Recently, there have been a number of bills issued and proposals made as the U.S. Congress begins the process of reauthorizing of the Higher Education Act (“HEA”).  Although a final reauthorization bill is not anticipated until 2015, and its substance may depend in large part on whether or not a change in party control occurs in either chamber, the recent activity in both the Senate and the House of Representatives indicates the most significant areas of focus. Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor and Pensions (“HELP”) Committee has introduced one comprehensive bill, whereas the House Committee on Education and the Workforce, under the leadership of Representative John Kline (R-MN) has considered a number of smaller bills that address specific aspects of the HEA.  In addition, there is a bipartisan effort underway in the Senate to provide more simplicity in the financial aid process and transparency for student borrowers, which may work its way into legislative language at some point in the process. This alert provides a summary of the primary Senate and House legislation to date regarding HEA reauthorization.

Sen. Harkin Discussion Draft (the “Higher Education Affordability Act”)

On June 25, 2014, Senate HELP Committee Chairman Harkin introduced a “discussion draft” reauthorization bill.  Enitled the Higher Education Affordability Act, the bill would amend the current HEA in a number of significant ways, as follows:

• Requiring further disclosures by institutions to prospective students, and including further requirements for schools with regard to entrance and exit loan counseling.

• Requiring more disclosures and accountability metrics from institutions, including loan repayment rates.

• Establishing a risk-sharing commission to explore holding low-performing institutions financially responsible for poor student outcomes.

• Eliminating origination fees on federal Direct Loans.

• Expanding access to dual enrollment and early college high school programs to help students earn college credit while they are in high school.

• Changing the 90/10 rule for for-profit institutions to 85/15.

• Prohibiting institutions from spending any funds derived from federal education programs on advertising and marketing.

• Creating a federal student complaint system for students.

• Authorizing several programs to reform and improve teacher and school leader preparation.

• Reinstating year-round Pell Grants.

Senator Harkin’s discussion draft bill also includes a number of provisions aimed at helping student borrowers as they enter repayment after leaving schools, such as: (1) streamlining repayment plans to create a single income-based repayment option for eligible borrowers; (2) helping severely delinquent borrowers avoid default by automatically enrolling them into income-based repayment; and (3) allowing private student loans to be discharged in bankruptcy.

House Committee White Paper and Higher Education Bills

House Committee White Paper

On June 25, 2014, the Republican-led House Committee on Education and the Workforce released a white paper, entitled “Strengthening America’s Higher Education System – Republican Priorities for Reauthorizing the Higher Education Act.”  The white paper outlines the party’s priorities for the upcoming HEA reauthorization, which include:

• Prohibiting the U.S. Department of Education (“DOE”) from implementing a college ratings system.

• Eliminating overly burdensome federal regulations, including the gainful employment and state authorization regulations.

• Establishing a “Flex Pell Grant” that would allow eligible students to use Pell Grant funds for a six-year period and draw from those funds until they are exhausted or the academic program is completed.

• Improving and streamlining the information provided by the Integrated Postsecondary Education Data System (“IPEDS”).

• Encouraging online learning by limiting federal regulations that would deny students’ access to online education.

• Encouraging competency-based learning by placing an emphasis on actual learning and skills obtained, rather than seat time.

In addition, the House committee’s white paper proposes a number of steps to help student borrowers, including: (1) Streamlining the loan repayment process to include only a 10-year standard option and a modified income-based repayment option; (2) enhancing loan counseling by making it an annual requirement; and (3) streamlining information for prospective students by making the information provided less complicated and therefore more transparent.

House Legislative Activity

In late June 2014 and early July 2014, a number of members of the House introduced bills related to the HEA.  Many of the initiatives within these bills reflect priorities within the House Republicans’ white paper (including certain bills that were introduced with bipartisan support).  The bills that were introduced are as follows:

• Simplifying the Application for Student Aid Act (H.R. 4982) (introduced by Reps. Larry Bucshon (R-IN), Mike Kelly (R-PA), John Tierney (D-MA), Tim Bishop (D-NY), Jared Polis (D-CO), and Ed Royce (R-CA)).  The bill proposes to reform the federal student aid process to help students make timely financial decisions about their education, as follows:

  • Allowing students to use family income data from two years prior to the date of the Free Application for Federal Student Aid (“FAFSA”) application. This process will help students apply for financial aid earlier so they can better prepare for their college costs.

