Archived Speeches

Rodney A. Erickson and Susan L. Grimm Remarks
Committee on Educational Policy
Board of Trustees
November 14, 2003

Reauthorization of the Higher Education Act

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Rod Erickson begins:

Slide 1 - Title Slide

Anna Griswold’s presentation about federal student aid programs has set the stage for a brief discussion of the Higher Education Act which is administered by the U.S. Department of Education and scheduled for reauthorization in 2004. The Higher Education Act was created in 1965 to provide financial assistance for students in postsecondary and higher education to ensure that students would not be denied access to college because of insufficient family income, and to strengthen the educational resources of colleges and universities. During each reauthorization process, programs are evaluated for their effectiveness in reaching the goals of federal policy makers.

It would be difficult to overstate the importance of the Higher Education Act to Penn State. The Act authorizes the federal government’s major student aid programs that Anna outlined this morning – Pell Grants, Student Loans, and Federal Work-Study. Nationwide, nearly 75 percent of full-time students receive federal student aid, as do almost 40 percent of part-time students.

Slide 2 - Higher Education Act

The Higher Education Act authorizes programs and activities in four main categories:

Student Financial Aid, which includes Pell Grants, Student Loans and campus-based programs such as Work-Study. The Pell Grant is the foundation of the student aid program providing direct aid to the lowest income students. Anna discussed the use of student loans and the levels of average student debt this morning. Federal Work-Study is a campus-based program which allocates funds to institutions for award to eligible undergraduate and graduate students with high financial need. Work-Study allows students to earn money to cover a portion of their educational expenses by working on campus or for off-campus, nonprofit organizations.

Student Support Services include the federal TRIO programs – so called because there were originally only three programs – and GEAR UP which stands for Gaining Early Awareness and Readiness for Undergraduate Programs. These programs provide support services to disadvantaged students to help them complete high school, and enter and succeed in college. Penn State operates eight very successful TRIO programs within the Office of the Vice Provost for Educational Equity.

The third category is Institutional Aid. The Higher Education Act authorizes financial assistance to historically black colleges and universities, and institutions serving other minority populations.

And the fourth major category includes aid to improve K-12 teacher training at postsecondary institutions.

Other important titles in the legislation relate to International Education Programs (Title VI) and Graduate Programs (Title VII). These are not currently seen as contentious issues in the reauthorization process.

During the past year, members of the Penn State community have participated in dozens of national association working groups and assisted in putting forward recommendations to Congress and the Department of Education.

Slide 3 - Reauthorization Issues for 2004

I’ll briefly summarize the key issues that are being addressed in the reauthorization process:

Access to Postsecondary Education

The original intent of the legislation was to ensure that low-income and disadvantaged students had the means necessary to obtain higher education. Over the last 30 years, students from low-income and disadvantaged families have made substantial gains in higher education participation rates – both nationwide and at Penn State. Despite these gains, however, such students remain significantly less likely to participate in postsecondary education than students from high-income families. Congress will be examining whether the current HEA programs adequately promote the goal of expanding access to postsecondary education for disadvantaged students. Congress will also consider whether the predominance of loans in student aid packages has adverse consequences for low-income students who are often not comfortable incurring large levels of debt, and whether the process of applying for student aid is too complicated and likely to discourage needy students from securing aid.

College Costs and Prices

More and more government policy makers are asking questions about college costs and prices. This is by far the most challenging issue under debate this year. Penn State is ahead of the curve in this regard because of our long-term attention to cost savings and efficiency. We have been open about our decision-making processes for tuition increases and have always assumed that our students and their families deserved to understand the reasons behind the university’s tuition and room and board rates. For example, the Tuition Task Force reported to the Board in January 2002 about the fiscal challenges we face and the specific areas where our costs outpace inflation. We’ve carefully reviewed ways that the university can cut its expenses without sacrificing quality. The Cost Savings Task Force is continuing to examine all possible means to reduce costs and increase non-tuition revenue. Sue Grimm will provide a more in-depth discussion of the legislative activity focused on college costs in her remarks.

Federal Tax Benefits

There are a growing number of programs to help families pay for higher education. The programs are coming in the form of tax provisions that reimburse families for college expenditures, such as the federal Hope Scholarship and Lifetime Learning tax credits, or that promote college savings, such as federal tax incentives for qualified tuition programs. In essence, this new way of assisting families has resulted in parallel systems, one through the tax code, and the other through direct financial support. The effectiveness of having these two systems and a clearer understanding of the actual populations they are reaching are important topics of discussion.

