The Senate is expected to pass today the Higher Education Amendments of 2007 Act to authorize programs under the Higher Education Act (HEA). It would also require institutions to draft student loan codes of conduct, prevent lenders from offering institutions benefits in exchange for being included on a preferred lender list and increase information institutions and lenders have to disclose to students about loans.

During debate on the Senate floor Monday, the Senate accepted by voice vote several amendments to expand aid to students, create a student loan clearinghouse to help students get the best deal on loans, and commission a Government Accountability Office (GAO) study on higher education. The Senate rejected one amendment that would have created a federal loan program to compete with private loans offered by banks. A complete list of the amendments offered is included at the end of the article.

The HEA reauthorization bill was a companion to the reconciliation bill (H.R. 2669) passed last week by the Senate.

"The reconciliation bill was only a small piece of the Higher Education Act," said Michael Enzi the ranking Republican on the Senate education committee. "Without considering both bills, we would only be doing part of the job."

The House has passed its version of the reconciliation bill, but has not moved on a HEA reauthorization bill. The HEA expired in 2003 and has not been updated since 1998. Congress has extended the HEA for three years and the latest extension is set to expire at the end of July.

Senate Majority Leader Harry Reid (D-NV) noted that the bill was years overdue.

Edward Kennedy (D-MA), chairman of the Senate education committee said that the bill would ensure that the student loan program works for students.

"We've documented how lenders who participate in the federal student loan program offer 'educational conferences' at luxury hotels, and offer free entertainment and free tickets to sporting events to college officials in order to entice those officials to recommend the lenders to their students," Kennedy said. "Our legislation makes these practices illegal, and protects students by ensuring that when a college recommends a lender, it's based on the best interest of students and nothing else."

In addition to the amendments listed below, Christopher Dodd (D-CT) may introduce an amendment today to provide regulations for the rapidly expanding private loan program. The amendment is expected to include a provision prohibiting lenders from considering where a student is attending college when determining the terms of a private loan.

Amendments:

Federal Private Loan Program Amendment

The Senate rejected by a 38 to 53 vote an amendment by Sherrod Brown (D-OH) that would have created a federal loan program to compete with the growing private loan sector. Brown and Kennedy argued that the program would provide more competition in the private loan market so students would get a better deal on private loans.

"We have worked to address help for neediest with the Pell and to help those borrowing federal loans and Senator Brown's amendment will help the increasing number of students who have to borrow private loans," Kennedy said. "We will never get a handle on the cost of tuition for colleges and universities until we get a handle on the [private loan] program as well."

Enzi expressed opposition to the amendment arguing that it "does not increase competition it increases government price fixing." He said that the secretary of education should not set the rate on private loans because they don't have the expertise to know what rate should be.

Enzi and other Republicans also expressed concern that the amendment has not been considered by the education or banking committee and urged the proposal be examined closely before it is passed.

Judd Gregg (R-NH) argued that the amendment was an expensive attempt to skew the loan system to favor the Direct Loan program.

Student Loan Clearinghouse Amendment

The Senate adopted by voice vote an amendment by Byron Dorgan (D-ND) to create a clearinghouse for private and federal student loans so students could shop for the best loans in an informed way.

Dorgan said that if it was up to him he would eliminate preferred lender lists.

"There is no evidence that preferred lender lists offer the best loan rates for students," he argued.

However, Dorgan recognized that the Senate would not approve an amendment to eliminate preferred lender lists, so he offered his an amendment as an alternative. The amendment also requires schools to include a disclosure on their preferred lender lists notifying students about the clearing house and requires a Government Accountability Office (GAO) report assessing whether students would have received better interest rates and benefits by using the clearinghouse instead of preferred lender lists.

"If the clearinghouse is more effective in helping students get the best rate on loans then we can hopefully eliminate preferred lenders," Dorgan said.

