On Tuesday July 24, 2007, the Senate passed S 1642, the Higher Education Amendments of 2007, which will reauthorize the Higher Education Act. The bill aims to address the rising costs of higher education, reform the student loan system and promotes teacher preparation programs. The House has yet to draft companion legislation. Relative to the Perkins Loan Program, the bill authorizes appropriations with “such sums as may be necessary for FY2008 through FY2012”. The bill also provides for the cancellation of loans for public service. The bill amends current law and adds loan cancellation for full-time faculty members at a Tribal College or University, Librarians (if the Librarian has a master’s degree in Librarian Science and is employed in a Title I eligible school under No Child Left Behind), and full-time speech language therapists with master’s degrees who are working exclusively with schools eligible for Title 1 assistance under No Child Left Behind.

The bill also corrects the elimination of the defense of infancy. When Congress eliminated the defense of infancy from being applied to federal Stafford and PLUS loans, this defense was still permitted for Perkins Loans under state law. This is inconsistent and has been corrected so that the ability of institutions of higher education to collect Federal Perkins Loans is not impaired.

Finally, the bill also significantly expands disclosure in the consolidation process regarding loss of benefits. The bill says that the lender will disclose, in a clear and conspicuous manner, to borrowers who consolidate loans that once the borrower adds the borrower's Federal Perkins Loan to a Federal Consolidation Loan, the borrower will lose all interest-free periods that would have been available, such as those periods when no interest accrues on the Federal Perkins Loan while the borrower is enrolled in school at least half-time, during the grace period, and during periods when the borrower's student loan repayments are deferred; that the borrower will no longer be eligible for loan cancellation of Federal Perkins Loans under any provision of section 465.

This section also provides that the lender shall, upon application for a consolidation loan, provide the borrower with information about the possible impact of loan consolidation, including--the total interest to be paid and fees to be paid on the consolidation loan, and the length of repayment for the loan; whether consolidation would result in a loss of loan benefits under FFELP or Direct Lending, including loan forgiveness, cancellation, and deferment; in the case of a borrower that plans to include a Federal Perkins Loan in the consolidation loan, that once the borrower adds the borrower's Federal Perkins Loan to a consolidation loan-- the borrower will lose all interest-free periods that would have been available for the Perkins loan, such as the periods during which no interest accrues on the Federal Perkins Loan while the borrower is enrolled in school at least half-time, the grace period, and the periods during which the borrower's student loan repayments are deferred; and the borrower will no longer be eligible for cancellation of part or all of a Federal Perkins loan; the ability of the borrower to prepay the consolidation loan, pay such loan on a shorter schedule, and to change repayment plans; that borrower benefit programs for a consolidation loan may vary among different lenders; the consequences of default on the consolidation loan; and that by applying for a consolidation loan, the borrower is not obligated to agree to take the consolidation loan.

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