Budget Control Act of 2011 (BCA) Federal Update NDASFAA. NDASFAA Federal Update 04/12/2012. Today s Topics

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1 Federal Update NDASFAA Rick Renshaw Federal Student Aid April 12, 2012 Today s Topics Budget Act of 2011 Consolidated Appropriations Act 2012 Other Legislative Information Program Integrity and Gainful Employment COD Update and Pell LEU President s 2013 Budget White House Student Loan Initiatives Negotiated Rulemaking 2 Budget Control Act of 2011 (BCA) 3 1

2 BCA - Subsidized Loans Elimination of Subsidized Loans for Graduate Students Effective for loans made for loan periods beginning on or after July 1, Subsidized Loans for loan periods beginning before July 1, 2012 remain unchanged. COD will edit for compliance. 4 BCA - Repayment Incentives Elimination of Direct Loan Incentives Terminates repayment incentives to encourage on-time repayment of loans. Effective for loans first disbursed on or after July 1, COD will edit for compliance. Allows interest rate reduction to borrowers who repay electronically. 5 Consolidated Appropriations Act 2012 See DCL GEN

3 Pell Grant Amounts Pell maximum award - $5, Pell minimum award - $550. Maximum Pell eligible EFC is 4995 Eliminates eligibility of a student who was eligible for between five and ten percent of maximum award payment schedules posted IFAP on January 12, 2012 (P-12-01) 7 Auto-Zero EFC Income Threshold Reduces the income threshold for an automatic zero expected family contribution (EFC) from $30,000 to $23,000. For the award year was scheduled to be $32,000. FAFSA on the Web and CPS have been updated, and both began FAFSA processing using $23,000 as the auto-zero EFC threshold. 8 Ability-to -Benefit (ATB) Eliminates Title IV eligibility for students without a high school diploma (or equivalent). Exceptions for Home schooled students Students who were enrolled in a Title IV eligible program of study prior to July 1,

4 Ability-to -Benefit (ATB) Students who are or were, enrolled in a Title IV eligible program anytime prior to July 1, 2012, may continue to qualify under one of the ATB alternatives Passing an independently administered, approved ATB test. Successfully completing at least six credit hours or 225 clock hours. 10 Pell Grant Duration of Eligibility Reduces the duration of a student s eligibility to receive Pell Grant from 18 semesters (or its equivalent) to 12 semesters (or its equivalent). Applies to all students effective with the award year. Calculation includes all earlier years of the student s receipt of Pell. 11 Pell Grant Duration of Eligibility Calculate the equivalency by adding together each of the annual percentages of a student s scheduled award that was actually disbursed to the student. LEU Lifetime Eligibility Used Once LEU reaches 600%, student no longer eligible. If LEU more than 500% but less than 600%, partial eligibility for next award year. 12 4

5 Pell Grant Duration of Eligibility Example Student s Scheduled Award was $5,550, but only received $2,775 because only enrolled for one semester, will have used 50% of that award year s scheduled award. Student who was enrolled three-quarter time for the entire award year would have used 75% of his scheduled award. This student s LEU is 125% of the total 600%. 13 Pell Grant Duration of Eligibility Electronic Announcement posted on February 17 Beginning mid April, COD will begin sending Weekly reports to schools of their applicants who have LEUs of more than 450% s to students who have LEUs of more than 450% 14 Grace Period Interest Subsidy Temporarily eliminates the interest subsidy on Direct Subsidized Loans during the six month grace period. Applies to new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012, and before July 1,

6 FFEL Lender SAP Payments Allows FFEL lender to choose the base on which special allowance payments (SAP) are calculated, from Commercial Paper (CP) to the London Inter Bank Offered Rate (LIBOR). Effective for loans first disbursed on or after January 1, By April 1, 2012, lender must inform ED of choice. No impact on students, borrowers or schools. 16 Other Legislative Information 17 Interest Rates CCRAA reduced the interest rate on subsidized loans made to undergrads in stages from 6.8 % to the current 3.4 %. The reduced rates end on July 1, Interest rate on subsidized loans first disbursed on or after July 1, 2012 to undergraduate students will be 6.8 percent. Same rate as on subsidized loans made to graduate students and to all unsubsidized loans. 18 6

