PASFAA Webinar: Federal Update November 26, 2013

PASFAA Webinar:Federal UpdateNovember 26, 2013 Department of Education: Greg Martin

Agenda GoToWebinar Navigation Federal Updates, Greg Martin FAFSA changes DOMA effect on FAFSA Verification 150% Subsidized Limitation Funding and sequestration Pell LEU Direct Loan interest rates Guidance/clarification on assorted topics Regulatory activity Discussion of Questions

The GoToWebinar Attendee View

How to Participate Today • Open and close your Panel • View, Select, and Test your audio • Submit text questions • Q&A addressed during and at end of session • Presentation slides will be sent to all attendees

2013-14 CPS/FAFSA Changes • Income Threshold for Automatic Zero EFC increased from $23,000 to $24,000 • The PIN signature option will display more prominently • “Sign Electronically With My PIN” will be the default signature option for most applicants • Students/parents can choose another option for signing, and when selected, the system will display options to use PIN, print a signature page, or submit without signatures, along with definitions for each 5

2014-15 FAFSA • Change to collection of parental information • See GEN 13-12 April 29, 2013 • Applies to dependent students when legal parents live together • Legal means biological or adoptive • Both parents income and other data must be reported • Regardless of marital status or gender • Higher Education Act Section 475 includes the terms “parent” and “parents” and not gender-specific terms “mother” and “father”

2014-15 FAFSA • New marital status option of “Unmarried and both parents living together • Dependent student instructed to provide information about both legal parents regardless of marital status and gender • Other parent marital status options: “Never married”, Married or remarried”, “Divorced or separated” and “Widowed”. • Reasoning behind changes: • Collecting parental information from both legal parents will result in fair treatment of all families by eliminating longstanding inequities that were based on the legal relationships of parents (married or not married) rather than on the parents’ relationship with their child.

2014-15 FAFSA • Two new fields added that collect the tax filing status of the student and the parents of the dependent student

Defense of Marriage Act -DOMA • On June 26, 2013, the Supreme Court struck down the portion of the Defense of Marriage Act providing that for the purpose of Federal programs, a marriage can only be between a man and a woman • Impacts the FAFSA/EFC and income driven repayment plans • 2014-2015 Draft FAFSA instructions direct same-sex couples to report their marital status as “married” • If legally married in a state or other jurisdiction that permits same-sex marriage

2014-15 Verification • Items to verify and acceptable documentation are published for each year in an annual Federal Register Notice • 2014-15 Federal Register Notice published June 13, 2013 • Refer to DCL GEN-13-16

2014-15 Verification • 2014-15 verification items are the same as for 2013-14with one addition – Other Untaxed Income • Certain applicants will be required to verify the untaxed income information they provided • Question 45 for students and Question 94 for dependent student’s parents • If FAA determines that amounts provided and verified from untaxed income and other sources do not appear sufficient, applicant and, if appropriate, applicant’s parents or spouse must explain how the family was financially supported during 2013 • Verification worksheets will not be provided • Suggested text for each 2014-15 verification item will be provided and posted to IFAP

2013-2014 Verification • Electronic Announcement dated October 23, 2013 updates acceptable documentation for the 2013-2014 award year • For the remainder of the 2013-2014 award year alternative documentation is acceptable in instances where the tax filer recently requested an IRS Tax Return Transcript but was unsuccessful in obtaining it • Must have used the paper or online request process • No alternative documentation allowed for telephone request process because IRS does not provide written documentation of request failure

2013-2014 Verification • Alternative Documentation acceptable per October 23, 2013 Electronic Announcement • Signed copy of relevant 2012 IRS tax return; and • Copy of IRS response to paper request (must be signed by the tax filer) informing tax filer that the requested transcript could not be provided – if transcript request was using IRS Form 4506T –EZ or 4506-T; or • Signed and dated copy of a screen print from the official IRS Web page that displays a message indicating the transcript request was unsuccessful • ADDITIONALLY: • Tax filer must provide the institution with a completed and signed IRS Form 4506T-EZ or 4506-T • Must include on Line 5 name, address and phone of institution as 3rd party for mailing transcript • If no reasonable doubt about accuracy of information on tax return, school simply retains the form • If any reason to believe information on tax return to be in accurate, must submit and wait for IRS to return a transcript

