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# Legislative Bulletin..............................................July 11, 2007

**Contents:**

> **H.R. 2669 ---** College Cost Reduction Act of 2007

H.R. 2669 --- College Cost Reduction Act of 2007 *(Miller, D-CA)*

**[Order of Business]{.underline}**: H.R. 2669 is expected to be
considered on Wednesday, July 11, 2007, subject to a rule. Details of
the rule are not currently available, although a structured rule is
expected.

**[Reconciliation Background]{.underline}**: The budget resolution (S.
Con. Res. 21) instructed the House Education and Labor Committee to find
\$750 million in savings over five years. The reconciliation process is
intended to reduce the growth in entitlement spending; however,
Democrats have chosen to use reconciliation as a method to create at
least nine new entitlement programs, create a mandatory funding stream
for the Pell Grant program, and to ensure that these education policy
changes, which could not garner the 60 votes necessary for cloture under
regular order in the Senate, are included in a reconciliation package,
which requires only 50 votes, instead of 60.

**[Student Loan Programs Background]{.underline}**: The federal
government provides subsidized and unsubsidized loans to parents and
students of higher education (both undergraduate and graduate) using two
major programs: the FFEL and the DL program. The FFEL loan program
offers subsidized loans provided to students from private lenders.
Conversely, in the DL program, the federal government acts as the lender
itself and provides the capital for all loans. In FY 2005, these two
programs provided \$56.2 billion in *new* loans.

In those loans which are subsidized by the federal government, the
government pays the interest while the student is enrolled as at least a
part-time student. The government does not pay the interest on
unsubsidized loans. Currently the interest charged on federal student
loans varies among the different types of loans offered---ranging from
6.8% to 8.5%. As of July 1, 2006, all Stafford loans have a fixed
interest rate of 6.8%.

The government guarantees a fixed return to lenders providing federal
loans. As such, by reducing costs incurred upon the student by
decreasing the interest rate, the federal government---i.e.
taxpayers---must make up the shortfall to the lender.

**[Summary by Title:]{.underline}**

***Title I---Pell Grants***

-   Increases the current authorized annual maximum award given to
    students under the Pell Grant program from \$5,800 for each academic
    year (AY) to the following amounts:

    -   \$7,600---AY 2008-2009;

    -   \$8,600---AY 2009-2010;

    -   \$9,600---AY 2010-2011;

    -   \$10,600---AY 2011-2012; and

    -   \$11,600---AY 2012-2013.

> This increase would double the *authorized* maximum over five years,
> from \$5,800 to \$11,600. Currently, the maximum award actually
> appropriated is \$4,310 (as set by the FY 2007 Continuing Resolution).
> As such, if the new authorized levels were realized, that would
> represent a 169% increase over the current appropriated level. In
> addition, according to CRS, the estimated [average]{.underline} (as
> opposed to the maximum) award granted to students in 2007 is \$2,456.

-   Creates a new mandatory funding stream to the Pell Grant program.
    Specifically, the bill would authorize and appropriate \$18.2
    billion over ten years for the Pell Grant program, as follows:

    -   \$840 million in FY 2008;

    -   \$870 million in FY 2009;

    -   \$1.34 billion in FY 2010;

    -   \$2.28 billion in FY 2011;

    -   \$2.35 billion in FY 2012;

    -   \$2.4 billion in FY 2013;

    -   \$2.45 billion in FY 2014;

    -   \$2.51 billion in FY 2015;

    -   \$2.55 billion in FY 2016; and

    -   \$2.57 billion in FY 2017.

> Of these amounts, the bill stipulates that the new mandatory spending
> for the Pell program would be used to *further increase* the maximum
> award made available to students in the program. The increase in the
> maximum annual award would be implemented as follows:

-   \$200 increase---AY 2008-2009 and AY 2009-2010;

-   \$300 increase---AY 2010-2011; and

-   \$500 increase---AY 2011-2012 and each subsequent year.

