Financial Aid Provisions of HCERA

HISTORY

The Health Care and Education Reconciliation Act (HCERA) of 2010 was signed into law on March 30, 2010. This new law eliminates the Federal Family Education Loan (FFEL) Program and makes the William D. Ford Direct Loan Program the only source of (1) subsidized Stafford Loans, (2) unsubsidized Stafford Loans, (3) PLUS Loans, and (4) federal consolidation loans. No new FFEL loans may be created after June 30, 2010. During the adjustment period, HCERA allows federal direct consolidation loans for students with loans from both the FFEL program and Direct Loan program from July 1, 2010 to July 1, 2011. HCERA also alters the Income-Based Repayment program, allowing new borrowers who assume loans after July 1, 2014, to cap their student loan repayments at 10 percent of their discretionary income and have the balance forgiven after 20 years (compared to the current 15 percent and 25 years, respectively). In addition, HCERA increases funding for Pell grants and incrementally increases the maximum Pell grant available to students to $5,975 (from the current $5,350) in 2017.

When providing Stafford, PLUS, and consolidation loans to students, schools previously had the option of choosing between the Direct Loan Program and the private bank-based FFEL program. In the Direct Loan Program, funds are provided by the Secretary of Education directly from the U.S. Treasury rather than private financial markets. Under HCERA, these loans will be serviced by eligible non-profit organizations under contract with the Department of Education.

APPLICABILITY TO BYU–HAWAII

In the past, Brigham Young University–Hawaii offered Stafford, PLUS, and consolidation loans through the FFEL program. To continue providing these after July 1, 2010, the university must transition to the Direct Loan Program.

REQUIREMENTS

Any school currently eligible and certified for Federal Student Aid is eligible to participate in the Direct Loan Program. Thus, the university may continue to certify disbursements of Stafford and PLUS loans for its students for enrollment periods commencing after July 1, 2010, as long as its financial aid program is compatible with the Direct Loan Program by then. Transitioning to the Direct Loan Program requires the university, among other things, to make requisite applications to the Department of Education, ensure that its financial aid software is Direct Loan-compatible, and modify its financial aid media (i.e. pamphlets, websites) to inform students and parents about the university’s participation in the Direct Loan Program. A complete “Checklist for the Transition to Direct Loans” is provided by the Department of Education’s Office of Federal Student Aid. HCERA requires the Secretary of Education to provide technical assistance to institutions transitioning to the Direct Loan Program and allocates $50 million to that end. A list of resources available to financial aid officers is provided below.

COMPLIANCE CALENDAR

The university must transition to the Direct Loan Program prior to certifying any Stafford or PLUS loans for enrollment periods commencing after July 1, 2010.