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Priming the Pump: A Primer on the Reauthorization of the Higher Education Act

In times gone by, it was not uncommon for families in the United States to have their own well as a source of water.  Attached to the well was a pump.  The iconic hand pump was a necessary component to having the water drawn up out of the well to the surface, whether the pump was located outside the house or one that was installed inside the house, most likely by the kitchen sink.  A key point for success in drawing the water from the well was to ensure the pump was primed.  In this article we want to prime your pump, so to speak, to give you an understanding of what reauthorization of the Higher Education Act is all about, and to hopefully open up the free flow of thoughts on the topic that you may share with your colleagues and Congressional representatives in both houses of Congress.

The Higher Education Act (HEA) Through the Years

Most individuals involved in some aspect of higher education have at least heard of the term, Higher Education Act (HEA, or sometimes referred to in higher education as simply, the Act).  The HEA is the all-encompassing law that gives foundation to the various programs and funding applicable in the postsecondary education arena.  These include other aspects of higher education than just student financial assistance programs.  For example, libraries, research, teacher programs, etc., are covered by the Act.  The HEA was first signed into law in 1965.  In theory, the HEA would be reauthorized every five years.  However, the reality is that the schedule for renewing the law has been sporadic.  Subsequent reauthorizations have occurred irregularly, but approximately every 4 to 6 years.  The most recent full reauthorization of the Act, which originally was supposed to have occurred in 2003, finally materialized as the Higher Education Opportunity Act of 2008 (HEOA) after a host of limited-time extensions of the Act between 2003 and its passage on August 14, 2008.  The current rendition of the HEA began as a bill titled “Student Aid and Fiscal Responsibility Act of 2009 (SAFRA).  It was passed by the House of Representatives as HR 3221 on September 17, 2009.  However, action was delayed in the Senate due to concern over having enough votes to pass in normal voting.  While a parliamentary option of “budget reconciliation” would have increased likelihood of its passage since only a simple majority of votes is necessary for passage in that process, only one such parliamentary option is allowed per federal budget cycle.  The Senate wanted to save that option for the passage of the then upcoming health care reform legislation.  Therefore, SAFRA was actually included—with some slight modifications—as a part of the Health Care and Education Reconciliation Act of 2010 which was signed into law on March 25, 2010.

The Health Care and Education Reconciliation Act of 2010 (HCERA), or the Act Today

The Health Care and Education Reconciliation Act of 2010 (HCERA) is a long piece of legislation, even when viewed in the Government Printing Office’s small font.  But, it does include both health care and education statutes.  Some of these laws are new provisions, while others are revisions to prior statute.  We will focus on the higher education related component of the law, what is called, “Title II—EDUCATION AND HEALTH, Subtitle A—Education.”   Some of the major provisions of the education side of the HCERA included a move to increase Federal Pell Grant funding, provisions for the College Access Challenge Grant program’s funding, as well as continued investments in historically black colleges and universities, along with other minority-serving institutions.  Perhaps most dramatic in this legislation was the complete elimination of the authorization to continue the Federal Family Education Loan Program (FFELP).  As those who started in the financial aid profession prior to 2011 are aware, formerly student loans, on a national level, were predominantly processed through private lenders who acted as partners in the student loan process with ED and guarantee agencies. (Guarantee agencies were entities that “guaranteed” the loans in the event of default).  With the passage of the HCERA and the elimination of FFELP, all schools desiring to offer student loans other than Federal Perkins Loans or private, non-federal loans were obliged to now participate in the William D. Ford Federal Direct Loan Program.  This program is commonly referred to simply as the Direct Loan Program (DL).  It is now, by far, the largest single source of federal student financial assistance funding available to students today.  In FY 2014, DL funds made up 73.4% of all aid available to students.  HCERA also had an impact on loan repayments as the law expanded the income-based repayment (IBR) plan by reducing the amount of the borrower’s payment to be no more than 10% of their discretionary income instead of the previous 15% limit.  It also reduced the repayment period from 25 years to 20 years, after which time any remaining balance of loans being repaid under the IBR plan may be forgiven.   Although HCERA did provide for slight increases in the annual amount of Federal Pell Grants, the actual amount projected was minimal in comparison with anticipated inflation between the time of passage and the ten following years through 2019-2020 (which is the period on which U.S. budgetary savings from the bill were projected).  Thus, the bill will result in a net reduction in Pell Grant dollar equivalency over the 10-year period when considering inflation.

The Higher Education Act, Somewhere Over the Rainbow

So, almost fifty years after the passage of the original HEA, have we found the end of the rainbow?  Do we have the perfect student financial aid system yet?  Without hesitancy, the response to those questions would be answered in the negative by anyone.  There are still many clouds of imperfection in the Federal Student Aid system.  And, a corresponding question would ask, if we are not there yet, what is likely to be next on the yellow brick road to a more perfect system?  Although no one can accurately predict what the final outcome of the next round of HEA reauthorization will reveal, there are some likely topics on the horizon that will vie for a spot in the hoped for pot of gold at the end of the rainbow.

In several of the past renditions of the HEA reauthorization a couple of topics have been consistently brought to the fore of discussion.  First on that list has been the overall simplification of the application process for Federal Student Aid.  As early as 1991, there was a “Financial Aid Administrators’ Review Panel” regarding the Application for Federal Student Aid (as it was called then).  Recalling discussions of that panel, a desire was expressed to be able to have students complete the application by use of a postcard.  (Naturally, that was before the days of the online FAFSA-on-the-Web.)  The point is that it was envisioned that the application process could be greatly simplified.  A recent proposal by Senators Lamar Alexander (R-TN) and Michael Bennett (D-CO), called the Financial Aid Simplification and Transparency Act, or FAST Act, would again try to reduce the size of the application, all the way down to two questions.  While this may or may not be viable, it does highlight that application simplification is likely to be on the agenda again.

