On July 1, 2021, several regulatory packages take effect including changes to the Clock-to-Credit Conversion formula. If you offer undergraduate non-degree programs in credit hours the new rules will determine the number of Title IV credit hours associated with each class in a program.
According to an electronic announcement from FSA, under the previous formula, schools were required to use a ratio of 37.5 in-class clock hours to each semester/trimester credit hour, or 25 in-class clock hours to each quarter hour, except that institutions could include “work outside of class” (out-of-class) hours as long as the in-class hours met a lower ratio – 30 clock hours to one semester hour or 20 clock hours to one quarter hour and the institution’s accrediting agency had not identified any problems with the institution’s establishment of credit hours. But under the new rules, out of class work time has been eliminated for the purposes of determining the number of Title IV credits in an eligible program.
Beginning on July 1, 2021the new conversion formula must be applied unless:
- The program is at least two academic years in length and provides an associate degree, a bachelor’s degree, a professional degree, or an equivalent as determined by the Department (Note that this does not permit an institution to ask for a determination that a non-degree program is equivalent to a degree program); or
- Each course within the program is acceptable for full credit toward a single associate degree, bachelor’s degree, or professional degree provided by that institution, or equivalent degree as determined by the Department, provided that the institution’s degree requires at least two academic years of study and the institution can demonstrate that students enroll in, and graduate from the degree program.
Make a note – if these changes affect your programs, you will need to report the change to ED on your E-App.
- If the new calculations result in a change in the number of Title IV credit hours in a program, the institution must submit an E-App immediately at https://eligcert.ed.gov to update both the number of clock hours and Title IV credit hours in the program; or
- If the new calculation does not change the number of Title IV credit hours in the program, the institution should update the E-App to change the number of clock hours reported for the program when the next update or recertification application is submitted.
Several other changes to regulatory requirements that were also part of the Distance Education and Innovation Final Regulations released on September 9, 2020, take effect on July 1, 2021, unless an institution decided to implement them early, including:
- Satisfactory Academic Progress
- Return to Title IV Funds
- Distance Education
- Institutional Eligibility
- Subscription-Based Programs
According to a May 14, 2021, Federal Register notice, The Education Department expanded the definition of who is an eligible “student” for the purposes of making Emergency Financial Aid Grants to Students under the Higher Education Emergency Relief Fund (HEERF) Programs. This rule is effective as of May 14, 2021, and you may need to adjust your HEERF awarding procedures accordingly.
The final regulations define “student,” for purposes of the phrases “grants to students,” “emergency financial aid grants to students,” and “financial aid grants to students” as used in the HEERF programs, as any individual who is or was enrolled (as defined in 34 CFR 668.2) at an eligible institution of higher education (IHE as defined in 34 CFR 600.2) on or after March 13, 2020, the date of declaration of the national emergency concerning the novel coronavirus disease. This definition enables an IHE to appropriately determine which individuals currently or previously enrolled at an institution are eligible to receive emergency financial aid grants to students under the HEERF programs, as originally enacted under the CARES Act and continued through the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA) (Pub. L. 116-260) and American Rescue Plan Act of 2021 (ARP) (Pub. L. 117-2).
The U.S. Department of Education (ED) has designated the Federal Communication Commission (FCC), the Department of Labor (DOL), and the Department of Health and Human Services (HHS) as entities that may use FAFSA data to aid in the administration of pandemic related benefits administered through each respective agency.
- The FCC designation will allow Pell eligible students to access Emergency Broadband Benefits. For background information and guidance on the EBB Program, see the FCC’s EBB Program Website: https://www.fcc.gov/broadbandbenefit
- The DOL designation will allow students who are unable to work due to the pandemic to access Pandemic Unemployment Assistance.
- The HHS designation allows ED to communicate with students about the availability of Health Insurance on the Federal Marketplace and a Special Enrollment Period that runs through August 15, 2021.
For more information about these designations and the relief programs available to students, please read this electronic announcement from Federal Student Aid.
This year Financial Aid Directors around the country are quietly rejoicing because Fiscal Year 2022 is the first year in over a decade that they will not have to worry about updating their Direct Loan Origination fees in the middle of their processing year. The origination fees have been changing every October 1st because of the Budget Control Act of 2011, known as the sequester law and frankly it is a real pain in the “you-know-what”. But not this year! So, rejoice friends, your fall disbursements will go smoothly.
For Federal Fiscal Year 22 (October 1, 2021 – September 30, 2022) the sequester required changes are the same as they were for FFY 21, so there is no change.
Beginning on October 1, 2021, origination fees on Direct Loans including Direct PLUS Loans, as well as the Iraq-Afghanistan Service Grants (IASG) and TEACH Grant awards are as follows:
- The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.057%. For example, the fee on a $5,500 loan will be $58.13.
- The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.228%. For example, the fee on a $10,000 PLUS Loan will be $422.80.
- An Iraq-Afghanistan Service Grant where the first disbursement is on or after October 1, 2021, and before October 1, 2022, requires a reduction of 5.7 percent from the award amount for which the student would otherwise have been eligible.
- A TEACH Grant where the first disbursement is on or after October 1, 2021, and before October 1, 2022, requires a reduction of 5.7 percent from the award amount for which the student would otherwise have been eligible.
For more information about the sequester see this electronic announcement from FSA.
NEW INTEREST RATES
Inflation is here and interest rates are going up for new Federal Direct Student Loans beginning on July 1, 2021.
Interest rates for Direct Loans are based on a formula whereby the rates are indexed to the 10-Year Treasury Note plus an “add-on” percentage. This year’s auction of the 10-year Treasury note resulted in a “high yield” of 1.684%, a huge decrease over last year’s high yield of 0.700% and a sign that inflation is on the rise. As a result, borrowers with new loans for the 2021-2022 award year will be paying much more in finance charges over the life of their loan. While interest rates are rising, it is important to remember that even these rates are still near historic lows and in general it is still a good time to borrow to take advantage of these low rates. You can read all about it here in a recent electronic announcement from FSA. Do not forget to update your borrower communications and consumer information!
Interest Rates for Direct Loans First Disbursed Between July 1, 2021, and June 30, 2022.
Direct Subsidized Loan 3.73%
Direct Unsubsidized Loans 3.73%
Direct PLUS Loans 6.28%
Graduate & Professional Students
Direct Unsubsidized Loans 5.28%
Direct PLUS Loans 6.28%
The maximum interest rates are 8.25% for Direct Subsidized Loans and Direct Unsubsidized Loans made to undergraduate students, 9.50% for Direct Unsubsidized Loans made to graduate and professional students, and 10.50% for Direct PLUS Loans made to parents of dependent undergraduate students or to graduate or professional students.