Senate education committee Chairman Lamar Alexander (R-Tenn.) has released a measure that would modify the current student loan repayment system before borrowers are required to resume monthly payments on October 1, simplify the FAFSA, and implement other elements of his bipartisan FAFSA simplification bill introduced in the fall.
Alexander’s unveiling of the standalone proposal — the Student Loan Repayment and FAFSA Simplification Act — comes as Congress faces the winnowing days of the summer’s legislative calendar and amid current negotiations surrounding the latest coronavirus aid package, while diverging priorities from all corners of the Capitol and the White House make their way to the forefront.
Specifically, Alexander’s proposal would consolidate all existing repayment plans into two options — one standard 10-year repayment plan and one income-based repayment plan for federal loans entering repayment on or after October 1. Borrowers already in repayment would have the option to opt in to either of the new repayment plans. This would allow, similar to how the income-driven repayment plans work now, borrowers who are earning no income after October 1 to have $0 monthly payments by enrolling in the income-based repayment plan.
Additionally, as part of Alexander's proposal, once a borrower enrolled in the income-based repayment plan begins earning income, their monthly payment would be capped at 10% of their income that exceeds 150% of the poverty line, similar to current income-driven repayment plans, except that the income exclusion amount would phase out for higher earners.
His proposal also calls for simplifying the FAFSA, reducing the number of questions students must answer to obtain federal financial aid from more than 100 to about 30 — an idea that has been recommended numerous times throughout the effort to reauthorize the Higher Education Act.
“These changes will give some peace of mind to the 43 million current borrowers and the tens of millions of Americans who are expected to sign up for new student loans over the next 10 years,” Alexander said.
Applicants who identify as nonfilers for tax purposes or recipients of certain means-tested benefits would only be asked to complete basic background and benefit-related questions to complete their FAFSA. All other applicants would be required to answer the same introductory questions, and would then go on to have the income information needed to calculate their eligibility for need-based aid transferred directly from the Internal Revenue Service (IRS) to the Department of Education (ED). The bill’s FAFSA simplification provisions are designed to work in tandem with data-sharing provisions included in the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act signed into law in December. The FUTURE Act’s data-sharing provisions, which were long-supported by NASFAA, permit the IRS to share taxpayer data directly with the ED, allowing an individual to have their income data directly imported into the form rather than requiring them to manually import the information through the existing IRS Data Retrieval Tool.
As part of the simplification effort, the expected family contribution (EFC) would be renamed the “Student Aid Index (SAI).” The SAI would be used to calculate need for need-based aid programs — not including the Pell Grant — such as the Federal Direct Subsidized Loan program, Federal Work-Study (FWS) program, the Federal Supplemental Educational Opportunity Grant (FSEOG) program, and some state aid and institutional aid.
Recipients of certain means-tested benefit programs would also be eligible for an automatic-zero SAI. A key difference between the SAI and the EFC under Alexander’s measure is that a student’s SAI can be in the negative, starting the scale at -$1,500 to help financial aid administrators better differentiate relative levels of student need. Tax nonfilers would receive an automatic SAI of -$1,500.
The bill would also make adjustments to how institutions calculate the cost of attendance (COA). The new COA rules would allow for the rental or purchase of “suggested electronic equipment,” expanding the current allowance for a personal computer. It limits financial aid administrator discretion in developing the COA by specifying that the food allowance provide the equivalent of three meals per day on institutionally-provided meal plans, and sets that figure as the cap for the off-campus food allowance. The bill also adds restrictions to the on-campus housing allowance, which would have to be the greater of the average or median amount assessed for on-campus housing, calculated separately for students with and without dependents; and would cap the off-campus housing allowance at the amount of the on-campus allowance.
Since the momentum for a full rewrite of the HEA this Congress has largely dissipated, it’s likely that members will continue to carve out policy areas of the overarching law and aim to make more narrowly tailored revisions. It’s unclear whether Alexander’s new bill will be worked into the next coronavirus aid package expected from Senate Republicans in the coming days.
Should the White House and Senate Republicans come to an agreement on the next coronavirus aid measure, Republicans will then have to aim to sort out differences between their proposal and House Democrats touted package, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, in order to get the next bout of federal aid closer to enactment.
Publication Date: 7/22/2020