Federal Update Anthony Jones Office of Postsecondary Education Dan Klock Federal Student Aid

Secretary’s Commission on the Future of Higher Education

3 Agenda  Secretary’s Commission on the Future of Higher Education  FY 2007 Budget Request and Appropriations  Update on Recent and Pending Legislation  Recent Title IV Program Regulations  Selected ACG/National SMART Grant Issues  General Provisions, Loans, and Need Analysis  Hot Topics  Operational Update  Issues on the Horizon

4 Secretary’s Commission on the Future of Higher Education Final Report — “A Test of Leadership: Charting the Future of Higher Education” “U.S. higher education needs to improve in dramatic ways,” changing from “a system primarily based on reputation to one based on performance.” html

5 Secretary’s Action Plan Accessibility “There are far too many Americans who want to go to college but cannot—because they're either not prepared or cannot afford it.” Affordability “There is little to no information on why costs are so high and what we're getting in return.” Accountability “No current ranking system of colleges and universities directly measures the most critical point—student performance and learning.”

6 Secretary’s Action Plan: Accessibility  Strengthen K-12 preparation and align high school standards with college expectations.  Work with Congress to expand the successful principles of the No Child Left Behind Act to high schools.  Redesign the 12th-grade NAEP test to provide state-level estimates of college and workforce readiness.  Raise awareness and mobilize leadership to address the issue of adult literacy as a barrier to national competitiveness and individual opportunity.  Develop a federal research agenda for adult literacy to identify strategies, models and programs that work.

7 Secretary’s Action Plan: Affordability  Simplify the aid process by using existing income and tax data to help students complete the FAFSA in half the time.  Notify students of their estimated aid eligibility before spring of their senior year in high school.  Work with Congress to provide new funds for need- based aid through the federal financial aid system.  Commission an independent management consultant review of the federal financial aid system.  Revitalize FIPSE to promote innovation and productivity.  Encourage organizations that report annual college data to develop consistent affordability measures.

8 Secretary’s Action Plan: Accountability  Work with states to build on and link together the 40 existing, privacy-protected higher education information systems.  Explore incentives for states and institutions that collect and report student learning outcome data.  Convene members of the accreditation community to recommend changes to the standards for recognition that will place a greater emphasis on results.  Redesign the Department of Education's college search website to allow consumers to weigh and compare institutions based on their individual interests and needs.

Status of Fiscal Year 2007 Budget Request and Appropriations

10 Title IV Program Budgets Appropriations * President's FY 2007 Budget Submission

11 Title IV Program Budgets Aid Available * President's FY 2007 Budget Submission

12 Title IV Program Budgets Status of Appropriations * Committee-passed Bills

Update on Higher Education Legislation (Recent and Pending)

14 Legislation  Higher Education Reconciliation Act of 2005  Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006  Continuing Appropriations Resolution, 2007 (Included in Department of Defense Appropriations Act, 2007)  Through November 17, 2006  Third Higher Education Extension Act of 2006  Through June 30, 2007

15 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

Title IV Program Regulations

17 Title IV Program Regulations Interim Final Regulations with Comments Invited ACG/National SMART Grants – July 3, 2006 Other HERA Issues – August 9, 2006 Final Regulations ACG/National SMART Grants – November 1, 2006 Other HERA Issues – November 1, 2006 Final Regulations Title IV Programs – anticipate by November 1, 2007

18 Title IV Program Regulations Major policies and changes in Nov. 1 Final Regulations from Interim Final Regulations: –Duration of student eligibility under ACG/SMART –Receipt of Pell Grant during award year not same payment period for ACG/SMART –Clarification of what ‘previously enrolled’ means –Early implementation –9.5% Special Allowance Payment clarification –Timing of Disaster Withdrawal & Overpayment Waiver

19 Negotiated Rulemaking  Federal Register Notice, August 18, 2006  Regulatory Issues  ACG and National SMART Grants  Recent Legislation, including HERA  Secretary’s Higher Education Commission  Up to Four Negotiating Committees  Committed to discussing ACG and National SMART Grants  Could Include other HERA changes  Title IV Programs including student loans  Institutional Eligibility  General Provisions

