Updated Report of the NASFAA Reauthorization …July 2016 Update Congressional Action in the 114th...
Transcript of Updated Report of the NASFAA Reauthorization …July 2016 Update Congressional Action in the 114th...
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Updated Report of the NASFAA Reauthorization Task ForceJuly 2016
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©2016NASFAA Pagei ReauthorizationTaskForce
UpdatedReportoftheNASFAAReauthorizationTaskForce,July2016
ForwardtotheJuly2016Update:
TheHigherEducationAct(HEA)of1965isthemainauthorizinglegislationthatsetsforththefederalstudentaidprogramsforhighereducation.Likealllegislationthatcreatesandmaintainsfederalprograms,itslifeprogressesin4to6yearperiodsofrelativestability,afterwhichCongressre-examinestheprogramstodeterminewhethertheyarestillservingtheirpurposesandwhetherthosepurposesneedsadjustment.InthecaseoftheHEA,thisprocessofreauthorizationhasoccurredmultipletimes,withvaryingdegreesoftimeliness.
AlthoughCongressintendedtoreauthorizetheHEAin2014,littleprogresshasbeenmadeinanycomprehensivewayasofJuly2016.SeveralbillshavebeenintroducedthatshowthedirectioninwhichcertainmembersofCongresswouldliketotakereauthorization,butnonehasprogressedpasttheintroductionphase.
NASFAAoriginallyreleaseditsreauthorizationrecommendationsin2013,basedonworkofamember-constitutedReauthorizationTaskForce(RTF)andapprovedbytheNASFAABoardofDirectors.NASFAAremainscommittedtotherecommendationsandprinciplesoutlinedintheoriginal2013RTFreport.TheAssociationhascontinuedthoseeffortsbyconveningseveralpolicy-orientedtaskforcesandworkinggroupstoexpandorenhancetheRTFrecommendationsortodevelopadditionallegislativerecommendations.TheBoardhasreviewedand,inmostcases,approvedtherecommendationsincludedinthesubsequenttaskforcereports.
ThepurposeofthisreportistoincorporatetheworkofthesubsequenttaskforcesintotheoriginalRTFreporttoformacomprehensiveworkingdocument,andtoupdatethemembershipontherecommendationsofthefollowingsubsequenttaskforcesandworkinggroups:
• Campus-BasedAidAllocationFormulaTaskForce,June2014
• ConsumerInformationTaskForce,June2014• PublicServiceLoanForgivenessTaskForce,June2014
• ServicingIssuesTaskForce,February2015• InnovativeLearningModelsTaskForce,June2015
• FAFSAWorkingGroup,July2015• ReturnofTitleIVFunds(R2T4)TaskForce,September2015
• ConsumerInformationandLawStudentIndebtednessTaskForce,March2016
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©2016NASFAA Pageii ReauthorizationTaskForce
Inthisreport,recommendationsformulatedsubsequenttotheoriginalRTFreportareidentifiedbyablue“ADD”notation.CongressionalorotheractivitythathasoccurredsinceJuly2013,andisstillactive,isshowninablue-shadedboxfollowingtherecommendationtowhichitisrelevant.
TheNASFAAStaffWashingtonDC,July2016
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©2016NASFAA Pageiii ReauthorizationTaskForce
TableofContentsIntroductiontotheOriginalJuly2013Report..............................................................................iv
GeneralProvisionsRecommendations..........................................................................................1
NeedAnalysisRecommendations................................................................................................11
DirectLoanRecommendations....................................................................................................32
PellGrantRecommendations......................................................................................................57
Campus-BasedRecommendations..............................................................................................64
ConsumerInformationRecommendations..................................................................................72
ReturnofTitleIVFundsRecommendations................................................................................82
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©2016NASFAA Pageiv ReauthorizationTaskForce
IntroductiontotheOriginalJuly2013Report:
NASFAA’sBoardofDirectorsconvenedaReauthorizationTaskForceinMarch2012toproduceasetofproposalsforthereauthorizationoftheHigherEducationActthat—• Promoteaccesstopostsecondaryeducation;• Providesimplicity,consistency,flexibility,andprogramintegrityinthedeliveryofstudent
financialaid;and• RepresentthediverseneedsoftheAssociationanditsmembership.
Indoingso,thetaskforcewasdirectedtoconsultwithNASFAA’smembershipandtoincorporatethefollowingguidingprinciples:• Promotefairnessandequityforstudentsacrossallsectorsofpostsecondaryeducation;• Promotepoliciesthataddresstheneedsofdisadvantagedstudents;• Promoteaccountability;• Encouragesimplicity;• Provideschoolswiththeflexibilitytorespondtothespecificneedsoftheirstudents;• Promotetheprimacyofneed-basedaid;• Recommendpoliciesthataccommodatethediversityofacademicdeliverymodels;• Promotetheuseoftechnologywhereverpossible;• Eliminatestatutoryrequirementsthatusefinancialaidtoenforceunrelatedsocialpolicies;• Supportrecommendationswithresearchanddataanalysiswhereverpossible;and• Promoteprogramsandeffortsthatencouragestudentfinancialandacademicpreparation
atanearlyage.
Accordingly,thetaskforceheldalmost40listeningsessionsatconferencesacrossthecountry.Membercommentswereanalyzedandcondensedintorecommendations.Inaddition,recommendationsfromtheprior(2003)reauthorizationtaskforcewererevisitedand,wherenecessary,updated.Thisprocessresultedin61recommendations,presentedtotheBoardinacondensedformatinMarch2013.Onerecommendationwasrejected,threewerereturnedtothetaskforceforfurtherdevelopment,and57wereaccepted.
Thisreportpresentstheacceptedrecommendationsinfullerdetail,andexpandeddiscussionsofthethreeissuesstillpendingBoardapproval.
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Update,July2016 GeneralProvisions
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GeneralProvisions
1. DateofIssuanceofFinalReportforaProgramReview
Recommendation
• RequiretheDepartmentofEducationtoprovidethefinalreportforaProgramReviewtoaninstitutionwithin60daysafterreceiptoftheinstitution’sresponse.
StatutoryCitation
MasterCalendarHEA§482[20U.S.C.1089]
ProgramParticipationAgreements(hearings;audits)HEA§487(b),(c)[20U.S.C.1094]
ProgramReviewHEA§498A[20U.S.C.1099c–1]
Background,Rationale,andImplementationConsiderations
InordinatelylongdelaysinreceiptofthefinalprogramreviewreportcreateuncertaintyandpotentiallyincreaseliabilitiesfortheschoolbecauseitdoesnotknowwhatisrequiredtoresolveproblemsorcontinuefundinginTitleIVprograms.Therehavebeeninstancesofyears-longdelays.TheRTFhasheardthatdelaysaresometimesduetoreviewerstryingtogetapolicyquestionresolvedtotheschool’sbenefit.However,ifexistingrulesandguidanceareunclearorinsufficientenoughtocausetheprogramreviewertoseekfurtherguidance,theschoolshouldnotbeheldtoaccounteither.
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Update,July2016 GeneralProvisions
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2. OverawardTolerance
Recommendation
• EstablishintheGeneralProvisionssectionoflawacommonoverawardtoleranceof$500incaseswherethestudentreceivesadditionalresourcesafterpackaging,applicabletothecampus-basedandDirectLoanPrograms.
StatutoryCitation
FFELP(overawards,applicabletoDL)HEA§428G(d)(2)[20U.S.C.1078−7(d)(2)]
FWS(toleranceforearningsaboveneed)HEA§443(b)(4)[42U.S.C.2753(b)(4)]
Background,Rationale,andImplementationConsiderations
ThisrecommendationseekstoensureconsistenttreatmentofstudentsacrosstheTitleIVprograms(otherthanPellGrant,whichisnotsubjecttooverawardsresultingfromotherresources).TheamountofPellGrantactuallydisbursedorexpectedtobedisbursedshouldbeusedtodetermineoverawards,toaccountforthestudent’sabilitytopostponereceipttolatertermsinviewofnewlifetimelimits.Theschoolshouldbeallowedtodeterminetheorderinwhichaidisadjusted(reflectingthecurrentpracticethatallowsschoolstodeterminetheorderinwhichaidprogramsareawardedtothestudentinpackaging).DirectLoanoverawardsthatremainafterapplyingthetoleranceandadjustingtheaidpackageshouldberepayableunderthetermsofthepromissorynote,asiscurrentlythecaseunderReturnofTitleIVFundsrules.Currently,onceaDirectLoanhasbeenfullydisbursed,thereisnoconceptofanoveraward;loanfundsdonothavetobereturned.Beforedisbursementhasoccurred,however,aschoolmustadjusttheloan(or,undercertaincircumstances,otheraidinthestudent’spackage)tothedollarforanyunanticipatedadditionalaidthestudentisawarded.Bycontrast,inthecampus-basedprogramsthereisa$300tolerance(whichdatesto1995).Forexample,astudentwhoisfullyfundedthroughcampus-basedandotheraidbutwithoutaDirectLoanreceivesa$300scholarship.Thatstudent’spackageisnotrequiredtobeadjusted.AnotherstudentwhowasnotfullyfundedbutcoveredallofhisunmetneedwithaDirectLoanalsoreceivesa$300scholarship,beforetheloanisdisbursed;hispackagemustbeadjustedforthefull$300.Further,iftheschoolhastheloanfundsinhand(buthasnotyetdisbursedthemtothestudent),theloanmustbeadjustedaheadofanycampus-basedaid.Athirdstudent’spackagecontainsFWSfundsinadditiontoaDirectLoan;becauseoftheFWSaward,hemayhavea$300toleranceappliedandtheloandoesnothavetobeadjustedevenifitwasnotyetdisbursed.TheFSAHandbookadvisesthat“Whenastudent’saidpackageincludesassistancefrommultipleprogramsandthoseprogramshavedifferentoverpaymentregulations/requirements,aschoolmustapplythemoststringent/restrictiverequirements.”TheRTFbelievesthatconsistencyintheoverawardprovisionswouldreducestudentconfusionandprovideafairerapproachamongstudentswithdifferentaidpackages.
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Update,July2016 GeneralProvisions
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3. AbilitytoBenefit
Recommendation
• Allowastudentwhodoesnothaveahighschooldiplomaoritsrecognizedequivalent,andwasnothome-schooled,tomeetthegeneralstudenteligibilityrequirementconcerningacademiccredentialsbycompleting,withtheequivalentofagradeofCorbetter,atleast6credithoursofcollegecoursework(ortheequivalent)thatisapplicabletowardadegreeorcertificate.
StatutoryCitation
GeneralStudentEligibilityHEA§484(d)[20U.S.C.1091(d)]
Background,Rationale,andImplementationConsiderations
TheConsolidatedAppropriationsActforfiscalyear2012barredstudentswithouteitherahighschooldiplomaoritsrecognizedequivalent(generallyaGeneralEducationDevelopment(GED)credential),unlesshomeschooled,fromreceivingfederalstudentaid,effectiveJuly1,2012.Previously,studentscouldalsoreceiveTitleIVfundsiftheydemonstratedtheabilitytobenefit(ATB)fromtheeducationoffered.Traditionally,theeligibilityofstudentswithoutahighschooldiplomaorGEDwasbasedontheresultsofED-approvedteststhatweredevelopedtomeasureATB.InAugust2008,basedonasuccessfulExperimentalSitesproject,Congressaddedtothelawaprovisionthatallowedstudentstodemonstratetheabilitytobenefitbysatisfactorycompletionofsixcredithoursortheequivalent,ifapplicabletowardadegreeorcertificateofferedbytheinstitution.Thatamendmentwaseffectiveuponenactment;governingregulationsbecameeffectiveJuly1,2011.Thus,thisprovisionwasinplaceforarelativelyshortspanoftimebeforeitwasknockedoutbyageneralrescissionoftheATBconcept.ForcingstudentstofirstgetaGEDandthenenrollinapostsecondarydegreeorcertificateprogramprolongstheirtimetodegreecompletionandinmanycasesimpactstheirabilitytoobtainwell-payingjobsandsupporttheirfamilies.TheRTFrecommendsthatthesix-creditprovisionbereinstated,withsomemodification.Astudentwhodoesnothaveahighschooldiplomaoritsrecognizedequivalent,andwasnothome-schooled,couldmeetthegeneralstudenteligibilityrequirementconcerningacademiccredentialsbysuccessfullycompleting,withtheequivalentofagradeofCorbetter,atleast6credithoursofcollegecourseworkthatisapplicabletowardadegreeorcertificate.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:
• ConsolidatedAppropriationsAct,2016[P.L.114-113]:amendsthedefinitionofcareerpathwaysprogramtoalignwithWorkforceInnovationandOpportunityAct(WIOA).Whilethischangeisastepforward,NASFAA’srecommendationdifferssubstantiallyfromthenewversionofabilitytobenefit.
Onebillhasbeenintroducedthatwouldimpactthisrecommendation:• RestoringInvestmentinATBStudentEducation(RISE)Act[H.R.4158]:wouldincludeacloser
versionofNASFAA’srecommendation.
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Update,July2016 GeneralProvisions
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4. SelectiveServiceRegistration
Recommendations
• Eliminatetheprovisionrequiringinstitutionstomonitorandenforceselectiveserviceregistration(assigntheresponsibilityfordeterminationtoSelectiveService).
• Considerapaththatallowsstudentswhofailedtoregister,butwhoarepasttheageofregistration,toregaineligibility(possiblythroughcommunityserviceorfederalawardsrestrictedtothecostoftuitionandfeesonly).
StatutoryCitation
GeneralStudentEligibilityHEA484(n)[20U.S.C.1091(n)]
MilitarySelectiveServiceAct50U.S.C.Appendix,462(f)
Background,Rationale,andImplementationConsiderations
TheRTFrecommendseliminationoftherequirementtoberegisteredwithSelectiveServicefromthegeneralstudenteligibilitycriteria.Thisrecommendationhasbeenmaderepeatedlyforalongtime.Attheveryleast,responsibilityfordeterminingwhetherafailuretoregisterwasknowingandwillfulshouldbeshiftedbacktoSelectiveServiceandsomepathbeconstructedthatallowsstudentswhoknowinglyfailedtoregister,butwhoarepasttheageofregistration,togaineligibility(possiblythroughcommunityserviceorfederalawardsrestrictedtothecostoftuitionandfeesonly).
July2016Update
CongressionalActioninthe114thCongress(2015-2016)SeveralbillshavebeenintroducedthatwouldimpacttheSelectiveService:
• ToRepealtheMilitarySelectiveServiceAct[H.R.4523]:wouldeliminateSelectiveServiceentirelyandwouldprohibitdenialofrights,privileges,benefits,oremploymentonthegroundsoffailuretoregisterfortheSelectiveServicepriortotherepeal
• DraftAmerica’sDaughtersActof2016[H.R.4478]:wouldrequirefemalesbetweentheagesof18and26toregisterfortheSelectiveService,effective90daysafterpassage
• NationalDefenseAuthorizationActforFiscalYear2017[S.2943]:wouldrequirefemalestoregisterwiththeSelectiveServicewhoturn18onorafterJanuary1,2018
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Update,July2016 GeneralProvisions
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5. Drug-relatedIneligibility
Recommendation
• Eliminatethetiebetweenstudenteligibilityanddrugconvictions.StatutoryCitation
GeneralStudentEligibilityHEA§484(r)[20U.S.C.1091(r)]
Background,Rationale,andImplementationConsiderations
Afederalorstatedrugconviction—ifreportedbythestudent—candisqualifyastudentforfederalstudentaidifitoccurredduringaperiodofenrollmentforwhichthestudentwasreceivingfederalstudentaid.Convictionsoccurringoutsideenrollmentperiodsasanaidrecipientdonotcount,unlessthestudentwasdeniedfederalbenefitsfordrugtraffickingbyafederalorstatejudge.Additionally,aconvictionthatwasreversed,setaside,orremovedfromthestudent’srecorddoesnotcount,nordoesonereceivedwhenthestudentwasajuvenilecount,unlessheorshewastriedasanadult.Manyifnotmostschoolscurrentlyhaveadmissionsandstudentconductruleswhichaddressdruguse.Institutionsgenerallyhaveinternalpoliciesandproceduresthatwouldresultinsuspensionorexpulsionofstudentswhoareconvictedofdrugabusewhileenrolled.TheRTFbelievesthatfinancialaidshouldnotbeusedtoenforcesocialpolicies.Individualscannotreceivefederalfinancialaidwhileincarceratedinfederalorstatefacilities.Oncereleasedandagainpossiblyeligibleforaid,theseindividualshavealreadysatisfiedpunishmentimposedforconviction;educationmaybetheirbestroutetorehabilitation.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Twodifferentbillshavebeenintroducedthatwouldmodifyorrepealthisprovision:
• FairAccesstoEducationAct[H.R.3561]:wouldexcludeamisdemeanorchargeforpossessionofmarijuanafromitscurrentclassificationasa“drug-relatedoffense”
• StoppingUnfairCollateralConsequencesfromEndingStudentSuccess(SUCCESS)Act[H.R.4004/S.2557]:wouldcompletelyrepealthedrug-relatedineligibilityprovision
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Update,July2016 GeneralProvisions
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6. Reinstatementofstudenteligibility
Recommendation
• StandardizetherulessurroundingtheregainingofstudenteligibilityacrosstheTitleIVprogramstotheextentpossible.
StatutoryCitation
GeneralStudentEligibilityHEA§484(j)[20U.S.C.1091(j)
Background,Rationale,andImplementationConsiderations
Undercurrentrules,astudentmaybepaidPellGrant,campus-basedaid,andTEACHGrantonlyforthepaymentperiodinwhichheorshegainseligibility,butmayreceiveDirectLoansfortheentireloanperiod.ForcertaincausesofineligibilitythestudentcanreceiveTitleIVaidfortheentireawardyearoncetheineligibilityisresolved.RequiringdifferentadministrativeapproachesdependinguponwhichTitleIVprogramisaffectedisneitheradministrativelyefficientnoreasilyunderstoodbytherecipientoftheTitleIVassistance.Formostcausesofineligibility,thisrecommendationwouldreinstateastudent’seligibilityretroactivelytothebeginningoftheawardyear(orloanperiod).Forsatisfactoryacademicprogress(SAP)issues,reinstatementwouldaffectonlythecurrentpaymentperiod,butthatpointintimewouldapplytoalloftheTIVprograms.
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Update,July2016 GeneralProvisions
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7. I-9EmploymentEligibilityVerification
Recommendation
• Includetheresultsofdatabasematchesasacceptableinlieuofdocumentsusedtoestablishemploymenteligibilityforemployment.
StatutoryCitation
HEA§484(g)(2)
Background,Rationale,andImplementationConsiderations
Currently,schoolsarerequiredtocollectcopiesofSocialSecurityCards,AlienRegistrationCards,citizenshipdocuments,orpassportseventhoughcitizenship,socialsecurityandINSmatchesareperformedinthefederalstudentaidapplicationprocess.Thisrecommendationwouldsimplifytheprocesswithoutcompromisingthelaw’sintentofverifyingidentityandeligibilityforemployment.
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Update,July2016 GeneralProvisions
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8. Non-automaticAllowableCharges(CashManagement)
Recommendation
• AllowschoolstouseTitleIVfundstopayallallowableeducation-relatedcostschargedtothestudent’sinstitutionalaccountwithoutanyadditionalauthorization,unlessthestudentactstoplacerestrictionsonautomaticpaymentforcertaincharges.
StatutoryCitation
Thisisessentiallyaregulatoryissue,basedonverygeneralauthoritytoregulateprovidedbyHEA§487(20U.S.C.1094).Background,Rationale,andImplementationConsiderations
Currently,theDepartmentofEducation(ED)requiresaschooltoobtainastudent’spermissiontocreditTitleIVfundstochargesbeyondtheautomaticallyallowablecostsoftuition,fees,institutionallycontractedroomandboard,and,forPellGrantrecipients,bookstorechargesrelatedtotherequirementtoprovideameansofobtainingbooksandsuppliesearlyinthepaymentperiod.SchoolscanuseTitleIVfundstopayothereducation-relatedcostschargedtothestudent’sinstitutionalaccountonlyifthestudentauthorizesit(i.e.,onlyifthestudentopts-intosuchuseofTitleIVfundsbytheschool).TheRTFrecommendationreversesthatprocess.Aschoolwouldhavetoinformstudentsofitspolicyandprovideanopt-outbywhichthestudentcouldrestrictautomaticapplicationofTitleIVfundstoonlytuition,fees,institutionallycontractedroomandboard,andearlybookstorecharges,unlessthestudenthasauthorizedpaymentofothercharges.Currently,theDepartmentofEducation(ED)requiresaschooltoobtainastudent’spermissiontocreditTitleIVfundstochargesbeyondtheautomaticallyallowablecostsoftuition,fees,institutionallycontractedroomandboard,andbookstorechargesrelatedtotherequirementtoprovideameansofobtainingbooksandsuppliesearlyinthepaymentperiod.SchoolscanuseTitleIVfundstopayothereducation-relatedchargesonlyifthestudentauthorizesit(i.e.,onlyifthestudentopts-intosuchuseofTitleIVfundsbytheschool).NASFAA’sReauthorizationTaskForce(RTF)recommendsreversingthatprocessbyallowingschoolstouseTitleIVfundstopayallallowableeducation-relatedcostschargedtothestudent’sinstitutionalaccount.Schoolswouldhavetoinformstudentsofthispolicyandprovideanopt-outbywhichthestudentcouldrestrictapplicationofTitleIVfundstoonlytuition,fees,andinstitutionallycontractedroomandboardunlessthestudenthasauthorizedpaymentofothercharges.Studentsandfamiliesdonotunderstandtheoptionscurrentlyavailableortherequirementthatschoolsdisbursefundstostudentsevenifthereareoutstandingchargesonthestudent’saccount.An“opt-out”processislesscumbersomeforthestudent.Sincethisrequirementisastudentaccountfunction,thisrequirementshouldnotbetiedtothefinancialaidawardingprocess.TheFAFSAand/orawardnoticewouldincludeastatementthatfundswillbecreditedtoincurredinstitutionalchargesunlessthestudentoptsoutofcertainones.
