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Session #63

Session #63. FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education. Agenda. Legislation Negotiated Rulemaking- Loans Regulations Other Regulations FFELP Forms. Legislation. Reauthorization of the Higher Education Act.

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Session #63

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  1. Session #63 FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education

  2. Agenda • Legislation • Negotiated Rulemaking- Loans Regulations • Other Regulations • FFELP Forms

  3. Legislation

  4. Reauthorization of the Higher Education Act • Third Higher Education Extension Act of 2007 (S.2258) • Extends the Higher Education Act through March 31, 2008 • Senate Reauthorization Bill-S.1642 • House Reauthorization Bill-H.R. 4137

  5. Other Legislation • HEROES Act – Reauthorized and made permanent –September 30, 2007 (P.L. 110-93) • College Cost Reduction and Access Act of 2007 – September 27, 2007 (P.L. 110-84)

  6. College Cost Reduction and Access Act of 2007 - Budget Reconciliation Loan forgiveness for: • Public service employees • Non-defaulted Direct Loan borrowers only • Balance of principal and interest forgiven after 120 payments made after 10/1/2007

  7. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • FFEL-only borrowers authorized to seek DL Consolidation for this purpose –effective July 1, 2008 • Included reconsolidation of existing FFEL Consolidation Loan

  8. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Must repay under any combination of: - income-based repayment - income-contingent repayment - 10-year standard repayment - any DL repayment based on 10-year repayment amounts

  9. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Must be employed in public service during 120-payment period • Must be employed in public service job at time of forgiveness

  10. College Cost Reduction and Access Act of 2007- Budget Reconciliation Public Service Jobs Include: • Full-time job in government or emergency management • Military service • Public safety • Public health

  11. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Public education (including early childhood education) • Law enforcement • Public interest law services (includingprosecution or public defense or legal advocacy in low-income communities at a non-profit organization)

  12. College Cost Reduction and Access Act – Budget Reconciliation • Public child care • Public service for the elderly and disabled • School-based library science and other school-based services

  13. College Cost Reduction and Access Act – Budget Reconciliation • Service at a 501(c)(3) organization • Full-time faculty at a Tribal college and in other high-needs areas determined by ED

  14. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Creates new Income-Based repayment plan for FFEL and DL borrowers (other than parent PLUS)-effective July 1, 2009 • Creates partial financial hardship deferment

  15. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Partial financial hardship = annual repayments exceed 15% of AGI minus 150% of poverty line based on family size based on standard 10-year repayment • Unpaid amounts forgiven after 25 years

  16. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • New economic hardship covers borrowers with income not exceeding 150% of poverty line applicable to the borrower’s family size –effective October 1, 2007 • Debt-to-income standard retained

  17. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces subsidizedundergrad Stafford Loan Interest Rates in FFEL and Direct Loan Programs: • 6% for loans first disbursed 7/1/2008-6/30/2009 • 5.6% for loans first disbursed 7/1/2009 – 6/30/2010

  18. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces subsidized undergrad Stafford Loan Interest Rates in FFEL and Direct Loan Programs: • 4.5% for loans first disbursed 7/1/2010 – 6/30/2011 • 3.4% for loans first disbursed 7/1/2011 – 6/30/2012

  19. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • HERA Military Service Deferment Amended- Effective 10/1/2007 • Eliminates 3-Year Limit • Extends deferment for 180-days after demobilization • Covers all title IV loans, not just loans disbursed on/after 7/1/2001

  20. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • New Military Deferment for 13 months after service for-effective 10/1/2007: • National Guard, Reserve, and Retired Military Personnel Called to Active Duty • Enrolled or enrolled within 6 months of activation

  21. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Parent PLUS Auction Authorized • FFEL Parent PLUS Loans for new borrowers beginning July 1, 2009

  22. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • State-based auction every 2 years • Origination rights limited to 2 lowest bidders

  23. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Bids based on lender special allowance rate (SAP) • Winning lender must make PLUS loans available to each parent of a dependent attending school in the State

