Federal Updates

HEA extension on hold

Some readers may have noticed that the last extension of the Higher Education Act (HEA), reported in Shoptalk Online edition 430, expired on April 30. Although the Senate has approved another extension (S.2929) through May 31, the House has yet to take up the issue.

Although some in the financial aid community have expressed concern about the expiration of the HEA, we wish to reassure our readers that business should and will continue as usual until Congress can turn its attention again to extending — and eventually, reauthorizing — the statute.

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Congress approves student loan access bill

On May 1, 2008, Congress approved H.R. 5715, the "Ensuring Continued Access to Student Loans Act of 2008." This bill, first reported in Shoptalk Online edition 451, responds to recent events in the U.S. credit markets. Selected provisions of the final version of H.R. 5715, with various effective dates noted, are summarized below.

Effective upon enactment, H.R. 5715

• Authorizes the Secretary of Education to designate an entire institution as eligible for the lender-of-last-resort (LLR) program after a school demonstrates that it has:
  • Attempted to secure lenders willing to make loans to its students, and
  • Met a minimum threshold of students unable to obtain FFELP loans.
• (The authorization and designation both expire on June 30, 2009.)
• Requires guarantors and lenders serving in the LLR program to abide by existing statutory marketing and inducement prohibitions.
• Authorizes the Secretary, acting as a secondary market lender, to purchase, or to enter into forward commitments to purchase, FFELP Stafford and PLUS loans originated on or after October 1, 2003, and before July 1, 2009. Such purchases must not carry any cost for the federal government and must provide that the FFELP lender that originated the loans uses the sale proceeds to continue its FFELP participation. This authorization also:
  • Allows lenders to continue servicing loans purchased by the Secretary as long as the cost does not exceed the cost ED would otherwise incur for servicing those loans.
  • Instructs the Secretary of Education to consult with the Secretary of Treasury to determine purchase prices.
  • Requires publication of the terms and conditions governing the purchase and the methodologies used to determine purchase prices in the Federal Register.
• Requires the Government Accountability Office (GAO) to analyze how increased loan limits affect college costs and private loan borrowing and report findings within one year of bill becoming law.
• Urges federal agencies to coordinate efforts to ensure access for federal student loans for academic year 2008-09.

Effective July 1, 2008:

• Requires the Secretary, beginning July 1, 2008, and ending June 30, 2010, to:
  • Disseminate information regarding LLR loan availability.
  • Provide copies of new or revised LLR agreements with guarantors.
  • Report on a quarterly basis the number and amounts of LLR loans originated by each guarantor and lender and any related activities.
  • Offer a budget estimate comparing costs of LLR loans to Direct loans.
  • Beginning July 1, 2010, provide an annual LLR report.
• Increases by $2,000 the Stafford annual loan limit for dependent undergraduates; this increase may be composed only of unsubsidized funds.
• Increases by $2,000 the additional unsubsidized Stafford annual loan amounts available to independent undergraduates, and to dependent undergraduates whose parents cannot obtain a PLUS loan. These limits will increase from an additional $4,000 to $6,000 per year for first- and second-year undergraduate students, and from $5,000 to $7,000 per year for third-, fourth-, and fifth-year undergraduate students.
• Increases the Stafford aggregate loan limits to $31,000 for dependent undergraduates and to $57,500 for independent undergraduates and dependent undergraduates whose parents cannot obtain a PLUS loan (but the subsidized portion of the aggregate limit still may not exceed $23,000 for both groups).
• Provides a parent PLUS loan borrower the option to defer repayment up to six months after his or her dependent student ceases to be enrolled at least half time. Regarding the interest associated with that loan:
  • The parent borrower may pay accruing interest on a monthly or quarterly basis; or
  • The lender may capitalize the unpaid accruing interest on a quarterly basis
• Provides deferment of a PLUS loan when the borrower meets certain existing deferment eligibility, such as unemployment, economic hardship, and pursuing at least half-time study.
• Permits a lender to consider an otherwise eligible PLUS loan applicant if between January 1, 2007, and December 31, 2009, he or she is:
  • Delinquent 180 days or fewer on a primary residence mortgage or medical bill
  • Delinquent no more than 89 days on any other debt

H.R. 5715 also changes the Academic Competitiveness Grant (ACG) and National Science and Mathematics Access to Retain Talent Grant (SMART) programs as follows. These provisions are effective January 1, 2009:

• Extends prorated ACG and SMART grant eligibility to students enrolled at least half time.
• Broadens ACG and SMART grant eligibility to eligible noncitizens (i.e., permanent residents).
• Replaces "academic year" with "year" for purposes of progression through grant levels.
• Seems to diminish the Secretary's authority to define "rigorous secondary school program of study," deferring to state designation of such programs.
• Extends first-year ACG eligibility to students enrolled in at least a one- or two-year certificate program at a degree-granting institution
• Offers SMART grant eligibility to students who are enrolled in a single baccalaureate-level liberal arts curriculum if the coursework is equivalent to a SMART-eligible major at other bachelor degree-granting institutions.
• Adds a fifth year to SMART eligibility for programs that require five years.

Unlike the loan-related provisions of H.R. 5715, changes to the ACG and SMART Grant Programs are subject to the negotiated rulemaking process prior to implementation.

What's next?
The bill has been sent to the president for his signature. Shoptalk Online will keep our readers informed as more information about the implementation of H.R. 5715 becomes available.

More information
To access the text of H.R. 5715, go to Thomas, the U.S. Congress Web site, at http://thomas.loc.gov/. In the space for "Search Bill Text," enter "H.R.5715," click on "Bill Number," and click "Search."

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ED issues new Dear Colleague Letter on lender-of-last-resort

ED has released a Dear Colleague Letter (DCL) GEN-08-05/FP-08-05, providing additional guidance on the lender-of-last-resort (LLR) program. The DCL may be accessed online at www.fp.ed.gov/fp/attachments/activities_whatsnew/55LLRDCL.pdf. Look for more information in next week’s edition of Shoptalk Online.

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Closed school corner

The following table provides a list of newly reported school closures and error corrections from the Postsecondary Educational Participants System (PEPS) and from the April 2008 Closed School Monthly Report supplied by the Department of Education.

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