ED issues DCL with details on ECASLA
On June 18, ED issued Dear Colleague Letter (DCL) GEN-08-08/FP-08-07, providing guidance on the provisions of the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). This letter, which may be accessed on the Information for Financial Aid Professionals (IFAP) website at http://ifap.ed.gov/dpcletters/061908GEN0808.html, discusses the major changes made by the ECASLA and the actions ED is taking to implement the legislation.
While the DCL largely summarizes guidance provided in prior DCLs, GEN-08-08 does provide some new information, as outlined below, that will help the financial aid community better understand some of the changes enacted by this legislation.
One of the objectives of the ECASLA is to encourage lender participation in the FFELP with the goal of ensuring that borrowers continue to have access to loan funds. ED notes in the DCL that "[s]ince the enactment of the Higher Education Act of 1965, non-federal lenders have provided the majority of the capital necessary to make student loans" and that the ECASLA has allowed ED to develop provisions that continue to support the FFELP as a successful public/private partnership.
Highlights of those provisions (described previously in Shoptalk Online editions 453 and 456) include:
- FFELP purchase and short-term liquidity programs for subsidized and unsubsidized Stafford loans, and parent and Grad PLUS loans. Eligible loans must have a loan period that includes, or begins on or after, July 1, 2008; and must be first disbursed on or after May 1, 2008, but no later than July 1, 2009. Loans purchased under this program must be fully disbursed no later than September 30, 2009.
ED states that it is continuing to refine the pricing and terms of these programs to meet the legal requirement that they result in no net cost to the federal government, and will finalize them in a Federal Register to be published soon.
In response to this provision, several FFELP lenders have recently stated their commitment to continue or resume participation in the FFELP.
- In the event borrowers face wide-spread difficulty obtaining conventional FFELP loans in spite of the provision described above, the ECASLA revises the lender-of-last-resort (LLR) program to permit institution-wide LLR eligibility, while retaining the existing borrower-based LLR provision. In order to request institution-wide LLR eligibility, a school must determine and document that 80 percent or more of its borrowers are unable to obtain conventional FFELP loans; and that it has made at least three attempts to find participating lenders that will make conventional FFELP loans, beyond those lenders that have previously provided such loans to its students.
If a school determines that it is necessary to pursue institution-wide LLR eligibility TG suggests its School Fact Sheets as a helpful starting point in the process of locating participating lenders.
To use this resource, go to www.tgslc.org/factsheets/schools/HTML_version.cfm, enter the search criteria for the school, then select "TG Gross Loan Volumes of Lenders by Fiscal Year." This search function provides a list of lenders that have provided FFELP loans to the school's borrowers for the current and immediately preceding fiscal years. In making at least three attempts to find a participating lender, a school cannot consider the lenders included in its School Fact Sheets, since those lenders have previously provided loans to that school's students.
Note that ED may determine, even if the school meets the minimum eligibility requirements described above, that there are lenders willing to make conventional FFELP loans to the school's borrowers; if so, ED will provide the school (and the guarantor) with information about those lenders rather than granting institution-wide LLR eligibility.
If ED grants an institution-wide LLR designation, the school's borrowers may receive LLR loans for the specified period of the institution's designation, even if a limited number of borrowers are able to secure conventional FFELP loans. All institution-wide LLR designations will expire on June 30, 2009.
Increased undergraduate Stafford limits
GEN-08-08 also addresses the increases in Stafford annual and aggregate undergraduate loan limits for loans first disbursed on or after July 1, 2008. For loan periods that cross over July 1, 2008, the increased loan limits apply only if the first disbursement will be on or after July 1, 2008; or if the school certifies a supplemental loan for the loan period with a first disbursement on or after July 1, 2008.
The DCL includes detailed loan charts that reflect the increases, and provides clarification on certain loan limits that have generated some confusion and discussion in the financial aid community:
- Dependent undergraduate students whose parents are unable to borrow a PLUS loan may not receive both the $2,000 unsubsidized Stafford annual loan limit increase (specifically available to dependent undergraduates, except those whose parents are unable to borrow a PLUS loan) and the $6,000 or $7,000 additional unsubsidized Stafford annual loan limit increase (specifically available to dependent undergraduates whose parents are unable to borrow a PLUS loan).
- The annual Stafford loan limit for a dependent student taking preparatory coursework for enrollment in an undergraduate program remains unchanged at $2,625. However, the additional unsubsidized Stafford annual loan limit for an independent, undergraduate student taking preparatory coursework necessary for enrollment in an undergraduate program is increased from $4,000 to $6,000.
- The additional unsubsidized Stafford limit for a student taking preparatory coursework for enrollment in a graduate or professional program, or in a teacher certification program, remains unchanged at $7,000.
ED suggests that if a school has already packaged students for the 2008-09 academic year using the previous loan limits, it can either re-package an otherwise eligible student with the increased loan amounts, or provide notification to the student that he or she may be eligible for increased amounts of unsubsidized Stafford loans.
Changes to PLUS loan credit criteria and repayment
The ECASLA enables a lender, in determining a parent or Grad PLUS borrower's eligibility, to consider certain extenuating circumstances (specifically, delinquent mortgage or medical bill payments) occurring between January 1, 2007, and December 31, 2009. Regarding this provision, ED encourages lenders to "re-examine the eligibility of applicants who may have been denied previously to determine whether these extenuating circumstances exist."