> **Note: this new entitlement spending is in addition to the authorized
> increases described earlier and made subject to appropriations.**
>
> Through the annual appropriation's process, in FY 2007, Congress
> appropriated \$12.6 billion in discretionary funding for the Pell
> program. **Some conservatives may be concerned that the large
> authorization level increases (subject to appropriations) and the
> additional \$18.2 billion in entitlement funding provided in H.R. 2669
> would significantly increase federal spending on the Pell Grant
> program.**

-   Authorizes the Department of Education to award students two Pell
    grants during one award year, if the student is enrolled in more
    than two semesters (or three quarters) during the academic year.
    Currently students may receive one Pell grant per year, which is
    typically divided in half and distributed evenly over the two
    semester year (Spring and Fall semesters). However, this provision
    would allow a student enrolled in summer school, to receive two Pell
    grants during one year.

-   Increases the income protection allowance from \$2,200 to the
    following:

    -   \$3,750---AY 2009-2010;

    -   \$4,500---AY 2011-2012;

    -   \$5,250---AY 2012-2013; and

    -   \$6,000---AY 2012-2013.

> Under current law, certain considerations are taken into account when
> calculating the award amount for each individual student. Part of this
> calculation includes an estimate of the student's contribution to
> their education to be made from their available income. In determining
> a student's available income, \$2,200 in an "income protection
> allowance" is deducted from the student's expected contribution to
> their education. This provision would increase the deduction for
> dependent students to \$6,000 by AY 2012-2013, and for unmarried
> independent students without dependents to \$8,090.

-   Increases from \$20,000 to \$30,000, the family income level below
    which a family is not expected to contribute to their child's
    educations costs. Under current law, families with an income of
    \$20,000 or less, are not expected to contribute to education costs,
    and typically students from these families receive the maximum Pell
    grant award each year. H.R. 2669 would increase this amount to
    \$30,000, and would also direct the Secretary to increase annually
    this threshold periodically by the rate of inflation. This provision
    would add to the current list of income exclusions.

-   Exempts certain federal benefits, including Temporary Aid for Needy
    Families (welfare), the Earned Income Tax Credit, untaxed social
    security benefits, credit for federal tax on special fuels, and the
    amount of foreign income excluded for purposes of federal income
    taxes, from the calculation of income when determining a family's
    need for federal Pell assistance.

-   Reduces gradually (over five years) the interest rate on subsidized
    Stafford loans provided to undergraduate students through both the
    Federal Family Education Loan (FFEL) and the William D. Ford Direct
    Loan (DL) programs. As of July 1, 2006, Stafford loans have a fixed
    interest rate of 6.8%. H.R. 2669 would decrease this fixed interest
    rate as follows:

    -   July 1, 2006 -- June 30, 2008: 6.8%

    -   July 1, 2008 -- June 30, 2009: 6.12%

    -   July 1, 2009 -- June 30, 2010: 5.44%

    -   July 1, 2010 -- June 30, 2011: 4.76%

    -   July 1, 2011 -- June 30, 2012: 4.08%

    -   July 1, 2012 -- June 30, 2013: 3.4%

> According to CBO, this provision would cost \$6.2 billion over five
> years and \$8.2 billion over ten years.
>
> **NOTE: The 3.40% interest rate would be available to students for
> loans that originate between July 1, 2012 and June 30, 2013. As of
> July 1, 2013, the interest rate would revert back to 6.8%. Some
> conservatives may be concerned that this provision would lower the
> interest rate on loans being paid back by students who have already
> graduated from college and would not actually benefit students
> entering college.**

-   Increases the annual borrowing limit for third and fourth year
    students with federally-insured student loans from \$5,500 to
    \$7,500. In addition, the bill would increase the aggregate
    borrowing limits to accommodate the annual limit increase. According
    to CBO, this provision would cost \$1.4 billion over five years and
    \$3.5 billion over ten years.

-   Decreases the special allowance rate (SAR) by .55% for Stafford and
    consolidation loans, and by .85% for PLUS loans. Utilized under FFEL
    loans only, SAR is the rate at which the federal government provides
    payments to lenders in compensation for the difference between the
    mandated borrower rate for federal loans and current market interest
    rates. According to CBO, this provision would save \$12.9 billion
    over five years, and \$27.8 billion over ten years.

-   Eliminates the "exceptional performance" designation that the
    Secretary gives to lenders, loan servicers and guaranty agencies
    with high performance levels.

