February 21, 2008

Higher Education Act (HEA) Reauthorization Update

The House of Representatives approved the College Opportunity and Affordability Act (H.R. 4137) on February 7, 2008 by a vote of 354-58. The bill reauthorizes the Higher Education Act (HEA) through FY 2012. During the debate on the bill, 27 amendments were considered for inclusion, and 26 of those amendments were adopted. Next, the bill will go to Conference Committee for negotiation and, if passed by both chambers of Congress, will be sent to the President for signature. The current extension of the HEA expires March 31, 2008.

Highlighted below are some of the amendments pertaining to the Federal Family Education Loan (FFEL) program.

• Amendment modifying the cohort default rate formula, which extends the length of the cohort default rate calculation from the current two-year period to a three-year period beginning with the FFY 2008 rates. Rates based on the new formula would be published for the first time in 2011. If approved, this modification could cause significant increases in cohort default rates for many schools. Other changes increase the ceilings for both benefits and sanctions and outline a transition plan.
  
  Regarding benefits for schools with lower cohort default rates, under current law, schools with a rate below 10 percent for each of the three most recent fiscal years may deliver or disburse, in a single installment, loans that are made for one semester or other prescribed academic period. Schools in this low cohort rate category may also choose not to delay the first disbursement of a loan for 30 days for first-time, first-year undergraduate borrowers. The proposed amendment would allow schools with a cohort rate below 15 percent to continue following these eased student loan disbursement rules, beginning FFY 2012.
  
  Regarding sanctions for schools with higher cohort default rates, currently, schools with a cohort default rate of 25 percent for three consecutive years or 40 percent for any one year may lose access to all Title IV funds. The proposed amendment would raise the limit to 30 percent for three consecutive years beginning FFY 2012, though any school with a default rate at or above 40 percent in any one year could still lose Title IV funding.

• Amendment requiring certification of private education loan applications by the financial aid office before the lender can disburse funds and requiring the lender to notify the school of the loan amount provided to the student.

• Amendment requiring the Secretary of Education and the Secretary of the Treasury to jointly conduct an evaluation of the parent PLUS loan auction established by the College Cost Reduction and Access Act (CCRAA). A preliminary report is due no later than September 1, 2010, with interim and final reports due in 2012 and 2013, respectively.

For more detailed information about these and other amendments, click here to read the National Council of Higher Education Loan Programs' (NCHELP) summary of select H.R. 4137 provisions, including the amendments approved by the House when the bill was passed on February 7.