Feb. 8

House, Focusing on Cost, Approves Higher Education Act

The House of Representatives on Thursday overwhelmingly approved legislation to renew the Higher Education Act that would toughen regulation of the student loan industry and simplify the process of applying for federal financial aid, among many other things. But while the legislation touches on an enormously broad range of issues and programs, the debate and discussion surrounding the measure focused heavily on the rising prices of college and the increasing difficulty students and families have paying for a higher education.

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The House bill (H.R. 4137), known as the College Opportunity and Affordability Act, represents Congress’s most aggressive efforts yet to pressure colleges to contain both their own internal costs and what they charge to students. In drafting the bill, Democratic leaders cast their lot with Republicans who have been pressing the issue for a decade, greatly increasing what colleges would have to report on their finances and agreeing to create lists designed to embarrass colleges that increase their tuitions significantly.

Under the legislation, the 5 percent of institutions in each sector (public, private, for-profit, two-year, four-year, etc.) that raise their tuitions by the highest percentage over a three-year period would have to create “quality efficiency task forces” to analyze why the colleges are raising prices more than their peers. Institutions on the list would also be required to report to the education secretary on the factors contributing to the price increases.

On top of those provisions, Thursday’s debate over the Higher Education Act legislation was dominated by the bipartisan embrace of several amendments — opposed by college leaders — designed to intensify the scrutiny of college spending and prices. Lawmakers, for example, approved amendments Thursday that would require colleges to (1) give prospective students information about what their tuitions are likely to be over multiple years and (2) report to the Education Department annually about how much of their endowments they spend on “reducing the costs of instruction offered by such institution, including the specific amounts expended for grants and other aid to reduce the amounts charged for tuition, fees, textbooks, meals, room and board.” An amendment that would have gone further — requiring a minimum payout from all college endowments — was withdrawn by its author, Rep. Peter Welch (D-Vt.), on Wednesday.

“Last year, by enacting a $20 billion increase in federal student aid – the largest increase since the G.I. Bill of 1944 – this Congress took an historic step to help American families pay for college,” said Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee. “Now we are redoubling our commitment to college students and parents by reining in skyrocketing tuition prices and making our whole system of higher education far more consumer-friendly.”

“Despite the considerable federal investment — or perhaps, in part, because of it — colleges and universities have increased tuition and fees year in and year out,” said Rep. Howard P. (Buck) McKeon of California, senior Republican and Miller’s counterpart on the House education panel. “The increases have come in good economic times and in bad, with steady enrollments and surging enrollments. It seems the only thing consistent about college costs is that they’re going up, and fast. With this bill, we hope to change that.”

The overarching agreement between leaders of the two parties over the centrality of the cost issue reflected the general consensus with which the key piece of legislation, which governs most federal higher education programs, was both drafted in recent weeks and discussed on Thursday. The day’s debate was largely devoid of drama — the final margin of the vote was 354-58 — and the only real moments of contention came at the very start, when Republicans balked that the Democratic-controlled Rules Committee had declared most of the potentially controversial amendments (most of which came from Republicans) to be “out of order” Wednesday night.

Only 4 of the 27 amendments cleared for consideration on the House floor Thursday came from Republicans, with the Rules Committee blocking votes on such core GOP issues as restricting aid for undocumented/illegal immigrants and endorsing David Horowitz’s Academic Bill of Rights, as well as McKeon’s plea to have the Education Department explore the damage being done to the student loan industry by last fall’s Congressionally mandated subsidy cuts and the current credit crunch.

Those moves prompted Republicans to bemoan what they characterized as a disruption of the bipartisan approach the committee’s leaders had used in crafting the underlying bill. “Why are Republicans being shut out of a bipartisan bill” by a “heavy-handed majority?” McKeon asked on the House floor, as he complained about the Democratic majority’s rejection of one of his amendments and those from several of his colleagues. McKeon said that the strict limits on amendments “taints the bipartisanship of the underlying bill.”

Once that unpleasantness was done, very little else disturbed the general geniality and accord of Thursday’s discussion. Even the few contested votes on amendments generated little in the way of discord from lawmakers across the aisle that separates the two parties. The only major disagreement came on an amendment that would have allowed borrowers to discharge private student loans after five years in bankruptcy.

Advocates for students supported the provision, which was proposed by Rep. Danny Davis (D-Ill.), because they say expensive and private student loans have become a major source of financial turmoil for borrowers and should be treated like many other forms of consumer loans, which can be discharged in bankruptcy.

