Section E - Postsecondary Education

• Overview
• Student Aid Summary Tables
• Student Aid Overview
• Pell Grants
• Campus-Based Programs
• Work-Study
• Supplemental Educational Opportunity Grants
• Perkins Loans
• Leveraging Educational Assistance Partnerships
• Direct Loans and Federal Family Education Loans
• Basic Loan Program Components
• Higher Education Amendments of 1998
• The 2000 Request
• Student Aid Program Management
• Higher Education Tax Benefits
• Higher Education Programs Overview
• Title III: Aid for Institutional Development
• Developing Hispanic-Serving Institutions
• International Education and Foreign Language Studies
• Institute for International Public Policy
• Fund for the Improvement of Postsecondary Education
• Urban Community Service
• Demonstration Projects to Ensure Quality Higher Education Programs for Students with Disabilities
• Academic Facilities
• Federal TRIO Programs
• Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP)
• Scholarships and Fellowships
• Child Care Access Means Parents in School
• Learning Anytime Anywhere Partnerships
• Preparing for College
• College Completion Challenge Grants
• D.C. Resident Tuition Support
• Teacher Quality Enhancement Grants
• Teacher Training in Technology
• Underground Railroad Program
• Web-Based Education Commission
• GPRA Data/HEA Program Evaluation
• Howard University

E. POSTSECONDARY EDUCATION

Overview

The 2000 request for postsecondary education reflects President Clinton's continued strong support for higher education and takes important steps toward ensuring equal access to a quality postsecondary education for all Americans. The 2000 budget builds upon the funding and legislative successes of 1999 and continues the implementation of the reauthorized Higher Education Act, including substantial increases for important new programs that enhance teacher quality, support Hispanic-serving institutions, and strengthen tribally controlled institutions.

The 2000 request would significantly increase grant aid and work-study assistance while reducing student borrowing costs. It would fund a critical new program that would promote early awareness of the importance of higher education and the financial aid that is available to pay for it. The budget would provide grants to institutions to help increase the retention of at-risk students and would provide funds to help the Department collect information about the effectiveness of its programs. Another initiative would help District of Columbia residents pay for out-of-state tuition costs.

Following are the highlights of the Department's 2000 request:

• Total student financial aid available would expand to $52.1 billion, a 3.9 percent increase over the 1999 level. Recipients of grant, loan, and work-study assistance would increase by 300,000 to over 8.7 million students.
• The Pell Grant maximum award would increase by $125 to $3,250, the highest ever, to improve access to postsecondary education for students from the neediest families. Nearly 3.9 million students would receive Pell grants.
• A $64 million increase for Work-Study would fulfill the President's commitment to give 1 million students the opportunity to work their way through college and would bolster the President's "America Reads" and "America Counts" initiatives, under which Work-Study recipients serve as reading and math tutors.
• In 2000, the HOPE and Lifetime Learning tax credits will give 12.7 million students and their families $7.5 billion to help pay postsecondary educational expenses. In addition, the Education IRA will promote savings for future educational expenses.
• A $120 million or 100 percent increase for GEAR UP would raise the educational expectations of nearly 381,000 students in high-poverty elementary and secondary schools and give them the skills and encouragement they need to successfully pursue postsecondary education.
• A $40 million or 53 percent increase for Teacher Quality Enhancement Grants would help States improve the quality of their teaching force, strengthen the capacity of educators to design effective teacher education programs, and support efforts to reduce shortages of qualified teachers in high-need school districts.
• A $14 million increase for Strengthening Historically Black Colleges and Universities would demonstrate strong continued support for institutions enrolling high percentages of African-American students.
• A $14 million increase for the Developing Hispanic-serving Institutions program would expand and enhance the academic offerings, program quality, and institutional stability of the colleges and universities that are educating the majority of Hispanic college students.
• Funding for Strengthening Tribally Controlled Colleges and Universities would double to $6 million.
• A $30 million increase for the TRIO programs would increase the number of McNair and Dissemination Partnership projects and provide more staff training. The total number of disadvantaged students served by the TRIO programs would increase to 725,000.
• A new $17 million D.C. Resident Tuition Support program would pay the difference between in-State and out-of-state tuition at all public institutions of higher education in Maryland and Virginia on behalf of eligible D.C. residents.
• The $15 million Preparing for College initiative would provide vital information to young students and their parents about the importance of higher education and the steps needed to go to college.
• A $35 million College Completion Challenge Grants proposal would help postsecondary institutions increase the retention rate of students who are at risk of dropping out by supporting innovative financial aid approaches and strengthened support services.
• Funding for Learning Anytime Anywhere Partnerships would double to $20 million to enhance the delivery of postsecondary education and lifelong learning opportunities for citizens in all settings.

Student Aid Summary Tables

The following tables show estimated Federal student aid funding, aid available, and recipients under the Department of Education's 2000 budget request.

¹ Budget authority requested for FFEL does not include the liquidating account.

