By Jeff Baker, Director Policy Liaison and Implementation, Federal Student Aid

The following letter from U.S. Education Secretary Arne Duncan was e-mailed to college presidents October 26, 2009

THE SECRETARY OF EDUCATION WASHINGTON, DC 20202

As this academic year moves forward, it is hard to believe we already need to consider the 2010-2011 year to come. In doing so, I am writing to seek your assistance and offer mine in taking the necessary steps to ensure uninterrupted access to federal student loans by ensuring your institution is Direct Loan-ready for the 2010-2011 academic year.

Eighteen months ago, uncertainty in the financial markets seriously threatened the availability of Federal Family Education Loan (FFEL) Program loans for the upcoming 2008-09 academic year. Congress acted quickly to provide the Department of Education with unprecedented temporary authority to directly finance loans made through FFEL Program lenders. The goal was to ensure that every student or parent with a need for a federal loan would be able to get one, whether or not the student’s educational institution had taken the steps to provide loans through the Direct Loan Program (where loan access was not affected). This stopgap measure, the Ensuring Continued Access to Student Loans Act (ECASLA), was helpful in assisting FFEL Program lenders in making $61.3 billion in new loans to students and their parents this past year. And the bulk of those funds—some $46.3 billion—was provided by the Department of Education.

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Did you know that the Higher Education Opportunity Act (HEOA) changed the requirements for FAFSA preparers? Effective August 14, 2008, only persons who are paid a fee to help the student complete the FAFSA are considered preparers. Those who advise students without charging a fee, such as high school counselors and financial aid administrators, are not preparers.

Preparers must include their name, their company’s name (if applicable), their address or the company address, and either their SSN or the company Employer Identification Number (EIN, as assigned by the IRS). With the paper FAFSA, the preparer must also sign and date the form. The wording for the related questions on the 2009-10 FAFSA has been updated.

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Guidance on Federal Veterans’ Education Benefits for Purposes of the Title IV Student Assistance Programs

Author: Jana Hernandes, Service Director, Operations, Federal Student Aid (September 10, 2009)

We are pleased to announce the availability of “A Guide to Creating a Policies and Procedures Manual.” We have developed this guide to assist schools in creating and revising written documentation of how they comply with the various federal regulations pertaining to the administration of the Title IV programs. The guide features activities designed to help a school meet the minimum general requirements with regard to documented policies and procedures. The document also highlights additional areas for which written policies and procedures are suggested in the Federal Student Aid Handbook.

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Author: David Bergeron, Acting Deputy Assistant Secretary for Policy, Planning, and Innovation, Office of Postsecondary Education (August 13, 2009)

On July 1, 2009, President Obama signed H.R. 1777 into law as Public Law 111-39, making technical corrections to the Higher Education Act (HEA). Among other things, H.R. 1777 updated the list of programs that meet the definition of “veterans’ education benefits” in section 480(c) of the HEA by including new programs and revising the statutory citations. Those programs are included in the attachment to this announcement. Note that section 480(c) includes, along with a listing of education benefit programs administered by the Department of Veterans Affairs (VA), certain ROTC programs that are administered by the Department of Defense (DOD).

In an electronic announcement posted on IFAP on July 2, 2009 we informed you that H.R. 1777 changed the effective date for the exclusion of Federal veterans’ education benefits, as defined in section 480(c) of the HEA, as estimated financial assistance (EFA) to July 1, 2009 (beginning with the 2009-2010 award year).

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July 12, 2009

In a January 30, 2009 Electronic Announcement on the Information for Financial Aid Professionals (IFAP) Web site, we provided customer service contact information for Federal Family Education Loan (FFEL) Program loans that the Department of Education (the Department) purchases from FFEL loan holders. Through methods commonly referred to as “PUT” by FFEL loan holders and the Department, the Department becomes the owner and servicer of the purchased loans. Upon purchase of a loan, both the prior FFEL loan holder and the Department correspond with an affected borrower.

Toll-Free Hours of Phone No. Operation

• For Collections 866/938-4749 Mon-Fri 8am-11pm (EST)
• For Schools 866/938-4750 Mon-Fri 8am-8:30pm (EST)
• For Borrowers 800/508-1378 Mon-Fri  8am-11pm (EST)

June 17, 2009

The Department awarded Title IV Student Loan Management/Servicing contracts to AES/PHEAA of Harrisburg, Pennsylvania; Great Lakes Education Loan Services, Inc. of Madison, Wisconsin; Nelnet, Inc. of Lincoln, Nebraska; and Sallie Mae  Corporation of Reston, Virginia. The award of these contracts provides the Department with the capacity necessary to support anticipated increases in the number of loans owned by the Department and ensures borrowers receive the assistance they need to effectively manage their federal student loan obligations.

Author: James F. Manning, Acting Chief Operating Officer

The Higher Education Opportunity Act of 2008 (HEOA) requires institutions to post a net price calculator (NPC) on their web sites by August 2011. The National Center for Education Statistics (NCES) is required to provide a template for this calculator by August 2009. The HEOA permits institutions to use the net price calculator developed by the NCES or to develop their own calculator — as long as this calculator includes “at a minimum the same data elements” found in the NCES calculator.

June 17, 2009

Beginning 7/1/09 federal student loan borrowers can take advantage of the new Income Based Repayment (IBR) Option available to assist with repayment. Borrowers with high debt and lower income levels can benefi t from this option especially during these economic times. Borrowers also pursuing careers in public service can benefi t from this option.

Monthly payments are based on income, not level of indebtedness. For example, a borrower ith a total  indebtedness of 40,000.00 in federal loans would generally be required to pay  $ 460.32/month with a standard 10 year repayment plan. If that borrower’s AGI was 35,000.00 /year they could take advantage of IBR and cap their monthly payment at $ 234.44/month. Documentation regarding a borrower’s annual income level must be collected by the lender or servicer in order to process the IBR option for a borrower. The IRS is working on electronic communication options for this but in the interim, paper needs to be exchanged. Until electronic communication is available the DOE is allowing lenders to request borrowers submit a copy of their most recent federal tax return with an original “pen and ink” signature. However, lenders have the option to obtain written certifi cations from borrowers or other documentation to verify income information.  Additional information on this topic is available in a DOE Electronic Announcement posted 6/12/2009

by Jeff Baker, Director Policy Liaison and Implementation, Federal Student Aid

HEOA section 480(j)(1) of the Higher Education Act was originally changed to exclude veterans education benefits  as an estimated financial aid resource effective 7/1/2010.   On 7/1/2009 President Obama signed H.R. 1777 making technical corrections to move the effective date to 7/1/2009 for the 2009-2010 award year.  Institutions may no longer consider any Federal veterans education benefits as a  financial aid resource for the student. This includes all benefits received by the veteran, his/her spouse and his/her dependent. Veteran education benefits continue to not be  considered as an income source in calculating the EFC for the student.  All institutions must re-review and if necessary make updates and repackage all students receiving Federal veterans education benefits for the 2009-2010 award year.  Any loans already processed for the 2009-2010 award year for the FFEL or Direct Loan programs would need to be reprocessed as well if eligibility has changed.

Student bankruptcy is an ongoing problem for the multitude of student loan programs. To address this problem, Congress passed 11 U.S.C.Sec 523(a)(8) of the Bankrupcy Code. Sec. 523(a)(8) states:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this Title does not discharge an individual debtor from any debt…(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or part by a governmental unit or nonprofit institution, or for any obligation to repay funds received as an educational benefit, scholarship or stipend unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents. Read the rest of this entry »