u.s. department of education federal update jeff baker federal student aid november 9, 2010 1

U.S. Department of Education

Federal Update

Jeff BakerFederal Student Aid

November 9, 2010

1

Appropriations and Budget

Legislative Update

Cohort Default Rates

Direct Loan Transition

IRS Data Retrieval

Two Pells In One Award Year

Regulatory Update

Today’s Topics

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Appropriations andProgram Budget

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Title IV Aid AvailableFY 2010 FY 2011*(AY 10-11) (AY 11-12)

Pell Grant $ 32,295,200,000 $ 34,834,300,000 (Max Award) $5,550 $5,710

FSEOG $ 958,800,000 $ 958,800,000

FWS $ 1,170,800,000 $ 1,170,800,000

Perkins $ 1,041,500,000 $ 2,609,200,000

LEAP $ 161,555,000 ―

ACG/SMART $ 932,000,000 ―

TEACH $ 79,800,000 $ 93,200,000

Loans $ 108,762,900,000 $ 116,393,200,000

TOTAL $145,402,555,000 $156,059,500,000

Program

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Legislative Update

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Legislative Update

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FFEL/Direct LoanCohort Default Rates

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National Student Loan Default Rates

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Missouri Default Rates(FY 2006 - FY 2008)

2006 2007 2008

Rate 4.3% 6.0% 5.8%

Borrowers inRepayment 75,925 77,164

Borrowers inDefault 4,617 4,539

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What is the CDR Calculation?

Currently, a school’s cohort default rate is:The percentage of the number of the school’s FFEL and Direct Loan borrowers who enter repayment in one Federal Fiscal Year who default in that Federal Fiscal Year or by the end of the next Federal Fiscal Year.

Beginning with the 2009 cohort will be:Borrowers who default in that Federal Fiscal Year or by the end of the next two Federal Fiscal Years.

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HEOA Changes

• Increases CDR monitoring period from two to three years

– Increases sanction threshold default rate from 25 percent to 30 percent

– Establishes transition period to implement sanctions

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2-Year Versus 3-Year Calculation

The Numerator is the number of borrowers from the denominator who default within a cohort period

The Denominator is the number of borrowers who enter repayment within a cohort period

3555000 .071 or 7.1%

6055000 .121 or 12.1%

5,000

FY-09 FY-10125 230

5,000

FY-09 FY-11FY-10

125 230 250

Transition Period

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• Contracted with 4 additional servicers– ACS (current servicer)– Nelnet– Sallie Mae– Great Lakes Education Loan Services– AES/PHEAA

• Will “service” borrowers only…no origination responsibility


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Can a school select the servicer with whom they wish to work?

• No, loans will be disbursed to all servicers systemically as they book

How will a school know which servicer has a particular loan?

• By looking at NSLDS


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IRS Data Retrieval

IRS-FSA Concept Federal Student Aid (FSA) and the Internal

Revenue Service (IRS) developed a non-consent solution to simplify FAFSA completion.

Tax filer retrieves own data No Consent Voluntary

Will allow some applicants to retrieve their income tax data from the IRS.

IRS data can be automatically transferred to FOTW.

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Option to Access IRS Information

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Get My Federal Income Tax Information

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Federal Income Tax Information Provided

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ISIR Codes and Flags

CPS will set flags and comment codes to indicate that student and/or parent transferred IRS data into FOTW

Comment codes will appear in – FAA Information section of the ISIR Student Inquiry section of FAA Access

Flags and codes set based on certain conditions.

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IRS Request Flag ValuesStudent & Parent IRS

Request Flag Description

00IRS data request for the student/parent was not submitted to IRS (default value)

01IRS data request for the student/parent was sent to IRS

02

IRS data for the student/parent was returned from the IRS and was not changed by the user

03

IRS data for the student/parent was returned from IRS and was changed by the user

04

IRS data for the student/parent was transferred from the IRS and on a correction entry at least one IRS data field was changed by the user

05 (Under Construction)

IRS data for the student/parent was transferred from the IRS but may be incomplete based on marital status and tax filing status

06 (Under Construction)

IRS data for the student/parent was transferred from the IRS but marital status conflicts with tax filing status

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IRS Data and Verification

An institution may consider as acceptable documentation IRS retrieved information if the Secretary has identified those items as having come from the IRS and not been changed – IRS Request Flag = 02.

