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Federal Update

Learn about the latest updates in federal regulations and initiatives in the field of financial aid. Topics include borrower defense, Pell eligibility reinstatement, teacher preparation, state authorization, REPAYE, strengthening accreditation, and SCRA.

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Federal Update

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  1. SESSION GS1 Federal Update Lynn Mahaffie and Jeff Baker |November 28, 2016 U.S. Department of Education 2016 FSA Training Conference for Financial Aid Professionals

  2. OPE Overview • Borrower Defense • Pell Eligibility Reinstatement • Teacher Preparation • State Authorization • Revised Pay As You Earn (REPAYE) • Strengthening Accreditation • Servicemember Civil Relief Act (SCRA)

  3. Borrower Defense

  4. Borrower Defense • Negotiated Rulemaking: January, February, March 2016 • No consensus, but ED took the Committee’s feedback into account when drafting the proposed regulations • NPRM Published, June 16, 2016 • 45-day comment period – ended August 1, 2016 • Received over 10,000 comments representing more than 50,000 parties • Final Regulations Published, November 1, 2016

  5. Borrower Defense • Builds on ED’s commitment to protect students’ and taxpayers’ investments • Provides additional protection to borrowers and taxpayers against predatory and other harmful practices

  6. Borrower Defense • Clarifies when and how students can obtain loan forgiveness if defrauded or deceived by an institution • Requires institutions to post a Letter of Credit if they engage in misconduct or exhibit signs of financial risk • Requires for-profit schools in which students have poor loan outcomes to provide clear, plain-language warnings to prospective and current students, and to the public

  7. Borrower Defense • Makes it simpler for eligible students to receive a closed-school discharge • Prohibits the use of mandatory pre-dispute arbitration clauses and class action waivers that deny students their day in court if they are wronged • Creates a process for group loan discharges when whole groups of students have been subject to misconduct

  8. Pell Eligibility Reinstatement

  9. Pell Eligibility Reinstatement • Pell Grant Eligibility Reinstatement (Lifetime Eligibility Used) • ED restoring eligibility for students who received Pell Grant funds at schools that closed before the student completed their program • ED exploring the operational changes required to implement this, but will not require an application

  10. Teacher Preparation

  11. Teacher Preparation • Negotiations held in 2012 – No consensus • NPRM published on December 3, 2014 • Supplemental NPRM published April 1, 2016 • Final regulations published October 31, 2016 • Correction to effective dates published Nov. 17, 2016

  12. Teacher Preparation • Final Regulations: • Establishes new regulations to implement requirements for the teacher preparation accountability system • Amends regulations governing the TEACH Grant Program

  13. State Authorization

  14. State Authorization • Negotiated held in 2014 — No consensus • Notice of Proposed Rulemaking was published in the Federal Register on July 15, 2016 • Public comment period closed on August 24, 2016 • Received 139 comments • Final Rule submitted for OMB review on November 4, 2016

  15. State Authorization • The proposed regulation would: • Require an institution offering distance education to be authorized by each State in which the institution enrolls students, if such authorization is required by the State • Define “State authorization reciprocity agreement” and provide that such an agreement could meet State authorization requirements for title IV purposes

  16. State Authorization • Require an institution to document the State process for resolving complaints from students enrolled in distance education programs • Require an additional location or branch campus located in a foreign location be authorized by an appropriate government agency of that country • Require disclosures specific to an institution’s distance education programs

  17. Revised Pay As Your Earn(REPAYE)

  18. Revised Pay As You Earn (REPAYE) • Extends the 10% of monthly discretionary income payment cap to an additional 3 million Direct Loan student borrowers • Forgives remaining debt after 20 years for those who borrowed only for undergraduate study and 25 years for those who borrowed for graduate study

  19. REPAYE – Email Campaign • Over 3 million borrowers were emailed from March-April, 2016 • Cohorts: • Delinquent • In hardship deferment or forbearance • Others

  20. Strengthening Accreditation

  21. Strengthening Accreditation • In the recent past, some schools went bankrupt while continuing to be accredited by agencies that are supposed to be guarantors of quality and gatekeepers of billions of dollars in federal student aid • This called for additional strengthening of the Department’s oversight of the accreditation system • In November 2015, ED announced a set of actions to strengthen accreditation by increasing transparency and promoting outcomes-driven accountability

  22. Strengthening Accreditation • ED has been implementing these executive actions by: • Publishing accreditors’ student achievement standards so the public can make comparison, to identify, for example the accreditors that have a standard for licensure pass rates and the necessary benchmarks • Publishing a customized version of College Scorecard arranged by accreditor to help the public and NACIQI identify differences in institutional outcomes

  23. Strengthening Accreditation • Webinars to help accreditors understand what is available at the FSA data center • Increasing the rigor of agency review for recognition • Issuing a draft terminology and reporting guidance to increase the usefulness of information reported to the Department and shared with the public • Establishing an Accreditation Steering Committee to improve coordination across various ED offices and externally with states, accreditors, and others

