LASFAA Spring Conference March 8, 2012 Federal Student Aid Update 1.

LASFAA Spring ConferenceMarch 8, 2012

Federal Student Aid Update

1

• FSA Update will be posted to LASFAA’s website.

• www.lasfaa.org

How is the Ride in Financial Aid?

Recent Legislation and Ramifications of Old Legislation

Budget Control Act of 2011

(BCA)

BCA - Subsidized Loans

• Elimination of Subsidized Loans for Graduate Students– Effective for loans made for loan periods

beginning on or after July 1, 2012– Subsidized Loans for loan periods

beginning before July 1, 2012 remain unchanged

– COD will edit for compliance

6

BCA - Repayment Incentives

• Elimination of Direct Loan Incentives– Terminates repayment incentives to

encourage on-time repayment of loans– Effective for loans first disbursed on or

after July 1, 2012– COD will edit for compliance– Allows interest rate reduction to borrowers

who repay electronically

7

Consolidated Appropriations Act – 2012

See DCL GEN-12-01

2012-2013 Pell Grant Amounts

• 2012-2013 Pell maximum award - $5,550• 2012-2013 Pell minimum award - $550• Maximum Pell eligible EFC is 4995

• Was 5273 in 11-12• 2012-2013 payment schedules posted IFAP

on January 12, 2012 (P-12-01)

Auto-Zero EFC Income Threshold

• Reduces the income threshold for an automatic zero expected family contribution (EFC) from $30,000 to $23,000

• For the 2012-2013 award year was scheduled to be $32,000

• FAFSA on the Web and CPS have been updated, and both began 2012-2013 FAFSA processing using $23,000 as the auto-zero EFC threshold

Ability-to-Benefit (ATB)

• Eliminates Title IV eligibility for students without a high school diploma (or equivalent)• Exceptions for

• Home schooled students• Students who were enrolled in a

Title IV eligible program of study prior to July 1, 2012

Ability-to-Benefit (ATB)

• Students who are or were, enrolled in a Title IV eligible program anytime prior to July 1, 2012, may continue to qualify under one of the ATB alternatives –• Passing an independently administered,

approved ATB test• Successfully completing at least six credit hours

or 225 clock hours

Pell Grant Duration of Eligibility

• Reduces the duration of a student’s eligibility to receive Pell Grant from 18 semesters (or its equivalent) to 12 semesters (or its equivalent)

• Applies to all students effective with the 2012-13 award year

• Calculation includes all earlier years of the student’s receipt of Pell


• Calculate the equivalency by adding together each of the annual percentages of a student’s scheduled award that was actually disbursed to the student• LEU – Lifetime Eligibility Used• Once LEU reaches 600%, student no longer

eligible• If LEU more than 500% but less than 600%,

partial eligibility for next award year


Examples – • Student’s Scheduled Award was $5,550,

but only received $2,775 because only enrolled for one semester, will have used 50% of that award year’s scheduled award

• Student who was enrolled three-quarter time for the entire award year would have used 75% of his scheduled award


• Electronic Announcement posted on February 17 • Beginning mid April, COD will begin

sending –• Weekly reports to schools of their

2012-2013 applicants who have LEUs of more than 450%

• Emails to students who have LEUs of more than 450%


• Electronic Announcement posted on February 17 • Beginning in July –

• NSLDS will display student’s LEU• CPS will use comment codes to flag

students whose LEU is close to or exceeds 600%

Grace Period Interest Subsidy

• Temporarily eliminates the interest subsidy on Direct Subsidized Loans during the six month grace period

• Applies to new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014

CCRAA of 2007 Interest Rate Reductions

First disbursement of a loan: Interest rate on

the unpaid

balance

Made on or after And made before

July 1, 2008 July 1, 2009 6.0 percent




CCRAA of 2007 Interest Rate Reductions

• Will sunset on June 30, 2012

• All Stafford Loans, grad and undergrad, sub and unsub, first disbursed on July 1, 2012 or later– Will have interest rate of 6.8%– 6.8% was the pre-CCRAA rate

• Requires change in law to prevent automatic increase

President’s FY 13 Budget

$5,635 maximum Pell Grant award for 2013-2014

Maintain the subsidized loan interest rate for undergraduate students at 3.4 percent for undergraduates until July 1, 2013

Limit the duration of the Stafford Loan in-school interest subsidy to 150 percent of the normal time required to complete the borrowers’ educational program

FY 13 Budget

Expand and improve the Perkins Loan program to provide $8.5 billion in loans annually

Provide $150 million in new funds for the Work-Study Program

Reform and expand Federal allocations in the campus-based programs

FY 13 Budget

FFEL/Direct LoanCohort Default Rates

What is the CDR Calculation?

