Spring 2010 Federal Perkins Loan Update. Agenda Budget Update Legislative Update Regulatory...

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Spring 2010 Federal Spring 2010 Federal Perkins Loan Update Perkins Loan Update

Transcript of Spring 2010 Federal Perkins Loan Update. Agenda Budget Update Legislative Update Regulatory...

Page 1: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Spring 2010 Federal Perkins Spring 2010 Federal Perkins Loan UpdateLoan Update

Page 2: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

AgendaAgenda

Budget UpdateBudget Update Legislative UpdateLegislative Update Regulatory UpdateRegulatory Update Perkins Loan IssuesPerkins Loan Issues GrassrootsGrassroots

Page 3: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Current Federal Perkins Loan Current Federal Perkins Loan ProgramProgram

Federal Perkins Loan ProgramFederal Perkins Loan Program Provides long-term, low-interest loans to ~ Provides long-term, low-interest loans to ~

500,000 students from ~ 1,700 institutions.500,000 students from ~ 1,700 institutions. Total assets of over $8 billion represent over Total assets of over $8 billion represent over

40 years of FCC, TCC, repayments on 40 years of FCC, TCC, repayments on previous loans, and Federal reimbursement previous loans, and Federal reimbursement for loan cancellationfor loan cancellation

Page 4: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

2010 Presidential Budget Request2010 Presidential Budget Request

FY2010 Presidential Budget RequestFY2010 Presidential Budget Request increase college access and success by increase college access and success by

expanding financial aid while making it expanding financial aid while making it simpler, more reliable, and more efficient.simpler, more reliable, and more efficient.

Page 5: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

2010 President’s Budget Request2010 President’s Budget Request

Increase PellIncrease Pell• Make Pell funding mandatory (not subject Make Pell funding mandatory (not subject

to appropriations funding)to appropriations funding)• Increase by $200 to $5,500 for 2010-11 Increase by $200 to $5,500 for 2010-11

award yearaward year• Then increase by consumer price index Then increase by consumer price index

plus one percentplus one percent

Page 6: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

2010 President’s Budget Request2010 President’s Budget Request

End entitlement subsides to FFEL loan End entitlement subsides to FFEL loan program.program. On all new loans as of July 1, 2010On all new loans as of July 1, 2010

Consolidate federal student loans under Consolidate federal student loans under William D. Ford Direct Loan ProgramWilliam D. Ford Direct Loan Program Increase efficiencyIncrease efficiency Less expensiveLess expensive Savings to finance higher Pell GrantsSavings to finance higher Pell Grants

Page 7: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

2010 President’s Budget Request – 2010 President’s Budget Request –

PerkinsPerkins Modernize and expand Perkins ProgramModernize and expand Perkins Program

New Perkins program = new unsub Direct Stafford New Perkins program = new unsub Direct Stafford ProgramProgram

Receive 6 billion in “mandatory” fundingReceive 6 billion in “mandatory” funding Expanded to all schoolsExpanded to all schools

• From 1,800 to 4,400From 1,800 to 4,400 5% interest would accrue while in school and grace5% interest would accrue while in school and grace Other terms and conditions would be same as Other terms and conditions would be same as

unsubsidized Staffordunsubsidized Stafford Federal Share of current loans sent to EDFederal Share of current loans sent to ED Overhaul of the administration of the programOverhaul of the administration of the program

• Fully originated and administrated by the Dept of EDFully originated and administrated by the Dept of ED

Page 8: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

2010 President’s Budget Request - 2010 President’s Budget Request - PerkinsPerkins

Administration says:Administration says: 2.7 million more students will receive loans2.7 million more students will receive loans Loans to be targeted to needy students and Loans to be targeted to needy students and

the schools they attendthe schools they attend• Schools with many Pell recipientsSchools with many Pell recipients

Colleges encouraged to control tuitionColleges encouraged to control tuition• New formula would encourage cost control and New formula would encourage cost control and

targeting of grants to prevent excessive targeting of grants to prevent excessive indebtednessindebtedness

Budget rules require ED servicingBudget rules require ED servicing• Arcane federal accounting/scoring rulesArcane federal accounting/scoring rules

Page 9: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Congressional Action Congressional Action

Student Aid and Fiscal Responsibility Act Student Aid and Fiscal Responsibility Act of 2009 (SAFRA) – H.R. 3221of 2009 (SAFRA) – H.R. 3221 Implements President’s 2010 budget requestsImplements President’s 2010 budget requests Introduced July 13, 2009Introduced July 13, 2009 Full committee markup July 21, 2009Full committee markup July 21, 2009 Passed the House on Sept. 17, 2009Passed the House on Sept. 17, 2009

• Vote 253 to 171Vote 253 to 171 Senate working on their versionSenate working on their version

Page 10: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

H.R. 4872 Health Care and Education H.R. 4872 Health Care and Education Affordability Reconciliation ActAffordability Reconciliation Act House passed on 3/21/10 vote 220-211House passed on 3/21/10 vote 220-211 Senate passed with vote 56-43Senate passed with vote 56-43

H.R. 4872 consists of amendments to H.R. 4872 consists of amendments to health care reform and a modified version health care reform and a modified version of SAFRA.of SAFRA.

