November Newsline Articles

Position Announcement: The Louisiana Student Financial Assistance Commission (LASFAC) is looking for an Assistant Executive Director for the Louisiana Office of Student Financial Assistance (LOSFA). Applicants must hold at least a bachelor’s degree, preferably in the fields of business administration, accounting, law, finance, economics, management or marketing. The successful candidate will also have a minimum of three years’ experience in executive management positions, with specific related experience in the area of student financial aid. Preferential consideration will be given to the applicant with management experience in a student loan guaranty agency. Review of applications begins upon receipt and will continue until a candidate is selected. Submit a letter of application and resume with at least three professional references to Jack L. Guinn, LOSFA Executive Director, P.O. Box 91202, Baton Rouge, LA 70821-9202. Contact LOSFA Human Resources at (225) 922-1035 or (800) 259-5626, Ext. 1035, for a detailed description of job announcement.

Edward Anders has replaced Teddy Duhé as the University of Louisiana System Board of Trustees representative on the Louisiana Student Financial Assistance Commission (LASFAC) and the Louisiana Tuition Trust Authority (LATTA). Anders retired 13 years ago from his position teaching mathematics at Northwestern State University in Natchitoches. He is a member of the Board of Trustees of the Louisiana College System and is in the antiques business in Natchitoches.

Pre-printed Applications: Because of the many requests we have received from lenders and schools, LOSFA is once again offering the option of providing pre-printed loan applications for participating FFELP lenders and public and not-for-profit postsecondary schools which request them. Order forms can be obtained from a Customer Service Representative at (800) 259-5626, Ext. 1012 or online via LOSFA’s website (www.osfa.state.la.us).

Advisory Committee: At its monthly meeting held on Tuesday, November 10, the Louisiana Student Financial Assistance Commission (LASFAC) expressed its appreciation to departing members of LASFAC’s Advisory Committee: Kim Barnette (Louisiana Technical College), Denise Chaisson (Sallie Mae), Pat Cottonham (University of Southwestern Louisiana), Patrick Gorman, Chair (LSU Medical Center, New Orleans), Emily Jones (Xavier University), Eugene Pennison (Camelot Career College), and Sandra Spraglin (Delgado Community College). It also confirmed the appointment of new members who will serve on the Advisory Committee for 1999, and they are Melanie Amrhein (LSU, Baton Rouge), Wally Boudet (Loyola University), John Cadenhead (Hibernia/Class Credit), Anita Dabon (Louisiana Technical College, River Parish), Sherry Gladney (LSU Medical Center, Shreveport), Connie Roubique (ITI Technical College), Kathy Sciacchetano, Chair (LSU, Baton Rouge), Ursula Shorty (Southern University, New Orleans), and Roger Vick (Louisiana Tech University).

Promoted: Susan Michelli (formerly McManus) has been promoted into the position of Audit Supervisor at LOSFA. As such, she heads the Program Compliance Section and also serves as the agency’s internal auditor. Susan earned her degree in Finance with honors from LSU in 1998. She has been employed by LOSFA since 1989 as a program reviewer, specializing in lender reviews.

Upcoming Holidays: LOSFA offices will be closed Thursday, December 24, 1998, and Friday, December 25, 1998, for Christmas and Thursday, December 31, 1998, and Friday, January 1, 1999, for New Year’s.

Professionals from all segments of the student financial aid industry are busy analyzing the impact of the reauthorization of the Higher Education Act (HEA). Schools and lenders must initiate action to revise and update their policies and systems to comply with the new provisions of the law, which the President signed on October 7. The following is a summary of some of the most important changes for lenders, schools and students.

Perhaps the issue which generated the most debate and concern is the change in the Stafford Loan interest rate. The rate for new Stafford Loans for which the first disbursement is made on or after October 1, 1998, and before July 1, 2003, during any 12-month period from July 1 through June 30, will be the bond equivalent rate of 91-day treasury bills, plus 2.3 percent, not to exceed 8.25 percent. The rate during in-school and grace periods will be the 91-day treasury bill rate plus 1.7 percent.

The PLUS Loan interest rate is the 91-day treasury bill rate plus 3.1 percent, not to exceed 9.0 percent. For any consolidation loan for which the lender receives application on or after October 1, 1998, through July 1, 2003, the rate is the lesser of the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of 1 percent or 8.25 percent.

The Stafford Loan special allowance will be calculated by determining the average of the bond equivalent rates of the 91-day treasury bills for the 3-month period, subtracting the applicable interest rate, adding 2.8 percent to the resultant percent and dividing by four. Special allowance for in-school and grace periods is calculated by substituting 2.2 percent for 2.8 percent in the preceding formula. Special allowance for PLUS Loans and consolidation loans is calculated by substituting 3.1 percent for 2.8 percent.

