MASFSA conference May

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					Spring 2010 Federal Perkins
       Loan Update
 Budget  Update
 Legislative Update
 Regulatory Update
 Perkins Loan Issues
 Grassroots
    COHEAO Announcements
  Tell your Friends and Colleagues to join.
   Membership is needed now more than ever.
1. Perkins is not dead; much remains to do.
2. COHEAO also working on other issues:
   accounts receivable management, financial
   literacy, institutional loans (private loans.)
 Discounts for Teleconferences, Annual, Mid-
   Year Conferences
 Mid-Year Conference: July 25-27, 2010
 Annual Conference, DC: Jan. 22-26, 2011
     Obama ED Budget for 2011
  A Repeat of the 2010 budget for the most part.
  Adopted House-Passed SAFRA bill
Financial Aid Changes:
 Increase Pell Grant max to $5,710, make it an
  automatic entitlement, increase by 1% over CPI
  every year
 Eliminate FFEL Program – all schools to Direct
  Lending as of July 1, 2010
 Work Study level at $980.5 million
 SEOG level at $757.5 million
 Simplify the FAFSA, tie in with IRS data
        Obama ED Budget for 2011
   Limit federal debt repayment under Income Based
    Repayment to 10% of disposable income, defined as
    150% of the poverty level, Down from 15%
   Forgive the loan balance after 20 years of IBR
    payments, Down from 25 years
   Eliminate the LEAP Program
   Eliminate Academic Competitiveness Grants
   Eliminate SMART Grants
   Continue TEACH “Grants” BUT 80% of “Grants”
    expected to become Unsubsidized Stafford Loans
       $93 million in “grants” only costs $12.7 million
       Eliminate The Perkins Loan Program
       Create a New “Direct Perkins Loan Program”
  What About Perkins Loans???
  We had to destroy (the program) in
 “
 order to save it.” – the Direct Perkins
  Loan proposal
First proposed in Administration’s FY 2010
     Passed by House in September 2009 as H.R.
     Senate HELP Committee wrote a bill and
      almost, almost, almost introduced it…. But
  Congress on Perkins in HEOA of
          2008: Keep it
 It is the sense of Congress that the Federal
 Perkins Loan Program, which provides low-
 interest loans to help needy students finance the
 costs of postsecondary education, is an
 important part of Federal student aid, and should
 remain a campus-based aid program at
 colleges and universities.”
            Direct Perkins Loan Idea
   Modernize and expand Perkins Program
       New Perkins program = new unsub Direct Stafford
       Receive 6 billion in “mandatory” funding
       Expanded to all schools
         • From 1,800 to 4,400
       5% interest would accrue while in school and grace
       Other terms and conditions would be same as
        unsubsidized Stafford
       Federal Share of current loans sent to ED
       Overhaul of the administration of the program
         • Fully originated and administrated by the Dept of ED
         Direct Perkins Loan Idea
 Administration      says:
     2.7 million more students will receive loans
     Loans to be targeted to needy students and
      the schools they attend
       • Schools with many Pell recipients
     Colleges encouraged to control tuition
       • New formula would encourage cost control and
         targeting of grants to prevent excessive
     Budget rules require ED servicing
       • Arcane federal accounting/scoring rules
            Congressional Action
 StudentAid and Fiscal Responsibility Act
 of 2009 (SAFRA) – H.R. 3221
     Implements President’s 2010 budget requests
     Introduced July 13, 2009
     Full committee markup July 21, 2009
     Passed the House on Sept. 17, 2009
       • Vote 253 to 171
     Senate working on their version
                   “Direct Perkins”:
                  Three Major Flaws
   In-School Interest Benefit dropped: 5% interest accrues
    from time loans made
       For undergrad: adds $5,000 to debt after 4 years
       It’s a numbers game: Money would be taken from student
        interest payments and spent on other federal “priorities”
       ED Justification: better than “private” loans
   All new loan servicing transferred to national Direct Loan
    servicing contractors
       Possibly also FFELP non-profits in some states
       Schools completely out of the servicing picture
       Responsible for possible “match”, default rates
   Perkins’ unique cancellation benefits killed
       ICBR supposed to substitute, along with DL’s cancellation after
        10 years of payments while in public service job.
                 What Passed
   H.R. 4872 Health Care and Education
    Affordability Reconciliation Act
       House passed on 3/21/10 vote 220-211
       Senate passed with vote 56-43
 H.R. 4872 consists of amendments to
  health care reform and a modified version
  of SAFRA.
 DCL GEN-10-5 briefly addresses these
               What Passed
 As  of 7/1/10, all Stafford, PLUS and
  Consolidation Loans will be made via the
  Direct Loan Program.
