September 6, 2007

• Congressional Update

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Congressional Update

The congress passed and the president has agreed to sign into law HR 2669. The budget reconciliation bill — The College Cost Reduction Act — amends Part B of the Higher Education Act (HEA) — the FFELP — in ways that achieve $21 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. The bill includes most of HR 5 — The College Student Relief Act, HR 472 — The College Affordability and Transparency Act, HR 1608/S 939 — The College Aid made EZ Act and The Financial Aid Form Simplification and Access Act, S 359 — The Student Debt Relief Act, and S 938 — The Accessing College through Comprehensive early Outreach and State Partnerships (ACCESS).

Major provisions include proposals to:

• Reduce the lender Special Allowance for for-profit FFELP lenders to 1.19 percent, 1.79, and 2.09 and 1.34, 1.94, and 2.24 percent for non-profit FFELP lenders. The reduction for Plus and Grad Plus loans is an additional .30%; (saves $12.4 billion)
• Halve student loan interest rates over five years from 6.8 percent to 3.4 percent, with the rate returning to 6.8 percent in 2012 (HR 5);
• Reduce the FFELP lender reinsurance to 95 percent beginning in 2012 (HR 5);
• Increase the FFELP lender fee from .5 percent to 1 percent; (Saves $1.2 billion)
• Repeal Exceptional Performer program (HR 5);
• Reduce the collection retention for FFELP guarantors from 23 percent to 16 percent (S 511) and reduce the payment of the Account Maintenance Fee from .10 to .06 percent; (saves $7 billion)
• Provide income-based repayment plans for hardship and poverty cases (S 359);
• Increase the annual Pell Grant to $5,400 over five years and expand eligibility for year-round grants to part-time students(S 359);
• Add $100,000,000 annually for five years to the Perkins Loan program;
• Restore funding to certain Upward Bound programs;
• Provide new tuition assistance for students who become teachers in public schools located in high-poverty areas;
• Establish incentives for institutions and states to control tuition and includes requirements for the provision of consumer information, transparency, and accountability (HR 472);
• Repeal the income contingent and income sensitive repayment options and replace them with a single "income-based" repayment option for both the FFELP and FDLP;
• Increase the length of student loan deferments from three to six years and expands the program;
• Provide and expand FDLP student loan forgiveness for certain public service workers and professionals;
• Establish the College Access Partnership Grant Program (S. 938);
• Eliminate the Pell Grant "tuition sensitivity" provision;
• Establish a nationwide pilot auction program for the FFELP PLUS program with two lenders per state.

The second part of this Congress' higher education agenda is passage of S. 1642 — The Higher Education Amendments of 2007 — which was passed by the Senate on July 24. This bill has drawn a presidential veto threat.

S. 1642 includes provisions from HR 5/S 282 — College Student Relief Act, S 359 — The Student Debt Relief Act (Pell Grant increase to $5,400 in 2008), HR 990/S 707 — Pell Grant Equity Act of 2007, expands eligibility for the ACG and SMART programs to less than full-time students, establishes the Promise Grant Program, prohibits the creation of a national student academic records database, eases the "90 percent-10 percent rule" impacting primarily proprietary schools, increases the lender fee on consolidation loans from .5 percent to one percent, repeals the FFELP Exceptional Performer program, repeals the "school as lender" program, increases in the authorized levels for all Title IV student aid programs, GEAR UP LEAP, S 938 — The Accessing College through Comprehensive Early Outreach and State Partnership (ACCESS Act, HR 1608/S 939 — College Aid Made EZ Act and the Financial Aid Form Simplification and Access Act, HR 472 — College Affordability and Transparency Act of 2007, HR 1994 — Financial Aid Accountability and Transparency Act of 2007, S 486/HR 890 — Student Loan Sunshine Act, S 1262 — Student Information means a positive Loan Experience (SIMPLE) Act, S 1401 — Student Financial Aid Data Privacy Protection Act, S 1561 — Discharge in Bankruptcy for Certain Educational Loans. The bill also establishes a national student loan (federal and private) information clearinghouse, funding for MSIs to advanced technology education, increases the authorized annual Pell Grant to $6,300 in 2008, expands student loan forgiveness programs, and establishes the Higher Education Cost Watch List.

If the reauthorization legislation fails, only changes made to the HEA in the budget reconciliation bill will be enacted. Any work not completed this year will be picked up during the second session of the 110th Congress next year at the point where the work is left at the end of this year.

With respect to FY 2008 appropriations for student financial aid, the House has passed its version of the FY 2008 appropriations act for Labor, Health and Human Services, and Education with increases for most Title IV, III, and V programs. The Senate is about to pass its version this month.

House

• Pell Grants — annual maximum increased from $4,310 to $4,700.
• SEOG — level funded at $770,933,000
• College Work-Study — increased from $980,354,000 to $980,492,000
• LEAP — level funded at $64,987,000
• TRIO — increased from $828,178,000 to $868,178,000
• GEAR UP — increased from $303,423,000 to $323,423,000
• HSIs — increased from $94,914,000 to $99,500,000
• HBCUs — increased from $238,095,000 to $249,500,000

Senate

• Pell Grants — same as current law
• SEOG — same as current law
• College Work-Study — same as current law
• LEAP — same as current law
• TRIO — $858,178,000
• GEAR UP — $313,423,000
• HSIs — same as current law
• HBCUs — same as current law

Both the House and Senate appropriations bills exceed the Administration's proposed budget submission for Labor, HHS and Education and therefore, as with the House and Senate budget reconciliation bills, have generated a veto threat from the White House.

House/Senate conference committees will be required to adjust the differences between these bills before being sent to the president for his veto. Two-thirds (291 in the House and 67 in the Senate) are needed to override a presidential veto and with about 30 days left in this session of the congress (target adjournment is October 6), it will be close if any of these bills are to pass.

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

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