For other versions of this document, see http://wikileaks.org/wiki/CRS-RL31618 ------------------------------------------------------------------------------ ¢ ¢ Prepared for Members and Committees of Congress ¢ Three Higher Education Act (HEA) programs--the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program--collectively are referred to as the campus-based programs. Funding authorization for the campus-based and other HEA programs is extended through July 31, 2008, under P.L. 110-256. The 110th Congress has considered bills to amend and extend the campus- based programs as part of the debate over reauthorizing the Higher Education Act. On July 24, 2007, the Senate passed S. 1642, the Higher Education Amendments of 2007. On February 7, 2008, the House passed H.R. 4137, the College Opportunity and Affordability Act of 2008. On July 29, 2008, House and Senate conferees agreed to a conference report to accompany H.R. 4137. Under the campus-based programs, federal funding is provided to institutions of higher education for the provision of need-based financial aid to students. Institutions participating in the programs are required to provide a match of approximately one-third of the federal funds they receive. The campus-based programs are unique among the need-based federal student aid programs in that the mix and amount of aid awarded to students are determined by each institution's financial aid administrator according to institution-specific award criteria (which must be consistent with federal program requirements), rather than according to non-discretionary award criteria, such as that applicable for Pell Grants and subsidized Stafford Loans. Each program provides students with a distinct type of aid. The FSEOG program provides grant aid only to undergraduate students. The FWS program provides undergraduate, graduate, and professional students the opportunity for paid employment in a field related to their course of study or in community service. The Perkins Loan program provides low-interest loans with favorable terms and conditions to undergraduate, graduate, and professional students. Funding is provided to institutions separately for each program according to formulas that take into account both the allocation institutions received in years past (their base guarantee) and their proportionate share of eligible students' need that is in excess of their base guarantee (their fair share increase). From these funds, institutions' financial aid administrators award aid to eligible students having financial need. The programs are among the oldest of the federal postsecondary aid programs; however, they now operate amidst a host of other aid programs and tax benefits, some of which are not need- based. At present, a relatively small proportion of all students receive campus-based financial aid. Over the past decade, the number of institutions participating in the programs has also declined. Introduction ..................................................................................................................................... 1 Current Program Descriptions......................................................................................................... 2 Federal Supplemental Educational Opportunity Grants............................................................ 2 Allocation of Funds to Institutions ..................................................................................... 3 Federal Work-Study Programs .................................................................................................. 4 FWS Employment............................................................................................................... 5 FWS Community Service Employment.............................................................................. 6 Job Location and Development Programs .......................................................................... 7 Federal and Non-Federal Shares of Compensation............................................................. 7 Work-Colleges .................................................................................................................... 8 Allocation of Funds to Institutions ..................................................................................... 8 Federal Perkins Loans ............................................................................................................... 9 Award Procedures and Terms of Perkins Loans.................................................................. 9 Deferment ......................................................................................................................... 10 Forbearance........................................................................................................................11 Cancellation .......................................................................................................................11 Loan Default ..................................................................................................................... 12 Allocation of Funds to Institutions ................................................................................... 13 Distribution of Assets from Perkins Loan Funds .............................................................. 14 Transfer of Funds Between Campus-Based Programs ............................................................ 14 Administrative Costs............................................................................................................... 15 Funding and Program Data............................................................................................................ 15 Funding for the Campus-Based Programs .............................................................................. 16 Institutional Participation ........................................................................................................ 17 Students Served and Average Aid Amounts ............................................................................ 18 FSEOG.............................................................................................................................. 18 FWS .................................................................................................................................. 19 Perkins Loans.................................................................................................................... 20 The Campus-Based Student Financial Aid Programs and Reauthorization of the Higher Education Act ............................................................................................................................. 22 Background ............................................................................................................................. 22 FSEOG Program ..................................................................................................................... 23 Authorization of Appropriations ....................................................................................... 23 Allocation of Funds According to Pell Grant Recipient Graduation and Transfer Rates .............................................................................................................................. 23 Allowance for Books and Supplies in Fair Share Allocation Procedures ......................... 23 FWS Program.......................................................................................................................... 24 Authorization of Appropriations ....................................................................................... 24 Allowance for Books and Supplies in Fair Share Allocation Procedures ......................... 25 Community Service Requirements ................................................................................... 25 Job Location and Development Programs ........................................................................ 25 Work-Colleges .................................................................................................................. 25 Federal Perkins Loan Program................................................................................................ 26 Authorization of Appropriations ....................................................................................... 26 Allowance for Books and Supplies in Fair Share Allocation Procedures ......................... 26 Perkins Loan Assignment ................................................................................................. 26 Loan Limits....................................................................................................................... 27 Forbearance....................................................................................................................... 27 Rehabilitation of Defaulted Perkins Loans ....................................................................... 27 Discharge of Perkins Loans .............................................................................................. 27 Loan Cancellation for Public Service ............................................................................... 28 General Provisions .................................................................................................................. 28 Students with Intellectual Disabilities............................................................................... 28 Statute of Limitations and Court Judgments..................................................................... 29 Transfer of Allotments between Campus-Based Programs............................................... 29 Figure 1. Institutions Participating in the Campus-Based Programs: AY1983-1984 through AY2007-2008 ................................................................................................................ 18 Figure 2. FSEOG: Number of Students Receiving Awards and Average Award Amounts, AY1986-1987 through AY2005-2006 ........................................................................................ 19 Figure 3. FWS: Number of Students Receiving Awards and Average Award Amounts, AY1986-1987 through AY2005-2006 ........................................................................................ 20 Figure 4. Perkins Loans: Number of Students Receiving Awards and Average Award Amounts, AY1986-1987 through AY2005-2006........................................................................ 21 Table 1. FWS Requirements for Federal Share of Compensation................................................... 7 Table 2. Perkins Loan Cancellation Rates by Type of Service...................................................... 12 Table 3. Administrative Cost Allowances for the Campus-Based Programs: AY 2005- 2006............................................................................................................................................ 15 Table 4. Campus-Based Program Funding: Appropriations for FY1999-FY2008........................ 16 Table 5. Perkins Loan Cohort Default Rates: AY1993-1994 through AY2004-2005.................... 21 Author Contact Information .......................................................................................................... 