Order Code RL31618
CRS Report for Congress
Received through the CRS Web
Campus-Based Student Financial Aid Programs
Under the Higher Education Act
Updated January 24August 2, 2006
David P. Smole
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress
Campus-Based Student Financial Aid Programs
Under the Higher Education Act
Summary
Three Higher Education Act (HEA) programs — The Federal Supplemental
Educational Opportunity Grant (FSEOG) program, Federal Work-Study (FWS)
program, and Federal Perkins Loan program — collectively are referred to as the
campus-based programs. Funding authorization for the campus-based and other
HEA programs wasis extended through March 31, 2006September 30, 2006, under the Second Higher
Education Extension Act of 20052006 (P.L. 109-150238). Reauthorization of the HEA,
including the campus-based programs, is being considered by the 109th Congress.
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 isare 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 nondiscretionary 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.
The 109th Congress is considering amending and extending the campus-based
programs as it debates reauthorization of the Higher Education Act. This report
reviews and analyzes major changes that would be made by H.R. 609, the College
Access and Opportunity Act of 2005 (H.Rept. 109-231),; and by S. 1614, the Higher
Education Education
Amendments of 2005. It will be updated to reflect legislative
developments.
Contents
Current Program Descriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Federal Supplemental Educational Opportunity Grants . . . . . . . . . . . . . . . . 2
Allocation of Funds to Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Federal Work-Study Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Award Procedures and Terms of Perkins Loans . . . . . . . . . . . . . . . . . 10
Deferment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Forbearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1112
Loan Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Allocation of Funds to Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Distribution of Assets from Perkins Loan Funds . . . . . . . . . . . . . . . . . 15
Transfer of Funds Between Campus-Based Programs . . . . . . . . . . . . . . . . . 15
Natural Disaster Student Fairness Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1516
Administrative Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Funding and Program Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Funding for the Campus-Based Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Institutional Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19
Students Served and Average Aid Amounts . . . . . . . . . . . . . . . . . . . . . . . . 20
FSEOG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Students Served and Average Aid Amounts. . . . . . . . . . . . . . 20
FWS . . . . . . . . . . . . . . . . 19
FSEOG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Perkins Loans . . . . . . . . . . . . . . . 19
FWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reauthorization of the Campus-Based Programs . . . . . . . . . . . . . . . . . . . . . . . . 20
Perkins Loans . .24
H.R. 609 and S. 1614 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Reauthorization of the Campus-Based Programs25
Allocation of Funds to Institutions:
FSEOG, FWS, and Perkins Loans . . . . . . . . . . . . . . . . . . . . . . . . 24
H.R. 609 and S. 1614 . . . . .25
Optional Allocation of Funds
Based on Outcomes of Pell Grant Recipients:
FSEOG and FWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of funds to institutions: FSEOG, FWS, and Perkins
Loans25
Targeting FSEOG aid to Pell Grant recipients: FSEOG . . . . . . . . . . . . . . .26
Community Service Requirements: FWS . . . . . . . . . . . . . . . . . . . . . . 27
Work-Colleges . . . . . . . . . .. . . . . . . . . 24
Optional Allocation of Funds Based on Outcomes of Pell
Grant Recipients: FSEOG and FWS . . . . . . . . . . . . . . . . . . . . . . 25
Targeting FSEOG aid to Pell Grant recipients: FSEOG . . . . . . . . . . . 27
Community Service Requirements: FWS .Work Assistance for Students
in Comprehensive Postsecondary Programs
for Students with Mental Retardation . . . . . . . . . . . . . . . . . . . . . 2728
Terms and Conditions of Loans: Perkins Loans . . . . . . . . . . . . . . . . . 28
Transfer of Allotments Between Campus-Based Programs . . . . . . . . . 29
List of Figures
Figure 1. Institutions Participating in the Campus-Based Programs: Award
Years 1984-1985 through 2005-2006 . .
Award Years 1985-1986 through 2006-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Figure 2. FSEOG: Number of Students Receiving Awards
and Average
Award Amounts, 1984-1985 through 2003-2004 . . . . . . . . . .1985-1986 through 2004-2005 . . . . . . . . . . 20
Figure 3. FWS: Number of Students Receiving Awards
and Average
Award Amounts, 1984-1985 through 2003-2004 . . . . . . . . . .1985-1986 through 2004-2005 . . . . . . . . . . 21
Figure 4. Perkins Loans: Number of Students Receiving Awards and
and Average Award Amounts, 1984-1985 through 2003-2004 . . .1985-1986 through 2004-2005 . . . . . . . . . . 23
List of Tables
Table 1. FWS Requirements for Federal Share of Compensation . . . . . . . . . . . . 8
Table 2. Perkins Loan Cancellation Rates by Type of Service
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Table 3. Administrative Cost Allowances
for the Campus-Based Programs: Award Year 2004-2005 . . . . . . . . . . . . . . . . . . . . . . . . 1217
Table 3. Administrative Cost Allowances for the Campus-Based Programs:
Award Year 2003-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 4. Campus-Based Program Funding: FY1999-2006 . . . . . . . . . . . . . . . . 17
Table 6. Number and Percent of Institutions Meeting FWS Community
Service (CS) Requirements4. Campus-Based Program Funding: FY1999-2007 . . . . . . . . . . . . . . . . 18
Table 5. Number and Percent of Institutions Meeting
FWS Community Service (CS) Requirements . . . . . . . . . . . . . . . . . . . . . . . 22
Table 6. Perkins Loan and FFEL/DL Cohort Default Rates:
1997-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table 7. Perkins and FFEL/DL Cohort Default Rates: 1997-2004. . . . . . . . . . . . . 2324
Campus-Based Student Financial Aid
Programs Under the Higher Education Act
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 Reauthorization of the HEA is being considered by the 109th Congress. The
campus-based programs were last significantlylast were 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. Funding authorization was further extended
through FY2005 under theAuthorization for the programs has been
extended incrementally, and ultimately through September 30, 2006, under a series
of Higher Education Extension Act of 2004 (P.L. 108-366),
and subsequently through December 31, 2005 under the Higher Education Extension
Act of 2005 (P.L. 109-81), and through March 31, 2006 under the Second Higher
Education Extension Act of 2005 (P.L. 109-150). Reauthorization of the HEA,
including the campus-based programs, is being considered during the 109th
Congress.2
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. It then provides historical information on federal funds appropriated for
each of the programs and an analysis of the number and types of students served.
The report concludes with a discussion of topics that might be of issue as the 109th
Congress considers reauthorization of the HEA.Acts (P.L. 108-366, P.L. 109-81, P.L. 109-150, P.L.
109-212, and P.L. 109-238). Several HEA programs were amended under the Higher
Education Reconciliation Act of 2005 (HERA), enacted as part of the Deficit
Reduction Act of 2006 (P.L. 109-171); however, the campus-based programs were
largely unaffected by this legislation.2 On February 28, 2006, the Senate Committee
on Health, Education, Labor, and Pensions (HELP) reported S. 1614 (S.Rept. 109218); and on March 30, 2006, the House passed H.R. 609. Both bills would amend
and extend the HEA.
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
1
Institutions are required to establish written procedures for selecting recipients of campusbased 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
For further information on reauthorization of the HEA, see CRS Report RL33040, The
Higher Education Act: Reauthorization Status and Issues, by Adam Stoll.
CRS-2how the Deficit Reduction Act of 2006 affects HEA programs, see CRS
Report RS22308, Student Loans and FY2006 Budget Reconciliation, by Adam Stoll.
CRS-2
purpose. It then provides historical information on federal funds appropriated for
each of the programs and an analysis of the number and types of students served.
The report concludes with a discussion of topics that may be of interest as the 109th
Congress considers reauthorization of the HEA.
Current Program Descriptions
This part of the report provides a description of each of the three HEA campusbased 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.
Federal Supplemental Educational Opportunity Grants
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 FSEOGs to
eligible students as part of their financial aid packages. Institutions are required to
award FSEOGs first to students with exceptional financial need, according to the
HEA need analysis provisions,3 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.”4 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.
