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Federal Update

David Bergeron Dan Madzelan

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Agenda Budget Legislation

Where We Are Today Student Lending Regulations Implementation

Dear Colleague Letters Regulations

A Rational Approach to Federal Student Aid

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Appropriations andProgram Budget

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FY 2007 FY 2008 FY 2009*(AY 07-08) (AY 08-09) (AY 09-10)

Pell Grant $13,660,711,520 $16,256,000,000 $18,941,100,000 (Max Award) $4,310 $4,731 $4,800

FSEOG $ 770,932,800 $ 757,464,800 -$ FWS $ 980,354,430 $ 980,491,815 $ 980,500,000 Perkins $ 65,470,680 $ 64,327,222 $ - LEAP $ 64,986,570 $ 63,851,677 $ - ACG/SMART $ 850,000,000 $ 395,000,000 $ 960,000,000

* President's FY 2009 Budget Request

Program

Title IV Program Budgets Appropriations

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FY 2008 FY 2009* FY 2009**(AY 08-09) (AY 09-10) (AY 09-10)

Pell Grant $16,256,000,000 $18,941,100,000 $18,851,000,000 (Max Award) $4,731 $4,800 $4,731

FSEOG $ 757,464,800 -$ $ 757,464,800 FWS $ 980,491,815 $ 980,500,000 $ 980,491,815 Perkins $ 64,327,222 $ - $ 64,327,222 LEAP $ 63,851,677 $ - $ 63,851,677 ACG/SMART $ 395,000,000 $ 960,000,000 $ 960,000,000

* President's FY 2009 Budget Request** Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (PL 110-329)

Program

Title IV Program Budgets Status of Appropriations

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Title IV Program Budgets Aid Available ($000)

FY 2008 FY 2009* FY 2009**(AY 08-09) (AY 09-10) (AY 09-10)

Pell Grant $ 17,492,000 $ 18,180,200 $ 20,185,000 (Max Award) $4,731 $4,800 $4,731

FSEOG $ 958,816 $ - $ 958,816 FWS $ 1,171,395 $ 1,171,400 $ 1,171,395 Perkins $ 1,103,398 $ - $ 1,103,398 LEAP $ 161,555 $ - $ 161,555 ACG/SMART $ 700,000 $ 760,000 $ 760,000 TEACH $ 86,000 $ 114,000 $ 114,000 Loans $ 70,345,247 $ 74,536,800 $ 74,536,800 TOTAL $ 92,018,411 $ 94,762,400 $ 98,990,964

* President's FY 2009 Budget Request** Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (PL 110-329)

Program

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Recent Legislation

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Higher Education Reconciliation Act (HERA) – February 8, 2006

College Cost Reduction and Access Act (CCRAA) – September 7, 2007

Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) – May 7, 2008 Extended by HR 6899

Higher Education Opportunity Act (Reauthorization) – August 14, 2008

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Where We Are Today Academic Competitiveness and National

SMART Grants Increased FFEL and DL Loan Limits Interest Rates PLUS Loans Professional Judgment/Dependency

Overrides

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ACG and National SMART Grants Eligible Non-Citizens Eligible At least half-time enrollment Students in certificate programs

eligible, if program is at least one year in length and offered at a two or four-year degree granting institution

Awards based on student’s grade level instead of “academic year”

Effective July 1, 2009 – by HEOA

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Grade LevelBase

AmountAdditional

Unsubsidized

1st-yr Dependent $3,500 $2,000

2nd-yr Dependent $4,500 $2,000

Upper Division Dep. $5,500 $2,000

1st-yr Independent $3,500 $6,000

2nd-yr Independent $4,500 $6,000

Upper Division Indep. $5,500 $7,000

Graduate/Professional $8,500 $12,000

FFEL/DL Annual Loan Limits

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Interest Rates Reduced interest rates on undergraduate

subsidized loans only from current 6.8% to

6.0% for loans disbursed on or after 7/1/2008 5.6% for loans disbursed on or after 7/1/2009 4.5% for loans disbursed on or after 7/1/2010 3.4% for loans disbursed on or after 7/1/2011

Beginning 7/1/2012, rates revert to 6.8% Unsubsidized Stafford Loans and all

Staffords for graduate students remain at 6.8% fixed

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PLUS Loans

Extenuating circumstances for adverse credit may include delinquency of up to 180 days on mortgage payments or on medical bill payments

