http://www.ogslp.org/news/archives/p...te12-28-05.pdf

http://www.ogslp.org/News/Archives/p...ummary2006.pdf <--This pdf. gives a nice summary of all the changes. It's in color and 32 pages.

Here is another link if you need some background info.

Major Provisions Affecting Student Loans in
the Higher Education Reconciliation Act of 2005 (Title VIII of the Deficit
Reduction Act of 2005 (S. 1932))
Loan Program Reauthorized

Loan Limits

• First- year Stafford limit increases from $2,625 to $3,500
• Second- year Stafford limit increases from $3,500 to $4,500
• Unsubsidized Stafford limit for graduate and professional students increases
from $10,000 to $12,000
• Increases annual limit for coursework necessary to enroll in a graduate program
or to obtain a professional credential as an elementary or secondary school
teacher from $5,000 to $7,000
• Undergraduate and graduate aggregate limits are unchanged
• Loan limit increases take effect July 1, 2007
• Authorizes PLUS loans to graduate and professional students
Interest Rates
• Maintains the scheduled July 1, 2006 change to a fixed interest rate for Stafford
and PLUS Loans
• Increases the PLUS fixed interest rate from 7.9% to 8.5%
• Maintains current fixed interest rate for consolidation loans

Consolidation Loans

• Retains the single holder rule. --This has changed. See my previous post.
• Eliminates spousal consolidation
• Eliminates in-school consolidation
• Eliminates reconsolidation in both FFELP and DL, except that a FFELP
borrower whose delinquent loan has been submitted to a guaranty agency for
default aversion is eligible for a DL Consolidation loan for the purpose of
obtaining an income contingent repayment plan
• Provides that a FFELP borrower may consolidate in the Direct Loan Program
only if a FFELP lender denies the borrower’s application for a consolidation loan
or denies the borrower’s application for a consolidation loan with income
sensitive repayment terms. Additionally, directs the Secretary to consolidate
loans of defaulted borrowers
• Provides that, unless otherwise specifically provided, the terms of DL
consolidation loans must be the same as FFELP consolidation loans

Loan Fees

• Creates parallel fee structures for FFELP and DL
• Phases the 3% maximum origination fee on FFELP Stafford loans down to 0%
by July 1, 2010:
• Lowers to 2% for loans first disbursed on or after 7/1/06
• Lowers to 1.5% for loans first disbursed on or after 7/1/07
• Lowers to 1% for loans first disbursed on or after 7/1/08
• Lowers to 0.5% for loans first disbursed on or after 7/1/09
• For FFELP loans guaranteed on or after July 1, 2006, requires the collection,
and the deposit into a guaranty agency’s Federal Fund of a federal default fee of
1% of principal, which “fee shall be collected either by deduction from the
proceeds of the loan or by payment from other non-federal sources
• Phases the 4% origination fee on DL Stafford loans down to 1% by July 1,
2010:
• Lowers to 3% for loans first disbursed on or after 7/1/06
• Lowers to 2.5% for loans first disbursed on or after 7/1/07
• Lowers to 2.0% for loans first disbursed on or after 7/1/08
• Lowers to 1.5% for loans first disbursed on or after 7/1/09
• Authorizes the Secretary to reduce the origination fee on DL loans in order to
encourage on-time repayment, but only if the Secretary determines the reduction
is cost neutral and in the best interest of the Federal Government

Risk Sharing

• Reduces lender insurance from 98% to 97% for loans for which the first
disbursement is made on or after July 1, 2006
• No change to guarantor reinsurance
• For loans disbursed on or after July 1, 2006, insurance and reinsurance on
exempt claims is set at 100%. Exempt claims are claims on loans where the
borrower provided false or erroneous information that caused the borrower to be
ineligible for federal benefits

Exceptional Performance

• Provides that lenders and servicers designated as exceptional performers
receive 99% insurance
• No other changes to exceptional performance

Repayment Terms
• Requires that DL repayment plans other than income contingent be consistent
with FFELP plans

