ESC-52-12-00004-P New York Higher Education Loan Program (NYHELPs)

12/26/12 N.Y. St. Reg. ESC-52-12-00004-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 52

December 26, 2012

RULE MAKING ACTIVITIES

HIGHER EDUCATION SERVICES CORPORATION

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. ESC-52-12-00004-P

New York Higher Education Loan Program (NYHELPs)

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Amendment of Part 2213 of Title 8 NYCRR.

Statutory authority:

Education Law, sections 691(10) and 655(4)

Subject:

New York Higher Education Loan Program (NYHELPs).

Purpose:

Amend several provisions of the regulation.

Substance of proposed rule (Full text is posted at the following State website: hesc.ny.gov/NYHELPs_Regulations):

1. Section 2213.1. Definitions. The amendment revises the definition of "eligible cosigner" to clarify that a cosigner may sign multiple NYHELPs loan applications within the same academic year for the same borrower, provided the total amount of loans for any student does not exceed the maximum loan limits. However, a cosigner is only eligible to sign Program loans for a maximum of three separate borrowers for each academic year unless there is a parental relationship for each additional borrower.

2. Section 2213.5. Due diligence in originating, disbursing, and servicing program loans. The amendment clarifies the requirement for reporting to consumer reporting agencies. The amendment also clarifies that a Program loan will enter repayment if the student for whom the loan was taken is no longer enrolled at a Title IV eligible college on at least a half time basis. Lastly, the amendment clarifies that payments in excess of fees and interest will be applied to principal.

3. Section 2213.13. College Certification requirements. The amendment clarifies that colleges must certify that the student for whom a Program loan is taken meets satisfactory academic progress in accordance with the federal satisfactory academic progress requirements.

4. Section 2213.16. Disclosure requirements for participating schools. The amendment clarifies the requirements for both entrance and exit counseling, which will be performed by the Corporation on behalf of participating colleges.

5. Section 2213.19. Reporting/retention requirements for participating holders. The amendment clarifies the documentation that holders of Program loans are required to maintain and increases the retention period for such records.

6. Section 2213.20. Program loan repayment. The amendment inserts titles for subdivisions and paragraphs, other such technical corrections, and:

(a) provides that repayment options will be determined on an annual basis;

(b) clarifies in-school payment deferment;

(c) clarifies that the grace period commences after the last date of attendance at a Title IV eligible college on a least a half time basis;

(d) clarifies that payments may be suspended if a student borrower in repayment returns to college at a Title IV eligible college on at least a half time basis;

(e) provides an exception to the minimum payment requirement for payments made in accordance with an approved modified payment plan;

(f) clarifies the administrative forbearance requirement;

(g) provides for a limited military service deferment for cosigners in active duty status during the student borrower's in-school and grace period;

(h) revises the requirements for continued military service deferment eligibility;

(i) provides that the terms of a disability discharge will be determined annually; and

(j) clarifies that to be eligible for cosigner release, the required payments must be made once the student is no longer enrolled at a Title IV eligible college on at least a half time basis, and allows for the ability to reduce the number of required payments effective July 1, 2012.

7. Section 2213.21. Due diligence for program loan delinquency. The amendment deletes the requirements for due diligence activity from the regulation text and provides that such requirements will be set forth in the Program's Default Avoidance and Claim Manual.

8. Section 2213.28. Incorporation by reference. The amendment updates the regulation to include version 4 of both the Program's Underwriting Manual and the Program's Default Avoidance and Claim Manual.

Text of proposed rule and any required statements and analyses may be obtained from:

Cheryl B. Fisher, NYS Higher Education Services Corporation, 99 Washington Avenue, Room 1315, Albany, NY 12255, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority:

Education Law § 691(10) provides that the New York State Higher Education Services Corporation (Corporation) shall have the power and duty to adopt rules and regulations to implement the New York Higher Education Loan Program (Program or NYHELPs).

Education Law § 652(2) includes in the Corporation's statutory purposes the improvement of the post-secondary educational opportunities of eligible students through the centralized administration and coordination of New York State's financial aid programs and those of other levels of government.

Education Law § 653(9) further empowers the Corporation's Board of Trustees to perform such other acts as may be necessary or appropriate to carry out the objects and purposes of the Corporation, including the promulgation of regulations.

