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1101 CONNECTICUT AVENUE NW, SUITE 1100 • WASHINGTON, DC 20036-4303 • 202.785.0453 • FAX. 202.785.1487 • WWW.NASFAA.ORG
Updated Report of the NASFAA Reauthorization Task ForceJuly 2016
©2016NASFAA Pagei ReauthorizationTaskForce
UpdatedReportoftheNASFAAReauthorizationTaskForce,July2016
ForwardtotheJuly2016Update:
TheHigherEducationAct(HEA)of1965isthemainauthorizinglegislationthatsetsforththefederalstudentaidprogramsforhighereducation.Likealllegislationthatcreatesandmaintainsfederalprograms,itslifeprogressesin4to6yearperiodsofrelativestability,afterwhichCongressre-examinestheprogramstodeterminewhethertheyarestillservingtheirpurposesandwhetherthosepurposesneedsadjustment.InthecaseoftheHEA,thisprocessofreauthorizationhasoccurredmultipletimes,withvaryingdegreesoftimeliness.
AlthoughCongressintendedtoreauthorizetheHEAin2014,littleprogresshasbeenmadeinanycomprehensivewayasofJuly2016.SeveralbillshavebeenintroducedthatshowthedirectioninwhichcertainmembersofCongresswouldliketotakereauthorization,butnonehasprogressedpasttheintroductionphase.
NASFAAoriginallyreleaseditsreauthorizationrecommendationsin2013,basedonworkofamember-constitutedReauthorizationTaskForce(RTF)andapprovedbytheNASFAABoardofDirectors.NASFAAremainscommittedtotherecommendationsandprinciplesoutlinedintheoriginal2013RTFreport.TheAssociationhascontinuedthoseeffortsbyconveningseveralpolicy-orientedtaskforcesandworkinggroupstoexpandorenhancetheRTFrecommendationsortodevelopadditionallegislativerecommendations.TheBoardhasreviewedand,inmostcases,approvedtherecommendationsincludedinthesubsequenttaskforcereports.
ThepurposeofthisreportistoincorporatetheworkofthesubsequenttaskforcesintotheoriginalRTFreporttoformacomprehensiveworkingdocument,andtoupdatethemembershipontherecommendationsofthefollowingsubsequenttaskforcesandworkinggroups:
• Campus-BasedAidAllocationFormulaTaskForce,June2014
• ConsumerInformationTaskForce,June2014• PublicServiceLoanForgivenessTaskForce,June2014
• ServicingIssuesTaskForce,February2015• InnovativeLearningModelsTaskForce,June2015
• FAFSAWorkingGroup,July2015• ReturnofTitleIVFunds(R2T4)TaskForce,September2015
• ConsumerInformationandLawStudentIndebtednessTaskForce,March2016
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Inthisreport,recommendationsformulatedsubsequenttotheoriginalRTFreportareidentifiedbyablue“ADD”notation.CongressionalorotheractivitythathasoccurredsinceJuly2013,andisstillactive,isshowninablue-shadedboxfollowingtherecommendationtowhichitisrelevant.
TheNASFAAStaffWashingtonDC,July2016
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TableofContentsIntroductiontotheOriginalJuly2013Report..............................................................................iv
GeneralProvisionsRecommendations..........................................................................................1
NeedAnalysisRecommendations................................................................................................11
DirectLoanRecommendations....................................................................................................32
PellGrantRecommendations......................................................................................................57
Campus-BasedRecommendations..............................................................................................64
ConsumerInformationRecommendations..................................................................................72
ReturnofTitleIVFundsRecommendations................................................................................82
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IntroductiontotheOriginalJuly2013Report:
NASFAA’sBoardofDirectorsconvenedaReauthorizationTaskForceinMarch2012toproduceasetofproposalsforthereauthorizationoftheHigherEducationActthat—• Promoteaccesstopostsecondaryeducation;• Providesimplicity,consistency,flexibility,andprogramintegrityinthedeliveryofstudent
financialaid;and• RepresentthediverseneedsoftheAssociationanditsmembership.
Indoingso,thetaskforcewasdirectedtoconsultwithNASFAA’smembershipandtoincorporatethefollowingguidingprinciples:• Promotefairnessandequityforstudentsacrossallsectorsofpostsecondaryeducation;• Promotepoliciesthataddresstheneedsofdisadvantagedstudents;• Promoteaccountability;• Encouragesimplicity;• Provideschoolswiththeflexibilitytorespondtothespecificneedsoftheirstudents;• Promotetheprimacyofneed-basedaid;• Recommendpoliciesthataccommodatethediversityofacademicdeliverymodels;• Promotetheuseoftechnologywhereverpossible;• Eliminatestatutoryrequirementsthatusefinancialaidtoenforceunrelatedsocialpolicies;• Supportrecommendationswithresearchanddataanalysiswhereverpossible;and• Promoteprogramsandeffortsthatencouragestudentfinancialandacademicpreparation
atanearlyage.
Accordingly,thetaskforceheldalmost40listeningsessionsatconferencesacrossthecountry.Membercommentswereanalyzedandcondensedintorecommendations.Inaddition,recommendationsfromtheprior(2003)reauthorizationtaskforcewererevisitedand,wherenecessary,updated.Thisprocessresultedin61recommendations,presentedtotheBoardinacondensedformatinMarch2013.Onerecommendationwasrejected,threewerereturnedtothetaskforceforfurtherdevelopment,and57wereaccepted.
Thisreportpresentstheacceptedrecommendationsinfullerdetail,andexpandeddiscussionsofthethreeissuesstillpendingBoardapproval.
Update,July2016 GeneralProvisions
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GeneralProvisions
1. DateofIssuanceofFinalReportforaProgramReview
Recommendation
• RequiretheDepartmentofEducationtoprovidethefinalreportforaProgramReviewtoaninstitutionwithin60daysafterreceiptoftheinstitution’sresponse.
StatutoryCitation
MasterCalendarHEA§482[20U.S.C.1089]
ProgramParticipationAgreements(hearings;audits)HEA§487(b),(c)[20U.S.C.1094]
ProgramReviewHEA§498A[20U.S.C.1099c–1]
Background,Rationale,andImplementationConsiderations
InordinatelylongdelaysinreceiptofthefinalprogramreviewreportcreateuncertaintyandpotentiallyincreaseliabilitiesfortheschoolbecauseitdoesnotknowwhatisrequiredtoresolveproblemsorcontinuefundinginTitleIVprograms.Therehavebeeninstancesofyears-longdelays.TheRTFhasheardthatdelaysaresometimesduetoreviewerstryingtogetapolicyquestionresolvedtotheschool’sbenefit.However,ifexistingrulesandguidanceareunclearorinsufficientenoughtocausetheprogramreviewertoseekfurtherguidance,theschoolshouldnotbeheldtoaccounteither.
Update,July2016 GeneralProvisions
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2. OverawardTolerance
Recommendation
• EstablishintheGeneralProvisionssectionoflawacommonoverawardtoleranceof$500incaseswherethestudentreceivesadditionalresourcesafterpackaging,applicabletothecampus-basedandDirectLoanPrograms.
StatutoryCitation
FFELP(overawards,applicabletoDL)HEA§428G(d)(2)[20U.S.C.1078−7(d)(2)]
FWS(toleranceforearningsaboveneed)HEA§443(b)(4)[42U.S.C.2753(b)(4)]
Background,Rationale,andImplementationConsiderations
ThisrecommendationseekstoensureconsistenttreatmentofstudentsacrosstheTitleIVprograms(otherthanPellGrant,whichisnotsubjecttooverawardsresultingfromotherresources).TheamountofPellGrantactuallydisbursedorexpectedtobedisbursedshouldbeusedtodetermineoverawards,toaccountforthestudent’sabilitytopostponereceipttolatertermsinviewofnewlifetimelimits.Theschoolshouldbeallowedtodeterminetheorderinwhichaidisadjusted(reflectingthecurrentpracticethatallowsschoolstodeterminetheorderinwhichaidprogramsareawardedtothestudentinpackaging).DirectLoanoverawardsthatremainafterapplyingthetoleranceandadjustingtheaidpackageshouldberepayableunderthetermsofthepromissorynote,asiscurrentlythecaseunderReturnofTitleIVFundsrules.Currently,onceaDirectLoanhasbeenfullydisbursed,thereisnoconceptofanoveraward;loanfundsdonothavetobereturned.Beforedisbursementhasoccurred,however,aschoolmustadjusttheloan(or,undercertaincircumstances,otheraidinthestudent’spackage)tothedollarforanyunanticipatedadditionalaidthestudentisawarded.Bycontrast,inthecampus-basedprogramsthereisa$300tolerance(whichdatesto1995).Forexample,astudentwhoisfullyfundedthroughcampus-basedandotheraidbutwithoutaDirectLoanreceivesa$300scholarship.Thatstudent’spackageisnotrequiredtobeadjusted.AnotherstudentwhowasnotfullyfundedbutcoveredallofhisunmetneedwithaDirectLoanalsoreceivesa$300scholarship,beforetheloanisdisbursed;hispackagemustbeadjustedforthefull$300.Further,iftheschoolhastheloanfundsinhand(buthasnotyetdisbursedthemtothestudent),theloanmustbeadjustedaheadofanycampus-basedaid.Athirdstudent’spackagecontainsFWSfundsinadditiontoaDirectLoan;becauseoftheFWSaward,hemayhavea$300toleranceappliedandtheloandoesnothavetobeadjustedevenifitwasnotyetdisbursed.TheFSAHandbookadvisesthat“Whenastudent’saidpackageincludesassistancefrommultipleprogramsandthoseprogramshavedifferentoverpaymentregulations/requirements,aschoolmustapplythemoststringent/restrictiverequirements.”TheRTFbelievesthatconsistencyintheoverawardprovisionswouldreducestudentconfusionandprovideafairerapproachamongstudentswithdifferentaidpackages.
Update,July2016 GeneralProvisions
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3. AbilitytoBenefit
Recommendation
• Allowastudentwhodoesnothaveahighschooldiplomaoritsrecognizedequivalent,andwasnothome-schooled,tomeetthegeneralstudenteligibilityrequirementconcerningacademiccredentialsbycompleting,withtheequivalentofagradeofCorbetter,atleast6credithoursofcollegecoursework(ortheequivalent)thatisapplicabletowardadegreeorcertificate.
StatutoryCitation
GeneralStudentEligibilityHEA§484(d)[20U.S.C.1091(d)]
Background,Rationale,andImplementationConsiderations
TheConsolidatedAppropriationsActforfiscalyear2012barredstudentswithouteitherahighschooldiplomaoritsrecognizedequivalent(generallyaGeneralEducationDevelopment(GED)credential),unlesshomeschooled,fromreceivingfederalstudentaid,effectiveJuly1,2012.Previously,studentscouldalsoreceiveTitleIVfundsiftheydemonstratedtheabilitytobenefit(ATB)fromtheeducationoffered.Traditionally,theeligibilityofstudentswithoutahighschooldiplomaorGEDwasbasedontheresultsofED-approvedteststhatweredevelopedtomeasureATB.InAugust2008,basedonasuccessfulExperimentalSitesproject,Congressaddedtothelawaprovisionthatallowedstudentstodemonstratetheabilitytobenefitbysatisfactorycompletionofsixcredithoursortheequivalent,ifapplicabletowardadegreeorcertificateofferedbytheinstitution.Thatamendmentwaseffectiveuponenactment;governingregulationsbecameeffectiveJuly1,2011.Thus,thisprovisionwasinplaceforarelativelyshortspanoftimebeforeitwasknockedoutbyageneralrescissionoftheATBconcept.ForcingstudentstofirstgetaGEDandthenenrollinapostsecondarydegreeorcertificateprogramprolongstheirtimetodegreecompletionandinmanycasesimpactstheirabilitytoobtainwell-payingjobsandsupporttheirfamilies.TheRTFrecommendsthatthesix-creditprovisionbereinstated,withsomemodification.Astudentwhodoesnothaveahighschooldiplomaoritsrecognizedequivalent,andwasnothome-schooled,couldmeetthegeneralstudenteligibilityrequirementconcerningacademiccredentialsbysuccessfullycompleting,withtheequivalentofagradeofCorbetter,atleast6credithoursofcollegecourseworkthatisapplicabletowardadegreeorcertificate.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:
• ConsolidatedAppropriationsAct,2016[P.L.114-113]:amendsthedefinitionofcareerpathwaysprogramtoalignwithWorkforceInnovationandOpportunityAct(WIOA).Whilethischangeisastepforward,NASFAA’srecommendationdifferssubstantiallyfromthenewversionofabilitytobenefit.
Onebillhasbeenintroducedthatwouldimpactthisrecommendation:• RestoringInvestmentinATBStudentEducation(RISE)Act[H.R.4158]:wouldincludeacloser
versionofNASFAA’srecommendation.
Update,July2016 GeneralProvisions
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4. SelectiveServiceRegistration
Recommendations
• Eliminatetheprovisionrequiringinstitutionstomonitorandenforceselectiveserviceregistration(assigntheresponsibilityfordeterminationtoSelectiveService).
• Considerapaththatallowsstudentswhofailedtoregister,butwhoarepasttheageofregistration,toregaineligibility(possiblythroughcommunityserviceorfederalawardsrestrictedtothecostoftuitionandfeesonly).
StatutoryCitation
GeneralStudentEligibilityHEA484(n)[20U.S.C.1091(n)]
MilitarySelectiveServiceAct50U.S.C.Appendix,462(f)
Background,Rationale,andImplementationConsiderations
TheRTFrecommendseliminationoftherequirementtoberegisteredwithSelectiveServicefromthegeneralstudenteligibilitycriteria.Thisrecommendationhasbeenmaderepeatedlyforalongtime.Attheveryleast,responsibilityfordeterminingwhetherafailuretoregisterwasknowingandwillfulshouldbeshiftedbacktoSelectiveServiceandsomepathbeconstructedthatallowsstudentswhoknowinglyfailedtoregister,butwhoarepasttheageofregistration,togaineligibility(possiblythroughcommunityserviceorfederalawardsrestrictedtothecostoftuitionandfeesonly).
July2016Update
CongressionalActioninthe114thCongress(2015-2016)SeveralbillshavebeenintroducedthatwouldimpacttheSelectiveService:
• ToRepealtheMilitarySelectiveServiceAct[H.R.4523]:wouldeliminateSelectiveServiceentirelyandwouldprohibitdenialofrights,privileges,benefits,oremploymentonthegroundsoffailuretoregisterfortheSelectiveServicepriortotherepeal
• DraftAmerica’sDaughtersActof2016[H.R.4478]:wouldrequirefemalesbetweentheagesof18and26toregisterfortheSelectiveService,effective90daysafterpassage
• NationalDefenseAuthorizationActforFiscalYear2017[S.2943]:wouldrequirefemalestoregisterwiththeSelectiveServicewhoturn18onorafterJanuary1,2018
Update,July2016 GeneralProvisions
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5. Drug-relatedIneligibility
Recommendation
• Eliminatethetiebetweenstudenteligibilityanddrugconvictions.StatutoryCitation
GeneralStudentEligibilityHEA§484(r)[20U.S.C.1091(r)]
Background,Rationale,andImplementationConsiderations
Afederalorstatedrugconviction—ifreportedbythestudent—candisqualifyastudentforfederalstudentaidifitoccurredduringaperiodofenrollmentforwhichthestudentwasreceivingfederalstudentaid.Convictionsoccurringoutsideenrollmentperiodsasanaidrecipientdonotcount,unlessthestudentwasdeniedfederalbenefitsfordrugtraffickingbyafederalorstatejudge.Additionally,aconvictionthatwasreversed,setaside,orremovedfromthestudent’srecorddoesnotcount,nordoesonereceivedwhenthestudentwasajuvenilecount,unlessheorshewastriedasanadult.Manyifnotmostschoolscurrentlyhaveadmissionsandstudentconductruleswhichaddressdruguse.Institutionsgenerallyhaveinternalpoliciesandproceduresthatwouldresultinsuspensionorexpulsionofstudentswhoareconvictedofdrugabusewhileenrolled.TheRTFbelievesthatfinancialaidshouldnotbeusedtoenforcesocialpolicies.Individualscannotreceivefederalfinancialaidwhileincarceratedinfederalorstatefacilities.Oncereleasedandagainpossiblyeligibleforaid,theseindividualshavealreadysatisfiedpunishmentimposedforconviction;educationmaybetheirbestroutetorehabilitation.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Twodifferentbillshavebeenintroducedthatwouldmodifyorrepealthisprovision:
• FairAccesstoEducationAct[H.R.3561]:wouldexcludeamisdemeanorchargeforpossessionofmarijuanafromitscurrentclassificationasa“drug-relatedoffense”
• StoppingUnfairCollateralConsequencesfromEndingStudentSuccess(SUCCESS)Act[H.R.4004/S.2557]:wouldcompletelyrepealthedrug-relatedineligibilityprovision
Update,July2016 GeneralProvisions
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6. Reinstatementofstudenteligibility
Recommendation
• StandardizetherulessurroundingtheregainingofstudenteligibilityacrosstheTitleIVprogramstotheextentpossible.
StatutoryCitation
GeneralStudentEligibilityHEA§484(j)[20U.S.C.1091(j)
Background,Rationale,andImplementationConsiderations
Undercurrentrules,astudentmaybepaidPellGrant,campus-basedaid,andTEACHGrantonlyforthepaymentperiodinwhichheorshegainseligibility,butmayreceiveDirectLoansfortheentireloanperiod.ForcertaincausesofineligibilitythestudentcanreceiveTitleIVaidfortheentireawardyearoncetheineligibilityisresolved.RequiringdifferentadministrativeapproachesdependinguponwhichTitleIVprogramisaffectedisneitheradministrativelyefficientnoreasilyunderstoodbytherecipientoftheTitleIVassistance.Formostcausesofineligibility,thisrecommendationwouldreinstateastudent’seligibilityretroactivelytothebeginningoftheawardyear(orloanperiod).Forsatisfactoryacademicprogress(SAP)issues,reinstatementwouldaffectonlythecurrentpaymentperiod,butthatpointintimewouldapplytoalloftheTIVprograms.
Update,July2016 GeneralProvisions
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7. I-9EmploymentEligibilityVerification
Recommendation
• Includetheresultsofdatabasematchesasacceptableinlieuofdocumentsusedtoestablishemploymenteligibilityforemployment.
StatutoryCitation
HEA§484(g)(2)
Background,Rationale,andImplementationConsiderations
Currently,schoolsarerequiredtocollectcopiesofSocialSecurityCards,AlienRegistrationCards,citizenshipdocuments,orpassportseventhoughcitizenship,socialsecurityandINSmatchesareperformedinthefederalstudentaidapplicationprocess.Thisrecommendationwouldsimplifytheprocesswithoutcompromisingthelaw’sintentofverifyingidentityandeligibilityforemployment.
Update,July2016 GeneralProvisions
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8. Non-automaticAllowableCharges(CashManagement)
Recommendation
• AllowschoolstouseTitleIVfundstopayallallowableeducation-relatedcostschargedtothestudent’sinstitutionalaccountwithoutanyadditionalauthorization,unlessthestudentactstoplacerestrictionsonautomaticpaymentforcertaincharges.
StatutoryCitation
Thisisessentiallyaregulatoryissue,basedonverygeneralauthoritytoregulateprovidedbyHEA§487(20U.S.C.1094).Background,Rationale,andImplementationConsiderations
Currently,theDepartmentofEducation(ED)requiresaschooltoobtainastudent’spermissiontocreditTitleIVfundstochargesbeyondtheautomaticallyallowablecostsoftuition,fees,institutionallycontractedroomandboard,and,forPellGrantrecipients,bookstorechargesrelatedtotherequirementtoprovideameansofobtainingbooksandsuppliesearlyinthepaymentperiod.SchoolscanuseTitleIVfundstopayothereducation-relatedcostschargedtothestudent’sinstitutionalaccountonlyifthestudentauthorizesit(i.e.,onlyifthestudentopts-intosuchuseofTitleIVfundsbytheschool).TheRTFrecommendationreversesthatprocess.Aschoolwouldhavetoinformstudentsofitspolicyandprovideanopt-outbywhichthestudentcouldrestrictautomaticapplicationofTitleIVfundstoonlytuition,fees,institutionallycontractedroomandboard,andearlybookstorecharges,unlessthestudenthasauthorizedpaymentofothercharges.Currently,theDepartmentofEducation(ED)requiresaschooltoobtainastudent’spermissiontocreditTitleIVfundstochargesbeyondtheautomaticallyallowablecostsoftuition,fees,institutionallycontractedroomandboard,andbookstorechargesrelatedtotherequirementtoprovideameansofobtainingbooksandsuppliesearlyinthepaymentperiod.SchoolscanuseTitleIVfundstopayothereducation-relatedchargesonlyifthestudentauthorizesit(i.e.,onlyifthestudentopts-intosuchuseofTitleIVfundsbytheschool).NASFAA’sReauthorizationTaskForce(RTF)recommendsreversingthatprocessbyallowingschoolstouseTitleIVfundstopayallallowableeducation-relatedcostschargedtothestudent’sinstitutionalaccount.Schoolswouldhavetoinformstudentsofthispolicyandprovideanopt-outbywhichthestudentcouldrestrictapplicationofTitleIVfundstoonlytuition,fees,andinstitutionallycontractedroomandboardunlessthestudenthasauthorizedpaymentofothercharges.Studentsandfamiliesdonotunderstandtheoptionscurrentlyavailableortherequirementthatschoolsdisbursefundstostudentsevenifthereareoutstandingchargesonthestudent’saccount.An“opt-out”processislesscumbersomeforthestudent.Sincethisrequirementisastudentaccountfunction,thisrequirementshouldnotbetiedtothefinancialaidawardingprocess.TheFAFSAand/orawardnoticewouldincludeastatementthatfundswillbecreditedtoincurredinstitutionalchargesunlessthestudentoptsoutofcertainones.
