Updated Report of the NASFAA Reauthorization Task Force · PDF fileUpdated Report of the...

transcript

1101 CONNECTICUT AVENUE NW, SUITE 1100 • WASHINGTON, DC 20036-4303 • 202.785.0453 • FAX. 202.785.1487 • WWW.NASFAA.ORG

Updated Report of the NASFAA Reauthorization Task ForceJuly 2016

UpdatedReportoftheNASFAAReauthorizationTaskForce,July2016

ForwardtotheJuly2016Update:

TheHigherEducationAct(HEA)of1965isthemainauthorizinglegislationthatsetsforththefederalstudentaidprogramsforhighereducation.Likealllegislationthatcreatesandmaintainsfederalprograms,itslifeprogressesin4to6yearperiodsofrelativestability,afterwhichCongressre-examinestheprogramstodeterminewhethertheyarestillservingtheirpurposesandwhetherthosepurposesneedsadjustment.InthecaseoftheHEA,thisprocessofreauthorizationhasoccurredmultipletimes,withvaryingdegreesoftimeliness.

AlthoughCongressintendedtoreauthorizetheHEAin2014,littleprogresshasbeenmadeinanycomprehensivewayasofJuly2016.SeveralbillshavebeenintroducedthatshowthedirectioninwhichcertainmembersofCongresswouldliketotakereauthorization,butnonehasprogressedpasttheintroductionphase.

NASFAAoriginallyreleaseditsreauthorizationrecommendationsin2013,basedonworkofamember-constitutedReauthorizationTaskForce(RTF)andapprovedbytheNASFAABoardofDirectors.NASFAAremainscommittedtotherecommendationsandprinciplesoutlinedintheoriginal2013RTFreport.TheAssociationhascontinuedthoseeffortsbyconveningseveralpolicy-orientedtaskforcesandworkinggroupstoexpandorenhancetheRTFrecommendationsortodevelopadditionallegislativerecommendations.TheBoardhasreviewedand,inmostcases,approvedtherecommendationsincludedinthesubsequenttaskforcereports.

ThepurposeofthisreportistoincorporatetheworkofthesubsequenttaskforcesintotheoriginalRTFreporttoformacomprehensiveworkingdocument,andtoupdatethemembershipontherecommendationsofthefollowingsubsequenttaskforcesandworkinggroups:

• Campus-BasedAidAllocationFormulaTaskForce,June2014

• ConsumerInformationTaskForce,June2014• PublicServiceLoanForgivenessTaskForce,June2014

• ServicingIssuesTaskForce,February2015• InnovativeLearningModelsTaskForce,June2015

• FAFSAWorkingGroup,July2015• ReturnofTitleIVFunds(R2T4)TaskForce,September2015

• ConsumerInformationandLawStudentIndebtednessTaskForce,March2016

Inthisreport,recommendationsformulatedsubsequenttotheoriginalRTFreportareidentifiedbyablue“ADD”notation.CongressionalorotheractivitythathasoccurredsinceJuly2013,andisstillactive,isshowninablue-shadedboxfollowingtherecommendationtowhichitisrelevant.

TheNASFAAStaffWashingtonDC,July2016

TableofContentsIntroductiontotheOriginalJuly2013Report..............................................................................iv

GeneralProvisionsRecommendations..........................................................................................1

NeedAnalysisRecommendations................................................................................................11

DirectLoanRecommendations....................................................................................................32

PellGrantRecommendations......................................................................................................57

Campus-BasedRecommendations..............................................................................................64

ConsumerInformationRecommendations..................................................................................72

ReturnofTitleIVFundsRecommendations................................................................................82

IntroductiontotheOriginalJuly2013Report:

NASFAA’sBoardofDirectorsconvenedaReauthorizationTaskForceinMarch2012toproduceasetofproposalsforthereauthorizationoftheHigherEducationActthat—• Promoteaccesstopostsecondaryeducation;• Providesimplicity,consistency,flexibility,andprogramintegrityinthedeliveryofstudent

financialaid;and• RepresentthediverseneedsoftheAssociationanditsmembership.

Indoingso,thetaskforcewasdirectedtoconsultwithNASFAA’smembershipandtoincorporatethefollowingguidingprinciples:• Promotefairnessandequityforstudentsacrossallsectorsofpostsecondaryeducation;• Promotepoliciesthataddresstheneedsofdisadvantagedstudents;• Promoteaccountability;• Encouragesimplicity;• Provideschoolswiththeflexibilitytorespondtothespecificneedsoftheirstudents;• Promotetheprimacyofneed-basedaid;• Recommendpoliciesthataccommodatethediversityofacademicdeliverymodels;• Promotetheuseoftechnologywhereverpossible;• Eliminatestatutoryrequirementsthatusefinancialaidtoenforceunrelatedsocialpolicies;• Supportrecommendationswithresearchanddataanalysiswhereverpossible;and• Promoteprogramsandeffortsthatencouragestudentfinancialandacademicpreparation

atanearlyage.

Accordingly,thetaskforceheldalmost40listeningsessionsatconferencesacrossthecountry.Membercommentswereanalyzedandcondensedintorecommendations.Inaddition,recommendationsfromtheprior(2003)reauthorizationtaskforcewererevisitedand,wherenecessary,updated.Thisprocessresultedin61recommendations,presentedtotheBoardinacondensedformatinMarch2013.Onerecommendationwasrejected,threewerereturnedtothetaskforceforfurtherdevelopment,and57wereaccepted.

Thisreportpresentstheacceptedrecommendationsinfullerdetail,andexpandeddiscussionsofthethreeissuesstillpendingBoardapproval.

Update,July2016 GeneralProvisions

GeneralProvisions

1. DateofIssuanceofFinalReportforaProgramReview

Recommendation

• RequiretheDepartmentofEducationtoprovidethefinalreportforaProgramReviewtoaninstitutionwithin60daysafterreceiptoftheinstitution’sresponse.

StatutoryCitation

MasterCalendarHEA§482[20U.S.C.1089]

ProgramParticipationAgreements(hearings;audits)HEA§487(b),(c)[20U.S.C.1094]

ProgramReviewHEA§498A[20U.S.C.1099c–1]

Background,Rationale,andImplementationConsiderations

InordinatelylongdelaysinreceiptofthefinalprogramreviewreportcreateuncertaintyandpotentiallyincreaseliabilitiesfortheschoolbecauseitdoesnotknowwhatisrequiredtoresolveproblemsorcontinuefundinginTitleIVprograms.Therehavebeeninstancesofyears-longdelays.TheRTFhasheardthatdelaysaresometimesduetoreviewerstryingtogetapolicyquestionresolvedtotheschool’sbenefit.However,ifexistingrulesandguidanceareunclearorinsufficientenoughtocausetheprogramreviewertoseekfurtherguidance,theschoolshouldnotbeheldtoaccounteither.

2. OverawardTolerance

Recommendation

• EstablishintheGeneralProvisionssectionoflawacommonoverawardtoleranceof$500incaseswherethestudentreceivesadditionalresourcesafterpackaging,applicabletothecampus-basedandDirectLoanPrograms.

StatutoryCitation

FFELP(overawards,applicabletoDL)HEA§428G(d)(2)[20U.S.C.1078−7(d)(2)]

FWS(toleranceforearningsaboveneed)HEA§443(b)(4)[42U.S.C.2753(b)(4)]

ThisrecommendationseekstoensureconsistenttreatmentofstudentsacrosstheTitleIVprograms(otherthanPellGrant,whichisnotsubjecttooverawardsresultingfromotherresources).TheamountofPellGrantactuallydisbursedorexpectedtobedisbursedshouldbeusedtodetermineoverawards,toaccountforthestudent’sabilitytopostponereceipttolatertermsinviewofnewlifetimelimits.Theschoolshouldbeallowedtodeterminetheorderinwhichaidisadjusted(reflectingthecurrentpracticethatallowsschoolstodeterminetheorderinwhichaidprogramsareawardedtothestudentinpackaging).DirectLoanoverawardsthatremainafterapplyingthetoleranceandadjustingtheaidpackageshouldberepayableunderthetermsofthepromissorynote,asiscurrentlythecaseunderReturnofTitleIVFundsrules.Currently,onceaDirectLoanhasbeenfullydisbursed,thereisnoconceptofanoveraward;loanfundsdonothavetobereturned.Beforedisbursementhasoccurred,however,aschoolmustadjusttheloan(or,undercertaincircumstances,otheraidinthestudent’spackage)tothedollarforanyunanticipatedadditionalaidthestudentisawarded.Bycontrast,inthecampus-basedprogramsthereisa$300tolerance(whichdatesto1995).Forexample,astudentwhoisfullyfundedthroughcampus-basedandotheraidbutwithoutaDirectLoanreceivesa$300scholarship.Thatstudent’spackageisnotrequiredtobeadjusted.AnotherstudentwhowasnotfullyfundedbutcoveredallofhisunmetneedwithaDirectLoanalsoreceivesa$300scholarship,beforetheloanisdisbursed;hispackagemustbeadjustedforthefull$300.Further,iftheschoolhastheloanfundsinhand(buthasnotyetdisbursedthemtothestudent),theloanmustbeadjustedaheadofanycampus-basedaid.Athirdstudent’spackagecontainsFWSfundsinadditiontoaDirectLoan;becauseoftheFWSaward,hemayhavea$300toleranceappliedandtheloandoesnothavetobeadjustedevenifitwasnotyetdisbursed.TheFSAHandbookadvisesthat“Whenastudent’saidpackageincludesassistancefrommultipleprogramsandthoseprogramshavedifferentoverpaymentregulations/requirements,aschoolmustapplythemoststringent/restrictiverequirements.”TheRTFbelievesthatconsistencyintheoverawardprovisionswouldreducestudentconfusionandprovideafairerapproachamongstudentswithdifferentaidpackages.

3. AbilitytoBenefit

Recommendation

• Allowastudentwhodoesnothaveahighschooldiplomaoritsrecognizedequivalent,andwasnothome-schooled,tomeetthegeneralstudenteligibilityrequirementconcerningacademiccredentialsbycompleting,withtheequivalentofagradeofCorbetter,atleast6credithoursofcollegecoursework(ortheequivalent)thatisapplicabletowardadegreeorcertificate.

StatutoryCitation

GeneralStudentEligibilityHEA§484(d)[20U.S.C.1091(d)]

TheConsolidatedAppropriationsActforfiscalyear2012barredstudentswithouteitherahighschooldiplomaoritsrecognizedequivalent(generallyaGeneralEducationDevelopment(GED)credential),unlesshomeschooled,fromreceivingfederalstudentaid,effectiveJuly1,2012.Previously,studentscouldalsoreceiveTitleIVfundsiftheydemonstratedtheabilitytobenefit(ATB)fromtheeducationoffered.Traditionally,theeligibilityofstudentswithoutahighschooldiplomaorGEDwasbasedontheresultsofED-approvedteststhatweredevelopedtomeasureATB.InAugust2008,basedonasuccessfulExperimentalSitesproject,Congressaddedtothelawaprovisionthatallowedstudentstodemonstratetheabilitytobenefitbysatisfactorycompletionofsixcredithoursortheequivalent,ifapplicabletowardadegreeorcertificateofferedbytheinstitution.Thatamendmentwaseffectiveuponenactment;governingregulationsbecameeffectiveJuly1,2011.Thus,thisprovisionwasinplaceforarelativelyshortspanoftimebeforeitwasknockedoutbyageneralrescissionoftheATBconcept.ForcingstudentstofirstgetaGEDandthenenrollinapostsecondarydegreeorcertificateprogramprolongstheirtimetodegreecompletionandinmanycasesimpactstheirabilitytoobtainwell-payingjobsandsupporttheirfamilies.TheRTFrecommendsthatthesix-creditprovisionbereinstated,withsomemodification.Astudentwhodoesnothaveahighschooldiplomaoritsrecognizedequivalent,andwasnothome-schooled,couldmeetthegeneralstudenteligibilityrequirementconcerningacademiccredentialsbysuccessfullycompleting,withtheequivalentofagradeofCorbetter,atleast6credithoursofcollegecourseworkthatisapplicabletowardadegreeorcertificate.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:

• ConsolidatedAppropriationsAct,2016[P.L.114-113]:amendsthedefinitionofcareerpathwaysprogramtoalignwithWorkforceInnovationandOpportunityAct(WIOA).Whilethischangeisastepforward,NASFAA’srecommendationdifferssubstantiallyfromthenewversionofabilitytobenefit.

Onebillhasbeenintroducedthatwouldimpactthisrecommendation:• RestoringInvestmentinATBStudentEducation(RISE)Act[H.R.4158]:wouldincludeacloser

versionofNASFAA’srecommendation.

4. SelectiveServiceRegistration

Recommendations

• Eliminatetheprovisionrequiringinstitutionstomonitorandenforceselectiveserviceregistration(assigntheresponsibilityfordeterminationtoSelectiveService).

• Considerapaththatallowsstudentswhofailedtoregister,butwhoarepasttheageofregistration,toregaineligibility(possiblythroughcommunityserviceorfederalawardsrestrictedtothecostoftuitionandfeesonly).

StatutoryCitation

GeneralStudentEligibilityHEA484(n)[20U.S.C.1091(n)]

MilitarySelectiveServiceAct50U.S.C.Appendix,462(f)

TheRTFrecommendseliminationoftherequirementtoberegisteredwithSelectiveServicefromthegeneralstudenteligibilitycriteria.Thisrecommendationhasbeenmaderepeatedlyforalongtime.Attheveryleast,responsibilityfordeterminingwhetherafailuretoregisterwasknowingandwillfulshouldbeshiftedbacktoSelectiveServiceandsomepathbeconstructedthatallowsstudentswhoknowinglyfailedtoregister,butwhoarepasttheageofregistration,togaineligibility(possiblythroughcommunityserviceorfederalawardsrestrictedtothecostoftuitionandfeesonly).

July2016Update

CongressionalActioninthe114thCongress(2015-2016)SeveralbillshavebeenintroducedthatwouldimpacttheSelectiveService:

• ToRepealtheMilitarySelectiveServiceAct[H.R.4523]:wouldeliminateSelectiveServiceentirelyandwouldprohibitdenialofrights,privileges,benefits,oremploymentonthegroundsoffailuretoregisterfortheSelectiveServicepriortotherepeal

• DraftAmerica’sDaughtersActof2016[H.R.4478]:wouldrequirefemalesbetweentheagesof18and26toregisterfortheSelectiveService,effective90daysafterpassage

• NationalDefenseAuthorizationActforFiscalYear2017[S.2943]:wouldrequirefemalestoregisterwiththeSelectiveServicewhoturn18onorafterJanuary1,2018

5. Drug-relatedIneligibility

Recommendation

• Eliminatethetiebetweenstudenteligibilityanddrugconvictions.StatutoryCitation

GeneralStudentEligibilityHEA§484(r)[20U.S.C.1091(r)]

Afederalorstatedrugconviction—ifreportedbythestudent—candisqualifyastudentforfederalstudentaidifitoccurredduringaperiodofenrollmentforwhichthestudentwasreceivingfederalstudentaid.Convictionsoccurringoutsideenrollmentperiodsasanaidrecipientdonotcount,unlessthestudentwasdeniedfederalbenefitsfordrugtraffickingbyafederalorstatejudge.Additionally,aconvictionthatwasreversed,setaside,orremovedfromthestudent’srecorddoesnotcount,nordoesonereceivedwhenthestudentwasajuvenilecount,unlessheorshewastriedasanadult.Manyifnotmostschoolscurrentlyhaveadmissionsandstudentconductruleswhichaddressdruguse.Institutionsgenerallyhaveinternalpoliciesandproceduresthatwouldresultinsuspensionorexpulsionofstudentswhoareconvictedofdrugabusewhileenrolled.TheRTFbelievesthatfinancialaidshouldnotbeusedtoenforcesocialpolicies.Individualscannotreceivefederalfinancialaidwhileincarceratedinfederalorstatefacilities.Oncereleasedandagainpossiblyeligibleforaid,theseindividualshavealreadysatisfiedpunishmentimposedforconviction;educationmaybetheirbestroutetorehabilitation.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)Twodifferentbillshavebeenintroducedthatwouldmodifyorrepealthisprovision:

• FairAccesstoEducationAct[H.R.3561]:wouldexcludeamisdemeanorchargeforpossessionofmarijuanafromitscurrentclassificationasa“drug-relatedoffense”

• StoppingUnfairCollateralConsequencesfromEndingStudentSuccess(SUCCESS)Act[H.R.4004/S.2557]:wouldcompletelyrepealthedrug-relatedineligibilityprovision

6. Reinstatementofstudenteligibility

Recommendation

• StandardizetherulessurroundingtheregainingofstudenteligibilityacrosstheTitleIVprogramstotheextentpossible.

StatutoryCitation

GeneralStudentEligibilityHEA§484(j)[20U.S.C.1091(j)

Undercurrentrules,astudentmaybepaidPellGrant,campus-basedaid,andTEACHGrantonlyforthepaymentperiodinwhichheorshegainseligibility,butmayreceiveDirectLoansfortheentireloanperiod.ForcertaincausesofineligibilitythestudentcanreceiveTitleIVaidfortheentireawardyearoncetheineligibilityisresolved.RequiringdifferentadministrativeapproachesdependinguponwhichTitleIVprogramisaffectedisneitheradministrativelyefficientnoreasilyunderstoodbytherecipientoftheTitleIVassistance.Formostcausesofineligibility,thisrecommendationwouldreinstateastudent’seligibilityretroactivelytothebeginningoftheawardyear(orloanperiod).Forsatisfactoryacademicprogress(SAP)issues,reinstatementwouldaffectonlythecurrentpaymentperiod,butthatpointintimewouldapplytoalloftheTIVprograms.

7. I-9EmploymentEligibilityVerification

Recommendation

• Includetheresultsofdatabasematchesasacceptableinlieuofdocumentsusedtoestablishemploymenteligibilityforemployment.

StatutoryCitation

HEA§484(g)(2)

Currently,schoolsarerequiredtocollectcopiesofSocialSecurityCards,AlienRegistrationCards,citizenshipdocuments,orpassportseventhoughcitizenship,socialsecurityandINSmatchesareperformedinthefederalstudentaidapplicationprocess.Thisrecommendationwouldsimplifytheprocesswithoutcompromisingthelaw’sintentofverifyingidentityandeligibilityforemployment.

8. Non-automaticAllowableCharges(CashManagement)

Recommendation

• AllowschoolstouseTitleIVfundstopayallallowableeducation-relatedcostschargedtothestudent’sinstitutionalaccountwithoutanyadditionalauthorization,unlessthestudentactstoplacerestrictionsonautomaticpaymentforcertaincharges.

StatutoryCitation

Thisisessentiallyaregulatoryissue,basedonverygeneralauthoritytoregulateprovidedbyHEA§487(20U.S.C.1094).Background,Rationale,andImplementationConsiderations

Currently,theDepartmentofEducation(ED)requiresaschooltoobtainastudent’spermissiontocreditTitleIVfundstochargesbeyondtheautomaticallyallowablecostsoftuition,fees,institutionallycontractedroomandboard,and,forPellGrantrecipients,bookstorechargesrelatedtotherequirementtoprovideameansofobtainingbooksandsuppliesearlyinthepaymentperiod.SchoolscanuseTitleIVfundstopayothereducation-relatedcostschargedtothestudent’sinstitutionalaccountonlyifthestudentauthorizesit(i.e.,onlyifthestudentopts-intosuchuseofTitleIVfundsbytheschool).TheRTFrecommendationreversesthatprocess.Aschoolwouldhavetoinformstudentsofitspolicyandprovideanopt-outbywhichthestudentcouldrestrictautomaticapplicationofTitleIVfundstoonlytuition,fees,institutionallycontractedroomandboard,andearlybookstorecharges,unlessthestudenthasauthorizedpaymentofothercharges.Currently,theDepartmentofEducation(ED)requiresaschooltoobtainastudent’spermissiontocreditTitleIVfundstochargesbeyondtheautomaticallyallowablecostsoftuition,fees,institutionallycontractedroomandboard,andbookstorechargesrelatedtotherequirementtoprovideameansofobtainingbooksandsuppliesearlyinthepaymentperiod.SchoolscanuseTitleIVfundstopayothereducation-relatedchargesonlyifthestudentauthorizesit(i.e.,onlyifthestudentopts-intosuchuseofTitleIVfundsbytheschool).NASFAA’sReauthorizationTaskForce(RTF)recommendsreversingthatprocessbyallowingschoolstouseTitleIVfundstopayallallowableeducation-relatedcostschargedtothestudent’sinstitutionalaccount.Schoolswouldhavetoinformstudentsofthispolicyandprovideanopt-outbywhichthestudentcouldrestrictapplicationofTitleIVfundstoonlytuition,fees,andinstitutionallycontractedroomandboardunlessthestudenthasauthorizedpaymentofothercharges.Studentsandfamiliesdonotunderstandtheoptionscurrentlyavailableortherequirementthatschoolsdisbursefundstostudentsevenifthereareoutstandingchargesonthestudent’saccount.An“opt-out”processislesscumbersomeforthestudent.Sincethisrequirementisastudentaccountfunction,thisrequirementshouldnotbetiedtothefinancialaidawardingprocess.TheFAFSAand/orawardnoticewouldincludeastatementthatfundswillbecreditedtoincurredinstitutionalchargesunlessthestudentoptsoutofcertainones.

