Session #63: FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education

Session #63
FFEL Regulatory and Policy

Update
Pamela Moran
Office of Postsecondary
Education
Agenda
• Legislation
• Negotiated Rulemaking- Loans

Regulations
• Other Regulations
• FFELP Forms
2
Legislation
3
Reauthorization of the Higher
Education Act
• Third Higher Education
Extension Act of 2007 (S.2258)
–Extends the Higher Education
Act through March 31, 2008
• Senate Reauthorization Bill-
S.1642
• House Reauthorization Bill-H.R.
4137
4
Other Legislation
• HEROES Act – Reauthorized and
made permanent –September
30, 2007 (P.L. 110-93)
• College Cost Reduction and
Access Act of 2007 – September
27, 2007 (P.L. 110-84)
5
College Cost Reduction and Access
Act of 2007 - Budget Reconciliation
Loan forgiveness for:

• Public service employees
• Non-defaulted Direct Loan
borrowers only
• Balance of principal and interest
forgiven after 120 payments made
after 10/1/2007
6
• FFEL-only borrowers authorized to

seek DL Consolidation for this
purpose –effective July 1, 2008
• Included reconsolidation of
existing FFEL Consolidation Loan
7
• Must repay under any combination

of:
- income-based repayment
- income-contingent repayment
- 10-year standard repayment
- any DL repayment based on 10-
year repayment amounts
8
• Must be employed in public service

during 120-payment period
• Must be employed in public service

job at time of forgiveness
9
Act of 2007- Budget Reconciliation
Public Service Jobs Include:

• Full-time job in government or
emergency management
• Military service
• Public safety
• Public health
10
•Public education (including early

childhood education)
•Law enforcement
•Public interest law services
(including prosecution or public
defense or legal advocacy in low-
income communities at a non-
profit organization)
11
Act – Budget Reconciliation
• Public child care
• Public service for the elderly and

disabled
• School-based library science and

other school-based services
12
Act – Budget Reconciliation
• Service at a 501(c)(3)
organization
• Full-time faculty at a Tribal

college and in other high-needs
areas determined by ED
13
• Creates new Income-Based

repayment plan for FFEL and DL
borrowers (other than parent
PLUS)-effective July 1, 2009
• Creates partial financial hardship

deferment
14
• Partial financial hardship =

annual repayments exceed 15%
of AGI minus 150% of poverty
line based on family size based
on standard 10-year repayment
• Unpaid amounts forgiven after

25 years
15
• New economic hardship covers

borrowers with income not
exceeding 150% of poverty line
applicable to the borrower’s
family size –effective October 1,
2007
• Debt-to-income standard
retained
16
• Reduces subsidized undergrad

Stafford Loan Interest Rates in
FFEL and Direct Loan Programs:
–6% for loans first disbursed
7/1/2008-6/30/2009
–5.6% for loans first disbursed
7/1/2009 – 6/30/2010
17
• Reduces subsidized undergrad

Stafford Loan Interest Rates in
FFEL and Direct Loan Programs:
7/1/2010 – 6/30/2011
7/1/2011 – 6/30/2012
18
• HERA Military Service Deferment
Amended- Effective 10/1/2007
–Eliminates 3-Year Limit
–Extends deferment for 180-
days after demobilization
–Covers all title IV loans, not
just loans disbursed on/after
7/1/2001
19
• New Military Deferment for 13

months after service for-
effective 10/1/2007:
–National Guard, Reserve, and
Retired Military Personnel
Called to Active Duty
–Enrolled or enrolled within 6
months of activation
20
• Parent PLUS Auction Authorized
• FFEL Parent PLUS Loans for new

borrowers beginning July 1,
2009
21
• State-based auction every 2

years
• Origination rights limited to 2

lowest bidders
22
• Bids based on lender special

allowance rate (SAP)
• Winning lender must make PLUS

loans available to each parent
of a dependent attending school
in the State
23
• Secretary selects parent PLUS

lender-of-last-resort (LLR) for
each state
24
College Cost Reduction and Access Act of
2007 - Budget Reconciliation
• Reduction in loan holder special

allowance rate (SAP)
• Effective for loans first disbursed

on or after October 1, 2007
25
College Cost Reduction and Access Act of
2007 - Budget Reconciliation
• Different reductions for “for
profit” and “not-for-profit” loan
holders
• “For profit”:
-- Stafford and Consolidation
0.55% Reduction
-- PLUS (incl. Grad PLUS)
0.85% reduction
26
College Cost Reduction and Access Act
of 2007 - Budget Reconciliation
• “Not-for-profit”
-- Stafford and Consolidation
0.40% reduction
-- PLUS (incl.Grad PLUS)
0.70% reduction
27
• Must be acting as “not-for-profit”
on date of enactment unless
waived by State
• “Not-for-Profit” defined as:

