May 30, 2007

• Legislative Overview — 80th Regular Session of the Texas Legislature
• Congressional Overview — First Session of the 110th Congress

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Legislative Overview — 80th Regular Session of the Texas Legislature

The 80th Regular Session of the Texas Legislature adjourned at midnight May 28th without passing legislation to consolidate, and increase the eligibility requirements for, the state's student financial aid programs, as proposed by the governor; amend the state's "top 10 percent" statute to limit the program's number of eligible applicants; and, establish a state statute to govern school and student loan lender relationships. Several studies concerning student financial aid will take place during the interim on these and other topics.

The FY 2008-2009 appropriations bill (HB1), increases funding for the TEXAS Grant program by $96 million, TEOG by $5 million, College Work-Study by $5 million, the B On Time Loan program by $56 million, and continues to fund the TEG program at the 2006-2007 level of $211.8 million.

Performance targets similar to those proposed by the governor in his February submission to the legislature to restructure higher education funding are linked to each public university's appropriations and goals and strategies in Article III of HB 1.

Additionally, HB 1 includes funding for the Higher Education Incentive Fund, which includes the Texas Competitive Knowledge Fund, Research Development Fund, Professional Nursing Shortage Reduction Fund, and the Higher Education Performance Initiative, which will fund $100,000,000 for scholarships for high school graduates with 3.0 GPAs who graduate in the top 10 percent of their high school graduation classes.

While legislation directing the Texas Higher Education Coordinating Board (THECB), in conjunction with the state student financial aid and higher education communities to study:

• the impact of imposing a 3.0 GPA on the state's grant programs;
• the feasibility of expanding the disbursal of TEXAS Grant funds to students over a period of time;
• the feasibility of using a debit card as a student aid delivery vehicle did not pass, these studies will probably occur any way.

Additionally, the THECB and Legislative Budget Board are to conduct a study on the feasibility of combining the TEXAS Grant and B-On Time Loan Programs. HB 1 includes a rider that directs the THECB to conduct interim studies on

• the impact of requiring completion of the Free Application for Federal Student Aid as a condition for enrollment in a Texas public college or university;
• converting the TEXAS Grant Program into a direct grant program;
• using the tuition deregulation set-aside and TPEG set-aside to fund the TEXAS Grant Program;
• changing the TEXAS Grant index from the average tuition and fees to the average of room and board and providing tuition and fees waivers to students who attend institutions with tuition and fees above the statewide average; and
• delivering TEXAS Grants as a stipend-based award to allow students to access federal higher education tax credits.

Additionally, two bills HCR 159 and SB 1234 that were passed propose interim studies to be conducted by a select commission appointed by the governor, lieutenant governor, and speaker of the House (HCR 159 and the THECB (SB 1234) on:

• Texas higher education and the global economy;
• global competitiveness;
• regional needs;
• structure and governance of higher education;
• mission, role, and purpose of institutions;
• funding and financial aid, and
• other issues.

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Congressional Overview — First Session of the 110th Congress

The First Session of the 110th Congress is in the beginning stages of its annual appropriations process. Their eleven FY 2008 appropriations bills will fund the federal government through 2008. Either as a part of this process, or through stand-alone legislation, the reauthorization process of the Higher Education Act (HEA) will also begin in earnest.

As the result of the FY 2008 budget resolution having a budget reconciliation instruction included in it directing the House and Senate education committees to report reconciliation legislation to the Budget Committees that achieves a savings of at least $750 million over a ten year period, it is now likely that the committees will include HEA reauthorization legislation in their reconciliation bills in which the Committees will amend the FFELP (Part B of the HEA) in ways that will achieve $18 - $22 billion in savings, with $750 million earmarked for deficit reduction and the remainder earmarked for increasing funding for Title IV, Title III, and Title V HEA programs, as well as, funding for new programs.

Using the reconciliation bill to enact the reauthorization bill allows the legislation to be "fast-tracked" by bypassing the normal legislative process of public hearings, multiple votes and debate, and the need for 60 votes (rather than 51 votes) for passage in the Senate.

