1. Reauthorization of the Higher Education Act (HEA)
Spring AASFAA
April 10, 2018
Presented by Becky Collins

2. Reauthorization of the Higher Education Act (HEA)
First HEA was enacted in 1965
52 pages long
Typically reauthorized every 4 to 6 years
Reauthorization language:
Creates, extends or makes changes
Specifies the amount of money the government can spend
The HEA has been reauthorized 8 times, the last one occurring in 2008
Reauthorization language creates, extends, or makes changes to a federal program, and specifies the amount of money that the government may spend to carry out the program

3. Reauthorization of the Higher Education Act (HEA)
Promoting Real Opportunity, Success, and Prosperity Through Education Reform (PROSPER) Act
House Education and Workforce Committee approved H.R on December 12, 2017
At this time, no action has been taken by the Senate Committee on Health, Education, Labor and Pensions (HELP) Committee
The theme is
One Loan
One Grant
One Work-Study

4. Reauthorization of the Higher Education Act (HEA)
House bill promotes
Innovation, Access and Completion
Pell Grant Bonus to promote on-time completion
Simplification
One loan, one grant, one work-study
Empowerment for better decision making
Enhanced counseling for all federal student aid recipients
Accountability
Program level loan repayment rate and reforming Return to Title IV funds
Promotes Innovation, Access and Completion

5. Pell Grant Program Pell Grant Bonus $300.00 per year
More than full-time course load that leads to at least 30 credit hours annually
Does not include summer enrollment, which is open for year-round Pell
The bill would create a Pell Grant Bonus that is provided to students that are taking more than a full-time course load that will lead to completion of at least 30 credit hours in each award year. It would be divided equally among each payment period. Pell recipients receiving a maximum Pell award would receive the Pell bonus, unless they received a summer/year-round Pell award in the same payment period.

6. Pell Grant Program Workforce Pell
Programs with 300 or more clock hours would be eligible for Pell
Current law is 600 clock hours
The bill would permit programs with 300 and more clock hours (as compared to 600 clock hours) to be eligible for Pell thereby creating a “workforce” Pell.

7. Pell Grant Program Annual Counseling (not all inclusive)
May be in-person or online
Terms and conditions of grant
Budgeting and financial literacy information
Lifetime eligibility
Approved use of funds
The bill, if passed as is, would require institutions to provide annual in-person or online Pell grant counseling to Pell recipients detailing among other things, the terms and conditions of the grant, budgeting and financial literacy information, lifetime eligibility, and approved use of Pell Grant funds.

8. Pell Grant Program Annual Status Report
Provided by the U.S. Department of Education
Each Pell recipient
Remaining Pell eligibility
Estimate future Pell Grant awards
Provide link to Pell calculator
The bill would require Pell Grant recipients to get an annual status report from the Department of Education. The report would inform the student of their remaining period of Pell eligibility, the amount of Pell that may be awarded for such remaining period and how it might change, and how the calculation for the remaining period of eligibility was made.

9. Pell Grant Program Pell Grant Disbursement
Substantially equal monthly or weekly installments
“Aid like a paycheck”
Unequal disbursements to account for unequal costs, i.e. tuition and fees
Pell payments would be made in monthly or weekly installments consistent with the structure of loan payments. Also know as “aid like a paycheck”. Unequal disbursement would be permitted to account for unequal cost or unequal financial assistance – like upfront charges for tuition and fees.

10. Pell Grant Program Pell Grant Limitations
Eligibility ceases for students receiving Pell funds for three payment periods with no earned credits
Financial Aid Administrator may waive rule if it is determined unusual circumstances existed
The bill makes ineligible any student who received Pell Grant funds for three payment periods without completing any credit hours. Financial aid administrators are, however, granted authority to issue waivers in cases where they determine the failure to complete the credit hours was due to circumstances beyond the student’s control.