-- a State, or a political
subdivision, authority, agency,
or instrumentality of State
28
-- Entity described under

section 150(d) of IRS Code
-- Entity described under

section 501 (c)(3) of IRS Code
29
-- Eligible lender trustee acting

on behalf of State, other State-
related entity, or 150(d)(2) or
501(c)(3) entity
30
• Lender Default Insurance

Reduced
• Loans first disbursed on/after

October 1, 2012
• Reduced from 97% to 95%
31
• Exceptional Performer Status

Eliminated
• Effective for lenders/lender

servicers on October 1, 2007
32
• Reduces GA account
maintenance fee from 0.10% to
0.06%- payments received
on/after October 1, 2007
33
• Reduces GA default collection

retention to 16% - payments
received on/after October 1,
2007
34
2006-2007
Negotiated
Rulemaking
35
Four Negotiating Teams –
• Loans – NPRM 8/7/07

• ACG/National Smart – NPRM
8/7/07
• General Provisions NPRM 8/8/07
• Accreditation – No Regulations
36
LOANS NPRM
• “No Consensus” on NPRM
• NPRM reflected what ED heard

and deliberations of Secretary’s
Loan Task Force
37
Regulations Calendar
• NPRM: June 12, 2007

• Deadline for Comments:
August 13, 2007
• 241 Comments Received
38
Regulations Calendar
• Final rules: no later than

November 1, 2007
• Effective date: July 1, 2008

with possible early voluntary
implementation
39
Loans Issues -All
• Simplification of • NSLDS
the Deferment Reporting
Process • Certification of
• Accurate & Electronic
Complete Copy
of Death Signatures
Certificate • Record
• Total and Retention on
Permanent MPNs
Disability
40
Loans Issues – FFEL/DL
• Maximum Loan Period

• Identity Theft
• Grad/Prof PLUS Loan
Counseling
41
Loans Issues – FFEL
• Prohibited Inducements
• Use of Preferred Lenders
• FFEL Loan Certification
• Frequency of Capitalization
• Eligible Lender Trustees (ELTs)
42
Loans Issues - Perkins
• Mandatory Assignment of
Defaulted Loans
• Reasonable Collection Costs
Definition
• Child and Family Services
Cancellation
43
Simplified Deferment Process
• §§682.210 and 685.204 allows
deferment based on information
from another loan holder or from
NSLDS if:
–“New” borrower with first loan
disbursed on or after July 1,
1993
– Written or verbal deferment
request received
44
–FFEL or Direct Loan deferment

already granted for same
reason and same period
–Loan holder has no conflicting

information on borrower’s
eligibility
45
• Notice to borrower required
• FFEL and Direct Loan deferment

may be granted only for
Economic Hardship based on
Perkins Loan deferment
46
• §§682.210 and 685.204
amended to allow military
service or armed forces
deferment based on:
- request of borrower or
borrower’s representative
- documentation establishing
borrower eligibility
47
• Required notice to the borrower

and borrower’s representative, if
applicable, that the deferment
has been granted
48
Accurate and Complete
Copy of a Death
Certificate
• §682.402 for death discharges
amended to allow use of an
accurate and complete
photocopy of a borrower’s death
certificate
49
Accurate and Complete
Copy of a Death
Certificate
NOTE:“exceptional
circumstances” discharge by
chief executive officer based
on “other reliable information”
unchanged
50
Total and Permanent
Disability Discharges
• Regulations governing TPD

discharges restructured in
§682.402
• Eligibility requirements and the

discharge process clarified
51
Total and Permanent
Disability Discharges
• Regulations:
-Require TPD application
submission within 90 days of
date certified by physician
–Define borrower’s TPD date as
physician’s certification date
52
Total and Permanent Disability
(TPD) Discharges
–DO NOT disqualify the

borrower for final discharge
based on Title IV loans or
earned income before the TPD
date
53
Total and Permanent Disability (TPD)
Discharges
-DO disqualify the borrower for

final discharge based on Title IV
loans from TPD date until date of
Secretary’s initial TPD
determination and during the
conditional discharge period
54
Total and Permanent Disability (TPD)
Discharges
–Make the Conditional

