# H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR45115 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** February 22, 2018 - **Citation:** R45115 ## Text H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act (name redacted)- Coordinator Analyst in Social Policy (name redacted) Analyst in Labor Policy (name redacted) Specialist in Education Policy (name redacted) Analyst in Education Policy (name redacted) Specialist in Education Policy (name redacted) Specialist in Education Policy Updated February 22, 2018 Congressional Research Service 7-.... www.crs.gov 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:    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 Congressional Research Service H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act      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 Congressional Research Service 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 Congressional Research Service 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 1 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.     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. Congressional Research Service R45115 · VERSION 3 · UPDATED 2 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act  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:     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. Congressional Research Service R45115 · VERSION 3 · UPDATED 3 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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:  Two grant programs: Pell Grants and Iraq and Afghanistan Service Grants. Pell Grants would be need-based aid, and both programs would be portable.  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.  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. Congressional Research Service R45115 · VERSION 3 · UPDATED 4 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 Congressional Research Service R45115 · VERSION 3 · UPDATED 5 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 6 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 7 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 Congressional Research Service R45115 · VERSION 3 · UPDATED 8 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 9 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 10 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 11 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.” Congressional Research Service R45115 · VERSION 3 · UPDATED 12 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 13 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 14 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 Congressional Research Service R45115 · VERSION 3 · UPDATED 15 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). Congressional Research Service R45115 · VERSION 3 · UPDATED 16 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 17 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 18 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 19 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 20 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 21 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 22 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 23 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. Congressional Research Service R45115 · VERSION 3 · UPDATED 24 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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%). Congressional Research Service R45115 · VERSION 3 · UPDATED 25 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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) . Congressional Research Service R45115 · VERSION 3 · UPDATED 26 H.R. 4508, the PROSPER Act: Proposed Reauthorization of the Higher Education Act 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 Repa [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR45115. Public record. Not legal advice.