U.S. Department of Education Federal Update Jeff Baker Federal Student Aid November 9,

 Appropriations and Budget  Legislative Update  Cohort Default Rates  Direct Loan Transition  IRS Data Retrieval  Two Pells In One Award Year  Regulatory Update Today’s Topics 2

Appropriations and Program Budget 3

Title IV Aid Available 4

Legislative Update 5

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FFEL/Direct Loan Cohort Default Rates 7

National Student Loan Default Rates 9

Missouri Default Rates (FY FY 2008) Rate 4.3% 6.0% 5.8% Borrowers in Repayment 75,925 77,164 Borrowers in Default 4,617 4,539 10

What is the CDR Calculation? Currently, a school’s cohort default rate is: The percentage of the number of the school’s FFEL and Direct Loan borrowers who enter repayment in one Federal Fiscal Year who default in that Federal Fiscal Year or by the end of the next Federal Fiscal Year. Beginning with the 2009 cohort will be: Borrowers who default in that Federal Fiscal Year or by the end of the next two Federal Fiscal Years. 10

11 HEOA Changes Increases CDR monitoring period from two to three years –Increases sanction threshold default rate from 25 percent to 30 percent –Establishes transition period to implement sanctions

12 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 or 7.1% or 12.1% 5,000 FY-09FY ,000 FY-09FY-11FY

Transition Period 13

Direct Loan Transition 14

Contracted with 4 additional servicers –ACS (current servicer) –Nelnet –Sallie Mae –Great Lakes Education Loan Services –AES/PHEAA Will “service” borrowers only…no origination responsibility Direct Loan Transition 15

Can a school select the servicer with whom they wish to work? No, loans will be disbursed to all servicers systemically as they book How will a school know which servicer has a particular loan? By looking at NSLDS Direct Loan Transition 16

17 IRS Data Retrieval

IRS-FSA Concept  Federal Student Aid (FSA) and the Internal Revenue Service (IRS) developed a non-consent solution to simplify FAFSA completion.  Tax filer retrieves own data  No Consent  Voluntary  Will allow some applicants to retrieve their income tax data from the IRS.  IRS data can be automatically transferred to FOTW. 19

Option to Access IRS Information 19

Get My Federal Income Tax Information 20

Federal Income Tax Information Provided 21

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ISIR Codes and Flags  CPS will set flags and comment codes to indicate that student and/or parent transferred IRS data into FOTW  Comment codes will appear in –  FAA Information section of the ISIR  Student Inquiry section of FAA Access  Flags and codes set based on certain conditions. 23

IRS Request Flag Values Student & Parent IRS Request Flag Description 00 IRS data request for the student/parent was not submitted to IRS (default value) 01 IRS data request for the student/parent was sent to IRS 02 IRS data for the student/parent was returned from the IRS and was not changed by the user 03 IRS data for the student/parent was returned from IRS and was changed by the user 04 IRS data for the student/parent was transferred from the IRS and on a correction entry at least one IRS data field was changed by the user 05 (Under Construction) IRS data for the student/parent was transferred from the IRS but may be incomplete based on marital status and tax filing status 06 (Under Construction) IRS data for the student/parent was transferred from the IRS but marital status conflicts with tax filing status 24

IRS Data and Verification  An institution may consider as acceptable documentation IRS retrieved information if the Secretary has identified those items as having come from the IRS and not been changed – IRS Request Flag =

Implementation Schedule  IRS process began in January  Pilot to test proof of concept.  IRS data share began in September of  IRS data share expected to begin with start-up in January  Within a couple of weeks electronic tax filing.  Within several weeks of paper tax filing. 26

Enhancements Beginning with the processing year, the IRS data retrieval process can be accessed by the applicant using Corrections on the Web. 27

Two Pells in an Award Year 28

29 Two Pells In An Award Year  Authorized by the Higher Education Opportunity Act (HEOA).  If eligible, student able to receive all or a portion of a second Scheduled Award within an Award Year.  Objective is to help needy students accelerate their academic progress.  Effective for the Award Year. 4

