Betsy Mayotte Presents
A REGULATORY EXTRAVAGANZA
Starring
• Latest Regulatory Changes
• DC Update
• Reauthorization Update and
Predictions
Also Starring..
150% Rule
Agenda
• Background
• Basics
• If, And’s, But’s and Maybe’s
• Preparatory Courses
• What ED Will Track
• What Schools Have to Track
• Questions And Words of Encouragement
Background
• Moving Ahead for Progress in the 21st
Century (MAP-21)
• Limits subsidy period to 150% of
program length
• Intended to encourage students to
complete programs in a timely manner
Who Does It Affect
• New borrowers on or after July 1, 2013
• Borrowers with no outstanding Stafford, PLUS
or Consolidation loans on or after July 1, 2013
• Perkins loans do not affect trigger
• Consolidating pre 7/1/2013 loans does not
change eligibility
Basics
New Terms
• Maximum Eligibility Period (MEP)– 150% of published
length of program
Number of days in months/weeks
--------------------------------------------------------------X1.5
Number of days in academic year
• Subsidized Usage Period (SUP) – period of time
borrower received direct subsidized loans
• Remaining Eligibility Period (REP)– difference between
maximum eligibility period and subsidized usage period
Basics
• Borrowers may only receive interest subsidy for
150% of published length of program
• Includes receiving new subsidized Stafford loans
and
• Interest subsidy on existing loans
Basics
• If borrower exceeds maximum eligibility period
(MEP):
• Borrower may not borrow additional subsidized
Stafford Loans
• Interest will accrue on existing loans beginning on
day borrower exceeds MEP and will continue to
accrue during
• Grace periods
• Deferment periods
• In-school periods
• Eligible IBR periods
Basics
• Borrower is considered to have exceeded maximum
eligibility period if:
• They are enrolled 150% of the program length
and
• Do not complete the program and
• Continue to be enrolled in that program or
• Transfer to another program of equal or shorter
length
Calculating the Subsidized Usage Period
• Measured in years:
Number of Days in Loan Period
----------------------------------------------------------Number of days in academic year
• Rounded down to nearest quarter
• Count only if borrower received Subsidized Loan
during timeframe
• Can be prorated in certain circumstances
Calculating the Subsidized Usage Period
• Amount of loan not relevant – one exception:
• Student receives full subsidized annual loan limit
for less than academic year:
SUB = 1
Calculating the Subsidized Usage Period
Example:
1. Academic year September 1 – May 15th = 258 days
Loan period September 1 – May 15th = 258 days
258/258 = SUB of 1 year
2. Academic year September 1 – May 15th = 258 days
Loan period September 1 – December 15th = 107 days
107/258 = .41% rounded down to .25 year SUB usage
Unless..
Borrower receives full annual sub loan limit then..
SUB usage = 1 year
Calculating the Subsidized Usage Period
Proration occurs when:
• Enrollment status is less than full time
• ¾ time enrollment: SUB x .75
• ½ time enrollment: SUB x .50
Example:
Academic year September 1 – May 15th = 258 days
Loan period September 1 – May 15th = 258 days
258/258 = SUB of 1 year
Borrower is only ¾ time:
1 x .75 = SUB of .75
Remaining Eligibility Period - REP
Maximum Eligibility Period (150% of program
length)
Subsidized Usage Periods
------------------------------------------------------Remaining Eligibility Period
Remaining Eligibility Period - REP
Example 1:
Borrower enrolled in 1 year program: MEP = 1.5 years
Borrower receives subsidized loans in this program for 1.5
years – does not complete. SUB = 1.5 years
Borrower transfers to 4 year program: MEP = 6 years
SUB of 1.5 years
---------------------------------------------------------------------REP = 4.5 years
Remaining Eligibility Period - REP
Example 2:
Borrower enrolled in 4 year program: MEP = 6 years
Borrower receives subsidized loans in this program for 1.5
years – does not complete. SUB = 1.5 years
Borrower transfers to 1 year program: MEP = 1.5 years
SUB of 1.5 years
---------------------------------------------------------------------REP = 0 years
Remaining Eligibility Period - REP
Example 3:
