Department of Education Negotiated Rulemaking and Perkins Loan Issues 2012 PacWest Conference

Pamela Moran Office of Postsecondary Education May 18, 2012

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Regulatory Activity

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Negotiated Rulemaking

• Negotiated Rulemaking Website: – http://www2.ed.gov/policy/highered/reg/hea rulemaking/2011/loans.html

• Federal Register Notice published May 5, 2011 announcing intent to establish Negotiated Rulemaking committees and public hearings – Tacoma, Washington – Chicago, Illinois – Charleston, South Carolina

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Negotiated Rulemaking

• Federal Register Notices published October 26, 2011 and October 28, 2011 announcing decision to establish Negotiated Rulemaking teams to address: – teacher preparation program issues in HEA, Title II and TEACH Grant Program – student loan program issues • Solicited nominations for non-Federal negotiators and issues for negotiation

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Negotiated Rulemaking

• Schedule for Teacher Prep Issues – January 18-20, 2012 – February 27-29, 2012 – April 3-5, 2012 • Schedule for Student Loan Issues – January 9-13, 2012 – February 13-17, 2012 – March 26-30, 2012

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Negotiated Rulemaking

• Consensus Reached by Loans Negotiating Committee - NPRM must be published with agreed-upon consensus language • Two Loans Regulations Packages “Pay As You Earn ICR, IBR changes, and TPD by 11/1/2012 - All other issues after 11/1/2012

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Negotiated Rulemaking

• No consensus on Teacher Preparation Issues • Department free to publish what Secretary views to be the best proposed regulations

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Negotiated Rulemaking

• Teacher Preparation Issue Agenda – Changes to State reporting requirements on teacher education program quality – Criteria that States use to assess the performance of teacher prep programs – Standards for State identification of low performing teacher prep programs – Definition of high-quality teacher prep program for TEACH Grant Program – Technical changes to the TEACH Grant Program

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Negotiated Rulemaking

• Student Loan Issues – Changes to the Income Contingent Repayment Program – Implementation of “Pay As You Earn” initiative through ICR – Changes to the Income-Based Repayment Plan –Statutory and Process Issues – FFEL Borrower Repayment Disclosures – Direct Loan and FFEL Forbearance Issues – Direct Loan Minimum Loan Period for Transfer Students in Non-term Programs

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Negotiated Rulemaking

• Student Loan Issues (cont.) – Title IV Loan Rehabilitation Issues – Repeal of Unnecessary FFEL Regulations – Modification of Direct Loan Regulations – Title IV Total and Permanent Disability Discharge Issues – Title IV Closed School Discharge – School Enrollment Status Reporting – Perkins Loan Issues – FFELP Administrative Wage Garnishment

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Negotiated Rulemaking – PAYE

• Pay As You Earn Implemented under ICR regulations in Direct Loan program only • IBR model followed : - Borrower must show partial financial hardship (PFH) and annual reevaluation of PFH status required - Interest capitalized as in IBR – borrower no longer PFH, no income for annual evaluation, or borrower leaves ICR

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Negotiated Rulemaking - PAYE

• IBR model followed (cont.): - ED pays accrued interest for 3 consecutive years if borrower payment is less than accrued interest • Unlike IBR, 10% overall cap on amount of interest capitalization • New borrower in 2008 is FY 2008, beginning October 1, 2007 and is defined as in DL and FFEL TLF Program – no outstanding balance on any DL or FFEL loan on 10/1/2007 or upon receipt of new loan after that date

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Negotiated Rulemaking - PAYE

• New loan in 2012 is any Direct student loan disbursement made on/after 10/1/2011 (FY 2012)to a borrower who meets new borrower definition • Borrower annual payments capped at 10% of discretionary income and loan forgiveness after 20 years of repayment

Negotiated Rulemaking - IBR

• IBR statutory changes for new borrowers on/after July 1, 2014 incorporated : – Annual borrower payments capped at 10% of discretionary income – Loan forgiveness after 20 years of repayment • New required borrower information and deadline notices • Borrowers with on-time annual submission of information for evaluation held harmless 14

Neg Reg Issues Affecting Perkins

• Closed School Discharge – Extends the current 90-day enrollment window to 120 days and provides examples of exceptional circumstances • School Enrollment Status Reporting – Amends regulations to reflect current process and adds comparable enrollment reporting provisions to the Perkins Program 15