11. Federal Work-Study and FSEOG
The bill authorizes funding at $1.72 billion
Almost double recent appropriations
Eliminates eligibility for graduate and professional students
Community service component replaced with work-based learning component
Provides for a set-aside of 20% of amounts appropriated to
Institutions with the highest completion rates for Pell Grant recipients, and;
Institutions with the highest rates of improvement in their Pell Grant recipients completion rates
FSEOG would be eliminated
Authorizes $1.72 B for work-study – double the amount of recent appropriations
Graduated and professional students no longer eligible
The community service component replaced with a work-based learning component, defined as “paid interaction with industry or community professionals in real workplace settings that foster in-depth, first-hand engagement with the tasks required of a given career field, that are aligned to a student field of study.”
20% to schools with highest institutions with the highest completion rates for Pell recipients and;
Institutions with the highest rates of improvement in their Pell Grant recipients completion rates
There would be no required non-federal share on these “improved institution” funds, but institutions would need to provide assurances that priority awarding for these additional funds was given to high-need students and to those student employed in work-based learning opportunities.
The allocation formula would be see a phase-out of the base guarantee in 5 years. May affect those with large base guarantees

12. Federal Student Loans
Direct Loan Program would be replaced with the Federal ONE Loan Program
Direct Loans would be phased out
All Federal ONE Loans would be unsubsidized
Origination fees would be eliminated

13. Federal Student Loans
The Federal ONE Loan Program would encompass loans to
Undergraduate students
Graduate and professional students
Parents of dependent undergraduates
Parent borrowers would still be disqualified by adverse credit (unless they obtain endorser)
Loans would be limited to an annual maximum
Consolidation Loans would be offered as well

14. Interest Rates Based on 10-year Treasury notes, subject to cap
Rate would be determined annually each July 1
Rate would be fixed for the life of the loan
Add-on
Undergraduate % (cap 8.25%)
Graduate/Professional - 3.6% (cap 9.5%)
Parent % (cap 10.5%)
The rate would be determined annually, and remain fixed for the life of the loan. The rate would be determined each June 1 for the upcoming award year by adding a defined percentage to the high yield of the 10-year Treasury not auctioned at the final auction held prior to June 1.
Example – 10-year Treasure yield is 2.36% on June 1, the interest rate would be 4.41%
The interest rate for consolidation loans would continue to be a weighted average

15. Loan Limits
Annual and aggregate loan limits would be imposed on all categories of borrowers
Most loan limits would rise
See handout
See handout

16. Proration and FAA Discretion
Proration would be required for only those academic programs less than one year in length
FAA would be given discretion to prorate or reduce annual loan or reduce annual loan limits institution-wide or by academic program based on
Student debt levels
Less than full-time or full-year enrollment
Credential level (degree or certificate); or
Year in program
The reduced amount would have to apply in the same manner to all students enrolled in the institution or program of study.

17. Disbursement
Loans would have to be disbursed in substantially equal monthly or weekly installments over the loan period
Unequal disbursements would be permitted to account for unequal costs or unequal financial assistance, i.e. tuition/fees
Bullet 1 – student aid like a pay check

18. Disbursement
Retains the 30-day delay for first-year, first-time borrowers, unless loan repayment rate* is greater than 60%
All other students, the first installment could be disbursed up to 30 days before the beginning of the loan period, and;
Must be disbursed no later than 30 days after the beginning of the loan period
* To be discussed later
We will discuss the repayment rate proposal later

19. Repayment Students would continue to have 6-month grace period
Parents would begin repayment 60 days after disbursement – just like today
Two repayment plans
10-year standard
Income-Based Repayment (IBR)
ED would be prohibited from designing any other repayment plans
Borrowers could switch between the two
Defaulted borrowers would be required to repay under IBR

20. Repayment IBR repayment amounts
15% of the excess Adjusted Gross Income (AGI) over 150% of the poverty line for borrower’s family size
Subject to $25 monthly minimum
Could be reduced to $5 if borrower is seeking full-time employment or has high medical bills
Income based repayment is not available for parent borrowers