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Update,July2016 GeneralProvisions
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9. Pay-as-you-godisbursementforcompetency-basededucation
Recommendation
� Incompetency-basededucation,disbursefundstocoverdirectcostsasastudentdemonstratescompetencymastery.
Background,Rationale,andImplementationConsiderations
ThisrecommendationwasputforwardbytheInnovativeLearningModelsTaskForceinJune2015.Thetaskforcerecommendsa“payasyougo”disbursementprocesswithincompetency-basededucation,similartothecurrentCompetency-BasedEducationExperimentalSiteInitiative,whichdisbursesfundstocoverdirectcostsasastudentdemonstratescompetencymastery.Withthismodel,highereducationinstitutionsshouldworkwiththestudentto“earn”thefinancialaidfundingbyprovidingperiodicorincrementaldeliveryatspecificsuccesspointsasthestudentworkstowardtheireducationalgoal.
ADD
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Update,July2016 GeneralProvisions
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10. Hybrid/mixedmodalityfordirectassessments
Recommendation
� AllowdirectassessmentcomponentswithintraditionallearningprogramstoqualifyaseligibleforTitleIVfunds.
Background,Rationale,andImplementationConsiderations
ThisrecommendationwasputforwardbytheInnovativeLearningModelsTaskForceinJune2015.ThetaskforceisencouragedbythecurrentExperimentalSiteInitiativeallowingmixedmodalityprogramstoreceivefederalfinancialaidfunds,andrecommendsachangetobothHEAsection481(b)(4)and34CFR668.10(a)(1),whichcurrentlyrequireaprogramutilizingdirectassessmenttousedirectassessmentfortheentireprogram.Thischangewouldallowstudentstomovemorequicklythroughtheareasinwhichtheyareknowledgeableandreceiveamoretraditionaleducationalexperienceinthoseareaswhichmaybeneworchallenging.
ADD
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Update,July2016 NeedAnalysis
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NeedAnalysis
1. Prior-PriorYear(PPY)Data
Recommendation
• Implementtheuseofincomedatafromthesecondprioryear,commonlyreferredtoasprior-prioryear,asthebasisfortheEFCcalculations,acrosstheboard.
StatutoryCitation
NeedAnalysisDefinitions(totalincome)HEA§480(a)(1)(A)[20U.S.C.1087vv(a)(1)(A)]
Background,Rationale,andImplementationConsiderations
Prior-prioryear(PPY)dataprovidesmoreaccurateincomedataingreaterdetail,withahigherlikelihoodofavailabilityfromtheIRSdataretrievaltool.Earlieravailabilityofincomeforneedanalysisallowsearliernotificationto,andplanningby,studentsandtheirfamilies.Schoolswouldretainprofessionaljudgmentauthoritytotreatindividualcircumstances.TheuseofPPYdatacanenhanceverificationefforts.Itfacilitatesabetteralignmentoftheaidapplicationprocessandtheadmissionsapplicationprocessfornewstudents.Asaresult,itoffersmoretimeforstudentstoevaluatetheawardsfrominstitutionstomakeaninformeddecisionaboutnetcostsforattendanceattherespectiveinstitutions.NASFAAconductedastudytodeterminewhetherbasingneedanalysisonprior-prioryeardataratherthanimmediatelyprioryeardatawouldsignificantlyaffectthedistributionoffederalstudentaidfunds,particularlyPellGrantfunds.
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Update,July2016 NeedAnalysis
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July2016Update
ThisrecommendationwasreinforcedbyNASFAA’sFAFSAWorkingGroupandreceivedwidespreadsupportfromotherorganizations.Utilizingexistinglegislativeauthority,PresidentObamaannouncedviaexecutiveauthorityinSeptember2015thattheDepartmentofEducation(ED)wouldadoptPPYforallapplicantsbeginningwiththe2017-18awardyearFAFSA.AreportdetailingtheNASFAAstudyresults,ATaleofTwoIncomeYears:ComparingPrior-PriorYearandPrior-YearthroughPellGrantsAwards,waspublishedinOctober2013.Asecondreport,GreatExpectations:ImplicationsofImplementingPrior-priorYearIncomeDatafortheFAFSA,releasedbyNASFAAinMay2015,presentedfurtherimplicationsandanalysisfromaworkinggroupofrepresentativehighereducationprofessionals.InOctober2015NASFAAestablishedaPPYImplementationTaskForcetorunthroughMarch2017.Thetaskforcewill:
(1) ProactivelyidentifyimplementationissuesandworkthroughtheNASFAAstaffandcollaboratewiththeUSDepartmentofEducationonensuringasuccessfulrolloutofPPY;
(2) SolicitanddeliverfeedbackfromtheNASFAAmembershipandboardofdirectorsonPPYrollout;
(3) Identifybestpractices,Q&As,andtrainingsrelatedtoPPYfortheNASFAAmembership;(4) IdentifyandaddressanyissuesimpactingfinancialaidcomputersystemsduringaPPY
transition;(5) FacilitatecollaborationswithotherkeystakeholdersinvestedinPPY,includingtheadmission
andstategrantagencycommunities;and(6) Conductapost-mortemasPPYisrolledout,deliveringfinalrecommendationsonthe
evolutionofPPYgoingforward.CongressionalActioninthe114thCongress(2015-2016)Threedifferentbillshavebeenintroducedthatwouldcodifythischangeintolaw:
• SimplifyingtheApplicationforStudentAidAct[H.R.3177]:wouldmakePPYpermanent• SimplifyingFinancialAidforStudentsAct[S.1872/H.R.3446]:wouldmakePPYpermanent• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldmakePPYpermanentand
wouldalsomodifyasmallprovisionincurrentlawthatwillfacilitatetheearlierreleaseoffinalPellGrantnumbersfromtheDepartmentofEducation(ED),allowingcollegestoprovideaccuratescholarshipandgrantinformationmuchearlier.SupportedbyNASFAA,thisbillpassedoutoftheHouseCommitteeonEducationandtheWorkforceonJune23,2016.
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page13
2. AutoZero–DislocatedWorkerQualificationCriterion
Recommendation
• Eliminatethedislocatedworkercriterionasanautomaticqualifierfortheauto-zerocomputation.StatutoryCitation
HEA§479(c)[20U.S.C.1087ss(c)]
Background,Rationale,andImplementationConsiderations
Useofthedislocatedworkercriteriontoqualifyforazero“EFC”hasunintendedeffects,distortingandsignificantlyreducingEFCforfamilieswheretheincomeofthedislocatedworkerisnotrepresentativeofthefamily’sfinances.TheappropriatevehicleforconsiderationofreducedincomeandtheimpactofthereductionisthediscretionofthefinancialaidadministratorauthorizedinHEAsection479.Anautomaticzeroexpectationcanbeasevereunderstatementoffamilyabilitytopayforeducationalexpenses,ifsubstantialfamilyassetsthatwouldsignificantlyincreasetheEFCareignoredbecauseofthisprovision.Whileotherqualificationcriteriafortheauto-zerocomputationrequirerelativelysimplefamilycircumstancesreflectedintheuseofsimplerversionsoftheIRSForm1040,thereceiptoffederalmeanstestedbenefits,oranincomesufficientlylowastonotrequirefilinganincometaxreturn,thedislocatedworkercriterioncanpermitafamilywithextremelyhighlevelsofassetstoqualifyforazeroEFC.Thisoutcomedistortsthepurposeof“need”analysis,andgivesanunfairadvantagetosomefamiliesthatareactuallymoreabletocontributethanothers.
July2016Update
NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.Theresultantproposedmodeldoesnotconsiderdislocatedworkerstatus.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactdislocatedworkerqualificationcriterion:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page14
3. FAFSASimplification:AutoZero
Recommendations
• AddreceiptofSSI,TANForGeneralReliefbenefitsassolequalifiersforanAutoZeroEFCdetermination.
• Students/parentswhorespondthattheyreceiveorreceivedthesebenefitswouldnothavetocompleteanyquestionsontheFAFSAregardingincomeorassetinformation.
• Verificationofbenefitswouldbeconductedeitherthoughadatabasematch(SSI)orattheschool.StatutoryCitation
HEA§479[20U.S.C.1087ss]
Background,Rationale,andImplementationConsiderations
Recipientsofthesebenefitshavealreadycompletedaneedanalysisprocessforagovernmentalagencyandshouldnothavetoproveagainthattheyareneedy.Thisrecommendationwouldallowstudentswhohave,orwhosefamilieshave,alreadydemonstratedhighneedtoauto-qualifyformaximumfederalstudentaidandwouldreducetheFAFSAtopersonalidentityandnon-incomeeligibilityquestions.
July2016Update
NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.TheresultantproposedmodelwouldassignmaximumPellGranteligibilitytoanyapplicantwhoseparent(ifdependent)orhouseholdmember(ifindependent)receivesSupplementalNutritionAssistanceProgram(SNAP)and/orSupplementalSecurityIncome(SSI)benefits.Effectivewiththe2017-18FAFSA,theDepartmentofEducationaddedMedicaidtothelistofmeans-testedbenefitswhichhelpanapplicantqualifyforthesimplifiedneedstestorforanautomaticzeroEFC.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldusemeans-testedfederalbenefitstoautomaticallyqualifyastudentforPellGrant.Forallotherapplicants,itwouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page15
4. SimplifiedNeedsTest
Recommendation
• Eliminatethesimplifiedneedstest.StatutoryCitation
HEA§479(b)[20U.S.C.1087ss(b)]
Background,Rationale,andImplementationConsiderations
Determinationofeligibilityiscomplexenoughtoconfuseapplicantsandbedifficulttoexplain,especiallywithregardtotaxformsthatcouldhavebeenfiled.Insomecases,theexclusionofsubstantialassetscausesunnecessaryexpenditureswhichcouldbetargetedatneedierapplicants.Theexclusionofhomeequityandretirement/pensionplansfromthedefinitionofassetsandtheassetprotectionallowancealreadyprovidereliefwithintheformula. Retainingaproperlydesignedandupdatedauto-zeroEFCoptionshouldbesufficienttoidentifypopulationsforwhomassumptionsofmaximumneedareappropriate.Asanalternativeapproach,increaseddataavailabilityfromtheIRSdataretrievaltoolmayallowforanappropriateflowofquestionsduringtheapplicationprocesstodeterminewhetheracollectionofassetinformationisnecessarybasedontheanalysisofappropriateincomeitemsfromtaxfilings.
July2016Update
NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.Theresultantproposedmodelcreatesthreepathsforassessingfinancialneed,incorporatingtheconceptthatfamilieswithcertainfinancialcharacteristicsneednotbeaskedafullrangeofincomeandassetinformation.AgraphicrepresentationofthemodelisattachedtothisreportasAppendixB.Effectivewiththe2017-18FAFSA,theDepartmentofEducationaddedMedicaidtothelistofmeans-testedbenefitswhichhelpanapplicantqualifyforthesimplifiedneedstestorforanautomaticzeroEFC.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page16
5. CostofAttendance
Recommendations
• Clarifyinstitutions’authoritytoreducenon-tuitioncostofattendance(COA)componentsforfactorsidentifiedbytheinstitution,suchasless-than-full-timeenrollmentordistanceeducation.
• Deleteotherreferencestocostdeterminationsfortelecommunicationsanddistanceeducation.
� Includepriorlearningassessmentsinthecostofattendance.
StatutoryCitation
HEA§472[20U.S.C.1087ll]
Conformingamendmentstodelete472(10)and484(l)(2)[20U.S.C.1087ll(10)and20U.S.C.1091(l)(2)]
Background,Rationale,andImplementationConsiderations
CurrentstatutereferstoenrollmentstatusdistinctionsonlyinthetuitionandfeescategoryofCOAcomponents.Thelawexcludescertaincategoriesofcostcomponentsaltogetherforless-than-half-timeenrollment.TheDepartmentofEducation(ED)interpretstheseaspectsofthelawasanindicationthatCongressdidnotintendlivingexpensestobereducedbasedsolelyonpart-timeenrollmentstatusesofhalf-timeorgreater,eventhoughthelawgivesinstitutionstheauthoritytodetermineallowances[“anallowance(asdeterminedbytheinstitution)forroomandboardcostsincurredbythestudent..”].Consequently,studentsenrolledathalf-timeorabove,butlessthanfull-timemayreceiveuptomaximumannualloanamountswhilemakingslowprogresstowardscompletingtheirprogramsofstudy,accruinglargerdebtandpotentiallyexhaustingfederalloaneligibilitybeforecompletingtheirprogramandover-borrowingintermsoftheircapacitytorepaytheirloansfromfutureearnings.Aninstitutionshouldbeabletosetallowancesandpoliciesthatarerelevanttoitsstudentdemographicsandmission.Thus,ifaschool’spart-timepopulationconsistsoverwhelminglyofadultlearnerswhoareemployedfull-time,theschoolcanadjustitscostofattendanceallowancestorecognizethatthosestudentsdonotneedextraassistancetosubsist.ProfessionaljudgmentcouldstillbeusedtoincreasetheCOAforthosestudentslegitimatelyneedingthemaximumresourceswhileenrolledlessthanfull-time.
TitleIVaidshouldbeallowedtopayforcostsassociatedwithpriorlearningassessmentpreparation.TheInnovativeLearningModelsTaskForceputforwardthisrecommendation.
Manypriorlearningassessmentsrequirethestudenttospendaconsiderableamountoftimepreparingmaterialsfortheassessment,whichcancreateafinancialburdenwithoutfundingtocovertherelatedcosts.Thischangemightencouragemorestudentstoapplytheirpriorlearningtowardsthecompletionofaprogram.AnExperimentalSiteInitiativepermitsTitleIVaidtocoversomevarietiesofpriorlearningassessments.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)• Onebillwasintroduced,theFlexibilitytoInnovateforCollegeAffordabilityAct[H.R.3372],
thatallowspriorlearningassessmentstobeincludedinCOA.
ADD
ADD
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page17
6. IndependentStudentDefinitionRelatedtoHomelessness
Recommendation
• Eliminatehomelessnessfromautomaticindependentcriteriaandmovetooverrideauthorityasanexample.
StatutoryCitation
NeedAnalysisDefinitions(independentstudent)HEA§480(d)(1)(H)and(I)[20U.S.C.1087vv(d)(1)(H)and(I)]
Background,Rationale,andImplementationConsiderations
ThecomplexityofthedefinitionsanddeterminationsofhomelessnesshasresultedinmisunderstandingandinaccuraciesobservedbyaidadministratorsintheanswerstotheFAFSAdependencyquestion.
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page18
7. ReflectregionalcostoflivinginIncomeProtectionAllowance(IPA)
Recommendation
• DirectEDtostudy,andreportbacktoCongress,thepossibilityofadjustingtheIPAonaregionalbasiswithperiodicCOLAadjustmentsbasedonregionalvariationsintheCOLA.
StatutoryCitation
Thisrecommendationwouldlikelybeincorporatedintothereauthorizinglegislation.Background,Rationale,andImplementationConsiderations
Currentlythesameincomeprotectionallowance(basedonfamilysizeandnumberincollege)isusednationwide,thoughthereisgreatvariationincostoflivingacrosstheU.S.AGovernmentAccountabilityOfficereport,GAO-09-825,statesthat“whiledatasuggestthatthecostoflivingishigherinsomeareasthaninothers,thecurrentaidformulaaccountsforthesedifferencesinonlyalimitedway.Howthesedifferencesaffectafamily’sabilitytopayforcollegeisunclear,inpartbecausenoofficialmeasureofgeographiccost-of-livingdifferencesexists.WeidentifiedthreepossibleCOLAoptionsthatcouldbeusedinthefederalaidformula.TheseCOLAscouldincreasePellGrantsandotherfinancialaidforasmallpercentageofstudentsfromhigh-costareasbutcouldalsofurthercomplicatetheprocessforcalculatingandadministeringfederalstudentaid.”Thistextsuggeststhatfurtherstudyisneeded.
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page19
8. EFCFormula–ForeignIncomeExclusion
Recommendation
• ReporttheamountofforeignincomeexclusionasuntaxedincomeontheFAFSA.
• ExpandtheIRSdataretrievaltooltoincludethisdataelement.StatutoryCitation
NeedAnalysisDefinitions(untaxedincomeandbenefits)HEA§480(b)(2)[USC1087vv(b)(2)]
Background,Rationale,andImplementationConsiderations
Thefederaltaxcodeallowsqualifiedindividualstoexcludecertainformsofincomeearnedinanothercountry.Theneedanalysisformuladoesnotutilize“excluded”foreignincome.However,theprimarypurposeofneedanalysisistodetermineafamily’sfinancialstrengthandabilitytocontributetoeducationalexpenses.Inmanyinstances,incomeearnedinanothercountrymaybetheindividual’smajororonlysourceofincome.Excludingitpresentsaninaccuratepictureofthefamily’sfinancialstrengthrelativetootherFAFSAapplicants.
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page20
9. EFCFormula–BusinessLosses/CapitalLosses/OtherLossesResultinginNegativeAdjustedGrossIncome
Recommendations
• Addbackanybusiness,capital,andotherlossesthatdonotrepresentareallossofincomewhendeterminingtheparents’andstudent’sincomeforFederalMethodology(FM)needanalysispurposes.
• UtilizetheIRSdataretrievaltooltoidentifythatincome.StatutoryCitation
NeedAnalysisDefinitions(untaxedincomeandbenefits)HEA§480(b)[20U.S.C.1087vv(b)]
Background,Rationale,andImplementationConsiderations
TheFMneedanalysisformuladeterminesafamily’sfinancialstrengthandabilitytocontributetoeducationalexpenses,andfacilitatescomparisonofonefamily’sneedtoanother’s.“Paper”lossesallowedaspartoftheIRStaxcodeartificiallyreduceincomeand,asaresult,artificiallyreduceEFC.EDwouldneedtodetermine,inconsultationwithIRSandrepresentativeschoolsthathaveexperienceinthispractice,whichlossesshouldbeincludedinincomeandhowtocapturethatinformationthroughtheIRSdataretrievaltool.
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page21
10. FederalMethodology(FM)EFCFormula–BusinessandFarmAssets
Recommendations
• Eliminatethesmallbusinessexclusion(countbusinessassetsregardlessofthenumberofemployees).
• Eliminatetheexclusionoffarmvaluefromassets.StatutoryCitation
NeedAnalysisDefinitions(assets)HEA§480(f)(2)[1087vv(f)(2)]
Background,Rationale,andImplementationConsiderations
Thethresholdfordefininga“small”businessis100employees,whichseemsexcessive.FMalreadyadjustsbusinessequitydownwardonaslidingscaletoprotecttheincome-producingcapacityoftheasset.Itmaymakemoresensetoreassesstheadequacyoftheprotectionallowancethanexcludebusinessesaltogether.Thenatureoffamilyfarmshaschangedandismoreakintoabusiness.Ifassetsfrom“small”businessesarereinstatedintheneedanalysis,soshouldfarmassets.Farmassets(otherthaninvestmentfarms)areadjustedinthesamewayasbusinessvalue,usingthesameslidingscale(onetableisusedforbothintheEFCformula).Asforbusinesses,theadequacyofthefarmassetadjustmentmightneedtobereviewed.Thevalueofafamilyhomesituatedonafarmcouldandshouldbeexcluded.
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page22
11. IRS/FAFSADataExchangeRecommendation
• DirecttheSecretarytocontinuetoexpandandrefinetheIRS/FAFSAdataexchangeprocesstoincludeallcurrentFAFSAdataelementsthatcanbeobtainedfromthefederaltaxreturn,tosupportamorerobustFMneedanalysisformula(e.g.interest/dividendincome,IRSdistributions,socialsecurityincome,certainformsofuntaxedincome,etc.).
StatutoryCitation
NeedAnalysisDefinitions(totalincome)HEA§480(a)(1)(B)[1087vv(a)(1)(B)]
Background,Rationale,andImplementationConsiderations
NowthattheIRS/FAFSADataExchangeprocesshasbeenimplemented,thenumberoftaxreturndataelementscollectedcouldbeexpandedsignificantlyinanefforttoincreasetheaccuracyofcurrentlyrequiredFMdataelements.Thepossibleinclusionofnewtaxreturndataelementscouldalsobeconsidered. Theaccuracyofthefinancialinformationcollectedfromfamiliestodeterminetheirexpectedcontributiontowardeducationalexpensesandeligibilityforfederalformsoffinancialaidisparamounttoafairandequitableprocess.Theadditionofanexpandednumberofdataelementssupportsthisgoalandreducestheverificationburdenoncollegesanduniversities.Theadditionofanexpandedsetoftaxreturndataelementswouldsupportamorerobustneedanalysisformula.