GAO Study On Employment Results For College Graduates Amendment

The Senate also adopted by voice vote an amendment by Jim DeMint (R-SC) requiring the GAO to conduct a study of the employment results of college graduates. The report would focus on:

1. the feasibility of collecting information on the employment results of college graduates

2. the value of collecting more information on the employment of college graduates

3. effective ways to disseminate this information

4. whether this information would be duplicative

5. whether the National Postsecondary Student Aid Survey (NPSAS) should be amended to include this information

6. how this information could be used

7. whether current state programs that connect education and employment interests can be employed by other states

DeMint said that this information would help students see how graduates from certain schools in certain degree programs fair in the workforce. The study would also help schools assess their effectiveness and help policymakers make informed decisions when designing policies.

Increased GEAR UP Authorized Funding Level Amendment

The Senate adopted by voice vote an amendment by Barbara Boxer (D-CA) to increase the authorized funding level for GEAR UP programs by $54 million. The amendment only increases the amount that Congress is authorized to increase GEAR UP funding, the actual funding level is set by the annual appropriations process.

MSI For Advanced Technology And Education Amendment

The Senate adopted by voice vote an amendment introduced by John Warner (R-VA) to provide five years of funding for a competitive grant program to increase Minority Serving Institutions' (MSIs') ability to provide information technology education for their students. Warner said that many MSIs lack resources to acquire basic equipment needed to provide their students with adequate access to information technology equipment. Under the amendment, MSIs would compete for grants to be used to increased access to computer technology and the Internet on MSI campuses. Warner believes this will help bridge the digital divide between MSIs and other schools.

Amendment Making Native Hawaiians And Pacific Islanders Eligible For The Ronald E. McNair Postbaccalaureate Achievement Program

The Senate adopted by voice vote an amendment by Daniel Akaka (D-HI) that expands eligibility for the Ronald E. McNair Postbaccalaureate Achievement Program to Native Hawaiians and Pacific Islanders. Akaka noted that Native Hawaiians and Pacific Islanders are poorly represented in higher education, but have been excluded from programs for other underrepresented groups like African Americans, Native Americans and Hispanics because they have been grouped with the larger Asian populations. He said the amendment would help increase Native Hawaiians and Pacific Islanders access to graduate education.

Amendment To Toughen Standards For Foreign Medical Schools

The Senate adopted by voice vote an amendment by Jeff Sessions (R-AL) to "protect taxpayer dollars from subsidizing foreign medical schools that fail to produce positive results." Under the amendment, foreign medical schools are given two years to increase the percentage of students who pass their medical exams after graduation from the current 60 percent to 75 percent to retain their federal student loan eligibility. The amendment would also require a GAO study on the effectiveness of foreign schools in preparing students, the percentage of foreign school students who practice medicine in the U.S. and compare the number of malpractice suits against foreign medical school graduates compared to graduates of U.S. schools.

Amendment To Develop Simplified FAFSA Faster

The Senate accepted by voice vote an amendment by Richard Burr (R-NC) to reduce the time that agencies have to report back their recommendations for simplifying the FAFSA. Under the amendment, agencies would have one year to submit their recommendations. Enzi argued that the FAFSA is long and duplicative and that it could be simplified without hampering its ability to determine a student's financial need.

Reporting On Teacher Support Amendment

The Senate adopted another amendment by Burr that requires teacher training programs to report to the secretary of education about how they are meeting the needs of their graduates once they are teaching in the classroom. Enzi noted that the amendment does not impose additional mandates for institutions with teacher training programs, it simply requires them to report on how they are meeting the needs of prospective teachers.

Loan Forgiveness For Public Service Lawyers Amendments

The Senate adopted by voice vote an amendment by Dick Durbin (D-IL), the Majority Whip, to provide $10,000 in annual loan forgiveness for up to six years for attorneys who commit to work for a minimum of three years as public prosecutors or public defenders. The program would give priority to those with the greatest need and make borrowers repay the money if they do not complete their three-year commitment. Sen. Tom Harkin (D-OH) successfully offered a second degree amendment to Durbin's amendment that would provide $6,000 in annual loan forgiveness for civil legal attorneys.

