Federal Program Integrity Regulations: Change is Now

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• Federal Program Integrity Regulations Change is
  Now
• Vermont Association of Student Financial Aid
  Administrators
• Conference
• Killington, Vermont
• June 15, 2011
• Harrison M. Wadsworth III
• Principal, Washington Partners, LLC
• hwadsworth_at_wpllc.net
• 202-289-3900
• www.wpllc.net

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Session descriptions

•  
• New Program Integrity Regulations Part 1  the
  U.S. Department of Education has made a host of
  regulatory changes that take effect this year,
  many on July 1st.  This session will take a look
  at the changes to the definition of Satisfactory
  Academic Progress, calculations of withdrawal
  dates for refunds and return of Title IV
  funds, changes in the disbursement schedule of
  Title IV funds and state authorization issues.
•  
• New Program Integrity Regulations Part 2 Plus a
  Few Other Regulatory Issues  There are so many
  new regulations coming out that they require two
  sessions.  This session will discuss the many
  changes in the definition of "gainful employment
  in a recognized occupation" and what can be
  expected next, definition of a credit
  hour, adding a program or location and incentive
  compensation.  Also touched on will be issues
  affecting private loans, such as preferred lender
  lists, and the Consumer Financial Protection
  Bureau -- and other issues raised by the
  conference participants.
•  

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What Is Washington Partners, LLC?

• Government and public relations consulting firm
  specializing in education policy and related
  issues
• Provides association management, including for
  COHEAO, and consulting to colleges and
  universities in the United States and
  internationally
• Expertise and experience in all aspects of
  education, P-18

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Title IV Aid Available
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What is the CDR Calculation?

• Currently, a schools cohort default rate is the
  percentage of the number of the schools FFEL
  and Direct Loan borrowers who enter repayment in
  one Federal Fiscal Year (October 1 through
  September 30) who default in that federal fiscal
  year or by the end of the next federal fiscal
  year.
• Increases continued in 2009 draft rates 8.9,
  327,669 borrowers, up from 7.0/238,852

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HEOA 2008 Changes

• Increases the CDR monitoring period from two to
  three years.
• Beginning with the 2009 cohort, the calculation
  will be
• Borrowers who default in that federal fiscal year
  or by the end of the next two federal fiscal
  years.
• Establishes a three-year transition period for
  sanctions.

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2-Year Versus 3-Year Calculation
The Numerator is the number of borrowers from the
denominator who default within a cohort period
The Denominator is the number of borrowers who
enter repayment within a cohort period
3555000 .071 or 7.1
6055000 .121 or 12.1
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Voluntary Flexible Agreements

• New request for proposals from guaranty agencies
  issued May 31, 2011 joint proposals preferred
• Secretary seems intent on setting up more VFAs,
  focusing on delinquency prevention
• Longstanding ED concerns over conflicts of
  interest at GAs reflected in separation of
  collections from default prevention, education,
  loan servicing
• Seen as more efficient, part of consolidation of
  GAs post-SAFRA and ECASLA

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New VFA Structure

• GA Responsibility Area I--Lender Claims Review,
  Lender Claims Payment, and Collections
• GA Responsibility Area II (Delinquency and
  Default Prevention and Management)
• GA Responsibility Area III (Community Outreach,
  Financial Literacy and Debt Management, School
  Training and Assistance, and School Oversight)
• GA Responsibility Area IV (Lender and Lender
  Servicer Oversight)

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VFAs

• Much concern by ED over FISMA information
  security as GAs wind down
• Collections deemed to be more efficient if fewer
  GAs involved.
• Enhanced oversight by ED of GAs, more reporting
  requirements
• Key duties default and delinquency prevention,
  financial literacy programs,
• A guaranty agency that assumes GA Responsibility
  Area I (Lender Claims Review, Lender Claims
  Payment, and Collections) may not also assume GA
  Responsibility Area II (Delinquency and Default
  Prevention and Management) or GA Responsibility
  Area IV (Lender and Lender Servicer Oversight).

