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No. 145
July 29, 2013
Part II
Department of Education
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34 CFR Parts 668, 674, 682, et al.
Student Assistance General Provisions, Federal Perkins Loan Program,
Federal Family Education Loan Program, and William D. Ford Federal
Direct Loan Program; Proposed Rule
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
DEPARTMENT OF EDUCATION
34 CFR Parts 668, 674, 682, and 685
RIN 1840–AD12
[Docket ID ED–2013–OPE–0063]
Student Assistance General
Provisions, Federal Perkins Loan
Program, Federal Family Education
Loan Program, and William D. Ford
Federal Direct Loan Program
Office of Postsecondary
Education, Department of Education.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Secretary proposes to
amend the Student Assistance General
Provisions, Federal Perkins Loan
(Perkins Loan) Program, Federal Family
Education Loan (FFEL) Program, and
William D. Ford Federal Direct Loan
(Direct Loan) Program regulations. The
proposed regulations would: amend the
FFEL and Direct Loan program
regulations to reflect changes made to
the Higher Education Act of 1965, as
amended (HEA), by the SAFRA Act
included in the Health Care and
Education Reconciliation Act of 2010;
incorporate other recent statutory
changes in the Direct Loan Program
regulations; update, strengthen, and
clarify various areas of the Student
Assistance General Provisions, Perkins
Loan, FFEL, and Direct Loan program
regulations; and provide for greater
consistency in the regulations governing
the title IV, HEA student loan programs.
These proposed regulations would
ensure that the title IV, HEA Federal
student aid programs operate as
efficiently as possible.
DATES: We must receive your comments
on or before August 28, 2013.
ADDRESSES: Submit your comments
through the Federal eRulemaking Portal
or via postal mail, commercial delivery,
or hand delivery. We will not accept
comments by fax or by email. To ensure
that we do not receive duplicate copies,
please submit your comments only
once. In addition, please include the
Docket ID at the top of your comments.
• Federal eRulemaking Portal: Go to
www.regulations.gov to submit your
comments electronically. Information
on using Regulations.gov, including
instructions for accessing agency
documents, submitting comments, and
viewing the docket, is available on the
site under ‘‘Are you new to the site?’’
• Postal Mail, Commercial Delivery,
or Hand Delivery: If you mail or deliver
your comments about these proposed
regulations, address them to Jessica
Finkel, U.S. Department of Education,
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SUMMARY:
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1990 K Street NW., Room 8031,
Washington, DC 20006–8502.
Privacy Note: The Department’s
policy is to make all comments received
from members of the public available for
public viewing in their entirety on the
Federal eRulemaking Portal at
www.regulations.gov. Therefore,
commenters should be careful to
include in their comments only
information that they wish to make
publicly available.
FOR FURTHER INFORMATION CONTACT:
Jessica Finkel, U.S. Department of
Education, 1990 K Street NW., Room
8031, Washington, DC 20006–8502.
Telephone: (202) 502–7647 or by email:
mailto:[email protected].
If you use a telecommunications
device for the deaf (TDD) or a text
telephone (TTY), call the Federal Relay
Service (FRS), toll free, at 1–800–877–
8339.
SUPPLEMENTARY INFORMATION:
Executive Summary
Purpose of This Regulatory Action:
These regulations would address issues
arising from the changes made to the
HEA by the SAFRA Act, included in the
Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152). The SAFRA Act ended the
origination of new loans under the FFEL
Program after June 30, 2010. With this
change, all new Stafford, PLUS, and
Consolidation loans with a first
disbursement on or after July 1, 2010,
are now made under the Direct Loan
Program. Because all new loans are
being made under the Direct Loan
Program, the proposed regulations
would amend the FFEL Program
regulations in 34 CFR part 682 by
removing provisions related to the
making of new loans. The proposed
regulations would also amend the Direct
Loan Program regulations in 34 CFR
part 685 by adding detailed regulations
in areas where the Direct Loan Program
regulations currently cross-reference the
FFEL Program regulations.
The proposed regulations would also
strengthen and clarify provisions of the
Perkins Loan, FFEL, and Direct Loan
program regulations including, but not
limited to, regulations governing:
Deferments, forbearances, loan
cancellation, rehabilitation of defaulted
loans, administrative wage garnishment,
and satisfactory repayment
arrangements. The proposed regulations
would also make the rules governing the
various title IV, HEA loan programs
more consistent.
Summary of the Major Provisions of
This Regulatory Action: The proposed
regulations would—
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• Raise the participation rate index
ceiling applicable to institutions that
have a single three-year cohort default
rate of over 40 percent for purposes of
challenges to and appeals from
sanctions based on that default rate.
• Clarify the Perkins Loan, FFEL, and
Direct Loan program regulations to
provide that a borrower who makes six
payments in the course of rehabilitating
a defaulted loan, but who does not seek
additional title IV aid, will not be
considered to have used the one-timeonly opportunity to regain title IV
eligibility by making satisfactory
repayment arrangements. The proposed
regulations would also define the term
‘‘satisfactory repayment arrangement’’
more consistently across the title IV,
HEA loan programs.
• Amend the closed school discharge
provisions in the Perkins Loan, FFEL,
and Direct Loan program regulations to
specify that a borrower may qualify for
a loan discharge if the borrower
withdrew from school not more than
120 days before the school closed,
instead of the current 90-day standard.
The proposed regulations would also
add examples of the types of
exceptional circumstances under which
the Department may extend the 120-day
window.
• Update the FFEL and Direct Loan
program enrollment status reporting
requirements for institutions to reflect
current processes and eliminate obsolete
terms and procedures. The proposed
regulations would also add comparable
enrollment status reporting provisions
to the Perkins Loan Program regulations.
• Revise the terms under which a
guaranty agency in the FFEL Program
may authorize a lender to grant
forbearance to permit a borrower or
endorser to resume honoring the
agreement to repay a debt after default
but prior to claim payment to require
either a signed written agreement to
repay or an oral affirmation of the
borrower’s or endorser’s obligation to
repay the debt. The proposed
regulations would provide that if a
forbearance is granted based on the
borrower’s or endorser’s oral request
and affirmation of the obligation, the
forbearance is limited to 120 days and
cannot be granted for consecutive
periods. In addition, the lender must
orally review with the borrower the
terms and conditions of the forbearance
and send a notice to the borrower or
endorser that confirms the terms of the
forbearance. The proposed regulations
would also define the term
‘‘affirmation.’’ Finally, the proposed
regulations would add comparable
provisions in the Direct Loan Program.
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• Require that lenders grant
forbearance to FFEL borrowers who are
performing service that qualifies them
for loan repayment under the
Department of Defense student loan
repayment programs in addition to the
program authorized by 10 U.S.C. 2171
(which is currently referenced in the
regulations). A comparable forbearance
provision would be added to the Direct
Loan Program regulations.
• Authorize a lender to grant an
administrative forbearance to a FFEL
borrower who is delinquent at the
beginning of an authorized period of
forbearance and add a corresponding
provision to the Direct Loan Program
regulations.
• Provide that the Secretary, in the
Direct Loan Program, and the guaranty
agency, in the FFEL Program, would
determine a borrower’s reasonable and
affordable payment amount under a
loan rehabilitation agreement based on
the borrower’s and, if applicable, the
borrower’s spouse’s current disposable
income, family size, and reasonable and
necessary expenses. The information
about income and expenses needed to
determine the reasonable and affordable
payment amount would be provided by
the borrower to the Secretary or the
guaranty agency on a form approved by
the Secretary and, if requested, with
supporting documentation from the
borrower or other sources.
• Specify in the FFEL and Direct
Loan program regulations that a
reasonable and affordable loan
rehabilitation payment amount must not
be a required minimum payment, a
percentage of the borrower’s total loan
balance, or an amount based on other
criteria unrelated to the borrower’s total
financial circumstances.
• Require that the Secretary, in the
Direct Loan Program, or the guaranty
agency, in the FFEL Program, provide
the borrower with a written
rehabilitation agreement within 15
business days of the determination of
the borrower’s reasonable and affordable
payment amount along with a
comprehensive description of the
borrower’s rights, the terms and
conditions of the payments, the effects
of loan rehabilitation, and, for a FFEL
borrower, the treatment of unpaid
collection costs.
• Provide that, if the borrower objects
to the payment amount determined by
the guaranty agency based on the
income and expenses shown by the
borrower and contained in the written
repayment agreement offered to the
borrower, the guaranty agency or the
Secretary will calculate an amount for
the borrower’s rehabilitation payment
using the formula for calculating a
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monthly payment amount under the
income-based repayment (IBR) plan in
the Direct Loan and FFEL Program
regulations, and offer the borrower the
option to use that amount as the
rehabilitation payment amount. The
borrower would be free to choose
between the amount determined
initially and the IBR-based payment
amount.
• Provide that, while the borrower is
making payments under a rehabilitation
agreement, the Secretary and the
guaranty agency would limit contact
with the borrower to collection
activities required by law or regulation
and communications that support the
rehabilitation.
• Amend the Direct Loan and FFEL
program regulations to provide that,
when a loan is being collected by
administrative wage garnishment
(AWG), the Secretary or the guaranty
agency, respectively, will suspend AWG
after the borrower makes five qualifying
monthly payments under a loan
rehabilitation agreement, unless the
borrower requests that AWG continue.
• Incorporate into the Perkins Loan
Program the same eligibility criteria
used in the Direct Loan and FFEL
programs to define an ‘‘eligible graduate
fellowship program’’ and to establish
the eligibility of a Perkins Loan
borrower for a graduate fellowship
deferment.
• Eliminate the debt-to-income
economic hardship deferment category
in the Perkins Loan Program.
• Modify the rehabilitation provisions
in the Perkins Loan Program regulations
to define the term ‘‘on-time’’ as it relates
to the series of payments required to
successfully rehabilitate a defaulted
loan.
• Allow assignment of a Perkins Loan
to the Secretary without the borrower’s
Social Security Number if the loan was
made before September 13, 1982.
• Permit a Perkins Loan borrower
who is unable to complete the second
half of an academic year of teaching due
to a condition covered under the Family
and Medical Leave Act (FMLA) to still
count that year as eligible teaching
service for loan cancellation purposes, if
the borrower’s employer considers the
borrower to have fulfilled the teacher
contract requirements for that academic
year.
• Permit a Perkins Loan borrower
who is unable to complete a full year of
eligible public service due to a
condition that is covered under the
FMLA to count that year as a full year
of public service for loan cancellation
purposes if the borrower completes at
least six months of consecutive eligible
service.
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• Specify that, if a Perkins Loan
borrower who is performing service that
qualifies the borrower for loan
cancellation at a cancellation rate
progression of 15 percent for the first
and second years of qualifying service,
20 percent for the third and fourth years
of qualifying service, and 30 percent for
the fifth year of qualifying service, takes
a job in a different field that qualifies
the borrower under a different
cancellation category that provides loan
cancellation at the same cancellation
rate progression as the prior category,
the borrower’s cancellation rate under
the new cancellation category would
continue from the last year the borrower
received a cancellation under the former
cancellation category, rather than
starting over at the first-year
cancellation rate.
• Change the timeframe for FFEL
lenders to send the required repayment
disclosure for borrowers who are 60
days delinquent from five calendar days
to five business days after the date the
borrower becomes 60 days delinquent.
• Amend the FFEL Program
regulations to provide that a lender does
not have to send a repayment disclosure
to a borrower who is having difficulty
making payments if the borrower’s
difficulty has been resolved through
contact resulting from an earlier
disclosure or from other contact
between the lender and the borrower.
• Amend the regulations governing
AWG to reflect the borrower’s right to
request a hearing on the enforceability
of the debt and to allow the borrower to
object to the amount or rate of AWG
withholding if such withholding would
cause financial hardship to the
borrower.
• Revise the regulations governing
AWG to conform the requirements for
borrowers whose defaulted loans are
held by a guaranty agency to the rules
and procedures used by the Secretary.
• Amend the regulations governing
AWG to incorporate existing policy
guidance related to third-party servicers
or collection contractors retained by
guaranty agencies.
• Amend the regulations governing
AWG to more clearly describe the
process, from the initial garnishment
notice to withholding.
• Amend the regulations governing
AWG to better reflect due process
requirements and to specify the
functions, delegations of authority,
recordkeeping requirements, and
permissible activities of guaranty
agencies and third-party servicers or
collection contractors.
• Clarify the limitations on the
amount that may be subject to AWG if
a guaranty agency is garnishing pay
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from a borrower who is not already
subject to a withholding order or from
a borrower who is already subject to one
or more withholding orders. The
proposed regulations would also permit
a greater amount or percentage to be
withheld with the borrower’s consent.
• Require that for a borrower to
receive a hearing before AWG begins,
the borrower’s written request for a
hearing must be received on or before
the 30th day following the date the
garnishment notice was sent, and delete
a provision that a borrower is
considered to have received a
garnishment notice five days following
the date of the notice.
• Provide that if a borrower’s written
request for a hearing is received by the
guaranty agency after the 30th day
following the date of the garnishment
notice, the agency must provide the
borrower a hearing and issue a decision
within 60 days following receipt of the
request. If a decision is not rendered
within 60 days, the guaranty agency
must suspend the order beginning on
the 61st day after the hearing request
was received until a hearing is provided
and a decision is rendered.
• Amend the FFEL Program
regulations to: Specify the contents of
an AWG notice; describe how an AWG
hearing is administered, including
provisions for the submission of
additional evidence and the granting of
continuances; provide for the
withholding order to end by either
rescission or full recovery of amounts
owed by the borrower; and clarify that
a borrower who wishes to object that he
or she is not subject to garnishment
because of involuntary separation bears
the burden of raising and proving that
claim.
• Eliminate provisions in the FFEL
Program regulations governing loan
origination and disbursement and
related requirements and activities
except for certain school-based
requirements and related activities.
• Eliminate obsolete provisions that
do not reflect the current procedures in
the FFEL Program.
• Make necessary conforming
changes in various FFEL Program
provisions to update the regulations.
• In the Direct Loan Program
regulations, modify the exception to the
minimum loan period requirement for
clock-hour and certain non-standard
term programs that allows a school, in
certain transfer student situations, to
originate a loan for a period shorter than
the lesser of the academic year or
program length only if the school
accepts credit or clock hours from the
school that the student was previously
attending. The proposed regulations
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would remove the provision that limits
this exception to situations in which the
school into which the student transfers
accepts credit or clock hours from the
prior school.
• Add detailed regulations to 34 CFR
part 685 in areas where the Direct Loan
Program regulations currently just crossreference the FFEL Program regulations.
• Remove obsolete provisions that do
not reflect current procedures used in
administering the Direct Loan Program.
• Revise the Direct Loan Program
regulations to reflect the impact of the
SAFRA Act and other recent statutory
changes.
Please refer to the Summary of
Proposed Changes section of this
preamble for more details on the major
provisions contained in this notice of
proposed rulemaking (NPRM).
Costs and Benefits: The proposed
regulations are estimated to have a net
budget impact of $2.8 to $3.4 million
over ten years from 2013 to 2022.
Consistent with the requirements of the
Credit Reform Act of 1990 (2 U.S.C.
661(a)(5)), budget cost estimates for the
student loan programs reflect the
estimated net present value of all future
non-administrative Federal costs
associated with a cohort of loans. (A
cohort reflects all loans originated in a
given fiscal year.)
Absent evidence of the impact of
these regulations on student behavior,
budget cost estimates were based on
behavior as reflected in various
Department data sets and longitudinal
surveys listed under Assumptions,
Limitations, and Data Sources. Program
cost estimates were generated by
running projected cash flows related to
each provision through the
Department’s student loan cost
estimation model. Student loan cost
estimates are developed across five risk
categories. The categories are:
• Loans for students attending less
than four-year for-profit institutions;
• Loans for students attending less
than four-year public and non-profit
institutions;
• Loans for freshmen or sophomores
in four-year institutions of all types;
• Loans for juniors or seniors in fouryear institutions of all types; and
• Loans for graduate students in
institutions of all types.
Risk categories have separate
assumptions based on the historical
pattern of the behavior of borrowers in
each category, such as the likelihood of
default or of the use of statutory
deferment or discharge benefits.
Overall, the proposed regulations
would strengthen and streamline the
Federal student loan programs and help
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support the American postsecondary
education system. As more and more
students depend on student loans to pay
for their college education, it is essential
that borrowers are able to fully
understand and comprehend their rights
and responsibilities in relation to their
student debt obligations. It is also
essential that the student loan programs
operate as efficiently as possible. A
college education has become essential
for employment in a large part of the
American economy and the percentage
of jobs that require a degree will only
increase in the future. The Department’s
loan programs support over ten million
students per year, and this number will
grow if the country pursues the
President’s 2020 goal of leading the
world in college degree attainment.
Keeping a strong and efficient higher
education system is essential to America
maintaining its economic advantage in
the world.
Invitation to Comment: As outlined in
Negotiated Rulemaking, significant
public participation, through three
public hearings and three negotiated
rulemaking sessions, has occurred in
developing this NPRM. We invite you to
submit comments regarding these
proposed regulations. To ensure that
your comments have maximum effect in
developing the final regulations, we
urge you to identify clearly the specific
section or sections of the proposed
regulations that each of your comments
addresses and to arrange your comments
in the same order as the proposed
regulations.
We invite you to assist us in
complying with the specific
requirements of Executive Orders 12866
and 13563 and their overall requirement
of reducing regulatory burden that
might result from these proposed
regulations. Please let us know of any
further ways we could reduce potential
costs or increase potential benefits
while preserving the effective and
efficient administration of the
Department’s programs and activities.
During and after the comment period,
you may inspect all public comments
about these proposed regulations by
accessing Regulations.gov. You may also
inspect the comments in person, in
Room 8031, 1990 K Street NW.,
Washington, DC, between 8:30 a.m. and
4:00 p.m., Washington DC time, Monday
through Friday of each week except
Federal holidays. Please contact the
person listed under FOR FURTHER
INFORMATION CONTACT.
Assistance to Individuals with
Disabilities in Reviewing the
Rulemaking Record: On request we will
provide an appropriate accommodation
or auxiliary aid to an individual with a
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disability who needs assistance to
review the comments or other
documents in the public rulemaking
record for these proposed regulations. If
you want to schedule an appointment
for this type of accommodation or
auxiliary aid, please contact the person
listed under FOR FURTHER INFORMATION
CONTACT.
Negotiated Rulemaking
Section 492 of the HEA requires the
Secretary, before publishing any
proposed regulations for programs
authorized by title IV of the HEA, to
obtain public involvement in the
development of the proposed
regulations. After obtaining advice and
recommendations from the public,
including individuals and
representatives of groups involved in
the Federal student financial assistance
programs, the Secretary must establish a
negotiated rulemaking committee and
subject the proposed regulations to a
negotiated rulemaking process. All
proposed regulations that the
Department publishes on which the
negotiators reached consensus must
conform to final agreements resulting
from that process unless the Secretary
reopens the process or provides a
written explanation to the participants
stating why the Secretary has decided to
depart from the agreements. Further
information on the negotiated
rulemaking process may be found at:
www2.ed.gov/policy/highered/reg/
hearulemaking/2011/loans.html.
On May 5, 2011, the Department
published a notice in the Federal
Register (76 FR 25650) announcing our
intent to establish up to two negotiated
rulemaking committees to prepare
proposed regulations. One committee
would focus on issues related to
streamlining institutional reporting
requirements and proposed regulations
regarding better State identification of
low-performing teacher preparation
programs pursuant to sections 205 and
207 of the HEA by focusing reporting on
improved measures of program quality.
A second committee (the ‘‘negotiating
committee’’) would address Federal
student loan issues. The regulations
considered by the negotiating committee
would: Implement changes made by the
SAFRA Act (Pub. L. 111–152), which
ended the making of new loans in the
FFEL Program as of July 1, 2010; make
improvements to the income-contingent
and income-based repayment plans; and
improve the process for consideration of
applications for total and permanent
disability discharges. The notice
requested nominations of individuals
for membership on the committees who
could represent the interests of key
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stakeholder constituencies on each
committee.
The Department developed a list of
proposed regulatory provisions from
advice and recommendations submitted
to the Department in testimony by
individuals and organizations in a series
of three public hearings and a
roundtable discussion held on:
• May 12, 2011, at Tennessee State
University, Nashville, Tennessee.
• May 16, 2011, at Pacific Lutheran
University, Tacoma, Washington.
• May 19, 2011, at Loyola
University—Lakeshore Campus,
Chicago, Illinois.
• May 26, 2011, at College of
Charleston, Charleston, South Carolina.
In addition, the Department accepted
written comments on possible
regulatory provisions submitted directly
to the Department by interested parties
and organizations. Transcripts of the
regional meetings can be accessed at
www2.ed.gov/policy/highered/reg/
hearulemaking/2011/loans.html and are
also accessible in the rulemaking docket
on www.regulations.gov.
Staff within the Department also
identified issues for discussion and
negotiation.
The negotiating committee included
the following members:
• Mr. Getachew Kassa, Legislative
Director, United States Student
Association, and Mr. Abou Amara, Jr.
(alternate), President, Graduate and
Professional Student Association,
University of Minnesota, Twin Cities.
• Ms. Deanne Loonin, National
Consumer Law Center, and Ms. Radhika
Miller (alternate), Program Manager,
Educational Debt Relief and Outreach,
Equal Justice Works.
• Ms. Jennifer Mishory, Deputy
Director, Young Invincibles, and Ms.
Maureen Thompson (alternate), The
Hastings Group, LLC.
• Ms. Margaret Rodriguez, Senior
Associate Director of Financial Aid,
University of Michigan, and Chair,
National Direct Student Loan Coalition,
and Ms. Elizabeth Hicks (alternate),
Executive Director, Student Financial
Services, Massachusetts Institute of
Technology.
• Mr. David Glezerman, Assistant
Vice President and University Bursar,
Temple University, and Ms. Maria
Livolsi (alternate), Student Loan Service
Center, State University of New York.
• Mr. Robert Perrin, President,
Williams & Fudge, Inc.
• Mr. Todd Leatherman, Executive
Director, Office of Consumer Protection,
Office of the Kentucky Attorney
General, and Ms. Michele Casey
(alternate), Assistant Attorney General,
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Consumer Fraud Bureau Office of the
Illinois Attorney General.
• Ms. Cristi Millard, Director of
Financial Aid, Salt Lake Community
College, and Mr. Chris Christensen,
(alternate), Director of Financial Aid,
Johnson County Community College,
Kansas.
• Ms. Kris Wright, Director, Office of
Student Finance, University of
Minnesota, and Executive Council
Member and Secretary, National Direct
Student Loan Coalition, and Ms. Elaine
Papas-Varas (alternate), University
Director of Student Financial Aid and
Director of the Primary Care Loan
Redemption Program of New Jersey,
University of Medicine and Dentistry of
New Jersey.
• Ms. Yvonne Gutierrez-Sandoval,
Senior Associate Director of Financial
Aid, Pitzer College, and Mr. Jeffrey A.
Gall (alternate), Associate Dean, Office
of Student Financial Services,
Georgetown University.
• Mr. Tom Sakos, Director of Student
Lending and Regulatory Quality
Assurance, DeVry Inc., and Mr.
Anthony Fragomeni (alternate), Director
of Governmental Affairs, Empire
Education Group, and Chairman,
American Association of Cosmetology
Schools’ Government Relations Team.
• Ms. Betsy Mayotte, Director,
Regulatory Compliance and Privacy,
American Student Assistance, and Mr.
Scott Giles (alternate), Vice President for
Operations, Social Marketing and
Strategy, Vermont Student Assistance
Corporation.
• Mr. Robert Sandlin, Director of
Policy and Compliance, Higher
Education Servicing Corporation, and
Ms. Vicki Shipley (alternate), Senior
Advisor, National Council of Higher
Education Loan Programs.
• Mr. Albert Gray, Executive Director
and CEO, Accrediting Council for
Independent Colleges and Schools, and
Ms. Sharon Tanner (alternate), Chief
Executive Officer, National League for
Nursing Accreditation.
• Ms. Pamela Moran and Ms. Gail
McLarnon, U.S. Department of
Education.
The negotiating committee met to
develop proposed regulations during the
months of January, February, and March
of 2012. These proposed regulations,
which reflect the work of this
committee, relate to the administration
of the Federal student loan programs.
At its first meeting, the negotiating
committee reached agreement on its
protocols and proposed agenda. The
negotiating committee’s protocols
provided that, unless agreed to
otherwise, for the committee to be
considered to have reached consensus
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on the regulations, consensus must be
reached on all of the proposed
regulations. Consensus means that there
must be no dissent by any member.
During its first meeting, the
negotiating committee agreed to
negotiate an agenda of 25 student loanrelated issues. The most significant
issues were: Developing regulations
necessary to implement the President’s
‘‘Pay As You Earn’’ repayment
initiative; developing regulations to
incorporate statutory changes to the IBR
plan and to address certain problems in
the administration of the IBR and the
income-contingent repayment (ICR)
plans; overhauling the total and
permanent disability discharge process;
updating the FFEL Program regulations
to eliminate obsolete and unnecessary
provisions governing loan origination
and disbursement; revising the Direct
Loan Program regulations to eliminate
cross-references to the FFEL Program
regulations; revising regulations
governing the determination of a
defaulted borrower’s reasonable and
affordable payment amount for purposes
of rehabilitation of the borrower’s
defaulted loan; revising the regulations
governing AWG for defaulted borrowers
in the FFEL Program; and providing for
consistent treatment of borrowers
requesting forbearance on or after the
270th day of delinquency.
The proposed regulations would also
include certain technical changes to the
regulations that are needed to reflect
recent amendments to the HEA and to
correct technical errors. These types of
changes are not normally subject to the
statutory requirements for negotiated
rulemaking and public notice and
comment. However, since those changes
affected the regulations that would be
considered by the negotiated
rulemaking committee, the Secretary
chose to include those changes in the
proposed regulations to be considered
by the committee to ensure that the
committee could evaluate the full scope
of changes to those regulations.
The Department stated its
commitment to publishing the
regulations to implement the Pay As
You Earn repayment initiative and to
overhaul and improve the total and
permanent disability discharge process
for borrowers as soon as possible.
During the development of proposed
regulatory language and prior to the
second meeting of the negotiating
committee, the Department concluded
that the scope and volume of the likely
resulting proposed regulations resulting
from the agenda approved by the
negotiating committee would require
extensive and significant changes to the
regulations. In particular, updating the
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FFEL Program regulations and making
major changes to the Direct Loan
Program regulations involved changes to
the entirety of those program
regulations. The Department determined
that it was unlikely that one NPRM
reflecting all of the issues could be
published by the deadline established
by section 482(c) of the HEA. To ensure
the earliest possible implementation of
the Pay As You Earn repayment
initiative and the revised total and
permanent disability discharge
regulations, which will provide
significant benefits to student loan
borrowers, the Department determined
that two NPRMs would result from the
negotiating committee’s work.
During the second meeting of the
negotiating committee, the Department
explained to the negotiating committee
members that one NPRM would contain
proposed regulations to implement the
Pay As You Earn repayment initiative,
to incorporate statutory changes in the
IBR plan, to make other changes to
improve the administration of the IBR
and ICR plans, and to overhaul the total
and permanent disability discharge
process. The second NPRM would
contain all the remaining proposed
regulations that were on the negotiating
committee’s agenda, including proposed
regulations involving rehabilitation of
defaulted loans and AWG in the FFEL
Program. The Department also
explained that any final regulations
published as a result of the second
NPRM would not be published by
November 1, 2012, and therefore would
not become effective until July 1, 2014,
under the master calendar provisions of
section 482(c)(1) of the HEA. The
Department committed, however, to
authorize, to the extent possible, early
implementation of the final regulations
published as a result of the second
NPRM under the Secretary’s authority to
designate regulatory provisions for early
implementation by program participants
under section 482(c)(2) of the HEA.
At the final meeting in March 2012,
the negotiating committee reached
consensus on the full agenda of loans
issues.
On July 17, 2012, the Secretary
published the first NPRM to propose
changes to implement the President’s
Pay As You Earn repayment plan and to
make changes to the ICR and IBR plans
and the process for evaluating disability
discharge requests (77 FR 42086). After
reviewing the public comments received
on the proposed rule, the Secretary
published the final regulations on
November 1, 2012 (77 FR 66088).
This NPRM is the second of the two
NPRMs resulting from the negotiating
committee’s negotiations. It contains
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proposed regulations to: Amend the
provisions governing the participation
rate index ceiling applicable to
institutions with a single three-year
cohort default rate of over 40 percent for
purposes of challenges to and appeals
from sanctions; revise the definitions of
‘‘satisfactory repayment arrangement’’
in the Perkins Loan, FFEL, and Direct
Loan programs; amend the closed
school loan discharge regulations in the
Perkins Loan, FFEL, and Direct Loan
programs; update the enrollment status
reporting requirements in the FFEL and
Direct Loan program regulations and
add comparable requirements to the
Perkins Loan Program regulations;
amend the forbearance regulations in
the FFEL and Direct Loan programs;
amend the FFEL and Direct Loan
program regulations governing the
determination of a borrower’s
reasonable and affordable payment
amount under a loan rehabilitation
agreement, and the treatment of
payments made through AWG while the
borrower is also making payments
under a loan rehabilitation agreement;
amend the Perkins Loan Program
regulations governing graduate
fellowship and economic hardship
deferments; modify the Perkins Loan
Program regulations governing
rehabilitation of a defaulted loan;
amend the requirements for assigning a
Perkins Loan to the Secretary; amend
the Perkins Loan Program regulations
related to loan cancellation; amend the
FFEL Program regulations governing
certain lender disclosures to borrowers;
amend the FFEL Program regulations
governing the AWG process; revise the
FFEL Program regulations by removing
provisions that are no longer needed
and make necessary technical and
conforming changes; amend the Direct
Loan Program regulations governing the
minimum period of enrollment for
which a loan may be originated in
certain transfer student situations;
revise the Direct Loan Program
regulations by incorporating provisions
that apply in the Direct Loan Program
but are currently only incorporated by
reference to the FFEL Program
regulations; amend the Direct Loan
Program regulations to reflect recent
statutory changes; remove obsolete
provisions from the Direct Loan
Program regulations; and make
necessary technical corrections and
conforming changes throughout the
Direct Loan Program regulations.
More information on the work of the
negotiating committee can be found at:
www.ed.gov/policy/highered/reg/
hearulemaking/2008/loans.html.
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Summary of Proposed Changes
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Student Assistance General Provisions
For purposes of challenges to and
appeals from sanctions, the proposed
regulations would raise the
participation rate index ceiling
applicable to institutions that have a
single three-year cohort default rate of
over 40 percent from 0.06015 to 0.0832.
Changes That Apply to the Perkins
Loan, FFEL, and Direct Loan Programs
• The definitions of ‘‘satisfactory
repayment arrangement’’ in the Perkins
Loan, FFEL, and Direct Loan program
regulations would be revised to provide
that a borrower is not considered to
have used the one-time-only
opportunity to regain eligibility for title
IV aid by making satisfactory repayment
arrangements if the borrower makes six
payments during the course of
rehabilitating a defaulted loan, but does
not seek additional title IV aid after
making those six payments. The
proposed regulations would also extend
the time period after the payment due
date during which a payment is
considered to be on-time for purposes of
making satisfactory repayment
arrangements in the FFEL and Direct
Loan programs from 15 to 20 days, and
would establish the same 20-day
standard in the Perkins Loan Program.
In addition, the proposed regulations
would define the term ‘‘satisfactory
repayment arrangement’’ more
consistently across the title IV, HEA
loan programs.
• The closed school loan discharge
provisions in the Perkins Loan, FFEL,
and Direct Loan program regulations
would be revised to specify that a
borrower who withdraws from a school
prior to the school’s closure may qualify
for a discharge if the borrower
withdraws not more than 120 days
before the date the school closes,
instead of the current standard of not
more than 90 days. The proposed
regulations would also add examples of
the types of exceptional circumstances
under which the Department may allow
borrowers who withdraw from a school
more than 120 days prior to the school’s
closure date to qualify for loan
discharge.
• The FFEL Program enrollment
status reporting requirements for
institutions would be updated by
eliminating outdated references to
receiving enrollment reports from
guaranty agencies and reporting
enrollment status information to
guaranty agencies, and by removing an
obsolete requirement to report
information about students who have
ceased to be enrolled on a full-time
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basis. The Direct Loan Program
enrollment status reporting
requirements would be revised by
eliminating obsolete references to the
frequency with which the Department
provides student status confirmation
reports to schools and the format of
those reports. Both the FFEL and Direct
Loan program enrollment status
reporting requirements for institutions
would be updated to eliminate obsolete
terms and procedures, reflect current
processes, and require institutions to
report certain enrollment status changes
for recipients of any type of title IV loan.
Comparable enrollment status reporting
requirements would be added to the
Perkins Loan Program regulations.
FFEL and Direct Loan Programs
• The proposed regulations would
revise the terms under which a guaranty
agency in the FFEL Program may
authorize a lender to grant forbearance
to permit a borrower or endorser to
resume honoring the agreement to repay
a debt after default but prior to claim
payment. The proposed regulations
would require the borrower or endorser
to provide either a signed written
repayment agreement or an oral
affirmation of the repayment obligation.
The proposed regulations would further
provide that if a forbearance is granted
based on the borrower’s or endorser’s
oral request and affirmation of the
obligation: (1) The forbearance may not
exceed 120 days and cannot be granted
for consecutive periods; (2) the lender
must orally review with the borrower
the terms and conditions of the
forbearance, including the consequences
of interest capitalization and other
available repayment options; and (3) the
lender must send a notice to the
borrower or endorser that confirms the
terms of the forbearance and the
affirmation of the repayment obligation
within 30 days of that affirmation. The
proposed regulations would also define
the term ‘‘affirmation.’’ Finally, the
proposed regulations would add
comparable forbearance provisions in
the Direct Loan Program.
• The current FFEL Program
forbearance provision for borrowers
who are performing service that
qualifies them for loan repayment under
the student loan repayment program
administered by the Department of
Defense under 10 U.S.C. 2171 would be
modified to also require lenders to grant
forbearance to borrowers performing
service that qualifies them for loan
repayment under Department of Defense
loan repayment programs that are
authorized under 10 U.S.C. 2173 and
2174, and any other student loan
repayment programs administered by
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the Department of Defense. A
comparable forbearance provision
would be added to the Direct Loan
Program regulations.
• The conditions under which a FFEL
Program lender may grant an
administrative forbearance would be
modified to include a circumstance in
which a borrower is delinquent at the
beginning of an authorized forbearance
period, and a corresponding forbearance
provision would be added to the Direct
Loan Program regulations.
• The proposed regulations would
include the following changes to the
provisions governing loan rehabilitation
in the Direct Loan and FFEL programs:
Æ The Secretary or the guaranty
agency, as applicable, would determine
a borrower’s reasonable and affordable
payment amount under a loan
rehabilitation agreement based on the
borrower’s and, if applicable, the
borrower’s spouse’s current disposable
income, family size, and reasonable and
necessary expenses. The borrower
would be required to provide the
Secretary or guaranty agency with the
information needed to determine the
reasonable and affordable payment
amount on a form approved by the
Secretary and, if requested, would be
required to provide supporting
documentation. The proposed
regulations would include a detailed list
of the types of expenses that the
Secretary or guaranty agency would
consider in determining a borrower’s
reasonable and affordable rehabilitation
payment amount.
Æ The reasonable and affordable loan
rehabilitation payment amount must not
be: (1) A required minimum payment,
such as $50, if the guaranty agency or
the Secretary determines that a smaller
amount is reasonable and affordable; (2)
a percentage of the borrower’s total loan
balance; or (3) an amount based on any
other formula or criteria unrelated to the
individual borrower’s total financial
circumstances.
Æ The Secretary or the guaranty
agency would provide the borrower
with a written rehabilitation agreement
within 15 business days of the
determination of the borrower’s
reasonable and affordable payment. The
agreement would include: (1) The
rehabilitation payment amount; (2) a
prominent statement that the borrower
may object to the payment amount and
the method and timeframe for raising
such an objection; (3) an explanation of
the terms and conditions of the required
series of payments, and the effects of
loan rehabilitation; and (4) for a FFEL
borrower, the amount of unpaid
collection costs to be added to the
unpaid principal of the rehabilitated
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loan when the loan is sold to an eligible
FFEL lender.
Æ A borrower’s rehabilitation
payment amount would be recalculated
if the borrower objects to the payment
amount in the written repayment
agreement. If the borrower objects to the
amount determined based on an
evaluation of income and expenses
documented by the borrower, the
Secretary or the guaranty agency would
recalculate an alternative rehabilitation
payment amount, based on
documentation provided by the
borrower, using the formula for
calculating a monthly payment amount
under the IBR plan in the Direct Loan
and FFEL program regulations. If the
recalculated amount using the IBR
formula is less than $5, the borrower’s
recalculated monthly rehabilitation
payment amount would be $5. The
borrower may choose either
rehabilitation payment amount.
Æ While a borrower is making
payments under a rehabilitation
agreement, the Secretary or guaranty
agency would limit contact with the
borrower to collection activities
required by law or regulation and
communications that support the
rehabilitation.
Æ If a borrower who is making
voluntary payments on a defaulted loan
under a loan rehabilitation agreement is
also making payments through AWG,
the Secretary or guaranty agency would
suspend collection through AWG after
the borrower has made five qualifying
monthly payments under the loan
rehabilitation agreement. A borrower
would have the option of requesting that
the Secretary or guaranty agency
continue collecting on the loan through
AWG while the borrower continues to
make voluntary payments under the
loan rehabilitation agreement. A
borrower would have only one
opportunity to benefit from suspension
of AWG while attempting to rehabilitate
a defaulted loan.
Perkins Loan Program
• Schools that participate in the
Perkins Loan Program would be
required to use the same eligibility
criteria used in the Direct Loan and
FFEL programs to define an ‘‘eligible
graduate fellowship program’’ and to
establish the eligibility of a Perkins
Loan borrower to receive a deferment
while participating in a graduate
fellowship program. The proposed
regulations would add a definition of
the term ‘‘eligible graduate fellowship
program’’ to the Perkins Loan Program
regulations consistent with the
definition currently used in the Direct
Loan and FFEL program regulations.
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• The Perkins Loan economic
hardship deferment eligibility criteria
would be revised by eliminating the
deferment category for borrowers who
work less than full-time and have a
specified debt-to-income ratio.
• The Perkins Loan rehabilitation
provisions would be modified to specify
that an ‘‘on-time’’ payment, for the
purpose of loan rehabilitation, is a
payment that is made within 20 days of
the due date.
• For Perkins Loans that were made
before September 13, 1982, the date the
Secretary began requiring institutions to
collect a borrower’s Social Security
Number (SSN) on the Perkins Loan
Program promissory notes, the proposed
regulations would allow assignment of
those loans to the Secretary without the
borrower’s SSN.
• A Perkins Loan borrower who
completes half of an academic year of
teaching, but who is unable to complete
the second half of the academic year
due to a condition covered under the
FMLA, would be able to count that year
as a full year of eligible teaching service
for loan cancellation purposes, if the
borrower’s employer considers the
borrower to have fulfilled the teacher
contract requirements for that academic
year. In addition, the proposed
regulations would allow a borrower who
is unable to complete a full year of
public service under other loan
cancellation categories due to a
condition covered under the FMLA to
count that year as a full year of public
service for loan cancellation purposes if
the borrower completes at least six
months of consecutive eligible service.
• If a Perkins Loan borrower who is
performing service that qualifies the
borrower for loan cancellation at a
cancellation rate progression of 15
percent for the first and second years of
qualifying service, 20 percent for the
third and fourth years of qualifying
service, and 30 percent for the fifth year
of qualifying service, takes a job in a
different field that qualifies the
borrower under a different cancellation
category that provides loan cancellation
at the same cancellation rate progression
as the prior category, the borrower’s
cancellation rate progression would be
uninterrupted. The borrower’s
cancellation rate under the new
cancellation category would continue
from the last year the borrower received
a cancellation under the former
cancellation category, rather than
reverting to the first-year cancellation
rate of 15 percent.
FFEL Program
• The timeframe for FFEL lenders to
send the required repayment disclosure
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for borrowers who are 60 days
delinquent would be changed from five
calendar days to five business days after
the date the borrower becomes 60 days
delinquent.
• The proposed regulations would
eliminate the requirement for a lender to
provide a repayment disclosure to a
borrower who is having difficulty
making payments if the borrower’s
difficulty has been resolved through
contact resulting from an earlier
disclosure or from other contact
between the lender and the borrower.
• The proposed regulations would
include the following changes to the
rules governing AWG in the FFEL
Program:
Æ The proposed regulations would
clarify the burden of proof that must be
met by the borrower during the hearing
process, specify the procedures that
must be followed by the borrower and
guaranty agency when objections are
raised, and specify requirements that
must be followed by a hearing official in
determining whether the proposed
withholding amount would cause a
financial hardship for the borrower.
Æ The regulations would be revised to
provide more consistent treatment with
respect to AWG for borrowers whose
defaulted loans are held by a guaranty
agency and borrowers whose defaulted
loans are held by the Secretary.
Æ Existing policy guidance related to
functions that may be performed by
third-party servicers or collection
contractors retained by guaranty
agencies for AWG purposes would be
incorporated in the regulations, and the
regulations would include examples of
permissible activities of third-party
contractors.
Æ The regulations would be revised to
more clearly describe the complete
AWG process, from the initial
garnishment notice to the withholding
of the borrower’s wages.
Æ Regulations would be amended to
better reflect due process requirements
and to specify the functions, delegations
of authority, recordkeeping
requirements, and permissible activities
of guaranty agencies and third-party
servicers or collection contractors.
Æ The regulations would be amended
to specify the limitations on the amount
that may be subject to AWG if a
guaranty agency is garnishing pay from
a borrower who is not already subject to
a withholding order, and to clarify the
withholding amount or percentage and
priority if a guaranty agency is
garnishing the pay of a borrower who is
already subject to one or more
withholding orders. The proposed
regulations would also permit a greater
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amount or percentage to be withheld
with the borrower’s consent.
Æ The proposed regulations would
require that for a borrower to receive a
hearing before AWG begins, the
borrower’s written request for a hearing
must be received on or before the 30th
day following the date the garnishment
notice was sent, instead of on or before
the 15th day following the borrower’s
receipt of a garnishment notice, as
under current regulations. The proposed
regulations would also delete a
provision that a borrower is considered
to have received a garnishment notice
five days following the date of the
notice.
Æ If a borrower’s written request for a
hearing is received by the guaranty
agency after the 30th day following the
date of the garnishment notice, the
agency must provide the borrower a
hearing and issue a decision within 60
days following receipt of the request. If
a decision is not rendered within 60
days, the guaranty agency would be
required to suspend the order beginning
on the 61st day after the hearing request
was received until a hearing is provided
and a decision is rendered.
Æ The proposed regulations would
also: (1) Specify the information that a
guaranty agency must provide in the
AWG notice it sends to a defaulted
borrower; (2) describe how an AWG
hearing must be conducted, including
with respect to the submission of
additional evidence and the granting of
continuances; (3) provide for the
withholding order to end by either
rescission of the order for AWG or full
recovery of the amount owed by the
borrower; and (4) clarify that a borrower
who wishes to object that he or she
should not be subject to garnishment
because of involuntary separation from
employment bears the burden of raising
and proving that claim.
• To reflect the impact of the SAFRA
Act, FFEL Program regulations
governing loan origination and
disbursement and related requirements
and activities (for example,
requirements for due diligence in the
making and disbursing of loans) would
be eliminated, except for certain schoolbased requirements and related
activities (for example, exit counseling
requirements).
• FFEL Program regulations that are
obsolete (for example, rules governing
the Federal Insured Student Loan (FISL)
Program) would be eliminated.
• Conforming changes and technical
corrections would be made as necessary
throughout the regulations to ensure
consistency and accuracy.
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Direct Loan Program
Student Assistance General Provisions
• The Direct Loan Program
regulations would be expanded by
adding provisions that apply in the
Direct Loan Program, but which are
currently reflected in 34 CFR part 685
only by cross-reference to the FFEL
Program regulations (for example,
eligibility criteria for graduate
fellowship and economic hardship
deferments).
• The proposed regulations would
remove provisions that are obsolete or
that do not reflect current procedures
used in administering the Direct Loan
program, such as loan limit amounts
that are no longer applicable because of
recent statutory changes, and outdated
school loan origination options and
eligibility criteria for initial
participation in the Direct Loan
Program.
• The Direct Loan Program deferment
regulations would be restructured for
greater clarity.
• The exception to the minimum loan
period requirement for clock-hour and
certain non-term programs that allows a
school to originate a loan for a transfer
student to cover a period of enrollment
shorter than the academic year or the
program length only if the school
accepts credit or clock hours from the
school the student previously attended
would be revised by removing the
provision that limits the exception to
situations in which the new school
accepts transfer credits or clock hours
from the prior school.
• Throughout the Direct Loan
Program regulations, conforming
changes would be made to reflect the
impact of the SAFRA Act and other
recent statutory changes, and other
conforming changes and technical
corrections would be made as necessary.
Three-Year Cohort Default Rate
Participation Rate Index Challenges
and Appeals (34 CFR 668.204 and
668.214)
Statute: Under section 435(a)(8) of the
HEA, an institution’s participation rate
index (PRI) is determined by
multiplying the institution’s Direct
Loan/FFEL cohort default rate (CDR) by
the percentage of the institution’s
regular students, enrolled on at least a
half-time basis, who received such a
loan for a 12-month period ending
during the six months immediately
preceding the fiscal year for which the
cohort of borrowers used to calculate
the institution’s CDR is determined.
Effective for fiscal years beginning on
and after October 1, 2011, section
435(a)(8)(A) of the HEA provides that an
institution that demonstrates to the
Secretary that its PRI is equal to or less
than 0.0625 for any of the three most
recent fiscal years for which data is
available will not lose eligibility to
participate in the FFEL and Direct Loan
programs for having three three-year
CDRs that are equal to or greater than 30
percent.
Current Regulations: Under section
668.206(a)(1), an institution that has one
three-year CDR of over 40 percent loses
its eligibility to participate in the FFEL
and Direct Loan programs. Sections
668.204(c)(1)(i), 668.214(a)(1), and
668.214(d)(2) use a participation rate
index of 0.06015 as the ceiling for
successful PRI challenges and appeals
brought by institutions having one
three-year CDR of over 40 percent.
Proposed Regulations: Proposed
§§ 668.204(c)(1)(i) and 668.214(a)(1)
substitute 0.0832 as the PRI ceiling for
purposes of challenges to and appeals
from sanctions based on one three-year
CDR of over 40 percent. Similarly, in
proposed § 668.214(d)(2), ‘‘0.06015’’ is
replaced with ‘‘0.0832.’’
Reasons: Under the statutory PRI
ceiling of 0.0625, which applies to
sanctions based on three three-year
CDRs of 30 percent or higher,
institutions can be excused from
sanctions based on the percentage of
Direct Loan and FFEL borrowers among
their enrollment even if that percentage
is as high as almost 21 percent,
depending on the lowest of the
institution’s three excessive CDRs (0.30
CDR × 0.20 < 0.0625 ceiling).
In contrast, using the current
regulatory 0.06015 PRI ceiling for an
institution that has a single three-year
CDR of over 40 percent means that the
cutoff for a successful PRI appeal of or
challenge to the regulatory loss of
eligibility is a borrower population
Significant Proposed Regulations
We group major issues according to
subject, with appropriate sections of the
proposed regulations referenced in
parentheses. We begin with an issue
that involves the Student Assistance
General Provisions regulations in 34
CFR part 668, followed by issues that
apply to all three title IV loan programs,
issues that apply to the FFEL and Direct
Loan programs, issues that apply only to
the Perkins Loan Program, issues that
apply only to the FFEL Program, and
finally issues that apply only to the
Direct Loan Program. We discuss
substantive issues under the sections of
the proposed regulations to which they
pertain. Generally, we do not address
proposed regulatory changes that are
technical or otherwise minor in effect.
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comprising no more than approximately
15 percent of enrollment (0.401 CDR ×
0.15 = 0.06015 ceiling).
The Department is proposing to raise
the PRI ceiling applicable to institutions
that have a single three-year CDR of over
40 percent so that, as with the PRI
challenge and appeal established by
statute for three-year CDRs of 30 percent
or higher, the institution can have
borrower enrollment as high as almost
21 percent and still bring a successful
PRI challenge to or appeal from the loss
of eligibility (0.401 CDR × 0.20 <
0.0832).
Perkins Loan, FFEL, and Direct Loan
Programs: Satisfactory Repayment
Arrangements (34 CFR 674.2(b),
674.9(k), 682.200(b), 685.102(b), and
685.200)
Statute: Under section 428F(b) of the
HEA, which is applicable to the Direct
Loan Program under section 455(a)(1) of
the HEA, a defaulted FFEL or Direct
Loan borrower may regain eligibility for
title IV student financial assistance if
the borrower makes six consecutive,
monthly payments on the defaulted
FFEL or Direct Loan Program loan. The
borrower may only regain eligibility
once under this provision of the HEA.
Under section 464(h)(2) of the HEA, a
defaulted Perkins Loan borrower may
regain eligibility for title IV student
financial assistance by making six ontime, consecutive, monthly payments on
the defaulted Perkins Loan Program
loan. As with FFEL and Direct Loan
borrowers, a Perkins Loan borrower may
only regain eligibility once under this
provision of the HEA.
Current Regulations: In the Perkins
Loan, FFEL, and Direct Loan programs,
a defaulted borrower may regain
eligibility for title IV student financial
assistance by making satisfactory
repayment arrangements with the loan
holder. The term ‘‘satisfactory
repayment arrangement’’ is defined in
34 CFR 674.2(b), 682.200(b), and
685.102(b) for the Perkins Loan, FFEL,
and Direct Loan programs, respectively.
The ‘‘satisfactory repayment
arrangement’’ definitions are slightly
different for each of the three loan
programs. For Perkins Loan borrowers,
a satisfactory repayment arrangement is
the making of six, on-time, consecutive,
monthly payments on a defaulted loan.
34 CFR 674.2(b) (‘‘Satisfactory
repayment arrangement’’). For FFEL and
Direct Loan borrowers, for purposes of
regaining eligibility, a satisfactory
repayment arrangement is the making of
six consecutive, on-time, voluntary, full
monthly payments on a defaulted loan.
34 CFR 682.200(b) (‘‘Satisfactory
repayment arrangement’’) and
685.102(b)(‘‘Satisfactory repayment
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arrangement’’). For FFEL and Direct
Loan borrowers, an on-time payment is
a payment made within 15 days of the
due date. The Perkins Loan Program
regulations do not specify a standard for
on-time payments. The standard for an
on-time payment is established by the
institution that is collecting the Perkins
Loan, or by the Secretary if the Secretary
holds the loan.
The ‘‘satisfactory repayment
arrangement’’ definitions in the FFEL
and Direct Loan program regulations
specify that voluntary payments are
payments made directly by the borrower
and do not include payments obtained
by income tax offset, garnishment, or
income or asset execution. These
limitations are not in the Perkins Loan
Program definition of ‘‘satisfactory
repayment arrangement,’’ but are in
§ 674.9(j) of the Perkins Loan Program
regulations.
The FFEL and Direct Loan program
regulations specify that a borrower may
only obtain the benefit of regaining title
IV eligibility by making satisfactory
repayment arrangements once. The
Perkins Loan Program regulations state
that a borrower may only obtain the
benefit of regaining title IV eligibility by
making satisfactory repayment
arrangements on a defaulted loan once.
None of the definitions address the
status of borrowers who, in the course
of making rehabilitation payments on a
defaulted title IV loan, also make the
required number of payments to regain
title IV eligibility under a satisfactory
repayment arrangement.
Proposed Regulations: The proposed
regulations would make the definitions
of ‘‘satisfactory repayment arrangement’’
more consistent across the three title IV
student loan programs. Proposed
§ 674.2(b) would add to the definition of
‘‘satisfactory repayment arrangement’’
in the Perkins Loan Program regulations
the requirements that the monthly
payments be ‘‘voluntary’’ and ‘‘full.’’
The proposed Perkins Loan Program
regulations would also specify that
voluntary payments are payments made
by the borrower and do not include
payments obtained by income tax offset,
garnishment, or income or asset
execution. The revised definition of
‘‘satisfactory repayment arrangement’’
in the Perkins Loan Program regulations
would also specify that a borrower may
only receive the benefit of regaining title
IV eligibility by a satisfactory repayment
arrangement once, not once on a
defaulted loan, as in the current
regulation.
The revisions to the ‘‘satisfactory
repayment arrangement’’ definitions for
the FFEL and Direct Loan programs in
proposed §§ 682.200(b) and 685.102(b)
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would extend the length of time during
which a payment would be considered
on-time from within 15 days of the due
date to within 20 days of the due date.
The revision to the ‘‘satisfactory
repayment arrangement’’ definition for
the Perkins Loan Program in proposed
§ 674.2(b) would establish the same 20day standard for an on-time payment.
The proposed regulations would add
a new paragraph to the definitions of
‘‘satisfactory repayment arrangement’’
in §§ 674.2(b), 682.200(b), and
685.102(b) of the Perkins Loan, FFEL,
and Direct Loan program regulations.
The proposed new paragraph would
provide that a borrower who makes six
qualifying payments under an
agreement to rehabilitate a loan, but
who does not receive additional title IV
aid prior to defaulting on the loan again,
will not be considered to have used the
one opportunity the borrower has to
renew eligibility for title IV aid by
making satisfactory repayment
arrangements.
The proposed regulations would add
a new § 674.9(k) to the Perkins Loan
Program regulations, to provide that a
borrower who is in default on a FFEL
or Direct Loan program loan may regain
eligibility to receive a Perkins Loan if
the borrower makes satisfactory
repayment arrangements on the FFEL or
Direct Loan program loan, as
determined by the loan holder. The
proposed regulations would also revise
§ 685.200(d) of the Direct Loan Program
regulations, by adding a reference to
defaulted Perkins Loans as well as to
defaulted FFEL and Direct Loan
program loans.
Reasons: A defaulted borrower may
regain eligibility for Federal student aid
by making satisfactory repayment
arrangements on a title IV loan. In
addition, a borrower also has the option
of rehabilitating a defaulted title IV loan
by making a series of on-time,
voluntary, full monthly payments as
part of a rehabilitation agreement with
the loan holder. To rehabilitate a loan in
the Direct Loan or FFEL program, a
borrower must make nine reasonable
and affordable payments within 20 days
of the due date during ten consecutive
months. To rehabilitate a loan in the
Perkins Loan Program, a borrower is
required to make nine consecutive
monthly payments. In the course of
making loan rehabilitation payments, a
title IV borrower may also make the six
consecutive on-time monthly payments
necessary to regain eligibility for title IV
aid.
A borrower making payments under a
loan rehabilitation agreement might not
have plans to return to school or to seek
additional title IV aid after making the
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required payments. The Department has
previously been asked whether a
borrower who makes the six payments
needed under satisfactory repayment
arrangements in the course of making
loan rehabilitation payments, but who
does not request additional title IV aid,
will automatically be considered to have
used the one-time-only opportunity to
regain eligibility by making satisfactory
repayment arrangements. The
Secretary’s policy is that a borrower in
this situation has not used the one-time
opportunity to regain title IV eligibility
by making satisfactory repayment
arrangements unless the borrower
receives title IV aid after regaining
eligibility. As a result of these inquiries,
the Secretary proposed amending the
‘‘satisfactory repayment arrangement’’
definitions in the Perkins Loan, FFEL,
and Direct Loan program regulations to
codify this policy. The negotiating
committee agreed with the changes
proposed by the Department.
The Secretary also proposed making
the definition of ‘‘satisfactory repayment
arrangement’’ more consistent across the
three loan programs. The Secretary
proposed removing the language in the
Perkins Loan Program regulations that
stated that a borrower may only obtain
this benefit once ‘‘on a defaulted loan.’’
The proposed change would make the
Perkins Loan Program definition
consistent with the FFEL and Direct
Loan program definitions, which state
that a borrower may only obtain this
benefit ‘‘once.’’ Non-Federal negotiators
recommended that the ‘‘on a defaulted
loan’’ language be added to the FFEL
and Direct Loan program definitions,
rather than removed from the Perkins
Loan Program definition. The Secretary
reviewed the Perkins Loan and FFEL
program statutory provisions, and
determined that the HEA restricts this
benefit to once per borrower, not once
per loan, in all three of the title IV
student loan programs. Accordingly, the
Secretary declined to accept this
recommendation from the non-Federal
negotiators.
Non-Federal negotiators
recommended expanding the standard
for an on-time payment in the FFEL and
Direct Loan definitions of ‘‘satisfactory
repayment arrangements’’ from within
15 days of the due date to within 20
days of the due date. They also
recommended adding this on-time
payment standard to the Perkins Loan
Program definition. The negotiators
noted that the 20-day standard is
already established for loan
rehabilitation payments, and believed
that it would be appropriate to use the
same standard for payments made under
a satisfactory repayment arrangement.
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Using the same standard for on-time
payments for purposes of satisfactory
repayment arrangements and for
purposes of loan rehabilitation would
reduce complexity and confusion for
borrowers and loan servicers. The
Secretary agreed with the
recommendation to have the same
standard for on-time payments made
under satisfactory repayment
arrangements in the three title IV loan
programs, and to make that standard
consistent with the standard for
rehabilitation payments.
The Secretary proposed revising the
Perkins Loan and Direct Loan student
and borrower eligibility regulations to
specify that a defaulted FFEL or Direct
Loan program borrower can qualify for
a new Perkins Loan by making
satisfactory repayment arrangements on
the defaulted loan, and to specify that
a defaulted Perkins Loan Program
borrower can qualify for a new Direct
Loan by making satisfactory repayment
arrangements. Sections 428F(b) and
455(a)(1) of the HEA already provide for
this treatment, and the Secretary
proposed revising the Perkins and
Direct Loan program regulations to more
closely match these HEA statutory
provisions.
Closed School Discharge (34 CFR
674.33(g), 682.402(d), and 685.214)
Statute: Sections 437(c)(1) (which is
applicable to the Direct Loan Program
under section 455 of the HEA) and
464(g) of the HEA provide for a closed
school discharge for borrowers in the
Perkins Loan, Direct Loan, and FFEL
programs who are unable to complete a
program of study because of a school
closure.
Current Regulations: Under
§§ 674.33(g), 685.214, and 682.402(d) of
the Department’s current regulations,
borrowers in the Perkins Loan, Direct
Loan, and FFEL programs (and PLUS
loan endorsers) may receive a loan
discharge if the borrower (or the student
on whose behalf a parent borrowed)
could not complete the program of
study at the school because the school
closed while the borrower (or student)
was enrolled, or if the borrower (or
student) withdrew from the school no
more than 90 days before the school
closed.
Sections 674.33(g), 685.214, and
682.402(d) of the Department’s
regulations provide that the 90-day
period may be extended if the Secretary
determines that exceptional
circumstances related to the school
closure justify an extension. The
school’s closure date is the date the
school ceases to provide educational
instruction in all of its programs, as
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determined by the Secretary. For closed
school discharge purposes a ‘‘school’’ is
the school’s main campus, or any
location or branch of the main campus,
regardless of whether the school or its
location or branch is considered eligible
for title IV purposes.
Proposed Regulations: Proposed
§§ 674.33(g)(4)(i)(B), 682.402(d)(1)(i),
and 685.214(c)(1)(ii), respectively,
would extend the current 90-day
window for students who leave before a
school closes to 120 days, and add
examples of the types of exceptional
circumstances under which the
Department may extend the 120-day
window. Specifically, the proposed
regulations would list the following
examples of exceptional circumstances
for this purpose: The school’s loss of
accreditation; the school’s
discontinuation of the majority of its
academic programs; action by the State
to revoke the school’s license to operate
or award academic credentials in the
State; or a finding by a State or Federal
government agency that the school
violated State or Federal law.
Reasons: During the public hearings
prior to the initiation of the negotiated
rulemaking sessions, some commenters
suggested that the 90-day window for
student withdrawal prior to a school’s
closure date may be too short because
there may be numerous signs of a
school’s pending closure that may
prompt a student to withdraw more
than 90 days prior to the school’s
closure date. The commenters also
noted that the Department has not
previously provided examples in the
regulations of the exceptional
circumstances under which the
Department would extend the 90-day
window.
To inform the discussions around the
closed school discharge, the Department
presented information to the negotiating
committee on its experience with closed
school discharges. In the last five years,
128 schools that participated in the title
IV programs have closed. The primary
reason for the school closures has been
the loss of accreditation. Of the 128
schools that closed, 82 were proprietary
schools.
The non-Federal negotiators raised
many questions about the Department’s
implementation of the statutory
requirement that a school must close in
order for the borrower to receive a loan
discharge. Some negotiators argued that
the closed school discharge should
include instances in which a program at
the school is discontinued but the
school continues to operate, especially
in the case of a school that offers many
of its programs online and which does
not associate its online programs with a
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physical location. The non-Federal
negotiators asked the Department to
clarify whether students would be
eligible for a closed school loan
discharge if a school discontinued one
of its traditional or online programs.
In response to the negotiators’
questions, the Department noted that for
a borrower to receive a loan discharge,
current regulations require that the
school must close. Under §§ 674.33(g),
682.402(d), and 685.214(a), the term
‘‘school’’ means a school’s main campus
or any location or branch of the main
campus, and a school is considered
closed as of the date that the school
ceases to provide education in all
programs. The law and regulations do
not provide a loan discharge when a
program, either traditional or distance,
is discontinued. The Department also
noted that distance education programs
are not locations of a school for title IV
eligibility purposes. A location is a
physical site where a student can
receive instruction in 50 percent or
more of an eligible program. If a school
offers online programs, the online
programs are considered associated with
the main campus of the school. Thus, a
borrower enrolled in an online course
would receive a closed school discharge
only if the main campus of the school
closed.
The Department proposed expanding
from 90 to 120 days the window in
which a student must be enrolled at a
school that closed for a borrower to
receive the closed school loan
discharge. Expanding the window
should help address the circumstances
under which a borrower has enough
information to determine that a school
is not providing an appropriate
education and may close and withdraws
from the school prior to its formal
closure date. The Department believes
that the extra time would help
borrowers who are in this situation and
would allow them to take advantage of
other opportunities, such as the option
to take advantage of a teach-out plan.
The non-Federal negotiators agreed
that this change would be beneficial for
borrowers and should be made.
In response to public commenters’
requests that the Department provide
examples of exceptional circumstances
that might justify an extension of the
window under §§ 674.33(g), 682.402(d),
and 685.214(c), the Department invited
the non-Federal negotiators to provide
examples of what they believed should
be considered exceptional
circumstances. After much discussion,
some of the non-Federal negotiators
recommended that the following
examples be included in the proposed
regulations: The school’s loss of
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accreditation; the school’s
discontinuation of the majority of its
academic programs; action by the State
to revoke the school’s license to operate
or award academic credentials in the
State; or a finding by a State or Federal
government agency that the school
violated State or Federal law.
In response to a question from some
negotiators, in regard to the last of the
listed examples, we note that we would
consider the term ‘‘finding’’ to refer to
a conclusion in a final or formal
document issued by the State or Federal
agency.
Some non-Federal negotiators
believed that it was particularly
important to treat as an exceptional
circumstance a school’s discontinuance
of the majority of its programs. Those
negotiators noted that while it is highly
improbable that a school will be able to
continue its operations after closing the
majority of its programs, there is a
possibility that a school in this situation
will remain open. In light of the fact that
a borrower cannot receive a loan
discharge based upon a single
discontinued program, the non-Federal
negotiators believed this language
would cover the exception and provide
relief for affected borrowers.
It is important to note that, although
the Secretary would view the cited
examples as exceptional circumstances,
these examples would not be exclusive
or otherwise narrow the scope of
exceptional circumstances that the
Secretary would consider. The Secretary
has the discretion to consider other
extenuating circumstances that may
warrant a closed school loan discharge
for a borrower who withdrew from a
school more than 120 days before the
school closed. As the Department noted
during the negotiated rulemaking
session, the Secretary determines
whether exceptional circumstances exist
on a case-by-case basis and takes into
account the facts of the particular
situation.
The Secretary also wants to note that
the listing of these examples is not
intended to provide borrowers with a
guaranteed right to a discharge. The
Secretary would still need to determine
that the situation presents exceptional
circumstances justifying an extension of
the 120-day window. Moreover, these
examples are not intended to provide a
borrower with a private right of action
against the school; these examples
would not establish any rights between
the student and the school.
After much deliberation and
discussion between the Department and
the non-Federal negotiators, the
Department and the non-Federal
negotiators reached consensus on the
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proposed changes to the closed school
loan discharge regulations.
School Enrollment Status Reporting
Requirements (34 CFR 674.61, 682.605,
682.610, and 685.309)
Statute: Section 428(b)(1)(P) of the
HEA requires a borrower who received
a FFEL Program loan to notify the
school of any change in the borrower’s
local address while the borrower is
enrolled. It also requires the borrower
and the school to promptly notify the
loan holder, either directly or through
the guaranty agency, if there is a change
in the borrower’s permanent address, if
the student ceases to be enrolled on at
least a half-time basis, or if there is any
other change in status that affects the
student’s eligibility for the loan.
Section 454(a)(1)(E)(i) of the HEA
requires a school that participates in the
Direct Loan Program to provide the
Secretary with timely and accurate
information concerning the status of
student borrowers (and students on
whose behalf parents borrow Direct
PLUS Loans) while the students are in
attendance at the school, and any new
information related to students or
parents after the borrowers leave the
school. This information is provided to
the Secretary to assist in the servicing
and collection of Direct Loan Program
loans.
Section 487(a)(3) of the HEA requires
a school that participates in a program
under title IV of the HEA to establish
and maintain such administrative and
fiscal procedures and records as are
necessary to ensure the proper and
efficient administration of funds
received from the Secretary or from
students. Upon request and in a timely
manner, schools must provide
information relating to their
administrative capability and financial
responsibility to the Secretary, the
appropriate guaranty agency, and the
appropriate accrediting agency or
association. In addition, section
487(a)(5) of the HEA requires a school
that participates in the title IV, HEA
programs to submit reports to the
Secretary (and to the holders of loans
made to the institution’s students) at
such times and containing such
information as the Secretary requires to
carry out the purpose of title IV of the
HEA.
Current Regulations: For the FFEL
Program, current § 682.610(c) requires a
school, upon receipt of a student status
confirmation report from the Secretary
or a similar report from a guaranty
agency, to complete and return the
report to the Secretary or guaranty
agency, as appropriate. Unless the
school expects to submit its next
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student status confirmation report to the
Secretary or guaranty agency within the
next 60 days, the current regulations
require a school to notify the guaranty
agency or lender within 30 days if the
school discovers that a student who
received a FFEL Program loan has
changed his or her permanent address,
or discovers that: (1) A FFEL Program
loan has been made to or on behalf of
a student who enrolled at the school,
but who has ceased to be enrolled on at
least a half-time basis; (2) a loan has
been made to or on behalf of a student
who has been accepted for enrollment,
but who failed to enroll on at least a
half-time basis; or (3) a loan has been
made on behalf of a full-time student
who has ceased to be enrolled on a fulltime basis. Current § 682.605(b)
provides that if a student withdraws, the
school must use the withdrawal date
determined under § 668.22(b) or
668.22(c), as applicable, for the purpose
of reporting to the lender the date that
the student withdrew from the school.
