Federal Updates

Reauthorization: Loan counseling

In recent Shoptalk Online articles (see editions 467, 468, 469, and 470), we have provided summaries of the various changes brought about by the Higher Education Opportunity Act of 2008 (HEOA), the legislation that amends and extends the Higher Education Act (HEA). This week we begin a series of articles focusing on the details of select provisions in hopes of clarifying the required changes and assisting our customers in planning for inevitable operational changes.

Keep in mind that while some provisions in the HEOA have delayed effective dates, most of the changes were effective upon enactment — August 14, 2008. Although we expect additional guidance from ED in the form of a Dear Colleague Letter in the near future, as well as the development of regulations through the negotiated rulemaking (Neg Reg) process (see Shoptalk Online edition 470 for more information), ED has stated that in the interim, all affected entities are responsible for taking the steps necessary to comply by the effective dates established by the HEOA.

Readers who have already reviewed the changes that the HEOA made to the HEA may have noticed that it includes many provisions that overlap with, and at times contradict, current regulatory requirements. Statute always supersedes regulation, so until these discrepancies are reconciled in the Neg Reg process, the financial aid community must adhere first and foremost to the requirements in the HEA, as amended, while continuing to comply with the regulations. Perhaps no topic in the HEA better illustrates this predicament than the sections on loan entrance and exit counseling.

The HEOA has codified many of the existing regulatory requirements, and has added several new provisions. We have highlighted the new and revised requirements only, and where the statutory and regulatory requirements are similar, we have noted the current regulatory language as well. All of the changes were effective upon enactment.

Entrance counseling
While a school still has the option of providing entrance counseling via electronic means — and indeed, ED encourages schools to use such interactive methods — now the school must also require the borrower to acknowledge receipt of the online information. Under the HEOA, a school now has the option to provide written counseling materials, either prior to or at the first disbursement of a loan, which the borrower must sign and return.

In addition to information currently required in regulations, the following new and revised information must be provided in Stafford and Grad PLUS entrance counseling:

• The effect of accepting the loan on eligibility for other forms of financial aid;
• An explanation of how interest accrues and is capitalized if it is not paid or subsidized;
• For unsubsidized Stafford loans and Grad PLUS loans, the borrower's option to pay interest rather than allowing it to capitalize;
• The school's definition of half-time enrollment during regular terms and — if applicable — summer terms;
• The consequences of not maintaining at least half-time enrollment;
• The importance of contacting the appropriate offices at the school if the borrower withdraws prior to completing his program of study, so the school can provide exit counseling;
• The borrower's obligation to repay the full amount of the loan, even if she does not complete her program within the regular completion time for that program (Note: Regulations also reference the borrower's obligation to repay even if she is unable to obtain employment upon completion or is otherwise dissatisfied with or does not receive the educational or other services that she expected.);
• The likely consequences of default, including delinquent debt collection procedures (Note: Regulations also reference adverse credit reports, federal offset, and litigation.);
• Information on the National Student Loan Data System (NSLDS) and how the borrower can access his records; and
• The name and contact information for the person the student can contact with questions about her rights and responsibilities or the terms and conditions of her loan.

The required information about sample monthly repayment amounts is also revised under the HEOA. Entrance counseling must now provide this information based on either:

• A range of levels of indebtedness of
  • Borrowers of subsidized or unsubsidized Stafford loans; and
  • As appropriate, graduate borrowers of unsubsidized Stafford loans or Grad PLUS loans;
• Or the average cumulative indebtedness of other borrowers in the same program as the borrower, at the same school

Previously, regulations required sample monthly repayment amounts based on a range of student indebtedness levels or the average indebtedness of unsubsidized or subsidized Stafford loan borrowers — or unsubsidized or subsidized Stafford and Grad PLUS loan borrowers, depending on the types of loans the student has borrowed — at the same school or in the same program of study at the same school.

