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Federal Updates

Shoptalk Online 509, June 23, 2009

Federal Updates

NCHELP announces industry interim IBR application

NCHELP's IBR Workgroup has produced an interim Income-Based Repayment Plan Application for the new Income-Based Repayment (IBR) plan available to borrowers on July 1, 2009. This form is not the official Office of Management and Budget (OMB)-approved Department of Education form, but instead a revision of the draft form submitted to the Department in March that has been updated and includes preliminary comments made by the Department. Here are a few important points regarding the use of the form.

The use of this form is encouraged but optional. The form is provided to assist FFEL lenders and servicers if needed until there is an OMB-approved Department of Education form.
The form may be used as is. However, your institution may want to modify it to accommodate its processes.
Section 2 contains information about the IRS Form 4506-T as some lenders and servicers will continue to use Form 4506-T for obtaining the borrower's adjusted gross income (AGI). For those who are going to use a copy of the first two pages of the borrower's tax return for obtaining the AGI (as outlined in the June 12, 2009, Electronic Announcement from the Department), participants may want to develop instructions to borrowers on how to provide those copies and also to obtain a borrower's self-certification of non-filing.
Section 8 contains a link to the Department's IBR calculator. Your institution may replace or supplement this with links to other online calculators.

Continuing work
The IBR Workgroup will begin working on the comments received from the Department for the Alternative Documentation of Income form and distribute it soon. The Workgroup will also be working with the Department to develop the official OMB-approved common forms. However, that process will take several months to complete. The industry's experience as it implements IBR over the next several months will help in the development of the common forms.

Accessing the form
TG provides a link to the form as a PDF and a Microsoft Word^® document through its corporate website, TG Online. Access the IBR form at http://www.tgslc.org/forms/ibr.cfm.

For more help
TG provides a convenient resource for learning more about IBR through TG Online. TG's Income-Based Repayment page defines IBR, describes who may be eligible, and answers various questions that borrowers may have about the plan. The IBR page adds one more tool to TG Online's Managing Repayment area for borrowers. Managing Repayment also offers a comparison of repayment plans, including IBR, to help borrowers consider all their options and choose a plan that best meets their financial circumstance.

Visit TG's IBR page at www.tgslc.org/borrowers/repay/IBR.cfm.

TG also provides a simple calculator tool to help evaluate if a borrower appears to qualify for IBR and estimate a monthly payment based on such factors as income, total federal student loan debt, and family size.

Visit TG's Adventures In Education website at www.aie.org/Calculators/IBR/index.cfm to access the calculator.

Loan Purchase Programs reminders and updates

On June 16, ED published Ensuring Continued Access to Student Loans (ECASLA) announcement #66, which reminds participants that the 2009-10 Loan Purchase Programs are new programs and not extensions of earlier programs. Thus each FFELP lender or loan holder that wishes to participate in the 2009-10 programs must execute the relevant Adoption Agreement (and other required documentation) regardless of any earlier participation in the ECASLA Loan Purchase Programs.

The announcement also alerts participants to certain changes to program documents. ED has made several changes to the text of the 2009-10 Master Participation Agreement (MPA) and Master Loan Sale Agreement (MLSA) as originally posted in January 2009. The changes incorporate into the Agreements themselves interpretations of the Agreements, such as those explicitly adopted in ECASLA announcement #34 dated October 31, 2008 [Questions & Answers 36 - 39], and made publicly available to rating agencies evaluating lenders' financial transactions; or in other guidance from ED. The changes are intended to clarify the rights and obligations of the parties under the agreements. Attached to announcement #66 are copies of both the revised 2009-10 Agreements (dated June 15, 2009) and redlined versions of those Agreements that show the changes made to the January 1, 2009, versions posted on January 16, 2009.

More information
The complete announcement and attachments are available on ED's ECASLA website at http://federalstudentaid.ed.gov/ffelp/library/EA66.pdf.

Reminder of changes effective July 1

Rev up your engines for the 2009-10 award year. June is flying by, and the various changes to the Title IV programs that become effective July 1, 2009, are fast approaching. Congress has stepped up its pace over the past several years, amending the Higher Education Act of 1965 (HEA) through the College Cost Reduction and Access Act of 2007 (CCRAA), the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA), and the Higher Education Opportunity Act of 2008 (HEOA, or reauthorization). Many of those changes have a delayed effective date of this July 1.

