On July 31, 2008, Congress passed the fi rst full reauthorization of the Higher Education Act of 1965, as amended (PL 105-244), since 1998. After more than fi ve years of consideration, Congress approved the Higher Education Opportunity Act (H.R. 4137) on a overwhelmingly bipartisan basis. The Act imposes a substantial number of new reporting requirements and obligations on institutions that participate in the Title IV federal student fi nancial aid programs. Below is a summary of some of the more noteworthy provisions of the Act.
- Cost Affordability and Transparency Lists. Based on data provided to the U.S. Department of Education by institutions regarding tuition costs, the Secretary of Education is required to begin publishing the following lists of institutions beginning in 2010: (1) the 5 percent of institutions that are the most expensive in the country (by type of institution); (2) the 10 percent of institutions that are the least expensive in the country (by type of institution); and (3) the 5 percent of institutions that had the largest percentage increase over the last three years (by type of institution). Any institution that appears on the third list will be required to report to the Secretary as to the reasons for its tuition increases unless the increase over a three-year period is less than $600.
- Cost Tools for Consumers. The Act requires the Secretary to publish, on an annual basis, a list of all institutions in the country that is searchable by tuition and fees, average price after grant aid, recent price increases and any changes in per-student spending. It also requires the Secretary to develop two calculators – one that institutions can post on their websites that allows students to estimate the cost to attend the institution and one that allows students to estimate the annual and total costs of undergraduate study at a particular institution. The latter calculator must also allow students to compare costs across institutions.
- Pell Grants. The Act authorizes increases in Pell Grants to $6,000 for the 2009-2010 academic year, $6,400 for the 2010-2011 academic year, $6,800 for the 2011-2012 academic year and $7,200 for the 2012-2013 academic year. It also makes the grants available to students year-round. Notwithstanding these increased authorizations, any actual Pell Grant increases are contingent on such funds being appropriated in separate legislation.
- Student Lending – Disclosures and Reporting. Under the Act, each institution that has a preferred lender arrangement is required to make a number of disclosures on its website, including the maximum amount of Title IV aid available to students, a statement that the institution is required to process loan documents from any lender regardless of its preferred lender status with the institution and various Truth in Lending disclosures. Institutions that offer private loans must disclose, in a userfriendly manner, that federal Title IV assistance is available and that the terms of a federal loan may be more favorable than the terms of the private loan. In addition, the Act requires the Secretary, within 18 months, to develop a set of additional minimum disclosures that institutions and lenders must make to borrowers. The Act also requires institutions with preferred lender lists to provide an annual report on why it entered into its preferred lender arrangements and requires lenders to report, on an annual basis, any reasonable expenses paid or provided to an employee of an institution that works in the fi - nancial aid offi ce or is otherwise responsible for the institution’s fi nancial aid, as well as the name of the employee.
- Student Lending – Code of Conduct. The Act requires each institution that has a preferred lender list to develop a Code of Conduct that prohibits, among other things, confl icts of interest, the acceptance of gifts or anything of value from a lender, revenue sharing with lenders, and participation in advisory committees or boards of lenders. The Act also prohibits any co-branding or use of institution names in a manner that suggest the institution is making a private loan.
- Student Lending – Private Loans. In addition to the reporting and disclosure requirements discussed above, Title X of the Act amends the Truth in Lending Act to make it applicable to all private student loans and to prohibit a private educational lender from offering or providing any gift to institutions or their personnel in exchange for any advantage related to loan activities, and to prohibit educational lenders from engaging in revenue sharing with institutions. The Act also mandates a number of disclosures that must be made in the course of offering a private student loan, including, among other things, disclosures related to the interest rate, fees, terms of the loan, fi nance charges and examples of the cost of the loan. Further, the Act requires the Secretary, with the Board of Governors of the Federal Reserve System, to develop a self-certifi cation that will be available to students through each institution’s fi nancial aid offi ce. The form is to contain disclosures about the availability of Title IV fi nancial aid and the impact of a private loan on the student’s eligibility for that aid, and the existence of the institution’s fi nancial aid offi ce as a resource. The form must also contain the borrower’s signature, cost of attendance, expected family contribution, estimated fi nancial assistance, and net of contribution and assistance.