Update,July2016 GeneralProvisions
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9. Pay-as-you-godisbursementforcompetency-basededucation
Recommendation
� Incompetency-basededucation,disbursefundstocoverdirectcostsasastudentdemonstratescompetencymastery.
Background,Rationale,andImplementationConsiderations
ThisrecommendationwasputforwardbytheInnovativeLearningModelsTaskForceinJune2015.Thetaskforcerecommendsa“payasyougo”disbursementprocesswithincompetency-basededucation,similartothecurrentCompetency-BasedEducationExperimentalSiteInitiative,whichdisbursesfundstocoverdirectcostsasastudentdemonstratescompetencymastery.Withthismodel,highereducationinstitutionsshouldworkwiththestudentto“earn”thefinancialaidfundingbyprovidingperiodicorincrementaldeliveryatspecificsuccesspointsasthestudentworkstowardtheireducationalgoal.
ADD
Update,July2016 GeneralProvisions
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10. Hybrid/mixedmodalityfordirectassessments
Recommendation
� AllowdirectassessmentcomponentswithintraditionallearningprogramstoqualifyaseligibleforTitleIVfunds.
Background,Rationale,andImplementationConsiderations
ThisrecommendationwasputforwardbytheInnovativeLearningModelsTaskForceinJune2015.ThetaskforceisencouragedbythecurrentExperimentalSiteInitiativeallowingmixedmodalityprogramstoreceivefederalfinancialaidfunds,andrecommendsachangetobothHEAsection481(b)(4)and34CFR668.10(a)(1),whichcurrentlyrequireaprogramutilizingdirectassessmenttousedirectassessmentfortheentireprogram.Thischangewouldallowstudentstomovemorequicklythroughtheareasinwhichtheyareknowledgeableandreceiveamoretraditionaleducationalexperienceinthoseareaswhichmaybeneworchallenging.
ADD
Update,July2016 NeedAnalysis
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NeedAnalysis
1. Prior-PriorYear(PPY)Data
Recommendation
• Implementtheuseofincomedatafromthesecondprioryear,commonlyreferredtoasprior-prioryear,asthebasisfortheEFCcalculations,acrosstheboard.
StatutoryCitation
NeedAnalysisDefinitions(totalincome)HEA§480(a)(1)(A)[20U.S.C.1087vv(a)(1)(A)]
Background,Rationale,andImplementationConsiderations
Prior-prioryear(PPY)dataprovidesmoreaccurateincomedataingreaterdetail,withahigherlikelihoodofavailabilityfromtheIRSdataretrievaltool.Earlieravailabilityofincomeforneedanalysisallowsearliernotificationto,andplanningby,studentsandtheirfamilies.Schoolswouldretainprofessionaljudgmentauthoritytotreatindividualcircumstances.TheuseofPPYdatacanenhanceverificationefforts.Itfacilitatesabetteralignmentoftheaidapplicationprocessandtheadmissionsapplicationprocessfornewstudents.Asaresult,itoffersmoretimeforstudentstoevaluatetheawardsfrominstitutionstomakeaninformeddecisionaboutnetcostsforattendanceattherespectiveinstitutions.NASFAAconductedastudytodeterminewhetherbasingneedanalysisonprior-prioryeardataratherthanimmediatelyprioryeardatawouldsignificantlyaffectthedistributionoffederalstudentaidfunds,particularlyPellGrantfunds.
Update,July2016 NeedAnalysis
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July2016Update
ThisrecommendationwasreinforcedbyNASFAA’sFAFSAWorkingGroupandreceivedwidespreadsupportfromotherorganizations.Utilizingexistinglegislativeauthority,PresidentObamaannouncedviaexecutiveauthorityinSeptember2015thattheDepartmentofEducation(ED)wouldadoptPPYforallapplicantsbeginningwiththe2017-18awardyearFAFSA.AreportdetailingtheNASFAAstudyresults,ATaleofTwoIncomeYears:ComparingPrior-PriorYearandPrior-YearthroughPellGrantsAwards,waspublishedinOctober2013.Asecondreport,GreatExpectations:ImplicationsofImplementingPrior-priorYearIncomeDatafortheFAFSA,releasedbyNASFAAinMay2015,presentedfurtherimplicationsandanalysisfromaworkinggroupofrepresentativehighereducationprofessionals.InOctober2015NASFAAestablishedaPPYImplementationTaskForcetorunthroughMarch2017.Thetaskforcewill:
(1) ProactivelyidentifyimplementationissuesandworkthroughtheNASFAAstaffandcollaboratewiththeUSDepartmentofEducationonensuringasuccessfulrolloutofPPY;
(2) SolicitanddeliverfeedbackfromtheNASFAAmembershipandboardofdirectorsonPPYrollout;
(3) Identifybestpractices,Q&As,andtrainingsrelatedtoPPYfortheNASFAAmembership;(4) IdentifyandaddressanyissuesimpactingfinancialaidcomputersystemsduringaPPY
transition;(5) FacilitatecollaborationswithotherkeystakeholdersinvestedinPPY,includingtheadmission
andstategrantagencycommunities;and(6) Conductapost-mortemasPPYisrolledout,deliveringfinalrecommendationsonthe
evolutionofPPYgoingforward.CongressionalActioninthe114thCongress(2015-2016)Threedifferentbillshavebeenintroducedthatwouldcodifythischangeintolaw:
• SimplifyingtheApplicationforStudentAidAct[H.R.3177]:wouldmakePPYpermanent• SimplifyingFinancialAidforStudentsAct[S.1872/H.R.3446]:wouldmakePPYpermanent• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldmakePPYpermanentand
wouldalsomodifyasmallprovisionincurrentlawthatwillfacilitatetheearlierreleaseoffinalPellGrantnumbersfromtheDepartmentofEducation(ED),allowingcollegestoprovideaccuratescholarshipandgrantinformationmuchearlier.SupportedbyNASFAA,thisbillpassedoutoftheHouseCommitteeonEducationandtheWorkforceonJune23,2016.
Update,July2016 NeedAnalysis
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2. AutoZero–DislocatedWorkerQualificationCriterion
Recommendation
• Eliminatethedislocatedworkercriterionasanautomaticqualifierfortheauto-zerocomputation.StatutoryCitation
HEA§479(c)[20U.S.C.1087ss(c)]
Background,Rationale,andImplementationConsiderations
Useofthedislocatedworkercriteriontoqualifyforazero“EFC”hasunintendedeffects,distortingandsignificantlyreducingEFCforfamilieswheretheincomeofthedislocatedworkerisnotrepresentativeofthefamily’sfinances.TheappropriatevehicleforconsiderationofreducedincomeandtheimpactofthereductionisthediscretionofthefinancialaidadministratorauthorizedinHEAsection479.Anautomaticzeroexpectationcanbeasevereunderstatementoffamilyabilitytopayforeducationalexpenses,ifsubstantialfamilyassetsthatwouldsignificantlyincreasetheEFCareignoredbecauseofthisprovision.Whileotherqualificationcriteriafortheauto-zerocomputationrequirerelativelysimplefamilycircumstancesreflectedintheuseofsimplerversionsoftheIRSForm1040,thereceiptoffederalmeanstestedbenefits,oranincomesufficientlylowastonotrequirefilinganincometaxreturn,thedislocatedworkercriterioncanpermitafamilywithextremelyhighlevelsofassetstoqualifyforazeroEFC.Thisoutcomedistortsthepurposeof“need”analysis,andgivesanunfairadvantagetosomefamiliesthatareactuallymoreabletocontributethanothers.
July2016Update
NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.Theresultantproposedmodeldoesnotconsiderdislocatedworkerstatus.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactdislocatedworkerqualificationcriterion:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations
Update,July2016 NeedAnalysis
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3. FAFSASimplification:AutoZero
Recommendations
• AddreceiptofSSI,TANForGeneralReliefbenefitsassolequalifiersforanAutoZeroEFCdetermination.
• Students/parentswhorespondthattheyreceiveorreceivedthesebenefitswouldnothavetocompleteanyquestionsontheFAFSAregardingincomeorassetinformation.
• Verificationofbenefitswouldbeconductedeitherthoughadatabasematch(SSI)orattheschool.StatutoryCitation
HEA§479[20U.S.C.1087ss]
Background,Rationale,andImplementationConsiderations
Recipientsofthesebenefitshavealreadycompletedaneedanalysisprocessforagovernmentalagencyandshouldnothavetoproveagainthattheyareneedy.Thisrecommendationwouldallowstudentswhohave,orwhosefamilieshave,alreadydemonstratedhighneedtoauto-qualifyformaximumfederalstudentaidandwouldreducetheFAFSAtopersonalidentityandnon-incomeeligibilityquestions.
July2016Update
NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.TheresultantproposedmodelwouldassignmaximumPellGranteligibilitytoanyapplicantwhoseparent(ifdependent)orhouseholdmember(ifindependent)receivesSupplementalNutritionAssistanceProgram(SNAP)and/orSupplementalSecurityIncome(SSI)benefits.Effectivewiththe2017-18FAFSA,theDepartmentofEducationaddedMedicaidtothelistofmeans-testedbenefitswhichhelpanapplicantqualifyforthesimplifiedneedstestorforanautomaticzeroEFC.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldusemeans-testedfederalbenefitstoautomaticallyqualifyastudentforPellGrant.Forallotherapplicants,itwouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations
Update,July2016 NeedAnalysis
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4. SimplifiedNeedsTest
Recommendation
• Eliminatethesimplifiedneedstest.StatutoryCitation
HEA§479(b)[20U.S.C.1087ss(b)]
Background,Rationale,andImplementationConsiderations
Determinationofeligibilityiscomplexenoughtoconfuseapplicantsandbedifficulttoexplain,especiallywithregardtotaxformsthatcouldhavebeenfiled.Insomecases,theexclusionofsubstantialassetscausesunnecessaryexpenditureswhichcouldbetargetedatneedierapplicants.Theexclusionofhomeequityandretirement/pensionplansfromthedefinitionofassetsandtheassetprotectionallowancealreadyprovidereliefwithintheformula. Retainingaproperlydesignedandupdatedauto-zeroEFCoptionshouldbesufficienttoidentifypopulationsforwhomassumptionsofmaximumneedareappropriate.Asanalternativeapproach,increaseddataavailabilityfromtheIRSdataretrievaltoolmayallowforanappropriateflowofquestionsduringtheapplicationprocesstodeterminewhetheracollectionofassetinformationisnecessarybasedontheanalysisofappropriateincomeitemsfromtaxfilings.
July2016Update
NASFAAestablishedaFAFSAWorkingGroupinJuly2015todevelopamodelthatwouldsimplifytheapplicationprocesswhilestillensuringprogramintegrityandaccuratetargetingoffederalfunds.Theresultantproposedmodelcreatesthreepathsforassessingfinancialneed,incorporatingtheconceptthatfamilieswithcertainfinancialcharacteristicsneednotbeaskedafullrangeofincomeandassetinformation.AgraphicrepresentationofthemodelisattachedtothisreportasAppendixB.Effectivewiththe2017-18FAFSA,theDepartmentofEducationaddedMedicaidtothelistofmeans-testedbenefitswhichhelpanapplicantqualifyforthesimplifiedneedstestorforanautomaticzeroEFC.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,toberetrievedfromtheIRS,thuseliminatingtheneedforalternatequalificationsorcalculations
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page16
5. CostofAttendance
Recommendations
• Clarifyinstitutions’authoritytoreducenon-tuitioncostofattendance(COA)componentsforfactorsidentifiedbytheinstitution,suchasless-than-full-timeenrollmentordistanceeducation.
• Deleteotherreferencestocostdeterminationsfortelecommunicationsanddistanceeducation.
� Includepriorlearningassessmentsinthecostofattendance.
StatutoryCitation
HEA§472[20U.S.C.1087ll]
Conformingamendmentstodelete472(10)and484(l)(2)[20U.S.C.1087ll(10)and20U.S.C.1091(l)(2)]
Background,Rationale,andImplementationConsiderations
CurrentstatutereferstoenrollmentstatusdistinctionsonlyinthetuitionandfeescategoryofCOAcomponents.Thelawexcludescertaincategoriesofcostcomponentsaltogetherforless-than-half-timeenrollment.TheDepartmentofEducation(ED)interpretstheseaspectsofthelawasanindicationthatCongressdidnotintendlivingexpensestobereducedbasedsolelyonpart-timeenrollmentstatusesofhalf-timeorgreater,eventhoughthelawgivesinstitutionstheauthoritytodetermineallowances[“anallowance(asdeterminedbytheinstitution)forroomandboardcostsincurredbythestudent..”].Consequently,studentsenrolledathalf-timeorabove,butlessthanfull-timemayreceiveuptomaximumannualloanamountswhilemakingslowprogresstowardscompletingtheirprogramsofstudy,accruinglargerdebtandpotentiallyexhaustingfederalloaneligibilitybeforecompletingtheirprogramandover-borrowingintermsoftheircapacitytorepaytheirloansfromfutureearnings.Aninstitutionshouldbeabletosetallowancesandpoliciesthatarerelevanttoitsstudentdemographicsandmission.Thus,ifaschool’spart-timepopulationconsistsoverwhelminglyofadultlearnerswhoareemployedfull-time,theschoolcanadjustitscostofattendanceallowancestorecognizethatthosestudentsdonotneedextraassistancetosubsist.ProfessionaljudgmentcouldstillbeusedtoincreasetheCOAforthosestudentslegitimatelyneedingthemaximumresourceswhileenrolledlessthanfull-time.
TitleIVaidshouldbeallowedtopayforcostsassociatedwithpriorlearningassessmentpreparation.TheInnovativeLearningModelsTaskForceputforwardthisrecommendation.
Manypriorlearningassessmentsrequirethestudenttospendaconsiderableamountoftimepreparingmaterialsfortheassessment,whichcancreateafinancialburdenwithoutfundingtocovertherelatedcosts.Thischangemightencouragemorestudentstoapplytheirpriorlearningtowardsthecompletionofaprogram.AnExperimentalSiteInitiativepermitsTitleIVaidtocoversomevarietiesofpriorlearningassessments.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)• Onebillwasintroduced,theFlexibilitytoInnovateforCollegeAffordabilityAct[H.R.3372],
thatallowspriorlearningassessmentstobeincludedinCOA.
ADD
ADD
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page17
6. IndependentStudentDefinitionRelatedtoHomelessness
Recommendation
• Eliminatehomelessnessfromautomaticindependentcriteriaandmovetooverrideauthorityasanexample.
StatutoryCitation
NeedAnalysisDefinitions(independentstudent)HEA§480(d)(1)(H)and(I)[20U.S.C.1087vv(d)(1)(H)and(I)]
Background,Rationale,andImplementationConsiderations
ThecomplexityofthedefinitionsanddeterminationsofhomelessnesshasresultedinmisunderstandingandinaccuraciesobservedbyaidadministratorsintheanswerstotheFAFSAdependencyquestion.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page18
7. ReflectregionalcostoflivinginIncomeProtectionAllowance(IPA)
Recommendation
• DirectEDtostudy,andreportbacktoCongress,thepossibilityofadjustingtheIPAonaregionalbasiswithperiodicCOLAadjustmentsbasedonregionalvariationsintheCOLA.
StatutoryCitation
Thisrecommendationwouldlikelybeincorporatedintothereauthorizinglegislation.Background,Rationale,andImplementationConsiderations
Currentlythesameincomeprotectionallowance(basedonfamilysizeandnumberincollege)isusednationwide,thoughthereisgreatvariationincostoflivingacrosstheU.S.AGovernmentAccountabilityOfficereport,GAO-09-825,statesthat“whiledatasuggestthatthecostoflivingishigherinsomeareasthaninothers,thecurrentaidformulaaccountsforthesedifferencesinonlyalimitedway.Howthesedifferencesaffectafamily’sabilitytopayforcollegeisunclear,inpartbecausenoofficialmeasureofgeographiccost-of-livingdifferencesexists.WeidentifiedthreepossibleCOLAoptionsthatcouldbeusedinthefederalaidformula.TheseCOLAscouldincreasePellGrantsandotherfinancialaidforasmallpercentageofstudentsfromhigh-costareasbutcouldalsofurthercomplicatetheprocessforcalculatingandadministeringfederalstudentaid.”Thistextsuggeststhatfurtherstudyisneeded.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page19
8. EFCFormula–ForeignIncomeExclusion
Recommendation
• ReporttheamountofforeignincomeexclusionasuntaxedincomeontheFAFSA.
• ExpandtheIRSdataretrievaltooltoincludethisdataelement.StatutoryCitation
NeedAnalysisDefinitions(untaxedincomeandbenefits)HEA§480(b)(2)[USC1087vv(b)(2)]
Background,Rationale,andImplementationConsiderations
Thefederaltaxcodeallowsqualifiedindividualstoexcludecertainformsofincomeearnedinanothercountry.Theneedanalysisformuladoesnotutilize“excluded”foreignincome.However,theprimarypurposeofneedanalysisistodetermineafamily’sfinancialstrengthandabilitytocontributetoeducationalexpenses.Inmanyinstances,incomeearnedinanothercountrymaybetheindividual’smajororonlysourceofincome.Excludingitpresentsaninaccuratepictureofthefamily’sfinancialstrengthrelativetootherFAFSAapplicants.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page20
9. EFCFormula–BusinessLosses/CapitalLosses/OtherLossesResultinginNegativeAdjustedGrossIncome
Recommendations
• Addbackanybusiness,capital,andotherlossesthatdonotrepresentareallossofincomewhendeterminingtheparents’andstudent’sincomeforFederalMethodology(FM)needanalysispurposes.
• UtilizetheIRSdataretrievaltooltoidentifythatincome.StatutoryCitation
NeedAnalysisDefinitions(untaxedincomeandbenefits)HEA§480(b)[20U.S.C.1087vv(b)]
Background,Rationale,andImplementationConsiderations
TheFMneedanalysisformuladeterminesafamily’sfinancialstrengthandabilitytocontributetoeducationalexpenses,andfacilitatescomparisonofonefamily’sneedtoanother’s.“Paper”lossesallowedaspartoftheIRStaxcodeartificiallyreduceincomeand,asaresult,artificiallyreduceEFC.EDwouldneedtodetermine,inconsultationwithIRSandrepresentativeschoolsthathaveexperienceinthispractice,whichlossesshouldbeincludedinincomeandhowtocapturethatinformationthroughtheIRSdataretrievaltool.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page21
10. FederalMethodology(FM)EFCFormula–BusinessandFarmAssets
Recommendations
• Eliminatethesmallbusinessexclusion(countbusinessassetsregardlessofthenumberofemployees).
• Eliminatetheexclusionoffarmvaluefromassets.StatutoryCitation
NeedAnalysisDefinitions(assets)HEA§480(f)(2)[1087vv(f)(2)]
Background,Rationale,andImplementationConsiderations
Thethresholdfordefininga“small”businessis100employees,whichseemsexcessive.FMalreadyadjustsbusinessequitydownwardonaslidingscaletoprotecttheincome-producingcapacityoftheasset.Itmaymakemoresensetoreassesstheadequacyoftheprotectionallowancethanexcludebusinessesaltogether.Thenatureoffamilyfarmshaschangedandismoreakintoabusiness.Ifassetsfrom“small”businessesarereinstatedintheneedanalysis,soshouldfarmassets.Farmassets(otherthaninvestmentfarms)areadjustedinthesamewayasbusinessvalue,usingthesameslidingscale(onetableisusedforbothintheEFCformula).Asforbusinesses,theadequacyofthefarmassetadjustmentmightneedtobereviewed.Thevalueofafamilyhomesituatedonafarmcouldandshouldbeexcluded.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page22
11. IRS/FAFSADataExchangeRecommendation
• DirecttheSecretarytocontinuetoexpandandrefinetheIRS/FAFSAdataexchangeprocesstoincludeallcurrentFAFSAdataelementsthatcanbeobtainedfromthefederaltaxreturn,tosupportamorerobustFMneedanalysisformula(e.g.interest/dividendincome,IRSdistributions,socialsecurityincome,certainformsofuntaxedincome,etc.).
StatutoryCitation
NeedAnalysisDefinitions(totalincome)HEA§480(a)(1)(B)[1087vv(a)(1)(B)]
Background,Rationale,andImplementationConsiderations
NowthattheIRS/FAFSADataExchangeprocesshasbeenimplemented,thenumberoftaxreturndataelementscollectedcouldbeexpandedsignificantlyinanefforttoincreasetheaccuracyofcurrentlyrequiredFMdataelements.Thepossibleinclusionofnewtaxreturndataelementscouldalsobeconsidered. Theaccuracyofthefinancialinformationcollectedfromfamiliestodeterminetheirexpectedcontributiontowardeducationalexpensesandeligibilityforfederalformsoffinancialaidisparamounttoafairandequitableprocess.Theadditionofanexpandednumberofdataelementssupportsthisgoalandreducestheverificationburdenoncollegesanduniversities.Theadditionofanexpandedsetoftaxreturndataelementswouldsupportamorerobustneedanalysisformula.
