Rise in student debt is driving action on the Hill

Tuition sticker shock – a fact of life for many families putting children through college – and recent scandals involving the student-loan industry are pushing Congress to address financial-aid programs after years of delay.

On Tuesday, the Senate voted 95-to-0 to boost the amount of federal aid that a low-income student can receive, create a simpler aid application, and eliminate some conflicts of interest for the student-loan industry. Four days earlier, it trimmed subsidies to the industry and used much of the money for grants to low-income and other college students.

Now that the Senate struggle is over, advocacy groups are turning their attention to the House, where the pressure is on "to push this through," says David Baime, vice president for government relations at the American Association of Community Colleges.

The House has passed some of the same provisions regarding the student-loan industry but has yet to reauthorize the Higher Education Act of 1965 (HEA), which governs nearly all higher education-related policy and related federal-aid programs.

The actions in the Senate "were a rare example of bipartisanship in an increasingly divided Congress," says Terry Hartle, vice president for government and public affairs at the American Council on Education, which supported the final version of the bill.

The bipartisan support was a far cry from the highly controversial debates over the HEA that have taken place over the last four years.

Congress is supposed to reauthorize the HEA every five years, and usually does so with little fanfare. But after it expired in 2003, the Senate repeatedly passed temporary extensions when it clashed with higher-education groups over regulation of the student-loan industry, the methods of accrediting institutions and transferring credit, and, in general, how involved the federal government should be in higher education issues.

"The system was in gridlock," says Barmak Nassirian, a spokesman for the American Association of Collegiate Registrars and Admissions Officers.

But the scandals coming out of the student-loan industry this year, as well as the Democrats' desire to move ahead with one of the issues they campaigned heavily on in 2006, helped push the Senate to take action, many observers say.

The Senate version of the HEA includes an increase in the maximum amount that can be awarded in a Pell Grant to $5,400 by 2012. The program provides financial aid for college to low-income families.

The bill also prohibits banks from giving gifts to college-aid officials – a practice that caused an uproar because banks were seen as trying to buy their way onto colleges' lists of preferred lenders.

The action came on the heels of a budget-reconciliation bill approved this past Friday in the Senate, which cut federal subsidies to banks and other private lenders to students by nearly $19.5 billion and diverted much of those funds to the Pell Grant and other financial-aid programs.

It also included debt assistance for college graduates in public-sector jobs, such as government, teaching, or social work, and capped monthly repayments of federal loan debt for low-income borrowers.

Pressure has been building on Congress to address financial aid as tuition costs have risen. The average annual cost of college this year at a four-year private institution is $22,218 and $5,836 for a public school, according to a report from the College Board, an association of colleges, universities, and other educational organizations. Both numbers represent around a 6 percent increase from last year's costs.

The HEA reauthorization required several compromises to win Senate approval. "It wasn't the bill I would have written," said Sen. Edward Kennedy (D) of Massachusetts and coauthor of the bill.

But some of the compromises received praise. Sen. Susan Collins (R) of Maine says that the reauthorization "brings back a balance between [lender] subsidies and financial aid," taking some funds away from lenders but not cutting them out completely from the system. Private lenders, she says, "are healthy for the marketplace."

Many higher-education advocacy groups involved in the debates over the HEA support the reauthorization overall, but they have concerns over individual provisions.

For instance, a new requirement for colleges to release data on completion rates broken down by race, ethnicity, and gender could "be used to make invidious comparisons about how colleges are performing," says Mr. Baime.

The reauthorization bill's focus on making small changes in existing programs – unlike the reconciliation bill, which represents a dramatic shift in federal policy regarding the lender industry – also weakens its ability to produce major changes to the status quo, according to Mr. Nassirian. "It isn't like it collapses programs or takes massive steps towards simplification" of the financial-aid system.

But this approach also has supporters. Mr. Hartle argues that current programs already work and just need to be tightened and expanded.