Negotiated Rulemaking - Loans Team Package II

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Negotiated Rulemaking - Loans Team
Package II
Betsy Mayotte, ASA
Vicki Shipley, NCHER
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
1
Disclaimer
This material is for informational purposes only
and is not intended to serve as legal advice.
Individuals are advised to consult their own legal
counsel to determine the issues particular to their
own situation and any results that may apply.
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
2
Background
• Guarantor Issues
• Lender/Servicer Issues
• What’s Next
• Resources
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Package 2 Agenda
• Forbearances
• FFEL Repayment Disclosures
• Administrative Wage Garnishment
• Minimum Loan Period for Transfer
Students
• Rehabilitation
• Participation Rate Index
• Enrollment Reporting
• FFEL/DL Alignment
• Closed School Discharge
• Perkins Loans
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Effective Dates
Package II
– Generally effective 7/1/2014
– Voluntary early implementation for some provisions
– Final Rule November 1, 2013
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Forbearance
New rules will allow administrative
forbearance to a borrower who is delinquent
at the beginning of an authorized period of
forbearance
682.211(f)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Lender 60-Day Repayment Disclosure
Requirements
 No longer required to provide “difficulty making
payment” disclosure if payment issue has been
resolved
 Timeframe to send 60 day delinquency notice changed
from 5 calendar days to 5 business days
 682.205(a)(4)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Military Forbearances
 Allows mandatory forbearance for service that is
eligible for partial loan repayment under any
Department of Defense program
– Adds this forbearance for Direct Loans
• Borrower must request and provide documentation
682.211(h)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Post 270-Day Forbearances
 Current rules allow verbal forbearances for both programs up to
270 days past due
– DL allows after 270 days up to transfer to collections
– FFELP only allows written after 270 days past due
 New rule will allow limited verbal forbearance under both
programs for loans 270 days past due or more where:
– No claim has been paid under the FFELP
– Loan has not been transferred to DL collections
 120-day limit
– Can be used multiple times but not consecutively
– 682.211(d)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Regaining Title IV Eligibility
 Borrower gets one opportunity to renew his/her
eligibility for title IV assistance.
 Making payments under rehab doesn’t trigger – must
actually obtain new Title IV funds
 “On-time” now within 20 days of due date rather than
15
 682.200(b)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Closed School Discharge
 Desire to specify an exceptional circumstance and tie
timeframes more closely to real life occurrences of
schools closing
 To qualify for closed school discharge, borrowers must
have attended within 120 (rather than 90) days of
school closure
– Other eligibility rules remain the same
– 682.402(d)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Closed School Discharge
 Exceptional circumstances may include, but are not limited
to:
– The school’s loss of accreditation;
– The school’s discontinuation of the majority of its academic
programs;
– Action by the State to revoke the school’s license to operate or
award academic credentials in the State, or
– A finding by a State or Federal government agency that the
school violated State or Federal law
– 682.402(d)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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When is a School Not a School?
 For purposes of closed school discharge a school IS:
– The school’s main campus and/or
– Any location or branch of the main campus
 A school is NOT:
– A single program
– Most but not all of a schools programs
– 682.402(d)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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FFELP and DL Clean-up
Longest Issue Paper EVER!
Deleted much of origination language from
FFEL – added to DL as needed
Inducement language
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Transfer of Credits
 For students transferring into clock hour or credit hour schools with
no standard terms
 Current rules only allow new loan origination
– For remainder of program if program is less than academic year in
length or
– For remainder of academic year but only
– If school accepts credits from “old” school
 Borrowers will no longer have to worry about the ramifications of
transferring to a school that does not accept credit or clock hours
from the previous school
 685.301
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Perkins Cancellation
 Teacher Loan Forgiveness/employment based
forgiveness
– Borrower who does not complete year for FMLA reasons
still gets credit as year worked
• Must have completed at least half of year
 Borrowers who change employment but maintain
same cancellation progression category maintains
status
 674.52(c)(1)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Other Perkins Changes
 On-time repayment definition for rehab changed from 15
to 20 days
 Perkins loans made prior to 1982 can now be assigned to
ED without an SSN
 Eliminates debt to income provisions for economic hardship
deferment
 Aligns graduate fellowship deferment requirements with
those of the FFEL and DL
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Questions?
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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First Things First..
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete,
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Guarantor Specific Issues
 Regaining Title IV Eligibility
 Loan Rehabilitation
 Loan Rehabilitation-AWG
 Administrative Wage Garnishment
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
All loan rehab payments must be “reasonable
and affordable” (R & A) and agreed upon by
loan holder and borrower.
– Cannot be balance based
§682.405 (b) §685.211(f)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
 *Guaranty agency must determine a borrower’s initial
reasonable and affordable payment amount based on the
“15% formula”.
