Negotiated Rulemaking - Loans Team Package II Betsy Mayotte, ASA Vicki Shipley, NCHER 1 2013 Knowledge Symposium November 5-7, 2013 ● St.
Negotiated Rulemaking - Loans TeamPackage II
Betsy Mayotte, ASAVicki Shipley, NCHER
12013 Knowledge Symposium November 5-
7, 2013 ● St. Pete, Florida
Disclaimer
This material is for informational purposes only and is not intended to serve as legal advice. Individuals are advised to consult their own legal counsel to determine the issues particular to their own situation and any results that may apply.
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Background
• Guarantor Issues
• Lender/Servicer Issues
• What’s Next
• Resources2013 Knowledge
Symposium November 5-7, 2013 ● St. Pete,
Florida
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Package 2 Agenda• Forbearances
• Administrative Wage Garnishment
• Rehabilitation
• Enrollment Reporting
• Closed School Discharge
• Perkins Loans
• FFEL Repayment Disclosures
• Minimum Loan Period for Transfer Students
• Participation Rate Index
• FFEL/DL Alignment
2013 Knowledge Symposium November 5-
7, 2013 ● St. Pete, Florida
Effective DatesPackage II
– Generally effective 7/1/2014– Voluntary early implementation for some provisions– Final Rule November 1, 2013
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Administrative ForbearanceNew rules will allow
administrative forbearance to a borrower who is delinquent at the beginning of an authorized period of forbearance
682.211(f)2013 Knowledge
Symposium November 5-7, 2013 ● St. Pete,
Florida
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Lender 60-Day Repayment Disclosure Requirements
No longer required to provide “difficulty making payment” disclosure if payment issue has been resolved
Timeframe to send 60 day delinquency notice changed from 5 calendar days to 5 business days
682.205(a)(4)
2013 Knowledge Symposium November 5-
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Military Forbearances
Allows mandatory forbearance for service that is eligible for partial loan repayment under any Department of Defense program– Adds this forbearance for Direct Loans
• Borrower must request and provide documentation
682.211(h)82013 Knowledge
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Post 270-Day Forbearances Current rules allow verbal forbearances for both
programs up to 270 days past due– DL allows after 270 days up to transfer to collections– FFELP only allows written after 270 days past due
New rule will allow limited verbal forbearance under both programs for loans 270 days past due or more where:– No claim has been paid under the FFELP– Loan has not been transferred to DL collections
120-day limit– Can be used multiple times but not consecutively– 682.211(d)
2013 Knowledge Symposium November 5-
7, 2013 ● St. Pete, Florida
Regaining Title IV Eligibility
Borrower gets one opportunity to renew his/her eligibility for title IV assistance.
Making payments under rehab doesn’t trigger – must actually obtain new Title IV funds
“On-time” now within 20 days of due date rather than 15
682.200(b)
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Closed School Discharge Desire to specify an exceptional
circumstance and tie timeframes more closely to real life occurrences of schools closing
To qualify for closed school discharge, borrowers must have attended within 120 (rather than 90) days of school closure– Other eligibility rules remain the same
– 682.402(d)
2013 Knowledge Symposium November 5-
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Closed School Discharge
Exceptional circumstances may include, but are not limited to: – The school’s loss of accreditation; – The school’s discontinuation of the majority of
its academic programs; – Action by the State to revoke the school’s
license to operate or award academic credentials in the State, or
– A finding by a State or Federal government agency that the school violated State or Federal law
– 682.402(d)
2013 Knowledge Symposium November 5-
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When is a School Not a School?
For purposes of closed school discharge a school IS:– The school’s main campus and/or – Any location or branch of the main campus
A school is NOT:– A single program– Most but not all of a schools programs
– 682.402(d)
2013 Knowledge Symposium November 5-
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FFELP and DL Clean-up
Longest Issue Paper EVER!
Deleted much of origination language from FFEL – added to DL as needed
Inducement language2013 Knowledge Symposium November 5-
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Transfer of Credits For students transferring into clock hour or
credit hour schools with no standard terms
Current rules only allow new loan origination – For remainder of program if program is less than
academic year in length or– For remainder of academic year but only– If school accepts credits from “old” school
Borrowers will no longer have to worry about the ramifications of transferring to a school that does not accept credit or clock hours from the previous school
685.3012013 Knowledge
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Florida
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Perkins Cancellation Teacher Loan Forgiveness/employment
based forgiveness– Borrower who does not complete year for
FMLA reasons still gets credit as year worked• Must have completed at least half of year
Borrowers who change employment but maintain same cancellation progression category maintains status
674.52(c)(1)
2013 Knowledge Symposium November 5-
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Other Perkins Changes On-time repayment definition for rehab
changed from 15 to 20 days
Perkins loans made prior to 1982 can now be assigned to ED without an SSN
Eliminates debt to income provisions for economic hardship deferment
Aligns graduate fellowship deferment requirements with those of the FFEL and DL
2013 Knowledge Symposium November 5-
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Questions?
2013 Knowledge Symposium November 5-
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First Things First..
