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Pamela Moran Office of Postsecondary Education U.S. Department of Education

Federal Update. Pamela Moran Office of Postsecondary Education U.S. Department of Education. November 5, 2007. 2007 NJASFAA Fall Conference. Agenda. Legislation Recent Regulations Negotiated Rulemaking Recent Dear Colleague Letters Default Rates Conferences

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Pamela Moran Office of Postsecondary Education U.S. Department of Education

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  1. Federal Update Pamela Moran Office of Postsecondary Education U.S. Department of Education November 5, 2007 2007 NJASFAA Fall Conference

  2. Agenda • Legislation • Recent Regulations • Negotiated Rulemaking • Recent Dear Colleague Letters • Default Rates • Conferences • Appendices: FAFSA and FAFSA4caster, Delivery System, and Other Announcements

  3. Legislation

  4. Legislation • Reauthorization • Senate passed July 24, 2007 • House not yet passed • P.L. 110-93 • Enacted September 30, 2007 • Permanently extends the waiver authority in the Higher Education Relief Opportunities for Students Act of 2003 • P. L. 110-84 - College Cost Reduction and Access Act (Budget Reconciliation Act) • Enacted September 27, 2007

  5. Legislation: CCRAAACG and National SMART Grants • Makes no changes to the ACG and National SMART Grant Programs

  6. Legislation: CCRAAFederal Pell Grants • Eliminates Federal Pell Grant “tuition sensitivity” as of July 1, 2007 Effective: July 1, 2007

  7. Legislation: CCRAAFederal Pell Grants • Increases Pell Grant award by – • $ 490 for 2008-09 and 2009-10 • $ 690 for 2010-11 and 2011-12 • $ 1,090 for 2012-13 Effective: 2008-2009 award year

  8. Legislation: CCRAAFederal Pell Grants • Increases applicable to students eligible based on the maximum award set in an appropriations act • For 2008-09, if appropriations act sets a $4,310 maximum award, sets Scheduled Awards: • Maximum $4,800 • Minimum $890 • Does not increase the number of eligible students Effective: 2008-2009 award year

  9. Legislation: CCRAA Teacher Education Assistance for College and Higher Education (TEACH) Grants • Is effective starting in 2008-2009 • Provides $4,000 for each academic year • Has aggregate maximums • $16,000 for first baccalaureate student or postbaccalaureate, nondegree student • $8,000 for graduate student Effective: 2008-2009 award year

  10. Legislation: CCRAATEACH Grants • Student eligibility for grant • If a current enrolled student: • Is Title IV eligible; • Has 3.25 GPA or statutory alternatives; and • Is completing, or plans to complete, coursework necessary to begin a career in teaching • If a current or prospective teacher, seeking a graduate degree: • Is a teacher or retiree with expertise in a shortage area; or • Is or was a teacher with high quality alternative certification, e.g., Teach for America Effective: 2008-2009 award year

  11. Legislation: CCRAATEACH Grants • Sign agreement to serve: • Must teach at Title I school • Must teach • Mathematics • Science • Foreign language • Bilingual education • Special education • High-need field approved by the Secretary • Must be treated as a Direct Unsub Stafford Loan to be repaid if student does not teach Effective: 2008-2009 award year

  12. Legislation: CCRAACollege Access Challenge Grants • Provides funds to States or others to be spent on efforts to increase college access • Must be matched two to one • $66 million for each of FY 2008 and FY 2009 Effective: October 1, 2007

  13. Legislation: CCRAANeed Analysis • Income protection allowance • Modifies the way income protection allowance is calculated and updated • Auto-Zero and Simplified Needs Test • Adds “dislocated worker” in addition to type of tax return and means tested benefits • Increases from 12 to 24 months for means tested benefits • Increases Auto Zero EFC income level from $20,000 to $30,000 (indexed) Effective: 2009-2010 award year

  14. Legislation: CCRAANeed Analysis • Redefines “untaxed income” by not listing: • Welfare benefits • Earned income credit amounts • Special fuel tax credit • Excluded foreign income • Untaxed social security benefits • But retains “any other untaxed income and benefits” in listing • Excludes additional child tax credit claimed Effective: 2009-2010 award year

  15. Legislation: CCRAANeed Analysis • Adds to independent student definition • Is in foster care or a ward of the court at any time when the individual is 13 years of age or older • Is an emancipated minor or is in legal guardianship as determined by a court • Has been verified in the year in which applying to be an unaccompanied youth who is a homeless child or youth, or is at risk of homelessness Effective: 2009-2010 award year

