1. Policy & Regulatory Update PASFAA 2011

2. Participation in the Direct Loan Program Direct Subsidized and Direct Unsubsidized Loans are two components of the same program »Schools cannot offer only subsidized or only unsubsidized loans Parent PLUS and PLUS loans for graduate and professional students are two components of one program »Schools cannot offer only parent PLUS or only graduate PLUS loans DCL GEN-11-07

3. FAFSA Required Effective with the 2011-12 award year, a student FAFSA is required for parent PLUS loans DCL GEN-11-07 Errata and Updates for 2010-2011 FSA Handbook

4. Distance Education Programs Disburse aid only to eligible students Identify and resolve discrepancies in student information Ensure all requirements regarding regular student are met Report any suspected fraud to the Inspector General DCL GEN-11-17

5. Distance Education Follow your policies and procedures for verifying the identity of students Take steps to ensure that students are academically engaged prior to disbursing Title IV student aid funds Modify disbursement rules »Delay disbursement of Title IV funds until the student has participated in the distance education program for a longer period of time »Make more frequent disbursements of Title IV funds

6. Documenting Attendance in Distance Education Programs Documenting that a student has logged into an online class is not sufficient, by itself, to demonstrate academic attendance by the student. A school must demonstrate that a student participated in class or was otherwise engaged in an academically related activity, such as by contributing to an online discussion or initiating contact with a faculty member to ask a course-related question.

7. Preventing Fraud Schools are now required to have procedures in place to address potentially fraudulent high school completion information on the FAFSA In the future the Department may in its annual verification notice specify certain additional items that would need to be verified including high school diploma information and applicant identity for students enrolled in Distance Education Programs

8. New FAFSA Question High school (27). Beginning in 2011-2012, an applicant must provide the name of the high school where he/she received or will receive his/her diploma as well as the city and state where it is located. FAFSA on the Web provides a drop down list of both public and private high schools, populated by the National Center for Education Statistics (NCES), for the applicant to choose from. If the applicant’s school is not listed, there is an option to write in the name. DCL GEN-11-17 Application & Verification Guide, Page AVG - 11

9. Verifying High School Diplomas If a college or the Department has reason to believe that the high school diploma is not valid or was not obtained from an entity that provides secondary school education, the college must evaluate the validity of the student’s high school completion Acceptable documentation for checking the validity of a student’s high school completion can include the diploma and a final transcript that shows all the courses taken

10. Verifying High School Diplomas For 2011–2012 the ISIR will not provide any more information than what the student submitted on the FAFSA, though in the future the ISIR may indicate that the Department considers a student’s high school questionable and in need of validation by the college A student’s self-certification is not sufficient to validate the high school diploma that is in question Colleges have final authority in meeting this requirement. The Department does not plan to have an appeal process or to intervene in reasonable judgments of college administrators FSA Handbook, Volume 1, Chapter 1, Page 1-6

11. Tax Credits Untaxed Income: The following credits may appear on a 2010 tax return. Both count as untaxed income: »Homebuyer tax credits : Maximum amounts of $6,500 or $8,000 for long-time resident or first-time homebuyers respectively. »Making work pay tax credit: The Making Work Pay provision of the American Recovery and Reinvestment Act of 2009 provided a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns. Federal Student Aid Handbook, Page AVG - 19

12. Enrollment Status Courses that do not count toward a student’s degree cannot be used to determine enrollment status unless they are eligible remedial courses. Federal Student Aid can be awarded only for learning that results from instruction provided or overseen by the school. Federal Student Aid cannot be awarded for any portion of a program based on study or life experience prior to enrollment in the program, or based on tests of learning that are not associated with educational activities overseen by the school. FSA Handbook, Volume 1, Chapter 1, Page 1-16

13. Conditional Acceptance Students admitted as conditional are regular students only if the school officially accepts them into the eligible degree or certificate program. Schools may offer a trial or conditional period during which a student attends a program without incurring program charges or receiving FSA funds. If he continues beyond the trial period and enrolls as a regular student, the school can pay him FSA grants for the entire payment period and loans for the period of enrollment. 2011-12 FSA Handbook, Volume 1, Page 1-3, and Dear Colleague Letter GEN-11-12

14. Clock Hour Programs Regulations now require some programs to be treated as clock hour programs for federal financial aid eligibility. A program is considered to be a clock-hour program if— »Receiving Federal or State approval or licensure to offer the program; or »Completing clock hours is a requirement for graduates to apply for licensure or the authorization to practice the occupation that the student is intending to pursue The credit hours awarded for the program are not in compliance with the Department’s new definition of a credit hour The institution does not provide the clock hours that are the basis for the credit hours awarded for the program or each course in the program and, except as provided in §668.4(e), requires attendance in the clock hours that are the basis for the credit hours awarded. Volume 2, Chapter 2 (Section 2.2.6).

