Negotiated Rulemaking - Loans Team Package II

Negotiated Rulemaking - Loans TeamPackage II

Betsy Mayotte, ASAVicki Shipley, NCHER

12013 Knowledge Symposium November 5-

7, 2013 ● St. Pete, Florida

Disclaimer

This material is for informational purposes only and is not intended to serve as legal advice. Individuals are advised to consult their own legal counsel to determine the issues particular to their own situation and any results that may apply.



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Background

• Guarantor Issues

• Lender/Servicer Issues

• What’s Next

• Resources2013 Knowledge

Symposium November 5-7, 2013 ● St. Pete,

Florida

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Package 2 Agenda• Forbearances

• Administrative Wage Garnishment

• Rehabilitation

• Enrollment Reporting

• Closed School Discharge

• Perkins Loans

• FFEL Repayment Disclosures

• Minimum Loan Period for Transfer Students

• Participation Rate Index

• FFEL/DL Alignment



Effective DatesPackage II

– Generally effective 7/1/2014– Voluntary early implementation for some provisions– Final Rule November 1, 2013



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Administrative ForbearanceNew rules will allow

administrative forbearance to a borrower who is delinquent at the beginning of an authorized period of forbearance

682.211(f)2013 Knowledge


Florida

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Lender 60-Day Repayment Disclosure Requirements

No longer required to provide “difficulty making payment” disclosure if payment issue has been resolved

Timeframe to send 60 day delinquency notice changed from 5 calendar days to 5 business days

682.205(a)(4)



Military Forbearances

Allows mandatory forbearance for service that is eligible for partial loan repayment under any Department of Defense program– Adds this forbearance for Direct Loans

• Borrower must request and provide documentation

682.211(h)82013 Knowledge


Florida

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Post 270-Day Forbearances Current rules allow verbal forbearances for both

programs up to 270 days past due– DL allows after 270 days up to transfer to collections– FFELP only allows written after 270 days past due

New rule will allow limited verbal forbearance under both programs for loans 270 days past due or more where:– No claim has been paid under the FFELP– Loan has not been transferred to DL collections

120-day limit– Can be used multiple times but not consecutively– 682.211(d)



Regaining Title IV Eligibility

Borrower gets one opportunity to renew his/her eligibility for title IV assistance.

Making payments under rehab doesn’t trigger – must actually obtain new Title IV funds

“On-time” now within 20 days of due date rather than 15

682.200(b)



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Closed School Discharge Desire to specify an exceptional

circumstance and tie timeframes more closely to real life occurrences of schools closing

To qualify for closed school discharge, borrowers must have attended within 120 (rather than 90) days of school closure– Other eligibility rules remain the same

– 682.402(d)



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Closed School Discharge

Exceptional circumstances may include, but are not limited to: – The school’s loss of accreditation; – The school’s discontinuation of the majority of

its academic programs; – Action by the State to revoke the school’s

license to operate or award academic credentials in the State, or

– A finding by a State or Federal government agency that the school violated State or Federal law

– 682.402(d)



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When is a School Not a School?

For purposes of closed school discharge a school IS:– The school’s main campus and/or – Any location or branch of the main campus

A school is NOT:– A single program– Most but not all of a schools programs

– 682.402(d)



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FFELP and DL Clean-up

Longest Issue Paper EVER!

Deleted much of origination language from FFEL – added to DL as needed

Inducement language2013 Knowledge Symposium November 5-


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Transfer of Credits For students transferring into clock hour or

credit hour schools with no standard terms

Current rules only allow new loan origination – For remainder of program if program is less than

academic year in length or– For remainder of academic year but only– If school accepts credits from “old” school

Borrowers will no longer have to worry about the ramifications of transferring to a school that does not accept credit or clock hours from the previous school

685.3012013 Knowledge


Florida

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Perkins Cancellation Teacher Loan Forgiveness/employment

based forgiveness– Borrower who does not complete year for

FMLA reasons still gets credit as year worked• Must have completed at least half of year

Borrowers who change employment but maintain same cancellation progression category maintains status

674.52(c)(1)



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Other Perkins Changes On-time repayment definition for rehab

changed from 15 to 20 days

Perkins loans made prior to 1982 can now be assigned to ED without an SSN

Eliminates debt to income provisions for economic hardship deferment

Aligns graduate fellowship deferment requirements with those of the FFEL and DL



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Questions?



First Things First..

192013 Knowledge Symposium

November 5-7, 2013 ● St. Pete, Florida

Guarantor Specific IssuesRegaining Title IV

Eligibility Loan Rehabilitation

Loan Rehabilitation-AWGAdministrative Wage

Garnishment



Loan Rehabilitation

All loan rehab payments must be “reasonable and affordable” (R & A) and agreed upon by loan holder and borrower.– Cannot be balance based

§682.405 (b) §685.211(f)



Loan Rehabilitation *Guaranty agency must determine a

borrower’s initial reasonable and affordable payment amount based on the “15% formula”.– IBR formula used but NOT an IBR payment– 15% of AGI – 150% of poverty level/12– New 7/1/2014 IBR rules will not apply here– No other IBR rules apply

§682.405 (b) §685.211(f)

– *Red denotes changed or new from Proposed Rule



Loan Rehabilitation If borrower objects to 15% formula payment

, payment Financial Disclosure for Reasonable and Affordable payment form must be collected and payment determined

Borrower can then choose which payment they prefer

Payment can be as low as $5

§682.405(b)(1)(iii) (A) §685.211(f)(1)(i)(A)



Loan Rehabilitation

New ED-approved form for gathering financial information if 15% formula payment amount is rejected by the borrower.