FSEOGs consist 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 nonfederal share, except for funds provided under the
3
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 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.
4
U.S. Department of Education, Federal Student Aid Handbook, 2005-2006, vol. 3 —
Cal cul at i ng Aw a r d s & P a c k a g i n g , p p . 3 -9 4 t h r o ugh 3-97, at
2006-2007, vol. 3 —
Calculating Awards & Packaging, pp. 3-95 through 3-97, at [http://www.ifap.ed.gov/
IFAPWebApp/currentSFAHandbooksPag.jsp], visited Jan. 17,
July 31, 2006. (Hereafter cited as ED, FSA Handbook.)
CRS-3
ED, FSA Handbook.)
CRS-3
FSEOGs consist 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
Leveraging Educational Assistance Partnership (LEAP) and the Special Leveraging
Educational Assistance Partnership (SLEAP) programs.5
Unlike the other two campus-based programs, students are eligible to receive
FSEOGs 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 are tomust be
proportionately reduced. Institutions are required to award a “reasonable proportion”
of FSEOG aid to independent students6 and to those who are enrolled less than fulltime 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 FSEOGs.
Allocation of Funds to Institutions. FSEOG funds are allocated to
institutions of higher education IHEs
according to procedures prescribed in the authorizing
statute.7 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
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
5
ED, FSA Handbook, vol. 6 — Campus-Based Programs, pp. 6-1213 through 6-15.
6
An independent student is one who is not considered dependent upon his or her parent’sparents’
income for financial aid purposes.
7
The allocation procedures for each of the three campus-based programs are described in
more 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.
CRS-4
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.8
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 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.9 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.10
Other FSEOG Funding Provisions. 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 appropriatedapp ropriated in excess of $700,000,000 million for
the programs authorized under HEA Title IV, Part A,11 to institutions from which
50% or more of Pell Grant recipients either graduate or transfer to four-year
institutions.
8
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.
9
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 2005-20062006-2007 award year is available from ED at
[http://www.ifap.ed.gov/dpcletters/attachments/CB0501AttachmentCEFCAverages.xls], visited Jan. 17,
July 31, 2006.
10
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).
11
HEA Title IV, Part A — Grants to Students in Attendance at Institutions of Higher
Education, includes the following programs: Pell Grants, TRIO, 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, and Learning Anytime Anywhere Partnerships.
CRS-5(continued...)
CRS-5
50% or more of Pell Grant recipients either graduate or transfer to four-year
institutions.
Federal Work-Study Programs12
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.
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.13 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. 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
11
(...continued)
Programs, the Robert C. Byrd Honors Scholarship Program, Child Care Access Means
Parents in School, and Learning Anytime Anywhere Partnerships.
12
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 (see CRS Report RS21183, Leveraging Education Assistance Partnership
Program (LEAP): An Overview, by Laura L. Monagle). 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.
13
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, D.C., 2000), p. 57.
CRS-6
(DC: 2000), p. 57.
CRS-6
(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 1938.14
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.
FWS Community Service Employment. 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.15 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;
14
15
HEA, § 443(b)(1) (42 U.S.C. § 2753(b)(1)).
From FY1994 through FY1999, institutions were statutorily required to use 5% of their
FWS allocation to compensate students employed in community service jobs.
CRS-7
(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
14
15
HEA, § 443(b)(1) (42 U.S.C. § 2753(b)(1)).
From FY1994 through FY1999, institutions were statutorily required to use 5% of their
FWS allocation to compensate students employed in community service jobs.
CRS-7
(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.16
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.17
Job Location and Development Programs. Institutions may use up to
the lesser of 10% of their FWS allocation or $50,000 to establish or expand a job
location and development program operated either by the institution or jointly with
another institution. The program must locate and develop jobs, including community
service jobs, for currently enrolled students. Jobs located and developed should be
compatible with students’ scheduling needs and compliment their educational and
vocational goals. The federal share of funds used to operate the program cannot
exceed 80%. Job location and development programs cannot be used to find jobs at
the institution, nor should they be used to find jobs for students after graduation.
Federal and Non-Federal Shares of Compensation. Under the FWS
program, students are compensated with a combination of federal funding and a
matching amount provided either by the institution or the employer. The share of
compensation that may be provided through federal funding varies according to the
type of FWS employment. For most FWS jobs, the maximum federal share of
compensation is 75%; however, in certain instances, the federal share may be higher
(see Table 1). For employment in the private for-profit sector, the federal share of
compensation is limited to 50%. An institution’s matching share of compensation
may come from any source (other than FWS), and may be paid in the form of
services, such as tuition, room, board, or books provided by the institution. Table
1 highlights the maximum federal share of compensation for the various types of
FWS employment.
16
HEA, § 441(c) (42 U.S.C. § 2751(c)).
17
ED, FSA Handbook, vol. 6 — Campus-Based Programs, pp. 6-2027 through 6-38, and 6-4244.
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Table 1. FWS Requirements for Federal Share of Compensation
Type of FWS
employment
Maximum
federal share
Specific requirements
FWS — In general
75%
General requirement
Private non-profit
or government
agency other than
the institution
May exceed
75%, but not
exceed 90%,
consistent with
regulations
Employer selected for student on case-by-case
basis and otherwise would be unable to afford
cost of employment; and no more than 10% of
the institution’s FWS students are employed in
jobs for which the federal share exceeds 75%
Regulatory
exceptiona
100%
Determination by the Secretary that federal
share in excess of 75% is necessary to further
the purpose of the FWS program
Private for-profit
sector
50%
Employing for-profit organization must provide
non-federal share of compensation
Tutoring and
Literacy Projects
100%
Priority given to employment of students in
projects funded under the Elementary and
Secondary Education Act (ESEA)
Work Colleges
50%
Separate funding authorization; institution must
match dollar-for-dollar with non-federal funds
Source: HEA, §§ 443, 444, 447, 448 (42 U.S.C. §§ 2753, 2754, 2756a, 2756b); and ED, FSA
Handbook, vol. 6 — Campus-Based Programs, pp. 6-9 through 6-11.
a. Applicable for schools designated as eligible schools under the Developing Hispanic Serving
Institutions Program, the Strengthening Institutions Program, the American Indian Tribally
Controlled Colleges and Universities Program, the Alaska Native and Native Hawaiian-Serving
Institutions Program, the Strengthening Historically Black Colleges and Universities Program.
Work -Colleges. FWS authorizes funding to support comprehensive worklearning 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
collegesworkcolleges can only be public or private nonprofit institutions and must have a
commitment of service to the community. Activities authorized under the Work
CollegesWorkColleges 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 worklearning programs. Funding for the Work -Colleges program is authorized separately
from the remainder of the FWS program. Institutions may transfer funds from the
FWS and Perkins Loan programs to the Work -Colleges program.
Allocation of Funds to Institutions. Similar to the FSEOG program, FWS
funds are allocated to institutions of higher educationIHEs according to a statutorily
statutorily prescribed procedures. Funds
first are allocated to institutions based on previous
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year’s years’ allocations, with priority
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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.18
Institutions that began participating after
FY1999, but which are not first- or second-timesecondtime 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 $700,000,000 million to institutions
from which 50% or more of Pell Grant recipients either graduate or transfer to fouryear institutions.
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.
18
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 for that year. These funds were awarded according
to criteria described below, to institutions that certified that they graduated or transferred
at least 50% of their Pell Grant recipients.
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Federal Perkins Loans
The Federal Perkins Loan program authorizes the allocation of federal funds to
institutions of higher educationIHEs 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 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.
Award Procedures and Terms of Perkins Loans. 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.19 However, no
interest accrues prior to a student beginning repayment, nor while repayment is
19
Loans made prior to July 1, 1981 were at 3%; loans made between July 1, 1981 and Sept.
30, 1981 were at 4%; and loans made on or after Oct. 1, 1981 are at 5%.
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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.
