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Federal Updates

Shoptalk Online 470, September 2, 2008

Federal Updates

ED issues hurricane guidance

On August 29, ED released an Electronic Announcement (E-ANN) notifying the financial aid community that is has established a website at www.ifap.ed.gov/disaster.html to provide guidance and contact information for students, schools, and others in the higher education community impacted by Hurricanes Gustav and Hanna.

In an effort to maintain open lines of communication, ED encourages all potentially impacted schools to provide alternate contact information at the website above or with its regional case team representative.

For hurricane-affected schools in Louisiana and Texas, please contact:

Jackie Shipman
School Participation Team — Dallas
(214) 661-9489
jackie.shipman@ed.gov

For hurricane-affected schools in Alabama, Florida, Georgia, Mississippi, North Carolina or South Carolina, please contact:

Laura Hall
School Participation Team — Atlanta
(404) 562-6265
laura.hall@ed.gov

Regulatory relief
ED also reminds the community of guidance regarding certain special provisions for affected individuals, as well as schools, lenders, and guaranty agencies, located in FEMA-declared disaster areas.

Dear Colleague Letter (DCL) GEN-04-04 details these provisions, and notes that "[u]nless stated otherwise, this regulatory relief applies to all Title IV loan borrowers, students, and their families who, at the time of a disaster, were residing in, employed in, or attending an institution located in an area designated as a Federally-declared disaster area. In addition, it applies to institutions, lenders, and guaranty agencies if they are located in such areas."

It also states that a Title IV participant must document the fact that it has used the exceptions included in this guidance and indicate what alternative procedures were followed.

The DCL provides specific exceptions for FFELP-related issues including repayment, forbearance, guarantor and lender disbursements, and NSLDS reporting. It also addresses agreements to permit study at another institution, length of academic year, cash management issues, lost student records, need analysis, professional judgment, satisfactory academic progress, verification, institutional charges and refunds, R2T4, and campus-based aid provisions.

TG will work with our affected borrowers in providing repayment relief, determined on a case-by-case basis or as specified in any forthcoming guidance.

For more information
The E-ANN is available on the Information for Financial Aid Professionals (IFAP) website at http://ifap.ed.gov/eannouncements/082908IFAPHurricaneWebsiteV2.html. To read the full text of DCL GEN-04-04, go to the IFAP website at http://ifap.ed.gov/dpcletters/GEN0404.html. If you have any questions, please contact TG customer assistance at (800) 845-6267, or send an message to cust.assist@tgslc.org.

Two additional public hearings scheduled

Last week, Shoptalk Online informed readers that ED had scheduled a series of four public hearings in preparation for conducting negotiated rulemaking (Neg Reg) beginning in February 2009. The Neg Reg sessions will focus on changes brought about by the Higher Education Opportunity Act (HEOA), the recently-enacted Higher Education Act (HEA) reauthorization bill.

Since then, ED has added two more hearing dates and locations. The current full list of hearings now includes:

September 19, 2008, at Texas Christian University, Fort Worth, Texas
September 29, 2008, at the University of Rhode Island, Providence Campus, Paff Auditorium, Providence, Rhode Island
October 2, 2008, at Pepperdine University, Malibu, California
October 6, 2008, at Johnson C. Smith University, Charlotte, North Carolina
October 8, 2008, at the U.S. Department of Education, 8th Floor Conference Center, 1990 K Street, N.W., Washington, DC
October 15, 2008, at Cuyahoga Community College, Cleveland, Ohio

For more information
ED will provide additional information on these hearings in the near future on its HEOA Web page at www.ed.gov/policy/highered/leg/hea08/index.html. We encourage readers to visit the HEOA Web page for information about the steps ED plans to take to assist the financial aid community in understanding and implementing this new legislation.

Reauthorization: Potpourri

In previous editions of Shoptalk Online, we examined some of the FFELP-related and grant-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 was signed into law on August 14, 2008, as it is extensive and covers many topics outside federal student aid that may impact various entities.

We also remind readers that many provisions in this bill are effective upon enactment, and while ED has historically worked with the financial aid community to develop guidelines and deadlines for implementing changes brought about by the reauthorization process, all affected parties are responsible for ensuring compliance with the effective dates in the legislation. For many of the provisions in the HEOA, ED will either publish regulations with a notice and comment period, or conduct negotiated rulemaking sessions to provide clarification and interpretation of the law.

In today's article, we review a "potpourri" of HEOA provisions: odds and ends that are neither FFELP-specific nor grant-specific. These apply to institutional eligibility issues, need analysis, and other Title IV (or non-Title IV, as in the case of Title X) programs. Among other things, the HEOA:

Revises the 90/10 rule, which currently states that a proprietary school must have not less than 10 percent of its revenue from sources other than Title IV funds. The HEOA, among other changes, increases what proprietary schools may count as revenue toward their 10 percent of non-Title IV revenue.

