Student Aid Legislation Passes House Education Committee With Amendments

On Jul 22, 2009, by a vote of 30-17, the House Education Committee passed an amended version of the Student Aid and Fiscal Responsibility Act of 2009 (H.R. 3221), which will now be reported to both the full House and the House Budget Committee. This leaves the door open for the bill to pass as stand-alone legislation or be taken up through the budget reconciliation process.

The bill would eliminate the Federal Family Education Loan Program (FFELP) and redirect those savings to increasing the Pell Grant and funding multiple other K-12 and post secondary education programs, including the President's proposed American Graduation Initiative which would pump $12 billion into community colleges and add 5 million new graduates by 2020.

"This legislation will help write the next great education legacy in this country," said Education Committee Chairman George Miller (D-CA) in his opening remarks. "All of these reforms are paid for by making common sense changes to the student loan programs."

The beginning of the hearing focused almost exclusively on the debate to move all schools into the Direct Loan program. Republicans offered an amendment to retain the FFEL program by extending the Ensuring Continued Access to Student Loans Act (ECASLA) through 2014 and another amendment to delay the elimination of FFELP until a study could be conducted to gauge possible job losses.

"This legislation vastly expands the reach of the federal government," stated Ranking Member John Kline. "I have to ask: Is there any industry not on the verge of federalization?"

Supporters of Direct Lending responded that the concerns about moving to 100 percent Direct Lending are largely overblown.

"We are not nationalizing the federal student loan program," said Rep. Thomas Petri (R-WI). "Rather, we are eliminating the federal loan program that has been fraught with scandal, is an unreliable source of funds, and costs billions more for taxpayers."

Petri also pointed to a recent survey released by NASFAA at the NASFAA National Conference that showed that most of the schools that have moved to Direct Lending in the last year said the conversion process was easier than they expected.

Representative Tim Bishop (D-NY) also weighed in on the claim that eliminating FFELP would cost jobs, stating that existing FFELP loans would need servicing far into the future and that the government will continue to contract with servicers on new loans made through the Direct Loan program.

Adopted Amendments

 

The markup hearing went on for several hours as committee members introduced a whopping 25 amendments to the proposed legislation. The proposed amendments covered a wide variety of topics ranging from pre-K issues to special education funding to water conservation in new campus construction. Seven of those amendments were either rejected through a committee vote or were withdrawn by their sponsors. Only a handful of amendments specifically dealt with Title IV funding.

A brief summary of the selected Title IV amendments that were adopted follows:

Manager's Amendment Submitted by George Miller (D-CA)  

  • Retains subsidized Stafford loans for grad/prof students
  • Slightly increases the proposed Stafford interest rate on loans first disbursed on or after July 1, 2012, to 2.5 percent (from 2.3 percent) plus the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1
  • Specifies which programs are subject to the asset cap (Pell, subsidized Direct Loans, and FWS); the original bill encompassed all Title IV need-based grants, loans, and work assistance. The revised language does not name FSEOG or Perkins loans. Unsubsidized Direct Loans and Direct PLUS loans, which are not considered need-based programs, would not be affected by the asset cap.
  • Changes allocation of College Access and Completion Fund from 24 percent to 23 percent to be made available to "Innovation in College Access and Completion National Activities" (Section 783) and from 1 percent to 2 percent to be made available to the Director of the Institute of Education Sciences to conduct a rigorous evaluation of the programs funded under the Access and Completion Fund (section 784).
  • Corrects erroneous changes (by eliminating them) to calculating the needs analysis Social Security tax allowance that had been proposed by the original bill.
  • Introduces a Job Retention Incentive Payment to servicers if the servicer agrees to give priority hiring for positions created as a result of the contract to those geographical locations at which the servicer performed student loan originations or servicing activities under FFELP.

Loan Forgiveness for Servicemembers Activated for Duty Submitted by Susan Davis (D-CA)  

  • An amendment that would forgive any federal student loans for members of the military that are borrowed for the term in which they are then called to active duty.

Veterans Educational Equity Supplemental Grant Program Submitted by Howard "Buck" McKeon (R-CA)  

  • An amendment to allow veterans who attend private colleges in states with a zero or very low basic tuition benefit to shift the unused portion of the maximum fee benefit to help cover costs of the veteran's actual tuition. This amendment seeks to fix an issue with the Post-9/11 GI Benefits where veterans were being denied funds because they attended schools in states that had very low tuition charges but higher student fees.

Extend Investment in HBCUs by Reuben Hinojosa (D-TX) (Cosponsored by Representatives Grijalva, Scott, Payne, Hirono, & Wu)  

  • An amendment to extend investment in HBCUs for an additional 5 years to 2019 to conform to the rest of the legislation.

Changes to the 90/10 Rule Submitted by Robert Andrews (D-NJ)  

  • An amendment to soften the 90/10 rule by: (1) extending the period from July 1, 2011, to July 1, 2012, whereby increased unsubsidized Stafford loan borrowing authorized by ECASLA is treated as non-Title IV revenue; (2) allowing funds from the proposed Direct Perkins Loan program to be treated as non-Title IV revenue until July 1, 2012; (3) giving proprietary schools three years (as opposed to two) to come into compliance with 90/10 provisions; (4) and giving schools two years (as opposed to one) of noncompliance before they would be moved into provisional eligibility status.

 

Publication Date: 7/22/2009

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