Transcript HERA Loan Changes

The HERA Code Loan Changes
Betsy Mayotte
Director of Regulatory Compliance and Privacy
American Student Assistance
Topics
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Loan Changes
School as Lender
Miscellaneous
Loan
Limits
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First year students:
$ 3,500
Second year students:
$ 4,500
Third and Fourth year:
$ 5,500 no change
Students in prep coursework: $ 7,000
Teacher certification pgms:
$ 7,000
Grad Unsub:
$12,000
Effective: Loans disbursed on or after 7/1/07
Interest
Rates
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Stafford Loan Interest Rates:
– Maintains scheduled fixed interest rate for
Stafford Loans at 6.8% fixed for new loans
made on or after 7/1/06
Consolidation Loan Interest Rates:
– Maintains current fixed interest rates
(calculated using the weighted average of the
loans being consolidated, rounded to the next
1/8 percent) on both FFEL and DL
Interest
Rates
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PLUS for FFEL fixed at 8.5%
PLUS for DL fixed at 7.9%
Effective:
Loans disbursed on or after July 1, 2006
Borrower
Fees FFELP
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Phase out of current 3% FFELP Stafford
origination fee by 7/1/10
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Loans 1st disbursed on or after 7/1/06 2%
7/1/07
1.5%
7/1/08
1.0%
7/1/09
.5%
7/1/10
0.0%
Default Fee mandatory at 1%
Effective: Loans guaranteed on or
after July 1st, 2006
Borrower
Fees –
Direct
Loans
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Phase down of current statutory 4% DL Stafford
origination fee by 7/1/10
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7/1/06
7/1/07
7/1/08
7/1/09
7/1/10
3%
2.5%
2.0%
1.5%
1.0%
Effective:
7/1/06
PLUS
Eligibility
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New PLUS eligibility for graduate and
professional students
Same eligibility criteria as parent PLUS
including credit checks and no in-school
status
Eligible for in-school deferment
Effective: Loans certified on or after
7/1/06
PLUS
Eligibility
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Processing
– Grad students fill out both borrower and
student section
– Addendum sent (on all loans, including
Stafford)
– Adjusted disclosure for existing MPN’s
PLUS
Eligibility
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Borrower required to apply for max
Stafford 1st
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Borrower must complete FAFSA
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Credit Check/Endorsers
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Loan limit = COA – EFA
Consolidation
Loans
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No re-consolidation allowed
– Unless FFEL consolidator is delinquent and
wants DL ICR
Eliminates ability of borrower to request early
repayment status or forego grace in order to
consolidate
Single Holder Rule subsequently eliminated
Eliminates DL in-school consolidation
Eliminates joint consolidation loans
Effective:
Applications received
on or after 7/1/06
Teacher
Loan
Forgiveness
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Extends Teacher Loan Forgiveness from
Teacher-Taxpayer Act
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$17,500 for highly qualified math, science
and special ed teachers at qualified lowincome schools
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Effective: February 8th, 2006
Retroactive to Oct. 1, 2005
Teacher Loan
Forgiveness
for Private
School
Teachers
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Under “certain conditions,” private school
teachers who are exempt from State
certification requirements may still be
eligible for loan forgiveness.
Effective: February 8th, 2006
Retroactive to Oct. 1, 2005
Military
Deferment
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The creation of a deferment for FFEL,
Direct Loan and Perkins Loan Program
borrowers who serve on active duty military
service during times of war or national
emergency, and a reduction of subsidies
paid to lenders
Effective: July 1, 2006
Disbursement
Rule Changes
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Reinstatement of low-default disbursement
rule waivers
School must have:
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School Exempt from:
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cohort default rate less than 10% for
3 most recent fiscal years
Multiple disbursements for single term loans and
from the 30-day delay requirement for first time
students.
