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   Government Relations Committee
   
 
 

 MASFAA’s Reauthorization Positions
          December, 2002

Loans

1) Continuation of two loan programs

Continue to support both the FFELP and FDLP at their current levels.  Without the competition, it is questionable whether the improvements seen over the last few years would be maintained and extended.

2) Loan Consolidation (NASFAA)

Continue the Consolidation loan program with the following changes:

Eliminate the "single holder rule" that currently restricts borrowers whose entire loan portfolio is held by a single lender to consolidate with that lender only.  This law limits borrower choice, especially when considering that different consolidation lenders offer varying borrower benefits and incentives.  It should also be noted that more than one third of all Federal Student loans are held by one particular private loan holder which means the likelihood of a borrower falling under the single holder rule is relatively high.

Change the current fixed interest rate structure to a variable rate that can be capped at the future loan cap of 6.8%.  The current consolidation interest rate formula calculates the weighted average of the variable rate underlying loans and rounds up to the nearest 1/8 of a point.  This means that, depending on the economy, borrowers consolidating the same loans at different times can end up with dramatically different fixed interest rates that are based strictly on the timing of the application.

3) Increase Loan Limits (NASFAA)

Raise loan limits to those listed in the table below:

Grade Level

Subsidized Limit

Unsubsidized Limit*

All undergraduate grade levels (1-5)

$7,000

$7,500

Graduate Students

$10,000

$15,000

*The unsubsidized amount for grades 1-5 is only awarded to students who are considered independents or whose parents are denied parent loans for credit reasons.

4) Voluntary Flexible Agreements (NASFAA)

That the current statutory language be maintained permitting the Secretary to negotiate Voluntary Flexible Agreements with Guarantors.

Needs Analysis

5)  Professional Judgment

Maintain professional judgment and emphasize the importance of exercising professional judgment when students and families are in difficult situations.

6)  Drug Question on the FAFSA (NASFAA)

Eliminate Section 484 (R) of the Higher Education Act.

7)  Operating Losses (NASFAA)

These operating losses are often a function of allowing non-cash expenses, such as depreciation and amortization, to reduce income. These expenses should be treated as non-taxed income and added to the worksheet for non-taxed income.

8) Prepaid Tuition Plans (NASFAA)

For purposes of determining a dependent student's eligibility for funds under this title, all "529" plans, including prepaid tuition and savings plans, as well as Educational Savings Accounts (ESAs), and other similar educational financial savings plans will be counted as a parental asset. For purposes of determining an independent student's eligibility, all "529" plans, including prepaid tuition and savings plans, as well as Educational Savings Accounts (ESAs), and other similar educational financial savings plans will be counted as the student's asset.

9) Update Federal Methodology Tables (NASFAA)

Tables and formulas that underpin Federal Methodology should be reviewed and revised in order to benefit students and their families by arriving at reasonable and equitable family contributions.

Campus-Based Programs

10) FWS & Community Service

Allow those schools which can certify that at least seven percent of their student body is involved in community service to be exempt from any FWS community service spending requirements.  The percentage would be factored by the total student financial aid population as determined by the FISAP.

Expand and clarify the conditions under which the Secretary may grant a waiver of the utilization of Federal Work-Study funds for community service and include the possibility of a family literacy/ reading tutor requirement. Do not prescribe in the law what the requirements beyond the seven percent (7%) will be as each institution has varying degrees of access to community service opportunities for its students.

11) Campus-based programs

Maintain the current structure and allocation formula of federal campus-based programs.

OTHER

12) Pell as Entitlement (NASFAA)

Create a Pell Grant Program "true" entitlement and assure that such an entitlement will extend for ten years into the future. The Pell Grant maximum should double in next five years, with an inflation adjustment after that. The maximum award under this entitlement proposal would be as follows: 

AY 2004-2005 $5,800 authorized
AY 2005-2006 $6,000 entitlement
AY 2006-2007 $6,500 entitlement
AY 2007-2008 $7,000 entitlement
AY 2008-2009 $7.500 entitlement
AY 2009-2010 $8,000 entitlement
AY 2010-2011 inflation adjustment
AY 2011-2012 inflation adjustment
AY 2012-2013 inflation adjustment
AY 2013-2014 inflation adjustment
AY 2014-2015 inflation adjustment

13) Commitment to need-based aid (NASFAA)

Maintain historic federal commitment to need-based financial aid.  New programs or changes to existing programs should be considered in this context. 

In order to maintain and expand the federal commitment to need-based financial aid, MASFAA supports the proposal of NASFAA, to do away with the Hope and Lifetime Learning Tax Credits and use this otherwise lost revenue to bolster and increase Pell and SEOG grant funding for the neediest students.

14) I-9 Requirements

INS should recognize that students whose eligibility to work has been established through database matches with Social Security and its own database, should satisfy the I-9 requirement in order to work on campus or through the Federal Work-Study program.  The examination of paper documents should be reserved for students who do not file the FAFSA or whose data does not match electronically.

 



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