OLR Research Report

August 29, 2008




By: Rute Pinhel, Research Analyst II

You asked for a summary of the Higher Education Opportunity Act of 2008 and its potential impact on the state's higher education system.


The president signed the Higher Education Opportunity Act of 2008 into law on August 14, 2008. The nearly 1,200 page bill includes many new reporting requirements for institutions, grant programs for colleges and students, and provisions designed to lower the cost of a college education. It addresses simplifying the federal aid application, developing campus safety plans, and rules regarding relationships between higher education institutions and student lenders. The law also mandates studies on 24 topics, including articulation agreements, nursing school capacity, and the impact of student loan debt on public service.

This report includes brief summaries of the law's provisions that are most likely to impact the state's higher education system, institutions, and students. (We have attached a more detailed summary of the new law, produced by the American Council on Education, for your review.) Most notably, the new law includes a “maintenance of effort” provision for state higher education spending; increases federal Pell Grant maximums; improves transparency in tuition increases for consumers; and requires institutions and lenders to adopt, publicize, and enforce a code of conduct for student lending.


State Higher Education Spending

The new law requires states to maintain a level of higher education appropriations equal to their previous five-year average (excluding capital and direct research and development expenses) and withholds federal College Access Challenge Grant funds from states that fail to do so. The challenge-grant program offers matching grants intended to increase the number of low-income students who are prepared to enter and succeed in postsecondary education.

Federal Pell Grants

The new law makes several changes to federal Pell Grant amounts, prohibitions, and applicability. Effective July 1, 2009, it increases the authorized Pell Grant maximums for eligible students (see Table 1).

Table 1: Pell Grant Maximums

Academic Year

Maximum Pell Grant













The law also rewards colleges and universities, in the form of additional Pell Grant aid, for limiting tuition increases. Beginning in the 2009-10 academic year, the education secretary may award additional grants and bonuses to (1) institutions with percentage increases in annual net tuition equal to or less than the Postsecondary Education Price Index for the academic year, (2) public institutions whose net tuition is in the lowest quartile of comparable institutions, and (3) public institutions that increase tuition by less than $500 for full-time undergraduate students. (Net tuition is an estimate of the actual tuition costs paid by students after accounting for scholarship and grant aid from federal, state, and institutional general fund resources.)

Transparency in Tuition Increases for Consumers

The legislation requires the education secretary to create and publish, on the department's College Navigator website, “watch lists” for institutions with the lowest and highest tuition increases for the most recent year and three-year period. Schools that appear on watch lists for large increases must report to the Education Department their reasons for the cost increases and the steps they are taking to reduce future increases.

The Education Department's website must also include state-by-state comparisons of (1) spending changes per full-time equivalent students at all public colleges and universities, (2) the percentage change in tuition and fees for all public colleges and universities for each of the five most recent academic years, and (3) the percentage change in the total amount of need- and merit-based aid to full-time public college and university students for the five most recent academic years.

Calculator. The education secretary must create an online calculator for students and family to estimate what any given college would cost based on their income level and family situation.

Responsibilities of Institutions and Lenders Concerning Student Loans

The new law requires colleges and universities to develop, publicize, and enforce codes of conduct for their officers, employees, and agents that prohibit conflicts of interest with respect to student loans. It also sets up various disclosure requirements for preferred lenders and institutions and civil penalties for their noncompliance.

Institutions must provide borrowers with counseling, before they sign their first promissory note, regarding (1) the average indebtedness of borrowers at the school, (2) sample monthly repayment amounts based on a range of student indebtedness levels, (3) starting salaries for their graduates in different fields of study, (4) repayment options, and (5) the likely consequences of default.

Preferred Lender Lists. The new law requires institutions that enter into preferred lender arrangements to make available to students and parents preferred lender lists that (1) include information about the preferred lenders, such as loan terms and philanthropic donations to the school; (2) fully disclose the reason for each lender's inclusion and the students' right to choose other lenders; (3) include at least three unaffiliated lenders and, if the school promotes or endorses private educational loans, at least two unaffiliated lenders of such loans; and (4) prominently disclose the process used to ensure that lenders are selected on the basis of the benefits they provide borrowers. Lenders that enter into preferred lender arrangements must annually certify their compliance with the law's requirements.

Campus Safety Plans

The legislation establishes a competitive matching grant program to assist institutions in developing and implementing (1) state-of-the art emergency communications systems, (2) campus safety plans, and (3) security assessments and training. It also creates a disaster and emergency relief loan program to help institutions recover from a major disaster or emergency.

Perkins Loan Limits

The law increase annual Perkins Loan limits from $4,000 to $5,500 for undergraduate students and from $6,000 to $8,000 for graduate and professional students. Perkins loans are awarded to students with exceptional financial need. Individual schools act as lenders using a pool of federal funds. (It is a subsidized loan, with the federal government paying the interest during the in-school and grace periods. There is a 10-year repayment period and the interest rate is 5%.)

Aggregate Perkins loan limits also increased from $20,000 to $27,500 for undergraduate students who have completed two years of study, from $40,000 to $60,000 for graduate and professional students, and from $8,000 to $11,000 for all other students.

Textbook Costs

The legislation requires publishers to disclose certain information about textbooks and supplemental materials to faculty members as they decide what books to require. They must disclose (1) the textbook's price, in all of its available formats (i.e. paperback or unbound), (2) the copyright dates of the textbook's three previous editions, and (3) the substantial content revisions made between the book's current and previous editions. Publishers that sell textbooks bundled with supplemental material must also make them available as separately priced, unbundled items.

Higher education institutions are required, to the maximum extent practicable, to list the prices and ISBN codes of the required and recommended textbooks for each course on their online course schedules used for preregistration and registration.

Copyright Infringement

The new law requires institutions to develop plans to detect and prevent unauthorized distribution of copyrighted material over campus networks. Colleges and universities must also, to the extent practicable, offer alternatives to illegal downloading or peer-to-peer distribution of intellectual property (e.g. music and video files). The law requires the institutions to disclose annually the policies to students and inform them that unauthorized peer-to-peer file sharing may subject them to civil and criminal liabilities.

Improvements to Free Application for Federal Student Aid Application (FAFSA) Process

The legislation includes provisions to streamline the FAFSA process and make it consumer-friendly, with fewer data elements and available in both paper and downloadable electronic formats. The education secretary must also develop an EZ FAFSA for low-income individuals. In addition, the secretary and comptroller general must design and conduct a study to simplify the FAFSA process and reduce the amount of financial information students and families need to provide to receive an eligibility determination. This includes coordinating with the Internal Revenue Service to use financial information that the government already has in making student aid determinations, if this does not negatively affect students, institutions, or the government.