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Regulations Galore July 1

• Negotiated Rulemaking process on Program
  Integrity Issues took place summer 2009-fall
  2010
• Not triggered by statutory change but instead by
  2008 election.
• Contentious, little hope of consensus given
  makeup of negotiating committee
• Biggest points of dispute GAINFUL EMPLOYMENT
  definition, Incentive compensation, credit hour,
  state licensing.

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Program Integrity Regs

• NPRMs published June 18 - To improve the
  integrity of the Title IV student assistance
  programs.
• Comment Period Ended August 2, 2010
• Final regulations published on Oct. 29, 2010
• Generally effective July 1, 2011 (2011-2012 AY)
• Verification effective with the 2012-2013 AY

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But Wait!

• Series of bills being introduced in the House to
  repeal program integrity regs
• Gainful employment passed in April as part of
  2011 CR, dropped in conference
• H.R. 2117 by Rep. Virginia Foxx (R-NC) passed
  Subcommittee on Higher Education June 14
  repeals credit hour definition, state oversight
  expansion
• More in the future
• Not likely to pass Senate, Sen. Tom Harkin (D-IA)
  has own plans

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High School Diploma

• Never specifically defined know it when you see
  it
• Schools required to verify if reason to believe
  diploma/school not valid
• Schools must develop procedures (1st yr students)
• ED will provide further guidance later
• Questions will be added to FAFSA on high school
• ED will maintain list of approved schools
• Being on the list does not mean approved
• Not being on the list does not mean unapproved
  or questionable

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Ability to Benefit

• Students considered to have the ATB if
• High school diploma or equivalent
• Pass an approved ATB test
• Satisfactorily complete 6 semester hours, 6
  trimester hours, 6 quarter hours, or 225 clock
  hours that are applicable toward a degree or
  certificate offered by the institution.
• Does not have to be same program, but should be
  rigorous
• Defines independent test administrator

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Satisfactory Academic Progress

• Financial aid warning students may still get
  aid for one additional payment period
• Only allowed if school measures SAP every payment
  period
• Financial aid probation student failed to have
  SAP and has appealed successfully and is
  receiving aid
• School allowed to impose conditions such as
  reduced course loads

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Satisfactory Academic Progress

• Schools must specify pace that student must
  matriculate to complete in maximum timeframe
• Policy must include
• How pace measured
• How transfers affect SAP
• Transfer credits count towards completed and
  attempted credits in calculations

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Satisfactory Academic Progress - Appeals

• Must have written policy
• Student must explain why they did not progress
  and what has changed to allow them to do so now
• Student must meet one of two elements for
  successful appeal
• The institution has determined that the student
  should be able to meet satisfactory progress
  standards after the subsequent payment period, or
  
• The institution develops an academic plan with
  the student that, if followed, will ensure that
  the student is able to meet the institutions
  satisfactory academic progress standards by a
  specific point in time.

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Written Arrangements Between Eligible Institutions

• Proprietary schools entering written
  arrangements with other eligible schools under
  same ownership must provide at least 50 of the
  program offered
• Public and private non-profits exempted
• Schools entering written arrangements with other
  eligible schools NOT under same ownership must
  provide at least some of the program offered

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Written Arrangements Between Ineligible
Institutions

• No written arrangements allowed for schools
  ineligible due to adverse action by ED,
  accrediting agency or state
• Ineligible school in written arrangement with
  eligible school under common ownership may
  provide only up to 25 of program
• Ineligible school in written arrangement with
  eligible school NOT under common ownership may
  provide up to 50 of the program

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Return of Title IV Aid

• New Reg
• -- Modifies and clarifies the definition of when
  a student is considered to have withdrawn from a
  program
• -- Clarifies the circumstances under which an
  institution is required to take attendance for
  the purpose of determining last date of
  attendance.

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Taking Attendance

• Proposal would add following requirements to
  definition of schools required to take
  attendance
• The institution itself has a requirement that its
  instructors take attendance or
• The institution or an outside entity has a
  requirement that can only be met by taking
  attendance or a comparable process, including but
  not limited to, requiring that students in a
  program demonstrate attendance in the classes of
  that program, or a portion of that program

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Taking Attendance Impact of Proposal

• An institution required to take attendance may
  use only the last date of attendance as the
  withdrawal date
• An institution not required to take attendance
  may use
• the date the student officially withdraws, or,
• for students who do not at least begin the
  institution's formal withdrawal process, the
  midpoint of the payment period or
• some other date based on documented
  participation in an academically-related
  activity.

