Federal Updates

ED releases official FY 2007 cohort default rates

On September 14, ED released the official cohort default rates (CDRs) for FY 2007. Domestic and foreign schools enrolled in the Electronic Cohort Default Rate (eCDR) process will receive their FY 2007 Official Cohort Default Rate and accompanying documentation via the Student Aid Internet Gateway (SAIG). Any school not enrolled in eCDR may download its CDR and accompanying Loan Record Detail Reports from the National Student Loan Data System (NSLDS) via the NSLDS Professional Access Web site.

Consequences of high cohort default rates
A school with an official CDR of 25 percent or greater for the three most recent fiscal years (FY 2005, FY 2006, and FY 2007) is subject to loss of eligibility to participate in the FFELP, Federal Direct Loan Program (FDLP), and Federal Pell Grant Program, unless the school successfully appeals the eligibility loss. A school with high CDRs that was not participating in the FFELP or FDLP on October 7, 1998, and has not participated in either of those programs since that time, is exempt from the loss of Pell Grant Program eligibility.

A school with an official FY 2007 CDR that is greater than 40 percent may lose its eligibility to participate in the FFELP and Direct Loan Program, unless the school successfully appeals the loss of eligibility.

Appeals and adjustments
As shown in the chart below, whether a school may submit an appeal or adjustment following the release of its official CDR depends on if the school is subject to sanction due to its CDR. The cite on each row identifies the location in the regulations where more information about that type of appeal or adjustment may be found.

Time frame and procedures for appeals
The time frame to initiate the appeal process begins on September 22, 2009.

A school that is subject to sanction because of a high official FY 2007 CDR may appeal its rate within 30 days of receiving notification of sanction. Appeals based on erroneous data and improper loan servicing of FFELP loans must be submitted to the school's guarantor(s) within specified time frames to permit the school's continued eligibility while the appeal is pending.

A school that is not subject to sanction may also be eligible to submit an uncorrected data adjustment, a new data adjustment, or a loan servicing appeal based on official FY 2007 CDRs. The Cohort Default Rate Guide explains the procedures, time frames, and other requirements for submitting these requests for adjustment.

A school must submit an appeal for exceptional mitigating circumstances, or an appeal pertaining to Direct loans, to ED.

Submitting appeals
Schools are advised to send CDR appeals to TG's compliance administrative operations at the corporate mailing or overnight shipping address, as appropriate:

Mailing address

TG
Attn: Compliance Analyst, Ken Johnson
P.O. Box 83100
Round Rock, Texas 78683-3100

Overnight delivery services

TG Distribution Center
Attn: Compliance Analyst
3500 Wadley Place, Building C, Suite 303
Austin, Texas 78728-1244

Upcoming changes
The Higher Education Opportunity Act of 2008 (HEOA) mandated a shift from two- to three-year CDRs. Borrowers who entered repayment between October 1, 2008, and September 30, 2009, will be included in the first three-year CDR that will be published in September 2012. In the interim period, while three years of data are collected, ED will continue to calculate two-year CDRs through September 2013. Watch future editions of Shoptalk Online for more information about this transition process.

Need help?
You can download the latest version of ED's Cohort Default Rate Guide at http://ifap.ed.gov/DefaultManagement/CDRGuideMaster.html. Note that updates to this publication will be reflected only at http://ifap.ed.gov/drmaterials/changelog.html. Therefore, periodic review of this site is recommended for maintaining an up-to-date version of the Guide.

Please also visit TG's Default Prevention Internet Resources page to access a wealth of CDR and default prevention-related resources, including the Cohort Default Rate Guide Quick Reference and other ED publications, online student loan debt management resources for borrowers, personal finance organizations, research reports, fact sheets, and more.

Questions?
For questions about the FY 2007 official CDR and appeal procedures, contact Ken Johnson in TG compliance administrative operations at (800) 252-9743, ext. 4701, or send an e-mail message to ken.johnson@tgslc.org.

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Neg Reg announcement

On September 9, following three regional hearings held last summer to gather public input on federal regulatory issues, ED published a Federal Register notice of multiple negotiated rulemaking (a.k.a. Neg Reg) sessions scheduled to begin this fall.

Neg Reg in a nutshell
Neg Reg is a process used by some federal agencies to develop and revise regulations. In Neg Reg sessions affecting financial aid regulations, a group of participants representing various sectors of the financial aid community meet with ED representatives to discuss and develop the language of a proposed rule. Depending on whether all negotiators reach consensus on all issues, ED may use that language as the basis for its proposed rule, which will be published, along with a request for public comments, following the conclusion of the Neg Reg process.

Fall 2009 Neg Reg
For this Neg Reg, ED plans to establish two committees, or "teams," to develop proposed regulations on a variety of issues. Some of these issues were introduced in the Higher Education Opportunity Act of 2008 (HEOA). The tentative agendas for the teams include the following topics, although topics may be added or removed as the process continues:

