The nine-month HEA extension bill signed into law by President Bush on Saturday makes several changes to the HEA, including loan forgiveness to survivors of victims of the 9/11 attacks and further restrictions to institutions ability to participate in the school-as-lender program.
9/11 Loan Forgiveness
The HEA extension bill includes a provision extending student loan forgiveness to the spouses and parents of those who died or became disabled in the terrorist attacks of September 11, 2001.
Under this provision the Department of Education will discharge federal student loans (1) of the spouses of an eligible public servant, including any consolidation loan used jointly by the spouse and the eligible public servant; (2) the portion incurred on behalf of the eligible victim (other than an eligible public servant), of a consolidation loan that was used jointly by the eligible victim and his or her spouse; (3) the portion of the consolidation loan of an eligible parent that was incurred on behalf of an eligible victim; and (D) the PLUS loan indebtedness of an eligible parent that was incurred on behalf of an eligible victim.
For the purposes of this provision:
- Eligible Public Servants are individuals who served as a police officer, firefighter, other safety or rescue personnel, or as a member of the Armed Forces who died or became permanently and totally disabled due to the injuries suffered in the 9/11 terrorist attack
- Victims are individuals who died or became permanently or totally disabled due to injuries suffered in the attacks
- Eligible Parents are parents of an eligible victim with a PLUS loan or a consolidation loan used to repay a PLUS loan incurred on behalf of an eligible victim.
The law requires the Department to establish procedures to apply for loan cancellation under this provision by regulations that must be prescribed and published by Dec. 29, 2006.
Eligible Lender Trustee Restrictions
The law also eliminates the ability of schools to circumvent recent school-as-lender restrictions by forming an eligible lender-trustee relationship.
During remarks on the House floor, Rep. Ric Keller (R-FL), chairman of the Subcommittee on 21st Century Competitiveness made it clear that all schools that have an eligible lender-trustee agreement in place may continue to operate, but they must comply with the school-as-lender program requirements.
Under the provision an eligible lender can't make or hold a loan as a trustee for an institution or an organization affiliated with an institution unless:
- The lender is serving as trustee for that institution or organization before Sept. 30
- The institution or organization and the lender comply with the school-as-lender requirements established by the HERA by Jan. 1, 2007.
Hispanic Institutions
The HEA extension law also eliminates the two-year waiting period for Hispanic-serving institutions applying for grants and a requirement that these institutions document the percentage of low income students enrolled at the institution.
Howard "Buck" McKeon (R-CA) chairman of the House Education and the Workforce Committee said eliminating the two-year waiting period would reduce red tape for Hispanic-serving institutions and described the low-income reporting requirement as "outdated and burdensome"
Guaranty Agencies
The bill also corrected a legislative error by continuing current law with respect to payments made to guaranty agencies. McKeon said this would enable guaranty agencies to continue working to help students avoid loan default.
By Haley Chitty
NASFAA Assistant Director for Communications
Posted October 4, 2006 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
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