July2016Update
NASFAA’sFAFSAWorkingGroupreinforcedthisrecommendation,andrecommendedexpansionoftheIRSDRTtoincludealllineitemsofthe1040andW2information.CongressionalActioninthe114thCongress(2015-2016)ThreebillshavebeenintroducedthatwouldencourageexpansionoftheIRSDataRetrievalTool(IRSDRT):
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldretrieveallincomeinformationforfinancialaidapplicantsfromtheIRS
• StudentFinancialAidSimplificationAct[H.R.3265]:wouldallowtheDepartmentofEducationtocollectmoreinformationfromtheIRS,reducingthenumberofquestionsoftheFAFSAby31
• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldencourageEDtocontinuetoenhancetheIRS/FAFSAdataexchangethroughautomaticallypopulatinginformationandskiplogic
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page23
12. Utilizethe1040astheFederalStudentFinancialAidApplicationRecommendations
• DirecttheDepartmenttoperformafeasibilitystudywiththeIRStodevelopaprocessinwhichthetaxreturnistheprimaryfederalfinancialaidapplicationvehicle.
• AmendbothHEAandtaxlawtoauthorizeuseofthetaxreturninthisway.StatutoryCitation
HEA§483(f)[20U.S.C.1090(f)]
Background,Rationale,andImplementationConsiderations
CurrentlymostofthefinancialdatausedtocompletetheFAFSAcomesfromthetaxreturn.TheIRSdataretrievaltoolprovidesdirectpopulationofthoseitems,andEDismovingsignificantlytowardsmandatoryusethroughtheverificationprocess.However,filingaFAFSAisstillaseparateprocessfromfilingthetaxreturnandrequiresthestudentandfamilytoinitiatethestudentaidprocessonanentirelydifferentwebsite.Theaidapplicationprocesscouldbemergedwiththetaxreturnprocessbyprovidingafinancialaidapplicationsectiononorwiththe1040asanoptionforapplyingforfederalstudentaid.ThiscouldeliminatetheFAFSAapplicationforstudentsandparentswhofiletaxreturns.ThisideabuildsonthesuccessoftheFAFSA/IRSdataretrievaltoolbymakingfilingtaxesandapplyingforfinancialaidoneprocess.Ifprior-prioryearneedanalysisisadopted,someofthetimingissueswouldbeeliminated.Inthatcase,thecheckoffwouldactuallybeforthepreviousyear’staxreturndata.Forexample,familiescouldindicateonthe1040thattheywanttoapplyforfederalaidbycheckingaboxorcompletingasupplemental1040form.TheFAFSAwouldstillbeneededasanoptionforfamiliesthatdonotfiletaxreturnsorwillnotfilebyinstitutionaldeadlinesandasaformthatcouldbeupdatedorcorrected.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• SimplifyingtheApplicationforStudentAidAct[H.R.5528]:wouldrequireEDtoexaminewhetherataxreturncanbeusedtogenerateanEFCwithoutadditionalactiononthepartofthestudent
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page24
13. SingleMethodologyandApplicationLimitsUseofFAFSADatabyStatesandInstitutionsDescriptionofIssue
Inresponsetowidespreadconcernabouttheactualandpossibleproliferationofneedanalysisapplicationformsandtheassociatedfamily/studentburdeninfilingmultipleforms,the1992HEAAmendmentsmandatedasinglemethodologyaswellasasingle,no-chargeapplicationform(FAFSA)fordeterminingTitleIVeligibility.CongressalsoprovidedtheSecretarywithauthoritytoincludealimitednumberofdataelementstotheFAFSAthatwerenotrequiredtodeterminefederaleligibility,butthatcouldbeincludedasanincentiveforstatesandinstitutionstousetheFAFSAandFederalMethodologyforawardingtheirownaid.Giventhataidapplicationwasapaper-basedprocess,suchconcernsaboutrespondentburdenwerenotunreasonable.However,todaythevastmajority—atleast98percentaccordingtorecentpublicstatementsbyFSA—ofTitleIVaidapplicantfiletheirFAFSAselectronically.Thus,concernsregardingtheneedforfamiliestocompletemultipleapplicationsinhardcopyformats—withmuchofthesamehouseholdandfinancialinformationcollectedmultipletimes—areoutdated.Infact,today’sFAFSAontheWeb(FOTW)encouragesapplicantstocompleteaseparateform—viatheDataRetrievalTool(DRT)—attheIRSwebsite.Arguably,then,FOTWisamulti-formfinancialaidapplicationprocess—whileintheFOTWsession,anapplicantcaninitiateasecondsessionattheIRSwebsite.Todayitismoreappropriatetothinkabouttheaidapplicationprocessasaseriesofconcurrentonlinesessionsinsteadofphysicallydistinctapplicationforms.Recommendation
AtthistimetheRTFisnotrecommendingastatutoryprovisiontodirecttheSecretarytousetechnologyinamoreusefulandefficientmanner.TheRTFdoesnotwanttheDepartmenttobeinthepositionofwaitingforstatutorychangetocatchupwithtechnologicalinnovation.Rather,CongressshouldencouragetheSecretarytoengagestakeholdersaswellastechnologyexpertsindiscussionstoexplorewaystheIRS-DRTmodelcouldbeextendedtootherfederalagencies,statesandinstitutions.However,astatutorychangemightbeneededtoallowthesharingofdatacollectedontheFAFSAwiththirdparties.Nevertheless,itiscriticaltoestablishwithintheHEAanappropriateframeworkforanaidapplicationprocessthatischaracterizedbyon-lineactivitybetweentheapplicantandavarietyofaidproviders—chieflythefederalgovernment,statesandinstitutions.Section483oftheHEAprescribestheformsthataretobeusedbystudentsandtheirfamiliestoapplyforfederalfinancialaid.Thebreadthofthestatutoryprescriptionextendstospecifyingbothpaper-basedandelectronicFAFSAforms.Theproposedrevisiontotheapplicationprocessenvisionsaschemewhereinthecompletionandsubmissionofanaidapplication“form”isaccomplishedinanonline“session.”Inparticular,CongressshouldusethestatutetoensurethattheSecretaryisabletoutilizeexisting,emerging,andas-yet-undevelopedtechnologiestosimplifyandstreamlinetheprocessforapplyingforfinancialaidirrespectiveofthesourceofthataid.OutmodedreferencestopaperFAFSAsmustbeeliminated.Itisalsoimperativeforthird-partyfinancialaidproviders(andtheiragents)tohaveaccesstofederalapplicantinformation.Anexistingstatutoryprovision—HEA483(a)(10)—permitsthesharingoffederally-collectedfinancialaidapplicationdatawithstatesandinstitutions.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page25
Specificand/oroptimaloperationalfeaturesarenotdiscussedhere.However,theDepartment’ssuccessfulimplementationoftheIRSDRTfunctionintheFOTWapplicationprovidesahelpfulwaytothinkaboutthebroadgoalsCongressshouldarticulateforanaidapplicationprocessthatcanshedthelimitsofapaper-boundprocessandtakefulladvantageoftechnologicalinnovations.Suchgoalscouldinclude:• Supportingtheconceptofa“one-stop”financialaidapplicationprocess;
• Identifyingwherevariousdataneededforfederalandnonfederalaideligibilitydeterminationscurrentlyreside;
• Encouragingallfinancialaidproviderstoembraceastudent-centricapproachasareplacementforthecurrentprogram-centricmodel;
• Ensuringthatthird-partyaidprovidersagreewithandadheretoacommonunderstandingofbroadfinancialaidpolicyobjectivesandmethodology;and
• Authorizingnear-term/startupexpenditurestohelpengagethird-partyaidproviders.Congressshouldnotbeoverlyprescriptivewithregardtothefinancialaidapplicationprocess.Congressshould,however,providetheSecretarywithflexibilitytoexecuteCongress’policyobjectivesinamannerthatoptimizestheefficientandeffectiveuseoftechnology.RationaleforRecommendation
TheIRS-DRTillustrateshowtechnologycanbeleveragedtohelpsimplifythefinancialaidapplicationprocessforstudentsandtheirparents.Italsocanhelppolicymakersthinkaboutwaystoimprovefinancialaidprogramdesignanddelivery.AlthoughtheIRS-DRTisessentiallyasolutiondevelopedandagreedtobytwofederalagencies,standardscurrentlyexisttofacilitatesharingofinformationinanon-proprietaryfashion.Anapplicationprogramminginterface(API)isareadilyavailableandcommonwayinwhichvarioussoftwarecomponents(e.g.FOTWandtheIRS-DTR,orwww.twitter.comandthevariousTwitterappsfortabletsandsmartphones)communicatewitheachother.Itseemsasimilarsolutioncouldbefoundtofacilitatecommunicationbetweenthefederalgovernmentandvariousthirdpartiesintheaidapplicationcontext.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page26
14. TreatmentofUnmarriedPartnersorSameSexCouples
Recommendations
• Fortheparentsofdependentstudents,allowunmarriedpartnerswholivetogether,regardlessofsex,tobecountedasaparentontheFAFSA(“Parent1”and“Parent2”),toaccordthosepartnersthesametreatmentasmarriedcouplesandcalculateneedoncombinedincomesandtotalhousehold.TheFAFSAquestionon“married”wouldhavetobealteredtoaccommodatethesesituations.
• Forstudents,treatcouples,regardlessofgender,inanyformofstate-recognizedrelationships(same-sexmarriage,civilunion,domesticpartnership,orotheridentifiedarrangement)asmarriedandcalculateneedoncombinedincomesandtotalhouseholdsize.
• AdjusttheFAFSAprocesssothattheIRSdataretrievalcanaccommodatesuchcouplesfilingseparately.
• ClarifyinthedependencyoverrideandprofessionaljudgmentsectionsoflawthatFAAsmayadjustanyapplicationinformationincludingmaritalstatustoreflectdomesticarrangementsthat,forallintentsandpurposes,mirrormarriage,eveniftheapplicant’sstatedoesnotrecognizeit.
StatutoryCitation
NeedAnalysisDefinitions(familysize)HEA§480(l)[20U.S.C.1087vv(l)]
Background,Rationale,andImplementationConsiderations
OnApril29,2013,theDepartmentofEducation(ED)announcedachangeinthewayitviewsunmarriedparentsofdependentstudentsforthepurposeofcompletingtheFAFSA.Beginningwiththe2014-15awardyear,incomeandotherinformationfrombothofastudent’slegalparentswillhavetobeprovidedontheFAFSAifthoseparentslivetogether,regardlessofmaritalstatusorgender.Legalparentsaredefinedasbiologicaloradoptiveparents.Thisapproachreflectsapolicychangethatconsiderstheparent’srelationshiptothestudent,ratherthantheparents’relationshiptoeachother.EDconstructedthisapproachundertheconstraintsoftheDefenseofMarriageAct(DOMA).Sincethen,inJune,theU.S.SupremeCourtruledthatDOMAisunconstitutional.Meanwhile,theReauthorizationTaskForce(RTF)proposedarecommendationthattakestheissuefurther.TheRTFbelievesthatanamendmenttoTitleIVoftheHEAshouldstatethat,notwithstandinganyotherfederallaw,boththeparentofadependentstudentandthatparent’spartner,regardlessofgender,shouldbetreatedthesameasopposite-sexmarriedcouples.Sincethestepparentinanopposite-sexmarriagedoesnothavetoadopttheapplicant,neithershouldthestepparentinasame-sexcouple.Studentsinastate-sanctioned,same-sexmarriageorotherstate-recognizeddomesticarrangementshouldalsobetreatedthesameasanopposite-sexmarriedcouple.TheRTFseekstorecognizetherealityofcurrentlivingsituationsandtoassessfamilyfinancialstrengthmoreaccurately.Forparentsofdependentstudents,allunmarriedpartners,regardlessofgenderorstatelaws,wouldbetreatedthesameasmarriedcouples.Unmarriedstudentswithpartnerswouldhavetobetreatedthesameasmarriedcouplesiftheyhavegonethroughsomeformalcommitmentprocesssanctionedbyastate;thisincludesconsideringotherwisedependentstudentsasindependentbyvirtueofmarriage.Ifastudenthasnotgonethroughastate-sanctionedprocess,aidadministratorscouldconsiderprofessionaljudgmentactionstooverridedependencyand/ormakeotheradjustments.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page27
AccordingtotheWilliamsInstitute(UCLASchoolofLaw),basedontheU.S.Census,therearenearly650,000same-sexcouplesintheUnitedStates,ofwhichapproximately114,100arelegallymarriedandover108,600areincivilunionsorregistereddomesticpartnerships.Asof2011,aboutoneinfivesame-sexcouplesareraisingchildrenunderage18.AccordingtotheNationalCouncilofStateLegislatures,twelvestates(Connecticut,Delaware,Iowa,Maine,Maryland,Massachusetts,Minnesota,NewHampshire,NewYork,RhodeIsland,Vermont,Washington)plustheDistrictofColumbiaallowsame-sexmarriagesasofMay2013.Anadditionalfourstatesallowcivilunionsthataffordallstate-levelspousalrightstosame-sexcouples.Severalotherstatesgrantvaryingdegreesofstate-levelspousalrightstounmarriedcouplesindomesticpartnerships.PollsconductedbythePewResearchCentershowthatpublicsupportforsingle-sexmarriagehasincreasedfrom35%in2001(with57%opposed)to49%inMarch2013(44%opposed).
July2016Update
AsaresultoftheSupremeCourt’s2013UnitedStatesv.WindsordecisioninvalidatingpartoftheDefenseofMarriageAct(DOMA),anylegalmarriagethatisrecognizedbythejurisdictioninwhichthemarriagewascelebratedisrecognizedforTitleIVHEAprogrampurposesregardlessofsexofpartners.ResultingEDguidanceappliesonlytosame-sexmarriageandexcludesotherrelationshipsrecognizedunderstatelawsuchasregistereddomesticpartnerships,civilunions.NASFAArecommendsthatPJshouldincludeadjustinganyapplicationelement,includingmaritalstatus,fordomesticarrangementsthatmirrormarriage,evenifapplicant’sstatedoesnotrecognizeit.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page28
15. HouseholdSize—DefinitionofDependents
Recommendations
• Removetheautomaticinclusioninhouseholdsizeofchildrenorothersbasedonproviding50%ofsupport.
• Allowinclusioninhouseholdsizeofchildrenwhomeetthedefinitionofdependentstudent(i.e.,arenotorwouldnotbeconsideredindependentforTitleIVpurposes).
• BaseinclusionofotherindividualsinthehouseholdsizeonIRSrulesforclaimingdependentsonthetaxreturn.
• UsetheIRSdataretrievalprocesstoverifyhouseholdsizewheneverpossible.
• Makethesamechangestothedefinitionofdependentforindependentstudents.
• Addtothestatutoryexamplesofallowableprofessionaljudgmenttheabilitytoadjusthouseholdsizetoincludeindividualswhowerenot,orcouldnotbe,claimedonthetaxreturniftheaidadministratordeterminesthatitwouldbeappropriatetodoso.
Thus,includeinhouseholdsizeforadependentstudentthefollowing:
1. Student;
2. Parent(s),inaccordancewithRecommendation10;
3. Childrenwhocananswer“no”toallofthedependencyquestions(i.e.,childrenundertheageof24whodonototherwisemeettheTitleIVdefinitionofindependent),iftheyliveinthehousehold;
4. Otherindividualswhowereclaimedbytheparent(s)onthebaseyearincometaxreturn(exclusiveofchildrenwhowouldbedependentunderTitleIVbutwhodonotliveinthehousehold);
5. Otherindividualsforwhomtheaidadministratormakesadocumenteddecisionthat,duetounusualcircumstances,inclusioninhouseholdsizeisappropriate.
Background,Rationale,andImplementationConsiderations
TheFederalMethodology(FM)setinlawallowschildrentobecountedinhouseholdsizeaslongastheylivewiththeapplicant’sparentsandtheparentsprovidemorethan50%support.Therearenootherrestrictions,althoughhouseholdsizeisabigfactorindeterminingEFC.Thus,childrenwhoareindependentstudentscanbecountedintheparent’shouseholdsizeforadependentsibling,andoldernon-studentchildrenlivingathome,regardlessofemploymentstatus,canbecountediftheparentsclaimtheyprovidemorethanhalfsupport.Thesupporttestalsoappliestootherindividualslivinginthehousehold.Thereisnoruleofthumbregardingdeterminationofhalfsupportforchildrenorotherindividuals,andthisdeterminationcanvarygreatlyacrossdifferenteconomicstrata.Verificationofhouseholdsizecanonlybeaccomplishedbycollectingasignedstatementfromeithertheparentsinthecaseofadependentstudentorfromtheindependentstudent,generallyrelyingonthoseindividualstodeterminewhat“halfsupport”means.
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page29
TheFAFSAinstructionscurrentlydirectdependentapplicantstoincludeinhouseholdsize:• Theapplicanthim-orherself,eveniftheapplicantdoesnotlivewiththeparents;• Theapplicant’sparents;• Theparents’otherchildrenif(a)theparentswillprovidemorethanhalfoftheirsupportbetween
duringtheawardyear,or(b)thechildrencouldanswer“no”toeveryoneofthedependencyquestionsontheFAFSA;
• Otherpeopleiftheylivewiththeparentsatthetimeofapplication,theparentsprovidemorethanhalfoftheirsupportandtheparentswillcontinuetoprovidemorethanhalfoftheirsupportduringtheawardyear.
TheRTFbelievesthatthedeterminationof“dependent”shouldbemorestandardizedandverifiable.TheRTFalsobelievesthatchildrenwhoarereceivingfinancialaidasindependentstudentsshouldnotbecountedinthehouseholdsizeusedtodetermineaidforotherchildrenwhoaredependent.Withregardtosiblingswhoarenotstudents,especiallyadultchildren,thereshouldbeadefinedcut-offpointfortheexpectationthatthosesiblingscanstillincreasethesizeoftheparents’householdwithregardtoaiddeterminationsfordependentapplicants.Whilethewillingnessofsomeparentstokeepcaringforolderchildrenislaudable,thatisaprivatedecisionthatshouldnotresultinincreasedpublicsupportofyoungerchildrenwhoseturnitistoattendcollege.TheRTFrecommendationtouseIRSdefinitionsofwhocanbeclaimedonataxreturnismeanttotightentherulesandprovidemoreconsistencysurroundingthedefinitionofdependentsforhouseholdsizepurposes.TheIRStesttoclaimanindividualasanexemptionprovidesamoredefinedapproachtoassessingwhatconstituteshalfsupport.TherecommendationwillalsoopenanotheravenueforverificationthroughtheIRSdataretrievaltool.Adependentapplicant’ssiblingwhoisreceivingaidasanindependentstudentisbenefitingfrompublicallyfundedbenefits.Theindependentstudent’scostofattendanceusedtocalculateaidincludesroomandboardandotherallowablelivingexpensesfortheperiodofenrollment,typically9months.Regardlessoftheformofthefederalaid(grant,loan,orwork),publicfundsareinvolved.AllowingthatsamestudenttoreducetheEFCforayoungerdependentsiblingineffectallowsthefamilyto“doubledip”intopublicsupport.UnderIRSrules,achildaged24orover(whetherornotastudentandwhetherornotlivingwiththeparents)couldbeclaimedasanexemptiononthetaxreturnandthereforestillbeincludedinhouseholdsizeifthatchildhasgrossincomeunder$3,800andtheparentsprovidemorethanhalfofhisorhersupport.(Grossincomeincludescertainscholarshipandfellowshipgrants.Scholarshipsandfellowshipsreceivedbydegreecandidatesandusedfortuition,fees,supplies,books,andequipmentrequiredforparticularcoursesgenerallyarenotincludedingrossincome.)Asiscurrentlythecase,anaidadministratorcanadjusthouseholdsizeunderprofessionaljudgment,byeitherincludingadditionalindividualsorexcludingindividuals.TheRTFrecognizesthattherearesituationswherehouseholdsizeshouldbeincreased.Forexample,agrandparentmaybesupportedbytheapplicant’sparents(whetherlivingintheparents’homeorinsomeotherfacility)butduetothegrossincometest,theparentmaynotbeabletoclaimthegrandparentasadependentonthetaxreturn.AnoldersiblingwhodoesnotmeettheIRStestscouldneverthelessbeincludedinthehouseholdifdeemedappropriatebytheFAA,butthereasonsforthatsibling’scontinueddependenceontheparentswouldhavetobedocumentedandwouldhavetobedifferentiatedbyspecialcircumstancesfromotherfamilieswitholderchildrenstillinthehome(thesearecurrentlythegeneralprinciplesofprofessionaljudgment).
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page30
TheRTFalsoseekstoensurethat,fordivorcedparents,adependentsiblingwholivesinthehouseholdoftheapplicant’scustodialparentcouldnotalsobecountedintheotherparent’shouseholdunderthe“otherindividual”category,hencetheparenthetical”exclusiveof”caveatinitem4undertherecommendations.IRSPublication17givesdetailedinformationonwhocanbeclaimed.AcondenseddescriptionoftherulesandtheapplicablepagesfromPublication17areattachedtothisreportasAppendixA.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldradicallyalterthemethodologyfordeterminingTitleIVaideligibility,simplifyingtheprocesstoveryfewdataelements,whichwouldincludeincomeandfamilysizetoberetrievedfromtheIRS
Update,July2016 NeedAnalysis
NASFAA©2016 ReauthorizationRecommendations Page31
16. RenametheresultsofFMwithatermthatreflectsitsindexnatureratherthan“EFC”
Recommendation
� TheresultoftheFederalMethodologyshouldbeanindexthatranksapplicantsaccordingtotheirfinancialstrength,ratherthananexpectedfinancialcontribution.
