1. 1 Federal Update David Bergeron Dan Madzelan

2. 2 Agenda  Budget  Legislation  Where We Are Today  Student Lending  Regulations  Implementation  Dear Colleague Letters  Regulations  A Rational Approach to Federal Student Aid

3. 3 Appropriations and Program Budget

4. 4 Title IV Program Budgets Appropriations

5. 5 Title IV Program Budgets Status of Appropriations

6. 6 Title IV Program Budgets Aid Available ($000)

7. 7 Recent Legislation

8. 8  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

9. 9 Where We Are Today  Academic Competitiveness and National SMART Grants  Increased FFEL and DL Loan Limits  Interest Rates  PLUS Loans  Professional Judgment/Dependency Overrides

10. 10 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

11. 11 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

12. 12 Interest Rates  Reduced interest rates on undergraduate subsidized loans only from current 6.8% to  6.0% for loans disbursed on or after 7/1/2008  5.6% for loans disbursed on or after 7/1/2009  4.5% for loans disbursed on or after 7/1/2010  3.4% for loans disbursed on or after 7/1/2011  Beginning 7/1/2012, rates revert to 6.8%  Unsubsidized Stafford Loans and all Staffords for graduate students remain at 6.8% fixed

13. 13 PLUS Loans  Extenuating circumstances for adverse credit may include delinquency of up to 180 days on mortgage payments or on medical bill payments  Delayed repayment start date for parent PLUS borrowers at their option

14. 14 Professional Judgment Dependency Overrides  Adds dislocated worker and homelessness as examples of when an FAA can use professional judgment  Provides that an FAA can use a dependency override made by another FAA within the same award year  Both effective for the 2009-2010 award year

15. 15 Student Lending

16. 16 DL/FFEL Activity for ’08-’09 YTD 2008 YTD 2007 % Change Direct Loans 3.9 million2.5 million+56% FFELP Loans 8.7 million7.7 million+13% Total 12.6 million10.2 million+24% Direct Loans $18.5 billion$12.3 billion+50% FFELP $46.7 billion$42.6 billion+10% Total $65.2 billion$54.9 billion+19% Number of Loans Dollars

17. 17 Student Lending  GA Lender of Last Resort Programs  Dear Colleague Letters  ECASLA Loan Purchase Programs  www.federalstudentaid.ed.gov/ffelp www.federalstudentaid.ed.gov/ffelp

18. 18 2006-2007 Regulations School Lender Relationships (Effective 7-1-08)

19. 19 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”

20. 20  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

21. 21 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

22. 22 2007-2008 Regulations

23. 23 2007-08 TEACH Final  Effective for the 2008-2009 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.”

24. 24 2007-08 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)

25. 25 2007-08 TEACH Final  TEACH Grant recipient must teach in a high-need field in the majority of classes taught  “Other” high-need fields must be listed in the Department of Education’s Nationwide Listing of Teacher Shortage Areas at the time the recipient begins qualified teaching

26. 26 2007-08 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

27. 27 TEACH Grant Statistics

28. 28 2007-2008 Loans Final  Definition of Not-for-Profit Holder  FFEL Only  Income-based Repayment Plans  FFEL and Direct Loans  Public Service Loan Forgiveness  Direct Loan only  Economic Hardship and Military Service Deferments  FFEL, Direct Loans, and Perkins

29. 29 A Rational Approach to Federal Student Aid

30. 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. 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.

32. 32 PreparingPreparing ChoosingChoosing ApplyingApplying FundingFunding AttendingAttending StudentAwardPackage SubsidizedSubsidizedUn-subsidizedUn-subsidizedPLUSPLUS Loans FFELFFELPerkinsPerkinsDirectLoansDirectLoans State and InstitutionalAid PrivateLoansPrivateLoans Schools Lenders GuarantyAgencies SecondaryMarkets Grants Federal Work Study PellGrantsPellGrants LEAP/ SLEAP SLEAPLEAP/ FSEOGFSEOG Student U.S. Department of Education AdmissionApplication FAFSA Student Eligibility Student Aid Report EmploymentEmployment GrantsGrants LoansLoans ScholarshipsScholarships MultipleAwardPackages Schools States PrivateFoundations Delivery Process/Student View – FY2007 10 Million Recipients 14.5 Million Aid Applications 2,400 35 42 6,000 $83 Billion Federal Aid $1.2 Billion $51.3 Billion $ 13 Billion $1.1 Billion $976 Million $165 Million $14.4 Billion ISIR ACG/SMARTACG/SMART $580 Million

33. 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.

34. 34 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.

35. 35 Current Model Family Financial Resources (45 Questions!) Income (37 Questions)Assets (6 Questions) + Taxable Income (AGI)+ Cash + Untaxed Income+ Savings + Stocks, Bonds, Investments, etc. - Home Equity, Retirement Accounts Family size & Number in College (2) Discretionary UsesNon-Discretionary Uses (Taxes, Living Expenses) EFC = Cost of Attendance Pell Grants + Subsidized Loans Unsubsidized Loans Less What students and families have to pay

36. 36 Proposed Model Family Financial Resources (2 Questions!) Cost of Attendance Pell Grants + Subsidized Loans Unsubsidized Loans/PLUS + Adjusted Gross Income + Tax Exemptions ?

37. 37 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 Information- Income / Exemptions - Eligibility- Certifications - Colleges and states to which information will be sent

38. 38 Simple FAFSA

39. 39 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.

40. 40 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.

41. 41 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;

42. 42 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.

43. 43 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

44. 44 Examples of Dials and Levers Unsubsidized

45. 45 Simple Look-Up Table (For Illustrative Purposes Only)

46. 46 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.