9. Pay-as-you-godisbursementforcompetency-basededucation

Recommendation

� Incompetency-basededucation,disbursefundstocoverdirectcostsasastudentdemonstratescompetencymastery.

ThisrecommendationwasputforwardbytheInnovativeLearningModelsTaskForceinJune2015.Thetaskforcerecommendsa“payasyougo”disbursementprocesswithincompetency-basededucation,similartothecurrentCompetency-BasedEducationExperimentalSiteInitiative,whichdisbursesfundstocoverdirectcostsasastudentdemonstratescompetencymastery.Withthismodel,highereducationinstitutionsshouldworkwiththestudentto“earn”thefinancialaidfundingbyprovidingperiodicorincrementaldeliveryatspecificsuccesspointsasthestudentworkstowardtheireducationalgoal.

10. Hybrid/mixedmodalityfordirectassessments

Recommendation

� AllowdirectassessmentcomponentswithintraditionallearningprogramstoqualifyaseligibleforTitleIVfunds.

ThisrecommendationwasputforwardbytheInnovativeLearningModelsTaskForceinJune2015.ThetaskforceisencouragedbythecurrentExperimentalSiteInitiativeallowingmixedmodalityprogramstoreceivefederalfinancialaidfunds,andrecommendsachangetobothHEAsection481(b)(4)and34CFR668.10(a)(1),whichcurrentlyrequireaprogramutilizingdirectassessmenttousedirectassessmentfortheentireprogram.Thischangewouldallowstudentstomovemorequicklythroughtheareasinwhichtheyareknowledgeableandreceiveamoretraditionaleducationalexperienceinthoseareaswhichmaybeneworchallenging.

Update,July2016 NeedAnalysis

NeedAnalysis

1. Prior-PriorYear(PPY)Data

Recommendation

• Implementtheuseofincomedatafromthesecondprioryear,commonlyreferredtoasprior-prioryear,asthebasisfortheEFCcalculations,acrosstheboard.

StatutoryCitation

NeedAnalysisDefinitions(totalincome)HEA§480(a)(1)(A)[20U.S.C.1087vv(a)(1)(A)]

Prior-prioryear(PPY)dataprovidesmoreaccurateincomedataingreaterdetail,withahigherlikelihoodofavailabilityfromtheIRSdataretrievaltool.Earlieravailabilityofincomeforneedanalysisallowsearliernotificationto,andplanningby,studentsandtheirfamilies.Schoolswouldretainprofessionaljudgmentauthoritytotreatindividualcircumstances.TheuseofPPYdatacanenhanceverificationefforts.Itfacilitatesabetteralignmentoftheaidapplicationprocessandtheadmissionsapplicationprocessfornewstudents.Asaresult,itoffersmoretimeforstudentstoevaluatetheawardsfrominstitutionstomakeaninformeddecisionaboutnetcostsforattendanceattherespectiveinstitutions.NASFAAconductedastudytodeterminewhetherbasingneedanalysisonprior-prioryeardataratherthanimmediatelyprioryeardatawouldsignificantlyaffectthedistributionoffederalstudentaidfunds,particularlyPellGrantfunds.

July2016Update

ThisrecommendationwasreinforcedbyNASFAA’sFAFSAWorkingGroupandreceivedwidespreadsupportfromotherorganizations.Utilizingexistinglegislativeauthority,PresidentObamaannouncedviaexecutiveauthorityinSeptember2015thattheDepartmentofEducation(ED)wouldadoptPPYforallapplicantsbeginningwiththe2017-18awardyearFAFSA.AreportdetailingtheNASFAAstudyresults,ATaleofTwoIncomeYears:ComparingPrior-PriorYearandPrior-YearthroughPellGrantsAwards,waspublishedinOctober2013.Asecondreport,GreatExpectations:ImplicationsofImplementingPrior-priorYearIncomeDatafortheFAFSA,releasedbyNASFAAinMay2015,presentedfurtherimplicationsandanalysisfromaworkinggroupofrepresentativehighereducationprofessionals.InOctober2015NASFAAestablishedaPPYImplementationTaskForcetorunthroughMarch2017.Thetaskforcewill:

(1) ProactivelyidentifyimplementationissuesandworkthroughtheNASFAAstaffandcollaboratewiththeUSDepartmentofEducationonensuringasuccessfulrolloutofPPY;

(2) SolicitanddeliverfeedbackfromtheNASFAAmembershipandboardofdirectorsonPPYrollout;

(3) Identifybestpractices,Q&As,andtrainingsrelatedtoPPYfortheNASFAAmembership;(4) IdentifyandaddressanyissuesimpactingfinancialaidcomputersystemsduringaPPY

transition;(5) FacilitatecollaborationswithotherkeystakeholdersinvestedinPPY,includingtheadmission

andstategrantagencycommunities;and(6) Conductapost-mortemasPPYisrolledout,deliveringfinalrecommendationsonthe

evolutionofPPYgoingforward.CongressionalActioninthe114thCongress(2015-2016)Threedifferentbillshavebeenintroducedthatwouldcodifythischangeintolaw:

• SimplifyingtheApplicationforStudentAidAct[H.R.3177]:wouldmakePPYpermanent• SimplifyingFinancialAidforStudentsAct[S.1872/H.R.3446]:wouldmakePPYpermanent• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldmakePPYpermanentand

wouldalsomodifyasmallprovisionincurrentlawthatwillfacilitatetheearlierreleaseoffinalPellGrantnumbersfromtheDepartmentofEducation(ED),allowingcollegestoprovideaccuratescholarshipandgrantinformationmuchearlier.SupportedbyNASFAA,thisbillpassedoutoftheHouseCommitteeonEducationandtheWorkforceonJune23,2016.

2. AutoZero–DislocatedWorkerQualificationCriterion

Recommendation

• Eliminatethedislocatedworkercriterionasanautomaticqualifierfortheauto-zerocomputation.StatutoryCitation

HEA§479(c)[20U.S.C.1087ss(c)]

Useofthedislocatedworkercriteriontoqualifyforazero“EFC”hasunintendedeffects,distortingandsignificantlyreducingEFCforfamilieswheretheincomeofthedislocatedworkerisnotrepresentativeofthefamily’sfinances.TheappropriatevehicleforconsiderationofreducedincomeandtheimpactofthereductionisthediscretionofthefinancialaidadministratorauthorizedinHEAsection479.Anautomaticzeroexpectationcanbeasevereunderstatementoffamilyabilitytopayforeducationalexpenses,ifsubstantialfamilyassetsthatwouldsignificantlyincreasetheEFCareignoredbecauseofthisprovision.Whileotherqualificationcriteriafortheauto-zerocomputationrequirerelativelysimplefamilycircumstancesreflectedintheuseofsimplerversionsoftheIRSForm1040,thereceiptoffederalmeanstestedbenefits,oranincomesufficientlylowastonotrequirefilinganincometaxreturn,thedislocatedworkercriterioncanpermitafamilywithextremelyhighlevelsofassetstoqualifyforazeroEFC.Thisoutcomedistortsthepurposeof“need”analysis,andgivesanunfairadvantagetosomefamiliesthatareactuallymoreabletocontributethanothers.

July2016Update

NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.Theresultantproposedmodeldoesnotconsiderdislocatedworkerstatus.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactdislocatedworkerqualificationcriterion:

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations

3. FAFSASimplification:AutoZero

Recommendations

• AddreceiptofSSI,TANForGeneralReliefbenefitsassolequalifiersforanAutoZeroEFCdetermination.

• Students/parentswhorespondthattheyreceiveorreceivedthesebenefitswouldnothavetocompleteanyquestionsontheFAFSAregardingincomeorassetinformation.

• Verificationofbenefitswouldbeconductedeitherthoughadatabasematch(SSI)orattheschool.StatutoryCitation

HEA§479[20U.S.C.1087ss]

Recipientsofthesebenefitshavealreadycompletedaneedanalysisprocessforagovernmentalagencyandshouldnothavetoproveagainthattheyareneedy.Thisrecommendationwouldallowstudentswhohave,orwhosefamilieshave,alreadydemonstratedhighneedtoauto-qualifyformaximumfederalstudentaidandwouldreducetheFAFSAtopersonalidentityandnon-incomeeligibilityquestions.

July2016Update

NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.TheresultantproposedmodelwouldassignmaximumPellGranteligibilitytoanyapplicantwhoseparent(ifdependent)orhouseholdmember(ifindependent)receivesSupplementalNutritionAssistanceProgram(SNAP)and/orSupplementalSecurityIncome(SSI)benefits.Effectivewiththe2017-18FAFSA,theDepartmentofEducationaddedMedicaidtothelistofmeans-testedbenefitswhichhelpanapplicantqualifyforthesimplifiedneedstestorforanautomaticzeroEFC.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldusemeans-testedfederalbenefitstoautomaticallyqualifyastudentforPellGrant.Forallotherapplicants,itwouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations

4. SimplifiedNeedsTest

Recommendation

• Eliminatethesimplifiedneedstest.StatutoryCitation

HEA§479(b)[20U.S.C.1087ss(b)]

Determinationofeligibilityiscomplexenoughtoconfuseapplicantsandbedifficulttoexplain,especiallywithregardtotaxformsthatcouldhavebeenfiled.Insomecases,theexclusionofsubstantialassetscausesunnecessaryexpenditureswhichcouldbetargetedatneedierapplicants.Theexclusionofhomeequityandretirement/pensionplansfromthedefinitionofassetsandtheassetprotectionallowancealreadyprovidereliefwithintheformula. Retainingaproperlydesignedandupdatedauto-zeroEFCoptionshouldbesufficienttoidentifypopulationsforwhomassumptionsofmaximumneedareappropriate.Asanalternativeapproach,increaseddataavailabilityfromtheIRSdataretrievaltoolmayallowforanappropriateflowofquestionsduringtheapplicationprocesstodeterminewhetheracollectionofassetinformationisnecessarybasedontheanalysisofappropriateincomeitemsfromtaxfilings.

July2016Update

NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.Theresultantproposedmodelcreatesthreepathsforassessingfinancialneed,incorporatingtheconceptthatfamilieswithcertainfinancialcharacteristicsneednotbeaskedafullrangeofincomeandassetinformation.AgraphicrepresentationofthemodelisattachedtothisreportasAppendixB.Effectivewiththe2017-18FAFSA,theDepartmentofEducationaddedMedicaidtothelistofmeans-testedbenefitswhichhelpanapplicantqualifyforthesimplifiedneedstestorforanautomaticzeroEFC.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations

5. CostofAttendance

Recommendations

• Clarifyinstitutions’authoritytoreducenon-tuitioncostofattendance(COA)componentsforfactorsidentifiedbytheinstitution,suchasless-than-full-timeenrollmentordistanceeducation.

• Deleteotherreferencestocostdeterminationsfortelecommunicationsanddistanceeducation.

� Includepriorlearningassessmentsinthecostofattendance.

StatutoryCitation

HEA§472[20U.S.C.1087ll]

Conformingamendmentstodelete472(10)and484(l)(2)[20U.S.C.1087ll(10)and20U.S.C.1091(l)(2)]

CurrentstatutereferstoenrollmentstatusdistinctionsonlyinthetuitionandfeescategoryofCOAcomponents.Thelawexcludescertaincategoriesofcostcomponentsaltogetherforless-than-half-timeenrollment.TheDepartmentofEducation(ED)interpretstheseaspectsofthelawasanindicationthatCongressdidnotintendlivingexpensestobereducedbasedsolelyonpart-timeenrollmentstatusesofhalf-timeorgreater,eventhoughthelawgivesinstitutionstheauthoritytodetermineallowances[“anallowance(asdeterminedbytheinstitution)forroomandboardcostsincurredbythestudent..”].Consequently,studentsenrolledathalf-timeorabove,butlessthanfull-timemayreceiveuptomaximumannualloanamountswhilemakingslowprogresstowardscompletingtheirprogramsofstudy,accruinglargerdebtandpotentiallyexhaustingfederalloaneligibilitybeforecompletingtheirprogramandover-borrowingintermsoftheircapacitytorepaytheirloansfromfutureearnings.Aninstitutionshouldbeabletosetallowancesandpoliciesthatarerelevanttoitsstudentdemographicsandmission.Thus,ifaschool’spart-timepopulationconsistsoverwhelminglyofadultlearnerswhoareemployedfull-time,theschoolcanadjustitscostofattendanceallowancestorecognizethatthosestudentsdonotneedextraassistancetosubsist.ProfessionaljudgmentcouldstillbeusedtoincreasetheCOAforthosestudentslegitimatelyneedingthemaximumresourceswhileenrolledlessthanfull-time.

TitleIVaidshouldbeallowedtopayforcostsassociatedwithpriorlearningassessmentpreparation.TheInnovativeLearningModelsTaskForceputforwardthisrecommendation.

Manypriorlearningassessmentsrequirethestudenttospendaconsiderableamountoftimepreparingmaterialsfortheassessment,whichcancreateafinancialburdenwithoutfundingtocovertherelatedcosts.Thischangemightencouragemorestudentstoapplytheirpriorlearningtowardsthecompletionofaprogram.AnExperimentalSiteInitiativepermitsTitleIVaidtocoversomevarietiesofpriorlearningassessments.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)• Onebillwasintroduced,theFlexibilitytoInnovateforCollegeAffordabilityAct[H.R.3372],

thatallowspriorlearningassessmentstobeincludedinCOA.

6. IndependentStudentDefinitionRelatedtoHomelessness

Recommendation

• Eliminatehomelessnessfromautomaticindependentcriteriaandmovetooverrideauthorityasanexample.

StatutoryCitation

NeedAnalysisDefinitions(independentstudent)HEA§480(d)(1)(H)and(I)[20U.S.C.1087vv(d)(1)(H)and(I)]

ThecomplexityofthedefinitionsanddeterminationsofhomelessnesshasresultedinmisunderstandingandinaccuraciesobservedbyaidadministratorsintheanswerstotheFAFSAdependencyquestion.

7. ReflectregionalcostoflivinginIncomeProtectionAllowance(IPA)

Recommendation

• DirectEDtostudy,andreportbacktoCongress,thepossibilityofadjustingtheIPAonaregionalbasiswithperiodicCOLAadjustmentsbasedonregionalvariationsintheCOLA.

StatutoryCitation

Thisrecommendationwouldlikelybeincorporatedintothereauthorizinglegislation.Background,Rationale,andImplementationConsiderations

Currentlythesameincomeprotectionallowance(basedonfamilysizeandnumberincollege)isusednationwide,thoughthereisgreatvariationincostoflivingacrosstheU.S.AGovernmentAccountabilityOfficereport,GAO-09-825,statesthat“whiledatasuggestthatthecostoflivingishigherinsomeareasthaninothers,thecurrentaidformulaaccountsforthesedifferencesinonlyalimitedway.Howthesedifferencesaffectafamily’sabilitytopayforcollegeisunclear,inpartbecausenoofficialmeasureofgeographiccost-of-livingdifferencesexists.WeidentifiedthreepossibleCOLAoptionsthatcouldbeusedinthefederalaidformula.TheseCOLAscouldincreasePellGrantsandotherfinancialaidforasmallpercentageofstudentsfromhigh-costareasbutcouldalsofurthercomplicatetheprocessforcalculatingandadministeringfederalstudentaid.”Thistextsuggeststhatfurtherstudyisneeded.

8. EFCFormula–ForeignIncomeExclusion

Recommendation

• ReporttheamountofforeignincomeexclusionasuntaxedincomeontheFAFSA.

• ExpandtheIRSdataretrievaltooltoincludethisdataelement.StatutoryCitation

NeedAnalysisDefinitions(untaxedincomeandbenefits)HEA§480(b)(2)[USC1087vv(b)(2)]

Thefederaltaxcodeallowsqualifiedindividualstoexcludecertainformsofincomeearnedinanothercountry.Theneedanalysisformuladoesnotutilize“excluded”foreignincome.However,theprimarypurposeofneedanalysisistodetermineafamily’sfinancialstrengthandabilitytocontributetoeducationalexpenses.Inmanyinstances,incomeearnedinanothercountrymaybetheindividual’smajororonlysourceofincome.Excludingitpresentsaninaccuratepictureofthefamily’sfinancialstrengthrelativetootherFAFSAapplicants.

9. EFCFormula–BusinessLosses/CapitalLosses/OtherLossesResultinginNegativeAdjustedGrossIncome

Recommendations

• Addbackanybusiness,capital,andotherlossesthatdonotrepresentareallossofincomewhendeterminingtheparents’andstudent’sincomeforFederalMethodology(FM)needanalysispurposes.

• UtilizetheIRSdataretrievaltooltoidentifythatincome.StatutoryCitation

NeedAnalysisDefinitions(untaxedincomeandbenefits)HEA§480(b)[20U.S.C.1087vv(b)]

TheFMneedanalysisformuladeterminesafamily’sfinancialstrengthandabilitytocontributetoeducationalexpenses,andfacilitatescomparisonofonefamily’sneedtoanother’s.“Paper”lossesallowedaspartoftheIRStaxcodeartificiallyreduceincomeand,asaresult,artificiallyreduceEFC.EDwouldneedtodetermine,inconsultationwithIRSandrepresentativeschoolsthathaveexperienceinthispractice,whichlossesshouldbeincludedinincomeandhowtocapturethatinformationthroughtheIRSdataretrievaltool.

10. FederalMethodology(FM)EFCFormula–BusinessandFarmAssets

Recommendations

• Eliminatethesmallbusinessexclusion(countbusinessassetsregardlessofthenumberofemployees).

• Eliminatetheexclusionoffarmvaluefromassets.StatutoryCitation

NeedAnalysisDefinitions(assets)HEA§480(f)(2)[1087vv(f)(2)]

Thethresholdfordefininga“small”businessis100employees,whichseemsexcessive.FMalreadyadjustsbusinessequitydownwardonaslidingscaletoprotecttheincome-producingcapacityoftheasset.Itmaymakemoresensetoreassesstheadequacyoftheprotectionallowancethanexcludebusinessesaltogether.Thenatureoffamilyfarmshaschangedandismoreakintoabusiness.Ifassetsfrom“small”businessesarereinstatedintheneedanalysis,soshouldfarmassets.Farmassets(otherthaninvestmentfarms)areadjustedinthesamewayasbusinessvalue,usingthesameslidingscale(onetableisusedforbothintheEFCformula).Asforbusinesses,theadequacyofthefarmassetadjustmentmightneedtobereviewed.Thevalueofafamilyhomesituatedonafarmcouldandshouldbeexcluded.

11. IRS/FAFSADataExchangeRecommendation

• DirecttheSecretarytocontinuetoexpandandrefinetheIRS/FAFSAdataexchangeprocesstoincludeallcurrentFAFSAdataelementsthatcanbeobtainedfromthefederaltaxreturn,tosupportamorerobustFMneedanalysisformula(e.g.interest/dividendincome,IRSdistributions,socialsecurityincome,certainformsofuntaxedincome,etc.).

StatutoryCitation

NeedAnalysisDefinitions(totalincome)HEA§480(a)(1)(B)[1087vv(a)(1)(B)]

NowthattheIRS/FAFSADataExchangeprocesshasbeenimplemented,thenumberoftaxreturndataelementscollectedcouldbeexpandedsignificantlyinanefforttoincreasetheaccuracyofcurrentlyrequiredFMdataelements.Thepossibleinclusionofnewtaxreturndataelementscouldalsobeconsidered. Theaccuracyofthefinancialinformationcollectedfromfamiliestodeterminetheirexpectedcontributiontowardeducationalexpensesandeligibilityforfederalformsoffinancialaidisparamounttoafairandequitableprocess.Theadditionofanexpandednumberofdataelementssupportsthisgoalandreducestheverificationburdenoncollegesanduniversities.Theadditionofanexpandedsetoftaxreturndataelementswouldsupportamorerobustneedanalysisformula.

July2016Update

NASFAA’sFAFSAWorkingGroupreinforcedthisrecommendation,andrecommendedexpansionoftheIRSDRTtoincludealllineitemsofthe1040andW2information.CongressionalActioninthe114thCongress(2015-2016)ThreebillshavebeenintroducedthatwouldencourageexpansionoftheIRSDataRetrievalTool(IRSDRT):

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldretrieveallincomeinformationforfinancialaidapplicantsfromtheIRS

• StudentFinancialAidSimplificationAct[H.R.3265]:wouldallowtheDepartmentofEducationtocollectmoreinformationfromtheIRS,reducingthenumberofquestionsoftheFAFSAby31

• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldencourageEDtocontinuetoenhancetheIRS/FAFSAdataexchangethroughautomaticallypopulatinginformationandskiplogic

12. Utilizethe1040astheFederalStudentFinancialAidApplicationRecommendations

• DirecttheDepartmenttoperformafeasibilitystudywiththeIRStodevelopaprocessinwhichthetaxreturnistheprimaryfederalfinancialaidapplicationvehicle.

• AmendbothHEAandtaxlawtoauthorizeuseofthetaxreturninthisway.StatutoryCitation

HEA§483(f)[20U.S.C.1090(f)]

CurrentlymostofthefinancialdatausedtocompletetheFAFSAcomesfromthetaxreturn.TheIRSdataretrievaltoolprovidesdirectpopulationofthoseitems,andEDismovingsignificantlytowardsmandatoryusethroughtheverificationprocess.However,filingaFAFSAisstillaseparateprocessfromfilingthetaxreturnandrequiresthestudentandfamilytoinitiatethestudentaidprocessonanentirelydifferentwebsite.Theaidapplicationprocesscouldbemergedwiththetaxreturnprocessbyprovidingafinancialaidapplicationsectiononorwiththe1040asanoptionforapplyingforfederalstudentaid.ThiscouldeliminatetheFAFSAapplicationforstudentsandparentswhofiletaxreturns.ThisideabuildsonthesuccessoftheFAFSA/IRSdataretrievaltoolbymakingfilingtaxesandapplyingforfinancialaidoneprocess.Ifprior-prioryearneedanalysisisadopted,someofthetimingissueswouldbeeliminated.Inthatcase,thecheckoffwouldactuallybeforthepreviousyear’staxreturndata.Forexample,familiescouldindicateonthe1040thattheywanttoapplyforfederalaidbycheckingaboxorcompletingasupplemental1040form.TheFAFSAwouldstillbeneededasanoptionforfamiliesthatdonotfiletaxreturnsorwillnotfilebyinstitutionaldeadlinesandasaformthatcouldbeupdatedorcorrected.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:

• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldrequireEDtoexaminewhetherataxreturncanbeusedtogenerateanEFCwithoutadditionalactiononthepartofthestudent

13. SingleMethodologyandApplicationLimitsUseofFAFSADatabyStatesandInstitutionsDescriptionofIssue

Inresponsetowidespreadconcernabouttheactualandpossibleproliferationofneedanalysisapplicationformsandtheassociatedfamily/studentburdeninfilingmultipleforms,the1992HEAAmendmentsmandatedasinglemethodologyaswellasasingle,no-chargeapplicationform(FAFSA)fordeterminingTitleIVeligibility.CongressalsoprovidedtheSecretarywithauthoritytoincludealimitednumberofdataelementstotheFAFSAthatwerenotrequiredtodeterminefederaleligibility,butthatcouldbeincludedasanincentiveforstatesandinstitutionstousetheFAFSAandFederalMethodologyforawardingtheirownaid.Giventhataidapplicationwasapaper-basedprocess,suchconcernsaboutrespondentburdenwerenotunreasonable.However,todaythevastmajority—atleast98percentaccordingtorecentpublicstatementsbyFSA—ofTitleIVaidapplicantfiletheirFAFSAselectronically.Thus,concernsregardingtheneedforfamiliestocompletemultipleapplicationsinhardcopyformats—withmuchofthesamehouseholdandfinancialinformationcollectedmultipletimes—areoutdated.Infact,today’sFAFSAontheWeb(FOTW)encouragesapplicantstocompleteaseparateform—viatheDataRetrievalTool(DRT)—attheIRSwebsite.Arguably,then,FOTWisamulti-formfinancialaidapplicationprocess—whileintheFOTWsession,anapplicantcaninitiateasecondsessionattheIRSwebsite.Todayitismoreappropriatetothinkabouttheaidapplicationprocessasaseriesofconcurrentonlinesessionsinsteadofphysicallydistinctapplicationforms.Recommendation

AtthistimetheRTFisnotrecommendingastatutoryprovisiontodirecttheSecretarytousetechnologyinamoreusefulandefficientmanner.TheRTFdoesnotwanttheDepartmenttobeinthepositionofwaitingforstatutorychangetocatchupwithtechnologicalinnovation.Rather,CongressshouldencouragetheSecretarytoengagestakeholdersaswellastechnologyexpertsindiscussionstoexplorewaystheIRS-DRTmodelcouldbeextendedtootherfederalagencies,statesandinstitutions.However,astatutorychangemightbeneededtoallowthesharingofdatacollectedontheFAFSAwiththirdparties.Nevertheless,itiscriticaltoestablishwithintheHEAanappropriateframeworkforanaidapplicationprocessthatischaracterizedbyon-lineactivitybetweentheapplicantandavarietyofaidproviders—chieflythefederalgovernment,statesandinstitutions.Section483oftheHEAprescribestheformsthataretobeusedbystudentsandtheirfamiliestoapplyforfederalfinancialaid.Thebreadthofthestatutoryprescriptionextendstospecifyingbothpaper-basedandelectronicFAFSAforms.Theproposedrevisiontotheapplicationprocessenvisionsaschemewhereinthecompletionandsubmissionofanaidapplication“form”isaccomplishedinanonline“session.”Inparticular,CongressshouldusethestatutetoensurethattheSecretaryisabletoutilizeexisting,emerging,andas-yet-undevelopedtechnologiestosimplifyandstreamlinetheprocessforapplyingforfinancialaidirrespectiveofthesourceofthataid.OutmodedreferencestopaperFAFSAsmustbeeliminated.Itisalsoimperativeforthird-partyfinancialaidproviders(andtheiragents)tohaveaccesstofederalapplicantinformation.Anexistingstatutoryprovision—HEA483(a)(10)—permitsthesharingoffederally-collectedfinancialaidapplicationdatawithstatesandinstitutions.

Specificand/oroptimaloperationalfeaturesarenotdiscussedhere.However,theDepartment’ssuccessfulimplementationoftheIRSDRTfunctionintheFOTWapplicationprovidesahelpfulwaytothinkaboutthebroadgoalsCongressshouldarticulateforanaidapplicationprocessthatcanshedthelimitsofapaper-boundprocessandtakefulladvantageoftechnologicalinnovations.Suchgoalscouldinclude:• Supportingtheconceptofa“one-stop”financialaidapplicationprocess;

• Identifyingwherevariousdataneededforfederalandnonfederalaideligibilitydeterminationscurrentlyreside;

• Encouragingallfinancialaidproviderstoembraceastudent-centricapproachasareplacementforthecurrentprogram-centricmodel;

• Ensuringthatthird-partyaidprovidersagreewithandadheretoacommonunderstandingofbroadfinancialaidpolicyobjectivesandmethodology;and

• Authorizingnear-term/startupexpenditurestohelpengagethird-partyaidproviders.Congressshouldnotbeoverlyprescriptivewithregardtothefinancialaidapplicationprocess.Congressshould,however,providetheSecretarywithflexibilitytoexecuteCongress’policyobjectivesinamannerthatoptimizestheefficientandeffectiveuseoftechnology.RationaleforRecommendation

TheIRS-DRTillustrateshowtechnologycanbeleveragedtohelpsimplifythefinancialaidapplicationprocessforstudentsandtheirparents.Italsocanhelppolicymakersthinkaboutwaystoimprovefinancialaidprogramdesignanddelivery.AlthoughtheIRS-DRTisessentiallyasolutiondevelopedandagreedtobytwofederalagencies,standardscurrentlyexisttofacilitatesharingofinformationinanon-proprietaryfashion.Anapplicationprogramminginterface(API)isareadilyavailableandcommonwayinwhichvarioussoftwarecomponents(e.g.FOTWandtheIRS-DTR,orwww.twitter.comandthevariousTwitterappsfortabletsandsmartphones)communicatewitheachother.Itseemsasimilarsolutioncouldbefoundtofacilitatecommunicationbetweenthefederalgovernmentandvariousthirdpartiesintheaidapplicationcontext.

14. TreatmentofUnmarriedPartnersorSameSexCouples

Recommendations

• Fortheparentsofdependentstudents,allowunmarriedpartnerswholivetogether,regardlessofsex,tobecountedasaparentontheFAFSA(“Parent1”and“Parent2”),toaccordthosepartnersthesametreatmentasmarriedcouplesandcalculateneedoncombinedincomesandtotalhousehold.TheFAFSAquestionon“married”wouldhavetobealteredtoaccommodatethesesituations.

• Forstudents,treatcouples,regardlessofgender,inanyformofstate-recognizedrelationships(same-sexmarriage,civilunion,domesticpartnership,orotheridentifiedarrangement)asmarriedandcalculateneedoncombinedincomesandtotalhouseholdsize.

• AdjusttheFAFSAprocesssothattheIRSdataretrievalcanaccommodatesuchcouplesfilingseparately.

• ClarifyinthedependencyoverrideandprofessionaljudgmentsectionsoflawthatFAAsmayadjustanyapplicationinformationincludingmaritalstatustoreflectdomesticarrangementsthat,forallintentsandpurposes,mirrormarriage,eveniftheapplicant’sstatedoesnotrecognizeit.

StatutoryCitation

NeedAnalysisDefinitions(familysize)HEA§480(l)[20U.S.C.1087vv(l)]

OnApril29,2013,theDepartmentofEducation(ED)announcedachangeinthewayitviewsunmarriedparentsofdependentstudentsforthepurposeofcompletingtheFAFSA.Beginningwiththe2014-15awardyear,incomeandotherinformationfrombothofastudent’slegalparentswillhavetobeprovidedontheFAFSAifthoseparentslivetogether,regardlessofmaritalstatusorgender.Legalparentsaredefinedasbiologicaloradoptiveparents.Thisapproachreflectsapolicychangethatconsiderstheparent’srelationshiptothestudent,ratherthantheparents’relationshiptoeachother.EDconstructedthisapproachundertheconstraintsoftheDefenseofMarriageAct(DOMA).Sincethen,inJune,theU.S.SupremeCourtruledthatDOMAisunconstitutional.Meanwhile,theReauthorizationTaskForce(RTF)proposedarecommendationthattakestheissuefurther.TheRTFbelievesthatanamendmenttoTitleIVoftheHEAshouldstatethat,notwithstandinganyotherfederallaw,boththeparentofadependentstudentandthatparent’spartner,regardlessofgender,shouldbetreatedthesameasopposite-sexmarriedcouples.Sincethestepparentinanopposite-sexmarriagedoesnothavetoadopttheapplicant,neithershouldthestepparentinasame-sexcouple.Studentsinastate-sanctioned,same-sexmarriageorotherstate-recognizeddomesticarrangementshouldalsobetreatedthesameasanopposite-sexmarriedcouple.TheRTFseekstorecognizetherealityofcurrentlivingsituationsandtoassessfamilyfinancialstrengthmoreaccurately.Forparentsofdependentstudents,allunmarriedpartners,regardlessofgenderorstatelaws,wouldbetreatedthesameasmarriedcouples.Unmarriedstudentswithpartnerswouldhavetobetreatedthesameasmarriedcouplesiftheyhavegonethroughsomeformalcommitmentprocesssanctionedbyastate;thisincludesconsideringotherwisedependentstudentsasindependentbyvirtueofmarriage.Ifastudenthasnotgonethroughastate-sanctionedprocess,aidadministratorscouldconsiderprofessionaljudgmentactionstooverridedependencyand/ormakeotheradjustments.

AccordingtotheWilliamsInstitute(UCLASchoolofLaw),basedontheU.S.Census,therearenearly650,000same-sexcouplesintheUnitedStates,ofwhichapproximately114,100arelegallymarriedandover108,600areincivilunionsorregistereddomesticpartnerships.Asof2011,aboutoneinfivesame-sexcouplesareraisingchildrenunderage18.AccordingtotheNationalCouncilofStateLegislatures,twelvestates(Connecticut,Delaware,Iowa,Maine,Maryland,Massachusetts,Minnesota,NewHampshire,NewYork,RhodeIsland,Vermont,Washington)plustheDistrictofColumbiaallowsame-sexmarriagesasofMay2013.Anadditionalfourstatesallowcivilunionsthataffordallstate-levelspousalrightstosame-sexcouples.Severalotherstatesgrantvaryingdegreesofstate-levelspousalrightstounmarriedcouplesindomesticpartnerships.PollsconductedbythePewResearchCentershowthatpublicsupportforsingle-sexmarriagehasincreasedfrom35%in2001(with57%opposed)to49%inMarch2013(44%opposed).

July2016Update

AsaresultoftheSupremeCourt’s2013UnitedStatesv.WindsordecisioninvalidatingpartoftheDefenseofMarriageAct(DOMA),anylegalmarriagethatisrecognizedbythejurisdictioninwhichthemarriagewascelebratedisrecognizedforTitleIVHEAprogrampurposesregardlessofsexofpartners.ResultingEDguidanceappliesonlytosame-sexmarriageandexcludesotherrelationshipsrecognizedunderstatelawsuchasregistereddomesticpartnerships,civilunions.NASFAArecommendsthatPJshouldincludeadjustinganyapplicationelement,includingmaritalstatus,fordomesticarrangementsthatmirrormarriage,evenifapplicant’sstatedoesnotrecognizeit.

15. HouseholdSize—DefinitionofDependents

Recommendations

• Removetheautomaticinclusioninhouseholdsizeofchildrenorothersbasedonproviding50%ofsupport.

• Allowinclusioninhouseholdsizeofchildrenwhomeetthedefinitionofdependentstudent(i.e.,arenotorwouldnotbeconsideredindependentforTitleIVpurposes).

• BaseinclusionofotherindividualsinthehouseholdsizeonIRSrulesforclaimingdependentsonthetaxreturn.

• UsetheIRSdataretrievalprocesstoverifyhouseholdsizewheneverpossible.

• Makethesamechangestothedefinitionofdependentforindependentstudents.

• Addtothestatutoryexamplesofallowableprofessionaljudgmenttheabilitytoadjusthouseholdsizetoincludeindividualswhowerenot,orcouldnotbe,claimedonthetaxreturniftheaidadministratordeterminesthatitwouldbeappropriatetodoso.

Thus,includeinhouseholdsizeforadependentstudentthefollowing:

1. Student;

2. Parent(s),inaccordancewithRecommendation10;

3. Childrenwhocananswer“no”toallofthedependencyquestions(i.e.,childrenundertheageof24whodonototherwisemeettheTitleIVdefinitionofindependent),iftheyliveinthehousehold;

4. Otherindividualswhowereclaimedbytheparent(s)onthebaseyearincometaxreturn(exclusiveofchildrenwhowouldbedependentunderTitleIVbutwhodonotliveinthehousehold);

5. Otherindividualsforwhomtheaidadministratormakesadocumenteddecisionthat,duetounusualcircumstances,inclusioninhouseholdsizeisappropriate.

TheFederalMethodology(FM)setinlawallowschildrentobecountedinhouseholdsizeaslongastheylivewiththeapplicant’sparentsandtheparentsprovidemorethan50%support.Therearenootherrestrictions,althoughhouseholdsizeisabigfactorindeterminingEFC.Thus,childrenwhoareindependentstudentscanbecountedintheparent’shouseholdsizeforadependentsibling,andoldernon-studentchildrenlivingathome,regardlessofemploymentstatus,canbecountediftheparentsclaimtheyprovidemorethanhalfsupport.Thesupporttestalsoappliestootherindividualslivinginthehousehold.Thereisnoruleofthumbregardingdeterminationofhalfsupportforchildrenorotherindividuals,andthisdeterminationcanvarygreatlyacrossdifferenteconomicstrata.Verificationofhouseholdsizecanonlybeaccomplishedbycollectingasignedstatementfromeithertheparentsinthecaseofadependentstudentorfromtheindependentstudent,generallyrelyingonthoseindividualstodeterminewhat“halfsupport”means.

TheFAFSAinstructionscurrentlydirectdependentapplicantstoincludeinhouseholdsize:• Theapplicanthim-orherself,eveniftheapplicantdoesnotlivewiththeparents;• Theapplicant’sparents;• Theparents’otherchildrenif(a)theparentswillprovidemorethanhalfoftheirsupportbetween

duringtheawardyear,or(b)thechildrencouldanswer“no”toeveryoneofthedependencyquestionsontheFAFSA;

• Otherpeopleiftheylivewiththeparentsatthetimeofapplication,theparentsprovidemorethanhalfoftheirsupportandtheparentswillcontinuetoprovidemorethanhalfoftheirsupportduringtheawardyear.

TheRTFbelievesthatthedeterminationof“dependent”shouldbemorestandardizedandverifiable.TheRTFalsobelievesthatchildrenwhoarereceivingfinancialaidasindependentstudentsshouldnotbecountedinthehouseholdsizeusedtodetermineaidforotherchildrenwhoaredependent.Withregardtosiblingswhoarenotstudents,especiallyadultchildren,thereshouldbeadefinedcut-offpointfortheexpectationthatthosesiblingscanstillincreasethesizeoftheparents’householdwithregardtoaiddeterminationsfordependentapplicants.Whilethewillingnessofsomeparentstokeepcaringforolderchildrenislaudable,thatisaprivatedecisionthatshouldnotresultinincreasedpublicsupportofyoungerchildrenwhoseturnitistoattendcollege.TheRTFrecommendationtouseIRSdefinitionsofwhocanbeclaimedonataxreturnismeanttotightentherulesandprovidemoreconsistencysurroundingthedefinitionofdependentsforhouseholdsizepurposes.TheIRStesttoclaimanindividualasanexemptionprovidesamoredefinedapproachtoassessingwhatconstituteshalfsupport.TherecommendationwillalsoopenanotheravenueforverificationthroughtheIRSdataretrievaltool.Adependentapplicant’ssiblingwhoisreceivingaidasanindependentstudentisbenefitingfrompublicallyfundedbenefits.Theindependentstudent’scostofattendanceusedtocalculateaidincludesroomandboardandotherallowablelivingexpensesfortheperiodofenrollment,typically9months.Regardlessoftheformofthefederalaid(grant,loan,orwork),publicfundsareinvolved.AllowingthatsamestudenttoreducetheEFCforayoungerdependentsiblingineffectallowsthefamilyto“doubledip”intopublicsupport.UnderIRSrules,achildaged24orover(whetherornotastudentandwhetherornotlivingwiththeparents)couldbeclaimedasanexemptiononthetaxreturnandthereforestillbeincludedinhouseholdsizeifthatchildhasgrossincomeunder$3,800andtheparentsprovidemorethanhalfofhisorhersupport.(Grossincomeincludescertainscholarshipandfellowshipgrants.Scholarshipsandfellowshipsreceivedbydegreecandidatesandusedfortuition,fees,supplies,books,andequipmentrequiredforparticularcoursesgenerallyarenotincludedingrossincome.)Asiscurrentlythecase,anaidadministratorcanadjusthouseholdsizeunderprofessionaljudgment,byeitherincludingadditionalindividualsorexcludingindividuals.TheRTFrecognizesthattherearesituationswherehouseholdsizeshouldbeincreased.Forexample,agrandparentmaybesupportedbytheapplicant’sparents(whetherlivingintheparents’homeorinsomeotherfacility)butduetothegrossincometest,theparentmaynotbeabletoclaimthegrandparentasadependentonthetaxreturn.AnoldersiblingwhodoesnotmeettheIRStestscouldneverthelessbeincludedinthehouseholdifdeemedappropriatebytheFAA,butthereasonsforthatsibling’scontinueddependenceontheparentswouldhavetobedocumentedandwouldhavetobedifferentiatedbyspecialcircumstancesfromotherfamilieswitholderchildrenstillinthehome(thesearecurrentlythegeneralprinciplesofprofessionaljudgment).

TheRTFalsoseekstoensurethat,fordivorcedparents,adependentsiblingwholivesinthehouseholdoftheapplicant’scustodialparentcouldnotalsobecountedintheotherparent’shouseholdunderthe“otherindividual”category,hencetheparenthetical”exclusiveof”caveatinitem4undertherecommendations.IRSPublication17givesdetailedinformationonwhocanbeclaimed.AcondenseddescriptionoftherulesandtheapplicablepagesfromPublication17areattachedtothisreportasAppendixA.

July2016Update

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,whichwouldincludeincomeandfamilysizetoberetrievedfromtheIRS

16. RenametheresultsofFMwithatermthatreflectsitsindexnatureratherthan“EFC”

Recommendation

� TheresultoftheFederalMethodologyshouldbeanindexthatranksapplicantsaccordingtotheirfinancialstrength,ratherthananexpectedfinancialcontribution.

StatutoryCitation

HEA§473andthroughoutPartF;§483[20U.S.C.1087andthroughoutPartE;20U.S.C.1090]

ThisrecommendationwasputforwardbytheFAFSAWorkingGroupinJuly2015.Theworkinggroupfeelsstronglythat,becausetheFederalMethodology(FM)hasbeenmodifiedovertheyearstoaccommodatepoliticalwhimsandcostconcerns,theterm“ExpectedFamilyContribution”isnowamisnomerthatmisleadsandconfusesstudentsandfamilies.Ratherthanrepresentingafinancialcontributionbytheapplicant,theresultoftheFMfunctionsmoreasanindexthatranksapplicantsaccordingtotheirfinancialstrength.Thenameoftheindexshouldbechangedtoreflectthatreality.

