Reauthorization

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Reauthorization

• SASFAA Conference
• February 15, 2005

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Reauthorization of the Higher Education Act of
1965As Amended
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Reauthorization What Is It?

• A type of legal plea bargaining (think Enron,
  WorldCom, etc.)
• Something Bob Villa shows you on This Old House
• Renewal of all federal higher education programs
• All of the above

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Why Is There a Reauthorization?

• Job security for 10,000 bureaucrats and lobbyists
• The moons of Jupiter have aligned with Halleys
  Comet
• Without it, every federal higher education
  program ceases to exist October 1, 2005

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When is Reauthorization?

• Every so often, when the moons of Jupiter
• Way too often how else can those 10,000
  lobbyists defend their billings?
• Every 5-6 years, depending on
• Congress currently in a continuation
• from October 2003.

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What Factors Influence Reauthorization?

• Federal deficit spending
• State revenue shortfalls
• Rising college costs
• Reduced Pell Grant purchasing power
• Continuing gaps in college participation
• Growth in merit aid
• Demographics

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Reauthorization Issues

• Budget vs. Program Costs
• Grant/Loan Imbalance
• Need Analysis Methodology
• College Costs
• Access, Accountability, Affordability

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The Coalition for Better Student Loans

• ACE EFC NASFAA
• AAU NAICU NCHELP
• CPA NASULGC SLMA
• CBA
• 10 Additions February 25, 2004
• AABC CIC NASCUUMC
• AAPICU DHECC NADSDA
• AICAD FIHE UNCF
• CCCU

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Recommendations

• Increase Stafford Loan Limits
• Provide Origination Fee Relief
• Improve Repayment Options
• Maintain a Viable Loan Consolidation Program
• Extend Loan Forgiveness in Needed Occupations

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Increase Stafford Loan Limits

• Increase First Two Years Annual Limit
• Create Flexible Borrowing Accounts
• Increase Limits for Graduate and Professional
  Students
• Flexibility to Set Lower Limits

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Increase 1st and 2nd Year Annual Limit

• Dep. 1st Year 4,000 Cum. 4,000
• Dep. 2nd Year 6,000 Cum. 10,000
• Indep. Addl 1st Year 5,500 Cum. 9,500
• Indep. Addl 2nd Year 5,500 Cum. 21,000

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Create Flexible Borrowing Accounts

• Dep. 3rd 6th Years 10,000 Annual
• Cum. 20,000 Aggregate 30,000
• Indep. 3rd 6th Years 7,000 Annual
• Cum. 28,000 Aggregate 39,000
• Total 69,000

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Increase Grad/Prof Students

• Subsidized 1st 6th 12,000 annual
• Unsubsidized 25,000 per year minus subsidized
  amount
• Aggregate set by regulation

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Ability to Set Lower Limits

• School-Based Policy

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Provide Origination Fee Relief

• Target Subsidized Stafford Borrowers
• Phase in Through Annual Increments

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Improve Repayment Options

• Interest-Only Plan
• Partial Interest Plan
• Extended Borrower Repayment

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Loan Consolidation Improvements

• Interest Rate Structure
• Retain Single Holder Rule
• Close Perkins Loan Loophole
• Offset Fee, if Necessary

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Extend Loan Forgiveness

• Borrowers entering low-paying, high-need career
  fields, i.e., teaching in low-income areas
• Provide funding for forgiveness program

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Advisory Committees Charge from Congress

• Primary Objectives
• Reduce application burden and complexity
• Address two key problems in need analysis
• Address certain key constraints

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Advisory Committees Charge from Congress
(continued)

• Examine ways to reduce application burden and
  complexity
• Using participation in federal means-tested
  programs to qualify for the SNT
• Tailoring the form to students circumstances
• Providing students with an estimate of their
  eligibility for various types of aid
• Streamlining the timing of the application
  process
• Reducing the number of data elements

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Advisory Committees Charge from Congress
(continued)

• Identify ways to simplify need analysis and
  address two key problems
• The student work penalty
• The current process for updating
• the state and local tax allowance

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Constraints from Congress

• Focus on the needs of low- and moderate- income
  students
• Identify and assess any potential adverse effects
  on
• Federal program costs
• Program integrity
• Delivery system
• Distribution of Pell Grants
• Consult broadly with stakeholders in higher
  education

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Advisory Committee - 2005 Reauthorization
Recommendations

