I write to you with genuine concern about the reauthorization of the Higher Education Act. As proposals and provisions continue to be discussed, it is critical that we consider their effect on students at The City University of New York and elsewhere, who increasingly rely on financial aid to pursue a college education. I have detailed below some of the most important issues regarding reauthorization, budget reconciliation, and appropriations, and ask for your assistance in achieving a reauthorization bill that truly reflects the importance of higher education to our country's future and the financial realities faced by college students across the country.

I am dismayed about the current budget environment, in which the House Education and Workforce Committee must start with a budget-neutral goal for the reauthorization bill and, as a result of budget resolutions, must save more than $13 billion from programsÑwith a significant portion (nearly $9 billion) to be derived from the student loan programs. This budget pressure affects Congress' ability to appropriate sufficient funds to support financial aid needs. Ultimately, students bear the brunt of these reductions, as they are forced to take a longer time to complete their degrees and to look for other sources of funding, such as private loans, which puts their financial future at greater risk. Given the increased global competition the United States faces from countries that are strengthening their educated workforces, it would be irresponsible and short-sighted to discourage our country's students from vigorously pursuing higher education.

Reauthorization

• The authorization for the maximum award for Pell Grants should be raised significantly from its current level of $5,800. While current appropriations only permit a maximum award of $4,050, the authorized level is a visible target, and thus an expression of the country's intended commitment to students. To leave it flat or to only minimally increase the authorized level through 2011 signals an intention to lower the national priority of higher education.
• The campus-based programs (Federal Supplemental Educational Opportunity Grants, Federal Work Study, and Federal Perkins Loans) should have their funding authorization levels increased significantly. While there is discussion about changes in the allocation formula (i.e., phasing out the "hold harmless" provisions to redistribute funds to institutions where enrollments have grown), the real problem is funding. A change in the allocation formula without increased funding only shifts an already inadequate amount of funding. Increases in funding make the hold-harmless provisions less significant to the distribution of funds by permitting the "fair-share" part of the allocation process to distribute new funds.
• Student loan limits need to be increased selectively. The current freshman level of $2,625, sophomore level of $3,500, and even the junior and senior levels of $5,500 are woefully inadequate to assist students in paying for college costs. While HR 609, the House version of the reauthorization bill, increases the freshman level to $3,500 and the sophomore level to $4,500, these are relatively minor increases in the context of the real costs of college. In addition, the undergraduate aggregate borrowing limit needs to be adjusted in accordance with any increases in the annual undergraduate limits. The current limit of 23,000 would not fully accommodate a fifth year of attendance, even with the modest increases in the House bill.
• Loan limits at the graduate level need to be increased significantly. The current subsidized limit of $8,500 and unsubsidized limit of $10,000 in no way reflect the actual costs of graduate education. In particular, an increase in the subsidized loan limit for graduate students is desirable, since the interest on unsubsidized loans accrues while the student in is school.
• The origination fees in the student loan programs were originally put in place to help reduce the federal budget deficit in the early 1980s. We applaud the House efforts to eliminate these fees over time, but we are concerned about the means by which the fees are phased out. Requiring the Secretary to collect the fee on Federal Direct Loans while still permitting banks/guarantee agencies to waive or pay the fee on the borrower's behalf creates an inequity in the program for students. This is contrary to the policy objective of equal terms for students regardless of the program their institutions choose to participate in.
• Education leaders nationwide are concerned about the current interest-rate environment and growing debt levels for students. Under bills pending before Congress, the typical student borrower, with $17,500 in debt, will have to pay an additional $5,800 for student loans. In light of this, greater flexibility in repayment is desirable, particularly early in the repayment process, when earnings are likely to be lower. In particular, it should not be made more difficult for Federal Family Education Loan Program (FFEL) consolidation loan borrowers to reconsolidate into the Direct Lending (DL) program to obtain income-contingent repayment. Provisions in the House bill make it possible for an FFEL lender to forestall the transfer of the loan to the DL program for purposes of using the income-contingent repayment option. An alternative would be to require FFEL holders to provide an income-contingent repayment plan upon the borrower's request.
• Changes have recently been made to the State and Local Tax Allowance rate table in the calculation of the family contribution for federal student aid. Congress should review this provision and provide for the use of a more accurate and timely set of data for the Department of Education to use to update the table. The current data specified in the law is not representative of the state and local tax burden and thus understates the burden-and overstates families' ability to contribute to college costs. The state and local tax calculation is one of the few elements in the formula that provides some sensitivity to regional differences in income and cost of living, and thus it is imperative that it accurately reflect those factors in order to treat families fairly in the distribution of federal student aid.
• While we appreciate Congress' concern about college costs for students and families, the approach in the House bill does not provide an adequate framework for measuring institutional effort in constraining costs. In particular, a two-year window to measure the constraint in tuition increases is too short. We would suggest an alternative time frame of five to seven years. This is especially important for public colleges, as economic cycles often result in declines in state support and, thus, periodic tuition increases.

Budget Reconciliation

We understand that difficult decisions have to be made in the context of extreme budget deficits. However, it appears that higher education programs are being asked to bear a disproportionate share of the deficit reduction effort. Reducing the national investment in higher education unfairly targets middle- and low-income students and is likely to result in fewer college graduates and a longer time to degree completion. This is hardly the time to discourage the pursuit of a college degree. In 2000, the proportion of the college-age population earning degrees in science and engineering fields was substantially larger in more than 16 countries in Asia and Europe than in the United States. Yet the nation's economic vitality, technological leadership, and competitive strength depend on the existence of an educated populace.

Any savings realized from FFEL loan organizations should be reinvested into the student aid programs, rather than diverted to deficit reduction efforts. The reauthorization process should be permitted to focus on planning for education's future-through the augmentation of current programs and/or the creation of new initiatives-rather than on reducing funding to account for budgetary deficits.

Appropriations

• The current House and Senate committee versions of the appropriations bills for FY'06 do not fund student aid adequately. In fact, when we account for record college and elementary/secondary enrollments, general education funding is cut by about two percent. At the very least, efforts should be made to increase the funding levels for Pell Grants. The Senate version holds the award at its current maximum level of $4,050, while the House version supports a $4,100 award level. An increase to at least $4,200 or $4,300 would more realistically address rising college costs.
• We are grateful that funding is restored for the TRIO and GEAR-UP programs in the two appropriations bills. However, looking forward, these funding levels are still insufficient to meet the needs of the students eligible for participation in the programs. We also urge Congress to resist pressure to set aside a portion of the TRIO and GEAR-UP appropriations for new applicants. Such a bias towards novice applications will necessarily result in the dismantling of some of the nation's most experienced and successful postsecondary opportunity projects. Indeed, we believe that the administration may have been responding to this pressure when it de-funded six longstanding, highly successful CUNY Student Support Services programs in favor of novice programs. Such policies and practices compromise education opportunities for the most vulnerable college students.

I know you share my concern for our higher education students, and I am deeply grateful for your thoughtful work on their behalf. During this important time, I am requesting your continued advocacy to ensure that our nation's education remains among our highest priorities.

Sincerely,

Matthew Goldstein