H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

H.R. 4508, the PROSPER Act: Proposed

Reauthorization of the Higher Education Act

(name redacted)- Coordinator

Analyst in Social Policy

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Analyst in Labor Policy

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Specialist in Education Policy

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Analyst in Education Policy

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Specialist in Education Policy

(name redacted)

Specialist in Education Policy

Updated February 22, 2018

Congressional Research Service

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R45115

H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Summary

During the 115th Congress, the House Committee on Education and the Workforce marked up and

ordered reported with amendments the Promoting Real Opportunity, Success, and Prosperity

through Education Reform Act (PROSPER Act; H.R. 4508), which would provide for the

comprehensive reauthorization of the Higher Education Act of 1965 (HEA).

H.R. 4508 would make numerous amendments to the HEA, many of which address six themes:

(1) redesigning the federal approach to providing student aid; (2) modifying federal student aid

rules; (3) eliminating or winding down programs; (4) revising the educational quality and

financial accountability requirements applicable to institutions of higher education (IHEs);

(5) amending public accountability, transparency, and consumer information requirements; and

(6) establishing limits on the Secretary of Education’s authority.

H.R. 4508 would extend the authorization of many currently operating HEA programs through

FY2024, repeal or wind down many HEA programs and activities, and make amendments to

myriad HEA programs and activities.

The amendments proposed in H.R. 4508 signal an attempt to redesign the federal approach to

providing student aid by transitioning toward the delivery of student aid through fewer programs.

The bill would terminate or phase-out several programs (e.g., TEACH Grants, Federal

Supplemental Educational Opportunity Grants, Direct Loans), establish a new Federal ONE Loan

program, and eliminate programs that have not been funded in recent years or that have never

been funded. By 2024, the Title IV federal student aid programs would include two grant

programs (Pell Grants and Iraq and Afghanistan Service Grants), the Federal ONE Loan program,

and the Federal Work-Study (FWS) program.

Regarding changes to student aid benefit levels and award rules, under H.R. 4508 a new Pell

Grant bonus would be available to students who enroll for at least 30 credit hours per award year.

In the Federal ONE Loan program, annual loan limits would be increased by $2,000 above what

undergraduate students may borrow through the Direct Loan program, while firm loan limits

would be established for graduate students and parent borrowers. Federal ONE Loans would be

repaid according to a limited set of repayment plans, and fewer loan forgiveness benefits would

be available compared with what is offered under the Direct Loan program. FWS funds would be

awarded to institutions according to a restructured allocation formula. Need-based aid would be

made available only to undergraduate students through the Pell Grant and FWS programs. All

other federal student aid would be made available without regard to financial need.

Aside from changes to the types of aid available and to student aid benefit levels and award rules,

other amendments proposed in H.R. 4508 include the following:

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changes to rules for disbursing Title IV aid to recipients, which would include

annual aid counseling for recipients and more-frequent, smaller disbursements;

the elimination or wind down of numerous programs supporting IHEs and

programs they operate, which are authorized under the HEA and other higher

education laws, including the Strengthening Institutions Program, programs to

enhance teacher education and preparation (HEA Title II), and all of the

programs in HEA Title VIII;

changes to HEA provisions designed to hold IHEs accountable for the

educational programs they offer, including the repeal of the gainful employment

regulations, the establishment of a programmatic loan repayment rate metric, and

amendments to Department of Education recognition criteria for accrediting

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

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agencies that would require accreditors to examine student learning and other

student outcomes relative to what should be expected from institutions or

educational programs;

adjustments to the fiscal accountability standards institutions must meet to

participate in the HEA Title IV programs, including the repeal of the 90/10 Rule,

which requires that at least 10% of institutional revenues come from sources

other than HEA Title IV aid at proprietary schools;

amendments to institutional information gathering and reporting requirements,

which are designed to generate information that can assist students in making

college-going decisions;

changes to ED’s administrative functions and the establishment of specified

limitations on the Secretary’s authority to promulgate regulations;

amendments to address campus safety and sexual violence issues at IHEs that

would add specificity to procedures for institutional disciplinary actions that must

be used by IHEs in alleged incidents of sexual violence and would require most

domestic IHEs to administer campus climate surveys of attitudes on campus

toward sexual assault; and

creation of a new competitive grant program to expand earn-and-learn programs

developed by partnerships of employers and IHEs that would provide students

with on-the-job training and accompanying for-credit classroom instruction.

Congressional Research Service

H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Contents

Introduction ..................................................................................................................................... 1

An Overview of H.R. 4508, as Reported with Amendments .......................................................... 1

Redesign of the Federal Approach to Providing Student Aid ................................................... 2

Modification of Federal Student Aid Rules............................................................................... 4

Elimination and Winding Down of Programs ........................................................................... 5

Revisions to Educational Quality and Financial Responsibility Accountability

Requirements for Institutions ................................................................................................. 6

Educational Accountability ................................................................................................. 7

Fiscal Accountability .......................................................................................................... 8

Public Accountability, Transparency, and Consumer Information ............................................ 8

Specified Limitations to the Secretary of Education’s Authority.............................................. 9

Student Aid ...................................................................................................................................... 9

Federal Programs ...................................................................................................................... 9

Federal Pell Grant Program .............................................................................................. 10

Federal Student Loans........................................................................................................ 11

Pell Grant and Loan Disbursement ................................................................................... 17

Federal Work-Study program ............................................................................................ 17

Expiring or Eliminated Programs ..................................................................................... 19

Student Aid Eligibility............................................................................................................. 22

Expected Family Contribution and FAFSA Completion .................................................. 22

Informational Tools ........................................................................................................... 23

Additional Student Eligibility Requirements .................................................................... 24

Institutional and Programmatic Title IV Eligibility ....................................................................... 24

Eligible Institutions ................................................................................................................. 24

Eligible Programs .................................................................................................................... 25

Educational Quality and Financial Responsibility Requirements ........................................... 26

Accreditation ..................................................................................................................... 26

Credit Hour Definition ...................................................................................................... 27

Programmatic Loan Repayment Rate ............................................................................... 27

Return of Title IV Aid ....................................................................................................... 28

Financial Responsibility.................................................................................................... 29

The 90/10 Rule.................................................................................................................. 29

Student Financial Aid Counseling and Information ................................................................ 30

Student Financial Counseling ........................................................................................... 30

Student Loan Plain Language Disclosure Form and Annual Loan Acceptance ................ 31

HEA Administrative Functions...................................................................................................... 31

Rulemaking ............................................................................................................................. 32

The Office of Federal Student Aid .......................................................................................... 32

Student Aid Contracts ............................................................................................................. 33

Administrative Expenses ......................................................................................................... 33

Public Accountability, Transparency, and Reporting of Consumer Information ........................... 34

Institutional Information for Students ..................................................................................... 34

Cost of Higher Education ........................................................................................................ 34

College Dashboard ............................................................................................................ 35

Data Collection ................................................................................................................. 35

Repeals .............................................................................................................................. 36

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Accountability for Programs that Prepare Teachers ................................................................ 36

Protection of Student Speech, Association of Rights, and Religious Institutional Missions......... 36

Protection of Student Speech and Association of Rights ........................................................ 36

Protection of Religious Institutional Missions ........................................................................ 37

Campus Safety and Sexual Violence at IHEs ................................................................................ 37

Clery Act Requirements .......................................................................................................... 37

Responding to Sexual Assault on Campus .............................................................................. 38

Additional Campus Safety Provisions..................................................................................... 38

Institutional Aid ............................................................................................................................. 39

Strengthening Institutions ....................................................................................................... 39

HBCU Capital Financing Program ......................................................................................... 40

Minority Science and Engineering Improvement Program ..................................................... 40

Grants to Expand Earn and Learn Programs ................................................................................. 40

Competitive Process and Award Criteria................................................................................. 41

Allowable Uses of Grant Funds and Evaluations.................................................................... 41

International Education Programs ................................................................................................. 41

Programs to Support Students ....................................................................................................... 42

TRIO Programs ....................................................................................................................... 42

Coordination and Duplication of Services ........................................................................ 42

Participant Eligibility ........................................................................................................ 43

Program Funds .................................................................................................................. 43

Required and Permissible Services ................................................................................... 43

Outcome Criteria............................................................................................................... 43

Grant Award Processes...................................................................................................... 44

Evaluations........................................................................................................................ 44

IMPACT Grants ................................................................................................................ 44

Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) ............. 45

Special Programs for Students Whose Families are Engaged in Migrant and Seasonal

Farmwork ............................................................................................................................. 45

Child Care Access Means Parents in School (CCAMPIS)...................................................... 46

Model Comprehensive Transition and Postsecondary Programs ............................................ 46

Programs Outside of the HEA ....................................................................................................... 47

Education of the Deaf Act ....................................................................................................... 47

Tribally Controlled Colleges and Universities Assistance Act of 1978 and Diné

College Act........................................................................................................................... 47

Title I Operating Grants .................................................................................................... 47

Title II Diné College Act ................................................................................................... 48

Title III Endowment Program ........................................................................................... 48

Tables

Table A-1. New and Continuing HEA Programs ........................................................................... 50

Table A-2. Existing HEA and Related Programs that Would Be Repealed or for which

Authorization of Appropriations Would be Repealed or Not Extended ..................................... 60

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Appendixes

Appendix. Program Authorizations under the HEA and H.R. 4508, as Reported with

Amendments............................................................................................................................... 49

Contacts

Author Contact Information .......................................................................................................... 74

Congressional Research Service

H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Introduction

The Higher Education Act of 1965 (HEA; P.L. 89-329, as amended)1 authorizes programs and

activities that make federal financial assistance available to individuals who are pursuing a

postsecondary education and to institutions of higher education (IHEs). It also authorizes a

number of other activities and functions related to postsecondary education. The HEA was last

comprehensively reauthorized by the Higher Education Opportunity Act of 2008 (HEOA; P.L.

110-315). The HEOA extended the authorization of the appropriation of funds for most HEA

programs through FY2014, while the General Education Provisions Act (GEPA) provided an

extension of that authority for an additional year, through FY2015. Many HEA programs have

continued beyond FY2015 with funding provided under a variety of appropriations legislation

and continuing resolutions.

During the 115th Congress, the House Committee on Education and the Workforce marked up and

reported with amendments the Promoting Real Opportunity, Success, and Prosperity through

Education Reform Act (PROSPER Act; H.R. 4508), which would provide for the comprehensive

reauthorization of the HEA. The proposed H.R. 4508 amendments would extend the authorization

of most HEA programs through FY2024. In general, for programs with discretionary funding

H.R. 4508 would authorize the appropriation of funds in specific, as opposed to indefinite,

amounts for each year in which funding would be authorized to be provided. The Congressional

Budget Office (CBO) estimates that the enactment of H.R. 4508 would reduce mandatory

spending outlays by $2.2 billion over the FY2018-FY2022 period and by $14.6 billion over the

FY2018-FY2027 period. Also, according to CBO estimates and assumptions, the enactment of

H.R. 4508 would lead to discretionary spending outlays increasing by $87.5 billion over the

FY2018-FY2022 period and by $210.1 billion over the FY2018-FY2027 period.2

This report focuses on changes H.R. 4508 would make to the HEA’s programs. It begins with an

overview identifying and discussing a number of key themes in H.R. 4508. This discussion

highlights major changes proposed in the bill. It may be sufficient to meet the needs of readers

seeking a general understanding of the primary proposals included in H.R. 4508. The next section

of the report examines in more detail the major features of H.R. 4508 and how they relate to

current law. The Appendix contains two tables that present information on the proposed

authorization of appropriations or budget authority for new programs and for programs currently

specified in the HEA and related laws (e.g., the Education of the Deaf Act). The report focuses on

the larger changes proposed in H.R. 4508; it does not aim to provide a comprehensive summary

of the bill or of technical changes that would be made by the bill.

An Overview of H.R. 4508, as Reported with

Amendments

H.R. 4508, as reported with amendments on February 8, 2018, would provide for the

comprehensive reauthorization of the HEA, amending numerous programs and activities that

make up a large portion of the federal effort to support postsecondary education. Taken

collectively, the changes that would be made by H.R. 4508 reflect several key themes: (1)

simplifying the federal approach to providing student aid; (2) modifying federal student aid rules;

1 For a description of current HEA provisions, see CRS Report R43351, The Higher Education Act (HEA): A Primer,

by (name redacted) .

2 Congressional Budget Office (CBO), Cost Estimate, “H.R. 4508 Promoting Real Opportunity, Success, and

Prosperity through Education Reform Act,” February 6, 2018.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

(3) eliminating or winding down programs; (4) revising the educational quality and financial

accountability requirements applicable to IHEs; (5) revising public accountability, transparency,

and consumer information requirements; and (6) establishing specified limitations to the

Secretary of Education’s (the Secretary’s) authority. This section of the report highlights how

these themes are reflected in the provisions of H.R. 4508.

Redesign of the Federal Approach to Providing Student Aid

Title IV of the HEA currently contains provisions authorizing six grant programs,3 three loan

programs,4 one work-study assistance program, and one service payback program5 to assist

students and their families finance the cost of a postsecondary education. It also contains two

programs that authorize the awarding of funds to states, which may, among other activities, use

the funds to award student financial aid to state residents.6

Although each of the authorized federal student aid programs has its own student eligibility

criteria, award rules, and administrative structures, there are five primary ways in which they may

be characterized: general form of aid (grant, loan, work-study, or service payback assistance);

broadly available or targeted aid (aid that is widely available to support qualified students

pursuing a broad array of educational programs versus aid targeted toward certain fields of study

or types of service), aid available by level of study; need-based/non-need-based aid; and

portable/non-portable aid.

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General type of aid: A grant is gift aid that does not need to be repaid by the

recipient. A loan is student aid that must be repaid by the recipient at some later

point in time. Work-study assistance is student aid provided to a student as

compensation for part-time employment while enrolled. Service payback

assistance is aid that is provided contingent on the recipient completing a service

obligation in return for the assistance provided.

Broadly available versus targeted aid: Student aid may be made available on a

broad basis to support the pursuits of qualified students in a wide array of eligible

postsecondary programs of study. Aid may also be made available on a targeted

basis, serving populations of students pursuing programs in certain specified

fields of study or to those connected to certain types of service.

Level of study: Student aid may be made available to individuals based on

whether they are enrolled in an undergraduate or graduate/professional course of

study.

Need-based/Non-need-based aid: Need-based student aid is aid for which a

student’s eligibility is based on his or her demonstrated need for the funds.

Nonneed-based aid is aid for which a student’s eligibility is determined without

regard to his or her financial need.

3 The Federal Pell Grant program; the Federal Supplemental Educational Opportunity Grant program; the Scholarships

for Veteran’s Dependents program (also known as Iraq and Afghanistan Service Grants); the Academic

Competitiveness (AC) Grant program; the National Science and Mathematics Access to Retain Talent (SMART) Grant

program; the Robert C. Byrd Honors Scholarship program.