July2016Update
NASFAA’sFAFSAWorkingGroupreinforcedthisrecommendation,andrecommendedexpansionoftheIRSDRTtoincludealllineitemsofthe1040andW2information.CongressionalActioninthe114thCongress(2015-2016)ThreebillshavebeenintroducedthatwouldencourageexpansionoftheIRSDataRetrievalTool(IRSDRT):
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldretrieveallincomeinformationforfinancialaidapplicantsfromtheIRS
• StudentFinancialAidSimplificationAct[H.R.3265]:wouldallowtheDepartmentofEducationtocollectmoreinformationfromtheIRS,reducingthenumberofquestionsoftheFAFSAby31
• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldencourageEDtocontinuetoenhancetheIRS/FAFSAdataexchangethroughautomaticallypopulatinginformationandskiplogic
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page23
12. Utilizethe1040astheFederalStudentFinancialAidApplicationRecommendations
• DirecttheDepartmenttoperformafeasibilitystudywiththeIRStodevelopaprocessinwhichthetaxreturnistheprimaryfederalfinancialaidapplicationvehicle.
• AmendbothHEAandtaxlawtoauthorizeuseofthetaxreturninthisway.StatutoryCitation
HEA§483(f)[20U.S.C.1090(f)]
Background,Rationale,andImplementationConsiderations
CurrentlymostofthefinancialdatausedtocompletetheFAFSAcomesfromthetaxreturn.TheIRSdataretrievaltoolprovidesdirectpopulationofthoseitems,andEDismovingsignificantlytowardsmandatoryusethroughtheverificationprocess.However,filingaFAFSAisstillaseparateprocessfromfilingthetaxreturnandrequiresthestudentandfamilytoinitiatethestudentaidprocessonanentirelydifferentwebsite.Theaidapplicationprocesscouldbemergedwiththetaxreturnprocessbyprovidingafinancialaidapplicationsectiononorwiththe1040asanoptionforapplyingforfederalstudentaid.ThiscouldeliminatetheFAFSAapplicationforstudentsandparentswhofiletaxreturns.ThisideabuildsonthesuccessoftheFAFSA/IRSdataretrievaltoolbymakingfilingtaxesandapplyingforfinancialaidoneprocess.Ifprior-prioryearneedanalysisisadopted,someofthetimingissueswouldbeeliminated.Inthatcase,thecheckoffwouldactuallybeforthepreviousyear’staxreturndata.Forexample,familiescouldindicateonthe1040thattheywanttoapplyforfederalaidbycheckingaboxorcompletingasupplemental1040form.TheFAFSAwouldstillbeneededasanoptionforfamiliesthatdonotfiletaxreturnsorwillnotfilebyinstitutionaldeadlinesandasaformthatcouldbeupdatedorcorrected.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldrequireEDtoexaminewhetherataxreturncanbeusedtogenerateanEFCwithoutadditionalactiononthepartofthestudent
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Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page24
13. SingleMethodologyandApplicationLimitsUseofFAFSADatabyStatesandInstitutionsDescriptionofIssue
Inresponsetowidespreadconcernabouttheactualandpossibleproliferationofneedanalysisapplicationformsandtheassociatedfamily/studentburdeninfilingmultipleforms,the1992HEAAmendmentsmandatedasinglemethodologyaswellasasingle,no-chargeapplicationform(FAFSA)fordeterminingTitleIVeligibility.CongressalsoprovidedtheSecretarywithauthoritytoincludealimitednumberofdataelementstotheFAFSAthatwerenotrequiredtodeterminefederaleligibility,butthatcouldbeincludedasanincentiveforstatesandinstitutionstousetheFAFSAandFederalMethodologyforawardingtheirownaid.Giventhataidapplicationwasapaper-basedprocess,suchconcernsaboutrespondentburdenwerenotunreasonable.However,todaythevastmajority—atleast98percentaccordingtorecentpublicstatementsbyFSA—ofTitleIVaidapplicantfiletheirFAFSAselectronically.Thus,concernsregardingtheneedforfamiliestocompletemultipleapplicationsinhardcopyformats—withmuchofthesamehouseholdandfinancialinformationcollectedmultipletimes—areoutdated.Infact,today’sFAFSAontheWeb(FOTW)encouragesapplicantstocompleteaseparateform—viatheDataRetrievalTool(DRT)—attheIRSwebsite.Arguably,then,FOTWisamulti-formfinancialaidapplicationprocess—whileintheFOTWsession,anapplicantcaninitiateasecondsessionattheIRSwebsite.Todayitismoreappropriatetothinkabouttheaidapplicationprocessasaseriesofconcurrentonlinesessionsinsteadofphysicallydistinctapplicationforms.Recommendation
AtthistimetheRTFisnotrecommendingastatutoryprovisiontodirecttheSecretarytousetechnologyinamoreusefulandefficientmanner.TheRTFdoesnotwanttheDepartmenttobeinthepositionofwaitingforstatutorychangetocatchupwithtechnologicalinnovation.Rather,CongressshouldencouragetheSecretarytoengagestakeholdersaswellastechnologyexpertsindiscussionstoexplorewaystheIRS-DRTmodelcouldbeextendedtootherfederalagencies,statesandinstitutions.However,astatutorychangemightbeneededtoallowthesharingofdatacollectedontheFAFSAwiththirdparties.Nevertheless,itiscriticaltoestablishwithintheHEAanappropriateframeworkforanaidapplicationprocessthatischaracterizedbyon-lineactivitybetweentheapplicantandavarietyofaidproviders—chieflythefederalgovernment,statesandinstitutions.Section483oftheHEAprescribestheformsthataretobeusedbystudentsandtheirfamiliestoapplyforfederalfinancialaid.Thebreadthofthestatutoryprescriptionextendstospecifyingbothpaper-basedandelectronicFAFSAforms.Theproposedrevisiontotheapplicationprocessenvisionsaschemewhereinthecompletionandsubmissionofanaidapplication“form”isaccomplishedinanonline“session.”Inparticular,CongressshouldusethestatutetoensurethattheSecretaryisabletoutilizeexisting,emerging,andas-yet-undevelopedtechnologiestosimplifyandstreamlinetheprocessforapplyingforfinancialaidirrespectiveofthesourceofthataid.OutmodedreferencestopaperFAFSAsmustbeeliminated.Itisalsoimperativeforthird-partyfinancialaidproviders(andtheiragents)tohaveaccesstofederalapplicantinformation.Anexistingstatutoryprovision—HEA483(a)(10)—permitsthesharingoffederally-collectedfinancialaidapplicationdatawithstatesandinstitutions.
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Update,July2016 NeedAnalysis
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Specificand/oroptimaloperationalfeaturesarenotdiscussedhere.However,theDepartment’ssuccessfulimplementationoftheIRSDRTfunctionintheFOTWapplicationprovidesahelpfulwaytothinkaboutthebroadgoalsCongressshouldarticulateforanaidapplicationprocessthatcanshedthelimitsofapaper-boundprocessandtakefulladvantageoftechnologicalinnovations.Suchgoalscouldinclude:• Supportingtheconceptofa“one-stop”financialaidapplicationprocess;
• Identifyingwherevariousdataneededforfederalandnonfederalaideligibilitydeterminationscurrentlyreside;
• Encouragingallfinancialaidproviderstoembraceastudent-centricapproachasareplacementforthecurrentprogram-centricmodel;
• Ensuringthatthird-partyaidprovidersagreewithandadheretoacommonunderstandingofbroadfinancialaidpolicyobjectivesandmethodology;and
• Authorizingnear-term/startupexpenditurestohelpengagethird-partyaidproviders.Congressshouldnotbeoverlyprescriptivewithregardtothefinancialaidapplicationprocess.Congressshould,however,providetheSecretarywithflexibilitytoexecuteCongress’policyobjectivesinamannerthatoptimizestheefficientandeffectiveuseoftechnology.RationaleforRecommendation
TheIRS-DRTillustrateshowtechnologycanbeleveragedtohelpsimplifythefinancialaidapplicationprocessforstudentsandtheirparents.Italsocanhelppolicymakersthinkaboutwaystoimprovefinancialaidprogramdesignanddelivery.AlthoughtheIRS-DRTisessentiallyasolutiondevelopedandagreedtobytwofederalagencies,standardscurrentlyexisttofacilitatesharingofinformationinanon-proprietaryfashion.Anapplicationprogramminginterface(API)isareadilyavailableandcommonwayinwhichvarioussoftwarecomponents(e.g.FOTWandtheIRS-DTR,orwww.twitter.comandthevariousTwitterappsfortabletsandsmartphones)communicatewitheachother.Itseemsasimilarsolutioncouldbefoundtofacilitatecommunicationbetweenthefederalgovernmentandvariousthirdpartiesintheaidapplicationcontext.
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14. TreatmentofUnmarriedPartnersorSameSexCouples
Recommendations
• Fortheparentsofdependentstudents,allowunmarriedpartnerswholivetogether,regardlessofsex,tobecountedasaparentontheFAFSA(“Parent1”and“Parent2”),toaccordthosepartnersthesametreatmentasmarriedcouplesandcalculateneedoncombinedincomesandtotalhousehold.TheFAFSAquestionon“married”wouldhavetobealteredtoaccommodatethesesituations.
• Forstudents,treatcouples,regardlessofgender,inanyformofstate-recognizedrelationships(same-sexmarriage,civilunion,domesticpartnership,orotheridentifiedarrangement)asmarriedandcalculateneedoncombinedincomesandtotalhouseholdsize.
• AdjusttheFAFSAprocesssothattheIRSdataretrievalcanaccommodatesuchcouplesfilingseparately.
• ClarifyinthedependencyoverrideandprofessionaljudgmentsectionsoflawthatFAAsmayadjustanyapplicationinformationincludingmaritalstatustoreflectdomesticarrangementsthat,forallintentsandpurposes,mirrormarriage,eveniftheapplicant’sstatedoesnotrecognizeit.
StatutoryCitation
NeedAnalysisDefinitions(familysize)HEA§480(l)[20U.S.C.1087vv(l)]
Background,Rationale,andImplementationConsiderations
OnApril29,2013,theDepartmentofEducation(ED)announcedachangeinthewayitviewsunmarriedparentsofdependentstudentsforthepurposeofcompletingtheFAFSA.Beginningwiththe2014-15awardyear,incomeandotherinformationfrombothofastudent’slegalparentswillhavetobeprovidedontheFAFSAifthoseparentslivetogether,regardlessofmaritalstatusorgender.Legalparentsaredefinedasbiologicaloradoptiveparents.Thisapproachreflectsapolicychangethatconsiderstheparent’srelationshiptothestudent,ratherthantheparents’relationshiptoeachother.EDconstructedthisapproachundertheconstraintsoftheDefenseofMarriageAct(DOMA).Sincethen,inJune,theU.S.SupremeCourtruledthatDOMAisunconstitutional.Meanwhile,theReauthorizationTaskForce(RTF)proposedarecommendationthattakestheissuefurther.TheRTFbelievesthatanamendmenttoTitleIVoftheHEAshouldstatethat,notwithstandinganyotherfederallaw,boththeparentofadependentstudentandthatparent’spartner,regardlessofgender,shouldbetreatedthesameasopposite-sexmarriedcouples.Sincethestepparentinanopposite-sexmarriagedoesnothavetoadopttheapplicant,neithershouldthestepparentinasame-sexcouple.Studentsinastate-sanctioned,same-sexmarriageorotherstate-recognizeddomesticarrangementshouldalsobetreatedthesameasanopposite-sexmarriedcouple.TheRTFseekstorecognizetherealityofcurrentlivingsituationsandtoassessfamilyfinancialstrengthmoreaccurately.Forparentsofdependentstudents,allunmarriedpartners,regardlessofgenderorstatelaws,wouldbetreatedthesameasmarriedcouples.Unmarriedstudentswithpartnerswouldhavetobetreatedthesameasmarriedcouplesiftheyhavegonethroughsomeformalcommitmentprocesssanctionedbyastate;thisincludesconsideringotherwisedependentstudentsasindependentbyvirtueofmarriage.Ifastudenthasnotgonethroughastate-sanctionedprocess,aidadministratorscouldconsiderprofessionaljudgmentactionstooverridedependencyand/ormakeotheradjustments.
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AccordingtotheWilliamsInstitute(UCLASchoolofLaw),basedontheU.S.Census,therearenearly650,000same-sexcouplesintheUnitedStates,ofwhichapproximately114,100arelegallymarriedandover108,600areincivilunionsorregistereddomesticpartnerships.Asof2011,aboutoneinfivesame-sexcouplesareraisingchildrenunderage18.AccordingtotheNationalCouncilofStateLegislatures,twelvestates(Connecticut,Delaware,Iowa,Maine,Maryland,Massachusetts,Minnesota,NewHampshire,NewYork,RhodeIsland,Vermont,Washington)plustheDistrictofColumbiaallowsame-sexmarriagesasofMay2013.Anadditionalfourstatesallowcivilunionsthataffordallstate-levelspousalrightstosame-sexcouples.Severalotherstatesgrantvaryingdegreesofstate-levelspousalrightstounmarriedcouplesindomesticpartnerships.PollsconductedbythePewResearchCentershowthatpublicsupportforsingle-sexmarriagehasincreasedfrom35%in2001(with57%opposed)to49%inMarch2013(44%opposed).
July2016Update
AsaresultoftheSupremeCourt’s2013UnitedStatesv.WindsordecisioninvalidatingpartoftheDefenseofMarriageAct(DOMA),anylegalmarriagethatisrecognizedbythejurisdictioninwhichthemarriagewascelebratedisrecognizedforTitleIVHEAprogrampurposesregardlessofsexofpartners.ResultingEDguidanceappliesonlytosame-sexmarriageandexcludesotherrelationshipsrecognizedunderstatelawsuchasregistereddomesticpartnerships,civilunions.NASFAArecommendsthatPJshouldincludeadjustinganyapplicationelement,includingmaritalstatus,fordomesticarrangementsthatmirrormarriage,evenifapplicant’sstatedoesnotrecognizeit.
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15. HouseholdSize—DefinitionofDependents
Recommendations
• Removetheautomaticinclusioninhouseholdsizeofchildrenorothersbasedonproviding50%ofsupport.
• Allowinclusioninhouseholdsizeofchildrenwhomeetthedefinitionofdependentstudent(i.e.,arenotorwouldnotbeconsideredindependentforTitleIVpurposes).
• BaseinclusionofotherindividualsinthehouseholdsizeonIRSrulesforclaimingdependentsonthetaxreturn.
• UsetheIRSdataretrievalprocesstoverifyhouseholdsizewheneverpossible.
• Makethesamechangestothedefinitionofdependentforindependentstudents.
• Addtothestatutoryexamplesofallowableprofessionaljudgmenttheabilitytoadjusthouseholdsizetoincludeindividualswhowerenot,orcouldnotbe,claimedonthetaxreturniftheaidadministratordeterminesthatitwouldbeappropriatetodoso.
Thus,includeinhouseholdsizeforadependentstudentthefollowing:
1. Student;
2. Parent(s),inaccordancewithRecommendation10;
3. Childrenwhocananswer“no”toallofthedependencyquestions(i.e.,childrenundertheageof24whodonototherwisemeettheTitleIVdefinitionofindependent),iftheyliveinthehousehold;
4. Otherindividualswhowereclaimedbytheparent(s)onthebaseyearincometaxreturn(exclusiveofchildrenwhowouldbedependentunderTitleIVbutwhodonotliveinthehousehold);
5. Otherindividualsforwhomtheaidadministratormakesadocumenteddecisionthat,duetounusualcircumstances,inclusioninhouseholdsizeisappropriate.
Background,Rationale,andImplementationConsiderations
TheFederalMethodology(FM)setinlawallowschildrentobecountedinhouseholdsizeaslongastheylivewiththeapplicant’sparentsandtheparentsprovidemorethan50%support.Therearenootherrestrictions,althoughhouseholdsizeisabigfactorindeterminingEFC.Thus,childrenwhoareindependentstudentscanbecountedintheparent’shouseholdsizeforadependentsibling,andoldernon-studentchildrenlivingathome,regardlessofemploymentstatus,canbecountediftheparentsclaimtheyprovidemorethanhalfsupport.Thesupporttestalsoappliestootherindividualslivinginthehousehold.Thereisnoruleofthumbregardingdeterminationofhalfsupportforchildrenorotherindividuals,andthisdeterminationcanvarygreatlyacrossdifferenteconomicstrata.Verificationofhouseholdsizecanonlybeaccomplishedbycollectingasignedstatementfromeithertheparentsinthecaseofadependentstudentorfromtheindependentstudent,generallyrelyingonthoseindividualstodeterminewhat“halfsupport”means.
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TheFAFSAinstructionscurrentlydirectdependentapplicantstoincludeinhouseholdsize:• Theapplicanthim-orherself,eveniftheapplicantdoesnotlivewiththeparents;• Theapplicant’sparents;• Theparents’otherchildrenif(a)theparentswillprovidemorethanhalfoftheirsupportbetween
duringtheawardyear,or(b)thechildrencouldanswer“no”toeveryoneofthedependencyquestionsontheFAFSA;
• Otherpeopleiftheylivewiththeparentsatthetimeofapplication,theparentsprovidemorethanhalfoftheirsupportandtheparentswillcontinuetoprovidemorethanhalfoftheirsupportduringtheawardyear.
TheRTFbelievesthatthedeterminationof“dependent”shouldbemorestandardizedandverifiable.TheRTFalsobelievesthatchildrenwhoarereceivingfinancialaidasindependentstudentsshouldnotbecountedinthehouseholdsizeusedtodetermineaidforotherchildrenwhoaredependent.Withregardtosiblingswhoarenotstudents,especiallyadultchildren,thereshouldbeadefinedcut-offpointfortheexpectationthatthosesiblingscanstillincreasethesizeoftheparents’householdwithregardtoaiddeterminationsfordependentapplicants.Whilethewillingnessofsomeparentstokeepcaringforolderchildrenislaudable,thatisaprivatedecisionthatshouldnotresultinincreasedpublicsupportofyoungerchildrenwhoseturnitistoattendcollege.TheRTFrecommendationtouseIRSdefinitionsofwhocanbeclaimedonataxreturnismeanttotightentherulesandprovidemoreconsistencysurroundingthedefinitionofdependentsforhouseholdsizepurposes.TheIRStesttoclaimanindividualasanexemptionprovidesamoredefinedapproachtoassessingwhatconstituteshalfsupport.TherecommendationwillalsoopenanotheravenueforverificationthroughtheIRSdataretrievaltool.Adependentapplicant’ssiblingwhoisreceivingaidasanindependentstudentisbenefitingfrompublicallyfundedbenefits.Theindependentstudent’scostofattendanceusedtocalculateaidincludesroomandboardandotherallowablelivingexpensesfortheperiodofenrollment,typically9months.Regardlessoftheformofthefederalaid(grant,loan,orwork),publicfundsareinvolved.AllowingthatsamestudenttoreducetheEFCforayoungerdependentsiblingineffectallowsthefamilyto“doubledip”intopublicsupport.UnderIRSrules,achildaged24orover(whetherornotastudentandwhetherornotlivingwiththeparents)couldbeclaimedasanexemptiononthetaxreturnandthereforestillbeincludedinhouseholdsizeifthatchildhasgrossincomeunder$3,800andtheparentsprovidemorethanhalfofhisorhersupport.(Grossincomeincludescertainscholarshipandfellowshipgrants.Scholarshipsandfellowshipsreceivedbydegreecandidatesandusedfortuition,fees,supplies,books,andequipmentrequiredforparticularcoursesgenerallyarenotincludedingrossincome.)Asiscurrentlythecase,anaidadministratorcanadjusthouseholdsizeunderprofessionaljudgment,byeitherincludingadditionalindividualsorexcludingindividuals.TheRTFrecognizesthattherearesituationswherehouseholdsizeshouldbeincreased.Forexample,agrandparentmaybesupportedbytheapplicant’sparents(whetherlivingintheparents’homeorinsomeotherfacility)butduetothegrossincometest,theparentmaynotbeabletoclaimthegrandparentasadependentonthetaxreturn.AnoldersiblingwhodoesnotmeettheIRStestscouldneverthelessbeincludedinthehouseholdifdeemedappropriatebytheFAA,butthereasonsforthatsibling’scontinueddependenceontheparentswouldhavetobedocumentedandwouldhavetobedifferentiatedbyspecialcircumstancesfromotherfamilieswitholderchildrenstillinthehome(thesearecurrentlythegeneralprinciplesofprofessionaljudgment).
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TheRTFalsoseekstoensurethat,fordivorcedparents,adependentsiblingwholivesinthehouseholdoftheapplicant’scustodialparentcouldnotalsobecountedintheotherparent’shouseholdunderthe“otherindividual”category,hencetheparenthetical”exclusiveof”caveatinitem4undertherecommendations.IRSPublication17givesdetailedinformationonwhocanbeclaimed.AcondenseddescriptionoftherulesandtheapplicablepagesfromPublication17areattachedtothisreportasAppendixA.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,whichwouldincludeincomeandfamilysizetoberetrievedfromtheIRS
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16. RenametheresultsofFMwithatermthatreflectsitsindexnatureratherthan“EFC”
Recommendation
� TheresultoftheFederalMethodologyshouldbeanindexthatranksapplicantsaccordingtotheirfinancialstrength,ratherthananexpectedfinancialcontribution.
StatutoryCitation
HEA§473andthroughoutPartF;§483[20U.S.C.1087andthroughoutPartE;20U.S.C.1090]
Background,Rationale,andImplementationConsiderations
ThisrecommendationwasputforwardbytheFAFSAWorkingGroupinJuly2015.Theworkinggroupfeelsstronglythat,becausetheFederalMethodology(FM)hasbeenmodifiedovertheyearstoaccommodatepoliticalwhimsandcostconcerns,theterm“ExpectedFamilyContribution”isnowamisnomerthatmisleadsandconfusesstudentsandfamilies.Ratherthanrepresentingafinancialcontributionbytheapplicant,theresultoftheFMfunctionsmoreasanindexthatranksapplicantsaccordingtotheirfinancialstrength.Thenameoftheindexshouldbechangedtoreflectthatreality.