Others also have called for greater simplification and accuracy of data by use of what is called the prior-prior year (PPY) income.  PPY is a proposal to use the second prior year’s income data rather than the immediately preceding year’s income.  (For example, if use of PPY income was authorized for the 2015-2016 award year, the income families would report would be the income from 2013.)  In addition to the Senators’ proposal mentioned above, Senator Cory Booker (D-NJ) also called for the use of PPY income in his proposed Simplifying Financial Aid for Students Act of 2014Similar proposals have also been made by members of the House Education and Workforce Committee.  Likewise, the National Association of Student Financial Aid Administrators (NASFAA) has recommended the use of PPY data.  Therefore, it is highly likely that this will be a major point of discussion in considerations for reauthorization.

Some additional topics that seem to be garnering a lot of discussion (and some are included in the proposals mentioned above) are the possible provision for Pell Grant funding to be available year round.  If included in reauthorization, it will likely see significant changes from the way the recent “two Pell Grants in an award year” worked.  There is also consideration, again, about the consolidation of aid programs to simplify the application process, as well as the administration of the aid programs.  For example, the programs may be streamlined to where there is only one loan program and one grant program instead of the multiple versions of these aid types.  And, it is quite probable that there will be a continued push for more financial literacy training and financial aid counseling (including at least one suggestion for annual loan counseling for students, and a new requirement for Pell Grant counseling).  Additionally, there is at least one recommendation of reinstituting the ability-to-benefit (ATB) provisions that allows a student to be considered having the ability to benefit by successfully completing 6 credit hours, or its equivalent.  (The number of clock hours was not specified, although the illustration used in the discussion referred to the brief period in 2011-2012 when the ATB definition had been expanded in similar manner.)  Finally, there have been hints at changing the 90/10 rule to the 85/15 ratio of years gone by.  The 90/10 rule is one that limits a for-profit educational institution from being allowed to receive more than 90% of its revenue from Federal Student Aid programs.  But, a significant variance from the current and past laws on this matter is that the discussion includes counting any federal veterans’ educational benefits in with all Title IV funds the institution receives when determining whether the school exceeds the ratio of receiving too much federal assistance or benefits.

Thus, it does appear that the road to the pot of gold at the end of the rainbow will provide for many twists and turns, and perhaps bumps, along the way.  The hope, of course, is that there will indeed be a pot of gold at the end of the journey.


Next Steps on the Road to Reauthorization of the Higher Education Act

Reauthorization of the HEA is a process.  It can be a lengthy one and fraught with much political posturing on every side.  Although it had been anticipated by some that reauthorization would occur this year, that does not appear probable at this point.  This is in spite of the recent bills put forth for consideration.  The most recent information received to date was stated by the president of NASFAA, Justin Draeger, at the 2014 annual conference that just ended.  In remarks to the approximately 2500 attendees of the NASFAA conference, he indicated that reauthorization will likely receive a one year extension.  This will result in early 2015 being the soonest for reauthorization to occur.  And, that is not a definite.  Members of Congress will continue to explore their options for putting forth more proposals or offering amendments to those presented to date.  So, there is a bit of uncertainty on the road ahead as to what will transpire when.

But, there are some steps that individuals can take on this road to reauthorization.  In fact, schools and financial aid administrators can help define the course of the road.  Here are some pointers for the journey toward reauthorization that allow you to have a participatory adventure on the way.

  • Review what has been in the news in the last few months related to members of Congress and their thoughts or proposals on reauthorization.
  • Analyze your own financial aid operations and student situations to determine what works well and what does not.  Perhaps survey students as to what they have found to be good with the financial aid process and programs and what has been a challenge.
  • Remain focused on being aware of the dialog on current and upcoming proposals offered by various entities, whether organizations, individuals, or members of Congress.  Utilize trusted professional associations as well as news media venues to stay aware of proposals and progress toward reauthorization.
  • Know who your elected officials are in Washington, DC.  Explore any positions held or statements made by your elected officials in the Senate and the House of Representatives regarding Federal Student Aid.  Help educate them on the facts by visiting with them and/or sending accurate information on financial aid topics
  • When actual bills are proposed by members of Congress, in either chamber, ensure you review them and then let your elected officials know your stance on the proposed bill.  Members of Congress may be swayed when they learn the impact a proposal may have on their constituents.
  • After appropriate study and thought, provide your member(s) of Congress with a proposal as a foundation for a bill to submit for consideration.  As an individual who works with and interacts with students regularly, you may very well be in a better position to recommend action than a politician.  But, your politician may be more than willing to take a good idea and work it into a proposed piece of legislation.  Perhaps you may be the one to prime his or her pump for ensuring good clean legislation.

Reauthorization of the Higher Education Act takes a lot of work.  Since it does impact so many constituents, members of Congress take it seriously.  At times it may seem the topic and process become a bit volatile.  But, for you, now that your pump is well primed, you have learned key reauthorization points, and the steps necessary to continue to grow in knowledge on the issues.  That knowledge can help you succeed in any fiery reauthorization debates that may arise.

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