7 Loan Limits $2,000 additional Direct Unsubsidized Loan funds for dependent students under the ECASLA remains available. Some confusion because of the June 30, 2011termination of the temporary special 90/10 treatment of these additional unsubsidized loan amounts. 19 Program Integrity Regulations 20 Program Integrity - Resources Notice of Proposed Rulemaking June 18, ProgramInterityIssuesNPRM.pdf Final regulations October 29, Final.pdf Program Integrity Questions and Answers aking/2009/integrity-qa.html 21 7

8 High School Diploma 22 High School Diploma Schools must develop and follow procedures to evaluate the validity of a student's high school diploma if the school 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. 23 High School Diploma FAFSA will ask student to indicate high school. Being on the list does not mean approved Not being on the list does not mean unapproved or questionable 24 8

9 Verification 25 Verification Resources Federal Register Notice of Information To Be Verified for the Award Year FAFSAInformation.html GEN and GEN html html 26 Verification Resources Q&A on Program Integrity web site: king/2009/verification.html Sample Verification Worksheets mpleverificationworksheets1213.html FAFSA-IRS Tax Return Transcript Matrix (revised) FSA1213VerificationIRSTaxReturnMatrix.html Application and Verification Guide AVG.html 27 9

10 Verification - Definitions o Subsidized student financial assistance programs o Eligibility uses EFC o Verification applies o Pell, FSEOG, FWS, Perkins, Direct Subsidized Loan o Unsubsidized student financial assistance programs o Eligibility does not use EFC o Verification does not apply o Direct Unsubsidized Loan & Direct PLUS Loan o TEACH Grant 28 Verification Selection o CPS applies risk model to FAFSA data o Goal is to target verification based upon the most error prone data items specific to an applicant o Non-selected applicants are again subject to risk model when submitting corrections 29 Verification Selection o Institutions must verify all applicants selected by CPS o Removes institution s option to verify only 30% of applicant pool 30 10

11 Changes To FAFSA Information o For subsidized programs, submit all verification changes to CPS if change is: o To any nondollar item or o A single dollar item of $25 or more o $400 tolerance is eliminated If required to submit one change, must submit all changes 31 Verification Items o Regulation eliminates five required verification items o Annual Federal Register notice lists verification items and acceptable documentation o notice published 7/13/11 o Goal to specify required verification items for individual applicant on SAR/ISIR o Institution may select additional applicants or verify additional items for an applicant Verification Items o All applicants ohousehold size onumber in college osnap benefits (formerly food stamps) if receipt reported on FAFSA ochild support paid if amount reported on FAFSA 33 11

12 Verification Items Tax filers Adjusted gross income U.S. income tax paid Education credits Specific untaxed income items Untaxed IRA distributions Untaxed Pensions IRA deductions Tax Exempt Interest Verification Items Non-tax filers oincome earned from work 35 Acceptable Documentation For items on 2011 income tax return o Amounts retrieved & unchanged from IRS via FOTW (either on initial or correction application) with IRS Request Flag value of 02 OR o A tax return transcript obtained from the IRS see DCL GEN For all other verification items o Verification worksheet either ED s sample or developed by institution

13 Acceptable Documentation IRS Data Retrieval Process IRS Tax Return Transcript By paper (Form 4506T-EZ or IRS Form 4506-T) 10 business days for processing Online or by phone 5 to10 business days for processing IRS Tax Account Transcript By paper (Form 4506-T) processed within 30 calendar days Online or by phone 5 to 10 business days for processing Record of Account By paper only (Form 4506-T) processed within 30 calendar days 37 Documentation: Household Size o Household size o Signed statement including oname of each household member, oage of each household member, AND othe relationship to the applicant Exceptions: Household Size For dependent student when parental marital status is- Single, separated, divorced, or widowed and family size on the FAFSA = 2 Married and family size on the FAFSA = 3 For independent student who is- Single, separated, divorced, or widowed and family size on the FAFSA = 1 Married and the family size on the FAFSA =

