December 20, 2007

• Congressional Update
• FY 2008 Appropriations and HEA Reauthorization

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Congressional Update

The First Session of the 110th Congress adjourned on December 19th.

The Second Session will convene on January 15, 2008, with an early September 26, 2008 adjournment date due to the November General Election (President/Vice-President, 435 House seats, and 33 Senate seats).

Any work not completed during the First Session will roll over to the Second Session.

After six years of level funding, one of the first items passed by the First Session of the 110th Congress early this year and signed into law by the president was legislation to increase the maximum annual Pell Grant from $4,050 to $4,310. The last significant increase in this program had been enacted under the previous Administration and the 106th Congress in 2000 when the maximum grant was increased from $3,750 to $4,000.

On December 17th, after acceding to the president's directive to not increase discretionary spending above $933 billion, the congress finally passed HR 2764 — The Consolidated Appropriations Act of 2008 — that, for the most part, level funded or decreased funding for the Title IV student financial aid programs, instead of providing an anticipated record increase for the maximum annual Pell Grant to $4,925. The vote in the House was 253-154 and 76 to 17 in the Senate.

The Senate added $70 billion for funding the war in Iraq. The bill, as amended, was returned to and passed by the House on December 18th by a 272-142 vote and sent to the president for his anticipated signature.

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FY 2008 Appropriations and HEA Reauthorization

With respect to FY 2008 appropriations for student financial aid, the congressionally passed Labor-HHS-Education appropriations bill includes:

• Pell Grants — annual maximum decreased from $4,310 to $4,241* (as contrasted with $4,925 in the original Labor-HHS-Education bill agreed to and passed by the House and Senate)
• AC/SMART Grants — level funded at annual maximums of $750 and $1,300, respectively (as contrasted with $1,125 and $1,950 in the original bill)
• SEOG — decreased from $770.9 to $757.4 (as contrasted with $770.9 in the original bill)
• College Work-Study — level funded at $980.4 (as contrasted with $980.5 in the original bill)
• Perkins Loan Program — decreased from $1.1 billion to $1 billion (as contrasted with $1.1 billion in the original bill)
• LEAP — decreased from $65 million to $63.9 million (as contrasted with $65 million in the original bill)
• TRIO — level funded at $828.2 million (as contrasted with $868.2 million in the original bill)
• GEAR UP — level funded at $303.4 million (as contrasted with $323.4 million in the original bill)
• HSIs — level funded at $94.9 million (as contrasted with $99.5 million in the original bill)
• HBCUs — level funded at $238.1 million (as contrasted with $249.5 million in the original bill)

* As a result of the additional funding made available through spending reductions in the Federal Family Education Loan Program (FFELP) through the enactment of HR 2669 — the College Cost Reduction and Access Act earlier this year, the annual maximum Pell Grant provided for in HR 2764 will be supplemented with $490, bringing the annual maximum for FY 2008 to $4,731-$109 less than that provided for in HR 2669.

The bill also includes a provision that directs the Secretary of Education to enter into renegotiations with FFELP guarantors that are operating under Voluntary Flexible Agreements provided for in Section 428A of the HEA and terminated effective January 1, 2008, to be concluded by March 31, 2008 with new VFAs that are cost neutral. The language reads as follows:

SEC. 308. Prior to January 1, 2008, the Secretary of Education may not terminate any voluntary flexible agreement under section 428A of the Higher Education Act of 1965 that existed on October 1, 2007. With respect to an entity with which the Secretary of Education had a voluntary flexible agreement under section 428A of the Higher Education Act of 1965 on October 1, 2007 that is not cost neutral, if the Secretary terminates such agreement on or after January 1, 2008, the Secretary of Education shall, not later than March 31, 2008, negotiate to enter, and enter, into a new voluntary flexible agreement with such entity so that the agreement is cost neutral, unless such entity does not want to enter into such agreement.

There are two HEA reauthorization bills before the congress — S 1642 — The Higher Education Amendments of 2007 — and HR 4137 — The College Opportunity and Affordability Act. Since the CCRA A addressed funding provisions for the Title IV programs, these bills are mostly policy bills that are cost-neutral.

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 &nmdash; 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.

HR 4137 includes S 1642's with added provisions (some taken from HR 3746 — The College Access & Opportunity Act) that increase the annual maximum Pell Grant to $9,000 minus EFC, provide financial incentives to institutions and states that control costs and increase student financial aid (including a higher education price index and price increase watch list), creates a 2-page EZ FAFSA for low income applicants, reduce the FAFSA data elements by 50 per cent, direct ED to work with the IRS to obtain income information, add transparency in the setting of tuition and fees and total costs for consumers, include HR 890 — The Student Loan Sunshine Act — and the as yet unnumbered Private Student Loan Transparency and Improvement Act, adopts S 1642 loan forgiveness provisions for FFELP and FDLP borrowers employed in areas of national need and for FDLP borrowers employed in public service jobs, require audits of the FDLP similar to those required of the FFELP, limit Pell eligibility to 18 semesters or 27 quarters, lengthen the cohort default rate calculation to the third fiscal year (instead of the current second fiscal year) following the fiscal year in which students entered repayment, require FFELP providers to provide borrower information to third party servicers engaged with institutions on default prevention activities which may share the information only with the school or borrowers, require FFELP guarantors to develop programs to prevent student loan delinquencies and defaults, and promote financial literacy, establish a new grant program for community colleges. There is also several "sense of the House" and study provisions concerning institutional environmental standards ("go green"), improving academic achievement, standardized testing, and student loans.

Copies of bills and background information can be accessed at thomas.loc.gov.

Assuming the HEA reauthorization is completed in the near future, the higher education-related topic that occupy congress' time (in addition to the continuing budget driven topics mentioned above) will likely involve the restructuring of higher education tax credit, tax incentive, and savings programs which currently benefit more students than Title IV programs at a cost of several billion dollars per year and are largely targeted at middle income families.

The challenges facing the FFELP will continue throughout this decade as federal domestic education and social policy continues to be dictated by budget considerations, with the control of the congress and White House impacting only, at most, the degree to which this will occur. "Entitlement reform" will continue to be a priority issue for the congress and administration for years to come. And, the FFELP will continue to change and proposals ranging from outright repeal to increased market-based competition to simply a continuation of cost cutting measures will be on the congressional menu for some time to come.

Merry Christmas and a Happy New Year.

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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