[Code of Federal Regulations]
[Title 34, Volume 3]
[Revised as of July 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 34CFR682.401]
[Page 729-740]
TITLE 34--EDUCATION
CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION
PART 682_FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM--
Table of Contents
Subpart D_Administration of the Federal Family Education Loan Programs
by a Guaranty Agency
Sec. 682.401 Basic program agreement.
(a) General. In order to participate in the FFEL programs, a
guaranty agency shall enter into a basic agreement with the Secretary.
(b) Terms of agreement. In the basic agreement, the guaranty agency
shall agree to ensure that its loan guarantee program meets the
following requirements at all times:
(1) Aggregate loan limits. The aggregate guaranteed unpaid principal
amount for all Stafford and SLS, loans made to a borrower may not exceed
the
[[Page 730]]
amounts set forth in Sec. 682.204 (b), (e), and (g).
(2) Annual loan limits. (i) The annual loan maximum amount for a
borrower that may be guaranteed for an academic year may not exceed the
amounts set forth in Sec. 682.204 (a), (c), (d), (f), and (h).
(ii) A guaranty agency may make the loan amounts authorized under
paragraph (b)(2)(i) of this section applicable for either--
(A) A period of not less than that attributable to the academic
year, as defined in 34 CFR 668.3; or
(B) A period attributable to the academic year that is not less than
the period specified in paragraph (b)(2)(ii)(A) of this section, in
which the student earns the amount of credit in the student's program of
study required by the student's school as the amount necessary for the
student to advance in academic standing as normally measured on an
academic year basis (for example, from freshman to sophomore or, in the
case of schools using clock hours, completion of at least 900 clock
hours).
(iii) The amount of a loan guaranteed may not exceed the amount set
forth in Sec. 682.204(k).
(3) Duration of borrower eligibility. (i) A student borrower under
the Stafford Loan Program or the PLUS Loan Program and a parent borrower
under the PLUS Program are eligible to receive a guaranteed loan for any
year of the student's study at a participating school.
(ii) Loans must be available to or on behalf of any student for at
least six academic years of study.
(4) Reinstatement of borrower eligibility. Except as provided in
Sec. 668.35(b) for a borrower with a defaulted loan on which a judgment
has been obtained and Sec. 668.35(i) for a borrower who fraudulently
obtained title IV, HEA program assistance, reinstatement of Title IV
eligibility for a borrower with a defaulted loan must be in accordance
with this paragraph (b)(4). For a borrower's loans held by a guaranty
agency on which a reinsurance claim has been paid by the Secretary, the
guaranty agency must afford a defaulted borrower, upon the borrower's
request, renewed eligibility for Title IV assistance once the borrower
has made satisfactory repayment arrangements as that term is defined in
Sec. 682.200.
(i) For purposes of this section, the determination of reasonable
and affordable must--
(A) Include consideration of the borrower's and spouse's disposable
income and necessary expenses including, but not limited to, housing,
utilities, food, medical costs, dependent care costs, work-related
expenses and other Title IV repayment;
(B) Not be a required minimum payment amount, e.g. $50, if the
agency determines that a smaller amount is reasonable and affordable
based on the borrower's total financial circumstances. The agency must
include documentation in the borrower's file of the basis for the
determination, if the monthly reasonable and affordable payment
established under this section is less than $50.00 or the monthly
accrued interest on the loan, whichever is greater.
(C) Be based on the documentation provided by the borrower or other
sources including, but not limited to--
(1) Evidence of current income (e.g. proof of welfare benefits,
Social Security benefits, Supplemental Security Income, Workers'
Compensation, child support, veterans' benefits, two most recent pay
stubs, most recent copy of U.S. income tax return, State Department of
Labor reports);
(2) Evidence of current expenses (e.g. a copy of the borrower's
monthly household budget, on a form provided by the guaranty agency);
and
(3) A statement of the unpaid balance on all FFEL loans held by
other holders.
(ii) A borrower may request that the monthly payment amount be
adjusted due to a change in the borrower's total financial circumstances
upon providing the documentation specified in paragraph (b)(4)(i)(C) of
this section.
(iii) A guaranty agency must provide the borrower with a written
statement of the reasonable and affordable payment amount required for
the reinstatement of the borrower's eligibility for Title IV student
assistance, and provide the borrower with an opportunity to object to
those terms.
[[Page 731]]
(iv) A guaranty agency must provide the borrower with written
information regarding the possibility of loan rehabilitation if the
borrower makes three additional reasonable and affordable monthly
payments after making payments to regain eligibility for Title IV
assistance and the consequences of loan rehabilitation.
