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Federal Update Jeff Baker Policy Liaison and Implementation Federal Student Aid

Federal Update Jeff Baker Policy Liaison and Implementation Federal Student Aid U.S. Department of Education December 12, 2007. 2008-2009 FAFSA and CPS. FAFSA Print Distribution Changes. Paper FAFSAs will not be distributed to post-secondary institutions. Emphasis on electronic filing.

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Federal Update Jeff Baker Policy Liaison and Implementation Federal Student Aid

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  1. Federal Update Jeff Baker Policy Liaison and Implementation Federal Student Aid U.S. Department of Education December 12, 2007

  2. 2008-2009FAFSA and CPS

  3. FAFSA Print Distribution Changes • Paper FAFSAs will not be distributed to post-secondary institutions. • Emphasis on electronic filing. • Students may contact FSAIC to request up to 3 paper FAFSAs. • FAFSA PDF format available online for printing and submission. • FOTW Worksheet still available.

  4. Redesigned PIN Application Process • Real-time PINs will be issued for new FAFSA applicants. • Only good for signing the FAFSA application. • Identifiers will then be matched with SSA. • If match is successful, the issued PIN will become valid. • If match fails, the PIN will be disabled and the application rejected – Reject SAR and Reject ISIR.

  5. Legislation and Budget

  6. LEGISLATION • College Cost Reduction and Access Act (CCRAA) Pub.L. 110-84 • Third Higher Education Extension Act of 2007 Pub.L. 110-109 – Expires March 31, 2008. • Reauthorization • S 1642 passed full Senate on July 24, 2007 • HR 4137 reported to full House on November 15, 2007 • Second Continuing Resolution Pub. L. 110-116

  7. Title IV Program BudgetsStatus of Appropriations

  8. Title IV Program Budget Aid Available * President's FY 2008 Budget Submission

  9. College Cost Reduction and Access Act

  10. College Cost Reduction and Access Act • Public Law 110-84 • Enacted September 27, 2007 • Amended by the Third Higher Education Extension Act of 2007 • Possible Other Amending Legislation

  11. Student BenefitsGrant Programs

  12. Federal Pell Grant • Eliminates tuition sensitivity award rule. • Rule reduced maximum Pell award for students attending low cost institutions. • Eliminated effective for the 2007-2008 award year. • See DCL P-07-02 (October 12, 2007).

  13. Federal Pell Grant • Increases discretionary appropriated Pell Grant award amount using mandatory funds. • $2.03 billion for 2008-2009. • Full-time awards increased by – • $ 490 for 2008-09 and 2009-10. • $ 690 for 2010-11 and 2011-12. • $1,090 for 2012-13. • Does not expand number of eligible students (i.e., maximum EFC is a function of appropriated maximum award amount).

  14. TEACH Grants • “Teacher Education Assistance for College and Higher Education Grants” • Effective for the 2008-2009 award year. • Must be repaid as Direct Unsubsidized Loan if student does not teach – • For at least four years within eight years of completing program, as a - • Highly Qualified Teacher • At a Title I school • In a specified subject area.

  15. TEACH Grants • Subject Areas – • Mathematics • Science • A foreign language • Bilingual education • Special education • As a reading specialist • Other ‘high-need’ fields

  16. TEACH Grants • Up to $4,000 per year for first undergraduate or post-baccalaureate (non degree) program - $16,000 aggregate. • Up to $4,000 per year for graduate student - $8,000 aggregate. • Prorated amounts for less than full-time enrolment.

  17. TEACH Grants • Award, when combined with other assistance cannot exceed cost of attendance (No EFC). • All Title IV student eligibility requirements – • Regular Student • Citizen or Eligible Non-Citizen • Not in Default • Satisfactory Progress • FAFSA required.

  18. TEACH Grants • Student must: • Be completing coursework necessary to begin a career in teaching, or • Plans to complete coursework necessary to begin a career in teaching. • Graduate degree alternatives for teacher or retiree with experience in a shortage area.

  19. TEACH Grants • Student Eligibility – • GPA of at least 3.25 for each payment period— • From high school for first year students. • From college for other students. • Or, above the 75th percentile on an admissions test, such as: • SAT • ACT • GRE

  20. Student BenefitsNeeds Analysis and EFC Calculation

  21. Need Analysis and EFC Calculation • Income Protection Allowances in EFC formulas. • Modifies the way student income protection allowances are calculated and updated. • Not parent income protection allowances • Will result in lower EFC. • Effective with the 2009-2010 award year.

  22. Need Analysis and EFC Calculation • Auto-Zero and Simplified Needs Test • Increases Auto Zero EFC income level from $20,000 to $30,000 (indexed to CPI). • Adds Dislocated Worker in addition to type of tax return and means tested benefits. • Increases time from 12 to 24 months for receipt of means tested benefits. • Effective for the 2009-2010 award year.

  23. Need Analysis and EFC Calculation • Excludes from specified list of “untaxed income” - • Welfare payments • Earned income credit amounts • Special fuel tax credit • Excluded foreign income • Untaxed Social Security Benefits • Effective for the 2009-2010 award year.

  24. Need Analysis and EFC Calculation • Adds to independent student definition – • Is in foster care or a ward of the court, at any time when the individual is 13 years of age or older. • Is an emancipated minor or is in legal guardianship in the student’s state of legal residence. • Has been verified as an unaccompanied youth who is a homeless child or youth. • Effective for the 2009-2010 award year.

  25. Need Analysis and EFC Calculation • Excludes ‘special combat pay’ from income. • Qualified education benefit (529 plan) owned by dependent student is an asset of the parent. • Distributions from 529 plans excluded from other financial assistance. • Effective for the 2009-2010 award year.

