House Dems Get Second Crack at Higher Education Appropriations Bill

Student Loan Girl — Wed, 25 Feb 2009 23:23:00 GMT

Just days after President Obama signed a $787 billion economic stimulus bill into law, House Democrats have reintroduced a $410 billion overdue appropriations measure that would finance dozens of federal agencies and programs, including many related to higher education, whose budgets went unapproved during the last session of Congress, reports The Chronicle of Higher Education (“Delayed Appropriations Bill Would Increase Pell Grant and Research Funds,” Feb. 24, 2009).

During the tail end of the Bush administration, democratic lawmakers chose to put the original appropriations bill on the back burner after President Bush threatened to veto any measure that would exceed his fiscal budget. Instead, legislators passed a “continuing resolution” to fund the budgetless organizations at fiscal 2008 levels through March 6, so that legislators could revisit the appropriations bill under a new administration.

Lawmakers, after being delayed by work on the stimulus bill, are finally taking a second look at the appropriations bill just days before the continuing resolution’s termination date and President Obama’s scheduled release of his fiscal year 2010 budget.

The proposed spending bill will “keep the government running and finish last year’s business,” said David Obey D-Wis., head of the House Appropriations Committee, as wells as complement the Obama administration’s economic recovery package.

While the proposed budget measure will provide expanded funding to a variety of agencies and programs, it currently offers few specific financing details. The Fund for the Improvement of Postsecondary Education could get $133.7 million to fund projects intended to model improvements to college education and accessibility, the Gear Up program could get $313.2 million to help financially needy middle and high school students prepare for college, and the government’s student financial aid programs could get a $19.2 billion boost.

The House Appropriations Committee bill would also expand research funding for the National Institutes of Health by $938 million, and provide an additional $347 million in funding to the Federal Pell Grant Program, drawing on the budget previously allocated for the underutilized, and Bush administration-supported, Academic Competitiveness and National Science and Mathematics Access to Retain Talent grant programs.

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Justice Department Should Weigh In On Student-Loan Loophole Scandal, Senator Says

Student Loan Girl — Wed, 08 Oct 2008 23:57:00 GMT

Rep. Thomas Petri, R-Wis., wrote to Secretary of Education Margaret Spellings this week asking whether she plans to involve the Justice Department in the investigation of a federal subsidy loophole that benefited nonprofit student loan providers and may have cost the federal government nearly $1.2 billion (“Republican Lawmaker Presses Spellings on Loan-Loophole Losses,” The Chronicle of Higher Education, Oct. 3, 2008).

“In order to restore integrity to the guaranteed-loan program,” Petri wrote, “it is vital that we understand where abuse has occurred.”

The audit of 14 student loan companies, published last month, found that a loophole in a government subsidy program, which guaranteed a 9.5-percent return on nonprofit lenders’ student loans, may have inadvertently allowed lenders to collect nearly three times the amount of subsidies they would have otherwise been entitled to.

If the actions of these lenders are representative of all student loan companies that participated in the subsidy program, writes Paul Basken of The Chronicle, “it would mean the government lost nearly $1.2 billion in improper payments over a six-year period, or about twice the previous estimates.”

Lenders Allowed to Keep Subsidies, Continue Using Program

The government subsidy program — initiated almost 30 years ago to encourage lenders to offer affordable student loans at a time when interest rates were high — gave nonprofit student loan lenders a guaranteed 9.5 percent rate-of-return on student loans they issued.

In 1993, after interest rates had dropped, Congress eliminated the 9.5-percent interest rate guarantee but grandfathered in all loans that lenders issued at the 9.5 interest rate before the cutoff date. To get around the cutoff, some lenders began “recycling” new loan money through old accounts to make them eligible again for the expired 9.5-percent subsidy rate (“Government Losses on 9.5 Percent Loan Loophole May Exceed $1 Billion,” The Chronicle of Higher Education, Sept. 18, 2008).

The audit’s findings come after Spellings, in January 2007, allowed lenders who had taken advantage of the loophole to keep the disputed subsidy payments they had already received. As part of her settlement offer, she also said that student loan providers who wanted to continue billing the government under the 9.5-percent rate program would have to provide independent audits proving their calculations were not based on the loophole.

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Student Loan Blog : U.S. Congress

House Dems Get Second Crack at Higher Education Appropriations Bill

Justice Department Should Weigh In On Student-Loan Loophole Scandal, Senator Says