2014-15 Verification • Verification Tracking Groups • V1, V3,V4and V5 retained • Group V2 (SNAP) eliminated • New Group V6 added – Income appears not sufficient to support family size (V1 + all untaxed FAFSA items must be verified) • Payments to tax-deferred pension and savings • Child support received • Housing, food and other living allowances paid to members of the military, clergy and others • Veterans noneducation benefits • Other untaxed income • Money received or paid on the applicant’s behalf

2014-15 Verification • Non tax filers • If an institution questions a claim that the tax filer is not required to file, it must require the applicant to submit a “Verification of Nonfiling” • Obtained by the tax filer using IRS Form 4506-T and checking box 7 • Verification of Nonfiling for 2013 tax year not issued until after June 15, 2014 • After examining the original Statement of Educational Purpose for accuracy and completeness, the institution may convert it to an electronic record

2014-2015 Verification • Verification –Suggested Text EA November 8, 2013 • Provides suggested text for each of the required 2014-2015 verification items (Appendix A) • Institutions are not required to use the Department’s text/formats • Exception – Institutions must use the exact language provided in the “Statement of Educational Purpose” in Appendix A for students for students in Verification Tracking Groups V4 or V5 • Use of a comprehensive verification worksheet is discouraged • Suggests to students that all items on the worksheet need to be verified • May delay notifications of awards and disbursements – students and families struggle to provide documentation for items for which verification is not needed

Extended Foster Care Payments • Extended foster care payments made under Title IV – Part E of the Social Security Act directly to foster youth are excluded from calculation of EFC and not included on FAFSA - See DCL GEN -13-18 • Payments made under the authority of a state foster youth program must be reported on FAFSA as untaxed income • Does not matter if all or any part of the payments is made from State or other non-federal sources • Determining factor is whether payments were made under Part E of Title IV of the Social Security Act • FAA s may need to become familiar with their state’s foster youth program

FAFSA – Income Earned From Work • Income Earned from Work field now automatically updated with IRS value • Effective September 2013 (see June 25, 2013 EA) • For students who use IRS DRT and indicate a marital status of Single, Separated or Divorced or Widowed • For parents of dependent students who use IRS DRT and indicate a marital status of Single, Divorced or Separated or Widowed • If marital status is married/remarried, Income Earned from is displayed view-only and total amount must be input for each spouse • Modification of this field will not change IRS Request Flag values • Dynamic display of tax line numbers • Student Application and Correction Entry will display applicable IRS tax line number associated with student/parent AGI, Income Tax Paid and Exemptions fields • Based on tax return type and tax filing status indicated by student or parent

Direct Subsidized Loan 150% Limitation • Public Law 112-141, Moving Ahead for Progress in the 21th Century Act, enacted July 6, 2012 • Amended the HEA to set a new limit on Direct Subsidized Loan eligibility • Statutory requirement for negotiated rulemaking and publication of regulations in accordance with master calendar are waived • ED published Interim Final Rule • Regulations effective immediately upon publication • Revises 34 CFR 685.200, 685.202, and 685.304 • Comment period ended on 7/01/13

Key Points On 150% Limitation • Higher Education Act has changed • Imposes a limit on Direct Subsidized Loan eligibility • 150% of published length of the educational program • Makes borrowers who exceed the limit responsible for accruing interest • Borrower becomes responsible for accruing interest as of the date he/she exceeds 150% limit • ED, not institutions, will be responsible for all tracking and notification of borrowers • Institutions will be required to report additional program and borrower information • ED will make necessary changes to its financial aid systems

150% Loan Limit Reporting • DCL GEN-13-13 contains guidance and examples on reporting academic year and loan periods to COD • Accurate reporting is critical to proper implementation of the 150% Direct Subsidized Loan limits • Many schools are not currently in the practice of updating loan period and academic year – updating is imperative • Follow guidance and examples provided in the DCL where borrower’s actual attendance during the loan period is different from the anticipated attendance that was the basis for the school’s initial reporting to COD

COD System Changes • Phase One changes already made • New System Field “Subsidized Usage Limit Applies” • Will be date of first actual disbursement of sub/unsub accepted by COD • Identify first-time borrower in COD for 150% Direct Loan Subsidized Limitation • New Warning Edit 200 “150% Subsidized Usage Limit Applies to Borrower” • Notify school that borrower subject to 150% Subsidized Limitation • Will be returned at person level on any award that has SULA 22

