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Session 20. FFEL and Direct Loan Policy Update Pamela Moran Office of Postsecondary Education. Agenda. Higher Education Reconciliation Act of 2005 Other Legislation Policy Guidance HEA Reauthorization. Recent Legislation. Higher Education Reconciliation Act of 2005 —

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session 20

Session 20

FFEL and Direct Loan Policy Update

Pamela Moran

Office of Postsecondary Education

agenda
Agenda
  • Higher Education Reconciliation Act of 2005
  • Other Legislation
  • Policy Guidance
  • HEA Reauthorization
recent legislation
Recent Legislation
  • Higher Education Reconciliation Act of 2005 —

P.L. 109-171, February 8, 2006 (HERA)

  • Emergency Supplemental Appropriations Act for

Defense, the Global War on Terror, and Hurricane

Recovery, 2006 —P.L. 109-234, June 15, 2006

  • Higher Education Act Extension P.L. 109-292 –

through June 30, 2007

not so recent legislation
Not-So-Recent Legislation
  • Student Loan Interest Rates —

P.L. 107-139, February 8, 2002

  • Taxpayer-Teacher Protection Act of 2004 —

P.L. 108-409, October 30, 2004

  • Higher Education Relief opportunities for students

(HEROES) P.L. 109-78 – extended through September 30, 2007

regulatory outlook
Regulatory Outlook
  • Academic Competitiveness and SMART Grants
    • Interim Final with Public Comment - July 3, 2006
    • Effective Date – August 2, 2006
    • Deadline for Public Comment – August 17, 2006
regulatory outlook6
Regulatory Outlook
  • Academic Competitiveness and SMART Grants
    • Revised Rule for Year Two - November 1, 2006
    • Negotiated Rulemaking for Year Three –

Nov. 1, 2007

regulatory outlook7
Regulatory Outlook
  • Student Loans, Eligibility, General Provisions
    • Interim Final with Public Comment —

August 9, 2006

    • Effective Date – September 8, 2006
    • Deadline for Public Comment –

September 8, 2006

regulatory outlook8
Regulatory Outlook
  • Student Loans, Eligibility, General Provisions
    • Revised Regulations — November 1, 2006
    • Negotiated Rulemaking if Issues Identified –

November 1, 2007

regulatory outlook9
Regulatory Outlook
  • Notice of Negotiated Rulemaking –

August 18, 2006

      • Comments Due: November 9, 2006
  • Four Regional Hearings
regulatory outlook10
Regulatory Outlook
  • Up to four negotiating committees
      • Deadline for negotiator

nominations: November 9, 2006

  • Negotiating Sessions – December 2006 – March 2007
higher education reconciliation act of 2005 ffel direct loans perkins loans
Higher Education Reconciliation Act of 2005 FFEL, Direct Loans, & Perkins Loans
  • Active Duty Military Deferment
    • Beginning July 1, 2006, up to three years military deferment on loans first disbursed on or after July 1, 2001
    • Active duty service during war or other military operation or during national emergency (including qualifying National Guard)
higher education reconciliation act of 2005 ffel direct loans perkins loans12
Higher Education Reconciliation Act of 2005 FFEL, Direct Loans, & Perkins Loans
  • Active Duty Military Deferment
    • Military operation defined as “contingency operation”

Current Examples: Operation Enduring Freedom

(Afghanistan) and Operation Iraqi Freedom (Iraq)

    • Consolidation Loan made on/after July 1, 2001 eligible if all underlying Title IV loans eligible
higher education reconciliation act of 2005 ffel direct loans perkins loans13
Higher Education Reconciliation Act of 2005 FFEL, Direct Loans, & Perkins Loans
  • Active Duty Military Deferment
    • Eligibility documentation includes military orders or commanding officer’s written statement
higher education reconciliation act of 2005 ffel direct loans perkins loans14
Higher Education Reconciliation Act of 2005 FFEL, Direct Loans, & Perkins Loans
  • Active Duty Military Deferment
    • Statute includes definitions of terms
    • No refund of payments made
higher education reconciliation act of 2005 ffel and direct loans
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Increased annual undergraduate loan limits
    • First year students from $2,625 to $3,500
    • Second year students from $3,500 to $4,500
  • Increased graduate annual unsubsidized loan limit from $10,000 to $12,000.

