NAICU Washington Update

Tweaking the HEA in Light of the Economy

March 30, 2009

Although technical amendments are supposed to be just that - "technical" - the economic downturn is already forcing Congress to make some major changes to the Higher Education Act reauthorization bill passed last August. 

The House is considering legislation today (March 30) to make technical amendments to the Higher Education Opportunity Act (P.L. 110-315) passed last August.  The bill will be considered under "suspension of the rules," which means that there can be no amendments to the bill, but it takes a two-thirds vote to pass.

Although a technical amendments bill is supposed to carry forward the type of actions for which it is named, in this case the bill carries several "must-do" provisions.  They include delaying for one year the PLUS Loan auction that would determine PLUS loan origination rights in each state.  The provision grows out of great concern that, given the tight credit situation, few if any lenders would have bid in time for the current July 1 deadline.  If that happened, it would compromise PLUS loan availability for coming academic year.

The bill also addresses a somewhat arcane, but extremely important provision for some borrowers.  Under current law a borrower may "rehabilitate" a defaulted FFELP student loan by making a prescribed number of on-time payments to the guaranty agency.  Once the payment threshold is met, the loan may be sold to a lender, and the borrower's credit record is cleared.  Because of the ongoing economic uncertainty, guarantors haven't been able to sell the rehabilitated loans, leaving those borrowers in default.  The new provision will allow FFELP loans qualified for rehabilitation to be assigned or sold to the Department of Education, allowing borrowers' credit records to be cleared.

The bill also fixes a discrepancy in the way veterans' benefits are considered in calculating Title IV financial aid in 2009 and 2010.  Currently, these benefits are taken into account, but in 2010, they won't be.  The bill changes the 2009 calculation to the 2010 calculation, meaning veterans can receive full veterans' benefits and full Title IV benefits.

The bill also includes some truly technical changes which simply change a number, a letter, punctuation, a word, or a date throughout the legislation.  Many of these corrections came from the Department of Education.

Further Higher Education Act technical amendments are likely to be needed, but these "must -dos" address some of the most urgently needed changes growing out of the troubled economy and the new GI Bill.

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