Deferment. 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. Borrowers are not required to make payments on principal or interest while
they areA Perkins Loan borrower is granted a deferment if the borrower:
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is enrolled at least half-time at an eligible institution, nor while they are
;
is pursuing a graduate fellowship or rehabilitation training program approved by the
Secretary. They also may not be required to make payments while they are seeking,
but unable to find, full-time employment, or while experiencing economic hardship
(for up to a maximum of three years in each instance). In addition, borrowers are
eligible for concurrent deferment during any period while they are engaged in types
of service which make them eligible for loan cancellation (discussed later).
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 (for up to three years);20
is experiencing economic hardship (for up to three years); or
is engaged in a type of service that makes the borrower eligible for
loan cancellation (discussed later).
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 above for which they are exempted from
making payments. Time in deferment does not count toward the 10-year repayment
period.
Forbearance. 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.”2021 Borrowers are required to request forbearance in writing. Forbearance
20
This provision applies to loans for which the first disbursement was made on or after July
1, 2001.
21
ED, FSA Handbook, vol. 6 — Campus-Based Programs, p. 6-75.
CRS-12
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.
Cancellation. Individuals who have engaged in the following types of public
service are eligible to have their loans cancelled.21:22
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elementary or secondary school teacher at a public or private school
located within the school district of a local educational agency
20
ED, FSA Handbook, vol. 6 — Campus-Based Programs, p. 6-71.
21
HEA, § 465(a) (20 U.S.C. § 1087ee(a)).
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(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;2223
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;
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.
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
cancelled 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
cancelled 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 cancelled
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.)
22
23
HEA, § 465(a) (20 U.S.C. § 1087ee(a)).
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 LowIncome Schools for Teacher Cancellation Benefits.
CRS-13
Table 2. Perkins Loan Cancellation Rates by Type of Service
Percent of Perkins Loan principal
cancelled per year of service
Type of service
1st and 2nd
years
3rd and
4th years
5th year
and later
Elementary or secondary school
teacher in a designated low-income
school
15%
20%
30%
100%
Staff member in Head Start program
15%
15%
15%
100%
Special education teacher/IDEA
professional provider
15%
20%
30%
100%
12½%
12½%
N/A
50%
Peace Corps or Americorps*VISTA
volunteer
15%
20%
N/A
70%15%
20%
N/A
70%
Armed Forces in area of hostilities
Peace Corps or Americorps*VISTA
volunteer
22
Max.
total
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 LowIncome Schools for Teacher Cancellation Benefits.
CRS-13
Percent of Perkins Loan principal
cancelled per year of service
Type of service
1st and 2nd
years
3rd and
4th years
5th year
and later
Law enforcement or corrections
officer
15%
20%
30%
100%
Full-time teacher in shortage subject
area
15%
20%
30%
100%
Nurse or medical technician
15%
20%
30%
100%
Employee of provider of services to
high-risk children and families
15%
20%
30%
100%
Armed Forces in area of hostilities
Max.
total
Source: HEA, § 465 (20 U.S.C. § 1087ee).
Max.
total
Source: HEA, § 465 (20 U.S.C. § 1087ee).
The Secretary is required to reimburse institutions for Perkins Loans cancelled
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.)
Borrowers’ liability to repay Perkins Loans also is cancelled 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 cancelled due to death or disability.
Loan Default. 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.2324 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
24
HEA, § 462(g) [42 U.S.C. § 1087bb(g)].
CRS-14
repayment status, begin a new 10-year repayment schedule, and have the default
remove 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
23
HEA, § 462(g) [42 U.S.C. § 1087bb(g)].
CRS-14
(FSA) Collections at ED. Upon accepting a loan, ED acquires all rights in the loan
and any payments made to the lending institution must be forwarded to ED.2425 Any
Perkins Loan collections received by ED are returned to the U.S. Treasury.
Allocation of Funds to Institutions. Under the Perkins Loan program,
funds are allocated to institutionsIHEs 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“1” and those with a default rate of 25% or greater are
assigned a default penalty of “0.”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.2526 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 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,”0, however, has its FCC allotment reduced to “0.”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
25
26
ED, FSA Handbook, vol. 6 — Campus-Based Programs, pp. 6-118 through 6-120.
According to the Department of Education’s Explanation of Worksheet 2006-2007 Award
Period for the campus-based programs, this is equal to the institution’s award year 19992000 conditional guarantee, multiplied by its award year 1999-2000 cohort default penalty
factor, multiplied by a 60.77% reduction factor.
CRS-15
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 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 program, an institution’s eligible
amount of need is the amount of the institution’s self-help need, minus the
24
25
ED, FSA Handbook, vol. 6 — Campus-Based Programs, pp. 6-116 through 6-116.
According to the Department of Education’s Explanation of Worksheet 2005-2006 Award
Period for the campus-based programs, this is equal to the institution’s award year 19992000 conditional guarantee, multiplied by its award year 1999-2000 cohort default penalty
factor, multiplied by a 60.77% reduction factor.
CRS-15
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.
Transfer of Funds Between Campus-Based Programs
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. However, no funds may be
transferred out of the FSEOG program.
Institutions generally have used their transfer authority to move funds to the
FSEOG program, primarily from FWS. For award year 2003-2004, based on data
reported to ED, 1,486 institutions participating in the FWS program transferred a
total of $97.1 million to the FSEOG program. Also in that year, 198 institutions
transferred $7.7 million from Perkins to FSEOG and 75 institutions transferred $1.8
million from Perkins to FWS.26
Distribution of Assets from Perkins Loan Funds. 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.27 Should this 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.28 In both his FY2006 and FY2007 budget proposals,
the President recommended terminating the Perkins Loan program. Were the
program to be terminated, it has been estimated that approximately $6.0 billion in
Perkins Loan FCCs would be returned to the federal government over the course of
several years.29
Transfer of Funds Between Campus-Based Programs
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. However, no funds may be
transferred out of the FSEOG program.
27
HEA, Section 466 (20 U.S. C. § 1087ff).
28
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%.
29
Office of Management and Budget, Budget of the United States Government, Fiscal Year
2006 — Appendix: Department of Education, Office of Student Financial Assistance, p. 368,
at [http://www.gpoaccess.gov/usbudget/fy06/pdf/appendix/edu.pdf], visited July 31, 2006.
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Institutions generally have used their transfer authority to move funds to the
FSEOG program, primarily from FWS. For award year 2004-2005, based on data
reported to ED, 1,488 institutions participating in the FWS program transferred a
total of $92.7 million to the FSEOG program. Also in that year, 180 institutions
transferred $6.4 million from Perkins to FSEOG and 55 institutions transferred $1.9
million from Perkins to FWS.30
Natural Disaster Student Fairness Act
The Natural Disaster Student Aid Fairness Act (P.L. 109-86) grants the
Secretary authority through October 7, 2006 to waive certain components of the
campus-based programs for IHEs that are located in areas affected by Hurricane
Katrina and Hurricane Rita (hereafter referred to as a Gulf hurricane disaster) or that
have accepted for enrollment any students affected by a Gulf hurricane disaster.
Firstly, with respect to funds made available for the 2004-2005 and 2005-2006
academic years, the Secretary must waive the institutional matching requirement for
affected IHEs, and (after considering an IHE’s student population and existing
resources) may waive the institutional matching requirement for IHEs that have
accepted for enrollment any affected students. Secondly, with respect to affected
IHEs and IHEs that have accepted for enrollment any affected students, the Secretary
shall (a) reallocate to those institutions any funds returned as unused from the 20042005 award year; and (b) waive any allocation reduction that would otherwise apply
to the IHE for award year 2006-2007 for returning more than 10% of its allocation.
26
U.S. Department of Education, Office of Postsecondary Education, Federal CampusBased Programs Data Book 2005, at [http://www.ed.gov/finaid/prof/resources/
data/databook2005/index.html], visited Jan. 17, 2006. (Hereafter cited as ED, Federal
Campus-Based Programs Data Book, 2005.)
CRS-16
Lastly, the availability of funds that would otherwise expire on September 30, 2005
is extended for one additional year;, and the Secretary is granted authority to recall
any funds that would lapse on September 30, 2005 for reallocation to eligible IHEs.
