Houses Passes Student Aid and Fiscal Responsibility Act with Amendments

The House of Representatives passed H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, this afternoon by a 253 to 171 vote. The bill would use savings from eliminating the Federal Family Education Loan Program (FFELP) to bolster the Pell Grant program, fund a new Federal Direct Perkins Loan program, and increase funding in other higher education and K12 programs.

"While the Student Aid and Fiscal Responsibility Act is not the perfect bill, it demonstrates that lawmakers and the Obama administration are committed to removing financial barriers to higher education to ensure students realize their potential and help the U.S. remain a leader in the global economy," NASFAA Interim President and CEO Joan Crissman said in a statement. "We look forward to working with lawmakers to improve this bill as it moves through the legislative process."

The House adopted several amendments to the bill that NASFAA had advocated in a letter sent to Representatives on Wednesday. These amendments:

make part-time students eligible for Year-Round Pell Grants
allocate $50 million to the Department of Education to help schools transition to the Direct Loan program
strengthen the support services being offered to student loan borrowers

The bill's provision to eliminate FFELP created a rift between Democrat and Republican leaders in the House.

"By converting all new federal student loans to the Direct Loan program starting in July 2010, we will finally end wasteful taxpayer subsidies that are keeping a broken system afloat," said George Miller (D-CA), Chairman of the House Education and Labor Committee, during debate on the House floor. "We will also insulate all federal college loans from future turmoil in the financial markets."

The committee's top Republican John Kline (R-MN) disagreed.

"By eliminating the FFEL program, we will lose the choice, competition, and innovation of the private sector," he said on the House floor. "That includes everything from technological innovations to loan discounts and borrower services. We will also lose jobs -- an estimated 30,000 or more in congressional districts from coast to coast."

Kline also expressed concern about spending in the bill, calling it "a massive entitlement spending spree."

Similar legislation has yet to be taken up by the Senate, although it is expected to do so in the near future. After the Senate passes its bill, lawmakers from the House and Senate will hammer out the differences between the two bills.

A comprehensive NASFAA summary of the entire bill, with amendments accepted by the House Education Committee and amendments accepted on the House floor will be released in the coming week.

Summary of Accepted Student Aid Amendments

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

Clarifies that part-time students can also receive year-round Pell Grants (p. 1-2) and sunsets the authority to make year-round Pell Grants at the end of FY 2014.
Adds nonprofit subsidiaries of guaranty agencies to the list of sub-grantees that can be awarded State Innovation Completion Grants by the State
Allows guarantors, nonprofit subsidiaries, and other nonprofits as eligible entities for "Innovation in College Access and Completion National Activities" dollars
Adds a new category of eligible student to the provision introduced by P.L. 111-39 (the technical amendments made to the HEOA) that reduces to zero the Title IV EFC of students whose parents or guardians were killed in action in Iraq or Afghanistan after 9/11. The EFC of a student whose parent or guardian died in the line of duty while actively serving as a public safety officer would be reduced to zero, effective with the 2010-11 academic year. Public safety officers include law enforcement officers, firefighters, and members of rescue squads or ambulance crews; may be paid or volunteer but must serve a public agency in an official capacity. [Proposed amendment does not specify any time period for death of parent/guardian.]
Removes the Federal Work-Study program from the list of programs that students would be ineligible for funds due to assets above $150,000. The Pell Grant and Subsidized Stafford Loans continue to be subject to the proposed asset cap
Deletes the provision in the bill that would have eliminated the limitations under which borrowers with a FFELP consolidation loan could re-consolidate into the Direct Loan program
Makes changes to the waiver provisions for lenders to receive a revised special allowance index
Clarifies that an "eligible not-for-profit servicer" - one of the entities eligible for Direct Loan Servicing contracts in an applicable state - must be an entity that is not owned or controlled in whole or in part by a for-profit entity or a nonprofit entity having its principal place of business in another state
Provides the Department of Education with $50 million in FY 2010 to provide schools with resources and assistance in transitioning into the Direct Loan program. That assistance includes "technical support, training for personnel, customized assistance to individual institutions of higher education, development of informational materials, and other services the Secretary determines to be appropriate."
Changes the minimum base guarantee for the new Direct Perkins Loan program, to the average amount of Perkins Loans made for award years 2003-04 through 2007-08 as compared to the total calculated allocation under the new formula; allocations are ratably reduced for schools whose allocations under the new proposed formula exceed their base guarantee. [As originally proposed, the base guarantee was calculated using the preceding 5 years rather than set years, and was compared only to the adjusted self-help need portion of the allocation formula, notwithstanding ratable reductions in the event of insufficient allocations.]

Financial Literacy Amendment Submitted by Jim Himes (D-CT), Carolyn McCarthy (D-NY), and Allyson Schwartz (D-PA): Makes five minor language adjustments to strengthen the financial literacy provisions of the State Innovation Completion Grants, Innovation in College Access and Completion National Activities, and contracting requirements related to private student loan servicers.

Guarantor Amendment Submitted by Bob Etheridge (D-NC), Peter Welch (D-VT), David Price (D-NC), Earl Pomeroy (D-ND), John Lewis (D-GA), David Scott (D-GA), Chellie Pingree (D-ME), Paul Tonko (D-NY), and Doris Matsui (D-CA): Clarifies that borrower services, including delinquency prevention, default aversion, and loan counseling, are allowed uses of grant funds. The amendment also explicitly authorizes the Department of Education to contract directly with guaranty agencies for funded services.

Direct Loan Outreach Amendment Submitted by Henry Cueller (D-TX): Requires the Secretary of Education to conduct outreach activities to educate students and their families about the transition to Federal Direct Lending.

An amendment to extend the ECASLA program through 2014 submitted by the ranking member of the House Education Committee John Kline (R-MN) was not accepted. An amendment to eliminate a provision in H.R. 3221 that would allow convicted drug users to receive federal student aid was withdrawn. The full list of amendments under consideration is available online.

Statements on House Passage of SAFRA

President Obama's Statement on House Passage of Historic Education Reform Bill

House Education Committee Chairman George Miller Statement

Ranking Republican on House Education and Labor Committee John Kline's Statement

Senate Education Committee Chairman Tom Harkin's Statement

Education Secretary Arne Duncan's Statement

U.S. Student Association Press Release

National Direct Student Loan Coalition Statement

U.S. Public Interest Research Groups (US PIRG) Statement

Posted 09/18/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.