The Senate's Higher Ed Act

The U.S. Senate's education committee will convene today to take up its version of legislation to renew the Higher Education Act -- a bill that most college lobbyists prefer to the version passed in July by the parallel panel in the House of Representatives.

The Senate bill was introduced jointly this week by Sen. Mike Enzi (R-Wyo.) and Sen. Edward M. Kennedy (D-Mass.), the chairman and top Democrat, respectively, on the Senate Committee on Health, Education, Labor and Pensions, and that bipartisanship infuses the contents of the measure, as compromises have been struck on several key, contentious issues in it.

The Senate panel took a middle ground approach, for example, on the thorny set of issues surrounding the status of for-profit colleges, which dominated the debate during the House's deliberations over its bill. 

Unlike the House bill, the Senate measure does not create a "single definition" of an institution of higher education, which career colleges have described as a matter of fairness and equity but traditional colleges oppose because it would give higher education companies access to pools of federal money from which they are now excluded. But the Senate bill, as drafted, would soften two other provisions in the higher education law that for-profit colleges say are outdated but traditional institutions say protect against financial aid fraud and abuse.

Similarly, the legislation splits the difference on a set of provisions related to the federal government's two competing student loan programs, seemingly giving supporters of each -- and advocates for students as well -- things to dislike as well as like.

As a result, lobbyists for most constituencies within higher education said that while they would seek some changes in the Senate bill, they preferred it to the House bill.

"While there are still some areas we need to fine tune, this is a measured bill that tones down some of the rhetoric" in the House bill, said Cynthia J. Littlefield, director of federal relations for the Association of Jesuit Colleges and Universities.

In a letter sent to Enzi and Kennedy late Wednesday, the American Council on Education and 16 other higher education associations praised the senators and the bill but stopped short of formally endorsing it, citing several concerns: extensive new reporting requirements in several areas, the weakening of the provisions aimed at guarding against fraud, and a new provision that requires institutions applying for international education funds "reflect diverse and balanced perspectives" in those programs.

The Senate's Legislation

The nearly 375-page Senate bill (S 1614) would extend the main law governing student aid and most other higher education programs for six years. Much of the bill deals with the federal grant and loan programs, and would do the following things to those programs:

• Make a set of changes in the Pell Grant Program, including letting recipients use their grants year-round; raising the income cutoff for the program to $20,000, from $15,000; repealing a provision in the law that limits the amount of Pell Grant funds students at community colleges and other low-tuition institutions can receive; and increasing the ceiling to which appropriators can raise the maximum Pell award to $5,100 in 2006-7 and incrementally to $6,300 over five years.
• Leave intact the current formula for distributing funds for three "campus based" aid programs: the Perkins Loan, Federal Work Study, and Supplemental Educational Opportunity Grant Programs. Private colleges favor the current arrangement, which distributes much of the programs' funds to institutions based on how long they've been in the programs. Community colleges and other newer institutions oppose the present formula and have pushed to revamp it, which the House bill would do.
• Use funds saved by cutting subsidies for lenders to establish a new "temporary" mandatory program that would provide $5.5 billion in grant funds over five years. About $4.5 billion of the money in the Provisional Grant Assistance Program (or ProGAP) would go to supplement other grant aid for students for low-income families; the other $1 billion would provide grants to third- and fourth-year college students in science, mathematics and foreign-language fields.

Like the House bill, the Senate version would put significant funds toward Congress's deficit reduction efforts by cutting subsidies for lenders and making other changes in the student loan programs, although Senate leaders expect to carve more money out of federal pension programs, easing the impact on the college programs with which they compete for funds.

The most significant difference between the Senate and House bills -- one that pleases students -- is that the Senate measure would leave at 6.8 percent the fixed rate that borrowers pay to consolidate multiple student loans into one, and set at a 6.8 percent fixed rate what borrowers pay for Stafford loans. But the Senate bill would increase to 8.5 percent from 7.9 percent the fixed rate on PLUS loans, and continue to allow some nonprofit lenders to benefit from a subsidized interest rate of 9.5 percent on loans made by “recycling” existing pools of funds drawn from certain bonds.

The For-Profit Question

Commercial colleges gained significantly in the House legislation, particularly because it would eliminate the separate description for for-profit institutions now in the Higher Education Act that lets them participate in the federal grant and loan programs but denies them access to other pools of federal education money. Under the House's proposed change, which faculty unions and most nonprofit institutions oppose, for-profit colleges would be eligible to compete for money from a range of other federal programs.

Leaders at community colleges and other nonprofit institutions lobbied senators to retain the separate definitions, which the Senate HELP committee did -- a decision met by applause in the letter the traditional higher education groups sent to Enzi and Kennedy on Wednesday.

Nancy Broff, general counsel of the Career College Association, said the trade group for for-profit institutions was "disappointed" by the Senate panel's decision. But Broff took heart at the committee's approach to provisions commonly referred to as the "90/10" and "50 percent" rules.

The 90/10 rule bars from awarding student aid any institution that generates more than 90 percent of its revenues from federal financial aid programs. For-profit institutions have sought to eliminate the rule, which they say restricts their ability to admit large numbers of low-income students in urban areas. While the Senate panel stopped short of eliminating the rule entirely, it "changes it so extensively that it effectively nullifies the provision," the ACE and other groups wrote in their letter to Senate leaders Wednesday.

Broff said: "If we can't get a full repeal [of 90/10], where they're headed with the changes they've made definitely are moving in the right direction."

The groups took similar, diametrically opposed stances on the Senate's approach to the 50 percent rule, which 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 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. Although colleges would still have to apply for permission to get around the rule, the bar for such approval would be set very low.

"The most critical lesson learned from the scandals of the 1980’s was that the absence of front-end controls is a formula for disaster for taxpayers and students," the ACE letter says. "This is particularly the case when the Congress is poised to open the Title IV programs to untold millions of new students through unmonitored, unrestricted online education."

Other provisions in the Senate bill would:

• Require institutions to report each year on what they charge students in tuition and other costs, and to provide other information about job placements for their graduates.
• Create a program to support graduate education at institutions that serve large numbers of Hispanic students.
• 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.

When it meets today, the Senate panel is expected to approve the bill with few if any changes; members of the committee have been urged to offer few if any amendments.