-   Reduces from 97% to 95%, the amount paid by the federal government
    to lenders if a borrower defaults on a loan. According to CBO, this
    provision would save \$1.8 billion over five years, and \$3.3
    billion over ten years.

-   Reduces from 23% to 16%, the amount a guaranty agency can retain on
    payments collected on defaulted loans. According to CBO, this
    provision would save \$1.9 billion over five years and \$2.8 billion
    over ten years.

-   Changes the method of payment for account maintenance fees paid to
    guaranty agencies, by paying the agencies based on the number of
    accounts managed by the agency instead of paying them based on the
    total dollar loan volume. According to CBO, this provision would
    save \$1 billion over both five and ten years.

[]{.mark}

-   Increases from .05% to 1%, the loan origination fee charged to
    for-profit lenders for new loans under the FFEL program. The bill
    would eliminate the fee for non-profit lenders and small lenders
    (those in the lower 15% of overall volume). Under current law,
    large, small and non-profit lenders pay a .5% loan origination fee.
    According to CBO, this provision would save \$935 million over five
    years and \$2 billion over ten years.

-   **Note: It is important to note that many of these provisions, which
    save money, have the effect of increasing the burden of private
    lenders participating in the FFEL program. This burden will make
    their participation in the program less attractive and could cause
    some to pull out of the program, forcing more students and
    institutions into the DL program.**

-   Directs the Secretaries of Education and Treasury, working with CBO,
    OMB and GAO, to conduct a planning study to determine market-based
    mechanisms for auctioning the rights to federal student loans. In
    addition, H.R. 2669 directs the Secretary to create a pilot program
    that would implement the auctioning mechanisms examined in the study
    (regardless of the study's actual findings) for 10% of the loan
    volume in the first year, and 20% of the volume in the second year.

-   **Private-sector Loan Forgiveness. Creates a new entitlement loan
    forgiveness program** for individuals who are employed full-time
    (and have not defaulted on their loan) in the following professions,
    which are designated as "areas of national need" by the Act:

    -   early childhood educator in an eligible preschool program or
        early childhood education program in a low-income community and
        who is involved directly in the care, development and education
        of infants, toddlers or young children age five and under;

    -   nurses in a clinical setting or at a nursing home at an
        accredited school of nursing;

    -   individuals with a degree in a critical foreign language that
        are employed as an elementary or secondary school teacher of a
        critical foreign language or who are employed at federal agency
        in a position that "regularly requires the use of such critical
        foreign language;"

    -   librarians at a public library that serves in certain
        geographical areas or librarians at an elementary or secondary
        school in certain school districts;

    -   highly qualified teachers (defined in current law) that are
        employed as a full-time teacher of bilingual education or is
        employed as a teacher in certain public or nonprofit private
        elementary or secondary schools;

    -   individuals who have a degree in social work or a related field
        and is employed in public or private child welfare services;

    -   speech-language pathologists, who are employed at an eligible
        preschool program or an elementary or secondary school and who
        has a graduate degree in speech-language pathology or
        communication sciences and disorders;

    -   national service workers;

    -   individuals employed in public safety, including as a first
        responder, firefighter, police officer, or other law enforcement
        or public safety officer; and

    -   individuals employed in emergency management, including as an
        emergency medical technician, public health, or public interest
        legal services, including prosecution or public defense.

> According to CBO, this provision would cost \$40 million in FY 2008,
> \$855 million over five years, and \$2.7 billion over ten years.

-   **Public-Sector Loan Forgiveness. Creates a new entitlement loan
    forgiveness program** that would forgive the loans of public sector
    works who agree to repay their loan through the income-contingent
    plan under the Federal Direct Loan Program (DL), have worked in the
    public sector for 10 years, and have made 120 payments on their
    loan. If an individual meets all three requirements, the new program
    would pay off the balance of their student loan. Individuals
    employed full-time in the following professions would be eligible
    full loan forgiveness under this new program: emergency management,
    government, public safety, law enforcement, public health,
    education, social work in a public child or family service agency,
    and public interest legal service, including prosecution or public
    defense.

