Final Regulation

Thursday,
October 29, 2009

Part III

Department of
Education

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34 CFR Parts 673, 674, 682, et al.
Federal Perkins Loan Program, Federal
Family Education Loan Program, and
William D. Ford Federal Direct Loan
Program; Final Rule

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Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations

DEPARTMENT OF EDUCATION
34 CFR Parts 673, 674, 682, and 685
RIN 1840–AC98
[Docket ID ED–2009–OPE–0004]

Federal Perkins Loan Program, Federal
Family Education Loan Program, and
William D. Ford Federal Direct Loan
Program

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AGENCY: Office of Postsecondary
Education, Department of Education.
ACTION: Final regulations.
SUMMARY: The Secretary amends the
Federal Perkins Loan (Perkins Loan)
Program, Federal Family Education
Loan (FFEL) Program, and William D.
Ford Federal Direct Loan (Direct Loan)
Program regulations to implement
provisions of the Higher Education Act
of 1965 (HEA), as amended by the
Higher Education Opportunity Act of
2008 (HEOA), and other recently
enacted legislation.
DATES: Effective Date: These regulations
are effective July 1, 2010.
Implementation Date: The Secretary
has determined, in accordance with
section 482(c)(2)(A) of the Higher
Education Act of 1965, as amended
(HEA)(20 U.S.C. 1089(c)(2)(A)), that
lenders, guaranty agencies, and loan
servicers that administer the FFEL and
Direct Loan programs may, at their
discretion, choose to implement the
new provisions in §§ 682.211(f) and
685.205(b) governing administrative
forbearances for PLUS loans on or after
November 1, 2009. For further
information, see the section entitled
Implementation Date of These
Regulations in the SUPPLEMENTARY
INFORMATION section of this preamble.
FOR FURTHER INFORMATION CONTACT: For
information related to total and
permanent disability loan discharges,
Jon Utz or Pamela Moran. Telephone:
(202) 377–4040 or (202) 502–7732 or via
the Internet at: [email protected] or
[email protected]. For information
related to FFEL and Direct Loan teacher
loan forgiveness, Donald Conner or Jon
Utz. Telephone: (202) 502–7818 or (202)
377–4040 or via the Internet at:
[email protected] or
[email protected]. For information related
to all other provisions included in these
final regulations, Pamela Moran.
Telephone: (202) 502–7732 or via the
Internet at: [email protected].
If you use a telecommunications
device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at
1–800–877–8339.
Individuals with disabilities can
obtain this document in an accessible

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format (e.g., braille, large print,
audiotape, or computer diskette) on
request to the contact person listed in
this section.
SUPPLEMENTARY INFORMATION: On July
23, 2009, the Secretary published a
notice of proposed rulemaking (NPRM)
for the Perkins Loan, FFEL, and Direct
Loan Programs in the Federal Register
(74 FR 36556).
In the preamble to the NPRM, the
Secretary discussed on pages 36558
through 36575 the major regulations
proposed in that document to
implement provisions of the HEOA,
including the following:
• Amending §§ 674.51(aa) and
682.200(b) by revising the definition of
‘‘totally and permanently disabled’’ for
title IV loan discharges to incorporate
statutory changes made by the HEOA,
including a separate total and
permanent disability standard for
certain veterans, and adding a definition
of ‘‘substantial gainful activity’’ in
§§ 674.51(x) and 685.200(b) to explain
the meaning of that term as used in the
revised definition of totally and
permanently disabled. The changes to
§ 674.51(aa) and § 674.51(x) appear in
final regulations published in the
Federal Register on October 28, 2009
(RIN 1840–AC95).
• Amending §§ 674.61(b),
682.402(c)(2) through (7), and
685.213(b) by revising the process for
discharging a borrower’s title IV loans
due to total and permanent disability to
reflect the revised definition of totally
and permanently disabled, including
the establishment of a separate
discharge process for certain veterans.
• Amending §§ 674.9(g), 682.201(a),
and 685.200(a) by making conforming
changes to the borrower eligibility
regulations needed to effectively
implement the new total and permanent
disability loan discharge process in
§§ 674.61(b), 682.402(c)(2) through (7),
and 685.213(b).
• Amending §§ 682.201(e) and
685.220(d) to provide that a borrower
with only FFEL Program loans may
consolidate those loans into the Direct
Loan Program to use the no accrual of
interest benefit for active duty military
service members.
• Amending § 682.206(f) to require
FFEL Program lenders to inform
borrowers that by applying for a
Consolidation loan, the borrower is not
obligated to agree to take the loan, and
to provide borrowers with a 10-day
period to cancel the Consolidation loan.
• Amending §§ 682.210 and 685.204
to provide that: (1) A parent PLUS
borrower may receive a deferment on a
PLUS loan first disbursed on or after

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July 1, 2008 while the dependent
student for whom the loan was obtained
is enrolled on at least a half-time basis
at an eligible institution, and during the
6-month period after the student ceases
to be enrolled at least half time; and (2)
a graduate or professional student PLUS
borrower may receive a deferment on a
PLUS loan first disbursed on or after
July 1, 2008 during the 6-month period
after the student ceases to be enrolled
on at least a half-time basis at an eligible
institution.
• Amending § 682.202(b) to provide
that a lender may capitalize PLUS loan
interest that has accrued from the date
of the first disbursement until the date
the repayment period begins, and
making a corresponding change in
§ 685.202(b) to provide that the
Secretary may capitalize interest on a
PLUS loan when the loan enters
repayment.
• Amending §§ 682.211(f) and
685.205(b) to provide that a FFEL lender
or the Secretary (for a Direct Loan) may
grant an administrative forbearance on a
borrower’s PLUS loans that were first
disbursed before July 1, 2008 to align
the repayment begin date of those loans
with the borrower’s PLUS loans first
disbursed on or after July 1, 2008 that
are eligible for the new PLUS loan
deferments in §§ 682.210 and 685.204.
• Amending §§ 682.202 and 685.202
to provide that any FFEL or Direct Loan
program loans of a military
servicemember that were incurred
before the servicemember entered
military service are subject to the
provision in section 207 of the
Servicemembers Civil Relief Act (50
U.S.C. 527) (SCRA) that limits the
interest rate on a loan to six percent
during periods of active duty service. In
addition, § 682.302 was amended to
provide that for FFEL Program loans
first disbursed on or after July 1, 2008
that are subject to the SCRA interest rate
cap, a lender’s special allowance
payment is calculated as it otherwise
would be under program requirements,
except that the applicable interest rate is
six percent.
• Amending §§ 682.210(c)(1) and
685.204(b)(1)(iii)(A) to provide that a
FFEL lender or the Secretary (for a
Direct Loan) may grant an in-school
deferment based on confirmation of the
borrower’s enrollment status through
the National Student Loan Data System
(NSLDS), if requested by the borrower’s
school.
• Amending § 682.210(a)(3) to require
a lender to notify a borrower of an
unsubsidized loan, at or before the time
a deferment is granted, that he or she
has the option to pay the interest that
accrues on the loan during the

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Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations
deferment or to cancel the deferment,
and to provide the borrower with
information on the impact of interest
capitalization if accrued interest is not
paid. A comparable change was made in
§ 685.204(b)(1)(ii)(B) to provide for the
same information to be given to Direct
Loan borrowers.
• Amending §§ 682.215(a) and
685.221(a) by revising the definition of
partial financial hardship for the
purpose of determining a borrower’s
eligibility to repay under the incomebased repayment (IBR) plan. The revised
definition specifies that the annual
amount due on a borrower’s eligible
loans (under a standard repayment plan
with a 10-year repayment period) for
purposes of determining whether a
borrower has a partial financial
hardship is calculated based on the
greater of: (1) The amount owed on the
eligible loans when the borrower
initially entered repayment; or (2) the
amount owed when the borrower
selected the IBR plan.
• Amending §§ 682.215(b)(1) and
685.221(b)(2) to provide that if a
borrower who requests the IBR plan and
the borrower’s spouse both have eligible
loans and file a joint Federal tax return,
the calculated IBR partial financial
hardship payment amount for each
borrower would be adjusted based on
each borrower’s percentage of the
couple’s total eligible loan debt.
• Amending §§ 682.216 and 685.217
to specify that an otherwise eligible
borrower may qualify for teacher loan
forgiveness based on teaching service
performed as an employee of an eligible
educational service agency. The
proposed regulations also added HEOA
prohibitions on receiving loan
forgiveness under the FFEL or Direct
Loan teacher loan forgiveness programs
and certain other loan forgiveness
programs for the same period of
teaching service.
• Amending §§ 682.405(a) and
685.211(f) to provide that a borrower
may not rehabilitate a defaulted FFEL or
Direct Loan program loan more than
once. The proposed regulations also
amended § 682.405(b)(1)(iii) to clarify
that both the guaranty agency and its
agents must comply with the
requirements in that section when
determining what constitutes a
‘‘reasonable and affordable’’ payment
amount for loan rehabilitation purposes.
• Amending §§ 682.200(b) and
682.401(e) by incorporating new
prohibited and permissible activities by
lenders and guaranty agencies that were
added to the HEA by the HEOA.
• Amending § 682.205 by adding new
disclosure requirements for FFEL
Program lenders that were added by the

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HEOA, and by reorganizing the existing
disclosure provisions to accommodate
the new disclosure requirements and
more clearly distinguish the various
disclosures that are required at various
points during the lifecycle of a loan.
• Amending § 682.208(e) to specify
additional information that must be
provided to a borrower if the assignment
or transfer of ownership interest on a
FFEL Program loan results in a change
in the identity of the party to whom the
borrower must send subsequent
payments.
• Amending § 682.211(e) to require a
lender, at the time a borrower is granted
a forbearance, to provide the borrower
with information on the impact of
interest capitalization, and to contact
the borrower at least once every 180
days during any period of forbearance
and provide additional information on
the impact of forbearance on the
borrower’s loan.
• Amending § 682.305(c) to require
that a FFEL school lender or an eligible
lender trustee (ELT) originating loans on
behalf of a school submit an annual
compliance audit to the Secretary,
regardless of the dollar volume of loans
originated. The proposed regulations
also specify the requirements that the
annual audit must meet.
• Adding a new § 682.401(g) to
implement a statutory requirement for a
guaranty agency to work with the
schools that it serves to develop and
make available to students and their
families high-quality educational
materials that provide training in
budgeting and financial management.
• Amending § 682.405 to require a
guaranty agency to make available
financial and economic education
materials, including debt management
information, to any borrower who has
rehabilitated a defaulted loan.
• Amending § 682.405(b) to require
the prior holder of a previously
defaulted loan that has been
rehabilitated, in addition to the guaranty
agency, to request that any consumer
reporting agency to which the default
was reported remove the default from
the borrower’s credit history. The
proposed regulations also provided
more detailed reporting deadlines for
the guaranty agency and prior loan
holder to request that the default be
removed from the borrower’s credit
history, and reduced the period for
these actions to be completed.
• Amending § 682.410(b) by
expanding the information that a
guaranty agency must provide to a
borrower who is in default, and by
adding a requirement that the guaranty
agency provide this same information to
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that the guaranty agency must send as
part of its collection efforts.
• Amending § 682.200(b) by
removing the definition of ‘‘National
credit bureau’’ and replacing it with a
definition of ‘‘Nationwide consumer
reporting agency’’. The proposed
regulations also replaced all references
to ‘‘credit bureau’’ in § 682.410(b)(5) and
(b)(6) with ‘‘consumer reporting
agency’’.
There are no significant differences
between the NPRM and these final
regulations resulting from public
comments.
In addition to the changes necessary
to implement provisions of the HEOA,
these final regulations also incorporate
certain changes made to the HEA by
Public Law 111–39, enacted on July 1,
2009, and by the Ensuring Continued
Access to Student Loans Act of 2008
(Pub. L. 110–227) (ECASLA), enacted on
May 7, 2008. These changes are:
• Amending the definition of
‘‘estimated financial assistance’’ (EFA)
in §§ 673.5(c), 682.200(b), and
685.102(b). The HEOA amended section
480(j)(1) of the HEA to exclude Federal
veterans’ education benefits, as defined
in section 480(c) of the HEA, from the
definition of EFA for the Title IV
student assistance programs. Public Law
111–39 made technical corrections to
the HEA that, among other things,
updated the list of Federal veterans’
education benefits that are excluded
from EFA and excluded the new Iraq
and Afghanistan Service Grants from the
definition of EFA. We have made
technical changes to the definition of
EFA in §§ 673.5(c), 682.200(b), and
685.102(b) to reflect these recent
changes to the HEA. We have also made
a few technical changes to clarify and
standardize the current EFA definitions.
• Amending the lists of prohibited
activities in §§ 682.200 and 682.401 to
reflect a change made by Public Law
111–39 that allows FFEL Program
lenders and guaranty agencies to
provide in-person entrance counseling
as well as exit counseling to borrowers.
• Amending §§ 682.216 and 685.217
to reflect a technical correction made by
Public Law 111–39 to the provisions
that prohibit a borrower from receiving,
for the same teaching service, loan
forgiveness under the FFEL or Direct
Loan teacher loan forgiveness programs
and certain other loan forgiveness
programs.
• Amending §§ 682.204 and 685.203
to reflect the changes to the annual and
aggregate loan limits for unsubsidized
Stafford Loans in both the FFEL and
Direct Loan programs that were made by
ECASLA.

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In addition to the changes related to
Public Law 111–39 and ECASLA that
are discussed above, these final
regulations make a number of minor
technical corrections and conforming
changes. Changes that are statutory or
that involve only minor technical
corrections are generally not discussed
in the Analysis of Comments and
Changes section.

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Waiver of Proposed Rulemaking and
Negotiated Rulemaking Regulations
Implementing the HEOA
Under the Administrative Procedure
Act (APA) (5 U.S.C. 553), the
Department is generally required to
publish an NPRM and provide the
public with an opportunity to comment
on proposed regulations prior to issuing
final regulations. In addition, all
Department regulations for programs
authorized under title IV of the HEA are
subject to the negotiated rulemaking
requirements of section 492 of the HEA.
However, the APA provides that an
agency is not required to conduct
notice-and-comment rulemaking when
the agency for good cause finds that
notice and comment are impracticable,
unnecessary or contrary to the public
interest. Similarly, section 492 of the
HEA provides that the Secretary is not
required to conduct negotiated
rulemaking for title IV, HEA program
regulations if the Secretary determines
that applying that requirement is
impracticable, unnecessary or contrary
to the public interest within the
meaning of the APA.
Although the regulations
implementing the changes made by
Public Law 111–39 and ECASLA are
subject to the APA’s notice-andcomment and the HEA’s negotiated
rulemaking requirements, the Secretary
has determined that it is unnecessary to
conduct negotiated rulemaking or
notice-and-comment rulemaking on the
limited regulatory changes. These
changes simply reflect statutory changes
made by Public Law 111–39 and
ECASLA that are already effective. The
Secretary does not have discretion as to
whether or how to implement these
changes.
Implementation Date of These
Regulations
Section 482(c) of the HEA requires
that regulations affecting programs
under title IV of the HEA be published
in final form by November 1 prior to the
start of the award year (July 1) to which
they apply. However, that section also
permits the Secretary to designate any
regulation as one that an entity subject
to the regulation may choose to
implement earlier and the conditions

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under which the entity may implement
the provisions early.
Consistent with the intent of this
regulatory effort to strengthen and
improve the administration of the title
IV, HEA programs, the Secretary is
using the authority granted him under
section 482(c) of the HEA to designate
the new provisions in §§ 682.211(f) and
685.205(b) governing administrative
forbearances for PLUS loans for early
implementation at the discretion of each
lender, guaranty agency, or servicer, as
appropriate.
Analysis of Comments and Changes
Except as noted above in regard to the
limited regulations implementing
provisions of Public Law 111–39 and
ECASLA, the regulations in this
document were developed through the
use of negotiated rulemaking. Section
492 of the HEA requires that, before
publishing any proposed regulations to
implement programs under title IV of
the HEA, the Secretary must obtain
public involvement in the development
of the proposed regulations. After
obtaining advice and recommendations,
the Secretary must conduct a negotiated
rulemaking process to develop the
proposed regulations. All proposed
regulations must conform to agreements
resulting from the negotiated
rulemaking process unless the Secretary
reopens that process or explains any
departure from the agreements to the
negotiated rulemaking participants.
These regulations were published in
proposed form on July 23, 2009, in
conformance with the consensus of the
negotiated rulemaking committee.
Under the committee’s protocols,
consensus meant that no member of the
committee dissented from the agreedupon language. The Secretary invited
comments on the proposed regulations
by August 24. Eighteen parties
submitted comments, many of which
were substantially similar. The
commenters generally supported the
proposed regulations. An analysis of the
comments and the changes in the
regulations since publication of the
NPRM follows.
We group major issues according to
subject, with appropriate sections of the
regulations referenced in parentheses.
We discuss other substantive issues
under the sections of the regulations to
which they pertain. Generally, we do
not address minor, non-substantive
changes, recommended changes that the
law does not authorize the Secretary to
make, or comments pertaining to
operational processes. We also do not
address comments pertaining to issues
that were not within the scope of the
NPRM.

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Total and Permanent Disability Loan
Discharges (§§ 674.61(b) and (c),
682.402(c), and 685.213)
Comment: One commenter noted that
there are a significant number of United
States citizens who live abroad and
suggested that the regulations be revised
to allow a disabled borrower living
overseas to submit an application for a
total and permanent disability discharge
certified by a physician who is licensed
to practice in the foreign country where
the borrower resides.
Discussion: The proposed regulations
retained the current regulatory
requirement that the physician who
certifies a total and permanent disability
discharge application must be a doctor
of medicine or osteopathy who is legally
authorized to practice in a State. The
term ‘‘State’’ is defined in section
103(23) of the HEA to include the States
of the United States, the District of
Columbia, Puerto Rico, Guam, Samoa,
the U.S. Virgin Islands, the Northern
Mariana Islands and the Freely
Associated States (the Marshall Islands,
Micronesia and Palau). The total and
permanent disability discharge
application requires the certifying
physician to identify the State in which
he or she is licensed to practice, and to
provide his or her professional license
number.
In June 1999, the Department of
Education’s Inspector General (IG)
issued a report that identified a number
of weaknesses in the procedures for
determining eligibility for total and
permanent disability loan discharge and
concluded that inappropriate discharges
were being granted as a result of those
weaknesses. In the years since the IG’s
report, the Department has revised the
total and permanent disability discharge
regulations and taken other measures to
strengthen the procedures for
determining a borrower’s eligibility for
discharge, including verification
through State records of a physician’s
license to practice. This verification is
conducted for each total and permanent
disability discharge application that the
Department reviews. Licensure
requirements for physicians in foreign
countries may differ significantly from
the requirements in the United States, or
in some countries may not exist. It
would not be possible for the
Department to verify a physician’s
license to practice in a foreign country,
even if a country requires its physicians
to be licensed. The Department also
follows up with physicians who
certified an application but did not
provide sufficient information
concerning the borrower’s medical
condition. Having to contact and

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communicate with physicians in foreign
countries would be difficult in many
cases.
For these reasons, the Department
believes that it is important to retain the
requirement that a physician who
certifies a total and permanent disability
discharge application must be licensed
to practice in a State.
Changes: None.
Comment: One commenter believed
that the preamble to the NPRM
indicated that the Department’s
standard for determining disability is
essentially the same as the standard
used in the Social Security Disability
Insurance (SSDI) program, and
suggested that the process of
determining a borrower’s eligibility for
total and permanent disability discharge
could be made more efficient if the
Department provided an electronic
means for a borrower to report that he
or she is receiving SSDI benefits.
Discussion: The commenter’s
understanding of the preamble
discussion in the NPRM is incorrect. In
the preamble to the NPRM, the
Department explained that the proposed
definition of substantial gainful
activity—not the definition of totally
and permanently disabled—is based, in
part, on the definition of substantial
gainful activity that is used by the
Social Security Administration (SSA) to
determine whether an individual is
eligible for Social Security disability
benefits. The NPRM included the
definition of totally and permanently
disabled that was added to the HEA by
the HEOA. This new statutory standard
does not correspond to any of the
disability standards used by the SSA for
determining an individual’s eligibility
for Social Security disability benefits.
An individual who receives SSA
disability benefits may not qualify as
totally and permanently disabled under
the definition of that term in the HEA.
Changes: None.
Comment: Two commenters
recommended that the Department
revise the total and permanent disability
discharge regulations to use the poverty
guideline amount for a borrower’s actual
family size to determine whether the
borrower’s annual employment earnings
during the post-discharge monitoring
period demonstrated that the borrower
was not totally and permanently
disabled. One of the commenters stated
that borrowers with larger families
should be allowed to earn more income
during the post-discharge monitoring
period. This commenter suggested that
any concerns about potential borrower
confusion over the use of a variable
standard based on actual family size
could be resolved by annually posting

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an updated poverty guideline chart on
a Department Web site.
Discussion: During the negotiated
rulemaking sessions, the Department
initially proposed an annual earnings
standard based on the poverty guideline
amount for the borrower’s actual family
size because we believed that it would
be more equitable for borrowers with a
family size greater than two. The
Department’s original proposal would
have been a change from the
employment earnings standard under
the current total and permanent
disability discharge regulations, which
provide that a conditionally discharged
loan will be removed from conditional
discharge status if a borrower has
annual employment earnings during the
conditional discharge period that
exceed the poverty guideline amount for
a family of two, regardless of the
borrower’s actual family size. However,
during the negotiated rulemaking
sessions, some of the non-Federal
negotiators, including the student and
legal aid representatives, felt strongly
that it would be better to continue to use
the poverty guideline amount for a
family of two. These negotiators noted
that a borrower’s family size could
change during the three-year postdischarge monitoring period, and in
such cases the borrower would have to
monitor changes in the employment
earnings limit. They believed that a
changing standard would be confusing
and could result in a borrower
inadvertently exceeding the
employment earnings limit. These
negotiators urged the Department to
retain the current fixed standard based
on a family size of two. The Department
agreed that retaining a fixed
employment earnings limit based on the
poverty guideline amount for a family of
two during the entire post-discharge
monitoring period would be less
confusing for borrowers and simpler to
administer.
Changes: None.
Comment: Several commenters noted
that under the proposed regulations in
§ 682.402(c)(8) governing total and
permanent disability discharges for
certain veterans, if the Department
determines that a veteran is eligible for
a loan discharge, the guaranty agency is
responsible for notifying the veteran
that the veteran has no obligation to
make further payments on the loan.
These commenters recommended that
the regulations be revised to provide
that the lender, rather than the guaranty
agency, would notify the veteran of his
or her eligibility for discharge. The
commenters believed that it would be
simpler to require the lender to make
this notification, since the proposed

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regulations already require the lender to
refund any payments received on the
loan after the date of the Department of
Veterans Affairs disability
determination, and the lender would
therefore already be communicating
with the borrower for this purpose. The
commenters further noted that this
approach would be more consistent
with the proposed regulations governing
the general process for total and
permanent disability discharges for
other borrowers. Under those
regulations, the lender notifies a
borrower that his or her loan has been
assigned to the Department for a
determination of discharge eligibility,
and that no further payments are
required.
Discussion: The Department agrees
with the commenters.
Changes: Section 682.402(c)(8)(ii)(F)
has been revised to specify that upon
receipt of the claim payment from the
guaranty agency (after the Department
has notified the guaranty agency that a
veteran is eligible for a discharge), the
lender notifies the veteran that the
veteran’s obligation to make any further
payments on the loan has been
discharged.
Comment: Several commenters
recommended that the changes to the
total and permanent disability discharge
definition and process should be made
effective for discharge applications
received on or after July 1, 2010. The
commenters believed that using the
application receipt date as the effective
date for the changes would benefit
borrowers who may not qualify for
discharge based on the current
definition of totally and permanently
disabled, and would provide a clearly
defined transition point for processing
discharge applications under the new
regulations.
Discussion: Under these final
regulations, the new definition of totally
and permanently disabled and the new
discharge process are effective for
discharge applications received on or
after July 1, 2010. Disability discharge
applications from borrowers other than
qualified veterans that are received prior
to July 1, 2010 will be processed under
the current regulations and borrower
eligibility will be determined based on
the current definition of totally and
permanently disabled. Veterans who
provide documentation that they have
been determined by the Secretary of
Veterans Affairs to be unemployable
due to a service-connected disability
will have their discharge applications
processed under the separate
procedures that the Department has
already implemented for these

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borrowers in accordance with the
requirements of the HEOA.
Changes: None.
Comment: One commenter expressed
concerns that many disabled military
borrowers are unaware that they may
qualify for total and permanent
disability discharge of their loans
because of widespread problems with a
lack of information about this benefit
from both FFEL Program lenders and
the Department. The commenter
recommended a number of operational
measures that lenders, the Department,
the Department of Defense, and the
Department of Veterans Affairs should
take to help ensure that disabled
military borrowers are made aware of
the total and permanent disability loan
discharge provision. The commenter
also recommended that loan amounts
discharged due to total and permanent
disability should not be treated as
taxable income, since this presents a
financial hardship for disabled
borrowers with low incomes.
Discussion: The Department provides
information about total and permanent
disability discharges on the master
promissory notes that are signed by all
borrowers in all three title IV loan
programs. Further, information about
total and permanent disability
discharges is also available on
Department Web sites, such as Student
Aid on the Web (http://
www.studentaid.ed.gov) and the Direct
Loan Program Web site (http://
www.ed.gov/DirectLoan), as well as Web
sites maintained by many FFEL Program
lenders. Moreover, customer service
representatives for the Department have
been given information about the
disability discharge process and can
provide this information to borrowers.
These efforts do not have to be
addressed in the Department’s
regulations. The commenter’s proposal
regarding the tax treatment of
discharged loan amounts would require
a statutory change in the Internal
Revenue Code and cannot be addressed
through these regulations.
Changes: None.
Comment: One commenter requested
clarification of the provisions in
§§ 674.9(g), 682.201(a), and 685.200(a)
that require a borrower who requests a
new title IV loan after receiving a total
and permanent disability discharge on a
prior loan to: (1) Provide a physician’s
certification that he or she is able to
engage in substantial gainful activity;
and (2) acknowledge that the new loan
may not be discharged in the future
based on any medical condition present
at the time the new loan is made, unless
that condition substantially deteriorates.
Specifically, the commenter asked if