On November 7, 2005, the Secretary published a notice in the Federal Register
regarding the reallocation of campus-based aid and waivers of statutory and
regulatory provisions pursuant to the Natural Disaster Student Aid Fairness Act.2731
Administrative Costs
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 $2,750,000.75 million in expenditures; plus
4% of the institution’s expenditures greater than $2,750,000 and less
than $5,500,000; plus
3% of the institution’s expenditures in excess of $5,500,000.75 million and
less than $5.5 million; plus
30
U.S. Department of Education, Office of Postsecondary Education, Federal CampusBased Programs Data Book 2006, at [http://www.ed.gov/finaid/prof/resources/data/
databook2006/databook2006.html], visited July 31, 2006. (Hereafter cited as ED, Federal
Campus-Based Programs Data Book, 2006.)
31
U.S. Department of Education, Office of Postsecondary Education, “Notice regarding
reallocation of campus-based aid and waivers of statutory and regulatory provisions
pursuant to the Natural Disaster Student Aid Fairness Act, Public Law 109 — 86,” 70
Federal Register 67373-67374, Nov. 7, 2005, at [http://ifap.ed.gov/fregisters/attachments/
FR11072005.pdf].
CRS-17
!
3% of the institution’s expenditures in excess of $5.5 million.
In calculating administrative costs, institutions include both federal and institutional
expenditures.2832 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.
Table 3. Administrative Cost Allowances for the
Campus-Based
Programs: Award Year 2003-20042004-2005
Campus-based
program
FSEOG
Administrative cost
allowance
$15,502,210
FWS
53,756,578
Perkins Loans
81,231,194
Total
150,489,982941,556
FWS
55,667,626
Perkins Loans
77,145,221
Total
148,754,403
Source: U.S. Department of Education, Office of Postsecondary Education, Federal Campus-Based
Programs Data Book 2005.
27
Office of Postsecondary Education, Department of Education, “Notice regarding
reallocation of campus-based aid and waivers of statutory and regulatory provisions
pursuant to the Natural Disaster Student Aid Fairness Act, Public Law 109 — 86,” 70
Federal Register 67373-67374, Nov. 7, 2005; available at
[http://ifap.ed.gov/fregisters/attachments/FR11072005.pdf].
28
HEA, § 489 (20 U.S.C. § 1096); ED, FSA Handbook, vol. 6 — Campus-Based Programs,
pp. 6-25 through 6-26.
CRS-172006.
Funding and Program Data
This section presents budget information on past funding levels for the campusbased programs, and also program information including the number of institutions
participating in each program, the number of students awarded aid and average award
amounts, and the distribution of campus-based aid according to student and
institutional characteristics.
Funding for the Campus-Based Programs
The share of postsecondary student financial aid provided through the campusbased programs has decreased steadily over the past 30 years. According to the
College Board, whereas in the 1971-1972 award year, 19.7% of total federal student
aid was provided through the campus-based programs, only 3.6% was in academic
year 2004-2005.2933 Now the greatest proportion of student aid is provided through
federal loans (other than Perkins Loans) and an increasing amount is provided
32
HEA, § 489 (20 U.S.C. § 1096); ED, FSA Handbook, vol. 6 — Campus-Based Programs,
pp. 6-25 through 6-26.
33
The College Board, Trends in Student Aid 2005,Online Table B-1a, Aid Used to Finance
Postsecondary Education Expenses in Current Dollars (in Millions), 2005, at [http://www.
collegeboard.com/prod_downloads/press/cost05/05-aid_charts.xls].
CRS-18
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. For FY2005 and
FY2006, no funding was provided for Perkins FCCs. Annual funding levels for each
of the campus-based programs, beginning with FY1999 (the first year since the HEA
last was reauthorized), are presented in Table 4.
Table 4. Campus-Based Program Funding: FY1999-20062007
(In thousands of dollars)
Fiscal year funding
FSEOG
FWS
PerkinsFCC
Perkins loanLoan
cancellations
1999 Appropriation
$619,000
$870,000
$100,000
$30,000
2000 Appropriation
631,000a
934,000
100,000
30,000
2001 Appropriation
691,000
1,011,000
100,000
60,000
2002 Appropriation
725,000
1,011,000
100,000
67,500
2003 Appropriation
760,028
1,004,428
99,350
67,061
2004 Appropriation
770,455
998,502
98,764
66,665
2005 Appropriation
778,720
990,257
0
66,132
2006 Appropriationb
770,933
980,354
0
65,471
29
The College Board, Trends in Student Aid 2005,Online Table B-1a, Aid Used to Finance
Postsecondary Education Expenses in Current Dollars (in Millions), 2005, at
[http://www.collegeboard.com/prod_downloads/press/cost05/05-aid_charts.xls], visited Jan.
17, 2006.
CRS-18
Sources: U.S. Department of Education, Budget Service, Education Department Budget History
Table: FY1980 — Present; and U.S. Department of Education, Budget Service, FY2006
Congressional Action2007 Budget requestc
770,933
980,354
0
0
Sources: U.S. Department of Education, Budget Service, FY2007 President’s Budget; and historical
tables.
a. Includes $10 million Emergency Appropriation for victims of Hurricanes Dennis and Floyd.
b. Amounts reflect a 1% government-wide rescission contained in P.L. 109-148, and as applied by
the U.S. Department of Education Budget Service.
c. As part of his FY2007 budget request, the President proposed terminating the Perkins Loan
program.
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.
CRS-19
Institutional Participation
In fall of 2004, 6,617 postsecondary institutions were eligible to participate in
HEA Title IV financial aid programs.3034 During award year 2004-2005,
approximately 58% of Title IV-eligible institutions participated in the FSEOG
program, while approximately 51% participated in FWS. However, only
approximately 27% of Title IV institutions participated in 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.3135 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
institutions 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 two decades. Figure 1 displays the number
of institutions participating in each of the campus-based programs since the 19841985 award year.
30
U.S. Department of Education, National Center for Education Statistics, Integrated
Postsecondary Education Data System (IPEDS), Peer Analysis System, 2004.
31
ED, Federal Campus-Based Programs Data Book, 2005.
CRS-19
Figure 1. Institutions Participating in the Campus-Based Programs:
Award Years 1984-1985 through 2005-2006
5,000
Institutions
4,000
3,000
2,000
1,000
Award Year
FWS
06
05
20
0
520
04
20
0
420
03
20
0
320
02
20
0
20
0
220
01
FSEOG
120
00
20
0
020
99
19
9
920
98
19
9
819
97
19
9
719
96
19
9
619
95
19
9
519
94
19
9
419
93
19
9
319
92
19
9
219
91
19
9
119
90
19
9
019
89
19
8
919
88
19
8
819
87
19
8
719
86
619
19
8
519
19
8
19
8
419
85
-
Perkins
1985-1986 through 2006-2007
5,000
Institutions
4,000
3,000
2,000
1,000
19
85
-1
19 986
86
-1
19 987
87
-1
19 988
88
-1
19 989
89
-1
19 990
90
-1
19 991
91
-1
19 992
92
-1
19 993
93
-1
19 994
94
-1
19 995
95
-1
19 996
96
-1
19 997
97
-1
19 998
98
-1
19 999
99
-2
20 000
00
-2
20 001
01
-2
20 002
02
-2
20 003
03
-2
20 004
04
-2
20 005
05
-2
20 006
06
-2
00
7
-
Award Year
Sources: ED, Federal Campus-Based Programs Data Book, 2005; and
ED, Federal Campus-Based Programs
Data Book, 2004. Data Book, 2006.
FSEOG
34
FWS
Perkins
U.S. Department of Education, National Center for Education Statistics, Integrated
Postsecondary Education Data System (IPEDS), Peer Analysis System, 2004.
35
ED, Federal Campus-Based Programs Data Book, 2004.
CRS-20
Students Served and Average Aid Amounts
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 20032004 dollars according to the consumer price
index for all urban consumers (CPI-U).
