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U.S. DEPARTMENT OF EDUCATION 

OFFICE OF POSTSECONDARY EDUCATION 

PUBLIC REGIONAL HEARING ON 

NEGOTIATED RULEMAKING 

Friday, November 2, 2007 

11:00 A.M. – 3:00 P.M. 

Bayside Room 

Sheraton Hotel 

500 Canal Street 

New Orleans, Louisiana 
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MR. BERGERON: Good morning. 

I am David Bergeron. This is in 

preparation for our conducting negotiated 

rulemaking under the Higher Education Act of 1965. 

I am David Bergeron, Director of Policy 

and Budget Development in the Office of PostSecondary Education at the Department of Education. 

And I am going to let my colleagues introduce 

themselves, and then I will say some more things 

about--that are preliminary, and I know that Diane 

will want to add some welcoming remarks. 

So, with that, I will give this to Diane. 

 MS. JONES: Hi, everyone. I’m Diane 

Jones. I am the Assistant Secretary for PostSecondary Education. 

 Thanks for being here for the hearing. It 

is a beautiful day outside, and I’m sure there are 

a million other things you could think about doing, 

but we really value the input that we get at these 

hearings and through the negotiating sessions. 

 You know, we are proud that we delivered 

three packages last week, and we think that the 

process--the process works. It works well. The 
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comments that we get from you during regional 

hearings during negotiation, and certainly in 

response to the published proposed rules and 

regulations, it is really helpful to us to make 

sure that the final package that we put out there 

is right and serves the purpose and, of course, 

continues to meet our statutory requirements. 

 So, thanks for being here. We look 

forward to hearing your comments, and we’ll go 

ahead and, I guess, get started. 

 MR. JENKINS: Good morning, everyone. I 

am Harold Jenkins with the Office of General 

Counsel, Department of Education. 

 MR. BERGERON: You know, I just want to 

thank you all. 

 As Diane said, it is a great day outside. 

I know that many of you have been here all week for 

the Federal Student Aid Conference. I know others 

have flown in this morning, and we appreciate 

everyone who is here. 

 As Diane said, this is a really important 

part of our process as we begin to think about 

regulating under the College Cost Reduction Access 

Act, and, you know, we’ve just gone through a very 
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extensive process coming out of the Higher 

Education Reconciliation Act. 

 So, we’re actually--have gotten some 

practice at this. We probably will find this to be 

an easier year, but we know that it is important 

that we start the process with all of you and 

getting your advice and counsel about the things 

that we should be included in to be considered on 

the negotiating agenda. 

 We will have another hearing in Washington 

on the 16t h of November, and then we will have a 

concluding hearing in San Diego on the 29t h . That 

hearing, again, will be in conjunction with the 

Federal Student Aid Conference so that it is easily 

accessible to people who are in the financial aid 

community, and allows us to be there and other 

things in the conference. So, it has worked out 

well, what we did last year, and I hope it will 

this year. 

 You know, we will be closing nominations 

for people to be serving on the negotiating 

committee on November 29t h . We welcome public 

comment on the things we should be negotiating 

until that date as well, and the details of that 
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are available in the Federal Register’s notices and 

on the Department’s website. 

 Diane is wanting me to mention the data is 

wrong on the website. It says the nominations 

close on November 9t h . We just left off a 2. And 

the sad part of that is that it was wrong in one 

place, and then we just copied that to someplace 

else. So, it is wrong twice on our website. But I 

think it is probably fixed by now. I know the 

staff back in Washington has been working on that 

over the past couple of days, and so I hope it is 

right by now. With that, I would like to invite 

the first commenter forward. 

 But as they come forward, it is Greg 

Guzman. As they do that, you will see us wander in 

and out from time to time. There will always be at 

least one person sitting at this table; I promise 

you that. But throughout the day, there will be 

different faces, different people sitting in these 

chairs, and just recognize that all of the 

proceedings are being recorded. 

 We will have that--make that available on 

our website as soon as we can after our hearings. 

And so--and I know that Diane, who just sat down 
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for a minute, and I, as well as all of our staff, 

go through these transcripts very carefully to make 

sure that we hear from you as we develop the agenda 

and proceed. 

 You can either use the microphone right 

there or the one at the podium, depending on 

whether or not you need to set paper down. So, 

with that, I will turn it over to Greg. 

 Thank you, Greg. 

 MR. GUZMAN: Thank you. Only because I am 

sick I am going to come up here. You guys can use 

the clean, healthy one back there. 

 During the past three days, we have heard 

Secretary Tucker and Secretary Jones both talk to 

us about how concerned they are about students and 

parents, and the entire direction of higher 

education. They have pledged mechanisms of 

transparency and accountability to students and the 

taxpayers, yet they seem to have left out one very 

important constituency as I see it, and that would 

be the aid administrator. 

 For over 40 organized years, aid 

administrators have been helping American families 

achieve the dream. You heard Secretary Tucker say 
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in her listening session how important a role the 

aid administrator plays in the success of students. 

We have been doing this without regulation, without 

oversight, and without recognition, because we 

passionately care about what we do. 

 However, over the past two years, our 

profession has been made out by the media and 

politicians to be the bad guy. It wasn’t already 

bad enough that financial aid offices are 

considered the most dangerous office to work on the 

college campus, or that research shows that 

financial aid is the most stressful occupation on a 

college campus. 

 No. Now, we are asked by families if we 

are on the take. We became used to the verbal and 

physical threats for administering federal 

regulations that we did not create. 

 Therefore, I now ask you to consider doing 

something for all of us who sit on the front lines 

of attacks for regulations that we did not create. 

During this process, I ask you to consider 

including in the loan forgiveness portion of the 

CCRAA--to include financial aid administrators as 

public service jobs. 
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 Thank you. 

 MR. BERGERON: Thank you. 

 Eric Melis, would you come ahead and join 

us at the microphone. 

 MR. MELIS: Thank you. 

 I am Eric Melis, Associate Director for 

Financial Aid at George Mason University in 

Fairfax, Virginia. 

 I have some real concerns with regard to 

the redefinitions, or the additions to the 

definitions of “independent student” in the CCRAA. 

In particular, ward of the court. Number one, it 

is very difficult to figure out what “ward of the 

court” is. It always has been--because, in 

speaking with one of my constituents, there are a 

number of jurisdictions where the legal system 

doesn’t even recognize ward of the court as a 

current status, as a recognized status. 

 I have some real concerns about the 

definition of “ward of the court” at any time since 

the age of 13. During the course of reviewing 

dependency appeals that we see on a regular basis, 

we have encountered a number of situations where--

there was a situation that lasted a very short 
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period of time in which the student was made “a 

ward of the court,” and then, the family situation 

resolved itself. There was reconciliation and 

everything went back to normal. And under these 

guidances, it appear that student would now be 

independent even though the family is fully capable 

and willing to be the primary support for the 

funding for the post-secondary education. 

 So, I would ask that we look very 

carefully at how we use the term “ward of the 

court,” and how that is defined, both in 

information provided to the aid administrators, but 

also in information provided upfront to the parents 

and students who are completing the application to 

make sure we are capturing what is truly meant by 

that status. 

 The same thing with regards to legal 

guardianship. We have run into a number of 

situations where a family has voluntarily, through 

the courts, assigned legal guardianship to an aunt 

or uncle or grandparent, not because there is some 

issue with the family or the parent’s unwillingness 

to support, but because the family wants the 

student to live either in the state in which the 
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school is located in hopes that they might secure 

instate domicile, or just for the mere convenience 

of geographic location and proximity to the 

institution. And again, a situation like that, I 

don’t think, at least based on intent, that the 

student really is an independent student, when it 

is a matter of voluntary convenience. 

 I have some real concerns about the 

emancipated minor issue, because, number one, the 

requirements to get yourself, or get the student 

declared emancipated as a minor, varies so greatly 

from locality to locality. Even in my geographic 

location, it is very easy for the family to have 

the student, once they turn 18, be declared 

emancipated. And though there is a declaration on 

the part of both the parents and students during 

that process, that the student has the resources to 

be self-supporting as part of that process, there 

is no follow-up validation of that. 

 And so, I know already during our 

dependency appeals processes and in conversations 

with students--we quite often have thrown to us 

from the students, “I’ll go get myself declared 

emancipated. Will that make a difference?” So, we 
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already see the potential that this will be twisted 

and used as a backdoor avenue to independent 

student status. 

 So, I’d like to make sure that we look 

very carefully during the process of negotiated 

rulemaking in how we define those items. 