14 Documentation: Number in College o Number in college o Signed statement o Name and age of each household member who will attend eligible postsecondary educational institution at least half-time in o Name of the eligible institution(s) that each household member is or will be attending during o Not required if applicant is only member in college Documentation: SNAP o Supplemental Nutrition Assistance Program (SNAP) benefits (formerly food stamps) if receipt is reported on the FAFSA o Certification on verification worksheet o Institution may request documentation from the agency that issues the SNAP benefit Documentation: Child Support o Child support paid if reported on the FAFSA o Certification on verification worksheet (or separate statement) indicating o Amount of child support paid o Name of the person to whom it was paid, and o Name of the children for whom it was paid

15 IRS Extension Filers o Verification is complete if you have -- o Documentation of IRS extension and o 2011 W-2 Forms or statement from selfemployed individual o MAY require an individual granted a tax filing extension to provide a copy of their completed and signed tax return when filed o MUST verify AGI and taxes paid, if you receive a copy of the return o May return all funds disbursed, if you do not receive copy Verification & PJ o Requires verification of all selected applicants before exercising professional judgment o Does not mean verification is required before exercising PJ for non-selected applicants 44 General Updating FAFSA-reported info is generally a snapshot Unless due to student s marital status change, must update for Dependency status changes (all applicants, anytime) AND Household size and number in college (selected applicants, at the time of verification) 45 15

16 Marital Status Updating Marital status updates permitted only by FAA to address inequity or better reflect ability to pay When dependency status changes AND/OR When selected applicant needs to update household size and number in college If FAA changes marital status, other updates may be needed 46 Interim Disbursements o May make interim disbursements without receipt of corrected ISIR if completed verification makes no change to aid eligibility o All required corrections must be submitted to CPS AND school must receive revised ISIR transaction OR school will be liable for payment student receives 47 Verification After Enrollment Ends o Student no longer limited to lesser Pell Grant award if verification completed after enrollment ends o Student will receive Pell Grant payment based upon correct EFC 48 16

17 R2T4 49 Program Definitions New rules define a program offered in modules A course or courses in program do not span entire length of payment period or period of enrollment Doesn t matter what modules are called at the institution 50 Examples of Modules Standard term program offered in modules Two 8-week sessions within a 16 week semester Three 5-week sessions within a 15 week semester Two 6-week sessions within a 12 week quarter Winter inter-session or J term between fall and spring semesters 51 17

18 Program Requirements Student considered to be withdrawal if does not complete all days scheduled to complete within payment period/term School must document completed all courses with a passing grade If no passing grade in last scheduled course, school must demonstrate student completed period 52 Program Requirements Student in modular program not considered a withdrawal if Provides written confirmation of intent to attend a future module in period of enrollment Must be provided at the time of withdrawal Student may change return date in writing Must provide change prior to original return date Future module must begin within 45 calendar days in a non-standard and non-term program 53 Gainful Employment 54 18

19 Gainful Employment Information Gainful Employment Page on IFAP at: or from IFAP Homepage Regulations and Federal Register Notices Dear Colleague Letters and Electronic Announcements Frequently Asked Questions Training, including webinars Resources 55 Gainful Employment Regulations Final Rules published on October 29, 2010, effective July 1, 2011 Disclosures Reporting New Programs Final Rules on metrics to define gainful employment published on June 13, 2011, with effective date of July 1, Disclosures Disclosure Information on GE Program s website home page Effective July 1, 2011 Must be simple and meaningful. Must contain direct links from any other webpage with information about the program. Must be in an open format and be retrieved, downloaded, indexed, and searched

