Congress Tackles Student Loan Debt and
Other Important Federal Financial Aid Issues with a Variety of Solutions

This year, both the U.S. House of Representatives and the U.S. Senate are in the process of reviewing and renewing the Higher Education Act, the federal law that guides our nation’s investment in post-secondary study. This reauthorization process began earlier in the 108th Congress and remains a work in progress as the House Education and the Workforce Committee and the Senate Health Education Labor and Pensions Committee grapple with making changes that seek to improve the law. What stands in the way? A number of issues actually: few legislative days left in this Congress; election year posturing and politics and honest disagreements between parties and “bodies” as to what "improves" the law for our nation’s college students.


COMMITTEE LEGISLATION INTRODUCED

PSYCHOLOGISTS AND THEIR DEBT

LOANS: HELPING TO MAKE THE DIFFERENCE

TAX POLICY: DON’T OVER LOOK BENEFITS FOUND IN THE TAX CODE

HIGHER EDUCATION ACT AND OTHER FEDERAL LEGISLATION IS RELEVANT TO YOU!

YOU HAVE A STORY TO TELL!

YOUR MESSAGE

TABLE OF BILLS INTRODUCED IN THE 108TH CONGRESS THAT WOULD AFFECT FEDERAL STUDENT LOAN PROGRAMS, TAX TREATMENT OF SCHOLARSHIPS, STUDENT LOAN DEBT, ETC.


COMMITTEE LEGISLATION INTRODUCED

On May 5th 2004, Rep. John Boehner (R-OH), Chairman of the House Education and the Workforce Committee along with Rep. Buck McKeon (R-CA), Chairman of the Subcommittee on 21st Century Competitiveness introduced H.R. 4283, the College Access and Opportunity Act. This legislation tackles the heart of the Higher Education Act, the federal student financial assistance programs, which include: Pell grants, Campus Based Aid (including Work-study), Perkins Loans, Federal Family Education Loan Program, Direct Loan Program, Need Analysis, and Program Accreditation.

A number of hearings have been held to discuss and debate programs included in this legislation. On May 12, 2004, the House Education and the Workforce held a hearing on the proposed legislation. Members of the committee heard from a variety of witnesses each offered a different perspective on the merits of the bill – and a myriad of perspectives on how to improve the Higher Education Act. Throughout this first hearing on H.R. 4283, there was lively debate about the different possibilities for ensuring that young people are provided the “best” opportunities for entering and completing post-secondary degrees. A second hearing entitled, ”H.R. 4283, the College Access & Opportunity Act: Are Students at Proprietary Institutions Treated Equitably Under Current Law?" was held on June 16th. Finally, on June 22nd, members of the committee heard witnesses on the topic of “H.R. 4283, the College Access & Opportunity Act:
Does Accreditation Provide Students and Parents Accountability and Quality?” For additional information on the hearings held to date on HR 4283, click onto:

May 12, 2004 Hearing on H.R. 4283, the College Access & Opportunity Act

June 16, 2004Hearing on "H.R. 4283, the College Access & Opportunity Act: Are Students at Proprietary Institutions Treated Equitably Under Current Law?"

June 22, 2004 Hearing on “H.R. 4283, the College Access & Opportunity Act: 
Does Accreditation Provide Students and Parents Accountability and Quality?”

PSYCHOLOGISTS AND THEIR DEBT

In general, APA has a great deal of interest in the higher education legislation – and our association has made significant progress in pursuing significant and valuable changes to the Act. In addition to our broad association-wide interests in education, science and the public interest, certainly and importantly, our undergraduate and graduate students in psychology have a particularly special interest in this law.

Newly minted psychologists are unique in many respects, yet like many of their colleagues who have pursued graduate degrees, they finish school saddled with significant debt from pursuing their career dreams. [See gradPSYCH, April 2004/]. A 2001 Doctorate Employment Survey made note of the primary sources of financial support for recent graduates were university research or teaching assistantships (32%); loans (30%); own earnings/family support (27%); and grants (5%), (with 6% not specified).

LOANS: HELPING TO MAKE THE DIFFERENCE

Most psychology doctoral candidates are quite familiar with the federal student loan programs. The U.S. Department of Education operates two major federal student loan programs: the Federal Family Education Loan Program (FFEL) and the William D. Ford Direct Loan Program (Direct Loans). Dependent on a student’s financial need, the loans made under these programs may either be subsidized or unsubsidized. The federal government pays the interest on subsidized loans while the student is in school and during a grace and deferment periods. Unsubsidized loans offer the same interest rates but the federal government does not pay the interest on these loans. Finally, consolidation loans allow borrowers to combine multiple student loans into one loan as well as offer extended repayment options.