HR 890 — The Student Loan Sunshine Act II — which is a bipartisan compromise bill combining parts of HR 890/S 486 and HR 1994, passed the House on May 9th by a 414 - 3 vote. The bill will now be incorporated into the Senate HEA reauthorization bill which will, in turn, be incorporated into the Senate reconciliation bill.

In spite of the speeded up process described above, look for many more oversight hearings through the summer on specific topics related to the HEA reauthorization, Title IV, and alleged abuse in, and reform of, the federal and private student loan programs.

The House Subcommittee on Higher Education, Lifelong learning, and Competitiveness will hold an HEA reauthorization hearing on Title III and Title V in Austin, Texas on June 4th.

To date the following major Higher Education Act reauthorization bills have been introduced.

HR 5/S 282 — College Student Relief Act — reduces interest rates for subsidized federal loans by 50 percent. The HR also reduces FFELP subsidies and reinsurance to offset the cost of the interest rate reductions.

HR 451/S 565 — Next Generation Hispanic-Serving Institutions Act — establishes a program of competitive grants to eligible HSIs that offer graduate degrees and authorizes appropriations to both the existing Title V program for four-year and two-year programs, and the proposed new program.

HR 990/S 707 — Pell Grant Equity Act of 2007 — repeals Section 401(b) (3) of the HEA requiring tuition sensitivity in the awarding of Pell Grants to students for 2007-2008. The cost is offset by a reduction in the FFELP guarantor collection rate to 23 percent and 22 percent.

HR 1608/S 939 — College Aid Made EZ Act and the Financial Aid Form Simplification and Access Act — proposes to implement the federal Advisory Committee on Student Financial Assistance's recommendations to simplify the FAFSA by establishing a FAFSA-EZ form that reduces the FASFA by 50 percent; establish a "pre-FAFSA to allow students and parents to apply for financial aid early; encourages ED to coordinate with the IRS and SSA to supplement the new FAFSA with tax information; and, improve on-line access to the FAFSA.

HR 1994 — Financial Aid Accountability and Transparency Act of 2007 — mirrors S 486/HR 890 in requiring increased disclosures by schools of their relationships with student loan providers and includes a code of ethics for schools to follow.

HR 2458/S — Universal Higher Education and Lifetime Learning Act — consolidates the Hope and Lifetime Learning tax credits and the tuition tax deduction into a single credit; expands the credit to more years of college and more expenses; increases the amount of the credit and expands it to higher income levels and is refundable for low income earners.

S 301 — Nontraditional Student Success Act — increases annual maximum Pell Grant award; allows for two Grants per award year; excludes EITC from need analysis; authorizes a Nontraditional Students Demonstration Program to test the effectiveness of providing expanded financial aid to less than half-time students; increases appropriations for TRIO and title V; reauthorizes and expands the Early Intervention and College Awareness program; increases the percentage of Lifetime learning income tax credit for higher education expenses and makes a portion refundable.

S 359 — Student Debt Relief Act — includes S 282; increases annual maximum Pell Grant program to $5,100 this year to $6,300 in 2011; establishes the Fair Payment Assurance Program which caps loan repayment at 15 percent of a borrower's income for low income borrowers; allows reconsolidation of loans; reduces FDLP origination fee to zero; extends tuition tax credit.

S 486/HR 890 — Student Loan Sunshine Act — establishes "transparency" in the student loan lending and marketing arena; requires reporting of any special arrangements between schools and lenders; requires reporting, and banning of certain, gifts more than $10, including travel, entertainment, and in-kind services; requires reporting and written policies concerning preferred lender lists; encourages borrowers to make full use of the federal student loan programs before taking out private alternative loans.