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these requirements apply to all
borrowers who received a prior total
and permanent disability discharge,
regardless of whether the discharge was
granted under the general discharge
procedures or the special procedures for
certain veterans.
Discussion: The requirements for
receiving a new loan after having a loan
discharged due to total and permanent
disability apply to all borrowers,
regardless of whether the discharge was
granted under the general discharge
process or the special discharge process
for certain veterans. These requirements
are intended to assure that the borrower
is likely to repay the loan in accordance
with the promissory note that the
borrower signs for the new loan.
Changes: None.
Comment: One commenter
recommended that current
§ 682.201(a)(6), which specifies the
additional eligibility requirements that
must be met by a borrower who requests
a new loan following a final discharge
of a prior title IV loan due to a total and
permanent disability, also be applied to
a borrower who is requesting a new loan
after receiving a final discharge of a
TEACH Grant service obligation due to
a total and permanent disability. The
commenter believed that an individual
who wants to receive a new loan after
previously receiving a final total and
permanent disability discharge should
have to meet the same eligibility
requirements, regardless of whether the
prior disability discharge involved a
title IV loan or a TEACH Grant service
obligation.
The commenter also asked if the
Department’s National Student Loan
Data System (NSLDS) will indicate that
a TEACH Grant service obligation has
been discharged due to a total and
permanent disability, just as it currently
identifies title IV loans that have been
discharged due to a total and permanent
disability.
Discussion: The Department agrees
that a borrower who requests a new title
IV loan after previously receiving a final
total and permanent disability discharge
of a TEACH Grant service obligation
should be subject to the same eligibility
requirements as a borrower who
previously received a final total and
permanent disability discharge of a title
IV loan. NSLDS does identify TEACH
Grant service obligations that have been
discharged based on the grant
recipient’s total and permanent
disability.
Changes: Section 682.201(a)(6) has
been revised by adding a reference to
TEACH Grant service obligations.
Corresponding changes have also been

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made in §§ 674.9(g) and
685.200(a)(1)(iv).
Comment: One commenter raised
concerns about the requirement in
current § 682.402(h)(1)(i)(B) as it relates
to the proposed regulations in
§ 682.402(c)(8) that govern the total and
permanent disability discharge process
for certain veterans. Under current
§ 682.402(h)(1)(i)(B), a guaranty agency
must promptly review a disability
discharge claim filed by a lender and
pay an approved claim within 90 days
after the claim was filed. The
commenter believed that this deadline
is reasonable in the case of a disability
claim processed under the standard
discharge process in proposed
§ 682.402(c)(1) through (7), since all of
the actions that are required to pay a
lender’s claim are entirely under the
guaranty agency’s control. However, the
commenter noted that under the
separate discharge process for certain
veterans in proposed § 682.402(c)(8), a
guaranty agency cannot pay a lender’s
disability claim until the Department
has reviewed the veteran’s discharge
request and notified the guaranty agency
that the veteran is eligible for discharge.
Therefore, a delay in the Department’s
review of a veteran’s discharge request
could prevent a guaranty agency from
meeting the 90-day time limit in current
§ 682.402(h)(1)(i)(B). The commenter
recommended that the Department
amend current § 682.402(h)(1)(i)(B) to
provide one deadline for a guaranty
agency to review a disability claim
involving a veteran’s discharge request
and either refer the discharge
application and any supporting
documentation to the Department or
return it to the lender, and a separate
deadline for the guaranty agency to
either pay or return the claim, as
applicable, after being notified by the
Department that the veteran is or is not
eligible for discharge.
Discussion: The Department agrees
with the commenter.
Changes: Section 682.402(h)(1) has
been revised to provide that a guaranty
agency must review a disability claim
based on a veteran’s discharge request
under § 682.402(c)(8) and either submit
the request to the Department or return
the claim to the lender within 45 days
after the claim was filed, and must pay
the claim or return the claim to the
lender within 45 days after being
notified by the Department of the
veteran’s eligibility or ineligibility for
discharge.
Consolidation Loans (§ 682.201(e))
Comment: One commenter asked that
the regulations clarify which FFEL
Program loans are eligible for the Direct

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Loan Program’s no accrual of interest
benefit for active duty military service
members after a FFEL borrower
consolidates the loans into the Direct
Loan Program. The commenter believed
the language in the proposed regulations
did not adequately address this issue
and suggested that the regulations be
amended to include the clarifying
language contained in the Department’s
Stafford Loan Master Promissory Note
(MPN).
Discussion: The Department agrees
with the commenter that the regulatory
language defining which loans are
eligible for the no accrual of interest
benefit should be clarified and that it is
appropriate to use the Stafford Loan
MPN language as a model. The Stafford
Loan MPN informs borrowers that a
FFEL Program loan that was first
disbursed on or after October 1, 2008,
including a Federal Consolidation Loan
that repaid FFEL or Direct Loan program
loans first disbursed on or after October
1, 2008, may be consolidated into the
Direct Loan Program to take advantage
of the no accrual of interest benefit for
active duty military service members,
and explains that no interest will be
charged on the portion of the new Direct
Consolidation Loan that repaid FFEL or
Direct Loan program loans first
disbursed on or after October 1, 2008
during periods of qualifying active duty
military service (for up to 60 months).
A Federal Consolidation Loan that
repaid some loans that were first
disbursed on or after October 1, 2008
and other loans that were first disbursed
before that date may be consolidated
into the Direct Loan Program to take
advantage of the no accrual of interest
benefit, but the benefit will apply only
to the portion of the Direct
Consolidation Loan that is attributable
to the loans repaid by the Federal
Consolidation Loan that were first
disbursed on or after October 1, 2008.
Changes: Section 682.201(e)(5) has
been revised to include language
specifying that FFEL Program loans first
disbursed on or after October 1, 2008
(including Consolidation loans that
repaid FFEL or Direct loans first
disbursed on or after October 1, 2008)
are eligible for the no accrual of interest
benefit when included in a Federal
Direct Consolidation Loan.
In-School Deferments for PLUS Loans
(§ 682.210)
Comment: One commenter raised an
issue concerning proposed
§ 682.210(v)(1)(ii), which provides that
if a lender grants an in-school deferment
on a student PLUS loan first disbursed
on or after July 1, 2008 based on
enrollment information that confirms

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the borrower’s eligibility for the
deferment, the deferment period
includes the additional 6-month postenrollment deferment period that begins
when the student ceases to be enrolled
on at least a half-time basis. The
commenter believed that the regulations
should not specify the operational
method by which a lender processes a
deferment, and recommended that the
regulatory language be revised to
provide that a lender may process the 6month post-enrollment deferment as
either an extension of the in-school
deferment period, or a separate
deferment period that begins when the
student ceases to be enrolled at least
half time.
Discussion: The regulatory language
stating that the deferment period
‘‘includes’’ the 6-month post-enrollment
deferment is intended to clarify that if
a lender grants an in-school deferment
on a student PLUS loan first disbursed
on or after July 1, 2008 based on
enrollment status information, the 6month post enrollment deferment may
be granted without a separate request
from the borrower. The regulatory
language does not dictate the
operational details of how a lender
processes the post-enrollment
deferment.
Changes: None.
Deferment (§§ 682.210 and 682.204)
Comment: One commenter raised an
issue concerning the discussion of
proposed § 682.210(a)(3)(ii) in the
preamble to the NPRM. This provision
requires a FFEL Program lender, at or
before the time a deferment is granted
to a borrower who is responsible for
paying the interest on a loan during the
deferment, to notify the borrower of
certain information, including the
borrower’s option to pay the interest
that accrues during the deferment or to
cancel the deferment and continue
paying on the loan. The Department
stated in the preamble that a comparable
change would be made to
§ 685.204(b)(1)(iii)(B)(2) to provide that
Direct Loan borrowers will be notified
of their right to cancel a deferment and
continue paying on the loan. The
commenter noted, however, that the
corresponding Direct Loan provision
does not specifically say that borrowers
will be notified of the option to pay the
accruing interest during a deferment
period, and recommended that this be
added to ensure that Direct Loan
borrowers receive the same information
as FFEL borrowers.
Discussion: Regulations are issued to
govern the activities of third parties; in
general, the Secretary does not issue
regulations to control the Department’s

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activities. Direct Loan Program
borrowers are notified of their option to
pay the interest that accrues during a
deferment on the Direct Loan Program
deferment request forms and in the
correspondence borrowers receive when
a deferment is granted.
Changes: None.
Comment: Several commenters raised
a concern about language in the
preamble to the NPRM that describes
the requirement for a lender to inform
a borrower, at or before the time a
deferment is granted, that the borrower
has the option to pay the accruing
interest or cancel the deferment and
continue to pay on the loan. The
commenters noted that, during the
negotiated rulemaking process, the
Department agreed that it would be
helpful for a borrower to receive this
information at the time of application
for the deferment, and that including
the required information in the
Department-approved, standardized
deferment forms would satisfy the
notification requirement. The
commenters were concerned that the
discussion in the preamble could be
misinterpreted to suggest that a lender
must provide the information both at
the time the borrower requests the
deferment and at the time the lender
grants the deferment.
Discussion: The Department did not
intend to imply a change in the meaning
of the language in the regulations
through the preamble discussion. As
stated in § 682.210(a)(3)(ii), the lender
may provide the required information
‘‘at or prior to the time the deferment is
granted.’’ Providing the required
information to the borrower as part of
the standardized deferment application
at the time the borrower requests the
deferment satisfies the regulatory
notification requirement. The lender
may, but is not required to, also provide
the information at the time the
deferment is granted.
Changes: None.
Income-Based Repayment (IBR) Plan
Comment: Some commenters praised
the Department for proposing changes to
the IBR regulations to address the
calculation of partial financial hardship
for borrowers whose outstanding loan
balances increase rather than decrease
while they repay their loans under
another repayment plan prior to
requesting IBR, and for married
borrowers who file joint tax returns with
the IRS and who both have eligible
education loans. One commenter noted,
however, that the Department had
amended the Direct Loan regulations to
allow a borrower who wants to repay a
defaulted FFELP loan with a Direct

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Consolidation Loan to agree to pay the
Direct Consolidation Loan under the
IBR Plan, but did not make a
comparable change in
§ 682.201(d)(1)(i)(A). The commenter
requested that a technical correction be
made to insert a reference to IBR in the
corresponding FFEL provision so that
comparable terms and conditions apply
to borrowers in both programs.
Discussion: The commenter is correct
that this change should be reflected in
the FFEL Program regulations. The
Department agrees that comparable
terms and conditions should apply for
this purpose for borrowers in both the
FFEL and Direct Loan programs.
Changes: Section 682.201(d)(1)(i)(A)
has been revised to provide that a
borrower may consolidate a defaulted
loan if he or she agrees to repay the
FFEL Consolidation loan under either
the income-sensitive repayment plan or
the income-based repayment plan.
FFEL and Direct Loan Program Teacher
Loan Forgiveness (§§ 682.216 and
685.217)
Comment: One commenter noted that
under the proposed regulations, an
educational service agency is
considered an eligible educational
service agency for teacher loan
forgiveness purposes only if the agency
meets the same eligibility requirements
as elementary and secondary schools
under current regulations, including the
requirement to be listed in the
Department’s Annual Directory of
Designated Low-Income Schools (LowIncome School Directory). The
commenter asked for clarification as to
whether an otherwise eligible teacher
who is employed by an educational
service agency that is not listed in the
Low-Income School Directory would
qualify for teacher loan forgiveness if
the teacher taught for five complete,
consecutive academic years at an
elementary or secondary school that is
included in the Low-Income School
Directory.
Discussion: The proposed regulations
allow a teacher to qualify for loan
forgiveness if he or she is employed as
a full-time teacher for five consecutive
complete academic years at an eligible
elementary or secondary school or by an
eligible educational service agency, and
meets the other eligibility requirements
of the teacher loan forgiveness program.
An otherwise eligible teacher who is
employed by an educational service
agency, but who teaches at a lowincome elementary or secondary school
that is not operated by the educational
service agency, may qualify for loan
forgiveness if either the educational
service agency or the school where the

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individual performs qualifying teaching
service is listed in the Low-Income
School Directory.
Changes: None.
Comment: One commenter asked for
clarification as to who the appropriate
certifying official would be for purposes
of certifying the loan forgiveness
application of a ‘‘traveling’’ teacher
who, as discussed in the preamble to the
NPRM, does not have a fixed location of
employment, but instead performs
qualifying teaching service at multiple
eligible schools or eligible educational
service agencies, and who may not
actually be employed by the schools or
educational service agencies where he
or she teaches. The commenter believed
that the reference in the NPRM to not
having a fixed location of employment
would imply that a traveling teacher is
an independent contractor who is not
actually employed by any school or
educational service agency.
Discussion: In the preamble to the
NPRM, the Department indicated that
‘‘traveling’’ teachers who do not have a
fixed location of employment, but who
perform qualifying teaching service at
multiple eligible elementary or
secondary schools, or at multiple
eligible educational service agencies,
may (if otherwise eligible) qualify for
teacher loan forgiveness even though
they are not employees of the schools or
educational service agencies where they
teach. The reference to not having a
fixed location of employment was not
intended to suggest that a traveling
teacher would be an independent
contractor. A traveling teacher may be
an employee of a particular school,
school district, or educational service
agency and provide teaching services at
various schools or locations operated by
educational service agencies. For
purposes of certifying such a teacher’s
loan forgiveness application, the
certifying official must be someone who
has access to employment records that
establish the teacher’s eligibility for loan
forgiveness, and who is authorized to
verify the teacher’s qualifying
employment. The appropriate certifying
official may vary depending on
individual employment circumstances.
The certifying official could be someone
at the borrower’s actual employer, or
someone at the location where the
borrower performed the qualifying
teaching service.
Changes: None.
Comment: Several commenters stated
that there appears to be a conflict
between the preamble of the NPRM and
the proposed regulatory language with
regard to the conditions under which
qualifying teaching service performed at
an eligible educational service agency

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prior to the date of enactment of the
HEOA may be counted toward the
required five complete consecutive
years of teaching service. The preamble
states that the required five complete
consecutive years may include any
combination of teaching at eligible
elementary or secondary schools or
eligible educational service agencies,
but that teaching at an educational
service agency may be counted toward
the five years only if the consecutive
five years includes qualifying service at
an eligible educational service agency
performed after the 2007–2008
academic year. The proposed regulatory
language in §§ 682.216(a)(2) and
685.217(a)(2) states that for teaching
service performed by an employee of an
eligible educational service agency, at
least one of the five consecutive
complete academic years must have
been after the 2007–2008 academic year.
The commenters noted that the
regulatory requirement for ‘‘at least one’’
of the complete academic years to have
been after the 2007–2008 academic year
could be interpreted to mean that for
any years of teaching at an eligible
educational service agency prior to the
enactment of the HEOA to count toward
the required five consecutive years, a
borrower must have completed a full
year of teaching at an eligible
educational service agency after the
2007–2008 academic year. They
believed this approach would be
contrary to the agreement reached
during the negotiated rulemaking
process and the preamble to the NPRM.
The commenters interpreted the
preamble language to mean that
qualifying teaching service performed
by an employee of an educational
service agency prior to the enactment of
the HEOA would count toward the
required five consecutive years as long
as the five-year period includes any
period of qualifying teaching at an
eligible educational service agency after
the 2007–2008 academic year, even if
the qualifying service at an educational
service agency after the 2007–2008
academic year is less than a full
academic year. For example, the
preamble language would allow a
borrower who performed qualifying
teaching service at an eligible
educational service agency for four
complete consecutive academic years
from 2004–2005 through 2007–2008 to
count those years toward the required
five consecutive years if, during the
2008–2009 academic year, the borrower
taught for half of the year at an eligible
educational service agency and the
other half of the year at an eligible
elementary or secondary school. The

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commenters recommended that
proposed § 682.216(a)(2) be revised to
reflect the language in the preamble.
Discussion: Proposed § 682.216(a)(2)
was intended to be consistent with the
preamble to the NPRM regarding the
eligibility of teaching service performed
by an employee of an educational
service agency prior to the date of
enactment of the HEOA. However, the
Department agrees with the commenters
that the regulatory language could be
misinterpreted.
Changes: Sections 682.216(a)(2) and
685.217(a)(2) have been revised to
reflect the language in the preamble to
the NPRM. Conforming changes have
also been made in §§ 682.216(c)(3)(iii)
and (c)(4)(iii), and 685.217(c)(3)(iii) and
(c)(4)(iii).

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Eligibility for Rehabilitation of
Defaulted FFEL and Direct Loans
(§§ 682.405(a) and (b)(1)(iii) and
685.211(f))
Comment: One commenter agreed
with the Department’s interpretation
that the limit on rehabilitation of
defaulted loans to one opportunity
applies to each loan, but requested
further clarification on the application
of the limit. The commenter asked
whether a borrower who successfully
rehabilitates a defaulted loan,
consolidates that loan, and then
subsequently defaults on the
consolidation loan would be eligible to
rehabilitate the consolidation loan. The
commenter believed the borrower
should be eligible to rehabilitate the
consolidation loan because the
previously rehabilitated loan was in
good standing when it was
consolidated.
Discussion: A consolidation loan is a
new loan. In the commenter’s example,
the borrower’s previously rehabilitated
loan was paid in full through the
consolidation process and has no
bearing on the borrower’s eligibility for
rehabilitation of the consolidation loan.
The Department agrees that the
borrower is eligible to rehabilitate the
defaulted consolidation loan, but does
not believe it is necessary to separately
address the treatment of consolidation
loans in the regulations.
Changes: None.
Definition of Lender (§ 682.200(b))
Comment: One commenter asked
whether the term ‘‘other group’’ in
paragraph (5)(i)(A)(6) of the prohibited
inducement provisions of the proposed
definition of ‘‘lender’’ includes a
lender’s board of directors. The
commenter asked the Department to
clarify that a lender’s board of directors
would be covered by the prohibition

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even if the Department decided not to
define the term.
Discussion: The term ‘‘other group’’ is
not defined in the HEA. The Department
agrees, however, that service on a
lender’s board of directors is one of the
groups established by a lender that
would be covered under the provision.
The Department declines to define the
term ‘‘other group’’ and does not believe
it is possible to provide an all-inclusive
listing of the possible types of groups a
lender may establish that would be
covered by the prohibition.
Changes: None.
Lender Disclosures (§ 682.205)
Comment: One commenter raised
concerns about the number of new and
revised borrower disclosures that
lenders must provide under proposed
§ 682.205. The commenter indicated
that his organization would need
substantial time to prepare the
disclosures, train its staff, and make
necessary data processing changes to
implement the regulations. The
commenter requested that the
Department extend the effective date of
the lender disclosure provisions to one
year after the final regulations are
issued.
Discussion: The Department notes
that the new and revised borrower
disclosures included in the proposed
regulations are required as a result of
the enactment of the HEOA and became
effective in most cases on August 14,
2008. Lenders are expected to comply
with the requirements to the extent
possible until these implementing
regulations become effective on July 1,
2010. The Department believes that
providing information to borrowers,
particularly those who are having
difficulty making payments or who are
past due on their payments, is critical,
and therefore declines to delay the July
1, 2010, effective date of these
implementing regulations.
Changes: None.
Comment: Several commenters
requested a change to § 682.205(c)(4) of
the proposed regulations, which
describes the information that must be
provided to borrowers who contact their
lenders indicating that they are having
difficulty making their payments. The
commenters were concerned that
sending the required information
repeatedly to a borrower if the borrower
contacts the lender more than once over
a short period of time would be
ineffective and could confuse the
borrower. The commenters requested
that the Department require the lender
to send the disclosure only if the lender
had not sent one to the borrower within
the previous 120 days. The commenters

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believed that this change would be
comparable to a change agreed to during
the negotiations related to the frequency
of the required disclosure for borrowers
who fall 60 days behind in making
payments. The Department agreed that,
in that situation, it was not beneficial to
send multiple disclosures to a borrower
who was rolling in and out of a 60-day
delinquency status and, as a result, the
proposed regulations do not require a
lender to continue to send the 60-day
delinquency disclosure if one was sent
to the borrower within the previous 120
days.
Discussion: The Department does not
agree that the disclosure required under
§ 682.205(c)(4) when a borrower
contacts the lender indicating he or she
is having difficulty making payments is
comparable to the disclosure of
information in the 60-day delinquency
situation. The 60-day delinquency
disclosure is automatically triggered by
the borrower’s delinquency status and is
in addition to other lender due diligence
contacts with the borrower required
under § 682.411 of the FFEL regulations.
In the case of a borrower having
difficulty making payments, the
borrower triggers the disclosure by
contacting the lender and requesting
assistance. Under these circumstances,
we believe a lender has a responsibility
and an obligation to assist the borrower
by providing information as frequently
as necessary to assist that borrower. The
Department disagrees that the situations
are comparable and declines to make
the change requested by the
commenters.
Changes: None.
Executive Order 12866
Regulatory Impact Analysis
Under Executive Order 12866, the
Secretary must determine whether the
regulatory action is ‘‘significant’’ and
therefore subject to the requirements of
the Executive order and subject to
review by the Office of Management and
Budget (OMB). Section 3(f) of Executive
Order 12866 defines a ‘‘significant
regulatory action’’ as an action likely to
result in a rule that may (1) have an
annual effect on the economy of $100
million or more, or adversely affect a
sector of the economy, productivity,
competition, jobs, the environment,
public health or safety, or State, local or
Tribal governments or communities in a
material way (also referred to as an
‘‘economically significant’’ rule); (2)
create serious inconsistency or
otherwise interfere with an action taken
or planned by another agency; (3)
materially alter the budgetary impacts of
entitlement grants, user fees, or loan

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programs or the rights and obligations of
recipients thereof; or (4) raise novel
legal or policy issues arising out of legal
mandates, the President’s priorities, or
the principles set forth in the Executive
order.
Pursuant to the terms of the Executive
order, it has been determined this
regulatory action will not have an
annual effect on the economy of more
than $100 million. Therefore, this action
is not ‘‘economically significant’’ and
subject to OMB review under section
3(f)(1) of Executive Order 12866.
Notwithstanding this determination, the
Secretary has assessed the potential
costs and benefits of this regulatory
action and has determined that the
benefits justify the costs.

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Need for Federal Regulatory Action
As discussed in the NPRM, these
regulations are needed to implement
provisions of the HEA, as amended by
the HEOA, particularly related to
changes related to loan discharge,
deferment, consolidation, rehabilitation,
and repayment plan provisions, and the
addition of a new Part E to title I of the
HEA, which establishes extensive new
disclosure requirements for lenders and
institutions participating in Federal and
private student loan programs.
Regulatory Alternatives Considered
Regulatory alternatives were
considered as part of the rulemaking
process. These alternatives were
reviewed in detail in the preamble to
the NPRM under both the Regulatory
Impact Analysis and the Reasons
sections accompanying the discussion
of each proposed regulatory provision.
To the extent that they were addressed
in response to comments received on
the NPRM, alternatives are also
considered elsewhere in the preamble to
these final regulations under the
Discussion sections related to each
provision. No comments were received
related to the Regulatory Impact
Analysis discussion of these
alternatives.
As discussed above in the Analysis of
Comments and Changes section, these
final regulations reflect statutory
amendments included in the HEOA and
minor revisions in response to public
comments. In most cases, these
revisions were technical in nature and
intended to address drafting issues or
provide additional clarity. Other
changes, such as the requirement that
lenders rather than guaranty agencies
notify veterans whose loans have been
discharged that their obligation to make
any further payments has been
discharged, were made to simplify and
standardize program operations. None

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of these changes result in revisions to
cost estimates prepared for and
discussed in the Regulatory Impact
Analysis of the NPRM.
Benefits
As discussed in the NPRM, benefits
provided in these proposed regulations
include greater transparency for
borrowers participating in the Federal
and private student loan programs;
clearer guidelines on acceptable
behavior by and relationships among
institutions participating in the student
loan programs; improvements to the IBR
plan, particularly for married borrowers;
a simpler process for obtaining loan
discharges due to total and permanent
disability; and expanded eligibility for
Teacher Loan forgiveness benefits. It is
difficult to quantify benefits related to
the new institutional and lender
requirements, as there is little specific
data available on either the extent of
improper or questionable relationships
between institutions and lenders prior
to the HEOA or of the harm such
relationships actually caused for either
borrowers, institutions, or the Federal
taxpayer. In the NPRM, the Department
requested comments or data that would
support a more rigorous analysis of the
impact of these provisions. No
comments or additional data were
received.
Benefits under these regulations flow
directly from statutory changes included
in the HEOA; they are not materially
affected by discretionary choices
exercised by the Department in
developing these regulations, or by
changes made in response to comments
on the NPRM. As noted in the
Regulatory Impact Analysis in the
NPRM, these proposed provisions result
in net costs to the government of $192.7
million over 2009–2013.
Costs
As discussed extensively in the
Regulatory Impact Analysis in the
NPRM, many of the statutory provisions
implemented though these regulations
will require regulated entities to
develop new disclosures and other
materials, as well as accompanying
dissemination processes. Other
regulations generally would require
discrete changes in specific parameters
associated with existing guidance—such
as changes to the process for loan
discharges, IBR, and various deferment
and forbearance benefits—rather than
wholly new requirements. In total, these
changes are estimated to increase
burden on entities participating in the
FFEL program by 1,313,964 hours. Of
this increased burden, 1,184,115 hours
are associated with lenders, 110,360

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hours with guaranty agencies, and 7,200
hours with institutions. An additional
12,289 hours are associated with
borrowers, generally reflecting the time
required to read new disclosures or
submit required information.
For lenders, over half of the
additional burden—798,000 hours—is
related to the requirement to provide
additional disclosures to borrowers who
are over 60 days delinquent or are
otherwise having trouble making
repayments. Another 216,000 hours are
associated with new requirements
related to the provision of
administrative forbearances. Roughly
90,000 hours in new burden are related
to changes in the methodology for
calculating income-based repayments.
The balance of additional burden is
spread across a number of minor
changes made by these regulations.
For guaranty agencies, virtually the
entire additional burden relates to new
requirements to provide information to
borrowers who are in default or have
rehabilitated their loans after being in
default. Other minor additional burden
for guaranty agencies results from new
requirements to provide consumer
information.
The monetized cost of this additional
burden, using loaded wage data
developed by the Bureau of Labor
Statistics, is $24,334,225, of which
$21.95 million is associated with
lenders, $2.05 million with guaranty
agencies, $0.2 million with borrowers,
and $0.13 million with schools. Given
the large number of entities affected by
these provisions, actual burden on
individual entities is not substantial.
Because data underlying many of
these burden estimates was limited, in
the NPRM, the Department requested
comments and supporting information
for use in developing more robust
estimates. In particular, we asked
institutions to provide detailed data on
actual staffing and system costs
associated with implementing these
regulations. No comments or additional
data were received.
Net Budget Impacts
As discussed more fully in the
Regulatory Impact Analysis of the
NPRM, HEOA provisions implemented
by these regulations are estimated to
have a net budget impact of $34.7
million in 2009 and $192.7 million over
FY 2009–2013. (The estimated impact
for 2009 does not include $144.2
million in costs related to loans
originated in prior fiscal years.)
Consistent with the requirements of the
Credit Reform Act of 1990, budget cost
estimates for the student loan programs
reflect the estimated net present value of

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all future non-administrative Federal
costs associated with a cohort of loans.
(A cohort reflects all loans originated in
a given fiscal year.)
The budgetary impact of these
regulations is largely driven by statutory
changes involving teacher loan
forgiveness, loan discharges, and IBR.
The Department estimates no budgetary
impact for other provisions included in
these regulations; there is no data
indicating that the new requirements
related to improper inducements and
additional loan disclosures will have
any impact on the volume or
composition of Federal student loans.
Assumptions, Limitations, and Data
Sources
As noted in the NPRM, because these
regulations would largely restate
statutory requirements that would be

self-implementing in the absence of
regulatory action, impact estimates
provided in the preceding section reflect
a pre-statutory baseline in which the
HEOA changes implemented in these
proposed regulations do not exist. Costs
have been quantified for five years.
In developing these estimates, a wide
range of data sources were used,
including data from the NSLDS;
operational and financial data from
Department systems; and data from a
range of surveys conducted by the
National Center for Education Statistics,
such as the 2004 National
Postsecondary Student Aid Survey, the
1994 National Education Longitudinal
Study, and the 1996 Beginning
Postsecondary Student Survey. Data
from other sources, such as the Census
Bureau, were also used.