  • Establishing a link between the online FAFSA form and income tax data stored by the Internal Revenue Service to automatically input income data into the FAFSA form, reducing the need to manually input information that often prevents low-income students from applying for aid.

  • Strengthening the integrity of federal financial aid by providing institutions more time to verify the income of their students.

• Strengthening Transparency in Higher Education Act (H.R. 4983) (introduced by Reps. Virginia Foxx (R-NC) and Luke Messer (R-IN)).  The bill proposes to help students gain access to the facts they need to make an informed decision about their education, as follows:

• Requiring the DOE to create a consumer-tested College Dashboard that would display only key information students need when deciding which school to attend (in place of the current College Navigator website).

• Ensuring that the College Dashboard includes information on the completion rates of all students, including contemporary students and Pell Grant recipients.

• Instructing the DOE to provide a link to the page of each institution listed on a student’s FAFSA to make sure students know this information is available.

• Directing the DOE to coordinate with other federal agencies to ensure all published higher education data is consistent with the information available on the College Dashboard.

The House committee passed this bill out of committee on July 10, 2014.

• Empowering Students Through Enhanced Financial Counseling Act (H.R. 4984) (introduced by Reps. Brett Guthrie (R-KY) and Richard Hudson (R-NC)).  The bill proposes to promote financial literacy through enhanced counseling for all recipients of federal financial aid, as follows:

  • Ensuring students who participate in the federal loan program receive interactive counseling each year and when they exit their education program.  The counseling students receive must reflect their individual borrowing situation.

  • Providing awareness about the financial obligations students are accumulating by requiring borrowers to consent each year before receiving federal student loans.

  • Informing low-income students about the terms and conditions of the Pell Grant program through annual counseling that will be provided to all grant recipients.

  • Directing the DOE to maintain and disseminate an online counseling tool that institutions can use to provide annual loan counseling, exit counseling, and annual Pell Grant counseling to their students.

The House committee passed this bill out of committee on July 10, 2014.

• Advancing Competency-Based Education Demonstration Project Act (H.R. 3136) (introduced by Reps. Matt Salmon (R-AZ), Susan Brooks (R-IN), and Jared Polis (D-CO)).  The bill proposes to provide students new opportunities through competency-based education, as follows:

  • Promoting innovation in higher education by directing the DOE to implement competency-based education demonstration projects. The DOE is authorized to waive current statutory and regulatory requirements that impede the creation of competency-based education programs.

  • Providing accountability by requiring an annual evaluation of each demonstration project to determine program quality, the progress of participating students towards earning a degree, obstacles related to student financial assistance, and the extent to which other legal barriers may exist that prevent the success of competency-based education.

  • Delivering greater flexibility to institutions that want to provide students a more personalized, cost-effective education.

The House committee passed this bill out of committee on July 10, 2014.

Financial Aid Simplification and Transparency (FAST) Act

On June 19, 2014, Senators Lamar Alexander (R-TN) and Michael Bennet (D-CO) introduced the Financial Aid Simplification and Transparency (“FAST”) Act, which would drastically simplify FAFSA and make other changes to help to increase low postsecondary completion rates for low-income students.  The major aspects of the bill are as follows:

• Reducing the 10-page FAFSA form to a form that would ask only two questions, on family size and household income two years ago.

• Creating a table to allow students in their junior year of high school to determine how much federal aid they are eligible for as they begin to consider colleges.

• Reducing the six different federal loan programs to three: one undergraduate loan program, one graduate loan program, and one parent loan program.

• Restoring year-round Pell Grant availability and providing flexibility, so that students can study at their own pace.

• Limiting the amount that a student is able to borrow based on enrollment.  It would also allow schools to limit borrowing in certain well-documented situations, such as when the average earnings of program graduates do not justify large amounts of debt.

• Streamlining complicated income-based repayment programs to increase their use from current low levels and decrease defaults by borrowers.