 Also, if we identify documentation 

requirements, if there may be some. As a quality 

assurance institution, I can pretty well assure 

that during at least the first round of these new 

statuses, that we would be verifying students who 

were eligible under those categories to make sure 

that we’re capturing the right people. We would do 

that as part of our institutional verification 

process. 

 Do I still have any time? 

 I will just throw one other thing out 

there, unrelated to the independent student status, 

and that is--my concerns--and I know that these 

have been echoed throughout the conference every 

time this has come up about the TEACH Grant. 

 At George Mason, our teacher programs, 

with the exception of Phys. Ed., are all graduate 

programs. But, since part of the student 
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eligibility definition to be eligible for the TEACH 

Grant is the plan to complete. I would assume that 

undergraduates who plan to then pursue the graduate 

teaching certificate or graduate teaching degree 

would be eligible for consideration, given any 

other eligibility criteria for the TEACH Grant. 

 So, potentially, we have the four years of 

undergraduate study, although they would hit their 

aggregate at $16,000, we have the two years of 

graduate study, and then, we have a period of time 

beyond that which they can actually commence the 

service component, because this is then treated as 

an unsubsidized loan at the point of non-completion 

of that service component. We have the potential 

there for some pretty serious accrued interest 

issues. 

 And I would just like to look very hard at 

what we do or what we are required to do to counsel 

these students who might be eligible for these 

upfront about the potential financial ramifications 

of taking these programs, because I’d hate to see 

that sort of debt burden dumped on these students 

so far down the road that they haven’t anticipated 

and aren’t prepared to deal with. 
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 Thank you. 

 MS. BERGERON: Thank you, Eric. 

 Yes, absolutely. 

 MR. JENKINS: I would just like to make 

one comment on the first couple of suggestions. 

 As we go through negotiated rulemaking, we 

in the Department, and also the negotiators from 

the community, need to keep in mind that for this 

particular exercise, we are restricted by the 

leeway that the Congress has given us in the 

legislation. 

 For example, some of the definitions, such 

as those that were mentioned here, “legal 

guardian,” “ward of the court,” these are in a 

section of the law that, for whatever reason, we 

are not allowed to regulate on. 

 Similarly, actually, the previous 

suggestion that financial aid administrators be 

considered to be providing public service for 

purposes of loan forgiveness, that is something 

that could only be considered if it turned out that 

they fit within one of the statutory categories 

that are already there for loan forgiveness. 

 So, although we are eager to hear 
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suggestions, and certainly we want to hear about 

concerns, these are sort of the ground rules that 

we all have to work on in the negotiated rulemaking 

process. 

 MR. BERGERON: Very good point, Harold. 

 The one thing that would be helpful is 

issues around documentation standard--what those--

those kind of things that we can address that 

aren’t specific to regulating the subject matter of 

mean analysis might be helpful as, either now, as 

we go through the public comment period--because I 

think there, and when we think about TEACH Grants, 

it is particularly critical that we do exactly what 

you have indicated, which is either by regulation 

or by just our consumer information that the 

Department makes available, make clear the 

potential implications of the TEACH Grants. 

 So, sometimes, what we’ll do is get out of 

this is things that we can do, and should be doing, 

administratively and not regulatorily, and we will 

take that back and address that through our 

process. And there are some times where there are 

statutory issues that constrain us, and we may need 

to be thoughtful about how we address them without 
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negating the statutory intent. 

 So, with that, Georgia Whidden, from 

Tulane, right here in town. 

 Thank you, Georgia. 

 MS. WHIDDEN: I had no idea I was going to 

speak. So I just scribbled down some notes. I had 

no idea. 

 I do want, first off, to say something. 

You just mentioned that this hearing is for a 

specific reason, and we should all be aware that 

our comments may or may not result in anything, but 

it actually brings to mind the fact that a lot of 

us here have something to say, and sometimes we 

feel if we just voice it, someone will hear it, and 

something will come out of it. Whether or not it 

is for this particular reason, I just want to kind 

of put that out there. 

 MR. BERGERON: Well, let me just respond 

to that. What we did from the public comments last 

time--we sorted things out and said, “Well, this 

isn’t really regulatory. These are administrative 

things that we could take back and we can work on.” 

Some of them have been implemented and some of them 

haven’t yet because they take a longer time. 
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 Other things are statutory. Well, we 

can’t change the law through this process. 

However, we may have another way that we can affect 

that. So, I encourage people to express what their 

concerns are, and we’ll do the sorting out as to 

how we resolve those particular issues through this 

process, or some other process. 

 So, you know--and I’m thrilled that you 

came even though you weren’t really thinking you’d 

say anything. 

 MS. WHIDDON: I wanted to express a couple 

of concerns, and I’m a little scattered, but I will 

start with the CCRAA’s loan forgiveness program for 

public service, which is a godsend for students I 

know and love, which are, in particular, law 

students who have chosen to go into public 

services: public defenders or legal aid--legal 

services. 

 This is a wonderful that has happened for 

them and will help elevate opportunities in that 

sector, and we will see some real value out of 

this, and we are thrilled about it. 

 There is still one sort of perverted twist 

that has been recognized, and I just want to--not 
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that you may necessarily be able to do anything 

about it regulatorily, but it has to do with 

whether or not you’re married. 

 We did a presentation on this the other 

day, and I asked the students the value of their 

love, because if they really loved the person that 

their--their girlfriend, or boyfriend, their 

fiancé, they have to consider, in some cases, 

whether or not they were worth $100,000 over ten 

years. 

 They might want to put it off, have a long 

engagement--they might have a few children. That’s 

perfectly fine, but as far as the marriage part, 

they may consider living in sin for a little while. 

 I think maybe, if there is anything that 

can be done about this, perhaps it should be looked 

at. I personally have tried to think of a way that 

you could allow someone to actually legally be 

married and get the same level of benefits. I 

haven’t been--I’m not that smart. But I do want to 

point that out and put it on the record that it is 

kind of a perversion that if you are someone who is 

passionate about going into public service, and you 

do have a high level of debt, that there is real 
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monetary incentive not to get married. 

 I just want to put that out there, at 

least to someone who also is employed. So, that is 

a little bit perverted. 

 The other thing I wanted to comment on 

is--the TEACH Grant, even though we don’t have a 

teaching program at my school, I did want to kind 

of put something out there. I hadn’t heard it 

talked about, but the TEACH Grant actually could be 

looked at as a way to increase your Stafford Loan 

limits. 

 You know, a 6.8 percent interest rate, for 

some students, whether or not it is a grant or an 

unsubsidized Stafford actually might not be such a 

bad thing. So, you know, we’re all bemoaning the 

fact that this can turn into a loan, but actually 

it is a loan at 6.8 that a student might not 

otherwise be able to get. I just wanted to put 

that out there. 

 Another thing that I wanted to also--this 

is kind of unrelated. You did say that this was to 

make comments for other areas that you might think 

help financial aid. 

 We are all concerned about private 
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educational loans. We are trying to wash our hands 

of being involved with these private lenders. You 

know, that is not our concern, but it is absolutely 

our concern. 

 And I think it would be remiss not to 

point out that private educational loans directly 

affect all of our students and families. 

 I have children. I get these mailings all 

the time, and we can’t look away. I do know the 

Department is working with other agencies to look 

at this. Please, please look at it very carefully. 

 Please put up some market barriers where 

you can. The fly-by-night, small--you know, 

selling products on QVC yesterday are now in--

student-lending guys are loving it. They are 

sending stuff out to all the kids, and our hands 

are almost tied in this. 

 Why is there a growth in private loans, 

and why will there be an explosive growth in 

private loans? We know it is because of the profit 

incentive of the lenders. They are going to be 

going after the private loans more and more because 

it is less profitable to go to federal loans. That 

is one thing. 
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 The other thing is that parents don’t want 

to go through the trouble of filling out the FAFSA 

in some cases. Some middle-income parents don’t 

want to go through the hassle of filling out the 

FAFSA. 

 You’ve just made it a little bit more 

difficult for everybody. The other day, I saw that 

we are required at financial aid offices to 

perform, by hand, matches that are right now 

available through the federal databases. 

 I suggest that there is created a FAFSA 

Lite, some sort of mechanism where a family can 

say, “I want to be able to borrow for my child. I 

want to be a responsible parent. I want to go 

through the federal loan program, but I don’t want 

my children to see my financial information. I 

don’t want to provide the financial information, 

but I would like to please be able to borrow this 

in a quick, easy manner.” That’s the marketing on 

all these private lenders: quick, easy, instant. 

 Why, with all these database matches in 

place, can’t there be a mechanism where a family 

can go in and choose, “I just want to go through 

the matches. I would like to borrow Parent Plus or 
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I would like my child to be able to borrow the 

unsub without going through all that financial 

rigmarole,” because I think that is a real barrier. 

