President Bush signed the College Cost Reduction and Access Act (H.R. 2669) (Public Law 110-84) into law on Sept. 27, 2007. These amendments to the Higher Education Act of 1965 became effective on Oct. 1, 2007, unless otherwise stated. This summary provides a general overview of the law.
Sec. 101. Tuition Sensitivity
The bill eliminates a "tuition sensitivity" provision in the Higher Education Act that prevents Pell Grant recipients at low-cost institutions from receiving their full Pell award. This section also authorizes and appropriates $11 million for FY 2008 to ensure that all eligible students receive funding in the 2007-08 award year.
Sec. 102. Mandatory Pell Increases
The bill extends Pell Grant funding authority through 2017 and authorizes the following amounts to be appropriated:
The amounts made available in the bill will be used to increase the amount of the maximum Federal Pell Grant by-
The amounts specified will be increased or decreased to the extent that funds are available.
Sec. 103. Upward Bound
Sec. 104. TEACH Grants
Beginning July 1, 2008, the TEACH Grant program will provide up to $4,000 a year in grant aid to undergraduate and graduate students and students enrolled in a post-baccalaureate teacher credential program, or current or prospective teachers. Eligible undergraduate and post-baccalaureate students may not receive more than $16,000 and graduate students may receive no more than $8,000 in total TEACH Grants.
Students enrolled less than full-time will have their TEACH Grant reduced according to a schedule established by the Department in regulations. The amount of TEACH Grant awarded when combined with other student aid may not exceed a student's cost of attendance (COA).
In exchange for TEACH Grant aid, students must agree to serve as a full-time teacher at specified schools and teach in a specified field for four academic years within eight years after completing the college course. TEACH Grant recipients that do not fulfill their teaching obligations must repay the grant as if it was an unsubsidized Direct Loan.
Student Eligibility Requirements:
Institutional Eligibility Requirements:
In order to award TEACH Grants, the Department must determine that an otherwise eligible institution:
The bill authorizes such sums as may be necessary to provide TEACH Grants to each eligible applicant.Return to top
Sec. 201. Interest Rate Reductions
The bill gradually cuts interest rates on subsidized Stafford loans for undergraduate students in half according to the following schedule:
Sec. 202. Student Loan Deferment for Certain Armed Forces Members
This section eliminates a three-year limitation on loan deferment for certain members of the armed forces. It allows deferments until 180 days after the borrowers are demobilized. It also allows borrowers in the military to receive the benefit regardless of when the loan was originated. Eligibility for this deferment remains limited to members serving on active duty or performing qualified National Guard duty during war and a national emergency.
Sec. 203 Income-Based Repayment
Generally, the provisions in this section become effective July 1, 2009. Loan payments will be limited to 15 percent of a borrower's discretionary income or 15 percent of the amount that a borrower's (and spouse's if applicable) adjusted gross income exceeds 150 percent of the poverty line, divided by 12. Unpaid interest and principal are capitalized and any outstanding loan balance is forgiven after 25 years of repayment. PLUS Loans made on behalf of a dependent student and Direct Consolidation Loans that contain PLUS loans are not eligible for the income-based repayment program.Holders of these loans must apply the borrower's payments first to interest, second to fees, and then toward the principal of the loan.
Any interest due and not covered by the borrower shall be paid by the Secretary for up to three years except for periods that a borrower is in deferment due to economic hardship.The lender shall also capitalize the interest due when the borrower stops participating in the income-based repayment program, or begins making payments larger than what is specified under income-based repayment. Principal due and not paid under income-base repayment shall be deferred. Borrowers may remain in income-based repayment more than 10 years.
When borrowers leave the program the maximum payment required on the loan shall not exceed the monthly amount based on a 10-year repayment period when the borrower first joined income-based repayment. The time the borrower is permitted to repay the loan may exceed 10 years.The Department must repay or cancel any outstanding loan principal and interest for borrowers after 25 years of repayment. Borrowers currently repaying loans according to income-contingent repayment or income-sensitive repayment plans will have the choice to continue in their current plans or may participate in the program created by this bill. The Department must establish procedures to annually determine borrowers' eligibility for the program, including verification of a borrower's income and the amount of their loans.
