Federal Updates

House passes student loan access bill

On April 17, 2008, by a vote of 383-27, the U.S. House of Representatives passed H.R. 5715, the Ensuring Continued Access to Student Loans Act of 2008. The bill responds to recent instability in the U.S. credit markets that has made it difficult for some FFELP lenders to secure the capital needed to finance student loans.

Provisions of the legislation

H.R. 5715:

• Increases Stafford annual loan limit for undergraduates by $2,000 (all unsubsidized), and increases Stafford aggregate loan limits to $31,000 for dependent undergraduates and to $57,500 for independent undergraduates;
• Gives a Parent PLUS loan borrower the option to defer repayment (i.e., a grace period) until up to six months after his or her dependent leaves school;
• Temporarily removes a delinquency of up to 180 days on a home mortgage as an indicator of adverse credit, thereby permitting a lender to approve an otherwise eligible parent loan applicant with such a delinquency for a PLUS loan; and
• Provides the Secretary of Education additional tools to safeguard access to student loans:
  • By clarifying existing law that gives the Secretary mandatory authority to advance federal funds to guarantors operating as lenders-of-last-resort in the event that they do not have sufficient capital to originate new loans, and by allowing guarantors to carry out the functions of lender of last resort on a school-wide basis, and
  • By giving the Secretary temporary authority to purchase loans from FFELP lenders (i.e., act as a secondary market), if it is determined that lenders and other existing policy options are unable to meet the demand for loans, and if such purchase carries no cost for the federal government.

Prior to passage, the bill was amended in the following ways:

• A provision was eliminated that would have increased Stafford annual loan limits for graduate students by $2,000;
• A provision was added to allow parents who are delinquent on medical bills to obtain PLUS loans;
• A provision was added to direct the Secretary of Education to review and, if necessary, to extend prohibited inducement rules to guarantors participating in the lender-of-last-resort program; and
• A provision was added to require the Government Accountability Office (GAO) to analyze how increased loan limits affect college costs.

What's next?
With the House passage of H.R. 5715, Sen. Edward Kennedy (D-Mass.) released a statement that he is "hopeful that the Senate also will act swiftly to enact these provisions to reassure students and families." Kennedy introduced a similar bill, the Strengthening Student Aid for All Act of 2008 (S. 2815), on April 3, 2008. The President's Statement of Administration Policy (SAP) expressed support for increased loan limits, authorization of the Secretary to purchase FFELP loans, and designation of a school's eligibility to participate in the lender-of-last-resort program, but expressed concern that increased limits "may make it more difficult for some institutions to keep their Federal student-aid funds under the '90-10' institutional eligibility requirement." The SAP also noted that the bill appeared "to be duplicative of existing law and would have little impact on preserving access to Federal student loans in the fall."

More information
For more information on H.R. 5715 and S. 2815, see TG's Legislative Report at www.tgslc.org/lege_report/index.cfm. Shoptalk Online will keep readers informed as this legislation continues through the committee and conference stages.

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Neg reg update: consensus reached!

Following up on the success of the TEACH Grant negotiated rulemaking (Neg Reg) team — which reached consensus in February — the student loan issues team concluded its fourth and final meeting last week after reaching consensus on all issues. Negotiators representing ED and non-federal entities (such as schools, lenders, guarantors, servicers, and consumer groups) came to agreement on the outstanding issues, which included:

• Retroactive payments in the income-based repayment (IBR) plan,
• Various definitions used in determining eligibility for public service loan forgiveness,
• Definition of not-for-profit holder, and
• Special allowance calculations under IBR.

What's next
ED will publish proposed regulations in the Federal Register, with a request for community comments. After reviewing those comments, ED will publish final regulations no later than November 1, 2008. Shoptalk Online will keep you informed as these events occur.

More information
Please visit ED's "2007-08 Negotiated Rulemaking for Higher Education" Web page at www.ed.gov/policy/highered/reg/hearulemaking/2008/index2008.html for a full history of this Neg Reg, including meeting agendas, memoranda to the committee members, and draft proposed regulatory language.

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ED makes increase in Stafford aggregate for health professions students official

ED released Dear Colleague Letter (DCL) GEN-08-04/FP-08-04 officially announcing new Stafford aggregate loan limits for graduate and professional students preparing for the health professions. Effective April 14, 2008, the limit was increased to $224,000.

More information
You can read DCL GEN-08-04/FP-08-04 at http://ifap.ed.gov/dpcletters/attachments/GEN0804Attach.pdf.

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