Congress

Bailout Measure Provides Government with Authority to Buy Up Bad Private Loans

Congress Extends and Expands Tuition Tax Relief

Many Community College Students Fail to Apply for Aid, Report Finds

It would be understandable if news of the impending multi-billion dollar shortfall in the Pell Grant program made recipients nervous about whether they will get the same level of federal support next school year. But low-income students who receive these awards have no need to worry -- the political stakes are too high for lawmakers to be stingy. We are confident that Congress will do all that it can to provide the dollars needed now to ensure that Pell Grant award levels remain at least at current levels next year.

Maintaining the grants will require substantial amounts of effort and resources from lawmakers. But keeping Pell Grants whole in the immediate future isn't the biggest challenge Congress will have to face. As we have noted previously, an even more daunting Pell Grant shortfall is looming in the future when the mandatory funds that are currently being used to boost the maximum award run out. While lawmakers may be motivated to "fix" Pell in the short term, it is unlikely that fundamental reform and expansion -- of Pell and the other federal student aid programs -- is on the near horizon.

So what accounts for the impending shortfall in the Pell Grant program? One cause is the downturn in the economy, which has helped lead to an unexpected surge in demand for the grants. According to the U.S. Department of Education's budget chief, 800,000 more students have applied for student aid this year than last, and a significant share of these applicants (about 41 percent) come from families making less than $30,000. In addition, Congress significantly expanded eligibility for Pell Grants last year when it made changes to the needs analysis formula as part of the College Cost Reduction and Access Act (CCRAA). These changes not only expanded the number of students eligible to receive the grants, but also qualified many current recipients for larger awards.

This post was authored by Timothy Little, a Research Intern for The American Strategy Program

One important, but often overlooked, area that is in need of reform is in the appropriations process for America’s intelligence agencies. In 2006, 9/11 Commission Chairman Thomas Kean said, “The person who controls your budget is the person you listen to,” noting that shifting budget authority to the intelligence committees is “extremely crucial.”

The 9/11 Commission characterized Congressional oversight of intelligence and counterterrorism as “dysfunctional.” In response the Senate overwhelming approved Resolution 445 to create a Senate Appropriations Subcommittee on Intelligence. The problem is this resolution was approved in 2004. To date, no such subcommittee exists.

The AMA brought its Voice for the Uninsured to the halls of Congress today, where they unveiled new print, broadcast, and online ads (see below). At a press conference today with Senator Ron Wyden (R-OR) and Representative Michael C. Burgess, MD (R-TX), AMA President Nancy Neilsen, MD, called on members of Congress to commit to covering all Americans next year:

Without action from Congress and the president, the uninsured problem is likely to get worse very soon. Most privately insured Americans get health insurance through an employer, and their coverage is at risk as unemployment rises. In fact, the most common reason patients have become uninsured this year is because they or someone in their family lost their job. We urge all members of Congress and the next president to stand with us in our commitment to get all Americans covered.

On Thursday, the U.S. House of Representatives Financial Services Committee is set to hold a hearing on auction rate securities -- a broken investment mechanism that non-profit student loan companies have relied on heavily for financing. The hearing is largely the brainchild of Rep. Paul Kanjorski (D-PA), a member of the committee who is using it to gin up support for federal policies to help non-profit lenders. This was evident from Kanjorski's initial press release on the hearing, in which he faulted the Bush Administration for failing to use "its full authority to help non-profit lenders like PHEAA," the primary student loan provider in the Congressman's home state.

Clearly Kanjorski thinks that the way the U.S. Department of Education enacted the Ensuring Continued Access to Student Loans Act (ECASLA), the law Congress passed last spring to help student loan providers weather the credit crunch, did not do enough to help non-profit lenders. We at Higher Ed Watch disagree. Instead, we believe Kanjorski has framed the non-profit lender problem in a dubious manner, and is proposing to solve this "problem," with a series of flawed solutions.

It seems that we have to keep reminding policymakers (and sadly, the media, too) that the one, and only, goal of the federal student loan program is to provide loans to college students that are more generous than those offered in the private market. That's it. So, yes, there would be a problem if students weren't able to get federal loans, which even top industry lobbyist John Dean agrees should be the "litmus test" of whether or not there is a "crisis."