Standards and accountability

Up until now, institutions have demonstrated that they meet standards and are “accountable” by documenting their rigorous administration of HEA institutional and student aid funds. Institutions are regularly reviewed for instances of fraud or abuse of funds and for the default rates of their students.

Penn State’s administration of HEA funds has been exemplary. The Department of Education has selected Penn State as a site for their demonstration programs that permit streamlined administration of financial aid.

This year, some members of Congress want to consider different standards that try to track educational outcomes of students, such as the rates at which students complete their programs of study or the rates at which graduates receive professional licensing or certification. As you know, Penn State already has extremely high graduation rates as compared to national rates.

Need analysis

With increasing use of the tax code and a growing population of non-traditional students, Congress will once again debate the specifics of determining a student’s ability to contribute toward their education. The key element in the system is the determination of the student’s expected family contribution (EFC), as described by Anna Griswold this morning. On the one hand, we want to encourage as much simplification of the need analysis as possible, on the other hand, the addition of tax credits and other measures has made it more complex to determine what families can be expected to contribute toward college expenses. Unfortunately, many families who benefit from tax credits do not view the credit as a form of financial aid that helps offset the cost of education.

Distance Education

This year, Congress will revisit distance education, which was only considered seriously for the first time during the last reauthorization. The growing use of distance education has raised very significant questions for student financial aid. Originally, Congress had to enact provisions to address abuses of student aid by various correspondence schools. But in the new technological age with growing use of Internet-based educational tools, including our own World Campus, we are challenging the traditional definitions of a “student,” and a “program.”

With all of these issues, there are four recommendations that, I believe, summarize the key concerns of Penn State and the other major research institutions.

Slide 4 - Increasing Access for Low-income Students

The first recommendation is to increase access to higher education for low-income students by increasing funding for grants. The Pell Grant and Supplemental Educational Opportunity Grant (SEOG) are key to increasing access for low-income students, typically students whose annual household income is less than $40,000. The real value of the maximum Pell Grant increased nine percent between 1990-91 and 2000-2001. In spite of this increase, the purchasing power of the maximum Pell Grant was greater in 1975 than today, when inflation is considered.

SEOG is intended to be the partner program to the Pell Grant. It provides financial assistance to Pell Grant recipients with the greatest need. We believe that significant new investments in both the Pell and SEOG programs are needed in order to provide greater opportunities for low-income students and to enable low-income students to pay for more of their education with grants rather than loans.

Slide 5 - Increasing Financial Support for Graduate Education

The second recommendation is increasing financial support for graduate education. The Department of Education administers two programs that support domestic graduate students–Graduate Assistance in Areas of National Need (GAANN) and the Jacob K. Javits Fellowships. Together, these programs provide support for the entire range of academic disciplines.

Unfortunately, funding for GAANN and Javits Fellowships has not kept pace with inflation or their authorized funding levels for more than a decade. The higher education community is recommending increased funding to reinvigorate these programs.

Slide 6 - Increasing Student Loan Terms and Increasing Loan Limits

The third recommendation is to improve student loan terms and conditions and to increase student loan borrowing limits. Federal student loans are one of the largest student aid programs. The Department of Education’s FY 04 budget proposal estimates that federal student loans will help more than 12 million students finance their education this year. Loan limits have not been adjusted for ten years, and evidence suggests that students are turning to the private sector to borrow increasing amounts of money at less favorable lending terms and conditions.

We recommend an increase in annual and aggregate loan limits for both subsidized and unsubsidized loans for all student borrowers from freshman through graduate and professional school students. We also seek better borrowing terms and conditions in order to make student loans more affordable and effective in helping low- and middle-income students finance their education. Support for increasing loan limits does not mean that we lessen our commitment to increasing grant funds, but it recognizes the magnitude of the unmet financial need of our students and the need to provide the most optimal loan rates and terms that will decrease students’ overall costs. Increasing loan limits would enable most of our students to borrow through a single source instead of borrowing from multiple lenders.

