PUBLIC SUBMISSION | As of: November 20, 2009 Tracking No. 8026912c Comments Due: August 13, 2007 |
Docket: ED-2007-OPE-0133
Title IV Loans
Comment On: ED-2007-OPE-0133-0001
Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program
Document: ED-2007-OPE-0133-0018
Comment on FR Doc # E7-10826
Washington, DC,
Organization: Career College AssociationJuly 16, 2007
Ms. Gail McLarnon
U.S. Department of Education
1990 K Street, NW
Room 8026
Washington, DC 20006-8542
Dear Ms. McLarnon:
The Career College Association (CCA), on behalf of its members, would like to
thank the Department of Education and the non-federal negotiators for working
together to discuss changes to the Federal student loan programs with the goal of
easing burden on and benefiting students, institutions, and taxpayers. While the
negotiating team failed to reach consensus on the package of issues before them,
we believe the discussions held provided valuable input from the community on
these issues.
We appreciate this opportunity to comment on the proposed changes to the
regulations published in the Notice of Proposed Rulemaking in the June 12, 2007
Federal Register. After carefully considering the impact these changes would have
on our member institutions and their students, we respectfully submit the following
for your consideration.
Loan Counseling for Graduate or Professional Student PLUS Loan Borrowers
(??682.603, 682.604(f), 682.604(g), 685.301, 685.304(a), and 685.304(b))
We support the changes to this regulation as a benefit for students.
Maximum Loan Period (??682.401, 682.603, and 685.301)
Eliminating the 12 month period will allow institutions more flexibility in disbursing
loans in a way that best serves their students.
Mandatory Assignment of Defaulted Perkins Loans (??674.8 and 674.50)
Institutions invest a lot of time and effort into collecting on defaulted Perkins loans
to keep these funds in their Perkins portfolio, allowing them to make additional
loans to needy students. Requiring them to assign these loans after this effort has
been expended, in a cost of time and money, removes this funding source from
students when these loans may be collected on in the future.
Should the Department codify this proposed change, we suggest making the
period of time a loan is in default for mandatory assignment be changed from
seven to ten years. Ten years after graduating from college puts many students at
the stage of life where they are taking out mortgages or doing other activities that
motivate them into clearing up their credit, including taking action on defaulted
loans. This would allow institutions to collect on these loans and maintain the
funds in their Perkins portfolio to assist additional needy students.
Reasonable Collection Costs (?674.45)
Most Perkins loans are low-balance and capping the collection costs at these
percents will make it financially unreasonable for institutions to collect on them.
Additionally, smaller institutions using outside contractors to collect on these
loans may end up paying more for collection than they can charge back to the
student.
Prohibited Inducements (??682.20 and 682.401)
Benefits to borrowers, including philanthropic giving by guaranty agencies and
lenders, should not be included in any inducement regulations. In many
instances, students incur large amounts of loan debt to achieve their educational
goals. Any assistance provided to student borrowers in the form of reduced
interest rates or loan forgiveness should be encouraged rather than discouraged,
and lenders should be allowed to provide information on these benefits to students
at an institution. Additionally, funds provided to institutions to be used to assist
the neediest of students should be permitted without a lender or institution having
to defend these scholarships under the ?guilty until proven innocent? theory of
rebuttable presumption.
CCA appreciates the FTC?s Holder Rule being extended to all postsecondary
institutions. Any rule or regulation that creates artificial divisions between sectors
of postsecondary education should be eliminated or modified to include all of
higher education; this extension will treat all FFEL borrowers equally regardless of
where they earn their postsecondary credential. However, CCA feels it would be
more appropriate to remove this language altogether as the Holder Rule may open
lenders up to frivolous lawsuits from disgruntled students.
In regards to the regulation prohibiting guaranty agencies or lenders from providing
staff to assist financial aid offices except on short-term emergency basis, CCA
believes the term ?emergency? should encompass broader circumstances than
State- or Federally-declared natural or national disasters that affect a school.
Some emergencies may be more local or personal in nature. For example, at a
small school with a very small two person financial aid office, should one of the
financial aid counselors become incapacitated due to a medical emergency (i.e. a
heart attack or similar situation, not, as one non-Federal negotiator pointed out, a
medical situation such as pregnancy that allows for advance planning), a lender or
guaranty agency could step in and provide much-needed assistance in loan
counseling and processing for the students at that institution until the institution is
able to secure and train replacement staff. In a situation like this, the hiring of
temporary help would not allow for the proper training of that staff person, and
students would not be able to receive the assistance they need in a timely
manner. In these personal or local emergency situations, the institution could
seek permission from the Secretary to receive assistance from the lender or
guaranty agency to provide the temporary staffing.
Eligible Lender Trustees (ELTs) (??682.200 and 682.602)
CCA believes the definition of school-affiliated organization is unnecessarily broad
and includes agencies or associations that the institution has no control over. For
example, under this language the Imagine America Foundation, CCA?s not-for-
profit foundation that provides scholarships to eligible students attending career
colleges, could be considered a school-affiliated organization when the institution
has absolutely no say in the Foundation?s operations or relationships. Likewise,
students may join professional associations that apply to the career field they are
studying; under this definition, that organization could be considered a ?school-
affiliated organization? and could participate in arrangements that would violate this
provision that the institution could be held accountable for under this provision. We
believe foundations or membership associations and organizations whose
membership is made up of many individual institutions should be exempt from this
definition.
Additionally, CCA believes the effective date of the provisions in this regulation
should be no earlier than the effective date of the regulation. Holding institutions
accountable for actions they conducted that were permitted under the regulation
at the time but are now prohibited is unacceptable.
Preferred Lender Lists (??682.212 and 682.401)
We are concerned with the provisions related to the timing of certification of loans
provided by lenders not on the preferred lender list. In some cases when a lender
provides a handful or fewer loans to an institution or does not participate in the
electronic processing system the institution uses, it may take more time for that
loan to be processed than when a lender provides a larger volume of FFEL loans,
regardless of their ?preferred lender list? status. Institutions should not be held
accountable for delays on the part of these lenders when the institution has no
control over how long it takes to certify these loans, especially when the lender
does not use electronic processing. Additionally, sometimes these delays are
caused by action ? or inaction ? on the part of the student. Again, the institution
should not be held accountable when this occurs. How should institutions
document the timing of certification of these loans and how will this timing be
audited in program reviews?
CCA also believes requiring three lenders on the list is arbitrary and may prevent
smaller schools with a very low FFEL volume from utilizing a preferred lender list.
In these cases, if the institution discloses the requirements and criteria used for
selecting lenders to be on the preferred list and only one or two lenders met that
criteria (i.e. providing borrower benefits as permitted, such as waiving all
origination and processing fees on behalf of the students or reduced interest rates
for timely repayment), we believe these institutions should be provided a waiver
from the number of lenders required on the list.
Once again, we would like to thank the Department of Education for continuing to
work with the higher education community to reduce and simplify the regulatory
burden faced by all parties involved in the student loan process. Please feel free to
contact me if you have any questions regarding CCA?s comments on the
regulatory changes contained in the Notice of Proposed Rulemaking.
Sincerely,
Reba A. Raffaelli
Senior Vice President of Advocacy & General Counsel
Career College Association