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Shoptalk Online Contents

Federal Updates

Shoptalk Online 392, February 13, 2007

Federal Updates

President Bush submits FY 2008 proposed budget to Congress

On February 5, 2007, President Bush submitted his FY 2008 proposed budget to Congress. The proposal provides for ED to administer over $90 billion in grants, loans, and Work-Study assistance to help over 11 million students and their families pay for college. Key findings from recommendations outlined in the 2006 report by the Secretary of Education's Commission on the Future of Higher Education — to improve access, affordability, and accountability in higher education — were cited within the proposal.

Request for funding
The budget calls for over $15 billion in Pell grants to nearly 5.5 million students and $73 billion in FFELP and Direct loans.

Pell grant As proposed, the Pell grant funding increase would include new mandatory funding for the Pell Grant Program throughout the period of 2008-2012. The 2008 budget proposes the following:

  • To raise the maximum Pell grant to $4,600 in 2008.
  • To increase the maximum Pell Grant by $200 annually from FY 2009-2012, to a total of $5,400.
  • To make Pell grants available year-round at eligible 2-year and 4-year degree granting schools.
  • To limit Pell grant eligibility to the equivalent of 16 semesters.
  • To eliminate the Pell grant award rule related to tuition sensitivity.
  • To exclude amounts held by students and parents in Section 529 savings and investment accounts from the statutory need analysis methodology used to determine financial need.

Additionally, ED and the Internal Revenue Service intend to implement a consent-based approach to matching applicant data reported on the Free Application for Federal Student Aid (FAFSA) with federal tax data in order to ensure proper use of Pell grant funding.

Under the president's request, the $4,600 maximum grant in FY 2008 awarded to the highest-need students would cover nearly 75 percent of tuition and fees at a typical public 4-year college, while the average award of $2,770 would pay for 42 percent of tuition and fees.

ACG and SMART grant
The president's request proposes to invest an additional $1 billion over 5 years to fund the ACG and SMART Grant programs for students completing a rigorous course of study in high school. The proposed plan would increase the ACG awarded to Pell grant recipients in the first two years of college from $750 to $1,125 for first-year students and from $1,300 to $1,950 for second-year students.

Loan programs
The Bush Administration has proposed to improve student loan programs by making them more "efficient and cost-effective vehicles for helping students finance their postsecondary education." The recommendations proposed are to:

  • Increase base Stafford annual loan limits for third- and fourth-year students by $2,000
  • Increase the overall Stafford aggregate loan limits
  • Standardize the interest rate on PLUS loans at a fixed rate of 8.3 percent under both the FFELP and Direct Loan Program
  • Reduce special allowance payments by 50 basis points
  • Increase the Consolidation loan lender fee to 1 percent
  • Reduce lender insurance from 97 percent to 95 percent, as well as reduce the insurance coverage for exceptional performer serviced loans from 99 percent to 97 percent
  • Reduce guaranty agency default collection payments

The president's request in assistance for the Work-Study program for FY 2008 would remain level with that of FY 2007 — $980.5 million.

Early notification
The Bush Administration has also proposed to implement early notification efforts in order to inform low and moderate-income students that if they complete high school and work hard, substantial resources are available to pay for college. Additional proposals will also be developed to raise awareness to students and their families regarding eligibility requirements for financial aid and how to prepare academically to receive this funding.

Elimination of programs
The budget has also called to eliminate certain programs found by the Secretary's Commission on the Future of Higher Education to be "needlessly complex and duplicative." The proposals would:

  • Eliminate the Supplemental Educational Opportunity Grant (SEOG).
  • Phase out the Perkins Loan Program through a recall of the federal portions of revolving funds held by schools.
  • Discontinue allocations for the Leveraging Educational Assistance Partnership (LEAP) Program.

More information
The president's complete FY 2008 budget is available online at

To review a summary of ED's FY 2008 budget, visit

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Neg Reg update

Last week, members from many sectors of the financial aid and higher education communities gathered in Washington, D.C., to participate in negotiated rulemaking (Neg Reg) sessions on a variety of issues affecting our industry. As reported in Shoptalk Online Edition 386, Neg Reg began in December with the first gathering of a Student Loan Issues team, and, as expected, ED has since established three additional teams to address general financial aid provisions, Academic Competitiveness Grant (ACG) and National Science and Mathematics to Retain Talent (SMART) grant topics, and accreditation issues.

