Spring 2010 Federal Perkins
Loan Update
Agenda
 COHEAO
 Budget
Update
 Legislative Update
 Regulatory Update
 Perkins Loan Issues
 Grassroots
COHEAO Announcements
NEW MEMBERS WANTED!

Tell your Friends and Colleagues to join.
Membership is needed now more than ever.
1. Perkins is not dead; much remains to do.
2. COHEAO also working on other issues:
accounts receivable management, financial
literacy, institutional loans (private loans.)
 Discounts for Teleconferences, Annual, MidYear Conferences
 Mid-Year Conference: July 25-27, 2010
 Annual Conference, DC: Jan. 22-26, 2011
Obama ED Budget for 2011

A Repeat of the 2010 budget for the most part.
Adopted House-Passed SAFRA bill
Financial Aid Changes:
 Increase Pell Grant max to $5,710, make it an
automatic entitlement, increase by 1% over CPI
every year
 Eliminate FFEL Program – all schools to Direct
Lending as of July 1, 2010
 Work Study level at $980.5 million
 SEOG level at $757.5 million
 Simplify the FAFSA, tie in with IRS data
Obama ED Budget for 2011






Limit federal debt repayment under Income Based
Repayment to 10% of disposable income, defined as
150% of the poverty level, Down from 15%
Forgive the loan balance after 20 years of IBR
payments, Down from 25 years
Eliminate the LEAP Program
Eliminate Academic Competitiveness Grants
Eliminate SMART Grants
Continue TEACH “Grants” BUT 80% of “Grants”
expected to become Unsubsidized Stafford Loans



$93 million in “grants” only costs $12.7 million
Eliminate The Perkins Loan Program
Create a New “Direct Perkins Loan Program”
What About Perkins Loans???
We had to destroy (the program) in
order to save it.” – the Direct Perkins
 “
Loan proposal
First proposed in Administration’s FY 2010
budget


Passed by House in September 2009 as H.R.
3221
Senate HELP Committee wrote a bill and
almost, almost, almost introduced it…. But
not.
Congress on Perkins in HEOA of
2008: Keep it
HEAO SEC. 466: “SENSE OF CONGRESS
REGARDING FEDERAL PERKINS LOANS.
It is the sense of Congress that the Federal
Perkins Loan Program, which provides lowinterest loans to help needy students finance the
costs of postsecondary education, is an
important part of Federal student aid, and should
remain a campus-based aid program at
colleges and universities.”
Direct Perkins Loan Idea

Modernize and expand Perkins Program



New Perkins program = new unsub Direct Stafford
Program
Receive 6 billion in “mandatory” funding
Expanded to all schools
• From 1,800 to 4,400




5% interest would accrue while in school and grace
Other terms and conditions would be same as
unsubsidized Stafford
Federal Share of current loans sent to ED
Overhaul of the administration of the program
• Fully originated and administrated by the Dept of ED
Direct Perkins Loan Idea
 Administration


says:
2.7 million more students will receive loans
Loans to be targeted to needy students and
the schools they attend
• Schools with many Pell recipients

Colleges encouraged to control tuition
• New formula would encourage cost control and
targeting of grants to prevent excessive
indebtedness

Budget rules require ED servicing
• Arcane federal accounting/scoring rules
Congressional Action
 Student
Aid and Fiscal Responsibility Act
of 2009 (SAFRA) – H.R. 3221




Implements President’s 2010 budget requests
Introduced July 13, 2009
Full committee markup July 21, 2009
Passed the House on Sept. 17, 2009
• Vote 253 to 171

Senate working on their version
“Direct Perkins”:
Three Major Flaws

In-School Interest Benefit dropped: 5% interest accrues
from time loans made




All new loan servicing transferred to national Direct Loan
servicing contractors




For undergrad: adds $5,000 to debt after 4 years
It’s a numbers game: Money would be taken from student
interest payments and spent on other federal “priorities”
ED Justification: better than “private” loans
Possibly also FFELP non-profits in some states
Schools completely out of the servicing picture
Responsible for possible “match”, default rates
Perkins’ unique cancellation benefits killed

ICBR supposed to substitute, along with DL’s cancellation after
10 years of payments while in public service job.
What Passed