Discharge Period a 3-year
prospective period from TPD
date
55
(TPD) Discharges
• Regulations:
-Allow minimal earned income
during conditional discharge
period (no Title IV loans)
-Require notice to borrower that
no payments on loan are due
during the discharge process
56
(TPD) Discharges
–Require only return of loan

payments made after the TPD
date (date of physician
certification of disability)
57
NSLDS Reporting Requirements
• §§682.208, 682.401 and

682.414 amended to require
enrollment and loan status
reporting (or any other Title IV-
related data required by the
Secretary) by Secretary’s
established deadline
58
• Deadlines to be published in
Federal Register Notice or DCL
format
59
• FFEL guaranty agency

enrollment and loan status
reporting deadline to loan
holders reduced from 60 to 35
days
60
Certification of Electronic
Signatures on Assigned MPNs
• §§682.409 and 682.414

amended to require loan holders
to maintain certification of
creation and maintenance of E-
MPN process, including borrower
authentication and signature
process
61
• Requires loan holders to retain

an original electronically signed
MPN for at least 3 years after all
MPN’s loans are satisfied
62
• Upon Secretary’s request:

–loan holder must provide the
certification and cooperate in
all activities to enforce an
assigned loan, including
testimony in a legal proceeding
63
• Required certification includes:

-Description of borrower’s steps
in executing the signed MPN
–Copy of each screen the
borrower saw when signing the
MPN electronically
64
Signatures on Assigned FFEL
Loan MPNs
–Description of field edits and

other security measures used
to ensure data integrity
through the loan origination
process
65
Loan MPNs
–Description of storage
process/systems for signed
MPNs to ensure document
integrity (no alterations)
66
Loan MPNs
–Documentation supporting the

lender’s authentication
electronic signature process
–All other evidence required by
the Secretary
67
Loan MPNs
• Documents to resolve factual
disputes on assigned loans
required within 10 business days
of ED’s request
• Full and complete access to

electronic records required until
all MPN-derived loans satisfied
68
Record Retention Requirements on
FFEL MPNs Assigned to the
Department
• §682.409 amended to require a

Guaranty Agency to submit
lender disbursement records on
assigned loans to ED
69
Maximum Loan Period
§682.603 and 682.604 amended to:
• Eliminate 12-month loan period
maximum
• Provide flexibility in non-term and
nonstandard term program loan
certification
• Provide flexibility in rescheduling
“stop out and return” disbursements
within 180-day period.
70
Loan Counseling for Grad/Prof PLUS
Borrowers
• §682.603 requires, before
certifying PLUS, comparative info
to eligible Stafford non-applicant:
–PLUS/Stafford interest rates,
interest accrual periods, and
grace periods
• Opportunity for Stafford Loan must
be given before receipt of PLUS
Loan
71
Loan Counseling for Grad/Prof PLUS
Borrowers
• Initial counseling required for all

PLUS borrowers
• Exit counseling required for

Stafford/PLUS combination
borrowers
72
Use of Eligible Lender Trustees
(ELTs) by FFEL Schools
• Lender definition in §682.200
amended to prohibit new ELT
relationships with schools
on/after September 30, 2006
• §682.602:HERA FFEL school
lender limits applied to school
ELT arrangements 1/1/2007
73
Frequency of Interest Capitalization
in FFEL Program
• §682.202 amended to limit
frequency of capitalization on
Federal Consolidation Loans
during in-school deferment
period
• Lenders may only capitalize
unpaid interest at expiration of
deferment period
74
Identity Theft Discharge
• HERA provided for a FFEL
and Direct Loan discharge if
borrower’s loan eligibility was
falsely certified due to the
crime of identity theft
• Implementing Interim and
Revised Final Regulations
published in 2006
75
• §682.402 defines “crime” for
discharge as judicial
determination by local, State, or
Federal court that “crime” of
identity theft has occurred and
names perpetrator
• Requires individual did not
receive or benefit from loan
proceeds
76
• No change to existing discharge
eligibility requirements
• Upon receipt of valid identity theft
report/notice alleging ID theft,
lender may:
–suspend credit bureau reporting
on a loan for 120 days
–grant a 120-day administrative
forbearance
77
School FFEL Loan Certification
• §682.603 (f) reorganized and
amended
• FFEL schools May Not:
- Refuse/Delay certification
based on choice of lender or
GA
- Assign lender to first-time
borrower in award packaging
or through other methods
78
School FFEL Loan Certification
• Engage in a pattern or practice
of discrimination to deny FFEL
access
• Refuse to certify or certify a