55981

Elsewhere in this SUPPLEMENTARY
section we identify and
explain burdens specifically associated
with information collection
requirements. See the heading
Paperwork Reduction Act of 1995.
INFORMATION

Accounting Statement
In Table 2 below, we have prepared
an accounting statement showing the
classification of the expenditures
associated with the provisions of these
proposed regulations. This table
provides our best estimate of the
changes in Federal student aid
payments as a result of these proposed
regulations. Expenditures are classified
as transfers from the Federal
government to student loan borrowers
(for expanded loan discharges, teacher
loan forgiveness payments).

TABLE 2—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES
[In millions]
Category

Transfers

Annualized Monetized Transfers ..............................................................
From Whom To Whom? ...........................................................................

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Regulatory Flexibility Act Certification
The Secretary certifies that these
regulations would not have a significant
economic impact on a substantial
number of small entities. These
regulations would affect institutions of
higher education, lenders, and guaranty
agencies that participate in Title IV,
HEA programs and individual students
and loan borrowers. The U.S. Small
Business Administration Size Standards
define institutions and lenders as ‘‘small
entities’’ if they are for-profit or
nonprofit institutions with total annual
revenue below $5,000,000 or if they are
institutions controlled by small
governmental jurisdictions, which are
comprised of cities, counties, towns,
townships, villages, school districts, or
special districts, with a population of
less than 50,000.
As discussed in more detail in the
Regulatory Flexibility Act section of the
NPRM, data from the Integrated
Postsecondary Education Data System
(IPEDS) indicate that roughly 1,200
institutions participating in the FFEL
program meet the definition of ‘‘small
entities.’’ Institutional burden stemming
from these regulations is associated with
audit requirements for schools serving
as lenders. Institutions meeting the
definition of small entities are extremely
unlikely to act as lenders in the FFEL
program. Accordingly, new
requirements imposed under these

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$57.
Federal Government to Student Loan Borrowers.

regulations are not expected to impose
significant new costs on these
institutions.
The Department believes few if any
lenders participating in the FFEL
program have revenues of less than $5
million. Lenders of this size are
extremely unlikely to engage in the type
of activities—inducements, etc.—
governed by these regulations.
Accordingly, the Department has
determined that the regulations did not
represent a significant burden on small
lenders.
Guaranty agencies are State and
private nonprofit entities that act as
agents of the Federal government, and
as such are not considered ‘‘small
entities’’ under the Regulatory
Flexibility Act. The impact of the
regulations on individuals is not subject
to the Regulatory Flexibility Act.
In the NPRM, the Secretary invited
comments from small institutions and
lenders as to whether they believe the
proposed changes would have a
significant economic impact on them.
No comments were received.
Paperwork Reduction Act of 1995
Sections 674.61, 682.202, 682.205,
682.206, 682.208, 682.210, 682.211,
682.216, 682.302, 682.305, 682.401,
682.402, 682.410, 682.601, 685.202,
685.204, 685.205, 685.213, and 685.217
contain information collection
requirements. Under the Paperwork

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Reduction Act of 1995 (44 U.S.C.
3507(d)), the Department of Education
has submitted a copy of these sections
to the Office of Management and Budget
(OMB) for its review.
Sections 674.61, 682.402, and 685.213—
Total and Permanent Disability Loan
Discharges
The final regulations revise the loan
discharge process for borrowers seeking
to have their title IV loans discharged
based on a total and permanent
disability. The changes to the loan
discharge process affect borrowers, loan
holders (and their servicers), and
guaranty agencies.
The burden hour estimate associated
with the current total and permanent
disability loan discharge provisions is
reported under OMB Control Number
1845–0065 (Discharge Application:
Total and Permanent Disability). The
Department does not expect these
changes to increase the burden for this
collection. However, the Department
will need to revise the Discharge
Application: Total and Permanent
Disability currently approved under
1845–0065 to reflect these final
regulations. The Department will submit
a revised form for clearance after the
final regulations have been published.
The revised form will not be needed
until July 1, 2010, the effective date of
the final regulations.

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In response to public comments, the
Department revised § 682.402(c)(8)(ii)(F)
to specify that upon receipt of a claim
payment from the guaranty agency (after
the Department has notified the
guaranty agency that a borrower is
eligible for a discharge under the
separate discharge process for certain
veterans), the lender notifies the veteran
that the veteran’s obligation to make any
further payments on the loan has been
discharged. Under the proposed
regulations, the guaranty agency would
have been responsible for notifying the
veteran of the discharge. This change
from the proposed regulations has no
effect on burden for lenders or guaranty
agencies, as it simply makes the
borrower notification process under the
special discharge procedures for
veterans consistent with the general
discharge procedures for other
borrowers and the notification
requirements under existing regulations.

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Section 682.206—Consolidation Loans
The final regulations revise
§ 682.206(f) to incorporate a new
requirement that is needed to fully
implement proposed § 682.205(i)(7),
which requires lenders to inform
borrowers that, by applying for the
Consolidation loan, the borrower is not
obligated to take the loan. Specifically,
§ 682.206(f) is revised to include a
requirement that the lender provide a
Consolidation loan borrower a period of
not less than 10 days, from the date the
borrower is notified by the lender that
it is ready to make the Consolidation
loan, to cancel the loan. The final
regulations require the lender to send
the notice of the option to cancel the
loan to the borrower before making any
payments to pay off a loan with the
proceeds of a Consolidation loan.
We estimate that these changes will
increase burden for borrowers by 10,032
hours and for loan holders (and their
servicers) by 54,552 hours for a total
increase in burden of 64,584 hours in
OMB Control Number 1845–0020.
Sections 682.210, 682.211, 685.204 and
685.205—In-School Deferments and
Administrative Forbearance for PLUS
Loans
The final regulations revise
§§ 682.210 and 685.204 to reflect
statutory deferment provisions for FFEL
and Direct PLUS loan borrowers with
loans first disbursed on or after July 1,
2008. Upon the request of the borrower,
a parent PLUS borrower must be granted
a deferment on a PLUS loan first
disbursed on or after July 1, 2008,
during the period when the student on
whose behalf the loan was obtained is
enrolled on at least a half-time basis at

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an eligible institution, and during the 6month period that begins on the later of
the day after the student ceases to be
enrolled on at least a half-time basis or,
if the parent borrower is also a student,
the day after the parent ceases to be
enrolled on at least a half-time basis.
For graduate and professional student
PLUS borrowers, the final regulations
provide that a borrower may be granted
a deferment on a PLUS loan first
disbursed on or after July 1, 2008 during
the 6-month period that begins on the
day after the student ceases to be
enrolled on at least a half-time basis at
an eligible institution. If a lender or the
Secretary grants an in-school deferment
on a student PLUS loan based on
information from the borrower’s school
about the borrower’s eligibility for a
new loan, student status information
from the school or information from
NSLDS confirming the borrower’s halftime enrollment status, the in-school
deferment period for a student PLUS
loan first disbursed on or after July 1,
2008 would include the 6-month period
that begins on the day after the student
PLUS borrower ceases to be enrolled on
at least a half-time basis.
The final regulations also add a new
administrative forbearance provision to
§ 682.211(f) allowing a lender to grant a
forbearance, upon notice to the
borrower, on a borrower’s PLUS loans
first disbursed before July 1, 2008 to
align repayment of the loans with a
borrower’s PLUS loans first disbursed
on or after July 1, 2008, or with a
borrower’s Stafford loans that are
subject to a grace period. The lender is
required to notify the borrower that he
or she has the option to cancel the
forbearance and to continue paying on
the loan. A corresponding
administrative forbearance provision
will be added to § 685.205(b) in the
Direct Loan Program regulations.
The changes to §§ 682.210 and
685.204 affect borrowers and loan
holders (and their servicers). The new
deferment provisions for certain PLUS
borrowers are expected to increase the
number of borrowers who apply for
deferments. Because these statutory
provisions could be implemented
without regulations, the FFEL and
Direct Loan deferment request forms
were previously revised to include the
new deferments for PLUS borrowers and
have been approved under OMB Control
Numbers 1845–0005 (FFEL Program
Deferment Request Forms) and 1845–
0011 (Direct Loan Program Deferment
Request Forms). The increased burden
associated with the final regulatory
changes is reflected in the burden
estimates reported under those control
numbers.

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We estimate that the final regulations
in § 682.211(e) related to administrative
forbearances will increase burden for
loan holders by 14,440 hours in OMB
Control Number 1845–0020.
Sections 682.215 and 685.221—IncomeBased Repayment (IBR) Plan
The final regulations revise the
definition of partial financial hardship
in § 682.215(a)(4) and 685.221(a)(4) to
specify that the annual amount due on
a borrower’s eligible loans for purposes
of determining whether the borrower
has a partial financial hardship is the
greater of the amount due on the eligible
loans when the borrower initially
entered repayment on those loans, or
the amount due on those loans when the
borrower elects the IBR plan. The final
regulations also provide that when a
married borrower and his or her spouse
file a joint Federal tax return with the
IRS and both the borrower and the
spouse have eligible loans, the joint AGI
and the total amount of the borrower’s
and spouse’s eligible loans will be used
in determining whether each borrower
has a partial financial hardship.
The final regulations revise
§§ 682.215(b)(1) and 685.221(b)(2) to
provide that if a borrower and a
borrower’s spouse both have eligible
loans and filed a joint Federal tax
return, each borrower’s percentage of
the couple’s total eligible loan debt
would be determined, and the
calculated partial financial hardship
payment amount for each borrower
would be adjusted by multiplying the
payment by the applicable borrower’s
percentage. As with all other borrowers,
each borrower’s adjusted payment
amount would be further adjusted if the
borrower’s loans are held by multiple
holders.
We estimate that the final regulations
will increase burden for loan holders by
90,286 hours in OMB Control Number
1845–0020.
Sections 682.202, 682.302, and
685.202—Applicability of the
Servicemembers Civil Relief Act
(SCRA) to FFEL and Direct Loan
Program Loans
The final regulations revise
§§ 682.202 and 685.202 to provide that,
effective August 14, 2008, upon a loan
holder’s receipt of a written request
from a borrower and a copy of the
borrower’s military orders, the
maximum interest rate (as defined in 50
U.S.C. 527, App, section 207(d)) that
may be charged on FFEL or Direct Loan
program loans made prior to the
borrower entering active duty status is
six percent while the borrower is on
active duty status. The final regulations

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would also revise § 682.302 of the FFEL
regulations by adding a new paragraph
(h) that specifies that, for FFEL loans
first disbursed on or after July 1, 2008,
that are subject to the SCRA interest rate
cap, the FFEL lender’s special
allowance payment is calculated as it
otherwise would be under program
requirements, except that the applicable
interest rate used is six percent.
We estimate that the final regulations
will increase burden for borrowers by
1,694 hours and for loan holders by 542
hours in new OMB Control Number
1845–XXX1. We estimate that the final
regulations will increase burden for
borrowers by 563 hours in new OMB
Control Number 1845–XXX2.
Sections 682.210 and 685.204—InSchool Deferment
The final regulations revise
§ 682.210(a)(3) of the FFEL regulations
to provide that if a borrower is
responsible for the interest on a loan
during a deferment period, the lender, at
or before the time the deferment is
granted, must notify the borrower that
he or she has the option to pay the
accruing interest or cancel the
deferment and continue paying on the
loan. The lender is also required to
provide information, including an
example, on the impact on a borrower’s
loan debt of capitalization of accrued
unpaid interest and on the total amount
of interest to be paid over the life of the
loan. A similar notification provision
that applied only to the granting of inschool deferments is removed from
§ 682.210(c)(2) of the FFEL regulations.
A comparable change is made in
§ 685.204(b)(1)(iii)(B) of the Direct Loan
regulations to provide that borrowers
will be notified of their option to cancel
a deferment and continue paying on the
loan and will be provided with
information on the impact of
capitalization, including an example.
The changes to §§ 682.210 and
685.204 affect borrowers and loan
holders (and their servicers). The FFEL
and Direct Loan deferment request
forms currently approved under OMB
Control Numbers 1845–0005 and 1845–
0011 already include the information
that a loan holder must provide to a
borrower at or before the time a
deferment is granted, as described
above. Therefore, there is no increase in
burden associated with the final
regulations.
Sections 682.216 and 685.217—FFEL
and Direct Loan Program Teacher Loan
Forgiveness
The final regulations allow a borrower
who otherwise meets the eligibility
requirements for teacher loan

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forgiveness to receive forgiveness based
on teaching service performed at one or
more eligible elementary or secondary
schools that serve low-income families,
or one or more eligible educational
service agencies that serve low-income
families. A borrower can also qualify
based on teaching service performed at
a combination of eligible elementary or
secondary schools and eligible
educational service agencies. To be
considered eligible for teacher loan
forgiveness purposes, an educational
service agency has to meet the same
eligibility requirements that apply to
elementary and secondary schools.
These changes will increase the
number of borrowers who are eligible
for teacher loan forgiveness, and will
require a revision of the FFEL and
Direct Loan Program Teacher Loan
Forgiveness Application that is
currently approved under OMB Control
Number 1845–0059. The Department
will submit a change request for 1845–
0059 (including an adjustment to the
burden hours associated with this
collection) after the final regulations
have been published.
Section 682.205—Disclosure
Requirements for Lenders
The final regulations reorganize and
expand § 682.205 to reflect new
disclosure requirements added by the
HEOA. The HEOA added additional
disclosures by lenders before
disbursement and requires new
disclosures at differing points in the
borrower’s repayment cycle. The HEOA
also added a separate set of disclosures
specifically for Consolidation loan
borrowers.
We estimate that the final regulations
will increase burden for loan holders
(and their servicers) by 797,661 hours in
OMB Control Number 1845–0020.
Section 682.208—Information to
Borrowers Upon Transfer, Sale or
Assignment of a FFEL Program Loan
The final regulations incorporate
three additional information items
specified in the HEA that must be
provided to a borrower if the assignment
or transfer of an ownership interest in
a FFEL program loan results in a change
in the identity of the party to whom
subsequent payments must be sent. The
three additional data items are: (1) The
effective date of the assignment or
transfer of the loan; (2) the date on
which the current loan servicer will
cease accepting payments; and (3) the
date on which the new loan servicer
will begin accepting payments. The date
on which the current servicer will stop
accepting payments is required only if
that is applicable.

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55983

Loan holders are already required,
under current regulations, to provide
certain information to a borrower if the
assignment of a FFEL Program loan
results in a change in the identity of the
party to whom the borrower must send
payments. The final regulations merely
add three additional items to the notice
that a loan holder is already required to
provide. Therefore, the Department
believes that the final regulations will
not significantly increase burden for
loan holders (and their servicers) in
OMB Control Number 1845–0020.
Section 682.211—Forbearance
Section 682.211(e) of the final
regulations requires the lender, at the
time the borrower is granted a
forbearance, to give the borrower
information about the impact of
capitalization of interest on the loan and
the total amount to be repaid over the
life of the loan. The final regulations
also require the lender to contact the
borrower at least once every 180 days
during any period of forbearance and to
give the borrower or endorser more
specific information, in conjunction
with that required under existing
regulations, as to the impact of
forbearance on the loan. This
information includes the amount of
interest that will be capitalized and
when that capitalization will take place
and the option of the borrower or
endorser to pay the interest that has
accrued before it is capitalized.
We estimate that the final regulations
will increase burden for loan holders
(and their servicers) by 215,734 hours in
OMB Control Number 1845–0020.
Sections 682.305 and 682.601—Audit
Requirements for a FFEL School Lender
or an Eligible Lender Trustee (ELT)
The final regulations revise
§ 682.305(c) to require that a FFEL
school lender, or a lender serving as a
trustee on behalf of a school or schoolaffiliated organization for the purpose of
originating loans, submit an annual
compliance audit to the Department
regardless of the dollar volume of loans
originated. The final regulations also
require that the audit be conducted by
a qualified, independent organization or
person. Section 682.305(c)(2)(vii)
governs the compliance audit of a
school or school-affiliated organization
lender trustee. The final regulations
require that the trustee’s audit include
a determination that the school for
whom the lender serves as trustee used
all the proceeds from special allowance
payments, interest subsidies received
from the Department, and any proceeds
from the sale or other disposition of the
loans originated through the lender for

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need-based grants, and that those funds
supplemented, but did not supplant,
other Federal or non-Federal funds
otherwise available to the school to
make need-based grants to its students.
The final regulations also require that
the audit determine that no more than
a reasonable portion of the payments
and proceeds from the loans were used
for direct administrative expenses in
accordance with § 682.601(b) of the
current regulations. These same
requirements with regard to annual
compliance audit determinations were
also added to the FFEL school lender
audit requirements in § 682.601(a)(7) of
the regulations.
We estimate that the final regulations
will increase burden for institutions by
7,200 hours and for loan holders (and
their servicers) by 10,900 hours for a
total increase in burden of 18,100 hours
in OMB Control Number 1845–0020.

guaranty agencies by 8,748 hours in
OMB Control Number 1845–0020.

Section 682.410—Notifications to
Borrowers in Default

Section 682.405—Financial and
Economic Literacy for Rehabilitated
Borrowers

Section 682.401—Consumer Education
Information Provided by Guaranty
Agencies
The final regulations require a
guaranty agency to work with the
schools that it serves to develop and
make available high-quality educational
materials and programs that provide
training for students and their families
in budgeting and financial management,
including debt management and other
aspects of financial literacy, such as the
cost of using high-interest loans to pay
for postsecondary education, and how
budgeting and financial management
relate to the title IV student loan
programs.
We estimate that the final regulations
will increase burden for institutions and

If a borrower successfully
rehabilitates a previously defaulted
loan, the final regulations require the
prior holder of the loan, in addition to
the guaranty agency, to request that a
consumer reporting agency to which the
default was reported remove the default
from the borrower’s credit history. The
final regulations also provide more
detailed reporting deadlines for the
guaranty agency and prior loan holder
to request removal of the report of the
default from the borrower’s credit
history, and reduce the overall period
for this activity from 90 to 75 days.
We estimate that the final regulations
will increase burden for guaranty
agencies by 18,392 hours in OMB
Control Number 1845–0020.

The final regulations expand the
information that must be provided in
the notice required under
§ 682.410(b)(5)(ii) to include
information on the options that are
available to the borrower to remove the
loan from default, including an
explanation of the fees and conditions
associated with each option. The final
regulations also require a guaranty
agency to provide this same information
to a defaulted borrower in a second
notice that the guaranty agency must
send as part of its required collection
efforts on a defaulted loan under
§ 682.410(b)(6). The second notice has
to be sent within a reasonable time after
the end of the period during which the
borrower may request an administrative
review as specified in
§ 682.410(b)(5)(iv)(B) or, if the borrower
has requested an administrative review,
within a reasonable time following the
conclusion of the administrative review.
We estimate that the final regulations
will increase burden for guaranty
agencies by 58,793 hours in OMB
Control Number 1845–0020.
Consistent with the discussion above,
the following chart describes the
sections of the final regulations
involving information collections, the
information being collected, and the
collections that the Department
submitted to the Office of Management
and Budget for approval and public
comment under the Paperwork
Reduction Act.

Regulatory section

Section 682.405—Consumer Credit
Reporting Following Loan
Rehabilitation

Information collection

Collection

674.61, 682.402, and
685.213.

The final regulations revise the loan discharge process
for borrowers seeking to have their title IV loans discharged based on total and permanent disability. Borrowers who apply for a total and permanent disability
discharge must complete a discharge application that
collects the information needed to determine their eligibility for discharge.

682.206 ...............................

§ 682.206(f) is amended to include a requirement that
the lender provide a Consolidation loan borrower a
period of not less than 10 days, from the date the
borrower is notified by the lender that it is ready to
make the Consolidation loan, to cancel the loan.
The final regulations implement the new deferment provisions for FFEL and Direct PLUS loan borrowers
with loans first disbursed on or after July 1, 2008 that
were added to the HEA by the HEOA. A loan holder
must collect the information needed to determine that
a borrower is eligible for a deferment.

OMB 1845–0065. The Discharge Application: Total and
Permanent Disability that is currently approved under
1845–0065 will be revised to reflect the final regulations that will be published by November 1, 2009.
The Department will submit a revised form for clearance after the final regulations have been published.
The revised form will not be needed until July 1,
2010, the effective date of the final regulations.
OMB 1845–0020. There will be an increase in burden
of 64,584 hours.

682.210, 682.211, 685.204
and 685.205.

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The final regulations revise § 682.405,
regarding loan rehabilitation
agreements, by adding a provision
requiring guaranty agencies to make
available financial and economic
education materials, including debt
management information, to any
borrower who has rehabilitated a
defaulted loan.
We estimate that the final regulations
will increase burden for guaranty
agencies by 24,427 hours in OMB
Control Number 1845–0020.

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OMB 1845–0005, 1845–0011 and 1845–0020. The
FFEL and Direct Loan deferment request forms were
previously revised to include the new deferments for
PLUS borrowers and have been approved under
OMB Control Numbers 1845–0005 (FFEL) and 1845–
0011 (Direct Loan). There will be an increase in burden of 14,440 hours in OMB 1845–0020.

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Regulatory section
682.202, 682.302, and
685.202.

682.210 and 685.204 ..........

682.215 and 685.221 ..........

682.216 and 685.217 ..........

682.205 ...............................

682.208 ...............................

682.211 ...............................

682.305 and 682.601 ..........

682.401 ...............................

682.405 ...............................

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682.405 ...............................

682.410 ...............................

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Information collection

Collection

The final regulations provide that, effective August 14,
2008, upon a loan holder’s receipt of a written request from a borrower and a copy of the borrower’s
military orders, the maximum interest rate that may
be charged on FFEL or Direct Loan program loans
made prior to the borrower entering active duty status
is six percent while the borrower is on active duty
status.
The final regulations require a loan holder to provide information about interest capitalization to a borrower
prior to or at the time of granting a deferment on an
unsubsidized loan.

OMB 1845–XXX1 and 1845–XXX2. These are new collections. A separate 60-day Federal Register Notice
has been published to solicit comments. In OMB
1845–XXX1 there will be an increase in burden of
2,236 hours. In OMB 1845–XXX there will be an increase in burden of 563 hours.

The final regulations revise the definition of partial financial hardship for purposes of determining a borrower’s eligibility for the income-based repayment
plan and would also revise the provisions governing a
loan holder’s calculation of a borrower’s incomebased payment amount.
The final regulations expand eligibility for teacher loan
forgiveness to allow a borrower who otherwise meets
the loan forgiveness eligibility requirements to receive
forgiveness based on teaching service performed at
one or more eligible educational service agencies
that serve low-income families.