COD System Changes • Phase One changes already made • New System Report • Weekly web-only report automatically posted to school’s Reporting Newsbox • Lists all borrowers subject to 150% Direct Subsidized Loan limitation • Borrower will appear only once in processing year • Borrower will remain on report for 45 days

COD/NSLDS System Change • Upcoming changes –next spring • Addition of tags to COD schema for borrower’s enrollment status and payment period begin dates of loan • Used to prorate borrower’s SUP where enrollment for payment period is < full-time • NSLDS will allow a new ¾ time enrollment status • Alternative method for COD to obtain enrollment statuses for loans made for 2013-2014 year (prior changes) • Use enrollment status info. currently reported to NSLDS • SUP for Direct Subsidized Loans will be prorated on the basis of ½ time enrollment – even if borrower is ¾ time • If, for any portion of the loan period, enrollment status reported to NSLDS is at least ½ time but less than less than full-time (NSLDS enrollment status = H)

COD Calc. of Subsidized Usage Periods • First COD calculation of Subsidized Usage periods will occur in March 2014 • COD will only prorate a 2013-2014 SUP of the school has reported at least ½ time but less than full-time enrollment status • COD will recalculate the SUP to account for enrollment information reported by schools after initial calculation • This may result temporarily incorrect SUPs

Loan Limit Webinars • DCL ANN-13-08 announces 150% webinar recordings • “COD Reporting of Academic Year and Loan Period” • “150% Direct Subsidized Loan Time Limit” • Recordings, presentation slides and transcripts available • Transcripts are especially useful • How to access: • Go into ifap.ed.gov • Select “Training & Conferences” – right side of main menu • Select “Training Announcements” • Select 2013 • Scroll down to ANN-13-08 and open it –you will see the appropriate links

2013-2014 Pell Grant Payment Schedules • See DCL GEN-13-06 • Maximum Scheduled Award is $5,645 • Maximum Eligible EFC is 5081 • Minimum Scheduled Award (formula) is $565 • Minimum Scheduled Award (schedules) is $582 • No LEU Minimum

2013-14 Funding • Pell and TEACH Grant are “records first” • COD must have accepted disbursement record before G5 will allow drawdown of funds • Schools may report up to 7 calendar days in advance of actual disbursement date • Direct Loan • School with history of “early” disbursements received initial Direct Loan current funding level in G5 on/about 3/25/13 • All other schools will have current funding level in June 2013 • Update to current funding level in November 2013

Sequestration • DCL GEN-13-22 describes FY 2014 sequestration changes to the Title IV programs • Federal Pell Grant • Exempted from the effects of sequester • 2013-2014 payment schedules posted in DCL GEN-13-06 remain in effect without changes • Information regarding 2014-2015 award year amounts will not be available until an appropriation bill is enacted • Campus-Based programs • 2013-2014 award year allocations provided in an April 5, 2013 EA and supplemented by a September 25, 2013 EA remain valid • These amounts were determined under earlier sequestration requirements • There is no information regarding sequester’s effect on 2014-2015 allocations

Sequestration • Iraq-Afghanistan Service Grants • Must be reduced by 7.2% from original statutory amount where the first disbursement is made on or after October 1, 2013 • Must be reduced by 10% from original statutory amount where the first disbursement was made after March 1, 2013 and prior to October 1, 2013 • Continue to be covered under the FY 2013 sequester • TEACH Grants • Must be reduced by 7.2% from original statutory amount where the first disbursement is made on or after October 1, 2013 • Must be reduced by 6.0% from original statutory amount where the first disbursement is made after March 1, 2013 and prior to October 1, 2013 • Continue to be covered under the FY 2013 sequester

Sequestration & New Loan Fees • DL fees where first disbursement is made on or after December 1, 2013 • 1.072% for DL Subsidized and Unsubsidized Loans • 4.288% for Direct PLUS Loans • DL fees where first disbursement was or will be made on or after July 1, 2013 and prior to December 1, 2013 • 1.051% for DL Subsidized and DL Unsubsidized Loans • 4.204% for Direct PLUS Loans • Fees are irrespective of when any second or subsequent disbursements are

