From the News You Can Use Archives 12/12/06

A Look Back and the View Forward for Federal Financial Aid
By Jack Gorman, EDFUND Senior Legislative Analyst

A look back…

It's frequently said that facing life's challenges can produce great opportunities. From the perspective of the financial aid industry, those words never rang truer than they did in 2006.

The passage of the Higher Education Reconciliation Act (HERA) sent financial aid offices scrambling to implement new grant programs that required administrators to track and validate information that had not been part of the financial aid process previously. At the same time, the loan industry geared up to deliver a new loan program to graduate and professional students. No matter your political leanings, it can't be denied that overcoming these significant challenges created new opportunities for many students to have more dollars in their pockets to help pay for college this year than they did last year.

The Department of Education deserves credit for its efforts in getting several new programs up and running in time for students to realize the benefits this academic year. The Department continues to tweak and improve the programs and a great deal of that effort will take place during Negotiated Rulemaking*, which is scheduled to begin right about the time you are reading this article.

To date, the Department has held four hearings across the country to listen to those who have a stake in the process. Students, parents, aid administrators, professional associations and the general public took the opportunity to weigh in on what will be discussed at the negotiating table.

Based on hearing testimony and formal written submissions, we may (or may not) see the following items on the Department's agenda:

• Transfer of credit between institutions
• The accreditation process
• Academic Competitiveness and SMART Grants
• Identity theft
• Student loan repayment
• Economic Hardship deferral determination
• Simplification of the application process (FAFSA)
• Continuing the Upward Bound Program
• Perkins loan issues
• Commission on the Future of Higher Education non-statutory recommendations

… And the View Forward

The changes brought about by HERA may have seemed like a lot to deal with in 2006, but the mid-term elections brought significant change in Washington , D.C. and may make 2007-08 even more interesting. After a dozen years of a Republican majority in both the U.S. House and Senate, the Democrats took control of both chambers of Congress. While the Iraq war seems to have been the major issue driving voters in this year's election, the Democrats have also laid out the basic framework for the domestic priorities they hope to accomplish not only in the next year, but several in the first 100 hours of the 110th Congress, which begins on January 3, 2007 .

On the education front, House Democratic leaders have publicly discussed a general plan to increase Pell Grants and cut student loan interest rates in half. On the Senate side, Senator Edward Kennedy (D-MA), current ranking Member and incoming Chairman of the Health, Education, Labor and Pensions (HELP) Committee, has already laid out his priorities for the upcoming year:

• Increase Pell Grants from $4,050 to $5,100
• Cap student loan payments at no more than 15 percent of the borrower's income
• Cut student loan interest rates

So far, the Democratic proposals are general in nature and don't contain much detail, not the least of which being how the programs will be funded. Democrats will have to reconcile the goals of accomplishing a comprehensive agenda with another pledge to bring order to federal spending.

The Republicans, it should be noted, haven't gone away either… there are just fewer of them. Democrats have chided the Republicans for the manner in which they operated the House and Senate and have therefore pledged to reach across the political aisle to work cooperatively with their Republican counterparts. A slim majority (51-49) In the Senate and an ever-looming threat of a Presidential veto will necessitate considerable compromise if anything is to actually be accomplished in the next two years.

As always, the financial aid community is poised to respond accordingly.

* The Department has established a Web site to keep you up-to-date on the Negotiated Rulemaking Process as information becomes available.

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From the December issue of NewSource , EDFUND's monthly newsletter providing timely, operational information to EDFUND customers and lender partners.

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Story posted December 12, 2006.

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