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Federal Update

This update provides information on the status and priorities of the Title IV program budgets and regulations, including changes in loan fees, eligibility criteria, and loan limits. It also includes updates on recent legislation and appropriations related to higher education.

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Federal Update

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  1. Federal Update Dan Madzelan Office of Postsecondary Education Jeff Baker Federal Student Aid

  2. Program Appropriations Higher Education Legislation Title IV Program Regulations

  3. Title IV Program Budgets Appropriations * President's FY 2007 Budget Submission

  4. Title IV Program Budgets Aid Available * President's FY 2007 Budget Submission

  5. Title IV Program BudgetsStatus of Appropriations * Committee-passed Bills

  6. Administration Pell Grants Eliminate Shortfall Mandate Annual Increases Establish $1,000 State Scholars Award Congress Pell Grants Shortfall Eliminated AC/SMART Grants Mandatory Spending Authorized: $4.53 Billion over 5 Years Title IV Program Budget Priorities

  7. Administration Make Active Duty Military Independent Clarify FAFSA “Drug Question” Revise CB Formulas Eliminate/Recall Perkins Congress Active Duty Military are Independent Applies to those in-school and receiving aid Not Addressed Not Addressed Title IV Program Budget Priorities

  8. Administration Create 25 basis point Loan Holder Fee Reduce insurance to 95% Eliminate special SAP on tax-exempt financings Not proposed Congress Recapture excess interest earnings Lender insurance reduced to 97% Special SAP largely eliminated Phase-out origination fees Loan Program Budget Priorities

  9. Legislation • Higher Education Reconciliation Act of 2005 • Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006 • Second Continuing Resolution, 2007 • Through December 8, 2006 • Third Higher Education Extension Act of 2006 • Through June 30, 2007

  10. Third Higher Education Extension Act • New restrictions on Eligible Lender Trustee arrangements with Postsecondary Institutions • Definition of Hispanic-Serving Institution • Clarification of GA Account Maintenance Fees • New Loan Discharge for Survivors of 9/11 Victims

  11. Hurricane Help for Institutions • Hurricane Education Recovery Act • $95 Million to 18 Louisiana Institutions • $95 Million to 38 Mississippi Institutions • $10 Million to 99 U.S. Institutions • $30 Million “Retained” by 18 Gulf Institutions • Higher Education Recovery Awards • $50 Million to 41 Gulf Institutions • Natural Disaster Student Aid Fairness Act • $28 Million Reallocated to 29 Campus-Based Program Institutions

  12. Regulations • Interim Final Regulations – Comments Invited • ACG/SMART Grants – July 3, 2006 • Other HERA Issues – Aug. 9, 2006 • Final Regulations • ACG/SMART Grants – Nov. 1, 2006 • Other HERA Issues – Nov. 1, 2006 • New September 11-Related Discharges – Dec. 29, 2006

  13. Regulations Negotiated Rulemaking for 2008-2009 and Beyond • Tentative Calendar • Sessions: Dec. 2006, Feb. and March 2007 • NPRM: May 2007 • Comments: July 2007 • Final Rule: Nov. 1, 2007 • Effective Date: July 1, 2008 with possible early implementation • Negotiated Rulemaking Website: http://www.ed.gov/policy/highered/reg/hearulemaking/2007/nr.html

  14. FY 2004 FFEL and Direct Loan Default Rates

  15. National Student Loan Default Rates

  16. Default Rates by Sector

  17. Higher Education Reconciliation Act of 2005 Enacted: February 8, 2006

  18. Institutional and Program Eligibility • Weeks in academic year for clock-hour programs reduced to 26 • 50% rules do not apply to telecommunications • Programs of distance education must be specifically accredited • Short-term telecommunications programs are eligible • Provision for programs using assessment to measure progress

  19. FFEL and Direct Loans PLUS Loan Eligibility to Graduate Students • Extends eligibility for PLUS Loans to graduate and professional students • Eligibility criteria is the same as for a parent, including credit checks and no in-school status. Student would be eligible for an in-school deferment • Student must file FAFSA • Effective for any loan certified or originated on or after July 1, 2006

  20. FFEL and Direct Loans Annual Loan Limits • Increases annual base loan limits for: • First-year students from $2,625 to $3,500 • Second-year students from $3,500 to $4,500 • Increases annual additional unsubsidized for: • Graduate students to $12,000 • Prep for Grad Program to $7,000 • Teacher Certification to $7,000 • Effective for loans first disbursed on or after July 1, 2007 • Aggregate loan limits are not increased

  21. FFEL and Direct Loans Annual Loan Limits Loans first disbursed on or after July 1, 2007 • First disbursement of loan • Loan can be certified/originated prior to July • Loan period must either begin on or after July 1 or include July 1 (cross-over period) • If loan period begins before July 1: • Delay certification/origination • Delay first disbursement until July 1 or later • Certify/Originate another separate loan for the increased amount

  22. FFEL and Direct Loans Interest Rates for New Loans • Fixed rate of 6.8% for new Stafford loans first disbursed or or after July 1, 2006 • Fixed rate of 8.5% for new FFEL PLUS loans first disbursed or or after July 1, 2006 • Fixed rate of 7.9% for new Direct Loan PLUS loans first disbursed or or after July 1, 2006

