Reauthorization of the Higher Education Act
In addition to the concerns outlined in Secretary Riley?s letter, this attachment expresses the Administration?s views on other important issues in the conference on the Higher Education Amendments of 1998. The issues are discussed in the order in which they appear in the current law or, in the case of new programs, in the passed versions of the bill.
Both the House and Senate versions of the bill would authorize the Department to offer grants and recognition awards to combat the illegal use of drugs and alcohol on campus. The Secretary would be authorized to make grants to or enter into contracts with institutions for alcohol, drug and violence prevention programming. This authority is similar to a program that already exists in the Safe and Drug-Free Schools program. While we believe this activity is very important, we do not believe that it needs to be authorized in both the Higher Education Act and the Safe and Drug-Free Schools Act. We recommend maintaining the authorization in Safe and Drug-Free Schools.
Both versions of the bill make several positive changes to the institutional aid provisions that the Administration has recommended. Both versions of the bill allow institutions participating in Title III programs and Hispanic-Serving Institutions (HSIs) to use up to 20% of their grant funds to establish or expand an endowment fund and expand allowable activities to encourage institutions to use technology. Both versions would provide the HSI program more visibility by moving the program to a separate part in a different title, and simplifying the definition of HSI. Both the Senate and the House versions authorize grants for Tribal Colleges, as proposed by the Administration.
We prefer the House language on the changed funding formula for Historically Black Graduate Institutions (HBGIs) with the addition of the substance of the descriptive factors in the Senate provision for a competition; this will provide a more equitable distribution than either provision by itself. We also support the Senate provision for a minimum grant of $1,000,000 to institutions before matching is required and the $28,000,000 threshold for the use of the funding formula.
We appreciate the strong support for the Pell Grant program that is evident in both versions of the bill, and are very pleased to see that many of the Administration?s proposals for the Pell Grant program have been included in either one version or the other.
We support the House provision to extend the cohort default rate cutoff to Pell Grant eligibility. This extension will increase institutional accountability and better protect students from unscrupulous schools.
We support the Senate version of the bill?s inclusion of the 150% time limit on student eligibility for Pell Grants, the new requirements for stand-alone English-as-a-Second- Language (ESL) programs, the tuition-sensitive award rule, and the extension of Pell Grant eligibility to college graduates enrolled in a non-graduate teacher training program. The Administration?s proposal to limit Pell Grant eligibility to 150% of the time normally required to complete the course of instruction, with adjustments for students attending part-time and exemptions for students with disabilities, would prevent abuse of the program. We urge that the Administration?s proposal to impose a total time limit of eight academic years of full time study, or the equivalent period of part-time study, be added to the 150% limit in the final version of the bill.
The Senate provision that students in stand-alone ESL programs may receive Pell Grants only if a minimum percentage of the program?s students pass an English proficiency exam will also increase program integrity. The Senate version also includes the Administration?s proposal to clarify that "tuition" includes fees required for attendance, and that the institution may determine the dependent care/disability allowance.
Finally, the Senate version includes a provision that would allow college graduates to receive Pell Grants on a case-by-case basis for a fifth year if they are enrolled in a teacher training program. This program would provide new assistance to encourage college students to become well-trained, motivated teachers. However, we need to ensure that it is administratively workable. We look forward to working with you in conference to refine this provision.
Current law provides for grants of both four and five years in the TRIO programs. The House version of the bill adopts the Administration?s proposal to standardize grant duration in the Talent Search, Upward Bound, Student Support Services, Postbaccalaureate Achievement, and Educational Opportunity Centers Programs at four years; the Senate version of the bill does not change current statutory provisions. We strongly support the House?s changes, since current law is confusing to the community, presents little or no practical benefit and is administratively complex.
The House version of the bill would eliminate the current administrative set-aside of 0.5% of appropriations for the TRIO Programs. The Senate version of the bill retains the set-aside. Eliminating the set-aside would have a significant and negative impact on the Department?s ability to administer the TRIO Programs effectively. We support the Senate version.