Professional Judgment provisions
Examples of special circumstances that financial aid administrators may consider as factors in adjusting the expected family contribution calculation or the cost of attendance (CCRAA) include:

The loss of employment of an independent student
Cases where a family member is a dislocated worker
Cases where a change in the student's housing status results in homelessness

Grant-related provisions

Availability of Academic Competitiveness Grants (ACG) and National SMART Grants to eligible non-citizens and students enrolled at least half time (ECASLA and HEOA)*
ACG and National SMART Grant awards based on grade level, instead of academic year (ECASLA and HEOA)*
Availability of ACG awards to students enrolled in a one- or two-year certificate program at a degree-granting institution (ECASLA and HEOA)*
Availability of a first-year ACG award to otherwise eligible students who were once enrolled in an undergraduate program as part of a secondary school program of study and to transfer students who are first-year students (ECASLA and HEOA)*
Extension of National SMART Grant eligibility to the fifth year of an eligible five-year program (ECASLA and HEOA)*
Availability of National SMART Grants to students enrolled in a qualifying liberal arts program (ECASLA and HEOA)*
Availability of two consecutive Pell grant-scheduled awards during a single award year (year-round Pell grant) to eligible students (HEOA)
Pell grant ineligibility for a student who is subject to an involuntary civil commitment after completing a period of incarceration for a forcible or nonforcible sexual offense (HEOA)
Availability of maximum Pell grants for an otherwise eligible student whose parent or guardian was a member of the Armed Forces and died as a result of performing military service in Iraq or Afghanistan after September 11, 2001, provided that the child was under 24 years old or was enrolled in college at the time of the parent or guardian's death (HEOA)

* In order to make timely grant awards for the 2009-2010 award year, ED issued interim final regulations on May 1 and accepted public comment through June 1 for these provisions.

Loan-related provisions

Reduction of interest rate for subsidized Stafford loans for undergraduate students first disbursed on or after July 1, 2009, and before July 1, 2010, from 6.0 percent to 5.6 percent (CCRAA); see the "Question of the Week" in Shoptalk Online edition 435 for more details
New Income-Based Repayment plan that offers affordable payments based on the borrower's income (CCRAA); see TG Online's comparison of repayment plans, Income-Based Repayment page and calculator and Shoptalk Online editions 506 and 507
New borrower disclosures during repayment (HEOA)
- for any loan for which the first payment is due on or after July 1, 2009, for the required bill or statement and required disclosures to borrowers having difficulty making payments, and
- for any loan that becomes delinquent on or after July 1, 2009
New economic hardship deferment (HRD) provisions^†, including
- definition of "family size"
- clarification that poverty guidelines used to determine HRD are issued by the U.S. Department of Health and Human Services
- guidance that the guideline that is relevant to a borrower's family size for the 48 contiguous states should also be used for a borrower who is not a resident of a state listed in the guidelines, and
- elimination of HRD categories based on the 20/220 provisions
New provisions for the post-active duty deferment^†, including
- clarification that a borrower's eligibility for this deferment terminates if the borrower returns to at least half-time enrollment status
- clarification that a borrower returning from active duty who is in a grace period is not required to waive the grace period to use this deferment
- clarification that active state duty for members of the National Guard includes both active state duty under which a governor activates members of the National Guard under state statute or policy and the activities are paid for with state funds; and active state duty under which a governor, with the approval of the president or the U.S. secretary of defense, activates members of the National Guard and the activities are paid for with federal funds. Active state duty does not include a borrower who is serving full time in a permanent position with the National Guard, unless the borrower is reassigned as part of a call-up to active duty service
New provision for the Military service deferment^† that authorizes loan holders to grant a military service deferment to an otherwise eligible borrower for an initial deferment period not to exceed 12 months based on a request from either the borrower or the borrower's representative
New provisions^† that if a borrower is eligible for both the 180-day military service deferment following the borrower's demobilization, and the 13-month post-active duty student deferment, the borrower's eligibility for these separate deferments runs concurrently

† These provisions were established by the final rules implementing the CCRAA, published on October 23, 2008.

Questions
ED provided clarification on several CCRAA issues in Dear Colleague Letter (DCL) GEN-08-01. Changes made by ECASLA are covered in DCL GEN-08-08. See DCL GEN-08-12 for a summary of HEOA changes.

As always, Shoptalk Online will keep readers informed of any new developments and ED guidance regarding the implementation of legislative and regulatory requirements. In the meantime, if you have any questions, please contact TG customer assistance at (800) 845-6267, or send an message to cust.assist@tgslc.org.