(v) A guaranty agency must inform the borrower that he or she may
only obtain reinstatement of borrower eligibility under this section
once.
(5) Borrower responsibilities. (i) The borrower must indicate his or
her preferred lender on the promissory note or other written or
electronic documentation submitted during the loan origination process
if he or she has such a preference.
(ii) The borrower must give the lender, as part of the promissory
note or application process for a parent PLUS loan--
(A) A statement, as described in 34 CFR part 668, that the loan will
be used for the cost of the student's attendance;
(B) A statement from the student authorizing the school to release
information relevant to the student's eligibility to have a parent
borrow on the student's behalf (e.g., the student's enrollment status,
financial assistance, and employment records); and
(C) Information from the school providing the maximum amount that
may be borrowed on behalf of the student.
(iii) The borrower shall give the lender, as part of the application
process for a Consolidation loan--
(A) Information demonstrating that the borrower is eligible for the
loan under Sec. 682.201(c); and
(B) A statement that the borrower does not currently have another
application for a Consolidation loan pending.
(iv) The borrower shall promptly notify--
(A) The current holder or the guaranty agency of any change of name,
address, student status to less than half-time, employer, or employer's
address; and
(B) The school of any change in local address during enrollment.
(6) School eligibility--(i) General. A school that has a program
participation agreement in effect with the Secretary under Sec.
682.14(a) is eligible to participate in the program of the agency under
reasonable criteria established by the guaranty agency, and approved by
the Secretary, under paragraph (d)(2) of this section, except to the
extent that--
(A) The school's eligibility is limited, suspended, or terminated by
the Secretary under 34 CFR part 668 or by the guaranty agency under
standards and procedures that are substantially the same as those in 34
CFR part 668;
(B) The Secretary upholds the limitation, suspension, or termination
of a school by a guaranty agency and extends that sanction to all
guaranty agency programs under section 432(h)(3) of the Act or Sec.
682.713;
(C) The school is ineligible under section 435(a)(2) of the Act;
(D) There is a State constitutional prohibition affecting the
school's eligibility;
(E) The school's programs consist of study solely by correspondence;
(F) The agency determines, subject to the agreement of the
Secretary, that the school does not satisfy the standards of
administrative capability and financial responsibility as defined in 34
CFR part 668;
(G) The school fails to make timely refunds to students as required
in Sec. 682.607(c);
(H) The school has not satisfied, within 30 days of issuance, a
final judgment obtained by a student seeking a refund;
(I) The school or an owner, director, or officer of the school is
found guilty or liable in any criminal, civil, or administrative
proceeding regarding the obtaining, maintenance, or disbursement of
State or Federal student grant, loan, or work assistance funds; or
(J) The school or an owner, director, or officer of the school has
unpaid financial liabilities involving the improper acquisition,
expenditure, or refund of State or Federal student financial assistance
funds.
(ii) Limitation by a guaranty agency of a school's participation.
For purposes of this paragraph, a school that is subject to limitation
of participation in the
[[Page 732]]
guaranty agency's program may be either a school that is applying to
participate in the agency's program for the first time, or a school that
is renewing its application to continue participation in the agency's
program. A guaranty agency may limit the total number of loans or the
volume of loans made to students attending a particular school, or
otherwise establish appropriate limitations on the school's
participation, if the agency makes a determination that the school does
not satisfy--
(A) The standards of financial responsibility defined in 34 CFR
668.5; or
(B) The standards of administrative capability defined in 34 CFR
668.16.
(iii) Limitation, suspension, or termination of school eligibility.
A guaranty agency may limit, suspend, or terminate the participation of
an eligible school. If a guaranty agency limits, suspends, or terminates
the participation of a school from the agency's program, the Secretary
applies that limitation, suspension, or termination to all locations of
the school.
(iv) Condition for guaranteeing loans for students attending a
school. The guaranty agency may require the school to execute a
participation agreement with the agency and to submit documentation that
establishes the school's eligibility to participate in the agency's
program.
(7) Lender eligibility. (i) An eligible lender may participate in
the program of the agency under reasonable criteria established by the
guaranty agency except to the extent that--
(A) The lender's eligibility has been limited, suspended, or
terminated by the Secretary under subpart G of this part or by the
agency under standards and procedures that are substantially the same as
those in subpart G of this part; or
(B) The lender is disqualified by the Secretary under sections
432(h)(1), 432(h)(2), 435(d)(3), or 435(d)(5) of the Act or Sec.
682.712; or
(C) There is a State constitutional prohibition affecting the
lender's eligibility.
(ii) The agency may not guarantee a loan made by a school lender
that is not located in the geographical area that the agency serves.
