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Session 63

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Session 63

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  1. Session 63 FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education

  2. Agenda • Higher Education Reconciliation Act of 2005 • Other Legislation • Policy Guidance • HEA Reauthorization

  3. 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

  4. 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

  5. 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

  6. Regulatory Outlook • Academic Competitiveness and SMART Grants • Revised Rule for Year Two - November 1, 2006 • Negotiated Rulemaking for Year Three • Nov. 1, 2007

  7. 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

  8. Regulatory Outlook • Student Loans, Eligibility, General Provisions • Revised Regulations — November 1, 2006 • Negotiated Rulemaking if Issues Identified – November 1, 2007

  9. Regulatory Outlook • Notice of Negotiated Rulemaking – August 18, 2006 • Comments Due: November 9, 2006 • Four Regional Hearings

  10. Regulatory Outlook • Up to four negotiating committees • Deadline for negotiator nominations: November 9, 2006 • Negotiating Sessions – December 2006 – March 2007

  11. Higher Education Reconciliation Act of 2005FFEL, 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)

  12. Higher Education Reconciliation Act of 2005FFEL, 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

  13. Higher Education Reconciliation Act of 2005FFEL, Direct Loans, & Perkins Loans • Active Duty Military Deferment • Eligibility documentation includes military orders or commanding officer’s written statement

  14. Higher Education Reconciliation Act of 2005FFEL, Direct Loans, & Perkins Loans • Active Duty Military Deferment • Statute includes definitions of terms • No refund of payments made

  15. 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)

  16. 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)

  17. 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

  18. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Origination Fees - FFEL • 1st disbursements 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)

  19. 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

  20. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Origination Fees - Direct Loan • 1st disbursements 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%

  21. 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)

  22. 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/originated on/after 7/1/06)

  23. 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/originated on/after 7/1/06)

  24. 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)

  25. 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

  26. 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

  27. 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

  28. 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

  29. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Disbursement Rule Changes • Disbursement using escrow agent for loan proceeds paid to agent on/after July 1, 2006 • Time period for payment reduced from 21 to 10 days • Limits on subsidized interest billing to 3 days before 1st disbursement

  30. 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)

  31. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Forbearance Agreements • Eliminates written agreement • Documentation • Lender confirms with borrower • Record in borrower’s file • Same as existing regulation

  32. 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)

  33. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Special Allowance • Loans on or after April 1, 2006 • Quarterly SA less than applicable rate • Remit excess to ED quarterly • “SAP Gap” • Bill on/after July 1, 2006 on PLUS loans first disbursed on/after 1/1/2000 and before 1/1/2006

  34. 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)

  35. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Lender Insurance on Defaults • 1st disbursement on or after 7-1-2006 • 97% • Exceptional Performer • 99% • Default claims submitted on or after 7-1-2006 Note: Reinsurance claims to be submitted within 30 days (versus 45)

  36. 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)

  37. 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)

  38. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Loan Default Collections • On or after 10-1-2006 • CL and Rehabs – not in excess of 18.5% • 8.5% remitted to Secretary • Beginning FY 2010 • CL collections over 45% of total • Remit all collection costs to Secretary

  39. Higher Education Reconciliation Act of 2005 FFEL and Direct Loans • Wage Garnishment Requirement • Increases maximum percentage of a defaulted borrower’s wage garnishment from 10% to 15% (Effective 7/1/06)

  40. 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-06-04 (March 30) Lender Reporting Changes • FP-06-05 (April 25) – FFEL Grad/PLUS Guidance • FP-06-10 (June 5) – SAP for FFEL PLUS • 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)

  41. 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

  42. Higher Education Reconciliation Act of 2005 • Forms: • Pending: • Revised Stafford and PLUS MPN • Revised Consolidation Loan App/P-Note • Military Deferment • Identity Theft Discharge

  43. 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

  44. 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

  45. 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

  46. 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

  47. HEA Reauthorization • H.R 609 • College Access and Opportunity Act of 2006 passed by House March 30, 2006 • Senate - ?

  48. Technical Slide We appreciate your feedback and comments. We can be reached at: • Phone: (202) 502-7732 • Fax: (202) 502-7874 • Email: Pamela.Moran@ed.gov