Current § 682.605(c) provides that, for
the purpose of a school’s reporting to
the lender, a student’s withdrawal date
is the month, day, and year of the
withdrawal date.
For the Direct Loan Program, current
§ 685.309(b) includes provisions
comparable to § 682.610(c). That
regulation requires schools participating
in the Direct Loan Program to submit
student status confirmation reports and
information about address and
enrollment status changes to the
Secretary. However, there is no
requirement for a school to report that
a full-time student who received a
Direct Loan has ceased to be enrolled on
a full-time basis, as is the case in the
FFEL Program under § 682.610(c)(2)(iii).
In addition, current §§ 685.309(b)(3) and
685.309(b)(4) specify that the Secretary
provides student status confirmation
reports to a school at least semiannually, and that the Secretary may
provide these reports in either paper or
electronic format.
For the Perkins Loan Program, current
regulations do not include enrollment
reporting requirements for schools
comparable to the FFEL and Direct Loan
program requirements.
Proposed Regulations: For the Perkins
Loan Program, the proposed regulations
would add a new § 674.19(f) with the
heading ‘‘Enrollment reporting
process.’’ Proposed § 674.19(f)(1) would
provide that, upon receipt of an
enrollment report from the Secretary, an
institution must update all information
included in the report and return the
report to the Secretary in the manner
and format and within the timeframe
prescribed by the Secretary. Proposed
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§ 674.19(f)(2) would provide that, unless
it expects to submit its next updated
enrollment report to the Secretary
within the next 60 days, an institution
must notify the Secretary within 30 days
after the date the school discovers that:
(1) A loan under title IV of the HEA was
made to a student who was enrolled or
accepted for enrollment at the
institution, and the student has ceased
to be enrolled on at least a half-time
basis; (2) a student failed to enroll on at
least a half-time basis for the period for
which a loan was intended; or (3) a
student who is enrolled at the
institution and who received a loan
under title IV of the HEA has changed
his or her permanent address.
For the FFEL Program, the proposed
regulations would retitle § 682.610(c)
‘‘Enrollment reporting process,’’ and
replace the term ‘‘student status
confirmation report’’ with ‘‘enrollment
report.’’ They would also revise
§ 682.610(c)(1) to provide that, upon
receipt of an enrollment report from the
Secretary, a school must update all
information included in the report and
return the report to the Secretary in the
manner and format and within the
timeframe specified by the Secretary.
Proposed § 682.610(c)(2) would provide
that, unless a school expects to submit
its next updated enrollment report to
the Secretary within the next 60 days,
the school must notify the Secretary
within 30 days after the date the school
discovers that: (1) A title IV loan was
made to or on behalf of a student who
was enrolled or accepted for enrollment
at the school, and the student has
ceased to be enrolled on at least a halftime basis; (2) a student failed to enroll
on at least a half-time basis for the
intended loan period; or (3) a student
who is enrolled at the school and who
has received a loan under title IV of the
HEA has changed his or her permanent
address. References in the current
regulations to receiving enrollment
reports from a guaranty agency or
reporting enrollment status information
to guaranty agencies would be removed.
The proposed regulations would also
amend §§ 682.605(b) and 682.605(c) to
require schools to report information
about a student’s withdrawal to both the
lender and the Secretary.
For the Direct Loan Program, the
proposed regulations would retitle
§ 685.309(b) ‘‘Enrollment reporting
process,’’ and replace the term ‘‘student
status confirmation report’’ with the
term ‘‘enrollment report.’’ It would also
revise § 685.309(b)(1) to provide that
upon receipt of an enrollment report
from the Secretary, a school must
update all information included in the
report and return the report to the
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Secretary in the manner and format and
within the timeframe prescribed by the
Secretary. Proposed § 685.309(b)(2)
would provide that, unless a school
expects to submit its next updated
enrollment report to the Secretary
within the next 60 days, the school must
notify the Secretary within 30 days after
the date the school discovers that: (1) A
title IV, HEA program loan was made to
or on behalf of a student who was
enrolled or accepted for enrollment at
the school, and the student has ceased
to be enrolled on at least a half-time
basis; (2) the student failed to enroll on
at least a half-time basis for the intended
loan period; or (3) a student who is
enrolled at the school and who received
a title IV loan has changed his or her
permanent address. Current
§§ 685.309(b)(3) and 685.309(b)(4)
would be removed.
Reasons: The current FFEL and Direct
Loan program regulations in
§§ 682.610(c) and 685.309(b) reflect
terminology and procedures that are not
consistent with current practices. These
obsolete provisions include the use of
the term ‘‘student status confirmation
report,’’ the references in the FFEL
Program regulations to receiving
enrollment reports from guaranty
agencies and reporting information to
guaranty agencies, and the references in
the Direct Loan Program regulations to
the frequency with which the Secretary
provides student status confirmation
reports and the format of those reports.
In addition, the current FFEL Program
provision requiring a school to report
that a student has ceased to be enrolled
on a full-time basis reflects an obsolete
eligibility requirement. The proposed
regulations would revise §§ 682.605(a)
and 685.309(b) to reflect the current
processes by which schools receive and
report student enrollment status
information. The proposed regulations
would also provide the Secretary with
greater flexibility to modify enrollment
reporting procedures in the future by
providing that schools must update all
information included in the enrollment
report received from the Secretary and
return the report to the Secretary in the
manner and format and within the
timeframe specified by the Secretary.
Further, the proposed regulations would
replace the current provisions in the
FFEL Program regulations that require a
school to report certain status changes
only for their students who received
FFEL Program loans, and the
comparable provisions in the Direct
Loan Program regulations that require
schools to report information only for
students who received Direct Loan
Program loans, with a more general
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requirement for schools to report these
status changes for students who
received any type of title IV loan. The
Department believes that it is
appropriate to establish this more
general requirement, since the National
Student Loan Data System (NSLDS)
enrollment reporting files that schools
receive from the Department include all
of a school’s students who have
received loans under the Direct Loan,
FFEL, or Perkins Loan programs. The
proposed changes to the FFEL and
Direct Loan program regulations
described here would also be
incorporated in the proposed new
enrollment status reporting
requirements for the Perkins Loan
Program that are discussed later in this
section.
To reflect current procedures, current
§§ 682.605(b) and 682.605(c) would be
modified to state that a school must
report information about student
withdrawals to both the FFEL Program
lender and the Secretary.
Schools that participate in the Perkins
Loan Program have indicated to the
Department’s NSLDS staff that having
enrollment status information on
Perkins borrowers from all schools
attended by the borrowers would
improve loan servicing in the Perkins
Loan Program. In response to this
request, the Department modified the
NSLDS enrollment reporting file sent to
schools by the Department to include,
beginning in June 2012, all of the
school’s students who received a
Perkins Loan for attendance at any
school. Perkins Loan schools, or their
servicers, may enroll with NSLDS to
receive enrollment data on their Perkins
Loan recipients. This will help schools
track their former students who have
enrolled at other schools, and will allow
schools to use NSLDS for enrollment
verification rather than having to rely on
paper Perkins Loan enrollment
verification forms. Proposed § 674.61(f)
would establish enrollment reporting
requirements for Perkins Loan schools
to support this new process.
To ensure more timely reporting of
certain student status changes, the
Department initially proposed to modify
current § 682.610(c)(2) to provide that,
unless a school expects to submit its
next updated enrollment report to the
Secretary within the next 60 days, a
school must notify the Secretary within
15 days (instead of the current 30 days)
after the date the school discovers that
certain status changes have occurred.
The Department proposed to make the
same change to current § 685.309(b)(2),
and to incorporate the 15-day reporting
deadline in proposed § 674.19(f).
Although the non-Federal negotiators
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generally had no objections to the
Department’s proposed changes to
enrollment status reporting
requirements, some of the negotiators
expressed concerns about the proposed
change from a 30-day reporting deadline
to a 15-day deadline. Those negotiators
were concerned that it may be difficult
for some schools to report the required
information within this shorter
timeframe. These negotiators asked that
the Department retain the current 30day reporting deadline. After further
consideration, the Department agreed to
retain the current 30-day deadline.
FFEL and Direct Loan Program
Common Issues Forbearance for
Borrowers Who Are 270 or More Days
Delinquent Prior to Guaranty Agency
Default Claim Payment or Transfer by
the Department to Collection Status (34
CFR 682.211(d) and 685.205)
Statute: Section 435(l) of the HEA
defines default on a loan as being 270
days past due in the case of a loan that
is repayable in monthly installments.
Section 428(c)(3) of the HEA specifies
that a guaranty agency is not precluded
from permitting the parties to a FFEL
Program loan from entering into a
forbearance agreement solely because
the loan is in default. Under section
455(a)(1) of the HEA, Direct Loans have
the same terms and conditions as FFEL
Program loans unless provided
otherwise.
Current Regulations: Section
682.211(b)(1) of the FFEL Program
regulations provides that a lender may
grant forbearance if the lender and the
borrower or endorser agree to the terms
of a forbearance and, unless the
agreement was in writing, the lender
sends a notice to the borrower or
endorser confirming the terms of the
forbearance within 30 days of the
agreement and records the terms of the
forbearance in the borrower’s file.
Section 682.211(c) of the FFEL
regulations provides that a lender may
grant a forbearance for up to one year at
a time if both the borrower or endorser
and the lender agree to the terms of the
forbearance. If the lender and the
borrower or endorser agree to the terms
of the forbearance orally, the lender
must send a notice to the borrower or
endorser confirming the terms of the
forbearance within 30 days of the
agreement.
Section 682.211(d) of the FFEL
regulations provides that a guaranty
agency may authorize a lender to grant
forbearance to permit a borrower or
endorser to resume honoring the
agreement to repay the debt after the
borrower has defaulted on a loan but
before the guaranty agency has paid the
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lender’s default claim. The regulations
further provide that the terms of the
forbearance in this situation must
include a new agreement to repay the
debt signed by the borrower.
The Direct Loan Program regulations
governing forbearance in § 685.205 do
not include a comparable forbearance
provision for borrowers who are 270 or
more days past due on loan payments.
However, Direct Loan borrowers are
granted forbearance under the same
circumstances based on the borrower’s
written or oral request.
Proposed Regulations: The proposed
regulations would amend current
§ 682.211(c) to provide that if the
forbearance is granted based on the
borrower’s or endorser’s oral request
and oral agreement to the terms of the
forbearance, the lender must send a
notice confirming the terms of the
agreement within 30 days of the
agreement. Section 682.211(d) of the
proposed regulations would also be
amended to specify in paragraph (d)(1)
that in the case of a forbearance granted
to a borrower or endorser who is in
default, but prior to default claim
payment, the forbearance agreement
must include either a new agreement to
repay the debt signed by the borrower
or endorser, or a written or oral
affirmation of the borrower’s or
endorser’s obligation to repay the debt.
Proposed § 682.211(d)(2) of the FFEL
regulations would require that if a
forbearance in this situation is based on
the borrower’s or endorser’s oral request
and affirmation of the obligation to
repay the debt: (1) The forbearance
period is limited to 120 days; (2)
forbearance cannot be granted for
consecutive periods; (3) the lender must
orally review with the borrower the
terms and conditions of the forbearance,
including the consequences of interest
capitalization and other repayment
options available to the borrower; and
(4) the lender must send the borrower or
endorser a notice that confirms the
terms of the forbearance and the
borrower’s or endorser’s affirmation of
the obligation to repay the debt within
30 days of that agreement, and must
retain a record of the terms and
conditions of the forbearance and
affirmation in the borrower’s or
endorser’s file. Finally, proposed
§ 682.211(d)(3) would define
‘‘affirmation’’ for this purpose as an
acknowledgement of the loan by the
borrower or endorser in a legally
binding manner that can take the form
of, but is not limited to: (1) A new
signed repayment agreement or
schedule, or another form of signed
agreement to repay the debt; (2) an oral
acknowledgment and agreement to
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repay the debt documented by the
lender in the borrower’s or endorser’s
file and confirmed by the lender in a
notice to the borrower; or (3) a payment
made on the loan by the borrower or
endorser.
The proposed regulations would also
add comparable forbearance provisions
to § 685.205(a) for the Direct Loan
Program.
Reasons: Prior to the formal
negotiated rulemaking sessions, the
Department received public comments
requesting that § 682.211(d) of the FFEL
regulations be amended to eliminate the
requirement that a lender collect a
signed repayment agreement from the
borrower as a condition for granting a
forbearance to a borrower who is in
default on a loan for which the guaranty
agency has not yet paid the default
claim to the lender. Commenters noted
that under the Department’s current
procedures, a forbearance may be
granted to a defaulted Direct Loan
borrower under the same circumstances
without a signed repayment agreement.
These commenters argued that the same
terms and conditions for granting a
forbearance to a defaulted borrower
should apply in both programs.
During the negotiations, the
Department stated its preference for
retaining the requirement for a signed
repayment agreement in the FFEL
regulations and, for consistency, adding
a comparable provision to the Direct
Loan Program regulations. The
Department indicated that it believes a
written affirmation of the debt by a
borrower who is in default after failing
to make payments for 270 or more days
increases the prospect that the borrower
will resume repayment following the
end of the forbearance period. Some
non-Federal negotiators argued that
lenders should have maximum
flexibility to work with borrowers at the
late stages of delinquency to avoid the
negative consequences of default and
supported a policy of allowing a lender
to grant forbearance based on an oral
request and oral affirmation of the debt
documented in the borrower’s file. One
non-Federal negotiator noted that
granting forbearance to a borrower who
is more than 270 days delinquent is a
matter of lender discretion and would
be granted only when appropriate.
Another non-Federal negotiator
disagreed with permitting oral
affirmation of the debt without a
separate acknowledgment of the
affirmation from the borrower that
would become part of the forbearance
agreement.
Some negotiators raised the issue of
whether a written forbearance request
and affirmation is demonstrably more
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effective at ensuring a borrower’s
successful repayment following the end
of a forbearance period than an oral
request and affirmation. To address this
issue, Department staff and lender
servicing representatives reviewed data
on delinquent and defaulted accounts
on which forbearance was granted, but
determined that most servicing systems
did not capture the method used to
request the forbearance. Limited data
available from one servicer of
Department-held loans suggested there
was virtually no difference in successful
repayment outcomes for borrowers
making written requests and providing
written affirmation of the debt versus
those making an oral request and
providing an oral affirmation of the
debt. Taking all of these considerations
into account, the negotiating committee
agreed on the approach in the proposed
regulations which permits forbearance
based on the borrower’s oral affirmation
of the debt but requires the lender to
follow-up on the oral agreement by
sending a written notice to the
borrower.
Non-Federal negotiators representing
State Attorneys General raised concerns
about the possible misuse of oral
forbearance requests and affirmations by
institutions of higher education that
might try to manipulate their default
rates. They requested that the
Department consider ways to address
the potential for abuse they believed
was inherent in an oral forbearance
request and authorization process by
requiring verification of the identity of
the borrower through the use of voice
recognition software or telephone
recordings of the borrower’s request and
affirmation. The Department noted that
any conversation between a borrower
and a lender servicer could lead to a
forbearance agreement and, given
applicable consent requirements, this
proposal could necessitate recording all
loan servicing calls with borrowers. The
Department also noted that due to
varying State laws on recording of
conversations, it was not feasible to add
a requirement to program regulations
that would ensure compliance with all
State laws. The Department agreed to
monitor the use of forbearances in its
oversight of schools and third-party
servicers who are working on default
aversion services on behalf of the
schools.
The State Attorneys General
representatives and student and
consumer advocate representatives
provided evidence to the negotiating
committee that suggested that some
institutions were attempting to manage
their student loan cohort default rates
by convincing borrowers to request
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45631
forbearances for the cohort default rate
period, whether or not it benefited the
borrower. This could allow the
institution to evade the consequences of
high default rates. To address this
potential problem, the Department
agreed to include a limit of 120 days on
any forbearance granted to a defaulted
borrower or endorser based on an oral
request and affirmation, and to prohibit
a servicer from granting the borrower or
endorser consecutive 120-day period
forbearances.
Some non-Federal negotiators also
expressed concern that granting
forbearance to a defaulted borrower or
endorser may simply delay a default
claim payment or transfer of the loan for
default collections if the borrower or
endorser is not provided with
information on other repayment
options. The Department agreed that a
lender should be required to orally
review with the borrower the various
repayment options available to the
borrower for any forbearance that is
based on an oral request and
affirmation. The Department also
reminded the non-Federal negotiators
that information on available repayment
plans is disclosed to delinquent
borrowers in their monthly billing
statements prior to default claim filing
or the transfer of the loan to default
collections, and as part of due diligence
and default aversion efforts in the FFEL
and Direct Loan programs.
Forbearance Provisions for Borrowers
Receiving Department of Defense
Student Loan Repayment Benefits
(34 CFR 682.211(h) and 685.205)
Statute: Section 428(c)(3)(A)(i)(IV) of
the HEA requires that, upon the
borrower’s request, a FFEL lender shall
grant forbearance in renewable 12month intervals to a borrower who is
eligible for interest payments to be made
on his or her loans under the repayment
benefit program authorized in 10 U.S.C.
2174 for service in the Armed Forces.
Under section 428(c)(3)(A)(ii)(II) of the
HEA, this forbearance may not exceed
three years. Under section 455(a)(1) of
the HEA, this forbearance is also
available to eligible Direct Loan
borrowers.
Current Regulations: The mandatory
forbearance for borrowers who are
eligible for interest payments under the
loan repayment program authorized in
10 U.S.C. 2174 is reflected in 34 CFR
682.211(h)(2)(ii)(B), but the current
regulations include an incorrect
statutory citation. There is no
comparable provision in the Direct Loan
Program regulations governing
forbearance at 34 CFR 685.205.
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Proposed Regulations: The proposed
regulations would amend 34 CFR
682.211(h)(2)(ii)(B) of the FFEL
regulations to require that lenders grant
forbearance to borrowers who are
performing service that qualifies them
for loan repayment under the
Department of Defense student loan
repayment programs authorized by 10
U.S.C. 2171, 2173, or 2174, or under any
other student loan repayment programs
administered by the Department of
Defense. We are also proposing to
amend 34 CFR 685.205(a)(9) of the
Direct Loan Program regulations to
include a comparable forbearance
provision.
Reasons: Current FFEL regulations
require a lender to grant forbearance to
a borrower who is performing service
that qualifies the borrower for a partial
repayment of his or her loan only under
the Student Loan Repayment Programs
authorized under 10 U.S.C. 2171.
During the public hearings prior to the
formal negotiated rulemaking sessions, a
number of commenters recommended
that the regulations be revised to also
include borrowers who receive benefits
under other student loan repayment
programs administered by the
Department of Defense. The commenters
also noted that there is no comparable
forbearance provision in the Direct Loan
Program regulations and recommended
that one be added to ensure consistency
between the two programs. The
negotiating committee agreed that these
regulatory changes should be made.
Borrowers Who Are Delinquent When
an Authorized Forbearance Is Granted
(34 CFR 682.211(f) and 685.205)
Statute: Under section 428(c)(3) of the
HEA, FFEL Program lenders may
exercise certain administrative
forbearances that do not require the
agreement of the borrower under
conditions specified by the Secretary.
The HEA specifies that such
forbearances shall include forbearances
for borrowers who are delinquent at the
time an authorized period of deferment
is granted and for borrowers who are
less than 60 days delinquent on their
loans at the time the loan is sold or
transferred to another entity.
Current Regulations: The conditions
under which a FFEL Program lender
may grant an administrative
forbearance, a form of forbearance that
does not require a request and
documentation from the borrower, are
specified in 34 CFR 682.211(f). In
addition to the circumstances identified
in the HEA for granting such a
forbearance, the regulations also
authorize a FFEL Program lender to
grant an administrative forbearance in a
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number of other circumstances,
including: (1) If the borrower has
payments that are overdue at the
beginning of a properly granted period
of deferment for which the lender learns
the borrower did not qualify; or (2) a
forbearance period not to exceed three
months when the lender determines that
a borrower’s ability to make payments
has been adversely affected by a natural
disaster, a local or national emergency
as declared by the appropriate
government agency, or a military
mobilization. The current regulations do
not authorize a forbearance for a period
in which a borrower has payments that
are overdue at the beginning of an
authorized period of forbearance.
Proposed Regulations: The proposed
regulations would amend 34 CFR
682.211(f) to authorize a lender to grant
an administrative forbearance to a
borrower who is delinquent at the
beginning of an authorized period of
forbearance and would add a
corresponding provision to the Direct
Loan regulations in 34 CFR 685.205(b).
Reasons: Under the FFEL Program
regulations, a borrower who is
delinquent at the beginning of an
authorized period of forbearance will
remain in a delinquent payment status
on the loan at the end of the authorized
forbearance period, unless the borrower
provides the lender with documentation
to support granting an authorized
forbearance that covers the borrower’s
entire period of delinquency. During the
public comment period prior to the
beginning of the formal negotiated
rulemaking sessions, representatives of
FFEL lenders and loan servicers asked
the Department to amend the
regulations to authorize FFEL lenders to
grant administrative forbearances to
borrowers to eliminate a period of
delinquency prior to the borrower’s
authorized forbearance period that is
not covered by the authorized
forbearance, to ensure that the borrower
is current in repayment at the end of the
authorized forbearance period. The
negotiating committee agreed that such
a change would be beneficial for
borrowers and would reduce the
likelihood that a borrower will be
confused if the borrower finds that the
loan is considered delinquent at the end
of a significant period of authorized
forbearance. For purposes of
consistency, the negotiating committee
also agreed to include a comparable
provision in 34 CFR 685.205(b) of the
Direct Loan Program regulations.
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Loan Rehabilitation Agreement:
Reasonable and Affordable Payment
Standard (34 CFR 682.405(b) and
685.211(f))
Statute: Under section 428F of the
HEA, a borrower may rehabilitate a
defaulted FFEL loan if the borrower
makes at least nine payments on the
loan, each of which is made within 20
days of its scheduled due date and all
of which are made over a period of 10
consecutive months beginning with the
month in which the first scheduled
payment is to be made under the
rehabilitation agreement. Once the
borrower meets this standard the
guaranty agency must, if practicable,
sell the defaulted FFEL loan to an
eligible lender. The guaranty agency
may not demand from the borrower a
monthly rehabilitation payment amount
that is more than is reasonable and
affordable based on the borrower’s total
financial circumstances. After selling
the loan to an eligible FFEL lender, the
guaranty agency must request any
consumer reporting agency to which the
guaranty agency reported the loan
default to remove the record of default
from the borrower’s credit history. The
requirements in section 428F(a) of the
HEA also apply to defaulted FFEL loans
held by the Secretary.
Section 428F(a)(1)(D)(i)(II)(aa) of the
HEA authorizes a guaranty agency to
charge the borrower collection costs not
in excess of 18.5 percent of the
outstanding principal and interest at the
time the guaranty agency sells the
rehabilitated loan to an eligible lender.
Current Regulations: Sections
685.211(f)(1) and 682.405(b)(1) of the
Direct Loan and FFEL program
regulations provide that the Secretary
(for Direct Loans) and the guaranty
agency (in FFEL) will provide a loan
rehabilitation program for defaulted
Direct Loan and FFEL borrowers. To
rehabilitate a defaulted loan, a Direct
Loan or FFEL borrower who requests
rehabilitation must make nine, monthly,
voluntary, on-time payments within a
ten-month period. The payments must
be for the full monthly payment amount
required under the rehabilitation
agreement, and must be received by the
Secretary or the guaranty agency within
20 days of the payment due date. The
monthly rehabilitation payment amount
must be reasonable and affordable as
determined by the Secretary under
§ 685.211(f)(1) of the Direct Loan
regulations or by the guaranty agency
under § 682.405(b)(1)(iii) of the FFEL
regulations.
The Direct Loan Program regulations
in § 685.211(f)(1) state that the
Secretary’s determination of reasonable
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and affordable payment amounts will be
based on the borrower’s total financial
circumstances. Under
§ 682.405(b)(1)(iii)(A), a guaranty
agency’s determination of reasonable
and affordable includes a consideration
of the disposable income of the
borrower and the borrower’s spouse and
of the borrower’s reasonable and
necessary expenses. Reasonable and
necessary expenses include, but are not
limited to: housing, utilities, food,
medical costs, work-related expenses,
dependent care costs, and repayment of
other title IV loans.
Section 682.405(b)(1)(iii)(B) of the
FFEL regulations specifies that a
reasonable and affordable payment
amount may not be a required minimum
payment amount, such as $50, if the
guaranty agency determines that a
smaller amount is reasonable and
affordable based on the borrower’s total
financial circumstances. If the guaranty
agency determines that a reasonable and
affordable payment for the borrower is
less than $50 or the monthly accrued
interest on the loan, whichever is
greater, the agency must include
documentation in the borrower’s file
supporting that determination.
Section 682.405(b)(1)(iii)(C) requires a
guaranty agency to base its
determination of a reasonable and
affordable rehabilitation payment on
documentation provided by the
borrower, or from other sources. The
documentation that may be considered
includes, but is not limited to:
• Evidence of current income (such as
proof of welfare benefits, Social Security
benefits, child support, veterans’
benefits, Supplemental Security Income,
Workmen’s Compensation, the two most
recent pay stubs, the most recent copy
of a U.S. income tax return, or State
Department of Labor reports);
• Evidence of current expenses (such
as a copy of the borrower’s monthly
household budget on a form provided
by the guaranty agency); and
• A statement of the unpaid balance
on all FFEL loans held by other lenders.
Section 682.405(b)(1)(v) authorizes a
FFEL borrower to request that the
guaranty agency adjust the monthly
payment amount due to a change in the
borrower’s total financial circumstances.
The borrower must provide
documentation supporting this request
to the guaranty agency.
Section 682.405(b)(1)(vi) requires a
guaranty agency to provide a FFEL
borrower with a written statement
confirming the borrower’s reasonable
and affordable payment amount. The
written statement must explain any
other terms and conditions applicable to
the required series of payments that the
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borrower must make before the
borrower’s account can be considered
for repurchase by an eligible FFEL
lender. The statement must inform the
borrower of the effects of loan
rehabilitation, and of the amount of the
collection costs that will be added to the
unpaid principal at the time the loan is
sold to a FFEL lender. The collection
costs may not exceed 18.5 percent of the
unpaid principal and accrued interest at
the time of the sale.
Section 682.405(b)(1)(vii) requires a
guaranty agency to provide a FFEL
borrower with an opportunity to object
to the terms of the rehabilitation
agreement.
Section 682.405(b)(2) requires a
guaranty agency to attempt to secure a
lender to purchase the loan after the
borrower makes the required number of
qualifying rehabilitation payments.
Section 682.405(b)(3)(i)(B) requires
the guaranty agency, within 45 days of
selling a rehabilitated loan to an eligible
FFEL lender, to request that any
consumer reporting agency to which the
default was reported remove the record
of the default from the borrower’s credit
history.
Some of the details related to loan
rehabilitation in the FFEL Program
regulations are not reflected in the
current Direct Loan Program
regulations. These include, for example,
details such as the specific types of
documentation of income and expenses
that the Secretary uses to determine a
borrower’s reasonable and affordable
payment amount.
Proposed Regulations: The proposed
regulations would incorporate many of
the details in current FFEL Program
regulations at § 682.405(b) into the
Direct Loan regulations at § 685.211(f)
and also add new details into both of
these sections. Specifically, the
proposed regulations would add new
§§ 685.211(f)(1)(i) and 682.405(b)(1)(iii)
to provide that the Secretary (in the
Direct Loan Program) and the guaranty
agency (in the FFEL Program) would
base the determination of reasonable
and affordable rehabilitation payment
amounts on information provided by the
borrower on a form approved by the
Secretary, and, if requested, supporting
documentation provided by the
borrower.
Proposed §§ 685.211(f)(1)(i)(A) and
682.405(b)(1)(iii)(A) would provide that
the Secretary and the guaranty agency
will consider the borrower’s and, if
applicable, the borrower’s spouse’s
current disposable income in
determining a reasonable and affordable
rehabilitation payment. Disposable
income includes public assistance
payments and other income received by
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the borrower and the spouse, such as
welfare benefits, Social Security
benefits, Supplemental Security Income
benefits, and workers’ compensation
benefits. Under proposed
§§ 685.211(f)(1)(i)(A) and
682.405(b)(1)(iii)(A), spousal income
would not be considered if the spouse
does not contribute to the borrower’s
household income.
Proposed §§ 685.211(f)(1)(i)(B) and
682.405(b)(1)(iii)(B) would provide that,
in determining the reasonable and
affordable payment amount, the
Secretary and the guaranty agency will
consider the borrower’s family size, as
defined in §§ 685.221(a)(3) and
682.215(a)(3).
Proposed §§ 685.211(f)(1)(i)(C) and
682.405(b)(1)(iii)(C) would provide a
more detailed list of the reasonable and
necessary expenses that the Secretary
and a guaranty agency will consider in
determining a borrower’s rehabilitation
payment amount. The proposed
expenses include:
• Food;
• Housing;
• Utilities;
• Basic communication expenses;
• Necessary medical and dental costs;
• Necessary insurance costs;
• Transportation costs;
• Dependent care and other workrelated expenses;
• Legally required child and spousal
support;
• Other title IV and non-title IV
student loan payments; and
• Other expenses approved by the
Secretary.
Proposed §§ 685.211(f)(1)(ii) and
682.405(b)(1)(iv) would provide that a
reasonable and affordable rehabilitation
payment amount must not be a required
minimum payment, such as $50, if the
Secretary or the guaranty agency
determines that a smaller amount is
reasonable and affordable. The payment
amount also must not be a percentage of
the borrower’s total loan balance, or be
based on other criteria unrelated to the
borrower’s total financial circumstances.
Under proposed §§ 685.211(f)(1)(iii)
and 682.405(b)(1)(v), the Secretary or
the guaranty agency would provide the
borrower with a written rehabilitation
agreement within 15 business days of
the determination of the borrower’s
reasonable and affordable payment
amount. The written rehabilitation
agreement would include the
rehabilitation payment amount, a
prominent statement that the borrower
may object orally or in writing to the
payment amount, and the method and
timeframe for raising an objection to the
payment amount. The written
rehabilitation agreement would provide
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an explanation of any other terms and
conditions applicable to the required
series of payments. The Secretary or the
guaranty agency may not impose any
other conditions unrelated to the
amount or timing of the rehabilitation
payments in the rehabilitation
agreement. The written rehabilitation
agreement would inform the borrower of
the effects of having a loan rehabilitated.
For FFEL Program loans, the written
repayment agreement would inform the
borrower of the amount of any unpaid
collection costs to be added to the
unpaid principal of the loan when the
loan is sold to an eligible FFEL lender
Proposed §§ 685.211(f)(3) and
682.405(b)(1)(vi) would provide that the
borrower’s rehabilitation payment
amount would be recalculated if the
borrower objects to the payment amount
contained in the written repayment
agreement that the Secretary or the
guaranty agency would send to the
borrower under proposed
§§ 685.211(f)(4) and 682.405(b)(1)(vi).
Under §§ 685.211(f)(5) and
682.405(b)(1)(vii) a borrower who
objects to the monthly repayment
amount contained in the written
repayment agreement would provide the
Secretary or guaranty agency the
documentation needed to recalculate a
monthly payment amount under the IBR
formula. The Secretary or the guaranty
agency would recalculate the
rehabilitation payment amount using
the formula for calculating a monthly
payment amount under the IBR plan in
§ 685.221(b)(1) and (b)(2) of the Direct
Loan regulations or § 682.215(b)(1) of
the FFEL regulations. If the recalculated
amount using the IBR plan formula is
less than $5, the borrower’s recalculated
monthly rehabilitation payment would
be $5. If the borrower does not provide
the required documentation to the
Secretary or the guaranty agency, the
Secretary or the guaranty agency would
not proceed with the rehabilitation
process.
Under proposed § 685.211(f)(7), a
Direct Loan borrower may request that
the Secretary adjust the borrower’s
monthly rehabilitation payment if there
is a change in the borrower’s financial
circumstances. The borrower would be
required to provide the documentation
specified in proposed § 685.211(f)(1)(i)
to support the request. This is
comparable to the requirement in
§ 682.405(b)(1) of the current FFEL
regulations.
Under proposed §§ 685.211(f)(8) and
682.405(b)(1)(x), while the borrower is
making payments under a rehabilitation
agreement, the Secretary and the
guaranty agency would limit contact
with the borrower on the loan being
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rehabilitated. Contact with the borrower
would be restricted to collection
activities that are required by law or
regulation, and to communications that
support the rehabilitation.
After a defaulted Direct Loan has been
rehabilitated, proposed § 685.211(f)(9)
provides that the Secretary will instruct
any consumer reporting agency to
which the default was reported to
remove the default from the borrower’s
credit history. This is comparable to the
requirement in § 682.405(b)(3)(i)(B) of
the current FFEL regulations.
Proposed revisions to §§ 685.211(f)
and 682.405(a) relating to the interplay
of AWG and loan rehabilitation
payments are discussed in the Loan
Rehabilitation Agreement: Treatment of
Borrowers Subject to Administrative
Wage Garnishment section of this
preamble. Reasons: During the public
comment period prior to the formal
negotiated rulemaking sessions, some
commenters recommended that the
Secretary consider using the IBR plan
formula to determine a borrower’s
reasonable and affordable payment
amount for loan rehabilitation purposes.
IBR, which provides for a monthly loan
payment that is intended to be
affordable based on a borrower’s income
and family size, became available to
borrowers in the Direct Loan and FFEL
programs on July 1, 2009. The
commenters believed that using the IBR
formula would simplify and standardize
the process for the determination of loan
rehabilitation payments. In addition, the
commenters argued that the availability
of IBR as a repayment option for
borrowers after rehabilitation of a loan
provides further support for using the
IBR formula to determine a reasonable
and affordable payment for loan
rehabilitation purposes, since borrowers
who have rehabilitated their defaulted
loans may request to repay under IBR.
Before the availability of IBR as a
repayment option, a borrower who
made very low monthly payments under
a rehabilitation agreement based on the
borrower’s income might be faced with
a much larger post-rehabilitation
monthly payment amount that the
borrower could not easily afford, since
there were no available repayment plans
that would provide for a payment as low
as the rehabilitation agreement
payment. If a FFEL Program borrower
made very low payments during the
rehabilitation period, the borrower
might not have been able to make the
larger, post-rehabilitation payments.
Therefore, the guaranty agency might
have had difficulty selling the loan to a
FFEL lender, or might have been forced
to sell the loan at a discount. A FFEL
loan is not rehabilitated until the
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guaranty agency sells it to a lender. The
Secretary believes that using the IBR
formula to determine what is a
reasonable and affordable payment
amount for loan rehabilitation purposes
would address the issue of borrowers’
payment amounts being too high after
rehabilitation, since a borrower who
paid the IBR amount during the
rehabilitation period could choose IBR
as his or her repayment plan postrehabilitation. Therefore, the Secretary
agreed to include this proposal on the
agenda for negotiated rulemaking.
At the first meeting of the negotiating
committee, non-Federal negotiators
representing legal aid and consumer
advocacy organizations proposed that
the IBR formula be used as the starting
point for determining a Direct Loan or
FFEL borrower’s reasonable and
affordable rehabilitation payment
amount. If the borrower objected to the
payment amount determined using the
IBR formula and could justify a lower
amount, the Secretary or the guaranty
agency could reduce the payment below
the amount determined under the IBR
formula.
Non-Federal negotiators representing
guaranty agencies argued that requiring
the use of the IBR formula would reduce
their ability to work with borrowers to
arrive at a rehabilitation payment
amount acceptable to both the guaranty
agency and to the borrower. They
pointed out that it is not in anyone’s
interest to set a borrower’s rehabilitation
payment so high that the borrower
cannot meet it. They contended that,
under their current procedures,
negotiations on loan rehabilitation that
occur between a borrower and a
guaranty agency result in appropriate
rehabilitation payment amounts. Those
negotiators contended that if the amount
initially proposed is too high, the
borrower will object and that the
negotiations generally result in an
amount acceptable to both parties.
Using the IBR formula would preclude
any such negotiations between the
borrower and the guaranty agency. They
argued that any change to the
regulations with regard to reasonable
and affordable rehabilitation payment
amounts would amount to fixing a
problem that does not exist.
Non-Federal negotiators representing
consumer advocacy groups and students
disputed this claim. They contended
that defaulted borrowers rarely are given
an opportunity to negotiate their loan
rehabilitation payments and are often
intimidated by the debt collectors trying
to collect the loan. These negotiators
asserted that borrowers are told by debt
collectors that they have no choice but
to accept the loan rehabilitation
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payment amount that is proposed to
them, even if the borrower has no
practical means of paying that amount.
These non-Federal negotiators also
asserted that the statutory requirement
that a loan rehabilitation payment
amount be ‘‘reasonable and affordable
based on the borrower’s total financial
circumstances’’ is routinely ignored by
guaranty agencies and the Secretary.
The current calculation methods, in
their view, are designed to require the
borrower to make as high a payment as
possible, with no consideration of the
borrower’s ability to maintain that level
of payment throughout the
rehabilitation period. These non-Federal
negotiators contended that collection
agencies working on behalf of guaranty
agencies and the Secretary on a
commission rate basis have no incentive
to help borrowers successfully
rehabilitate their loans.
Non-Federal negotiators representing
guaranty agencies and collection
agencies countered by noting that a
collection agency does not earn a
commission unless the borrower makes
a payment. Setting the payment amount
too high is counter-productive to that
goal. These negotiators also stated that
guaranty agencies do look at a
borrower’s total financial situation
when determining reasonable and
affordable payment amounts. They
stated that it is routine practice to
review a borrower’s income and
expenses when determining
rehabilitation payment amounts.
The negotiators representing guaranty
agencies also pointed out that under the
IBR formula a $0 payment is possible,
and they argued that $0 should not be
an acceptable payment amount for
purposes of rehabilitating a defaulted
loan. They emphasized that loan
rehabilitation is a significant benefit. It
allows defaulted borrowers to have their
credit reports cleared of the default and
also allows them to receive additional
title IV aid, including new title IV loans.
Loan rehabilitation is intended to help
the borrower develop a pattern of
making monthly, on-time payments on
the loan. If a borrower succeeds in
making the required number of monthly
payments, the borrower is more likely to
succeed in continuing to make
payments on the loan once the loan goes
back into regular repayment. These
negotiators pointed out that a borrower
may only rehabilitate a loan once. If a
borrower rehabilitates a loan, and then
re-defaults on the loan, the borrower
will not have another opportunity to
rehabilitate that loan. These negotiators
contended that allowing a borrower to
rehabilitate a loan by making monthly
payments as low as $0 would not be
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beneficial to the borrower or to
taxpayers.
Non-Federal negotiators representing
consumer advocacy groups agreed to
address the $0 payment issue by setting
a minimum payment amount. However,
they argued that the minimum payment
should be a very low amount, such as
$5, arguing that there is no evidence
that borrowers who successfully
rehabilitate their loans by making small
monthly payments are more likely to redefault than other borrowers or that
guaranty agencies have difficulty selling
these loans after the borrower has made
the required rehabilitation payments.
On the contrary, these negotiators
asserted that borrowers who make small
monthly rehabilitation payments are
more likely to get into the habit of
making on-time, monthly payments, and
to continue making these payments after
completing rehabilitation.
Non-Federal negotiators representing
guaranty agencies pointed out, however,
that, while a low-income borrower
might have very small monthly
payments under the IBR formula, a
borrower with a high income would
have higher payments under the IBR
formula than under a different
approach. Using the IBR formula for
calculation of the reasonable and
affordable payment amount could result
in higher payment amounts than the
guaranty agency would propose to a
borrower under their current
methodologies.
The proposed regulations attempt to
address the concerns expressed on both
sides of this debate. The proposed
regulations would allow the Secretary
and the guaranty agencies to retain the
flexibility to work with borrowers to
determine reasonable and affordable
repayment amounts, but would more
clearly define the parameters within
which the guaranty agencies must work.
The Secretary and the guaranty agencies
would still be free, under the proposed
regulations, to develop their own
methodologies for determining the
reasonable and affordable payment
amount initially proposed to the
borrower. However, the Secretary and
all of the guaranty agencies would base
their determinations of loan
rehabilitation payment amounts on the
same factors. Specifically, the proposed
regulations would require the Secretary
and the guaranty agencies to collect
information on a borrower’s income and
expenses using a standardized form.
The form would identify the sources of
income that the Secretary or the
guaranty agency will consider, apply a
consistent definition of family size for
borrowers, and identify the types of
expenses the Secretary or the guaranty
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45635
agency must take into account in
determining the reasonable and
affordable payment amount for the
borrower.
The Secretary invites comment on
whether the final regulations should
require the Secretary and the guaranty
agencies to use a standardized
methodology to determine reasonable
and affordable rehabilitation payment
amounts. Under a standardized
methodology, in addition to identifying
the types of expenses that the Secretary
or the guaranty agency may consider,
we would use standard allowable
expense amounts, such as the IRS
National Standards, for each type of
expense reported by the borrower so
that the payment calculation is based on
allowable expenses that are consistent
across all borrowers. The IRS National
Standards are described under the
section of this preamble titled
‘‘Borrower Hearing Opportunities on the
Enforceability of the Debt and a
Borrower’s Claim of Financial
Hardship.’’
Regardless of the methodology used to
determine the payment amount, the
proposed regulations would establish a
process by which borrowers may object
to the payment amount proposed by the
Secretary or the guaranty agency. The
Secretary or the guaranty agency will
notify the borrower of the reasonable
and affordable payment amount the
Secretary or the agency has calculated
for the borrower. The notice would
include a prominent statement that the
borrower may object to the amount
proposed. The borrower would be
allowed to object, verbally or in writing,
to the payment amount that has been
determined. If the borrower objects, the
Secretary or the guaranty agency would
recalculate the amount using the IBR
formula. This establishes the IBR
formula as a fallback methodology for
determining reasonable and affordable
payment amounts for loan rehabilitation
purposes. Furthermore, the borrower
would have the option to reject the
amount calculated using the IBR
formula and accept the amount initially
proposed for any reason, such as if the
initially proposed amount is lower than
the amount calculated using the IBR
formula.
To address the concerns regarding the
potential of payments of $0, the
proposed regulations specify that if the
IBR formula results in a payment of $0,
the payment amount would be set at $5.
A payment amount this small would
apply only to borrowers with extremely
low incomes, and would help these
borrowers establish the habit of making
monthly, on-time payments on the loan.
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We believe that this approach
preserves flexibility for the Secretary
and the guaranty agencies, while at the
same time providing a borrower with
access to an alternative payment amount
if the borrower feels the payment
amount proposed by the Secretary or the
guaranty agency is too high. The
proposed regulations would also ensure
that, regardless of which method is used
to determine the borrower’s
rehabilitation payment amount, the
amount will be based on the borrower’s
total financial circumstances without
regard to other factors.
Under proposed §§ 685.211(f)(5) and
682.405(b)(1)(vii), if a borrower objects
to the initial monthly payment amount,
but does not provide the documentation
required to calculate a monthly payment
amount using the income-based
repayment plan formula, the
rehabilitation does not proceed.
However, the borrower may have
already provided some or all of the
information required for a recalculation
when the borrower initially requested
rehabilitation. We invite comments on
whether it would be appropriate to
make a change in the final regulations
to require a borrower to submit
information needed to recalculate the
borrower’s reasonable and affordable
rehabilitation payment amount only if
new information is required beyond
what the borrower provided when he or
she initially requested loan
rehabilitation.
To ensure consistency in the
treatment of Direct Loan and FFEL
borrowers, the changes to the
regulations discussed above would also
be made in the Direct Loan program
regulations and the Secretary would
follow these same guidelines for
defaulted FFEL loans held by the
Secretary. We are also proposing to
incorporate into the Direct Loan
Program regulations the provision in
§ 682.405(b)(1)(v) of the current FFEL
Program regulations that allows a
borrower to request that the monthly
payment amount be adjusted due to a
change in the borrower’s total financial
circumstances and that specifies the
documentation a borrower must provide
to support this request.
The proposed regulations would limit
contact between the Secretary or a
guaranty agency and the borrower
during the rehabilitation period. Only
those contacts required by law or
regulation, or that support the
rehabilitation, would be permitted. This
addresses a concern raised during the
negotiated rulemaking sessions that
borrowers who are making good faith
efforts to rehabilitate their defaulted
Direct Loan or FFEL program loans
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should not be subject to inappropriate
collection contacts while they are
making rehabilitation payments.
Loan Rehabilitation Agreement:
Treatment of Borrowers Subject to
Administrative Wage Garnishment (34
CFR 682.405(a) and 685.211(f))
Statute: Section 428F(a) of the HEA
governs rehabilitation of defaulted
loans; however, it does not address the
treatment of borrowers who are subject
to AWG while making voluntary
payments under a loan rehabilitation
agreement.
Current Regulations: The current
Direct Loan and FFEL program
regulations do not specifically address
payments collected by AWG while a
Direct Loan or FFEL borrower is also
making voluntary payments under a
loan rehabilitation agreement.
Proposed Regulations: The proposed
regulations would add new
§§ 685.211(f)(12) and 682.405(a)(3) to
the Direct Loan and FFEL program
regulations to provide that the Secretary
or the guaranty agency, respectively,
will suspend collection on a defaulted
loan through AWG after the borrower
makes five qualifying payments under a
loan rehabilitation agreement. The
suspension of the AWG collection
would be automatic after the borrower
makes five qualifying payments, but the
borrower could request that the
Secretary or the guaranty agency
continue collecting on the loan through
AWG while the borrower also makes
voluntary payments under the
rehabilitation agreement. The Secretary
or the guaranty agency would not
suspend AWG unless and until the
borrower makes the fifth payment under
a loan rehabilitation agreement.
Under proposed new
§§ 685.211(f)(12)(ii) and
682.405(a)(3)(ii), the borrower would
have only one opportunity to benefit
from a suspension of AWG while
attempting to rehabilitate a defaulted
loan.
Reasons: Loan rehabilitation provides
a borrower who has defaulted on a
Direct Loan or a FFEL Program loan the
opportunity to reaffirm his or her
intention to repay the defaulted loan
and to establish a repayment history
sufficient to support treating the loan as
no longer in default. In addition to
regaining the benefits that apply to a
non-defaulted Direct Loan or FFEL
program loan, if a borrower successfully
rehabilitates a loan the Secretary or
guaranty agency requests that credit
bureaus remove the default from the
borrower’s credit report. Loan
rehabilitation payments in the Direct
Loan and FFEL programs must be made
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voluntarily. Payments made through
AWG are not voluntary payments.
Currently, for loans held by the
Secretary, if a borrower is subject to
AWG at the time the borrower enters
into a loan rehabilitation agreement, the
Secretary will continue to collect on the
loan by AWG while the borrower makes
the series of voluntary payments
necessary to rehabilitate the loan. The
voluntary payments the borrower must
make are over and above the payments
secured through the AWG process.
In response to public comments
received on this issue before the
negotiated rulemaking sessions, the
Secretary initially proposed to relax the
requirement that loans continue to be
collected through AWG while borrowers
who are subject to AWG attempt to
rehabilitate a loan. Many of the nonFederal negotiators argued that
continuing to collect through AWG
while a borrower makes voluntary
rehabilitation payments makes it harder
for a borrower to complete loan
rehabilitation. The negotiations around
this issue centered on the following
issues: whether there should be a
distinction between borrowers already
subject to AWG at the time the borrower
requests loan rehabilitation and
borrowers for whom AWG is about to be
initiated; the appropriate number of
voluntary payments a borrower should
make before AWG is suspended; and
how frequently a borrower should be
allowed to qualify for this opportunity.
In addition, although the Secretary’s
initial proposal did not address whether
the amount of an AWG payment should
affect rehabilitation payments, the
negotiators discussed whether the total
amount of an involuntary AWG
payment and a voluntary rehabilitation
payment should be limited to the
calculated reasonable and affordable
payment amount under the loan
rehabilitation agreement.
Under current Department policy, a
guaranty agency should not start AWG
for a borrower who has requested loan
rehabilitation. If the borrower requests
the opportunity for rehabilitation, the
borrower should be allowed that
opportunity before the guaranty agency
initiates AWG. If AWG collections
started before the borrower requests
rehabilitation, guaranty agencies are not
required to suspend AWG during the
loan rehabilitation process.
Negotiators representing guaranty
agencies indicated that the guaranty
agencies have different policies with
regard to suspending AWG during the
rehabilitation period. Some guaranty
agencies do not suspend AWG while a
borrower is making rehabilitation
payments out of a concern that the
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borrower will stop making payments as
soon as AWG is suspended. Other
guaranty agencies suspend AWG after
six rehabilitation payments are received
from the borrower; and some suspend
AWG after three or fewer payments by
the borrower.
A non-Federal negotiator representing
consumer groups argued that having a
single standard for all guaranty agencies
would be preferable to having standards
that vary from guaranty agency to
guaranty agency. Although a uniform
standard may increase the number of
loan rehabilitation payments some
borrowers would be required to make
before AWG is suspended, this
negotiator contended that, overall,
standardizing the number of payments
would be more beneficial to borrowers.
That negotiator recommended a threepayment standard.
Borrowers are not subject to AWG
unless they have been in default on the
loan for a lengthy period of time and
other collection efforts have been
unsuccessful. Given the administrative
requirements for initiating AWG, the
Secretary does not believe that a
standard of three voluntary payments is
sufficient as a uniform standard for
suspending AWG. The Secretary
initially proposed requiring five
payments—slightly more than half the
number of payments needed to
rehabilitate a defaulted Direct Loan or
FFEL program loan—before the
Secretary or a guaranty agency would
suspend AWG.
A non-Federal negotiator representing
students proposed that the five-payment
requirement be a cap on the number of
required payments. Under this proposal,
guaranty agencies could suspend AWG
after the borrower has made fewer than
five loan rehabilitation payments, but
would be required to suspend AWG
after the fifth payment.
The Secretary believes this approach
would contravene one of the goals of the
proposal—to standardize the treatment
of borrowers who are making loan
rehabilitation payments while the loan
is also being collected by AWG—and
did not accept this proposal. The
negotiating committee reached
consensus on the Secretary’s initial
proposal of requiring five AWG
payments before the Secretary or a
guaranty agency would suspend AWG
during a concurrent period of
rehabilitation.
Some non-Federal negotiators asked
whether borrowers who are subject to
AWG by mistake would be required to
continue in AWG for five months before
AWG could be suspended. The
proposed regulations would not affect
longstanding guidance from the
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Secretary that if a borrower is approved
for AWG by mistake, the guaranty
agency should immediately take steps to
terminate AWG. The proposed
regulations only apply to suspension of
AWG due to payments made under a
loan rehabilitation agreement.
Non-Federal negotiators representing
guaranty agencies expressed concerns
that borrowers who do not intend to
actually rehabilitate the loan might use
this provision to force guaranty agencies
to suspend AWG indefinitely. Although
a borrower may only successfully
rehabilitate a loan once, there is no limit
to the number of times a borrower may
attempt to rehabilitate a loan. The
guaranty agencies expressed concern
that a borrower could interfere with the
guaranty agency’s ability to collect on a
loan through AWG by requesting loan
rehabilitation over and over again.
These negotiators pointed out that AWG
is an effective tool for collecting on
student loans, and that the proposed
regulations should not provide a
loophole for defaulted borrowers to
indefinitely forestall AWG.
To address the concern raised by
these negotiators, the proposed
regulations specify that a borrower may
only receive this benefit once. If a
borrower subject to AWG makes five
qualifying payments on a loan under a
rehabilitation agreement, AWG will be
suspended. If the borrower fails to make
qualifying loan rehabilitation payments,
the Secretary or the guaranty agency
may take the steps necessary to reinstate
AWG. If the borrower attempts to
rehabilitate the loan again, AWG would
remain in place during the entire loan
rehabilitation period.
A non-Federal negotiator asked
whether a guaranty agency would be
required to go through the AWG hearing
and notice requirements if it resumes
AWG. Since AWG would be suspended
but not withdrawn, the formal hearing
requirements would not apply.
However, consistent with requirements
to provide other notices to the borrower
throughout the AWG process, the
guaranty agency would be expected to
notify the borrower of the resumption of
AWG.
Although the proposal only addresses
the suspension of AWG during a period
in which the borrower is making
payments under a loan rehabilitation
agreement, some non-Federal
negotiators asked about the relationship
between the amount of money collected
involuntarily from the borrower through
AWG and the voluntary payments the
borrower makes under a loan
rehabilitation agreement. As discussed
earlier in the Loan Rehabilitation
Agreement: Reasonable and Affordable
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45637
Payment Standard section of this
preamble, a loan rehabilitation payment
amount must be reasonable and
affordable. Non-Federal negotiators
representing consumer groups and
students recommended that the
regulations require that the Secretary or
the guaranty agency adjust the amounts
collected under AWG and the loan
rehabilitation agreement, so that the two
payments would combine to equal the
reasonable and affordable payment
amount agreed to by the guaranty
agency and the borrower in the
rehabilitation agreement.
Under the HEA, a rehabilitation
payment must not only be reasonable
and affordable, but it must also be made
voluntarily. AWG payments are not
voluntary, and are not part of a
borrower’s loan rehabilitation payment.
Non-Federal negotiators representing
guaranty agencies stated that some
guaranty agencies currently do reduce
AWG payments for borrowers who are
rehabilitating their loans. These
negotiators indicated that guaranty
agencies would likely continue this
practice under the proposed regulations,
but, to preserve flexibility for guaranty
agencies, they did not support requiring
this practice in the regulations. The
Department agreed with these
negotiators that, since the guaranty
agencies work with many different types
of borrowers, it would be preferable to
continue to allow the guaranty agencies
flexibility in making these
determinations. Therefore, proposed
§§ 685.211(f) and 682.405(a) do not
require the Secretary or the guaranty
agencies to reduce AWG payments to
reflect the amount of payments made by
the borrower under a loan rehabilitation
agreement, nor do they prevent the
Secretary or a guaranty agency from
making such reductions at their
discretion.
Some non-Federal negotiators
suggested that some borrowers may
prefer to continue AWG payments while
they are also making loan rehabilitation
payments. These borrowers might view
the AWG payments as similar to
automatic debit payments that would
pay down their loans faster than
rehabilitation payments alone. These
negotiators recommended that the
proposed regulations allow these
borrowers to request that AWG continue
while they make rehabilitation
payments. The Secretary agreed with
this suggestion.
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Perkins Loan Program Issues
Federal Perkins Loan Graduate
Fellowship Deferment Eligibility (34
CFR 674.34(b)(1) and (f))
Statute: Section 464(c)(2)(A)(i)(II) of
the HEA authorizes a deferment for a
Perkins Loan borrower while the
borrower is pursuing a course of study
pursuant to a graduate fellowship
program approved by the Secretary,
except that a borrower is not eligible for
a deferment while serving in a medical
internship or residency program. HEA
section 464(c)(2)(A)(i)(II) does not
specify the requirements that a Perkins
Loan borrower must meet to be eligible
for the graduate fellowship deferment.
Current Regulations: The Perkins
Loan Program regulations in
§ 674.34(b)(1)(ii) provide that a Perkins
Loan borrower is eligible for a graduate
fellowship deferment when the
borrower is enrolled and in attendance
as a regular student in a course of study
that is part of a graduate fellowship
program approved by the Secretary. To
qualify for the deferment, § 674.34(f)
requires a borrower to provide
certification to the institution that the
borrower has been accepted or is
engaged in full-time study in the
institution’s graduate fellowship
program.
Proposed Regulations: The proposed
regulations in § 674.34(f)(1) would
require schools that participate in the
Perkins Loan Program to use the same
eligibility criteria that lenders use in the
FFEL Program (under § 682.210(d)) to
define an eligible graduate fellowship
program and to establish the eligibility
of a Perkins Loan borrower for a
graduate fellowship deferment.
Proposed § 674.34(f)(2) would define an
‘‘eligible graduate fellowship program’’
as a program that:
• Provides sufficient financial
support to allow for full-time study for
at least six months;
• Requires a written statement from
each applicant explaining the
applicant’s objectives before the award
of that financial support;
• Requires a graduate fellow to
submit periodic reports, projects, or
evidence of the fellow’s progress; and
• In the case of a course of study at
a foreign university, accepts the course
of study for completion of the
fellowship program.
Proposed § 674.34(f)(1) would also
require a statement signed by an official
of the program certifying:
• That the borrower holds at least a
baccalaureate degree conferred by an
institution of higher education;
• That the borrower has been
accepted or recommended by an
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institution of higher education for
acceptance on a full-time basis into an
eligible graduate fellowship program;
and
• The borrower’s anticipated
completion date in the program.
Reasons: We are proposing changes to
§ 674.34(f)(1) of the Perkins Loan
Program regulations to mirror the
definition of an ‘‘eligible graduate
fellowship program’’ and the graduate
fellowship deferment eligibility criteria
that are used in the FFEL and Direct
Loan programs. These changes would
provide consistent treatment of
borrowers across the HEA, title IV loan
programs.
Federal Perkins Loan Economic
Hardship Deferment Debt-to-Income
Ratio Provision (34 CFR 674.34(e)(4))
Statute: Section 304 of the College
Cost Reduction and Access Act
(CCRAA), Public Law 110–84, amended
the definition of ‘‘economic hardship’’
in section 435(o) of the HEA by
eliminating section 435(o)(1)(B). That
section defined the term ‘‘economic
hardship’’ to include a borrower who is
working full-time and has a Federal
educational debt burden that equals or
exceeds 20 percent of the borrower’s
adjusted gross income (AGI), if the
difference between the borrower’s AGI
and the borrower’s Federal debt burden
is less than 220 percent of either the
annual minimum wage or the poverty
line.
Current Regulations: Under
§ 674.34(e)(4), a Perkins Loan borrower
may receive an economic hardship
deferment if he or she is not receiving
total monthly gross income that exceeds
twice the amount specified in
§ 674.34(e)(3) and, after deducting an
amount equal to the borrower’s
payments on Federal postsecondary
education loans, the remaining amount
of the borrower’s income does not
exceed the amount specified in
§ 674.34(e)(3). The amount specified in
§ 674.34(e)(3) is the greater of the
monthly earnings of an individual
earning the minimum wage rate, or an
amount equal to 150 percent of the
poverty guideline for the borrower’s
family size.
Proposed Regulations: The proposed
regulations would remove the debt-toincome economic hardship deferment
category in § 674.34(e)(4) and related
provisions in § 674.34(e)(6) and (e)(9)
from the Perkins Loan Program
regulations.
Reasons: Final regulations published
by the Department on October 23, 2008,
(73 FR 63232) eliminated from the
Perkins, Direct Loan, and FFEL
regulations the debt-to-income
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economic hardship deferment that was
based on former section 435(o)(1)(B) of
the HEA. The final regulations also
eliminated a similar debt-to-income
economic hardship deferment category
for a borrower who is working less than
full-time from the Direct Loan and FFEL
regulations, but inadvertently retained
the comparable category in
§ 674.34(e)(4) of the Perkins Loan
Program regulations, thus creating a
disparity between the economic
hardship deferment eligibility criteria in
the Perkins program and the eligibility
criteria in the Direct Loan and FFEL
programs. We are proposing to eliminate
§ 674.34(e)(4) and related provisions in
§ 674.34(e)(6) and (e)(9) to reflect the
statutory change made to the definition
of ‘‘economic hardship’’ in HEA section
435(o) and to make the Perkins Loan
Program regulations consistent with the
comparable FFEL and Direct Loan
program regulations.
Federal Perkins Loan Standard for
On-Time Loan Rehabilitation Payment
(34 CFR 674.39(a)(2))
Statute: In accordance with section
464(h)(1)(A) of the HEA, a defaulted
Perkins loan is successfully
rehabilitated if a borrower makes nine
on-time, consecutive, monthly
payments of amounts owed on the loan,
as determined by the institution, or by
the Secretary. The term ‘‘on-time’’ is not
defined.
Current Regulations: Under
§ 674.39(a)(2), a defaulted Perkins Loan
is rehabilitated if the borrower makes an
on-time, monthly payment, as
determined by the institution, each
month for nine consecutive months and
the borrower requests rehabilitation.
The term ‘‘on-time’’ is not defined. In
§ 682.405(a)(2)(A)(3) of the FFEL
Program regulations and § 685.211(f)(1)
of the Direct Loan Program regulations,
a payment made within 20 days of the
due date is considered ‘‘on-time’’ for the
purposes of rehabilitating a defaulted
loan.
Proposed Regulations: The proposed
regulations would modify § 674.39(a)(2)
by requiring a borrower to make a full,
monthly payment, as determined by the
institution, within 20 days of the due
date, each month, for nine consecutive
months.
Reasons: The issue of establishing a
standard for an on-time payment for the
purposes of rehabilitating a defaulted
Perkins Loan was added to the
negotiating agenda at the suggestion of
a non-Federal negotiator. The nonFederal negotiator believed that a
similar standard for determining ‘‘ontime’’ in the Perkins Loan, FFEL, and
Direct Loan programs would help
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borrowers with more than one type of
title IV loan to successfully rehabilitate
the loan and would provide consistency
across the HEA, title IV loan programs
in the treatment of borrowers who are
rehabilitating a defaulted loan. The
Department agreed.
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Social Security Number Requirement
(SSN) for Assignment of Defaulted
Federal Perkins Loans to the United
States (34 CFR 674.50(e)(1))
Statute: The HEA does not include
any specific rules for the process for
assigning defaulted Perkins Loans.
Current Regulations: The current
regulations in § 674.50(e)(1) provide that
the Secretary does not accept
assignment of a loan if the institution
has not provided the SSN of the
borrower, unless the loan is submitted
for assignment under § 674.8(d)(3).
(§ 674.8(d)(3) refers to the Secretary’s
authority to mandate assignment of
certain defaulted Perkins Loans. This
authority was eliminated by the Higher
Education Opportunity Act of 2008,
Public Law 110–315 (HEOA)).
Proposed Regulations: The proposed
regulations in § 674.50(e)(1) would
allow assignment of a Perkins Loan
without the borrower’s SSN if the loan
was made before September 13, 1982,
which was the date the Department
began requiring institutions to collect
the borrower’s SSN on the Perkins Loan
Program promissory notes.
Reasons: The Department believes
that it is unfair to require an institution
to provide the borrower’s SSN when
assigning a Perkins Loan if the
institution was not required to collect
the SSN at the time the loan was made.
The proposed regulations would give
the institution the option of assigning
such a loan to the Department, rather
than holding on to a defaulted loan that
the institution has little chance of
collecting.
Federal Perkins Loan Break in
Cancellation Service Due to a Condition
Covered Under the Family and Medical
Leave Act (34 CFR 674.52(b)(2))
Statute: Section 465(a)(3)(A) of the
HEA provides that a specified
percentage of principal and interest on
a Perkins Loan can be cancelled for each
‘‘year’’ during which the borrower is
employed in certain specified positions.
Section 465(a)(4) provides that the term
‘‘year’’ where applied to employment as
a teacher means the academic year as
defined by the Secretary. The HEA does
not provide for a break in qualified
service for cancellation purposes.
Current Regulations: Current
regulations in § 674.52(b)(2) allow a
borrower who is performing qualified
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teaching service, but who is unable to
complete the academic year due to
illness or pregnancy, to still qualify for
cancellation of the principal and
interest on his or her Perkins Loan if the
borrower completes the first half of the
academic year, and has begun teaching
the second half, and the borrower’s
employer considers the borrower to
have fulfilled his or her contract for the
academic year for purposes of salary
increment, tenure, and retirement. The
regulations in § 674.52(b)(2) address
only qualified teaching service, not
other types of employment which may
qualify the borrower for loan
cancellation, such as nursing or law
enforcement.
In the FFEL and Direct Loan
programs, under §§ 682.216(c)(7)(ii) and
685.217(c)(7)(ii), respectively, if the
borrower is unable to complete the
second half of an academic year of
teaching due to a condition covered
under the FMLA, the teaching service
for loan cancellation purposes in those
programs may still count as a year of
eligible teaching service if the
borrower’s employer considers the
borrower to have fulfilled the teacher
contract requirements for that academic
year. Conditions covered under the
FMLA include:
• The birth of a child and to care for
the newborn child within one year of
birth;
• The placement with the employee
of a child for adoption or foster care and
to care for the newly placed child
within one year of placement;
• To care for the employee’s spouse,
child, or parent who has a serious
health condition;
• A serious health condition that
makes the employee unable to perform
the essential functions of his or her job;
• Any qualifying exigency arising out
of the fact that the employee’s spouse,
son, daughter, or parent is a covered
military member on ‘‘covered active
duty;’’ and
• To care for a covered service
member with a serious injury or illness
who is the spouse, son daughter, parent,
or next of kin to the employee (military
caregiver leave). (29 U.S.C. 2601 et seq.)
Proposed Regulations: The proposed
regulations in § 674.52(c)(1) would
allow a Perkins Loan borrower who is
unable to complete the second half of an
academic year of teaching due to a
condition covered under the FMLA to
still count that year as eligible teaching
service if the borrower’s employer
considers the borrower to have fulfilled
the teacher contract requirements for
that academic year. In addition, the
proposed regulations in § 674.52(c)(2)
would allow a Perkins Loan borrower
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who is unable to complete a full year of
eligible public service under §§ 674.56,
674.57, 674.59, or 674.60 due to a
condition that is covered under the
FMLA to count that year as a full year
of public service if the borrower
completes at least six months of
consecutive eligible service.
Reasons: By allowing a Perkins Loan
borrower to count a year of teaching
service that is interrupted by a
condition covered under the FMLA, the
proposed regulations would provide for
more consistent treatment of similarly
situated borrowers who are performing
teaching service that may qualify them
for FFEL or Direct Loan teacher loan
forgiveness. By allowing a Perkins Loan
borrower to count a year of service that
has been interrupted by a condition
covered under the FMLA for the public
service loan cancellations under
§§ 674.56, 674.57, 674.59, or 674.60, the
proposed regulations would provide for
consistent treatment of all Perkins Loan
borrowers who are seeking cancellation
benefits on their Perkins Loans, not just
those borrowers seeking a cancellation
based on employment as a teacher.
Federal Perkins Loan Cancellation Rate
Progression (34 CFR 674.52(g),
674.53(d), 674.56(h), 674.57(c)(2),
674.59(c)(2) and 674.60(b))
Statute: Under section 465(a)(3)(A)(i)
of the HEA, the percent of original
principal on a Perkins Loan that is
canceled for each year of employment
by a Perkins Loan borrower in certain
qualified public service jobs is 15
percent for the first and second year of
service, 20 percent for the third and
fourth year of service, and 30 percent for
the fifth and final year of service. The
interest on the unpaid balance of the
loan that accrues during any year of
qualifying service is also canceled.
Qualified public service under section
465(a)(2) of the HEA includes, among
other things, teaching, military service
in an area of hostility, law enforcement,
nursing, and firefighting. There are two
types of public service that have a
different cancellation rate progression.
Under section 465(a)(3)(A)(ii), the
cancellation rate for each year of
qualified service in certain early
childhood education programs is 15
percent of the original loan principal
plus the interest on the unpaid balance
accruing during the year of qualifying
service. Under section 465(a)(3)(A)(iii),
the cancellation rate for each year of a
borrower’s qualified service as a
volunteer under the Peace Corps Act or
a volunteer under the Domestic
Volunteer Service Act of 1973 is 15
percent of the original loan principal for
the first or second year of qualified
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service and 20 percent of the original
loan principal for the third or fourth
year of qualified service. The interest on
the unpaid balance that accrues during
any year of qualifying service is also
canceled.