ADD
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FederalDirectLoanProgram
1. InterestRates
Recommendations
• Establishvariable-fixedinterestratesthatarereflectiveofmarketrates,butallowrefinancing.
• ForParentPLUSloans,linkinteresttoaTreasurybillinstrument,withanaddedpercentagethatreflectsthecosttothegovernmentofborrowingmoneyandservicingtheloans.
• ForGradStudentPLUSloans,discounttherateslightlybyasmalleraddedpercentagethanisappliedtoParentPLUS,andestablishaninterestratecap.
• ForStaffordloans,discounttheratemorebyasmalleraddedpercentagethanisappliedtoGradPLUS,andestablishalowerinterestratecap.Subsidizedloansshouldcarryalowerinterestratethanunsubsidizedloans.
StatutoryCitation
TermsandConditionsofLoans(interestrate)HEA§455(b)[20U.S.C.1087e(b)]
Background,Rationale,andImplementationConsiderations
TheRTFbelievesthatalong-termfixtoDirectLoaninterestratesisneeded;thisrecommendationexpandsononemadebyNASFAA’sStudentLoanIndebtednessTaskForce(ITF).Aninstrumentshouldbeestablishedthatwillmeasureafairmarketvalueofinterestratesforstudentloansandthecosttoadministertheprogram,whichcanhaveasharedriskforboththetaxpayerandthestudent.ThisratewouldbeestablishedonJuly1andcarryforthforthetermsoftheloan(“variable-fixed”).TheratedeterminedonanyJuly1wouldapplytoallloansmadewithintheensuingyearuntilthenextJuly1determination.Whenaborrowerhasmultipleloanswithdifferentrates,themonthlyrepaymentamountcouldbedeterminedasaweightedrepaymentoftheseparateloans.ForParentPLUSloans,theRTFrecommendslinkingtheinterestratetomarketrates,suchasaTreasurybill(T-bill)rateplusanadditionalpercentagethatreflectsthecosttothegovernmentofborrowingmoneyandservicingtheloans.ForGradPLUSloans,discounttheinterestrateslightly(i.e.,addasmallerpercentagetotheT-billrate)andestablishacapoverwhichtheinterestratemaynotgo.Thepremisehereisthatalthoughprofitshouldnotbeanobjectiveofthestudentloanprogram,graduatestudentshavealargerpersonalgainatstakefromtheiradvancededucationandsoshouldbearslightlymoreoftheprogramcost.ForStaffordloans,discounttheinterestratefurtherandestablishalowercapoverwhichtheinterestratemaynotgo,onthepremisethatthefederalgovernmentshouldhelpfinanceundergraduateeducation,whichresultsinamoresignificantsocietalgain,bymakingloansaffordable.Ifsubsidizedloanscontinuetobeauthorized,subsidizedloansshouldbemadeatalowerinterestratethanunsubsidizedloansasthereisademonstratedneedcomponent.Finally,ifmarketinterestratesdecreasebysomespecifiedamountfromtherateatwhichaborrower’sloansweremade,theprogramshouldallowrefinancing,subjecttoarefinancefee.Refinancingwouldbeseparatefromconsolidationprovisions.
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July2016Update
InAugust2013,theBipartisanStudentLoanCertaintyActof2013[P.L.113-28]wassignedintolaw.ThelegislationtiesannualinterestratesonDirectLoanstotherateonhigh-yield10-yearTreasurynotesplusanadd-onpercentagewithinaspecifiedcap.
LoanType Add-OnPercentage InterestRateCap
DirectStaffordLoans 2.05% 8.25%DirectUnsubsidizedLoans
(Undergraduates) 2.05% 8.25%
DirectUnsubsidizedLoans(GraduateandProfessional
Students)3.6% 9.5%
DirectPLUSLoans 4.6% 10.5%CongressionalActioninthe114thCongress(2015-2016)Severalbillshavebeenintroducedthatwouldaffectloaninterestrates,includingtheissueofrefinancing:
• StudentLoanRefinancingAct[H.R.649]:wouldallowstudentstorefinanceDirectLoansattheinterestrateatthetimeofthemodification
• FairnessinStudentLoanLendingAct[H.R.1141/S.729]:wouldallowstudentloanborrowersingoodstandingtorefinancetheirloanstoarateequaltothe10-yearTreasurynoteonthelastdayofbusinessofthepreviousmonthplusonepercent
• BankonStudentsEmergencyLoanRefinancingAct[S.793/H.R.1434]:wouldalloweligiblestudentloanborrowerstorefinancetheirfederalloanstolowerinterestrates
• CollegeforAllAct[S.1373/H.R.4385]:wouldcutinterestratesandimposeacapof8.25%andallowborrowerstorefinanceloansatthecurrentinterestrates
• StudentBorrowerFairnessAct[H.R.3675]:wouldallowborrowerstorefinancetheirstudentloansattheinterestratesofferedtobanksbytheFederalReserve
• FederalStudentLoanRefinancingAct[H.R.3751]:wouldautomaticallyrefinanceinterestratesonallfederalstudentloanstofourpercent
• ParentPLUSLoanImprovementAct[H.R.4661]:wouldlowerinterestratesonPLUSloansmadeonbehalfofadependentstudent
• IntheRedAct[S.2677]:wouldalloweligiblestudentloanborrowerstorefinancetheirfederalloanstolowerinterestrates
• StudentLoanRefinancingandRecalculationAct[H.R.5274]:wouldallowforrefinancingofbothDirectLoansandFFELPLoansandwouldlowerthepercentageadd-ontothe10-yearTreasurybillinthecalculationofinterestratestoonepercentforundergraduate,graduate,andparentborrowers
• StudentLoanFairnessAct[H.R.5487]:wouldcapnewDirectLoaninterestratesat3.4percent
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2. LoanFees
Recommendation
• Eliminatetheloanfeecurrentlychargedtostudents.StatutoryCitation
TermsandConditionsofLoans(loanfee)HEA§455(c)[20U.S.C.1087e(c)]
Background,Rationale,andImplementationConsiderations
LoanfeeswereintroducedtohelpoffsetloansubsidiesintheFFELProgram.Theoriginationfeewasintendedtobetemporarywhenitwasimposedonstudentborrowersintheearly1980sasabudgetmeasure,butisessentiallyataxonstudentscollectedbywithholdingaportionofthestudent’sproceeds,butrequiringrepaymentofthefullloanamountbeforedeductionoffees.Loanfeestherebymasktheborrower’strueloancostandeffectiveinterestrate:Aftertakingintoaccountloanfees,theannualpercentagerateonfederalloansishigherthantheadvertisedinterestrate.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Threebillshavebeenintroducedthatwouldeliminateloanoriginationfees:
• EliminatingtheHiddenStudentLoanTaxAct[H.R.1285]:wouldeliminateoriginationfeesonallDirectLoans
• ParentPLUSLoanImprovementAct[H.R.4661]:wouldeliminateoriginationfeesonPLUSloansmadeonbehalfofadependentstudent
• StudentLoanRefinancingandRecalculationAct[H.R.5274]:wouldeliminateoriginationfeesonallDirectLoans
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3. SchoolAuthoritytoReduceLoanAmounts
Recommendations
• Allowschoolstosetlowerloanlimitsforspecificpopulations,academicprograms,credentiallevels,orothercategoriesestablishedbytheschool.
• Allowaidadministratorstoincreaseaparticularstudent’sloanfromtheschool’simposedlimit,uptotheregularapplicablestatutorylimit,onacase-by-casebasisunderprofessionaljudgment.
• Retaintheauthorityforschoolstodenyloansonacase-by-casebasis.StatutoryCitation
LoanLimitsHEA§428(b)(1)[20U.S.C.1078(b)(1)]
ProfessionalJudgmentHEA§479A(c)[20U.S.C.1087tt(c)]
Background,Rationale,andImplementationConsiderations
Thisrecommendationessentiallyreversescurrentpolicy,whichallowsreductionofloansonlyonacase-by-casebasis,withindividualdocumentation.Withtheauthoritytosetlimitsbyprogram,dependencystatus,livingarrangement,enrollmentstatus,orotherparameters,schoolscouldnotifystudentsearlierofthereducedloanamountandoftheschool’sprocessforexceptions,ifany,tothepolicy.ManyNASFAAmembershaverequestedthisauthorityforsometimeasatooltoavoidincurringunnecessarydebt,reachingaggregateloanlimitsbeforetheprogramofstudyiscompleted,andlosingtheinterestsubsidybeforecompletingtheprogramofstudy.TheITFmadeasimilarrecommendation.IfCongressdoesnotadoptthisrecommendation,theRTFbelievesothermeasureswouldbeneededtocontrolborrowing,suchasmandatedreductionofannualloanlimitsbasedonenrollmentstatus.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldallowaninstitutiontosetalowerloanlimitforstudentsinprogramsofstudyidentifiedbytheschoolifcertainconditionsaremet,withaprovisionforincreasingthatlimitforindividualstudentsintheprogramunderspecialcircumstances
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4. ProrationofAnnualLoanLimitsforRemainingPortionsofPrograms
Recommendation
• EliminateDirectloanprorationforfinalperiodsofprogramsthatareatleastayearinlength.StatutoryCitation
LoanLimitsHEA§428(b)(1)[20U.S.C.1078(b)(1)]
Background,Rationale,andImplementationConsiderations
AnnualStaffordloanlimitsforundergraduatesmustbeproratedifthestudentisenrolledinaprogramthatisshorterthanoneacademicyear,orifthestudentisenrolledinaprogramthatisanacademicyearorlongerbutthestudentisborrowingforafinalperiodofenrollmentthatislessthanafullacademicyearinlength.Bycontrast,astudentenrolledforafullyearbutlessthanfull-time,orforasingletermthatisnotthefinaltermintheacademicprogram,iseligibletoborrowthefullannualamount.Prorationforstudentsinafinalperiodofenrollmentisinconsistentwithotherloanlimitpolicy.Prorationpenalizesstudentswhoareabouttocompletetheirprogramofstudyandmaydrivestudentstoborrowfromaprivatelender.Prorationofloanlimitswouldberetained,however,forprogramsthatarelessthananacademicyearinlength.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldrequireprorationbasedonactualenrollmentstatus
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5. SeparatetheGradPLUSandParentPLUSProgramsfromEachOther
Recommendations
• EstablishaseparateloanprogramforgraduateborrowersthatmirrorsthecurrentGradPLUSprogrambutidentifiesthisprogramspecificallyasaloanforgraduate/professionalstudents.
• Retainadversecreditrulesforstudentborrowersbutconductthecreditcheckonlyforfirst-timeborrowersattheschool.
• DirectEDtophaseinrevisedunderwritingstandardsforparentborrowerstoreflectamorerealisticassessmentofabilitytorepay.
• DirectEDtopublishannually,andsolicitpubliccommenton,theunderwritingstandardstobeappliedtoparentborrowers.
StatutoryCitation
AuthorityforPLUSProgramHEA§428B[20U.S.C.1078-2]
LoanTypesIncludedUnderPLUSProgramUmbrellaHEA§455(a)(2)[20U.S.C.1087e(a)(2)]
Background,Rationale,andImplementationConsiderations
Currently,thereisonePLUSLoanprogramavailabletobothparents(ParentPLUS)andgraduatestudents(GradPLUS).Althoughthetypicalborrowingprofilesofparentsandgraduate/professionalstudentsareverydifferent,thesamecreditstandardsapplytobothparentandgraduate/professionalborrowers(i.e.,PLUSborrowersmusthavenoadversecredithistoryinordertoborrow).Theterm“noadversecredithistory”isnotastrictmeasureofunderwriting,yetborrowersunderbothParentPLUSandGradPLUScanborrowuptothecostofattendance,whichcanbetensofthousandsofdollars.SeparatingtheGradPLUSandParentPLUSprogramsallowsforvariations,suchascreditstandards,loanlimits,andinterestrates(asproposedinRecommendation#1above)thataretailoredtothedifferencesbetweenthesetwodistincttypesofborrowers.Indeterminingcreditworthiness,parenteligibilitycreditcriteriashouldincludesomemeasureoflikelyabilitytomanagetheirdebtandrepaytheloan,suchasadebt-to-incomemeasure,useofFICOscores,oranothertestofadequateresources.Currently,financialaidadministratorsareallowedtoevaluateaborrower’sabilitytorepayaPLUSloanthroughdebt-to-incomemeasures.However,financialaidadministratorshavelittleloanunderwritingexpertiseandarereluctanttousethisauthority.Further,amorecomprehensivemeansofassessingtheabilitytomanagedebtandthewillingnessandtrackrecordtorepaydebtisneeded.Anychangesmadetoparenteligibilitycriteriashouldbeappliedtonewborrowersonly,toprotectcurrentborrowersalreadyintheDirectLoansystem.Asmorecreditrestrictionsareimposed,moregrantsupportneedstobecreatedforschoolsservingunderrepresentedanddisadvantagedpopulationsandtheirstudents.
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6. AnnualandAggregateLoanLimits
Recommendations
• Establishoneannualsubsidizedlimitbyeliminatingdifferencesbasedonyearinschool.
• Increaseannualandaggregateloanlimitstoamorerealisticlevel.
• Stepaggregatelimits,sothatalowerlimitappliestoundergraduatestudentswhohavenotyetsuccessfullycompletedthesecondyearofanundergraduateprogram.
• Simplifythesubsidized/unsubsidizedstructureofloanlimits.StatutoryCitation
AnnualandAggregateLoanLimitsHEA§428(b)(1)(A)and(B)[20U.S.C.1078(b)(1)(A)and(B)
AdditionalUnsubsidizedLoanLimitsHEA§428H(d)[20U.S.C.1078−8(d)
Background,Rationale,andImplementationConsiderations
TheRTFwouldeliminatedifferencesinannualloanlimitsbasedonyearinschool,andwouldstepaggregatelimitssothataloweraggregatelimitappliestoundergraduatestudentswhohavenotyetsuccessfullycompletedthesecondyearofanundergraduateprogram.SteppingtheaggregateswouldbesimilartothePerkinsLoanlimitstructure.Undergraduatesubsidizedannualloanlimitshavenotincreasedsince2007-08.BeginningJuly1,2007,loanlimitsincreasedfrom$2,625to$3,500forfirst-yearundergraduatestudents,andfrom$3,500to$4,500forsecond-yearstudents.Priortothisincrease,loanlimitshadnotbeenraisedsince1993.Theannuallimitfortheremainderofundergraduateeducationwasraisedfrom$4,000to$5,500in1993andhasremainedatthatlevel.Morerelianceonunsubsidizedloanswasreflectedinincreasesin2008.Full-timelimitsneedtobestructuredtoaccountforinflation(forexample,keyedtotheConsumerPriceIndex)toavoidlossofbuyingpowerandtoreflectrealisticexpenses.Thestructureofloanlimitsisdifficulttoexplainandneedstobesimplified.Thecurrentstructureofbaselimitsdividedbetweensubsidizedandunsubsidizedamountsplusadditionalunsubsidizedamounts,allofwhichvarybyyearinschool,reflectspiecemealchangestotheloanprograms.Thechartonthefollowingpagesummarizestheloanlimitrecommendation.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldeliminatevariancesinannuallimitsbyyearinschoolandincreaseannualandaggregateloanlimits;however,itwouldnotstepaggregatelimits
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CurrentUndergraduate Yr1 Yr2Yr3andBeyond
TotalAggregate
Sub $3,500 $4,500 $5,500$23,000Sub$31,000SubandUnsubUnsub $2,000 $2,000 $2,000
YearlyTotal $5,500 $6,500 $7,500
AdditionalUnsubforIndepStudentsorPLUSDenials
$4,000 $4,000 $5,000$57,500
YearlyTotal $9,500 $10,500 $12,500
ProposedUndergraduate Yr1 Yr2 Yr2+TotalAggregateforStudentsthrough2ndYear
Yr3andBeyond
TotalAggregate
Sub $5,500 $5,500 $5,500 $16,500Sub$22,500SubandUnsub
$5,500 $33,000Sub$45,000SubandUnsub
Unsub $2,000 $2,000 $2,000 $4,500
YearlyTotal $7,500 $7,500 $7,500 $10,000
AdditionalUnsubforIndepStudentsorPLUSDenials
$5,000 $5,000 $5,000$37,500
$6,000$75,000
YearlyTotal $12,500 $12,500 $12,500 $16,000
CurrentGraduate AnnualAnnualAddtlUnsub1
AnnualAddtlUnsub2
TotalAggregate
Sub $0 $138,500
$224,000ifformerHEALeligibleUnsub $20,500 $16,667 $26,667
YearlyTotal $20,500 $16,667 $26,6671ForGraduateinPublicHealth;Dr.ofPharmacyorChiropractic;Dr.DegreeinClinicalPsychology;MastersorDoctoralDegreeinHealthAdministration.2ForDoctorofDentistry,VeterinaryMedicine,Optometry,AllopathicMedicine,OsteopathicMedicine,PodiatricMedicine,NaturopathicMedicine,orDoctorofNaturopathy.
ProposedGraduate AnnualAnnualAddtlUnsub1
AnnualAddtlUnsub2
TotalAggregate
Sub $0 $169,000
($274,000ifformerHEALeligible)Unsub $25,000 $20,326 $32,521
YearlyTotal $25,000 $20,326 $32,5211ForGraduateinPublicHealth;Dr.ofPharmacyorChiropractic;Dr.DegreeinClinicalPsychology;MastersorDoctoralDegreeinHealthAdministration.2ForDoctorofDentistry,VeterinaryMedicine,Optometry,AllopathicMedicine,OsteopathicMedicine,PodiatricMedicine,NaturopathicMedicine,orDoctorofNaturopathy.
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7. LoanDisbursement
Recommendation
• Allowunequaldisbursementstoaccommodateunequalcostsorresources(asmaybedoneforFSEOGandPerkinsLoans)andtofacilitatedisbursementbyterminnonstandardtermprograms.
StatutoryCitation
MultipleDisbursementRequirementHEA§428G(a)[20U.S.C.1078−7(a)]
Background,Rationale,andImplementationConsiderations
Currently,loansmustbedisbursedinequalinstallmentsunderrulesspecifiedbylaw.Thisrulepreventsadjustmentofdisbursementstoaddresssituationswherethereareunequalresourcesorcostsamongpaymentperiods.Fornonstandardtermprograms,itresultsindifferentdisbursementtimesforDirectLoansthanforotherTitleIVprograms,andpreventsalignmentofloandisbursementwithterms.ThisrecommendationwouldallowdisbursementstooccuratthesametimeacrossallTitleIVprograms.
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8. RepaymentIncentives
Recommendation
• ReinstatetheDepartmentofEducation’s(ED)authoritytoofferrepaymentincentives,ifthereisevidenceofeffectivenessandcostneutrality.
StatutoryCitation
InterestRate(repaymentincentives)HEA§455(b)(8)[20U.S.C.1087e(b)(8)]
Background,Rationale,andImplementationConsiderations
TheBudgetControlActof2011prohibitedEDfromauthorizingorprovidingrepaymentincentivesonnewloansdisbursedonorafterJuly1,2012,exceptthataninterestratereductionmaybeprovidedtoaborrowerwhoagreestoautomaticallydebitelectronicpayments.Aslongasincentivesdonothaveanetcost,whynotallowthem?
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9. LateOrigination
Recommendation
• Allowschoolstooriginateloansupto30daysafterthestudent'slastdateofenrollmentorchangetoanineligibleenrollmentstatus,tocovercostsincurredbeforelossofeligibility.
StatutoryCitation
ParticipationAgreement(authoritytooriginateloanstoeligiblestudents)HEA§454(b)[20U.S.C.1087d(b)]
Background,Rationale,andImplementationConsiderations
Currently,loansmaynotbeoriginatedoncetheenrollmentperiodhasended,thestudentwithdraws,orthestudent’senrollmentstatusdropstolessthanhalftime.Thisrecommendationwouldallowschoolstoassiststudentswhowereunabletocompletetheloanapplicationprocesspriortoceasingenrollmentorwhoanticipatedresourcesthatdidnotmaterialize.Theproposedoptionmayreducetheuseoflessbeneficialprivateeducationloans.Itwouldprovidethelate-applyingstudentaccesstofederalDirectLoanstoresolveinstitutionaldebtsothatthestudentcanreenrollandgoontosuccessfullycompletehisorherprogram.Thisrecommendationwouldnotchangethecurrentprohibitionagainstlatedisbursementofsecondorsubsequentinstallments.
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10. ConsolidationRecommendations
• Maintainaloanconsolidationprogramtoallowborrowerswithmultipleloanstohaveasingleholderandasinglepayment.
• Continuetoallowconsolidationtopreventborrowerdefaults.
• Separaterefinanceoptionsfromconsolidation,sothatconsolidationretainsitsoriginalpurposes.(SeeRecommendation#1)
• Retainaninterestratethatconsiderstheweightedaverageoftheloansbeingconsolidated.