But opponents said such a change could serve to drive up the cost of private loans for all borrowers because such loans would become riskier for lenders and therefore made at higher interest rates. “This would help a small number of people, but hurt a larger number,” said Rep. Ric Keller (R-Fla.), who heads the House’s postsecondary education committee. Although the bankruptcy provision appeared to win approval in an early-afternoon voice vote, it failed by a margin of 236 to 179 when lawmakers had to put their votes on the record.

“We are disappointed that the House chose to stand with big banks instead of students who fall victim to predatory private student loans,” said Luke Swarthout, higher education advocate for the U.S. Public Interest Research Group.

Other amendments approved on the House floor Thursday would direct the Education Department to study the pros and cons of allowing federal aid to flow to students who attend college less than half time, and urge the U.S. Education Department and the Internal Revenue to collaborate so that information that citizens submit on their tax returns can be used when they apply for federal financial aid. “I hope that both of the bureaucracies involved will really heed this,” Rep. John Doggett (D-Tex.) said of the latter amendment, which he sponsored.

The Underlying Bill

The Higher Education Act bill, which gives most federal college programs the authority to operate for five years and was last renewed (because of repeated false starts since then) in 1998, touches on an enormously wide range of issues. Among many other things, the legislation would:

Give the Education Department significantly more authority to regulate private student loans, as part of a broad set of provisions — prompted by last year’s investigations into illegal inducements given to colleges by lenders — aimed at cracking down on the behavior of lenders and college officials in making loans to students.
Dictate that colleges craft plans for giving their students legal ways to download movies and music, and that institutions explore technologies to stop illegal peer to peer file sharing. This provision had been strongly opposed by several college groups, especially since those promoting it based their arguments largely on data about campus downloading that have since been shown to be seriously flawed.
Bar the U.S. Education Department from issuing regulations governing higher education accreditation, designed to ensure that colleges are measuring student learning outcomes. Education Secretary Margaret Spellings vehemently opposes the provision (leading the White House to “strongly oppose” the bill) and will try to alter it when House and Senate negotiators meet to craft a compromise version of the Higher Ed Act legislation in coming weeks. The legislation would also create a new federal position, an “ombudsman,” to intervene in disputes related to accreditation.
Extend to three years from two the period the federal government uses to calculate the rate at which student loan borrowers default, but delay implementation of the change until 2012 and raise some of the rates at which penalties against institutions with high rates kick in.
Set a ceiling on the maximum Pell Grant of $9,000, and allow for students to receive Pell Grant funds year-round, instead of just during the traditional academic year.
Require states to maintain their financial support of higher education and allow the Education Department to withhold some funds to states that cut their college appropriations — an idea endorsed by some college officials but strongly opposed by many state legislators.
Make some much-sought changes in the Academic Competitiveness Grant Program, including making the much-maligned grants for low-income students available to part-time students and those seeking certificates as well as degrees, and taking the education secretary out of the business of deciding whether high school programs are of sufficient academic rigor to quality students for the grants, leaving that decision instead up to state officials.
Mandate that textbook publishers expand the information they provide to faculty members about pricing and changes from past editions, and that colleges put information about required boooks in their course schedules to help students shop for books more cost effectively, among other provisions aimed at easing textbook prices.
Crack down on diploma mills by directing the Education Department to publish lists of accredited institutions and accreditation agencies, among other things.
Make several changes designed to make it easier for students to get information about their financial aid awards and to generally simplify the process by which students — particularly those from low-income families — can qualify for federal financial aid.
Establish a loan fund to help colleges and universities damaged or otherwise impaired by natural disasters such as the 2005 hurricanes in the Gulf Coast.
Toughen standards for teacher education programs.

Leaders in the Senate and the House both said they hoped lawmakers from the two chambers could meet soon to work out differences between their respective versions of the Higher Education Act legislation and get a compromise version to President Bush, who has expressed concerns about both versions but not threatened to veto either one.

— Doug Lederman

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Comments

Meet the new boss, same as the old boss.

Taking bankruptcy protections away for private student loans in 2005 was the height of arrogance on the part of the industry, and the republican controlled Congress.

There was weak grounds for taking bankruptcy away for federally guaranteed student loans, but absolutely no defensible argument for taking them away for private loans. Restoring this protection for private loans is a no brainer, and should have sailed through the House.

Buck McKeon predictably turned his back on the students today. What really is disturbing, however, was how easily and quickly the blue dog democrats sold out to the banks.

The students would have been better off paying their tuition with credit cards.

This is despicable.