(iii) The guaranty agency may refuse to guarantee loans made by a
school on behalf of students not attending that school.
(iv) The guaranty agency may, in determining whether to enter into a
guarantee agreement with a lender, consider whether the lender has had
prior experience in a similar Federal, State, or private nonprofit
student loan program and the amount and percentage of loans that are
currently delinquent or in default under that program.
(8) Out-of-State schools. The agency shall guarantee Stafford, SLS,
and PLUS loans for students who are legal residents of any State served
by the agency under Sec. 682.404(h)(2) but who attend schools out of
that State and for parents who are legal residents of that State and are
borrowing on behalf of students attending schools out of that State. In
guaranteeing these loans, the agency may not impose any restrictions
that it does not apply to borrowers who are legal residents of the State
attending in-State schools or to parent borrowers who are legal
residents of the State and are borrowing for students attending in-State
schools.
(9) Out-of-State residents. The agency shall guarantee Stafford,
SLS, and PLUS loans for students who are not legal residents of any
State served by the agency under Sec. 682.404(h)(2) but who attend
schools in that State, and for parents who are not legal residents of
that State and who are borrowing on behalf of students attending schools
in that State. In guaranteeing these loans, the agency may not impose
any restrictions that it does not apply to borrowers who are legal
residents of the State attending in-State schools, or to parent
borrowers who are legal residents of the State and who are borrowing for
students attending in-State schools.
(10) Insurance premiums and Federal default fees. (i) Except for a
Consolidation Loan or SLS or PLUS loans refinanced under Sec. 682.209
(e) or (f), a guaranty agency:
(A) May charge the lender an insurance premium for Stafford, SLS, or
PLUS loans it guarantees prior to July 1, 2006; and
[[Page 733]]
(B) Must collect, either from the lender or by payment from any
other non-Federal source, a Federal default fee for any Stafford or PLUS
loans it guarantees on or after July 1, 2006, to be deposited into the
Federal Fund under Sec. 682.419.
(ii) The guaranty agency may not use the Federal default fee for
incentive payments to lenders, and may only use the insurance premium or
the Federal default fee for costs incurred in guaranteeing loans or in
the administration of the agency's loan guarantee program, as specified
in Sec. 682.410(a)(2) or Sec. 682.419(c).
(iii) If a lender charges the borrower an insurance premium or
Federal default fee, the lender must deduct the charge proportionately
from each disbursement of the borrower's loan proceeds.
(iv) The amount of the insurance premium or Federal default fee, as
applicable--
(A) May not exceed 3 percent of the principal balance for a loan
disbursed on or before June 30, 1994;
(B) May not exceed 1 percent of the principal balance for a loan
disbursed on or after July 1, 1994;
(C) Shall be 1 percent of the principal balance of a loan guaranteed
on or after July 1, 2006.
(v) If the circumstances specified in paragraph (vi) exist, the
guaranty agency shall refund to the lender any insurance premium or
Federal default fee paid by the lender.
(vi) The lender shall refund to the borrower by a credit against the
borrower's loan balance the insurance premium or Federal default fee
paid by the borrower on a loan under the following circumstances:
(A) The insurance premium or Federal default fee attributable to
each disbursement of a loan must be refunded if the loan check is
returned uncashed to the lender.
(B) The insurance premium or Federal default fee, or an appropriate
prorated amount of the premium or fee, must be refunded by application
to the borrower's loan balance if--
(1) The loan or a portion of the loan is returned by the school to
the lender in order to comply with the Act or with applicable
regulations;
(2) Within 120 days of disbursement, the loan or a portion of the
loan is repaid or returned, unless--
(i) The borrower has no FFEL Program loans in repayment status and
has requested, in writing, that the repaid or returned funds be used for
a different purpose; or
(ii) The borrower has a FFEL Program loan in repayment status, in
which case the payment is applied in accordance with Sec. 682.209(b)
unless the borrower has requested, in writing, that the repaid or
returned funds be applied as a cancellation of all or part of the loan;
(3) Within 120 days of disbursement, the loan check has not been
negotiated; or
(4) Within 120 days of disbursement, the loan proceeds disbursed by
electronic funds transfer or master check in accordance with Sec.
682.207(b)(1)(ii) (B) and (C) have not been released from the restricted
account maintained by the school.
(11) Inquiries. The agency must be able to receive and respond to
written, electronic, and telephone inquiries.
(12) Administrative fee for Consolidation loans. The guaranty agency
may charge a lender a fee, not to exceed $50, reasonably calculated to
cover the agency's cost of increased or extended liability incurred in
guaranteeing a Consolidation loan. The lender may not pass the fee on to
the borrower. If it charges the fee, the agency must charge it for all
loans made under the agency's Consolidation Loan program.
