Title: Higher Education Act Budget and Reauthorization Goals and Perkins Loan Program Management Issues
1Higher Education Act Budget and Reauthorization
Goals and Perkins Loan Program Management
Issues
- COHEAO Mid-Year Conference
- Newport Beach, California
- Gail McLarnon
- U.S. Department of Education
2Administrations Budget Reauthorization Goals
- Direct taxpayer resources to students with the
most need - Provide significant program improvements
- Save taxpayer money by eliminating funding for
ineffective programs - Contribute to the reduction of the deficit
3Administrations Budget Reauthorization Goals
- Pell Grant Program
- Increase maximum award by 100 a year over 5
years - Eliminate 4.3 billion shortfall
- Eight year cap on receipt
4Administrations Budget Reauthorization Goals
- Pell Grant Program (cont.)
- Year-round awards for students attending 2 4
year degree granting schools - Eliminate tuition sensitivity award rule
- Additional 1,000 for students who complete high
school State Scholars program
5Administrations Budget Reauthorization Goals
- Student Loan Reforms That Increase Program Costs
- Retain variable interest rates on
non-consolidation loans - Increase Stafford undergrad/grad loan limits
- Re-establish low-default waivers
- Eliminate rules restricting distance education
programs
6Administrations Budget Reauthorization Goals
- Student Loan Reforms That Reduce Program Costs
- Eliminate Perkins Loan Program
- Establish an annual loan holder fee of .025
percent on non-consolidation loans - Eliminate rollover of loans funded with
tax-exempt securities - Standardize extended repayment across FFEL and
the Direct Loan Program
7Administrations Budget Reauthorization Goals
- Student Loan Reforms That Reduce Program Costs
- Variable rates on consolidation loans
- Increase lender fee on consolidation loans from
0.5 to 1 percent - Repeal single holder rule
- Provide for reconsolidation with a 1 percent
origination fee
8Administrations Budget Reauthorization Goals
- Student Loan Reforms That Reduce Program Costs
- Reduce collection retention percentage over 5
years - Reduce lender insurance and guaranty agency
reinsurance - Modify exceptional performer rules
9Administrations Budget Reauthorization Goals
- Extend new teacher loan forgiveness provisions
permanently - Create new long program for short-term training
- Create Presidential Math-Science Scholars Program
10Administrations Budget Reauthorization Goals
- Make active duty military personnel independent
for need analysis - Limit loss of eligibility due to drug offenses
- Revise allocation formula for campus-based
programs - Create Community College Access Grants
11Perkins Loan Program Management Issues
- New Default Reduction Assistance Program (DRAP)
- Dear Colleague Letter CB-05-11 published July 7,
2005 - DRAP process will be initiated and managed via
eCampus-based Web site. - Effective late July 2005
12Perkins Loan Program Management Issues
- New Default Reduction Assistance Program (DRAP)
- Eliminates need for a school to manually request,
create and send DRAP file to the Department via
SAIG - School or its servicer enters/edits/updates
borrower information - School or its servicer can monitor and track
letters
13Perkins Loan Program Management Issues
- Eligibility after Bankruptcy Filing
- Bankruptcy Reform Act of 1994 Pub. L. 103-394
- No denial of grant or loan to a person who has
filed or received a discharge in bankruptcy - 1998 Amendments to the HEA
- Eliminates bankruptcy discharge to borrowers in
repayment for seven years borrowers must prove
undue hardship
14Perkins Loan Program Management Issues
- Eligibility after Bankruptcy Filing
- Loan disbursements are clearly identifiable by
date before and after filing - New Master Promissory Note not a requirement
- Filing borrowers remain in default without
satisfactory repayment arrangements - Voluntary SRA does not violate stay of
collections
15Perkins Loan Program Management Issues
- Deferment and Default --34 CFR 674.38(b)
- Defaulted borrowers are not entitled to deferment
- If granted, borrower must execute a new written
repayment agreement - School may require immediate payment of all past
due amounts as of the date on which the borrower
demonstrates eligibility for the deferment
16Perkins Loan Program Management Issues
- Deferment and Default
- Retroactive deferment acknowledges time period
when no payments were due - Late fees or accrued interest must be deducted
from loan balance - Negative credit history must be removed
- If deferment brings borrower to a pre-240
default status, borrower not in default for CDR
purposes
17Perkins Loan Program Management Issues
- Deferment, Cancellation and Default
- Deferment runs concurrent with eligible
cancellation service - In cases where eligible service is complete,
concurrent deferment is not appropriate - Principal and interest are cancelled
- Late fees and collection costs remain
- Negative credit history remains
18Perkins Loan Program Management Issues
- Revolving fund cash flow issues
- Excess cash strategies
- Consolidation of borrowers in-school or in
grace vs. repayment and calculation of cohort
default - Use of late fees