The final regulations implement new statutory requirements for lenders to disclose certain information to
borrowers at various points during the lifecycle of a
borrower’s loan. The proposed regulations also add
new lender disclosure requirements for consolidation
loan borrowers.
The final regulations incorporate three additional information items that must be provided to a borrower if
the assignment or transfer of an ownership interest in
a FFEL program loan results in a change in the identity of the party to whom subsequent payments must
be sent.
The final regulations require the lender, at the time the
borrower is granted a forbearance, to give the borrower information about the impact of capitalization of
interest on the loan and the total to be repaid over
the life of the loan.
The final regulations amend § 682.305(c) to require that
a FFEL school lender, or a lender serving as a trustee on behalf of a school or school-affiliated organization for the purpose of originating loans, submit an
annual compliance audit to the Department regardless of the dollar volume of loans originated.
The final regulations require guaranty agencies to work
with the schools that it serves to develop and make
available high-quality educational materials and programs to provide training for students and their families in budgeting and financial management, including
debt management and other aspects of financial literacy, such as the cost of using high-interest loans to
pay for postsecondary education, and how budgeting
and financial management relate to the title IV student loan programs.
The final regulations require guaranty agencies to provide certain information to borrowers who have rehabilitated defaulted loans.
The final regulations require the prior holder of a previously defaulted loan, in addition to the guaranty
agency, to request that consumer reporting agencies
remove the record of the default from the borrower’s
credit history after the borrower has successfully rehabilitated the loan.
The final regulations require guaranty agencies to provide certain additional notifications to borrowers who
are in default.

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OMB 1845–0005 and 1845–0011. These collections
(FFEL and Direct Loan Program deferment request
forms) were previously revised to include the required
information about interest capitalization and have
been approved by OMB.
OMB 1845–0020. There will be an increase in burden
of 90,286 hours.

OMB 1845–0059. The final regulations require a revision of the FFEL and Direct Loan Program Teacher
Loan Forgiveness Application currently approved
under OMB Control Number 1845–0059. The Department will submit a change request for 1845–0059 (including an adjustment to the burden hours associated
with this collection) after the final regulations have
been published.
OMB 1845–0020. There will be an increase in burden
of 797,661 hours.

OMB 1845–0020. There will be no change in burden
hours.

OMB 1845–0020. There will be an increase in burden
of 215,734 hours.

OMB 1845–0020. There will be an increase in burden
of 181,100 hours.

OMB 1845–0020. There will be an increase in burden
of 8,748 hours.

OMB 1845–0020. There will be an increase in burden
of 24,427 hours.
OMB 1845–0020. There will be an increase in burden
of 18,392 hours.

OMB 1845–0020. There will be an increase in burden
of 58,793 hours.

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Assessment of Educational Impact
Based on our own review, we have
determined that these final regulations
do not require transmission of
information that any other agency or
authority of the United States gathers or
makes available.
Electronic Access to This Document
You may view this document, as well
as all other Department of Education
documents published in the Federal
Register, in text or Adobe Portable
Document Format (PDF) on the Internet
at the following site: http://www.ed.gov/
news/FedRegister.
To use PDF you must have Adobe
Acrobat Reader, which is available free
at this site. If you have questions about
using PDF, call the U.S. Government
Printing Office (GPO), toll free, at 1–
888–293–6498; or in the Washington,
DC area at (202) 512–1530.
Note: The official version of this document
is the document published in the Federal
Register. Free Internet access to the official
edition of the Federal Register and the Code
of Federal Regulations is available on GPO
Access at: http://www.access.gpo.gov/nara/
index.html.
(Catalog of Federal Domestic Assistance
Number: 84.032 Federal Family Education
Loan Program; 84.037 Federal Perkins Loan
Program; and 84.268 William D. Ford Federal
Direct Loan Program)

List of Subjects in 34 CFR Parts 673,
674, 682, and 685
Administrative practice and
procedure, Colleges and universities,
Education, Loan programs—education,
Reporting and recordkeeping
requirements, Student aid, and
Vocational education.
Dated: October 15, 2009.
Arne Duncan,
Secretary of Education.

For the reasons discussed in the
preamble, the Secretary amends parts
673, 674, 682, and 685 of title 34 of the
Code of Federal Regulations as follows:

■

PART 673—GENERAL PROVISIONS
FOR THE FEDERAL PERKINS LOAN
PROGRAM, FEDERAL WORK-STUDY
PROGRAM, AND FEDERAL
SUPPLEMENTAL EDUCATIONAL
OPPORTUNITY GRANT PROGRAM
1. The authority citation for part 673
continues to read as follows:

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■

Authority: 20 U.S.C. 421–429, 1070b–
1070b–3, 1070g, 1087aa–1087ii, 42 U.S.C.
2751–2756b, unless otherwise noted.

2. Section 673.5(c) is amended by:
A. Revising paragraph (c)(1)(v).
B. In paragraph (c)(1)(vi), removing
the words ‘‘and ROTC scholarships’’.

■
■
■

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C. Revising paragraph (c)(1)(ix).
D. In paragraph (c)(2)(iii), removing
the word ‘‘and’’ immediately after the
semicolon at the end of the paragraph.
■ E. In paragraph (c)(2)(iv), removing
the words ‘‘this part’’ and adding, in
their place, the words ‘‘a title IV, HEA
program,’’ and removing the
punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
punctuation ‘‘;’’.
■ F. Adding a new paragraph (c)(2)(v).
■ G. Adding a new paragraph (c)(2)(vi).
■ H. In paragraph (c)(3), removing the
words ‘‘veterans education benefits paid
under Chapter 30 of title 38 of the
United States Code (Montgomery GI
Bill-Active Duty) and’’.
The revisions and additions read as
follows:
■
■

§ 673.5

Overaward.

(c) * * *
(1) * * *
(v) Grants, including FSEOGs, State
grants, Academic Competitiveness
Grants, and National SMART Grants;
*
*
*
*
*
(ix) Except as provided in paragraph
(c)(2)(v) of this section, veterans’
education benefits;
*
*
*
*
*
(2) * * *
(v) Federal veterans’ education
benefits paid under—
(A) Chapter 103 of title 10, United
States Code (Senior Reserve Officers’
Training Corps);
(B) Chapter 106A of title 10, United
States Code (Educational Assistance for
Persons Enlisting for Active Duty);
(C) Chapter 1606 of title 10, United
States Code (Selected Reserve
Educational Assistance Program);
(D) Chapter 1607 of title 10, United
States Code (Educational Assistance
Program for Reserve Component
Members Supporting Contingency
Operations and Certain Other
Operations);
(E) Chapter 30 of title 38, United
States Code (All-Volunteer Force
Educational Assistance Program, also
known as the ‘‘Montgomery GI Bill—
active duty’’);
(F) Chapter 31 of title 38, United
States Code (Training and Rehabilitation
for Veterans with Service-Connected
Disabilities);
(G) Chapter 32 of title 38, United
States Code (Post-Vietnam Era Veterans’
Educational Assistance Program);
(H) Chapter 33 of title 38, United
States Code (Post 9/11 Educational
Assistance);
(I) Chapter 35 of title 38, United States
Code (Survivors’ and Dependents’
Educational Assistance Program);

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(J) Section 903 of the Department of
Defense Authorization Act, 1981 (10
U.S.C. 2141 note) (Educational
Assistance Pilot Program);
(K) Section 156(b) of the ‘‘Joint
Resolution making further continuing
appropriations and providing for
productive employment for the fiscal
year 1983, and for other purposes’’ (42
U.S.C. 402 note) (Restored Entitlement
Program for Survivors, also known as
‘‘Quayle benefits’’);
(L) The provisions of chapter 3 of title
37, United States Code, related to
subsistence allowances for members of
the Reserve Officers Training Corps; and
(M) Any program that the Secretary
may determine is covered by section
480(c)(2) of the HEA; and
(vi) Iraq and Afghanistan Service
Grants made under section 420R of the
HEA.
*
*
*
*
*
PART 674—FEDERAL PERKINS LOAN
PROGRAM
3. The authority citation for part 674
continues to read as follows:

■

Authority: 20 U.S.C. 1087aa–1087hh and
20 U.S.C. 421–429 unless otherwise noted.

4. Section 674.9 is amended by:
A. Revising paragraph (g).
B. In the introductory text of
paragraph (h), removing the words
‘‘based on’’ and adding, in their place,
the word ‘‘after’’, and adding the words
‘‘based on a discharge request received
prior to July 1, 2010’’ immediately after
the word ‘‘disabled’’.
■ C. In paragraph (h)(1), removing the
words ‘‘paragraphs (h)(1) and (h)(2)’’
and adding, in their place, the words
‘‘paragraphs (g)(1) and (g)(2)’’.
■ D. In paragraph (h)(2)(ii), removing
the words ‘‘, as described in
§ 674.61(b)(9)’’ immediately after the
word ‘‘period’’.
■ E. In the second sentence of paragraph
(i), removing the words ‘‘described in
§§ 674.61(b), 682.402(c), or 685.213(a)’’
immediately after the word ‘‘period’’.
The revision reads as follows:
■
■
■

§ 674.9

Student eligibility.

*

*
*
*
*
(g) In the case of a borrower whose
prior loan under title IV of the Act or
whose TEACH Grant service obligation
was discharged after a final
determination of total and permanent
disability—
(1) Obtains a certification from a
physician that the borrower is able to
engage in substantial gainful activity;
(2) Signs a statement acknowledging
that any new Federal Perkins Loan the
borrower receives cannot be discharged

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Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations
in the future on the basis of any present
impairment, unless that condition
substantially deteriorates; and
(3) If the borrower receives a new
Federal Perkins Loan within three years
of the date that any previous title IV
loan or TEACH Grant service obligation
was discharged due to a total and
permanent disability in accordance with
§ 674.61(b)(3)(i), 34 CFR 682.402(c), 34
CFR 685.213, or 34 CFR 686.42(b) based
on a discharge request received on or
after July 1, 2010, resumes repayment
on the previously discharged loan in
accordance with § 674.61(b)(5), 34 CFR
682.402(c)(5), or 34 CFR 685.213(b)(4),
or acknowledges that he or she is once
again subject to the terms of the TEACH
Grant agreement to serve before
receiving the new loan.
*
*
*
*
*
■ 5–6. Section 674.61 is amended by:
■ A. Revising paragraph (b).
■ B. Redesignating paragraphs (c) and
(d) as paragraphs (d) and (e),
respectively.
■ C. Adding a new paragraph (c).
The revision and addition read as
follows:
§ 674.61

Discharge for death or disability.

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*

*
*
*
*
(b) Total and permanent disability as
defined in § 674.51(aa)(1)—
(1) General. A borrower’s Defense,
NDSL, or Perkins loan is discharged if
the borrower becomes totally and
permanently disabled, as defined in
§ 674.51(aa)(1), and satisfies the
additional eligibility requirements
contained in this section.
(2) Discharge application process for
borrowers who have a total and
permanent disability as defined in
§ 674.51(aa)(1). (i) To qualify for
discharge of a Defense, NDSL, or
Perkins loan based on a total and
permanent disability as defined in
§ 674.51(aa)(1), a borrower must submit
a discharge application approved by the
Secretary to the institution that holds
the loan.
(ii) The application must contain a
certification by a physician, who is a
doctor of medicine or osteopathy legally
authorized to practice in a State, that the
borrower is totally and permanently
disabled as defined in § 674.51(aa)(1).
(iii) The borrower must submit the
application to the institution within 90
days of the date the physician certifies
the application.
(iv) Upon receiving the borrower’s
complete application, the institution
must suspend collection activity on the
loan and inform the borrower that—
(A) The institution will review the
application and assign the loan to the
Secretary for an eligibility

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determination if the institution
determines that the certification
supports the conclusion that the
borrower is totally and permanently
disabled, as defined in § 674.51(aa)(1);
(B) The institution will resume
collection on the loan if the institution
determines that the certification does
not support the conclusion that the
borrower is totally and permanently
disabled; and
(C) If the Secretary discharges the loan
based on a determination that the
borrower is totally and permanently
disabled, as defined in § 674.51(aa)(1),
the Secretary will reinstate the
borrower’s obligation to repay the loan
if, within three years after the date the
Secretary granted the discharge, the
borrower—
(1) Has annual earnings from
employment that exceed 100 percent of
the poverty guideline for a family of
two, as published annually by the
United States Department of Health and
Human Services pursuant to 42 U.S.C.
9902(2);
(2) Receives a new TEACH Grant or a
new loan under the Perkins, FFEL, or
Direct Loan programs, except for a FFEL
or Direct Consolidation Loan that
includes loans that were not discharged;
or
(3) Fails to ensure that the full amount
of any disbursement of a Title IV loan
or TEACH Grant received prior to the
discharge date that is made during the
three-year period following the
discharge date is returned to the loan
holder or to the Secretary, as applicable,
within 120 days of the disbursement
date.
(v) If, after reviewing the borrower’s
application, the institution determines
that the application is complete and
supports the conclusion that the
borrower is totally and permanently
disabled as defined in § 674.51(aa)(1),
the institution must assign the loan to
the Secretary.
(vi) At the time the loan is assigned
to the Secretary, the institution must
notify the borrower that the loan has
been assigned to the Secretary for
determination of eligibility for a total
and permanent disability discharge and
that no payments are due on the loan.
(3) Secretary’s eligibility
determination. (i) If the Secretary
determines that the borrower is totally
and permanently disabled as defined in
§ 674.51(aa)(1), the Secretary discharges
the borrower’s obligation to make
further payments on the loan and
notifies the borrower that the loan has
been discharged. The notification to the
borrower explains the terms and
conditions under which the borrower’s
obligation to repay the loan will be

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55987

reinstated, as specified in paragraph
(b)(5) of this section.
(ii) If the Secretary determines that
the certification provided by the
borrower does not support the
conclusion that the borrower is totally
and permanently disabled as defined in
§ 674.51(aa)(1), the Secretary notifies the
borrower that the application for a
disability discharge has been denied,
and that the loan is due and payable to
the Secretary under the terms of the
promissory note.
(iii) The Secretary reserves the right to
require the borrower to submit
additional medical evidence if the
Secretary determines that the borrower’s
application does not conclusively prove
that the borrower is totally and
permanently disabled as defined in
§ 674.51(aa)(1). As part of the
Secretary’s review of the borrower’s
discharge application, the Secretary may
arrange for an additional review of the
borrower’s condition by an independent
physician at no expense to the borrower.
(4) Treatment of disbursements made
during the period from the date of the
physician’s certification until the date of
discharge. If a borrower received a Title
IV loan or TEACH Grant prior to the
date the physician certified the
borrower’s discharge application and a
disbursement of that loan or grant is
made during the period from the date of
the physician’s certification until the
date the Secretary grants a discharge
under this section, the processing of the
borrower’s loan discharge request will
be suspended until the borrower
ensures that the full amount of the
disbursement has been returned to the
loan holder or to the Secretary, as
applicable.
(5) Conditions for reinstatement of a
loan after a total and permanent
disability discharge. (i) The Secretary
reinstates a borrower’s obligation to
repay a loan that was discharged in
accordance with paragraph (b)(3)(i) of
this section if, within three years after
the date the Secretary granted the
discharge, the borrower—
(A) Has annual earnings from
employment that exceed 100 percent of
the poverty guideline for a family of
two, as published annually by the
United States Department of Health and
Human Services pursuant to 42 U.S.C.
9902(2);
(B) Receives a new TEACH Grant or
a new loan under the Perkins, FFEL or
Direct Loan programs, except for a FFEL
or Direct Consolidation Loan that
includes loans that were not discharged;
or
(C) Fails to ensure that the full
amount of any disbursement of a Title
IV loan or TEACH Grant received prior

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to the discharge date that is made
during the three-year period following
the discharge date is returned to the
loan holder or to the Secretary, as
applicable, within 120 days of the
disbursement date.
(ii) If a borrower’s obligation to repay
a loan is reinstated, the Secretary—
(A) Notifies the borrower that the
borrower’s obligation to repay the loan
has been reinstated; and
(B) Does not require the borrower to
pay interest on the loan for the period
from the date the loan was discharged
until the date the borrower’s obligation
to repay the loan was reinstated.
(iii) The Secretary’s notification under
paragraph (b)(5)(ii)(A) of this section
will include—
(A) The reason or reasons for the
reinstatement;
(B) An explanation that the first
payment due date on the loan following
reinstatement will be no earlier than 60
days after the date of the notification of
reinstatement; and
(C) Information on how the borrower
may contact the Secretary if the
borrower has questions about the
reinstatement or believes that the
obligation to repay the loan was
reinstated based on incorrect
information.
(6) Borrower’s responsibilities after a
total and permanent disability
discharge. During the three-year period
described in paragraph (b)(5)(i) of this
section, the borrower or, if applicable,
the borrower’s representative—
(i) Must promptly notify the Secretary
of any changes in address or phone
number;
(ii) Must promptly notify the
Secretary if the borrower’s annual
earnings from employment exceed the
amount specified in paragraph
(b)(5)(i)(A) of this section; and
(iii) Must provide the Secretary, upon
request, with documentation of the
borrower’s annual earnings from
employment.
(7) Payments received after the
physician’s certification of total and
permanent disability. (i) If, after the date
the physician certifies the borrower’s
loan discharge application, the
institution receives any payments from
or on behalf of the borrower on or
attributable to a loan that was assigned
to the Secretary for determination of
eligibility for a total and permanent
disability discharge, the institution must
forward those payments to the Secretary
for crediting to the borrower’s account.
(ii) At the same time that the
institution forwards the payment, it
must notify the borrower that there is no
obligation to make payments on the loan
prior to the Secretary’s determination of

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eligibility for a total and permanent
disability discharge, unless the
Secretary directs the borrower
otherwise.
(iii) When the Secretary makes a
determination to discharge the loan, the
Secretary returns any payments received
on the loan after the date the physician
certified the borrower’s loan discharge
application to the person who made the
payments on the loan.
(c) Total and permanent disability
discharges for veterans—(1) General. A
veteran’s Defense, NDSL, or Perkins
loan will be discharged if the veteran is
totally and permanently disabled, as
defined in § 674.51(aa)(2).
(2) Discharge application process for
veterans who have a total and
permanent disability as defined in
§ 674.51(aa)(2). (i) To qualify for
discharge of a Defense, NDSL, or
Perkins loan based on a total and
permanent disability as defined in
§ 674.51(aa)(2), a veteran must submit a
discharge application approved by the
Secretary to the institution that holds
the loan.
(ii) With the application, the veteran
must submit documentation from the
Department of Veterans Affairs showing
that the Department of Veterans Affairs
has determined that the veteran is
unemployable due to a serviceconnected disability. The veteran will
not be required to provide any
additional documentation related to the
veteran’s disability.
(iii) Upon receiving the veteran’s
completed application and the required
documentation from the Department of
Veterans Affairs, the institution must
suspend collection activity on the loan
and inform the veteran that—
(A) The institution will review the
application and submit the application
and supporting documentation to the
Secretary for an eligibility
determination if the documentation
from the Department of Veterans Affairs
indicates that the veteran is totally and
permanently disabled as defined in
§ 674.51(aa)(2);
(B) The institution will resume
collection on the loan if the
documentation from the Department of
Veterans Affairs does not indicate that
the veteran is totally and permanently
disabled as defined in § 674.51(aa)(2);
and
(C) If the documentation from the
Department of Veterans Affairs does not
indicate that the veteran is totally and
permanently disabled as defined in
§ 674.51(aa)(2), but the documentation
indicates that the veteran may be totally
and permanently disabled as defined in
§ 674.51(aa)(1), the veteran may reapply
for a total and permanent disability

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discharge in accordance with the
procedures described in § 674.61(b).
(iv) If the documentation from the
Department of Veterans Affairs indicates
that the veteran is totally and
permanently disabled as defined in
§ 674.51(aa)(2), the institution must
submit a copy of the veteran’s
application and the documentation from
the Department of Veterans Affairs to
the Secretary. At the time the
application and documentation are
submitted to the Secretary, the
institution must notify the veteran that
the veteran’s discharge request has been
referred to the Secretary for
determination of discharge eligibility
and that no payments are due on the
loan.
(v) If the documentation from the
Department of Veterans Affairs does not
indicate that the veteran is totally and
permanently disabled as defined in
§ 674.51(aa)(2), the institution must
resume collection on the loan.
(3) Secretary’s determination of
eligibility. (i) If the Secretary
determines, based on a review of the
documentation from the Department of
Veterans Affairs, that the veteran is
totally and permanently disabled as
defined in § 674.51(aa)(2), the Secretary
notifies the institution of this
determination, and the institution
must—
(A) Discharge the veteran’s obligation
to make further payments on the loan;
and
(B) Return to the person who made
the payments on the loan any payments
received on or after the effective date of
the determination by the Department of
Veterans Affairs that the veteran is
unemployable due to a serviceconnected disability.
(ii) If the Secretary determines, based
on a review of the documentation from
the Department of Veterans Affairs, that
the veteran is not totally and
permanently disabled as defined in
§ 674.51(aa)(2), the Secretary notifies the
institution of this determination, and
the institution must resume collection
on the loan.
*
*
*
*
*
PART 682—FEDERAL FAMILY
EDUCATION LOAN (FFEL) PROGRAM
7. The authority citation for part 682
continues to read as follows:

■

Authority: 20 U.S.C. 1071 to 1087–2 unless
otherwise noted.

8. Section 682.200(b) is amended by:
A. In the definition of ‘‘Estimated
financial assistance,’’ revising
paragraphs (1)(i) and (ii).
■ B. In the definition of ‘‘Estimated
financial assistance,’’ removing
■
■

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Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations
paragraphs (1)(iii) and (iv), and
redesignating paragraphs (1)(v), (vi),
(vii), and (viii) as paragraphs (1)(iii),
(iv), (v), and (vi), respectively.
■ C. In paragraph (2)(i) of the definition
of ‘‘Estimated financial assistance,’’
removing the word ‘‘is’’ in the second
sentence and adding, in its place, the
words ‘‘must be’’.
■ D. In paragraph (2)(iii) of the
definition of ‘‘Estimated financial
assistance,’’ removing the words
‘‘veterans’ educational benefits paid
under chapter 30 of title 38 of the
United States Code (Montgomery GI
Bill—Active Duty) and’’.
■ E. In paragraph (2)(v) of the definition
of ‘‘Estimated financial assistance,’’
removing the word ‘‘and’’ after the
semicolon at the end of the paragraph.
■ F. In paragraph (2)(vi) of the definition
of ‘‘Estimated financial assistance,’’
removing the words ‘‘this title’’ in the
first sentence and adding, in their place,
the words ‘‘a title IV, HEA program’’,
and removing the punctuation ‘‘.’’ at the
end of the paragraph and adding, in its
place, the punctuation ‘‘;’’.
■ G. In the definition of ‘‘Estimated
financial assistance,’’ adding new
paragraphs (2)(vii) and (viii).
■ H. Revising paragraph (5) of the
definition of ‘‘Lender.’’
■ I. Removing the definition of
‘‘National credit bureau.’’
■ J. Adding a definition of ‘‘Nationwide
consumer reporting agency.’’
■ K. Adding a definition of ‘‘Substantial
gainful activity.’’
■ L. Revising the definition of ‘‘Totally
and permanently disabled.’’
The revisions and additions read as
follows:
§ 682.200

Definitions.