  24. Servicemember Civil Relief Act(SCRA)

  25. Servicemember Civil Relief Act • On November 10, 2016 ED issued guidance to retroactively apply the Servicemember Civil Relief Act (SCRA) to FFEL Program loans obtained by servicemembers on or after August 14, 2008

  26. Servicemember Civil Relief Act • Guidance builds on previous efforts: • August 2015 guidance authorized FFEL lenders to apply SCRA interest rate limitation to eligible servicemembers using DoD database (DMDC) • May 2016 approval of new SCRA Interest Rate Limitation form for Direct Loan and FFEL programs to fulfill regulatory requirement • April 2016 directive to retroactive apply SCRA

  27. Servicemember Civil Relief Act • The November 10 guidance: • Encourages FFEL loan holders and servicers to retroactively adjust the balances of loans belonging to servicemembers who were in active duty status on or after August 14, 2008 • Reimburses borrower for overpayment resulting from SCRA interest rate readjustment

  28. Servicemember Civil Relief Act • Describes methods used by ED that FFEL Program loan holders and servicers can replicate when making the retroactive adjustments • Provides additional guidance for FFEL Program loan holders and servicers, particularly when servicemembers contest the information in the Defense Manpower Data Center (DMDC)

  29. FSA Overview • Default Rates • Early FAFSA/Prior- Prior • Pell Grant Payment Schedules • Perkins Loan Program • Cash Management • Reporting • Protecting Information • Gainful Employment • Other

  30. FFEL/Direct FY ‘13 Cohort Default Rates

  31. FY ‘13 Cohort Default Rates School Type

  32. Early FAFSA/Prior – Prior

  33. Early FAFSA • President’s Announcement – • FAFSA Start-Up on October 1 • Use of Prior-Prior Income Data • Beginning with the 2017-2018 FAFSA • October 1, 2016 • 2015 Tax/Calendar Year for Income

  34. Questions?

  35. Prior-Prior and Early FAFSA • Verification • Use of DRT Will Reduce Selection for Verification • Documentation of income/taxes from 2016-2017 can be used for 2017-2018 • Eliminating Tracking Group V6 (Low Income)

  36. Prior-Prior and Early FAFSA • Conflicting Information • Occurrences reduced if DRT used for both 2016-2017 and 2017-2018 • FOTW warnings if 2017-2018 reporting income/taxes not equal to 2016-2017 reported amounts

  37. Prior-Prior and Early FAFSA • Conflicting Information – The CPS Will – • Perform an automatic review to determine if there might be conflicting information between the two FAFSAs • Flag for institutional resolution only those 2017-2018 ISIRs where the potential conflict, once resolved, would have a significant impact on the student’s 2017-2018 EFC

  38. 2017-2018 Pell Grant Payment Schedules

  39. 2017-2018 Pell Grant Program • Maximum Award - $5,920 • Increase from 2016-2017 - $105 • Minimum Award - $595 • Maximum eligible EFC – 5328 • Payment Schedules – See DCL GEN-16-19

  40. Perkins Loan Program(DCL GEN-16-05)

  41. Perkins Loan Program • Federal Perkins Loan Program Extension Act • Extends program through September 30, 2017 • Effectively eliminates the eligibility for graduate students to receive Perkins Loans. • Receipt of Direct Loan requirements on the eligibility for undergraduates to receive a loan • Subsequent disbursements can be made if first disbursement made prior to October 1, 2017

  42. Perkins Loan Program • Federal Perkins Loan Program Extension Act of 2015 • Requires return of federal share of revolving fund once no additional disbursements can be made – June 30, 2017 • More information will be provided next year

  43. Perkins Loan Program • Federal Perkins Loan Excess Liquid Capital (ELC) • Not part of termination of the program • Last year more than $190 million was returned • Emails to > 600 schools on October 7, with link to “estimated” ELC based on last FISAP • “Appeal” process was provided through October 25 • Deadline to return the federal share was November 17 • Follow-up letters next week with warning

  44. Cash Management

  45. Cash Management Regulations • October 30, 2015: Final regulations published • July 1, 2016: Regulations effective • Ensure that students receiving Title IV, HEA funds: • Have convenient access to their funds • Do not incur unreasonable financial account fees • Are not led to believe they must open a particular financial account to receive their funds 46

  46. Public Disclosures – Troubling Practices • Contracts governing these accounts are often private; difficult for Federal agencies and consumer groups to analyze the student card marketplace • Students do not have information about how much the accounts typically cost • Some students receive inferior account terms because of lack of contract transparency; their school fails to negotiate on their behalf

  47. Cash Management Regulations • Institutions must by September 1, 2016 – • Post on its public website any contract it has with an outside entity regarding Title IV credit balances • Submit to the Department the URLs for the contracts for publication in an ED central database for public access • Institutions must by September 1, 2017– • Post on its public website data on the number of students and parents with financial accounts under a third-party arrangement and the mean and median annual costs to students and parents • Submit to the Department the URLs for that data 48

  48. Correct and Timely Reporting

  49. Correct and Timely Reporting • COD – • Student’s academic program information • NSLDS – • Enrollment, including academic program • Revised NSLDS Enrollment Reporting Guide posted on November 22 • GE Reporting – October 1 following end of award year

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