Effective:
February 8, 2006
Disbursement
Rule Changes
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Schools must participate in active
confirmation for late disbursements
– Including instructions and right to cancel
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Return of Title IV time-frame increased
from 30 to 45 days from withdrawal
determination
School As
Lender
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The school must have met the requirements to
be an eligible lender as of February 7, and
The school must have made a loan on or
before April 1, 2006.
School as
Lender
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Under the new law, school lenders:
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Cannot make loans to undergraduate students
Cannot make PLUS loans to parents or
graduate/professional students
Shall not make a loan to a borrower not
enrolled at that school
Can make both subsidized and unsubsidized
Stafford loans to graduate or professional
students
Must offer a lower origination fee and/or
interest rate than allowed by law.
School As
Lender
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Other new restrictions on school lenders include:
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Cannot have a cohort default rate greater than 10% (previously 15%)
Must use a competitive basis for awarding a contract for financing,
servicing or administering loans
Must submit an annual compliance audit to ED
Earnings (special allowance, interest, etc.) must be used for needbased grant aid and must supplement, not supplant funds that would
otherwise go toward grant aid.
Interest rate and origination fee discounts can be included in
administrative costs
Eligible lender trustee arrangements apply
Rehabilitation
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Reduces required payments from 12
to 9 consecutive
Must be made within 20 rather than 15
days from due date
Note that current language still
requires payments within 15 days for
regaining Title IV eligibility
Escrow
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Lenders may not begin to bill for
interest subsidy prior to 3 days before
the 1st disbursement date
– Regardless of if the funds are sent
through an escrow agent
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Funds may not stay in escrow longer
than 10 days (reduced from 21)
Claims
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Ineligible borrower claims
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Disbursed on or after July 1, 2006 will receive
100% rather than 98% reinsurance
Exceptional performers
– Default claims submitted on or after July 1st,
2006 will receive 99% rather than 100%
reinsurance
– This includes loans disbursed prior to 10/1/1993
Non-exceptional performers
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Default claims paid by the guarantor on or after
July 1st, 2006 will receive 99% rather than 100%
reinsurance
Still receives 100% on pre-10/1/1993 loans
College
Access
Initiative
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Guarantors must provide information
on postsecondary education
opportunities, programs, web sites,
publications and other services within
their designated states
Must be provided to ED and the public
Effective 270 days from date of
enactment
Miscellaneous
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False Certification
– Loans may be discharged if was falsely
approved as a result of identity theft
– Suspect must be convicted
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Fraud
– PLUS borrowers (including graduates)
convicted or pleading no contest must
pay back all monies prior to future Title IV
eligibility
Miscellaneous
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Forbearance
– Mandatory forbearances may be verbal
– Includes:
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Excessive debt
National service
Medical internship
– Lender must send terms in writing
Miscellaneous
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Wage Garnishments
– Guarantors may garnish up to 15% of a
defaulted borrower’s disposable pay
– Per pay period
– Up from 10%
Opus Dei - The Mixed
Bag of Changes
Eileen O’Leary
Director, Student Aid and Finance
Stonehill College
Definition
of
Academic
Year
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Changes to the definition of an academic
year for programs measured in clock hours
only
Minimum number of weeks necessary to
define an academic year is reduced to 26
for clock hour programs.
Effective 7/1/2006
Distance
Education
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Changes and additions to provisions related
to distance education and direct
assessment academic programs
Under the amended HEA, courses offered
by telecommunications that meet certain
conditions are no longer considered
correspondence courses, and students
enrolled in telecommunications courses are
no longer considered to be correspondence
students.
Distance
Education
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The amended definition of a telecommunications course
acknowledges the importance of interactivity in electronicallydelivered instruction and clearly distinguishes telecommunications
from correspondence.
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Statute: Section 8020 of the HERA adds a new type of eligible
program to section 481(b) of the HEA--an instructional program
that uses direct assessment of student learning, or recognizes the
direct assessment of student learning by others, in lieu of
measuring student learning in credit hours or clock hours. The
assessment must be consistent with the institution's or program's
accreditation. The HERA also provides that the Secretary will
determine initially whether each program for which an institution
proposes to use direct assessment is an eligible program.