Delayed repayment start date for parent PLUS borrowers at their option

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Professional Judgment Dependency Overrides Adds dislocated worker and

homelessness as examples of when an FAA can use professional judgment

Provides that an FAA can use a dependency override made by another FAA within the same award year

Both effective for the 2009-2010 award year

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Student Lending

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DL/FFEL Activity for ’08-’09YTD 2008

YTD 2007 % Change

Direct Loans 3.9 million 2.5 million +56%

FFELP Loans 8.7 million 7.7 million +13%

Total 12.6 million 10.2 million +24%

Direct Loans $18.5 billion $12.3 billion +50%

FFELP $46.7 billion $42.6 billion +10%

Total $65.2 billion $54.9 billion +19%

Number of Loans

Dollars

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Student Lending GA Lender of Last Resort

Programs Dear Colleague Letters

ECASLA Loan Purchase Programs www.federalstudentaid.ed.gov/ffelp

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2006-2007 RegulationsSchool Lender Relationships

(Effective 7-1-08)

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FFEL Loan Certification

A school may not: Refuse or delay certification based on

borrower’s choice of lender or GA Assign lender to first-time borrower Refuse to certify or certify a reduced

amount; except on a case-by-case basis Includes “school as lender”

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School may choose to have preferred lender list (includes web processes)

List must have at least 3 unaffiliated lenders Must disclose method/criteria for lender

inclusion on the list Must provide comparative information Must include prominent statement advising

borrowers that use of school preferred lender not required

FFEL Preferred Lender Lists

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Prohibited Inducements Affects FFEL lenders and guaranty

agencies

Creates concept of “rebuttable presumption” for prohibited and allowed activities

Includes a non-exhaustive list of prohibited activities

Includes a list of allowed activities

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2007-2008 Regulations

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2007-08 TEACH Final Effective for the 2008-2009 award year Must be repaid as Direct Unsubsidized Loan

if student does not – Teach for at least four years within

eight years of ceasing enrollment in the TEACH Grant eligible program, as a - Highly Qualified Teacher At a Title I school In a specified subject area

“In for a dollar, in for four years.”

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2007-08 TEACH Final Up to $4,000 per year for first

undergraduate or post-baccalaureate (non degree) program - $16,000 aggregate

Up to $4,000 per year for graduate student - $8,000 aggregate

Prorated amounts for less than full-time enrollment

Award, when combined with other assistance, cannot exceed cost of attendance (No EFC)

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2007-08 TEACH Final TEACH Grant recipient must teach in a

high-need field in the majority of classes taught

“Other” high-need fields must be listed in the Department of Education’s Nationwide Listing of Teacher Shortage Areas at the time the recipient begins qualified teaching

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2007-08 TEACH Final Institutional Eligibility

See DCL GEN-08-07, posted to IFAP on June 3, 2008

Institutional Choice whether to participate An institution that offers one or more

TEACH Grant-eligible programs may participate in the TEACH Grant Program

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TEACH Grant Statistics

Number of Approved TEACH Grant Schools 611Number of Originating and Disbursing Schools 179Amount of Originations Number of TEACH Originations $12,992,725Number of TEACH Originations 3,754Actual Disbursement Amount $4,639,083Average TEACH Grant Award $3,462ATS Notes Received 5,821

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2007-2008 Loans Final

Definition of Not-for-Profit Holder FFEL Only

Income-based Repayment Plans FFEL and Direct Loans

Public Service Loan Forgiveness Direct Loan only

Economic Hardship and Military Service Deferments FFEL, Direct Loans, and Perkins

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A Rational Approach to Federal Student Aid

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Mandates

“ The entire financial aid system—including federal, state, institutional, and private programs—is confusing, complex, inefficient, duplicative, and frequently does not direct aid to students who truly need it.”

- The Secretary of Education’sCommission on the Future of Higher Education

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Mandates

Congress, in passing the HEOA, required the Department of Education to issue a report on efforts to simplify the FAFSA that includes looking at the elimination of income data elements, as well as other items. 

