Transcript Document

EASFAA 2012
FEDERAL UPDATE
Jeff Baker
May 23, 2012
Today’s Topics
 White House Student Loan Initiatives
 Budget Act of 2011
 Consolidated Appropriations Act – 2012
 Other Legislative
 President’s 2013 Budget
 Cohort Default Rates
 Verification
 Gainful Employment
2
White House Student
Loan Initiatives
3
Special Direct Consolidation
Loans
4
Special Direct Consolidation Loan
 January 17 through June 30, 2012.
 Only for “Split Borrowers”
 Loans held by ED and FFEL lender
 ED Held Loans –Direct Loans and ‘PUT’
FFEL Loans
 Only the commercial FFEL to be consolidated
 Underlying loans paid off
 Underlying loans maintain identity
Same terms, conditions, dates
5
Special Direct Consolidation Loan
Benefits –
 Single holder/servicer/bill/payment
 Loans maintain terms and conditions
 Reduction in interest rate of 0.25%
 Additional 0.25% reduction for EFT
 Loans eligible for Public Service Loan
Forgiveness
6
”Pay As You Earn”
Income Driven Repayment
Plans
7
Income Based Repayment (IBR) Plan
 Statutory - FFEL and Direct Loan
 Current Law –
 Maximum annual payment amount is 15% of
discretionary income.
 Remaining balance forgiven after 25 years.
 New Law (SAFRA) – Effective 2014
 Maximum annual payment amount is 10% of
discretionary income
 Remaining balance forgiven after 20 years.
8
Income Contingent Repayment Plan
 Regulatory - Direct Loan Only
 Current Regulation  Regulatory defined formula
 Complex
 Loan amount and income
 Remaining balance forgiven after 25
years.
 Limited “take-up” rate
9
Revised Repayment Plan
 Amend ICR regulations to –
 Accelerate 2014 IBR changes
 Reduce from 15% of discretionary income to
10%
 Reduce forgiveness time from 25 years to
20 years
 Negotiated rulemaking required- finalized in
March
 NPRM Next
 Expected effective date – Fall 2012
10
Budget Control Act of 2011
(BCA)
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BCA - Subsidized Loans
 Elimination of Subsidized Loans for
Graduate Students
 Effective for loans made for loan periods
beginning on or after July 1, 2012.
 Subsidized Loans for loan periods
beginning before July 1, 2012 remain
unchanged.
 COD will edit for compliance.
12
BCA - Repayment Incentives
 Elimination of Direct Loan Incentives
 Terminates repayment incentives to
encourage on-time repayment of loans.
 Effective for loans first disbursed on or after
July 1, 2012.
 COD will edit for compliance.
 Allows interest rate reduction to borrowers
who repay electronically.
13
Consolidated Appropriations
Act – 2012
See DCL GEN-12-01
14
Ability-to -Benefit (ATB)
 Eliminates Title IV eligibility for students
without a high school diploma (or equivalent).
 Exceptions for
 Home schooled students
 Students who were enrolled in a Title IV
eligible program of study prior to July 1,
2012.
15
Ability-to -Benefit (ATB)
 Students who are or were, enrolled in a Title
IV eligible program anytime prior to July 1,
2012, may continue to qualify under one of
the ATB alternatives –
 Passing an independently administered,
approved ATB test.
 Successfully completing at least six credit
hours or 225 clock hours.
16
Pell Grant Duration of Eligibility
 Reduces the duration of a student’s eligibility
to receive Pell Grant from 18 semesters (or
its equivalent) to 12 semesters (or its
equivalent).
 Applies to all students effective with the
2012-13 award year.
 Calculation includes all earlier years of the
student’s receipt of Pell.
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Pell Grant Duration of Eligibility
 Calculate the equivalency by adding
together each of the annual percentages of
a student’s scheduled award that was
actually disbursed to the student.
 LEU – Lifetime Eligibility Used
 Once LEU reaches 600%, student no
longer eligible.
 If LEU more than 500% but less than
600%, partial eligibility for next award
year.