4 The Federal Perkins Loan Program, the William D. Ford Direct Loan program, and the Federal Family Education

Loan Program.

5 The Teacher Education Assistance for College and Higher Education (TEACH) Grant program.

6 The Leveraging Educational Partnerships Program (LEAP) and the Grants for Access and Persistence program.

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Portable/Non-portable aid: Portable aid may be characterized as being widely

available across Title IV-participating IHEs, and as being awarded to eligible

students on the basis of statutorily specified, nondiscretionary award criteria.

Non-portable aid may be characterized as being less widely available, such as

from fewer participating IHEs, and as being awarded to eligible students

according to discretionary award criteria that may be institution-specific.

In academic year (AY) 2017-2018, federal student aid is being made available to students only

through a subset of the total number of programs authorized under Title IV. Those operational

programs comprise aid available by level of study, both need-based and non-need-based aid, and

both portable and non-portable aid. They include the following:

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Three grant programs: the Federal Pell Grant program, the Federal

Supplemental Educational Opportunity Grant (FSEOG) program, and the

Scholarships for Veteran’s Dependents program (also known as the Iraq and

Afghanistan Service Grants). Aid under each program is only available to

undergraduate students. The Pell Grant and FSEOG programs are need-based aid

programs. The Pell Grant and Iraq and Afghanistan Service Grants are portable

aid.

Two loan programs: the William D. Ford Direct Loan program and the Federal

Perkins Loan program. Direct Loans are available to help finance the cost of both

undergraduate and graduate/professional study; however, loan terms and

conditions may vary depending on the level of study. Federal Perkins Loans are

only available to undergraduate students.7 The Direct Loan program offers one

need-based loan (i.e., the Direct Subsidized Loan) among a mix of other nonneed-based loans, while the Federal Perkins Loan program is need-based. Direct

Loans are portable aid.

One work-study assistance program: the Federal Work-Study (FWS) program,

which is need-based, non-portable aid that is available to both undergraduate and

graduate/professional students.

One service payback program: the Teacher Education Assistance for College

and Higher Education (TEACH) Grant program, which is non-need-based,

portable aid that is available to both undergraduate and graduate students.

Collectively, these programs made approximately $123 billion available in the most recently

completed academic year, AY2016-2017.8 All told, Title IV aid comprises roughly 49% of all

student aid provided to students and their families nationwide.9 All but two of the operational

programs provide broadly available aid. The two providing targeted aid, Iraq and Afghanistan

7 The Perkins Loan program is in the process of being wound down and completely ceasing operations and institutional

authority to make new Perkins Loans to undergraduate students expired on September 30, 2017. However if an eligible

undergraduate student received a disbursement of a Perkins Loans prior to October 1, 2017 for the 2017-2018 award

year, IHEs are permitted to make subsequent disbursements on such loans through June 30, 2018. ED is to begin

collecting the federal share of institutions’ Perkins Loan Revolving Funds following the submission of the 2019-2020

Fiscal Operations and Application to Participate, which is due October 1, 2018. Office of Federal Student Aid, “Perkins

Loan Extension Act of 2015,” GEN-17-10, October 6, 2017, https://ifap.ed.gov/dpcletters/GEN1710.html.

8 CRS analysis of The College Board, Trends in Student Aid 2017, p. 9, Table 1.

9 Ibid. The remainder of student aid awarded to students and their families is derived from federal veterans and military

education benefits, state and institutional grants, private and employer grants, education tax benefits, and nonfederal

education loans.

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Service Grants and TEACH Grants, collectively provide $86 million in aid,10 a relatively small

share of federal student aid.

H.R. 4508 would redesign the current federal approach to student aid programs by transitioning

toward the provision of aid through a smaller number of programs. To do so, the bill would

eliminate those student aid programs that are not currently operational, immediately eliminate or

phase-out some others that are currently funded and operational (e.g., TEACH Grants, FSEOG,

Direct Loans), continue to wind down the Perkins Loan program (current statute specifies new

Perkins Loans may not be made after September 30, 2017), and create a new federal student loan

program, the Federal ONE Loan program. As proposed in H.R. 4508, for students who would be

new recipients of federal student aid on or after July 1, 2019,11 the mix of available federal

student aid programs would consist of the following:

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Two grant programs: Pell Grants and Iraq and Afghanistan Service Grants. Pell

Grants would be need-based aid, and both programs would be portable.

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One loan program: Federal ONE Loans, which would be non-need-based,

portable aid. Aid administrators would be authorized to exercise discretion in

specifying, within some limits, the amount eligible students may borrow.

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One work-study assistance program: FWS, which would be need-based, nonportable aid.

All of these federal student aid programs would be made available to eligible undergraduate

students; however, only the Federal ONE Loan program would be made available to graduate

students. The lone remaining targeted aid program would be Iraq and Afghanistan Service Grants.

Modification of Federal Student Aid Rules

The HEA currently specifies procedures for identifying students eligible to receive federal student

aid and determining a student’s expected family contribution (EFC) toward postsecondary

education expenses. (A student’s EFC is used in the process of determining his or her eligibility

for need-based federal student aid.) H.R. 4508 would make changes to the procedures for

determining students’ eligibility for federal student aid and determining the amount of aid that

students would be able to receive. Recently implemented provisions for calculating a student’s

EFC on the basis of income from the second year prior to enrollment would be incorporated into

statute. Students from families with an adjusted gross income (AGI) of less than $100,000 also

would be eligible to have their EFC determined according to a Simplified Needs Test (SNT) that

does not require the reporting of information on assets.

Under the amendments proposed in H.R. 4508, the availability of need-based aid would be

limited to undergraduate students and made available through the Pell Grant and FWS programs.

All other forms of federal student aid would be made available without regard to a student’s

financial need. In the Federal Pell Grant program, a new Pell Grant bonus would be made

available to students who enroll for at least 30 credit hours per award year. In the Federal WorkStudy program, federal funding would be distributed to participating IHEs according to a revised

allocation formula, and the generally applicable cap on the federal share of compensation for

work-study employment would be reduced from 75% to 50%.

10 U.S. Department of Education, Federal Student Aid, FY 2017 Annual Report, p. 11.

11 Students who had previously received federal student aid through the TEACH Grant and Direct Loan programs

would remain eligible to continue to receive aid through these programs during a phase-out period. Phase-out

provisions for these programs are discussed below.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

In the proposed Federal ONE Loan program (in contrast to the Direct Loan program, which it

would replace), all loans would be made without borrowers being charged loan origination fees,

while interest subsidies would not be offered during periods while borrowers are in school, during

a grace period, or during periods of deferment. For undergraduate students, annual borrowing

limits would be set at $2,000 above what may currently be borrowed through the Direct Loan

program. For graduate students and the parents of undergraduate dependent students, borrowing

would be constrained by the establishment of specified annual and aggregate loan limits. A small

set of repayment plans would be offered in the Federal ONE Loan program, and loans would be

eligible to be discharged in only a limited set of circumstances.

The HEA also contains numerous provisions relating to when Title IV aid recipients are eligible

to receive disbursements of their federal student aid and the timing of such disbursements. To

borrow a Direct Loan, the HEA requires that a borrower sign a master promissory note (MPN),

which contains the loan’s terms and conditions. An individual may borrow multiple loans under a

single MPN for up to 10 years without being required to acknowledge having reviewed the loan

terms and conditions prior to borrowing a new loan under that MPN. The HEA also requires that

certain Direct Loan borrowers undergo loan entrance counseling prior to loan disbursement, and

that certain borrowers undergo exit counseling after a student drops below half-time enrollment.

Both of these requirements are intended to help ensure that borrowers are aware of their loan

terms and conditions and of the potential consequences of borrowing a student loan. The HEA

also specifies the timing for Title IV aid disbursement from IHEs to students and the rate at which

students are deemed to have “earned” Title IV aid. As a consequence of being deemed to have

earned aid, students may be held responsible for repaying a portion of it to ED should they

withdraw from school before completing their term of enrollment.

H.R. 4508 would make several changes to the provisions relating to when Title IV aid recipients

are eligible to receive disbursements of their federal student aid and the timing of such

disbursements. Many of these changes represent a more scaled-back approach to aid

disbursement to recipients, potentially helping to ensure that recipients are better able to manage

their aid and fully understand the responsibilities that come along with aid receipt. For instance,

under the bill, borrowers would continue to be permitted to borrow multiple loans under a single

MPN for an extended amount of time, but they would be required to acknowledge the receipt of

loan terms and conditions prior to disbursement of the new loans. In addition, all Title IV loan

borrowers and Pell Grant recipients would be required to receive annual counseling to assist them

in understanding the terms and conditions of the federal student aid they are receiving and the

potential consequences of accepting such aid. H.R. 4508 would require that IHEs disburse Title

IV funds more frequently and in smaller increments than current practice generally, and would

specify that borrowers earn federal student aid at a slower rate than under current law. Taken

together, these changes would temper the process of making federal study aid available to

students.

Elimination and Winding Down of Programs

The HEA authorizes numerous programs to support both individuals pursuing postsecondary

education and institutions of higher education. Included in such programs are those that provide

federal student aid directly to students and those that provide federal support directly to

institutions to support postsecondary education programs with the aim of meeting specific policy

goals (e.g., to support international education programs, to prepare postsecondary students who

are preparing for careers in teaching).

H.R. 4508 would eliminate or wind down numerous programs authorized under the HEA and

other statutes related to higher education. One of the larger programs that provides aid to students

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that would be eliminated under H.R. 4508 is the FSEOG program, which in FY2017 provided

nearly 1.5 million FSEOG awards totaling $712 million.12 One of the larger programs that

provides support for institutions and the programs they operate that would be eliminated is the

Strengthening Institutions program, which in FY2017 provided approximately $85 million to

support development of 178 IHEs with a high percentage of needy students and financial

limitations.13

Many programs that H.R. 4508 would eliminate have never or have not recently received

appropriations and, therefore, are not currently operational. This is especially true regarding Title

VIII of the HEA, which includes 27 parts, each of which establishes one or more programs

focusing on a broad array of topics. All of the programs in Title VIII were incorporated into the

HEA by the HEOA and most of them have never been funded.14

H.R. 4508 would also wind down some currently operational programs. That is, H.R. 4508 would

authorize the programs to operate for a limited number of future years but would subsequently

curtail the programs’ operations. Programs that would be wound down under H.R. 4508 include

the TEACH Grant program and the Direct Loan program.

The elimination or wind-down of these programs relates to an effort to streamline and scale back

the number of programs included in the HEA, most of which receive small amounts of or no

funding. Doing so could lead to a more-focused, discrete federal effort to support postsecondary

education that may be easier to administer and could lead to reduced federal expenditures.

However, doing so may also result in a reduction of available approaches for addressing priorities

that are targeted by programs proposed to be eliminated.

Revisions to Educational Quality and Financial Responsibility

Accountability Requirements for Institutions

Currently, the HEA provides for institutional accountability measures throughout many of its

programs. Some measures address educational accountability, which relates to institutions

providing a quality educational program (e.g., accreditation requirements). Other measures

address fiscal accountability, which relate to the manner in which institutions handle Title IV

funds and can signify whether they are good stewards of federal student aid. H.R. 4508 would

address both educational and fiscal accountability in multiple ways, including by adding

accountability requirements and amending or eliminating some existing accountability

requirements. Together, the changes discussed below and other provisions of H.R. 4508 signal a

congressional interest in treating proprietary and public and nonprofit IHEs equally and with

significantly less differentiation—a departure from current statute.

12 Office of Federal Student Aid, FY2017 Annual Report, p. 10.

13 U.S. Department of Education, FY2019 Congressional Budget Justification, Vol. II, “Higher Education,” p. R-33,

https://www2.ed.gov/about/overview/budget/budget19/justifications/r-highered.pdf.

14 Those Title VIII programs that have been funded at some point in time are Part F—Teach for America, Part S—

Training for Realtime Writers (funded under Fund for the Improvement of Postsecondary Education (FIPSE)); Part T—

Centers of Excellence for Veteran Student Success (funded under FIPSE); and Part Z—Henry Kuualoha Giugni

Kupuna Memorial Archives (funded under the Native Hawaiian Education program authorized by Part B of Title VII of

the Elementary and Secondary Education Act (ESEA); and Part AA—Promoting Postbaccalaureate Opportunities for

Hispanic Americans.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Educational Accountability

Educational accountability relates to attempts to ensure institutions are providing a quality

educational program, and it may be assessed in a variety of ways. H.R. 4508 would address

educational accountability in multiple ways.

H.R. 4508 would make adjustments to the standards IHEs must meet to participate in the Title IV

student aid programs. The HEA currently specifies that accrediting agencies must meet certain

institutional evaluation standards to be recognized by ED as “reliable authorit[ies] regarding the

quality of education or training offered.” ED relies on the accrediting agencies it has recognized

to certify that an IHE offers quality programs of study. H.R. 4508 would eliminate many of the

current institutional evaluation standards required of ED-recognized accrediting agencies (some

of which gauge inputs that may be associated with quality programs, such as facilities and

equipment, and some of which gauge outcomes such as “success with respect to student

achievement in relation to the institution’s mission”) and would require that such agencies

evaluate IHE’s success with respect to student educational outcomes in relation to expected

measures of educational outcomes.

The bill would also repeal the current regulatory definition of “credit hour,” a measure of how

much instruction must be provided in a program, which can be seen as an indicator of the depth

of a program.

H.R. 4508 would also repeal several existing regulatory or statutory outcome measures that have

been relied upon to gauge education quality. In addition, it would repeal regulatory requirements

applicable to certain types of sub-baccalaureate educational programs at public and nonprofit

IHEs and most educational programs (including degree programs) at proprietary IHEs that

prepare students for gainful employment in a recognized occupation.15 The institutional cohort

default rate metric, which is applicable to IHEs participating in federal student loan programs,

would be phased out.

These metrics would be replaced with a new programmatic loan repayment rate metric. Most

educational programs offered by IHEs would be required to meet loan repayment rate

performance targets for continued Title IV participation. The loan repayment rate metric would

measure the extent to which students who borrowed Title IV loans to attend an educational

program are able to remain in a positive repayment status on their qualified Title IV loans (e.g.,

not being delinquent on the loan for 90 days or longer). It appears a presumption behind the

metric would be that if an educational program is of sufficient quality, then individuals who

borrow to attend the program should be able to earn adequate wages to make sufficient payments

on their loans to remain in positive repayment status. The new loan repayment rate differs from

the cohort default rate in that it would be used to assess the educational quality of a program of

study rather than the entire IHE, and would differ from current gainful employment metrics in

that it would apply to all programs at all IHEs regardless of institutional sector.