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Taking Attendance Defining Academic Activity

• For attendance purposes, an academic activity is
• Physically attending a class where a teacher is
  present
• Submitting an academic assignment
• Taking an exam or computer assisted instruction
• Attending a study group that has been assigned by
  the school
• Participating in an online discussion about
  academic matters
• Contacting an instructor to discuss academic
  subject studied in the course
• It is not
• Living on campus
• Using the cafeteria
• Logging into an online class with no
  participation
• Academic counseling or advisement

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State Authorization

• More details see DCL GEN-11-05, March 17, 2011
  state authorization required to be eligible for
  Title IV funds
• States must name institution in some way to give
  it legal right to exist, all required licenses
  must obtained
• Public community colleges seen as part of state
  govt so dont have to be named. Religious schools
  generally exempt

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Distance Ed

• Distance ed programs must be separately licensed
  in every state where there are students -- some
  leeway on enforcement
• The Department will not initiate any action to
  establish repayment liabilities or limit student
  eligibility for distance education activities
  undertaken before July 1, 2014, so long as the
  institution is making good faith efforts to
  identify and obtain necessary state
  authorizations before that date.

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Credit Hours

• Regs seek to define credit hour in terms of work
  completed by a student
• Carnegie Unit remains the basis
• Consists of one hour of classroom or direct
  faculty instruction and a minimum of two hours of
  out of class student work for approximately
  fifteen weeks for one semester or trimester hour
  of credit, or
• ten to twelve weeks for one quarter hour of
  credit, or the equivalent amount of work over a
  different amount of time
• Alternative would be based on learning outcomes
• Responsibility for review of institutional
  policies would rest with accrediting agencies
• Clock hours may be used if credit hour definition
  for a program is deficient

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Definition of a Credit Hour

• 1 hour of direct faculty instruction
• at least two hours of student work outside
  classroom over set period of time for 15 weeks
  1 Credit Hour
• Does not have to be exact, stated intent is to be
  flexible conforms to commonly accepted
  practice
• Not dependent on seat time but needs metric of
  some sort, such as completion of work in time
• Accrediting agencies required to focus on whether
  policies in place and applied
• Enforcement flexibility next year

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Misrepresentation by an Institution

• When the institution itself, one of its
  representatives, or any ineligible institution,
  organization, or person with whom the eligible
  institution has an agreement, makes a substantial
  misrepresentation regarding the eligible
  institution, including about the nature of its
  educational program, its financial charges, or
  the employability of its graduates.

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Substantial Misrepresentation

• Any misrepresentation on which the person to whom
  it was made could reasonably be expected to rely,
  or has reasonably relied, to that persons
  detriment.
• Does not include statements made by students
  through social media or by vendors not engaged in
  enrollment or education
• Possible results
• Revoke program participation agreement
• Limitations on participation in Title IV programs
• Deny participation applications made on behalf of
  the institution or
• Fines and penalties

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Misrepresentation by an Institution

• Claims that constitute substantial
  misrepresentation by an institution would
  include, if not true
• Offers of scholarships to pay all or part of a
  course charge
• A charge is the customary charge at the
  institution for a course
• The cost of the program and the institution's
  refund policy if the student does not complete
  the program
• Loan repayment or forgiveness information or
  other financial aid information

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Misrepresentation by an Institution

• Program cost
• Refund policy
• Students right to reject all or a portion of aid
• Whether employment is being offered by
  institutions
• Help wanted
• Business opportunities
• Men and women wanted to train for
• Cannot describe Title IV eligibility in a way
  that implies ED endorsement of school

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Repeating Coursework

• Repeated courses count towards enrollment status
  regardless of credits earned for term-based
  program only
• Non-term based programs remain unchanged credits
  must be earned in addition to those previously
  earned.
• Can be repeated only once
• Does not include previously passed courses due to
  student failing other courses

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Disbursements

• Disbursing Federal Student Aid Funds
  Institutions are required to ensure that Pell
  Grant recipients have resources to obtain books
  and supplies by the seventh day of payment
  period.