Borrower enrolled in 1 year program: MEP = 1.5 years
Borrower receives subsidized loans in this program for 1 year
SUB = 1 years
Borrower transfers to 1 year program: MEP = 1.5 years
SUB of 1 years
---------------------------------------------------------------------REP = .5 years
Effect to Subsidy Benefits
Borrowers lose eligibility for interest subsidies when:
• They have reached the 150% of the allowable
subsidized usage period AND
• They did not complete the program AND
• They continue at least half time enrollment in
that program OR
• They enroll in a new program of equal or lesser
program length
Effect to Subsidy Benefits
• Borrower loses:
• Eligibility for new subsidized Stafford loans
• Eligibility for further subsidy on existing loans
• Is not retroactive
• Borrower responsible for interest regardless of
further borrowing
• Lost subsidies cannot be recaptured
• Loans that lose subsidy eligibility remain Subsidized
Stafford loans
Effect to Subsidy Benefits
Examples:
4 year program, borrower attends and receives
subsidized loans for 4 years, does not complete
program SUP = 4 years
1. Borrower transfers to another 4 year program,
completes after 3 more years of receiving sub loans
1. Interest begins accruing beginning of year 7
2. Borrower transfers to two year program
1. Interest begins accruing 1st year of that program
Effect to Subsidy Benefits
Examples:
4 year program, borrower attends and receives
subsidized loans for 4 years, does complete program
SUP = 4 years
3. Borrower enrolls in two year program
1. Interest does NOT begin accruing on prior loans
2. Borrower has no further subsidized loan
eligibility
Effect to Subsidy Benefits
Examples:
2 year program, borrower attends and receives
subsidized loans for 3 years, does not complete
program SUP = 3 years
4. Borrower transfers to 4 year program
1. Interest does NOT begin accruing on prior loans
2. Borrower has 3 more years of REP
Effect to Subsidy Benefits
Examples:
2 year program, borrower attends and receives
subsidized loans for 4 years, does not complete
program SUP = 3 years
4. Borrower transfers to 4 year program
1. Interest continues to accrue on prior loans
2. Borrower has 3 more years of REP
Preparatory Courses
• Preparatory courses for Undergrad enrollment count
towards the total MEP allowed for the undergrad
program itself
• 150% rule does not supersede 12 month max
allowed for prep courses to receive federal aid
• Preparatory courses for graduate school based on
borrowers most recent undergrad program of study
• If max SUP is used, no new Subsidized loans but
interest will not accrue on prior loans
Teacher Certification Courses
• Teacher certification courses where credential is awarded
by school treated the same as other undergrad or grad
• Teacher certification courses where credential is not
awarded by school treated separately from other SUP
periods
• Total of all TCC considered when determining MEP
• TCC subsidy usage not considered when totally other
undergrad subsidy usage
• Exceeding subsidy usage for TCC does not cause interest
to accrue
What ED Will Track
• The Department will track and report to you a
students:
• Subsidized usage period
• Whether they are a new 7/1/2013 borrower
• Loss of subsidy
• Maximum eligibility period
• Remaining eligibility period
• Loss of subsidy benefits (NSLDS)
What You (Schools) Will Track
• Schools must report to COD
• SAY/BBAY dates
• Loan period dates
• Changes to these dates
• Do not include summer header/trailers unless
borrower is receiving subsidized loans for that
period
• Effective for all loans 1st disbursed on or after July 1,
2013
• Regardless if borrower is affected by subsidy
rules
What You (Schools) Will Track – this year
• When reporting enrollment, schools must report to
NSLDS:
• Credential level
• Indicate if prep or teacher prep course
• Length of program in years, months or weeks
• CIP code
What You (Schools) Will Track – next year
• Schools must report to COD
• Same items as prior year plus
• Enrollment “level” (full time, half time, etc)
• Credential level
• Program flag
• CIP code
• Length of program
• Effective for all loans 1st disbursed on or after July 1,
2013
