ILASFAA Federal Update April 18, 2008 Jeff Baker Federal Student Aid U.S. Department of Education

2 Legislation and Budget

3 LEGISLATION  College Cost Reduction and Access Act (CCRAA) Pub.L  Reauthorization  S 1642 passed full Senate on July 24, 2007  HR 4137 passed full House on February 7, 2008  In conference, final bill expected in May

4 Title IV Program Budgets Appropriations and Budget Request

5 Title IV Program Budgets Aid Available

6 College Cost Reduction and Access Act

7 Student Benefits Grant Programs

8 Federal Pell Grant  Increases discretionary appropriated Pell Grant award amount using mandatory funds.  Full-time awards increased by –  $ 490 for and  Maximum Award $4,731  $ 690 for and  $1,090 for  Payment Schedule Released on January 14, 2008 (See DCL P-08-01)

9 TEACH Grants  “Teacher Education Assistance for College and Higher Education Grants”  Effective for the award year.  Must be repaid as Direct Unsubsidized Loan if student does not teach –  For at least four years within eight years of completing program, as a -  Highly Qualified Teacher  At a Title I school  In a specified subject area.

10 TEACH Grants  Subject Areas –  Mathematics  Science  A foreign language  Bilingual education  Special education  As a reading specialist  Other ‘high-need’ fields

11 TEACH Grants  Student must:  Be completing coursework necessary to begin a career in teaching, or  Plans to complete coursework necessary to begin a career in teaching.  Graduate degree alternatives for teacher or retiree with experience in a shortage area.

12 TEACH Grants  Up to $4,000 per year for first undergraduate or post-baccalaureate (non degree) program - $16,000 aggregate.  Up to $4,000 per year for graduate student - $8,000 aggregate.  Prorated amounts for less than full-time enrollment.  If converted to loan –  Does not count against annual or aggregate maximums.  Interest accrued from date of grant disbursement.

13 TEACH Grants  Award, when combined with other assistance cannot exceed cost of attendance (No EFC).  All Title IV student eligibility requirements –  Regular Student  Citizen or Eligible Non-Citizen  Not in Default  Satisfactory Progress  FAFSA required.

14 TEACH Grants  Student Eligibility – Academic Standard  Above the 75 th percentile on one battery of an admissions test, such as:  SAT, ACT, GRE, etc. OR  GPA of at least 3.25 for each payment period—  From high school for first year students.  From college for other students.

15 Student Benefits Needs Analysis and EFC Calculation

16 Need Analysis and EFC Calculation  Income Protection Allowances in EFC formulas.  Modifies the way student income protection allowances are calculated and updated.  Not parent income protection allowances  Will result in lower EFC.  Effective with the award year.

17 Need Analysis and EFC Calculation  Auto-Zero and Simplified Needs Test  Increases Auto Zero EFC income level from $20,000 to $30,000 (indexed to CPI).  Increases time from 12 to 24 months for receipt of means tested benefits.  Adds Dislocated Worker in addition to type of tax return and means tested benefits.  Effective for the award year.

18 Need Analysis and EFC Calculation  Excludes from specified list of “untaxed income” -  Welfare payments  Untaxed Social Security Benefits  Earned income credit amounts  Special fuel tax credit  Excluded foreign income  Effective for the award year.

19 Need Analysis and EFC Calculation  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 in the student’s state of legal residence.  Has been verified as an unaccompanied youth who is a homeless child or youth.  Effective for the award year.

20 Need Analysis and EFC Calculation  Excludes ‘special combat pay’ from income.  Qualified education benefit (529 plan) owned by dependent student is an asset of the parent.  Distributions from 529 plans excluded from other financial assistance.  Effective for the award year.

21 Borrower Benefits

22 FFEL and Direct Loans Interest Rates Reduces interest rates on undergraduate subsidized loans only from current 6.8% to –  6.0% for loans disbursed on or after July 1, 2008  5.6% for loans disbursed on or after July 1, 2009  4.5% for loans disbursed on or after July 1, 2010  3.4% for loans disbursed on or after July 1, 2011  Beginning July 1, 2012, rates revert to 6.8%.  Unsubsidized Stafford Loans and all Staffords for grad students remain at 6.8% fixed.

