President's Budget Offers
First Glance at Higher Ed Reauthorization Proposals
February 6, 2004 - The president's FY 2005 budget
proposal includes several provisions related to the reauthorization
of Title IV the Higher Education Act, which governs most of
the student financial aid programs. Legislative authority
for the Act expired on Sept. 30, 2003, and Congress and the
Administration are currently working on their proposals for
reauthorizing the legislation. The following proposals related
to the reauthorization of the Higher Education Act may be
of interest to medical schools and teaching hospitals:
- Increase undergraduate freshman loan limits from the
current $2,625 to $3,000. The overall limit for undergraduates
does not change from the current $23,000. Such a change
is estimated to cost $775 million over ten years.
- Eliminate the scheduled interest rate move to 6.8 percent
in 2006 for Stafford subsidized and unsubsidized loans,
maintaining it as a variable rate. This comes at a cost
of $1.8 billion over ten years. The interest rate for
consolidation loans is not specifically mentioned.
- Proposes that guaranty agencies be required to collect
the 1 percent insurance premium for loans disbursed after
Oct. 1, 2004, which would produce additional revenue of
$3.8 billion over the next ten years.
- Extend repayment up to 30 years, depending on the size
of the loan balance (12 years for $7,500 - 10,000; 15
years for $10,000 - $20,000; 20 years for $20,000 - $40,000;
25 years for $40,000 - $60,000; and 30 years for $60,000+).
This proposal is estimated to cost $1 billion over 10
years.
- Exempt institutions with less than 10 percent cohort
default rates from the 30-day delay for disbursements
to first-year students, and from the requirement that
loans be issued in at least two separate disbursements.
- Clarify that ineligibility for student aid for students
convicted of a drug-related offense is limited to those
whose offenses occurred while enrolled in higher education.
- Finally, the budget includes $3 billion for additional
undetermined student benefits to be negotiated in consultation
with Congress. Reduced fees, default prevention activities,
and additional loan limit increases are mentioned as potential
items.
Information:
Jonathan Fishburn, Director, Research, Education and Veterans' Legislative Affairs
AAMC Government Relations
jfishburn@aamc.org
(202) 828-0525
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