NASFAA Issues Summary of House Republicans’ HEA Reauthorization Bill

By Allie Bidwell, Communications Staff

Editor's Note: A markup of this bill took place on Dec. 12, 2017— after the article below was written. An "amendment in the nature of a substitute," replaced the original bill text. The substitute amendment made several minor changes, which are detailed in NASFAA's markup summary.

Republican members of the House education committee on Friday introduced a 542-page bill that would significantly reshape how students apply for and receive federal financial aid. The much-anticipated bill to reauthorize the Higher Education Act (HEA) contains some proposals higher education advocates have pushed for, but others that would take a step backwards on higher education access.

The bill, called the Promoting Real Opportunity, Success and Prosperity Through Education Reform (PROSPER) Act, would move to a “one grant, one loan, one work-study” system, eliminate student loan origination fees, and give financial aid administrators the authority to limit loan amounts, but it would also eliminate entire programs and certain benefits for students and borrowers.

Congress is tasked with reauthorizing — or updating — the HEA every five years. But a major review and revision is long overdue, as the last reauthorization took place in 2008, and the current version of the law, which authorizes federal student aid programs for higher education, expired in 2013. Lawmakers have delayed another major overhaul by passing an extension of the current law. The process has also been pushed aside over the years as lawmakers turned their attention to other pressing issues, such as health care, tax reform, a repeal of the No Child Left Behind law, and the debt ceiling.

While this is the first step of the 115th Congress, this is not the first attempt since 2008 to kick-off a reauthorization process. Senate Democrats in 2014 released a broad reauthorization bill after months of bipartisan hearings on the topic — 12 in total. The House education committee also released four smaller individual reauthorization bills in the summer of 2014 that focused on different issues, such as simplification, transparency, financial awareness, and innovation. The House reintroduced those bills in 2015 and passed them in 2016.

In a statement released Friday, Reps. Virginia Foxx (R-NC), chairwoman of the House Committee on Education and the Workforce, and Brett Guthrie (R-KY), chairman of the Higher Education and Workforce Development subcommittee, called the PROSPER Act a “long overdue reform” for higher education. “With six million unfilled jobs and over a trillion dollars in student debt, simply reauthorizing the Higher Education Act will help no one,” the statement said. “A hard truth that students, families, and institutions must face is that the promise of a postsecondary education is broken,” the statement continued, calling for a system with more flexibility to better meet the needs of current college students. While a date has not yet been set, a quick committee markup is expected later this month.

"[I]t’s extremely disappointing that House Republicans are taking another partisan step in the wrong direction and introducing a plan that would harm students by cutting billions in financial aid," said Sen. Patty Murray (D-WA) in a statement issued Wednesday in anticipation of the bill's release. "And despite the concerning number of predatory for-profit colleges that have taken advantage of students, this bill would give for-profits more taxpayer money, while loosening the standards they need to uphold. We have a record of solving big issues in education with broad, bipartisan legislation, so I hope Republicans abandon these ill-conceived efforts and work with us to reauthorize the Higher Education Act through a comprehensive approach that puts students’ and borrowers’ best interests first."

Justin Draeger, president of NASFAA, said in a statement on Friday that while some changes “deserve the support of higher education advocates,” there are others “that raise questions and concerns that we hope to work with Congress on as they proceed, and still others that should be abandoned completely by lawmakers.” Although the bill includes several measures that NASFAA has long supported — such as eliminating student loan origination fees, instating a “Super Pell” award, and giving financial aid administrators the authority to limit loan amounts and prevent overborrowing — NASFAA is “concerned about the reduction in available loan funds for graduate students” and “opposes the elimination of all loan forgiveness provisions proposed in the bill, which will negatively impact many borrowers,” he said.

While this bill marks an important first step toward a full reauthorization, many more steps — including action from the Senate and a conferencing of bills from both chambers — have to occur before any reauthorization bill will would be signed into law.