  24. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Secretary selects parent PLUS lender-of-last-resort (LLR) for each state

  25. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduction in loan holder special allowance rate (SAP) • Effective for loans first disbursed on or after October 1, 2007

  26. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Different reductions for “for profit” and “not-for-profit” loan holders • “For profit”: -- Stafford and Consolidation 0.55% Reduction -- PLUS (incl. Grad PLUS) 0.85% reduction

  27. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • “Not-for-profit” -- Stafford and Consolidation 0.40% reduction -- PLUS (incl.Grad PLUS) 0.70% reduction

  28. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Must be acting as “not-for-profit” on date of enactment unless waived by State • “Not-for-Profit” defined as: -- a State, or a political subdivision, authority, agency, or instrumentality of State

  29. College Cost Reduction and Access Act of 2007 - Budget Reconciliation -- Entity described under section 150(d) of IRS Code -- Entity described under section 501 (c)(3) of IRS Code

  30. College Cost Reduction and Access Act of 2007 - Budget Reconciliation -- Eligible lender trustee acting on behalf of State, other State-related entity, or 150(d)(2) or 501(c)(3) entity

  31. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Lender Default Insurance Reduced • Loans first disbursed on/after October 1, 2012 • Reduced from 97% to 95%

  32. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Exceptional Performer Status Eliminated • Effective for lenders/lender servicers on October 1, 2007

  33. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces GA account maintenance fee from 0.10% to 0.06%- payments received on/after October 1, 2007

  34. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces GA default collection retention to 16% - payments received on/after October 1, 2007

  35. 2006-2007Negotiated Rulemaking

  36. Four Negotiating Teams – • Loans – NPRM 8/7/07 • ACG/National Smart – NPRM 8/7/07 • General Provisions NPRM 8/8/07 • Accreditation – No Regulations

  37. LOANS NPRM • “No Consensus” on NPRM • NPRM reflected what ED heard and deliberations of Secretary’s Loan Task Force

  38. Regulations Calendar • NPRM: June 12, 2007 • Deadline for Comments: August 13, 2007 • 241 Comments Received

  39. Regulations Calendar • Final rules: no later than November 1, 2007 • Effective date: July 1, 2008 with possible early voluntary implementation

  40. Simplification of the Deferment Process Accurate & Complete Copy of Death Certificate Total and Permanent Disability NSLDS Reporting Certification of Electronic Signatures Record Retention on MPNs Loans Issues -All

  41. Loans Issues – FFEL/DL • Maximum Loan Period • Identity Theft • Grad/Prof PLUS Loan Counseling

  42. Loans Issues – FFEL • Prohibited Inducements • Use of Preferred Lenders • FFEL Loan Certification • Frequency of Capitalization • Eligible Lender Trustees (ELTs)

  43. Loans Issues - Perkins • Mandatory Assignment of Defaulted Loans • Reasonable Collection Costs Definition • Child and Family Services Cancellation

  44. Simplified Deferment Process • §§682.210 and 685.204 allows deferment based on information from another loan holder or from NSLDS if: • “New” borrower with first loan disbursed on or after July 1, 1993 • Written or verbal deferment request received

  45. Simplified Deferment Process • FFEL or Direct Loan deferment already granted for same reason and same period • Loan holder has no conflicting information on borrower’s eligibility

  46. Simplified Deferment Process • Notice to borrower required • FFEL and Direct Loan deferment may be granted only for Economic Hardship based on Perkins Loan deferment

  47. Simplified Deferment Process • §§682.210 and 685.204 amended to allow military service or armed forces deferment based on: - request of borrower or borrower’s representative - documentation establishing borrower eligibility

  48. Simplified Deferment Process • Required notice to the borrower and borrower’s representative, if applicable, that the deferment has been granted

  49. Accurateand Complete Copy of a Death Certificate • §682.402 for death discharges amended to allow use of an accurate and complete photocopy of a borrower’s death certificate

  50. Accurate and Complete Copy of a Death Certificate NOTE:“exceptional circumstances” discharge by chief executive officer based on “other reliable information” unchanged

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