# Presentation: 067394

## Session 63

- FFEL Regulatory and Policy Update
- Pamela Moran
- Office of Postsecondary Education

## Agenda

**Agenda**

- Higher Education Reconciliation Act of 2005
- Other Legislation
- Policy Guidance
- HEA Reauthorization

## Recent Legislation

- Higher Education Reconciliation Act of 2005
- P.L. 109-171, February 8, 2006 (HERA)
- Emergency Supplemental Appropriations Act for
- Defense, the Global War on Terror, and Hurricane
- Recovery, 2006 — P.L. 109-234, June 15, 2006
- Higher Education Act Extension P.L. 109-292 – through June 30, 2007

## Not-So-Recent Legislation  

- Student Loan Interest Rates
- P.L. 107-139, February 8, 2002
- Taxpayer-Teacher Protection Act of 2004
- P.L. 108-409, October 30, 2004
- Higher Education Relief opportunities for students
- (HEROES) P.L. 109-78 – extended through September 30, 2007

## Regulatory Outlook

- Academic Competitiveness and SMART Grants
- Interim Final with Public Comment - July 3, 2006
- Effective Date – August 2, 2006
- Deadline for Public Comment – August 17, 2006

## Regulatory Outlook

- Academic Competitiveness and SMART Grants
- Revised Rule for Year Two - November 1, 2006
- Negotiated Rulemaking for Year Three
- Nov. 1, 2007

## Regulatory Outlook

- Student Loans, Eligibility, General Provisions
- Interim Final with Public Comment
- August 9, 2006
- Effective Date – September 8, 2006
- Deadline for Public Comment
- September 8, 2006

## Regulatory Outlook

- Student Loans, Eligibility, General Provisions
- Revised Regulations — November 1, 2006
- Negotiated Rulemaking if Issues Identified –  November 1, 2007

## Regulatory Outlook

- Notice of Negotiated Rulemaking – 		August 18, 2006
-  Comments Due:  November 9, 2006
- Four Regional Hearings

## Regulatory Outlook

- Up to four negotiating committees
- Deadline for negotiator nominations: November 9, 2006
- Negotiating Sessions – December 2006 – March 2007

## Higher Education Reconciliation Act of 2005FFEL, Direct Loans, & Perkins Loans

- Active Duty Military Deferment
- Beginning July 1, 2006, up to three years military deferment on loans first disbursed on or after July 1, 2001
- Active duty service during war or other military operation or during national emergency (including qualifying National Guard)

## Higher Education Reconciliation Act of 2005FFEL, Direct Loans, & Perkins Loans

- Active Duty Military Deferment
- Military operation defined as “contingency operation” Current Examples: Operation Enduring Freedom (Afghanistan) and Operation Iraqi Freedom (Iraq)
- Consolidation Loan made on/after July 1, 2001 eligible if all underlying Title IV loans eligible

## Higher Education Reconciliation Act of 2005FFEL, Direct Loans, & Perkins Loans

- Active Duty Military Deferment
- Eligibility documentation includes military orders or commanding officer’s written statement

## Higher Education Reconciliation Act of 2005FFEL, Direct Loans, & Perkins Loans

- Active Duty Military Deferment
- Statute includes definitions of terms
- No refund of payments made

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Increased annual undergraduate loan limits
- First year students from $2,625 to $3,500
- Second year students from $3,500 to $4,500
- Increased graduate annual unsubsidized loan limit from $10,000 to $12,000.

- (Effective: Loans First Disbursed on/after 7/1/07)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Increased annual unsubsidized preparatory limits
- Pre-Grad/Prof and Teacher Cert. $7,000 (formerly $5000)
- No change to aggregate loan limits

- (Effective: Loans First Disbursed on/after 7/1/07)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Interest Rates
- FFEL PLUS Loans first disbursed on/after July 1, 2006
- fixed interest rate of 8.5 percent
- Direct PLUS Loans
- fixed rate of 7.9 percent
- Stafford Loans first disbursed on/after 7/1/06
- fixed at 6.8 percent
- Consolidation Loans – No change