 Additional mandatory funding is provided
  to augment funds appropriated each year.
     increase the federal maximum Pell Grant
      each year by the change in the Consumer
      Price Index.
     According to ED/Labor Committee the
      maximum Pell for 2010 is $5,500
                    What Passed
 The legislation uses $13.6 billion of the savings
  to cover most of approximately $19 billion
  shortfall in current Pell Grant funding.
 Bill does not include ongoing increases in Pell at
  the rate of inflation plus 1% as in the SAFRA bill.
       The annual appropriation process will fund the bulk of
        each year’s Pell grant.
       No guarantee that there will be an annual increase in
        the total grant.
                What Passed
 $750 million is included for “College
  Access Challenge Grants” through 2014.
     Rate of $150 million per year.
 $50  million goes to assist school transition
  into Direct Loan program.
 $2.55 billion goes to HBCU as well as
  Minority Serving Institutions
                What Passed
        Profit direct loan servicers receive
 Not-for
 funding if needed.
     If meet minimum standards, they would be
      allocated a minimum 100,000 loan accounts
      annually, with the first 100,000 eligible for a
      special pricing tier.
                What Passed
 $2billion is set aside for community
 colleges via Trade Adjustment Act funding
 under the Dept of Labor.
     The larger American Graduation Initiative was
      dropped from bill due to budget issues.
               What Passed
 Income-based Repayment was modified
 for new borrowers beginning 2014.
     Borrower payments are limited to 10% of
      discretionary income. (reduced from 15%)
     Unpaid balance would be forgiven after 20
      years. (reduced from 25%)
            What Passed
 $25 million is provided in fiscal year 2010
 and 2011 for Direct Loan servicers “to
 retain jobs at locations where such
 servicers were servicing FFEL loans on
               What Passed
 For one year beginning 7/1/10, borrowers
 who are not in repayment on all there
 loans can consolidate into the Direct Loan
 Program if they have loans in at lease two
 of the following categories;
     FFELP Loans,
     FFELP loans that have been sold to the
     Direct Loans
               What Passed
 TheCurrent Perkins Loan Program is not
     The administration's proposal (and passed by
      the House in Sept) to create a new “Direct
      Perkins Loan Program” was deleted in its
    What Happened to the Rest?
 CBO “scores” proposed changes to a law
  against a “baseline” of current services.
 A new baseline is developed by CBO every
  January. The January 2010 baseline resulted in
  less savings from ending the FFEL program than
  January 2009
       Economy changed, schools converted to DL, Pell
        Grants ballooned, Pell shortfall appeared
 Money needed to offset costs of Health Care
  Reform legislation, $2 billion for deficit reduction.
 The result: a pared down spending bill, no
  Perkins changes
                 What’s Next
 COHEAO  will turn it’s attention to extend
 and expand the current Perkins Program.
    Most important matter (because of timing) is
      • President’s FY2011 budget request was written in
        the expectation of the “Direct Perkins”
      • No FCC or Cancellation funding is currently
                What’s Next
   Need to address the 2012 sunset for Perkins.
     • It requires the federal share of the Perkins Loan
       revolving fund to be sent to the Department or ED
     • This date has been extended several times, last in
     • COHEAO’s high priority to eliminate or extend this
               COHEAO Actions
 COHEAO fought vigorously in 2009 and 2010 to
  retain benefits of the traditional Perkins Program
  while supporting its expansion and continuation.
 Sometimes at odds with others in the Higher Ed
  Community, often worked together – now
 Grassroots actions led by Board of Directors:
       dozens of Conference calls arranged with Senate
        offices and home-state colleges and commercial
       Dozens of in-person meetings
   In the end, the changed CBO score led to all
    Perkins changes being dropped.
         Grassroots Efforts
 We  must work to fund and extend the
  Perkins Loan program
 COHEAO is working on new ideas to
  preserve the program
 Support Appropriations
 Support Perkins
 See for details
 Stay In Touch with your Congressional
 Regulatory - Perkins Loan Issues
 Economic     Hardship Deferment
     College Cost Reduction and Access Act
      (CCRAA, P.L. 110-84).
     Definition changes effective 7/1/09
     Eliminates the 20/220 qualification for Econ
 Regulatory - Perkins Loan Issues
 Electronic   Announcements
     Perkins Cohort Default Rates
     Orange Book 6/30/09 rates
     Posted 5/6/10
     U.S. aggregate 10.04%
    Regulatory - Perkins Loan Issues
   Total and Permanent Disability
        New Definition as of 7/1/10