29 Three postsecondary student financial aid programs authorized under the Higher Education Act of 1965, as amended (HEA)--the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Work-Study (FWS) program, and the Federal Perkins Loan program-- collectively are referred to as the campus-based programs. The campus-based programs are unique among the need-based federal student aid programs in that federal funds are awarded to institutions of higher education (IHEs) according to formulas that take into account past institutional awards and the aggregate financial need of students attending the institutions. The mix and amount of aid students receive is determined by each institution's financial aid administrator according to institution-specific award criteria, rather than according to non- discretionary award criteria, such as that applicable for Pell Grants and subsidized Stafford Loans.1 The campus-based programs were last significantly amended under the Higher Education Amendments of 1998 (P.L. 105-244), which reauthorized the programs that are part of the HEA. While funding authorization for these programs expired at the end of FY2003, the General Education Provisions Act (GEPA) provided for an automatic one-year extension through FY2004. Authorization for the programs has been extended incrementally, and ultimately through July 31, 2008, under a series of Higher Education Extension Acts.2 Several HEA programs were amended under the Higher Education Reconciliation Act of 2005 (HERA) and enacted as part of the Deficit Reduction Act of 2006 (P.L. 109-171)3 and under the College Cost Reduction Act of 2007 (P.L. 110-84);4 however, the campus-based programs were largely unaffected. The 110th Congress is considering bills to amend and extend the campus-based programs as part of the debate over reauthorizing the Higher Education Act. On July 24, 2007, the Senate passed S. 1642, the Higher Education Amendments of 2007. On February 7, 2008, the House passed H.R. 4137, the College Opportunity and Affordability Act of 2008.5 On July 29, 2008, House and Senate conferees agreed to a conference report to accompany H.R. 4137. This report begins by providing a brief description of each of the campus-based programs, including the terms under which financial aid is awarded to students and the procedures under which federal funds are allocated to institutions for that purpose.6 It then provides historical 1 Institutions are required to establish written procedures for selecting recipients of campus-based financial aid. These selection procedures must meet the requirements of each campus-based program, and must be kept on file at each institution. Consistent with the availability of funds, institutions must make campus-based aid reasonably available to all eligible students demonstrating financial need. 2 P.L. 108-366, P.L. 109-81, P.L. 109-150, P.L. 109-212, P.L. 109-238, P.L. 109-292, P.L. 110-44, P.L. 110-51, P.L. 110-109, P.L. 110-198, P.L. 110-230, P.L. 110-238, and P.L. 110-256. 3 For information on how the Deficit Reduction Act of 2006 affects HEA programs, see CRS Report RS22308, Student Loans and FY2006 Budget Reconciliation, by Adam Stoll. 4 For information on how the College Cost Reduction Act of 2007 affects HEA programs, see CRS Report RL34077, Student Loans, Student Aid, and FY2008 Budget Reconciliation, by Adam Stoll, David P. Smole, and Charmaine Mercer. 5 For additional information on HEA reauthorization, see CRS Report RL34283, Higher Education Act Reauthorization in the 110th Congress: A Comparison of Major Proposals, by Blake Alan Naughton et al. 6 The allocation procedures for each of the three campus-based programs are described in greater detail in CRS Report RL32775, The Campus-Based Financial Aid Programs: A Review and Analysis of the Allocation of Funds to Institutions and the Distribution of Aid to Students, by David P. Smole. information on federal funds appropriated for each of the programs, an analysis of the number and types of students served, and selected program statistics. It concludes with a discussion of amendments to the campus-based programs proposed in S. 1642 and H.R. 4137. This part of the report provides a description of each of the three HEA campus-based financial aid programs--the FSEOG program, the FWS program, and the Federal Perkins Loan program. Program descriptions explain the purpose of each program and the terms under which aid is provided to students. They also include a brief explanation of how federal funds are allocated to institutions for the purpose of providing aid to students. ¢ The FSEOG program authorizes the Secretary to grant funds to institutions of higher education for the purpose of providing financial assistance to undergraduate students with exceptional financial need to aid them in obtaining the benefits of postsecondary education. The FSEOG program is authorized by Title IV, Part A, Subpart 3 of the HEA. It first was incorporated into the HEA under the Education Amendments of 1972 (P.L. 92-318). Prior to authorization of the FSEOG program, Education Opportunity Grants, authorized under the HEA of 1965 (P.L. 89- 329), served a similar purpose. From the funds allotted to them by the Secretary, institutions award FSEOG aid to eligible students as part of their financial aid packages. Institutions are required to award FSEOG aid first to students with exceptional financial need, according to the HEA need analysis provisions,7 with priority going to students receiving Pell Grants. Institutions may establish categories of students for purposes of packaging FSEOG awards. For example, "categories may be based on class standing, enrollment status, program, date of application, or a combination of factors."8 Categorization of awards may not be used to arbitrarily deny FSEOG aid to students, for example by establishing a policy of awarding aid on a first-come, first-served basis. FSEOG aid consists of a federal share, not to exceed 75% (except if the Secretary determines that a larger share is necessary to further the purpose of the program), and a non-federal share of at least 25%. The non-federal share is required to be funded through the institution's resources, such as institutional grants and scholarships, tuition or fee waivers, state scholarships, and foundation or other charitable organization funds. ED has determined that all state scholarships and grants can be counted toward meeting the non-federal share, except for funds provided under the 7 Per HEA Title IV, Subpart F--Need Analysis, a student's financial need is calculated as the cost of attendance, minus the expected family contribution (EFC)--the amount that a student's family is expected to contribute toward the student's education, and minus the estimated financial assistance (EFA) not received under HEA Title IV (this includes scholarships, grants, loans, veterans' education benefits (Section 480(c)), national service educational awards, and post- service benefits under Title I of the National and Community Service Act of 1990. 8 U.S. Department of Education, Federal Student Aid Handbook, 2007-2008, vol. 3--Calculating Awards & Packaging, pp. 3-105 through 3-108, at http://www.ifap.ed.gov/IFAPWebApp/ currentSFAHandbooksPag.jsp. (Hereafter cited as ED, FSA Handbook.) Leveraging Educational Assistance Partnership (LEAP) and the Special Leveraging Educational Assistance Partnership (SLEAP) programs.9 Unlike the other two campus-based programs, students are eligible to receive FSEOG aid only during the period required to complete a first undergraduate baccalaureate course of study. The maximum FSEOG award amount per academic year is the lesser of the student's financial need or $4,000. In the case of a student studying abroad, and if the cost of studying abroad exceeds the cost of studying at the student's home institution, the FSEOG award may be increased to a maximum of $4,400. The minimum value of an FSEOG award is $100 per year. For students enrolled for less than a full academic year, the value of FSEOG awards must be proportionately reduced. Institutions are required to award a "reasonable proportion" of FSEOG aid to independent students10 and to those who are enrolled less than full-time if the institution's allocation of FSEOG funds was based in part on the financial need of such students. (Students enrolled less than half-time are eligible for aid under each of the campus-based programs.) Students do not repay FSEOG awards. The federal share of FSEOG funds are allocated to IHEs according to procedures prescribed in the authorizing statute. Institutions first are allocated funds in proportion to the amount they received in previous years, with priority going to institutions that participated in the program in FY1999 or earlier. Next, funds are allocated to those institutions that began participating after FY1999, but which are not first- or second-time participants. Following this, funds are allocated to institutions that are first- or second-year participants. Provided that sufficient funds are appropriated, institutions that participated in the FSEOG program in FY1999 or earlier receive 100% of their FY1999 allocation. This is referred to as their base guarantee. Institutions that began participating after FY1999, but which are not first- or second-time participants receive a base guarantee that is the greater of 90% of the amount they received in their second year of participation, or $5,000. Institutions participating in the FSEOG program for their first or second year receive as their base guarantee, the greatest of $5,000, 90% of an amount proportional to that received by comparable institutions, or 90% of what the institution received in its first year of participation. However, if an institution began participating in FSEOG after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation. Institutions' base guarantees are adjusted to be proportional to the ratio of total funds available for the FSEOG program to the national total of institutions' base guarantees. This amount is called an institution's adjusted base guarantee.11 After allocating institutions their adjusted base guarantee, any remaining FSEOG funds are allocated to institutions proportionately according to their eligible amount of need that is in excess of their adjusted base guarantee. An institution's eligible amount of need, or fair share, is calculated by subtracting the sum of aid provided under the Pell Grant and LEAP/SLEAP 9 ED, FSA Handbook, vol. 6--Campus-Based Programs, pp. 6-13 through 6-15. 10 An independent student is one who is not considered dependent upon his or her parents' income for financial aid purposes. 