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Federal Update

Federal Update. GHEAC Annual Conference March 4-5, 2003. David Bartnicki 404-562-6290; david.bartnicki@ed.gov. Electronic Initiatives. eZ-Audit.

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Federal Update

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  1. Federal Update GHEAC Annual Conference March 4-5, 2003 David Bartnicki 404-562-6290; david.bartnicki@ed.gov

  2. Electronic Initiatives

  3. eZ-Audit • eZ-Audit will provide schools with a paperless single point of submission for financial statements and compliance audits through the web, as of April 1, 2003. • A designee from your school will simply sign on to eZ-Audit (www.ezaudit.ed.gov), enter summary audit and financial data directly from your report into a web form, attach an electronic version of the report, and hit the submit button. • Electronic Announcements – 2/5; 2/19 (eZ-Audit User Guide coming soon!) • Questions - 1-877-263-0780; fsaezaudit@ed.gov

  4. Common Origination and Disbursement • COD replaces the Recipient Financial Management System (RFMS) and the Direct Loan Origination System (DLOS) starting in 2002-2003 and will allow full participants ability to submit campus-based data EVENTUALLY • ALL SCHOOLS process data via COD in 2002-2003 • All schools must be full participants by 2004-2005 • Pell Rounding • Effective 12/17/2002 - if a student's Total Payment Ceiling (Origination Award Amount) includes pennies, a school can report exact pennies or round up to the nearest whole dollar (12/20/02 electronic announcement)

  5. Common Origination and Disbursement • COD Website • cod.ed.gov • Set up a system administrator • Send in specific info on school letterhead • Set up additional users • View, update, reports, change admin. options • Electronic Ann. – 6/3/02 • Advanced pay schools – Pell • Though you can submit disbursement records up to 30 days prior to disbursement date, COD provides disbursement data to GAPS no earlier than 7 days prior to disbursement date (may take a couple of days to show up in GAPS)

  6. Common Origination and Disbursement 2003-2004 modifications • EDExpress • Full Participant in 2003-2004 • Software Modified to support XML Common Record • Users still need to contact COD customer service • Pell Grant Changes • New Pell Verification Status Codes • S = Selected, but Not Verified • Blank = Not Selected • School/Vendor Testing: February/March 2003 • System Start Up: April 2003 • Notify COD customer service if you want to be a full participant for 03/04 by March 1, 2003 (Elec. Ann. 10/29/02)

  7. Common Origination and Disbursement • IFAP Website (www.ifap.ed.gov) • Common Origination and Disbursement page • Announcements and Frequently Asked Questions • COD Technical Reference: • Full Participant Implementation Guide • Phase-In Participant Information • COD Testing Guide • COD Customer Service Telephone Numbers: • 1-800-474-7268 for Pell Grant Assistance • 1-800-848-0978 for Direct Loan Assistance • Email questions to CODSupport@acs-inc.com

  8. FSA Assessment Modules(Self-Evaluation Tool) • Tools to prevent and/or identify compliance issues • Series of questions/comments outlining major requirements/policies needed to properly administer the Title IV programs (checklist, exercises, Q & As, description boxes – who, what, when, where, how) • Updated with hyperlinks to Reg’s and the Student Financial Aid Handbook • Interactive and noninteractive modules • All modules have printing options

  9. Four Categories • Students • Student eligibility, Awarding aid, SAP, Verification • Schools • Institutional eligibility, Consumer information, Recertification, Change in ownership, Default Management • Managing Funds • Disbursing aid, Reporting/Reconciling, Fiscal management, R2T4, Perkins due diligence, Perkins awarding and disbursements, FWS, FSEOG • Campus Needs • Automation, Administrative capabilities (policy and procedure manual activity)

  10. FSA Assessment ModulesEnhancements • New module formats (easier to use) • helpful icons, Q & As, activities, color codes • New modules: Verification, Default Management, Perkins awarding and disbursing, FWS, FSEOG • Will soon be an ED supported website • Helpful hints and trouble shooting tips • Technical assistance resources • Effective Practice database • Management Enhancement Worksheet • IFAP (ifap.ed.gov – “tools for schools”) • Schools Portal (fsa4schools.ed.gov – “resources and training”)