Current Regulations: The cancellation
progression rate for qualified public
service performed by a Perkins Loan
borrower under §§ 674.53(d) (teachers),
674.56(a) (nurse or medical technician),
674.57(c)(2) (law enforcement or
corrections officer), and 674.59(c)(2)
(military service), is 15 percent of the
original principal for the first and
second year of service, 20 percent for
the third and fourth year of service, and
30 percent for the fifth and final year of
service, consistent with section
465(a)(3)(A)(i) of the HEA. The interest
on the unpaid balance that accrues
during any year of qualifying service is
also canceled. The cancellation
progression rate for each year of
qualified service in an early childhood
education program performed by a
Perkins Loan borrower under § 674.58 is
15 percent of the original principal plus
interest that accrues during the year of
qualifying service on a Perkins Loan,
which mirrors section 465(a)(3)(A)(ii) of
the HEA. Lastly, the cancellation
progression rate for each year of
qualified service as a volunteer under
the Peace Corps Act or a volunteer
under § 674.60 is 15 percent of the
original principal for the first or second
year of qualified service and 20 percent
for the third or fourth year of qualified
service, plus any interest that accrued
during the year of qualifying service,
which mirrors section 465(a)(3)(A)(iii)
of the HEA.
Proposed Regulations: The proposed
regulations would not change the
current cancellation progression rate
under the cancellation categories in
§§ 674.53, 674.56, 674.57, or 674.59.
The percentage of original principal
canceled would remain the same, and
any interest on the unpaid balance that
accrues during any year of qualifying
service would continue to be canceled.
However, under proposed § 674.52(g)(1),
if, after the first, second, third, or fourth
complete year of qualifying service the
borrower switches to a position that
qualifies the borrower for cancellation
under a different cancellation category
under §§ 674.53, 674.56, 674.57, or
674.59, the borrower’s cancellation rate
progression continues from the last year
the borrower received a cancellation
under the former cancellation category.
Under proposed § 674.52(g)(2), if, after
the first, second, third, or fourth
complete year of qualifying service
under §§ 674.53, 674.56, 674.57, or
674.59 the borrower switches to a
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position that qualifies the borrower for
cancellation under § 674.58 or 674.60,
the borrower’s cancellation rate
progression begins at the year one
cancellation rates specified in
§§ 674.58(b) or 674.60(b), respectively.
Reasons: We believe that requiring a
borrower to restart a cancellation
progression is unnecessary. In each of
these situations, the borrower is
performing a valuable public service
which qualifies for loan cancellation.
Since the cancellation rates in these
categories are identical, we believe it is
more equitable to allow borrowers to
continue their progression toward full
loan cancellation when they change jobs
to a position with the same cancellation
progression.
We are not proposing to allow
borrowers who switch to or from the
cancellation categories in §§ 674.58 or
674.60 to continue under the same
cancellation rate progression because
the cancellation rates under these two
provisions are not comparable to the
cancellation rates in §§ 674.53, 674.56,
674.57, or 674.59. Under § 674.58(b), a
borrower receives cancellation at the
rate of 15 percent for each year of
eligible service. Under § 674.60(a), a
borrower may only receive cancellation
of up to 70 percent of the original
principal.
FFEL Program Issues
FFEL Lender Repayment Disclosures
for Borrowers Who Are 60 Days
Delinquent (34 CFR 682.205(c))
Statute: Section 433(e)(3) of the HEA
requires FFEL Program lenders to
provide a borrower who is 60 days
delinquent in making payments on a
FFEL Program loan a notice that informs
the borrower of: (1) The date on which
the loan will default if no payment is
made; (2) the minimum payment the
borrower must make to avoid default;
(3) a description of the options available
to the borrower to avoid default and the
relevant fees or costs associated with
each option; (4) a description of
deferment and forbearance options and
the requirements to obtain each; (5) any
discharge options the borrower may be
entitled to; and (6) any additional
resources of which the lender is aware
that can provide the borrower with
advice and assistance on student loan
repayment, including nonprofit
organizations, advocates, counselors,
and the Department’s Student Loan
Ombudsman.
Current Regulations: Section
682.205(c)(5)(ii) of the Department’s
regulations requires FFEL lenders to
provide a repayment disclosure to a
borrower, including all of the
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information listed in section 433(e)(3) of
the HEA, within five days of the
borrower becoming 60 days delinquent
on the FFEL loan. The Department
interprets five days for this purpose as
five calendar days, rather than business
days. The regulations also specify that
the minimum payment necessary to
avoid default disclosed to the borrower
must be the amount as of the disclosure
date. The lender must also include the
amount necessary to bring the loan
current or pay the loan in full.
Proposed Regulations: The proposed
regulations would redesignate current
§ 682.205(c) as § 682.205(a).
Redesignated § 682.205(a)(5)(ii) would
change the timeframe for FFEL lenders
to send the required disclosure from five
calendar days after the date the
borrower becomes 60 days delinquent to
five business days after that date.
Reasons: The non-Federal negotiators
representing lenders and lender
servicers indicated that the required
disclosure is often system-generated and
sent out automatically on a fixed
schedule. These negotiators stated that
office closures and delays due to
necessary system maintenance and
upgrades may result in a technical
violation of the regulations if the lender
is unable to send the required notice to
the borrower within the five calendar
days provided under current
regulations. The Department and the
other non-Federal negotiators agreed
that unintended noncompliance with
the regulatory deadline could result
under these circumstances and that the
regulations were not intended to
penalize the lender for this type of
possible delay. Accordingly, the
proposed regulations would provide the
lender with five business days to
generate the required disclosure.
FFEL Lender Repayment Disclosures to
Borrowers Who Are Having Difficulty
Making Payments (34 CFR 682.205(c))
Statute: Section 433(e)(2) of the HEA
requires FFEL Program lenders to
provide certain information to assist
borrowers who notify the lender that
they are having difficulty making
payments on their loans. The lender
must provide the borrower with
information about: (1) The repayment
plans available to the borrower and how
the borrower may request a change in
repayment plan; (2) the requirements for
obtaining a forbearance on a loan and
any expected costs associated with
forbearance; and (3) the options
available to the borrower to avoid
default and any relevant fees or costs
associated with those options.
Current Regulations: Section
682.205(c)(4) of the Department’s
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regulations requires a lender to provide
a borrower who is having difficulty
making required payments on a loan a
disclosure that contains the information
specified in section 433(e)(2) of the
HEA. The lender must send the
disclosure each time the borrower
contacts the lender and tells the lender
that he or she is having difficulty
making payments on the loan.
Proposed Regulations: The proposed
regulations would amend 34 CFR
682.205(c)(4) to no longer require a
lender to provide the disclosure
required by that section if the
borrower’s difficulty has been resolved
through contact resulting from an earlier
disclosure or from other contact
between the lender and the borrower.
Reasons: The non-Federal negotiators
representing FFEL lenders and lender
servicers noted that providing the
required disclosure in response to every
borrower contact may confuse the
borrower if prior contact between the
borrower and the lender or servicer has
addressed the borrower’s repayment
problem. The negotiating committee
agreed that the disclosure should not be
automatically triggered under these
circumstances because the repeated
disclosure could confuse the borrower
and be counterproductive to keeping the
borrower in active, timely repayment or
in another acceptable repayment status.
Administrative Wage Garnishment of
the Disposable Pay of Defaulted FFEL
Program Borrowers (34 CFR 682.410(b))
Borrower Hearing Opportunities on the
Enforceability of the Debt and a
Borrower’s Claim of Financial
Hardship (34 CFR 682.410(b)(9)(i))
Statute: Section 488A(a)(3) of the
HEA provides borrowers who have
defaulted on a title IV loan and who are
subject to AWG the opportunity to
inspect and copy records relating to the
debt. Section 488A(a)(5) of the HEA
provides that these borrowers must be
provided the opportunity for a hearing
concerning the existence or amount of
the debt. Section 488A(b) of the HEA
establishes certain requirements for the
hearing opportunity required under
subsection (a)(5).
Current Regulations: Section
682.410(b)(9)(i)(E) of the Department’s
regulations reflects the statutory
requirement that the borrower be
provided the opportunity for a hearing
concerning the existence or amount of
the debt. Section 682.410(b)(9)(i)(J)
provides that the borrower has the
choice of having an oral or written
hearing. However, the current
regulations do not include further
details on how the hearing should be
conducted, the method by which the
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borrower may raise objections to the
AWG or how the hearing official should
make decisions during the hearing. The
current regulations do not address a
borrower’s objections to the
enforceability of the debt or a claim of
financial hardship.
Proposed Regulations: The proposed
regulations would amend
§ 682.410(b)(9)(i)(E) of the Department’s
regulations to require that a guaranty
agency offer a borrower the opportunity
to contest the enforceability of the debt
in addition to the existence or amount
of the debt. The proposed regulations
would also require the guaranty agency
to provide the borrower with the
opportunity to raise an objection that
withholding from the borrower’s
disposable pay—in the amount or at the
rate proposed in the notice advising the
borrower of the planned garnishment—
would cause financial hardship to the
borrower.
The proposed regulations would also
amend § 682.410(b)(9)(i)(F) to clearly
address the burden of proof that applies
with regard to objections by the
borrower to garnishment, and to
describe the procedures that must be
followed by the borrower and guaranty
agency when the borrower raises the
objections described in paragraph
§ 682.410(b)(9)(i)(E). Under proposed
§ 682.410(b)(9)(i)(F)(1)(i), as part of the
oral or written hearing, the guaranty
agency would have to provide evidence
of the existence of the debt. Once the
agency provides that evidence, the
burden of proof would shift to the
borrower to establish, by a
preponderance of the evidence that: No
debt exists; the amount of the debt the
agency claims is incorrect, including
that any amount of collection costs
assessed to the borrower exceeds the
regulatory limits; the debt is not
enforceable under applicable law; or the
debt is not delinquent. If the borrower
objects to the amount of the collection
costs charged by the agency included in
the debt, the borrower must prove that
collection costs charged on the
defaulted loan exceed the amount a
guaranty agency is permitted to assess a
borrower under § 682.410(b)(2) of the
Department’s regulations.
Under proposed
§ 682.410(b)(9)(i)(F)(1)(ii), the borrower
would be able to raise any of these
objections at any time before the hearing
official closes the record and notifies the
parties that no additional evidence or
objections will be accepted.
If the borrower claims that the
withholding amount or rate that the
agency proposed in its notice would
cause financial hardship to the borrower
and the borrower’s spouse and
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dependents, the borrower bears the
burden of proving the claim of financial
hardship by a preponderance of the
evidence. Under
§ 682.410(b)(9)(i)(F)(2)(ii), in
determining whether the withholding
amount would cause a financial
hardship for the borrower, the hearing
official would compare the borrower’s
living expenses against the amount
spent for basic living expenses by
families of the same size and similar
income to the borrower’s, as reflected in
the IRS National Standards. The term
‘‘National Standards’’ is more precisely
used by the IRS to refer to a subset of
living expenses that includes five
necessary expenses: food, housekeeping
supplies, apparel and services, personal
care products and services, and
miscellaneous. In addition, the IRS has
established standards for: Out-of-pocket
health care expenses, which include
medical services, prescription drugs,
and medical supplies (e.g. eyeglasses,
contact lenses, etc.); transportation
standards for taxpayers with a vehicle;
and housing and utilities standards,
which include mortgage or rent,
property taxes, interest, insurance,
maintenance, repairs, gas, electric,
water, heating oil, garbage collection,
residential telephone service, cell phone
service, cable television, and internet
service. The IRS refers to these
standards collectively as the ‘‘Collection
Financial Standards.’’ The proposed
regulations refer to all these standards
collectively as the ‘‘National
Standards.’’ For more information on
the IRS National Standards refer to
www.irs.gov/Individuals/CollectionFinancial-Standards. We invite
comment on whether the term should be
changed to conform to the term used by
the IRS, which developed the standards.
Under proposed
§ 682.410(b)(9)(i)(F)(2)(iv), if the hearing
official upholds the borrower’s objection
to the amount or rate of withholding in
part, then the garnishment may be
ordered at a lesser rate or amount that
would allow the borrower to meet basic
living expenses. If the garnishment
order is already in effect when the
hearing official makes a decision, the
guaranty agency must notify the
borrower’s employer of any change in
the amount to be withheld or the rate of
withholding.
The Department notes that the
consensus language of
§ 682.410(b)(9)(i)(F)(2)(iv) of the
proposed regulations differs from
regulations governing wage garnishment
of Department-held loans at 34 CFR part
34. The proposed regulations state that
a withholding order ‘‘may be ordered at
a lesser rate or amount’’ by a guaranty
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agency if a hearing official upholds, in
part, a borrower’s claim of financial
hardship. The Department believes that
the proposed language could be
interpreted as providing a guaranty
agency discretion in adjusting a
borrower’s payment and rate based on a
hearing official’s finding, rendering the
hearing official’s ruling moot and
potentially resulting in inconsistent
treatment of similarly situated
borrowers. The Department considers
the hearing official’s determinations
whether garnishment would cause
hardship, and whether garnishment can
be ordered only at a lesser rate than
proposed by the guaranty agency, to be
binding on the agency, and not a matter
left to the discretion of the agency. The
Department particularly invites
comments on whether the agreed-upon
language—using ‘‘may’’ in this context
rather than ‘‘must’’—is contrary to the
intent of providing the borrower an
opportunity for an independent
determination on a financial hardship
objection.
Proposed § 682.410(b)(9)(i)(F)(2)(v)
would also require that a determination
of financial hardship be effective for no
longer than six months, and that if, after
that period, the guaranty agency
determines that the amount or rate of
withholding should be increased, the
guaranty agency must notify the
borrower of the increase and provide the
borrower with an opportunity to contest
the determination and obtain a hearing
on the objection.
The proposed regulations would also
add a new § 682.410(b)(9)(i)(N) to the
regulations to specify the process by
which a borrower may raise an objection
to the amount or rate of a withholding
order on grounds of financial hardship.
The proposed regulations would allow
the borrower to raise an objection at any
time, but would not require the guaranty
agency to consider the objection until at
least six months after the date the order
was issued. Under the proposed
regulations the guaranty agency may
provide a hearing earlier than six
months after the date the order was
issued under extraordinary
circumstances—that is, if the borrower’s
request for review shows that the
borrower’s financial circumstances have
substantially changed after the
garnishment notice because of an event
such as an injury, divorce, or a
catastrophic illness.
The Department is also proposing to
reorganize current provisions in
§ 682.410(b)(9) to more logically reflect
the AWG process, from the initial
garnishment notice, to the hearing
process, to the withholding of wages.
The following sections summarize the
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discussion and proposed changes to
§ 682.410(b)(9).
Reasons: The Department did not
include the regulations governing AWG
for defaulted FFEL Program borrowers
on the original list of regulations to be
addressed by the negotiated rulemaking
process. However, a non-Federal
negotiator asked that the topic be added
to the agenda and that § 682.410(b)(9) of
the regulations be amended to make
certain provisions consistent with the
requirements in 34 CFR part 34 that
govern AWG for loans held by the
Department.
Specifically, the negotiator requested
that the regulations be amended to
specifically reflect a borrower’s right to
request a hearing on the enforceability
of the debt and to allow the borrower to
object to the amount or rate of AWG
withholding on the basis that such
withholding would cause financial
hardship to the borrower.
As negotiations proceeded, other nonFederal negotiators requested that
additional changes be made to the
regulations to provide more detail on
the guaranty agency’s administration of
the AWG notification and hearing
process.
The Department agreed to revise the
FFEL Program regulations to provide
more consistent treatment for both
borrowers whose defaulted loans are
held by a guaranty agency and those
with loans held by the Secretary. In
addition, the Department is proposing to
amend certain regulatory provisions to
incorporate existing policy guidance
and, at the request of the non-Federal
negotiators, to provide examples of
permissible activities associated with
certain phases of AWG.
To respond to a request from a nonFederal negotiator that borrowers be
allowed to object at any time to the
amount or rate of withholding on the
basis of financial hardship, the
negotiators agreed to propose new
§ 682.410(b)(9)(i)(N). This proposed
paragraph was added to balance the
ability of borrowers to raise a financial
hardship objection at any time against
the practical necessity of limiting the
number of hearings to a reasonable
number. Accordingly, the proposed
regulations limit such a hearing
opportunity to once every six months
absent extraordinary circumstances that
have substantially changed the
borrower’s financial circumstances.
Use of Third-Party Contractors in AWG
Hearings (34 CFR 682.410(b)(9))
Statute: Section 436(a) of the HEA
provides that a FFEL Program lender or
guaranty agency that delegates its
functions to another entity is not
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relieved of its duty to comply with the
HEA and must monitor the other
entity’s activities to ensure compliance
with the requirements of the HEA.
Section 488A(b) of the HEA prohibits
the use of a hearing official who is
under the supervision or control of the
guaranty agency, but does not otherwise
prevent a guaranty agency from
retaining a third-party agent to perform
AWG-related administrative functions
for the agency.
Current Regulations: Section
682.203(a) of the FFEL Program
regulations reflects section 436(a) of the
HEA and acknowledges that a guaranty
agency may contract or otherwise
delegate the performance of its
functions to a servicing agency or other
party. Such a delegation does not relieve
the guaranty agency of its duty to ensure
that the other party’s actions comply
with the requirements imposed on the
guarantor by the HEA. Section
682.410(b)(9) of the regulations
governing a guaranty agency’s
administration of the AWG process does
not address the use of third-party
contractors within the AWG context.
Proposed Regulations: The proposed
regulations would add new
§ 682.410(b)(9)(i)(I) to specify that the
wage garnishment hearing official may
not be under the control of a third-party
servicer or collection contractor
employed by the guaranty agency.
Paragraph (b)(9)(i)(I) would also clarify
that payment of compensation to the
hearing official for hearing services does
not constitute impermissible control by
the guaranty agency, a third-party
servicer, or a collection contractor
employed by the agency. The proposed
regulations would also provide that all
of the hearing official’s oral
communications must be made with
both the guaranty agency (or its
representative) and the borrower
present, and that all of the hearing
official’s written communications with
one party must be promptly shared with
the other party, with the exception of
those communications necessary to plan
the time, place, and manner of the
hearing.
The proposed regulations would also
add a new § 682.410(b)(9)(i)(T) to
specify the functions that may be
performed by a third-party servicer or
collection contractor employed by the
guaranty agency for AWG purposes,
such as obtaining employment
information for the purposes of
garnishment, negotiating alternative
repayment arrangements with
borrowers, and responding to inquiries
from borrowers. The proposed
regulations would make it clear that the
guaranty agency may not delegate to a
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third party the decision to order
withholding of an individual borrower’s
wages, and that the agency must create
and retain records to demonstrate that
each AWG order has been individually
authorized by an appropriate official of
the guaranty agency. The proposed
regulations would also specify the
manner by which a withholding order
may be sent to employers.
Reasons: In an effort to ensure that
AWG hearings are impartial, the
Department is proposing new paragraph
(b)(9)(i)(I) to clarify that an AWG
hearing official may not be under the
supervision or control of the guaranty
agency or of a third-party servicer or
contractor employed by the agency. A
non-Federal negotiator requested that
language be added to the regulations to
provide that the normal payment of
compensation to the hearing official for
performance of his or her duties would
not constitute such impermissible
control. To further ensure a fair hearing,
the Department also added language to
prohibit the hearing official from
engaging in ex parte communications
without notice to the other party, except
in regard to the logistical details of the
hearing.
Section 488A of the HEA gives the
Secretary and guaranty agencies
authority to issue a garnishment order.
In the case of a guaranty agency, only
a guaranty agency official, and not a
contractor for the agency, can lawfully
issue an order for the withholding of a
borrower’s wages. New paragraph
(b)(9)(i)(T) reflects that restriction, and
includes a non-exhaustive list of
activities that may be performed by a
third-party servicer or collection
contractor employed by the guaranty
agency. The proposed regulations reflect
the Department’s earlier guidance to the
guaranty agencies on the limitations on
the use of collection contractors or other
third-party servicers to conduct
administrative activities for a guaranty
agency related to the wage garnishment
process. The Department believes that
some guaranty agencies may not be
aware of the guidance or are no longer
monitoring their servicers for
compliance with that guidance. The
Department therefore determined that
this guidance should be incorporated
into the proposed regulations. Most
significantly, a third-party contractor
may not make the determination that a
withholding order is to be issued, and
the order must clearly identify the
guaranty agency as the holder of the
debt. The order cannot expressly state or
imply that the third-party agent is the
holder of the loan or that the third-party
agent has authority to initiate a
withholding order.
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A non-Federal negotiator also
requested that the proposed regulations
include a list of examples of the
permissible activities that third-party
contractors may perform in the AWG
process. New paragraph (b)(9)(i)(T)(1)
lists examples of such activities, which
are limited to administrative tasks, such
as obtaining employment information,
receiving garnishment payments, and
providing information to borrowers.
Amount or Rate of Wage Withholding
(34 CFR 682.410(b)(9))
Statute: Section 488A(a)(1) of the
HEA limits the amount of the borrower’s
pay that may be subject to garnishment
to 15 percent of the borrower’s
disposable pay for any pay period.
Section 1673 of Title 15 of the U.S. Code
limits the amount of disposable pay that
may be subject to garnishment to the
lesser of 25 percent of the borrower’s
disposable pay for any pay period (in
cases where multiple withholding
orders exist) or the amount by which the
borrower’s disposable pay for any pay
period exceeds 30 times the minimum
wage.
Current Regulations: Current
§ 682.410(b)(9)(i)(A) describes the
statutory limits to garnishment as an
amount that does not exceed the lesser
of 15 percent of the borrower’s
disposable pay for each pay period or
the amount permitted by 15 U.S.C.
1673, unless the borrower provides the
agency with written consent to deduct
a greater amount. The current
regulations do not describe the
limitations in detail, including the
limitation on the amount of garnishment
in cases where there is a single
withholding order compared to when
multiple orders exist.
Proposed Regulations: The proposed
regulations would add a new
§ 682.410(b)(9)(i)(K) to the Department’s
regulations. The proposed regulation
would limit the withholding amount or
percentage if a guaranty agency is
garnishing pay from a borrower who is
not already subject to a withholding
order. Unless the individual consents to
a greater percentage or amount, the
guaranty agency would be required to
garnish the smallest of: (1) The amount
specified in the withholding order; (2)
15 percent of the borrower’s pay for the
pay period; or (3) the amount by which
the borrower’s disposable pay for the
pay period exceeds 30 times the
minimum wage.
The proposed regulations would also
add a new § 682.410(b)(9)(i)(L) to the
regulations to clarify the withholding
amount or percentage and priority if a
guaranty agency is garnishing the pay of
a borrower who is already subject to one
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or more withholding orders. Unless
another Federal law dictates a different
priority, the borrower’s employer would
be required to honor the guaranty
agency’s withholding order before any
later-received withholding orders,
except a family support withholding
order. The proposed regulations clarify
that the cumulative allowable amount to
be withheld under the sum of all
withholding orders is limited to 25
percent of the borrower’s disposable pay
for the pay period or the amount by
which the borrower’s disposable pay for
the pay period exceeds 30 times the
minimum wage. In a case where one or
more guaranty agencies have issued
wage garnishment orders with respect to
the same individual borrower, no single
agency would be permitted to order
withholding of a total amount exceeding
15 percent of the disposable pay for the
pay period of a borrower to be withheld
in response to all of the withholding
orders it issued for its claims.
The proposed regulations would also
add a new § 682.410(b)(9)(i)(M) which
would permit a greater amount or
percentage to be withheld if the
borrower has given the employer
written consent to the higher amount or
percentage.
Reasons: One non-Federal negotiator
argued that current § 682.410(b)(9)(i)(A)
was not sufficiently clear with regard to
the limits on the amount that may be
subject to wage garnishment, especially
in cases in which a borrower is subject
to more than one withholding order. In
an effort to clarify the rules regarding
wage withholding, the Department
agreed to propose new paragraphs
(b)(9)(i)(K) through (M) to provide more
clarity as well as the statutory basis for
the applicable limits in section
488A(a)(1) of the HEA and 15 U.S.C.
1673(a)(2).
Borrower Hearing Requests (34 CFR
682.410(b)(9))
Statute: Sections 488A(a)(5) and (b) of
the HEA provide borrowers with the
opportunity to request a hearing
concerning the existence or the amount
of the debt and the terms of the
repayment schedule.
Current Regulations: Current
§ 682.410(b)(9) requires the guaranty
agency to offer the borrower an
opportunity for a hearing concerning the
existence or the amount of the debt and
the terms of the repayment schedule.
The current regulations provide that the
guaranty agency may not issue a
withholding order until the hearing is
provided, as long as the borrower’s
written request for a hearing is received
by the guaranty agency within 15 days
after the borrower’s receipt of the
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garnishment notice. The current
regulations further provide that a
borrower is considered to have received
the garnishment notice 5 days after it
was mailed by the agency. Finally,
current regulations provide that if the
borrower’s written request for a hearing
is received by the guaranty agency after
the 15-day period, the guaranty agency
must provide a hearing to the borrower
but must still go forward with the
withholding order (unless the agency
determines that the filing delay was
caused by factors outside the borrower’s
control, or receives information that
justifies a delay or cancellation of the
order), and that the withholding order
can be rescinded by a decision from the
hearing official.
Proposed Regulations: The proposed
regulations would replace current
§ 682.410(b)(9)(i)(K) with proposed
§ 682.410(b)(9)(i)(G) and change the
current requirement that a borrower’s
written request for a hearing be received
on or before the 15th day following the
borrower’s receipt of a garnishment
notice to be assured of a hearing prior
to issuance of a garnishment order. The
proposed regulations would require that
if a borrower’s written request for a
hearing is received on or before the 30th
day following the date the garnishment
notice was sent, the borrower would be
assured of a hearing prior to issuance of
a garnishment order. We are also
proposing to delete the rule that a
borrower is considered to have received
a garnishment notice five days after it
was mailed by the agency.
The Department has decided to retain
the requirement in current
§ 682.410(b)(9)(i)(L) (now proposed
§ 682.410(b)(9)(i)(H)) that if a borrower
does not request a hearing within the
30-day time limit, the guaranty agency
must go forward with the withholding
unless the agency determines that the
filing delay was caused by factors
outside the borrower’s control, or
receives information that justifies a
delay or cancellation of the order. If a
borrower’s request for a hearing is
received after the 30th day, a guaranty
agency is still required to provide a
hearing in enough time to have a
decision issued within 60 days of the
date the guaranty agency received the
hearing request. The Department would
add to proposed § 682.410(b)(9)(i)(H)
(which would replace current
§ 682.410(b)(9)(i)(L)) a provision
specifying that if the hearing is not
provided and a decision issued within
60 days following the receipt of the
borrower’s written request for a hearing,
then the agency must suspend the order
beginning on the 61st day until a
decision is rendered.
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Reasons: In the preamble to the final
regulations issued by the Department on
April 19, 1994, 59 FR 22462, 22475, we
explained that we agreed with the
public comments we had received
stating that borrowers should be deemed
to have received a garnishment notice
five days after its mailing date to
prevent disputes about the date the
borrower received the notice. During the
recent negotiated rulemaking sessions, a
non-Federal negotiator requested that
the time limit for when the guaranty
agency must receive the borrower’s
written request for a hearing be
measured against the date the
garnishment notice was sent, rather than
the date the borrower received the
notice. The Department accepted this
suggestion because measurement of the
date the notice was sent is more readily
verifiable than the date the notice was
received. However, to balance this
interest against the borrower’s need for
time to respond, the Department
increased the time limit from 15 days to
30 days, consistent with a suggestion
from another non-Federal negotiator.
The provision specifying suspension
of the order on the 61st day was added
to make explicit the consequence if a
decision is not issued within the
required time period.
Other Provisions Related to AWG (34
CFR 682.410(b)(9))
Statute: Section 488A of the HEA
authorizes the Secretary and guaranty
agencies in the FFEL Program to garnish
up to 15 percent of a defaulted
borrower’s disposable income per pay
period, unless the individual consents
to a greater percentage or amount. The
statute requires that a notice be sent to
a borrower no less than 30 days prior to
initiation of the garnishment
proceedings against the borrower
informing the borrower of the nature
and amount of the debt, the intention of
the guaranty agency or Secretary, as
appropriate, to initiate garnishment, and
an explanation of the rights of the
borrower. The statute provides the
borrower, among other rights, an
opportunity for a hearing regarding the
proposed garnishment.
Current Regulations: Section
682.410(b)(9) of the FFEL Program
regulations includes the rules that
govern the hearing notice and the
conduct of the hearing in cases of
administrative wage garnishment by a
guaranty agency.
Current paragraph (b)(9)(i)(B) requires
a guaranty agency to mail to the
borrower’s last known address, at least
30 days before the initiation of
garnishment proceedings, a written
notice of the nature and amount of the
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debt, the intention of the agency to
initiate proceedings to collect the debt
through deductions from the borrower’s
pay, and an explanation of the
borrower’s rights. Current paragraphs
(b)(9)(i)(C) and (b)(9)(i)(D) require a
guaranty agency to offer the borrower an
opportunity to inspect and copy agency
records related to the debt and an
opportunity to enter into a written
repayment agreement.
Proposed Regulations: The proposed
regulations would amend
§ 682.410(b)(9)(i)(B) of the FFEL
Program regulations to enumerate the
elements that a guaranty agency must
include in the garnishment notice it
sends to a defaulted borrower. Under
the proposed regulations, the notice
would: Describe the nature and amount
of the debt; the intention of the agency
to collect the debt through deductions
from the borrower’s disposable pay;
provide an explanation of the
borrower’s rights; identify the deadlines
by which the borrower must exercise
those rights; and describe the
consequences of the failure to exercise
those rights in a timely manner.
The proposed regulations would add
new paragraph (b)(9)(i)(J), which would
specify the rules under which the
hearing would be conducted, including
provisions for granting continuances.
Specifically, the proposed regulations
would require that the hearing be
conducted as an informal proceeding,
require witnesses in an oral hearing to
testify under oath or affirmation, and
require maintenance of a summary
record of any hearing. Proposed
paragraph (b)(9)(i)(J) would also allow
the borrower to request a continuance of
the hearing to submit additional
evidence or the agency to request and
receive from the hearing officer a
reasonable extension of time sufficient
to enable the agency to evaluate and
respond to any additional evidence or
any objections raised pursuant to
paragraph (b)(9)(i)(F)(1)(ii).
The proposed regulations would also
add new paragraph (b)(9)(i)(O), which
would provide for the withholding
order to be effective until the guaranty
agency rescinds the order or the agency
has fully recovered the amount owed by
the borrower.
The proposed regulations would
redesignate paragraphs (b)(9)(i)(F)
through (b)(9)(i)(I) of § 682.410 as new
paragraphs (b)(9)(i)(P) through
(b)(9)(i)(S). Proposed
§ 682.410(b)(9)(i)(Q) would clarify that a
borrower who wishes to object to the
garnishment on the basis that he or she
is not subject to garnishment because of
involuntary separation from
employment bears the burden of raising
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and proving that claim. Proposed
§ 682.410(b)(9)(i)(S) would enumerate
the information that a guaranty agency
must include in the withholding order
sent to the employer. The order may
only include the information necessary
for the employer to comply with the
withholding order. Accordingly, under
the proposed regulations, the order must
include the borrower’s name, address,
and SSN, as well as instructions for the
employer’s withholding of the
borrower’s pay and information as to
where the employer must send the
withheld funds.
The proposed regulations would
redesignate paragraph
§ 682.410(b)(9)(i)(O) as new paragraph
(b)(9)(i)(U).
Finally, § 682.410(b)(9)(ii) of the
proposed regulations would add
definitions for certain terms used in
paragraph (b)(9)(i). These definitions
were incorporated from other sections of
the existing FFEL Program regulations
and other Department regulations.
Reasons: A non-Federal negotiator
requested that the regulations be revised
to include an expanded description of
what would be permissible information
to include in the garnishment notice
sent to defaulted borrowers. In an effort
to provide clear regulatory guidance to
guaranty agencies sending such notices
and to ensure that borrowers fully
understand the garnishment process and
its implications, the Department is
proposing to list the required
components of the garnishment notice
in the regulations.
The Department added language in
new paragraph (b)(9)(i)(J) to emphasize
that the hearing official in an
administrative wage garnishment
hearing must conduct the hearing as an
informal proceeding, require witnesses
in an oral hearing to testify under oath
or affirmation, and maintain a summary
record of the hearing. The Department
added this language because FFEL
Program garnishment hearings and
decisions, like those conducted by the
Department, may be subject to judicial
review. This judicial review is based on
a review of the administrative record.
The proposed regulatory language
ensures that the guaranty agency will
have a record appropriate for judicial
review that includes not only the
decision issued, but also a summary
record of the proceedings showing the
evidence considered and the procedure
followed by the guaranty agency.
The Department proposes to allow a
borrower to request a continuance of the
hearing if the borrower needs more time
to gather, prepare, and present
additional evidence. Proposed
paragraph (b)(9)(i)(F)(1)(ii) would allow
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a borrower to raise permissible
objections during the hearing even if
they were not raised in the borrower’s
written request for a hearing. Because a
borrower has a limited period of time to
request a hearing, and gathering
evidence in preparation for such a
hearing may identify an additional basis
for the borrower to object to the
garnishment, the Department agreed
with a negotiator’s proposal to allow the
borrower to raise these objections any
time prior to completion of the hearing
and to request a continuance if the
borrower requires more time to present
evidence. At the suggestion of another
non-Federal negotiator, proposed
paragraph (b)(9)(i)(J) would require the
hearing official to grant a guaranty
agency’s request for a continuance to
provide time for the agency to respond
to such an objection. We propose this
requirement to ensure that the agency
has sufficient time to respond to an
objection from the borrower, especially
because the borrower may raise the
objection without prior notice to the
guaranty agency.
Proposed paragraph (b)(9)(i)(O)
specifies the process by which a wage
withholding order may be terminated by
the guaranty agency and was drafted to
reflect similar rules under 34 CFR 34.26.
The proposed regulations would require
a withholding order to be effective until
the guaranty agency rescinds the order
or the amount owed has been fully
recovered. Under the proposed
regulations, if the borrower does not
have enough pay in a pay period to
permit withholding, the employer must
notify the guaranty agency and restart
garnishment when the borrower’s pay is
sufficient. We propose this language to
provide full information and clarity
with regard to the withholding process
for both the employer and the guaranty
agency.
Proposed paragraphs (b)(9)(i)(P)
through (b)(9)(i)(S) are similar to
paragraphs (b)(9)(i)(F) through (b)(9)(i)(I)
of the current regulations but would be
reordered by this proposed rule. These
provisions, and paragraph (b)(9)(i)
generally, were reordered to reflect the
chronological processes of garnishment
notification, hearing, and withholding
orders, and to provide a more logical
order to the proposed regulations.
The Department proposes to add new
paragraph (b)(9)(i)(Q) to clarify that a
borrower bears the burden of claiming
involuntary separation from
employment. The Department proposes
to place that burden on the borrower
because such information is more easily
accessible to and reportable by the
borrower rather than by the guaranty
agency.
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At the request of a non-Federal
negotiator, new paragraph (b)(9)(i)(S)
specifies the contents of the
withholding order, to ensure that the
order reflects the information necessary
for the employer to comply with the
withholding order.
The proposed regulations would
redesignate current paragraph
(b)(9)(i)(O) as new paragraph (b)(9)(i)(U).
This new paragraph would reflect the
statutory provision that allows a
borrower to seek judicial relief against
an employer for taking adverse
employment action against the borrower
because of the garnishment. As with
other provisions in paragraph (b)(9)(i),
this paragraph was reordered to reflect
the chronological processes of
garnishment notification, hearing, and
withholding orders, and to provide a
more logical order to the proposed
regulations.
Section 682.410(b)(9)(ii) of the
proposed regulations would add
definitions for certain terms used in
paragraph (b)(9)(i). The Department
incorporated these definitions from
existing FFEL Program regulations to
provide clarity and readily-available
definitions that affect the preceding
sections.
Modification of the FFEL Program
Regulations (34 CFR Part 682)
Background: As noted earlier, the
SAFRA Act ended the making of new
FFEL Program loans as of July 1, 2010.
The current FFEL Program regulations
in 34 CFR part 682 contain numerous
provisions that are no longer needed in
light of this change. The regulations that
are no longer needed include those
governing: The FFEL loan application
process and use of the master
promissory note; interest rates for loans
originated after July 1, 2010; lender loan
origination, refinancing, and
disbursement requirements; fees for
refinanced loans; lender disclosures for
newly originated loans; school loan
delivery and entrance counseling
requirements for first-time borrowers;
and school and school-affiliated
organization lender requirements. The
current regulations also contain other
provisions that are no longer needed,
including regulations that require a
guaranty agency to: provide lender-oflast-resort services to borrowers;
establish regulations for eligible schools
to participate in the guaranty agency’s
program; and guarantee loans up to
specified annual and aggregate limits.
Other regulations that are no longer
necessary include those that: Specify a
borrower’s responsibility in the loan
origination process; govern a guaranty
agency’s authority to limit and suspend
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school participation in its program;
govern a guaranty agency’s required area
of service in guaranteeing loans;
prohibit guaranty agencies from offering
inducements to prospective borrowers,
schools and school-affiliated
organizations, or to any individual or
entity to secure loan applications; bar
guaranty agencies from assessing
additional costs or denying benefits to
schools and lenders participating in the
agency’s program on the basis of that
entity’s failure to agree to participate or
to provide a specified volume of loans
for the agency’s guarantee; and prohibit
guaranty agencies from offering
incentive payments or other
inducements to a lender to secure
additional loan guarantees.
The current FFEL Program regulations
contain other provisions that the
Department believes are obsolete.
Subpart E of 34 CFR part 682 includes
regulations governing the Federal
Insured Student Loan (FISL) Program.
No new FISL Program loans have been
made since 1983. Accordingly, subpart
E and appendix C to subpart E, which
provides guidance for curing lender due
diligence violations on FISL Program
loans, are no longer needed. In addition,
the FFEL Program regulations include
some sections implementing certain
time-limited provisions of the HEA,
such as the regulations governing the
creation of the guaranty agencies’
Operating Funds and Federal Funds and
the regulations governing Federal
nonliquid assets held by a guaranty
agency. These regulations are no longer
applicable and can be eliminated from
the Code of Federal Regulations. To
address these issues, the Department
proposes the following technical
changes to the FFEL Program
regulations:
• Eliminating provisions governing
loan origination and disbursement and
related requirements and activities
except for certain school-based
requirements and related activities.
• Eliminating obsolete provisions that
do not reflect the current procedures in
the FFEL Program.
• Making necessary conforming
changes in various provisions to clarify
the regulations.
The Department is retaining all of the
FFEL Program definitions, the
provisions and sections of the
regulations that govern the servicing
and collection of FFEL loans, the
guaranty agency program requirements
that are still applicable, and the lender
participation requirements.
During the negotiated rulemaking
sessions, the Department provided the
non-Federal negotiators with a detailed
overview of the planned technical
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changes to the FFEL Program
regulations that identified all the
regulatory provisions and sections
recommended for elimination,
identified other provisions that required
conforming and other clarifying
technical changes or corrections, and
provided the rationale for each
proposed technical change.
During the negotiations, many nonFederal negotiators representing
lenders, guaranty agencies, and loan
servicers raised questions about the
Department’s plan to eliminate the
regulations dealing with loan
origination and disbursement, the FISL
Program, and a guaranty agency’s
maintenance of its Federal Fund and
Operating Fund in the first few years
after those funds were established.
These negotiators argued that the FISL
provisions should be retained because
there are still some outstanding FISL
loans to which some of the regulations
may apply and that provisions
governing loan origination and
disbursement are needed because they
are relevant to guaranty agency
oversight of lenders and the review of
lender claims, and were often helpful in
resolving borrower disputes. These
same negotiators stated that the
regulations governing a guaranty
agency’s maintenance of the Federal
Fund and Operating Fund should be
retained because there were crossreferences to these sections elsewhere in
the regulations. The Department
indicated that it sees no basis for
retaining regulatory provisions that are
no longer supported in the HEA or that
are obsolete. The Department pointed
out that there were fewer than 500 FISL
loans in repayment, many of them
defaulted loans held by the Department,
and also noted that lender requirements
and activities that were subject to
guaranty agency oversight remained
enforceable even if the regulatory
provisions governing them are not
included in future copies of the Code of
Federal Regulations. The Department
agreed to eliminate and make other
necessary changes to address crossreferences that would be rendered
obsolete by the planned technical
changes.
One non-Federal negotiator
representing legal assistance
organizations asked the Department to
retain § 682.103, which identifies the
applicability of the various subparts in
the regulations because the negotiator
felt it was a useful index to the
regulatory subparts. The same negotiator
also requested that § 682.209(k), which
acknowledges that a lender may be
subject to any claims and defenses a
borrower could assert against a school
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with respect to a loan under certain
circumstances, be retained to facilitate
borrowers raising such defenses against
repayment. The negotiating committee
agreed to retain these two provisions.
A non-Federal negotiator representing
the guaranty agencies asked that the
Department remove provisions in
current § 682.401(e) identifying
guaranty agency payments and activities
that do not represent prohibited
incentives to secure new loan
guarantees. The negotiator stated that
removing provisions identifying
prohibited payments and activities
while retaining the related permissible
activities and payments would result in
misleading regulations and was
unnecessary. The negotiating committee
agreed to remove these provisions. The
non-Federal negotiators representing
lenders, guaranty agencies, and loan
servicers also identified additional
technical corrections and minor
clarifying technical edits that the
negotiating committee agreed to make.
Following the Department’s review
and discussion with the non-Federal
negotiators of the technical changes and
corrections the Department proposed to
make in the FFEL Program regulations
and the rationale for those changes, the
negotiating committee agreed the
changes should be made to update and
streamline the regulations.
The more substantive technical
changes to the FFEL Program
regulations are discussed below. A
complete summary of the proposed
technical changes to 34 CFR part 682 is
found in Appendix A at the end of this
NPRM.
Subpart A—Purpose and Scope
§ 682.102
Loan
Obtaining and Repaying a
Statute: Sections 428(a)(2)–(6), 428B
(a) and (b), and 428C(b) of the HEA
authorize the application process for
FFEL Stafford, PLUS, and Consolidation
loans.
Current Regulations: Section
682.102(a)–(d) of the current regulations
provide a general description of the
process by which an individual requests
a Stafford, PLUS, or Consolidation loan.
Current § 682.102(e) of the regulations
provides a general summary of FFEL
Program loan repayment.
Proposed Regulations: The proposed
regulations would amend the heading of
§ 682.102 to read ‘‘Repaying a loan,’’
remove § 682.102(a)–(d), which detail
the application process for Stafford,
PLUS, and Consolidation loans, and
redesignate the paragraphs in current
§ 682.102(e), which describes the loan
repayment process, as § 682.102(a)–(g).
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Reasons: Under the SAFRA Act, no
new FFEL Program loans may be made
after June 30, 2010. Accordingly, the
provisions that relate to the making of
new FFEL Program loans are no longer
needed.
Subpart B—General Provisions
§ 682.200
Definitions
Lender
Statute: Section 435(d)(7) of the HEA
specifies the requirements for an eligible
lender that makes or holds FFEL loans
as a trustee for an institution of higher
education or a school-affiliated
organization. Under the HEA, the
trustee lender: May not make loans to
undergraduate students at the school;
may only make Federal Stafford Loans
to graduate and professional students at
that school; and may only offer loans
with an origination fee or an interest
rate, or both, that are less than the fee
or rate otherwise authorized for such
loans in the HEA. In addition, the loans
must be included in an annual
compliance audit that meets the
requirements in section 435(d)(8) of the
HEA.
Current Regulations: Sections
682.601(a)(3), (a)(5), and (a)(7) of the
current regulations and paragraphs (7)
and (8) of the definition of ‘‘Lender’’ in
§ 682.200(b) reflect the requirements of
section 435(d)(7) and (8) of the HEA.
Proposed Regulations: The proposed
regulations would move the provisions
of current § 682.601(a)(3), (a)(5), and
(a)(7) to paragraph (8) of the definition
of ‘‘Lender’’ in § 682.200(b), and remove
from the regulations the remainder of
§ 682.601.
Reasons: We are proposing to remove
§ 682.601 from the regulations because
(as a result of the SAFRA Act) no new
loans are being made under the FFEL
Program and therefore most of the
provisions in that section are no longer
relevant. However, the requirements
governing lenders operating as trustees
on behalf of a school or a schoolaffiliated organization that serves as a
FFEL lender were retained and
relocated to the definition of ‘‘Lender’’
consistent with section 435(d)(7) of the
HEA.
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Nationwide Consumer Reporting
Agency
Statute: A ‘‘nationwide consumer
reporting agency’’ is defined in 15
U.S.C. 1681a(p).
Current Regulations: The current
regulations at § 682.200(b) define
‘‘nationwide consumer reporting
agency’’ through a cross-reference to 15
U.S.C. 1681(a).
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Proposed Regulations: The proposed
regulations would amend the definition
of ‘‘nationwide consumer reporting
agency’’ to include a more specific
statutory citation for the definition of
‘‘nationwide consumer reporting
agency’’ at 15 U.S.C. 1681a(p), and to
specify that a ‘‘nationwide consumer
reporting agency’’ is one that compiles
and maintains public record and credit
account information on consumers on a
nationwide basis.
Reasons: The changes would correct
the statutory citation for the definition
and reflect the terminology used in that
statute.
Satisfactory Repayment Arrangements
Statute: Section 428F(b) of the HEA
provides that a borrower with a
defaulted loan may renew eligibility for
title IV student financial assistance after
making six consecutive monthly
payments on the defaulted loan. The
required monthly payment amount
cannot be more than is reasonable and
affordable based on the borrower’s total
financial circumstances. A borrower is
limited to one opportunity to regain
eligibility for title IV student financial
assistance under this provision.
Current Regulations: The definition of
‘‘satisfactory repayment arrangement’’
in current § 682.200(b) reflects the
statutory requirements and specifies
that the required six consecutive
monthly payments must be on-time,
voluntary, full monthly payments. For
this purpose, ‘‘voluntary payments’’ are
those made directly by the borrower and
do not include payments obtained by
income tax offset, garnishment, or
income or asset execution. The
regulations state that ‘‘on-time’’ means a
payment received by the Secretary or a
guaranty agency or its agent within 15
days of the scheduled due date. For
purposes of consolidating a defaulted
loan in the FFEL Program, ‘‘satisfactory
repayment arrangements’’ means the
making of three consecutive, on-time
voluntary full monthly payments on a
defaulted loan.
Proposed Regulations: The proposed
regulations would replace the current
cross-reference to § 682.401(b)(4) in
paragraph (1) of the definition of
‘‘satisfactory repayment arrangement’’
with language explaining that the
definition applies to a borrower who is
trying to regain eligibility under the title
IV student financial assistance
programs. The proposed regulations
would also remove current paragraph
(2) of the definition, which relates to
FFEL Program loan consolidation, and
renumber current paragraph (3) as
paragraph (2).
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Reasons: The change to paragraph (1)
of the definition is intended to clarify
that a borrower making satisfactory
repayment arrangements on a defaulted
loan regains eligibility for all title IV
assistance programs, not just eligibility
for additional title IV loans. Paragraph
(2) of the definition is no longer needed
because no new FFEL Consolidation
loans are being made.
§ 682.204 Maximum Loan Amounts
Statute: Sections 428(b)(1)(A) and (B)
and 428H(d) of the HEA specify the
annual and aggregate loan limits that
apply to Subsidized and Unsubsidized
Stafford loans for undergraduate and
graduate and professional students in
the FFEL and Direct Loan programs.
Current Regulations: Section 682.204
of the current FFEL Program regulations
reflects the annual and aggregate loan
limits specified in the HEA. The loan
limits are the combined limits for
borrowing under the FFEL Stafford Loan
(Subsidized and Unsubsidized) and
Direct Subsidized and Unsubsidized
Loan programs. The current regulations
also include the Stafford Loan annual
and aggregate loan limits for loans first
disbursed prior to July 1, 2008 and, in
§ 682.204(f), the annual loan limits for
loans made under the Supplemental
Loans for Students (SLS) program.
Proposed Regulations: The proposed
regulations would remove references
throughout current § 682.204 to the
annual and aggregate Stafford Loan
limits that existed prior to July 1, 2008
and would also remove § 682.204(f),
which includes the SLS annual loan
limits. The remaining paragraphs in the
section would be redesignated as
paragraphs (f)–(l). All references in
§ 682.204 to the Federal Direct Stafford/
Ford Loan Program would be replaced
by references to the Direct Subsidized or
Direct Unsubsidized Loan Program, as
applicable. Section 682.204(a)(1)(iii),
(c)(1)(iii) (current (c)(1)(ii)(C), and
(d)(1)(iii)) would be amended to correct
the numerator of the second fraction
used to calculate the prorated annual
loan limit when a student is enrolled in
a program of study that is less than a
full academic year in length.
Specifically, the numerator would be
revised to show the number of weeks
that the student is enrolled in the
program rather than the number of
weeks in the program.
Reasons: The proposed regulations
would retain only the loan limits that
were in effect as of July 30, 2010, the
last date that new loans were made
under the FFEL Program. The pre-July 1,
2008, annual and aggregate loan limits
that had ceased to be effective two years
before the last new FFEL Program loans
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were made would be removed from the
regulations. Similarly, the SLS annual
loan limits would be removed because
the authority to make loans under that
program ended effective July 1, 1994.
For consistency with proposed
changes in the Direct Loan Program
regulations, references to ‘‘Federal
Direct Stafford/Ford Loans’’ and
‘‘Federal Direct Unsubsidized Stafford/
Ford Loans’’ would be changed to
‘‘Direct Subsidized Loans’’ and ‘‘Direct
Unsubsidized Loans,’’ respectively.
The changes in § 682.204(a)(1)(iii),
(c)(1)(iii) (current (c)(1)(ii)(C)), and
(d)(1)(iii)) are necessary to make the
numerator of the second fraction
consistent with the numerator of the
first fraction that appears in each of
these paragraphs. In the first fraction,
the numerator refers to the number of
semester, trimester, quarter, or clock
hours that the student is enrolled in the
program.
§ 682.205 Disclosure Requirements for
Lenders
Statute: Section 433(a) of the HEA
requires each FFEL lender to provide a
disclosure to a borrower prior to or at
the time a FFEL PLUS loan, Stafford
loan, or Unsubsidized Stafford loan is
disbursed. The disclosure must include:
(1) A statement prominently and
clearly displayed and in bold print that
the borrower is receiving a loan that
must be repaid;
(2) The name of the eligible lender,
and the address to which
communications and payments should
be sent;
(3) The principal amount of the loan;
(4) The interest rate on the loan;
(5) Any charges or fees that may be
assessed on the loan;
(6) The borrower’s option to pay
accruing interest on an unsubsidized
loan while the borrower is a student at
an institution of higher education and
the timing and frequency of
capitalization if interest is not paid;
(7) For loans made to a parent
borrower on behalf of a student under
section 428B, information about
deferring payment on the loan;
(8) The yearly and cumulative
maximum amounts that may be
borrowed;
(9) A cumulative balance statement of
all loans owed by the borrower to the
lender, including the loan being
disbursed, and an estimate of the
projected monthly payment, given such
cumulative balance;
(10) Information on repayment of the
loan; and
(11) The definition of default and the
consequences to the borrower of
defaulting on the loan.
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Section 433(c) of the HEA also
requires the lender to provide a separate
disclosure to a borrower each time a
new loan is approved which
summarizes, in simple and
understandable terms, the rights and
responsibilities of the borrower with
respect to the loan. Section
428C(b)(1)(F) of the HEA requires that
when a lender provides a borrower with
an application for a consolidation loan,
the lender must provide the borrower
with information on whether
consolidation would result in the loss of
any loan benefits for the borrower. The
lender providing the consolidation loan
application must also inform the
borrower that loan benefits may vary
among lenders, tell the borrower that
simply applying for a consolidation loan
does not obligate the borrower to take
out the loan, provide information on
available repayment plans, and explain
the consequences to the borrower of
defaulting on a consolidation loan.
Current Regulations: Section
682.205(a) of the current regulations
reflects the requirements of section
433(a) of the HEA. This regulatory
section details the initial disclosure a
FFEL lender must provide to a borrower
prior to or at the time of the first
disbursement of a PLUS, Stafford, or
Unsubsidized Stafford loan. Consistent
with section 433(c) of the HEA,
§ 682.205(b) and (g) of the regulations
require a separate notice of borrower
rights and responsibilities and a plain
language disclosure each time a new
PLUS, Stafford, or Unsubsidized
Stafford loan is approved for a borrower.
Section 682.205(i) requires that at the
time a lender provides a Consolidation
loan application to a borrower, the
lender must disclose the information
specified in section 428C(b)(1)(F) of the
HEA.
Proposed Regulations: The proposed
regulations would remove § 682.205(a),
(b), (g), and (i) from the FFEL Program
regulations and renumber the remaining
provisions.
Reasons: The SAFRA Act ended the
authority to make new FFEL Program
loans, including new FFEL
Consolidation loans. As a result, the
lender disclosure requirements for new
loans are no longer needed and thus
should be removed from the regulations.
§ 682.206 Due Diligence in Making a
Loan
Statute: Title IV, part B of the HEA
includes the terms and conditions of
FFEL Program loans and the
requirements for lenders making FFEL
Program loans.
Current Regulations: Consistent with
title IV, part B of the HEA, § 682.206 of
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the current regulations requires a FFEL
lender to exercise due diligence in
making a loan. Loan making duties
include determining the borrower’s loan
amount, approving the loan, explaining
to the borrower his or her rights and
responsibilities, and confirming that
each loan is supported by an executed
enforceable promissory note or master
promissory note. The regulations also
require a FFEL lender, prior to making
a Consolidation loan, to collect from the
holder of each loan being repaid
through the Consolidation loan a
certification that the loan is a legal,
valid, and binding obligation of the
borrower, that the loan was made and
serviced in compliance with applicable
law and regulations, and that, where
applicable, the loan’s guarantee remains
in full force and effect. Before making a
Consolidation loan, a lender must also
notify the applicant of the option to
cancel the Consolidation loan before it
is made and provide the deadline for the
applicant to exercise this option.
Proposed Regulations: The proposed
regulations would remove § 682.206
from the FFEL Program regulations.
Reasons: The SAFRA Act eliminated
the authority to make new FFEL
Program loans, including new FFEL
Consolidation loans. As a result, the
requirements governing the making of
new FFEL Program loans are no longer
needed and thus should be eliminated
from the regulations.
§ 682.207 Due Diligence in Disbursing
a Loan
Statute: Sections 428(b)(1)(N),
428B(c), and 428G of the HEA detail the
disbursement requirements for FFEL
Stafford and PLUS loans. Section 428G
of the HEA requires that loan proceeds
be disbursed in two or more
installments over the course of the loan
period, based on a disbursement
schedule provided to the lender by the
school, unless: (1) The loan period is
not more than one semester, one
trimester, one quarter, or four months in
duration; and (2) the school has a cohort
default rate below a certain specified
level. Section 428G(e) of the HEA allows
the proceeds of a loan to be disbursed
in a single installment if the loan is
made to a student to cover the cost of
attendance in a study abroad program
offered by a school with a cohort default
rate below a certain specified level.
Section 428G(a) specifies that no
installment may exceed more than onehalf of the loan. Under section 428G(b),
loans may not be disbursed earlier than
30 days prior to the first day of the loan
period and first time borrowers in
undergraduate courses of study may not
receive the first installment until 30
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days after beginning their course of
study. Under section 428G(d), second or
subsequent installments of a loan
cannot be disbursed if the lender is
informed that the student has
withdrawn from the school and a
disbursement that is withheld for this
reason is treated as a prepayment on the
borrower’s loan. Section 428(b)(1)(N)
requires that funds borrowed by a
student be disbursed to the school by
check or other means that is payable to,
and requires the endorsement of or
other certification by, the student. This
provision also authorizes, in certain
circumstances, the direct disbursement
of loan proceeds to the student if the
student is enrolled in a study abroad
program or is enrolled at an eligible
foreign school. Section 428B(c) of the
HEA requires PLUS loans to be
disbursed in accordance with the
requirements of section 428G of the
HEA, and to be disbursed by electronic
funds transfer to the school or in the
form of a check co-payable to the school
and the PLUS borrower.
Current Regulations: Section 682.207
of the regulations reflects the
requirements in the HEA for
disbursement of Stafford and PLUS
loans.
Proposed Regulations: The proposed
regulations would remove § 682.207
from the FFEL Program regulations.
Reasons: The SAFRA Act ended the
authority to make new FFEL Program
loans. As a result, the requirements
governing loan disbursement are no
longer needed and thus should be
removed from the regulations.
§ 682.209 Repayment of a Loan
Statute: Section 428(b)(7) of the HEA
provides that the repayment period on
a Federal Stafford loan begins the day
after six months after the date the
student ceases to carry at least one-half
the normal full-time academic workload
as determined by the institution.
Section 428B(e) of the HEA authorizes
the refinancing of FFEL PLUS loans to
secure a combined repayment plan or to
secure a variable interest rate. Section
493C of the HEA, governing the IBR
plan, provides for a borrower’s loan
payment to be less than the accruing
interest on the loan.
Current Regulations: Section
682.209(a)(3) specifies when repayment
on a Federal Stafford Loan begins.
Section 682.209(e) and (f) govern the
refinancing of PLUS and SLS loans,
respectively, and paragraph (g) specifies
the conditions under which these loans
may be refinanced. Section 682.209(j)
requires a lender, within 10 business
days after receiving a written request for
a certification of payoff information on
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loans it holds in connection with a
borrower’s Consolidation loan
application, to provide the requesting
consolidation lender with either the
completed certification or an
explanation of the reasons it is unable
to do so.
Proposed Regulations: The proposed
regulations would amend
§ 682.209(a)(3)(i) by adding new
paragraph § 682.209(a)(3)(i)(D), which
specifies that borrowers with Stafford
loans that have fixed interest rates of 6
percent, 5.6 percent, or 6.8 percent enter
repayment on those loans the day after
six months following the date the
borrower was no longer enrolled on at
least a half-time basis. The proposed
regulations would remove current
§ 682.209(e) through (g) and (j) from the
regulations and redesignate the
remaining paragraphs as paragraphs (e)
through (g). Redesignated § 682.209(e)
(current paragraph (h)) would be
amended to specify that a FFEL
Consolidation loan borrower repaying
under the IBR plan may make a
scheduled monthly payment of less than
the interest that accrues on the loan.
Reasons: For consistency with the
HEA, proposed new paragraph
§ 682.209(a)(3)(i)(D) would clarify when
borrowers with certain fixed interest
rate Stafford loans enter repayment on
those loans. The proposed change to
newly redesignated § 682.209(e) would
clarify that the scheduled monthly
payment amount for a Consolidation
Loan borrower repaying under the
income-based repayment plan may be
less than the amount of accruing interest
on the loan, which would otherwise be
required under all other FFEL
repayment plans. Current § 682.209(e),
(f), (g), and (j) of the regulations are
removed because no new FFEL loans are
being made.
§ 682.210 Deferment
Statute: Section 428(b)(1)(M) of the
HEA authorizes deferments to FFEL
Program borrowers when they are: (1)
Pursuing at least a half-time course of
study at an eligible institution; (2)
pursuing a course of study pursuant to
a graduate fellowship program approved
by the Secretary or rehabilitation
training program for disabled
individuals approved by the Secretary;
(3) seeking but unable to find full-time
employment; (4) serving on active duty
or performing qualifying National Guard
duty during a war or other military
operation or national emergency; or (5)
experiencing an economic hardship as
defined in section 435(o) of the HEA.
Current Regulations: Section
682.210(a) of the FFEL Program
regulations contains a number of
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provisions that describe the terms of
and the rules for granting deferments on
FFEL Program loans. Section
682.210(a)(1) of the regulations reflect
the prior statutory provision that
provided for a six-month post-deferment
grace period for borrowers with loans
made before October 1, 1981. Paragraph
(b) of this section lists the authorized
deferments available to borrowers who
received FFEL Program loans as new
borrowers prior to July 1, 1993.
Paragraphs (c) through (e) and (h) of
§ 682.210 contain the eligibility criteria
that all FFEL borrowers must meet to
qualify for an in-school, graduate
fellowship, rehabilitation training
program, or unemployment deferment.
Paragraphs (f) through (g) and (i)
through (r) of § 682.210 contain the
eligibility criteria for deferments that are
available to individuals who borrowed
as new borrowers before July 1, 1993.
Paragraphs (s) through (v) contain the
eligibility criteria for deferments
available to new borrowers on or after
July 1, 1993, military service
deferments, and deferments available to
PLUS loan borrowers on loans first
disbursed on or after July 1, 2008.
Section 682.210(t)(7) of the regulations
permits the representative of a borrower
who is serving in the military to request
a military service deferment on the
borrower’s behalf.
Proposed Regulations: The proposed
regulations would amend
§ 682.210(a)(4) of the regulations to
provide, consistent with § 682.210(t)(7),
that a borrower’s representative may
request a military service deferment on
behalf of the borrower. In § 682.210(b),
the introductory language in paragraphs
(b)(1) through (6) of § 682.210 would be
revised to clearly identify the cohort of
borrowers to which each paragraph
applies. Throughout § 682.210(b) crossreferences would be added to the
eligibility criteria described in
paragraphs (c) through (r) of § 682.210
that are applicable to deferments
available to these borrowers. The
proposed regulations would also amend
§ 682.210(s)(2) by removing the
exception clause at the end of the
provision, and would amend
§ 682.210(u)(5) by replacing the words
‘‘military active’’ with ‘‘post-active.’’
Reasons: The proposed regulations
would amend § 682.210(a)(4) to
facilitate deferment requests by
borrowers serving in the military by
further clarifying that a representative of
the borrower may apply for the
deferment on the borrower’s behalf.
The proposed changes in § 682.210(b)
would clearly identify the pre-July 1,
1993, cohorts of new borrowers to
which the paragraph applies and would
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distinguish the deferments available to
these borrowers from those available to
new borrowers on or after July 1, 1993.
Technical changes would be made in
§ 682.210(b)(i) to correct a crossreference, clarify that the deferment
granted to borrowers in the specified
cohort are subject to the procedural
requirements described in § 682.210(c),
and remove obsolete language related to
borrowers attending schools operated by
the Federal government and to
borrowers who are not U.S. nationals
attending schools that are not located in
a State.
The clause at the end of
§ 682.210(s)(2) should be removed
because no FFEL borrowers are required
to take out a new Stafford or SLS loan
to qualify for an in-school deferment. A
technical change would be made in
§ 682.210(u)(5) to clarify that the
provision applies to borrowers seeking a
post-active duty student deferment
rather than a military service deferment.
§ 682.214 Compliance With Equal
Credit Opportunity Requirements
Statute: The Equal Credit Opportunity
Act, 15 U.S.C. 1601 et seq., is intended
to protect applicants for consumer
credit, including student loans, against
discrimination.
Current Regulations: Current
§ 682.214 provides that a lender making
subsidized Federal Stafford Loans must
comply with the requirements of the
Equal Credit Opportunity Act
regulations issued by the Board of
Governors of the Federal Reserve
System in Regulation B (12 CFR part
202).
Proposed Regulations: The proposed
regulations would remove § 682.214
from the FFEL Program regulations.
Reasons: The SAFRA Act ended the
making of new FFEL loans and therefore
these requirements should be
eliminated from the FFEL regulations.
Subpart C—Federal Payments of
Interest and Special Allowance
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§ 682.300 Payment of Interest Benefits
on Stafford and Consolidation Loans
Statute: Section 428(a)(3) of the HEA
provides that the Secretary will pay the
interest on Stafford Loans on behalf of
eligible borrowers during certain
periods. Section 428(a)(3)(A)(v) of the
HEA specifies that a lender may not
receive interest payments on a loan for
a period any earlier than 10 days before
the first disbursement of a loan if the
loan is disbursed by check, three days
before the first disbursement of the loan
if the loan is disbursed by electronic
funds transfer, or three days before the
disbursement of the loan if the loan is
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disbursed through an escrow agent on
behalf of the lender. Section 428(a)(7) of
the HEA specifies that a lender may not
charge interest or receive interest
subsidies or special allowance payments
on loans for which the disbursement
checks have not been cashed or for
which the electronic funds transfers
have not been completed.
Current Regulations: Section
682.300(c) details the circumstances
under which the Secretary will not
make interest payments to a loan holder.
Section 682.300(c)(3) and (4) of the
regulations reflect the statutory
limitations on interest billing on the
first disbursement of a subsidized
Stafford loan and on loans for which the
check has not been cashed or the
electronic funds transfer has not been
completed.
Proposed Regulations: The proposed
regulations would remove
§ 682.300(c)(3) and (4) from the FFEL
Program regulations.
Reasons: As a result of the SAFRA
Act, no new FFEL Program loans will be
made, and thus these provisions should
be eliminated from the regulations.
§ 682.301 Eligibility of Borrowers for
Interest Benefits on Stafford and
Consolidation Loans
Statute: Section 428(a)(2)(E) of the
HEA specifies that in determining
whether a student has the financial need
to qualify for the interest subsidy on a
FFEL Stafford loan, the expected family
contribution of the student for the
academic year for which financial need
is being determined may be offset by
Unsubsidized Stafford loans, parent
PLUS loans, and loans under any Statesponsored or private loan program that
are made for that same academic year.
Current Regulations: Section
682.301(c) of the regulations reflects
§ 428(a)(2)(E) of the HEA.
Proposed Regulations: The proposed
regulations would remove § 682.301(c)
from the regulations.
Reasons: As a result of the SAFRA
Act, no new FFEL Program loans will be
made and, thus, this provision related to
determining borrower eligibility for the
interest subsidy on new loans should be
eliminated from the FFEL regulations.
§ 682.305 Procedures for Payment of
Interest Benefits and Special Allowance
and Collection of Origination and Loan
Fees
Statute: Section 428(b)(1)(U)(iii)(I) of
the HEA requires a lender that holds or
originates more than $5,000,000 in FFEL
loans during the lender’s fiscal year to
submit to the Department an annual
compliance audit conducted by a
qualified, independent organization or
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individual. Section 435(d)(2)(A)(vii) of
the HEA specifies that an institution of
higher education engaging in activities
as an eligible lender must submit to the
Secretary an annual compliance audit
conducted in accordance with the
requirements of section
428(b)(1)(U)(iii)(I) of the HEA.
Current Regulations: Section
682.305(c) of the regulations reflects the
statutory requirement that a FFEL
lender originating or holding more than
$5 million in FFEL Program loans
during its fiscal year must submit an
annual independent lender compliance
audit. Section 682.305(c)(1)(ii) specifies
that, regardless of the dollar volume of
loans originated or held, a school lender
or an eligible lender serving as trustee
for a school or school-affiliated
organization for the purpose of
originating FFEL loans must submit an
independent compliance audit to the
Department each year. Section
682.305(c)(2)(vi) and (c)(2)(vii) details
the compliance review requirements for
such a school or trustee lender audit.
Proposed Regulations: The proposed
regulations would remove the reference
in § 682.305(c)(1)(i) to FFEL lenders
originating loans.