Alan Collinge, Founder at Studentloanjustice.org, at 5:05 am EST on February 8, 2008

head scratcher

“[T]hat would require colleges to (1) give prospective students information about what their tuitions are likely to be over multiple years and...”

Huh? Last time I checked banks aren’t required to inform lenders about what their mortgage rates might be several years from now, nor are automakers for the price of their new cars. Great, I can just see all the lawsuits from students who feel duped when rate hikes don’t match “likely” estimates.

Dumb amendments 1 — good amendments 0.

Informed Observer, at 9:40 am EST on February 8, 2008

horrible

Again, Congress has sold out people for banks. Private loans SHOULD have the same consumer protections and have bankruptcy options as any other loans, as credit cards, as gambling debts and everything else. When I went through bankruptcy in 2005, the guy ahead of me had $124,000 in gambling debts. They were wiped out. HOW FAIR IS THAT? This country wants to give ILLEGAL ALIENS FREE TUITION while people like me who can’t find enough work to LIVE and pay my loans are RUINED for life. I hate my country now. HATE IT!!! And then I’m caught between the horrid student loan laws and the despicable, draconian SSI Laws. My husband is on SSI, so if I earn over $240 a month, they TAKE money from him, so we are right back where we started. If I temp for a week, it’s like working for practically nothing, because of the SSI laws, yet I still have to pay my loans. This country ought to get the laws in a row. GET IT RIGHT. STOP HURTING PEOPLE. I paid off my loans in the 1980’s WHEN NO ONE ELSE WAS. I even got evicted to pay my loans. Well, I’m too old for that now. I want justice. This country is over. It is a mess.

And Congress is bought. And like I’ve always thought — Democrats are NO BETTER than Republicans. WAKE UP PEOPLE!!!!!

Nanette Rayman, Writer, at 10:30 am EST on February 8, 2008

Charles instead of George?

I wonder what this legislative sausage would look like if Charles Miller (Spellings Commission Chair) were its floor manager instead of George Miller!

The prospect of NACIQI slipping into partisan politics is disheartening. By allowing congress to have a greater say in who staffs it, the segregation of duties, parceled amongst the vertices of the Gatekeeping Triad (US Dept of Ed, states, accrediting agencies), is compromised.

To make matters worse, in this delicately balanced fiduciary system of checks and balances, the states are missing in action, and the accreditors are guilds that rubber-stamp approvals for their members. With the proposed changes to NACIQI, not only is the gatekeeping gate locked in the open position, but the established checks and balances all but disappear.

No wonder the higher education guilds approve: CHEA, ACE, AAU, American Association of State Colleges and Universities, American Association of Community Colleges, National Association of Independent Colleges and Universities, National Association of State Universities and Land Grant Colleges, Association of Jesuit Colleges and Universities, Association of Community College Trustees.(according to Prof. GOllin IHE 2/7/08).

Left intact as well is the Diploma Mill Prevention provision, which the guilds apparently support as well. The reason for this is as clear as it is self-serving: the strengthening of the protected monopoly enjoyed by the accrediting guilds. No hidden self-interest here!

Of course, this has yet to be reconciled with the Senate, and there may be court cases challenging it.

Other losers in this legislation also include students caught in the ever tightening coils of credential inflation, tuition increases, and loan debt. My condolences to them. Lost in the flowery rhetoric of increased accessibiltiy is the reverse effect of the credential spiral that undermines the value of the degrees already granted.

All this goes to confirm my impression of Washington. http://home.earthlink.net/~fheapblog/id8.html

Glen S. McGhee, Dir., at Florida Higher Education Accountability Project, at 10:30 am EST on February 8, 2008

Congress is Reducing Access to Education

It is about time that the colleges take some responsibility for the scandals. Many lenders were NOT involved with bribing school officials and up until now, all the legislation has been geared towards punishing the lenders. The colleges remained unscathed, although they had entire departments taking bribes, free meals, golf outings, expensive sports tickets, and other gifts.

Congress has done NOTHING to reduce the cost of a college education. They cut subsidies making lenders less willing to make loans. The money they “saved” by doing this they are giving away to a lesser number of students as grants. I’m sorry, but it’s better that MORE people have the opportunity to attend college, even if they have to get a loan. Without a loan, I could not have gone to college because the grants weren’t near enough. Pushing grants instead of loans will help a FAR smaller amount of kids go to college.

Not all lenders are evil. There are many non-profit lenders that have been punished, too. This, inspite of the fact that these lenders didn’t even have the resources to go out and bribe anyone.

Greed, as usual, has ruined this for everyone, especially prospective college students.