• Regardless if borrower is affected by subsidy
rules
Counseling
• For new borrowers on or after July 1, 2013 schools
must
• Provide “robust” entrance counseling about
150% rule prior to 1st disbursement
• Schools “encouraged” to provide info to affected
borrowers who receive counseling prior to
7/1/2013
• 5/16/2013 announcement contains materials
• Will be added to Direct Loan entrance
counseling October, 2013
Questions? Resources
• ED Q and A http://ifap.ed.gov/150PercentDirectSubsidizedLoanLimitInfo/FAQ.html
• NASFAA Q and A (login may be required)
http://www.nasfaa.org/Main/orig/2013/Your_Questions_Answered__The_150_Per
cent_Rule.aspx
• DCL on reporting requirements
• http://www.ifap.ed.gov/dpcletters/GEN1313.html
• May 16th announcement – includes counseling requirements
• http://www.ifap.ed.gov/eannouncements/051613DirectSubsidizedLoanLimit1
50PercentAnnounce1.html
•
DCL overviewing 150% rule
• http://www.ifap.ed.gov/eannouncements/062013DirectSubsidizedLoanLimit1
50PercentEA2.html
2013-2014 NEGOTIATED
RULEMAKING(S)
Student Loan Neg Reg
•
•
•
•
•
•
•
Effective July 1, 2014
Post-270 day forbearance
Rehabilitation of defaulted loans
Administrative Wage Garnishment
Closed School Discharge
Transfer of credits
Regaining Title IV eligibility
PLUS Loans
• NPRM for PLUS released
• Draft rule would allow loan approval for
borrowers with one or more debts with a
total combined outstanding balance
greater than $2,085 that:
– are 90 or more days delinquent as of the
date of the credit report, or
– have been placed in collection or charged
off (as defined earlier in paragraph (c)(1))
during the two years preceding the date of
the credit report
• Borrower who have successful appeal
must complete loan counseling
Other Neg Reg Topics
• Cash management
– Addresses how funds are delivered to
students
– Goal to ensure student choice,
transparency and no fees for federal aid
delivery
– Introduces “sponsored account”
– Sets framework for ED delivery mechanism
Other Neg Reg Topics
• State authorization of distance education
• State authorization of foreign locations of
US schools
• Retaking coursework
• Clock to credit hour conversion
OTHER NEW RULES AND
REMINDERS
NSLDS Reporting
• Student enrollment must be reported at:
– Academic program level
– Institutional (campus) level
– Program level retroactively to July 1, 2014
• Schools must report no less than once
every two months
• Effective for all submissions to NSLDS on or
after October 1st, 2014
High School Diplomas
• Clarifies that for these purposes, there is not such thing as an
“online GED program” only an online GED test
• Must have test results or transcripts from GED publisher
showing test scores
• Certificate of high school completion not sufficient
• High schools do not have to be accredited, but diplomas must be
recognized by the state the school is located in
• Clarifies that you can admit a student who doesn’t have a
diploma
• Must be beyond compulsory age
• Cannot award aid
• Foreign diplomas ok if comparable to U.S. secondary school
• School can use outside foreign diploma service to do this
evaluation
Interest Rates
• New rate structure applies to all loans first
• disbursed on or after July 1, 2013.
• Annual fixed rates based on 10 Year T-Bill,
• plus margin.
• Applies to loans first disbursed between
• July 1 and June 30.
• Rate applies for the life of the loan.
Origination Fee
• Subsidized and Direct Unsubsidized Loan Fee
– 1.072 percent for loans first disbursed on or after
December 1, 2013 and before October 1, 2014;
– 1.073 percent for loans first disbursed on or after
October 1, 2014 and before October 1, 2015.
• Direct PLUS Loan Fee
– 4.288 for loans first disbursed on or after December
1, 2013 and before October 1, 2014
– 4.292 percent for loans first disbursed on or after
October 1, 2014 and before October 1, 2015
Defense of Marriage Act
• Expands definition of marriage to include same
sex couples
• Who are married in a jurisdiction that
recognizes the marriage
• Place of celebration rule
• Place of resident not relevant
• Does not change non-married couples living
together regardless of state recognition
(domestic partnerships etc.)