> According to CBO, this provision would cost \$10 million in FY 2008,
> but save \$20 million over five years, and \$70 million over ten.
> However, CBO is required to take certain considerations into account,
> which results in estimated savings associated with the Direct Loan
> program that conservatives may not agree actually exist. As such, CBO
> scores any shift of loans to the Direct Loan program as saving the
> government money. To read more about how CBO scores the federal loan
> programs, please read this document:
> <http://www.cbo.gov/ftpdocs/68xx/doc6874/11-16-StudentLoans.pdf>.

-   Creates a new income-based repayment plan for all borrowers that
    would allow borrowers to have their monthly payments limited to no
    more than 15 percent of their calculated income, which is their
    adjusted gross income less an amount that is 150 percent of poverty
    for their family size. When a borrower is able to pay 100 percent of
    their payment, both interest and principal, they would return to a
    10-year repayment plan. If after 20 years the principal portion of
    the loan (including capitalized interest) was not fully paid off,
    the government would pay off the remainder of the loan if it is a
    FFEL loan, and would forgive the loan if it is handled by the Direct
    Loan program. According to CBO, this provision would cost \$990
    million over five years and \$1.8 billion over ten years.

-   Loosens the definition of "economic hardship" in current law, which
    is used to determine if a borrower has the means to repay their loan
    or if they should be granted an economic hardship deferment.
    Currently, economic hardship is defined as individual with an income
    level below 100 percent of poverty for a family of two, or below 220
    percent of poverty for a family of two with debt payments exceeding
    20 percent of their income. H.R. 2669 would increase the family
    income level to 150 percent of poverty, based on family size.

-   Eliminates (for all borrowers) the current three-year period maximum
    for which a borrower could receive an economic hardship deferment.
    During deferment, individuals are not required to make payments on
    their loans

-   Allows members of the National Guard and other reserve components of
    the Armed Forces, and veterans, who were enrolled in or left college
    within six months of deployment, to receive extended repayment on
    loan terms of up to 13 months when returning from active duty.

-   Expresses the sense of Congress that the Secretaries of Education
    and Treasury should work together with GAO to develop a process by
    which borrowers could make payments on federal student loans using
    the income tax withholding system.

-   Provides \$100 million annually from FY 2008 through FY 2012, in
    entitlement funding for federal capital contributions in the Perkins
    loan program. The Perkins Loan program, historically funded through
    discretionary spending, provides low-interest, fixed-rate loans to
    students in financial need. However, this account has not received
    funding through the appropriations process since FY 2004, and the FY
    2008 Labor-HHS appropriations bill continues this lack of funding.
    **Some conservatives may be concerned that H.R. 2669 would create a
    new entitlement program to fund the Perkins Loan program, which has
    not been funded through the appropriation's process since FY 2004.**

***Title II---Cost of College***

-   Requires states, under penalty of losing their Leveraging
    Educational Assistance Partnership Program (LEAP) funding, to
    continue funding for institutions of higher education compared at
    average amount provided by a state in the average of the previous
    five years. Allows the Secretary of Education to waive this
    requirement under certain circumstances.

> According to the Department of Education website, "the LEAP Program
> provides grants to states to assist them in providing need-based
> grants and community service work-study assistance to eligible
> postsecondary students. States must administer the program under a
> single state agency and meet maintenance-of-effort criteria."

-   Requires changes to the College Opportunity On-Line (COOL) Website
    including information comparing each institution's tuition
    percentage change in sticker price compared to the overall
    percentage change in the Higher Education Price Index (HEPI).

> Colleges that increase their tuition two academic years in a row by an
> amount that is twice the rate of the HEPI would be put on
> 'affordability alert status," requiring the institution to explain the
> factors leading to the tuition increase relative to other institutions
> of higher education.

-   **Low Tuition Grants. Creates a new entitlement program, the
    Incentives and Rewards for Low Tuition program,** which would
    provide additional Pell Grant funding to institutions if they meet
    certain tuition requirements outlined in the bill. In order to be
    eligible for this money an institution would have to increase
    tuition by an amount less than the overall higher education price
    index (HEPI) for that academic year, to be determined by the Bureau
    of Labor Statistics. The money given to institutions of higher
    education would come in the form of need-based grant aid for the
    institution to give to its students. The Secretary would provide a
    school with the funding to provide a 25 percent increase to Pell
    Grant recipients attending the institution for the next award year.
    The Secretary's authority under this provision would expire in
    FY 2012. According to CBO, the total cost of this provision is \$75
    million over five years---\$15 million a year from 2008 to 2012.

