Federal Update NYSFAAA Federal Update NYSFAAA Nautochia Webb April 13,

 White House Student Loan Initiatives  Budget Act of 2011  Consolidated Appropriations Act – 2012  Regulatory Update: Program Integrity and Gainful Employment Today’s Topics 2

White House Student Loan Initiatives

Special Direct Consolidation Loans

Regular Direct Consolidation Loan  Borrowers with any federal student loan  FFEL, Direct Loan, Perkins, HHS  Direct Consolidation Loan  Underlying loans paid off  New Repayment Period  Interest Rate – Fixed  Weighted average rounded up to the next 1.8 percent 5

Special Direct Consolidation Loan  January 17 through June 30,  Only for “Split Borrowers”  Loans held by ED and FFEL lender  ED Held Loans –Direct Loans and ‘PUT’ FFEL Loans  Only the commercial FFEL to be consolidated  Underlying loans paid off  Underlying loans maintain identity  Same terms, conditions, dates 6

Special Direct Consolidation Loan  Benefits –  Single holder/servicer/bill/payment  Loans maintain terms and conditions  Reduction in interest rate of 0.25%  Additional 0.25% reduction for EFT  Loans eligible for Public Service Loan Forgiveness 7

”Pay As You Earn” Income Driven Repayment Plans

Income Based Repayment (IBR) Plan  Statutory - FFEL and Direct Loan  Current Law –  Maximum annual payment amount is 15% of discretionary income.  Remaining balance forgiven after 25 years.  New Law (SAFRA) – Effective 2014  Maximum annual payment amount is 10% of discretionary income  Remaining balance forgiven after 20 years. 9

Budget Control Act of 2011 (BCA)

BCA - Subsidized Loans  Elimination of Subsidized Loans for Graduate Students  Effective for loans made for loan periods beginning on or after July 1,  Subsidized Loans for loan periods beginning before July 1, 2012 remain unchanged.  COD will enforce. 11

BCA - Repayment Incentives  Elimination of Direct Loan Incentives  Terminates repayment incentives to encourage on-time repayment of loans.  Effective for loans first disbursed on or after July 1,  COD will enforce.  Allows interest rate reduction to borrowers who repay electronically. 12

Consolidated Appropriations Act of 2012

Auto-Zero EFC Income Threshold  Reduces the income threshold for an automatic zero expected family contribution (EFC) from $30,000 to $23,000.  For the award year was scheduled to be $32,000.  FAFSA on the Web and CPS have been updated, and both began FAFSA processing using $23,000 as the auto-zero EFC threshold.

Ability-to -Benefit (ATB)  Eliminates Title IV eligibility for students without a high school diploma (or equivalent).  Students who first enroll in a program of study on or after July 1,  Exceptions for  Home schooled students

Ability-to -Benefit (ATB)  Students who are or were, enrolled in a Title IV eligible program anytime may continue to qualify under one of the ATB alternatives –  Passing an independently administered, approved ATB test.  Successfully completing at least six credit hours or 225 clock hours.

Pell Grant Amounts  Pell maximum award - $5,550  Pell minimum award - $550.  Maximum Pell eligible EFC – 4995  Eliminates eligibility of a student who was eligible for between five and ten percent of maximum award.  Payment schedules posted IFAP on January 12, 2012.

Pell Grant Duration of Eligibility  Reduces the duration of a student’s eligibility to receive Pell Grant from 18 semesters (or its equivalent) to 12 semesters (or its equivalent).  Applies to all students effective with the award year.  Calculation includes all earlier years of the student’s receipt of Pell.

Pell Grant Duration of Eligibility  Calculate the equivalency by adding together each of the annual percentages of a student’s scheduled award that was actually disbursed to the student.  LEU – Lifetime Eligibility Used  Once total reaches 600%, student no longer eligible.  If total more than 500% but less than 600%, partial eligibility for next award year.

Pell Grant Duration of Eligibility  Example –  Student’s Scheduled Award was $5,550, but only received $2,775 because only enrolled for one semester, will have used 50% of that award year’s scheduled award.  Student who was enrolled three-quarter time for the entire award year would have used 75% of his scheduled award.  This student has used 125% of the total 600%.

Grace Period Interest Subsidy  Temporarily eliminates the interest subsidy on Direct Subsidized Loans during the six month grace period.  Applies to new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014.

FFEL Lender SAP Payments  Allows FFEL lender to choose the base on which special allowance payments (SAP) are calculated, from Commercial Paper (CP) to the London Inter Bank Offered Rate (LIBOR).  Effective for loans first disbursed on or after January 1,  By April 1, 2012, lender must inform ED of choice.  No impact on students, borrowers or schools.

Other Legislative Loan Changes

Interest Rates  CCRAA reduced the interest rate on subsidized loans made to undergrads in stages from 6.8 % to the current 3.4 %.  The reduced rates end on July 1,  Interest rate on subsidized loans first disbursed on or after July 1, 2012 to undergraduate students will be 6.8 percent.  Same rate as on subsidized loans made to graduate students and to all unsubsidized loans.

