Access to Student Loans Protected
INSTABILITY IN THE FINANCIAL markets that has rocked the national economy in recent months will have no impact on federal student loans if action by Congress and words from the Bush administration this spring are any indication. In April, the House of Representatives overwhelmingly passed legislation to ensure that families will continue to have access to federal college loans even if stress in the credit markets leads a significant number of lenders in the federally guaranteed student loans programs to substantially scale back their lending activity.
The administration promptly responded with a statement supporting the measure, asserting that it was "committed to ensuring that students and their parents have access to the federal student aid they need to pay for college this fall."
As the American Council on Education (ACE) has noted, most higher education institutions have not experienced significant problems with student loan availability. Still, Congress and the administration are working together to put in place an infrastructure and processes that can be put to use immediately should the need arise.
It has already risen in at least one segment of the higher education market-for-profit colleges and universities, according to Harris N. Miller, president of that segment's trade group, the Career College Association. "The student lending market is having a harmful impact now, not at some point down the road," he wrote to House and Senate education committee leaders.
Under current law, dependent undergraduates can borrow $3,500 in unsubsidized federal loans during their first year in college, $4,500 during their second year, and $5,500 during their final two years. They can borrow up to $23,000 total in federal student loans (subsidized and unsubsidized). Independent students can borrow up to $46,000.
The legislation-the Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715), sponsored by Rep. George Miller (D-Calif.), chairman of the House Committee on Education and Labor-would increase the annual loan limits for federal unsubsidized loans by $2,000 for all students and the aggregate loan limits to $31,000 for dependent undergraduates and $57,500 for independent students.
Also under current law, parent borrowers must begin repayment of federal PLUS (Parent Loan for Undergraduate Students) loans 60 days after disbursement. The new legislation would give parents the option to defer repayment until up to six months after their children leave school.
Further, while current law makes parents with an adverse credit history ineligible to receive a PLUS loan except under extenuating circumstances, the House-passed bill would temporarily classify delinquencies of up to 180 days on home mortgages as an extenuating circumstance. That would make it possible for parents feeling strained by the housing market to secure loans for their children.
The legislation would give the secretary of education new tools to safeguard access to student loans, too. It would clarify that the secretary is required to advance federal funds to guarantee agencies operating as lenders of last resort in the event that they do not have sufficient capital to originate new loans. It also would give the secretary temporary authority to purchase loans from lenders in the federal guaranteed loan program if it is determined that lenders were unable to meet the demand for loans.
In its statement, issued by the Office of Management and Budget, the administration said it appreciates that the bill provides the "flexibility" the secretary would need to ensure that families continue to have access to federal student loans. While the statement supported the provisions of the measure that would allow an entire higher education institution to be designated eligible for Lender of Last Resort (LLR) programs if they would be needed, it recommended that the authority be temporary.
And although expressing support for the raised loan limits in the bill, the administration said it shared concerns of some in Congress and the higher ed community that the increases might make it more difficult for some IHEs to keep their federal student aid funds under the "90- 10" eligibility requirement-that no more than 90 percent of an institution's revenues come from the Higher Education Act Title IV student aid programs, with the other 10 percent coming from nonfederal sources.
Sen. Edward Kennedy (D-Mass.), chairman of the Senate Health, Education, Labor and Pensions Committee, has introduced legislation in the Senate that is similar to the House-passed bill, signaling that enactment of a measure is likely.
Another Senate committee-the Committee on Banking, Housing and Urban Affairs-took up the student lending issue at a hearing on the impact of the credit crunch on the student loan market. Afterward, the committee chairman, Sen. Chris Dodd (D-Conn.), and other committee members, wrote to Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke, urging them to ensure that lenders can continue to provide loans to students and their families.
In their letter to Paulson, they urged that the administration use the Federal Financing Bank to inject liquidity into the student loan market. They noted that at the hearing, higher education experts testified that if liquidity restraints remain and more lenders withdraw from the market, "we could conceivably reach a point where the demand for student loans will exceed the supply."
"The Treasury Department and the Federal Reserve Board must be prepared to take immediate, decisive action to prevent today's concern from worsening into tomorrow's crisis," Dodd declared in a statement as he sent the letters.
Meanwhile, both houses are addressing another issue of importance to higher ed in a different way: the tax treatment of employer-provided cell phones and other hand-held devices like BlackBerries.
Under current law, employers, including colleges and universities, are required to maintain extensive records related to cell phones they provide for employees' business use. Any personal use of the devices represents taxable income to the employee who uses it.
Congress enacted the legislation in 1989, "when cell phones were novel technology, expensive, and viewed typically as corporate executive perquisites," notes a statement by the National Association of College and University Business Officers. The initial legislation added cell phones to items considered "listed property" under tax code provisions addressing fringe benefits. "Listed property" includes employer-provided items like automobiles, and detailed documentation is required to substantiate their business use by employees.
Now, 19 years later and after "dramatic changes" in both the availability and affordability of cell phones, notes the NACUBO statement, the old rules still are in effect and Internal Revenue Service agents have applied them during examinations of institutions.
Campuses unable to provide "voluminous detailed logs" tracking employees' individual calls have been subject to tax liability, says Mary M. Bachinger, NACUBO's director of tax policy. But detailed documentation is not required "for use of the telephone at an employee's desk or the use of in-office e-mail or computers," NACUBO President and CEO John D. Walda wrote to Rep. Sam Johnson (R-Texas), a sponsor of the House bill, H.R. 5719, which NACUBO supported and which passed in May.
The measure removes cell phones, BlackBerries, and similar digital devices from being characterized as listed property in the tax code. The bill was also backed by the Association of College and University Telecommunications Administrators and a number of employer groups.
Sen. John Kerry (D-Mass.) introduced a companion bill, S. 2668, in the Senate.
In other Washington developments:
A joint House-Senate conference committee worked through the spring to reconcile different versions passed by each house of legislation to reauthorize the Higher Education Act (HEA), the primary federal law aimed at expanding college access for low- and middle-income students. Miller said in a statement that he was concerned by a survey released by the U.S. Public Interest Research Group showing that college students were increasingly using credit cards to pay for tuition and books.
Four historically black college and university presidents told the House education committee that their institutions play a crucial role in filling the higher education gap despite receiving disproportionately fewer federal dollars than other IHEs. Dorothy Cowser Yancy, president of <b>Johnson C. Smith University</b> (N.C.), cited National Science Foundation data showing that six of the top 20 predominantly white IHEs receive more federal research dollars than the 79 HBCUs combined.
The Department of Education proposed revised rules on student privacy to clarify for administrators, as well as students and their families, how information about students' health and safety can be shared. Regulation changes include protecting administrators who release confidential information about a student when they believe there is a threat to the health or safety of the student or to others. The federal agency issued the proposed rule changes just before the first anniversary of the shootings at <b>Virginia Tech</b> that subsequently raised questions about the use of information institutions maintain about their students.
<em> Alan Dessoff is a former reporter for</em> The Washington Post <em>and a freelance writer based in Bethesda, Md.</em>