Fall 2008 Federal Update
Agenda
 Budget
Update
 Legislative Update
 Regulatory Update
 Perkins Loan Issues



NSLDS Reporting
FISAP
Electronic Announcements
Budget - Appropriations
Program
Pell Grant
FY 2008
FY 2009*
(AY 07-08)
(AY 08-09)
(AY 09-10)
$13,660,711,520 $16,256,000,000 $18,941,100,000
(Max Award)
FSEOG
FWS
Perkins
LEAP
ACG/SMART
FY 2007
$4,310
$
$
$
$
$
770,932,800
980,354,430
65,470,680
64,986,570
850,000,000
$4,731
$
$
$
$
$
757,464,800
980,491,815
64,327,222
63,851,677
395,000,000
$4,800
$
$
$
$
$
980,500,000
960,000,000
* President's FY 2009 Budget Request
3
The President's FY 2009 Request
Non-Defense
Department of
Education
Discretionary
(Excludes
2.4%
Education)
Defense
14.1%
$65
22.4%
$417
$730
$644
$260
Interest on Debt
8.3%
Social Security
20.8%
$360
$224
$40
Other Mandatory
11.5%
Medicaid/SCHIP
Medicare
7.2%
13.3%
FY 2009 Budget Policy







Provide for “Year-round” Pell Grants
Establish a “Lifetime Limit” for Pell
Implement Consent-Based IRS/FAFSA
Data Matching
Provide Loans for Short-Term Training
Modify Public Service Loan Forgiveness
Eliminate the Income-Based Repayment
Three-Year Interest Subsidy
Recall Federal Share of Perkins Loans
Higher Education Opportunity Act –
H.R. 4137 (Reauthorization)
29 – House and Senate Conferees
approve H.R. 4137
 July 31st -- House passes H.R. 4137 by a
vote of 380 to 49
 July 31st -- Senate passes H.R. 4137 by a
vote of 83 to 8
 President Bush signed H.R. 4137 into law
on 8/14/08
 July
HEA Reauthorization – H.R. 4137
Overview

Accreditation



Advisory Committee selected by House, Senate and
ED Secretary. No appointments until after 1/31/09.
Prohibits ED Secretary from establishing criteria to
assess student achievement
Consumer Information & Disclosure


Greater transparency on college costs
Disclosures for IHEs with preferred lender lists
HEA Reauthorization – H.R. 4137
Overview
 Pell



Grants
Provides for year-round Pell Grants
Limits eligibility to 18 semesters
Sets EFC to $0 for students whose parent
was in Armed Forces and died in Iraq or
Afghanistan after 9/11/01
 ACG/SMART

Technical changes on ECASLA provisions
HEA Reauthorization – H.R. 4137
Overview

Student Loans
 Requires ED to oversee private education
loans made by FFEL lenders to students
attending Title IV institutions
 Expands loan forgiveness if Congress
appropriates funds
 Makes foreign nursing schools eligible to
participate in the FFEL program
 FAFSA Simplification
HEA Reauthorization – H.R. 4137
Overview
of Effort (MOE) – Withholds
College Access Challenge Grant (old
SLEAP Program) funds from States that
failed to raise spending on higher ed each
year by at least as much as they increased
it, on average, over the last five years.
 Maintenance
HEA Reauthorization – H.R. 4137
Overview
 Settlement

Settlements for any claims exceeding $1
million must be reviewed by Attorney General
 New

of Claims
Programs and Reports
Over 60 new programs authorized and more
than 20 new studies must be completed
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §428C(b)(1) to require
disclosures to Perkins Loan borrowers who
consolidate:



Borrower will lose all interest-free periods associated
with a Perkins Loan
Borrower will no longer be eligible for cancellation
benefits
Lender must list occupations contained in HEA
section 465 that qualify for cancellation
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §463(a)(4)(B) – Secretary may
allow institutions to refer Perkins Loans to
the Department for collection. Any sums
collected must be repaid to the institution
(minus collection costs) as additional FCC.