H.R. 4508 would also add educational performance requirements to HEA programs not part of

Title IV. For instance, to be eligible for funding under several of the minority-serving institution

15 Regulations establish debt-to-earnings ratios that certain educational programs offered by an IHE must meet to be

considered as leading to gainful employment and requirements for IHEs to disclose information relating to their gainful

employment programs. The regulations attempt to measure whether a sufficient number of graduates in certain

educational programs can repay their student loans and have been subject to challenge. Although the regulations are in

effect, several aspects of them have been delayed in implementation and ED is currently undergoing a negotiated

rulemaking to rewrite them.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

(MSI) grant programs under Title III and Title V, H.R. 4508 would require that IHEs have

completion rates of at least 25%.

Taken together, these revisions in educational accountability seem to signal an interest in shifting

the focus of the overall postsecondary education accountability framework across all institutions

and education program types, as opposed to only a subset of institutions or educational programs.

Fiscal Accountability

Fiscal accountability requirements relate to the manner in which institutions handle Title IV funds

and whether they are good stewards of federal student aid funds. H.R. 4508 would make several

changes to current fiscal accountability provisions.

H.R. 4508 would amend the current Return of Title IV provisions, which specify how and when

Title IV funds shall be returned to ED by a school and/or student when a student withdraws from

school. In general, when a student withdraws from an IHE, the IHE first determines the portion of

Title IV aid considered to be earned by the student while enrolled and the portion considered to

be unearned. Unearned aid must be returned to ED. Up to the 60% point of a payment or

enrollment period, unearned funds must be returned on a pro rata schedule. After the 60% point,

the total amount of funds awarded is considered to have been earned by the student and no funds

are required to be returned. Whether an IHE and/or student are required to return the funds to ED

depends on a variety of circumstances. Among other amendments, H.R. 4508 would reduce the

rate at which federal student aid would be considered as having been earned by a student and

would require IHEs to return a larger portion of aid after a student withdraws than under current

law. This may ultimately provide financial incentives for IHEs to work toward ensuring that

students complete their period of enrollment and, thus, boost both educational and fiscal

accountability.

H.R. 4508 would also expand upon the current conditions under which IHEs could be considered

financially responsible to participate in the Title IV aid program. In addition, it would repeal the

90/10 Rule (applicable only to proprietary institutions), which specifies that for Title IV eligibility

purposes, IHEs may not derive less than 10% of their revenues from non-Title IV funds for any

two consecutive years (i.e., no more than 90% of their revenues can come from Title IV funds).

Public Accountability, Transparency, and Consumer Information

The HEA also provides a set of measures that relate to public accountability, transparency, and

consumer information. In general, these provisions are intended to provide information to

consumers to enable them to make informed college-going decisions. Currently, the HEA

addresses issues related to college affordability and the collection and dissemination of consumer

information to students and the public by requiring, among other things, the Secretary to

administer the College Navigator website, through which certain consumer information about

IHEs is made publicly available, and by requiring IHEs to make Net Price Calculators available

on their websites. Net Price Calculators allow prospective students to obtain individual estimates

of the net price of an IHE, taking into account the financial aid they might be likely to receive.

H.R. 4508 would amend the HEA to provide for a more-tailored approach to public

accountability, transparency, and consumer information requirements in some instances, while

eliminating such requirements in other instances. For example, H.R. 4508 would amend a

primary consumer information tool authorized under the HEA, the College Navigator, by

renaming it the College Dashboard. Under H.R. 4508, ED would be required to collect new

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

information on specified student outcomes such as the median earnings of Title IV aid recipients

who have completed a degree or certificate program. This would be published on the Dashboard.

At the same time, the proposed College Dashboard would not make available some information

currently made available on the College Navigator, including data on the number of applicants

and the percentages who were admitted and who enrolled.

H.R. 4508 would also eliminate Title II transparency provisions that apply to teacher preparation

programs at IHEs. These provisions have required collection and reporting of data to assess

teacher preparation programs, including those that provide “traditional” and/or “alternative”

routes to state teacher certification, and of teacher candidate performance data.

Specified Limitations to the Secretary of Education’s Authority

The Secretary is vested with the authority to undertake numerous actions necessary or appropriate

to administer and manage ED functions and programs, including the authority to prescribe rules

and regulations and to enter into contracts for supplies and services.16 While many of these

general authorities are granted to the Secretary in statutes other than the HEA, the HEA

supplements those general authorities by providing specific direction or specifications related to

the Secretary’s authority to administer HEA programs. For instance, the HEA specifies that the

Secretary may enter into contracts for the origination, servicing, and collection of Direct Loans

and that the Secretary must, in general, engage in negotiated rulemaking when promulgating

regulations under HEA, Title IV.

H.R. 4508 would amend the HEA in several ways that would place limitations on the Secretary’s

general authority. Many of the bill’s provisions would prohibit the Secretary from promulgating

regulations on specific topics, especially within the Title IV student aid programs. For instance,

the bill would prohibit the Secretary from promulgating rules related to the term “gainful

employment,” the definition of “credit hour,” or state authorization requirements.

Other bill provisions would provide additional oversight of activities within ED’s Office of

Federal Student Aid (FSA), including requiring FSA to collect input from stakeholders on the

operation of the Title IV programs, and the bill would establish an advisory board to conduct

oversight of FSA to ensure it is meeting goals specified in its required performance plans. In other

cases, H.R. 4508 would require specific actions of the Secretary. For instance, H.R. 4508 contains

provisions providing guidance on how borrower accounts shall be allocated under loan-servicing

contracts entered into by ED.

Student Aid

Title IV of the HEA contains provisions authorizing numerous federal student aid programs to

assist students and their families finance the cost of a postsecondary education. This section of the

report describes some of the changes to the Title IV student aid programs and student aid

eligibility criteria that would be made by H.R. 4508.

Federal Programs

Title IV of the HEA contains provisions that authorize more than a dozen federal student aid

programs. These programs provide students with loans, grants, and work-study assistance. H.R.

16 See, for example, Department of Education Organization Act (P.L. 96-88), §§414 and 415, 20 U.S.C. §§3474 and

3475; General Education Provisions Act (P.L. 90-247), §410, 20 U.S.C. §1221e-3.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

4508 would make adjustments to the design of several student aid programs and it would reduce

the overall number of programs.

Federal Pell Grant Program

Section 401 of the HEA authorizes the Federal Pell Grant program, which is the single largest

source of federal grant aid supporting postsecondary education students.17 The Pell Grant

program provides need-based grants to financially needy undergraduate students and is intended

to be the foundation for all federal student aid awarded to undergraduate students. In FY2017,

over 8.3 million students received Pell Grants totaling approximately $26.9 billion.18 H.R. 4508

would make several changes to the program, including authorizing a Pell Grant Bonus award. Pell

Grants are funded through mandatory and discretionary appropriations. H.R. 4508 would not

modify the permanent mandatory appropriations, but it would extend the current discretionary

indefinite authorization of appropriations (i.e., appropriations authorized at “such sums as may be

necessary”) through FY2024.

Federal Pell Grant Bonus

Under current law, Pell Grant-eligible students who are enrolled full-time for a full academic year

may receive up to the total maximum Pell Grant award. Full-time enrollment is at least 12

semester hours (or the equivalent) for each semester (or the equivalent) and at least 24 semester

hours (or the equivalent) for the academic year. The total maximum Pell Grant award amount is

the sum of the discretionary maximum award specified in annual appropriations law and the

mandatory “add-on” award, which is specified in the HEA and funded through indefinite

permanent mandatory appropriations.

H.R. 4508 would authorize the awarding of up to an additional $300 in an award year to a Pell

Grant recipient who enrolls more than full-time for each payment period and whose enrollment

will lead to the completion of at least 30 semester hours (or the equivalent) in the award year. The

bonus would be paid for using the indefinite permanent mandatory appropriations. The bonus

would go into effect in award year 2018-2019.

In addition, H.R. 4508 would require the Secretary to report annually to the authorizing

committees on the number of students receiving a Pell Grant bonus and their time to certificate or

degree. Within approximately 30 months of the bill’s enactment, the U.S. Government

Accountability Office (GAO) would be required to submit a comparative study examining the

student loan debt of Pell Grant bonus recipients and Pell Grant recipients who did not receive a

bonus, the completion rate of Pell Grant bonus recipients and students who did not receive the

Pell Grant bonus, and whether students took an increased course load as a result of the

availability of the Pell Grant bonus.

Student Disclosures

Under current law, financial aid administrators (FAAs) inform students of the amount of Pell

Grant and other HEA Title IV aid they are eligible for in a payment period or award year. All Pell

Grant recipients are subject to a cumulative lifetime eligibility cap equal to 12 full-time semesters

(or the equivalent) of Pell Grant aid. H.R. 4508 would require that ED provide an annual status

report to Pell Grant recipients of their estimated remaining Pell Grant lifetime eligibility,

17 For more information, see CRS Report R42446, Federal Pell Grant Program of the Higher Education Act: How the

Program Works and Recent Legislative Changes, by (name redacted) .

18 U.S. Department of Education, Federal Student Aid, FY 2017 Annual Report, p. 10.

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estimated Pell Grant amounts during the remaining lifetime eligibility period, and limitations of

such estimates. FAAs would be permitted to provide additional Pell Grant counseling to students,

as long as the counseling would not delay or impede Pell Grant disbursements.

Student Fraud Reduction

Under current ED practice, a student with an “unusual enrollment history” loses eligibility for

additional HEA Title IV aid until an FAA documents a legitimate reason for the unusual

enrollment. An unusual enrollment history occurs when a student displays a pattern of attending

multiple institutions, receives Pell Grant or Direct Loan credit balances, and does not earn

academic credit during any of the four most recent award years.19

H.R. 4508 would codify two similar provisions. First, a student who received a Pell Grant for

three award years and did not earn academic credit for each such award year would be ineligible

for Pell Grant aid unless an FAA could document circumstances as being beyond the student’s

control. Circumstances beyond the student’s control could include an illness that precipitated

withdrawal, but could not include a withdrawal to avoid a particular grade. The second provision

would authorize ED to prevent a student from receiving a second disbursement of a Pell Grant in

an award year if the student has an unusual enrollment history until an FAA determines the

enrollment history was not unusual.20

Report Comparing Actual and Estimated Federal Pell Grant Costs

Under current practice, ED reports actual Pell Grant program costs. At least annually, CBO

estimates 10-year budget projections and the cumulative shortfall or surplus for the Pell Grant

program. Under H.R. 4508, ED would be required to compare actual Pell Grant component and

total program obligations and expenditures to prior CBO estimates.

Federal Student Loans

Title IV of the HEA specifies provisions for the operation of three federal student loan programs:

the Federal Family Education Loan (FFEL) program, the William D. Ford Federal Direct Loan

(Direct Loan) program, and the Federal Perkins Loan program. Currently, however, new loans are

authorized to be made only through the Direct Loan program. The authority to make new loans

through the FFEL program expired June 30, 2010, and the authority to make new loans through

the Federal Perkins Loan program expired September 30, 2017.

H.R. 4508 would establish a new Federal ONE Loan program to be a successor to the Direct

Loan program. Under the bill, language pertaining to the FFEL program would remain in the

HEA, while language pertaining to the Federal Perkins Loan program would be removed from the

HEA and would be deemed to be incorporated into the PROSPER Act. This section of the report

discusses provisions in H.R. 4508 that would phase out lending through the Direct Loan program

and establish a new Federal ONE Loan program. Provisions pertaining to the Federal Perkins

Loan program are discussed later in this report.

19 Department of Education, “Change to Unusual Enrollment History Selection,” Electronic Announcement, January

20, 2016, https://ifap.ed.gov/eannouncements/012016ChangetoUnusualEnrollmentHistorySelection.html.

20 H.R. 4508 would not define unusual enrollment history.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

William D. Ford Federal Direct Loan program

The Direct Loan program is authorized under HEA, Title IV, Part D, and is the largest federal

program that makes financial assistance available to support students’ postsecondary educational

pursuits. The Direct Loan program is a federal credit program. Permanent indefinite mandatory

appropriations are provided for loan subsidy costs, while annual discretionary appropriations are

provided for administrative costs. Direct Loans are made to students and their families using

funds borrowed by ED from the U.S. Treasury. The institution a student attends originates and

disburses Direct Loans, while federal contractors hired by ED perform loan servicing and

collection functions. Several types of loans are made available through the program: Direct

Subsidized Loans to undergraduate students, Direct Unsubsidized Loans to undergraduate and

graduate students, Direct PLUS Loans to graduate students and the parents of undergraduate

dependent students, and Direct Consolidation Loans, which enable individuals who have

previously borrowed federal student loans to combine them into a single new loan. Loan terms

and conditions (e.g., interest rates, borrowing limits) are specified in statute. In FY2017, $93.0

billion in Direct Loans were made to finance the postsecondary education expenses of 9.4 million

students. An additional $49.0 billion in Direct Consolidation Loans were made in FY2017.21

H.R. 4508 would terminate the authority to make new loans through the Direct Loan program

after September 30, 2024. Transition language would permit existing borrowers who had obtained

a Direct Loan prior to July 1, 2019, to continue to borrow through the Direct Loan program for

purposes of financing the remainder of a program of study at the same academic level (either

undergraduate or graduate) until September 30, 2024, so long as the first disbursement of the loan

would be made prior to that date. However, H.R. 4508 would provide that upon an individual

borrowing a loan through the Federal ONE Loan program, the individual would lose eligibility to

borrow again through the Direct Loan program. After September 30, 2024, individuals would be

able to obtain HEA, Title IV federal student loans solely through the Federal ONE Loan program.

H.R. 4508 would amend existing Direct Loan procedures applicable to borrower defense to

repayment and loan discharge. These changes are discussed in greater detail below. Otherwise,

the terms and conditions of Direct Loans would generally be unaffected by H.R. 4508. Thus,

benefits such as deferments, income-driven repayment plans, Teacher Loan Forgiveness, and

Public Service Loan Forgiveness (PSLF) would remain available to Direct Loans borrowers,

subject to their satisfying eligibility criteria for these benefits.

Federal ONE Loan program

H.R. 4508 would establish the Federal ONE Loan program as a new direct loan federal credit

program. Like the Direct Loan program it would succeed, permanent indefinite mandatory

appropriations would be provided for loan subsidy costs, and annual discretionary appropriations

would be authorized for administrative costs. Federal ONE Loans would be made to students and

their families using funds borrowed by ED from the U.S. Treasury. Beginning July 1, 2019,

Federal ONE Loans would be the only type of federal student loans made available to new

borrowers under Title IV of the HEA.22 A different type of Federal ONE Loan would be made

available to each of three borrower types: Federal ONE Loans to undergraduate students, Federal

One Loans to graduate and professional students, and Federal ONE Parent Loans to parents of

dependent undergraduate students. In addition, Federal ONE Consolidation Loans would enable

21 Office of Federal Student Aid, FY2017 Annual Report, p. 9.

22 HEA, §103(12), provides that “[t]he term ‘new borrower’ when used with respect to any date means an individual

who on that date has no outstanding balance of principal or interest owing on any loan made, insured, or guaranteed

under Title IV.”