FSEOG. FSEOG program data on the number of students granted awards and
the average award amount since the 1984-19851985-1986 award year (in constant 20032004 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 award
year 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 1.394 million in 2003-20042004-2005 (more
than twice as many students as received awards in 1984-19851985-1986). The average amount
of aid provided per student under the FSEOG program is the lowest among the three
campus-based programs. AsOver the past two decades, increasing numbers of students
have been served
through FSEOG over the past two decades, through the FSEOG program, and the average FSEOG award amount has
decreased (in real terms) by 23%, from $1,015 in 1984-1985 (2003 dollars) to $766
in 2003-2004, though it has increased in current dollars.
CRS-20award amount has
increased from $598 in 1985-1986 to $756 in 2004-2005. However, in constant
dollars, award amounts have declined by 28%.
Figure 2. FSEOG: Number of Students Receiving Awards and
Average Award Amounts, 1984-1985 through 2003-20041985-1986 through 2004-2005
1,500,000
$2,500
$2,000
1,000,000
$1,500
750,000
$1,000
500,000
Average FSEOG Award
FSEOG Awards Granted
1,250,000
$500
250,000
$-
19
19
84
-8
5
85
-8
19 6
86
19 87
87
-8
19 8
88
19 8985
-8
6
86
-8
19 7
87
19 88
88
-8
19 9
89
19 90
90
-9
19 1
91
19 92
92
-9
19 3
93
19 9493
93
-9
19 4
94
19 95
95
19 96
96
19 97
97
19 98
9
19 8-9
99 9899 99
-2
0
20 00
00
20 01
01
20 02
02
20 03
03
20 04
04
-0
5-0
4
0
Students Served
Avg. Award
Avg. Award (20032004 $'s)
Source: U.S. Department of Education. Office of Postsecondary Education. Federal Campus-Based
Programs Data Book 2005.
2006.
Average FSEOG Award
FSEOG Awards Granted
1,250,000
CRS-21
FWS. 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, slightly more than 750in recent years there has been a marked increase in participation —
more than 810,000 students received FWS aid in 2002-2003
and 2003-20042004-2005. Since the mid-1980s,
the average FWS award (in 2003 dollars) has
remained slightly below $1,500has increased from $901 in 1985-1986 to $1,335 in 20042005. However, when adjusted for inflation, this amounts to a decrease of 16.2% in
constant dollars. From the 1994-1995 award year through the 199920001999-2000 award year,
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 award year 200020012000-2001, institutions are now
required to expend 7% of their FWS allotment on
community service and to operate
at least 1one 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 award year
1994-1995 to 131,295 in 135,758 in
award year 2002-20032004-2005. The shaded portion of the bars in
Figure 3 indicates the
number of students employed in community service.
CRS-21
Figure 3. FWS: Number of Students Receiving Awards and Average
Award Amounts, 1984-1985 through 2003-20041985-1986 through 2004-2005
1,500,000
$2,500
$2,000
1,000,000
$1,500
750,000
$1,000
500,000
Average FWS Award
FWS Awards Granted
1,250,000
$500
250,000
$-
19
84
19 85
85
19 86
86
-8
19 7
87
19 88
88
-8
19 919 87
87
-8
19 8
88
19 89
89
19 90
90
-9
19 911
91
19 92
92
19 93
93
19 94
94
-9
19 595
95
19 96
96
19 97
97
19 98
9
19 8-9
99 9899 99
-2
0
20 00
00
20 01
01
20 02
02
20 03
03
20 04
04
-0
5-0
4
0
Students Served
Students in Community Service
Avg. Award
Avg. Award (20032004 $'s)
Source: U.S. Department of Education. Office of Postsecondary Education. Federal Campus-Based
Programs Data Book 20052006.
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.
CRS-22
Table 65 shows the number and percentage of institutions meeting the FWS
community service requirements since award year 1994-1995.32 As can be seen by
the table, 36 The table shows that
while the 5% requirement was in place, the percentage of institutions
IHEs meeting the
requirement trended upward. However, since implementation of the dual
requirements of expending 7% of their allocation on community service employment
and having at least one tutoring or family literacy project, institutions have struggled
to meet both requirements. It appears that more institutions are having difficulty
meeting the tutoring and family literacy project
requirement than the 7% expenditure
requirement.
32
A small number of schools (generally less than 100 each year) apply for and receive
waivers from the FWS community service requirements. Table 6 does not reflect whether
an institution has an approved waiver.
CRS-22
Table 6is the more difficult to meet of the two requirements.
Table 5. Number and Percent of Institutions Meeting FWS
FWS Community Service (CS) Requirements
Number
with a
tutoring
or family
literacy
project
Total FWS
institutionsa
Number
meeting CS
percent
expenditure
standard
1994-1995b
3,257
2,481
1995-1996b
3,249
1996-1997b
Number
with a
tutoring
or family
literacy
project
Number
meeting
both
standards
Percent
meeting
applicable
standards
N/A
N/A
76.2N/A
N/A
76.2
1995-1996b
3,249
2,781
N/A
N/A
85.6
1996-1997b
3,231
2,927
N/A
N/A
90.6
1997-1998b
3,282
2,859
N/A
N/A
87.1
1998-1999b
3,342
3,153
N/A
N/A
94.3
1999-2000b
3,230
2,919
N/A
N/A
90.4
2000-2001c
3,221
2,791
2,848
2,600
80.7
2001-2002c
3,250
2,870
2,905
2,715
83.5
2002-2003c
3,276
2,942
2,606
2,457
75.0
2003-2004c
3,271
2,974
2,560
2,445
74.7
Award
year
Number
meeting
both
standards
Percent
meeting
applicable
standards2004-2005c
3,284
2,979
2,557
2,427
73.9
Award
year
Sources: ED, Community Service in the FWS Program; and U.S. Department of Education, Office
of Postsecondary Education, Fiscal Operations Report program data for award years 1999-2000, 20002001, 2001-2002, 2002-2003, and 2003-2004, and 2004-2005 from annual Fiscal Operation Reports and Applications
Applications to Participate (FISAPs).
a. InstitutionsIHEs reporting expenditure of FWS authorizations. (A small number of institutionsIHEs in receipt
of FWS
allotments, but not reporting the expenditure of funds for FWS, are excluded from the
table.)
b. Requirement to expend 5% of FWS allocation on community service.
c. Requirement to expend 7% of FWS allocation on community service and to operate at least one
tutoring or family literacy project.
36
A small number of IHEs (generally less than 100 each year) apply for and receive waivers
from the FWS community service requirements. Table 5 does not reflect whether an
institution has an approved waiver.
CRS-23
Perkins Loans. Historical data on the Perkins Loan program are provided in
Figure 4. Slightly fewer students receive aid through the Perkins Loan program than
through FWS, making it the smallest of the three campus-based programs in terms
of number of students served.
Since 1984-19851985-1986, the annual number of students
served has averaged between
630,000 and 760,000. The average Perkins Loan
amount, however, is considerably
greater than the amount of aid provided under
either FSEOG or FWS. Since the early 1990sOver the past
two decades, average Perkins Loan amounts have
increased from $1,709 and $2,166 (in 2003 dollars).
CRS-23 more than doubled, increasing
from $1,003 in 1985-1986 to $2,206 in 2004-2005. In constant dollars, this
represents an increase of 25.3%.
Figure 4. Perkins Loans: Number of Students Receiving Awards and
Average Award Amounts, 1984-1985 through 2003-20041985-1986 through 2004-2005
1,500,000
$2,500
$2,000
1,000,000
$1,500
750,000
$1,000
500,000
Average Perkins Loan
Perkins Loans Awarded
1,250,000
$500
250,000
$-
19
19
84
-8
5
85
-8
19 6
86
19 8785
-8
6
86
-8
19 7
87
19 88
88
19 89
89
19 90
90
-9
19 1
91
19 9291
91
-9
19 2
92
19 93
93
-9
19 4
94
19 9594
94
-9
19 5
95
19 96
96
-9
19 977
97
19 98
9
19 8-9
99 9
-2
0
20 0098
19
99 99
-2
00
20 0
00
20 01
01
-0
20 2
02
20 03
03
-0
420 02
02
-0
20 3
03
20 04
04
-0
5
0
Students Served
Avg. Award
Avg. Award (20032004 $'s)
Source: U.S. Department of Education. Office of Postsecondary Education. Federal Campus-Based
Programs Data Book 20052006.
