COHEAO Mid-Year Meeting
Denver, Colorado
August 2001
2002 Labor-HHS-ED Appropriations
The appropriations process is off to a late start this year, mainly
because of the uncertainty surrounding the Presidential election last
November. However, the process has begun as the House and Senate Appropriations
Committees have marked up their Fiscal Year (FY) 2002 spending bills
earlier this summer. Both chambers will attempt to resolve the most
contentious appropriations bills, including the Labor-HHS-Education
Appropriations bill in September. In May, Congress approved the non-binding
funding levels in the FY 2002 Budget Resolution conference report (H.
Con. Res. 83), which included a 4 percent increase in discretionary
funding, $1.25 trillion in tax cuts over 10 years, and $100 billion
directed towards immediate tax refunds. In addition, the budget resolution
included budget authority for a fix to the 2003 interest rate problem;
however, an amendment to the Higher Education Act to eliminate 2003
interest rate provisions is still needed. In order to fund his priorities,
President Bush's budget request he released in April included a $1 billion
increase in funding for Pell Grants for low-income students; a $50 million
increase for TRIO programs, and an increase in the loan forgiveness
program for teachers who majored in math or science and teach those
subjects in high-need schools for five years from $5,000 to $17,500.
Bankruptcy Reform
The House and the Senate passed bankruptcy reform legislation (S. 420
and H.R. 333) that would require many people to file for bankruptcy
under Chapter 13 and pay off their debts on a schedule on March 1st
and July 17th, respectively. Currently, most debtors can file under
either Chapters 13 or 7-the latter of which allows debtors to erase
almost all of their debts, including credit card debt. Both bills include
an amendment extending non-dischargeability provisions under Title 11
to alternative student loans made or guaranteed by for-profit entities.
The Senate has already named its Conference Committee members, including
Judiciary Committee Chairman Patrick Leahy (D-VT) and ranking member
Orrin Hatch (R-UT), as well as Senators Joseph Biden (D-DE), Edward
Kennedy (D-MA), Herb Kohl (D-WI), Jeff Sessions (R-AL), Mitch McConnell
(R-KY), Russ Feingold (D-WI), Charles Schumer (D-NY), Jon Kyl (R-AZ),
Charles Grassley (R-IA), Richard Durbin (D-IL), and Mike DeWine (R-OH).
The House, however, has not named its conferees. President Bush has
stated that he will sign a final bankruptcy reform bill.
60-Month Limit on Student Loan Interest Deductibility
In both the House and Senate, Senators Grassley and Baucus and Rep.
Mink introduced bills (S. 152 and H.R. 686) that would eliminate the
60-month limit on student loan interest deduction and raise deduction
amounts. In addition, Rep. English introduced the Student Loan Interest
Deduction Act (H.R. 436), which would eliminate the 60-month limit on
the deductibility of student loan interest, making it deductible for
the duration of the loan, and repeal the current $2,500 limit on the
deduction. The legislation would also make more people eligible for
the deduction by raising the income limit from $40,000 to $100,000 for
single taxpayers and from $60,000 to $150,000 for a joint return.
Higher Education Tax Provisions
A number of bills have been introduced in the House and Senate amending
tax provisions related to higher education. First, Senator Daschle introduced
a bill (S. 9) that would allow up to $12,000 in college tuition and
fees tax deductible for taxpayers with a marginal income tax rate of
28 percent or less and a bill (S. 7) that would increase tuition tax
credits for families and increase the maximum Pell grant amount to $4,700.
In the House, Rep. Bachus introduced a bill (H.R. 249) that would amend
the Internal Revenue Code of 1986 to permit private educational institutions
to maintain qualified tuition programs and to provide that distributions
from such programs that are used to pay educational expenses shall not
be included as gross income. While Rep. Ford introduced the "Make
College Affordable Act of 2001" (H.R. 342) that would allow a credit
for $10,000 per student per year or $20,000 per taxpayer per year on
higher education expenses and interest on higher education loans, Senator
Shumer introduced a bill with the same title (S. 458) that allows up
to $12,000 a year in college costs to be tax deductible for any family
in the 28 percent tax bracket and offers a tax credit of up to $1,500
for interest paid on student loans over first five year. Furthermore,
Rep. McCarthy introduced the "Student Loan Relief Act" (H.R.
678) that would amend the IRC to increase the amount of student loan
interest deduction permitted and to allow more taxpayers to claim that
deduction.
In addition, Congress passed legislation (H.R. 1836) that will provide
a tax cut to Americans in various income ranges. Among other priorities,
the measure includes several education incentives of interest to the
higher education community. In particular, the bill increases contribution
levels-from $500 to $2,000-for education IRAs; excludes from gross income
education distributions from qualified tuition programs; extends the
exclusion of employer-provided educational assistance to graduate programs
and makes permanent the exclusion for all studies; repeals the 5-year
limit for use of the student loan interest deduction and modifies the
income phase-out of the deduction; eliminates the tax on awards under
the National Health Service Corps Scholarship Program and the F. Edward
Hebert Armed Forces Scholarship Program, without regard to any associated
service obligations; and provides an "above-the-line" deduction
for qualified higher education expenses-up to $3,000 for 2002 and 2003
and up to $4,000 for 2004 and 2005.
