Federal Updates

Taking a closer look at the final rules: Entrance counseling for Grad PLUS borrowers

All of the new regulatory information and requirements swirling around may have you feeling a bit overwhelmed and wondering how you are going to actually carry out many of the new responsibilities. In today's Shoptalk Online we are going to launch a new series of articles focusing on some of the more troublesome areas of the new final rules. We will begin by addressing one of the new requirements that has prompted sighs of both relief and consternation: entrance counseling for Grad PLUS borrowers. Not to worry, by the time you finish reading this article, you should have a much better understanding in this area. Please note, all of these changes are effective for entrance counseling provided on or after July 1, 2008, but can be implemented earlier.

Entrance Counseling
Let's first examine the entrance counseling requirements. The new regulations specify that entrance counseling must be conducted with each Grad PLUS loan borrower before the release of the first disbursement, unless the borrower has received a prior PLUS loan.

Many of the basic entrance counseling requirements mirror those found in the Stafford entrance counseling requirements. For example, the school must still conduct the counseling session either in person or by electronic means and ensure that an individual with expertise with the Title IV programs is reasonably available shortly after the counseling to answer questions. For borrowers enrolled in a correspondence program or a study-abroad program that the home institution approves for credit, the counseling may be provided through written materials. The school must maintain documentation regarding their compliance with entrance counseling requirements.

For all Grad PLUS borrowers
Schools must inform the borrower of sample monthly repayment amounts based on:

• A range of debt levels, or
• Average indebtedness of Grad PLUS borrowers at the school or in a specific program of study, or
• Average indebtedness of borrowers who have both Stafford and Grad PLUS loans at the school or in a specific program.

There is a corresponding change in the Stafford loan entrance counseling requirements: If the Stafford loan borrower also has Grad PLUS loans, the sample repayment amount — if based on average indebtedness — must include both Stafford and Grad PLUS indebtedness.

Since some additional counseling requirements for Grad PLUS borrowers vary depending on whether the borrower has previously received a Stafford or Direct subsidized or unsubsidized loan, you must know the previous loan history of the borrower.

Grad PLUS borrowers who have not received a prior FFELP or Direct Stafford loan
The school must provide the entrance counseling information required of first time Stafford loan borrowers. Let's review those components.

• Explain the use of a Master Promissory Note (MPN)
• Emphasize the importance of repayment
• Describe the likely consequences of default, including:
  • Adverse credit reports
  • Federal offset
  • Litigation
• Stress that the student borrower is obligated to repay the full loan even if he or she:
  • Doesn't finish the program;
  • Can't get a job after graduating; and
  • Is dissatisfied with or does not receive the educational or other services purchased from the school.

While the information above encompasses the required entrance counseling components, the Federal Student Aid Handbook (FSA Handbook) offers additional points that could be covered during entrance counseling.

Grad PLUS borrowers who have received a prior FFELP or Direct Stafford loan
Since these borrowers have already received the above information during Stafford loan entrance counseling, their requirements are different.

The school must notify the Grad PLUS borrower of the maximum Stafford loan amount that he or she is eligible to receive and provide the borrower with a comparison of:

• Maximum interest rate for both a Stafford and a PLUS loan,
• Periods when interest accrues on both a Stafford and PLUS loan, and
• Points at which both a Stafford and a PLUS loan enter repayment.

Note: This information may be incorporated into the financial aid award letter process, as long as it occurs prior to loan certification. The school must also give the Grad PLUS borrower the opportunity to request the maximum Stafford loan amount for which he or she is eligible.

The new regulations do not prohibit schools from exceeding the minimum entrance counseling requirements. A school may choose to provide comprehensive entrance counseling to all Grad PLUS borrowers if it is more cost effective than providing the limited counseling requirements required by the regulations.

Exit Counseling
Exit counseling is still required only for borrowers with Stafford loans. However, for borrowers with both Stafford and Grad PLUS loans, the school must provide some additional information, as noted below.

As a reminder, exit counseling must include information about:

• The same topics outlined in entrance counseling
• Average anticipated monthly repayment amount based on the:
  • specific borrower's indebtedness, or
  • the average indebtedness of Stafford borrowers at your school, or in the same program at your school.
  
  Note: If a Stafford borrower also has Grad PLUS loans, the anticipated monthly repayment amount — if based on average indebtedness — must include both Stafford and Grad PLUS indebtedness.
  
  
• Various repayment options
• Debt management strategies
• Conditions for forbearance, deferment and cancellation
• Availability of the:
  • Loan information on the National Student Loan Data System (NSLDS)
  • FSA Ombudsman's office

During exit counseling, the school must collect and update certain personal and contact information from the borrower. Additionally, the school must maintain documentation supporting the school's compliance with the exit counseling requirements.

More information
To read more about entrance and exit counseling requirements a school must follow, please see the 2007-08 FSA Handbook, pages 2-76 through 2-81, and 34 CFR 682.604(2).

  Back to Top

2008 poverty guidelines released

The Department of Health and Human Services (HHS) has updated the United States federal poverty guidelines in the Federal Register dated January 23, 2008, as outlined in the chart below.

The poverty guideline is one qualifier that may be used in determining a borrower's eligibility for an economic hardship deferment.

The Economic Hardship Deferment Request form (HRD) is currently being revised to incorporate changes due to the College Cost Reduction and Access Act as well as the 2008 poverty guideline figures. In the interim, lenders must use the new poverty guideline figures when determining eligibility on or after January 23, 2008.

Revised Chart
Based on 2008 Poverty Guidelines

More information and questions
For more information about the updated poverty guidelines, visit the HHS web site at http://aspe.hhs.gov/poverty/08poverty.shtml.

  Back to Top