11 In instances where total funds available is greater than or equal to the national total of base guarantees, then the base guarantee and the adjusted base guarantee would be equal. programs from the aggregate financial need of the institution's undergraduate students. Undergraduate student financial need is determined through a formula that takes into account the cost of attendance (COA) at the institution and the expected family contribution (EFC) of a representative sample of students.12 Institutions with a fair share amount of need that is greater than their FSEOG adjusted base guarantee are considered to have an excess eligible amount of need. These institutions receive an allocation in excess of their base guarantee, which is called their fair share increase. Institutions' total allotments are the sum of their adjusted base guarantee and their total fair share increase.13 Institutions are provided flexibility to carryover up to 10% of their allocation for use in a succeeding fiscal year to carry out the FSEOG program. They also may carry-back funds to make grants to students prior to the beginning of the fiscal year, but after the end of the prior academic year. The Secretary is authorized to reallocate any excess funds returned by institutions. An institution returning more than 10% of its allocation will have its next year's allocation reduced by the amount returned, unless the Secretary determines it would be contrary to the interest of the program. Finally, the Secretary is authorized under FSEOG to allocate up to 10% of funds appropriated in excess of $700 million for the programs authorized under HEA Title IV, Part A,14 to institutions from which 50% or more of Pell Grant recipients either graduate or transfer to four- year institutions. ¢ The purpose of FWS is to provide part-time employment to undergraduate, graduate, and professional students in need of earnings to pursue their course of study; and to encourage student participation in community service activities. FWS programs are authorized under the HEA at Title IV, Part C. They first were authorized under the Economic Opportunity Act of 1964 (P.L. 88- 452) and administered by the U.S. Department of Labor's Office of Economic Opportunity. In 1968, under P.L. 90-575, authority for the Work-Study Programs was transferred to Title IV of the HEA. 12 ED has calculated a table of EFCs used in the campus-based funding process. The table includes average EFCs within 14 income bands for dependent and independent undergraduates, and for graduate and first-professional students. The EFC for students is based on information from the second preceding fiscal year. EFCs from this table, rather than the actual EFCs of students at a particular institution, are entered into the allocation formula. The table of EFCs for the 2007-2008 award year is available from ED at http://www.ifap.ed.gov/dpcletters/attachments/ EFCAverages.xls. 13 Institutions may receive both an initial fair share increase and an additional fair share increase, the latter being based on the reallocation of excess funds returned by other institutions (described in the next section). 14 HEA Title IV, Part A--Grants to Students in Attendance at Institutions of Higher Education, includes the following programs: Pell Grants, the TRIO programs, GEAR-UP, Academic Achievement Incentive Scholarships, FSEOG, LEAP, Migrant and Seasonal Farmworker Programs, the Robert C. Byrd Honors Scholarship Program, Child Care Access Means Parents in School, Learning Anytime Anywhere Partnerships, and TEACH Grants. 15 This report covers only FWS programs authorized under Part C of the HEA. The LEAP program provides federal funds that can be used by states to support state work-study programs. The Department of Veterans Affairs also administers the Veterans Administration Student Work-Study Allowance Program (VASWSAP) for veterans and eligible persons. Authorization for this program is codified at 38 U.S.C. §§ 3485 and 3537. An institution's financial aid administrator is responsible for awarding FWS aid to eligible students. Unlike the FSEOG and Perkins Loan programs in which aid is required to be awarded first to students with exceptional financial need, FWS aid may be provided to any student demonstrating financial need. Awards typically are based on factors such as each student's financial need, the availability of FWS funds, and whether a student requests FWS employment and is willing to work.16 Students receive their award as compensation for the hours they have worked. Earnings from FWS employment are considered "excludable income" in determining a student's financial need for the subsequent year. Awards are based on a combination of factors such as a student's financial need, financial aid available from other sources, the wage rate, and how many hours per week the student can work. There is no maximum award amount. ¢ FWS employment may consist of work for the higher education institution a student attends, for a private non-profit organization, for a federal, state, or local public agency, or for a private for- profit organization. Conditions applicable to all types of FWS employment include that it: (A) will not result in the displacement of employed workers or impair existing contracts for services; (B) will be governed by such conditions of employment as will be appropriate and reasonable in light of such factors as type of work performed, geographical regions, and proficiency of the employee; (C) does not involve the construction, operation, or maintenance of so much of any facility as is used or is to be used for sectarian instruction or as a place for religious worship; and (D) will not pay any wage to students employed ... [through the FWS program] that is less than the current federal minimum wage as mandated by Section 6(a) of the Fair Labor Standards Act of 1938.17 Students working for private for-profit organizations must be employed in jobs that are academically relevant to their pursuits. Furthermore, such students cannot be employed under FWS if they otherwise would have been employed by the organization. Students employed by proprietary institutions that they also attend either must be employed on-campus in jobs that, in addition to the abovementioned requirements, also provide student services directly related to the student's education; or in community service jobs. Proprietary institutions cannot employ FWS students in jobs that involve the solicitation of other students to attend the institution. Employment by private for-profit organizations must be arranged between the sponsoring institution and the for-profit organization. 16 U.S. Department of Education, Office of the Under Secretary, Planning and Evaluation Service, Postsecondary, Adult, and Vocational Education Division, The National Study of the Operation of the Federal Work-Study Program: Summary Findings from the Student and Institutional Surveys (Washington, DC: 2000), p. 57. 17 HEA, § 443(b)(1) (42 U.S.C. § 2753(b)(1)). ¢ ¢ Since FY2000, institutions participating in FWS have been required to use at least 7% of their FWS allocation to compensate students employed in community service jobs, including 100% of any excess FWS funds they receive through reallocation of other institutions' unspent FWS funds.18 In meeting the 7% requirement, institutions are required to ensure that they are operating at least one tutoring or family literacy project in service to the community. Institutions may use up to 10% of the funds they receive for administrative expenses under section 489 of the HEA for the operation of their FWS community service programs. The HEA defines community service as follows: COMMUNITY SERVICES.--For purposes of this part, the term "community services" means services which are identified by an institution of higher education, through formal or informal consultation with local nonprofit, governmental, and community-based organizations, as designed to improve the quality of life for community residents, particularly low-income individuals, or to solve particular problems related to their needs, including: (1) such fields as health care, child care (including child care services provided on campus that are open and accessible to the community), literacy training, education (including tutorial services), welfare, social services, transportation, housing and neighborhood improvement, public safety, crime prevention and control, recreation, rural development, and community improvement; (2) work in a project, as defined in Section 101(20) of the National and Community Service Act of 1990 (42 U.S.C. § 12511(20)); (3) support services to students with disabilities, including students with disabilities who are enrolled at the institution; and (4) activities in which a student serves as a mentor for such purposes as-- (A) tutoring; (B) supporting educational and recreational activities; and (C) counseling, including career counseling.19 Tutoring and family literacy projects include those that employ students as reading tutors of children who are of preschool age or who are in elementary school, or in family literacy projects. In many instances, FWS jobs in tutoring and family literacy projects count toward an institution's 7% community service requirement. However, this may not always be the case. For instance, ED has determined that if FWS students are employed as tutors in an institution's daycare center and the center is not open and accessible to the community, then the job could not be counted toward satisfying the institution's 7% community service requirement.20 18 From FY1994 through FY1999, institutions were statutorily required to use 5% of their FWS allocation to compensate students employed in community service jobs. 19 HEA, § 441(c) (42 U.S.C. § 2751(c)). 20 ED, FSA Handbook, vol. 6--Campus-Based Programs, pp. 6-27 through 6-55. .margorP seitisrevinU dna segelloC kcalB yllacirotsiH gninehtgnertS eht ,margorP snoitutitsnI gnivreS-naiiawaH evitaN dna evitaN aksalA eht ,margorP seitisrevinU dna segelloC dellortnoC yllabirT naidnI naciremA eht ,margorP snoitutitsnI gninehtgnertS eht ,margorP snoitutitsnI gnivreS cinapsiH gnipoleveD eht rednu sloohcs elbigile sa detangised sloohcs rof elbacilppA .a .11-6 hguorht 9-6 .pp ,smargorP desaB-supmaC --6 .lov ,koobdnaH ASF ,DE dna ;)b6572 ,a6572 ,4572 ,3572 §§ .C.S.U 24( 844 ,744 ,444 ,344 §§ ,AEH :ecruoS sdnuf laredef-non htiw rallod-rof -rallod hctam tsum noitutitsni ;noitazirohtua gnidnuf etarapeS %05 segelloC-kroW )AESE( tcA noitacudE yradnoceS dna yratnemelE eht rednu stcejorP dednuf stcejorp ni stneduts fo tnemyolpme ot nevig ytiroirP %001 ycaretiL dna gnirotuT noitasnepmoc fo erahs laredef-non edivorp tsum noitazinagro tiforp-rof gniyolpmE %05 rotces tiforp-rof etavirP margorp SWF eht fo esoprup eht rehtruf ot yrassecen si %57 fo ssecxe ni erahs laredef taht yraterceS eht yb noitanimreteD %001 a noitpecxe yrotalugeR %57 sdeecxe erahs laredef eht hcihw rof sboj ni deyolpme snoitaluger era stneduts SWF s'noitutitsni eht fo %01 naht erom on htiw tnetsisnoc noitutitsni eht naht dna ;tnemyolpme fo tsoc droffa ot elbanu eb dluow esiwrehto ,%09 deecxe ton rehto ycnega tnemnrevog dna sisab esac-yb-esac no tneduts rof detceles reyolpmE tub ,%57 deecxe yaM ro tiforp-non etavirP tnemeriuqer lareneG %57 lareneg nI--SWF stnemeriuqeR cificepS erahS laredeF tnemyolpmE mumixaM SWF fo epyT noitasnepmoC fo erahS laredeF rof stnemeriuqeR SWF . 1 elbaT maximum federal share of compensation for the various types of FWS employment. services, such as tuition, room, board, or books provided by the institution. Table 1 highlights the compensation may come from any source (other than FWS), and may be paid in the form of sector, the federal share of compensation is limited to 50%. An institution's matching share of instances, the federal share may be higher (see Table 1). For employment in the private for-profit For most FWS jobs, the maximum federal share of compensation is 75%; however, in certain that may be provided through federal funding varies according to the type of FWS employment. matching amount provided either by the institution or the employer. The share of compensation Under the FWS program, students are compensated with a combination of federal funding and a after graduation. cannot be used to find jobs at the institution, nor should they be used to find jobs for students funds used to operate the program cannot exceed 80%. Job location and development programs scheduling needs and compliment their educational and vocational goals. The federal share of for currently enrolled students. Jobs located and developed should be compatible with students' another institution. The program must locate and develop jobs, including community service jobs, expand a job location and development program operated either by the institution or jointly with Institutions may use up to the lesser of 10% of their FWS allocation or $50,000 to establish or FWS authorizes funding to support comprehensive work-learning programs at select institutions called "work-colleges." Work-colleges are institutions that make work-learning an integral part of their educational programs. For an institution to qualify for the Work-Colleges program, all resident students must be required by the institution to participate in a work-learning