(13) Administrative fee for refinancing fixed-rate PLUS or SLS
loans. The guaranty agency may require a lender to pay to the guaranty
agency up to 50 percent of the fee the lender charges a borrower under
Sec. 682.202(e) for the purpose of defraying the agency's
administrative costs incident to the guarantee of a lender's reissuance
of a fixed-rate PLUS or SLS loan at a variable interest rate. If it
charges the fee, the agency must charge the same fee to all lenders that
refinance under this paragraph.
(14) Guaranty liability. The guaranty agency shall guarantee--
(i) 100 percent of the unpaid principal balance of each loan
guaranteed for loans disbursed before October 1, 1993;
[[Page 734]]
(ii) Not more than 98 percent of the unpaid principal balance of
each loan guaranteed for loans first disbursed on or after October 1,
1993 and before July 1, 2006; and
(iii) Not more than 97 percent of the unpaid principal balance of
each loan guaranteed for loans first disbursed on or after July 1, 2006.
(15) Guaranty agency verification of default data. A guaranty agency
must meet the requirements and deadlines provided for it in subpart M of
34 CFR part 668 for the cohort default rate process.
(16) Guaranty agency administration. In the case of a State loan
guarantee program administered by a State government, the program must
be administered by a single State agency, or by one or more private
nonprofit institutions or organizations under the supervision of a
single State agency. For this purpose, ``supervision'' includes, but is
not limited to, setting policies and procedures, and having full
responsibility for the operation of the program.
(17) Loan assignment. (i) Except as provided in paragraph
(b)(17)(iii) of this section, the guaranty agency must allow a loan to
be assigned only if the loan is fully disbursed and is assigned to--
(A) An eligible lender;
(B) A guaranty agency, in the case of a borrower's default, death,
total and permanent disability, or filing of a bankruptcy petition, or
for other circumstances approved by the Secretary, such as a loan made
for attendance at a school that closed or a false certification claim;
(C) An educational institution, whether or not it is an eligible
lender, in connection with the institution's repayment to the agency or
to the Secretary of a guarantee or a reinsurance claim payment made on a
loan that was ineligible for the payment;
(D) A Federal or State agency or an organization or corporation
acting on behalf of such an agency and acting as a conservator,
liquidator, or receiver of an eligible lender; or
(E) The Secretary.
(ii) For the purpose of this paragraph, ``assigned'' means any kind
of transfer of an interest in the loan, including a pledge of such an
interest as security.
(iii) The guaranty agency must allow a loan to be assigned under
paragraph (b)(17)(i) of this section, following the first disbursement
of the loan if the assignment does not result in a change in the
identity of the party to whom payments must be made.
(18) Transfer of guarantees. Except in the case of a transfer of
guarantee requested by a borrower seeking a transfer to secure a single
guarantor, the guaranty agency may transfer its guarantee obligation on
a loan to another guaranty agency, only with the approval of the
Secretary, the transferee agency, and the holder of the loan.
(19) Standards and procedures. (i) The guaranty agency shall
establish, disseminate to concerned parties, and enforce standards and
procedures for--
(A) Ensuring that all lenders in its program meet the definition of
``eligible lender'' in section 435(d) of the Act and have a written
lender agreement with the agency;
(B) School and lender participation in its program;
(C) Limitation, suspension, termination of school and lender
participation;
(D) Emergency action against a participating school or lender;
(E) The exercise of due diligence by lenders in making, servicing,
and collecting loans; and
(F) The timely filing by lenders of default, death, disability,
bankruptcy, closed school, false certification unpaid refunds, identity
theft, and ineligible loan claims.
(ii) The guaranty agency shall ensure that its program and all
participants in its program at all times meet the requirements of
subparts B, C, D, and F of this part.
(20) Monitoring student enrollment. The guaranty agency shall
monitor the enrollment status of a FFEL program borrower or student on
whose behalf a parent has borrowed that includes, at a minimum,
reporting to the current holder of the loan within 35 days any change in
the student's enrollment status reported that triggers--
(i) The beginning of the borrower's grace period; or
[[Page 735]]
(ii) The beginning or resumption of the borrower's immediate
obligation to make scheduled payments.
(21) Submission of interest and special allowance information. Upon
the Secretary's request, the guaranty agency shall submit, or require
its lenders to submit, information that the Secretary deems necessary
for determining the amount of interest benefits and special allowance
payable on the agency's guaranteed loans.
