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Government Affairs Home > Education > Higher Education Act

Higher Education Act Reauthorization

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Current Status

On August 14, 2008, President Bush signed the "Higher Education Opportunity Act" (P.L. 110-315), completing the first Higher Education Act (HEA) reauthorization since 1998. The bill creates new loan forgiveness programs, expands workforce shortage grants, increases Perkins loan limits, requires State maintenance of education funding, and provides for regulation and oversight of the student financial aid community.

Public Service Loan Forgiveness Clarified
Effective July 1, 2009, a new loan forgiveness program established by the "College Cost Reduction and Access Act of 2007" (P.L. 110-84) will absolve Direct student loans for borrowers who work 10 years in certain "public service" jobs and make loan payments during that time. [see Student Loan Repayment]. Among other professions, public service will include all 501(c)(3) employers, "faculty teaching in high-needs areas as determined by the Secretary," and service at private organizations providing "public health" or "emergency management" services. H.R. 4137 clarifies the definition of public health to include "full-time professionals engaged in health care practitioner occupations and health care support occupations, as such terms are defined by the Bureau of Labor Statistics."

Grants and Loan Forgiveness in Areas of National Need
P.L. 110-315 could expand medical schools' access to grants for Graduate Assistance in Areas of National Need (GAANN). Under the new definition, the Secretary of Education, in consultation with appropriate Federal and nonprofit agencies and organizations, including the National Science Foundation, the Department of Defense, the Department of Homeland Security, the National Academy of Sciences, and the Bureau of Labor Statistics, will designate areas of national need based on the following criteria:

  • The extent to which the interest in the area is compelling;
  • The extent to which other Federal programs support post baccalaureate study in the area concerned;
  • An assessment of how the program may achieve the most significant impact with available resources; and
  • An assessment of current and future professional workforce needs of the United States.

The AAMC believes that health professions education programs, such as medicine and nursing, should qualify for GAANN institutional grants in light of their expected workforce shortages.

P.L. 110-315 also creates a new loan forgiveness program for service in areas of national need [see Student Loan Repayment]. Under this program, "public sector employees" and "medical specialists" are eligible for up to $10,000 in loan forgiveness over 5 years. Public sector employment includes "full-time professionals engaged in health care practitioner occupations and health care support occupations." Medical specialists are defined as residents that have been accepted to, or currently participate in, an ACGME-accredited graduate medical education training program or fellowship that requires more than 5 years of total graduate medical training and has fewer U.S. medical school graduate applicants nationwide than the total number of positions available under these programs or fellowships.

The bill prohibits participants in the loan forgiveness program for service in areas of national need from receiving additional repayments for the same service under the new public service loan forgiveness program.

Perkins Loan Funding and Limits
A Federal Perkins loan is a low interest (5 percent) loan available to medical students with exceptional financial need. [see Federal Student Loans] P.L. 110-315 reauthorizes the Perkins loan program through FY 2015 at $300 million, a $50 million (20 percent) increase over the current authorization level. The bill also increases the annual Perkins loan limit for graduate/professional students from $6,000 to $8,000 and provides a corresponding increase in the aggregate (lifetime combined graduate and undergraduate) loan limit for graduate/professional students from $40,000 to $60,000.

Maintenance of State Education Funding
P.L. 110-315 includes a State "maintenance of effort" provision that requires a state's funding to public and private educational institutions to match (in the aggregate) the average annual support for the previous 5 academic years. Public institutions funding is defined as non-capital and non-direct research and development expenses or costs by such State. Private institutions funding is defined as funds provided by the State for student financial aid for paying costs associated with postsecondary education.