Specifically, to answer concerns that the College Cost Reduction and Access Act of 2007 (CCRAA) and Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) raised Stafford annual and aggregate loan limits — thereby increasing proprietary schools' Title IV revenue, which could affect compliance with the 90/10 rule — the HEOA provides a temporary remedy to allow for such schools to adjust to the new limits. Thus, for loans received by students between July 1, 2008, and July 1, 2011, the proprietary school counts as non-Title IV revenue the amount of unsubsidized Stafford loan funds that exceed the loan limits that were in effect prior to May 7, 2008 (the date of enactment of ECASLA).

The HEOA also moves the 90/10 rule to within the Program Participation Agreement and eases penalties for noncompliance with the rule.
Removes veterans' educational benefits from the definition of estimated financial assistance (EFA) — often still referred to as resources — effective July 1, 2010. Currently, a financial aid administrator (FAA) excludes veterans' educational benefits (and AmeriCorps benefits) from a student's EFA only when determining the student's eligibility for a subsidized Stafford loan.
Increases the amount of Federal Work-Study funds institutions of higher education may use for Job Location and Development (JL&D) programs to not more than 10 percent or $75,000 of their Federal Work-Study allocations, up from not more than ten percent or $50,000. Also adds "emergency preparedness and response" to the definition of community service.
Increases Perkins annual loan limits from $4,000 to $5,500 for undergraduate students and from $6,000 to $8,000 for graduate and professional students; increases Perkins aggregate loan limits from $20,000 to $27,500 for undergraduate students, from $40,000 to $60,000 for graduate and professional students, and from $8,000 to $11,000 for all other students. These increases are effective with the date of enactment of the HEOA, or August 14, 2008; thus, you could be utilizing these limit increases for otherwise eligible students for the current term. Note that the HEOA did not revive federal capital contributions for Perkins loans, so these increased limits, as is the case with all new Perkins awards, will have to come out of your own Perkins pocket.
Reduces the number of on-time, consecutive, monthly payments required for rehabilitation of a Perkins loan from twelve to nine. This aligns with the number of payments required for FFELP loan rehabilitation, although FFELP loan rehabilitation consists specifically of nine on-time, full monthly payments during a period of ten consecutive months.
Allows an FAA to use professional judgment to consider nursing home expenses not covered by insurance and unusually high dependent care expenses to adjust a student's expected family contribution (EFC). Also, allows an FAA to use discretion to consider a student's or dependent student's parents' dislocated worker status to adjust the EFC.
Allows an FAA to use discretion to offer unsubsidized Stafford loan funds to a dependent student whose parents do not support the student and refuse to complete a FAFSA. In a case like this, the student would not be required to complete the FAFSA (even without parental information) and would not be considered an independent student; instead, the student would simply be eligible for unsubsidized Stafford loan funds. This provision will present challenges in negotiated rulemaking in determining how much unsubsidized Stafford loan funds the student can borrow and how the school will collect pertinent information and perform required data matches without a FAFSA.
Authorizes the Secretary of Education to issue regulations that allow the use of the second preceding tax year — often referred to as the prior-prior year — information to simplify the FAFSA process. This may include data sharing between the Internal Revenue Service (IRS) and ED with the taxpayer's permission.
Adds a new section to the HEA, Title X ("Private Student Loan Improvement"), which addresses private education loans and the Truth-in-Lending Act.

The subtitles of Title X are the following:

Subtitle A — Preventing Unfair and Deceptive Private Educational Lending Practices and Eliminating Conflicts of Interest
Subtitle B — Improved Disclosures for Private Education Loans
Subtitle C — College Affordability
Subtitle D — Financial Literacy; Studies and Reports

Title X:

Defines a private education loan as a loan made by a private education lender expressly for postsecondary educational expenses, regardless of whether the loan is released directly to the borrower or through the school.
States that private education loans do not include Title IV loans, open-end consumer credit plans, and loans secured by real property.
Establishes prohibited inducement rules and conflict of interest rules; for example, a private educational lender may not use the name, emblem, mascot, or logo of a school in the marketing of private educational loans in a way that implies endorsement by the school.
Makes it unlawful to impose an early repayment penalty on a private loan.
Requires a private lender to provide borrower disclosures in the application or solicitation for a private educational loan, at the time of loan approval, and at the time of loan consummation.
Requires that a private loan applicant complete a "self-certification" that the school will provide to the applicant (on a form to be developed by the Secretary of Education) that will include information on the applicant's cost of attendance, EFC, and EFA, and the difference between such amounts.
Provides that no funds may be disbursed until acceptance of the loan by the borrower and provides that a borrower is entitled to a mandatory three-day cancellation period after loan consummation.

For more information
TG Online contains bookmarked, integrated versions of Title IV of the HEA, Parts B, D, G, and I; Title I; and sections of the Truth-in-Lending Act at www.tgslc.org/policy/hea.cfm.

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