reduced amount except on a
case-by-case, documented basis
with reason provided to
borrower in writing
79
School Preferred Lender List in FFELP
Background:
• School’s Option
• Allowed But Never Regulated
• Evolution:
–Default prevention
–Simplification E-transmission
–Competition
–Proliferation of borrower
benefits
80
Regulations require:
• List must contain at least 3
unaffiliated lenders
• “Unaffiliated” means:
–No common control or
ownership
–No common directors,
trustees, or general partners
81
§682.212 requires a school to:
• Disclose method/criteria for
lender inclusion on the list
• Provide comparative information
on borrower benefits offered by
listed lenders
–Department to provide model
format for school use
82
• Include prominent statement

advising borrowers that use of
the school’s preferred lender
not required
• Update at least annually
83
Under §682.212, a school MUST
NOT:
• Include lenders that were
solicited and provided school or
school- employee benefits, but
may include lenders solicited for
best borrower benefits
84
Under §682.212, a school MUST

NOT:
• Assign lender to first-time
borrower
• Cause any unnecessary delays
in certification for borrowers not
using one of the school’s
preferred lenders
85
FFEL Program Lender and GA
Prohibited Inducements
Background:
• Enacted as part of 1986
Amendments to HEA
• 1998 Amendments to HEA
allowed lenders and GAs to
provide assistance to schools
comparable to what Secretary
provides to Direct Loan schools
86
• Affects lender eligibility and

participation and GA
participation
• Prior regulations primarily

reflect statutory provisions
87
• Regulations codify current
interpretive and clarifying
guidance on prohibited
inducements and retain
Prohibited and Permissible
Activities format of 1989 DCL
guidance (89-L-189, February
1989)
88
• Regulation introduce use of:
-- “rebuttable presumption”
in formal enforcement actions
• Expands use of Federal Trade

Commission’s (FTC) “Holder
Rule” to loans for all schools
89
FFEL Program Prohibited
Inducements -Lenders
• Lender definition in §682.200
forbids an eligible lender, directly or
through an agent from:
- Offering directly or indirectly,
points, premiums, payments or
other inducements to a school or
any party to secure FFEL
applications or loan volume
90
Inducements -Lenders
Such as:
 Payments to prospective
borrowers, including prizes and
additional financial aid
91
Inducements - Lenders
 Payments or other benefits to a
school, school-affiliated
organization, or other individual for
loan apps, volume of loans, or
placement on a preferred lender list
 Payment and service on lender
advisory boards
92
 Payments or other benefits to

student lender reps on campus or
other solicitors to secure loan
applications from prospective
borrowers
93
 Payment of referral fees, or

processing fees not required to
comply with federal or state law,
to another lender or other party
94
 Payment of conference or training
registration, transportation, and
lodging costs for school or school-
affiliated organization employees
 Payment of entertainment
expenses related to lender-
sponsored activities for the same
95
 Undertaking philanthropic
activities in exchange for FFEL
applications, volume, or
placement on a school’s
preferred lender list
96
 Providing staffing services to a
school, except a foreign school,
other than on a short-term, non-
recurring emergency basis,
including compensated and third-
party contractual services
97
§682.200 provides that an eligible

lender may ONLY provide:
• Assistance to schools
comparable to that provided DL
schools by the Secretary
98
• Support for or participation in

student aid/financial literacy
outreach with schools and
guaranty agencies, except in-
person initial and exit counseling
99
• Reasonable costs of meals,
refreshments, and receptions for
meeting, training, or
conferences if open to all
attendees
• Toll-free numbers for FFEL info
and school loan data
transmission
100
• Reduced origination fees