Another new provision allows a parent PLUS borrower to postpone repayment until either 60 days after the loan is fully disbursed or until six months after the dependent student on whose behalf the parent borrowed ceases to be enrolled on at least a half-time basis. This option will be available for loans that are first disbursed on or after July 1, 2008.
For a Grad PLUS borrower, and for a parent PLUS borrower who does not elect to postpone repayment beyond 60 days after the loan is fully disbursed, the Higher Education Act now requires the lender to capitalize the interest that accrues on the loan from the date of the first disbursement until 60 days after the loan is fully disbursed (instead of capitalizing no more frequently than quarterly, as is currently permitted). The lender must notify the borrower of the capitalization and provide the opportunity to pay the capitalized amount of accrued interest. This provision applies to loans that are first disbursed on or after July 1, 2008.
For a parent PLUS borrower who chooses to postpone repayment, the interest that accrues on the loan prior to the postponed repayment start date may be paid, at the option of the borrower, either monthly or quarterly; or it may be capitalized no more frequently than quarterly.
Changes to ACG and SMART Grant Programs
ECASLA not only ensures and increases loan access, it also aims to boost participation in the Academic Competitiveness Grant (ACG) and National SMART Grant Programs. Effective January 1, 2009, provisions in the ECASLA (detailed in Shoptalk Online edition 453) will allow a greater number of students to meet the eligibility requirements of the programs.
ED also provides this cautionary note: "The changes to the ACG and National SMART Grant programs are effective January 1, 2009; however, we also note that these changes to the ACG and National SMART Grant programs may possibly be revisited in the next few weeks. Therefore, we will be providing more information about the implementation of these changes in the very near future."
For questions about the ECASLA, call TG customer assistance at (800) 845-6267, or send an message to email@example.com.
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ED releases draft proposed regulations for loan provisions
With its release of a draft version of the notice of proposed rulemaking (NPRM) for loan issues, ED has taken one of the final steps in a negotiated rulemaking (Neg Reg) process that began last October (see Shoptalk Online edition 428). The announcement of the draft proposed regulations is available on the Information for Financial Aid Professional (IFAP) website at http://ifap.ed.gov/eannouncements/06192008DraftStudentLoanNotice.html.
Note that although this is a draft, ED does not expect any changes to the language prior to its official publication in the Federal Register, which ED expects to occur in the very near future.
Although the loan issues Neg Reg team reached consensus on the draft version of the proposed rules, ED received comments from the Department of Defense and the Department of Health and Human Services, following the conclusion of the Neg Reg process. Those comments resulted in technical changes that are reflected in the proposed rules.
The proposed regulations concern various provisions enacted by the College Cost Reduction and Access Act of 2007 (CCRAA), including the following topics:
- Eligibility for economic hardship deferment;
- Military service deferment and post-active duty student deferment;
- Income-based repayment plan;
- Public service loan forgiveness; and
- Definition of eligible not-for-profit holder.
When the NPRM is published in the Federal Register, ED will provide a 45-day public comment period. Shoptalk Online will notify readers when the Federal Register notice is published, and will provide additional comment submission information at that time. Following ED’s review of comments, the final regulations will be published November 1, 2008, and will become effective beginning July 1, 2009.
Detailed information about this Neg Reg session is available on ED's website at www.ed.gov/policy/highered/reg/hearulemaking/2008/index2008.html#loans. For questions about the recently released regulations, contact TG customer assistance at (800) 845-6267, or send an message to firstname.lastname@example.org.
TEACH grant final rules
As noted last week, ED released a draft version of the final rules for the Teacher Education Assistance for College and Higher Education (TEACH) Grant program (see Shoptalk Online edition 459). Yesterday, ED published the official version of the final rules, which are effective on July 1, 2008.
The TEACH Grant negotiated rulemaking committee reached consensus in February 2008 discussed during its meetings (see Shoptalk Online edition 451). After reviewing public comments regarding the proposed rules, ED made a few minor technical corrections and a small number of changes based upon submitted comments and suggestions.
The TEACH Grant Program is a non-need-based grant program that provides up to $4,000 per year to students who are enrolled in an eligible program and who agree to teach in a high-need field at a low-income elementary or secondary school for at least four years within eight years of completing the program for which the TEACH grant was awarded. If the grant recipient fails to complete the required teaching service, the TEACH grant is converted to a Federal Direct unsubsidized loan.
For more information
To view the full Federal Register regarding the TEACH grant, see http://edocket.access.gpo.gov/2008/pdf/E8-13587.pdf.
NSLDS Newsletter #18 available
On June 13, ED released NSLDS Newsletter #18, which discusses the rules and responsibilities of schools and school servicers, their CEO/President, Primary Destination Point Administrator (PDPA), and individual users under which National Student Loan Data System (NSLDS) online access is granted.
Highlights of the newsletter include:
- Outline of school and school servicers responsibility for NSLDS access;
- Summary of personal responsibilities for accessing NSLDS online and protecting privacy information;
- Guidelines for establishing relationships and acceptable uses of NSLDS;
- NSLDS password rules;
- Reminder that NSLDS online users' loans must be in good standing; and,
- Instructions for protecting data.
To access NSLDS Newsletter #18, visit the Information for Financial Aid Professionals (IFAP) website at http://ifap.ed.gov/nsldsmaterials/Newsletter18.html.
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