  11. Quality Analysis (Verification)Tool • FSA designed the QA Tool to help schools analyze FAFSA application information reported on the ISIR. • Users will import ISIR records into the tool and then use queries and specialized reports to obtain aid applicant data for illuminating problematic areas, zeroing in on specific EFC ranges, data elements, and populations. • School are able to use a series of reports that indicate how well their verification procedures are working • Develop verification criteria that fit its particular population • Learn which application errors occur locally and educate students and parents about them • Identify and eliminate verification practices that take time but make little or no difference in final awards • IFAP (ifap.ed.gov – “tools for schools”) • Schools Portal (fsa4schools.ed.gov – “resources and training”)

  12. New Publications

  13. Federal Registers

  14. Loan Issues & Program Issues • NPRM – 8/6/02 (Loan Issues) • NPRM – 8/8/02 – (Program Issues) • Final Regs – combined both issues • Effective date – 7/1/03 (except GEAR UP regulations become effective 12/2/03) • ALL provisions can be implemented as of 11/1/02 • Need to use alternative methods to capture correct data until new forms are developed • Must wait for Perkins MPN to be approved • Required to take Attendance provision used for all students who withdraw on/after school’s implementation date • Leave of Absence provision used for all students that are granted a LOA on or after the school’s implementation date

  15. Loan Issues - FFEL, DL and Perkins • Rehabilitation of Defaulted Loans • Exclude from rehabilitation defaulted Perkins, FFEL and Direct Loans on which a judgment has been obtained • Allows for borrower subject to a judgment ability to regain eligibility at loan holder discretion (at least 6 consecutive monthly payments) • Clarify “voluntary payments” • Promissory Note Retention • If a promissory note was signed electronically it must be stored electronically in accordance with record retention requirements

  16. Loan Issues - FFEL, DL and Perkins • Economic Hardship deferments • Use the borrower’s actual monthly payment amount if the loan is scheduled to be repaid in 10 years or less or a monthly payment amount on a 10-year repayment schedule if the borrower’s repayment schedule is longer than 10 years • Initial and Exit Counseling • School need not provide the counseling, but must ensure that it is provided • Require only disclosure of average anticipated repayment amounts (initial and exit) • Provide borrowers with information about availability of NSLDS (website, 800 number)

  17. Loan Issues – FFEL and DL • Loan Limits • A school may not link separate, stand-alone programs to allow students to be eligible for higher annual loan limits • A student that has completed the 1st academic year of a program that is more than one academic year, but less than two academic years in length, may receive a prorated loan at the 2nd year level for the final portion of the program • Unemployment Deferment • Borrower can provide written certification (can be electronic) that 6 attempts to secure employment were made and they have registered with a local employment agency without providing detailed information • Consolidation • If a consolidation loan repaid a PLUS loan obtained for a student who died, the portion of the consolidation loan attributable to that PLUS loan will be discharged. • Discharge of the applicable portion of a joint consolidation loan if one of the borrowers dies, becomes totally and permanently disabled or qualifies for forgiveness under the teacher loan forgiveness program

  18. Loan Issues – Perkins • Master Promissory Note • Provides for use of a Perkins MPN • Write-Offs • Allows an institution to write off account balances of less than$25, and if the borrower has been billed for at least 2 years, balances of less than $50 • A borrower whose balance has been written off is relieved of all repayment obligations • Transfer of Loan Fund • Eliminate the provision allowing an institution to transfer its Perkins loan portfolio to another institution

  19. Loan Issues – Perkins • Borrower Repayment • An institution is required to coordinate borrower’s monthly payments with other institutions only if requested by borrower • This requirement must be explained during the exit counseling • Copies of Promissory Notes • Eliminate school requirement to provide borrower with a copy of the signed promissory note (unless requested by borrower) • Late Charges • Schools have the option of assessing late charges (consistently imposed on borrowers with overdue payments) • Credit Bureau Reporting • Institution must report an account as in default to a national credit bureau when borrower does not respond satisfactorily to institution’s billing procedures