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

borrowers to combine existing federal student loans into a single new loan. Many of the terms

and conditions of loans that would be made through the Federal ONE Loan program would be

similar to the terms and conditions of Direct Loan program loans, but with some important

differences. IHEs would be eligible to participate in the Federal ONE Loan program on a basis

similar to their current participation in the Direct Loan program.

Interest Rates and Fees. Federal ONE Loans would be made with market-indexed, fixed interest

rates according to the same interest rate formulas that currently apply to the Direct Loan program.

Thus, a different interest rate formula would apply to each loan type. Each year, interest rates

would become effective for loans disbursed during the period from July 1 through June 30. For

Federal ONE Loans to undergraduate students, the interest rate would be the 10-year U.S.

Treasury note rate plus 2.05%, with a cap of 8.25%. For Federal ONE Loans to graduate students,

the interest rate would be the 10-year U.S. Treasury note rate plus 3.6%, with a cap of 9.5%. For

Federal ONE Parent Loans, the interest rate would be the 10-year U.S. Treasury note rate plus

4.6%, with a cap of 10.5%. For Federal ONE Consolidation Loans, the interest rate would equal

the weighted average of the interest rates in effect on the loans being consolidated, rounded up to

the nearest higher one-eighth of 1%. For all loan types, interest would begin to accrue once a loan

was made. Unlike Direct Loans, no loan origination fees would be charged on Federal ONE

Loans.

Interest Subsidies. Under the Federal ONE Loan program, borrowers would generally be

responsible for paying the interest that accrues on their loans during all periods. An interest

subsidy for the period while a borrower is enrolled in an eligible program on at least a half-time

basis and during grace periods (akin to what is currently available with Direct Subsidized Loans)

would not be available. However, a limited set of interest subsidies—some of which are

substantially similar to benefits currently offered on Direct Loans—would be available on Federal

ONE Loans. These include an interest rate reduction of 0.25% for borrowers who agree to have

their monthly loan payments automatically debited from a bank account and no accrual of interest

for up to 60 months for borrowers who are serving on active duty or performing qualifying

National Guard duty in an area of hostilities during a war or national emergency.

Loan Eligibility. All types of Federal ONE Loans would be made available to borrowers without

regard to financial need. However, in two instances applicants could be required to obtain an

endorser23 to borrow some types of Federal ONE Loans: (1) if the parent of an undergraduate

student seeks to borrow a Federal ONE Parent Loan but has an adverse credit history; and (2) if

an existing borrower seeks to include a Federal ONE Parent Loan, a FFEL Parent PLUS Loan, or

a Direct Parent PLUS Loan in a Federal ONE Consolidation Loan, which could lead to the term

of the loan being extended to a period of up to 30 years.

Borrowing Limits. On an annual basis, loans could be borrowed in amounts up to the lesser of

the amount by which the student’s cost of attendance (COA) exceeds the total estimated financial

assistance (EFA) made available to the student, or specified annual loan limits that would vary by

borrower type and academic class level. Borrowing would also be limited by aggregate loan

limits.

In general, undergraduate students would be eligible to borrow up to $2,000 more per year

through the Federal ONE Loan program than they currently may borrow through the Direct Loan

program. In contrast, graduate students and parents of undergraduate dependent students

generally would be eligible to borrow less per year through the Federal ONE Loan program than

23 An endorser is an individual who does not have an adverse credit history and who agrees to repay the loan should the

borrower not do so.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

they currently may borrow through the Direct Loan program, as annual and aggregate borrowing

limits would newly apply to these borrowers.

For undergraduate dependent students, borrowing would be limited to $7,500 for the 1st year of

study, $8,500 for the 2nd year, $9,500 for the 3rd and each subsequent year; and $39,000 in the

aggregate. For undergraduate independent students, borrowing would be limited to $11,500 for

the 1st year of study, $12,500 for the 2nd year, $14,500 for the 3rd and each subsequent year; and

$60,250 in the aggregate. For graduate students, in general, borrowing would be limited to

$28,500 per year and $150,000 in the aggregate; however, higher borrowing limits would apply to

students in health professions programs.24 For Federal ONE Parent Loan borrowers, on a perstudent basis, borrowing would be limited to $12,500 per year and $56,250 in the aggregate.

Financial aid administrators would be newly permitted to reduce the amounts that students

enrolled in a particular program of study at an IHE could borrow on the basis of certain factors,

which would be required to be uniformly applied. Borrowing could be limited based on the IHE’s

ability to reasonably demonstrate that student debt levels would otherwise be excessive for

occupations typically pursued by graduates of a particular program, a borrower’s enrollment on

less than a full-time basis, the credential level of the program (e.g., degree, certificate), or a

student’s year of enrollment. Financial aid administrators would also be permitted, upon request,

to authorize borrowing up to otherwise applicable limits for students with special circumstances

or who have exceptional need.

Loan Repayment Plans. Under current law, numerous loan repayment plans are available to

borrowers of loans made through the Direct Loan program. These include the standard repayment

plan, the graduated repayment plan, the extended repayment plan, and several income-driven

repayment (IDR) plans: the income-contingent repayment (ICR) plan, the income-based

repayment (IBR) plan, the Pay As You Earn (PAYE) repayment plan, and the Revised Pay As You

Earn (REPAYE) repayment plan. In general, borrowers may choose any of these repayment plans

and may switch from one repayment plan to another. However, PLUS Loans made to parent

borrowers may not be repaid according to any of the income-driven repayment plans.25

H.R. 4508 would attempt to reduce the number of repayment plans available to borrowers.

Borrowers of Federal ONE Loans would be permitted to choose between a fixed-term standard

repayment plan and an income-based repayment (IBR) plan. Under a standard repayment plan,

for loans other than Federal ONE Consolidation Loans, borrowers would make level payments

over a period of 10 years; while for Federal ONE Consolidation Loans, borrowers would make

level payments over a period that could range from 10 to 30 years, depending on the loan balance.

The IBR plan would be available for loans other than Federal ONE Parent Loans and Excepted

Federal ONE Consolidation Loans,26 and, in general, borrowers would make monthly payments

equal to the greater of 1/12th of 15% of the amount (if any) that their adjusted gross income (AGI)

exceeded 150% of the federal poverty guideline applicable to their family size, or $25. (For

borrowers who become unemployed or who have high medical expenses that constitute an

extreme economic hardship, minimum monthly payments could be reduced to $5 for a period of

24 For graduate students in certain health professions programs, borrowing would be limited to $45,500 per year for

students in programs with a 9-month academic year, and to $55,167 for students in programs with a 12-month

academic year, and would be capped at $235,500 in the aggregate.

25 Consolidation Loans that repaid PLUS Loans to parent borrowers also may not be repaid according to the IDR plans,

with the exception of the ICR plan.

26 An Excepted Federal ONE Consolidation Loan would be a Federal ONE Consolidation Loan that was borrowed to

repay a Federal ONE Parent Loan, a Direct Parent PLUS Loan, a FFEL Parent PLUS Loan, or a Direct Consolidation

Loan or FFEL Consolidation Loan that was borrowed to repay a Direct Parent PLUS Loan or a FFEL Parent PLUS

Loan.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

up to three years.) In the case of a married borrower, the AGI of both spouses would be

considered for purposes of calculating payment amounts, regardless of their tax filing status. If

two borrowers were married and each wished to repay their loans according to the IBR plan,

monthly payment amounts would be calculated on the basis of both borrowers’ combined loan

balance.

Limitations on maximum cumulative payments required to be made would apply to Federal ONE

Loans repaid exclusively according to either the IBR plan or a standard repayment plan with a

term of no more than 10 years. For these loans, borrowers would be required to make cumulative

payments of no more than the amount of principal and interest that would otherwise have been

paid based on a 10-year repayment period beginning when the borrower entered repayment on

such loans, plus any interest that accrued during periods of in-school deferment. Any remaining

loan balance would be forgiven. Borrowers of Federal ONE Consolidation Loans who ever opt to

repay their loans according to a standard repayment plan with a term greater than 10 years would

be ineligible for the IBR limitation on maximum cumulative payments.

Deferment. A deferment is the temporary cessation of a borrower’s obligation to make payments

on a loan. In contrast to the Direct Loan program, borrowers of all types of Federal ONE Loans

would generally be eligible for deferments based on only a limited set of criteria (e.g., on the

basis of being enrolled in-school at least half-time or performing certain types of qualifying

military service). Borrowers and endorsers of Federal ONE Parent Loans and Excepted Federal

ONE Consolidation Loans would also be eligible for deferments on the basis of having an

economic hardship, having exceptionally high medical expenses, or being unemployed but

seeking to obtain employment. Any interest that would accrue during a period of deferment

would be capitalized into the principal balance of the loan when the deferment ended.

Loan Forgiveness and Loan Discharge due to Death or Total and Permanent Disability. The

Direct Loan program currently authorizes two loan forgiveness benefits: Loan Forgiveness for

Teachers and Public Service Loan Forgiveness (PSLF). Through the Loan Forgiveness for

Teachers program, teachers in general may have up to $5,000 of their student loan debt forgiven

following five years of service as a full-time teacher in a qualifying low-income school, while

those who are also special education teachers or secondary school teachers of mathematics or

science may have up to $17,500 forgiven. Through the PSLF program, borrowers who make 120

qualifying monthly payments on or after October 2, 2007, according to an IDR plan or any of the

standard, graduated, or extended repayment plans in amounts equal to or greater than the monthly

amount due as calculated according to a standard 10-year repayment period, while concurrently

being employed full-time in one or more public service jobs, may have the remaining balance of

their Direct Loans forgiven. H.R. 4508 would retain these loan forgiveness benefits for borrowers

of Direct Loans. However, the Loan Forgiveness for Teachers and PSLF programs would not be

made available to borrowers of Federal ONE Loans.

Under current law, liability for federal student loans made through the Direct Loan, FFEL, and

Perkins Loan programs is discharged in the case of borrowers who die, become permanently and

totally disabled, or are unable to engage in any substantial gainful activity due to a physical or

mental impairment that can be expected to result in death or that has lasted continuously or can be

expected to last continuously for 60 months. H.R. 4508 would retain these benefits for existing

borrowers and extend them to borrowers of loans made through the Federal ONE Loan program.

Borrower Defense to Repayment and Other Loan Discharge Provisions

In certain instances, borrowers may have their Title IV student loans discharged, and thus be

relieved of the responsibility to repay them. The HEA specifies these instances, and regulations

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

add some specificity to them.27 H.R. 4508 would make changes to the statutory requirements

related to these loan discharge provisions.

Borrower Defense to Repayment. HEA Section 455(h) provides that ED shall specify in

regulations the acts or omissions of an IHE that a Direct Loan borrower may assert as a borrower

defense to repayment (BDR). Current regulations promulgated under this authority require that an

IHE’s acts or omissions must give rise to a cause of action against an IHE under applicable state

law.28 In addition, FFEL regulations provide that in more limited circumstances, FFEL borrowers

may assert claims similar to Direct Loan BDR to receive debt relief.29 Perkins Loan borrowers

may not assert BDR claims. In implementing the regulations, ED has established subregulatory

procedures and standards, which include specifying that FFEL and Perkins Loan borrowers may

consolidate their loans into a Direct Consolidation Loan to have the underlying FFEL and Perkins

Loans evaluated under the same BDR standards as a Direct Loan.30

Effective July 1, 2018, H.R. 4508 would establish new standards and procedures for BDR that

would apply to Direct Loans and Federal ONE Loans. FFEL and Perkins Loan borrowers seeking

relief under the BDR procedures would first be required to consolidate their loans into a Federal

ONE Consolidation Loan. H.R. 4508 would specify that a borrower has a BDR if (1) the

borrower has obtained a nondefault, favorable contested judgment based on state or federal law

against the IHE; (2) the IHE for which the borrower received the loan failed to perform its

obligations under the terms of a contract with the student; or (3) the IHE made a substantial

misrepresentation that the borrower reasonably relied on when the borrower decided to attend or

continue attending the IHE. The bill would also specify the following:









ED may approve a borrower’s BDR application in full or in part;

ED may consolidate individually filed applications that have common facts and

claims to allow for faster processing of applications;

a borrower may not recover amounts previously collected by ED later than three

years after the IHE’s actions giving rise to a cause of action have occurred; and

ED may initiate proceedings against IHEs to recover amounts resulting from

successful BDR claims from IHEs.

Finally, H.R. 4508 would repeal BDR regulations promulgated in 2016 but delayed in

implementation until July 1, 2019.

Other Types of Loan Discharge. The HEA specifies that borrowers of FFEL and Direct Loan

program loans may have the balance of their loans discharged if they (or the student on whose

behalf a parent borrowed) are unable to complete the educational program in which they enrolled

due to the closure of the school31 or if they were falsely certified as eligible for the loan by an

IHE or as a result of a crime of identity theft.32 The HEA also provides that FFEL and Direct

Loan borrowers may have a portion of their loans discharged if an IHE failed to make a refund of

27 For information on two types of loan discharge available to Title IV borrowers (closed school discharge and

borrower defense to repayment), see CRS Report R44737, The Closure of Institutions of Higher Education: Student

Options, Borrower Relief, and Implications, by (name redacted) .

28 34 C.F.R. §685.206(c).

29 34 C.F.R. §682.209(g).

30 Joseph Smith, Fourth Report of the Special Master for Borrower Defense to the Under Secretary, U.S. Department of

Education, June 29, 2016, p. 4.

31 The HEA also specifies that Perkins Loan borrowers are eligible for a closed school discharge. HEA §464(g).

32 HEA §§437(c)(1); 455(a)(1).

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loan proceeds that the IHE owed to the borrower.33 Regulations add specificity to borrower

qualification requirements and procedures for each of these discharge options.34



H.R. 4508 would largely codify the current FFEL and Direct Loan regulations

relating to borrower qualifications and procedures for closed school discharge

and apply them to FFEL, Direct Loan, and Federal ONE Loan program loans.

H.R. 4508 would also codify many aspects of the current FFEL and Direct Loan

regulations relating to borrower qualification for false certification discharge and

unpaid refund discharge and apply them to FFEL, Direct Loan, and Federal ONE

Loan program loans.

Pell Grant and Loan Disbursement

HEA Section 428G requires that federal student loans be disbursed in at least two installments for

any period of enrollment (e.g., an academic year). Under ED regulations,35 Pell Grant payments

must also be disbursed to students in at least two installments. IHEs may disburse funds in a lump

sum for each payment period36 or more frequently, as best meets a student’s needs. IHEs are

required to provide a way for Title IV eligible students to obtain or purchase the books and

supplies applicable to the payment period by the seventh day of the period.37 IHEs may disburse

funds as early as 10 days before the beginning of a payment period.