The Administration proposed modifying the campus-based aid formula to gradually distribute a larger share of the program appropriation on the basis of measured institutional need for funds. The House version would eliminate the "pro rata" step. However, this change could lead to some institutions? allocations being reduced too quickly, rather than the gradual shifts proposed by the Administration. The Senate version has no comparable change, and, thus, fails to respond to changes in institutional need. We urge the conferees to adopt the Administration?s proposal.
Neither passed version of H.R. 6 would authorize the college awareness program proposed by the Administration. Recent studies have shown that low-income students attend college at significantly lower rates than individuals from high- and middle-income families, not because of financial inability to attend college but because of a lack of information about the requisite steps to prepare for, apply for, finance, and enroll in college. A college awareness program is a crucial element in our efforts to increase college attendance among low-income students, and would complement well the High Hopes program, which received support in both versions of the bill.
Both versions of the bill authorize up to six guaranty agencies to enter into voluntary flexible agreements with the Department. Guaranty agency arrangements need to focus more heavily on preventing defaults, and voluntary flexible agreements could help promote greater administrative efficiency and improved service for students.
The Administration supports components of both the House and Senate versions of the guaranty agency reform, including the House provisions to allow the Secretary to regulate the operating fund when monies are owed to the Federal fund and to allow the Secretary to waive or modify any statutory requirements for agencies that enter into voluntary flexible agreements. The Administration supports the provision in the Senate version that specifies that voluntary flexible agreements cannot restrict borrowers from selecting the lender of their choice. The Administration also supports the Senate provisions to prohibit agencies that fail to make scheduled payments from receiving additional Federal funds, to require the Secretary?s approval before agencies may support other student aid activities, to prohibit agencies from depositing interest earned on the Federal fund in the operating fund, and to reduce the loan processing and retention allowance fee. The Administration opposes the Senate provisions that would add burdensome notice requirements regarding voluntary flexible agreements.
The Administration also supports the provision of the House version that requires guaranty agencies to invest funds deposited into their operating funds in accordance with prudent investor standards, rather than the Senate provision which permits investment of the fund at the sole discretion of the guaranty agency.
We support the Senate provision to offer extended repayment plans of up to 25 years to FFEL borrowers with loans in excess of $30,000. We also support the House provision that allows FFEL borrowers to retain their interest subsidies when they consolidate their loans. These changes would benefit FFEL borrowers with heavy debt burdens and would help level the playing field between the two loan programs. In addition, we support consideration of efforts to extend income-contingent repayment plans to FFEL borrowers.
Unfortunately, neither version would lower the up-front loan fees for students. Reducing the origination fees for Direct Loans and the insurance fees for FFEL loans would reduce students? cost of borrowing. The Administration proposed to lower the fees by one percentage point for all borrowers, and to phase them out entirely for borrowers of subsidized loans. These fee reductions could be included in the conference agreement if their costs are appropriately offset.
Both the House and Senate include programs to forgive loans for teachers in high-poverty schools. We support encouraging students to teach in the schools where their talents are needed most. However, changes are needed to the program as currently written to make the program more effective and its administration, by the Department, institutions, guaranty agencies, and lenders, more workable. For example, because of the need to track student loans separately under the loan forgiveness provisions as currently structured, a student seeking loan forgiveness would be unable to consolidate his or her student loans. This is inequitable because it would limit the student?s repayment options. In addition, the House and Senate versions of the bill also contain provisions for loan forgiveness for child care workers. In lieu of these proposals, the Administration supports its Child Care Provider Scholarship Fund, which would provide more than $300 million in scholarships over five years to up to 50,000 child care providers annually.
We would like to work with you on making the loan forgiveness provisions more equitable and effective. Options to consider include: treating all Federal student loans equally, regardless of the year in which they were received; offering loan forgiveness from the first year of teaching, or explicitly providing forbearance for the first years of teaching; changing the percentage of loans that may be forgiven each year; and creating a simpler administrative and financing mechanism for both teachers and child care workers.
Finally, under both versions of the bill, borrowers who have their remaining outstanding loan balance forgiven after 25 years of income-contingent repayment must continue to pay taxes on the amount forgiven. Saddling borrowers with additional tax liability is neither appropriate nor was it ever intended. The Administration supports adding a provision to exempt the amount forgiven from Federal income taxation.