  20. Loan Issues – Perkins • Litigation • Review accounts for litigation once every 2 years • $500 threshold to determine if required to litigate • Assignment of Loans • If a borrower is eligible for a disability discharge, the school must assign the loan to the Department • Optional for the Department to require an institution to reimburse the Perkins fund if an assigned loan is unenforceable due to an act or omission by the institution

  21. Loan Issues – FFEL • Definition of Lender • Loans held in trust by a trustee lender are not part of the trustee lender’s consumer credit loan function • Repayment Requirements • Increases first payment due date for a borrower that enters initial repayment or reenters repayment from 45 to 60 days • If a lender receives an updated enrollment status date that is within the same month and year as the date previously reported, the lender may use the previously reported date • A borrower does not have to provide a written notice to extend a repayment schedule up to the minimum of 5 years

  22. Loan Issues – FFEL • Forbearance • Allows a lender to grant a discretionary forbearance without a written agreement (must send the borrower a notice confirming the agreement within 30 days) • Lender must contact a borrower with a forbearance once every 6 months (up from 3) and provide specific data on outstanding debt • Lender can grant a discretionary administrative forbearance for a borrower impacted by a natural disaster, or local or national emergency • Sovereign Immunity • A guaranty agency that is a State agency and does not assign to other guaranty agencies loans affected by bankruptcy is not required to file a proof of claim on loans it holds and may instruct lenders not to file proof of claims on loans it guaranteed • Claims Paid on Disability Discharges • Guaranty agency must pay within 90 days (up from 45)

  23. Loan Issues – Direct Loans • Cohort Default Rate • Borrowers included in a proprietary, non-degree-granting institution’s cohort who have been repaying their loans under the Direct Loan Program’s income-contingent repayment plan for 360 days with scheduled payments less than 15 dollars per month and less than the amount of interest accruing on the loan, would not be considered to be in default when calculating the institution’s cohort default rate • Expiration of MPN • MPNs processed on or after July 1, 2003 would expire on the earliest of: • The date the school or Department receives borrower written notification that no more loans can be made under the MPN • One year after the date the borrower signed the MPN or date Department received MPN if no disbursements made • 10 years after the date the borrower signed the MPN or date Department received MPN

  24. Program Issues • Branch Campus • 2-year certification requirement applies to branch campuses of proprietary institutions of higher education and postsecondary vocational institutions (schools can be more than one type) • Change of Ownership • Definition of family expanded to include grandchildren, a spouse’s children and grandchildren and family members as a result of marriage • Excluded transactions include transfers of ownership/control (partnership/corporation/proprietorship) to “family members”, OR upon death or retirement to a person that held an ownership interest and management role at the school for at least 2 years (must report change to Department)

  25. Program Issues • Definition of Academic Year • Eliminates the 12-Hour rule for nonstandard and nonterm credit hour programs • Week of instructional time is the same for all types of programs (one-day rule) • Payment Periods • Students required to complete one-half the weeks in the academic year or program, as well as, one-half the academic coursework in credit hour nonterm programs • Students in clock hour or credit hour nonterm programs that withdraw but return to the same program at the same school within 180 days of the original withdrawal, are considered to still be in the original payment period and eligible for any aid that had been returned

  26. Program Issues • Payment Periods cont. • Students in clock hour or credit hour nonterm programs that withdraw but return to the same program after 180 days, or transfer, within any time frame, into another program either at the same school or at another school would start new payment periods based upon the remainder of the program that the students have to complete (if the remainder is one-half of an academic year or less, the remaining period would constitute one payment period) • Incentive Payments - 12 “safe harbor” activities • 1.) 2 salary adjustments within a 12-month period to covered school employees (cannot be based solely on the number of students recruited, admitted, enrolled, awarded financial aid) • one cost of living increase within a 12-month period to all full-time employees not considered an adjustment