² Includes subsidy costs plus Federal administration funding for Direct Loans, which includes funds used for student aid management and support for guaranty agencies.

¹ Shows total aid generated by Department programs, including Federal Family Education Loan capital, Perkins Loan capital from institutional revolving funds, and institutional and State matching funds.

² New FFEL and Direct Loans issued to consolidate existing loans.

³ Reflects the LEAP program's statutory dollar-for-dollar State matching requirement.

¹ Reflects only the LEAP program?s statutory dollar-for-dollar State matching requirement.

Student Aid Overview

With more affordable student loans, significant increases in Work-Study assistance and Pell Grants, and higher education tax credits, the Administration continues to make great strides in opening the doors of college to everyone who has the desire and preparation to go. The enactment of the Higher Education Amendments of 1998 reflected a number of the Administration's key initiatives and marked an important step forward in the President's effort to help more Americans get the higher education they need to succeed in today's global economy and to make lifelong learning a real possibility for all Americans.

The Higher Education Amendments of 1998 made many important changes to the Federal student aid programs including:

• Establishing the Office of Student Financial Assistance Programs as the first Performance-Based Organization (PBO) in the Federal Government. The PBO will modernize the delivery of student aid and improve services to millions of students and the postsecondary institutions they attend;
• Improving the need analysis system, which will increase student aid awards for students from low-income families;
• Extending Pell Grant eligibility for future teachers in States that require a fifth year of study beyond a bachelor's degree for teacher certification;
• Improving student loan terms by reducing borrower interest rates and deferment requirements, expanding repayment options, and allowing students to consolidate in either FFEL or Direct Loans;
• Restructuring the student loan guaranty agency system for greater efficiencies;
• Modifying the allocation formula for all three Campus-Based programs (SEOG, Work-Study and Perkins loans) to target student aid more effectively;
• Expanding student aid eligibility for distance learners through demonstration projects that waive some student aid restrictions to allow more nontraditional students to obtain higher education.

The Administration's 2000 proposals build upon these changes and support major Departmental objectives of ensuring postsecondary education access and completion while maintaining efficiently run, cost-effective delivery systems. One of the Administration's primary goals is to continue the growth of grant and work-study assistance programs in light of substantial borrowing trends. For example, the Administration is seeking a $125 increase to the Pell Grant maximum award for a 2000 level of $3,250, the highest ever. This would represent part of a 41 percent increase in the Pell Grant maximum since 1992. In addition, one million students would be able to take advantage of Work-Study opportunities under a proposed $64 million increase in the program.

As reflected in the chart above, total new student loan volume continues to expand dramatically, more than doubling from about $15 billion in 1992 to over $30 billion in 1998, and estimated to grow to over $34 billion by 2000. Much of this growth in loan volume is attributable to students at four-year institutions, accounting for over 80 percent of all borrowing in the loan programs.

The Department proposes to help borrowers ease loan repayment by extending the temporary interest rates for Direct Consolidation Loans, enabling students to save on loan costs. At the same time, the 2000 loan policies focus on improved management and collection of defaulted loans to help sustain the progress already achieved in recent years both in reducing default levels and increasing collections as realized. For instance, in 1998, FFEL default levels decreased almost $800 million, or 28 percent, to $2.1 billion while collections were up by over $100 million. These proposed policies would affect lenders, guaranty agencies, and borrowers.

Overall, the 2000 request further strengthens the President's commitment to postsecondary education by providing $52.1 billion in grant, loan and work-study assistance to over 8.7 million students, an increase of over 300,000 from 1999. In addition, approximately $7.5 billion in Hope Scholarship and Lifetime Learning tax benefits will make college more affordable for an estimated 12.7 million Americans. This significant investment will ensure that the doors of college remain open to all Americans in the 21^st Century.

Pell Grants

The Pell Grant program helps ensure financial access to postsecondary education by providing grant aid to low- and middle-income undergraduate students. The most need-focused of the Department's student aid programs, Pell Grant awards vary in proportion to the financial circumstances of students and their families.

The Administration is proposing to increase the Pell Grant maximum award to $3,250 in 2000, up from $3,125 in 1999. This $125 increase would expand access to postsecondary education for millions of disadvantaged students while also increasing opportunities for working Americans to upgrade their knowledge and skills.

The 2000 request assumes a projected funding surplus of $449 million for the Pell Grant program. This cumulative surplus represents a continuous yield of unobligated balances from previous award years as well as projected program costs for the 1998-1999 and 1999-2000 award years that are below the respective appropriations for those years. The largest components of the cumulative surplus are projected to occur in award years 1998-1999 and 1999-2000. Based primarily on a lower than expected growth rate for undergraduate Title IV applicants, the Department now projects that the 1998 appropriation exceeds the total cost of the 1998-1999 award year by $115 million. This change in the Department's applicant growth rate assumption is compounded in its award year 1999-2000 estimate which is nearly $312 million below the FY 1999 appropriation. The remaining surplus of $22 million is a result of unobligated balances through the 1997-1998 award year.

