Federal Pell Grant Degree Restrictions

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					    Federal Update


        Carney McCullough
Office of Postsecondary Education
                                    1
 FY 07 Appropriations
 FY 08 President’s Budget Request
 Legislation
 Recent Regulations
 Secretary’s Commission on the Future of
  Higher Education
 Negotiated Rulemaking
 Higher Education Reconciliation Act of 2005
  (HERA)
 Cohort Default Rates

                                                2
              Title IV Program Budgets
                   Appropriations

                   FY 2006           FY 2007*         FY 2008*
Program
                   (AY 06-07)        (AY 07-08)       (AY 08-09)
Pell Grant     $13,045,230,000   $12,745,329,000   $15,203,562,000
(Max Award)         $4,050            $4,050           $4,600
FSEOG          $   770,932,800   $   770,932,800   $             -
FWS            $   980,354,485   $   980,492,000   $   980,492,000
Perkins        $    65,470,363   $    65,470,363   $             -
LEAP           $    64,987,000   $    64,468,000   $             -
ACG/SMART      $   790,000,000   $   850,000,000   $ 1,180,000,000



* President's FY 2008 Budget Submission
                                                                     3
      Title IV Program Budgets
            Aid Available
 Program               FY 2007*               FY 2008*
                       (AY 07-08)             (AY 08-09)
 Pell Grant       $   12,954,000,000      $   15,176,000,000
(Max Award)              $4,050                 $4,600
 FSEOG            $      975,000,000      $                -
 FWS              $    1,175,000,000      $    1,175,000,000
 Perkins          $    1,104,000,000      $                -
 LEAP             $      165,000,000      $                -
 ACG/SMART        $      730,000,000      $    1,180,000,000
 Loans            $   65,999,000,000      $   72,895,000,000
 TOTAL            $ 83,102,000,000        $ 90,426,000,000
* President's FY 2008 Budget Submission                        4
 Title IV Program Budgets
     Status of Appropriations
                    FY 2006           FY 2007**          FY 2007**
Program
                    (AY 06-07)          House             Senate
Pell Grant      $13,045,230,000   $13,932,000,000
(Max Award)          $4,050            $4,310
FSEOG           $   770,932,800   $    771,000,000
FWS             $   980,354,485   $    980,000,000
Perkins         $    65,470,363   $     65,000,000
LEAP            $    64,987,000   $     65,000,000
ACG/SMART       $   790,000,000   $    850,000,000   $    850,000,000



** Fourth Continuing Resolution (H.J. Res. 20)
                                                                        5
Fiscal Year 2008
Budget Proposals


                   6
   Fiscal Year 2008 Budget
           Proposals

 Increase maximum Pell Grants to
  $4,600 effective for 2008-09 award
  year
 Increase ACG awards by 50% for the
  2008-09 award year
  – 1st year awards $1,125
  – 2nd year awards $1,950

                                       7
   Fiscal Year 2008 Budget
       Proposals, con’t.

 Year round Pell Grants at eligible 2-
  and 4-year degree-granting institutions
 Limit Pell Grant eligibility to the
  equivalent of 16 semesters
 Eliminate tuition sensitivity rule in Pell
  Grant Program

                                               8
   Fiscal Year 2008 Budget
       Proposals, con’t.

 Exclude Section 529 savings and
  investment accounts from need
  analysis
 Implement a consent-based approach
  to matching applicant data on the
  FAFSA with the IRS

                                       9
   Fiscal Year 2008 Budget
       Proposals, con’t.

 Increase annual Stafford loan limits for
  juniors and seniors to $7,500
 Reduce interest subsidies to lenders
  by ½ percent



                                             10
   Fiscal Year 2008 Budget
       Proposals, con’t.

 Reduce default insurance from 97% to
  95%
 Reduce guaranty agency default
  collection payments
 Move guaranty agency account
  maintenance fees to a unit cost basis

                                          11
   Fiscal Year 2008 Budget
       Proposals, con’t.

 Increase consolidation lender fee to
  1%
 Eliminate funding for FSEOG, Federal
  Perkins Loan, and LEAP



                                         12
Higher Education
   Legislation


                   13
Higher Education Legislation

 Higher Education Reconciliation Act of
  2005
 Third Continuing Resolution, 2007
  – Extends appropriations through Feb. 15
 Third Higher Education Extension Act of
  2006
  – Extends the HEA through June 30, 2007