• Applyamodestbasispointincreasetoconsolidationloans.StatutoryCitation
ConsolidationLoansHEA§428C,§455(g)&variousothersections[20U.S.C.1078–3,1087e(g)]
Background,Rationale,andImplementationConsiderations
TheRTFrecommendsthattheloanconsolidationprogrambemaintainedtoallowborrowerswithmultipleloanstohaveasingleholderandasinglepayment.Consolidationshouldalsocontinuetobeusedtopreventdefaults.Theinterestrateshouldremaintheweightedaverageoftheloansbeingconsolidated,althoughamodestbasispointincreasecouldbeappliedtoconsolidationloans.RefinancingoptionsshouldbeallowedasnotedinLoanRecommendation#1,butshouldbekeptseparatefromconsolidation,sothatconsolidationretainsitsoriginalpurposes.TheinterestrateforconsolidationloansshouldtracktheinterestrateforDirectLoans,butneedsfurtherstudytodeterminetheappropriateinterestrate.Apremiumintheformofamodestbasispointincreasecouldbeappliedtoconsolidationloanstohelpreducetheconsolidationloansubsidythatmightbebetterusedtooffsetcoststogainotherbenefits,suchasincreasedloanlimitsoreliminationoftheoriginationfee.
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11. LoanSubsidiesRecommendations
• Continueneed-basedborrowersubsidiesduringin-school,grace,anddefermentperiods.
• Removethe150%limitontheinterestsubsidy.StatutoryCitation
InterestSubsidies(suspensionofsubsidyduringgraceperiods)HEA§428(a)(3)(A)(i)[20U.S.C.1078(a)(3)(A)(i)]
TerminationofSubsidiesforGraduateStudentsHEA§455(a)(3)[20U.S.C.1087(a)(3)]
150%LimitationHEA§455(q)
Background,Rationale,andImplementationConsiderations
TheITFrecommendedrethinkingtheDirectLoansubsidystructuretoexploretheefficacyoffront-endsubsidiesandwhethertherearebetterwaystotargetthoseresources.OnesuchalternativerecommendedbytheITFisaback-endsubsidythatutilizesautomaticincome-basedrepaymentforallborrowers.Thisdebatebetweenfront-endandback-endsubsidies,whichseemtobeviewedasmutuallyexclusiveduetobudgetaryconstraints,hasreceivedmuchattentionandcontinuestodoso.Meanwhile,loansubsidieshavebeenincrementallyerodedasCongresslooksforsourcesoffundsbothtosupportthePellGrantProgramandtohelpalleviatethegeneralbudgetdeficit.TheRTFisconcernedthatneedystudentsarecaughtbetweenlostbuyingpowerofgrants,whichhavenotkeptpacewithinflationandrisingcosts,andlossofbeneficialloanterms.TheRTFisalsoconcernedwiththeimpactthatlossofinterestsubsidiesmayhaveonaccesstohighereducationandincreasedcostsofborrowing.
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July2016Update
CongressionalActioninthe114thCongress(2015-2016)Severalbillshavebeenintroducedthattouchonsubsidyandautomaticincome-basedrepaymentissues:
• EarningsContingentEducationLoansAct[H.R.3695andH.R.3752]:wouldeliminatetheDirectLoanProgramandinsteadestablishan"IncomeDependentEducationAssistance(IDEA)"LoanProgram.Thenewprogramwouldincludeauniversalincome-basedrepaymentcomponentwithautomaticwagewithholdingasthemechanismforrepayment.
• ProtectingOurStudentsbyTerminatingGraduateRatesthatAddtoDebt(POSTGRAD)Act[H.R.4223]:wouldrestoregraduateandprofessionalstudenteligibilityforthein-schoolinterestsubsidy
• SimpleIncome-BasedRepaymentAct[H.R.4256]:wouldautomaticallyenrollallnewborrowersoffederalstudentloans(exceptParentPLUS)intoincome-basedrepayment(IBR)
• DynamicRepaymentAct[S.2456]:wouldreplacecurrentloans,subsidies,deferments,forbearances,andrepaymentoptionswithasingleloancalledtheIncomeDependentEducationAssistance(IDEA)Loanandwouldberepaidthroughincome-basedrepayment
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12. CreateaUniversalLoanPortalforStudentsRecommendation
• Mandatethecreationofasinglewebportalwherestudentscangotoeasilyaccessinformationaboutalloftheirloans—federal,private,andinstitutional.
StatutoryCitation
EstablishmentofNSLDSHEA§485B[20U.S.C.1092b]
Background,Rationale,andImplementationConsiderations
ThetaskforcerecommendsthatCongressmandatethecreationofasinglewebportalwherestudentscaneasilyaccessinformationaboutalloftheirstudentloans.Thiswouldallowalleducationalloansfromthefederalgovernment,privatelenders,andcollegesanduniversitiestobereportedtoonecentraldatabase.ThecreationofsucharesourcecouldresultfromtheexpansionofthedatacollectedbytheNationalStudentLoanDataSystem(NSLDS).Studentsneedanaccessible“one-stopshop”wheretheycanmanagetheirstudentloans.Manyborrowershavemultipleloanswithdifferentloanholdersthatmaybeinvariousstagesofrepayment.Havingacentralwebsitewhereborrowerscouldaccessinformationaboutalloftheirloanswouldsignificantlyhelpstudentsastheymanagetheirborrowingandrepayment.Undersuchascenario,allstudentswouldhaveaccesstotheirentiredebtportfolioinrealtime,enablingthemtocalculateamoreaccuratemonthlyrepaymentamountbasedonavarietyofpotentialcircumstances.Itshouldbeunderscoredthatacentralcomponentofthisrecommendationistheneedforstudentstohaveaccesstonotonlytheirfederalloaninformation,butalsotheirprivateloaninformation.Itiscriticalthatstudentsbeabletoobtainandmonitoralloftheirloaninformationinonecentraldatabase,regardlessoftheirloan’sorigination,ratherthanhavingtopullinformationtogetherinapiecemealfashion.Thelattercreatesopportunityforimportantinformationtofallthroughthecracks.Currently,NSLDSonlypartiallyservesthispurposeasitincludesonlysomefederalloans,anditdoesnotincludehealthprofessionsloansmadethroughtheDepartmentofHealthandHumanServices(HHS),privateloans,orinstitutionalloans.Auniversalloanportalwouldcapturealloftheseloans.
Toachievethisrecommendation,EDcouldexpandtheirexistingstudentloans.govwebsite.Studentsarecurrentlyaccessingwww.studentloans.govtocompleteentranceandexit
counseling,viewrepaymentoptionsandcancellations,signtheMasterPromissoryNoteandcompleteconsolidationrequests.Byenhancingthecurrentwebsiteofstudentloans.govintothesingleportal,EDcouldmakeuseofexistinginfrastructurewhileenhancingandstreamliningtheborrowerexperience.
ADD
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July2016Update
InFebruary2015,theServicingIssuesTaskForcereiteratedthisrecommendationusingtheresultsfromasurveyofNASFAAmembershipthatincludedmorethan2,2000financialaidadministratorsatover1,500uniqueinstitutions.OnMarch13,2015,PresidentObamaissueda“StudentAidBillofRightstoHelpEnsureAffordableLoanRepayment.”Underthisinitiative,EDisdirectedtoestablishacentralizedpointofaccessforallFederalstudentloanborrowersinrepayment,includingacentrallocationforaccountinformationandpaymentprocessingforallFederalstudentloanservicing,regardlessofthespecificservicer.InApril2016,EDannounced“anewvisionforservingstudentloanborrowers”throughanewcustomerservicemodelthatincludesa“streamlinedborrowerexperienceviaasinglewebportal.”InJuly2016,EDreleasedthelistofvendorswhometthetechnicalcapabilitiestobeginbuildingthenewsystem,whichincludesthesingleservicingplatform.CongressionalActioninthe114thCongress(2015-2016)Twobillshasbeenintroducedthatwouldimpactthisrecommendation:
• SimplifyingAccesstoStudentLoanInformationAct[S.445]:wouldrequireprivateeducationloanstoberecordedinNSLDS
• StudentLoanBillofRights[S.840]:wouldrequireEDtodevelopacentralizedpointofaccessforallborrowersforaccountinformation,paymentprocessing,andallotherloanservicingactivities
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13. StandardizeLoanServicingPoliciesandProceduresandProcessforRepaymentOptions
Recommendation
• DirectEDtostandardizetheprocessforplacingastudentinthevariousrepaymentplans,includingacceptabledocumentationtobeusedbyallservicers,therepaymentstartdate,andthetimingandmethodforcapitalizationofinterestonfederalstudentloans.
StatutoryCitation
SimplificationofLendingProcessforBorrowersHEA§485C[20U.S.C.1092c]
Background,Rationale,andImplementationConsiderations
ThecurrentDirectLoanprogramisonewherestudentsborrowdirectlyfromthefederalgovernment.Theintentoftheprogramwasforstudentstohaveonelenderandoneservicerwithstandardizedprocesses.However,thegovernmentisparcelingoutloanstovariousservicers,andsomeborrowersareconfusedbecausenotallservicersarehandlingstandardissuesinthesamemanner.Borrowerscannotchooseorswitchtheirloanservicer,sotheyaresubjecttovaryingadministrativeprocedureswithoutanyrecourse.Thelackofstandardizationalsohindersfinancialaidadministrators’effortstoaccuratelycounselstudentsonwhattheycanexpectwhentheyenterrepayment.Toalleviateconfusionanddifferentialtreatment,thedirectloanprogramshouldhaveastandardizedrepaymentprocess,communications,andforms,regardlessoftheservicer.
July2016Update
EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Amongtheobjectivesforthisinitiativeare:acommonborrowerexperience,feweraccounttransfers,commonservicingpracticesandbranding,improvedoversight,greatercostefficiency,andimproveddatacollectionandanalysis.CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:
• ConsolidatedAppropriationsAct,2016[P.L.114-113]:includeslanguageinthebill’sjointexplanatorystatementrequestingEDtopublisha“commonpoliciesandproceduresmanualforservicingthatappliestoallDirectLoanservicers”
Onebillhasbeenintroducedthatwouldimpactthisrecommendation:• StudentLoanBillofRights[S.840]:wouldaddressservicingbystandardizingcertain
disclosuresandotheractions
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14. RevisitInstitutionalRequirementsforPrivateLenderLists
Recommendation
• StreamlinestatutoryandresultingregulatoryprovisionsrelatedtoPreferredLenderLists(PLL)toencouragemorewidespreadusebyschoolswithoutcompromisingtheiroriginalpurpose.
StatutoryCitation
ProgramParticipationAgreements(preferredlenderlistrequirements)HEA§487(h)[20U.S.C.1094(h)]
Background,Rationale,andImplementationConsiderations
TheRTFadoptsthisITFproposal#8,whichwouldbeaccomplishedbytakingthefollowingsteps:• Reviewtypesofloansthatshouldbeclassifiedasprivateeducationloans.
Ø Excludefederalhealthprofessionsloansfromthedefinitionofprivateeducationloans.Ø Eliminatestate-sponsoredloansthatmeetcriteriaacceptabletotheU.S.SecretaryofEducation
fromthedefinitionofprivateeducationloans.Ø GivetheSecretaryauthoritytodetermine,throughregulation,whetherinstitutionalloansmust
beconsideredprivateeducationloans.• Narrowthedefinitionofapreferredlenderarrangementtoreducethecircumstancesunderwhicha
PLLisrequired.Ø Allowinstitutionstogivebasicinformationaboutlenderavailabilityordisplaylenderbrochures
aslongastheydonotactuallyrecommendanyparticularlendersorproducts.Ø Allowinstitutionstosharesummariesofpreviousstudents’experiencesorsatisfactionwith
lenderswithoutconsideringthatsummaryapreferredlenderarrangement.• Improvetheefficiencyofloancounselingrequirements.
Ø Eliminateduplicativeloancounselinganddisclosures,andbroadenthemethodofmakingdisclosuresincludingtheallowablesourcesofdisclosure.
Ø Replacelistsofdisclosuresinthelawwithmoregeneralgoalsandobjectivesofdisclosure,anddirecttheSecretaryofEducationtosetspecificdisclosuresthroughnegotiatedrulemaking.
Ø Shiftresponsibilityfordisclosingtermsandconditionsofloansfromschooltolenders,andrequireTruthinLendingActdisclosuresonlyoflenders.
• Eliminateduplicationofinformationprovidedbythelenderandtheinstitutionbyrequiringonlythelendertodescribethetermsandconditionsoftheloansitoffersandallowingtheinstitutiontodirectstudentstothelender’smaterialsorwebsiteforsuchinformation.
• Deletereportingrequirementsinfavorofadherencetoacodeofconduct,disclosuretostudentsandfamiliesofthecriteriausedtodevelopapreferredlenderlist,andassurancethatborrowersmaychooseanylenderwithoutpenalty,regardlessofwhetherthelenderappearsonthelist.
• Eliminatethemodeldisclosureformprovision(EDhasnotproducedamodel).• Replacestudentself-certificationwithfullschoolcertificationofprivateeducationloans.• Streamline,clarify,andbetteralignthePLLrequirementsof34CFR601.10(a)(2),HEAsection
128(e),andHEAsec.153.
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Provisionsinthecurrentlawandregulationsthatdealwithcodeofconduct,disclosureofthecriteriausedtodevelopapreferredlenderlist,andassurancesthatfamiliesmayalsochoosealendernotonthelistmustberetained.InstitutionsarenotrequiredtohaveaPLL.However,aschoolthatchoosestopublishaPLLisrequiredbytheHigherEducationOpportunityAct(HEOA)tocreateandannuallyupdatethatlistwithinformationonthelistedlendersandloans,including:• Termsandconditionsoftheloan;• Thereasontheschoolenteredintoanarrangementwiththatparticularlender;• Astudent’sabilitytochoosealenderthatisnotonthelist;and• Themethodandcriteriausedforselectingthelenders.AprivateeducationloanPLLmustalsocontainatleasttwounaffiliatedlenders.Affiliationsofanyotherlendersonthelistmustbedisclosedanddescribed.WiththeeliminationofFFELP,therulesapplicabletoprivateeducationloanscanbenefitfromreviewandadjustment.TheworstofthepracticesthatgaverisetothecurrentruleswerelimitedtoonlyafewinstitutionsandrelatedlargelytoFFELP,butalarge,unintendedconsequenceoftheserulespreventstheentirefinancialaidcommunityfromgivingreasonableadvicetofamilieswhoseekprofessionalassistancefromthestudentaidoffice.Today,thefinancialaidcommunityiswellawarethatinstitutionscannotgainanybenefitfromthebusinesstheirstudentsdowithprivatelenders.Nevertheless,thePLLrequirementsinhibittheirabilityandwillingnesstorecommendonlythoselenderswhooffergoodratesandgoodservice,ortosharewithcurrentstudentstheirknowledgeofpaststudents’experiences.Theresultisthatstudentsoftenareswayedbymarketingandadvertisements.Institutionsshouldbeallowedtoprovidemoreusefulandcomparableinformationonprivateloanstostudentsbasedonloantermsandconditions,thelender’shistoryofservice,andpaststudents’experiencewithoutbeingtiedtothelitanyofPLLrules.InadditiontoremovingimpedimentstoresponsibleuseofPLLs,thecurrentprivateeducationloanapplicationprocessshouldberevisedtocountertheimpactoflendermarketing.Replacingstudentself-certificationwithfullschoolcertificationwouldgiveinstitutionstheopportunitytoensurethatastudentisawareofthebenefitsoffederalloansbeforethestudentcommitstoalessfavorableprivateloan.
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15. ContinuePublicServiceLoanForgivenesswithModifications
Recommendations
� CommittocontinuingthePublicServiceLoanForgiveness(PSLF)Program,retainingcurrenteligibilitycriteria.� Institutelimitsontheamountofforgiveness.
� KeepPublicServiceLoanForgivenessuntaxed.
� MakePublicServiceLoanForgivenessProgramdatapublic.
� Stronglyencourageannualsubmissionofemploymentcertificationforms.
� IncreasecommunicationaboutthePublicServiceLoanForgivenessProgram.StatutoryCitation
RepaymentplanforpublicserviceemployeesHEA§455(m)[20U.S.C.1087e(m)]
Background,Rationale,andImplementationConsiderations
ThePublicServiceLoanForgivenessTaskForceputforwardtheserecommendationsinJune2014.ConcernoverthepotentialcostofPSLFhasgenerateduncertaintyforthecontinuationoftheprogramamonghighereducationprofessionalsandstudents.Inthisenvironment,thetaskforcefeelsitisimportanttoreiterateacommitmenttosupportingtheforgivenessprogramandthestudentsitwillserve.IntheabsenceofrobustandreadilyavailabledataaboutthepotentialparticipationinthePSLFprogram,thedefinitionsofqualifyingfulltimework,qualifyingemployment,qualifyingmonthlypayments,qualifyingloantypes,andlengthofserviceshouldremainunchanged.Thetaskforcerecommendsallowingforgivenessofupto100percentofaqualifyingloanbalancethatdoesnotexceedtheundergraduateaggregateStaffordLoanlimit(currently$57,500)andallowadditionalforgivenessof50percentofanyremainingqualifyingloanbalance,conditionedthattotalforgivenesscannotexceedthegraduateaggregateStaffordLoanlimit(currently$138,500).Additionally,borrowerswithabalanceremainingafterreceivingPSLFforgivenessshouldbeallowedtocontinueutilizinganincome-basedrepaymentplantopaytheirremainingbalance,andpotentiallycouldqualifyforadditionalloanforgivenessundertheincome-basedrepaymentplan.Structuringtheforgivenesscapinthismannerwillcreate“skininthegame”whilealsoaddressingconcernsaboutborrowerspotentiallyreceivingexcessiveforgivenessforthepursuitofmultipleadvanceddegrees,orforanextremeamountofdebtincurredpursuingasingledegree.Acaponthemaximumamountofforgivenesswillensurethatstudentsarediscouragedfromover-borrowing.Taxingborrowersontheamountofforgivenessreceivediscounterintuitive,asitbothprovidesadisincentiveforhigh-debtborrowerstotakeadvantageoftheprogramandcreatesasuddenfinancialhardshipforborrowersreceivingforgiveness.Atthemomenttheyshouldfinallybeemergingfromtheirdebts,theyareabruptlyfacedwithasignificantlump-sumcost.Itcouldbearguedthatincertaincases,thisisamorecalamitousfinancialeventthansimplyremaininginrepayment.Itislikelythatmanyborrowerswouldneedtopaythiscostininstallments,meaningtheywillhavesimplymovedfrommakingmonthlypaymentstoastudentloanservicertomakingmonthlypaymentstotheIRS,whodoesnotoffertheborrowerprotectionsandbenefitsfoundinthestudentloanprogram.ThedesignatedPSLFservicershouldmakepublic,dataandinformationcollectedintheadministrationofthePSLFprogram.Analysisofsuchdatawouldallowinterestedconstituenciestheopportunityto
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moreaccuratelyevaluatetheforgivenessprogram,itseffectivenessasanincentivetopursuepublicservicework,andthecostoftheprogram.Borrowersmaycompleteanemploymentcertificationformatanytimeduringtheirpublicserviceemployment.Thereareseveralpossiblenegativeconsequencesifborrowerswaituntiltheendofthe10yearsofqualifyingemploymenttobeginprovidingemploymentcertification.Assuch,stronglyencouragingborrowerstocompletetheemploymentcertificationformannuallywillensurethatthedesignatedPSLFservicercanmonitoraneligibleborrower’srepaymentandemployment.ThePSLFprogramshouldbemorewidelypublicizedbytheDepartmentofEducationandtheloanservicersasanincentiveforborrowersandthoseconsideringenrollmentinhighereducationtoenterpublicservicework.Owingtothebroadnatureoftheprogram,communicationabouttheprogramshouldbeincreasedandthetypeandtimingofinformationmadeavailabletothepublicshouldbeexpandedtoensureawarenessoftheprogram.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)SeveralbillshavebeenintroducedthatwouldeitherexpandeligibilityormodifyPSLF:
• YoungFarmerSuccessAct[H.R.2590]:wouldaddnewandbeginningfarmerstothePublicServiceLoanForgiveness(PSLF)program
• AdjunctFacultyLoanFairnessAct[S.1556]:wouldallowpart-timefacultymemberstoqualifyforPSLF
• TeachOurTeachersAct[H.R.3366]:wouldallowteacherstoqualifyforbothteacherloanforgivenessandpublicserviceloanforgiveness
• StudentLoanDebtProtectionAct[H.R.3634]:wouldallowborrowerstoqualifyforsomeversionofPSLFafterfiveyearsofpublicservicework
• StrengtheningForgivenessforPublicServantsAct[S.2463]:wouldremovethe"allornothing"componentofPSLFandallowborrowersemployedinpublicservicejobstoreceiveapercentageofforgivenessifemployedinapublicservicejobforlessthan10years.Thepercentageoftheloanthatiscancelledvaries:for2-5years,15%;for6-9years,20%;andfor10years,30%.
• TeacherDebtReliefAct[H.R.4933]:wouldallowteacherstoqualifyforbothStaffordloanteacherforgivenessandforgivenessunderPSLF
• FairnessinForgivenessAct[H.R.5274]:wouldexpandeligibilityforPSLFtocurrentandformeremployeesatall16privatelyoperatedDepartmentofEnergyNationalLaboratories
• StudentLoanFairnessAct[H.R.5487]:wouldexpandPSLFtoincludephysiciansinMedicallyUnderservedAreas
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Update,July2016 DirectLoans
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16. Clarifyandimproveservicercommunicationwithborrowers
Recommendations
� Removeservicerbrandingfromcommunicationwithborrowers.� Permittheuseofinnovativetechnologiesinordertoallowservicerstomoreefficientlyandeffectivelycommunicatewithborrowers.
