Federal Updates

Reauthorization: More FFELP-related provisions

In last week's Shoptalk Online, we examined some of the FFELP-related provisions included in the Higher Education Opportunity Act (HEOA), the legislation that amends and extends the Higher Education Act (HEA). We again encourage readers to carefully review the legislation, which the president signed into law last Thursday, as it is extensive and covers many topics outside of federal student aid that may impact various entities. In some cases, if the changes are more lengthy or detailed than we can address in this article, we have noted the change and provided its location in the integrated HEA (see the following article) for easy reference.

Although many provisions in this bill are effective upon enactment, ED has historically worked with the financial aid community to develop guidelines and deadlines for implementing changes brought about by the reauthorization process. Also keep in mind that for many of the provisions in the HEOA, ED will conduct negotiated rulemaking sessions to provide clarification and interpretation of the law.

In today's article, we will consider additional FFELP-related provisions included in the bill. Here is a selection of significant changes included in HEOA:

• Revises the Program Participation Agreement to require a school that participates in a Title IV loan program to develop a code of conduct that prohibits conflicts of interest, to inform staff of the code of conduct at least annually, and to publish the code on the school's website, (see Sections 487(a)(25) and 487(e) of the integrated HEA). Note that some of these requirements overlap with, and complement, provisions related to prohibited inducements found in the November 1, 2007, final rules.
  
  The code must include a ban on revenue sharing agreements and contracting arrangements; a prohibition on assigning a FFELP lender to a first-time borrower or refusing to certify (or delaying certification of) a loan based on the borrower's choice of lender or guarantor; and a prohibition on accepting a lender's offer of private loan funds in exchange for the school's promise to provide a preferred lending arrangement or a specified number or volume of FFELP loans.
  
  Under the code of conduct, a school may accept reasonable reimbursement for service on an advisory board, commission, or group established by a lender, guarantor, or group of lenders or guarantors.
  
  The code must also prohibit the soliciting and accepting of gifts from a lender, servicer, or guarantor. A gift is defined as "any gratuity, favor, discount, entertainment, hospitality, loan, or other item having a monetary value of more than a de minimus amount"; but the following are expressly excluded from the definition of gift:
  • Entrance and exit counseling provided for the school's borrowers (as long as the school's staff are in control of the counseling, whether it is provided in person or electronically; and the counseling does not promote the products or services of any specific lender);
  • Food, refreshments, training, or informational material included in a training session that is designed to improve the service of a lender, guarantor, or servicer to the school, if the training contributes to the professional development of the staff; and
  • Standard material, activities, or programs on issues related to a loan, default aversion, default prevention, or financial literacy.
• Requires a school with a preferred lender list (PLL) to comply with certain disclosure requirements, which closely mirror the PLL requirements found in the November 1, 2007, final rules (see Sections 487(a)(27) and 487(h) of the integrated HEA). Of special note, however, is a provision that requires an institution that recommends, promotes, or endorses private education loans to include at least two unaffiliated private lenders on any private loan preferred lender list.
• Revises the cohort default rate (CDR) calculation by expanding the "window" of repayment from 2 to 3 years, beginning with the FY 2009 cohort; raises the CDR threshold for school ineligibility from 25 percent to 30 percent beginning in fiscal year 2012; creates new appeal processes for schools that do not meet the revised threshold; and requires schools that do not meet the revised threshold to establish a default prevention task force.
• Requires a school as lender to submit an annual compliance audit to ED.
• Allows a FFELP, Direct, or Perkins loan borrower to qualify for a Total and Permanent Disability (TPD) discharge if Veterans Affairs determines that he or she is unemployable due to a service-connected condition. The borrower must provide documentation to the Secretary of Education to verify this status. HEOA also revises the timeline for TPD determinations, permitting discharge if a borrower is unable to engage in substantial gainful activity due to a medically-determined physical or mental impairment that can be expected to result in death, and has lasted — or can be expected to last — over a continuous period of not less than 60 months.
• Excludes veterans education benefits, and awards or benefits received under the National and Community Service Act (for example, AmeriCorps awards), from a borrower's estimated financial assistance in determining his or her eligibility for a subsidized Stafford loan.
• Creates new loan forgiveness and repayment programs, on a "first-come, first-served" basis, for certain FFELP loans made to a borrower serving in an area of national need or employed as a civil legal assistance attorney (see Section 428K of the integrated HEA for a full list of areas of national need).
• Increases the borrower disclosures a lender must provide at various points throughout the life of a loan:
  • Before disbursement;
  • Before repayment;
  • During repayment;
  • When granting a deferment;
  • When approving a forbearance;
  • When a borrower is having difficulty making payments; and
  • During delinquency.