Slide 7 - Ensuring Accountability

The fourth recommendation relates to the need for accountability in the financial aid system. In many countries, governments control and manage higher education, including the mechanisms of accountability for institutional and program performance. In the United States, however, higher education is controlled mostly at the institutional level through internal efforts to monitor quality and by accreditation–a mostly non-governmental process for external accountability. Accreditation is a process by which universities demonstrate that they meet certain performance standards and offer quality programs. The process allows institutions to receive feedback, guidance and even sanctions if improvements are necessary. Penn State’s programs are accredited by about 40 different professional organizations.

Accountability is also provided through oversight by governing boards and by institutionally initiated external and internal program reviews. Accountability is also promoted by the competition among colleges and universities to attract students in an open and competitive environment.

We recommend that the current system of non-governmental accountability be preserved. Colleges and universities in the United States are already highly accountable and heavily regulated institutions. The American system of higher education is the envy of the world, and the competition among institutions and the current systems of accountability are major factors in this success.

In general, we agree with the rest of the higher education community that the Higher Education Act serves students and universities well and does not need significant modification. Further controls will only add to the costs of attendance for our students, while doing little, if anything, to improve quality. Since all members of Congress may not agree, I will turn to Sue Grimm, Penn State’s Director of Federal Relations, to report on the current status of the Congressional reauthorization process.

Slide 8 - Sue Grimm’s title slide

Sue Grimm begins:

Before I discuss the status of the Reauthorization of the Higher Education Act, and the issues raised by Dr. Erickson, I thought it would be useful to detail the role an individual university Governmental Affairs representative like myself serves in the larger arena of the legislative process. As Penn State’s Director of Federal Relations, I report to Rich DiEugenio, Special Assistant to the President for Governmental Affairs. While you often work with him and are engaged in issues pending at the State level, our office also is actively involved in carrying the Penn State message to Washington and our members of the Pennsylvania Congressional Delegation.

In Washington, higher education interests are represented by a myriad of associations and coalitions from individual scientific disciplines to groups that administer specific programs on our campuses. While I interact with many of these groups, our office maintains its most direct involvement with the associations that represent the institutions themselves and have direct involvement and leadership from our presidents. These groups are commonly referred to as the “Big Six.”

Slide 9 - Big Six Higher Education Associations

The umbrella organization for higher education is the American Council on Education (ACE), which is the national coordinating body for all accredited colleges and universities in the country. Of the five associations that branch out from ACE, we work most closely with the Association of American Universities (AAU), which represents the nation’s leading research universities and the National Association of State Colleges and Land Grant Universities (NASULGC), where our land grant interests are at the forefront. As a public institution, we also are members of the American Association of State Colleges and Universities (AASCU). The other two organizations are the National Association of Independent Colleges and Universities (NAICU) and the American Association of Community Colleges (AACC). There are designated committees of governmental affairs representatives within each of these associations charged with developing and implementing a legislative agenda that most effectively meets the needs of our institutions.

I provide you with this background because these groups are “leading the charge” for the national higher education agenda. On a bill such as the Reauthorization of the Higher Education Act, the details are often complex and require individuals with a very specialized expertise to coordinate the positions of the relevant experts on our campuses. These experts work on issues contained in the Act almost on a continual basis, but last year they began the process of gathering priority issues and concerns from our universities and from the associations representing specific disciplines. One key national group involved in this effort is the National Association of Student Financial Aid Administrators (NASFAA). From both Anna Griswold’s and Rod Erickson’s comments you can clearly see how important this group is to the discussion. Together, these organizations developed a very detailed and specific list of recommendations for the Reauthorization that were submitted to the Department of Education and the House and Senate Congressional Committees with oversight responsibility for the Act.

The federal relations officers on each campus work with the associations through this process and act much like a member of a grassroots network after our presidents have signed-off on the global positions. In fact, my work began early this year when Anna Griswold joined me in Washington to discuss Penn State’s student financial aid programs with individual staff members of the Pennsylvania Congressional Delegation. She provided them with a presentation very similar to the one you heard today and we began to detail some of the key issues that we believed would be central to the discussion in the upcoming reauthorization. At the same time, the Congressional committees have held numerous hearings on the individual issues contained in the Act. Legislative action on these issues was initiated earlier this fall in the House of Representatives. I will use the action in the House as the basis for my discussion today since the Senate does not plan to introduce legislation until next year.