StatutoryCitation
ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]
Background,Rationale,andImplementationConsiderations
TheServicingIssuesTaskForceproposedtheserecommendationsinJanuary2015.Loanservicersco-brandtheirownlogowithED’slogoonallcorrespondencewithstudents;thisleadstoconsiderableconfusionamongborrowersaboutwhoistheactualholderandserviceroftheirloan,andthemistakencategorizationofthecommunicationasjunkmailorspam.Inordertoprovideclear,unambiguousinformationtoborrowers,theonlybrandingoncommunicationtotheborrowershouldbefromED.ThetaskforcerecommendsthatEDpermittheuseofnewtechnologiesandsupportingdatatoallowservicerstoexperimentwithdevelopinginnovativeandeffectiveperformancebaseddelinquencyanddefaultpreventionactivitiesinlieuofcertaincurrentprescribedrequirements.Currently,servicersaresubjecttoprescriptiveduediligenceandrestrictionsrequirementsthatcanstifleinnovationandexperimentationwiththemosteffectivewaysinwhichtoreachborrowers,andatwhatpointintime.Forexample,servicersarerequiredtosendborrowersdelinquencynoticebetweendays1-15ofdelinquencystatus.However,servicerscanidentifyborrowerrepaymenthabitsthroughtheirdataanalytics,andinsomecasescandeterminethataborrowerisa“slowpayer”andwillalwayspayonacertaindaylaterinthemonth.Insuchinstances,itwouldbemoreusefulfortheservicertoputtime,resources,andeffortsintoborrowersidentifiedastrulybeingat-riskofdefault.Inaddition,allowingflexibilityfromthecurrentprescriptivestudentdisclosurerequirementswouldallowservicerstoprovideborrowerswiththerightinformationattherighttime,andintherightamount.Thiswouldincludeallowingservicerstodisseminatecertaindisclosurestogetherandmaketheirowndeterminationofthebestpointintimefortheinformationtobedistributed.
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July2016Update
Inrelatedactivity,theObamaAdministrationpublishedaStudentAidBillofRightsonMarch13,2015,directingEDtofindthemostinnovativeandeffectivewaystocommunicatewithborrowers,leveragethelatestresearchidentifyingkeyfactorsthatinfluenceborrowerrepayment,andmonitorkeytrendsinthestudentloanportfoliotoimproveloanservicing.EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Amongtheobjectivesforthisinitiativeareacommonborrowerexperienceandbranding,greatercostefficiency,andimproveddatacollectionandanalysis.Thesolicitationstates:“Whileindividualborrowerstypicallydealwithonlyoneservicer,thelackofasingleinterfaceandcommonbrandingmayleadtoconfusionamongborrowers,schools,andconsumeradvocates.Undertheplannedcontract,FSAwillcreateasinglewebportalclearlylabeledasrepresentingtheDepartmentofEducationthroughwhichallborrowerscanaccessinformation,makepayments,applyforbenefits,andmanagetheiraccounts.Borrowercorrespondence,callcentercontacts,andotheroutreachmaterialswillalsobeconsistentandclearlylabeledascomingfromtheDepartmentofEducation.”
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17. EDshoulddevelopapoliciesandproceduresmanualforservicing
Recommendation
� DirectEDtoprovideanoverviewofstandardizedloanservicingpracticesthroughanonlinefederalservicingpoliciesandprocedures(P&P)manual.
StatutoryCitation
ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]
Background,Rationale,andImplementationConsiderations
TheServicingIssuesTaskForcerecommendedinJanuary2015thatEDprovideanoverviewofstandardizedloanservicingpracticesthroughanonlinefederalservicingpoliciesandprocedures(P&P)manual.Whilethetaskforceunderstandsthecompetitivenatureoftheservicercontracts,aP&Pmanualwouldofferstandardizationinareaswherethereisafinancialimpact,orrisk,fortheborrower.Thetaskforcereportdetailsnineareaswherestandardizationcouldbenefitborrowers,schools,andtheservicersthemselves.
ADD
July2016Update
EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Onegoalistoestablishcommonservicingpractices;EDacknowledged,“Departmentservicerscurrentlyeachhavetheirownprocesses,callscripts,andotheruniqueprocedures.Inaddition,borrowershavetoadjusttonewsystemsandadifferentexperiencewhenaccountsaretransferred.Undertheplannedcontract,allborrowerswillhaveaccesstoasinglesetofconsistentprocessesandpractices.”CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:
• ConsolidatedAppropriationsAct,2016[P.L.114-113]:includeslanguageinthebill’sjointexplanatorystatementrequestingEDtopublisha“commonpoliciesandproceduresmanualforservicingthatappliestoallDirectLoanservicers”byMarch1,2016.AsofJuly1,2016,thisrequesthasnotbeenmet.
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18. Providestandardconsumerprotectionsforfederalstudentborrowers
Recommendation
� Providestandardconsumerprotectionsforfederalstudentborrowersthatareinlinewithotherconsumerfinancialproducts.
StatutoryCitation
ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]
Background,Rationale,andImplementationConsiderations
TheServicingIssuesTaskForcemadethisrecommendationinJanuary2015.Mostconsumercreditproducts(mortgages,creditcards,carloans,etc.)aregovernedbyfederalconsumerlawsthatdictateservicingstandardsandprocesses.Whilefederalstudentloanscontainsomeborrowerprotections,therearefewerthanalmosteveryotherconsumerfinancialproduct.Federalstudentloansandtheirservicingshouldcontainanenumerated,standardizedsetofconsumerprotections.Typicalconsumercreditprotectionsincludestandardizedprocessesforstatementsandpaymenthandling,servicertransfers,errorresolution,delinquencyservicing,andmilitaryservice,justtonameafew.Thereisnosuchsetofenumeratedprotectionsforfederalstudentloanborrowers.BorrowerprotectionsshouldalsoincludetherighttoescalateanissuetohigherauthoritieswithinEDandtherightoftheborrowertoquestioncertainpoliciesandprocedures,orrequestassistanceoraccommodationifnecessary.Theloanservicershouldberesponsibleforcommunicatingthisright,andtheprocesstoinvokethisright,onwrittencommunicationswiththeborrower.Aswithotherconsumerfinancialproducts,EDshould,incollaborationwiththeConsumerFinancialProtectionBureau(CFPB),requirebasicconsumerprotectionsforstudentborrowersandensurethattheircontractorscomplywiththoseprotections.
ADD
July2016Update
TheObamaAdministrationissuedaStudentAidBillofRightsinMarch2015thatincludesacentralizedstudentcomplaintsystem.CommentsonaproposedsystemweresolicitedinDecember2015.Thisinitiativerequiresenhanceddisclosuresandstrengthenedconsumerprotectionsandassessmentoftheapplicabilityofconsumerprotectionsinthemortgageandcreditcardmarketstostudentloans.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• StopDebtCollectionAbuseAct[S.2255]:wouldamendtheFairDebtCollectionPracticesAct(FDCPA)toclarifythattheprotectionsfromoverlyaggressivedebtcollectionpracticesalsoapplytodebtcollectionagentshiredbythefederalgovernment,includingservicersoffederalstudentloans
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Update,July2016 PellGrantProgram
©2016NASFAA ReauthorizationRecommendations Page57
FederalPellGrantProgram
1. MakeFederalPellGrantaTrueEntitlement
Recommendations
• MakeFederalPellGrantatrueentitlementprogramwith100%mandatoryfunding.
• Applytheinflationadjustmenttotheentireaward.
StatutoryCitation
AwardAmountHEA§401(b)(2)[20U.S.C.1070a(b)(2)
FundingHEA§401(b)(7)[20U.S.C.1070a(b)(7)
Background,Rationale,andImplementationConsiderations
TheRTFproposesthattheFederalPellGrantbecomeatrueentitlementprogram.ThisconcepthasbeenaNASFAAgoalformanyyears.Currently,thefundingthatmakesupmostofaPellGrantcomesfromthediscretionarysideofthebudget,whichmustbeappropriatedeveryyearandissubjecttopoliticsandbudgetarymachinations.AsmallamountofPellGrantawardsissetinlawasmandatoryfunding,thatis,automaticspendingthatisnotsubjecttoannualappropriationsfights.For2013-14,themaximumawardof$5,645ismadeupof$4,860fromtheannualappropriation;thebalanceof$785isthemandatoryfundingportion.Theincreaseof$95fromthe2012-13maximumawardisobtainedbyapplyinganinflationadjustmentderivedfromtheConsumerPriceIndex(CPI)toonlythemandatoryfundingportionofthe2012-13maximumaward.DuetothefactthattheFederalPellGrantProgramremainstiedtoacyclicalappropriationsprocess,theamountofsupportthatahigh-needstudentcanexpectfromthisprogramremainsuncertainfromyeartoyear.Whenmakingplanstoattendaninstitutionofhighereducationalevelofcertaintyinregardtothecontinuingavailabilityoffinancialaidresourcesisespeciallycriticaltolow-incomestudents.TheannualuncertaintyofFederalPellGrantawardsalsoimpactsinstitutionsinprovidingaccurateinformationaboutnetcoststolow-incomestudentsinatimelyfashion.TransformingtheFederalPellGrantProgramintoatruefederalentitlementprogramwouldprovidealevelofcertaintytohigh-needstudents.
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Update,July2016 PellGrantProgram
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July2016Update
CongressionalActioninthe114thCongress(2015-2016)
SeveralbillshavebeenintroducedthatincludeprovisionsrelatedtomandatoryPellfundingandthePellinflationadjustment:
• PellGrantProtectionAct[S.1060/H.R.1956]:wouldchangethePellGrantProgram’sfundingtosolelymandatoryfunds
• PellGrantCostofTuitionAdjustmentAct[S.1061/H.R.1957]:wouldannuallyapplyaninflationadjustmentincreasetotheentiremaximumaward
• MiddleClassCreatingHigherEducationAffordabilityNecessarytoCompeteEconomically(CHANCE)Act[S.1998/H.R.5310]:wouldpermanentlyextendtheannualinflationadjustmenttothePellGrantmaximumaward
• PathwaystoanAffordableEducationAct[H.R.4386]:wouldchangethePellGrantProgram’sfundingtosolelymandatoryfundsandwouldpermanentlyextendtheannualinflationadjustmenttothePellGrantmaximumaward
• IntheRedAct[S.2677]:wouldannuallyapplyaninflationadjustmentincreasetotheentirePellGrantmaximumaward
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Update,July2016 PellGrantProgram
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2. InstitutionalIneligibilityforPellGrantDuetoLoanDefaultRates
Recommendation
• EliminatethestatutorylanguagethatbarsparticipationintheFederalPellGrantProgramfor
schoolsthathavebeenrenderedineligibletoparticipateintheDirectLoanProgramduetohigh
defaultrates.
StatutoryCitation
InstitutionalIneligibilityBasedonDefaultRatesHEA§401(j)[20U.S.C.1070a(j)
Background,Rationale,andImplementationConsiderations
CurrentlyaninstitutionlosesitseligibilitytoparticipateintheFederalPellGrantProgramiftheinstitutionlosesitseligibilitytoparticipateintheDirectLoanProgramasaresultofafinaldefaultratedeterminationaboveacertainpercentage.TheRTFbelievesthathigh-needstudentsshouldhaveaccesstoFederalPellGrantfundingirrespectiveoftheactionsofformerstudentswhoarenotfulfillingtheirobligationsasborrowers.SchoolsthathavesmallpopulationsofTitleIVstudentloanborrowersriskplacingtheirparticipationintheFederalPellGrantPrograminjeopardyshouldevenasmallnumberofborrowersdefaultontheirTitleIVloans.Thetiebetweenaschool’sTitleIVcohortdefaultrateandtheFederalPellGrantplacesinstitutionsthatadmitahighpercentageofhigh-needstudentsatadecideddisadvantageanddissuadessomeschoolsfromparticipatingintheDirectLoanProgram.
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Update,July2016 PellGrantProgram
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3. FederalPellGrantEligibilityBeyond6YearLEU
Recommendation
• AllowadditionalFederalPellGranteligibility,determinedonacase-by-casebasisbytheaid
administrator,ifstudent/schoolcandemonstratethatthestudentcancompletehisorherdegree
programwithinoneadditionalperiodofenrollment.
• Sunsetthisauthoritysothatitisessentiallyagrandfatherprovisionforstudentsalreadyenrolled
whenlimitswereimposed.
StatutoryCitation
PeriodofEligibilityforGrantsHEA§401(c)(5)[20U.S.C.1091(c)(5)
Background,Rationale,andImplementationConsiderations
WhenPelllimitswereoriginallyimposedat18semesters,studentswhowerealreadyPellGrantrecipientswereexcludedfromthelimitation.Thegrandfatheringclausewasdeletedwhenthelimitwassubsequentlyfurtherreducedto12semesters.ThisrecommendationwouldprovideawayforFAAstohelpstudentswhohavenothadtheopportunitytoplanforaprecipitouslossofPellGranteligibilitybutareveryclosetocompletionofadegreeprogram.Atsomepoint,however,thelimitsshouldbecomeabsoluteasstudentshavehadadequatetimetoprepareforthat,sotheauthoritytoextendeligibilitywouldendatareasonablepointintime.
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Update,July2016 PellGrantProgram
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4. FlexPell
Recommendations
• Reinstatestudentaccesstotwoscheduledawardsinanawardyearbutwithouttheacceleration
clause.
• Clarifythatassignmentofcross-overperiodsisinstitutionalpolicyandprohibitEDfrom
regulating.
• EnsurePellutilizationstatuswithinformationaboutPelllimitsisreadilyavailabletostudents.
• Reinforcestudents’righttodeclinePellpaymentstosavefundsforfutureuse.
StatutoryCitation
PurposeandAmountofGrantsHEA§401(b)[20U.S.C.1070a(b)]
Background,Rationale,andImplementationConsiderations
Studentshaveaccesstoalifetimelimitoftheequivalentofsixfull-timeacademicyears’worthofFederalPellGrants.Studentsarecurrentlyrestrictedtoonescheduledawardforeachawardyear,generallypayableoverthenumberofpaymentperiodsthatmakeupanacademicyear.Thewaythestudentusesthatgrantwithintheawardyearcanvarydependingonthestudent’senrollmentpattern.Forabriefperiodoftimebetween2009and2011,priortothelifetimelimit,CongressauthorizedpaymentofasecondPellGrantscheduledawardwithinthesameawardyear(“year-roundPell”)ifreceiptoffundsfromthesecondscheduledawardpermittedthestudenttoacceleratehisorheracademicprogram.Thedefinitionof“accelerate”wasleftuptotheDepartmentofEducation(ED).Theresultwasessentiallyacase-by-caseevaluation,aseachstudent’sprogresshadtobeassessedtosatisfytheaccelerationcriterion.Atthesametime,EDintroducedaregulatorychangethatdictatedhowtoassignasummerpaymentperiodtoanawardyearwhenthepaymentperiodcrossedoverJuly1.Thisregulatoryinitiativewasalsohighlymanualinthatithadtobedeterminedforeachstudentindividually,sometimesmorethanonceifadditionalinformationwasreceivedbeforeacertaindate.Thecombinationofthetwochanges—onestatutory,oneregulatory,butbothlabor-intensive—createdanadministrativenightmare.Alloftheseregulationswereremovedwhenyear-roundPellwasrescinded.TheRTFproposesthatavariationofyear-roundPellbereinstituted,butwithouttheaccelerationclause.WiththelifetimelimitonPellGrant,persistenteconomicproblems,andincreasinglyflexibleprogramformats,studentsneedmoreflexibilityandcontroloverhowandwhentheyaccesstheirresources.TheRTFbelievesastudentshouldbeabletoutilizegrantresourceswhenheorsheneedsthem.Currentrulesregardingdisbursementbypaymentperiodandcalculationofpaymentperiodawardamountswouldcontinuetoapply.ThesatisfactoryacademicprogressrulethatlimitsoverallTitleIVeligibilityto150%ofprogramlengthwouldstillapply.Paymentperiodrulesforclockhourprograms,non-termprograms,andcertainnonstandardtermformatsthatrequireworkcoveredbyapaymentofTitleIVfundstobecompletedbeforethenextpaymentmaybemadewouldalsoremainunchanged.Therecommendationtoallowstudentsmorecontrolrecognizesthatastudentmayhavegreaterneedearlierinhisorherpursuitofhighereducation,especiallyifthestudentneedssometimeto“gearup”tothecollegelevelexperience.Also,thestudent’sgoalmightnotbeafour-yeardegree,sopreservingfundsforlaterstudywouldnotbetothestudent’sadvantage.Theincreasingpopulationofnon-
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Update,July2016 PellGrantProgram
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traditionalstudentsandagreatervarietyofnon-traditionalprogramformatsalsonecessitateadifferentviewofPellGrantutilization.AstudentcouldrunoutofPellGrantfundsbeforecompletionofabaccalaureate.However,thestudentwouldstillhaveaccesstoloanfundsandwouldprobablyhaveastrongerabilitytorepaythoseloansthefurtheralongtowardsbaccalaureatecompletionheorsheisbeforehavingtoresorttoloans.Astudent’sabilitytoassumemorecontroloverhisorherresourcesdoesrequiresolidacademicandfinancialcounseling,whichwouldbeleftuptotheschooltodesignandaccomplish.EDshouldberequiredtoprovideadditionalinformationaboutPellGrantlimitationsandusagetostudentsandinmaterialsthatschoolscanuseincounseling.ThestudentshouldalsobeabletodeclineusingaPellawardinanygivenpaymentperiod.Thestudentwouldneedtobeawareoftheimplicationsfortakingornottakingthepayment.Thisrecommendationhasparallelstootherconceptsthathavebeendiscussedinthebroaderhighereducationcommunity,especiallythe“PellWell”whicharefeaturedintheReimaginingAidDesignandDelivery(RADD)project.
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Update,July2016 PellGrantProgram
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July2016Update
CongressionalActioninthe114thCongress(2015-2016)
SeveralbillshavebeenintroducedthatexpandPellbeyondasinglescheduledawardinanawardyear,withvaryingprovisions:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldallowastudentwhohascompletedcourseworkequivalenttooneacademicyearbeforetheendofanawardyearaccesstoasecondaward
• All-YearAffordabilityforConstantandContinualEducationtoEnhanceStudentSuccessAct(ACCESS)Act[S.242]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• AccesstoEducationandTrainingAct[H.R.1064]:wouldreinstatetheyear-roundPellGrantwiththeoriginallanguage,includingtheaccelerationcomponent,foundinthe2008HigherEducationOpportunityAct[P.L.110-315]
• Year-RoundPellGrantRestorationAct[S.1062/H.R.1958]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• FlexiblePellGrantfor21stCenturyStudentsAct[H.R.3180]:wouldreinstateaccesstoasecondscheduledawardinanawardyearifastudentis“acceleratingprogresstowardadegreeorcertificate”andwouldallowinstitutionstoassigncrossoverperiods
• MiddleClassCreatingHigherEducationAffordabilityNecessarytoCompeteEconomically(CHANCE)Act[S.1998/H.R.5310]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• PathwaystoanAffordableEducationAct[H.R.4386]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• FY2017AppropriationsfortheDepartmentsofLabor,HealthandHumanServices,andEducation,andRelatedAgenciesAct[S.3040]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
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Update,July2016 Campus-BasedPrograms
©2016NASFAA ReauthorizationRecommendations Page64
Campus-BasedPrograms
1. AllocationFormulas
Recommendations
� Reconstructtheincomebandsusedtodetermineinstitutionalneedforcampus-basedprogramstomoreaccuratelyreportstudentneed.
� EliminatetheBaseGuaranteeandincludephase-inprotectionsothatnoinstitutionhasadecreaseorincreaseofmorethan10%peryear.
� RestructuretheFSEOGformulatobebasedontheamountofPellfundingreceivedbytheinstitution,includingaphase-inprovisionwherebynoinstitutionhasadecreaseorincreaseofmorethan10%peryear.
� Increasethepercentofself-helpassumedintheundergraduateinstitutionalneedcalculationoftheFederalWork-StudyandPerkinsLoanformulasto35%self-help,includingaphase-inprovisionwherebynoinstitutionhasadecreaseorincreaseofmorethan10%peryear.
StatutoryCitation
FederalSupplementalEducationalOpportunityGrantAllocationofFundsHEA§413D[20U.S.C.1070b-3]
FederalWorkStudyAllocationofFundsHEA§442[42U.S.C.2752]
FederalPerkinsLoansAllocationofFundsHEA§462[20U.S.C.1087bb]
Background,Rationale,andImplementationConsiderations
TheRTFTaskForcebelievesthatthecurrentallocationformulasareinequitableduetothefactthat,overtime,thecampus-basedfundingformulahasnotbeenadjustedtoreflectthedemographicredistributionofneedystudentsthathasoccurredacrossthenation.In2014,TheCampus-BasedAidAllocationTaskForcedevelopedtherecommendationsinthissection.TheFairShareformulausedtodetermineaninstitution’sallocationofcampus-basedfunds,firstcalculateseachrecipientinstitution’sneedforfunding,andthenaggregatesthoseindividualamountstoestablishthenationalneedforprogramfunds.Thecurrentschemaislargelyinsensitivetoincomechangesinthelowerincomelevelsandnotsensitiveenoughatthehigherincomelevels.Inaddition,theincomelevelsthemselveshavenotkeptpacewithnationalaverageincomelevels.Thebaseguaranteeoffunding,currentlybasedonFY1999expenditures,wasintendedtobeatemporarymeasuretomitigatelossestoindividualinstitutionsasaresultofradicalfluctuationsin
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funding.Duetothestaticnatureoftheformula,formostschools,theprioryearexpenditureislinkedtoitsprogramparticipationinthe1970’s.Thus,today’sallocationofcampus-basedfundslargelyreflectsa40-year-olddistributionofprogramfunds.Thissituationisinequitablebecausegrowingschools,servingneedierstudentpopulations,cannotincreasetheirfundingbecauseotherinstitutions’fundinglevelsarelargelyprotected.Thetaskforcerecommendseliminatingthebaseguaranteeportionoftheallocation.Thus,allocationswouldbebasedonlyonafairshareformula.Toavoidlargeswingsinallocationsfromyeartoyear,aphase-inprotectionwouldensurethatnoinstitution’sallocationwouldincreaseordecreasebymorethan10%peryear.ThetaskforcerecommendsthatthefairshareformulaforFSEOGfundingbebasedontheamountofPellGrantfundsaninstitution’sstudentsreceiveratherthanthecurrentinstitutionalneedformulathatislargelybasedonthecostofattendance.Theformulawouldtakeintoaccounteachschool’stotalofPellgrantfundsreceivedrelativetototalPellgrantsfundsawardednationally.Thisformulachangewilldirectmoreofthefederalgrantfundstothepooreststudents.ForFederalWork-Study,theformulatocalculateinstitutionalneedassumes25%ofthecostofattendanceisfinancedviaself-helpaidforallundergraduatestudents.Whilethetaskforcebelievesthattheunderlyingcost/needformulainthecurrentfairshareformulaisanappropriatemethodtoallocatefundsfortheseprograms,datademonstratethatthecurrentself-helppercentageismuchcloserto35%.Thetaskforcerecommendsthatthe25%assumptionforself-helpbeupdatedto35%,alongwitha10%phase-inprovision.