Exit counseling
In addition to information currently required in regulations, the following new and revised information must be provided in Stafford, Grad PLUS, and Perkins exit counseling:

• Information on available repayment plans (already required under regulations), as well as a description of the different features of each plan;
• Sample information showing the average anticipated monthly payments under each repayment plan, including the difference in interest paid and total payments under each plan (Note: It is not clear if this requirement replaces or complements the current regulatory requirement for providing average anticipated monthly repayment amounts; schools may consider including both types of information until ED issues further guidance.);
• General descriptions of the terms and conditions for full or partial forgiveness or cancellation, deferment, or forbearance;
• A copy of a publication from ED — yet to be distributed — that will include extensive loan literacy and debt management information;
• The borrower's option to prepay each loan, pay on a shorter schedule, and change repayment plans;
• The likely consequences of default, including delinquent debt collection procedures (Note: Regulations also reference adverse credit reports, federal offset, and litigation.);
• General description of the types of tax benefits that may be available to borrowers;
• The availability of NSLDS (already required in regulations) as well as how the borrower can use the system to obtain information on her loans; and
• The consequences of consolidating Title IV loans, including at least:
  • The effects on total interest and fees to be paid, and length of repayment;
  • The effects on underlying loan benefits, including grace periods, and forgiveness, cancellation, and deferment options;
  • The option to prepay the loan or change repayment plans; and
  • Variation in borrower benefit programs among different lenders.

In the real world
What does this mean for a school? If a school provides in-person or written counseling, it should incorporate the new requirements into its counseling materials as quickly as possible. If it has developed and uses its own electronic counseling system, it should begin making revisions to its online content. In the meantime, we recommend that those schools consider providing the new information via alternative means. If the school uses an electronic system maintained by a third-party, it should contact that provider to discuss the status of any updates. Mapping Your Future® is currently working to revise its Online Student Loan Counseling site.

For more information
We encourage readers to download the Integrated HEA, Title IV, at TG Online and review the new entrance and exit counseling requirements, which are located in sections 485(l) and 485(b), respectively. The corresponding regulatory requirements are found in 34 CFR 682.604(f) and 682.604(g). For questions, contact TG customer assistance at (800) 845-6267, or send an e-mail message to cust.assist@tgslc.org.

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Periods of unavailability for processing Loan Participation Program funding requests

On September 3, ED released an Electronic Announcement (E-ANN) providing further guidance on the implementation of the loan purchase programs authorized by the Ensuring Continued Access to Student Loans Act (ECASLA).

E-ANN #24 alerts program participants of upcoming periods of unavailability for processing Loan Participation Program funding requests. While ED is committed to providing funding within seven business days — and has, in fact, averaged a 2-3 business day processing time so far — there are times when ED's payment processing system will be unavailable, and program participants should plan accordingly. ED will still be able to receive funding request packages during these periods, but cannot process the Loan Schedule file.

For more information
The E-ANN, including the dates of unavailability, is available online at http://federalstudentaid.ed.gov/ffelp/library/EA24.doc.

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Updated integrated HEA Title IV available on TG Online

TG is pleased to announce the availability of an updated integrated Higher Education Act (HEA) Title IV document that incorporates changes from the Higher Education Opportunity Act (HEOA). The NCHELP Program Regulations Committee contributed to this resource.

To assist customers in using this resource, TG has combined the integrated HEA Title IV into one easy-to-use, searchable PDF that includes:

• Part A — Grants To Students In Attendance At Institutions Of Higher Education
• Part B — Federal Family Education Loan Program
• Part C — Federal Work-Study
• Part D — Federal Direct Loan Program
• Part E — Federal Perkins Loans
• Part F — Need Analysis
• Part G — General Provisions Relating To Student Assistance
• Part H — Program Integrity
• Part I — Competitive Loan Auction Pilot Program
• Part J — Strengthening Historically Black Colleges And Universities And Other Minority Serving Institutions

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 www.tgslc.org/policy/hea.cfm.

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

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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 September 2008 Closed School Monthly Report supplied by ED.

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