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Implementation Schedule

2009-10 IRS process began in January 2010. Pilot to test proof of concept.

2010-11 IRS data share began in September of 2010.

2011-12 IRS data share expected to begin with start-up in January 2011. Within a couple of weeks electronic tax filing. Within several weeks of paper tax filing.

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Enhancements

• Beginning with the 2011-12 processing year, the IRS data retrieval process can be accessed by the applicant using Corrections on the Web.

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Two Pells in an Award Year

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Two Pells In An Award Year

Authorized by the Higher Education Opportunity Act (HEOA).

If eligible, student able to receive all or a portion of a second Scheduled Award within an Award Year.

Objective is to help needy students accelerate their academic progress.

Effective for the 2009-2010 Award Year.

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Regulations

Team V-General and Nonloan Programmatic Issues in 2009

Notice of Proposed Rulemaking: August 21, 2009

Final regulations: October 29, 2009 Effective with the 2010-2011 Award Year

Two Pells In An Award Year

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Unchanged Pell Rules

• Scheduled Award– Amount that full-time student would

receive for a full academic year based on the student’s EFC and COA.

– Prorated by payment period based on hours and weeks of instructional time attended – Pell Formulas.

• Payment periods

• Payment for a payment period calculations

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Changed Pell Rules

• Scheduled Award –

– Old: Student may receive only one Scheduled Award in an award year.

– New: Student may receive more than one Scheduled Award in an award year.

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Changed Pell Rules

• Enrollment Status -

– Old: Less than half-time enrollment eligible at all times.

– New: Must be at least half-time for second scheduled award.

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Changed Pell Rules

• Cross-Over Payment Periods

– Old: Institution may assign a crossover payment period to either award year as a general policy or on a case-by-case basis.

– New: Must assign to award year that will produce higher payment amount.

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Award Amount

No change in calculation of award for payment periodAwarding formulas have not changedAward by payment period based on

Scheduled Award School continues to pay until reaching 200%

of Scheduled Award

– Payment period may include awards from both first Scheduled Award and second Scheduled Award.

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Final Regulations – October 29, 2009

Effective with the 2010-11 Award Year

Cross-Over Payment Period If cross-over payment period, school must

award from the award year with the highest award amount for the payment period for the student.

Academic Year Progression At least one credit or clock hour in the payment

period must be attributable to the student’s next academic year.

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If Law Had Not Changed - Semester Example

Student may only receive up to ONE Scheduled Award within an Award Year. Assume student’s 2009-2010 Scheduled Award is $5,350 and will be $5,550 for 2010-2011.

Spring 2011$2,775

Summer 2011$2,855

Fall 2010$2,775

Fall 2011$2,855

2010-11 Award Year

2011-12 Award Year

Spring 2012$0

100% 2010-11 AY

100% 2011-12 AY

Summer 2011$0

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New Law - Semester Example

Spring 2011$2,775

Fall 2011$2,855

Fall 2010$2,775

Spring 2012$2,855

2010-11 Award Year

2011-12 Award Year

Summer 2012$2,855

Summer 2011$2,775

150% 2010-11 AY

150% 2011-12 AY

Student may receive up to TWO Scheduled Awards within an Award Year. Assume student’s 2009-2010 Scheduled Award is $5,350 and will be $5,550 for 2010-2011.

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New Law - Semester Example

Student may receive up to TWO Scheduled Awards. Student’s Scheduled Award is $5,350 for the Award Year.

Fall 2010$2,775

Summer 2011$2,775

Summer 2010$2,775

2010-11 Award Year

Spring 2011$2,775

200% 2010-11 AY

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New Regs for Cross-Over Term

Effective with the 2010-2011 Award Year Must assign to award year in which student

receives greater payment for the term - based upon information available at initial calculation. Assume other year is higher if –

No SAR/ISIR. Rejected ISIR with no EFC. ISIR selected for verification but verification

not completed.

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Cross-Over Payment Period

EXAMPLE A program has a semester calendar with two

summer sessions (6/1 – 7/14 and 7/20 – 8/28). If combined in one term, the combined term is a

crossover payment period regardless of what classes students attend or when a disbursement is made.