-   **Cooperative Education Rewards. Creates a new entitlement program,
    Cooperative Education Rewards**, to provide funding to institutions
    that offer students "cooperative education" during their schooling,
    in order to prepare them for their career. Cooperative education is
    described in the bill as giving "students work experiences related
    to their academic or occupational objectives and an opportunity earn
    the funds necessary for continuing and completing their education."
    The Secretary's authority under this provision would expire in
    FY 2012. The Minority Views in the Committee Report express concerns
    about giving money to institutions of higher education instead of to
    students directly and also about providing this money in the form of
    new entitlement spending. According to CBO, the total cost of this
    provision is \$75 million over five years---\$15 million a year from
    2008 to 2012.

***Title III--- Qualified Teachers***

-   **TEACH Grants. Creates a new entitlement program**, the Teacher
    Education Assistance for College and Higher (TEACH) Education
    Grants, which would provide grants to institutions of higher
    education to provide \$4,000 annual scholarships to students that
    teach in a high need subject area for four years after graduation
    and \$500 Bonus TEACH Grants for students who are enrolled in
    teacher education programs. Undergraduate students could receive up
    to \$16,000 total in scholarship money from this program, and
    students receive the Bonus TEACH grants could receive up to \$18,000
    (both figures equaling the maximum annual amount over four years).
    Graduate students could receive up to \$8,000 total in scholarships,
    while those receiving the Bonus TEACH grants could receive up to
    \$10,000.

> In order to qualify, students would be required to agree to serve as a
> full-time teacher for not less than four years, within eight years of
> completing the required coursework, and to teach in one of the
> following fields: math, science, foreign language, bilingual
> education, special education, as a reading specialist, or in another
> field documented as high-need by the federal government, a state
> government or a local education agency and approved by the Secretary.
> In addition, a student has to maintain a 3.25 GPA.
>
> If a student fails to meet their obligation, the sum of TEACH grants
> received by that student would then be converted into a loan under the
> Federal Direct Loan program. According to CBO, this provision would
> cost \$15 million in FY 2008, \$375 million over five years, and \$910
> million over ten years.

-   **Centers of Excellence. Creates a new entitlement program**,
    Centers of Excellence, which would provide funding to institutions
    of higher education (IHE) to "recruit and prepare teachers,
    including minority teachers" and to "increase opportunities for
    Americans of all educational, ethnic, class, and geographic
    backgrounds to become highly qualified teachers." Through this
    program, the Secretary would make grants (\$500,000 minimum) to
    institutions to establish a center of excellence. The following
    types of institutions would be eligible:

    -   Hispanic-serving institutions,

    -   Tribal colleges or universities,

    -   Alaska Native-serving institutions, and

    -   Native Hawaiian-serving institutions.

> No more than 2 percent of the funds provided to an institution may be
> used to administer the grant.
>
> The Centers of Excellence would be designed to prepare potential
> teachers at these specific universities by carrying out one of several
> activities listed in the bill, such as "to prepare teachers to close
> student achievement gaps," to provide high-quality clinical
> experience, and to award scholarships based on financial need to
> assist students in completing teacher training. The Centers of
> Excellence program was included in H.R. 609 (the Higher Education
> legislation passed by the House in the 109^th^ Congress) as a
> *discretionary* program, but was not signed into law. According to
> CBO, this provision would cost \$3 million in FY 2008, \$50 million
> over five years, and \$50 million over ten years.

***Title IV---College Access***

-   **Investment in Historically Black Colleges and Universities and
    Minority-Serving Institution.** H.R. 2669 would **create a new
    entitlement program** that would provide \$500 million over five
    years to certain types of institutions, distributing the funds as
    follows for the five year period:

    -   \$200 million for Hispanic-serving institutions to increase the
        number of students attaining degrees in math, science, and
        technology;

    -   \$170 million for Historically Black Colleges and Universities
        (HBCU) to purchase lab equipment and materials and to pay
        teachers for the establishment or development of a teacher
        education program, or to increase the institution's capacity to
        prepare students for careers in science, technology,
        engineering, and other similar fields;

    -   \$30 million for Predominately Black Intuitions to award ten,
        \$600,000 grants for science, technology, math and engineering
        programs to "improved the educational outcomes of African
        American males;"

    -   \$60 million for Tribal Colleges and Universities for the
        purchase lab equipment and materials and to pay teachers for the
        establishment or enhancement of teacher education and outreach
        programs;

    -   \$30 million for Alaska/ Native Hawaiian institutions for the
        purchase of lab equipment and the creation of academic tutoring
        programs; and

    -   \$10 million for Asian American and Pacific Islander
        Institutions for the purchase of lab equipment and the creation
        of academic tutoring programs.

