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Shoptalk Online 437, January 15, 2008

Federal Updates

ED issues DCL on the CCRAA

On January 8, ED issued Dear Colleague Letter (DCL) GEN-08-01/FP-08-01, providing guidance on the provisions of the College Cost Reduction and Access Act of 2007 (CCRAA). This letter, which may be accessed on the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/dpcletters/010808GENFP0801.html, discusses the major changes made to the Title IV loan and grant programs by the CCRAA.

While the DCL largely reiterates the provisions of the CCRAA in plainer language, there are a few tidbits inserted into the DCL, as outlined below, that will help the financial aid industry better understand some of the provisions as they implement them.

The DCL provides clarification on the military deferment. Specifically, the DCL:
- States that a lender or school may apply the expanded eligibility of the deferment to an eligible borrower who is currently receiving the deferment, or received the deferment for a period that included October 1, 2007, without receiving a new deferment request from the borrower or the borrower's representative. If the lender or school does this, it must notify the borrower of the additional deferment benefits and allow the borrower the opportunity to decline them.
- Clarifies that a lender or school may only apply the additional 180-day deferment period now permitted at the conclusion of the borrower's active duty service if the lender or school has documentation of the date that the borrower will be demobilized, since the lender or school would not otherwise have a basis for establishing the beginning of the 180-day period.
- Describes the interaction of the expanded military deferment and the new 13-month active duty deferment. First, the DCL states that if a borrower has already received the military service deferment, a lender or school may grant the 13-month active duty deferment to a borrower without an additional request from the borrower or the borrower's representative if the lender has appropriate documentation outlined in the DCL. If the lender or school does this, however, it must notify the borrower of the additional benefits and allow the borrower to decline the deferment. The DCL also states that the 180-day extended deferment period of the military deferment and the 13-month active duty service deferment periods will run concurrently for a borrower who qualifies for both.
The DCL also states that for purposes of the active duty deferment, "enrolled" means at least half-time enrollment, and "active duty" must include at least 30 consecutive days of service, excluding training. Unlike a borrower receiving the military deferment, a borrower receiving the active duty deferment is not required to have been activated during a war or other military operation, or national emergency, or performing qualifying National Guard service during a war or other military operation or national emergency.
The DCL states definitively that guarantors will not have a role in the PLUS pilot loan auction process. This information has, until now, been shared only at ED training and conference events. Per the DCL, the Secretary of Education will guarantee loans made by lenders under this program against default.
The DCL clarifies that the new economic hardship deferment standard is as follows: "Effective for all economic hardship deferment requests made on or after October 1, 2007…150 percent of the poverty line applicable to the borrower's family size." Further, in the evaluation of the borrower's eligibility for this deferment, only the borrower's income is taken into consideration. By contrast, the DCL states that for purposes of the new income-based repayment plan, the borrower's and spouse's income is considered — if applicable — when evaluating the borrower's eligibility for the plan.
The DCL provides, as an example of a high quality alternative certification program for graduate students seeking a TEACH grant, the Teach for America program.
The DCL clarifies on page 14 that "[u]nder the CCRAA, effective July 1, 2008, a FFEL borrower may consolidate his or her FFEL loans into a Direct Consolidation Loan if the borrower intends to be eligible to use the public service loan forgiveness program." In last week's Shoptalk Online, TG had specified that "[A] borrower can consolidate FFELP loans into the Federal Direct Loan Program for the purposes of participating in the public service loan forgiveness program. In addition, beginning July 1, 2008, a borrower can reconsolidate an existing FFELP Consolidation loan into a Federal Direct Consolidation loan for the purposes of this program." Based on this guidance in the DCL, it is clear that no borrower can consolidate from FFELP into the Direct Loan Program for the purpose of participating in this forgiveness program — be it to reconsolidate an existing FFELP Consolidation loan into a Federal Direct Consolidation loan, or to consolidate other existing FFELP loans into the Federal Direct Loan Program — until July 1, 2008.
The DCL also provides some additional triggering events for applicable effective dates for certain provisions. Check the individual effective date for a particular provision in the DCL to see if a triggering event is provided.

It is expected that the details of many of the more complex and controversial provisions of the CCRAA will be considered during current or future Neg Reg sessions. As reported in last week's Shoptalk Online, the proposed agenda for the 2008 Neg Reg includes items in the CCRAA such as income-based repayment, public service loan forgiveness, and the TEACH grant. Other provisions with later effective dates, such as the PLUS pilot loan auction program and changes to federal methodology, may be considered in a future Neg Reg process.

More information
For questions about the CCRAA, call TG customer assistance at (800) 845-6267, or send an e-mail message to cust.assist@tgslc.org.

HEROES waiver extended

In the December 26, 2007, Federal Register, ED announced an extension through September 30, 2012, of the waivers and modifications provided under the HEROES (Higher Education Relief Opportunities for Students) Act of 2003. The previous extension of the HEROES Act expired on September 30, 2007; however, the provision was made permanent by the College Cost Reduction and Access Act (CCRAA) of 2007, which was signed into law on September 30, 2007.