If the two sessions are considered separate terms, only the 6/1 – 7/14 term is a crossover payment period.

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Cross-Over Payment Period

For Pell, use EFC for the award year from which the student will be paid

May use either EFC, COA, and need for all other Title IV programs except Pell

Treat Pell as estimated financial assistance (EFA) for other Title IV, regardless of which award year it is from.

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New Regs for Cross-Over Term

Changes – Until date published in Federal Register (2010-11 -

September 10, 2010) - Must reassign payment period if information received

showing greater payment from other Award Year. Must compare again if re-calculating for any reason.

May monitor and adjust after Federal Register date up to February 1, 2011.

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Spring 2011$2,775

Summer 2011$2,855

Fall 2010$2,775

Fall 2011$2,855

2010-11 Award Year

2011-12 Award Year

Spring 2012$2,855

Summer 2011$0

100% 2010-11 AY

150% 2011-12 AY

Student may receive up to TWO Scheduled Awards. Assume student’s 2010-11 Scheduled Award is $5,550 and $5,710 for2011- 2012 and student eligible for either.

New Law – Assign Cross-Over To Higher PaymentSemester Example

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Academic Year Progression

• At least one credit or clock hour (or partial hour if school uses partial hours) in the payment period when award will be from a second Scheduled Award must be attributable to the student’s next academic year.

• Gives meaning to statutory use of term “accelerate”

• Not “grade progression”.• Must be applied for any required recalculation.

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Academic Year Minimums

Academic ProgressMeasured By:

Semester hours

Trimester hours

Quarter hours

Clock hours

Minimum CompletionRequirement*

24 semester hours

24 trimester hours

36 quarter hours

900 clock hours

Minimum InstructionalTime Requirement

30 weeks

30 weeks

30 weeks

26 weeks

*Number of hours that a student enrolled full time is expected to complete in a full academic year.

Statutory Definition of an Academic Year

**A week is a seven day period in which there is at least one day of instruction or exams.

**

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Spring 201050% Paid12 HoursEarned

Fall 200950% Paid12 HoursEarned

First Scheduled Award

Summer 2010Enrolled in

6 HoursELIGIBLE

Second Scheduled Award

Semester Academic Year Progression

No Hours to Prior Academic YearSix Hours for New Academic Year

Pay 25% of Second Scheduled Award

Assumes academic year defined as 24 hours

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6 HoursELIGIBLE



Three Hours to Prior Academic YearThree Hours for New Academic Year

Pay 25% of Second Scheduled Award

Assumes academic year defined as 24 hours

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6 HoursNOT ELIGIBLE


Six Hours to Prior Academic YearNo Hours for New Academic Year

Cannot pay second Scheduled AwardMay pay from upcoming Award Year

Assumes Academic Year defined as 24 hours


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Transfer Student Final regulations: Two options

Assumption method Based on disbursements received Do not consider hours earned at other

institutions to be conflicting information Hours-earned method

Based on actual hours earned in award year

Method at option of institution: apply on a student-by-student basis or to all students

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Special Circumstances

• Academic Year completion requirement can be waived if –

–FAA determines that student was unable to complete the hours of the first academic year due to ‘circumstances beyond the student’s control’.

–Determination must be documented and made on a student by student basis.

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Other Information

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Parent PLUS and FAFSA Beginning 2011-2012 student must file

FAFSA for Parent PLUS Loan 98 percent already file COD will monitor Need to perform database matches to

verify that student is eligible Social Security Number Citizenship Status Selective Service NSLDS for defaults and overpayments

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Regulatory Update

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Program Integrity NPRM-1

Notice of Proposed Rulemaking issued June 18, 2010 to improve the integrity of the Title IV student assistance programs. Negotiations held between November 2,

2009 and January 29, 2010 Comment Period Ended August 2, 2010 Final regulations published on October 29, 2010

Generally effective July 1, 2011 (2011-2012 AY)

Verification effective with the 2012-2013 AY)

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Program Integrity NPRM – Part 1

Ensuring that only eligible students receive federal funds. High School Diploma: Requires

institutions to develop and follow procedures to evaluate the validity of a student's high school diploma if the institution or the Secretary has reason to believe that the diploma is not valid or was not obtained from an entity that provides secondary school education.