H.R. 4508 would require IHEs to disburse Pell Grant and Federal ONE Loan payments to

recipients in substantially equal weekly or monthly installments. IHEs would be permitted to

make adjustments in the amount of various disbursements to account for factors such as the

upfront payment of tuition and fees. Disbursements would be required to be made within 30 days

of the beginning of the payment period. IHEs with a loan repayment rate (see discussion below)

at or below 60% would not be permitted to make payments of loans to entering first-year

undergraduate students who are new federal student loan borrowers until 30 days after the student

begins a course of study.

Federal Work-Study program

HEA, Title IV, Part C authorizes the Federal Work-Study (FWS) program, the purpose of which is

to provide part-time employment to postsecondary students in need of earnings to pursue their

course of study and to encourage student participation in community service.38 In FY2017,

approximately $949 million in FWS assistance was disbursed to approximately 634,000

students.39

H.R. 4508 would make several significant changes to the FWS program. The bill would amend

the current procedures used to allocate FWS funds to IHEs, provide a set-aside from

appropriations to make allocations of additional funds to “improved institutions,” and make

33 Ibid.

34 34 C.F.R. 682.402(d), (e), (l); 685.214-.216.

35 34 CFR §§668.4 and 690.63.

36 For instance, an IHE using a semester system could disburse a lump sum of aid funds to a student at the beginning of

the fall and spring semesters.

37 34 C.F.R. §668.134(m).

38 For additional information, see CRS Report RL31618, Campus-Based Student Financial Aid Programs Under the

Higher Education Act, by (name redacted)

.

39 Office of Federal Student Aid, FY2017 Annual Report, p. 11.

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changes to student employment requirements and the proportion of student compensation

comprised by the federal share. H.R. 4508 would authorize discretionary appropriations of

approximately $1.723 billion annually for the FWS program for FY2019 through FY2024.

Indefinite discretionary appropriations have been authorized to be provided for the FWS program,

and in FY2017 the appropriations for the federal share of FWS compensation totaled

approximately $984.8 million.40

Allocation Procedures

HEA Section 442 specifies that FWS funds are to be allocated to IHEs through a two-stage

process. First, each participating IHE is allocated a base guarantee, which generally is equal to a

portion of the amount of program funds an IHE received in prior award years. In the second

stage, any remaining appropriated funds are allocated to IHEs according an IHE’s “fair share,”

which is determined by calculating the self-help need41 of the institution’s eligible undergraduate

and graduate students. If an IHE’s fair share is greater than its base guarantee, it has a shortfall in

funding and is eligible to receive additional funding (a fair share increase) to help reduce the

shortfall between its base guarantee and its fair share. If an institution’s base guarantee is greater

than its fair share, it receives only the base guarantee amount. The sum of an IHE’s base

guarantee and fair share amount accounts for nearly all of an IHE’s allocation.42

H.R. 4508 would ultimately eliminate the base guarantee and all program funds would be

allocated to IHEs according to new fair share allocation procedures. One-half of an IHE’s fair

share allocation would be allocated based on an IHE’s total undergraduate need.43 The other half

of an IHE’s fair share would be based on the proportional amount of Pell Grant funds awarded at

the IHE relative to the total Pell Grant funds awarded at all FWS-participating IHEs in the

preceding fiscal year. Under H.R. 4508, an IHE could receive a “new base guarantee” in the

period from FY2019 through FY2023 that would be equal to a declining percentage of the

combined base guarantee and fair share increase it received in FY2017. An IHE would only

receive the new base guarantee (instead of its fair share allocation) if the amount of the new base

guarantee were greater than the fair share allocation it would receive under the new fair share

allocation procedures. Beginning in FY2024, all available funds would be allocated using new

fair share allocation procedures.

Reservations and Improved Institutions

Under current law, the Secretary is authorized (but not required) to reserve 10% of the amount of

FWS appropriations in excess of $700 million for allocation to IHEs from which 50% or more of

Pell Grant recipients either graduate or transfer to a four-year IHE. It does not appear that the

Secretary has ever reserved funds under this authority.

40 There is a practice employed in H.R. 4508 of generally replacing open-ended discretionary authorized appropriation

levels with specified levels. This is one of the few instances in which an existing program’s newly specified

appropriations level would substantially exceed the most recent appropriations level.

41 Self-help need is calculated based on an approximation of the average cost of attendance and expected family

contribution of eligible undergraduate and graduate students.

42 If schools return funds, ED reallocates funds to institutions using a separate formula.

43 Similar to current law, undergraduate need would be based on the difference between the average cost of attendance

and each undergraduate student’s expected family contribution. However, under H.R. 4508, undergraduate need for

each student could not exceed $12,500.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

H.R. 4508 would eliminate the Secretary’s current authority to reserve FWS funds and instead

require that the Secretary reserve for allocation to “improved institutions” the lesser of (1) 20% of

the amount of the appropriation that is in excess of $700 million, or (2) $150 million. An

improved institution would be determined based on its completion or graduation rate of Federal

Pell Grant recipients relative to similar FWS-participating IHEs44 or based on the improvement in

its graduation or completion rates relative to FWS-participating IHEs.

An improved institution would be eligible to receive an allocation amount from the reserved

funds that is proportional to the dollar amount of Pell Grants awarded at the IHE relative to the

total dollar amount of Pell Grants awarded in the second preceding fiscal year at all FWS

institutions that meet at least one of the improved institution criteria. The minimum allocation an

improved institution could receive would be $10,000, and the maximum allocation would be

$1,500,000.

Student Eligibility, Employment, and Maximum Federal Compensation

Currently, undergraduate, graduate, and professional students that demonstrate financial need are

eligible to receive FWS awards. FWS employment may consist of work for the IHE a student

attends, government entities, private nonprofit organizations, or private for-profit organizations.

IHEs are required to use at least 7% of their FWS allocation to compensate students employed in

community service jobs and to ensure that at least one FWS student is employed in a reading

tutoring or family literacy project. IHEs may not use more than 25% of their FWS allocation to

compensate students employed by for-profit organizations. For all FWS jobs, students are

compensated with a combination of federal funding and a matching amount provided by either

the IHE or the employer. The share of compensation that may be provided through federal

funding varies according to the type of FWS employment. For most FWS jobs, the maximum

federal share of compensation is 75%; however, in certain instances the federal share may be

higher. For employment in the private for-profit sector, the federal share of compensation is

limited to 50%.

Under H.R. 4508, graduate and professional students would no longer be eligible to participate in

the FWS program; FWS assistance would only be available to undergraduate students with

financial need. The bill would also eliminate the requirements that IHEs use 7% of FWS

allocations to compensate students employed in community service jobs and ensure that at least

one student is employed in a reading tutoring or family literacy project. H.R. 4508 would

eliminate the 25% restriction on the use of FWS funds for students employed in the private forprofit sector. Finally, H.R. 4508 would, in general, reduce the maximum federal share of

compensation for all FWS employment to 50% over a five-year period, but would permit the

federal share to equal 100% for funds received through the improved institution reservation and

would permit the federal share to exceed 50% if the Secretary determines that it would be

necessary to further the purpose of the FWS program.

Expiring or Eliminated Programs

In addition to the federal student aid programs described above, several other student aid

programs are authorized under HEA, Title IV. The authority to make new awards or the

authorization of appropriations for some of these programs has already expired, and H.R. 4508

44 For instance, a four-year IHE’s completion or graduation rate would be evaluated in relation to all other four-year

FWS-participating IHEs.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

would either not act to extend the authorization or would explicitly repeal some programs. Other

programs that currently receive funding and are operational, would be repealed by H.R. 4508.

Federal Perkins Loan program

HEA, Title IV, Part E authorizes the Federal Perkins Loan program.45 Under the program, IHEs

established and maintained revolving loan funds for the purpose of making of low-interest loans

to students with exceptional financial need to help cover the cost of postsecondary education. The

loan funds were capitalized with a combination of federal and institutional funds, and IHEs are

responsible for several administrative aspects of the program, such as servicing and collecting

outstanding Perkins Loans. Among other loan terms and conditions specified in statute, IHEs are

required to cancel the Perkins Loans for borrowers who have completed specified types of public

service, and the Secretary is required to reimburse IHEs for those cancellations. In the past,

Congress has specifically appropriated funds for reimbursing IHEs; however, funds for the

reimbursement of Perkins Loan cancellations were last appropriated in FY2009. In FY2017,

356,000 Perkins Loan awards, totaling approximately $885 million were disbursed to students

under the program.46

The authorization for IHEs to make new Perkins Loans to students expired on September 30,

2017. Under current law, beginning on October 1, 2017, each IHE was to begin returning to the

Secretary the federal share of its Perkins Loan fund and the federal share of payments and

collections made on outstanding Perkins Loans.47 Institutions are permitted to retain any

remaining funds after remitting the federal share.

H.R. 4508 would remove from the HEA the current language pertaining to the Perkins Loans

program and would deem the current Perkins Loan program language incorporated into the

PROSPER Act. Thus, although the current provisions pertaining to the Perkins Loan program

(e.g., loan terms and conditions) would not appear in the HEA, they would still retain the full

force and effect as on the day before enactment of H.R. 4508.

H.R. 4508 also includes several provisions pertaining to how IHEs should wind down the

operation of the Perkins Loan program. The bill would allow institutions to continue servicing

Perkins Loans during the wind-down or assign the loans to the ED for collection and servicing.

The bill would also permit an IHE that, on or after October 1, 2006, made a short-term loan to its

Perkins Loan revolving fund and subsequently reimbursed itself from the fund, to collect interest

earned on Perkins Loans made with those funds. Finally, pursuant to regulations, an IHE is

required to complete a final program audit upon the IHE’s termination of participation in a Title

IV HEA program.48 H.R. 4508 would provide some flexibilities to IHEs in submitting such

audits. H.R. 4508 does not address institutional reimbursement for cancelled Perkins Loans.

45 For additional information, see CRS Report RL31618, Campus-Based Student Financial Aid Programs Under the

Higher Education Act, by (name redacted)

; and CRS Report R44343, The Federal Perkins Loan Program

Extension Act of 2015: In Brief, by (name redacted) .

46 Office of Federal Student Aid, FY2017 Annual Report, p. 10.

47 ED has indicated that it will begin the process of collecting the federal share of IHEs’ Perkins Loan revolving funds

following the submission of the 2019-2020 Fiscal Operations and Applications to Participate (FISAP), which is due

October 1, 2018. See ED Dear Colleague Letter, “Perkins Loan Extension Act of 2015” GEN-17-10, October 6, 2017,

https://ifap.ed.gov/dpcletters/GEN1710.html.

48 34 C.F.R. 668.26.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Federal Supplemental and Educational Opportunity Grant program

HEA Title IV, Part A, Subpart 3 authorizes the Federal Supplemental Educational Opportunity

Grant (FSEOG) program.49 The program provides need-based grants to undergraduate students

with exceptional financial need to assist them in financing the cost of postsecondary education. In

FY2017, nearly 1.5 million FSEOG awards totaling $712 million were disbursed.50

Effective June 30, 2018, H.R. 4508 would repeal the FSEOG program. Funds appropriated for the

program in FY2018 would be made available to IHEs until the end of FY2019. Discretionary

indefinite appropriations have been authorized to be provided for the FSEOG program, and in

FY2017, approximately $729.5 million was appropriated for the federal share of FSEOG awards.

TEACH Grant program

HEA Section 420M authorizes the Teacher Education Assistance for College and Higher

Education (TEACH) Grant program, which is a service payback program. The program provides

grants of $4,000 per year to undergraduate and graduate students who are preparing for a career in

teaching. Recipients must commit to teaching a high-need subject in a high-poverty elementary or

secondary school for four years within eight years after completing the course of study for which

the TEACH Grant was received. If recipients do not fulfill their service requirement, TEACH

grants are converted to Federal Direct Unsubsidized Stafford Loans, with interest accrued from

the date each grant was awarded. ED has estimated that approximately 74% of program grants

will convert to loans.51 In FY2017, ED disbursed approximately 38,200 grants totaling $85.3

million under the program.52

H.R. 4508 would terminate authority to make new TEACH Grants to new recipients after June

30, 2018. However, the bill would authorize additional TEACH Grants to be made to individuals

who received a TEACH Grant on or prior to June 30, 2018 to enable such individuals to complete

their course of study.

Additional Programs

The Leveraging Educational Assistance Partnership Program (LEAP), Grants for Access and

Persistence Program (GAP), and the Robert C. Byrd Honors Scholarship Program all provide

federal funds either directly to students or to students through states for additional financial

assistance in postsecondary education.53 Each of these programs was last funded in FY2010. The

Academic Competitiveness Grant program and the National Science and Mathematics Access to

Retain Talent (SMART) Grant program also previously provided federal funds to Pell-eligible

students to help cover the cost of postsecondary education.54 These two programs were last

funded in FY2011.

H.R. 4508 would repeal each of these programs.

49 For additional information, see CRS Report RL31618, Campus-Based Student Financial Aid Programs Under the

Higher Education Act, by (name redacted)

.

50 Office of Federal Student Aid, FY2017 Annual Report, p. 10.

51 Department of Education, FY2018 Congressional Budget Justifications, Volume II, “TEACH Grants,” p. P-2.

52 Office of Federal Student Aid, FY2017 Annual Report, p. 11.

53 For additional information on these programs, see CRS Report R43351, The Higher Education Act (HEA): A Primer,

by (name redacted) .

54 Ibid.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

Student Aid Eligibility

HEA, Title IV contains provisions that generally apply across the various Title IV student aid

programs, such as student eligibility criteria for receipt of federal student aid and the

establishment of the need analysis formula to calculate the Expected Family Contribution (EFC)

for federal student aid applicants. H.R. 4508 would make numerous changes to various Title IV

student aid eligibility criteria and the processes used to determine aid eligibility.

Expected Family Contribution and FAFSA Completion

Several types of federal student aid are contingent upon a student demonstrating financial need. A

key component of student need is the ability of the student, and if applicable the student’s family,

to pay for postsecondary education expenses. This ability to pay is determined by a group of

formulas in the Title IV that translate responses from the Free Application for Federal Student Aid

(FAFSA) into a single EFC.55 H.R. 4508 would make changes to the way in which the EFC is

calculated and provide for tools to assist with the FAFSA completion process.

Calculating EFC Using Prior Prior Year Income

Section 480 of the HEA specifies that the EFC formula will consider income from the year

immediately preceding the award year for which the student is applying for aid, but gives ED the

authority to use income from the second preceding year (known as “prior prior year”). To ease the

student aid process by allowing students to complete the FAFSA earlier in the college application

process by using prior prior year income information,56 ED exercised this authority beginning

with the 2017-2018 award year when it required students to complete the FAFSA using income

information from the 2015 tax year.57

H.R. 4508 would amend the HEA to require that the EFC be calculated using prior prior year

income information.

