Technical Corrections Bill May Postpone FFELP PLUS Loan Auction Pilot
Education and Labor Committee Chair George Miller (D-CA) recently introduced a bill making technical corrections and conforming changes to the Higher Education Act (HEA). The 54-page bill, H.R. 1777, includes a provision to suspend the federal Parent PLUS Loan auction pilot program - which was slated to take effect on July 1 for the 2009-2010 academic year - for one year until July 1, 2010. The bill passed the House yesterday and will now be considered by the Senate.
H.R. 1777 also includes a provision to assist borrowers who are eligible to rehabilitate their loans, but whose rehabilitated loans haven't been purchased by an eligible lender, causing them to remain in default status. Ongoing disruption in the credit markets has severely limited lender participation in the loan rehabilitation program. The pending bill provision allows guaranty agencies to assign loans to the Secretary of Education that meet the rehabilitation requirements (nine payments within 20 days of the due date for 10 consecutive months) if the guaranty agency is unable to sell the rehabilitated loans due to the current market conditions.
The Secretary of Education will make the determination that market conditions limit the guaranty agency's ability to sell the rehabilitated loans before the Department can accept the loan assignments. A guaranty agency will be required to charge to the borrower an amount not to exceed 18.5 percent of the outstanding principle and interest as a collection charge. The assignment authority under this provision would expire September 11, 2011.
Other HEA changes addressed in the proposed bill include:
- acknowledgement that in-person entrance and exit counseling functions can be provided by both lenders and guarantors.
- delayed implementation of the simplified Free Application for Federal Student Aid (FAFSA) for one year.
- advancement of the implementation date for provisions changing how veteran's education benefits are considered in Title IV financial aid calculations from July 1, 2010 to July 1, 2009.
OGSLP will continue to keep you informed about legislative activity. We encourage you to visit our Legislation Page often to view important updates and access more detailed information. If you have questions, please contact our Policy, Compliance, and Training department at 405.234.4432 or firstname.lastname@example.org. We're here to help!