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Ensuring that only eligible students receive federal funds. Ability to Benefit:

Extends eligibility for federal student aid to students without high school diplomas after they successfully complete six credit hours or 225 clock hours of college work.

Improved oversight of test publishers, test administrators, and testing centers.

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Ensuring that only eligible students receive federal funds. Satisfactory Academic Progress:

Requires a structured and consistent approach to evaluating a student's academic work, while continuing to provide flexibility to institutions in establishing their policies. Some relief to schools that monitor each

payment period.

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Program Integrity NPRM – Part 1 Ensuring that only eligible students

receive federal funds. Verification:

Replacing the five verification items for all selected applicants with a targeted selection of items based upon each student’s characteristics.

Eliminating the 30 percent institutional verification cap.

Requiring the processing of all changes and corrections to an applicant’s FAFSA information.

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Program Integrity NPRM – Part 1 Protecting consumers.

Misrepresentation: Strengthens the Department's authority to take action against institutions engaging in deceptive advertising, marketing, and sales practices,

State Authorization: Clarifies this important State responsibility.

Incentive Compensation: Removes the "safe harbor" provisions and generally relies on the statutory language for guidance and enforcement.

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Clarifying eligible coursework: Credit Hour: Defines a credit hour and

establishes procedures for accrediting agencies to determine whether an institution's assignment of a credit hour is acceptable.

Retaking Coursework: Allows repeated coursework to count toward enrollment status.

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Program Integrity NPRM – Part 1 Clarifying eligible coursework:

Written Agreements: Limits the amount of a program that can

be provided by another school. Requires disclosures to students and

potential students. Prohibits arrangements between

ineligible institutions that have had their Federal student aid participation revoked.

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Other: Return of Title IV Aid:

Modifies and clarifies the definition of when a student is considered to have withdrawn from a program.

Clarifies the circumstances under which an institution is required to take attendance for the purpose of determining last date of attendance.

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Other: Disbursing Federal Student Aid Funds:

Requires institution to ensure that student has resources to obtain books and supplies by the seventh day of payment period.

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Program Integrity NPRM-2

GAINFUL EMPLOYMENT

NPRM published on July 26, 2010. Negotiations held between November 2,

2009 and January 29, 2010 Comment Period Ended September 9, 2010 Final regulations for some provisions published

on October 29, 2010. Effective July 1, 2011

More final regulations to be published in December or January. Effective July 1, 2012

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Gainful EmploymentWhy is the Department regulating to define “gainful employment”

at this time? Programs at for-profit institutions and occupationally specific training

at other institutions must lead to gainful employment in a recognized occupation.

Currently there is no standard to measure “gainful employment”. This NPRM, when finalized, would establish such a standard.

Public comment received last year along with a number of studies, reports, and media reports point to the need to regulate in this area.

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Gainful Employment

• Proprietary Institution of Higher Education and Postsecondary Vocational Institution– All programs must prepare students for

gainful employment in a recognized occupation• Two exceptions

– Program leading to baccalaureate degree in liberal arts (proprietary institution)

– Comprehensive transition program for students with intellectual disabilities (vocational institutions)

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Gainful Employment

• Public/Private Non-profit Institution of Higher Education– Non-degree/certificate programs must

prepare students for gainful employment in a recognized occupation

– Two exceptions• Transfer program• Comprehensive transition program for

students with intellectual disabilities

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Gainful EmploymentDisclosures

Institutions with “gainful employment” programs must provide prospective students with each eligible program's graduation and job placement rates, and provide the Department with information that will allow for the determination of student debt levels and incomes after program completion.

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Repayment Rate

The percentage of the outstanding principal balance of the Federal loans taken by the academic program’s former students who entered repayment in the previous four years that has been repaid.

Gainful Employment Metrics

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Debt to Earnings Ratio

For the academic program’s completers, the average educational loan payments (Federal, private, and institutional financing plans) as a proportion of the borrower’s income (either discretionary income or average annual earnings). Loan payment amount based on a 10-year amortization schedule at 6.8 percent.

Gainful Employment Metrics

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u.s. department of education federal update jeff baker federal student aid november 9, 2010 1

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