30 Regulations  Team V-General and Nonloan Programmatic Issues in 2009  Notice of Proposed Rulemaking: August 21, 2009  Final regulations: October 29, 2009  Effective with the Award Year Two Pells In An Award Year

31 Unchanged Pell Rules Scheduled Award – Amount that full-time student would receive for a full academic year based on the student’s EFC and COA. –Prorated by payment period based on hours and weeks of instructional time attended – Pell Formulas. Payment periods Payment for a payment period calculations

32 Changed Pell Rules Scheduled Award – –Old: Student may receive only one Scheduled Award in an award year. –New: Student may receive more than one Scheduled Award in an award year.

33 Changed Pell Rules Enrollment Status - –Old: Less than half-time enrollment eligible at all times. –New: Must be at least half-time for second scheduled award.

34 Changed Pell Rules Cross-Over Payment Periods –Old: Institution may assign a crossover payment period to either award year as a general policy or on a case-by-case basis. –New: Must assign to award year that will produce higher payment amount.

35 Award Amount  No change in calculation of award for payment period  Awarding formulas have not changed  Award by payment period based on Scheduled Award  School continues to pay until reaching 200% of Scheduled Award –Payment period may include awards from both first Scheduled Award and second Scheduled Award.

36 Final Regulations – October 29, 2009  Effective with the Award Year  Cross-Over Payment Period  If cross-over payment period, school must award from the award year with the highest award amount for the payment period for the student.  Academic Year Progression  At least one credit or clock hour in the payment period must be attributable to the student’s next academic year. 36

If Law Had Not Changed - Semester Example Student may only receive up to ONE Scheduled Award within an Award Year. Assume student’s Scheduled Award is $5,350 and will be $5,550 for Spring 2011 $2,775 Summer 2011 $2,855 Fall 2010 $2,775 Fall 2011 $2, Award Year Award Year Spring 2012 $0 100% AY 100% AY Summer 2011 $0 37

New Law - Semester Example Spring 2011 $2,775 Fall 2011 $2,855 Fall 2010 $2,775 Spring 2012 $2, Award Year Award Year Summer 2012 $2,855 Summer 2011 $2, % AY 150% AY Student may receive up to TWO Scheduled Awards within an Award Year. Assume student’s Scheduled Award is $5,350 and will be $5,550 for

New Law - Semester Example Student may receive up to TWO Scheduled Awards. Student’s Scheduled Award is $5,350 for the Award Year. Fall 2010 $2,775 Summer 2011 $2,775 Summer 2010 $2, Award Year Spring 2011 $2, % AY 39

40 New Regs for Cross-Over Term  Effective with the Award Year  Must assign to award year in which student receives greater payment for the term - based upon information available at initial calculation.  Assume other year is higher if –  No SAR/ISIR.  Rejected ISIR with no EFC.  ISIR selected for verification but verification not completed.

41 Cross-Over Payment Period EXAMPLE  A program has a semester calendar with two summer sessions (6/1 – 7/14 and 7/20 – 8/28).  If combined in one term, the combined term is a crossover payment period regardless of what classes students attend or when a disbursement is made.  If the two sessions are considered separate terms, only the 6/1 – 7/14 term is a crossover payment period. 41

42 Cross-Over Payment Period  For Pell, use EFC for the award year from which the student will be paid  May use either EFC, COA, and need for all other Title IV programs except Pell  Treat Pell as estimated financial assistance (EFA) for other Title IV, regardless of which award year it is from. 42

43 New Regs for Cross-Over Term Changes –  Until date published in Federal Register ( September 10, 2010) -  Must reassign payment period if information received showing greater payment from other Award Year.  Must compare again if re-calculating for any reason.  May monitor and adjust after Federal Register date up to February 1, 2011.