  27. Program Issues • Incentive Payments (12 “safe harbor” activities) cont. • 2.) Payments based upon the enrollment of students in programs that are NOT Title IV eligible • 3.) Payments for securing business contracts to provide education/training to various companies • The company must pay 50% or more of tuition and fees • Cannot be based on the number of company employees enrolled or the amount of revenue generated • Institutional representative cannot have any contact with the company employees • 4.) Profit-sharing and bonus payments to substantially all full-time institutional employees (or within an organizational level) • Similar payments or based upon same salary percentages

  28. Program Issues • Incentive Payments (12 “safe harbor” activities) cont. • 5.) Payments based upon students completing a program, or completing one academic year of credit (at your institution) for a longer program • 6.) Payments for clerical “pre-enrollment” activities • Soliciting students for interviews is considered recruitment • 7.) Payments to supervisors who do not directly manage employees that are involved in recruitment, admissions, enrollment, or financial aid • 8.) $100 token non-cash gift to alumnus or students annually • 9.) Profits based upon an employee’s ownership interest • 10.) Payments to a service provider for Internet-based recruitment and admission services

  29. Program Issues • Incentive Payments (12 “safe harbor” activities) cont. • 11.) Payments to third parties for services other than recruiting, admissions, enrollment or financial aid services • 12.) Payments to third parties for recruiting, admissions, enrollment or financial aid services as long as compensation is based upon the same limitations that apply to the institution • Institutions Required to take Attendance • Institution is considered “required to take attendance” if an outside entity specifically requires attendance taking • If only required to take attendance for a portion of students, attendance records would only be required for those students • If required to take attendance for a limited period of time, attendance records would only be required for the limited period of time

  30. Program Issues • Institutions Required to take Attendance cont. • If an institution administratively withdraws a student from all classes, the student officially withdrew as of the date of the administrative withdrawal • If through a census on a certain date, all of a student’s instructors indicate that the student is no longer enrolled, the student is considered to have officially withdrawn as of the census date • Leaves of Absence (LOA) • Allows multiple LOAs, as long as the total number of days for all leaves do not exceed 180 days within a 12-month period • Requires (via school LOA policy) student to state leave reason

  31. Program Issues • Leaves of Absence (LOA) • Clarifies that if a student returns from a LOA and repeats prior coursework - • student cannot incur any additional charges • Preparatory/repeated coursework not eligible for Title IV • For R2T4 purposes, still considered to be on a LOA until the student starts attendance where the LOA began, except in a clock hour or nonterm credit hour program, the student need not complete the exact same coursework he or she began prior to the leave • Overpayments • Students not liable for Perkins or Title IV grant overpayments that are less than $25 • Student is not liable for an overpayment if the school is liable • Provide students with an opportunity to object to any overpayment determination

  32. Program Issues • Ability to Benefit Tests • Eliminates the 12 month expiration rule for ATB tests • School must obtain the results of an approved ATB test from the test publisher or assessment center • Late Disbursements • Increase late disbursements from 90 to 120 days (applies to post-withdrawal disbursements as well) • The Department can approve late disbursements beyond 120 days if the student is not at fault • School must make or offer a post-withdrawal disbursement • School must make or offer a late disbursement to a student that completed a payment period or period of enrollment

  33. Program Issues • Late Disbursements cont. • Eliminates the SAR/ISIR requirement for a late disbursement of a PLUS loan (student must still meet all eligibility rules) • Student’s eligibility for a late Pell Grant disbursement would be based on the Department processing a SAR/ISIR with an official EFC while the student was still eligible (still have to receive SAR/ISIR before actual disbursement) • Notices and Authorizations • Eliminates the requirement that an institution confirm the receipt of a notice sent electronically (crediting loan funds)