Below is a high-level breakdown of the proposals within the bill. Stay tuned to Today’s News for more information on the PROSPER Act, and the reauthorization process overall.

Super Pell With Additional Limitations and Counseling
The bill would create a “Super Pell” award option through which students who take greater than the full-time workload and will complete 30 or more credit hours per year (or equivalent) would receive an additional $300 in Pell dollars per award year. It would also maintain the current funding structure for the Pell Grant program, where a portion comes from mandatory funding, and a portion comes from discretionary funding. Some lawmakers in the past have suggested moving the Pell Grant program to fully discretionary funding, which would subject the entire program to the annual appropriations process and could put the financial stability of the program in danger.

Despite some improvements to the Pell Grant program, the bill would also cut off Pell eligibility after three payment periods with no credits earned, and mandate annual student loan and Pell Grant counseling, which without appropriate resources and support could be a severe administrative burden for financial aid professionals, and a struggle for some students. NASFAA has not recommended mandated annual counseling, but has suggested that financial aid professionals should have the ability to require additional counseling.

Streamlining FWS, FSEOG and Perkins
Republican lawmakers have over the years emphasized that simplification and streamlining would be a focus of any reauthorization bill. In line with that vision, the bill proposes eliminating a couple of crucial programs, including the Perkins Loan program and the Federal Supplemental Educational Opportunity Grant (FSEOG) with the intent of funneling FSEOG money into the Federal Work-Study (FWS) program. The bill authorizes funding for FWS at $1.72 billion, which, if funded at the level, would be almost double recent appropriations for the program. It would also create a reserve fund for FWS of up to $150 million, that would be available to schools with high Pell completion rates compared with their peers, and schools that have shown significant improvement in Pell completion rates. However, under the bill graduate students would no longer be eligible for FWS.

The allocation formula for FWS would also shift, as the base guarantee would be phased out over five years and the program would move entirely to fair-share, also a proposal of NASFAA’s, which would be based half on need and half on an institution’s Pell funds. In addition, the bill adopts two of NASFAA’s FWS recommendations by eliminating the private sector employment cap and the community service requirement.

Phase Out of Direct Loans, Introduction of ONE Loans
The bill replaces the Direct Loan Program with a new Federal ONE Loan Program, effective July 1, 2019, for new borrowers. The Direct Loan Program remains operative for current borrowers through Sept. 30, 2024, unless the borrower switches to the ONE Loan. All Federal ONE loans are unsubsidized, and are calculated the same as Direct Unsubsidized Loans, subject to annual and aggregate loan limits. The new program increases loan limits, but retains the current Direct Loan undergraduate loan limit structure of increasing amounts with years completed, and higher amounts for independent students and students whose parents cannot borrow.

Loan limits are imposed for all categories of borrowers, including parent and graduate PLUS borrowers who can currently borrow up to the cost of attendance under the Direct Loan Program. The bill allows financial aid administrators to reduce Federal ONE loan limits on an institution-wide or academic program basis under certain circumstances. (For charts showing the bill’s proposed annual and aggregate loan limits, refer to the "Loan Limits" section of our PROSPER Act: House HEA Reauthorization Bill’s Impact on Loan Programs article.)

The bill incorporates several loan-related proposals NASFAA has supported, such as eliminating loan origination fees, and giving financial aid administrators the authority to limit loan amounts based on categories rather than on a case-by-case basis. It would also cap total repayment under the income-driven plan at the amount of principal and interest that would have accrued under the 10-year standard plan.

To simplify borrowing, the bill seeks to significantly scale down the number of repayment plans available to borrowers. The bill would allow for one 10-year standard repayment plan, one income-driven plan, and eight deferment and forbearance options.

However, the bill would eliminate some repayment benefits, including loan forgiveness through income-driven repayment plans and through the Public Service Loan Forgiveness (PSLF) program. Borrowers enrolled in the income-driven repayment plan would see monthly payments set at 15 percent of discretionary income, with no monthly payment caps, and a minimum payment of $25.