44 Spring 2011 $2,775 Summer 2011 $2,855 Fall 2010 $2,775 Fall 2011 $2, Award Year Award Year Spring 2012 $2,855 Summer 2011 $0 100% AY 150% AY Student may receive up to TWO Scheduled Awards. Assume student’s Scheduled Award is $5,550 and $5,710 for and student eligible for either. New Law – Assign Cross-Over To Higher Payment Semester Example

45 Academic Year Progression At least one credit or clock hour (or partial hour if school uses partial hours) in the payment period when award will be from a second Scheduled Award must be attributable to the student’s next academic year. Gives meaning to statutory use of term “accelerate” Not “grade progression”. Must be applied for any required recalculation. 45

46 Academic Year Minimums Academic Progress Measured By: Semester hours Trimester hours Quarter hours Clock hours Minimum Completion Requirement* 24 semester hours 24 trimester hours 36 quarter hours 900 clock hours Minimum Instructional Time Requirement 30 weeks 26 weeks *Number of hours that a student enrolled full time is expected to complete in a full academic year. Statutory Definition of an Academic Year **A week is a seven day period in which there is at least one day of instruction or exams. **

47 Spring % Paid 12 Hours Earned Fall % Paid 12 Hours Earned First Scheduled Award Summer 2010 Enrolled in 6 Hours ELIGIBLE Second Scheduled Award Semester Academic Year Progression No Hours to Prior Academic Year Six Hours for New Academic Year Pay 25% of Second Scheduled Award Assumes academic year defined as 24 hours

48 Spring % Paid 9 Hours Earned Fall % Paid 12 Hours Earned First Scheduled Award Summer 2010 Enrolled in 6 Hours ELIGIBLE Second Scheduled Award Semester Academic Year Progression Three Hours to Prior Academic Year Three Hours for New Academic Year Pay 25% of Second Scheduled Award Assumes academic year defined as 24 hours

49 Spring % Paid 9 Hours Earned Fall % Paid 9 Hours Earned First Scheduled Award Summer 2010 Enrolled in 6 Hours NOT ELIGIBLE Second Scheduled Award Six Hours to Prior Academic Year No Hours for New Academic Year Cannot pay second Scheduled Award May pay from upcoming Award Year Assumes Academic Year defined as 24 hours Semester Academic Year Progression

50 Transfer Student  Final regulations: Two options  Assumption method  Based on disbursements received  Do not consider hours earned at other institutions to be conflicting information  Hours-earned method  Based on actual hours earned in award year  Method at option of institution: apply on a student-by-student basis or to all students

51 Special Circumstances Academic Year completion requirement can be waived if – –FAA determines that student was unable to complete the hours of the first academic year due to ‘circumstances beyond the student’s control’. –Determination must be documented and made on a student by student basis. 51

Other Information 52

Parent PLUS and FAFSA  Beginning student must file FAFSA for Parent PLUS Loan  98 percent already file  COD will monitor  Need to perform database matches to verify that student is eligible  Social Security Number  Citizenship Status  Selective Service  NSLDS for defaults and overpayments 53

Regulatory Update 54

Program Integrity NPRM-1  Notice of Proposed Rulemaking issued June 18, 2010 to improve the integrity of the Title IV student assistance programs.  Negotiations held between November 2, 2009 and January 29, 2010  Comment Period Ended August 2, 2010  Final regulations published on October 29, 2010  Generally effective July 1, 2011 ( AY)  Verification effective with the AY) 47

Program Integrity NPRM – Part 1  Ensuring that only eligible students receive federal funds.  High School Diploma: Requires institutions to develop and follow procedures to evaluate the validity of a student's high school diploma if the institution or the Secretary has reason to believe that the diploma is not valid or was not obtained from an entity that provides secondary school education. 56

