In This Issue: (click on the links below to access each article)

Regulation / Legislation Update

Supplemental Appropriations Bill Repeals Single Holder Rule
The House and Senate have both passed H.R. 4939. The bill includes repeal of the Single Holder Rule for consolidation loans as well as a second amendment intended to ease FFEL borrower access to Direct Consolidation Loans. The second amendment restores a provision that was repealed by the Higher Education Reconciliation Act this year, although the provision had not yet taken effect. This permits a FFELP borrower who has sought a consolidation loan from a FFELP lender to then seek a Direct Consolidation Loan if the FFELP lender does not offer income sensitive repayment terms acceptable to the borrower. The idea behind the change is to make it easier for borrowers to get income contingent repayment, which is only offered in the Direct Loan Program.

The House passed the measure 351-67 on June 13 and the Senate passed it 98-1 on June 15. Sen. Arlen Specter (R-PA), Chairman of the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies, was the lone vote against the bill in the Senate. Specter was displeased that conferees had rejected his efforts to include an additional $7 billion in education and healthcare spending authority for FY2007 in the Conference Report.

The repeal of the Single Holder Rule is effective upon enactment, and the President signed the legislation into law the evening of June 15.

House Appropriations Subcommittee Funds Cancellations, No Funding for FCC
On June 14, the House Appropriations Subcommittee on Labor, Health and Human Services, and Education (Labor-HHS-Education) marked up their FY2007 appropriations bill and reported the recommended bill to the full Appropriations Committee. This bill would fund the Perkins Loan Program.

The Subcommittee rejected the President’s proposal to eliminate the Perkins Loan Program and transfer $664 million in Perkins Loan funds during the year to other programs. The bill funds Loan Cancellations at last year’s level – approximately $65.4 million. Unfortunately, the bill again fails to fund the Federal Capital Contribution, choosing instead to add $349 million in funding for Pell Grants so as to increase the maximum grant to $4,150.

FY2007 Budget Resolution Remains Elusive in House
Negotiations have gone on for weeks with GOP moderates, lead by Rep. Mike Castle (R-DE), who are still pushing additional funding for domestic discretionary programs - hoping to match the $7 billion in the Senate’s resolution. Reports indicate that negotiations between House Leadership, moderates, appropriators and the conservative Republican Study Committee (RSC) will continue through the weekend; however it is unclear if leadership will “throw in the towel” and move forward with a deeming resolution or similar legislative vehicle to set the budget for the coming fiscal year.

Technically, the Appropriations Committee can bring appropriations bills to the floor without a budget resolution. Rep. Jerry Lewis (R-CA), chairman of the Appropriations Committee, took steps to move the process forward during the full committee mark-up of the FY2007 Agriculture appropriations bill. Included in the bill is a “deeming resolution” that does the work of a budget, setting spending limits on each Appropriations subcommittee. The subcommittees then divide their allocation up among the programs in their jurisdiction. The overall spending number for all discretionary programs is $872 billion, slightly below the President’s request. Reflecting pressure from Republican moderates, the Labor, Health and Human Services and Education (Labor-HHS-Education) allocation is approximately $4 billion greater than the president’s FY 2007 request and over $800 million greater than FY2006 request. It is important to note that new to the Labor-HHS-Education bill is “section 458” – administrative fees for student loan programs that transferred from mandatory to discretionary spending as part of the Deficit Reduction Act of 2005. The President’s request for section 458 was $733 million, leaving very little additional funding remaining for other programs in the bill, unless student loan administration is reduced. The following is breakdown of the House subcommittee allocations.

House Completes Work on Lobby Reform Legislation
The House passed lobbying reform legislation in early May in a close vote, 217-213. The bill would tighten certain rules regarding lobbyists’ relations with lawmakers, requiring lobbyists to file quarterly instead of semiannual reports, to include in those reports donations they give to federal candidates and political action committees, and to make public gifts that they give to lawmakers or congressional aides. In the aftermath of the Jack Abramoff scandal last year, Congress pledged to toughen rules on how lobbyists interact with lawmakers, although neither the House nor Senate bill go as far as initially promised.

House GOP leaders praised passage of the bill. “We took another step in the right direction,” said House Majority Leader John Boehner (OH). Many Democrats criticized the bill, including Education & the Workforce Committee Ranking Member George Miller (CA), who said, “This is such a weak bill that it will do little to slow the revolving door between Members of Congress and K Street lobbying firms and will continue to place interests of the well-connected few above the interests of everyone else. This bill is a sham – the Republicans know it, the news media knows it, and the American people will know it soon enough.”

The Senate passed its version of lobby reform in March; the bill will now head to conference.