Defense of Marriage Act
• As of December 13, 2013
• Students submitting the 2013-2014 FAFSA for
the first time list themselves or parents legally
married if they are in fact legally married
• Students who have already submitted the
2013-2014 FAFSA:
• If parent or student wishes to update
status you MUST allow
• Associated 2013-2014 package changes
must also occur
Gainful Employment
• Background
• GE programs defined as:
• Proprietary institutions –
– All programs, except for • Liberal Arts Undergraduate degree
Preparatory non-certificate coursework
necessary for enrollment in an eligible
program
• All other institutions
– Non-degree programs of less than two years
other than preparatory coursework
Gainful Employment*
ANZFAA 2014 *Chart by ACE
WASHINGTON UPDATE
Default Rates
• National rate reduced from 14.7% to
13.7%
• Foreign school rate reduced from 4.6%
to 3.8%
• ED made adjustments for some splitservicing borrowers
Presidents Higher Education
Initiative
• “A Better Bargain for the Middle Class –
Making College More Affordable
– Paying for Performance
– Promoting Innovation and Competition
– Ensuring that Student Debt Remains
Affordable”
Presidents Higher Education
Initiative
• Pay As You Earn expansion
• College Scorecard and Navigator
• Financial Aid Shopping Sheet
• Net Price Calculator
• Financial Aid Shopping Sheet
REAUTHORIZATION PREDICTIONS
Background
Can’t We All Just Get Along?
U.S. Tax revenue:
$2,170,000,000,000
Federal budget:
$3,820,000,000,000
New debt: $ 1,650,000,000,000
National debt: $14,271,000,000,000
2011 budget cut: $ 38,500,000,000
2013 budget cut: $85,000,000,000
Annual family income: $21,700
Money the family spent: $38,200
New debt on the credit card:
$16,500
Outstanding balance on the credit
card: $142,710
Budget cuts: $385 and $850
Not Running for Re-election - House
Spencer Bachus, R-Ala.
Michele Bachmann, R-MN.
John Campbell, R-Calif.
Howard Coble, R-N.C.
Jim Gerlach, R-Pa.
Tim Griffin, R-Ark.
Tom Latham, R-Iowa
Jim Matheson, D-Utah,
Carolyn McCarthy, D-N.Y
John Tierney, D-MA
Mike McIntyre, D-N.C
Howard "Buck"McKeon,
R-Calif
George Miller, D-Calif
James P. Moran, D-Va
Bill Owens, D-N.Y
Jon Runyan, R-N.J
Henry A. Waxman, DCalif
Frank R. Wolf, R-Va
Not Running For Re-election - Senate
Max Baucus, DMont.
Mike Johanns, RNeb.
Saxby Chambliss, RGa.
Tim Johnson, D-S.D.
Tom Coburn, ROkla.
Tom Harkin, D-Iowa
Carl Levin, D-Mich.
Jay Rockefeller, DW.Va.
Background
• Washington Resolutions
– Lose weight
– Be stricter with the kids
• ED Resolutions
– Set ground rules for with the kids
– Install more security, monitoring, set parental controls
• High Level Reauthorization Proposals
– The good, the bad etc..
• General Chatter
Bills Offered to Date
• Senate Reauthorization Bills
• Higher Education Affordability Act (HEAA)
• Financial Aid Simplification and Transparency (FAST) Act
• House Reauthorization Bills:
• Simplifying the Application for Student Aid Act (H.R. 4982)
• Empowering Students Through Enhanced Financial
Counseling Act (H.R. 4984)
• Strengthening Transparency in Higher Education Act (H.R.
4983)
Higher Education Affordability
Act
•
•
•
•
•
•
•
College Dashboard/college navigator
ED complaint system
Mandatory award letter format
Expand loan counseling
Streamline income based plans
Adds PLUS to CDR
Allow schools to reduce annual loan
limits
Congressman Tom Petri (R-WI)
introduced a bill in December, 2012
that would require new student loan
borrowers to pay their federal loans
back on an income based plan where
the appropriate payments would be
withheld from the borrower’s paycheck
and sent directly to the Department of
Education.