program that is an integral part of its educational philosophy. For purposes of the program, work-colleges can only be public or private nonprofit institutions and must have a commitment of service to the community. Activities authorized under the Work-Colleges program include those generally authorized under FWS grants, including job location and development. In addition, Work- Colleges program funds may be used to provide payments or credits to students participating in work-learning programs, to promote and administer work-learning, and for the study of work- learning programs. Funding for the Work-Colleges program is authorized separately from the remainder of the FWS program. Institutions also may transfer funds from their FWS and Perkins Loan FCC allocations to the Work-Colleges program. Similar to the FSEOG program, FWS funds are allocated to IHEs according to statutorily prescribed procedures. Funds first are allocated to institutions based on previous years' allocations, with priority going to institutions that participated in the program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation as their base guarantee.21 Institutions that began participating after FY1999, but which are not first- or second-time participants receive a base guarantee that is the greater of 90% of the amount they received in their first year of participation, or $5,000. Institutions participating in the FWS program for their first or second year receive as their base guarantee, the greatest of $5,000, 90% of an amount proportional to that received by comparable institutions, or 90% of what the institution received in its first year of participation. However, if an institution began participating in FWS after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation. If sufficient funds are not appropriated, then institutions' awards are reduced proportionately, resulting in an amount called their adjusted base guarantee. Funds in excess of the amount required to meet institutions' base guarantee are allocated according to institutions' proportionate share of excess eligible need. For the FWS program, excess eligible need is the amount by which an institution's share of self-help need (fair share) exceeds its base guarantee. Self-help need is calculated separately for undergraduate students and graduate and professional students according to formulas that take into account the cost of attendance at the institution and the approximate EFCs of students attending the institution. Institutions whose grants are based in part on the need of independent students or those attending less than full-time are required to assist these students through FWS employment with a reasonable portion of the FWS grant. The Secretary is authorized to allocate up to 10% of funds appropriated for FWS that are in excess of $700 million to institutions from which 50% or more of Pell Grant recipients either graduate or transfer to four-year institutions. 21 This is equal to the sum of its FY1999 (award year 1999-2000) base guarantee, plus its initial award year 1999-2000 pro rata increase, plus the additional FWS funds the institution received from the $17 million set aside that year for allocation to institutions that certified that they graduated or transferred at least 50% of their Pell Grant recipients. Institutions are provided flexibility to carryover up to 10% of their FWS funds for use in a succeeding fiscal year to carry out the FWS program. If an institution neither uses funds in the year for which they were granted, nor carries them over to the next fiscal year, the Secretary may, in the next succeeding fiscal year, reallocate them to other institutions within the same state. Up to 10% of an institution's allocation may be granted by the Secretary for the purpose of making grants to students prior to the beginning of the fiscal year, but after the end of the prior academic year. The Secretary also is required to reallocate any excess funds returned by institutions to eligible institutions that in the previous fiscal year used at least 5% of their FWS allocation to compensate students employed in tutoring in reading or family literacy activities. Reallocated funds must be distributed to such institutions according to their excess eligible need. Institutions returning more than 10% of their allocation may, at the discretion of the Secretary, have their next year's allocation reduced by the amount returned. The Federal Perkins Loan program authorizes the allocation of federal funds to IHEs to assist them in capitalizing revolving loan funds for the purpose of making low-interest loans to students with exceptional financial need. The Federal Perkins Loan program is authorized under the HEA at Title IV, Part E. It supersedes Title II--Loans to Students in Institutions of Higher Education, of the National Defense Education Act of 1958 (P.L. 85-864), which was incorporated into the HEA through the Education Amendments of 1972 (P.L. 92-318). Previously, these loans were known as National Defense Student Loans (Defense Loans) and National Direct Student Loans (NDSLs). Institutions capitalize revolving loan funds created under the Federal Perkins Loan program with a combination of federal and institutional capital contributions (FCCs and ICCs, respectively). Institutions apply to ED for FCC funds which are allocated according to procedures similar to those used for the FSEOG and FWS programs. Each institution's ICC must be equal to one-third of the FCC. After making loans, institutions recapitalize their loan funds by depositing the principal and interest repaid by students who borrowed under the program, as well as any other charges or earnings associated with the operation of the program. Institutions are required to establish written selection procedures for awarding Perkins Loans to eligible students and to keep these on file at the institution. Loans must be made reasonably available to all eligible students, to the extent that funds are available, and priority must be given to students with exceptional financial need. Institutions' selection procedures may include individuals' willingness to repay the loan. Undergraduate students (including those seeking an additional undergraduate degree, if they are otherwise eligible), and graduate and professional students are eligible to borrow from the institutions they attend under the Perkins Loan program. Students studying abroad in programs approved for academic credit by participating institutions also may receive Perkins Loans. Under the terms of the program, the maximum amount a student may borrow per academic year is $4,000 for undergraduate students and $6,000 for graduate and professional students. The maximum aggregate amount that a student may borrow is limited to $20,000 in unpaid principal for undergraduate students who have completed two years of study, but who have not completed their baccalaureate degree; $40,000 for graduate and professional students; and $8,000 for any other students. Both the annual and aggregate loan limits may be increased by up to 20% for students studying abroad in approved programs. If the amount of an institution's FCC is based in part on independent students or those studying less than full-time, then these students must be provided with a reasonable portion of the Perkins Loans made by the institution. Interest on Perkins Loans is fixed at a rate of 5% per year.22 However, no interest accrues prior to a student beginning repayment, nor while repayment is suspended during deferment (described below). Borrowers must begin repaying Perkins Loans nine months after they no longer are enrolled at least half-time, and must complete repayment within 10 years after beginning repayment. Institutions may establish incentive repayment programs in which they may reduce the interest rate by up to one percentage point in instances where a student makes 48 consecutive payments. In addition, if a student repays a Perkins Loan in full prior to the end of the repayment period, an institution may discount the loan balance owed by up to 5% at the time the repayment is made. However, institutions may not use either federal or institutional funds from the Perkins revolving loan fund to absorb the costs of incentive repayment programs and must reimburse the fund on a quarterly basis for any lost income. In general, deferment is a period during which a borrower is not required to make payments on the loan balance and during which interest does not accrue. A Perkins Loan borrower is granted a deferment if the borrower: · is enrolled at least half-time at an eligible institution; · is pursuing a graduate fellowship or rehabilitation training program approved by the Secretary (excluding medical internship and residency programs); · is seeking, but unable to find, full-time employment (for up to three years); · is serving on active duty in the military or is performing qualifying National Guard duty during a war or other military operation of national emergency, and for 180 days following such service; · is experiencing economic hardship (for up to three years); · is engaged in a type of service that makes the borrower eligible for loan cancellation (discussed later); or · is a member of the National Guard or other reserve component of the armed forces, or a member of the armed forces in retired status, who was called to active duty service while enrolled, or within six months after being enrolled, at an eligible institution (for up to 13 months following the completion of such service or re-enrollment). Borrowers are not required to request deferment in writing, but must provide the institution with information necessary to document their deferment status. They also are not required to resume making payments until six months following the completion of any of the periods described 22 Loans made prior to July 1, 1981 were at 3%; loans made between July 1, 1981 and September 30, 1981 were at 4%; and loans made on or after October 1, 1981 are at 5%. above for which they are exempted from making payments. Time in deferment does not count toward the 10-year repayment period. In general, forbearance is a temporary suspension or postponement of payments during which interest continues to accrue. A borrower may be granted forbearance from paying principal and interest or of principal only if the borrower's debt burden due to HEA student financial assistance loans is greater than or equal to 20% of the borrower's gross income, or if the institution determines that forbearance should be granted for other reasons. Examples include services in AmeriCorps or for reasons due to a "national military mobilization or other national emergency."23 Borrowers are required to request forbearance in writing. Forbearance may be granted for a period of up to one year at a time, and may be renewed for a total period of up to three years. Individuals who have engaged in the following types of public service are eligible to have part or all of their loans canceled:24 · elementary or secondary school teacher at a public or private school located within the school district of a local educational agency (LEA) eligible for federal aid under Title I-A of the ESEA and in which low-income students are more than 30% of the school's enrollment;25 · full-time staff member in a Head Start program; · full-time special education teacher or a professional provider of Individuals with Disabilities Education Act (IDEA) early intervention services; · member of the U.S. Armed Forces in an area of hostilities; · Peace Corps or Americorps*VISTA volunteer;26 · full-time federal, state, or local law enforcement or corrections officer (including prosecuting attorneys, but not public defenders); · full-time teacher of mathematics, science, foreign languages, bilingual education, or other shortage subject area; · full-time nurse or medical technician; or · full-time employee of a public or private nonprofit agency serving high-risk children from low-income communities and their families. 