Congress

President Bush Quietly Signs Higher Education Act Into Law

No Need for Additional Loan Changes for Now, Congressional Research Service Says

Massachusetts Calls Off Plan To Rescue Lender

ACT Exam's Popularity Increases

By Christina Satkowski and Stephen Burd

You can't always believe what you read in the papers. That old saying has gained new currency this year with all of the misleading and panicked news coverage of the student loan credit crunch. Unfortunately, the same can be said of recent reports about Congressional efforts to simplify the process of applying for financial aid.

At issue are news stories reporting on a provision in the recently-passed Higher Education Act reauthorization legislation that requires the U.S. Department to create a new "EZ FAFSA," a shorter version of the Free Application for Federal Student Aid (FAFSA) that tens of millions of students fill out each year to determine their aid eligibility. Recent articles in Congressional Quarterly, Education Week, The New York Times, and other publications leave the impression that the new bill streamlines the FAFSA -- from seven pages to two -- for all students.

But that's not the case. While the legislation introduces an EZ FAFSA, it makes it available to only those students whose family income is low enough that they already qualify for an expedited review of their finances when applying for federal financial aid. As a result, most aid applicants will still be stuck with the longer form.

Under the new law, students who will be eligible to use the EZ FAFSA include those whose families earn earn less than $50,000 a year and either are not required to file the long version of the 1040 federal income tax return or receive certain federal means-tested benefits such as welfare payments or food stamps. The federal government doesn't take into consideration the assets of families of students who meet these criteria.

Since 1986, health care costs have been the number one issue for small businesses according to the National Federation of Independent Business (NFIB) (Our personal top issues at the time were soft foods and walking upright). NFIB president Todd Stottlemeyer has called health care one of the biggest barriers to entrepreneurship in this country, and nearly 80 percent of small business owners say they have trouble finding affordable health care.

Not surprisingly, lawmakers have often tried to address the burden of health care for small business and a story in Reuters yesterday focuses on two current pieces of legislation in Congress which look to provide relief:

Last week, we identified our favorite and least favorite provisions in the mammoth Higher Education Act reauthorization legislation that Congress overwhelmingly approved on Thursday. Neither list, however, included sections of the bill that target the types of "pay for play" conflicts of interest in the student loan programs that Higher Ed Watch helped expose last year. That's because, frankly, we had mixed feelings about the provisions.

The legislation certainly takes some positive steps to safeguard students. It, for example, bars colleges from entering into revenue-sharing arrangements, in which colleges get a cut of each loan their students take out. Colleges are also forbidden from entering into "opportunity loan" deals with lenders -- arrangements in which loan companies waive or loosen credit requirements on private student loans in exchange for becoming the exclusive provider of Federal Family Education Loans (FFEL) on a campus.

The legislation also prohibits colleges from allowing lenders to staff their financial aid offices or to run the call centers that students depend upon to answer their questions about student aid. And it forbids schools from assigning first-time borrowers' federal loans to a particular lender through award packaging or other methods. This should put a stop to some colleges' particularly deceptive practice of providing pre-filled out master promissory notes to incoming students in order to shepherd them toward favored lenders.

By Ben Miller, Stephen Burd, and Sara Mead

Yesterday, Higher Ed Watch highlighted our favorite provisions in the final version of legislation to reauthorize the Higher Education Act. With Congress poised to approve the bill today and send it to President Bush for his signature, we take a critical look at the parts of the legislation that fail to close loopholes, open new areas for potential exploitation, and weaken existing accountability frameworks.

• Easing Restrictions on Trade Schools
  

For-profit colleges' lobbyists are exuberant about the reauthorization legislation. And who can blame them? Congress has gutted a key consumer protection provision that the career college lobbyists have been trying to kill since it was first introduced in 1992. The provision, which is known as the "90-10 rule," was intended to crack down on unscrupulous trade schools. It requires proprietary institutions to receive at least 10 percent of their revenue from sources other than federal student aid in order to participate in the aid programs. Congress' legislation would keep the requirement in place, but takes all the teeth out of it.