18
Pell Grant Duration of Eligibility
 Electronic Announcements –
 In mid-April, COD began sending –
 Weekly reports to schools of their
2012-2013 applicants who have LEUs
of more than 450%
 Emails to students who have LEUs of
more than 500%
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Pell Grant Duration of Eligibility
 Beginning in July –
 COD will return LEU in the common
record response
 COD will display LEU on the COD
website
 COD will edit and return warning edits
when LEU is near or exceeds 600%.
20
Pell Grant Duration of Eligibility
 Beginning in July –
 NSLDS will display student’s LEU
 CPS will use comment codes to flag
students whose LEU is close to or
exceeds 600%.
21
Grace Period Interest Subsidy
 Temporarily eliminates the interest subsidy
on Direct Subsidized Loans during the six
month grace period.
 Applies to new Direct Stafford Loans for
which the first disbursement is made on
or after July 1, 2012, and before July 1,
2014.
22
Other Legislative Loan
Changes
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Interest Rates
 CCRAA reduced the interest rate on
subsidized loans made to undergrads in
stages from 6.8 % to the current 3.4 %.
 The reduced rates end on July 1, 2012.
 Interest rate on subsidized loans first
disbursed on or after July 1, 2012 to
undergraduate students will be 6.8 percent.
 Same rate as on subsidized loans made to
graduate students and to all unsubsidized
loans.
24
President’s FY 13 Budget
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FY 13 Budget
 $5,635 maximum Pell Grant award for
2013-2014
 Maintain the subsidized loan interest rate
for undergraduate students at 3.4 percent
for undergraduates until July 1, 2013
 Limit the duration of the Stafford Loan inschool interest subsidy to 150 percent of
the normal time required to complete the
borrowers’ educational program.
26
FY 13 Budget
 Expand and improve the Perkins Loan
program to provide $8.5 billion in loans
annually.
 Provide $150 million in new funds for the
Work-Study Program.
 Reform and expand Federal allocations in
the campus-based programs
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Verification
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Highlights of New Regulations
 Eliminates $400 tolerance; replaces with
$25 tolerance for any item.
 Must report all changes, not just those that
impact Pell
 Eliminates the 30 percent institutional
verification cap
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Highlights of New Regulations
 Allows for changes in marital status only if it
would change dependency status.
 School discretion
 Must update other information
 Family size
 Spouse’s income
 Student may make change but reject
transaction.
 FAA Override
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Highlights of New Regulations
 Allows the Secretary to include any item
from the FAFSA for possible verification.
 Replaces the five verification items for all
selected applicants with a targeted
selection of items based upon each
student’s characteristics.
 No customization for 2012-2013.
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2012-13 Verification Items
 Annual Federal Register notice—
 Items to verify
 Acceptable documentation
 Federal Register Notice: July 13, 2011
 DCL GEN-11-13, July 2011
 February 3 – Sample Verification
Worksheets
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2012-13 Documentation
 Comprehensive list in July 13, 2011 Federal
Register notice
 FAFSA IRS Data Retrieval Process
 IRS Transcript
 Request
 On-Line
 Phone – (800) 908-9946
 Form 4506T-EZ
 IRS Tax Return: Limited conditions
33
Updated IRS Request Flags
00
Student/Parent was ineligible to use the IRS Data Retrieval Tool and was therefore not
presented with the option to use it in FAFSA on the Web
01
Student/Parent was presented with the option to use the IRS Data Retrieval Tool in
FAFSA on the Web and elected to use it, but did not transfer IRS data into the FAFSA
02
IRS data for the student/parent was transferred from the IRS and was not changed by
the user prior to submission of an application or correction
03
IRS data for the student/parent was transferred from the IRS and changed by the user
prior to submission of an application or correction
04
IRS data for the student/parent was transferred from the IRS and then changed by the
user on a subsequent transaction
05
Student/parent was presented with the option to use the IRS Data Retrieval Tool in
FAFSA on the Web, but did not elect to use it
06
IRS data for the student/parent was transferred from the IRS, but a subsequent change
made the student/parent ineligible to use the IRS Data Retrieval Tool
blank
34
IRS Data Retrieval Tool not available in the application method utilized by the
student/parent(i.e., paper FAFSA, EDE, or FAA Access)
IRS Data and Verification
 An institution may consider as acceptable
documentation IRS retrieved information if the
Secretary has identified those items as having
come from the IRS and not been changed –
IRS Request Flag = 02.
