Federal Update

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Pell ACA. Processing began 03/18/06 for 2005-2006 first payment

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Federal Update

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1. Federal Update ILASFAA Springfield, IL April 4, 2006

2. Pell ACA Processing began 03/18/06 for 2005-2006 first payment & 2004-2005 third/final payment See latest ESOA PGAS06OP for 2005-2006 PGAS05OP for 2004-2005

3. NSLDS Unallocated Amounts NSLDS will not use unallocated amounts when calculating subsidized, unsubsidized, and combined outstanding principal balances Schools may ignore unallocated amounts reported on ISIR and NSLDS NSLDS Newsletter Number 11, February 2006 Effective Jan. 2006 ISIR will still show unallocated amountsEffective Jan. 2006 ISIR will still show unallocated amounts

4. NSLDS Unallocated Amounts Capitalized Interest Perkins Loan Health Professions PLUS Non Title IV loan Ineligible loan Spouse’s loans Loan not cleared by lender yet Missing loan

5. Documentation To Resolve Defaults Schools may use info taken via direct access to real-time data from the holder’s database. This includes real-time access using third party software or products. Must ensure that access is to source data and not to data stored by third party. Must ensure that data is current and clearly identifies the defaulted loans or overpayments and the current status of those loans or overpayments. Print Screen with full details

6. Higher Education Reconciliation Act of 2005 Deficit Reduction Act of 2005—S. 1932 Conference Report passed the House on December 19, 2005 Conference Report passed the Senate on December 22, 2005 in slightly different form House passed Senate version on February 1, 2006 President signed into law February 8, 2006 Turning to Budget Reconciliation. This slide shows a brief chronology. The Conference Report passed the House by a narrow margin in December 212-206. It passed the Senate in slightly different form by a vote of 51-50 with Vice President Cheney casting the deciding vote. Since there were differences, it had to go back to the House who passed the Senate version on February 1 by an even narrower margin of . President Bush signed the bill into law on Wednesday, February 8, 2006. The law makes $39.7 billion in budget cuts to mandatory programs, including $12.7 billion from student loans. The Administration is happy with HERA—particularly with the new programs that supplement the Pell Grant Program by providing additional grant aid to the neediest students, and the reduction of excess subsidies in the FFEL program. HERA generally achieves the Administration’s key objectives for reauthorization of the HEA as set forth in last year’s budget proposals of— Making the student loan programs more efficient and cost-effective, increasing student benefits, and reducing cost to the taxpayer through expanded risk-sharing with schools and lenders. Turning to Budget Reconciliation. This slide shows a brief chronology. The Conference Report passed the House by a narrow margin in December 212-206. It passed the Senate in slightly different form by a vote of 51-50 with Vice President Cheney casting the deciding vote. Since there were differences, it had to go back to the House who passed the Senate version on February 1 by an even narrower margin of . President Bush signed the bill into law on Wednesday, February 8, 2006. The law makes $39.7 billion in budget cuts to mandatory programs, including $12.7 billion from student loans. The Administration is happy with HERA—particularly with the new programs that supplement the Pell Grant Program by providing additional grant aid to the neediest students, and the reduction of excess subsidies in the FFEL program. HERA generally achieves the Administration’s key objectives for reauthorization of the HEA as set forth in last year’s budget proposals of— Making the student loan programs more efficient and cost-effective, increasing student benefits, and reducing cost to the taxpayer through expanded risk-sharing with schools and lenders.

7. Higher Education Reconciliation Act of 2005 Creates Two New Grant Programs Academic Competitiveness Grant Program National “Science and Mathematics Access to Retain Talent (National SMART Grant)” Grant Program Both programs are funded and will be operational for the 2006-2007 award year. $790 million have been appropriated for these two new grant programs.$790 million have been appropriated for these two new grant programs.

8. Higher Education Reconciliation Act of 2005 Academic Competitiveness Grant U.S. citizens Enrolled full-time Pell Grant recipients First and second year students enrolled in a degree granting institution Not been previously enrolled in a program of undergraduate education Have completed a rigorous secondary school program of study For second year students have at least a 3.0 GPA $750 – first year $1,300 – second year May be ratably reduced

9. Higher Education Reconciliation Act of 2005 National SMART Grant U.S. citizens Enrolled full-time Pell Grant recipients Third and fourth year students enrolled in a degree granting institution Majoring in science, technology, math, or certain designated foreign languages Have at least a 3.0 GPA in the major $4,000 for each year May be ratably reduced

10. Higher Education Reconciliation Act of 2005 Institutional and Program Eligibility Change in Definition of Academic Year Change in the definition of “academic year” to mean at least 30 weeks of instruction for a program measured in credit hours and at least 26 weeks for a program that measures progress in clock hours. (Effective 7/1/06)

11. Higher Education Reconciliation Act of 2005 Institutional and Program Eligibility Amend 50% Rule Excludes telecommunication courses from the so-called “50 percent rules” related to distance education. Retains limits on correspondence study. (Effective 7/1/06)