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Private Loans Overview of Final Rule

• New disclosures and timing rules
• Disclosures on or with an application
• Disclosures after loan approval
• Consumers 30-day acceptance period
• No changes to rate or terms with some exceptions
• Disclosures at consummation
• Consumers 3-day right to cancel
• Creditor must not disburse funds

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Overview of Final Rule (cont.)

• Self-certification form before consummation
• Lenders require school certification
• Model disclosure forms developed through consumer
  testing and in consultation with the Department
  of Education
• Prohibition on co-branding in marketing
• Provision of information by creditors to
  educational institutions with Preferred Lender
  Arrangements

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Program Participation Agreement
Requirements

• Institutions must develop, publish, administer
  and enforce a code of conduct with respect to
  loans made under the title IV, HEA loan programs
  in accordance with 601.21
• For any year an institution has a PLA, annually
  compile, maintain and make available to students,
  a list of private education loans the institution
  recommends

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Program Participation Agreement
Requirements

• Institutions must, upon request of an enrolled or
  admitted student applicant of a private education
  loan, provide the applicant with the
  self-certification form and the information
  needed to complete it

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Definition of Creditor

• A creditor means a person who regularly
  extends consumer credit that
• Is subject to a finance charge or
• Is payable by written agreement in more than four
  installments
• And is the person to whom the obligation is
  initially payable

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Coverage Loans

• Covers loans made in whole or in part for
  postsecondary educational expenses at covered
  educational institutions, including unaccredited.
• Excludes
• Federal Title IV loans (NOT health professions )
• Open-end (revolving) credit
• Real-estate secured loans
• Two types of credit extensions made by
  educational institutions

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Coverage Loans

• Excludes credit extended by educational
  institutions if
• The term of the credit extension is 90 days or
  less OR
• An interest rate will not be applied to the
  credit balance and the term is one year or less,
  even if the credit is payable in more than 4
  installments
• BUT

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Coverage Loans

• Exclusions applicable to credit extended by
  educational institutions are only exempt from the
  new private education loan rules, not from all
  of Reg. Z
• As a result, disclosures under the Truth in
  Lending Act may still be required under 12 CFR
  226.17 and 226.18, (according to Dept. of Ed)

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HEOA Loan Disclosures Key Terms

• Preferred lender arrangement an arrangement or
  agreement, between a lender and covered
  institution, in which a lender provides education
  loans to students/families and the covered
  institution recommends, promotes or endorses the
  education loan products of the lender

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HEOA Loan Disclosures Key Terms

• Preferred lender arrangement (cont.)
• Includes arrangements between a lender and an
  institution-affiliated organization
• Does not include arrangements involving
• Direct Loan Program loans
• Loans originated through PLUS auction pilot
  program

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HEOA Loan Disclosures
Key Terms

• Preferred lender arrangement (cont.)
• Does not include private education loans made by
  a covered institution to students attending a
  covered institution if the private education loan
  is
• Funded by covered institutions own funds
• Funded by donor-directed contributions

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HEOA Loan Disclosures
Key Terms

• Preferred Lender Arrangement (cont.)
• Does not include private education loans made by
  a covered institution to students attending a
  covered institution if the private education loan
  is made under
• Title VII or VIII of Public Service Act
• A State-funded financial aid program, if the
  terms and conditions of the loan include a loan
  forgiveness option for public service

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Applicability of GEN-08-06 to Private
Education Loans

• GEN-08-06 guidance applies to private education
  loans
• Covered institution not considered in a preferred
  lender arrangement if it provides borrowers with
  neutral, comprehensive list of private education
  lenders that have made loans within a 3-5 year
  time period and a statement that borrower can
  choose any lender
• Covered institution cannot recommend any lender
  and may include a comparison of the private loan
  terms and conditions

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Applicability of GEN-08-06 to Private
Education Loans

• GEN-08-06 guidance (cont.)
• Covered institutions may refer borrowers to a 3rd
  party entity that maintains neutral,
  comprehensive list and not be in a preferred
  lender arrangement if institution ensures that
  the list is broad in scope, does not endorse any
  lender and lender does not pay to be placed on
  the list or pay the 3rd party entity a fee based
  on loan volume generated.

