Federal Update

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
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Title IV Program Budgets Aid Available
President's FY 2007 Budget Submission
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Title IV Program BudgetsStatus of Appropriations
Committee-passed Bills
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Title IV Program Budget Priorities

• 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

7
Title IV Program Budget Priorities

• 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

8
Loan Program Budget Priorities

• 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

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

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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

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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

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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/hearulemakin
  g/2007/nr.html

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FY 2004 FFEL and Direct Loan Default Rates
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National Student Loan Default Rates
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Default Rates by Sector
School Type FY 2002 FY 2003 FY 2004
Public 2 Year 8.5 7.6 8.3
Public 4 Year 4.0 3.3 3.6
Private 2 Year 6.1 6.3 7.4.
Private 4 Year 3.1 2.6 2.9
Proprietary 8.7 7.3 8.8
Foreign 2.0 1.8 1.5
National Rate 5.2 4.5 5.1
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Higher Education Reconciliation Act of
2005 Enacted February 8, 2006
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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

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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

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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

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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

• 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

Stafford Loan Fees
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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

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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

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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

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Cost Of Attendance

• Cost of Attendance (COA) for less than half-time
  students may include room and board costs, at
  schools option
• Cost of Attendance may include, at schools
  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 students
  tax return for both SNT and Auto Zero EFC
• Tax return alternative if family received
  benefits from a federal means-tested benefits
  program

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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

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A Couple of Other Issues
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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

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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

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More ACG/National SMART
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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

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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

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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

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National SMART Designated Majors

• Must be designated with one of the approved
  Classification of Instructional Program codes
  (CIP Codes)

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• ACG/National SMART
• Academic Year Progression

• Basic Requirement Academic year progression
  based on all credits earned in any ACG/SMART
  eligible program
• Current Institutions Credits All credits
  earned
• Transfer Institutions Credits Only credits
  accepted by current institution
• Regardless of application to students current
  program

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• 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
  institutions GPA

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• ACG/National SMART
• Remedial Coursework

• Enrollment Status Use credits or equivalent
• Academic Year Progression Institutional policy
• GPA - Institutional policy