20 Adding New GE Programs Must notify ED at least 90 days before the first day of class of a new Gainful Employment Program. If the institution provided the required notification at least 90 days before the first day of class for the new program it need not wait for Departmental approval before disbursing funds to students enrolled in the new GE Program Unless ED says otherwise. 58 GE Reporting Institutions must annually report information about students enrolled in GE Programs. General information on reporting was provided in the Dear Colleague Letter GEN NSLDS GE Reporting Guide at - ex.html 59 GE Reporting Reporting is by Award Year Student GE Program Institution (Six-digit OPEID) CIP Code (See User Guide) Credential Level (See User Guide) 60 20

21 GE Reporting Institution must report information on students who were enrolled in a GE Program for each award year - Student identifying information Program identifying information Enrollment information Amounts from private education loans and from institutional financing plans Tuition and Fees (Optional) 61 GE Metrics Metrics final rule published on June 13, 2011 Defines gainful employment to be when a substantial number of the GE Program s students Are repaying their Title IV loans Repayment Rate Have a reasonable debt burden Debt to Earnings Ratios. 62 GE Metrics ED calculates Repayment Rate as A percentage of the Title IV loan amounts that a GE Program s former students are repaying. ED calculates Debt to Earnings Ratios as The median educational loan annual repayment amount as a proportion of the borrowers average annual income

22 Title IV Eligibility A program must pass at least one of the following three rates to be a Gainful Employment Program eligible for Title IV participation: Repayment rate of at least 35%. Debt-to-Earnings ratio of less than 12% of total annual earnings, or Debt-to-Earnings ratio of less than 30% of total discretionary income. 64 Title IV Eligibility Upon first year as a failing program institution must Disclose to students and prospective students the amount by which the program did not meet the minimum standards and any plans for improvement; Establish a three day waiting period before students can enroll. 65 Title IV Eligibility Upon being a failing program for two years out of three, institution must tell students that - Their debts may be unaffordable; The program may lose eligibility; and What transfer options exist

23 Title IV Eligibility If a failing program for three of four years, program loses eligibility for Federal student aid. 67 GE Contact Information General Information: IFAP Website Gainful Employment Information Page Policy Questions: ge-questions@ed.gov Reporting Questions: nslds@ed.gov 68 COD Updates and Lifetime Pell 69 23

24 COD Release 11.0 March 2012 Enrollment School Tag Starting with the Award Year, COD will begin to collect an <EnrollmentSchoolCode> tag for all award programs. Provides the physical location of the student for Enrollment Reporting and Delinquency Monitoring purposes Collected at the disbursement level in the Common Record Will be returned in the Common Record response Required value will be 8 digit, valid OPEID and will get reject edit if missing. 70 Consolidated Appropriations Act-2012 On December 23, 2011, President Obama signed into law the Consolidated Appropriations Act, 2012 Public Law amended HEA section 401(c)(5). GEN posted January 18, Communications Related to Systems Communications referencing COD and Pell LEU: EA posted on February 17, 2012 Outlined changes to each COD, NSLDS, and CPS EA posted on February 28, 2012 COD System Implementation Plans for the Award Year Outlined what COD functionality would be implemented when EA coming in early April to outline specifics on student s and school weekly reports that begin mid-april

25 Consolidated Appropriations Act-2012 Reduces the duration of a student s eligibility to receive Pell Grant from 18 semesters (or its equivalent) to 12 semesters (or its equivalent). Applies to all students effective with the award year. Calculation of the amount of eligibility used includes the most reliable Pell Grant history for each student. 73 Calculate Pell Duration of Eligibility COD will calculate the equivalency by adding together each of the annual percentages of a student s scheduled award that was actually disbursed to the student. EU Pell Eligibility Used, per school, per award year TEU Pell Total Eligibility Used across all schools in an award year, and should not exceed 100%. (POP issue if over 100%) LEU Pell Lifetime Eligibility Used is the addition of all EUs across a student s academic career 74 COD Current Example of Pell LEU 75 25