Under current law, secondary markets using tax-exempt funds must file a plan for doing business with the Department. This provision includes substantive restrictions on discrimination and on payment of premiums exceeding one percent for loans. The House version of the bill would eliminate both the filing requirement and the restrictions. The Senate version eliminates the filing requirement and the payment of premiums restriction, retaining only the nondiscrimination provision. The Administration supports elimination of the filing requirement but retention of both substantive restrictions.
Neither version would permit the Secretary to pay the interest that accrues on an unsubsidized FFEL or Direct Loan while the borrower is receiving an economic hardship deferment on the loan and performing community service. This important proposal is part of the President's call to action to all Americans to serve their communities, and would allow individuals with student loans who qualify for economic hardship deferments to take up to three years to serve their communities without accruing additional interest on their loans. This would remove a financial obstacle to community service for borrowers who already satisfy economic hardship criteria, such as Peace Corps volunteers.
The Administration continues to support an objective, market-based determination of appropriate rates of return for lenders on student loans. A number of different market mechanisms have the potential to achieve this outcome, and we are eager to work with Congress to find the right approach. We also support obtaining financial information from FFEL lenders as part of a new study that could better guide the Congress regarding the profitability of lenders and the formulation of policy on student loans.
The House version of the bill would add several burdensome requirements. First, it would add a requirement that at least two percent of an institution's allocation (in addition to the current five percent community service requirement) be spent on early childhood reading tutors. The House version of the bill would also require institutions to give priority in Work-Study funds to students tutoring in schools that meet certain criteria, a requirement which would unnecessarily complicate institutions' administration of the program. The Department has had great success with its voluntary partnerships with America Reads tutors, and prefers to continue with that approach.
Both the House and Senate versions of the bills would eliminate the Federal Perkins Loan revolving fund account; the House would do so explicitly in order to subsidize loan forgiveness for teachers in the FFEL and Direct Loan programs. We oppose this elimination. Without this fund, Congress would need to provide an increase in discretionary appropriations for Perkins Loan Federal Capital Contributions in order to avoid reducing loan volume. In addition, the House version of the bill includes forbearance provisions, including mandatory forbearance for Perkins Loans recipients during a term of national service, that should be expanded to be comparable with FFEL and Direct Lending.
We are pleased with the House provisions to combine parent and dependent student assets to eliminate the differential assessment rates and to increase the income protection allowances significantly. These changes will protect more of the earnings of needy students, will restore Pell Grant eligibility to many nontraditional students, and are a step in the right direction toward encouraging saving, increasing fairness, and simplifying the financial aid process for students and families, as proposed by the Administration. However, we note this change would increase discretionary spending, and thus the funding of these provisions would need to be examined during the annual appropriations process.
We are also pleased that both the Senate and House version of the bills would add an offset for dependent students in the amount of the parents? negative available income. This offset would exclude from need analysis calculation the income of a student whose earnings are necessary for the family?s living expenses. The Administration supports the House version of this offset since it allows for the use of "adjusted" available income as an offset against dependent student income. This means that any negative amount remaining after first offsetting any contribution from parental assets would then be used to offset dependent student income. The Senate version, on the other hand, would allow the full unadjusted negative available income to offset both parental assets and the same amount again to offset dependent student income. In a sense, the Senate proposal would inappropriately provide a double counting advantage.
Neither the House nor the Senate included language clarifying that financial aid administrators may adjust need determination to assist dislocated workers. The Administration has requested this change in recent letters to Congress, and will continue to seek to include it in the final version of the bill.
The House version of the bill would require a multiyear promissory note within 180 days of the enactment of the reauthorization bill. The Senate version would require the Secretary to develop a master promissory note for use beginning July 1, 2000. We agree that a multiyear promissory note will simplify the process by which students and their families apply for and receive federal student loans. In fact, we are currently in the final stages of developing the procedures and notes for the introduction of a master promissory note with a multiyear loan renewal process in both the FFEL and Direct Loan programs. We expect the new notes to be available for the 1999-2000 academic year, with borrowers who apply for loans for the 2000-2001 year being the first who would benefit from the "multiyear functionality," since they would have signed the master note during the prior year. With these targets in mind, and in order to ensure that the processes work properly and effectively, we would prefer that the law not include a specific time frame.