A cohort default rate is the percentage of the number of the school’s FFEL and Direct Loan borrowers who enter repayment in one Federal Fiscal Year (October 1 through September 30) who default in that federal fiscal year or by the end of the next federal fiscal year.

HEOA Changes• Increases the CDR monitoring period

from two to three years.

• Beginning with the 2009 cohort, the calculation will be:– Borrowers who default in that federal fiscal

year or by the end of the next two federal fiscal years

– Establishes a three-year transition period for sanctions

2-Year Versus 3-Year Calculation

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The Numerator is the number of borrowers from the denominator who default within a cohort period

The Denominator is the number of borrowers who enter repayment within a cohort period

3555000 .071 or 7.1%

6055000 .121 or 12.1%

5,000

FY-09 FY-10125 230

5,000

FY-09 FY-11FY-10

125 230 250

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Transition Period

CDR Sanctions

Sanctions based 3 year CDRs will not be implemented until 2014

School’s 3 most recent official CDRs are 25.0% or higher for the 2 year calculation OR 30.0% or higher for the 3 year calculation

Loss of Pell and DL for the current year and two subsequent fiscal years

A school‘s current officialCDR is greater than 40.0%, for either 2 year and 3 yearcalculation.

Loss of DL for the current year and two subsequent fiscal years

If 2009 3 Year CDR is ≥ 30.0%• Identify the factors causing the default rate

to exceed the threshold;

• Establish measureable objectives and the steps the school will take to improve its cohort default rate; and

• Specify the actions the school will take to improve student loan repayment, including counseling students on repayment options.

Program Integrity

Regulations

Program Integrity - Resources

• Notice of Proposed Rulemaking—June 18, 2010• Final regulations—October 29, 2010• Program Integrity Questions and Answers• http://www2.ed.gov/policy/highered/reg/

hearulemaking/2009/integrity-qa.html

High School Diploma

High School Diploma

Schools must develop and follow procedures to evaluate the validity of a student's high school diploma if the school or the Secretary has reason to believe that the diploma is not valid or was not obtained from an entity that provides secondary school education.

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High School Diploma

• FAFSA will ask student to indicate high school.

– Being on the list does not mean “approved”

– Not being on the list does not mean “unapproved” or “questionable”

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Verification

Verification Resources

• Federal Register Notice of Information To Be Verified for the 2012–2013 Award Year http://www.ifap.ed.gov/fregisters/FR071311FAFSAInformation.html

• GEN-11-13 and GEN-11-03 http://www.ifap.ed.gov/dpcletters/GEN1113.html http://www.ifap.ed.gov/dpcletters/GEN1103.html

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• Q&A on Program Integrity web site:– http://www2.ed.gov/policy/highered/reg/

hearulemaking/2009/verification.html

• Sample 2012-13 Verification Worksheets– http://www.ifap.ed.gov/eannouncements/

020312SampleVerificationWorksheets1213.html

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• FAFSA-IRS Tax Return Transcript Matrix– http://www.ifap.ed.gov/eannouncements/

022412Verification1213IRSTaxReturnMatrix.html

• 2012-13 Application and Verification Guide– http://ifap.ed.gov/fsahandbook/

1213FSAHandbookAVG.html

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Verification - Definitions• Subsidized student financial assistance programs

– Eligibility uses EFC– Verification applies– Pell, FSEOG, FWS, Perkins, Direct Subsidized Loan

• Unsubsidized student financial assistance programs– Eligibility does not use EFC– Verification does not apply– Direct Unsubsidized Loan & Direct PLUS Loan – TEACH Grant

42

Verification Selection

• CPS applies risk model to FAFSA data

• Goal is to target verification based upon the most error prone data items specific to an applicant

• Non-selected applicants are again subject to risk model when submitting corrections

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Verification Selection

• Institutions must verify all applicants selected by CPS

• Removes institution’s option to verify only 30% of applicant pool

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Changes To FAFSA Information

• For subsidized programs, submit all verification changes to CPS if change is: – To any nondollar item or– A single dollar item of $25 or more

• $400 tolerance is eliminated

• If required to submit one change, must submit all changes

45

Verification Items• Regulation eliminates five required

verification items

• Annual Federal Register notice lists verification items and acceptable documentation– 2012-13 notice published 7/13/11

46

Verification Items

• Goal to specify required verification items for individual applicant on SAR/ISIR