Lenders will offer a new repayment option, extended repayment, not to exceed 25 years for new borrowers on or after October 1, 1998, who accumulate outstanding loans totaling more than $30,000.

Use of a master promissory note form will be available for periods of enrollment beginning not later than July 1, 2000. Separate loans may be sold or assigned independently of any other loan made under the same note and shall be separately enforceable in all federal and state courts on the basis of an original or a copy.

A pilot program will offer blanket certification of guaranty to lenders, permitting them to make loans without receiving prior approval from the guarantor of individual loans for eligible borrowers. Guarantors may establish restrictions on the number or volume of loans issued by the lender. Beginning in fiscal year 2001, any guarantor may offer such a blanket certificate.

Interest on loans for which payments of interest are not required during in-school and grace periods will be paid monthly or quarterly or be capitalized by the lender only when the loan enters repayment, at the expiration of the grace period, the expiration of a period of deferment or forbearance or when the borrower defaults.

The definition of eligible lender was amended to include two new categories: a bank that is a wholly-owned subsidiary of a nonprofit 501(c) foundation that makes part B loans only to undergraduate students aged 22 or younger and has a portfolio of not more than $5 million, and a consumer finance company subsidiary of a national bank which acts as a small business lending company and participates in the part B program, in which the bank and its subsidiaries do not have as their primary consumer credit function the making or holding of student loans.

Those who lend from proceeds of tax-exempt obligations no longer must observe a Plan for Doing Business requirement. Such an authority must not engage in discriminatory patterns or practices to be eligible for special allowance.

The Free Application for Federal Student Aid (FAFSA) has been authorized to be used as an application document for any Federal Family Education Loan Program (FFELP) loan, and guaranty agencies and states are added to the list of entities entitled to receive data collected by the Secretary from the FAFSA.

Schools were also authorized to perform electronic information dissemination activities such as electronic entrance and exit counseling for prospective and enrolled students.

The Secretary of the U. S. Department of Education (ED) and the Comptroller General of the General Accounting Office will convene a study group to design and conduct a study to identify and evaluate means of establishing a market mechanism for the delivery of Title IV loans. Preliminary findings will be issued for a public comment period no later than November 15, 2000.

Any school whose cohort default rate for each of the three most recent fiscal years is less than 10 percent may disburse any loan in a single installment for any period of enrollment that is not more than one semester, one trimester, one quarter, or four months.

A borrower who is a member of a reserve component of the Armed Forces may exclude from his or her grace period any active duty period of more than 30 days, not to exceed three years.

A new loan forgiveness program for teachers will repay not more than $5,000 of loan indebtedness for a borrower who has been employed as a full-time teacher for five consecutive complete school years in a school which qualifies for Perkins cancellation, who teaches a subject relevant to his academic major, and who is not in default.

A separate new demonstration program of loan forgiveness for child care providers will repay loans on behalf of new borrowers who complete a degree in early childhood education, obtain employment in a child care facility, and work full-time for two consecutive years as a child care provider in a low-income community.

Any student convicted of any offense involving possession or sale of a controlled substance shall not be eligible to receive student assistance for specified periods.

Guaranty agencies and lenders may provide assistance to institutions of higher education comparable to the kinds of assistance provided to institutions of higher education by ED.

As effective dates, guidance from the U.S. Department of Education, and regulations are made available, the Louisiana Office of Student Financial Assistance (LOSFA) will follow up with detailed explanations of the changes via Loan Program Bulletins (LPBs) and Newsline.

On the Road Again . . . .

The commencement of the 1998-99 school year has meant the start of another busy season for LOSFA’s Customer Service Representatives. Students, parents, high school guidance counselors, college financial aid officers and other concerned and interested individuals are looking for information on LOSFA’s various programs. Number one on just about everybody’s list is TOPS, the new state scholarship program. As a result, most of the calls to LOSFA’s information line have been about TOPS, most of the presentations have been TOPS-related and most of the materials picked up at browse sessions have been TOPS brochures. As of Nov. 1, Customer Services has:

• Participated in parish-wide college nights, college fairs or career days in 15 parishes (Ascension, Bossier, Caddo, Calcasieu, East Baton Rouge, East Feliciana, Evangeline, Iberville, Lafayette, Natchitoches, Pointe Coupee, St. Charles, St. Landry, St. Tammany, Tangipahoa) and the Archdiocese of New Orleans. More than 12,000 students, parents and high school faculty members have attended these events. Staff members distributed more than 10,000 materials, including information on TOPS and START, flyers on surfing the web and FundFinders and Funding Your Education, a U.S. Department of Education publication.
• Presented financial aid information at the college/career fairs of 10 different high schools. Attendance at these events numbered more than 1,500 students and parents.
• Presented TOPS information at guidance counselor articulation workshops in Hammond, Thibodaux, Eunice, Natchitoches, Shreveport and Ruston. Total attendance at these workshops numbered approximately 450.