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Preferred Lender Arrangement
(PLA) Disclosures

• Covered institution/institution-affiliated
  organization participating in a PLA must disclose
  on its Web site and all informational materials
  that describe private education loans
• Maximum amount of aid available under title IV
• Disclosures required by TILA 128(e)(11) for
  private loans offered by covered institutions
• Disclosures required by TILA 128(e)(1) for
  private loans offered by institution-affiliated
  organizations

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PLA Disclosures (cont.)

• Informational materials publications,
  mailings, electronic messages or materials
• Distributed to prospective/current students
• Describe/discuss available financial aid
  opportunities
• Disclosures must be provided annually for each
  type of private education loan offered pursuant
  to a PLA for consideration before a student
  borrows

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Preferred Lender List Requirements

• Institutions preferred lender list must contain
  not less than 2 unaffiliated private education
  lenders and clearly and fully disclose for each
  lender
• Reasons institution includes lenders on list,
  particularly with respect to loan
  terms/conditions favorable to borrower
• That students do not have to borrow from lender
  on list
• Method and criteria used to choose lenders to
  ensure lenders selected on basis of best interest
  of borrowers
• Institution must compile preferred lender list
  without prejudice and for sole benefit of
  students attending the institution

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Private Education Loan Disclosures

• Covered institution or affiliate that provides
  information on private education loans,
  regardless of participation in a PLA, must
• Provide prospective borrower with TILA
  disclosures under 128(e)(1)
• Inform borrowers of possible eligibility for
  title IV loans that title IV loan
  terms/conditions may be more favorable than
  private education loans
• Private loan disclosures must be presented in
  manner distinct from title IV loan information

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Private Education Loan PLAs

• Covered institutions or affiliates that
  participate in a PLA with a lender of private
  education loans
• Cannot agree to the lenders use of the name,
  emblem, mascot, or logo of the institution or
  affiliate or pictures, words or symbols
  identified with the institution or affiliate in
  the marketing of private education loans in a way
  that implies the loan is offered or made by the
  institution or affiliate
• Must ensure the lenders name is displayed in all
  information and documentation related to the loan

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PLA Annual Report

• Covered institution/affiliate participating in a
  PLA
• Must submit to ED an annual report that includes
  for each private education lender in the
  arrangement
• Disclosures provided on institutions preferred
  lender list
• PLA Annual Report must contain
• Detailed reasons why entity participates in a PLA
  with each private education lender including why
  terms and conditions of each loan provided
  pursuant to a PLA are beneficial to borrowers

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PLA Annual Report

• School must ensure the report is made available
  to the public, and current and prospective
  students
• Note ED has not issued a format or guidance for
  compiling annual reports, so it is not currently
  requiring them

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• QUESTIONS??
• For Part 1
• Federal Program Integrity Regulations Change is
  Now
• Harrison M. Wadsworth III
• Principal, Washington Partners, LLC
• hwadsworth_at_wpllc.net
• 202-289-3900
• www.wpllc.net

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Moving Forward 2011
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• Federal Program Integrity Regulations Change is
  Now
• Vermont Association of Student Financial Aid
  Administrators
• Conference
• Killington, Vermont
• June 15, 2011
• Harrison M. Wadsworth III
• Principal, Washington Partners, LLC
• hwadsworth_at_wpllc.net
• 202-289-3900
• www.wpllc.net

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New Incentive Compensation Reg Says

• In order to be an eligible institution a school
• will not provide any commission, bonus, or other
  incentive payment based in any part, directly or
  indirectly, upon success in securing enrollments
  or the award of financial aid, to any person or
  entity who is engaged in any student recruitment
  or admission activity, or in making decisions
  regarding the award of title IV, HEA program
  funds.
• 34 CFR 668.14 (b)(22)(i)

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Incentive Compensation

• All 2002 reg safe harbors eliminated
• Non-Title IV eligible programs dont count
• Allows 3 annual raises as long as not directly or
  indirectly based on enrollment/aid
• Rebuttable presumption of guilt in effect for
  those engaged in enrollment, financial aid or
  recruitment
• Profit sharing and bonuses ok as long as are of
  same percentage as other employees

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Incentive Comp

• Foreign student recruitment exempt if student not
  eligible to receive aid
• Includes athletic recruiting
• Bonus ok if based on success
• Institutions should re-examine all contracts with
  recruiters and compensation policies for
  admissions and financial aid and their
  supervisors to ensure compliance
• Enforcement you will know it when it happens

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The Two-Part Test

• Is the payment a commission, bonus or other
  incentive payment?
• Is the payment based in any part, directly or
  indirectly on success in securing enrollments or
  the award of financial aid?
• If yes to both, the payment is prohibited.