• Team I, Program Integrity:
  • Satisfactory academic progress
  • Monitoring grade point averages
  • Incentive compensation
  • Gainful employment in a recognized occupation
  • State authorization as a component of institutional eligibility
  • Definition of a credit hour
  • Verification of information included on a Free Application for Federal Student Aid (FAFSA)
  • Definition of a high school diploma for purposes of establishing eligibility to participate in federal student aid programs
  • Misrepresentation of information provided to students and prospective students
  • Ability to benefit
  • Agreements between institutions of higher education
  • Retaking coursework
  • Term-based module programs
  • Institutions required to take attendance for purposes of the Return of Title IV Funds requirements
  • Timeliness and method of disbursement of Title IV funds
• Team II, Foreign Schools:
  • United States Generally Accepted Accounting Principles (U.S. GAAP) financial statements (section 493(b) of the HEOA)
  • Compliance audits (section 493(b) of the HEOA)
  • Definition of a foreign school
  • Nonprofit status for foreign schools
  • Public foreign schools and financial responsibility
  • Consolidation of select Title IV requirements on a countrywide basis
  • Deferments for eligible non-citizens
  • Nondegree programs
  • Issues specific to foreign medical schools:
    • New eligibility criteria for foreign medical schools (section 102(a)(1)(B) and (b) of the HEOA)
    • Clinical sites of foreign medical schools in other countries
    • Basic science locations of foreign medical schools in other countries
  • Eligibility requirements for foreign veterinary schools
  • Eligibility requirements for foreign nursing schools (sections 102(a)(1)(A) and (D) of the HEOA)
  • Foreign medical and veterinary schools certified separately from larger schools

How to get involved
The Federal Register notice also calls for nominations for individual negotiators. Neg Reg committees are composed of representatives of organizations or groups with interests that are significantly affected by the subject matter of the proposed regulations, namely, the Title IV student financial assistance and grant programs. Negotiators must be involved in and have demonstrated expertise or experience in the relevant subjects under negotiation. Nominations must be submitted by September 25, 2009.

Timeline
ED anticipates that negotiations will begin in November 2009 and conclude by February 2010, with each committee meeting for three week-long sessions at roughly monthly intervals. The schedule for negotiations has been developed to ensure publication of the final regulations by November 1, 2010, with implementation of the new regulations no later than July 1, 2011.

More information
TG will attend or monitor the Neg Reg sessions and will provide regular updates through Shoptalk Online. The Federal Register notice is available online at http://edocket.access.gpo.gov/2009/pdf/E9-21695.pdf.

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ED clarifies recent changes to minor prior-year charges

On September 8, ED released Dear Colleague Letter (DCL) GEN-09-11, which provides clarification on the use of current year Title IV funds to pay for minor prior-year charges. Since the publication of final regulations on November 1, 2007, that changed the rules pertaining to this area of cash management, schools have raised several issues with respect to compliance with those regulatory provisions, particularly in the case of a program for which a school assesses all institutional charges up front.

Background
The amended regulations (found in 34 CFR 668.164(d)(2)) increased the maximum amount of prior-year charges that may be paid with current year funds from $100 to $200, but removed the provision that allowed a school to pay for prior-year charges above that amount under certain circumstances. These rules are intended to facilitate a student's continued enrollment by providing an administrative solution for dealing with minor unpaid school charges from a prior year; in this case, the charges were effective July 1, 2008, unless a school chose to implement them earlier.

Determining current-year and prior-year charges
The DCL states that for the purposes of these regulations, the costs of education and other services a school provides to a student, and that may be eligible under this provision, are associated with the year for which the education and services are provided. If a student's financial aid package includes a FFELP or Direct loan, the year is the loan period. If the student does not have an FFELP or Direct loan, the year is the award year.

In most cases, the total charges a school assesses in a semester, academic year, or other instructional period are for education and services the school provides within that period of time. But in the case of a multi-year program for which the school charges a student the total cost up front, the school can encounter difficulties in complying with the regulatory requirements. The DCL explains in detail how a school can allocate charges for those programs over the length of the program in determining the amount of current-year charges and in determining whether the student has a Title IV credit balance.

Cost of attendance
The provisions related to prior-year charges do not affect the cost of attendance used for determining a student's aid package. A school that assesses all institutional charges at the beginning of a multi-year program must still count those total charges in the cost of attendance for the loan period that covers the period when those charges are assessed, even though it allocates portions of those total charges to separate years. Subsequent loan periods would continue to have a cost of attendance that does not include any institutional charges when all of the institutional charges are assessed up front in a multi-year program.

Return of Title IV Funds
The DCL does not modify the Return of Title IV Funds (R2T4) procedures. When a school performs an R2T4 calculation on a payment period basis, it includes institutional charges and Title IV aid only for the payment period. When the charges are for a period longer than a payment period, the institutional charges for the payment period used in the calculation are the greater of the prorated amount of the institutional charges for the longer period, or the amount of Title IV aid retained by the school for (current year) institutional charges. Prior-year charges and amounts retained for prior year charges are not included in that calculation. Similarly, Title IV aid applied to prior-year charges is not included as aid disbursed in that calculation.

More information
The complete DCL is available on the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/dpcletters/GEN0911.html. If you have questions, please contact TG customer assistance at (800) 845-6267, or send an e-mail message to cust.assist@tgslc.org.

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Submit your comments on 2010-11 draft FAFSA

On September 4, ED released a draft version of the 2010-11 Free Application for Federal Student Aid (FAFSA) with a request for comments, ideas, and suggestions from the financial aid community. ED has also posted a summary of the proposed changes and instructions for submitting comments.

For more information
The announcement and all related documents are available on the Information for Financial Aid Professionals (IFAP) Web site at http://ifap.ed.gov/fafsa/1011FAFSADraft.html.

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Closed school corner

The following table provides a list of newly reported school closures and corrections from the Postsecondary Educational Participants System (PEPS) and from the September 2009 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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