  26. Professional Judgment and Dependency Overrides • Adds dislocated worker and homelessness as examples of when an FAA can use professional judgment. • Provides that an FAA can use a dependency override made by another FAA within the same award year. • Both effective for the 2009-2010 award year.

  27. Borrower Benefits

  28. FFEL and Direct Loans Interest Rates Reduces interest rates on undergraduate subsidized loans only from current 6.8% to – • 6.0% for loans disbursed on or after July 1, 2008 • 5.6% for loans disbursed on or after July 1, 2009 • 4.5% for loans disbursed on or after July 1, 2010 • 3.4% for loans disbursed on or after July 1, 2011 • Beginning July 1, 2012, rates revert to 6.8%.

  29. FFEL and Direct Loans Economic Hardship Deferment • Changed one of the eligibility conditions – • From borrower’s earnings being less than 100% of the poverty level for a family size of two; • To borrower’s earnings being less than 150% of poverty level for the borrower’s family size. • Effective October 1, 2007

  30. FFEL and Direct Loans Economic Hardship Deferment • Regulations maintain income to debt eligibility calculation for full-time and part-time employment. • Effective October 1, 2007

  31. FFEL and Direct Loans Income Based Repayment • Stafford and Student PLUS loans. • Borrower’s maximum annual repayment amount no more than 15% of the difference AGI and 150% of the poverty line based on family size. • If negative amortization, government pays interest on subsidized loans for up to three years. • Unpaid amounts are forgiven after 25 years. • Effective July 1, 2009.

  32. Direct Loans (FFEL) Forgiveness for Public Service Employees • Direct Loan borrower who – • Makes 120 monthly payments, starting after October 1, 2007, and • Is employed in public service during period when the 120 payments were made.

  33. Direct Loans (FFEL) Forgiveness for Public Service Employees • Payments count if made under – • Income Contingent Repayment. • Income Based Repayment. • Other repayment plans, if payments are at least equal to 10-year standard repayment amount. • FFEL borrowers may consolidate into Direct Loans to get benefit but 120 payments must have been in Direct Loans.

  34. Perkins, FFEL, and Direct Loans Military Deferments • HERA Military Deferment – • All Title IV loans, not just loans that were made on or after July 1, 2001. • Removes three year time limit. • Adds a 180 day period after demobilization. • New deferment for up to 13 months following end of service for certain borrowers who were in school or grace when called to active duty. • Effective October 1, 2007.

  35. Offsets from FFEL Program

  36. FFEL Lenders and Guaranty Agencies • Reduction of FFEL lender insurance from current 97% to 95% for loans first disbursed on or after October 1, 2012. • Reduction of FFEL guaranty agency defaulted loan collections retention rate from 23% to 16%, effective October 1, 2007. • Elimination of “Exceptional Performer” designation for some FFEL lenders, lender servicers, and guaranty agencies effective October 1, 2007.

  37. FFEL Lenders and Guaranty Agencies • Reduction of FFEL lender special allowance payments (SAP) by 55 basis points (40 for non-profit lenders). • Increased lender loan fee from .50% to 1.0%. • Reduction in guaranty agency account maintenance fee from .10% to .06% • All effective October 1, 2007.

  38. Special FFEL PLUS Loan Auction Pilot • Requires an “auction” for the origination of FFEL parent PLUS loans. • Starting on July 1, 2009. • New parent PLUS borrowers only. • State by state auction looking for lowest special allowance rates. • Two “winning” lenders will be the only FFEL lenders new parent PLUS borrowers can use. • Based upon state where dependent student is enrolled.

  39. NegotiatedRulemaking

  40. 2007-2008 Negotiated Rulemaking • For 2009-2010 & subsequent award years • CCRAA Implementation and possible other issues. • One or two committees depending on issue to be negotiated

  41. 2006-2007 Negotiated Rulemaking • For 2008-2009 & subsequent award years • Four negotiating committees were established: • Accreditation • Loans • General Provisions • ACG and National SMART Grants

  42. 2006-2007 Negotiated Rulemaking • Accreditation • The Secretary has decided that we will not issue regulations on accreditation at this time.

  43. 2006-2007 Negotiated Rulemaking • Loans - NPRM Published July 12 Final Published November 1 • ACG/SMART - NPRM Published - August 7 Final Published October 29 • General Prov. - NPRM Published August 8 Final Published November 1 • Effective Dates: July 1, 2008 • Possible early voluntary implementation

  44. 2006-2007 Negotiated Rulemaking General Provisions • Cash management improvements: • Recovery of funds not claimed • Permissions for electronic disbursements • Elimination of Late, Late Disbursements

  45. Consistent definitions of terms -Enrollment status, academic level, and independent study Addressing inconsistencies in the award of aid in nonstandard and nonterm programs 2006-2007 Negotiated Rulemaking General Provisions

  46. 2006-2007 Negotiated Rulemaking General Provisions • Aligns disbursements for all Title IV grant and loan programs (with a few exceptions) • Defines “independent study” for direct assessment programs

  47. 2006-2007 Negotiated Rulemaking ACG and National SMART • Rigorous secondary school programs • Mandatory institutional participation • GPA requirements • Academic Year progression • Majors

  48. 2006-2007 Negotiated Rulemaking Title IV Loan Programs • Perkins Loans • Mandatory assignment • Prohibited Inducements • Preferred Lenders

  49. 2006-2007 Negotiated Rulemaking Title IV Loan Programs • Counseling required for Grad PLUS • Eliminates maximum 12-month loan period • Limits frequency of capitalization for Consolidation Loan borrowers • Allows loan holders to grant deferments based on another loan holder’s eligibility determination

  50. 2006-2007 Negotiated Rulemaking Title IV Loan Programs • Use of photocopy of death certificate to grant a discharge • Identity Theft • Total and Permanent Disability

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