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2. TransferofCampus-BasedProgramFunds
Recommendations• Allowtransferof15%ofcurrentyearPerkinscollectionstoFSEOGorFWS.• Allow50%ofFWSallocationtobetransferredtoFSEOGorPerkins.• Allow50%ofFSEOGallocationtobetransferredtoFWS.StatutoryCitation
TransferofallotmentsHEA§488[20U.S.C.1095]
Background,Rationale,andImplementationConsiderations
Currently,thelawallowsaninstitutiontotransferupto25%ofitscampus-basedallotmentsasfollows:• FromFWS:25%ofallotmenttoFSEOGorPerkins• FromFSEOG:25%ofallotmenttoFWS• FromPerkins:25%ofallotmenttoFSEOGorFWS;however,noallocationofnewPerkinsLoan
fundinghasbeenmadeinrecentyears,sothistransferoptionhasnotbeenavailable.Carryforward/backprovisionswouldremainastheyarecurrently.
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3. DistributionofPerkinsFundAssetsifProgramCeases
Recommendation• Amendthedistributionofaninstitution’sPerkinsFundintheeventtheprogramceasestoexist
to:
Ø InstructtheSecretarytooffsettheamountoffederalcapitalcontributions(FCC)tobereturnedtothefederalgovernmentbytheaggregateamountofunfundedreimbursementforcancellations.
Ø EnsurethatinstitutionalcontributionsmadeinexcessoftheFCCormadewhentherewasnonewFCCarealsooffsetsothattheamountduethefederalgovernmentisnotoverestimated.
StatutoryCitation
DistributionofAssetsfromStudentLoanFundsHEA§466[20U.S.C.1087ff]
Background,Rationale,andImplementationConsiderations
IntheeventthattheFederalPerkinsLoanProgramceasestoexist,thelawspecifieshowtodistributetheassetsoftheschool’sPerkinsFundbetweentheschoolandthefederalgovernment(whichhasaninvestmentthroughfederalcapitalcontributions—FCC—overtheyears).AlthoughthelawprovidesforreimbursementtotheschoolforFederalPerkinsLoansservicecancellations,thefederalgovernmenthasnotprovidedsuchreimbursementinrecentyears.Intheeventthatthecurrentcampus-basedformoftheFederalPerkinsLoanProgramceasestoexist,schoolswill,mostlikely,berequiredtoreturnaportionoftheirPerkinsFundthatrepresentsthefederalcapitalcontributionsitreceivedthroughouttheyearsfromthefederalgovernment.Further,nonewFCChasbeenprovidedinrecentyears.TheRTFrecommendsthatdistributionofFundassetsshouldincludeanoffsetforunfundedreimbursementsforrequiredloancancellations.Inaddition,theprocessshouldtakeintoaccountanyinstitutionalcontributionsmadeinexcessoftheFCCormadewhentherewasnonewFCC.SchoolsshouldnotbeheldliableforunfundedPerkinsLoanreimbursementsthatresultedfromlegitimateFederalPerkinsLoancancellations.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)• FederalPerkinsLoanProgramExtensionActof2015[P.L.114-105]:(1.)eliminatesPerkins
loaneligibilityfornewgraduatestudentsbeginninginthe2016-17year;(2.)requiresschoolstoawardallsubsidizedandunsubsidizedDirectloanspriortoawardingPerkinsfornewundergraduatePerkinsborrowers;and(3.)endsallPerkinsloanauthorityeffectiveSeptember30,2017,therebydiscontinuinganygrandfatheringbeyondthatdate
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4. ExpandDefinitionofCommunityServiceforFWSProgram
Recommendations
• Allowinstitutionstocount,forcommunityservicepurposes,FWSemploymentinon-campuschildcarefacilitiesprovidednoformalruledenieschildcaretothecommunityatlargeotherthanapreferencetoservetheinstitution’sfaculty/staff/studentcommunityneedsfirstduetolimitedspace/staffingresources.
• Revisedefinitionofcommunityservicetoacknowledgethatthe“community”includesfaculty,staff,andstudentsresidingoff-campus(withinthecommonlyunderstoodconceptofcommunity).
StatutoryCitation
“Communityservices”definedHEA§441(c)(1)[42U.S.C.2751]
Background,Rationale,andImplementationConsiderations
Currentlawincludes“childcareservicesprovidedoncampusthatareopenandaccessibletothecommunity”inthedefinitionofcommunityservice.Manycampus-basedchildcarefacilitieshavewaitingliststhatnevergetfilledduetothedemandfromtheschool’semployeesandstudentsforaffordableandconvenientchildcare.Othermembersofthecommunity-at-largearethusunabletousetheseservicesbecausestudentsoremployeeshavefirstpriority.Consequently,manycampus-basedchildcarefacilitiesfailtomeetthestrictdefinitionofcommunityservice,eventhoughfacultyandstaffarethemselvesmembersofthelargercommunity,asareadultstudentslivingoff-campus.TheRTFrecommendsanamendmenttoclarifythedefinitionofcommunityservicewithregardtoon-campuschildcarefacilitiesthat,whileopentothecommunityatlarge,givepreferencetostudentsandfaculty,and,duetolimitedresources,arefilledbytheirchildren.Attheheartofthisrecommendationisthebeliefthatcollegefacultyandstaff,aswellstudentsresidingoffcampus,areinfactmembersofthesurroundingcommunity.Facultyandstaffinparticularareoftenlong-termresidents,indistinguishablefromothermembersofthecommunitywhohappentoworkforanemployerotherthanthecollege.Similarrecommendationshavebeenmadeinthepast.Attemptstoresolvethisissuethroughregulationhavenotbeensuccessfulinthenegotiatedrulemakingprocess.
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5. Set-AsideforCommunityService
Recommendation
• Replacethecurrentcommunityservicerequirementwithavoluntaryapproachwhere7%oftheannualappropriationisputintoacommunityservicecomponentprogramunderFWS,forwhichinstitutionswouldapplyseparately.
StatutoryCitation
ParticipationAgreementHEA§443(b)(2)[42U.S.C.2753(b)(2)]
Background,Rationale,andImplementationConsiderations
TheRTFrecommendsreplacingthecurrentcommunityservicerequirementwithavoluntaryapproachwhere7percentoftheannualappropriationisputintoacommunityservicecomponentprogramunderFWS,forinstitutionstoapplyforseparately.Manyschoolsalreadyhadstrong,broad-basedcommitmentstocommunityservicebeforeitwasincorporatedasarequirementunderFWS.Otherschoolsarelocatedinareaswheretheyfindplacementinqualifyingcommunityservicepositionsdifficult.Undertherecommendedapproach,thebulkoftheFWSappropriationwouldgotoschoolswithnocommunityservicestringsattached.SchoolswouldhavetheoptionofapplyingforasmuchadditionalcommunityserviceFWSastheythinktheycoulduse,withnominimumpercentageoftheiroverallallocationrequired.
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6. PrivateSectorEmploymentCap
Recommendation
• Eliminatethe25%caponprivatesectoremployment.StatutoryCitation
PrivateSectorAgreementHEA§443(c)(2)[42U.S.C.2753(c)(2)]
Background,Rationale,andImplementationConsiderations
Schoolsshouldbeabletoplacestudentswhereverjobsareavailableandreasonable.Thisrecommendationwouldnotchangeanyofthecurrentcaveatssurroundingprivatesectorplacement,includingtherequirementthatprivatesectorjobsbeacademicallyrelevanttothestudent’sprogram.
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7. FSEOGEligibilityandPellLEU
Recommendations
• RestrictFSEOGtostudentswhoseEFCfallsintothePelleligibilityrange,buteliminatethetietoactualreceiptofaPellGrant.
• EliminateorderofawardingbylowestEFC.StatutoryCitation
SelectionofRecipientsHEA§413C(c)(2)[20U.S.C.1070b-2(c)(2)]
Background,Rationale,andImplementationConsiderations
FSEOGmustbeawardedfirsttostudentswithexceptionalneed,withprioritygiventoPellGrantrecipients.Thelawdefines“studentswithexceptionalneed”asstudentswiththelowestexpectedfamilycontributionsattheinstitution.EffectiveJuly1,2012,alifetimeeligibilitylimitof6scheduledawardshasbeenimposedonPellGrantrecipients.DuetotheverylimitednatureofFSEOGfunding,therequirementthatFSEOGbeawardedfirsttoPellGrantrecipientseffectivelycausesalossofFSEOGfundingonceastudentreacheshisorherPelllifetimeeligibilityused(LEU)limit.TheRTFrecommendsthatFSEOGbeawardedtostudentswhoseEFCsfallintothePellGrantrange,regardlessofwhetherthestudentactuallyreceivesaPellGrant,andthatthe“lowestEFC”orderofawardingbeeliminated.StudentswhoseEFCswouldenablethemtoreceivePellGrantsareinfacttheneedieststudents.Furtherdefininganorderwithinthatrangeseemsunnecessarilyredundant.SchoolsshouldbeabletoestablishtheirownpackagingpolicieswithintheEFCeligibilityrange.
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ConsumerInformation
1. EffectivenessofCurrentRequirements
Recommendations
• Requireastudytoreviewtheeffectivenessofcurrentconsumerrequirementsintermsof:Ø Content(studentunderstandingofsignificance)Ø Volume(howmuchistoomuch)Ø Delivery(useofcurrenttechnologies)Ø Timing(linkedtostudentandfamilydecisionsaboutattendanceandfinancialaid)Ø Responsibility[theDepartmentofEducation(ED)vs.theschool]
� EliminatetheannualnoticeandusetheCollegeNavigatorastheprimarywaytodisseminateinformationtostudentsandparents
� Allowschoolstosatisfycompletion/graduationrateandretentionratedisclosureswithaprominentlinkfromtheschool’swebsitetotheCollegeNavigator
StatutoryCitation
InstitutionalandFinancialAssistanceInformationforStudentsHEA§485[20U.S.C.1092]Background,Rationale,andImplementationConsiderations
Theobjectiveofthestudywouldbetodeterminewhether:(1)currentrequirementsareeffectiveandcanbemademoreso;(2)leveragingexistingreportstandardizationcouldallowthefederalgovernmenttotakeovertheresponsibilityofdisclosinginstitution-specificconsumerinformationtothegeneralpublic,andprospectiveandcontinuingstudents;(3)updatingforcurrenttechnologycanestablishmorecommonalityinmethodsofreporting.Simplyput,ifinformationisavailableatED,thenschoolsshouldsimplylinktoit,notreplicateitinanotherway.Everythingshouldbewebdriven.Thus,onegoalofthestudyshouldbetodeterminewhetherprovisionofcertainelementsbyEDwouldbenefitstudentsbystandardizingpresentationanddelivery,andfacilitatingcross-schoolcomparisons.Thestudyshouldalsoexaminethemosteffectivetimingofinformationdeliverywithregardtothevariousstagesofschoolselection,applicationforadmission,applicationforfinancialaidandborrowingdecisions,decisionsregardingattendance,andenrollment.TheprovisionshouldnotallowEDtoconstruethatmoreinformationmustbeproactivelyprovidedtostudentsindividuallyratherthanpostingitontheschool’swebsiteandpointingtowherethatis.TheRTFbelievesthatreducingduplicationofinformationwilleliminateconfusionamongstudentsandreducethemultipleeffortscurrentlytakingplacewithEDandindividualinstitutions.Onesource,suchasED,willresultinmakingthefinancialaidprocesslessconfusingforstudentsandfamilies.Undersuchanapproach,institutionswouldreporttothefederalgovernmentthedetailsofconsumerinformationrequirements.Afederalgovernmentalentitywouldthenserveasthedistributeroftherequiredconsumerinformationdisclosures.Forexample,foreachschoollistedbyastudentonhis/her
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FAFSA,thisgovernmentalentitycouldprovideaside-by-sidecomparisonofconsumerinformationforeachofthelistedinstitutions.Bydrivingtheinformationtothestudentandcentralizingittooneagency,theconsumerwouldbenefitfromastandardizedapproach.ThismayrequirethebroadeningofdataelementsthataninstitutionreportstoED.ApossiblevehicleforthewideningofrequireddataelementsisthroughthecurrentIPEDSSurvey.Inthisvein,thedeliveryofnearlyallTitleIVdisclosurerequirementstostudentsandtothepublicwouldshiftfromtheinstitution’sresponsibilitytothefederalgovernment’sresponsibility,usingastandardizedformat.Byassumingresponsibilityofprovidingconsumerinformationtocontinuingstudents,EDcouldalsoofferamorestudent-centricapproachbycomplementinginstitutionaldisclosureinformationwithstudent-specificdataalreadyassociatedwiththestudentwithinNSLDSandCOD.Thisstudyshouldbeconductedbyanindependent,non-partisanfirmwithexpertiseinconsumertestingforeffectivecommunication.
InJune2014,theConsumerInformationTaskForceexpandedandrefinedthisconcept,specificallyrecommendingthatCollegeNavigatorbeusedasamoreefficientmeansofdistributingthedisclosuresandinformationcurrentlyaddressedbytheannualnoticethat
institutionsmustdistributetoeachenrolledstudent,aswellasretentionandgraduation/completionrates.ThetaskforcereportobservesthatinstitutionsalreadyreportthemajorityoftherequiredconsumerinformationintheannualIPEDSSurveywhichis,inturn,displayedontheCollegeNavigatorwebsiteforusebystudents,theirparents,andothermembersofthepublic.Thetaskforce’sreviewofwebsiteshostedbyEDshowedthattheCollegeNavigatorisaviableplatformthatcouldbeenhancedtoserveasthecentralpointofreferenceforparticipatinginstitutions’studentconsumerinformation.EnhancementstothedataprovidedbyinstitutionswouldeliminatetheneedtosendaseparatenoticetostudentswiththesameinformationandwouldpermitinstitutionstoprovidealinktotheCollegeNavigatorasthesinglesourceofstandardizedinformationforprospectiveandcontinuingstudents.ThetaskforcereportrecommendsanumberofenhancementsthatcouldbemadetotheCollegeNavigator.
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2. IntendedAudience
Recommendation
• Restricttoundergraduatestudentstherequiredprovisionofconsumerinformationregardingmetricsandotherinformationgenerallyinapplicabletograduatestudents.
StatutoryCitation
InstitutionalandFinancialAssistanceInformationforStudents(informationdisseminationactivities)HEA§485(a)[Specificallyparagraphs(L),(N),(Q),(R)asregardsundergraduatestudents,(S),(U)][20U.S.C.1092(a)]
Background,Rationale,andImplementationConsiderations
Requirementstoprovideconsumerinformationshoulddistinguishbetweenundergraduateandgraduatestudents.Requiredprovisionofinformationthatisnotrelevantto,ordoesnotusedatapertainingto,graduatestudentsshouldberestrictedtoundergraduates.
July2016Update
InMarch2016,NASFAA’sConsumerInformationandLawStudentIndebtednessTaskForceproposedthatEDreorganizeitswebsitesbycreatinglandingpagestodirectusersdownrelevantpathwayscustomizedtomeetthespecificneedsofintendedaudiences.
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3. LoanConsumerInformation
Recommendations
• MakeEDandloanservicersresponsiblefordevelopinganddistributingloan-relatedconsumerinformation,includingdebtmanagement.
• Betteralignthetimingofinformationwiththeneedforit.
• Retaintherequirementthatschoolshavecounselorsavailabletoanswerquestions.
• RequireEDtoappointanadvisorypanelforthepurposeofassessingandmakingrecommendationsonthequality,sufficiency,andprocessesforprovidingdebtcounseling.Panelmembershipshouldincluderepresentativesfromfinancialservicesorganizations,institutionsofhighereducationandconsumeradvocacyorganizations.
StatutoryCitation
LoancounselingHEA§485(b),(l)[20U.S.C.1092(b),(l)]
Background,Rationale,andImplementationConsiderations
TheDepartmenthastraditionallycraftedthesematerials,media,andprocesseswithaone-size-fits-allapproach,whichrarelyfitsmost.Thisprocessneedsabetterqualityassuranceprocess.Bettertimingwouldprovide“just-in-time”counselingonoptionsavailableatthetimetheyaremeaningfultotheborrower,somethingschoolsgenerallyhavenocontrolover.ThisrecommendationwouldcomplementIndebtednessTaskForcerecommendations#5and#7.
July2016Update
InJanuary2015,theServicingIssuesTaskForcerecommendedembeddingtheregulatoryrequirementsofentranceandexitcounselingintoED’sFinancialAwarenessCounselingTool(FACT)inordertoeducateandempowerborrowersinacomprehensivewayaboutborrowingandrepayment.CongressionalActioninthe114thCongress(2015-2016)
• StudentLoanBorrowerBillofRights[S.840]:wouldrequirelenderstoprovideinformationanddisclosuresatdesignatedpointsintherepaymentprocess
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4. DecoupleConstitutionDay,VoterRegistration,AthleticDisclosures
Recommendation
• Eliminatenon-TitleIVrelatedrequirementsconcerningConstitutionDay,VoterRegistration,andAthleticDisclosuresfromcompliancewithinTitleIVadministration.
StatutoryCitation
ConstitutionDaySection111ofDivisionJofPub.L.108-447,theConsolidatedAppropriationsAct,2005,12/8/04;118Stat.2809,3344-45(Section111)[FederalRegister:May24,2005]
Voterregistration:HEA§487(a)(23)[20U.S.C.1094(a)(23)]
Athleticdisclosures:HEA§485(a)(5),§485(e)[20U.S.C.1092(a)(5),1092(e)]
Background,Rationale,andImplementationConsiderations
Consumerinformationneedstobeusableandeasytounderstand,andneedstomakeanimpactonstudentchoice.Currently,consumerinformationcomplianceistoocomplexandincludesprovisionsforconsumerinformationdisclosuresthathavenorelationshiptoTitleIVeligibility.TheseprovisionsspecificallyhavenobearingonTitleIVstudentfinancialaidbutinsteadcontributetotheconfusion.
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5. EliminateRequirementToProvideInformationAboutStateGrantAssistance
Recommendation
• EliminatethePPArequirementthatschoolsprovideinformationaboutstategrantassistancetoalleligibleDirectLoanborrowersinfavorofinformationmaintainedbyEDonawebsitethatisalsolinkedtotheFAFSA.
StatutoryCitation
ProgramParticipationAgreementHEA§487(a)(9)[20U.S.C.1094(a)(9)]
Background,Rationale,andImplementationConsiderations
ThisinformationshouldbeavailableontheEDwebsite,butcurrenttechnologyalsoallowsEDtodisplaythisinformationwhenastudentcompletestheFAFSA.
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6. Re-examineconsumerdisclosuresnotrelatedtoTitleIV
Recommendation
� ConductastudytodeterminetheusefulnessandutilityoftheCampusSecurityReport,FireSafetyReportandtheFireLog,andDrugandAlcoholPreventionInformation.
StatutoryCitation
InstitutionalandfinancialassistanceinformationforstudentsHEA§485(a),(f),(i),(k)[20U.S.C.1092(a),(f),(i),(k)]
Background,Rationale,andImplementationConsiderations
TheConsumerInformationTaskForcemadethisrecommendationinJune2014becauseitisunclearifaninstitutionaldisclosureisthemosteffectivewaytocommunicatetheinformation,orifthepreponderanceofstudentsandfamilies,prospectiveandcurrent,findthisinformationusefulformakingsafeandinformedchoices.Consideringthenotinsignificantburdeninvolvedingatheringthisinformationandissuingthesedisclosures,thesearequestionsthatmustbestudiedandanswered.Whilethetaskforcemembersstronglysupportthatthisinformationbeavailabletoprospectiveandcurrentstudents,thescopeofthesedisclosuresgobeyondfinancialaidrecipients,andhavenodirectcorrelationtoreceivingfinancialaid.Thisconsumerinformationmustcurrentlybereceivedbyallstudents;assuch,theyshouldberelocatedtoanareaofcompliancethatmoreholisticallyassessesaninstitution’sgeneralfitnessforservingastudentpopulation.Additionally,theoffice(s)oncampusresponsibleforsendingoutthesetypesofnon-TitleIVdisclosuresshouldhaveamissionmoredirectlycorrelatedwiththesafetyandwell-beingofallstudentsataninstitution.
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7. Federal-levelstudentunitrecord
Recommendations
� Repealthebanonthefederal-levelstudentunitrecord.
