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Financial Aid

Back to the Drawing Board

Congress tries to tackle reauthorization of the Higher Education Act... again.
University Business, Apr 2005

Beware: reauthorization approaches. Institutions have heard this repeatedly for the past couple of years, but major systemic changes have yet to take place in higher education. What exactly is the reauthorization of the Higher Education Act? When will it really take place? And what will this mean for the financial aid programs that help your institution's students attend college?

Federal law requires that the act be renewed--or "reauthorized"--every six years. The most recent reauthorization cycle was supposed to culminate in 2004, but Congress failed to pass legislation before it adjourned.

"Since we did not pass a bill last year, we had to start all over again. That means everything has to be reintroduced and re-passed," said National Association of Student Financial Aid Administrators President Dallas Martin in March at NASFAA's annual Leadership Conference. House Education and the Workforce Committee Chairman John Boehner (R-Ohio) has promised completion by the end of the current 109th Congress in 2006.

The Republican majority of the House education committee introduced in February the College Access and Opportunity Act (H.R. 609), a reauthorization bill intended to expand college access for low- and middle-income students. A similar bill was introduced last year; hearings were held, but it never came to a vote in the House.

"They will pay for increases by
cannibalizing good programs."
-Dallas Martin, NASFAA

This time around, Congress is focusing on several issues, including college costs and prices, access and affordability, and accountability. Changes proposed by Republicans include expanding Federal Pell Grants for high-achieving, low-income first- and second-year students; providing year-round Pell Grant aid; and removing an incentive for colleges to raise tuition by repealing a federal rule that limits the amount of Pell Grant aid low-cost institutions can receive.

However, Chairman Boehner has stated repeatedly that the committee intends to pass "revenue-neutral" legislation, with strategic, if small, program increases that are paid for through cuts to other programs, restructuring, and reforms. "Essentially there is no flexibility, and they will pay for any increases by cannibalizing good programs," Martin said.

The bill would also ease several restrictions currently placed on for-profit institutions. Specifically, it would eliminate both the 90/10 rule (which requires that institutions derive at least 10 percent of their revenue from funds other than Title IV aid), and the 50 percent rule (which mandates that schools deliver 50 percent of their instruction through non-distance learning methods). It also would allow for-profit institutions to compete with traditional institutions for campus-based aid, and specify that transfer-of-credit not be denied solely based on a school's accreditation.

The proposed GOP measure would permanently end a statutory provision under which nonprofit lenders that finance their loans using tax-exempt bonds receive a guaranteed return rate of 9.5 percent, although the bill does not totally close that loophole.

Moreover, it would also expand student loan relief for K-12 teachers of key subjects such as math, science, and special education, and expand opportunities for graduate study in these subjects.

NASFAA's Martin noted that this bill is essentially the same as the GOP-backed measure introduced in the House last year. "Looking at this bill, the same concerns we had last year are still there," Martin commented. "We in higher education are not looking for a Christmas tree to hang things on, but we do need legislation that meets the educational needs of students and the long-term needs of our country."

President Bush unveiled in February his discretionary budget request for fiscal year 2006, which would cut several longstanding aid programs in order to reallocate funds elsewhere in higher education.

The most controversial is a proposal to help pay for an increase to the need-based Federal Pell Grant program by recalling the revolving loan funds used to finance the Federal Perkins Loan program, essentially terminating the program.

The President's proposed fiscal year 2006 budget would also:

Retire the $4.3 billion Pell shortfall, increase the Pell maximum by $100 annually over five years to $4,550, and add funding for minority-serving institutions.

Create a $50 million Presidential Math and Science Scholars program, a $33 million enhanced Pell Grants for State Scholars program, and a $125 million Community College Access Grants program to foster dual enrollment for low-income and minority high schoolers who wish to take college courses.

Provide funding at the current levels for Federal Supplemental Educational Opportunity Grants (FSEOG), and Federal Work-Study.

Terminate funding for Byrd Honors Scholarships, the Leveraging Educational Assistance Partnership (LEAP) program, GEAR UP early awareness programs, and portions of TRIO.

Sen. Edward Kennedy (D-Mass.), the senior Democrat on the Senate Health, Education, Labor and Pensions Committee, introduced in February the College Quality, Affordability, and Diversity Improvement Act (S. 371), in part to address higher education reauthorization issues.

The Kennedy bill would go far beyond the Pell increases proposed by President Bush, double the maximum Hope Scholarship Tax Credit to $3,000 and make it available for all four years of college; provide financial rewards to colleges that switch to the Direct Loan program; and allow borrowers to refinance Federal Consolidation Loans to attain better rates.

The bill would maintain the authorization for LEAP, increase funding for TRIO and GEAR UP, and increase authorization levels for the campus-based financial aid programs: FSEOG, Federal Work-Study, and Federal Perkins Loans. Like the President's budget, the Democratic bill would increase funds to minority-serving institutions and for loan forgiveness for teachers in high-need fields. According to Martin, "Kennedy's bill is a 'message bill,' that essentially says, 'these are the issues we believe in.'"

Last year the Senate education committee never authorized a majority-party bill. The committee is expected to take a more active role in the reauthorization process this year.

Passage of the HEA reauthorization this year is far from assured, however, and much work remains to be done. "We still have a very divided electorate and Congress, and higher education, in my opinion, is not a priority on Capitol Hill at this time," Martin concluded.

Elizabeth Guerard is the assistant director for communications, National Association of Student Financial Aid Administrators (

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