Amends HEA §463(a)(9) to prohibit the
Secretary from mandating assignment other
than as provided in §463(a)(4) and (5).
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §464(a) to:





Increase annual loan limits to $5,500 for
undergraduate students
Increase annual loan limits to $8,000 for
graduate/professional students
Increase aggregate loan limits for undergraduate
students to $27,500
Increase aggregate loan limits for
graduate/professional students to $60,000
Increase aggregate loan limits to $11,000 for “any
other student”
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §464(c)(1)(F) to require the
Secretary to cancel a Perkins Loan if the
borrower is:



Permanently and totally disabled
Unable to engage in any substantial gainful activity
because of a physical or mental impairment that is
expected to result in death, has lasted for a
continuous period of not less than 60 months, or can
be expected to last for a continuous period of not less
than 60 months or
If the borrower is determined by the VA to
unemployable due to a service-connected disability
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §464(c)(1)(F) to:



Allow Secretary to develop regulations safeguarding
against fraud and abuse in TPD discharges
Allow Secretary to develop regulations to resume
collection on loans discharged for TPD if the borrower
receives a new Title IV loan or earns income in
excess of the poverty line
Effective July 1, 2008
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §464(e) to remove requirement
that a forbearance request be in writing

Requires terms of forbearance to be
documented by confirming the agreement
with borrower by notice and recording terms
in the borrower’s file.

Amends HEA §464(h)(1)(A) to require 9 ontime payments to successfully rehabilitate a
defaulted Perkins Loan
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §465(a)(2) to extend
cancellation benefits to Perkins Loan
borrowers who are:




teachers in low-income educational service agencies
(including special ed teachers)
Full-time staff in a pre-kindergarten or child care
program licensed or regulated by a State
Full-time lawyers employed by a public defender
organization
Full-time fire fighters
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §465(a)(2) to extend
cancellation benefits to Perkins Loan
borrowers who are:



Full-time faculty members at a Tribal college or
University
Librarians with a Master’s degree in Library Science
employed in a low-income school or a public library
serving low-income schools
Full-time speech language pathologists with a
Master’s degree working with low-income children
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program
 Full
cancellation benefits (100%) over give
years for members of the Armed forces
serving in areas of hostility
 Sense of Congress:

“The Federal Perkins Loan program is an
important part of Federal student aid and
should remain a campus-based aid program
at colleges and Universities.”
HEA Reauthorization – H.R. 4137
Federal Perkins Loan Program

Amends HEA §484A to require that:



Perkins Loans are not subject to a defense based on
a claim of infancy
Obligation to title IV aid does not apply to deceased
students, a deceased student’s estate or the estate of
such student’s family.
Amends HEA §485(b)(1)(A) to expand exist
counseling requirements for FFEL, Direct
and Perkins Loans
Ensuring Continued Access to
Student Loans Act (ECASLA)
 Public
Law 110-227
 Enacted May 7, 2008
 Addresses concerns about student loan
access problems created by recent
disruptions in credit markets
 Increases annual and aggregate Stafford
Loan Limits
 Makes changes to the PLUS Loan &
ACG/SMART Grant Programs
ECASLA – Lender of Last Resort

All FFEL loan types, except Federal
Consolidation Loans, must be made under an
LLR Program
 All LLR loans must be made with statutory
maximum interest rate, origination fee, and
default fee
 Secretary may designate entire schools as LLR
eligible through June 30, 2009
 GAs and lenders are prohibited from violating
inducement provisions or marketing LLR loans
ECASLA – Loan Purchases by ED
 Department
of Education given authority
to purchase from FFEL lenders Stafford
and PLUS loans first disbursed on or after
October 1, 2003 and before July 1, 2009
 Authority expires on July 1, 2009
 Represents temporary measure to provide
capital for student loan market
ECASLA – PLUS Loan Eligibility

Extenuating circumstances in determining PLUS
loan eligibility for parent and grad/prof student
applicants during period between 1/1/007 and
12/31/09:


Borrower has been or is delinquent for 180 days or
less on mortgage payments or medical bills
Borrower has not or is not more than 89 days
delinquent on repayment of any other debt
ECASLA – Parent PLUS Borrowers

PLUS Loans disbursed on or after July 1, 2008:



Option to enter repayment either 60 days after
disbursement or 6 months after dependent student
falls below half-time
Accrued interest is capitalized for borrowers who do
not delay repayment
Borrowers may repay accrued interest before entering
repayment if they opt to delay repayment
ECASLA – Loan Limits
 Increases
unsubsidized Stafford annual
limit by $2,000 for undergraduate
dependent students
 Increases additional unsubsidized Stafford
annual limits by $2,000 for dependent
students whose parents are unable to
borrow a PLUS loan
ECASLA – Loan Limits
 Increases
the additional unsubsidized
Stafford annual limits by $2,000 for
independent undergraduate students
 Increases additional unsubsidized Stafford
Loan limit by $2,000 for preparatory
coursework for enrollment in
undergraduate programs
ECASLA – Loan Limits
 Increases
aggregate unsubsidized loan
amounts for undergraduate dependent
students from $23,000 to $31,000
 Increases aggregate unsubsidized loan
amounts for undergraduate independent
students from $46,000 to $57,500
ECASLA – ACT/SMART Grants

Eliminates restriction to U.S. citizens
 Allows awards to students enrolled less than fulltime but at least half-time, with proportionally
reduced maximum awards
 Requires awarding of grants and making of
payments to be on the same basis as the Pell
Grant Program
 Provides that awards are based on the student’s
grade level instead of academic year
2007-2008 Negotiated Rulemaking



CCRAA Implementation
Rules effective for 2009-2010 &
subsequent award years, except TEACH
Two committees established


TEACH Grant
Loan Issues
31
2007-2008 Negotiated Rulemaking

TEACH Grant Negotiations
 3 Sessions of Negotiations



January 8-10, 2008
January 22-24, 2008
February 6-8, 2008

NPRM published March 21, 2008
 Final Regulations published June 23, 2008
 Negotiated Rulemaking website:

http://www.ed.gov/policy/highered/reg/hearulemaking/
2008/index2008.html
2007-2008 Negotiated Rulemaking
 Loan
Negotiations
 4 Sessions




January 14-16
February 4-6
March 4-6
April 15-16
 NPRM
published July 1, 2008
 Final expected by November 1, 2008
TEACH GRANT PROGRAM
SUMMARY


The TEACH Grant Program is a non-need based
program that provides up to $4,000 per year to students
enrolled in an eligible program and who agree to teach
as a highly-qualified teacher in a high-need field, at a
low-income elementary or secondary school for at least
four years within eight years of completing the program
for which the TEACH Grant was awarded.
If the Grant recipient fails to complete the required
teaching service, the TEACH Grant is converted to a
Federal Direct Unsubsidized Loan with interest accruing
from the date the grant was disbursed.
TEACH Grant Program
Final Regulations

Grants of up to:



$4,000 per year for 1st undergraduate or postbaccalaureate degree (up to an aggregate amount of
$16,000)
$4,000 per year for graduate degree (up to aggregate
amount of $8,000)
TEACH Grants are prorated for less than full-time
students
 Amount of TEACH Grants, in combination with
other assistance, may not exceed the cost of
attendance.
TEACH Grant Program
Final Regulations
 Applicants




can be:
Undergraduate students
Graduate students pursuing a Master’s
Students enrolled in a post-baccalaureate
teacher credential program or
Current or former teachers or retirees
TEACH Grant Program
Final Regulations

TEACH Grant Eligibility – All applicants must:






Meet requirements of 34 CFR 668, Subpart C –
General Provisions Student Eligibility
Submit a completed FAFSA
Sign an Agreement to Serve
Enroll in a TEACH Grant-eligible institution in a
TEACH Grant-eligible program
Be completing, or intend to complete, coursework
necessary to begin a career in teaching
Not have already earned a first BA or post-bac
TEACH Grant Program
Final Regulations

TEACH Grant Undergraduate, Post-Bac and
Graduate Student Eligibility

Cumulative GPA of at least 3.25
• From high school for first year student or first semester of
college
• From college for other students

Or above the 75th percentile on one of the batteries of
an admissions test, such as:
• SAT
• ACT
• GRE
TEACH Grant Program
Final Regulations

TEACH Grant Eligibility for Current/ Former
Teachers and Retirees:



Current teachers/retirees must have expertise in a
high-need field and be pursuing a master’s degree
Former teachers must be pursuing a certification
through a high-quality alternative certification route
Alternative certification must be offered by an
eligible institution of higher education and must be
part of a Master’s degree program
TEACH GRANT Program
Final Regulations
 TEACH



Grant-eligible Institutions:
Must be financially responsible in accordance
with 34 CFR 668, subpart L, or an alternative
standard
May establish eligibility in any of 4 detailed in
Dear Colleague Letter GEN-08-07
TEACH Grant-eligible institutions have wide
latitude to designate the TEACH Grant eligible
programs offered by the institution
TEACH Grant Program
Final Regulations
 TEACH
Grant recipient must sign an
“Agreement to Serve” that requires the
recipient to:

Teach for four years within 8 years of
completing or ceasing enrollment in a
TEACH Grant-eligible program as a fulltime highly-qualified teacher in—
• A low-income elementary or secondary school
• A high-need field
TEACH Grant Program
Final Regulations

High-need field –








Mathematics
Science
Foreign language
Bilingual education
English language acquisition
Special education
Reading Specialist
Other high-need field documented by local, State or
Federal government
TEACH Grant Program
Final Regulations

If the Grant recipient fails to complete the
required teaching service, the TEACH Grant is
converted to a Federal Direct Unsubsidized
Loan with interest accruing from the date the
grant was disbursed.

Grant recipient will have 30 days from the date
of conversion in which to pay accrued interest.
Otherwise interest will be capitalized as of the
date of conversation.
TEACH Grant Program
Final Regulations

A TEACH GRANT recipient whose grant has
converted to a Federal Direct Unsubsidized
Loan—




Enters repayment immediately
Is eligible for most benefits of the Direct Loan
Program, including an in-school deferment and
Is not eligible for any grace period
A TEACH Grant that is converted to a loan
cannot reconvert to a TEACH Grant
FINAL RULES
Perkins, FFEL & Direct Loans
 Simplification



of Deferment Process
Secretary may grant a deferment based on
information from a FFEL holder
FFEL holder may grant a deferment based on
information from the Secretary or another
FFEL holder
Perkins Loan school may grant a deferment
based on information from the Secretary, a
FFEL holder or another Perkins Loan school
FINAL RULES
Perkins, FFEL & Direct Loans

Simplification of Deferment Process (cont.)



Borrower must request deferment verbally or in
writing
Holder must grant deferment for same reason and
same time period
Holder must have no conflicting information on
borrower’s eligibility
FINAL RULES
Perkins, FFEL & Direct Loans
 Simplified


Deferment Process (cont.)
Holder must grant a military deferment based
on request from borrower or borrower’s
representative with supporting documentation
Holder must provide notice to borrower or
representative, if applicable, that deferment
has been granted
FINAL RULES
Perkins, FFEL & Direct Loans
 Loan
holders may use an accurate and
complete photocopy of a Death Certificate to
document death discharge
 “Exceptional
circumstances” discharge by
chief executive officer based on other
reliable information unchanged
FINAL RULES
Perkins, FFEL & Direct Loans

Total and Permanent Disability (TPD)
Discharge



Title IV Loan Program regulations restructured to
follow process and clarify eligibility requirements
TPD discharge application must be submitted within
90 days of date physician certifies the form
Borrower’s TPD date defined as physician’s
certification date on the application
FINAL RULES
Perkins, FFEL & Direct Loans

TPD Discharge (cont.)



Conditional discharge period is prospective starting on
the date the physician certifies the borrower’s TPD
Title IV loans or earned income received before date of
TPD do not disqualify borrower for discharge
Title IV loans or loan disbursements received after date
of TPD disqualify borrower for discharge
FINAL RULES
Perkins, FFEL & Direct Loans
 TPD



Discharge (cont.)
Minimal earned income allowed during
conditional discharge period
Loan holder must notify borrower that no
payments are due during discharge process
Only payments made after the TPD date
(physician’s certification date) are returned upon
receipt of final discharge
FINAL RULES
FFEL & Perkins Loan Program
 NSLDS

Reporting Requirements
Requires schools, lenders and GAs to report
enrollment and loan status information or any
other Title IV loan-related information required
by the Secretary by a deadline established by
the Secretary
FINAL RULES
FFEL & Perkins Loan Programs
 Certification
of Electronic Signatures on
MPNs Assigned to ED


Schools & loan holders must maintain a
certification of creation and maintenance of EMPN process, including borrower authentication
and signature process
E-signed MPNs must be retained for at least 3
years after all loans are satisfied
FINAL RULES
FFEL & Perkins Loan Programs

Certification of Electronic Signatures on MPNs
Assigned to ED (cont.)