(22) Submission of information for reports. The guaranty agency
shall require lenders to submit to the agency the information necessary
for the agency to complete the reports required by Sec. 682.414(b).
(23) Guaranty agency transfer of information. (i) A guaranty agency
from which another guaranty agency requests information regarding
Stafford and SLS loans made after January 1, 1987, to students who are
residents of the State for which the requesting agency is the principal
guaranty agency shall provide--
(A) The name and social security number of the student; and
(B) The annual loan amount and the cumulative amount borrowed by the
student in loans under the Stafford and SLS programs guaranteed by the
responding agency.
(ii) The reasonable costs incurred by an agency in fulfilling a
request for information made under paragraph (b)(23)(i) of this section
must be paid by the guaranty agency making the request.
(24) Information on defaults. The guaranty agency shall, upon the
request of a school, furnish information with respect to students,
including the names and addresses of such students, who were enrolled at
that school and who are in default on the repayment of any loan
guaranteed by that agency.
(25) Information on loan sales or transfers. The guaranty agency
must, upon the request of a school, furnish to the school last attended
by the student, information with respect to the sale or transfer of a
borrower's loan prior to the beginning of the repayment period,
including--
(i) Notice of assignment;
(ii) The identity of the assignee;
(iii) The name and address of the party by which contact may be made
with the holder concerning repayment of the loan; and
(iv) The telephone number of the assignee or, if the assignee uses a
lender servicer, another appropriate number for borrower inquiries.
(26) Third-party servicers. The guaranty agency may not enter into a
contract with a third-party servicer that the Secretary has determined
does not meet the financial and compliance standards under Sec.
682.416. The guaranty agency shall provide the Secretary with the name
and address of any third-party servicer with which the agency enters
into a contract and, upon request by the Secretary, a copy of that
contract.
(27) Consolidation of defaulted FFEL loans.
(i) A guaranty agency may charge collection costs in an amount not
to exceed 18.5 percent of the outstanding principal and interest on a
defaulted FFEL Program loan that is paid off by a Federal Consolidation
loan.
(ii) Prior to October 1, 2006, when returning the proceeds from the
consolidation of a defaulted loan to the Secretary, a guaranty agency
may only retain the amount charged to the borrower pursuant to this
paragraph.
(iii) On or after October 1, 2006, when returning proceeds to the
Secretary from the consolidation of a defaulted loan, a guaranty agency
that charged the borrower collection costs must remit an amount that
equals the lesser of the actual collection costs charged or 8.5 percent
of the outstanding principal and interest of the loan.
(iv) On or after October 1, 2009, when returning proceeds to the
Secretary from the consolidation of a defaulted loan that is paid off
with excess consolidation proceeds as defined in paragraph (b)(27)(v) of
this section, a guaranty agency must remit the entire amount of
collection costs repaid through the consolidation loan pursuant to
paragraph (b)(27)(ii) of this section.
(v) The term excess consolidation proceeds means, for any Federal
fiscal year beginning on or after October 1, 2009, the amount of
Consolidation Loan proceeds received for defaulted loans
[[Page 736]]
under the FFEL Program that exceed 45 percent of the agency's total
collections on defaulted loans in that Federal fiscal year.
(28) Change in agency's records system. The agency shall provide
written notification to the Secretary at least 30 days prior to placing
its new guarantees or converting the records relating to its existing
guaranty portfolio to an information or computer system that is owned
by, or otherwise under the control of, an entity that is different than
the party that owns or controls the agency's existing information or
computer system. If the agency is soliciting bids from third parties
with respect to a proposed conversion, the agency shall provide written
notice to the Secretary as soon as the solicitation begins. The
notification described in this paragraph must include a concise
description of the agency's conversion project and the actual or
estimated cost of the project.
(29) Plans to Reduce Consolidation of defaulted loans. A guaranty
agency shall establish and submit to the Secretary for approval,
procedures to ensure that consolidation loans are not an excessive
proportion of the guaranty agency's recoveries on defaulted loans.
(c) Lender-of-last-resort. (1) The guaranty agency must ensure that
it, or an eligible lender described in section 435(d)(1)(D) of the Act,
serves as a lender-of-last-resort in the State in which the guaranty
agency is the designated guaranty agency. The guaranty agency or an
eligible lender described in section 435(d)(1)(D) of the Act may arrange
for a loan required to be made under paragraph (c)(2) of this section to
be made by another eligible lender. As used in this paragraph, the term
``designated guaranty agency'' means the guaranty agency in the State
for which the Secretary has signed a Basic Program Agreement under this
section.