The Administration is also disappointed that neither version of H.R. 6 would provide the Secretary with the authority to approve alternative forms to determine need and eligibility for student aid that contain the same information as the Free Application for Federal Student Aid (FAFSA) as long as the entire form is provided free of charge, as was proposed by the Administration. The use of alternative free versions of the FAFSA, especially electronic versions, could reduce burden for students and families while streamlining the aid award process and maintaining the integrity of the delivery system.
The House version of the bill would authorize the Secretary to confirm with the IRS each aid applicant's adjusted gross income, Federal income taxes paid, tax filing status, and number of exemptions. The Senate version of the bill would require the Secretary to verify aid applicants? tax return information with the IRS. The Administration has several concerns regarding the income verification proposals in both the House and Senate versions, including confidentiality of taxpayer information, and IRS resource and systems capacity issues (particularly in light of the Year 2000 conversion under way). The Administration would like to work with the conferees to determine whether an approach can be developed to address these issues, while still accomplishing the Members' objectives.
We oppose the language in both versions of the bill suspending aid eligibility for students who have been convicted of any drug offense under Federal or State law. This provision would largely duplicate existing law denying Federal benefits to individuals convicted of a drug offense under Federal or State law. Current law also contains important judicial discretion provisions that are lacking in both versions.
Under current law, citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau attending any eligible institutions may be eligible for Pell Grants and certain other forms of student financial aid. (Students who are permanent residents of the Freely Associated States may be eligible for such aid to attend institutions in the Freely Associated States.) The Senate version makes no change to these provisions. The House version would terminate the eligibility of students who are citizens or permanent residents of Micronesia, the Marshall Islands, or Palau on October 1, 2001, and, until then, they would be eligible only if they attend an institution in Guam, Micronesia, the Marshall Islands, or Palau. We strongly oppose the House provisions. The United States has a special relationship with these countries, as well as a responsibility to assist them in nation-building, and the State Department has raised questions about the international significance of curtailing Federal student aid and its potential impact on the negotiation of future compacts with the Freely Associated States. Finally, it would be useful if the final version of H.R. 6 were to include a clearer expression of congressional intent that the eligibility of these students from the FAS was not affected by the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
Although we are pleased that the Senate adopted the Administration's general approach for calculating refunds, we have strong concerns about allowing schools to retain all Title IV funds for students who withdraw from an institution without going through an official withdrawal process. This policy would create a huge loophole that would encourage abuse in reporting withdrawals and recouping appropriate funds. It would reward institutions for unofficial withdrawals by students by giving those students the same amount of student aid as is given to students who complete the term. We also have some drafting concerns regarding this provision. We hope to work with you to adopt the Senate approach with some changes.
The Administration opposes a variety of provisions in the House version that would weaken program integrity. The House provision to allow proprietary institutions to include revenues from job training contracts as part of the requisite 15% of revenues from non-Title IV sources would seriously undermine the intent of the 85-15 rule, which was to ensure that eligible institutions are not primarily dependent on public monies to exist.
The House version also would vitiate the anti-injunction provision in current law. This provision prohibits injunctions against the Secretary that interfere with the Secretary?s responsibilities in the loan programs. An institution with an official cohort default rate that would remove it from the loan programs still may receive loan funds during the course of its administrative appeal of its loss of eligibility, but if the institution loses its administrative appeal, its participation ends. The anti-injunction provision has prevented institutions whose loan eligibility has been terminated on the basis of high cohort default rates from receiving loan funds while they sue the Secretary over the termination. We strongly believe that the institution should not be able to enjoin the Secretary to restore its participation during the course of a lawsuit. Without the current anti-injunction provision, these lawsuits could be used as a delaying tactic by unscrupulous institutions merely to obtain more loan funds. The anti-injunction provision has prevented millions of dollars of loan funds from going to high default schools that were properly terminated from the loan programs. It would undermine program integrity to undo this well-established precedent.
The Senate version provides that schools with default rates of over 50 percent for three consecutive years would not be eligible to participate in the Perkins program. We believe this provision would be too lenient, and prefer a provision that would end participation for an institution with default rates of 25% or higher for three consecutive years. This change would standardize the cohort default rate cap across Federal student loan programs.
