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Federal Updates

Shoptalk Online 487, January 20, 2009

Federal Updates

Economic stimulus bill proposes changes to student aid programs

Last week, House Democrats released a preliminary, draft version of the American Recovery and Investment Bill of 2009, a new economic stimulus bill that is intended to provide supplemental appropriations for a variety of initiatives, including job preservation and creation, infrastructure investment, energy efficiency and science, and expansion or modification of certain federal student aid programs. House Committees are scheduled to start hearings on the bill this week.

Among the proposed changes in the student aid programs are increases in Pell grant funding and Work-Study funding, as well as increases in annual and aggregate unsubsidized Stafford loan limits. The bill also recommends simplification of the current education tax credits. Additional funding would be allocated for state fiscal relief programs to prevent cutbacks to key services, including appropriations for elementary, secondary, and higher education institutions.

More information
Shoptalk Online will keep readers informed as this bill progresses through the legislative process.

The text of the draft House American Recovery and Investment Bill of 2009 is available online at http://appropriations.house.gov/pdf/RecoveryBill01-15-09.pdf. The draft committee report is located at http://appropriations.house.gov/pdf/RecoveryReport01-15-09.pdf.

ED releases Special Allowance Rate memo and additional ECASLA guidance

Last week, ED issued a memo on FFELP special allowance rates for the period ending December 31, 2008. The memo outlines revisions to the special allowance calculation for loans whose special allowance calculation is based on the rate of 3-month commercial paper. Under the revised calculation, the average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in the quarter is 2.58 percent.

For loans for which the special allowance rate is calculated by using the average of the bond equivalent rates of the 91-day Treasury bills auctioned during the quarter ending December 31, 2008, the average of the rates is 0.35 percent.

ED has also released several additional Electronic Announcements (E-ANN) on the Ensuring Continued Access to Student Loans Act (ECASLA). These include:

E-ANN #44: Provides official notification of the participant yield rate for the quarter ending March 31, 2009, under the Master Participation Agreement. Based on the SAP rate noted above, the participant yield rate for the quarter ending March 31, 2009, is 3.08 percent.
E-ANN #45: Contains a link to the Asset-Backed Commercial Paper (ABCP) Conduit Put Agreement to be executed between ED, a Conduit, and that Conduit's Conduit Administrator, as provided in the terms and conditions for the Conduit Program.
E-ANN #46: Provides links to the Master Participation Agreement and the Master Loan Sales Agreement for the 2009-10 Loan Purchase Programs.

More information
The SAP memo, along with attachments providing more detailed information, is located on the Information for Financial Aid Professionals Web site at www.ifap.ed.gov/ffelspecrates/011609SAPMemo.html.

The ECASLA E-ANNs may be accessed through ED's ECASLA Web page at http://federalstudentaid.ed.gov/ffelp/.

Reauthorization DCL: Second look

In this week's edition we continue our coverage of Dear Colleague Letter (DCL) GEN-08-12/FP-08-10, which provides a summary of many of the Higher Education Opportunity Act of 2008 (HEOA) provisions that amended and reauthorized the Higher Education Act of 1965 (HEA). In this article we highlight additional topics for which the DCL provides further details or significant new information, or which may not have been widely discussed in various industry communications.

Although many readers may have already become familiar with the various provisions included in the HEOA, we encourage affected parties to review the DCL summaries alongside the HEOA text to ensure a complete understanding of the requirements and their respective effective dates. To facilitate this review, TG provides convenient, searchable HEA compilations that integrate the HEOA changes on its Web site at www.tgslc.org/policy/hea.cfm. The DCL may be accessed on the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/dpcletters/GEN0812FP0810.html.

Keep in mind that for many of the provisions, ED will conduct negotiated rulemaking sessions to provide clarification and interpretation of the law. In some cases, ED must implement operational changes before parties may comply.

Program Participation Agreement (PPA): 90/10 Rule (DCL GEN-08-12, pages 24, 68-69, 188, and 199, and HEA Sec. 487(a)(24) and (d))

The HEOA moves the 90/10 Rule to the PPA. This rule applies only to proprietary institutions and requires them to derive at least 10 percent of their revenue from non-Title IV sources. Previously, an institution that violated the 90/10 Rule for one year lost its eligibility to participate in the Title IV programs. However, under the HEOA, the institution's participation becomes provisional for two fiscal years, and ED must publicly disclose on the College Navigator Web site the identity of that institution and the extent to which the institution failed to satisfy the rule. If the institution does not satisfy the 90/10 Rule for two consecutive fiscal years, it loses its eligibility to participate in the Title IV programs for at least two fiscal years.

In addition, no later than July 1 of each year, ED must submit to Congress a report that contains, for each proprietary institution, the amount and percentage of the institution's revenues from Title IV sources and non-Title IV sources, as provided by the institution in its audited financial statements. (Review Shoptalk Online, edition 470, and see DCL GEN-08-12 for more details.)
Program Participation Agreement (PPA): Preferred Lender Lists (DCL GEN-08-12, pages 41 and 71, and HEA Sec. 487(a)(27) and (h))

HEOA amendments largely reflect the preferred lender list provisions in the November 1, 2007, final rules, but note that in addition to ensuring that the list contains at least three unaffiliated lenders for FFELP loans, the list must specifically indicate whether a lender is or is not an affiliate of each other lender on the list. If a lender is an affiliate of another lender, the institution must describe that affiliation. If a school provides a preferred lender list for private loans, the list must include at least two unaffiliated private loan lenders.
Ability to Benefit (DCL GEN-08-12, page 93, and HEA Sec. 484(d)(4))

Students without a high school diploma or its equivalent become eligible to receive Title IV funding upon satisfactory completion of six credit hours or the equivalent coursework that are applicable toward a degree or certificate. Note, however, that those students may not receive Title IV aid while earning the six credit hours. This change was effective August 14, 2008.
Professional Judgment disclosure (DCL GEN-08-12, page 92, and HEA Sec. 483(h))

ED must disclose on a student's Student Aid Report (SAR) that the student may, on a case-by-case basis, qualify for a professional judgment adjustment to the cost of attendance or the values of the data items required to calculate the EFC. The disclosure will include examples of qualifying special circumstances and additional information on the steps a student or family member may take in order to seek an adjustment.
Notice to students concerning penalties for drug violations (DCL GEN-08-12, pages 101-102, and HEA Sec. 485(k) and 484(r))

Upon enrollment, institutions must provide to every student a separate, clear, and conspicuous written notice about the suspension of eligibility for Title IV aid due to drug-related offenses. An institution must also provide a timely, separate, clear, and conspicuous written notice to each student who has lost eligibility under such circumstance, that notifies the student of the loss and advises the student how to regain eligibility.
Reporting student loans to consumer reporting agencies (DCL GEN-08-12, page 127, and HEA Sec. 430A)

The agreements governing the exchange of student loan information between ED and each guarantor, eligible lender, and subsequent loan holder with each consumer reporting agency now require reporting on FFELP, FDLP, and private education loans, applicable to all reports made to consumer reporting agencies on or after August 14, 2008.

What's next?
As required by the HEA, ED will issue regulations through the negotiated rulemaking process, through notice and comment rulemaking or, where the new regulations will merely reflect the changes to the HEA, without notice and comment. Shoptalk Online will provide additional information about this DCL and any further guidance ED may provide in upcoming editions.

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