Reasons: As a result of the SAFRA
Act, no new loans are being made in the
FFEL Program. Therefore, we are
eliminating references to the origination
of loans from this regulation.
Subpart D—Administration of the
Federal Family Education Loan
Programs by a Guaranty Agency
§ 682.401
Basic Program Agreement
Statute: Sections 428(b) through (o) of
the HEA contain the requirements that
apply to a guaranty agency
administering the FFEL Program under
agreements with the Department.
Current Regulations: Section 682.401
of the regulations reflects the statutory
requirements that apply to a guaranty
agency in the FFEL Program, including
the following provisions:
• Paragraphs (b)(1) and (b)(2) of the
regulations require a guaranty agency to
make loans available to borrowers up to
the annual and aggregate loan limits
specified in the HEA;
• Paragraph (b)(3) specifies the
duration of the borrower’s eligibility;
• Paragraph (b)(5) describes the
borrower’s responsibilities in the loan
origination process;
• Paragraph (b)(6) details the
eligibility requirements for a school to
participate in a guaranty agency’s
program;
• Paragraphs (b)(8) and (b)(9) outline
when a guaranty agency must guarantee
loans for students attending out-of-state
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schools and for out-of-state residents;
and
• Paragraphs (b)(12) and (b)(13)
authorize a guaranty agency to charge
lenders an administrative fee for
Consolidation loans and refinanced
loans.
Section 682.401(c) of the regulations
requires a guaranty agency to ensure
that it, or an eligible lender described in
section 435(d)(1)(D) of the HEA, serves
as a lender-of-last-resort for students
who are otherwise unable to secure
Federal Stafford loans. Section
682.401(d)(4) authorizes the multi-year
use of the Master Promissory Note
(MPN). Section 682.401(e) specifies
certain prohibited and allowed activities
by guaranty agencies.
Proposed Regulations: The proposed
regulations would remove from
§ 682.401(b) paragraphs (1), (2), (3), (5),
(6), (8), (9), (12), and (13) and renumber
the remaining provisions. The proposed
regulations would also remove
§ 682.401(c), (d)(4), and (e) and
redesignate current paragraphs (d), (f),
and (g) as paragraphs (c), (d), and (e),
respectively. In newly redesignated
§ 682.401(c) (currently § 682.401(d)),
paragraphs § 682.401(c)(5) and (6)
would be redesignated as (c)(4) and (5),
respectively.
Reasons: The regulatory provisions
that we are proposing to remove from
§ 682.401 address new FFEL loan
originations, the process supporting
these originations, and a guaranty
agency’s efforts to secure new FFEL loan
volume. These provisions should be
eliminated from the regulations because
no new FFEL loans are being made. The
remaining provisions proposed for
elimination relate to school eligibility to
participate in a guaranty agency’s
program and the authority of an agency
to limit, suspend, or terminate a school
from its program. For purposes of new
loans, schools now participate only in
the Direct Loan Program. Any future
actions to limit, suspend, or terminate a
school’s participation in the student
loan programs will be undertaken by the
Department under 34 CFR part 668,
subpart G. Therefore, § 682.401(b)(6)
should also be eliminated from the
FFEL regulations.
§ 682.403 Federal Advances for Claim
Payments
Statute: Sections 422(a) through (c) of
the HEA authorize the Secretary to
provide Federal advances to guaranty
agencies for various purposes spelled
out in the HEA.
Current Regulations: Section 682.403
of the FFEL regulations reflects the
Department’s authority to provide
advances under certain circumstances to
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a State guaranty agency or to one or
more private, nonprofit guaranty
agencies in a State in certain
circumstances and specifies the
conditions under which the Department
will provide such advances.
Proposed Regulations: The proposed
regulations would remove § 682.403
from the FFEL Program regulations.
Reasons: Congress has not
appropriated funds for advances to
guaranty agencies for many years, and
such funding is unnecessary as a result
of the end of new loan originations in
the FFEL Program. The Department
notes that most of the advances made to
the guaranty agencies were returned to
the Secretary in accordance with
sections 422(d), (h), and (i) of the HEA.
§ 682.408 Loan Disbursement Through
an Escrow Agent
Statute: Section 428(i) of the HEA
authorizes a guaranty agency or a FFEL
lender to act as an escrow agent by
entering into an agreement with any
other eligible lender that is not an
eligible institution or an agency or
instrumentality of the State for the
purpose of disbursing FFEL Program
loans to students.
Current Regulations: Section 682.408
of the FFEL Program regulations
contains provisions governing the use of
an escrow agent to make Federal
Stafford and PLUS loan disbursements,
including the nature of the agreement
that must be established between the
lender and the escrow agent, the escrow
agent’s authority, and the requirements
for the transmittal and disbursement of
the loan funds.
Proposed Regulations: The proposed
regulations would remove § 682.408
from the FFEL regulations.
Reasons: As a result of the SAFRA
Act, no new loan disbursements are
being made in the FFEL Program.
Therefore, this section is no longer
needed and should be eliminated.
§ 682.418 Prohibited Uses of the Assets
of the Operating Fund During Periods in
Which the Operating Fund Contains
Transferred Funds Owed to the Federal
Fund
§ 682.420
Federal Nonliquid Assets
§ 682.421 Funds Transferred From the
Federal Fund to the Operating Fund by
a Guaranty Agency
§ 682.422 Guaranty Agency
Repayment of Funds Transferred From
the Federal Fund
Statute: We have grouped our
discussion of §§ 682.418, 682.420,
682.421, and 682.422 together. Sections
422A and 422B of the HEA direct a
guaranty agency to establish a Federal
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Student Loan Reserve Fund (referred to
as the Federal Fund) and an Operating
Fund to manage the funds it receives as
a guaranty agency.
Section 422A(e) of the HEA provides
that the Federal Fund and any
nonliquid assets (such as a building or
equipment) developed or purchased by
a guaranty agency in whole or in part
with Federal reserve funds are the
property of the United States. The
Federal interest in nonliquid assets is
prorated based on the percentage of the
asset developed or purchased with
Federal reserve funds. The Secretary is
authorized to restrict or regulate the use
of such assets to the extent necessary to
protect the Federal share of the asset.
Section 422A(f) of the HEA
authorized a guaranty agency to transfer
funds from its Federal Fund to establish
the agency’s Operating Fund for a
period not to exceed three years
following the establishment of the
Operating Fund. The law also allowed
a limited number of agencies, with the
approval of the Secretary, to transfer
interest earned on the Federal Fund to
their Operating Fund for a three-year
period. The HEA specifies that the
agencies had to repay the transferred
funds no later than five years from the
date the Operating Fund was
established, but also authorized the
Secretary to waive that requirement for
repayment of transferred amounts of
earned interest for up to five additional
years under certain circumstances.
Section 422B(e)(3) of the HEA
specifies that during any period in
which a guaranty agency owes
transferred funds back to the Federal
Fund, the guaranty agency is limited to
using the Operating Fund only for
expenses related to the FFEL Program.
Current Regulations: Section 682.418
of the FFEL regulations reflects the
statutory limits on a guaranty agency’s
use of the Operating Fund while it
contains funds transferred from the
agency’s Federal Fund. Section 682.420
reflects section 422A(e) of the HEA and
specifies the permitted uses of the
Federal portion of a nonliquid asset and
the treatment of any revenue derived
from the asset. Section 682.421 reflects
the statutory authority for transferring
funds and earned interest from a
guaranty agency’s Federal Fund to its
Operating Fund and the requirements
for requesting such a transfer. Section
682.422 reflects the timelines and
requirements in section 422A(f) of the
HEA for repayment of transferred funds
back to the agency’s Federal Fund.
Proposed Regulations: The proposed
regulations would remove §§ 682.418,
682.420, 682.421, and 682.422 from the
FFEL Program regulations.
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Reasons: The Higher Education
Amendments of 1998 required the
financial restructuring of the guaranty
agencies, including the requirement that
each guaranty agency establish a Federal
Fund and an Operating Fund. Under the
terms of that law, the period during
which an agency could transfer funds
from the Federal Fund to its Operating
Fund and the deadline for repayment of
transferred funds back to the Federal
Fund lapsed many years ago. Therefore,
the regulations governing this process in
§§ 682.418, 682.421, and 682.422 are
obsolete and should be eliminated from
the FFEL regulations. Similarly, the
Department and the guaranty agencies
have worked together to resolve each
instance of nonliquid assets that were
purchased or developed in whole or in
part with Federal Reserve Funds and
from which revenue could have
resulted. Those guaranty agencies have
reimbursed their Federal Funds for the
value of the Federal interest. As a result,
the requirements of § 682.420 are also
obsolete and should be eliminated.
Subpart E—Federal Guaranteed
Student Loan Programs
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§§ 682.500–515 and Appendix C to the
Regulations
Statute: Sections 423–425, 427, and
429–430 of the HEA authorize and
establish the FISL Program, a Federal
program of loan insurance for lenders
that do not have reasonable access to
State or private nonprofit guaranty
agency loan programs.
Current Regulations: Subpart E of 34
CFR part 682 contains the regulations
that govern the FISL Program. Appendix
C to part 682 includes certain required
procedures for FISL lenders for curing
due diligence and timely filing
violations.
Proposed Regulations: The proposed
regulations would remove all of the
regulations under subpart E (§§ 682.500
through 682.515) and reserve the
subpart. The proposed regulations
would also remove Appendix C to part
682 from the regulations.
Reasons: No new loans have been
made in the FISL Program since 1983.
There are fewer than 500 outstanding
FISL loans, and many of those loans are
in default and are held by the
Department. Under these conditions,
there is no need to retain the FISL
Program regulations.
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Subpart F—Requirements, Standards,
and Payments for Participating Schools
§ 682.601 Rules for a School That
Makes or Originates Loans
§ 682.602 Rules for a School or SchoolAffiliated Organization That Makes or
Originates Loans Through an Eligible
Lender Trustee
§ 682.608 Termination of a School’s
Lending Eligibility
Statute: We have grouped our
discussion of §§ 682.601, 682.602, and
682.608 together. Section 435(d)(1)(E) of
the HEA authorizes an institution of
higher education to participate as an
eligible lender in the FFEL Program if it
meets the requirements in section
435(d)(2) through (d)(5) of the HEA.
Section 435(d)(2)(A)(ix) of the HEA
limits this eligibility to those schools
that met the requirements on February
7, 2006, and that made loans on or
before April 1, 2006. Section 435(d)(7)
of the HEA limits the ability of an
eligible lender to make or hold loans as
a trustee for a school or a schoolaffiliated organization to eligible lenders
serving in that capacity on September
29, 2006, based on a contract that was
in effect before that date. Section
435(d)(7) also applies most of the
requirements of section 435(d)(2) of the
HEA (which apply to school lenders) to
trustee arrangements between an
eligible lender and a school or a schoolaffiliated organization for the purpose of
originating loans. Section 435(d)(3) of
the HEA provides that a school will be
disqualified as an eligible lender if the
default rate on the loans made by the
school for each of two consecutive years
is 15 percent or more of the total
amount of the loans made by the school
lender. Section 435(d)(4) of the HEA
authorizes the Department to waive a
determination that a school is
disqualified as an eligible lender if the
school can reasonably be expected to
improve loan collections within one
year after the determination is made or
the termination would represent a
hardship to the school’s present or
prospective students.
Current Regulations: Section 682.601
includes rules for schools that make or
originate loans and reflects the
requirements of section 435(d)(2)
through (5) of the HEA. Section 682.602
reflects section 435(d)(7) of the HEA and
provides the regulations for schools or
school-affiliated organizations that make
or originate loans through an eligible
lender trustee. Section 682.608 details
the procedures for terminating a school
lender from the program.
Proposed Regulations: The proposed
regulations would remove §§ 682.601,
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682.602, and 682.608 from the FFEL
Program regulations.
Reasons: The proposed regulations
would remove §§ 682.601, 682.602, and
682.608 from the FFEL regulations
because they are no longer needed.
There are 12 school lenders that hold
FFEL Program loans previously made to
their students, and this number cannot
increase. Under § 435(d)(2)(A)(ix) of the
HEA no new school lenders could begin
to participate after February 8, 2006.
Additionally, no new loans are
authorized to be made under the FFEL
program by any lender after June 30,
2010.
§ 682.604 Processing the Borrower’s
Loan Proceeds and Counseling
Borrowers
Statute: Sections 428(b)(1)(N),
428B(c), and 428G of the HEA detail the
disbursement and school delivery
requirements for FFEL Stafford and
PLUS loan funds. Section 428G(a) of the
HEA requires that loan proceeds be
delivered to students in two or more
installments over the course of the loan
period unless: (1) The loan period is not
more than one semester, one trimester,
one quarter, or four months in duration,
and (2) the school has a cohort default
rate of less than 10 percent for each of
the three most recent fiscal years for
which data is available. Section 428G(e)
provides that loan proceeds may be
delivered in a single installment if the
loan is made to a student to cover the
cost of attendance in a study abroad
program offered by an eligible home
institution that has a cohort default rate
of less than five percent, as calculated
under section 435(m) of the HEA. Under
section 428G(a)(1), no installment may
exceed more than one-half of the loan.
Section 428G(b) of the HEA provides
that the first installment of a loan made
to a new borrower who is entering the
first year of a program of undergraduate
study cannot be presented to the student
for endorsement until 30 days after the
borrower begins a course of study unless
the school’s cohort default rate is less
than 10 percent for each of the three
most recent fiscal years for which data
is available. Section 428G(d)(2) of the
HEA provides that the school must
return a portion or all of an installment
to the lender if the sum of a
disbursement and the student’s other
financial aid exceeds the amount for
which the student is eligible. Section
428(b)(1)(N) of the HEA requires that
funds borrowed by the student must be
disbursed by check or other means that
is payable to the student and requires
the endorsement or other certification
by the student. Section 428B(c) of the
HEA requires that PLUS loan proceeds
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be disbursed in accordance with the
requirements of section 428G of the
HEA and be transmitted to the school
through an electronic transfer of funds
or in the form of a co-payable check to
the school and the PLUS borrower.
Section 485(b) of the HEA requires a
school to conduct exit counseling with
its FFEL Stafford and student PLUS
borrowers, prior to the borrower’s
completion of his or her course of study
or at the time the borrower leaves the
school, and details the information that
must be included in the exit counseling.
Section 485(l) of the HEA requires the
school to conduct entrance counseling
with its first-time Stafford and student
PLUS borrowers, at or prior to the
school’s delivery of the first
disbursement of a loan. Section 485(l)(2)
of the HEA details the information that
must be included in the entrance
counseling.
Current Regulations: Consistent with
sections 428(b)(1)(N), 428B(c), 428G,
and 485(l)(2), the current FFEL Program
regulations in § 682.604 govern delivery
of Stafford or PLUS loan proceeds to
borrowers and counseling for borrowers.
The school must confirm the student’s
enrollment, secure the student’s
endorsement or confirm the borrower’s
authorization for funds to be delivered
and credited electronically. The current
regulations also require the school to
comply with the notification
requirements of 34 CFR 668.165 prior to
delivering loan proceeds to a borrower
and authorize the school to deliver a
late disbursement to a borrower under
the conditions and using the procedures
specified in 34 CFR 668.164(g).
Current § 682.604(f) requires a school
to provide entrance counseling to its
student borrowers during an in-person
session, on a separate written form
provided to the borrower that the
borrower signs and returns to the
school, or by online or interactive
electronic means with the borrower
acknowledging receipt of the
information. The counseling must
include the information specified in
section 485(l) of the HEA. If the
entrance counseling is conducted online
or through interactive electronic means,
the school must take reasonable steps to
ensure that each student borrower
receives the counseling materials and
participates in and completes the
counseling. The school must also
maintain documentation that shows it
provided the entrance counseling for
each borrower.
Current § 682.604(g) requires a school
to conduct exit counseling with its
Stafford and PLUS loan student
borrowers shortly before the borrower
ceases at least half-time study at the
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school through an in-person session, by
audiovisual presentation, or by
interactive electronic means.
Alternatively, the school may provide
written counseling materials through
the mail to borrowers who complete
correspondence programs or studyabroad programs approved for credit by
the school. For borrowers who
withdraw from the school without the
school’s prior knowledge or who fail to
complete the required exit counseling
session, the regulations require the
school to ensure that exit counseling is
provided to the student borrower
through interactive means or by mailing
written counseling materials to the
borrower at the student’s last known
address within 30 days of the school
learning that the borrower withdrew
from the school or failed to complete the
exit counseling. Exit counseling must
include the information specified in
section 485(b) of the HEA, regardless of
the form in which it is provided.
Proposed Regulations: The proposed
regulations would change the heading of
§ 682.604 to ‘‘Required exit counseling
for borrowers.’’ The proposed
regulations would remove current
paragraph (a), remove and reserve
paragraph (b), and remove paragraphs
(c) through (f) and (h). The proposed
regulations would also redesignate
current paragraph (g) as paragraph (a).
Newly redesignated § 682.604(a)(1)
would be amended to include another
option for providing exit counseling to
a student borrower who withdraws
without the school’s knowledge or fails
to complete required exit counseling. In
addition to the existing options
described above under ‘‘Current
Regulations,’’ a school could also send
written counseling materials
electronically to an email address
provided by the student borrower.
Newly redesignated § 682.604(a)(2)
would be amended by replacing crossreferences to current paragraph (a),
which we are proposing to remove, with
the substantive information contained
in the cross-referenced provision that
must be included in the counseling. A
new paragraph (a)(5) would also be
added to newly redesignated
§ 682.604(a) to clarify that: (1) A
school’s compliance with the Direct
Loan Program exit counseling
requirements in 34 CFR 685.304(b)
satisfies the FFEL Program regulatory
exit counseling requirements for student
borrowers who received both FFEL and
Direct Loan program loans for
attendance at the school if the school
provides the information required by
redesignated § 682.604(a)(2)(i) and
(a)(2)(ii); and (2) a student’s completion
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of interactive exit counseling offered by
the Secretary meets both the FFEL exit
counseling requirements and the Direct
Loan exit counseling requirements in 34
CFR 685.304(b).
Reasons: The provisions in current
§ 682.604 that govern school delivery of
FFEL loan proceeds, required entrance
counseling with new FFEL Program
borrowers, and handling of excess loan
proceeds that result from a borrower
receiving an overaward are no longer
needed in the regulations since no new
loans are being made in the FFEL
Program. The proposed change to
redesignated § 682.604(a)(1) would
incorporate into the regulations existing
guidance that is in the Department’s
Federal Student Aid Handbook.
Similarly, the addition of new
paragraph (a)(5) would incorporate in
the regulations guidance that the
Department has previously provided in
response to questions from schools
about options for providing exit
counseling to borrowers who have
received loans through both the FFEL
and Direct Loan programs for
attendance at the same school. Because
the FFEL and Direct Loan exit
requirements are generally the same, the
Department has previously permitted
schools to provide a single exit
counseling session to satisfy the exit
counseling requirements for students
who have received both FFEL and
Direct Loan program loans for
attendance at the school, provided that
the counseling includes separate loan
information for the loans made under
each program. The Department has also
previously clarified that the optional
interactive electronic exit counseling
offered by the Secretary is designed to
satisfy the exit counseling requirements
for borrowers who received only Direct
Loans or those who receive both Direct
Loans and FFEL Program loans.
Subpart G—Limitation, Suspension, or
Termination of Lender or Third-Party
Servicer Eligibility and Disqualification
of Lenders and Schools
§ 682.702
Effect on Participation.
§ 682.704
Emergency Action
§ 682.705
Suspension Proceedings
§ 682.706 Limitation or Termination
Proceedings
§ 682.709 Reimbursements, Refunds,
and Offsets
Statute: We have grouped our
discussions of §§ 682.702, 682.704,
682.705, 682.706, and 682.709 together.
Section 432(h)(1) of the HEA authorizes
the Department to initiate and impose
limitation, suspension, and termination
actions against lenders participating in
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the FFEL Program if, after reasonable
notice and opportunity for a hearing, the
Department finds that the lender has
substantially failed to: (1) Exercise care
and diligence in the making and
collecting of FFEL loans, (2) make
reports or statements that support
interest and special allowance payments
to the lender, or (3) pay required loan
insurance premiums to a guaranty
agency, or the lender has engaged in
fraudulent or misleading advertising or
solicitations that resulted in loans being
made to ineligible borrowers or made in
violation of the certification
requirements of section 428 of the HEA.
Current Regulations: Section 682.702
details the effects on a lender of the
Department’s action to limit, suspend,
or terminate the lender from
participation in the FFEL Program.
Section 682.704 states that the
Department or a guaranty agency may
take an emergency action against a
lender to stop new loan guarantees
being issued to the lender and to
withhold payment of interest and
special allowance payments to the
lender under conditions identified in
the regulations. Sections 682.705 and
682.706 detail the procedures for a
suspension action or a limitation or
termination action against a lender or
third-party servicer. Sections 682.705(c)
and 682.706(d) of the regulations both
provide that if an action to suspend,
limit, or terminate a lender is based on
a violation of section 435(d)(5) of the
HEA, and the Secretary, a designated
Departmental official, or a hearing
official finds that the lender provided
prohibited payments or engaged in
prohibited activities, the Secretary or
official will apply a rebuttable
presumption that the payments or
activities were offered to secure
applications for FFEL loans or to secure
new FFEL loan volume. Section 682.709
provides that as part of a limitation or
termination proceeding, the Department
may require a lender or third-party
servicer to take reasonable corrective
action, which may include payments to
the Department or other designated
parties in the form of a refund,
reimbursement, or offset.
Proposed Regulations: Section
682.702(b)(1) would be revised to
remove the reference to a lender making
loans and current paragraphs (b)(2) and
(d) would be removed. Section
682.702(b)(3) would be redesignated as
§ 682.702(b)(2). Section 682.704(a)
would be amended to remove the
reference to stopping the issuance of
guarantee commitments by the Secretary
and guaranty agencies. Section
682.705(a)(1) would be amended to
remove the reference to new loans made
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by a lender and § 682.705(c) would be
removed. Section 682.706 would be
amended to remove paragraph (d).
Section 682.709 would be amended to
add new paragraph (d) that provides for
the application of a rebuttable
presumption related to future limitation
and termination actions that may
involve findings of violations of section
435(d)(5) of the HEA.
Reasons: Since no new FFEL loans are
being made, the regulations on possible
sanctions on lenders for violations of
FFEL Program requirements no longer
should include limits on new loan
volume or loan guarantee commitments.
The application of a rebuttable
presumption as part of a suspension
proceeding or limitation or termination
action against a lender will apply to
existing loans and past lender activities
during the period when the potential for
new loan applicants and increased loan
volume existed in the FFEL Program. As
a result, references to the application of
a rebuttable presumption would be
removed from §§ 682.705 and 682.706
and incorporated as new paragraph (d)
in § 682.709 of the regulations.
§ 682.713 Disqualification Review of
Limitation, Suspension, and
Termination Actions Taken by Guaranty
Agencies Against a School
Statute: Section 432(h)(3) of the HEA
requires the Department to review any
limitation, suspension, or termination
imposed on an eligible school by a
guaranty agency under its authority in
section 428(b)(1)(T) of the HEA within
60 days of the guaranty agency’s
notification that the agency has imposed
such a sanction, unless the school
waives its right to a review in writing.
The Department must uphold the
guaranty agency’s imposition of the
sanction and notify the agency if the
review is waived by the school. If the
review is not waived, the Department
must determine whether the agency’s
sanction was imposed in accordance
with the requirements of section
428(b)(1)(T) of the HEA. The
Department’s review of the agency’s
sanction of the school is limited to a
review of the written record of the
proceedings in which the agency
imposed the sanction.
Current Regulations: Section 682.713
of the regulations reflects the statutory
requirements of section 432(h)(3) of the
HEA.
Proposed Regulations: The proposed
regulations would remove § 682.713
from the FFEL regulations.
Reasons: As a result of the SAFRA
Act, all schools now participate in the
Direct Loan Program and are subject to
oversight by the Department. The
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Department is the only party that will
take any limitation, suspension, or
termination action taken against a
school that participates in the Direct
Loan Program.
Subpart H—Special Allowance
Payments on Loans Made or Purchased
With Proceeds of Tax-Exempt
Obligations
§ 682.800 Prohibition Against
Discrimination as a Condition for
Receiving Special Allowance Payments
Statute: Section 438(e) of the HEA
states that for the holder of loans made
or purchased with funds from an
Authority issuing tax-exempt
obligations to receive special allowance
payments, the Authority cannot engage
in any pattern or practice which results
in a denial of borrower access to FFEL
Program loans on the basis of a
borrower’s race, sex, color, religion,
national origin, age, disability status,
income, attendance at a particular
eligible institution within the area
served by the Authority, the length of
the borrower’s educational program, or
the borrower’s academic year in school.
Current Regulations: Section 682.800
of the regulations reflects the statutory
requirements of section 428(e) of the
HEA and provides that if an Authority
makes or acquires loans made or
guaranteed by an organization that
discriminates on one or more of the
grounds listed, the Department will
consider the Authority to have adopted
a discriminatory practice on that basis
unless the Authority provides for
making loans to the excluded borrowers
using other resources.
Proposed Regulations: The proposed
regulations would remove subpart F of
part 682, which consists of § 682.800,
from the FFEL regulations.
Reasons: As a result of the SAFRA
Act, no new FFEL loans are being made
with tax-exempt or other funds and this
provision of the FFEL regulations is no
longer needed.
Direct Loan Program Issues
Minimum Loan Period for Transfer
Students in Non-Term and Certain NonStandard Term Programs (34 CFR
685.301)
Statute: The HEA does not specify the
minimum period for which a school
may originate a Direct Loan for a
student who transfers from one school
into a non-term or non-standard term
program at another school.
Current Regulations: (Note: The
regulatory citations in the discussion
that follows refer to § 685.301(a)(9) as
set forth in the second Editorial Note at
the end of § 685.301 in 34 CFR Part 685,
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revised as of July 1, 2012.) Under
§ 685.301(a)(9)(i)(A), for a school that
measures academic progress in credit
hours and uses a semester, trimester, or
quarter system, or that has terms
substantially equal in length, with no
term less than nine weeks in length, the
minimum period for which the school
may originate a Direct Loan is a single
academic term (e.g., a semester or
quarter).
Under current § 685.301(a)(9)(i)(B), for
a school that measures academic
progress in clock hours, or measures
academic progress in credit hours but
does not use a semester, trimester, or
quarter system and does not have terms
that are substantially equal in length
with no term less than nine weeks in
length, the minimum period for which
a school may originate a Direct Loan is
the lesser of: (1) The length of the
student’s program at the school (or the
remaining portion of the program); or (2)
the academic year as defined by the
school in accordance with 34 CFR
668.3. Current § 685.301(a)(9)(ii)
provides an exception to this
requirement in the case of a student
who transfers into a school with credit
or clock hours from another school, and
the loan period at the prior school
overlaps the loan period at the new
school. In this circumstance, the new
school may originate a loan for the
remaining balance of the program or the
academic year that started at the prior
school, in an amount up to the
remaining balance of the borrower’s
annual loan limit (as determined in
accordance with § 685.203) after
subtracting the amount borrowed for
attendance at the prior school. After this
initial loan period, the student becomes
eligible for a new annual loan limit,
with a new loan period corresponding
to the lesser of the program (or the
remaining portion of the program) or
academic year at the new school. If the
new school does not accept any transfer
hours from the prior school, the
exception does not apply and the
transfer student is limited to receiving
no more than the remaining balance
under the applicable annual loan limit
for the entire program or academic year
at the new school, whichever is less.
The following example illustrates the
application of the current regulation: A
student who received $2,750 in a
combination of Direct Subsidized and
Direct Unsubsidized Loan funds (out of
a maximum annual loan limit of $5,500)
for a loan period from October 31, 2011,
to June 8, 2012, at School A transfers
into a 1500-clock hour program at
School B that begins on March 5, 2012.
School B defines the academic year for
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the program as 900 clock hours and 26
weeks of instructional time.
If School B accepts credit or clock
hours from School A, current
§ 685.301(a)(9)(ii) allows School B to
originate an initial loan for a loan period
that begins on March 5, 2012, and ends
on June 8, 2012, the ending date of the
original loan period at School A. For
this initial loan period, the student
could receive a loan of up to $2,750, the
difference between the $5,500 annual
loan limit and the loan amount the
student received for the overlapping
loan period at School A. After the
balance of the loan period from School
A ends (i.e., starting on June 9, 2012),
the student could receive a new loan for
a new academic year or, if there is less
than an academic year remaining in the
program at School B, for the remainder
of the program.
However, if School B does not accept
any transfer hours from School A, in
accordance with current
§ 685.301(a)(9)(i)(B), the initial loan
period for the program at School B
would be March 5, 2012, to August 31,
2012, corresponding to the period in
which the student is expected to
complete the first academic year of the
program (900 clock hours and 26 weeks
of instructional time). In addition, the
student’s maximum loan eligibility for
that loan period would be $2,750 (the
difference between the annual loan limit
of $5,500 and the $2,750 previously
received for the overlapping loan period
at School A).
Proposed Regulations: The proposed
regulations would redesignate current
§ 685.301(a)(9)(ii) as § 685.301(a)(10)(ii)
and modify the exception to the
minimum loan period requirement
discussed under ‘‘Current Regulations’’
by removing the provision that limits
the exception to situations where the
school the student transfers to accepts
credit or clock hours from the prior
school. Under proposed
§ 685.301(a)(10)(ii), if a student transfers
into a school that measures academic
progress in clock hours, or measures
academic progress in credit hours but
does not use a semester, trimester, or
quarter system and does not have terms
that are substantially equal in length
with no term less than nine weeks in
length, and the prior school originated
a loan for a loan period that overlaps the
loan period at the new school, the new
school may originate a Direct Loan for
the remaining portion of the program or
academic year that began at the prior
school, regardless of whether the new
school accepts credit or clock hours
from the prior school. For this loan
period, the student would be eligible to
receive up to the difference between the
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45655
applicable annual loan limit and the
loan amount the student received at the
prior school for the overlapping loan
period. Using the example presented
above under ‘‘Current Regulations,’’ the
proposed regulations would allow
School B in all cases to originate a
Direct Loan of up to $2,750 for the loan
period from March 5, 2012, to June 8,
2012.
Reasons: The exception to the
minimum loan period rule in current
§ 685.301(a)(9)(ii) applies only if the
new school accepts credit or clock hours
from the school that the student
previously attended. If the new school
does not accept any transfer hours from
the prior school, the exception does not
apply and the transfer student is limited
to receiving no more than the remaining
balance under the applicable annual
loan limit for the entire program or
academic year at the new school,
whichever is less. Thus, in some cases
a student may be eligible to receive
loans only up to one full annual loan
limit for a combined period of
enrollment at the two schools that is
significantly longer than one academic
year. The Department believes that the
limited scope of the current regulatory
exception to the minimum loan period
rule provides a benefit to only a
minority of transfer students (since
many schools do not accept credit or
clock hours from other schools) and
may in some cases discourage students
from transferring to different schools.
Therefore, the Department proposes to
modify the current regulations by
removing the provision that allows the
exception to be applied only if the new
school accepts credit or clock hours
from the prior school. The non-Federal
negotiators supported this proposal.
Modification of the Direct Loan
Program Regulations (34 CFR Part 685)
Background: The current Direct Loan
Program regulations in 34 CFR Part 685
include numerous cross-references to
the FFEL Program regulations in 34 CFR
Part 682 for provisions that apply in
both loan programs, such as the
definitions of certain terms and the
eligibility requirements for certain types
of loan deferments. For certain
provisions that apply in both the FFEL
and Direct Loan programs, the Direct
Loan Program regulations do not
include language that is currently only
in the corresponding FFEL Program
regulations. The Direct Loan Program
regulations also include a number of
provisions that are outdated and do not
reflect current procedures. To address
these issues, the Department proposes to
make technical changes to the Direct
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Loan Program regulations that would
include:
• Adding provisions to 34 CFR Part
685 that apply in the Direct Loan
Program, but are currently included
only in 34 CFR Part 682, so that it will
no longer be necessary to refer to the
FFEL Program regulations for certain
terms and conditions of Direct Loan
Program loans;
• Where necessary, modifying
existing Direct Loan Program
regulations for consistency with the
corresponding FFEL Program
regulations; and
• Removing obsolete provisions that
do not reflect current procedures used
in the Direct Loan Program.
The proposed changes to the Direct
Loan Program regulations also include
minor technical and conforming
changes in various regulations to correct
errors and present information more
clearly. In addition, the proposed
changes reflect: (1) The provisions of the
SAFRA Act that eliminate new loans
under the FFEL Program after June 30,
2010; (2) the provisions of the
Consolidated Appropriations Act, 2012
(Pub. L. 112–74) that eliminate the grace
period interest subsidy on Direct
Subsidized Loans with a first
disbursement date on or after July 1,
2012, and before July 1, 2014, and that
eliminate Federal student aid eligibility
for students without a certificate of
graduation from a school providing
secondary education or the recognized
equivalent of such a certificate; (3) the
provision of the Budget Control Act of
2011 (Pub. L. 112–25) that eliminates
Direct Subsidized Loan eligibility for
graduate or professional students
effective for loan periods beginning on
or after July 1, 2012; and (4) the
provision of the Higher Education
Opportunity Act (Pub. L. 110–315) that
replaced the term ‘‘credit bureau’’ with
the term ‘‘consumer reporting agency.’’
During the public negotiating
sessions, the Department provided the
non-Federal negotiators with a
comprehensive overview of the
proposed technical changes to the Direct
Loan Program regulations and explained
the rationale for each proposed
technical change. Following the
Department’s review and discussion of
these proposed changes with the nonFederal negotiators, the negotiating
committee agreed that the changes
should be made. During the
negotiations, the non-Federal
negotiators also recommended
additional minor technical changes
throughout 34 CFR part 685 for clarity
and consistency. The proposed
regulations incorporate many of these
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additional recommended technical
changes.
A complete summary of all of the
proposed technical changes to 34 CFR
part 685 may be found in Appendix B
at the end of this NPRM. A discussion
of the more significant proposed
technical changes follows.
Modification of Direct Loan Program
Regulations: Definitions (34 CFR
685.102)
Statute: The definitions included in
this section reflect definitions and the
use of terms in various sections of the
HEA, including provisions of parts B, D,
and G. The Department has already
placed some of these definitions in our
regulations.
Current Regulations: Current
§ 685.102(a)(3) refers to the FFEL
Program regulations in 34 CFR part 682
for the definitions of the following
terms: ‘‘Act,’’ ‘‘endorser,’’ ‘‘Federal
Insured Student Loan (FISL) Program,’’
‘‘Federal Stafford Loan Program,’’
‘‘guaranty agency,’’ ‘‘holder,’’ ‘‘legal
guardian,’’ ‘‘lender,’’ and ‘‘totally and
permanently disabled.’’ Current
§ 685.102(b) contains definitions of the
following terms: ‘‘alternative
originator,’’ ‘‘consortium,’’ ‘‘default,’’
‘‘estimated financial assistance,’’
‘‘Federal Direct Consolidation Loan
Program,’’ ‘‘Federal Direct PLUS
Program,’’ ‘‘Federal Direct Stafford/Ford
Loan Program,’’ ‘‘Federal Direct
Unsubsidized Stafford/Ford Loan
Program,’’ ‘‘grace period,’’ ‘‘interest
rate,’’ ‘‘loan fee,’’ ‘‘Master Promissory
Note,’’ ‘‘payment data,’’ ‘‘period of
enrollment,’’ ‘‘satisfactory repayment
arrangement,’’ ‘‘school origination
option 1,’’ ‘‘school origination option
2,’’ ‘‘servicer,’’ and ‘‘standard
origination.’’
Proposed Regulations: The proposed
regulations would remove
§ 685.102(a)(3) and add all of its
definitions, except ‘‘legal guardian,’’ to
§ 685.102(b). The regulations would also
add a definition of ‘‘substantial gainful
activity’’ to § 685.102(b).
The definitions currently included
only in the FFEL Program regulations at
§ 682.200 would be added to
§ 685.102(b) without any changes,
except for the definitions of ‘‘holder’’
and ‘‘lender.’’ The regulations propose a
new definition of ‘‘holder’’ as the entity
that owns a loan. The regulations would
further specify that for a FFEL Program
loan, the term ‘‘holder’’ refers to an
eligible lender owning a FFEL Program
loan, including 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. The
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proposed definition of ‘‘lender’’ would
state that this term has the meaning
specified in section 435(d) of the HEA
for purposes of the FFEL Program.
The proposed regulations would
further amend § 685.102(b) by removing
the definitions of ‘‘alternative
originator,’’ ‘‘consortium,’’ ‘‘school
origination option 1,’’ ‘‘school
origination option 2,’’ ‘‘servicer,’’ and
‘‘standard origination,’’ and by revising
the definitions of ‘‘Master Promissory
Note (MPN)’’ and ‘‘satisfactory
repayment arrangement.’’
The proposed regulations would add
a new paragraph (4) to the definition of
‘‘Master Promissory Note (MPN)’’
stating that unless the Secretary
determines otherwise, a school may use
a single MPN as the basis for all loans
borrowed by a student or parent for
attendance at that school. Proposed new
paragraph (4) would further provide that
if a school is not authorized for multiyear use of the MPN, a borrower must
sign a new MPN for each academic year.
The definition of ‘‘satisfactory
repayment arrangement’’ would be
revised by adding a new paragraph
(2)(ii) providing that, for the purpose of
consolidating a defaulted loan into a
Direct Consolidation Loan, a borrower
may make satisfactory repayment
arrangements by agreeing to repay the
Direct Consolidation Loan under one of
the income-contingent repayment plans
described in § 685.209 or the incomebased repayment plan described in
§ 685.221. Additional proposed changes
to the definition of ‘‘satisfactory
repayment arrangement’’ are discussed
earlier in the ‘‘Significant Proposed
Regulations’’ section of this preamble
under the heading ‘‘Satisfactory
Repayment Arrangements.’’
Reasons: The Department is
proposing to expand § 685.102(b) to
include definitions that apply in the
Direct Loan Program but that are
currently included only in the FFEL
Program regulations. Readers will not
have to refer to 34 CFR part 682 for
these definitions.
The definition of ‘‘legal guardian,’’
currently listed in § 685.102(a)(3),
would not be added to § 685.102(b)
because that term is not used in 34 CFR
part 685.
Although it is not currently listed in
§ 685.102(a)(3), a definition of
‘‘substantial gainful activity’’ would also
be added to § 685.102(b). This term is
defined in § 682.200(b) of the FFEL
Program regulations and also applies in
the Direct Loan Program.
The definitions of ‘‘holder’’ and
‘‘lender’’ would be modified to fit the
Direct Loan Program. The current
definition of ‘‘holder’’ in § 682.200(b)
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applies only to holders of FFEL Program
loans. However, the term ‘‘holder’’ as
used in the Direct Loan Program
regulations also covers holders of other
types of loans. The current definition of
‘‘lender’’ in § 682.200(b) includes
numerous provisions relevant for
purposes of the FFEL Program that
would not be included in the definition
in § 685.102(a)(3) because they are not
needed for the Direct Loan Program.
The definitions of ‘‘alternative
originator,’’ ‘‘consortium,’’ ‘‘school
origination option 1,’’ ‘‘school
origination option 2,’’ and ‘‘standard
origination’’ would be removed from
§ 685.102(b) because they describe
options for school participation in the
Direct Loan Program that have not been
used by schools or reflect obsolete
provisions that are no longer used in the
administration of the program.
The term ‘‘servicer’’ would be
removed because the Department is
proposing to replace all uses of the term
‘‘servicer’’ elsewhere in the Direct Loan
Program regulations with ‘‘Secretary’’ to
ensure consistent terminology
throughout 34 CFR part 685.
The proposed change to the definition
of ‘‘Master Promissory Note (MPN)’’
would simplify the regulations by
incorporating a provision governing
multi-year use of the MPN that is in
current § 685.402(f) into the definition
of MPN in § 685.102(b). This provision
would also be updated to reflect the
Secretary’s policy on the authority of
schools to use the MPN as a multi-year
promissory note.
Similarly, the proposed change to the
definition of ‘‘satisfactory repayment
arrangement’’ would provide greater
clarity by incorporating in that
definition, with minor technical
changes, a provision for making
satisfactory repayment arrangements
that is currently in § 685.220(d)(1)(ii)(D).
Modification of Direct Loan Program
Regulations: Deferment (34 CFR
685.204)
Statute: Section 455(f)(2) of the HEA
provides that a Direct Loan borrower is
eligible for a deferment during any
period when the borrower is: enrolled at
least half-time at an eligible institution;
pursuing a course of study pursuant to
a graduate fellowship program approved
by the Secretary, or pursuant to a
rehabilitation training program for
individuals with disabilities approved
by the Secretary; seeking and unable to
find full-time employment (for not more
than three years); serving on active duty
or performing qualifying National Guard
duty during a war or other military
operation or national emergency, and
for the 180-day period following the
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demobilization date for such service; or
experiencing (for not more than three
years) an economic hardship as
determined in accordance with
regulations prescribed under section
435(o) of the HEA.
Section 455(f)(4) of the HEA provides
that a Direct Loan borrower who has an
outstanding balance on a FFEL Program
loan made before July 1, 1993, at the
time the borrower applies for a Direct
Loan, is eligible for deferments under
section 427(a)(2)(C) or section
428(b)(1)(M) of the HEA as those
sections were in effect on July 22, 1992.
Section 428B(d)(1) of the HEA, which
applies to Direct Loan borrowers
through section 455(a)(1) of the HEA,
provides that a parent Direct PLUS Loan
borrower may defer repayment of a
Direct PLUS Loan that was first
disbursed on or after July 1, 2008,
during any period when the student on
whose behalf the loan was obtained is
enrolled at least half-time at an eligible
school and during the six-month period
after the student ceases to be enrolled at
least half-time.
Finally, section 493D of the HEA
authorizes a deferment for the 13-month
period following the conclusion of
active duty service for a Direct Loan
borrower who is a member of the
National Guard or other reserve
component of the U.S. Armed Forces
and who is called or ordered to active
duty while he or she is enrolled at least
half-time at an eligible school or within
six months of having been enrolled at
least half-time.
Current Regulations: Current
§ 685.204(a) provides that interest does
not accrue on a subsidized Direct Loan
during periods of deferment.
Current § 685.204(b) provides that a
Direct Loan borrower is eligible to
receive a deferment while he or she is—
• enrolled at least half-time at an
eligible school (in-school deferment);
• pursuing a course of study in a
graduate fellowship program approved
by the Secretary (graduate fellowship
deferment);
• pursuing an approved rehabilitation
training program for individuals with
disabilities that is approved by the
Secretary (rehabilitation training
program deferment);
• seeking but unable to find full-time
employment (unemployment
deferment); or
• experiencing an economic hardship
(economic hardship deferment).
This section also sets forth the
eligibility requirements for a borrower
to receive an in-school deferment.
Current § 685.204(b) does not specify
the requirements for a graduate
fellowship program or rehabilitation
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training program to be approved by the
Secretary. For the graduate fellowship
and rehabilitation training program
deferments, the Direct Loan Program
regulations rely on the eligibility criteria
in §§ 682.210(d) and 682.210(e) of the
FFEL Program regulations. For the
unemployment and economic hardship
deferments, current § 685.204(b) refers
to the FFEL Program regulations in
§§ 682.210(h) and 682.210(s)(6),
respectively, for eligibility requirements
and procedures.
Current § 685.204(c) states that a
period of deferment based on
unemployment or economic hardship
may not exceed three years.
Current § 685.204(d) states that a
Direct Loan borrower who had an
outstanding balance on a FFEL Program
loan that was made prior to July 1, 1993,
at the time the borrower applied for his
or her first Direct Loan Program loan is
eligible for all of the deferments
described in § 685.204 and the
deferments described in § 682.210(b),
including deferments that apply to a
‘‘new borrower’’ as that term is defined
in § 682.210(b)(7). The latter deferments
include deferments based on: Having a
temporary total disability, caring for a
disabled dependent, serving in the
military, serving in the United States
Public Health Service, serving as a
Peace Corps volunteer, performing
volunteer service in the ACTION
programs, performing volunteer service
for a tax-exempt organization, serving in
an internship or residency program,
caring for a newborn or newly adopted
child, serving in the National Oceanic
and Atmospheric Administration Corps,
teaching in a teacher-shortage area, and
being a full-time working mother of a
preschool-age child.
Current §§ 685.204(e) and 685.204(f)
specify the eligibility requirements for a
deferment based on active-duty military
service (military service deferment) and
the 13-month post-active-duty
deferment authorized by section 493D of
the HEA (post-active-duty student
deferment), respectively.
Current § 685.204(g) contains the
eligibility criteria for deferments for
Direct PLUS Loan borrowers with loans
first disbursed on or after July 1, 2008,
as authorized under section 428B(d)(1)
of the HEA (in-school PLUS deferment).
Current § 685.204(h) specifies that a
borrower whose loan is in default is not
eligible for a deferment, unless the
borrower has made payment
arrangements satisfactory to the
Secretary.
Current § 685.204(i) describes the
Secretary’s procedures for granting
deferments and the Secretary’s actions
after a deferment has been granted.
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Proposed Regulations: The proposed
regulations would significantly
restructure current § 685.204 without
changing any of the deferment eligibility
requirements.
Proposed § 685.204(a) would include
general deferment provisions.
Specifically, proposed § 685.204(a)(1)
and (a)(2) would include, with only
minor technical changes, the same
provisions related to interest subsidy
during deferment periods that are in
current § 685.204(a)(1) and (a)(2). In
addition, proposed § 685.204(a)(2)
would be expanded to include the last
sentence of § 685.204(b)(1)(iii)(B)(2),
which notes that the Secretary provides
borrowers with information about the
effect of interest capitalization at or
before the time a deferment is granted.
Proposed § 685.204(a)(3) would
contain the provision currently in
§ 685.204(h) stating that a borrower
whose loan is in default is not eligible
for a deferment unless the borrower has
made payment arrangements
satisfactory to the Secretary.
Proposed § 685.204(a)(4) would
contain, with minor technical changes,
the procedures for requesting a
deferment that are in current
§§ 685.204(i)(1) and 685.204(i)(5).
Proposed § 685.204(a)(5) would
include, with minor technical changes,
provisions currently in §§ 685.204(i)(2),
685.204(i)(3), and 685.204(i)(4)
describing the Secretary’s procedures
for granting a deferment and the actions
taken by the Secretary after granting a
deferment.
Reasons: To improve the clarity of the
regulations, general deferment
requirements that are currently in
§§ 685.204(a), 685.204(b), 685.204(h),
and § 685.204(i) would be consolidated
in § 685.204(a), followed by individual
sections, designated §§ 685.204(b)
through (j), containing the requirements
for the various deferment categories.
Proposed Regulations: Proposed
§ 685.204(b) would include the
eligibility requirements and procedures
for the in-school deferment that are in
current §§ 685.204(b)(1)(i)(A) and
685.204(b)(1)(iii).
Reasons: To make the deferment
regulations easier to read, the graduate
fellowship, rehabilitation training
program, unemployment, and economic
hardship requirements that are in
current § 685.204(b) would be moved to
separate paragraphs within § 685.204,
leaving only the in-school deferment
requirements and procedures in
§ 685.204(b).
Proposed Regulations: Proposed
§ 685.204(c) would include the
eligibility requirements for the in-school
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PLUS deferment that are in current
§ 685.204(g).
Reasons: Because the in-school PLUS
deferment requirements are similar to
the requirements for a student’s inschool deferment, they would be moved
to proposed § 685.204(c), immediately
following the in-school deferment
requirements in proposed § 685.204(b).
Proposed Regulations: Proposed
§ 685.204(d) would include the
eligibility requirements for the graduate
fellowship deferment that are in current
§ 685.204(b)(1)(i)(B) and (b)(1)(ii), as
well as the eligibility criteria for this
deferment that apply in the Direct Loan
Program but that are currently only in
the FFEL Program regulations.
Reasons: To make the Direct Loan
Program regulations comprehensive and
eliminate the need to refer to the FFEL
Program regulations, all requirements
for the graduate fellowship deferment
would be placed in § 685.204(d).
Proposed Regulations: Proposed
§ 685.204(e) would include the
eligibility requirements for the
rehabilitation training program
deferment that are in current
§ 685.204(b)(1)(i)(C), as well as the
eligibility criteria for this deferment that
apply in the Direct Loan Program but
that are currently only in the FFEL
Program regulations.
Reasons: To make the Direct Loan
Program regulations comprehensive and
eliminate the need to refer to the FFEL
Program regulations, all requirements
for the rehabilitation training program
deferment would be placed in
§ 684.204(e).
Proposed Regulations: Proposed
§ 685.204(f) would include the
eligibility requirements for the
unemployment deferment that are in
current § 685.204(b)(2), as well as the
eligibility criteria and procedures for
this deferment that apply in the Direct
Loan Program but that are currently
only in the FFEL Program regulations.
Proposed § 685.204(f)(1) would include
the provision, currently in § 685.204(c),
that an unemployment deferment may
not exceed three years.
Reasons: To make the Direct Loan
Program regulations comprehensive and
eliminate the need to refer to the FFEL
Program regulations, all requirements
and procedures for the unemployment
deferment would be included in
§ 685.204(f). For greater clarity,
proposed § 685.204(f) would also
incorporate the three-year limit that is
currently in § 685.204(c) so that this
provision will be included with all of
the other requirements of the
deferments to which it applies instead
of in a separate stand-alone section of
the deferment regulations.
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Proposed Regulations: Proposed
§ 685.204(g) would include the
eligibility requirements for the
economic hardship deferment that are
in current § 685.204(b)(3), as well as the
eligibility requirements and procedures
for this deferment that apply in the
Direct Loan Program but that are
currently only in the FFEL Program
regulations. Proposed § 685.204(g)(1)
would include the provision, currently
in § 685.204(c), that an economic
hardship deferment may not exceed
three years.
Reasons: To make the Direct Loan
Program regulations comprehensive and
eliminate the need to refer to the FFEL
Program regulations, all requirements
and procedures for the economic
hardship deferment would be placed in
§ 685.204(g). For greater clarity,
proposed § 685.204(g) would
incorporate the three-year limit that is
currently in § 685.204(c) so that this
provision will be included with all of
the other requirements of the
deferments to which it applies instead
of in a separate stand-alone section of
the deferment regulations.
Proposed Regulations: Proposed
§ 685.204(h) would include the
eligibility requirements for the military
service deferment that are in current
§ 685.204(e).
Reasons: Because of the restructuring
of § 685.204, just described, current
§ 685.204(e) would be redesignated as
§ 685.204(h).
Proposed Regulations: Proposed
§ 685.204(i) would include the
requirements for the post-active-duty
student deferment that are in current
§ 685.204(f).
Reasons: Because of the restructuring
of § 685.204, just described, current
§ 685.204(f) would be redesignated as
§ 685.204(i).
Proposed Regulations: Proposed
§ 685.204(j) would contain the
provisions currently in § 685.204(d)
stating that a Direct Loan program
borrower who had an outstanding
balance on a FFEL Program loan that
was made prior to July 1, 1993, at the
time the borrower applied for his or her
first Direct Loan Program loan is eligible
for all of the deferments described in
§ 685.204 and the additional deferments
described in § 682.210(b) of the FFEL
Program regulations, including
deferments that apply to a ‘‘new
borrower’’ as that term is defined in
§ 682.210(b)(7).
Reasons: Because of the restructuring
of § 685.204, just described, current
§ 685.204(d) would be redesignated as
§ 685.204(j). Proposed § 685.204(j)
would continue to refer to the FFEL
Program regulations, as under current
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§ 685.204(d). Because relatively few
Direct Loan borrowers qualify for these
deferments, the Department believes it
is preferable to retain the current crossreference to the FFEL Program
regulations in this one case rather than
to significantly expand § 685.204 by
adding eligibility criteria for deferment
types that are not available to the great
majority of Direct Loan borrowers.
Modification of Direct Loan Program
Regulations: Consolidation (34 CFR
685.220)
Statute: Section 455(a)(1) of the HEA
provides that unless otherwise specified
under part D of the HEA, loans made
under part D have the same terms,
conditions, and benefits as loans made,
and first disbursed before July 1, 2010,
under sections 428, 428B, 428C, and
428H in part B of the HEA.
Section 428C(a)(3)(B)(i)(I) provides
that, in general, a borrower who receives
a consolidation loan may not repay the
consolidation loan with a subsequent
consolidation loan unless the borrower
receives eligible loans after the
consolidation loan is made. However,
under section 428C(a)(3)(B)(i)(V) a
borrower may consolidate a FFEL
consolidation loan into the Direct Loan
Program without including an
additional loan if the borrower is
consolidating for the purpose of—
• obtaining an income-contingent or
income-based repayment plan, and the
FFEL consolidation loan is in default or
has been submitted to the guaranty
agency for default aversion;
• using the Public Service Loan
Forgiveness program under section
455(m) of the HEA; or
• using the no accrual of interest
benefit for active duty service members
under section 455(o) of the HEA.
Section 428C(a)(3)(A)(i) of the HEA
provides that for the purpose of
receiving a Federal Consolidation Loan,
the term ‘‘eligible borrower’’ means a
borrower who is not subject to a
judgment secured through litigation
with respect to a loan under title IV of
the HEA or to an order for wage
garnishment under section 488A of the
HEA.
Current Regulations: Current
§ 685.220(d)(1)(i) provides that to obtain
a Direct Consolidation Loan, a borrower
must either have an outstanding balance
on a Direct Loan or have an outstanding
balance on a FFEL Program loan. If a
borrower does not have an outstanding
balance on a Direct Loan but has an
outstanding balance on a FFEL Program
loan, current § 685.220(d)(1)(i)(B)
provides that the borrower must:
(1) be unable to obtain a FFEL
consolidation loan;
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(2) be unable to obtain a FFEL
consolidation loan with incomesensitive repayment terms acceptable to
the borrower;
(3) wish to use the Public Service
Loan Forgiveness Program or the no
accrual of interest benefit for active duty
service members;
(4) have a FFEL consolidation loan
that is in default or that has been
submitted to the guaranty agency for
default aversion and want to consolidate
the FFEL consolidation loan into the
Direct Loan Program to obtain an
income contingent repayment plan or an
income-based repayment plan; or
(5) have a FFEL consolidation loan
and want to consolidate that loan into
the Direct Loan Program for the purpose
of using the Public Service Loan
Forgiveness Program or the no accrual
of interest benefit for active duty service
members.
Current § 685.220(d)(1)(ii)(E) and (F)
provide that at the time a borrower
applies for a Direct Consolidation Loan,
the borrower must not be subject to a
judgment secured through litigation,
unless the judgment has been vacated or
to an order for wage garnishment under
section 488A of the HEA, unless the
order has been lifted.
Current § 685.220(d)(1)(iii)(A) and (B)
provide that on the loans being
consolidated into a Direct Consolidation
Loan, the borrower must not be subject
to a judgment secured through
litigation, unless the judgment has been
vacated, or subject to an order for wage
garnishment under section 488A of the
HEA, unless the order has been lifted.
Current § 685.220(d)(1)(iv) provides
that to obtain a Direct Consolidation
Loan, a borrower must certify that no
other application to obtain a
consolidation loan is pending with
another lender.
Current § 685.220(d)(2) states that a
borrower may not consolidate a Direct
Consolidation Loan into a new Direct
Consolidation Loan unless at least one
additional eligible loan is included in
the consolidation.
Current § 685.220(f)(1)(iii) provides
that if a borrower consolidates a FFEL
or Direct Loan program loan that is in
default, the Secretary limits collection
charges to the borrower to no more than
the costs authorized under the FFEL
Program.
Proposed Regulations: The proposed
regulations would remove the
provisions in current
§ 685.220(d)(1)(i)(B)(1), (2) and (3) that
allow a borrower who has FFEL
Program loans, but no Direct Loans, to
obtain a Direct Consolidation Loan only
if the borrower is unable to obtain a
FFEL consolidation loan, is unable to
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obtain a FFEL consolidation loan with
income-sensitive repayment terms that
are acceptable to the borrower, or if the
borrower wishes to use the Public
Service Loan Forgiveness Program or
the no accrual of interest benefit for
active duty service members. Current
§ 685.220(d)(1)(i) would be revised to
simply state that a borrower must
consolidate at least one Direct Loan
Program or FFEL Program loan to obtain
a Direct Consolidation Loan.
Reasons: Because the SAFRA Act
ended the making of new FFEL Program
loans (including FFEL Consolidation
Loans) as of July 1, 2010, the current
restrictions on consolidation into the
Direct Loan Program for borrowers who
have only FFEL Program loans are no
longer relevant and can be removed
from the regulations.
Proposed Regulations: The provisions
in current § 685.220(d)(1)(i)(B)(4) and
(5) related to the conditions under
which a borrower may consolidate a
single FFEL Consolidation Loan into the
Direct Loan Program would be moved to
proposed revised § 685.220(d)(2).
Reasons: For greater clarity, the
proposed regulations would incorporate
all regulations governing the
consolidation of an existing
consolidation loan in the same
paragraph.
Proposed Regulations: Current
§ 685.220(d)(1)(ii) would be revised to
incorporate the requirements currently
in § 685.220(d)(1)(iii) that, on the loans
being consolidated, a borrower must not
be subject to a judgment secured
through litigation or to an order for
wage garnishment. Current
§ 685.220(d)(1)(iii) would be removed.
Reasons: Some of the non-Federal
negotiators noted that current
§ 685.220(d)(1)(ii) is ambiguous and
could be read to suggest that a borrower
would be ineligible to receive a Direct
Consolidation Loan if, at the time the
borrower applies for a consolidation
loan, the borrower is subject to a
judgment or to an order for wage
garnishment for any reason, even if it is
unrelated to any of the loans that the
borrower wishes to consolidate. These
negotiators did not believe that this was
the intent of the regulations. Rather, the
negotiators believed that these
limitations should apply only to
judgments or orders for wage
garnishment that are related to the loans
being consolidated, and only at the time
of consolidation. They noted that there
are separate provisions in current
§ 685.220(d)(1)(iii) stating that a
borrower is not eligible for a Direct
Consolidation Loan if the borrower is
subject to a judgment secured through
litigation or to an order for wage
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garnishment under section 488A of the
HEA ‘‘on the loans being consolidated,’’
unless the judgment has been vacated or
the wage garnishment order has been
lifted. The Department agreed with the
non-Federal negotiators. Because
proposed revised § 685.220(d)(1)(ii)
would incorporate the provisions that
are currently in § 685.220(d)(1)(iii),
current § 685.220(d)(1)(iii) would no
longer be needed.
Proposed Regulations: Current
§ 685.220(d)(1)(iv), which requires a
Direct Consolidation Loan applicant to
certify that no other application to
consolidate the borrower’s loans with
another lender is pending, would be
removed.
Reasons: This regulation is no longer
needed because, as a result of the
SAFRA Act, FFEL Program lenders are
no longer authorized to make
consolidation loans, and a borrower
cannot have more than one application
for a Direct Consolidation Loan.
Proposed Regulations: Current
§ 685.220(d)(2) states that a borrower
may not consolidate a Direct
Consolidation Loan into a new
consolidation loan unless at least one
additional loan is included in the
consolidation. We would revise this
section to provide that the same
limitation applies to a borrower who
wishes to consolidate a FFEL
Consolidation Loan into a new Direct
Consolidation Loan. The section would
also be expanded to incorporate
provisions currently in
§§ 685.220(d)(1)(i)(B)(4) and (5) that
allow a borrower, under certain
conditions, to consolidate a single FFEL
consolidation loan into the Direct Loan
Program without including an
additional eligible loan in the
consolidation.
Reasons: For greater clarity, all rules
governing the conditions under which
an existing consolidation loan may be
consolidated into a new Direct
Consolidation Loan would be placed in
the same section of the regulations.
Proposed Regulations: Current
§ 685.220(f)(1)(iii) would be revised to
provide that if a borrower consolidates
a Direct Loan or FFEL program loan that
is in default, the Secretary limits
collection costs that may be charged to
the borrower to a maximum of 18.5
percent of the outstanding principal and
interest amount of the defaulted loan.
For any other defaulted Federal
education loan, all collection costs that
are owed may be charged to the
borrower.
Reasons: Some of the non-Federal
negotiators asked the Department to
expand § 685.220 of the Direct Loan
regulations to include some of the
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disclosure provisions that apply under
§ 682.205(i) of the FFEL Program
regulations to lenders that made FFEL
Consolidation Loans. In particular, these
negotiators asked the Department to
include the provision in current
§ 682.205(i)(7), which requires a lender
to inform a borrower that applying for
a consolidation loan does not obligate
the borrower to accept it, and to explain
the process and deadline by which the
borrower may cancel the consolidation
loan. The negotiators noted that these
requirements are in the HEA and also
apply in the Direct Loan Program. These
non-Federal negotiators also
recommended that the Department
revise current § 685.220(f)(1)(iii) to
specify the actual maximum amount of
collection costs that may be charged to
a borrower who consolidates a defaulted
Direct Loan or FFEL program loan.
The Department declined to expand
§ 685.220 to include the consolidation
disclosure provisions that are in current
§ 682.205(i) of the FFEL Program
regulations. The FFEL Program
regulations govern the activities of third
parties; the Direct Loan Program
regulations in this area would govern
the Department. In general, the
Secretary does not issue regulations to
control the Department’s activities.
Moreover, the disclosures discussed by
the negotiators are already provided by
the Department in the Direct
Consolidation Loan Application and
Promissory Note that a borrower must
complete before receiving a Direct
Consolidation Loan. The promissory
note explains that before the
Department pays off the loans the
borrower has selected for consolidation,
the Department will send the borrower
a notice that provides information about
the loans and payoff amounts that have
been verified, and tells the borrower the
deadline by which the Department must
be notified if the borrower wants to
cancel the consolidation loan. The
notice also specifies the timeframe
during which the borrower may cancel
the entire consolidation loan or notify
the Department that he or she does not
want to consolidate one or more of the
loans listed in the notice that is sent to
the borrower.
However, the Department agreed that
for greater clarity, current
§ 685.220(f)(1)(iii) should be revised to
include the specific maximum amount
of collection costs that may be charged
to a borrower who consolidates a
defaulted loan. The Department noted
that the 18.5 percent limit on the
amount of collection costs that may be
charged to a borrower is also included
on the Direct Consolidation Loan
Application and Promissory Note.
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Modification of Direct Loan Program
Regulations: Counseling Borrowers (34
CFR 685.304)
Statute: Section 485(b) of the HEA
requires that schools provide FFEL and
Direct Loan program borrowers (except
for consolidation loan borrowers and
parent PLUS loan borrowers) with exit
counseling prior to the borrower’s
completion of his or her course of study
at the school or at the time of the
borrower’s departure from a school.
This section of the HEA also specifies
the information that must be included
in the exit counseling. Exit counseling
may be provided through a school’s
financial aid office or by other means.
Section 485(b)(2)(C) allows for exit
counseling to be provided
electronically.
Current Regulations: For the Direct
Loan Program, current § 685.304(b)(1)
requires a school to ensure that exit
counseling is conducted with each
borrower of a Direct Subsidized Loan or
a Direct Unsubsidized Loan and with
any graduate or professional student
Direct PLUS Loan borrower shortly
before the borrower ceases at least halftime study at the school.
Current § 685.304(b)(2) provides that
exit counseling must be in person, by
audiovisual presentation, or by
interactive electronic means.
Current § 685.304(b)(3) states that if a
borrower withdraws from school
without the school’s knowledge or fails
to complete required exit counseling,
exit counseling must be provided either
through interactive electronic means or
by mailing written counseling materials
to the borrower at the borrower’s last
known address. The school must
provide the counseling materials to the
borrower within 30 days after the school
learns that the student has withdrawn or
failed to complete exit counseling.
Current § 685.304(b)(4) specifies the
information that must be included in
exit counseling.
Proposed Regulations: We propose to
revise current § 685.304(b)(3) to include
another option for providing exit
counseling to a student borrower who
withdraws without the school’s
knowledge or fails to complete required
exit counseling. Under proposed
§ 685.304(b)(3), a school could send
written counseling materials to an email
address provided by the student
borrower.
The proposed regulations would also
add a new § 685.304(b)(8)(i). For
students who have received both FFEL
and Direct Loan program loans for
attendance at a school, the school’s
compliance with the Direct Loan
Program exit counseling requirements in
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§ 685.304(b) satisfies the FFEL Program
exit counseling requirements in
proposed redesignated § 682.604(a), if
the school ensures that the exit
counseling includes the information
related to a borrower’s FFEL
indebtedness as described in proposed
§ 682.604(a)(2)(i) and (ii).
Finally, proposed § 685.304(b)(8)(ii)
would state that a student’s completion
of electronic interactive exit counseling
offered by the Secretary satisfies the
Direct Loan exit counseling
requirements in § 685.304(b) and, for
students who have also received FFEL
Program loans for attendance at the
school, the FFEL Program exit
counseling requirements in proposed
§ 682.604(a).
Reasons: The proposed revision of
§ 685.304(b)(3) reflects the Department’s
existing guidance to schools included in
the Department’s Federal Student Aid
Handbook. Similarly, proposed new
§ 685.304(b)(8)(i) and (ii) would
incorporate guidance that the
Department has previously provided in
response to questions from schools
about options for providing exit
counseling to borrowers who have
received loans through both the FFEL
and Direct Loan programs for
attendance at the same school. Because
the Direct Loan and FFEL exit
counseling requirements are generally
the same, the Department has
previously allowed schools to use a
single exit counseling session to satisfy
the exit counseling requirements for
these students, provided that the
counseling includes the separate loan
debt information for the loans made
under each program. The Department
has also previously advised schools that
the optional interactive electronic exit
counseling offered by the Secretary
satisfies the exit counseling
requirements for borrowers who have
received only Direct Loans or who have
received both Direct Loans and FFEL
Program loans.
Regulatory Impact Analysis
Under Executive Order 12866, the
Secretary must determine whether this
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
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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 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
stated in the Executive order.
This proposed regulatory action raises
novel policy issues relating to the
Department’s efforts in support of the
President’s initiative to increase college
attendance and completion. Therefore,
this proposed action is subject to review
by OMB under section 3(f) of Executive
Order 12866.
We have also reviewed these
regulations under Executive Order
13563, which supplements and
explicitly reaffirms the principles,
structures, and definitions governing
regulatory review established in
Executive Order 12866. To the extent
permitted by law, Executive Order
13563 requires that an agency—
(1) Propose or adopt regulations only
upon a reasoned determination that
their benefits justify their costs
(recognizing that some benefits and
costs are difficult to quantify);
(2) Tailor its regulations to impose the
least burden on society, consistent with
obtaining regulatory objectives and
taking into account—among other things
and to the extent practicable—the costs
of cumulative regulations;
(3) In choosing among alternative
regulatory approaches, select those
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety,
and other advantages; distributive
impacts; and equity);
(4) To the extent feasible, specify
performance objectives, rather than the
behavior or manner of compliance a
regulated entity must adopt; and
(5) Identify and assess available
alternatives to direct regulation,
including economic incentives—such as
user fees or marketable permits—to
encourage the desired behavior, or
provide information that enables the
public to make choices.