ED will review the waivers and modifications provided by the HEROES Act in light of recent statutory and regulatory changes. If ED decides to change some or all of the waivers and modifications, those changes will be published in a notice in the Federal Register.

More information
The Federal Register notice is available online at http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-24947.pdf. For more information about the HEROES Act, see section H.4.A of the 2007 Electronic Common Manual.

Dear Colleague Letter provides addenda and Plain Language Disclosures

On January 8, ED issued Dear Colleague Letter (DCL) FP-08-02 that announces revised promissory note addenda and Plain Language Disclosures (PLD) for Federal Stafford Loans and Federal PLUS Loans, and a new promissory note addendum for Federal Consolidation Loans.

The revised Federal Stafford Loan and Federal PLUS Loan addenda and PLDs explain the changes to loan terms and conditions that were made by both the Higher Education Reconciliation Act of 2005 (HERA) and the College Cost Reduction and Access Act of 2007 (CCRAA). The new addendum for the Federal Consolidation Loan Application and Promissory Note explains the changes to the terms and conditions of Federal Consolidation Loans that were made by the CCRAA.

FP-08-02 states that until revised Stafford and PLUS MPNs and a revised Federal Consolidation Loan Application and Promissory Note are approved for use, the addenda must be used with the current promissory notes to inform borrowers of the changes made to the terms and conditions of their loans by the HERA and/or the CCRAA. The revised Stafford and PLUS PLDs provide information on the HERA and CCRAA changes for borrowers who are receiving second or subsequent loans under previously-signed MPNs, or who may have signed an MPN for the first time before the addenda were available.

Implementation
Program participants must discontinue use of the current Stafford and PLUS addenda and PLDs (see DCLs FP-06-05 and FP-07-02) and begin using the revised addenda and PLDs as soon as possible. Program participants must begin providing individuals who apply for Federal Consolidation Loans with the Consolidation addendum as soon as possible.

More information
To access FP-08-02, visit the Information for Financial Aid Professionals Web site at http://ifap.ed.gov/dpcletters/FP0802.html.

CRI granted permanent approval

On December 21, ED notified guarantors that it has approved the Common Review Initiative (CRI) on a permanent basis, beginning January 1, 2008. ED states that the approval "will remain in effect unless and until the Department notifies the guaranty agencies that the CRI process cannot be used." Previously, the CRI process had been approved only on a pilot basis, and approval of the process was set to expire on December 31, 2007.

What is the CRI?
The regulatory requirements of 34 CFR 682.410(c)(1) state that guarantors must conduct periodic reviews of some FFELP lending partners. In a CRI review, instead of multiple guarantors conducting separate reviews of the lender, those guarantors combine resources to form a cross-guarantor team that performs the lender review on behalf of all of those guarantors. ED also participates in the CRI process by conducting a review of lender reporting activities related to federal interest and special allowance benefits. The result is a more efficient, more consistent, and less redundant review process for the affected lenders, servicers, guarantors, and ED.

More information
TG is pleased to be a participant in the CRI process, and we encourage our customers to visit the National Council of Higher Education Loan Programs (NCHELP) CRI information page at www.nchelp.org/pages/page.cfm?id=24 for more information.

Latest volume of the 2008-09 FSA Handbook now online

ED has released volume 2, School Eligibility and Operations, of the new 2008-09 Federal Student Aid Handbook (FSA Handbook). In total, two volumes of the latest FSA Handbook have been released, including:

The Application and Verification Guide
Volume 2: School Eligibility and Operations

The current volumes are available on TG Online at www.tgslc.org/resources/fsa_handbook.cfm. Other volumes will be posted as they are released. Once all the volumes of the 2008-09 FSA Handbook have been released, TG will provide a single downloadable file encompassing all of the volumes. Watch future editions of Shoptalk Online for details.

NSLDS Newsletter #16 available

On December 21, ED released NSLDS Newsletter #16, which discusses the upcoming implementation of an e-mail notification process that will replace the National Student Loan Data System (NSLDS) user ID and password letters as well as enrollment late letters.

Highlights of the changes include:

Beginning January 2008, NSLDS will no longer mail user ID letters and password letters to individual users. Instead, notification of an approved NSLDS user ID will be sent by e-mail to the organization's designated primary destination point administrator (PDPA).
NSLDS previously produced a series of overdue letters reminding schools of their obligation to respond to updated enrollment information requests. Beginning in January, the series of late notices will be discontinued and replaced with e-mail notification.

More information
To access NSLDS Newsletter #16, visit the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/nsldsmaterials/NSLDSNewsletter16.html.

Reminder to issue Form 1099-C

FFELP lenders are reminded of their responsibility to issue an IRS Form 1099-C, Cancellation of Debt, to borrowers and to the IRS for the reporting of all forgiveness of indebtedness, including that provided under the Teacher Loan Forgiveness Program. The 1099-C must be provided to borrowers by January 31, 2008.

More information
If you have questions about reporting on Form 1099-C, call the IRS information reporting customer service site at (866) 455-7438, Monday through Friday from 8:30 a.m. to 4:30 p.m. EST.