–
–
–
–
IBR formula used but NOT an IBR payment
15% of AGI – 150% of poverty level/12
New 7/1/2014 IBR rules will not apply here
No other IBR rules apply
 §682.405 (b) §685.211(f)
– *Red denotes changed or new from Proposed Rule
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
 If borrower objects to 15% formula payment , payment
Financial Disclosure for Reasonable and Affordable
payment form must be collected and payment determined
 Borrower can then choose which payment they prefer
 Payment can be as low as $5
 §682.405(b)(1)(iii) (A)
 §685.211(f)(1)(i)(A)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
 New ED-approved form for gathering financial
information if 15% formula payment amount is
rejected by the borrower.
 Form includes consideration for family size and specific
expenses.
 Borrower may be asked to provide documentation to
support the request.
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
 Rehab agreement due to borrower within 15
days of payment determination
 Rehab Agreement must include:
– Borrower’s reasonable and affordable payment
amount.
– A prominent statement that the borrower may object
orally or in writing to the R & A payment amount.
– Method and timeframe for raising such an
objection…
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
– An explanation of any other terms and conditions required for
loan to be rehabilitated
– The effects / benefits of having a loan rehabilitated.
– Amount of collection cost to be added to the unpaid principal
when the loan is sold
• May not exceed 18.5%
 §682.405(b)(1)(v)

 §685.211(f)(1)(iii)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Additional Restrictions Prohibited
• Guarantors and ED may not impose additional
requirements for borrowers to rehabilitate.
• Requiring updated contact information not considered
an additional requirement so is allowed
• Requiring a signed rehabilitation agreement is allowed
• §682.405(b)(1)(v) and §685.211(f)91)(iii)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation
 GA must limit contact with the borrower whose
loan is being rehabilitated to:
– Collection activities that are required by law or
regulation.
– Communications that support the rehabilitation.
 §682.405(b)(1)(x)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Loan Rehabilitation - AWG
 Administrative Wage Garnishment must be suspended after 5 voluntary
payments
–
–
–
–
Unless otherwise instructed by borrower
Does not supersede other suspension requirements
Benefit can only be used once
GA must notify if AWG resumes, but hearing and notice requirements do not
apply.
 Adjustments can be made to the voluntary payment amount
– should be agreed to and reflected in the written rehabilitation agreement.
 §682.405(a)(3)
 §685.211(f)912)(i)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Wage Garnishment
 30-day notice still required prior to initiating garnishment
proceedings. Must include
– Nature and amount of the debt.
– Intention to collect the debt through deductions from
disposable pay.
– An explanation of the borrower’s rights.
– Deadlines by which the borrower must exercise those rights.
– Consequences of failure to exercise those rights in a timely
manner.
 §682.410 (b)(9)(i)(H)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Wage Garnishment
 GA must still offer borrower reasons to object to AWG.
Reasons include:
Existence of the debt.
The amount of the debt
Enforceability of the debt. (New for 2014)
Amount of collection cost exceeds the permissible
amount
– Financial hardship caused due to the amount or at the
withholding rate proposed in the notice.
–
–
–
–
 §682.410 (b)(9)(i)(E)(1)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Wage Garnishment
 Borrower’s objection due to financial hardship due to amount of
AWG:
– Borrower must provide proof of income and expenses
– GA must lower if required by hearing official
– Borrowers financials are in sync with “collection financial standards”
set by IRS
– Lowered order in effect for six months
– GA may increase, but must notify borrower and give opportunity to
object
– Borrower may object to amount at any time, but GA is not required
to consider until six months after prior order issued
 §682.410(b)(9)(i)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Wage Garnishment
 Borrower will have 30 days from AWG notice to submit
written request for hearing
– If received timely, GA may not issue withholding order until
hearing completed and decision rendered
– Must be completed within 60 days
• Can be extended if borrower raises objection not previously raised
– If not received timely, withholding order must be issued
• Hearing and decision must still be completed within 60 days
– Withholding order must be suspended if hearing not
completed on 61st day – even if extension granted
 §682.410 (b)(9)(i)(J)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Wage Garnishment
Miscellaneous Bits
 Hearing official may not be under the supervision/control
of the head of the guaranty agency, “or of a third-party
servicer or collection contractor employed by the agency.”
 All oral communications — except for hearing logistical
issues — with any representative of the guaranty agency
or with the borrower are made within the hearing of the
other party
– Copies of any written communication with either party are
promptly provided to the other party.
 §682.410(b)(9)(i)(I)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Administrative Wage Garnishment
 Employer in receipt of AWG order must withhold
smaller of:
– Amount specified in the AWG order.
– 15% of the borrower’s disposable pay (as permitted by
section 488A(a)(1) of the HEA)
– Cumulative amount of all orders not to exceed 25%
 Federal loans receive priority over other orders other
than family support.
 §682.410 (b)(9)(i)(K)
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
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Negotiated Rulemaking & Pending Regulatory
Changes
Additional resources/references can be
obtained by accessing the NCHER Negotiated
Rulemaking 2011-2013 web-link:
http://www.ncher.us/?page=158
Neg Reg pages
 http://www2.ed.gov/policy/highered/reg
/hearulemaking/2011/index.html
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
36
Questions and Discussion
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