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The statute requires an institution to apply to the Secretary to
have a direct assessment program determined to be an eligible
program.
Drug
Conviction
Changes
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Ineligible for Title IV, HEA program
assistance only if the conviction for a
Federal or State offense involving the
possession or sale of a controlled
substance is for conduct that occurred
during a period of enrollment for which
the student was receiving Title IV aid.
Ineligibility
Based on
Fraud
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A student or parent who has not repaid
fraudulently obtained Title IV, HEA program
funds is ineligible for additional Title IV,
program assistance until the fraudulently
obtained funds have been repaid.
R2T4
Changes
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Allows multiple leaves of absence within total of 180
days per year
Using scheduled clock hours to calculate the portion of
the period completed (including the determination of
the 60% point and regardless of the student’s
progress, thereby eliminating the regulatory 70% rule
Limits aid subject to return to Pell, FSEOG, Perkins,
FFEL, and DL
Requires institution to contact a borrower who is
eligible for a post-withdrawal disbursement of loan
funds to confirm that he/she still requires the funds and
to explain the obligation to repay
R2T4
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Allows the institution 45 days to return its
share of unearned funds, from date it
determined a withdrawal occurred (from 30
days in current regulation)
Clarifies that a student need not return more
than 50% of the grant assistance he/she
received for the period (rather than 50% of
the grant amount subject to return)
Establishes a $50 de minimis for a student’s
grant repayment
Effective July 1, 2006
Need
Analysis
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Increases dependent student’s IPA to $3000
from $2200 (2007-2008)
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Decreases the assessment of dependent
student assets to 20% from 35% (20072008)
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For independent students with dependents:
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Reduces asset conversion rate to 7% from 12%
(2007-2008)
Need
Analysis
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Increases the IPA for independent students
without dependents to $6050 if single or
married with both in college (from $5000)
(2007-2008)
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To $9700 if married with one in college
(from $8000) (2007-2008)
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Reduces asset conversion rate to 20% from
35% (2007-2008)
Simplified
Needs
Test
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Eliminates the requirement that the dependent student
meet the same tax filing criterion that the parents must
meet
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Adds alternative to the tax filing status:
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Parents or student (or independent student & spouse)
received benefits at some time during previous 12 month
period under a means-tested federal benefit program (not Title
IV) eg.
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SSI, food stamps, school lunches, TANF, WIC, and other
programs identified by ED
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$50,000 AGI cap remains unchanged using either
method above
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Effective 2006-2007
Automatic
Zero EFC
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Eliminates the requirement that the dependent student
meet the same tax filing criterion that the parents must
meet
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Adds same alternative to the tax filing status under
Simplified Needs Test
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Changes the AGI cap to $20,000 regardless of
criterion used above
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Effective 2006-2007
Independent
Student
Definition
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Expanded to include members of the
armed services currently serving on
active duty for other than training
purposes
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Effective 2006-2007
Assets
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Count qualified education benefits as
assets, except that they cannot be counted
as an asset of a dependent student (eg. 529
plans, prepaid tuition plans, Coverdell
education savings accounts)
Deleted language that treated tuition
prepayment plans as a straight deduction
from COA
Excluded any family-owned and –controlled
small business with 100 or fewer full-time or
full-time equivalent employees
Effective 2006-2007
COA
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COA may include room and board for
less-than-half-time students for a
limited number of semesters
COA may include one-time costs of
obtaining first professional credentials
for a student in a program requiring
professional licensure or certification
COA
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COA may include room and board for
less-than-half-time students for a
limited number of semesters
COA may include one-time costs of
obtaining first professional credentials
for a student in a program requiring
professional licensure or certification
Being Smart about
SMART (and ACG) or
the Beginning of a
New Age
Bernie Pekala
Director, Student Financial Strategies
Boston College
HERA –
created two
new grant
programs
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Academic Competitiveness Grant –
ACG
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National Science and Mathematics
Access to Retain Talent Grant National SMART Grant
HERA –
Participating
Schools
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All schools that participate in Pell and
offer an eligible educational program
must participate in ACG and SMART
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No new Program Participation
Agreement (PPA) required
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No Administrative Cost Allowance
(ACA)
ACG
Eligibility
Requirements
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U.S. Citizen
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Federal Pell Grant Recipient