Boehner Announces Likelihood of Lame Duck Session
House Majority Leader John Boehner (R-OH) commented that the slow pace of work on legislation makes a lame duck session highly likely this year. Boehner is quoted as saying, “Unfortunately, we’re going to be here for Christmas.” That means that the current Congress would return to Washington after the November 7 election and resume legislating, even though some of its members will have been defeated for re-election. The appropriations bill that includes the Department of Education appropriations recently has been one of the last bills completed, so Perkins Loan funding may not be resolved until then. A lame duck session could also increase the probability of Congress completing action on the remaining Higher Education Act reauthorization bill this year (H.R. 609/S. 1614), given that it opens more time for action.

Perkins Loan Default Rate Falls: Department Orange Book
The Perkins Loan cohort default rate fell in the most recent year, according to statistics just released as part of the Department of Education “Orange Book” for the Perkins Loan Program. The rate fell to 8.12% for the 2004 cohort, according to the book.

The Orange Book provides a wide range of default-related statistics for each school participating in the Perkins Loan Program. To download the book, visit: http://ifap.ed.gov/cbpmaterials/0405PerkinsDCROrngBk.html.

The Orange Book contains the following national statistics on the Perkins Loan Program:

• Number of borrowers entering repayment status (2003-2004): 374,219
• Number of borrowers who entered into repayment status in default as of June 30, 2005: 30,395
• Cohort default rate: 8.12%
• Number of borrowers in default greater than 240 days: 496,004
• Principal owed on borrowers in default greater than 240 days: $820,255,818

Manning Named Acting Assistant Secretary for Postsecondary Education
President Bush designated James Manning to serve as Acting Assistant Secretary for Postsecondary Education for the Department of Education. In this role, Manning will formulate federal postsecondary education policy and administer programs that address critical national needs in support of increasing access and quality to higher education. Prior to the appointment, Manning served as chief of staff at Federal Student Aid, he also served as the Department’s Acting Assistant Secretary for Civil Rights from December 2004 through December 2005 and before that as chief of staff to former Deputy Secretary Bill Hansen.

Department Releases Guidance and ACG and SMART Grants
The Department of Education has issued guidance regarding the Academic Competitiveness Grants (ACG) and the National Science and Mathematics Access to Retain Talent (SMART) Grants. The guidance was issued via two “Dear Colleague Letters” (GEN-06-06 and GEN-06-08, available at http://www.ifap.ed.gov/IFAPWebApp/currentHERAPag.jsp?p1=c).

This guidance describes how the Department intends to implement these new programs and emphasizes the effort to give schools and states guidelines that meet the statutory requirements of the new programs while allowing some flexibility in implementation that will allow the funds to become available for college students in the 2006-07 academic year. The guidance notes that the approaching 2006-2007 school year required the issuance of this guidance, but that it will be followed by the publication of final regulations, with a waiver of notice-and-comment rulemaking and negotiated rulemaking. Those regulations, expected later this month, will specify program implementation for at least the next two academic years. The Department intends to eventually promulgate regulations to establish the details of the program’s implementation for succeeding years.

The ACG and SMART grants were enacted as part of the Deficit Reduction Act of 2005 (PL 109-171), earlier this year. On May 2, the U.S. Department of Education (ED) hosted a conference to discuss the guidance. Much of the community’s concerns, reflected both in this call and in a similar call held for the education community the following day, focused on defining the “rigorous” curriculum that is a requirement for eligibility, as well as the technical aspects of application and processing. According to the Department, ED was given the “mammoth task” of creating a “transition program” for this first two years of the new grant programs. According to ED, this guidance is “well within Congressional intent.”

More information on Academic Competitiveness Grants and National SMART Grants can be found at: http://www.ed.gov/.

Department Announces 2006-2007 Campus-Based Awards
The Department of Education has announced awards for the 2006-2007 academic year for all campus-based programs, including the Perkins Loan Program. Since there was no Federal Capital Contribution, no additional funds will be infused into existing revolving funds. In the announcement, the Department states that there are 1,707 campus-based revolving funds in operation, benefiting an estimated 946,721 students. For more information visit: http://ifap.ed.gov/cbpmaterials/0607NotifCBFunding.html.

Department Announces new FFEL Deferment Forms
The Department announced the approval of a revised loan deferment form for the FFEL program for eight categories of deferments: unemployment, public service, parental leave/working mother; PLUS borrower with dependent student; in-school; economic hardship; education related; and temporary total disability. The forms are available for immediate use.

To access the DCL, please click here: http://www.ifap.ed.gov/dpcletters/FP0606.html.