The payment would be no more than
15% of the borrower’s income over and
above 150% of the poverty line. All
loan subsidies would be eliminated as
would existing repayment, deferment
and forbearance options.
Any remaining balance would be
forgiven after 25 years.
Accrued
interest would be limited to 50% of the
original loan balance. This plan is
modeled after existing student loan
programs in the United Kingdom,
Australia and New Zealand.
More Information:
http://petri.house.gov/pressrelease/petri-introduces-student-loanbill
Income Based
Payment Plans
• Eliminates complex repayment option rules and
application process.
PROS
• Eliminates or greatly reduces delinquency and
default.
• Limits interest for low-income borrowers who may take
longer to pay debt.
• Does not account for other types of education debt
such as private, parent PLUS, institutional or state
loans.
CONS
• Long – term outcome and cost, if any, to taxpayer
unknown.
• Some borrowers end up paying more in the long run
under this plan
OTHER
SUPPORTERS
New American Foundation, NASFAA, TICAS (for
delinquent borrowers only), Committee for Economic
Development
COMMENTS
May result in perception that debt management no
longer needed
While
most agree that higher
education
is
generally
an
investment
that
results
in
increased lifetime earnings, most
also agree that there are those
some programs where the cost
benefit analysis just might not be
there. Many students also enter
some programs unprepared and
drop-out before prior to completion
which results in debt without
accomplishing
the
increased
earning potential. Other students,
who do successfully complete a
program of higher education, do
so by accumulating debt levels
that are unsustainable based on
the earnings expected for their
field of study. Several entities
have suggested proposals to
attempt to minimize these results.
STUDENT
INFORMATION
PROS
Such Proposals Include:
A ratings plan has been touted by
the administration as a way to
help families compare college
programs. Some proposals also
call for publication of graduation
and placement rates
CONS
OTHER SUPPORTERS
COMMENTS
• May curtail over-borrowing
• Better informed consumer
• Would likely reduce budgetary outlays for loan
program
• May change middle and high school preparedness
behaviors in some families
Some studies show that such information cannot always
be processed correctly by the families that need it most
New American Foundation, NASFAA,
There’s no such thing as too much information as long as
there are resources to help families understand it.
While
there has been significant
focus on the effects of education
debt on students, such debt can be
equally or even more difficult for
parents. Unlike Stafford loans, Parent
PLUS loans have no annual or
aggregate loan limit other than the
cost of attendance. While a credit
check is required, debt to income
ratio, a fairly accurate predictor of
borrower ability to repay a loan, is
not a component of the eligibility
criteria.
PARENT
PLUS
LOANS
While
PLUS
loans
can
be
consolidated, they are not eligible
for many of the forgiveness options
and none of the income based
repayment options.
There are
discussions among many industry
groups as to what can and should
be done within this program to assist
these borrowers.
Some Suggestions Include:
• Adding a debt to income ratio
component to the eligibility criteria
• Allowing Parent PLUS borrowers to
utilize Income Based Repayment
• Phase out PLUS loans entirely,
moving that market to private
PROS
Debt to income ratio requirement would likely reduce
delinquencies and defaults
IBR would assist existing PLUS borrowers with high debt
levels
CONS
Phasing out PLUS would require families to utilize less
advantageous, likely more expensive loans
Restricting eligibility would increase private borrowing
Allowing IBR would increase budgetary costs.
OTHER
SUPPORTERS
Has not been publically proposed to date, but actively
discussed within the industry
With education debt burdens such a
focus of the recent Presidential
elections, and default and debt
statistics a frequent topic in the media,
the availability and timing of debt
management services is a common
topic
during
reauthorization
discussions. As the largest provider of
student loans, clearly the Department
of Education needs to be provided
adequate
funding
for
debt
management services.
There are
various proposals being put forward to
improve the content and timing of debt
management
communications
to
borrowers.
Schools also want the ability to require
additional and more robust entrance
and exit counseling as part of a default
management and financial literacy
program. There is also a call for more
information being made available
during the college application stage
including cumulative federal and
private debt levels as well as
graduation rates and anticipated
earnings.
