# Presentation: 067403

## Federal Update

**Dan Madzelan**
**Office of Postsecondary Education**
**Jeff Baker**
**Federal Student Aid**

## Program Appropriations

- Higher Education Legislation
- Title IV Program Regulations

## Title IV Program Budgets Appropriations

*** President's FY 2007 Budget Submission **

## Title IV Program Budgets Aid Available

*** President's FY 2007 Budget Submission**

## Title IV Program BudgetsStatus of Appropriations

*** Committee-passed Bills **

## Title IV Program Budget Priorities

**Administration**
- Pell Grants
- Eliminate Shortfall
- Mandate Annual Increases
- Establish $1,000 State Scholars Award

**Congress**
- Pell Grants
- Shortfall Eliminated
- AC/SMART Grants
- Mandatory Spending Authorized:  $4.53 Billion over 5 Years

## Title IV Program Budget Priorities

**Administration**
- Make Active Duty Military Independent
- Clarify FAFSA “Drug Question”
- Revise CB Formulas
- Eliminate/Recall Perkins

**Congress**
- Active Duty Military are Independent
- Applies to those in-school and receiving aid
- Not Addressed
- Not Addressed

## Loan Program Budget Priorities

**Administration**
- Create 25 basis point  Loan Holder Fee
- Reduce insurance to 95%
- Eliminate special SAP on tax-exempt financings
- Not proposed

**Congress**
- Recapture excess interest earnings
- Lender insurance reduced to 97%
- Special SAP largely eliminated
- Phase-out origination fees

## Legislation

- Higher Education Reconciliation Act of 2005
- Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006
- Second Continuing Resolution, 2007
- Through December 8, 2006
- Third Higher Education Extension Act of 2006
- Through June 30, 2007

## Third Higher Education Extension Act

**Third Higher Education Extension Act**

- New restrictions on Eligible Lender Trustee arrangements with Postsecondary Institutions
- Definition of Hispanic-Serving Institution
- Clarification of GA Account Maintenance Fees
- New Loan Discharge for Survivors of 9/11 Victims

## Hurricane Help for Institutions

- Hurricane Education Recovery Act
- $95 Million to 18 Louisiana Institutions
- $95 Million to 38 Mississippi Institutions
- $10 Million to 99 U.S. Institutions
- $30 Million “Retained” by 18 Gulf Institutions
- Higher Education Recovery Awards
- $50 Million to 41 Gulf Institutions
- Natural Disaster Student Aid Fairness Act
- $28 Million Reallocated to 29 Campus-Based Program Institutions

## Regulations

- Interim Final Regulations – Comments Invited
- ACG/SMART Grants – July 3, 2006
- Other HERA Issues – Aug. 9, 2006
- Final Regulations
- ACG/SMART Grants – Nov. 1, 2006
- Other HERA Issues – Nov. 1, 2006
- New September 11-Related Discharges – Dec. 29, 2006

## Regulations

- Negotiated Rulemaking for 2008-2009 and Beyond
- Tentative Calendar
-  Sessions:  		Dec. 2006, Feb. and March 2007
-  NPRM:   		May 2007
-  Comments:		July 2007
-  Final Rule:		Nov. 1, 2007
-  Effective Date:	July 1, 2008 with possible 					early implementation
- Negotiated Rulemaking Website:
- http://www.ed.gov/policy/highered/reg/hearulemaking/2007/nr.html

## FY 2004

**FFEL and Direct Loan**
**Default Rates**

## National Student Loan Default Rates

**National Student Loan Default Rates**

## Default Rates by Sector

| School Type | FY 2002 | FY 2003 | FY 2004 |
| --- | --- | --- | --- |
| Public – 2 Year | 8.5% | 7.6% | 8.3% |
| Public – 4 Year | 4.0% | 3.3% | 3.6% |
| Private – 2 Year | 6.1% | 6.3% | 7.4.% |
| Private – 4 Year | 3.1% | 2.6% | 2.9% |
| Proprietary | 8.7% | 7.3% | 8.8% |
| Foreign | 2.0% | 1.8% | 1.5% |
| National Rate | 5.2% | 4.5% | 5.1% |

## Higher Education Reconciliation Act of 2005

**Enacted: February 8, 2006**

## Institutional and Program Eligibility

- Weeks in academic year for clock-hour programs reduced to 26
- 50% rules do not apply to telecommunications
- Programs of distance education must be specifically accredited
- Short-term telecommunications programs are eligible
- Provision for programs using assessment to measure progress

## FFEL and Direct Loans

- Extends eligibility for PLUS Loans to graduate and professional students
- Eligibility criteria is the same as for a parent, including credit checks and no in-school status.  Student would be eligible for an in-school deferment
- Student must file FAFSA
- Effective for any loan certified or originated on or after July 1, 2006

_**PLUS Loan Eligibility to Graduate Students**_

## FFEL and Direct Loans

-  Increases annual base loan limits for:
- First-year students from $2,625 to $3,500
- Second-year students from $3,500 to $4,500
-   Increases annual additional unsubsidized for:
- Graduate students to $12,000
- Prep for Grad Program to $7,000
- Teacher Certification to $7,000
-  Effective for loans first _disbursed_ on or after   July 1, 2007
- Aggregate loan limits are not increased

_**Annual Loan Limits**_

## FFEL and Direct Loans

- First disbursement of loan
- Loan can be certified/originated prior to July
- Loan period must either begin on or after July 1 or include July 1 (cross-over period)
- If loan period begins before July 1:
- Delay certification/origination
- Delay first disbursement until July 1 or later
- Certify/Originate another separate loan for the increased amount

_**Annual Loan Limits**_
**Loans first **_**disbursed**_** on or after July 1, 2007**

