CCCSFAAA December 7, 2008 Federal Update Jeff Baker Federal Student Aid U.S. Department of Education

2 Dependency Overrides

33 Students Seeking Dependency Overrides The Problem –  Some students who are likely eligible for a dependency override cannot find a school to consider an override at the time they need to submit a FAFSA.  Web FAFSA products to not allow a dependent student to submit without parental information.

44 Students Seeking Dependency Overrides The Solution –  Students who are unable to provide parental data will be able to submit their application through FOTW by indicating they believe that they have a special circumstance.

55 Students Seeking Dependency Overrides  Application can be submitted for processing and all appropriate matches will be performed  No EFC will be calculated  These records will have a “special circumstances” flag.  School makes the determination after obtaining documentation.

6 FFEL Loan Purchase Programs  Participation Purchase Program for partially disbursed FFEL loans through September 30,  Loan Purchase Program for fully disbursed FFEL loans through September 30,  Participation Purchase Program for partially disbursed FFEL loans through September 30,  Loan Purchase Program for fully disbursed FFEL loans through September 30, 2010.

7 Higher Education Opportunity Act

8 HEOA - Pell Grants  Year Round Awards – Up to two full scheduled awards within on award year.  Effective with the award year.  Life-Time Limit - Limits the duration of a student’s eligibility to 18 semesters.  Effective with the award year  Changes the minimum Pell Grant award from a fixed $400 to ten percent of the appropriated maximum Pell Grant award.  Effective for the award year.

9 HEOA - Pell Grants  Provides a maximum Pell Grant award to any Pell eligible student whose parent or guardian was a member of the Armed Forces and died in Iraq or Afghanistan after September 11,  Effective with the award year.

10 HEOA – Student Loans  Changes Cohort Default Rate Calculation  From two years to three years  Transition Period  30% Penalty Rate  Increases “disbursement relief” CDR to 15%.  Effective October 1, 2011

11 HEOA – Student Loans  Removes VA Educational Benefits from “Estimated Financial Assistance” for loans and from “Resources” for campus-based aid.  Effective with the award year.

12 HEOA – Student Loans  Dependent students eligible for unsubsidized without parental FAFSA information.  Effective on enactment – August 14, 2008  Paper FAFSA or EDE Submission  Special process for Direct Loans

13 Perkins Loans  Increases annual and aggregate loan limits –  Annual $5,500 for undergrad  Annual $8,000 for grad  Aggregate $60,000 for grad  Aggregate $27,500 for upper division undergrad  $11,000 for all others Effective with the award year.

14 Recent Legislation

15  Higher Education Reconciliation Act (HERA) – February 8, 2006  College Cost Reduction and Access Act (CCRAA) – September 7, 2007  Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) – May 7, 2008  Extended by HR 6899  Higher Education Opportunity Act (Reauthorization) – August 14, 2008 Recent Legislation

16 ACG and National SMART Grants  Eligible Non-Citizens Eligible  At least half-time enrollment  Students in certificate programs eligible, if program is at least one year in length and offered at a two or four-year degree granting institution.  Awards based on student’s grade level instead of “academic year”  Effective July 1, 2009 – by HEOA

17 Grade Level Base Amount Additional Unsubsidized 1 st -yr Dependent$3,500$2,000 2 nd -yr Dependent$4,500$2,000 Upper Division Dep.$5,500$2,000 1 st -yr Independent$3,500$6,000 2 nd -yr Independent$4,500$6,000 Upper Division Indep.$5,500$7,000 Graduate/Professional$8,500$12,000 FFEL/DL Annual Loan Limits

18 Dependency Criteria  Independent student definition –  Is an orphan, in foster care, or a ward of the court, or was at any time when the student was 13 years of age or older.  Is, or was, 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

19 Auto Zero EFC and SNT  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

Rulemaking  TEACH Grant  NPRM Published March 24, 2008  Final Rule Published June 23, 2008  Rules Effective July 1, 2008  Title IV Loan Programs  NPRM Published July 1, 2008  Final Rule Published October 23, 2008  Rules Effective July 1, 2009

TEACH Final  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 ceasing enrollment in the TEACH Grant eligible program, as a -  Highly Qualified Teacher  At a Title I school  In a specified subject area.  “In for a dollar, in for four years.”

