House Approves Reauthorization Bill

On a largely party-line vote of 221 to 199, the U.S. House has approved legislation that would complete the reauthorization of the Higher Education Act of 1965. Portions of the law that supports the major federal student-aid programs were reauthorized as part of the Deficit Reduction Act of 2005, which was signed into law in February.

The remaining provisions are included in the College Access and Opportunity Act, which now goes to the U.S. Senate for consideration.

Key student-aid provisions of the bill include the following items:

Federal Family Education Loan Program

• Loan forgiveness. Provides loan forgiveness of up to $5,000 to borrowers who work in areas of national need — including early-childhood educators, nurses, foreign-language specialists, librarians, bilingual-education teachers, emergency responders, child-welfare workers, speech language pathologists, qualified public-service employees, certain medical specialists, as well as child and adolescent mental-health professionals — after working full time in those fields for five years.
• Loan consolidation. Effective July 1, 2006, repeals the so-called “single-holder rule,” which requires borrowers whose loans are held by one entity to first seek consolidation loans from that entity. Consolidation lenders, and schools during exit counseling, would be required to provide borrowers significant consumer information about the effects of loan consolidation. Consolidation loans also would count against aggregate loan limits.
• Loan repayment. For graduated repayment, eliminates the rule that no payment may exceed three times the amount of any other payment.
• Credit-bureau reporting. Requires loan holders to report to all national credit bureaus.

Pell Grants

• Increases the maximum authorized Pell-Grant award to $6,000 from $5,800, although the actual maximum award is subject to annual appropriations, and the current maximum award is $4,050.
• Provides authority for year-round Pell-Grant funding to help students accelerate the completion of their studies.
• Limits a student’s Pell-Grant eligibility to 18 semesters or 27 quarters.
• Authorizes a new “Pell Grant Plus” program that would add up to $1,000 to the maximum Pell-Grant award for first- and second-year students who have completed a rigorous high-school curriculum.
• Repeals the tuition-sensitivity requirement that limits the amount of Pell-Grant aid that a student attending a very low-cost school can receive.

Perkins Loans

Raises annual loan limits to $5,500 for undergraduates and $8,000 for graduate students.

Need Analysis

Expands eligibility for the simplified needs test.

Institutional Eligibility

• Includes for-profit institutions in a single definition of an institution of higher education.
• Applies to all postsecondary institutions, rather than just proprietary institutions, the requirement that at least 10 percent of the institution’s revenues come from sources other than federal student-aid programs.

College Costs

Provides for the calculation of a college-affordability index for each postsecondary institution receiving federal funds. The index compares an institution’s tuition-and-fee increases against the Consumer Price Index. Beginning in July 2009, institutions whose tuition-and-fee increases are more than double the index could be required to submit reports and management plans to the government. Republican leaders significantly softened some of the potential consequences for institutions with above-average cost indices. For example, only those institutions whose cost increases fall in the highest 10 percent would be required to establish quality and efficiency task forces. In addition, an earlier provision calling for reviews and audits of high-cost schools by the U.S. Department of Education’s inspector general was removed from the final version of the bill.

Campus-Based Programs

Republican leaders also relented on an earlier provision to phase out the formula for distributing campus-based-program funds to schools based on amounts the institutions previously received. The final measure retains the current allocation formula.

The measure now goes to the U.S. Senate. While Congress continues work on reauthorization, lawmakers have approved, and President Bush has signed into law, a measure that extends the Higher Education Act for another three months, through June 30.