 And if we could hold that up and we could 

say, “This is fast. This is easy. This is just as 

fast and easy as that marketing piece you got in 

the mail the other day.” That’s just a suggestion. 

 Another place where resources might be 

able to be used from the Department rather than 

through schools is actually through the lender 

list. Certainly, lenders are vetted. Please tell 

me they are vetted somewhere. 

 MR. BERGERON: I guarantee. 

 Just so you know, the primary agreement 

that lenders have to participate in the FFELP 

Program is through the guarantee agencies, and the 

guarantee agencies are the ones that do the vetting 

of lenders to determine their eligibility to 

participate in the FFELP Program. So, that’s where 

that responsibility lies. 

 MS. WHIDDEN: Got it. 

 So, the guarantee agencies are vetting, 

and there is a database of lenders. 

 Is there a database of these borrower 
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benefits that lenders may offer today and bring 

away tomorrow? 

 MR. BERGERON: No. 

 MS. WHIDDEN: But we are, at the financial 

aid offices, required to put those out there and to 

determine once a year whether or not they are still 

valid. Can’t the guarantee agencies do that? 

 MR. BERGERON: Well, then you get in the 

circumstances where the guarantee agencies are the 

ones who are basically developing the preferred 

lender list, and the prohibition of the restriction 

is, “You can’t prohibit a borrower’s choice and 

lend--or a guarantee agency.” So, it gets very 

circular. 

 We hear you. We absolutely hear you. And 

we’ve been struggling with this, and we’ll take 

this back and do some more work around this issue. 

Because yes, we hear you. 

 MS. WHIDDEN: All right. I think that is 

all my ramblings. 

 Thank you. 

 MR. BERGERON: Thank you. 

Melanie Amrhein. 

 MS. AMRHEIRN: And I do represent a 
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guarantee agency. I’m with the Louisiana Office of 

Student Financial Assistance. 

 And Georgia, I think that’s a great idea. 

I think the guarantee agencies could help fill that 

role with our agreements to the lenders if the 

Department would sanction it, and I think we could 

do so in a very honest and forthright way that 

would not show any favoritism, but just lay out the 

facts, is what I would recommend. 

 But my question actually is from the state 

scholarship and grant area. On the College Access 

Challenge Grants, and I did not see those mentioned 

in the negotiated rulemaking, and I didn’t know if 

that was intentional, and does that mean that the 

Department will totally regulate that program? 

 MR. BERGERON: College--the Access-- 

 MS. AMRHEIN: The Challenge Grants. 

 MR. BERGERON: The Challenge Grants are 

not in Title IV of the Higher Education Act. They 

are not subject to negotiated rulemaking. 

 Likely, we will not regulate the program. 

We will do a grant solicitation to get information 

from the states about their desire to participate 

in the program and get application from them, and 
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that the program will basically operate under the 

Department’s general administrative regulations 

statute, and the application that the agency or 

organization representing the state or the 

philanthropic submits. 

 So, it is not something where we intend to 

regulate or would regulate. Particularly, that is 

only a two-year program. 

 With that, I am going to turn it over to 

Diane. 

 MS. JONES: That being said, I have 

another group of staff people back at the office 

actually working right now to develop a 

solicitation for that program. So, if you have 

some ideas and suggestions, I’d love to hear them, 

even though we are not going to go through a 

rulemaking. We are in the process of developing a 

solicitation. So, please let us know your 

thoughts. 

 MS. AMRHEIRN: Great. Thank you. 

 MR. BERGERON: That is everyone who has 

signed up to this point to testify. 

 So, if anyone else wants to testify, I 

would ask that you go and see my friend Nikki, who 
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is standing by the door, and sign up. 

 The reason I suggest that rather than just 

going to the microphone is our court reporter will 

need that information in order to have a record, a 

full record, of the hearing. So, if people want to 

sign up, go and see Nikki, and we’ll add you to the 

list--or maybe we have one more. 

 MR. BERGERON: Jeremy Wichert. 

 MR: WICHERT: Jerome Wichert 

 MR. BERGERON: Jerome Wichert. Okay. 

 I have been telling my wife for the last 

couple of days--like, the last month-and-a-half 

that I have to go and get my glasses changed, 

because I cannot read anything. 

 MR. WICHERT: Most of it is me. It is my 

penmanship. 

 I guess the thing I wanted to just mention 

is I am thinking about the lender lists, and in one 

of the sessions the other day we talked about the 

fact that you could possibly operate without a 

lender list. 

 The issue that we really get into is 

making this easy for students, and we use ELM as a 

disbursement agent, and we still would like to be 
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able to use ELM. I’m okay with actually getting 

rid of a lender list, but we still need to be able 

to operate efficiently. And part of that is for 

the school’s purposes, and part of it is for the 

student’s purposes. 

 And without the ability to at least direct 

in some manner--I don’t think we could operate 

efficiently for students with large volumes. 

 So, I just wanted to mention that. 

 MR. BERGERON: Thank you. 

 As I said, if others want to testify, go 

and see Nikki and she’ll sign up. Otherwise, we’ll 

just stay here for a little bit--well, somebody 

will be here throughout the day taking testimony 

from anybody who wants to come and testify, but 

we’ll let the transcriber take a little rest until 

someone is ready. 

 MR. BERGERON: We have another person 

signed up. 

 Jim Reed, from West Texas A&M. 

 Thank you, Jim. 

 MR. REED: Thank you, David. 

 I’d like to continue part of the 

conversation that was started with Jeff in the 
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earlier session concerning the determination 

concerning dislocated workers and other persons in 

that venue. 

 A very great concern that we have at the 

institutions, as I voiced there, is that we will 

find ourselves with people submitting themselves as 

dislocated halfway through the year, three-fourths 

of the way through the year, and asking us to do 

dependency overrides for their children at that 

point in time. 

 The other thing that concerns me about the 

independency thing is the portion concerning--how 

to best put this--the homeless student, and I think 

the Department is going to really need to help us 

as far as giving us some very clear not only 

guidance, but perhaps some documentation that we 

can ask for to ascertain as to whether a student 

falls into this point. 

 I think the gentleman made a valid point 

earlier that this is something we all struggle 

with, along with the emancipated minor. It is a 

point that we cannot seem to communicate in 

anything that we share with parents and students. 

 Part of it, of course, is tied to the age-
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old conflict of the regulations saying that a 

student is not independent until they attain the 

age of 24, where we live in a society where the--

quote often, families determine that, when a 

student completes his or her high school education, 

that they have then become an adult, and separate 

themselves. 

 And we find ourselves discussing with 

students ad infinitum, ad nauseum about, “Well, my 

parents don’t provide any support to me.” 

 “Well, do you have contact with your 

parents?” 

 “Well, I only see them twice a year,” or 

“I know where they live,” and yet we find ourselves 

having to enforce the rule that says, “If there is 

no instance of abuse or some other mitigating 

circumstances, that you’re still a dependent 

student.” 

 And I’m really concerned that the points 

concerning emancipation and homelessness are going 

to fall into this same category, and we’re going to 

have an immense amount--a drastic influx of people 

rushing to get these things acquired when they 

determine that their son or daughter, by doing one 
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of these things, can then evade having to include 

their tax information. And I just wanted to voice 

that very strong concern. 

 Thank you. 

 MR. BERGERON: Thank you. 

 And with that, we will wait until we have 

another person sign up. 

 MR. BERGERON: It is about noon, and so 

we’re going to go ahead and adjourn until 1:00, 

since there is no one signed up to speak, but we’ll 

reconvene at 1:00. 

 Thanks, everybody. 

 [Whereupon, at 12:00 p.m., the hearing was 

recessed until 1:18 p.m.) 
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AFTERNOON SESSION 

 MR. BERGERON: Good afternoon. We are 

going to go ahead and reconvene. 

 We have another person signed up to 

testify, and that is Ray Testa. 

 Ray, go ahead and tell us what you’d like 

to say. 

 MR. TESTA: Well, as I said outside, this 

was one of those things where I called home to some 

of my constituents and said, “There are really not 

a lot of people talking.” And they said, “Well, 

aren’t you going to talk?” 

 “Well, I was prepared to just be in the 

audience.” And they said, “Come on. It is an open 

microphone. You’ve got to take advantage of it.” 

 I would just like to make a couple of 

general remarks. 

 First of all, I’ve been involved in the 

negotiated rulemaking process in one way, shape, or 

form since 1992. So, I pre-date a lot of folks in 

this. And so I would just like to commend the 

Department, especially as a result of the last 

round in terms of the way the process has evolved. 