StatutoryCitation
HEA§473andthroughoutPartF;§483[20U.S.C.1087andthroughoutPartE;20U.S.C.1090]
Background,Rationale,andImplementationConsiderations
ThisrecommendationwasputforwardbytheFAFSAWorkingGroupinJuly2015.Theworkinggroupfeelsstronglythat,becausetheFederalMethodology(FM)hasbeenmodifiedovertheyearstoaccommodatepoliticalwhimsandcostconcerns,theterm“ExpectedFamilyContribution”isnowamisnomerthatmisleadsandconfusesstudentsandfamilies.Ratherthanrepresentingafinancialcontributionbytheapplicant,theresultoftheFMfunctionsmoreasanindexthatranksapplicantsaccordingtotheirfinancialstrength.Thenameoftheindexshouldbechangedtoreflectthatreality.
ADD
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page32
FederalDirectLoanProgram
1. InterestRates
Recommendations
• Establishvariable-fixedinterestratesthatarereflectiveofmarketrates,butallowrefinancing.
• ForParentPLUSloans,linkinteresttoaTreasurybillinstrument,withanaddedpercentagethatreflectsthecosttothegovernmentofborrowingmoneyandservicingtheloans.
• ForGradStudentPLUSloans,discounttherateslightlybyasmalleraddedpercentagethanisappliedtoParentPLUS,andestablishaninterestratecap.
• ForStaffordloans,discounttheratemorebyasmalleraddedpercentagethanisappliedtoGradPLUS,andestablishalowerinterestratecap.Subsidizedloansshouldcarryalowerinterestratethanunsubsidizedloans.
StatutoryCitation
TermsandConditionsofLoans(interestrate)HEA§455(b)[20U.S.C.1087e(b)]
Background,Rationale,andImplementationConsiderations
TheRTFbelievesthatalong-termfixtoDirectLoaninterestratesisneeded;thisrecommendationexpandsononemadebyNASFAA’sStudentLoanIndebtednessTaskForce(ITF).Aninstrumentshouldbeestablishedthatwillmeasureafairmarketvalueofinterestratesforstudentloansandthecosttoadministertheprogram,whichcanhaveasharedriskforboththetaxpayerandthestudent.ThisratewouldbeestablishedonJuly1andcarryforthforthetermsoftheloan(“variable-fixed”).TheratedeterminedonanyJuly1wouldapplytoallloansmadewithintheensuingyearuntilthenextJuly1determination.Whenaborrowerhasmultipleloanswithdifferentrates,themonthlyrepaymentamountcouldbedeterminedasaweightedrepaymentoftheseparateloans.ForParentPLUSloans,theRTFrecommendslinkingtheinterestratetomarketrates,suchasaTreasurybill(T-bill)rateplusanadditionalpercentagethatreflectsthecosttothegovernmentofborrowingmoneyandservicingtheloans.ForGradPLUSloans,discounttheinterestrateslightly(i.e.,addasmallerpercentagetotheT-billrate)andestablishacapoverwhichtheinterestratemaynotgo.Thepremisehereisthatalthoughprofitshouldnotbeanobjectiveofthestudentloanprogram,graduatestudentshavealargerpersonalgainatstakefromtheiradvancededucationandsoshouldbearslightlymoreoftheprogramcost.ForStaffordloans,discounttheinterestratefurtherandestablishalowercapoverwhichtheinterestratemaynotgo,onthepremisethatthefederalgovernmentshouldhelpfinanceundergraduateeducation,whichresultsinamoresignificantsocietalgain,bymakingloansaffordable.Ifsubsidizedloanscontinuetobeauthorized,subsidizedloansshouldbemadeatalowerinterestratethanunsubsidizedloansasthereisademonstratedneedcomponent.Finally,ifmarketinterestratesdecreasebysomespecifiedamountfromtherateatwhichaborrower’sloansweremade,theprogramshouldallowrefinancing,subjecttoarefinancefee.Refinancingwouldbeseparatefromconsolidationprovisions.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page33
July2016Update
InAugust2013,theBipartisanStudentLoanCertaintyActof2013[P.L.113-28]wassignedintolaw.ThelegislationtiesannualinterestratesonDirectLoanstotherateonhigh-yield10-yearTreasurynotesplusanadd-onpercentagewithinaspecifiedcap.
LoanType Add-OnPercentage InterestRateCap
DirectStaffordLoans 2.05% 8.25%DirectUnsubsidizedLoans
(Undergraduates) 2.05% 8.25%
DirectUnsubsidizedLoans(GraduateandProfessional
Students)3.6% 9.5%
DirectPLUSLoans 4.6% 10.5%CongressionalActioninthe114thCongress(2015-2016)Severalbillshavebeenintroducedthatwouldaffectloaninterestrates,includingtheissueofrefinancing:
• StudentLoanRefinancingAct[H.R.649]:wouldallowstudentstorefinanceDirectLoansattheinterestrateatthetimeofthemodification
• FairnessinStudentLoanLendingAct[H.R.1141/S.729]:wouldallowstudentloanborrowersingoodstandingtorefinancetheirloanstoarateequaltothe10-yearTreasurynoteonthelastdayofbusinessofthepreviousmonthplusonepercent
• BankonStudentsEmergencyLoanRefinancingAct[S.793/H.R.1434]:wouldalloweligiblestudentloanborrowerstorefinancetheirfederalloanstolowerinterestrates
• CollegeforAllAct[S.1373/H.R.4385]:wouldcutinterestratesandimposeacapof8.25%andallowborrowerstorefinanceloansatthecurrentinterestrates
• StudentBorrowerFairnessAct[H.R.3675]:wouldallowborrowerstorefinancetheirstudentloansattheinterestratesofferedtobanksbytheFederalReserve
• FederalStudentLoanRefinancingAct[H.R.3751]:wouldautomaticallyrefinanceinterestratesonallfederalstudentloanstofourpercent
• ParentPLUSLoanImprovementAct[H.R.4661]:wouldlowerinterestratesonPLUSloansmadeonbehalfofadependentstudent
• IntheRedAct[S.2677]:wouldalloweligiblestudentloanborrowerstorefinancetheirfederalloanstolowerinterestrates
• StudentLoanRefinancingandRecalculationAct[H.R.5274]:wouldallowforrefinancingofbothDirectLoansandFFELPLoansandwouldlowerthepercentageadd-ontothe10-yearTreasurybillinthecalculationofinterestratestoonepercentforundergraduate,graduate,andparentborrowers
• StudentLoanFairnessAct[H.R.5487]:wouldcapnewDirectLoaninterestratesat3.4percent
Update,July2016 DirectLoans
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2. LoanFees
Recommendation
• Eliminatetheloanfeecurrentlychargedtostudents.StatutoryCitation
TermsandConditionsofLoans(loanfee)HEA§455(c)[20U.S.C.1087e(c)]
Background,Rationale,andImplementationConsiderations
LoanfeeswereintroducedtohelpoffsetloansubsidiesintheFFELProgram.Theoriginationfeewasintendedtobetemporarywhenitwasimposedonstudentborrowersintheearly1980sasabudgetmeasure,butisessentiallyataxonstudentscollectedbywithholdingaportionofthestudent’sproceeds,butrequiringrepaymentofthefullloanamountbeforedeductionoffees.Loanfeestherebymasktheborrower’strueloancostandeffectiveinterestrate:Aftertakingintoaccountloanfees,theannualpercentagerateonfederalloansishigherthantheadvertisedinterestrate.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Threebillshavebeenintroducedthatwouldeliminateloanoriginationfees:
• EliminatingtheHiddenStudentLoanTaxAct[H.R.1285]:wouldeliminateoriginationfeesonallDirectLoans
• ParentPLUSLoanImprovementAct[H.R.4661]:wouldeliminateoriginationfeesonPLUSloansmadeonbehalfofadependentstudent
• StudentLoanRefinancingandRecalculationAct[H.R.5274]:wouldeliminateoriginationfeesonallDirectLoans
Update,July2016 DirectLoans
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3. SchoolAuthoritytoReduceLoanAmounts
Recommendations
• Allowschoolstosetlowerloanlimitsforspecificpopulations,academicprograms,credentiallevels,orothercategoriesestablishedbytheschool.
• Allowaidadministratorstoincreaseaparticularstudent’sloanfromtheschool’simposedlimit,uptotheregularapplicablestatutorylimit,onacase-by-casebasisunderprofessionaljudgment.
• Retaintheauthorityforschoolstodenyloansonacase-by-casebasis.StatutoryCitation
LoanLimitsHEA§428(b)(1)[20U.S.C.1078(b)(1)]
ProfessionalJudgmentHEA§479A(c)[20U.S.C.1087tt(c)]
Background,Rationale,andImplementationConsiderations
Thisrecommendationessentiallyreversescurrentpolicy,whichallowsreductionofloansonlyonacase-by-casebasis,withindividualdocumentation.Withtheauthoritytosetlimitsbyprogram,dependencystatus,livingarrangement,enrollmentstatus,orotherparameters,schoolscouldnotifystudentsearlierofthereducedloanamountandoftheschool’sprocessforexceptions,ifany,tothepolicy.ManyNASFAAmembershaverequestedthisauthorityforsometimeasatooltoavoidincurringunnecessarydebt,reachingaggregateloanlimitsbeforetheprogramofstudyiscompleted,andlosingtheinterestsubsidybeforecompletingtheprogramofstudy.TheITFmadeasimilarrecommendation.IfCongressdoesnotadoptthisrecommendation,theRTFbelievesothermeasureswouldbeneededtocontrolborrowing,suchasmandatedreductionofannualloanlimitsbasedonenrollmentstatus.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldallowaninstitutiontosetalowerloanlimitforstudentsinprogramsofstudyidentifiedbytheschoolifcertainconditionsaremet,withaprovisionforincreasingthatlimitforindividualstudentsintheprogramunderspecialcircumstances
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page36
4. ProrationofAnnualLoanLimitsforRemainingPortionsofPrograms
Recommendation
• EliminateDirectloanprorationforfinalperiodsofprogramsthatareatleastayearinlength.StatutoryCitation
LoanLimitsHEA§428(b)(1)[20U.S.C.1078(b)(1)]
Background,Rationale,andImplementationConsiderations
AnnualStaffordloanlimitsforundergraduatesmustbeproratedifthestudentisenrolledinaprogramthatisshorterthanoneacademicyear,orifthestudentisenrolledinaprogramthatisanacademicyearorlongerbutthestudentisborrowingforafinalperiodofenrollmentthatislessthanafullacademicyearinlength.Bycontrast,astudentenrolledforafullyearbutlessthanfull-time,orforasingletermthatisnotthefinaltermintheacademicprogram,iseligibletoborrowthefullannualamount.Prorationforstudentsinafinalperiodofenrollmentisinconsistentwithotherloanlimitpolicy.Prorationpenalizesstudentswhoareabouttocompletetheirprogramofstudyandmaydrivestudentstoborrowfromaprivatelender.Prorationofloanlimitswouldberetained,however,forprogramsthatarelessthananacademicyearinlength.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldrequireprorationbasedonactualenrollmentstatus
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page37
5. SeparatetheGradPLUSandParentPLUSProgramsfromEachOther
Recommendations
• EstablishaseparateloanprogramforgraduateborrowersthatmirrorsthecurrentGradPLUSprogrambutidentifiesthisprogramspecificallyasaloanforgraduate/professionalstudents.
• Retainadversecreditrulesforstudentborrowersbutconductthecreditcheckonlyforfirst-timeborrowersattheschool.
• DirectEDtophaseinrevisedunderwritingstandardsforparentborrowerstoreflectamorerealisticassessmentofabilitytorepay.
• DirectEDtopublishannually,andsolicitpubliccommenton,theunderwritingstandardstobeappliedtoparentborrowers.
StatutoryCitation
AuthorityforPLUSProgramHEA§428B[20U.S.C.1078-2]
LoanTypesIncludedUnderPLUSProgramUmbrellaHEA§455(a)(2)[20U.S.C.1087e(a)(2)]
Background,Rationale,andImplementationConsiderations
Currently,thereisonePLUSLoanprogramavailabletobothparents(ParentPLUS)andgraduatestudents(GradPLUS).Althoughthetypicalborrowingprofilesofparentsandgraduate/professionalstudentsareverydifferent,thesamecreditstandardsapplytobothparentandgraduate/professionalborrowers(i.e.,PLUSborrowersmusthavenoadversecredithistoryinordertoborrow).Theterm“noadversecredithistory”isnotastrictmeasureofunderwriting,yetborrowersunderbothParentPLUSandGradPLUScanborrowuptothecostofattendance,whichcanbetensofthousandsofdollars.SeparatingtheGradPLUSandParentPLUSprogramsallowsforvariations,suchascreditstandards,loanlimits,andinterestrates(asproposedinRecommendation#1above)thataretailoredtothedifferencesbetweenthesetwodistincttypesofborrowers.Indeterminingcreditworthiness,parenteligibilitycreditcriteriashouldincludesomemeasureoflikelyabilitytomanagetheirdebtandrepaytheloan,suchasadebt-to-incomemeasure,useofFICOscores,oranothertestofadequateresources.Currently,financialaidadministratorsareallowedtoevaluateaborrower’sabilitytorepayaPLUSloanthroughdebt-to-incomemeasures.However,financialaidadministratorshavelittleloanunderwritingexpertiseandarereluctanttousethisauthority.Further,amorecomprehensivemeansofassessingtheabilitytomanagedebtandthewillingnessandtrackrecordtorepaydebtisneeded.Anychangesmadetoparenteligibilitycriteriashouldbeappliedtonewborrowersonly,toprotectcurrentborrowersalreadyintheDirectLoansystem.Asmorecreditrestrictionsareimposed,moregrantsupportneedstobecreatedforschoolsservingunderrepresentedanddisadvantagedpopulationsandtheirstudents.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page38
6. AnnualandAggregateLoanLimits
Recommendations
• Establishoneannualsubsidizedlimitbyeliminatingdifferencesbasedonyearinschool.
• Increaseannualandaggregateloanlimitstoamorerealisticlevel.
• Stepaggregatelimits,sothatalowerlimitappliestoundergraduatestudentswhohavenotyetsuccessfullycompletedthesecondyearofanundergraduateprogram.
• Simplifythesubsidized/unsubsidizedstructureofloanlimits.StatutoryCitation
AnnualandAggregateLoanLimitsHEA§428(b)(1)(A)and(B)[20U.S.C.1078(b)(1)(A)and(B)
AdditionalUnsubsidizedLoanLimitsHEA§428H(d)[20U.S.C.1078−8(d)
Background,Rationale,andImplementationConsiderations
TheRTFwouldeliminatedifferencesinannualloanlimitsbasedonyearinschool,andwouldstepaggregatelimitssothataloweraggregatelimitappliestoundergraduatestudentswhohavenotyetsuccessfullycompletedthesecondyearofanundergraduateprogram.SteppingtheaggregateswouldbesimilartothePerkinsLoanlimitstructure.Undergraduatesubsidizedannualloanlimitshavenotincreasedsince2007-08.BeginningJuly1,2007,loanlimitsincreasedfrom$2,625to$3,500forfirst-yearundergraduatestudents,andfrom$3,500to$4,500forsecond-yearstudents.Priortothisincrease,loanlimitshadnotbeenraisedsince1993.Theannuallimitfortheremainderofundergraduateeducationwasraisedfrom$4,000to$5,500in1993andhasremainedatthatlevel.Morerelianceonunsubsidizedloanswasreflectedinincreasesin2008.Full-timelimitsneedtobestructuredtoaccountforinflation(forexample,keyedtotheConsumerPriceIndex)toavoidlossofbuyingpowerandtoreflectrealisticexpenses.Thestructureofloanlimitsisdifficulttoexplainandneedstobesimplified.Thecurrentstructureofbaselimitsdividedbetweensubsidizedandunsubsidizedamountsplusadditionalunsubsidizedamounts,allofwhichvarybyyearinschool,reflectspiecemealchangestotheloanprograms.Thechartonthefollowingpagesummarizestheloanlimitrecommendation.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldeliminatevariancesinannuallimitsbyyearinschoolandincreaseannualandaggregateloanlimits;however,itwouldnotstepaggregatelimits
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page39
CurrentUndergraduate Yr1 Yr2Yr3andBeyond
TotalAggregate
Sub $3,500 $4,500 $5,500$23,000Sub$31,000SubandUnsubUnsub $2,000 $2,000 $2,000
YearlyTotal $5,500 $6,500 $7,500
AdditionalUnsubforIndepStudentsorPLUSDenials
$4,000 $4,000 $5,000$57,500
YearlyTotal $9,500 $10,500 $12,500
ProposedUndergraduate Yr1 Yr2 Yr2+TotalAggregateforStudentsthrough2ndYear
Yr3andBeyond
TotalAggregate
Sub $5,500 $5,500 $5,500 $16,500Sub$22,500SubandUnsub
$5,500 $33,000Sub$45,000SubandUnsub
Unsub $2,000 $2,000 $2,000 $4,500
YearlyTotal $7,500 $7,500 $7,500 $10,000
AdditionalUnsubforIndepStudentsorPLUSDenials
$5,000 $5,000 $5,000$37,500
$6,000$75,000
YearlyTotal $12,500 $12,500 $12,500 $16,000
CurrentGraduate AnnualAnnualAddtlUnsub1
AnnualAddtlUnsub2
TotalAggregate
Sub $0 $138,500
$224,000ifformerHEALeligibleUnsub $20,500 $16,667 $26,667
YearlyTotal $20,500 $16,667 $26,6671ForGraduateinPublicHealth;Dr.ofPharmacyorChiropractic;Dr.DegreeinClinicalPsychology;MastersorDoctoralDegreeinHealthAdministration.2ForDoctorofDentistry,VeterinaryMedicine,Optometry,AllopathicMedicine,OsteopathicMedicine,PodiatricMedicine,NaturopathicMedicine,orDoctorofNaturopathy.
ProposedGraduate AnnualAnnualAddtlUnsub1
AnnualAddtlUnsub2
TotalAggregate
Sub $0 $169,000
($274,000ifformerHEALeligible)Unsub $25,000 $20,326 $32,521
YearlyTotal $25,000 $20,326 $32,5211ForGraduateinPublicHealth;Dr.ofPharmacyorChiropractic;Dr.DegreeinClinicalPsychology;MastersorDoctoralDegreeinHealthAdministration.2ForDoctorofDentistry,VeterinaryMedicine,Optometry,AllopathicMedicine,OsteopathicMedicine,PodiatricMedicine,NaturopathicMedicine,orDoctorofNaturopathy.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page40
7. LoanDisbursement
Recommendation
• Allowunequaldisbursementstoaccommodateunequalcostsorresources(asmaybedoneforFSEOGandPerkinsLoans)andtofacilitatedisbursementbyterminnonstandardtermprograms.
StatutoryCitation
MultipleDisbursementRequirementHEA§428G(a)[20U.S.C.1078−7(a)]
Background,Rationale,andImplementationConsiderations
Currently,loansmustbedisbursedinequalinstallmentsunderrulesspecifiedbylaw.Thisrulepreventsadjustmentofdisbursementstoaddresssituationswherethereareunequalresourcesorcostsamongpaymentperiods.Fornonstandardtermprograms,itresultsindifferentdisbursementtimesforDirectLoansthanforotherTitleIVprograms,andpreventsalignmentofloandisbursementwithterms.ThisrecommendationwouldallowdisbursementstooccuratthesametimeacrossallTitleIVprograms.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page41
8. RepaymentIncentives
Recommendation
• ReinstatetheDepartmentofEducation’s(ED)authoritytoofferrepaymentincentives,ifthereisevidenceofeffectivenessandcostneutrality.
StatutoryCitation
InterestRate(repaymentincentives)HEA§455(b)(8)[20U.S.C.1087e(b)(8)]
Background,Rationale,andImplementationConsiderations
TheBudgetControlActof2011prohibitedEDfromauthorizingorprovidingrepaymentincentivesonnewloansdisbursedonorafterJuly1,2012,exceptthataninterestratereductionmaybeprovidedtoaborrowerwhoagreestoautomaticallydebitelectronicpayments.Aslongasincentivesdonothaveanetcost,whynotallowthem?
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page42
9. LateOrigination
Recommendation
• Allowschoolstooriginateloansupto30daysafterthestudent'slastdateofenrollmentorchangetoanineligibleenrollmentstatus,tocovercostsincurredbeforelossofeligibility.
StatutoryCitation
ParticipationAgreement(authoritytooriginateloanstoeligiblestudents)HEA§454(b)[20U.S.C.1087d(b)]
Background,Rationale,andImplementationConsiderations
Currently,loansmaynotbeoriginatedoncetheenrollmentperiodhasended,thestudentwithdraws,orthestudent’senrollmentstatusdropstolessthanhalftime.Thisrecommendationwouldallowschoolstoassiststudentswhowereunabletocompletetheloanapplicationprocesspriortoceasingenrollmentorwhoanticipatedresourcesthatdidnotmaterialize.Theproposedoptionmayreducetheuseoflessbeneficialprivateeducationloans.Itwouldprovidethelate-applyingstudentaccesstofederalDirectLoanstoresolveinstitutionaldebtsothatthestudentcanreenrollandgoontosuccessfullycompletehisorherprogram.Thisrecommendationwouldnotchangethecurrentprohibitionagainstlatedisbursementofsecondorsubsequentinstallments.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page43
10. ConsolidationRecommendations
• Maintainaloanconsolidationprogramtoallowborrowerswithmultipleloanstohaveasingleholderandasinglepayment.
• Continuetoallowconsolidationtopreventborrowerdefaults.
• Separaterefinanceoptionsfromconsolidation,sothatconsolidationretainsitsoriginalpurposes.(SeeRecommendation#1)
• Retainaninterestratethatconsiderstheweightedaverageoftheloansbeingconsolidated.