Sequestration & New Loan Fees • October 18 was earliest date schools could begin submitting DL records to COD for loans where the first disbursement will be on or after December 1, 2013 • If DL records were submitted to COD using last spring’s sequestration percentages, origination must be cancelled and a new loan originated using the correct loan fee percentages • DCL GEN-13-22 contains an attachment detailing loan fees and providing examples bases on maximum loan amounts

Change to COD Disbursement Reporting • Applies to 2012-13 and 2013-14 • Actual disbursements and adjustments to disbursements made on/after 4/01/13 must be submitted to COD no later than 15 calendar days after date of disbursement • Applies to Pell Grant, Iraq and Afghanistan Service Grant, TEACH Grant and Direct Loan • An institution's failure to submit disbursement records within the required timeframe may result in the Secretary rejecting all or part of the reported disbursement. In addition, such failure may result in an audit or program review finding.

Pell LEU & COD Edits • HARD REJECT in COD began in summer 2013 • Will prevent Pell disbursements to students with LEU greater than 600% • Will apply to 2012-13 and forward • Modified COD warning edits • 177 – Pell LEU equal/greater than 450% but equal/less than 600% • 178 – Pell LEU exceeds 600% 34

Pell LEU DCL GEN 13-14 • Examples of how to calculate student eligibility for Pell Grant awards and reduced Pell Grant awards • COD calculates eligibility to the 3rd decimal point • No rounding to three decimals • Must truncate at cents • Ex. $1,233.567 truncates to $1,233.56 • If Pell awarded in whole dollars, award must be truncated to the next whole dollar • Ex. $1,233.56 truncates to $1,233 • No de minimus award amount

Pell LEU Dispute Process • See EA dated June 27, 2013 • Outlines process for students/schools disputing accuracy of information resulting in Pell LEU percentage • Student who believes there to be an inaccuracy must contact his/her current school • Must have filed a FAFSA for the current award year • Must provide all documentation requested by the current school • Current school must take active role in resolution using steps provided in EA attachment • Former schools expected to cooperate in resolution • School reporting errors are non-dispute issues – school must make required corrections

Pell LEU Dispute Process • Escalation • Occurs once the current school has taken all required steps and determined the dispute should be escalated • Initiated by contacting COD – Case Number assigned • ED staff review the dispute and documentation then issue approval or denial notification • Note : If the disputed amount, were it resolved in the student’s favor, would not bring LEU to less than %600, do not escalate the matter • New: adjusted Pell Grant LEU available on COD website’s Pell LEU History screen

Ability To Benefit (ATB) • Consolidated Appropriations Act, 2012 • Eliminated Title IV aid eligibility for students without a high school diploma or equivalent (34 CFR 600.2) • Effective for 2012-13 award year • DCL GEN-12-01 and GEN-12-09 • Exception explained in DCL • Students who were enrolled in a Title IV eligible program anytime prior to July 1, 2012, as ATB student, may continue to qualify under one of the ATB alternatives • Approved ATB test • Completion of six credit or 225 clock hours 38

Cohort Default Rates • FY 2010 3-year cohort default rate (CDR) distributed • All schools enrolled in eCDR were sent FY 2010 3-year official CDR and accompanying documentation via SAIG on September 23, 2013 • 2-year Official CDRs distributed on September 16, 2013 • Last 2-year CDR to be calculated • 2014 – three 3-year official CDRs will be available with sanctions based on the 3-year rates beginning • 3-year Cohort Default rate Sanctions (in effect 2014) • School’s three most recent CDRs 30% or greater • Loss of DL and Pell Grant program eligibility for remainder of the fiscal year in which notified and two following fiscal years • School’s current CDR is above 40% • Loss of DL eligibility for remainder of the fiscal year in which notified and two following fiscal years

Cohort Default Rates • For purposes of 30 day delay and single disbursement of one-term only loans, you can use a mix of 2 year and 3 year rates to get three years below 15% • FY 2011 2-year rate will be last 2-year rate calculated • As of 2014, we will have three 3-year rates calculated

Grace Period Interest Subsidy Consolidated Appropriations Act, 2012 • Temporarily eliminates interest subsidy on Direct Subsidized Loans during 6 month grace period • Effective for new Subsidized Loans first disbursed on/after July 1, 2012 and before July 1, 2014 • COD will monitor for compliance • Will only impact students whom you report as out of school or less than half-time 41