35
IRS Documentation Requirements
Special Announcement
 DCL GEN-12-07 – April 16, 2012
 Paper copies of IRS Tax Returns may be
accepted
 Only until July 15, 2012
 Regular rules apply – signatures, etc.
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Gainful Employment
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Gainful Employment Information
 Gainful Employment Page on IFAP at:
http://ifap.ed.gov/GainfulEmploymentInfo/
or from IFAP Homepage
 Regulations and Federal Register Notices
 Dear Colleague Letters and Electronic
Announcements
 Frequently Asked Questions
 Training, including webinars
 Resources
38
The Law - HEA
 An educational program is Title IV
eligible only if the program:
 Is offered by a public or non-profit
institution and leads to a degree; or
 Is offered at any institution and “leads to
gainful employment in a recognized
occupation”.
 Referred to as a Gainful Employment
Program or a GE Program.
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The Law - HEA
 Proprietary institutions –
 All programs, except for  Programs leading to a baccalaureate
degree in liberal arts offered since
January 2009 that has been regionally
accredited since October 2007 .
 Preparatory course work necessary for
enrollment in an eligible program.
40
The Law - HEA
 Public institutions and not-for-profit
institutions –
 All programs, except for  Programs that lead to a degree;
 Programs of at least two years in
length that are fully transferable to a
bachelor’s degree program; and
 Preparatory course work necessary
for enrollment in an eligible program.
41
GE Programs Include
 Preparatory courses of study that do lead
to a degree or certificate awarded by the
institution.
 Teacher certification programs leading to a
certificate awarded by the institution
 ESL programs leading to a certificate or, if
a proprietary institution, a degree—Pell
only
42
GE Programs Do Not Include
 Preparatory courses of study that do NOT
lead to a degree or certificate awarded by
the institution.
 Teacher certification programs that do
NOT lead to a certificate awarded by the
institution.
 Transfer programs that do NOT lead to a
certificate awarded by the institution.
 Programs that are not Title IV eligible.
43
Gainful Employment Regulations
 Final Rules published on October 29, 2010,
effective July 1, 2011
 Disclosures
 Reporting
 New Programs
 Final Rules on metrics to define gainful
employment published on June 13, 2011,
with effective date of July 1, 2012
44
GE Metrics
 Metrics final rule published on June 13, 2011
 Defines “gainful employment” to be when a
substantial number of the GE Program’s
students –
 Are repaying their Title IV loans –
 Repayment Rate
Have a reasonable debt burden –
 Debt to Earnings Ratios.
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GE Metrics
 ED calculates Repayment Rate as –
 A percentage of the Title IV loan amounts
that a GE Program’s former students are
repaying.
 ED calculates Debt to Earnings Ratios as –
 The median educational loan annual
repayment amount as a proportion of the
borrowers’ average annual income.
46
Title IV Eligibility
 A program must pass at least one of the
following three rates to be a Gainful
Employment Program eligible for Title IV
participation:
 Repayment rate of at least 35%.
 Debt-to-Earnings ratio of 12% or less of
total annual earnings, or
 Debt-to-Earnings ratio of 30% or less of
total discretionary income.
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CALENDAR
YEAR
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ACTIONS AND CHALLENGES
2011
•Enhanced disclosure and reporting begin under October final rules.
2012
•The informational rates (FY 2011) are released.
2013
•First final debt measures (FY 2012) are released.
•Failing programs must provide first-year debt warnings.
2014
•Second final debt measures (FY 2013) are released.
•Failing programs must provide first- or second-year debt warnings.
2015
•Third final debt measures (FY 2014) are released.
•First eligibility losses for programs that failed three consecutive
times.
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