Reauthorization: Friend or Foe?
Submitted by Steve Greenough, American Student Assistance

Mentioning the word “reauthorization” to any member of the higher education finance community can elicit a variety of reactions, ranging from hopeful optimism to minor annoyance to downright dread. Of course, to those new to the industry, reauthorization may be just one more term added to the pile of unfamiliar jargon that accompanies their new job. But with the next reauthorization of the Higher Education Act (HEA) right around the corner, even newbies to the profession will be experts on the subject before year’s end.

Just what is this mysterious legislative act that can strike fear in the hearts of financial aid administrators everywhere? In a nutshell, the Higher Education Act of 1965 that instituted federal financial aid in the United States must be reapproved or reauthorized every four to five years. This is similar to many pieces of legislation that govern our nation. Realizing that laws must be able to grow and adapt to citizens’ changing needs, lawmakers oftentimes include time frames or expiration dates on bills they introduce. For example, you may have heard that the controversial Patriot Act is slated for reauthorization in the near future, prompting a flurry of activity from the act’s supporters and detractors.

Streamlining the process
Reauthorization, then, gives legislators a chance to amend the law. In the case of the HEA, it’s an opportunity to reexamine the federal financial aid programs and optimize efficiency for all participants. The goal of reauthorization is to streamline the financial aid process; in essence, to make the federal aid system the best it can be for students, parents, schools and the U.S. taxpayer who ultimately foots the bill. In the world of student loans alone, past reauthorizations have raised borrowing limits, set interest rates, and introduced serial borrowing with the Master Promissory Note (MPN). Without reauthorization, federal financial aid would be regulated by antiquated laws that make the programs less manageable.

So the concept of reauthorization is sound. Why the negative reaction from some? Fear of change, for one.

“Reauthorization can bring about great innovations in financial aid, but the actual implementation of those innovations can be painful, especially for the administrators who must change daily procedures,” said Betsy Mayotte, director of Privacy and Regulatory Compliance at American Student Assistance. “Sometimes the first year or two after the new rules go into effect are rough, such as the introduction of the serial MPN after the last reauthorization in 2001. Entire systems and workflows had to be retooled. So while the long-term impact was beneficial, with a less burdensome process for students and financial aid offices, getting to that point was problematic for some.”

Making the decisions
But while most would agree that the minor headaches associated with reauthorization compliance are worth it in the long run, what if there are doubts that a reauthorization’s proposed changes are really in everyone’s best interest? What if the interests of different financial aid players run counter to each other? How do policymakers determine whose interests take precedent? Should it be new students just entering college? Or past students dealing with education loan debt? And how much do those Washington senators and representatives even understand about financial aid anyway? Are they equipped with the proper knowledge to make these reauthorization decisions?

That’s where the higher education finance community comes in. To make well-informed decisions, legislators need the opinions of those in the trenches, from financial aid directors and staff, to student loan lenders, to students themselves. Education finance groups and associations, such as the National Association of Student Financial Aid Administrators, the National Council of Higher Education Loan Programs, the Consumer Bankers Association, the American Council for Education and numerous students rights groups, often join efforts to lobby government and influence policy. Which brings up the contentious topic of undue influence over government officials by special interest groups. It’s a problem that spreads far wider than just higher education—and has cynics fearing that organizations with the deepest pockets have an unfair advantage come reauthorization time.

Is the reauthorization process perfect? Perhaps not—but the idea at its core, the true belief that anything can be improved upon, is a valid one. The road to HEA reauthorization is certainly fraught with the same pitfalls that potentially mar any bureaucracy, but the alternative of an inflexible program with a rigid framework and no room for change is even more frightening.

Federal Family Education Loan Program guarantor American Student Assistance delivers quality FFELP default prevention, guarantee, origination and fund delivery services to students, parents, schools and lenders nationwide. Want to stay up to date on reauthorization? Sign up for e.clips, ASA’s online newsletter for student aid professionals, at www.amsa.com.