23 ED, FSA Handbook, vol. 6--Campus-Based Programs, pp. 6-81. 24 HEA, § 465(a) (20 U.S.C. § 1087ee(a)). 25 Teacher cancellations may be granted only to individuals teaching in a school serving children from low-income families and which is listed in the Directory of Designated Low-Income Schools for Teacher Cancellation Benefits. 26 Borrowers who have received a national service education award for volunteer service with Americorps under Title I-D of the National and Community Service Act of 1990 are not eligible for loan cancellation benefits. Perkins Loan cancellation is based on both the number of years of service an individual has completed and a rate of cancellation applicable to the particular type of service. Table 2 presents the percentage of the principal of Perkins Loans that is canceled for each year of service in an activity eligible for Perkins Loan cancellation. The terms of the program prescribe that the amount of principal and interest canceled for public service shall not be considered as income for purposes of the Internal Revenue Code (IRC) of 1986. The Secretary is required to reimburse institutions for Perkins Loans canceled for students engaged in public service. Funds for reimbursing institutions for loan cancellations may not come from the appropriation designated for FCCs. Each year, the Secretary is required (to the extent feasible), to reimburse institutions within three months after they file their applications for reimbursement of campus-based funds. (Funds for the reimbursement of Perkins Loan cancellations are appropriated separately from funds for Perkins Loan FCCs.) eciv reS fo epy yb setaR noitallecnaC naoL snikreP .2 elba T T raeY reP delecnaC lapicnirP naoL snikreP fo tnecreP ecivreS fo ecivreS fo epyT ts1 dna dn2 dr3 dna ht4 ht5 dna raeY .xaM sraeY sraeY retaL latoT a ni rehcaet loohcs yradnoces ro yratnemelE 51 02 03 001 loohcs emocni-wol detangised margorp tratS daeH ni rebmem ffatS 51 51 51 001 lanoisseforp AEDI/rehcaet noitacude laicepS 51 02 03 001 redivorp seitilitsoh fo aera ni secroF demrA ½21 ½21 A/N 05 reetnulov ATSIV*sprociremA ro sproC ecaeP 51 02 A/N 07 reciffo snoitcerroc ro tnemecrofne waL 51 02 03 001 aera tcejbus egatrohs ni rehcaet emit-lluF 51 02 03 001 naicinhcet lacidem ro esruN 51 02 03 001 ksir-hgih ot secivres fo redivorp fo eeyolpmE 51 02 03 001 seilimaf dna nerdlihc .)ee7801 § .C.S.U 02( 564 § ,AEH :ecruoS A borrower's liability to repay Perkins Loans is also canceled upon death or becoming permanently and totally disabled, as determined according to regulations issued by the Secretary. However, institutions are not reimbursed by the Secretary for loans canceled due to death or disability. In general, a Perkins Loan is considered to be in default if the borrower has failed to comply with the terms of the promissory note or failed to make payments on a loan for 240 days (for a loan repayable monthly) or 270 days (for a loan repayable quarterly). The cohort default rate for an institution is defined as the percentage of current and former students entering repayment on Perkins Loans received for attendance at that institution who default on their loans before the end of the following award year.27 For institutions with less than 30 students entering repayment in any year, the cohort default rate is calculated over a three-year period. A borrower who has defaulted on a loan may rehabilitate the loan by making 12 consecutive on- time payments. Rehabilitated borrowers are returned to regular repayment status, begin a new 10- year repayment schedule, and have the default removed from their credit history. A borrower may rehabilitate a loan only once. In certain instances where a school has followed due diligence procedures and is unable to collect payments on a loan in which the amount owed is $25 or more, the school may assign a Perkins Loan (or NDSL) for collection to Federal Student Aid (FSA) Collections at ED.28 Upon accepting a loan, ED acquires all rights in the loan and any payments made to the lending institution must be forwarded to ED.29 Any collections on Perkins Loans assigned to ED are returned to the U.S. Treasury.30 Under the Perkins Loan program, funds are allocated to IHEs according to procedures using a two-stage process somewhat similar to that used for the FSEOG and FWS programs--funds first are allocated according to institutions' previous year's allocations (base guarantee), and any remaining funds are allocated according to institutions' share of excess eligible amounts of student need (fair share increase). Unlike the formulas for the FSEOG and FWS programs, however, the Perkins Loan allocation formulas also include a default penalty applicable to institutions with large proportions of borrowers defaulting on their Perkins Loans. The default penalty is used to limit the awarding of Perkins Loan FCCs to only institutions with cohort default rates below a maximum threshold. Institutions with a cohort default rate of less than 25% are assigned a default penalty of "1" and those with a default rate of 25% or greater are assigned a default penalty of "0." According to the allocation formulas, FCC funds first are allocated to IHEs according to their previous year's allocations with priority going to institutions that participated in the Perkins program in FY1999. These institutions are eligible to receive 100% of their FY1999 allocation.31 Institutions that began participating in the Perkins Loan program after FY1999, but which are not first- or second-time participants, are eligible to receive 100% of the amount they received in their first year of participation. Those institutions that began participating after FY1999, and which are first or second time participants, generally are eligible to be awarded either 90% of the amount they received in the previous year or 90% of the amount awarded to comparable 27 HEA, § 462(g) [42 U.S.C. § 1087bb(g)]. 28 For additional information on the assignment of Perkins Loans to ED for collection, see U.S. Department of Education, Office of Federal Student Aid, Dear Colleague Letter, CB-06-12, "Revised Assignment Form and Procedures for Assigning Perkins Loans," August 2006, at http://www.ifap.ed.gov/dpcletters/CB0612.html. 29 ED, FSA Handbook, vol. 6--Campus-Based Programs, pp. 6-124 through 6-126. 30 The Secretary is authorized, but not required, to reallocate collections received on such loans (less an amount not to exceed 30% to cover collection costs) to IHEs according to the procedures for allocating federal capital contributions (described below). 31 According to the Department of Education's Explanation of Worksheet 2007-2008 Award Period for the campus- based programs, this is equal to the institution's award year 1999-2000 conditional guarantee, multiplied by its award year 1999-2000 cohort default penalty factor, multiplied by a 60.77% reduction factor. institutions on a per-capita basis. However, if an institution began participating in the Perkins Loan program after FY1999 and received a larger allocation in its second year of participation than in its first, it is allocated 90% of the amount it received in its second year of participation if this is a larger amount than it would otherwise receive. The minimum grant amount is $5,000. Any institution with a default penalty of "0," however, has its FCC allotment reduced to "0." After allocating funds according to institutions' previous year's allocations, any remaining FCC funds are allocated based on each institution's fair share of excess eligible student need. This is the amount by which an institution's share of eligible self-help need exceeds the amount already allocated to it according to its base guarantee. Like in the FWS program, self-help need is calculated separately for undergraduate students, and for graduate and professional students according to formulas that take into account the institution's COA and the approximate EFCs of students attending the institution. However, for the Perkins Loan program, an institution's eligible amount of need is the amount of the institution's self-help need, minus the institution's collections (defined as the amount the institution collected in the second year prior to the award year, multiplied by 1.21), multiplied by its cohort default penalty (either 1 or 0). The Secretary is authorized to reallocate any excess Perkins Loan funds returned by institutions. Eighty percent of these funds must be reallocated to institutions according to their excess eligible amounts of student need, while the remaining 20% can be reallocated according to regulation established by the Secretary. An institution returning more than 10% of its allocation will have its subsequent year's allocation reduced by the amount returned, unless waived by the Secretary as contrary to the interest of the program. Upon ceasing to participate in the Perkins Loan program or if authorization of the program expires, institutions are required to begin a distribution of assets from their revolving loan funds.32 Should either occur, institutions must repay the Secretary a portion of the balance of their loan funds that is proportional to the amount constituted by FCCs. In many instances, this percentage could range between 85% and 90% of an institution's Perkins Loan fund.33 In its FY2006, FY2007, and FY2008 budget proposals, the Administration has recommended terminating the Perkins Loan program, which would result in a distribution of assets. Institutions are afforded flexibility in being able to transfer funds between the campus-based programs in which they participate. They may transfer a total of 25% of their allotment under the Perkins Loan program for use in the FSEOG or FWS programs, or both. Institutions also may transfer up to 25% of their allotment under the FWS program for use in the FSEOG program. Work-colleges also may transfer up to 100% of their Perkins Loan FCC to the FWS Work- Colleges program. No funds may be transferred out of the FSEOG program. 32 HEA, Section 466 (20 U.S. C. § 1087ff). 33 U.S. Department of Education, Office of Postsecondary Education, Dear Colleague Letter CB-00-05, Enclosure 1. Institutions participating in the Perkins Loan program typically have received FCCs throughout the duration of their participation in the program. From the inception of the program through the 1992-1993 award year, the federal share was 90%. In the 1993-1994 award year, the federal share was 70%. Since the 1994-1995 award year the federal share has been 75%. Institutions generally have used their transfer authority to move funds to the FSEOG program, primarily from FWS. For award year (AY) 2005-2006, based on data reported to ED, 1,495 institutions participating in the FWS program transferred a total of $108.9 million to the FSEOG program.34 During years when Perkins Loan FCCs were appropriated, some institutions also transferred funds from the Perkins Loan program to the FSEOG and FWS programs. Institutions participating in the campus-based programs are entitled to an administrative cost allowance to cover the expenses of administering the programs. Administrative cost allowances are determined according to the following schedule: · 5% of the institution's first $2.75 million in expenditures; plus · 4% of the institution's expenditures greater than $2.75 million and less than $5.5 million; plus · 3% of the institution's expenditures in excess of $5.5 million. In calculating administrative costs, institutions include both federal and institutional expenditures.35 Institutions take their administrative cost allowances out of federal funds allocated for the FSEOG and FWS programs, and from cash on hand in their revolving loan funds for the Perkins Loan program. Institutions have some discretion in determining how to allocate administrative costs across the three campus-based programs. Administrative cost allowances as claimed for the campus-based programs are shown in Table 3. eht rof secnawollA tsoC evitartsinimdA .3 elbaT 6002-5002 YA :smargorP desaB-supmaC margorP desaB-supmaC ecnawollA tsoC evitartsinimdA GOESF 925,841,51$ SWF 241,518,36 snaoL snikreP 960,523,76 latoT 047,882,641 ataD smargorP desaB-supmaC laredeF ,noitacudE yradnocestsoP fo eciffO ,noitacudE fo tnemtrapeD .S.U :ecruoS .7002 kooB This section presents budget information on past funding levels for the campus-based programs, and also program information including the number of institutions participating in each program, 34 U.S. Department of Education, Office of Postsecondary Education, Federal Campus-Based Programs Data Book 2007, at http://www.ed.gov/finaid/prof/resources/data/databook2007/databook2007.html. (Hereafter cited as ED, Federal Campus-Based Programs Data Book, 2007.) 