26 Pell Grant Archived Data COD will include the most reliable Pell Grant history for the student when calculating LEU. COD gathers and stores all Pell Grant Student Recipient Historical Archive Data at USED Virtual Data Center (VDC). COD includes disbursements when calculating each Pell Grant recipient s LEU o LEU will also include any actual Pell disbursements (DRI = true) accepted by COD after April 16, Pell Changes in COD- April 2012 COD will have a special implementation the weekend of April 13-14, Two main functions will be initiated: 1. COD will begin to produce a weekly report for schools of their applicants who have LEUs of greater than 450%. 2. COD will begin targeted outreach to Pell Eligible CPS applicants that are near or exceeding an LEU of 600% One will be generated for those that have LEUs of greater than 500% but less than 600% Another will be generated for those that have LEUs of greater or equal to 600% 77 COD Weekly Pell LEU Report The interim Pell LEU Report will identify those Pell-Eligible CPS applicants who have an LEU > or = 450%, and listed the school s federal school code on their FAFSA application. The Pell LEU Report will be generated weekly, mid-april through June 2012 only, and will be cumulative

27 COD Weekly Pell LEU Report The report will be in CSV format and located in the school s Pell newsbox on the COD Reporting Website This report is not sent to SAIG. The report will have minimal data elements, including student identifiers, CPS transaction #, and LEU percentage. 79 Pell LEU Notification to Students COD will send two different messages to FAFSA applicants who appear to be Pell Grant eligible: 1. Those that have a Pell LEU greater than 500%, but less than 600% The informs them that because of a change in the law, they may be eligible for less Pell grant than originally determined. 2. Those that have a Pell LEU greater than or equal to 600% The informs them that because of a change in the law, they are no longer eligible for Pell Grant funds. Outreach will be repeated weekly until July 2012 for new FAFSA filers and for filers making corrections to their FAFSA information. 80 Pell Changes in COD- July 2012 On July 6, 2012, the COD System will modify the following LEU functionality : COD will return LEU in the common record response for all Pell recipients. COD will display LEU on the COD website for all Pell recipients. Current award warning edit 177 will be returned in the common record response when LEU is between 450% and 600 % Current award warning edit 178 will be returned in the common record response when LEU is greater than 600% NOTE: There is no hard reject edit in COD that prevents a school from disbursing Pell to a student with an LEU of > 600%. Schools are responsible for monitoring LEU closely

28 Pell Changes in COD- July 2012 A new COD Pell LEU History page will be added to the COD Web site to allow a school to view historical Pell Grant student data to determine how the LEU was calculated. COD currently provides the LEU on the following Pell Grant SAIG reports/files for and forward: o Multiple Reporting Record (MRR)-- includes POP and concurrent enrollment o Pell Reconciliation Report o Pell Year to Date File 82 Pell Changes in NSLDS- July 2012 In July 2012, schools will be able to access the National Student Loan Data System (NSLDS) to determine a student s Pell Grant Lifetime Eligibility Used (LEU). COD will send NSLDS a one-time load/file of all Pell Grant recipients LEU by early July 2012 NSLDS will provide this LEU information to the CPS via the pre-screening and post-screening processes COD will continue to include the Pell Grant LEU on all Pell Grant files sent to the NSLDS after the one-time load. 83 Pell Changes in CPS- July 2012 In July 2012, the Central Processing System (CPS) will begin reporting Pell Grant LEU information on ISIRs and Student Aid Reports (SARs). To alert schools and applicants who are close to or have exceeded 600% LEU To avoid making mid-cycle changes to the ISIR record layout, this information will be reported using comment codes