  16. Legislation: CCRAANeed Analysis • Excludes ‘special combat pay’ from income • Provides that a qualified education benefit (529 plan) owned by dependent student is an asset of the parent • Excludes distributions from 529 plans from estimated financial assistance Effective: 2009-2010 award year

  17. Legislation: CCRAAPJ and Dependency Overrides • Adds dislocated worker and homelessness as examples of when an FAA can use professional judgment • Provides that an FAA can use a dependency override made by another FAA within the same award year Effective: 2009-2010 award year

  18. Legislation: CCRAAFFEL and Direct Loans • Interest rates • Reduces interest rates on undergraduate subsidized loans from 6.8 percent to 3.4 percent by 2012 • Begins reductions with loans first disbursed on or after July 1, 2008 • Beginning in 2013 the rate reverts back to 6.8 percent • No increase in loan limits Effective: July 1, 2008

  19. Legislation: CCRAAFFEL and Direct Loans • Revises economic hardship definition • Changed from borrower’s earnings being less than 100 percent of the poverty level for a family size of two to earnings being 150 percent of poverty level for the borrower’s family size • Now requires that borrower must be working fulltime and is earning less than the greater of– • Federal minimum wage (annualized) • 150 percent of poverty level for borrower’s family size Effective: October 1, 2007

  20. Legislation: CCRAAPerkins, FFEL, and Direct Loans • Changes the current military deferment • Applies to all Title IV loans, not just loans that were made on or after July 1, 2001 • Removes three-year time limit. • Adds a 180-day period after demobilization • Adds a new deferment for up to 13 months following end of service if borrower was in school, or was in school within 6 months, when called to active duty • Continues qualification based on serving during a war or in a national emergency Effective: October 1, 2007

  21. Legislation: CCRAAFFEL and Direct Loans • Adds income-based repayment plan • Applies to Stafford, Student PLUS loans, and Consolidation (if Consolidation does not include excepted Parent PLUS) • Borrower’s maximum annual repayment amount is no more than 15 percent of the difference between the borrower’s AGI and 150 percent of the poverty line based on family size. • If negative amortization, government pays interest on subsidized loans for 3 years. • Unpaid amounts (except PLUS) are forgiven after 25 years. Effective: July 1, 2009; conforming change, July 1, 2008

  22. Legislation: CCRAAFFEL and Direct Loans • Public service employees loan forgiveness • Any Direct Loan (Stafford, PLUS, Consolidation) borrowers • Is not in default • Has made 120 monthly payments • Is employed in public sector during entire repayment period • FFEL consolidation into Direct Loans to get benefit, but all payments in Direct Loans Effective: October 1, 2007

  23. Legislation: CCRAAFFEL and Direct Loans • A borrower is eligible to consolidate an FFEL Consolidation Loan into a Direct Loan to participate in the public service loan forgiveness program. Effective: July 1, 2008

  24. Legislation: CCRAAFFEL Lenders and GAs • Reduce FFEL lender special allowance payments (SAP) by 55 basis points • 40 for nonprofit lenders • Increase lender loan fee from 0.5 percent to 1.0 percent • Reduce FFEL guaranty agency retention on default collections from 23 percent to 16 percent • Reduce GA account maintenance fee from 0.1 percent to 0.06 percent Effective: October 1, 2007

  25. Legislation: CCRAAFFEL Lenders and GAs • Elimination of Exceptional Performer Designation for FFEL lenders, lender servicers, and guaranty agencies Effective: October 1, 2007

  26. Legislation: CCRAAFFEL Lenders and GAs • Reduce FFEL lender insurance on defaulted loans from 97 percent to 95 percent for loans first disbursed on or after October 1, 2012. Effective: October 1, 2012

  27. Legislation: CCRAAFFEL • Authorizes • FFEL Competitive Loan Auction Pilot • Study of auction method for the origination or selling of student loans • Date of enactment through June 30, 2009 for implementation • Pilot with FFEL Parent PLUS loans for new borrowers for loans first disbursed on or after July 1, 2009 • Is State by State Effective: July 1, 2009

  28. Recent Regulations

  29. Recent Final Regulations • 9/11 Survivors Discharge Final Regulations • Published September 28, 2007 • Perkins, FFEL, and Direct Loans • Spouses and Parents Loans Discharged based on death or total and permanent disability • Not clear if there are any remaining eligible survivors: have paid off loans