(Effective: Loans First Disbursed on/after 7/1/07)

higher education reconciliation act of 2005 ffel and direct loans16
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Increased annual unsubsidized preparatory limits
    • Pre-Grad/Prof and Teacher Cert. $7,000 (formerly $5000)
    • No change to aggregate loan limits

(Effective: Loans First Disbursed on/after 7/1/07)

higher education reconciliation act of 2005 ffel and direct loans17
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Interest Rates
    • FFEL PLUS Loans first disbursed on/after July 1, 2006
      • fixed interest rate of 8.5 percent
    • Direct PLUS Loans
      • fixed rate of 7.9 percent
    • Stafford Loans first disbursed on/after 7/1/06
      • fixed at 6.8 percent
    • Consolidation Loans – No change
higher education reconciliation act of 2005 ffel and direct loans18
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Origination Fees - FFEL
    • 1st disbursement on or after:
    • July 1, 2006 – 2%
    • July 1, 2007 – 1.5%
    • July 1, 2008 – 1%
    • July 1, 2009 - .5%
    • July 1, 2010 – no fee * (*1% FDF remains)
higher education reconciliation act of 2005 ffel and direct loans19
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Federal Default Fee (Formerly Insurance Premium or Guarantee Fee)
    • Requires Collection of 1% for loans guaranteed on/after July 1, 2006
    • Requires deposit of fee into GA Federal Fund
    • GA may collect from borrower or pay from non-Federal sources
higher education reconciliation act of 2005 ffel and direct loans20
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Origination Fees – Direct Loan
    • 1st disbursement on or after:
    • July 1, 2006 – 3%
    • July 1, 2007 – 2.5%
    • July 1, 2008 – 2 %
    • July 1, 2009 - 1.5%
    • July 1, 2010 – 1%
higher education reconciliation act of 2005 ffel and direct loans21
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • PLUS Eligibility for Graduate/Professional Students
    • Same eligibility criteria as Parent PLUS including credit checks and endorsers
    • No in-school status or grace period but eligible for in-school deferment

(Effective: Loans certified/originated on/after 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans22
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • PLUS Eligibility for Graduate Professional Students
    • FAFSA Required
    • Stafford eligibility determination required
    • Stafford application not required

(Effective: Loans certified on/after 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans23
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • PLUS Eligibility for Graduate Professional Students
    • No direct disbursement to student
    • Initial and Exit counseling strongly recommended

(Effective: Loans certified on/after 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans24
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Extends Teacher Loan Forgiveness from Teacher-Taxpayer Act
    • Makes permanent increased loan forgiveness of $17,500 for “highly qualified” math, science, and special education teachers at qualified low-income schools
    • Provides eligibility to private school teachers by defining “highly qualified” for them

(Effective on date of enactment, retroactive to October 1, 2005)

higher education reconciliation act of 2005 ffel and direct loans25
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Disbursement Rule Changes
    • Loan disbursement on/after 2/8/06 for school with CDR less than 10%
      • No multiple disbursement for single term or four-month loans
      • No 30-day delayed delivery
higher education reconciliation act of 2005 ffel and direct loans26
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Disbursement Rule Changes
    • Loan disbursement for withdrawals on/after July 1, 2006
      • School must confirm “need for/ acceptance of / need to repay” before crediting or directly disbursing
      • Document confirmation
      • No response to notice = no crediting or disbursing
higher education reconciliation act of 2005 ffel and direct loans27
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Disbursement Rule Changes
    • Foreign Schools (FFEL only)
      • Foreign school must request direct disbursement to student; otherwise goes to school
      • Lender or GA must verify student’s enrollment
      • No direct disbursement of Parent or Graduate/Professional PLUS Loans

For Loans First Disbursed on/after 7/1/06

higher education reconciliation act of 2005 ffel and direct loans28
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Disbursement Rule Changes
    • Study–Abroad Programs through Home Institution (FFEL only)
      • Student may request Direct Disbursement by lender
      • Not subject to school request or approval
      • Lender or GA must verify student’s enrollment
      • No direct disbursement of Parent PLUS or Graduate/Professional PLUS Loans