DEBT
MANAGEMENT
PROS
CONS
OTHER
SUPPORTERS
ADDITIONAL
READING
• Lower delinquencies and defaults; higher
successful repayment rates
• Overall improved financial literacy of this group of
consumers creates beneficial trickle down for
overall economy
Expensive. Hard sell in current U.S. budget situation
especially when up against consistent Pell shortfalls
Price ED willing to pay may not be reasonable
NCHER, TICAS, NASFAA, New America Foundation,
Young Invincible
http://ticas.org/files/pub/TICAS_RADD_White_Paper.pd
f
http://younginvincibles.org/wpcontent/uploads/2012/11/Student-Perspective-onFederal-Financial-Aid-Reform.pdf
The
high
cost
of higher
education has become a
significant cause for concern
and one that is represented in
several distinct ways in the
various
published
reauthorization proposals. The
proposal published by The
Campaign for the Future of
Higher Education, a coalition of
multiple faculty groups, would
create a small (they say ½%
would be enough) financial
transaction tax whose revenue
would, in part, be used to
reduce the tuition cost for all
public institutions with much of
the rest going towards student
advising and higher skilled
instructors.
Another suggestion from this
group would eliminate all
federal financial aid and use
the funds to reduce tuition at
public institutions.
Another
group, The Education Trust, has
a similar proposal where existing
federal aid dollars would be
directed to states to keep tuition
costs down and create a more
robust college ready program
for high school students.
Reducing
Cost of
Education
PROS
Reduces education debt for future students
Increases access for low and middle class families
CONS
Funding would be at risk during future lean budget years,
leaving higher education costs and fewer payment
resources
Financial transaction tax would be a very difficult sell to
Republican leaders, making it’s passing unlikely
ADDITIONAL
READING
http://futureofhighered.org/workingpapers/
http://www.edtrust.org/sites/edtrust.org/files/Doing_Away_
With_Debt.pdf
http://www.newamerica.net/publications/policy/rebalancin
g_resources_and_incentives_in_federal_student_aid
Almost every proposal
paper to date has
contained
language
about simplifying the
federal
financial
aid
system. In some cases
the suggested solution is
to create a single loan,
single grant program
and eliminate all other
existing forms of federal
aid.
Others
suggest
eliminating the FAFSA
and award aid based
strictly on information
contained within the W-2
or directly from the IRS.
Others take less drastic
approaches such as
eliminating the PLUS loan
for Graduate students
but
increasing
unsubsidized loan limits.
SIMPLIFYING
AID
PROS
CONS
SUPPORTERS
COMMENTS
• Easier for consumers to understand and compare
various aid packages
• Reduces administration costs
• Do nothing to address existing education debt
• “One size fits all” approach can often unintentionally
leave intended recipients behind
• Some proposals not as simplified as first appear,
creating additional rules that would result in existing
outcomes
TICAS, The Young Invincible,
This proposal was a large part of Presidential Candidate
Mitt Romney’s Higher Education policy platform during
the election.
This summary was intended to
give a brief overview of some
of
the
more
significant
reauthorization proposals that
are currently being discussed
within the industry. There are
dozens more proposals and
suggestions offered that were
not mentioned due to limited
support,
small
potential
impact
or
likeliness
of
approval
based
on
the
current environment.
While
due
in
2013,
reauthorization of the Higher
Education Act is unlikely to be
completed this year, leaving
significant time for these and
other proposals to gain or lose
momentum as the political
and public climate changes.
Questions on Reauth?
Other Proposals?
Resources
• NSLDS Reporting
– http://www.ifap.ed.gov/eannouncement
s/092614ReminderPrgmLevelEnrollmentRe
portingRequirement.html
• Gainful Employment
– http://www2.ed.gov/policy/highered/reg
/hearulemaking/2012/gainfulemployment
.html
Resources
• College Scorecard
– http://collegecost.ed.gov
• DOMA
– http://www.ifap.ed.gov/dpcletters/GEN1
415.html
• VAWA
– https://www.ifap.ed.gov/dpcletters/GEN1
413.html