  30. NegotiatedRulemaking

  31. Negotiated Rulemaking2006-2007 • Notices of proposed rulemaking (NPRM) published: • Loans – June 12 • ACGs and National SMART Grants – August 7 • General Provisions – August 8 • Final regulations by November 1, 2007 • Effective dates: July 1, 2008 • Possible early voluntary implementation

  32. Loan • FFEL/DL • ID theft • Entrance counseling for PLUS borrowers • Maximum length of loan period • Determination of deferment eligibility by one loan holder

  33. Loan • FFEL • Eligible lender trustee relationships • Frequency of capitalization for consolidation loan borrowers (already in DL) • Preferred lender • Prohibited inducements • FFEL/DL/Perkins • Use of true & exact copy of death certificate • Prospective discharge for TPD purposes

  34. Loan • FFEL/Perkins • Standardize NSLDS reporting • Retention of disbursement records • Certification of E-signatures for assigned MPNs

  35. Loan • Perkins Loan • Clarify eligibility requirements for child & family service agency cancellation • Define “reasonable” collection costs • Mandate assignment of defaulted Perkins Loans

  36. Loan Maximum Loan Period (FFEL and DL) • Eliminate 12-month loan period maximum • Flexibility in non-term and nonstandard term program loan certification • Flexibility in rescheduling “stop out and return” disbursements within allowed 180-day period

  37. Loan Loan Counseling for Grad/Prof Borrowers (FFEL/DL) • Required counseling before PLUS certification for eligible Stafford non-applicants • Opportunity for Stafford Loan must be given before receipt of PLUS loan

  38. Loan Loan Counseling for Grad/Prof Borrowers • Initial counseling required for PLUS borrowers • Exit counseling required for Stafford/PLUS combination borrowers

  39. Loan School FFEL Loan Certification (All FFEL Schools) - • FFEL schools may not: • Refuse/Delay certification based on choice of lender or GA • Assign lender to first-time borrower in award packaging or through other methods

  40. Loan School FFEL Loan Certification (All FFEL Schools) - • FFEL schools may not: • Engage in pattern or practice of discrimination to deny FFEL access • Refuse to certify/reduce except on case-by-case, documented basis with written reason provided to borrower

  41. Loan School FFEL Preferred Lender List - • Regulations require: • List containing minimum of 3 unaffiliated lenders • “Unaffiliated” means no common control or ownership; no common directors, trustees, or general partners

  42. Loan School FFEL Preferred Lender List - • Regulations require: • School to disclose method and criteria for lender inclusion on list • Provide comparative information on borrower benefits offered by listed lenders (ED will provide model format)

  43. Loan School FFEL Preferred Lender List - • Regulations require: • School to include prominent statement advising use of of school’s preferred lender not required • Update at least annually

  44. Loan School FFEL Preferred Lender List - • Regulations: • Require that School not include on list a lender that solicited and provided school or school-employee benefits • Specify school may include lender solicited to offer best borrower benefits

  45. Loan School FFEL Preferred Lender List - • Regulations require that school: • Not assign lender to first-time borrower • Not cause any unnecessary delays in certification for borrowers not using a school preferred lender

  46. Loan FFEL Lender Prohibited Inducements- • Regulations forbid lender to provide, directly or through an agent, points, premiums, payments or other inducements to a school or any other party to secure FFEL applications or loan volume

  47. Loan FFEL Lender Prohibited Inducements - • No payments to prospective borrowers, including prizes and additional financial aid • No payments to schools, school-affiliated org, or individuals to secure applications, loan volume, or placement on preferred lender list • No service on lender advisory boards and related payments to school or school-affiliated org employees

  48. Loan FFEL Lender Prohibited Inducements - • No payments to student lender reps or other campus solicitors to secure apps from prospective borrowers • No payment of conference or training registration, transportation, and lodging costs for school or school-affiliated org employees • No payment of entertainment expenses for the same

  49. Loan FFEL Lender Prohibited Inducements - • No philanthropic activities or payments for FFEL applications or loan volume, or placement on preferred lender list • No staffing services to schools except on short-term, non-recurring emergency basis, including compensated and third-party contractual services

  50. Loan FFEL Lender Permitted Activities - • Assistance to schools comparable to Secretary’s assistance to Direct Loans • Support and participation in student aid and financial literacy outreach with schools and GAs, excluding in-person school-based counseling • Reasonable costs of meals, refreshments, and receptions for meeting, training, or conferences if open to all attendees

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