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Shoptalk 539, February 9, 2010

Industry Update

Program integrity Neg Reg concludes without consensus

The program integrity team (Team I) of the 2009-10 negotiated rulemaking (Neg Reg) process has concluded its negotiations without reaching consensus. As a reminder, the team was considering fourteen issues.

The team reached tentative agreement on the following topics:

  • Definition of a high school diploma for the purpose of establishing institutional eligibility to participate in the Title IV programs, and student eligibility to receive Title IV aid;
  • Ability to benefit;
  • Misrepresentation of information to students and prospective students;
  • Definition of a credit hour;
  • Agreements between institutions of higher education;
  • Verification of information included on student aid applications;
  • Satisfactory academic progress;
  • Retaking coursework; and
  • Disbursements of Title IV funds.

However, agreement could not be reached on these issues:

  • Incentive compensation;
  • State authorization as a component of institutional eligibility;
  • Gainful employment in a recognized occupation;
  • Return of Title IV funds (R2T4) for term-based programs with modules or compressed courses; and
  • R2T4 and taking attendance.

What's next?
Since the team did not reach consensus, ED is not required to use any of the team's agreed-upon language in crafting the proposed regulations. However, it is likely that such language will be strongly considered as ED completes its development of the proposed rules.

ED will publish its proposed regulations in a Notice of Proposed Rulemaking (NPRM) in the Federal Register by this summer, and will provide an opportunity for public comment at that time. Final regulations are expected to be published in the Federal Register by November 1, 2010, with most or all of the new provisions becoming effective on July 1, 2011.

More information
Team II, which is discussing foreign school issues, will hold its third meeting February 22-26, 2010.

Please visit ED's "Negotiated Rulemaking for Higher Education 2009-10" Web page for more information on both teams' activities, including issue summaries and ED's most-recently posted proposed language. Note that the posted language will not reflect any revisions considered during the final team meetings.

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New private education loan disclosure requirements effective February 14

The Board of Governors of the Federal Reserve published the Final Rules on August 14, 2009, in the Federal Register amending 12 CFR Part 226, otherwise known as Regulation Z. These amendments were necessary in order to implement provisions under Title X of the Higher Education Opportunity Act of 2008 (HEOA) that amended the Truth in Lending Act (TILA). The compliance date for these new rules is February 14, 2010.

The final rules require creditors who make private education loans to provide consumers with certain disclosures throughout the loan process. The new disclosure requirements apply to loans made expressly for postsecondary educational expenses, but not to educational financing that is funded by credit card advances or real estate-secured loans. In addition, these amendments do not apply to Title IV loans, which are subject to separate disclosure rules issued by ED.

The HEOA provides a safe harbor for any creditor that elects to use a model form promulgated by the Board that accurately reflects the terms of the creditor's loans. As part of the final rules, the Board provided private education loan model disclosure forms and samples that creditors may use to comply with the new disclosure requirements, including:

Additionally, prior to consummation of a private education loan, the lender must obtain a self-certification form from the consumer. The purpose of this self-certification form is to inform the consumer of the maximum amount that he or she can expect to borrow without affecting federal, state, or school financial aid eligibility. The self-certification form is required for private education loans for which the loan application is received on or after February 14, 2010. Per industry guidance, ED expects to make the model self-certification form available by February 12, 2010.

For more information
The Board's announcement, Federal Register notice, model disclosure forms and samples, as well as a report, "Consumer Research and Testing for Private Education Loans: Final Report of Findings," are available at www.federalreserve.gov/newsevents/press/bcreg/20090730a.htm.

Visit TG Online to download an integrated, searchable PDF version of the portions of the TILA that were affected by the HEOA.

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Reminder: Draft cohort default rates released yesterday

As reported in last week's Shoptalk, ED released FY 2008 draft cohort default rates (CDRs) to schools on February 8. For information about challenging draft CDRs, schools are encouraged to view TG's webinar titled "How to Challenge Your Cohort Default Rate," available on TG Online.

More information
For questions about the FY 2008 draft CDR challenge procedures, contact TG's compliance analyst Ken Johnson at (800) 252-9743, ext. 4701, or send an email message to ken.johnson@tgslc.org.

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