The appropriations process is off to a late start this year, mainly because of the uncertainty surrounding the Presidential election last November. However, the process has begun as the House and Senate Appropriations Committees have marked up their Fiscal Year (FY) 2002 spending bills earlier this summer. Both chambers will attempt to resolve the most contentious appropriations bills, including the Labor-HHS-Education Appropriations bill in September. In May, Congress approved the non-binding funding levels in the FY 2002 Budget Resolution conference report (H. Con. Res. 83), which included a 4 percent increase in discretionary funding, $1.25 trillion in tax cuts over 10 years, and $100 billion directed towards immediate tax refunds. In addition, the budget resolution included budget authority for a fix to the 2003 interest rate problem; however, an amendment to the Higher Education Act to eliminate 2003 interest rate provisions is still needed. In order to fund his priorities, President Bush's budget request he released in April included a $1 billion increase in funding for Pell Grants for low-income students; a $50 million increase for TRIO programs, and an increase in the loan forgiveness program for teachers who majored in math or science and teach those subjects in high-need schools for five years from $5,000 to $17,500.
The House and the Senate passed bankruptcy reform legislation (S. 420 and H.R. 333) that would require many people to file for bankruptcy under Chapter 13 and pay off their debts on a schedule on March 1st and July 17th, respectively. Currently, most debtors can file under either Chapters 13 or 7-the latter of which allows debtors to erase almost all of their debts, including credit card debt. Both bills include an amendment extending non-dischargeability provisions under Title 11 to alternative student loans made or guaranteed by for-profit entities. The Senate has already named its Conference Committee members, including Judiciary Committee Chairman Patrick Leahy (D-VT) and ranking member Orrin Hatch (R-UT), as well as Senators Joseph Biden (D-DE), Edward Kennedy (D-MA), Herb Kohl (D-WI), Jeff Sessions (R-AL), Mitch McConnell (R-KY), Russ Feingold (D-WI), Charles Schumer (D-NY), Jon Kyl (R-AZ), Charles Grassley (R-IA), Richard Durbin (D-IL), and Mike DeWine (R-OH). The House, however, has not named its conferees. President Bush has stated that he will sign a final bankruptcy reform bill.
In both the House and Senate, Senators Grassley and Baucus and Rep. Mink introduced bills (S. 152 and H.R. 686) that would eliminate the 60-month limit on student loan interest deduction and raise deduction amounts. In addition, Rep. English introduced the Student Loan Interest Deduction Act (H.R. 436), which would eliminate the 60-month limit on the deductibility of student loan interest, making it deductible for the duration of the loan, and repeal the current $2,500 limit on the deduction. The legislation would also make more people eligible for the deduction by raising the income limit from $40,000 to $100,000 for single taxpayers and from $60,000 to $150,000 for a joint return.
A number of bills have been introduced in the House and Senate amending tax provisions related to higher education. First, Senator Daschle introduced a bill (S. 9) that would allow up to $12,000 in college tuition and fees tax deductible for taxpayers with a marginal income tax rate of 28 percent or less and a bill (S. 7) that would increase tuition tax credits for families and increase the maximum Pell grant amount to $4,700. In the House, Rep. Bachus introduced a bill (H.R. 249) that would amend the Internal Revenue Code of 1986 to permit private educational institutions to maintain qualified tuition programs and to provide that distributions from such programs that are used to pay educational expenses shall not be included as gross income. While Rep. Ford introduced the "Make College Affordable Act of 2001" (H.R. 342) that would allow a credit for $10,000 per student per year or $20,000 per taxpayer per year on higher education expenses and interest on higher education loans, Senator Shumer introduced a bill with the same title (S. 458) that allows up to $12,000 a year in college costs to be tax deductible for any family in the 28 percent tax bracket and offers a tax credit of up to $1,500 for interest paid on student loans over first five year. Furthermore, Rep. McCarthy introduced the "Student Loan Relief Act" (H.R. 678) that would amend the IRC to increase the amount of student loan interest deduction permitted and to allow more taxpayers to claim that deduction.
In addition, Congress passed legislation (H.R. 1836) that will provide a tax cut to Americans in various income ranges. Among other priorities, the measure includes several education incentives of interest to the higher education community. In particular, the bill increases contribution levels-from $500 to $2,000-for education IRAs; excludes from gross income education distributions from qualified tuition programs; extends the exclusion of employer-provided educational assistance to graduate programs and makes permanent the exclusion for all studies; repeals the 5-year limit for use of the student loan interest deduction and modifies the income phase-out of the deduction; eliminates the tax on awards under the National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Scholarship Program, without regard to any associated service obligations; and provides an "above-the-line" deduction for qualified higher education expenses-up to $3,000 for 2002 and 2003 and up to $4,000 for 2004 and 2005.