Perkins Loans cohort default rates have declined from a high of 12.95% in 1997
to 8.2912% in 20042005. (See Table 76.) Four-year institutions typically have the lowest
cohort default rates, while those of two-year and proprietary institutions are much
higher. In comparison, FFEL/Direct Loan cohort default rates typically have been a
a few percentage points lower than rates for Perkins Loans.3337 At the end of FY2003FY2004,
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.34
Table 7. Perkins and FFEL/DL Cohort Default Rates: 1997-200438
37
U.S. Department of Education, National Student Loan Default Rates, at [http://www.ed.
gov/offices/OSFAP/defaultmanagement/defaultrates.html].
38
Office of Management and Budget, Budget of the United States Government, Fiscal Year
2005 — Appendix, “Department of Education, Office of Student Financial Assistance,” p.
(continued...)
CRS-24
Table 6. Perkins Loan and FFEL/DL Cohort Default Rates:
1997-2005
Loan type
1997
1998
1999
2000
2001
2002
2003
2004
Perkinsa2005
Perkins Loansa
12.95
12.48
11.54
10.61
9.99
8.35
8.85
8.29
8.12
FFEL/DLb
10.4
9.6
8.8
6.9
5.6
5.9
5.4
5.2
4.5
Sources: ED, Federal Campus-Based Programs Data Books, 1997 through 20052006; U.S. Department
of Education, Official Cohort Default Rates for Schools, National Student Loan Default Rates.
a. Perkins Loan cohort default rates are for the two-year period ending June 30 of the year indicated.
b. FFEL/DL cohort default rates are for the two-year period ending Sept. 30 of the year indicated.
33
U.S. Department of Education, National Student Loan Default Rates, at [http://www.ed.
gov/offices/OSFAP/defaultmanagement/defaultrates.html], visited Jan. 17, 2006.
34
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.
CRS-24
Reauthorization of the Campus-Based Programs
The 109th Congress is currently in the process of considering reauthorization of
the HEA. On September 22, 2005, the House Committee on Education and the
Workforce reported H.R. 609, the College Access and Opportunity Act of 2005
(H.Rept. 109-231). On September 8, 2005, the Senate Committee on Health,
Education, Labor, and Pensions (HELP) marked up and ordered to be reported S.
1614, the Higher Education Amendments of 2005. In the first session of the 109th
Congress, consideration of HEA reauthorization wasReauthorization of the Campus-Based Programs
The 109th Congress is currently in the process of considering reauthorization of
the HEA. HEA reauthorization has been influenced to a large extent by
reconciliation of the federal budget, particularly with respect to student loans.35 As
budget reconciliation proceeded, the Higher Education Amendments of 2005 —
which include amendments to the campus-based programs — were incorporated into
S. 1932, the Deficit Reduction Omnibus Reconciliation Act of 2005, and passed by
the Senate on November 3, 2005, by a vote of 52 to 47. The House did not include
substantive changes to the campus-based programs in its reconciliation bill, H.R.
4241. Subsequently, differences between the House (H.R. 4241) and Senate (S. 1932)
bills were reconciled and reported in the conference report to S. 1932 (H.Rept. 109362). On December 19, 2005, the House agreed to the conference report by a vote
of 212-206. On December 21, 2005, the Senate amended the conference report and
approved it, as amended, by a vote of 51-50. It was then sent back to the House.
S. 1932 does not substantively address the campus-based programs, with the
exception of one provision authorizing deferments under the Perkins Loan program
for a period of up to three years for borrowers while serving on active duty in the
armed services or while performing qualifying National Guard duty during a war or
other military operation or national emergency. Significant changes to the campusbased programs that are proposed under H.R. 609 and S. 1614 are described and
analyzed in the remainder of this section. In instances where proposed changes
would apply in a similar manner to more than one of the programs, they are presented
together.
H.R. 609 and S. 1614
Allocation of funds to institutions39 On
September 22, 2005, the House Committee on Education and the Workforce reported
H.R. 609, the College Access and Opportunity Act of 2005 (H.Rept. 109-231); and
on March 30, 2006, the House passed H.R. 609 after stripping from the bill several
provisions that were enacted under the HERA (P.L. 109-171). On February 28, 2006,
the Senate HELP Committee reported S. 1614, the Higher Education Amendments
of 2005 (S.Rept. 109-218).
In their current form, H.R. 609 and S. 1614 — the two primary bills being
considered by the 109th Congress to reauthorize the HEA — would make only modest
changes to the campus-based programs. The most significant of the changes to the
campus-based programs proposed under H.R. 609 and S. 1614 are described in the
remainder of this section. In instances where proposed changes would apply in a
similar manner to more than one of the programs, they are presented together.
38
(...continued)
361.
39
For additional information on budget reconciliation, see CRS Report RL33132, Budget
Reconciliation Legislation in 2005, by Robert Keith; and CRS Report RS22308, Student
Loans and FY2006 Budget Reconciliation, by Adam Stoll.
CRS-25
H.R. 609 and S. 1614
Allocation of Funds to Institutions: FSEOG, FWS, and Perkins
Loans. Under current law, the majority of federal funding for the campus-based
programs (FSEOG, FWS, and federal capital contributions (FCCs) for the Perkins
Loan program) is allocated to IHEs on the basis of institutional base guarantees, with
the remainder being allocated on the basis of each institution’s proportionate amount
— or “fair share” — of aggregate student financial need. Under H.R. 609, the
procedures used for allocating funds to IHEs would be amended to incrementally
phase out base guarantee funding so that increasing proportions of funding would be
allocated according to existing “fair share” procedures. Beginning in FY2008,
funding for base guarantees would be reduced by 20 percentage points every two
years until being completely phased out by FY2016. S. 1614 would retain the
existing procedures for allocating funds under which institutional base guarantees are
35
For additional information on budget reconciliation, see CRS Report RL33132, Budget
Reconciliation Legislation in 2005, by Robert Keith, and CRS Report RS22308, Student
Loans and FY2006 Budget Reconciliation, by Adam Stoll.
CRS-25
awarded prior to allocating the remainder of funds according to “fair share”
procedures. Both H.R. 609 and S. 1614 would retain the fair share allocation
procedures in their current form, with the exception of an increase in the annual
allowance for books and supplies from $450 to $600.
A detailed analysis of the proposal under H.R. 609 to phase out institutional
base guarantees in favor of allocating all funding according to “fair share” allocation
procedures is beyond the scope of this report. However, past CRS analysis of the
allocation procedures for the campus-based programs using award year 2004-2005
data has shown that if the allocation procedures were to be changed by completely
phasing out base guarantees in favor of allocating all funds according to fair share
procedures, a redistribution of funding allocations would likely occur.36 Prior
analysis has shown that under all three programs, more IHEs likely would experience
funding increases than decreases, and that on average, the increase in funds received
by gaining institutions would be smaller than the cut in funding experienced by
institutions seeing funding decreases. It has also been shown that in many instances,
higher-cost institutions currently receive less than their “fair share” of funding as
calculated according to the fair share formula — and that since this is the case, if base
guarantees were to be completely phased out so that all funds were to be allocated
according to existing fair share procedures, the distribution of funds likely would
shift slightly to the advantage of higher-cost institutionsAn allowance for books
and supplies is one factor that enters into the fair share allocation formula. Both H.R.
609 and S. 1614 would amend the fair share allocation procedures by increasing the
annual student allowance for books and supplies from $450 to $600. It is expected
that this change would have only a slight impact on the distribution of funds across
institutions, as the allowance for books and supplies is incorporated into the formula
in a uniform manner.
When H.R. 609 was first introduced, it contained a proposal to gradually phase
out the allocation of funds to institutions on the basis of institutional base guarantees.
