NASFAA Regulatory Perils Session (Answer Key)



2008 CASFAA Conference

Policy Potpourri

1) Exit counseling must be provided to both Stafford and Grad PLUS borrowers who drop below half-time enrollment.

A) True

B) False

Basis: The HEA, as amended by the Higher Education Opportunity Act (HEOA), now requires exit counseling for both Stafford and Grad PLUS loan borrowers. The Grad PLUS loan exit counseling is effective with the date of enactment of the HEOA, or August 14, 2008.

2) Under the HEOA, a student is limited to how many semesters (or the equivalent) of full-time Pell?

A) 12

B) 15

C) 18

D) 24

Basis: Section 401(c)(5) of the HEA, as amended by the HEOA. This provision is effective for a student who receives his or her first Pell grant on or after July 1, 2008.

3) If a school gives a student a TEACH grant and he/she doesn’t fulfill the teaching obligation—causing the grant to convert to a Direct unsubsidized loan—the student may still be able to have all or a portion of the loan forgiven under the Teacher Loan Forgiveness Program.

A) True

B) False

Basis: In the exit counseling that a school must provide to a TEACH Grant recipient at the time the student ceases attendance, the school must, among other requirements, “Review for the grant recipient the conditions under which he or she may defer or forbear repayment, obtain a full or partial discharge, or receive teacher loan forgiveness if the TEACH Grant converts to a Federal Direct Unsubsidized Loan” [per federal regulations in §686.32(c)(4)(xiii)].

4) A school may have a general policy that limits the number of times a student can borrow a Stafford loan at a particular grade level.

A) True

B) False

Basis: According to the 2008-09 Federal Student Aid Handbook, page 3-97, “If the student is maintaining satisfactory academic progress, your school is not permitted to have a general policy that limits the number of times the student can receive the maximum annual loan limit at one grade level. A school may refuse to certify/originate a loan, or may certify/originate a loan for an amount less than the borrower’s maximum eligibility, only on a case-by-base basis.”

5) If a student transfers from a graduate program to an undergraduate program in the middle of an academic year, the undergraduate Stafford annual loan limit that corresponds to the student’s grade level applies.

A) True

B) False

However, amounts previously borrowed at the graduate level within the same academic year do not count against the undergraduate Stafford annual loan limit. The total amount awarded for the academic year may not exceed the higher (graduate/professional) annual loan limit.

Example: A graduate student receives $10,250 in Stafford loan funds in the fall semester and then changes to an undergraduate program of study in the spring. The student is now an independent first-year undergraduate with a Stafford annual loan limit of $9,500. Because amounts borrowed at the graduate level within the same academic year do not count against the undergraduate Stafford annual loan limit, the school must simply ensure that the student will not exceed the higher graduate Stafford annual loan limit of $20,500. Since $20,500-$10,250= $10,250, the school can certify the full $9,500 first-year annual loan limit in the spring, assuming the student’s cost of attendance supports this amount.

Basis: 2008-09 Federal Student Aid Handbook, page 3-93.

6) If a student receives a TEACH grant at a time when his/her area of study is considered a “high-need” field, but when he/she begins the teaching service, the field is no longer considered “high-need,” the student cannot fulfill the agreement to serve and his/her grant automatically converts to a loan.

A) True

B) False

Basis: The HEA, as amended by the HEOA, allows a TEACH grant recipient to fulfill his or her service requirement by teaching in a field that is not designated as a high-need field, as long as that field was designated as high-need when the grant was awarded.

7) The new school code of conduct required in the HEOA must include (among others) the following item(s):

A) A prohibition on conflicts of interest

B) A ban on revenue sharing agreements and contracting arrangements

C) A requirement that a school with a preferred lender list (PLL) comply with certain disclosure requirements

D) A ban on secret handshakes

E) A, B, and C

Basis: Section 487(e) of the HEA, as amended by the HEOA. The code of conduct provisions are effective with the date of enactment of the HEOA, or August 14, 2008.

8) The HEOA revises the cohort default rate (CDR) calculation by expanding the "window" of repayment from two to ________ years.

A) Three

B) Four

C) Five

D) Six

Basis: Section 435(m) of the HEA, as amended by the HEOA. This provision begins with the FY09 cohort default rate calculation.

9) Effective for loans first disbursed on or after July 1, 2008, both Grad and parent PLUS borrowers are eligible for a deferment for six months after the borrower or the student for whom the parent borrowed the loan drops below half-time enrollment.

A) True

B) False

Basis: Section 428B(d)(1)(B) of the HEA, as amended by the HEOA.

