Imperfect (Yet Successful?) Bill

July 25, 2005

If the mythical “perfect” piece of legislation pleases everyone, the next best thing may be a measure that satisfies no one.

The bill ( H.R. 609 ) that the House of Representatives Committee on Education and the Workforce approved on Friday to renew the Higher Education Act fits the latter definition. While it’s possible to identify some relative winners and losers -- for-profit institutions and Hispanic-serving institutions gained, lenders and certain borrowers took significant hits -- all of the many types of institutions and groups of people affected by the law found aspects of the bill to like and not.

For example, the bill's provisions on student loan programs provoked complaints from lenders and student groups alike that Congress was trying to balance the federal budget on their backs. And while lobbyists for nonprofit colleges still believe the bill goes too far in strengthening the hand of for-profit institutions, Democrats (and several Republicans) amended the legislation in several ways that blunted the impact of the changes and led career college lobbyists to complain that traditional institutions are afraid of competition.

The bill's lack of appeal is unsurprising in part because of the environment in which it has been drafted this year. The legislation, which governs federal student aid and other higher education programs and is renewed every five years, is normally a chance for lawmakers in both parties to rethink, and even reimagine, how best to help students enroll and succeed in college, and that usually means opportunities to create new programs (and spend money).

But this year, the education committee’s Republican majority, under pressure from their party’s leaders in the House, agreed to try to wring billions of dollars a year out of the programs covered by the measure, and to use that money to help shrink the growing budget deficit (as opposed to reinvesting them to boost student aid, as Democrats urged). So while legislators can often throw dollars around to ease the sting of unpleasant philosophical shifts or policy changes, the House committee had little new money to offer to increase benefits for students, and in fact cut subsidies for lenders and made changes that will raise the cost of loans for some borrowers over the next several years.

The lengthy (333-page) and complex legislation approved along strict party lines Friday by the education committee would, among many other things:

  • Allow for moderately increased spending on Pell Grants over six years, make the grants available to students year-round, and provide somewhat larger grants to students who perform well academically in their first two years in college. To the relief of many private college officials, the measure would ignore a Bush administration proposal to end the Perkins Loan Program (along with several other programs popular with college officials), but to their dismay, the legislation would reallocate funds for the Perkins, Federal Work Study, and the Supplemental Educational Opportunity Grants Programs so that more money flows to institutions newer to the programs. An attempt to reverse this change was narrowly turned away during Friday morning's vote.
  • Cut payments made to lenders and other entities in the guaranteed student loan program, by closing a legal loophole that has allowed nonprofit lenders to reap billions of dollars in profits and increasing the amount that banks and guarantors must repay when borrowers default on their loans. The bill also would allow borrowers to consolidate several student loans into one at either a variable or fixed rate -- student groups had fought to sustain the fixed rate that would have vanished in the Republican committee's original legislation -- but it would set the rate for both kinds of loans at 8.25 percent, instead of the 6.8 percent that student groups favored. While Republicans said that that and other changes, such as lowering over time the fees most students pay to originate loans, would make loans more available and lower costs to students, Democrats said that the changes, taken together, would increase the average cost of a loan by thousands of dollars in the next several years.
  • Ease restrictions on for-profit colleges (by creating a "single definition" of a higher education institution) and on institutions that operate mainly online (by eliminating a rule that bars federal aid to institutions that offer more than half of their courses online). But the changes ultimately adopted by the committee were narrower in several key respects than proposals originally offered by the education panel's Republican leaders.

The committee's chairman, Rep. John A. Boehner (R-Ohio), heralded the bill produced by the committee's nearly two years of work. "We're providing meaningful reforms that will expand college access, prioritize the needs of students and protect American taxpayers," said Boehner. 

As they assessed the House higher education committee's bill in the aftermath of its passage late last week, most higher education groups had reactions similar to that of the American Council on Education: not great, but could have been worse, and we hope it will get better. David Ward, who heads the council, the umbrella group for college associations, described the renewal of the Higher Education Act as "a process -- not an event."  

"Our goal," Ward said, "has always been to work with members of Congress to refine the bill as it moves through the legislative process," and "we believe the legislation has improved as it has moved through subcommittee and committee." 