Executive Order 13563 also requires
an agency ‘‘to use the best available
techniques to quantify anticipated
present and future benefits and costs as
accurately as possible.’’ The Office of
Information and Regulatory Affairs of
OMB has emphasized that these
techniques may include ‘‘identifying
changing future compliance costs that
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45661
might result from technological
innovation or anticipated behavioral
changes.’’
We are issuing these regulations only
on a reasoned determination that their
benefits justify their costs. In choosing
among alternative regulatory
approaches, we selected those
approaches that maximize net benefits.
Based on the analysis that follows, the
Department believes that these
regulations are consistent with the
principles in Executive Order 13563.
We also have determined that this
regulatory action would not unduly
interfere with State, local, and tribal
governments in the exercise of their
governmental functions.
In accordance with both Executive
orders, the Department has assessed the
potential costs and benefits of this
regulatory action. The potential costs
associated with this regulatory action
are those resulting from statutory
requirements and those we have
determined as necessary for
administering the Department’s
programs and activities.
Elsewhere in this section under the
heading Paperwork Reduction Act of
1995, we identify and explain burdens
specifically associated with information
collection requirements.
In this regulatory impact analysis we
discuss the need for regulatory action,
the potential costs and benefits, net
budget impacts, assumptions,
limitations, and data sources, as well as
regulatory alternatives we considered.
The Need for Regulatory Action
The Department is responsible for
administering the Federal student loan
programs authorized by title IV of the
HEA. Federal student loans are a crucial
element in providing important
opportunities for Americans seeking to
expand their skills and earn
postsecondary degrees and certificates.
With these proposed regulations, the
Department seeks to clarify the
rehabilitation process for borrowers
with defaulted student loans. The
Department is addressing concerns
raised by advocates and borrowers about
that rehabilitation process. The
Department wants to ensure that
borrowers who wish to rehabilitate their
defaulted loans are properly informed
about their rights to ‘‘reasonable and
affordable’’ payments and how a
reasonable and affordable payment is
determined.
In addition to the changes made to
improve program administration,
statutory revisions or administration
priorities sometimes require the
Department to revise its policies and
regulations.
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In the case of these regulations, the
passage of the SAFRA Act ended the
origination of new loans under the FFEL
Program. Now, new Federal subsidized
and unsubsidized student loans and
PLUS loans are made through the Direct
Loan Program. The Department
therefore also seeks to remove
regulations governing the FFEL Program
that are no longer needed and to make
the Direct Loan Program regulations
comprehensive. Finally, the Department
seeks to add consistency and clarity to
all regulations governing student loans.
Beyond those details, Executive Order
12866 emphasizes that ‘‘Federal
agencies should promulgate only such
regulations as are required by law, are
necessary to interpret the law, or are
made necessary by compelling public
need, such as material failures of private
markets to protect or improve the health
and safety of the public, the
environment, or the well-being of the
American people.’’ In this case, there is
indeed a compelling public need for
regulation.
The Secretary recognizes the growth
in the number of students enrolled in
college and the resulting increased need
for student loans. The Secretary’s goal
in regulating is to promote viable
Federal student loan programs by
ensuring that the regulations that govern
the origination and servicing of student
loans are clear and concise so that
borrowers can make informed decisions
about borrowing and repayment.
Current regulations allow a borrower
with defaulted student loans to
rehabilitate those loans by making 9
full, on-time payments (within 20 days
of the due date) over a 10-month period
in an amount agreed to by the borrower
and the loan holder (the Department for
a defaulted Direct Loan, a guaranty
agency or the Department for a
defaulted FFEL Program loan). These
regulations provide that the payment
amount required by the guaranty agency
and the Secretary must be reasonable
and affordable. However, there have
been complaints that guaranty agencies,
the Department, and the debt collection
agencies that collect Federal student
loans require payments that exceed this
standard.
During the negotiated rulemaking
sessions, non-Federal negotiators
representing consumer advocacy groups
expressed concern that the payments
requested by the collection agencies
often are not reasonable and affordable
and that borrowers are not informed of
their right to object to these requested
payment amounts. They stated that, as
a result, many borrowers attempt to
rehabilitate their loans but are unable to
do so because the payments are too high
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or because they are discouraged by the
process. Similar complaints have been
made regularly to the Department at
public hearings and other venues.
Under current practices, many
collection agencies first try to get the
defaulted borrower to pay the total
amount of the defaulted debt because by
law, the full amount of the loan is due
and payable at the time of default. If a
borrower is unable to pay the full
amount, collection agencies then
attempt to negotiate a payment with the
borrower that is as close to the 10-year
standard payment amount as the
borrower can afford to pay. These
amounts are generally based on the
borrower’s income and expenses. This
approach assumes that borrowers who
pay an amount comparable to the 10year standard will have an easier
transition into regular payments after
rehabilitating their loans. Generally, for
collection agencies to receive a
commission on successful loan
rehabilitation, the total amount
collected must be equivalent to a certain
percentage of the total loan amount
owed.
While defaulters represent a small
portion of the total borrower population,
the number of defaults has been on the
rise.1 The Department has sought to
reduce the number of defaulters by
improving borrowers’ payment
management options through the
implementation of the President’s Pay
As You Earn initiative and other
changes to the Federal student loan
programs. The changes to the loan
rehabilitation process included in this
NPRM are another part of this overall
effort. Even with these efforts, the
Department cannot gauge whether or
not the default rate will increase,
decrease, or remain steady.
Some defaulted borrowers who may
be interested in rehabilitating their
defaulted loans are also subject to AWG.
Those borrowers may be discouraged
from trying to fully rehabilitate their
loans because they fear that they will
not be able to make loan payments in
addition to the amount garnished.
Through the proposed regulations, the
Department aims to add clarity to the
AWG process so that affected borrowers
will understand what is required for
AWG to be suspended.
While defaulted borrowers are subject
to immediate collection of their total
loan debt, the Secretary believes that
providing them with an improved
process to rehabilitate the defaulted
1 U.S. Department of Education, First Official
Three-Year Student Loan Default Rates published,
September 28, 2012, www.ed.gov/news/pressreleases/first-official-three-year-student-loandefault-rates-published.
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loan is in the best interests of the
taxpayers and the borrower. Defaulted
borrowers continue to accrue interest on
the debt and are charged collection
costs. In addition, the default harms
their credit scores, and the borrowers
may have trouble purchasing homes or
obtaining auto loans or other types of
consumer credit. By improving the
opportunities for defaulted borrowers to
rehabilitate their student loans, the
Department will not only improve its
chances for full collection of the debt
but also help some defaulted borrowers
return to full economic participation.
The Secretary is also proposing other
changes to the FFEL and Direct Loan
program regulations. The elimination of
new loan originations in the FFEL
Program means that many of the current
FFEL Program regulations are no longer
necessary. In addition, this change
presented the Secretary with an
opportunity to improve consistency
across the FFEL, Direct and Perkins loan
programs. Currently the different Title
IV loan programs are regulated and
administered differently in areas where
they could be consistent. The Secretary
is proposing to eliminate these
differences where appropriate.
The Secretary proposes to revise the
Direct Loan regulations to incorporate
provisions from the FFEL regulations
that are currently only cross-referenced
in the Direct Loan regulations. By
incorporating the substantive provisions
in the Direct Loan regulations instead of
simply cross-referencing to the FFEL
regulations, the Direct Loan regulations
will be comprehensive. This step is
appropriate since the Direct Loan
Program is now the predominant
Federal student loan program.
By proposing revisions to the
regulations, the Secretary aims to
provide clarity and transparency to the
administration of the loans programs.
Over the years there have been
consistent concerns that borrowers are
unable to properly manage their Federal
student loans because of confusion over
their rights and options. This is
particularly true for borrowers who are
delinquent on their loans and borrowers
who experience personal hardship. The
revised regulations would clarify the
rules for borrowers and provide them
with a better understanding of their
rights and responsibilities. Also, the
revised rules would provide better and
clearer guidance to lenders and guaranty
agencies about their roles and
responsibilities in servicing Federal
student loans.
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Discussion of Costs, Benefits and
Transfers
Adding clarity to the loan
rehabilitation process offers many
benefits. The Department believes that
rehabilitation offers benefits for
students, the Department, and the
Nation. Defaulted borrowers may be
more willing to complete the
rehabilitation process. Defaulted
borrowers may see significant
improvements in their credit scores and
purchasing power. As these borrowers
become bigger participants in the
economy, an improved rehabilitation
process should support positive growth.
Improved loan rehabilitation rates
will also allow the Department and
collection agencies to concentrate their
collection efforts on non-paying
borrowers. In general, the more student
loan accounts that are active and
current, the better for the programs. The
Department believes these proposed
regulatory changes will help ensure that
the Federal student loan programs
remain strong and support maximum
access to higher education for American
students.
Over the past decade, the Department
has steadily increased the number of
loans it rehabilitates annually. As Chart
1 shows, in FY 2001 the Department
and guaranty agencies rehabilitated just
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over $223 million in defaulted Federal
student loan debt. By FY 2011, this
number had jumped to $5 billion. The
Department and guaranty agencies also
recovered $12 billion worth of defaulted
loan debt in FY 2011 compared to $5
billion in FY 2001. Part of the increase
in loan rehabilitation can be linked to
growing enrollment, rising tuition, and
two economic slowdowns, which led to
more borrowing. However, the higher
percentage of total collections that
comes from loan rehabilitation shows
that the Department and guaranty
agencies are working with borrowers to
help them take advantage of the
opportunity for loan rehabilitation.
[$mns]
2001
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Total Rehabilitations ...............
Total Collections ..
Rehabilitations as
% of Collections
2005
224
5,124
1,606
5,809
4.4%
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2009
3,722
8,580
27.6%
Even though the proposed regulations
could possibly result in lower payment
amounts for borrowers while they are
rehabilitating their defaulted loans, the
borrowers would still be responsible for
ultimately paying their entire debt.
Furthermore, even if rehabilitation
payments are lowered on average across
the board, the Department believes that
the overall benefits of having more
borrowers current in their debt
payments will outweigh any short-term
cost of reduced payments.
Overall, the true monetary effect of
the proposed regulations would depend
heavily on various factors. The
Department is currently implementing
changes to its income driven repayment
options and expects these changes to
help slow down a rising default rate by
offering improved payment management
options to borrowers. Also, as the
economy continues to improve, the
default rate may drop as more borrowers
find employment.
The proposed regulations would
provide many additional benefits to
borrowers and promote a more efficient
and transparent Federal student loan
program.
By expanding from 90 to 120 days the
window during which a borrower may
qualify for a closed school loan
discharge after withdrawing from a
school that eventually closes, the
number of borrowers who qualify for the
discharge may increase. However,
school closures are a relatively rare
occurrence. In 2007, 43 Title IV
participating schools closed. This
number dropped to 30 in 2008 and to
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3,504
8,820
43.4%
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2011
4,332
10,214
39.7%
18 in 2011. Unlike two decades ago,
when fraudulent institutions would
quickly shut their doors without any
notification to students or regulators,
most closures these days are due to a
loss of accreditation. In most cases,
students who attend schools that lose
accreditation are given ample warning
about a possible closure and can make
educated decisions about continuing
their programs beforehand. While the
extended window may mean that more
borrowers qualify under the proposed
closed school regulations, we do not
believe it will present a significant cost.
In 2011, 214 borrowers received closed
school loan discharges for loans valued
at approximately $870,000. This was an
increase from the 2010 numbers of 50
borrowers with a loan value of $467,000
but still represents a very small portion
of the student loan portfolio.
The proposed revisions to the
forbearance process in the different loan
programs will offer many benefits to
borrowers. By expanding the
circumstances in which lenders may
grant administrative forbearance,
borrowers who had difficulty making
payments but who are trying to rectify
the situation, will receive relief. The
regulations would give the Department
and FFEL lenders more flexibility in
dealing with defaulted borrowers. These
revisions would also clarify the
eligibility for forbearance and promote a
more transparent loan program.
The proposed revisions to § 685.301
would offer benefits for certain
borrowers in non-traditional programs.
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2010
42.4%
5,165
12,006
43.0%
Under the proposed regulations,
students who transfer from one school
into non-term or certain standard nonterm programs at a different school
during the middle of an academic year
would initially be eligible for a Direct
Loan to cover the remainder of the
academic year that began at the prior
school (up to their remaining eligibility
under the annual loan limits), regardless
of whether the new school accepts
credits from the prior school. The
current regulation only allows this
result if the new school accepts transfer
credits from the prior school.
Eligible borrowers would also be able
to receive an initial loan at the new
school for an amount up to the
difference between the annual loan limit
and the amount received at the prior
school, with a loan period covering the
remainder of the academic year that
began at the prior school, followed by a
second loan for up to the full annual
loan limit for the next academic year at
the new school. Under the current
regulations, if the new school does not
accept transfer credits from the prior
school, the initial loan at the new school
must be for the lesser of a full academic
year or for the remainder of the program
at the new school. The maximum loan
amount the student may receive for that
entire period is the difference between
the annual loan limit and the loan
amount received at the prior school.
While the ability of these transfer
students to receive additional loan
funds will result in a cost to the
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government, the Department believes it
will be minimal since these borrowers
will repay those loans.
Borrowers would see other benefits
under the proposed regulations as well.
The proposed revisions to the
Administrative Wage Garnishment
(AWG) hearing process would ensure
that borrowers have a better
understanding of their rights and
responsibilities in that process and
ensure that borrowers are treated
consistently by guaranty agencies and
the Department.
Overall, the proposed regulations
would strengthen the Federal student
loan programs and help support the
American postsecondary education
system. As more and more students now
depend on student loans to pay for their
college education, it is essential that
borrowers fully understand the rights
and responsibilities that are a part of
their student loan obligations. It is also
essential that the student loan programs
operate as efficiently as possible. These
revisions are part of the Department’s
commitment to running efficient loan
programs that support more than ten
million students per year. This number
will grow as the country pursues the
President’s 2020 goal of leading the
world in college degree attainment.
Keeping a strong higher education
system will be essential to America
maintaining its economic advantage in
the world.
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Net Budget Impacts
The regulations are estimated to have
a net budget impact of $2.8 to $3.4
million over ten years from 2013–2022
driven by the expansion of the time
period for eligibility for a closed school
discharge. Consistent with the
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requirements of the Credit Reform Act
of 1990, budget cost estimates for the
student loan programs reflect the
estimated net present value of all future
non-administrative Federal costs
associated with a cohort of loans. A
cohort reflects all loans originated in a
given fiscal year.
In general, these estimates were
developed using the Office of
Management and Budget’s (OMB’s)
credit subsidy calculator. The calculator
takes projected future cash flows from
the Department’s student loan cost
estimation model and produces
discounted subsidy rates reflecting the
net present value of all future Federal
costs associated with awards made in a
given fiscal year. Values are calculated
using a ‘‘basket of zeros’’ methodology
under which each cash flow is
discounted using the interest rate of a
zero-coupon Treasury bond with the
same maturity as that cash flow. To
ensure comparability across programs,
this methodology is incorporated into
the calculator and used Government
wide to develop estimates of the Federal
cost of credit programs. Accordingly,
the Department believes it is the
appropriate methodology to use in
developing estimates for these
regulations. That said, in developing the
following Accounting Statement, the
Department consulted with OMB on
how to integrate our discounting
methodology with the discounting
methodology traditionally used in
developing regulatory impact analyses.
Absent evidence of the effect of these
regulations on student behavior, budget
cost estimates were based on behavior
as reflected in various Department data
sets and longitudinal surveys listed
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under Assumptions, Limitations, and
Data Sources. Program cost estimates
were generated by running projected
cash flows related to each provision
through the Department’s student loan
cost estimation model. Student loan cost
estimates are developed across five risk
categories: Students at less than fouryear for-profit institutions, students at
less than four-year public and non-profit
institutions, freshmen/sophomores at
four-year institutions, juniors/seniors at
four-year institutions, and graduate
students. Risk categories have separate
assumptions based on the historical
pattern of behavior—for example, the
likelihood of default or the likelihood to
use statutory deferment or discharge
benefits—of borrowers in each category.
Closed School Discharge
Under current regulations §§ 674.33,
682.404, and 685.214, student borrowers
may qualify for a loan discharge if they
are unable to complete a program of
study because a school closes or if they
withdraw no more than 90 days before
school closure. The Secretary could
extend the 90-day window based on
exceptional circumstances. The
proposed regulations would extend the
90-day period to a 120-day period and
provide examples of what qualifies as
an exceptional circumstance. We
estimate these changes to have a cost of
approximately $3.1 million over 10
years as the pool of borrowers eligible
for discharge will increase. The costs are
limited by the small number of closed
schools, the availability of teach-outs,
and the assignment of recoveries to the
Department. Chart 2 shows the 128
closed schools since 2007 by year and
institutional category.
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Since 2007, closed school discharges
totaling $5.9 million have been granted
to approximately 1,600 borrowers,
representing approximately 3.4 percent
of borrowers estimated to be eligible for
discharge under the existing 90-day
window. Some borrowers did not
receive a discharge because the
institution arranged a teach-out or
students completed their educational
program with credit for the work at the
closed school. By extending the window
to 120 days, the Department estimates
that an additional 100 students would
receive closed school discharges totaling
approximately $400,000 annually.
This projected amount was
determined by estimating that the
almost 1,600 borrowers with discharges
over five years were evenly distributed,
resulting in approximately 320
borrowers with closed school discharges
annually. The Department then assumed
that extending the window to 120 days
would increase the number of borrowers
receiving discharges by about a third
since some students would already have
qualified under the 90-day window and
we are adding 30 days, about a third of
the original 90-day window. As the
discharge amounts involved are small,
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no subsidy impact is estimated. On a
cash basis, the estimated budget impact
of expanding closed school discharge is
$2.8 to $3.4 million over 10 years when
discounted at 7 percent or 3 percent.
The Department welcomes comments
about these assumptions and estimates
and will consider them in drafting the
final rule.
Loan Rehabilitation
Two areas related to loan
rehabilitation affected by the proposed
regulations are the determination of the
reasonable and affordable payment for
loan rehabilitation and the limitations
on the use of administrative wage
garnishment while a borrower is
attempting to rehabilitate a defaulted
loan. While the proposed regulatory
changes in both areas would change the
period of time and sources of payments
the Department receives, the
Department does not estimate that the
proposed regulations would have any
significant budget impact.
The proposed regulations refine the
process for determining the reasonable
and affordable payment for loan
rehabilitation to improve consistency
across loan programs. The current
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regulations for the FFEL Program
require guaranty agencies and their
collection agents to negotiate a
reasonable and affordable payment for
loan rehabilitation with the borrower
that takes into account all of the
borrower’s financial circumstances. The
Direct Loan Program currently does not
have similar regulatory language
describing how the Department
determines a reasonable and affordable
payment amount, but the program does
have a similar process for receiving
income and expense information and
negotiating a payment with the
borrower.
Borrower advocates have claimed that
this process results in inconsistent
treatment across guaranty agencies and
payments that may not be reasonable
and affordable for borrowers. Borrower
advocates have suggested that the
Department require the use of the IBR
formula to establish the reasonable and
affordable payment for loan
rehabilitation to improve consistency
and potentially reduce the borrower’s
rehabilitation payment amount.
Guaranty agencies and the Department
wanted to preserve the flexibility to
work with borrowers, but agreed to have
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the IBR formula as a second option if
the borrower objected to the reasonable
and affordable payment initially
determined by the Department or the
guaranty agency. The Department and
several negotiators agreed to the use of
the IBR formula with the caveat that an
IBR formula calculation of $0 would
result in a monthly rehabilitation
payment of $5 (not $0), since a key part
of the rehabilitation process is getting
borrowers in the habit of making
payments. Additionally, to make the
Direct Loan Program regulations more
comprehensive and informative for
borrowers, the Department agreed to
incorporate the regulations governing
the determination of a reasonable and
affordable payment amount into the
Direct Loan Program regulations.
With approximately $1.49 billion in
defaulted loan balances rehabilitated by
the Department in FY 2011, loan
rehabilitation is a valuable collections
tool that also allows borrowers to
improve their credit history and regain
eligibility for title IV, HEA Federal
student aid. The Department and
guaranty agencies have emphasized
keeping the rehabilitation payment
amount close to the payment the
borrower will have to make following
rehabilitation to avoid sharp increases
in the required payment. The
availability of IBR or ICR payment plans
after rehabilitation expands the range of
payments possible during rehabilitation
that would be in line with postrehabilitation payments. This new
standard may also help decrease the
number of rehabilitation borrowers who
re-default, as their required
rehabilitation plan payment amount
will be very similar to the payment
amount they will make when they
return to regular repayment. The
proposed regulations would retain the
current FFEL Program regulations
requiring consideration of the
borrower’s income and expenses while
clarifying the types of incomes and
expenses to consider, require the use of
a standardized form, and allow
borrowers to object to the payment
determined based on the individual’s
income and expenses and included in
the written rehabilitation agreement
offered to the borrower. A borrower who
objected to the amount required under
that method would be able to obtain an
alternative amount determined using
the IBR formula. A borrower could
choose between the two proposed
payment amounts. As the negotiation
process and factors considered in
determining the reasonable and
affordable payments will largely remain
the same for FFEL Program loans, the
Department does not estimate a budget
impact from the proposed changes.
With respect to the Direct Loan
portfolio, the Department would be
required to consider the same income
and expense factors, with the same
possibility of the IBR formula as a
fallback calculation for borrowers who
object to the first payment amount that
the Department offers to the borrower.
For individual borrowers, the payment
offered as an alternative rehabilitation
amount based on IBR might be less than
what the Department would determine
to be appropriate based on an
assessment of the borrower’s income
and expenses. If this is the case, the
Department would collect less money
during the months the borrower
attempts loan rehabilitation, but the
borrower would still owe the remaining
balance after rehabilitation. In addition,
to the extent lower payments encourage
borrowers to complete a loan
rehabilitation and continue payments
they otherwise would not make, the
proposed regulations may increase total
payments over the life of the loan for
some borrowers. The likelihood of
borrowers paying less, the same, or
more over the life of a loan over time as
a result of the proposed changes in
defining a reasonable and affordable
payment is uncertain, but the
Department does not expect it to have
an appreciable budget impact.
Perkins Loans Provisions
The proposed regulations address a
few areas related to the Perkins Loan
Program including: Revising
cancellation progression rates;
modifying the treatment of healthrelated breaks in service for certain loan
cancellations; making the eligibility for
a graduate fellowship deferment
consistent with FFEL and Direct Loan
program criteria; making a technical
correction to eliminate the debt-toincome economic hardship deferment
category for borrowers working less than
full-time; defining ‘‘on-time’’ for
rehabilitation payments; and allowing
assignment to the Department of Perkins
Loans made before September 13, 1982,
without the borrower’s SSN. The
Department does not estimate a
significant budget impact from these
provisions. No appropriations have been
made to support the Perkins Loan
Program since 2008, and institutions
make loans from payments made on
their portfolios of existing loans. The
effect on the Federal budget of increased
costs in the Perkins Loan Program is a
possible reduction of Federal Perkins
assets available to be recalled in future
years.
The technical changes to make the
debt-to-income economic hardship
deferment, graduate deferment
eligibility, and on-time payment
standard for rehabilitation payments in
the Perkins Loan Program more
consistent with the FFEL and Direct
Loan programs are not expected to have
any budget impact. Students with
graduate fellowships are already eligible
for deferments in the Perkins Loan
Program, and the Department estimates
that aligning the definition of a graduate
fellowship in the Perkins Loan Program
with that used in the FFEL and Direct
Loan programs will not expand the pool
of graduate fellows allowed a deferment.
For the on-time payments standards for
loan rehabilitation purposes, the Perkins
Loan Program does not currently have a
regulatory standard, but the discretion
institutions have in setting their own
standard is constrained by the
requirement that nine monthly
payments be made for rehabilitation.
The slight changes in timing
associated with defining the on-time
payment standard at 20 days is not
expected to change the number of
borrowers successfully rehabilitating
their Perkins loans or the ultimate
amount collected from those borrowers,
so no budget impact is expected. The
ability to assign loans to the Department
without the borrower’s SSN may
facilitate some institutions leaving the
program and, if the Department is able
to collect on those loans, result in some
small additional revenues.
As shown in Table 1, the proposed
regulations related to Perkins Loan
cancellation do involve some
substantial cancellation amounts (e.g.
Teacher Service), but the limited scope
of the changes and the reduction of
Federal funding in the Perkins Loan
Program limits the net budget impact on
the Federal government.
TABLE 1—PERKINS LOAN CANCELLATIONS BY CANCELLATION TYPE
[IN $mn]
Cancellation type
2007
Nurse/Medical Tech .................................
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29.6
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35.2
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33.7
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TABLE 1—PERKINS LOAN CANCELLATIONS BY CANCELLATION TYPE—Continued
[IN $mn]
Cancellation type
2007
2008
2009
2010
2011
Grand total
Teacher Service .......................................
Teaching in Teacher Shortage Field .......
Law Enforcement .....................................
Early Intervention .....................................
Volunteer Service .....................................
Death, Disability, and Bankruptcy ............
Defense Teacher/Military prior to 1972 ...
Military Service .........................................
Speech Pathologist ..................................
Firefighter .................................................
Librarian ...................................................
Other ........................................................
Tribal College ...........................................
20.4
5.8
4.4
4.4
3.0
2.8
0.2
0.1
........................
........................
........................
0.00
........................
21.1
5.5
4.4
4.2
3.1
3.1
0.1
0.1
........................
........................
........................
0.02
........................
21.4
5.6
4.8
4.1
3.4
3.2
0.1
0.1
0.0
........................
0.0
0.0
........................
22.4
5.8
5.4
4.5
3.5
2.9
0.1
0.1
0.1
0.1
0.0
0.01
0.0
19.9
5.0
5.7
4.1
3.7
2.9
0.0
0.1
0.2
0.1
0.1
0.01
0.0
105.3
27.6
24.6
21.2
16.7
14.8
0.5
0.5
0.4
0.2
0.1
0.1
0.0
Total .........................................................
67.4
71.1
75.5
80.0
75.4
369.5
Source: NSLDS.
As detailed in the Summary of
Proposed Regulations section of this
preamble, proposed § 674.52(g)(1)
would change the Department’s
longstanding policy that switching
cancellation categories results in a
borrower falling back to the first-year
cancellation rate. Instead, the proposed
regulations would allow borrowers who
switch between cancellation categories
with the same rate of progression to
continue the progression from the last
year under the prior category; however,
the borrower would fall back to the firstyear cancellation rate if the borrower
switches to a category with a different
progression rate.
The three Perkins Loan cancellation
progression rates are summarized in
Table 2, and all categories except early
childhood education, Peace Corps
volunteer, or voluntary service have a
15/15/20/20/30 percent cancellation
progression. After a Perkins Loan
borrower receives cancellations for five
years at these rates, 100 percent of the
original principal balance of the
borrower’s loan is canceled. While some
borrowers may be able to accelerate
their cancellation or achieve full
cancellation, the nature of the categories
affected by the policy change would
limit the likelihood of borrowers
switching between them. To the extent
a small number of borrowers do switch
and are allowed to maintain their
progression rate instead of falling back
to year one, the primary effect would be
on the timing of cancellation received,
not the amount.
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TABLE 2—PERKINS LOAN CANCELLATION PROGRESSION RATES
Firefighter, Law Enforcement, Teacher,
Teacher in Shortage Area, Librarian,
Military Service, Defense Teacher/Military prior to 1972, Nurse/Medical Tech,
Speech Pathologist, Early intervention,
and Tribal College.
§ 674.53, § 674.56,
§ 674.57, § 674.59.
Early Childhood Education .........................
§ 674.58 ....................
Peace Corps or Volunteer Service .............
§ 674.60 ....................
Additionally, proposed § 674.52(c)
would replace the current Perkins Loan
treatment of a break in teaching service
for pregnancy or illness. Currently
teachers must complete the first half of
the academic year, begin the second
half, and have the employer agree that
the teacher fulfilled that year of the
contract. In the FFEL and Direct Loan
programs, if a borrower is unable to
complete the second half of the year of
teaching for reasons covered by the
FMLA, the service could count towards
cancellation if the employer agrees the
contract has been fulfilled for the year.
The proposed regulations would
apply the FMLA-related break-in-service
exception to all Perkins Loan
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15%
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20%
30%
15% for each year of service; Up to 100% can be
cancelled if service extends to 7 years
15%
15%
cancellation categories, not just
teachers. As Perkins loan cancellation
does not require consecutive service, the
Department expects this provision may
allow some borrowers to receive credit
for a year that would not otherwise have
counted as service and speed up the
ultimate cancellation of the loan, but it
will not significantly expand the
number of borrowers who achieve loan
cancellation as their next year of service
could qualify instead. These
cancellation provisions may affect the
timing of when borrowers achieve
cancellation, but the Department does
not estimate that they will significantly
increase the overall amount cancelled.
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20%
................
100%.
up to 100%.
70%.
Additional Provisions
Many of the proposed regulations
have no impact on the Federal budget as
they reflect statutory changes already
incorporated into the budget baseline or
clarify existing practices. Several areas
of the current regulations that are
proposed for removal from the
regulations by this NPRM relate to
origination and administration of FFEL
Program loans. Those regulations
became irrelevant when new FFEL
Program loan originations ended as of
July 1, 2010. Any costs or savings
resulting from the end of FFEL Program
loan originations were attributed to the
SAFRA Act, so there is no estimated
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budget impact from these provisions.
The budget impact of these changes was
already incorporated into the budget
baseline.
Updates were also made to the Direct
Loan regulations to incorporate specific
provisions that previously were
included in the Direct Loan regulations
by cross-reference to the FFEL
regulations. The restructuring of the
Direct Loan regulations to remove
references to the FFEL Program
regulations or to reflect current practices
is not estimated to have a budget
impact.
Assumptions, Limitations, and Data
Sources
sources, such as the U.S. Census
Bureau, were also used.
In developing these estimates, a wide
range of data sources were used,
including data from the National
Student Loan Data System; operational
and financial data from Department of
Education systems, including especially
the Fiscal Operations Report and
Application to Participate (FISAP); and
data from a range of surveys conducted
by the National Center for Education
Statistics, such as the 2008 National
Postsecondary Student Aid Survey and
the 2004 Beginning Postsecondary
Student Survey. Data from other
Accounting Statement
As required by OMB Circular A–4
(available at http://
www.whitehouse.gov/sites/default/files/
omb/assets/omb/circulars/a004/a4.pdf), in Table 3, we have prepared an
accounting statement showing the
classification of the expenditures
associated with the provisions of these
regulations. This table provides our best
estimate of the changes in Federal
student aid payments as a result of these
regulations. Expenditures are classified
as transfers from the Federal
Government to student loan borrowers.
TABLE 3—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES
[in millions]
Category
Benefits
7%
Greater consistency between the title IV loan programs. .......................................................................................
Not Quantified
Category
Costs
Costs of compliance with paperwork requirements ................................................................................................
Category
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In the spirit of good governance, the
Department carefully considers any
regulatory action or revision to ensure
that the final decision represents what
the Department believes is the best
feasible option. First and foremost, the
Department considered whether or not
negotiated rulemaking was necessary in
this instance and concluded that the
magnitude of the statutory and
regulatory revisions to these rules
would require stakeholder input. Many
of the regulatory alternatives proposed
by non-Federal negotiators were
ultimately rejected by the Department
because of statutory limitations.
For example, some non-Federal
negotiators raised questions about the
Department’s implementation of the
statutory requirement that a school must
close in order for the borrower to
receive a loan discharge. The nonFederal negotiators asked the
Department to clarify whether students
would be eligible for a closed school
discharge in the event an online school
closed one of its locations or ceased to
operate one of its programs.
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In response to the negotiators’
questions, the Department noted that,
for purposes of the discharge, the terms
‘‘school’’ and ‘‘location’’ are defined by
the HEA. If a school (distance education
or traditional) closes one of its
programs, a borrower does not qualify
for a closed school discharge because
the school itself did not close. The
entire school has to close for online
distance education students to receive a
discharge. The Department also noted
that, under the regulations, for students
attending an online school that operates
at many different locations, the main
campus or main location of the online
school would have to close in order for
the online distance education student to
receive the discharge. Although this
topic engendered much discussion, the
provisions governing what constitutes a
school and location in the current
regulations at §§ 674.33(g), 682.402(d),
and 685.214(c) are based on statutory
requirements.
The Department proposed amending
regulations so that a borrower’s
reasonable and affordable payment
amount for loan rehabilitation would be
calculated using the IBR formula.
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3%
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Transfers
Reduced payments to Federal Government from additional borrowers receiving closed school discharges ........
Alternatives Considered
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$0.40
3%
$0.40
However, there was strong disagreement
among the non-Federal negotiators
about the merits of this proposal.
Negotiators representing guaranty
agencies argued that requiring the use of
the IBR formula would reduce their
ability to work with borrowers to arrive
at a rehabilitation payment amount
acceptable to both the guaranty agency
and to the borrower. Negotiators
representing borrower advocacy groups
strongly disagreed with the argument
that the use of IBR would reduce the
agencies’ ability to work with
borrowers. After careful deliberation,
the Department decided to allow
guaranty agencies to keep their
flexibility in negotiating reasonable and
affordable rehabilitation payments, but
it ensured that borrowers would be
made aware of their right to ask for a
recalculation of the payment amount.
The Department considered other
smaller proposals and alternatives as
discussed in the preamble but believes
that these proposed regulations
represent the best possible and most
feasible outcomes.
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Clarity of the Regulations
Executive Order 12866 and the
Presidential memorandum ‘‘Plain
Language in Government Writing’’
requires each agency to write
regulations that are easy to understand.
The Secretary invites comments on
how to make these proposed regulations
easier to understand, including answers
to questions such as the following:
• Are the requirements in the
proposed regulations clearly stated?
• Do the proposed regulations contain
technical terms or other wording that
interferes with their clarity?
• Does the format of the proposed
regulations (grouping and order of
sections, use of headings, paragraphing,
etc.) aid or reduce their clarity?
• Would the proposed regulations be
easier to understand if we divided them
into more (but shorter) sections? (A
‘‘section’’ is preceded by the symbol
‘‘§ ’’ and a numbered heading; for
example, § 682.209 Repayment of a
loan.)
• Could the description of the
proposed regulations in the
SUPPLEMENTARY INFORMATION section of
the preamble be more helpful in making
the proposed regulations easier to
understand? If so, how?
• What else could we do to make the
proposed regulations easier to
understand?
To send any comments that concern
how the Department could make these
proposed regulations easier to
understand, see the instructions in the
ADDRESSES section of this preamble.
they are independently owned and
operated and not dominant in their field
of operation, or as small entities if they
are institutions controlled by
governmental entities with populations
below 50,000. The revenues involved in
the sector affected by these regulations,
and the concentration of ownership of
institutions by private owners or public
systems means that the number of title
IV, HEA eligible institutions that are
small entities would be limited but for
the fact that the nonprofit entities fit
within the definition of a small
organization regardless of revenue.
Given the definitions above, several of
the entities subject to the proposed
regulations are small, leading to the
preparation of the following Initial
Regulatory Flexibility Analysis.
Regulatory Flexibility Act Certification
The proposed regulations amend the
FFEL and Direct Loan program
regulations to: Reflect changes made to
the HEA by the SAFRA Act; incorporate
other statutory changes in the Direct
Loan Program regulations; update,
strengthen, and clarify various areas of
the Student Assistance General
Provisions, Perkins Loan, FFEL, and
Direct Loan program regulations; and
provide for greater consistency in the
regulations governing title IV, HEA
student loan programs.
In addition, On January 21, 2011,
President Obama issued Executive
Order 13563, ‘‘Improving Regulation
and Regulatory Review’’ (76 FR 3821).
Initial Regulatory Flexibility Analysis
These proposed regulations would
affect institutions that participate in the
title IV, HEA programs, including
alternative certification programs not
housed at institutions, and individual
borrowers. The U.S. Small Business
Administration (SBA) Size Standards
define for-profit institutions as ‘‘small
businesses’’ if they are independently
owned and operated and not dominant
in their field of operation with total
annual revenue below $7,000,000. The
SBA Size Standards define nonprofit
institutions as small organizations if
Description of the Reasons That Action
by the Agency Is Being Considered
With these proposed regulations, the
Department seeks to remove certain
regulations governing the FFEL Program
that are no longer needed and to revise
Direct Loan Program regulations to
ensure that they are comprehensive and
to add consistency and clarity to all
regulations governing student loans by
revising where applicable. The
Department also seeks to provide clarity
to the loan rehabilitation process for
borrowers with defaulted student loans
by developing clear guidance and
regulations.
Succinct Statement of the Objectives of,
and Legal Basis for, the Regulations
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The order requires all Federal agencies
to ‘‘consider how best to promote
retrospective analysis of rules that may
be outmoded, ineffective, insufficient,
or excessively burdensome, and to
modify, streamline, expand, or repeal
them in accordance with what has been
learned.’’ Accordingly, on August 22,
2011, the Department issued its Plan for
Retrospective Analysis of Existing
Regulations. (See ed.gov/policy/gen/reg/
retrospective-analysis/index.html).
Our plan identified a number of
regulatory initiatives for retrospective
review and analysis. One of those
initiatives was transitioning from the
FFEL Program, under which new loans
ceased on July 1, 2010, to the Direct
Loan Program. This proposed rule
would remove obsolete FFEL Program
regulations.
Description of and, Where Feasible, an
Estimate of the Number of Small
Entities to Which the Regulations Will
Apply
The proposed regulations would
affect several categories of entities
involved in the administration and
servicing of Federal student loans. Many
of the proposed regulations relate to
notifications, servicing, or collection
activities done by loan servicers or
entities acting for the Federal
government. The Department does not
expect these entities to meet the
applicable definition of ‘‘small entity.’’
The proposed regulations related to
Perkins Loans will affect the institutions
that participate in the program, some of
which would be classified as small
entities. As discussed above, private
non-profit institutions that do not
dominate in their field are defined as
small entities and a few other
institutions that participate in the
Perkins Loan Program do not have
revenues above $7 million and are also
categorized as small entities. Table 4
summarizes AY 2010–11 Perkins loan
disbursements by institutions that
qualify as small entities. Based on the
definition of non-profit institutions as
small entities, approximately 59 percent
of institutions that disbursed Perkins
loans in AY2010–11 were small entities.
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TABLE 4—AY2010–11 PERKINS LOAN DISBURSEMENT SUMMARY
Perkins Loan Institutions with disbursements .................................................
Small entities with Perkins disbursements ......................................................
% of small entities by control ...........................................................................
Overall Disbursements ....................................................................................
% by control .....................................................................................................
Amounts at Small Entities ...............................................................................
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0.4%
387,694,908
45.26%
53,467
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874
100.0%
448,589,990
52.37%
448,589,990
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25
23.4%
20,332,961
2.37%
1,012,596
1526
901
59.0%
856,617,859
100%
2,808,851
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The Secretary invites comments from
small entities as to whether they believe
the proposed changes would have a
significant economic impact on them
and, if so, requests evidence to support
that belief.
Description of the Projected Reporting,
Recordkeeping and Other Compliance
Requirements of the Regulations,
Including an Estimate of the Classes of
Small Entities That Will Be Subject to
the Requirement and the Type of
Professional Skills Necessary for
Preparation of the Report or Record
The various provisions in the
proposed regulations would modify or
increase the paperwork burden on
entities participating in the FFEL, Direct
Loan, or Perkins Loan programs, as
described in the Paperwork Reduction
Act section of this NPRM. Much of this
burden would be associated with
OMB Control
No.
Description
FFEL forbearance ............................................................................................
Reasonable and Affordable loan rehab ...........................................................
Suspension of AWG for rehab borrowers .......................................................
School Enrollment Status Reporting ...............................................................
Deferment of repayment—Federal Perkins Loans—definition of eligible
graduate fellowship programs ......................................................................
AWG 3rd party contractors; hearing requests, and hearing administration ....
Lender disclosure ............................................................................................
Due diligence in making a loan .......................................................................
Equal credit—removal of provision ..................................................................
Eligibility for interest benefits ...........................................................................
Basic program agreement ...............................................................................
Records, reports, inspection requirements for GA programs ..........................
Prohibited use of Operating Fund when it contains Federal Fund assets—
removal of provision .....................................................................................
Funds transferred to Operating Fund by a GA—removal of provision ...........
FISL loan related—removal of provisions .......................................................
School as lender—removal of provision ..........................................................
Exit counseling .................................................................................................
Disqualification review of limitation, suspension, and termination actions
taken by GA against a school—removal of provision ..................................
Identification, to the Extent Practicable,
of all Relevant Federal Regulations
That May Duplicate, Overlap or
Conflict With the Proposed Regulation
The proposed regulations are unlikely
to conflict with or duplicate existing
Federal regulations.
Alternatives Considered
As described above, the Department
participated in negotiated rulemaking in
developing the proposed regulations
and considered a number of options for
some of the provisions. No alternatives
were aimed specifically at small
entities.
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Paperwork Reduction Act of 1995
Sections 674.19, 674.33, 674.34,
682.102, 682.200, 682.205, 682.206,
682.208, 682.209, 682.210, 682.211,
682.212, 682.214, 682.216, 682.301,
682.305, 682.401, 682.402, 682.404,
682.405, 682.406, 682.409, 682.410,
682.411, 682.412, 682.414, 682.417,
682.418, 682.421, 682.507, 682.508,
682.511, 682.515, 682.602, 682.603,
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Small entity
hours
Cost($)
Cost per small
entity
1845–0020
1845–0020
1845–0020
1845–0019
264
69,161
1,257
24,342
6,497
1,702,052
30,935
599,068
650
154,732
2,812
54,461
1845–0019
1845–0020
1845–0020
1845–0020
1845–0020
1845–0020
1845–0020
1845–0020
175
57,568
(20,461)
(40,923)
(40,923)
(40,923)
(11,174)
(5,587)
4,316
1,416,748
(503,556)
(1,007,112)
(1,007,112)
(1,007,112)
(274,982)
(137,495)
22
128,795
(50,356)
(100,711)
(100,711)
(100,711)
(27,498)
(12,500)
1845–0020
1845–0020
1845–0020
1845–0020
1845–0020
(111,739)
(111,739)
(163,692)
(206,534)
(134,247)
(2,749,889)
(2,749,889)
(4,028,450)
(5,082,791)
(3,303,819)
(249,990)
(249,990)
(884.40)
(1,115.87)
(725.32)
1845–0020
(111,739)
(2,749,889)
(249,990)
682.604, 682.605, 682.610, 682.711,
682.712, 682.713, 685.205, 685.211,
685.214, contain information collection
requirements. Under the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C.
3507(d)), the Department of Education
has submitted a copy of these sections,
related forms, and Information
Collection Requests (ICRs) to the Office
of Management and Budget (OMB) for
its review.
As part of its continuing effort to
reduce paperwork and respondent
burden, the Department conducts a
preclearance consultation program to
provide the general public and Federal
agencies with an opportunity to
comment on proposed and continuing
collections of information in accordance
with the PRA (44 U.S.C. 3506(c)(2)(A)).
This helps ensure that: The public
understands the Department’s collection
instructions, respondents can provide
the requested data in the desired format,
reporting burden (time and financial
resources) is minimized, collection
instruments are clearly understood, and
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borrowers or the Department and its
agents and therefore does not affect
small entities. Table 5 summarizes the
estimated burden on small entities,
primarily institutions and guaranty
agencies, from the paperwork
requirements associated with the
proposed regulations. As discussed in
the Paperwork Reduction Act section of
this NPRM, several of the provisions
reduce the estimated burden on
institutions, lenders, and guaranty
agencies from the elimination of
regulatory provisions or changes to
requirements and this is reflected by the
negative numbers in the table.
the Department can properly assess the
impact of collection requirements on
respondents.
The forms that would be used to
collect the information related to these
proposed regulations and the ICRs
related to the proposed regulations and
forms are available for comment on
Regulations.gov under the same Docket
number as the proposed regulations. We
ask that commenters submit a separate
set of comments on the paperwork
burdens that would be imposed under
the proposed regulations and associated
forms. The OMB Control numbers
associated with the proposed
regulations and related forms are 1845–
0015, 1845–0019, 1845–0020, 1845–
NEW1, and 1845–NEW2.
Please note that the comment period
regarding paperwork burden runs
concurrently with the comment period
for the proposed regulations. We have
asked OMB for emergency review
because the Department needs to start
collecting this information before the
start of the next academic year, as soon
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as the regulations become final. The
comment period for the burden
associated with these regulations is 30
days. See the DATES section of this
preamble for the deadline to submit
PRA comments.
A Federal agency may not conduct or
sponsor a collection of information
unless OMB approves the collection
under the PRA and the corresponding
information collection instrument
displays a currently valid OMB control
number. Notwithstanding any other
provision of law, no person is required
to comply with, or is subject to penalty
for failure to comply with, a collection
of information if the collection
instrument does not display a currently
valid OMB control number.
In the final regulations we will
display the control number assigned by
OMB to any information collection
requirement proposed in this NPRM and
adopted in the final regulations.
Sections 682.211 and 685.205—
Forbearance
The proposed regulations amend the
current FFEL Program regulations to
authorize a lender, prior to resolving a
default claim payment, to grant
forbearance to a borrower or endorser
who is in default on a loan based on the
borrower’s or endorser’s oral request.
The current regulations require
borrowers to submit a written request
for forbearance. The burden calculations
address only the added burden created
by accepting oral requests for
forbearance. The proposed regulations
provide that a forbearance agreement in
this situation must include a new
agreement to repay the debt signed by
the borrower or endorser (as required
under the current regulations), or a
written or oral affirmation of the
borrower’s or endorser’s obligation to
repay the debt. The proposed
regulations define ‘‘affirmation’’ for this
purpose to be an acknowledgment of the
loan by the borrower or endorser in a
legally binding manner that can take the
form of: (1) A new signed repayment
agreement or schedule, or another form
of signed agreement to repay the debt
(as under current regulations); (2) an
oral acknowledgment and agreement to
repay the debt that is documented by
the lender in the borrower’s or
endorser’s file and confirmed by the
lender in a notice to the borrower; or (3)
a payment made on the loan by the
borrower or endorser. The proposed
regulations also specify that if a
forbearance in this situation is based on
the borrower’s or endorser’s oral request
and affirmation, the lender must orally
review with the borrower the terms and
conditions of the forbearance. The
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lender must also send the borrower or
endorser a notice that confirms the
terms of the forbearance and the
borrower’s or endorser’s affirmation of
the obligation to make the first payment
under the forbearance agreement within
30 days after entering into that
agreement. The proposed regulations
require the lender to retain a record of
the terms and conditions of the
forbearance and affirmation in the
borrower’s or endorser’s file.
For the 2011 calendar year, the last
year for which data are available, we
estimate that 172,915 FFEL borrowers
requested forbearance after defaulting
on a loan. Of that number, 49,350
borrowers have FFEL program loans
held by lenders. Of those borrowers, we
estimate that 25 percent (12,338
borrowers) would exercise the option in
these proposed regulations to orally
acknowledge the debt and agree to repay
the debt. The remaining 123,565 loans
for which we estimate borrowers will
request forbearance after defaulting will
be held by the Department. We estimate
that 25 percent of those borrowers
(30,891 borrowers) who request
forbearance from the Department will
exercise the option to orally
acknowledge the debt and agree to repay
the debt, as would be authorized under
these proposed regulations. Because
OMB requires Federal agencies to
account for burden imposed on nonFederal entities separately by type, i.e.
public, not-for-profit, and for-profit, the
following analysis of the burden
imposed on lenders other than the
Department is broken down by the types
of entities. Note that State guaranty
agencies are covered under the ‘‘public’’
type of entities.
Of the FFEL Program loans held by
lenders, we estimate that public holders
(State guaranty agencies) will have 2
FFEL borrowers who seek to orally
acknowledge a defaulted FFEL Program
loan. On average, we estimate that it
would take the lender 0.17 hours (10
minutes) per oral acknowledgment to
orally review with the borrower the
terms and conditions of the forbearance
and document the conversation and
place that documentation in the
borrower’s or endorser’s file. For public
holders, we estimate that burden would
increase by 0.34 hours (2 borrowers
multiplied by 0.17 hours per oral
forbearance request).
Of the FFEL Program loans, we
estimate that not-for-profit holders will
have 1,551 FFEL borrowers who seek an
oral forbearance on a defaulted FFEL
program loan. On average, we estimate
that it would take the lender 0.17 hours
(10 minutes) per oral acknowledgment
to orally review with the borrower the
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terms and conditions of the forbearance
and document the conversation and
place that documentation in the
borrower’s or endorser’s file. For notfor-profit holders, we estimate that
burden would increase by 264 hours
(1,551 borrowers multiplied by 0.17
hours per oral forbearance request).
Of the FFEL Program loans, we
estimate that for-profit holders would
have 10,785 FFEL borrowers who seek
an oral forbearance on a defaulted FFEL
Program loan. On average, we estimate
that it would take the lender 0.17 hours
(10 minutes) per oral acknowledgment
to orally review with the borrower the
terms and conditions of the forbearance
and document the conversation and
place that documentation in the
borrower’s or endorser’s file. We
estimate that burden would increase by
1,833 hours (10,785 borrowers
multiplied by 0.17 hours per oral
forbearance request) at for-profit
holders.
We estimate there would be an equal
amount of burden on the borrower
engaged in the oral acknowledgement
and agreement to repay the debt request
with the lender. The oral
acknowledgment process would
increase burden by 7,349 hours for all
FFEL borrowers (12,338 held by lenders
and 30,891 ED-held = 43,229 borrowers
multiplied by 0.17 hours per oral
forbearance request). Since there is no
FFEL general forbearance form
approved by OMB, the proposed
regulations would impose new burden.
Collectively, we estimate that these
proposed FFEL forbearance regulations
would increase burden by 9,446 hours
under OMB Control Number 1845–0020.
The proposed regulations would
amend the current Direct Loan Program
regulations to authorize the Secretary,
prior to the loan being transferred to the
Department’s default collections office,
to grant forbearance to a borrower or
endorser who is in default on a loan
based on the borrower’s or endorser’s
oral request. The proposed regulations
provide that a forbearance agreement in
this situation must include a new
agreement to repay the debt signed by
the borrower or endorser (as required
under the current regulations), or a
written or oral affirmation of the
borrower’s or endorser’s obligation to
repay the debt. The proposed
regulations define ‘‘affirmation’’ for this
purpose to be an acknowledgment of the
loan by the borrower or endorser in a
legally binding manner that can take the
form of: (1) A new signed repayment
agreement or schedule, or another form
of signed agreement to repay the debt
(as under current regulations); (2) an
oral acknowledgment and agreement to
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repay the debt that is documented by
the Secretary in the borrower’s or
endorser’s file and confirmed by the
Secretary in a notice to the borrower; or
(3) a payment made on the loan by the
borrower or endorser. The proposed
regulations also specify that if a
forbearance in this situation is based on
the borrower’s or endorser’s oral request
and affirmation, the Secretary must
orally review with the borrower the
terms and conditions of the forbearance,
and that the Secretary must send the
borrower or endorser a notice that
confirms the terms of the forbearance
and the borrower’s or endorser’s
affirmation of the obligation to make the
first payment under the agreement
within 30 days after entering into that
agreement. The proposed regulations
require the Secretary to retain a record
of the terms and conditions of the
forbearance and affirmation in the
borrower’s or endorser’s file.
For the 2011 calendar year, 62,905
Direct Loan borrowers requested
forbearance after defaulting on a loan.
Of that number, we estimate that 25
percent (15,726 borrowers) would have
exercised an option to orally
acknowledge the debt and agree to repay
the debt. On average, we estimate that
it would take a borrower 0.17 hours (10
minutes) per oral acknowledgment to
listen to the list of terms and conditions
of the forbearance as they are reviewed
with the borrower. The burden
associated with the completion of the
General Forbearance Request form,
OMB 1845–0031, is estimated to average
0.2 hours (12 minutes). Therefore, the
net reduction in burden to provide an
oral acknowledgement rather than
complete the form is the difference of
the two or 0.03 hours (0.20 hours minus
0.17 hours or 2 minutes) per oral
forbearance.
We estimate that burden would
decrease by 472 hours (15,726
borrowers multiplied by 0.03 hours per
oral forbearance) under OMB Control
Number 1845–NEW2.
Sections 682.405(b) and 685.211(f)—
Reasonable and Affordable Loan
Rehabilitation Agreement
The proposed regulations would add
new §§ 682.405(b)(1)(iii) and
685.211(f)(1)(i), requiring a guaranty
agency and the Secretary, respectively,
to base determinations of reasonable
and affordable rehabilitation payment
amounts of defaulted loans on
information provided on an OMBapproved form, and, if requested,
supporting documentation.
Proposed §§ 682.405(b)(1)(iii)(A) and
685.211(f)(1)(i)(A) would require a
guaranty agency and the Secretary to
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consider the borrower’s, and if
applicable, the borrower’s spouse’s
current disposable income in
determining a reasonable and affordable
rehabilitation payment amount on a
defaulted loan. Under proposed
§§ 682.405(b)(1)(iii)(A) and
685.211(f)(1)(i)(A), spousal income
would not be considered if the spouse
does not contribute to the borrower’s
household income.
Proposed §§ 682.405(b)(1)(iii)(B) and
685.211(f)(1)(i)(B) would require a
guaranty agency and the Secretary to
consider the borrower’s family size, as
defined in § 682.215(a)(3) in
determining the borrower’s loan
rehabilitation payment amount.
In calendar year 2011, there were
approximately 299,159 FFEL borrowers
(192,029 borrowers whose FFEL
program loans are held by lenders and
107,130 FFEL program borrowers whose
loans are held by the Department) that
requested and received a loan
rehabilitation agreement for their
defaulted loans. We estimate that on
average it would take a borrower 1.5
hours (90 minutes) to complete and
submit the loan rehabilitation form.
Under these proposed regulations, we
estimate that burden will increase by
448,739 hours (299,159 borrowers
requesting loan rehabilitation
multiplied by 1.5 hours per loan
rehabilitation requests) under OMB
Control Number 1845–NEW1.
In calendar year 2011, there were
approximately 92,870 Direct Loan
borrowers that requested and received a
loan rehabilitation agreement for their
defaulted loans. We estimate that it
would take a borrower on average 1.5
hours (90 minutes) to complete and
submit the loan rehabilitation form.
Under these proposed regulations, we
estimate that burden will increase by
139,305 hours (92,870 borrowers
requesting loan rehabilitation
multiplied by 1.5 hours per loan
rehabilitation request) under OMB
Control Number 1845–NEW1.
Collectively, the proposed changes in
§§ 682.405 and 685.211 associated with
the completion and submission of the
reasonable and affordable form would
increase burden by 588,044 hours
(448,739 hours plus 139,305 hours)
under OMB 1845–NEW1.
We estimate that of the 192,029 FFEL
loans held by lenders, 66,283 loans are
held by state guaranty agencies and
125,746 loans are held by not-for-profit
guaranty agencies, with the remaining
107,130 loans (299,159 minus 192,029)
held by the Department. Under the
proposed regulations, 66,283 FFEL
borrowers whose loans are held by state
guaranty agencies will request
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rehabilitation of their defaulted loans
and complete the loan rehabilitation
form. We estimate that for each loan
rehabilitation form submitted it would
take the guaranty agency on average 0.5
hours (30 minutes) to review and
process the loan rehabilitation form.
Under these proposed regulations, we
estimate that burden would increase by
33,142 hours (66,283 borrowers
requesting loan rehabilitation
multiplied by 0.5 hours per loan
rehabilitation request) under OMB
Control Number 1845–0020.
Under the proposed regulations, we
estimate that of the 192,029 FFEL loans
held by non-Federal entities, 125,746
FFEL borrowers whose loans are held by
not-for-profit guaranty agencies will
request rehabilitation and complete the
loan rehabilitation form. We estimate
that for each loan rehabilitation form
submitted it would take the guaranty
agency on average 0.5 hours (30
minutes) to review and process the loan
rehabilitation form. Under these
proposed regulations, we estimate that
burden will increase by 62,873 hours
(125,746 borrowers requesting loan
rehabilitation multiplied by 0.5 hours
per loan rehabilitation request) under
OMB Control Number 1845–0020.
Proposed §§ 682.405(b)(1)(vi) and
685.211(f)(3) would require a guaranty
agency and the Secretary to recalculate
the borrower’s rehabilitation payment
amount if the borrower objects to the
payment amount contained in the
written repayment agreement that the
guaranty agency or the Secretary sent to
the borrower.
Of the 299,159 FFEL borrowers in
calendar year 2011 that requested
rehabilitation of their defaulted loans,
we estimate that 12 percent or 35,899
borrowers would raise an objection to
the initial determination of the
reasonable and affordable monthly
payment amount by the guaranty agency
or the Secretary. We estimate that each
objection will entail a phone
conversation or email that would span
on average 0.17 hours (10 minutes). This
would increase burden to the borrowers
for a total of 6,103 hours (35,899
borrowers objecting to the initial
determination of the reasonable and
affordable payment amount multiplied
by 0.17 hours per loan rehabilitation
request) under OMB Control Number
1845–0020.
Of the 92,870 Direct Loan borrowers
in calendar year 2011 that requested
loan rehabilitation of their defaulted
loans, we estimate that 11,144 Direct
Loan borrowers would raise an
objection to the initial determination of
the reasonable and affordable monthly
payment amount. We estimate that each
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objection will entail a phone
conversation or email that would span
on average 0.17 hours (10 minutes). This
would increase burden to the borrowers
for a total of 1,894 hours (11,144
borrowers objecting to the initial
determination of the reasonable and
affordable payment amount multiplied
by 0.17 hours per loan rehabilitation
request) under OMB Control Number
1845–NEW2.
Proposed §§ 682.405(b)(1)(vii) and
685.211(f)(5) would require a borrower
who objects to the monthly repayment
amount contained in the written
repayment agreement to provide the
guaranty agency or the Secretary the
documentation needed to calculate a
monthly payment amount under the
income-based repayment plan formula.
If the borrower does not provide this
information to the guaranty agency or
the Secretary, no rehabilitation
agreement would exist with the
borrower, and the guaranty agency or
the Secretary would not proceed with
the rehabilitation.
Of the 299,159 FFEL borrowers in
calendar year 2011 that requested
rehabilitation of their defaulted loans,
we estimate that 12 percent or 35,899
borrowers would choose to submit
documentation for a monthly payment
amount to be calculated using the
income-based repayment plan formula.
We estimate that on average, each
borrower would take 0.33 hours (20
minutes) to collect, copy, and submit
the required documentation. We
estimate that burden would increase by
11,847 hours (35,899 borrowers required
to submit documentation multiplied by
0.33 hours per loan rehabilitation
request) under OMB Control Number
1845–0020.
Of the 92,870 Direct Loan borrowers
in calendar year 2011 that requested
rehabilitation of their defaulted loans,
we estimate that 12 percent or 11,144
borrowers would choose to submit
documentation for a monthly payment
amount to be calculated using the
income-based repayment plan formula.
We estimate that on average each
borrower would take 0.33 hours (20
minutes) to collect, copy, and submit
the required documentation. We
estimate that burden would increase by
3,678 hours (11,144 borrowers required
to submit documentation multiplied by
0.33 hours per loan rehabilitation
request) under OMB Control Number
1845–NEW2.
Proposed §§ 682.405(b)(1)(ix) and
685.211(f)(7) would require the
Secretary or the guaranty agency, upon
the borrower’s request, to adjust the
borrower’s monthly rehabilitation
payment due to a change in the
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borrower’s financial circumstances. The
borrower would be required to provide
documentation supporting the request.
We estimate that 10 percent of the
299,159 FFEL borrowers who requested
rehabilitation of their defaulted loans
(29,916 FFEL borrowers, 19,203 of
whom have FFEL program loans that are
held by lenders and 10,713 of whom
have FFEL program loans that are held
by the Department) would have a
change in their financial circumstances
in the initial year the proposed
regulation is implemented. We estimate
that on average each borrower would
take 0.33 hours (20 minutes) to collect,
copy, and submit the required
documentation. We estimate that
burden would increase by 9,872 hours
(29,916 borrowers with changes in
financial circumstances multiplied by
0.33 hours per loan rehabilitation
request) under OMB Control Number
1845–0020.
Of the 19,203 borrowers with FFEL
loans held by lenders, 6,628 are held by
public guaranty agencies and 12,575 are
held by not-for-profit guaranty agencies.
Under the proposed regulations, we
estimate 6,628 FFEL borrowers whose
loans are held by public guaranty
agencies would have a change in their
financial circumstances in the initial
year the proposed regulation is
implemented. We estimate that for each
request submitted it would take on
average the guaranty agency 0.5 hours
(30 minutes) to review and process the
request. Under these proposed
regulations, we estimate that burden
would increase by 3,314 hours (6,628
borrowers requesting loan rehabilitation
multiplied 0.5 hours per loan
rehabilitation request equals 3,314
hours) under OMB Control Number
1845–0020.
Under the proposed regulations, we
estimate that 12,575 FFEL borrowers
whose loans are held by not-for-profit
guaranty agencies would request a
change in their reasonable and
affordable payment amount due to
changed financial circumstances in the
initial year the proposed regulation is
implemented. We estimate that for each
request submitted it would take on
average the guaranty agency 0.5 hours
(30 minutes) to review and process the
request for a change in the payment
amount. Under these proposed
regulations, we estimate that burden
will increase by 6,288 hours (12,575
borrowers requesting a change in the
loan rehabilitation payment amount
multiplied by 0.5 hours per request)
under OMB Control Number 1845–0020.
We estimate that 10 percent of Direct
Loan borrowers who are rehabilitating
their defaulted loans (9,287 Direct Loan
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45673
borrowers) would request a change in
the reasonable and affordable payment
amount due to a change in their
financial circumstances in the initial
year the proposed regulation is
implemented. We estimate that on
average each borrower would take 0.33
hours (20 minutes) to collect, copy, and
submit the required documentation. We
estimate that burden would increase by
3,065 hours (9,287 borrowers requesting
a change in the reasonable and
affordable payment amount multiplied
by 0.33 hours per payment change
request equals 3,065 hours) under OMB
Control Number 1845–NEW2.
Sections 682.405(a) and 685.211(f)—
Suspension of Administrative Wage
Garnishment for Borrowers
Rehabilitating Defaulted Loans
The proposed regulations would add
new §§ 682.405(a)(3)(i) and
685.211(f)(12)(i) to the FFEL and Direct
Loan Program regulations requiring a
guaranty agency or the Secretary,
respectively, to suspend collecting on a
defaulted loan through Administrative
Wage Garnishment (AWG) after the
borrower makes five qualifying
payments under a loan rehabilitation
agreement. The guaranty agency or the
Secretary would not be permitted to
suspend AWG prior to the fifth
payment, and, after the fifth payment,
the borrower would have the option to
request that the guaranty agency or the
Secretary continue collecting on the
loan through AWG while the borrower
makes voluntary payments under the
rehabilitation agreement.
Under proposed § 682.405(a)(3)(ii), we
estimate that state guaranty agencies
will have 663 FFEL borrowers from
whom they will be collecting payments
through AWG while the borrower is also
making voluntary repayments to
rehabilitate the loan. After the borrower
has made five qualifying voluntary loan
payments (in addition to the AWG
payments), the holder would suspend
AWG. We estimate that on average each
suspension of AWG would take one
hour (60 minutes). We estimate that
burden would increase by 663 hours
(663 borrower requests multiplied by 1
hour per AWG suspension equals 663
hours) under OMB Control Number
1845–0020.
Under proposed § 682.405(a)(3)(ii), we
estimate that not-for-profit guaranty
agencies will have 1,257 FFEL
borrowers from whom they will be
collecting payments using AWG while
the borrower is also making voluntary
repayments to rehabilitate the loan.
After the borrower has made five
qualifying voluntary loan payments (in
addition to the AWG payments) the
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holder would suspend AWG. We
estimate that on average each
suspension of AWG would take 1 hour
(60 minutes). We estimate that burden
would increase by 1,257 hours (1,257
borrower requests multiplied by 1 hour
per AWG suspension equals 1,257
hours) under OMB Control Number
1845–0020.
Any burden under proposed
§ 685.211(f)(12)(i) is attributable to the
Department and therefore not a part of
this burden assessment of affected
entities.
Collectively, the proposed changes in
§ 682.405(a) and (b) would increase
burden by 135,359 hours in OMB
Control Number 1845–0020.
Collectively, the proposed changes in
§ 685.211(f) would increase burden by
8,637 hours in OMB Control Number
1845–NEW2.
Sections 674.33(g), 682.402(d), and
685.214—Closed School Discharge
The proposed regulations at
§§ 674.33(a)(4)(i)(B), 682.402(d)(1), and
685.214(c)(1)(iii) would extend, for
purposes of the closed school discharge,
the current 90-day period to 120-days
for students who leave before a school
closes and add examples of the types of
exceptional circumstances under which
the Department may extend the 120-day
window.
During the 2011 calendar year, 0
Perkins Loan borrowers received closed
school loan discharges. We estimate that
15 Perkins Loan borrowers submitted
applications for closed school
discharges. We estimate that the average
burden per response is 0.5 hours (30
minutes) for each loan discharge
application and that by expanding the
period from 90 days to 120 days prior
to school closure for students who had
withdrawn to apply for a closed school
loan discharge would increase the
number of applicants by 20 percent. As
a result there would be an estimated 18
applications under the proposed
regulation for a total increase in burden
of 2 hours (18 borrowers applying for
loan discharge multiplied by 0.5 hours
per application minus 15 borrowers
applying for loan discharge under
current regulations multiplied by 0.5
hours per application) under OMB
Control Number 1845–0015.
During the 2011 calendar year, 163
FFEL borrowers received closed school
loan discharges. We estimate that 230
FFEL borrowers submitted applications
for discharge. We estimate that the
average burden per response is 0.5
hours (30 minutes) for each loan
discharge application and that by
expanding the period from 90 days to
120 days prior to school closure for
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students who had withdrawn to apply
for a closed school loan discharge
would increase the number of
applicants by 20 percent. As a result
there would be 276 applications under
the proposed regulation for a total
increase in burden of 23 hours (276
borrowers applying for loan discharge
multiplied by 0.5 hours per application
minus 230 borrowers applying for loan
discharge under current regulations
multiplied by 0.5 hours per application)
under OMB Control Number 1845–0015.
During the 2011 calendar year, 128
Direct Loan borrowers received closed
school loan discharges. We estimate that
295 Direct Loan borrowers submitted
applications for discharge. We estimate
that the average burden per response is
0.5 hours (30 minutes) for each loan
discharge application and that by
expanding the period from 90 days to
120 days prior to school closure for
students who had withdrawn to apply
for a closed school loan discharge
would increase the number of
applicants by 20 percent, thus totaling
354 applications under the proposed
regulation for a total increase in burden
of 29 hours (354 borrowers applying for
loan discharge multiplied by 0.5 hours
per application minus 295 borrowers
applying for loan discharge under
current regulations multiplied by 0.5
hours per application) under OMB
Control Number 1845–0015.
Collectively, the total increase in
burden is 54 hours under OMB Control
Number 1845–0015.
Sections 674.19, 682.610, and 685.309—
School Enrollment Status Reporting
Requirements
For the Federal Perkins Loan program,
the proposed regulations would add a
new § 674.19(f) with the heading
‘‘enrollment reporting process.’’