Yesterday, the U.S. House of Representatives pushed through a bill that would extend a previous effort to bail out student loan providers. Before the Senate acts on this legislation, Higher Ed Watch urges lawmakers to view this as an opportunity to come to the aid of financially distressed borrowers struggling with private loan debt.

The House legislation, H.R. 6889, would extend the expiration date of two parts of the Ensuring Continued Access to Student Loans Act (ECASLA) to July 1, 2010, a year longer than they were originally written to last. First, the measure would continue a program that allows the Secretary of Education to either buy outright or purchase participation interests in newly disbursed student loans. These programs have resulted in between $3 billion and $4 billion of loan agreements with student loan giants Sallie Mae and Nelnet, as well as several other lenders, according to various sources.

Second, the bill would also continue allowing entire schools to be eligible for assistance through the "lender of last resort" program if 80 percent or more of their students cannot find loans. While this would ensure that all students at a given institution would receive loans either through a guaranty agency or other designated lender of last resort, there are no reports that this extremely complex program has been used.

No Loan Crisis Here, Report New England Colleges

Sen. Grassley Requests New IRS 990 Form for Colleges

Survey Reveals How Families Pay for College

Speaking at a Congressional roundtable on college endowment spending on Monday, college leaders and lobbyists offered a multitude of reasons why requiring institutions of higher education to spend a minimum amount of their endowments each year is bad policy and fundamentally unworkable. Among their arguments, they claim that a mandatory payout of endowment funds would be overly burdensome on institutions; would harm future generations of students on their campuses by depleting present resources; and would serve no public good.

We respectfully disagree. At Higher Ed Watch, we have offered a proposal for a mandatory payout that renders most of these objections moot. Our plan would require the wealthiest colleges to spend a specific percentage of the market value of their endowment funds each year, with the difference between their current spending rate and the new threshold going to concrete, measurable projects aimed at improving socioeconomic diversity among students and applicants.

Co-hosted by Sen. Charles Grassley (R-Iowa), the ranking member of the Senate Finance Committee, and Rep. Peter Welch (D-Vt.), who moderated the discussion, yesterday's event featured experts on college endowment practices, higher education leaders and lobbyists, and watchdog groups [Disclosure: the author of this post participated in the roundtable.] Ostensibly, the event's three major goals were to (1) provide a better understanding of the link between college costs and tuition, (2) define and classify university endowments, and (3) debate whether institutional endowments should be subject to a mandatory annual payout. Ultimately, the discussion largely focused on reasons that colleges believe requiring a minimum spending rate would be inadvisable.

President Bush Quietly Signs Higher Education Act Into Law

No Need for Additional Loan Changes for Now, Congressional Research Service Says

Massachusetts Calls Off Plan To Rescue Lender

ACT Exam's Popularity Increases

By Christina Satkowski and Stephen Burd

You can't always believe what you read in the papers. That old saying has gained new currency this year with all of the misleading and panicked news coverage of the student loan credit crunch. Unfortunately, the same can be said of recent reports about Congressional efforts to simplify the process of applying for financial aid.

At issue are news stories reporting on a provision in the recently-passed Higher Education Act reauthorization legislation that requires the U.S. Department of Education to create a new "EZ FAFSA," a shorter version of the Free Application for Federal Student Aid (FAFSA) that tens of millions of students fill out each year to determine their aid eligibility. Recent articles in Congressional Quarterly, Education Week, The New York Times, and other publications leave the impression that the new bill streamlines the FAFSA -- from seven pages to two -- for all students.

But that's not the case. While the legislation introduces an EZ FAFSA, it makes it available to only those students whose family income is low enough that they already qualify for an expedited review of their finances when applying for federal financial aid. As a result, most aid applicants will still be stuck with the longer form.

Under the new law, students who will be eligible to use the EZ FAFSA include those whose families earn earn less than $50,000 a year and either are not required to file the long version of the 1040 federal income tax return or receive certain federal means-tested benefits such as welfare payments or food stamps. The federal government doesn't take into consideration the assets of families of students who meet these criteria.