Final Rule 2002

1. Final Rule 2002 Presented by: Betsy Mayotte American Student Assistance MASFAA, November 2002

2. Background • Final regulations issued 11/1/02. • All items must be implemented no later than 7/1/03. • Many items may be implemented prior to 7/1/03.

3. School Issues

4. Stafford Annual Limits • School may NOT consider a borrower’s previous programs of study when determining the borrower’s year of undergraduate study. • A student borrower attending a one-year undergrad program is never eligible for more than Year 1 loan limits.

5. Entrance & Exit Counseling • Schools are no longer required to personally conduct entrance and exit counseling. • Other entities may perform this responsibility on the school’s behalf.

6. Entrance Counseling • The following information must be provided as part of entrance counseling: • The consequences of default no longer must be explained in “forceful terms.” • “Federal offset” is included as one of the consequences of default. • The borrower must be provided sample monthly repayment amounts based on either a range of indebtedness or the average indebtedness of borrowers at the school or program.

7. Exit Counseling • In addition to existing requirements, the following must be provided as part of exit counseling: • Standard, graduated, extended, and income-sensitive repayment plans, as well as loan consolidation. • Conditions under which a student may receive forbearance. • Availability of Title IV loan information on NSLDS.

8. Disbursing Funds • Late disbursement limit changed from 90 to 120 days after the date: • of the institution’s determination that the student withdrew or • the date the student otherwise became ineligible. • ONLY Department can approve post-120 day disbursement!!

9. Disbursing Funds • Electronic Disbursement Notice • Eliminated requirement for institution to receive acknowledgement of receipt of notice

10. 12 Hour Rule • Eliminated and replaced with “one day rule” • Must be exact rather than “on average” • Number of hours not specific but must instead be “reasonable” • 30-week minimum not changed

11. Timely Refunds • Clarifies that refund check must CLEAR BANK within 45 days of school’s determination of student withdrawal • 30 day check issuance time-frame unchanged

12. Perkins Loans • No early implementation • Changes made to make way for MPN • Changes made to make way for e-signature • Lots of clean up items such as: • transfer of Perkins from closed institution to other institution

13. Perkins Loans • Write-Offs’ • Write off amount increased to $25 • $50 write off limit if borrower “properly billed” for previous 2 years • Borrowers no longer required to reaffirm write off amount • Payment coordination with other institution only required if borrower requests.

14. Perkins Loans • Judgements • Ups threshold from $200 to $500 • Ups review period from 1 to 2 years • School no longer required to rehab if judgement has been secured on loan • Late charges • Now discretionary rather than mandatory based on school preference

15. Perkins Loans • School reimbursement of fund • Allows, but does not require, ED to instruct a school to reimburse Perkins fund if loan deemed unenforceable due to to school or it’s agent

16. Lender Issues

17. Stafford Repayment • The number of days from repayment begin to first payment due is changed from 45 days to 60 days. • This is for Stafford loans exiting grace, deferment, forbearance, and post-deferment grace.

18. Stafford Repayment • A lender is not required to process a new enrollment end date when: • the change is within the same month and year as the most recently reported date and • the lender has already disclosed repayment terms to the borrower.

19. Stafford Repayment • A borrower with a repayment period of less than 5 years may extend the repayment period to a minimum of 5 years. • A written request is not required to make this change.

20. Unemployment Deferment • Job search demographic details no longer required • Borrower now certifies in writing that they made 6 attempts • Form in process of being changed • Two other unemployment “tweaks”

21. Economic Hardship Deferment • When calculating the borrower’s debt burden for deferment eligibility, the following will be used: • If the education loan is scheduled to be repaid in 10 years or less, the actual monthly payment amount is used. • If the education loan is scheduled to be repaid in more than 10 years, a monthly payment amount that would have been due if the loan had been scheduled to be repaid in 10 years is used. • Also applies to Perkins borrowers

22. Forbearance • A lender is permitted to verbally grant a discretionary forbearance if: • the lender and the borrower/endorser agree to the terms of the forbearance and • the lender sends, within 30 days, a notice to the borrower/endorser confirming the terms of the forbearance. • Frequency of forbearance contact reduced from 3 to 6 months

23. Consolidation Loans - Disability Discharge • Spousal consolidation loans may be partially discharged due to the death or total and permanent disability of one of the co-borrowers. • Both borrowers remain liable for remaining balance • Any portion of a Consolidation loan that is attributable to a PLUS loan borrowed for a dependent who is deceased is discharged as of the date of the dependent’s death.

24. Sources • NPRM, Federal Register, 8/6/02, pages 51036-51056 • Final Rules, Federal Register, 11/01/2002, pages 67048 - 67083 • www.ifap.ed.gov • www.nchelp.org