23 FFEL and Direct Loans Income Based Repayment  Stafford and Student PLUS loans.  Borrower’s maximum annual repayment amount no more than 15% of the difference AGI and 150% of the poverty line based on family size.  If negative amortization, government pays interest on subsidized loans for up to three years.  Unpaid amounts are forgiven after 25 years.  Effective July 1, 2009.

24 Direct Loans (FFEL) Forgiveness for Public Service Employees  Direct Loan borrower who –  Makes 120 monthly payments, starting after October 1, 2007, and  Is employed in public service during period when the 120 payments were made.  FFEL borrowers may consolidate into Direct Loans to get benefit but 120 payments must have been in Direct Loans.

25 Direct Loans (FFEL) Forgiveness for Public Service Employees  Payments count if made under –  Income Contingent Repayment.  Income Based Repayment.  Other repayment plans, if payments are at least equal to 10-year standard repayment amount.

26 Perkins, FFEL, and Direct Loans Military Deferments  HERA Military Deferment –  All Title IV loans, not just loans that were made on or after July 1,  Removes three year time limit.  Adds a 180 day period after demobilization.  New deferment for up to 13 months following end of service for certain borrowers who were in school or grace when called to active duty.  Effective October 1, 2007.

27 Offsets from FFEL Program

28 FFEL Lenders and Guaranty Agencies  Reduction of FFEL lender insurance from current 97% to 95% for loans first disbursed on or after October 1,  Reduction of FFEL guaranty agency defaulted loan collections retention rate from 23% to 16%, effective October 1,  Reduction of FFEL lender special allowance payments (SAP) by 55 basis points (40 for non- profit lenders).

29 Special FFEL PLUS Loan Auction Pilot  Requires an “auction” for the origination of FFEL parent PLUS loans.  Starting on July 1,  New parent PLUS borrowers only.  State by state auction looking for lowest special allowance rates.  Two “winning” lenders will be the only FFEL lenders new parent PLUS borrowers can use.  Based upon state where dependent student is enrolled.

30 Negotiated Rulemaking

Negotiated Rulemaking Loan Issues Committee  Three Negotiated Rulemaking Sessions  Jan 14-16, Feb 4-6, March 4-6, and April  NPRM to follow  Comment Period  Final Rule by November 1, 2008  Implementation July 1, 2009

Negotiated Rulemaking Loan Issues Committee Issues  Income-based Repayment Plans (IBR) (FFEL and Direct Loans)  Public Service Loan Forgiveness (FFEL and Direct Loans)  Economic Hardship and Military Service Deferments (FFEL, Direct Loans, and Perkins)  Definition of Not-for-Profit Holder

Negotiated Rulemaking Teach Grant Committee  Conducted three Negotiated Rulemaking Sessions  Jan 8 – 10, Jan 22-24, and Feb 6 – 8  Consensus Met  NPRM on March 21  Comment Period ends on April 21  Final by June 1, 2008  Implementation July 1, 2008

Negotiated Rulemaking Teach Grant Committee Issues  Eligible Institution and Eligible Program  Four Year Service Requirement  Entrance and Exit Counseling  Define –  Highly Qualified Teacher  Title I School  Other ‘high-need’ fields  Completing coursework necessary to begin a career in teaching.

Negotiated Rulemaking  Loans - NPRM Published July 12 Final Published November 1  ACG/SMART - NPRM Published - August 7 Final Published October 29  General Prov. - NPRM Published August 8 Final Published November 1  Effective Dates: July 1, 2008  Possible early voluntary implementation

Negotiated Rulemaking  Cash management improvements:  Recovery of funds not claimed  Permissions for electronic disbursements  Elimination of Late, Late Disbursements General Provisions

Negotiated Rulemaking  Consistent definitions of enrollment status and academic level (grad/undergrad)  Addressing inconsistencies in the award of aid in nonstandard and nonterm programs  Aligns disbursements for all Title IV grant and loan programs (with a few exceptions) General Provisions

Negotiated Rulemaking ACG and National SMART  Rigorous secondary school programs  Mandatory institutional participation  GPA requirements  Academic Year progression  Eligible Majors

