Department of Education Update 2012 PacWest Conference

1. Department of Education Update 2012 PacWest Conference Pamela Moran Office of Postsecondary Education May 16, 2012

2. TOPICS • Consolidated Appropriations Act • Budget Control Act of 2011 • Department of Education Initiatives • President’s 2013 Budget

3. Consolidated Appropriations Act of 2012

4. Consolidated Appropriations Act Consolidated Appropriations Act, 2012 (Public Law 112-74) Signed into law December 23, 2011 Provides appropriations for the Department through 9/31/2012 Significantly impacts Federal student aid programs authorized under title IV of the Higher Education Act

5. Consolidated Appropriations Act • Reduces the income threshold for Auto-Zero EFC from $30,000 to $23,000 for 2012-13 Award Year - affects independent and dependent students • Establishes maximum Pell Grant of $5,550 for 2012-2013 • Limits Pell eligibility to 12 semesters - impacts all Pell eligible students beginning 2012-2013 award year

6. Consolidated Appropriations Act • Pell minimum eligibility changed beginning with 2012-2013 award year - no eligibility unless student eligible for at least 10% of maximum award - 4995 maximum EFC for eligibility for 2012-2013 award year

7. Consolidated Appropriations Act Temporarily eliminates interest subsidy on Direct subsidized Loans during six month grace period for new Direct Stafford Loans first disbursed on or after July 1, 2012 and before July 1, 2014 Changes base on which special allowance payment calculations to FFELP lenders are made from commercial paper rate to LIBOR for loans first disbursed on/after 1/1/2000

8. Consolidated Appropriations Act • Eliminates Federal student aid eligibility for students without a HS diploma or recognized equivalent under “ability to benefit” except for home-schooled high school grads - applies to students who first enroll in a program of study on/after 7/1/2012 - not applicable to students enrolled under ATB in title IV programs prior to 7/1/2012

9. Budget Control Act of 2011

10. Budget Control Act of 2011 Budget Control Act of 2011 (Pub. L. 112-25) Signed into law August 20, 2011 Eliminates subsidized loans for graduate/professional students effective for loans made for loan periods beginning on or after July 1, 2012 COD will edit for compliance

11. Budget Control Act of 2011 Terms and conditions of prior graduate/professional subsidized loans remain unchanged – subsidy applies No impact on undergraduate borrowers Non-degree preparatory and teacher certification coursework eligibility remains unchanged – considered undergraduate loans

12. Budget Control Act of 2011 • Direct Loan Repayment Incentives Eliminated - No reduced fees(“rebates”)through interest rate reduction for loans first disbursed on/after July 1, 2012 • Stafford Fee at 1% and PLUS fee at 4% for loans first disbursed on/after July 1, 2012

13. Budget Control Act of 2011 • Direct Loan Repayment Incentives Eliminated - interest rate reduction for automatic electronic debit payment retained - COD programmed for compliance with fee elimination

14. Other Legislative Changes

15. Direct Loan Undergraduate Interest Rates CCRAA reduced the interest rate on subsidized loans made to undergrads in stages from 6.8% to the current 3.4% Reduced rate ends on subsidized loans first disbursed on or after July 1, 2012 to undergrads – reverts to 6.8% Rate will be the same as on subsidized loans made to graduate students and to unsubsidized loans made to all borrowers

16. Dependent Loan Limits • $2,000 additional Direct Unsubsidized Loan funds for dependent students authorized by the ECASLA remains available • Some confusion because of the July 30, 2011 termination of the temporary special 90/10 treatment of these additional unsubsidized loan amounts

17. Department of Education Initiatives

18. Department of Education Initiatives • Special Direct Consolidation Loans • When: Mid-January 2012 through June 30, 2012 • Who: Borrowers with at least one student loan held by the Department (FFEL or DL) and at least one commercially held FFEL loan • Goal: Help borrowers manage debt by ensuring all Federal loans serviced by same servicer=one bill, one payment

19. Special Direct Consolidation Loans • Eligible loans • At least one ED-held Direct Loan or ED-held FFEL loan and at least one commercially-held FFEL loan (sub, unsub, PLUS, consolidation) • Commercially-held FFELs must be in grace, repayment, deferment, forbearance • Commercially-held FFELs can be defaulted loans that have been rehabilitated • Commercially-held FFELs cannot be in default or subject to bankruptcy

20. Special Direct Consolidation Loans • What is the Process? • Eligible borrowers will be contacted by one of ED’s four Federal Loan servicers • Servicers provide borrower with application instructions – not traditional consolidation application process • Borrowers apply through a new and different on-line process • ED’s servicer will contact FFEL lender to verify eligibility and payoff amounts

21. Special Direct Consolidation Loans • Borrower Benefits of Special Consolidation • One servicer/one payment • For commercially-held FFEL loans: • a 0.25 interest rate reduction plus opportunity to receive an additional 0.25 interest rate reduction if repayment by automatic debit • Conversion to a fixed interest rate at lower percentage – no annual change to variable rate loans • Eligibility for Public Service Loan Forgiveness after the loan becomes a Direct Loan

22. Special Direct Consolidation Loans • Borrower Benefits (cont.) • Previous time in repayment on a loan will count towards the repayment term for the new Special Direct Consolidation Loan • IBR loan payments made prior to consolidation will count towards the required 25 years of payments for IBR loan forgiveness • Continuation of deferment/forbearance status if eligible loan was in that status at time of consolidation

23. Pay As You Earn • Pay As You Earn Student Loan Repayment Initiative • New borrower in 2008 who receives a loan in 2012 is eligible • Annual payments capped at 10% of discretionary income • Maximum repayment period for loan forgiveness reduced to 20 years • Must be implemented through regulations

24. Public Service Loan Forgiveness (PSLF) • PSLF Employment Certification Process Implemented • Available February 2012 • “Dear Borrower” Letter: Provides information about PSLF eligibility, including eligible employment and loan payment eligibility and how borrowers can monitor progress toward qualifying for PSLF • Employment Certification Form and instructions

25. Public Service Loan Forgiveness (PSLF) • Employment certification is borrower option and can be as frequent as annually • Loan servicer informs borrower of employment and payment eligibility for certified period • Loan account transferred after initial certification review to PSLF servicer

26. President’s 2013 Budget

27. FY 13 Budget Request $5,635 maximum Pell Grant award for 2013-2014 Maintain subsidized loan interest rate for undergraduate students at 3.4% for until July 1, 2013 Limit duration of the Stafford Loan in-school interest subsidy to 150% of the normal time required to complete the borrower’s educational program

28. FY 13 Budget Request Expand and improve the Perkins Loan Program to provide 48.5 billion in loans annually Provide $150 million in new funds for the Work Study Program Reform and expand Federal allocations in the campus-based programs

29. ED RESOURCES

30. Dear Colleague Letters • DCL GEN – 11-16 Subject: Budget Control Act of 2011 • DCL GEN-12-01 Subject: Changes Made To The Title IV Student Aid Programs By The Recently Enacted Consolidated Appropriations Act, 2012 • DCL – GEN– 12-04 Subject: Student Loan Issues

31. Dear Colleague Letters DCL GEN – 12-03 Subject: Title IV Aid Disbursed to Students W/O Valid H.S. Diploma DCL GEN – 12-02 Subject: Employment Certification for PSLF

32. Questions

33. Contact Information Pamela Moran Office of Postsecondary Education 202-502-7732 Pamela.Moran@ed.gov