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Preparing

Preparing

Preparing

Preparing

Choosing

Choosing

Choosing

Choosing

Applying

Applying

Applying

Applying

Funding

Funding

Funding

Funding

Attending

Attending

Attending

Attending

StudentStudentAwardAward

PackagePackage

SubsidizedSubsidizedSubsidizedSubsidized

Un-subsidizedUn-subsidizedUn-subsidizedUn-subsidized

PLUSPLUSPLUSPLUS

LoansLoans

FFELFFELFFELFFEL

PerkinsPerkinsPerkinsPerkinsDirectDirect

LoansLoans

DirectDirectLoansLoans

State andState andInstitutionalInstitutional

AidAid

PrivatePrivateLoansLoans

PrivatePrivateLoansLoans

SchoolsSchools

LendersLenders

GuarantyGuarantyAgenciesAgencies

SecondarySecondaryMarketsMarkets

GrantsGrants

FederalFederalWork StudyWork Study PellPell

GrantsGrants

PellPellGrantsGrants

LEAP/LEAP/ SLEAPSLEAP

LEAP/LEAP/ SLEAPSLEAP

FSEOGFSEOGFSEOGFSEOG

StudentStudent

U.S.U.S.Department ofDepartment of

EducationEducation

AdmissionAdmissionApplicationApplication

FAFSAFAFSA

Student EligibilityStudent Eligibility

Student Aid ReportStudent Aid Report

EmploymentEmploymentEmploymentEmployment

GrantsGrantsGrantsGrants

LoansLoansLoansLoans

ScholarshipsScholarshipsScholarshipsScholarships

MultipleMultipleAwardAward

PackagesPackages

SchoolsSchoolsStatesStates

PrivatePrivateFoundationsFoundations

Delivery Process/Student ViewDelivery Process/Student View – – FY2007FY200710 Million Recipients

14.5 MillionAid Applications

2,400

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6,000 $83 Billion Federal Aid

$1.2 Billion

$51.3 Billion $ 13 Billion$ 13 Billion $1.1 Billion$1.1 Billion

$976 Million$976 Million

$165 Million$165 Million

$14.4 Billion$14.4 Billion

ISIRISIR

ACG/SMARTACG/SMARTACG/SMARTACG/SMART

$580 Million$580 Million

Issues – Federal Student Aid The application is complex and

intimidating. Much of the data are unverifiable. Current EFC formula is arbitrary,

difficult to understand, lacks clarity and relevance, and subject to “gaming.”

Result of application (EFC) is “how much the student will NOT receive.”

Multiplicity of programs is confusing.

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Principles for Reform Access to Aid

Application will request information that is easily obtainable and verifiable.

Application will only ask questions necessary to determine eligibility and award levels.

Federal Student Aid Targets the neediest students; Is independent of other aid; Is predictable; Is portable, and Distributes aid through fewer programs.

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Current ModelFamilyFamily Financial Resources (45

Questions!)Income (37 Questions) Assets (6 Questions)

+ Taxable Income (AGI) + Cash

+ Untaxed Income + Savings

+ Stocks, Bonds, Investments, etc.

- Home Equity, Retirement Accounts

Family size & Number in College (2)

Discretionary Uses Non-Discretionary Uses (Taxes, Living Expenses)

EFCEFC = Cost of AttendanceCost of Attendance

Pell GrantsPell Grants + Subsidized LoansSubsidized Loans

Unsubsidized LoansUnsubsidized Loans

LessWhat students and families have to pay

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Proposed ModelFamilyFamily Financial Resources (2 Questions!)

Cost of AttendanceCost of Attendance

Pell GrantsPell Grants + Subsidized LoansSubsidized Loans

Unsubsidized Loans/PLUSUnsubsidized Loans/PLUS

+ Adjusted Gross Income

+ Tax Exemptions

?

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A Simplified FAFSA

Only ask for information needed to determine federal aid eligibility, aid types, and amounts.Two pages - no instruction pages(s).Fewer than 30 questions –

- Identification - Dependency- Contact Information - Income / Exemptions- Eligibility - Certifications- Colleges and states to which information will be sent

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Simple FAFSA

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Rational Approach Establish–

Federal Student Aid Target (FSAT)

Federal Student Aid Commitment (FSAC)

Consolidate aid programs into one grant (Pell), one loan (DL/FFEL) and one work study (FWS) program.

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Federal Student Aid Target (FSAT)

Maximum amount of federal subsidized aid (Pell Grant, subsidized loans, and FWS).

Amount increases annually by CPI.

For example –-100% of average Tuition & Fees, Books & Supplies, and Meals & Housing at community colleges.