Representative Barney Frank (D-MA) introduced legislation (H.R. 786) in February 2001 that amends the Higher Education Act of 1965 to repeal the provisions prohibiting persons convicted of drug offenses from receiving student financial assistance. Congress has not acted on the measure since its introduction.
Representative Frank introduced a bill (H.R. 343) amending the Higher Education Act to provide forgiveness of Perkins loans to members of the armed services on active duty, while Rep. Graham introduced legislation (H.R. 650) that would expand loan forgiveness for teachers. In addition, The Senate's bill to reauthorize the Elementary and Secondary Education Act (S. 1) contains a provision that would provide $5,000 of student loan forgiveness for people who teach Head Start for five years, which was offered by Sen. George Voinovich (R-OH).
The House unanimously approved the Need-Based Educational Aid Act of 2001 (H.R. 768), which Representative Barney Frank (D-MA) introduced on April 3, 2001. The legislation, which was sent to the Senate, permanently exempts college financial aid officials from antitrust laws when meeting to discuss formulas for granting need-based scholarships. The measure is in response to a suit by the Justice Department alleging that the "Overlap Group," a group of private colleges and universities, including several Ivy League schools, that meet to set standards in making awards, violated anti-trust laws. Congress passed a two-year antitrust exemption for the schools in the Higher Education Amendments of 1992 and has since passed similar extensions. The last exemption, made in 1997, is set to expire on September 30, 2001. The new law would permit the schools to agree to award financial aid on a need-blind basis and to use common principles of need analysis in making their award determination. It would also permit schools to exchange a student's information through a third party and agree on the use of a common aid application form.
In the House, Rep. Mink introduced a bill (H.R. 590) that calls for full funding of the Pell Grant Program. Similarly, Rep. Wu introduced a bill (H. Res. 53) that would increase the maximum Pell Grant to $4,350.
Senator Joseph Lieberman (D-CT) introduced the College Tuition Assistance Act of 2001 (S. 888) which provides tax relief to middle and lower-income American families by offering four ways to help families pay for higher education. It increases the value of the Lifetime Learning Credit to $2,800, aswell as the income eligibility levels at which individuals and families qualify, removes the requirement that Pell grants and other need-based government aid be subtracted from a family's eligible college expenses allowing more families to take advantage of the Lifetime Learning Credit. In addition, the measure removes the 60-month limit on taking advantage of the student loan interest deduction, raises the income levels so more individuals and families can qualify for the deduction, and raises the authorization level for the maximum Pell grant over academic years 2001-2002 and 2002-2003 to $5,800.
On June 13th, Senator Joseph Lieberman (D-CT) introduced a bill (S. 1025) designed to help families save for education expenses. In particular, the bill would create Individual Development Accounts, or IDAs, that "have proven to be successful in helping low-income working families save and accumulate assets." Under IDAs, families deposit savings and the financial institution-which receives tax breaks for participating-provides a dollar-for-dollar match for the first $500 families contribute to the account. One national demonstration project resulted in 2,378 low-income families saving a total of $834,442 in one year which generated another $1,644,510 in private matching funds. Thus far, IDA savings have been used to purchase long-term, high-return assets, including homes, post-secondary education and training, and small businesses.
House Education and the Workforce Committee Ranking Democrat George Miller (D-CA) introduced the "Affordable Student Loans Act of 2001" (H.R. 1622) that would eliminate origination fees and insurance fees in both the Federal Family Education Loan Program (FFELP) and Federal Direct Student Loan Program (FDSLP). The legislation would take effect on or after the first July 1st following the date of enactment and states that during the interim period between the bill's enactment and the first July 1st, the Department of Education "shall" charge the Direct Loan borrower a 4.0 percent origination fee. The legislation also amends the Higher Education Act to permit "any guaranty agency or consortium thereof" to enter into a voluntary flexible agreement with the Secretary. This provision would take effect on the date of enactment of the bill.
On June 19th, the House unanimously approved legislation (H.R. 1291) to increase G.I. Bill education benefits by nearly 70 percent. The bill would gradually raise the monthly benefit for full-time veterans from $650 to $1,100 by October 1, 2002 and raise the maximum total award a veteran could receive from $23,400 to $39,600. The measure, which President George W. Bush has pledged to sign, is expected to cost $9 billion over 10 years.