Final Stretch

Final Stretch

As Congress nears the end of its session, some work is finished but much remains to be done.

SOME LEGISLATION IMPORTANT to higher education has been completed, but much remains to be done as Congress enters the home stretch of its work for the year. Among issues still pending is the long-delayed reauthorization of the Higher Education Act, which finally seems to be moving toward completion as House and Senate conferees work out differences between versions of the legislation both chambers have passed.

One measure that gained final congressional approval, and which President George W. Bush was expected to sign, would increase federal support for science education and research in an effort to address challenges facing American competitiveness in the global economy.


Dodd's bill bars lenders from 'co-branding' loans with an institution's logo.

Although the America COMPETES Act focuses on strengthening educational opportunities in science, technology, engineering, and mathematics principally at the K-12 level, it contains a number of provisions of interest to higher education if Congress funds them as called for in the legislation. As analyzed by the American Council on Education (ACE), the major coordinating organization for the nation's higher ed institutions, they include:

$22 billion to the National Science Foundation over FY 2008-2010, including grants for graduate research fellowships.

$17 billion to Department of Energy programs to foster collaboration between universities and the agency and for an early career grant program for scientists at universities and national laboratories.

Creation of programs at the Department of Education to align K-12 math and science curricula with the requirements of college courses. Also, authorization of $151.2 million over FY 2008-2010 to help students earn bachelor's degrees in a science or math field or critical foreign language concurrently with a teacher certification, and $125 million to help working teachers enroll in part-time graduate programs.

$2.65 billion to the National Institute of Standards and Technology to create a new Technology Innovation Program that would encourage the participation of universities in high-risk, high-reward, precompetitive technology development by small- and medium-sized companies.

Student loan issues, which captured frontpage headlines earlier in the year, continue to be high on both legislative and regulatory agendas. On the legislative side, the full Senate will consider a measure to expand the federal government's oversight of private student loans by requiring more disclosure to prospective borrowers about the terms of their loans.

Proposed by Sen. Christopher Dodd (D-Conn.) and approved by the Senate Banking, Housing, and Urban Affairs Committee, which Dodd heads, the Private Student Loan Transparency and Improvement Act also would require lenders to notify borrowers of their eligibility for lower-cost federally guaranteed loans.

In an analysis of data from DOE's National Postsecondary Student Aid Study, ACE reported that one of five undergraduate private loan borrowers did not take advantage of federal student loans that offer lower interest rates and more flexible payment options, even though the students appeared to be eligible for the aid.

Dodd's bill also bars lenders from "cobranding" their loans with an institution's logos or colors and mandates a government study of the extent to which underwriting practices may disparately impact student borrowers and colleges on the basis of factors such as race and income level.

On the regulatory front, the Department of Education responded to a critical report of its oversight of the federal student loan programs by maintaining that it is taking steps to address many of the shortcomings cited in the report released in August by the Government Accountability Office (GAO).

According to the GAO, the government's nonpartisan watchdog agency, DOE has failed to safeguard the loan programs and should immediately increase its oversight of lenders and schools and fully enforce applicable laws.

Under current law, lenders participating in the federal program are prohibited from using inducements or gifts to curry favor with IHEs. The GAO found that the Education Department doesn't have a sufficient oversight program in place to identify and address questionable lender behavior and has not updated its inducement guidelines in 20 years.

The GAO also determined that the department had a poor system for dealing with complaints of improper lender behavior. Only two of 26 complaints that DOE received from 2001 to 2006 prompted action by the department, according to the watchdog agency. Further, it said, DOE attempted to use its sanctioning authority against lenders accused of improper inducements only twice over the past 20 years.

The GAO prepared the report at the request of congressional members including Rep. George Miller (D-Calif.) and Sen. Edward M. Kennedy (D-Mass.), chairs of the House and Senate education committees. "This report again underscores that the Department of Education completely defaulted on its responsibilities to protect the nation's student loan programs," Miller declared in a statement. Added Kennedy, "Students and families should be deeply concerned that the Department of Education failed to enforce the laws designed to protect them from unscrupulous lenders for so long."

Miller and Kennedy have been conducting investigations into the student loan industry for several months, and both chambers of Congress have passed legislation that would clean up the relationship between lenders and schools. Miller and Kennedy also introduced the bipartisan Student Loan Sunshine Act, which the House passed overwhelmingly in May. The Senate incorporated key provisions of the bill into legislation to reauthorize the Higher Education Act, which is working its way toward final approval in both houses.

Responding to the GAO report, Lawrence Warder, acting chief operating officer of federal student aid in DOE, said the department will update its oversight mechanisms and be proactive in investigating instances of prohibited activities.

However, he added in a letter to Comptroller General David M. Walker, who oversees the GAO, under existing law the DOE's authority to take action regarding some practices is limited. As an example, he said that current regulations do not include specific limitations on the use of preferred lender lists by schools. That was one of several unsavory lending practices that touched off the congressional investigations as well as the GAO probe.

In June, DOE published new proposed regulations to strengthen rules regarding payments and other inducements from lenders and loan-guarantee agencies to college officials and to limit colleges' use of preferred lender lists. While commending the "generally positive direction" of the proposed changes, ACE nevertheless urged DOE to substantially modify its proposals dealing with the Perkins Loan Program, the federal program that provides low-interest loans to needy students at about 1,800 participating institutions.

The Perkins loan provision would mandate that institutions assign certain defaulted loans to DOE for collection. A Perkins loan would be subject to "mandatory assignment" to DOE if the outstanding principal were $100 or more, the loan had been in default for seven or more years, and no payment had been received in the past year. Once a loan was assigned to the department, any funds recovered would go to the federal treasury rather than the Perkins Loan Program.

In a letter to the agency on behalf of ACE and four other major postsecondary associations, ACE Senior Vice President Terry W. Hartle urged DOE to withdraw the proposed regulation because it lacks statutory authority to require mandatory assignment. Also, wrote Hartle, "the Department is demanding that an institution work against its own interests by tirely choosing to hand over to the Department a portion of its assets or refuse to participate in the loan program altogether."


Current regulations don't include limitations for preferred lender lists.

Joining ACE in the comments were the American Association of Community Colleges, Association of American Universities, National Association of Independent Colleges and Universities, and National Association of State Universities and Land-Grant Colleges.

ACE points out that the regulation changes under review are the result of a months-long negotiating process that the department initiated a year ago to consider changes in federal student loan regulations. When the negotiating process ended last spring without an agreement on possible rules, Education Secretary Margaret Spellings appointed an internal working group to craft the new regulations. The final rules will be published in November and will become effective in July 2008.

On another note, the Department of Homeland Security (DHS) has established a working group to study possible revisions to a proposed rule that would subject institutions to what ACE terms "rigorous and excessive" new security regulations involving the storage and use of chemicals.

Under the rule, facilities that might possess even the smallest amount of any of more than 100 chemicals identified by DHS as high risk must inventory each location where that chemical might be present. That would mean, ACE maintains, that colleges and universities would be required to inspect "every building, laboratory and classroom," whether or not DHS ultimately deems that the facility presents a high risk of terrorist attack.

Campus and association representatives were slated to serve on the working group with DHS officials to consider possible modifications to the rule that would make it more suitable to the higher education community while maintaining an appropriate level of security.


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