  23. FFEL and Direct Loans Stafford Loan Fees • Phased reduction of the four-percent Direct Loan fee to one percent • Phased reduction of the three-percent FFEL origination fee to zero • Requires that the one-percent FFEL default fee be deposited into the federal fund of the FFEL guaranty agency. Requires the agency to either deduct from loan proceeds or pay from non-federal sources

  24. FFEL and Direct Loans Consolidation Loans • Generally no re-consolidation of a single consolidation loan • FFEL loans consolidated into Direct only if borrower certifies unable to obtain a FFEL consolidation loan • Eliminates in-school consolidation in Direct Loans and “early conversion to repayment” consolidation in FFEL • Eliminates joint consolidations

  25. FFEL and Direct Loans Low Default Rate Disbursement Waivers • An institution with cohort default rates of less than 10 percent for the three most recent years is exempted from the requirement that FFEL and Direct Loans: • Be issued in at least two disbursements for one-term loans • Be delayed for 30 days for first-time students

  26. FFEL and Direct Loans Teacher Loan Forgiveness • Permanently and retroactively extends the authorization of the increased loan forgiveness of $17,500 for "highly qualified" math, science and special education teachers at qualified low-income schools • Effective on date of enactment, retroactive to October 1, 2005

  27. FFEL, Direct and Perkins Loans Active Duty Military Deferment • Provides for a military deferment of up to three years for FFEL, Direct and Perkins Loans that were first disbursed on or after July 1, 2001. Includes definitions of “active duty”

  28. Cost Of Attendance • Cost of Attendance (COA) for less than half-time students may include room and board costs, at school’s option • Cost of Attendance may include, at school’s option, the one-time cost of obtaining the first professional license or certification

  29. Calculation Of EFC - 2006-2007 Simplified Needs Test and Auto Zero EFC • Increases the threshold to $20,000 under which a family would automatically have an EFC of zero • Eliminates consideration of dependent student’s tax return for both SNT and Auto Zero EFC • Tax return alternative if family received benefits from a federal means-tested benefits program

  30. Calculation Of EFC - 2006-2007 Other EFC Changes • Treats all 529 Pre-Paid and Tuition Savings Plans as assets of the owner, unless the owner is the dependent student • Excludes small businesses from assets • Adds active duty military to the criteria that makes a student independent

  31. Calculation Of EFC - 2007-2008 Other EFC Changes • Increases Income-Protection Allowances • Decreases Asset Assessment Rates

  32. Drug Conviction • Provides that an applicant loses eligibility for Title IV aid only if the drug-related offense for which he or she was convicted occurred while the student was receiving Title IV aid

  33. Return Of Title IV Aid (R2T4) • Specifies that scheduled clock hours are used to determine earned aid for clock-hour programs • Limits a grant overpayment due from a student to the amount by which the original overpayment amount exceeds half of the total grant funds received by the student

  34. A Couple of Other Issues

  35. Preferred Lenders • Preferred Lenders Lists are allowed • No Automatic Referrals • Must process any loan request made by a student or parent regardless of lender • May not have unreasonable delays • Publications, scripts and staff training should comply • Violations could bring sanctions • Does not apply to FFEL/Direct Loan choice

  36. Alternative Loans • Alternative loans must be included as “estimated financial assistance” if enrollment is a condition for the loan • Does not matter where loan proceeds are sent or whether school certified enrollment • May replace EFC • Think about it like an outside scholarship

  37. More ACG/National SMART

  38. ACG/National SMARTNSLDS Reporting • December 16 – Reporting to COD Begins • December 17 – COD to NSLDS • December 17 – NSLDS FAP Access • January 1 – 2007-08 ISIRs include 2006-07 ACG/SMART disbursements • January 1 – Transfer Monitoring includes 2006-07 ACG/SMART disbursements • Will not include ACG/SMART if previously reported on ISIR

  39. ACG/National SMARTDetermining Enrollment Status • Initial Calculation – Enrollment status determined at time of initial award calculation • Enrollment status could be different than Pell • Recalculation – Must use same recalculation policy (e.g., recalculation date, census date) that is used for Pell Grants

  40. ACG/National SMARTLate Disbursements and R2T4 • May make late disbursement even if eligibility not determined before student no longer enrolled • Note regulatory time limits for late disbursements • Included in R2T4 as “aid that could have been disbursed” as long as eligibility is determined before R2T4 calculation • Could result in post-withdrawal disbursement

  41. National SMART Designated Majors • Must be designated with one of the approved “Classification of Instructional Program” codes (CIP Codes)

  42. ACG/National SMART • Academic Year Progression • Basic Requirement – Academic year progression based on all credits earned in any ACG/SMART eligible program • Current Institution’s Credits – All credits earned • Transfer Institution’s Credits – Only credits accepted by current institution • Regardless of application to student’s current program

  43. ACG/National SMART • Transfer Students - GPA • Upon transfer, the new institution must calculate GPA using the grades from all coursework accepted from prior institution(s) • Once student has GPA at new institution, use new institution’s GPA

  44. ACG/National SMART • Remedial Coursework • Enrollment Status – Use credits or equivalent • Academic Year Progression – Institutional policy • GPA - Institutional policy

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