35 HEA, § 489 (20 U.S.C. § 1096); ED, FSA Handbook, vol. 6--Campus-Based Programs, pp. 6-25 through 6-26. the number of students awarded aid and average award amounts, and the distribution of campus- based aid according to student and institutional characteristics. The share of postsecondary student financial aid provided through the campus-based programs has decreased steadily over the past 35 years. According to the College Board, whereas in academic year 1971-1972, 19.7% of total federal student aid was provided through the campus- based programs, preliminary figures indicate that only 3.6% was in academic year 2006-2007.36 Now the greatest proportion of student aid is provided through federal loans (other than Perkins Loans) and an increasing amount is provided through higher education tax benefits. Over the past several years, funding has increased modestly for the FSEOG program, while funding for the FWS and Perkins Loan programs (FCCs and loan cancellations) has decreased. FY2004 was the last fiscal year in which discretionary funding was appropriated for Perkins FCCs. Annual funding levels for each of the campus-based programs, beginning with FY1999 (the first year since the last HEA reauthorization), are presented in Table 4. Under each of the campus-based programs federal funds are required to be matched by the participating institution (or the employer under FWS, if other than the institution). As previously described, under each of the programs, the institutional match generally is one-third the amount of the federal share (however, in the FWS program, the required match can be as high as one-half of the federal share or as low as zero, depending on the type of employment). Because of the matching requirements, the campus-based programs leverage federal funding to provide an amount of student financial aid that is greater than the amount of federal funds appropriated for each program. :gnidnuF margorP desaB-supmaC .4 elbaT 8002YF-9991YF rof snoitairporppA )sra llod fo sdnasuoht ni( naoL snikreP raeY lacsiF GOESF SWF CCF-snikreP snoitallecnaC 9991YF 000,916 000,078 000,001 000,03 a0002YF 000,136 000,439 000,001 000,03 1002YF 000,196 000,110,1 000,001 000,06 2002YF 000,527 000,110,1 000,001 005,76 3002YF 820,067 824,400,1 053,99 160,76 4002YF 554,077 205,899 467,89 566,66 5002YF 027,877 752,099 0 231,66 b6002YF 264,577 325,999 137,4 174,56 7002YF 339,077 453,089 0 174,56 36 The College Board, Trends in Student Aid 2007, "Trends in Student Aid: Table 1a (History), Funds Used to Finance Postsecondary Education Expenses in Current Dollars (in Millions), 1963-64 to 2006-07" 2006, at http://www.collegeboard.com/prod_downloads/about/news_info/trends/07_student_aid_tables.xls. naoL snikreP raeY lacsiF GOESF SWF CCF-snikreP snoitallecnaC 8002YF 564,757 294,089 0 723,46 c9002YF 0 294,089 0 0 s'tnediserP 9002 raeY lacsiF noitacudE fo tnemtrapeD ,ecivreS tegduB ,noitacudE fo tnemtrapeD .S.U :secruoS .selbat lacirotsih dna ;tegduB .dyolF dna sinneD senacirruH fo smitciv rof noitairporppa ycnegreme noillim 01$ a sedulcni GOESF .a lanoitaN eht ot tnausrup sdnuf 5002YF deripxe ni noillim 924,82$ fo noitairporppaer yrotadnam a sedulcnI .b .) 68-901 .L.P( tcA ssenriaF diA tnedutS retsasiD .9002YF rof tseuqer tegdub s'tnediserP .c In fall of 2005, 6,793 postsecondary institutions were participating in HEA Title IV financial aid programs.37 During AY2005-2006, approximately 55% of Title IV institutions awarded FSEOG aid, while approximately 48% employed students in FWS. However, only approximately 25% of Title IV institutions advanced loans under the Perkins Loan program. While fewer institutions of all types participate in the Perkins Loan program than in either FSEOG or FWS, far fewer two- year and proprietary participate in the Perkins Loan program than the other two programs.38 It is possible that these lower levels of participation are due to factors such as the administrative burden of administering a revolving loan fund and the generally higher cohort default rates of students who attend these types of institutions. Over the past decade, there has been a slight increase in the number of IHEs participating in the FSEOG and FWS programs. Institutional participation in the Perkins Loan program, however, has continued a pattern of decline that has occurred over the past quarter century. Figure 1 displays the number of institutions participating in each of the campus-based programs since the 1983- 1984 award year. 37 U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), Peer Analysis System, 2004. 38 ED, Federal Campus-Based Programs Data Book, 2005. 1 erugiF 4891-3891YA :smargorP desaB-supmaC eht ni gnitapicitraP snoitutitsnI . 8002-7002YA hguorht ataD smargorP desaB- supmaC laredeF ,DE dna ;6002 ,kooB ataD smargorP desaB-supmaC laredeF ,DE :ecruoS .7002 ,kooB This section presents information on the number of students being served and the average award amounts for each of the three campus-based programs based on program data from ED. To facilitate comparison of student award amounts over time, these data have been adjusted to 2005 dollars according to the consumer price index for all urban consumers (CPI-U). FSEOG program data on the number of students granted awards and the average award amount since the 1986-1987 award year (in constant 2005 dollars) are presented in Figure 2. Once the smallest of the three campus-based programs in terms of the number of students served, the FSEOG program has grown steadily since its inception in the 1967-1968 award year to become the largest today. Since AY 1989-1990, it has served more students annually than either of the other two campus-based programs. The number of students receiving FSEOG awards increased considerably during the 1990s, reaching 1.4 million in 2005-2006 (more than twice as many students as received awards in 1986-1987). The average amount of aid provided per student under the FSEOG program is the lowest among the three campus-based programs. Over the past two decades, increasing numbers of students have been served through the FSEOG program, and the average award amount has increased from $633 in 1986-1987 to $764 in 2005-2006. However, in constant dollars, award amounts have declined by 32%. 2 erugiF drawA egarevA dna sdrawA gnivieceR stnedutS fo rebmuN :GOESF . 6002-5002YA hguorht 7891-6891YA ,stnuomA smargorP desaB supmaC laredeF .noitacudE yradnocestsoP fo eciffO .noitacudE fo tnemtrapeD .S.U :ecruoS .7002 kooB ataD FWS program data are presented in Figure 3. For most of the past two decades, between 650,000 and 750,000 students have been served annually through FWS; however, in recent years there has been a marked increase in participation--more than 810,000 students received FWS aid in 2004- 2005. Since the mid-1980s, the average FWS award has increased from $912 in 1986-1987 to $1,478 in 2005-2006. However, when adjusted for inflation, this amounts to a decrease of 9.1% in constant dollars. From AY1994-1995 through AY1999-2000, institutions participating in the FWS program were required to expend at least 5% of their initial and supplemental FWS allocations to compensate students employed in community service jobs. Beginning with AY2000-2001, institutions are now required to expend 7% of their FWS allotment on community service and to operate at least one tutoring or family literacy project. Since the community service requirements have been in place, ED reports that the number of students employed in community service increased from 58,596 in AY1994-1995 to 135,758 in AY2004-2005, but decreased to 121,097 in AY2005-2006. The shaded portion of the bars in Figure 3 indicates the number of students employed in community service. ,stnuomA drawA egarevA dna sdrawA gnivieceR stnedutS fo rebmuN :SWF .3 erugiF 6002-5002YA hguorht 7891-6891YA smargorP desaB supmaC laredeF .noitacudE yradnocestsoP fo eciffO .noitacudE fo tnemtrapeD .S.U :ecruoS .7002 kooB ataD Success in meeting the community service requirements is determined by dividing the total funds used to compensate students employed in community service jobs by the institution's total FWS allocation; and by determining whether the institution expended part of its allocation to compensate students for community service employment as reading tutors or for family literacy activities. Institutions may apply to the Secretary for a waiver from either or both of the FWS community service requirements. There is no explicit penalty for failing to meet the requirement. Information on the expenditure of FWS funds for community service, by IHE for AY2005-2006, has been reported by the U.S. Department of Education and is available from the Corporation for National and Community Service. Overall, participating IHEs spent 15.75% of their allocations to compensate students employed in community service jobs. Of 3,366 IHEs reporting data for AY2005-2006, 2,997 (89%) either met the 7% expenditure requirement or received a waiver.39 Historical data on the Perkins Loan program are provided in Figure 4. Approximately the same number of students receive aid through the Perkins Loan program as through FWS. Since 1986- 1987, the annual number of students served has ranged between approximately 640,000 and 760,000. The average Perkins Loan amount, however, is considerably greater than the amount of aid provided under either FSEOG or FWS. Over the past two decades, average Perkins Loan 39 Corporation for National and Community Service, Volunteering in America, The Role of the Federal Government, Federal Work-Study Program, at http://www.nationalservice.gov/pdf/05-06_FWS.xls. Note: data are not reported on tutoring and family literacy projects. amounts have more than doubled, increasing from $1,067 in 1986-1987 to $2,190 in 2004-2005. In constant dollars, this represents an increase of 15%. drawA egarevA dna sdrawA gnivieceR stnedutS fo rebmuN :snaoL snikreP .4 erugiF 6002-5002YA hguorht 7891-6891YA ,stnuomA smargorP desaB supmaC laredeF .noitacudE yradnocestsoP fo eciffO .noitacudE fo tnemtrapeD .S.U :ecruoS .7002 kooB ataD Perkins Loans cohort default rates have declined from a high of 12.95% for the 1995-1996 cohort to 8.10% for the 2004-2005 cohort. (See Table 5.) Four-year institutions typically have the lowest cohort default rates, while those of two-year and proprietary institutions are much higher. At the end of FY2004, the Administration reported a total of $1.2 billion in outstanding defaulted Perkins Loans, with $321 million of this amount assigned to ED for collection.40 :setaR tluafeD trohoC naoL snikreP .5 elbaT 5002-4002YA hguorht 4991-3991YA -3991 -4991 -5991 -6991 -7991 -8991 -9991 -0002 -1002 -2002 -3002 -4002 4991 5991 6991 7991 8991 9991 0002 1002 2002 3002 4002 5002 67.01 75.21 59.21 84.21 45.11 16.01 99.9 53.8 58.8 92.8 21.8 01.8 ,noitacudE fo tnemtrapeD .S.U ;7002 hguorht 6991 ,skooB ataD smargorP desaB-supmaC laredeF ,DE :secruoS .setaR tluafeD naoL tnedutS lanoitaN ,sloohcS rof setaR tluafeD trohoC laiciffO 40 Office of Management and Budget, Budget of the United States Government, Fiscal Year 2005--Appendix, "Department of Education, Office of Student Financial Assistance," p. 361. £ In the 110th Congress, authorization for the campus-based programs and other HEA programs has been extended through April 30, 2008, under the Higher Education Extension Act of 2008 (P.L. 110-198). In each chamber, bills have advanced to amend and extend the HEA. On July 24, 2007, the Senate passed S. 1642, the Higher Education Amendments of 2007; and on February 7, 2008, the House passed H.R. 4137, the College Opportunity and Affordability Act of 2008. Both bills amend the campus-based programs, as well as other programs authorized under the HEA, and extend their authorization through FY2013.41 On July 29, 2008, House and Senate conferees agreed to a conference report to accompany H.R. 4137.42 This part of the report reviews selected aspects of the campus-based programs that may be affected by proposals contained in S. 1642 and H.R. 4137, as passed by the Senate and the House, respectively. Over the past several years, a number of proposals have been made to substantially modify or terminate authorization for one or more of the campus-based programs. For instance, in the 108th Congress and in the 109th Congress, HEA reauthorization bills were considered that would have amended the procedures used to allocate funds to institutions by phasing out the procedures for allocating funds on the basis of institutional base guarantees.43 For each year since FY2004, in its budget request, the Administration has requested that no funding be provided for federal capital contributions for the Federal Perkins Loan program; and for each year since FY2006, it has proposed terminating the program. In its FY2006 budget request, the Administration proposed replacing the FWS program requirement that IHEs use 7% of their allocation to compensate students employed in community service jobs with a community service set-aside equal to 20% of the funds appropriated for FWS. Under the proposal, IHEs would apply separately for community service funds that could be used only to support community service employment. In the summer of 2006, the Secretary's Commission on the Future of Higher Education recommended "that the entire financial aid system be restructured" and that "federal grant programs should be consolidated to increase the purchasing power of the Pell Grant."44 The Administration's FY2008 and FY2009 budget requests have recommended terminating both the FSEOG program and the Federal Perkins Loan program.45 41 For more detailed information on S. 1642, H.R. 4137, and HEA reauthorization, see CRS Report RL33415, Higher Education Act Reauthorization: A Comparison of Current Law and Major Proposals, by Adam Stoll et al., and CRS Report RL34283, Higher Education Act Reauthorization in the 110th Congress: A Comparison of Major Proposals, by Blake Alan Naughton et al. 42 The Senate Committee on Health, Education, Labor, and Pensions has posted a draft of the conference report to accompany H.R. 4137 that was agreed to by House and Senate conferees on July 29, 2008, at http://help.senate.gov/ Hearings/2008_07_29_E/KOS08400_xml.pdf. 43 For a more detailed discussion of issues concerning the allocation procedures for each of the three campus-based programs, see CRS Report RL32775, The Campus-Based Financial Aid Programs: A Review and Analysis of the Allocation of Funds to Institutions and the Distribution of Aid to Students, by David P. Smole. 44 U.S. Department of Education, A Test of Leadership: Charting the Future of U.S. Higher Education, 2006, p. 19, at http://www.ed.gov/about/bdscomm/list/hiedfuture/reports/final-report.pdf. 45 U.S. Department of Education, Fiscal Year 2008 Justifications of Appropriation Estimates to the Congress, Volume II, Student Aid Overview, 2007, pp. N-5 to N-6, available at http://www.ed.gov/about/overview/budget/budget08/ (continued...) Over the past several years, a number of major changes have been proposed for one or more of the campus-based programs, including their termination. However, the proposals being advanced in the 110th Congress would make comparatively modest changes to the programs and would extend the authorization of appropriations to fund most programs through FY2013. The remainder of this part provides a brief overview amendments to the campus-based programs proposed in S. 1642 and H.R. 4137. £ S. 1642 authorizes the appropriation of $675 million for the FSEOG program for FY2008, and such sums as may be necessary for each successive fiscal year through FY2013. H.R. 4137 authorizes the appropriation of $675 million for FY2009, and such sums as may be necessary for each successive fiscal year through FY2013. Under current law, the Secretary is authorized to allocate an amount equal to up to 10% of the amount by which funds appropriated for the programs authorized under HEA, Title IV, Part A exceeds $700 million, among IHEs from which 50% or more Pell Grant recipients either graduate or transfer to four-year IHEs. S. 1642 eliminates this provision; H.R. 4137 retains current law. The authority to allocate FSEOG funds to institutions meeting the specified 50% graduation or transfer rates is not exercised by the Secretary, and institutional data on Pell Grant recipient graduation and transfer rates are not currently collected by ED. (Although this authority is not used for the FSEOG program, the Secretary once exercised a similar authority under the FWS program to award $13 million in FWS funding for the 1997-1998 award year to IHEs that certified that 50% or more of their 1990-1991 Pell Grant recipients had either graduated or transferred to a four-year college.46) As noted earlier, after allocating base guarantee funds to institutions, all remaining funds are allocated to institutions according to fair share allocation procedures. According to the fair share allocation procedures, funds are allotted to IHEs in proportion to each institution's share of the national total of institutional need that is in excess of the amount each IHE received as its base guarantee. Institutional need is an expression of the relationship between the average cost of attendance (COA) at a participating institution and the average expected family contributions (EFCs) of the students who apply for federal student aid at that institution. For purposes of the (...continued) justifications/n-aidoverview.pdf. 46 U.S. Department of Education, Office of Postsecondary Education, Dear Colleague Letter CB-97-11, July 1, 1997; http://www.ifap.ed.gov/dpcletters/doc0246_bodyoftext.htm. fair share allocation procedures, COA consists of the average tuition and fees per student at the IHE, plus a standard living cost allowance and an allowance of $450 for books and supplies. Both S. 1642 and H.R. 4137 increase the allowance for books and supplies from $450 to $600 uniformly for all institutions. It appears that this change will have a very modest impact in redistributing the allocation of fair share funding from higher-cost institutions to lower-cost institutions, since the $150 increase is proportionally greater for low-cost IHEs. For example, if an IHE has a COA of $5,000, the change represents a 3% increase in COA; for an IHE with a COA of $15,000, the change represents only a 1% increase in COA. Still, because in recent years, after allocating funds for base guarantees, only a limited amount has been available for allocation according to fair share procedures and because the aggregate total of institutional need will increase as well, the redistribution of funds across institutions will likely be minimal. £ Under current law, two authorizations of appropriations are provided for the FWS program. Section 441(b) authorizes the appropriation of funds for the FWS program in general; and § 448(f) authorizes the appropriation of funds for the Work-Colleges component of the FWS program. Although a separate authorization of appropriations is provided for Work-Colleges, funds have often been provided from the amount appropriated under § 441(b). For example, for FY2006, $6 million was provided for Work-Colleges from among the total FWS appropriation provided under § 441(b).47 For FY2008, the conference report to the Consolidated Appropriations Act, 2008 (P.L. 110-161) directs ED "to provide the same funding as in fiscal year 2007 for the Work Colleges program authorized under section 448 of the Higher Education Act from the Federal Work-Study Programs appropriation."48 S. 1642 authorizes the appropriation of $1 billion for the FWS program for FY2008, and such sums as may be necessary for each succeeding fiscal year through FY2013. S. 1642 also removes the separate authorization of appropriations specifically for the Work-Colleges program and provides for the use of funds appropriated under § 441(b) for the Work-Colleges program. H.R. 4137 authorizes the appropriation of $1.5 billion for the FWS program under § 441(b) for FY2009, and such sums as may be necessary for each successive fiscal year through FY2013; and such sums as may be necessary for FY2009 through FY2013 for the Work-Colleges program. H.R. 4137 also establishes a new authorization of appropriations to grant funds to IHEs for Off- Campus Community Service (described below). Such sums as may be necessary are authorized to be appropriated for FY2009 through FY2013 for Off-Campus Community Service grants. 47 H.Rept. 109-337, conference report to accompany H.R. 3010, "Making appropriations for the Departments of Labor, Health and Human Services, and Education, and Related Agencies for the fiscal year ending September 30, 2006, and for other purposes," (P.L. 109-149). Similarly, for FY2002, $4 million was provided for Work-Colleges (H.Rept. 107- 342); for FY2001, $4 million was provided (H.Rept. 106-1033); and for FY1997, $1.5 million was provided (H.Rept. 104-863). 