FFEL Regulatory and Policy Update

1
Session 63

• FFEL Regulatory and Policy Update
• Pamela Moran
• Office of Postsecondary Education

2
Agenda

• Higher Education Reconciliation Act of 2005
• Other Legislation
• Policy Guidance
• HEA Reauthorization

3
Recent Legislation

• Higher Education Reconciliation Act of 2005
• P.L. 109-171, February 8, 2006 (HERA)
• Emergency Supplemental Appropriations Act for
• Defense, the Global War on Terror, and Hurricane
• Recovery, 2006 P.L. 109-234, June 15, 2006
• Higher Education Act Extension P.L. 109-292
  through June 30, 2007

4
Not-So-Recent Legislation

• Student Loan Interest Rates
• P.L. 107-139, February 8, 2002
• Taxpayer-Teacher Protection Act of 2004
• P.L. 108-409, October 30, 2004
• Higher Education Relief opportunities for
  students
• (HEROES) P.L. 109-78 extended through September
  30, 2007

5
Regulatory Outlook

• Academic Competitiveness and SMART Grants
• Interim Final with Public Comment - July 3, 2006
• Effective Date August 2, 2006
• Deadline for Public Comment August 17, 2006

6
Regulatory Outlook

• Academic Competitiveness and SMART Grants
• Revised Rule for Year Two - November 1, 2006
• Negotiated Rulemaking for Year Three
• Nov. 1, 2007

7
Regulatory Outlook

• Student Loans, Eligibility, General Provisions
• Interim Final with Public Comment
• August 9, 2006
• Effective Date September 8, 2006
• Deadline for Public Comment
• September 8, 2006

8
Regulatory Outlook

• Student Loans, Eligibility, General Provisions
• Revised Regulations November 1, 2006
• Negotiated Rulemaking if Issues Identified
  November 1, 2007

9
Regulatory Outlook

• Notice of Negotiated Rulemaking August 18,
  2006
• Comments Due November 9, 2006
• Four Regional Hearings

10
Regulatory Outlook

• Up to four negotiating committees
• Deadline for negotiator nominations November 9,
  2006
• Negotiating Sessions December 2006 March 2007

11
Higher Education Reconciliation Act of 2005FFEL,
Direct Loans, Perkins Loans

• Active Duty Military Deferment
• Beginning July 1, 2006, up to three years
  military deferment on loans first disbursed on or
  after July 1, 2001
• Active duty service during war or other military
  operation or during national emergency (including
  qualifying National Guard)

12
Higher Education Reconciliation Act of 2005FFEL,
Direct Loans, Perkins Loans

• Active Duty Military Deferment
• Military operation defined as contingency
  operation Current Examples Operation Enduring
  Freedom (Afghanistan) and Operation Iraqi Freedom
  (Iraq)
• Consolidation Loan made on/after July 1, 2001
  eligible if all underlying Title IV loans eligible

13
Higher Education Reconciliation Act of 2005FFEL,
Direct Loans, Perkins Loans

• Active Duty Military Deferment
• Eligibility documentation includes military
  orders or commanding officers written statement

14
Higher Education Reconciliation Act of 2005FFEL,
Direct Loans, Perkins Loans

• Active Duty Military Deferment
• Statute includes definitions of terms
• No refund of payments made

15
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Increased annual undergraduate loan limits
• First year students from 2,625 to 3,500
• Second year students from 3,500 to 4,500
• Increased graduate annual unsubsidized loan limit
  from 10,000 to 12,000.

(Effective Loans First Disbursed on/after 7/1/07)
16
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Increased annual unsubsidized preparatory limits
• Pre-Grad/Prof and Teacher Cert. 7,000 (formerly
  5000)
• No change to aggregate loan limits

(Effective Loans First Disbursed on/after 7/1/07)
17
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Interest Rates
• FFEL PLUS Loans first disbursed on/after July 1,
  2006
• fixed interest rate of 8.5 percent
• Direct PLUS Loans
• fixed rate of 7.9 percent
• Stafford Loans first disbursed on/after 7/1/06
• fixed at 6.8 percent
• Consolidation Loans No change

