Senator Michael B. Enzi
Chair, Health, Education, Labor and Pensions
United States Senate
379A Russell Senate Office Building
Washington, DC 20510

Senator Edward M. Kennedy
Ranking Member, Health, Education, Labor and Pensions
United States Senate
317 Russell Senate Office Building
Washington, DC 20510

Dear Senators Enzi and Kennedy,

The American Association of State Colleges and Universities (AASCU) offers comments on S. 1614, the Higher Education Amendments of 2005, marked up by the Senate Health, Education, Labor and Pension Committee on September 8, 2005. AASCU represents more than 430 public colleges, universities and systems of higher education throughout the United States and its territories. AASCU schools enroll more than three million students or 55 percent of the enrollment at all public four-year institutions.
Pell Grants
We strongly support the authorized increases in the Pell Grant maximum award for academic years 2006-2007 through academic 2010-2011, and the new authority for a year-round Pell Grant award. These changes in conjunction with the new Provisional Grant Assistance Program (ProGAP) will be a major contribution to minimizing debt burden and furthering access to postsecondary education for needy students. The ProGAP, in addition provides a new legislative guarantee for needy students that additional Pell funding will be available.

Loan Limits
We support the increases in first and second year loan limits in the Federal Family Education Loan program (FFEL) and Direct Loan programs (DL), while maintaining the current aggregate limits. We believe this provides needed flexibility to institutions to help students finance postsecondary education without significantly increasing overall indebtedness.

Interest On Loans In The FFEL And DL Programs
We support the provision that would recapture for the federal government the excess interest now being paid by students to lenders in these programs. We understand that the Congressional Budget Office (CBO) has scored $15 billion in savings over five years for this change, and $36 billion over ten years. We also support the changes to lender yield for loans made with certain tax-exempt bond authority, which we understand would save $1.4 billion over 5 years.

We strongly believe however, that with savings of this magnitude, resulting from the recapture of interest being paid by students, priority should be given when the bill comes to the floor, of making student borrower repayment provisions as manageable as possible. This would entail making the interest rate in both Stafford and Consolidation loans variable with a 6.8 percent cap. S.1614 as marked up would retain current law and allow Stafford interest rates to be fixed at 6.8 percent for the life of the loan, irrespective of fluctuations such as we have seen in recent years.
S.1614 would also leave Consolidation loans fixed, with an 8.25 percent cap. We believe that the interest rates for the Stafford and Consolidation loans should be the same: variable with a 6.8 percent cap, to protect student borrowers from interest rate fluctuations up or down. There are unfortunately many borrowers who consolidated under earlier law when interest rates were high and currently are paying 8-9 percent on these federal loans. We believe they should have the opportunity to consolidate again into a variable rate, capped at 6.8 percent.

Extended Repayment In The Student Loan Programs
We also propose making the same carefully constructed extended repayment terms currently available in the Direct Loan and FFEL Consolidation programs available in the FFEL Stafford program. We note that the Administration has made the same proposal. Borrowers should not have to consolidate their loans in order to get a reasonable interest rate or extended repayment. While in school, student borrowers, with access to counseling by financial aid administrators, should be able to obtain Stafford loans, whether FFEL or DL, with optimum repayment provisions.

School As Lender
We support the reforms proposed in S. 1614.

INCOME CONTINGENT REPAYMENT WITH LOAN FORGIVENESS AFTER 10 YEARS FOR PUBLIC SECTOR EMPLOYEES
We support this option in the Direct Loan program, which achieves savings according to the CBO.

Loan Forgiveness For Teachers
We support making increased benefits in this program permanent.

Student Aid Delivery System
We support the improvement proposed for the delivery of student aid to high-risk students.

College Access Initiative
We cannot support this new postsecondary education information system to be done by guaranty agencies. The current primary federal statutory requirement is for guaranty agencies to engage in default aversion, helping borrowers and lenders use the repayment flexibility available under the current law. Under current law, there is no reason for any borrower to default since the lender and guaranty agency have 270 days to "cure" a delinquency before the borrower is put into default status. We believe the guaranty agencies should concentrate their efforts on this function.

Increased Reporting Requirements
We oppose the new requirement for institutions to report the percentage of students successfully transferring academic credit from another institution. We believe this proposed reporting would significantly increase workload on institutions without providing students with useful consumer information.

We also cannot support the provisions requiring "information" regarding students who have completed a program and are placed in employment, and students who have completed a program and who enroll in graduate education. These are two major data collection goals when done properly and would require enormous institutional effort if done under the NCES IPEDS collection process.

Thank you for the opportunity to comment on this important legislation. Please feel free to contact me with any questions.

Respectfully,
Edward M. Elmendorf
Senior Vice President for Government Relations and Policy Analysis