 By they way, if you recall, I was on the 
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team that did reach consensus. But I also thought 

it was very significant that the Department made 

every effort to incorporate those areas where 

consensus was reached, even on portions of the 

other teams, in order to come up with a fair 

product, and I think they should be commended on 

that, and we are pleased with the packages pretty 

much as they came out. 

 I would like to address, in reaction to--

or in regards to the College Cost Reduction and 

Access Act, one of the things that we are very 

concerned with is, as we expand Title IV programs--

and, of course, on behalf of our students, we 

greatly support that effort, and we look at some of 

the things that can trickle down as a result of 

that. 

 We are very concerned that institutions 

may face increased problems with the 90/10 

provisions. We are looking at an arena where a 

school that might be close--and by the way, most of 

my institutions are not affected by this because of 

the way we are structured, but generally, 

proprietary institutions deal with this and, in 

many cases, they are very close. 
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 And when you look at the increase in loan 

limits, pending increase in Pell limits, schools 

that were at 88/12 or at 85/15 might all of a 

sudden find themselves at 91/9. 

 We are hopeful that, in the process of 

reauthorization, 90/10 may go away, or it may get 

moved from one section to another. Sanctions may 

not be as draconian where they would hit in one 

year. They may apply to all institutions, which we 

support, by the way, but those are things that 

might happen. You know, we’ve been looking for 

reauthorization to occur for the last couple of 

years. 

 Since you are going to engage in another 

round of negotiated rulemaking, you have the 

ability, as was done in the last round, to add 

items to the agenda. And in view of the increasing 

limits on loans, the increasing Pell Grants 

available to students, we think it would be prudent 

for the Department to take another look at 90/10, 

in the definition of what revenues count where. 

These items were brought up before, and they 

weren’t deemed necessary to be changed, but we 

believe it might be worth taking another look at 
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that now. 

 We are also very concerned that, as a 

result of the CCRAA, that we may be heading toward 

an area of lender access problems, especially for 

smaller institutions, and for institutions that 

offer programs of one academic year, two academic 

years. As we shrink the margins for lenders and 

certainly there are reasons to do that--we do run 

the risk that lenders will begin to be very 

selective as to who they want to lend to. And 

lenders can say, “We are not going to lend to twoyear or one-year programs, because the cost of 

servicing a $3,000 loan is the same as cost of 

servicing a $30,000 loan.” 

 And any of us who were around in the past 

when we hit lender access problems, lenders said, 

“Well, we’re not going to service--we’re not going 

to make loans to students at schools that had over 

a 7 percent default or over a 10 percent default 

rate, whatever.” 

 And those institutions found themselves in 

the lender-of-last-resort world. I would be, 

perhaps, bold enough to say that lender-of-lastresort programs are out there theoretically. 
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Whether they have any money left or the states have 

siphoned it off and moved it around and done 

whatever--if this happens suddenly, we could find 

serious problems in students being able to get 

access to FELP Loans. 

 Of course, the schools could migrate to 

the direct loan program, and some people think that 

would be a good idea, but in principle, we believe 

that the dual programs have served, perhaps, the 

best of all worlds in making competition and making 

lenders more sensitive to students and their needs. 

 So, again, I think--we would ask that the 

Department be mindful in crafting regulations that 

we take the restrictions that have been placed by 

statute, and we don’t so overimpose them as to 

drive lenders from the field. 

 You know, if you are in a small town--

those schools in small towns may have trouble 

finding three lenders that are unaffiliated to put 

on a preferred lender list, and if two of the 

lenders decide to leave the program or not to offer 

loans to that school, or students in that school, 

we could have problems with that lender access 

issue. 
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 And I think that is about it. I don’t 

know how specific--I can’t make specific 

recommendations, other than, if you are going to 

have a round of Neg Reg, you have the--while the 

book is open, you can pinpoint areas that are 

significant, and I think that those do represent 

potential problems for the education community 

going forward. 

 Thank you. 

 MR. BERGERON: Thank you, Ray. 

 Anyone else who wants to speak, go and 

visit with Nikki and give her your information, and 

until then, we will just hang out for a few 

minutes. 

 No, Danny, you can’t. 

 MR. MORAN: We are going to reconvene the 

hearing. 

 As we do that, I am going to introduce 

myself. My name is Bob Moran, and I am a senior 

advisor in the Undersecretary’s Office at the 

Department. 

 And our next witness is Jennifer McNeel 

from Tulane. 

 MS. McNEEL: I had a question regarding 
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the TEACH Grant and how it--when it gets converted 

to an unsubsidized Stafford Loan if they don’t 

participate in a--you know, they decide that they 

don’t want to teach. 

 My question is, “How will that be 

reflected on NSLDS?” And he indicated that it 

wasn’t going to go towards aggregate limits. So, 

I’m just curious how that is going to be reported 

on NSLDS. 

 And then my second question is, “Once that 

becomes a direct student loan, if a prior borrower 

has a consolidated loan in FELP through a FELP 

lender, can they then consolidate that direct 

unsubsidized loan into their FELP consolidation 

loan if they choose to do so?” 

 MR. MADZELAN: Hi, I am Dan Madzelan with 

the Office of Postsecondary Education. 

 Not to be fresh, but your first question, 

“What do you suggest?” 

 And I say that because, I mean, we’re in 

the session here to try and get some ideas from you 

folks about how we should be addressing some of the 

issues that have been raised--programmatic issues 

that have been raised by the Reconciliation Act. 
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 We have, you know, at least 1,000 

approaching a million questions about the TEACH 

Grant program and how we implement that. 

 And, you know, it is safe to say right 

now, “We just haven’t made any decisions.” This is 

a program that comes online next July 1s t . We are 

planning for a relatively aggressive rulemaking 

process this winter and spring, so that we have 

final rules in place at about the time the program 

comes online. So, you know, there’s just a lot of 

questions, both policy and operational. 

 Now, in terms of NSLDS reporting, that 

will most likely follow along after we make certain 

policy decisions about when--these are clearly 

grants at the start, and they may be, clearly, 

loans at the end. So, between those two points, if 

there is a change from grant to loan, when does 

that occur, and what is the programmatic response? 

What is the apparatus that has to kick in at that 

point so that we are now treating this benefit that 

we provided as a grant now as a loan? 

 Now, you know, this statute gives us some 

guidance about, you know, accrued interest and that 

kind of stuff, because it acts as an unsubsidized 
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loan--unsubsidized direct Stafford Loan, but again, 

the operational issues, we have to make the policy 

and programmatic decisions first. 

 MS. MCNEEL: Okay. So, my question was--I 

mean, we’re a school that does not offer a teaching 

program, so we may have a lot of students coming in 

at the graduate level that took out this grant and 

then decided that is not what they want to do. 

They want to pursue something else. 

 And so, I would encourage that it still 

remain as a line item on NSLDS, that we can view 

that, so that they know that they have a loan out 

there, but I would strongly suggest that it doesn’t 

reflect anywhere in the aggregate totals up at the 

top, because right now, we already have an issue 

with loans as being flagged as over aggregate even 

if they are not. 

 And then, the second part of my question 

regarding if they have--they take out--let’s say it 

becomes an unsubsidized direct loan, and then 

they’ve no borrowed a FELP loan after it has 

already become the direct unsub loan. Can they 

then consolidate that loan back into the FELP 

Program? 
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 MR. MADZELAN: Again, I think that is a 

decision we will have to make. 

 Under current law, when you look at what 

are the loans that are eligible for consolidation, 

and you take the position that this TEACH Grant is 

now an unsubsidized direct Stafford Loan, well, 

that is a loan that is eligible for consolidation. 

 So, if you just sort of take the world as 

it is today, I think the answer to your question is 

yes. But again, because we have to make some 

decisions and some calls around, “When does this 

thing that begins life as a grant that may in fact 

turn into loan--when, in fact, does that occur?” 

 And you know, these are questions for us 

around returns to Title IV. 

 MS. McNEEL: Well, that was going to be my 

next question, was, “How is that going to play in 

RTT IV?” 

 MR. MADZELAN: Exactly. And then how do 

these play into institution’s cohort default rates. 

 It is just many, many questions for us. 

 MS. McNEEL: Okay. Well, then that was my 

comment more than a question. 

 Thank you. 
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 MR. MADZELAN: Thank you very much. 

 MR. MORAN: Is there anybody else at this 

point? 

 Well, we’ll go on short recess again. 

 Again, if anyone would like to testify, 

please leave your name in the back, and that way we 

can get it on the record. 

 And we’ll take a short recess until we get 

another name. Thank you. 

 [Brief recess.] 