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*

*
*
*
*
(b) * * *
Estimated financial assistance. (1)
* * *
(i) Except as provided in paragraph
(2)(iii) of this definition, national
service education awards or post-service
benefits under title I of the National and
Community Service Act of 1990
(AmeriCorps);
(ii) Except as provided in paragraph
(2)(vii) of this definition, veterans’
education benefits;
*
*
*
*
*
(2) * * *
(vii) Federal veterans’ education
benefits paid under—
(A) Chapter 103 of title 10, United
States Code (Senior Reserve Officers’
Training Corps);
(B) Chapter 106A of title 10, United
States Code (Educational Assistance for
Persons Enlisting for Active Duty);

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(C) Chapter 1606 of title 10, United
States Code (Selected Reserve
Educational Assistance Program);
(D) Chapter 1607 of title 10, United
States Code (Educational Assistance
Program for Reserve Component
Members Supporting Contingency
Operations and Certain Other
Operations);
(E) Chapter 30 of title 38, United
States Code (All-Volunteer Force
Educational Assistance Program, also
known as the ‘‘Montgomery GI Bill—
active duty’’);
(F) Chapter 31 of title 38, United
States Code (Training and Rehabilitation
for Veterans with Service-Connected
Disabilities);
(G) Chapter 32 of title 38, United
States Code (Post-Vietnam Era Veterans’
Educational Assistance Program);
(H) Chapter 33 of title 38, United
States Code (Post 9/11 Educational
Assistance);
(I) Chapter 35 of title 38, United States
Code (Survivors’ and Dependents’
Educational Assistance Program);
(J) Section 903 of the Department of
Defense Authorization Act, 1981 (10
U.S.C. 2141 note) (Educational
Assistance Pilot Program);
(K) Section 156(b) of the ‘‘Joint
Resolution making further continuing
appropriations and providing for
productive employment for the fiscal
year 1983, and for other purposes’’ (42
U.S.C. 402 note) (Restored Entitlement
Program for Survivors, also known as
‘‘Quayle benefits’’);
(L) The provisions of chapter 3 of title
37, United States Code, related to
subsistence allowances for members of
the Reserve Officers Training Corps; and
(M) Any program that the Secretary
may determine is covered by section
480(c)(2) of the HEA; and
(viii) Iraq and Afghanistan Service
Grants made under section 420R of the
HEA.
*
*
*
*
*
Lender. * * *
(5)(i) The term eligible lender does not
include any lender that the Secretary
determines, after notice and opportunity
for a hearing before a designated
Department official, has, directly or
through an agent or contractor—
(A) Except as provided in paragraph
(5)(ii) of this definition, offered, directly
or indirectly, points, premiums,
payments (including payments for
referrals, finder fees or processing fees),
or other inducements to any school, any
employee of a school, or any individual
or entity in order to secure applications
for FFEL loans or FFEL loan volume.
This includes but is not limited to—
(1) Payments or offerings of other
benefits, including prizes or additional

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55989

financial aid funds, to a prospective
borrower or to a school or school
employee in exchange for applying for
or accepting a FFEL loan from the
lender;
(2) Payments or other benefits,
including payments of stock or other
securities, tuition payments or
reimbursements, to a school, a school
employee, any school-affiliated
organization, or to any other individual
in exchange for FFEL loan applications,
application referrals, or a specified
volume or dollar amount of loans made,
or placement on a school’s list of
recommended or suggested lenders;
(3) Payments or other benefits
provided to a student at a school who
acts as the lender’s representative to
secure FFEL loan applications from
individual prospective borrowers,
unless the student is also employed by
the lender for other purposes and
discloses that employment to school
administrators and to prospective
borrowers;
(4) Payments or other benefits to a
loan solicitor or sales representative of
a lender who visits schools to solicit
individual prospective borrowers to
apply for FFEL loans from the lender;
(5) Payment to another lender or any
other party, including a school, a school
employee, or a school-affiliated
organization or its employees, of referral
fees, finder fees or processing fees,
except those processing fees necessary
to comply with Federal or State law;
(6) Compensation to an employee of a
school’s financial aid office or other
employee who has responsibilities with
respect to student loans or other
financial aid provided by the school or
compensation to a school-affiliated
organization or its employees, to serve
on a lender’s advisory board,
commission or other group established
by the lender, except that the lender
may reimburse the employee for
reasonable expenses incurred in
providing the service;
(7) Payment of conference or training
registration, travel, and lodging costs for
an employee of a school or schoolaffiliated organization;
(8) Payment of entertainment
expenses, including expenses for private
hospitality suites, tickets to shows or
sporting events, meals, alcoholic
beverages, and any lodging, rental,
transportation, and other gratuities
related to lender-sponsored activities for
employees of a school or a schoolaffiliated organization;
(9) Philanthropic activities, including
providing scholarships, grants,
restricted gifts, or financial
contributions in exchange for FFEL loan
applications or application referrals, or

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Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations

a specified volume or dollar amount of
FFEL loans made, or placement on a
school’s list of recommended or
suggested lenders;
(10) Performance of, or payment to
another third party to perform, any
school function required under title IV,
except that the lender may perform
entrance counseling as provided in
§ 682.604(f) and exit counseling as
provided in § 682.604(g), and may
provide services to participating foreign
schools at the direction of the Secretary,
as a third-party servicer; and
(11) Any type of consulting
arrangement or other contract with an
employee of a financial aid office at a
school, or an employee of a school who
otherwise has responsibilities with
respect to student loans or other
financial aid provided by the school
under which the employee would
provide services to the lender.
(B) Conducted unsolicited mailings,
by postal or electronic means, of student
loan application forms to students
enrolled in secondary schools or
postsecondary institutions or to family
members of such students, except to a
student or borrower who previously has
received a FFEL loan from the lender;
(C) Offered, directly or indirectly, a
FFEL loan to a prospective borrower to
induce the purchase of a policy of
insurance or other product or service by
the borrower or other person; or
(D) Engaged in fraudulent or
misleading advertising with respect to
its FFEL loan activities.
(ii) Notwithstanding paragraph (5)(i)
of this definition, a lender, in carrying
out its role in the FFEL program and in
attempting to provide better service,
may provide—
(A) Technical assistance to a school
that is comparable to the kinds of
technical assistance provided to a
school by the Secretary under the Direct
Loan program, as identified by the
Secretary in a public announcement,
such as a notice in the Federal Register;
(B) Support of and participation in a
school’s or a guaranty agency’s student
aid and financial literacy-related
outreach activities, including in-person
entrance and exit counseling, as long as
the name of the entity that developed
and paid for any materials is provided
to the participants and the lender does
not promote its student loan or other
products;
(C) Meals, refreshments, and
receptions that are reasonable in cost
and scheduled in conjunction with
training, meeting, or conference events
if those meals, refreshments, or
receptions are open to all training,
meeting, or conference attendees;

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(D) Toll-free telephone numbers for
use by schools or others to obtain
information about FFEL loans and free
data transmission service for use by
schools to electronically submit
applicant loan processing information
or student status confirmation data;
(E) A reduced origination fee in
accordance with § 682.202(c);
(F) A reduced interest rate as
provided under the Act;
(G) Payment of Federal default fees in
accordance with the Act;
(H) Purchase of a loan made by
another lender at a premium;
(I) Other benefits to a borrower under
a repayment incentive program that
requires, at a minimum, one or more
scheduled payments to receive or retain
the benefit or under a loan forgiveness
program for public service or other
targeted purposes approved by the
Secretary, provided these benefits are
not marketed to secure loan applications
or loan guarantees;
(J) Items of nominal value to schools,
school-affiliated organizations, and
borrowers that are offered as a form of
generalized marketing or advertising, or
to create good will; and
(K) Other services as identified and
approved by the Secretary through a
public announcement, such as a notice
in the Federal Register.
(iii) For the purposes of this
paragraph (5)—
(A) The term ‘‘school-affiliated
organization’’ is defined in § 682.200.
(B) The term ‘‘applications’’ includes
the Free Application for Federal Student
Aid (FAFSA), FFEL loan master
promissory notes, and FFEL
Consolidation loan application and
promissory notes.
(C) The term ‘‘other benefits’’
includes, but is not limited to,
preferential rates for or access to the
lender’s other financial products,
information technology equipment, or
non-loan processing or non-financial
aid-related computer software at below
market rental or purchase cost, and
printing and distribution of college
catalogs and other materials at reduced
or no cost.
*
*
*
*
*
Nationwide consumer reporting
agency. A consumer reporting agency as
defined in 15 U.S.C. 1681a.
*
*
*
*
*
Substantial gainful activity. A level of
work performed for pay or profit that
involves doing significant physical or
mental activities, or a combination of
both.
*
*
*
*
*
Totally and permanently disabled.
The condition of an individual who—

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(1) Is unable to engage in any
substantial gainful activity by reason of
any medically determinable physical or
mental impairment that—
(i) Can be expected to result in death;
(ii) Has lasted for a continuous period
of not less than 60 months; or
(iii) Can be expected to last for a
continuous period of not less than 60
months; or
(2) Has been determined by the
Secretary of Veterans Affairs to be
unemployable due to a serviceconnected disability.
*
*
*
*
*
■ 9. Section 682.201 is amended by:
■ A. In paragraph (a)(4)(i), removing the
words ‘‘legal costs, and late charges’’
and adding, in their place, the words
‘‘court costs, attorney fees, and late
charges’’.
■ B. In paragraph (a)(5), removing the
words ‘‘under § 682.402(c)’’.
■ C. In the introductory text of
paragraph (a)(6), adding the words ‘‘or
whose TEACH Grant service obligation’’
immediately after the word ‘‘Act’’.
■ D. Revising paragraph (a)(6)(iii).
■ E. In the introductory text of
paragraph (a)(7), removing the words
‘‘based on’’ and adding, in their place,
the word ‘‘after’’, and adding the words
‘‘based on a discharge request received
prior to July 1, 2010’’ immediately after
the word ‘‘disabled’’.
■ F. In paragraph (a)(7)(ii)(B), removing
the words ‘‘, as described in paragraph
682.402(c)(16)’’.
■ G. In paragraph (d)(1)(i)(A)(3), adding
the words ‘‘or the income-based
repayment plan described in § 682.215’’
immediately after the reference
‘‘§ 682.209(a)(6)(iii)’’.
■ H. In paragraph (e)(4), adding the
words ‘‘is in default or’’ immediately
after the first appearance of the words
‘‘consolidation loan’’ and adding the
words ‘‘or an income-based repayment
plan’’ immediately after the words
‘‘income contingent repayment plan’’.
■ I. Revising paragraph (e)(5).
The revisions read as follows:
§ 682.201

Eligible borrowers.

(a) * * *
(6) * * *
(iii) If a borrower receives a new FFEL
loan, other than a Federal Consolidation
Loan, within three years of the date that
any previous title IV loan or TEACH
Grant service obligation was discharged
due to a total and permanent disability
in accordance with § 682.402(c)(3)(ii),
34 CFR 674.61(b)(3)(i), 34 CFR 685.213,
or 34 CFR 686.42(b) based on a
discharge request received on or after
July 1, 2010, resume repayment on the
previously discharged loan in

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Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations
accordance with § 682.402(c)(5), 34 CFR
674.61(b)(5), or 34 CFR 685.213(b)(4), or
acknowledge that he or she is once
again subject to the terms of the TEACH
Grant agreement to serve before
receiving the new loan.
*
*
*
*
*
(e) * * *
(5) A FFEL borrower may consolidate
his or her loans (including a FFEL
Consolidation Loan) into the Federal
Direct Consolidation Loan Program for
the purpose of using—
(i) The Public Service Loan
Forgiveness Program; or
(ii) For FFEL Program loans first
disbursed on or after October 1, 2008
(including Federal Consolidation Loans
that repaid FFEL or Direct Loan program
Loans first disbursed on or after October
1, 2008), the no accrual of interest
benefit for active duty service members.
■ 10. Section 682.202 is amended by:
■ A. In the introductory text of
paragraph (a), adding the words ‘‘and
(a)(8)’’ after the reference ‘‘(a)(4)’’.
■ B. Adding a new paragraph (a)(8).
■ C. In paragraph (b)(2)(i), adding the
words ‘‘or, for a PLUS loan, for the
period from the date the first
disbursement was made to the date the
repayment period begins’’ immediately
before the semicolon.
The addition reads as follows:
§ 682.202 Permissible charges by lenders
to borrowers.

*

*
*
*
*
(a) * * *
(8) Applicability of the
Servicemembers Civil Relief Act (50
U.S.C 527, App. sec. 207).
Notwithstanding paragraphs (a)(1)
through (a)(4) of this section, effective
August 14, 2008, upon the loan holder’s
receipt of the borrower’s written request
and a copy of the borrower’s military
orders, the maximum interest rate, as

defined in 50 U.S.C. 527, App. section
207(d), on FFEL Program loans made
prior to the borrower entering active
duty status is 6 percent while the
borrower is on active duty military
service.
*
*
*
*
*
■ 11. Section 682.204 is amended by:
■ A. Revising paragraph (c)(1).
■ B. Revising paragraph (d) introductory
text.
■ C. In paragraph (d)(1)(i), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ D. In paragraph (d)(1)(ii), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ E. In paragraph (d)(1)(iii), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ F. In paragraph (d)(2)(i), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ G. In paragraph (d)(2)(ii), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$,4000’’.
■ H. In paragraph (d)(3)(i), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $7,000,’’
immediately after ‘‘$5,000’’.
■ I. In paragraph (d)(3)(ii), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $7,000,’’
immediately after ‘‘$5,000’’.
■ J. In paragraph (d)(6)(i), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ K. Adding a new paragraph (d)(9).
■ L. Redesignating paragraphs (e)(1) and
(e)(2) as paragraphs (e)(2) and (e)(3),
respectively.
■ M. Adding a new paragraph (e)(1).

55991

N. Revising newly redesignated
paragraph (e)(2).
The revisions and additions read as
follows:

■

§ 682.204

Maximum loan amounts.

*

*
*
*
*
(c) Unsubsidized Stafford Loan
Program. (1) In the case of a dependent
undergraduate student—
(i) For a loan first disbursed before
July 1, 2008, the total amount the
student may borrow for any period of
study under the Unsubsidized Stafford
Loan Program in combination with the
Federal Direct Unsubsidized Stafford/
Ford Loan Program is the same as the
amount determined under paragraph (a)
of this section, less any amount received
under the Stafford Loan Program or the
Federal Direct Stafford/Ford Loan
Program.
(ii) Except for a dependent
undergraduate who qualifies for
additional Unsubsidized Stafford Loan
funds under paragraph (d) of this
section in accordance with the
conditions specified in § 682.201(a)(3),
for a loan first disbursed on or after July
1, 2008, the total amount the student
may borrow for any period of study
under the Unsubsidized Stafford Loan
Program in combination with the
Federal Direct Unsubsidized Stafford/
Ford Loan Program is the same as the
amount determined under paragraph (a)
of this section, less any amount received
under the Stafford Loan Program or the
Federal Direct Stafford/Ford Loan
Program, plus—
(A) $2,000, for a program of study of
at least a full academic year in length.
(B) For a program of study that is at
one academic year or more in length
with less than a full academic year
remaining, the amount that is the same
ratio to $2,000 as the—

Number of semester, trimester, quarter, or clock hours enro
olled
Number of semester, trimester, quarter, or clock hourrs in academic year.
(C) For a program of study that is less
than a full academic year in length, the

amount that is the same ratio to $2,000
as the lesser of the—

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Number of semester, trimester, quarter, or clock hours enro
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Number of semester, trimester, quarter, or clock hourrs in academic year.

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or

Number of weeks in program
Number of weeks in academic year..

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*

*
*
*
*
(d) Additional eligibility under the
Unsubsidized Stafford Loan Program.
An independent undergraduate student,
graduate or professional student, and
certain dependent undergraduate
students under the conditions specified
in § 682.201(a)(3) may borrow
additional amounts under the
Unsubsidized Stafford Loan Program in
addition to any amount borrowed under
paragraphs (a) and (c) of this section,
except as provided in paragraph (d)(9)
of this section. The additional amount
that such a student may borrow for any
academic year of study under the
Unsubsidized Stafford Loan Program in
combination with the Federal Direct
Unsubsidized Stafford/Ford Loan
Program, in addition to the amounts
allowed under paragraphs (a) and (c) of
this section, except as provided in
paragraph (d)(9) of this section for
certain dependent undergraduate
students—
*
*
*
*
*
(9) A dependent undergraduate
student who qualifies for the additional
Unsubsidized Stafford Loan amounts
under this section in accordance with
the conditions specified in
§ 682.201(a)(3) is not eligible to receive
the additional Unsubsidized Stafford
Loan amounts under paragraph (c)(1)(ii)
of this section.
(e) * * *
(1) $23,000, or, effective July 1, 2008,
$31,000, for a dependent undergraduate
student.
(2) $46,000, or, effective July 1, 2008,
$57,500, for an independent
undergraduate student or a dependent
undergraduate student under the
conditions specified in § 682.201(a)(3).
*
*
*
*
*
■ 12. Section 682.205 is amended by:
■ A. In paragraph (a)(2)(vi), removing
the words ‘‘insurance premium’’ and
adding, in their place, the words
‘‘Federal default fee’’, and adding,
immediately before the semicolon, the
words ‘‘or paid by the lender’’.
■ B. In paragraph (a)(2)(ix), removing
the words ‘‘a national credit bureau’’
and adding, in their place, the words
‘‘each nationwide consumer reporting
agency’’.
■ C. In paragraph (a)(2)(x), adding,
immediately before the semicolon, the
words ‘‘, and a description of the types
of repayment plans available’’.
■ D. In paragraph (a)(2)(xvi), removing
the words ‘‘a national credit bureau’’

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and adding, in their place, the words
‘‘each nationwide consumer reporting
agency’’.
■ E. In paragraph (a)(2)(xviii), removing
the words ‘‘in the making or’’ and
adding, in their place, the words
‘‘during repayment or in the’’; adding
the words ‘‘including any fees the
borrower may be charged’’ immediately
after the words ‘‘the loan’’; and
removing the words ‘‘; and’’ at the end
of the paragraph and adding, in their
place, the punctuation ‘‘;’’.
■ F. In paragraph (a)(2)(xx), removing
the punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
punctuation ‘‘;’’.
■ G. Adding new paragraphs (a)(2)(xxi),
(a)(2)(xxii), (a)(2)(xxiii), and (a)(2)(xxiv).
■ H. In paragraph (b), in the second
sentence, adding the words ‘‘, and that
the default will be reported to each
nationwide consumer reporting agency’’
immediately after the word ‘‘loan’’.
■ I. In paragraph (c), in the heading,
removing the words ‘‘Disclosure of
repayment’’ and adding, in their place,
the word ‘‘Repayment’’.
■ J. In paragraph (c)(1), adding the
heading ‘‘Disclosures at or prior to
repayment.’’ immediately after the
paragraph designation ‘‘(1)’’; removing
the words ‘‘Federal SLS’’ and adding, in
their place, the words ‘‘Federal PLUS’’;
and removing the words ‘‘240 days’’ and
adding, in their place, the words ‘‘150
days’’.
■ K. In paragraph (c)(2)(ii), adding the
words ‘‘, or a deferment under
§ 682.210(v), if applicable, is to end’’
immediately after the word ‘‘begin’’ at
the end of the sentence.
■ L. In paragraph (c)(2)(iii), adding the
words ‘‘a deferment under § 682.210(v),
if applicable, is to end,’’ immediately
after the words ‘‘begin’’.
■ M. In paragraph (c)(2)(vi), adding the
words ‘‘based on the repayment
schedule selected by the borrower’’
immediately after the word ‘‘payments’’.
■ N. In paragraph (c)(2)(viii), removing
the words ‘‘; and’’ and adding, in their
place, the words ‘‘, and if interest has
been paid, the amount of interest paid;’’.
■ O. In paragraph (c)(2)(ix), removing
the punctuation ‘‘.’’ at the end of the
sentence and adding, in its place, the
punctuation ‘‘;’’.
■ P. Adding new paragraphs (c)(2)(x),
(c)(2)(xi), (c)(2)(xii), (c)(2)(xiii) and
(c)(2)(xiv).
■ Q. Adding new paragraphs (c)(3),
(c)(4) and (c)(5).
■ R. In paragraph (d), adding the words
‘‘Federal Unsubsidized Stafford loan or
a’’ immediately after the words ‘‘In the
case of a’’ at the beginning of the first
sentence; removing the words ‘‘the
student’’ in the first sentence and

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adding, in their place, the words ‘‘the
borrower or student on whose behalf the
loan is made’’; and removing the words
‘‘PLUS promissory note’’ in the last
sentence and adding, in their place, the
words ‘‘Stafford and PLUS promissory
notes’’.
■ S. Adding new paragraph (i).
■ T. Adding new paragraph (j).
The additions read as follows:
§ 682.205
lenders.

Disclosure requirements for

(a) * * *
(2) * * *
(xxi) For unsubsidized Stafford or
student PLUS borrowers, an explanation
that the borrower may pay the interest
while in school and, if the interest is not
paid by the borrower while in school,
when and how often the interest will be
capitalized;
(xxii) For parent PLUS borrowers, an
explanation that the parent may defer
payment on the loan while the student
on whose behalf the parent borrowed is
enrolled at least half-time and, if the
parent does not pay interest while the
student is in school, when and how
often interest will be capitalized, and
that the parent may be eligible for a
deferment on the loan if the parent is
enrolled at least half-time;
(xxiii) A statement summarizing the
circumstances in which a borrower may
obtain forbearance on the loan; and
(xxiv) A description of the options
available for forgiveness of the loan and
the requirements to obtain that
forgiveness.
*
*
*
*
*
(c) * * *
(2) * * *
(x) Information on any special loan
repayment benefits offered on the loan,
including benefits that are contingent on
repayment behavior, and any other
special loan repayment benefits for
which the borrower may be eligible that
would reduce the amount or length of
repayment; and at the request of the
borrower, an explanation of the effect of
a reduced interest rate on the borrower’s
total payoff amount and time for
repayment;
(xi) If the lender provides a repayment
benefit, any limitations on that benefit,
any circumstances in which the
borrower could lose that benefit, and
whether and how the borrower may
regain eligibility for the repayment
benefit;
(xii) A description of all the
repayment plans available to the
borrower and a statement that the
borrower may change plans during the
repayment period at least annually;
(xiii) A description of the options
available to the borrower to avoid or be

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removed from default, as well as any
fees associated with those options; and
(xiv) Any additional resources,
including nonprofit organizations,
advocates and counselors, including the
Department of Education’s Student Loan
Ombudsman, the lender is aware of
where the borrower may obtain
additional advice and assistance on loan
repayment.
(3) Required disclosures during
repayment. In addition to the
disclosures required in paragraph (c)(1)
of this section, the lender must provide
the borrower of a FFEL loan with a bill
or statement that corresponds to each
payment installment time period in
which a payment is due that includes in
simple and understandable terms—
(i) The original principal amount of
the borrower’s loan;
(ii) The borrower’s current balance, as
of the time of the bill or statement;
(iii) The interest rate on the loan;
(iv) The total amount of interest for
the preceding installment paid by the
borrower;
(v) The aggregate amount paid by the
borrower on the loan, and separately
identifying the amount the borrower has
paid in interest on the loan, the amount
of fees the borrower has paid on the
loan, and the amount paid against the
balance in principal;
(vi) A description of each fee the
borrower has been charged for the most
recent preceding installment time
period;
(vii) The date by which a payment
must be made to avoid additional fees
and the amount of that payment and the
fees;
(viii) The lender’s or servicer’s
address and toll-free telephone number
for repayment options, payments and
billing error purposes; and
(ix) A reminder that the borrower may
change repayment plans, a list of all of
the repayment plans that are available to
the borrower, a link to the Department
of Education’s Web site for repayment
plan information, and directions on how
the borrower may request a change in
repayment plans from the lender.
(4) Required disclosures for borrowers
having difficulty making payments. The
lender shall provide a borrower who has
notified the lender that he or she is
having difficulty making payments
with—
(i) A description of the repayment
plans available to the borrower, and
how the borrower may request a change
in repayment plan;
(ii) A description of the requirements
for obtaining forbearance on the loan
and any costs associated with
forbearance; and

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(iii) A description of the options
available to the borrower to avoid
default and any fees or costs associated
with those options.
(5) Required disclosures for borrowers
who are 60-days delinquent in making
payments on a loan. (i) The lender shall
provide to a borrower who is 60 days
delinquent in making required
payments a notice of—
(A) The date on which the loan will
default if no payment is made;
(B) The minimum payment the
borrower must make, as of the date of
the notice, to avoid default, including
the payment amount needed to bring the
loan current or payment in full;
(C) A description of the options
available to the borrower to avoid
default, including deferment and
forbearance and any fees and costs
associated with those options;
(D) Any options for discharging the
loan that may be available to the
borrower; and
(E) Any additional resources,
including nonprofit organizations,
advocates and counselors, including the
Department of Education’s Student Loan
Ombudsman, the lender is aware of
where the borrower may obtain
additional advice and assistance on loan
repayment.
(ii) The notice must be sent within
five days of the date the borrower
becomes 60 days delinquent, unless the
lender has sent such a notice within the
previous 120 days.
*
*
*
*
*
(i) Separate disclosure for
Consolidation loans. At the time the
lender provides a Consolidation loan
application to a prospective borrower, it
must disclose to the prospective
borrower, in simple and understandable
terms—
(1) Whether consolidation will result
in a loss of loan benefits, including, but
not limited to, loan forgiveness,
cancellation, deferment, or a reduced
interest rate on FFEL or Direct Loans
repaid through consolidation;
(2) If a borrower is repaying a Federal
Perkins Loan with the Consolidation
loan, that the borrower will lose—
(i) The interest-free periods available
on the Perkins Loan while the borrower
is enrolled in-school at least half-time,
in the grace period, or in a deferment
period; and
(ii) The cancellation benefits on the
Perkins Loan. The lender must provide
to the borrower a list of the Perkins
Loan cancellation benefits that would
not be available on the Consolidation
loan.
(3) The repayment plans available to
the borrower;

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(4) The borrower’s options to prepay
the Consolidation loan, to pay the loan
on a shorter repayment schedule, and to
change repayment plans;
(5) That the borrower benefit
programs for a Consolidation loan vary
among lenders;
(6) The consequences of default on
the Consolidation loan; and
(7) That applying for the
Consolidation loan does not obligate the
borrower to agree to take the
Consolidation loan, and the process and
deadline by which the borrower may
cancel the Consolidation loan.
(j) Disclosure procedures when a
borrower’s address is not available. If a
lender receives information indicating it
does not know the borrower’s current
address, the lender is excused from
providing disclosure information under
this section unless it receives
communication indicating a valid
borrower address before the 241st day of
delinquency, at which point the lender
must resume providing the installment
bill or statement, and any other
disclosure information required under
this section not previously provided.
■ 13. Section 682.206 is amended by
revising paragraph (f) to read as follows:
§ 682.206

Due diligence in making a loan.

*

*
*
*
*
(f) Additional requirements for
Consolidation loans. (1) Prior to making
any payments to pay off a loan with the
proceeds of a Consolidation loan, the
lender shall—
(i) Obtain from the holder of each loan
to be consolidated a certification with
respect to the loan held by the holder
that—
(A) The loan is a legal, valid, and
binding obligation of the borrower;
(B) The loan was made and serviced
in compliance with applicable laws and
regulations; and
(C) In the case of a FFEL loan, that the
guarantee on the loan is in full force and
effect; and
(ii) Consistent with the requirements
of § 682.205(i)(7), notify the borrower,
upon receipt of all information
necessary to make the Consolidation
loan, of the borrower’s option to cancel
the Consolidation loan, and the
deadline by which the borrower must
notify the lender that he or she wishes
to cancel the loan. The lender must
allow the borrower no less than 10 days
from the date of the notice to cancel the
loan.
(2) The Consolidation loan lender
may rely in good faith on the
certification provided under paragraph
(f)(1)(i) of this section by the holder of
a loan to be consolidated.
■ 14. Section 682.208 is amended by:

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A. In paragraph (e)(1) introductory
text, adding the words ‘‘or transfer of
ownership interest’’ immediately after
the word ‘‘assignment’’.
■ B. In paragraph (e)(1)(iii), removing
the word ‘‘and’’ after the semicolon.
■ C. In paragraph (e)(1)(iv), removing
the punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
punctuation ‘‘;’’.
■ D. Adding new paragraphs (e)(1)(v),
(vi), and (vii).
The additions read as follows:
■

§ 682.208
loan.