21. Repayment Safeguards against negative amortization under IBR
No time-based forgiveness
Outstanding balances would be forgiven when total amount paid is equal to the total principal and interest that would have been paid under the 10-year standard repayment plan

22. Deferments Deferments available to both student and parent borrowers
Half-time enrollment
Enrolled in an eligible graduate fellowship program
Enrolled in eligible rehabilitation program
Serving on active duty
Certain National Guard service
Serving in certain medical or dental internship or residency
Administrative deferment
Active duty during war or other military operation or national emergency, and for 180 day period following the demobilization date for such service
Since parent borrower are not eligible for IBR, they would be eligible for economic hardship, unemployment and high medical expenses.
NOTE: The bill would allow defaulted borrowers to rehabilitate loans twice.

23. Loan Repayment Rate
Replaces the CDR with a program-based repayment rate
A program would lose its Title IV eligibility for three years if its loan repayment rate is less than 45% for each of the three most recent fiscal years
Repayment rate is defined as
Percentage of borrowers who enter repayment in the fiscal year and who are in a positive repayment status at the end of the second fiscal year after entering repayment
Note – it is based on the program – not the entire institution.
Institutions with a program with a repayment rate of less than 45% for one or two consecutive fiscal years must take formal steps to improve the rate, including the establishment of a repayment improvement task force and improvement plan, which must be submitted to the Department of Education.

24. Loan Repayment Rate
Loans are considered to be in a positive repayment status if they are
In repayment and less than 90 days delinquent
Paid-in-full (not by consolidation)
For Federal ONE Loans, in deferment
For other loans, in a deferment or forbearance status that is comparable to a deferment allowed for Federal ONE Loans
Institutions will be notified of the loss of eligibility for a program may appeal – just like today.

25. Return of Title IV Funds
Percentage of aid earned would be based on a quarterly assessment of the payment period
Depending on the range of percentages within which the student’s withdrawal date occurs, the amount of aid earned would be
25%
50%
75%
Institutions would be responsible for returning all unearned aid
Federal law requires colleges to pay back a portion of aid student receive if they drop out before a term is completed. Now, amount is determined on when the student dropped or withdrew and is a prorated amount based on those date. When the student has attended 60% of the term, the college does not have to return any aid.
When student attend for a quarter of a term before withdrawing, college would keep 25% of federal aid money, if they attend half the term, 50% would be earned, and so on.

26. Return of Title IV Funds
Introduces institutional risk-sharing
Institutions would keep no federal aid money if student withdraws before a quarter of the term is over
At no point before the end of the semester would a student be considered to have “earned” all of their aid

27. Student Eligibility
Would incorporate the current regulatory definition of maximum time frame into the statute (150% of the published length of the program)
Would require students have a C average or its equivalent each academic year (Current statue requires a C average at the end of the second academic year)

28. Student Eligibility Restores Ability-To-Benefit
Applies to students without a high school diploma or equivalent
Would grant aid upon successful completion of six credit hours or the equivalent that are applicable to a degree or certificate
Selective Service still required
Student required to registered
Is 26 years old or older and didn’t register
Would no longer be deemed ineligible
Current rules restrict student aid eligibility to student enrolled in eligible career pathways programs.
The PA is still a requirement. A student who is required to register but did not, and is 26 years or older, would no longer be deemed ineligible for student aid for solely for that reason. This would eliminate the need for FAA’s to determine if a student willingly and knowingly failed to register in order to determine eligibility.

29. What’s Happened in the Senate?
Senate Committee on Health, Education, Labor and Pensions (HELP)
Conducted several hearings
No bill as of today
Themes
Accountability
Simplification
Transparency
Access and Innovation

30. What’s Next? PROSPER Act must pass the full House
Senate must introduce a bill
Pass out of committee
Pass the full Senate
Conference between House and Senate
Both chambers pass final version
President signs into law

31. Questions