                                             14
  Higher Education Legislation

 Third Higher Education Extension Act of
  2006 (cont.)
  – New restrictions on Eligible Lender Trustee
    arrangements with schools
  – Definition of Hispanic-serving institution
  – Clarification of GA account maintenance
    fees
  – New loan discharge for survivors of 9/11
    victims
                                                  15
    Pending Higher Education
          Legislation
 The College Student Relief Act of 2007—
  H.R.5 – Passed House 1/17/07
  – Reduces interest rates for undergrad
    subsidized Stafford loans to 3.4% by 2011
  – Decreases lender SAP
  – Reduces lender insurance to 95%
  – Eliminates “Exceptional Performers”
  – Increases lender origination fees to 1%
  – Reduces GA collection fees
  – Increases annual fee to 1.30% on consolidation

                                                     16
   Pending Higher Education
         Legislation

 Student Debt Relief Act – S. 359
  – Increases Pell Grant maximums
  – Authorizes Student Aid Reward Program
  – Reduces interest rate for subsidized
    Stafford Loans to 3.4% by 2012
  – Establishes Fair Payment Assurance Plan
  – Changes economic hardship deferment
  – Reduces Direct Loan origination fees
                                              17
Recent Regulations




                     18
  Recently Published Title IV
      Program Regulations
 Interim Final Regulations w/comments
  – ACG/SMART – July 3, 2006
  – Other HERA issues – August 9, 2006
 Final Regulations
  – ACG/SMART – November 1, 2006
  – Other HERA issues – November 1, 2006
 Interim Final Regulations Implementing Loan
  Discharge for 9/11 Survivors w/comments –
  December 29, 2006
                                                19
Secretary’s Commission
        on the
   Future of Higher
      Education

                         20
Secretary’s Commission on the
  Future of Higher Education
Final Report – ―A Test of Leadership:Charting
the Future of Higher Education‖

―U.S. higher education needs to improve in
dramatic ways,‖ changing from ―a system
primarily based on reputation to one based
on performance.‖

http://www.ed.gov/about/bdscomm/list/hiedfuture/index.html
                                                             21
 Secretary’s Action Plan
Accessibility
  ―There are far too many Americans who want
  to go to college but cannot—because they’re
  either not prepared or cannot afford it.‖
Affordability
  ―There is little to no information on why costs
  are so high and what we’re getting in return.‖
Accountability
  ―No current ranking system of colleges and
  universities directly measures the most critical
  point—student performance and learning.‖           22
 On the Horizon

 Engaging with low-income, disadvantaged
  traditional students who never apply for
  financial aid
  – Paperless FAFSA
  – Estimate financial aid for juniors in high school
  – Link outreach with Upward Bound Programs




                                                        23
On the Horizon, con’t

  Revising the application process
   – Total student experience
   – Customizable for each student
   – Federal Government assuming the
     responsibility for verification


    Summit in March



                                       24
Negotiated
Rulemaking


             25
Federal Register Notices –

   August 18, 2006
   December 8, 2006
   January 30, 2007




                             26
4 Regional Hearings –

   Berkeley, CA
   Chicago, IL
   Orlando, FL
   Washington, D.C.



                        27
Four Negotiating Teams –

   Loans
   ACG/National SMART
   General Provisions
   Accreditation



                           28
Meetings – Loans

Session 1 – December 12-14, 2006
Session 2 – February 5-7, 2007
Session 3 – March 12-14, 2007




                                   29
Meetings – ACG/SMART

Session 1 – February 5-7, 2007
Session 2 – March 5-7, 2007
Session 3 – April 16-18, 2007




                                 30
Meetings – General Provisions

Session 1 – February 7-9, 2007
Session 2 – March 14-16, 2007
Session 3 – April 18-20, 2007




                                 31
Meetings – Accreditation

Session 1 – February 21-23, 2007
Session 2 – March 26-28, 2007
Session 3 – April 24-26, 2007




                                   32
  Negotiated Rulemaking –
          Loan Issues
 Loans Committee Agenda
 FFEL/DL Issues
  – ID Theft
  – Entrance Counseling for PLUS borrowers
  – Maximum Length of Loan Period
  – Frequency of Capitalization for Consolidation
    Loan Borrowers
  – Determination of Deferment Eligibility by One
    Loan Holder
                                                    33
    Negotiated Rulemaking –
            Loan Issues
 Loans Committee Agenda (cont.)
 FFEL Issues
  – Eligible Lender Trustee Relationships
  – Preferred Lender
  – Prohibited Inducements
 FFEL/DL/Perkins Issues
  – Use of True & Exact Copy of death cert.
  – Prospective Discharge for TPD purposes

                                              34
    Negotiated Rulemaking –
       Loan Issues

 Loans Committee Agenda (cont.)
 FFEL/Perkins Issues
  – Standardize NSLDS Reporting
  – Retention of Disbursement Records &
    Certification of E-signatures for Assigned
    MPNs