 MR. MORAN: we have another person who 

would like to come to the microphone, and her name 

is Adrianne Mendes of St. Joseph’s School of 

Nursing. 

 MS. MENDES: Hi. Thank you. 

 This will have more of a comment and I 

guess a question and concern. 

 I heard through all the conference this 

week about--especially under Secretary Tucker. She 

talked about simplicity--simplifying the process, 

accessibility. 

 And I am quite--going home a little bit 

discouraged with that, because, under the new 

regulations for lender choice, I don’t know how 
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this is going to make the process any simpler for 

our students. 

 I represent a very small institution, and 

I see pretty much my students on a one-by-one 

basis, and I can understand the process of 

confusion. I see the faces of confusion. For 

them, it is very difficult. 

 So, I am really concerned about this 

lender choice, because, frankly, to be honest with 

you, in my 14 years of financial aid, counseling 

students and parents, I can tell you firsthand that 

when something goes wrong with the lender, it comes 

back to us, the financial aid office, and that’s 

what really concerns me. 

 One of the reasons we do what we do is 

because we know what we are doing. And I feel that 

in some way, the Department--yes, the Department--

needs to make lenders a little bit more accountable 

as to, you know, the information they are providing 

to students, the information that they are putting 

out there, but at the same time, I don’t know how 

this is going to simplify the process for students. 

 And it is not going to be just the FAFSA. 

I can picture this, in my institution, how this is 
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going to play out: the confusion of filling out the 

FAFSA, and now, more information to them to go and 

disseminate, go figure out what lender you want to 

use. 

 That’s one area that I’m concerned and 

really, really wish--you know, I know you are in 

the process right now where the rules are made, but 

I just wanted you to keep that in mind, because I 

not only do that, but I do speak in a lot of 

financial aid nights at the high school level, so 

that is a concern. 

 My next concern has to do with the parent 

in college, and I know that, right now, under the 

current formula, the student cannot count the 

parent. And if--I want to know if there is the 

possibility of putting that back into the--since we 

are talking about the middle class America here 

being the most affected--I, personally, would be 

affected by that, because my daughter is going to 

go to school next year, and we are in the middle 

class, and I don’t see how that can help me, even 

being a financial aid administrator. I would like 

to see something like that proposed again where the 

parent can--we’re not in a position where we can 
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possibly support right now support tuition and fees 

for my husband and my daughter as well. So, I 

would like to see that reopened again and probably 

discuss that again--the possibility of counting the 

parent. 

 MR. MORAN: Well, real quick, on your 

first comments about simplicity and the Under 

Secretary’s comments earlier this week. 

 You know, that was mainly the FAFSA, and 

when you take a look at the rules that have come 

out, we have tried to take a very consumer-friendly 

approach, tried to get as much information out for 

the consumer, and the consumer-oriented--and that 

being the student that we are all here to serve. 

 And so, when you look at the 

Undersecretary’s comments about simplification, 

making that process less onerous, so that--where 

they are not thwarted away and, you know, other 

marketing provisions become more interesting than 

going after federal aid, federal grant aid, federal 

programs, and then, state aid and institutional 

aid, that would result from completing the FAFSA. 

 And then, obviously, you mentioned the 

lender regs, that--again, that is from a consumer-
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friendly standpoint of trying to get information 

out. 

 And as I think you heard in our session 

earlier, we are going to develop and assist in what 

we feel is the right information that should be 

provided, and we think that we can work with you as 

we move forward in making that a less onerous 

process. 

 We understand that--well, we’ve heard the 

comments and understand, you know, the concerns 

there. 

 On your second point, I’m going to let 

you... 

 MR. MADZELAN: Well, with respect to 

parents in college and the need analysis formula, 

recall that the federal formula is specified in 

statute. 

 I mean, the Congress basically wrote the 

formula for us. I am of an age when the Education 

Department had regulatory authority to essentially 

write these formulas for the Pell Grant and other 

programs, but again, this is a statutory provision. 

 There are some reasons why the Congress 

chose to do this. I think it was back in 1982 when 
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they decided to make the change, but, you know, 

where--at the Education Department, at any rate, in 

terms of this provision--I mean, we are bound by 

the statute here. So, there is really nothing 

through the regulatory process that we could do. 

 MS. MENDES: Okay. Thank you. 

 MR. MORAN: The next person we’d like to 

call to the microphone is Rosy Toney, from 

Southwestern Louisiana University. 

 MS. TONEY: Good afternoon. 

 I have a couple of questions, and I am 

kind of asking for clarification, too. 

 One would be the emancipated student. For 

students, my understanding is, for ’08-’09 

students, emancipated students can now be declared 

independent. My question is, “Are there going to 

be any guidance on a timeline?” 

 I do know that emancipated students that 

have to have some sort of support and there’s some 

other things that’s ordered through the court. So, 

are emancipated students--I’m making an assumption 

here, so please correct me if I’m wrong--would have 

to be court-ordered emancipated? If not, that 

would certainly be a suggestion. 
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 The other thing is, at one point can a 

student become emancipated before they begin 

college? For instance, I can allow my son to 

graduate in May and then emancipate him in June. 

 So, in my opinion, I could see some abuse 

of that. So, will there be some type of timeline 

as to--maybe a student would have to be emancipated 

so many months or a year before they are--before 

they actually attend college, or will it be that at 

any time--whatever time they are emancipated, they 

automatically become eligible? 

 MR. MADZELAN: Well, this is a tricky area 

for the same reason when I responded to our 

previous speaker. 

 This provision that Congress expanded to 

essentially expand the definition of “independent 

students” is basically what it is doing, is within 

that portion of the law in Title IV of the 

Education Act, Part F, the Need Analysis, that the 

Congress specifically forbids the Department from 

regulating. 

 So, we cannot go through a regular 

rulemaking process. However, we can offer guidance 

based on what we see in the legislation, if there 
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is legislative history. You know, Congress 

supports those kinds of things. We get other floor 

debate speeches by representatives and Senators. 

We find that in the Congressional Record, but any 

kind of information that we can find that would 

illustrate for us what the members of Congress were 

thinking when this provision was being proposed. 

 We will certainly be providing some 

guidance, likely through “Dear Colleague” letters, 

but again, it will be in a fashion that we think 

best interprets the plain language of the statute. 

And again, I am being a little cautious here, 

because, again, this is an area we are specifically 

forbidden from regulating on. 

 I think the statute does speak to 

emancipated youth, homeless youth, individuals in 

circumstances of that kind of nature. And it also 

makes references to other federal legislation. So, 

we think, without having the benefit of our 

attorneys check this out closely for us yet, of 

course, this will happen over the next several 

weeks, that the other federal legislation that is 

referenced in our legislation will, we think, 

probably give us some benchmarks that then we can 
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use and then share with you. 

 I think--is this a provision that is 

effective ’09-’10. Anybody recall offhand? I know 

you mentioned ’08-’09, but my general recollection 

is--and I no longer rely on memory. I have gotten 

to that stage in my life, that I think the need 

analysis provisions are effective for ’09-’10. I 

could be wrong on that. But either way, you know, 

we will have some guidance and information out for 

you, again, in a timely fashion. 

 MS. TONEY: Okay. Even though--I know 

that it is not something that can be regulated, but 

could it be suggested that there be a timeline as 

opposed to--because, I mean, we can see the fraud 

and abuse in that easily--that a student completes 

high school with their parents, and then they are 

immediately emancipated to get the benefit of 

becoming an independent student with virtually no 

income. 

 The other thing pretty much follows the 

same line, is the legal guardianships. Could we 

make suggestions that there be a timeline placed on 

the legal guardianship, also? And it follows that 

same point. Students could easily finish high 
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school with the parent’s information, and then 

parents can then release--give guardianship to 

another relative whose income is not as high and 

making them automatically become eligible as an 

independent student for more funds. 

 MR. MADZELAN: Yes, we certainly share 

your concerns for potential fraud and abuse. 

 Again, this whole notion of the 

emancipated youth, homeless youth, guardianship--

you know, these are issues that, in our Title IV 

programs, really haven’t been required, at least in 

terms of the eligibility part of it--haven’t been 

required to address up until this point in time. 

So again, this is something we will be studying 

carefully. 

 MS. TONEY: And in both of them, 

especially with the legal guardianships, I think it 

is--the guardianship regulations are from state to 

state, but I believe, in Louisiana, legal 

guardianship is recognized through an attorney. 

Some are only recognized through the courts. 

 So, could we also get some guidance--I 

mean is it--if an attorney just gives the 

guardianship or do a guardianship, is that 
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acceptable, or will it have to go through the 

courts. We just kind of need some guidance on 

that, also. 

