Final Rule 2002 Presented by: Betsy Mayotte American Student Assistance MASFAA, November 2002

Background §Final regulations issued 11/1/02. §All items must be implemented no later than 7/1/03. §Many items may be implemented prior to 7/1/03.

School Issues

Stafford Annual Limits §School may NOT consider a borrower’s previous programs of study when determining the borrower’s year of undergraduate study. §A student borrower attending a one-year undergrad program is never eligible for more than Year 1 loan limits.

Entrance & Exit Counseling §Schools are no longer required to personally conduct entrance and exit counseling. l Other entities may perform this responsibility on the school’s behalf.

Entrance Counseling §The following information must be provided as part of entrance counseling: l The consequences of default no longer must be explained in “forceful terms.” l “Federal offset” is included as one of the consequences of default. l The borrower must be provided sample monthly repayment amounts based on either a range of indebtedness or the average indebtedness of borrowers at the school or program.

Exit Counseling §In addition to existing requirements, the following must be provided as part of exit counseling: l Standard, graduated, extended, and income-sensitive repayment plans, as well as loan consolidation. l Conditions under which a student may receive forbearance. l Availability of Title IV loan information on NSLDS.

Disbursing Funds §Late disbursement limit changed from 90 to 120 days after the date: l of the institution’s determination that the student withdrew or l the date the student otherwise became ineligible. §ONLY Department can approve post-120 day disbursement!!

Disbursing Funds §Electronic Disbursement Notice l Eliminated requirement for institution to receive acknowledgement of receipt of notice

12 Hour Rule §Eliminated and replaced with “one day rule” §Must be exact rather than “on average” §Number of hours not specific but must instead be “reasonable” §30-week minimum not changed

Timely Refunds §Clarifies that refund check must CLEAR BANK within 45 days of school’s determination of student withdrawal l 30 day check issuance time-frame unchanged

Perkins Loans §No early implementation §Changes made to make way for MPN §Changes made to make way for e-signature §Lots of clean up items such as: l transfer of Perkins from closed institution to other institution

Perkins Loans §Write-Offs’ l Write off amount increased to $25 l $50 write off limit if borrower “properly billed” for previous 2 years l Borrowers no longer required to reaffirm write off amount §Payment coordination with other institution only required if borrower requests.

Perkins Loans §Judgements l Ups threshold from $200 to $500 l Ups review period from 1 to 2 years l School no longer required to rehab if judgement has been secured on loan §Late charges l Now discretionary rather than mandatory based on school preference

Perkins Loans §School reimbursement of fund l Allows, but does not require, ED to instruct a school to reimburse Perkins fund if loan deemed unenforceable due to to school or it’s agent

Lender Issues

Stafford Repayment §The number of days from repayment begin to first payment due is changed from 45 days to 60 days. §This is for Stafford loans exiting grace, deferment, forbearance, and post-deferment grace.

Stafford Repayment §A lender is not required to process a new enrollment end date when: l the change is within the same month and year as the most recently reported date and l the lender has already disclosed repayment terms to the borrower.

Stafford Repayment §A borrower with a repayment period of less than 5 years may extend the repayment period to a minimum of 5 years. §A written request is not required to make this change.

Unemployment Deferment §Job search demographic details no longer required §Borrower now certifies in writing that they made 6 attempts §Form in process of being changed §Two other unemployment “tweaks”

Economic Hardship Deferment §When calculating the borrower’s debt burden for deferment eligibility, the following will be used: l If the education loan is scheduled to be repaid in 10 years or less, the actual monthly payment amount is used. l If the education loan is scheduled to be repaid in more than 10 years, a monthly payment amount that would have been due if the loan had been scheduled to be repaid in 10 years is used. l Also applies to Perkins borrowers

Forbearance §A lender is permitted to verbally grant a discretionary forbearance if: l the lender and the borrower/endorser agree to the terms of the forbearance and l the lender sends, within 30 days, a notice to the borrower/endorser confirming the terms of the forbearance. §Frequency of forbearance contact reduced from 3 to 6 months

Consolidation Loans - Disability Discharge §Spousal consolidation loans may be partially discharged due to the death or total and permanent disability of one of the co- borrowers. l Both borrowers remain liable for remaining balance §Any portion of a Consolidation loan that is attributable to a PLUS loan borrowed for a dependent who is deceased is discharged as of the date of the dependent’s death.

Sources §NPRM, Federal Register, 8/6/02, pages §Final Rules, Federal Register, 11/01/2002, pages § §