Sec. 204. Deferral of Loan Repayment Following Active Duty
Active duty National Guard or other reserve component of the armed forces and retired members of the armed forces who are called to active duty while enrolled at an institution will be eligible for a deferment during the 13 months after they complete their service. Their deferment expires if they enroll in school again.
The proposed legislation would introduce several cuts to lenders and guarantors. The agreed upon legislation would:
The definition of economic hardship is also changed under from 100 percent of the poverty line for a family of 2 to 150 percent of the poverty line applicable to the family size.Return to top
The proposed legislation would allow the Secretary of Education to cancel the balance of any interest and principal due on any Federal Direct Loan - including Direct Stafford, PLUS, or Consolidation Loan - that is not in default for borrowers who:
A public service job is defined as a full-time job in emergency management, government, military service, public safety, law enforcement, public health, public education, social work, public interest law services, child care, public library sciences, or any other job at an organization that is described in section 501(C)(3) of the Internal Revenue Code of 1986.Return to top
The date on which institutions must return late collections on Perkins loans due to the Secretary would increase from March 31, 2012 to Sept. 30, 2012.
Income Protection Allowances: The proposed legislation would provide systematic increases in the income protection allowances for dependent students, independent students, married students where either or both spouses are enrolled in college, and for students with dependents other than spouses through the 2012-13 academic year. After the 2012-13 academic year, the Secretary would be required to update the dollar amounts of the income protection allowances by a percentage equal to the Consumer Price Index. Revised tables with updated amounts would be released by the Secretary of Education in the Federal Register for each academic year.
Simplified Needs Test: The proposed legislation would increase the family income level needed to qualify for an automatic zero from $20,000 to $30,000 and would require the Secretary to increase that amount according to the increases in the Consumer Price Index.
Increased Discretion Given To Financial Aid Administrators: Financial aid administrators would be given additional discretion on July 1, 2009 in calculating the EFC of families where at least one member of the family is a "dislocated worker," i.e., a person who has lost their job and is eligible for federal benefits. FAAs are also given more discretion in calculating the EFC of independent students that suffer a loss of employment or have become homeless.
The proposed legislation would require the Secretary of Education to implement a student loan auction program for parent PLUS loans in the FFEL program to begin on July 1, 2009. Prior to its July 1, 2009 implementation date, the Secretary would hold an auction in each state where lenders would bid on the minimum amount of subsidization they would accept to have exclusive rights to originate parent PLUS loans in that state. The two lowest bidders would be given exclusive rights to originate those loans for two years for all students at institutions within that state until the students graduate from or leave that institution. An auction would be held every two years.
Lenders that want to make a bid would need to meet minimum requirements in a prequalification process established by the Secretary that contains a set of borrower benefits and servicing requirements and an assessment of the lender's capital capacity to effectively participate. If no winning bids are made, the Secretary shall designate a lender of last resort in each state. Lenders that want the lender of last resort designation would be required to submit an application to the Secretary.
Students who want to consolidate loans made under the auction process would be required to notify their originating lender first to give that lender the opportunity to meet the terms and conditions of another loan provider offering a consolidation loan.Return to top
Sec. 801 College Access Challenge Grants
The legislation would establish "College Access Challenge Grants" that would provide a two to one matching grant to be spent on efforts to increase college access and success among underserved student populations. If states fail to raise their share the Department will reduce the federal award proportionally. $66 million is authorized to be appropriated for FY 2008 and another $66 million for FY 2009.
Generally grant recipients must use the funds to:
The funds provide in this section may not be used to promote any lender's loans.
Sec. 802. Investment in HBCUs and Minority Serving Institutions
This section provides $510 million from FY 2008 to FY 2009 for HBCUs and minority serving institutions to be distributed in the following manner:
Publication Date: 9/7/2007