For Loans First Disbursed on/after 7/1/06

higher education reconciliation act of 2005 ffel and direct loans29
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Standardized Repayment Plans on FFEL Model
    • Direct Loan standard, graduated, and extended repayment plans comparable to FFEL Program
      • Exception: ICR Repayment

(Effective 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans30
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Consolidation Loans
    • Generally no reconsolidation of Consolidation Loan
    • FFEL- only borrower to Direct Loan only if FFEL application denied - SUPERSEDED
    • No In-School Consolidations in Direct Loan or “Early Conversion to Repayment” Consolidations in FFEL
    • No Joint Spousal Consolidations

(Effective 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans31
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • False Certification Discharge
    • Based on borrower being victim of CRIME of identity theft
    • Application in FFEL to lender or guaranty agency and in DL to Direct Loan Servicer or Debt Collection Services
    • Copy of local, State, or Federal court verdict or judgment required

(Effective 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans32
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Rehabilitation of Defaulted Loans
    • Number of on-time payments reduced from 12 to 9
    • “On-time” now within 20 days of due date
    • Completed within 10 consecutive months

(Effective: New rehab agreements on/after 7/1/06)

higher education reconciliation act of 2005 ffel and direct loans33
Higher Education Reconciliation Act of 2005 FFEL and Direct Loans
  • Rehabilitation of Defaulted Loans
    • Missed or ineligible payment allowed
    • GA OPTION – New standard “OK” on prior agreements if at least one scheduled payment of 9 after 7/1/06

(Effective: New rehab agreements on/after 7/1/06)

higher education reconciliation act of 2005
Higher Education Reconciliation Act of 2005

Published Guidance: See.WWW.IFAP.ed.gov special link to HERA information

“Dear Colleague” Letters and Announcements

  • GEN-06-03 (March 10) – HERA Summary for Loans
  • FP-06-05 (April 25) – FFEL Grad/PLUS Guidance
  • ANN – (June 23) – DL GRAD/PLUS Guidance
  • ANN – (May 30) – HERA Training Opportunities
  • GEN-06-10 (June 20) – HERA Implementing Provisions
  • GEN-06-11 (June 21) – Foreign Schools and FFEL
  • NSLDS – HERA updates (April 24, July 7, July 10)
higher education reconciliation act of 200535
Higher Education Reconciliation Act of 2005

Forms:

  • FP-06-05 (April 24) – FFEL Promissory Note Addenda and Plain Language Disclosures
  • FP-06-08 (May 23) FFEL Stafford and PLUS MPNs
  • FP-06-12 (July 3) – FFEL Consolidation Application Addendum
  • GEN-06-13 (July 3) – Teacher Loan Forgiveness
higher education reconciliation act of 200536
Higher Education Reconciliation Act of 2005

Forms:

  • Pending:
    • Revised Stafford and PLUS MPN
    • Revised Consolidation Loan App/P-Note
    • Military Deferment
    • Identity Theft Discharge
emergency supplemental appropriations act 2006
Emergency Supplemental Appropriations Act (2006)
  • DCL – GEN-06-12, June 23, 2006
  • Repealed “Single Holder Rule” in FFEL Consolidation Program
    • Effective for applications received on or after June 15, 2006
emergency supplemental appropriations act 200638
Emergency Supplemental Appropriations Act (2006)
  • Repealed HERA July 1, 2006 changes limiting FFEL Stafford or PLUS borrower access to Direct Loan Consolidation
    • denial of application no longer required
    • income-sensitive repayment that meets the borrower’s needs reinstated as condition
emergency supplemental appropriations act 200639
Emergency Supplemental Appropriations Act (2006)
  • Impact
    • All eligible loans of equal status
    • FFEL loan not required in FFEL Consolidation
    • Single eligible loan can be consolidated
hea extension p l 109 292
HEA Extension – P.L. 109-292
  • Limitation on School and School-Affiliated Organizations use of Eligible Lender Trustees (ELT) in FFEL Program
  • Loan Discharge for 9/11 spouses and parents
    • Spouse of eligible public servant
    • Parent of eligible victim
    • Includes portion of Consolidation Loan
hea reauthorization
HEA Reauthorization

H.R 609 - College Access and Opportunity

Act of 2006 - passed by House

March 30, 2006

Senate - ?

technical slide
Technical Slide

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