Update,July2016 DirectLoans

FederalDirectLoanProgram

1. InterestRates

Recommendations

• Establishvariable-fixedinterestratesthatarereflectiveofmarketrates,butallowrefinancing.

• ForParentPLUSloans,linkinteresttoaTreasurybillinstrument,withanaddedpercentagethatreflectsthecosttothegovernmentofborrowingmoneyandservicingtheloans.

• ForGradStudentPLUSloans,discounttherateslightlybyasmalleraddedpercentagethanisappliedtoParentPLUS,andestablishaninterestratecap.

• ForStaffordloans,discounttheratemorebyasmalleraddedpercentagethanisappliedtoGradPLUS,andestablishalowerinterestratecap.Subsidizedloansshouldcarryalowerinterestratethanunsubsidizedloans.

StatutoryCitation

TermsandConditionsofLoans(interestrate)HEA§455(b)[20U.S.C.1087e(b)]

TheRTFbelievesthatalong-termfixtoDirectLoaninterestratesisneeded;thisrecommendationexpandsononemadebyNASFAA’sStudentLoanIndebtednessTaskForce(ITF).Aninstrumentshouldbeestablishedthatwillmeasureafairmarketvalueofinterestratesforstudentloansandthecosttoadministertheprogram,whichcanhaveasharedriskforboththetaxpayerandthestudent.ThisratewouldbeestablishedonJuly1andcarryforthforthetermsoftheloan(“variable-fixed”).TheratedeterminedonanyJuly1wouldapplytoallloansmadewithintheensuingyearuntilthenextJuly1determination.Whenaborrowerhasmultipleloanswithdifferentrates,themonthlyrepaymentamountcouldbedeterminedasaweightedrepaymentoftheseparateloans.ForParentPLUSloans,theRTFrecommendslinkingtheinterestratetomarketrates,suchasaTreasurybill(T-bill)rateplusanadditionalpercentagethatreflectsthecosttothegovernmentofborrowingmoneyandservicingtheloans.ForGradPLUSloans,discounttheinterestrateslightly(i.e.,addasmallerpercentagetotheT-billrate)andestablishacapoverwhichtheinterestratemaynotgo.Thepremisehereisthatalthoughprofitshouldnotbeanobjectiveofthestudentloanprogram,graduatestudentshavealargerpersonalgainatstakefromtheiradvancededucationandsoshouldbearslightlymoreoftheprogramcost.ForStaffordloans,discounttheinterestratefurtherandestablishalowercapoverwhichtheinterestratemaynotgo,onthepremisethatthefederalgovernmentshouldhelpfinanceundergraduateeducation,whichresultsinamoresignificantsocietalgain,bymakingloansaffordable.Ifsubsidizedloanscontinuetobeauthorized,subsidizedloansshouldbemadeatalowerinterestratethanunsubsidizedloansasthereisademonstratedneedcomponent.Finally,ifmarketinterestratesdecreasebysomespecifiedamountfromtherateatwhichaborrower’sloansweremade,theprogramshouldallowrefinancing,subjecttoarefinancefee.Refinancingwouldbeseparatefromconsolidationprovisions.

July2016Update

InAugust2013,theBipartisanStudentLoanCertaintyActof2013[P.L.113-28]wassignedintolaw.ThelegislationtiesannualinterestratesonDirectLoanstotherateonhigh-yield10-yearTreasurynotesplusanadd-onpercentagewithinaspecifiedcap.

LoanType Add-OnPercentage InterestRateCap

DirectStaffordLoans 2.05% 8.25%DirectUnsubsidizedLoans

(Undergraduates) 2.05% 8.25%

DirectUnsubsidizedLoans(GraduateandProfessional

Students)3.6% 9.5%

DirectPLUSLoans 4.6% 10.5%CongressionalActioninthe114thCongress(2015-2016)Severalbillshavebeenintroducedthatwouldaffectloaninterestrates,includingtheissueofrefinancing:

• StudentLoanRefinancingAct[H.R.649]:wouldallowstudentstorefinanceDirectLoansattheinterestrateatthetimeofthemodification

• FairnessinStudentLoanLendingAct[H.R.1141/S.729]:wouldallowstudentloanborrowersingoodstandingtorefinancetheirloanstoarateequaltothe10-yearTreasurynoteonthelastdayofbusinessofthepreviousmonthplusonepercent

• BankonStudentsEmergencyLoanRefinancingAct[S.793/H.R.1434]:wouldalloweligiblestudentloanborrowerstorefinancetheirfederalloanstolowerinterestrates

• CollegeforAllAct[S.1373/H.R.4385]:wouldcutinterestratesandimposeacapof8.25%andallowborrowerstorefinanceloansatthecurrentinterestrates

• StudentBorrowerFairnessAct[H.R.3675]:wouldallowborrowerstorefinancetheirstudentloansattheinterestratesofferedtobanksbytheFederalReserve

• FederalStudentLoanRefinancingAct[H.R.3751]:wouldautomaticallyrefinanceinterestratesonallfederalstudentloanstofourpercent

• ParentPLUSLoanImprovementAct[H.R.4661]:wouldlowerinterestratesonPLUSloansmadeonbehalfofadependentstudent

• IntheRedAct[S.2677]:wouldalloweligiblestudentloanborrowerstorefinancetheirfederalloanstolowerinterestrates

• StudentLoanRefinancingandRecalculationAct[H.R.5274]:wouldallowforrefinancingofbothDirectLoansandFFELPLoansandwouldlowerthepercentageadd-ontothe10-yearTreasurybillinthecalculationofinterestratestoonepercentforundergraduate,graduate,andparentborrowers

• StudentLoanFairnessAct[H.R.5487]:wouldcapnewDirectLoaninterestratesat3.4percent

2. LoanFees

Recommendation

• Eliminatetheloanfeecurrentlychargedtostudents.StatutoryCitation

TermsandConditionsofLoans(loanfee)HEA§455(c)[20U.S.C.1087e(c)]

LoanfeeswereintroducedtohelpoffsetloansubsidiesintheFFELProgram.Theoriginationfeewasintendedtobetemporarywhenitwasimposedonstudentborrowersintheearly1980sasabudgetmeasure,butisessentiallyataxonstudentscollectedbywithholdingaportionofthestudent’sproceeds,butrequiringrepaymentofthefullloanamountbeforedeductionoffees.Loanfeestherebymasktheborrower’strueloancostandeffectiveinterestrate:Aftertakingintoaccountloanfees,theannualpercentagerateonfederalloansishigherthantheadvertisedinterestrate.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)Threebillshavebeenintroducedthatwouldeliminateloanoriginationfees:

• EliminatingtheHiddenStudentLoanTaxAct[H.R.1285]:wouldeliminateoriginationfeesonallDirectLoans

• ParentPLUSLoanImprovementAct[H.R.4661]:wouldeliminateoriginationfeesonPLUSloansmadeonbehalfofadependentstudent

• StudentLoanRefinancingandRecalculationAct[H.R.5274]:wouldeliminateoriginationfeesonallDirectLoans

3. SchoolAuthoritytoReduceLoanAmounts

Recommendations

• Allowschoolstosetlowerloanlimitsforspecificpopulations,academicprograms,credentiallevels,orothercategoriesestablishedbytheschool.

• Allowaidadministratorstoincreaseaparticularstudent’sloanfromtheschool’simposedlimit,uptotheregularapplicablestatutorylimit,onacase-by-casebasisunderprofessionaljudgment.

• Retaintheauthorityforschoolstodenyloansonacase-by-casebasis.StatutoryCitation

LoanLimitsHEA§428(b)(1)[20U.S.C.1078(b)(1)]

ProfessionalJudgmentHEA§479A(c)[20U.S.C.1087tt(c)]

Thisrecommendationessentiallyreversescurrentpolicy,whichallowsreductionofloansonlyonacase-by-casebasis,withindividualdocumentation.Withtheauthoritytosetlimitsbyprogram,dependencystatus,livingarrangement,enrollmentstatus,orotherparameters,schoolscouldnotifystudentsearlierofthereducedloanamountandoftheschool’sprocessforexceptions,ifany,tothepolicy.ManyNASFAAmembershaverequestedthisauthorityforsometimeasatooltoavoidincurringunnecessarydebt,reachingaggregateloanlimitsbeforetheprogramofstudyiscompleted,andlosingtheinterestsubsidybeforecompletingtheprogramofstudy.TheITFmadeasimilarrecommendation.IfCongressdoesnotadoptthisrecommendation,theRTFbelievesothermeasureswouldbeneededtocontrolborrowing,suchasmandatedreductionofannualloanlimitsbasedonenrollmentstatus.

July2016Update

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldallowaninstitutiontosetalowerloanlimitforstudentsinprogramsofstudyidentifiedbytheschoolifcertainconditionsaremet,withaprovisionforincreasingthatlimitforindividualstudentsintheprogramunderspecialcircumstances

4. ProrationofAnnualLoanLimitsforRemainingPortionsofPrograms

Recommendation

• EliminateDirectloanprorationforfinalperiodsofprogramsthatareatleastayearinlength.StatutoryCitation

LoanLimitsHEA§428(b)(1)[20U.S.C.1078(b)(1)]

AnnualStaffordloanlimitsforundergraduatesmustbeproratedifthestudentisenrolledinaprogramthatisshorterthanoneacademicyear,orifthestudentisenrolledinaprogramthatisanacademicyearorlongerbutthestudentisborrowingforafinalperiodofenrollmentthatislessthanafullacademicyearinlength.Bycontrast,astudentenrolledforafullyearbutlessthanfull-time,orforasingletermthatisnotthefinaltermintheacademicprogram,iseligibletoborrowthefullannualamount.Prorationforstudentsinafinalperiodofenrollmentisinconsistentwithotherloanlimitpolicy.Prorationpenalizesstudentswhoareabouttocompletetheirprogramofstudyandmaydrivestudentstoborrowfromaprivatelender.Prorationofloanlimitswouldberetained,however,forprogramsthatarelessthananacademicyearinlength.

July2016Update

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldrequireprorationbasedonactualenrollmentstatus

5. SeparatetheGradPLUSandParentPLUSProgramsfromEachOther

Recommendations

• EstablishaseparateloanprogramforgraduateborrowersthatmirrorsthecurrentGradPLUSprogrambutidentifiesthisprogramspecificallyasaloanforgraduate/professionalstudents.

• Retainadversecreditrulesforstudentborrowersbutconductthecreditcheckonlyforfirst-timeborrowersattheschool.

• DirectEDtophaseinrevisedunderwritingstandardsforparentborrowerstoreflectamorerealisticassessmentofabilitytorepay.

• DirectEDtopublishannually,andsolicitpubliccommenton,theunderwritingstandardstobeappliedtoparentborrowers.

StatutoryCitation

AuthorityforPLUSProgramHEA§428B[20U.S.C.1078-2]

LoanTypesIncludedUnderPLUSProgramUmbrellaHEA§455(a)(2)[20U.S.C.1087e(a)(2)]

Currently,thereisonePLUSLoanprogramavailabletobothparents(ParentPLUS)andgraduatestudents(GradPLUS).Althoughthetypicalborrowingprofilesofparentsandgraduate/professionalstudentsareverydifferent,thesamecreditstandardsapplytobothparentandgraduate/professionalborrowers(i.e.,PLUSborrowersmusthavenoadversecredithistoryinordertoborrow).Theterm“noadversecredithistory”isnotastrictmeasureofunderwriting,yetborrowersunderbothParentPLUSandGradPLUScanborrowuptothecostofattendance,whichcanbetensofthousandsofdollars.SeparatingtheGradPLUSandParentPLUSprogramsallowsforvariations,suchascreditstandards,loanlimits,andinterestrates(asproposedinRecommendation#1above)thataretailoredtothedifferencesbetweenthesetwodistincttypesofborrowers.Indeterminingcreditworthiness,parenteligibilitycreditcriteriashouldincludesomemeasureoflikelyabilitytomanagetheirdebtandrepaytheloan,suchasadebt-to-incomemeasure,useofFICOscores,oranothertestofadequateresources.Currently,financialaidadministratorsareallowedtoevaluateaborrower’sabilitytorepayaPLUSloanthroughdebt-to-incomemeasures.However,financialaidadministratorshavelittleloanunderwritingexpertiseandarereluctanttousethisauthority.Further,amorecomprehensivemeansofassessingtheabilitytomanagedebtandthewillingnessandtrackrecordtorepaydebtisneeded.Anychangesmadetoparenteligibilitycriteriashouldbeappliedtonewborrowersonly,toprotectcurrentborrowersalreadyintheDirectLoansystem.Asmorecreditrestrictionsareimposed,moregrantsupportneedstobecreatedforschoolsservingunderrepresentedanddisadvantagedpopulationsandtheirstudents.

6. AnnualandAggregateLoanLimits

Recommendations

• Establishoneannualsubsidizedlimitbyeliminatingdifferencesbasedonyearinschool.

• Increaseannualandaggregateloanlimitstoamorerealisticlevel.

• Stepaggregatelimits,sothatalowerlimitappliestoundergraduatestudentswhohavenotyetsuccessfullycompletedthesecondyearofanundergraduateprogram.

• Simplifythesubsidized/unsubsidizedstructureofloanlimits.StatutoryCitation

AnnualandAggregateLoanLimitsHEA§428(b)(1)(A)and(B)[20U.S.C.1078(b)(1)(A)and(B)

AdditionalUnsubsidizedLoanLimitsHEA§428H(d)[20U.S.C.1078−8(d)

TheRTFwouldeliminatedifferencesinannualloanlimitsbasedonyearinschool,andwouldstepaggregatelimitssothataloweraggregatelimitappliestoundergraduatestudentswhohavenotyetsuccessfullycompletedthesecondyearofanundergraduateprogram.SteppingtheaggregateswouldbesimilartothePerkinsLoanlimitstructure.Undergraduatesubsidizedannualloanlimitshavenotincreasedsince2007-08.BeginningJuly1,2007,loanlimitsincreasedfrom$2,625to$3,500forfirst-yearundergraduatestudents,andfrom$3,500to$4,500forsecond-yearstudents.Priortothisincrease,loanlimitshadnotbeenraisedsince1993.Theannuallimitfortheremainderofundergraduateeducationwasraisedfrom$4,000to$5,500in1993andhasremainedatthatlevel.Morerelianceonunsubsidizedloanswasreflectedinincreasesin2008.Full-timelimitsneedtobestructuredtoaccountforinflation(forexample,keyedtotheConsumerPriceIndex)toavoidlossofbuyingpowerandtoreflectrealisticexpenses.Thestructureofloanlimitsisdifficulttoexplainandneedstobesimplified.Thecurrentstructureofbaselimitsdividedbetweensubsidizedandunsubsidizedamountsplusadditionalunsubsidizedamounts,allofwhichvarybyyearinschool,reflectspiecemealchangestotheloanprograms.Thechartonthefollowingpagesummarizestheloanlimitrecommendation.

July2016Update

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldeliminatevariancesinannuallimitsbyyearinschoolandincreaseannualandaggregateloanlimits;however,itwouldnotstepaggregatelimits

CurrentUndergraduate Yr1 Yr2Yr3andBeyond

TotalAggregate

Sub $3,500 $4,500 $5,500$23,000Sub$31,000SubandUnsubUnsub $2,000 $2,000 $2,000

YearlyTotal $5,500 $6,500 $7,500

AdditionalUnsubforIndepStudentsorPLUSDenials

$4,000 $4,000 $5,000$57,500

YearlyTotal $9,500 $10,500 $12,500

ProposedUndergraduate Yr1 Yr2 Yr2+TotalAggregateforStudentsthrough2ndYear

Yr3andBeyond

TotalAggregate

Sub $5,500 $5,500 $5,500 $16,500Sub$22,500SubandUnsub

$5,500 $33,000Sub$45,000SubandUnsub

Unsub $2,000 $2,000 $2,000 $4,500

YearlyTotal $7,500 $7,500 $7,500 $10,000

AdditionalUnsubforIndepStudentsorPLUSDenials

$5,000 $5,000 $5,000$37,500

$6,000$75,000

YearlyTotal $12,500 $12,500 $12,500 $16,000

CurrentGraduate AnnualAnnualAddtlUnsub1

AnnualAddtlUnsub2

TotalAggregate

Sub $0 $138,500

$224,000ifformerHEALeligibleUnsub $20,500 $16,667 $26,667

YearlyTotal $20,500 $16,667 $26,6671ForGraduateinPublicHealth;Dr.ofPharmacyorChiropractic;Dr.DegreeinClinicalPsychology;MastersorDoctoralDegreeinHealthAdministration.2ForDoctorofDentistry,VeterinaryMedicine,Optometry,AllopathicMedicine,OsteopathicMedicine,PodiatricMedicine,NaturopathicMedicine,orDoctorofNaturopathy.

ProposedGraduate AnnualAnnualAddtlUnsub1

AnnualAddtlUnsub2

TotalAggregate

Sub $0 $169,000

($274,000ifformerHEALeligible)Unsub $25,000 $20,326 $32,521

YearlyTotal $25,000 $20,326 $32,5211ForGraduateinPublicHealth;Dr.ofPharmacyorChiropractic;Dr.DegreeinClinicalPsychology;MastersorDoctoralDegreeinHealthAdministration.2ForDoctorofDentistry,VeterinaryMedicine,Optometry,AllopathicMedicine,OsteopathicMedicine,PodiatricMedicine,NaturopathicMedicine,orDoctorofNaturopathy.

7. LoanDisbursement

Recommendation

• Allowunequaldisbursementstoaccommodateunequalcostsorresources(asmaybedoneforFSEOGandPerkinsLoans)andtofacilitatedisbursementbyterminnonstandardtermprograms.

StatutoryCitation

MultipleDisbursementRequirementHEA§428G(a)[20U.S.C.1078−7(a)]

Currently,loansmustbedisbursedinequalinstallmentsunderrulesspecifiedbylaw.Thisrulepreventsadjustmentofdisbursementstoaddresssituationswherethereareunequalresourcesorcostsamongpaymentperiods.Fornonstandardtermprograms,itresultsindifferentdisbursementtimesforDirectLoansthanforotherTitleIVprograms,andpreventsalignmentofloandisbursementwithterms.ThisrecommendationwouldallowdisbursementstooccuratthesametimeacrossallTitleIVprograms.

8. RepaymentIncentives

Recommendation

• ReinstatetheDepartmentofEducation’s(ED)authoritytoofferrepaymentincentives,ifthereisevidenceofeffectivenessandcostneutrality.

StatutoryCitation

InterestRate(repaymentincentives)HEA§455(b)(8)[20U.S.C.1087e(b)(8)]

TheBudgetControlActof2011prohibitedEDfromauthorizingorprovidingrepaymentincentivesonnewloansdisbursedonorafterJuly1,2012,exceptthataninterestratereductionmaybeprovidedtoaborrowerwhoagreestoautomaticallydebitelectronicpayments.Aslongasincentivesdonothaveanetcost,whynotallowthem?

9. LateOrigination

Recommendation

• Allowschoolstooriginateloansupto30daysafterthestudent'slastdateofenrollmentorchangetoanineligibleenrollmentstatus,tocovercostsincurredbeforelossofeligibility.

StatutoryCitation

ParticipationAgreement(authoritytooriginateloanstoeligiblestudents)HEA§454(b)[20U.S.C.1087d(b)]

Currently,loansmaynotbeoriginatedoncetheenrollmentperiodhasended,thestudentwithdraws,orthestudent’senrollmentstatusdropstolessthanhalftime.Thisrecommendationwouldallowschoolstoassiststudentswhowereunabletocompletetheloanapplicationprocesspriortoceasingenrollmentorwhoanticipatedresourcesthatdidnotmaterialize.Theproposedoptionmayreducetheuseoflessbeneficialprivateeducationloans.Itwouldprovidethelate-applyingstudentaccesstofederalDirectLoanstoresolveinstitutionaldebtsothatthestudentcanreenrollandgoontosuccessfullycompletehisorherprogram.Thisrecommendationwouldnotchangethecurrentprohibitionagainstlatedisbursementofsecondorsubsequentinstallments.

10. ConsolidationRecommendations

• Maintainaloanconsolidationprogramtoallowborrowerswithmultipleloanstohaveasingleholderandasinglepayment.

• Continuetoallowconsolidationtopreventborrowerdefaults.

• Separaterefinanceoptionsfromconsolidation,sothatconsolidationretainsitsoriginalpurposes.(SeeRecommendation#1)

• Retainaninterestratethatconsiderstheweightedaverageoftheloansbeingconsolidated.