 MR. MADZELAN: Yes. We will certainly try 

to provide our guidance that is sensitive to the 

laws and customs in the various states. 

 MS. TONEY: Okay. Thank you. 

 Oh. One correction: It is Southeastern 

Louisiana University. 

 MR. MORAN: Thank you. 

 Next person we would like to call is Tom 

McDermott, from Johns Hopkins University. 

 MR. McDERMOTT: Good afternoon. 

 My question has to do about--with the new 

TEACH Grant Program, and I’ll be the first to admit 

I have not yet read the final rules that were 

released on November 1s t . So, I am basing this 

question on information that I have learned 

throughout the conference this week. 

 My first question is, Do students--or will 

students need to demonstrate a financial need in 

order to qualify for the TEACH Grant, because I 

didn’t see that as a bullet point requirement in 

any of the slides? 
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 MR. MORAN: Legislatively, at this time, 

there was no need in there at all. 

 MR. McDERMOTT: Okay. 

 My second question is, Since the Grant 

could conceivably turn into a loan for some 

students, can schools treat it as an unsubsidized 

loan? And what I mean by that is, use it to 

replace EFC as opposed to reduce need when they 

apply for financial aid. 

 MR. MORAN: The--that’s just going to be 

something that we are going to work out through 

negotiated rulemaking. I think that there’s a lot 

of questions around the TEACH Grant on how it gets 

applied. 

 I--you know, and legislatively, it is 

silent on that. So, that is going to be something 

that we are going to work through as we go through 

this. 

 MR. McDERMOTT: And then, the third 

question is, Will the Department publish annual 

statistics regarding how many of the TEACH Grants 

actually convert to unsubsidized loans? 

 MR. MADZELAN: I think that--you know, 

obviously I can’t give, obviously, a definite 
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answer. I mean it is a good idea. 

 I mean, we, obviously--we will know that 

information internally, just like we know, you 

know, information on the number of Pell recipients, 

right on down the line. 

 We routinely make a lot of programmatic 

data available--you know, Pell Grant, end-of-year 

report, student loan stuff. The--I mean it is a 

good issue--a good question. And you know, we used 

to be able to kind of say, “Well, you know, if we 

have the resources, we’ll do it.” But now, since 

we basically publish everything electronically, you 

know, we have to come up with a different excuse to 

not do something. 

 But I think that, by and large, this will 

be information that obviously will be of interest 

to policymakers, both here in the Department and 

then on the Hill, as well. So, it is probably 

something that--I don’t think that would be 

something that we would hide. 

 And in the terms of annual reporting, 

well, you know, I don’t know exactly how we’d do 

that. But again, in the context of making a lot of 

programmatic--program-specific information 
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available, the answer is probably yes. 

 MR. McDERMOTT: And then the fourth and 

final question regarding TEACH Grants. 

 If there is no needs tests required for a 

student, will the student have to submit the FAFSA 

to apply for the TEACH Grant? 

 MR. MORAN: Well, I mean, right now we are 

working on developing a question for the FAFSA. 

 I don’t know that we’ve talked about the 

corollary where if you don’t complete the FAFSA, 

would you still be eligible, and I would think that 

would be something that could be worked out. 

 MR. MADZELAN: Well, we would hope that 

individuals would complete the FAFSA, because it is 

the gateway to other forms of aid. 

 We understand that there are those who, 

you know, are--maybe feel some of the questions are 

a bit intrusive or whatever. But also, a TEACH 

Grant awardee, a grantee, a student still has to 

demonstrate otherwise eligible--which, you know--

appropriate citizenship, and males are registered 

with Selective Service if they are supposed to be, 

and you know, we have the drug question and 

citizenship, and so there are a lot of these 
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eligibility questions that we handle, you know, 

sort of in a very transparent fashion via the FAFSA 

and the central processing system, and the matching 

arrangements we have with other agencies. 

 So, I think, as sort of as a policy 

matter, we want as many people to fill out a FAFSA 

as we can. And again, as a practical matter, we 

haven’t made a decision yet, but having a 

potential--or teacher candidate as the statute 

refers to these individuals, go through the FAFSA 

process wouldn’t be a bad idea just to get the 

other eligibility checking taken care of. 

 MR. McDERMOTT: Thank you. 

 MR. MORAN: Before you go, can I--this is 

a hearing really designed to get your thoughts on 

some of these questions that you’ve just raised. 

 And so, can I ask you if you have some 

thoughts on that to share some of them? 

 MR. McDERMOTT: Well, at Hopkins, we 

struggle with--we try to encourage parents to fill 

out the FAFSA when they are interested in a Plus 

Loan, for all of the reasons that you just 

described, are useful and would be helpful for the 

TEACH Grant program. But we still have a 
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significant number of families every year who just 

do not want to file the FAFSA. So, we collect 

signed statements regarded citizenship, and 

certifications regarding Selective Service. 

 And I could foresee the same issue 

occurring with students who perhaps were never 

receiving any type of assistance before who are 

interested in the TEACH Grant, and may say, “Well, 

why do I have to follow the FAFSA?” 

 So, the FAFSA in its current state, you 

know, with all the questions--it is hard to argue 

with a student or with a family that, you know--

“Why do I have to divulge all this information if 

this is the only thing I’m getting and it is not 

really based on need?” 

 The issue about the possibility about the 

award turning into unsub is a concern for us, just 

in terms of, you know, trying to control student 

debt and make sure that students don’t end up 

graduating with significant debt load. 

 So, if there is, you know, statistics at 

some point that show that there is a large number 

of students who actually end up turning their grant 

into a loan, we would want to be able to let 
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students know about that upfront, as they consider 

taking that grant. And hopefully, it wouldn’t turn 

into a loan, but we would want to advise them about 

that. 

 Thanks. 

 MR. MORAN: Thank you. 

 The next person we would like to call is 

Jennifer McNeel from Tulane again. 

 MS. McNEEL: I’m back. 

 I have some follow-up concerns regarding 

the TEACH. 

 One concern I had was abuse and fraud. In 

the cases where you have students coming in that 

may not necessarily want to teach, but you are at a 

school that offers teaching and they see this as a 

way of obtaining additional loans, with no intent 

to teach. 

 So, there was mention that there was a 

signed letter of an intent to teach. Could you 

inform me of that? Is there going to be a letter 

that they have to sign indicating that they have an 

intent to teach in order to get the grant, or is 

this self-identified? 

 I’m sorry, I didn’t read the whole rule on 
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it, but I am trying to find out, “How do they 

identify themselves as a student that wants to 

teach?” 

 MR. MORAN: Those eligibility requirements 

and those other factors that Dan was talking about 

earlier, we haven’t developed how those mechanisms 

will work yet. 

 That will come out as we move forward 

here. I will say that we do share the same type of 

concerns, and as we move forward, we will be, 

hopefully, moving forward making sure that these 

are directed to those folks that... 

 MS. McNEEL: And I am just concerned about 

how you are going to monitor intent for someone 

that leaves your school five years later. 

 MR. MADZELAN: Well, we think at the front 

end--again, we said the front end is a grant unless 

it becomes not. And we believe that there is 

something that we need to get on the front end so 

that the student understands that it is a grant 

now, but may not always be a grant. 

 And you know, not to say that it is going 

to be a promissory note, but again, it has to be 

some firm indication that the student knows that 
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this is a grant that may not stay a grant forever. 

So, again, on the upfront side--you know, it is not 

going to be like a Pell Grant--“Well, here’s your 

money and see you next semester,” but rather some 

additional communication, some additional 

counseling, some additional work with the 

individual student, so, they, you know, understand 

as best they can, as an 18-year-old incoming 

freshman, that maybe 8, 10, 12 years from now, it 

could become a loan. 

 MS. McNEEL: Okay. And in that aspect, if 

it does become the unsubsidized Stafford Loan, 

since a requirement of that is the Free Application 

for Federal Student Aid, I would recommend that 

become a requirement of the program. 

 The second thing is, if the TEACH Grant 

will affect the school’s cohort default rate, and I 

would recommend no on that. 

 The next thing I wanted to refer back to 

was lender lists and providing some guidance 

regarding some sort of chart. 

 I am assuming that when we develop a 

streamlined lender list, we usually provide a link 

to those lenders that we use on our website that 
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details the borrower’s benefits in that program. 

And we used to do a chart, and we removed the chart 

because of the fact that the moment you published 

the chart, it was no longer valid and those 

benefits have changed. 

 And so, I would encourage some guidance on 

exactly what type of chart or exactly what sort of 

documentation on our websites we should be 

providing. 