• Simplification of financial aid process
• Provide students with early assurances of
  adequate grant aid through federal/state
  partnerships
• The Student Aid Gauntlet

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The Student Aid Gauntlet Recommendations

• Create a System of Early Financial Aid
  Information
• Make Federal Need Analysis Transparent,
  Consistent and Fair (Costs)
• Reform Treatment of
• Student Earnings
• College Savings Plans
• State and Local Taxes
• Special Circumstances

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The Student Aid GauntletRecommendations
(continued)

• Expand Existing Simplification to More Students
• Expand automatic zero EFC (auto-zero) income
  threshold from 15,000 to 25,000 (Costs)
• Expand and streamline the Simplified Needs Test
  (SNT) to low- and moderate-income students
  (Costs)
• Allow All Students to Apply for Financial Aid
  Earlier

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The Student Aid GauntletRecommendations
(continued)

• Make the FAFSA Relevant and Understandable
• Eliminate redundant questions
• Eliminate irrelevant questions to federal or
  state aid
• Simplify language

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The Student Aid Gauntlet Recommendations
(continued)

• Create a Simpler Paper Form for Low-Income
  Students
• EZ-FAFSA
• Phase Out the Full Paper Form and Increase the
  Use of Technology 5 year timeline

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The Student Aid GauntletRecommendations
(continued)

• Simplify and Streamline FAFSA on the Web
• Reduce the number of data elements
• Simplify the Verification Process
• Create and implement a centralized, web-based
  verification system
• Create a National Partnership to Make Access
  Simple and Certain
• Public/private partnerships

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Legislative Action to Date (U. S. House of
Representatives)

• HR 507 The College Access and Opportunity Act
  of 2005

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House Bill Overview HR 507

• Pell Grant Provisions
• FFELP Changes
• Positive Provisions
• Institutional Changes

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HR 507 Pell Grant Provisions

• Retains 5,800 maximum award for AY 2005-06
  through AY 2012-13
• Eliminates Pell Grant tuition sensitivity
  provision
• Establishes year-round Pell Grants for students
  in baccalaureate degree programs at institutions
  with a graduation rate of 30 or more for 4
  preceding years

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HR 507 Pell Grant Provisions

• Establishes Pell Grant Plus for State Scholar
  achievers
• Eligible recipients have completed rigorous State
  Scholars program of study
• Pell eligible for year award is granted

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HR 507 Pell Grant Provisions

• 1st year Pell Grant eligible students enrolled
  full time can receive additional 50 of scheduled
  award.
• 2nd year Pell Grant eligible students enrolled
  full time, with 3.0 GPA who meet SAP standards
  can receive additional 50 of scheduled award.

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HR 507 Loan Changes

• Increase Loan Limits
• 2,625 to 3,500
• 3,500 to 4,500
• Maintain 23,000 cap
• Graduate unsub 10,000 - 12,000

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HR 507 Loan Changes

• Changes interest rate to variable on
• all - including consolidation loans
• Eliminates single holder rule
• Requires reporting of borrower credit to all
  national credit bureaus
• Interest-only loan payment for 2 years of not
  less than 600

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HR 507 Loan Changes

• Reduces origination fees
• From 3 to 2 after July 1, 2006
• and before July 1, 2008
• From 2 to 1.5 after July 1, 2008 and before
  July 1, 2010
• From 1.5 to 1.0 after July 1, 2010

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HR 507 Loan Changes

• Permanently extends the limits on higher than
  market subsidies paid to certain lenders (FFELP)
• Reforms floor income guarantees (FFELP)
• Additional consumer information relative to
  consolidation loans
• Expand loan forgiveness for teachers

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HR 507 Positive Provisions

• Restores expired loan disbursement provisions
• Increases dependent student IPA from 2,440 to
  3,000
• Treats 529 savings plans as parental assets
• Expands SNT and Auto-Zero EFC to recipients of
  means-tested federal benefit programs

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HR 507 Positive Provisions

• Makes improvements in Return of Title IV Funds
  calculation
• Increases annual and aggregate loan limits for
  Perkins Loan borrowers
• Clarifies when students lose eligibility due to
  drug offenses

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HR 507 Institutional Changes

• Single definition of institution of higher
  education
• Eliminates 90/10 rule on for-profit institutions
• Eliminates 50 rule on distance education
• Transfer of credit policy modifications
• Modifies campus-based allocation formula

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HR 507 Institutional Changes

• Alters institutional accreditation requirements
• Adds new reporting and disclosure requirements on
  institutions