Education Department Issues Interim Final Regulations on Student-Aid Changes

The Department of Education has issued interim final regulations, effective Sept. 8, 2006, to reflect changes in federal student-aid terms enacted as part of the Higher Education Reconciliation Act of 2005 and other legislation passed by Congress. At the same time, the Department requests comments on the regulations by Sept. 8 and will incorporate any necessary changes in final regulations to be effective July 1, 2007.

The regulations address changes made by the HERA, including the following provisions:

• An increase in certain annual Stafford-loan limits.
• A reduction in Stafford-loan origination fees.
• The creation of a new military deferment.
• Changes to the definition of an academic year for programs measured in clock hours.
• Changes in provisions related to distance education and direct-assessment academic programs.
• Changes in student eligibility relating to drug-related convictions.
• Changes to the treatment of institutional refunds when a student withdraws.
• Waivers from requirements for delayed and multiple loan disbursements for schools with low cohort-default rates.

The final interim regulations also reflect student-aid changes made by other recently enacted laws, including the following provisions:

• Fixed interest rates for PLUS and Stafford loans first disbursed on or after July 1, 2006.
• Waivers from requirements to repay federal student grants when a student withdrew from an institution because of a major disaster.
• The repeal of the single-holder rule for consolidation loans.
• Requirements for consolidating Federal Family Education Loan Program loans into a Direct Consolidation loan.

USA Funds^® offers a wealth of resources for complying with new student-aid terms in the Reauthorization section of its Web site for financial-aid professionals and education lenders.