Reauthorization Deficit Reduction Act

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Reauthorization(Deficit Reduction Act)

• SunTrust Education Loans

February 2006
2
Reauthorization and Reconciliation

• Congress has extended the Higher Education Act
  (HEA) through March 31, 2006
• The Deficit Reduction Act (S.1932) passed both
  the Senate and the House on February 1, 2006 and
  is expected to be signed into law by the
  President
• S.1932 includes many of the components contained
  in Reauthorization
• The remaining items in reauthorization may be
  decided prior to March 31, 2006 or there may be
  an additional extension
• Unless otherwise specifically provided,
  amendments made under S.1932 become effective
  July 1, 2006

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Changes to Loan Limits

• Annual loan limits for First-year Stafford from
  2,625 to 3,500
• Annual loan limits for Second-year Stafford
  from 3,500 to 4,500
• Annual unsubsidized Stafford limit for
  graduate/professional students from 10,000 to
  12,000
• Annual limit for coursework necessary to enroll
  in a graduate program or to obtain a professional
  credential as an elementary or secondary school
  teacher from 5,000 to 7,000
• No change in aggregate limits for
  Undergraduate/Graduate

Loan limit increases take effect July 1, 2007
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Adds New Graduate (PLUS) Loan

• For Graduate and Professional students (effective
  July 1, 2006)
• May borrow funds beyond Stafford loan limits
• Terms would mimic those of PLUS loans

5
Adds Grant Programs

• Authorizes Academic Competitiveness Grants of
  750 and 1,300 to first and second-year
  undergraduate students
• Authorizes SMART Grants of 4,000 for third and
  fourth-year undergraduate students
• Provides for ratable reductions in the amount
  that the government makes available if the amount
  in any fiscal year is less than the amount
  required

6
Interest Rates

• Maintains the scheduled July 1,2006 change to a
  fixed interest rate for Stafford (6.8)
• Increases the fixed interest rate for PLUS loans
  in the FFELP from 7.9 to 8.5 (July 1, 2006)
  (Apparent oversight, but Direct Loan rate is not
  increased)
• Maintains current fixed interest rate for
  consolidation loans

7
Origination Fees

• Creates parallel fee structures for FFELP and DL
• Phases the 3 maximum origination fee on FFELP
  Stafford loans to 0 by July 1, 2010

8
Guaranty Fee Added

• Mandates a 1 of principle federal default fee to
  be charged by all guarantors (including those
  with VFAs)
• The fee shall be deducted from the proceeds of
  the loan or by payment from other nonfederal
  sources

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Disbursements

• Restores expired provisions which granted
  disbursement relief for loans to students at
  schools with low default rates
• Single disbursement for a single-term loan
• Waiving the 30-day delay in disbursement for
  first-year students

10
Eliminates 50 Rule

• Removes distance-learning courses from the 50
  requirement that an institutions courses be
  delivered on campus

11
Consolidation

• Retains the single holder rule
• Eliminates spousal and in-school consolidation
  eligibility
• Eliminates reconsolidation in both FFELP and FDLP
  
• Allows FFELP borrowers to consolidate under FDLP
  if lender denies the borrowers application or
  refuses to provide an income sensitive repayment
  term
• Parallels FFELP and FDLP consolidation loan terms
  (unless otherwise mandated)
• If the lender denies a defaulted borrowerwho has
  made satisfactory repayment arrangementsa
  Consolidation loan, then the Secretary is
  required to offer the borrower a consolidation
  loan to resolve the default

12
School as Lender

• Limits lending to Stafford loans for graduates
  and professional students, effective April 1,
  2006
• Schools will need to turn to direct lending or
  private lender route for all other loans

13
Family Contribution and Needs Analysis

• Increases the income-protection allowance for
  students (July 1, 2007)
• Reduces the expected contribution from assets
  (July 1, 2007)
• Expands eligibility for the simplified need test
  and eligibility criteria for the automatic zero
  Expected Family Contribution
• Raises the income level to20,000 to qualify for
  an automatic-zero Expected Family Contribution
• Treats active duty members of the armed forces as
  independent students
• Excludes family controlled small businesses from
  assets
• Considers 529 plans and Coverdell education
  savings accounts as assets of the parent

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Cost of Attendance

• Adds the cost of room and board for up to 3
  semesters for less than half-time students
• Adds a one-time cost of obtaining the first
  professional credential for a student enrolled in
  a program requiring professional licensure or
  certification

15
Title IV Funds

• A school is required to return Title IV funds
  within 45 days from the determination of a
  students withdrawal

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Military Deferment

• Provides a new deferment of up to 3 years for
  FFELP, Direct and Perkins loans borrowers while
  on active duty or performing qualified National
  Guard duty during a war, other military
  operation, or national emergency
• Applies to loans first disbursed beginning July
  1, 2001

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Forbearances

• Eliminates the requirement that forbearance for
  serving in certain medical, dental and national
  service programs (or for borrowers having Title
  IV debt burden of over 20) be in writing
  provided the borrower is provided a confirming
  notice

18
Teacher Loan Forgiveness

• Extends provisions that permit certain teachers
  to qualify for up to 17,500 in loan forgiveness
• Extends eligibility to include teachers in
  private schools

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Eligibility

• Disqualifies borrowers from Title IV assistance
  if they committed a crime involving fraud in
  obtaining Title IV funds and have not fully
  repaid those funds
• Suspension of eligibility for students convicted
  of drug offenses is limited to offenses that
  occurred while the student received Title IV
  assistance

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