Federal Updates

Arne Duncan confirmed as 9th U.S. Secretary of Education

On January 21, 2009, Arne Duncan was confirmed by the Senate as the 9th U.S. Secretary of Education. Secretary Duncan served as the chief executive officer (CEO) of the Chicago Public Schools.

Arne Duncan graduated magna cum laude from Harvard University in 1987, majoring in sociology. He was co-captain of Harvard's basketball team and was named a first team Academic All-American. From 1987-91, Mr. Duncan played professional basketball in Australia, where he also worked with children who were wards of the state.

Duncan returned to Chicago in 1992 to direct the Ariel Education Initiative, which seeks to create outstanding educational opportunities for inner-city children on the city's South Side. In 1998, he joined the Chicago Public Schools, and in June, 2001, Mayor Richard M. Daley named Duncan CEO of the Chicago Public Schools.

He also serves on the Board of Overseers for Harvard College and the Visiting Committees for Harvard University's Graduate School of Education and the University of Chicago's School of Social Service Administration.

More information
See www.whitehouse.gov/agenda/education for details about the Obama administration’s education plan.

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Reauthorization DCL: Loan forgiveness, cancellation, and discharge

Today's edition of Shoptalk Online continues coverage of selected topics from Dear Colleague Letter (DCL) GEN-08-12/FP-08-10, which provides a summary of most of the Higher Education Opportunity Act of 2008 (HEOA) provisions that amended and reauthorized the Higher Education Act of 1965 (HEA). This article features provisions that pertain to loan forgiveness, cancellation, and discharge for which the DCL provides further details or significant new information, or that may not have been widely discussed in various industry communications.

Note that two programs created by the HEOA — loan forgiveness for service in areas of national need and loan repayment for civil legal assistance attorneys — are currently unfunded and cannot be implemented until Congress provides funding. Shoptalk Online will provide more information about these programs as it becomes available.

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, convenient, searchable files that integrate the HEOA amendments into the HEA are provided on TG Online at www.tgslc.org/policy/hea.cfm. The DCL may be accessed on the Information for Financial Aid Professionals (IFAP) website at http://ifap.ed.gov/dpcletters/GEN0812FP0810.html.

Perkins Loan Program

Disability discharge (DCL GEN-08-12, page 140, and HEA Sec. 464(c)(1)(F))

Effective July 1, 2008, and subject to regulations, a borrower's Perkins loan may be discharged if the borrower is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that:

• Can be expected to result in death;
• Has lasted for a continuous period of not less than 60 months; or
• Can be expected to last for a continuous period of not less than 60 months.

In addition, a borrower who is determined by the Department of Veterans Affairs (VA) to be unemployable due to a service-connected disability also qualifies for a discharge on his or her Perkins loan. ED will issue additional guidance to Perkins loan holders describing the procedures for discharging these loans after working with the VA to identify the appropriate documentation needed to support a borrower's eligibility for the discharge.

Reinstatement of loans discharged due to death or disability (DCL GEN-08-12, page 140, and HEA Sec. 464(k))

Also effective July 1, 2008, and subject to regulations, ED is authorized to resume collection on a Perkins loan that has been discharged due to death or disability after the loan has been discharged if:

• The borrower receives another Title IV loan;
• The borrower earns income in excess of the poverty line; or
• The Secretary determines it is necessary to resume collection.

Expansion of teacher, Head Start, and law enforcement cancellation categories and addition of new public service cancellation categories (DCL GEN-08-12, pages 141-142, and HEA Sec. 465(a))

The HEOA expands the existing teacher, Head Start, and law enforcement Perkins cancellation categories and adds public service cancellation categories for borrowers who are full-time fire fighters, Tribal College or University faculty, librarians, or speech-language pathologists. Eligible service performed on or after August 14, 2008, in these expanded and new cancellation categories will qualify a borrower for cancellation, regardless of whether information on the expansion or the cancellation category appears on the borrower's promissory note.

Military service cancellation (DCL GEN-08-12, page 142, and HEA Sec. 465(a)(3)(A))

Effective August 14, 2008, the HEOA eliminates the 50 percent limitation on Perkins military service cancellations. Borrowers may now receive military service cancellation of up to 100 percent of the loan in increments of 15 percent (for the first and second years of service), 20 percent (for the third and fourth years of service), and 30 percent (for the fifth year of service).

FFELP or Federal Direct Loan Program (FDLP)

Teacher Loan Forgiveness (TLF) (DCL GEN-08-12, pages 123-124, and HEA Sec. 428J and 460)

For TLF applications and TLF forbearance applications received on or after August 14, 2008, the HEOA has broadened the definition of qualifying teaching service to include service at one or more locations that are operated by an educational service agency, but are not a school, and that have been determined by ED, in consultation with the state, to be eligible locations for this purpose. The chief administrative officer of an educational service agency is authorized to certify a borrower's eligibility for TLF for borrowers who performed their qualifying teaching service as employees of such an agency.

FDLP Public Service Loan Forgiveness (DCL GEN-08-12, pages 137-138, and HEA Sec. 455(m))

GEN-08-12 clarifies that for the purpose of a job in public interest law services, legal advocacy may be provided "on behalf of" low-income communities at a nonprofit organization rather than strictly "in" low-income communities at a nonprofit organization. It also specifies that full-time faculty teaching in "high needs areas" includes high needs subject areas or areas of shortage, including nursing faculty, foreign language faculty, and part-time faculty at community colleges.

Loan discharges based on Total and Permanent Disability (TPD) (DCL GEN-08-12, pages 132-133, and HEA Sec. 437)

Effective August 14, 2008, a FFELP or FDLP borrower is eligible for a TPD discharge if the borrower provides ED with documentation from the VA showing that the VA has determined the borrower to be unemployable due to a service-connected condition. The borrower will not be required to provide additional documentation to support the discharge. ED is currently working with the VA to determine what documentation is appropriate to support a borrower's eligibility for the discharge. As soon as that information is available, ED will issue additional guidance describing the procedures for discharging these loans.

Effective July 1, 2010, a FFELP or FDLP borrower will be eligible for a TPD discharge if the borrower is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that:

• Can be expected to result in death;
• Has lasted for a continuous period of not less than 60 months; or
• Can be expected to last for a continuous period of not less than 60 months.

ED is authorized to develop safeguards to prevent fraud and abuse within the TPD program, including developing regulations to require the reinstatement and resumption of collections on a loan if, after the loan has been discharged:

• The borrower receives another Title IV loan;
• The borrower earns income in excess of the poverty line; or
• The Secretary determines it is necessary to resume collection.

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. In some cases, ED must implement operational changes before parties may comply. Shoptalk Online will keep readers informed of any further guidance ED may provide in upcoming editions.

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

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2009 poverty guidelines released

The Department of Health and Human Services (HHS) has updated the United States federal poverty guidelines in the Federal Register dated January 23, 2009.

The poverty guideline is one qualifier that may be used in determining a borrower's eligibility for an economic hardship deferment. Lenders must use the new poverty guideline figures when determining eligibility on or after January 23, 2009. The NCHELP Operations Forms Subcommittee is updating the "HRD Information Sheet" used for processing the Economic Hardship Deferment Request until such time that ED publishes a revised form. When updated, this sheet will be available on NCHELP's e-library in the Forms section (See www.nchelp.org/elibrary/index.cfm?parent=61).

More information and questions
For more information about the updated poverty guidelines, visit the HHS website at http://aspe.hhs.gov/poverty/09poverty.shtml.

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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 January 2008 Closed School Monthly Report supplied by ED. Schools listed are those with which TG has done business or to which TG has otherwise provided services.

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