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Origination Fees - FFEL
- 1st disbursements on or after:
- July 1, 2006 – 2%
- July 1, 2007 – 1.5%
- July 1, 2008 – 1%
- July 1, 2009 - .5%
- July 1, 2010 – no fee* (1% FDF)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Federal Default Fee (Formerly Insurance Premium or Guarantee Fee)
- Requires Collection of 1% for loans guaranteed on/after July 1, 2006
- Requires deposit of fee into GA Federal Fund
- GA may collect from borrower or pay from non-Federal sources

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Origination Fees - Direct Loan
- 1st disbursements on or after:
- July 1, 2006 – 3%
- July 1, 2007 – 2.5%
- July 1, 2008 – 2%
- July 1, 2009 - 1.5%
- July 1, 2010 – 1%

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- PLUS Eligibility for Graduate/Professional Students
- Same eligibility criteria as Parent PLUS including credit checks and endorsers
- No in-school status or grace period but eligible for  in-school deferment

- (Effective Loans certified/originated on/after 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- PLUS Eligibility for Graduate Professional Students
- FAFSA Required
- Stafford eligibility determination required
- Stafford application not required

- (Effective Loans certified/originated on/after 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- PLUS Eligibility for Graduate Professional Students
- No direct disbursement to student
- Initial and Exit counseling strongly recommended

- (Effective Loans certified/originated on/after 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Extends Teacher Loan Forgiveness from Teacher-Taxpayer Act
- Makes permanent increased loan forgiveness of $17,500 for “highly qualified” math, science, and special education teachers at qualified low-income schools
- Provides eligibility to private school teachers by defining “highly qualified” for them

-  (Effective on date of enactment, retroactive to October 1, 2005)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans 

- Disbursement Rule Changes
- Loan disbursement on/after 2/8/06 for school with CDR less than 10%
- No multiple disbursement for single term or four-month loans
- No 30-day delayed delivery

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Disbursement Rule Changes
- Loan disbursement for withdrawals on/after July 1, 2006
- School must confirm “need for/ acceptance of / need to repay” before crediting or directly disbursing
- Document confirmation
- No response to notice = no crediting or disbursing

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans 

- Disbursement Rule Changes
- Foreign Schools (FFEL only)
- Foreign school must request direct disbursement to student; otherwise goes to school
- Lender or GA must verify student’s enrollment
- No direct disbursement of Parent or Graduate/Professional PLUS Loans

- For Loans First Disbursed on/after 7/1/06

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans 

- Disbursement Rule Changes
- Study–Abroad Programs through Home Institution (FFEL only)
- Student may request Direct Disbursement by lender
- Not subject to school request or approval
- Lender or GA must verify student’s enrollment
- No direct disbursement of Parent PLUS or Graduate/Professional PLUS Loans

- For Loans First Disbursed on/after 7/1/06

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans 

- Disbursement Rule Changes
- Disbursement using escrow agent for loan proceeds paid to agent on/after July 1, 2006
- Time period for payment reduced from 21 to 10 days
- Limits on subsidized interest billing to 3 days before 1st disbursement

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Standardized Repayment Plans on FFEL Model
- Direct Loan standard, graduated, and extended repayment plans comparable to FFEL Program
- Exception: ICR Repayment

- (Effective 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Forbearance Agreements
- Eliminates written agreement
- Documentation
- Lender confirms with borrower
- Record in borrower’s file
- Same as existing regulation

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Consolidation Loans
- Generally no reconsolidation of Consolidation Loan
- FFEL- only borrower to Direct Loan only if FFEL application denied - **SUPERSEDED**
- No In-School Consolidations in Direct Loan or “Early Conversion to Repayment” Consolidations in FFEL
- No Joint Spousal Consolidations

- (Effective 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Special Allowance
- Loans on or after April 1, 2006
- Quarterly SA less than applicable rate
- Remit excess to ED quarterly
- “SAP Gap”
- Bill on/after July 1, 2006 on PLUS loans first disbursed on/after 1/1/2000 and before 1/1/2006