Student Loan Lender, at 1:10 pm EST on February 8, 2008

Dumb and Dumber

“[T]hat would require colleges to (1) give prospective students information about what their tuitions are likely to be over multiple years and...”

Huh? Didn’t we have an anti-trust case because schools were accused of colluding on what their prospecive tuitions were going to be? Now Congress is mandating that we do just that?

TB, at 1:10 pm EST on February 8, 2008

Student Loan Lender — OK, lenders have taken their lumps (some deserved, some not), but colleges are unscathed? Huh? Schools all over the country — including many whose FA staff never got more than lender logo pens as “bribes” — have had to adopt draconian codes of conduct that include mandated defensive, mea culpa language on their website that anyone reading would assume means that they have been guilty of all kinds of wrongdoing. NASFAA, based on the acts of a handful of individuals, some of whom were barely even involved with the association, has had to endure public sloggings and has been called “poison” by House staffers. Financial aid administrators have had their reputations trashed.

And it takes two to tango...if lenders didn’t pay up, nobody would have received any of those perks. What went on was obscene, but the guilt is bilateral.

Lenders have had some of their profits reduced by legislation that makes loans cheaper for both borrowers and taxpayers (and sorry, that’s a good thing), but that’s unrelated legislation. To imply that lenders have been the only group to pay the price for the lender list fiasco is simply inaccurate.

DS, at 1:50 pm EST on February 8, 2008

Cost or Price?

Oh my! To paraphrase the Clinton campaign 16 years ago, “It’s the PRICE, stupid!!” Even IHE got into the confusion – “House, Focusing on Cost, Approves HE Act.” They are not focusing on the cost of providing an education – they are focusing on the price charged to students, which they think is too high (apparently, House members paid little attention to the GAO report released in December, stating that only 3% of the nation’s undergraduates attended colleges charging more than $25,000!).

This is not to dismiss the concern that the price of attending a private college is high for many. But the answer cannot be found in increasing discounts. Only a handful of super-wealthy institutions can increase the payout from their large endowments to further lower the PRICE charged to students. This, however, simply subsidizes larger costs. Most institutions do not have the endowment flexibility to provide these increased subsidies beyond what they already do, and would instead have to increase tuitions further in order to plow more funds into financial aid for those unable to afford the price. This hardly addresses access and affordability, and it does not even come close to addressing the COST of providing an education.

So, the House focuses on price charged by colleges. Why not focus on the price charged by dairy companies (who are subsidized) for milk? How about focusing on the price charged by pharmaceutical companies whose products are paid for in part by federal dollars? The 5% of dairy or drug companies increasing their prices the most will be subject to investigation. As Woody Allen said in Annie Hall, “Excuse me, but I have an appointment back on the planet Earth!”

Interestingly, the super wealthy schools that spurred this flurry of discussion on Capitol Hill (because they were “hording” endowment earnings) will be the ones least affected by this regulation. When their costs increase, they can simply dip into their huge endowments to further subsidize the price, leaving the bulk of institutions with lower endowments to further increase prices to meet increased costs. How does this help affordability?

This is NOT a panacea, but it seems to me that unless colleges are allowed to collaborate on ways to reduce costs, price will continue to climb. Congress and the Justice Department need to come to an agreement to exempt colleges and universities from the anti-trust laws for a limited period of time (say five years) for the specific goal of developing system-wide strategies for cost containment under strict guidelines. Will that work to control cost and thus price? I don’t know. In the private sector, competition can reduce price AND cost. In education, competition increases cost and subsequently price, because lower student-faculty ratios, state-of-the-art facilities, and more overseas programs all cost money to provide as we compete for students and resources. The students “win,” in that a higher education today is more comprehensive than it was 30 years ago. But it comes at a price. And that’s what all the fuss is about.

Again, I don’t know if collaboration among colleges to reduce costs is THE answer. But I do know that if Congress keeps talking about “costs” while focusing regulatory energy on “price,” the rich will get richer and the poor will have to fend for themselves.

Robert J. Massa Vice PresidentDickinson College

Bob Massa, Vice President at Dickinson College, at 3:30 pm EST on February 8, 2008

THE GRASS ISN’T ALWAYS GREENER IS IT??

