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Shoptalk Online Contents

Trends and Issues

Shoptalk Online 503, May 12, 2009

Trends and Issues

TG receives questions on unsubsidized Stafford loan for dependent student who lacks parental support

Shoptalk Online edition 486 offered details regarding the provision in the Higher Education Act of 1965 (HEA), as amended by the Higher Education Opportunity Act (HEOA), that allows a school to award an unsubsidized Stafford loan to a dependent undergraduate student whose parent refuses to complete the Free Application for Federal Student Aid (FAFSA) and has ceased to provide financial support. However, questions remain about this new provision, which became effective August 14, 2008, including what type and amount of aid a student may be awarded under this provision, and how the provision differs from a dependency override.

To address these questions, TG provides the following examples of dependent students in different scenarios. Each example describes a unique scenario, actions the student must take regarding the FAFSA, and the Stafford loan type and amount the student is eligible for.

Scenarios

Dan is a first-year, dependent student whose parent provides financial support and is willing to provide his or her information for the FAFSA.

Must Dan complete the FAFSA? Yes.
Whose information must be included on the FAFSA? Both Dan's and his parent's.
What Stafford loan is Dan eligible for? As a first-year dependent student, Dan is eligible for up to $5,500 in Stafford loan funds — no more than $3,500 of which may be subsidized. Note that if Dan's parent applies for a PLUS loan and is denied, Dan becomes eligible for up to $9,500 in Stafford loan funds — no more than $3,500 of which may be subsidized. Also note that Dan may receive other federal student aid, if otherwise eligible.

Fran is a first-year, dependent student whose parent provides financial support but is unwilling to provide his or her information for the FAFSA. However, her parent is willing to borrow a PLUS loan for Fran.

Must Fran complete a FAFSA? No, not unless her school requires it (see the 09-10 Federal Student Aid Handbook, Application and Verification Guide, page AVG-113).
Whose information must be included on the FAFSA? This is not applicable unless Fran's school requires a FAFSA for PLUS only, in which case Fran will have to provide her information and convince her parent to do so as well. If the parent still refuses, then Fran may be in Stan's shoes (see Stan's example below).
What Stafford loan is Fran eligible for? In this scenario, Fran and her parent are pursuing a PLUS loan only, so Fran is not eligible for Stafford loan funds, and is not eligible for any other federal student aid, either.

Stan is a first-year, dependent student whose parent has ceased to provide financial support and is unwilling to provide his or her information for the FAFSA. Note that Stan is not in an abusive family environment and has not been abandoned by his parents, so Stan is not a candidate for a dependency override. Instead, the school uses its new (effective August 14, 2008) professional judgment authority to award Stan an unsubsidized Stafford loan only.

Must Stan complete the FAFSA? Yes, per Dear Colleague Letter (DCL) GEN-08-12, page 79.
Whose information must be included on the FAFSA? Just Stan's, per DCL GEN-08-12, page 79.
What Stafford loan is Stan eligible for? As a first-year dependent student — note that Stan is not independent because he has not received a dependency override — Stan is eligible for up to $5,500 in Stafford loan funds, all unsubsidized. Note that Stan is not eligible for any other federal student aid.

Also note that the school must document its decision to award Stan this unsubsidized Stafford loan. The documentation requirements are described on page 80 of DCL GEN-08-12.

Also note that, if Stan's parents are separated or divorced, and Stan's noncustodial parent (i.e., the parent whose information would not have been included on the FAFSA were it provided) wants to borrow a PLUS loan for Stan, that noncustodial parent may do so, per private letter guidance issued by ED. However, if Stan's noncustodial parent is denied a PLUS loan, Stan is not eligible for the additional unsubsidized Stafford loan funds typically available to a dependent student whose parent is unable to obtain a PLUS loan.

Jan, a first-year, dependent student, is in an abusive family environment. The school uses its professional judgment authority to grant Jan a dependency override.

Must Jan complete the FAFSA? Yes.
Whose information must be included on the FAFSA? Just Jan's.
What Stafford loan is Jan eligible for? As a first-year (now) independent student, Jan is eligible for up to $9,500 in Stafford loan funds, no more than $3,500 of which may be subsidized. Note that Jan may receive other federal student aid, if otherwise eligible.

Note that the school must document its decision to grant Jan the dependency override. See the 09-10 Federal Student Aid Handbook, Application and Verification Guide, page AVG-30, for information on dependency override documentation.

More information
Please review "Reauthorization DCL: First Flyover" under the heading "Unsubsidized Stafford loans for dependent student who lacks parental support" in Shoptalk Online, edition 486, as it summarizes the criteria for determining that a student lacks parental support, the definition of support, and documentation requirements.