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Full-time enrollment as a first or
second year student in a qualifying
program of study
ACG
Eligibility
Requirements
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1st Year Students
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May not have been previously enrolled in a program of
undergraduate education
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Have completed secondary school program of study after
01/01/2006
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2nd Year Students
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Have completed secondary school program of study after
01/01/2005
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Have 3.0 G.P.A. in an eligible program
ACG
Requirements
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ACG requires completion of a rigorous
high school program
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ED has outlined options to meet this
requirement in
– Dear Colleague Letter GEN-06-08
Rigorous
Secondary
Programs
Include
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4 years of English
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3 years of Math – Algebra I, Algebra II, Geometry, Statistics,
Data Analysis
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3 years of Science – must be at least 1 year each of least two
of the following
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Biology,
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Chemistry
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Physics
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3 years of social studies
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1 year of a language other than English
State
Scholars
Initiative
Requirements
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An advanced or honors secondary program
established by a state and in existence for the
04/05 or the 05/06 academic year
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Completion of at least two Advanced Placement or
International Baccalaureate courses with a passing
test score
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The website for information on individual states’
rigorous secondary programs of study is
http://www.ed.gov/admins/finaid/about/acsmart/state-programs06.html
FAFSA
Processing
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The Central Processing System (CPS) has been
asking students to ‘self identify’ each time they log
into FAFSA.ed.gov
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The CPS then notifies the school of an ISIR with
comment codes: 267/268/270/271
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The school is then required to verify that the
student is eligible
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Home schooled & Transfer students must provide
the school with additional information
ACG
Award
Amounts
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First Year Students
– Maximum of $750 per year
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Second Year Students
– Maximum of $1,300 per year
– Must have had a 3.0 GPA in first year of
college
SMART Grant
Requirements
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U.S. Citizen
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Federal Pell Grant Recipient
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Third or Fourth Year students in an
eligible degree program
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Full-time enrollment in an eligible
major
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Cumulative 3.0 GPA on a 4.0 scale in
their program
SMART
Grant Major
Fields
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Computer Science
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Physical Sciences
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Engineering
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Technology
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Foreign Language
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Life Sciences
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Mathematics
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Identified by CIP code in DCL GEN-06-06
SMART
Grant –
Monitoring
the Major
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Requires student declare an eligible major
Or
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If school does not require a major prior to 3rd year
of study,
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Student must show intent to declare an eligible major and
enroll in coursework leading to that major
In either case
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The student must enroll in coursework leading to
completion of the program with that eligible major.
National
SMART –
Major
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If student changes to an eligible major
within a payment period
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Can be paid for the entire payment period
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Cannot be paid for prior payment periods
If student changes to an ineligible major
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No more SMART Grant disbursements
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Prior disbursements do not need to be repaid
SMART
Grant–
Award
Amounts
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$4,000 per academic year in third and
fourth years of an eligible program
SMART Grant
– Recipient
Identification
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Schools must review records to
identify all eligible students
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Check ISIR for Pell eligibility and
citizenship
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Check academic records for eligible
major, fulltime enrollment and G.P.A.
Follow Pell
Recalculation
Policy
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Schools must use their Pell
recalculation policy to determine
enrollment status for ACG and for
National SMART
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If you use a ‘census date’ for Pell, you
must also use it for ACG & SMART
Reporting
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ACG and SMART Grant recipients will
be reported through COD
Money will be received through RFMS