Federal Update

Dan MadzelanOffice of Postsecondary

Education

Jeff BakerFederal Student Aid

Program Appropriations

Higher Education Legislation

Title IV Program Regulations

Title IV Program Budgets Appropriations

FY 2005 FY 2006 FY 2007*(AY 05-06) (AY 06-07) (AY 07-08)

Pell Grant $12,364,997,280 $13,045,230,000 $12,738,770,000 (Max Award) $4,050 $4,050 $4,050

FSEOG $ 778,720,000 $ 770,932,800 $ 770,932,800

FWS $ 990,257,056 $ 980,354,485 $ 980,354,485

Perkins $ 66,131,680 $ 65,470,363 $ -

LEAP $ 65,643,000 $ 64,987,000 $ -

ACG/SMART $ - $ 790,000,000 $ 850,000,000

Program

* President's FY 2007 Budget Submission

Title IV Program Budgets Aid AvailableFY 2006 FY 2007*(AY 06-07) (AY 07-08)

Pell Grant $ 12,745,900,000 $ 12,986,000,000 (Max Award) $4,050 $4,050

FSEOG $ 975,900,000 $ 975,900,000

FWS $ 1,172,000,000 $ 1,172,000,000

Perkins $ 1,135,000,000 $ 133,000,000

LEAP $ 165,000,000 $ -

ACG/SMART $ 790,000,000 $ 850,000,000

Loans $ 60,577,000,000 $ 66,082,000,000

TOTAL $ 77,560,800,000 $ 82,198,900,000

Program

* President's FY 2007 Budget Submission

Title IV Program BudgetsStatus of Appropriations

FY 2006 FY 2007* FY 2007*(AY 06-07) House Senate

Pell Grant $13,045,230,000 $13,009,000,000 $12,606,713,000 (Max Award) $4,050 $4,150 $4,050

FSEOG $ 770,932,800 $ 770,933,000 $ 770,933,000

FWS $ 980,354,485 $ 980,354,000 $ 980,354,000

Perkins $ 65,470,363 $ 65,471,000 $ 65,471,000

LEAP $ 64,987,000 $ 64,987,000 $ 64,987,000

ACG/SMART $ 790,000,000 $ 850,000,000 $ 850,000,000

Program

* Committee-passed Bills

Title IV Program Budget PrioritiesAdministration

• Pell Grants – Eliminate Shortfall

– Mandate Annual Increases

– Establish $1,000 State Scholars Award

Congress• Pell Grants

– Shortfall Eliminated

• AC/SMART Grants – Mandatory Spending

Authorized: $4.53 Billion over 5 Years

Title IV Program Budget PrioritiesAdministration

• Make Active Duty Military Independent

• Clarify FAFSA “Drug Question”

• Revise CB Formulas• Eliminate/Recall

Perkins

Congress• Active Duty Military

are Independent• Applies to those in-

school and receiving aid

• Not Addressed• Not Addressed

Loan Program Budget PrioritiesAdministration

• Create 25 basis point Loan Holder Fee

• Reduce insurance to 95%

• Eliminate special SAP on tax-exempt financings

• Not proposed

Congress• Recapture excess

interest earnings• Lender insurance

reduced to 97%• Special SAP largely

eliminated

• Phase-out origination fees

Legislation• Higher Education Reconciliation Act of 2005• Emergency Supplemental Appropriations Act

for Defense, the Global War on Terror, and Hurricane Recovery, 2006

• Second Continuing Resolution, 2007 – Through December 8, 2006

• Third Higher Education Extension Act of 2006– Through June 30, 2007

Third Higher Education Extension Act• New restrictions on Eligible Lender

Trustee arrangements with Postsecondary Institutions

• Definition of Hispanic-Serving Institution

• Clarification of GA Account Maintenance Fees

• New Loan Discharge for Survivors of 9/11 Victims

Hurricane Help for Institutions• Hurricane Education Recovery Act

– $95 Million to 18 Louisiana Institutions– $95 Million to 38 Mississippi Institutions– $10 Million to 99 U.S. Institutions– $30 Million “Retained” by 18 Gulf Institutions

• Higher Education Recovery Awards– $50 Million to 41 Gulf Institutions

• Natural Disaster Student Aid Fairness Act– $28 Million Reallocated to 29 Campus-Based