Due diligence in servicing a

*

*
*
*
*
(e) * * *
(1) * * *
(v) The effective date of the
assignment or transfer of the loan;
(vi) The date, if applicable, on which
the current loan servicer will stop
accepting payments; and
(vii) The date on which the new loan
servicer will begin accepting payments.
*
*
*
*
*
§ 682.209

[Amended]

15. Section 682.209 is amended in
paragraph (a)(2)(v) by removing the
reference ‘‘(a)(2)(ii)’’ and adding, in its
place, the reference ‘‘(a)(2)(i)’’.
■ 16. Section 682.210 is amended by:
■ A. In paragraph (a)(1)(i), adding the
words ‘‘and paragraphs (s) through (v)’’
after the words ‘‘paragraph (b)’’.
■ B. Revising paragraph (a)(3).
■ C. In paragraph (a)(4), removing the
words ‘‘paragraphs (c)(1)(ii) and (iii)’’
and adding, in their place, the words
‘‘paragraphs (c)(1)(ii), (iii), and (iv)’’.
■ D. In paragraph (c)(1)(ii), removing the
word ‘‘or’’ at the end of the paragraph.
■ E. In paragraph (c)(1)(iii), removing
the punctuation ‘‘.’’ and adding, in its
place, ‘‘; or’’ at the end of the paragraph.
■ F. Adding a new paragraph (c)(1)(iv).
■ G. Revising paragraph (c)(2).
■ H. In paragraph (c)(3), removing the
word ‘‘SSCR’’ and adding, in its place,
the words ‘‘Student Status Confirmation
Report’’.
■ I. Adding a new paragraph (v).
The revisions and additions read as
follows:
■

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§ 682.210

Deferment.

(a) * * *
(3)(i) Interest accrues and is paid by—
(A) The Secretary during the
deferment period for a subsidized
Stafford loan and for all or a portion of
a Consolidation loan that qualifies for
interest benefits under § 682.301; or
(B) The borrower during the
deferment period and, as applicable, the
post-deferment grace period, on all
other loans.

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(ii) A borrower who is responsible for
payment of interest during a deferment
period must be notified by the lender,
at or before the time the deferment is
granted, that the borrower has the
option to pay the accruing interest or
cancel the deferment and continue
paying on the loan. The lender must
also provide information, including an
example, on the impact of capitalization
of accrued, unpaid interest on loan
principal, and on the total amount of
interest to be paid over the life of the
loan.
*
*
*
*
*
(c) * * *
(1) * * *
(iv) The lender confirms a borrower’s
half-time enrollment status through the
use of the National Student Loan Data
System if requested to do so by the
school the borrower is attending.
(2) The lender must notify the
borrower that a deferment has been
granted based on paragraphs (c)(1)(ii),
(iii), or (iv) of this section and that the
borrower has the option to cancel the
deferment and continue paying on the
loan.
*
*
*
*
*
(v) In-school deferments for PLUS
loan borrowers with loans first
disbursed on or after July 1, 2008. (1)(i)
A student PLUS borrower is entitled to
a deferment on a PLUS loan first
disbursed on or after July 1, 2008 during
the 6-month period that begins on the
day after the student ceases to be
enrolled on at least a half-time basis at
an eligible institution.
(ii) If a lender grants an in-school
deferment to a student PLUS borrower
based on § 682.210(c)(1)(ii), (iii), or (iv),
the deferment period for a PLUS loan
first disbursed on or after July 1, 2008
includes the 6-month post-enrollment
period described in paragraph (v)(1)(i)
of this section. The notice required by
§ 682.210(c)(2) must inform the
borrower that the in-school deferment
on a PLUS loan first disbursed on or
after July 1, 2008 will end six months
after the day the borrower ceases to be
enrolled on at least a half-time basis.
(2) Upon the request of the borrower,
an eligible parent PLUS borrower must
be granted a deferment on a PLUS loan
first disbursed on or after July 1, 2008—
(i) During the period when the
student on whose behalf the loan was
obtained is enrolled at an eligible
institution on at least a half-time basis;
and
(ii) During the 6-month period that
begins on the later of the day after the
student on whose behalf the loan was
obtained ceases to be enrolled on at
least a half-time basis or, if the parent

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borrower is also a student, the day after
the parent borrower ceases to be
enrolled on at least a half-time basis.
■ 17. Section 682.211 is amended by:
■ A. Revising paragraph (e).
■ B. In paragraph (f)(11), removing the
word ‘‘or’’ at the end of the paragraph.
■ C. In paragraph (f)(12), removing the
punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
punctuation ‘‘;’’.
■ D. In paragraph (f)(13), removing the
punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
punctuation ‘‘;’’.
■ E. In paragraph (f)(14), removing the
punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, ‘‘;
or’’.
■ F. Adding new paragraph (f)(15).
The revisions and additions read as
follows:
§ 682.211

Forbearance.

*

*
*
*
*
(e)(1) At the time of granting a
borrower or endorser a forbearance, the
lender must provide the borrower or
endorser with information to assist the
borrower or endorser in understanding
the impact of capitalization of interest
on the loan principal and total interest
to be paid over the life of the loan; and
(2) At least once every 180 days
during the period of forbearance, the
lender must contact the borrower or
endorser to inform the borrower or
endorser of—
(i) The outstanding obligation to
repay;
(ii) The amount of the unpaid
principal balance and any unpaid
interest that has accrued on the loan
since the last notice provided to the
borrower or endorser under this
paragraph;
(iii) The fact that interest will accrue
on the loan for the full term of the
forbearance;
(iv) The amount of interest that will
be capitalized, as of the date of the
notice, and the date capitalization will
occur;
(v) The option of the borrower or
endorser to pay the interest that has
accrued before the interest is
capitalized; and
(vi) The borrower’s or endorser’s
option to discontinue the forbearance at
any time.
(f) * * *
(15) For PLUS loans first disbursed
before July 1, 2008, to align repayment
with a borrower’s PLUS loans that were
first disbursed on or after July 1, 2008,
or with Stafford Loans that are subject
to a grace period under § 682.209(a)(3).
The notice specified in paragraph (f)
introductory text of this section must

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inform the borrower that the borrower
has the option to cancel the forbearance
and continue paying on the loan.
*
*
*
*
*
■ 18. Section 682.215 is amended by:
■ A. Revising paragraph (a)(4).
■ B. In paragraph (b)(1), removing the
words ‘‘Except as provided under
paragraph (b)(1)(i), (b)(1)(ii), and
(b)(1)(iii) of this section, the’’ in the
second sentence and adding, in their
place, the word ‘‘The’’.
■ C. In paragraph (b)(1)(i), removing the
word ‘‘The’’ at the beginning of the
paragraph and adding, in its place, the
words ‘‘Except for borrowers provided
for in paragraph (b)(1)(ii) of this section,
the’’.
■ D. Redesignating paragraphs (b)(1)(ii)
and (b)(1)(iii) as paragraphs (b)(1)(iii)
and (b)(1)(iv), respectively.
■ E. Adding a new paragraph (b)(1)(ii).
■ F. In newly redesignated paragraph
(b)(1)(iii), removing the words ‘‘or
(b)(1)(i)’’ and adding, in their place, the
words ‘‘, (b)(1)(i), or (b)(1)(ii)’’.
■ G. In newly redesignated paragraph
(b)(1)(iv), removing the words ‘‘or
(b)(1)(i)’’ and adding, in their place, the
words ‘‘, (b)(1)(i), or (b)(1)(ii)’’.
■ H. In paragraph (b)(2), removing the
words ‘‘(b)(1)(ii) and (iii)’’ in the second
sentence and adding, in their place, the
words ‘‘(b)(1)(iii) and (iv)’’.
The revision and addition reads as
follows:

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§ 682.215

Income-based repayment plan.

(a) * * *
(4) Partial financial hardship means a
circumstance in which—
(i) For an unmarried borrower or a
married borrower who files an
individual Federal tax return, the
annual amount due on all of the
borrower’s eligible loans, as calculated
under a standard repayment plan based
on a 10-year repayment period, using
the greater of the amount due at the time
the borrower initially entered
repayment or at the time the borrower
elects the income-based repayment
plan, exceeds 15 percent of the
difference between the borrower’s AGI
and 150 percent of the poverty guideline
for the borrower’s family size; or
(ii) For a married borrower who files
a joint Federal tax return with his or her
spouse, the annual amount due on all of
the borrower’s eligible loans and, if
applicable, the spouse’s eligible loans,
as calculated under a standard
repayment plan based on a 10-year
repayment period, using the greater of
the amount due at the time the loans
initially entered repayment or at the
time the borrower or spouse elects the
income-based repayment plan, exceeds

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15 percent of the difference between the
borrower’s and spouse’s AGI, and 150
percent of the poverty guideline for the
borrower’s family size.
*
*
*
*
*
(b) * * *
(1) * * *
(ii) Both the borrower and the
borrower’s spouse have eligible loans
and filed a joint Federal tax return, in
which case the loan holder
determines—
(A) Each borrower’s percentage of the
couple’s total eligible loan debt;
(B) The adjusted monthly payment for
each borrower by multiplying the
calculated payment by the percentage
determined in paragraph (b)(1)(ii)(A) of
this section; and
(C) If the borrower’s loans are held by
multiple holders, the borrower’s
adjusted monthly payment by
multiplying the payment determined in
paragraph (b)(1)(ii)(B) of this section by
the percentage of the total outstanding
principal amount of eligible loans that
are held by the loan holder;
*
*
*
*
*
■ 19. Section 682.216 is amended by:
■ A. Revising paragraph (a).
■ B. In paragraph (b), adding, in
alphabetical order, a definition of
Educational service agency.
■ C. Revising the introductory text of
paragraph (c)(1).
■ D. In paragraph (c)(1)(ii), adding the
words ‘‘or educational service agency’s’’
immediately after the words ‘‘the
school’s’’.
■ E. In paragraph (c)(1)(iii), removing
the words ‘‘Bureau of Indian Affairs
(BIA)’’ and adding, in their place, the
words ‘‘Bureau of Indian Education
(BIE)’’, and removing the words ‘‘the
BIA’’ and adding, in their place, the
words ‘‘the BIE’’.
■ F. In paragraph (c)(2), adding the
words ‘‘or educational service agency’’
immediately after the words ‘‘If the
school’’ at the beginning of the
paragraph, and removing the words ‘‘the
school’’ immediately after the words
‘‘teaching and’’.
■ G. In paragraph (c)(3)(i)(A), removing
the words ‘‘in which’’ and adding, in
their place, the words ‘‘or educational
service agency where’’.
■ H. In paragraph (c)(3)(i)(B), removing
the words ‘‘in which’’ and adding, in
their place, the words ‘‘or educational
service agency where’’.
■ I. In paragraph (c)(3)(ii)(A), removing
the word ‘‘in’’ and adding, in its place,
the word ‘‘at’’, and adding the words
‘‘, or taught mathematics or science to
secondary school students on a full-time
basis at an eligible educational service
agency,’’ immediately after the words
‘‘secondary school’’.

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J. In paragraph (c)(3)(ii)(B), removing
the word ‘‘in’’ the first time it appears
and adding, in its place, the word ‘‘at’’,
and adding the words ‘‘or educational
service agency’’ immediately after the
words ‘‘secondary school’’ the first time
they appear.
■ K. Adding a new paragraph (c)(3)(iii).
■ L. In paragraph (c)(4)(i), removing the
word ‘‘in’’ and adding, in its place, the
word ‘‘at’’, and adding the words ‘‘or
educational service agency’’
immediately after the words ‘‘secondary
school’’ the first time they appear.
■ M. In paragraph (c)(4)(ii)(A), removing
the word ‘‘in’’ and adding, in its place,
the word ‘‘at’’, and adding the words
‘‘, or taught mathematics or science on
a full-time basis to secondary school
students at an eligible educational
service agency,’’ immediately after the
words ‘‘secondary school’’.
■ N. In paragraph (c)(4)(ii)(B), removing
the word ‘‘in’’ the first time it appears
and adding, in its place, the word ‘‘at’’,
and by adding the words ‘‘or
educational service agency’’
immediately after the words ‘‘secondary
school’’ the first time they appear.
■ O. Adding a new paragraph (c)(4)(iii).
■ P. Revising paragraph (c)(9).
■ Q. Revising paragraph (c)(11).
The revisions and additions read as
follows:
■

§ 682.216
program.

Teacher loan forgiveness

(a) General. (1) The teacher loan
forgiveness program is intended to
encourage individuals to enter and
continue in the teaching profession. For
new borrowers, the Secretary repays the
amount specified in this paragraph on
the borrower’s subsidized and
unsubsidized Federal Stafford Loans,
Direct Subsidized Loans, Direct
Unsubsidized Loans, and in certain
cases, Federal Consolidation Loans or
Direct Consolidation Loans. The
forgiveness program is only available to
a borrower who has no outstanding loan
balance under the FFEL Program or the
Direct Loan Program on October 1, 1998
or who has no outstanding loan balance
on the date he or she obtains a loan after
October 1, 1998.
(2)(i) The borrower must have been
employed at an eligible elementary or
secondary school that serves lowincome families or by an educational
service agency that serves low-income
families as a full-time teacher for five
consecutive complete academic years.
The required five years of teaching may
include any combination of qualifying
teaching service at an eligible
elementary or secondary school or an
eligible educational service agency.

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(ii) Teaching at an eligible elementary
or secondary school may be counted
toward the required five consecutive
complete academic years only if at least
one year of teaching was after the 1997–
1998 academic year.
(iii) Teaching at an educational
service agency may be counted toward
the required five consecutive complete
academic years only if the consecutive
five-year period includes qualifying
service at an eligible educational service
agency performed after the 2007–2008
academic year.
(3) All borrowers eligible for teacher
loan forgiveness may receive loan
forgiveness of up to a combined total of
$5,000 on the borrower’s eligible FFEL
and Direct Loan Program loans.
(4) A borrower may receive loan
forgiveness of up to a combined total of
$17,500 on the borrower’s eligible FFEL
and Direct Loan Program loans if the
borrower was employed for five
consecutive years—
(i) At an eligible secondary school as
a highly qualified mathematics or
science teacher, or at an eligible
educational service agency as a highly
qualified teacher of mathematics or
science to secondary school students; or
(ii) At an eligible elementary or
secondary school or educational service
agency as a special education teacher.
(5) The loan for which the borrower
is seeking forgiveness must have been
made prior to the end of the borrower’s
fifth year of qualifying teaching service.
(b) * * *
Educational service agency means a
regional public multiservice agency
authorized by State statute to develop,
manage, and provide services or
programs to local educational agencies,
as defined in section 9101 of the
Elementary and Secondary Education
Act of 1965, as amended.
*
*
*
*
*
(c) * * *
(1) A borrower who has been
employed at an elementary or secondary
school or at an educational service
agency as a full-time teacher for five
consecutive complete academic years
may obtain loan forgiveness under this
program if the elementary or secondary
school or educational service agency—
*
*
*
*
*
(3) * * *
(iii) Teaching service performed at an
eligible educational service agency may
be counted toward the required five
years of teaching only if the consecutive
five-year period includes qualifying
service at an eligible educational service
agency performed after the 2007–2008
academic year.
(4) * * *

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(iii) Teaching service performed at an
eligible educational service agency may
be counted toward the required five
years of teaching only if the consecutive
five-year period includes qualifying
service at an eligible educational service
agency performed after the 2007–2008
academic year.
*
*
*
*
*
(9) A borrower who was employed as
a teacher at more than one qualifying
school, at more than one qualifying
educational service agency, or at a
combination of both during an academic
year and demonstrates that the
combined teaching was the equivalent
of full-time, as supported by the
certification of one or more of the chief
administrative officers of the schools or
educational service agencies involved,
is considered to have completed one
academic year of qualifying teaching.
*
*
*
*
*
(11) A borrower may not receive loan
forgiveness for the same qualifying
teaching service under this section if the
borrower receives a benefit for the same
teaching service under—
(i) Subtitle D of title I of the National
and Community Service Act of 1990;
(ii) 34 CFR 685.219; or
(iii) Section 428K of the Act.
*
*
*
*
*
■ 20. Section 682.302 is amended by
adding a new paragraph (h) to read as
follows:
§ 682.302 Payment of special allowance on
FFEL loans.

*

*
*
*
*
(h) Calculation of special allowance
payments for loans subject to the
Servicemembers Civil Relief Act (50
U.S.C. 527, App. sec. 207). For FFEL
Program loans first disbursed on or after
July 1, 2008 that are subject to the
interest rate limit under the
Servicemembers Civil Relief Act, special
allowance is calculated in accordance
with paragraphs (c) and (f) of this
section, except the applicable interest
rate for this purpose shall be 6 percent.
■ 21. Section 682.305 is amended by:
■ A. Revising paragraph (c)(1).
■ B. In paragraph (c)(2)(v), removing the
word ‘‘and’’ immediately after the
semicolon.
■ C. In paragraph (c)(2)(vi), removing
the punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
words ‘‘; and’’.
■ D. Redesignating paragraph (c)(2)(vii)
as paragraph (c)(3).
■ E. Adding a new paragraph (c)(2)(vii).
The revision and addition read as
follows:

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§ 682.305 Procedures for payment of
interest benefits and special allowance and
collection of origination and loan fees.

*

*
*
*
*
(c) Independent audits. (1)(i) A lender
originating or holding more than $5
million in FFEL loans during its fiscal
year must submit an independent
annual compliance audit for that year,
conducted by a qualified independent
organization or person.
(ii) Notwithstanding the dollar
volume of loans originated or held, a
school lender under § 682.601 or a
lender serving as trustee on behalf of a
school or a school-affiliated
organization for the purpose of
originating loans must submit an
independent annual compliance audit
for that year, conducted by a qualified
independent organization or person.
(iii) The Secretary may, following
written notice, suspend the payment of
interest benefits and special allowance
to a lender that does not submit its audit
within the time period prescribed in
paragraph (c)(2) of this section.
(2) * * *
(vii) With regard to a lender serving
as a trustee for the purpose of
originating loans for a school or schoolaffiliated organization, the audit must
include a determination that—
(A) Except as provided in paragraph
(c)(2)(vii)(B) of this section, the school
used all proceeds from special
allowance payments, interest subsidies
received from the Department, and any
proceeds from the sale or other
disposition of the loans originated
through the lender for need-based grant
programs and that those funds
supplemented, but did not supplant,
other Federal or non-Federal funds
otherwise available to be used to make
need-based grants to its students; and
(B) The lender used no more than a
reasonable portion of payments and
proceeds from the loans for direct
administrative expenses in accordance
with § 682.601(b), with all references to
eligible school lender understood to
mean a lender in its capacity as trustee
on behalf of a school or school-affiliated
organization for the purpose of
originating loans.
*
*
*
*
*
■ 22. Section 682.401 is amended by:
■ A. In paragraph (e)(1)(i), adding the
words ‘‘stock or other securities, tuition
payment or reimbursement’’
immediately after the word ‘‘payment’’,
and by adding the words ‘‘, or any
individual or entity,’’ immediately after
the words ‘‘school-affiliated
organization’’ the second time they
appear.

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B. In paragraph (e)(1)(i)(D), adding the
words ‘‘travel or’’ immediately after the
words ‘‘Payment of’’.
■ C. Revising paragraph (e)(1)(i)(F).
■ D. In paragraph (e)(1)(iii)(C), removing
the word ‘‘and’’ immediately after the
semicolon.
■ E. In paragraph (e)(1)(iii)(D), removing
the punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
punctuation ‘‘;’’.
■ F. Adding new paragraphs
(e)(1)(iii)(E), (F), and (G).
■ G. In paragraph (e)(1)(v), adding the
words ‘‘, terms or conditions’’
immediately after the word
‘‘availability’’.
■ H. In paragraph (e)(2)(i), removing the
word ‘‘Assistance’’ at the beginning of
the paragraph and adding, in its place,
the words ‘‘Technical assistance’’, and
removing the words ‘‘that provided’’
and adding, in their place, the words
‘‘the technical assistance provided’’.
■ I. In paragraph (e)(2)(ii), adding the
words ‘‘and 433A’’ immediately after
the reference to ‘‘422(h)(4)(B)’’.
■ J. In paragraph (e)(2)(iii), removing the
word ‘‘excluding’’ and adding, in its
place, the word ‘‘including’’, and
removing the word ‘‘initial’’ and adding,
in its place, the word ‘‘entrance’’.
■ K. Revising paragraph (e)(2)(vi).
■ L. In paragraph (e)(3)(iii), removing
the words ‘‘The terms’’ and adding, in
their place, the words ‘‘The term’’, and
removing the words ‘‘computer
hardware’’ and adding, in their place,
the words ‘‘information technology
equipment’’.
■ M. Removing paragraph (e)(3)(v).
■ N. Adding a new paragraph (g).
The revision and additions read as
follows:
■

§ 682.401

Basic program agreement.

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*

*
*
*
*
(e) * * *
(1) * * *
(i) * * *
(F) Performance of, or payment to a
third party to perform, any school
function required under title IV, except
that the guaranty agency may provide
entrance counseling as provided in
§ 682.604(f) and exit counseling as
provided in § 682.604(g), and may
provide services to participating foreign
schools at the direction of the Secretary,
as a third-party servicer.
*
*
*
*
*
(iii) * * *
(E) Providing or reimbursing travel or
entertainment expenses;
(F) Providing or reimbursing tuition
payments or expenses; and
(G) Offering prizes, or providing
payments of stocks or other securities.
*
*
*
*
*

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(2) * * *
(vi) Reimbursement of reasonable
expenses incurred by school employees
to participate in the activities of an
agency’s governing board, a standing
official advisory committee, or in
support of other official activities of the
agency;
*
*
*
*
*
(g)(1) A guaranty agency must work
with schools that participate in its
program to develop and make available
high-quality educational materials and
programs that provide training to
students and their families in budgeting
and financial management, including
debt management and other aspects of
financial literacy, such as the cost of
using high-interest loans to pay for
postsecondary education, and how
budgeting and financial management
relate to the title IV student loan
programs.
(2) The materials and programs
described in paragraph (g)(1) of this
section must be in formats that are
simple and understandable to students
and their families, and must be made
available to students and their families
by the guaranty agency before, during,
and after a student’s enrollment at an
institution of higher education.
(3) A guaranty agency may provide
similar programs and materials to an
institution that participates only in the
William D. Ford Federal Direct Loan
Program.
(4) A lender or loan servicer may also
provide an institution with outreach
and financial literacy information
consistent with the requirements of
paragraphs (g)(1) and (2) of this section.
■ 23. Section 682.402 is amended by:
■ A. Revising paragraph (c).
■ B. In paragraph (h)(1)(i), removing the
word ‘‘The’’ at the beginning of the
sentence and adding, in its place, the
words ‘‘Except as provided in paragraph
(h)(1)(v) of this section, the’’.
■ C. Adding a new paragraph (h)(1)(v).
The revision and addition read as
follows:
§ 682.402 Death, disability, closed school,
false certification, unpaid refunds, and
bankruptcy payments.

*

*
*
*
*
(c)(1) Total and permanent disability.
(i) A borrower’s loan is discharged if the
borrower becomes totally and
permanently disabled, as defined in
§ 682.200(b), and satisfies the eligibility
requirements in this section.
(ii) For a borrower who becomes
totally and permanently disabled as
described in paragraph (1) of the
definition of that term in § 682.200(b),
the borrower’s loan discharge
application is processed in accordance

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with paragraphs (c)(2) through (7) of this
section.
(iii) For a veteran who is totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), the veteran’s loan
discharge application is processed in
accordance with paragraph (c)(8) of this
section.
(2) Discharge application process for
a borrower who is totally and
permanently disabled as described in
paragraph (1) of the definition of that
term in § 682.200(b). After being
notified by the borrower or the
borrower’s representative that the
borrower claims to be totally and
permanently disabled, the lender
promptly requests that the borrower or
the borrower’s representative submit a
discharge application to the lender on a
form approved by the Secretary. The
application must contain a certification
by a physician, who is a doctor of
medicine or osteopathy legally
authorized to practice in a State, that the
borrower is totally and permanently
disabled as described in paragraph (1) of
the definition of that term in
§ 682.200(b). The borrower must submit
the application to the lender within 90
days of the date the physician certifies
the application. If the lender and
guaranty agency approve the discharge
claim under the procedures described in
paragraph (c)(7) of this section, the
guaranty agency must assign the loan to
the Secretary.
(3) Secretary’s eligibility
determination. (i) If, after reviewing the
borrower’s application, the Secretary
determines that the certification
provided by the borrower supports the
conclusion that the borrower is totally
and permanently disabled, as described
in paragraph (1) of the definition of that
term in § 682.200(b), the borrower is
considered totally and permanently
disabled as of the date the physician
certifies the borrower’s application.
(ii) Upon making a determination that
the borrower is totally and permanently
disabled as described in paragraph (1) of
the definition of that term in
§ 682.200(b), the Secretary discharges
the borrower’s obligation to make
further payments on the loan and
notifies the borrower that the loan has
been discharged. Any payments
received after the date the physician
certified the borrower’s loan discharge
application are returned to the person
who made the payments on the loan.
The notification to the borrower
explains the terms and conditions under
which the borrower’s obligation to repay
the loan will be reinstated, as specified
in paragraph (c)(5)(i) of this section.