Campus-based Programs

The Work-Study, Supplemental Educational Opportunity Grants, and Perkins Loans programs are collectively referred to as the "campus-based" programs because participating institutions are provided with funding that they are responsible for administering on their own campuses. These programs provide financial aid administrators with considerable flexibility in the packaging of financial aid awards to best meet the needs of their students.

Work-Study

The 2000 request for Work-Study is $934 million, an increase of $64 million or 7.4 percent over the 1999 level, to give over one million students the opportunity to work their way through college.

The Work-Study program provides grants to participating institutions to pay up to 75 percent of the wages of needy undergraduate and graduate students working part-time to help pay their college costs. The school or other eligible employer provides the remaining 25 percent of the student's wages. Funds are allocated to institutions on the basis of a statutory formula, and individual award amounts to students are determined at the discretion of institutional financial aid administrators.

Institutions must use at least 7 percent of their Work-Study allocations to support students working in community service jobs. The President encourages institutions to continue using Work-Study funds to promote community service activities, particularly in the areas of tutoring children in mathematics, reading, and serving in family literacy programs.

Through the America Reads Challenge, tens of thousands of Work-Study students at more than 1,000 colleges and universities are earning money for college while they are helping others to learn to read. The Department waives the 25 percent institutional matching requirement for students who work as reading tutors in literacy programs that provide services to preschool age children, children in elementary school, and their families.

As part of the America Counts Challenge, the Department has extended this matching requirement waiver to mathematics tutors starting with the 1999-2000 award year. The America Counts Challenge is aimed at helping all students master challenging mathematics, including the foundations of algebra and geometry, by the end of the 8^th grade. The Work-Study waiver enables college students with an affinity for mathematics and science to gain valuable work experience as tutors while taking an active role in helping students master advanced skills in mathematics.

Supplemental Educational Opportunity Grants

The Supplemental Educational Opportunity Grant (SEOG) program provides grant assistance of up to $4,000 per academic year to undergraduate students with demonstrated financial need. The $631 million request is an increase of $12 million over the 1999 level. Along with institutional matching funds, the request would provide nearly $800 million in grant aid to more than 1.1 million students.

SEOG funds are allocated to institutions on the basis of a statutory formula, and a 25 percent institutional match is required. Awards to students who meet general need criteria are determined at the discretion of institutional financial aid administrators, although schools are required to give priority to students with "exceptional need" and to Pell Grant recipients.

Perkins Loans
(BA in millions)

In 2000, nearly $1.1 billion will be available for new Perkins Loans to some 698,000 recipients, the same as in 1999. The Administration is requesting $100 million in new budget authority for Federal Capital Contributions to supplement the resources from repayments on outstanding loans. As in past years, the majority of the funding for new loans made under the Perkins Loans program will come from the repayment of outstanding loans to the program's institutional revolving funds. The Department estimates that over $930 million from these repayments will be available in 2000 before subtracting administrative expenses.

The Perkins Loan program provides long-term, low-interest loans to undergraduate and graduate students with demonstrated financial need. Loans are made from institutional revolving funds. Approximately 2,000 participating institutions currently administer Perkins Loans institutional revolving funds, with total assets of about $7 billion representing nearly

40 years of Federal capital contributions, institutional matching funds, repayments on previous loans, and reimbursements for cancellations. Institutions provide one dollar for every three dollars of new Federal capital.

Perkins Loan borrowers pay no interest during in-school, grace, and deferment periods, and are currently charged 5 percent interest during the principal repayment period. With the enactment of the Higher Education Amendments of 1998, undergraduate students can now borrow up to $4,000 and graduate and professional students can borrow up to $6,000 each year. The cumulative maximum is $40,000 for combined undergraduate and graduate or professional study.

The $30 million request for Perkins Loan Cancellations will reimburse institutional revolving funds for borrowers who seek cancellation of their Perkins loans in exchange for undertaking certain public service employment, such as teaching in Head Start programs, full-time law enforcement, or nursing.

Leveraging Educational Assistance Partnerships

¹Reflects the program's statutory dollar-for-dollar State matching requirement. Discretionary State contributions above the required match, which are not reflected, significantly increase the number of grant recipients, the amount of available aid, and the average award.

The newly authorized Leveraging Educational Assistance Partnership (LEAP) program provides dollar-for-dollar Federal matching funds to support State need-based postsecondary student grant assistance. The program was previously authorized as the State Student Incentive Grant (SSIG) Program. When the SSIG program was first authorized in 1972, 28 States had undergraduate grant programs. Now all States have established need-based student grant programs.

Federal LEAP funds are awarded to States to encourage the retention and expansion of existing State grant programs, and to establish community service programs to help financially needy students pay for college.

Direct Loans and Federal Family Education Loans
(BA in millions)

¹ For Direct Loans made in 2000, the value of future repayments of interest and collections on defaults will exceed the costs of defaults and in-school interest subsidies.