         The condition of an individual who is (1) unable to engage in any
          substantial gainful activity by reason of any medically
          determinable physical or mental impairment that –
        (i) can be expected to result in death;
        (ii) has lasted for a continuous period of not less than 60 months;
        (iii) can be expected to last for a continuous period of not less
          than 60 months; or
        (2) Has been determined by the Secretary of Veterans Affairs to
          be unemployable due to a service connected disability.
 Regulatory - Perkins Loan Issues
 DearColleague Letter CB-09-06 and CB-
     Published 9/28/09
     Approval of the revised Perkins MPN and
      Addendum to Perkins MPN
     MPN contains changes to cancellation,
      rehabilitation, forbearance and deferment
     Must begin using by 12/31/09
           HHS Loan Changes
 Health   Care Reform Bill
     Signed into law 3/23/10
     New Law – Patient Protection and
      Affordability Care Act of 2010 (PPACA)
     Made changes to NSL and PCL loans
              NSL Loan Changes
   Loan Funding Limits increased
       $2,500 changed to $3,000
       $4,000 (for last two academic years) changed to
   Aggregate Limits increased
       $13,000 changed to $17,000 for academic year 10/11
       After AY11 amounts adjusted to provide cost of
        attendance increase for the yearly and aggregate
   P.L. 111-148, Sec 5202(a), Loan Agreements
           NSL Loan Changes
 Date   of Enrollment
     Change in date a student of financial need
      must be enrolled in a nursing program in
      order to be eligible to receive NSL funds.
     6/30/86 changed to 6/30/00
     111-148, Sec 5202(b)(1), Loan
 P.L.
              NSL Loan Changes
   Partial Loan Cancellation Date
       The date for a partial loan cancellation formerly
        applied to a loan a student received before xx/xx/xx.
       9/29/79 changed to 9/29/95
   A student who received a NSL prior to 9/29/95
    can still have up to 85% cancelled for
       full-time employment as a professional nurse in public
        or non-profit.
       Nursing experience prior to 3/23/10 will not be eligible
        for cancellation.
   P.L. 111-148, Sec 5202(b)(2)
           PCL Loan Changes
   Primary Health Care Service Requirements
     New PCL loans made on or after 3/23/10.

     New PCL required to enter a residency and

      practice in primary health care for 10 years
      (including the years spent in residency) or
      until the loan is repaid in full, which ever
      occurs first.
     P.L. 111-148, Sec 5201(a)(1)(B),

      Requirements for Students
           PCL Loan Changes
 Service   Default Rate
     Borrowers who receive a PCL on or after
     and fail to comply with the service
      requirement will have their loans begin to
      accrue at a rate of 2% per year greater than
      the rate at which the student would have paid
      if compliant.
     P.L. 111-148, Sec 5201(a)(3), Noncompliance
      by Student
           PCL Loan Changes
         Financial info requirement for
 Parental
 Independent Students
     Independent students no longer required to
      submit parental financial information to
      determine financial need.
     Determination of need of such information is
      at discretion of the school.
             PCL Loan Changes
 Definition: a student who is at least 24 years of
  age and has not been listed as a dependent on
  his or her parent’s tax forms within the last three
 Changes to MPN required, old MPN still in
       Borrower with old MPN with new disbursements on or
        after 3/23/10 required to sign new terms and
   P.L. 111-148, Sec 5201(b), Student Loan
         Lori Hartung
Todd, Bremer & Lawson, Inc.

       Audrey Atkins