Higher Education Reconciliation Act of 2005: Higher Education Reconciliation Act of 2005: ACG/National SMART Grant (Academic Year Progression and Determining Financial Need)

21 Academic Year Student’s progress and duration of eligibility in an eligible program is measured in Title IV academic years. A Title IV academic year is defined in the HEA to be – A minimum of either:  Twenty-four semester credit hours, or  Thirty-six quarter credit hours, or  900 clock hours. --AND—  A minimum of 30 weeks of instruction (26 for clock hours)

22 Academic Year - Credit Hours Regardless of how many credit hours an institution uses to define a program’s academic year, full-time for an undergraduate is a minimum of:  12 semester hour credits for a semester or trimester; or  12 quarter hour credits for a quarter. Title IV Academic Year is often not the same as grade level progression for institutional purposes and loan limits (i.e., 30 credit hours to progress from grade level 1 to grade level 2)

23 Academic Year - Weeks of Instruction For the and award years, an institution with a 30 week academic year and standard terms ( Formula 1) may –  Determine the actual number of weeks of instruction that were included for the student to complete the number of credit hours in the institution’s Title IV academic year definition.  Assume that there were 30 weeks of instructional time for each increment of credit hours that comprises the institution’s Title IV academic year definition. - OR -

24 Academic Year – Weeks of Instruction May exercise option –  On a student by student basis;  For same student for different terms;  For transfer credits differently than for home earned credits

25 Academic Year - Weeks of Instruction NOTE: An institution must determine the actual number of weeks of instruction for a student that requests that such a determination be made or questions whether they have completed an academic year. See DCL GEN-06-18

ACG and National SMART Grant Examples for determining academic year progression and financial need

27 Example 1: What courses/credits that do not count in weeks of instructional time? When tracking actual weeks of instructional time, courses that are not part of an eligible program of postsecondary education or courses not at the postsecondary level such as: –Remedial Coursework; –Advanced Placement (AP) or International Baccalaureate (IB) courses/exams; –College Level Examination Program (CLEP); –Credit for life experience; –Courses taken when not enrolled as a regular student; and –Courses that are not part of an eligible program.

28 Example 2: Advanced Placement courses Student graduated high school May Enrolls at School A for Fall Student has 45 AP credits, all with a score of 3 or higher. School A’s definition of academic year is 24 credit hours and 30 weeks of instructional time. If School A assumes weeks of instructional time, this student would be in his/her second academic year. 45/24 = 1.875

29 Example 2: AP courses (cont’d) However, student has no GPA from “first academic year” and would therefore not be eligible to receive ACG funds for his/her “second academic year. If School A chose to track actual weeks, then the student would still be in his/her first academic year as AP credits carry no weeks of instructional time. This student would be eligible for first year ACG award assuming all other eligibility criteria are met.

30 Example 3: Academic Year Student completes 36 credit hours at School X and has 3.50 GPA. School Y accepts only 24 hours upon transfer. School Y is only required to use credit hours that transfer in determining academic year (hours and weeks), but the school may look at transcript (i.e., all 36) to determine weeks of instructional time completed. School Y chooses to use only the hours accepted to determine weeks. Therefore, School Y must use GPA for 24 hours transferred in to determine if student eligible for 2 nd year ACG award.

31 Example 4: Academic Year Student enrolls at School A for award year. Student completes 24 semester hours over three terms (part-time enrollment) and receives no ACG.. Student transfers to School B for award year. School B only accepts 18 semester hours of the courses taken at School A. School B defines its academic year as 24 semester hours and 30 weeks of instructional time. School B chooses to assume weeks of instructional time instead of tracking actual weeks of enrollment.

32 Example 4: Academic Year (cont’d) School B determines student has completed 18 credit hours and instead of tracking actual weeks of instructional time assumes 75% of academic year’s weeks (18/24) completed. Student is still in first academic year at School B. –Year 1 is 0-24 hours and 30 weeks, Year 2 is hours and weeks … School B awards half of ACG award ($375) for Fall 2007

33 Example 4: Academic Year (cont’d) Student completes 15 hours in Fall 2007 and now has completed 33 semester hours. Student has cumulative GPA of School B assumes weeks, which means student has completed academic years (33/24). Student has completed year 1 and is in academic year 2. For Spring 2008, school may award half of second year ACG ($650). Student received total of $1,025 in ACG funds for

34 Example 5: Academic Year Same student as in ‘Academic Year: Example 4’. Student enrolls at School A for award year. Student completes 24 semester hours over three terms (part-time enrollment) and receives no ACG. Student transfers to School B for award year. School B only accepts 18 semester hours of the courses taken at School A. School B defines its academic year as 24 semester hours and 30 weeks of instructional time.