However, this proposal was removed from the bill prior to it being passed by the
House. H.R. 609 now directs the Comptroller General to conduct a study of the
FSEOG, FWS, and Federal Perkins Loan programs to examine the procedures for
allocating funds to institutions; to compare the amount of funds allocated to
institutions and awarded to students on a per-student basis; and to suggest any
modifications to the allocation procedures to ensure an appropriate distribution of
funds under the programs. The Comptroller General would be directed to submit a
report to Congress on findings of the study within one year of enactment.
Optional Allocation of Funds Based on Outcomes of Pell Grant
Recipients: FSEOG and FWS. Under current law, in the FSEOG and FWS
programs, up to 10% of program funding in excess of $700 million may be allocated
to IHEs from which 50% or more of Pell Grant recipients either graduate from or
transfer to four-year institutions.3740 H.R. 609 would amend the allocation procedures
for the FSEOG and FWS programs to permit up to 10% of any funds in excess of
$700 million appropriated under Title IV-A-2 (FSEOG) and Title IV-C (FWS) of the
HEA, respectively,
to be allocated to four-year institutions at which at least 10% of
students are Pell
Grant recipients and which have graduation rates for Pell Grant
recipients that exceed
the median rate for their class of institution; or to two-year
institutions at which at
least 10% of students are Pell Grant recipients and which
have graduation rates or
rates of transfer to four-year institutions that exceed the
median rate for their class
of institution. S. 1614 would retain the procedures under
current law.
36
The procedures for allocating funds to institutions under the campus-based programs are
described in detail and analyzed in CRS Report RL32775, The Campus-Based financial Aid
Programs: A Review and Analysis fo the Allocation of Funds to Institutions and the
Distribution of Aid to Students, by David P. Smole.
37 current law.
In the past, it has not been a common occurrence under current law for the
Secretary to allocate FSEOG or FWS funds in excess of $700 million to IHEs
40
Up to 10% of funds in excess of $700 million appropriated under: (a) HEA, Title IV-A
(Pell Grants, TRIO, 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, and Learning Anytime Anywhere
Partnerships) may be so allocated under the FSEOG program; and (b) HEA, Title IV-C
(FWS) may be so allocated under the FWS program.
CRS-26
In the past, it has not been a common occurrence under current law for the
Secretary to allocate FSEOG or FWS funds in excess of $700 million to IHEs
graduating or transferring more than 50% of their Pell Grant recipients. However,
for the 1997-1998 award year, the Secretary awarded $13 million in FWS funding to
IHEs that certified that 50% or more of their 1990-1991 Federal Pell Grant recipients
either graduated or transferred to a four-year college.3841
Two practical issues may be relevant when considering the proposal contained
in H.R. 609 to grant the Secretary authority to allocate up to 10% of FSEOG or FWS
funding in excess of $700 million to IHEs that meet the proposed Pell Grant recipient
graduation and transfer rates. FirstFirstly, it appears that in order to implement this
proposal, a new data collection requirement may need to be developed for
participating institutions. While information on graduation and transfer rates is
currently collected as part of the Integrated Postsecondary Education Data System
(IPEDS) Graduation Rate Survey,3942 this information is only collected for first-time,
full-time students, and does not distinguish between Pell Grant recipients and nonrecipients. Information on Pell Grant recipients would be necessary for the
calculation of the proposed measures, and it also may be important to collect
graduation and transfer data for less-than-full-time students and for students
transferring into an institution. For example, in award year 2003-2004, less than 462004-2005, nearly 20%
of Pell Grant recipients were enrolled full-time.40
Second, any other than on a full-time basis.43 Secondly, any
funds reserved for allocation to eligible institutions according to the
proposed criteria
would reduce funding available for allocation according to the fair
share allocation procedures. Using FY2005 appropriation levels as an example, up
to $7.9 million in FSEOG funds (1% of the total), and up to $28.4 million in FWS
funds (2.9% of the total), would be available for allocation to IHEs with Pell Grant
recipient graduation and transfer rates that are higher than the median for their
institution type. However, 59% of FSEOG funds were allocated for base guarantees,
as were 67% of FWS funds. So, the 41% of FSEOG funds available for fair share
would be reduced by any amount allocated on the basis of Pell Grant recipient
graduation and transfer rates, as would the 33% of FWS funds available for fair
share. If base guarantee funding were to be phased out, as is also proposed under
H.R. 609 (see above analysis), then allocating funds based on Pell Grant recipient
graduation and transfer rates would, over time, have less of an impact on the amount
of funds available for fair share allocations.
38
procedures.
Targeting FSEOG aid to Pell Grant recipients: FSEOG. Under current
law, FSEOG aid must first be awarded to students with exceptional financial need,
with priority going to students who receive Pell Grants.44 H.R. 609 would change the
procedures for awarding FSEOG aid to students to (a) require that Pell Grant
recipients meeting the requirements of HEA § 48445 be given priority over other
students, and to (b) prohibit IHEs from awarding more than 10% of their FSEOG aid
to students who did not receive a Pell Grant in the prior year. S. 1614 would retain
the procedures for awarding FSEOG aid as provided under current law.
41
U.S. Department of Education, Office of Postsecondary Education, Dear Colleague Letter
CB-97-11, July 1, 1997;, at [http://www.ifap.ed.gov/dpcletters/doc0246_bodyoftext.htm],
visited Aug. 1, 2006.
42.
39
For further information on the IPEDS Graduation Rate Survey, see L.G. Knapp, J.E.
Kelly-Reid, R.W. Whitmore, S. Huh, B. Levine, M. Berzofsky, and S.G. Broyles,
Enrollment in Postsecondary Institutions, Fall 2003; Graduation Rates 1997 & 2000
Cohorts; and Financial Statistics, Fiscal Year 2003 (NCES 2005 — 177). U.S. Department
of Education (Washington, D.C.DC: National Center for Education Statistics), available at
[http://nces.ed.gov/pubs2005/2005177.pdf], visited Aug. 2, 2006.
43.
40
U.S. Department of Education, Office of Postsecondary Education, 2003-20042004-2005 Federal
Pell Grant Program End-of-Year Report, Table 13. Federal Pell Grant Recipient Enrollment
Enrollment Status by Type and Control of Institution, available at Award Period 2004-2005, at
[http://www.ed.gov/
finaid/prof/resources/data/pell0304.pdf].
CRS-27
Targeting FSEOG aid to Pell Grant recipients: FSEOG. Under current
law, FSEOG aid must first be awarded to students with exceptional financial need,
with priority going to students who receive Pell Grants.41 H.R. 609 would change the
procedures for awarding FSEOG aid to students to (a) require that Pell Grant
recipients meeting the requirements of HEA § 48442 be given priority over other
students, and to (b) prohibit IHEs from awarding more than 10% of their FSEOG aid
to students who did not receive a Pell Grant in the prior year. S. 1614 would retain
the procedures for awarding FSEOG aid as provided under current law.pell0405.pdf], visited Aug. 2, 2006.
44
HEA, § 413C(b)(2). The term “students with exceptional financial need” is defined to
mean students at the institution with the lowest EFCs.
45
HEA § 484 includes student eligibility requirements.
CRS-27
The proposal under H.R. 609 would amend the language specifying the criteria
for awarding FSEOG aid to students by requiring simply that Pell Grant recipients
must be given priority over other eligible students. The proposal also would limit the
amount of FSEOG aid that IHEs could award to students who had not received Pell
Grants in a prior year to 10% of their allocation. The proposal does not specify
whether first-year Pell Grant recipients (e.g., freshmen or other students receiving a
Pell Grant for the first time) would be excluded from the 10% limit. However, as
currently drafted, a strict interpretation couldmay have the effect of limiting the amount
of of
FSEOG aid that could be awarded to first-year Pell Grant recipients.
Community Service Requirements: FWS. Under current law, IHEs
participating in the FWS program are required to use at least 7% of their FWS
allocation to compensate students employed in community service jobs. (They must
also use 100% of any excess FWS funds they receive through the reallocation of
other institutions’ unspent FWS funds to compensate students in community service.)