15. Exception to New Clock Hour Requirements for Current Students For students enrolled continuously in both the 2010-11 and 2011-12 award years, in programs subject to the new credit vs. clock-hour calculation requirements and the elements of (and when to use) the credit to clock-hour conversion formula, you may choose to either: »apply the pertinent regulations as they existed prior to Oct 29, 2010, as described in the 2010-11 FSA Handbook Vol. 3 until these students complete the program; or »apply the amended guidance as described in the 2011-12 FSA Handbook Vol. 3 for all students enrolled in payment periods assigned to the 2011-12 and subsequent award years. 34 CFR 668.8(k),(l)

16. School Issued Stored Value Cards If the school pays a FSA credit balance to a student by making funds available through a school issued stored value card over which the school exercises control, the school is, in effect, holding a credit balance. All of the conditions for holding credit balances apply FSA Handbook, Volume 4, Chapter 1, Page 4-25

17. Debit, Demand, and Smart Cards A school that enters into a contract with a servicer to provide debit, demand or smart cards through which FSA credit balances are paid to students must have a system to ensure compliance with all regulatory time frames including students having access to any credit balance within the 14 days, and to any FWS wages at least once per month. FSA Handbook, Volume 4, Chapter 1, Page 4-19

18. Authorization to Hold an FSA Credit Balance Sample Authorization »Explains how an FSA credit balance is created »Explains requirement to return credit balance within 14 calendar days »Advises the student, or parent in the case of a PLUS loan, that the consent is voluntary »Explains the borrower’s right to cancel the loan, and that loan funds will not be held beyond the end of the loan period and other FSA funds will not be held beyond the end of the last payment period FSA Handbook Volume 4, Chapter 1, Page 4-8

19. Special Provisions for Books & Supplies By the seventh day of a payment period, a school must provide a way for a student who is eligible for a Federal Pell Grant to obtain or purchase the books and supplies required for the payment period if: »ten days before the beginning of the payment period, the school could have disbursed FSA funds to the student; and »disbursement of those funds would have created an FSA credit balance. FSA Handbook, Volume 4, Chapter 1, Page 4-27

20. Electronic Processes Voluntary Consent Required: Voluntary consent to participate in electronic transactions is required for all financial information provided or made available to student loan borrowers, and for all notices and authorizations to FSA recipients required under 34 CFR 668.165. »Financial Aid Award Letter »Notice of Loan credit FSA Handbook, Volume 4, Chapter 1, Page 4-11 2010-11 FSA Handbook, Volume 2, Chapter 7, Page 2-126

21. Cohort Default Rates Increase from 2 to 3 year monitoring period Established a 3-year transition period

22. Cohort Default Rates New contact for cohort default rate challenges and questions for PHEAA and FedLoan Servicing: Margaret Sandherr (Maggie) Email: msandher@pheaa.orgmsandher@pheaa.org Phone: 717.720.7690

23. 2 nd Pell Grant The provision for a 2nd Pell Grant has been repealed, effective for the 2011-12 award year. No 2nd Pell Grant Scheduled Awards may be sourced out of 2011-12 funds. The last period in which you may award a 2nd Pell Grant Scheduled Award is a summer crossover period in 2011. The regulation requiring sourcing a crossover Pell from the period from which the student would receive the greater payment for the payment period is waived for 2nd Pell Awards in 2011 crossover periods.

24. 2012-2013 Fixed Interest Rates Subsidized Stafford loan interest rates for undergraduate students Time periodInterest Rate First disbursed on or after July 1, 2008, but before July 1, 2009 6.0% First disbursed on or after July 1, 2009, but before July 1, 2010 5.6% First disbursed on or after July 1, 2010, but before July 1, 2011 4.5% First disbursed on or after July 1, 2011, but before July 1, 2012 3.4% First disbursed on or after July 1, 20126.8%

25. Budget Control Act of 2011 Eliminates Federal Direct Subsidized Stafford loans for graduate and professional students »Annual loan limit remains at $20,500 »Aggregate loan limit remains at $138,500 Ends Repayment incentives including any reduction in the interest rate or origination fee »One exception: Interest rate reductions to borrowers who sign up for electronic debits from a bank account Effective for loans first disbursed on or after July 1, 2012

26. Verification for 2012-2013 Number of Household Members Number of Household Members enrolled at least half time in eligible post-secondary institutions Tax Filers »AGI »US Income Tax Paid »Untaxed Income Non-tax Filers » Income earned from work July 13, 2011 Federal register DCL GEN-11-13

27. Loan Notes Has a New Name Our monthly policy newsletter, Loan Notes, has been renamed PHEAA Industry Bulletin.PHEAA Industry Bulletin We made this change to better identify our publication as one that discusses a breadth of financial aid and regulatory topics, not just loan information.

28. Accessing the PHEAA Industry Bulletin Visit PHEAA.org to access our monthly policy bulletin. Select ‘Schools’, under Partner Access, then Select ‘PHEAA Industry Bulletin’.

29. Accessing the PHEAA Industry Bulletin You can access any 2011 Industry Bulletin from the PHEAA Industry Bulletin page.

30. Accessing the PHEAA Industry Bulletin Our interactive bulletin allows you easy access to important information.

31. Would You Like to Receive the PHEAA Industry Bulletin? Contact us at CMPolicy@aessuccess.org to begin receiving our monthly policy bulletin.CMPolicy@aessuccess.org

32. Contact Information Cindy Davis Director, Compliance Services PHEAA (717) 720-2182 Cdavis@pheaa.org