Changes to EFC Formula

The HEA establishes a “Simplified Needs Test” (SNT) which bases the EFC calculation for

certain students on a reduced set of factors.58 Under current law, a student can qualify for the SNT

if the student’s family has an adjusted gross income of less than $50,000 and meets other

criteria.59 Applicants who are not eligible for the SNT must report the assets of the student and

any applicable family members on the FAFSA. Assets can increase the EFC and include balances

55 For a detailed description of the EFC formulas, see CRS Report R44503, Federal Student Aid: Need Analysis

Formulas and Expected Family Contribution, by (name redacted) .

56 Students and applicable family members are likely to have filed tax returns for the second preceding tax year before

completing the FAFSA, using income from the second preceding year may increase usage of the Internal Revenue

Service Data Retrieval Tool (IRS-DRT) when completing the FAFSA.

57 See Department of Education, “Early FAFSA Electronic Announcement #1 – President’s Announcement of FAFSA

Filing Changes,” September 14, 2015, https://ifap.ed.gov/eannouncements/

091415PresidentAnnounceFAFSAFilingChanges.html.

58 Students who are eligible for the SNT are not required to provide information on assets (e.g., bank account balances,

stocks, and business equity) when completing the FAFSA. For these students, EFC is based on a formula that considers

various forms of taxable and untaxed income.

59 Generally, the non-AGI criteria relate to filing a simplified tax form or not being required to file a tax return,

receiving a means-tested benefit, or being a dislocated worker. See HEA §479.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

of bank accounts and certain investments, as well as college savings vehicles commonly known

as “529 accounts.”60 In the case of dependent students, balances of 529 accounts are considered

an asset of the student’s parent, regardless of if they are owned by the student or student’s parent.

This treatment is beneficial for students who own 529 accounts, as assets owned by a parent will

typically have less of an effect on the EFC than similar assets owned by a dependent student.

Distributions from a 529 account that is owned by a student or the parent of a dependent student

are not considered income in the EFC formula if the distributions were used for a qualified

educational expense. Distributions from an account that is not owned by the student or the parent

of a dependent student and therefore not reported on the FAFSA as an asset (such as an account

owned by a grandparent of a dependent student) are not excluded from consideration in the EFC

and must be reported on the FAFSA as untaxed income of the student.

H.R. 4508 would increase the SNT AGI threshold to $100,000 and retain the other SNT criteria.

The bill would also exclude certain 529 accounts from consideration as assets in calculating the

EFC. This could be seen as excluding a family’s savings for higher education from the amount

the family is expected to contribute to higher education costs. The bill would retain the current

law’s treatment of distributions from these accounts: distributions from accounts owned by a

student or the parent of a dependent student would be excluded from the EFC calculation and

distributions from other accounts would be counted as untaxed income of the student.

Tools to Assist the FAFSA Completion Process

Currently, aid applicants can file a paper FAFSA or complete the FAFSA online. Applicants who

file the FAFSA online and who have already completed their tax returns for the applicable year

have the option of using the Internal Revenue Service Data Retrieval Tool (IRS-DRT). The tool

provides tax data to the applicants that they can then choose to import into the FAFSA. Some

FAFSA items do not have tax form equivalents and therefore only a portion of the FAFSA

responses can be imported using the IRS-DRT.

H.R. 4508 would direct ED to make available an electronic version of the FAFSA that is

“optimized for mobile devices” and would allow a student to complete the form on such a device.

The mobile-optimized form would be required to be available within one year of the enactment of

H.R. 4508.61 The bill would also direct ED to make efforts to allow applicants to use the IRSDRT while maintaining rigorous authentication processes and would require ED to provide

annual reports to the authorizing committees62 on the progress of FAFSA simplification efforts

and the security of the IRS-DRT.

Informational Tools

H.R. 4508 would direct ED to make available online tools to increase awareness of student aid

opportunities and provide students with nonbinding estimates of aid eligibility. The bill would

direct ED to make available an online tool that would use “basic financial information” from the

60 See HEA §479(f) for full definition of assets.

61 It is unclear how this policy would interact with ED’s initiatives related to mobile-based FAFSA filing that are

expected to be available in Spring 2018. See U.S. Department of Education, “U.S. Department of Education Announces

Vision to Transform Federal Student Aid, Improve Customer Service,” press release, November 29, 2017,

https://www.ed.gov/news/press-releases/us-department-education-announces-vision-transform-federal-student-aidimprove-customer-service.

62 House Committee on Education and the Workforce and the Senate Committee on Health, Education, Labor, and

Pensions.

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H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act

student to estimate a student’s eligibility for federal grants, loans, and work-study assistance.63

The estimate would be accompanied by net price information from institutions specified by the

student. The net price estimates would be disaggregated by income level.

In addition and separate from the estimator tool, H.R. 4508 would direct ED to develop annual

tables that would present the percentage of full-time, full academic year students at IHEs who

filed a FAFSA that received Pell Grants of specified amounts. These tables would disaggregate

data by each of three dependency statuses and income levels specified in the legislation.

Additional Student Eligibility Requirements

HEA Section 484 specifies criteria related to academics that students must meet to receive any

Title IV aid. In general, a student must have a high school diploma or its recognized equivalent to

be eligible for Title IV aid. However, a student not meeting that criterion may receive Title IV aid

if the student is enrolled in an eligible career pathway program and demonstrates an ability to

benefit from the education or training through one of three mechanisms. In addition, Section 484

specifies that a student must maintain satisfactory academic progress (SAP) in his or her course

of study to remain eligible for Title IV aid, which includes the student having a cumulative C

average (or the equivalent) at the end of the second academic year. ED’s regulations

implementing SAP require that, in general, a student must maintain a pace of completion that

ensures he or she will complete the program within 150% of the published length of the

educational program (known as the maximum timeframe) and specify how an IHE must calculate

the student’s pace.64

H.R. 4508 would amend eligibility requirements for students who do not have a high school

diploma to allow any students that have satisfactorily completed six credit hours of coursework

(or the equivalent) applicable to a degree or certificate offered by the IHE to be eligible for Title

IV aid. The bill would also codify SAP regulations related to a student’s pace of completion

within the maximum timeframe, would require a student to maintain a cumulative C average (or

the equivalent) at the end of each academic year, and would permit IHEs to determine how to

calculate the pace of completion.

Institutional and Programmatic Title IV Eligibility

To participate in the Title IV federal student aid programs, postsecondary institutions and their

educational programs must meet numerous criteria. This section of the report describes some of

the changes to institutional and programmatic participation requirements that would be made by

H.R. 4508.

Eligible Institutions

To participate in the Title IV federal student aid programs, postsecondary institutions must meet

several requirements, including meeting the HEA Section 102 definition of an institution of

higher education (IHE). Currently, the HEA includes two definitions of IHE. The Section 101

definition of an IHE applies to institutional participation in HEA programs, other than the Title IV

federal student aid programs, and includes public and private nonprofit institutions that typically

offer educational programs leading to a degree and those public and nonprofit institutions that

63 This portion of the tool may be similar to the existing FAFSA4Caster, which is maintained by ED at

https://fafsa.ed.gov/FAFSA/app/f4cForm?execution=e1s1.

64 34 C.F.R. §668.34.

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provide not less than a one-year program that prepares students for gainful employment in a

recognized occupation. The Section 102 definition of an IHE applies to institutional participation

in HEA Title IV federal student aid programs and includes all institutions included in the Section

101 definition and also proprietary (for-profit) institutions, postsecondary vocational institutions,

and foreign institutions. In general, under Section 102, proprietary and postsecondary vocational

institutions must offer education programs that prepare students for gainful employment in a

recognized occupation, regardless of whether they lead to a degree. Many references in federal

law to the term institution of higher education use the Section 101 definition.

Because the Section 102 definition of IHE references the Section 101 definition, both definitions

have several overlapping components. For instance, both definitions require that an IHE be

legally authorized to provide a postsecondary education by the state in which it is located.

Regulations add specificity to this requirement.65 For instance, effective July 1, 2018, an IHE

offering postsecondary distance or correspondence education in a state in which it is not

physically located must meet any requirements within that state.

H.R. 4508 would combine several aspects of the current Section 101 and Section 102 IHE

definitions into a new Section 101 IHE definition. The new Section 101 definition of IHE would

include public, private nonprofit, proprietary, and postsecondary vocational institutions and

would apply to all HEA programs; however, a proprietary institution would not be considered an

IHE for purposes of the Title III and Title V institutional aid programs for minority-serving

institutions. All references to programs that prepare students for gainful employment in a

recognized occupation would be removed. All IHEs under the new Section 101 definition would

continue to be required to meet current statutory state authorization requirements, but H.R. 4508

would repeal regulations relating to state authorization and prohibit the Secretary from

promulgating or enforcing any rules or regulations relating to state authorization. Under H.R.

4508, an amended Section 102 would define foreign institutions and would only apply to the Title

IV, Part D (Direct Loan) and new Part E (Federal ONE Loan) programs.

Eligible Programs

Under current law, students must be enrolled in an eligible program at an eligible IHE to be

eligible to receive Title IV federal student aid. At public and nonprofit IHEs, eligible programs

include those that lead to certain defined degrees or certificates (e.g., associate’s degrees); those

that are not less than two years in length and that are acceptable for full credit toward a bachelor’s

degree; and those that are less than one year in length, lead to a certificate or other nondegree

recognized credential, and prepare students for gainful employment in a recognized occupation.

Such programs are not required to meet durational requirements. Programs offered by proprietary

and postsecondary vocational institutions must fulfill durational requirements to be eligible for

Title IV participation and virtually all programs offered by such institutions must prepare students

for gainful employment in a recognized occupation. In general, such programs that admit students

without an associate’s degree or the equivalent must provide at least 600 clock hours, 16 semester

hours, or 24 quarter hours of instruction over a minimum of 15 weeks, and such programs that are

graduate or professional programs or that only admit students with an associate’s degree or the

equivalent must provide at least 300 clock hours, 8 semester hours, or 12 quarter hours of

instruction over a minimum of 10 weeks.66

65 See 34 C.F.R. §600.9.

66 In addition, gainful employment programs may also be undergraduate programs offering 300-599 clock hours if they

admit at least some students who do not have an associate’s degree or the equivalent and meet specific qualitative

standard (e.g., a verified completion rate of at least 70%).

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In addition, as described above, most educational programs offered by proprietary and

postsecondary vocational IHEs and nondegree programs offered by public and nonprofit IHEs

must prepare students for gainful employment in a recognized occupation. Regulations establish

debt-to-earnings ratios that educational programs offered by an IHE must meet to be considered

as leading to gainful employment and requirements for IHEs to disclose information relating to

their gainful employment programs.67

H.R. 4508 would eliminate the requirement that nondegree programs lead to gainful employment

in a recognized occupation and would require that all nondegree programs leading to a recognized

educational credential and offered by any type of institution meet specified durational

requirements. Specified durational requirements would be shorter than what is currently specified

in the HEA and would require that nondegree programs leading to a recognized educational

credential provide at least 300 clock hours, 8 semester hours, or 12 quarter hours of instruction

over a minimum of 10 weeks. The bill would also specify criteria that competency-based

education programs must meet to be considered Title IV eligible programs and would define

several terms related to competency-based education.

H.R. 4508 would also repeal these gainful employment regulations, would eliminate from the

definition of an IHE the requirement that certain postsecondary institutions must offer programs

leading to gainful employment in a recognized occupation, and would prohibit the Secretary from

promulgating or enforcing any rules or regulations relating to the term gainful employment.

Educational Quality and Financial Responsibility Requirements

The HEA contains several provisions related to ensuring the quality of educational offerings of

Title IV participating IHEs and to ED being required to certify that IHEs meet Title IV

participation requirements, including fiscal responsibility requirements. H.R. 4508 would make

several changes to these requirements.

Accreditation

To participate in Title IV programs, IHEs must be accredited by an accreditation agency that is

recognized by ED as a reliable authority as to the quality of education offered at an IHE.68 HEA

Section 496 sets forth the recognition criteria to be used by ED. In general, accreditation agencies

may establish their own educational quality standards against which to evaluate IHEs and their

own operating procedures, so long as they meet HEA-specified criteria. Accreditation agency

standards to evaluate the educational quality of an IHE and its offerings must assess student

achievement in relation to an IHE’s mission (including, as applicable, course completion, passage

of state licensing exams, and job placement rates) and a variety of other factors such as an IHE’s

faculty, curricula, facilities, and fiscal and administrative capacity. Accreditation agency operating

procedures must include, among other criteria, onsite reviews of IHEs at regularly established

intervals, and upon request, making available to the public summary information on specified

agency actions (e.g., denial or withdrawal of an IHE’s accreditation).

H.R. 4508 would eliminate many of the currently required institutional evaluation standards and

instead would require that accreditation agencies evaluate IHEs’ success with respect to student

67 34 C.F.R. §668.401 et seq. ED is currently undertaking a negotiated rulemaking to make changes to the gainful

employment regulations. U.S. Department of Education “Gainful Employment,” https://www2.ed.gov/policy/highered/

reg/hearulemaking/2017/gainfulemployment.html.

68 For additional information on accreditation, see CRS Report R43826, An Overview of Accreditation of Higher

Education in the United States, by (name redacted) .

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learning and educational outcomes in relation to expected measures of learning and outcomes at

the institutional or program level, as determined by the agency or the institution or program. The

bill would also establish criteria that accreditation agencies must meet to include within their

scope of recognition the evaluation of competency-based education. H.R. 4508 would require

agencies to develop mechanisms to identify IHEs that are experiencing difficulties in

accomplishing their student learning and educational outcome goals. The mechanisms would be

required to include, as appropriate, information on student loan default and repayment rates,

graduation and retention rates, and other specified indicators. H.R. 4508 would permit

accreditation agencies to review an IHE less frequently or under differing procedures, based on an

IHE’s demonstration of exceptional past performance in meeting the agency’s accreditation

standards (known as differentiated or risk-based review) and would require accreditation agencies

to make publicly available summary information on specified agency actions on their websites

and without being specifically requested. Finally, H.R. 4508 would prohibit the Secretary from

promulgating regulations regarding agencies’ established mechanisms for identifying IHEs that

may be experiencing difficulties in accomplishing their student learning and educational outcome

goals or agency policies and procedures relating to an IHE’s substantive change to its educational

mission or educational programs.

Credit Hour Definition

Credit hours are one measurement IHEs may use to determine how much instruction a program

must provide to students for it to be Title IV eligible and are used as a metric for determining

student work and achievement.69 Regulations define the term “credit hour” and establish certain

procedures that ED-recognized accrediting agencies and state authorizing agencies must have in

place to determine whether an institution’s assigned of a credit hour meets federal standards.70

H.R. 4508 would repeal the regulatory definition of credit hour71 and prohibit the Secretary from

promulgating or enforcing any rules or regulations relating to the term credit hour.

