Financial Aid: Legislative Changes and Student Stresses

1. Financial Aid: Legislative Changes and Student Stresses 2012 OrACRAO Meeting Sunriver Resort, Sunriver, Oregon Kathy Campbell, Dean of Enrollment Services and Financial Aid, Chemeketa Community College; Mike Johnson, Financial Aid Director, Pacific University

2. Recent and Proposed Federal Financial Aid Legislation • College Cost Reduction and Access Act of 2007 • Higher Education Opportunity Act of 2008 • Program Integrity Regulations (October 29, 2010) • Budget Control Act of 2011 • Department of Defense and Full Year Continuing Appropriations Act - 2011 • Consolidated Appropriations Act – 2012 • President’s FY 2013 Budget

3. College Cost Reduction and Access Act of 2007 • Decreased, by annual increments, Federal Direct subsidized Loan interest rates for undergraduate borrowers from 6.8% for 2007-2008 to 3.4% for 2011-2012 • This law is scheduled to sunset on July 1, 2012 (but stay tuned…)

4. Higher Education Opportunity Act of 2008 • Authorized two Federal Pell Grants in an academic year for eligible students • Authorized an IRS data match for FAFSA filers • The need for this data match had been discussed for several years

5. Program Integrity Regulations • Required colleges to adopt more specifically defined and standardized policies for monitoring students’ Satisfactory Academic Progress. The new regulations: • Define “Financial Aid Warning” and “Financial Aid Probation” • Specify how pace of progression and maximum time-frame must be measured • Specify the kinds of information that students’ appeals must include for continued aid eligibility

6. Program Integrity Regulations • Created new requirements for students selected for federal verification to document their income • Selected students must successfully use the IRS Data Retrieval Process to populate the income information on their FAFSA – or – provide the school with an official IRS Tax Return Transcript; schools can no longer accept copies of tax returns • Schools may update a student’s marital status if the new status will change the student’s dependency status • Increased complexity is planned for 2013-2014

7. Budget Control Act of 2011 • Effective for loan periods beginning on or after July 1, 2012, eliminates subsidized loans for graduate students • Previously, graduate students who demonstrated sufficient federally defined “need” could borrow up to $8,500 per year in subsidized loans • All Federal Direct Loans for graduate students will now begin accruing interest at 6.8% upon disbursement • This change will increase the cost of education for all graduate student borrowers

8. Budget Control Act of 2011 • Effective for loans first disbursed on or after July 1, 2012, eliminates Federal Direct Loan repayment incentives • As a result, borrowers’ disbursements will be reduced by fees of 1% for subsidized and unsubsidized loans, and 4% for PLUS loans • A 0.25% interest rate reduction of electronic payments remains in place

9. Department of Defense and Full Year Continuing Appropriations Act -- 2011 • Removed students’ eligibility for a second Federal Pell Grant in the same academic year • This change had been requested in the President’s FY 2012 Budget • As you’ll recall from an earlier slide, this increased aid for the neediest undergraduates – that was intended to allow them to complete their educational programs more quickly – only lasted three years

10. Consolidated Appropriations Act – 2012 • Effective July 1, 2012, eliminated Title IV eligibility for new students who have not earned a high school diploma or GED. • Previously, students could establish eligibility by passing an Ability to Benefit test, or successfully completing six college credits or 225 clock hours • An exception is in place for home schooled students and currently enrolled students • As you can imagine, this change affects a disproportionate number of students attending community colleges

11. Consolidated Appropriations Act – 2012 • Effective July 1, 2012, reduced the duration of a student’s Federal Pell Grant eligibility to 12 semesters or its equivalent • Previously, students could receive a Federal Pell Grant for up to 18 semesters • Affects new and currently enrolled students; calculations include all earlier years of students’ Federal Pell Grant disbursements • Again, community college students are likely to be the most affected

12. Consolidated Appropriations Act – 2012 • For new Federal Direct subsidized Loans disbursed between July 1, 2012 and June 30, 2014, eliminates the interest subsidy during the borrower’s six month grace period • Previously, interest did not accrue on the borrower’s loans until he or she entered repayment at the end of the grace period • This change will increase the cost of education for undergraduate students who demonstrate the most federally defined “need”

13. President’s FY 2013 Budget • Requests a one-year extension of the current 3.4% Federal Direct subsidized Loan interest rate for undergraduate borrowers • Bills to accomplish this are currently being considered by the House and Senate; the two sides do not yet agree on how to fund it • Requests a limit on the duration of the Federal Direct Loan in-school interest subsidy to 150% of the normal time to complete the borrower’s educational program

14. For More Information • USED’s Information for Financial Aid Professionals page at: • www.ifap.ed.gov • Your friendly financial aid professionals at any college or university