HEA Reauthorization Moving in Congress

After more than three years of on-again, off-again work, legislation to renew the Higher Education Act is once again starting to move through Congress. Both the House Education and Labor Committee and the Senate Committee on Health, Education, Labor and Pensions have approved different versions of legislation to modify and update the Act.  The legislative process, including the consideration of these bills before the full House and Senate, as well as the work of a House-Senate conference committee to work out the differences in the legislation, is expected to stretch into the fall. 

House Action

Following a series of  committee and subcommittee hearings, the full Committee on Education and Labor approved H.R. 2669, the College Cost Reduction Act of 2007, on June 13, 2007.  The bill now awaits scheduling on the House floor.

The College Cost Reduction Act would:

• Gradually cut interest rates in half on subsidized student loans over the next five years.
• Increase federal loan limits - the maximum annual loan limits for students in their third or subsequent years would be increased from $5,500 to $7,500, and aggregate loan limits would be similarly increased.
• Increase the maximum Pell grant from its current level of $4,700 by at least $500 over the next five years, ultimately reaching a maximum scholarship of at least $5,200.  In addition, Pell grant recipients would be allowed to enroll and receive aid at all times during the year, eliminating the current 9-month limitation.
• Expand eligibility to include and serve more students with financial need.
• Provide upfront tuition assistance to qualified undergraduate students who commit to teaching in public schools in high-poverty communities or high-need subject areas.
• Provide loan forgiveness for first responders, law enforcement officers, firefighters, nurses, public defenders, prosecutors, early childhood educators, librarians and others.
• Revise policies to allow public servants to have their loans forgiven after 10 years.
• Establish a partnership with federal, state and local government entities, and philanthropic organizations through matching challenge grants aimed at increasing the number of first-generation and low-income college students.

The bill instructs the Secretary to withhold LEAP funding from any state that funds higher education during the 2008-09 academic year and future academic years at a lower level than the average amount provided during the five most recent, preceding academic years.

The bill also includes incentives for institutions to keep their tuition low.  Beginning with the 2008-09 academic year, Pell Grant recipients at institutions that have tuition increases equal to or less than the percentage change in the higher education price index (HEPI) will be given a 25 percent increase in their Pell award. Institutions that guarantee they will not increase tuition by more than the HEPI for five years (one-and-a-half years for an associate degree) will be given an additional 10 percent Pell increase for their students. The HEPI is defined as a "statistical measure of change over time in the prices of a fixed market basket of goods and services purchased by colleges and universities through current fund educational and general expenditures (excluding expenditures for research), as developed by the Bureau of Labor Statistics."

The legislation would pay for increased student benefits by reducing various lender subsidies. On May 9, the House passed a stand-alone bill, HR 890, The Student Loan Sunshine Act, as its response to recent concerns about the relationships between the student loan industry and institutions, so those issues are not addressed in the College Cost Reduction Act.

Senate Action

For procedural reasons, legislation to renew the Higher Education Act in the Senate was written into two distinct bills: S. 1642, the Higher Education Amendments of 2007, and the Higher Education Access Act (not yet introduced).  Both bills were approved by the Senate Health, Education, Labor and Pensions Committee on June 20, 2007. 

The Senate legislation proposes increasing the maximum Pell grant to a higher level than the College Cost Reduction Act passed by the House Education and Labor Committee. The Senate bill would increase the maximum 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 House bill, students would be allowed two Pell Grants during a calendar year to permit them to accelerate pursuit of their degrees by taking extra classes.

The Senate legislation also seeks to limit the amount that colleges raise annual tuition. The proposed legislation would create a higher education price index within one year of the bill’s enactment. Schools would then be placed on a list made public by the Department of Education, organized by state and institutional type, to "provide consumers with general information on pricing trends" relative to the index.

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."

Like the House legislation, the proposed increases in student aid would be paid for be reduction in the fees paid to lenders and guarantors that participate in the FFEL program.

Next Steps

The focus now turns to the floors of the House and Senate, which will see debate on these bills later this summer.