Program Institutions

Regulations• Interim Final Regulations – Comments

Invited– ACG/SMART Grants – July 3, 2006– Other HERA Issues – Aug. 9, 2006

• Final Regulations– ACG/SMART Grants – Nov. 1, 2006– Other HERA Issues – Nov. 1, 2006– New September 11-Related Discharges

– Dec. 29, 2006

RegulationsNegotiated Rulemaking for 2008-2009 and Beyond • Tentative Calendar

– Sessions: Dec. 2006, Feb. and March 2007– NPRM: May 2007– Comments: July 2007– Final Rule: Nov. 1, 2007– Effective Date: July 1, 2008 with possible

early implementation

• Negotiated Rulemaking Website:

http://www.ed.gov/policy/highered/reg/hearulemaking/2007/nr.html

FY 2004FFEL and Direct Loan

Default Rates

National Student Loan Default Rates

Default Rates by SectorSchool Type FY 2002 FY 2003 FY 2004

Public – 2 Year 8.5% 7.6% 8.3%

Public – 4 Year 4.0% 3.3% 3.6%

Private – 2 Year 6.1% 6.3% 7.4.%

Private – 4 Year 3.1% 2.6% 2.9%

Proprietary 8.7% 7.3% 8.8%

Foreign 2.0% 1.8% 1.5%

National Rate 5.2% 4.5% 5.1%

Higher Education Reconciliation Act of 2005

Enacted: February 8, 2006

Institutional and Program Eligibility• Weeks in academic year for clock-hour

programs reduced to 26• 50% rules do not apply to telecommunications• Programs of distance education must be

specifically accredited• Short-term telecommunications programs are

eligible • Provision for programs using assessment to

measure progress

FFEL and Direct Loans

• Extends eligibility for PLUS Loans to graduate and professional students– Eligibility criteria is the same as for a parent,

including credit checks and no in-school status. Student would be eligible for an in-school deferment

– Student must file FAFSA– Effective for any loan certified or originated on or

after July 1, 2006

PLUS Loan Eligibility to Graduate Students

FFEL and Direct Loans

• Increases annual base loan limits for:– First-year students from $2,625 to $3,500– Second-year students from $3,500 to $4,500

• Increases annual additional unsubsidized for:– Graduate students to $12,000– Prep for Grad Program to $7,000– Teacher Certification to $7,000– Effective for loans first disbursed on or after

July 1, 2007• Aggregate loan limits are not increased

Annual Loan Limits

FFEL and Direct Loans

• First disbursement of loan• Loan can be certified/originated prior to July• Loan period must either begin on or after July

1 or include July 1 (cross-over period)• If loan period begins before July 1:

– Delay certification/origination– Delay first disbursement until July 1 or later– Certify/Originate another separate loan for

the increased amount

Annual Loan LimitsLoans first disbursed on or after July 1, 2007

FFEL and Direct Loans

• Fixed rate of 6.8% for new Stafford loans first disbursed or or after July 1, 2006

• Fixed rate of 8.5% for new FFEL PLUS loans first disbursed or or after July 1, 2006

• Fixed rate of 7.9% for new Direct Loan PLUS loans first disbursed or or after July 1, 2006

Interest Rates for New Loans

FFEL and Direct Loans

• Phased reduction of the four-percent Direct Loan fee to one percent

• Phased reduction of the three-percent FFEL origination fee to zero

• Requires that the one-percent FFEL default fee be deposited into the federal fund of the FFEL guaranty agency. Requires the agency to either deduct from loan proceeds or pay from non-federal sources

Stafford Loan Fees

FFEL and Direct Loans

• Generally no re-consolidation of a single consolidation loan

• FFEL loans consolidated into Direct only if borrower certifies unable to obtain a FFEL consolidation loan

• Eliminates in-school consolidation in Direct Loans and “early conversion to repayment” consolidation in FFEL

