Federal Updates

Congress approves another HEA extension

On Tuesday, May 6, Congress approved S. 2929, a "clean," short-term extension of the Higher Education Act (HEA). S. 2929 is retroactive to the expiration of the previous extension, with effective dates of "as if enacted on April 30, 2008" through May 31, 2008. The bill has been sent to the president for his signature.

For more information
To access the text of S. 2929, go to Thomas, the U.S. Congress Web site, at http://thomas.loc.gov/. In the space for "Search Bill Text," enter "S. 2929," click on "Bill Number," and click "Search."

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New loan limits effective July 1, 2008

With the signing into law of H.R. 5715, the "Ensuring Continued Access to Student Loans Act of 2008" this week, the financial aid community must now begin to prepare for the increases in annual and aggregate loan limits contained in the bill. In response to the many inquiries TG has received about these increases, we are providing a quick reference guide that we hope will be helpful.

Dependent undergraduate students (excluding dependent undergraduates whose parents are unable to borrow a PLUS loan):

• 1st year = $5,500 (no more than $3,500 of this amount may be subsidized)
• 2nd year = $6,500 (no more than $4,500 of this amount may be subsidized)
• 3rd year = $7,500 (no more than $5,500 of this amount may be subsidized)
• Aggregate limit = $31,000 (no more than $23,000 of this amount may be subsidized)

Independent undergraduate students (and dependent undergraduates whose parents are unable to borrow a PLUS loan):

• 1st year = $9,500 (no more than $3,500 of this amount may be subsidized)
• 2nd year = $10,500 (no more than $4,500 of this amount may be subsidized)
• 3rd year = $12,500 (no more than $5,500 of this amount may be subsidized)
• Aggregate limit = $57,500 (no more than $23,000 of this amount may be subsidized)

Loan limits and aggregate limits for graduate and professional students are unchanged under H.R. 5715.

All of these increases will be effective for disbursements made on or after July 1, 2008.

Loan certification
TG's loan guarantee operations (LGO) is revising its systems to allow for certification of the new loan limits, and Shoptalk Online will notify readers when those revisions are complete. In the interim, to certify loans for the increased unsubsidized amounts, school customers should submit the unsubsidized certification separately, rather than as a combined subsidized/unsubsidized certification. Alternatively, if a school does not have the capability to submit the unsubsidized certification separately, it may send CommonLine change transactions (@24) for the higher limits. For assistance, please contact LGO at (800) 446-5616, or send an e-mail message to lgo.helps@tgslc.org.

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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School Preferred Lender Lists: Are You Ready for July 1, 2008?

What has your school decided to do?
As a reminder, new regulations that become effective July 1, 2008, were published as final rules on November 1, 2007. As noted in these rules, if schools choose to develop and use a preferred lender list (PLL), certain disclosures must be provided by the school:

• The method and criteria used by the school to select the lenders on the PLL
• Comparative benefits offered by each of the lenders included on the PLL
• A clear statement that a borrower may choose a lender not listed in the PLL

Other requirements and discussion pertaining to the development and use of a PLL are provided in Shoptalk Online editions 440 and 451, which may be helpful to review to determine if the school's current process and published list meets the new federal requirements.

Need help to be ready by July 1?
If a school has not yet completed its preparations to publish a PLL that meets the new regulatory requirements as of July 1, TG is available as a resource to provide further guidance and assistance as needed. Specific contact information is provided at the end of this article.

ED provides new clarification on PLL
On Friday, May 9, 2008, ED released Dear Colleague Letter (DCL) GEN-08-06/FP-08-06, providing guidance to schools that choose to make available a PLL to students, prospective students, and their families. ED affirms in this DCL its view that a PLL "may help students and their parents navigate the increasingly complex student loan landscape" and that "a borrower's choice of lender may be better informed by preferred lender lists and other consumer information on the federal student loan process." However, ED notes that since the final rules regarding the development and use of PLLs were published last November 1, "[t]he student loan marketplace has changed significantly," resulting in concerns from some schools regarding compliance with those new regulations.

Affiliated lender status
Many FFELP participants have also requested clarification of the requirement that a PLL include at least three unaffiliated lenders. GEN-08-06 states that "[ED] has reviewed this issue and has determined that the regulations only require that at least three lenders on a school's preferred lender list must be unaffiliated with each other regardless of the number of lenders on that list." While a school is not required to do so, ED notes that it would be helpful to the school's consumers to identify, as part of the school's PLL disclosures, any affiliations among the lenders on its list.

Alternative approaches to providing lender information other than using a PLL
The DCL states that a school that is unable to identify at least three unaffiliated lenders for inclusion on a properly constructed PLL may instead choose to provide the names of the lenders that have indicated they will provide, or continue to provide, FFELP loans to the school's students and their parents. If a school chooses this option, it must make clear that it is not endorsing the lenders, and that the borrower can choose to use any FFELP lender that will make loans to the borrower for attendance at that school.

As an alternative, a school may choose to provide a comprehensive list of lenders that have made loans to the school's students or parents in the past three to five years (or some other period) and that have indicated that they will continue to make such loans. In doing so, the school should not provide any additional information about the lenders. The list should not include any lender that offered a prohibited inducement to the school in the past in order to obtain loans. Again, if a school chooses this option, it must make clear that it is not endorsing these lenders. The school must provide a clear statement that a borrower can choose to use any FFELP lender that will make loans to the borrower for attendance at that school.

For schools that have already established a PLL and have been subsequently notified that one or more of the listed lenders has decided to discontinue making loans to the school's students and parents, ED will take such circumstances — over which a school has no control — into consideration in determining compliance with the regulations until at least July 1, 2009. TG will adopt the same approach on this issue.

TG strongly encourages schools to review the DCL in greater detail, as appropriate, using the link provided below.

For questions on any of the above information, contact Laura Kowalski at (800) 252-9743 or laura.kowalski@tgslc.org.

For questions regarding how TG's products and processes will support a school's PLL responsibilities, contact Cynthia Mayberry at (800) 252-9743 or cynthia.mayberry@tgslc.org.

For more information
To access GEN-08-06/FP-08-06, visit the Information for Financial Aid Professionals Web site at www.ifap.ed.gov/dpcletters/GEN0806.html.

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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 May 2008 Closed School Monthly Report supplied by the Department of Education.

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