Loan Limits  $2,000 additional Direct Unsubsidized Loan funds for dependent students under the ECASLA remains available.  Some confusion because of the June 30, 2011 termination of the temporary special 90/10 treatment of these additional unsubsidized loan amounts.

Regulatory Update Program Integrity Regulations 26

Regulatory Activity  Program Integrity  October 29, 2010: Effective July 1, 2011  June 13, 2011: Effective July 1, 2012  Foreign Schools  November 1, 2010:Effective July 1,

October 29 Regulatory Topics  Definition of a Credit Hour  Return of Title IV Funds (R2T4)  State Authorization  Satisfactory Academic Progress  Ability-to-Benefit  Incentive Compensation  Written Agreements Between Schools  Misrepresentation  Disbursements for Books and Supplies 28

October 29 Regulatory Topics  High School Diploma  Verification  Gainful Employment 29

Federal Update END

Verification

Communications  NPRM: June 18, 2010  Final regulations: October 29, 2010  Effective with the Award Year  Federal Register Notice: July 13, 2011  Dear Colleague letters  GEN-11-03, February 2011 (IRS)  GEN-11-13, July 2011 (Verification) 32

Highlights of New Regulations  Eliminates $400 tolerance; replaces with $25 tolerance for any item.  Must report all changes, not just those that impact Pell  Eliminates the 30 percent institutional verification cap 33

Highlights of New Regulations  Allows for changes in marital status only if it would change dependency status.  School discretion  Must update other information  Family size  Spouse’s income  Student may make change but reject transaction.  FAA Override 34

Highlights of New Regulations  Allows the Secretary to include any item from the FAFSA for possible verification.  Replaces the five verification items for all selected applicants with a targeted selection of items based upon each student’s characteristics.  No customization for

Verification Items  Annual Federal Register notice—  Items to verify  Acceptable documentation  Federal Register Notice: July 13, 2011  DCL GEN-11-13, July 2011

Verification Items  All Applicants—  Number in Household –  Not required if:  Dependent student household size reported is two and the parent is unmarried or three if the parent is married.  Independent student household reported is one and the applicant is unmarried or two if the applicant is married. 37

Verification Items  All Applicants —  Number in College  Not required if reported is one. 38

Verification Items  All Applicants —  Food Stamps (SNAP), if receipt reported on FAFSA—  Documentation is signed statement from independent student or parent of dependent student stating that –  Someone in the family received SNAP in calendar 2010 or

Verification Items  All Applicants —  Child support paid if amount reported on FAFSA—  Statement signed by the applicant, spouse, or parent who paid the child support certifying:  Amount of child support paid  Name of the person to whom child support was paid  Name of the children. 40

Verification Items  Tax Filers— (Best from IRS Data Retrieval)  Adjusted Gross Income (AGI)  Taxes paid  Specific untaxed income items from 1040  Untaxed IRA distributions  Untaxed pensions  IRA deductions  Tax exempt interest  Education credits from

Verification Items  Nontax Filers —  A signed statement certifying that the individual has not filed, will not file, and is not required to file an income tax return for tax year  Copy of IRS Form W-2 for each source of employment income received for tax year 2011 and listing of sources and amounts of income earned not on W-2s. 42

Documentation  Comprehensive list in July 13, 2011 Federal Register notice  FAFSA IRS Data Retrieval Process  IRS Transcript  Request  On-Line  Phone – (800)  Form 4506T-EZ  IRS Tax Return: Limited conditions 43

IRS Data Retrieval  CPS will set flags and comment codes to indicate that the student and/or parent transferred IRS data into FOTW.  Comment codes will appear in –  FAA Information section of the ISIR  Student Inquiry section of FAA Access  Flags and codes based on results 44

Updated IRS Request Flags 45

IRS Data and Verification  An institution may consider as acceptable documentation IRS retrieved information if the Secretary has identified those items as having come from the IRS and not been changed – IRS Request Flag =

IRS Data Retrieval Tool FAFSA on the Web will include logic to make the determination for the applicant. 47

IRS Data Retrieval Tool Reminders  Around March 15 th, students and/or parents will receive reminders to update the student’s FAFSA with filed tax information  Messaging encourages the use of the IRS Data Retrieval Tool if the option is available in FAFSA on the Web 48

IFAP.ED.GOV HIGHER EDUCATION Program Integrity Information - Questions and Answers In order to ensure questions coming into the Department of Education about the Program Integrity Regulations are consolidated and easily accessible to interested parties, we have created this Web site containing questions and answers. We will update this list on a regular basis, therefore be sure to check back for any new information. You will also find links to various resources with additional guidance pertaining to the Program Integrity Issues. State Authorization Retaking Coursework Credit Hour Ability-to-Benefit Incentive Compensation Misrepresentation Return of Title IV Funds Satisfactory Academic Progress Gainful Employment Verification Program Integrity Home | Negotiated Rulemaking | OPE Policy PageProgram Integrity HomeNegotiated Rulemaking OPE Policy Page

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