Federal Update

Janet Dodson

July 1

• The measure prohibits first disbursements of Federal Family Education Loan Program loans after June 30.

• Allocate $61 billion in savings that government accounting rules project over the next 10 years to other student aid and higher education initiatives.

Temporary Loan Consolidation Authority

• Between July 1, 2010, and June 30, 2011• allows borrowers whose loans are not yet in

repayment to obtain Direct Consolidation loans if they have at least two of the following three loan types:– Direct loans– FFELP loans that were sold or put under the Ensuring

Continued Access to Student Loans Act. – FFELP loans held by an eligible FFELP lender.

Foreign Schools

• Foreign School Loan Program. Effective July 1, permits foreign schools serving U.S. students to originate Direct Loans through financial institutions designated by the Secretary of Education.

Note: today foreign schools may use only FFELP loans.

Eligible Nonprofit Servicers

• Eligible Nonprofit Servicers. Permits the Secretary of Education to contract with eligible nonprofit organizations to service Direct Loans and provides mandatory funding to cover these contracts

Technical Assistance for DL Transition

• Technical Assistance for Direct Loan Transition. Provides $50 million in fiscal 2010 funding to help postsecondary institutions transition to the Direct Loan program.

Job Retention for Servicers

• Job Retention for Servicers. Provides $25 million each in fiscal years 2010 and 2011 to pay loan servicers for retaining jobs at locations where they were servicing FFELP loans on Jan. 1, 2010.

IBR

• Income-Based Repayment. Effective July 1, 2014, new borrowers could qualify for new income-based repayment terms.

• Maximum monthly loan payment made under IBR would fall to 10 percent (currently 15 percent of discretionary income)

• IBR borrowers would be eligible for loan forgiveness after 20 years rather than the current 25 years of repayment.

Pell Grants

• Pell Grants• Provides a $36.1 billion increase in Pell Grant

funding over the next 10 years. • Beginning in 2013-2014, mandatory funding for

Pell Grants will be indexed to the Consumer Price Index, but that inflation adjustment ends in 2017-2018.

• The bill includes an additional $13.5 billion in mandatory funding to address a portion of a $19 billion budget shortfall in the Pell Grant program, due to increased demand for grant aid.

College Access Challenge Grants

• College Access Challenge Grants

• Provides $750 million

• Extends for five years College Access Challenge Grants to the states.

• Total annual funding increases to $150 million for 2010-2014, from the $66 million authorized each year for 2008 and 2009.

Minority-Serving Institutions

• Extends through fiscal 2019 funding originally authorized under the College Cost Reduction and Access Act.

• Provides a total of $2.55 billion over the period in funding for Historically Black Colleges and Universities and other minority-serving postsecondary institutions

• Funding expectation in part to promote graduates in the fields of science, math, engineering and technology.

Community College Grants

• Provides a total of $2 billion in grants to community colleges for career training programs as part of a U.S. Department of Labor program

What’s not changing - today

• No EFC calculation simplification– Elimination of Assets– All financial data from tax return

• No new Perkins program

• Relaxation of Drug Conviction Provision

3-Year Cohort Default Rate

• Beginning FY 2009 the institutional cohort default rate calculation will be based on the three most recent fiscal years available

• Expands the timeframe during which defaulted borrowers are counted from two to three years and creates a transition period

• Applies for any fiscal year in which 30 or more current or former students enter repayment on an applicable FFEL or DL

• Default rate threshold raised from 25% to 30% along with new sanctions (for the 2011 CDR published 9/2014)

• ED will publish an annual cumulative default rate by institution type

New 3-year CDR Formula

# of student borrowers who entered repayment in the cohort fiscal year and

defaulted within the next two fiscal years

# of student borrowers who entered repayment in the cohort fiscal year

% = Cohort Default Rate

Are schools ready for the unexpected?

• Program Integrity Topics from Negotiated Rulemaking

• Consensus not reached – NPRM coming “soon”– Satisfactory academic progress– Disbursement of Title IV fund – Incentive compensation– Gainful employment in a recognized occupation– Definition of a high school diploma for purposes of

eligibility for federal student aid– Ability to Benefit

Are schools ready for the unexpected?

• Program Integrity Topics from Negotiated Rulemaking

• Consensus not reached – NPRM coming “soon”– Definition of a credit hour– State authorization and institutional eligibility– Misrepresentation of information provided to students

and prospective students– Retaking coursework– Institutions required to take attendance for purposes

of Title IV refund requirements

Are schools ready for the unexpected?

• Program Integrity Topics from Negotiated Rulemaking

• Consensus not reached – NPRM coming “soon”– Verification – Agreements between institutions of higher education – R2T4 – term-based module programs

This may all be published with a short window for comment. You are encouraged to be alert!

Gainful Employment

• The provisions currently apply to certificate programs at traditional institutions and essentially all for-profit programs

• Federal regulations do not currently define “gainful employment”

• The Department’s proposal would limit a programs debt-to-earnings ratio to 8% along with two alternative methods of compliance (using actual earnings or loan repayment rate)

IRS – FSA Concept

• FSA and IRS are collaborating– Data Retrieval up in January, 10 for 2009-10– ‘10–11 tax information available 07, 2010– ’11-12 hope to be available with January,

2011 start-up.

Other Stuff – that’s a technical term

• ACG and SMART

• Year Round Pell

• Self-certification form for non-federal loans now available