(2) The lender-of-last-resort must make subsidized Federal Stafford
loans and unsubsidized Federal Stafford loans to any eligible student
who--
(i) Qualifies for interest benefits pursuant to Sec. 682.301;
(ii) Qualifies for a combined loan amount of at least $200; and
(iii) Has been otherwise unable to obtain loans from another
eligible lender for the same period of enrollment.
(3) The lender-of-last resort may make unsubsidized Federal Stafford
and Federal PLUS loans to borrowers who have been otherwise unable to
obtain those loans from another eligible lender.
(4) The guaranty agency must develop policies and operating
procedures for its lender-of-last-resort program that provide for the
accessibility of lender-of-last-resort loans. These policies and
procedures must be submitted to the Secretary for approval as required
under paragraph (d)(2) of this section. The policies and procedures for
the agency's lender-of-last-resort program must ensure that--
(i) The guaranty agency will serve eligible students attending any
eligible school;
(ii) The program establishes operating hours and methods of
application designed to facilitate application by students; and
(iii) Information about the availability of loans under the program
is made available to schools in the State;
(iv) Appropriate steps are taken to ensure that borrowers receiving
loans under the program are appropriately counseled on their loan
obligation;
(v) The guaranty agency will respond to a student within 60 days
after the student submits an original complete application; and
(vi) Borrowers are not required to obtain more than two objections
from eligible lenders prior to requesting assistance under the lender-
of-last-resort program.
(5)(i) Upon request of the guaranty agency, the Secretary may
advance Federal funds to the agency, on terms and conditions agreed to
by the Secretary and the agency, to ensure the availability of loan
capital for subsidized and unsubsidized Federal Stafford and Federal
PLUS loans to borrowers who are otherwise unable to obtain those loans
if the Secretary determines that--
(A) Eligible borrowers in a State who qualify for subsidized Federal
Stafford loans are seeking and are unable to obtain subsidized Federal
Stafford loans;
[[Page 737]]
(B) The guaranty agency designated for that State has the capability
for providing lender-of-last-resort loans in a timely manner, either
directly or indirectly using a third party, in accordance with the
guaranty agency's obligations under the Act, but cannot do so without
advances provided by the Secretary; and
(C) It would be cost-effective to advance Federal funds to the
agency.
(ii) If the Secretary determines that the designated guaranty agency
does not have the capability to provide lender-of-last-resort loans, in
accordance with paragraph (c)(5)(i) of this section, the Secretary may
provide Federal funds to another guaranty agency, under terms and
conditions agreed to by the Secretary and the agency, to make lender-of-
last-resort loans in that State.
(d) Review of forms and procedures. (1) The guaranty agency shall
submit to the Secretary its write-off criteria and procedures. The
agency may not use these materials until the Secretary approves them.
(2) The guaranty agency shall promptly submit to the Secretary its
regulations, statements of procedures and standards, agreements, and
other materials that substantially affect the operation of the agency's
program, and any proposed changes to those materials. Except as provided
in paragraph (d)(1) of this section, the agency may use these materials
unless and until the Secretary disapproves them.
(3) The guaranty agency must use common application forms,
promissory notes, Master Promissory Notes (MPN), and other common forms
approved by the Secretary.
(4)(i) The Secretary authorizes the use of the multi-year feature of
the MPN--
(A) For students and parents for attendance at four-year or
graduate/professional schools; and
(B) For students and parents for attendance at other institutions
meeting criteria or otherwise designated at the sole discretion of the
Secretary.
(ii) The Secretary may prohibit use of the multi-year feature of the
MPN at specific schools described under paragraph (4)(i) of this section
under circumstances including, but not limited to, the school being
subject to an emergency action or a limitation, suspension, or
termination action, or not meeting other performance criteria determined
by the Secretary.
(iii) A student or parent borrower who is borrowing funds for
attendance at a school for which the multi-year feature of the MPN has
not been authorized must complete a new promissory note for each
academic year.
(iv) Each loan made under an MPN is enforceable in accordance with
the terms of the MPN and is eligible for claim payment based on a true
and exact copy of such MPN.
(v) A lender's ability to make additional loans under an MPN will
automatically expire upon the earliest of--
(A) The date the lender receives written notification from the
borrower requesting that the MPN no longer be used as the basis for
additional loans;
(B) Twelve months after the date the borrower signed the MPN if no
disbursements are issued by the lender under that MPN; or
(C) Ten years from the date the borrower signed the MPN or the date
the lender receives the MPN. However, if a portion of a loan is made on
or before 10 years from the signature date, remaining disbursements of
that loan may be made.
(vi) The lender and school must develop and document a confirmation
process in accordance with guidelines established by the Secretary for
loans made under the multi-year feature of the MPN.