• Institution may select additional applicants or verify additional items for an applicant

47

2012-13 Verification Items

• All applicants—– Household size– Number in college– SNAP benefits (formerly food stamps)—if

receipt reported on FAFSA– Child support paid—if amount reported on

FAFSA

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2012-13 Verification Items• Tax filers—

– Adjusted gross income– U.S. income tax paid– Education credits– Specific untaxed income items

• Untaxed IRA distributions• Untaxed Pensions• IRA deductions• Tax Exempt Interest

– Making Work Pay will not be on 2011 returns

4949

2012-13 Verification Items

• Non-tax filers– Income earned from work

50

Acceptable Documentation

• For items on 2011 income tax return—

• Amounts retrieved & unchanged from IRS via FOTW (either on initial or correction application) with IRS Request Flag value of 02 OR

5151


• A tax return transcript obtained from the IRS—see DCL GEN-11-13

• For all other verification items—

• Verification worksheet—either ED’s sample or developed by institution

5252

IRS Data Retrieval

• FAFSA on the Web IRS Data Retrieval Process will only transfer information from an original tax return and not from an amended tax return

IRS Transcripts• IRS Tax Return Transcript only includes

information from the original tax return. • IRS Tax Account Transcript, does include tax

return items that were changed when an amended return was filed, it does not include all of the data that did not change. Therefore, both an IRS Tax Return Transcript and an IRS Tax Account Transcript must be obtained from the IRS when an amended return was filed.

IRS Record of Account• Record of Account which includes the required

information from both the IRS Tax Return Transcript and the IRS Tax Account Transcript.

• Record of Account can only be requested using a paper IRS Form 4506-T and, as a paper request, it could take up to 30 days for the tax filer to receive the Record of Account, whereas the IRS Tax Return Transcript and IRS Tax Account Transcript can be requested electronically from the IRS or by phone, which for electronic filers will yield quicker results.

Acceptable Documentation• IRS Data Retrieval Process• IRS Tax Return Transcript

– By paper (Form 4506T-EZ or IRS Form 4506-T) 10 business days for processing

– Online or by phone—5 to10 business days for processing

• IRS Tax Account Transcript (used with amended returns)– By paper (Form 4506-T)—processed within 30 calendar days– Online or by phone—5 to 10 business days for processing

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•Record of Account– By paper only (Form 4506-T)—processed within

30 calendar days

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Documentation: Household Size

• Household size

• Signed statement including—• Name of each household member,• Age of each household member, AND• The relationship to the applicant

5858

Exceptions: Household Size• For dependent student when parental marital

status is-– Single, separated, divorced, or widowed and

family size on the FAFSA = 2– Married and family size on the FAFSA = 3

• For independent student who is-– Single, separated, divorced, or widowed and

family size on the FAFSA = 1 – Married and the family size on the FAFSA = 2

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Documentation: Number in College

• Number in college• Signed statement

• Name and age of each household member who will attend eligible postsecondary educational institution at least half-time in 2012–2013

• Name of the eligible institution(s) that each household member is or will be attending during 2012–2013

• Not required if applicant is only member in college

60

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Documentation: SNAP

• Supplemental Nutrition Assistance Program (SNAP) benefits (formerly food stamps) if receipt is reported on the FAFSA– Certification on verification worksheet– Institution may request documentation from the

agency that issues the SNAP benefit– FOTW users who get SNAP may never see the

question

3261

Documentation: Child Support

• Child support paid if reported on the FAFSA

• Certification on verification worksheet (or separate statement) indicating—– Amount of child support paid– Name of the person to whom it was paid,

and– Name of the children for whom it was paid

3362

IRS Extension Filers• Verification is complete if you have --

– Documentation of IRS extension and– 2011 W-2 Forms or statement from self-

employed individual

• MAY require an individual granted a tax filing extension to provide a copy of their completed and signed tax return when filed

6363

IRS Extension Filers

• MUST verify AGI and taxes paid, if you receive a copy of the return

• May return all funds disbursed, if you do not receive copy

6464

Verification & PJ

• Requires verification of all selected applicants before exercising professional judgment

• Does not mean verification is required before exercising PJ for non-selected applicants

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General Updating

• FAFSA-reported info is generally a snapshot

• Unless due to student’s marital status change, must update for—– Dependency status changes (all applicants,

anytime) AND– Household size and number in college (selected

applicants, at the time of verification)

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Marital Status Updating• Marital status updates permitted only by

