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Government Affairs Home > Education > Higher Education Act

Reauthorization of the Higher Education Act

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Current Status

Current authority for the Higher Education Act (HEA) expired on September 30, 2003; however, several extensions have been enacted, making no policy changes but allowing uninterrupted administration of the programs authorized under the law.

On September 27, 2007, the President signed the "College Cost Reduction and Access Act" (CCRAA, H.R. 2669, H. Rpt. 110-317), the budgetary provisions of the current HEA reauthorization. Among the most notable changes, the measure includes a change to the definition of economic hardship deferment, which has the potential to eliminate the pathway that most medical residents use to qualify for the program (see Economic Hardship Deferment). The bill also creates a new income-based repayment and "public service" loan forgivness program.

On July 31, 2007, President Bush signed the "Second Higher Education Extension Act of 2007" (P.L. 110-44) to extend the rest of HEA through October 31, 2007.

The President Feb. 8, 2006, signed the "Deficit Reduction Act of 2005" (S. 1932, P.L. 109-171), which includes many of the student loan provisions from HEA reauthorization (H.R. 609, S. 1614). The Congressional Budget Office (CBO) estimates that the changes to the higher education programs in P.L. 109-171 will generate a net $11.9 billion in savings between 2006 and 2010 and $29.0 billion in savings between 2006 and 2015. While the law's provisions mandate savings of over $20 billion between 2006 and 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, the new law:

  • extends authority for Family Federal Education Loan Program (FFELP) through 2012;
  • expands the loan eligibility for the federal Parent Loan for Undergraduate Students (PLUS) loan program to include graduate and professional students;
  • increases annual unsubsidized Stafford loan limits for graduate and professional students from $10,000 to $12,000;
  • increases the interest rate for a PLUS loan in the FFELP from 7.9 percent to 8.5 percent;
  • creates a parallel fee structure for the FFELP and Direct Loan (DL) programs, incrementally reducing net borrower loan fees in both the FFELP and DL over the next 5 years to 1 percent in 2010;
  • repeals spousal and in-school consolidation of FFELP and DL loans;
  • limits "School as Lender" programs to Stafford Loans to graduate and professional students; and
  • allows 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, the President 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 Federal Family Educational Loan Program (FFELP) by prohibiting borrowers whose FFELP loans are currently with a single lender from consolidating under different lenders.

Congressional Activity

The House and Senate have introduced a number of bills to be considered as reauthorization packages in the 110th Congress, including:

  • The House-passed "Student Loan Sunshine Act" (H.R. 890), which provides for oversight of the educational lending industry and financial aid administration;
  • The "College Cost Reduction Act of 2007" (H.R. 2669), an education budget bill approved by the House on July 11, 2007;
  • The "Higher Education Access Act of 2007" (S. 1762), the corresponding Senate education budget bill, approved by the Senate on July 19, 2007; and
  • The Senate HELP Committee-approved "Higher Education Amendments of 2007" (S. 1642), which includes the non-budgetary items of HEA reauthorization and the student loan oversight language.

A third House HEA reauthorization bill is expected later this year to address the non-budgetary provisions included in S. 1642.

S. 1762 increases the cap on the economic hardship deferment from 3 years to 6 years, allowing qualifying resident physicians to postpone federal loan repayments. H.R. 2669 eliminates this limit completely. The House and Senate bill also decrease the debt-to-income ratio necessary to qualify for the economic hardship deferment and create an income-based repayment system for federal educational loans. This system would cap repayment at 15 percent of the amount by which a borrower's adjusted gross income exceeds 150 percent of the poverty line.

H.R.890 is designed to establish conflict of interest requirements for lenders and institutions of higher education. The bill is a compromise between Rep. Buck McKeon's (R-Calif.) "Financial Aid Accountability and Transparency Act of 2007" (H.R.1994) and the Democratic version of the "Student Loan Sunshine Act," introduced Feb. 7 by House Education and Labor Chair George Miller (D-Calif.). Among other provisions, the Sunshine Act would:

  • Require institutions to develop and administer a code of conduct for their financial aid offices;
  • Require institutions to disclose all relationships with lenders;
  • Ban all gifts, opportunity pools, and revenue-sharing between lenders and institutions;
  • Prohibit financial aid administrators' participation on lender advisory boards (other college officials may participate without compensation or reimbursement of expenses);
  • Require "preferred lender lists" to include at least 3 unaffiliated lenders and the process that was used to develop the list; and
  • Prohibit staffing of campus financial aid offices by lenders or their employees, excluding services provided in exit interviews for borrowers.

Of particular importance to financial aid administration, the student loan oversight language in S. 1642 differs from the "Student Loan Sunshine Act" as follows:

  • Allows financial aid administrators to participate on lender advisory boards with reimbursement for travel and related activities;
  • Exempts travel for training sessions sponsored by lenders from prohibited gifts; and
  • Does not require lenders to notify institutions before issuing private educational loans.

S. 1642 also would require the public disclosure of accrediting agencies' findings and official "comments of the affected institution." The bill also would require consideration of an institution's "mission" as part of the standards for accrediting agencies. The final House reauthorization bill is expected to include accreditation reform provisions.

AAMC Activity

On July 11, 2007, the AAMC sent a comment letter to the House Education and Labor Chair George Miller (D-Calif.) and Ranking Member Howard "Buck" McKeon (R-Calif.) And to the Health, Education, Labor and Pensions Chair Edward Kennedy (D-Mass.) And Ranking Member Michael Enzi (R-Wyo.). The letter addresses the multiple House and Senate bills that make up the HEA reauthorization packages. In the letter, the AAMC recommends:

  • Adoption of the House language in H.R. 2669 to remove the three-year limit on the Economic Hardship Deferment in the final HEA reauthorization package;
  • That Congress direct the Secretary to define the aggregate combined Stafford loan limit for health professions students in regulation and increase the amount to account for the annual loan limit for 12 month programs and for increases in the aggregate combined Stafford loan limits;
  • Adoption of the Senate Student Loan oversight language in S. 1642 with the addition of the private loan notification requirement in H.R. 890;
  • That public disclosure of accrediting agencies' findings and the comments of an affected institution remain at the discretion of the institution; and
  • The inclusion of report language to exempt (in the interest of public health) medical programs and institutions from proposed "mission"-related accreditation standards in S. 1642.

With the high debt levels of medical school graduates, many medical students come up against the annual and even the aggregate limits for federal Stafford education loans. Because the current limits have not been raised in over a decade, the Association believes that these limits should be adjusted to have at least kept up with the cost of inflation. Additionally, the unique nature of residency training makes repayment of these high debt burdens difficult in the years immediately following medical school graduation. Specifically, the AAMC advocacy agenda for the HEA reauthorization has been to support increasing the annual limit on subsidized Stafford loans from the current $8,500 to at least $12,000, and to extend the Economic Hardship Deferment throughout the initial residency period for individuals that continue to qualify. The Association also supports including all school-certified educational debt in the calculation used to determine eligibility for the deferment.

Contact

Matthew Shick, Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 828-0525

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