• Applyamodestbasispointincreasetoconsolidationloans.StatutoryCitation

ConsolidationLoansHEA§428C,§455(g)&variousothersections[20U.S.C.1078–3,1087e(g)]

TheRTFrecommendsthattheloanconsolidationprogrambemaintainedtoallowborrowerswithmultipleloanstohaveasingleholderandasinglepayment.Consolidationshouldalsocontinuetobeusedtopreventdefaults.Theinterestrateshouldremaintheweightedaverageoftheloansbeingconsolidated,althoughamodestbasispointincreasecouldbeappliedtoconsolidationloans.RefinancingoptionsshouldbeallowedasnotedinLoanRecommendation#1,butshouldbekeptseparatefromconsolidation,sothatconsolidationretainsitsoriginalpurposes.TheinterestrateforconsolidationloansshouldtracktheinterestrateforDirectLoans,butneedsfurtherstudytodeterminetheappropriateinterestrate.Apremiumintheformofamodestbasispointincreasecouldbeappliedtoconsolidationloanstohelpreducetheconsolidationloansubsidythatmightbebetterusedtooffsetcoststogainotherbenefits,suchasincreasedloanlimitsoreliminationoftheoriginationfee.

11. LoanSubsidiesRecommendations

• Continueneed-basedborrowersubsidiesduringin-school,grace,anddefermentperiods.

• Removethe150%limitontheinterestsubsidy.StatutoryCitation

InterestSubsidies(suspensionofsubsidyduringgraceperiods)HEA§428(a)(3)(A)(i)[20U.S.C.1078(a)(3)(A)(i)]

TerminationofSubsidiesforGraduateStudentsHEA§455(a)(3)[20U.S.C.1087(a)(3)]

150%LimitationHEA§455(q)

TheITFrecommendedrethinkingtheDirectLoansubsidystructuretoexploretheefficacyoffront-endsubsidiesandwhethertherearebetterwaystotargetthoseresources.OnesuchalternativerecommendedbytheITFisaback-endsubsidythatutilizesautomaticincome-basedrepaymentforallborrowers.Thisdebatebetweenfront-endandback-endsubsidies,whichseemtobeviewedasmutuallyexclusiveduetobudgetaryconstraints,hasreceivedmuchattentionandcontinuestodoso.Meanwhile,loansubsidieshavebeenincrementallyerodedasCongresslooksforsourcesoffundsbothtosupportthePellGrantProgramandtohelpalleviatethegeneralbudgetdeficit.TheRTFisconcernedthatneedystudentsarecaughtbetweenlostbuyingpowerofgrants,whichhavenotkeptpacewithinflationandrisingcosts,andlossofbeneficialloanterms.TheRTFisalsoconcernedwiththeimpactthatlossofinterestsubsidiesmayhaveonaccesstohighereducationandincreasedcostsofborrowing.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)Severalbillshavebeenintroducedthattouchonsubsidyandautomaticincome-basedrepaymentissues:

• EarningsContingentEducationLoansAct[H.R.3695andH.R.3752]:wouldeliminatetheDirectLoanProgramandinsteadestablishan"IncomeDependentEducationAssistance(IDEA)"LoanProgram.Thenewprogramwouldincludeauniversalincome-basedrepaymentcomponentwithautomaticwagewithholdingasthemechanismforrepayment.

• ProtectingOurStudentsbyTerminatingGraduateRatesthatAddtoDebt(POSTGRAD)Act[H.R.4223]:wouldrestoregraduateandprofessionalstudenteligibilityforthein-schoolinterestsubsidy

• SimpleIncome-BasedRepaymentAct[H.R.4256]:wouldautomaticallyenrollallnewborrowersoffederalstudentloans(exceptParentPLUS)intoincome-basedrepayment(IBR)

• DynamicRepaymentAct[S.2456]:wouldreplacecurrentloans,subsidies,deferments,forbearances,andrepaymentoptionswithasingleloancalledtheIncomeDependentEducationAssistance(IDEA)Loanandwouldberepaidthroughincome-basedrepayment

12. CreateaUniversalLoanPortalforStudentsRecommendation

• Mandatethecreationofasinglewebportalwherestudentscangotoeasilyaccessinformationaboutalloftheirloans—federal,private,andinstitutional.

StatutoryCitation

EstablishmentofNSLDSHEA§485B[20U.S.C.1092b]

ThetaskforcerecommendsthatCongressmandatethecreationofasinglewebportalwherestudentscaneasilyaccessinformationaboutalloftheirstudentloans.Thiswouldallowalleducationalloansfromthefederalgovernment,privatelenders,andcollegesanduniversitiestobereportedtoonecentraldatabase.ThecreationofsucharesourcecouldresultfromtheexpansionofthedatacollectedbytheNationalStudentLoanDataSystem(NSLDS).Studentsneedanaccessible“one-stopshop”wheretheycanmanagetheirstudentloans.Manyborrowershavemultipleloanswithdifferentloanholdersthatmaybeinvariousstagesofrepayment.Havingacentralwebsitewhereborrowerscouldaccessinformationaboutalloftheirloanswouldsignificantlyhelpstudentsastheymanagetheirborrowingandrepayment.Undersuchascenario,allstudentswouldhaveaccesstotheirentiredebtportfolioinrealtime,enablingthemtocalculateamoreaccuratemonthlyrepaymentamountbasedonavarietyofpotentialcircumstances.Itshouldbeunderscoredthatacentralcomponentofthisrecommendationistheneedforstudentstohaveaccesstonotonlytheirfederalloaninformation,butalsotheirprivateloaninformation.Itiscriticalthatstudentsbeabletoobtainandmonitoralloftheirloaninformationinonecentraldatabase,regardlessoftheirloan’sorigination,ratherthanhavingtopullinformationtogetherinapiecemealfashion.Thelattercreatesopportunityforimportantinformationtofallthroughthecracks.Currently,NSLDSonlypartiallyservesthispurposeasitincludesonlysomefederalloans,anditdoesnotincludehealthprofessionsloansmadethroughtheDepartmentofHealthandHumanServices(HHS),privateloans,orinstitutionalloans.Auniversalloanportalwouldcapturealloftheseloans.

Toachievethisrecommendation,EDcouldexpandtheirexistingstudentloans.govwebsite.Studentsarecurrentlyaccessingwww.studentloans.govtocompleteentranceandexit

counseling,viewrepaymentoptionsandcancellations,signtheMasterPromissoryNoteandcompleteconsolidationrequests.Byenhancingthecurrentwebsiteofstudentloans.govintothesingleportal,EDcouldmakeuseofexistinginfrastructurewhileenhancingandstreamliningtheborrowerexperience.

July2016Update

InFebruary2015,theServicingIssuesTaskForcereiteratedthisrecommendationusingtheresultsfromasurveyofNASFAAmembershipthatincludedmorethan2,2000financialaidadministratorsatover1,500uniqueinstitutions.OnMarch13,2015,PresidentObamaissueda“StudentAidBillofRightstoHelpEnsureAffordableLoanRepayment.”Underthisinitiative,EDisdirectedtoestablishacentralizedpointofaccessforallFederalstudentloanborrowersinrepayment,includingacentrallocationforaccountinformationandpaymentprocessingforallFederalstudentloanservicing,regardlessofthespecificservicer.InApril2016,EDannounced“anewvisionforservingstudentloanborrowers”throughanewcustomerservicemodelthatincludesa“streamlinedborrowerexperienceviaasinglewebportal.”InJuly2016,EDreleasedthelistofvendorswhometthetechnicalcapabilitiestobeginbuildingthenewsystem,whichincludesthesingleservicingplatform.CongressionalActioninthe114thCongress(2015-2016)Twobillshasbeenintroducedthatwouldimpactthisrecommendation:

• SimplifyingAccesstoStudentLoanInformationAct[S.445]:wouldrequireprivateeducationloanstoberecordedinNSLDS

• StudentLoanBillofRights[S.840]:wouldrequireEDtodevelopacentralizedpointofaccessforallborrowersforaccountinformation,paymentprocessing,andallotherloanservicingactivities

13. StandardizeLoanServicingPoliciesandProceduresandProcessforRepaymentOptions

Recommendation

• DirectEDtostandardizetheprocessforplacingastudentinthevariousrepaymentplans,includingacceptabledocumentationtobeusedbyallservicers,therepaymentstartdate,andthetimingandmethodforcapitalizationofinterestonfederalstudentloans.

StatutoryCitation

SimplificationofLendingProcessforBorrowersHEA§485C[20U.S.C.1092c]

ThecurrentDirectLoanprogramisonewherestudentsborrowdirectlyfromthefederalgovernment.Theintentoftheprogramwasforstudentstohaveonelenderandoneservicerwithstandardizedprocesses.However,thegovernmentisparcelingoutloanstovariousservicers,andsomeborrowersareconfusedbecausenotallservicersarehandlingstandardissuesinthesamemanner.Borrowerscannotchooseorswitchtheirloanservicer,sotheyaresubjecttovaryingadministrativeprocedureswithoutanyrecourse.Thelackofstandardizationalsohindersfinancialaidadministrators’effortstoaccuratelycounselstudentsonwhattheycanexpectwhentheyenterrepayment.Toalleviateconfusionanddifferentialtreatment,thedirectloanprogramshouldhaveastandardizedrepaymentprocess,communications,andforms,regardlessoftheservicer.

July2016Update

EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Amongtheobjectivesforthisinitiativeare:acommonborrowerexperience,feweraccounttransfers,commonservicingpracticesandbranding,improvedoversight,greatercostefficiency,andimproveddatacollectionandanalysis.CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:

• ConsolidatedAppropriationsAct,2016[P.L.114-113]:includeslanguageinthebill’sjointexplanatorystatementrequestingEDtopublisha“commonpoliciesandproceduresmanualforservicingthatappliestoallDirectLoanservicers”

Onebillhasbeenintroducedthatwouldimpactthisrecommendation:• StudentLoanBillofRights[S.840]:wouldaddressservicingbystandardizingcertain

disclosuresandotheractions

14. RevisitInstitutionalRequirementsforPrivateLenderLists

Recommendation

• StreamlinestatutoryandresultingregulatoryprovisionsrelatedtoPreferredLenderLists(PLL)toencouragemorewidespreadusebyschoolswithoutcompromisingtheiroriginalpurpose.

StatutoryCitation

ProgramParticipationAgreements(preferredlenderlistrequirements)HEA§487(h)[20U.S.C.1094(h)]

TheRTFadoptsthisITFproposal#8,whichwouldbeaccomplishedbytakingthefollowingsteps:• Reviewtypesofloansthatshouldbeclassifiedasprivateeducationloans.

Ø Excludefederalhealthprofessionsloansfromthedefinitionofprivateeducationloans.Ø Eliminatestate-sponsoredloansthatmeetcriteriaacceptabletotheU.S.SecretaryofEducation

fromthedefinitionofprivateeducationloans.Ø GivetheSecretaryauthoritytodetermine,throughregulation,whetherinstitutionalloansmust

beconsideredprivateeducationloans.• Narrowthedefinitionofapreferredlenderarrangementtoreducethecircumstancesunderwhicha

PLLisrequired.Ø Allowinstitutionstogivebasicinformationaboutlenderavailabilityordisplaylenderbrochures

aslongastheydonotactuallyrecommendanyparticularlendersorproducts.Ø Allowinstitutionstosharesummariesofpreviousstudents’experiencesorsatisfactionwith

lenderswithoutconsideringthatsummaryapreferredlenderarrangement.• Improvetheefficiencyofloancounselingrequirements.

Ø Eliminateduplicativeloancounselinganddisclosures,andbroadenthemethodofmakingdisclosuresincludingtheallowablesourcesofdisclosure.

Ø Replacelistsofdisclosuresinthelawwithmoregeneralgoalsandobjectivesofdisclosure,anddirecttheSecretaryofEducationtosetspecificdisclosuresthroughnegotiatedrulemaking.

Ø Shiftresponsibilityfordisclosingtermsandconditionsofloansfromschooltolenders,andrequireTruthinLendingActdisclosuresonlyoflenders.

• Eliminateduplicationofinformationprovidedbythelenderandtheinstitutionbyrequiringonlythelendertodescribethetermsandconditionsoftheloansitoffersandallowingtheinstitutiontodirectstudentstothelender’smaterialsorwebsiteforsuchinformation.

• Deletereportingrequirementsinfavorofadherencetoacodeofconduct,disclosuretostudentsandfamiliesofthecriteriausedtodevelopapreferredlenderlist,andassurancethatborrowersmaychooseanylenderwithoutpenalty,regardlessofwhetherthelenderappearsonthelist.

• Eliminatethemodeldisclosureformprovision(EDhasnotproducedamodel).• Replacestudentself-certificationwithfullschoolcertificationofprivateeducationloans.• Streamline,clarify,andbetteralignthePLLrequirementsof34CFR601.10(a)(2),HEAsection

128(e),andHEAsec.153.

Provisionsinthecurrentlawandregulationsthatdealwithcodeofconduct,disclosureofthecriteriausedtodevelopapreferredlenderlist,andassurancesthatfamiliesmayalsochoosealendernotonthelistmustberetained.InstitutionsarenotrequiredtohaveaPLL.However,aschoolthatchoosestopublishaPLLisrequiredbytheHigherEducationOpportunityAct(HEOA)tocreateandannuallyupdatethatlistwithinformationonthelistedlendersandloans,including:• Termsandconditionsoftheloan;• Thereasontheschoolenteredintoanarrangementwiththatparticularlender;• Astudent’sabilitytochoosealenderthatisnotonthelist;and• Themethodandcriteriausedforselectingthelenders.AprivateeducationloanPLLmustalsocontainatleasttwounaffiliatedlenders.Affiliationsofanyotherlendersonthelistmustbedisclosedanddescribed.WiththeeliminationofFFELP,therulesapplicabletoprivateeducationloanscanbenefitfromreviewandadjustment.TheworstofthepracticesthatgaverisetothecurrentruleswerelimitedtoonlyafewinstitutionsandrelatedlargelytoFFELP,butalarge,unintendedconsequenceoftheserulespreventstheentirefinancialaidcommunityfromgivingreasonableadvicetofamilieswhoseekprofessionalassistancefromthestudentaidoffice.Today,thefinancialaidcommunityiswellawarethatinstitutionscannotgainanybenefitfromthebusinesstheirstudentsdowithprivatelenders.Nevertheless,thePLLrequirementsinhibittheirabilityandwillingnesstorecommendonlythoselenderswhooffergoodratesandgoodservice,ortosharewithcurrentstudentstheirknowledgeofpaststudents’experiences.Theresultisthatstudentsoftenareswayedbymarketingandadvertisements.Institutionsshouldbeallowedtoprovidemoreusefulandcomparableinformationonprivateloanstostudentsbasedonloantermsandconditions,thelender’shistoryofservice,andpaststudents’experiencewithoutbeingtiedtothelitanyofPLLrules.InadditiontoremovingimpedimentstoresponsibleuseofPLLs,thecurrentprivateeducationloanapplicationprocessshouldberevisedtocountertheimpactoflendermarketing.Replacingstudentself-certificationwithfullschoolcertificationwouldgiveinstitutionstheopportunitytoensurethatastudentisawareofthebenefitsoffederalloansbeforethestudentcommitstoalessfavorableprivateloan.

15. ContinuePublicServiceLoanForgivenesswithModifications

Recommendations

� CommittocontinuingthePublicServiceLoanForgiveness(PSLF)Program,retainingcurrenteligibilitycriteria.� Institutelimitsontheamountofforgiveness.

� KeepPublicServiceLoanForgivenessuntaxed.

� MakePublicServiceLoanForgivenessProgramdatapublic.

� Stronglyencourageannualsubmissionofemploymentcertificationforms.

� IncreasecommunicationaboutthePublicServiceLoanForgivenessProgram.StatutoryCitation

RepaymentplanforpublicserviceemployeesHEA§455(m)[20U.S.C.1087e(m)]

ThePublicServiceLoanForgivenessTaskForceputforwardtheserecommendationsinJune2014.ConcernoverthepotentialcostofPSLFhasgenerateduncertaintyforthecontinuationoftheprogramamonghighereducationprofessionalsandstudents.Inthisenvironment,thetaskforcefeelsitisimportanttoreiterateacommitmenttosupportingtheforgivenessprogramandthestudentsitwillserve.IntheabsenceofrobustandreadilyavailabledataaboutthepotentialparticipationinthePSLFprogram,thedefinitionsofqualifyingfulltimework,qualifyingemployment,qualifyingmonthlypayments,qualifyingloantypes,andlengthofserviceshouldremainunchanged.Thetaskforcerecommendsallowingforgivenessofupto100percentofaqualifyingloanbalancethatdoesnotexceedtheundergraduateaggregateStaffordLoanlimit(currently$57,500)andallowadditionalforgivenessof50percentofanyremainingqualifyingloanbalance,conditionedthattotalforgivenesscannotexceedthegraduateaggregateStaffordLoanlimit(currently$138,500).Additionally,borrowerswithabalanceremainingafterreceivingPSLFforgivenessshouldbeallowedtocontinueutilizinganincome-basedrepaymentplantopaytheirremainingbalance,andpotentiallycouldqualifyforadditionalloanforgivenessundertheincome-basedrepaymentplan.Structuringtheforgivenesscapinthismannerwillcreate“skininthegame”whilealsoaddressingconcernsaboutborrowerspotentiallyreceivingexcessiveforgivenessforthepursuitofmultipleadvanceddegrees,orforanextremeamountofdebtincurredpursuingasingledegree.Acaponthemaximumamountofforgivenesswillensurethatstudentsarediscouragedfromover-borrowing.Taxingborrowersontheamountofforgivenessreceivediscounterintuitive,asitbothprovidesadisincentiveforhigh-debtborrowerstotakeadvantageoftheprogramandcreatesasuddenfinancialhardshipforborrowersreceivingforgiveness.Atthemomenttheyshouldfinallybeemergingfromtheirdebts,theyareabruptlyfacedwithasignificantlump-sumcost.Itcouldbearguedthatincertaincases,thisisamorecalamitousfinancialeventthansimplyremaininginrepayment.Itislikelythatmanyborrowerswouldneedtopaythiscostininstallments,meaningtheywillhavesimplymovedfrommakingmonthlypaymentstoastudentloanservicertomakingmonthlypaymentstotheIRS,whodoesnotoffertheborrowerprotectionsandbenefitsfoundinthestudentloanprogram.ThedesignatedPSLFservicershouldmakepublic,dataandinformationcollectedintheadministrationofthePSLFprogram.Analysisofsuchdatawouldallowinterestedconstituenciestheopportunityto

moreaccuratelyevaluatetheforgivenessprogram,itseffectivenessasanincentivetopursuepublicservicework,andthecostoftheprogram.Borrowersmaycompleteanemploymentcertificationformatanytimeduringtheirpublicserviceemployment.Thereareseveralpossiblenegativeconsequencesifborrowerswaituntiltheendofthe10yearsofqualifyingemploymenttobeginprovidingemploymentcertification.Assuch,stronglyencouragingborrowerstocompletetheemploymentcertificationformannuallywillensurethatthedesignatedPSLFservicercanmonitoraneligibleborrower’srepaymentandemployment.ThePSLFprogramshouldbemorewidelypublicizedbytheDepartmentofEducationandtheloanservicersasanincentiveforborrowersandthoseconsideringenrollmentinhighereducationtoenterpublicservicework.Owingtothebroadnatureoftheprogram,communicationabouttheprogramshouldbeincreasedandthetypeandtimingofinformationmadeavailabletothepublicshouldbeexpandedtoensureawarenessoftheprogram.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)SeveralbillshavebeenintroducedthatwouldeitherexpandeligibilityormodifyPSLF:

• YoungFarmerSuccessAct[H.R.2590]:wouldaddnewandbeginningfarmerstothePublicServiceLoanForgiveness(PSLF)program

• AdjunctFacultyLoanFairnessAct[S.1556]:wouldallowpart-timefacultymemberstoqualifyforPSLF

• TeachOurTeachersAct[H.R.3366]:wouldallowteacherstoqualifyforbothteacherloanforgivenessandpublicserviceloanforgiveness

• StudentLoanDebtProtectionAct[H.R.3634]:wouldallowborrowerstoqualifyforsomeversionofPSLFafterfiveyearsofpublicservicework

• StrengtheningForgivenessforPublicServantsAct[S.2463]:wouldremovethe"allornothing"componentofPSLFandallowborrowersemployedinpublicservicejobstoreceiveapercentageofforgivenessifemployedinapublicservicejobforlessthan10years.Thepercentageoftheloanthatiscancelledvaries:for2-5years,15%;for6-9years,20%;andfor10years,30%.

• TeacherDebtReliefAct[H.R.4933]:wouldallowteacherstoqualifyforbothStaffordloanteacherforgivenessandforgivenessunderPSLF

• FairnessinForgivenessAct[H.R.5274]:wouldexpandeligibilityforPSLFtocurrentandformeremployeesatall16privatelyoperatedDepartmentofEnergyNationalLaboratories

• StudentLoanFairnessAct[H.R.5487]:wouldexpandPSLFtoincludephysiciansinMedicallyUnderservedAreas

16. Clarifyandimproveservicercommunicationwithborrowers

Recommendations

� Removeservicerbrandingfromcommunicationwithborrowers.� Permittheuseofinnovativetechnologiesinordertoallowservicerstomoreefficientlyandeffectivelycommunicatewithborrowers.