Programmatic Loan Repayment Rate

For accountability purposes, the HEA currently requires the use of limited student outcome

metrics as indicators of institutional quality. Most notably, IHEs must meet cohort default rate

(CDRs) requirements to maintain Title IV eligibility. HEA Section 435 specifies that IHEs with

high CDRs for a specified number of years may lose Title IV eligibility. The CDR is the

percentage of an IHE’s FFEL and Direct Loan program Stafford (Subsidized) and Unsubsidized

Loan recipients who enter repayment in a given fiscal year and who default prior to the end of the

second succeeding fiscal year. H.R. 4508 would sunset the CDR provisions during a transition

period and would establish a new accountability metric for Title IV participation. This new metric

would be a programmatic loan repayment rate (PLRR). The CDR transition period would end on

the date on which the Secretary publishes programmatic loan repayment rates that would be

newly established under H.R. 4508 for FY2018.

69 When promulgating the regulations, ED stated “We believe that the definition of a credit hour in § 600.2 in these

final regulations emphasizes that institutions may award credit to courses for an amount of work represented by

verifiable student achievement of institutionally established learning outcomes.” Department of Education, “Program

Integrity Issues,” 75 Federal Register 66846, October 29, 2010.

70 34 C.F.R. §§600.2, 602.24, 603.24, and 668.8.

71 See 34 C.F.R. §600.2.

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In general, the PLRR would apply to each educational program at an IHE and would be defined

as the number of current and former students who enter repayment on their qualified federal

student loans in a fiscal year and who are in a “positive repayment status” on each such loan at

the end of the second succeeding fiscal year.72 Positive repayment status would be defined as

borrowers who are less than 90 days delinquent on their loans, who have repaid their loans in full,

or who are in specified periods of deferment or forbearance on their loans. An educational

program with PLRRs of less than 45% for each of the three most recent fiscal years would lose

Title IV eligibility for the remainder of the fiscal year in which the determination was made and

for the two succeeding fiscal years. The loan repayment metrics would be established with the

presumption being that if an educational program’s loan repayment rate meets the specified

thresholds, then its educational offerings are of sufficient quality such that borrowers should be

able to remain in good standing on the repayment of loans. The bill would also provide for a

transition period during which both CDRs and PLRRs would be calculated.

Return of Title IV Aid

To address issues of waste and abuse in the Title IV aid programs and to minimize loan defaults,

in the Higher Education Amendments of 1992 (P.L. 102-325), Congress enacted provisions that

specify how and when Title IV funds shall be returned to ED by a school and/or student when a

student withdraws from school.73 HEA Section 484B specifies that when a Title IV aid recipient

withdraws from an IHE before the end of the payment or enrollment period for which funds were

disbursed, Title IV funds must be returned to ED according to a statutorily prescribed schedule. In

general, when a student withdraws from an IHE, an IHE first determines the portion of Title IV

aid considered to be earned by the student while enrolled and the portion considered to be

unearned. Unearned aid must be returned to ED. Up to the 60% point of a payment or enrollment

period, unearned funds must be returned on a pro rata schedule. After the 60% point, the total

amount of funds awarded is considered to have been earned by the student and no funds are

required to be returned. Whether an IHE and/or the student is required to return the funds to ED

depends on a variety of circumstances, including whether Title IV funds have been applied

directly to a student’s institutional charges. Unearned funds must be returned to their respective

programs in a specified order, with loans being returned first, followed by Pell Grants, and then

other Title IV aid. In some instances, a student may have earned more aid than has been

disbursed, and the difference is disbursed to the student after the student withdraws.

H.R. 4508 would reduce the rate at which federal student aid would be considered as having been

earned by a student and would require IHEs to return a larger portion of aid after a student

withdraws than under current law. This may ultimately provide financial incentives for IHEs to

work toward ensuring that their students complete their period of enrollment and, thus, boost

educational and fiscal accountability. H.R. 4508 would also require IHEs to return Pell Grant

funds first, then loans, and finally other Title IV aid. Aid would be classified as either having been

earned or unearned by the student according to the following schedule. If the student completed





0% to 24% of the payment or enrollment period, 0% of Title IV aid would be

earned and 100% would be unearned;

25% to 49% of the payment or enrollment period, 25% of Title IV aid would be

earned and 75% would be unearned;

72 Education programs that can demonstrate a low borrower participation rate may appeal the application of the PLRR.

73 U.S. Congress, House Committee on Education and Labor, Higher Education Amendments of 1992, report to

accompany H.R. 3553, 102nd Cong., 2nd sess., February 27, 1992, H.Rept. 102-447 (Washington: GPO, 1992), p. 10.

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



50% to 74% of the payment or enrollment period, 50% of Title IV aid would be

earned and 50% would be unearned; or

75% to 99% of the payment or enrollment period, 75% of Title IV aid would be

earned and 25% would be unearned.

IHEs would be permitted to require a student to pay to the IHE up to 10% of the amount of

unearned aid required to be returned to ED by the IHE. In addition, H.R. 4508 would allow IHEs

to design institutional policies regarding student eligibility for and amounts of post-withdrawal

aid disbursements. Finally, the bill would require IHEs to first return Pell Grants, then loans, and

finally other Title IV aid.

Financial Responsibility

Another condition of Title IV institutional eligibility is certification by ED, wherein ED is

responsible for, among other actions, evaluating an IHE’s financial responsibility to administer

the Title IV programs.

HEA, Section 498(c) specifies that, among other criteria, a public IHE meets Title IV financial

responsibility standards if its debts and liabilities are backed by the full faith and credit of a state

or another government entity, and a proprietary or nonprofit IHE is financially responsible if it

meets specific financial ratios established by ED (known as a composite score).74 Regulations

provide specificity to these requirements and provide for additional oversight of IHEs that do not

meet all of the financial responsibility standards.75

H.R. 4508 would retain many of the current financial responsibility standards and expand the

conditions under which an IHE may be considered financially responsible. The bill would also

require the Secretary to establish policies and procedures to address an IHE’s failure to meet

financial responsibility standards that would include providing additional oversight and cash

monitoring restrictions, as appropriate, allowing an IHE to submit third-party financial guarantees

to ED; and providing for the removal of such requirements once financial responsibility standards

are met.

The 90/10 Rule

To address issues of waste and abuse in the Title IV aid programs and concerns that proprietary

institutions were failing to consistently provide students with a quality education or training and

focusing instead on obtaining federal student aid dollars, Congress adopted the predecessor to the

90/10 Rule (the 85/15 Rule) in the Higher Education Amendments of 1992 (P.L. 102-325).76

Under the 90/10 Rule, proprietary IHEs may not derive less than 10% of their revenues from nonTitle IV funds for any two consecutive years (i.e., no more than 90% of their revenues can come

from Title IV funds). If a school does so, it loses its Title IV eligibility for at least two years.77

The presumption underlying the rule is that if a proprietary IHE is providing a high-quality

education, they should be able to attract a specific percentage of their revenue from non-Title IV

sources. H.R. 4508 would repeal the 90/10 Rule.

74 In evaluating an IHE’s financial responsibility, ED will calculate a composite score based on its equity, primary, and

net income ratios. 34 C.F.R. §668.172.

75 34 C.F.R. §668 Subpart L.

76 See, for example, U.S. Government Accountability Office, Testimony: Ensuring Quality Education from Proprietary

Institutions, GAO/T-HEHS-96-158, June 6, 1996.

77 HEA §487(a)(24) and (d)(2).

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Student Financial Aid Counseling and Information

As a condition of Direct Loan program participation, IHEs are required to provide a variety of

information related to Direct Loans to borrowers. H.R. 4508 would make several changes to these

requirements.

Student Financial Counseling

HEA Section 485(l) requires IHEs to provide entrance counseling to enrolled students who are

first-time Direct Loan borrowers at or prior to the time of disbursement of Direct Loans.78

Individuals who only receive Pell Grants are not required to undergo any statutorily prescribed

financial aid counseling, but any Pell Grant recipients who are also first-time Direct Loan

borrowers are required to undergo student loan entrance counseling. HEA Section 485(l) specifies

the information that must be provided in entrance counseling, which generally relates to loan

terms and conditions and borrower rights and responsibilities. HEA Section 485(b) requires IHEs

to provide all Title IV loan borrowers (except parents borrowing on behalf of their dependent

students and borrowers of Consolidation Loan) with exit counseling if they are graduating,

leaving school, or dropping below half-time enrollment. The information provided in the exit

counseling generally pertains to available repayment plans and debt management strategies and to

borrower rights and responsibilities in relation to the loan. IHEs may develop their own entrance

and exit counseling or they may use the ED-developed online entrance and exit counseling

tools.79

H.R. 4508 would replace entrance counseling with a requirement that financial aid counseling be

provided annually. All students who are Title IV loan borrowers (except Consolidation Loan

borrowers) and/or Pell Grant recipients, and all parent borrowers of Direct PLUS Loans and

Federal ONE Parent Loans would be required to receive counseling for each award year for

which the individual receives aid. The bill would require that specified information be given to all

Title IV recipients and that additional specified information be given to individuals on the basis of

the types of federal student aid received. For instance, it would require that Pell Grant recipients

receive an explanation of the terms and conditions of the Pell Grant and a statement of the

amount of enrollment periods remaining for which the student may be eligible to receive future

Pell Grants. For all loan borrowers, the bill would require that financial counseling include the

anticipated monthly payment amount under the Standard repayment plan and, for enrolled

students who borrow loans, the anticipated monthly payments amount under an income-based

repayment plan.

H.R. 4508 would retain the current exit counseling requirements and would require some

additional information to be provided to all Title IV borrowers (other than parents borrowing on

behalf of their dependent students). New information to be included in exit counseling would

include a summary of the outstanding balance and principal due on all Title IV loans, an

78 In general, entrance counseling is not required for borrowers of Direct PLUS Loans who are parents borrowing on

behalf of their dependent students. However, as of March 2015, regulations specify that special loan counseling is

required for any PLUS loan applicant, including parent borrowers, who has an adverse credit history but who otherwise

qualifies for a PLUS loan. 34 C.F.R. §685.200(c)(2)(viii)(A) and U.S. Department of Education, “Early

Implementation of Changes in Regulations on Adverse Credit History Under the Direct PLUS Loan Program,”

electronic announcement, January 27, 2015.

79 See Office of Federal Student aid “Entrance Counseling,” https://studentloans.gov/myDirectLoan/

counselingInstructions.action?counselingType=entrance and Office of Federal Student Aid, “Exit Counseling,”

https://studentloans.gov/myDirectLoan/exitCounseling.action?execution=e1s1.

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explanation of the grace period preceding repayment, and information on available repayment

plans based on the borrower’s outstanding loan balance.

Finally, H.R. 4508 would require IHEs to provide annual and exit counseling through the use of

interactive programs. IHEs could develop their own counseling programs or use an ED-developed

online tool. The bill would require the Secretary to develop a consumer-tested online tool for

annual and exit counseling.

Student Loan Plain Language Disclosure Form and Annual Loan Acceptance

Under current law, the terms and conditions of federal student loans are specified in a Master

Promissory Note (MPN). The MPN must be read and signed by the borrower before loan funds

may be disbursed. IHEs may choose to use MPNs with a multi- or single-year feature. IHEs that

use a single-year MPN may only make loans under the MPN for one academic year. IHEs that use

the multi-year feature may make one of more Direct Loans to borrowers for multiple award years

for up to 10 academic years. IHEs that use a multiyear MPN must confirm a borrower’s

acceptance of a new Direct Loan for subsequent years by either obtaining written confirmation

from the borrower (active confirmation) or by receiving notification from the borrower that he or

she is specifically declining the loan in whole or in part (passive confirmation).80 In addition, a

Plain Language Disclosure (PLD) form explains loan terms and conditions in simplified terms

and is provided with an MPN and prior to each disbursement of a Direct Loan, regardless of

whether an IHE uses a single-year or multi-year MPN.81

H.R. 4508 would amend existing requirements for the PLD so that it would also disclose the

annual percentage rate (APR) of the loan, as calculated using a standard 10-year repayment term.

It would require the Secretary, within 24 months of enactment, to develop a new PLD, based on

consumer testing and in consultation with the Federal Reserve Board, student borrowers, and

other stakeholders. The new PLD would be required to include personalized information about

the borrower and the borrower’s loans. H.R. 4508 would also require borrowers to acknowledge

in writing having read the PLD prior to disbursement for the year that a loan is obtained.

HEA Administrative Functions

The Department of Education (ED) administers the various programs authorized under the HEA.

In administering these programs, the Secretary has authority to undertake a variety of functions

including engaging in rulemaking, monitoring and enforcing program requirements, and entering

into contracts for supplies and services. Multiple offices within ED may undertake any or all of

these tasks; however, two primary offices performing HEA administrative functions are the Office

of Postsecondary Education (OPE) and the Office of Federal Student Aid (FSA).82 Several

statutes specify provisions that apply to ED administrative functions in general;83 and the HEA

80 34 C.F.R. §668.165(a),

81 HEA Sections 433(a) and 455(p) require Direct Loan participating IHEs to make a variety of disclosures related to

loan terms and conditions to borrowers throughout various phases of the lending relationship. HEA Section

432(m)(2)(D) requires the Secretary to develop and require the use of the MPN. Neither the HEA nor regulations

require ED to develop a PLD; however, ED has developed a PLD to enable IHEs to meet HEA Section 433(a)

disclosure requirements.

82 Typically, OPE is responsible for the development and promulgation of policies and regulations relating to Title IV

programs, while FSA is responsible for the day-to-day operational functions of the Title IV program and the

enforcement of Title IV requirements.

83 For instance, the General Education Provisions Act contains statutory provisions that are applicable to the majority of

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supplements or provides specificity to these provisions. This section of the report describes the

changes H.R. 4508 would make to the several HEA administrative functions.

Rulemaking

HEA Section 492 specifies several requirements the Secretary must meet in promulgating

regulations for the Title IV federal student aid programs. In general, the Secretary must provide

for a comprehensive exchange of information in developing proposed Title IV regulations

through mechanisms such as regional meetings and must engage in negotiated rulemaking.

H.R. 4508 would retain these requirements and add further steps the Secretary must take when

promulgating Title IV regulations. New requirements would include providing information to the

authorizing committees about certain actions taken as part of the rulemaking process, including

notice of ED’s intent to establish a negotiated rulemaking committee and a copy of proposed

regulations.84 After providing notice of each of these actions, the Secretary would not be

permitted to proceed with the rulemaking process until the authorizing committees have had a

sufficient amount of time to comment on the proposals and, if necessary, the Secretary has

responded to such comments.

H.R. 4508 would provide multiple general secretarial prohibitions relating to Title IV rulemaking,

including explicitly prohibiting the Secretary from defining any term used in the HEA in a

manner that is inconsistent with the HEA and imposing a condition of participation in an HEA

program that exceeds the scope of requirements specifically set forth in the HEA.