Finally, we oppose the provision in the Senate version of the bill that requires the Department to calculate a program participation rate index for each institution subject to loan eligibility termination on the basis of high cohort default rates. The participation rate index is currently used in the mitigating circumstances appeals process, where the calculation is performed by the institution. The Department does not have data on the number of loan-eligible students at each institution, and therefore cannot calculate the participation rate index for all institutions without imposing significant new reporting requirements on institutions for no substantial benefit.
The Senate version of the bill would clarify that institutions may provide personalized electronic exit counseling for borrowers. We support this clarification. By offering institutions the flexibility to use communications technology to counsel students, electronic exit counseling can reduce costs while improving service to borrowers.
The Administration generally supports most of the changes made by the House and Senate versions of the bill. Both versions would require institutions to maintain open crime logs and expand the number of crimes that must be reported; we support these changes. They also contain language permitting disclosure of campus disciplinary records. Both versions have drafting flaws that would undermine their effectiveness and compromise legitimate privacy interests. We look forward to working with the conferees to develop more acceptable language.
The Senate version of the bill clarifies and expands the definition of campus, so that institutions have to report crimes that take place on public property contiguous to the campus, e.g. sidewalks, and in any building owned by the institution or a student organization. This information is critical for students to know and will help provide a more accurate picture of crime on campus.
We support the language in both the House and Senate versions of the bill that would authorize a grant program to prevent violence against women on campus. Violence against women is a serious issue, and this program would help female students feel safer on their campuses. The Senate also authorizes a study of campus sexual assault policies, which would shed new light on the controversial issue of how campus authorities handle sexual assaults.
The House version of the bill would effectively end these two programs, replacing them with a "Regulatory Simplification Program" that would not allow for waiver of statutory requirements, or provide for alternatives for administering the programs. The Senate version of the bill does attempt to expand the areas included in the QA program, but then undermines that expansion by specifically limiting waivers to verification, as is now the case in the current QA program. The Administration supports the inclusion of the waivers necessary to give effect to the expanded scope of the QA program included in the Senate version.
The Senate version of the bill would make less drastic changes to the experimental sites program than the House version. The Senate version includes requirements that the Secretary review all projects and report to Congress his recommendations to streamline and improve student aid programs based on the projects (these reporting requirements would also be applicable to the QA program). It is important that the experimental sites program be continued, as it has provided administrative relief to institutions with strong performance managing the student financial assistance programs and has supported important research into alternatives to current law and regulation. The provisions in the Senate bill for both programs are preferable to those in the House version of the bill.
The House and Senate versions of the bills are overly broad in scope and include unrealistic time requirements that would actually impede effective negotiated rulemaking. The Administration strongly opposes the requirement that all future Title IV regulations be subject to negotiated rulemaking regardless of their technicality or urgency, skewing resources away from the most important issues and generating unnecessary litigation, delay, and expense. We hope to work with Congress to develop a workable process for fashioning more focused and flexible regulations. That process should include the ability to negotiate with the higher education community to identify the issues to be subject to negotiated rulemaking.
We support the House version?s language on loan proration. The House provisions move in the direction of the Administration proposal and would simplify proration by allowing it to be done proportionally for all types of loans affected.
The Senate version of the bill includes the Administration?s proposal to authorize the Secretary to designate regulatory provisions that institutions or other entities may choose to implement before the otherwise applicable effective date which, as required by the Master Calendar, includes a delay of at least seven months. These changes would provide the Secretary and program participants with greater flexibility.
The House version of the bill would require the Secretary to conduct reviews of regulations every two years. The Senate version also requires the Secretary to review regulations, but does not specify frequency. The Department already reviews its regulations regularly, and feels that either version of this provision would be an unnecessary and inappropriate intrusion upon the Secretary?s authority and responsibility to manage the Department.
The House version of the bill contains confusing language that could be read to undermine the well-received financial responsibility regulations that the Department recently developed in close cooperation with the higher education community and to establish a dangerously low standard for the financial health of institutions participating in student financial aid programs. We oppose these provisions.