 I feel that, if we are directing them to 

the lender’s websites, which are updated with the 

most accurate information--is that sufficient when 

the school themselves is not providing that 

benefit? Is the link itself okay? Or is it--if I 

am not putting it out in text on my website, is 

that sufficient? And that is my concern with that. 

 MR. MORAN: You know, as we have 

highlighted, the Department is working on a mild 

disclosure form, and as far as the other comments 

about whether the website is sufficient to move 

forward, I think we will be issuing guidance around 

that area as we move forward with this issue. 

 MS. MCNEEL: Okay. And I guess, the 

sooner the guidance the better. 
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 Because, as a school that does early 

decision and early action, we are already getting 

our award letters out for the next year, and 

providing that information on our websites to our 

students. 

 MR. MORAN: Sure. And obviously, the 

Department would love to see compliance as early as 

possible. 

 But as you know, the regs that were 

published yesterday don’t go into full effect until 

July 1 of ’08. So, you know, any ED decisions that 

are coming up this spring, we’d like to see them 

applied, but, you know, if they’re not, then we 

can’t really--there is no enforcement level on our 

part. 

 The next person we would like to bring 

back is Rosy Toney from Southeastern Louisiana 

University. 

 MS. TONEY: Thank you. 

 Once again, I want to address the--as you 

can see, I am on the emancipations, legal 

guardianships, and this time it is the foster 

child. 

 It is my understanding that, if a child is 
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in foster care from--at age 13, regardless of the 

situation that occurred after that, they would 

still be considered an independent student. Is 

that correct? 

 MR. MADZELAN: Yes. I believe that the 

literal reading of the statute would say yes. 

 MS. TONY: Okay. I would like possibly 

for that--and I know--I guess we can’t--I am going 

to say, “to be reconsidered,” because I am a 

counsel worker, and we work a lot with foster 

children. 

 And we see a lot of--and children are gone 

for a lot of reasons, but they often are not--a lot 

of them are not gone but a few months. And they go 

back to middle- to upper-class homes. They go back 

to parents who can afford to pay. And they are, 

there--if we remove them at age 13 and then from 13 

to 18, from then on they will be considered 

independent. They will be living with their 

parents, and the parents are going to be able to 

pay for college, and I think that is an abuse for 

the other children who are legitimately away from 

home and cannot pay and don’t fall in the middleto upper-income categories. A lot of these parents 
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fall into the middle- to upper-income categories. 

 And to just blankly say that a child who 

has been in foster care, for whatever reason, at 

age 13--and may have only been there for a couple 

of months--they would then be considered 

independent, I would think is an abuse. So, it 

would, you know, behoove us to maybe consider that 

and maybe do a timeline on that, also--that maybe 

if they have been in foster care or were in foster 

care at 16 or 17 be considered--and have not 

returned to their families or to their parents--be 

considered independent as opposed to putting them 

in foster care, taking them out, and they remain 

with the parents who can pay and then let them come 

out as independent students. 

 Okay. 

 MR. MORAN: We’re going to wait for the 

next person to arrive. 

 [Pause.] 

 MR. MORAN: We’re going to invite Patrick 

Gorman from LSU Health Science Center back to the 

microphone. 

 MR. GORMAN: Thank you. 

 This is my first trip. It's okay, though. 
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Thank you. 

 I just want to follow up on some comments 

on several of the issues that have already been 

discussed--a few suggestions regarding the TEACH 

Grant. 

 One is, in order to strike a little fear 

in hearts of students who might be considering 

using this mainly to get more loan money, you might 

put some sort of a statement to the effect that 

you’re not allowed to tell lies when you’re trying 

to get federal aid, even though, as been discussed, 

it would be very hard to prove somebody had a false 

intent. It wouldn’t hurt to have a statement of 

that to that effect on the initial agreement that 

the students would sign. 

 I’d also like to suggest that, to the 

extent that you may be allowed to under the law, 

you’d consider special circumstances in the 

fulfillment of the teaching commitment. If I 

understand correctly, they have eight years to 

teach for four years to meet--to fulfill that 

commitment. 

 If you’re able, you may want to consider, 

essentially, deferments or forbearances of that 
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timeframe for continuing education. I know eight 

years seems like a lot to do something for four 

years, a good timeframe, but you may run into 

situations where it would be appropriate to extend 

that timeframe. It could be issues related to 

hardship and family situations, and what have you. 

 You might also give some consideration to 

those teachers who might, through their own 

excellence, be offered administrative positions in 

their Title I schools. And if that occurred early 

enough to prevent them from fulfilling their four 

years of teaching, you may want to consider that 

service as fulfilling the commitment, or do 

something to give them some--to avoid them 

incurring the full penalty, which I guess is a 

related suggestion, “If someone is unable to 

fulfill the full four years, and there is some 

legitimate cause that you could develop,” I don’t 

really have them in mind right now, “but if 

possible, you might want to consider a partial 

conversion of the funds from grant to loan, because 

basically, as it stands now it is all or nothing. 

 So, those are my suggestions on a program 

that I have no business talking about because we 
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don’t teach teachers at our school. I hope we’re 

going to teach a few teachers--a few students who 

will go on to teach in healthcare education, but of 

course that’s not--that wouldn’t be qualifying. 

 Sorry. I knew I wanted to follow up on 

some of the other-- 

 MR. MORAN: All right. As you are 

thinking about that, we appreciate those comments, 

and we’ll certainly take them all in as we move 

forward on the negotiated rulemaking provisions. 

 MR. GORMAN: Okay. All right. Thank you. 

 I did have a suggestion, and this I know 

is not--well, it is not related to the new law. I 

guess it is related more towards our brewing 

controversy over the past year or so regarding 

lender lists, lender choice, providing lender 

information. 

 I recommend that the Department of 

Education go the extra mile with their template, 

and actually require or invite lenders to provide--

to fill in that template and provide a link where 

schools can go out and grab those templates on 

given lenders and put them--or link to them. 

 That way, you could put the onus on the 
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lenders to keep their templates up to date, because 

as Jennifer mentioned, it is tough to keep a chart 

up to date. Well, it may be impossible to keep a 

chart up to date, because it is possible lenders 

will make changes without telling us in advance or 

even afterwards. 

 So, I don’t know that you have the 

authority to require lenders to provide that 

information, but you could possibly go out and get 

that authority, or certainly try to create an 

environment where it would be beneficial to lenders 

to provide you with that information so that you 

could provide populated grids or charts that 

schools could tap into. 

 All right. Thank you. 

 MR. MORAN: The next person that we’d like 

to invite to the microphone is Tom McDermott from 

Johns Hopkins. 

 MR. McDERMOTT: Hello again. 

 My question this time, or actually, 

suggestion, is regarding the loan auction process 

that was discussed where, in each state, there 

would be essentially two Plus lenders that would be 

designated. 
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 And my concern is that it conflicts with 

the guidance to schools to have at least three 

lenders on a preferred lender list if a school was 

going to create such a thing. And so, there could 

be a situation where there are only two lenders 

that students could borrow from in a state, and a 

school could only put those two on a list. How 

would they meet the guidance or the guidelines 

established for the criteria for creating a 

preferred lender list? 

 MR. MORAN: Well, again, the auction is 

only on the Parent Plus Program. 

 MR. McDERMOTT: Right. 

 MR. MORAN: So, you know, obviously this 

is one of those dichotomies where the Department, 

when it moved forward with its regulations--and 

we’re trying to make sure the message of borrower 

choice was out there. 

 One, it is statutory that a borrower can 

go anywhere and bring in any lender that they would 

like. But on the borrower choice side, when we 

talked about there being three choices by the 

school, we were hoping to provide options. 

 This is a legislative provision. Now, let 
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me take a step back there, please. Those three are 

also in various other--referenced in other various 

legislative proposals that are on the Hill. 

 Now, you have the Hill in a different 

program, in a pilot program--they consider to be a 

pilot program, for this auction, saying, “In the 

Plus, this is how you’re going to do it.” 

 And so, I hear your concerns and I hear 

your dichotomy there, and we--it is actually--we 

appreciate these comments. 

 MR. McDERMOTT: Thank you. 

 MR. MORAN: We would like to invite 

Jennifer McNeel from Tulane back. 

 Thank you. 

 MS. McNEEL: To follow up my colleague’s 

question about the Parent Plus loan--is it the 

state that the school is in or the state of the 

borrower? 

 MR. MORAN: The school. 

 MS. McNEEL: The state of the school. 

Okay. 

 So, I could potentially have a parent who 

sends their child down here to Tulane but also has 

a child back in California being required to borrow 
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through two different lenders? 

 MR. MORAN: That is the potential, yes. 

 MS. McNEEL: I’m concerned. 