The Office of Federal Student Aid

HEA Section 141 establishes FSA as a performance-based organization,85 operating as a discrete

management unit with ED and responsible for the administrative and oversight functions

supporting the Title IV federal student aid programs. The administrative functions for which FSA

is responsible include collecting and transmitting data to federal student aid stakeholders,

providing customer service and support related to Title IV administration, ensuring the integrity

of the Title IV programs, and annually developing a budget. The Secretary may also allocate

additional functions to FSA as necessary and appropriate. FSA is led by a Chief Operating Officer

(COO) who is appointed by the Secretary, and by other senior managers who are appointed by the

COO. Annually, the COO and the Secretary develop an FSA performance plan for the succeeding

five years that establishes goals and objectives for FSA that addresses specified areas. In

developing the performance plan, FSA is required to consult with stakeholders such as students

and IHEs.

federal education programs administered by ED, as well as provisions related to the powers and responsibilities of ED.

For additional information, see CRS Report R41119, General Education Provisions Act (GEPA): Overview and Issues,

by (name redacted) and (name redacted)

.

84 House Committee on Education and the Workforce and the Senate Committee on Health, Education, Labor, and

Pensions.

85 Performance-based organizations are intended to be results-driven organizations that have clear objectives and

measureable goals intended to improve an agency’s performance and transparency. PBOs are led by chief executives

who are personally accountable for meeting measurable goals within the organization. In exchange, PBOs are granted

greater discretion to operate more like private sector companies, with more control over budget, personnel decisions,

and procurement. For additional information, see CRS Report R44845, Administration of the William D. Ford Federal

Direct Loan Program, by (name redacted) .

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H.R. 4508 would make multiple changes to HEA Section 141 that largely relate to additional

oversight and accountability of FSA. It would require FSA to collect input from stakeholders on

the operation of Title IV programs and accountability practices and to address operational

transparency in its performance plan.86 H.R. 4508 would also require the Secretary to develop a

performance evaluation system for the COO and senior managers and to establish an advisory

board to conduct oversight of FSA to ensure it is meeting its performance plan goals.

Finally, to improve transparency in the federal student aid programs as a whole, H.R. 4508 would

direct the Secretary and FSA to collect and publish on a publicly accessible website a variety of

information on the performance of the Title IV student loans programs.87

Student Aid Contracts

HEA Section 456 requires the Secretary, to the extent practicable, to award contracts for the

origination, servicing, and collections of Direct Loans88 and other ED-held loans.89 Operating

under this general authority, FSA is the office within ED that is responsible for and maintains

contracts for servicing and collections. HEA Section 142 provides FSA with procurement

flexibility in procuring property and services for student aid administration and requires FSA, to

the extent practicable, to maximize the use of performance-based contracts.90 Beyond these

statutory requirements, however, the HEA is relatively silent regarding student aid procurement.

H.R. 4508 would largely maintain the provisions of Section 456 (but would relocate them to a

new Section 493E), would extend to the Secretary authority to award contracts for the origination,

servicing, and collection of Federal ONE Loans, and would establish some specific procedures

for ED to follow in allocating new borrower loan accounts to contracted loan servicers. H.R. 4508

would require ED to develop and biannually update a guidance manual for contracted loan

servicers. The bill would also provide for federal preemption of state and local laws relating to

several activities associated with student loan origination, servicing, and collections, such as

disclosure requirements.

Administrative Expenses

HEA, Title IV, Part D, provides authorization for indefinite discretionary funding to be

appropriated for administrative expenses for the FFEL program and the Direct Loan program; and

86 H.R. 4508 would also require that the performance plan be developed not less than every three years for the

succeeding three year period and that the Secretary consult with stakeholders regarding any subsequent revisions to the

plan.

87 FSA currently makes available data on numerous aspects of the Title IV student aid programs. See Office of Federal

Student Aid “The Federal Student Aid Data Center,” at https://studentaid.ed.gov/sa/data-center.

88 For additional information on Direct Loan servicing and collections, see CRS Report R44845, Administration of the

William D. Ford Federal Direct Loan Program, by (name redacted) .

89 In 2008, the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA; P.L. 110-227) granted ED the

temporary authority to purchase student loans made under the FFEL program. In 2008, the Higher Education

Opportunity Act (HEOA; P.L. 110-315) extended ED’s temporary purchase authority through July 1, 2010. After

purchasing loans made under the FFEL program, control of loan servicing was transferred to ED. In addition, in some

instances, ED may hold Perkins Loans that IHEs do not otherwise service; thus, control of Perkins Loan servicing is

transferred to ED.

90 Performance-based contracts are those in which FSA specifies desired results and the contractor has discretion to

decide how best to achieve them. The use of performance-based contracts is intended to promote competition among

federal student loan servicers to provide the best possible services to FSA borrowers.

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for mandatory funding to be obligated for account maintenance fees payable to FFEL program

guaranty agencies.

H.R. 4508 would amend the HEA to authorize the appropriation of indefinite discretionary

funding for administrative costs for all the various programs authorized under Title IV of the

HEA for FY2019 through FY2024. It would also extend the authority for mandatory funding to

be obligated for account maintenance fees for guaranty agencies through FY2024; and would

provide $50 million for FY2019 for the Secretary to provide technical assistance to IHEs that

participate in the federal student loan programs.

Public Accountability, Transparency, and Reporting

of Consumer Information

The HEA contains several provisions relating to public accountability, transparency, and

consumer information. Many of these provisions are aimed at providing information to

consumers to enable them to make informed college-going decisions. H.R. 4508 would make

several changes relating to these topics.

Institutional Information for Students

HEA Section 485(a) requires IHEs to disseminate to current and prospective students a variety of

information related to the institution in general (e.g., information on the cost of attending the

institution). Information to be disseminated also includes numerous student enrollment and

outcome measures such as student body diversity statistics, the retention and completion rates of

students disaggregated for certain groups of students, and employment placement rates of the

institution’s graduates.

H.R. 4508 would eliminate many of the dissemination requirements relating to institutional

student enrollment and outcome measures, but would require IHEs to include on their websites a

link to the new authorized College Dashboard website, which would contain a variety of

institutional student enrollment and outcome measures and which is described later in this section

of the report.

Cost of Higher Education

Provisions in HEA, Title I, Part C generally address issues related to college affordability and to

the collection and dissemination of consumer information to students and the public. Selected

Title I-C requirements include the following:







The Secretary must administer a College Navigator website through which

certain consumer information about IHEs is made publicly available. The College

Navigator website primarily presents information that is collected through the

Integrated Postsecondary Education Data System (IPEDS) institutional data

collection. The College Navigator includes multi-year tuition calculators for

IHEs.

The Secretary must publish College Affordability and Transparency Lists, which

identify the IHEs with the highest and lowest tuition and fees and net prices.

The Secretary must publish State Higher Education Spending Charts, which

present information on changes in state funding for postsecondary education.

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

IHEs must make available Net Price Calculators on their websites. These allow

prospective students to obtain individual estimates of the net price of an

institution, taking into account the financial aid they might be likely to receive.

The federal government is prohibited from developing, implementing, or maintaining a federal

student record database containing the personally identifiable information of students, except with

regard to systems necessary for the operation of programs authorized under Title IV, Title IV, or

Title VII of the HEA that were in use by the Secretary prior to the enactment of the Higher

Education Opportunity Act of 2008 (P.L. 110-315).

College Dashboard

H.R. 4508 would amend Title I-C by renaming the College Navigator the College Dashboard and

by revising the information required to be collected and disseminated through the website.

Information not currently made available on the College Navigator that would be made available

on the College Dashboard would include, for each educational program offered by an IHE, the

average federal student loan debt of borrowers and the median earnings of Title IV aid recipients

who have completed a degree or certificate program.

Information on completion rates, net price, federal student aid receipt, student-faculty ratios, and

campus safety would continue to be disclosed on the College Dashboard. The Secretary would

also be required to make available through the College Dashboard links to information on student

enrollment, data on completion rates disaggregated for different types of students, data on college

costs, financial aid receipt, and rates of repayment on federal student loans, and links to

institutional Net Price Calculators. Individuals who complete a FAFSA would be required to be

provided with a link to the information made available through the College Dashboard.

Under H.R. 4508, information that would no longer be made available would include data on the

number of applicants, the percentages who were admitted and who enrolled, and the SAT and

ACT scores of applicants who enrolled.

Data Collection

Within two years of enactment of the bill, the Secretary would be required to complete a review

of all HEA institutional data reporting requirements to identify any that are duplicative or no

longer necessary to provide information for compliance, accountability, or transparency in

decision-making. The Secretary would also be required to examine approaches for best collecting

data from institutions on all students concerning their enrollment, retention, transfer, completion,

and post-collegiate earnings with an aim of limiting collection burden while also capturing

sufficient information to ensure compliance, accountability, and transparency in decision-making.

In completing this task, the Secretary would be required to explore the feasibility of working with

the National Student Clearinghouse to collect data on individual students as a third party agent.91

The Secretary would be required to implement changes to data collection as necessary, and to

submit a report to the authorizing committees92 on any legislative changes needed to facilitate

improvements in data collection.

91 The National Student Clearinghouse is a tax-exempt, 501(c)(4) nonprofit social welfare organization that serves the

education community by facilitating the exchange and understanding of student enrollment, performance, and related

information. National Student Clearinghouse, http://www.studentclearinghouse.org/, accessed January 9, 2018.

92 House Committee on Education and the Workforce and the Senate Committee on Health, Education, Labor, and

Pensions.

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Repeals

H.R. 4508 would repeal Title I-C requirements pertaining to College Affordability and

Transparency Lists, State Higher Education Spending Charts, and Multi-Year Tuition Calculators.

Accountability for Programs that Prepare Teachers

HEA, Title II contains provisions intended to hold teacher preparation programs accountable for

preparing highly qualified teachers and to improve the quality of prospective and new teachers.93

Title II requires ED to issue an annual report on the quality of teacher preparation in the United

States. ED’s report is based on information provided by states that, in order to receive HEA

funds, are required to collect information from every teacher preparation program in the state,

including those programs that provide “traditional” and/or “alternative” routes to state teacher

certification or licensure. ED’s report must contain all state-provided information, which includes

a wide array of data used by the state to assess preparation program and teacher candidate

performance. In addition, Title II stipulates that in order to receive funds under the HEA, each

state must conduct an assessment to identify low-performing teacher preparation programs in the

state and report on such findings to ED. Finally, Title II authorizes a variety of grants and

programs to enhance teacher education and preparation. Although the Title II, Part A, Teacher

Quality Partnership program has consistently received appropriations ($43.1 million in FY2017),

several other Title II programs have not been funded in several years.

H.R. 4508 would repeal all current provisions in HEA Title II and insert a new Title II that would

authorize a new grant program to expand earn-and-learn programs (discussed later in this report).

Protection of Student Speech, Association of Rights,

and Religious Institutional Missions

The HEA expresses the sense of Congress relating to the protection of student speech and

association rights and addresses the treatment of religious IHEs by accrediting agencies. This

section of the report describes some of the changes H.R. 4508 would make related to these topics.

Protection of Student Speech and Association of Rights

HEA Section 112 expresses the sense of Congress that no student of an IHE should be excluded

from participation in, be denied the benefits of, or be subjected to discrimination or official

sanction under any education program or activity based on participation in protected speech or

protected association.

H.R. 4508 would amend HEA Section 112 to additionally express the sense of that individuals

should be free to profess religious opinions on campus without impacting their civil liberties and

that free speech zones and restrictive speech codes are inherently at odds with the First

Amendment of the U.S. Constitution and should not be used by IHEs to restrict free speech. It

would require all IHEs receiving funds under the HEA to annually certify that they have disclosed

to current and prospective students institutional policies related to protected speech on campus

and would require the Secretary to establish procedures to resolve submitted complaints regarding

IHEs believed not to be in compliance with the disclosure requirements.

93 For additional information on Title II, see CRS Report R43351, The Higher Education Act (HEA): A Primer, by

(name redacted) .

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H.R. 4508 would create a new HEA Section 122 that would specify that no funds made available

under the HEA may be provided to any public IHE that denies a religious student organization

any right, benefit, or privilege that is generally afforded to other student organizations at the

institution because of the organization’s religious beliefs or practices. Finally, the bill would

create a new Section 125 that would prohibit IHEs with policies allowing for the official

recognition of single-sex student organizations from requiring or coercing such recognized

organizations to admit or permit participation of members of the opposite sex.

Protection of Religious Institutional Missions

HEA Section 496(a) specifies that ED-recognized accrediting agencies must consistently apply

and enforce accreditation standards with respect to an IHE’s stated mission, including missions

that are religious in nature. HEA Section 496(k) requires the Secretary to maintain the Title IV

eligibility of a religious institution whose loss of accreditation, whether voluntary or not, is

related to its religious mission or affiliation and not to HEA accreditation standards for a period

sufficient for the institution to obtain accreditation from another accrediting agency.

H.R. 4508 would amend Section 496(k) by specifying that a standard used by an accreditation

agency fails to respect an IHE’s religious mission if the IHE determines that the standard induces,

pressures, or coerces the institution to act contrary to any aspect of its religious mission. It would

also establish a process through which an IHE may file a complaint with the Secretary against the

accreditation agency for failing to respect its religious mission. The bill would prohibit the

Secretary from issuing guidance, “or otherwise determine or suggest, when discussions to remedy

the failure by an accrediting agency or association to respect the religious mission of an

institution of higher education ... have failed or will fail.”

H.R. 4508 would also create a new HEA Section 124 that generally would prohibit a government

entity from taking an adverse action against a Title IV IHE that would have the effect of

prohibiting or penalizing the IHE for its acts or omissions that are in furtherance of its religious

mission or are related to its religious affiliation.

Campus Safety and Sexual Violence at IHEs

The HEA contains several provisions related to helping ensure the safety of students and faculty

on college campuses. In general, these provisions require IHEs to disclose campus crime statistics

and to establish and disseminate campus safety and security policies and procedures.94 H.R. 4508

would make several changes to the HEA that relate to campus security in general and specifically

to sexual violence.

Clery Act Requirements

HEA Section 485(f), referred to as the Clery Act, generally requires Title IV participating IHEs to

report to ED and disseminate to students in their annual security reports (ASRs) campus crime

statistics and campus safety and security policies. These requirements apply to sexual violence95

on campus and to other crimes and offenses specified in statue. ASRs must contain statements of

94 For information on two federal statutes that address sexual violence on college campuses, see CRS Report R43764,

Sexual Violence at Institutions of Higher Education, by (name redacted) and (name redacted).

95 For purposes of this report, sexual violence includes the following crimes specified in the Clery Act: domestic

violence, dating violence, sexual assault, or stalking.

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campus policies relating to alleged sexual violence, including procedures for institutional

disciplinary actions and the standard of evidence the IHE uses in disciplinary proceedings.

H.R. 4508 would add some specificity to procedures for institutional disciplinary actions that

must be used by IHEs. It would require that any institutional investigation into an alleged incident

of sexual violence must ensure all parties to a proceeding have access to all material evidence

within a specified timeframe and that the proceeding is free from conflicts of interest. H.R. 4508

would also specify that an IHE may establish a standard of evide

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