Financial Aid Oversight
P.L. 110-315 provides for regulation and oversight of the financial aid community [see Financial Aid Regulation]. Among other provisions, the conference agreement:

  • Requires institutions to develop and administer a code of conduct for their financial aid offices;
    Requires institutions to disclose all relationships with lenders;
  • Requires "preferred lender lists" to include at least three unaffiliated lenders and the process that was used to develop the list;
  • Prohibits financial aid administrators who participate on lender advisory boards from receiving compensation for such activities, and requires such administrators to report lender support provided for travel and related activities;
  • Prohibits staffing of campus financial aid offices by lenders or their employees, excluding services provided in exit interviews for borrowers;
  • Bans all gifts, opportunity pools, and revenue-sharing between lenders and institutions, with the exception of favorable loan benefits/terms, informational material, professional training programs, and exit/entrance interview services by lenders (under the direction of the institution's financial aid administrator); and
  • Requires certain lender disclosures in private education loan applications, solicitations, and approvals.

Higher Education Amendments

On September 27, 2007, President Bush signed the "College Cost Reduction and Access Act" (P.L. 110-84). Among the most notable changes, the measure includes a change to the definition of economic hardship deferment, which eliminates the pathway that most medical residents use to qualify for the program. The bill also creates a new income-based repayment and "public service" loan forgiveness program [see Student Loan Repayment].

On February 8, 2006, President Bush signed the "Deficit Reduction Act of 2005" (P.L. 109-171), which amends many of the student loan provisions under HEA. The Congressional Budget Office (CBO) estimated that the changes to the higher education programs in P.L. 109-171 will generate a net $11.9 billion in savings between FY 2006 and FY 2010 and $29.0 billion in savings between FY 2006 and FY 2015. While the law's provisions mandate savings of over $20 billion between FY 2006 and FY 2010 from higher education programs, $9 billion is recycled back into student aid. A majority of the savings are generated through increases to borrowers' interest rates and changes to lender-yield formulas.

Of particular interest to medical schools, P.L. 109-171:

  • Extended authority for Federal Family Education Loan (FFEL) program through 2012;
  • Expanded the loan eligibility for the federal Parent Loan for Undergraduate Students (PLUS) loan program to include graduate and professional students (now "GradPLUS");
  • Increased annual unsubsidized Stafford loan limits for graduate and professional students from $10,000 to $12,000;
  • Increased the interest rate for a PLUS loan in the FFEL from 7.9 percent to 8.5 percent;
  • Created a parallel fee structure for the FFEL and Direct Loan (DL) programs, incrementally reducing net borrower loan fees in both the FFEL and DL over the next 5 years to 1 percent in 2010;
  • Repealed spousal and in-school consolidation of FFEL and DL loans;
  • Limited "School as Lender" programs to Stafford Loans for graduate and professional students; and
  • Allowed the one time cost of obtaining the first professional credentials to be included in total cost of attendance for students enrolled in a program requiring professional licensure or certification.

On June 15, 2006, President Bush signed a FY 2006 Emergency Supplemental Appropriations bill (H.R. 4939), repealing the single-holder rule. The single-holder rule restricted consolidation of loans under the FFEL by prohibiting borrowers whose FFELP loans are currently with a single lender from consolidating under different lenders.

AAMC Activity

On May 14, 2008, the AAMC sent its most recent comment letter to the House Education and Labor Committee and the Senate Health, Education, Labor and Pensions Committee regarding the conference of the "College Opportunity and Affordability Act of 2007" (H.R. 4137) and the "Higher Education Amendments of 2007" (S.1642). The letter commented on provisions of the Higher Education Act (HEA) reauthorization bills that affect medical education including loan repayment, financial aid, institutional grant programs, and accreditation.

The AAMC also joined with the American Medical Association(AMA) in a March 12, 2008, letter to the House and Senate education committees urging reinstatement of the economic hardship deferment's "20/220 pathway." The 20/220 pathway allows medical residents who meet certain debt and income criteria to postpone loan repayments during their training, without the additional interest that accrues in forbearance. On March 5, 2008, the Department of Education announced that they would no longer use its regulatory authority to continue the 20/220 pathway, and would stop accepting applications effective July 1, 2009 [see Student Loan Repayment]. The AAMC-AMA joint letter noted that "medical residents rely on the 20/220 pathway to help defray their high debt burden," and "Borrowers with high loan debt may be deterred from entering public health service, practicing medicine in underserved areas, starting a career in medical education or research, or practicing primary care medicine."

Contact

Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116

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