Late yesterday, Sen. Edward Kennedy (D-MA), chairman of the Senate Health, Education, Labor, and Pensions Committee, released the Higher Education Amendments of 2007, a bill that would reauthorize the Higher Education Act and make several significant changes to the federal student aid programs. The 534-page legislative proposal includes significant increases in the Pell Grant and introduces several amendments in an attempt to better regulate the student loan industry. The budget reconciliation language, which will presumably include further cuts to lenders, has not yet been released. The amendments released yesterday are scheduled for full committee markup tomorrow.
Grant Increases
The Senate bill proposes increasing the Federal Pell Grant maximum higher than the College Cost Reduction Act passed by the House Education Committee last week and the President’s 2008 budget. The Senate bill would increase the Pell Grant as follows:
- $5,400 for academic year 2008-09
- $5,700 for academic year 2009-10
- $6,000 for academic year 2010-11
- $6,300 for academic year 2011-12
By contrast, the House approved increasing the Pell Grant to $5,200 by the 2011-12 academic year. Like the bill that passed in the House Education Committee, students would be allowed two Pell Grants during an award year to permit them to accelerate in pursuit of their degrees by taking extra classes. The minimum Pell Grant would also be increased from $400 to 10 percent of the maximum Pell Grant award.
The Senate bill would also expand access to the ACG and SMART Grants by allowing part-time students enrolled in certificate programs to participate.
The proposed legislation would allow increases in the Federal Supplemental Educational Opportunity Grants and the Federal Work-Study Program by eliminating a dollar-specific cap in the legislation and replacing it with "such sums as may be necessary for fiscal year 2008 and each of the five succeeding fiscal years."
The Leveraging Education Assistance Partnership (LEAP) program would also see an increase by replacing the $5,000 per academic year cap with the lesser of $12,500 or a student’s cost of attendance per academic year.
Grants for Access and Persistence
The bill proposes new grants to promote coordination among federal, state, and local governmental agencies, as well as private-sector companies, to help low-income students attend postsecondary schools. The new grants would inform underserved students about financial aid and encourage both participation and persistence in postsecondary education. These funds would be distributed to states that apply for the access grants.
Besides new grants for access and persistence, the bill also seeks to limit the amount that colleges raise annual tuition. The proposed legislation would create a higher education price index to be created within one year of the bill’s enactment. Schools would then be placed on a list, by state and institutional type, to "provide consumers with general information on pricing trends" relative to the index.
Simplifying the Student Aid Process
The proposed reauthorization bill would require the Secretary of Education to create an "EZ FAFSA," a simplified application form for certain students. The proposed legislation would also mandate a phase-out of the current, paper FAFSA at a time that the Secretary determines that it is no longer cost effective to continue printing it. A full, printable copy would still be available online. Additional requirements would mandate that the reapplication process be more streamlined and easier for students returning to college.
A study group would be created under the proposed legislation within 180 days of the bill’s enactment to study, evaluate, and identify ways to simplify the student aid process and alternative ways to calculate the expected family contribution (EFC). The study group would consist of the Secretary of Education, the Secretary of the Treasury, the Director of the Office of Management and Budget, the Comptroller General, and the Director of the Congressional Budget Office, as well as any other individuals designated by the Secretary and Comptroller General.
Prohibition Against Inducements
Lenders and guarantors would be banned 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. Lenders would be prohibited from offering any compensation to financial aid administrators serving on lender advisory boards or commissions, but would be allowed to reimburse aid administrators for "reasonable expenses incurred in providing such service."
On an annual basis, lenders would be required to report any expenses paid to financial aid administrators to the Department that would include each specific instance in which reimbursement was made, the name of the financial aid administrator, and the date and the activity that was covered. That information will be compiled by the Secretary and delivered to an authorizing committee on an annual basis.
Additional Disclosures to Students
Under the proposed legislation, lenders and guarantors would be required to inform students both before and during periods of deferment and forbearance about their loan balances and interest accrual rates.
For students that have defaulted and are in loan rehabilitation, the legislation would require financial literacy and education training to help the borrowers keep their loans in good standing.
Guaranty agencies would also be required to provide additional consumer education information to borrowers to provide training to students on topics such as budgeting, financial management, debt management, the pitfalls of alternative, high priced financing, and other aspects of financial literacy.
Direct-to-Consumer Marketing on Federal Loans Regulated
Both lenders and guarantors would be prohibited from sending any unsolicited loan applications by mail or e-mail to any students that do not already have a relationship with that lender or guarantor. Furthermore, lenders and guarantors would be forbidden from sending any solicitations that are "fraudulent or misleading" in any way about loan availability, terms, or conditions.
Reductions to Lenders
The proposed increases would presumably come at the expense of lenders and guarantors in the FFEL program. The entire budget reconciliation language that would specifically outline the expected cuts in the FFEL program was not available as of last night. Inside Higher Ed reports this morning that Senators are still sharply divided on how much to cut from lender subsidies and specifically whether cuts to subsidies should be different for for-profit and non-profit lenders.
As with the College Cost Reduction Act, the special allowance rate paid to lenders by the Department would be changed to .5 percent of the principal amount of a loan. Also in lock-step with the House version is a 1 percent fee assessed to lenders on the principal amount of consolidation loans, although the dates are slightly different.
Other Provisions
Several other provisions were amended, added, and deleted in the bill that is scheduled for full Senate Education Committee markup tomorrow. Some of the other provisions include:
- Guidance on appropriate use and privacy associated with NSLDS
- A sunset on the school as lender program for all schools currently operating in the school-as-lender program, as well as lender trustee relationships on June 30, 2011
- Wording that makes it easier for proprietary schools to participate in Title IV programs
- A prohibition against the creation of a unit record system, or any other system to track individual students over the course of their collegiate careers
- Replacement of 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.
Other Media Coverage
By Justin Draeger
NASFAA Assistant Director for Communications
Posted 06/19/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