Upon Secretary’s request:
• Loan holder must provide the certification and
cooperate in all activities to enforce an assigned loan,
including provision of testimony in a legal proceeding
FINAL RULES
FFEL & Perkins Loan Program
 Certification
of Electronic Signatures on
MPNs Assigned to ED (cont.)
 Required certification must include:


Description of borrower’s steps to execute &
sign MPN
Copy of each screen as viewed by the borrower
when signing MPN electronically
FINAL RULES
FFEL & Perkins Loan Programs
 Certification
of Electronic Signatures on
MPNs Assigned to ED (cont.)
 Required certification must include:



Description of process ensuring data integrity
Documentation supporting loan holder’s
authentication and electronic signature process
All other evidence required by ED
FINAL RULES
FFEL & Perkins Loan Programs
 Certification
of Electronic Signatures on
MPNs Assigned to ED (cont.)


Loan holder must provide any records
requested to resolve a dispute within 10
business days
Loan holder must provide complete access to
e-records until all loans made on the MPN are
satisfied
FINAL RULES
FFEL & Perkins Loan Programs

Record Retention Requirements on MPNs
Assigned to ED



Perkins schools must retain records showing date &
amount of each disbursement of loan made on MPN
until the loan is satisfied.
Upon the Secretary request, schools must submit
disbursement records on assigned loans to ED.
GAs must submit lender disbursement records to ED
on assigned loans
FINAL RULES
Perkins Loan Program

Mandatory Assignment



Schools hold more than $400 million in Perkins
Loans that have been in default for 5 or more
years
Little collection activity seen on these loans.
ED streamlined the voluntary assignment to
encourage schools to assign their aged,
defaulted loans
59
FINAL RULES
Perkins Loans Program


Secretary may require assignment of a Perkins
Loan if—

Outstanding principal balance is $100 or more,

In default for 7 or more years, and

No payment has been received in past 12 months
ED will notify schools when to assign loans.
60
FINAL RULES
Perkins Loan Program
 Definition



of “Reasonable” Collection Costs
First Collection Effort: 30% of principal,
interest and late charges collected
Second Collection Effort: 40% of principal,
interest and late charges collected
Litigation: 40% plus court costs
FINAL RULES
Perkins Loan Program
 Child
& Family Service Cancellation
 To qualify for cancellation a borrower must
be:


Employed full-time by a child and family service
agency
Provide services directly and exclusively to highrisk children from low-income communities
Perkins Loan Issues
 Electronic Announcements:



Use of Third-Party Contractors to Perform
Perkins Loan Billing and Collection Activities –
Posted April 24, 2008
Discontinuation of “Late” Late Disbursements
– Posted July 1, 2008
Changes in Assignment Procedures for
Conditional Disability Discharge – Posted July
9, 2008
Perkins Loan Issues
 FISAP-related



Dear Colleague Letters:
2007-2008 Campus-Based Reallocation Form
and process – DCL CB-08-10
FISAP Form/Instructions – DCL CB-08-09
Edit Corrections and Perkins Cash on Hand
Update Due December 15, 2008 – DCL CB07-17
Perkins Loan Issues
 NSLDS



Technical Updates:
Temporary Relaxation of Edits for Student’s
Academic Level – PK –2008-04
Reporting of a New Deferment Type Code for
Military Reservists – PK –2008-03
Reporting Perkins Loans to NSLDS by
Separate Award Year – PK-2008-02
Red Flag Rules
 The
rules are meant to help stop identity theft
and to prevent people from committing fraud
by using stolen identities.

This is different from efforts to prevent data
breaches by having adequate data security in place,
which were the subject of the 2004 set of FTC
rules on the Gramm Leach Bliley law.
Red Flag Rules
 Perkins
Loan Schools are going to be
considered “creditors” under the new rules and
will be covered.

schools who don’t make Perkins Loans are also
going to be considered creditors because they have
institutional loan programs, they accept payments
of tuition or fees over time, or they issue a debit
card to their students.
Red Flag Rules

The rules will require that the schools have in place
methods to discover when a stolen identity is being
used and to prevent the person whose identity was
stolen from being harmed, once the theft comes to the
attention of the school.

schools should have in place appropriate procedures
that they will follow if an ID Theft “red flag” comes
up, such as preventing additional charges from being
placed on an account when they are notified that it
may be subject to fraud.
Red Flag Rules
 http://www.nacubo.org/x10808.xml

NACUBO’s memo on the Red Flag Rules.
Questions?
Lori Hartung
Todd, Bremer & Lawson, Inc.
1.800.849.6669
[email protected]
70
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