1. NOTE: This document is for general reference purposes only. Readers should refer to the detail of the Higher Education Reconciliation Act of 2005 (S. 1932), and the corresponding ED Dear Colleague Letter (GEN-06-02 & FP-06-01), for official guidance. Higher Education Reconciliation Act of 2005 Title VIII of the Deficit Reduction Act of 2005 NHHEAF Networks Organizations Training April 25, 2006 Craig Stevens Regulatory Compliance Specialist cstevens@gsmr.org Items Pertaining to Institutions and Borrowers

2. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Removal of Early Repayment Option HEA §428(b)(7)(A) Borrowers are no longer allowed to request early entry into repayment from their lenders. Conversion to repayment is defined as no less than six months and one day after ceasing to become half-time. This provision applies to all requests for early entry into repayment received on or after July 1, 2006. Any request received after July 1, 2006 for early entry into repayment must be denied.

3. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Termination of Eligibility for FFEL and Direct Consolidation Loans HEA §428C(a)(3)(B) Borrowers who obtain a consolidation loan in either FFELP or Direct Consolidation Programs may not obtain a subsequent consolidation loan unless they meet a certain criteria. Included language also adds a provision to the borrower eligibility criteria that allows a FFELP borrower with no Direct Loans to consolidate with the Direct Loan Program for the purposes of obtaining an income-contingent repayment plan, so long as the loan has been submitted to the Guaranty Agency for default aversion. This change is effective for consolidation applications received on or after July 1, 2006.

4. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Removal of Joint Consolidation Loans HEA §428C(a)(3)(C) Married borrowers will no longer be allowed to jointly consolidate their FFELP or Direct Loans into one single consolidation loan. This change is effective for any joint consolidation applications received on or after July 1, 2006.

5. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. FFELP Borrower Access to the Direct Consolidation Program HEA §428C(b)(5) If a FFELP borrower is denied a FFELP consolidation loan, or is unable to obtain a FFELP consolidation loan with income-sensitive repayment terms, the Secretary will offer a Direct Consolidation loan to any borrower who requests it. Also added is a provision to allow the Secretary to offer a Direct Consolidation loan to a defaulted borrower in order to resolve that default. Borrowers seeking a Direct Consolidation loan will be able to apply on or after July 1, 2006.

6. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Study Abroad Loan Disbursement HEA §428(b)(1)(N) A student enrolled in a study abroad program is now eligible to receive direct disbursements, instead of disbursements being done through schools. Loans with loan periods beginning on or after July 1, 2006 are affected.

7. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Multiple Disbursement Exemption HEA §428G(a)(3) An institution with a cohort default rate of less than 10 percent in each of the last three fiscal years for which information is available, is now eligible for an exemption of the multiple disbursement requirement. These changes take effect for any disbursement made on or after February 8, 2006.

8. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Disbursement Delay for First Time Students HEA §428G(b)(1) An institution with a cohort default rate of less than 10 percent in each of the last three fiscal years for which information is available, is now exempt from delaying a disbursement for a first time student for thirty days. These changes take effect for any disbursement made on or after February 8, 2006.

9. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. PLUS Loan Interest Rate HEA §427A(1)(2) The interest rate for Federal PLUS loans increases from 7.9 percent to 8.5 percent. This increase applies to all Federal PLUS loans which are first disbursed on or after July 1, 2006.

10. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Increase in Annual Stafford Loan Limits HEA §428(b)(1)(A) and §428H Annual loan limits for Stafford Loans were increased in the following amounts: first year subsidized/unsubsidized combined limit was increased from $2,625 to $3,500 second year subsidized/unsubsidized combined limit was increased from $3,500 to $4,500 for graduate or professional students, additional unsubsidized loan limit was increased from $10,000 to $12,000 for students with a baccalaureate degree who are enrolled in coursework necessary for a professional credential or state required certification for teaching at the elementary or secondary level, the additional unsubsidized loan limit has been increased from $5,000 to $7,000 The increase in Annual Stafford Loan Limits will be effective for any loan certified on or after July 1, 2007.

11. Base Sub/UnSubAdditional Unsub 1 st year undergraduate $3,500 $4,000 2 nd year undergraduate $4,500 $4,000 3 rd year & beyond undergraduate $5,500$5,000 Graduate/Professional$8,500 $12,000 Preparatory coursework (for enrollment in an undergraduate program) $2,625$4,000 Preparatory coursework (for enrollment in a graduate or professional program) $5,500 $7,000 Teacher Certification$5,500 $7,000 Annual Stafford Loan Limits

12. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. PLUS loans for Graduate and Professional Students HEA §428B Graduate and professional students are now eligible to borrow PLUS loans up to the cost of attendance minus other financial assistance. Graduate and professional students must have applied for their annual loan maximum under the Stafford loan program before applying for a Graduate or Professional PLUS loan. This program will be available to graduate and professional students for any loan that will be certified by the school on or after July 1, 2006.

13. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. College Access Initiative HEA §485D Guaranty agencies are now required to provide the Secretary with information to develop a Department of Education-run website. Guaranty agencies will provide information that contains links for promoting postsecondary education opportunities, programs, publications, and other services to provide students and their families with a comprehensive source for information. Guaranty agencies are required to submit information by July 1, 2006 to the Secretary.

14. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Removal of Federal Insurance Fee and Implementation of Federal Default Fee HEA §428(b)(1)(H) Changes made by HERA removed the optional 1 percent insurance premium and replaces it with a mandatory 1 percent Federal default fee. The Federal default fee is in effect for all loans with a date of guarantee on or after July 1, 2006.

15. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. Origination Fee Reduction HEA §438(c)(2) The origination fee charged to Stafford Loan borrowers is being proportionally reduced annually until its elimination in July 2010. On July 1, 2006, the maximum origination fee will be reduced to 2 percent and will decrease ½ percent every year on July 1. Fees will reduced beginning with loans with a first disbursement date on or after July 1, 2006.

16. Beginning with loans with a first disbursement date of 7/1/06, the reduction schedule goes as follows: First disbursement before 7/1/07, maximum origination fee is 2 percent; First disbursement on or after 7/1/07 but before 7/1/08, maximum origination fee is 1.5 percent; First disbursement on or after 7/1/08 but before 7/1/09, maximum origination fee is 1.0 percent; First disbursement on or after 7/1/09 but before 7/1/10, maximum origination fee is 0.5 percent; First disbursement on or after 7/1/10 the origination fee is eliminated. Origination Fee Reduction

17. Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit Reduction Act of 2005) H.E.R.A. What Else is Coming? HR 609 – Reauthorization Has passed House vote, placed on Senate Calendar. Potential Lawsuits Questions?