After a review of Dear Colleague Letter (DCL) GEN-08-12, FP-08-10 with our previous announcement, Highlights of the Higher Education Opportunity Act of 2008, below is a list of key provisions affecting the FFEL and Private Education Loan programs by effective date that were not included in our first announcement on this Act.

Keep in mind, the U.S. Department of Education is aware that program participants were required to implement new provisions that were effective as of August 14, 2008 before receiving guidance from them and they will keep this in mind when they hold future compliance reviews of the HEOA.

Section I. Provisions Effective August 14, 2008


Academic Year
  • Clarifies that, on a case-by-case basis, the Department may reduce the required 30 week minimum of an academic year to not less than 26 weeks for institutions that measure their program length in credit or clock hours and provide 2 and 4 year programs resulting in associate or baccalaureate degrees

Reports on Student Loans to Consumer Reporting Agencies
  • Replaces the term “credit bureau organizations” with “consumer reporting agencies” and now requires lenders, guarantors, and subsequent loan holders must also report to each consumer reporting agency a FFEL loan as an “education loan” and the repayment status of the loan.

National Student Loan Data System (NSLDS)
  • Requires the Secretary to create a disclosure for students when completing the FAFSA and as part of the exit counseling process
  • Requires guaranty agencies, eligible lenders, and eligible institutions of higher education that enter into agreements with a potential student, a student, or parent that the loan shall be submitted to NSLDS and accessible to guaranty agencies, lenders, and institutions of higher education determined to be authorized users by the Secretary.

Program Participation Agreement (PPA)
  • Adds a provision that an institution can satisfy the requirement to distribute voter registration forms by electronically transmitting the form or a link to an internet address where the form can be accessed as long as the electronic message is devoted exclusively to voter registration.
  • Moves the 90/10 rule (proprietary schools must derive not less than ten percent of its revenue sources other than from Title IV funds) from Title I of the HEA to the PPA. If the institution does not satisfy the 90/10 Rule for two fiscal years, it loses its eligibility to participate in the Title IV programs for at least two fiscal years. The DCL: lists what funds should be considered as revenue; specifies sources of revenue that count toward the 10 percent requirement other than Title IV funds used to pay the student’s tuition, fees, and other institutional charges; and specifies the types or amounts of funds that are excluded from revenues under the 90/10 calculation.
  • Requires through the PPA that an institution participating in Title IV loan programs must develop, publish, administer, and enforce a code of conduct that applies to the officers, employees, and agents of the institution. The DCL lists what specifically needs to be included.
  • Adds a new requirement, for institutions that have entered into a preferred lender arrangement, that annually they must compile, maintain, and make available to students (and families) attending the school a list of lenders for Title IV or private loans that the school promotes, recommends, and or endorses in accordance with the arrangement. The DCL lists what needs to be included.

Professional Judgment
  • Expands the professional judgment of the Financial Aid Officer (FAO). In cases where a dependent student’s parent(s) do not provide any financial support and refuses to fill out a FAFSA, an FAO may offer that student an unsubsidized Stafford loan. Also expands examples of special circumstances to include: nursing home expenses not covered by insurance; dependent care; and a student who is a dislocated worker.

Ability to Benefit
  • Provides that a student without a high school diploma or its equivalent can become eligible to receive Title IV funding after satisfactory completion of six credit hours or the equivalent coursework that are applicable toward a degree or certificate offered by the institution. The student is ineligible to receive Title IV aid while earning the six credits.

Exit Counseling
  • Modifies the requirements that eligible institutions through financial aid offices or otherwise, conduct exit counseling for borrowers. The DCL lists the items that need to be addressed in the exit counseling. HESC recommends that schools use Mapping Your Future or HESC can provide brochures that may be used when providing exit counseling to student borrowers.

Eligibility for Loan Rehabilitation
  • Limits the ability of a borrower to rehabilitate each defaulted loan only once.

Master Promissory Note (MPN)
  • Provides that schools, both domestic and foreign, may utilize the MPN for multiple loans unless otherwise directed by the Secretary.

Cohort Default Rate Institutional Appeal
  • Provides that the Department may not place an institution in provisional certification status based solely on the institution’s cohort default rate if an institution files a successful extenuating mitigating circumstance appeal after two consecutive years of cohort default rates that equal or exceed the applicable cohort threshold percentage.

Transparency in College Tuition for Consumers
  • Requires the Secretary to annually report on its College Navigator Web site changes in State Higher Education spending. The DCL outlines what will be on the report.
  • Requires the Secretary, once every four years, to conduct a survey through the National Center for Education Statistics (NCES), using a representative group of Federal student aid recipients identifying their characteristics and the aid they receive and to better understand the impact on them of issues such as debt burden, cost of attendance, and textbook prices.

Private Student Loan Improvements
  • Requires the Secretary to develop the self-certification form for private education loans.
  • Requires each lender that has a preferred lender arrangement with a covered educational institution to annually provide to that institution information included in the model form developed under The Truth in Lending Act Sec. 128(e) (5) Format of Disclosures for each type of private education loan that the lender plans to offer to students attending that covered institution, or to the families of such students, for the next award year.

