Archived Information

Technical Amendments to the Higher Education Act


RETURNS OF GRANT OVERPAYMENT

SEC. ___. (a) Section 484B(b)(2) of the Higher Education Act of 1965 (20 U.S.C. 1091b(b)(2), hereinafter referred to as "the Act") is amended?

(1) in subparagraph (B)(ii), by striking out "subject to?" and inserting in lieu thereof "subject to the procedures described in subparagraph (C)(iii) and?"."; and

(2) by amending subparagraph (C) to read as follows:

"(C) GRANT OVERPAYMENT REQUIREMENTS.?(i) Notwithstanding subparagraphs (A) and (B), and subject to clauses (ii) and (iii), a student shall not be required to return 50 percent of the grant assistance received by a student under this title that is the responsibility of the student to repay under this section.

"(ii) Subject to clause (iv), a student shall not be required to return his or her first grant overpayment determined under subparagraph (A).

"(iii) Subject to clause (iv), a student shall be permitted to repay any grant overpayment determined under this section under terms that permit the student to maintain his or her eligibility for further assistance under this title, including a period during which no payment is due from the student, and no interest shall accrue?

"(I) for six months, beginning on the day the student withdrew; or

"(II) while the student is pursuing at least a half-time course of study, as determined by the institution, and

"(iv) Clauses (ii) and (iii) shall not apply to a student who is in default on any repayment obligations under this title, or who has not made satisfactory repayment arrangements with respect to such obligations.

(b) EFFECTIVE DATE. The amendments made by subsection (a) shall be effective October 7, 2000, except that, in the case of an institution of higher education that chooses to implement section 484B of the Act prior to that date, the amendments made by subsection (a) shall be effective on the later of--

(1) the date of such institution's implementation of such section; or

(2) the date of enactment of this section (but in no case later than October 7, 2000).


Rationale:

Section ___(a) of the bill would amend section 484B(b)(2) of the Higher Education Act of 1965 (20 U.S. 1091b(b)(2), "the Act"), which specifies the procedures for the return, by a student, of grant and loan assistance provided under title IV of the Act when he or she withdraws from an institution of higher education. The proposed amendments pertain to the return of Federal grant overpayments, and are designed to lessen the impact of changes made by the Higher Education Amendments of 1998 (P.L. 105-244) on the lowest income students.

Section ___(a)(1) of the bill would amend section 484B(b)(2)(B)(ii) to clarify that the grace period and deferment provisions proposed as new section 484B(b)(2)(C)(iii) would apply whether grant overpayments are subject to repayment arrangements satisfactory to the institution attended by the student, or to collection procedures specified by the Secretary. It is important to ensure that the proposed new grace period and deferment provisions be uniformly applied so that all affected students may benefit from their availability.

Section ___(a)(2) of the bill would significantly expand section 484B(b)(2)(C) of the Act, which currently states that students are not required to return 50 percent of the grant assistance they receive that would otherwise be their responsibility to return under section 484B of the Act. In addition to the current law requirements, proposed new section 484B(b)(2)(C) of the Act would, in clause (ii), specify that a student would not be required to return the first grant overpayment determined under section 484B of the Act. The student's responsibility under current law to repay, upon withdrawal, some portion of title IV grants received can make it more difficult for the student to return to postsecondary education. This obstacle falls disproportionately on the lowest income students?the majority of title IV grants awarded are Federal Pell Grants, and, for the 1997-1998 award year, over two-thirds of Federal Pell Grant recipients were from families with total incomes of $20,000 or less--and those who attend community colleges, where students typically receive more grant aid than loans. This amendment would help alleviate this burden.

In addition, proposed new section 484B(b)(2)(C)(iii) of the Act would permit a student to repay a grant overpayment determined under section 484B of the Act on terms that enable the student to retain his or her eligibility for further title IV assistance. These terms would include a six-month grace period that would begin on the day the student withdrew, and a period of deferment while the student is pursuing at least a half-time course of study, as determined by the institution. No interest would accrue on a grant overpayment during the proposed grace and deferment periods. By providing a period of continued eligibility for title IV assistance of a student owing a grant overpayment under section 484B of the Act, these amendments would eliminate a barrier that may currently prevent a low-income student from making another attempt to obtain a postsecondary education. The proposed grace and deferment periods would also offer the student additional time in which to find the resources necessary to repay the grant overpayment, making the grant repayments more similar to loan repayments in that respect.

Proposed new section 484B(b)(2)(C)(iv) of the Act places an important limitation on the availability of the benefits of proposed new sections 484B(b)(2)(C)(ii) and (iii) of the Act. In order to obtain the grace and deferment periods and eligibility for further student assistance, or to avoid having to repay the first grant overpayment owed by a student under section 484B, the student must not be in default on any title IV repayment obligations, or must have made satisfactory repayment arrangements with respect to those obligations. This would ensure that the new benefits are provided only to those students who are making genuine efforts to meet their repayment responsibilities.

Section ___(b) of the bill would specify the effective date for the amendments made by section ___(a). In general, these amendments would be effective on October 7, 2000, the general effective date for section 484B, as specified in section 484B(e) of the Act. However, that provision also authorizes institutions to implement section 484B earlier than October 7, 2000, so in those cases the amendments made by section ___(a) would be effective on the date that the institution implements section 484B, or the date of enactment of this section, whichever is later. In no case would the amendments made by section __(a) take effect any later than October 7, 2000.

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