Neg Reg Issues Affecting Perkins

• Total & Permanent Disability Discharge Process – Provides for direct application to ED for TPD discharge requests – Provides more detailed information to borrowers about the process • Definition of on-time payment for a Perkins Loan rehabilitation – 20 days • Satisfactory Repayment Arrangements and Loan Rehabilitation 16

Neg Reg Issues Affecting Perkins

• Allows assignment of a Perkins Loan without a borrower SSN if loan was made before SSNs were collected • Perkins Loan Deferment & Cancellation Issues – Incorporates graduate fellowship deferment eligibility criteria from FFEL regulations – Addresses cancellation progression for borrowers who switch cancellation categories – Removes debt-to-income economic hardship deferment category – Allows break in cancellation service due to a FMLA condition 17

Negotiated Rulemaking – Upcoming

• Federal Register Notice published on May 1, 2012 announcing intent to establish new negotiating committee • Focus on preventing fraud and ensuring proper use of title IV funds. Specific focus on fraud in distance education programs and use of debit cards and other banking mechanisms to disburse title IV aid. Also, improving and streamlining campus-based regulations.

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Negotiated Rulemaking – Upcoming

• Solicited nominations for non-Federal negotiators and other possible issues • Public Hearings Scheduled – 5/23/2012 – South Mountain Community College, Phoenix, AZ 5/31/2012 – Department of ED, 1990 K St., Washington, DC • Negotiations begin in September 2012 19

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PERKINS LOAN ISSUES

Perkins Loan Initiatives

21 • FSA still concerned that Perkins schools are not making loans • Reasons: – The program is going to be eliminated – Waiting for fund to be replenished • Expectation is that schools will make loans or liquidate from the program • FSA is monitoring and contacting schools as appropriate

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Perkins Loan Initiatives

• FSA is monitoring excess cash and is asking schools to return it • Schools are claiming Administrative Cost Allowance without advancing funds to students (see 34 CFR 673.7(b))

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Perkins Loan Initiatives

• Department is enforcing § 674.5(a)(2) which renders schools with a CDR of over 50% for past three years ineligible to participate in the Perkins Loan Program • Department is making individual contact with affected schools • 17 schools identified

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ED RESOURCES

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Dear Colleague Letters

• DCL GEN – 12-06 Subject: Information about enhancements to the NSLDS Enrollment Reporting Process • DCL GEN – 11-17 Subject: Actions to Detect and Prevent Fraud in Distance Education

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Electronic Announcements

• 2012-05-01- (Campus-Based) Subject: Federal Perkins Loan Program Status of Default as of June 30, 2011 (Orange Book) • 2012-04-30 – (Campus-Based) Subject: 2010-2011 Federal Perkins Loan Service Cancellation Reimbursement • 2012-04-26 – (Campus-Based) Subject: 2010-2011 Campus Based Awards Closeout • 2012-04-23 – (Campus-Based) Subject: Notification of Campus Based Funding for the 2012-2013 Award Year • 2012-03-29 – (Campus-Based) Subject: Transfers of Campus Based Program Funds and G5 Award Adjustments

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Electronic Announcements

• • • • • • • 2012-03-29 - (Campus-Based) Subject: 2012-2013 Final Funding Authorizations for the Campus-Based Programs 2012-03-29 - (Campus-Based) Subject: Transfers of Campus Based Program Funds and G5 Award Adjustments 2012-03-13 - (Campus-Based) Subject: 2012-2013 Federal Work-Study Program Community Service Waiver Requests 2012-02-16 - (Campus-Based) Subject: Draft FISAP and Instruction Booklet 2012-02-01 - (Campus-Based) Subject: Participation in the Work Colleges Program 2012-01-23 - (Campus-Based) Subject: Reminder - Deadline for 2012-2013 Underuse Penalty Waiver for the Campus-Based Programs is February 10, 2012 2012-01-19 - (Campus-Based) Subject: Tentative 2012-2013 Funding Levels for the Campus-Based Programs

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Questions

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Contact Information

Pamela Moran Office of Postsecondary Education 202-502-7732 [email protected]