ACE officials said, for instance, that they believed the committee had significantly improved language in the bill regarding accreditation, including softening proposals contained in the draft of the bill introduced in the spring that would have significant increased the reporting requirements on accrediting groups. But the council said it would continue -- when this legislation is considered by the full House and when the Senate drafts its own parallel measure to extend the Higher Education Act, some time this fall -- to try to ease or eradicate provisions in the House legislation that impose "many new reporting requirements" on colleges related to their costs. 

A Mixed Bag for Most

Virtually every set of institutions or constituents in higher education saw the bill in a similar way.
Lenders and guarantee agencies, who tend to be viewed by student groups and others as favored sons of the Republicans who have dominated Congress for a decade, are poised to lose several billion dollars in revenues if cuts approved by the education committee are ultimately enacted into law (as seems likely). The Consumer Bankers Association said it was "concerned about the cumulative impact of several student loan budget cuts in the bill," and that it hopes to continue to work with both the House and Senate education committees to assure that a strong and innovative student loan program is the end game." 

Still, even as the banks and guarantors watched the education committee reach into their pockets for most of the nearly $11 billion that it has sought to squeeze from the bill, Republicans on the panel easily rejected a Democratic proposal that would have rewarded (with the ability to offer students larger Pell Grants) colleges that left the guaranteed program for the competing, government-run direct loan program. 

Student groups gained some small victories; for instance, the education committee partially repealed a provision in current law that bars the awarding of federal student aid to students who have been convicted of a drug offense (under the panel's change, students who are convicted while in college would continue to be denied financial aid, but those convicted before enrolling would be eligible). But advocates for students, who tend to take a no-holds-barred approach to lobbying, said the legislation as drafted "slams shut access to affordable higher education for millions of student and families."

Even for-profit institutions, which probably fared better than any other group in the original legislation introduced by the education committee's Republican leaders, saw some of their gains whittled away by a group of Democrats and moderate Republicans as the education committee and its higher education subcommittee considered the bill during the last two weeks. 

For instance, the bill approved by the full committee Friday would, as proposed by Republican leaders, create a "single definition" of an institution of higher education, theoretically ending a restriction that limited career institutions to the student aid funds available through Title IV of the Higher Education Act. But a coalition of Democrats and Republicans wary of abuse by for-profit colleges won approval of a pair of changes that would limit the pots of funds, in the Education Department and in other agencies, that for-profit institutions could compete for.

The education panel's Republican leaders had in their original bill (which, in contrast to most past reauthorizations of the Higher Education Act, was drafted without significant input from the minority party) also proposed eliminating a provision in current law that bars from awarding student aid any institution that generates more than 90 percent of its revenues from federal financial aid programs.

But the same coalition of Democrats and Republican moderates succeeded in keeping the so-called 90-10 rule in the law -- though it was amended in a way that applies it to nonprofit institutions as well as for-profit ones, and penalizes students at such an institution only if it runs afoul of the rule for three straight years.

The legislation approved by the House Friday would make dozens of other changes in the Higher Education Act. Among the most noteworthy, the measure would:

  • Resolve that colleges should provide an intellectual climate that supports a wide range of views and does not permit professors to punish students who don't see eye to eye with them. The American Council on Education and some other higher education groups had signed off on the proposal, a watered-down version of David Horowitz's Academic Bill of Rights, but Democratic lawmakers' tried unsuccessfully to strip it from the legislation or amend it to similarly protect professors whose political views come under attack from small groups of critical students.
  • Eliminate a current provision in the Higher Education Act that bars from federal financial aid programs colleges that (1) offer more than half their courses via distance education or (2) enroll more than half of their students in online programs. The regulation, known as the “50 percent rule,” was drafted in 1992 to rein in the rapid growth of fraudulent diploma mills and correspondence schools, and although critics believe gutting the rule could bring back the bad old days, a mix of nonprofit and for-profit institutions have favored ending it.
  • Create a new grant program aimed at increasing the number of Hispanic Americans who move into postgraduate studies.
  • Institute a series of recommendations made by the Advisory Committee on Student Financial Assistance to make it easier for students to apply for an qualify to receive federal financial aid.
  • Require colleges to publish information about fire safety, including how many incidents they've had and which of their buildings have sprinklers.

With the House committee's work done for now, further action on the Higher Education Act is unlikely until after Congress's August recess, when the full House is expected to take up the legislation approved Friday and the Senate will draft its own version of the bill.

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