                                                 35
   Negotiated Rulemaking –
      Loan Issues
 Loans Committee Agenda (cont.)
 Perkins Loan Issues
  – Clarify eligibility requirements for Child &
    Family Service Agency Cancellation
  – Define ―reasonable‖ Collection Costs
  – Mandate Assignment of Defaulted Perkins
    Loans

                                                   36
   Negotiated Rulemaking –
      ACG/SMART Issues
 ACG/SMART Committee Agenda
  –   Rigorous secondary school programs
  –   Mandatory institutional participation
  –   Eligibility of certification programs/ACG
  –   Disbursement requirements
  –   Use of grade point average
  –   Academic year progression
  –   Majors
  –   Successful completion of rigorous program
  –   Departmental monitoring
                                                  37
   Negotiated Rulemaking – General
          Provisions Issues

 General Provisions/Institutional Eligibility
  Committee Agenda
   – Provide consistency in definitions for enrollment
     status and student type
   – Provide consistent disbursement requirements for
     Nonstandard and Nonterm programs
   – Cash management
   – Eliminate single disbursement for Perkins and
     FSEOG


                                                         38
Negotiated Rulemaking – General
    Provisions Issues, con’t
– Student confirmation for post-withdrawal
  disbursement of a grant
– Pro-ration of awards for Federal Pell Grants, ACG,
  and SMART
– Treatment with only standard terms for Pell, ACG,
  and SMART
– Pro-rating loans for graduating seniors who take
  less than full schedule in final semester/term
– Paying for prior year expenses
– Certification of a loan for transfer students in non-
  term environment

                                                          39
     Negotiated Rulemaking –
       Accreditation Issues

 Accreditation Agenda
  – Measures of student achievement
  – Relationship of process standards to
    student achievement
  – Consideration of mission in application of
    standards
  – Monitoring of institutions by accrediting
    organizations

                                                 40
   Negotiated Rulemaking –
  Accreditation Issues, con’t


– Substantive change
– Due Process
– Transfer of credit
– Technical and process improvements




                                       41
      Tentative Calendar

 Sessions: December 2006, February,
  March & April 2007
 NPRM: June 2007
 60-day comment period
 Final rules: November 1, 2007
 Effective date: June 1, 2008 with
  possible early implementation
                                       42
       Negotiating Rulemaking
       Web Site

http://www.ed.gov/policy/highered/reg/hea
  rulemaking/2007/nr.html




                                            43
 Higher Education
Reconciliation Act of
        2005
       (HERA)



                        44
        FFEL and Direct Loans

Loan Limits in FFEL and Direct Loan:
Increases annual base loan limits for --
     First year students from $2,625 to $3,500


     Second year students from $3,500 to $4,500


Increases annual additional unsub for --
     Graduate students from $10,000 to $12,000.


     Prep for Grad Program from $5,000 to $7,000


     Teacher Certification from $5,000 to $7,000


 Aggregate loan limits are not changed.
 Effective for loans first disbursed on or after July 1,
   2007                                                    45
Calculation of EFC – 2006-2007

  SIMPLIFIED NEEDS TEST AND
        AUTO ZERO EFC
 Increases to $20,000 the threshold
  under which a family would
  automatically have an EFC of zero.
 Eliminates consideration of
  dependent student’s tax return for
  both SNT and Auto-Zero EFC.
                                       46
Calculation of EFC – 2006-2007

 SIMPLIFIED NEEDS TEST AND
       AUTO ZERO EFC
 Tax return alternative for parents or
 students that received, during the
 base year, benefits from a Federal
 means-tested program, such as
 supplemental security income, food
 stamp, free and reduced priced
 school lunch, TANF, and WIC.
                                         47
Calculation of EFC – 2006-2007
 Active Duty Military
  Adds active duty military to the criteria that makes
  a student independent
  Action: Dependency Override.
 529 Tuition Savings Plans
  Treats all 529 Pre-Paid and Tuition Savings Plans
  as assets of the owner, unless the owner is the
  dependent student.
  Action: Update Assets – Do not include as EFA
 Small Businesses
  Excludes small-businesses from assets
  Action: Update Assets
                                                         48
Calculation of EFC – 2007-2008


 Income Protection Allowances
 Increases Income Protection
 Allowances.
 Asset Assessment Rates
 Decreases Asset Assessment Rates



                                    49
    New Grant Programs

 Academic Competitiveness Grant
  (ACG)

 National Science and
  Mathematics Access to Retain
  Talent Grant (National SMART
  Grant)
                                   50
  Authorization and Funding

Funding for these programs is not subject
  to the annual appropriations process:

  2006-07 -- $790 million
  2007-08 -- $850 million
  2008-09 -- $920 million
  2009-10 -- $960 million
  2010-11 -- $1.01 billion

                                            51
       Rules and Regulations

 Interim Final Regulations for the 2006-2007 award year
  published on July 3, 2006.
      Invitation to comment through August 17, 2006 for
       possible changes for the 2007-2008 award year.
      Received 80 comments.