By Ben Miller, Stephen Burd, and Sara Mead

A decade after its last reauthorization and five years since an updated version was due, a new version of the Higher Education Act is finally ready for Congressional passage. With both chambers set to vote on the bill this week, Higher Ed Watch will take a closer look at various parts of the legislation over the next two days. Today, we praise lawmakers for doing the following:

• Putting Teeth Into Loan Auctions

Last year, Congress created a groundbreaking pilot auction program that uses market forces to set student loan subsidy rates for lenders making federal PLUS loans to parents and graduate students. With about a year left to enact the pilot project, lawmakers have added penalties for lenders who win an auction and then back out. The bill allows the Education Secretary to punish lenders that violate the terms of the auction agreement by one of the following methods: fining the lender for any additional costs needed to find and subsidize a replacement PLUS loan lender; banning the offending lender from future auctions; or, kicking them out of the Federal Family Education Loan (FFEL) program entirely. We particularly like the fact that the Secretary can retrieve the fine by reducing subsidies paid to the lenders on other FFEL loans or having another federal agency garnish other subsidies the lender might receive. While we have some complaints about the language (it doesn't, for example, address the PLUS loan auction bidding cap, which needs to be more flexible to encourage robust bidding in a range of financial market conditions), overall, we believe that this provision is an important step forward in getting this pilot program off the ground.

Is the U.S. Department of Education deliberately trying to undermine a new program created by Congress to encourage students to pursue careers in the public service?

That question came to mind as we reviewed the Education Department's proposed regulations for enacting the Public Service Loan Forgiveness program that Congress created in September as part of the College Cost Reduction and Access Act (CCRA).

Under the program, the federal government will forgive the remaining debt of Direct Student Loan borrowers if they make 120 payments on their loans while holding a low-paying, full-time public service-oriented job. Borrowers with loans through the competing Federal Family Education Loan program can take advantage of this benefit by consolidating their debt into Direct Lending.

The program is a reaction to reports that student loan borrowers are increasingly shying away from pursuing public-service careers, such as teaching and social work, and is designed to provide incentives to get college graduates to enter these fields and reward them for their service.

Despite the upcoming August recess and the looming presidential election, there is bipartisan news out of the House of Representatives today (where rumor has it all 435 Members are in an election year), following the reintroduction of the Healthy Americans Act with 19 cosponsors, 17 Democrats and 2 Republicans. (The bill was introduced originally about a year ago, also on a bipartisan basis). The new House version includes the amendment to the Senate bill, which allows employers to continue offering coverage to their employees. Reps. Debbie Wasserman Schultz, a Florida Democrat, and Jo Ann Emerson, a Missouri Repubilcan, are lead sponsors.

But the good will is not coming from the House alone. In the past two weeks, Senators Wyden and Bennett have added two new cosponsors to the Senate version of the legislation, Senators Gordon Smith and Maria Cantwell. Both Smith, an Oregon Republican, and Cantwell, a Washington Democrat, are members of the powerful Finance Committee, which has jurisdiction over many of the levers needed to reform and fund our health system.

We know there is a long way to go, but bipartisanship is key to reforming our health system. Stay tuned...

Last Friday we reported on the status of the House and Senate Labor-HHS-Education Appropriations bills for fiscal year 2009. Committees in both Chambers had agreed to a 302(b) suballocation of $153.1 billion, and sub-committees in both houses adopted approved bills and sent them on to the full Appropriations Committees.

The Senate Committee successfully passed their Labor-HHS-Education appropriations bill on July 26th. But the House Committee hit a minor (read: politically challenging) road block. Representative Jerry Lewis (R-Calif.), the ranking member of the House Appropriations Committee, offered an amendment to strip the text from the Labor-HHS-Education appropriations bill and replace it with the text from the appropriations bill for the U.S. Department of the Interior. Lewis and his Republican colleagues argued that passing the Interior bill would lessen the burden of rising gas prices before the July 4^th holiday weekend, but House Appropriations Committee Chairman David Obey (D-Wisc.) derided the move as a "political stunt." Stunt or not, Lewis' amendment effectively stalled the Labor-HHS-Education Appropriations bill in its tracks, postponing action on the legislation until after the July 4^th Congressional recess-and potentially scuttling the Labor-HHS-Education bill's passage for much longer.

It's appropriations time on Capitol Hill. This week, the House and Senate Appropriations Committees moved to adopt their respective versions of the fiscal year 2009 Labor-HHS-Education appropriations bill. This week's committee action begins the annual federal education funding process, but the spending bill still faces a number of procedural steps and political hurdles before it becomes law.

In February, the President released his budget proposal for the upcoming fiscal year, which outlined funding levels for all education programs, and established a recommended total appropriations spending level of $990.7 billion. Congress adopted its own total funding level of $1.012 trillion in May when it passed the fiscal year 2009 congressional budget resolution. (Last year Congress set the spending level at $953.1 billion).

As we explained in our federal budget primer earlier this year, the budget resolution funding ceiling (called a 302(a) allocation) does not specify funding levels for individual programs, only an aggregate total. So, anyone interested in federal education funding has had to wait until now to get a glimpse of the funding levels Congress is likely to adopt. The House and Senate Appropriations Committees took two key actions over the past weeks that gave some shape to education funding for the upcoming fiscal year.