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Guarantor Specific IssuesRegaining Title IV
Eligibility Loan Rehabilitation
Loan Rehabilitation-AWGAdministrative Wage
Garnishment
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Loan Rehabilitation
All loan rehab payments must be “reasonable and affordable” (R & A) and agreed upon by loan holder and borrower.– Cannot be balance based
§682.405 (b) §685.211(f)
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Loan Rehabilitation *Guaranty agency must determine a
borrower’s initial reasonable and affordable payment amount based on the “15% formula”.– IBR formula used but NOT an IBR payment– 15% of AGI – 150% of poverty level/12– New 7/1/2014 IBR rules will not apply here– No other IBR rules apply
§682.405 (b) §685.211(f)
– *Red denotes changed or new from Proposed Rule
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Loan Rehabilitation If borrower objects to 15% formula payment
, payment Financial Disclosure for Reasonable and Affordable payment form must be collected and payment determined
Borrower can then choose which payment they prefer
Payment can be as low as $5
§682.405(b)(1)(iii) (A) §685.211(f)(1)(i)(A)
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Loan Rehabilitation
New ED-approved form for gathering financial information if 15% formula payment amount is rejected by the borrower.
Form includes consideration for family size and specific expenses.
Borrower may be asked to provide documentation to support the request.
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Loan Rehabilitation
Rehab agreement due to borrower within 15 days of payment determination
Rehab Agreement must include:– Borrower’s reasonable and affordable
payment amount.– A prominent statement that the
borrower may object orally or in writing to the R & A payment amount.
– Method and timeframe for raising such an objection…
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Loan Rehabilitation– An explanation of any other terms and
conditions required for loan to be rehabilitated
– The effects / benefits of having a loan rehabilitated.
– Amount of collection cost to be added to the unpaid principal when the loan is sold• May not exceed 18.5%
§682.405(b)(1)(v) §685.211(f)(1)(iii)
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Additional Restrictions Prohibited
• Guarantors and ED may not impose additional requirements for borrowers to rehabilitate.
• Requiring updated contact information not considered an additional requirement so is allowed
• Requiring a signed rehabilitation agreement is allowed
• §682.405(b)(1)(v) and §685.211(f)91)(iii)
2013 Knowledge Symposium November 5-
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Loan Rehabilitation
GA must limit contact with the borrower whose loan is being rehabilitated to:
– Collection activities that are required by law or regulation.
– Communications that support the rehabilitation.
§682.405(b)(1)(x)
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Loan Rehabilitation - AWG
Administrative Wage Garnishment must be suspended after 5 voluntary payments– Unless otherwise instructed by borrower– Does not supersede other suspension requirements– Benefit can only be used once– GA must notify if AWG resumes, but hearing and notice
requirements do not apply.
Adjustments can be made to the voluntary payment amount– should be agreed to and reflected in the written
rehabilitation agreement.
§682.405(a)(3) §685.211(f)912)(i)
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Administrative Wage Garnishment 30-day notice still required prior to initiating
garnishment proceedings. Must include– Nature and amount of the debt.– Intention to collect the debt through deductions
from disposable pay.– An explanation of the borrower’s rights.– Deadlines by which the borrower must exercise
those rights.– Consequences of failure to exercise those rights
in a timely manner.
§682.410 (b)(9)(i)(H)
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Administrative Wage Garnishment GA must still offer borrower reasons to
object to AWG. Reasons include:– Existence of the debt.– The amount of the debt– Enforceability of the debt. (New for 2014)– Amount of collection cost exceeds the
permissible amount– Financial hardship caused due to the
amount or at the withholding rate proposed in the notice.
§682.410 (b)(9)(i)(E)(1)
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Administrative Wage Garnishment Borrower’s objection due to financial hardship
due to amount of AWG:– Borrower must provide proof of income and
expenses– GA must lower if required by hearing official– Borrowers financials are in sync with “collection
financial standards” set by IRS– Lowered order in effect for six months– GA may increase, but must notify borrower and
give opportunity to object– Borrower may object to amount at any time, but
GA is not required to consider until six months after prior order issued
§682.410(b)(9)(i)
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Administrative Wage Garnishment Borrower will have 30 days from AWG notice to
submit written request for hearing– If received timely, GA may not issue withholding
order until hearing completed and decision rendered– Must be completed within 60 days
• Can be extended if borrower raises objection not previously raised
– If not received timely, withholding order must be issued• Hearing and decision must still be completed within 60
days– Withholding order must be suspended if hearing not
completed on 61st day – even if extension granted
§682.410 (b)(9)(i)(J)
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Administrative Wage Garnishment Miscellaneous Bits
Hearing official may not be under the supervision/control of the head of the guaranty agency, “or of a third-party servicer or collection contractor employed by the agency.”
All oral communications — except for hearing logistical issues — with any representative of the guaranty agency or with the borrower are made within the hearing of the other party– Copies of any written communication with either
party are promptly provided to the other party.
§682.410(b)(9)(i)(I)
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Administrative Wage Garnishment
Employer in receipt of AWG order must withhold smaller of: – Amount specified in the AWG order.– 15% of the borrower’s disposable pay (as
permitted by section 488A(a)(1) of the HEA)– Cumulative amount of all orders not to
exceed 25%
Federal loans receive priority over other orders other than family support.
§682.410 (b)(9)(i)(K)
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Negotiated Rulemaking & Pending Regulatory Changes
Additional resources/references can be obtained by accessing the NCHER Negotiated Rulemaking 2011-2013 web-link:
http://www.ncher.us/?page=158
Neg Reg pageshttp://www2.ed.gov/policy/high
ered/reg/hearulemaking/2011/index.html 362013 Knowledge
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Questions and Discussion