“NASFAA opposes the elimination of all loan forgiveness provisions proposed in the bill, which will negatively impact many borrowers, but especially students attending graduate and professional schools,” Draeger said. “We acknowledge concerns about the long-term viability and administration of the Public Service Loan Forgiveness program, and have put forward a reasonable and responsible pathway forward that would retain these vital forgiveness programs.

FAFSA Simplification
The new reauthorization bill would take several steps to simplify and improve the financial aid process for students. It would codify the use of prior-prior year (PPY) income data for the FAFSA, as well as support earlier notification of financial aid eligibility to students by moving up the Pell Grant payment schedule release date from February 1 to November 1. It would also reinforce and expand use of the IRS Data Retrieval Tool, require consumer testing of the FAFSA, and develop a mobile FAFSA application.

Disbursing and Returning Aid, Risk Sharing, and Institutional Eligibility
The bill would mandate that aid be disbursed on a weekly or monthly basis — an idea known as “aid like a paycheck,” which NASFAA believes should be an option for schools, not a mandate. The bill would, however, allow for unequal installments to help with upfront costs.

The bill would also make significant changes to other areas of higher education, such as the return of Title IV funds (R2T4) process. Under the bill, the percentage of aid earned would be based on a quarterly assessment of the payment period rather than a day-by-day reckoning. Depending on the range of percentages within which the student's withdrawal date occurs, the amount earned would be zero, 25, 50 or 75 percent of aid, as explained in a recently-released bill from the House. Under the bill, the institution would be responsible for returning all unearned aid, thus introducing a concept of risk-sharing where the institution takes on the full risk of student withdrawals through the first 25 percent of their payment period.

Also worthy of more examination is a proposal to phase out the cohort default rate (CDR) metric, which measures the percentage of a school’s borrowers who enter repayment during a fiscal year and default prior to the end of the second following fiscal year, in favor of a program-level repayment rate. Under the bill, programs would be penalized if their three-year repayment rates fell below 45 percent, and would become ineligible for federal grants and loans. The bill also eliminates “90/10” rule, the requirement that proprietary institutions must have at least 10 percent of their revenue come from sources other than the federal government.

Reforming FSA
The bill aims to address opportunities for reform at the Office of Federal Student Aid (FSA) through several recommendations provided by NASFAA last May. In particular, the bill strengthens strategic planning and goal-setting at the agency, sets time limits for program reviews, and would establish an FSA Advisory Board that would approve the appointment or reappointment of the chief operating officer and conduct other oversight to monitor the strategic direction, performance, and management of FSA.

Repeals and Prohibitions on Specific Regulations
The bill repeals regulatory provisions related to gainful employment, borrower defenses and state authorization, and goes even further by prohibiting any future ED secretary from issuing new regulations related to gainful employment, the definition of a credit hour, or from creating an institutional ratings system, an idea pursued by the Obama administration.


In the coming weeks, NASFAA’s policy & federal relations staff will be providing a series of more detailed analyses into Title IV issues contained in the bill. Stay tuned to Today’s News for more information.


Publication Date: 12/4/2017

Jon J | 12/5/2017 2:50:58 PM

The savings from no longer offering subsidized loans should make it easier for Republicans to pay for another batch of Abrams tanks that the Pentagon says they don't even need- which they've already done twice. These guys are just looting the treasury to get as much as they can before the 2018 elections.

David S | 12/4/2017 3:11:44 PM

This bill was likely to include both good and bad things, and it has both. But going in, bad was about an 8 or 9 point favorite, and it looks as though it covered the point spread and then some. Combined with some of the atrocities being thrown around in the tax bill, we have a lot of work to do. A lot.

Theodore M | 12/4/2017 9:29:14 AM

"Hello Scammers, please come get our students" House Republicans

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