18
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Origination Fees - FFEL
• 1st disbursements on or after
• July 1, 2006 2
• July 1, 2007 1.5
• July 1, 2008 1
• July 1, 2009 - .5
• July 1, 2010 no fee (1 FDF)

19
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Federal Default Fee (Formerly Insurance Premium
  or Guarantee Fee)
• Requires Collection of 1 for loans guaranteed
  on/after July 1, 2006
• Requires deposit of fee into GA Federal Fund
• GA may collect from borrower or pay from
  non-Federal sources

20
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Origination Fees - Direct Loan
• 1st disbursements on or after
• July 1, 2006 3
• July 1, 2007 2.5
• July 1, 2008 2
• July 1, 2009 - 1.5
• July 1, 2010 1

21
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• PLUS Eligibility for Graduate/Professional
  Students
• Same eligibility criteria as Parent PLUS
  including credit checks and endorsers
• No in-school status or grace period but eligible
  for in-school deferment

(Effective Loans certified/originated on/after
7/1/06)
22
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• PLUS Eligibility for Graduate Professional
  Students
• FAFSA Required
• Stafford eligibility determination required
• Stafford application not required

(Effective Loans certified/originated on/after
7/1/06)
23
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• PLUS Eligibility for Graduate Professional
  Students
• No direct disbursement to student
• Initial and Exit counseling strongly recommended

(Effective Loans certified/originated on/after
7/1/06)
24
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Extends Teacher Loan Forgiveness from
  Teacher-Taxpayer Act
• Makes permanent increased loan forgiveness of
  17,500 for highly qualified math, science, and
  special education teachers at qualified
  low-income schools
• Provides eligibility to private school teachers
  by defining highly qualified for them

(Effective on date of enactment, retroactive to
October 1, 2005)
25
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Disbursement Rule Changes
• Loan disbursement on/after 2/8/06 for school with
  CDR less than 10
• No multiple disbursement for single term or
  four-month loans
• No 30-day delayed delivery

26
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Disbursement Rule Changes
• Loan disbursement for withdrawals on/after July
  1, 2006
• School must confirm need for/ acceptance of /
  need to repay before crediting or directly
  disbursing
• Document confirmation
• No response to notice no crediting or disbursing

27
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Disbursement Rule Changes
• Foreign Schools (FFEL only)
• Foreign school must request direct disbursement
  to student otherwise goes to school
• Lender or GA must verify students enrollment
• No direct disbursement of Parent or
  Graduate/Professional PLUS Loans

For Loans First Disbursed on/after 7/1/06
28
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Disbursement Rule Changes
• StudyAbroad Programs through Home Institution
  (FFEL only)
• Student may request Direct Disbursement by lender
• Not subject to school request or approval
• Lender or GA must verify students enrollment
• No direct disbursement of Parent PLUS or
  Graduate/Professional PLUS Loans

For Loans First Disbursed on/after 7/1/06
29
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Disbursement Rule Changes
• Disbursement using escrow agent for loan proceeds
  paid to agent on/after July 1, 2006
• Time period for payment reduced from 21 to 10
  days
• Limits on subsidized interest billing to 3 days
  before 1st disbursement

30
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Standardized Repayment Plans on FFEL Model
• Direct Loan standard, graduated, and extended
  repayment plans comparable to FFEL Program
• Exception ICR Repayment

(Effective 7/1/06)
31
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Forbearance Agreements
• Eliminates written agreement
• Documentation
• Lender confirms with borrower
• Record in borrowers file
• Same as existing regulation

32
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Consolidation Loans
• Generally no reconsolidation of Consolidation
  Loan
• FFEL- only borrower to Direct Loan only if FFEL
  application denied - SUPERSEDED
• No In-School Consolidations in Direct Loan or
  Early Conversion to Repayment Consolidations in
  FFEL
• No Joint Spousal Consolidations

(Effective 7/1/06)
33
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Special Allowance
• Loans on or after April 1, 2006
• Quarterly SA less than applicable rate
• Remit excess to ED quarterly
• SAP Gap
• Bill on/after July 1, 2006 on PLUS loans first
  disbursed on/after 1/1/2000 and before 1/1/2006