• Applyamodestbasispointincreasetoconsolidationloans.StatutoryCitation
ConsolidationLoansHEA§428C,§455(g)&variousothersections[20U.S.C.1078–3,1087e(g)]
Background,Rationale,andImplementationConsiderations
TheRTFrecommendsthattheloanconsolidationprogrambemaintainedtoallowborrowerswithmultipleloanstohaveasingleholderandasinglepayment.Consolidationshouldalsocontinuetobeusedtopreventdefaults.Theinterestrateshouldremaintheweightedaverageoftheloansbeingconsolidated,althoughamodestbasispointincreasecouldbeappliedtoconsolidationloans.RefinancingoptionsshouldbeallowedasnotedinLoanRecommendation#1,butshouldbekeptseparatefromconsolidation,sothatconsolidationretainsitsoriginalpurposes.TheinterestrateforconsolidationloansshouldtracktheinterestrateforDirectLoans,butneedsfurtherstudytodeterminetheappropriateinterestrate.Apremiumintheformofamodestbasispointincreasecouldbeappliedtoconsolidationloanstohelpreducetheconsolidationloansubsidythatmightbebetterusedtooffsetcoststogainotherbenefits,suchasincreasedloanlimitsoreliminationoftheoriginationfee.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page44
11. LoanSubsidiesRecommendations
• Continueneed-basedborrowersubsidiesduringin-school,grace,anddefermentperiods.
• Removethe150%limitontheinterestsubsidy.StatutoryCitation
InterestSubsidies(suspensionofsubsidyduringgraceperiods)HEA§428(a)(3)(A)(i)[20U.S.C.1078(a)(3)(A)(i)]
TerminationofSubsidiesforGraduateStudentsHEA§455(a)(3)[20U.S.C.1087(a)(3)]
150%LimitationHEA§455(q)
Background,Rationale,andImplementationConsiderations
TheITFrecommendedrethinkingtheDirectLoansubsidystructuretoexploretheefficacyoffront-endsubsidiesandwhethertherearebetterwaystotargetthoseresources.OnesuchalternativerecommendedbytheITFisaback-endsubsidythatutilizesautomaticincome-basedrepaymentforallborrowers.Thisdebatebetweenfront-endandback-endsubsidies,whichseemtobeviewedasmutuallyexclusiveduetobudgetaryconstraints,hasreceivedmuchattentionandcontinuestodoso.Meanwhile,loansubsidieshavebeenincrementallyerodedasCongresslooksforsourcesoffundsbothtosupportthePellGrantProgramandtohelpalleviatethegeneralbudgetdeficit.TheRTFisconcernedthatneedystudentsarecaughtbetweenlostbuyingpowerofgrants,whichhavenotkeptpacewithinflationandrisingcosts,andlossofbeneficialloanterms.TheRTFisalsoconcernedwiththeimpactthatlossofinterestsubsidiesmayhaveonaccesstohighereducationandincreasedcostsofborrowing.
Update,July2016 DirectLoans
©2016NASFAA ReauthorizationRecommendations Page45
July2016Update
CongressionalActioninthe114thCongress(2015-2016)Severalbillshavebeenintroducedthattouchonsubsidyandautomaticincome-basedrepaymentissues:
• EarningsContingentEducationLoansAct[H.R.3695andH.R.3752]:wouldeliminatetheDirectLoanProgramandinsteadestablishan"IncomeDependentEducationAssistance(IDEA)"LoanProgram.Thenewprogramwouldincludeauniversalincome-basedrepaymentcomponentwithautomaticwagewithholdingasthemechanismforrepayment.
• ProtectingOurStudentsbyTerminatingGraduateRatesthatAddtoDebt(POSTGRAD)Act[H.R.4223]:wouldrestoregraduateandprofessionalstudenteligibilityforthein-schoolinterestsubsidy
• SimpleIncome-BasedRepaymentAct[H.R.4256]:wouldautomaticallyenrollallnewborrowersoffederalstudentloans(exceptParentPLUS)intoincome-basedrepayment(IBR)
• DynamicRepaymentAct[S.2456]:wouldreplacecurrentloans,subsidies,deferments,forbearances,andrepaymentoptionswithasingleloancalledtheIncomeDependentEducationAssistance(IDEA)Loanandwouldberepaidthroughincome-basedrepayment
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12. CreateaUniversalLoanPortalforStudentsRecommendation
• Mandatethecreationofasinglewebportalwherestudentscangotoeasilyaccessinformationaboutalloftheirloans—federal,private,andinstitutional.
StatutoryCitation
EstablishmentofNSLDSHEA§485B[20U.S.C.1092b]
Background,Rationale,andImplementationConsiderations
ThetaskforcerecommendsthatCongressmandatethecreationofasinglewebportalwherestudentscaneasilyaccessinformationaboutalloftheirstudentloans.Thiswouldallowalleducationalloansfromthefederalgovernment,privatelenders,andcollegesanduniversitiestobereportedtoonecentraldatabase.ThecreationofsucharesourcecouldresultfromtheexpansionofthedatacollectedbytheNationalStudentLoanDataSystem(NSLDS).Studentsneedanaccessible“one-stopshop”wheretheycanmanagetheirstudentloans.Manyborrowershavemultipleloanswithdifferentloanholdersthatmaybeinvariousstagesofrepayment.Havingacentralwebsitewhereborrowerscouldaccessinformationaboutalloftheirloanswouldsignificantlyhelpstudentsastheymanagetheirborrowingandrepayment.Undersuchascenario,allstudentswouldhaveaccesstotheirentiredebtportfolioinrealtime,enablingthemtocalculateamoreaccuratemonthlyrepaymentamountbasedonavarietyofpotentialcircumstances.Itshouldbeunderscoredthatacentralcomponentofthisrecommendationistheneedforstudentstohaveaccesstonotonlytheirfederalloaninformation,butalsotheirprivateloaninformation.Itiscriticalthatstudentsbeabletoobtainandmonitoralloftheirloaninformationinonecentraldatabase,regardlessoftheirloan’sorigination,ratherthanhavingtopullinformationtogetherinapiecemealfashion.Thelattercreatesopportunityforimportantinformationtofallthroughthecracks.Currently,NSLDSonlypartiallyservesthispurposeasitincludesonlysomefederalloans,anditdoesnotincludehealthprofessionsloansmadethroughtheDepartmentofHealthandHumanServices(HHS),privateloans,orinstitutionalloans.Auniversalloanportalwouldcapturealloftheseloans.
Toachievethisrecommendation,EDcouldexpandtheirexistingstudentloans.govwebsite.Studentsarecurrentlyaccessingwww.studentloans.govtocompleteentranceandexit
counseling,viewrepaymentoptionsandcancellations,signtheMasterPromissoryNoteandcompleteconsolidationrequests.Byenhancingthecurrentwebsiteofstudentloans.govintothesingleportal,EDcouldmakeuseofexistinginfrastructurewhileenhancingandstreamliningtheborrowerexperience.
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July2016Update
InFebruary2015,theServicingIssuesTaskForcereiteratedthisrecommendationusingtheresultsfromasurveyofNASFAAmembershipthatincludedmorethan2,2000financialaidadministratorsatover1,500uniqueinstitutions.OnMarch13,2015,PresidentObamaissueda“StudentAidBillofRightstoHelpEnsureAffordableLoanRepayment.”Underthisinitiative,EDisdirectedtoestablishacentralizedpointofaccessforallFederalstudentloanborrowersinrepayment,includingacentrallocationforaccountinformationandpaymentprocessingforallFederalstudentloanservicing,regardlessofthespecificservicer.InApril2016,EDannounced“anewvisionforservingstudentloanborrowers”throughanewcustomerservicemodelthatincludesa“streamlinedborrowerexperienceviaasinglewebportal.”InJuly2016,EDreleasedthelistofvendorswhometthetechnicalcapabilitiestobeginbuildingthenewsystem,whichincludesthesingleservicingplatform.CongressionalActioninthe114thCongress(2015-2016)Twobillshasbeenintroducedthatwouldimpactthisrecommendation:
• SimplifyingAccesstoStudentLoanInformationAct[S.445]:wouldrequireprivateeducationloanstoberecordedinNSLDS
• StudentLoanBillofRights[S.840]:wouldrequireEDtodevelopacentralizedpointofaccessforallborrowersforaccountinformation,paymentprocessing,andallotherloanservicingactivities
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13. StandardizeLoanServicingPoliciesandProceduresandProcessforRepaymentOptions
Recommendation
• DirectEDtostandardizetheprocessforplacingastudentinthevariousrepaymentplans,includingacceptabledocumentationtobeusedbyallservicers,therepaymentstartdate,andthetimingandmethodforcapitalizationofinterestonfederalstudentloans.
StatutoryCitation
SimplificationofLendingProcessforBorrowersHEA§485C[20U.S.C.1092c]
Background,Rationale,andImplementationConsiderations
ThecurrentDirectLoanprogramisonewherestudentsborrowdirectlyfromthefederalgovernment.Theintentoftheprogramwasforstudentstohaveonelenderandoneservicerwithstandardizedprocesses.However,thegovernmentisparcelingoutloanstovariousservicers,andsomeborrowersareconfusedbecausenotallservicersarehandlingstandardissuesinthesamemanner.Borrowerscannotchooseorswitchtheirloanservicer,sotheyaresubjecttovaryingadministrativeprocedureswithoutanyrecourse.Thelackofstandardizationalsohindersfinancialaidadministrators’effortstoaccuratelycounselstudentsonwhattheycanexpectwhentheyenterrepayment.Toalleviateconfusionanddifferentialtreatment,thedirectloanprogramshouldhaveastandardizedrepaymentprocess,communications,andforms,regardlessoftheservicer.
July2016Update
EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Amongtheobjectivesforthisinitiativeare:acommonborrowerexperience,feweraccounttransfers,commonservicingpracticesandbranding,improvedoversight,greatercostefficiency,andimproveddatacollectionandanalysis.CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:
• ConsolidatedAppropriationsAct,2016[P.L.114-113]:includeslanguageinthebill’sjointexplanatorystatementrequestingEDtopublisha“commonpoliciesandproceduresmanualforservicingthatappliestoallDirectLoanservicers”
Onebillhasbeenintroducedthatwouldimpactthisrecommendation:• StudentLoanBillofRights[S.840]:wouldaddressservicingbystandardizingcertain
disclosuresandotheractions
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14. RevisitInstitutionalRequirementsforPrivateLenderLists
Recommendation
• StreamlinestatutoryandresultingregulatoryprovisionsrelatedtoPreferredLenderLists(PLL)toencouragemorewidespreadusebyschoolswithoutcompromisingtheiroriginalpurpose.
StatutoryCitation
ProgramParticipationAgreements(preferredlenderlistrequirements)HEA§487(h)[20U.S.C.1094(h)]
Background,Rationale,andImplementationConsiderations
TheRTFadoptsthisITFproposal#8,whichwouldbeaccomplishedbytakingthefollowingsteps:• Reviewtypesofloansthatshouldbeclassifiedasprivateeducationloans.
Ø Excludefederalhealthprofessionsloansfromthedefinitionofprivateeducationloans.Ø Eliminatestate-sponsoredloansthatmeetcriteriaacceptabletotheU.S.SecretaryofEducation
fromthedefinitionofprivateeducationloans.Ø GivetheSecretaryauthoritytodetermine,throughregulation,whetherinstitutionalloansmust
beconsideredprivateeducationloans.• Narrowthedefinitionofapreferredlenderarrangementtoreducethecircumstancesunderwhicha
PLLisrequired.Ø Allowinstitutionstogivebasicinformationaboutlenderavailabilityordisplaylenderbrochures
aslongastheydonotactuallyrecommendanyparticularlendersorproducts.Ø Allowinstitutionstosharesummariesofpreviousstudents’experiencesorsatisfactionwith
lenderswithoutconsideringthatsummaryapreferredlenderarrangement.• Improvetheefficiencyofloancounselingrequirements.
Ø Eliminateduplicativeloancounselinganddisclosures,andbroadenthemethodofmakingdisclosuresincludingtheallowablesourcesofdisclosure.
Ø Replacelistsofdisclosuresinthelawwithmoregeneralgoalsandobjectivesofdisclosure,anddirecttheSecretaryofEducationtosetspecificdisclosuresthroughnegotiatedrulemaking.
Ø Shiftresponsibilityfordisclosingtermsandconditionsofloansfromschooltolenders,andrequireTruthinLendingActdisclosuresonlyoflenders.
• Eliminateduplicationofinformationprovidedbythelenderandtheinstitutionbyrequiringonlythelendertodescribethetermsandconditionsoftheloansitoffersandallowingtheinstitutiontodirectstudentstothelender’smaterialsorwebsiteforsuchinformation.
• Deletereportingrequirementsinfavorofadherencetoacodeofconduct,disclosuretostudentsandfamiliesofthecriteriausedtodevelopapreferredlenderlist,andassurancethatborrowersmaychooseanylenderwithoutpenalty,regardlessofwhetherthelenderappearsonthelist.
• Eliminatethemodeldisclosureformprovision(EDhasnotproducedamodel).• Replacestudentself-certificationwithfullschoolcertificationofprivateeducationloans.• Streamline,clarify,andbetteralignthePLLrequirementsof34CFR601.10(a)(2),HEAsection
128(e),andHEAsec.153.
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Provisionsinthecurrentlawandregulationsthatdealwithcodeofconduct,disclosureofthecriteriausedtodevelopapreferredlenderlist,andassurancesthatfamiliesmayalsochoosealendernotonthelistmustberetained.InstitutionsarenotrequiredtohaveaPLL.However,aschoolthatchoosestopublishaPLLisrequiredbytheHigherEducationOpportunityAct(HEOA)tocreateandannuallyupdatethatlistwithinformationonthelistedlendersandloans,including:• Termsandconditionsoftheloan;• Thereasontheschoolenteredintoanarrangementwiththatparticularlender;• Astudent’sabilitytochoosealenderthatisnotonthelist;and• Themethodandcriteriausedforselectingthelenders.AprivateeducationloanPLLmustalsocontainatleasttwounaffiliatedlenders.Affiliationsofanyotherlendersonthelistmustbedisclosedanddescribed.WiththeeliminationofFFELP,therulesapplicabletoprivateeducationloanscanbenefitfromreviewandadjustment.TheworstofthepracticesthatgaverisetothecurrentruleswerelimitedtoonlyafewinstitutionsandrelatedlargelytoFFELP,butalarge,unintendedconsequenceoftheserulespreventstheentirefinancialaidcommunityfromgivingreasonableadvicetofamilieswhoseekprofessionalassistancefromthestudentaidoffice.Today,thefinancialaidcommunityiswellawarethatinstitutionscannotgainanybenefitfromthebusinesstheirstudentsdowithprivatelenders.Nevertheless,thePLLrequirementsinhibittheirabilityandwillingnesstorecommendonlythoselenderswhooffergoodratesandgoodservice,ortosharewithcurrentstudentstheirknowledgeofpaststudents’experiences.Theresultisthatstudentsoftenareswayedbymarketingandadvertisements.Institutionsshouldbeallowedtoprovidemoreusefulandcomparableinformationonprivateloanstostudentsbasedonloantermsandconditions,thelender’shistoryofservice,andpaststudents’experiencewithoutbeingtiedtothelitanyofPLLrules.InadditiontoremovingimpedimentstoresponsibleuseofPLLs,thecurrentprivateeducationloanapplicationprocessshouldberevisedtocountertheimpactoflendermarketing.Replacingstudentself-certificationwithfullschoolcertificationwouldgiveinstitutionstheopportunitytoensurethatastudentisawareofthebenefitsoffederalloansbeforethestudentcommitstoalessfavorableprivateloan.
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15. ContinuePublicServiceLoanForgivenesswithModifications
Recommendations
� CommittocontinuingthePublicServiceLoanForgiveness(PSLF)Program,retainingcurrenteligibilitycriteria.� Institutelimitsontheamountofforgiveness.
� KeepPublicServiceLoanForgivenessuntaxed.
� MakePublicServiceLoanForgivenessProgramdatapublic.
� Stronglyencourageannualsubmissionofemploymentcertificationforms.
� IncreasecommunicationaboutthePublicServiceLoanForgivenessProgram.StatutoryCitation
RepaymentplanforpublicserviceemployeesHEA§455(m)[20U.S.C.1087e(m)]
Background,Rationale,andImplementationConsiderations
ThePublicServiceLoanForgivenessTaskForceputforwardtheserecommendationsinJune2014.ConcernoverthepotentialcostofPSLFhasgenerateduncertaintyforthecontinuationoftheprogramamonghighereducationprofessionalsandstudents.Inthisenvironment,thetaskforcefeelsitisimportanttoreiterateacommitmenttosupportingtheforgivenessprogramandthestudentsitwillserve.IntheabsenceofrobustandreadilyavailabledataaboutthepotentialparticipationinthePSLFprogram,thedefinitionsofqualifyingfulltimework,qualifyingemployment,qualifyingmonthlypayments,qualifyingloantypes,andlengthofserviceshouldremainunchanged.Thetaskforcerecommendsallowingforgivenessofupto100percentofaqualifyingloanbalancethatdoesnotexceedtheundergraduateaggregateStaffordLoanlimit(currently$57,500)andallowadditionalforgivenessof50percentofanyremainingqualifyingloanbalance,conditionedthattotalforgivenesscannotexceedthegraduateaggregateStaffordLoanlimit(currently$138,500).Additionally,borrowerswithabalanceremainingafterreceivingPSLFforgivenessshouldbeallowedtocontinueutilizinganincome-basedrepaymentplantopaytheirremainingbalance,andpotentiallycouldqualifyforadditionalloanforgivenessundertheincome-basedrepaymentplan.Structuringtheforgivenesscapinthismannerwillcreate“skininthegame”whilealsoaddressingconcernsaboutborrowerspotentiallyreceivingexcessiveforgivenessforthepursuitofmultipleadvanceddegrees,orforanextremeamountofdebtincurredpursuingasingledegree.Acaponthemaximumamountofforgivenesswillensurethatstudentsarediscouragedfromover-borrowing.Taxingborrowersontheamountofforgivenessreceivediscounterintuitive,asitbothprovidesadisincentiveforhigh-debtborrowerstotakeadvantageoftheprogramandcreatesasuddenfinancialhardshipforborrowersreceivingforgiveness.Atthemomenttheyshouldfinallybeemergingfromtheirdebts,theyareabruptlyfacedwithasignificantlump-sumcost.Itcouldbearguedthatincertaincases,thisisamorecalamitousfinancialeventthansimplyremaininginrepayment.Itislikelythatmanyborrowerswouldneedtopaythiscostininstallments,meaningtheywillhavesimplymovedfrommakingmonthlypaymentstoastudentloanservicertomakingmonthlypaymentstotheIRS,whodoesnotoffertheborrowerprotectionsandbenefitsfoundinthestudentloanprogram.ThedesignatedPSLFservicershouldmakepublic,dataandinformationcollectedintheadministrationofthePSLFprogram.Analysisofsuchdatawouldallowinterestedconstituenciestheopportunityto
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moreaccuratelyevaluatetheforgivenessprogram,itseffectivenessasanincentivetopursuepublicservicework,andthecostoftheprogram.Borrowersmaycompleteanemploymentcertificationformatanytimeduringtheirpublicserviceemployment.Thereareseveralpossiblenegativeconsequencesifborrowerswaituntiltheendofthe10yearsofqualifyingemploymenttobeginprovidingemploymentcertification.Assuch,stronglyencouragingborrowerstocompletetheemploymentcertificationformannuallywillensurethatthedesignatedPSLFservicercanmonitoraneligibleborrower’srepaymentandemployment.ThePSLFprogramshouldbemorewidelypublicizedbytheDepartmentofEducationandtheloanservicersasanincentiveforborrowersandthoseconsideringenrollmentinhighereducationtoenterpublicservicework.Owingtothebroadnatureoftheprogram,communicationabouttheprogramshouldbeincreasedandthetypeandtimingofinformationmadeavailabletothepublicshouldbeexpandedtoensureawarenessoftheprogram.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)SeveralbillshavebeenintroducedthatwouldeitherexpandeligibilityormodifyPSLF:
• YoungFarmerSuccessAct[H.R.2590]:wouldaddnewandbeginningfarmerstothePublicServiceLoanForgiveness(PSLF)program
• AdjunctFacultyLoanFairnessAct[S.1556]:wouldallowpart-timefacultymemberstoqualifyforPSLF
• TeachOurTeachersAct[H.R.3366]:wouldallowteacherstoqualifyforbothteacherloanforgivenessandpublicserviceloanforgiveness
• StudentLoanDebtProtectionAct[H.R.3634]:wouldallowborrowerstoqualifyforsomeversionofPSLFafterfiveyearsofpublicservicework
• StrengtheningForgivenessforPublicServantsAct[S.2463]:wouldremovethe"allornothing"componentofPSLFandallowborrowersemployedinpublicservicejobstoreceiveapercentageofforgivenessifemployedinapublicservicejobforlessthan10years.Thepercentageoftheloanthatiscancelledvaries:for2-5years,15%;for6-9years,20%;andfor10years,30%.
• TeacherDebtReliefAct[H.R.4933]:wouldallowteacherstoqualifyforbothStaffordloanteacherforgivenessandforgivenessunderPSLF
• FairnessinForgivenessAct[H.R.5274]:wouldexpandeligibilityforPSLFtocurrentandformeremployeesatall16privatelyoperatedDepartmentofEnergyNationalLaboratories
• StudentLoanFairnessAct[H.R.5487]:wouldexpandPSLFtoincludephysiciansinMedicallyUnderservedAreas
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16. Clarifyandimproveservicercommunicationwithborrowers
Recommendations
� Removeservicerbrandingfromcommunicationwithborrowers.� Permittheuseofinnovativetechnologiesinordertoallowservicerstomoreefficientlyandeffectivelycommunicatewithborrowers.
