College Access and Opportunity Act (HR4283)
The House Committee on Education and the Workforce
College Access and Opportunity Act
on May 5, 2004. This is the House
legislation to reauthorize the Higher Education Act of 1965 for the
next six years through 2011.
This page contains FinAid's summary of the proposed changes
to the Higher Education Act.
Impact on Students
Most of the proposed changes are beneficial to students. There are,
however, a few provisions that are not helpful to students:
- The proposed legislation does not increase the Pell Grant and will hold
the maximum authorized Pell Grant flat for the next six years.
- It increases annual student loan limits by only a token amount and
does not increase cumulative loan limits. This will force many
students to use more expensive private loans to help pay for their
- It switches consolidation loans from a fixed interest rate to a
variable interest rate. This will eliminate a source of competitive
pressure on lenders that would otherwise act as an incentive for
lenders to improve their customer service and cut costs. So although
the legislation eliminates the anticompetitive single holder rule, it
mutes the effectiveness of this change by removing the ability for
students to consolidate their debt in order to lock in low interest
- Pell Grant Plus. Authorizes an extra $1,000 Pell Grant for lower
income first and second year students who complete a rigorous high
school curriculum through the State Scholars Program. The total
amount of the Pell Grants may not exceed cost of attendance.
- Provides for year-round Pell Grant aid for students who accelerate
their programs by attending college throughout the year.
- Repeals tuition sensitivity aspects of Pell Grant award
- Keeps the maximum authorized Pell Grant at $5,800 through 2011.
- Expands the Simplified Needs Test to apply to families that
receive benefits under a means-tested Federal benefit
program, such as food stamps or school lunch programs.
- Increases the dependent student IPA from $2,200 to $3,000
effective July 1, 2005.
- Authorizes a data match of any FAFSA data that is supposed to be
based on the family's income tax returns with the same information
filed with the IRS. This provision is intended to eliminate fraud.
- Adds "a student's status as a ward of the court at any time prior
to attaining 18 years of age" as an additional example of a
special circumstance that merits professional judgment.
- Adds students who are "currently serving on active duty in the
armed forces for other than training purposes" to the definition
of students automatically considered to be independent.
- Modifies the need analysis treatment of qualified tuition plans
(section 529 plans) so that both section 529 prepaid tuition plans
and section 529 college savings plans are treated as an asset of
the parent (or in the case of an independent student, as an asset
of the independent student) and that non-taxable distributions
from qualified tuition plans are excluded from income. The
specific language of the proposed change would also indicate that
a section 529 plan funded through a student's custodial account
(UGMA/UTMA) would no longer be treated as an asset of the
dependent student, but instead as an asset of the dependent
student's parents for need analysis purposes. The valuation of
prepaid tuition plans would be equal to the refund value of the
plan. The valuation of college savings plans would continue to
be the current balance of the account.
- Gradually reduces loan origination fees for both FFEL and Direct
Loans to 1% (i.e., 2% from July 2006 to July 2008, 1.5% from July
2008 to July 2010, and 1% from July 2010 onward). The 1% guarantee
fee will continue to be required of FFEL loans.
- Increases Stafford loan limits during the first year from $2,625
to $3,500 and during the second year from $3,500 to $4,500. Loan
limits during the remaining years will remain unchanged at $5,500
and cumulative loan limits will remain unchanged at $23,000.
Unsubsidized loan limits for graduate students will increase from
$10,000 to $12,000.
- Repeals the change in Stafford Loan interest rates to a fixed rate
of 6.8% on July 1, 2006. Instead, the Stafford Loans will continue
to be based on a variable interest rate that changes each July
1. Likewise, it repeals the change in PLUS Loans to a fixed interest
rate of 7.9% on July 1, 2006, allowing the loans to continue to have
a variable interest rate.
- Changes consolidation loans from a fixed rate to a variable
interest rate starting July 1, 2006. The variable interest rates
will be based on the 91-day T-Bill in the same manner as for
current education loans.
- Eliminates the single-holder rule effective July 1, 2006.
- Adds an interest-only repayment plan. The "Delayed Repayment Plan"
allows the borrower to make payments of interest only for up to
two years. Annual payments must be at least the interest due or
$300, whichever is greater.
- Increases opportunities for Perkins Loan cancellation for
- Increases student loan forgiveness for math, science and special
education teachers who commit to teaching in high-need K-12
schools for five years from $5,000 to $17,500.
- Increases Perkins Loan limits from $4,000 to $5,500 for
undergraduate students and from $6,000 to $8,000 for graduate and
professional students, and the cumulative limits from $20,000 to
$27,500 for undergraduate loans and $40,000 to $60,000 for
graduate and undergraduate loans combined.
- Eliminates the ability of married borrowers to consolidate their
loans together, as this causes problems for such borrowers in the
event of a divorce.
- Requires the US Department of Education to publish "College
Consumer Profiles" based on the data it receives from colleges,
including tuition and fees, room and board, cost of attendance,
average amount of financial aid received by full time
undergraduate students (including a breakdown according to type of
aid), the number of students receiving financial aid, the average
net price for students receiving financial aid, student
demographics, faculty/student ratios, and the institution's
instructional expenditure per full-time equivalent student.
- Calculates a "College Affordability Index" based on the ratio of
the percentage tuition increase during the past three years and
the corresponding percentage increase in the inflation rate
(CPI-U). Will publicize a list of colleges that routinely increase
tuition and fees at more than twice the rate of inflation. Exempts
institutions who charge tuition rates that are in the bottom
quartile for their class (private/public, nonprofit/for-profit,
and 1/2/4-year program) or for whom the increase exceeds the twice
inflation threshold by less than $500.
- Extends incentives for schools with default rates under 10%, such
as the 30-day delay for first-time borrowers.
- Repeals the 90/10 rule.
- Combines the two current definitions of institution of higher
education, making proprietary schools eligible for more forms of
- Repeals the 50-percent rule, which acts as a barrier to distance
- Clarifies that the drug-related offenses restriction only applies
to students are convicted under federal or state law for
possession or sale of a controlled substance while currently
enrolled and receiving federal student aid.
- Includes many of the FED UP recommendations.
- Prohibits discrimination based on political, ideological or
religious beliefs or exercise of free speech/association.
- Requires the National Postsecondary Student Aid Study to occur at
least once every four years.
- Phases out the current method of allocating funds for campus-based
aid by reducing the percentage of allocations based on previous
allocations by 20% every two years.