TG provides convenient, searchable HEA compilations that integrate the HEOA changes on its Web site at www.tgslc.org/policy/hea.cfm. See HEA, Title IV, Section 479A for professional judgment.

DCL GEN-08-12 can be accessed as a PDF document on the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/dpcletters/GEN0812FP0810.html; pages 79-80 relate to this topic.

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

Mapping Your Future^® helps schools meet new counseling requirements under the Higher Education Opportunity Act

Last fall, Shoptalk Online provided information on the impact of reauthorization on loan counseling. In addition to requiring a school to provide general information during loan counseling, the Higher Education Opportunity Act of 2008 (HEOA) also requires a school to provide school-specific information to its students. As stated in Dear Colleague Letter (DCL) GEN-08-12, these new requirements took effect on August 14, 2008. For a school that uses Mapping Your Future^® for its entrance and exit counseling, it can easily meet these school-specific counseling requirements using the free customized page of Mapping Your Future's Online Student Loan Counseling (OSLC) at www.mappingyourfuture.org/oslc/ugcustomization.htm#page.

A school must include the following school-specific information in its Stafford and Grad PLUS entrance counseling:

The definition of half-time enrollment at the school, during regular terms and summer school, and the consequences of not maintaining half-time enrollment;
An explanation of the importance of contacting the appropriate offices at the school if the student withdraws, so the school can provide exit counseling, including information regarding the student's repayment options and loan consolidation;
Examples of monthly repayment amounts based on a range of level of indebtedness for students with Stafford loans, for students with PLUS loans, and, as appropriate, for students with Stafford and Grad PLUS loans, or the average cumulative indebtedness of other students in the same programs at the school; and
The name and contact information of the individual a student can contact with questions regarding the student's rights and responsibilities as a borrower pertaining to the terms and conditions of the loan.

In its Stafford and Grad PLUS exit counseling, a school must provide, among other things, information on repayment plans, including a description of the different features of each plan and examples showing average anticipated monthly payment amounts with the difference in interest paid and total amount paid over the life of the loan under each plan. For an illustration, see TG's "Repayment Plan" and "Comparison of Repayment Plans" pages on TG Online at www.tgslc.org/borrowers/repay/plans.cfm and www.tgslc.org/borrowers/repay/comparison.cfm, respectively.

To help with these repayment plan counseling requirements, Mapping Your Future added a sample payment scenario to topic three of the exit counseling sessions for a borrower, which includes sample payments for each repayment plan type.

Note: The entrance and exit counseling regulations are currently being revised through the process of negotiated rulemaking. While the regulations are not finalized, it appears that this HEOA exit counseling requirement to review repayment plan options and provide comparative examples will complement — not replace — the current regulatory requirement to provide average anticipated monthly repayment amounts. TG recommends that a school include both types of information in its exit counseling until the regulations are finalized.

Resources to help
DCL GEN-08-12 is available from ED's IFAP Web site at www.ifap.ed.gov/dpcletters/GEN0812FP0810.html. The section on Entrance Counseling for Borrowers begins on page 102; Exit Counseling begins on page 96.

Mapping Your Future offers a summary of these updates to the OSLC sessions at www.mappingyourfuture.org/downloads/OSLCUpdatesPerRegs.pdf. If you have questions about the updates and changes to the counseling sessions, contact Mapping Your Future at feedback@mappingyourfuture.org.

For more information
We encourage readers to download the Integrated HEA, Title IV, at www.tgslc.org/policy/hea.cfm and review the new entrance and exit counseling requirements, which are located in sections 485(l) and 485(b), respectively. For quick reference, comprehensive lists of entrance and exit counseling requirements (with new requirements introduced by the HEOA set in bold) are available at www.tgslc.org/policy/index.cfm. For questions, contact TG customer assistance at (800) 845-6267, or send an e-mail message to cust.assist@tgslc.org.

Policy potpourri

Q.: The Unemployment Deferment Request contains a requirement for the applicant to be registered with a private or public employment agency. Does an online employment agency or service meet this requirement?

A.: A Web site that facilitates an online posting of employment advertisements for which the employer pays to have its ad posted but requires no "registration" of the person looking for employment would not meet the requirement. Regulations in 34 CFR 682.210(h) specifically state that the applicant must be "registered" with a private or public employment agency. However, there are private and public employment agencies that utilize an online registration feature for the person looking for employment.

The key to meeting the requirement is that the borrower "registers" as a person who is looking for employment with the public or private employment agency, and there is some type of interaction between the borrower and the agency.

Do you have a question?
If you have a question that needs an answer, feel free to Ask TG™. Ask TG is TG's online query tool for borrowers, schools, and lenders. It includes a database of frequently asked questions about financial aid, student loan processing, and TG's products and services. To submit a question to Ask TG, visit tgslc.custhelp.com.