> Under current law, minority-serving institutions (MSI), such as HBCUs
> and others, receive discretionary federal funding, which is subject to
> the appropriation's process. However, H.R. 2669 would provide in
> addition to this discretionary funding, new mandatory funding, as
> outlined above. In addition, H.R. 2669 creates a new category of
> MSI---the "predominantly black institution." The bill defines a
> predominately black institution as one with an enrollment of
> undergraduate students with at least a 40% black population, at least
> 1,000 undergraduate students, and with least 50 percent of the student
> body low-income or first generation college students. According to
> CBO, this provision would cost \$5 million in FY 2008, \$369 million
> over five years, and \$500 million over ten years.
>
> **[Possible Conservative Concerns]{.underline}:** Some conservatives
> may be concerned that this section creates a new entitlement program.
> In addition, some conservatives may be concerned that the expiration
> date on this program, set at 2012, is a gimmick to fit the total cost
> of H.R. 2669 within the amount required through the reconciliation
> process. Some conservatives may also be concerned that Native
> Hawaiians are a racial group, not an Indian tribe, and dispensing
> benefits to them would likely be subject to strict scrutiny in federal
> courts (and thus presumably unconstitutional).

-   **College Access Challenge Grants.** H.R. 2669 **creates a new
    entitlement program**, College Access Challenge Grants, to provide
    federal funding to philanthropic organizations in the form of
    matching grants, to encourage these entities to assist low-income
    students enter and complete college. According to CBO, this
    provision would cost \$45 million in FY 2008, and \$300 million over
    both the five- and ten-year periods.

-   **Upward Bound.** H.R. 2669 would provide \$120 million in
    entitlement funding to the **Upward Bound program.** Upward Bound is
    designed to provide precollege students and veterans with the skills
    needed to succeed in postsecondary education. However, according to
    the Administration, the Upward Bound TRIO program is "ineffective"
    and has had no significant effect on high-risk students. In
    addition, the program has been unable to demonstrate any improved
    efficiencies, despite previous poor evaluations. According to CBO,
    this provision would cost \$2 million in FY 2008, \$109 million over
    five years, and \$120 million over ten years.

***Title V---Additional Provisions***

-   **Independent Evaluation of Distance Education Programs.** Requires
    the Secretary of Education to work with the National Academy of
    Sciences to conduct an evaluation of the "quality of distance
    education programs." An interim report is due by December 31, 2007
    and a final report is due by December 31, 2009. \$100,000 is
    authorized for this purpose.

-   **Encourages Colleges and Universities to "Go Green."** Expresses
    the Sense of the Committee on Education and Labor that it is
    desirable for institutions of higher education to use sustainable
    economic and environmental practices and "go green."

**[Additional Possible Conservative Concerns]{.underline}**:

**1) Increasing Tuition Costs, Not Lowering Them:** While the cost of
attending college has risen rapidly in the last decade, federal aid
provided for postsecondary education has almost doubled in the same
timeframe, reaching \$94 billion in FY 2006. Despite the claim that
Republicans had conducted a "raid on student aid" in recent years,
Congress has substantially increased federal loan limits. Some experts
contend that the significant rise in federal aid has actually
contributed to increased college tuition. As the federal and state
governments absorb and thus stimulate demand, institutions of higher
education must ensure enough supply and do so by raising tuition prices
at taxpayers' expense.

**2) Helping Upper-Income Families, Not Lower-Income Families**: A
recent Heritage Foundation report suggests that too much federal
postsecondary aid is being directed to middle-class families. The essay
stated that, "An increasing share of federal grant and loan subsidies
are being provided to students from non-economically disadvantaged
families. The College Board recently reported that 'changes in student
aid policies have benefited those in the upper half of the income
distribution more than those in the lower half.' A recent Department of
Education report found that 47 per­cent of students from middle-income
families accepted federal loans in 2000, compared to 31 percent in
1993."