Amendment Restricting Higher Education Lobbying Funding

Sen Tom Coburn (R-OK) introduced an amendment that would require institutions to certify that they are not using tuition money or other federal money received for student aid or from an earmark to pay for lobbying efforts. Coburn said the amendment would encourage institutions to use their endowments to pay for lobbying instead of tuition dollars or federal funds. Kennedy expressed some concern that the amendment went to far and could hamper institutions' ability to advise policymakers about important issues. Kennedy expressed concern that the amendment would have unwanted, unintended consequences, but agreed that it addressed an important issue. Kennedy pledged to work with Coburn to develop a workable amendment.

The HEA reauthorization bill is expected to be approved by the Senate today. The legislation:

• Requires institutions to draft codes of conduct governing the relationships between institutions and lenders.

• Expands eligibility for ACG and National SMART Grant programs to part-time students, legal permanent residents, and certificate student programs

• Authorizes Congress to raise the maximum Pell Grant to $6,300. However, the actual maximum Pell Grant would be set by the reconciliation bill and the appropriations process.

• Expands loan forgiveness to more borrowers

• Includes a broad range of provisions aimed at simplifying the student aid application process without reducing the FAFSA's ability to identify need students.

• Requires colleges to report their costs and prices and creates a Higher Education Price Increase Watch List to rank schools that increase tuition and fees at a greater rate than similar institutions

• Increases the amount of information institutions must disclose to the government and students, including the racial and ethnic diversity of their financial aid recipients among other things.

• Bans lenders from offering any inducements, prizes, gifts, payments, securities, etc. to any school or school personnel in exchange for loan volume or to secure loan applications.

• Prohibits lenders from offering any compensation to financial aid administrators serving on lender advisory boards or commissions, but allows lenders to reimburse aid administrators for "reasonable expenses incurred in providing such service."

• Requires lenders to report expenses paid to financial aid administrators to the Department, including every instance that a reimbursement was made, the name of the financial aid administrator, and the date and the activity covered.

• Requires financial literacy education and training to help borrowers who have defaulted repay their loans.

• Requires guaranty agencies to provide additional consumer education information to borrowers, including budgeting, financial management, debt management, the pitfalls of alternative, high priced financing, and other aspects of financial literacy.

• Prohibits lenders and guarantee agencies from sending any unsolicited loan applications to any students that don't have a relationship with the lender or guarantor. The bill also prohibits lenders and guarantors from sending any solicitations that are "fraudulent or misleading."

• Creates a June 30, 2011 sunset on the school as lender programs and lender trustee relationships

• Makes it easier for proprietary schools to participate in Title IV by allowing them to count funds from 529 savings plans and institutional aid as non-federal financial aid revenue when determining if at least 10 percent of their revenue is from non-federal financial aid sources.

• Allows banks to contribute to colleges as long as it is unrelated to financial aid programs.

• Requires lenders to educate borrowers about interest capitalization when they grants deferment on unsubsidized Stafford loans

• Requires lenders to inform borrowers about loan benefits, including how borrowers can lose benefits, and the impact of benefits on the amount they must repay

• Requires lenders to determine if a borrower is eligible for in-school deferment by confirming the borrower's enrollment status through the NSLDS, if requested by the school

• Requires guarantors and lenders to report type of loan and repayment status with national consumer reporting agencies

• Provides guidance on appropriate use and privacy associated with NSLDS

• Prohibits the creation of a unit record system, or any other system to track individual students over the course of their collegiate careers

• Replaces the current National Advisory Committee on Institutional Quality and Integration with a new committee that would be made of members appointed by not only the Secretary, but appointees from the Senate and the House.

• Requires states to report annually to the secretary of education on teacher preparation quality. However the secretary would not be allowed to create a national list or ranking based on those reports.

Media Coverage

The Evolving Higher Ed Act Bill (Inside Higher Ed)

Senate Debates Higher Education Act, Rejecting Controversial Amendment to Create Federal Loan Program (The Chronicle of Higher Education) A paid subscription may be required

Sen. Kennedy Press Release

Sen Enzi Press Release

By Haley Chitty
NASFAA Assistant Director for Communications

Posted 07/24/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.