Roundup: Week of July 23 - July 27

Senate Unanimously Passes Bill to Reauthorize the Higher Education Act

By a vote of 95 to 0, the Senate unanimously approved legislation Tuesday that would impose new restrictions on the relationships between student loan providers and colleges, simplify the process of applying for financial aid, and require colleges to provide more detailed information about their costs and prices.

The bill, S. 1642, would renew the Higher Education Act of 1965 which governs most federal student aid programs for five years. Congress has been debating versions of this legislation for the past three years, but this is the first time that the bill has come up for a vote in the Senate. "Today, the Senate made education a priority in this country again," said Sen. Edward Kennedy (D-MA), the bills sponsor. "Students and their families have been crying out for change. We heard their call, and passed a bill that will help millions." [Disclosure: the editor of Higher Ed Watch used to work for Kennedy.]

Coming less than a week after the Senate approved legislation that would make $18 billion in cuts to student loan providers and use the savings to increase spending on need-based student aid, the bill would

• Raise the authorized level of the maximum Pell Grant to $6,300, from $5,800, by 2011-12. (The figure is a ceiling that appropriators cannot exceed when setting actual grant levels each year. The current maximum grant is $4,310.) It would also increase the minimum grant to 10 percent of the maximum award. The current minimum is $400.
• Require colleges in the Federal Family Education Loan (FFEL) program to include at least three lenders on their preferred lender lists, explain why those lenders were chosen, and include a disclaimer that students are not required to choose a lender from that list.
• Implement a code of conduct between lenders and colleges that prevents financial aid officials from receiving gifts of more than "nominal value" from lenders, prohibits them from serving as consultants for lenders, and bars them from receiving anything more than "reasonable expenses" for serving on the advisory boards of loan providers.
• Require colleges to report more detailed information on their costs and prices, and penalize those that continually raise their tuition at high rates by placing them on a "federal watch list."
• Simplify the Free Application for Federal Student Aid (FAFSA) form to make it easier for low-income students to fill it out and obtain financial aid.
• Create a federal clearinghouse that students could use to shop around for the best deals on their loans.

The House Education and Labor Committee is hoping to introduce its own version of the Higher Education Act legislation this fall.

Nelnet to Cease Alumni Payments

As the Senate debated legislation that would crack down on the relationships between colleges and lenders, one of the nation's largest student-loan providers announced on Tuesday that it would no longer pay alumni associations to market its loan products to their members. Nelnet, the Nebraska-based lender that has previously been accused of bilking taxpayers, said it will end arrangements it has with 110 alumni associations across the country that steer recent graduates, who wish to consolidate their federal student loans, to the company in exchange for a fee. These deals, known as "affinity" agreements, usually consisted of a flat annual fee (as high as $113,000) that was often combined with additional payments for each loan that was refinanced. According to the Dallas Morning News, Nelnet sent letters to the associations, saying that as a result of the heightened levels of scrutiny the student loan industry is facing, "we see no option other than to cancel our existing Affinity relationships." New York Attorney General Andrew Cuomo has been investigating Nelnets relationship with alumni associations since early May.