12. Higher Education Reconciliation Act of 2005 Institutional and Program Eligibility Recognition of Distance Education Programs Provides that a program offered in whole or in part through telecommunications is an eligible program if it has been specifically approved by its accrediting agency that is recognized by the Secretary and has distanced education in its scope. (Effective 7/1/06)

13. Higher Education Reconciliation Act of 2005 Institutional and Program Eligibility Short-Term Telecommunications Program Eliminates the requirement that a certificate program offered through telecommunications must be one year or longer in order for it to not be considered a correspondence course (and therefore ineligible for Title IV assistance). (Effective 7/1/06)

14. Higher Education Reconciliation Act of 2005 Institutional and Program Eligibility Program Using Assessment to Measure Progress Provides that a program that measures progress by direct assessment of students is an eligible program if the assessment is consistent with standards of the institution’s accrediting agency. Initial eligibility is determined by the Secretary. (Effective 7/1/06)

15. Higher Education Reconciliation Act of 2005 FFEL, Direct Loans, & Perkins Loans Active Duty Military Deferment Provides for a military deferment of up to three years for FFEL, Direct Loan, and Federal Perkins Loans that were first disbursed on or after July 1, 2001. Includes definitions of terms used in the deferment. No refund of payments made. (Effective for any loan made on or after July 1, 2001) This is not the same as the pre-1992 military deferment. Not all active duty military may qualify A given borrower may not qualify for coverage on all of his/her loans because this is loan specific rather than borrower-based. NOTE: Also applies to Federal Perkins Loan Program.This is not the same as the pre-1992 military deferment. Not all active duty military may qualify A given borrower may not qualify for coverage on all of his/her loans because this is loan specific rather than borrower-based. NOTE: Also applies to Federal Perkins Loan Program.

16. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Increase Loan Limits in FFEL and Direct Loan Increases annual loan limits for first year students from $2,625 to $3,500 and for second year students from $3,500 to $4,500. Increases annual unsubsidized loan limit for graduate students from $10,000 to $12,000. Aggregate loan limits would not be changed. (Effective 7/1/07)

17. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Extends PLUS Eligibility to Graduate Students Extends eligibility for PLUS Loans to graduate and professional students. All eligibility criteria remain including credit checks and no in-school status. However, student would be eligible for an in-school deferment. (Effective 7/1/06) Effective for loans disbursed on or after July 1, 2006. Probably will issue an addendum to the PLUS MPN to bring this up by July 1.Effective for loans disbursed on or after July 1, 2006. Probably will issue an addendum to the PLUS MPN to bring this up by July 1.

18. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Loan Rehabilitation Provides that the number of on-time payments required to rehabilitate a loan would be reduced from 12 to 9 made within 20 days of the due date during 10 consecutive months. (Effective 7/1/06)

19. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Extends Teacher Loan Forgiveness from Teacher-Taxpayer Act 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)

20. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Reinstate Low-Default Disbursement Rule Waivers Reinstates two provisions that expired on October 1, 2002, relating to loan disbursements. An institution with cohort default rates of less than 10 percent for the three most recent fiscal years would be exempted from the requirement that FFELs or Direct Loans be issued in at least two separate disbursements for one term loans and from the 30-day delay requirement for first time, first year undergraduate students. (Effective on Date of Enactment)

21. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Standardized Repayment Plans on FFEL Model Provides that the standard, graduated, and extended repayment plans in the Direct Loan Program be comparable to the same repayment plans in the FFEL Program. Maintains differences between FFEL’s Income Sensitive Repayment Plan and Direct Loan’s Income Contingent Repayment Plan. (Effective 7/1/06)

22. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans FFEL PLUS Interest Rate Increases the scheduled FFEL PLUS Loan fixed interest rate for new loans made on or after July 1, 2006 from 7.9 to 8.5 percent. Direct PLUS loans will remain at a fixed rate of 7.9 percent. (Effective 7/1/06) NOTE: Stafford rates for new loans in both programs will be fixed at 6.8 percent for loans made on or after 7/1/06.

23. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Borrower Origination Fees Phases out the current 3 percent FFEL Stafford origination fee by July 1, 2010, and reduces the Direct Stafford Loan loan fee (which represents both an origination fee and a 1 percent insurance premium) to 1 percent by the same date. (Effective 7/1/06)

24. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Require Collection of 1 Percent Guaranty Fee Changes the one percent insurance premium to a one percent Federal default fee that all guaranty agencies (including ones with a Voluntary Flexible Agreement) must deposit into their Federal funds. Requires the agency to either deduct from borrower’s loan proceeds or pay with other non-Federal sources. (Effective 7/1/06)

25. Higher Education Reconciliation Act of 2005 FFEL/DL Consolidation Loans Generally no re-consolidation Applies within and across programs FFEL Loans to Direct only if FFEL application denied Eliminates In-School Consolidations in Direct Loans and “Early Conversion to Repayments” Consolidations in FFELP Eliminates Joint Consolidation Effective 7/1/06

26. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans School as FFEL Lender Places restrictions on school FFEL lenders (Effective 7/1/06) No loans to undergraduates No loans to borrowers not enrolled at the school No new school lenders after April 1, 2006

27. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Creates Negative Special Allowance (Rebate of Excess Special Allowance) Makes permanent earlier changes to 9.5 percent tax-exempt Special Allowance Reduces Lender Insurance from 98 percent to 97 percent Reduces Lender Exceptional Performer Insurance from 100 percent to 99 percent Limits guaranty agency collection costs when defaulted loan is consolidated to not exceed 18.5%

28. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans Wage Garnishment Requirement Changes the maximum percentage of a defaulted borrower’s disposable income subject to wage garnishment from 10 percent to 15 percent. (Effective 7/1/06)

29. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans College Access Initiative Guaranty agencies must work with the Secretary to gather and publicize college access information. (Effective 7/1/06)

30. Higher Education Reconciliation Act of 2005 COA and Need Analysis Cost of Attendance For Less Than Half-Time Students Amends cost of attendance calculation for less than half-time students to include room and board costs. However, a less than half-time student could only receive the room and board allowance for up to three semesters (or the equivalent) and no more than 2 of those semesters may be consecutive. (Effective 7/1/06)

31. Higher Education Reconciliation Act of 2005 COA and Need Analysis Inclusion of Costs for Obtaining Professional Credential in Cost of Attendance Gives an institution the option of including the one-time cost of obtaining the first professional credential in the cost of attendance for a student in a program requiring professional licensure or certification. (Effective 7/1/06)

32. Higher Education Reconciliation Act of 2005 COA and Need Analysis Changes to EFC Calculation Changes to allowances Changes to offsets Changes to assessment rates Effective July 1, 2007

33. Higher Education Reconciliation Act of 2005 COA and Need Analysis Simplified Needs Test Modifies the requirements by providing a bypass for parents or students that benefit under a Federal means-tested program, such as supplemental security income, food stamp, free and reduced priced school lunch, TANF, and special supplemental nutrition programs. (Effective 7/1/06)

34. Higher Education Reconciliation Act of 2005 COA and Need Analysis Auto-Zero EFC Increases the threshold under which a family would be automatically considered to have an EFC of zero to $20,000. (Effective 7/1/06)

35. Higher Education Reconciliation Act of 2005 COA and Need Analysis Active-Duty Military Automatically Independent Adds active duty military to the criteria that makes a student independent. (Effective 7/1/06)

36. Higher Education Reconciliation Act of 2005 COA and Need Analysis Other Need Analysis Changes Changes how 529 Tuition Savings Plans are treated Excludes small-businesses from assets Effective 7/1/06

37. Higher Education Reconciliation Act of 2005 Student Eligibility Drug Conviction Eligibility 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. (Effective 7/1/06)

38. Higher Education Reconciliation Act of 2005 Return of Title IV Aid Clarifies that multiple leaves of absence are permitted Clarifies when a student earns 100% of his/her aid for clock hour programs Restricts applicability to Pell Grants, FSEOG, FFEL, Direct Loan, Perkins Loan, and the new Academic Competitiveness Grants and SMART Grants

39. Higher Education Reconciliation Act of 2005 Return of Title IV Aid Adds procedures that require an institution to contact a former student prior to making a late or post-withdrawal disbursement Requires an institution to return funds not later than 45 days (instead of 30) after the date that it determines the student has withdrawn

40. Higher Education Reconciliation Act of 2005 Return of Title IV Aid 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. Provides that a student does not have to repay grant overpayments of $50 or less Specifies when scheduled clock hours are used to determine earned aid

41. Other Recently Enacted Legislation P.L. 109-78, Higher Education Relief Opportunities for Students (HEROES) Extension—Through September 30, 2007 P.L. 109-150, Higher Education Act Extension—Through March 31, 2006 Just wanted to point out a couple of other important pieces of legislation that have recently been passed and signed into law. On September 30, 2005, President Bush signed into law PL 109-78 which extended the expiration date of the HEROES Act of 2003 from September 30, 2005 to September 30, 2007. We’ve also had two extensions of the HEA. The second extension extends the HEA through March 31, 2006 and contained extenders of 9.5% tax exempt loans and the effective date on the increased teacher loan forgiveness benefits which is no longer necessary with the enactment of HERA.Just wanted to point out a couple of other important pieces of legislation that have recently been passed and signed into law. On September 30, 2005, President Bush signed into law PL 109-78 which extended the expiration date of the HEROES Act of 2003 from September 30, 2005 to September 30, 2007. We’ve also had two extensions of the HEA. The second extension extends the HEA through March 31, 2006 and contained extenders of 9.5% tax exempt loans and the effective date on the increased teacher loan forgiveness benefits which is no longer necessary with the enactment of HERA.

42. President’s FY 2007 Budget Request Title IV Program Budgets Appropriations

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