Session C-07 HEA Changes on Perkins & Work Study Gail McLarnon Nikki Harris U.S. Department of...

Session C-07

HEA Changes on Perkins & Work Study

Gail McLarnonNikki Harris

U.S. Department of Education

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Agenda

• Legislative Changes to the Campus-Based Programs Resulting from The Higher Education Opportunity Act

• Regulatory Changes to the Federal Perkins Loan Program

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Campus-Based Legislative & Regulatory Update

• Campus-Based Programs:–Federal Supplemental Educational Opportunity Grant (FSEOG) Program

–Federal Work-Study (FWS) Program

–Federal Perkins Loan Program

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Higher Education Opportunity Act (HEOA)– HEA Reauthorization

• July 29 – House and Senate Conferees approve H.R. 4137

• July 31st -- House passes H.R. 4137 by a vote of 380 to 49

• July 31st -- Senate passes H.R. 4137 by a vote of 83 to 8

• President Bush signed H.R. 4137 into law August 14, 2008 – P.L. 110-315

• Dear Colleague Letter in development

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HEOA Changes to FSEOG

• HEA section 413A(b)(1) amended to:– Authorize appropriations

• HEA section 413D(c)(3) amended to:– Increase the allowance for books and

supplies from $450 to $600 when calculating an institution’s average cost of attendance for purposes of the allocation formula

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HEOA Changes to FWS Programs

• Three programs fall under title IV, Part C Federal Work-Study Programs:– Federal Work-Study (FWS) Program

•34 CFR 675 Subpart A– Job Location and Development Program

•34 CFR 675 Subpart B– Work Colleges Program

•34 CFR 675 Subpart C

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• HEA section 441 amended:–Appropriations authorized–Emergency preparedness and response has been added to the definition of “Community Services”

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• HEA section 442 amended to increase allowance for books and supplies from $450 to $600 when calculating an institution’s average cost of attendance for purposes of the allocation formula

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• HEA section 443 amended to fund “Civic Education and Participation Activities” for students employed in projects that:– Teach civics in school;– Raise awareness of government

functions or resources; or– Increase civic participation

• Regulatory action required

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• Priority to the extent practicable must be given to the employment of students participating in projects:– Educating or training the public about evacuations,

emergency response and injury prevention relating to natural disasters and acts of terrorism and other emergency situations

• Students must receive appropriate training• Students may be paid for both training time and travel

time • Allows Federal share of FWS student compensation

under this subsection to exceed 75%

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• HEA section 445 amended to allow institutions flexible use of FWS funds in a Major Disaster:– Payments may be made to disaster-

affected students under certain conditions, for a period of time not to exceed one academic year, in which the disaster-affected students were prevented from fulfilling their FWS obligations

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HEOA Changes to FWS Programs• HEA section 446(a) amended to

increase the amount of FWS funds an institution may use for the Job Location and Development Program from the lesser of 10% or $50,000 of its FWS allocation to the lesser of 10% or $75,000

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HEOA Changes to FWS Programs• HEA section 447 amended to create a new

discretionary grant program for FWS schools to supplement off-campus community service employment:– Priority must be given to applications that

support work in early childhood education projects and activities in preparation for emergencies or natural disasters

– Funds must be used to pay students performing off-campus community service activities, including for training time and travel time related to this community service

– New discretionary grant program not currently funded

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Review of FWS “Community Services” Definition

• Services identified by a school, through formal or informal consultation with local nonprofit, governmental, and community-based organizations, as designed to improve the quality of life for community residents, particularly low-income individuals, or to solve particular problems related to their needs

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Review of Community Service Examples• FSA Handbook Examples of Community

Service:– Health care, child care, literacy training,

education (including tutorial services) welfare, social services, transportation, public safety, recreation, crime prevention and control, and community improvement

– New: Emergency preparedness and response, civic education and participation activities

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Review of Steps to Establish Community Service Jobs

• In establishing community service jobs, a school:– Identifies potential jobs and

employers– Researches students’ interests in

community service– Promotes community service jobs– Places a priority on jobs that meet

needs of low-income individuals

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Review of On-Campus Community Service• On-Campus Community Service must be

open and accessible to the community– The school is not considered a community

for this purpose– Service is considered open to the

community if it is publicized to the general public and the general public use the service

– Statutory exception is given for support services to students with disabilities even if services are only provided to students enrolled at the school

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HEOA Changes to FWS Programs• HEA section 448 amended to define

Work College as an eligible institution that:– Has been a public or private

nonprofit, 4 year, degree-granting institution with a commitment to community service

– Has also operated a comprehensive work-learning-service program for at least 2 years

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• Work College is an eligible institution that:– Requires students, including at least one/half of

all students who are enrolled on a f/t basis, to participate in a comprehensive work-learning-service program for at least 5hrs each week or at least 80 hrs during each enrollment period, except summer school, unless the student is in a school approved study abroad or externship program