StatutoryCitation
ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]
Background,Rationale,andImplementationConsiderations
TheServicingIssuesTaskForceproposedtheserecommendationsinJanuary2015.Loanservicersco-brandtheirownlogowithED’slogoonallcorrespondencewithstudents;thisleadstoconsiderableconfusionamongborrowersaboutwhoistheactualholderandserviceroftheirloan,andthemistakencategorizationofthecommunicationasjunkmailorspam.Inordertoprovideclear,unambiguousinformationtoborrowers,theonlybrandingoncommunicationtotheborrowershouldbefromED.ThetaskforcerecommendsthatEDpermittheuseofnewtechnologiesandsupportingdatatoallowservicerstoexperimentwithdevelopinginnovativeandeffectiveperformancebaseddelinquencyanddefaultpreventionactivitiesinlieuofcertaincurrentprescribedrequirements.Currently,servicersaresubjecttoprescriptiveduediligenceandrestrictionsrequirementsthatcanstifleinnovationandexperimentationwiththemosteffectivewaysinwhichtoreachborrowers,andatwhatpointintime.Forexample,servicersarerequiredtosendborrowersdelinquencynoticebetweendays1-15ofdelinquencystatus.However,servicerscanidentifyborrowerrepaymenthabitsthroughtheirdataanalytics,andinsomecasescandeterminethataborrowerisa“slowpayer”andwillalwayspayonacertaindaylaterinthemonth.Insuchinstances,itwouldbemoreusefulfortheservicertoputtime,resources,andeffortsintoborrowersidentifiedastrulybeingat-riskofdefault.Inaddition,allowingflexibilityfromthecurrentprescriptivestudentdisclosurerequirementswouldallowservicerstoprovideborrowerswiththerightinformationattherighttime,andintherightamount.Thiswouldincludeallowingservicerstodisseminatecertaindisclosurestogetherandmaketheirowndeterminationofthebestpointintimefortheinformationtobedistributed.
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July2016Update
Inrelatedactivity,theObamaAdministrationpublishedaStudentAidBillofRightsonMarch13,2015,directingEDtofindthemostinnovativeandeffectivewaystocommunicatewithborrowers,leveragethelatestresearchidentifyingkeyfactorsthatinfluenceborrowerrepayment,andmonitorkeytrendsinthestudentloanportfoliotoimproveloanservicing.EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Amongtheobjectivesforthisinitiativeareacommonborrowerexperienceandbranding,greatercostefficiency,andimproveddatacollectionandanalysis.Thesolicitationstates:“Whileindividualborrowerstypicallydealwithonlyoneservicer,thelackofasingleinterfaceandcommonbrandingmayleadtoconfusionamongborrowers,schools,andconsumeradvocates.Undertheplannedcontract,FSAwillcreateasinglewebportalclearlylabeledasrepresentingtheDepartmentofEducationthroughwhichallborrowerscanaccessinformation,makepayments,applyforbenefits,andmanagetheiraccounts.Borrowercorrespondence,callcentercontacts,andotheroutreachmaterialswillalsobeconsistentandclearlylabeledascomingfromtheDepartmentofEducation.”
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17. EDshoulddevelopapoliciesandproceduresmanualforservicing
Recommendation
� DirectEDtoprovideanoverviewofstandardizedloanservicingpracticesthroughanonlinefederalservicingpoliciesandprocedures(P&P)manual.
StatutoryCitation
ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]
Background,Rationale,andImplementationConsiderations
TheServicingIssuesTaskForcerecommendedinJanuary2015thatEDprovideanoverviewofstandardizedloanservicingpracticesthroughanonlinefederalservicingpoliciesandprocedures(P&P)manual.Whilethetaskforceunderstandsthecompetitivenatureoftheservicercontracts,aP&Pmanualwouldofferstandardizationinareaswherethereisafinancialimpact,orrisk,fortheborrower.Thetaskforcereportdetailsnineareaswherestandardizationcouldbenefitborrowers,schools,andtheservicersthemselves.
ADD
July2016Update
EDissuedasolicitation,withresponsesdueMay8,2016,forasingleservicingsolutionforthefederalloanportfolio.Onegoalistoestablishcommonservicingpractices;EDacknowledged,“Departmentservicerscurrentlyeachhavetheirownprocesses,callscripts,andotheruniqueprocedures.Inaddition,borrowershavetoadjusttonewsystemsandadifferentexperiencewhenaccountsaretransferred.Undertheplannedcontract,allborrowerswillhaveaccesstoasinglesetofconsistentprocessesandpractices.”CongressionalActioninthe114thCongress(2015-2016)Onepieceoflegislationenactedintolawimpactsthisrecommendation:
• ConsolidatedAppropriationsAct,2016[P.L.114-113]:includeslanguageinthebill’sjointexplanatorystatementrequestingEDtopublisha“commonpoliciesandproceduresmanualforservicingthatappliestoallDirectLoanservicers”byMarch1,2016.AsofJuly1,2016,thisrequesthasnotbeenmet.
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18. Providestandardconsumerprotectionsforfederalstudentborrowers
Recommendation
� Providestandardconsumerprotectionsforfederalstudentborrowersthatareinlinewithotherconsumerfinancialproducts.
StatutoryCitation
ContractsundertheDirectLoanProgramHEA§456[20U.S.C.1087f]
Background,Rationale,andImplementationConsiderations
TheServicingIssuesTaskForcemadethisrecommendationinJanuary2015.Mostconsumercreditproducts(mortgages,creditcards,carloans,etc.)aregovernedbyfederalconsumerlawsthatdictateservicingstandardsandprocesses.Whilefederalstudentloanscontainsomeborrowerprotections,therearefewerthanalmosteveryotherconsumerfinancialproduct.Federalstudentloansandtheirservicingshouldcontainanenumerated,standardizedsetofconsumerprotections.Typicalconsumercreditprotectionsincludestandardizedprocessesforstatementsandpaymenthandling,servicertransfers,errorresolution,delinquencyservicing,andmilitaryservice,justtonameafew.Thereisnosuchsetofenumeratedprotectionsforfederalstudentloanborrowers.BorrowerprotectionsshouldalsoincludetherighttoescalateanissuetohigherauthoritieswithinEDandtherightoftheborrowertoquestioncertainpoliciesandprocedures,orrequestassistanceoraccommodationifnecessary.Theloanservicershouldberesponsibleforcommunicatingthisright,andtheprocesstoinvokethisright,onwrittencommunicationswiththeborrower.Aswithotherconsumerfinancialproducts,EDshould,incollaborationwiththeConsumerFinancialProtectionBureau(CFPB),requirebasicconsumerprotectionsforstudentborrowersandensurethattheircontractorscomplywiththoseprotections.
ADD
July2016Update
TheObamaAdministrationissuedaStudentAidBillofRightsinMarch2015thatincludesacentralizedstudentcomplaintsystem.CommentsonaproposedsystemweresolicitedinDecember2015.Thisinitiativerequiresenhanceddisclosuresandstrengthenedconsumerprotectionsandassessmentoftheapplicabilityofconsumerprotectionsinthemortgageandcreditcardmarketstostudentloans.CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• StopDebtCollectionAbuseAct[S.2255]:wouldamendtheFairDebtCollectionPracticesAct(FDCPA)toclarifythattheprotectionsfromoverlyaggressivedebtcollectionpracticesalsoapplytodebtcollectionagentshiredbythefederalgovernment,includingservicersoffederalstudentloans
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FederalPellGrantProgram
1. MakeFederalPellGrantaTrueEntitlement
Recommendations
• MakeFederalPellGrantatrueentitlementprogramwith100%mandatoryfunding.
• Applytheinflationadjustmenttotheentireaward.
StatutoryCitation
AwardAmountHEA§401(b)(2)[20U.S.C.1070a(b)(2)
FundingHEA§401(b)(7)[20U.S.C.1070a(b)(7)
Background,Rationale,andImplementationConsiderations
TheRTFproposesthattheFederalPellGrantbecomeatrueentitlementprogram.ThisconcepthasbeenaNASFAAgoalformanyyears.Currently,thefundingthatmakesupmostofaPellGrantcomesfromthediscretionarysideofthebudget,whichmustbeappropriatedeveryyearandissubjecttopoliticsandbudgetarymachinations.AsmallamountofPellGrantawardsissetinlawasmandatoryfunding,thatis,automaticspendingthatisnotsubjecttoannualappropriationsfights.For2013-14,themaximumawardof$5,645ismadeupof$4,860fromtheannualappropriation;thebalanceof$785isthemandatoryfundingportion.Theincreaseof$95fromthe2012-13maximumawardisobtainedbyapplyinganinflationadjustmentderivedfromtheConsumerPriceIndex(CPI)toonlythemandatoryfundingportionofthe2012-13maximumaward.DuetothefactthattheFederalPellGrantProgramremainstiedtoacyclicalappropriationsprocess,theamountofsupportthatahigh-needstudentcanexpectfromthisprogramremainsuncertainfromyeartoyear.Whenmakingplanstoattendaninstitutionofhighereducationalevelofcertaintyinregardtothecontinuingavailabilityoffinancialaidresourcesisespeciallycriticaltolow-incomestudents.TheannualuncertaintyofFederalPellGrantawardsalsoimpactsinstitutionsinprovidingaccurateinformationaboutnetcoststolow-incomestudentsinatimelyfashion.TransformingtheFederalPellGrantProgramintoatruefederalentitlementprogramwouldprovidealevelofcertaintytohigh-needstudents.
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July2016Update
CongressionalActioninthe114thCongress(2015-2016)
SeveralbillshavebeenintroducedthatincludeprovisionsrelatedtomandatoryPellfundingandthePellinflationadjustment:
• PellGrantProtectionAct[S.1060/H.R.1956]:wouldchangethePellGrantProgram’sfundingtosolelymandatoryfunds
• PellGrantCostofTuitionAdjustmentAct[S.1061/H.R.1957]:wouldannuallyapplyaninflationadjustmentincreasetotheentiremaximumaward
• MiddleClassCreatingHigherEducationAffordabilityNecessarytoCompeteEconomically(CHANCE)Act[S.1998/H.R.5310]:wouldpermanentlyextendtheannualinflationadjustmenttothePellGrantmaximumaward
• PathwaystoanAffordableEducationAct[H.R.4386]:wouldchangethePellGrantProgram’sfundingtosolelymandatoryfundsandwouldpermanentlyextendtheannualinflationadjustmenttothePellGrantmaximumaward
• IntheRedAct[S.2677]:wouldannuallyapplyaninflationadjustmentincreasetotheentirePellGrantmaximumaward
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2. InstitutionalIneligibilityforPellGrantDuetoLoanDefaultRates
Recommendation
• EliminatethestatutorylanguagethatbarsparticipationintheFederalPellGrantProgramfor
schoolsthathavebeenrenderedineligibletoparticipateintheDirectLoanProgramduetohigh
defaultrates.
StatutoryCitation
InstitutionalIneligibilityBasedonDefaultRatesHEA§401(j)[20U.S.C.1070a(j)
Background,Rationale,andImplementationConsiderations
CurrentlyaninstitutionlosesitseligibilitytoparticipateintheFederalPellGrantProgramiftheinstitutionlosesitseligibilitytoparticipateintheDirectLoanProgramasaresultofafinaldefaultratedeterminationaboveacertainpercentage.TheRTFbelievesthathigh-needstudentsshouldhaveaccesstoFederalPellGrantfundingirrespectiveoftheactionsofformerstudentswhoarenotfulfillingtheirobligationsasborrowers.SchoolsthathavesmallpopulationsofTitleIVstudentloanborrowersriskplacingtheirparticipationintheFederalPellGrantPrograminjeopardyshouldevenasmallnumberofborrowersdefaultontheirTitleIVloans.Thetiebetweenaschool’sTitleIVcohortdefaultrateandtheFederalPellGrantplacesinstitutionsthatadmitahighpercentageofhigh-needstudentsatadecideddisadvantageanddissuadessomeschoolsfromparticipatingintheDirectLoanProgram.
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3. FederalPellGrantEligibilityBeyond6YearLEU
Recommendation
• AllowadditionalFederalPellGranteligibility,determinedonacase-by-casebasisbytheaid
administrator,ifstudent/schoolcandemonstratethatthestudentcancompletehisorherdegree
programwithinoneadditionalperiodofenrollment.
• Sunsetthisauthoritysothatitisessentiallyagrandfatherprovisionforstudentsalreadyenrolled
whenlimitswereimposed.
StatutoryCitation
PeriodofEligibilityforGrantsHEA§401(c)(5)[20U.S.C.1091(c)(5)
Background,Rationale,andImplementationConsiderations
WhenPelllimitswereoriginallyimposedat18semesters,studentswhowerealreadyPellGrantrecipientswereexcludedfromthelimitation.Thegrandfatheringclausewasdeletedwhenthelimitwassubsequentlyfurtherreducedto12semesters.ThisrecommendationwouldprovideawayforFAAstohelpstudentswhohavenothadtheopportunitytoplanforaprecipitouslossofPellGranteligibilitybutareveryclosetocompletionofadegreeprogram.Atsomepoint,however,thelimitsshouldbecomeabsoluteasstudentshavehadadequatetimetoprepareforthat,sotheauthoritytoextendeligibilitywouldendatareasonablepointintime.
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4. FlexPell
Recommendations
• Reinstatestudentaccesstotwoscheduledawardsinanawardyearbutwithouttheacceleration
clause.
• Clarifythatassignmentofcross-overperiodsisinstitutionalpolicyandprohibitEDfrom
regulating.
• EnsurePellutilizationstatuswithinformationaboutPelllimitsisreadilyavailabletostudents.
• Reinforcestudents’righttodeclinePellpaymentstosavefundsforfutureuse.
StatutoryCitation
PurposeandAmountofGrantsHEA§401(b)[20U.S.C.1070a(b)]
Background,Rationale,andImplementationConsiderations
Studentshaveaccesstoalifetimelimitoftheequivalentofsixfull-timeacademicyears’worthofFederalPellGrants.Studentsarecurrentlyrestrictedtoonescheduledawardforeachawardyear,generallypayableoverthenumberofpaymentperiodsthatmakeupanacademicyear.Thewaythestudentusesthatgrantwithintheawardyearcanvarydependingonthestudent’senrollmentpattern.Forabriefperiodoftimebetween2009and2011,priortothelifetimelimit,CongressauthorizedpaymentofasecondPellGrantscheduledawardwithinthesameawardyear(“year-roundPell”)ifreceiptoffundsfromthesecondscheduledawardpermittedthestudenttoacceleratehisorheracademicprogram.Thedefinitionof“accelerate”wasleftuptotheDepartmentofEducation(ED).Theresultwasessentiallyacase-by-caseevaluation,aseachstudent’sprogresshadtobeassessedtosatisfytheaccelerationcriterion.Atthesametime,EDintroducedaregulatorychangethatdictatedhowtoassignasummerpaymentperiodtoanawardyearwhenthepaymentperiodcrossedoverJuly1.Thisregulatoryinitiativewasalsohighlymanualinthatithadtobedeterminedforeachstudentindividually,sometimesmorethanonceifadditionalinformationwasreceivedbeforeacertaindate.Thecombinationofthetwochanges—onestatutory,oneregulatory,butbothlabor-intensive—createdanadministrativenightmare.Alloftheseregulationswereremovedwhenyear-roundPellwasrescinded.TheRTFproposesthatavariationofyear-roundPellbereinstituted,butwithouttheaccelerationclause.WiththelifetimelimitonPellGrant,persistenteconomicproblems,andincreasinglyflexibleprogramformats,studentsneedmoreflexibilityandcontroloverhowandwhentheyaccesstheirresources.TheRTFbelievesastudentshouldbeabletoutilizegrantresourceswhenheorsheneedsthem.Currentrulesregardingdisbursementbypaymentperiodandcalculationofpaymentperiodawardamountswouldcontinuetoapply.ThesatisfactoryacademicprogressrulethatlimitsoverallTitleIVeligibilityto150%ofprogramlengthwouldstillapply.Paymentperiodrulesforclockhourprograms,non-termprograms,andcertainnonstandardtermformatsthatrequireworkcoveredbyapaymentofTitleIVfundstobecompletedbeforethenextpaymentmaybemadewouldalsoremainunchanged.Therecommendationtoallowstudentsmorecontrolrecognizesthatastudentmayhavegreaterneedearlierinhisorherpursuitofhighereducation,especiallyifthestudentneedssometimeto“gearup”tothecollegelevelexperience.Also,thestudent’sgoalmightnotbeafour-yeardegree,sopreservingfundsforlaterstudywouldnotbetothestudent’sadvantage.Theincreasingpopulationofnon-
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traditionalstudentsandagreatervarietyofnon-traditionalprogramformatsalsonecessitateadifferentviewofPellGrantutilization.AstudentcouldrunoutofPellGrantfundsbeforecompletionofabaccalaureate.However,thestudentwouldstillhaveaccesstoloanfundsandwouldprobablyhaveastrongerabilitytorepaythoseloansthefurtheralongtowardsbaccalaureatecompletionheorsheisbeforehavingtoresorttoloans.Astudent’sabilitytoassumemorecontroloverhisorherresourcesdoesrequiresolidacademicandfinancialcounseling,whichwouldbeleftuptotheschooltodesignandaccomplish.EDshouldberequiredtoprovideadditionalinformationaboutPellGrantlimitationsandusagetostudentsandinmaterialsthatschoolscanuseincounseling.ThestudentshouldalsobeabletodeclineusingaPellawardinanygivenpaymentperiod.Thestudentwouldneedtobeawareoftheimplicationsfortakingornottakingthepayment.Thisrecommendationhasparallelstootherconceptsthathavebeendiscussedinthebroaderhighereducationcommunity,especiallythe“PellWell”whicharefeaturedintheReimaginingAidDesignandDelivery(RADD)project.
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July2016Update
CongressionalActioninthe114thCongress(2015-2016)
SeveralbillshavebeenintroducedthatexpandPellbeyondasinglescheduledawardinanawardyear,withvaryingprovisions:
• FinancialAidSimplificationandTransparency(FAST)Act[S.108]:wouldallowastudentwhohascompletedcourseworkequivalenttooneacademicyearbeforetheendofanawardyearaccesstoasecondaward
• All-YearAffordabilityforConstantandContinualEducationtoEnhanceStudentSuccessAct(ACCESS)Act[S.242]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• AccesstoEducationandTrainingAct[H.R.1064]:wouldreinstatetheyear-roundPellGrantwiththeoriginallanguage,includingtheaccelerationcomponent,foundinthe2008HigherEducationOpportunityAct[P.L.110-315]
• Year-RoundPellGrantRestorationAct[S.1062/H.R.1958]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• FlexiblePellGrantfor21stCenturyStudentsAct[H.R.3180]:wouldreinstateaccesstoasecondscheduledawardinanawardyearifastudentis“acceleratingprogresstowardadegreeorcertificate”andwouldallowinstitutionstoassigncrossoverperiods
• MiddleClassCreatingHigherEducationAffordabilityNecessarytoCompeteEconomically(CHANCE)Act[S.1998/H.R.5310]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• PathwaystoanAffordableEducationAct[H.R.4386]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
• FY2017AppropriationsfortheDepartmentsofLabor,HealthandHumanServices,andEducation,andRelatedAgenciesAct[S.3040]:wouldreinstateaccesstoasecondscheduledawardinanawardyearwithoutanaccelerationclauseandwouldallowinstitutionstoassigncrossoverperiods
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Campus-BasedPrograms
1. AllocationFormulas
Recommendations
� Reconstructtheincomebandsusedtodetermineinstitutionalneedforcampus-basedprogramstomoreaccuratelyreportstudentneed.
� EliminatetheBaseGuaranteeandincludephase-inprotectionsothatnoinstitutionhasadecreaseorincreaseofmorethan10%peryear.
� RestructuretheFSEOGformulatobebasedontheamountofPellfundingreceivedbytheinstitution,includingaphase-inprovisionwherebynoinstitutionhasadecreaseorincreaseofmorethan10%peryear.
� Increasethepercentofself-helpassumedintheundergraduateinstitutionalneedcalculationoftheFederalWork-StudyandPerkinsLoanformulasto35%self-help,includingaphase-inprovisionwherebynoinstitutionhasadecreaseorincreaseofmorethan10%peryear.