Education Law § 655(4) authorizes the President of the Corporation (President) to propose regulations, subject to approval by the Board of Trustees, governing the application for, and the granting and administration of, student aid and loan programs, the repayment of loans or the guarantee of loans made by the Corporation, and administrative functions in support of New York State student aid programs. Under Education Law § 655(9), the Corporation's President is also authorized to receive assistance from any Division, Department or Agency of the State in order to properly carry out the President's powers, duties and functions. Finally, Education Law § 655(12) provides the President with the authority to perform such other acts as may be necessary or appropriate to effectively carry out the general objects and purposes of the Corporation.

2. Legislative objectives:

The Program, as enacted by Part J of Chapter 57 of the Laws of 2009, authorizes the Corporation to serve as the Program's administrator and empowers the Corporation to adopt rules and regulations to implement the Program.

3. Needs and benefits:

NYHELPs was enacted on April 7, 2009 to offer New York State students and families the option of an affordable private education loan to fill the gap between college costs and currently available State and federal student aid. The regulations implementing the Program were effective on November 4, 2009, which led to the sale of private activity bonds to underwrite the Program in mid-December, and the processing of the first applications on December 21, 2009.

As a new Program with no prior history, NYHELPs was structured to maximize the number of constituents served while offering the most favorable interest rate, and utilizing a relatively small pool of funds. As the Program developed over its first year, the Corporation identified several sections of the regulation that required clarification or revision, which were adopted on June 2, 2010 (as a consensus rule), August 25, 2010, and January 26, 2011.

As the Program grows, the Corporation continues to work with Program participants (especially colleges, students, and families) to enhance and streamline the Program and its processes. Additionally, the Corporation continues to review actual Program data to ascertain whether its constituency is being served as intended. As a result of these efforts, the Corporation identified several sections of the regulation that require clarification or revision. Some of the changes include:

(i) Clarification of, or changes to, processing and servicing requirements:

- In developing policies and procedures in connection with modified payment plans, it was decided to clarify that the monthly payments made in accordance with an approved modified payment plan may be less that the required minimum monthly payment.

- In developing policies and procedures in connection with servicing loans, it was decided to eliminate the Default Aversion Assistance Request (DAAR) filing requirement as well as streamline other due diligence and loan processing requirements. These changes will enable the Corporation to provide more consistent, effective and efficient customer service to students and their families.

(ii) Conformance with other provisions of the regulation:

- In response to amendments to the regulation text, corresponding provisions to the Underwriting Manual were made for consistency, such as the ability of the borrower to change his or her repayment option as described in (iii) below.

- In response to amendments to the regulation text, corresponding provisions to the Default Avoidance and Claim Manual were made for consistency, such as the elimination of the DAAR filing requirements.

(iii) Program flexibility:

- After consultation with SONYMA, it was decided to provide the Corporation with the authority to offer student borrowers who demonstrate compelling financial circumstances the option to change his or her repayment option to the interest only or fully deferred payment option. This type of program flexibility will benefit consumers experiencing difficulty in repaying their loans.

- After consultation with SONYMA, it was decided to provide a limited military service deferment for cosigners in active military status during the student borrower's in-school and grace period.

(iv) Clarification of language with no substantive change:

- In responding to consumer inquiries, it was decided to clarify the definition of "eligible cosigner".

- In response to inquiries from participating colleges, it was decided to specify that colleges must certify that students meet satisfactory academic progress in accordance with the federal requirements (rather than the State requirements).

(v) Technical clean up:

- As a result of the extension of the origination period in connection with the Bond proceeds, the effective date of certain provisions was changed to the 2012-13 academic year.

- It was decided to insert titles for subdivisions and paragraphs in the section addressing Program loan repayment in order to make it easier to identify subject areas.

4. Costs:

There is no anticipated cost to the Corporation, other state agencies, or local governments for the implementation of, or continuing compliance with, this rule. In fact, the proposed amendments to this rule will result in consistency, increased efficiency and reduced complexity, which will avoid costs and could reduce costs.

5. Paperwork:

This rule will not result in any additional paperwork on Program participants. In fact, the rule streamlines the documentation requirements and the processing of those documents.

6. Local government mandates:

No program, service, duty, or responsibility will be imposed by this rule upon any county, city, town, village, school district, fire district or other special district.