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Federal Student Aid Commitment (FSAC)

Student’s portion of FSAT based on AGI and IRS Number of Exemptions, related to HHS Poverty Levels.

Example: -- Grants up to 250% of poverty level; Sub loans and FWS up to 400% of poverty level;

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Unsubsidized Aid Includes unsubsidized Stafford and

PLUS loans;

Applies only after all other aid is awarded;

Covers difference between cost of attendance and all other sources of aid;

Includes annual loan limits for unsubsidized Stafford.

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Policy/Budget Considerations

Select “Dials” FSAT: percentage of cost of

attendance at which type of school FSAC: percentages of HHS poverty

level to be used for grant, subsidized loan, and work study

Determine “Levers” Maximum spending with current

allocations Optimized spending to ensure access

and success

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0

2,000

4,000

6,000

8,000

10,000

12,000

Pell Sub Loan

Pell Max = $4,800

Sub Loan Max = $5,500

Examples of Dials and Levers

0

2,000

4,000

6,000

8,000

10,000

12,000

Lowto $0

$3Kto

$6K

$9Kto

$12K

$15Kto

$18K

$21Kto

$25K

$29Kto

$32K

$36Kto

$40K

$44Kto

$48K

$51Kto

$55K

$58Kto

$62K

$68Kto

$71K

$73Kto

$80K

above$88K

Pell Sub Loan

Pell Max = $4,800

Sub Loan Max = $6,000

-

2

4

6

8

10

12

14

Lowto $0

$3 to$6

$9 to$12

$15to

$18

$21to

$25

$29to

$32

$36to

$40

$44to

$48

$51to

$55

$58to

$62

$68to

$71

$73to

$80

above$88

Income Level (in thousands of $)

Aid

(in

th

ou

san

ds

of

$)

Pell Grants

Subsidized Loans

0

2,000

4,000

6,000

8,000

10,000

12,000

Pell Sub Loan

Pell Max = $4,800

Sub Loan Max = $5,200

Unsubsidized Unsubsidized

Unsubsidized Unsubsidized

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1 2 2 3 4 5 6 7 8 More than 8

AGIMarried w/

Spouse Including Child

Income Cut-Off $21,000 $29,000 $36,000 $45,000 $55,000 $64,000 $73,000 $82,000 $92,000 $92,000

Low to $0 3,400 3,600 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $1 to $3,000 3,400 3,400 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $3,001 to $6,000 3,400 3,400 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $6,001 to $9,000 3,400 3,400 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $9,001 to $12,000 2,800 2,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $12,001 to $15,000 1,950 2,400 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $15,001 to $18,000 1,100 2,100 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $18,001 to $21,000 400 1,500 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $21,001 to $25,000 - 800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $25,001 to $29,000 - 400 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $29,001 to $32,000 - - 4,800 4,800 4,800 4,800 4,800 4,800 4,800 4,800 $32,000 to $36,000 - - 3,000 3,900 4,000 4,100 4,200 4,300 4,400 4,500 $36,001 to $40,000 - - - 2,600 3,100 3,200 3,300 3,400 3,500 3,600 $40,001 to $45,000 - - - 2,000 2,100 2,200 2,300 2,400 2,500 2,600 $45,001 to $48,000 - - - - 1,500 1,800 1,900 2,000 2,100 2,200 $48,001 to $51,000 - - - - 1,200 1,400 1,500 1,600 1,700 1,800 $51,001 to $55,000 - - - - 900 1,000 1,100 1,200 1,300 1,400 $55,000 to $58,000 - - - - - 800 900 1,000 1,100 1,200 $58,001 to $64,000 - - - - - 600 600 700 800 1,000 $64,001 to $68,000 - - - - - - 600 700 700 900 $68,001 to $71,000 - - - - - - 500 500 700 800 $71,001 to $73,000 - - - - - - 500 500 700 700 $73,001 to $82,000 - - - - - - - 400 600 600 $82,001 to $87,000 - - - - - - - - 500 500 $87,001 to $92,000 - - - - - - - - 400 400

"Single Persons, or Married w/ no

Children" "Families w/ a minimum of one Child"

Simple Look-Up Table(For Illustrative Purposes Only)

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What Does This Mean For Students?

A FAFSA that encourages access; Real-time feedback on probable

Federal Student Aid; Better awareness of state and

institutional value-added aid, and Predictability for persistence.