Last August, Congress signed into law the Higher Education Opportunity Act, which reauthorizes the Higher Education Act of 1965. This act is the first piece of comprehensive higher education reform legislation in 10 years and totals over 1,000 pages in length. The law is broad in scope, focusing on problems such as the complex financial aid process and the rising cost of textbooks as well as illegal file sharing on campus. This is the first in a series of three articles that examine the various aspects of this law.
College is expensive. Given the record increase in financial aid applications from 7.7 million nationally in 2007-2008 to 9.3 million for the 2008-2009 academic year, it would seem that even more people are having trouble financing college on their own. It is not surprising therefore that more and more students are taking out loans, applying for financial aid and getting into debt.
But with a lengthy application process requiring students and their parents to turn in several forms including tax returns and W-2 forms among others, many students find the process unnecessarily complex. The Higher Education Opportunity Act aims to simplify the financial aid process for future generations of students and control the rising cost of college.
As one of the most significant reform measures in over a decade, the law is forcing institutions of higher education around the country to comply with several new regulations to increase transparency and accountability in lending practices that target students while simultaneously encouraging colleges to keep price increases at a minimum.
According to Thomas Keane, director of financial aid for scholarships and policy analysis at Cornell, this law is notable in two ways. The reauthorization of the HEA alone, he said, is important because it signifies that the government suppor higher education.
“It’s a really big statement to the higher education community that the federal government supports higher education. They’ve made changes over the last 10 years in bits and pieces, but this was a comprehensive look at the law and reaffirmed that the federal government supports higher education,” he said.
He noted that government could have easily stopped funding financial aid programs.
He also pointed out that the new version of the law expands college access and support for minority and low-income students by allowing students to receive Pell Grant scholarships year-round. Originally students could only obtain grants in the fall and the spring.
To help expand college access, the law states it will “[strengthen] the TRIO and GEAR UP college readiness and support programs for low-income and first generation students.” Additionally, it expands funding for graduate student programs at historically black colleges, historic serving institutions and predominately black institutions.
Designed to help students from disadvantaged backgrounds, low-income students, first-generation college students and students with disabilities, the TRIO program helps students from middle school through post-baccalaureate degrees according to the U.S. Department of Education. Similarly, the goal of GEAR UP, an acronym for Gaining Early Awareness and Readiness for Undergraduate Programs, is to help increase the number of low-income students in college by aiding them as early as 7th grade.
The law requires that individual colleges create a user-friendly website that will provide consumers with the necessary information to determine the cost of attending college. This information would include tuition prices, graduation rates and popular majors — factors the law says are necessary for making “important education decisions.”
In addition to this website, colleges will be required to publish web-based calculators that would enable students and their families to calculate an early estimate of their expected college costs.
Keane noted that this could especially be useful for high school students who may be on the fence about attending college because of monetary concerns. Under the old system, he said “when you’re a freshman in high school you can’t really find out what your aid eligibility will be in four years. You find it out your senior year and if you haven’t taken the right courses, you have may missed an opportunity.”
However, he also said that many students do not take advantage of the current information available on the financial aid website, which was recently revamped before the law went into effect.
“When we put new consumer information, hardly anyone notices the difference between the new and old,” he said. He added that more concise information on loan and aid options will be given out through websites and publications available to students and parents.
Lack of consumer information drives the predatory loan practices that these “sunshine provisions” are trying to combat. Lending practices became especially problematic a few years ago when college financial aid directors and officers were receiving perks from certain lenders to encourage the directors to refer to students to these lenders.
In response to this, Norma Schwab, associate University counsel, said the tuition and loan clauses are known as “sunshine provisions” in order to help students get the information they need before they take out a loan and to increase transparency in lending practices. Colleges with preferred lenders will have to publish the reasons why they choose these lenders and adopt a code of conduct that states they will not accept gifts, according to Keane. Lenders will be chosen by a committee of people to ensure transparency.
Melissa Salmanowitz, spokeswoman for the Committee on Education and Labor, said, “The law also puts our nation’s student loan programs — which for too long have been tilted in the favor of lenders and banks — back into the hands of students by providing borrowers with critical safeguards against deceptive lender marketing practices and vital information to help them get the best deal possible on their loans.” She said these provisions will go into effect immediately.
While many schools around the country will have to re-evaluate their relationship with their lenders, Cornell appears to be ahead of the curve. C.U. got rid of preferred lenders over two years ago as the controversy started to erupt.
To increase accountability and transparency, the law “requires schools with the largest percentage increases in tuition prices to report the reasons for these increases to the U.S. Department of Education.” This is meant to embarrass colleges who do have these price hikes, according to Richard Vedder, director of the non-profit Center for College Affordability and Productivity.
Salmanowitz said the user-friendly website that reports tuition increases will be available by next summer. Lists of schools with the highest reported tuition increases will be available starting in 2011.
Schwab, who is currently reviewing the document to identify what practices within the law require disclosures of information to consumers, said she expects institutions that do not meet the requirements will most likely be given a chance to comply with the law before anything serious is enacted against them.
In the worst case scenario, “the ultimate penalty would be losing the federal assistance, but that certainly would never be imposed unless an institution was flagrantly violating the requirements,” she said.
Keane speculates that the U.S. Department of Education will check for compliance with the HEOA when the University participates in the federal audit of its financial aid program, assuming it will take the form of an audit review item.
But he is concerned that the law will require too much reporting, which would ultimately drive up administrative costs as the University searches for someone to oversee the process.
However, some critics argue that the law does not do enough to curb the rocketing costs of college or the confusion found in the financial aid process.
Comparing the new law to a band-aid, Vedder said, “It doesn’t fundamentally change the system or revamp the financial aid system to make it more simple and efficient … It’s hardly a piece of landmark legislation.”
Keane echoed similar thoughts, explaining that there were hardly any new financial aid programs or grants.
“I don’t think it’s going to hit you like ‘oh my god everyone got $3000 or that Cornell was able to reduce tuition by $8000’… It’s not that kind of a program,” he said.