� Worktodevelopalimitedstudentunitrecordthatcollectsmoreaccurateandcomprehensivedataoncontemporarystudentbehavior.
StatutoryCitation
DatabaseofstudentinformationprohibitedHEA§134(b)[20U.S.C.1015c]
Background,Rationale,andImplementationConsiderations
InJune2014,NASFAA’sConsumerinformationTaskForcerecommendedthatafederalstudentunitrecordbeestablishedtoallowstudent-leveldatatobesenttoED,ratherthanthecurrentsystemofaggregatedinstitutionaldatacapturedinIPEDS.Forpurposesofpostsecondaryeducation,astudentunitrecordwouldallowfortheassessmentof,amongotherthings,studentsuccess(includingtransferrates),completionrates,andsalariesbymajororprogram.Itcouldalsofollowstudentsastheymovethroughandbetweenpostsecondaryinstitutionsandintotheworkforce.MoreimportantlyitwouldaddresscurrentshortcomingswithIPEDS.
ADD
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• StudentRighttoKnowBeforeYouGoAct[S.1195/H.R.2518]:wouldrequirecollegesanduniversitiestoreportindividualstudenteducationalrecordsto“statewideindividual-levelintegratedpostsecondaryeducationdatasystems”
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8. Newconsumerinformationrequirements
Recommendation
� Developandconsistentlyuseaconsumer-testingmodelwhenimplementinganynewconsumerinformationrequirements.
StatutoryCitation
InstitutionalandfinancialassistanceinformationforstudentsHEA§485[20U.S.C.1092]
Background,Rationale,andImplementationConsiderations
InJune2014,theConsumerInformationTaskForcerecommendedthatnonewconsumerinformationrequirementshouldbeimposedwithoutpriorconsumertesting.Testingshouldbeconductedatthefederallevelonasmanyexistingconsumerinformationrequirementsasisfeasible,withthegoalofimprovingtheireffectiveness.CongressshoulddirectEDtoconductsuchtestingofcurrentrequirementsbyadatecertainandreportonitsfindings.
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Update,July2016 ConsumerInformation
©2016NASFAA ReauthorizationRecommendations Page81
9. ReviewcalculationmethodforStudentRight-to-KnowActdisclosures
Recommendation
� Reconsidertheexclusiveuseoffirst-time/full-timedegree-orcertificate-seekingstudentsinthecalculationofgraduationandretentionrates.
StatutoryCitation
InstitutionalandfinancialassistanceinformationforstudentsHEA§485(a)(1)(L),(U);(a)(3)-(7);[20U.S.C.1092(a)(1)(L),(U);(a)(3)-(7)]
Background,Rationale,andImplementationConsiderations
InJune2014,theStudentInformationTaskForcerecommendedthatthevalueofexclusivelyusingfirst-time/full-timedegreeorcertificateseekingstudentsinthecalculationofgraduationandretentionratesbereviewed.Manyschoolshavelargertransferpopulationsthanfirst-time/full-timestudents,soidentifyingtheappropriatemetrictocapturethatstudentpopulationwouldbebeneficialtothosestudentsintheircollegesearchprocess.Additionally,thereviewshouldincludepart-timestudentssoastoachieveamorerealisticpictureatcommunitycollegesandfor-profitinstitutions.
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Update,July2016 ReturnofTitleIVFunds
©2016NASFAA ReauthorizationRecommendations Page82
ReturnofTitleIVFundsforWithdrawingStudents
1. SimplifytheReturnofTitleIVFunds(R2T4)CalculationsandProcess
Recommendations
• Restrictlawandregulationtoundergraduates.Leavetreatmentofgraduatestudentstoinstitution.
• Narrowthedefinitionofschoolsthatarerequiredtotakeattendance:onlyiftheyarerequiredtotakeattendanceforallstudentsinagivenacademicprogramthroughouttheentirepaymentperiodbytheaccreditingorstatelicensingagency.Allowschoolsthatarenotrequiredtotakeattendancetouseadocumentedlastdateofattendanceorotheracademicactivityforanystudentattheschool’soption.
• Continuetorequirethatschoolshaveanaccessible,publicizedwithdrawalprocedurethatrecognizesthestudent’swithdrawaldateasthedatethestudentinitiatesthatprocedure.(Theschoolcontinuestodefinewhatconstitutesthebeginningofthewithdrawalprocess.)Eliminatethe“intenttowithdraw”rules.Eliminaterulesconcerningstudentsrescindingtheirdecisiontowithdrawandleavethatentirelyuptoschoolpolicy.
• Forstudentswhodonotfollowtheschool’sofficialwithdrawalprocedure(mostlystudentswhodropoutwithoutnotifyingtheschool),allowaschoolthatisnotrequiredtotakeattendancetosetthewithdrawaldateunderitsowndefinedpolicies.(UnofficialwithdrawalswouldthusnotberegulatedbyED.)Thiswouldalsoallowtheinstitutioncompletediscretiontosetthewithdrawaldateifthestudentcouldnotfollowofficialproceduresbecauseofillnessetc.
• Followthecurrentmodifiedpro-rataapproach,butsimplifytherulesasfollows:Establishweeklyincrementsbasedoncalendartimeratherthantheday-by-daycalculationthatexcludescertaindaysundercertainconditions.Fractionsofweekswouldberoundedup:attendanceinanydayoftheweekcountsthatweek.Retain60%asthepointatwhichallaidisearned,butexpressitasattendancein60%oftheweeks(sothatfractionscountasaweek).Untilthatpoint,foreachweekatleaststartedbythestudent,aidisearnedinproportiontothenumberofweeksconstituting60%(thatwouldavoidthe“cliffeffect”currentlyseen).
• Restoreauthorityforpost-withdrawaldisbursementstobeatthediscretionoffinancialaidadministratorsbasedonpublicizedinstitutionalpolicy(i.e.,notnecessarilyonacase-by-casebasis;schoolcansetparameters).Retaintherulethattheschoolshouldaskthestudentfirstifaloandisbursementshouldbemade,andextendthattoPellaswell.
• ModifytheassumptionthatTitleIVaidisappliedtoinstitutionalchargesfirst.Allowaidthatisspecifiedforaparticularcostofattendance(e.g.,tuition)andthatwillnotneedtobereturnedunderthesource’srulestobedeductedfrominstitutionalchargeswhendeterminingtheamountofunearnedaidthatmustbereturnedbytheinstitution.
• AllowmoretimeforschoolstoprocessR2T4byincreasingfrom45daysto60daystheperiodoftimetheinstitutionhastoreturnfunds.
• Amendtheorderofreturnlanguage.MaketheorderofreturnsubjecttoregulationbutspecifyTEACHGrantandloansfirst,withadirectivetorepayleastadvantageousloansfirst.RemovereferencestoFWS.
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Update,July2016 ReturnofTitleIVFunds
©2016NASFAA ReauthorizationRecommendations Page83
• DirectEDtoseekpublicinputonwaystodecreasetheburdenandcomplexityofR2T4regulationsandprocedureswithinasetperiodoftimeafterenactment,andtoconductasubsequentnegotiatedrulemakingsessiondevotedsolelytoR2T4.
• RequireEDtoreporttoCongressbyadatecertain,detailingwaysinwhichR2T4canbemadelessburdensome,includingtreatmentofvariousprogramformatssuchasmodules.
� AllowanexemptionfromR2T4requirementsforinstitutionsthatimplementsmaller,morefrequentdisbursements
StatutoryCitation
HEA§484B[20U.S.C.1091b]
Background,Rationale,andImplementationConsiderations
Undercurrentlaw,astudentwhowithdrawsbeforecompletingtheperiodforwhichheorshehasreceivedTitleIVstudentaidfundsiscurrentlyconsideredtohave“earned”therighttothosefundsonaproratedbasis.Astudentwhohascompletedmorethan60%(intime)ofthepaymentperiodhasearned100%ofaidthatwasormaystillbedisbursed.Upthroughthe60%point,aidisearnedinproportiontothepercentageoftimeenrolledasmeasuredbythelengthoftheentirepaymentperiod.Thus,astudentwhowasenrolledfor60%ofthepaymentperiodearns60%ofaid,whileastudentwhowasenrolled61%oftimeearns100%ofaid.Astudentwhowasenrolledevenonedayearnsaportionofhisorheraid,whichmustbedisbursedoratleastoffered.Undercurrentregulation,thesecalculationsareperformedindaysforcredithourprograms(withscheduledbreaksofatleast5daysexcluded)orinscheduledhoursforclockhourprograms.Thelynchpinofthecalculationisdeterminingthestudent’swithdrawaldate.Schoolsmusthaveawithdrawalprocessthatstudentscaneasilyaccess.Awithdrawaldatecanbeidentifiedforstudentswhofollowthoseprocedures,althoughtherearecomplicationseveninthataspectoftherules.Studentswhodropoutwithoutnotifyingtheschoolarefarmoredifficulttotreat,unlesstheschooltakesattendance,whichisamatterofacademicpurviewunlessanaccreditingagencyorstatelicensingagencyrequiresit.Thelawdifferentiatesbetweenschoolsthatareorarenot“requiredtotakeattendance”indefiningwithdrawaldate,buttheDepartmenthasgonefarbeyondthatsimpledistinctionindefiningwhatismeantby“requiredtotakeattendance.”WhilethebasicconceptunderlyingthereturnofTitleIVfunds(R2T4)isquitestraightforward,thedetailshavebecomesocomplicatedthatithasbecomeveryburdensometoexplaintostudentsandtoadminister.EventheDepartmentneedsover200pagesintheHandbooktodescribeandillustratethisprocess.Errorsarevirtuallyinevitableinsocomplexasetofrules.Further,giventhewiderangeofprogramformats,individualstudentcircumstances,andotherfactors,itisverydifficulttoaddressallscenariosthatariselogicallyundera“onesizefitsall,”highlyregulatedapproach.ThelawshouldlayoutthebasicrequirementsandparametersofanR2T4policy,whichschoolsmustfillinbuthavesomediscretionover.Thelawshouldclearlyidentifythoseareasoverwhichtheinstitutionhassolediscretion.GraduatestudentsreceivenoPellorsubsidizedloans.Institutionalinvestmentingraduatestudentsisgenerallymuchhigherandselectionforadmissionmorerigorous.Thus,thelawshouldaddressonlyundergraduates,andEDshouldnotregulateR2T4policyforgraduatestudents.
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Update,July2016 ReturnofTitleIVFunds
©2016NASFAA ReauthorizationRecommendations Page84
Anexampleoftheproposedmodificationstothepro-ratacalculationofearned/unearnedaidwouldbeasfollows.AsemesterrunsfromSeptember3,2013,throughDecember13,whichis15weeksbythecalendar.Astudentearnsallaidbyremainingenrolledin60%oftheweeksinapaymentperiod—0.6x15=9weeksregardlessofanybreaks.The9thweekbeginsOctober27.AstudentwhowithdrawsanytimeduringtheweekofOctober27hasearnedallaid.Forthe15-weeksemester,astudentwhowithdrawsanytimeduringthefirstweekearns1/9thofaid.Astudentwhowithdrawsanytimeduringthe8thweekearns8/9thsofaid.Furtherdiscussionregardingthetreatmentofmodulesisneeded.However,thislevelofdetailshouldnotbespecifiedinlaw,butshouldbethesubjectofadedicatednegotiatedrulemaking.
InJune2015,theInnovativeLearningModelsTaskForcerecommendedthat,inalignmentwiththeCompetencyBasedEducationExperimentalSiteInitiative,institutionsimplementingamodelofsmaller,morefrequentdisbursements(threemonthsorless),beexemptfromHEA
section484Band34CFR668.22,ReturnofTitleIVfundsuponstudentwithdrawalfromschool.
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July2016Update
InJuly2015,theReturnofTitleIVFunds(R2T4)TaskForceencouragedacloserlookattheobjectivesofafederalreturnpolicy,andproposedanumberofalternativeapproachestoconsiderinfurtherdevelopingtheRTFrecommendationsoraddressingadditionalissues.FurtheractionisneededtoformulateoneormoreoftheconsiderationsintorecommendationsuponwhichtheNASFAABoardofDirectorscouldact,andfurtherstudyofthetreatmentofmodulesisalsoneeded.Thetaskforcesuggestedconsideringthefollowingideas:
• EliminatethereturnofTitleIVfundsrequirementaltogetherinviewofotherprocessesthatlimitastudent’slong-termaccesstofederalstudentaid,suchassatisfactoryacademicprogress(SAP),loanandloansubsidylimits,lifetimePelllimits,andunusualenrollmenthistoryreviews.
• IncorporateR2T4intoSAP.• Movethedeterminationofwithdrawalandcalculationofunearnedfundstotheendofthe
paymentperiod.• Eliminatethereturnofloanfunds.
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AppendixA:FederalIncomeTaxExemptionsforDependentsUnderthetaxcodeataxpayerandspouse,ifapplicable,areentitledtopersonalexemptions.Additionally,adependent,whoisthuseligibletobeclaimedasanexemptiononanotherperson’sincometaxreturn,isapersonwhoqualifiesassuchundereitheroftwocategories:qualifyingchildorqualifyingrelative.Ineitherinstance,thedependentmustbeaU.S.citizen,residentalienornational,oraresidentofCanadaorMexico.Theannualdollarvalueofpersonalanddependentexemptionsisthesame.Qualifyingchild.Therearefivetestsaqualifyingchildmustmeetinordertobeconsideredadependentofataxpayer.Abasicdescriptionofeachtestfollows.TherearecertainexceptionstotheResidencytestthatpertaininatypicalorextraordinarycases,forexample,childrenofdivorcedorseparatedparents,andkidnappedanddeceasedchildren.1.Relationship.Thechildmustbethetaxpayer’sson,daughter,stepchild,fosterchild,brother,
sister,halfbrother,halfsister,stepbrother,stepsister,oradescendantofanyoftheaforementionedpersons.
2.Age.Attheendofthecalendaryear,thechildmustbe
(a)underage19andyoungerthanthetaxpayer(orthespouseiffilingjointly),or
(b)underage24andfull-timestudentforatleastpartofatleasteachoffivemonthsduringtheyear,andyoungerthanthetaxpayer(orthespouseiffilingjointly),orFull-time:Definedbyschool.
(c)anyageiftotallyandpermanentlydisabled.Permanentlyandtotallydisabled.Achildispermanentlyandtotallydisabledif:
• Heorshecannotengageinanysubstantialgainfulactivitybecauseofaphysicalormentalcondition;and
• Adoctordeterminestheconditionhaslastedorcanbeexpectedtolastcontinuouslyforatleastayearorcanleadtodeath.
3.Residency.Thechildmusthavelivedwiththetaxpayerformorethanhalfoftheyear.
Temporaryabsencesforeducationdonotdisqualify.
4.Support.Thechildmustnothaveprovidedmorethanhalfofhisorherownsupportfortheyear.5.Jointtaxreturn.Thechildisnotfilingajointtaxreturnfortheyear.Thequalifyingchildtestsaresimilartothoseforincludingcertainfamilymembersinthenumberinthehouseholdforfederalneedanalysispurposes.Therearetwonotableexceptions.Intermsofa“residencytest,”federalneedanalysisdoesnotrequireasiblingofthefinancialaidapplicanttoliveinthehomeinordertobeincludedinthatapplicant’sfamilysize.Also,afosterchildisnotincludedinthehouseholdsizeifthefosterparentsreceivesupportpaymentsforthatfosterchild.Anotherdifferenceisthatfederalneedanalysisdoesnotincludeanagecriterionforsiblings,exceptintermsoftheindependentstudentdefinition.
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AppendixA
Qualifyingrelative.Therearefourtestsaqualifyingrelativemustmeetinordertobeconsideredadependentofataxpayer.Abasicdescriptionofeachtestfollows.TherearecertainexceptionstotheMemberofhouseholdorrelationship,Grossincome,andSupportteststhatpertaininatypicalcases,forexample,multiplesupportagreementsbetweendivorcedparents,andkidnappedanddeceasedchildren.1.Notaqualifyingchild.Thepersoncannotbethequalifyingchildofanytaxpayer.2.Memberofhousehold/relationship.Thepersonmust
(a)berelatedtothetaxpayerthoughnotnecessarilylivingwiththetaxpayer1,or(b)livewiththetaxpayerallyearasamemberofthetaxpayer’shousehold(andthis
relationshipdoesnotviolatelocallaw).3.Grossincome.Theperson’sgrossincomefortheyearmustbelessthan$3,800(2012amount,
indexedannuallyforinflation).
4.Support.Morethanhalfoftheperson’stotalsupportfortheyearmustbeprovidedbythetaxpayer.
Thequalifyingrelativeprovisionextendsthetaxexemptionfordependentstoadditionalpersonsgiventhataqualifyingchildcanneverbeaqualifyingrelative.UndertheMemberofhousehold/relationshiptestthequalifyingrelativeneednotberelatedtothetaxpayer,thoughthatpersonmusthavelivedinthehouseholdallyearandthetaxpayermusthaveprovidedmorethanhalfofthatperson’stotalsupportfortheyear.Also,thequalifyingrelative’sgrossincomecannotexceedthedollarvalueoftheexemptionforthetaxyear.Aswiththequalifyingchildtests,thequalifyingrelativetestsaresimilartothoseforincludingcertainfamilymembersinthenumberinthehouseholdforfederalneedanalysispurposes,withtwonotableexceptions.Federalneedanalysistreatmentdoesnotconsiderthequalifyingrelative’sgrossincome,andapersonwhoisrelatedtothetaxpayerneednotlivewiththetaxpayer.Finally,animportantnoteaboutsupportthatisprovidedtoanotherperson.Thetaxcodespeakstosupportduringthetaxyear,whereasfederalneedanalysisgenerallyspeakstosupportfortheupcomingawardyear.
1Child,stepchild,fosterchild,oradescendantofanyofthese(e.g.grandchild)Brother,sister,halfbrother,halfsister,stepbrotherorstepsisterFather,mother,grandparent,uncle,aunt,nephew,niece,orotherdirectancestorFather-in-law,mother-in-law,brother-in-law,sister-in-law,son-in-law,ordaughter-in-law
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AppendixA
Crosswalk:TitleIVHouseholdMembersandFederalIncomeTaxExemptions
DependentStudentsforTitleIVPurposes
TITLEIVHOUSEHOLDMEMBERS
(TITLEIVREQUIREMENTSSATISFIED)
PARENT(S)FEDERALINCOMETAXEXEMPTION?
Student(FAFSAApplicant) Yes,iflivedwithparent(s)morethanhalfoftheyear(residencytest)
Parent(s) Yes
Applicant’ssiblings:
• Parent(s)providesmorethanhalfsupport Yes,ifmeettheageandresidencytests
• DependentunderTitleIVrules Yes,ifmeettheage,residencyandsupporttests
Otherpersonslivingwithparent(s):
• Relatedtotheparent(s),or Yes• Notrelatedtotheparent(s),and Yes
• Grossincomeexceeds$3,800(2012) No
IndependentStudentsforTitleIVPurposes
TITLEIVHOUSEHOLDMEMBERS(TITLEIVREQUIREMENTSSATISFIED)
STUDENT’SFEDERALINCOMETAXEXEMPTION?
Student(FAFSAApplicant) Yes
Spouse Yes
Children Yes,ifmeettheageandresidencytests
Otherpersonslivingwithstudent: • Relatedtothestudent,or Yes
• Notrelatedtothestudent,and Yes• Grossincomeexceeds$3,800(2012) No
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AppendixA
Crosswalk:FederalIncomeTaxExemptionsandTitleIVHouseholdMembers
DependentStudentsforTitleIVPurposes
PARENT(S)FEDERALINCOMETAXEXEMPTION
(TAXCODEREQUIREMENTSSATISFIED)
TITLEIVHOUSEHOLDMEMBER?
Student(FAFSAApplicant) Yes
Parent(s) Yes
Applicant’ssiblings Yes
Otherpersonsrelatedtotheparent(s): • Livingwiththeparent(s) Yes
• Notlivingwiththeparent(s) No
Otherpersonsnotrelatedtotheparent(s) Yes
IndependentStudentsforTitleIVPurposes
STUDENT’SFEDERALINCOMETAXEXEMPTION(TAXCODEREQUIREMENTSSATISFIED)
TITLEIVHOUSEHOLDMEMBER?
Student(FAFSAApplicant) Yes
Spouse Yes
Children Yes
Otherpersonsrelatedtothestudent: • Livingwiththestudent Yes
• Notlivingwiththestudent No
Otherpersonsnotrelatedtothestudent Yes
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Appendix B: FAFSA Application Process: Three Pathways
After"initial"questions"related"to"demographics"and"dependency"status,"the"FAFSA"will"ask"applicants"about"
receipt"of"SNAP"and/or"SSI"benefits"and"for"those"who"answer"“No”,"tax"filing"status."The"applicant’s"
response(s)"will"then"steer"the"applicant"down"one"of"three"pathways."
YES
Did any of the following individuals receive SNAP and/or SSI benefits?
• You (the student) and/or spouse
• Your parent(dependentstudents only)
• Any other memberof your household
Did the following tax filer complete a 1040A, 1040 EZ or 1040 without forms or schedules?
• You/spouse(independentstudents only)
• Your parent(dependentstudents only)
Did the following individuals file a tax return?
• You/spouse(independentstudents only)
• Your parent(dependentstudents only)
Applicant eligible for maximum Pell Grant. No additional financial information requested
Applicant must provide limited financial information
Applicant must provide limited income and asset information
Applicant must provide complete income and asset information
YES
NO
YES
NO
PATH 1 PATH 2 PATH 3
NO