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(iii) If the Secretary determines that
the certification provided by the
borrower does not support the
conclusion that the borrower is totally
and permanently disabled as described
in paragraph (1) of the definition of that
term in § 682.200(b), the Secretary
notifies the borrower that the
application for a disability discharge has
been denied and that the loan is due
and payable to the Secretary under the
terms of the promissory note.
(iv) The Secretary reserves the right to
require the borrower to submit
additional medical evidence if the
Secretary determines that the borrower’s
application does not conclusively prove
that the borrower is totally and
permanently disabled as described in
paragraph (1) of the definition of that
term in § 682.200(b). As part of the
Secretary’s review of the borrower’s
discharge application, the Secretary may
arrange for an additional review of the
borrower’s condition by an independent
physician at no expense to the borrower.
(4) Treatment of disbursements made
during the period from the date of the
physician’s certification until the date of
discharge. If a borrower received a Title
IV loan or TEACH Grant prior to the
date the physician certified the
borrower’s discharge application and a
disbursement of that loan or grant is
made during the period from the date of
the physician’s certification until the
date the Secretary grants a discharge
under this section, the processing of the
borrower’s loan discharge request will
be suspended until the borrower
ensures that the full amount of the
disbursement has been returned to the
loan holder or to the Secretary, as
applicable.
(5) Conditions for reinstatement of a
loan after a total and permanent
disability discharge. (i) The Secretary
reinstates the borrower’s obligation to
repay a loan that was discharged in
accordance with paragraph (c)(3)(ii) of
this section if, within three years after
the date the Secretary granted the
discharge, the borrower—
(A) Has annual earnings from
employment that exceed 100 percent of
the poverty guideline for a family of
two, as published annually by the
United States Department of Health and
Human Services pursuant to 42 U.S.C.
9902(2);
(B) Receives a new TEACH Grant or
a new loan under the Perkins, FFEL, or
Direct Loan programs, except for a FFEL
or Direct Consolidation Loan that
includes loans that were not discharged;
or
(C) Fails to ensure that the full
amount of any disbursement of a title IV
loan or TEACH Grant received prior to

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the discharge date that is made during
the three-year period following the
discharge date is returned to the loan
holder or to the Secretary, as applicable,
within 120 days of the disbursement
date.
(ii) If a borrower’s obligation to repay
a loan is reinstated, the Secretary—
(A) Notifies the borrower that the
borrower’s obligation to repay the loan
has been reinstated; and
(B) Does not require the borrower to
pay interest on the loan for the period
from the date the loan was discharged
until the date the borrower’s obligation
to repay the loan was reinstated.
(iii) The Secretary’s notification under
paragraph (c)(5)(ii)(A) of this section
will include—
(A) The reason or reasons for the
reinstatement;
(B) An explanation that the first
payment due date on the loan following
reinstatement will be no earlier than 60
days after the date of the notification of
reinstatement; and
(C) Information on how the borrower
may contact the Secretary if the
borrower has questions about the
reinstatement or believes that the
obligation to repay the loan was
reinstated based on incorrect
information.
(6) Borrower’s responsibilities after a
total and permanent disability
discharge. During the three-year period
described in paragraph (c)(5)(i) of this
section, the borrower or, if applicable,
the borrower’s representative must—
(i) Promptly notify the Secretary of
any changes in address or phone
number;
(ii) Promptly notify the Secretary if
the borrower’s annual earnings from
employment exceed the amount
specified in paragraph (c)(5)(i)(A) of this
section; and
(iii) Provide the Secretary, upon
request, with documentation of the
borrower’s annual earnings from
employment.
(7) Lender and guaranty agency
actions. (i) After being notified by a
borrower or a borrower’s representative
that the borrower claims to be totally
and permanently disabled, the lender
must continue collection activities until
it receives either the certification of total
and permanent disability from a
physician or a letter from a physician
stating that the certification has been
requested and that additional time is
needed to determine if the borrower is
totally and permanently disabled as
described in paragraph (1) of the
definition of that term in § 682.200(b).
Except as provided in paragraph
(c)(7)(iii) of this section, after receiving
the physician’s certification or letter the

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lender may not attempt to collect from
the borrower or any endorser.
(ii) The lender must submit a
disability claim to the guaranty agency
if the borrower submits a certification
by a physician and the lender makes a
determination that the certification
supports the conclusion that the
borrower is totally and permanently
disabled as described in paragraph (1) of
the definition of that term in
§ 682.200(b).
(iii) If the lender determines that a
borrower who claims to be totally and
permanently disabled is not totally and
permanently disabled as described in
paragraph (1) of the definition of that
term in § 682.200(b), or if the lender
does not receive the physician’s
certification of total and permanent
disability within 60 days of the receipt
of the physician’s letter requesting
additional time, as described in
paragraph (c)(7)(i) of this section, the
lender must resume collection of the
loan and is deemed to have exercised
forbearance of payment of both
principal and interest from the date
collection activity was suspended. The
lender may capitalize, in accordance
with § 682.202(b), any interest accrued
and not paid during that period.
(iv) The guaranty agency must pay a
claim submitted by the lender if the
guaranty agency has reviewed the
application and determined that it is
complete and that it supports the
conclusion that the borrower is totally
and permanently disabled as described
in paragraph (1) of the definition of that
term in § 682.200(b).
(v) If the guaranty agency does not
pay the disability claim, the guaranty
agency must return the claim to the
lender with an explanation of the basis
for the agency’s denial of the claim.
Upon receipt of the returned claim, the
lender must notify the borrower that the
application for a disability discharge has
been denied, provide the basis for the
denial, and inform the borrower that the
lender will resume collection on the
loan. The lender is deemed to have
exercised forbearance of both principal
and interest from the date collection
activity was suspended until the first
payment due date. The lender may
capitalize, in accordance with
§ 682.202(b), any interest accrued and
not paid during that period.
(vi) If the guaranty agency pays the
disability claim, the lender must notify
the borrower that—
(A) The loan will be assigned to the
Secretary for determination of eligibility
for a total and permanent disability
discharge and that no payments are due
on the loan; and

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(B) If the Secretary discharges the loan
based on a determination that the
borrower is totally and permanently
disabled as described in paragraph (1) of
the definition of that term in
§ 682.200(b), the Secretary will reinstate
the borrower’s obligation to repay the
loan if, within three years after the date
the Secretary granted the discharge, the
borrower—
(1) Receives annual earnings from
employment that exceed 100 percent of
the poverty guideline for a family of
two, as published annually by the
United States Department of Health and
Human Services pursuant to 42 U.S.C.
9902(2);
(2) Receives a new TEACH Grant or a
new title IV loan, except for a FFEL or
Direct Consolidation Loan that includes
loans that were not discharged; or
(3) Fails to ensure that the full amount
of any disbursement of a title IV loan or
TEACH Grant received prior to the
discharge date that is made during the
three-year period following the
discharge date is returned to the loan
holder or to the Secretary, as applicable,
within 120 days of the disbursement
date.
(vii) After receiving a claim payment
from the guaranty agency, the lender
must forward to the guaranty agency
any payments subsequently received
from or on behalf of the borrower.
(viii) The Secretary reimburses the
guaranty agency for a disability claim
paid to the lender after the agency pays
the claim to the lender.
(ix) The guaranty agency must assign
the loan to the Secretary after the
guaranty agency pays the disability
claim.
(8) Discharge application process for
veterans who are totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b)—(i) General. After
being notified by the veteran or the
veteran’s representative that the veteran
claims to be totally and permanently
disabled, the lender promptly requests
that the veteran or the veteran’s
representative submit a discharge
application to the lender, on a form
approved by the Secretary. The
application must be accompanied by
documentation from the Department of
Veterans Affairs showing that the
Department of Veterans Affairs has
determined that the veteran is
unemployable due to a serviceconnected disability. The veteran will
not be required to provide any
additional documentation related to the
veteran’s disability.
(ii) Lender and guaranty agency
actions. (A) After being notified by a
veteran or a veteran’s representative that

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the veteran claims to be totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), the lender must
continue collection activities until it
receives the veteran’s completed loan
discharge application with the required
documentation from the Department of
Veterans Affairs, as described in
paragraph (8)(i) of this section. Except
as provided in paragraph (c)(8)(ii)(C) of
this section, the lender will not attempt
to collect from the veteran or any
endorser after receiving the veteran’s
discharge application and
documentation from the Department of
Veterans Affairs.
(B) If the veteran submits a completed
loan discharge application and the
required documentation from the
Department of Veterans Affairs, and the
documentation indicates that the
veteran is totally and permanently
disabled as described in paragraph (2) of
the definition of that term in
§ 682.200(b), the lender must submit a
disability claim to the guaranty agency.
(C) If the documentation from the
Department of Veterans Affairs does not
indicate that the veteran is totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), the lender—
(1) Must resume collection and is
deemed to have exercised forbearance of
payment of both principal and interest
from the date collection activity was
suspended. The lender may capitalize,
in accordance with § 682.202(b), any
interest accrued and not paid during
that period.
(2) Must inform the veteran that he or
she may reapply for a total and
permanent disability discharge in
accordance with the procedures
described in § 682.402(c)(2) through
(c)(7), if the documentation from the
Department of Veterans Affairs does not
indicate that the veteran is totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), but indicates that
the veteran may be totally and
permanently disabled as described in
paragraph (1) of the definition of that
term.
(D) If the documentation from the
Department of Veterans Affairs indicates
that the borrower is totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), the guaranty
agency must submit a copy of the
veteran’s discharge application and
supporting documentation to the
Secretary, and must notify the veteran
that the veteran’s loan discharge request
has been referred to the Secretary for a
determination of discharge eligibility.

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55999

(E) If the documentation from the
Department of Veterans Affairs does not
indicate that the veteran is totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), the guaranty
agency does not pay the disability claim
and must return the claim to the lender
with an explanation of the basis for the
agency’s denial of the claim. Upon
receipt of the returned claim, the lender
must notify the veteran that the
application for a disability discharge has
been denied, provide the basis for the
denial, and inform the veteran that the
lender will resume collection on the
loan. The lender is deemed to have
exercised forbearance of both principal
and interest from the date collection
activity was suspended until the first
payment due date. The lender may
capitalize, in accordance with
§ 682.202(b), any interest accrued and
not paid during that period.
(F) If the Secretary determines, based
on a review of the documentation from
the Department of Veterans Affairs, that
the veteran is totally and permanently
disabled as described in paragraph (2) of
the definition of that term in
§ 682.200(b), the Secretary notifies the
guaranty agency that the veteran is
eligible for a total and permanent
disability discharge. Upon notification
by the Secretary that the veteran is
eligible for a discharge, the guaranty
agency pays the disability discharge
claim. Upon receipt of the claim
payment from the guaranty agency, the
lender notifies the veteran that the
veteran’s obligation to make any further
payments on the loan has been
discharged and returns to the person
who made the payments on the loan any
payments received on or after the
effective date of the determination by
the Department of Veterans Affairs that
the veteran is unemployable due to a
service-connected disability.
(G) If the Secretary determines, based
on a review of the documentation from
the Department of Veterans Affairs, that
the veteran is not totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in § 682.200(b), the Secretary
notifies the guaranty agency of this
determination. Upon notification by the
Secretary that the veteran is not eligible
for a discharge, the guaranty agency and
the lender must follow the procedures
described in paragraph (c)(8)(ii)(E) of
this section.
(H) The Secretary reimburses the
guaranty agency for a disability claim
paid to the lender after the agency pays
the claim to the lender.
*
*
*
*
*

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(h) * * *
(1) * * *
(v) In the case of a disability claim
based on a veteran’s discharge request
processed in accordance with
§ 682.402(c)(8), the guaranty agency
shall—
(A) Review the claim promptly and
not later than 45 days after the claim
was filed by the lender submit the
veteran’s discharge application and
supporting documentation to the
Secretary or return the claim to the
lender in accordance with
§ 682.402(c)(8)(ii)(D) or (E), as
applicable; and
(B) Not later than 45 days after
receiving notification from the Secretary
of the veteran’s eligibility or ineligibility
for discharge, pay the claim or return
the claim to the lender in accordance
with § 682.402(c)(8)(ii)(F) or (G), as
applicable.
*
*
*
*
*
■ 24. Section 682.405 is amended by:
■ A. In paragraph (a)(3), adding a new
sentence at the end of the paragraph.
■ B. In paragraph (b)(1)(iii), adding the
words ‘‘by the guaranty agency or its
agents’’ immediately after the word
‘‘affordable’’.
■ C. Revising paragraph (b)(3).
■ D. Adding a new paragraph (c).
The revision and additions read as
follows:

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§ 682.405

Loan rehabilitation agreement.

(a) * * *
(3) * * * Effective for any loan that
is rehabilitated on or after August 14,
2008, the borrower cannot rehabilitate
the loan again if the loan returns to
default status following the
rehabilitation.
(b) * * *
(3) Upon the sale of a rehabilitated
loan to an eligible lender—
(i) The guaranty agency must, within
45 days of the sale—
(A) Provide notice to the prior holder
of such sale, and
(B) Request that any consumer
reporting agency to which the default
was reported remove the record of
default from the borrower’s credit
history.
(ii) The prior holder of the loan must,
within 30 days of receiving the
notification from the guaranty agency,
request that any consumer reporting
agency to which the default claim
payment or other equivalent record was
reported remove such record from the
borrower’s credit history.
*
*
*
*
*
(c) A guaranty agency must make
available financial and economic
education materials, including debt

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management information, to any
borrower who has rehabilitated a
defaulted loan in accordance with
paragraph (a)(2) of this section.
■ 25. Section 682.410 is amended by:
■ A. In paragraph (b)(5), removing the
heading ‘‘Credit bureau reports’’ and
adding, in its place, the heading
‘‘Reports to consumer reporting
agencies’’.
■ B. In paragraph (b)(5)(i) introductory
text, removing the words ‘‘national
credit bureaus’’ at the end of the
paragraph and adding, in their place,
the words ‘‘nationwide consumer
reporting agencies’’.
■ C. In paragraph (b)(5)(ii) introductory
text, removing the words ‘‘credit
bureau’’ and adding, in their place, the
words ‘‘consumer reporting agency’’,
and removing the reference ‘‘(b)(6)(v)’’
and adding, in its place, the reference
‘‘(b)(6)(ii)’’.
■ D. In paragraph (b)(5)(iv)(A), removing
the words ‘‘credit bureaus’’ and adding,
in their place, the words ‘‘consumer
reporting agencies’’.
■ E. In paragraph (b)(5)(vi)(F), removing
the words ‘‘national credit bureaus’’ and
adding, in their place, the words
‘‘nationwide consumer reporting
agencies’’.
■ F. In paragraph (b)(5)(vi)(G), removing
the words ‘‘credit bureaus’’ and adding,
in their place, the words ‘‘consumer
reporting agencies’’.
■ G. In paragraph (b)(5)(vi)(K), removing
the word ‘‘and’’ at the end of the
paragraph.
■ H. In paragraph (b)(5)(vi)(L), removing
the punctuation ‘‘.’’ at the end of the
paragraph and adding, in its place, the
words ‘‘; and’’.
■ I. Adding a new paragraph
(b)(5)(vi)(M).
■ J. Redesignating paragraphs (b)(6)(ii),
(iii), (iv), (v), and (vi) as paragraphs
(b)(6)(v), (vi), (vii), (ii), and (iii)
respectively.
■ K. In newly redesignated paragraph
(b)(6)(iii), removing the reference
‘‘(b)(6)(v)’’ and adding, in its place, the
reference ‘‘(b)(6)(ii)’’, and removing the
words ‘‘national credit bureaus (if that
is the case)’’ and adding, in their place,
the words ‘‘nationwide consumer
reporting agencies’’.
■ L. Adding a new paragraph (b)(6)(iv).
■ M. In newly redesignated paragraph
(b)(6)(vi), removing the reference
‘‘(b)(6)(iv)’’ and adding, in its place, the
reference ‘‘(b)(6)(vii)’’.
The additions read as follows:
§ 682.410 Fiscal, administrative, and
enforcement requirements.

*

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*
*
(b) * * *
(5) * * *

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*

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*

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(vi) * * *
(M) Inform the borrower of the
options that are available to the
borrower to remove the loan from
default, including an explanation of the
fees and conditions associated with
each option.
*
*
*
*
*
(6) * * *
(iv) The agency must send a notice
informing the borrower of the options
that are available to remove the loan
from default, including an explanation
of the fees and conditions associated
with each option. This notice must be
sent within a reasonable time after the
end of the period for requesting an
administrative review as specified in
paragraph (b)(5)(iv)(B) of this section or,
if the borrower has requested an
administrative review, within a
reasonable time following the
conclusion of the administrative review.
*
*
*
*
*
■ 26. Section 682.601 is amended by
adding a new paragraph (a)(7)(iii) to
read as follows:
§ 682.601 Rules for a school that makes or
originates loans.

(a) * * *
(7) * * *
(iii) With regard to any school, the
audit must include a determination
that—
(A) Except as provided in paragraphs
(a)(8) and (b) of this section, the school
used all payments and proceeds from
the loans for need-based grant programs;
(B) The school met the requirements
of paragraph (c) of this section in
making the need-based grants; and
(C) The school used no more than a
reasonable portion of payments and
proceeds from the loans for direct
administrative expenses.
*
*
*
*
*
PART 685—WILLIAM D. FORD
FEDERAL DIRECT LOAN PROGRAM
27. The authority citation for part 685
continues to read as follows:

■

Authority: 20 U.S.C. 1087a et seq., unless
otherwise noted.

28. In § 685.102(b), the definition of
‘‘Estimated financial assistance’’ is
amended by:
■ A. Removing paragraphs (1)(ii), (iii),
(iv), and (ix), and redesignating
paragraphs (1)(i), (v), (vi), (vii), and (viii)
as paragraphs (1)(ii), (iii), (iv), (v), and
(vi), respectively.
■ B. Adding a new paragraph (1)(i) and
revising newly redesignated paragraph
(1)(ii).
■ C. Adding the word ‘‘and’’ after the
semicolon at the end of newly
redesignated paragraph (1)(v).
■

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D. Removing the words ‘‘; and’’ at the
end of newly redesignated paragraph
(1)(vi) and adding, in their place, the
punctuation ‘‘.’’.
■ E. Removing paragraph (2)(iii), and
redesignating paragraphs (2)(iv) and (v)
as paragraphs (2)(iii) and (iv),
respectively.
■ F. In newly redesignated paragraph
(2)(iii), removing the words ‘‘veterans’
educational benefits paid under chapter
30 of title 38 of the United States Code
(Montgomery GI Bill-Active Duty) and’’.
■ G. In newly redesignated paragraph
(2)(iv), removing the word ‘‘and’’ at the
end of the paragraph.
■ H. Adding a new paragraph (2)(v).
■ I. In paragraph (2)(vi), removing the
words ‘‘this part’’ in the first sentence
and adding, in their place, the words ‘‘a
title IV, HEA program,’’ and by
removing the punctuation ‘‘.’’ at the end
of the paragraph and adding, in its
place, the punctuation ‘‘;’’.
■ J. Adding new paragraphs (2)(vii) and
(viii).
The revisions and additions read as
follows:
■

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§ 685.102

Definitions.

Estimated financial assistance.
(1) * * *
(i) Except as provided in paragraph
(2)(iii) of this definition, national
service education awards or post-service
benefits under title I of the National and
Community Service Act of 1990
(AmeriCorps).
(ii) Except as provided in paragraph
(2)(vii) of this definition, veterans’
education benefits;
*
*
*
*
*
(2) * * *
(v) Non-need-based employment
earnings;
*
*
*
*
*
(vii) Federal veterans’ education
benefits paid under—
(A) Chapter 103 of title 10, United
States Code (Senior Reserve Officers’
Training Corps);
(B) Chapter 106A of title 10, United
States Code (Educational Assistance for
Persons Enlisting for Active Duty);
(C) Chapter 1606 of title 10, United
States Code (Selected Reserve
Educational Assistance Program);
(D) Chapter 1607 of title 10, United
States Code (Educational Assistance
Program for Reserve Component
Members Supporting Contingency
Operations and Certain Other
Operations);
(E) Chapter 30 of title 38, United
States Code (All-Volunteer Force
Educational Assistance Program, also
known as the ‘‘Montgomery GI Bill—
active duty’’);

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(F) Chapter 31 of title 38, United
States Code (Training and Rehabilitation
for Veterans with Service-Connected
Disabilities);
(G) Chapter 32 of title 38, United
States Code (Post-Vietnam Era Veterans’
Educational Assistance Program);
(H) Chapter 33 of title 38, United
States Code (Post 9/11 Educational
Assistance);
(I) Chapter 35 of title 38, United States
Code (Survivors’ and Dependents’
Educational Assistance Program);
(J) Section 903 of the Department of
Defense Authorization Act, 1981 (10
U.S.C. 2141 note) (Educational
Assistance Pilot Program);
(K) Section 156(b) of the ‘‘Joint
Resolution making further continuing
appropriations and providing for
productive employment for the fiscal
year 1983, and for other purposes’’ (42
U.S.C. 402 note) (Restored Entitlement
Program for Survivors, also known as
‘‘Quayle benefits’’);
(L) The provisions of chapter 3 of title
37, United States Code, related to
subsistence allowances for members of
the Reserve Officers Training Corps; and
(M) Any program that the Secretary
may determine is covered by section
480(c)(2) of the HEA; and
(viii) Iraq and Afghanistan Service
Grants made under section 420R of the
HEA.
*
*
*
*
*
■ 29. Section 685.200 is amended by:
■ A. In the introductory text to
paragraph (a)(1)(iv), adding the words
‘‘or TEACH Grant service obligation’’
immediately after the word ‘‘loan’’.
■ B. In the introductory text to
paragraph (a)(1)(iv)(A), adding the
words ‘‘or TEACH Grant service
obligation’’ immediately after the word
‘‘Act’’.
■ C. In paragraph (a)(1)(iv)(A)(1),
removing the word ‘‘and’’ at the end of
the paragraph.
■ D. In paragraph (a)(1)(iv)(A)(2),
removing the punctuation ‘‘.’’ at the end
of the paragraph and adding, in its
place, the words ‘‘; and’’.
■ E. Adding a new paragraph
(a)(1)(iv)(A)(3).
■ F. Removing paragraph (a)(1)(iv)(B).
■ G. Redesignating paragraph
(a)(1)(iv)(C) as paragraph (a)(1)(iv)(B).
■ H. In the introductory text to newly
redesignated paragraph (a)(1)(iv)(B),
removing the words ‘‘based on’’ and
adding, in their place, the word ‘‘after’’,
and adding the words ‘‘based on a
discharge request received prior to July
1, 2010’’ immediately after the word
‘‘disabled’’.
The addition reads as follows:
§ 685.200

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Borrower eligibility.

(a) * * *

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56001

(1) * * *
(iv) * * *
(A) * * *
(3) If the borrower receives a new
Direct Loan, other than a Direct
Consolidation Loan, within three years
of the date that any previous title IV
loan or TEACH Grant service obligation
was discharged due to a total and
permanent disability in accordance with
§ 685.213(b)(4), 34 CFR 674.61(b)(3)(i),
34 CFR 682.402(c), or 34 CFR 686.42(b)
based on a discharge request received
on or after July 1, 2010, resumes
repayment on the previously discharged
loan in accordance with
§ 685.213(b)(3)(ii)(A), 34 CFR
674.61(b)(5), or 34 CFR 682.402(c)(5), or
acknowledges that he or she is once
again subject to the terms of the TEACH
Grant agreement to serve before
receiving the new loan.
*
*
*
*
*
■ 30. Section 685.202 is amended by:
■ A. Adding a new paragraph (a)(4).
■ B. In paragraph (b)(2), removing the
words ‘‘the Secretary capitalizes’’ and
adding, in their place, the words ‘‘or for
a Direct PLUS Loan, the Secretary may
capitalize’’.
The addition reads as follows:
§ 685.202 Charges for which Direct Loan
Program borrowers are responsible.

(a) * * *
(4) Applicability of the
Servicemembers Civil Relief Act (50
U.S.C. 527, App. sec. 207).
Notwithstanding paragraphs (a)(1)
through (3) of this section, effective
August 14, 2008, upon the Secretary’s
receipt of a borrower’s written request
and a copy of the borrower’s military
orders, the maximum interest rate, as
defined in 50 U.S.C. 527, App. section
207(d), on Direct Loan Program loans
made prior to the borrower entering
active duty status is 6 percent while the
borrower is on active duty military
service.
*
*
*
*
*
■ 31. Section 685.203 is amended by:
■ A. In paragraph (a)(1)(iii), adding the
punctuation ‘‘,’’ immediately after
‘‘$3,500’’.
■ B. Revising paragraph (b).
■ C. In paragraph (c)(1)(i), adding the
words ‘‘, except as provided in
paragraph (c)(3) for certain dependent
undergraduate students’’ immediately
after the words ‘‘this section’’.
■ D. In paragraph (c)(2)(i)(A), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ E. Removing paragraph (c)(2)(i)(B).
■ F. Redesignating paragraph (c)(2)(i)(C)
as paragraph (c)(2)(i)(B).

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G. In newly redesignated paragraph
(c)(2)(i)(B), adding the words ‘‘, or, for
a loan first disbursed on or after July 1,
2008, $6,000,’’ immediately after
$4,000’’.
■ H. Redesignating paragraph (c)(2)(i)(D)
as paragraph (c)(2)(i)(C).
■ I. In newly redesignated paragraph
(c)(2)(i)(C), adding the words ‘‘, or, for
a loan first disbursed on or after July 1,
2008, $6,000,’’ immediately after
‘‘$4,000’’.
■ J. In paragraph (c)(2)(ii)(A), adding the
words ‘‘, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ K. In paragraph (c)(2)(ii)(B), adding
the words ‘‘, or, for a loan first disbursed
on or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ L. In paragraph (c)(2)(iii)(A), adding
the words ‘‘, or, for a loan first disbursed
on or after July 1, 2008, $7,000,’’
immediately after ‘‘$5,000’’.
■ M. In paragraph (c)(2)(iii)(B), adding
the words ‘‘, or, for a loan first disbursed
■

on or after July 1, 2008, $7,000,’’
immediately after ‘‘$5,000’’.
■ N. In paragraph (c)(2)(vi)(A), adding
the words ‘‘, or, for a loan first disbursed
on or after July 1, 2008, $6,000,’’
immediately after ‘‘$4,000’’.
■ O. Adding a new paragraph (c)(3).
■ P. In paragraph (e)(1), adding the
words ‘‘, or, effective July 1, 2008,
$31,000,’’ immediately after ‘‘$23,000’’.
■ Q. In paragraph (e)(2), adding the
words ‘‘, or, effective July 1, 2008,
$57,500,’’ immediately after ‘‘$46,000’’.
■ R. Adding a new paragraph (k).
The revisions and additions read as
follows:
§ 685.203

Loan limits.