– Gives the students participating the chance to contribute to their education and to contribute to the welfare of the community as a whole

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HEOA Changes to FWS Programs• HEA section 448 amended to define

“Comprehensive Student Work-Learning-Service Program” as a program that:– Is an integral and stated part of the

institution’s educational philosophy and program

– Requires participation of all resident students for enrollment and graduation

– Includes learning objectives, evaluation, and a record of work performance as part of the student’s college record

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HEOA Changes to FWS Programs• “Comprehensive Student Work-Learning-

Service Program” as a program that:– Provides programmatic leadership by

college personnel at levels comparable to traditional academic programs

– Recognizes the educational role of work-learning-service supervisors

– Include consequences for nonperformance or failure in the work-learning-service program similar to the consequences for failure in the regular academic program

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HEOA Changes to Perkins Loan Program• Amends HEA §428C(b)(1) to require

disclosures to Perkins Loan borrowers who consolidate: – Borrower will lose all interest-free periods

associated with a Perkins Loan– Borrower will no longer be eligible for

cancellation benefits – Lender must list occupations contained in

HEA section 465 that qualify for cancellation

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HEOA Changes to Perkins Loan Program• Amends HEA §463(a)(4)(B) – Secretary may

allow institutions to refer Perkins Loans to the Department for collection. Any sums collected must be repaid to the institution (minus collection costs) as additional FCC.

• Amends HEA §463(a)(9) to prohibit the Secretary from mandating assignment other than as provided in §463(a)(4) and (5).

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HEOA Changes to Perkins Loan Program• Amends HEA §464(a) to:

– Increase annual loan limits to $5,500 for undergraduate students

– Increase annual loan limits to $8,000 for graduate/professional students

– Increase aggregate loan limits for undergraduate students to $27,500

– Increase aggregate loan limits for graduate/professional students to $60,000

– Increase aggregate loan limits to $11,000 for “any other student”

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HEOA Changes to Perkins Loan Program• Amends HEA §464(c)(1)(F) to require the

Secretary to cancel a Perkins Loan if the borrower is:– Permanently and totally disabled – Unable to engage in substantial gainful activity

because of a physical or mental impairment that is expected to result in death, has lasted continuously for not less than 60 months, or can be expected to last continuously for not less than 60 months or

– If the borrower is determined by the VA to unemployable due to a service-connected disability

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HEOA Changes to Perkins Loan Program• Amends HEA §464(c)(1)(F) to:

– Allow Secretary to develop regulations to:•safeguard against fraud and abuse in

TPD discharges•resume collection on loans discharged

for TPD if the borrower receives a new Title IV loan or earns income in excess of the poverty line

• Effective July 1, 2008

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HEOA Changes to Perkins Loan Program• Amends HEA §464(e) to remove requirement

that a forbearance request be in writing• Requires terms of forbearance to be

documented by confirming the agreement with borrower by notice and recording terms in the borrower’s file.

• Amends HEA §464(h)(1)(A) to require 9 on-time payments to successfully rehabilitate a defaulted Perkins Loan

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HEOA Changes to Perkins Loan Program• Amends HEA §465(a)(2) to extend

cancellation benefits to Perkins Loan borrowers who are: – teachers in low-income educational service

agencies (including special ed teachers)– Full-time staff in a pre-kindergarten or child care

program licensed or regulated by a State– Full-time lawyers employed by a public defender

organization– Full-time fire fighters

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HEOA Changes to Perkins Loan Program• Amends HEA §465(a)(2) to extend

cancellation benefits to Perkins Loan borrowers who are:– Full-time faculty members at a Tribal college or

University– Librarians with a Master’s degree in Library

Science employed in a low-income school or a public library serving low-income schools

– Full-time speech language pathologists with a Master’s degree working with low-income children

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HEOA Changes to Perkins Loan Program• Full cancellation benefits (100%) over

five years for members of the Armed forces serving in areas of hostility

• Sense of Congress:– “The Federal Perkins Loan program

is an important part of Federal student aid and should remain a campus-based aid program at colleges and Universities.”

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HEA Reauthorization – H.R. 4137 Federal Perkins Loan Program

• Amends HEA §484A to require that:– Perkins Loans are not subject to

a defense based on a claim of infancy

– Obligation to title IV aid does not apply to deceased students, a deceased student’s estate or the estate of such student’s family.