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Incentive pay rule components

• BUT, a couple of exceptions have now appeared
  See DCL GEN-11-05
• Tuition Sharing OK under three conditions
• Payment is to unaffiliated third party
• Third party provides bundled services that may
  include recruitment
• Third party has no say in admissions decisions.

66
Gainful Employment

• HEA proprietary schools and non-degree programs
  at all schools must provide gainful employment
  in a recognized occupation.
• In the law for decades, definition got a lot
  longer 5 words result in 432 pages of
  regulations.
• Final regs not as tough as draft still
  controversial

67
Gainful Employment

• Applicable to all participating institutions
• Two Final Rules published on 10/29/2010 with
  effective date of 7/1/2011.
• Final Rules published on June 2, 2011

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GE

• Alarm over growing student loan debt
• Concern over creating labor oversupply when the
  number of expected job openings in certain
  occupations is significantly lower than the
  number of degrees being produced
• Protect taxpayers against wasteful spending on
  educational programs of little or no value that
  lead to high indebtedness
• Leave former students with debt or default and no
  access to future aid

69
GE Rules Cover

• All programs at for-profit institutions
• Except liberal arts baccalaureate degree programs
  
• Otherwise eligible Non-degree programs at public
  and private not-for-profit institutions
• Exceptions are teacher certification programs
  where the certificate is awarded by the state

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Gainful Employment Regs Effective July 1, 2011

• Program eligibility regulations based on debt,
  income formulas not effective until July 1, 2012
• BUT reporting requirement effective in a few
  weeks
• Reporting is on all students regardless of aid
• Exception for students for whom school does not
  have a Social Security Number
• First annual report on employment due no later
  than October 1, 2011 must include information
  for students enrolled in GE programs in
• 2006-2007, 2007-2008, 2008-2009, 2009-2010 award
  years
• If some info not available, written explanation
  must be provided
• -

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GE Requirements Effective July 1, 2011

• Data elements to be reported include
• Award year
• Student info
• CIP code
• School code
• Credential level
• Federal, institutional and Private loan amounts
• Attendance information

72
GE Disclosure Requirements Effective July 1, 2011

• School must disclose on Web site and on all
  promotional materials provided to prospective
  students
• SOC code of occupations programs prepare for
• Links to profiles of those occupations from US
  Department of Labor
• On-time graduation rate for students completing
  each GE program
• Cost for student completing in normal timeframe
• Includes tuition and fees, books and room and
  board if applicable

73
GE Disclosure Requirements

• Disclose to prospective students
• Job placement rate for completers
• Median loan debt for completers
• Must report federal, private and institutional
  debt separately
• School must determine this year, ED will provide
  in subsequent years
• School must use own format until ED provides one

74
Adding New Programs

• New programs defined as
• CIP coded program that is different from any
  other program offered by the school or
• A program with the same CIP code as another at
  the school but that leads to a different degree
  or certificate or
• One that the schools accrediting agency
  determines to be an additional program

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New Program Approval

• ED must be notified of new covered programs at
  least 90 days before 1st day of class
• Include date of 1st day of classes
• Programs beginning after July 1st but before
  October 1, 2011, must be reported to ED no later
  than July 1st.
• Notification must include statement as to the
  schools belief that the program should lead to
  employment in the field for which it is preparing
  students
• ED may request additional information at later
  date
• School may go ahead and start program unless ED
  requests info at least 30 days prior OR
• Otherwise informs school that the program must be
  delayed
• Schools on provisional certification must seek
  approval before starting new programs

76
Reporting Requirements

• For each affected program an institution must
  report
• number of students that are enrolled at the end
  of the award year
• identifying information for those students
• Students who complete program that award year
• name and CIP code of program
• Date student completed program
• Amount student received in private loans
• Amount student received in payment plans
• What the student owed the school when they
  completed
• Whether the student moved to a higher degree
  within or outside the institution
• Students who begin program that award year
• Name and CIP code of the program
• First set of four year data due October 1, 2011
• Includes back to 2006-2007 award year
• Future dates announced by ED, but no earlier than
  September 30th.