## FFEL and Direct Loans

- Fixed rate of 6.8% for new Stafford loans first disbursed or or after July 1, 2006
- Fixed rate of 8.5% for new FFEL PLUS loans first disbursed or or after July 1, 2006
- Fixed rate of 7.9% for new Direct Loan PLUS loans first disbursed or or after July 1, 2006

_**Interest Rates for New Loans **_

## FFEL and Direct Loans

- Phased reduction of the four-percent Direct Loan fee to one percent
- Phased reduction of the three-percent FFEL origination fee to zero
- Requires that the one-percent FFEL default fee be deposited into the federal fund of the FFEL guaranty agency.  Requires the agency to either deduct from loan proceeds or pay from non-federal sources

_**Stafford Loan Fees**_

## FFEL and Direct Loans

- Generally no re-consolidation of a single consolidation loan
- FFEL loans consolidated into Direct only if borrower certifies unable to obtain a FFEL consolidation loan
- Eliminates in-school consolidation in Direct Loans and “early conversion to repayment” consolidation in FFEL
- Eliminates joint consolidations

_**Consolidation Loans**_

## FFEL and Direct Loans

- An institution with cohort default rates of less than 10 percent for the three most recent years is exempted from the requirement that FFEL and Direct Loans:
- Be issued in at least two disbursements for one-term loans
- Be delayed for 30 days for first-time students

_**Low Default Rate Disbursement Waivers**_

## FFEL and Direct Loans

- Permanently and retroactively extends the authorization of the increased loan forgiveness of $17,500 for "highly qualified" math, science and special education teachers at qualified low-income schools
- Effective on date of enactment, retroactive to October 1, 2005

_**Teacher Loan Forgiveness**_

## FFEL, Direct and Perkins Loans

- Provides for a military deferment of up to three years for FFEL, Direct and Perkins Loans that were first disbursed on or after July 1, 2001.  Includes definitions of “active duty”

_**Active Duty Military Deferment**_

## Cost Of Attendance 

- Cost of Attendance (COA) for less than half-time students may include room and board costs, at school’s option
- Cost of Attendance may include, at school’s option, the one-time cost of obtaining the first professional license or certification

## Calculation Of EFC - 2006-2007

_**Simplified Needs Test and Auto Zero EFC**_

- Increases the threshold to $20,000 under which a family would automatically have an EFC of zero
- Eliminates consideration of dependent student’s tax return for both SNT and Auto Zero EFC
- Tax return alternative if family received benefits from a federal means-tested benefits program

## Calculation Of EFC - 2006-2007

- Treats all 529 Pre-Paid and Tuition Savings Plans as assets of the owner, unless the owner is the dependent student
- Excludes small businesses from assets
- Adds active duty military to the criteria that makes a student independent

_**Other EFC  Changes**_

## Calculation Of EFC - 2007-2008

- Increases Income-Protection Allowances
- Decreases Asset Assessment Rates

_**Other EFC  Changes**_

## Drug Conviction

- Provides that an applicant loses eligibility for Title IV aid only if the drug-related offense for which he or she was convicted occurred while the student was receiving Title IV aid

## Return Of Title IV Aid (R2T4)

- Specifies that scheduled clock hours are used to determine earned aid for clock-hour programs
- Limits a grant overpayment due from a student to the amount by which the original overpayment amount exceeds half of the total grant funds received by the student

## A Couple of Other Issues

## Preferred Lenders

- Preferred Lenders Lists are allowed
- No Automatic Referrals
- Must process any loan request made by a student or parent regardless of lender
- May not have unreasonable delays
- Publications, scripts and staff training should comply
- Violations could bring sanctions
- Does not apply to FFEL/Direct Loan choice

## Alternative Loans

- Alternative loans must be included as “estimated financial assistance” if enrollment is a condition for the loan
- Does not matter where loan proceeds are sent or  whether school certified enrollment
- May replace EFC
- Think about it like an outside scholarship

## More ACG/National SMART

## ACG/National SMARTNSLDS Reporting

- December 16 – Reporting to COD Begins
- December 17 – COD to NSLDS
- December 17 – NSLDS FAP Access
- January 1 – 2007-08 ISIRs include 2006-07 ACG/SMART disbursements
- January 1 – Transfer Monitoring includes 2006-07 ACG/SMART disbursements
- Will not include ACG/SMART if previously reported on ISIR

## ACG/National SMARTDetermining Enrollment Status

- Initial Calculation – Enrollment status determined at time of initial award calculation
- Enrollment status could be different than Pell
- Recalculation – Must use same recalculation policy (e.g., recalculation date, census date) that is used for Pell Grants

## ACG/National SMARTLate Disbursements and R2T4

- May make late disbursement even if eligibility not determined before student no longer enrolled
- Note regulatory time limits for late disbursements
- Included in R2T4 as “aid that could have been disbursed” as long as eligibility is determined before R2T4 calculation
- Could result in post-withdrawal disbursement

## National SMART Designated Majors

- Must be designated with one of the approved “Classification of Instructional Program” codes (CIP Codes)

## ACG/National SMART
Academic Year Progression

**Academic Year Progression**

- Basic Requirement – Academic year progression based on _all_ credits earned in any ACG/SMART eligible program
- Current Institution’s Credits – All credits earned
- Transfer Institution’s Credits – Only credits accepted by current institution
- Regardless of application to student’s current program

## ACG/National SMART
Transfer Students - GPA

**Transfer Students - GPA**

- Upon transfer, the new institution ***must*** calculate GPA using the grades from all coursework accepted from prior institution(s)
- Once student has GPA at new institution, use new institution’s GPA

## ACG/National SMART
Remedial Coursework

**Remedial Coursework**

- Enrollment Status – Use credits or equivalent
- Academic Year Progression – Institutional policy
- GPA - Institutional policy