Slide 10 - Subcommittee on 21st Century Competitiveness

Congressman Buck McKeon from California serves as Chairman of the Subcommittee on Twenty-First Century Competitiveness, which is the committee responsible for higher education issues. Under his leadership, the Committee has approached the Bill in a unique way. Rather than work on a single bill, the Committee is taking a thematic approach to issues. The Committee also has established an elaborate web site and titled it “College Cost Central.” And, it has determined that there will be four central themes in this year’s reauthorization.

The four themes are:

Holding colleges accountable for cost increases;
Removing barriers for non-traditional students;
Improving quality and innovation by empowering consumers; and,
Realigning student aid programs to ensure fairness for America’s neediest students and families.

Obviously, these represent issues for which universities are challenged on a daily basis. They are serious issues and concerns for all our families and are discussions we in government relations routinely address, not only with our members of Congress, but with elected officials at the State level as well. But how the Federal Government can achieve these objectives within a national system of higher education that is as rich and diverse as the one we have in this country is the bigger challenge.

In 1997, during the last Reauthorization of the Higher Education Act, a College Cost Commission was established to try to address the challenges. At the risk of oversimplifying the outcome, I will say that, in short, the Commission concluded that there is no “one size fits all” approach to addressing the rising costs of higher education or our individual missions. Congressman McKeon, who was a member of the committee when the Commission issued its report, has revived the discussion and issued his own report along with committee chairman, Congressman John Boehner from Ohio. This report, entitled “The College Cost Crisis,” came after Mr. McKeon had made it known that he was determined to find a way for the federal government to intervene and control college costs. The report represents a compilation of any information that supports the notion that university costs, and therefore tuition, are out of control. He did not solicit input from the higher education community on the contents of the report prior to its release.

Members of the committee have proposed their solutions to the issues, some with which we agree and others that we don’t. After much anticipation, the discussion has finally begun to take shape and an active dialogue between members of Congress and the higher education community is underway, including public hearings.

Slide 11 - Passed by House of Representatives

A few of the less controversial issues have already seen action in Committee and have already passed in the House of Representatives. These include:

The International Studying in Higher Education Act – This bill would renew the existing programs for international education and foreign language programs that are designed to address the need for global educational experiences for our students. Concerns from the tragedies of September 11, 2001 have created increased scrutiny and reporting for international students through legislation not associated with the Higher Education Act. However issues of oversight of the international education programs in this Act are issues that the higher education community is actively discussing with the Committee.

The Graduate Opportunities in Higher Education Act – This bill would renew fellowship programs for graduate students in scientific and technical fields, the arts and humanities, and legal studies by providing financial assistance and support services to those displaying academic excellence. Most of the support for graduate education comes from sources outside of this Act including grants through the National Science Foundation.

The Teacher Recruitment and Retention Act – This bill would increase and expand loan forgiveness for eligible teachers. It would increase the amount of loan forgiveness from $5,000 to $17,500 for qualified teachers in math, science, and special education who commit to teaching for five years in schools that are facing shortages in these areas and facing the greatest difficulty in recruiting and retaining high quality teachers.

The Ready to Teach Act – This bill implements the requirements of the No Child Left Behind Act of 2001 for teacher quality enhancement programs. The No Child Left Behind Act imposed new standards for measuring the academic quality of the education provided in elementary and secondary schools. This bill would authorize programs, including state grants, to assist colleges and universities in training teachers to meet the new standards.

I believe it is safe to say that each of these bills represents areas in which the Congress and the higher education community tend to have the least disagreement.

There are three bills currently in committee that have yet to be acted upon. Each bill is a bit more controversial and keeps with the tone and theme of access, accountability and affordability that are overriding the reauthorization process right now.

Slide 12 - Expanding Opportunities in Higher Education Act

The Expanding Opportunities in Higher Education Act addresses the programs that are aimed at making it easier for all students to receive a higher education. It reaffirms the federal government’s commitment to TRIO and GEAR UP as well as other programs for students with special needs. It also addresses issues involved with how the federal government defines attendance and other credit-related requirements as it pertains to the growing use of distance education.

Slide 13 - Financial Aid Simplification Act

The next act is the Financial Aid Simplification Act. This Bill would direct the Advisory Committee on Student Financial Assistance, which provides advice and counsel to Congress and the Secretary of Education on student financial aid matters, to conduct a thorough study of how the process for determining eligibility for financial aid could be simplified. Among the list of issues the Committee would examine are:

whether the formula can be simplified without significant adverse effects on program intent, costs, integrity, delivery and distribution of awards;

whether the number of data elements and the complexity of questions can be reduced;

whether the application can be streamlined; and

whether students can complete limited sections of the financial aid application according to their specific circumstances.