StatutoryCitation
FederalSupplementalEducationalOpportunityGrantAllocationofFundsHEA§413D[20U.S.C.1070b-3]
FederalWorkStudyAllocationofFundsHEA§442[42U.S.C.2752]
FederalPerkinsLoansAllocationofFundsHEA§462[20U.S.C.1087bb]
Background,Rationale,andImplementationConsiderations
TheRTFTaskForcebelievesthatthecurrentallocationformulasareinequitableduetothefactthat,overtime,thecampus-basedfundingformulahasnotbeenadjustedtoreflectthedemographicredistributionofneedystudentsthathasoccurredacrossthenation.In2014,TheCampus-BasedAidAllocationTaskForcedevelopedtherecommendationsinthissection.TheFairShareformulausedtodetermineaninstitution’sallocationofcampus-basedfunds,firstcalculateseachrecipientinstitution’sneedforfunding,andthenaggregatesthoseindividualamountstoestablishthenationalneedforprogramfunds.Thecurrentschemaislargelyinsensitivetoincomechangesinthelowerincomelevelsandnotsensitiveenoughatthehigherincomelevels.Inaddition,theincomelevelsthemselveshavenotkeptpacewithnationalaverageincomelevels.Thebaseguaranteeoffunding,currentlybasedonFY1999expenditures,wasintendedtobeatemporarymeasuretomitigatelossestoindividualinstitutionsasaresultofradicalfluctuationsin
ADD
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funding.Duetothestaticnatureoftheformula,formostschools,theprioryearexpenditureislinkedtoitsprogramparticipationinthe1970’s.Thus,today’sallocationofcampus-basedfundslargelyreflectsa40-year-olddistributionofprogramfunds.Thissituationisinequitablebecausegrowingschools,servingneedierstudentpopulations,cannotincreasetheirfundingbecauseotherinstitutions’fundinglevelsarelargelyprotected.Thetaskforcerecommendseliminatingthebaseguaranteeportionoftheallocation.Thus,allocationswouldbebasedonlyonafairshareformula.Toavoidlargeswingsinallocationsfromyeartoyear,aphase-inprotectionwouldensurethatnoinstitution’sallocationwouldincreaseordecreasebymorethan10%peryear.ThetaskforcerecommendsthatthefairshareformulaforFSEOGfundingbebasedontheamountofPellGrantfundsaninstitution’sstudentsreceiveratherthanthecurrentinstitutionalneedformulathatislargelybasedonthecostofattendance.Theformulawouldtakeintoaccounteachschool’stotalofPellgrantfundsreceivedrelativetototalPellgrantsfundsawardednationally.Thisformulachangewilldirectmoreofthefederalgrantfundstothepooreststudents.ForFederalWork-Study,theformulatocalculateinstitutionalneedassumes25%ofthecostofattendanceisfinancedviaself-helpaidforallundergraduatestudents.Whilethetaskforcebelievesthattheunderlyingcost/needformulainthecurrentfairshareformulaisanappropriatemethodtoallocatefundsfortheseprograms,datademonstratethatthecurrentself-helppercentageismuchcloserto35%.Thetaskforcerecommendsthatthe25%assumptionforself-helpbeupdatedto35%,alongwitha10%phase-inprovision.
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2. TransferofCampus-BasedProgramFunds
Recommendations• Allowtransferof15%ofcurrentyearPerkinscollectionstoFSEOGorFWS.• Allow50%ofFWSallocationtobetransferredtoFSEOGorPerkins.• Allow50%ofFSEOGallocationtobetransferredtoFWS.StatutoryCitation
TransferofallotmentsHEA§488[20U.S.C.1095]
Background,Rationale,andImplementationConsiderations
Currently,thelawallowsaninstitutiontotransferupto25%ofitscampus-basedallotmentsasfollows:• FromFWS:25%ofallotmenttoFSEOGorPerkins• FromFSEOG:25%ofallotmenttoFWS• FromPerkins:25%ofallotmenttoFSEOGorFWS;however,noallocationofnewPerkinsLoan
fundinghasbeenmadeinrecentyears,sothistransferoptionhasnotbeenavailable.Carryforward/backprovisionswouldremainastheyarecurrently.
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3. DistributionofPerkinsFundAssetsifProgramCeases
Recommendation• Amendthedistributionofaninstitution’sPerkinsFundintheeventtheprogramceasestoexist
to:
Ø InstructtheSecretarytooffsettheamountoffederalcapitalcontributions(FCC)tobereturnedtothefederalgovernmentbytheaggregateamountofunfundedreimbursementforcancellations.
Ø EnsurethatinstitutionalcontributionsmadeinexcessoftheFCCormadewhentherewasnonewFCCarealsooffsetsothattheamountduethefederalgovernmentisnotoverestimated.
StatutoryCitation
DistributionofAssetsfromStudentLoanFundsHEA§466[20U.S.C.1087ff]
Background,Rationale,andImplementationConsiderations
IntheeventthattheFederalPerkinsLoanProgramceasestoexist,thelawspecifieshowtodistributetheassetsoftheschool’sPerkinsFundbetweentheschoolandthefederalgovernment(whichhasaninvestmentthroughfederalcapitalcontributions—FCC—overtheyears).AlthoughthelawprovidesforreimbursementtotheschoolforFederalPerkinsLoansservicecancellations,thefederalgovernmenthasnotprovidedsuchreimbursementinrecentyears.Intheeventthatthecurrentcampus-basedformoftheFederalPerkinsLoanProgramceasestoexist,schoolswill,mostlikely,berequiredtoreturnaportionoftheirPerkinsFundthatrepresentsthefederalcapitalcontributionsitreceivedthroughouttheyearsfromthefederalgovernment.Further,nonewFCChasbeenprovidedinrecentyears.TheRTFrecommendsthatdistributionofFundassetsshouldincludeanoffsetforunfundedreimbursementsforrequiredloancancellations.Inaddition,theprocessshouldtakeintoaccountanyinstitutionalcontributionsmadeinexcessoftheFCCormadewhentherewasnonewFCC.SchoolsshouldnotbeheldliableforunfundedPerkinsLoanreimbursementsthatresultedfromlegitimateFederalPerkinsLoancancellations.
July2016Update
CongressionalActioninthe114thCongress(2015-2016)• FederalPerkinsLoanProgramExtensionActof2015[P.L.114-105]:(1.)eliminatesPerkins
loaneligibilityfornewgraduatestudentsbeginninginthe2016-17year;(2.)requiresschoolstoawardallsubsidizedandunsubsidizedDirectloanspriortoawardingPerkinsfornewundergraduatePerkinsborrowers;and(3.)endsallPerkinsloanauthorityeffectiveSeptember30,2017,therebydiscontinuinganygrandfatheringbeyondthatdate
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4. ExpandDefinitionofCommunityServiceforFWSProgram
Recommendations
• Allowinstitutionstocount,forcommunityservicepurposes,FWSemploymentinon-campuschildcarefacilitiesprovidednoformalruledenieschildcaretothecommunityatlargeotherthanapreferencetoservetheinstitution’sfaculty/staff/studentcommunityneedsfirstduetolimitedspace/staffingresources.
• Revisedefinitionofcommunityservicetoacknowledgethatthe“community”includesfaculty,staff,andstudentsresidingoff-campus(withinthecommonlyunderstoodconceptofcommunity).
StatutoryCitation
“Communityservices”definedHEA§441(c)(1)[42U.S.C.2751]
Background,Rationale,andImplementationConsiderations
Currentlawincludes“childcareservicesprovidedoncampusthatareopenandaccessibletothecommunity”inthedefinitionofcommunityservice.Manycampus-basedchildcarefacilitieshavewaitingliststhatnevergetfilledduetothedemandfromtheschool’semployeesandstudentsforaffordableandconvenientchildcare.Othermembersofthecommunity-at-largearethusunabletousetheseservicesbecausestudentsoremployeeshavefirstpriority.Consequently,manycampus-basedchildcarefacilitiesfailtomeetthestrictdefinitionofcommunityservice,eventhoughfacultyandstaffarethemselvesmembersofthelargercommunity,asareadultstudentslivingoff-campus.TheRTFrecommendsanamendmenttoclarifythedefinitionofcommunityservicewithregardtoon-campuschildcarefacilitiesthat,whileopentothecommunityatlarge,givepreferencetostudentsandfaculty,and,duetolimitedresources,arefilledbytheirchildren.Attheheartofthisrecommendationisthebeliefthatcollegefacultyandstaff,aswellstudentsresidingoffcampus,areinfactmembersofthesurroundingcommunity.Facultyandstaffinparticularareoftenlong-termresidents,indistinguishablefromothermembersofthecommunitywhohappentoworkforanemployerotherthanthecollege.Similarrecommendationshavebeenmadeinthepast.Attemptstoresolvethisissuethroughregulationhavenotbeensuccessfulinthenegotiatedrulemakingprocess.
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5. Set-AsideforCommunityService
Recommendation
• Replacethecurrentcommunityservicerequirementwithavoluntaryapproachwhere7%oftheannualappropriationisputintoacommunityservicecomponentprogramunderFWS,forwhichinstitutionswouldapplyseparately.
StatutoryCitation
ParticipationAgreementHEA§443(b)(2)[42U.S.C.2753(b)(2)]
Background,Rationale,andImplementationConsiderations
TheRTFrecommendsreplacingthecurrentcommunityservicerequirementwithavoluntaryapproachwhere7percentoftheannualappropriationisputintoacommunityservicecomponentprogramunderFWS,forinstitutionstoapplyforseparately.Manyschoolsalreadyhadstrong,broad-basedcommitmentstocommunityservicebeforeitwasincorporatedasarequirementunderFWS.Otherschoolsarelocatedinareaswheretheyfindplacementinqualifyingcommunityservicepositionsdifficult.Undertherecommendedapproach,thebulkoftheFWSappropriationwouldgotoschoolswithnocommunityservicestringsattached.SchoolswouldhavetheoptionofapplyingforasmuchadditionalcommunityserviceFWSastheythinktheycoulduse,withnominimumpercentageoftheiroverallallocationrequired.
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6. PrivateSectorEmploymentCap
Recommendation
• Eliminatethe25%caponprivatesectoremployment.StatutoryCitation
PrivateSectorAgreementHEA§443(c)(2)[42U.S.C.2753(c)(2)]
Background,Rationale,andImplementationConsiderations
Schoolsshouldbeabletoplacestudentswhereverjobsareavailableandreasonable.Thisrecommendationwouldnotchangeanyofthecurrentcaveatssurroundingprivatesectorplacement,includingtherequirementthatprivatesectorjobsbeacademicallyrelevanttothestudent’sprogram.
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7. FSEOGEligibilityandPellLEU
Recommendations
• RestrictFSEOGtostudentswhoseEFCfallsintothePelleligibilityrange,buteliminatethetietoactualreceiptofaPellGrant.
• EliminateorderofawardingbylowestEFC.StatutoryCitation
SelectionofRecipientsHEA§413C(c)(2)[20U.S.C.1070b-2(c)(2)]
Background,Rationale,andImplementationConsiderations
FSEOGmustbeawardedfirsttostudentswithexceptionalneed,withprioritygiventoPellGrantrecipients.Thelawdefines“studentswithexceptionalneed”asstudentswiththelowestexpectedfamilycontributionsattheinstitution.EffectiveJuly1,2012,alifetimeeligibilitylimitof6scheduledawardshasbeenimposedonPellGrantrecipients.DuetotheverylimitednatureofFSEOGfunding,therequirementthatFSEOGbeawardedfirsttoPellGrantrecipientseffectivelycausesalossofFSEOGfundingonceastudentreacheshisorherPelllifetimeeligibilityused(LEU)limit.TheRTFrecommendsthatFSEOGbeawardedtostudentswhoseEFCsfallintothePellGrantrange,regardlessofwhetherthestudentactuallyreceivesaPellGrant,andthatthe“lowestEFC”orderofawardingbeeliminated.StudentswhoseEFCswouldenablethemtoreceivePellGrantsareinfacttheneedieststudents.Furtherdefininganorderwithinthatrangeseemsunnecessarilyredundant.SchoolsshouldbeabletoestablishtheirownpackagingpolicieswithintheEFCeligibilityrange.
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ConsumerInformation
1. EffectivenessofCurrentRequirements
Recommendations
• Requireastudytoreviewtheeffectivenessofcurrentconsumerrequirementsintermsof:Ø Content(studentunderstandingofsignificance)Ø Volume(howmuchistoomuch)Ø Delivery(useofcurrenttechnologies)Ø Timing(linkedtostudentandfamilydecisionsaboutattendanceandfinancialaid)Ø Responsibility[theDepartmentofEducation(ED)vs.theschool]
� EliminatetheannualnoticeandusetheCollegeNavigatorastheprimarywaytodisseminateinformationtostudentsandparents
� Allowschoolstosatisfycompletion/graduationrateandretentionratedisclosureswithaprominentlinkfromtheschool’swebsitetotheCollegeNavigator
StatutoryCitation
InstitutionalandFinancialAssistanceInformationforStudentsHEA§485[20U.S.C.1092]Background,Rationale,andImplementationConsiderations
Theobjectiveofthestudywouldbetodeterminewhether:(1)currentrequirementsareeffectiveandcanbemademoreso;(2)leveragingexistingreportstandardizationcouldallowthefederalgovernmenttotakeovertheresponsibilityofdisclosinginstitution-specificconsumerinformationtothegeneralpublic,andprospectiveandcontinuingstudents;(3)updatingforcurrenttechnologycanestablishmorecommonalityinmethodsofreporting.Simplyput,ifinformationisavailableatED,thenschoolsshouldsimplylinktoit,notreplicateitinanotherway.Everythingshouldbewebdriven.Thus,onegoalofthestudyshouldbetodeterminewhetherprovisionofcertainelementsbyEDwouldbenefitstudentsbystandardizingpresentationanddelivery,andfacilitatingcross-schoolcomparisons.Thestudyshouldalsoexaminethemosteffectivetimingofinformationdeliverywithregardtothevariousstagesofschoolselection,applicationforadmission,applicationforfinancialaidandborrowingdecisions,decisionsregardingattendance,andenrollment.TheprovisionshouldnotallowEDtoconstruethatmoreinformationmustbeproactivelyprovidedtostudentsindividuallyratherthanpostingitontheschool’swebsiteandpointingtowherethatis.TheRTFbelievesthatreducingduplicationofinformationwilleliminateconfusionamongstudentsandreducethemultipleeffortscurrentlytakingplacewithEDandindividualinstitutions.Onesource,suchasED,willresultinmakingthefinancialaidprocesslessconfusingforstudentsandfamilies.Undersuchanapproach,institutionswouldreporttothefederalgovernmentthedetailsofconsumerinformationrequirements.Afederalgovernmentalentitywouldthenserveasthedistributeroftherequiredconsumerinformationdisclosures.Forexample,foreachschoollistedbyastudentonhis/her
ADD
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FAFSA,thisgovernmentalentitycouldprovideaside-by-sidecomparisonofconsumerinformationforeachofthelistedinstitutions.Bydrivingtheinformationtothestudentandcentralizingittooneagency,theconsumerwouldbenefitfromastandardizedapproach.ThismayrequirethebroadeningofdataelementsthataninstitutionreportstoED.ApossiblevehicleforthewideningofrequireddataelementsisthroughthecurrentIPEDSSurvey.Inthisvein,thedeliveryofnearlyallTitleIVdisclosurerequirementstostudentsandtothepublicwouldshiftfromtheinstitution’sresponsibilitytothefederalgovernment’sresponsibility,usingastandardizedformat.Byassumingresponsibilityofprovidingconsumerinformationtocontinuingstudents,EDcouldalsoofferamorestudent-centricapproachbycomplementinginstitutionaldisclosureinformationwithstudent-specificdataalreadyassociatedwiththestudentwithinNSLDSandCOD.Thisstudyshouldbeconductedbyanindependent,non-partisanfirmwithexpertiseinconsumertestingforeffectivecommunication.
InJune2014,theConsumerInformationTaskForceexpandedandrefinedthisconcept,specificallyrecommendingthatCollegeNavigatorbeusedasamoreefficientmeansofdistributingthedisclosuresandinformationcurrentlyaddressedbytheannualnoticethat
institutionsmustdistributetoeachenrolledstudent,aswellasretentionandgraduation/completionrates.ThetaskforcereportobservesthatinstitutionsalreadyreportthemajorityoftherequiredconsumerinformationintheannualIPEDSSurveywhichis,inturn,displayedontheCollegeNavigatorwebsiteforusebystudents,theirparents,andothermembersofthepublic.Thetaskforce’sreviewofwebsiteshostedbyEDshowedthattheCollegeNavigatorisaviableplatformthatcouldbeenhancedtoserveasthecentralpointofreferenceforparticipatinginstitutions’studentconsumerinformation.EnhancementstothedataprovidedbyinstitutionswouldeliminatetheneedtosendaseparatenoticetostudentswiththesameinformationandwouldpermitinstitutionstoprovidealinktotheCollegeNavigatorasthesinglesourceofstandardizedinformationforprospectiveandcontinuingstudents.ThetaskforcereportrecommendsanumberofenhancementsthatcouldbemadetotheCollegeNavigator.
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2. IntendedAudience
Recommendation
• Restricttoundergraduatestudentstherequiredprovisionofconsumerinformationregardingmetricsandotherinformationgenerallyinapplicabletograduatestudents.
StatutoryCitation
InstitutionalandFinancialAssistanceInformationforStudents(informationdisseminationactivities)HEA§485(a)[Specificallyparagraphs(L),(N),(Q),(R)asregardsundergraduatestudents,(S),(U)][20U.S.C.1092(a)]
Background,Rationale,andImplementationConsiderations
Requirementstoprovideconsumerinformationshoulddistinguishbetweenundergraduateandgraduatestudents.Requiredprovisionofinformationthatisnotrelevantto,ordoesnotusedatapertainingto,graduatestudentsshouldberestrictedtoundergraduates.
July2016Update
InMarch2016,NASFAA’sConsumerInformationandLawStudentIndebtednessTaskForceproposedthatEDreorganizeitswebsitesbycreatinglandingpagestodirectusersdownrelevantpathwayscustomizedtomeetthespecificneedsofintendedaudiences.
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3. LoanConsumerInformation
Recommendations
• MakeEDandloanservicersresponsiblefordevelopinganddistributingloan-relatedconsumerinformation,includingdebtmanagement.
• Betteralignthetimingofinformationwiththeneedforit.
• Retaintherequirementthatschoolshavecounselorsavailabletoanswerquestions.
• RequireEDtoappointanadvisorypanelforthepurposeofassessingandmakingrecommendationsonthequality,sufficiency,andprocessesforprovidingdebtcounseling.Panelmembershipshouldincluderepresentativesfromfinancialservicesorganizations,institutionsofhighereducationandconsumeradvocacyorganizations.
StatutoryCitation
LoancounselingHEA§485(b),(l)[20U.S.C.1092(b),(l)]
Background,Rationale,andImplementationConsiderations
TheDepartmenthastraditionallycraftedthesematerials,media,andprocesseswithaone-size-fits-allapproach,whichrarelyfitsmost.Thisprocessneedsabetterqualityassuranceprocess.Bettertimingwouldprovide“just-in-time”counselingonoptionsavailableatthetimetheyaremeaningfultotheborrower,somethingschoolsgenerallyhavenocontrolover.ThisrecommendationwouldcomplementIndebtednessTaskForcerecommendations#5and#7.
July2016Update
InJanuary2015,theServicingIssuesTaskForcerecommendedembeddingtheregulatoryrequirementsofentranceandexitcounselingintoED’sFinancialAwarenessCounselingTool(FACT)inordertoeducateandempowerborrowersinacomprehensivewayaboutborrowingandrepayment.CongressionalActioninthe114thCongress(2015-2016)
• StudentLoanBorrowerBillofRights[S.840]:wouldrequirelenderstoprovideinformationanddisclosuresatdesignatedpointsintherepaymentprocess
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4. DecoupleConstitutionDay,VoterRegistration,AthleticDisclosures
Recommendation
• Eliminatenon-TitleIVrelatedrequirementsconcerningConstitutionDay,VoterRegistration,andAthleticDisclosuresfromcompliancewithinTitleIVadministration.
StatutoryCitation
ConstitutionDaySection111ofDivisionJofPub.L.108-447,theConsolidatedAppropriationsAct,2005,12/8/04;118Stat.2809,3344-45(Section111)[FederalRegister:May24,2005]
Voterregistration:HEA§487(a)(23)[20U.S.C.1094(a)(23)]
Athleticdisclosures:HEA§485(a)(5),§485(e)[20U.S.C.1092(a)(5),1092(e)]
Background,Rationale,andImplementationConsiderations
Consumerinformationneedstobeusableandeasytounderstand,andneedstomakeanimpactonstudentchoice.Currently,consumerinformationcomplianceistoocomplexandincludesprovisionsforconsumerinformationdisclosuresthathavenorelationshiptoTitleIVeligibility.TheseprovisionsspecificallyhavenobearingonTitleIVstudentfinancialaidbutinsteadcontributetotheconfusion.
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5. EliminateRequirementToProvideInformationAboutStateGrantAssistance
Recommendation
• EliminatethePPArequirementthatschoolsprovideinformationaboutstategrantassistancetoalleligibleDirectLoanborrowersinfavorofinformationmaintainedbyEDonawebsitethatisalsolinkedtotheFAFSA.
StatutoryCitation
ProgramParticipationAgreementHEA§487(a)(9)[20U.S.C.1094(a)(9)]
Background,Rationale,andImplementationConsiderations
ThisinformationshouldbeavailableontheEDwebsite,butcurrenttechnologyalsoallowsEDtodisplaythisinformationwhenastudentcompletestheFAFSA.
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6. Re-examineconsumerdisclosuresnotrelatedtoTitleIV
Recommendation
� ConductastudytodeterminetheusefulnessandutilityoftheCampusSecurityReport,FireSafetyReportandtheFireLog,andDrugandAlcoholPreventionInformation.
StatutoryCitation
InstitutionalandfinancialassistanceinformationforstudentsHEA§485(a),(f),(i),(k)[20U.S.C.1092(a),(f),(i),(k)]
Background,Rationale,andImplementationConsiderations
TheConsumerInformationTaskForcemadethisrecommendationinJune2014becauseitisunclearifaninstitutionaldisclosureisthemosteffectivewaytocommunicatetheinformation,orifthepreponderanceofstudentsandfamilies,prospectiveandcurrent,findthisinformationusefulformakingsafeandinformedchoices.Consideringthenotinsignificantburdeninvolvedingatheringthisinformationandissuingthesedisclosures,thesearequestionsthatmustbestudiedandanswered.Whilethetaskforcemembersstronglysupportthatthisinformationbeavailabletoprospectiveandcurrentstudents,thescopeofthesedisclosuresgobeyondfinancialaidrecipients,andhavenodirectcorrelationtoreceivingfinancialaid.Thisconsumerinformationmustcurrentlybereceivedbyallstudents;assuch,theyshouldberelocatedtoanareaofcompliancethatmoreholisticallyassessesaninstitution’sgeneralfitnessforservingastudentpopulation.Additionally,theoffice(s)oncampusresponsibleforsendingoutthesetypesofnon-TitleIVdisclosuresshouldhaveamissionmoredirectlycorrelatedwiththesafetyandwell-beingofallstudentsataninstitution.