Program Integrity NPRM – Part 1  Ensuring that only eligible students receive federal funds.  Ability to Benefit:  Extends eligibility for federal student aid to students without high school diplomas after they successfully complete six credit hours or 225 clock hours of college work.  Improved oversight of test publishers, test administrators, and testing centers. 57

Program Integrity NPRM – Part 1  Ensuring that only eligible students receive federal funds.  Satisfactory Academic Progress: Requires a structured and consistent approach to evaluating a student's academic work, while continuing to provide flexibility to institutions in establishing their policies.  Some relief to schools that monitor each payment period. 58

Program Integrity NPRM – Part 1  Ensuring that only eligible students receive federal funds.  Verification:  Replacing the five verification items for all selected applicants with a targeted selection of items based upon each student’s characteristics.  Eliminating the 30 percent institutional verification cap.  Requiring the processing of all changes and corrections to an applicant’s FAFSA information. 59

Program Integrity NPRM – Part 1  Protecting consumers.  Misrepresentation: Strengthens the Department's authority to take action against institutions engaging in deceptive advertising, marketing, and sales practices,  State Authorization: Clarifies this important State responsibility.  Incentive Compensation: Removes the "safe harbor" provisions and generally relies on the statutory language for guidance and enforcement. 60

Program Integrity NPRM – Part 1  Clarifying eligible coursework:  Credit Hour: Defines a credit hour and establishes procedures for accrediting agencies to determine whether an institution's assignment of a credit hour is acceptable.  Retaking Coursework: Allows repeated coursework to count toward enrollment status. 61

Program Integrity NPRM – Part 1  Clarifying eligible coursework:  Written Agreements:  Limits the amount of a program that can be provided by another school.  Requires disclosures to students and potential students.  Prohibits arrangements between ineligible institutions that have had their Federal student aid participation revoked. 62

Program Integrity NPRM – Part 1  Other:  Return of Title IV Aid:  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. 63

Program Integrity NPRM – Part 1  Other:  Disbursing Federal Student Aid Funds: Requires institution to ensure that student has resources to obtain books and supplies by the seventh day of payment period. 64

Program Integrity NPRM-2 GAINFUL EMPLOYMENT NPRM published on July 26,  Negotiations held between November 2, 2009 and January 29, 2010  Comment Period Ended September 9, 2010  Final regulations for some provisions published on October 29,  Effective July 1, 2011  More final regulations to be published in December or January.  Effective July 1,

Gainful Employment Why is the Department regulating to define “gainful employment” at this time?  Programs at for-profit institutions and occupationally specific training at other institutions must lead to gainful employment in a recognized occupation.  Currently there is no standard to measure “gainful employment”. This NPRM, when finalized, would establish such a standard.  Public comment received last year along with a number of studies, reports, and media reports point to the need to regulate in this area.  66

Gainful Employment Proprietary Institution of Higher Education and Postsecondary Vocational Institution –All programs must prepare students for gainful employment in a recognized occupation Two exceptions –Program leading to baccalaureate degree in liberal arts (proprietary institution) –Comprehensive transition program for students with intellectual disabilities (vocational institutions) 60

Gainful Employment Public/Private Non-profit Institution of Higher Education –Non-degree/certificate programs must prepare students for gainful employment in a recognized occupation –Two exceptions Transfer program Comprehensive transition program for students with intellectual disabilities 61

Gainful Employment Disclosures  Institutions with “gainful employment” programs must provide prospective students with each eligible program's graduation and job placement rates, and provide the Department with information that will allow for the determination of student debt levels and incomes after program completion. 69

Repayment Rate The percentage of the outstanding principal balance of the Federal loans taken by the academic program’s former students who entered repayment in the previous four years that has been repaid. Gainful Employment Metrics 63

Debt to Earnings Ratio For the academic program’s completers, the average educational loan payments (Federal, private, and institutional financing plans) as a proportion of the borrower’s income (either discretionary income or average annual earnings). Loan payment amount based on a 10-year amortization schedule at 6.8 percent. Gainful Employment Metrics 64

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