The Committee also will look at whether information provided on other federal forms could be used to qualify potential students for the simplified needs test. Additionally, the Financial Aid Simplification Act requires the Secretary of Education to make special efforts to notify students who qualify for free lunch at the secondary education level or food stamps of their eligibility for the maximum Pell Grant award.

Slide 14 - Affordability in Higher Education Act

The last act I’ll discuss is the Affordability in Higher Education Act.

Effective June 30, 2008, this bill would impose sanctions on institutions whose tuitions rise over a three-year period by more than twice the rate of the Consumer Price Index (CPI). This would become known as the College Affordability Index.
Institutions that exceed the College Affordability Index will have to provide to the Department of Education: an explanation of the factors contributing to the increase in the institution’s costs and the tuition and fees charged to students; a management plan stating the steps the institution is and will be taking to reduce its College Affordability Index; and an action plan, with a schedule, by which the institution will maintain or reduce increases in such costs, and tuition and fees.
If the institution fails to comply with its own management plan for two academic years, the institution will be placed in “cost affordability alert” status. This would impose additional requirements and make the institution’s status public. By 2011, sanctions would include loss of federal student aid eligibility for campus-based programs. Federal student aid programs that would be affected include TRIO, GEAR UP, federal work-study, and Perkins loan programs, among others. Financial aid programs that provide direct aid to students including Pell Grants and Stafford and Direct Student loans would not be affected.
The Bill also would create a College Affordability Demonstration Program to enable institutions to test innovative cost-saving measures; address barriers to student credit transfers; and encourage greater transparency in college cost and related information.

Slide 15 - Areas of Agreement

The key responses coming from the higher education community include some areas of agreement and some areas where we obviously have very serious concerns. We all agree that rising costs are a concern. We all agree that controlling costs is essential wherever possible. We all agree we need to make the financial aid process as streamlined and simplified as possible. And we certainly will take whatever steps we can to provide more user-friendly information on college tuitions, costs and financial aid. I say this upfront because, as Rod said earlier, you as trustees and the Penn State administration have been ahead of the curve in your approach to these issues. We are working very hard to make that known in all our communications with members of Congress.

Slide 16 - Areas of Concern

Federal price controls could seriously impinge upon a university’s ability to provide a quality education in the face of declining State financial support and legitimate cost increases. In addition, there are reports from Wall Street that such efforts at price controls could adversely affect university bond ratings, further hampering our ability to acquire capital at most favorable rates.

Since Mr. McKeon began discussing his ideas for price controls, our office has been coordinating efforts to educate members of the Pennsylvania Delegation about our concerns with this proposal. This is where our work in Harrisburg and Washington are intersecting and where we are calling on the many resources that have been developed as the University faces the difficult task of setting tuition each year.

In fact, the key issues we are communicating come directly from the Tuition Task Force report that was presented to the Board of Trustees last year. We are facing a serious decline in state revenues. We are facing increased costs for health care, library materials, technology and other operational costs that are far outpacing the CPI and are not within our control. And, we cannot and do not want to compromise quality.

Finally, we are still awaiting a proposal from the committee that addresses Pell Grants and student loan limits. Congress has not increased the limits on federally based student loans since 1992 and the borrowing limit for freshmen hasn’t been raised since 1986. We believe Congress must raise federal student loan limits to address the growing number of students who are turning to the private market to meet their educational expenses. We are urging members of Congress to strike a balance between grant and loan aid to continue to help us make higher education accessible to all students. In addition, while there are positive steps being taken to provide tax incentives for families, we are urging Congress to recognize that these programs do not eliminate the need for direct aid to help families pay for higher education.

Slide 17 - Summary

As you can see, the discussion around the Reauthorization of the Higher Education Act promises to be dynamic and challenging. I cannot predict the final outcome, and the reactions from individual members of Congress are as diverse as the interests they serve. However, I can assure you that we will continue to answer any and all questions raised by members of Congress and we will work with the national associations to ensure that we accomplish reasonable solutions to the challenges presented to us.

Dr. Erickson and I are available to answer any questions or concerns you may have regarding these important issues.



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