H.R. 4872 Health Care and Education
Affordability Reconciliation Act


House passed on 3/21/10 vote 220-211
Senate passed with vote 56-43
 H.R.
4872 consists of amendments to
health care reform and a modified version
of SAFRA.
 DCL GEN-10-5 briefly addresses these
changes
What Passed
 As
of 7/1/10, all Stafford, PLUS and
Consolidation Loans will be made via the
Direct Loan Program.
 Additional mandatory funding is provided
to augment funds appropriated each year.


increase the federal maximum Pell Grant
each year by the change in the Consumer
Price Index.
According to ED/Labor Committee the
maximum Pell for 2010 is $5,500
What Passed

The legislation uses $13.6 billion of the savings
to cover most of approximately $19 billion
shortfall in current Pell Grant funding.
 Bill does not include ongoing increases in Pell at
the rate of inflation plus 1% as in the SAFRA bill.


The annual appropriation process will fund the bulk of
each year’s Pell grant.
No guarantee that there will be an annual increase in
the total grant.
What Passed
 $750
million is included for “College
Access Challenge Grants” through 2014.

Rate of $150 million per year.
 $50
million goes to assist school transition
into Direct Loan program.
 $2.55 billion goes to HBCU as well as
Minority Serving Institutions
What Passed
 Not-for
Profit direct loan servicers receive
funding if needed.

If meet minimum standards, they would be
allocated a minimum 100,000 loan accounts
annually, with the first 100,000 eligible for a
special pricing tier.
What Passed
 $2
billion is set aside for community
colleges via Trade Adjustment Act funding
under the Dept of Labor.

The larger American Graduation Initiative was
dropped from bill due to budget issues.
What Passed
 Income-based
Repayment was modified
for new borrowers beginning 2014.


Borrower payments are limited to 10% of
discretionary income. (reduced from 15%)
Unpaid balance would be forgiven after 20
years. (reduced from 25%)
What Passed
 $25
million is provided in fiscal year 2010
and 2011 for Direct Loan servicers “to
retain jobs at locations where such
servicers were servicing FFEL loans on
1/1/10.
What Passed
 For
one year beginning 7/1/10, borrowers
who are not in repayment on all there
loans can consolidate into the Direct Loan
Program if they have loans in at lease two
of the following categories;



FFELP Loans,
FFELP loans that have been sold to the
Department
Direct Loans
What Passed
 The
Current Perkins Loan Program is not
touched!

The administration's proposal (and passed by
the House in Sept) to create a new “Direct
Perkins Loan Program” was deleted in its
entirety.
What Happened to the Rest?
CBO “scores” proposed changes to a law
against a “baseline” of current services.
 A new baseline is developed by CBO every
January. The January 2010 baseline resulted in
less savings from ending the FFEL program than
January 2009



Economy changed, schools converted to DL, Pell
Grants ballooned, Pell shortfall appeared
Money needed to offset costs of Health Care
Reform legislation, $2 billion for deficit reduction.
 The result: a pared down spending bill, no
Perkins changes
What’s Next
 COHEAO
will turn it’s attention to extend
and expand the current Perkins Program.

Most important matter (because of timing) is
appropriations.
• President’s FY2011 budget request was written in
the expectation of the “Direct Perkins”
• No FCC or Cancellation funding is currently
requested.
What’s Next

Need to address the 2012 sunset for Perkins.
• It requires the federal share of the Perkins Loan
revolving fund to be sent to the Department or ED
• This date has been extended several times, last in
2007.
• COHEAO’s high priority to eliminate or extend this
clause.
COHEAO Actions

COHEAO fought vigorously in 2009 and 2010 to
retain benefits of the traditional Perkins Program
while supporting its expansion and continuation.
 Sometimes at odds with others in the Higher Ed
Community, often worked together – now
together
 Grassroots actions led by Board of Directors:



dozens of Conference calls arranged with Senate
offices and home-state colleges and commercial
members
Dozens of in-person meetings
In the end, the changed CBO score led to all
Perkins changes being dropped.
Grassroots Efforts
 We
must work to fund and extend the
Perkins Loan program
 COHEAO is working on new ideas to
preserve the program
 Support Appropriations
 Support Perkins
 See www.coheao.org for details
 Stay In Touch with your Congressional
Representatives
Regulatory - Perkins Loan Issues
 Economic



