NAICU Washington Update

Senate Education Funding Bill Supports Pell Max, Hints at HEA Reauthorization

June 22, 2012

The Senate Appropriations Committee approved its 2013 fiscal year education funding bill (which covers the 2013-14 academic year) on June 14. The bill provides funding for a Pell Grant maximum of $5,635 (maintaining a commitment to a scheduled $85 increase, through three significant student aid program changes that save money), while continuing current spending levels for all other student aid programs.

The bill also includes several provisions aimed at tackling abuse in the student aid programs, and provides some long-awaited funding for a study on deregulation of colleges.

The committee’s accompanying report language (Senate Report 112-176) hints at the policy direction Congress could take in next year’s scheduled reauthorization of the Higher Education Act (HEA). The report reflects ideas on campus-based aid, college affordability, and higher education reform that were part of President Obama’s budget proposals last winter.

The language takes on particular significance because Sen. Tom Harkin (D-Iowa), chair of the education appropriations panel, is also the education committee chair in charge of the HEA rewrite, if Democrats maintain control of the Senate after the November election.

Savings to Support Pell Maximum

The actual bill language (S. 3295) makes three specific changes to student aid programs, consistent with the president’s budget request, that address the expected $6 billion funding shortfall in the Pell Grant program in FY 2014. The changes provide $3.5 billion in savings for FY 2013 and FY 2014:

  • Limiting Subsidized Loan Eligibility: As of July 1, 2013, new borrower access to subsidized federal loans will be limited to 150 percent of the published length of the education programs in which the students are enrolled. Once that time has expired, borrowers will only be eligible for unsubsidized federal loans.
  • Limiting Living Expenses for Distance Education: For students receiving instruction exclusively through telecommunication technology, Pell Grant eligibility would be limited to the cost of tuition and fees, books, and supplies. This provision aims to address recent scams from “straw student” rings that target distance education programs at lower cost institutions, where students usually receive back funds for living expenses. 
  • Limiting Payments to Guaranty Agencies: The legislation cuts in half what a guaranty agency may retain for rehabilitating a defaulted loan. It also requires that the rehabilitated loan be given over to the department rather than being sold. The report language asserts that the loss in revenue will be made up by servicing contracts of nonprofits affiliated with guaranty agencies.

First in the World

The bill provides $39 million for a “First in the World Fund,” based on a proposal from the president’s budget last winter. The program would provide incentives to colleges for innovative proposals to keep tuition down and improve productivity. Private, non-profit colleges can apply for these funds. Of the $39 million, $14 million is set aside for minority-serving institutions.

Ban on Use of Federal Funds for Student Recruitment and Marketing

The bill prohibits spending federal dollars for college advertising, recruiting enrollment, and marketing. Although this provision is aimed at for-profit schools that receive nearly all their revenue from federal student aid, and spend a quarter of it on advertising and related activities, it applies to all institutions and all federal funds.

The bill requires colleges to certify to the education secretary that they are in compliance, and “report annually to the Secretary of Education and to Congress the institution’s expenditures on advertising, marketing, and recruiting.” While on its face it sounds relatively simple, this could be a significant added burden for institutions to calculate, as the language is generally lacking in definitions or process.

NAICU polled some of its members on an earlier version of the law that covered only student aid from the Department of Education, the Department of Veterans Affairs, and the Department of Defense. Most thought they would not violate the prohibition, but some, especially those at larger, decentralized institutions, thought collecting the data could be time-consuming and costly.

New ATB Eligibility 

A modest number of students without high school diplomas or the equivalent could qualify for aid as of July 1, 2012, based on a new process, partially reversing a recent action that excluded anyone without at least a GED. Such students would have to be enrolled in an eligible “career pathway” program, and pass an ability-to-benefit test (ATB), be determined as having the ability to benefit by a state-approved process, or be determined by an institution as having the ability to benefit upon satisfactory completion of six credit hours of course work acceptable for a certificate or degree at the institution.

The career pathway program has a specific structure, and is designed to support students who enroll in adult education programs to advance to higher levels of education and employment aligned with the needs of the regional economy.

Funding for a Deregulation Study

The bill provides $1 million for a study of all federal regulations and reporting requirements with which colleges must comply. The study would be conducted by the National Research Council of the National Academy of Sciences, and is to be completed in one year. Such a study was authorized in 2008, but this is the first time funding has been provided for it. Senators Lamar Alexander (R-Tenn.) and Barbara Mikulski (D-Md.) championed the issue. Both were among the senators who raised concerns about the costs of regulation at a February Senate hearing on college affordability.

Funding for International Education

After taking a 40 percent cut in funding last year, Title VI international education funding would be slightly increased under the bill. The new spending would be aimed at strengthening undergraduate foreign language programs and supporting study abroad. This pleasant surprise sends an important signal that the committee may feel last year’s funding hit was sufficient.

The Committee Report

The report language does not have the weight of bill language but is interesting because it hints at a shift in thinking about the federal role in higher education, similar to the transformation in elementary and secondary education policy that has been underway since No Child Left Behind became law in 2002. Key areas include outcomes measures, program quality, and merit. Specifically, the language touches on two hot button topics: the future of the campus-based aid programs and verbal support (but not funding) for a state-based higher education reform effort targeted at college affordability.

The campus-based aid language indicates support for a proposal from the president’s budget last winter that would redirect Supplemental Educational Opportunity Grants and Federal Work-Study funds from “higher-priced and well-endowed institutions to lower-priced public and private institutions that enroll and graduate higher numbers of Pell-eligible students and restrain tuition increases.”

The report states that the committee “supports the proposals in principle but believes they deserve more deliberation in Congress.” The report also includes a reference to the president’s proposal to revamp the Perkins Loan Program, a goal strongly supported by NAICU.

The report also discusses the president’s request for Race to the Top: College Affordability. The committee does not fund this program because of budget constraints, but indicates its support for state-level reforms to higher education policies and practices that address increasing college costs. The committee says it will continue to support the Race to the Top higher education concept, and continue deliberations through the hearing process.

Next Steps

The House most likely will mark up its education funding bill the week of July 9. The Senate is not expected to take its bill to the floor, so any negotiations between the two chambers is likely to take place during the post-election lame duck session. In the meantime, rumor has it that the Senate Health, Education, Labor, and Pensions Committee will hold a college affordability hearing in July.

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