AAMC on Current Status of the Higher Education Act

Reauthorization of the Higher Education Act
Related Resources
Compilation of Federal Education Laws (House Education and Workforce Committee)
May 26, 2004, ACE Letter to the House on Reauthorization
H.R. 609
S. 1614
AAMC Documents
AAMC Letter on Accreditation Provisions of HEA Reauthorization (PDF, 3 pages - 49KB)
AAMC Letter to the Senate on HEA Reauthorization (PDF, 3 pages - 47KB)
Medical Educational Costs and Student Debt: A Working Group Report to the AAMC Governance (PDF, 17 pages - 1.52MB)
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Current Status
Current authority for the Higher Education Act (HEA) expired on Sept. 30, 2003, however several extensions have been enacted, making no policy changes but allowing uninterrupted administration of the programs. President Bush Sept. 30 signed the "Second Higher Education Extension Act of 2006" (P.L. 109-238) to extend temporarily HEA through June 30, 2007. The House and Senate education committees are expected to resume consideration of HEA reauthorization in 2007.

The President Feb. 8, 2006, signed the "Deficit Reduction Act of 2005" (S. 1932, P.L. 109-171), which includes many of the student loan provisions from HEA reauthorization (H.R. 609, S. 1614). The Congressional Budget Office (CBO) estimates that the changes to the higher education programs in P.L. 109-171 will generate a net $11.9 billion in savings between 2006 and 2010 and $29.0 billion in savings between 2006 and 2015. While the law's provisions mandate savings of over $20 billion between 2006 and 2010 from higher education programs, $9 billion is recycled back into student aid. A majority of the savings are generated through increases to borrowers' interest rates and changes to lender-yield formulas.

Of particular interest to medical schools, the new law:

extends authority for Family Federal Education Loan Program (FFELP) through 2012;
expands the loan eligibility for the federal Parent Loan for Undergraduate Students (PLUS) loan program to include graduate and professional students;
increases annual unsubsidized Stafford loan limits for graduate and professional students from $10,000 to $12,000;
increases the interest rate for a PLUS loan in the FFELP from 7.9 percent to 8.5 percent;
creates a parallel fee structure for the FFELP and Direct Loan (DL) programs, incrementally reducing net borrower loan fees in both the FFELP and DL over the next 5 years to 1 percent in 2010;
prevents reconsolidation of previously consolidated loans under both the FFELP and DL programs unless they are being consolidated with additional student loans;
repeals spousal and in-school consolidation of FFELP and DL loans;
limits "School as Lender" programs to Stafford Loans to graduate and professional students;
allows the one time cost of obtaining the first professional credentials to be included in total cost of attendance for students enrolled in a program requiring professional licensure or certification;
disqualifies students from eligibility for FFELP or DL student aid if they have committed a crime involving fraud in obtaining Title IV funds and have not fully repaid those funds; and
limits the suspension of eligibility for students convicted of drug offenses to those that occurred during the period the student received FFELP or DL student aid.
The President June 15 signed a FY 2006 Emergency Supplemental Appropriations bill (H.R. 4939), repealing the single-holder rule. The single-holder rule restricted consolidation of loans under the Federal Family Educational Loan Program (FFELP) by prohibiting borrowers whose FFELP loans are currently with a single lender from consolidating under different lenders.

Congressional Activity
The House March 30 approved the College Access and Opportunity Act of 2005 (H.R. 609), which reauthorizes HEA through 2012. The night before its consideration on the House Floor, House Committee on Education and the Workforce Chair Howard "Buck" McKeon struck two provisions from the bill. One provision would have revised the formula used to allocate funds for the government's campus-based student-aid programs. The other would have allowed the Department of Education's Office of the Inspector General to audit the financial records of institutions that repeatedly raise their tuition by more than twice the rate of inflation.

H.R. 609 includes two studies on medical education. A provision introduced by Rep. Tom Price (R-Ga.), an orthopedic surgeon, requires the "Secretary of Education to conduct a study of the indebtedness of medical students, asking the question of whether the cost of medical school is becoming prohibitive and whether the best and brightest individuals are not choosing careers in medicine because of the potential debt burden." Rep. Charles Boustany (R-La.), a heart surgeon, and Rep. Robert Andrews (D-N.J.) sponsored a second study by the Government Accountability Office (GAO) to evaluate and determine reasons for the decline in the number of medical school graduates entering residency programs lasting more than 5 years.

Rep. Boustany and Rep. Andrews also sponsored an approved amendment that adds "medical specialists" to a new loan forgiveness program for service in "areas of national need." Eligible medical residents must be enrolled in a residency program that requires more than 5 years of graduate medical education training and has fewer US medical school graduate applicants than the total number of training and fellowship positions available. Participants in the loan forgiveness program will be eligible for $5,000 each year of training after their 5th year.

H.R. 609 also requires that accrediting associations or agencies enforce standards that "consider the stated missions of institutions of higher education, including religious missions."

The Senate Committee on Health, Education, Labor, and Pensions unanimously approved without amendment its version of HEA reauthorization Sept. 8, 2005. It is unclear whether this bill will be considered for a Senate vote this year.

AAMC Activity
With the high debt levels of medical school graduates, many medical students come up against the annual and even the aggregate limits for federal Stafford education loans. Because the current limits have not been raised in over a decade, the Association believes that these limits should be adjusted to have at least kept up with the cost of inflation. Additionally, the unique nature of residency training makes repayment of these high debt burdens difficult in the years immediately following medical school graduation. Specifically, the AAMC advocacy agenda for the HEA reauthorization has been to support increasing the annual limit on subsidized Stafford loans from the current $8,500 to at least $12,000, and to extend the Economic Hardship Deferment throughout the initial residency period for individuals that continue to qualify. The Association also supports including all school-certified educational debt in the calculation used to determine eligibility for the deferment.

The AAMC sent a comment letter Nov 15, 2005, to the House and Senate Education Committees expressing concerns regarding the accreditation provisions of the HEA reauthorization bills (H.R. 609, S. 1614). The letter focuses on several changes in accrediting bodies' reporting requirements and recommends that public disclosure of sensitive findings remain at the discretion of the institution. Additionally, the AAMC recommends the deletion of provisions that require accrediting associations or agencies to enforce standards based on the institution's mission.

Contact
Matthew Shick, Legislative Analyst
AAMC Office of Governmental Relations
mshick@aamc.org
(202) 828-0525