Reauthorization of the Higher Education Act of 1965
Harrison M. Wadsworth III, Special Counsel's Office Consumer Bankers Association Supporting Document - Student Loan Community HEA Reauthorization Recommendations (Part 2 of 2)
Archived Information

HEA Cite
Suggested Amendment and/or Recommendation
Proposed Statutory Language
Repayment Issues
1 428(b)(1) (M)(iii) and 435(o) Economic Hardship Deferment - Simplify the process for applying for a hardship deferment. Applications for the hardship deferment are often rejected on the first and second submission, frustrating and complicating the borrower's already tenuous situation. Many unsubsidized borrowers elect to apply for a forbearance rather than undertake the cumbersome process for obtaining this particular deferment. To be provided.
2 428(b)(1)(M) Deferment Eligibility - Simplify deferment eligibility criteria and certification requirements while ensuring sufficient flexibility to use emerging technologies in the borrower submission and lender/servicer approval of deferment requests. Allow for alignment of deferments on all of a borrower's loans, regardless of program. Students would be better able to understand the benefit provisions and the administration of deferment provisions would be streamlined and less error-prone. To be provided.
Spousal Consolidation
3A 428C(a)(3)(C) Eliminate 428C(a)(3)(C), which allows a married couple to consolidate their loans if the couple agrees to be held jointly and severally liable for repayment of the consolidation loan. Spousal consolidation loans, as they exist today, are not in the best interest of borrowers as both individuals are held jointly and severally liable for the debt regardless of their future marital status. Strike section 428C(a)(3)(C).
3B 428C(c)(2)(C) Add a new section, 428C(c)(2)(C), to allow a married couple that consolidates their loans individually to extend the repayment term of their individual consolidation loans by including their spouse's outstanding education loan debt in the calculation of the maximum repayment term. Adding this provision would allow a married couple the same repayment flexibility they have today with spousal consolidation loans, without the complications/hardships inherent with joint and several liability. Insert a new subparagraph (C) at the end of Section 428C(c)(2), as follows: "(C) For a married couple, each of whom has an eligible consolidation loan, the amount of the spouse's loan may be counted for the purpose of subparagraph (A)."
4 437(a) Discharge of a Spousal Consolidation Loan Due to Total and Permanent Disability of One Borrower. The recent final rule issued by the Department provides that if a joint consolidation loan is partially discharged based on the total and permanent disability of one of the borrowers, both borrowers are still jointly and severely liable on the portion of the loan that remains after the discharge. We believe the disabled borrower's obligation should be completely discharged. It doesn't make sense that a borrower who is "unable to work and earn money" should remain obligated to repay the non-disabled borrower's loan amount. To be provided.
5 428C(b)(1)(C) Eliminate requirement that a consolidation loan not be less than the minimum amount required for eligibility under subsection 428C(a)(3). Technical correction. There is no longer a minimum loan requirement for consolidation loans in the HEA. Revise 428C(b)(1)(C) to read: "that each consolidation loan will be made, nothwithstanding any other provision of this part limiting the annual or aggregate principal amount for all insured loans made to a borrower, in an amount which is equal to the sum of the unpaid principal and accrued interest and late charges of all eligible student loans received by the eligible borrower which are selected by the borrower for consolidation;"
Anticipated Graduation Date
6 432(l)(1) Standardize enrollment reporting by providing schools with clearly defined expectations and standards within the statute and regulations, of a common method to calculate and report students' Anticipated Graduation Dates (AGD). If the student is enrolled in a two-year program at the school, the school should only calculate an AGD two years into the future, even if the school believes the student intends to transfer to a 4-year institution at the end of the second year. The standardization of enrollment reporting is an important part of the industry simplification efforts. The inclusion of schools in this effort will ultimately benefit borrowers, in consistent, timely, and accurate processing of enrollment information to their FFEL accounts. Modify section 432(l)(1) by including AGD as a separate element or modify 432(l)(1)(H) as follows:"(H) borrower status change, including Anticipated Graduation Date; and"
Use of Emerging Technologies
7 432(l)(2) Provide definitive authority for financial partners to convert paper applications/promissory notes to electronic records, provide that underlying loans are enforceable based solely on such electronic records, and further provide that financial partners fulfill FFELP retention obligations by solely retaining the electronic record of the application/promissory note. Fulfills objectives of Federal E-Sign law as applied to FFELP. Achieves cost and processing efficiencies. To be provided.
8 432(l) Provide that SSN is permissible account identifier for all Title IV loans and provide further that related use for loan origination, disbursement, servicing, collection and account maintenance activities is not subject to state laws limiting SSN usage. State-based SSN usage limitations frustrate HEA objective of assuring efficient administration of a national student loan program. Avoids undue burden of satisfying unique and sometimes incompatible state-specific SSN usage requirements. To be provided.
9A 483(a) Direct the Secretary to conduct customer identification datamatching under the USA PATRIOT Act, Bank Secrecy Act, and similar federal laws. Providing for centralized and coordinated customer identification datamatching for purposes of the USA PATRIOT Act, the Bank Secrecy Act and other similar federal laws is an appropriate federal function/role for the Department. Using information collected during the FAFSA process, the Secretary can perform such datamatching more efficiently and than individual FFELP participants. Would assure that datamatching is conducted prior to delivery of loan funds. Results could also be used to assure that grant aid is not provided to persons on the restricted lists. To be provided.
9B 483(a) Corollary to #9A. Require all Stafford and PLUS borrowers to complete and submit the FAFSA. Further discussion needed with schools. Are there other options/ways to gather this information that would still give ED the necessary information to complete the datamatching? Furthers previous proposal. To be provided.
Default Aversion
10 428(l)(2)(B)(ii) Default Aversion Fee - The HEA provides that a guaranty agency may receive the Default Aversion Fee more than once for a particular loan if (i) at least 18 months have elapsed between the date the borrowers entered current status (thus qualifying the loan for a DAF payment) and the date a subsequent DAF payment request is filed, and (ii) the borrower was not more than 30 days past due during such time. This last condition cannot be met because a loan must be 60 days delinquent before a lender may file a DAF request. Because it is impossible for a loan to meet the conditions described, we believe this was an inadvertent technical oversight that should be corrected. The requirement that the borrower not be more than 30 days delinquent prior to the date at filing of the DAF request should be eliminated. To be provided.
11 Title IV, Part B, section 428(l)(2)(B) (ii) Default Aversion Fee Retention on Repurchases - The statute should be clarified to provide that a defaulted loan that is later repurchased results in a successful default aversion. Repurchases are performed for a variety of reasons including the correction of an error or allowing a borrower to prevent his or her loan from defaulting, working within the boundaries of the regulations. A repurchase, therefore, does not ultimately result in default, but successfully averts it. By clarifying that a repurchase constitutes a successful default aversion, guarantors will be permitted to receive the default aversion fee originally paid to them as a reflection of their default aversion efforts. To be provided.


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Last Modified: 02/09/2009