Monday, July 27, 2009

AACC Summary of H.R. 3221

Below is a summary of major provisions of H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009, as reported by the House Education and Labor Committee last week:


College Modernization and Construction (Section 351)

$2.5 billion is provided in Fiscal Year 2011 to states for new community college facilities and modernizing, renovating, and repairing existing facilities. Grants can be used to:

• Reduce the financing cost of loans (such as paying interest or points on loans)
• Provide matching funds for community college capital campaigns
• Capitalize a revolving loan fund

Federal funds cannot exceed 25% of the cost of the reduced interest or matched funds.

Funds are to be distributed to states based on their relative share of the nation’s community college student enrollment. The statute appears to give states broad discretion to award funds to community colleges. Funds must be used by states to supplement, not supplant, existing funding. In addition, community colleges that received facilities funding under the American Recovery and Reinvestment Act (ARRA) or the Higher Education Act are not eligible for funding.

Grants to Eligible Entities for Community College Reform (Section 503)

$630 million per year, through FY 2013, is made available to “eligible entities” to compete for four year grants (minimum grant is $750,000) to support innovative programs or programs of demonstrated effectiveness that lead to the completion of a postsecondary degree, certificate, or industry recognized credential leading to a skilled occupation in a high-demand industry. In addition to community colleges and consortia thereof, states, area career and technical centers, and four-year colleges that serve areas not otherwise served by a community college are eligible to compete for funds; states cannot receive more than 50% of overall funding. Eligible entities must match funds provided by the Federal government, but in-kind contributions, broadly defined, may be used for the match. Hardship waivers may be granted.

Priority is given to applicants that: 1) enter into partnerships with: philanthropic or research organizations with expertise in the area of the program; businesses that help design and underwrite the program; labor organizations that provide technical expertise in programs leading to an industry credential in a high-demand industry; 2) serve non-traditional students as defined in the law; or 3) are Title III- or Title V-eligible as defined in the Higher Education Act (or are part of a consortia including one of those institutions). Among other things, applicants must partner with the state employment services and local Workforce Investment Boards.

Funds can be used for:

• Expanding opportunities for students to earn bachelor’s degrees;
• Academic or training programs, which shall be carried out in partnership with employers
• Providing student support services
• Creating workforce programs that lead to industry-recognized credentials
• Building or enhancing dual enrollment programs and early college high schools

Each eligible entity must develop quantifiable benchmarks, to be approved by the Secretary. An entity will not be able to receive the final, fourth year of funding if it has not made “demonstrable progress” towards meeting the benchmarks after three years. The benchmarks are:

1) Closing gaps in enrollment and completion rates for: groups underrepresented in higher education and groups of students at the institution who have the lowest enrollment and completion rates

2) Meeting local and regional workforce needs

3) Establishing articulation agreements between two-year and four-year public institutions of higher education within a State

4) Improving comprehensive employment and educational outcomes for postsecondary programs, including:

• Student persistence between academic years
• Number of credits earned
• Number of students in developmental education courses who subsequently enroll in credit courses
• Transfer of general education credits between institutions, as applicable
• Completion of industry-recognized credential or associate degrees to work in high-demand industries
• Transfer to four-year institutions
• Job placement related to skills training or associate degree completion.

Also, “to the maximum extent practicable,” each community college receiving a grant shall include in each electronic and printed publication of the college’s course schedule, for each course listed in the course schedule, whether such course is transferable for credit toward completion of a 4-year baccalaureate degree at a public institution in the State.

Grants to States to Implement the Systematic Reform of Community Colleges (Section 504)

Beginning on October 1, 2013, $630 million is provided annually to states to apply for grants to engage in the systematic reform of their community colleges, by carrying out the programs, services, and policies that are found by the Federal Institute of Education Sciences, after a study based on the grants awarded under Section 503 above, to have “demonstrated effectiveness.” States must have longitudinal data systems that include community colleges and meet other criteria in order to be eligible for funding. A state shall lose its funding if it has not made “demonstrable progress” in meeting quantitative benchmarks after three years.

Federal funds can comprise only half the cost of the reform programs, though financial hardship waivers are available. Federal funds must be used to supplement, not supplant, State funding. As per an AACC legislative recommendation, 90% of the state funds are to be provided directly to community colleges.