Repeal Law Prohibiting Financial Aid to Convicted Drug Offenders
Representative Barney Frank (D-MA) introduced legislation (H.R. 786)
in February 2001 that amends the Higher Education Act of 1965 to repeal
the provisions prohibiting persons convicted of drug offenses from receiving
student financial assistance. Congress has not acted on the measure
since its introduction.
Loan Forgiveness
Representative Frank introduced a bill (H.R. 343) amending the Higher
Education Act to provide forgiveness of Perkins loans to members of
the armed services on active duty, while Rep. Graham introduced legislation
(H.R. 650) that would expand loan forgiveness for teachers. In addition,
The Senate's bill to reauthorize the Elementary and Secondary Education
Act (S. 1) contains a provision that would provide $5,000 of student
loan forgiveness for people who teach Head Start for five years, which
was offered by Sen. George Voinovich (R-OH).
Anti-Trust Exemption for College Financial Aid Officials
The House unanimously approved the Need-Based Educational Aid Act of
2001 (H.R. 768), which Representative Barney Frank (D-MA) introduced
on April 3, 2001. The legislation, which was sent to the Senate, permanently
exempts college financial aid officials from antitrust laws when meeting
to discuss formulas for granting need-based scholarships. The measure
is in response to a suit by the Justice Department alleging that the
"Overlap Group," a group of private colleges and universities,
including several Ivy League schools, that meet to set standards in
making awards, violated anti-trust laws. Congress passed a two-year
antitrust exemption for the schools in the Higher Education Amendments
of 1992 and has since passed similar extensions. The last exemption,
made in 1997, is set to expire on September 30, 2001. The new law would
permit the schools to agree to award financial aid on a need-blind basis
and to use common principles of need analysis in making their award
determination. It would also permit schools to exchange a student's
information through a third party and agree on the use of a common aid
application form.
Student Aid - Pell Grants
In the House, Rep. Mink introduced a bill (H.R. 590) that calls for
full funding of the Pell Grant Program. Similarly, Rep. Wu introduced
a bill (H. Res. 53) that would increase the maximum Pell Grant to $4,350.
Tuition Assistance Legislation
Senator Joseph Lieberman (D-CT) introduced the College Tuition Assistance
Act of 2001 (S. 888) which provides tax relief to middle and lower-income
American families by offering four ways to help families pay for higher
education. It increases the value of the Lifetime Learning Credit to
$2,800, aswell as the income eligibility levels at which individuals
and families qualify, removes the requirement that Pell grants and other
need-based government aid be subtracted from a family's eligible college
expenses allowing more families to take advantage of the Lifetime Learning
Credit. In addition, the measure removes the 60-month limit on taking
advantage of the student loan interest deduction, raises the income
levels so more individuals and families can qualify for the deduction,
and raises the authorization level for the maximum Pell grant over academic
years 2001-2002 and 2002-2003 to $5,800.
Individual Development Accounts for College
On June 13th, Senator Joseph Lieberman (D-CT) introduced a bill (S.
1025) designed to help families save for education expenses. In particular,
the bill would create Individual Development Accounts, or IDAs, that
"have proven to be successful in helping low-income working families
save and accumulate assets." Under IDAs, families deposit savings
and the financial institution-which receives tax breaks for participating-provides
a dollar-for-dollar match for the first $500 families contribute to
the account. One national demonstration project resulted in 2,378 low-income
families saving a total of $834,442 in one year which generated another
$1,644,510 in private matching funds. Thus far, IDA savings have been
used to purchase long-term, high-return assets, including homes, post-secondary
education and training, and small businesses.
Legislation to Eliminate Origination Fees
House Education and the Workforce Committee Ranking Democrat George
Miller (D-CA) introduced the "Affordable Student Loans Act of 2001"
(H.R. 1622) that would eliminate origination fees and insurance fees
in both the Federal Family Education Loan Program (FFELP) and Federal
Direct Student Loan Program (FDSLP). The legislation would take effect
on or after the first July 1st following the date of enactment and states
that during the interim period between the bill's enactment and the
first July 1st, the Department of Education "shall" charge
the Direct Loan borrower a 4.0 percent origination fee. The legislation
also amends the Higher Education Act to permit "any guaranty agency
or consortium thereof" to enter into a voluntary flexible agreement
with the Secretary. This provision would take effect on the date of
enactment of the bill.
GI Education Bill
On June 19th, the House unanimously approved legislation (H.R. 1291)
to increase G.I. Bill education benefits by nearly 70 percent. The bill
would gradually raise the monthly benefit for full-time veterans from
$650 to $1,100 by October 1, 2002 and raise the maximum total award
a veteran could receive from $23,400 to $39,600. The measure, which
President George W. Bush has pledged to sign, is expected to cost $9
billion over 10 years.
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