The full list of required items is located in Section 433 of the integrated HEA.

• States that a deceased student's estate (or the estate of a deceased student's family) must not be required to repay any Title IV aid, interest, collection costs, or other charges.
• Requires that a student loan reported to a consumer reporting agency must be reported as an "education loan" and must include the borrower's repayment status.

For more information
For questions, contact TG customer assistance at (800) 845-6267, or send an message to cust.assist@tgslc.org.

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Updated integrated HEA available on TG Online

Last Thursday, President Bush signed into law H.R. 4137, the Higher Education Opportunity Act (HEOA). As a result, the NCHELP Program Regulations Committee has released integrated Higher Education Act (HEA) documents that incorporate changes from the HEOA to certain sections of the law.

To assist customers in using this resource, TG has combined the integrated HEA into one easy-to-use, searchable PDF.

• Part B — FFELP
• Part D — Federal Direct Loan Program
• Part G — General Provisions Relating to Student Assistance
• Part I — Competitive Loan Auction Pilot Program

The PDF shows the language that has been stricken as well as language that has been added. Additionally, each part and section has been bookmarked for easy navigation.

Accessing the bookmarked integrated HEA
To access this practical tool, visit TG Online at http://www.tgslc.org/policy/hea.cfm.

More information
For questions about the integrated HEA, contact TG customer assistance at (800) 845-6267 or send an message to cust.assist@tgslc.org.

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More loan purchase program guidance from ED

Over the past several weeks, Shoptalk Online has provided summaries of a series of Electronic Announcements (E-ANN) from ED with guidance on the operational details of the loan purchase programs authorized by the Ensuring Continued Access to Student Loans Act (ECASLA). We continue this week with a quick look at the E-ANNs that have been released since our last update:

• E-ANN #16, released August 8, replaces E-ANN #12, which provided submission instructions for several loan purchase program documents. E-ANN #16 includes revised copies of the:
  • Security Release Certificate (Exhibit G) from the Master Participation Agreement (MPA)
  • Loan Schedule and Custodial Certification Data File Fields — Definitions and Submission Procedures
  • Loan Schedule Custodial Certification file layout
  • Funding Request Submission Instructions
• E-ANN #17, released August 8, describes the Monthly Aggregate Settlement Date Report Submission Procedures, identifies the information that should appear in the Monthly Settlement Aggregate Report, and includes the "Monthly Aggregate Settlement Date Report" file layout and the "Monthly Aggregate Settlement Report Data Fields - Definitions and Submission Procedures."
• E-ANN #18, released August 8, announces a 3.25 percent participant yield rate for the quarter ending September 30, 2008, and instructs participants to use this rate when calculating ED's yield on participation principal balances that ED funds during the quarter of July 1, 2008, through September 30, 2008.
• E-ANN #19, released August 11, provides a list of entities approved to serve as custodians for the purpose of the Master Participation Agreement. The list will be amended as ED approves new custodians.
• E-ANN #20, released August 11, replaces E-ANN #13, and includes a revised version of the "Loan Schedule and Custodial Certification Table Load Procedures," which details the edits that will be run against each Loan Schedule and Custodial Certification data file transmission prior to ED's funding of the participation request.

For more information
The E-ANNs and related attachments are all posted in the "News and Announcements" section at http://federalstudentaid.ed.gov/ffelp/.

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New and revised forms for FFELP participants

The NCHELP Program Operation's Default Aversion and Claim Standardization Subcommittee (DACS) has released two revised forms and one new addendum for FFELP participants, which reflect various legislative, regulatory, and operational changes.

• FFELP Default Aversion Assistance Request (DAAR) Form
  Includes the new post-active duty deferment in the list of available deferments and forbearances.
  
  
• FFELP Claim Form
  Includes the new Identity Theft claim type code in the filing instructions, and modifies the definitions and instructions for the Ineligible Borrower claim type code.
  
  
• FFELP Ineligible Borrower and Identity Theft Addendum
  Supports and provides additional information necessary to request claim reimbursement for Ineligible Borrower or Identity Theft claims. This new form is designed to accompany the FFELP Claim Form.

Although these forms are available for immediate use, industry participants will need to coordinate the use of, and the eventual complete transition to, the updated forms.

For more information
The forms are available on TG Online at www.tgslc.org/forms/index.cfm.

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

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