² Direct Loans re-estimate for 1999 is -$360.9 million, primarily reflecting technical adjustments in interest rate assumptions and repayment plan distribution data. FFEL re-estimate for 1999 is -$153.1 million due primarily to technical adjustments in repayments and defaults. Under Credit Reform, the subsidy amounts needed for active loan cohorts are re-estimated annually in both Direct Loans and FFEL to account for changes in actual data compared to projections.

³ These costs include loan servicing, collection, and other administrative costs associated with the Direct Student Loan program, and student aid management costs such as application processing as well as other ADP contracts, including the National Student Loan Data System. In 1999, about 30 percent of these costs reflect estimated payments to FFEL guaranty agencies. Total for 1998 includes $25 million transfer from Higher Education Assistance Foundation Treasury account.

⁴ This account reflects costs associated with loans made prior to 1992. In fiscal years 1999 and 2000, collections will exceed default and in-school interest costs. Therefore, Budget Authority is negative in those years.

The Department of Education operates two major student loan programs: the Federal Family Education Loan (FFEL) program and the William D. Ford Federal Direct Loan (Direct Loan) program. The Administration is committed to supporting two strong student loan delivery systems, allowing individual institutions to choose which best meets their needs and the needs of their students.

The FFEL program makes loan capital available to students and their families through some 4,800 participating private lenders. There are 36 active State and private nonprofit guaranty agencies which administer the Federal guarantee protecting FFEL lenders against losses related to borrower default. These agencies also collect on defaulted loans and provide other services to lenders.

In order to reduce complexity, improve efficiency for both borrowers and schools, and lower taxpayer costs, a simpler Direct Loan program was established by the Student Loan Reform Act (SLRA) of 1993. Under this program, the Federal Government uses Treasury funds to provide loan capital directly to schools, which then disburse loan funds to students—greatly streamlining loan delivery for students, parents, and schools.

The Direct Loan program began operation in academic year 1994-95 and has now grown to about 33 percent of student loan volume, a level it is projected to sustain over the next few years. By the end of the fourth year of operation (1997-98) approximately 1,260 schools—representing about 26 percent of all schools in the Department's student loan programs—were actively participating in the Direct Loan program.

Basic Loan Program Components

Both FFEL and Direct Loans feature four types of loans with similar fees and maximum borrowing amounts:

• Stafford Loans are subsidized, low-interest loans based on financial need. The Federal Government pays the interest while the student is in school and during certain grace and deferment periods. The interest rate varies annually and is capped at 8.25 percent. The 1999 rate is 7.46 percent for borrowers in repayment.
• Unsubsidized Stafford Loans are offered at the same low rates as subsidized Stafford Loans, but the Federal Government does not pay interest for the student during in-school, grace, and deferment periods.
• PLUS Loans are available to parents of dependent undergraduate students at slightly higher rates than Stafford or Unsubsidized Stafford Loans, and the Federal Government does not pay interest during in-school, grace, and deferment periods. The interest rate varies annually and is capped at 9 percent. The 1999 rate is 8.26 percent.
• Consolidation Loans allow borrowers with multiple student loans who meet certain criteria to combine their obligations and extend their repayment schedules. Under the recently enacted Higher Education Amendments of 1998, Direct Consolidation Loan applications received between October 1, 1998 and February 1, 1999 have interest based on the 91 day T-bill plus 2.3 percent, (or 7.46 percent). FFEL Consolidation Loans use the weighted average of loans consolidated rounded up to the nearest 1/8^th of a percent.

Higher Education Amendments of 1998

The student loan programs were recently reauthorized by The Higher Education Amendments of 1998 ("the reauthorization"). This legislation reformulated a number of loan policies in an effort to improve the effectiveness and efficiency of the student loan programs.

One key change was to interest rate calculations. Loans disbursed after October 1, 1998 will accrue interest based on the 91-day T-bill plus 1.7 percent while borrowers are in school and 2.3 percent when loans are in repayment. Lenders receive an additional one-half of one percent subsidy from the Government. Thus, lenders will earn interest based on the 91 day T-bill plus 2.2 percent during the in-school period and 2.8 percent during in repayment. These new rates are lower for both students and lenders.

Other changes made in reauthorization include the following:

For students: reducing the interest rate basis, limiting the periods where lenders may capitalize interest, providing an extended repayment option to new FFEL borrowers with over $30,000 in student loan debt, allowing FFEL borrowers to annually change their repayment option, allowing Direct Loan borrowers to consolidate into FFEL, limiting bankruptcy discharge of student loans to cases of undue hardship, and establishing a new teacher loan-forgiveness program.

For lenders: increasing default timing criteria from 180 days to 270 days, revising methods for the Secretary to collect origination fees, and exempting small lenders from annual compliance audits.

For guaranty agencies: reducing reinsurance payment levels from 98 to 95 percent, reducing default collection retention from 27 to 24 percent, introducing voluntary flexible agreements, establishing new default aversion fees in place of supplemental pre-claims assistance payments, and separating reserve funds into Federal funds owned by the government and operating funds owned by the agency.