• Eliminates joint consolidations

Consolidation Loans

FFEL and Direct Loans

• An institution with cohort default rates of less than 10 percent for the three most recent years is exempted from the requirement that FFEL and Direct Loans:– Be issued in at least two disbursements

for one-term loans– Be delayed for 30 days for first-time

students

Low Default Rate Disbursement Waivers

FFEL and Direct Loans

• Permanently and retroactively extends the authorization of the increased loan forgiveness of $17,500 for "highly qualified" math, science and special education teachers at qualified low-income schools– Effective on date of enactment,

retroactive to October 1, 2005

Teacher Loan Forgiveness

FFEL, Direct and Perkins Loans

• Provides for a military deferment of up to three years for FFEL, Direct and Perkins Loans that were first disbursed on or after July 1, 2001. Includes definitions of “active duty”

Active Duty Military Deferment

Cost Of Attendance

• Cost of Attendance (COA) for less than half-time students may include room and board costs, at school’s option

• Cost of Attendance may include, at school’s option, the one-time cost of obtaining the first professional license or certification

Calculation Of EFC - 2006-2007Simplified Needs Test and Auto Zero EFC

• Increases the threshold to $20,000 under which a family would automatically have an EFC of zero

• Eliminates consideration of dependent student’s tax return for both SNT and Auto Zero EFC

• Tax return alternative if family received benefits from a federal means-tested benefits program

Calculation Of EFC - 2006-2007

• Treats all 529 Pre-Paid and Tuition Savings Plans as assets of the owner, unless the owner is the dependent student

• Excludes small businesses from assets• Adds active duty military to the criteria that

makes a student independent

Other EFC Changes

Calculation Of EFC - 2007-2008

• Increases Income-Protection Allowances• Decreases Asset Assessment Rates

Other EFC Changes

Drug Conviction

• Provides that an applicant loses eligibility for Title IV aid only if the drug-related offense for which he or she was convicted occurred while the student was receiving Title IV aid

Return Of Title IV Aid (R2T4)• Specifies that scheduled clock hours are

used to determine earned aid for clock-hour programs

• Limits a grant overpayment due from a student to the amount by which the original overpayment amount exceeds half of the total grant funds received by the student

A Couple of Other Issues

Preferred Lenders• Preferred Lenders Lists are allowed• No Automatic Referrals• Must process any loan request made by a

student or parent regardless of lender• May not have unreasonable delays• Publications, scripts and staff training should

comply• Violations could bring sanctions• Does not apply to FFEL/Direct Loan choice

Alternative Loans• Alternative loans must be included as

“estimated financial assistance” if enrollment is a condition for the loan– Does not matter where loan proceeds

are sent or whether school certified enrollment

– May replace EFC– Think about it like an outside

scholarship

More ACG/National SMART

ACG/National SMARTNSLDS Reporting

• December 16 – Reporting to COD Begins• December 17 – COD to NSLDS • December 17 – NSLDS FAP Access• January 1 – 2007-08 ISIRs include 2006-07

ACG/SMART disbursements• January 1 – Transfer Monitoring includes

2006-07 ACG/SMART disbursements– Will not include ACG/SMART if

previously reported on ISIR

ACG/National SMARTDetermining Enrollment Status

• Initial Calculation – Enrollment status determined at time of initial award calculation– Enrollment status could be different than

Pell• Recalculation – Must use same recalculation

policy (e.g., recalculation date, census date) that is used for Pell Grants

ACG/National SMARTLate Disbursements and R2T4

• May make late disbursement even if eligibility not determined before student no longer enrolled– Note regulatory time limits for late

disbursements• Included in R2T4 as “aid that could have been

disbursed” as long as eligibility is determined before R2T4 calculation– Could result in post-withdrawal disbursement

National SMART Designated Majors

• Must be designated with one of the approved “Classification of Instructional Program” codes (CIP Codes)

ACG/National SMARTAcademic Year Progression

• Basic Requirement – Academic year progression based on all credits earned in any ACG/SMART eligible program– Current Institution’s Credits – All credits

earned– Transfer Institution’s Credits – Only credits

accepted by current institution– Regardless of application to student’s

current program

ACG/National SMARTTransfer Students - GPA

• Upon transfer, the new institution must calculate GPA using the grades from all coursework accepted from prior institution(s)

• Once student has GPA at new institution, use new institution’s GPA

ACG/National SMARTRemedial Coursework

• Enrollment Status – Use credits or equivalent

• Academic Year Progression – Institutional policy

• GPA - Institutional policy