Learning and Earning Research Center

A grant shall be made to a non-Federal organization with demonstrated expertise in the research and evaluation of community colleges. The grantee is charged with a number of activities, including judging the effectiveness of community colleges and developing metrics and data elements to measure the education and employment outcomes of community college students. The center is also directed to develop standardized data gathering systems, emphasizing linkages between states.

State Data Systems

Grants are made available to States or consortia of States to establish cooperative agreements to develop, implement, and expand interoperable statewide longitudinal data systems.


Pell Grants

The Pell Grant maximum is steadily increased from $5,550 in FY 2010 (funding the 2010-11 award year) to $6,900 in FY 2019. The entire program is not made an entitlement, as proposed by President Obama; rather, some $40 billion of savings from the legislation is used to augment funding provided through the regular appropriations process.

Federal Family Education Loan (FFEL) Program

The bank-based FFEL program is phased out as of July 1, 2010, at which time all institutions will have to participate in the Direct Loan (DL) program, under which loan capital is provided by the Federal government rather than banks. A limited number of private lenders will service the loans but cannot originate them. State guaranty agencies retain a role in outreach, financial literacy, and default prevention.

Perkins Loan Program

The bill restructures the Perkins Loan Program, making it essentially a second, unsubsidized Direct Loan program that is campus-based, with the goal of providing an additional $5 billion in Perkins loans. Historically, community colleges have not generally participated in this program.

The institutional allocation formula, i.e., Perkins loan lending authority, is complex. Half of the funding is based on institutional need and funding for holding past participants harmless. The other half of the formula incorporates incentives, at one-quarter each, for low tuition and improved Pell recipient graduation rates.

Stafford Loan Interest Rates

The bill provides $3.25 billion to change the fixed interest rates on subsidized loans to a variable rate. In recent years the interest rate on these loans, currently at 5.6 percent, has decreased and will ultimately drop to 3.4 percent. However, the rate is set to revert to 6.8 percent in 2012. This provision ensures that borrowers get the lowest current interest rate, not to exceed 6.8 percent. Interest rates for unsubsidized and PLUS loans are unchanged.

Free Application for Federal Student Aid (FAFSA) Simplification

Changes to the need analysis formula allow student aid applicants to simply use IRS data for the purpose of completing the FAFSA. For those with less than $150,000 in assets, the bill would eliminate assets from the need calculation for federal student aid. (A recent Department of Education study indicated that income level was sufficient to determine eligibility.) The value of a family's house, farm, business, or employee pension benefit plan would not be included in calculating whether a family's assets exceed the cap. It is unclear how the asset information will be collected.


Additional Funding for HBCUs and Hispanic-Serving Institutions (HSIs)

The bill includes $2.5 billion in guaranteed funding for Historically Black Colleges and Universities (HBCUs) and Hispanic-Serving Institutions over FYs 2010 through 2019. The HSI funding is to be targeted to STEM programs and articulation.

Open Online Education

The Department of Education will make competitive grants for the development, evaluation, and dissemination of freely-availably online training and high school and postsecondary education courses. $50 million is made available for each over FYs 2010-2019.

New Grants for Access, Completion, and Persistence Grant Programs

The legislation provides $600 million annually for FYs 2010 to 2014 for a "College Access and Completion Fund" to: promote innovation in postsecondary education practices and policies by institutions of higher education, States, and nonprofit organizations to improve student success, completion, and post-completion employment, particularly for students from groups that are underrepresented in postsecondary education; and to assist States in developing longitudinal data systems, common metrics, and reporting systems to enhance the quality and availability of information about student success, completion, and post completion employment.

Funds are to be allocated as follows:

• 25 percent for formula/matching grants to states and philanthropic organizations for access and persistence activities under the current College Access Challenge Grant Program.
• 50 percent for new competitive matching grants for states to develop innovative plans for college completion, including state plans that embrace all higher education sectors and longitudinal data systems.
• 23 percent for federal discretionary grants - open to a wide range of organizations - for innovative access and persistence activities. Individual grants would be no less than $1 million, and could be more if matched by philanthropies.
• 2 percent for evaluation.

For more information contact David Baime, Vice President for Government Relations,, or 202-728-0200, ext. 224.