• Visited financial aid offices at 12 Louisiana colleges and universities.

• Participated in televised interviews on the START Savings Program in Alexandria, Monroe and Lake Charles.

There have been many more presentations, programs, and information sessions which have included LOSFA representation. Customer Service Representatives Pamela Malveaux and Sigmund Morel gave a LOSFA and TOPS update at the conference of the Louisiana Association of Student Financial Aid Administrators in Baton Rouge on Oct. 9.

Guidance counselors: Don’t forget the series of Guidance Counselor Workshops in December. Refer to the notice on the right for the schedule. Our December calendar is shown on page 5.

1999-2000 FAFSA Re-Dressed in Purple and Yellow

The Free Application for Federal Student Aid, or FAFSA, for the 1999-2000 school year has hit the streets. Students, parents, high school guidance counselors and college financial aid administrators should be on the lookout for changes designed to make the application easier to complete.

Ease of use seems to have been the catch phrase for the new FAFSA’s designers. The entire application is in an "interview" format. For example, instead of telling applicants to fill in the date they became residents of their state, the 1999-2000 FAFSA asks, "Did you become a legal resident of this state before January 1, 1994?" Other questions have been similarly re-formatted. In past FAFSAs, only the sections to be filled out by the student were in this interview format.

The latest FAFSA is coded yellow, distinguishing it from the blue of the 1998-99 version. Sections to be completed by students are in yellow, and sections to be completed by parents are in purple, making it clearer who is to fill out what. Pages 4 and 5, for example, are opposite each other: page 4 for the student is yellow and page 5 for the parent is purple. Similarly, page 8, which includes two worksheets, is distinguished by having a yellow column on the left for student information and a purple column on the right for parent information.

Other changes include:

• The application booklet has been reduced from 12 to eight pages. The application itself is still four pages, but there are only 99 items to fill out instead of 108.
• The application no longer asks for "course of study." Other questions relating to certain financial information from students and/or parents have also been eliminated.
• Applicants will no longer have to specify the state to which they want the information sent; the FAFSA will go to the student’s state of residence.
• The telephone number for the U.S. Department of Education’s information center has been moved to a prominent place on the front cover. Applicants are also given a phone number to call if they don’t hear from FAFSA processors within four weeks after submitting the application.
• The list of deadlines for state aid has also been moved to the front cover from the back.
• Applicants should be aware that "legal guardian" is no longer considered as part of the definition of a parent.
• A new feature is a supplemental insert explaining types of federal financial aid. Many students don’t know what they can qualify for, and this insert is designed to help them understand what’s available. It also includes information on the Hope Tax Credit and the Lifetime Learning Tax Credit.

Remember: 1999 high school graduates who wish to apply for a TOPS award must file their 1999-2000 FAFSA by April 15th, 1999, for priority consideration.

Students who need 1999-2000 FAFSAs should see their guidance counselors or financial aid administrators at the colleges they are attending or planning to attend. Forms are also available from the Louisiana Office of Student Financial Assistance by calling (800) 259-5626, Ext. 1012.

 LOSFA Installs New Autodialer

The Pre-Claims and Collections units of the Louisiana Office of Student Financial Assistance (LOSFA) opened the month of October with an exciting collection tool. A new autodialer — a Mosaix system — was installed to increase productivity and efficiency of the two units and enable collectors to provide callers with better service.

The autodialer handles both outbound and inbound calling. It places calls for Pre-Claims and Collections based on groups of borrower accounts selected from mainframe files. The autodialer "listens to" and handles calls with no answer, busy and disconnected number messages. If someone answers the telephone, LOSFA’s collectors are forwarded the call to handle personally. The call, along with the social security number of the borrower, is sent to a collector who may then access mainframe files to assist the borrower.

Inbound calls for Pre-Claims are distributed among all the staffers in the unit by the Mosaix system. Collections will continue to utilize the Automated Call Distribution system for inbound calls. The Mosaix system will switch collectors from outbound to inbound if callers are left on hold for too long. The system is network-based and accessible to all Pre-Claims and Collections personnel. It includes an array of different types of reports to track productivity and determine peak calling times for both inbound and outbound calling.

Master Prom Note Streamlines Loan Process

The loan application procedure for students will soon be simplified by the Master Promissory Note (MPN), the new common Stafford Loan form for all Federal Family Education Loan Program (FFELP) institutions and Stafford borrowers. The MPN will be available for the 1999-2000 academic year and will replace the current Common Stafford Loan Application and Promissory Note for the 2000-2001 academic year.

The MPN will offer several advantages over existing loan application procedures. It can be used for a single loan or for multiple loans covering one or multiple loan periods. A new note is not required as long as the student attends a school authorized to use the MPN.

