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Higher Education Policy Updates: FFEL Regulatory and Policy Changes

Stay informed about the latest legislative changes impacting federal student loans under FFEL, including loan forgiveness programs and repayment options. Explore key updates in regulations and legislation affecting student borrowers.

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Higher Education Policy Updates: FFEL Regulatory and Policy Changes

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  1. Session #63 FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education

  2. Agenda • Legislation • Negotiated Rulemaking- Loans Regulations • Other Regulations • FFELP Forms

  3. Legislation

  4. Reauthorization of the Higher Education Act • Third Higher Education Extension Act of 2007 (S.2258) • Extends the Higher Education Act through March 31, 2008 • Senate Reauthorization Bill-S.1642 • House Reauthorization Bill-H.R. 4137

  5. Other Legislation • HEROES Act – Reauthorized and made permanent –September 30, 2007 (P.L. 110-93) • College Cost Reduction and Access Act of 2007 – September 27, 2007 (P.L. 110-84)

  6. College Cost Reduction and Access Act of 2007 - Budget Reconciliation Loan forgiveness for: • Public service employees • Non-defaulted Direct Loan borrowers only • Balance of principal and interest forgiven after 120 payments made after 10/1/2007

  7. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • FFEL-only borrowers authorized to seek DL Consolidation for this purpose –effective July 1, 2008 • Included reconsolidation of existing FFEL Consolidation Loan

  8. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Must repay under any combination of: - income-based repayment - income-contingent repayment - 10-year standard repayment - any DL repayment based on 10-year repayment amounts

  9. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Must be employed in public service during 120-payment period • Must be employed in public service job at time of forgiveness

  10. College Cost Reduction and Access Act of 2007- Budget Reconciliation Public Service Jobs Include: • Full-time job in government or emergency management • Military service • Public safety • Public health

  11. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Public education (including early childhood education) • Law enforcement • Public interest law services (includingprosecution or public defense or legal advocacy in low-income communities at a non-profit organization)

  12. College Cost Reduction and Access Act – Budget Reconciliation • Public child care • Public service for the elderly and disabled • School-based library science and other school-based services

  13. College Cost Reduction and Access Act – Budget Reconciliation • Service at a 501(c)(3) organization • Full-time faculty at a Tribal college and in other high-needs areas determined by ED

  14. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Creates new Income-Based repayment plan for FFEL and DL borrowers (other than parent PLUS)-effective July 1, 2009 • Creates partial financial hardship deferment

  15. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Partial financial hardship = annual repayments exceed 15% of AGI minus 150% of poverty line based on family size based on standard 10-year repayment • Unpaid amounts forgiven after 25 years

  16. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • New economic hardship covers borrowers with income not exceeding 150% of poverty line applicable to the borrower’s family size –effective October 1, 2007 • Debt-to-income standard retained

  17. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces subsidizedundergrad Stafford Loan Interest Rates in FFEL and Direct Loan Programs: • 6% for loans first disbursed 7/1/2008-6/30/2009 • 5.6% for loans first disbursed 7/1/2009 – 6/30/2010

  18. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces subsidized undergrad Stafford Loan Interest Rates in FFEL and Direct Loan Programs: • 4.5% for loans first disbursed 7/1/2010 – 6/30/2011 • 3.4% for loans first disbursed 7/1/2011 – 6/30/2012

  19. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • HERA Military Service Deferment Amended- Effective 10/1/2007 • Eliminates 3-Year Limit • Extends deferment for 180-days after demobilization • Covers all title IV loans, not just loans disbursed on/after 7/1/2001

  20. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • New Military Deferment for 13 months after service for-effective 10/1/2007: • National Guard, Reserve, and Retired Military Personnel Called to Active Duty • Enrolled or enrolled within 6 months of activation

  21. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Parent PLUS Auction Authorized • FFEL Parent PLUS Loans for new borrowers beginning July 1, 2009

  22. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • State-based auction every 2 years • Origination rights limited to 2 lowest bidders

  23. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Bids based on lender special allowance rate (SAP) • Winning lender must make PLUS loans available to each parent of a dependent attending school in the State