(5) The guaranty agency must develop and implement appropriate
procedures that provide for the granting of a student deferment as
specified in Sec. 682.210(a)(6)(iv) and (c)(3) and require their
lenders to use these procedures.
(6) The guaranty agency shall ensure that all program materials meet
the requirements of Federal and State law, including, but not limited
to, the Act and the regulations in this part and part 668.
(e) Prohibited activities. (1) A guaranty agency may not, directly
or through an agent or contractor--
(i) Except as provided in paragraph (e)(2) of this section, offer
directly or indirectly from any fund or assets available to the guaranty
agency, any
[[Page 738]]
premium, payment, or other inducement to any prospective borrower of an
FFEL loan, or to a school or school-affiliated organization or an
employee of a school or school-affiliated organization, to secure
applications for FFEL loans. This includes, but is not limited to--
(A) Payments or offerings of other benefits, including prizes or
additional financial aid funds, to a prospective borrower in exchange
for processing a loan using the agency's loan guarantee;
(B) Payments or other benefits, including prizes or additional
financial aid funds under any Title IV or State or private program, to a
school or school-affiliated organization based on the school's or
organization's voluntary or coerced agreement to use the guaranty agency
for processing loans, or to provide a specified volume of loans using
the agency's loan guarantee;
(C) Payments or other benefits to a school or any school-affiliated
organization, or to any individual in exchange for FFEL loan
applications or application referrals, a specified volume or dollar
amount of FFEL loans using the agency's loan guarantee, or the placement
of a lender that uses the agency's loan guarantee on a school's list of
recommended or suggested lenders;
(D) Payment of entertainment expenses, including expenses for
private hospitality suites, tickets to shows or sporting events, meals,
alcoholic beverages, and any lodging, rental, transportation or other
gratuities related to any activity sponsored by the guaranty agency or a
lender participating in the agency's program, for school employees or
employees of school-affiliated organizations;
(E) Philanthropic activities, including providing scholarships,
grants, restricted gifts, or financial contributions in exchange for
FFEL loan applications or application referrals, a specified volume or
dollar amount of FFEL loans using the agency's loan guarantee, or the
placement of a lender that uses the agency's loan guarantee on a
school's list of recommended or suggested lenders; and
(F) Staffing services to a school, except for services provided to
participating foreign schools at the direction of the Secretary, as a
third-party servicer or otherwise on more than a short-term, emergency
basis, which is non-recurring, to assist the institution with financial
aid-related functions.
(ii) Assess additional costs or deny benefits otherwise provided to
schools and lenders participating in the agency's program on the basis
of the lender's or school's failure to agree to participate in the
agency's program, or to provide a specified volume of loan applications
or loan volume to the agency's program or to place a lender that uses
the agency's loan guarantee on a school's list of recommended or
suggested lenders.
(iii) Offer, directly or indirectly, any premium, incentive payment,
or other inducement to any lender, or any person acting as an agent,
employee, or independent contractor of any lender or other guaranty
agency to administer or market FFEL loans, other than unsubsidized
Stafford loans or subsidized Stafford loans made under a guaranty
agency's lender-of-last-resort program, in an effort to secure the
guaranty agency as an insurer of FFEL loans. Examples of prohibited
inducements include, but are not limited to--
(A) Compensating lenders or their representatives for the purpose of
securing loan applications for guarantee;
(B) Performing functions normally performed by lenders without
appropriate compensation;
(C) Providing equipment or supplies to lenders at below market cost
or rental; and
(D) Offering to pay a lender that does not hold loans guaranteed by
the agency a fee for each application forwarded for the agency's
guarantee.
(iv) Mail or otherwise distribute unsolicited loan applications to
students enrolled in a secondary school or a postsecondary institution,
or to parents of those students, unless the potential borrower has
previously received loans insured by the guaranty agency.
(v) Conduct fraudulent or misleading advertising concerning loan
availability.