The Secretary is permitted to waive the 7% community service requirement if she
determinesit is
determined that enforcing the requirement would cause hardship for students at the
institution. S. 1614 would authorize the Secretary to also waive the requirement that
an IHE use 7% of its FWS funding to compensate students employed in community
service jobs if the IHE certified that 15% or more of its total full-time enrollment is
employed in community service jobs or in tutoring and literacy activities. H.R. 609
would not modify the 7% community service requirement.
As described earlier in this report, a substantial portion of IHEs are not meeting
current community service requirements. S. 1614 would permit the Secretary to
waive the requirement that IHEs use 7% of their FWS funding for community service
compensation if they can certify that 15% of their students are employed in
community service or tutoring and family literacy jobs. These students would not
have to be receiving FWS aid to be included in the calculation. It appears that this
proposal would allow institutions with strong community service participation to
remain in compliance with FWS requirements even if a substantial portion of this
community service was performed outside of the FWS program. S. 1614 would not
establish any explicit penalty for IHEs that fail to comply with their community
service requirements.
41
HEA, § 413C(b)(2). The term “students with exceptional financial need” is defined to
mean students at the institution with the lowest EFCs.
42
HEA § 484 includes student eligibility requirements.
CRS-28
Under current law, “community services” are defined in HEA § 441(c)(1), and
include, among other activities, fields such as “child care (including child care
services provided on campus that are open and accessible to the community).” H.R.
609 would amend the definition of community services applicable to FWS
employment by eliminating language specifying that child care services provided on
campus must be open and accessible to the community. S. 1614 would retain the
definition under current law.
H.R. 609 would also increase the amount of FWS funding that IHEs could use
for job location and development from the lesser of 10% of their allocation or
$50,000 (current restrictions) to the lesser of 15% of their allocation or $75,000, and
would specify that at least one-third of the funds used for job location and
development must be used to locate and develop community service jobs. S. 1614
would amend the provisions regarding the use of funds for job location and
development to be the lesser of 10% of their allocation, or $75,000.
Work-Colleges. Currently under the FWS Work-Colleges program, at
participating institutions all students who reside on campus are required to participate
in a comprehensive work-learning program. H.R. 609 would amend the WorkColleges program to require all resident students, including at least half of all
students who are enrolled on a full-time basis, to participate in a comprehensive
work-learning-service program for at least five hours each week, or at least 80 hours
during each period of enrollment.
CRS-28
Work Assistance for Students in Comprehensive Postsecondary
Programs for Students with Mental Retardation. H.R. 609 would amend the
FWS program to allow an institution with a plan approved by the Secretary to
transfer a portion of its FWS allocation for use in awarding work assistance to
students with mental retardation who are enrolled and maintaining satisfactory
progress in a comprehensive postsecondary program for students with mental
retardation at that institution. Under the program, certain Title IV student eligibility
provisions would be relaxed for participating students with mental retardation. It is
unclear how FWS funds transferred under the program would be counted in
determining whether institutions meet their 7% community service requirementthe lesser of 10% of their allocation, or $75,000.
Terms and Conditions of Loans: Perkins Loans.4346 Under current law,
the maximum amount that may be borrowed per academic year is $4,000 for
undergraduate students, and $6,000 for graduate and professional students. The
maximum aggregate amount that may be borrowed is limited to $20,000 in unpaid
principal for undergraduate students who have completed two years of study, but who
have not completed a baccalaureate degree; $40,000 for graduate and professional
students; and $8,000 for any other students. H.R. 609 would increase annual loan
limits for Perkins Loans from $4,000 to $5,500 for undergraduate students; and from
$6,000 to $8,000 for graduate and professional students. It would also increase
aggregate loan limits from $20,000 to $27,500 for undergraduate students who have
completed two years of undergraduate education, but who have not yet earned a
bachelor’s degree; from $40,000 to $60,000 for graduate and professional students;
and from $8,000 to $11,000 for any other students. S. 1614 would retain current loan
limits.
Loan limits for Perkins Loans would be increased under H.R. 609, as would
loan limits for first-year and second-year students borrowing FFEL and DL Stafford
Loans under H.R. 609 and S. 1614. (Perkins Loan limits would not be increased
under S. 1614.) However, the practical effect of increasing loan limits for Perkins
Loans would operate differently than would increasing loan limits for Stafford Loans.
The proposal under H.R. 609 to increase loan limits for Perkins Loans would
likely have a different effect on the amount of aid available to students through
borrowing than will the increase in loan limits enacted under the HERA for first-year
and second-year students who borrow under the FFEL and DL Stafford Loans
programs. The FFEL and DL Stafford Loan programs operate as quasi-entitlement
programs —
meaning that eligible students may borrow up to the amount for which
they qualify,
irrespective of annual appropriations.
However, absent significant new
appropriations for FCCs, since each participating institution administers its Perkins
Loan program with a constrained pool of funds, itsan institution’s ability to make new
loans is
limited by the size of its revolving loan fund. (As previously mentioned, each
each institution recapitalizes its loan fund by depositing the principal and interest repaid
repaid by students who previously borrowed under the program, as well as any other
program-related charges or earnings.) Thus, an increase in loan limits for Stafford
43
Additional information on terms and conditions of Perkins Loans and how they compare
with Stafford Loans is provided in CRS Report RL32854, Federal Perkins Loans and
FFEL/DL Stafford Loans: A Brief Comparison, by David P. Smole.
CRS-29
Loans would likely result in an increased ability to borrow for individual students,
with no direct effect on the aggregate number of students eligible; while under the
Perkins Loan program, the borrowing of larger amounts by individual students likely
would result in a corresponding decrease in the aggregate number of borrowers.
Under current law, borrowers of Perkins Loans are required to request
forbearance in writing. (This is in contrast to the procedures for Stafford Loans, inSince the amount of funds in institutions’
Perkins Loan revolving funds is constrained, any increase in the size of loans made
to individual students will result in a smaller number of students being able to
borrow.
Under current law, borrowers of Perkins Loans are required to request
forbearance in writing. (This is in contrast to the procedures for Stafford Loans, in
46
Additional information on terms and conditions of Perkins Loans and how they compare
with Stafford Loans is provided in CRS Report RL32854, Federal Perkins Loans and
FFEL/DL Stafford Loans: A Brief Comparison, by David P. Smole.
CRS-29
which requests for forbearance need not be made in writing.) Both H.R. 609 and S.
1614 would eliminate the requirement that requests for forbearance be made in
requested in writing.
Under current law, borrowers of Perkins Loans who have been employed in
certain types of public service are eligible to have the obligation to repay some or all
of the unpaid principal on their loans canceled. (See Table 2.) For many types of
public service (e.g., as an elementary or secondary school teacher in a high-poverty
school, or as a nurse or medical technician), a borrower may have up to 100% of his
or her loan canceled incrementally over five years of service. However, for service
in the armed forces in an area of hostilities, the maximum amount of loan principal
that borrowers may have canceled is 50%: 12½, 12.5% per year over four years of service.
H.R. 609 would make the loan cancellation terms for service in the armed forces in
an area of hostilities similar to the provisions applicable to most of the other forms
of qualifying public service employment, including teaching and nursing.
S. 1614 would add three new types of public service employment for which up
to 100% of loan principal may be canceled: (a) employment as a full-time faculty
member at a tribally controlled college or university, (b) (for individuals with a
master’s degree in library science) employment as a librarian in a school library in
an ESEA Title I-A school or in a public library serving a geographic area that serves
an ESEA Title I-A school, and (c) (for individuals with a master’s degree) for
employment as a full-time speech therapist working exclusively with ESEA Title I-A
schools. S. 1614 would retain the 50% limit on loan principal that may be canceled
for borrowers who serve in the armed forces in an area of hostilities.
Transfer of Allotments Between Campus-Based Programs. Under
current law, IHEs are permitted to transfer up to 25% of the Perkins Loan FCC
allotment to the FSEOG or FWS programs (or both); and may transfer up to 25% of
the FWS allotment to the FSEOG program. S. 1614 would alter the procedures for
transferring allotments to permit IHEs to transfer up to 25% of their FSEOG
allotment to the FWS program. H.R. 609 would retain the procedures under current
law.