7. Duplication:

This rule clarifies provisions, without duplication, and streamlines processes. In fact, this rule eliminates duplication by consolidating provisions.

8. Alternatives:

The 'no action' alternative would perpetuate inconsistencies, misinterpretation, and inefficient servicing, and the alternatives considered were deemed to be less effective than the proposed amendments. For example:

- Provisions contained in the bond documents require changing the effective date of the current credit criteria regarding delinquencies.

- In connection with the current servicing and due diligence provisions contained in the text as well as the Default Avoidance and Claim Manual, other alternatives were considered, but ultimately the Corporation concluded that the proposed amendments would best serve the Program's constituency by providing accurate, consistent, and efficient servicing of their loans.

9. Federal standards:

This proposal does not exceed any minimum standards of the federal government.

10. Compliance schedule:

The Corporation, students, colleges and any other parties impacted by this proposal will be able to comply with this rule immediately upon its adoption.

Regulatory Flexibility Analysis

This statement is being submitted pursuant to subdivision (3) of section 202-b of the State Administrative Procedure Act and in support of the New York State Higher Education Services Corporation’s (Corporation) Notice of Proposed Rulemaking seeking to amend part 2213 of Title 8 of the Official Compilation of Codes, Rules and Regulations of the State of New York.

It is apparent from the nature and purpose of this rule that it will not impose an adverse economic impact on small businesses or local governments. The Corporation finds that this rule will not impose reporting, record keeping or compliance requirements on small businesses or local governments. The regulation implements the New York Higher Education Loan Program (NYHELPs), which will help fill the gap between college costs and available financial aid in order to assist eligible students and their families in the financing of their college costs. The proposal provides for: (i) clarification of, or changes to, processing and servicing requirements; (ii) conformance with other provisions of the regulation; (iii) program flexibility; (iv) clarification of language with no substantive change; and (v) technical clean up.

The Corporation has determined that this rule will not impose an adverse economic impact or impose reporting or other compliance requirements on either small businesses or local governments; therefore, a full Regulatory Flexibility Analysis for Small Businesses and Local Governments is not required.

Rural Area Flexibility Analysis

This statement is being submitted pursuant to subdivision (4) of section 202-bb of the State Administrative Procedure Act and in support of the New York State Higher Education Services Corporation’s (Corporation) Notice of Proposed Rulemaking seeking to amend part 2213 of Title 8 of the Official Compilation of Codes, Rules and Regulations of the State of New York.

It is apparent from the nature and purpose of this rule that it will not impose an adverse impact on rural areas. The Corporation finds that this rule will not impose any additional reporting, record keeping or other compliance requirements on public or private entities in rural areas. The regulation implements the New York Higher Education Loan Program (NYHELPs), which will help fill the gap between college costs and available financial aid in order to assist eligible students and their families in the financing of their college costs. The proposal provides for: (i) clarification of, or changes to, processing and servicing requirements; (ii) conformance with other provisions of the regulation; (iii) program flexibility; (iv) clarification of language with no substantive change; and (v) technical clean up.

The Corporation has determined that this rule will not impose an adverse economic impact on public or private entities in rural areas and therefore a full Rural Area Flexibility Analysis is not required.

Job Impact Statement

This statement is being submitted pursuant to subdivision (4) of section 202-bb of the State Administrative Procedure Act and in support of the New York State Higher Education Services Corporation’s (Corporation) Notice of Proposed Rulemaking seeking to amend part 2213 of Title 8 of the Official Compilation of Codes, Rules and Regulations of the State of New York.

It is apparent from the nature and purpose of this rule that it will not impose an adverse impact on rural areas. The Corporation finds that this rule will not impose any additional reporting, record keeping or other compliance requirements on public or private entities in rural areas. The regulation implements the New York Higher Education Loan Program (NYHELPs), which will help fill the gap between college costs and available financial aid in order to assist eligible students and their families in the financing of their college costs. The proposal provides for: (i) clarification of, or changes to, processing and servicing requirements; (ii) conformance with other provisions of the regulation; (iii) program flexibility; (iv) clarification of language with no substantive change; and (v) technical clean up.

The Corporation has determined that this rule will have no substantial adverse impact on any private or public sector jobs or employment opportunities and therefore a full Job Impact Statement is not necessary.