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Federal Updates

Shoptalk Online 499, April 14, 2009

Federal Updates

PLUS auction cancelled

On April 10, 2009, ED announced the cancellation of the competitive loan auction pilot program for parent PLUS loans (auction). The announcement states that during the 2009-10 and 2010-11 award years, FFELP parent PLUS loans may be made by any eligible lender to parents of students attending eligible educational institutions in any state.

As reported previously in Shoptalk Online (see edition 493), ED published a notice in the March 3, 2009, Federal Register that established an April 1, 2009, deadline for lenders to submit auction pre-qualification requests. In order for the auction to have been considered successful for any state, at least two lenders must have submitted pre-qualification requests for that state. However, ED did not receive two requests for pre-qualification for any state, and for the "vast majority" of states, ED received no requests at all. For this reason, ED is cancelling the auction that was scheduled to occur on April 15, 2009.

Congress is also currently considering legislation that addresses the auction (see Shoptalk Online edition 497). Shoptalk Online will keep readers informed as that bill progresses through the legislative process.

For more information
The Electronic Announcement about the auction cancellation is available on the Information for Financial Aid Professionals website at http://ifap.ed.gov/eannouncements/041009PLUSAuction.html.

ECASLA Electronic Announcement #55

ED has issued Ensuring Continued Access to Student Loans Act (ECASLA) Electronic Announcement #55, providing instructions for obtaining access to information from ED's servicer for the Master Loan Sales Agreement (MLSA) Agreed Upon Procedures (AUP) letter.

In accordance with Section 5 (B)(ix) of the MSLA for the 07-08 Short-Term Purchase Program and the 08-09 Loan Purchase Commitment Program, the Seller must deliver to ED an AUP letter by an independent public accountant in an acceptable form. The AUP letter assists ED in evaluating whether sales of loans to ED were in compliance with the provisions of the 2007-08 MLSA or the 2008-09 MLSA, as appropriate.

ED's Office of the Inspector General (OIG) issued the Agreed Upon Procedures Attestation Engagement Guides that lenders participating in the 2007-08 Short-Term Purchase Program and the 2008-09 Loan Purchase Commitment Program must use for the AUP letters. The guides are located at www.ed.gov/about/offices/list/oig/nonfed/ecalsa-aup-030409.pdf and www.ed.gov/about/offices/list/oig/nonfed/ecalsa-aup-12092008.pdf, respectively.

The guides require that auditors obtain loan information from ED's servicer. To obtain this information, the auditor will be required to execute a security agreement regarding the use and safeguarding of such information.

More information
For information on how to execute the security agreement, please contact Greg Plenty at (202) 377-3253 or at gregory.plenty@ed.gov. The complete announcement, and all previous ECASLA guidance issued by ED, is available at www.federalstudentaid.ed.gov/ffelp.

ED reminds schools about professional judgment for special circumstances

In light of the current economic challenges, ED recently released Dear Colleague Letter (DCL) GEN-09-04, reminding schools that they may use professional judgment (PJ) when determining a student's eligibility for federal student aid.

For families that may be balancing college with a challenge such as a job loss, foreclosure, or medical expense, PJ becomes particularly significant. In the DCL, ED encourages schools not only to "do more than provide good service to the students who request that you make an adjustment" but also to "reach out to your students (and prospective students), particularly those who seem to have hit a rough patch, to make sure that they know there may be ways that you can help." Exercising PJ may increase a student's eligibility for a Federal Pell Grant, campus-based aid, or subsidized Stafford loan — and may make the difference in whether a student can begin or continue his or her studies.

PJ primer
In GEN-09-04, ED reminds schools of several principles to keep in mind when making PJ decisions:

For every PJ determination, the school should seek to obtain and maintain verifiable third-party documentation of the changed circumstances in order to support the decision.
PJ adjustments must be made on a case-by-case basis; that is, consideration should include special circumstances that differentiate an individual student from a class of students. The DCL notes that, "[w]hile students may face common or similar issues in these economic times, you may not establish automatic categories of special circumstances and provide identical treatment to all students in that circumstance. You could, however, identify a category to reach out to (for example, all students that have a parent who recently lost a job) but then [you] would need to assess and document how each individual student's situation was affected."
ED also noted that reductions in income may occur for a variety of reasons, some of them voluntary, and a school may use PJ to account for "the income loss associated with a prospective student's decision to leave the workforce or to reduce work hours in order to return to school." Whether the loss of income is voluntary or involuntary, the school may adjust the student's or family's FAFSA income data so that it more accurately reflects the student's or family's current and projected economic reality. As an example, ED suggests that for an individual who has lost a job or has taken a significant salary cut beginning in November 2008, the school may choose to project income for the next 12-month period (December 2008 through November 2009) and use that figure instead of the base year income (calendar 2008) that was initially used in the calculation of the student's expected family contribution (EFC).

More information
To access DCL GEN-09-04, go to http://ifap.ed.gov/dpcletters/GEN0904.html.

The DCL refers to more PJ information in the Application and Verification Guide. TG has posted the recently released 2009-10 version in PDF format on TG Online at www.tgslc.org/policy/fsa_handbook.cfm. The section on PJ begins on page AVG-105.