Loan Limits, Regulatory Rollback in New Higher Education Bill

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Limits on student borrowing, a simplified financial aid process and an easing of accountability measures for colleges are among the main features of a wide-ranging higher education reauthorization bill introduced by Republicans on the House Education and the Workforce Committee.

Committee Chairwoman Virginia Foxx (R-N.C.) told Bloomberg Government that the bill won’t need another hearing because the committee held a number of them on higher education in the past several years.

“A hard truth that students, families, and institutions must face is that the promise of a postsecondary education is broken,” Foxx said in a statement soon after the bill (H.R. 4508) was released Dec. 1. “We need a higher education system that is designed to meet the needs of today’s students.”

The Higher Education Act (Pub. L. No. 110-315) was last updated in 2008.

Mixed Reactions

Groups representing colleges and higher education advocacy groups said an update to the Higher Education Act is needed, but initial comments on the 542-page bill were mixed.

The American Association of State Colleges and Universities, which represents 400 public colleges and universities, said the bill was “a step backwards on access and quality because it eliminates important student benefits and undermines accountability.”

Meanwhile, Career Education Colleges and Universities, which represents post-secondary programs that focus on educating students for specific careers, including programs at for-profit schools, praised “important reforms that emphasize good jobs and quality careers for our nation’s students.”

The National Skills Coalition, which represents businesses, labor groups and community colleges, appeared to disagree with Foxx on the impact the legislation would have on helping align higher education with the needs of employers.

“While the bill makes some changes to expand financial aid to short-term and competency-based programs that help students get and keep well-paying jobs, it does little to ensure industry engagement or to make sure that credentials meet employer demands,” said Kermit Kaleba, the group’s federal policy director.

The White House also released a set of principles for a higher education reauthorization, including reducing the number of student loan and repayment options, slashing regulations and expanding Pell Grants for short-term programs.

Loan Simplification

The bill proposes having one federal loan program—with limits on how much students can borrow—as well as one grant and one work study program. The streamlining of federal aid programs is meant “to ease confusion for students who are deciding on the best options available to responsibly pay for their college education,” according to a committee summary of the bill.

Undergraduate students would be limited to borrowing as little as $7,500 or as much as $14,500, depending on whether the student was a dependent and how many years of a program they had completed.

Graduate student borrowing would be capped at $28,500 per year. Parents borrowing on behalf of their children would be prevented from borrowing more than $12,500 per student.

In streamlining the federal student aid program, a number of grants would be eliminated, including the Federal Supplemental Education Opportunity Grant, funding for low-income students, which the White House considered cutting earlier this year. It would also end the Perkins Loan program, which expired at the end of September and has yet to be reauthorized by Congress.

The benefits to streamlining a program have been debated by student aid administrators for many years, said Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators. But he said, however, no matter how many programs there were, it was important to keep funding levels for students the same.

“One of our top priorities is to ensure that any funds produced through program consolidation are held and reinvested into students,” Draeger said in a statement.

Rolling Back Obama Rules

While the bill does add some provisions meant to increase college accountability, it also would undo a number of Obama-era regulations opposed by Republicans including:

•  gainful employment, through which a vocational program could lose federal funding if the average loan payments for program students were above a certain percentage of their overall earnings;
•  state authorization, which required schools to be authorized not only in the states where they were physically located, but in any state where students were living and taking distance or online courses;
•  borrower defense, which allowed federal student loans to be discharged in cases in which a college has defrauded or seriously misled students. It also set up triggering mechanism that would require colleges to set funding aside as collateral; and
•  a federal definition of a credit hour.

In addition to repealing those regulations, the bill would bar the education secretary from attempting to regulate the issues in the future .

At the same time, Republicans are seeking different measures of accountability through the bill.

Under the legislation, institutions such as historically black colleges and universities would not be able to access certain types of federal funding if less than 25 percent of students graduated or transferred.

The bill would stop using cohort default rates to determine a school’s eligibility for federal dollars. Instead, programs, rather than schools, would be measured on how many students were making payments on their loans. Schools risk losing federal funding if 45 percent of students did not meet the threshold for repayment for three consecutive years.

The Federal Student Aid office would also be required to publish more data on student borrowers, including those who paid their loans in full before 10 years, the average length a loan stays in default, and the number of borrowers in income-driven repayment plans who aren’t required to make monthly payments.

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