10) The HEOA allows an eligible borrower to request, under the Servicemembers Civil Relief Act, an interest rate reduction on a FFELP or Direct loan to:

A) 7.25%

B) 6.5%

C) 6.0%

D) 5.5%

Basis: Section 428(d)(1) of the HEA, as amended by the HEOA. Note: The SCRA provides general relief to servicemembers from certain civil limitations; up until the HEOA, student loans were excluded from the SCRA. This is effective for borrower requests received on or after the date of enactment of the HEOA, or August 14, 2008, and applies to debt incurred by the servicemember prior to the period of military service.

11) If a school certifies a fall/spring loan in the spring with two scheduled disbursements, the school can request that both be disbursed in one lump sum.

A) True

B) False

Basis: The Common Manual Subsection 6.4.B states: “If the first disbursement would occur on or after the date on which the second or subsequent disbursement could be made, the first and second disbursements, or the first and subsequent disbursements, may be combined … [§682.207(d)]”

12) The Public Service Loan Forgiveness Program authorized under the CCRAA provides forgiveness to certain Direct loan borrowers based on service in all but one of the following professions:

A) Public child care

B) Public health

C) Public law enforcement

D) Investment banking

Basis: 34 CFR 685.219(b).

“Public service” is defined as a full-time job in public emergency management, government, public safety, public law enforcement, public health, public education, public early childhood education, public child care, social work in a public child or family service agency, public services for individuals with disabilities, public services for the elderly, public interest legal services (including prosecution or public defense), public library services, public school library sciences, other public school-based services or a tax exempt organization that is described in Section 501(c)(3) of the IRS code, or teaching as a full-time faculty member of a Tribal College or University or other faculty teaching in high-needs areas as determined by ED.

Under the Public service Loan Forgiveness Program, a Direct Loan borrower may have the balance (including principal and interest) of his or her loan forgiven after the borrower has made 120 payments on the loan (made under a standard, income-contingent, or income-based repayment plan). All of the payments must have been made after October 1, 2007, and the loan must not be in default. In addition, the borrower must be employed in a public service job during the period in which each of the 120 payments were made and at the time forgiveness is applied.

13) Effective January 1, 2009, eligible noncitizens will be able to receive ACG and SMART grants.

A) True

B) False

Basis: The ECASLA made this change to the Higher Education Act and made it effective in the middle of an award year; however, Section 402 of the HEOA moved the effective date for this and other provisions pertaining to ACG and SMART grants to align with the beginning of the following award year—thus, this provision is now effective July 1, 2009.

14) Effective July 1, 2008, a school may use current-year Title IV aid to pay minor, prior-year charges, if:

A) The minor, prior-year charges are less than $100

B) The minor, prior-year charges total no more than $200

C) Payment of the minor, prior-year charges does not prevent payment of current-year charges

D) Either B or C

Basis: November 1, 2007, final rules amended §668.164(d)(2) as follows: “An institution may use title IV, HEA program funds to credit a student's account at the institution to satisfy … (2) Prior award year charges for a total of not more than $200 for— (i) Tuition and fees, room, or board; and (ii) If the institution obtains the student’s or parent’s authorization under §668.165(b), other educationally related charges incurred by the student at the institution.” The regulations no longer permit an exception above the set threshold (which was $100 and is now $200) if payment of the minor, prior-year charges does not prevent payment of current-year charges.

15) A school must certify/originate a Stafford or PLUS loan by:

A) The end of the loan period

B) The date on which the student ceases to be enrolled at least half time

C) A or B, whichever is earlier

D) Whenever the aid office can get around to it

Basis: The Common Manual Section 6.15 states: “A school must certify the borrower’s loan eligibility by the end of the loan period or the date on which the student ceases to be enrolled at least half time, whichever is earlier. If the school does not certify the loan by the earlier of these two dates, the loan cannot be disbursed… [§668.164(g)(2)(ii)(A); §682.207(f)]”

16) Assuming proration does not apply, a school is permitted to award a full Stafford annual loan limit in one academic term if:

A) The student is enrolled full time

B) The student is independent

C) The student is in his or her final year of study

D) None of the above is required

Basis: Because the minimum loan period allowed per the Common Manual Section 6.2 [based on federal regulations in §682.200(b)], is “An academic term (e.g., a semester or quarter) for schools that measure academic progress in credit hours and use a semester, trimester, or quarter system,” there is no prohibition on awarding a full Stafford annual loan limit in one term, as long as the loan is not subject to proration and the student’s cost of attendance supports it.