Section II. Provisions Effective August 14, 2009


Program Participation Agreement
  • Adds a provision that an institution, must upon written request of a victim (or the victim’s next of kin, if the victim is deceased as the result of the offense) of a violent crime or a sex offense, provide a report on the results of any disciplinary proceedings against a student who is the alleged perpetrator of the offense.

Transparency in College Tuition for Consumers – not later than 8/14/09
  • Requires the Secretary to develop a net-price calculator to assist students, families and consumers estimate the net-price associated with a post-secondary institution to determine the student’s net price to attend the institution.
  • Requires the Secretary to collect and display on its College Navigator Web site extensive information (outlined in the DCL) about each participant in the Title IV student aid programs.
  • Requires the Secretary to consult with appropriate experts to develop a multi-year tuition calculator so that students and families can estimate the amount of tuition and fees in future years at a particular institution. This calculator should be made available on the College Navigator Web site.

Section III. Provisions Effective Fiscal Year Beginning October 1, 2009


Cohort Default Rate Calculation
  • Amends the HEA to calculate an institution’s cohort default rate using a three-year period instead of a two year period. This would mean that the cohort default rate would be based on the percentage of those borrowers who defaulted before the end of the second fiscal year following the fiscal year in which the borrowers entered repayment.
  • Provides for a transition period during which no institutional sanctions will be taken based on the three-year calculated rate until after there have been three consecutive cohort years of such rates calculated. During this period, sanctions will be based on calculations made according to pre- HEOA provisions.

Section IV. Provisions Effective February 14, 2010


Preferred Lender List Disclosure Form
  • Requires the Secretary to determine the minimum information that needs to be disclosed by institutions participating in preferred lender arrangements and to develop a model disclosure form.

Private Student Loan Improvements – Effective on the earlier date on which regulations issued under HEOA Sec. 1002 become effective or on 2/14/10
  • Requires the lender to make disclosures to the applicant from solicitation to consummation of the loan.
  • Requires the Lender to obtain a “Self-Certification form for Private Education Loans” completed and signed by the student loan applicant before consummating the Private Student Loan.
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Section V. Provisions Effective July 1, 2010


Total Income
  • Allows the use of the second preceding tax year information in order to carry out the simplification of the FAFSA application process.

Section VI. Provisions Effective July 1, 2011


Transparency in College Tuition for Consumers
  • Directs the Secretary, using the College Navigator Web site, to provide lists of college affordability information that will be searchable by state and by 1 of 9 categories of institutions of higher education participating in Title IV programs. The Secretary must summarize all institutional reports, link to each report, and publish a summary on the College Navigator Web site.
  • Requires institutions that are on the list of institutions having the largest increase of percentage change in tuition and fees or net price over the last three academic periods to submit a report to the Department of ED describing: 1) the major areas in the institution’s budget with the greatest cost increases; 2) cost increases; 3) steps the institution will take towards reducing the costs in those areas. For those institutions that are on this list for two or more consecutive years, they need to provide the Department a description of progress made on the steps taken to reduce costs that were included in their report to ED for the prior year. If the institution determines that any cost increase is not within the exclusive control of the institution then they need to include an explanation of the extent to which the institution determined the cost increase and identify the agency or State government responsible for determining the cost increase.

Section VII. Provisions Effective Fiscal Year Beginning October 1, 2011


Cohort Default Rate Participation Rate Index
  • Increases the participation rate index standard from 0.0375 to 0.625.

Section VIII. Provisions Effective Fiscal Year Beginning October 1, 2012


Cohort Default Rates
  • Raises the default rate that triggers ineligibility from 25% to 30%.
  • Adds a new appeal. If an institution’s cohort default rate is equal to or greater than the threshold percentage for fiscal year 2012 and beyond for 2 consecutive years, then the institution has 30 days to file an appeal after receiving notification from ED. Within 45 days ED will issue a decision. If the institution is found to have exceptional mitigating circumstances, ED may not subject the institution to provisional certification based solely on the cohort default rate.

Default Prevention Plans
  • Requires an institution to establish a default prevention task force to prepare and submit a plan to ED that identifies factors, establish steps to improve rate, and specify actions that can improve student repayment if the institution’s cohort default rate for fiscal year 2012 or any succeeding fiscal year is equal to or greater that the new 30 % cohort default rate threshold.
  • If the institution’s threshold is still equal to or greater than the threshold for 2 consecutive years the task force must reevaluate the plan.
  • The Department will evaluate each plan and may require additional steps that will promote student loan repayment.

For your information, the Department announced its intent to establish five negotiated rulemaking committees to develop proposed regulations to implement the changes that the HEOA made to the Higher Education Act. The Department explained in this announcement that due to the large volume of changes made by the HEOA not all of the provisions will be discussed during these sessions.

HESC will continue to work with other industry partners to analyze the changes this Act has made to the FFEL program and will keep you updated with any new guidance we can offer.

If you have questions related to this announcement, please contact the Office of Regulatory Compliance at 1-518-473-3986; toll free at 1-866-431-HESC (866-431-4372), press 6; or by e-mail at askpolicy@hesc.org

Posted: 1/28/09