For borrowers in four-year and graduate schools, the MPN offers a paperless serial loan renewal process. The process will initially be available to all four-year and graduate institutions as defined by the Secretary of the Department of Education and other institutions selected by the Secretary. Students attending these schools will be able to use the MPN unless the school chooses not to participate or if the school is declared ineligible.

Several features have been incorporated into the MPN to make the loan process simpler for student borrowers.

• Students may use the Free Application for Federal Student Aid (FAFSA) to request a loan, eliminating the need for separate loan applications. Within the MPN structure, the FAFSA or another process adopted by the school serves as the loan application.
• The MPN eliminates many of the check-off boxes on the face of the loan note. Such boxes often result in processing delays.
• The MPN provides a more conspicuous explanation of loan terms and conditions and improves quality of information provided to students on loan-specific and optional annual disclosures.
• The MPN provides options for students throughout the loan delivery process to make adjustments in loan type and amount.

The MPN process strengthens the one lender, one holder, one servicer and one guarantor concept by providing a convenient method to borrow from the same lender with the same guarantor. The MPN encourages but does not mandate such a policy. There is room for student choice, change in school, and lender and guarantor mergers and consolidations.

How does the MPN process work? First, the student requests a loan through either the FAFSA or the school’s financial aid process. The school annually determines the student’s eligibility for aid and advises the student of the loan amount. The school then certifies the student’s eligibility. The student completes the MPN. If the student is attending a four-year or graduate school, this step is eliminated in subsequent years. The loan is then guaranteed, and funds are disbursed using existing procedures.

The MPN is intended to be a simpler process that reduces paper requirements for students and schools. It will provide faster serial loan turnaround by eliminating the primary cause of delays — the distribution and collection of promissory notes. Delays caused by missing or incomplete promissory note data are also eliminated. The borrower remains in control of choices regarding loan amount and type. These choices are made at the beginning and throughout the entire loan process.

Peace Corps Volunteers Eligible for Economic Hardship Deferments

The U. S. Department of Education (Dear Colleague Letter 98-G-310) has proposed regulatory changes that will make it easier for Peace Corps volunteers who are ineligible for categorical loan deferments based on Peace Corps service to apply for economic hardship deferments on their federal student loans. The changes will affect the Federal Family Education Loan Program (FFELP), the William D. Ford Federal Direct Loan Program, and the Federal Perkins Loan Program.

The Peace Corps has noted that borrowers who are not eligible for loan deferment or cancellation based on service in the Peace Corps qualify for economic hardship deferments in Title IV federal student loan programs because of the extremely modest level of monthly allowances received by Peace Corps volunteers. Peace Corps assignments, however, make it difficult for volunteers to apply for these deferments in accordance with requirements imposed by current regulations and procedures.

Borrowers are eligible for economic hardship deferments if they are working full time and earning a total monthly gross income that doesn’t exceed minimum wage or 100 percent of the poverty line for a family of two, whichever is greater. Many Peace Corps volunteers meet this eligibility requirement. Under current regulations, borrowers who apply for economic hardship deferments must submit evidence showing their most recent total monthly gross income. This requirement may present significant logistical difficulties for those Peace Corps volunteers who serve in remote overseas locations.

A Peace Corps volunteer who wishes to apply for an economic hardship deferment may simply provide the loan holder with a signed and dated economic hardship deferment request form and documentation from the Peace Corps showing that the borrower will be serving as a Peace Corps volunteer. This documentation will be available to volunteers at their pre-departure Peace Corps orientation sessions.

Action Taken on TOPS Rules

The Louisiana Student Financial Assistance Commission (LASFAC) took several actions related to the Tuition Opportunity Program for Students at its October 13, 1998 meeting.

The Commission’s Ad Hoc Rules Committee held a public hearing to receive comments on a rule revision to allow 1997 and 1998 high school graduates who have not previously taken an ACT Test an extension to take the ACT by the national test date scheduled in October 1998. The Committee afforded all interested persons the opportunity to submit data, views, comments and arguments orally and in writing.

The Ad Hoc Committee recommended that the Commission publish the TOPS ACT test deadline extension without change, and the Commission accepted the recommendation.

Public comment recommending that students be allowed to retake the ACT after graduation to improve their scores was not incorporated into the final rule published in the Louisiana Register.

In other action, the Commission authorized the publication of the final rule promulgating revisions to the Scholarship and Grant Policy and Procedure Manual based on amended provisions of TOPS included in Act 165 of the 1998 Legislative First Extraordinary Session. These amendments expanded TOPS to include additional eligible high school students, including home study students, certain out-of-state high school graduates and children of active duty military personnel who have maintained Louisiana residency.

Those interested in details about TOPS may request copies of the TOPS Emergency Rules from LOSFA's Legal and Policy Division at 922-1133 or access LOSFA’s website at www.osfa.state.la.us.

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