The Congressional Budget Office has issued its estimate of the cost to the federal government of H.R. 4137, the College Opportunity and Affordability Act of 2007, as approved by the House Education and Labor Committee on November 15. This bill represents the House version of Higher Education Act reauthorizing. In contrast to the budget reconciliation legislation enacted in September (which was a cost cutting and spending bill), the HEA reauthorization is referred to as a policy bill.
According to the CBO, the bill (if enacted) would increase direct spending by $75 million in 2008 and decrease direct spending by $27 million over the 2008 to 2017 period. One of the “savers” in the bill is the change in the definition of “cohort default rate”. The bill includes an amendment offered by Congressmen Grijalva (D-AR) and Bishop (D-NY) that would revise the definition of cohort default rate by adding to the period of time in which a default is counted as part of a school’s cohort default rate. Right now, a borrower default is included in the rate only if it occurs during the fiscal year when the installment loan enters repayment or the following year. The amendment would add one year to this period. Schools are subject to losing eligibility to participate in Pell and the student installment loan programs if their default rate exceeds 25% for three years. While no schools have been subject to this sanction in recent years, that could change if the amendment were included in final legislation.
CBO projects that this change would reduce the number of schools eligible to participate in the student installment loan programs, thereby reducing direct spending by $27 million over the 2008 to 2017 period. Accordingly, all the net savings in the bill are attributable to the change in the cohort default rate definition.
The CBO cost estimate also points out that the bill reauthorizes and amends many of the discretionary programs, and creates new discretionary programs. Discretionary programs require annual appropriations. CBO estimates that implementing these programs would cost $97.4 billion over the 2008 to 2012 period.
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