Loans, while an extraordinary benefit in many respects, can also result in an enormous, seemingly insurmountable burden to students upon graduation from a doctoral program. In fact, according to a recent gradPSYCH article, “Twenty-six percent of psychology doctoral graduates reported a debt of $75,000 or higher and the average debt for a psychology doctoral grad is $53,111 according to the 2001 Doctorate Employment Survey by APA’s research office.” Carrying that kind of significant debt has real repercussions in post-graduate life including passing up lower paying public service jobs for fear of not being able to pay back loans, forgoing savings, and delaying the purchase of a first home. For additional information on doctoral debt and careers in psychology, please check out the power point presentation done by APA’s research office:

Yesterday, Today, and Tomorrow Careers in Psychology: 2004 What Students Need to Know [PDF]
*Requires free download of Adobe Reader.

TAX POLICY: DON’T OVER LOOK BENEFITS FOUND IN THE TAX CODE

Doctoral students have a stake in federal tax policy as well. There are a number of bills that have been introduced this Congress that make changes to federal tax policies intended to benefit graduate students. One such bill is HR 3412. On October 30th, 2003 Rep. Phil English (R-PA) introduced “the Higher Education Affordability and Equity Act” (HR 3412). The bill was jointly referred to the House Ways and Means Committee and the House Education and the Workforce Committee. It is currently co-sponsored by 23 members - both Republican and Democrat - of the U.S. House of Representatives. This legislation would allow a taxpayer to deduct the full amount of their student loan interest; allow tax-free treatment of scholarships including room and board; increase allowable contributions to Educational Savings Accounts; and make permanent some previously enacted tax provisions for college savings.

With regard to the benefits to graduate students, the legislation offers significant and positive changes that will make graduate study more affordable. HR 3412 would make student loan interest fully-tax deductible for higher income levels. Further, in terms of the current tax treatment of scholarships, fellowships and grants, they are only tax exempt if used for tuition, required fees and books. The legislation proposed by Rep. Phil English would expand the exemption to include all related costs of education including room and board, and special needs services.

This is one example, among many that graduate students may be interested in following during the remainder of this Congress – and throughout the 109th Congress. (See list below or search for bills via this site by sponsor, by committee referral or by key word.)

HIGHER EDUCATION ACT AND OTHER FEDERAL LEGISLATION IS RELEVANT TO YOU!

Why is the Higher Education Act relevant to prospective psychologists as well as new graduates, regardless of what field/specialty they have pursued? Within this law, both through mandatory and discretionary spending, it outlines the way the federal student loan programs work, including setting interest rate maximums, rules around consolidation and sets or eliminates fees associated with taking out a loan. It defines the parameters of the federal grant programs, work-study programs and aid for institutions and graduate school grant assistance.

In addition to the awaited introduction of the College Access and Opportunity Act of 2004 (HR 4283), during this congressional session, there have been a number of bills introduced that amend provisions relating to the student loan programs and the tax treatment of scholarships, fellowships and grants.

AND YOU HAVE A STORY TO TELL!

Your personal story can be a great informational tool for Members of Congress. Explaining the details about your debt burden and how it has affected your choices of career, your ability to plan and save for your future; your ability to invest in our nation’s economy by purchasing a house, helps to educate Members of Congress in both the U.S. House of Representatives and the U.S. Senate, about the real life consequences of the decisions they make with regard to the Higher Education Act as well as other relevant tax proposals.

YOUR MESSAGE

It’s easy to get involved to make sure your Senators and Representative hear your voice on these important issues. You do not have to be an expert on any of the specific legislative proposals listed below in order to inform your Representative and Senators about the repercussions of carrying significant student loan debt. It can seem daunting, but while these loan issues and tax proposals are quite complex but your message does not have to be: You can simply ask Congress to make sure that folks in your shoes, with significant student loan debt, not be forgotten during this reauthorization of the Higher Education Act. Further, you can ask that they do all they can to ensure they fight for the most favorable terms for current students and recent graduates.

It’s easy to get involved. You can find your Representative by going to the US House of Representative's webpage. In the top left hand corner of the website, type in your zip-code and you will be able to link directly to your U.S. House Representative.

The following is a list of legislation proposed during the 108th Congress that would make changes to the federal student loan programs or tax treatment of scholarships, student loan debt, etc. (List is not exhaustive):