Form includes consideration for family size and specific expenses.

Borrower may be asked to provide documentation to support the request.



Loan Rehabilitation

Rehab agreement due to borrower within 15 days of payment determination

Rehab Agreement must include:– Borrower’s reasonable and affordable

payment amount.– A prominent statement that the

borrower may object orally or in writing to the R & A payment amount.

– Method and timeframe for raising such an objection…



Loan Rehabilitation– An explanation of any other terms and

conditions required for loan to be rehabilitated

– The effects / benefits of having a loan rehabilitated.

– Amount of collection cost to be added to the unpaid principal when the loan is sold• May not exceed 18.5%

§682.405(b)(1)(v) §685.211(f)(1)(iii)



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Additional Restrictions Prohibited

• Guarantors and ED may not impose additional requirements for borrowers to rehabilitate.

• Requiring updated contact information not considered an additional requirement so is allowed

• Requiring a signed rehabilitation agreement is allowed

• §682.405(b)(1)(v) and §685.211(f)91)(iii)



Loan Rehabilitation

GA must limit contact with the borrower whose loan is being rehabilitated to:

– Collection activities that are required by law or regulation.

– Communications that support the rehabilitation.

§682.405(b)(1)(x)



Loan Rehabilitation - AWG

Administrative Wage Garnishment must be suspended after 5 voluntary payments– Unless otherwise instructed by borrower– Does not supersede other suspension requirements– Benefit can only be used once– GA must notify if AWG resumes, but hearing and notice

requirements do not apply.

Adjustments can be made to the voluntary payment amount– should be agreed to and reflected in the written

rehabilitation agreement.

§682.405(a)(3) §685.211(f)912)(i)



Administrative Wage Garnishment 30-day notice still required prior to initiating

garnishment proceedings. Must include– Nature and amount of the debt.– Intention to collect the debt through deductions

from disposable pay.– An explanation of the borrower’s rights.– Deadlines by which the borrower must exercise

those rights.– Consequences of failure to exercise those rights

in a timely manner.

§682.410 (b)(9)(i)(H)



Administrative Wage Garnishment GA must still offer borrower reasons to

object to AWG. Reasons include:– Existence of the debt.– The amount of the debt– Enforceability of the debt. (New for 2014)– Amount of collection cost exceeds the

permissible amount– Financial hardship caused due to the

amount or at the withholding rate proposed in the notice.

§682.410 (b)(9)(i)(E)(1)



Administrative Wage Garnishment Borrower’s objection due to financial hardship

due to amount of AWG:– Borrower must provide proof of income and

expenses– GA must lower if required by hearing official– Borrowers financials are in sync with “collection

financial standards” set by IRS– Lowered order in effect for six months– GA may increase, but must notify borrower and

give opportunity to object– Borrower may object to amount at any time, but

GA is not required to consider until six months after prior order issued

§682.410(b)(9)(i)



Administrative Wage Garnishment Borrower will have 30 days from AWG notice to

submit written request for hearing– If received timely, GA may not issue withholding

order until hearing completed and decision rendered– Must be completed within 60 days

• Can be extended if borrower raises objection not previously raised

– If not received timely, withholding order must be issued• Hearing and decision must still be completed within 60

days– Withholding order must be suspended if hearing not

completed on 61st day – even if extension granted

§682.410 (b)(9)(i)(J)



Administrative Wage Garnishment Miscellaneous Bits

Hearing official may not be under the supervision/control of the head of the guaranty agency, “or of a third-party servicer or collection contractor employed by the agency.”

All oral communications — except for hearing logistical issues — with any representative of the guaranty agency or with the borrower are made within the hearing of the other party– Copies of any written communication with either

party are promptly provided to the other party.

§682.410(b)(9)(i)(I)



Administrative Wage Garnishment

Employer in receipt of AWG order must withhold smaller of: – Amount specified in the AWG order.– 15% of the borrower’s disposable pay (as

permitted by section 488A(a)(1) of the HEA)– Cumulative amount of all orders not to

exceed 25%

Federal loans receive priority over other orders other than family support.

§682.410 (b)(9)(i)(K)



Negotiated Rulemaking & Pending Regulatory Changes

Additional resources/references can be obtained by accessing the NCHER Negotiated Rulemaking 2011-2013 web-link:

http://www.ncher.us/?page=158

Neg Reg pageshttp://www2.ed.gov/policy/high

ered/reg/hearulemaking/2011/index.html 362013 Knowledge


Florida



http://www2.ed.gov/policy/highered/reg/hearulemaking/2011/index.html



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Negotiated Rulemaking - Loans Team Package II

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