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Gainful Employment, cont.

• Gainful Employment Information Page

http//ifap.ed.gov/GainfulEmploymentInfo/index.htm
l
78
Gainful Employment, cont.

• Updated list of Frequently Asked Questions

Send GE related questions to GE-Questions_at_ed.gov
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Gainful EmploymentRules Effective July 1, 2012

• Eligible GE Programs must meet at least one of
  the following three criteria for one of the past
  three years
• At least 35 of former students have reduced loan
  principle by at least 1 during past year
• Estimated monthly payment for typical graduate
  does not exceed 30 of discretionary income
• Estimated annual loan payment for typical
  graduate does not exceed 12 of total earnings
• Put another way If the program fails all three
  tests for three of four years, it is disqualified

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Penalties

• If a program (not the entire institution) fails
  all three metrics three times in four years, the
  program loses eligibility for all Title IV
  federal aid for its students
• First programs could lose eligibility in 2015
  (for three years through FY 2014 metrics)
• Eligibility losses capped at 5 of programs for
  each type of college for FY 2014 only
• Exception for programs with less than 30
  borrowers
• Programs will be ineligible for at least three
  years before they can re-apply

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GE Penalties

• Year one fail
• School must disclose to current and prospective
  students that school did not meet debt measures
  and by how much
• Disclosure must include what school is doing to
  improve stats
• No public warning required
• School must establish three-day waiting period
  before allowing students to enroll

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GE- Penalties

• Year two fail
• School must do same disclosures as year one and
• Include if and when it plans to discontinue the
  program
• Plain language explanation of risks associated
  with continuing or enrolling in the program
• Options and consequences if the program becomes
  ineligible for aid
• Explanation of resources available to research
  other education options
• A clear and conspicuous statement that a student
  who enters or stays in the program should expect
  to have difficulty repaying their student loans
• Disclosures to enrolled and prospective students
  until schools meets at least one metric for two
  of the most recent three years.

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GE Debt-to-Income Ratio

• Applies to Associate and Certificate programs
  based on 10-year repayment plan
• Allies to proprietary Bachelors and Masters
  degree programs based on 15-year repayment term
• Liberal arts programs exempted
• Graduate and professional measurements based on
  20-year repayment
• Would use most current income available for
  students who completed the program in the most
  recent four years
• Six years for those with less than 30 borrowers
• Repayment rate is reasonable if annual loan
  payment is 30 or less of discretionary income OR
  12 or less of annual earnings

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Debt-to-Income Ratio Debt

• Calculated Annual loan payment is lesser of
• average loan debt of students who completed that
  program during the most recent 4 6 year period
  or,
• Total tuition and fees charged the student for
  all programs and current annual interest rate on
  Federal unsubsidized loans at time of calculation

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Debt-to-Income Ratio Debt

• Loan debt includes
• Sub and unsub Stafford
• Perkins
• Graduate PLUS
• Consolidation Loans
• Private Loans
• Institutional payment plans or loans
• Any private educational loans or debt obligations
  arising from institutional financing plans
• Only debt accumulated in the applicable program
  or at the same/a related institution will be used
  in the calculation
• Up to highest degree completed at school
• May include other institutions debt if under
  common ownership
• Loan debt does NOT include
• Parent PLUS loans
• Loans where the student attended school or the
  military during earnings period
• Loans where the student died or was submitted to
  ED for TPD

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Debt-to-Income Ratio Income

• Average annual earnings using most current info
  from Social Security Administration or another
  Federal agency
• Earnings counted for students who completed
  program during most recent four-year period
• Discretionary income average annual earnings
  minus 150 of the poverty rate for single person
  in the continental US
• http//aspe.hhs.gov/poverty
• 2010 poverty guideline for a one-person family
  10,830 (August 2010)