StatutoryCitation

ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]

TheServicingIssuesTaskForceproposedtheserecommendationsinJanuary2015.Loanservicersco-brandtheirownlogowithED’slogoonallcorrespondencewithstudents;thisleadstoconsiderableconfusionamongborrowersaboutwhoistheactualholderandserviceroftheirloan,andthemistakencategorizationofthecommunicationasjunkmailorspam.Inordertoprovideclear,unambiguousinformationtoborrowers,theonlybrandingoncommunicationtotheborrowershouldbefromED.ThetaskforcerecommendsthatEDpermittheuseofnewtechnologiesandsupportingdatatoallowservicerstoexperimentwithdevelopinginnovativeandeffectiveperformancebaseddelinquencyanddefaultpreventionactivitiesinlieuofcertaincurrentprescribedrequirements.Currently,servicersaresubjecttoprescriptiveduediligenceandrestrictionsrequirementsthatcanstifleinnovationandexperimentationwiththemosteffectivewaysinwhichtoreachborrowers,andatwhatpointintime.Forexample,servicersarerequiredtosendborrowersdelinquencynoticebetweendays1-15ofdelinquencystatus.However,servicerscanidentifyborrowerrepaymenthabitsthroughtheirdataanalytics,andinsomecasescandeterminethataborrowerisa“slowpayer”andwillalwayspayonacertaindaylaterinthemonth.Insuchinstances,itwouldbemoreusefulfortheservicertoputtime,resources,andeffortsintoborrowersidentifiedastrulybeingat-riskofdefault.Inaddition,allowingflexibilityfromthecurrentprescriptivestudentdisclosurerequirementswouldallowservicerstoprovideborrowerswiththerightinformationattherighttime,andintherightamount.Thiswouldincludeallowingservicerstodisseminatecertaindisclosurestogetherandmaketheirowndeterminationofthebestpointintimefortheinformationtobedistributed.

July2016Update

Inrelatedactivity,theObamaAdministrationpublishedaStudentAidBillofRightsonMarch13,2015,directingEDtofindthemostinnovativeandeffectivewaystocommunicatewithborrowers,leveragethelatestresearchidentifyingkeyfactorsthatinfluenceborrowerrepayment,andmonitorkeytrendsinthestudentloanportfoliotoimproveloanservicing.EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Amongtheobjectivesforthisinitiativeareacommonborrowerexperienceandbranding,greatercostefficiency,andimproveddatacollectionandanalysis.Thesolicitationstates:“Whileindividualborrowerstypicallydealwithonlyoneservicer,thelackofasingleinterfaceandcommonbrandingmayleadtoconfusionamongborrowers,schools,andconsumeradvocates.Undertheplannedcontract,FSAwillcreateasinglewebportalclearlylabeledasrepresentingtheDepartmentofEducationthroughwhichallborrowerscanaccessinformation,makepayments,applyforbenefits,andmanagetheiraccounts.Borrowercorrespondence,callcentercontacts,andotheroutreachmaterialswillalsobeconsistentandclearlylabeledascomingfromtheDepartmentofEducation.”

17. EDshoulddevelopapoliciesandproceduresmanualforservicing

Recommendation

� DirectEDtoprovideanoverviewofstandardizedloanservicingpracticesthroughanonlinefederalservicingpoliciesandprocedures(P&P)manual.

StatutoryCitation

TheServicingIssuesTaskForcerecommendedinJanuary2015thatEDprovideanoverviewofstandardizedloanservicingpracticesthroughanonlinefederalservicingpoliciesandprocedures(P&P)manual.Whilethetaskforceunderstandsthecompetitivenatureoftheservicercontracts,aP&Pmanualwouldofferstandardizationinareaswherethereisafinancialimpact,orrisk,fortheborrower.Thetaskforcereportdetailsnineareaswherestandardizationcouldbenefitborrowers,schools,andtheservicersthemselves.

July2016Update

EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Onegoalistoestablishcommonservicingpractices;EDacknowledged,“Departmentservicerscurrentlyeachhavetheirownprocesses,callscripts,andotheruniqueprocedures.Inaddition,borrowershavetoadjusttonewsystemsandadifferentexperiencewhenaccountsaretransferred.Undertheplannedcontract,allborrowerswillhaveaccesstoasinglesetofconsistentprocessesandpractices.”CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:

• ConsolidatedAppropriationsAct,2016[P.L.114-113]:includeslanguageinthebill’sjointexplanatorystatementrequestingEDtopublisha“commonpoliciesandproceduresmanualforservicingthatappliestoallDirectLoanservicers”byMarch1,2016.AsofJuly1,2016,thisrequesthasnotbeenmet.

18. Providestandardconsumerprotectionsforfederalstudentborrowers

Recommendation

� Providestandardconsumerprotectionsforfederalstudentborrowersthatareinlinewithotherconsumerfinancialproducts.

StatutoryCitation

TheServicingIssuesTaskForcemadethisrecommendationinJanuary2015.Mostconsumercreditproducts(mortgages,creditcards,carloans,etc.)aregovernedbyfederalconsumerlawsthatdictateservicingstandardsandprocesses.Whilefederalstudentloanscontainsomeborrowerprotections,therearefewerthanalmosteveryotherconsumerfinancialproduct.Federalstudentloansandtheirservicingshouldcontainanenumerated,standardizedsetofconsumerprotections.Typicalconsumercreditprotectionsincludestandardizedprocessesforstatementsandpaymenthandling,servicertransfers,errorresolution,delinquencyservicing,andmilitaryservice,justtonameafew.Thereisnosuchsetofenumeratedprotectionsforfederalstudentloanborrowers.BorrowerprotectionsshouldalsoincludetherighttoescalateanissuetohigherauthoritieswithinEDandtherightoftheborrowertoquestioncertainpoliciesandprocedures,orrequestassistanceoraccommodationifnecessary.Theloanservicershouldberesponsibleforcommunicatingthisright,andtheprocesstoinvokethisright,onwrittencommunicationswiththeborrower.Aswithotherconsumerfinancialproducts,EDshould,incollaborationwiththeConsumerFinancialProtectionBureau(CFPB),requirebasicconsumerprotectionsforstudentborrowersandensurethattheircontractorscomplywiththoseprotections.

July2016Update

TheObamaAdministrationissuedaStudentAidBillofRightsinMarch2015thatincludesacentralizedstudentcomplaintsystem.CommentsonaproposedsystemweresolicitedinDecember2015.Thisinitiativerequiresenhanceddisclosuresandstrengthenedconsumerprotectionsandassessmentoftheapplicabilityofconsumerprotectionsinthemortgageandcreditcardmarketstostudentloans.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:

• StopDebtCollectionAbuseAct[S.2255]:wouldamendtheFairDebtCollectionPracticesAct(FDCPA)toclarifythattheprotectionsfromoverlyaggressivedebtcollectionpracticesalsoapplytodebtcollectionagentshiredbythefederalgovernment,includingservicersoffederalstudentloans

Update,July2016 PellGrantProgram

FederalPellGrantProgram

1. MakeFederalPellGrantaTrueEntitlement

Recommendations

• MakeFederalPellGrantatrueentitlementprogramwith100%mandatoryfunding.

• Applytheinflationadjustmenttotheentireaward.

StatutoryCitation

AwardAmountHEA§401(b)(2)[20U.S.C.1070a(b)(2)

FundingHEA§401(b)(7)[20U.S.C.1070a(b)(7)

TheRTFproposesthattheFederalPellGrantbecomeatrueentitlementprogram.ThisconcepthasbeenaNASFAAgoalformanyyears.Currently,thefundingthatmakesupmostofaPellGrantcomesfromthediscretionarysideofthebudget,whichmustbeappropriatedeveryyearandissubjecttopoliticsandbudgetarymachinations.AsmallamountofPellGrantawardsissetinlawasmandatoryfunding,thatis,automaticspendingthatisnotsubjecttoannualappropriationsfights.For2013-14,themaximumawardof$5,645ismadeupof$4,860fromtheannualappropriation;thebalanceof$785isthemandatoryfundingportion.Theincreaseof$95fromthe2012-13maximumawardisobtainedbyapplyinganinflationadjustmentderivedfromtheConsumerPriceIndex(CPI)toonlythemandatoryfundingportionofthe2012-13maximumaward.DuetothefactthattheFederalPellGrantProgramremainstiedtoacyclicalappropriationsprocess,theamountofsupportthatahigh-needstudentcanexpectfromthisprogramremainsuncertainfromyeartoyear.Whenmakingplanstoattendaninstitutionofhighereducationalevelofcertaintyinregardtothecontinuingavailabilityoffinancialaidresourcesisespeciallycriticaltolow-incomestudents.TheannualuncertaintyofFederalPellGrantawardsalsoimpactsinstitutionsinprovidingaccurateinformationaboutnetcoststolow-incomestudentsinatimelyfashion.TransformingtheFederalPellGrantProgramintoatruefederalentitlementprogramwouldprovidealevelofcertaintytohigh-needstudents.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)

SeveralbillshavebeenintroducedthatincludeprovisionsrelatedtomandatoryPellfundingandthePellinflationadjustment:

• PellGrantProtectionAct[S.1060/H.R.1956]:wouldchangethePellGrantProgram’sfundingtosolelymandatoryfunds

• PellGrantCostofTuitionAdjustmentAct[S.1061/H.R.1957]:wouldannuallyapplyaninflationadjustmentincreasetotheentiremaximumaward

• MiddleClassCreatingHigherEducationAffordabilityNecessarytoCompeteEconomically(CHANCE)Act[S.1998/H.R.5310]:wouldpermanentlyextendtheannualinflationadjustmenttothePellGrantmaximumaward

• PathwaystoanAffordableEducationAct[H.R.4386]:wouldchangethePellGrantProgram’sfundingtosolelymandatoryfundsandwouldpermanentlyextendtheannualinflationadjustmenttothePellGrantmaximumaward

• IntheRedAct[S.2677]:wouldannuallyapplyaninflationadjustmentincreasetotheentirePellGrantmaximumaward

2. InstitutionalIneligibilityforPellGrantDuetoLoanDefaultRates

Recommendation

• EliminatethestatutorylanguagethatbarsparticipationintheFederalPellGrantProgramfor

schoolsthathavebeenrenderedineligibletoparticipateintheDirectLoanProgramduetohigh

defaultrates.

StatutoryCitation

InstitutionalIneligibilityBasedonDefaultRatesHEA§401(j)[20U.S.C.1070a(j)

CurrentlyaninstitutionlosesitseligibilitytoparticipateintheFederalPellGrantProgramiftheinstitutionlosesitseligibilitytoparticipateintheDirectLoanProgramasaresultofafinaldefaultratedeterminationaboveacertainpercentage.TheRTFbelievesthathigh-needstudentsshouldhaveaccesstoFederalPellGrantfundingirrespectiveoftheactionsofformerstudentswhoarenotfulfillingtheirobligationsasborrowers.SchoolsthathavesmallpopulationsofTitleIVstudentloanborrowersriskplacingtheirparticipationintheFederalPellGrantPrograminjeopardyshouldevenasmallnumberofborrowersdefaultontheirTitleIVloans.Thetiebetweenaschool’sTitleIVcohortdefaultrateandtheFederalPellGrantplacesinstitutionsthatadmitahighpercentageofhigh-needstudentsatadecideddisadvantageanddissuadessomeschoolsfromparticipatingintheDirectLoanProgram.

3. FederalPellGrantEligibilityBeyond6YearLEU

Recommendation

• AllowadditionalFederalPellGranteligibility,determinedonacase-by-casebasisbytheaid

administrator,ifstudent/schoolcandemonstratethatthestudentcancompletehisorherdegree

programwithinoneadditionalperiodofenrollment.

• Sunsetthisauthoritysothatitisessentiallyagrandfatherprovisionforstudentsalreadyenrolled

whenlimitswereimposed.

StatutoryCitation

PeriodofEligibilityforGrantsHEA§401(c)(5)[20U.S.C.1091(c)(5)

WhenPelllimitswereoriginallyimposedat18semesters,studentswhowerealreadyPellGrantrecipientswereexcludedfromthelimitation.Thegrandfatheringclausewasdeletedwhenthelimitwassubsequentlyfurtherreducedto12semesters.ThisrecommendationwouldprovideawayforFAAstohelpstudentswhohavenothadtheopportunitytoplanforaprecipitouslossofPellGranteligibilitybutareveryclosetocompletionofadegreeprogram.Atsomepoint,however,thelimitsshouldbecomeabsoluteasstudentshavehadadequatetimetoprepareforthat,sotheauthoritytoextendeligibilitywouldendatareasonablepointintime.

4. FlexPell

Recommendations

• Reinstatestudentaccesstotwoscheduledawardsinanawardyearbutwithouttheacceleration

clause.

• Clarifythatassignmentofcross-overperiodsisinstitutionalpolicyandprohibitEDfrom

regulating.

• EnsurePellutilizationstatuswithinformationaboutPelllimitsisreadilyavailabletostudents.

• Reinforcestudents’righttodeclinePellpaymentstosavefundsforfutureuse.

StatutoryCitation

PurposeandAmountofGrantsHEA§401(b)[20U.S.C.1070a(b)]

Studentshaveaccesstoalifetimelimitoftheequivalentofsixfull-timeacademicyears’worthofFederalPellGrants.Studentsarecurrentlyrestrictedtoonescheduledawardforeachawardyear,generallypayableoverthenumberofpaymentperiodsthatmakeupanacademicyear.Thewaythestudentusesthatgrantwithintheawardyearcanvarydependingonthestudent’senrollmentpattern.Forabriefperiodoftimebetween2009and2011,priortothelifetimelimit,CongressauthorizedpaymentofasecondPellGrantscheduledawardwithinthesameawardyear(“year-roundPell”)ifreceiptoffundsfromthesecondscheduledawardpermittedthestudenttoacceleratehisorheracademicprogram.Thedefinitionof“accelerate”wasleftuptotheDepartmentofEducation(ED).Theresultwasessentiallyacase-by-caseevaluation,aseachstudent’sprogresshadtobeassessedtosatisfytheaccelerationcriterion.Atthesametime,EDintroducedaregulatorychangethatdictatedhowtoassignasummerpaymentperiodtoanawardyearwhenthepaymentperiodcrossedoverJuly1.Thisregulatoryinitiativewasalsohighlymanualinthatithadtobedeterminedforeachstudentindividually,sometimesmorethanonceifadditionalinformationwasreceivedbeforeacertaindate.Thecombinationofthetwochanges—onestatutory,oneregulatory,butbothlabor-intensive—createdanadministrativenightmare.Alloftheseregulationswereremovedwhenyear-roundPellwasrescinded.TheRTFproposesthatavariationofyear-roundPellbereinstituted,butwithouttheaccelerationclause.WiththelifetimelimitonPellGrant,persistenteconomicproblems,andincreasinglyflexibleprogramformats,studentsneedmoreflexibilityandcontroloverhowandwhentheyaccesstheirresources.TheRTFbelievesastudentshouldbeabletoutilizegrantresourceswhenheorsheneedsthem.Currentrulesregardingdisbursementbypaymentperiodandcalculationofpaymentperiodawardamountswouldcontinuetoapply.ThesatisfactoryacademicprogressrulethatlimitsoverallTitleIVeligibilityto150%ofprogramlengthwouldstillapply.Paymentperiodrulesforclockhourprograms,non-termprograms,andcertainnonstandardtermformatsthatrequireworkcoveredbyapaymentofTitleIVfundstobecompletedbeforethenextpaymentmaybemadewouldalsoremainunchanged.Therecommendationtoallowstudentsmorecontrolrecognizesthatastudentmayhavegreaterneedearlierinhisorherpursuitofhighereducation,especiallyifthestudentneedssometimeto“gearup”tothecollegelevelexperience.Also,thestudent’sgoalmightnotbeafour-yeardegree,sopreservingfundsforlaterstudywouldnotbetothestudent’sadvantage.Theincreasingpopulationofnon-

traditionalstudentsandagreatervarietyofnon-traditionalprogramformatsalsonecessitateadifferentviewofPellGrantutilization.AstudentcouldrunoutofPellGrantfundsbeforecompletionofabaccalaureate.However,thestudentwouldstillhaveaccesstoloanfundsandwouldprobablyhaveastrongerabilitytorepaythoseloansthefurtheralongtowardsbaccalaureatecompletionheorsheisbeforehavingtoresorttoloans.Astudent’sabilitytoassumemorecontroloverhisorherresourcesdoesrequiresolidacademicandfinancialcounseling,whichwouldbeleftuptotheschooltodesignandaccomplish.EDshouldberequiredtoprovideadditionalinformationaboutPellGrantlimitationsandusagetostudentsandinmaterialsthatschoolscanuseincounseling.ThestudentshouldalsobeabletodeclineusingaPellawardinanygivenpaymentperiod.Thestudentwouldneedtobeawareoftheimplicationsfortakingornottakingthepayment.Thisrecommendationhasparallelstootherconceptsthathavebeendiscussedinthebroaderhighereducationcommunity,especiallythe“PellWell”whicharefeaturedintheReimaginingAidDesignandDelivery(RADD)project.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)

SeveralbillshavebeenintroducedthatexpandPellbeyondasinglescheduledawardinanawardyear,withvaryingprovisions:

• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldallowastudentwhohascompletedcourseworkequivalenttooneacademicyearbeforetheendofanawardyearaccesstoasecondaward

• All-YearAffordabilityforConstantandContinualEducationtoEnhanceStudentSuccessAct(ACCESS)Act[S.242]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods

• AccesstoEducationandTrainingAct[H.R.1064]:wouldreinstatetheyear-roundPellGrantwiththeoriginallanguage,includingtheaccelerationcomponent,foundinthe2008HigherEducationOpportunityAct[P.L.110-315]

• Year-RoundPellGrantRestorationAct[S.1062/H.R.1958]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods

• FlexiblePellGrantfor21stCenturyStudentsAct[H.R.3180]:wouldreinstateaccesstoasecondscheduledawardinanawardyearifastudentis“acceleratingprogresstowardadegreeorcertificate”andwouldallowinstitutionstoassigncrossoverperiods

• MiddleClassCreatingHigherEducationAffordabilityNecessarytoCompeteEconomically(CHANCE)Act[S.1998/H.R.5310]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods

• PathwaystoanAffordableEducationAct[H.R.4386]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods

• FY2017AppropriationsfortheDepartmentsofLabor,HealthandHumanServices,andEducation,andRelatedAgenciesAct[S.3040]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods

Update,July2016 Campus-BasedPrograms

Campus-BasedPrograms

1. AllocationFormulas

Recommendations

� Reconstructtheincomebandsusedtodetermineinstitutionalneedforcampus-basedprogramstomoreaccuratelyreportstudentneed.

� EliminatetheBaseGuaranteeandincludephase-inprotectionsothatnoinstitutionhasadecreaseorincreaseofmorethan10%peryear.

� RestructuretheFSEOGformulatobebasedontheamountofPellfundingreceivedbytheinstitution,includingaphase-inprovisionwherebynoinstitutionhasadecreaseorincreaseofmorethan10%peryear.

� Increasethepercentofself-helpassumedintheundergraduateinstitutionalneedcalculationoftheFederalWork-StudyandPerkinsLoanformulasto35%self-help,includingaphase-inprovisionwherebynoinstitutionhasadecreaseorincreaseofmorethan10%peryear.

StatutoryCitation

FederalSupplementalEducationalOpportunityGrantAllocationofFundsHEA§413D[20U.S.C.1070b-3]

FederalWorkStudyAllocationofFundsHEA§442[42U.S.C.2752]

FederalPerkinsLoansAllocationofFundsHEA§462[20U.S.C.1087bb]

TheRTFTaskForcebelievesthatthecurrentallocationformulasareinequitableduetothefactthat,overtime,thecampus-basedfundingformulahasnotbeenadjustedtoreflectthedemographicredistributionofneedystudentsthathasoccurredacrossthenation.In2014,TheCampus-BasedAidAllocationTaskForcedevelopedtherecommendationsinthissection.TheFairShareformulausedtodetermineaninstitution’sallocationofcampus-basedfunds,firstcalculateseachrecipientinstitution’sneedforfunding,andthenaggregatesthoseindividualamountstoestablishthenationalneedforprogramfunds.Thecurrentschemaislargelyinsensitivetoincomechangesinthelowerincomelevelsandnotsensitiveenoughatthehigherincomelevels.Inaddition,theincomelevelsthemselveshavenotkeptpacewithnationalaverageincomelevels.Thebaseguaranteeoffunding,currentlybasedonFY1999expenditures,wasintendedtobeatemporarymeasuretomitigatelossestoindividualinstitutionsasaresultofradicalfluctuationsin

funding.Duetothestaticnatureoftheformula,formostschools,theprioryearexpenditureislinkedtoitsprogramparticipationinthe1970’s.Thus,today’sallocationofcampus-basedfundslargelyreflectsa40-year-olddistributionofprogramfunds.Thissituationisinequitablebecausegrowingschools,servingneedierstudentpopulations,cannotincreasetheirfundingbecauseotherinstitutions’fundinglevelsarelargelyprotected.Thetaskforcerecommendseliminatingthebaseguaranteeportionoftheallocation.Thus,allocationswouldbebasedonlyonafairshareformula.Toavoidlargeswingsinallocationsfromyeartoyear,aphase-inprotectionwouldensurethatnoinstitution’sallocationwouldincreaseordecreasebymorethan10%peryear.ThetaskforcerecommendsthatthefairshareformulaforFSEOGfundingbebasedontheamountofPellGrantfundsaninstitution’sstudentsreceiveratherthanthecurrentinstitutionalneedformulathatislargelybasedonthecostofattendance.Theformulawouldtakeintoaccounteachschool’stotalofPellgrantfundsreceivedrelativetototalPellgrantsfundsawardednationally.Thisformulachangewilldirectmoreofthefederalgrantfundstothepooreststudents.ForFederalWork-Study,theformulatocalculateinstitutionalneedassumes25%ofthecostofattendanceisfinancedviaself-helpaidforallundergraduatestudents.Whilethetaskforcebelievesthattheunderlyingcost/needformulainthecurrentfairshareformulaisanappropriatemethodtoallocatefundsfortheseprograms,datademonstratethatthecurrentself-helppercentageismuchcloserto35%.Thetaskforcerecommendsthatthe25%assumptionforself-helpbeupdatedto35%,alongwitha10%phase-inprovision.