Negotiated Rulemaking Title IV Loan Programs  Perkins Loans  Mandatory assignment  Prohibited Inducements  Preferred Lenders

40 Mandatory Assignment of Defaulted Perkins Loans  Schools hold more than $400 million in Perkins Loans that have been in default for 5 or more years  Little collection activity seen on these loans.  ED streamlined the voluntary assignment procedures, to encourage schools to assign their aged, defaulted loans

41 Mandatory Assignment of Defaulted Perkins Loans  Secretary may require assignment of a Perkins Loan if—  Outstanding principal balance is $100 or more,  In default for 7 or more years, and  No payment has been received in past 12 months  ED will notify schools when to assign loans.

42 School FFEL Loan Certification  A school may not:  Refuse or delay certification based on borrower’s choice of lender or GA  Assign lender to first-time borrower  Includes “school as lender”

43 Preferred Lenders  School may choose to have preferred lender(s) list (includes web processes)  List must have at least 3 unaffiliated lenders  Must disclose method/criteria for lender inclusion on the list  Must provide comparative information on borrower benefits offered by listed lenders

44 Preferred Lenders  Must include prominent statement advising borrowers that use of school preferred lender not required  Cause any unnecessary delays in certification for borrowers not using one of the school’s preferred lenders

45 Prohibited Inducements  Affects FFEL lender and guaranty agency eligibility and participation in the program.  Creates concept of “rebuttable presumption” for prohibited and allowed activities.  Includes a non-exhaustive list of prohibited activities.  Includes a list of allowed activities.

46 Prohibited Inducements  Prohibited activities include:  Payments to prospective borrowers, including prizes and additional financial aid  Payments or other benefits to a school, school- affiliated organization, or individual for loan applications, volume of loans made, or placement on a preferred lender list

47 Prohibited Inducements  Prohibited activities include:  Payments or other benefits to student lender reps on campus or other solicitors to secure loan applications from prospective borrowers  Payment of referral or processing fees to another lender or other party  Payment of conference or training registration, transportation, and lodging costs for school or school-affiliated organization employees

48 Prohibited Inducements  Prohibited activities include:  Providing staffing to a school except on a short- term, emergency basis  Payment of entertainment expenses related to lender-sponsored activities for school or school- affiliated employees  Undertaking philanthropic activities in exchange for FFEL applications, volume, or placement on a school’s preferred lender list

49 Prohibited Inducements  Allowed activities include:  Assistance to schools comparable to that provided DL schools by the Secretary  Support or Participation in student aid/financial literacy outreach with schools and guaranty agencies  Toll-free numbers for FFEL info and school loan data transmission

50 Prohibited Inducements  Allowed activities include:  Reasonable costs of meals, refreshments, and receptions for meeting, training, or conferences if open to all attendees  Reduced origination fees and interest rates  Payment of Federal Default Fees  Borrower benefits under repayment incentive programs  Items of nominal value

51 Prohibited Inducements  Allowed GA activities include:  Payments for default aversion activities approved by the Secretary.  Payments for expenses related to participation in GA’s governing board, official advisory committee, or for other official GA-sponsored activities.

52 Training

On going Training Financial Aid Basics –Held at regional offices Fundamentals for Title IV –This is for newly certified schools Creating a library

54  Financial Aid Professionals Portal under “Resources and Training”  No sign-on necessary

55 TFAP

56 Training via the Web  COD Basics for Direct Loans  NSLDS Data Overview  Available as Podcasts  Applicant data resolution Identifying information sources with FAA Access Resolving data issues

Saved Webcasts  Available Through Web Screening  Webinar on the College Cost Reduction and Access Act (CCRAA)  Two Webinars on New Regulations

58 Upcoming FSA Training  Teach Grant Operational Webinar – April 10  Direct Loan and COD Webinars – April 8 and 15  Spring 2008 Stand Up training in regional offices and some college campuses  April 15 through June 16  CCRAA  New Federal Regulations posted November 2007

59 Upcoming FSA Training  Federal Student Aid Conferences –  October , 2008  Hyatt Regency Dallas  Dallas, Texas  December 2-5, 2008  Paris/Bally's  Las Vegas, Nevada

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