34
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• False Certification Discharge
• Based on borrower being victim of CRIME of
  identity theft
• Application in FFEL to lender or guaranty agency
  and in DL to Direct Loan Servicer or Debt
  Collection Services
• Copy of local, State, or Federal court verdict or
  judgment required

(Effective 7/1/06)
35
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Lender Insurance on Defaults
• 1st disbursement on or after 7-1-2006
• 97
• Exceptional Performer
• 99
• Default claims submitted on or after 7-1-2006

Note Reinsurance claims to be submitted within
30 days (versus 45)
36
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Rehabilitation of Defaulted Loans
• Number of on-time payments reduced from 12 to 9
• On-time now within 20 days of due date
• Completed within 10 consecutive months

(Effective New rehab agreements on/after 7/1/06)
37
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Rehabilitation of Defaulted Loans
• Missed or ineligible payment allowed
• GA OPTION New standard OK on prior agreements
  if at least one scheduled payment of 9 after
  7/1/06

(Effective New rehab agreements on/after 7/1/06)
38
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Loan Default Collections
• On or after 10-1-2006
• CL and Rehabs not in excess of 18.5
• 8.5 remitted to Secretary
• Beginning FY 2010
• CL collections over 45 of total
• Remit all collection costs to Secretary

39
Higher Education Reconciliation Act of 2005 FFEL
and Direct Loans

• Wage Garnishment Requirement
• Increases maximum percentage of a defaulted
  borrowers wage garnishment from 10 to 15

(Effective 7/1/06)
40
Higher Education Reconciliation Act of 2005
Published Guidance See.WWW.IFAP.ed.gov special
link to HERA information

• Dear Colleague Letters and Announcements
• GEN-06-03 (March 10) HERA Summary for Loans
• FP-06-04 (March 30) Lender Reporting Changes
• FP-06-05 (April 25) FFEL Grad/PLUS Guidance
• FP-06-10 (June 5) SAP for FFEL PLUS
• GEN-06-10 (June 20) HERA Implementing
  Provisions
• GEN-06-11 (June 21) Foreign Schools and FFEL
• NSLDS HERA updates (April 24, July 7, July 10)

41
Higher Education Reconciliation Act of 2005

• Forms
• FP-06-05 (April 24) FFEL Promissory Note
  Addenda and Plain Language Disclosures
• FP-06-08 (May 23) FFEL Stafford and PLUS MPNs
• FP-06-12 (July 3) FFEL Consolidation
  Application Addendum
• GEN-06-13 (July 3) Teacher Loan Forgiveness

42
Higher Education Reconciliation Act of 2005

• Forms
• Pending
• Revised Stafford and PLUS MPN
• Revised Consolidation Loan App/P-Note
• Military Deferment
• Identity Theft Discharge

43
Emergency Supplemental Appropriations Act
(2006)

• DCL GEN-06-12, June 23, 2006
• Repealed Single Holder Rule in FFEL
  Consolidation Program
• Effective for applications received on or after
  June 15, 2006

44
Emergency Supplemental Appropriations Act (2006)

• Repealed HERA July 1, 2006 changes limiting FFEL
  Stafford or PLUS borrower access to Direct Loan
  Consolidation
• denial of application no longer required
• income-sensitive repayment that meets the
  borrowers needs reinstated as condition

45
Emergency Supplemental Appropriations Act
(2006)

• Impact -
• All eligible loans of equal status
• FFEL loan not required in FFEL Consolidation
• Single eligible loan can be consolidated

46
HEA Extension P.L. 109-292

• Limitation on School and School-Affiliated
  Organizations use of Eligible Lender Trustees
  (ELT) in FFEL Program
• Loan Discharge for 9/11 spouses and parents
• Spouse of eligible public servant
• Parent of eligible victim
• Includes portion of Consolidation Loan

47
HEA Reauthorization

• H.R 609
• College Access and Opportunity Act of 2006 passed
  by House March 30, 2006
• Senate - ?

48
Technical Slide

• We appreciate your feedback and comments.
• We can be reached at
• Phone [phone]
• Fax [phone]
• Email Pamela.Moran_at_ed.gov