House Passes Reauthorization Bill

On a vote of 354-58, the U.S. House approved the College Opportunity and Affordability Act. The legislation reauthorizes major federal student aid programs, seeks to constrain college cost increases, and establishes new guidelines for relations between postsecondary institutions and student loan service providers.

Lawmakers approved 26 amendments. The most significant amendment offered by Rep. George Miller, D-Calif, who chairs the House Committee on Education and Labor, makes several changes to the reauthorization bill that cleared the committee last November. Among the changes are the following items:

• Stafford loan default rates would be calculated based on a three-year borrower cohort, rather than the current two-year cohort, but sanctions for schools that fail to meet the new cohort default rate standards would not apply until fiscal 2012. In addition, the excessive default rate standard effective for the three-year cohort measurement would be increased to three consecutive years of rates of 30 percent or more, rather than the current standard of 25 percent or more.  Under the new cohort rate definition, schools could qualify for waivers of delayed or multiple disbursement requirements with cohort rates of less than 15 percent rather than the current limit of 10 percent.
• Effective July 1, PLUS loans to graduate and professional students would qualify for a six-month grace period before repayment. Parent PLUS loans would continue to offer no grace period.

The House rejected an amendment by Rep. Danny Davis, D-Ill., that would have permitted private education loans to be discharged in bankruptcy after five years of repayment.

The House accepted two amendments offered by Rep. Thomas Petri, R-Wis., a leading advocate of the William D. Ford Direct Loan Program. One would require an evaluation and pilot program using “alternative market-based mechanisms” to determine lender yields in the Federal Family Education Loan Program. A similar study authorized by the 1998 amendments to the Higher Education Act found significant problems with an auction-based student loan system.

Petri’s other amendment would limit the scope of an annual audit of the direct loan program, a provision that had been approved by the House education committee, and instead provide for redundant audits of student loan guarantors in the FFELP. Guarantors already are subject to annual compliance audits by outside auditors, regular audits by the U.S. Department of Education’s Office of Federal Student Aid, and periodic audits by the department’s Office of the Inspector General.

The House also approved additional student aid-related amendments that will:

• Prevent interest from accruing on direct loans for members of the military and National Guard while they are on active duty in a combat zone.
• Extend Pell Grant eligibility to students who lost a parent or guardian as a result of the conflicts in Iraq or Afghanistan.
• Provide federal student loan relief to school administrators serving low-income districts.
• Encourage pre-population of the Free Application for Federal Student Aid with federal income tax data.
• Authorize a study of the costs and benefits of making student aid available to less than half-time students.
• Provide loan forgiveness to community college students based on the number of hours they mentor at-risk children.

Negotiators for the House and Senate now will meet in an attempt to square differences between the House-passed bill and a reauthorization measure that the Senate approved last July 24. The current HEA extension expires March 31, 2008, so the House-Senate conferees are expected to try to complete their work prior to that date.