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.
17
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%
19
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
23
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
27
Verification
28
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
29
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
30
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.
31
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
32
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.
36
Gainful Employment
37
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.
39
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.
45
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.
47
CALENDAR
YEAR
48
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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