FAA to address inequity or better reflect ability to pay—– When dependency status changes – AND/OR– When selected applicant needs to update

household size and number in college

• If FAA changes marital status, other updates may be needed

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Interim Disbursements

• May make interim disbursements without receipt of corrected ISIR if completed verification makes no change to aid eligibility

• All required corrections must be submitted to CPS AND school must receive revised ISIR transaction OR school will be liable for payment student receives

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Verification After Enrollment Ends

• Student no longer limited to lesser Pell Grant award if verification completed after enrollment ends

• Student will receive Pell Grant payment based upon correct EFC

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Process is a Work in Progress

• Keep watching IFAP for Q&As, EAs, and DCLs• Watch for an updated Matrix• Watch for info about multiple requests for the

same transcript• Watch for the Federal Register where 13-14

verification elements will be identified

Gainful Employment

Gainful Employment Info• Gainful Employment Page on IFAP at:

http://ifap.ed.gov/GainfulEmploymentInfo/ or from IFAP Homepage– Regulations and Federal Register Notices– Dear Colleague Letters and Electronic

Announcements– Frequently Asked Questions– Training, including webinars– Resources

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GE Reporting • Institutions must annually report information

about students enrolled in GE Programs• General information on reporting was

provided in the Dear Colleague Letter GEN-11-10

• NSLDS GE Reporting Guide at - http://ifap.ed.gov/GainfulEmploymentInfo/index.html

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GE Reporting

• Reporting is by –– Award Year– Student – GE Program

• Institution (Six-digit OPEID)• CIP Code (See User Guide)• Credential Level (See User Guide)

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GE Metrics Metrics final rule published on June 13, 2011 Defines “gainful employment” to be when a

substantial number of the GE Program’s students – Are repaying their Title IV loans –

Repayment RateHave a reasonable debt burden –

Debt to Earnings Ratios.

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GE Metrics

ED calculates Repayment Rate as –A percentage of the Title IV loan amounts that

a GE Program’s former students are repayingED calculates Debt to Earnings Ratios as –

The median educational loan annual repayment amount as a proportion of the borrowers’ average annual income

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Title IV Eligibility• A program must pass at least one of the

following three rates to be a Gainful Employment Program eligible for Title IV participation:– Repayment rate of at least 35%.– Debt-to-Earnings ratio of less than 12% of total

annual earnings, or– Debt-to-Earnings ratio of less than 30% of total

discretionary income.

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Title IV Eligibility

• If a failing program for three of four years, program loses eligibility for Federal student aid.

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General Information: IFAP Website Gainful Employment Information Page

Policy Questions: [email protected]

Reporting Questions: [email protected]

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GE Contact Information

Negotiated Rulemaking

• Federal Register Notice—– October 28, 2011

• Two teams—– Student loan issues– Teacher preparation issues

• http://www2.ed.gov/policy/highered/reg/hearulemaking/2011/index.html

Negotiated Rulemaking

• Federal Register Notice—– October 28, 2011

• Two teams—– Student loan issues– Teacher preparation issues

• http://www2.ed.gov/policy/highered/reg/hearulemaking/2011/index.html

Other Resources

General Title IV Treatment of An Award for 2011-2012 *

*Federal veterans education benefits, as defined in section 480(c) of the HEA, and the Iraq and Afghanistan Service Grant are not EFA nor used

in calculating EFC

START

Is award received

because of postsecondary enrollment or to pay for education

costs?

Is award considered

employment according to

Federal or State rules?

[STOP] Treat as EFA (If in income, list amount in

FAFSA question 43)

Is employment

based on need?

[STOP] Not EFA (If in income, it remains in

income)

[STOP] Treat as EFA (If in income, list amount in

FAFSA question 43)

Yes

NoYes

No

Yes

No

[STOP] Not EFA (If in income, it remains in income)

FSA Training• No in-person training scheduled this

year except for FT4

• Variety of CBTs are available

• Variety of webinars are planned– Business Officer Series– Default Aversion webinars– Some webinars are only recorded

• GE Guide is planned for release soon

• TOPICS Survey

FSA Conference

• 2011 presentations are moving from one server to another and will be available again soon

• 2012 FSA Conference will occur – Location TBD

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Supervisor of Training Officers Requests Feedback

from FAAs• Jo Ann Borel• Supervisor of Training Officers• United States Department of Education-

Federal Student Aid• Phone: 202-377-3930• [email protected]

Contact Information

Kevin Campbell

Training Officer

United States Department of Education

[email protected]

214.661.9488

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LASFAA Spring Conference March 8, 2012 Federal Student Aid Update 1.

Documents