For schools: waiving the 30-day delayed disbursement rule for schools with cohort default rates under 10 percent, creating additional mitigating circumstances criteria, and using a master (multi-year) promissory note by July 1, 2000.

For the Federal Government: creating new processing and issuance fees and account maintenance fees paid to guaranty agencies and authorizing the sale of Direct Loans.

The 2000 Request

The Administration?s 2000 budget proposals for the student loan programs build on changes made in the reauthorization and are designed to produce greater program efficiencies, increased taxpayer savings, and reduced borrowing costs. Administration proposals would save an estimated $2.3 billion in 2000 and $4.6 billion over five years. These policies and their budget impact in 2000 are shown below:

• Extend the current interest rate basis for Direct Consolidation Loans?scheduled to increase on February 1, 1999—through the end of fiscal year 2000, resulting in lower borrowing costs for students (costs $91 million).
• Reduce the percentage of default collections guaranty agencies may retain from the current 24 percent to 18.5 percent, in line with Department experience from its own collection contractors (saves $481 million).
• Eliminate the complement percentage that guaranty agencies charge as part of default collections. The reauthorization lowered the amount guaranty agencies are reimbursed for most defaulted loans from 98 percent to 95 percent of the insured loan amount. This proposal would create real risk-sharing by eliminating the "complement" provisions that allow agencies to recoup this 5 percent cost from subsequent default collections. For example, if a guaranty agency collects $100 on a defaulted loan, not only does it retain 24 percent (or $24) of that collection, but it is allowed to add 5 percent back for the "complement" for a total retention of $29 (saves $41 million).
• Allow interest to accrue on delinquent loans up to the 180th day of delinquency, but not beyond. The reauthorization increased the number of delinquent days required before lenders may file a default claim from 180 to 270. Under this proposal lenders would not earn interest after day 180. This would act as a lender incentive to bring the loan into repayment or consolidation (saves $17 million).
• Extend Department of Education access to the National Directory of New Hires now used in the Department of Health and Human Services to help track down people liable for child support payments. By providing information about the most recent employer of loan defaulters, this database adds another resource to aid in the collection of student loan defaults by the Department and the guaranty agencies (saves $879 million).
• Expand the use of voluntary flexible agreements with guaranty agencies that may not survive economically under new HEA rules in order to provide them maximum flexibility to operate. Such agreements would afford agencies greater discretion in their financial and operational organization.
• Allow guaranty agencies an additional 5 years to pay back working capital borrowed from the Federal Fund. This would allow more time for guaranty agencies to establish operations under the new system.
• The restructuring of the guaranty agency system under reauthorization and the President's proposals reduced the need for agencies to hold Federal reserve funds (saves $23 million).
• Recall an additional $1.6 billion in reserve funds held by guaranty agencies (saves $868 million) and accelerate the recall of $165 million in Federal reserves into 1999 and 2000.
• Reduce interest subsidy payments to lenders from 50 basis points to 20 basis points for loans funded through tax-exempt securities. This would be consistent with loan yields funded through private capital (saves $132 million).

Student Aid Program Management

The Department would spend almost $867 million in 2000 to administer the Federal postsecondary student aid programs and pay account maintenance fees to FFEL guaranty agencies, an increase of $120 million over the 1999 level. Of these funds, $687 million would support Department administrative activities, primarily for the student financial assistance programs, and $180 million would be paid to guaranty agencies. These funds, which make up more than 65 percent of the Department?s overall administrative budget, are drawn from four sources: mandatory funding authorized under Section 458 of the Higher Education Act (84.8 percent of total funds available), the discretionary Program Administration account (9.6 percent), a discretionary appropriation covering a portion of administrative costs for the FFEL program (5.5 percent), and discretionary appropriations for administrative costs associated with facilities loan programs (less than 1 percent). For more details, see Section G on Departmental Management.

In recognition of the importance of these management responsibilities, the Department has undertaken a major reorganization to better focus resources and management expertise. The Office of Student Financial Assistance Programs (OSFAP), which had previously been included within the Office of Postsecondary Education (OPE), is being transformed into a performance-based organization (PBO) reporting directly to the Secretary.

On December 8, 1998, Greg Woods was sworn in as Chief Operating Officer of the PBO. Mr. Woods is now moving ahead to develop performance measures and a five-year budget plan consistent with the requirements of the Higher Education Amendments of 1998. The Department expects to submit a revised program management budget plan and performance measures for the PBO to Congress in late Spring 1999.

The remaining offices of OPE—the Office of Policy, Planning and Innovation, the Office of Higher Education Programs, and the immediate office of the Assistant Secretary—will focus on providing national leadership and fostering strategic innovations to ensure access to postsecondary education, promote high standards and achievement for all postsecondary students, and expand linkages with other areas of national interest.

Higher Education Tax Benefits

Important postsecondary education tax benefits enacted as part of the Taxpayer Relief Act of 1997 will save students and families billions of dollars in fiscal year 2000.

Tax Credits. The HOPE Scholarship tax credit will reimburse families for up to $1,500 for each of the first two years of postsecondary education. An estimated 5.5 million students and their families will receive nearly $4.9 billion in HOPE tax credits in 2000. Lifetime Learning tax credits, worth up to $2,000 in 2000 and later years, will make postsecondary education more affordable for students beyond their first two years of study, as well as for those taking classes part-time to upgrade their job skills. An estimated 7.2 million students will receive nearly $2.7 billion in Lifetime Learning tax credits in 2000. Eligibility for both higher education tax credits phases out at incomes between $80,000 and $100,000 for joint filers, and at incomes between $40,000 and $50,000 for single filers.

New Individual Retirement Account rules will promote savings for college by allowing families to withdraw funds from their IRA accounts without penalty and spend the earnings on postsecondary education costs on a tax-free basis.

Student Loans interest deduction. A new Tax Code provision allows an "above the line" deduction (the taxpayer does not need to itemize in order to benefit) for interest paid in the first 60 months of repayment on private or Government-backed loans for postsecondary education. The maximum deduction is $1,500 in 1999, $2,000 in 2000, and $2,500 in 2001 and beyond. Eligibility for this deduction is phased out at incomes between $60,000 and $75,000 for joint filers and between $40,000 and $55,000 for single filers.

Employer-provided education benefits. Section 127 of the Tax Code, which allows workers to exclude from their taxable income up to $5,250 of employer-provided education benefits for undergraduate courses, was extended through June 1, 2000.

Higher Education Programs Overview

Research shows that the rates at which minority, low-income, and other disadvantaged students enroll in and graduate from postsecondary institutions remain far lower than those of other students, despite the availability of substantial amounts of Federal student financial aid. To address this serious issue, the President?s budget request for Higher Education calls for additional types of support for these students through such programs as GEAR UP, Title III, TRIO, Preparing for College, and College Completion Challenge Grants.

The 2000 request would double funding for GEAR UP to provide comprehensive mentoring, counseling, outreach, and support services for a larger number of low-income elementary and secondary school students who must overcome many non-financial barriers to obtain a postsecondary education. The Administration also requests a substantial increase in the Aid for Institutional Development and Developing Hispanic-serving Institutions programs to support institutions that serve minority and disadvantaged students. This includes large increases for Historically Black Colleges and Universities, Historically Black Graduate Institutions, Tribally Controlled Colleges and Universities, and the Minority Science and Engineering Improvement Program.

The Administration's request includes a $30 million increase for the TRIO programs to help improve the participation and completion rates of disadvantaged students through the academic pipeline from middle school through graduate school. Funding for Learning Anytime Anywhere Partnerships would be doubled to $20 million to expand support for pilot projects using technology and other innovations to enhance the delivery of postsecondary education and lifelong learning opportunities for all citizens in all settings.

Three new initiatives also would improve college-going and completion rates. The $15 million Preparing for College proposal would inform middle and secondary school students, as well as adults, about the importance of postsecondary education and the availability of student financial aid. The $35 million College Completion Challenge Grants initiative would help universities to increase the persistence rate of students who are at risk of dropping out. And the new $17 million D.C. Resident Tuition Support program would help D.C. residents pay for tuition at all public higher education institutions in Maryland and Virginia.

A 53 percent increase for Teacher Quality Enhancement Grants, to $115 million, would expand efforts to recruit and train high-quality teachers. The $27.5 million FIPSE request would promote excellence and improve the quality of higher education institutions. Increases for the Byrd Honors Scholarships, GAANN, and Jacob J. Javits Fellowship programs would recognize and reward a high level of achievement by providing more scholars with the resources to successfully acquire a high-quality undergraduate and graduate education.

Title III: Aid for Institutional Development
(BA in millions)

The 2000 request for Title III supports the Administration's strong commitment to ensuring access to high quality postsecondary education for the Nation's minority and disadvantaged students. A $22 million or 9 percent overall increase in Title III funding would help provide equal educational opportunity and strong academic programs for such students and help achieve greater financial stability for the institutions that serve these students. The Department is requesting a $14.3 million increase for Historically Black Colleges and Universities and a $2 million increase for Historically Black Graduate Institutions. The request also would double funding for the Tribally Controlled Colleges and Universities program to support institutions that serve Native Americans. Other institutions with limited resources enrolling a high percentage of needy students (Part A institutions) would receive an 2.2 percent increase over the 1999 level.

The request also provides a $1 million or 13 percent increase for the Minority Science and Engineering Improvement Program to help improve science and engineering programs at postsecondary institutions with predominantly minority enrollments.

Developing Hispanic-serving Institutions

The budget provides an increase of $14.3 million to expand and enhance the academic offerings, program quality, and institutional stability of the colleges and universities that award the majority of undergraduate degrees to Hispanics. This request demonstrates the Administration's commitment to improving postsecondary opportunities for Hispanic students.