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7. Federal-levelstudentunitrecord
Recommendations
� Repealthebanonthefederal-levelstudentunitrecord.
� Worktodevelopalimitedstudentunitrecordthatcollectsmoreaccurateandcomprehensivedataoncontemporarystudentbehavior.
StatutoryCitation
DatabaseofstudentinformationprohibitedHEA§134(b)[20U.S.C.1015c]
Background,Rationale,andImplementationConsiderations
InJune2014,NASFAA’sConsumerinformationTaskForcerecommendedthatafederalstudentunitrecordbeestablishedtoallowstudent-leveldatatobesenttoED,ratherthanthecurrentsystemofaggregatedinstitutionaldatacapturedinIPEDS.Forpurposesofpostsecondaryeducation,astudentunitrecordwouldallowfortheassessmentof,amongotherthings,studentsuccess(includingtransferrates),completionrates,andsalariesbymajororprogram.Itcouldalsofollowstudentsastheymovethroughandbetweenpostsecondaryinstitutionsandintotheworkforce.MoreimportantlyitwouldaddresscurrentshortcomingswithIPEDS.
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July2016Update
CongressionalActioninthe114thCongress(2015-2016)Onebillhasbeenintroducedthatwouldimpactthisrecommendation:
• StudentRighttoKnowBeforeYouGoAct[S.1195/H.R.2518]:wouldrequirecollegesanduniversitiestoreportindividualstudenteducationalrecordsto“statewideindividual-levelintegratedpostsecondaryeducationdatasystems”
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8. Newconsumerinformationrequirements
Recommendation
� Developandconsistentlyuseaconsumer-testingmodelwhenimplementinganynewconsumerinformationrequirements.
StatutoryCitation
InstitutionalandfinancialassistanceinformationforstudentsHEA§485[20U.S.C.1092]
Background,Rationale,andImplementationConsiderations
InJune2014,theConsumerInformationTaskForcerecommendedthatnonewconsumerinformationrequirementshouldbeimposedwithoutpriorconsumertesting.Testingshouldbeconductedatthefederallevelonasmanyexistingconsumerinformationrequirementsasisfeasible,withthegoalofimprovingtheireffectiveness.CongressshoulddirectEDtoconductsuchtestingofcurrentrequirementsbyadatecertainandreportonitsfindings.
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9. ReviewcalculationmethodforStudentRight-to-KnowActdisclosures
Recommendation
� Reconsidertheexclusiveuseoffirst-time/full-timedegree-orcertificate-seekingstudentsinthecalculationofgraduationandretentionrates.
StatutoryCitation
InstitutionalandfinancialassistanceinformationforstudentsHEA§485(a)(1)(L),(U);(a)(3)-(7);[20U.S.C.1092(a)(1)(L),(U);(a)(3)-(7)]
Background,Rationale,andImplementationConsiderations
InJune2014,theStudentInformationTaskForcerecommendedthatthevalueofexclusivelyusingfirst-time/full-timedegreeorcertificateseekingstudentsinthecalculationofgraduationandretentionratesbereviewed.Manyschoolshavelargertransferpopulationsthanfirst-time/full-timestudents,soidentifyingtheappropriatemetrictocapturethatstudentpopulationwouldbebeneficialtothosestudentsintheircollegesearchprocess.Additionally,thereviewshouldincludepart-timestudentssoastoachieveamorerealisticpictureatcommunitycollegesandfor-profitinstitutions.
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ReturnofTitleIVFundsforWithdrawingStudents
1. SimplifytheReturnofTitleIVFunds(R2T4)CalculationsandProcess
Recommendations
• Restrictlawandregulationtoundergraduates.Leavetreatmentofgraduatestudentstoinstitution.
• Narrowthedefinitionofschoolsthatarerequiredtotakeattendance:onlyiftheyarerequiredtotakeattendanceforallstudentsinagivenacademicprogramthroughouttheentirepaymentperiodbytheaccreditingorstatelicensingagency.Allowschoolsthatarenotrequiredtotakeattendancetouseadocumentedlastdateofattendanceorotheracademicactivityforanystudentattheschool’soption.
• Continuetorequirethatschoolshaveanaccessible,publicizedwithdrawalprocedurethatrecognizesthestudent’swithdrawaldateasthedatethestudentinitiatesthatprocedure.(Theschoolcontinuestodefinewhatconstitutesthebeginningofthewithdrawalprocess.)Eliminatethe“intenttowithdraw”rules.Eliminaterulesconcerningstudentsrescindingtheirdecisiontowithdrawandleavethatentirelyuptoschoolpolicy.
• Forstudentswhodonotfollowtheschool’sofficialwithdrawalprocedure(mostlystudentswhodropoutwithoutnotifyingtheschool),allowaschoolthatisnotrequiredtotakeattendancetosetthewithdrawaldateunderitsowndefinedpolicies.(UnofficialwithdrawalswouldthusnotberegulatedbyED.)Thiswouldalsoallowtheinstitutioncompletediscretiontosetthewithdrawaldateifthestudentcouldnotfollowofficialproceduresbecauseofillnessetc.
• Followthecurrentmodifiedpro-rataapproach,butsimplifytherulesasfollows:Establishweeklyincrementsbasedoncalendartimeratherthantheday-by-daycalculationthatexcludescertaindaysundercertainconditions.Fractionsofweekswouldberoundedup:attendanceinanydayoftheweekcountsthatweek.Retain60%asthepointatwhichallaidisearned,butexpressitasattendancein60%oftheweeks(sothatfractionscountasaweek).Untilthatpoint,foreachweekatleaststartedbythestudent,aidisearnedinproportiontothenumberofweeksconstituting60%(thatwouldavoidthe“cliffeffect”currentlyseen).
• Restoreauthorityforpost-withdrawaldisbursementstobeatthediscretionoffinancialaidadministratorsbasedonpublicizedinstitutionalpolicy(i.e.,notnecessarilyonacase-by-casebasis;schoolcansetparameters).Retaintherulethattheschoolshouldaskthestudentfirstifaloandisbursementshouldbemade,andextendthattoPellaswell.
• ModifytheassumptionthatTitleIVaidisappliedtoinstitutionalchargesfirst.Allowaidthatisspecifiedforaparticularcostofattendance(e.g.,tuition)andthatwillnotneedtobereturnedunderthesource’srulestobedeductedfrominstitutionalchargeswhendeterminingtheamountofunearnedaidthatmustbereturnedbytheinstitution.
• AllowmoretimeforschoolstoprocessR2T4byincreasingfrom45daysto60daystheperiodoftimetheinstitutionhastoreturnfunds.
• Amendtheorderofreturnlanguage.MaketheorderofreturnsubjecttoregulationbutspecifyTEACHGrantandloansfirst,withadirectivetorepayleastadvantageousloansfirst.RemovereferencestoFWS.
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• DirectEDtoseekpublicinputonwaystodecreasetheburdenandcomplexityofR2T4regulationsandprocedureswithinasetperiodoftimeafterenactment,andtoconductasubsequentnegotiatedrulemakingsessiondevotedsolelytoR2T4.
• RequireEDtoreporttoCongressbyadatecertain,detailingwaysinwhichR2T4canbemadelessburdensome,includingtreatmentofvariousprogramformatssuchasmodules.
� AllowanexemptionfromR2T4requirementsforinstitutionsthatimplementsmaller,morefrequentdisbursements
StatutoryCitation
HEA§484B[20U.S.C.1091b]
Background,Rationale,andImplementationConsiderations
Undercurrentlaw,astudentwhowithdrawsbeforecompletingtheperiodforwhichheorshehasreceivedTitleIVstudentaidfundsiscurrentlyconsideredtohave“earned”therighttothosefundsonaproratedbasis.Astudentwhohascompletedmorethan60%(intime)ofthepaymentperiodhasearned100%ofaidthatwasormaystillbedisbursed.Upthroughthe60%point,aidisearnedinproportiontothepercentageoftimeenrolledasmeasuredbythelengthoftheentirepaymentperiod.Thus,astudentwhowasenrolledfor60%ofthepaymentperiodearns60%ofaid,whileastudentwhowasenrolled61%oftimeearns100%ofaid.Astudentwhowasenrolledevenonedayearnsaportionofhisorheraid,whichmustbedisbursedoratleastoffered.Undercurrentregulation,thesecalculationsareperformedindaysforcredithourprograms(withscheduledbreaksofatleast5daysexcluded)orinscheduledhoursforclockhourprograms.Thelynchpinofthecalculationisdeterminingthestudent’swithdrawaldate.Schoolsmusthaveawithdrawalprocessthatstudentscaneasilyaccess.Awithdrawaldatecanbeidentifiedforstudentswhofollowthoseprocedures,althoughtherearecomplicationseveninthataspectoftherules.Studentswhodropoutwithoutnotifyingtheschoolarefarmoredifficulttotreat,unlesstheschooltakesattendance,whichisamatterofacademicpurviewunlessanaccreditingagencyorstatelicensingagencyrequiresit.Thelawdifferentiatesbetweenschoolsthatareorarenot“requiredtotakeattendance”indefiningwithdrawaldate,buttheDepartmenthasgonefarbeyondthatsimpledistinctionindefiningwhatismeantby“requiredtotakeattendance.”WhilethebasicconceptunderlyingthereturnofTitleIVfunds(R2T4)isquitestraightforward,thedetailshavebecomesocomplicatedthatithasbecomeveryburdensometoexplaintostudentsandtoadminister.EventheDepartmentneedsover200pagesintheHandbooktodescribeandillustratethisprocess.Errorsarevirtuallyinevitableinsocomplexasetofrules.Further,giventhewiderangeofprogramformats,individualstudentcircumstances,andotherfactors,itisverydifficulttoaddressallscenariosthatariselogicallyundera“onesizefitsall,”highlyregulatedapproach.ThelawshouldlayoutthebasicrequirementsandparametersofanR2T4policy,whichschoolsmustfillinbuthavesomediscretionover.Thelawshouldclearlyidentifythoseareasoverwhichtheinstitutionhassolediscretion.GraduatestudentsreceivenoPellorsubsidizedloans.Institutionalinvestmentingraduatestudentsisgenerallymuchhigherandselectionforadmissionmorerigorous.Thus,thelawshouldaddressonlyundergraduates,andEDshouldnotregulateR2T4policyforgraduatestudents.
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Anexampleoftheproposedmodificationstothepro-ratacalculationofearned/unearnedaidwouldbeasfollows.AsemesterrunsfromSeptember3,2013,throughDecember13,whichis15weeksbythecalendar.Astudentearnsallaidbyremainingenrolledin60%oftheweeksinapaymentperiod—0.6x15=9weeksregardlessofanybreaks.The9thweekbeginsOctober27.AstudentwhowithdrawsanytimeduringtheweekofOctober27hasearnedallaid.Forthe15-weeksemester,astudentwhowithdrawsanytimeduringthefirstweekearns1/9thofaid.Astudentwhowithdrawsanytimeduringthe8thweekearns8/9thsofaid.Furtherdiscussionregardingthetreatmentofmodulesisneeded.However,thislevelofdetailshouldnotbespecifiedinlaw,butshouldbethesubjectofadedicatednegotiatedrulemaking.
InJune2015,theInnovativeLearningModelsTaskForcerecommendedthat,inalignmentwiththeCompetencyBasedEducationExperimentalSiteInitiative,institutionsimplementingamodelofsmaller,morefrequentdisbursements(threemonthsorless),beexemptfromHEA
section484Band34CFR668.22,ReturnofTitleIVfundsuponstudentwithdrawalfromschool.
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July2016Update
InJuly2015,theReturnofTitleIVFunds(R2T4)TaskForceencouragedacloserlookattheobjectivesofafederalreturnpolicy,andproposedanumberofalternativeapproachestoconsiderinfurtherdevelopingtheRTFrecommendationsoraddressingadditionalissues.FurtheractionisneededtoformulateoneormoreoftheconsiderationsintorecommendationsuponwhichtheNASFAABoardofDirectorscouldact,andfurtherstudyofthetreatmentofmodulesisalsoneeded.Thetaskforcesuggestedconsideringthefollowingideas:
• EliminatethereturnofTitleIVfundsrequirementaltogetherinviewofotherprocessesthatlimitastudent’slong-termaccesstofederalstudentaid,suchassatisfactoryacademicprogress(SAP),loanandloansubsidylimits,lifetimePelllimits,andunusualenrollmenthistoryreviews.
• IncorporateR2T4intoSAP.• Movethedeterminationofwithdrawalandcalculationofunearnedfundstotheendofthe
paymentperiod.• Eliminatethereturnofloanfunds.
AppendixA:FederalIncomeTaxExemptionsforDependentsUnderthetaxcodeataxpayerandspouse,ifapplicable,areentitledtopersonalexemptions.Additionally,adependent,whoisthuseligibletobeclaimedasanexemptiononanotherperson’sincometaxreturn,isapersonwhoqualifiesassuchundereitheroftwocategories:qualifyingchildorqualifyingrelative.Ineitherinstance,thedependentmustbeaU.S.citizen,residentalienornational,oraresidentofCanadaorMexico.Theannualdollarvalueofpersonalanddependentexemptionsisthesame.Qualifyingchild.Therearefivetestsaqualifyingchildmustmeetinordertobeconsideredadependentofataxpayer.Abasicdescriptionofeachtestfollows.TherearecertainexceptionstotheResidencytestthatpertaininatypicalorextraordinarycases,forexample,childrenofdivorcedorseparatedparents,andkidnappedanddeceasedchildren.1.Relationship.Thechildmustbethetaxpayer’sson,daughter,stepchild,fosterchild,brother,
sister,halfbrother,halfsister,stepbrother,stepsister,oradescendantofanyoftheaforementionedpersons.
2.Age.Attheendofthecalendaryear,thechildmustbe
(a)underage19andyoungerthanthetaxpayer(orthespouseiffilingjointly),or
(b)underage24andfull-timestudentforatleastpartofatleasteachoffivemonthsduringtheyear,andyoungerthanthetaxpayer(orthespouseiffilingjointly),orFull-time:Definedbyschool.
(c)anyageiftotallyandpermanentlydisabled.Permanentlyandtotallydisabled.Achildispermanentlyandtotallydisabledif:
• Heorshecannotengageinanysubstantialgainfulactivitybecauseofaphysicalormentalcondition;and
• Adoctordeterminestheconditionhaslastedorcanbeexpectedtolastcontinuouslyforatleastayearorcanleadtodeath.
3.Residency.Thechildmusthavelivedwiththetaxpayerformorethanhalfoftheyear.
Temporaryabsencesforeducationdonotdisqualify.
4.Support.Thechildmustnothaveprovidedmorethanhalfofhisorherownsupportfortheyear.5.Jointtaxreturn.Thechildisnotfilingajointtaxreturnfortheyear.Thequalifyingchildtestsaresimilartothoseforincludingcertainfamilymembersinthenumberinthehouseholdforfederalneedanalysispurposes.Therearetwonotableexceptions.Intermsofa“residencytest,”federalneedanalysisdoesnotrequireasiblingofthefinancialaidapplicanttoliveinthehomeinordertobeincludedinthatapplicant’sfamilysize.Also,afosterchildisnotincludedinthehouseholdsizeifthefosterparentsreceivesupportpaymentsforthatfosterchild.Anotherdifferenceisthatfederalneedanalysisdoesnotincludeanagecriterionforsiblings,exceptintermsoftheindependentstudentdefinition.
AppendixA
Qualifyingrelative.Therearefourtestsaqualifyingrelativemustmeetinordertobeconsideredadependentofataxpayer.Abasicdescriptionofeachtestfollows.TherearecertainexceptionstotheMemberofhouseholdorrelationship,Grossincome,andSupportteststhatpertaininatypicalcases,forexample,multiplesupportagreementsbetweendivorcedparents,andkidnappedanddeceasedchildren.1.Notaqualifyingchild.Thepersoncannotbethequalifyingchildofanytaxpayer.2.Memberofhousehold/relationship.Thepersonmust
(a)berelatedtothetaxpayerthoughnotnecessarilylivingwiththetaxpayer1,or(b)livewiththetaxpayerallyearasamemberofthetaxpayer’shousehold(andthis
relationshipdoesnotviolatelocallaw).3.Grossincome.Theperson’sgrossincomefortheyearmustbelessthan$3,800(2012amount,
indexedannuallyforinflation).
4.Support.Morethanhalfoftheperson’stotalsupportfortheyearmustbeprovidedbythetaxpayer.
Thequalifyingrelativeprovisionextendsthetaxexemptionfordependentstoadditionalpersonsgiventhataqualifyingchildcanneverbeaqualifyingrelative.UndertheMemberofhousehold/relationshiptestthequalifyingrelativeneednotberelatedtothetaxpayer,thoughthatpersonmusthavelivedinthehouseholdallyearandthetaxpayermusthaveprovidedmorethanhalfofthatperson’stotalsupportfortheyear.Also,thequalifyingrelative’sgrossincomecannotexceedthedollarvalueoftheexemptionforthetaxyear.Aswiththequalifyingchildtests,thequalifyingrelativetestsaresimilartothoseforincludingcertainfamilymembersinthenumberinthehouseholdforfederalneedanalysispurposes,withtwonotableexceptions.Federalneedanalysistreatmentdoesnotconsiderthequalifyingrelative’sgrossincome,andapersonwhoisrelatedtothetaxpayerneednotlivewiththetaxpayer.Finally,animportantnoteaboutsupportthatisprovidedtoanotherperson.Thetaxcodespeakstosupportduringthetaxyear,whereasfederalneedanalysisgenerallyspeakstosupportfortheupcomingawardyear.
1Child,stepchild,fosterchild,oradescendantofanyofthese(e.g.grandchild)Brother,sister,halfbrother,halfsister,stepbrotherorstepsisterFather,mother,grandparent,uncle,aunt,nephew,niece,orotherdirectancestorFather-in-law,mother-in-law,brother-in-law,sister-in-law,son-in-law,ordaughter-in-law
AppendixA
Crosswalk:TitleIVHouseholdMembersandFederalIncomeTaxExemptions
DependentStudentsforTitleIVPurposes
TITLEIVHOUSEHOLDMEMBERS
(TITLEIVREQUIREMENTSSATISFIED)
PARENT(S)FEDERALINCOMETAXEXEMPTION?
Student(FAFSAApplicant) Yes,iflivedwithparent(s)morethanhalfoftheyear(residencytest)
Parent(s) Yes
Applicant’ssiblings:
• Parent(s)providesmorethanhalfsupport Yes,ifmeettheageandresidencytests
• DependentunderTitleIVrules Yes,ifmeettheage,residencyandsupporttests
Otherpersonslivingwithparent(s):
• Relatedtotheparent(s),or Yes• Notrelatedtotheparent(s),and Yes
• Grossincomeexceeds$3,800(2012) No
IndependentStudentsforTitleIVPurposes
TITLEIVHOUSEHOLDMEMBERS(TITLEIVREQUIREMENTSSATISFIED)
STUDENT’SFEDERALINCOMETAXEXEMPTION?
Student(FAFSAApplicant) Yes
Spouse Yes
Children Yes,ifmeettheageandresidencytests
Otherpersonslivingwithstudent: • Relatedtothestudent,or Yes
• Notrelatedtothestudent,and Yes• Grossincomeexceeds$3,800(2012) No
AppendixA
Crosswalk:FederalIncomeTaxExemptionsandTitleIVHouseholdMembers
DependentStudentsforTitleIVPurposes
PARENT(S)FEDERALINCOMETAXEXEMPTION
(TAXCODEREQUIREMENTSSATISFIED)
TITLEIVHOUSEHOLDMEMBER?
Student(FAFSAApplicant) Yes
Parent(s) Yes
Applicant’ssiblings Yes
Otherpersonsrelatedtotheparent(s): • Livingwiththeparent(s) Yes
• Notlivingwiththeparent(s) No
Otherpersonsnotrelatedtotheparent(s) Yes
IndependentStudentsforTitleIVPurposes
STUDENT’SFEDERALINCOMETAXEXEMPTION(TAXCODEREQUIREMENTSSATISFIED)
TITLEIVHOUSEHOLDMEMBER?
Student(FAFSAApplicant) Yes
Spouse Yes
Children Yes
Otherpersonsrelatedtothestudent: • Livingwiththestudent Yes
• Notlivingwiththestudent No
Otherpersonsnotrelatedtothestudent Yes
Appendix B: FAFSA Application Process: Three Pathways
After"initial"questions"related"to"demographics"and"dependency"status,"the"FAFSA"will"ask"applicants"about"
receipt"of"SNAP"and/or"SSI"benefits"and"for"those"who"answer"“No”,"tax"filing"status."The"applicant’s"
response(s)"will"then"steer"the"applicant"down"one"of"three"pathways."
YES
Did any of the following individuals receive SNAP and/or SSI benefits?
• You (the student) and/or spouse
• Your parent(dependentstudents only)
• Any other memberof your household
Did the following tax filer complete a 1040A, 1040 EZ or 1040 without forms or schedules?
• You/spouse(independentstudents only)
• Your parent(dependentstudents only)
Did the following individuals file a tax return?
• You/spouse(independentstudents only)
• Your parent(dependentstudents only)
Applicant eligible for maximum Pell Grant. No additional financial information requested
Applicant must provide limited financial information
Applicant must provide limited income and asset information
Applicant must provide complete income and asset information
YES
NO
YES
NO
PATH 1 PATH 2 PATH 3
NO