Proposed § 674.19(f)(1) would provide
that, upon receipt of an enrollment
report from the Secretary, an institution
must update all information included in
the report and return the report to the
Secretary in the manner and format
prescribed by the Secretary and within
the timeframe prescribed by the
Secretary. Proposed § 674.19(f)(2) would
provide that, unless it expects to submit
its subsequent updated enrollment
report to the Secretary within the next
60 days, an institution must notify the
Secretary within 30 days after: (1) The
date the school discovers that a loan
under title IV of the HEA was made to
a student who was enrolled or accepted
for enrollment at the institution, and the
student has ceased to be enrolled on at
least a half-time basis, or has failed to
enroll on at least a half-time basis for
the period for which the loan was
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intended; or (2) the date the school
discovers that a student who is enrolled
at the institution and who received a
loan under title IV of the HEA has
changed his or her permanent address.
Because the Secretary already receives
enrollment information on Federal
Perkins Loan borrowers who also have
a FFEL loan or a Direct Loan, the
additional burden associated with
sending enrollment reports to
institutions for the Federal Perkins Loan
program is only associated with those
Federal Perkins Loan borrowers whose
only loan received under title IV of the
HEA is a Federal Perkins Loan and who
are enrolled on at least a half-time basis
or who had recently changed enrollment
status.
In the 2011 calendar year, there were
2,070,514 Federal Perkins Loan
borrowers. Of the 2,070,514 Federal
Perkins Loan borrowers, 240,959
borrowers have a Federal Perkins Loan
as the only loan received under title IV
of the HEA. Of the 240,959 borrowers,
53 percent (127,708 borrowers) were
enrolled at least half-time or had
recently changed enrollment status. The
Secretary will be sending enrollment
reports to each of the institutions
approximately every 60 days or 6
reports per year. We estimate that on
average the completion and submission
of an enrollment report would take 0.05
hours (3 minutes) per borrower. Burden
would increase by 38,312 hours
(127,708 borrowers multiplied by 0.05
hours per borrower multiplied by 6
reports per year) under OMB Control
Number 1845–0019.
For the 2011 calendar year 51 percent
of the Federal Perkins loan borrowers or
65,131 affected borrowers were at public
institutions, therefore we estimate that
burden would increase for public
institutions by 19,539 hours (38,312
hours multiplied by 0.51) under OMB
1845–0019.
For the 2011 calendar year 45 percent
of the Federal Perkins loan borrowers or
57,469 affected borrowers were at
private not-for-profit institutions,
therefore we estimate that burden would
increase for private not-for-profit
institutions by 17,240 hours (38,312
hours multiplied by 0.45) under OMB
1845–0019.
For the 2011 calendar year 4 percent
of the Federal Perkins loan borrowers or
5,108 affected borrowers were at
proprietary institutions, therefore we
estimate that burden would increase for
proprietary institutions by 1,533 hours
(38,312 hours multiplied by 0.04) under
OMB 1845–0019.
Collectively, the proposed regulatory
changes to § 674.19 would increase
burden by 38,312 hours for 127,708
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affected borrowers under OMB 1845–
0019.
For the FFEL Program, the proposed
regulations would replace the term
‘‘student status confirmation reports’’ in
§ 682.610(c) with the term ‘‘enrollment
reporting process,’’ and would revise
§ 682.610(c)(1) to provide that upon
receipt of an enrollment report from the
Secretary, a school must update all
information included in the report and
return the report to the Secretary in the
manner and format prescribed by the
Secretary and within the timeframe
specified by the Secretary. Institutions
currently participating in the FFEL or
Direct Loan programs would continue to
report enrollment to the Secretary and
the lender. Because the only change
regarding the FFEL Program reporting is
in the definition of the reporting
requirement, there is no change in
burden for institutions participating in
the FFEL and Direct Loan programs.
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Section 674.34—Deferment of
Repayment—Federal Perkins Loans
The proposed regulations in
§ 674.34(f)(1) would require schools that
participate in the Perkins Loan Program
to use the same eligibility criteria to
define an eligible graduate fellowship
program and to establish the eligibility
of a borrower for a graduate fellowship
deferment that lenders and the
Department use in the FFEL and Direct
Loan programs, respectively. The
proposed regulations would require that
a borrower provide the institution with
a statement from an authorized official
of the borrower’s graduate fellowship
program certifying: (1) That the
borrower holds at least a bachelor’s
degree; and (2) the borrower’s
anticipated completion date of the
program. In calendar year 2011 there
were 1,104 Perkins borrowers who
applied for a graduate fellowship
deferment. We estimate that on average
it would take the borrower 0.25 hours
(15 minutes) to obtain the certification
from an authorized official of the
graduate fellowship program and to
complete and submit the Perkins loan
deferment form multiplied by an
estimated 1,104 deferment applications
equals 276 hours of increased burden to
borrowers under OMB Control Number
1845–0019.
For the 2011 calendar year 51 percent
of the Federal Perkins Loan borrowers
or 563 affected borrowers were at public
institutions, therefore we estimate that
burden would increase for authorizing
officials at public institutions by 141
hours (1,104 applications multiplied by
0.51 multiplied by 0.25 hours per
certification) under OMB 1845–0019.
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For the 2011 calendar year 45 percent
of the Federal Perkins Loan borrowers
or 497 affected borrowers were at
private not-for-profit institutions,
therefore we estimate that burden would
increase authorizing officials at for
private not-for-profit institutions by 124
hours (1,104 applications multiplied by
0.45 multiplied by 0.25 hours per
certification) under OMB 1845–0019.
For the 2011 calendar year 4 percent
of the Federal Perkins Loan borrowers
or 44 affected borrowers were at
proprietary institutions, therefore we
estimate that burden would increase for
private not-for-profit institutions by 11
hours (1,104 applications multiplied by
0.04 multiplied by 0.25 hours per
certification) under OMB 1845–0019.
Collectively, the proposed regulatory
changes to § 674.34 would increase
burden by 552 hours under OMB 1845–
0019.
Section 682.410(b)(9)(i)(T)(2)—
Administrative Wage Garnishment
(AWG)—Use of Third-Party Contractors
The proposed regulations would also
add a new § 682.410(b)(9)(i)(T) to the
regulations, which specifies the
functions that may be performed by a
third-party servicer or collection
contractor employed by the guaranty
agency for services needed in the AWG
process. The proposed regulations
would make clear that the guaranty
agency may not delegate to any third
party the decision to order withholding
of an individual borrower’s wages, and
must create and retain records to
demonstrate that each order issued has
been individually authorized by an
appropriate official of the guaranty
agency. The proposed regulations would
also specify the manner by which a
withholding order may be sent to
employers and the permissible activities
that may be performed by a third-party
servicer or collection contractor
employed by the guaranty agency with
respect to withholding orders. Only an
authorized official of the guaranty
agency may determine that an
individual withholding order is to be
issued. The guarantor must record the
official’s determination for each order it
issues by either including the official’s
signature on the order, or, by retaining
in the agency’s records, the identity of
the approving official, the date of the
approval, the amount or rate of the
order, the name and address of the
employer to whom the order was issued
and the debt for which the order was
issued.
In calendar year 2011, we estimate
there were 84,293 FFEL Program
borrowers whose loans were held by
state guaranty agencies and for which
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the guaranty agency had initiated AWG.
We estimate that on average the
guaranty agency would take 0.25 hours
(15 minutes) to meet the recordkeeping
requirements specified above. Total
burden hours would increase by 21,073
hours (84,293 multiplied by 0.25 hours)
under OMB 1845–0020.
In calendar year 2011, we estimate
there were 159,912 FFEL borrowers
whose loans were held by not-for-profit
guaranty agencies and for which the
guaranty agency had initiated AWG. We
estimate that on average the guaranty
agency would take 0.25 hours (15
minutes) to meet the recordkeeping
requirements specified above. Total
burden hours would increase by 39,978
hours (159,912 multiplied by 0.25
hours) under OMB 1845–0020.
The proposed changes in
§ 682.410(b)(9)(i)(T)(2) would increase
burden by 61,051 hours under OMB
Control Number 1845–0020.
Section 682.410(b)(9)(i)(H)
Administrative Wage Garnishment
(AWG)—Borrower Hearing Requests
The proposed regulations would also
replace § 682.410(b)(9)(i)(L) of the FFEL
Program regulations with
§ 682.410(b)(9)(i)(H) to provide that if a
borrower’s written request for a hearing
is received by the guaranty agency after
the 30th day following the date of the
garnishment notice and a decision is not
rendered within 60 days following
receipt of the borrower’s written request
for a hearing, the guaranty agency must
suspend the order beginning on the 61st
day after the hearing request was
received until a hearing is provided and
a decision is rendered.
If a borrower does not request a
hearing within the 30-day time limit,
the guaranty agency must go forward
with the AWG. However, if a borrower
does eventually request a hearing, a
guaranty agency would still be required
to provide one in sufficient time to have
a decision issued within 60 days of the
request. The Department added a
provision specifying that if this hearing
is not provided and a decision issued
within 60 days, then the agency must
suspend the AWG order beginning on
the 61st day until a decision is issued.
In calendar year 2011, we estimate
there were 84,293 FFEL borrowers
whose loans were held by state guaranty
agencies and for which the agencies had
initiated AWG. We estimate that 10
percent of these borrowers (8,429)
would request a hearing and that in 10
percent of those cases (843) a decision
would not be rendered until after 60
days following the receipt of the
borrower’s request. On average, we
estimate that it would take one hour (60
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minutes) to suspend an administrative
wage garnishment order. The total
increase in burden would be 843 hours
(843 FFEL borrowers undergoing AWG
who requested a hearing where a
decision was not rendered until after 60
days following the receipt of the
borrower’s request multiplied by one
hour per suspension) under OMB 1845–
0020.
In calendar year 2011, we estimate
there were 159,912 FFEL borrowers
whose loans where held by not-forprofit guaranty agencies and for which
the agencies had initiated AWG. We
estimate that 10 percent of these
borrowers (15,991) would request a
hearing and that in 10 percent of those
cases (1,599) a decision would not be
rendered until after 60 days following
the receipt of the borrower’s request. On
average, we estimate that it would take
one hour (60 minutes) to suspend an
administrative wage garnishment order.
The total increase in burden would be
1,599 hours (1,599 FFEL borrowers
undergoing AWG who requested a
hearing where a decision was not
rendered until after 60 days following
the receipt of the borrower’s request
multiplied by one hour per suspension)
under OMB 1845–0020.
Collectively, the proposed changes in
§ 682.410(b)(9)(i)(H) would increase
burden by 2,442 hours in OMB Control
Number 1845–0020.
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Section 682.410(b)(9)(i)(J)—
Administrative Wage Garnishment
(AWG)—Hearing Administration
The proposed regulations would add
new paragraph (b)(9)(i)(J) and would
provide for the manner by which the
hearing is administered and certain
provisions relating to bringing forth
additional evidence and continuances.
Specifically, the proposed regulations
would require that the hearing be
conducted as an informal proceeding,
require witnesses in an oral hearing to
testify under oath or affirmation, and
require maintenance of a summary
record of the hearing. The proposed
regulations would also allow the
borrower to request a continuance to
submit additional evidence.
In calendar year 2011, we estimate
there were 84,293 FFEL borrowers
whose loans where held by state
guaranty agencies and for which the
agencies had initiated AWG. We
estimate that 10 percent of these
borrowers (8,429) would request a
hearing. We estimate that on average
each summary record would take 1 hour
(60 minutes). The total burden increase
for this recordkeeping would be 8,429
hours (8,429 hearings multiplied by one
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hour per hearing) under OMB 1845–
0020.
In calendar year 2011, we estimate
there were 159,912 FFEL borrowers
whose loans where held by not-forprofit guaranty agencies and for which
the agencies had initiated AWG. We
estimate that 10 percent of these
borrowers (15,991) would request a
hearing. We estimate that on average
each summary record would take one
hour (60 minutes). The total burden
increase for this recordkeeping would
be 15,991 hours (15,991 hearings
multiplied by one hour per hearing)
under OMB 1845–0020.
Collectively, the proposed changes in
§ 682.410(b)(9)(i)(J) would increase
burden by 24,420 hours in OMB Control
Number 1845–0020.
Section 682.410(b)(9)(i)(Q)—
Administrative Wage Garnishment
(AWG)—Recent Reemployment After
Involuntary Unemployment
Proposed § 682.410(b)(9)(i)(Q) would
clarify that a borrower who wishes to
object to AWG on the basis that he or
she is not subject to garnishment
because of recent reemployment after
involuntary separation, bears the burden
of raising and proving that claim.
In calendar year 2011, we estimate
that there were 84,293 FFEL borrowers
whose loans where held by state
guaranty agencies and for which the
agencies had initiated AWG. Of that
number, we estimate that 8 percent
(6,743) became unemployed
involuntarily. Furthermore, we estimate
that a sub-group of those who became
unemployed involuntarily, 5 percent
(337) gained subsequent reemployment.
We estimate that the average amount of
time for each borrower subject to AWG
in this sub-group to provide
documentation that supports their claim
to not be subject to AWG due to their
recent reemployment to be 0.5 hours.
The increased burden to provide
documentation that would support the
borrower’s claim that he not be subject
to AWG due to recent reemployment is
169 hours (337 borrowers whose student
loans were being collected by AWG,
who became unemployed involuntarily,
but subsequently gained reemployment
multiplied by 0.5 hours per claim)
under OMB 1845–0020.
In calendar year 2011, we estimate
that there were 159,912 FFEL borrowers
whose loans where held by not-forprofit guaranty agencies and for which
the agencies had initiated AWG. Of that
number, we estimate that 8 percent
(12,793) became unemployed
involuntarily. Furthermore, we estimate
that a sub-group of those who became
unemployed involuntarily, 5 percent
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(640) gained subsequent reemployment.
We estimate that the average amount of
time for each borrower subject to AWG
in this sub-group to provide
documentation that supports their claim
to not be subject to AWG due to their
recent reemployment to be 0.5 hours.
The total amount of increased burden to
provide documentation that would
support the borrower’s claim that he not
be subject to AWG due to recent
reemployment is 320 hours (640
borrowers whose loans were being
collected by AWG, who became
employed involuntarily, but
subsequently gained reemployment
multiplied by 0.5 hours per claim)
under OMB 1845–0020.
The proposed changes in
§ 682.410(b)(9)(i)(Q) would collectively
increase burden by 489 hours in OMB
Control Number 1845–0020.
Collectively, the proposed changes in
all subparagraphs of § 682.410(b)(9)
would increase burden by 88,402 hours
in OMB Control Number 1845–0020.
Repeal of Unnecessary FFEL Program
Regulations
The proposed regulatory language
removes provisions from 34 CFR part
682 that are no longer required as a
result of the SAFRA Act included in the
Health Care and Reconciliation Act of
2010. One of the provisions of the
SAFRA Act was the termination, as of
July 1, 2010, of the authority for lenders
to make new loans under the FFEL
program. These proposed regulations
would remove the FFEL provisions that
are now unnecessary in light of this
change and would also make technical
and conforming changes. A number of
the proposed technical and conforming
changes in 34 CFR Part 682 are for
clarity, others are due to the elimination
of cross-references.
Typically, the results of negotiated
rulemaking produce some regulatory
changes that correspond to reporting or
recordkeeping burden on affected
entities such as borrowers, lenders, or
guaranty agencies. The primary
information collection associated with
34 CFR Part 682 is the currently
approved OMB 1845–0020. Unlike other
newly proposed regulations where the
resultant proposed regulation would
either increase or decrease burden as a
result of the change in a regulation, this
expansive effort to eliminate unneeded
regulations includes more wholesale
changes being proposed to 34 CFR Part
682. As a result, the entire history of
burden associated with OMB 1845–0020
was examined. While the burden
assessments for OMB 1845–0020 stretch
back over 13 years, the necessary level
of detail does not exist to disaggregate
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the amount of the currently approved
amount of burden in this collection into
its corresponding subsections of 34 CFR
Part 682.
Therefore, a new methodology to
calculate burden is required. We are
able to establish that there are 38
subsections of 34 CFR Part 682 that have
burden under OMB 1845–0020. We
propose to divide the total of the
currently approved burden hours of
12,352,197 hours by the 38 affected
subsections which on average yields
325,058 hours per affected subsection.
Each of the proposed subsections
listed below will use this number of
burden hours as a starting point. The
proposed changes as provided below
explain the burden impact.
The specific number of respondents
from the affected entities is similarly
unavailable, so we have established a
percentage based on the number of
borrowers per loan type to distribute the
number of respondents across the
affected entities.
Section 682.210—Deferment
The proposed regulations would
amend § 682.210(a)(4) of the regulations
to provide that a borrower’s
representative may request a military
service deferment on behalf of the
borrower. In § 682.210(b), the
introductory language in paragraphs
(b)(1) through (6) of § 682.210 would be
revised to identify the cohort of
borrowers to which each paragraph
applies. Throughout § 682.210(b) crossreferences would be added to the
eligibility criteria that are applicable to
deferments available to these borrowers.
The proposed regulations also amend
§ 682.210(s)(2) by removing the
exception clause at the end of the
provision, and amend § 682.210(u)(5) by
replacing the words ‘‘military active’’
with ‘‘post-active’’.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.102—Repaying a Loan
Section 682.206—Due Diligence in
Making a Loan
The proposed regulations would
remove § 682.206 from the FFEL
regulations. The SAFRA Act eliminated
the authority to make new FFEL
Program loans, including FFEL
Consolidation loans. As a result, the
requirements governing the making of
new FFEL Program loans are no longer
needed and the previous burden
associated with the making of a loan by
a lender would be removed.
The proposed change would remove
all of the prior assessment of 325,058
hours of burden associated under OMB
Control Number 1845–0020, and
therefore burden would decrease by
325,058 hours for a total of 0 hours.
The proposed regulations would
amend the section heading, remove
§ 682.102(a) through (d), which describe
the application process for Stafford,
PLUS, and Consolidation loans, and
redesignate the paragraphs in current
§ 682.102(e), which describes the loan
repayment process, as § 682.102(a)–(g).
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.208—Due Diligence in
Servicing a Loan
The proposed regulations would
replace the term ‘‘national credit
bureau(s)’’ with ‘‘nationwide consumer
reporting agency(ies)’’ to more
accurately reflect the reporting
requirements.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.211—Forbearance
Substantive changes in this section
have been identified earlier which
added 9,446 hours of burden to OMB
Control Number 1845–0020. There were
no further changes to this section that
would alter the prior burden assessment
of 325,058 hours under OMB Control
Number 1845–0020.
Collectively, the proposed changes
would increase the burden assessment
from 325,058 by 9,446 hours (as
identified earlier) for a total of 334,504
hours under OMB Control Number
1845–0020.
Section 682.200—Definitions—Lender
Section 682.209—Repayment of a Loan
The proposed regulations would
amend § 682.209(a)(3)(i) by adding a
new paragraph that specifies that
borrowers with fixed interest rates on
their Stafford loans enter repayment on
those loans the day after six months
following the date the borrower was no
longer enrolled on at least a half-time
basis. The proposed regulations would
remove current § 682.209(e) through (g)
and (j) from the regulations and redesignate the remaining paragraphs as
paragraphs (e)–(g). Redesignated
§ 682.209(e) (current paragraph (h))
would be amended to specify that a
FFEL Consolidation loan borrower
repaying under the IBR plan may make
a scheduled monthly payment of less
than the interest that accrues on the
loan.
The proposed changes would
decrease the burden by 65,012 hours,
and therefore the current burden
assessment would decrease from
325,058 to 260,046 hours under OMB
Control Number 1845–0020.
Section 682.212—Prohibited
Transactions
There is no change to the current
language in this section of the
regulations, however the current burden
referenced in OMB Control Number
1845–0020 is incorrectly calculated.
This section primarily defines
‘‘prohibited transactions,’’ but does not
impose recordkeeping or reporting
requirements upon entities and thus
does not impose burden. Therefore,
these proposed regulations remove the
325,058 hours of burden that was
previously incorrectly attributed to this
section of the regulations. While
subsection 34 CFR 682.212(h) provides
that an institution, at its option, may
make available a list of recommended or
suggested lenders, the burden associated
with that reporting is accounted for in
§§ 601.10 and 668.14.
We propose removal of the prior
burden assessment of 325,058 hours
under OMB Control Number 1845–0020,
and therefore burden would decrease by
325,058 hours for a total of 0 hours.
The proposed regulations would
remove the provisions of current
§ 682.601(a)(3), (a)(5), and (a)(7), and
place these provisions into paragraph
(8) of the definition of ‘‘Lender’’ in
§ 682.200(b).
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.205—Disclosure
Requirements for Lenders
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disclosures for borrowers having
difficulty making payments.
The proposed changes would
decrease the required burden by 162,529
hours, and therefore the current burden
hours would decrease from 325,058
hours to 162,529 hours under OMB
Control Number 1845–0020.
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The proposed regulations would
remove § 682.205(a) (the initial
disclosure statement), (b) (statement of
borrower rights and responsibilities), (g)
(plain language disclosure), and (i)
(separate disclosure for Consolidation
loans) from the FFEL Program
regulations and renumber the remaining
provisions. The remaining provisions
include providing repayment
information, providing required
disclosures during the repayment
period, and providing required
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
Section 682.214—Compliance With
Equal Credit Opportunity Requirements
The proposed regulations would
remove § 682.214 from the FFEL
regulations. The SAFRA Act ended the
making of new FFEL loans and therefore
these requirements can be eliminated
from the FFEL regulations.
The proposed change would remove
the prior burden assessment of 325,058
hours under OMB Control Number
1845–0020, and therefore burden would
decrease by 325,058 hours for a total of
0 hours.
Section 682.216—Teacher Loan
Forgiveness Program
The proposed regulations provide for
minor language changes.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
Section 682.301—Eligibility of
Borrowers for Interest Benefits on
Stafford and Consolidation Loans
The proposed regulations would
remove § 682.301(c) from the
regulations. The SAFRA Act ended the
making of new FFEL Program loans and
this provision related to determining
borrower eligibility for the interest
subsidy on new loans would be
eliminated.
The proposed change would remove
the prior burden assessment of 325,058
hours under OMB Control Number
1845–0020, and therefore burden would
decrease by 325,058 hours for a total of
0 hours under this section.
Section 682.305—Procedures for
Payment of Interest Benefits and
Special Allowance and Collection of
Origination and Loan Fees
Section 682.305(c)(1)(ii) specifies that,
regardless of the dollar volume of loans
originated or held, a school lender or an
eligible lender serving as trustee for a
school or school-affiliated organization
originating FFEL Program loans as a
lender must submit an independent
compliance audit to the Department
each year. The proposed regulations
would remove the reference to FFEL
lenders originating loans. The proposed
regulations would also remove the
language specifying that a school and
lender serving as a trustee for a school
must submit an independent
compliance audit to the Department
each year.
The number of school lenders or
lenders serving as a trustee on behalf of
a school or a school affiliated
organization whose purpose is to
originate loans for which the proposed
regulations would provide relief is so
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small as to not be substantive. As a
result, these proposed changes would
not alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.401—Basic Program
Agreement
The proposed regulations would
remove from § 682.401 language that
addresses new loan originations, the
process supporting loan origination, and
a guaranty agency’s efforts to secure
new loan volume. These provisions can
be eliminated from the FFEL Program
regulations because no new FFEL loans
are being made. The remaining
provisions proposed for elimination
relate to school eligibility to participate
in a guaranty agency’s program and the
authority of an agency to limit, suspend,
or terminate a school from its program.
For purposes of new loans, schools now
participate only in the Direct Loan
Program. Any future actions to limit,
suspend, or terminate a school’s
participation in the student loan
programs would be undertaken by the
Department under 34 CFR part 668,
subpart G. Therefore, § 682.401(b)(6) can
also be eliminated from the FFEL
Program regulations.
The proposed changes would
decrease the burden related to FFEL
processes by 32,506 hours, and therefore
the current burden hours would
decrease from 325,058 hours by 32,506
hours to 292,552 hours under OMB
Control Number 1845–0020.
Section 682.402—Death, Disability,
Closed School, False Certification,
Unpaid Refunds, and Bankruptcy
Payments
Substantive changes in this section
have been identified earlier under OMB
1845–0015. There were no further
changes to this section that impacted
the burden under OMB 1845–0020.
As a result, the prior burden
assessment of 325,058 hours under
OMB Control Number 1845–0020 would
not be altered.
Section 682.404—Federal Reinsurance
Agreement
The proposed regulations would make
conforming language changes required
due to the elimination of previous crossreferences or obsolete requirements.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
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Section 682.405—Loan Rehabilitation
Agreement
Substantive changes in this section
have been identified earlier. There were
no further changes to this section.
The substantive changes would be in
addition to the previous burden
assessment of 325,058 hours under
OMB Control Number 1845–0020 and
the earlier assessment increases burden
by 135,359 hours in OMB 1845–0020 for
a total burden of 460,417 hours.
Section 682.406—Conditions for Claim
Payments From the Federal Fund and
for Reinsurance Coverage
The proposed regulations would make
a minor wording change due to the
elimination of previous cross-references
and add an ending date coinciding with
the implementation of the SAFRA Act,
which ended the making of new FFEL
Program loans.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.409—Mandatory
Assignment by Guaranty Agencies of
Defaulted Loans to the Secretary
The proposed regulations would make
no changes to this section of the
regulations.
These proposed regulations would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.410—Fiscal,
Administrative, and Enforcement
Requirements
Apart from the earlier discussion of
the changes made to the administrative
wage garnishment provisions in this
section of the regulations, the proposed
regulations would only make minor
wording changes to correct crossreferences and delete obsolete
references.
Substantive changes in this section
have been identified earlier. There are
no further changes to this section. These
proposed changes would not alter the
prior burden assessment of 325,058
hours under OMB Control Number
1845–0020 and the earlier assessment
that increased burden by 88,402 hours
in OMB 1845–0020 for a total of 413,460
hours.
Section 682.411—Lender Due Diligence
in Collecting Guaranty Agency Loans
The proposed regulations would make
a minor wording change.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
Section 682.412—Consequences of the
Failure of a Borrower or Student To
Establish Eligibility
The proposed regulations would make
a minor wording change.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.414—Records, Reports, and
Inspection Requirements for Guaranty
Agency Programs
The proposed regulations would make
minor wording changes. One of the
minor wording changes would eliminate
a reporting category from annual
guaranty agency reporting requirement.
Under proposed § 682.414, annually, for
each State in which it operates, a
guaranty agency report of the total
guaranteed loan volume, default
volume, and default rate does not have
to be categorized by schools for all loans
guaranteed after December 31, 1980. We
estimate that this reduction in reporting
categories would decrease the previous
burden assessment by 16,253 hours, and
therefore the current burden of 325,058
would decrease to 308,805 hours under
OMB Control Number 1845–0020.
Section 682.417—Determination of
Federal Funds or Assets To Be
Returned
The proposed regulations make no
changes to this section of the
regulations. These proposed changes
would not alter the prior burden
assessment of 325,058 hours under
OMB Control Number 1845–0020.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
Section 682.418—Prohibited Uses of the
Assets of the Operating Fund During
Periods in Which the Operating Fund
Contains Transferred Funds Owed to
the Federal Fund
The proposed regulations would
remove § 682.418 from the FFEL
regulations. The proposed change
would remove the prior burden
assessment of 325,058 hours under
OMB Control Number 1845–0020, and
therefore burden would be decreased by
325,058 hours for a total of 0 hours
based on the elimination of the prior
FFEL requirements.
Section 682.421—Funds Transferred
From the Federal Fund to the Operating
Fund by a Guaranty Agency
The proposed regulations would
remove § 682.421 from the FFEL
regulations. The proposed change
would remove the prior burden
assessment of 325,058 hours under
OMB Control Number 1845–0020, and
therefore burden would decrease by
325,058 hours for a total of 0 hours
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based on the elimination of the prior
FFEL requirements.
Section 682.507—Due Diligence in
Collecting a Loan
Section 682.508—Assignment of a Loan
Section 682.511—Procedures for Filing
a Claim
Section 682.515—Records, Reports, and
Inspection Requirements for Federal
GSL Program Lenders
The proposed regulations would
remove all of the regulations under Part
682, subpart E (§§ 682.500 through
682.515) and reserve the subpart. The
proposed regulations would also remove
FISL-related Appendix C to part 682
from the regulations.
The proposed change would remove
the prior burden assessment of
1,300,232 hours under OMB Control
Number 1845–0020, and therefore
burden would decrease by 325,058
hours for each of these four sections and
decrease burden by 1,300,232 hours for
a total of 0 hours based on the
elimination of the prior FFEL
requirements.
Section 682.602—Rules for a School or
School-Affiliated Organization That
Makes or Originates Loans Through an
Eligible Lender Trustee
The proposed regulations would
remove § 682.602 from the FFEL
regulations. The proposed change
would remove the prior burden
assessment of 325,058 hours under
OMB Control Number 1845–0020, and
therefore burden would decrease by
325,058 hours for a total of 0 hours
based on the elimination of the prior
FFEL requirements.
Section 682.603—Certification by a
School That Participated in Connection
With a Loan Application
The proposed regulations would make
conforming language changes required
due to the elimination of a crossreference and reorganization due to a
deletion of previous requirements.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.604—Processing the
Borrower’s Loan Proceeds and
Counseling Borrowers (Required Exit
Counseling for Borrowers)
The proposed regulations would
change the heading of § 682.604, remove
current paragraph (a), remove and
reserve paragraph (b), and remove
paragraphs (c) through (f) and (h). The
proposed regulations would also
redesignate current paragraph (g) as
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45679
paragraph (a). Newly redesignated
§ 682.604(a)(1) would be amended to
include another option for providing
exit counseling to a student borrower
who withdraws without the school’s
knowledge or fails to complete required
exit counseling. In addition to the
existing options described under
‘‘Current Regulations,’’ a school could
also send written counseling materials
to an email address provided by the
student borrower. Newly redesignated
§ 682.604(a)(2) would be amended by
replacing cross-references to current
paragraph (a), which we are proposing
to remove, with the substantive
information contained in the crossreferenced provision that must be
included in the counseling. A new
paragraph (a)(5) would also be added to
newly redesignated § 682.604(a) to
clarify that: (1) A school’s compliance
with the Direct Loan Program exit
counseling requirements in 34 CFR
685.304(b) satisfies the FFEL exit
counseling requirements for student
borrowers who received both FFEL and
Direct Loan program loans for
attendance at the school if the school
provides the information required by
§ 682.604(a)(2)(i) and (a)(2)(ii); and (2) a
student’s completion of interactive exit
counseling offered by the Secretary
meets both the FFEL exit counseling
requirements and the Direct Loan exit
counseling requirements in 34 CFR
685.304(b).
The proposed changes would
decrease the previous burden
assessment of 325,058 hours by 211,288
hours, and therefore the current burden
of 325,058 hours would decrease to
113,770 hours under OMB Control
Number 1845–0020 because the burden
associated with new FFEL Program
loans would be eliminated.
Section 682.605—Determining the Date
of a Student’s Withdrawal
The proposed regulations would not
make any changes to this section. These
proposed regulations would not alter
the prior burden assessment of 325,058
hours under OMB Control Number
1845–0020.
Section 682.610—Administrative and
Fiscal Requirements for Schools That
Participated
Apart from the earlier discussion of
the changes made to this section, the
proposed regulations would only make
minor wording changes.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
Section 682.711—Reinstatement After
Termination
The proposed regulations would
remove the language regarding the loss
of a school lender’s participation upon
the loss of the school’s eligibility to
participate in the Title IV, Federal
student financial aid programs.
These proposed changes would not
alter the prior burden assessment of
325,058 hours under OMB Control
Number 1845–0020.
Section 682.712—Disqualification
Review of Limitation, Suspension, and
Termination Actions Taken by
Guarantee Agencies Against Lenders
The proposed regulations would
remove a cross-reference to a section
proposed for deletion. These proposed
changes would not alter the prior
burden assessment of 325,058 hours
under OMB Control Number 1845–0020.
Section 682.713 Disqualification
Review of Limitation, Suspension, and
Termination Actions Taken by
Guaranty Agencies Against a School
The proposed regulations would
remove § 682.713 from the FFEL
Program regulations. The proposed
change would remove the prior burden
assessment of 325,058 hours under
OMB Control Number 1845–0020,
therefore burden would decrease by
325,058 hours for a total of 0 hours
based upon the elimination of the prior
FFEL requirements.
Consistent with the discussion above,
the following chart describes the
sections of the proposed regulations
involving information collections, the
information being collected, and the
collections that the Department will
submit to the Office of Management and
Budget for approval and public
comment under the Paperwork
Reduction Act, and the estimated costs
associated with the information
collections. The monetized net savings
from of the reduced burden on lender/
guaranty agencies, institutions, and
borrowers using wage data developed
using BLS data, available at http://
www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is
¥$86,625,970 as shown in the chart
below. This cost was based on an hourly
rate of $24.61.
COLLECTION OF INFORMATION
Regulatory
section
§682.211
Forbearance
§685.205
;Forbearance
§§ 682.405 and 685.211
Reasonable and affordable rehabilitation
payments form.
§ 682.405(b) Loan rehabilitation agreement.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.211(f) Loan rehabilitation agreement.
§§§ 674.33, 682.402,
685.214 Closed
school discharge form.
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[change in burden]
Information collection
These proposed regulations amend the current
FFEL regulations to authorize a lender to grant
forbearance to a borrower who is in default on
a loan, but prior to a default claim payment
based on the borrower’s oral request. The
lender must orally review with the borrower the
terms and conditions of the forbearance and
send a notice confirming the terms within 30
days of the oral agreement.
These proposed regulations amend the current
Direct Loan regulations to authorize the Secretary to grant forbearance to a borrower who
is in default on a loan, but prior to a default
claim payment based on the borrower’s oral request. The Secretary must orally review with
the borrower the terms and conditions of the
forbearance and send a notice confirming the
terms within 30 days of the oral agreement.
This is the form that the new regulations require
to be used by the Secretary and a guaranty
agency to determine a borrower’s request for a
reasonable and affordable monthly rehabilitation payment of a defaulted loan.
The proposed regulations would require the guaranty agency to base determinations of reasonable and affordable rehabilitation payment
amounts of defaulted loans on information provided on an OMB-approved form, and if requested, supporting documentation.
The proposed regulations would require the Secretary to base determinations of reasonable
and affordable rehabilitation payment amounts
of defaulted loans on information provided on
an OMB-approved form, and if requested, supporting documentation.
The proposed regulations would extend the current 90-day window to 120-days for students
who leave before a school closes may apply
for a discharge of a title IV, HEA loan.
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Estimated
costs
OMB 1845–0020 ...................................................
The Department estimates that the burden would
increase by 9,446 hours.
$232,466.
OMB 1845–NEW2 The Department estimates
that the burden would decrease by 472 hours.
¥11,616.
OMB 1845–NEW1 This would be a new collection. A separate 60-day FEDERAL REGISTER notice will be published to solicit comment on the
proposed form. The Department estimates that
the burden would increase by 588,044 hours.
OMB 1845–0020 The Department estimates that
the burden would increase by 135,359 hours.
14,471,763.
OMB 1845–NEW2 The Department estimates
that the burden would increase by 8,637 hours.
212,557.
OMB 1845–0015 ...................................................
The Department estimates that the burden would
increase by 54 hours.
1,329.
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3,331,185.
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COLLECTION OF INFORMATION—Continued
Information collection
§ 674.19 School enrollment status reporting.
The proposed regulations would add a new section requiring institutions that participate in the
Federal Perkins Loan program to, upon receipt
of an enrollment report from the Secretary, update all information included in the report and
return it to the Secretary in the manner and
format and within the timeframe prescribed by
the Secretary.
The proposed regulations would require schools
that participate in the Perkins Loan Program to
use the same eligibility criteria that FFEL lenders and the Department use to define an eligible graduate fellowship program and to establish the eligibility of a Perkins Loan borrower
for a graduate fellowship deferment.
The proposed regulations would add a new section to specify the functions that may be performed by a third-party servicer or collection
contractor employed by a guaranty agency
(GA) for administrative wage garnishment
(AWG) purposes; replace a section of the regulations with a new section to provide that if a
borrower’s written request for a hearing is received by the GA after the 30th day following
the date of the garnishment notice and a decision is not rendered within 60 days following
receipt of a borrower’s written request the GA
must suspend the AWG order beginning on the
61st day after the request was received until
the hearing is provided and a decision rendered; provide for the manner by which the
hearing is administered and certain provisions
relating to bringing forth additional evidence
and continuances; clarify that a borrower who
wishes to object that they are not subject to
garnishment because of recent reemployment
after involuntary separation bears the burden
of raising and proving the claim.
The proposed regulations would amend the section heading, remove the section of the regulations that describes the application process for
FFEL loans, and re-designates the paragraphs
describing the loan repayment process.
The proposed regulations make a conforming
change to the definition of ‘‘Lender’’ due to the
elimination of § 682.601.
Removes regulations governing required lender
disclosures to borrowers that are provided
when new loans are made. The remaining provisions include providing repayment information, providing required disclosures during the
repayment period, and providing required disclosures for borrowers having difficulty making
payments.
The proposed regulations would remove
§ 682.206 from the FFEL regulations. The
SAFRA Act eliminated the authority to make
new FFEL Program loans, including FFEL consolidation loans.
The proposed regulations would replace the term
‘‘national credit bureau(s)’’ with ‘‘nationwide
consumer reporting agency(ies)’’ to more accurately reflect the appropriate legal terms.
§ 674.34 Deferment of
repayment—Federal
Perkins Loans.
§ 682.410 Fiscal, administrative and enforcement requirements.
§ 682.102 Obtaining
and repaying a loan.
§ 682.200 Definitions—
Lender.
§ 682.205 Disclosure
Requirements for
Lenders.
§ 682.206 Due Diligence in making a
loan.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
OMB Control No. and
estimated burden
[change in burden]
Regulatory
section
§ 682.208 Due diligence in servicing a
loan.
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Estimated
costs
OMB 1845–0019 ...................................................
The Department estimates that the burden would
increase by 38,312 hours.
942,858.
OMB 1845–0019 ...................................................
The Department estimates that the burden would
increase by 276 hours.
13,585.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
increase by 88,402 hours.
2,175,573.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 162,529 hours to 162,529 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
¥7,999,677.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
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¥3,999,839.
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
COLLECTION OF INFORMATION—Continued
Regulatory
section
§ 682.209 Repayment
of a loan.
§ 682.210
Deferment ...
§ 682.211
Forbearance
§ 682.212 Prohibited
transactions.
§ 682.214 Compliance
with equal credit opportunity requirements.
§ 682.216 Teacher loan
forgiveness program.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 682.301 Eligibility of
borrowers for interest
benefits on Stafford
and Consolidation
Loans.
§ 682.305 Procedures
for payment of interest
benefits and special allowance and collection
of origination and loan
fees.
VerDate Mar<15>2010
OMB Control No. and
estimated burden
[change in burden]
Estimated
costs
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease from 325,058 by 65,012 hours to
260,046 hours.
¥1,599,945.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020
The Department estimates that the burden would
remain 325,058 hours. (NOTE: Other earlier
proposed changes increased burden by 9,446
hours for a total of 334,504 hours.).
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
¥7,999,677.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
Information collection
The proposed regulations would amend
§ 682.209(a)(3)(i) by adding a new paragraph
which specifies that borrowers with fixed interest rates on their Stafford loans enter repayment on those loans the day after six months
following the date the borrower was no longer
enrolled on at least a half-time basis. The proposed regulations would remove current
§§ 682.209(e)–(g) and (j) from the regulations
and re-designate the remaining paragraphs as
paragraphs
(e)–(g).
Re-designated
§ 682.209(e) (current paragraph (h)) would be
amended to specify that a FFEL Consolidation
loan borrower repaying under the incomebased repayment plan may make a scheduled
monthly payment of less than the interest that
accrues on the loan.
The proposed regulations would amend the
deferment regulations to provide that a borrower’s representative may request a military
service deferment on behalf of the borrower. In
§ 682.210(b), the introductory language would
be revised to identify the cohort of borrowers to
which each paragraph applies. Throughout
§ 682.210(b) cross-references would be added
to the eligibility criteria that are applicable to
deferments available to these borrowers. The
proposed regulations would remove the exception clause at the end of the provision, and by
replacing the words ‘‘military active’’ with the
word ‘‘post-active’’.
Substantive changes in this section have been
identified earlier. The additional proposed
amendments to the regulations would allow a
lender to grant forbearance to a borrower who
is delinquent at the beginning of a period of
non-mandatory authorized forbearance.
There is no change to the current language in
this section of the regulations however the current burden referenced in OMB Control Number 1845–0020 is incorrect.
The proposed regulations would remove
§ 682.214 from the FFEL regulations. The
SAFRA Act ended the making of new FFEL
loans and therefore these requirements can be
eliminated from the FFEL regulations.
The proposed regulations provide for minor language changes.
The proposed regulations would remove
§ 682.301(c) from the regulations. The SAFRA
Act ended the making of new FFEL loans and
this provision related to determining borrower
eligibility for the interest subsidy on new loans
would be eliminated.
Section 682.305(c)(1)(ii) specifies that, regardless
of the dollar volume of loans originated or held,
a school lender or an eligible lender serving as
trustee for a school or school-affiliated organization originating FFEL loans as a lender must
submit an independent compliance audit to the
Department each year. The proposed regulations would remove the reference to FFEL
lenders originating loans.
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¥7,999,677.
¥7,999,677.
Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
45683
COLLECTION OF INFORMATION—Continued
Regulatory
section
§ 682.401 Basic Program Agreement.
§ 682.402 Death, disability, closed school,
false certification, unpaid refunds, and
bankruptcy payments.
§ 682.404 Federal reinsurance agreement.
§ 682.405 Loan rehabilitation agreement.
§ 682.406 Conditions
for claim payments
from the Federal Fund
and for reinsurance
coverage.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 682.409 Mandatory
assignment by guaranty agencies of defaulted loans to the
Secretary.
§ 682.410 Fiscal, administrative, and enforcement requirements.
§ 682.411 Lender due
diligence in collecting
guaranty agency loans.
§ 682.412 Consequences of the failure of a borrower or
student to establish eligibility.
§ 682.414 Records, reports, and inspection
requirements for guaranty agency programs.
§ 682.417 Determination of Federal funds
or assets to be returned.
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OMB Control No. and
estimated burden
[change in burden]
Information collection
Estimated
costs
The proposed regulations would remove from
§ 682.401 language addressing new loan originations, the process for loan origination, and a
guaranty agency’s efforts to secure new loan
volume. These provisions can be eliminated
from the FFEL regulations because no new
FFEL loans are being made. The remaining
provisions proposed for elimination relate to
school eligibility to participate in a guaranty
agency’s program and the authority of an
agency to limit, suspend, or terminate a school
from its program. For purposes of new loans,
schools now participate only in the Direct Loan
Program. Any future actions to limit, suspend,
or terminate a school’s participation in the student loan programs will be undertaken by the
Department under 34 CFR part 668, subpart G.
Substantive changes in this section have been
identified earlier. There were no further
changes to this section.
OMB 1845–0020 ...................................................
The Department estimates that the burden of
325,058 hours would decrease by 32,506 to
292,552 hours.
¥799,973.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
The proposed regulations would make conforming language changes required due to the
elimination of previous cross references or obsolete requirements.
Substantive changes in this section have been
identified earlier. There were no further
changes to this section.
The proposed regulations would make a minor
wording change due to the elimination of previous cross-references and add an ending date
coinciding with the implementation of the
SAFRA Act, which ended the making of new
FFEL loans.
The proposed regulations make no changes to
this section of the regulations.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
Apart from the earlier discussion of the changes
made to the administrative wage garnishment
provisions of this section of the regulations, the
proposed regulations would only make minor
wording changes to conform to cross reference
changes and delete obsolete references.
The proposed regulations would make a minor
wording change.
OMB 1845–0020
The Department estimates that the burden would
remain 325,058 hours. (NOTE: Other earlier
proposed changes to the Administrative Wage
Garnishment regulations increase burden by
88,402 hours for a total of 413,460 hours.).
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease from 325,058 hours by 16,253 hours
for a total of 308,805 hours.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
¥399,986.
The proposed regulations would make a minor
wording change.
The proposed regulations would make a minor
wording change.
The proposed regulations would make a minor
wording change.
18:48 Jul 26, 2013
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29JYP2
No change.
No change.
No change.
No change.
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
COLLECTION OF INFORMATION—Continued
Regulatory
section
OMB Control No. and
estimated burden
[change in burden]
Estimated
costs
§ 682.418 Prohibited
uses of the assets of
the Operating Fund
during periods in which
the Operating Fund
contains transferred
funds owed to the
Federal Fund.
§ 682.421 Funds transferred from the Federal
Fund to the Operating
Fund by a guaranty
agency.
§ 682.507 Due diligence in collecting a
loan.
The proposed regulations would
§ 682.418 from the FFEL regulations.
remove
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
¥7,999,677.
The proposed regulations would
§ 682.421 from the FFEL regulations.
remove
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
¥7,999,677.
The proposed regulations would remove all of the
regulations under subpart E (§§ 682.500
through 682.515) and reserve the subpart.
¥7,999,677.
§ 682.508 Assignment
of a loan.
The proposed regulations would remove all of the
regulations under subpart E (§§ 682.500
through 682.515) and reserve the subpart.
§ 682.511 Procedures
for filing a claim.
The proposed regulations would remove all of the
regulations under subpart E (§§ 682.500
through 682.515) and reserve the subpart.
§ 682.515 Records, reports, and inspection
requirements for Federal GSL program
lenders.
§ 682.602 Rules for a
school or school-affiliated organization that
makes or originates
loans through an eligible lender trustee.
§ 682.603 Certification
by a school that participated in connection
with a loan application.
The proposed regulations would remove all of the
regulations under subpart E (§§ 682.500
through 682.515) and reserve the subpart.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
remove
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
¥7,999,677.
The proposed regulations would make conforming language changes required due to the
elimination of a cross reference and reorganization due to a deletion of previous requirements.
The proposed regulations would remove, reserve,
and redesignate paragraphs to illustrate the
counseling requirements, specifically the exit
counseling requirements.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease from 325,058 by 211,288 hours for a
total of 113,770 hours.
¥5,199,798.
The Secretary is not proposing to change the
language in this section.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
OMB 1845–0020 ...................................................
The Department estimates that the burden would
remain 325,058 hours.
No change.
§ 682.604 Processing
the borrower’s loan
proceeds and counseling borrowers (Required exit counseling
for borrowers).
§ 682.605 Determining
the date of a student’s
withdrawal.
§ 682.610 Administrative and fiscal requirements for schools that
participated.
§ 682.711 Reinstatement after termination.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
Information collection
§ 682.712 Disqualification review of limitation, suspension, and
termination actions
taken by guarantee
agencies against lenders.
VerDate Mar<15>2010
The proposed regulations would
§ 682.602 from the FFEL regulations.
The proposed regulations would only make minor
wording changes.
The proposed regulations remove the language
regarding the loss of a school lender’s participation upon the loss of the school’s eligibility to
participate in the Title IV, Federal student financial assistance programs.
The proposed regulations would remove a crossreference to a section proposed for deletion.
18:48 Jul 26, 2013
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E:\FR\FM\29JYP2.SGM
29JYP2
¥7,999,677.
¥7,999,677.
¥7,999,677.
No change.
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
COLLECTION OF INFORMATION—Continued
Regulatory
section
§ 682.713 Disqualification review of limitation, suspension, and
termination actions
taken by guaranty
agencies against a
school.
OMB Control No. and
estimated burden
[change in burden]
Estimated
costs
OMB 1845–0020 ...................................................
The Department estimates that the burden would
decrease by 325,058 hours to 0 hours of burden.
¥7,999,677.
Information collection
The proposed regulations would
§ 682.713 from the FFEL regulations.
The total burden hours and change in
burden hours associated with each OMB
remove
Control number affected by these
proposed regulations follows:
Total proposed
burden hours
Control number
1845–0015 ...................................................................................................................................................
1845–0019 ...................................................................................................................................................
1845–0020 ...................................................................................................................................................
1845–NEW1 .................................................................................................................................................
1845–NEW2 .................................................................................................................................................
14,828
6,247,152
8,197,127
588,044
8,165
+54
+38,864
¥4,155,077
+588,044
+8,165
Total ......................................................................................................................................................
15,055,316
¥3,519,950
Intergovernmental Review
This program is subject to Executive
Order 12372 and the regulations in 34
CFR part 79. One of the objectives of the
Executive order is to foster an
intergovernmental partnership and a
strengthened federalism. The Executive
order relies on processes developed by
State and local governments for
coordination and review of proposed
Federal financial assistance.
This document provides early
notification of our specific plans and
actions for this program.
Assessment of Educational Impact
tkelley on DSK3SPTVN1PROD with PROPOSALS2
Proposed change
in burden hours
In accordance with section 411 of the
General Education Provisions Act, 20
U.S.C. 1221e–4, the Secretary
particularly requests comments on
whether these proposed regulations
would require transmission of
information that any other agency or
authority of the United States gathers or
makes available.
Accessible Format: Individuals with
disabilities can obtain this document in
an accessible format (e.g., braille, large
print, audiotape, or compact disc) on
request to the program contact person
listed under FOR FURTHER INFORMATION
CONTACT.
Electronic Access to This Document:
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 via the Federal Digital System
at: www.gpo.gov/fdsys. At this site you
VerDate Mar<15>2010
18:48 Jul 26, 2013
Jkt 229001
can view this document, as well as all
other documents of this Department
published in the Federal Register, in
text or Adobe Portable Document
Format (PDF). To use PDF you must
have Adobe Acrobat Reader, which is
available free at the site.
You may also access documents of the
Department published in the Federal
Register by using the article search
feature at: www.federalregister.gov.
Specifically, through the advanced
search feature at this site, you can limit
your search to documents published by
the Department.
PART 668—STUDENT ASSISTANCE
GENERAL PROVISIONS
1. The authority citation for part 668
continues to read as follows:
■
Authority: 20 U.S.C. 1001, 1002, 1003,
1070(g), 1085, 1088, 1091, 1092, 1094, 1099c,
and 1099c–1, unless otherwise noted.
§ 668.204
[Amended]
2. Section 668.204(c)(1)(i) is amended
by removing the figure ‘‘0.06015’’ and
adding, in its place, the figure ‘‘0.0832’’.
■
§ 668.214
[Amended]
(Catalog of Federal Domestic Assistance
Numbers: 84.032 Federal Family
Education Loan Program; 84.038 Federal
Perkins Loan Program; 84.268 William
D. Ford Federal Direct Loan Program)
3. Section 668.214 is amended by:
A. In paragraph (a)(1), removing the
figure ‘‘0.06015’’ and adding, in its
place, the figure ‘‘0.0832’’.
■ B. In paragraph (d)(2), removing the
words ‘‘0.06015 or 0.0625’’ and adding,
in their place, the words ‘‘0.0832 or
0.0625, as applicable’’.
List of Subjects in 34 CFR Parts 668,
674, 682, and 685
PART 674—FEDERAL PERKINS LOAN
PROGRAM
Administrative practice and
procedure, Colleges and universities,
Education, Loan programs—education,
Reporting and recordkeeping
requirements, Student aid, Vocational
education.
■
Dated: June 27, 2013.
Arne Duncan,
Secretary of Education.
Frm 00069
Fmt 4701
4. The authority citation for part 674
continues to read as follows:
Authority: 20 U.S.C. 1070g, 1087aa–
1087hh, unless otherwise noted.
5. Section 674.2(b) is amended by
revising the definition of ‘‘Satisfactory
repayment arrangement’’ to read as
follows:
■
§ 674.2
For the reasons discussed in the
preamble, the Secretary proposes to
amend title 34 of the Code of Federal
Regulations chapter VI as follows:
PO 00000
■
■
Sfmt 4702
Definitions.
*
*
*
*
*
(b) * * *
Satisfactory repayment arrangement:
(1) For purposes of regaining eligibility
for grant, loan, or work assistance under
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
title IV of the HEA, to the extent that the
borrower is otherwise eligible, the
making of six on-time, consecutive,
voluntary, full monthly payments on a
defaulted loan. ‘‘On-time’’ means a
payment made within 20 days of the
scheduled due date. A borrower may
obtain the benefit of this paragraph with
respect to renewed eligibility once.
(2) Voluntary payments are payments
made directly by the borrower, and do
not include payments obtained by
income tax offset, garnishment, or
income or asset execution.
(3) A borrower has not used the one
opportunity to renew eligibility for title
IV assistance if the borrower makes six
consecutive, on-time, voluntary, full
monthly payments under an agreement
to rehabilitate a defaulted loan, but does
not receive additional title IV assistance
prior to defaulting on that loan again.
*
*
*
*
*
■ 6. Section 674.9 is amended by:
■ A. In paragraph (j)(1), removing the
word ‘‘those’’.
■ B. Redesignating paragraph (k) as
paragraph (l).
■ C. Adding a new paragraph (k).
The addition reads as follows:
§ 674.9
Student eligibility.
*
*
*
*
*
(k) In the case of a borrower who is
in default on an FFEL Program or a
Direct Loan Program loan, makes
satisfactory repayment arrangements as
defined in 34 CFR 682.200(b) or
685.102(b) on the defaulted loan, as
determined by the loan holder; and
*
*
*
*
*
■ 7. Section 674.19 is amended by
adding a new paragraph (f) to read as
follows:
§ 674.19
Fiscal procedures and records.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
*
*
*
*
*
(f) Enrollment reporting process. (1)
Upon receipt of an enrollment report
from the Secretary, an institution must
update all information included in the
report and return the report to the
Secretary—
(i) In the manner and format
prescribed by the Secretary; and
(ii) Within the timeframe specified by
the Secretary.
(2) Unless it expects to submit its next
updated enrollment report to the
Secretary within the next 60 days, an
institution must notify the Secretary
within 30 days after the date the school
discovers that—
(i) A loan under title IV of the HEA
was made to a student who was enrolled
or accepted for enrollment at the
institution, and the student has ceased
to be enrolled on at least a half-time
basis or failed to enroll on at least a half-
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time basis for the period for which the
loan was intended; or
(ii) A student who is enrolled at the
institution and who received a loan
under title IV of the HEA has changed
his or her permanent address.
*
*
*
*
*
■ 8. Section 674.33 is amended by:
■ A. Revising paragraph (g)(4)(i)(B).
■ B. In paragraph (g)(8)(i), removing the
figure ‘‘90’’ and adding, in its place, the
figure ‘‘120’’.
The revision reads as follows:
§ 674.33
Repayment.
*
*
*
*
*
(g) * * *
(4) * * *
(i) * * *
(B) Did not complete the program of
study at that school because the school
closed while the student was enrolled,
or the student withdrew from the school
not more than 120 days before the
school closed. The Secretary may
extend the 120-day period if the
Secretary determines that exceptional
circumstances related to the school’s
closing justify an extension. Exceptional
circumstances for this purpose may
include, but are not limited to: The
school’s loss of accreditation; the
school’s discontinuation of the majority
of its academic programs; action by the
State to revoke the school’s license to
operate or award academic credentials
in the State; or a finding by a State or
Federal government agency that the
school violated State or Federal law;
and
*
*
*
*
*
■ 9. Section 674.34 is amended by:
■ A. In the introductory text of
paragraph (e), removing the reference
‘‘(e)(5)’’ and adding, in its place, the
reference ‘‘(e)(4)’’, each time it appears.
■ B. Removing paragraph (e)(4).
■ C. Redesignating paragraph (e)(5) as
paragraph (e)(4).
■ D. Removing paragraph (e)(6).
■ E. Redesignating paragraphs (e)(7) and
(e)(8) as paragraphs (e)(5) and (e)(6),
respectively.
■ F. In newly redesignated paragraph
(e)(5), removing the words ‘‘paragraphs
(e)(3) and (e)(4)’’ and adding, in their
place, the words ‘‘paragraph (e)(3)’’.
■ G. Removing paragraph (e)(9).
■ H. Revising paragraph (f) to read as
follows:
§ 674.34 Deferment of repayment—Federal
Perkins loans, NDSLs and Defense loans.
*
*
*
*
*
(f)(1) To qualify for a deferment for
study as part of a graduate fellowship
program pursuant to paragraph (b)(1)(ii)
of this section, a borrower must provide
the institution with a statement from an
PO 00000
Frm 00070
Fmt 4701
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authorized official of the borrower’s
graduate fellowship program
certifying—
(i) That the borrower holds at least a
baccalaureate degree conferred by an
institution of higher education;
(ii) That the borrower has been
accepted or recommended by an
institution of higher education for
acceptance on a full-time basis into an
eligible graduate fellowship program;
and
(iii) The borrower’s anticipated
completion date in the program.
(2) For purposes of paragraph (b)(1)(ii)
of this section, an eligible graduate
fellowship program is a fellowship
program that—
(i) Provides sufficient financial
support to graduate fellows to allow for
full-time study for at least six months;
(ii) Requires a written statement from
each applicant explaining the
applicant’s objectives before the award
of that financial support;
(iii) Requires a graduate fellow to
submit periodic reports, projects, or
evidence of the fellow’s progress; and
(iv) In the case of a course of study at
a foreign university, accepts the course
of study for completion of the
fellowship program.
*
*
*
*
*
■ 10. Section 674.39 is amended by
revising paragraph (a)(2) to read as
follows:
§ 674.39
Loan rehabilitation.
(a) * * *
(2) A loan is rehabilitated if the
borrower—
(i) Requests rehabilitation; and
(ii) Makes a full monthly payment—
as determined by the institution—
within 20 days of the due date, each
month for 9 consecutive months.
*
*
*
*
*
§ 674.50
[Amended]
11. Section 674.50(e)(1) is amended
by removing the words ‘‘is submitted for
assignment under 674.8(d)(3)’’ and
adding, in their place, the words ‘‘was
made before September 13, 1982’’.
■ 12. Section 674.52 is amended by:
■ A. Removing paragraph (b)(2).
■ B. Redesignating paragraph (b)(1)(i) as
paragraph (b)(1).
■ C. Redesignating paragraph (b)(1)(ii)
as paragraph (b)(2).
■ D. Redesignating paragraphs (c), (d),
and (e) as paragraphs (d), (e), and (f),
respectively.
■ E. Adding a new paragraph (c).
■ F. Adding a new paragraph (g).
The additions read as follows:
■
§ 674.52
*
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Cancellation procedures.
*
29JYP2
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*
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
tkelley on DSK3SPTVN1PROD with PROPOSALS2
(c) Break in service. (1) If the borrower
is unable to complete an academic year
of eligible teaching service due to a
condition that is covered under the
Family and Medical Leave Act of 1993
(FMLA) (29 U.S.C. 2601, et seq.), the
borrower still qualifies for the
cancellation if—
(i) The borrower completes one half of
the academic year; and
(ii) The borrower’s employer
considers the borrower to have fulfilled
his or her contract requirements for the
academic year for purposes of salary
increases, tenure, and retirement.
(2) If the borrower is unable to
complete a year of eligible service under
§§ 674.56, 674.57, 674.59, or 674.60 due
to a condition that is covered under the
FMLA, the borrower still qualifies for
the cancellation if the borrower
completes at least six consecutive
months of eligible service.
*
*
*
*
*
(g) Switching cancellation categories.
A borrower who qualifies for a
cancellation under one of the
cancellation categories in §§ 674.53,
674.56, 674.57, or 674.59 receives
cancellation of 15 percent of the original
principal for the first and second years
of qualifying service, 20 percent of the
original principal for the third and
fourth years of qualifying service, and
30 percent of the original principal for
the fifth year of qualifying service. If,
after the first, second, third, or fourth
complete year of qualifying service—
(1) The borrower switches to a
position that qualifies the borrower for
cancellation under a different
cancellation category under §§ 674.53,
674.56, 674.57, or 674.59, the borrower’s
cancellation rate progression continues
from the last year the borrower received
a cancellation under the former
cancellation category; or
(2) The borrower switches to a
position that qualifies the borrower for
cancellation under a different
cancellation category under §§ 674.58 or
674.60, the borrower’s cancellation rate
progression under the new cancellation
category begins at the year one
cancellation rates specified in
§§ 674.58(b) or 674.60(b), respectively.
*
*
*
*
*
PART 682—FEDERAL FAMILY
EDUCATION LOAN (FFEL) PROGRAM
13. The authority citation for part 682
continues to read as follows:
■
Authority: 20 U.S.C. 1071 to 1087–2,
unless otherwise noted.
14. Section 682.100 is amended by:
A. Revising the introductory text of
paragraph (a).
■
■
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18:48 Jul 26, 2013
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B. In paragraph (a)(1), removing the
word ‘‘encourages’’ and adding, in its
place, the word ‘‘encouraged’’.
■ C. In the first sentence of paragraph
(a)(3), removing the word ‘‘encourages’’
and adding, in its place, the word
‘‘encouraged’’.
■ D. Revising the last sentence of
paragraph (a)(3).
■ E. In paragraph (a)(4), removing the
word ‘‘encourages’’ and adding, in its
place, the word ‘‘encouraged’’.
■ F. In paragraph (a)(4), adding the
words ‘‘and prior to July 1, 2010’’ in the
last sentence between the date
‘‘November 13, 1997’’ and the
punctuation ‘‘.’’.
■ G. Revising paragraph (b)(2)(iii).
The revisions read as follows:
■
§ 682.100 The Federal Family Education
Loan programs.
(a) This part governs the following
four programs collectively referred to in
these regulations as ‘‘the Federal Family
Education Loan (FFEL) programs,’’ in
which lenders used their own funds
prior to July 1, 2010, to make loans to
enable a student or his or her parents to
pay the costs of the student’s attendance
at postsecondary schools.
*
*
*
*
*
(3) * * * The PLUS Program also
provided for making loans to graduate
and professional students on or after
July 1, 2006 and prior to July 1, 2010.
*
*
*
*
*
(b) * * *
(2) * * *
(iii) The Federal GSL programs were
authorized to operate in States not
served by a guaranty agency program. In
addition, the FISL and Federal SLS (as
in effect for periods of enrollment that
began prior to July 1, 1994) programs
were authorized, under limited
circumstances, to operate in States in
which a guaranty agency program did
not serve all eligible students.
*
*
*
*
*
■ 15. Section 682.101 is amended by:
■ A. Adding introductory text to this
section.
■ B. In paragraph (a), removing the
words ‘‘may make loans.’’ and adding,
in their place, the words ‘‘made loans
prior to July 1, 2010.’’
■ C. In paragraph (b), removing the
words ‘‘may participate’’ and adding, in
their place, the word ‘‘participated’’.
■ D. Revising paragraph (c).
The addition and revision read as
follows:
§ 682.101 Participation in the FFEL
programs.
The following entities and persons
participate in the FFEL programs:
*
*
*
*
*
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45687
(c) Students who met certain
requirements, including enrollment at a
participating school, borrowed under
the Stafford Loan Program prior to July
1, 2010 and, for periods of enrollment
that began prior to July 1, 1994, the SLS
program. Parents of eligible dependent
undergraduate students borrowed under
the PLUS Program prior to July 1, 2010.
Borrowers with outstanding Stafford,
SLS, FISL, Perkins, HPSL, HEAL, ALAS,
PLUS, or Nursing Student Loan Program
loans borrowed under the Consolidation
Loan Program prior to July 1, 2010. The
PLUS Program also provided for making
loans to graduate and professional
students on or after July 1, 2006 and
prior to July 1, 2010.
*
*
*
*
*
■ 16. Section 682.102 is amended by:
■ A. Revising the section heading.
■ B. Removing paragraphs (a), (c), and
(d).
■ C. In the introductory text of
paragraph (e), removing the paragraph
heading.
■ D. Redesignating paragraphs (e)(1)
through (e)(7) as paragraphs (a) through
(g), respectively.
■ E. In newly redesignated paragraph
(a), revising the last sentence.
■ F. In newly redesignated paragraph
(b), removing the words ‘‘on a Stafford
Loan’’.
The revisions read as follows:
§ 682.102
Repaying a loan.
(a) * * * The obligation to repay all
or a portion of a loan may be forgiven
for Stafford Loan borrowers who enter
certain areas of the teaching profession.
*
*
*
*
*
§ 682.103
[Amended]
17. Section 682.103(c) is amended by
removing the letter and the punctuation
‘‘E,’’.
■ 18. Section 682.200 is amended by:
■ A. In paragraph (a)(1) introductory
text, removing the words ‘‘subpart A
of’’.
■ B. In paragraph (a)(1), removing from
the list, the terms Academic
Competitiveness Grant (ACG) Program,
Graduate and professional student,
Leveraging Educational Assistance
Partnership (LEAP) Program, National
Science and Mathematics Access to
Retain Talent Grant (National SMART
Grant) Program, Supplemental
Educational Opportunity Grant (SEOG)
Program, and Supplemental Loans for
Students (SLS) Program.
■ C. In paragraph (a)(1), adding to the
list, in alphabetical order, the terms
Federal Supplemental Educational
Opportunity Grant (SEOG) Program,
Federal Supplemental Loans for
■
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Students (SLS) Program, and Graduate
or professional student.
■ D. In paragraph (b), in the definition
of Authority, removing the words
‘‘making or purchasing’’ and adding, in
their place, the word ‘‘purchase’’.
■ E. In paragraph (b), in the definition
of Borrower, removing the word ‘‘is’’
and adding, in its place, the word
‘‘was’’.
■ F. In paragraph (b), in the definition
of Estimated financial assistance, in
paragraph (1)(vi), removing the words
‘‘Academic Competitiveness Grant,
National SMART Grant,’’.
■ G. In paragraph (b), in the definition
of Lender, revising paragraphs
(5)(i)(A)(10) and 8.
■ H. In paragraph (b), revising the
definition of Nationwide consumer
reporting agency.
■ I. In paragraph (b), revising the
definition of Satisfactory repayment
arrangement.
The revisions read as follows:
§ 682.200
Definitions.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
*
*
*
*
*
(b) * * *
Lender
*
*
*
*
*
(5) * * *
(i) * * *
(A) * * *
(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 and, as provided in
§ 682.604(a), exit counseling, and may
provide services to participating foreign
schools at the direction of the Secretary,
as a third-party servicer; and
*
*
*
*
*
(8) As of January 1, 2007, and for
loans first disbursed on or after that date
under a trustee arrangement, an eligible
lender operating as a trustee under a
contract entered into on or before
September 30, 2006, and which
continues in effect with a school or a
school-affiliated organization—
(i) Must not—
(A) Make a loan to any undergraduate
student;
(B) Make a loan other than a Federal
Stafford loan to a graduate or
professional student; or
(C) Make a loan to a borrower who is
not enrolled at that school;
(ii) Must offer loans that carry an
origination fee or an interest rate, or
both, that are less than the fee or rate
authorized under the provisions of the
Act; and
(iii) Must, for any fiscal year
beginning on or after July 1, 2006 in
which the school engages in activities as
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an eligible lender, submit an annual
compliance audit that satisfies the
following requirements:
(A) With regard to a school that is a
governmental entity or a nonprofit
organization, the audit must be
conducted in accordance with
§ 682.305(c)(2)(v) and chapter 75 of title
31, United States Code, and in addition,
during years when the student financial
aid cluster (as defined in Office of
Management and Budget Circular
A–133, Appendix B, Compliance
Supplement) is not audited as a ‘‘major
program’’ (as defined under 31 U.S.C.
7501) must, without regard to the
amount of loans made, include in such
audit the school’s lending activities as a
major program.
(B) With regard to a school that is not
a governmental entity or a nonprofit
organization, the audit must be
conducted annually in accordance with
§ 682.305(c)(2)(i) through (iii).