2. TransferofCampus-BasedProgramFunds

Recommendations• Allowtransferof15%ofcurrentyearPerkinscollectionstoFSEOGorFWS.• Allow50%ofFWSallocationtobetransferredtoFSEOGorPerkins.• Allow50%ofFSEOGallocationtobetransferredtoFWS.StatutoryCitation

TransferofallotmentsHEA§488[20U.S.C.1095]

Currently,thelawallowsaninstitutiontotransferupto25%ofitscampus-basedallotmentsasfollows:• FromFWS:25%ofallotmenttoFSEOGorPerkins• FromFSEOG:25%ofallotmenttoFWS• FromPerkins:25%ofallotmenttoFSEOGorFWS;however,noallocationofnewPerkinsLoan

fundinghasbeenmadeinrecentyears,sothistransferoptionhasnotbeenavailable.Carryforward/backprovisionswouldremainastheyarecurrently.

3. DistributionofPerkinsFundAssetsifProgramCeases

Recommendation• Amendthedistributionofaninstitution’sPerkinsFundintheeventtheprogramceasestoexist

Ø InstructtheSecretarytooffsettheamountoffederalcapitalcontributions(FCC)tobereturnedtothefederalgovernmentbytheaggregateamountofunfundedreimbursementforcancellations.

Ø EnsurethatinstitutionalcontributionsmadeinexcessoftheFCCormadewhentherewasnonewFCCarealsooffsetsothattheamountduethefederalgovernmentisnotoverestimated.

StatutoryCitation

DistributionofAssetsfromStudentLoanFundsHEA§466[20U.S.C.1087ff]

IntheeventthattheFederalPerkinsLoanProgramceasestoexist,thelawspecifieshowtodistributetheassetsoftheschool’sPerkinsFundbetweentheschoolandthefederalgovernment(whichhasaninvestmentthroughfederalcapitalcontributions—FCC—overtheyears).AlthoughthelawprovidesforreimbursementtotheschoolforFederalPerkinsLoansservicecancellations,thefederalgovernmenthasnotprovidedsuchreimbursementinrecentyears.Intheeventthatthecurrentcampus-basedformoftheFederalPerkinsLoanProgramceasestoexist,schoolswill,mostlikely,berequiredtoreturnaportionoftheirPerkinsFundthatrepresentsthefederalcapitalcontributionsitreceivedthroughouttheyearsfromthefederalgovernment.Further,nonewFCChasbeenprovidedinrecentyears.TheRTFrecommendsthatdistributionofFundassetsshouldincludeanoffsetforunfundedreimbursementsforrequiredloancancellations.Inaddition,theprocessshouldtakeintoaccountanyinstitutionalcontributionsmadeinexcessoftheFCCormadewhentherewasnonewFCC.SchoolsshouldnotbeheldliableforunfundedPerkinsLoanreimbursementsthatresultedfromlegitimateFederalPerkinsLoancancellations.

July2016Update

CongressionalActioninthe114thCongress(2015-2016)• FederalPerkinsLoanProgramExtensionActof2015[P.L.114-105]:(1.)eliminatesPerkins

loaneligibilityfornewgraduatestudentsbeginninginthe2016-17year;(2.)requiresschoolstoawardallsubsidizedandunsubsidizedDirectloanspriortoawardingPerkinsfornewundergraduatePerkinsborrowers;and(3.)endsallPerkinsloanauthorityeffectiveSeptember30,2017,therebydiscontinuinganygrandfatheringbeyondthatdate

4. ExpandDefinitionofCommunityServiceforFWSProgram

Recommendations

• Allowinstitutionstocount,forcommunityservicepurposes,FWSemploymentinon-campuschildcarefacilitiesprovidednoformalruledenieschildcaretothecommunityatlargeotherthanapreferencetoservetheinstitution’sfaculty/staff/studentcommunityneedsfirstduetolimitedspace/staffingresources.

• Revisedefinitionofcommunityservicetoacknowledgethatthe“community”includesfaculty,staff,andstudentsresidingoff-campus(withinthecommonlyunderstoodconceptofcommunity).

StatutoryCitation

“Communityservices”definedHEA§441(c)(1)[42U.S.C.2751]

Currentlawincludes“childcareservicesprovidedoncampusthatareopenandaccessibletothecommunity”inthedefinitionofcommunityservice.Manycampus-basedchildcarefacilitieshavewaitingliststhatnevergetfilledduetothedemandfromtheschool’semployeesandstudentsforaffordableandconvenientchildcare.Othermembersofthecommunity-at-largearethusunabletousetheseservicesbecausestudentsoremployeeshavefirstpriority.Consequently,manycampus-basedchildcarefacilitiesfailtomeetthestrictdefinitionofcommunityservice,eventhoughfacultyandstaffarethemselvesmembersofthelargercommunity,asareadultstudentslivingoff-campus.TheRTFrecommendsanamendmenttoclarifythedefinitionofcommunityservicewithregardtoon-campuschildcarefacilitiesthat,whileopentothecommunityatlarge,givepreferencetostudentsandfaculty,and,duetolimitedresources,arefilledbytheirchildren.Attheheartofthisrecommendationisthebeliefthatcollegefacultyandstaff,aswellstudentsresidingoffcampus,areinfactmembersofthesurroundingcommunity.Facultyandstaffinparticularareoftenlong-termresidents,indistinguishablefromothermembersofthecommunitywhohappentoworkforanemployerotherthanthecollege.Similarrecommendationshavebeenmadeinthepast.Attemptstoresolvethisissuethroughregulationhavenotbeensuccessfulinthenegotiatedrulemakingprocess.

5. Set-AsideforCommunityService

Recommendation

• Replacethecurrentcommunityservicerequirementwithavoluntaryapproachwhere7%oftheannualappropriationisputintoacommunityservicecomponentprogramunderFWS,forwhichinstitutionswouldapplyseparately.

StatutoryCitation

ParticipationAgreementHEA§443(b)(2)[42U.S.C.2753(b)(2)]

TheRTFrecommendsreplacingthecurrentcommunityservicerequirementwithavoluntaryapproachwhere7percentoftheannualappropriationisputintoacommunityservicecomponentprogramunderFWS,forinstitutionstoapplyforseparately.Manyschoolsalreadyhadstrong,broad-basedcommitmentstocommunityservicebeforeitwasincorporatedasarequirementunderFWS.Otherschoolsarelocatedinareaswheretheyfindplacementinqualifyingcommunityservicepositionsdifficult.Undertherecommendedapproach,thebulkoftheFWSappropriationwouldgotoschoolswithnocommunityservicestringsattached.SchoolswouldhavetheoptionofapplyingforasmuchadditionalcommunityserviceFWSastheythinktheycoulduse,withnominimumpercentageoftheiroverallallocationrequired.

6. PrivateSectorEmploymentCap

Recommendation

• Eliminatethe25%caponprivatesectoremployment.StatutoryCitation

PrivateSectorAgreementHEA§443(c)(2)[42U.S.C.2753(c)(2)]

Schoolsshouldbeabletoplacestudentswhereverjobsareavailableandreasonable.Thisrecommendationwouldnotchangeanyofthecurrentcaveatssurroundingprivatesectorplacement,includingtherequirementthatprivatesectorjobsbeacademicallyrelevanttothestudent’sprogram.

7. FSEOGEligibilityandPellLEU

Recommendations

• RestrictFSEOGtostudentswhoseEFCfallsintothePelleligibilityrange,buteliminatethetietoactualreceiptofaPellGrant.

• EliminateorderofawardingbylowestEFC.StatutoryCitation

SelectionofRecipientsHEA§413C(c)(2)[20U.S.C.1070b-2(c)(2)]

FSEOGmustbeawardedfirsttostudentswithexceptionalneed,withprioritygiventoPellGrantrecipients.Thelawdefines“studentswithexceptionalneed”asstudentswiththelowestexpectedfamilycontributionsattheinstitution.EffectiveJuly1,2012,alifetimeeligibilitylimitof6scheduledawardshasbeenimposedonPellGrantrecipients.DuetotheverylimitednatureofFSEOGfunding,therequirementthatFSEOGbeawardedfirsttoPellGrantrecipientseffectivelycausesalossofFSEOGfundingonceastudentreacheshisorherPelllifetimeeligibilityused(LEU)limit.TheRTFrecommendsthatFSEOGbeawardedtostudentswhoseEFCsfallintothePellGrantrange,regardlessofwhetherthestudentactuallyreceivesaPellGrant,andthatthe“lowestEFC”orderofawardingbeeliminated.StudentswhoseEFCswouldenablethemtoreceivePellGrantsareinfacttheneedieststudents.Furtherdefininganorderwithinthatrangeseemsunnecessarilyredundant.SchoolsshouldbeabletoestablishtheirownpackagingpolicieswithintheEFCeligibilityrange.

Update,July2016 ConsumerInformation

ConsumerInformation

1. EffectivenessofCurrentRequirements

Recommendations

• Requireastudytoreviewtheeffectivenessofcurrentconsumerrequirementsintermsof:Ø Content(studentunderstandingofsignificance)Ø Volume(howmuchistoomuch)Ø Delivery(useofcurrenttechnologies)Ø Timing(linkedtostudentandfamilydecisionsaboutattendanceandfinancialaid)Ø Responsibility[theDepartmentofEducation(ED)vs.theschool]

� EliminatetheannualnoticeandusetheCollegeNavigatorastheprimarywaytodisseminateinformationtostudentsandparents

� Allowschoolstosatisfycompletion/graduationrateandretentionratedisclosureswithaprominentlinkfromtheschool’swebsitetotheCollegeNavigator

StatutoryCitation

InstitutionalandFinancialAssistanceInformationforStudentsHEA§485[20U.S.C.1092]Background,Rationale,andImplementationConsiderations

Theobjectiveofthestudywouldbetodeterminewhether:(1)currentrequirementsareeffectiveandcanbemademoreso;(2)leveragingexistingreportstandardizationcouldallowthefederalgovernmenttotakeovertheresponsibilityofdisclosinginstitution-specificconsumerinformationtothegeneralpublic,andprospectiveandcontinuingstudents;(3)updatingforcurrenttechnologycanestablishmorecommonalityinmethodsofreporting.Simplyput,ifinformationisavailableatED,thenschoolsshouldsimplylinktoit,notreplicateitinanotherway.Everythingshouldbewebdriven.Thus,onegoalofthestudyshouldbetodeterminewhetherprovisionofcertainelementsbyEDwouldbenefitstudentsbystandardizingpresentationanddelivery,andfacilitatingcross-schoolcomparisons.Thestudyshouldalsoexaminethemosteffectivetimingofinformationdeliverywithregardtothevariousstagesofschoolselection,applicationforadmission,applicationforfinancialaidandborrowingdecisions,decisionsregardingattendance,andenrollment.TheprovisionshouldnotallowEDtoconstruethatmoreinformationmustbeproactivelyprovidedtostudentsindividuallyratherthanpostingitontheschool’swebsiteandpointingtowherethatis.TheRTFbelievesthatreducingduplicationofinformationwilleliminateconfusionamongstudentsandreducethemultipleeffortscurrentlytakingplacewithEDandindividualinstitutions.Onesource,suchasED,willresultinmakingthefinancialaidprocesslessconfusingforstudentsandfamilies.Undersuchanapproach,institutionswouldreporttothefederalgovernmentthedetailsofconsumerinformationrequirements.Afederalgovernmentalentitywouldthenserveasthedistributeroftherequiredconsumerinformationdisclosures.Forexample,foreachschoollistedbyastudentonhis/her

FAFSA,thisgovernmentalentitycouldprovideaside-by-sidecomparisonofconsumerinformationforeachofthelistedinstitutions.Bydrivingtheinformationtothestudentandcentralizingittooneagency,theconsumerwouldbenefitfromastandardizedapproach.ThismayrequirethebroadeningofdataelementsthataninstitutionreportstoED.ApossiblevehicleforthewideningofrequireddataelementsisthroughthecurrentIPEDSSurvey.Inthisvein,thedeliveryofnearlyallTitleIVdisclosurerequirementstostudentsandtothepublicwouldshiftfromtheinstitution’sresponsibilitytothefederalgovernment’sresponsibility,usingastandardizedformat.Byassumingresponsibilityofprovidingconsumerinformationtocontinuingstudents,EDcouldalsoofferamorestudent-centricapproachbycomplementinginstitutionaldisclosureinformationwithstudent-specificdataalreadyassociatedwiththestudentwithinNSLDSandCOD.Thisstudyshouldbeconductedbyanindependent,non-partisanfirmwithexpertiseinconsumertestingforeffectivecommunication.

InJune2014,theConsumerInformationTaskForceexpandedandrefinedthisconcept,specificallyrecommendingthatCollegeNavigatorbeusedasamoreefficientmeansofdistributingthedisclosuresandinformationcurrentlyaddressedbytheannualnoticethat

institutionsmustdistributetoeachenrolledstudent,aswellasretentionandgraduation/completionrates.ThetaskforcereportobservesthatinstitutionsalreadyreportthemajorityoftherequiredconsumerinformationintheannualIPEDSSurveywhichis,inturn,displayedontheCollegeNavigatorwebsiteforusebystudents,theirparents,andothermembersofthepublic.Thetaskforce’sreviewofwebsiteshostedbyEDshowedthattheCollegeNavigatorisaviableplatformthatcouldbeenhancedtoserveasthecentralpointofreferenceforparticipatinginstitutions’studentconsumerinformation.EnhancementstothedataprovidedbyinstitutionswouldeliminatetheneedtosendaseparatenoticetostudentswiththesameinformationandwouldpermitinstitutionstoprovidealinktotheCollegeNavigatorasthesinglesourceofstandardizedinformationforprospectiveandcontinuingstudents.ThetaskforcereportrecommendsanumberofenhancementsthatcouldbemadetotheCollegeNavigator.

2. IntendedAudience

Recommendation

• Restricttoundergraduatestudentstherequiredprovisionofconsumerinformationregardingmetricsandotherinformationgenerallyinapplicabletograduatestudents.

StatutoryCitation

InstitutionalandFinancialAssistanceInformationforStudents(informationdisseminationactivities)HEA§485(a)[Specificallyparagraphs(L),(N),(Q),(R)asregardsundergraduatestudents,(S),(U)][20U.S.C.1092(a)]

Requirementstoprovideconsumerinformationshoulddistinguishbetweenundergraduateandgraduatestudents.Requiredprovisionofinformationthatisnotrelevantto,ordoesnotusedatapertainingto,graduatestudentsshouldberestrictedtoundergraduates.

July2016Update

InMarch2016,NASFAA’sConsumerInformationandLawStudentIndebtednessTaskForceproposedthatEDreorganizeitswebsitesbycreatinglandingpagestodirectusersdownrelevantpathwayscustomizedtomeetthespecificneedsofintendedaudiences.

3. LoanConsumerInformation

Recommendations

• MakeEDandloanservicersresponsiblefordevelopinganddistributingloan-relatedconsumerinformation,includingdebtmanagement.

• Betteralignthetimingofinformationwiththeneedforit.

• Retaintherequirementthatschoolshavecounselorsavailabletoanswerquestions.

• RequireEDtoappointanadvisorypanelforthepurposeofassessingandmakingrecommendationsonthequality,sufficiency,andprocessesforprovidingdebtcounseling.Panelmembershipshouldincluderepresentativesfromfinancialservicesorganizations,institutionsofhighereducationandconsumeradvocacyorganizations.

StatutoryCitation

LoancounselingHEA§485(b),(l)[20U.S.C.1092(b),(l)]

TheDepartmenthastraditionallycraftedthesematerials,media,andprocesseswithaone-size-fits-allapproach,whichrarelyfitsmost.Thisprocessneedsabetterqualityassuranceprocess.Bettertimingwouldprovide“just-in-time”counselingonoptionsavailableatthetimetheyaremeaningfultotheborrower,somethingschoolsgenerallyhavenocontrolover.ThisrecommendationwouldcomplementIndebtednessTaskForcerecommendations#5and#7.

July2016Update

InJanuary2015,theServicingIssuesTaskForcerecommendedembeddingtheregulatoryrequirementsofentranceandexitcounselingintoED’sFinancialAwarenessCounselingTool(FACT)inordertoeducateandempowerborrowersinacomprehensivewayaboutborrowingandrepayment.CongressionalActioninthe114thCongress(2015-2016)

• StudentLoanBorrowerBillofRights[S.840]:wouldrequirelenderstoprovideinformationanddisclosuresatdesignatedpointsintherepaymentprocess

4. DecoupleConstitutionDay,VoterRegistration,AthleticDisclosures

Recommendation

• Eliminatenon-TitleIVrelatedrequirementsconcerningConstitutionDay,VoterRegistration,andAthleticDisclosuresfromcompliancewithinTitleIVadministration.

StatutoryCitation

ConstitutionDaySection111ofDivisionJofPub.L.108-447,theConsolidatedAppropriationsAct,2005,12/8/04;118Stat.2809,3344-45(Section111)[FederalRegister:May24,2005]

Voterregistration:HEA§487(a)(23)[20U.S.C.1094(a)(23)]

Athleticdisclosures:HEA§485(a)(5),§485(e)[20U.S.C.1092(a)(5),1092(e)]

Consumerinformationneedstobeusableandeasytounderstand,andneedstomakeanimpactonstudentchoice.Currently,consumerinformationcomplianceistoocomplexandincludesprovisionsforconsumerinformationdisclosuresthathavenorelationshiptoTitleIVeligibility.TheseprovisionsspecificallyhavenobearingonTitleIVstudentfinancialaidbutinsteadcontributetotheconfusion.

5. EliminateRequirementToProvideInformationAboutStateGrantAssistance

Recommendation

• EliminatethePPArequirementthatschoolsprovideinformationaboutstategrantassistancetoalleligibleDirectLoanborrowersinfavorofinformationmaintainedbyEDonawebsitethatisalsolinkedtotheFAFSA.

StatutoryCitation

ProgramParticipationAgreementHEA§487(a)(9)[20U.S.C.1094(a)(9)]

ThisinformationshouldbeavailableontheEDwebsite,butcurrenttechnologyalsoallowsEDtodisplaythisinformationwhenastudentcompletestheFAFSA.

6. Re-examineconsumerdisclosuresnotrelatedtoTitleIV

Recommendation

� ConductastudytodeterminetheusefulnessandutilityoftheCampusSecurityReport,FireSafetyReportandtheFireLog,andDrugandAlcoholPreventionInformation.

StatutoryCitation

InstitutionalandfinancialassistanceinformationforstudentsHEA§485(a),(f),(i),(k)[20U.S.C.1092(a),(f),(i),(k)]

TheConsumerInformationTaskForcemadethisrecommendationinJune2014becauseitisunclearifaninstitutionaldisclosureisthemosteffectivewaytocommunicatetheinformation,orifthepreponderanceofstudentsandfamilies,prospectiveandcurrent,findthisinformationusefulformakingsafeandinformedchoices.Consideringthenotinsignificantburdeninvolvedingatheringthisinformationandissuingthesedisclosures,thesearequestionsthatmustbestudiedandanswered.Whilethetaskforcemembersstronglysupportthatthisinformationbeavailabletoprospectiveandcurrentstudents,thescopeofthesedisclosuresgobeyondfinancialaidrecipients,andhavenodirectcorrelationtoreceivingfinancialaid.Thisconsumerinformationmustcurrentlybereceivedbyallstudents;assuch,theyshouldberelocatedtoanareaofcompliancethatmoreholisticallyassessesaninstitution’sgeneralfitnessforservingastudentpopulation.Additionally,theoffice(s)oncampusresponsibleforsendingoutthesetypesofnon-TitleIVdisclosuresshouldhaveamissionmoredirectlycorrelatedwiththesafetyandwell-beingofallstudentsataninstitution.