The Administration opposes the provision in both versions of the bill that would require the Department to prioritize program reviews based on criteria in statute, such as high default or withdrawal rates, or large fluctuations in Pell Grant and loan volume. This is unwarranted micro-management. The Department selects its program review sites based on a probabilistic risk analysis model. While this model incorporates many of the criteria listed in the Senate provision, strict adherence to the provision would require the development of a new model and would remove all flexibility for the Department. We are confident that the current program review selection model effectively targets problem institutions while maintaining an element of randomness to promote broad program compliance.
The Senate version of the bill would establish a Student Loan Ombudsman Office to assist borrowers with problems with their student loans. We understand the desire to provide a place for students to go, if they have particularly complex student loan problems, or have been frustrated by other attempts to resolve these problems. This is the kind of customer-oriented activity that we would want a PBO to address, and we would prefer for the new Chief Operating Officer (COO) to determine its structure and mission. However, if the conferees intend to include statutory language regarding an Ombudsman, we would seek changes to the Senate provisions. For example, the relationships between the Secretary, the COO, and the ombudsman are very unclear, which would result in a substantial danger of poor coordination in providing services to students. We hope to work with Congress to look at the role and function of an ombudsman and to relate any such office appropriately to the PBO.
The House version would eliminate the Javits, Faculty Development, and Legal Training for the Disadvantaged programs, retaining only a modified Graduate Assistance in Areas of National Need (GAANN) program. The Senate version authorizes all of these programs with some changes: Javits and GAANN eligibility would be limited to students who demonstrate financial need; forward-funding of Javits would be permitted; the Faculty Development Fellowship program would be redesigned; and Assistance for Training in the Legal Profession would be replaced by the Thurgood Marshall Legal Educational Opportunity Program. The Administration supports the House approach to consolidate all graduate programs into one, which is closer to the approach proposed by the Administration, with the addition of the Administration?s provisions for students from underrepresented groups.
We support the Senate version of the bill?s new program to provide competitive grants to colleges to improve teaching for students with disabilities. The grants would support technical assistance and training for faculty and administrators to enable them to effectively teach students with disabilities. Many more students with disabilities are now benefiting from higher education; the grants would help faculty members better reach these students.
We are pleased that both versions of the bill would reauthorize the current Advanced Placement Fee Payment Program, the Senate with significant modifications. We prefer the Senate version of the bill; however, we recommend that the final bill clarify that any State in which all low-income individuals are required to pay no more than a nominal fee to take advanced placement tests may use any remaining funds to increase the participation of low-income students in Advanced Placement courses and exams through activities such as information dissemination, teacher training, and curriculum development.
The Senate version of the bill attempts to accommodate this recommendation in part, by permitting States to use up to 5 percent of grant funds to disseminate information about the program and by providing an exception to the "supplement, not supplant" rules when funds are used to increase the participation of low-income individuals in advanced placement courses through teacher training and other activities directly related to increasing the availability of Advanced Placement courses. However, the supplanting language is very difficult to understand and inconsistent with the Senate committee report?s description of the program.
Another problem with the Senate language concerns the provision that, notwithstanding an appropriation, the Secretary shall award grants for this program only if the College Board funds its fee assistance program at no less than the level of the previous year. It is inappropriate for the behavior of a private organization to determine whether a nationwide Federal program, for which funds have been appropriated, can be carried out. We recommend that this language be eliminated, and that the conferees instead include report language recommending that members of the appropriations committees should consider whether the College Board and other private efforts are continuing their support.
The provisions in the House version that would reauthorize the Education of the Deaf Act include a provision to eliminate the 10 percent cap on enrollment of international deaf students. The current tuition charges for these students cover less than one-third of the educational costs related to their attendance, and the Administration is concerned about the high Federal cost of subsidizing these students. Elimination of the cap, without a corresponding increase in the tuition surcharge for international students, would result in resources being diverted from other university level programs to support these students. We support the provisions in the Senate version, which retain current law and add language clarifying that no qualified United States citizen shall be denied admission because of the admission of an international student.
Proprietary school liaison
The Senate version of the bill would establish a Liaison for Proprietary Institutions of Higher Education within the Department. The need for such a liaison has not been demonstrated. The Department works with many different kinds of schools, all with their own specific interests. To single out the proprietary sector for special representation is inappropriate and opens the door to a multitude of liaisons.