(C) With regard to any school, the
audit must include a determination
that—
(1) The school used all payments and
proceeds (i.e., special allowance and
interest payments from borrowers,
interest subsidy payments, proceeds
from the sale or other disposition of
loans) from the loans for need-based
grant programs;
(2) Those need-based grants
supplemented, rather than supplanted,
the institution’s use of non-Federal
funds for such grants; and
(3) The school used no more than a
reasonable portion of payments and
proceeds from the loans for direct
administrative expenses.
*
*
*
*
*
Nationwide consumer reporting
agency. A consumer reporting agency
that compiles and maintains files on
consumers on a nationwide basis and as
defined in 15 U.S.C. 1681a(p).
*
*
*
*
*
Satisfactory repayment arrangement.
(1) For purposes of regaining eligibility
under the title IV student financial
assistance programs, the making of six
consecutive, on-time, voluntary full
monthly payments on a defaulted loan.
A borrower may only obtain the benefit
of this paragraph with respect to
renewed eligibility once.
(2) The required full monthly
payment amount may not be more than
is reasonable and affordable based on
the borrower’s total financial
circumstances. Voluntary payments are
payments made directly by the
borrower, and do not include payments
obtained by income tax off-set,
garnishment, or income or asset
execution. ‘‘On-time’’ means a payment
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received by the Secretary or a guaranty
agency or its agent within 20 days of the
scheduled due date.
(3) A borrower has not used the one
opportunity to renew eligibility for title
IV assistance if the borrower makes six
consecutive, on-time, voluntary full
monthly payments under an agreement
to rehabilitate a defaulted loan but does
not receive additional title IV assistance
prior to defaulting on that loan again.
*
*
*
*
*
§ 682.201
[Amended]
19. Section 682.201 is amended by:
A. In paragraph (a) introductory text,
removing the words ‘‘made under
§ 682.209(e) or (f)’’.
■ B. In paragraph (a)(4)(ii) introductory
text, adding the words ‘‘paragraph (a)(4)
of’’ between the words ‘‘of’’ and ‘‘this’’.
■ C. In paragraph (a)(6) introductory
text, removing the word ‘‘student’’ and
adding, in its place, the word
‘‘borrower’’.
■ D. In paragraph (c)(2)(i), removing the
words ‘‘credit bureau’’ and adding, in
their place, the words ‘‘consumer
reporting agency’’.
■ 20. Section 682.202 is amended by:
■ A. Revising paragraphs (a)(1)(i),
(a)(1)(ii) introductory text, (a)(1)(iii),
(a)(1)(iv), (a)(1)(v), and (a)(1)(vi)
introductory text.
■ B. In paragraph (a)(1)(vii) introductory
text, removing the first occurrence of the
word ‘‘is’’ and adding, in its place, the
word ‘‘was’’.
■ C. In paragraph (a)(1)(viii)
introductory text, removing the first
occurrence of the word ‘‘is’’ and adding,
in its place, the word ‘‘was’’.
■ D. In paragraph (a)(1)(ix), removing
the first occurrence of the word ‘‘is’’ and
adding, in its place, the word ‘‘was’’.
■ E. In paragraph (a)(1)(x) introductory
text, removing the word ‘‘is’’ and
adding, in its place, the word ‘‘was’’.
■ F. Removing paragraphs (a)(1)(x)(D)
and (a)(1)(x)(E).
■ G. In paragraph (a)(2)(ii) introductory
text, removing the words ‘‘loan made
under § 682.209(e) or (f)’’ and adding, in
their place, the words ‘‘refinanced PLUS
loan’’.
■ H. In paragraph (a)(2)(iv) introductory
text, removing the first occurrence of the
word ‘‘is’’ and adding, in its place, the
word ‘‘was’’.
■ I. In paragraph (a)(2)(v) introductory
text, removing the first occurrence of the
word ‘‘is’’ and adding, in its place, the
word ‘‘was’’.
■ J. In paragraph (a)(3)(ii) introductory
text, removing the words ‘‘loan made
under § 682.209(e) or (f)’’ and adding, in
their place, the words ‘‘refinanced SLS
loan’’.
■ K. In paragraph (a)(4)(iv) introductory
text, adding the words ‘‘and prior to July
■
■
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1, 2010’’ after the date ‘‘1998’’ and
before the punctuation ‘‘,’’.
■ L. In paragraph (a)(4)(v), adding the
words ‘‘and prior to July 1, 2010’’ after
the date ‘‘1997’’ and before the
punctuation ‘‘,’’.
■ M. In paragraph (a)(7)(iii)(A),
removing the citation ‘‘(a)(6)(ii)’’ and
adding, in its place, the citation
‘‘(a)(7)(i)’’.
■ N. In paragraph (b)(1), adding the
words ‘‘or Federal default fees’’ between
the words ‘‘premiums’’ and ‘‘to’’.
■ O. Removing paragraph (c)(1)(vi).
■ P. Redesignating paragraph (c)(1)(vii)
as paragraph (c)(1)(vi)’’.
■ Q. In paragraphs (c)(5), (c)(6), and the
introductory text of paragraph (c)(7),
removing the word ‘‘Shall’’ and adding,
in its place, the words ‘‘A lender must’’.
■ R. In paragraph (c)(7)(iv), removing
the words ‘‘in accordance with
§ 682.207(b)(1)(ii)(B) and (C)’’.
■ S. In paragraph (d)(2), removing the
words ‘‘, other than an SLS or PLUS
loan refinanced under § 682.209(e) or
(f)’’ and adding, in their place, the
words ‘‘and prior to July 1, 2010’’.
■ T. Removing paragraph (e).
■ U. Redesignating paragraphs (f)
through (h) as paragraphs (e) through
(g), respectively.
■ V. In newly redesignated paragraph
(e)(1), removing the citation ‘‘(f)(2)’’ and
adding, in its place, the citation ‘‘(e)(2)’’.
■ W. In newly redesignated paragraph
(f)(1)(i), removing the punctuation and
letter ‘‘’s’’.
■ X. In newly redesignated paragraph
(f)(2), removing the citation ‘‘(g)(1)’’ and
adding, in its place, the citation ‘‘(f)(1)’’.
The revisions read as follows:
§ 682.202 Permissible charges by lenders
to borrowers.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
*
*
*
*
*
(a) * * *
(1) * * *
(i) For loans made prior to July 1,
1994, if the borrower, on the date the
promissory note evidencing the loan
was signed, had an outstanding balance
of principal or interest on a previous
Stafford loan, the interest rate is the
applicable interest rate on that previous
Stafford loan.
(ii) If the borrower, on the date the
promissory note evidencing the loan
was signed, had no outstanding balance
on any FFEL Program loan, and the first
disbursement was made—
*
*
*
*
*
(iii) For a Stafford loan for which the
first disbursement was made before
October 1, 1992—
(A) If the borrower, on the date the
promissory note was signed, had no
outstanding balance on a Stafford loan
but had an outstanding balance of
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principal or interest on a PLUS or SLS
loan made for a period of enrollment
beginning before July 1, 1988, or on a
Consolidation loan that repaid a loan
made for a period of enrollment
beginning before July 1, 1988, the
interest rate is 8 percent; or
(B) If the borrower, on the date the
promissory note evidencing the loan
was signed, had an outstanding balance
of principal or interest on a PLUS or
SLS loan made for a period of
enrollment beginning on or after July 1,
1988, or on a Consolidation loan that
repaid a loan made for a period of
enrollment beginning on or after July 1,
1988, the interest rate is 8 percent until
48 months elapse after the repayment
period begins, and 10 percent thereafter.
(iv) For a Stafford loan for which the
first disbursement was made on or after
October 1, 1992, but before December
20, 1993, if the borrower, on the date the
promissory note evidencing the loan
was signed, had no outstanding balance
on a Stafford loan but had an
outstanding balance of principal or
interest on a PLUS, SLS, or
Consolidation loan, the interest rate is 8
percent.
(v) For a Stafford loan for which the
first disbursement was made on or after
December 20, 1993 and prior to July 1,
1994, if the borrower, on the date the
promissory note was signed, had no
outstanding balance on a Stafford loan
but had an outstanding balance of
principal or interest on a PLUS, SLS, or
Consolidation loan, the interest rate is
the rate provided in paragraph
(a)(1)(ii)(B) of this section.
(vi) For a Stafford loan for which the
first disbursement was made on or after
July 1, 1994 and prior to July 1, 1995,
for a period of enrollment that included
or began on or after July 1, 1994, the
interest rate is a variable rate, applicable
to each July 1–June 30 period, that
equals the lesser of—
*
*
*
*
*
■ 21. Section 682.204 is amended by:
■ A. In paragraph (a) introductory text,
removing the words ‘‘Federal Direct
Stafford/Ford’’ and adding, in their
place, the words ‘‘Direct Subsidized’’.
■ B. In paragraphs (a)(i) and (a)(1)(ii),
removing the words ‘‘$2,625, or, for a
loan disbursed on or after July 1, 2007,
$3,500,’’ and adding, in their place, the
figure ‘‘$3,500’’.
■ C. Revising paragraph (a)(1)(iii).
■ D. In paragraph (a)(2) introductory
text, removing the words ‘‘Federal
Direct Stafford/Ford’’ and adding, in
their place, the words ‘‘Direct
Subsidized’’.
■ E. In paragraphs (a)(2)(i) and (a)(2)(ii),
removing the words ‘‘$3,500, or, for a
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loan disbursed on or after July 1, 2007,
$4,500,’’ and adding, in their place, the
figure ‘‘$4,500’’.
■ F. In paragraph (a)(3) introductory
text, removing the words ‘‘Federal
Direct Stafford/Ford’’ and adding, in
their place, the words ‘‘Direct
Subsidized’’.
■ G. Revising paragraph (a)(5).
■ H. In paragraph (a)(6) introductory
text and paragraph (a)(7), removing the
words ‘‘Federal Direct Stafford/Ford’’
and adding, in their place, the words
‘‘Direct Subsidized’’.
■ I. In paragraph (b) introductory text,
removing the words ‘‘Federal Direct
Stafford/Ford’’, and adding, in their
place, the words ‘‘Direct Subsidized’’.
■ J. Revising paragraph (c)(1).
■ K. Revising paragraph (c)(2).
■ L. In paragraph (d) introductory text,
removing the word ‘‘additional’’ that
appears after the word ‘‘borrow’’.
■ M. In paragraph (d) introductory text,
removing the words ‘‘Federal Direct
Unsubsidized Stafford/Ford’’ and
adding, in their place, the words ‘‘Direct
Unsubsidized’’.
■ N. In paragraphs (d)(1)(i), (d)(1)(ii),
(d)(2)(i), and (d)(2)(ii), removing the
words ‘‘$4,000, or, for a loan first
disbursed on or after July 1, 2008,
$6,000,’’ and adding, in their place, the
figure ‘‘$6,000’’.
■ O. Revising paragraph (d)(1)(iii).
■ P. In paragraphs (d)(3)(i) and (d)(3)(ii),
removing the words ‘‘$5,000, or, for a
loan first disbursed on or after July 1,
2008, $7,000,’’ and adding, in their
place, the figure ‘‘$7,000’’.
■ Q. In paragraph (d)(5), removing the
words ‘‘$10,000, or, for a loan disbursed
on or after July 1, 2007,’’.
■ R. In paragraph (d)(6)(i), removing the
words ‘‘$4,000, or, for a loan first
disbursed on or after July 1, 2008,
$6,000,’’ and adding, in their place, the
figure ‘‘$6,000’’.
■ S. In paragraph (d)(6)(ii), removing the
words ‘‘$5,000, or, for a loan disbursed
on or after July 1, 2007, $7,000,’’ and
adding, in their place, the figure
‘‘$7,000’’.
■ T. In paragraph (d)(6)(iii), removing
the words ‘‘$5,000, or, for a loan
disbursed on or after July 1, 2007,’’.
■ U. Revising paragraph (e).
■ V. Removing paragraph (f).
■ W. Redesignating paragraphs (g)
through (m) as paragraphs (f) through
(l), respectively.
■ X. In newly redesignated paragraph
(l), removing the citation ‘‘(d), (e), and
(f)’’ and adding, in its place, the citation
‘‘(d), and (e)’’.
The revisions read as follows:
§ 682.204
Maximum loan amounts.
(a) * * *
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(1) * * *
(iii) For a program of study that is less
than a full academic year in length, the
amount that is the same ratio to $3,500
as the lesser of the—
Number of semester, trimester, quarter,
or clock hours enrolled
lllllllllllllllllll
Number of semester, trimester, quarter,
or clock hours in academic year or
Number of weeks enrolled
lllllllllllllllllll
Number of weeks in academic year
*
*
*
*
*
(5) In the case of a graduate or
professional student, the total amount
the student may borrow for loans made
prior to July 1, 2010 for any academic
year of study under the Stafford Loan
Program, in combination with any
amount borrowed under the Direct
Subsidized Loan Program, may not
exceed $8,500.
*
*
*
*
*
(c) * * *
(1) Except for a dependent
undergraduate student who qualifies for
additional Unsubsidized Stafford Loan
funds because the student’s parents are
unable to borrow under the PLUS Loan
Program, as described in paragraph (d)
of this section, the total amount the
dependent undergraduate student may
borrow for any academic year under the
Unsubsidized Stafford Loan Program in
combination with the Direct
Unsubsidized Loan Program is the same
amount determined under paragraph (a)
of this section, less any amount received
under the Stafford Loan Program or the
Direct Subsidized Loan program, plus—
(i) $2,000, for a program of study of
at least a full academic year in length.
(ii) For a program of study that is at
least 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 enrolled
lllllllllllllllllll
Number of semester, trimester, quarter,
or clock hours in academic year
(iii) 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 enrolled
lllllllllllllllllll
Number of semester, trimester, quarter,
or clock hours in academic year or
Number of weeks enrolled
lllllllllllllllllll
Number of weeks in academic year
(2) In the case of an independent
undergraduate student, a graduate or
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professional student, or certain
dependent undergraduate students
under the conditions specified in
§ 682.201(a)(3), the total amount the
student may borrow for any period of
enrollment under the Unsubsidized
Stafford Loan and Direct Unsubsidized
Loan programs may not exceed the
amounts determined under paragraph
(a) of this section less any amount
received under the Federal Stafford
Loan Program or the Direct Subsidized
Loan Program, in combination with the
amounts determined under paragraph
(d) of this section.
(d) * * *
(1) * * *
(iii) For a program of study that is less
than a full academic year in length, an
amount that is the same ratio to $6,000
as the lesser of—
Number of semester, trimester, quarter,
or clock hours enrolled
lllllllllllllllllll
Number of semester, trimester, quarter,
or clock hours in academic year or
Number of weeks enrolled
lllllllllllllllllll
Number of weeks in academic year
lllllllllllllllllll
*
*
*
*
*
(e) Combined Federal Stafford, SLS
and Federal Unsubsidized Stafford Loan
Program aggregate limits. The aggregate
unpaid principal amount of Stafford
Loans, Direct Subsidized Loans,
Unsubsidized Stafford Loans, Direct
Unsubsidized Loans and SLS Loans, but
excluding the amount of capitalized
interest, may not exceed the following:
(1) $31,000 for a dependent
undergraduate student.
(2) $57,500 for an independent
undergraduate student or a dependent
undergraduate student under the
conditions specified in § 682.201(a)(3).
(3) $138,500 for a graduate or
professional student.
*
*
*
*
*
■ 22. Section 682.205 is amended by:
■ A. Removing paragraphs (a), (b), (g),
and (i).
■ B. Redesignating paragraphs (c), (d),
(e), (f), (h), and (j) as paragraphs (a), (b),
(c), (d), (e), and (f), respectively.
■ C. In newly redesignated paragraph
(a)(1), removing the citation ‘‘(c)(2)’’ and
adding, in its place, the citation ‘‘(a)(2)’’.
■ D. In newly redesignated paragraph
(a)(3) introductory text, removing the
citation ‘‘(c)(1)’’ and adding, in its place,
the citation ‘‘(a)(1)’’.
■ E. Revising newly redesignated
paragraph (a)(4).
■ F. In newly redesignated paragraph
(a)(5)(ii), adding the word ‘‘business’’
after the word ‘‘five’’.
■ G. In newly redesignated paragraph
(b), removing the parenthetical ‘‘(c)’’
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and adding, in its place, the
parenthetical ‘‘(a)’’.
■ H. In newly redesignated paragraph
(e)(2), removing the citation ‘‘(h)(1)’’ and
adding, in its place, the citation ‘‘(e)(1)’’.
The revision reads as follows:
§ 682.205
lenders.
Disclosure requirements for
*
*
*
*
*
(a) * * *
(4) Required disclosures for borrowers
having difficulty making payments. (i)
Except as provided in paragraph
(a)(4)(ii) of this section, the lender must
provide a borrower who has notified the
lender that he or she is having difficulty
making payments with—
(A) A description of the repayment
plans available to the borrower, and
how the borrower may request a change
in repayment plan;
(B) A description of the requirements
for obtaining forbearance on the loan
and any costs associated with
forbearance; and
(C) A description of the options
available to the borrower to avoid
default and any fees or costs associated
with those options.
(ii) A disclosure under paragraph
(a)(4)(i) of this section is not required if
the borrower’s difficulty has been
resolved through contact with the
borrower resulting from an earlier
disclosure or other communication
between the lender and the borrower.
*
*
*
*
*
§ 682.206
■
§ 682.207
■
[Removed]
23. Remove § 682.206.
[Removed]
24. Remove § 682.207.
§ 682.208
[Amended]
25. Section 682.208 is amended by:
A. In paragraph (a), removing the
words ‘‘national credit bureaus’’ and
adding, in their place, the words
‘‘nationwide consumer reporting
agencies’’.
■ B. In paragraph (b)(1) introductory
text, removing the words ‘‘at least one
national credit bureau’’ and adding, in
their place, the words ‘‘each nationwide
consumer reporting agency’’.
■ C. In paragraph (b)(2), removing the
words ‘‘at least one national credit
bureau’’ and adding, in their place, the
words ‘‘each nationwide consumer
reporting agency’’.
■ D. In paragraph (b)(3) introductory
text, removing both occurrences of the
words ‘‘credit bureau’’ and adding, in
their place, the words ‘‘consumer
reporting agency’’.
■ E. In paragraph (b)(3)(i)(A), removing
the words ‘‘credit bureau’’ and adding,
■
■
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in their place, the words ‘‘consumer
reporting agency’’.
■ F. In paragraph (e)(3), removing the
citation ‘‘§ 682.401(b)(17)(ii)’’ and
adding, in its place, the citation
‘‘§ 682.401(b)(8)(ii)’’.
■ G. In paragraph (g), removing the
citation ‘‘§ 682.411(g)’’ and adding, in
its place, the citation ‘‘§ 682.411(h)’’.
■ 26. Section 682.209 is amended by:
■ A. In paragraph (a)(3)(i)(B), removing
the word ‘‘and’’.
■ B. In paragraph (a)(3)(i)(C), removing
the punctuation ‘‘.’’ and adding, in its
place, the punctuation and the word ‘‘;
and’’.
■ C. Adding a new paragraph
(a)(3)(i)(D).
■ D. In paragraph (a)(3)(ii)(E), removing
the citation ‘‘§ 682.205(c)(1)’’ and
adding, in its place, the citation
‘‘§ 682.205(a)(1)’’.
■ E. In paragraph (b)(2)(ii), revising the
last sentence.
■ F. Removing paragraphs (e), (f), (g),
and (j).
■ G. Redesignating paragraphs (h), (i),
and (k) as paragraphs (e), (f), and (g),
respectively.
■ H. In newly redesignated paragraph
(e)(3) introductory text, removing the
citation ‘‘(h)’’ and adding, in its place,
the citation ‘‘(e)’’.
■ I. In newly redesignated paragraph
(e)(4)(ii), removing the word ‘‘Must’’
and adding, in its place, the words
‘‘Except in the case of an income-based
repayment schedule, must’’.
■ J. In newly redesignated paragraph
(e)(5), removing the citation ‘‘(h)’’ and
adding, in its place, the citation ‘‘(e)’’.
■ K. In newly redesignated paragraph
(f)(2)(i), removing the words ‘‘under
§ 682.209(f)’’.
■ L. In newly redesignated paragraph
(f)(2)(ii), removing the citation ‘‘(i)(2)(i)’’
and adding, in its place, the citation
‘‘(f)(2)(i)’’.
The addition and revision read as
follows:
§ 682.209
Repayment of a loan.
(a) * * *
(3) * * *
(i) * * *
(D) For a borrower with a loan for
which the applicable interest rate is
fixed at 6.0 percent per year, 5.6 percent
per year, or 6.8 percent per year, the day
after 6 months following the date on
which the borrower is no longer
enrolled on at least a half-time basis at
an institution of higher education;
*
*
*
*
*
■ (b) * * *
■ (2) * * *
(ii) * * * Information related to next
scheduled payment due date need not
be provided to borrowers making such
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■
■
■
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prepayments while in an in-school,
grace, deferment, or forbearance period
when payments are not due.
*
*
*
*
*
■ 27. Section 682.210 is amended by:
■ A. In paragraph (a)(4), adding the
words and punctuation ‘‘, or the
borrower’s representative for purposes
of paragraphs (i) and (t) of this section,’’
between the words ‘‘borrower’’ and
‘‘must’’.
■ B. Revising paragraph (b).
■ C. In paragraph (n)(1) introductory
text and in paragraph (n)(2), removing
the citation ‘‘(b)(2)(v)’’ and adding, in its
place, the citation ‘‘(b)(3)(iv)’’.
■ D. In paragraph (o)(1) introductory
text, adding the parenthetical ‘‘(i)’’
between the parenthetical ‘‘(3)’’ and the
word ‘‘of’’.
■ E. In paragraph (q)(1) introductory
text, removing the citation ‘‘(b)(5)(ii)’’
and adding, in its place, the citation
‘‘(b)(3)(iii)’’.
■ F. In paragraph (r)(1) introductory
text, removing the citation ‘‘(b)(5)(iv)’’
and adding, in its place, the citation
‘‘(b)(3)(v)’’.
■ G. In paragraph (s)(2), removing the
punctuation and the words ‘‘, except
that the borrower is not required to
obtain a Stafford or SLS loan for the
period of enrollment covered by the
deferment’’.
■ H. In paragraph (s)(6) introductory
text, removing both occurrences of the
citation ‘‘(s)(6)(vi)’’ and adding, in their
place, the citation ‘‘(s)(6)(iv)’’.
■ I. In paragraph (u)(5), removing both
occurrences of the words ‘‘military
active’’ and adding, in their place, the
words ‘‘post-active’’.
The revision reads as follows:
§ 682.210
Deferment.
*
*
*
*
*
(b) Authorized deferments for
borrowers prior to July 1, 1993. (1) For
all borrowers who are not new borrowers
on or after July 1, 1993. Deferment is
authorized for a FFEL borrower during
any period when the borrower is—
(i) Except as provided in paragraph
(b)(4) of this section, engaged in fulltime study at a school in accordance
with paragraph (c) of this section;
(ii) Engaged in a course of study
under an eligible graduate fellowship
program in accordance with paragraph
(d) of this section;
(iii) Engaged in a rehabilitation
training program for disabled
individuals in accordance with
paragraph (e) of this section;
(iv) Temporarily totally disabled in
accordance with paragraph (f) of this
section, or unable to secure employment
because the borrower is caring for a
spouse or other dependent who is
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disabled and requires continuous
nursing or similar services for up to
three years in accordance with
paragraph (g) of this section; or
(v) Conscientiously seeking, but
unable to find, full-time employment in
the United States, for up to two years,
in accordance with paragraph (h) of this
section.
(2) For all Stafford and SLS borrowers
who are not new borrowers on or after
July 1, 1993, and for parent PLUS loans
made before August 15, 1983.
Deferment is authorized during any
period when the borrower is—
(i) On active duty status in the United
States Armed Forces in accordance with
paragraph (i) of this section, or an
officer in the Commissioned Corps of
the United States Public Health Service
in accordance with paragraph (j) of this
section, for up to three years (including
any period during which the borrower
received a deferment authorized under
paragraph (b)(3)(ii) of this section);
(ii) A full-time volunteer under the
Peace Corps Act, for up to three years,
in accordance with paragraph (k) of this
section;
(iii) A full-time volunteer under title
I of the Domestic Volunteer Service Act
of 1973 (ACTION programs), for up to
three years, in accordance with
paragraph (l) of this section;
(iv) A full-time volunteer for a taxexempt organization, for up to three
years, in accordance with paragraph (m)
of this section; or
(v) Engaged in an internship or
residency program, in accordance with
paragraph (n) of this section, for up to
two years (including any period during
which the borrower received a
deferment authorized under paragraph
(b)(3)(iv) of this section).
(3) For new Stafford or SLS borrowers
on or after July 1, 1987 but before July
1, 1993. Deferment is authorized—
(i) In accordance with paragraph (o) of
this section, if the borrower has been
enrolled on at least a half-time basis at
an institution of higher education
during the six months preceding the
beginning of the deferment, for a period
of up to six months during which the
borrower is—
(A)(1) Pregnant;
(2) Caring for his or her newborn
child; or
(3) Caring for a child immediately
following the placement of the child
with the borrower before or immediately
following adoption; and
(B) Not attending a school or gainfully
employed;
(ii) During a period when the
borrower is on active duty status in the
National Oceanic and Atmospheric
Administration Corps, for up to three
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years, in accordance with paragraph (p)
of this section, (including any period
during which the borrower received a
deferment authorized under paragraph
(b)(2)(i) of this section);
(iii) During a period of up to three
years when the borrower is serving as a
full-time teacher in a public or nonprofit private elementary or secondary
school in a teacher shortage area
designated by the Secretary under
paragraph (q) of this section;
(iv) During a period when the
borrower is engaged in an internship or
residency program, for up to two years,
in accordance with paragraph (n) of this
section, (including any period during
which the borrower received a
deferment authorized under paragraph
(b)(2)(v) of this section); or
(v) When a mother who has
preschool-age children (i.e., children
who have not enrolled in first grade)
and who is earning not more than $1 per
hour above the Federal minimum wage,
for up to 12 months of employment, and
who began that full-time employment
within one year of entering or reentering the work force, in accordance
with paragraph (r) of this section. Fulltime employment involves at least 30
hours of work a week and it is expected
to last at least 3 months.
(4) For new Stafford or SLS borrowers
on or after July 1, 1987. Deferment is
authorized during periods when the
borrower is engaged in at least half-time
study at a school in accordance with
paragraph (b) of this section.
(5) For new parent PLUS borrowers on
or after July 1, 1987 and before July 1,
1993. Deferment is authorized during
any period when a student on whose
behalf the parent borrower received the
loan—
(i) Is not independent as defined in
section 480(d) of the Act; and
(ii) Meets the conditions and provides
the required documentation, for any of
the deferments described in paragraphs
(b)(1)(i) through (iii) and (b)(4) of this
section.
(6) Definition of a new borrower. For
purposes of paragraphs (b)(3), (b)(4), and
(b)(5) of this section, a ‘‘new borrower’’
with respect to a loan is a borrower
who, on the date he or she signs the
promissory note, has no outstanding
balance on—
(i) A Stafford, SLS, or PLUS loan
made prior to July 1, 1987 for a period
of enrollment beginning prior to July 1,
1987; or
(ii) A Consolidation loan that repaid
a loan made prior to July 1, 1987 and
for a period of enrollment beginning
prior to July 1, 1987.
*
*
*
*
*
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28. Section 682.211 is amended by:
A. In paragraph (a)(4), removing the
parenthetical ‘‘(10)’’ and adding, in its
place, the parenthetical ‘‘(11)’’.
■ B. Revising paragraphs (c) and (d).
■ C. In paragraph (f)(2), removing the
words ‘‘or an administrative forbearance
period as specified under paragraph
(f)(11) or (i)(2) of this section;’’ and
adding, in their place, the words ‘‘or an
authorized period of forbearance;’’.
■ D. In paragraph (f)(6), removing the
words ‘‘credit bureau’’ and adding, in
their place, the words ‘‘consumer
reporting agency’’.
■ E. In paragraph (h)(2)(ii)(B), removing
the words ‘‘10 U.S.C. 2171; or’’ and
adding, in their place, the words ‘‘10
U.S.C. 2171, 2173, 2174 or any other
student loan repayment programs
administered by the Department of
Defense; or’’.
■ F. In paragraph (h)(2)(ii)(C), removing
the citation ‘‘§ 682.215’’ and adding, in
its place, the citation ‘‘§ 682.216’’.
■ G. In paragraph (h)(4)(iii)(A),
removing the citation ‘‘§ 682.215(c)’’
and adding, in its place the citation
‘‘§ 682.216(c)’’.
■ H. In paragraph (h)(4)(iii)(B),
removing the citation ‘‘§ 682.215(c)’’
and adding, in its place the citation
‘‘§ 682.216(c)’’.
The revisions read as follows:
■
■
§ 682.211
Forbearance.
*
*
*
*
*
(c) Except as provided in paragraph
(d)(2) of this section, a lender may grant
forbearance for a period of up to one
year at a time if both the borrower or
endorser and an authorized official of
the lender agree to the terms of the
forbearance. If the borrower or endorser
requests the forbearance orally and the
lender and the borrower or endorser
agree to the terms of the forbearance
orally, the lender must notify the
borrower or endorser of the terms
within 30 days of that agreement.
(d)(1) A guaranty agency may
authorize a lender to grant forbearance
to permit a borrower or endorser to
resume honoring the agreement to repay
the debt after default but prior to claim
payment. The forbearance agreement in
this situation must include a new
agreement to repay the debt signed by
the borrower or endorser or a written or
oral affirmation of the borrower’s or
endorser’s obligation to repay the debt.
(2) If the forbearance is based on the
borrower’s or endorser’s oral request
and affirmation of the obligation to
repay the debt—
(i) The forbearance period is limited
to a period of 120 days;
(ii) Such a forbearance cannot be
granted consecutively;
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(iii) The lender must orally review
with the borrower the terms and
conditions of the forbearance, including
the consequences of interest
capitalization, and other repayment
options available to the borrower; and
(iv) The lender must send a notice to
the borrower or endorser, as provided in
paragraph (c) of this section, that
confirms the terms of the forbearance
and the borrower’s or endorser’s
affirmation of the obligation to repay the
debt, and retain a record of the terms of
the forbearance and affirmation in the
borrower’s or endorser’s file.
(3) For purposes of this section, an
‘‘affirmation’’ means an
acknowledgement of the loan by the
borrower or endorser in a legally
binding manner. The form of the
affirmation may include, but is not
limited to, the borrower’s or
endorser’s—
(i) New signed repayment agreement
or schedule, or another form of signed
agreement to repay the debt;
(ii) Oral acknowledgment and
agreement to repay the debt
documented by the lender in the
borrower’s or endorser’s file and
confirmed by the lender in a notice to
the borrower; or
(iii) A payment made on the loan by
the borrower or endorser.
*
*
*
*
*
§ 682.214
[Removed]
29. Remove § 682.214.
30. Section 682.216 is amended by:
A. In paragraph (a)(2)(iii), removing
the first occurrence of the word ‘‘at’’ and
adding, in its place, the word ‘‘for’’.
■ B. In paragraph (a)(4)(i), removing the
second occurrence of the word ‘‘at’’ and
adding, in its place, the word ‘‘for’’.
■ C. In paragraph (c)(1) introductory
text, removing the words ‘‘at an
educational’’ and adding, in their place,
the words ‘‘for an educational’’.
■ D. In paragraph (c)(1)(iii), removing
the final sentence.
■ E. Redesignating paragraphs (c)(2)
through (c)(11) as paragraphs (c)(3)
through (c)(12), respectively.
■ F. Adding a new paragraph (c)(2).
■ G. In newly redesignated paragraph
(c)(4)(ii)(A), removing the words ‘‘at an
eligible educational’’ and adding, in
their place, the words ‘‘for an eligible
educational’’.
■ H. In newly redesignated paragraph
(c)(4)(ii)(B), adding the words ‘‘for an’’
immediately before the words
‘‘educational service agency’’.
■ I. In newly redesignated paragraph
(c)(4)(iii), removing the first occurrence
of the word ‘‘at’’ and adding, in its
place, the word ‘‘for’’.
■ J. In newly redesignated paragraph
(c)(5)(i), adding the words ‘‘for an’’
■
■
■
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immediately before the words
‘‘educational service’’.
■ K. In newly redesignated paragraph
(c)(5)(ii)(A), removing the words
‘‘students at an eligible’’ and adding, in
their place, the words ‘‘students for an
eligible’’.
■ L. In newly redesignated paragraph
(c)(5)(ii)(B), adding the words ‘‘for an’’
immediately before the words
‘‘educational service’’.
■ M. In newly redesignated paragraph
(c)(5)(iii), removing the first occurrence
of the word ‘‘at’’ and adding, in its place
the word ‘‘for’’.
■ N. In newly redesignated paragraph
(c)(10), removing the second occurrence
of the word ‘‘at’’ and adding, in its
place, the word ‘‘for’’.
■ O. In paragraph (e) introductory text,
removing the word ‘‘discharge’’ and
adding in its place, the word
‘‘forgiveness’’.
■ P. In paragraph (e)(1)(i), removing the
citation ‘‘(h)(3)(iii)’’ and adding, in its
place, the citation ‘‘(h)(4)(iii)’’.
■ Q. In paragraph (e)(1)(iii), removing
the word ‘‘discharge’’ and adding, in its
place, the word ‘‘forgiveness’’.
■ R. Revising paragraphs (f)(2)(i) and
(f)(2)(ii).
■ S. In paragraph (f)(2)(iii), removing
both occurrences of the word
‘‘discharged’’ and adding, in their place,
the words ‘‘loan forgiveness’’.
■ T. In paragraph (f)(3)(ii), removing
both occurrences of the word
‘‘discharge’’ and adding, in their place,
the words ‘‘loan forgiveness’’.
■ U. In paragraph (f)(4), removing both
occurrences of the word ‘‘discharge’’
and adding, in their place, the words
‘‘loan forgiveness’’.
■ V. In paragraph (f)(5), removing the
word ‘‘discharge’’.
■ W. Revising paragraph (g).
The additions and revisions read as
follows:
§ 682.216
program.
Teacher loan forgiveness
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*
*
*
*
*
(c) * * *
(2) The Secretary considers all
elementary and secondary schools
operated by the Bureau of Indian
Education (BIE) or operated on Indian
reservations by Indian tribal groups
under contract with the BIE to qualify
as schools serving low-income students.
*
*
*
*
*
(f) * * *
(2) * * *
(i) The holder must file a request for
payment with the guaranty agency on a
teacher loan forgiveness amount no later
than 60 days after the receipt, from the
borrower, of a completed teacher loan
forgiveness application.
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(ii) When filing a request for payment
on a teacher loan forgiveness, the holder
must provide the guaranty agency with
the completed loan forgiveness
application submitted by the borrower
and any required supporting
documentation.
*
*
*
*
*
(g) Claims for reimbursement from the
Secretary on loans held by guaranty
agencies. In the case of a teacher loan
forgiveness applied to a defaulted loan
held by the guaranty agency, the
Secretary pays the guaranty agency a
percentage of the amount forgiven that
is equal to the complement of the
reinsurance percentage paid on the loan.
The payment of up to $5,000, or up to
$17,500, may also include interest that
accrues on the forgiveness amount
during the period from the date on
which the guaranty agency received
payment from the Secretary on a default
claim to the date on which the guaranty
agency determines that the borrower is
eligible for the teacher loan forgiveness.
*
*
*
*
*
■
■
§ 682.300
§ 682.305
[Amended]
31. Section 682.300 is amended by:
A. In paragraph (b)(2)(ii) introductory
text, removing the words ‘‘, except as
provided in paragraph (c)(4) of this
section’’.
■ B. In paragraph (b)(2)(ii)(B), removing
the words ‘‘in accordance with
§ 682.207(b)(1)(ii)(B) and (C)’’.
■ C. In paragraph (c)(1), adding the
word ‘‘or’’ after the punctuation ‘‘;’’.
■ D. In paragraph (c)(2), removing the
punctuation ‘‘;’’ and adding, in its place,
the punctuation ‘‘.’’.
■ E. Removing paragraphs (c)(3) and
(c)(4).
■
■
§ 682.301
[Amended]
32. Section 682.301 is amended by
removing paragraph (c).
■ 33. Section 682.302 is amended by:
■ A. In paragraph (b)(3) introductory
text, adding the words ‘‘and prior to July
1, 2010’’ after the date ‘‘1992’’ and
before the punctuation ‘‘,’’.
■ B. In paragraph (d)(1)(vi)(B), removing
the words ‘‘the loan proceeds disbursed
by electronic funds transfer or master
check in accordance with
§ 682.207(b)(1)(ii)(B) and (C)’’ and
adding, in their place, the words ‘‘The
loan proceeds disbursed by electronic
funds transfer or master check’’.
■ C. In paragraph (d)(2) introductory
text, adding the words ‘‘and prior to July
1, 2010’’ after the date ‘‘1992’’ and
before the punctuation ‘‘,’’.
■ D. In paragraph (e)(1)(i), removing the
citation ‘‘§ 682.800’’ and adding, in its
place, the words ‘‘section 438(e) of the
Act’’.
■
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E. Revising paragraph (f)(3)(viii)(B).
F. In paragraph (f)(3)(x)(B)(3),
removing the figure ‘‘503’’ and adding,
in its place, the figure ‘‘501’’.
The revision reads as follows:
§ 682.302 Payment of special allowance on
FFEL loans.
*
*
*
*
*
(f) * * *
(3) * * *
(viii) * * *
(B) Fees are reasonable and customary
for purposes of paragraph (f)(3)(viii) of
this section, if they do not exceed the
amounts received by the trustee for
similar services with regard to similar
portfolios of loans of that State or nonprofit entity or its related special
purpose entity that are not eligible to
receive special allowance at the rate
established under paragraph (f)(2) of
this section, or if they do not exceed an
amount as determined by such other
method requested by the State or nonprofit entity that the Secretary considers
reliable.
*
*
*
*
*
[Amended]
34. Section 682.305 is amended by:
A. In paragraph (a)(3)(ii)(B), by adding
the words ‘‘and prior to July 1, 2010’’
after the date ‘‘2007’’ and before the
punctuation ‘‘,’’.
■ B. In paragraph (c)(1)(i), removing the
words ‘‘originating or’’.
■ C. Removing paragraph (c)(1)(ii).
■ D. Redesignating paragraph (c)(1)(iii)
as paragraph (c)(1)(ii).
■ E. In paragraph (c)(2)(iv), adding the
word ‘‘and’’ as the last word in the
paragraph, immediately following the
punctuation ‘‘;’’.
■ F. In paragraph (c)(2)(v), removing the
final punctuation ‘‘;’’ and adding, in its
place, the punctuation ‘‘.’’.
■ G. Removing paragraphs (c)(2)(vi) and
(c)(2)(vii).
■ 35. Section 682.400 is amended by
revising paragraph (b)(1)(i) to read as
follows:
■
■
§ 682.400 Agreements between a guaranty
agency and the Secretary.
*
*
*
*
*
(b) * * *
(1) * * *
(i) Borrowers whose Stafford or
Consolidation loans are guaranteed by
the agency may qualify for interest
benefits that are paid to the lender on
the borrower’s behalf under 34 CFR
682.301; and
*
*
*
*
*
■ 36. Section 682.401 is amended by:
■ A. Removing paragraphs (b)(1), (b)(2),
and (b)(3).
■ B. Redesignating paragraph (b)(4) as
paragraph (b)(1).
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C. In newly redesignated paragraph
(b)(1) introductory text, removing the
citation ‘‘(b)(4)’’ and adding, in its place,
the citation ‘‘(b)(1)’’.
■ D. Removing paragraphs (b)(5) and
(b)(6).
■ E. Redesignating paragraph (b)(7) as
paragraph (b)(2).
■ F. Removing paragraphs (b)(8) and
(b)(9).
■ G. Redesignating paragraphs (b)(10)
and (b)(11) as paragraphs (b)(3) and
(b)(4), respectively.
■ H. In newly redesignated paragraph
(b)(3)(i) introductory text, removing the
words ‘‘SLS or PLUS loans refinanced
under § 682.209(e) or (f)’’ and adding, in
their place, the words ‘‘refinanced SLS
or PLUS loans’’.
■ I. In newly redesignated paragraph
(b)(3)(iv)(C), adding the words ‘‘and
prior to July 1, 2010’’ between the date
‘‘2006’’ and the punctuation ‘‘.’’.
■ J. In newly redesignated paragraph
(b)(3)(vi)(B)(4), removing the words ‘‘in
accordance with § 682.207(b)(1)(ii)(B)
and (C)’’.
■ K. Removing paragraphs (b)(12) and
(b)(13).
■ L. Redesignating paragraphs (b)(14)
through (b)(29) as paragraphs (b)(5)
through (b)(20), respectively.
■ M. In newly redesignated paragraph
(b)(6), adding the words ‘‘and N’’
between the letter ‘‘M’’ and the word
‘‘of’’.
■ N. In newly redesignated paragraph
(b)(8)(i) introductory text, removing the
parenthetical ‘‘(17)’’ and adding, in its
place, the parenthetical ‘‘(8)’’.
■ O. In newly redesignated paragraph
(b)(8)(iii), removing the parenthetical
‘‘(17)’’ and adding, in its place, the
parenthetical ‘‘(8)’’.
■ P. In newly redesignated paragraph
(b)(10)(i)(B), removing the words
‘‘School and lender’’ and adding, in
their place, the word ‘‘Lender’’.
■ Q. In newly redesignated paragraph
(b)(10)(i)(C), removing the words
‘‘school and’’.
■ R. In newly redesignated paragraph
(b)(10)(i)(D), removing the words
‘‘school or’’.
■ S. In newly redesignated paragraph
(b)(11) introductory text, adding the
word ‘‘of’’ between the words ‘‘days’’
and ‘‘any’’.
■ T. In newly redesignated paragraph
(b)(14)(ii), removing the parenthetical
‘‘(23)’’ and adding, in its place, the
parenthetical ‘‘(14)’’.
■ U. In newly redesignated paragraph
(b)(18)(i), removing the word ‘‘Federal’’
and adding, in its place, the word
‘‘Direct’’.
■ V. In newly redesignated paragraph
(b)(18), removing paragraph (b)(18)(ii).
■ W. In newly redesignated paragraph
(b)(18), redesignating paragraphs
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(b)(18)(iii) through (v) as paragraphs
(b)(18)(ii) through (iv), respectively.
■ X. Revising newly redesignated
paragraph (b)(18)(iii).
■ Y. Removing paragraph (c).
■ Z. Redesignating paragraph (d) as
paragraph (c).
■ AA. In newly redesignated paragraph
(c)(2), removing the parenthetical ‘‘(d)’’
and adding, in its place, the
parenthetical ‘‘(c)’’.
■ BB. In newly redesignated paragraph
(c)(3), adding a final sentence to the end
of the paragraph.
■ CC. In newly redesignated paragraph
(c), removing paragraph (c)(4).
■ DD. In newly redesignated paragraph
(c), redesignating paragraphs (c)(5) and
(c)(6) as paragraphs (c)(4) and (c)(5),
respectively.
■ EE. Removing paragraph (e).
■ FF. Redesignating paragraphs (f) and
(g) as paragraphs (d) and (e),
respectively.
■ GG. In newly redesignated paragraph
(d)(2), removing the word ‘‘HEA’’ and
adding, in its place, the word ‘‘Act’’.
■ HH. In newly redesignated paragraph
(e)(1), removing the word ‘‘participate’’
and adding, in its place, the word
‘‘participated’’.
■ II. In newly redesignated paragraph
(e)(2), removing the parenthetical ‘‘(g)’’
and adding, in its place, the
parenthetical ‘‘(e)’’.
■ JJ. In newly redesignated paragraph
(e)(4), removing the parenthetical ‘‘(g)’’
and adding, in its place, the
parenthetical ‘‘(e)’’.
The revision and addition read as
follows:
§ 682.401
Basic program agreement.
*
*
*
*
*
(b) * * *
(18) * * *
(iii) 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)(18)(iv) of this section, a
guaranty agency must remit the entire
amount of collection costs repaid
through the consolidation loan.
*
*
*
*
*
(c) * * *
(3) * * * 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.
*
*
*
*
*
■ 37. Section 682.402 is amended by:
■ A. In paragraph (a)(5)(ii), removing
the words ‘‘credit bureau’’ and adding,
in their place, the words ‘‘consumer
reporting agency’’.
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B. Revising paragraph (d)(1)(i).
C. In paragraph (d)(3)(ii)(B), by
removing the figure ‘‘90’’ and adding, in
its place, the figure ‘‘120’’.
■ D. Except for paragraphs
(d)(6)(ii)(G)(1) and (d)(6)(ii)(G)(2), in
paragraph (d)(6), by removing the figure
‘‘90’’ each time it appears and adding,
in its place, the figure ‘‘120’’.
■ E. In paragraph (d)(7)(iv), removing
the words ‘‘credit bureaus’’ and adding,
in their place, the words ‘‘consumer
reporting agencies’’.
■ F. In paragraph (d)(8)(i), removing the
citation ‘‘34 CFR 685.213’’ and adding,
in its place, the citation ‘‘34 CFR
685.214’’.
■ G. In paragraph (e)(3) introductory
text, removing the parenthetical ‘‘(14)’’
and adding, in its place, the
parenthetical ‘‘(15)’’.
■ H. In paragraph (e)(3)(v)(C), removing
the word ‘‘identify’’ and adding, in its
place, the word ‘‘identity’’.
■ I. In paragraph (e)(12)(v) introductory
text, removing the words ‘‘credit
bureaus’’ and adding, in their place, the
words ‘‘consumer reporting agencies’’.
■ J. In paragraphs (l)(1), (l)(2)(ii), and
(l)(3)(i), adding the words ‘‘or Federal
default fees’’ between the word
‘‘premiums’’ and the punctuation ’’)’’.
■ K. In paragraph (n)(2), adding the
words ‘‘or Federal default fees’’ between
the word ‘‘premiums’’ and the
punctuation ’’)’’.
The revision reads as follows:
■
■
§ 682.402 Death, disability, closed school,
false certification, unpaid refunds, and
bankruptcy payments.
*
*
*
*
*
(d) * * *
(1) * * *
(i) The Secretary reimburses the
holder of a loan received by a borrower
on or after January 1, 1986, and
discharges the borrower’s obligation
with respect to the loan in accordance
with the provisions of paragraph (d) of
this section, if the borrower (or the
student for whom a parent received a
PLUS loan) could not complete the
program of study for which the loan was
intended because the school at which
the borrower (or student) was enrolled
closed, or the borrower (or student)
withdrew from the school not more than
120 days prior to the date the school
closed. The Secretary may extend the
120-day period if the Secretary
determines that exceptional
circumstances related to a school’s
closing justify an extension. Exceptional
circumstances for this purpose may
include, but are not limited to: The
school’s loss of accreditation; the
school’s discontinuation of the majority
of its academic programs; action by the
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State to revoke the school’s license to
operate or award academic credentials
in the State; or a finding by a State or
Federal government agency that the
school violated State or Federal law.
*
*
*
*
*
§ 682.403
[Removed]
38. Remove § 682.403.
39. Section 682.404 is amended by:
A. Revising paragraph (b)(3)(ii).
B. In paragraph (b)(3)(iii), adding the
word ‘‘or’’ after the punctuation ‘‘;’’.
■ C. In paragraph (b)(4)(ii)(G)(2),
removing the words ‘‘is consistent with
§ 682.509(a)(1)’’ and adding, in their
place, the words ‘‘addresses the
condition identified in paragraph
(b)(3)(ii) of this section’’.
■ D. In paragraph (d)(1) introductory
text, removing the words ‘‘made under
§ 682.209(e), (f) and (h),’’ and adding, in
their place the words ‘‘that were
refinanced pursuant to section
428B(e)(2) and (3) of the Act,’’.
■ E. Removing paragraph (h).
■ F. Redesignating paragraphs (i)
through (l) as paragraphs (h) through (k),
respectively.
■ G. In newly redesignated paragraph
(j)(3)(i), removing the parenthetical
‘‘(k)(2)(i)’’ and adding, in its place, the
parenthetical ‘‘(j)(2)(i)’’.
■ H. In newly resdesignated paragraph
(j)(3)(ii), removing the parenthetical
‘‘(k)(2)(ii)’’ and adding, in its place, the
parenthetical ‘‘(j)(2)(ii)’’.
The revision reads as follows:
■
■
■
■
§ 682.404
Federal reinsurance agreement.
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*
*
*
*
*
(b) * * *
(3) * * *
(ii) Under a policy established by the
agency that addresses instances in
which, for a non-school originated loan,
a lender learns that the school
terminated its teaching activities while
a student was enrolled during the
academic period covered by the loan;
*
*
*
*
*
■ 40. Section 682.405 is amended by:
■ A. In the introductory text of
paragraph (a)(2)(i), adding the word
‘‘qualifying’’ between the words ‘‘ten’’
and ‘‘payments’’.
■ B. Revising the introductory text of
paragraph (a)(2)(i)(A).
■ C. Redesignating paragraph (a)(3) as
paragraph (a)(4).
■ D. Adding a new paragraph (a)(3).
■ E. Revising paragraph (b)(1).
The revisions and addition read as
follows:
§ 682.405
Loan rehabilitation agreement.
(a) * * *
(2) * * *
(i) * * *
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(A) A qualifying payment is—
*
*
*
*
(3)(i) If a borrower’s loan is being
collected by administrative wage
garnishment while the borrower is also
making monthly payments on the same
loan under a loan rehabilitation
agreement, the guaranty agency must
continue collecting the loan by
administrative wage garnishment until
the borrower makes five qualifying
monthly payments under the
rehabilitation agreement. After the
borrower makes the fifth qualifying
monthly payment, the guaranty agency
must, unless otherwise directed by the
borrower, suspend collecting the loan
by administrative wage garnishment.
(ii) A borrower may only obtain the
benefit of a suspension of administrative
wage garnishment while also attempting
to rehabilitate a defaulted loan once.
*
*
*
*
*
(b) * * *
(1) A borrower may request
rehabilitation of the borrower’s
defaulted loan held by the guaranty
agency. In order to be eligible for
rehabilitation of the loan, the borrower
must voluntarily make at least 9 of the
10 payments required under a monthly
repayment agreement.
(i) Each of which payment is—
(A) Made voluntarily;
(B) In the full amount required;
(C) Received within 20 days of the
due date for the payment; and
(D) Reasonable and affordable.
(ii) All 9 payments are received
within a 10-month period that begins
with the month in which the first
required due date falls and ends with
the ninth consecutive calendar month
following that month.
(iii) For the purposes of this section,
the borrower’s reasonable and affordable
payment amount, as determined by the
guaranty agency or its agents, is based
solely on information provided on a
form approved by the Secretary and, if
requested, supporting documentation
from the borrower and other sources,
and considers—
(A) The borrower’s, and if applicable,
the spouse’s current disposable income,
including public assistance payments,
and other income received by the
borrower and the spouse, such as
welfare benefits, Social Security
benefits, Supplemental Security Income,
and workers’ compensation. Spousal
income is not considered if the spouse
does not contribute to the borrower’s
household income;
(B) Family size as defined in
§ 682.215(a)(3); and
(C) Reasonable and necessary
expenses, which include—
*
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(1) Food;
(2) Housing;
(3) Utilities;
(4) Basic communication expenses;
(5) Necessary medical and dental
costs;
(6) Necessary insurance costs;
(7) Transportation costs;
(8) Dependent care and other workrelated expenses;
(9) Legally required child and spousal
support;
(10) Other title IV and non-title IV
student loan payments; and
(11) Other expenses approved by the
Secretary.
(iv) The reasonable and affordable
payment amount must not be—
(A) A required minimum loan
payment amount (e.g., $50) if the agency
determines that a smaller amount is
reasonable and affordable;
(B) A percentage of the borrower’s
total loan balance; or
(C) Based on other criteria unrelated
to the borrower’s total financial
circumstances.
(v) Within 15 business days of its
determination of the borrower’s
reasonable and affordable payment
amount, the guaranty agency must
provide the borrower with a written
rehabilitation agreement which includes
the borrower’s reasonable and affordable
payment amount, a prominent statement
that the borrower may object orally or in
writing to the reasonable and affordable
payment amount, with the method and
timeframe for raising such an objection,
and an explanation of any other terms
and conditions applicable to the
required series of payments that must be
made before the borrower’s account can
be considered for repurchase by an
eligible lender (i.e., rehabilitated). The
agency may not impose any other
conditions unrelated to the amount or
timing of the rehabilitation payments in
the rehabilitation agreement. The
written rehabilitation agreement must
inform the borrower of—
(A) The effects of having the loans
rehabilitated (e.g., removal of the record
of default from the borrower’s credit
history and return to normal
repayment); and
(B) The amount of any collection costs
to be added to the unpaid principal of
the loan when the loan is sold to an
eligible lender, which may not exceed
18.5 percent of the unpaid principal and
accrued interest on the loan at the time
of the sale.
(vi) If the borrower objects to the
monthly payment amount determined
under paragraph (b)(1)(iii) of this
section, the guaranty agency must
recalculate the payment amount. The
guaranty agency must follow the
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monthly payment calculation rules in
§ 682.215(b)(1) to determine a
borrower’s recalculated reasonable and
affordable payment amount, except that
if the recalculated amount under
§ 682.215(b)(1) is less than $5, the
borrower’s recalculated monthly
rehabilitation payment is $5. The
guaranty agency must provide the
borrower with a new written
rehabilitation agreement confirming the
borrower’s recalculated reasonable and
affordable payment amount within the
timeframe specified in paragraph
(b)(1)(v) of this section.
(vii) If the borrower objects to the
monthly payment amount determined
under paragraph (b)(1)(iii) of this
section, but does not provide the
documentation required to calculate a
monthly payment amount under
§ 682.215(b)(1), no rehabilitation
agreement exists between the borrower
and the guaranty agency, and the
rehabilitation does not proceed.
(viii) The agency must include any
payment made under § 682.401(b)(1) in
determining whether the 9 out of 10
payments required under paragraph
(b)(1) of this section have been made.
(ix) A borrower may request that the
monthly payment amount be adjusted
due to a change in the borrower’s total
financial circumstances only upon
providing the documentation specified
in paragraph (b)(1)(iii) of this section.
(x) During the rehabilitation period,
the guaranty agency must limit contact
with the borrower on the loan being
rehabilitated to collection activities that
are required by law or regulation and to
communications that support the
rehabilitation.
*
*
*
*
*
§ 682.406
[Amended]
41. Section 682.406 is amended by:
A. In paragraph (a)(2)(ii), removing
the words ‘‘in accordance with
§ 682.207(b)(1)(ii)(B) and (C)’’.
■ B. In paragraph (a)(12)(iv), adding the
words ‘‘and prior to July 1, 2010’’ after
the date ‘‘1999’’ and before the
punctuation ‘‘,’’.
■
■
§ 682.407
[Amended]
42. Section 682.407(e)(1)(ii) is
amended by removing the figure ‘‘24’’
the first time it appears and adding, in
its place, the figure ‘‘72’’.
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■
§ 682.408
■
[Removed]
43. Remove § 682.408.
§ 682.409
[Amended]
44. Section 682.409 is amended by:
A. In paragraph (a)(2)(i), removing the
citation ‘‘§ 682.401(b)(4)’’ and adding, in
its place, the citation ‘‘§ 682.401(b)(1)’’.
■
■
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B. In paragraph (a)(3)(i)(B), removing
the citation ‘‘§ 682.401(b)(4)’’ and
adding, in its place, the citation
‘‘§ 682.401(b)(1)’’.
■ 45. Section 682.410 is amended by:
■ A. Revising the introductory text of
paragraph (a)(2).
■ B. In paragraph (a)(2)(ii) introductory
text, removing the word ‘‘preclaims’’
and adding, in its place, the words
‘‘default aversion’’.
■ C. In paragraph (b)(2) introductory
text, removing the citation
‘‘§ 682.401(b)(27)’’ and adding, in its
place, the citation ‘‘§ 682.401(b)(18)(i)’’.
■ D. In paragraph (b)(5)(i) introductory
text, removing the parenthetical
‘‘(b)(6)(v)’’ and adding, in its place, the
parenthetical ‘‘(b)(6)(ii)’’.
■ E. In paragraph (b)(7)(i), removing the
words ‘‘conditions described in
§ 682.509(a)(1)’’ and adding, in their
place, the words ‘‘condition described
in § 682.404(b)(3)(ii)’’.
■ F. In paragraph (b)(7)(ii)(A), removing
the words ‘‘credit bureau’’ and adding,
in their place, the words ‘‘consumer
reporting agency’’.
■ G. Revising paragraph (b)(9).
■ H. In paragraph (c)(1)(i)(A)
introductory text, removing the words
‘‘made or’’.
■ I. In paragraph (c)(1)(i)(A)(1),
removing the words ‘‘in that year’’.
■ J. In paragraph (c)(1)(i)(A)(2),
removing the words ‘‘in that year’’.
■ K. Revising paragraph (c)(1)(i)(C).
■ L. In paragraph (c)(1)(ii), adding the
parenthetical ‘‘(i)’’ between the
parenthetical ‘‘(1)’’ and the
parenthetical ‘‘(A)’’.
■ M. Removing paragraph (c)(4).
■ N. Redesignating paragraphs (c)(5)
through (c)(11) as paragraphs (c)(4)
through (c)(10), respectively.
■ O. In newly redesignated paragraphs
(c)(8)(i) and (c)(8)(ii), adding the words
‘‘title IV eligibility of a’’ between the
words ‘‘or’’ and ‘‘school’’.
■ P. Revising newly redesignated
paragraph (c)(10) introductory text.
The revisions read as follows:
■
§ 682.410 Fiscal, administrative, and
enforcement requirements.
(a) * * *
(2) Uses of reserve fund assets. A
guaranty agency may use the assets of
the reserve fund established under
paragraph (a)(1) of this section to pay
only—
*
*
*
*
*
(b) * * *
(9) Administrative garnishment. (i) If
a guaranty agency decides to garnish the
disposable pay of a borrower who is not
making payments on a loan held by the
agency, on which the Secretary has paid
a reinsurance claim, it must do so in
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accordance with the following
procedures:
(A) At least 30 days before the
initiation of garnishment proceedings,
the guaranty agency must mail to the
borrower’s last known address, a written
notice described in paragraph
(b)(9)(i)(B) of this section.
(B) The notice must describe—
(1) The nature and amount of the
debt;
(2) The intention of the agency to
collect the debt through deductions
from disposable pay;
(3) An explanation of the borrower’s
rights;
(4) The deadlines by which a
borrower must exercise those rights; and
(5) The consequences of failure to
exercise those rights in a timely manner.
(C) The guaranty agency must offer
the borrower an opportunity to inspect
and copy agency records related to the
debt.
(D) The guaranty agency must offer
the borrower an opportunity to enter
into a written repayment agreement
with the agency under terms agreeable
to the agency.
(E)(1) The guaranty agency must offer
the borrower an opportunity for a
hearing in accordance with paragraphs
(b)(9)(i)(F) through (J) of this section and
other guidance provided by the
Secretary, for any objection regarding
the existence, amount, or enforceability
of the debt, and any objection that
withholding from the borrower’s
disposable pay in the amount or at the
rate proposed in the notice would cause
financial hardship to the borrower.
(2) The borrower must request a
hearing in writing. At the borrower’s
option, the hearing may be oral or
written. The time and location of the
hearing is established by the guaranty
agency. An oral hearing may, at the
borrower’s option, be conducted either
in-person or by telephone conference.
The agency notifies the borrower of the
process for arranging the time and
location of an oral hearing. All
telephonic charges are the responsibility
of the agency. All travel expenses
incurred by the borrower in connection
with an in-person oral hearing are the
responsibility of the borrower.
(F)(1) If the borrower submits a
written request for a hearing on the
existence, amount, or enforceability of
the debt—
(i) The guaranty agency must provide
evidence of the existence of the debt. If
the agency provides evidence of the
existence of the debt, the borrower must
prove by the preponderance of the
evidence that no debt exists, the debt is
not enforceable under applicable law,
the amount the guaranty agency claims
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the borrower owes is incorrect,
including that any amount of collection
costs assessed to the borrower exceeds
the limits established under
§ 682.410(b)(2), or the debt is not
delinquent; and
(ii) The borrower may raise any of the
objections described in paragraph
(b)(9)(i)(F)(1)(i) of this section not raised
in the written request, but must do so
before a hearing is completed. For
purposes of this paragraph, a hearing is
completed when the record is closed
and the hearing official notifies the
parties that no additional evidence or
objections will be accepted.
(2) If the borrower submits a written
request for a hearing on an objection
that withholding the amount or rate that
the agency proposed in its notice would
cause financial hardship to the borrower
and the borrower’s spouse and
dependents—
(i) The borrower bears the burden of
proving the claim of financial hardship
by a preponderance of the credible
evidence by providing credible
documentation that the amount of
wages proposed in the notice would
leave the borrower unable to meet basic
living expenses of the borrower, the
borrower’s spouse, and the borrower’s
dependents. The documentation must
show the amount of the costs incurred
for basic living expenses and the income
available from any source to meet those
expenses;
(ii) The borrower’s claim of financial
hardship must be evaluated by
comparing the amounts that the
borrower proves are being incurred for
basic living expenses against the
amounts spent for basic living expenses
by families of the same size and similar
income to the borrower’s. For the
purposes of this section, the standards
published by the Internal Revenue
Service under 26 U.S.C. 7122(c)(2) (the
National Standards) establish the
average amounts spent for basic living
expenses for families of the same size
as, and with family incomes comparable
to, the borrower’s family;
(iii) The amount that the borrower
proves is incurred for a type of basic
living expense is considered to be
reasonable to the extent that the amount
does not exceed the amount spent for
that expense by families of the same size
and similar income according to the
National Standards. If the borrower
claims an amount for any basic living
expense that exceeds the amount in the
National Standards, the borrower must
prove that the amount claimed is
reasonable and necessary;
(iv) If the borrower’s objection to the
rate or amount proposed in the notice is
upheld in part, the garnishment may be
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ordered at a lesser rate or amount, that
is determined will allow the borrower to
meet basic living expenses proven to be
reasonable and necessary. If this
financial hardship determination is
made after a garnishment order is
already in effect, the guaranty agency
must notify the borrower’s employer of
any change required by the
determination in the amount to be
withheld or the rate of withholding
under that order; and
(v) A determination by a hearing
official that financial hardship would
result from garnishment is effective for
a period not longer than six months
after the date of the finding. After this
period, the guaranty agency may require
the borrower to submit current
information regarding the borrower’s
family income and living expenses. If
the borrower fails to submit current
information within 30 days of this
request, or the guaranty agency
concludes from a review of the available
evidence that garnishment should now
begin or the rate or the amount of an
outstanding withholding should be
increased, the guaranty agency must
notify the borrower and provide the
borrower with an opportunity to contest
the determination and obtain a hearing
on the objection under the procedures
in paragraph (b)(9)(i) of this section.
(G) If the borrower’s written request
for a hearing is received by the guaranty
agency on or before the 30th day
following the date of the notice
described in paragraph (b)(9)(i)(B) of
this section, the guaranty agency may
not issue a withholding order until the
borrower has been provided the
requested hearing and a decision has
been rendered. The guaranty agency
must provide a hearing to the borrower
in sufficient time to permit a decision,
in accordance with the procedures that
the agency may prescribe, to be
rendered within 60 days.
(H) If the borrower’s written request
for a hearing is received by the guaranty
agency after the 30th day following the
date of the notice described in
paragraph (b)(9)(i)(B) of this section, the
guaranty agency must provide a hearing
to the borrower in sufficient time that a
decision, in accordance with the
procedures that the agency may
prescribe, may be rendered within 60
days, but may not delay issuance of a
withholding order unless the agency
determines that the delay in filing the
request was caused by factors over
which the borrower had no control, or
the agency receives information that the
agency believes justifies a delay or
cancellation of the withholding order. If
a decision is not rendered within 60
days following receipt of a borrower’s
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written request for a hearing, the
guaranty agency must suspend the order
beginning on the 61st day after the
hearing request was received until a
hearing is provided and a decision is
rendered.
(I) The hearing official appointed by
the agency to conduct the hearing may
be any qualified individual, including
an administrative law judge. Under no
circumstance may the hearing official be
under the supervision or control of the
head of the guaranty agency or of a
third-party servicer or collection
contractor employed by the agency.
Payment of compensation by the
guaranty agency, third-party servicer, or
collection contractor employed by the
agency to the hearing official for service
as a hearing official does not constitute
impermissible supervision or control
under this paragraph. The guaranty
agency must ensure that, except as
needed to arrange the type of hearing
requested by the borrower and the time,
place, and manner of conducting an oral
hearing, all oral communications with
any representative of the guaranty
agency or with the borrower are made
within the hearing of the other party,
and that copies of any written
communication with either party are
promptly provided to the other party.
(J) The hearing official must conduct
any hearing as an informal proceeding,
require witnesses in an oral hearing to
testify under oath or affirmation, and
maintain a summary record of any
hearing. The hearing official must issue
a final written decision at the earliest
practicable date, but not later than 60
days after the guaranty agency’s receipt
of the borrower’s hearing request.
However—
(1) The borrower may request an
extension of that deadline for a
reasonable period, as determined by the
hearing official, for the purpose of
submitting additional evidence; and
(2) The agency may request, and the
hearing official must grant, a reasonable
extension of time sufficient to enable
the guaranty agency to evaluate and
respond to any such additional evidence
or any objections raised pursuant to
paragraph (b)(9)(i)(F)(1)(ii) of this
section.
(K) An employer served with a
garnishment order from the guaranty
agency with respect to a borrower
whose wages are not then subject to a
withholding order of any kind must
deduct and pay to the agency from a
borrower’s disposable pay an amount
that does not exceed the smallest of—
(1) The amount specified in the
guaranty agency order;
(2) The amount permitted by section
488A(a)(1) of the Act, which is 15
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percent of the borrower’s disposable
pay; or
(3) The amount permitted by 15
U.S.C. 1673(a)(2), which is the amount
by which the borrower’s disposable pay
exceeds 30 times the minimum wage.
(L) If a borrower’s pay is subject to
more than one garnishment order—
(1) Unless other Federal law requires
a different priority, the employer must
pay the agency the amount calculated
under paragraph (b)(9)(i)(K) of this
section before the employer complies
with any later garnishment orders,
except a family support withholding
order;
(2) If an employer is withholding from
a borrower’s pay based on a
garnishment order served on the
employer before the guaranty agency’s
order, or if a withholding order for
family support is served on an employer
at any time, the employer must comply
with the agency’s garnishment order by
withholding an amount that is the lesser
of—
(i) The amount specified in the
guaranty agency order; or
(ii) The amount calculated under
paragraph (b)(9)(i)(L)(3) of this section
less the amount or amounts withheld
under the garnishment order or orders
that have priority over the agency’s
order; and
(3) The cumulative withholding for all
garnishment orders issued by guaranty
agencies may not exceed, for an
individual borrower, the amount
permitted by 15 U.S.C. 1673, which is
the lesser of 25 percent of the borrower’s
disposable pay or the amount by which
the borrower’s disposable pay exceeds
30 times the minimum wage. If a
borrower owes debts to one or more
guaranty agencies, each agency may
issue a garnishment order to enforce
each of those debts, but no single agency
may order a total amount exceeding 15
percent of the disposable pay of a
borrower to be withheld. The employer
must honor these orders as provided in
paragraphs (b)(9)(i)(L)(1) and (2) of this
section.