(2) Notwithstanding paragraph (e)(1)(i), (ii), and (iii) of this
section, a
[[Page 739]]
guaranty agency is not prohibited from providing--
(i) Assistance to a school that is comparable to that provided by
the Secretary to a school under the Direct Loan Program, as identified
by the Secretary in a public announcement, such as a notice in the
Federal Register;
(ii) Default aversion activities approved by the Secretary under
section 422(h)(4)(B) of the Act;
(iii) Student aid and financial-literacy related outreach
activities, excluding in-person school-required initial and exit
counseling, as long as the name of the entity that developed and paid
for any materials is provided to participants and the guaranty agency
does not promote its student loan or other products; but a guaranty
agency may promote benefits provided under other Federal or State
programs administered by the guaranty agency;
(iv) Meals and refreshments that are reasonable in cost and provided
in connection with guaranty agency provided training of program
participants and elementary, secondary, and postsecondary school
personnel and with workshops and forums customarily used by the agency
to fulfill its responsibilities under the Act;
(v) 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;
(vi) Travel and lodging costs that are reasonable as to cost,
location, and duration to facilitate the attendance of school staff in
training or service facility tours that they would otherwise not be able
to undertake, or 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;
(vii) Toll-free telephone numbers for use by schools or others to
obtain information about FFEL loans and free data transmission services
for use by schools to electronically submit applicant loan processing
information or student status confirmation data;
(viii) Payment of Federal default fees in accordance with the Act;
(ix) 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;
(x) Loan forgiveness programs for public service and other targeted
purposes approved by the Secretary, provided the programs are not
marketed to secure loan applications or loan guarantees; and
(xi) Other services as identified and approved by the Secretary
through a public announcement, such as a notice in the Federal Register.
(3) For the purposes of this section--
(i) The term ``school-affiliated organization'' is defined in Sec.
682.200.
(ii) The term ``applications'' includes the FAFSA, FFEL loan master
promissory notes, and FFEL consolidation loan application and promissory
notes.
(iii) The terms ``other benefits'' includes, but is not limited to,
preferential rates for or access to a guaranty agency's products and
services, computer hardware or non-loan processing or non-financial aid
related computer software at below market rental or purchase cost, and
the printing and distribution of college catalogs and other non-
counseling or non-student financial aid-related materials at reduced or
not costs.
(iv) The terms ``premium,'' ``incentive payment,'' and ``other
inducement'' do not include services directly related to the enhancement
of the administration of the FFEL Program that the guaranty agency
generally provides to lenders that participate in its program. However,
the terms ``premium,'' ``incentive payment,'' and ``inducement'' do
apply to other activities specifically intended to secure a lender's
participation in the agency's program.
(v) The term ``emergency basis'' for the purpose of staffing
services to a school under paragraph (e)(1)(i)(F) of this section means
a State- or Federally-declared natural disaster, a Federally-declared
national disaster, and other localized disasters and emergencies
identified by the Secretary.
(f) College Access Initiative. (1) A guaranty agency shall establish
a plan to promote access to postsecondary education by--
[[Page 740]]
(i) Providing the Secretary and the public with information on
Internet web links and a comprehensive listing of postsecondary
education opportunities, programs, publications and other services
available in the State, or States for which the guaranty agency serves
as the designated guaranty agency;
(ii) Promoting and publicizing information for students and
traditionally underrepresented populations on college planning, career
preparation, and paying for college in coordination with other entities
that provide or distribute such information in the State, or States for
which the guaranty agency serves as the designated guaranty agency;
(2) The activities required by this section may be funded from the
guaranty agency's Operating Fund in accordance with Sec.
682.423(c)(1)(vii) or from funds remaining in restricted accounts
established pursuant to section 422(h)(4) of the HEA.
(3) The guaranty agency shall ensure that the information required
by this subsection is available to the public by November 5, 2006 and
is--
(i) Free of charge; and
(ii) Available in print.
(Approved by the Office of Management and Budget under control number
1845-0020)
(Authority: 20 U.S.C. 1078, 1078-1, 1078-2, 1078-3, 1082)
[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9120, Feb. 19, 1993; 59
FR 22454, Apr. 29, 1994; 59 FR 25746, May 17, 1994; 59 FR 32923, June
27, 1994; 59 FR 33353, June 28, 1994; 59 FR 61428, Nov. 30, 1994; 60 FR
30788, June 12, 1995; 60 FR 31411, June 15, 1995; 60 FR 61757, Dec. 1,
1995; 61 FR 60436, 60486, Nov. 27, 1996; 62 FR 63434, Nov. 28, 1997; 64
FR 18978, Apr. 16, 1999; 64 FR 58627, Oct. 29, 1999; 64 FR 58959, Nov.
1, 1999; 65 FR 65650, Nov. 1, 2000; 66 FR 34763, June 29, 2001; 67 FR
67079, Nov. 1, 2002; 68 FR 75429, Dec. 31, 2003; 71 FR 45705, Aug. 9,
2006; 71 FR 64398, Nov. 1, 2006; 72 FR 62003, Nov. 1, 2007]
| File Type | application/msword |
| Author | Authorised User |
| Last Modified By | Authorised User |
| File Modified | 2009-05-07 |
| File Created | 2009-05-07 |