7. Federal-levelstudentunitrecord

Recommendations

� Repealthebanonthefederal-levelstudentunitrecord.

� Worktodevelopalimitedstudentunitrecordthatcollectsmoreaccurateandcomprehensivedataoncontemporarystudentbehavior.

StatutoryCitation

DatabaseofstudentinformationprohibitedHEA§134(b)[20U.S.C.1015c]

InJune2014,NASFAA’sConsumerinformationTaskForcerecommendedthatafederalstudentunitrecordbeestablishedtoallowstudent-leveldatatobesenttoED,ratherthanthecurrentsystemofaggregatedinstitutionaldatacapturedinIPEDS.Forpurposesofpostsecondaryeducation,astudentunitrecordwouldallowfortheassessmentof,amongotherthings,studentsuccess(includingtransferrates),completionrates,andsalariesbymajororprogram.Itcouldalsofollowstudentsastheymovethroughandbetweenpostsecondaryinstitutionsandintotheworkforce.MoreimportantlyitwouldaddresscurrentshortcomingswithIPEDS.

July2016Update

• StudentRighttoKnowBeforeYouGoAct[S.1195/H.R.2518]:wouldrequirecollegesanduniversitiestoreportindividualstudenteducationalrecordsto“statewideindividual-levelintegratedpostsecondaryeducationdatasystems”

8. Newconsumerinformationrequirements

Recommendation

� Developandconsistentlyuseaconsumer-testingmodelwhenimplementinganynewconsumerinformationrequirements.

StatutoryCitation

InstitutionalandfinancialassistanceinformationforstudentsHEA§485[20U.S.C.1092]

InJune2014,theConsumerInformationTaskForcerecommendedthatnonewconsumerinformationrequirementshouldbeimposedwithoutpriorconsumertesting.Testingshouldbeconductedatthefederallevelonasmanyexistingconsumerinformationrequirementsasisfeasible,withthegoalofimprovingtheireffectiveness.CongressshoulddirectEDtoconductsuchtestingofcurrentrequirementsbyadatecertainandreportonitsfindings.

9. ReviewcalculationmethodforStudentRight-to-KnowActdisclosures

Recommendation

� Reconsidertheexclusiveuseoffirst-time/full-timedegree-orcertificate-seekingstudentsinthecalculationofgraduationandretentionrates.

StatutoryCitation

InstitutionalandfinancialassistanceinformationforstudentsHEA§485(a)(1)(L),(U);(a)(3)-(7);[20U.S.C.1092(a)(1)(L),(U);(a)(3)-(7)]

InJune2014,theStudentInformationTaskForcerecommendedthatthevalueofexclusivelyusingfirst-time/full-timedegreeorcertificateseekingstudentsinthecalculationofgraduationandretentionratesbereviewed.Manyschoolshavelargertransferpopulationsthanfirst-time/full-timestudents,soidentifyingtheappropriatemetrictocapturethatstudentpopulationwouldbebeneficialtothosestudentsintheircollegesearchprocess.Additionally,thereviewshouldincludepart-timestudentssoastoachieveamorerealisticpictureatcommunitycollegesandfor-profitinstitutions.

Update,July2016 ReturnofTitleIVFunds

ReturnofTitleIVFundsforWithdrawingStudents

1. SimplifytheReturnofTitleIVFunds(R2T4)CalculationsandProcess

Recommendations

• Restrictlawandregulationtoundergraduates.Leavetreatmentofgraduatestudentstoinstitution.

• Narrowthedefinitionofschoolsthatarerequiredtotakeattendance:onlyiftheyarerequiredtotakeattendanceforallstudentsinagivenacademicprogramthroughouttheentirepaymentperiodbytheaccreditingorstatelicensingagency.Allowschoolsthatarenotrequiredtotakeattendancetouseadocumentedlastdateofattendanceorotheracademicactivityforanystudentattheschool’soption.

• Continuetorequirethatschoolshaveanaccessible,publicizedwithdrawalprocedurethatrecognizesthestudent’swithdrawaldateasthedatethestudentinitiatesthatprocedure.(Theschoolcontinuestodefinewhatconstitutesthebeginningofthewithdrawalprocess.)Eliminatethe“intenttowithdraw”rules.Eliminaterulesconcerningstudentsrescindingtheirdecisiontowithdrawandleavethatentirelyuptoschoolpolicy.

• Forstudentswhodonotfollowtheschool’sofficialwithdrawalprocedure(mostlystudentswhodropoutwithoutnotifyingtheschool),allowaschoolthatisnotrequiredtotakeattendancetosetthewithdrawaldateunderitsowndefinedpolicies.(UnofficialwithdrawalswouldthusnotberegulatedbyED.)Thiswouldalsoallowtheinstitutioncompletediscretiontosetthewithdrawaldateifthestudentcouldnotfollowofficialproceduresbecauseofillnessetc.

• Followthecurrentmodifiedpro-rataapproach,butsimplifytherulesasfollows:Establishweeklyincrementsbasedoncalendartimeratherthantheday-by-daycalculationthatexcludescertaindaysundercertainconditions.Fractionsofweekswouldberoundedup:attendanceinanydayoftheweekcountsthatweek.Retain60%asthepointatwhichallaidisearned,butexpressitasattendancein60%oftheweeks(sothatfractionscountasaweek).Untilthatpoint,foreachweekatleaststartedbythestudent,aidisearnedinproportiontothenumberofweeksconstituting60%(thatwouldavoidthe“cliffeffect”currentlyseen).

• Restoreauthorityforpost-withdrawaldisbursementstobeatthediscretionoffinancialaidadministratorsbasedonpublicizedinstitutionalpolicy(i.e.,notnecessarilyonacase-by-casebasis;schoolcansetparameters).Retaintherulethattheschoolshouldaskthestudentfirstifaloandisbursementshouldbemade,andextendthattoPellaswell.

• ModifytheassumptionthatTitleIVaidisappliedtoinstitutionalchargesfirst.Allowaidthatisspecifiedforaparticularcostofattendance(e.g.,tuition)andthatwillnotneedtobereturnedunderthesource’srulestobedeductedfrominstitutionalchargeswhendeterminingtheamountofunearnedaidthatmustbereturnedbytheinstitution.

• AllowmoretimeforschoolstoprocessR2T4byincreasingfrom45daysto60daystheperiodoftimetheinstitutionhastoreturnfunds.

• Amendtheorderofreturnlanguage.MaketheorderofreturnsubjecttoregulationbutspecifyTEACHGrantandloansfirst,withadirectivetorepayleastadvantageousloansfirst.RemovereferencestoFWS.

• DirectEDtoseekpublicinputonwaystodecreasetheburdenandcomplexityofR2T4regulationsandprocedureswithinasetperiodoftimeafterenactment,andtoconductasubsequentnegotiatedrulemakingsessiondevotedsolelytoR2T4.

• RequireEDtoreporttoCongressbyadatecertain,detailingwaysinwhichR2T4canbemadelessburdensome,includingtreatmentofvariousprogramformatssuchasmodules.

� AllowanexemptionfromR2T4requirementsforinstitutionsthatimplementsmaller,morefrequentdisbursements

StatutoryCitation

HEA§484B[20U.S.C.1091b]

Undercurrentlaw,astudentwhowithdrawsbeforecompletingtheperiodforwhichheorshehasreceivedTitleIVstudentaidfundsiscurrentlyconsideredtohave“earned”therighttothosefundsonaproratedbasis.Astudentwhohascompletedmorethan60%(intime)ofthepaymentperiodhasearned100%ofaidthatwasormaystillbedisbursed.Upthroughthe60%point,aidisearnedinproportiontothepercentageoftimeenrolledasmeasuredbythelengthoftheentirepaymentperiod.Thus,astudentwhowasenrolledfor60%ofthepaymentperiodearns60%ofaid,whileastudentwhowasenrolled61%oftimeearns100%ofaid.Astudentwhowasenrolledevenonedayearnsaportionofhisorheraid,whichmustbedisbursedoratleastoffered.Undercurrentregulation,thesecalculationsareperformedindaysforcredithourprograms(withscheduledbreaksofatleast5daysexcluded)orinscheduledhoursforclockhourprograms.Thelynchpinofthecalculationisdeterminingthestudent’swithdrawaldate.Schoolsmusthaveawithdrawalprocessthatstudentscaneasilyaccess.Awithdrawaldatecanbeidentifiedforstudentswhofollowthoseprocedures,althoughtherearecomplicationseveninthataspectoftherules.Studentswhodropoutwithoutnotifyingtheschoolarefarmoredifficulttotreat,unlesstheschooltakesattendance,whichisamatterofacademicpurviewunlessanaccreditingagencyorstatelicensingagencyrequiresit.Thelawdifferentiatesbetweenschoolsthatareorarenot“requiredtotakeattendance”indefiningwithdrawaldate,buttheDepartmenthasgonefarbeyondthatsimpledistinctionindefiningwhatismeantby“requiredtotakeattendance.”WhilethebasicconceptunderlyingthereturnofTitleIVfunds(R2T4)isquitestraightforward,thedetailshavebecomesocomplicatedthatithasbecomeveryburdensometoexplaintostudentsandtoadminister.EventheDepartmentneedsover200pagesintheHandbooktodescribeandillustratethisprocess.Errorsarevirtuallyinevitableinsocomplexasetofrules.Further,giventhewiderangeofprogramformats,individualstudentcircumstances,andotherfactors,itisverydifficulttoaddressallscenariosthatariselogicallyundera“onesizefitsall,”highlyregulatedapproach.ThelawshouldlayoutthebasicrequirementsandparametersofanR2T4policy,whichschoolsmustfillinbuthavesomediscretionover.Thelawshouldclearlyidentifythoseareasoverwhichtheinstitutionhassolediscretion.GraduatestudentsreceivenoPellorsubsidizedloans.Institutionalinvestmentingraduatestudentsisgenerallymuchhigherandselectionforadmissionmorerigorous.Thus,thelawshouldaddressonlyundergraduates,andEDshouldnotregulateR2T4policyforgraduatestudents.

Anexampleoftheproposedmodificationstothepro-ratacalculationofearned/unearnedaidwouldbeasfollows.AsemesterrunsfromSeptember3,2013,throughDecember13,whichis15weeksbythecalendar.Astudentearnsallaidbyremainingenrolledin60%oftheweeksinapaymentperiod—0.6x15=9weeksregardlessofanybreaks.The9thweekbeginsOctober27.AstudentwhowithdrawsanytimeduringtheweekofOctober27hasearnedallaid.Forthe15-weeksemester,astudentwhowithdrawsanytimeduringthefirstweekearns1/9thofaid.Astudentwhowithdrawsanytimeduringthe8thweekearns8/9thsofaid.Furtherdiscussionregardingthetreatmentofmodulesisneeded.However,thislevelofdetailshouldnotbespecifiedinlaw,butshouldbethesubjectofadedicatednegotiatedrulemaking.

InJune2015,theInnovativeLearningModelsTaskForcerecommendedthat,inalignmentwiththeCompetencyBasedEducationExperimentalSiteInitiative,institutionsimplementingamodelofsmaller,morefrequentdisbursements(threemonthsorless),beexemptfromHEA

section484Band34CFR668.22,ReturnofTitleIVfundsuponstudentwithdrawalfromschool.

July2016Update

InJuly2015,theReturnofTitleIVFunds(R2T4)TaskForceencouragedacloserlookattheobjectivesofafederalreturnpolicy,andproposedanumberofalternativeapproachestoconsiderinfurtherdevelopingtheRTFrecommendationsoraddressingadditionalissues.FurtheractionisneededtoformulateoneormoreoftheconsiderationsintorecommendationsuponwhichtheNASFAABoardofDirectorscouldact,andfurtherstudyofthetreatmentofmodulesisalsoneeded.Thetaskforcesuggestedconsideringthefollowingideas:

• EliminatethereturnofTitleIVfundsrequirementaltogetherinviewofotherprocessesthatlimitastudent’slong-termaccesstofederalstudentaid,suchassatisfactoryacademicprogress(SAP),loanandloansubsidylimits,lifetimePelllimits,andunusualenrollmenthistoryreviews.

• IncorporateR2T4intoSAP.• Movethedeterminationofwithdrawalandcalculationofunearnedfundstotheendofthe

paymentperiod.• Eliminatethereturnofloanfunds.

AppendixA:FederalIncomeTaxExemptionsforDependentsUnderthetaxcodeataxpayerandspouse,ifapplicable,areentitledtopersonalexemptions.Additionally,adependent,whoisthuseligibletobeclaimedasanexemptiononanotherperson’sincometaxreturn,isapersonwhoqualifiesassuchundereitheroftwocategories:qualifyingchildorqualifyingrelative.Ineitherinstance,thedependentmustbeaU.S.citizen,residentalienornational,oraresidentofCanadaorMexico.Theannualdollarvalueofpersonalanddependentexemptionsisthesame.Qualifyingchild.Therearefivetestsaqualifyingchildmustmeetinordertobeconsideredadependentofataxpayer.Abasicdescriptionofeachtestfollows.TherearecertainexceptionstotheResidencytestthatpertaininatypicalorextraordinarycases,forexample,childrenofdivorcedorseparatedparents,andkidnappedanddeceasedchildren.1.Relationship.Thechildmustbethetaxpayer’sson,daughter,stepchild,fosterchild,brother,

sister,halfbrother,halfsister,stepbrother,stepsister,oradescendantofanyoftheaforementionedpersons.

2.Age.Attheendofthecalendaryear,thechildmustbe

(a)underage19andyoungerthanthetaxpayer(orthespouseiffilingjointly),or

(b)underage24andfull-timestudentforatleastpartofatleasteachoffivemonthsduringtheyear,andyoungerthanthetaxpayer(orthespouseiffilingjointly),orFull-time:Definedbyschool.

(c)anyageiftotallyandpermanentlydisabled.Permanentlyandtotallydisabled.Achildispermanentlyandtotallydisabledif:

• Heorshecannotengageinanysubstantialgainfulactivitybecauseofaphysicalormentalcondition;and

• Adoctordeterminestheconditionhaslastedorcanbeexpectedtolastcontinuouslyforatleastayearorcanleadtodeath.

3.Residency.Thechildmusthavelivedwiththetaxpayerformorethanhalfoftheyear.

Temporaryabsencesforeducationdonotdisqualify.

4.Support.Thechildmustnothaveprovidedmorethanhalfofhisorherownsupportfortheyear.5.Jointtaxreturn.Thechildisnotfilingajointtaxreturnfortheyear.Thequalifyingchildtestsaresimilartothoseforincludingcertainfamilymembersinthenumberinthehouseholdforfederalneedanalysispurposes.Therearetwonotableexceptions.Intermsofa“residencytest,”federalneedanalysisdoesnotrequireasiblingofthefinancialaidapplicanttoliveinthehomeinordertobeincludedinthatapplicant’sfamilysize.Also,afosterchildisnotincludedinthehouseholdsizeifthefosterparentsreceivesupportpaymentsforthatfosterchild.Anotherdifferenceisthatfederalneedanalysisdoesnotincludeanagecriterionforsiblings,exceptintermsoftheindependentstudentdefinition.

AppendixA

Qualifyingrelative.Therearefourtestsaqualifyingrelativemustmeetinordertobeconsideredadependentofataxpayer.Abasicdescriptionofeachtestfollows.TherearecertainexceptionstotheMemberofhouseholdorrelationship,Grossincome,andSupportteststhatpertaininatypicalcases,forexample,multiplesupportagreementsbetweendivorcedparents,andkidnappedanddeceasedchildren.1.Notaqualifyingchild.Thepersoncannotbethequalifyingchildofanytaxpayer.2.Memberofhousehold/relationship.Thepersonmust

(a)berelatedtothetaxpayerthoughnotnecessarilylivingwiththetaxpayer1,or(b)livewiththetaxpayerallyearasamemberofthetaxpayer’shousehold(andthis

relationshipdoesnotviolatelocallaw).3.Grossincome.Theperson’sgrossincomefortheyearmustbelessthan$3,800(2012amount,

indexedannuallyforinflation).

4.Support.Morethanhalfoftheperson’stotalsupportfortheyearmustbeprovidedbythetaxpayer.

Thequalifyingrelativeprovisionextendsthetaxexemptionfordependentstoadditionalpersonsgiventhataqualifyingchildcanneverbeaqualifyingrelative.UndertheMemberofhousehold/relationshiptestthequalifyingrelativeneednotberelatedtothetaxpayer,thoughthatpersonmusthavelivedinthehouseholdallyearandthetaxpayermusthaveprovidedmorethanhalfofthatperson’stotalsupportfortheyear.Also,thequalifyingrelative’sgrossincomecannotexceedthedollarvalueoftheexemptionforthetaxyear.Aswiththequalifyingchildtests,thequalifyingrelativetestsaresimilartothoseforincludingcertainfamilymembersinthenumberinthehouseholdforfederalneedanalysispurposes,withtwonotableexceptions.Federalneedanalysistreatmentdoesnotconsiderthequalifyingrelative’sgrossincome,andapersonwhoisrelatedtothetaxpayerneednotlivewiththetaxpayer.Finally,animportantnoteaboutsupportthatisprovidedtoanotherperson.Thetaxcodespeakstosupportduringthetaxyear,whereasfederalneedanalysisgenerallyspeakstosupportfortheupcomingawardyear.

1Child,stepchild,fosterchild,oradescendantofanyofthese(e.g.grandchild)Brother,sister,halfbrother,halfsister,stepbrotherorstepsisterFather,mother,grandparent,uncle,aunt,nephew,niece,orotherdirectancestorFather-in-law,mother-in-law,brother-in-law,sister-in-law,son-in-law,ordaughter-in-law

AppendixA

Crosswalk:TitleIVHouseholdMembersandFederalIncomeTaxExemptions

DependentStudentsforTitleIVPurposes

TITLEIVHOUSEHOLDMEMBERS

(TITLEIVREQUIREMENTSSATISFIED)

PARENT(S)FEDERALINCOMETAXEXEMPTION?

Student(FAFSAApplicant) Yes,iflivedwithparent(s)morethanhalfoftheyear(residencytest)

Parent(s) Yes

Applicant’ssiblings:

• Parent(s)providesmorethanhalfsupport Yes,ifmeettheageandresidencytests

• DependentunderTitleIVrules Yes,ifmeettheage,residencyandsupporttests

Otherpersonslivingwithparent(s):

• Relatedtotheparent(s),or Yes• Notrelatedtotheparent(s),and Yes

• Grossincomeexceeds$3,800(2012) No

IndependentStudentsforTitleIVPurposes

TITLEIVHOUSEHOLDMEMBERS(TITLEIVREQUIREMENTSSATISFIED)

STUDENT’SFEDERALINCOMETAXEXEMPTION?

Student(FAFSAApplicant) Yes

Spouse Yes

Children Yes,ifmeettheageandresidencytests

Otherpersonslivingwithstudent: • Relatedtothestudent,or Yes

• Notrelatedtothestudent,and Yes• Grossincomeexceeds$3,800(2012) No

AppendixA

Crosswalk:FederalIncomeTaxExemptionsandTitleIVHouseholdMembers

DependentStudentsforTitleIVPurposes

PARENT(S)FEDERALINCOMETAXEXEMPTION

(TAXCODEREQUIREMENTSSATISFIED)

TITLEIVHOUSEHOLDMEMBER?

Parent(s) Yes

Applicant’ssiblings Yes

Otherpersonsrelatedtotheparent(s): • Livingwiththeparent(s) Yes

• Notlivingwiththeparent(s) No

Otherpersonsnotrelatedtotheparent(s) Yes

IndependentStudentsforTitleIVPurposes

STUDENT’SFEDERALINCOMETAXEXEMPTION(TAXCODEREQUIREMENTSSATISFIED)

TITLEIVHOUSEHOLDMEMBER?

Spouse Yes

Children Yes

Otherpersonsrelatedtothestudent: • Livingwiththestudent Yes

• Notlivingwiththestudent No

Otherpersonsnotrelatedtothestudent Yes

Appendix B: FAFSA Application Process: Three Pathways

After"initial"questions"related"to"demographics"and"dependency"status,"the"FAFSA"will"ask"applicants"about"

receipt"of"SNAP"and/or"SSI"benefits"and"for"those"who"answer"“No”,"tax"filing"status."The"applicant’s"

response(s)"will"then"steer"the"applicant"down"one"of"three"pathways."

Did any of the following individuals receive SNAP and/or SSI benefits?

• You (the student) and/or spouse

• Your parent(dependentstudents only)

• Any other memberof your household

Did the following tax filer complete a 1040A, 1040 EZ or 1040 without forms or schedules?

• You/spouse(independentstudents only)

Did the following individuals file a tax return?

• You/spouse(independentstudents only)

Applicant eligible for maximum Pell Grant. No additional financial information requested

Applicant must provide limited financial information

Applicant must provide limited income and asset information

Applicant must provide complete income and asset information

PATH 1 PATH 2 PATH 3

Updated Report of the NASFAA Reauthorization Task Force · PDF fileUpdated Report of the...

Documents