  34. Program Issues • Timely Return of Funds • Must return funds within 30 days after the date of the institution determined the student withdrew • Funds are “returned” when – • deposited in Federal funds account (i.e. Perkins), • EFT transfer initiated, • electronic transaction with FFEL lender initiated, OR • a check is issued (must be endorsed within 45 days) • School can ask the Department to reconsider a finding of returning funds late due to exceptional circumstances or auditor/reviewer error (must show would not have exceeded the 5% threshold had it not been for the exceptional circumstances or error)

  35. Program Issues • Timely Return of Funds cont. • Letter of Credit (LOC) is due 30 days after the Department, IG, or guaranty agency issues a preliminary report with an error of more than 10% (if error rate is 10% or less, LOC would be due 30 days after the final report, if required) • School not required to submit a LOC of less than $5,000 (must have cash reserves of at least $5,000) • Department considers an institution that makes 2 late returns to still be in compliance with the reserve standard • FWS at For-Profit Schools • Expand definition of student services to include job placement, assisting instructors in curriculum related activities (i.e. teaching assistant) and security (still require non-community service jobs to provide student services that are directly related to the FWS student’s training or education)

  36. Program Issues • FWS at for-Profit schools cont. • A service would be considered a “student service” if the service provides a benefit either directly or indirectly to “current” students • Facility maintenance, cleaning, purchasing, and public relations jobs are NOT considered student services • Work in admissions or recruitment still prohibited • GEAR UP Program • Eliminate requirement that an institution award student financial assistance in an established order for students who are eligible for a GEAR UP scholarship • A GEAR UP scholarship, along with Title IV aid or other assistance, may not exceed the student’s Cost of Attendance

  37. Dear Colleague Letters

  38. GEN-02-10 (Nov. 02) • Unless a school is specifically informed otherwise, all schools participating in the FFEL or Direct Loan programs that are located in the United States may allow their student and parent borrowers to use the multi-year feature of the MPN. (Foreign schools need to get Dept. approval) • Effective for FFEL loans certified by a school on or after 3/1/2003 • Effective for 2003-2004 Direct Loans processed after the 2.0 Release of the Common Origination and Disbursement System • Institutions, lenders and borrowers are not required to use the multi-year feature of the MPN • Will be extended to the use of the Perkins MPN

  39. GEN-02-11 (Nov. 02) • The Department considers that a home-schooled student is beyond the age of compulsory school attendance if the State in which the institution is located does not consider the student truant once he or she has completed a home-school program. • Under the student eligibility provisions of section 484(d)(3) of the HEA, a student who does not have a high school diploma or GED is eligible to receive Title IV, HEA program assistance if the student "completes a secondary school education in a home school setting that is treated as a home school or private school under State law." • An institution may accept a home-schooled student's self-certification that he or she completed secondary school in a home school setting, just as it may accept a high school graduate’s self-certification of his or her receipt of a high school diploma.

  40. GEN-03- 02 (Jan. 03) • (G-03-344; L-03-238) • Federal Family Education Loan (FFEL) Program loan holders must respond to Consolidation Loan verification requests within 10 business days. • Loan holders must, within 10 business days after receiving a request for loan certification, provide the requesting lender with the requested certification information or a reason why it is unable to provide the information. • 34 CFR 682.209(j); 34 CFR 685.220(f)(1)(i)

  41. GEN-03-03 (Feb. 03) • (G-03-345; L-03-239) • FFEL PLUS MPN • Designed for a parent borrower to use as a multi-year note for one dependent student • When must a new MPN be signed? • Different lenders (unless result of a merger or acquisition, or if the earlier loans are sold and the acquiring lender assumes the right to offer subsequent loans under the PLUS MPN) • A different parent chooses to borrow a PLUS Loan for the same dependent student • A separate PLUS MPN must be completed for each dependent student • At the borrower, school or lender’s request

  42. GEN-03-03 Cont. • Each loan received under a PLUS MPN is a separate and distinct loan. The terms (i.e., interest rates, fees) applicable to each loan are dependent on the terms in effect at the time each loan is made. • Before making each PLUS Loan, the parent must indicate to either the school, the guarantor, or the lender the PLUS Loan amount that he or she wants to borrow which can be obtained on: • The school certification form • Separate PLUS loan amount request form • Parent response section on the institution’s financial aid award letter • Documented telephone or electronic requests