Also note that per the Common Manual Subsection 6.4.A [based on federal regulations in §682.604(c)(8)], if the school meets the multiple disbursement exemption requirement as follows, the full annual loan limit may be released in one disbursement:

“A Stafford or PLUS loan may be disbursed by a single disbursement only in the following cases:

The loan is made for a period of enrollment that is not more than one semester, trimester, or quarter, or, for a school without standard terms, not more than 4 months, if the school’s cohort default rate for each of the three most recent fiscal years for which information is available is less than 10%.”

17) The HEOA permits an otherwise eligible student to receive Pell year-round.

A) True

B) False

Basis: Section 401(b)(5)(A) of the HEA, as amended by the HEOA. This provision is effective July 1, 2009.

18) Effective July 1, 2008, when a school issues a credit balance as a paper check for pickup, the school must notify the student that the check is available for immediate pickup. If the student does not pick up the check within 21 days, the school must immediately:

A) Mail the check to the student or parent

B) Initiate an EFT to the student’s or parent’s bank account

C) Return the funds to the appropriate Title IV program

D) Any of the above

Basis: The November 1, 2007, final rules amended §668.164(c)(1), as follows:

“(ii) Issuing a check payable to and requiring the endorsement or certification of the student or parent. An institution issues a check on the date that it—

(A) Mails the check to the student or parent; or

(B)Notifies the student that the check is available for immediate pickup at a specified location at the institution. The institution may hold the check for up to 21 days after the date it notifies the student. If the student does not pick up the check within this 21-day period, the institution must immediately mail the check to the student or parent, initiate an EFT to the student’s or parent’s bank account, or return the funds to the appropriate Title IV, HEA program;”

19) A school may have a general policy of refusing to certify/originate additional unsubsidized Stafford loan funds for dependent undergraduate students whose parents are unable to obtain a PLUS loan.

A) True

B) False

Basis: The Common Manual Subsection 6.15.D states: “A school is not permitted to deny the additional unsubsidized Stafford loan funds to an otherwise eligible student unless such denial is based on a permissible reason and the school provides the reason for its action to the borrower in writing.” This text is based on federal regulations in §682.603(f).

20) The HEOA increased Perkins annual loan limits from $4,000 to _____ for undergraduate students and from $6,000 to _____ for graduate/professional students.

A) $4,500/$6,500

B) $5,000/$7,000

C) $5,500/$7,500

D) $5,500/$8,000

Basis: Section 464(a)(2) of the HEA, as amended by the HEOA.

Note: The HEOA also increased Perkins aggregate loan limits from $20,000 to $27,500 for undergraduate students, from $40,000 to $60,000 for graduate and professional students, and from $8,000 to $11,000 for all other students. These increases are effective with the date of enactment of the HEOA, or August 14, 2008.

21) An otherwise eligible student enrolled in a certificate program is eligible for an ACG or SMART grant, effective July 1, 2009, if the program:

A) Is at least one year in length

B) Is offered at a two- or four-year degree granting institution

C) Offers a certificate in how to decipher convoluted federal laws and regulations

D) A and B

Basis: The ECASLA made this change to the Higher Education Act, but made it effective January 1, 2009; however, the HEOA moved the effective date to align with the beginning of an award year—this provision is now effective July 1, 2009.

22) The HEOA changes the number of on-time, consecutive, monthly payments required for the rehabilitation of a Perkins loan from twelve to ___.

A) Six

B) Nine

C) Ten

D) Fourteen

Basis: Section 464(h)(1)(A) of the HEA, as amended by the HEOA.

Note: This aligns with the number of payments required for FFELP/Direct loan rehabilitation, although FFELP/Direct loan rehabilitation consists specifically of nine on-time, full monthly payments during a period of ten consecutive months.

23) An FAA may use professional judgment to offer what type(s) of federal financial aid to a dependent student whose parents do not support the student and refuse to complete a FAFSA?

A) Unsubsidized Stafford loan

B) Pell grant

C) Perkins loan

D) Subsidized Stafford loan

Basis: Section 472 of the HEA, as amended by the HEOA. This provision is effective with the date of enactment of the HEOA, or August 14, 2008.

24) Under the new Income-Based Repayment plan (IBR), a borrower’s remaining loan balance is forgiven after ____ years of qualifying payments.

A) 15

B) 20

C) 25

D) 30

Basis: 34 CFR 682.215(f). IBR will be available to FFELP and DL borrowers beginning July 1, 2009.

25) Which of the following items was not added by the HEOA to the list of professional judgment areas a school may consider in adjusting a student's expected family contribution (EFC)?

A) Nursing home expenses not covered by insurance

B) Unusually high dependent care expenses

C) A student's or dependent student's parents' dislocated worker status

D) Fraternity or sorority dues

Basis: Section 479A(a) of the HEA, as amended by the HEOA, effective August 14, 2008.

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