Higher Education Act

The Higher Education Act of 1965
The Higher Education Act (HEA) of 1965 established the federal student loan program and currently governs all federal postsecondary funding, including student loan interest rate adjustments, deferments, subsidies, and tax deductions. Every five years, the U.S. Congress must reauthorize the HEA and its programs. However, this reauthorization process often lasts several years, requiring the enactment of numerous “HEA extensions” to keep the existing student loan programs funded. The current reauthorization process, which started in 2003, has been extended until July 31, 2008. However, an additional extension is likely, with completion of the HEA reauthorization possibly in 2008 or postponed until the next Congress.

The HEA has been extended 14 times since the previous reauthorization, which has not occurred since 1998. The latest extension of the HEA was signed into law by the President on June 30, 2008, and extends HEA through July 31, 2008.

Recent legislative activity
On July 24, 2007, the Senate passed its version of HEA reauthorization legislation. S. 1642, the “Higher Education Amendments of 2007,” was passed in the Senate by a vote of 95-0. S. 1642 contains the following key provisions:

• Efforts to increase transparency in college tuition;
• Lender disclosure requirements;
• Requirements to disclose information on loan consolidation; and
• Requirements for lenders to report student loan status to each consumer reporting agency (nationwide credit bureaus).

On Feb. 7, 2008, the House passed its version of HEA reauthorization legislation, H.R. 4137, the “College Opportunity and Affordability Act of 2007.”  H.R. 4137 was passed in the House by a vote of 354-58, and contains the following provisions:

• Lender disclosure requirements;
• GAO study on medical student indebtedness;
• Loan forgiveness for services in areas of national need for residency programs longer than five years (Secretary of Dept. of Education will determine what constitutes national need); and
• Additional private student loan transparency (imposes additional consumer protection and disclosure requirements).

Currently, the House and Senate will have to meet to reconcile the differences between the two bills.  The latest extension of the HEA, S. 3180,  was signed into law by the President on June 30, 2008.  It is anticipated that another extension will be signed into law by the end of July if Congress cannot come to an agreement before June 31, 2008.

Other relevant legislative activity
The Deficit Reduction Act (DRA), which was enacted in February 2006, included several higher education provisions affecting both students and lenders. Relevant provisions in the DRA affecting medical students and graduates include:

• Interest rates: Maintained the scheduled shift to a fixed interest rate of 6.8% for new student loans effective July 1, 2006, pursuant to legislation passed in February 2002 in response to fluctuating interest rates. Loan consolidation interest rates will continue to be based on a weighted average of a student’s loans. The interest rate on parent loans, currently capped at 9%, will be fixed at 8.5%.
• Reduction of origination fees: Immediately reduced certain loan origination fees charged to borrowers by one percentage point and by half of a percentage point for each year beginning July 1, 2007, and continuing through July 1, 2010.
• Increased loan limits: Increased loan limits for first and second year undergraduate students to $3,500 and $4,500, respectively, and increased graduate borrowing limits to $12,000/year for unsubsidized loans. Graduate students will also be permitted to borrow PLUS loans.

In a budget reconciliation process, the “College Cost Reduction and Access Act” (CCRAA), which was signed into law on Sept. 27, 2007, yielded several changes to the HEA outside of the normal reauthorization process.  A House Budget Conference Report required the Senate Committee on Health, Education, Labor and Pension (HELP) and the House Committee on Education and Labor to report legislation that would produce $750 million in savings over 5 years. The CCRAA contained the following key provisions:

• Increases Pell Grant award eligibility;
• Increases the maximum Pell Grant award;
• Reduces undergraduate loan interest rates from 6.8 percent to 3.4 percent from 2008-2013 (does not change graduate loan interest rates);
• Provides complete loan forgiveness if economic hardship lasts twenty-five years;
• Introduces an Income-Based Repayment Program, which caps payments for participants at a level based on their income (everyone can apply) and provides forgiveness after 10 years of public service; scheduled to go into effect July 2009; and
• Eliminates the 20/220 pathway to economic hardship deferment, effective Oct. 1, 2007, a program which allows up to 67% of eligible entering residents to defer loan repayments for up to three years without accumulating interest on subsidized portions of those loans.

Following joint advocacy efforts from the AMA and Association of American Medical Colleges (AAMC), the 20/220 pathway has been temporarily maintained by the Department of Education through July 1, 2009.  For more information and a list of AMA advocacy efforts on this particular issue, visit the MSS 20/220 page.

Next steps
Although S. 1642 and H.R. 4137 contain some of the provisions for which the AMA has advocated, the two bills will require discussions between the two chambers of Congress before moving forward.  The AMA will continue to advocate for key provisions to be included in the final reauthorization, including the lender transparency provisions, loan forgiveness program, and the GAO study on medical student debt. The AMA will also continue to advocate for the reinstatement of the 20/220 pathway through the HEA as well as through S. 2303 and H.R. 4344 to maintain this important loan repayment deferment option for residents beyond July 2009.

AMA advocacy on the HEA Reauthorization
For the last five years, the AMA has worked diligently to educate the Administration, Members of Congress, and their staffs on the issues important to medical students and residents. Numerous advocacy materials and suggested legislative comments for the upcoming reauthorization have been widely distributed to policymakers on Capitol Hill. In addition, the AMA has been deeply involved in the negotiations surrounding the reauthorization legislation. Below is a sample of the AMA’s advocacy efforts with the current, 110th Congress:

March 19, 2008: The AMA, in association with eight other medical specialty organizations, submitted a joint letter (PDF, 21KB) to leadership of the relevant House and Senate Committees supporting provisions in the HEA Reauthorization bills and urging Congress to make relief available to physicians pursuing medical specialties that should be considered areas of national need.

March 11, 2008: The AMA and the AAMC, through a joint letter (PDF, 67KB) to leadership of the relevant House and Senate Committees, asserted the need for a legislative reinstatement of the 20/220 pathway after the Department of Education pulled the 20/220 pathway language from proposed draft regulations, citing cost concerns.

March 9, 2007: The AMA prepared a set of recommendations (PDF, 21KB) for the HEA Reauthorization in the beginning of 2007 as the process began during the 110th Congress.

Previous advocacy efforts:

May 2006: The AMA sent letters to Reps. Charles Boustany, MD, (R-LA) and Robert Andrews (D-NJ) expressing appreciation for their efforts to amend H.R. 609, the “College Access and Opportunity Act of 2006,” to include provisions to evaluate and address the decline in the number of medical school graduates pursuing post-graduate studies requiring more than five years of training.

March 2006: The AMA sent a letter (PDF, 49KB) to the entire House of Representatives prior to its successful passage of H.R. 609. The letter expressed support for certain provisions included in the bill that would help ease the high debt burden of medical graduates.

August 2005: The AMA sent a letter (PDF, 69KB) to Rep. Tom Price, MD, (R-GA) expressing appreciation for his efforts to include a study to evaluate the level of education-related indebtedness of medical school graduates in H.R. 609.

July 2005: The AMA sent a letter (PDF, 101KB) to the House E&C Committee to voice support for several student aid provisions in H.R. 609, as well as to request that additional provisions be included - particularly one that would allow students a choice between a variable and fixed interest rate when consolidating loans.

May 2005: The AMA submitted legislative comments/recommendations (PDF, 45KB) to the Senate HELP Committee regarding the HEA reauthorization.