- 90/10. The Act makes the requirement that a proprietary institution of higher education receive no less than 10 percent of its revenues from sources other than federal fi nancial aid a requirement of an institution’s Program Participation Agreement (previously, the requirement was set forth in provisions defi ning institutional eligibility). The Act also clarifi es that certain additional sources of revenue, such as funds from 529 college savings plans and certain institutional aid and scholarships, are to be treated as non-Title IV funds for the purposes of satisfying this requirement. In addition, revenue from educational programs that are not eligible for Title IV assistance can also be included as revenue in the calculation, provided those programs are licensed and accredited. The Act replaces the automatic termination of institutional eligibility for a single violation of the 90/10 rule with a two-year period of ineligibility following two consecutive violations of the rule. On the enforcement side, the Act provides the Secretary authority to require increased monitoring and reporting requirements from institutions that fail to meet the 90/10 rule in a single year. Finally, the Act provides a three-fi scal-year temporary relief period during which institutions may count both the net present value of institutional aid in the year made, as well as any amount of students’ unsubsidized Stafford loans in excess of the loan limits as they existed prior to the Ensuring Continued Access to Student Loans Act (which was enacted earlier this year) toward their 10 percent of non-Title IV revenues.
- Cohort Default Rates. Effective with the beginning of fi scal year 2009, the Act extends the time period for measuring cohort default rates from two years to three years. However, an institution is not subject to penalties for high cohort default rates until it has three consecutive years of default rates calculated under the Act’s new formula. The threshold for losing Title IV eligibility based on three consecutive years of default rates will increase from the current 25 percent to 30 percent in fi scal year 2012 and years thereafter. The Act further imposes default prevention measures on institutions whose rates exceed the threshold for one or two fi scal years (25 percent through 2011 and 30 percent in subsequent years). For institutions whose cohort default rates exceed the statutory threshold, the Act provides an appeal process if mitigating circumstances exist to explain the high default rate.
- Student Achievement and Accreditation. The Act amends provisions relating to the requirements of an accrediting agency or association to maintain standards on student achievement. The Act attempts to balance the ability of institutions to create student achievement measures with the accrediting agencies’ responsibilities. It allows accrediting agencies to maintain different standards for different institutions or programs, and continues to allow consideration of state licensing examinations, course completion and job placement rates. The Act’s provisions, and in particular a “Rule of Construction,” provide that accrediting agencies continue to set and apply standards on student achievement for or to their members, and that institutions may also develop methods for assessing the achievement of their students, which may be considered by accrediting agencies when the institution is being evaluated. The Secretary’s authority to regulate in this area is restricted. Further, the Act includes some enhanced due process protections for institutions undergoing reviews by their accreditors. The Act also requires accrediting agencies or associations to disclose summaries of actions taken with respect to an institution to the public, and requires an agency or association to monitor an institution’s enrollment growth and to ensure disclosure of an institution’s policies on transfer of credit. The Act also reconstitutes the National Advisory Committee on Institutional Quality and Integrity, which advises the Secretary of the recognition of accrediting agencies.
- Textbooks. The Act requires publishers to inform faculty and other school personnel of (1) the price that they charge institutions’ bookstores as well as the price they charge the public for textbooks; (2) the last three copyright dates of a textbook; (3) a description of the major revisions since the last publication; and (4) whether the textbook or supplemental material are available in any other form. The Act also requires publishers to make textbooks and supplemental material available separately (i.e., unbundled). Further, the Act requires institutions, to the extent practicable, to make the ISBN number and retail price of textbooks available to students as early in the scheduling process as possible, so that students will have the information when selecting their courses.
- Sustainability. Among the more interesting provisions not related to federal student assistance programs, the Act creates a University Sustainability Grant Program in which competitive grants will be made available to institutions and associations of higher education for purposes of developing, implementing and evaluating curricula, practices, and academic programs focused on environmental sustainability. In addition, the Act directs the U.S. Department of Education to convene a national summit of higher education sustainability experts, federal agency staff and business leaders to identify best practices, guidelines, and opportunities for collaboration in sustainability.
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The U.S. Department of Education is required to utilize a negotiated rulemaking process to begin implementation of the Act’s provisions. However, many of the Act’s provisions are effective immediately, and educational institutions and other organizations subject to the Act need to thoroughly review and begin complying with the new requirements.