DCL GEN-10-5 briefly addresses these DCL GEN-10-5 briefly addresses these changeschanges

Page 11: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

As of 7/1/10, all Stafford, PLUS and As of 7/1/10, all Stafford, PLUS and Consolidation Loans will be made via the Consolidation Loans will be made via the Direct Loan Program.Direct Loan Program.

Additional mandatory funding is provided Additional mandatory funding is provided to augment funds appropriated each year.to augment funds appropriated each year. increase the federal maximum Pell Grant increase the federal maximum Pell Grant

each year by the change in the Consumer each year by the change in the Consumer Price Index.Price Index.

According to ED/Labor Committee the According to ED/Labor Committee the maximum Pell for 2010 is $5,500maximum Pell for 2010 is $5,500

Page 12: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

The legislation uses $13.6 billion of the savings The legislation uses $13.6 billion of the savings to cover most of approximately $19 billion to cover most of approximately $19 billion shortfall in current Pell Grant funding.shortfall in current Pell Grant funding.

Bill does not include ongoing increases in Pell at Bill does not include ongoing increases in Pell at the rate of inflation plus 1% as in the SAFRA bill.the rate of inflation plus 1% as in the SAFRA bill. The annual appropriation process will fund the bulk of The annual appropriation process will fund the bulk of

each year’s Pell grant.each year’s Pell grant. No guarantee that there will be an annual increase in No guarantee that there will be an annual increase in

the total grant.the total grant.

Page 13: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

$750 million is included for “College $750 million is included for “College Access Challenge Grants” through 2014.Access Challenge Grants” through 2014. Rate of $150 million per year.Rate of $150 million per year.

$50 million goes to assist school transition $50 million goes to assist school transition into Direct Loan program.into Direct Loan program.

$2.55 billion goes to HBCU as well as $2.55 billion goes to HBCU as well as Minority Serving InstitutionsMinority Serving Institutions

Page 14: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

Not-for Profit direct loan servicers receive Not-for Profit direct loan servicers receive funding if needed.funding if needed. If meet minimum standards, they would be If meet minimum standards, they would be

allocated a minimum 100,000 loan accounts allocated a minimum 100,000 loan accounts annually, with the first 100,000 eligible for a annually, with the first 100,000 eligible for a special pricing tier.special pricing tier.

Page 15: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

$2 billion is set aside for community $2 billion is set aside for community colleges via Trade Adjustment Act funding colleges via Trade Adjustment Act funding under the Dept of Labor.under the Dept of Labor. The larger American Graduation Initiative was The larger American Graduation Initiative was

dropped from bill due to budget issues.dropped from bill due to budget issues.

Page 16: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

Income-based Repayment was modified Income-based Repayment was modified for new borrowers beginning 2014.for new borrowers beginning 2014. Borrower payments are limited to 10% of Borrower payments are limited to 10% of

discretionary income. (reduced from 15%)discretionary income. (reduced from 15%) Unpaid balance would be forgiven after 20 Unpaid balance would be forgiven after 20

years. (reduced from 25%)years. (reduced from 25%)

Page 17: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

$25 million is provided in fiscal year 2010 $25 million is provided in fiscal year 2010 and 2011 for Direct Loan servicers “to and 2011 for Direct Loan servicers “to retain jobs at locations where such retain jobs at locations where such servicers were servicing FFEL loans on servicers were servicing FFEL loans on 1/1/10.1/1/10.

Page 18: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

For one year beginning 7/1/10, borrowers For one year beginning 7/1/10, borrowers who are not in repayment on all there who are not in repayment on all there loans can consolidate into the Direct Loan loans can consolidate into the Direct Loan Program if they have loans in at lease two Program if they have loans in at lease two of the following categories;of the following categories; FFELP Loans, FFELP Loans, FFELP loans that have been sold to the FFELP loans that have been sold to the

DepartmentDepartment Direct LoansDirect Loans

Page 19: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What PassedWhat Passed

The Current Perkins Loan Program is not The Current Perkins Loan Program is not touched!touched! The administration's proposal (and passed by The administration's proposal (and passed by

the House in Sept) to create a new “Direct the House in Sept) to create a new “Direct Perkins Loan Program” was deleted in its Perkins Loan Program” was deleted in its entirety.entirety.

Page 20: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What’s NextWhat’s Next

COHEAO will turn it’s attention to extend COHEAO will turn it’s attention to extend and expand the current Perkins Program.and expand the current Perkins Program. Most important matter (because of timing) is Most important matter (because of timing) is

appropriations.appropriations.• President’s FY2011 budget request was written in President’s FY2011 budget request was written in

the expectation of the “Direct Perkins”the expectation of the “Direct Perkins”• No FCC or Cancellation funding is currently No FCC or Cancellation funding is currently

requested.requested.