Regular Floor Income

• Provides for capture by the government of interest in excess of the special
allowance rate for loans disbursed beginning April 1, 2006

9.5% Floor Loans

• Makes permanent the Taxpayer-Teacher Protection Act provisions that pertain
to the elimination of the 9.5% floor; eliminates the exemption for recycling
beginning on the date of enactment of the Higher Education Reconciliation Act of
2005
• Delays until December 31, 2010 the effective date of the recycling prohibition
for governmental or nonprofit entities not owned or controlled by a for-profit entity
that receive the 9.5% SAP on less than $100 million of loans in the most recent
quarterly payment prior to September 30, 2005

PLUS SAP Gap

• Limitations on payment of special allowances on PLUS loans made on or after
January 1, 2000 are deleted
Disbursement Relief Renewed
• Expired provisions which granted disbursement relief for loans to students at
schools with low default rates are renewed, effective upon enactment of the
legislation
Section 458 Account/Account Maintenance Fee
• For FY 2006, preserves mandatory appropriations for administering the loan
programs and for paying guarantors the AMF; caps the amounts at $820 million
(this amount has been set at $795 million since FY 2003
• Beginning in FY 2007, provides that administrative funds other than the AMF
are subject to the annual appropriations process
• AMF payments from FY 2007-2011 continue to be mandatory
• Eliminates the cap on AMF funds and set s the AMF payment at an amount “not
to exceed the basis of 0.10 percent of the original principal amount of
outstanding loans”

Wage Garnishments

• Increases the amount that guaranty agencies may garnish without the
borrower’s consent to 15% of disposable pay

Loan Collection

• Beginning October 1, 2006, requires guarantors to remit to the Secretary a
portion of the collection fees on default consolidations equal to 8.5% of principal
and interest, thus effectively cutting retention on those collections to 10%
• Beginning October 1, 2009, prohibits guarantors from retaining any collection
fees on default consolidations that exceed 45 percent of the agency’s total
collections on defaulted loans
• No other retention cuts
• Reduces the number of payments needed to rehabilitate a loan from
“consecutive payments for 12 months” to “9 payments made within 20 days of
the due date during 10 consecutive months”

VFAs

• Eliminates the authority to waive the inducement provisions and the required
federal default fee in VFAs

School as Lender

• Limits lending to Stafford Loans to graduate and professional students at the
school that is acting as lender
• Requires that the lender award any contract for financing, servicing, or
administration of Title IV, HEA loans on a competitive basis; offer loans with a
origination fee or interest rate below Title IV levels; not have a cohort default rate
of more than 10 percent; provide for a compliance audit for any year it serves as
lender; and have met the current school-as-lender requirements and made
FFELP loans on or before April 1, 2006
• Provides that all proceeds above administrative expenses, including the
proceeds from sales of loans, must be directed to need-based aid

Military Deferment

• Provides for a 3-year military deferment for qualifying duty; applies to loans first
disbursed beginning July 1, 2001
Forbearances
• Eliminates the requirement that forbearance for serving in certain medical,
dental and national service programs, or for borrowers having a Title IV debt
burden of over 20%, be in writing is eliminated, provided the borrower is provided
a confirming notice

Loan Discharge

• Loans that were falsely certified as a result of a crime of identity theft are
dischargeable

Grants

• Authorizes “Academic Competitiveness Grants” of $750 and $1,300 to first- and
second-year undergraduate students, respectively, and “National Science and
Mathematics Access to Retain Talent SMART) Grants” of $4,000 for third- and
fourth-year undergraduate students
• To be eligible, a student must be a citizen of the United States, be eligible for a
Pell Grant, and meet academic requirements. First- and second-year students
must have completed a rigorous secondary school program of study recognized
by the Secretary; second-year students must also have earned at least a 3.0
GPA in their first year. Third- and fourth-year students must be pursuing a major
in one of several areas related to science, mathematics, or foreign language and
have earned at least a 3.0 GPA in the coursework required for their major.
Authorizes and appropriates $790 million for FY 2006 and increasing amounts in
each succeeding year through FY 2010; provides for ratable reductions in grants