New Rules for Loan Rehabilitation and Administrative Wage Garnishment

1. New Rules for Loan Rehabilitation and Administrative Wage Garnishment Fred Lundquist, Windham Professionals Susan High, Texas Guaranteed Dwight Vigna, U.S. Department of Education Doug St. Peters, Sallie Mae, Inc.

2. Basics Package 2 – Includes other regulations beyond Rehabilitation and AWG Effective July 1, 2014 Agencies may implement early as of Nov 1, 2013 for some of the regulations Changes amend FFELP, DLP, and Perkins 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

3. Basics Continued • Focus today on Rehabilitation and AWG • SRA – Satisfactory Repayment Arrangements • If Borrower paying towards rehabilitation and has made 6 payments, Borrower does not use one-time opportunity for SRA of Title IV Reinstatement and does not receive additional Title IV assistance prior to defaulting on that loan again • Six on-time payments is now 20 days of due date instead of 15 days 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

4. Rehabilitation STEP ONE – Calculate R&A Payment using the “15 Percent Formula”– 15% of amount of Borrower’s AGI (Adjusted Gross Income) that exceeds 150% of poverty guideline applicable to family size and state, divided by 12 NOT considered an IBR payment plan MUST be at least $5 monthly payment MUST be calculated first in all cases for rehabilitation 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

5. Rehabilitation continued Determine appropriate poverty guideline (http://aspe.hhs.gov/POVERTY/13poverty.cfm) Multiply poverty guideline by 150 percent Subtract borrower’s adjusted gross income Multiply by 15 percent Divide result by 12 to determine borrower’s monthly payment amount 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

6. Rehabilitation continued- Example Necessary information Calculation steps $15,510 X 150% = $23,265 $26,530 - $23,265 = $3,265 $3,265 X 15% = $489.75 $489.75 ÷ 12 = $40.81 Monthly payment amount • Family size = 2 • HSS poverty guideline = $15,510 • Adjusted gross income = $26,530 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

7. Rehabilitation Continued • Can NOT: • Be a required minimum payment, except as described under the “15 Percent Formula” • Be a percentage of Borrower’s total loan balance • Be an amount based on other criteria unrelated to financial circumstances 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

8. Rehabilitation Continued • CAN: • Offer payment amount orally • Discuss other payment arrangements such as PIF or Consolidation • Borrower objects the offer • MUST: • If Borrower agrees to payment amount, provide documentation required to calculate the “15 Percent Formula”- such as, Tax Return, ADOI (Alternative Documentation of Income) • Provide Borrower with written rehabilitation agreement within 15 business days of determination of R&A payment amount 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

9. Rehabilitation Continued • MUST continued: • Agreement must include comprehensive description of rights, terms (including amount of payment), conditions, and collection costs • Include a prominent statement that Borrower can object orally or in writing to amount, terms, conditions • If Borrower does NOT provide documentation required within a reasonable time, Rehabilitation Agreement for amount agreed upon is null and void • Require Borrower to sign Rehabilitation Agreement 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

10. Rehabilitation Continued • CAN: • Request updated contact information including references on agreement • Contact Borrowers to communicate support for Rehabilitation • Reminder of payment coming due • Missed payment 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

11. Rehabilitation Continued STEP TWO – If Borrower objects to initial payment amount, calculate amount based on Borrower, and Spouse if applicable, current disposable income, family size, R&A expenses on approved form – “Financial Disclosure For Reasonable and Affordable Rehabilitation Payments” Can request supporting documentation 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

12. Rehabilitation Continued • Flexibility of expenses allowed; no national standards required • Borrower may choose which payment amount to accept – from Step One or Step Two • Provide Borrower with written rehabilitation agreement within 15 business days of determination of R&A payment amount ; other agreement requirements apply • Borrower may request payment amount be adjusted due to change in financial circumstances 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

13. AWG Rehabilitation Borrowers in AWG making payments toward Rehabilitation – Agency Must Suspend AWG after 5 qualifying monthly payments Borrowers may request that AWG continue Borrower has one opportunity to comply If missed payment, suspension lifted on AWG 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

14. Questions? 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida