Congressional Bill Introduced to Lower College Costs

Last week U.S. Senators Wyden and Merkley (D-OR) introduced legislation to address college affordability.

The Promoting Access and Retention Through New Efforts to Require Shared Higher Investments in Postsecondary Success (PARTERNSHIPS) Act encourages states to support lower tuition and in return provide federal matching funds for states that support lower tuition at public higher education institutions.

The legislation sets matching rates based on how much funding a state provides for public higher education operating support on a per-student basis, compared and indexed to the maximum Pell Grant award.  The legislation would also expand and make permanent the American Opportunity Tax Credit by increasing the tax refund for lower-income families and making Pell grants tax-free.

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Legislation Would Automatically Enroll Students in Income-Based Repayment Plans

U.S. Representatives Polis (D-CO) and Hanna (R-NY) recently introduced the Earnings Continent Education Loans Act (ExCEL).

The ExCEL Act would discontinue subsidized Direct Loans and phase out unsubsidized and PLUS loans for student borrowers in favor of a new loan program, Income Dependent Education Assistance (IDEA) loans.

IDEA loans would have similar terms and conditions as unsubsidized Direct loans have, except that repayment would be income-based and deducted from the borrower’s paycheck. The ExCEL Act would direct the Department of the Treasury to transmit certain income data to the Department of Education for purposes of calculating a repayment amount. Employers would withhold the repayment amount from a borrower’s wages unless the borrower opts out of that repayment method, electing to make monthly payments on their own.

In addition under the IDEA loan program:

  • Parents would continue to borrow under the Direct PLUS Program.
  • Loan limits would essentially be the same as in the current Direct Loan program.
  • The interest rate would be fixed, determined in the year the loan was made.
  • While interest during the in-school or deferment periods would not be subsidized for any students, the total interest that can accrue over the life of the loan would be capped.
  • Only interest that accrues during the in-school period could be capitalized; interest that accrues during the repayment period (up to the cap) would never be capitalized.
  • IDEA loans would not be eligible for public service loan forgiveness (PSLF)
  • There would be no automatic loan discharge after a defined period of repayment. Other current loan forgiveness provisions would apply.
  • Borrowers who want to repay the loan more quickly could prepay at any time without penalty.

HEA Reauthorization Focus of Higher Education Gathering

Higher education stakeholders met in Washington D.C. recently to discuss the reauthorization of the Higher Education Act (HEA) and the issues that should be at the forefront of policymakers’ minds as they craft a final agreement.

The gathering, entitled The Higher Education Act at 50: A Time for Reflection and Revitalization, was hosted by the Lumina Foundation and featured four panels. The panel topics ranged from reflections on success and failures of past reauthorizations to the importance that the next reauthorization address the challenges faced by current students.

Several themes emerged within the panels that policymakers should address in the reauthorization process:

  • Equity and accountability in higher education including completion and access, completion and quality, and consequences for “bad actors”
  • Strong data on student outcomes and costs
  • The increasingly polarization of the political climate and the impact on higher education

Congress Introduces New Textbook Legislation

Last week, U.S. Senators Durbin (D-IL), Franken (D-MN) an King (I-ME) introduced a bill to create a competitive grant program to support open textbook pilot programs at colleges and universities.

The programs would allow professors, students, researchers, and others to freely access materials that are available under an open license. The Affordable College Textbook Act requires any open textbooks or educational material to be freely and easily accessible by the public and forces entities receiving funds to complete a report on how effective the program is at saving students money.

A companion bill was also offered in the U.S. House last week by Representatives Hinojosa (D-TX) and Polis (D-CO).

U.S. Government Accountability Office Releases Report Recommending Changes to Reduce Student Loan Defaults

This week the U.S. Government Accountability Office (GAO) released a report arguing that the U.S. Department of Education could do more to help ensure student loan borrowers are aware of repayment and forgiveness options as a means of reducing default rates.

The 50+ page report found that many eligible borrowers do not participate in the Department’s Income-Based Repayment and Pay As You Earn repayment plans for Direct Loans and the Department has not provided information about the plans to all borrowers in repayment.  In addition, many borrowers who may be eligible for the Public Service Loan Forgiveness program are not aware of the program, and the Department, despite specific goals to provide “superior information and service to borrowers”,  has not examined borrower awareness of the program to determine how well its efforts are working.

The report recommended that the Department, to help ensure that Income-Based Repayment, Pay As You Earn, and Public Service Loan Forgiveness serve their intended beneficiaries to the greatest extent possible, take the following steps:

  • Consistently and regularly notify all borrowers who have entered repayment of income-driven repayment plan options, including Income-Based Repayment and Pay As You Earn.
  • Examine borrower awareness of Public Service Loan Forgiveness and increase outreach about the program as needed.

Congress Introduces Bill to Restore Pell Grants to Defrauded Students

This week U.S. Senator Barbara Boxer (D-CA) and U.S. Representative Bobby Scott (D-VA) introduced legislation that would restore Pell eligibility to students who had their loans discharged through compromise and settlement authority, defenses to repayment, or statutory discharges or for students who would qualify under these provisions if they had taken out a federal student loan.

The Pell Grant Restoration Act of 2015 has 40 co-sponsors in the U.S. House of Representatives and seven in the U.S. Senate.

U.S. House Fiscal Committee Looks at Costs of Higher Education

Last week, the U.S. House Committee on Ways and Means Subcommittee on Oversight held a hearing to look at the rising cost of higher education and the relationship to national tax policies.

The focus of the hearing centered on four factors that are thought to contribute to rising tuition:

  • Federal student aid
  • College and university spending
  • Executive compensation rates at private institutions
  • College and university endowments

The subcommittee heard testimony from five witnesses:

  • David Luca, Research Officer, Federal Reserve Bank of New York
  • Richard Vedder, Director, Center for College Affordability and Professor at Ohio University
  • Brian Galle, Professor, Georgetown University
  • MaryFrances McCourt, Senior VP and CFO, Indiana University, representing the National Association of College and University Business Officers
  • Terry Hartle, Senior VP, American Council on Education

The discussion focused heavily on whether increases in and changes to federal aid programs contribute to the rise in tuition.  Known as the Bennett Hypothesis, several prior studies have been unable to support a link between access to federal aid and increased tuition.  However, the Federal Reserve Bank of New York recently released a report showing a causal link .

In addition members also questioned those testifying about how institutions spend their money and whether revenue from endowments could be better targeted to directly help students.  Several members raised the question whether institutional endowments should continue to have a tax-free status.