Page 21: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

What’s NextWhat’s Next

Need to address the 2012 sunset for Perkins.Need to address the 2012 sunset for Perkins.• It requires the federal share of the Perkins Loan It requires the federal share of the Perkins Loan

revolving fund to be sent to the Department or EDrevolving fund to be sent to the Department or ED• This date has been extended several times, last in This date has been extended several times, last in

2007.2007.• COHEAO’s high priority to eliminate or extend this COHEAO’s high priority to eliminate or extend this

clause.clause.

Page 22: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues

Economic Hardship Deferment Economic Hardship Deferment College Cost Reduction and Access Act College Cost Reduction and Access Act

(CCRAA, P.L. 110-84). (CCRAA, P.L. 110-84). Definition changes effectiveDefinition changes effective 7/1/09 7/1/09 Eliminates the 20/220 qualification for Econ Eliminates the 20/220 qualification for Econ

HD.HD.

Page 23: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues

FISAP Perkins Loan ChangesFISAP Perkins Loan Changes New Lines:New Lines:

New cancellations authorized by HEOA plus New cancellations authorized by HEOA plus corresponding instructionscorresponding instructions

Short-term loans to the Fund and Short-term loans to the Fund and reimbursement to the institution of short-term reimbursement to the institution of short-term loans to the Fund plus instructionsloans to the Fund plus instructions

Transfer of FWS to Perkins Loan FundTransfer of FWS to Perkins Loan Fund

Page 24: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues

Total and permanent disability discharge Total and permanent disability discharge for borrowers designated as unemployable for borrowers designated as unemployable due to a service-related condition by due to a service-related condition by Veterans AffairsVeterans Affairs

New TPD form postedNew TPD form posted DCL GEN-09-02 DCL GEN-09-02

Two DCLs on Veteran’s TPD dischargeTwo DCLs on Veteran’s TPD discharge ProcessProcess PolicyPolicy

Page 25: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues

DCL 09-07DCL 09-07 Procedures for discharging Title IV loans by Procedures for discharging Title IV loans by

determination by the Dept of Veterans Affairsdetermination by the Dept of Veterans Affairs VA determines discharge on one of two VA determines discharge on one of two

standards:standards:• A determination that the veteran has a service-A determination that the veteran has a service-

connected disability (or disabilities), that are 100% connected disability (or disabilities), that are 100% disabling; ordisabling; or

• A determination that the veteran is totally disabled A determination that the veteran is totally disabled based on an individual unemployability based on an individual unemployability determination.determination.

Page 26: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues Following procedures must be followed:Following procedures must be followed:

Borrower must apply to loan holder for TPDBorrower must apply to loan holder for TPD• Completes section 1 and 3 of TPDCompletes section 1 and 3 of TPD

Physician is not required to sign Section 4 of Physician is not required to sign Section 4 of TPDTPD• Instead borrower submits documentation from the Instead borrower submits documentation from the

VA showing the determination of unemployability VA showing the determination of unemployability or 100% disabledor 100% disabled

Schools review TPD for completion and Schools review TPD for completion and attached VA documentation.attached VA documentation.• Make preliminary determination of eligibilityMake preliminary determination of eligibility

Page 27: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues If eligible for TPD based on VA If eligible for TPD based on VA

documentation, submit TPD form and VA documentation, submit TPD form and VA documentation to the Department. documentation to the Department. • DO NOT assign loanDO NOT assign loan

The Department will review submitted The Department will review submitted paperwork and determine final eligibility.paperwork and determine final eligibility.• Department will instruct school to discharge the Department will instruct school to discharge the

loan loan • No three year conditional waiting periodNo three year conditional waiting period

School cancels the loanSchool cancels the loan• And refunds any payments made on or after And refunds any payments made on or after

effective dateeffective date

Page 28: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues

If TPD was denied by school or DepartmentIf TPD was denied by school or Department• School must notify borrower and borrower must School must notify borrower and borrower must

resume paymentsresume payments• Loan is deemed in forbearance from date of Loan is deemed in forbearance from date of

collection activity was suspendedcollection activity was suspended During discharge process, schools must During discharge process, schools must

provide borrower with phone number to call if provide borrower with phone number to call if they have questions.they have questions.

Page 29: Spring 2010 Federal Perkins Loan Update. Agenda  Budget Update  Legislative Update  Regulatory Update  Perkins Loan Issues  Grassroots.

Perkins Loan IssuesPerkins Loan Issues

Dear Colleague Letter CB-09-06 and CB-Dear Colleague Letter CB-09-06 and CB-09-0509-05 Published 9/28/09Published 9/28/09 Approval of the revised Perkins MPN and Approval of the revised Perkins MPN and

Addendum to Perkins MPNAddendum to Perkins MPN MPN contains changes to cancellation, MPN contains changes to cancellation,

rehabilitation, forbearance and defermentrehabilitation, forbearance and deferment Must begin using by 12/31/09Must begin using by 12/31/09

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Questions?Questions?

Lori HartungLori HartungTodd, Bremer & Lawson, Inc.Todd, Bremer & Lawson, Inc.

[email protected]