35 Example 5: Academic Year (cont’d) School B determines student has completed 18 credit hours and has policy to track actual weeks of instructional time School B may look at transcript and determine that student has completed the weeks in a full academic year, because student completed two semesters at School A, but will only have 18 hours “completed” at School B.

36 Example 5: Academic Year (cont’d) Note that the regulations and guidance will allow School B to assume weeks of instructional time for hours transferred in and then track actual weeks of instructional time from that point on. Nothing prevents a school from using the assumption method for transfer hours then tracking actual weeks of instructional time at the school, unless the student requests that all weeks of instructional time be tracked rather than assumed.

37 Example 5: Academic Year (cont’d) For the first semester (Fall 2007) at School B, the student can be awarded $375 in ACG funds. Student completes 15 hours in Fall 2007 and has a cumulative GPA of This GPA represents only the 15 hours taken in Fall –If school policy is to include GPA for courses transferred in, then the cumulative GPA at the end of Fall 2007 would also include the GPA for those courses. At the end of Fall 2007, the student will have completed the weeks for 1 ½ academic years and have 33 hours. The school may award $650 in ACG funds for Spring 2008.

38 Example 6: Academic Year At School C, student completes 12 credit hours. Student was only enrolled full-time one semester and received only one disbursement ($375) of ACG funds. Student transfers to School D and none of the 12 credits transfer. School D assumes weeks of instructional time. With zero hours, School D reviews NSLDS and notes the student has already been awarded ACG funds (which serves as documentation of completion of rigorous secondary school program of study). School D awards this student $375 ACG award.

39 Example 6: Academic Year (cont’d) Student completes 14 credit hours in Fall. Although student is still in first academic year at School D, there are no remaining ACG funds for Spring. –With no transfer hours, no weeks of instructional time were assumed. Even if School D chose to track actual weeks, this student would have completed the weeks of instructional time for an academic year but still not have the credit hours. –Student must meet both measures before funds can be awarded for next academic year.

40 Example 7: Academic Year Progression Student graduates high school and enrolls at school that tracks actual weeks of instructional time. Fall 2006: 15 hours, 15 weeks –Awarded ½ of 1 st academic year ACG –Ends term with 15 hours and 3.66 GPA Spring 2007: 18 hours, 15 weeks –Awarded ½ of 1 st academic year ACG –Ends term with 33 hours and 3.58 GPA Summer 2007: 9 hours, 15 weeks* –Receives no ACG (less than full-time) –Ends term with 42 hours and 3.63 GPA *Certain programs allowed to treat summer term as 15 weeks

41 Example 7: Academic Year Progression (cont’d) Fall 2007: 18 hours, 15 weeks –Awarded ½ of 2 nd academic year ACG –Ends term with 60 hours and 3.67 GPA Spring 2008: 18 hours, 15 weeks –Awarded ½ of 3 rd academic year Nat’l SMART Grant (beyond 2 nd yr in wks & hrs; SMART-eligible major declared) –Ends term with 78 hours and 3.72 GPA Summer 2008: 9 hours, 15 weeks* –Receives no ACG (less than full-time) –Ends term with 87 hours and 3.69 GPA *Certain programs allowed to treat summer term as 15 weeks

42 Example 7: Academic Year Progression (cont’d) Fall 2008: 15 hours, 15 weeks –Awarded ½ of 4 th academic year Nat’l SMART Grant –Ends term with 102 hours and 3.67 GPA Spring 2009: 18 hours, 15 weeks –Awarded ½ of 4 th academic year Nat’l SMART Grant –Ends term with 120 hours and 3.64 GPA Total ACG received: $1,400 Total National SMART Grant received: $6,000