  24. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Secretary selects parent PLUS lender-of-last-resort (LLR) for each state

  25. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduction in loan holder special allowance rate (SAP) • Effective for loans first disbursed on or after October 1, 2007

  26. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Different reductions for “for profit” and “not-for-profit” loan holders • “For profit”: -- Stafford and Consolidation 0.55% Reduction -- PLUS (incl. Grad PLUS) 0.85% reduction

  27. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • “Not-for-profit” -- Stafford and Consolidation 0.40% reduction -- PLUS (incl.Grad PLUS) 0.70% reduction

  28. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Must be acting as “not-for-profit” on date of enactment unless waived by State • “Not-for-Profit” defined as: -- a State, or a political subdivision, authority, agency, or instrumentality of State

  29. College Cost Reduction and Access Act of 2007 - Budget Reconciliation -- Entity described under section 150(d) of IRS Code -- Entity described under section 501 (c)(3) of IRS Code

  30. College Cost Reduction and Access Act of 2007 - Budget Reconciliation -- Eligible lender trustee acting on behalf of State, other State-related entity, or 150(d)(2) or 501(c)(3) entity

  31. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Lender Default Insurance Reduced • Loans first disbursed on/after October 1, 2012 • Reduced from 97% to 95%

  32. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Exceptional Performer Status Eliminated • Effective for lenders/lender servicers on October 1, 2007

  33. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces GA account maintenance fee from 0.10% to 0.06%- payments received on/after October 1, 2007

  34. College Cost Reduction and Access Act of 2007 - Budget Reconciliation • Reduces GA default collection retention to 16% - payments received on/after October 1, 2007

  35. 2006-2007Negotiated Rulemaking

  36. Four Negotiating Teams – • Loans – NPRM 8/7/07 • ACG/National Smart – NPRM 8/7/07 • General Provisions NPRM 8/8/07 • Accreditation – No Regulations

  37. LOANS NPRM • “No Consensus” on NPRM • NPRM reflected what ED heard and deliberations of Secretary’s Loan Task Force

  38. Regulations Calendar • NPRM: June 12, 2007 • Deadline for Comments: August 13, 2007 • 241 Comments Received

  39. Regulations Calendar • Final rules: no later than November 1, 2007 • Effective date: July 1, 2008 with possible early voluntary implementation

  40. Simplification of the Deferment Process Accurate & Complete Copy of Death Certificate Total and Permanent Disability NSLDS Reporting Certification of Electronic Signatures Record Retention on MPNs Loans Issues -All

  41. Loans Issues – FFEL/DL • Maximum Loan Period • Identity Theft • Grad/Prof PLUS Loan Counseling

  42. Loans Issues – FFEL • Prohibited Inducements • Use of Preferred Lenders • FFEL Loan Certification • Frequency of Capitalization • Eligible Lender Trustees (ELTs)

  43. Loans Issues - Perkins • Mandatory Assignment of Defaulted Loans • Reasonable Collection Costs Definition • Child and Family Services Cancellation

  44. Simplified Deferment Process • §§682.210 and 685.204 allows deferment based on information from another loan holder or from NSLDS if: • “New” borrower with first loan disbursed on or after July 1, 1993 • Written or verbal deferment request received

  45. Simplified Deferment Process • FFEL or Direct Loan deferment already granted for same reason and same period • Loan holder has no conflicting information on borrower’s eligibility

  46. Simplified Deferment Process • Notice to borrower required • FFEL and Direct Loan deferment may be granted only for Economic Hardship based on Perkins Loan deferment

  47. Simplified Deferment Process • §§682.210 and 685.204 amended to allow military service or armed forces deferment based on: - request of borrower or borrower’s representative - documentation establishing borrower eligibility

  48. Simplified Deferment Process • Required notice to the borrower and borrower’s representative, if applicable, that the deferment has been granted

  49. Accurateand Complete Copy of a Death Certificate • §682.402 for death discharges amended to allow use of an accurate and complete photocopy of a borrower’s death certificate

  50. Accurate and Complete Copy of a Death Certificate NOTE:“exceptional circumstances” discharge by chief executive officer based on “other reliable information” unchanged

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