48 Committee Print of the House Committee on Appropriations on H.R. 2764/P.L. 110-161 Books 1&2, Division G-- Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, p. 1587. Both S. 1642 and H.R. 4137 increase the allowance for books and supplies used in the fair share allocation procedures from $450 to $600. This change is similar to the $150 increase for books and supplies described above for the FSEOG program. ¢ Under current law, institutions must use at least 7% of their FWS allocation to compensate students employed in community service and must operate at least one tutoring or family literacy project. However, these requirements may be waived if the Secretary determines that enforcement would cause hardship for students at the IHE. S. 1642 revises the criteria upon which the Secretary may grant a waiver of the FWS community service requirements to provide that waivers may be granted if enforcement of the requirement would cause hardship for students at the IHE; or if the IHE certifies that 15% or more of its full- time students participate in specified community service or tutoring and literacy activities. ¢ H.R. 4137 establishes a new Off-Campus Community Service grant program under which the Secretary may award grants to IHEs to recruit and compensate students for off-campus community service employment. Under the new program, priority in the awarding of grants to institutions would be provided for the support of early childhood education activities and activities in preparation for and during emergencies and natural disasters. H.R. 4137 also revises the definition of "community services" to include "responding to the needs of the community, which may include activities in preparation for and during emergencies and natural disasters." Under current law, institutions may use not more than 10% or $50,000 of their FWS allocations for job location and development programs. S. 1642 permits IHEs to use not more than 10% or $75,000 of their FWS allocations for job location and development programs. H.R. 4137 retains current law. In addition to making changes to how funds are made available for the Work-Colleges program (described above), S. 1642 permits institutions to use funds received under the Work-Colleges program to support model volunteer community service projects associated with local IHEs. Both S. 1642 and H.R. 4137 revise the definition of the term "work-college" by limiting eligible institutions to public or private non-profit four-year institutions; by replacing the term "work- learning" with "work-learning-service"; and by adding a provision that institutions require at least half of all full-time resident students to participate in a comprehensive work-learning-service program for at least five hours per week, or at least 80 hours during each period of enrollment, except during summer school and approved study abroad or externship programs. £ S. 1642 extends the authorization of appropriations for Perkins Loan federal capital contributions in the amount of such sums as may be necessary for FY2008 through FY2012. H.R. 4137 extends the authorization of appropriation for federal capital contributions in the amount of $350 million for FY2009 and such sums as may be necessary for FY2010 through 2013. H.R. 4137 also extends the authorization of appropriations for federal capital contributions to enable students receiving Perkins Loans for academic years ending prior to October 1, 2014, to continue or complete their course of study in the amount of such sums as may be necessary for FY2014 through FY2019. Both S. 1642 and H.R. 4137 increase the allowance for books and supplies used in the fair share allocation procedures from $450 to $600. This change is similar to the $150 increase for books and supplies described above for the FSEOG and FWS programs. Institutions must enter into program participation agreements with the Secretary to participate in the Federal Perkins Loan program. Program participation agreements address certain aspects concerning the operation of the program, including actions to be taken with respect to defaulted loans and loans an institution decides not to service and collect. The statute grants the Secretary authority, in certain circumstances, to permit or require institutions to assign, transfer, or refer such loans to the Secretary. The statute also permits, but does not require, the Secretary to reallocate funds collected on defaulted loans assigned to the Secretary, (less an amount not to exceed 30% to cover collection costs), among other participating institutions as additional federal capital contributions.49 In addition, the statute grants the Secretary the authority to include in program participation agreements "such other reasonable provisions as may be necessary to protect the United States from unreasonable risk or loss and as are agreed to by the Secretary and the institution."50 In accordance with regulations implementing program participation agreements for the Federal Perkins Loan program, if an institution decides not to service or collect a loan, or if a loan is in default despite the institution's due diligence in trying to collect on the loan, the institution may assign its rights to the loan to the United States without recompense.51 Citing the authority under HEA, § 463(a)(9) to add requirements to the Perkins Loan program participation agreement to protect the United States against unreasonable risk of loss, the Secretary has promulgated regulations, effective July 1, 2008, requiring program participation agreements to provide that institutions must assign defaulted loans to the Secretary if the outstanding balance is $100 or more, the loan has been in default for seven or more years, and a payment has not been received 49 HEA, § 463(a)(4)(A) [20 U.S.C. 1087cc(a)(4)(A)]. 50 HEA, § 463(a)(9) [20 U.S.C. 1087cc(a)(9)]. 51 34 C.F.R. § 674.8(d). in the previous 12 months, unless the loan was in forbearance or deferment.52 Current regulations on program participation agreements do not address the transfer or referral of Perkins Loans to the Secretary. H.R. 4137 amends HEA, § 436(a)(4)(B) to provide that if an IHE has not knowingly failed to maintain an acceptable collection record with respect to a defaulted Perkins Loan, the Secretary may allow the institution to refer the loan to the Secretary, without recompense, except that the amount collected (less collection costs) shall be repaid to the referring institution within 180 days of collection and shall be treated as an additional federal capital contribution. H.R. 4137 also seeks to limit the authority of the Secretary to require the mandatory assignment of Perkins Loans. Under current law, annual loan limits for borrowers of Perkins Loans are $4,000 for undergraduate students and $6,000 for graduate and professional students. Aggregate loan limits for borrowers of Perkins Loans are $20,000 for undergraduate students who have completed two years of study, $40,000 for graduate and professional students, and $8,000 for all other students. H.R. 4137 increases annual loan limits to $5,500 for undergraduate students and to $8,000 for graduate and professional students. H.R. 4137 also increases aggregate Perkins Loan limits to $27,500 for undergraduate students who have completed two years of study; $60,000 for graduate and professional students; and $11,000 for all other students. Under current law, borrowers of Perkins Loans are required to request forbearance in writing; whereas such a requirement does not apply with respect to requesting forbearance on FFEL and DL program loans. S. 1642 removes the requirement that forbearance must be requested in writing and provides that the terms of forbearance agreed to by the borrower and the lending institution must be documented and recorded in the borrower's file. Under current law, Perkins Loan borrowers may rehabilitate a defaulted loan by making 12 on- time, consecutive, monthly payments. When a defaulted loan is rehabilitated, the holder of the loan (i.e., the institution or the Secretary) must request that the default be removed from the borrower's credit history. H.R. 4137 provides that a defaulted Perkins Loan shall be considered rehabilitated upon a borrower making 9 on-time, consecutive, monthly payments. S. 1642 retains current law. Under current law, borrowers of Perkins Loans who die or become permanently and totally disabled (as determined in accordance with regulations) may have their loans discharged. S. 1642 52 U.S. Department of Education, "34 CFR Parts 674, 682, and 685: Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program; Final Rule," 72 Federal Register 61996, and 61973-61974, November 1, 2007. provides that in addition to current provisions, Perkins Loan borrowers shall have their loans discharged if they are unable to engage in gainful activity due to a medically determinable physical or mental impairment that is expected to result in death, and which has lasted or is expected to last continuously for 60 months. H.R. 4137 simplifies the procedures for having a Perkins Loan discharged for disabled veterans by providing that borrowers of Perkins Loans who receive a permanent total disability rating from the Secretary of Veterans Affairs, and who provide such documentation to the Secretary, shall be considered permanently and totally disabled for the discharge of student loans; and that such borrowers shall not be required to present additional documentation. As explained earlier (see Table 2), borrowers of Perkins Loans may have a portion or all of their loans cancelled for public service. S. 1642 expands the types of public service for which borrowers may have their Perkins Loans cancelled. Loan cancellation at the rate of 15% per year of service is provided for service as a full-time staff member in a pre-kindergarten or child care program that is licensed or regulated by the state. Loan cancellation the rate of 15% for the first and second years of service; 20% for the third and fourth years of service; and 30% for the fifth year of service, is provided for service as a full-time faculty member at a Tribal College or University; as a librarian with a master's degree in library science, and employed in a school served under Title I of the ESEA, or a public library serving a Title I school; as a full-time speech language therapist with a master's degree working exclusively in Title I schools; and for service as a member of the armed forces in an area of hostility (which under current law is provided at the rate of 12½% per year, for up to four years of service). In addition to the expanded types of public service for which loan cancellation is provided under S. 1642, H.R. 4137 also provides loan cancellation for full-time fire fighters at the rate of 15% for the first and second years of service; 20% for the third and fourth years of service; and 30% for the fifth year of service. Both S. 1642 and H.R. 4137 extend eligibility to receive aid under the FSEOG and FWS programs (as well as under the Pell Grant program) to students with intellectual disabilities who would not otherwise qualify for federal aid by making certain student eligibility requirements inapplicable to such students. Under both bills, a "student with an intellectual disability" is an individual who has a cognitive impairment that substantially affects intellectual and cognitive functioning, who is eligible for assistance under the Individuals with Disabilities and Education and Improvement Act (IDEA) and who has completed secondary school or who is no longer eligible for assistance under IDEA because of age, and who is enrolled or accepted for enrollment in a comprehensive transition or postsecondary education program that meets requirements such as preparing students for gainful employment and independent living. Students must participate in eligible programs on at least a half-time basis by enrolling in regular classes, auditing classes, enrolling in non-credit courses, or participating in internships. In some states, individuals who enter into a loan agreement while they are a minor may be able to subsequently break the terms of their loan agreement by raising a claim of "infancy."53 Both S. 1642 and H.R. 4137 specify that for the Perkins Loan program, institutions shall not be subject to a defense raised by a borrower on the basis of a claim of infancy under state law. Under current law, institutions may transfer up to 25% of their Perkins Loan FCC allotment to either or both the FSEOG and the FWS programs; and may transfer up to 25% of their FWS allotment to the FSEOG program. S. 1642 expands the transfer of allotments provision to permit IHEs to transfer up to 25% of their FSEOG allotment to the FWS program. H.R. 4137 retains current law. David P. Smole Specialist in Education Policy dsmole@crs.loc.gov, 7-0624 53 As defined by Merriam-Webster's Dictionary of Law, 1986, infancy is "the affirmative defense of lacking legal capacity (as to make a contract or commit a crime) because of being too young and esp. because one's age is below an age set by statute." ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL31618