  43. GEN-03-03 Cont. • Expiration Conditions: • date the lender receives written notification from the parent borrower asking that a previously signed PLUS MPN no longer be used • Twelve months after the date the original PLUS MPN was signed if no disbursements were ever made under that MPN • Ten years from the date the parent signed the PLUS MPN, or the date the lender receives the PLUS MPN • PLUS Credit Report • By signing the PLUS MPN, the parent applicant acknowledges that the lender will review the parent’s credit history • If the parent borrower requests additional funds for an existing loan period (resulting in a loan amount adjustment, not a new loan), the lender is not required to obtain a new credit report.

  44. GEN-03-03 Cont. • Endorser • Any loan for which an endorser is required, must be made under a new PLUS MPN, with a new Endorser Addendum, because the PLUS MPN becomes a “single-loan” promissory note when an endorser is used • Endorser is liable only for the specific loan or loans he or she agreed to endorse • PLUS MPN may be used for loan periods beginning on or after July 1, 2003 • Must be used for all Federal PLUS Loans for loan periods beginning on or after July 1, 2004, or for any loan certified on or after July 1, 2004, regardless of the loan period • MPN and other forms attached to DCL

  45. Direct Loan Bulletin-03-07 • Direct Loan PLUS MPN • Most requirements similar to FFEL PLUS MPN • Effective with any Direct PLUS Loan made for the 2003-2004 year (ID number includes “04”) • If a school is not authorized to use or chooses not to use the multi-year feature of the Direct PLUS MPN, it may make multiple Direct PLUS Loans under a single Direct PLUS MPN within the same academic year (enrollment period for FFEL) • Must have an active confirmation process for Direct PLUS Loans made under the multi-year feature of the Direct PLUS MPN • For operational business rules related to Direct Loan MPN, please refer to the 2003-2004 COD Technical Reference Vol. II, Section 1 (Full Part.) or Vol. IV, Section 1 (Phase-In Part.) • MPN and other forms attached to DLB

  46. CB-02-12 (July 02) • Electronic versions of the Federal Perkins Loan Program (Perkins eNotes). • Perkins eNotes should be used in conjunction with the Standards for Electronic Signatures in Electronic Loan Transactions - Dear Partner Letter GEN-01-06 • Contains attachments for open-end and closed-end Notes in PDF and HTML formats • Questions - Neil Sattler at (202) 377-3513 P-03-1 (Feb. 03) • 2003-2004 Pell Payment and Disbursement Schedules • Maximum - $4050; Minimum - $400 • Maximum EFC to receive Pell - 3850

  47. Electronic Announcements

  48. Electronic Announcements Electronic Cohort Default Rate (eCDR) • Electronic Announcement – 2/3/03 • 2001 Draft Cohort Rates available 2/18/03 • Cohort default rate challenge timeframes begin on the sixth business day after 2/18/03 • eCDR package - a cover letter, a reader-friendly loan record detail report, and an extract-type loan record detail report • All domestic schools not already signed up for eCDR must sign-up at www.sfawebenroll.ed.gov by June 1, 2003 • Questions - FSA.schools.default.management@ed.gov or via phone at 202-377-4259 • Electronic Announcement – 2/24/03 • eCDR Download and File Reviewing Instructions

  49. Electronic Announcements Resources/References • Electronic Announcement – 2/19/03 • a new document called "Sources of Assistance for Schools" (sfadownload.ed.gov) • phone numbers, e-mail addresses, Web site addresses, etc. will be updated monthly as needed Resources for Blind and Visually Impaired Students • Electronic Announcement – 2/6/03 • Aid Audio Guide, Braille publications, screen readers Closed School Guide • Electronic Announcement – 1/28/03 • Provides information on how to assist students, Teach Outs, Transfers, Approving Locations/Programs, Aid Eligibility • State Authorizing contacts

  50. "In Case You Didn't Know..."

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