International Education and Foreign Language Studies

The request would provide continued support for Domestic and Overseas programs that strengthen the American education system in the area of foreign languages and international studies. These programs support comprehensive language and area study centers within the United States, research and curriculum development, and opportunities for American scholars to study abroad. In addition to promoting general understanding of the peoples of other countries, the Department's international programs also serve important economic, diplomatic, defense, and other security interests of the United States. The request would fund approximately 443 grants to institutions of higher education and directly support 955 individuals though fellowships and projects.

Institute for International Public Policy

The 2000 request maintains support for the Institute's efforts to encourage under-represented minorities to enter the Foreign Service of the United States and serve in private international voluntary organizations.

Fund for the Improvement of Postsecondary Education (FIPSE)

The FIPSE request would provide continued support for innovative projects that enhance postsecondary education quality and cost effectiveness. The request would fund 173 new and continuing projects under the Comprehensive program in areas of postsecondary education access, retention and completion, workforce preparation, school-college partnerships, improvement of campus environments, curricula reform, and faculty development. In response to growing concern over the rising costs of higher education, the Department is proposing to increase FIPSE's support for restructuring projects that address issues of cost containment at postsecondary institutions. The request also would support new dissemination and international exchange efforts.

Urban Community Service

This program helps institutions of higher education serve as a resource for urban communities attempting to solve problems. The program is proposed for elimination since efforts to solve the social and economic problems of urban areas are more appropriately addressed under other Department programs and initiatives as well as programs and budgets of other Federal and State agencies.

Demonstration Projects to Ensure Quality Higher Education for Students with Disabilities

This program funds model demonstration projects that provide technical assistance and professional development activities for faculty and administrators in institutions of higher education in order to improve the quality of education for students with disabilities. Funds are used to develop innovative and effective teaching methods, synthesize research and information, and conduct training sessions.

Academic Facilities
(BA in millions)

The academic facilities programs were created to provide financial assistance to institutions of higher education for the construction, reconstruction, or renovation of academic facilities. Funds are requested solely to manage and service the existing portfolios of facilities loans and grants that were made in prior years.

Federal TRIO Programs
(BA in millions)

The TRIO programs fund outreach and student support services that encourage individuals from disadvantaged backgrounds to enter and complete postsecondary education programs. These services complement the Department's student financial aid programs by helping to ensure postsecondary education access for disadvantaged students and by providing them with the support they need to successfully complete postsecondary programs. The 2000 request would provide new awards for the McNair program, Staff Training, and Dissemination Partnerships and continuation awards for the remaining TRIO programs. These programs will serve almost 725,000 students in fiscal year 2000.

Student Support Services, which research shows to have a positive effect on college grade point average and retention, would provide remediation and intensive support services to an estimated 178,099 disadvantaged undergraduate students. Talent Search would identify and encourage an estimated 320,499 students from disadvantaged backgrounds to graduate from high school and enroll in college. Educational Opportunity Centers would provide assistance and information to an estimated 162,286 adults seeking to pursue a program of postsecondary education. Upward Bound, which has been shown to improve the academic preparation of participants while in high school, would provide intensive academic support services to an estimated 56,462 disadvantaged high school students to generate the skills and motivation needed to pursue a program of education beyond high school. The McNair program would support scholarly activities and other assistance to help prepare an estimated 3,675 disadvantaged undergraduates who want to pursue graduate or doctoral study. The Dissemination Partnership projects would leverage the success of TRIO to help ensure access and success in postsecondary education for disadvantaged students not directly served by TRIO programs.

Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP)

Through early college preparation and awareness activities, GEAR UP will raise the educational expectations of nearly 381,000 students in high-poverty elementary and secondary schools and give them the skills and encouragement they need to successfully pursue postsecondary education. The 2000 request, which would double the first-year funding provided in 1999, demonstrates the Administration?s strong commitment to ensuring access to postsecondary education for all students. The request would create a strong impact at the national level by providing funds to all of the 53 eligible States and Territories and to nearly 1,000 of the 6,000 middle grade schools that have more than half of their students living in poverty.

Scholarships and Fellowships
(BA in millions)

¹ Funding for Javits Fellowships non-competing continuation awards and new awards is included in the total for GAANN.

The Byrd Honors Scholarships program provides merit-based awards to four cohorts of undergraduate college students. Increased funding for the program would provide awards for over 26,500 students, including 6,928 new scholars. Scholarships would remain at the authorized level of $1,500.

The Graduate Assistance in Areas of National Need (GAANN) program rewards excellence and supports financial opportunity through fellowships to outstanding students studying in areas of critical national need. Participating graduate schools are required to recruit students from under-represented groups. The request would support an estimated 1,281 fellows, a 36 percent increase over the 1999 level.