Hardship Deferment
College Cost Reduction and Access Act
(CCRAA, P.L. 110-84).
Definition changes effective 7/1/09
Eliminates the 20/220 qualification for Econ
HD.
Regulatory - Perkins Loan Issues
 Electronic




Announcements
Perkins Cohort Default Rates
Orange Book 6/30/09 rates
Posted 5/6/10
U.S. aggregate 10.04%
http://ifap.ed.gov/perkinscdrguide/0809Perkin
sCDR.html
Regulatory - Perkins Loan Issues

Total and Permanent Disability


New Definition as of 7/1/10
The condition of an individual who is (1) unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that –
(i) can be expected to result in death;
(ii) has lasted for a continuous period of not less than 60 months;
or
(iii) can be expected to last for a continuous period of not less
than 60 months; or
(2) Has been determined by the Secretary of Veterans Affairs to
be unemployable due to a service connected disability.
Regulatory - Perkins Loan Issues
 Dear
Colleague Letter CB-09-06 and CB09-05




Published 9/28/09
Approval of the revised Perkins MPN and
Addendum to Perkins MPN
MPN contains changes to cancellation,
rehabilitation, forbearance and deferment
Must begin using by 12/31/09
HHS Loan Changes
 Health



Care Reform Bill
Signed into law 3/23/10
New Law – Patient Protection and
Affordability Care Act of 2010 (PPACA)
Made changes to NSL and PCL loans
NSL Loan Changes

Loan Funding Limits increased



Aggregate Limits increased



$2,500 changed to $3,000
$4,000 (for last two academic years) changed to
$5,200
$13,000 changed to $17,000 for academic year 10/11
After AY11 amounts adjusted to provide cost of
attendance increase for the yearly and aggregate
limits
P.L. 111-148, Sec 5202(a), Loan Agreements
NSL Loan Changes
 Date


of Enrollment
Change in date a student of financial need
must be enrolled in a nursing program in
order to be eligible to receive NSL funds.
6/30/86 changed to 6/30/00
 P.L.
111-148, Sec 5202(b)(1), Loan
Provisions
NSL Loan Changes

Partial Loan Cancellation Date



A student who received a NSL prior to 9/29/95
can still have up to 85% cancelled for



The date for a partial loan cancellation formerly
applied to a loan a student received before xx/xx/xx.
9/29/79 changed to 9/29/95
full-time employment as a professional nurse in public
or non-profit.
Nursing experience prior to 3/23/10 will not be eligible
for cancellation.
P.L. 111-148, Sec 5202(b)(2)
PCL Loan Changes

Primary Health Care Service Requirements
 New PCL loans made on or after 3/23/10.
 New PCL required to enter a residency and
practice in primary health care for 10 years
(including the years spent in residency) or
until the loan is repaid in full, which ever
occurs first.
 P.L. 111-148, Sec 5201(a)(1)(B),
Requirements for Students
PCL Loan Changes
 Service



Default Rate
Borrowers who receive a PCL on or after
3/23/10,
and fail to comply with the service
requirement will have their loans begin to
accrue at a rate of 2% per year greater than
the rate at which the student would have paid
if compliant.
P.L. 111-148, Sec 5201(a)(3), Noncompliance
by Student
PCL Loan Changes
 Parental
Financial info requirement for
Independent Students


Independent students no longer required to
submit parental financial information to
determine financial need.
Determination of need of such information is
at discretion of the school.
PCL Loan Changes

Definition: a student who is at least 24 years of
age and has not been listed as a dependent on
his or her parent’s tax forms within the last three
years.
 Changes to MPN required, old MPN still in
effect.


Borrower with old MPN with new disbursements on or
after 3/23/10 required to sign new terms and
conditions.
P.L. 111-148, Sec 5201(b), Student Loan
Guidelines
Questions?
Lori Hartung
Todd, Bremer & Lawson, Inc.
lori.hartung@TBandL.com
1-803-371-2394
Audrey Atkins
NCO
audrey.atkins@ncogroup.com
1-850-264-7543
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