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Reconciliation Legislation Addresses Education Issues Update

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This week Congress passed health-care legislation and its version of H.R. 4872, the Health Care and Education Affordability Reconciliation Bill of 2010.  H.R. 4872 contains health-care legislation fixes and the Student Aid and Fiscal Responsibility Act (SAFRA). The House passed the reconciliation bill by a vote of 220-211.  Democrats are describing this legislation as the single largest investment in higher education ever – which will go a long way towards ensuring that the U.S. leads the world in college graduates by 2020.

The reconciliation bill eliminates the Federal Family Education Loan (FFEL) program and moves all federal student loans into the Direct Loan program. Colleges participating in federal student loans will need to move to the Direct Loan program by July 1, 2010.

Through the conversion to the Direct Loan program, the bill creates $61 billion in savings.  Of the $61 billion the government expects to save by cutting subsidies to banks for student loans, $36 billion will go to Pell grants.  The legislation also allocates $2.5 billion to historically black colleges, $2 billion to community colleges and at least $10 billion to reduce the federal deficit.

The student aid reform included in the reconciliation bill passed by the House was a leaner version of SAFRA.  Democrats had to revise the bill when the Congressional Budget Office showed that expected savings from the elimination of the FFEL program were lower than previously estimated and eliminated the proposal of several new programs to comply with procedural requirements in the Senate.

If SAFRA was not passed the shortfall in the Pell Grant program (created by sharp increase in students during the recession) would have necessitated cutting a half a million students from the program.  The remaining students in the program would have had their grants cut by 60 percent.

Provisions of Importance to CCA Members in the Reconciliation bill:
·        The legislation excludes the Andrews/Souder 90/10 language that was contained in the House-passed version of SAFRA.

·        The bill eliminates the proposed newly structured Perkins program (meaning that the program continues to function under existing law without change) and eliminates new community college funding that was contained in the House-passed version of SAFRA.

·        The bill invests $36 billion over 10 years to increase the maximum annual Pell Grant scholarship to $5,550 in 2010 and to $5,975 by 2017, which is less than the $6,900 maximum in the original House version of SAFRA. Starting in 2013, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index.

·        The bill includes an investment of $13.6 billion to fund a shortfall in the Pell Grant scholarship program due to increased demand for the scholarship, leaving a $5.5 billion shortfall.

·        The legislation invests $2 billion ($500 million in FY 2011-FY 2014) for Community College and Career Training Grants for eligible institutions of higher education as defined in section 102 of the Higher Education Act of 1965 (20 U.S.C. 1002) for programs offered by such institution that can be completed in not more than 2 years. This is significant expansion of this grant program. The stimulus bill only contained $90 million total for FY 2009-FY 2011 for these grants. Each state must receive no less than .5% of appropriated annual funding for these grants and statutory limits pertaining to maximum grant award and number of grants per eligible institution are waived for the funding period.

Four major provisions that were a part of the original House-passed SAFRA were not included in the student aid legislation included in the House version of the reconciliation bill:

·        The Obama Administration’s proposal to revise the Perkins Loan Program

·        A provision to lower interest rates on student loans

·        Funding for Obama’s American Graduation Initiative to help community colleges graduate five million more students by 2020.

·        $2.5 billion for a new College Access and Completion Fund

Once we have a final Senate-passed reconciliation bill CCA staff will provide our membership with a comparison of the original House version of SAFRA vs. the enacted legislation.

Information provided by the CCA

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