(a) * * *
(b) Direct Unsubsidized Loans. (1) In
the case of a dependent undergraduate
student—
(i) For a loan first disbursed before
July 1, 2008, the total amount a student
may borrow for any period of study
under the Federal Direct Unsubsidized
Loan Program and the Federal
Unsubsidized Stafford Loan Program is

the same as the amount determined
under paragraph (a) of this section, less
any amount received under the Federal
Direct Stafford/Ford Loan Program or
the Federal Stafford Loan Program.
(ii) Except as provided in paragraph
(c)(3) of this section, for a loan first
disbursed on or after July 1, 2008, the
total amount a student may borrow for
any period of study under the Federal
Direct Unsubsidized Stafford/Ford Loan
Program in combination with the
Federal Unsubsidized Stafford Loan
Program is the same as the amount
determined under paragraph (a) of this
section, less any amount received under
the Federal Direct Stafford/Ford Loan
Program or the Federal Stafford Loan
Program, plus—
(A) $2,000, for a program of study of
at least a full academic year in length.
(B) For a program of study that is one
academic year or more in length with
less than a full academic year
remaining, the amount that is the same
ratio to $2,000 as the—

Number of semester, trimester, quarter, or clock hours enro
olled.
Number of semester, trimester, quarter, or clock hou
urs in academic year.
(C) For a program of study that is less
than a full academic year in length, the

amount that is the same ratio to $2,000
as the lesser of the—

Number of semester, trimester, quarter, or clock hours enro
olled.
Number of semester, trimester, quarter, or clock hou
urs in academic year.

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32. Section 685.204 is amended by:
A. In paragraph (b)(1)(iii)(A)(2),
removing the word ‘‘or’’ at the end of
the paragraph.
■ B. In paragraph (b)(1)(iii)(A)(3),
removing the punctuation ‘‘.’’ and
adding, in its place, ‘‘; or’’ at the end of
the paragraph.
■ C. Adding a new paragraph
(b)(1)(iii)(A)(4).
■ D. Revising paragraph (b)(1)(iii)(B).
■
■

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§ 685.204

Deferment.

*

*
*
*
*
(b) * * *
(1) * * *
(iii)(A) * * *
(4) The Secretary confirms a
borrower’s half-time enrollment status
through the use of the National Student
Loan Data System if requested to do so
by the school the borrower is attending.

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ER29OC09.005

(2) In the case of an independent
undergraduate student, a graduate or
professional student, or certain
dependent undergraduate students
under the conditions specified in
paragraph (c)(1)(ii) of this section,
except as provided in paragraph (c)(3) of
this section, the total amount the
student may borrow for any period of
enrollment under the Federal Direct
Unsubsidized Stafford/Ford Loan and
Federal Unsubsidized Stafford Loan
programs may not exceed the amounts
determined under paragraph (a) of this
section less any amount received under
the Federal Direct Stafford/Ford Loan
Program or the Federal Stafford Loan
Program, in combination with the
amounts determined under paragraph
(c) of this section.
(c) * * *

E. Redesignating paragraphs (g) and
(h) as paragraphs (h) and (i),
respectively.
■ F. In newly redesignated paragraph
(i)(3), removing the words ‘‘paragraph
(h)(2)’’ each time they appear and
adding, in their place, the words
‘‘paragraph (i)(2)’’.
■ G. In newly redesignated paragraph
(i)(4), removing the words ‘‘paragraph
(h)(2)’’ and adding, in their place, the
words ‘‘paragraph (i)(2)’’.
■ H. Adding a new paragraph (g).
The revisions and additions read as
follows:
■

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Number of weeks in program.
Number of weeks in academic yearr.

(3) A dependent undergraduate
student who qualifies for additional
Direct Unsubsidized Loan amounts
under this section in accordance with
paragraph (c)(1)(ii) is not eligible to
receive the additional Direct
Unsubsidized Loan amounts provided
under paragraph (b)(1)(ii) of this section.
*
*
*
*
*
(k) Any TEACH Grants that have been
converted to Direct Unsubsidized Loans
are not counted against any annual or
aggregate loan limits under this section.

ER29OC09.003

or

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(B)(1) Upon notification by the
Secretary that a deferment has been
granted based on paragraph
(b)(1)(iii)(A)(2), (3), or (4) of this section,
the borrower has the option to cancel
the deferment and continue paying on
the loan.
(2) If the borrower elects to cancel the
deferment and continue paying on the
loan, the borrower has the option to
make the principal and interest
payments that were deferred. If the
borrower does not make the payments,
the Secretary applies a deferment for the
period in which payments were not
made and capitalizes the interest. The
Secretary will provide information,
including an example, to assist the
borrower in understanding the impact of
capitalization of accrued, unpaid
interest on the borrower’s loan principal
and on the total amount of interest to be
paid over the life of the loan.
*
*
*
*
*
(g) In-school deferments for Direct
PLUS Loan borrowers with loans first
disbursed on or after July 1, 2008. (1)(i)
A student Direct PLUS Loan borrower is
entitled to a deferment on a Direct PLUS
Loan first disbursed on or after July 1,
2008 during the 6-month period that
begins on the day after the student
ceases to be enrolled on at least a halftime basis at an eligible institution.
(ii) If the Secretary grants an in-school
deferment to a student Direct PLUS
Loan borrower based on
§ 682.204(b)(1)(iii)(A)(2), (3), or (4), the
deferment period for a Direct PLUS
Loan first disbursed on or after July 1,
2008 includes the 6-month postenrollment period described in
paragraph (g)(1)(i) of this section.
(2) Upon the request of the borrower,
an eligible parent Direct PLUS Loan
borrower will receive a deferment on a
Direct PLUS Loan first disbursed on or
after July 1, 2008—
(i) During the period when the
student on whose behalf the loan was
obtained is enrolled at an eligible
institution on at least a half-time basis;
and
(ii) During the 6-month period that
begins on the later of the day after the
student on whose behalf the loan was
obtained ceases to be enrolled on at
least a half-time basis or, if the parent
borrower is also a student, the day after
the parent borrower ceases to be
enrolled on at least a half-time basis.
*
*
*
*
*
■ 33. Section 685.205 is amended by:
■ A. In paragraph (b)(8), removing the
word ‘‘or’’ at the end of the paragraph.
■ B. In paragraph (b)(9), removing the
punctuation ‘‘.’’ at the end of the

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paragraph and adding, in its place, ‘‘;
or’’.
■ C. Adding a new paragraph (b)(10) to
read as follows:
§ 685.205

Forbearance.

*

*
*
*
*
(b) * * *
(10) For Direct PLUS Loans first
disbursed before July 1, 2008, to align
repayment with a borrower’s Direct
PLUS Loans that were first disbursed on
or after July 1, 2008, or with Direct
Subsidized Loans or Direct
Unsubsidized Loans that have a grace
period in accordance with § 685.207(b)
or (c). The Secretary notifies the
borrower that the borrower has the
option to cancel the forbearance and
continue paying on the loan.
*
*
*
*
*
■ 34. Section 685.211 is amended by:
■ A. In paragraph (f)(1), removing the
words ‘‘credit bureau’’ in the third
sentence and adding, in their place, the
words ‘‘consumer reporting agency’’.
■ B. Adding a new paragraph (f)(4).
The addition reads as follows:
§ 685.211 Miscellaneous repayment
provisions.

*

*
*
*
*
(f) * * *
(4) Effective for any defaulted Direct
Loan that is rehabilitated on or after
August 14, 2008, the borrower cannot
rehabilitate the loan again if the loan
returns to default status following the
rehabilitation.
■ 35. Section 685.213 is revised to read
as follows:
§ 685.213 Total and permanent disability
discharge.

(a) General. (1) A borrower’s Direct
Loan is discharged if the borrower
becomes totally and permanently
disabled, as defined in 34 CFR
682.200(b), and satisfies the eligibility
requirements in this section.
(2) For a borrower who becomes
totally and permanently disabled as
described in paragraph (1) of the
definition of that term in 34 CFR
682.200(b), the borrower’s loan
discharge application is processed in
accordance with paragraph (b) of this
section.
(3) For veterans who are totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in 34 CFR 682.200(b), the veteran’s
loan discharge application is processed
in accordance with paragraph (c) of this
section.
(b) Discharge application process for
a borrower who is totally and
permanently disabled as described in
paragraph (1) of the definition of that

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term in 34 CFR 682.200(b). (1) Borrower
application for discharge. To qualify for
a discharge of a Direct Loan based on a
total and permanent disability, a
borrower must submit a discharge
application to the Secretary on a form
approved by the Secretary. The
application must contain a certification
by a physician, who is a doctor of
medicine or osteopathy legally
authorized to practice in a State, that the
borrower is totally and permanently
disabled as described in paragraph (1) of
the definition of that term in 34 CFR
682.200(b). The borrower must submit
the application to the Secretary within
90 days of the date the physician
certifies the application. Upon receipt of
the borrower’s application, the Secretary
notifies the borrower that no payments
are due on the loan while the Secretary
determines the borrower’s eligibility for
discharge.
(2) Determination of eligibility. (i) If,
after reviewing the borrower’s
application, the Secretary determines
that the certification provided by the
borrower supports the conclusion that
the borrower meets the criteria for a
total and permanent disability
discharge, as described in paragraph (1)
of the definition of that term in 34 CFR
682.200(b), the borrower is considered
totally and permanently disabled as of
the date the physician certifies the
borrower’s application.
(ii) Upon making a determination that
the borrower is totally and permanently
disabled, as described in paragraph (1)
of the definition of that term in 34 CFR
682.200(b), the Secretary discharges the
borrower’s obligation to make any
further payments on the loan, notifies
the borrower that the loan has been
discharged, and returns to the person
who made the payments on the loan any
payments received after the date the
physician certified the borrower’s loan
discharge application. The notification
to the borrower explains the terms and
conditions under which the borrower’s
obligation to repay the loan will be
reinstated, as specified in paragraph
(b)(4)(i) of this section.
(iii) If the Secretary determines that
the certification provided by the
borrower does not support the
conclusion that the borrower is totally
and permanently disabled, as described
in paragraph (1) of the definition of that
term in 34 CFR 682.200(b), the Secretary
notifies the borrower that the
application for a disability discharge has
been denied, and that the loan is due
and payable to the Secretary under the
terms of the promissory note.
(iv) The Secretary reserves the right to
require the borrower to submit
additional medical evidence if the

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Secretary determines that the borrower’s
application does not conclusively prove
that the borrower is totally and
permanently disabled as described in
paragraph (1) of the definition of that
term in 34 CFR 682.200(b). As part of
the Secretary’s review of the borrower’s
discharge application, the Secretary may
arrange for an additional review of the
borrower’s condition by an independent
physician at no expense to the borrower.
(3) Treatment of disbursements made
during the period from the date of the
physician’s certification until the date of
discharge. If a borrower received a title
IV loan or TEACH Grant prior to the
date the physician certified the
borrower’s discharge application and a
disbursement of that loan or grant is
made during the period from the date of
the physician’s certification until the
date the Secretary grants a discharge
under this section, the processing of the
borrower’s loan discharge request will
be suspended until the borrower
ensures that the full amount of the
disbursement has been returned to the
loan holder or to the Secretary, as
applicable.
(4) Conditions for reinstatement of a
loan after a total and permanent
disability discharge. (i) The Secretary
reinstates a borrower’s obligation to
repay a loan that was discharged in
accordance with paragraph (b)(2)(ii) of
this section if, within three years after
the date the Secretary granted the
discharge, the borrower—
(A) Has annual earnings from
employment that exceed 100 percent of
the poverty guideline for a family of
two, as published annually by the
United States Department of Health and
Human Services pursuant to 42 U.S.C.
9902(2);
(B) Receives a new TEACH Grant or
a new loan under the Perkins, FFEL or
Direct Loan programs, except for a FFEL
or Direct Consolidation Loan that
includes loans that were not discharged;
or
(C) Fails to ensure that the full
amount of any disbursement of a title IV
loan or TEACH Grant received prior to
the discharge date that is made during
the three-year period following the
discharge date is returned to the loan
holder or to the Secretary, as applicable,
within 120 days of the disbursement
date.
(ii) If the borrower’s obligation to
repay the loan is reinstated, the
Secretary—
(A) Notifies the borrower that the
borrower’s obligation to repay the loan
has been reinstated; and
(B) Does not require the borrower to
pay interest on the loan for the period
from the date the loan was discharged

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until the date the borrower’s obligation
to repay the loan was reinstated.
(iii) The Secretary’s notification under
paragraph (b)(4)(ii)(A) of this section
will include—
(A) The reason or reasons for the
reinstatement;
(B) An explanation that the first
payment due date on the loan following
reinstatement will be no earlier than 60
days after the date of the notification of
reinstatement; and
(C) Information on how the borrower
may contact the Secretary if the
borrower has questions about the
reinstatement or believes that the
obligation to repay the loan was
reinstated based on incorrect
information.
(5) Borrower’s responsibilities after a
total and permanent disability
discharge. During the three-year period
described in paragraph (b)(4)(i) of this
section, the borrower or, if applicable,
the borrower’s representative must—
(i) Promptly notify the Secretary of
any changes in address or phone
number;
(ii) Promptly notify the Secretary if
the borrower’s annual earnings from
employment exceed the amount
specified in paragraph (b)(4)(i)(A) of this
section; and
(iii) Provide the Secretary, upon
request, with documentation of the
borrower’s annual earnings from
employment.
(c) Discharge application process for
veterans who are totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in 34 CFR 682.200(b).
(1) Veteran’s application for
discharge. To qualify for a discharge of
a Direct Loan based on a total and
permanent disability as described in
paragraph (2) of the definition of that
term in 34 CFR 682.200(b), a veteran
must submit a discharge application to
the Secretary on a form approved by the
Secretary. The application must be
accompanied by documentation from
the Department of Veterans Affairs
showing that the Department of
Veterans Affairs has determined that the
veteran is unemployable due to a
service-connected disability. The
Secretary does not require the veteran to
provide any additional documentation
related to the veteran’s disability. Upon
receipt of the veteran’s application, the
Secretary notifies the veteran that no
payments are due on the loan while the
Secretary determines the veteran’s
eligibility for discharge.
(2) Determination of eligibility. (i) If
the Secretary determines, based on a
review of the documentation from the
Department of Veterans Affairs, that the

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veteran is totally and permanently
disabled as described in paragraph (2) of
the definition of that term in
§ 682.200(b), the Secretary discharges
the veteran’s obligation to make any
further payments on the loan and
returns to the person who made the
payments on the loan any payments
received on or after the effective date of
the determination by the Department of
Veterans Affairs that the veteran is
unemployable due to a serviceconnected disability.
(ii)(A) If the Secretary determines,
based on a review of the documentation
from the Department of Veterans Affairs,
that the veteran is not totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in 34 CFR 682.200(b), the Secretary
notifies the veteran that the application
for a disability discharge has been
denied, and that the loan is due and
payable to the Secretary under the terms
of the promissory note.
(B) The Secretary notifies the veteran
that he or she may reapply for a total
and permanent disability discharge in
accordance with the procedures
described in paragraph (b) of this
section if the documentation from the
Department of Veterans Affairs does not
indicate that the veteran is totally and
permanently disabled as described in
paragraph (2) of the definition of that
term in 34 CFR 682.200(b), but indicates
that the veteran may be totally and
permanently disabled as described in
paragraph (1) of the definition of that
term.
■ 36. Section 685.217 is amended by:
■ A. Revising paragraph (a).
■ B. In paragraph (b), adding a
definition of Educational service agency
in alphabetical order.
■ C. Revising the introductory text of
paragraph (c)(1).
■ D. In paragraph (c)(1)(ii), adding the
words ‘‘or educational service agency’s’’
immediately after the words ‘‘the
school’s’’.
■ E. In paragraph (c)(1)(iii), removing
the words ‘‘Bureau of Indian Affairs
(BIA)’’ and adding, in their place, the
words ‘‘Bureau of Indian Education
(BIE)’’, and removing the words ‘‘the
BIA’’ and adding, in their place, the
words ‘‘the BIE’’.
■ F. In paragraph (c)(2), adding the
words ‘‘or educational service agency’’
immediately after the words ‘‘If the
school’’ at the beginning of the
paragraph, and removing the words ‘‘the
school failed’’ and adding, in their
place, the word ‘‘fails’’.
■ G. In paragraph (c)(3)(i)(A), removing
the words ‘‘in which’’ and adding, in
their place, the words ‘‘or educational
service agency where’’.

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H. In paragraph (c)(3)(i)(B), removing
the words ‘‘in which’’ and adding, in
their place, the words ‘‘or educational
service agency where’’.
■ I. In paragraph (c)(3)(ii)(A), removing
the word ‘‘in’’ and adding, in its place,
the word ‘‘at’’, and adding the words ‘‘,
or taught mathematics or science to
secondary school students on a full-time
basis at an eligible educational service
agency,’’ immediately after the words
‘‘secondary school’’.
■ J. In paragraph (c)(3)(ii)(B), removing
the word ‘‘in’’ the first time it appears
and adding, in its place, the word ‘‘at’’,
and adding the words ‘‘or educational
service agency’’ immediately after the
words ‘‘secondary school’’ the first time
they appear.
■ K. Adding a new paragraph (c)(3)(iii).
■ L. In paragraph (c)(4)(i), removing the
word ‘‘in’’ and adding, in its place, the
word ‘‘at’’, and adding the words ‘‘or
educational service agency’’
immediately after the words ‘‘secondary
school’’ the first time they appear.
■ M. In paragraph (c)(4)(ii)(A), removing
the word ‘‘in’’ and adding, in its place,
the word ‘‘at’’, and adding the words ‘‘,
or taught mathematics or science on a
full-time basis to secondary school
students at an eligible educational
service agency,’’ immediately after the
words ‘‘secondary school’’.
■ N. In paragraph (c)(4)(ii)(B), removing
the word ‘‘in’’ the first time it appears
and adding, in its place, the word ‘‘at’’,
and by adding the words ‘‘or
educational service agency’’
immediately after the words ‘‘secondary
school’’ the first time they appear.
■ O. Adding a new paragraph (c)(4)(iii).
■ P. Revising paragraph (c)(9).
■ Q. Revising paragraph (c)(11).
■ R. In paragraph (d)(2), removing the
reference ‘‘34 CFR 682.215’’ and adding,
in its place, the reference ‘‘34 CFR
682.216’’.
The revisions and additions read as
follows:
■

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§ 685.217
program.

Teacher loan forgiveness

(a) General. (1) The teacher loan
forgiveness program is intended to
encourage individuals to enter and
continue in the teaching profession. For
new borrowers, the Secretary repays the
amount specified in this paragraph (a)
on the borrower’s subsidized and
unsubsidized Federal Stafford Loans,
Direct Subsidized Loans, Direct
Unsubsidized Loans, and in certain
cases, Federal Consolidation Loans or
Direct Consolidation Loans. The
forgiveness program is only available to
a borrower who has no outstanding loan
balance under the FFEL Program or the
Direct Loan Program on October 1, 1998

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or who has no outstanding loan balance
on the date he or she obtains a loan after
October 1, 1998.
(2)(i) The borrower must have been
employed at an eligible elementary or
secondary school that serves lowincome families or by an educational
service agency that serves low-income
families as a full-time teacher for five
consecutive complete academic years.
The required five years of teaching may
include any combination of qualifying
teaching service at an eligible
elementary or secondary school or an
eligible educational service agency.
(ii) Teaching at an eligible elementary
or secondary school may be counted
toward the required five consecutive
complete academic years only if at least
one year of teaching was after the 1997–
1998 academic year.
(iii) Teaching at an eligible
educational service agency may be
counted toward the required five
consecutive complete academic years
only if the consecutive five-year period
includes qualifying service at an eligible
educational service agency performed
after the 2007–2008 academic year.
(3) All borrowers eligible for teacher
loan forgiveness may receive loan
forgiveness of up to a combined total of
$5,000 on the borrower’s eligible FFEL
and Direct Loan Program loans.
(4) A borrower may receive loan
forgiveness of up to a combined total of
$17,500 on the borrower’s eligible FFEL
and Direct Loan Program loans if the
borrower was employed for five
consecutive years—
(i) At an eligible secondary school as
a highly qualified mathematics or
science teacher, or at an eligible
educational service agency as a highly
qualified teacher of mathematics or
science to secondary school students; or
(ii) At an eligible elementary or
secondary school or educational service
agency as a highly qualified special
education teacher.
(5) The loan for which the borrower
is seeking forgiveness must have been
made prior to the end of the borrower’s
fifth year of qualifying teaching service.
(b) * * *
Educational service agency means a
regional public multiservice agency
authorized by State statute to develop,
manage, and provide services or
programs to local educational agencies,
as defined in section 9101 of the
Elementary and Secondary Education
Act of 1965, as amended.
*
*
*
*
*
(c) * * *
(1) A borrower who has been
employed at an elementary or secondary
school or an educational service agency

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56005

as a full-time teacher for five
consecutive complete academic years
may obtain loan forgiveness under this
program if the elementary or secondary
school or educational service agency—
*
*
*
*
*
(3) * * *
(iii) Teaching service performed at an
eligible educational service agency may
be counted toward the required five
years of teaching only if the consecutive
five-year period includes qualifying
service at an eligible educational service
agency performed after the 2007–2008
academic year.
(4) * * *
(iii) Teaching service performed at an
eligible educational service agency may
be counted toward the required five
years of teaching only if the consecutive
five-year period includes qualifying
service at an eligible educational service
agency performed after the 2007–2008
academic year.
*
*
*
*
*
(9) A borrower who was employed as
a teacher at more than one qualifying
school, at more than one qualifying
educational service agency, or at a
combination of both during an academic
year and demonstrates that the
combined teaching was the equivalent
of full-time, as supported by the
certification of one or more of the chief
administrative officers of the schools or
educational service agencies involved,
is considered to have completed one
academic year of qualifying teaching.
*
*
*
*
*
(11) A borrower may not receive loan
forgiveness for the same qualifying
teaching service under this section if the
borrower receives a benefit for the same
teaching service under—
(i) Subtitle D of title I of the National
and Community Service Act of 1990;
(ii) 34 CFR 685.219; or
(iii) Section 428K of the Act.
*
*
*
*
*
§ 685.219

[Amended]

37. Section 685.219 is amended in
paragraph (b) by removing the words
‘‘licensed or regulated health care’’ in
paragraph (5)(i) of the definition of
‘‘Public service organization’’ and
adding, in their place, the words
‘‘licensed or regulated child care’’.

■

§ 685.220

[Amended]

38. Section 685.220 is amended by:
A. In paragraph (d)(1)(i)(B)(3), adding
the words ‘‘or the no accrual of interest
benefit for active duty service’’
immediately after the word ‘‘Program’’.
■ B. In paragraph (d)(1)(i)(B)(4), adding
the words ‘‘or an income-based
repayment plan’’ immediately after the
■
■

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words ‘‘income contingent repayment
plan’’.
■ C. In paragraph (d)(1)(i)(B)(5), adding
the words ‘‘or the no accrual of interest
benefit for active duty service’’
immediately after the words
‘‘Forgiveness Program’’.
■ D. In paragraph (d)(1)(ii)(D), adding
the words ‘‘or the income-based
repayment plan described in
§ 685.208(m),’’ immediately after the
reference ‘‘§ 685.208(k)’’.
■ 39. Section 685.221 is amended by:
■ A. Revising paragraph (a)(4).
■ B. In paragraph (b)(1), removing the
words ‘‘Except as provided under
paragraph (b)(2) of this section, the’’ in
the second sentence and adding, in their
place, the word ‘‘The’’.
■ C. In paragraph (b)(2)(i), removing the
word ‘‘The’’ at the beginning of the
sentence and adding, in its place, the
words ‘‘Except for borrowers provided
for in paragraph (b)(2)(ii) of this section,
the’’.
■ D. Redesignating paragraphs (b)(2)(ii)
and (b)(2)(iii) as paragraphs (b)(2)(iii)
and (b)(2)(iv), respectively.
■ E. Adding a new paragraph (b)(2)(ii).
■ F. In newly redesignated paragraph
(b)(2)(iii), removing the words ‘‘or
(b)(2)(i)’’ and adding, in their place, the
words ‘‘, (b)(2)(i), or (b)(2)(ii)’’.

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G. In newly redesignated paragraph
(b)(2)(iv), removing the words ‘‘or
(b)(2)(i)’’ and adding, in their place, the
words ‘‘, (b)(2)(i), or (b)(2)(ii)’’.
The revision and addition read as
follows:

■

§ 685.221

Income-based repayment plan.

(a) * * *
(4) Partial financial hardship means a
circumstance in which—
(i) For an unmarried borrower or a
married borrower who files an
individual Federal tax return, the
annual amount due on all of the
borrower’s eligible loans, as calculated
under a standard repayment plan based
on a 10-year repayment period, using
the greater of the amount due at the time
the borrower initially entered
repayment or at the time the borrower
elects the income-based repayment
plan, exceeds 15 percent of the
difference between the borrower’s AGI
and 150 percent of the poverty guideline
for the borrower’s family size; or
(ii) For a married borrower who files
a joint Federal tax return with his or her
spouse, the annual amount due on all of
the borrower’s eligible loans and, if
applicable, the spouse’s eligible loans,
as calculated under a standard
repayment plan based on a 10-year
repayment period, using the greater of

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the amount due at the time the loans
initially entered repayment or at the
time the borrower or spouse elects the
income-based repayment plan, exceeds
15 percent of the difference between the
borrower’s and spouse’s AGI, and 150
percent of the poverty guideline for the
borrower’s family size.
*
*
*
*
*
(b) * * *
(2) * * *
(ii) Both the borrower and borrower’s
spouse have eligible loans and filed a
joint Federal tax return, in which case
the Secretary determines—
(A) Each borrower’s percentage of the
couple’s total eligible loan debt;
(B) The adjusted monthly payment for
each borrower by multiplying the
calculated payment by the percentage
determined in paragraph (b)(2)(ii)(A) of
this section; and
(C) If the borrower’s loans are held by
multiple holders, the borrower’s
adjusted monthly Direct Loan payment
by multiplying the payment determined
in paragraph (b)(2)(ii)(B) of this section
by the percentage of the outstanding
principal amount of eligible loans that
are Direct Loans;
*
*
*
*
*
[FR Doc. E9–25190 Filed 10–28–09; 8:45 am]
BILLING CODE 4000–01–P

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