**3) Direct Loan Program vs. Federal Family Education Loan Program:**
Some conservatives may also be concerned that enacting H.R. 2669 is part
of a larger effort by some lawmakers to breathe new life into the Direct
Loan (DL) program, and at the same time, stifle the Federal Family
Education Loan (FFEL) program. In the 109^th^ Congress, Senator Kennedy
was the primary sponsor of S. 754, the Student Aid Reward Act of 2005,
which sought to encourage universities to use the DL program, instead of
participating in the FFEL program. As previously noted, in the FFEL
program, the loan capital is provided by private lenders. The FFEL
program has been extremely successful in efficiently providing students
with access to college loans. In fact, according to a report by
[America's Student Loan Providers](../www.studentloanfacts.org), as of
2004, 83% of schools used FFEL program exclusively to provide financial
assistance to students. At that same time, only 11% of schools used only
the DL program, while the remaining 6% utilized both.

Many of the offsets included in H.R. 2669 to pay for large increases in
mandatory spending, will increase the costs for lenders to provide loans
through the program. As such, some conservatives may be concerned that
this legislation may discourage lenders from participating in the FFEL
program, or make the DL program more appealing, as lenders seek to
recoup their costs by charging fees.

**4) New Entitlement Programs**: In addition, some conservatives may be
concerned that **H.R. 2669 would create at least nine new entitlement
programs, spending over \$17 billion of the total savings achieved by
the bill.** The reconciliation process has been used in this instance to
create new programs and provide for significant increases in federal
education spending, instead of applying the achieved savings to deficit
reduction. In addition, some conservatives may be concerned that
although many of the new entitlement programs are set to expire in FY
2012, this is likely a gimmick to fit the total cost of H.R. 2669 within
the amount required through the reconciliation process, while it is
unlikely that the programs will actually be terminated in five years.

**[Earmark Compliance]{.underline}**: According to Committee Report
[110-210,](http://www.congress.gov/cgi-lis/cpquery/R?cp110:FLD010:@1(hr210))
the "H.R. 2669 does not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits as defined in clause 9(d), 9(e), or
9(t) of rule XXI."

**[Committee Action]{.underline}**: H.R. 2669 was introduced on June 12,
2007, and referred the House Committee on Education and Labor, which
considered it, held a mark-up, and reported the bill, as amended, by a
vote of 30-16, on June 25, 2007.

**[Cost to Taxpayer]{.underline}**: According to CBO, the net mandatory
savings from H.R. 2669 is \$1.67 billion over five years and \$914
million over ten years, which satisfies the \$750 million target set for
the Education and Labor Committee as part of the reconciliation process
in the FY 2008 budget resolution. The five year net savings total
results from \$18.8 billion in mandatory savings offset by \$17.1
billion in new mandatory spending.

The score for H.R. 2669 relies on several provisions, that score as
increasing mandatory spending, expiring within the ten year budget
window. These provisions that expire within the ten year budget window
under H.R. 2669 include the reduction in subsidized student loans,
without which, H.R. 2669 would score as increasing the deficit over the
ten year budget window.

In addition to changes to mandatory spending, H.R. 2669 also authorizes
\$197 billion in discretionary spending over five years and \$303
billion over ten years for Pell Grants (including what is currently
provided).

**[Does the Bill Expand the Size and Scope of the Federal
Government?:]{.underline}** Yes. The bill would create at least nine new
federal programs, and dramatically increase the Pell Grant program.

[]{.mark}

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: No.

[]{.mark}

**[Constitutional Authority]{.underline}**: Committee Report
[110-210](http://www.congress.gov/cgi-lis/cpquery/R?cp110:FLD010:@1(hr210))
cites constitutional authority in Article 1, Section 8, Clause 1
(general welfare) of the Constitution.

**[RSC Staff Contact]{.underline}:** Brad Watson;
<brad.watson@mail.house.gov>; 202.226.917, and

Joelle Cannon; joelle.cannon@mail.house.gov; 202.226.0718

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