spring 2010 federal perkins loan update. agenda coheao budget update legislative update ...

Spring 2010 Federal Perkins Spring 2010 Federal Perkins Loan UpdateLoan Update

AgendaAgenda

COHEAO COHEAO Budget UpdateBudget Update Legislative UpdateLegislative Update Regulatory UpdateRegulatory Update Perkins Loan IssuesPerkins Loan Issues GrassrootsGrassroots

COHEAO AnnouncementsCOHEAO Announcements

NEW MEMBERS WANTED!NEW MEMBERS WANTED! Tell your Friends and Colleagues to join. Tell your Friends and Colleagues to join.

Membership is needed now more than ever.Membership is needed now more than ever.1.1. Perkins is not dead; much remains to do.Perkins is not dead; much remains to do.2.2. COHEAO also working on other issues: COHEAO also working on other issues:

accounts receivable management, financial accounts receivable management, financial literacy, institutional loans (private loans.)literacy, institutional loans (private loans.)

Discounts for Teleconferences, Annual, Mid-Discounts for Teleconferences, Annual, Mid-Year ConferencesYear Conferences

Mid-Year Conference: July 25-27, 2010Mid-Year Conference: July 25-27, 2010 Annual Conference, DC: Jan. 22-26, 2011Annual Conference, DC: Jan. 22-26, 2011

Obama ED Budget for 2011 Obama ED Budget for 2011 A Repeat of the 2010 budget for the most part. A Repeat of the 2010 budget for the most part.

Adopted House-Passed SAFRA billAdopted House-Passed SAFRA billFinancial Aid Changes:Financial Aid Changes: Increase Pell Grant max to $5,710, make it an Increase Pell Grant max to $5,710, make it an

automatic entitlement, increase by 1% over CPI automatic entitlement, increase by 1% over CPI every yearevery year

Eliminate FFEL Program – all schools to Direct Eliminate FFEL Program – all schools to Direct Lending as of July 1, 2010Lending as of July 1, 2010

Work Study level at $980.5 millionWork Study level at $980.5 million SEOG level at $757.5 millionSEOG level at $757.5 million Simplify the FAFSA, tie in with IRS dataSimplify the FAFSA, tie in with IRS data

Obama ED Budget for 2011 Obama ED Budget for 2011 Limit federal debt repayment under Income Based Limit federal debt repayment under Income Based

Repayment to 10% of disposable income, defined as Repayment to 10% of disposable income, defined as 150% of the poverty level, Down from 15%150% of the poverty level, Down from 15%

Forgive the loan balance after 20 years of IBR Forgive the loan balance after 20 years of IBR payments, Down from 25 yearspayments, Down from 25 years

Eliminate the LEAP ProgramEliminate the LEAP Program Eliminate Academic Competitiveness Grants Eliminate Academic Competitiveness Grants Eliminate SMART GrantsEliminate SMART Grants Continue TEACH “Grants” BUT 80% of “Grants” Continue TEACH “Grants” BUT 80% of “Grants”

expected to become Unsubsidized Stafford Loansexpected to become Unsubsidized Stafford Loans $93 million in “grants” only costs $12.7 million$93 million in “grants” only costs $12.7 million

Eliminate The Perkins Loan ProgramEliminate The Perkins Loan Program Create a New “Direct Perkins Loan Program”Create a New “Direct Perkins Loan Program”

What About Perkins Loans??? What About Perkins Loans???

““We had to destroy (the program) in We had to destroy (the program) in order to save it.”order to save it.” – the Direct Perkins – the Direct Perkins Loan proposalLoan proposal

First proposed in Administration’s FY 2010 First proposed in Administration’s FY 2010 budgetbudget Passed by House in September 2009 as H.R. Passed by House in September 2009 as H.R.

32213221 Senate HELP Committee wrote a bill and Senate HELP Committee wrote a bill and

almost, almost, almost introduced it…. But almost, almost, almost introduced it…. But not.not.

Congress on Perkins in HEOA of Congress on Perkins in HEOA of 2008: Keep it2008: Keep it

HEAO HEAO SEC. 466: “SENSE OF CONGRESS SEC. 466: “SENSE OF CONGRESS REGARDING FEDERAL PERKINS LOANS.REGARDING FEDERAL PERKINS LOANS.

It is the sense of Congress that the Federal It is the sense of Congress that the Federal Perkins Loan Program, which provides low-Perkins Loan Program, which provides low-interest loans to help needy students finance the interest loans to help needy students finance the costs of postsecondary education, is an costs of postsecondary education, is an important part of Federal student aid, and should important part of Federal student aid, and should remain a campus-based aid program at remain a campus-based aid program at colleges and universities.”colleges and universities.”

Direct Perkins Loan IdeaDirect Perkins Loan Idea

Modernize and expand Perkins ProgramModernize and expand Perkins Program New Perkins program = new unsub Direct Stafford New Perkins program = new unsub Direct Stafford

ProgramProgram Receive 6 billion in “mandatory” fundingReceive 6 billion in “mandatory” funding Expanded to all schoolsExpanded to all schools

• From 1,800 to 4,400From 1,800 to 4,400 5% interest would accrue while in school and grace5% interest would accrue while in school and grace Other terms and conditions would be same as Other terms and conditions would be same as

unsubsidized Staffordunsubsidized Stafford Federal Share of current loans sent to EDFederal Share of current loans sent to ED Overhaul of the administration of the programOverhaul of the administration of the program

• Fully originated and administrated by the Dept of EDFully originated and administrated by the Dept of ED

Direct Perkins Loan Idea Direct Perkins Loan Idea

Administration says:Administration says: 2.7 million more students will receive loans2.7 million more students will receive loans Loans to be targeted to needy students and Loans to be targeted to needy students and

the schools they attendthe schools they attend• Schools with many Pell recipientsSchools with many Pell recipients

Colleges encouraged to control tuitionColleges encouraged to control tuition• New formula would encourage cost control and New formula would encourage cost control and

targeting of grants to prevent excessive targeting of grants to prevent excessive indebtednessindebtedness

Budget rules require ED servicingBudget rules require ED servicing• Arcane federal accounting/scoring rulesArcane federal accounting/scoring rules

Congressional Action Congressional Action

Student Aid and Fiscal Responsibility Act Student Aid and Fiscal Responsibility Act of 2009 (SAFRA) – H.R. 3221of 2009 (SAFRA) – H.R. 3221 Implements President’s 2010 budget requestsImplements President’s 2010 budget requests Introduced July 13, 2009Introduced July 13, 2009 Full committee markup July 21, 2009Full committee markup July 21, 2009 Passed the House on Sept. 17, 2009Passed the House on Sept. 17, 2009

• Vote 253 to 171Vote 253 to 171 Senate working on their versionSenate working on their version

““Direct Perkins”: Direct Perkins”: Three Major FlawsThree Major Flaws

In-School Interest Benefit dropped: 5% interest accrues In-School Interest Benefit dropped: 5% interest accrues from time loans madefrom time loans made

For undergrad: adds $5,000 to debt after 4 yearsFor undergrad: adds $5,000 to debt after 4 years It’s a numbers game: Money would be taken from student It’s a numbers game: Money would be taken from student

interest payments and spent on other federal “priorities” interest payments and spent on other federal “priorities” ED Justification: better than “private” loansED Justification: better than “private” loans

All new loan servicing transferred to national Direct Loan All new loan servicing transferred to national Direct Loan servicing contractors servicing contractors

Possibly also FFELP non-profits in some statesPossibly also FFELP non-profits in some states Schools completely out of the servicing pictureSchools completely out of the servicing picture Responsible for possible “match”, default rates Responsible for possible “match”, default rates

Perkins’ unique cancellation benefits killedPerkins’ unique cancellation benefits killed ICBR supposed to substitute, along with DL’s cancellation after ICBR supposed to substitute, along with DL’s cancellation after

10 years of payments while in public service job.10 years of payments while in public service job.

What PassedWhat Passed

H.R. 4872 Health Care and Education H.R. 4872 Health Care and Education Affordability Reconciliation ActAffordability Reconciliation Act House passed on 3/21/10 vote 220-211House passed on 3/21/10 vote 220-211 Senate passed with vote 56-43Senate passed with vote 56-43

H.R. 4872 consists of amendments to H.R. 4872 consists of amendments to health care reform and a modified version health care reform and a modified version of SAFRA.of SAFRA.

DCL GEN-10-5 briefly addresses these DCL GEN-10-5 briefly addresses these changeschanges


As of 7/1/10, all Stafford, PLUS and As of 7/1/10, all Stafford, PLUS and Consolidation Loans will be made via the Consolidation Loans will be made via the Direct Loan Program.Direct Loan Program.

Additional mandatory funding is provided Additional mandatory funding is provided to augment funds appropriated each year.to augment funds appropriated each year. increase the federal maximum Pell Grant increase the federal maximum Pell Grant

each year by the change in the Consumer each year by the change in the Consumer Price Index.Price Index.

According to ED/Labor Committee the According to ED/Labor Committee the maximum Pell for 2010 is $5,500maximum Pell for 2010 is $5,500


The legislation uses $13.6 billion of the savings The legislation uses $13.6 billion of the savings to cover most of approximately $19 billion to cover most of approximately $19 billion shortfall in current Pell Grant funding.shortfall in current Pell Grant funding.

Bill does not include ongoing increases in Pell at Bill does not include ongoing increases in Pell at the rate of inflation plus 1% as in the SAFRA bill.the rate of inflation plus 1% as in the SAFRA bill. The annual appropriation process will fund the bulk of The annual appropriation process will fund the bulk of

each year’s Pell grant.each year’s Pell grant. No guarantee that there will be an annual increase in No guarantee that there will be an annual increase in

the total grant.the total grant.


$750 million is included for “College $750 million is included for “College Access Challenge Grants” through 2014.Access Challenge Grants” through 2014. Rate of $150 million per year.Rate of $150 million per year.

$50 million goes to assist school transition $50 million goes to assist school transition into Direct Loan program.into Direct Loan program.

$2.55 billion goes to HBCU as well as $2.55 billion goes to HBCU as well as Minority Serving InstitutionsMinority Serving Institutions


Not-for Profit direct loan servicers receive Not-for Profit direct loan servicers receive funding if needed.funding if needed. If meet minimum standards, they would be If meet minimum standards, they would be

allocated a minimum 100,000 loan accounts allocated a minimum 100,000 loan accounts annually, with the first 100,000 eligible for a annually, with the first 100,000 eligible for a special pricing tier.special pricing tier.


$2 billion is set aside for community $2 billion is set aside for community colleges via Trade Adjustment Act funding colleges via Trade Adjustment Act funding under the Dept of Labor.under the Dept of Labor. The larger American Graduation Initiative was The larger American Graduation Initiative was

dropped from bill due to budget issues.dropped from bill due to budget issues.


Income-based Repayment was modified Income-based Repayment was modified for new borrowers beginning 2014.for new borrowers beginning 2014. Borrower payments are limited to 10% of Borrower payments are limited to 10% of

discretionary income. (reduced from 15%)discretionary income. (reduced from 15%) Unpaid balance would be forgiven after 20 Unpaid balance would be forgiven after 20

years. (reduced from 25%)years. (reduced from 25%)


$25 million is provided in fiscal year 2010 $25 million is provided in fiscal year 2010 and 2011 for Direct Loan servicers “to and 2011 for Direct Loan servicers “to retain jobs at locations where such retain jobs at locations where such servicers were servicing FFEL loans on servicers were servicing FFEL loans on 1/1/10.1/1/10.


For one year beginning 7/1/10, borrowers For one year beginning 7/1/10, borrowers who are not in repayment on all there who are not in repayment on all there loans can consolidate into the Direct Loan loans can consolidate into the Direct Loan Program if they have loans in at lease two Program if they have loans in at lease two of the following categories;of the following categories; FFELP Loans, FFELP Loans, FFELP loans that have been sold to the FFELP loans that have been sold to the

DepartmentDepartment Direct LoansDirect Loans


The Current Perkins Loan Program is not The Current Perkins Loan Program is not touched!touched! The administration's proposal (and passed by The administration's proposal (and passed by

the House in Sept) to create a new “Direct the House in Sept) to create a new “Direct Perkins Loan Program” was deleted in its Perkins Loan Program” was deleted in its entirety.entirety.

What Happened to the Rest?What Happened to the Rest? CBO “scores” proposed changes to a law CBO “scores” proposed changes to a law

against a “baseline” of current services.against a “baseline” of current services. A new baseline is developed by CBO every A new baseline is developed by CBO every

January. The January 2010 baseline resulted in January. The January 2010 baseline resulted in less savings from ending the FFEL program than less savings from ending the FFEL program than January 2009January 2009 Economy changed, schools converted to DL, Pell Economy changed, schools converted to DL, Pell

Grants ballooned, Pell shortfall appearedGrants ballooned, Pell shortfall appeared Money needed to offset costs of Health Care Money needed to offset costs of Health Care

Reform legislation, $2 billion for deficit reduction.Reform legislation, $2 billion for deficit reduction. The result: a pared down spending bill, no The result: a pared down spending bill, no

Perkins changesPerkins changes

What’s NextWhat’s Next

COHEAO will turn it’s attention to extend COHEAO will turn it’s attention to extend and expand the current Perkins Program.and expand the current Perkins Program. Most important matter (because of timing) is Most important matter (because of timing) is

appropriations.appropriations.• President’s FY2011 budget request was written in President’s FY2011 budget request was written in

the expectation of the “Direct Perkins”the expectation of the “Direct Perkins”• No FCC or Cancellation funding is currently No FCC or Cancellation funding is currently

requested.requested.

What’s NextWhat’s Next

Need to address the 2012 sunset for Perkins.Need to address the 2012 sunset for Perkins.• It requires the federal share of the Perkins Loan It requires the federal share of the Perkins Loan

revolving fund to be sent to the Department or EDrevolving fund to be sent to the Department or ED• This date has been extended several times, last in This date has been extended several times, last in

2007.2007.• COHEAO’s high priority to eliminate or extend this COHEAO’s high priority to eliminate or extend this

clause.clause.

COHEAO ActionsCOHEAO Actions COHEAO fought vigorously in 2009 and 2010 to COHEAO fought vigorously in 2009 and 2010 to

retain benefits of the traditional Perkins Program retain benefits of the traditional Perkins Program while supporting its expansion and continuation. while supporting its expansion and continuation.

Sometimes at odds with others in the Higher Ed Sometimes at odds with others in the Higher Ed Community, often worked together – now Community, often worked together – now togethertogether

Grassroots actions led by Board of Directors: Grassroots actions led by Board of Directors: dozens of Conference calls arranged with Senate dozens of Conference calls arranged with Senate

offices and home-state colleges and commercial offices and home-state colleges and commercial membersmembers

Dozens of in-person meetingsDozens of in-person meetings In the end, the changed CBO score led to all In the end, the changed CBO score led to all

Perkins changes being dropped. Perkins changes being dropped.

Grassroots EffortsGrassroots Efforts

We must work to fund and extend the We must work to fund and extend the Perkins Loan programPerkins Loan program

COHEAO is working on new ideas to COHEAO is working on new ideas to preserve the programpreserve the program

Support AppropriationsSupport Appropriations Support PerkinsSupport Perkins See See www.coheao.org for details for details Stay In Touch with your Congressional Stay In Touch with your Congressional

RepresentativesRepresentatives

Regulatory - Perkins Loan IssuesRegulatory - Perkins Loan Issues

Economic Hardship Deferment Economic Hardship Deferment College Cost Reduction and Access Act College Cost Reduction and Access Act

(CCRAA, P.L. 110-84). (CCRAA, P.L. 110-84). Definition changes effectiveDefinition changes effective 7/1/09 7/1/09 Eliminates the 20/220 qualification for Econ Eliminates the 20/220 qualification for Econ

HD.HD.


Electronic AnnouncementsElectronic Announcements Perkins Cohort Default RatesPerkins Cohort Default Rates Orange Book 6/30/09 ratesOrange Book 6/30/09 rates Posted 5/6/10Posted 5/6/10 U.S. aggregate 10.04%U.S. aggregate 10.04%

http://ifap.ed.gov/perkinscdrguide/0809PerkinsCDR.html


Total and Permanent Disability Total and Permanent Disability New Definition as of 7/1/10New Definition as of 7/1/10

The condition of an individual who is (1) unable to engage in any The condition of an individual who is (1) unable to engage in any substantial gainful activity by reason of any medically substantial gainful activity by reason of any medically determinable physical or mental impairment that –determinable physical or mental impairment that –

(i) can be expected to result in death;(i) can be expected to result in death; (ii) has lasted for a continuous period of not less than 60 months; (ii) has lasted for a continuous period of not less than 60 months;

or or (iii) can be expected to last for a continuous period of not less (iii) can be expected to last for a continuous period of not less

than 60 months; orthan 60 months; or (2) Has been determined by the Secretary of Veterans Affairs to (2) Has been determined by the Secretary of Veterans Affairs to

be unemployable due to a service connected disability.be unemployable due to a service connected disability.


Dear Colleague Letter CB-09-06 and CB-Dear Colleague Letter CB-09-06 and CB-09-0509-05 Published 9/28/09Published 9/28/09 Approval of the revised Perkins MPN and Approval of the revised Perkins MPN and

Addendum to Perkins MPNAddendum to Perkins MPN MPN contains changes to cancellation, MPN contains changes to cancellation,

rehabilitation, forbearance and defermentrehabilitation, forbearance and deferment Must begin using by 12/31/09Must begin using by 12/31/09

HHS Loan ChangesHHS Loan Changes

Health Care Reform BillHealth Care Reform Bill Signed into law 3/23/10Signed into law 3/23/10 New Law – Patient Protection and New Law – Patient Protection and

Affordability Care Act of 2010 (PPACA)Affordability Care Act of 2010 (PPACA) Made changes to NSL and PCL loansMade changes to NSL and PCL loans

NSL Loan ChangesNSL Loan Changes Loan Funding Limits increasedLoan Funding Limits increased

$2,500 changed to $3,000$2,500 changed to $3,000 $4,000 (for last two academic years) changed to $4,000 (for last two academic years) changed to

$5,200$5,200

Aggregate Limits increasedAggregate Limits increased $13,000 changed to $17,000 for academic year 10/11$13,000 changed to $17,000 for academic year 10/11 After AY11 amounts adjusted to provide cost of After AY11 amounts adjusted to provide cost of

attendance increase for the yearly and aggregate attendance increase for the yearly and aggregate limitslimits

P.L. 111-148, Sec 5202(a), Loan AgreementsP.L. 111-148, Sec 5202(a), Loan Agreements

NSL Loan ChangesNSL Loan Changes

Date of EnrollmentDate of Enrollment Change in date a student of financial need Change in date a student of financial need

must be enrolled in a nursing program in must be enrolled in a nursing program in order to be eligible to receive NSL funds.order to be eligible to receive NSL funds.

6/30/86 changed to 6/30/006/30/86 changed to 6/30/00 P.L. 111-148, Sec 5202(b)(1), Loan P.L. 111-148, Sec 5202(b)(1), Loan

ProvisionsProvisions

NSL Loan ChangesNSL Loan Changes

Partial Loan Cancellation DatePartial Loan Cancellation Date The date for a partial loan cancellation formerly The date for a partial loan cancellation formerly

applied to a loan a student received before xx/xx/xx.applied to a loan a student received before xx/xx/xx. 9/29/79 changed to 9/29/959/29/79 changed to 9/29/95

A student who received a NSL prior to 9/29/95 A student who received a NSL prior to 9/29/95 can still have up to 85% cancelled for can still have up to 85% cancelled for full-time employment as a professional nurse in public full-time employment as a professional nurse in public

or non-profit.or non-profit. Nursing experience prior to 3/23/10 will not be eligible Nursing experience prior to 3/23/10 will not be eligible

for cancellation.for cancellation. P.L. 111-148, Sec 5202(b)(2)P.L. 111-148, Sec 5202(b)(2)

PCL Loan ChangesPCL Loan Changes

Primary Health Care Service RequirementsPrimary Health Care Service Requirements New PCL loans made on or after 3/23/10.New PCL loans made on or after 3/23/10. New PCL required to enter a residency and New PCL required to enter a residency and

practice in primary health care for 10 years practice in primary health care for 10 years (including the years spent in residency) or (including the years spent in residency) or until the loan is repaid in full, which ever until the loan is repaid in full, which ever occurs first.occurs first.

P.L. 111-148, Sec 5201(a)(1)(B), P.L. 111-148, Sec 5201(a)(1)(B), Requirements for StudentsRequirements for Students


Service Default RateService Default Rate Borrowers who receive a PCL on or after Borrowers who receive a PCL on or after

3/23/10, 3/23/10, and fail to comply with the service and fail to comply with the service

requirement will have their loans begin to requirement will have their loans begin to accrue at a rate of 2% per year greater than accrue at a rate of 2% per year greater than the rate at which the student would have paid the rate at which the student would have paid if compliant. if compliant.

P.L. 111-148, Sec 5201(a)(3), Noncompliance P.L. 111-148, Sec 5201(a)(3), Noncompliance by Studentby Student


Parental Financial info requirement for Parental Financial info requirement for Independent StudentsIndependent Students Independent students no longer required to Independent students no longer required to

submit parental financial information to submit parental financial information to determine financial need.determine financial need.

Determination of need of such information is Determination of need of such information is at discretion of the school.at discretion of the school.


Definition: a student who is at least 24 years of Definition: a student who is at least 24 years of age and has not been listed as a dependent on age and has not been listed as a dependent on his or her parent’s tax forms within the last three his or her parent’s tax forms within the last three years.years.

Changes to MPN required, old MPN still in Changes to MPN required, old MPN still in effect. effect. Borrower with old MPN with new disbursements on or Borrower with old MPN with new disbursements on or

after 3/23/10 required to sign new terms and after 3/23/10 required to sign new terms and conditions.conditions.

P.L. 111-148, Sec 5201(b), Student Loan P.L. 111-148, Sec 5201(b), Student Loan GuidelinesGuidelines

3939

Questions?Questions?Lori HartungLori Hartung

Todd, Bremer & Lawson, Inc.Todd, Bremer & Lawson, [email protected]

1-803-371-23941-803-371-2394

Audrey AtkinsAudrey AtkinsNCONCO

[email protected]

spring 2010 federal perkins loan update. agenda coheao budget update legislative update ...

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