Jacob K. Javits Fellowships provide up to 4 years of support to students of superior ability who are pursuing doctoral or the highest terminal degrees in the arts, humanities, and social sciences. Javits fellows may pursue study at any participating institution of their choice. The 2000 request would support an estimated 317 fellows.

Child Care Access Means Parents in School

Level-funding would support 40 continuing awards planned for fiscal year 1999. Grants under this program support or establish campus-based childcare centers serving primarily the needs of low-income students. Grants are also used to provide before- and after-school services. These funds are only used to supplement childcare services or start a new program, not to supplant funds for current childcare services.

Learning Anytime Anywhere Partnerships

This program supports pilot projects using distance learning technology and other innovations to enhance the delivery of postsecondary education and lifelong learning opportunities to students. The program especially helps dislocated workers who need to acquire new skills, individuals making the transition from welfare to work, and individuals interested in investing in their own futures by upgrading their academic or job skills who may be limited in their options because of family obligations or by other time and place constraints. The increase would support a new competition while continuing projects first funded in 1999.

Preparing for College

This new program would provide information to middle and high school students, as well as to adults, on preparation for college. Through pamphlets and videos, community events, and public service announcements, the program would educate students, especially middle school students and their parents, about the importance of higher education and the many steps necessary to attend college. It would inform families about the academic coursework that is needed in middle school and high school to gain entrance into college and about the financial aid opportunities available to finance that education.

College Completion Challenge Grants

This proposal would support experimental approaches to retention aimed at helping institutions of higher education increase the persistence rate of students who are at risk of dropping out. Institutions of higher education that show they have already invested their own resources in persistence programs for at-risk students, but still experience a gap between the dropout rates of disadvantaged students and other students, may apply for competitive grants. Funds would be used to strengthen existing retention efforts by providing larger grant awards, intensive summer programs, and stronger support services.

D.C. Resident Tuition Support

This new initiative would pay the difference between in-State and out-of-State tuition at all public institutions of higher education in Maryland and Virginia on behalf of D.C. residents who have recently graduated from high school or received a GED. The proposal would provide expanded opportunities for D.C. residents that are similar to opportunities available to residents of States and would provide incentives for local public colleges and universities in Maryland and Virginia to actively recruit D.C. students.

Teacher Quality Enhancement Grants
(BA in millions)

The State Grants program is designed to help States improve the quality of their teaching force through promoting reform activities such as teacher licensing and certification, accountability for high quality teacher preparation and professional development, and recruiting teachers for high-need schools. The Partnership Grants program supports strengthening the capacity of K-12 educators in designing and implementing effective teacher education programs, and by increasing collaboration among these practitioners and departments of arts and sciences and schools of education at institutions of higher education. The Recruitment Grants program supports the efforts to reduce shortages of qualified teachers in high-need school districts. The program also supports high-quality teacher preparation and induction programs tailored to meet these locally-identified needs, identify the pools of potential teachers who meet these needs, and recruit individuals from these pools. States or partnerships may apply to receive recruitment grants.

The $40 million increase proposed for 2000 would support 24 State grants and 24 Partnership grants, and would increase the number of scholarships by an estimated 5,445 over the 1999 level.

Teacher Training in Technology

This program makes competitive grants to consortia of States, colleges of education, school districts, and others to help ensure that all new teachers can teach effectively with technology. Currently, most colleges of education do not adequately prepare teachers to use educational technology; the emphasis is on computer literacy rather than the application of technology to the classroom. The request would support 75 new awards for intensive training and support of new teachers that are closely linked to efforts by States, colleges of education, and the private sector.

Underground Railroad Program

This program helps one or more non-profit educational organizations establish facilities to house, display, and interpret artifacts relating to the history of the Underground Railroad, and to make the interpretive efforts available to institutions of higher education. Funds are used to assist in the building of public-private partnerships and the creation of endowment funds to support ongoing museum operations.

Web-based Education Commission

This program provides funding for a commission to conduct a thorough study to assess the educational software available in retail markets for secondary and postsecondary students who choose to use such software. The Administration is not requesting funds for the program in fiscal year 2000 because it received a one-year authorization under the Higher Education Amendments of 1998.

GPRA Data/HEA Program Evaluation

This request would enable the Department to obtain the data that is needed to measure progress on many Higher Education Act (HEA) program indicators, pursuant to the requirements of the Government Performance and Results Act (GPRA). It would also permit the Department to carry out comprehensive evaluations or reports on HEA programs, including those required in the recently reauthorized Higher Education Act.

Howard University
(BA in millions)

The 2000 request would maintain support for Howard's academic operations, research, endowment, construction, and the Hospital, while giving the University broad flexibility to allocate funds to best meet its needs. The request reflects the Administration's support for maintaining and improving the quality and financial strength of an institution that provides a major avenue of postsecondary access and opportunity for African Americans.

Direct any questions to Martha Jacobs, Budget Service

[Section D - Vocational and Adult Education]

[Section F - Educational Research and Improvement]

This page last updated February 9, 1999 (saw).