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Loan Repayment Rate The Calculation
OOPB of LPF OOPB of PML OOPB of all loans for
students attending the program

• FFY Federal fiscal year 10/1 9/30
• OOPB original outstanding principal balance
  including capitalized interest on the day they
  first entered repayment
• All FFEL and DL that entered repayment in the
  four preceding Federal fiscal years
• LPF Loans paid in full
• Loans can have never been in default
• Consolidations not counted
• PML payments-made loans

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Loan Repayment Rate

• 1 per year of principal of federal loans
  required to be PML looking at past 4 years
• No parent PLUS or TEACH loan counted
• Portion of consolidation loan attributable to
  program counted
• Includes transferred debt for same program
• Included regardless of completion
• Borrowers qualifying for PSLF count as PML
• Borrowers making interest only payments count as
  PML up to 3 of total of OOPB

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Net Price Calculator

• The Higher Education Opportunity Act of 2008
  (HEOA), provides that, by October 29, 2011, each
  postsecondary institution that participates in
  Title IV federal student aid programs must post a
  net price calculator on its website that uses
  institutional data to provide estimated net price
  information to current and prospective students
  and their families based on a students
  individual circumstances. The net price
  calculator is required for all Title IV
  institutions that enroll full-time, first-time
  degree- or certificate-seeking undergraduate
  students.

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Net Price Calculator (cont.)
Price of Attendance average annual cost of
tuition and fees, room and board, books,
supplies, and transportation
Net Price
Total need- and merit-based federal, state, and
institutional GRANT aid awarded to FTFT
undergraduate students
Institutions Price of Attendance for
First-Time, Full-Time (FTFT) undergraduates
-

Number of FTFT students receiving such aid
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Net Price Calculator (cont.)

• Institutions may use Departments calculator or
  develop its own NPC.
• If developing its own calculator, an institution
  must use (at a minimum) all inputs and outputs of
  Departments Net Price Calculator
• NPC must be published on institution website by
  October 29, 2011
• School must create website for the NPC if it does
  not already have one

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Net Price Calculator (cont.)

• Departments Net Price Calculator
• Part I - Institution application Data provided
  by an institution to calculate a students net
  price, including
• Price of attendance elements (tuition, fees,
  books and supplies, room and board, and other
  educational expenses.)
• Median amount of grant and scholarship aid
  awarded to, and accepted by, first-time,
  full-time undergraduate degree or certificate
  seeking students, grouped by expected family
  contribution (EFC) ranges.
• Institutional Disclaimers
• Part II Inputs from Student Nine questions to
  determine
• Dependency status (age, number of children,
  marital status),
• Approximated EFC (number in family, number in
  college, income)
• Estimated cost (price) of attendance (housing,
  residency status)
• Asks if student intends to apply for aid

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Net Price Calculator (cont.)

• Departments Net Price Calculator Outputs
• Estimated total price of attendance
• Estimated tuition and fees
• Estimated room and board
• Estimated books and supplies
• Estimated other expenses (personal expenses,
  transport, etc.)
• Estimated total grant aid
• Estimated net price
• Percent of the student cohort that received grant
  aid and
• Caveats and disclaimers.
• e.g. My school participates in only Direct Loans
  Price may differ for international students.

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Net Price Calculator (cont.)

• Net Price Calculator On-Line Resources
• http//nces.ed.gov/ipeds/resource/net_price_calcul
  ator.asp
• Template
• FAQs
• Contacts
• Tools

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Neg Reg 2011

• Because there are never too many regulations
• ED announced May 5, 2011 intent to have new
  negotiated rulemaking
• Death and disability loan discharge rules
• Direct lending regs to stand alone
• Other issues whatever they decide to put on the
  agenda based on proposals from the public via
  Regs.gov and three hearings around the country

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• ANY QUESTIONS?
• Part 2 (or Part 1)
• Federal Program Integrity Regulations Change is
  Now
• Harrison M. Wadsworth III
• Principal, Washington Partners, LLC
• hwadsworth_at_wpllc.net
• 202-289-3900
• www.wpllc.net

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