43 Example 8: Academic Year Progression Student graduates high school and enrolls at school that assumes weeks of instructional time based on credits. Fall 2006: 15 hours, 15 actual weeks –Awarded ½ of 1 st academic year ACG –Ends term with 15 hours and 3.66 GPA (assumes ac.yrs.) Spring 2007: 18 hours, 15 actual weeks –Awarded ½ of 1 st academic year ACG –Ends term with 33 hours and 3.58 GPA (assumes ac.yrs.) Summer 2007: 9 hours, 15 weeks* –Receives no ACG (less than full-time) –Ends term with 42 hours and 3.63 GPA (assumes 1.75 ac.yrs.) *Certain programs allowed to treat summer term as 15 weeks

44 Example 8: Academic Year Progression (cont’d) Fall 2007: 18 hours, 15 weeks –Awarded ½ of 2 nd academic year ACG –Ends term with 60 hours and 3.67 GPA (assumes 2.5 ac.yrs.) Spring 2008: 18 hours, 15 weeks –Awarded ½ of 3 rd academic year Nat’l SMART Grant because eligible major declared –Ends term with 78 hours and 3.72 GPA (assumes 3.25 ac.yrs.) Summer 2008: 9 hours, 15 weeks * –Receives no ACG (less than full-time) –Ends term with 87 hours and 3.69 GPA (assumes ac.yrs.)

45 Example 8: Academic Year Progression (cont’d) Fall 2008: 15 hours, 15 weeks –Awarded ½ of 4 th academic year Nat’l SMART Grant –Ends term with 102 hours and 3.67 GPA (assumes 4.25 ac.yrs.) Spring 2009: 18 hours, 15 weeks –Awarded ½ of 4 th academic year Nat’l SMART Grant –Ends term with 120 hours and 3.64 GPA (graduates) Total ACG received: $1,400 Total National SMART Grant received: $6,000

46 Example 9: Change in Academic Year Student completes 49 semester hours at School A over three award years then transfers to School B. School B reviews NSLDS and see that the student received a full scheduled award for ACG for the award year for academic year 2. School B only accepts 22 semester hours as applicable toward a degree at its institution. Student is not eligible for academic year 1 ACG because history shows year 2 already received.

47 Associate’s Degree Second Academic Year For the and Award Years –  For a student enrolled in an associate’s degree program the second academic year ends when the student has completed the credits required for completion of that academic program, as published in the institution’s official academic publications. See DCL GEN-06-18

48 Bachelor’s Degree Fourth Academic Year For the and award years, for a student enrolled in a bachelor’s degree program the fourth academic year ends when the student has completed the credits required for completion of that academic program, as published in the institution’s official academic publications. See DCL GEN-06-18

49 Example 10: Financial Need Student Profile COA: $19,500 EFC: 0 Need:$19,500 Original Determinations Merit Scholarship $15,000 Federal Pell Grant$ 4,050 ACG:$ 750 Packaging Options Merit Scholarship:$14,700 Federal Pell Grant:$ 4,050 ACG:$ OR-- Merit Scholarship:$15,000 Federal Pell Grant:$ 4,050 ACG:$ 450

50 Example 11: Financial Need Student Profile COA: $25,500 EFC: 0 Need:$25,500 Original Determinations Veterans Benefits $21,970 Federal Pell Grant$ 4,050 ACG:$ 750 Packaging Options Veterans Benefits $21,970 Federal Pell Grant:$ 4,050 ACG:$ 0 Student cannot receive any ACG funds because need has already been met. No overaward for Pell and VA only.

Higher Education Reconciliation Act of 2005: Higher Education Reconciliation Act of 2005: General Provisions, Loans, and Need Analysis

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

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. However, 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

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 $7,000  Teacher Certification to $7,000 Effective for loans first disbursed on or after July 1, 2007 ( Aggregate loan limits are not increased)

FFEL and Direct Loans Interest Rates  Fixed rate of 6.8% for new Stafford loans first disbursed or after July 1, 2006  Fixed rate of 8.5% for new FFEL PLUS loans first disbursed or after July 1, 2006  Fixed rate of 7.9% for new Direct Loan PLUS loans first disbursed or after July 1, 2006

FFEL and Direct Loans Origination Fees Phases out the 3 percent FFEL origination and reduces the Direct Loan loan fee (which represents both an origination fee and a one percent insurance premium) to one percent

FFEL and Direct Loans Guaranty Fee Requires that the one percent default fee be deposited into the federal fund of the FFEL guaranty agency. Requires the agency to either deduct from loan proceeds or pay with non-Federal sources.

