Federal Updates

ED issues new professional judgment guidance

On the heels of a Dear Colleague Letter (DCL) about professional judgment released just a few weeks ago (see Shoptalk Online edition 499), ED has published a new DCL that focuses on students and families experiencing unemployment. The DCL discusses the steps the federal government is taking to ensure that affected individuals are aware of higher education opportunities and options for financing that education; as well as how the financial aid office can facilitate those individuals' access to financial aid.

DCL GEN-09-05, published on May 8, notes that, "Many recently unemployed individuals do not know that they may now be eligible for Federal Pell Grants and other need-based student aid. Most do not know of [their] ability to adjust financial aid eligibility based on their special circumstances." To address this concern, the U.S. Department of Labor is working with each state to send letters to all recipients of unemployment insurance benefits to encourage them to consider enrolling in postsecondary education and applying for financial aid.

What can schools do?
ED states that schools may use the letter from the state unemployment agency, or other evidence that a student is receiving unemployment benefits, to document that the student's income earned from work is zero for the purposes of adjusting data items on the student's FAFSA. Additionally, under this DCL, unemployment benefits can be treated as zero for income purposes. The DCL also encourages schools to consider unemployment benefits received by other family members and examine the totality of the family's economic situation.

An unemployed individual will be able to present the letter from the state unemployment agency to schools for 90 days from the date of issuance. Other verification of current receipt of unemployment benefits is an acceptable substitute for the letter.

Adjustments
While ED will continue to monitor and enforce requirements for appropriate use of professional judgment, it recognizes that a school's use of professional judgment is likely to increase in the current economic environment. Accordingly, for the 2008-09 and 2009-10 award years, ED will make appropriate adjustments to the risk-based model it uses to select schools for program reviews. As long as the school retains in the student's records a valid letter, as described above, or other evidence of current receipt of unemployment insurance benefits from a state unemployment office, ED will consider that to be adequate documentation for the adjustment to the student's income.

More information
Please read the complete text of DCL GEN-09-05 on the Information for Financial Aid Professionals Web site at http://ifap.ed.gov/dpcletters/GEN0905.html. In addition, the Departments of Education and Labor have established a Web site to assist those who are recently unemployed at www.opportunity.gov.

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Guidance on new Total and Permanent Disability provision

One of the many loan-related changes enacted by last year's Higher Education Opportunity Act (HEOA) established a separate standard for determining whether certain veterans are totally and permanently disabled for Title IV loan discharge purposes. Specifically, this change allows a FFELP, Direct, or Perkins Loan borrower to qualify for a Total and Permanent Disability (TPD) discharge if the Department of Veterans Affairs determines that he or she is unemployable due to a service-connected condition. The borrower must provide documentation to the Secretary of Education to verify this status. These provisions became effective August 14, 2008, for the FFEL and Direct Loan programs, and July 1, 2008, for the Perkins Loan Program.

On May 15, ED released Dear Colleague Letter (DCL) GEN-09-07, which explains in detail the above changes to the Higher Education Act and provides implementation guidance to FFELP lenders and guarantors, and Perkins school lenders, on the procedures for processing total and permanent disability discharge requests for borrowers who are covered by the new statutory provisions.

The DCL also includes information about:

• Department of Veterans Affairs determinations that qualify a borrower for a service-connected disability discharge;
• Processing TPD applications for borrowers who have been determined to be unemployable due to a service-connected condition or disability;
• Availability of the application and the effective date for its use;
• Triggering date for implementation;
• Instructions for submitting the TPD requests to ED; and
• A question and answer document that provides additional information on the procedures for processing service-connected disability discharges.

More information
The DCL is available on the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/dpcletters/GEN0907.html.

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Reminder: Public comments due on proposed TILA regulations

Last March, the Federal Reserve Board (Board) published proposed amendments to Regulation Z, which implements the Truth in Lending Act, or TILA (see Shoptalk Online edition 497). The amendments will implement certain provisions of the Higher Education Opportunity Act of 2008 related to private education loans. Public comments on the rules must be submitted by May 26, 2009.

TG encourages our school and lender customers and their legal counsel to review the proposed rules, and the included model forms and samples. As described previously in Shoptalk Online (edition 503), these proposed regulations will affect the treatment of private education loans in a variety of areas, including:

• Prohibiting the use of a covered educational institution's name, logo, mascot, or other words or symbols readily identified with the educational institution on marketing materials;
• Providing the consumer 30 days after a private education loan application is approved to decide whether to accept the loan offered;
• Ensuring the consumer the right to cancel the loan for up to three business days after consummation; and
• Setting disclosure requirements.

More information
You may access the Notice of Proposed Rulemaking at http://edocket.access.gpo.gov/2009/pdf/E9-5561.pdf.

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ED releases new ECASLA Electronic Announcements

Last week, ED published a series of new announcements (E-ANN) on the Ensuring Continued Access to Student Loans Act (ECASLA):

• E-ANN #60 announces the implementation of an Asset-Backed Commercial Paper (ABCP) Conduit Program that will help ensure the continued availability of FFELP loans to students and parents for the 2009-10 academic year.
• E-ANN #61 provides an amended and restated Put agreement between ED and The Bank of New York Mellon as Conduit Administrator and Eligible Lender Trustee and Straight-A Funding, LLC, dated January 19, 2009, including Exhibits.
• E-ANN #62 includes revised funding request submission instructions for several documents that must be submitted under ED's Loan Purchase Participation Program and the table load procedures applicable to the Loan Schedule and Custodial Certification data file. The changes to those documents will go into effect on June 14, 2009. Through June 13, 2009, participants must continue to use the existing Loan Schedule described in Electronic Announcement #53 and adhere to the guidance as defined in Electronic Announcements #20 and #53.

More information
The complete announcements, and all previous ECASLA guidance issued by ED, are available at www.federalstudentaid.ed.gov/ffelp.

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No consensus for Neg Reg Team V

Last week, Shoptalk Online reported that Team I (general and lender loan issues) and Team II (school-based loan issues) negotiators for this year's round of Negotiated Rulemaking (Neg Reg) ended with both teams reaching consensus (see edition 503). In contrast, Team V, the General and Non-Loan Programmatic Issues team concluded its third and final meeting last week without reaching consensus. Negotiators could not reach complete agreement on some issues, including student eligibility for year-round Pell grants as well as the school's reporting of job placement rates within its consumer information. A lack of consensus means that ED is able to draft proposed regulations as it deems appropriate.

Team V considered a wide array of issues, including, among other things:

• TEACH Grant extenuating circumstances
• Conforming the FWS rules to the cash management rules
• 90/10 rule (non-Title IV revenue requirement)
• Fire safety standards
• Missing person procedures
• Hate crime reporting
• Emergency response and evacuation procedures
• Students with intellectual disabilities
• Readmission for servicemembers
• Teach-out requirements and procedures
• GAP: program activities, allotment, matching, statutory and regulatory relief, and estimated financial assistance

What's next?
ED will issue a Notice of Proposed Rulemaking (NPRM) in the Federal Register sometime this summer, which will provide an opportunity for public comment. The final regulations, to be issued no later than November 1, 2009, are expected to have implementation dates of no later than July 1, 2010.

More information
Please visit ED's "Higher Education Opportunity Act-2008" Web page at www.ed.gov/policy/highered/leg/hea08/index.html for more information, including issue papers, and ED's most-recently posted proposed language.

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