S 511 — Student Loan Bill of Rights — requires lenders to report loan information to credit bureaus; caps monthly payments to an amount based on a borrower's income and status; requires ED to conduct a study on interest rates and fees charged on private loans; caps the collection fees on defaulted loans to 7.5 percent for consolidated loans, 13.5 percent for rehabilitated loans, and 18 percent for other loans; requires ED to set a cap on the total amount that can be charged to a borrower of a federal student loan, as a percentage of the original loan balance.

S 572/HR 1010 — Student Aid Reward Act — proposes to establish a program whereby institutions will be encouraged to participate in the federal student loan program (FFELP or FDLP) that is most cost-effective for taxpayers; proposes to share the savings generated by the choice of the most cost-effective program between the institution and federal government on a 50-50 basis; the institution's share would be required to be used to supplement need-based grants; includes methodology to be used to assess the cost of the FFELP and FDLP.

S 938 — The Accessing College through Comprehensive Early Outreach and State Partnerships (ACCESS) — which proposes to implement the federal Advisory Committee on Student Financial Assistance's recommendations to create a national public-private federal-state partnership to increase access and persistence through early assurances of student financial grant aid and academic support for low income students; create a comprehensive system of early information about financial aid eligibility; and, increasing access to need-based financial aid.

S 945 — proposes to make several changes to the way college textbooks and materials are marketed and sold to institutions and students.

S 1262 — Student Loan Accountability and Disclosure Reform Act — includes much of the disclosure requirements included in S 486/HR 890 and HR 1194 and expands prohibitions to guaranty agencies. Also includes a code of conduct for institutions and a prohibition against "preferred lender lists".

S 1400 — Student Information Means a Positive Loan Experience (SIMPLE) Act — extends the availability of extended student loan repayment plans to borrowers with $20,000 in debt; allows borrowers to pay only the interest on their debt for two years; requires lenders to provide repayment information on the impact of postponed payments; specifies details to be included in exit counseling.

S 1401 — Student Financial Aid Data Privacy Protection Act — strengthens the limitations on accessing the national Student Loan Data System and requires lenders and the Department of Education to better educate and inform borrowers about the sensitivity and use of their data.

The Administration submitted its proposed FY 2008 budget to the congress on February 5th. In it, the Administration proposes lender reductions and fee increases in the FFELP for all lenders, collection retention reduction for guarantors, and changing the guarantor account maintenance fee payment from a portfolio-based fee to a unit cost basis.

The Administration's budget also proposes abolishing the SEOG, Perkins Loan, and LEAP programs. The total estimated savings of $19 billion over a five year period is proposed to increase the funding for the Pell, SMART, and Academic Competitiveness Grant programs. While most of the Administration's submission was "dead on arrival", this part has been of interest to the House and Senate education committees as a way to dramatically increase funding for the federal need-based student financial aid programs.

The president's budget also proposes to de-fund the Voluntary Flexible Agreement program authorized under Section 428A of the Higher Education Act, while the congress is considering expanding the program as a part of an effort to reform the federal student loan programs.

At this time, the consensus is that the Senate HELP Committee will have before it a comprehensive HEA reauthorization bill that includes the above listed bills and will report the bill to the full Senate by early summer. If for some reason this does not occur, the Committee will move on to move legislation to reauthorize the No Child Left Behind, Head Start, and Workforce Investment Acts. The House may not have a bill out of the Education and Labor Committee until late this year. The House Committee may convene as many as 20 hearings in Washington, DC, as well as in several locations, including Texas, around the country.

While TG is working with its partners and the full Texas Congressional Delegation and Committee staffs, we will focus our reauthorization efforts on the House Education & Labor Committee's Subcommittee on Higher Education, Lifelong Learning, and Competitiveness on which Congressman Ruben Hinojosa (D-TX) serves as Chair.

Copies of bills before the congress can be accessed at thomas.loc.gov.

Copies of bills before the state legislature can be accessed at www.capitol.state.tx.us.

The governor's higher education proposal can be accessed at www.governor.state.tx.us/divisions/press/highered_reform.

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For more information, contact:

TG Congressional and Legislative Relations
(512) 219-4503
P.O. Box 83100
Round Rock, TX 78683-3100