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- False Certification Discharge
- Based on borrower being victim of CRIME of identity theft
- Application in FFEL to lender or guaranty agency and in DL to Direct Loan Servicer or Debt Collection Services
- Copy of local, State, or Federal court verdict or judgment required

- (Effective 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Lender Insurance on Defaults
- 1st disbursement on or after 7-1-2006
- 97%
- Exceptional Performer
- 99%
- Default claims submitted on or after 7-1-2006

- Note: Reinsurance claims to be submitted within 30 days (versus 45)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Rehabilitation of Defaulted Loans
- Number of on-time payments reduced from 12 to 9
- “On-time” now within 20 days of due date
- Completed within 10 consecutive months

- (Effective: New rehab agreements on/after 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Rehabilitation of Defaulted Loans
- Missed or ineligible payment allowed
- GA OPTION – New standard “OK” on prior agreements if at least one scheduled payment of 9 after 7/1/06

- (Effective: New rehab agreements on/after 7/1/06)

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Loan Default Collections
- On or after 10-1-2006
- CL and Rehabs – not in excess of 18.5%
- 8.5% remitted to Secretary
- Beginning FY 2010
- CL collections over 45% of total
- Remit all collection costs to Secretary

## Higher Education Reconciliation Act of 2005 FFEL and Direct Loans

- Wage Garnishment Requirement
- Increases maximum percentage of a defaulted borrower’s wage garnishment from 10% to 15%

- (Effective 7/1/06)

## Higher Education Reconciliation Act of 2005

- “Dear Colleague” Letters and Announcements
- GEN-06-03 (March 10) – HERA Summary for Loans
- FP-06-04 (March 30) Lender Reporting Changes
- FP-06-05 (April 25) – FFEL Grad/PLUS Guidance
- FP-06-10 (June 5) – SAP for FFEL PLUS
- GEN-06-10 (June 20) – HERA Implementing Provisions
- GEN-06-11 (June 21) – Foreign Schools and FFEL
- NSLDS – HERA updates (April 24, July 7, July 10)

- Published Guidance:  See.WWW.IFAP.ed.gov special link to  HERA information

## Higher Education Reconciliation Act of 2005

- Forms:
- FP-06-05 (April 24) – FFEL Promissory Note Addenda and Plain Language Disclosures
- FP-06-08 (May 23) FFEL Stafford and PLUS MPNs
- FP-06-12 (July 3) – FFEL Consolidation Application Addendum
- GEN-06-13 (July 3) – Teacher Loan Forgiveness

## Higher Education Reconciliation Act of 2005

- Forms:
- Pending:
- Revised Stafford and PLUS MPN
- Revised Consolidation Loan App/P-Note
- Military Deferment
- Identity Theft Discharge

## Emergency Supplemental Appropriations Act (2006)  

- DCL – GEN-06-12, June 23, 2006
- Repealed “Single Holder Rule” in FFEL Consolidation Program
- Effective for applications received on or after June 15, 2006

## Emergency Supplemental Appropriations Act (2006)

- Repealed HERA July 1, 2006 changes limiting FFEL Stafford or PLUS borrower access to Direct Loan Consolidation
- denial of application no longer required
- income-sensitive repayment that meets the borrower’s needs reinstated as condition

## Emergency Supplemental Appropriations Act (2006)  

- Impact -
- All eligible loans of equal status
- FFEL loan not required in FFEL Consolidation
- Single eligible loan can be consolidated

## HEA Extension – P.L. 109-292

- Limitation on School and School-Affiliated Organizations use of Eligible Lender Trustees (ELT) in FFEL Program
- Loan Discharge for 9/11 spouses and parents
- Spouse of eligible public servant
- Parent of eligible victim
- Includes portion of Consolidation Loan

## HEA Reauthorization

- H.R 609
- College Access and Opportunity Act of 2006 passed by House March 30, 2006
-  Senate      -     ?

## Technical Slide

- We appreciate your feedback and comments.
- We can be reached at:
- Phone: (202) 502-7732
- Fax: (202) 502-7874
- Email: Pamela.Moran@ed.gov