29 COD Technical Reference Updates Date Spring 2012 Summer 2012 Fall 2012 Technical Reference Updates COD System will begin accepting the new 3.0e schema and post a revised Technical Reference Revised Technical Reference will be posted based on Summer and Fall 2012 system modifications Technical Reference to be posted including the new 3.0f schema for Reconciliation Issues to Consider Because of the new 600% LEU limit, it is important schools reconcile the individual Pell disbursements reported to COD with the cash drawn to ensure they match. Schools should review disbursement data and confirm its accuracy. Schools do not need administrative relief to report downward disbursement adjustments. Schools can utilize the Pell Reconciliation Report to assist in this task. 86 Reconciliation Issues to Consider COD will not return the LEU, or warning edits 177 or 178 in the response files for and because they did not exists in these years. Schools that have been granted extending processing for these years will need to view the LEU on the COD web before adjusting any disbursements

30 White House Student Loan Initiatives 88 Special Direct Consolidation Loans 89 Special Direct Consolidation Loan NOT A PROGRAM An opportunity for borrowers in repayment or deferment or forbearance who have an ED-held loan or loans (Direct Loan or ED-held FFEL loan) that are not delinquent AND also have a commerciallyheld FFEL loan and face paying multiple loan holders

31 Special Direct Consolidation Loan Benefits include: Single Servicer One bill and one payment Interest rate of underlying loan(s) less 0.25% reduction fixed for life of loan Additional 0.25% for EFT Loans are eligible for Public Service Loan Forgiveness 91 Special Direct Consolidation Loan Available January 17,2012 June 30, 2012 NOT the standard loan consolidation program or process Servicers will notify eligible borrowers Sallie Mae FedLoan Servicing (PHEAA) NelNet Great Lakes 92 Special Direct Consolidation Loan Borrowers should not apply for a Special Consolidation at loanconsolidation.ed.gov Borrowers should direct questions to FSAIC at FED-AID Electronic Announcements dated 12/28/2011 and 01/13/

32 Pay As You Earn Income Driven Repayment Plans 94 Income Based Repayment (IBR) Plan Statutory - FFEL and Direct Loan Current Law Maximum annual payment amount is 15% of discretionary income. Remaining balance forgiven after 25 years. New Law (SAFRA) Effective 2014 Maximum annual payment amount is 10% of discretionary income Remaining balance forgiven after 20 years. 95 Income Contingent Repayment Plan Regulatory - Direct Loan Only Current Regulation - Regulatory defined formula Complex Loan amount and income Remaining balance forgiven after 25 years. Limited take-up rate 96 32

33 Revised Repayment Plan Amend ICR regulations to Accelerate 2014 IBR changes Reduce from 15% of discretionary income to 10% Reduce forgiveness time from 25 years to 20 years Negotiated rulemaking required Began in January 2012 Expected effective date Fall Negotiated Rulemaking 98 Negotiated Rulemaking Federal Register Notice October 28, 2011 Two teams Student loan issues Teacher preparation issues emaking/2011/index.html 99 33

34 President s Proposed FY 13 Budget 100 FY 13 Budget Proposal $5,635 maximum Pell Grant award for Maintain the subsidized loan interest rate for undergraduate students at 3.4 percent for undergraduates until July 1, 2013 Limit the duration of the Stafford Loan inschool interest subsidy to 150 percent of the normal time required to complete the borrowers educational program. 101 FY 13 Budget Proposal Reduce FFEL guaranty agencies retention of funds collected through loan rehabilitation. Overhaul and replace TEACH Grants with a new Presidential Teaching Fellows (PTF) program

35 FY 13 Budget Proposal Expand and improve the Perkins Loan program to provide $8.5 billion in loans annually. Provide $150 million in new funds for the Work-Study Program. Reform and expand Federal allocations in the campus-based programs 103 My Training Officer Supervisor requests feedback from FAAs Mark Gerhard Supervisor of Training Officers U.S. Dept of Ed/Federal Student Aid My contact information Rick Renshaw Training Officer U.S. Dept of Ed Federal Student Aid Denver Regional Office

36 Your Denver Regional Training Team Margaret Day, Training Officer Rick Renshaw, Training Officer Deb Tarpley, Training Officer