   Final Regulations for the 2007-2008 award year and
       beyond published on November 1, 2006.
       Institutions may implement changes made in the
       final regulation for the 2006-2007 award year.




                                                           52
  Rules and Regulations

One Significant Change:
 July 3 interim final rule required student to
  have received a Pell Grant in the same
  payment period (e.g., term) to receive an
  ACG or National SMART Grant.
 November 1 final rule requires student to
  have received a Pell Grant sometime in the
  same award year to receive an ACG or
  National SMART Grant.

                                                  53
 Institutional Responsibilities

 Institutions are responsible for implementing
  the new programs within the guidance
  provided.

 The Secretary recognizes that institutions will
  face significant challenges in implementing the
  programs with virtually no lead time for the
  2006-2007 award year.

 These facts will be considered during reviews of
  an institution’s implementation of the programs.
                                                     54
Basic Program
Requirements



                55
Programs Are Similar in Some Ways

Student Eligibility
 U.S. Citizen Only – Eligible Non-Citizens Do Not
  Qualify
 Pell Grant Recipient During Same Award Year
 Full-time Enrollment for Payment Period
 Enrolled in Degree Program
 Progression by Student Academic Year
 Only One Scheduled Award for Each Academic
  Year


                                                     56
  Separate and Distinct Programs

             ACG                        National SMART
1st & 2nd academic years of a    3rd & 4th academic years of a
two or four year degree          four year degree program.
program.
Requires completion of           Requires student to be in a
rigorous secondary school        designated major.
program of study.
1st Academic Year - $ 750        3rd Academic Year - $4,000
2nd Academic Year- $1,300        4th Academic Year - $4,000

GPA of at least 3.0 as of the    GPA of at least 3.0 at each
end of 1st academic year only.   disbursement.


                                                                 57
    Duration of Student Eligibility
 For ACG, students are restricted to:
     100% of a Year 1 ACG scheduled award for
      the student’s first academic year, and
     100% of a Year 2 ACG scheduled award for
      the student’s second academic year.
 For National SMART Grant, students are
  restricted to:
     100% of a Year 3 SMART Grant scheduled
      award for the student’s third academic
      year.
     100% of a Year 4 SMART Grant scheduled
      award for the student’s fourth academic
      year.
                                                 58
          ACG/National Smart
           NSLDS Reporting
 December 16 – Reporting to COD began
 December 17 – COD to NSLDS
 December 17 – NSLDS FAP Access
 January 1 – 2007-08 ISIRs include 2006-07
  ACG/SMART disbursements
 January 1 – Transfer Monitoring includes
  2006-07 ACG/SMART disbursements
     Will not include ACG/SMART if previously
      reported on ISIR
                                                 59
      NSLDS and ACG/SMART


 No ACG/SMART Grant award data will
  appear on 2006-2007 ISIRs.
 Beginning on January 1, 2007:
    2007-08 ACG/SMART Grant disbursement
     data will appear on 2007-08 ISIRs.
    ISIR Financial Aid History will display up to
     three ACG and SMART Grant disbursements
     for the 2007-08 award year.


                                                     60
Default Rates



                61
62
     Cohort Default Rates by Sector

School Type        FY 2002   FY 2003   FY 2004
Public – 2 Year     8.5%      7.6%      8.3%
Public – 4 Year     4.0%      3.3%      3.6%
Private – 2 Year    6.1%      6.3%      7.4.%
Private – 4 Year    3.1%      2.6%      2.9%
Proprietary         8.7%      7.3%      8.8%
Foreign             2.0%      1.8%      1.5%
National Rate       5.2%      4.5%      5.1%
                                                 63
            SASFAA Default Rates
                 (FY 2002 – FY 2004)

State            FY 2002     FY 2003   FY 2004
Alabama           6.8%        5.6%      6.0%
Florida           7.0%        6.0%      6.1%
Georgia           6.6%        5.8%      6.7%
Kentucky          6.7%        5.2%      5.8%
Mississippi       6.4%        5.4%      6.4%
North Carolina    4.2%        3.3%      3.6%
South Carolina    4.6%        3.5%      4.8%
Tennessee         6.1%        5.6%      6.4%
Virginia          4.4%        3.5%      4.3%
                                                 61
 Contact Information
Your feedback and comments are
      welcomed. If you have
   questions, you may contact:

  Carney.McCullough@ed.gov
        202-502-7639

                                 65

				
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