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HEOA Changes to Perkins Loan Program

• Amends HEA §485(b)(1)(A) to expand exit counseling requirements for FFEL, Direct and Perkins Loans

• Amends HEA §488 to authorize the transfer of up to 25% of an institution’s FWS allocation to its Perkins Loan fund

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Regulatory Changes - Perkins Loan Program

• Regulatory changes in the Perkins Loan Program effective July 1, 2008

• Resulted from 2006-07 negotiated rulemaking

• Consensus was not reached• NPRM:

http://ifap.ed.gov/fregisters/FR06122007.html • FINAL:

http://ifap.ed.gov/fregisters/FR11012007.html

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• Mandatory Assignment-Sec. 674.8

• Schools hold more than $400 million in Perkins Loans that have been in default for 5 or more years

• Little collection activity seen on these loans

• ED streamlined the voluntary assignment to encourage schools to assign their aged, defaulted loans


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• HEOA supersedes Perkins Loan Program rules allowing the Secretary to require assignment of a Perkins Loan if—

• In default for 7 or more years, and

• No payment has been received in past 12 months

• Outstanding principal balance is $100 or more


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•NSLDS Reporting Requirements –Sec. 674.16– Requires schools to report

enrollment and loan status information or any other Perkins loan-related information required by the Secretary by a deadline established by the Secretary


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• Record Retention Requirements on MPNs Assigned to ED (Sec. 674.19)– Perkins schools must retain records

showing date & amount of each disbursement of loan made on MPN until the loan is satisfied

– Upon the Secretary request, schools must submit disbursement records on assigned loans to ED


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• Simplification of Deferment Process-Sec. 674.34–Perkins Loan school may grant a deferment based on information from the Secretary, a FFEL holder or another Perkins Loan school


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• Simplification of Deferment Process (Sec. 674.34 cont.)– Borrower must request deferment

verbally or in writing– School must grant deferment for same

reason and same time period– School must have no conflicting

information on borrower’s eligibility


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• Simplified Deferment Process (Sec. 674.34 cont.)– School must grant a military

deferment based on request from borrower or borrower’s representative without supporting documentation

– School must provide notice to borrower or representative, if applicable, that deferment has been granted


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• Deferments (Sec. 674.34 cont.) – Economic hardship income standard an

amount equal to 150% of the poverty line applicable to the borrower’s family size

– All loans now eligible for military deferment, not just loans made on or after July 1, 2001; three-year restriction removed


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• Deferments (Sec. 674.34 cont.)– Military deferment period ends 180 days

after demobilization – New military deferment for up to 13

months following conclusion of military service for National Guard, other reserves and retired military borrowers enrolled, or enrolled within six months of call to active duty


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• Definition of “Reasonable” Collection Costs in Sec. 674.45– First Collection Effort: 30% of principal,

interest and late charges collected– Second Collection Effort: 40% of

principal, interest and late charges collected

– Litigation: 40% plus court costs


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• Certification of Electronic Signatures on MPNs Assigned to ED (Sec. 674.50)– Schools must maintain a certification of

creation and maintenance of E-MPN process, including borrower authentication and signature process

– E-signed MPNs must be retained for at least 3 years after all loans are satisfied


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• Certification of Electronic Signatures on MPNs Assigned to ED (Sec. 674.50 cont.)– Upon Secretary’s request:

•School must provide the certification and cooperate in all activities to enforce an assigned loan, including provision of testimony in a legal proceeding


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• Certification of Electronic Signatures on MPNs Assigned to ED (Sec. 674.50 cont.)

• Required certification must include:– Description of borrower’s steps to

execute & sign MPN– Copy of each screen as viewed by the

borrower when signing MPN electronically


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• Certification of Electronic Signatures on MPNs Assigned to ED (Sec. 674.50 cont.)

• Required certification must include:– Description of process ensuring data

integrity– Documentation supporting school’s

authentication and electronic signature process

– All other evidence required by ED


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• Certification of Electronic Signatures on MPNs Assigned to Ed (Sec. 674.50 cont.)– School must provide any records

requested to resolve a dispute within 10 business days

– School must provide complete access to E-records until all loans made on the MPN are satisfied


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• Sec. 674.51—School may use an accurate and complete photocopy of a Death Certificate to document death discharge

• “Exceptional circumstances” discharge by chief executive officer based on other reliable information unchanged


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• Child & Family Service Cancellation (Sec. 674.56)

• To qualify for cancellation a borrower must be:– Employed full-time by a child and

family service agency– Provide services directly and

exclusively to high-risk children from low-income communities


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• Total and Permanent Disability (TPD) Discharge-Sec. 674.61– Title IV Loan Program regulations

restructured to follow process and clarify eligibility requirements

– TPD discharge application must be submitted within 90 days of date physician certifies the form

– Borrower’s TPD date defined as physician’s certification date on the application


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• TPD Discharge (Sec. 674.61 cont.)– Conditional discharge period is prospective

starting on the date the physician certifies the borrower’s TPD

– Title IV loans or earned income received before date of TPD do not disqualify borrower for discharge

– Title IV loans or loan disbursements received after date of TPD disqualify borrower for discharge


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• TPD Discharge (Sec. 674.61 cont.)– Minimal earned income allowed

during conditional discharge period– School must notify borrower that no

payments are due during discharge process

– Only payments made after the TPD date (physician’s certification date) are returned upon receipt of final discharge


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Contact Information:

Gail McLarnon202-219-7048

[email protected]

Nikki Harris202-219-7050

[email protected]

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