 And my follow-up question to that was--I 

am concerned that you’re limiting choices. You’re 

having this broad umbrella under the Stafford 

Programs and under the Grad Plus Program, and the 

Grad Plus Program was designed very similarly 

through the Parent Plus loan route--that is how it 

was originally designed--and yet now we’re limiting 

the lenders that our parents can choose, and I’m 

concerned about that. 

 MR. MORAN: Thank you. 

 Would Patrick Gorman please return to the 

mike, from LSU Health Sciences--and this time you 

are returning. 

 MR. GORMAN: Yes, I’m back. Thank you. 

 A follow-up regarding the Plus Program--

the Parent Plus auction. I’ve been in student 

financial aid for quite a while. I just got my 20-

year plaque at our state conference. It is the 

“professional mortality plaque,” is what I would 

like to think of it as. 

 But I’ve always worked in health 
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professions, and I worked with the health education 

assistance loan program, and I don’t know--those of 

who have been around for quite a while and had any 

dealings with that program may remember that there 

was--the HEAL Loan Program did have a competitive 

bidding for lender participation. 

 And two things about that I’d like to say. 

One is that the basis of competition was, “Which 

lender would provide the lowest rate to the 

borrower?” And I would love to see that kind of 

competition. Because frankly, I think this kind of 

competition is not going to produce lenders that 

are not going to offer anything special to the 

borrower. And you know, even with the cut in 

margins and all--of course we are seeing special 

benefits trimmed and probably going away. 

 But with competition for the lender that 

is willing to take the lowest special allowance, I 

don’t think we are going to see lenders willing to 

provide any special financial benefits to parent 

borrowers, and that does concern me. I don’t know 

if you could have another stage to the auction, 

“What were you going to do for our borrowers?” but 

that is something that I am concerned with. 
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 Now, of course, the HEAL was not a pretty 

loan. It was variable rate. It was designed to be 

self-sustaining. It had a fairly high insurance 

premium. So, I’m not up here to be a cheerleader 

for the HEAL loan program, but I did like the 

concept of competition to provide the borrowers 

with the better rate. 

 I would also like to say about that, 

though--and this, I think, could be applicable 

here--it was a fairly disruptive process, because 

lenders had to bid every so often to become the 

Heal lenders. Schools were confused, borrowers, I 

guess, were confused at various times. There 

became orphan disciplines, because it was bidding 

by health professions’ disciplines, and some 

disciplines that were smaller, they didn’t have a 

lot of people bidding for their business. So, I 

think that this process is going to create some 

disruptions. 

 One other thing with that in mind is I 

suggest that you include in your process what you 

will do if one of the lenders that wins the lending 

rights for a state decides that they don’t want to 

make student loans anymore, or that they bid too 
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low and they really can’t afford to do this, and 

so, they’re not going to make loans. You know, I 

don’t think we want a situation where there is only 

going to be one Plus lender really active in a 

state. 

 Or, of course, I guess the idea of all 

this is, eventually, if it is really groovy--

they’re going to put that in there, aren’t they?--

that this would spread to Stafford, too. 

 Is that not the idea? I mean... 

 MR. MORAN: We would hate to guess at 

congressional intent beyond what has already been 

indicated. 

 MR. GORMAN: Okay, okay. 

 MR. MORAN: But--and I don’t want to go 

through the machinations of how we got to the 

auction, but what I will tell you is that, in the 

legislation, Congress proscriptively told the 

Department that we have, basically--in determining 

who will be eligible to make a bid, the Department 

has some criteria around which they can limit those 

bidders, mainly around the service area and how 

we--and set up service criteria, and what type of--

basically, what will end up a minimal level of 
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service that we’ll be allowed to provide. 

 Then, once we have set that service, the 

bidders who come in to meet that--we are required 

by law to take the two lowest bidders for--on what 

they will take as a SAP payment. 

 The borrower rates are set. You know, 

they are already statutorily set. That is not 

necessarily part of the auction program. 

 So, the only thing we really can influence 

here is the service aspect of that. And on that 

service side, we may or may not get the best 

service out of the list of candidates. 

 MR. GORMAN: Okay. And service, of 

course, would be things like customer service hours 

and availability of human interaction--some kind of 

track record, possibly. It would not involve 

discounts or financial--potential financial 

benefits to the borrowers, though, I assume, right? 

 MR. MORAN: We need to work through those, 

but at this time I don’t believe there can be 

discounts in that fashion. 

 MR. GORMAN: And the second point, if a 

lender drops out of student lending--a winning bid 

lender drops out of student lending or determines 
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that they don’t want to make the loan at that rate, 

so they are not going to be providing the loans? 

 MR. MORAN: Right. And as the Assistant 

Secretary, Diane Jones, indicated earlier in her 

talk, that they are two-year auctions. 

 So, every two years, the lenders will be 

rebidding for each state. So, we would--I think 

the assumption on our part--and again, it is an 

assumption, so I don’t want to make it sound like 

it is concrete at this point, but we would be 

expecting anybody who bids to service and provide 

that service for those two years for the auction. 

 MR. GORMAN: Okay. Well, then, I would 

still stand by my suggestion that you have a 

fallback in cases where a lender might, for 

whatever reason, drop out within that two-year 

period. 

 MR. MORAN: There are provisions in the 

law where a lender may not necessarily bid, but ask 

the Secretary to be the lender of last resort for 

that state where no one bids, potentially. 

 And so, there’s some provisions of making 

sure that there is at least lender service out 

there for each state, but we appreciate the 
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comments on the other side. 

 Jennifer McNeel from Tulane. 

 MS. MCNEEL: My question is regarding--

well, my statement regarding ranking customer 

service. 

 Electronic processing is key in making 

sure that they are able to transmit and receive 

information electronically from every single school 

in that state--would be key, depending on the 

software packages that each institution uses 

differ. 

 And then, my second response is that the 

Plus MPN is currently good for--it is a ten-year 

note on that. If there is a two-year auction, and 

at the end of the two years that lender is no 

longer still a viable lender, that parent will need 

to re-sign a new note with the new bank? 

 MR. MORAN: Those are discussions we are 

having now, as to working through that. 

 It is part of the question raised earlier 

today in the general discussion around, “If I’m 

already a Plus borrower when the auction starts, 

does my Mass Promissory Note continue through that 

or not?” And so, those are things that we are 
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still working through. 

 MS. MCNEEL: Which would lead me to my 

concern regarding default prevention and having 

several different lenders out there that you’re 

making payments to and having to keep track of who 

owns your loan, and who I should be contacting. 

So, that’s a reason for my concern of that. 

 MR. MORAN: Thank you. 

 Rosy Toney from Southeastern Louisiana 

University. 

 MS. TONEY: Thank you. 

 We are having this side bar conversation 

back here because we are concerned. We are 

concerned about the service that not only the 

parents and students will be receiving, but the 

schools. 

 It opens the door for the lowest door for 

the bidder of Plus Loan lenders and right now, we 

are going through this--well, you know, the issues 

with the lender partners has become a big thing. 

But we base a lot of our decisions on service. It 

is not always who is going to feed us the biggest 

meal, but who is going to provide us the better 

service. Who can we get in touch with during our 
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working hours? Who can we refer students to that 

we know that their questions are going to be 

answered? 

 If a student is going into default, we 

kind of know who we can send them to, to work with 

them to keep them from going into default. 

 We are not going to have the benefit--

possibly we are not going to have the benefit this 

time. We don’t have a clue what we’re going to 

get. 

 And if it is not going to be service 

oriented, how will that benefit anybody? I guess 

that’s my question. How is that going to--I mean, 

I think it is going to be more of a fiasco than 

anything else. 

 The students can’t get in touch with them. 

The schools can’t get in touch with them. The 

parents won’t know how to get in touch with them. 

How is that going to benefit the whole loan 

program, limiting it to two possibly unknown 

lenders? 

 I mean, we’re real concerned about that. 

Okay. 

 MR. MORAN: I appreciate your comments. 
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Thank you. 

 Jennifer McNeel from Tulane. 

 MS. McNEEL: You are getting the entire 

contingency of Louisiana over here. 

 To follow up on that. With just offering 

the two Parent Plus loans, I would be fearful, too, 

that if a parent sees it as, “This is the lender 

that the state and the DOE says is the best lender, 

then this might be the best lender for the Stafford 

loan, too.” 

 And so, all of our hard work going into 

providing them with the best Stafford loans that 

are out there--they are going to just streamline it 

right to that lender that may be unknown. 

 MR. MADZELAN: Well, thank everyone for 

coming today. 

 Our time is up. And again, thanks again 

to all of our commenters. 

 [Whereupon, the hearing concluded at 3:30 

p.m.]