Loan session II
During the second loan issues session (held February 5 - 7), the Student Loan Issues team and ED representatives reviewed and revised regulatory language proposed by ED on these issues:

  • Entrance counseling for Grad PLUS loan borrowers
  • Length of loan period for nonterm programs
  • Frequency of capitalization for Consolidation loan borrowers currently in an in-school deferment
  • Simplification of determination of deferment eligibility for multiple loan holders
  • Eligible lender trustee relationships
  • Use of preferred lenders
  • Prohibited inducements
  • Use of true and exact copy of death certificates for death discharge
  • Retroactive discharge for totally and permanently disabled borrowers
  • Lender NSLDS reporting timeframes
  • Retention of disbursement records supporting master promissory notes (MPNs)
  • Certification of e-signatures on MPNs assigned to ED
  • Perkins loan issues, including:
    • Assignment of defaulted loans
    • Eligibility requirements for child and family service cancellation
    • Definition of "reasonable and affordable" collection costs

ED has proposed removing the following topics from the loan issues agenda:

  • Providing additional disclosures to borrowers in repayment
  • Reasonable and affordable payments for Title IV defaulted loan rehabilitation
  • Repayment alignment for borrowers with both Stafford and Grad PLUS loans
  • Standardization of policies and procedures for hardship defenses for administrative wage garnishment and federal benefit offset programs
  • Economic hardship
  • Cessation of ordinary collection activities on defaulted Title IV loans in rehabilitation

ED is in the process of developing proposed regulatory language on the remaining topic — loan discharge for the crime of identity theft.

The third and final loan issues session is scheduled to take place from March 12 - 14. During this session, participants will attempt to finalize proposed language, which will then be published in the Federal Register for community comment.

General provisions session I
Last week marked the first session of negotiations for the General Provisions team (held February 7 - 9). The team will consider the following topics:

  • Consistent enrollment status definitions for all Title IV programs (full-time, half-time, etc.)
  • Consistent definitions of undergraduate and graduate student for all Title IV programs
  • Definition of independent study
  • Nonstandard term and nonterm programs, including
    • Use of completion of half the weeks of instructional time for timing of loan disbursements
    • Determining loan eligibility for nonstandard term programs
    • Requiring institutions to use consistent disbursement periods, where allowed under the law
  • Cash management, including
    • Recovery of funds not claimed by student or parent
    • Student/parent permission for electronic disbursements
    • Requirements for "issuing a check" by making it available for pickup
    • Late disbursements
    • Active confirmation of a loan
    • Simplifying excess cash allowances
  • Treatment of FFEL and Direct Loan funds when a student withdraws before beginning class (making consistent with other programs)
  • Elimination of the single disbursement requirement for Perkins and FSEOG
  • Technical corrections

The second general provisions session is tentatively scheduled to occur from March 14 - 16, and the third session from April 18 - 20.

ACG and SMART grants session I
The ACG and SMART grants team also met from February 5 - 7 to discuss items of great interest to financial aid administrators:

  • Rigorous secondary school programs
  • Mandatory institutional participation in ACG and National SMART Grants
  • The eligibility of certificate programs for ACG
  • The requirement that Pell Grants and ACG or National SMART Grants be disbursed at the same institution when awarded within the same term
  • Grade point average, including:
    • Transfer students
    • Coursework
    • Timing of calculation
    • Eligibility for disbursement
  • Academic year progression

The second ACG and SMART grant session is scheduled for March 5 - 7, with the final session taking place from April 16 - 18.

Accreditation sessions
The accreditation team is scheduled to begin meeting February 21 - 23, with additional meetings on March 26 - 28 and April 24 - 26. This committee will consider the following topics:

  • Measures of student achievement
  • Relationship of process standards to student achievement
  • Consideration of mission in application of standards
  • Monitoring of institutions by accrediting organizations
  • Substantive change
  • Due process
  • Transfer of credit
  • Definition of terms
  • Technical and process improvements

More information
Please visit ED's "2006-07 Negotiated Rulemaking for Higher Education" Web page at for more information, including ED's proposed language for final loan issues agenda items. The names of committee members selected for the ACG and SMART grant, general provisions, and accreditation teams are provided in the January 30 Federal Register. TG will continue to keep its customers informed about the Neg Reg sessions via Shoptalk Online.

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