I will admit that the student loan industry needed an overhaul but was it worth it?? You now have less choices than you did before and most lenders are going to discourage you from consolidating because it’s less profitable for them than if you stay in crippling debt. Congress has let big lenders win and pushed small lenders and consolidation companies out of the industry. So I ask you...is the grass really greener on the other side? You will now find it harder to find Federal Student Loans and you can forget getting borrower benefits to help you in repayment. I hope it was worth it. Did you all really think that the overhaul and subsequent demise of the industry was going to help you? It wont. Congress should write a book on how to kill an industry in 4 months. I work for a consolidation company that will be out of business by the end of the week. I promise you many more will follow. I hope you all like Sallie Mae and Direct Loans. That’s who will survive. Competition is a good thing and there is now no competition in the student loan industry. Lenders will make loans for who they want and those who really need them will be passed over. The College Cost and Reduction Act of 2007 isn’t going to save you money...it’s going to cause a monopoly of the industry. You all made your beds now you get to lie in it.

Student Loan Consolidator, at 11:35 am EST on February 10, 2008

To student loan consolidator

OH NO... You’re losing your job... and you work for a private student loan company who offers “competition” on FFEL and “alternative loans". I hope you don’t have any student loans in repayment yourself because now you might just get a taste firsthand of what happens when you don’t pay them on time during financial disasters... especially if you have private loans. I hope the student loan bubble bursts and they start acting responsibly. I am sorry you may be losing your job, but then again, I’m not, because you work for one of the nastiest, greediest, an unethical industries out there right now.

Intrigued, at 12:50 pm EST on February 10, 2008

It’s always amazing what we are able to discern from the people on the other side of an argument when they face setback or defeat relative to their positions in that argument. Their true character and motivations are usually revealed in moments of weakness like these (it’s human nature). For instance, does anybody of pragmatic disposition actually believe that students are better off borrowing money from the credit card industry in lieu of private student loan lenders? Let’s see, credit cards offer no in-school deferment, have double-cycle billing, have limited or no grace periods (if you miss a payment), $40+ dollar late fees, have interest rates where 13% to 25% is the norm rather than the exception, have “universal default” rate increases, and offer situations where your interest rate may increase regardless of whether you’re making your payments on time and are otherwise a good credit risk. Credit card borrowing in lieu of private student loans sounds like a great idea from the people who purport to have the best interest of the students in mind when championing issues like making private student loans dischargeable in bankruptcy. Makes those who again have pragmatic dispositions wonder what really are the motivations of those who disapprove of private student lending? Perhaps much of the noise about private student loans is less about the “victims” and more about the ideological disposition of their “saviors”.

Ah, the financial aid office. Yes, you too were the victims of Cuomo’s version of modern-day McCarthyism. But, very few of you are going to loose your jobs. Very many FFELP employees have lost their jobs, and will continue to loose their jobs. Maybe, as Americans, we can find it in our hearts to have a little sympathy for our fellow citizens. After all, the customers of FFELP lenders received the same interest rates (or better in some circumstances) than customers of the government direct loan program no matter how many cruises you attended or free T-shirts you received. Also, don’t forget that two Presidential candidates are toying with removing the last vestiges of the free enterprise system in higher ed. finance when out on the stump attempting to win over the electorate (not sure this is Constitutional, but let’s not let that stop the real reform that only government takeover can provide). I doubt you’d enjoy this uncertainty in your workplace.

That brings us to the schools, who, while they lament the “arms race” as it is called, are at the same time empowered to stop it. Maybe like the rest of the economy, you will try to do more with less, instead of more with more, for the sake of all who participate in this system.

Patrick Bott, at 8:10 pm EST on February 10, 2008

Read BEFORE You Sign.

Intrigued- Actually I don’t have any student loans myself because I know I can not afford college so I have not yet attended. Also, I work for a Federal Student Loan Consolidation company that used to actually help people. We have helped thousands of doctors, lawyers and chiropactors with their consolidations. We have helped them complete deferment paperwork, helped complete forgiveness paperwork. Even educated them on ways of staying OUT of default. It’s not my problem that you have student loans that you maybe can’t afford to make the payments on. You should have thought about it BEFORE you signed on the magical dotted line. You disgust me to say that it doesn’t matter that I’m losing my job. It matters to my family and my four year old daughter that we won’t be able to afford daycare for. This will com back to bite you and you will wish that companies like mine still existed a few months from now. Oh but it’s ok cause you’ll save $20 a month in repayment. Unless your loans have already been disbursed....then you save NOTHING! So this won’t even help you. It will help FUTURE student loans borrowers. I don’t feel bad for you at all, you got to go to college and get a degree probably have a pretty good job. I am not unemployed, with a daughter trying to survive. Hope you feel high and mighty now.

Student Loan Consolidator, at 10:10 am EST on February 11, 2008

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