Direct Loan Interest Rates • Bipartisan Student Loan Certainty Act of 2013 provides new formulas for determination of Direct Loan interest rates – see August 9, 2013 EA • Applicable to all Direct Loans for which the first disbursement is on or after July1, 2013 and all Direct Consolidation Loans for which the application was received on or after July 1, 2013 • How rates are determined • Established each year for which the disbursement is on or after July 1 through the following June 30 for the life of the loan • Rate is the sum of the uniform “index rate” plus an add-on depending upon the loan type and whether grad or undergrad • Interest rate caps as follows: • Direct Subsidized and Direct Unsubsidized Loans for undergraduates = 8.25% • Direct Unsubsidized Loans for graduate/professional students = 9.50% • Direct PLUS Loans Parent and Grad/Professional = 10.50% • Interest rate for Direct Consolidation Loans remains weighted average except the 8.25% interest cap is removed

Direct Loan Interest Rates • Overview of 2013-14 interest rates • Direct Subsidized Loans • Undergraduate 3.86% • Direct Unsubsidized Loans • Undergraduate 3.86% • Graduate/Professional 5.41% • Direct PLUS Loans • Parent and Grad/Professional 6.41% • Direct Consolidation Loans • Weighted average of the interest rates of the loans included in the consolidation rounded up to the next higher one-eighth of one percent

PLUS Loan Applicant Communications • Special outreach to PLUS loan applicants denied because of credit began 6/28/13 • Applicants invited to contact Student Loan Support Center for more information, encourage to request reconsideration • COD and Web site modifications (June 25, 2013 EA) • New PLUS Loan Reconsideration Report (COD Reporting Newsbox) – IDs applicants who would most likely benefit from reconsideration • Modified COD Web site to include a Credit Check Reconsideration Flag • Indicates whether applicant has received communication that he/she may qualify under the reconsideration process (Y=Yes; N=No) • August 13, 2013 EA – Additional applicants identified as likely to be approved upon reconsideration

Resolving Inadvertent Overborrowing • Inadvertent student borrowing in excess of annual or aggregate loan limits • ISIR reflects flags and comment codes • Student regains eligibility by • Repaying excess amount in full • Making satisfactory payment arrangements • Involves reaffirmation • Refer to DCL GEN-13-02

Direct Loan & Student Attendance • Student must begin attendance to be Direct Loan eligible • Failure to begin attendance in any class • School must return any DL funds applied to student account • Immediately notify loan servicer of non-attendance • Failure to begin attendance on a less than half-time basis • No return of funds required by school or student • No subsequent disbursements until student resumes at least half-time status • Refer to DCL GEN-13-02

Clarification To Previous Guidance 4/19/13 IFAP E.A. clarifies statement in 11/09/12 IFAP E.A. “Packaging and Repackaging Title IV Aid” Example B - Student Eligibility • Student Enrollment: Student was enrolled in both the fall and spring terms. • FAFSA Application Status: Student did not complete FAFSA until after the end of the fall term. • Student Eligibility: Student did not meet all eligibility requirements until the spring term. 47

Clarification To Previous Guidance • Aid Eligibility: Because, while the student was enrolled in the fall term, he or she did not meet all of the eligibility requirements in the fall term, even though the student applied while enrolled (here, during the spring term), the student can only receive Pell Grant funding (and campus-based funding) for the spring term – the term when eligibility was met. However, unless the student was ineligible due to not making SAP, the student can receive Direct Loan funding for all periods of the loan period, including the fall term. A student who is not making SAP regains eligibility only when the student is in compliance with the school’s SAP standards, and does not regain eligibility for a prior period of ineligibility. 48

GE Disclosure Template • Gainful Employment Electronic Announcement #46 • November 22, 2013 • GE Disclosure Template released • Institutions must use by January 14, 2014 • Use output document from the Template to meet currently effective disclosure requirements • EA provides a link to the disclosure template application

StudentLoans.gov For 2013-14 • All FSA loan counseling tools together on this site • Entrance Counseling • Subsidized, Unsubsidized, and Graduate/Professional PLUS • Exit Counseling • NSLDS will continue to provide detailed exit counseling reports • Financial Awareness Counseling • New Repayment Estimator on “My Preferences” screen

PASFAA Webinar: Federal Update November 26, 2013