(statutorily authorized)
• Reduced interest rates

(statutorily authorized)
101
• Payment of Federal Default fees
(not statutorily prohibited)
• Borrower benefits under

repayment incentive and certain
loan forgiveness programs
• Items of nominal value
102
Inducements – GAs
• §682.401(e) same as lenders,

except GAs permitted to pay:
-- travel and lodging expenses
related to school employee
service on GA advisory or
governing board
103
Inducements – GAs
-- reasonable costs of meals

and refreshments for GA-
sponsored training, workshops,
and forums permitted
104
Negotiated Rulemaking
2007-2008
• 2009-10 and subsequent years

• Federal Register notice Fall
2007
• Regional hearings in Fall 2007
• Negotiating committees TBD
105
Negotiated Rulemaking
2007-2008
• Committees expected to meet

January – March 2008
• NPRMS in June 2008
• Final regulations by
November 1, 2008
106
Other Regulations
and Forms
107
9/28/07
• Part of HEA Extension –

P.L. 109-292
• Loan Discharge for 9/11 spouses
and parents
• Interim Final Regulations –
December 28, 2006
108
9/28/07
• Revised Final Regulations –

September 28, 2007
–Spouse of eligible public
servant
–Parent of eligible victim
–Includes portion of
Consolidation Loan
109
Forms
MILITARY DEFERMENT (HERA)

-Form Posted to IFAP
June 11, 2007-GEN-07-04
-Requires CCRAA revisions
9/11 DISCHARGE APPLICATION
- Form Posted to IFAP
November 9, 2007–GEN-07-08
110
Forms
• Federal Consolidation Loan
Application and Promissory Note
-Form Posted to IFAP 3/12/07
-Requires CCRAA addendum
• PLUS MPN
-Form approved by OMB and
to be posted to IFAP with
CCRAA changes
111
Forms
• Federal Stafford MPN
-Requires CCRAA addendum
• Teacher Loan Forgiveness –

undergoing ED review prior to
entering Paperwork Act clearance
process
112
Contact Information
We appreciate your feedback and
comments. We can be reached
at:
• Phone:(202) 502-7732
• Email: Pamela.Moran@ed.gov
• Fax: (202) 502-7873
113

Session #63: FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Session #63: FFEL Regulatory and Policy Update Pamela Moran Office of Postsecondary Education

Uploaded by

Copyright:

Available Formats

Session #63

FFEL Regulatory and Policy

• Negotiated Rulemaking- Loans

Loan forgiveness for:

• FFEL-only borrowers authorized to

• Must repay under any combination

• Must be employed in public service

• Must be employed in public service

Public Service Jobs Include:

•Public education (including early

• Public service for the elderly and

• School-based library science and

• Full-time faculty at a Tribal

• Creates new Income-Based

• Creates partial financial hardship

• Partial financial hardship =

• Unpaid amounts forgiven after

• New economic hardship covers

• Reduces subsidized undergrad

• Reduces subsidized undergrad

• New Military Deferment for 13

• Parent PLUS Auction Authorized

• FFEL Parent PLUS Loans for new

• State-based auction every 2

• Origination rights limited to 2

• Bids based on lender special

• Winning lender must make PLUS

• Secretary selects parent PLUS

• Reduction in loan holder special

• Effective for loans first disbursed

• “Not-for-Profit” defined as:

-- Entity described under

-- Entity described under

-- Eligible lender trustee acting

• Lender Default Insurance

• Loans first disbursed on/after

• Reduced from 97% to 95%

• Exceptional Performer Status

• Effective for lenders/lender

• Reduces GA default collection

• Loans – NPRM 8/7/07

• “No Consensus” on NPRM

• NPRM reflected what ED heard

• NPRM: June 12, 2007

• Final rules: no later than

• Effective date: July 1, 2008

• Maximum Loan Period

–FFEL or Direct Loan deferment

–Loan holder has no conflicting

• Notice to borrower required

• FFEL and Direct Loan deferment

• Required notice to the borrower

• Regulations governing TPD

• Eligibility requirements and the

–DO NOT disqualify the

-DO disqualify the borrower for

–Make the Conditional

–Require only return of loan

• §§682.208, 682.401 and

• FFEL guaranty agency

• §§682.409 and 682.414

• Requires loan holders to retain

• Upon Secretary’s request: