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Higher Education Act Budget and Reauthorization Goals and Perkins Loan Program Management Issues

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Save taxpayer money by eliminating funding for ineffective programs ... Provide for reconsolidation with a 1 percent origination fee ... – PowerPoint PPT presentation

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Title: Higher Education Act Budget and Reauthorization Goals and Perkins Loan Program Management Issues


1
Higher 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

2
Administrations 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

3
Administrations 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

4
Administrations 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

5
Administrations 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

6
Administrations 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

7
Administrations 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

8
Administrations 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

9
Administrations Budget Reauthorization Goals
  • Extend new teacher loan forgiveness provisions
    permanently
  • Create new long program for short-term training
  • Create Presidential Math-Science Scholars Program

10
Administrations 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

11
Perkins 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

12
Perkins 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

13
Perkins 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

14
Perkins 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

15
Perkins 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

16
Perkins 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

17
Perkins 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

18
Perkins 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
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