TEACH Final  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  Award, when combined with other assistance, cannot exceed cost of attendance (No EFC)

TEACH Final  Institutional Eligibility  See DCL GEN-08-07, posted to IFAP on June 3, 2008  Institutional Choice whether to participate  An institution that offers one or more TEACH Grant-eligible programs may participate in the TEACH Grant Program

24 TEACH Grant Statistics

Regulations School Lender Relationships (Effective )

26 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  Refuse to certify or certify a reduced amount; except on a case-by-case basis  Includes “school as lender”

27  School may choose to have preferred lender 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  Must include prominent statement advising borrowers that use of school preferred lender not required FFEL Preferred Lender Lists

28 Prohibited Inducements  Affects FFEL lenders and guaranty agencies  Creates concept of “rebuttable presumption” for prohibited and allowed activities  Includes a non-exhaustive list of prohibited activities  Includes a list of allowed activities

29 A Rational Approach to Federal Student Aid

30 Mandates “The entire financial aid system—including federal, state, institutional, and private programs—is confusing, complex, inefficient, duplicative, and frequently does not direct aid to students who truly need it.” -The Secretary of Education’s Commission on the Future of Higher Education

31 Mandates Congress, in passing the HEOA, required the Department of Education to issue a report on efforts to simplify the FAFSA that includes looking at the elimination of income data elements, as well as other items.

Issues – Federal Student Aid  The application is complex and intimidating.  Much of the data are unverifiable.  Current EFC formula is arbitrary, difficult to understand, lacks clarity and relevance, and subject to “gaming.”  Result of application (EFC) is “how much the student will NOT receive.”  Multiplicity of programs is confusing.

33 Principles for Reform  Access to Aid  Application will request information that is easily obtainable and verifiable.  Application will only ask questions necessary to determine eligibility and award levels.  Federal Student Aid  Targets the neediest students;  Is independent of other aid;  Is predictable;  Is portable, and  Distributes aid through fewer programs.

34 A Simplified FAFSA  Only ask for information needed to determine federal aid eligibility, aid types, and amounts.  Two pages - no instruction pages(s).  Fewer than 30 questions – - Identification- Dependency - Contact Info- Income/Exempts - Eligibility- Certifications - Colleges and states

35 Simple FAFSA

36 Rational Approach  Establish–  Federal Student Aid Target (FSAT)  Federal Student Aid Commitment (FSAC)  Consolidate aid programs into one grant (Pell), one loan (DL/FFEL) and one work study (FWS) program.

37 Federal Student Aid Target (FSAT)  Maximum amount of federal subsidized aid (Pell Grant, subsidized loans, and FWS).  Amount increases annually by CPI.  For example –-  100% of average Tuition & Fees, Books & Supplies, and Meals & Housing at community colleges.

38 Federal Student Aid Commitment (FSAC)  Student’s portion of FSAT based on AGI and IRS Number of Exemptions, related to HHS Poverty Levels.  Example: --  Grants up to 250% of poverty level;  Sub loans and FWS up to 400% of poverty level;

39 Unsubsidized Aid  Includes unsubsidized Stafford and PLUS loans;  Applies only after all other aid is awarded;  Covers difference between cost of attendance and all other sources of aid;  Includes annual loan limits for unsubsidized Stafford.

40 Policy/Budget Considerations  Select “Dials”  FSAT: percentage of cost of attendance at which type of school  FSAC: percentages of HHS poverty level to be used for grant, subsidized loan, and work study  Determine “Levers”  Maximum spending with current allocations  Optimized spending to ensure access and success

41 Examples of Dials and Levers Unsubsidized

42 Simple Look-Up Table (For Illustrative Purposes Only)

43 What Does This Mean For Students?  A FAFSA that encourages access;  Real-time feedback on probable Federal Student Aid;  Better awareness of state and institutional value-added aid, and  Predictability for persistence.