FFEL and Direct Loans Consolidation Loans  Generally no re-consolidation  Applies within and across programs  FFEL Loans to Direct only if FFEL application denied or certain defaults  Eliminates In-School consolidations in Direct Loans and “early conversion to repayment” consolidations in FFEL  Eliminates Joint Consolidations

FFEL and Direct Loans Low-Default 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-day for first time students.

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)

FFEL and Direct Loans FFEL School as Lender  No new school lenders after April 1, 2006  Can only make Stafford Loans  No Parent or Grad PLUS  Must use proceeds for grant aid  Must offer reduced interest or fees

FFEL, Direct Loans, and Perkins Loans Active Duty Military Deferment  Provides for a military deferment of up to three years for FFEL, Direct Loan, and Perkins Loans that were first disbursed on or after July 1, Includes definitions of “active duty”.

Cost of Attendance  Cost of Attendance (COA) for less than half-time students may include room and board costs, at school’s option.  Cost of Attendance (COA) may include, at school’s option, the one-time cost of obtaining the first professional license or certification

Calculation of EFC (begins with ) Simplified Needs Test and Auto Zero EFC  Increases to $20,000 the threshold under which a family would automatically have an EFC of zero  Eliminates consideration of dependent student’s tax return for both SNT and Auto-Zero EFC  Tax return alternative if family received benefits from a Federal means-tested program

Calculation of EFC (begins with ) 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

Calculation of EFC (begins with ) Other EFC Changes  Increases Income Protection Allowances  Decreases Asset Assessment Rates

Drug Convictions and Title IV Eligibility Provides that an applicant loses eligibility for Title IV aid only if the drug related offence for which he or she was convicted occurred while the student was receiving Title IV aid

Return of Title IV Aid (R2T4)  Excludes LEAP/SLEAP/GEAR-UP/SSS from calculations  Specifies that scheduled clock hours are used to determine earned aid  Clarifies that multiple leaves of absence are permitted.  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

Hot Topics: Preferred Lender Lists and Processing Alternative Loans

70  Preferred Lenders Lists are OK  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/DL choice. Preferred Lenders

71  Alternative loans must be included as “estimated financial assistance” if --  School is aware of the loan  Condition of loan is enrollment  Does not matter where loan proceeds are sent or whether school “certified” enrollment  Think about it like an outside scholarship Alternative Loans

Operational Update

73 FAFSA Filing Application Processing Statistics FAFSA Filing vs  11,931, FAFSAs filed as of Week 50  88.5% electronic  12,068, FAFSAs filed as of Week % electronic

Federal Student Aid Assessments

75 IFAP School Portal Student Aid4schools.ed.gov Where to find the Federal Student Aid Assessments

76 Policies and Procedures

77 FY 2004 FFEL and Direct Loan Default Rates FY 2004 FFEL and Direct Loan Default Rates

78

79 Default Rates by Sector School TypeFY 2002FY 2003FY 2004 Public – 2 Year8.5%7.6%8.3% Public – 4 Year4.0%3.3%3.6% Private – 2 Year6.1%6.3%7.4.% Private – 4 Year3.1%2.6%2.9% Proprietary8.7%7.3%8.8% Foreign2.0%1.8%1.5% National Rate5.2%4.5%5.2%

On the Horizon

81 Secretary’s Commission Report  Engaging low-income, disadvantaged traditional students who never apply for financial aid  Paperless FAFSA  Estimate financial aid for Juniors in High School  Link outreach with Upward Bound programs  Revising the Application Process  Total Student Experience  Customizable for Each Student  Federal government assuming the responsibility for verification

82 Upcoming Training HERA Training  Stand Up Training  More than 50 sites across country  Began late September  Will offer a Spring series also

83 Thank you! Questions? Comments?