(M) Notwithstanding paragraphs
(b)(9)(i)(K) and (L) of this section, an
employer may withhold and pay a
greater amount than required under the
order if the borrower gives the employer
written consent.
(N) A borrower may, at any time, raise
an objection to the amount or the rate
of withholding specified in the guaranty
agency’s order to the borrower’s
employer on the ground of financial
hardship. However, the guaranty agency
is not required to consider such an
objection and provide the borrower with
a hearing until at least six months after
the agency issued the most recent
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garnishment order, either one for which
the borrower did not request a hearing
or one that was issued after a hardshiprelated hearing determination. The
agency may provide a hearing in
extraordinary circumstances earlier than
six months if the borrower’s request for
review shows that the borrower’s
financial circumstances have
substantially changed after the
garnishment notice because of an event
such as injury, divorce, or catastrophic
illness.
(O) A garnishment order is effective
until the guaranty agency rescinds the
order or the agency has fully recovered
the amounts owed by the borrower,
including interest, late fees, and
collections costs. If an employer is
unable to honor a garnishment order
because the amount available for
garnishment is insufficient to pay any
portion of the amount stated in the
order, the employer must notify the
agency and comply with the order when
sufficient disposable pay is available.
Upon full recovery of the debt, the
agency must send the borrower’s
employer notification to stop wage
withholding.
(P) The guaranty agency must sue any
employer for any amount that the
employer, after receipt of the
withholding order provided by the
agency under paragraph (b)(9)(i)(R) of
this section, fails to withhold from
wages owed and payable to an employee
under the employer’s normal pay and
disbursement cycle.
(Q) The guaranty agency may not
garnish the wages of a borrower whom
it knows has been involuntarily
separated from employment until the
borrower has been reemployed
continuously for at least 12 months. The
borrower has the burden of informing
the guaranty agency of the
circumstances surrounding the
borrower’s involuntary separation from
employment.
(R) Unless the guaranty agency
receives information that the agency
believes justifies a delay or cancellation
of the withholding order, it must send
a withholding order to the employer
within 20 days after the borrower fails
to make a timely request for a hearing,
or, if a timely request for a hearing is
made by the borrower, within 20 days
after a final decision is made by the
agency to proceed with garnishment.
(S) The notice given to the employer
under paragraph (b)(9)(i)(R) of this
section must contain only the
information as may be necessary for the
employer to comply with the
withholding order and to ensure proper
credit for payments received. At a
minimum, the notice given to the
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employer includes the borrower’s name,
address, and Social Security Number, as
well as instructions for withholding and
information as to where the employer
must send payments.
(T)(1) A guaranty agency may use a
third-party servicer or collection
contractor to perform administrative
activities associated with administrative
wage garnishment, but may not allow
such a party to conduct required
hearings or to determine that a
withholding order is to be issued.
Subject to the limitations of paragraphs
(b)(9)(i)(T)(2) and (3) of this section,
administrative activities associated with
administrative wage garnishment may
include but are not limited to—
(i) Identifying to the agency suitable
candidates for wage garnishment
pursuant to agency standards;
(ii) Obtaining employment
information for the purposes of
garnishment;
(iii) Sending candidates selected for
garnishment by the agency notices
prescribed by the agency;
(iv) Negotiating alternative repayment
arrangements with borrowers;
(v) Responding to inquiries from
notified borrowers;
(vi) Receiving garnishment payments
on behalf of the agency;
(vii) Arranging for the retention of
hearing officials and for the conduct of
hearings on behalf of the agency;
(viii) Providing information to
borrowers or hearing officials on the
process or conduct of hearings; and
(ix) Sending garnishment orders and
other communications to employers on
behalf of the agency.
(2) Only an authorized official of the
agency may determine that an
individual withholding order is to be
issued. The guarantor must record the
official’s determination for each order it
issues, including any order which it
causes to be prepared or mailed by a
third-party servicer or collection
contractor. The guarantor must evidence
the official’s approval, either by
including the official’s signature on the
order or, if the agency uses a form of
withholding order that does not provide
for execution by signature, by retaining
in the agency’s records the identity of
the approving official, the date of the
approval, the amount or rate of the
order, the name and address of the
employer to whom the order was issued,
and the debt for which the order was
issued.
(3) The withholding order must
identify the guaranty agency as the
holder of the debt, as the issuer of the
order, and as the sole party legally
authorized to issue the withholding
order. If a guaranty agency uses a third-
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party servicer or collection contractor to
prepare and mail a withholding order
that includes the name of the servicer or
contractor that prepared or mailed the
order, the guaranty agency must also
ensure that the order contains no
captions or representations that the
servicer or contractor is the party that
issued, or was empowered by Federal
law or by the agency to issue, the
withholding order.
(U) As specified in section 488A(a)(8)
of the Act, the borrower may seek
judicial relief, including punitive
damages, if the employer discharges,
refuses to employ, or takes disciplinary
action against the borrower due to the
issuance of a withholding order.
(ii) For purposes of paragraph (b)(9) of
this section—
(A) ‘‘Borrower’’ includes all endorsers
on a loan;
(B) ‘‘Day’’ means calendar day;
(C) ‘‘Disposable pay’’ means that part
of a borrower’s compensation for
personal services, whether or not
denominated as wages from an
employer, that remains after the
deduction of health insurance
premiums and any amounts required by
law to be withheld, and includes, but is
not limited to, salary, bonuses,
commissions, or vacation pay.
‘‘Amounts required by law to be
withheld’’ include amounts for
deductions such as Social Security taxes
and withholding taxes, but do not
include any amount withheld under a
court order or other withholding order.
All references to an amount of
disposable pay refer to disposable pay
calculated for a single week;
(D) ‘‘Employer’’ means a person or
entity that employs the services of
another and that pays the latter’s wages
or salary and includes, but is not limited
to, State and local governments, but
does not include an agency of the
Federal Government;
(E) ‘‘Financial hardship’’ means an
inability to meet basic living expenses
for goods and services necessary for the
survival of the borrower and the
borrower’s spouse and dependents;
(F) ‘‘Garnishment’’ means the process
of withholding amounts from an
employee’s disposable pay and paying
those amounts to a creditor in
satisfaction of a withholding order; and
(G) ‘‘Withholding order’’ means any
order for withholding or garnishment of
pay issued by the guaranty agency and
may also be referred to as ‘‘wage
garnishment order’’ or ‘‘garnishment
order.’’
*
*
*
*
*
(c) * * *
(1) * * *
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(i) * * *
(C) Each school that participated in
the guaranty agency’s program, located
in a State for which the guaranty agency
is the principal guaranty agency, that
has a cohort default rate, as described in
subpart M of 34 CFR part 668, that
includes FFEL Program loans, for either
of the 2 immediately preceding fiscal
years, as defined in 34 CFR 668.182,
that exceeds 20 percent, unless the
school is under a mandate from the
Secretary under subpart M of 34 CFR
part 668 to take specific default
reduction measures or if the total dollar
amount of loans entering repayment in
each fiscal year on which the cohort
default rate of over 20 percent is based
does not exceed $100,000; or
*
*
*
*
*
(10) Taking prompt action to protect
the rights of borrowers and the Federal
fiscal interest respecting loans that the
agency has guaranteed when the agency
learns that a school that participated in
the FFEL Program or a holder of loans
participating in the program is
experiencing problems that threaten the
solvency of the school or holder,
including—
*
*
*
*
*
§ 682.411
[Amended]
46. Section 682.411 is amended by:
■ A. In paragraph (d)(2), removing the
words ‘‘all national credit bureaus’’ and
adding, in their place, the words ‘‘each
nationwide consumer reporting
agency’’.
■ B. In paragraph (f), removing the
words ‘‘a national credit bureau’’ and
adding, in their place, the words ‘‘each
nationwide consumer reporting
agency’’.
■ C. In paragraph (n)(2), removing the
words ‘‘a national credit bureau’’ and
adding, in their place, the words ‘‘each
nationwide consumer reporting
agency’’.
■ D. In paragraph (o)(2), removing the
words ‘‘credit bureau’’ and adding, in
their place, the words ‘‘consumer
reporting agency’’.
■
§ 682.412
[Amended]
47. Section 682.412(a)(2) is amended
by removing the words ‘‘as provided
under § 682.301’’.
■ 48. Section 682.413 is amended by:
■ A. In paragraph (c)(1)(vi), removing
the words ‘‘certification required under
§ 682.206(f)(1)’’ and adding, in their
place the words ‘‘required lender
verification certification’’.
■ B. Revising the first sentence of
paragraph (h).
The revision reads as follows:
■
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§ 682.413
45699
Remedial actions.
*
*
*
*
*
(h) In any action to require repayment
of funds or to withhold funds from a
guaranty agency, or to limit, suspend, or
terminate a guaranty agency based on a
violation of section 428(b)(3) of the Act,
if the Secretary finds that the guaranty
agency provided or offered the
prohibited payments or activities, the
Secretary applies a rebuttable
presumption that the payments or
activities were offered or provided to
secure applications for FFEL loans or to
secure FFEL loan volume. * * *
*
*
*
*
*
§ 682.414
[Amended]
49. Section 682.414 is amended by:
A. In paragraph (a)(1)(ii)(D), removing
the words ‘‘credit bureau’’ and adding,
in their place, the words ‘‘consumer
reporting agency’’.
■ B. In paragraph (a)(4)(ii)(J), removing
the words ‘‘credit bureau’’ and adding,
in their place, the words ‘‘consumer
reporting agency’’.
■ C. In paragraph (a)(6)(ii)(D), removing
the word ‘‘is’’ and adding, in its place,
the word ‘‘it’’.
■ D. In paragraph (b)(2), removing
paragraph (b)(2)(i).
■ E. Redesignating paragraphs (b)(2)(ii)
through (b)(2)(iv), as (b)(2)(i) through
(b)(2)(iii), respectively.
■ F. In paragraph (b)(3)(i), removing the
words ‘‘schools and’’.
■ G. In paragraph (b)(3)(ii), removing
the words ‘‘schools and’’.
■ H. In paragraph (b)(3)(iii), removing
the words ‘‘school or’’.
■ I. In paragraph (c)(2), removing the
citation ‘‘§ 682.401(b)(21) and (22)’’ and
adding, in its place, the citation
‘‘§ 682.401(b)(12) and (13)’’.
■
■
§ 682.416
[Amended]
50. Section 682.416(d)(2) is amended
by removing the word ‘‘Title’’ and
adding, in its place, the word ‘‘title’’.
■
§ 682.418
■
[Removed]
51. Remove § 682.418.
§ 682.419
[Amended]
52. Section 682.419 is amended by:
A. In paragraph (b)(8), removing the
words ‘‘, in accordance with § 682.420’’.
■ B. In paragraph (c)(6), removing the
citation ‘‘§ 682.421’’ and adding, in its
place, the citation ‘‘section 422A(f) of
the Act’’.
■
■
§ 682.420
■
§ 682.421
■
[Removed]
54. Remove § 682.421.
§ 682.422
■
[Removed]
53. Remove § 682.420.
[Removed]
55. Remove § 682.422.
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§ 682.423
Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
[Amended]
56. Section 682.423 is amended by:
A. In the second sentence of
paragraph (a), adding the word ‘‘may’’
between the words ‘‘that’’ and ‘‘have’’.
■ B. In paragraph (a), removing the last
sentence.
■
■
Subpart E [Removed and Reserved]
57. Remove and reserve subpart E of
part 682.
■ 58. Revising the heading to subpart F
of part 682 to read as follows:
■
Subpart F—Requirements, Standards,
and Payments for Schools That
Participated in the FFEL Program
*
*
§ 682.601
■
*
*
*
[Removed]
59. Remove § 682.601.
§ 682.602
[Removed]
60. Remove § 682.602.
61. Section 682.603 is amended by:
A. Revising the section heading.
B. In paragraph (b)(3), removing the
citation ‘‘§ 682.604(c)’’ and adding, in
its place, the citation ‘‘section 428G of
the Act’’.
■ C. Revising paragraphs (g), (h), and (i).
■ D. Removing the second of the two
paragraphs that are both designated as
paragraph (j).
■ E. Revising the first of the two
paragraphs that are both designated as
paragraph (j).
■ F. Adding paragraphs (k) and (l).
The revisions and additions read as
follows:
■
■
■
■
§ 682.603 Certification by a school that
participated in the FFEL Program in
connection with a loan application.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
*
*
*
*
*
(g) The maximum period for which a
school may certify a loan application
is—
(1) Generally an academic year, as
defined by 34 CFR 668.3, except that a
guaranty agency may allow a school to
use a longer period of time,
corresponding to the period to which
the agency applies the annual loan
limits; or
(2) For a defaulted borrower who has
regained eligibility under
§ 682.401(b)(1), the academic year in
which the borrower regained eligibility.
(h) In certifying a Stafford or
Unsubsidized Stafford loan amount in
accordance with § 682.204—
(1) A program of study must be
considered at least one full academic
year if—
(i) The number of weeks of
instructional time is at least 30 weeks;
and
(ii) The number of clock hours is a
least 900, the number of semester or
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Jkt 229001
trimester hours is at least 24, or the
number of quarter hours is at least 36;
(2) A program of study must be
considered two-thirds (2⁄3) of an
academic year if—
(i) The number of weeks of
instructional time is at least 20 weeks;
and
(ii) The number of clock hours is at
least 600, the number of semester or
trimester hours is at least 16, or the
number of quarter hours is at least 24;
(3) A program of study must be
considered one-third (1⁄3) of an
academic year if—
(i) The number of weeks of instruction
time is at least 10 weeks; and
(ii) The number of clock hours is at
least 300, the number of semester or
trimester hours is at least 8, or the
number of quarter hours is at least 12;
and
(4) In prorating a loan amount for a
student enrolled in a program of study
with less than a full academic year
remaining, the school need not
recalculate the amount of the loan if the
number of hours for which an eligible
student is enrolled changes after the
school certifies the loan.
(i)(1) If a school measures academic
progress in an educational program in
credit hours and uses either standard
terms (semesters, trimesters, or quarters)
or nonstandard terms that are
substantially equal in length, and each
term is at least nine weeks of
instructional time in length, a student is
considered to have completed an
academic year and progresses to the
next annual loan limit when the
academic year calendar period has
elapsed.
(2) If a school measures academic
progress in an educational program in
credit hours and uses nonstandard
terms that are not substantially equal in
length or each term is not at least nine
weeks of instructional time in length, or
measures academic progress in credit
hours and does not have academic
terms, a student is considered to have
completed an academic year and
progresses to the next annual loan limit
at the later of—
(i) The student’s completion of the
weeks of instructional time in the
student’s academic year; or
(ii) The date, as determined by the
school, that the student has successfully
completed the academic coursework in
the student’s academic year.
(3) If a school measures academic
progress in an educational program in
clock hours, a student is considered to
have completed an academic year and
progresses to the next annual loan limit
at the later of—
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(i) The student’s completion of the
weeks of instructional time in the
student’s academic year; or
(ii) The date, as determined by the
school, that the student has successfully
completed the clock hours in the
student’s academic year.
(4) For purposes of this section, terms
in a loan period are substantially equal
in length if no term in the loan period
is more than two weeks of instructional
time longer than any other term in that
loan period.
(j)(1) A school must cease certifying
loans based on the exceptions in section
428G(a)(3) of the Act no later than—
(i) 30 days after the date the school
receives notification from the Secretary
of an FFEL cohort default rate,
calculated under subpart M of 34 CFR
part 668, that causes the school to no
longer meet the qualifications outlined
in those paragraphs; or
(ii) October 1, 2002.
(2) A school must cease certifying
loans based on the exceptions in section
428G(a)(3) of the Act no later than 30
days after the date the school receives
notification from the Secretary of an
FFEL cohort default rate, calculated
under subpart M of 34 CFR part 668,
that causes the school to no longer meet
the qualifications outlined in those
paragraphs.
(k) A school may not assess the
borrower, or the student in the case of
a parent PLUS loan, a fee for the
completion or certification of any FFEL
Program form or information or for
providing any information necessary for
a student or parent to receive a loan
under part B of the Act or any benefits
associated with such a loan.
(l) Pursuant to paragraph (b)(3) of this
section, a school may not request the
disbursement by the lender for loan
proceeds earlier than the period
specified in 34 CFR 668.167.
*
*
*
*
*
■ 62. Section 682.604 is amended by:
■ A. Revising the section heading.
■ B. Removing paragraphs (a), (c), (d),
(e), (f), (h), and (i).
■ C. Redesignating paragraph (g) as
paragraph (a).
■ D. Removing and reserving paragraph
(b).
■ E. In the last sentence of newly
redesignated paragraph (a)(1), adding
the punctuation and words ‘‘, or by
sending written counseling materials by
email to an email address provided by
the student borrower’’ between the
words ‘‘last known address’’ and
‘‘within 30 days’’.
■ F. Removing newly redesignated
paragraph (a)(2)(vi).
■ G. In newly redesignated paragraph
(a), redesignating paragraphs (a)(2)(vii)
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through (a)(2)(xii) as paragraphs
(a)(2)(ix) through (a)(2)(xiv),
respectively.
■ H. Adding new paragraphs (a)(2)(vi)
through (a)(2)(viii).
■ I. Adding new paragraph (a)(5).
The revision and additions read as
follows:
§ 682.604 Required exit counseling for
borrowers.
(a) * * *
(2) * * *
(vi) Explain to the borrower the use of
a Master Promissory Note;
(vii) Emphasize to the student
borrower the seriousness and
importance of the repayment obligation
the borrower has assumed;
(viii) Emphasize to the student
borrower that the full amount of the
loan (other than a loan made or
originated by the school) must be repaid
in full even if the student borrower does
not complete the program, does not
complete the program within the regular
time for program completion, is unable
to obtain employment upon completion,
or is otherwise dissatisfied with or does
not receive the educational or other
services that the student borrower
purchased from the school;
*
*
*
*
*
(5)(i) For students who have received
both FFEL Program and Direct Loan
Program loans for attendance at a
school, the school’s compliance with
the exit counseling requirements in 34
CFR 685.304(b) satisfies the
requirements of this section if the
school ensures that the exit counseling
also provides the borrower with the
information described in paragraph
(a)(2)(i) and (a)(2)(ii) of this section.
(ii) A student’s completion of
electronic interactive exit counseling
offered by the Secretary satisfies the
requirements of this section, and for
students who have also received Direct
Loan Program loans for attendance at
the school, the requirements of 34 CFR
685.304(b).
*
*
*
*
*
§ 682.605
[Amended]
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■
■
■
■
■
[Removed]
64. Remove § 682.608.
65. Section 682.610 is amended by:
A. Revising the section heading.
B. Revising paragraph (b)(5).
C. Revising paragraph (c).
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§ 682.610 Administrative and fiscal
requirements for schools that participated.
*
*
*
*
*
(b) * * *
(5) For loans delivered by electronic
funds transfer or master check, a copy
of the borrower’s required written
authorization, if it was not provided in
the loan application or MPN, to deliver
the initial and subsequent
disbursements of each FFEL Program
loan; and
*
*
*
*
*
(c) Enrollment reporting process. (1)
Upon receipt of an enrollment report
from the Secretary, a school must
update all information included in the
report and return the report to the
Secretary—
(i) In the manner and format
prescribed by the Secretary; and
(ii) Within the timeframe specified by
the Secretary.
(2) Unless it expects to submit its next
updated enrollment report to the
Secretary within the next 60 days, a
school must notify the Secretary within
30 days after the date that the school
discovers that—
(i) A loan under title IV of the Act was
made to or on behalf of a student who
was enrolled or accepted for enrollment
at the school, and the student has
ceased to be enrolled on at least a halftime basis or failed to enroll on at least
a half-time basis for the period for
which the loan was intended; or
(ii) A student who is enrolled at the
school and who received a loan under
title IV of the Act has changed his or her
permanent address.
*
*
*
*
*
■ 66. The heading of subpart G of part
682 is revised to read as follows:
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§ 682.701
subpart.
*
*
*
*
Disqualification: The removal of a
lender’s eligibility for an indefinite
period of time by the Secretary on
review of limitation, suspension, or
termination action taken against the
lender by a guaranty agency.
*
*
*
*
*
■ 69. Section 682.702 is amended by:
■ A. In paragraph (a), removing the
words ‘‘in paragraph (d) of this section
and’’.
■ B. Revising paragraph (b)(1).
■ C. Removing paragraph (b)(2).
■ D. Redesignating paragraph (b)(3) as
paragraph (b)(2).
■ E. Removing paragraph (d).
The revision reads as follows:
§ 682.702
*
*
*
*
(b) * * *
(1) A limit on the number or total
amount of loans that a lender may
purchase or hold under the FFEL
Program; or
*
*
*
*
*
§ 682.704
§ 682.705
*
[Amended]
67. Section 682.700 is amended by:
A. In paragraph (a), removing the
words ‘‘or school’’ in the final sentence.
■ B. In paragraph (b)(1)(ii), adding the
word ‘‘or’’ after the punctuation ‘‘;’’.
■ C. Removing paragraph (b)(2).
■ D. Redesignating paragraph (b)(3) as
paragraph (b)(2).
■ E. In paragraph (c), removing the
words ‘‘or schools’’.
■ 68. Section 682.701 is amended by
revising the definition of
‘‘Disqualification’’ to read as follows:
■
■
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[Amended]
71. Section 682.705 is amended by:
A. In paragraph (a)(1) introductory
text, removing the words ‘‘new loan
made by the lender or’’.
■ B. In paragraph (b)(2)(v), removing the
words ‘‘, except as provided in
paragraph (c)(9) of this section,’’.
■ C. Removing paragraph (c).
■
■
§ 682.706
§ 682.709
offsets.
*
[Amended]
70. Section 682.704(a) introductory
text is amended, by removing the words
‘‘stop the issuance of guarantee
commitments by the Secretary and
guarantee agencies and to’’.
■
*
*
Effect on participation.
*
■
*
Definitions of terms used in this
*
Subpart G—Limitation, Suspension, or
Termination of Lender or Third-party
Servicer Eligibility and Disqualification
of Lenders
§ 682.700
63. Section 682.605 is amended by:
A. In paragraph (b), adding the words
‘‘and the Secretary’’ between the words
‘‘lender’’ and ‘‘the date’’.
■ B. In paragraph (c), adding the words
‘‘and the Secretary’’ between the word
‘‘lender’’ and the punctuation ‘‘,’’.
■
■
§ 682.608
The revisions read as follows:
45701
[Amended]
72. Section 682.706 is amended by
removing paragraph (d).
■ 73. Section 682.709 is amended by
adding paragraph (d) to read as follows:
Reimbursements, refunds, and
*
*
*
*
*
(d) In any action under this part based
on a violation of the prohibitions in
section 435(d)(5) of the Act, if the
Secretary, the designated Department
official, or the hearing official finds that
the lender provided or offered the
payments or activities described in
paragraph (5)(i) of the definition of
‘‘lender’’ in § 682.200(b), the Secretary
or the official applies a rebuttable
presumption that the payments or
activities were offered or provided to
secure applications for FFEL loans. To
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reverse the presumption, the lender
must present evidence that the activities
or payments were provided for a reason
unrelated to securing applications for
FFEL loans or securing FFEL loan
volume.
*
*
*
*
*
§ 682.711
[Amended]
74. Section 682.711 is amended by:
A. Removing paragraph (c).
B. Redesignating paragraphs (d) and
(e) as paragraphs (c) and (d),
respectively.
■ C. In newly redesignated paragraph
(d)(2), removing the parenthetical ‘‘(d)’’
and adding, in its place, the
parenthetical ‘‘(c)’’.
■ D. In newly redesignated paragraph
(d)(2), removing the parenthetical ‘‘(e)’’
and adding, in its place, the
parenthetical ‘‘(d)’’.
■
■
■
§ 682.712
[Amended]
75. Section 682.712 is amended by:
A. In paragraph (g)(2), removing the
parenthetical ‘‘(j)’’ and adding, in its
place, the parenthetical ‘‘(i)’’.
■ B. In paragraph (h)(2) and in
paragraph (h)(3) introductory text,
removing the parenthetical ‘‘(j)’’ and
adding, in its place, the parenthetical
‘‘(i)’’.
■ C. Removing paragraph (i).
■ D. Redesignating paragraph (j) as
paragraph (i).
■
■
§ 682.713
■
[Removed]
76. Remove § 682.713.
Subpart H of part 682—[Removed and
Reserved]
77. Remove and reserve subpart H of
part 682.
■
Appendix C to Part 682 [Removed]
78. Remove and reserve Appendix C
to part 682.
■
Appendix D to Part 682 [Amended]
79. In appendix D to part 682,
paragraph 3 of the introduction is
amended by removing the final citation
‘‘34 CFR 682.401(d)’’ and adding, in its
place, the citation ‘‘34 CFR 682.401(c)’’.
■
PART 685—WILLIAM D. FORD
FEDERAL DIRECT LOAN PROGRAM
80. The authority citation for part 685
continues to read as follows:
tkelley on DSK3SPTVN1PROD with PROPOSALS2
■
Authority: 20 U.S.C. 1070g, 1087a, et seq.,
unless otherwise noted.
81. Section 685.100 is amended by:
A. Revising paragraph (a).
B. In paragraph (b), removing the
words ‘‘has been selected by the
Secretary to participate’’ and adding, in
their place, the word ‘‘participates’’.
■
■
■
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■
C. Revising paragraph (c).
The revisions read as follows:
§ 685.100 The William D. Ford Federal
Direct Loan Program.
(a) Under the William D. Ford Federal
Direct Loan (Direct Loan) Program
(formerly known as the Federal Direct
Student Loan Program), the Secretary
makes loans to enable a student or
parent to pay the costs of the student’s
attendance at a postsecondary school.
This part governs the Federal Direct
Stafford/Ford Loan Program, the Federal
Direct Unsubsidized Stafford/Ford Loan
Program, the Federal Direct PLUS
Program, and the Federal Direct
Consolidation Loan Program. The
Secretary makes loans under the
following program components:
(1)(i) Federal Direct Stafford/Ford
Loan Program (Direct Subsidized Loan
Program), which provides loans to
undergraduate, graduate, and
professional students. Loans made
under this program are referred to as
Direct Subsidized Loans. Except as
provided in paragraph (a)(1)(ii) of this
section, the Secretary subsidizes the
interest while the borrower is in an inschool, grace, or deferment period.
Graduate and professional students are
not eligible to receive Direct Subsidized
Loans for any period of enrollment
beginning on or after July 1, 2012.
(ii) The Secretary does not subsidize
the interest that accrues during the grace
period on any Direct Subsidized Loan
for which the first disbursement is made
on or after July 1, 2012 and before July
1, 2014.
(2) Federal Direct Unsubsidized
Stafford/Ford Loan Program (Direct
Unsubsidized Loan Program), which
provides loans to undergraduate,
graduate and professional students.
Loans made under this program are
referred to as Direct Unsubsidized
Loans. The borrower is responsible for
the interest that accrues during any
period.
(3) Federal Direct PLUS Program
(Direct PLUS Loan Program), which
provides loans to parents of dependent
students and to graduate or professional
students. Loans made under this
program are referred to as Direct PLUS
Loans. The borrower is responsible for
the interest that accrues during any
period.
(4) Federal Direct Consolidation Loan
Program (Direct Consolidation Loan
Program), which provides loans to
borrowers to consolidate certain Federal
educational loans. Loans made under
this program are referred to as Direct
Consolidation Loans.
*
*
*
*
*
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(c) The Secretary makes a Direct
Consolidation Loan only to a borrower
who is consolidating at least one loan
made under the Direct Loan Program or
the Federal Family Education Loan
(FFEL) Program.
*
*
*
*
*
■ 82. Section 685.101 is revised to read
as follows:
§ 685.101 Participation in the Direct Loan
Program.
(a) Colleges, universities, graduate
and professional schools, vocational
schools, and proprietary schools may
participate in the Direct Loan Program.
Participation in the Direct Loan Program
enables an eligible student or parent to
obtain a loan to pay for the student’s
cost of attendance at the school.
(b)(1) An eligible undergraduate
student who is enrolled at a school
participating in the Direct Loan Program
may borrow under the Direct Subsidized
Loan and Direct Unsubsidized Loan
Programs.
(2) An eligible graduate or
professional student enrolled at a school
participating in the Direct Loan Program
may borrow under the Direct Subsidized
Loan, Direct Unsubsidized Loan, and
Direct PLUS Loan Programs, except that
a graduate or professional student may
not borrow under the Direct Subsidized
Loan Program for any period of
enrollment beginning on or after July 1,
2012.
(3) An eligible parent of an eligible
dependent student enrolled at a school
participating in the Direct Loan Program
may borrow under the Direct PLUS
Loan Program.
(Authority: 20 U.S.C. 1087a et seq.)
83. Section 685.102 is amended by:
A. In paragraph (a)(1) introductory
text, removing the words ‘‘subpart A
of’’.
■ B. In paragraph (a)(1), removing the
terms ‘‘Academic Competitiveness
Grant (ACG) Program’’, ‘‘Disburse’’,
‘‘Federal Direct Student Loan Program
(Direct Loan Program)’’, ‘‘Leveraging
Educational Assistance Partnership
Program’’, ‘‘National Science and
Mathematics Access to Retain Talent
Grant (National SMART Grant)
Program’’, and ‘‘State’’.
■ C. In paragraph (a)(1), adding the
terms ‘‘Disbursement’’ and ‘‘William D.
Ford Federal Direct Loan (Direct Loan)
Program’’ in alphabetical order.
■ D. In paragraph (a)(2), adding the
terms ‘‘Correspondence course’’ and
‘‘State’’ in alphabetical order.
■ E. In paragraph (a)(2), removing the
term ‘‘Program of study by
correspondence’’.
■ F. Removing paragraph (a)(3).
■
■
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G. In paragraph (b), adding the
definitions of ‘‘Act’’, ‘‘Endorser’’,
‘‘Federal Insured Student Loan
Program’’, ‘‘Federal Stafford Loan
Program’’, ‘‘Guaranty agency’’,
‘‘Holder’’, ‘‘Lender’’, ‘‘Nationwide
consumer reporting agency’’,
‘‘Substantial gainful activity’’, and
‘‘Totally and permanently disabled’’, in
alphabetical order.
■ H. In paragraph (b), removing the
definitions of ‘‘Alternative originator’’,
‘‘Consortium’’, ‘‘School origination
option 1’’, ‘‘School origination option
2’’, ‘‘Servicer’’, and ‘‘Standard
origination’’.
■ I. In paragraph (b), in the definition of
‘‘Estimated financial assistance’’,
revising paragraphs (1)(vi) and (2)(i).
■ J. In paragraph (b), in the heading of
the definition of ‘‘Federal Direct
Consolidation Loan Program:’’, adding
the words ‘‘(Direct Consolidation Loan
Program)’’ immediately before the
punctuation ‘‘:’’.
■ K. In paragraph (b), in paragraph (4)
of the definition of ‘‘Federal Direct
Consolidation Loan Program’’, removing
the words ‘‘The term’’ in the first
sentence and adding, in their place, the
words ‘‘In the case of a Direct
Consolidation Loan that entered
repayment prior to July 1, 2006, the
term’’.
■ L. In paragraph (b), in the heading of
the definition of ‘‘Federal Direct PLUS
Program:’’, adding the words ‘‘(Direct
PLUS Loan Program)’’ immediately
before the punctuation ‘‘:’’.
■ M. In paragraph (b), revising the
definition of ‘‘Federal Direct Stafford/
Ford Loan Program’’.
■ N. In paragraph (b), in the heading of
the definition of ‘‘Federal Direct
Unsubsidized Stafford/Ford Loan
Program:’’, adding the words ‘‘(Direct
Unsubsidized Loan Program)’’
immediately before the punctuation ‘‘:’’.
■ O. In paragraph (b), revising the
definition of ‘‘Grace period’’.
■ P. In paragraph (b), in the definition
of ‘‘Master Promissory Note (MPN)’’,
adding a new paragraph (4).
■ Q. In paragraph (b), revising the
definition of ‘‘Satisfactory repayment
arrangement’’.
The revisions and additions read as
follows:
■
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.102
Definitions.
*
*
*
*
*
(b) * * *
Act: The Higher Education Act of
1965, as amended, 20 U.S.C. 1071 et
seq.
*
*
*
*
*
Endorser: An individual who signs a
promissory note and agrees to repay the
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loan in the event that the borrower does
not.
Estimated financial assistance: (1)
* * *
(vi) The estimated amount of other
Federal student financial aid, including
but not limited to a Federal Pell Grant,
campus-based aid, and the gross amount
(including fees) of subsidized and
unsubsidized Federal Stafford Loans,
Direct Subsidized and Unsubsidized
Loans, and Federal PLUS or Direct
PLUS Loans.
(2) * * *
(i) Those amounts used to replace the
expected family contribution (EFC),
including the amounts of any TEACH
Grants, unsubsidized Federal Stafford
Loans or Direct Unsubsidized Loans,
Federal PLUS or Direct PLUS Loans,
and non-federal non-need-based loans,
including private, state-sponsored, and
institutional loans. However, if the sum
of the amounts received that are being
used to replace the student’s EFC
exceed the EFC, the excess amount must
be treated as estimated financial
assistance;
*
*
*
*
*
Federal Direct Stafford/Ford Loan
Program (Direct Subsidized Loan
Program): A loan program authorized by
title IV, part D of the Act that provides
loans to undergraduate, graduate, and
professional students attending Direct
Loan Program schools, and one of the
components of the Direct Loan Program.
The Secretary subsidizes the interest
while the borrower is in an in-school,
grace, or deferment period, except that
the Secretary does not subsidize the
interest that accrues during the grace
period on a loan for which the first
disbursement is made on or after July 1,
2012 and before July 1, 2014. Loans
made under this program are referred to
as Direct Subsidized Loans. Graduate
and professional students are not
eligible to receive Direct Subsidized
Loans for any period of enrollment
beginning on or after July 1, 2012.
*
*
*
*
*
Federal Insured Student Loan
Program: The loan program authorized
by title IV, part B of the Act under
which the Secretary directly insures
lenders against losses.
Federal Stafford Loan Program: The
loan program authorized by title IV, part
B of the Act which encouraged the
making of subsidized and unsubsidized
loans to undergraduate, graduate, and
professional students and is one of the
Federal Family Education Loan
programs.
Grace period: A six-month period that
begins on the day after a Direct
Subsidized Loan borrower, a Direct
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Unsubsidized Loan borrower, or, in
some cases, a Direct Consolidation Loan
borrower whose consolidation
application was received before July 1,
2006, ceases to be enrolled as at least a
half-time student at an eligible
institution and ends on the day before
the repayment period begins.
Guaranty agency: A State or private
nonprofit organization that has an
agreement with the Secretary under
which it will administer a loan
guarantee program under the Act.
Holder: The entity that owns a loan.
For a FFEL Program loan, the term
‘‘holder’’ refers to an eligible lender
owning a FFEL Program loan, including
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.
*
*
*
*
*
Lender: As used in this part, the term
‘‘lender’’ has the meaning specified in
section 435(d) of the Act for purposes of
the FFEL Program.
*
*
*
*
*
Master Promissory Note (MPN):
*
*
*
*
*
(4) Unless the Secretary determines
otherwise, a school may use a single
MPN as the basis for all loans borrowed
by a student or parent borrower for
attendance at that school. If a school is
not authorized by the Secretary for
multi-year use of the MPN, a student or
parent borrower must sign a new MPN
for each academic year.
Nationwide consumer reporting
agency: A consumer reporting agency as
defined in 15 U.S.C. 1681a(p).
*
*
*
*
*
Satisfactory repayment arrangement:
(1) For the purpose of regaining
eligibility under section 428F(b) of the
HEA, the making of six consecutive,
voluntary, on-time, full monthly
payments on a defaulted loan. A
borrower may only obtain the benefit of
this paragraph with respect to renewed
eligibility once.
(2) For the purpose of consolidating a
defaulted loan under
§ 685.220(d)(1)(ii)(A)(3)—
(i) The making of three consecutive,
voluntary, on-time, full monthly
payments on a defaulted loan prior to
consolidation; or
(ii) Agreeing to repay the Direct
Consolidation Loan under one of the
income-contingent repayment plans
described in § 685.209 or the incomebased repayment plan described in
§ 685.221.
(3) For the purpose of paragraph (2)(i)
of this definition, the required monthly
payment amount may not be more than
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is reasonable and affordable based on
the borrower’s total financial
circumstances. ‘‘On-time’’ means a
payment made within 20 days of the
scheduled due date, and voluntary
payments are payments made directly
by the borrower and do not include
payments obtained by Federal offset,
garnishment, or income or asset
execution.
(4) A borrower has not used the one
opportunity to renew eligibility for title
IV assistance if the borrower makes six
consecutive, on-time, voluntary, full
monthly payments under an agreement
to rehabilitate a defaulted loan, but does
not receive additional title IV assistance
prior to defaulting on that loan again.
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—
(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.
*
*
*
*
*
■ 84. Section 685.200, is amended by:
■ A. Revising paragraph (a)(1)(iv).
■ B. Revising paragraph (a)(1)(v).
■ C. Revising paragraph (b)(4).
■ D. In paragraph (c)(1)(vii)(C), adding
the word ‘‘paragraph’’ immediately
before the citation ‘‘(c)(1)(vii)(A)’’.
■ E. Adding a new paragraph
(c)(1)(vii)(D).
■ F. Revising paragraph (d).
The revisions and addition read as
follows:
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.200
Borrower eligibility.
(a) * * *
(1) * * *
(iv) In the case of a borrower whose
previous loan or TEACH Grant service
obligation was discharged due to total
and permanent disability, the student—
(A) In the case of a borrower whose
prior loan under title IV of the Act or
TEACH Grant service obligation was
discharged after a final determination of
total and permanent disability, the
borrower—
(1) Obtains a certification from a
physician that the borrower is able to
engage in substantial gainful activity;
and
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(2) Signs a statement acknowledging
that neither the new Direct Loan the
borrower receives nor any previously
discharged loan on which the borrower
is required to resume payment in
accordance with paragraph (a)(1)(iv)(B)
of this section can be discharged in the
future on the basis of any impairment
present when the new loan is made,
unless that impairment substantially
deteriorates;
(B) In the case of a borrower who
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)(iii), 34 CFR
674.61(b)(3)(v), 34 CFR
682.402(c)(3)(iv), or 34 CFR 686.42(b)
based on a discharge request received
on or after July 1, 2010, the borrower
resumes repayment on the previously
discharged loan in accordance with
§ 685.213(b)(7), 34 CFR 674.61(b)(6), or
34 CFR 682.402(c)(6), 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; and
(C) In the case of a borrower whose
prior loan under title IV of the Act was
conditionally discharged after an initial
determination that the borrower was
totally and permanently disabled based
on a discharge request received prior to
July 1, 2010—
(1) The suspension of collection
activity on the prior loan has been
lifted;
(2) The borrower complies with the
requirement in paragraph (a)(1)(iv)(A)(1)
of this section;
(3) The borrower signs a statement
acknowledging that neither the new
Direct Loan the borrower receives nor
the loan that has been conditionally
discharged prior to a final determination
of total and permanent disability can be
discharged in the future on the basis of
any impairment present when the
borrower applied for a total and
permanent disability discharge or when
the new loan is made, unless that
impairment substantially deteriorates;
and
(4) The borrower signs a statement
acknowledging that the suspension of
collection activity on the prior loan will
be lifted.
(v) In the case of a student who was
enrolled in a program of study prior to
July 1, 2012 and who seeks a loan but
does not have a certificate of graduation
from a school providing secondary
education or the recognized equivalent
of such a certificate, the student meets
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the requirements under 34 CFR
668.32(e)(2), (3), (4), or (5).
*
*
*
*
*
(b) * * *
(4) The student has received a
determination of his or her annual loan
maximum eligibility under the Direct
Unsubsidized Loan Program and, for
periods of enrollment beginning before
July 1, 2012, the Direct Subsidized Loan
Program; and
*
*
*
*
*
(c) * * *
(1) * * *
(vii) * * *
(D) For the purposes of paragraph
(c)(1)(vii)(A)(3) of this section, the
Secretary may determine that
extenuating circumstances exist based
on documentation that includes, but is
not limited to, an updated credit report,
a statement from the creditor that the
borrower has made satisfactory
arrangements to repay the debt, or a
satisfactory statement from the borrower
explaining any delinquencies with
outstanding balances of less than $500.
*
*
*
*
*
(d) Defaulted Perkins, FFEL, and
Direct Loan program borrowers. Except
as noted in § 685.220(d)(1)(ii)(A)(3), in
the case of a student or parent borrower
who is currently in default on a Perkins,
FFEL, or Direct Loan program loan, the
borrower must make satisfactory
repayment arrangements, as described
in paragraph (1) of the definition of that
term under § 685.102(b), on the
defaulted loan.
*
*
*
*
*
■ 85. Section 685.201 is amended by:
■ A. Revising paragraph (a)(2).
■ B. Revising paragraph (b).
■ C. Revising paragraph (c)(1).
■ D. In paragraph (c)(2), removing the
word ‘‘Servicer’’ and adding, in its
place, the word ‘‘Secretary’’.
The revisions read as follows:
§ 685.201
Obtaining a loan.
(a) * * *
(2) If the student is eligible for a
Direct Subsidized Loan or a Direct
Unsubsidized Loan, the school in which
the student is enrolled must perform the
following functions:
(i) Create a loan origination record
and transmit the record to the Secretary.
(ii) Ensure that the loan is supported
by a completed Master Promissory Note
(MPN) and, if applicable, transmit the
MPN to the Secretary.
(iii) In accordance with 34 CFR
668.162, draw down funds or receive
funds from the Secretary, and disburse
the funds to the student.
(b) Application for a Direct PLUS
Loan. (1) For a parent to obtain a Direct
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PLUS Loan, the parent must complete
the Direct PLUS Loan MPN and the
dependent student on whose behalf the
parent is borrowing must complete a
Free Application for Federal Student
Aid and submit it in accordance with
instructions in the application.
(2) For a graduate or professional
student to apply for a Direct PLUS Loan,
the student must complete a Free
Application for Federal Student Aid and
submit it in accordance with
instructions in the application. The
graduate or professional student must
also complete the Direct PLUS Loan
MPN.
(3) For either a parent or student
PLUS borrower, as applicable, the
school must complete its portion of the
PLUS MPN and, if applicable, submit it
to the Secretary. The Secretary makes a
determination as to whether the parent
or graduate or professional student has
an adverse credit history. The school
performs the functions described in
paragraph (a)(2) of this section.
(c) * * *
(1) To obtain a Direct Consolidation
Loan, the applicant must complete the
application and promissory note and
submit it to the Secretary. The
application and promissory note sets
forth the terms and conditions of the
Direct Consolidation Loan and informs
the applicant how to contact the
Secretary. The Secretary answers
questions regarding the process of
applying for a Direct Consolidation
Loan and provides information about
the terms and conditions of both Direct
Consolidation Loans and the types of
loans that may be consolidated.
*
*
*
*
*
■ 86. Section 685.202 is amended by:
■ A. Revising paragraph (a)(1)(iv).
■ B. In the introductory text of
paragraph (a)(1)(v), removing the words
‘‘subsidized Stafford loan’’ and adding,
in their place, the words ‘‘Direct
Subsidized Loan’’.
■ C. In paragraph (a)(1)(v)(A), adding
the words ‘‘or on or after July 1, 2013,’’
immediately before the words ‘‘the
interest rate’’.
■ D. Revising paragraph (b)(2).
The revisions read as follows:
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.202 Charges for which Direct Loan
Program borrowers are responsible.
(a) * * *
(1) * * *
(iv) Loans first disbursed on or after
July 1, 2006. Except as provided in
paragraph (a)(1)(v) of this section for
Direct Subsidized Loans made to
undergraduate students, the interest rate
is 6.8 percent.
*
*
*
*
*
(b) * * *
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(2) For a Direct Unsubsidized Loan, a
Direct Unsubsidized Consolidation Loan
that qualifies for a grace period under
the regulations that were in effect for
consolidation applications received
before July 1, 2006, a Direct PLUS Loan,
or for a Direct Subsidized Loan for
which the first disbursement is made on
or after July 1, 2012 and before July 1,
2014, the Secretary may capitalize the
unpaid interest that accrues on the loan
when the borrower enters repayment.
*
*
*
*
*
■ 87. Section 685.203 is amended by:
■ A. Revising the introductory text of
paragraph (a)(1).
■ B. In paragraphs (a)(1)(i), (a)(1)(ii), and
(a)(1)(iii), removing the words ‘‘$2,625,
or, for a loan disbursed on or after July
1, 2007, $3,500,’’ and adding, in their
place, the figure ‘‘$3,500’’.
■ C. Revising the introductory text of
paragraph (a)(2).
■ D. In paragraphs (a)(2)(i) and (a)(2)(ii),
removing the words ‘‘$3,500, or, for a
loan disbursed on or after July 1, 2007,
$4,500,’’ and adding, in their place, the
figure ‘‘$4,500’’.
■ E. Revising the introductory text of
paragraph (a)(3).
■ F. Revising paragraph (a)(5).
■ G. Revising the introductory text of
paragraph (a)(6).
■ H. Revising paragraph (a)(7).
■ I. Revising paragraph (b).
■ J. In paragraph (c)(1)(i), removing the
words ‘‘Federal Direct Unsubsidized
Loan Program’’ and adding, in their
place, the words ‘‘Direct Unsubsidized
Loan Program’’.
■ K. Revising paragraph (c)(1)(ii).
■ L. In paragraph (c)(1)(iii), in the last
sentence, removing the words ‘‘Federal
PLUS Loan or’’.
■ M. Revising the introductory text of
paragraph (c)(2).
■ N. In paragraphs (c)(2)(i)(A),
(c)(2)(i)(B), (c)(2)(i)(C), (c)(2)(ii)(A), and
(c)(2)(ii)(B), removing the words
‘‘$4,000, or, for a loan first disbursed on
or after July 1, 2008, $6,000,’’ and
adding, in their place, the figure
‘‘$6,000’’.
■ O. In paragraphs (c)(2)(iii)(A) and
(c)(2)(iii)(B), removing the words
‘‘$5,000, or, for a loan first disbursed on
or after July 1, 2008, $7,000,’’ and
adding, in their place, the figure
‘‘$7,000’’.
■ P. In paragraph (c)(2)(v), removing the
words ‘‘$10,000, or, for a loan disbursed
on or after July 1, 2007,’’.
■ Q. In paragraph (c)(2)(vi)(A), removing
the words ‘‘$4,000, or, for a loan first
disbursed on or after July 1, 2008,
$6,000,’’ and adding, in their place, the
figure ‘‘$6,000’’.
■ R. In paragraph (c)(2)(vi)(B), removing
the words ‘‘$5,000, or, for a loan
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45705
disbursed on or after July 1, 2007,
$7,000,’’ and adding, in their place, the
figure ‘‘$7,000’’.
■ S. In paragraph (c)(2)(vii), removing
the words ‘‘$5,000, or, for a loan
disbursed on or after July 1, 2007,’’.
■ T. Revising the introductory text of
paragraph (d).
■ U. Revising paragraph (e).
■ V. In paragraph (i)(1), adding the word
‘‘Subsidized’’ immediately before the
words ‘‘Federal Stafford Loans’’.
■ W. In paragraph (i)(2), removing the
words ‘‘Federal Unsubsidized Stafford
Loans’’ and adding, in their place, the
words ‘‘Unsubsidized Federal Stafford
Loans’’.
The revisions read as follows:
§ 685.203
Loan limits.
(a) * * *
(1) In the case of an undergraduate
student who has not successfully
completed the first year of a program of
undergraduate education, the total
amount the student may borrow for any
academic year of study under the Direct
Subsidized Loan Program may not
exceed the following:
*
*
*
*
*
(2) In the case of an undergraduate
student who has successfully completed
the first year of an undergraduate
program but has not successfully
completed the second year of an
undergraduate program, the total
amount the student may borrow for any
academic year of study under the Direct
Subsidized Loan Program may not
exceed the following:
*
*
*
*
*
(3) In the case of an undergraduate
student who has successfully completed
the first and second years of a program
of study of undergraduate education but
has not successfully completed the
remainder of the program, the total
amount the student may borrow for any
academic year of study under the Direct
Subsidized Loan Program may not
exceed the following:
*
*
*
*
*
(5) In the case of a graduate or
professional student for periods of
enrollment beginning before July 1,
2012, the total amount the student may
borrow for any academic year of study
under the Direct Subsidized Loan
Program may not exceed $8,500.
(6) In the case of a student enrolled
for no longer than one consecutive 12month period in a course of study
necessary for enrollment in a program
leading to a degree or a certificate, the
total amount the student may borrow for
any academic year of study under the
Direct Subsidized Loan Program may
not exceed the following:
*
*
*
*
*
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(7) In the case of a student who has
obtained a baccalaureate degree and is
enrolled or accepted for enrollment in
coursework necessary for a professional
credential or certification from a State
that is required for employment as a
teacher in an elementary or secondary
school in that State, the total amount the
student may borrow for any academic
year of study under the Direct
Subsidized Loan Program may not
exceed $5,500.
*
*
*
*
*
(b) Direct Unsubsidized Loans. (1) In
the case of a dependent undergraduate
student, except as provided in
paragraph (c)(3) of this section, the total
amount a student may borrow for any
academic year of study under the Direct
Unsubsidized Loan Program is the same
as the amount determined under
paragraph (a) of this section, less any
amount received under the Direct
Subsidized Loan Program, plus—
(i) $2,000 for a program of study of at
least a full academic year in length.
(ii) 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 enrolled
lllllllllllllllllll
Number of semester, trimester, quarter
or clock hours in academic year
(iii) 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 enrolled
lllllllllllllllllll
Number of semester, trimester, quarter
or clock hours in academic year or
Number of weeks enrolled
lllllllllllllllllll
Number of weeks in academic year
(2)(i) In the case of an independent
undergraduate 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 Direct
Unsubsidized Loan Program may not
exceed the amounts determined under
paragraph (a) of this section less any
amount received under the Direct
Subsidized Loan Program in
combination with the amounts
determined under paragraph (c) of this
section.
(ii) In the case of a graduate or
professional student for a period of
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enrollment beginning before July 1,
2012, the total amount the student may
borrow for any academic year of study
under the Direct Unsubsidized Loan
Program may not exceed the amount
determined under paragraph (a)(5) of
this section, less any amount received
under the Direct Subsidized Loan
Program.
(iii) In the case of a graduate or
professional student for a period of
enrollment beginning on or after July 1,
2012, the total amount the student may
borrow for any academic year of study
under the Direct Unsubsidized Loan
Program may not exceed $8,500.
(c) * * *
(1) * * *
(ii) In order for a dependent
undergraduate student to receive this
additional loan amount, the financial
aid administrator must determine that
the student’s parent likely will be
precluded by exceptional circumstances
from borrowing under the Direct PLUS
Loan Program and the student’s family
is otherwise unable to provide the
student’s expected family contribution.
The financial aid administrator must
base the determination on a review of
the family financial information
provided by the student and
consideration of the student’s debt
burden and must document the
determination in the school’s file.
*
*
*
*
*
(2) The additional amount that a
student described in paragraph (c)(1)(i)
of this section may borrow under the
Direct Unsubsidized Loan Program for
any academic year of study may not
exceed the following:
*
*
*
*
*
(d) Aggregate limits for subsidized
loans. The aggregate unpaid principal
amount of all Direct Subsidized Loans
and Subsidized Federal Stafford Loans
made to a student but excluding the
amount of capitalized interest may not
exceed the following:
*
*
*
*
*
(e) Aggregate limits for unsubsidized
loans. The total amount of Direct
Unsubsidized Loans, Unsubsidized
Federal Stafford Loans, and Federal SLS
Loans, excluding the amount of
capitalized interest, may not exceed the
following:
(1) For a dependent undergraduate
student, $31,000 minus any Direct
Subsidized Loan and Subsidized
Federal Stafford Loan amounts, unless
the student qualifies under paragraph
(c) of this section for additional
eligibility or qualified for that additional
eligibility under the Federal SLS
Program.
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(2) For an independent undergraduate
or a dependent undergraduate who
qualifies for additional eligibility under
paragraph (c) of this section or qualified
for this additional eligibility under the
Federal SLS Program, $57,500 minus
any Direct Subsidized Loan and
Subsidized Federal Stafford Loan
amounts.
(3) For a graduate or professional
student, $138,500, including any loans
for undergraduate study, minus any
Direct Subsidized Loan, Subsidized
Federal Stafford Loan, and Federal SLS
Program loan amounts.
*
*
*
*
*
■ 88. Section 685.204 is revised to read
as follows:
§ 685.204
Deferment.
(a) General. (1) A Direct Subsidized
Loan or Direct Subsidized Consolidation
Loan borrower who meets the
requirements described in paragraphs
(b), (d), (e), (f), (g), (h), (i), and (j) of this
section is eligible for a deferment during
which periodic installments of principal
and interest need not be paid.
(2) A Direct Unsubsidized Loan,
Direct Unsubsidized Consolidation
Loan, Direct PLUS Loan, or Direct PLUS
Consolidation Loan borrower who meets
the requirements described in
paragraphs (b) through (j) of this section
is eligible for a deferment during which
periodic installments of principal need
not be paid but interest does accrue and
is capitalized or paid by the borrower.
At or before the time a deferment is
granted, the Secretary provides
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.
(3) A borrower whose loan is in
default is not eligible for a deferment,
unless the borrower has made payment
arrangements satisfactory to the
Secretary.
(4)(i) To receive a deferment, except
as provided for in-school deferments
under paragraphs (b)(2)(ii) through (iv)
of this section, the borrower must
request the deferment and, except as
provided in paragraph (a)(5)(i) of this
section, provide the Secretary with all
information and documents required to
establish eligibility for the deferment.
(ii) In the case of a military service
deferment under paragraph (h) of this
section, a borrower’s representative may
request the deferment and provide the
required information and documents on
behalf of the borrower. If the Secretary
grants a military service deferment
based on a request from a borrower’s
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representative, the Secretary notifies the
borrower that the deferment has been
granted and that the borrower has the
option to cancel the deferment and
continue to make payments on the loan.
The Secretary may also notify the
borrower’s representative of the
outcome of the deferment request.
(5)(i) After receiving a borrower’s
written or verbal request for a
deferment, the Secretary may grant a
graduate fellowship deferment under
paragraph (d), a rehabilitation training
deferment under paragraph (e), an
unemployment deferment under
paragraph (f), an economic hardship
deferment under paragraph (g), a
military service deferment under
paragraph (h), or a post-active duty
student deferment under paragraph (i)
of this section if the Secretary confirms
that the borrower has received a
deferment on a FFEL Program loan for
the same reason and during the same
time period.
(ii) The Secretary will grant a
deferment based on the information
obtained under paragraph (a)(5)(i) of
this section when determining a
borrower’s eligibility for a deferment,
unless the Secretary, as of the date of
the determination, has information
indicating that the borrower does not
qualify for the deferment. The Secretary
will resolve any discrepant information
before granting a deferment under
paragraph (a)(5)(i) of this section.
(iii) If the Secretary grants a deferment
under paragraph (a)(5)(i) of this section,
the Secretary notifies the borrower that
the deferment has been granted and that
the borrower has the option to cancel
the deferment and continue to make
payments on the loan.
(b) In-school deferment. (1) A Direct
Loan borrower is eligible for a
deferment during any period during
which—
(i) The borrower is carrying at least
one-half the normal full-time work load
for the course of study that the borrower
is pursuing, as determined by the
eligible school the borrower is
attending; and
(ii) The borrower is not serving in a
medical internship or residency
program, except for a residency program
in dentistry.
(2) For the purpose of paragraph (b)(1)
of this section, the Secretary processes
a deferment when—
(i) The borrower submits a request to
the Secretary along with documentation
verifying the borrower’s eligibility;
(ii) The Secretary receives information
from the borrower’s school indicating
that the borrower is eligible to receive
a new loan;
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(iii) The Secretary receives student
status information from the borrower’s
school, either directly or indirectly,
indicating that the borrower is enrolled
on at least a half-time basis; or
(iv) 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.
(3)(i) Upon notification by the
Secretary that a deferment has been
granted based on paragraph (b)(2)(ii),
(iii), or (iv) of this section, the borrower
has the option to cancel the deferment
and continue to make payments on the
loan.
(ii) If the borrower elects to cancel the
deferment and continue to make
payments 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.
(c) 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
eligible for a deferment on a Direct
PLUS Loan first disbursed on or after
July 1, 2008 during the six-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 the Secretary grants an in-school
deferment to a student Direct PLUS
Loan borrower in accordance with
§ 685.204(b)(2)(ii), (iii), or (iv), the
deferment period for a Direct PLUS loan
first disbursed on or after July 1, 2008
includes the six-month post-enrollment
period described in paragraph (c)(1)(i) of
this section.
(2) A parent Direct PLUS Loan
borrower is eligible for a deferment on
a Direct PLUS Loan first disbursed on or
after July 1, 2008—
(i) Upon the request of the borrower,
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) Upon the request of the borrower,
during the six-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 halftime 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.
(d) Graduate fellowship deferment. (1)
A Direct Loan borrower is eligible for a
deferment during any period in which
an authorized official of the borrower’s
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graduate fellowship program certifies
that the borrower is pursuing a course
of study pursuant to an eligible graduate
fellowship program in accordance with
paragraph (d)(2) of this section.
(2)(i) To qualify for a deferment under
paragraph (d)(1) of this section, a
borrower must—
(A) Hold at least a baccalaureate
degree conferred by an institution of
higher education;
(B) Have been accepted or
recommended by an institution of
higher education for acceptance on a
full-time basis into an eligible graduate
fellowship program, as defined in
paragraph (d)(2)(ii) of this section; and
(C) Not be serving in a medical
internship or residency program, except
for a residency program in dentistry.
(ii) An eligible graduate fellowship
program is a fellowship program that—
(A) Provides sufficient financial
support to graduate fellows to allow for
full-time study for at least six months;
(B) Requires a written statement from
each applicant explaining the
applicant’s objectives before the award
of that financial support;
(C) Requires a graduate fellow to
submit periodic reports, projects, or
evidence of the fellow’s progress; and
(D) In the case of a course of study at
a foreign university, accepts the course
of study for completion of the
fellowship program.
(e) Rehabilitation training program
deferment. (1) A Direct Loan borrower is
eligible for a deferment during any
period in which an authorized official of
the borrower’s rehabilitation training
program certifies that the borrower is
pursuing an eligible rehabilitation
training program for individuals with
disabilities in accordance with
paragraph (e)(2) of this section.
(2) For purposes of paragraph (e)(1) of
this section, an eligible rehabilitation
training program for disabled
individuals is a program that—
(i) Is licensed, approved, certified, or
otherwise recognized as providing
rehabilitation training to disabled
individuals by—
(A) A State agency with responsibility
for vocational rehabilitation programs;
(B) A State agency with responsibility
for drug abuse treatment programs;
(C) A State agency with responsibility
for mental health services programs;
(D) A State agency with responsibility
for alcohol abuse treatment programs; or
(E) The Department of Veterans
Affairs; and
(ii) Provides or will provide the
borrower with rehabilitation services
under a written plan that—
(A) Is individualized to meet the
borrower’s needs;
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(B) Specifies the date on which the
services to the borrower are expected to
end; and
(C) Is structured in a way that requires
a substantial commitment by the
borrower to his or her rehabilitation.
The Secretary considers a substantial
commitment by the borrower to be a
commitment of time and effort that
normally would prevent an individual
from engaging in full-time employment,
either because of the number of hours
that must be devoted to rehabilitation or
because of the nature of the
rehabilitation. For the purpose of this
paragraph, full-time employment
involves at least 30 hours of work per
week and is expected to last at least
three months.
(f) Unemployment deferment. (1) A
Direct Loan borrower is eligible for a
deferment during periods that,
collectively, do not exceed three years
in which the borrower is seeking and
unable to find full-time employment.
(2) A borrower qualifies for an
unemployment deferment by—
(i) Providing evidence of eligibility for
unemployment benefits to the Secretary;
or
(ii) Providing to the Secretary a
written certification, or an equivalent as
approved by the Secretary, that—
(A) The borrower has registered with
a public or private employment agency,
if one is available to the borrower
within a 50-mile radius of the
borrower’s current address; and
(B) For all requests beyond the initial
request, the borrower has made at least
six diligent attempts during the
preceding six-month period to secure
full-time employment.
(3) For purposes of obtaining an
unemployment deferment under
paragraph (f)(2)(ii) of this section, the
following rules apply:
(i) A borrower may qualify for an
unemployment deferment whether or
not the borrower has been previously
employed.
(ii) An unemployment deferment is
not justified if the borrower refuses to
seek or accept employment in kinds of
positions or at salary and responsibility
levels for which the borrower feels
overqualified by virtue of education or
previous experience.
(iii) Full-time employment involves at
least 30 hours of work a week and is
expected to last at least 3 months.
(iv) The initial period of
unemployment deferment may be
granted for a period of unemployment
beginning up to six months before the
date the Secretary receives the
borrower’s request, and may be granted
for up to six months after that date.
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(4) The Secretary does not grant an
unemployment deferment beyond the
date that is six months after the date the
borrower provides evidence of the
borrower’s eligibility for unemployment
insurance benefits under paragraph
(f)(2)(i) of this section or the date the
borrower provides the written
certification, or an approved equivalent,
under paragraph (f)(2)(ii) of this section.
(g) Economic hardship deferment.
(1)(i) A Direct Loan borrower is eligible
for a deferment during periods that,
collectively, do not exceed three years
in which the borrower has experienced
or will experience an economic
hardship in accordance with paragraph
(g)(2) of this section.
(ii) An economic hardship deferment
is granted for periods of up to one year
at a time, except that a borrower who
receives a deferment under paragraph
(g)(2)(iv) of this section may receive an
economic hardship deferment for the
lesser of the borrower’s full term of
service in the Peace Corps or the
borrower’s remaining period of
economic hardship deferment eligibility
under the 3-year maximum.
(2) A borrower qualifies for an
economic hardship deferment if the
borrower—
(i) Has been granted an economic
hardship deferment under either the
FFEL or the Federal Perkins Loan
programs for the period of time for
which the borrower has requested an
economic hardship deferment for his or
her Direct Loan;
(ii) Is receiving payment under a
Federal or State public assistance
program, such as Aid to Families with
Dependent Children, Supplemental
Security Income, Food Stamps, or State
general public assistance;
(iii) Is working full-time (as defined in
paragraph (g)(3)(iii) of this section) and
has a monthly income (as defined in
paragraph (g)(3)(iv) of this section) that
does not exceed the greater of (as
calculated on a monthly basis)—
(A) The minimum wage rate described
in section 6 of the Fair Labor Standards
Act of 1938; or
(B) An amount equal to 150 percent
of the poverty guideline applicable to
the borrower’s family size (as defined in
paragraph (g)(3)(v) of this section) as
published annually by the Department
of Health and Human Services pursuant
to 42 U.S.C. 9902(2). If a borrower is not
a resident of a State identified in the
poverty guidelines, the poverty
guideline to be used for the borrower is
the poverty guideline (for the relevant
family size) used for the 48 contiguous
States; or
(iv) Is serving as a volunteer in the
Peace Corps.
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(3) The following rules apply to a
deferment granted under paragraph
(g)(2)(iii) of this section:
(i) For an initial period of deferment,
the Secretary requires the borrower to
submit evidence showing the amount of
the borrower’s monthly income.
(ii) To qualify for a subsequent period
of deferment that begins less than one
year after the end of a period of
deferment under paragraph (g)(2)(iii) of
this section, the Secretary requires the
borrower to submit evidence showing
the amount of the borrower’s monthly
income or a copy of the borrower’s most
recently filed Federal income tax return.
(iii) A borrower is considered to be
working full-time if the borrower is
expected to be employed for at least
three consecutive months at 30 hours
per week.
(iv) A borrower’s monthly income is
the gross amount of income received by
the borrower from employment and
from other sources, or one-twelfth of the
borrower’s adjusted gross income, as
recorded on the borrower’s most
recently filed Federal income tax return.
(v) Family size means the number that
is determined by counting the borrower,
the borrower’s spouse, and the
borrower’s children, including unborn
children who will be born during the
period covered by the deferment, if the
children receive more than half their
support from the borrower. A borrower’s
family size includes other individuals if,
at the time the borrower requests the
economic hardship deferment, the other
individuals—
(A) Live with the borrower; and
(B) Receive more than half their
support from the borrower and will
continue to receive this support from
the borrower for the year the borrower
certifies family size. Support includes
money, gifts, loans, housing, food,
clothes, car, medical and dental care,
and payment of college costs.
(h) Military service deferment. (1) A
Direct Loan borrower is eligible for a
deferment during any period in which
the borrower is—
(i) Serving on active duty during a
war or other military operation or
national emergency, as defined in
paragraph (h)(5) of this section; or
(ii) Performing qualifying National
Guard duty during a war or other
military operation or national
emergency, as defined in paragraph
(h)(5) of this section.
(2) For a borrower whose active duty
service includes October 1, 2007, or
begins on or after that date, the
deferment period ends 180 days after
the demobilization date for each period
of the service described in paragraphs
(h)(1)(i) and (h)(1)(ii) of this section.
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(3) Without supporting
documentation, the military service
deferment will be granted to an
otherwise eligible borrower for a period
not to exceed the initial 12 months from
the date the qualifying eligible service
began based on a request from the
borrower or the borrower’s
representative.
(4) The provisions of paragraph (h) of
this section do not authorize the
refunding of any payments made by or
on behalf of a borrower during a period
for which the borrower qualified for a
military service deferment.
(5) As used in paragraph (h) of this
section—
(i) Serving on active duty during a war
or other military operation or national
emergency means service by an
individual who is—
(A) A Reserve of an Armed Force
ordered to active duty under 10 U.S.C.
12301(a), 12301(g), 12302, 12304, or
12306;
(B) A retired member of an Armed
Force ordered to active duty under 10
U.S.C. 688 for service in connection
with a war or other military operation
or national emergency, regardless of the
location at which such active duty
service is performed; or
(C) Any other member of an Armed
Force on active duty in connection with
such emergency or subsequent actions
or conditions who has been assigned to
a duty station at a location other than
the location at which the member is
normally assigned;
(ii) Qualifying National Guard duty
during a war or other operation or
national emergency means service as a
member of the National Guard on fulltime National Guard duty, as defined in
10 U.S.C. 101(d)(5) under a call to active
service authorized by the President or
the Secretary of Defense for a period of
more than 30 consecutive days under 32
U.S.C. 502(f) in connection with a war,
other military operation, or national
emergency declared by the President
and supported by Federal funds;
(iii) Active duty means active duty as
defined in 10 U.S.C. 101(d)(1) except
that it does not include active duty for
training or attendance at a service
school;
(iv) Military operation means a
contingency operation as defined in 10
U.S.C. 101(a)(13); and
(v) National emergency means the
national emergency by reason of certain
terrorist attacks declared by the
President on September 14, 2001, or
subsequent national emergencies
declared by the President by reason of
terrorist attacks.
(i) Post-active duty student deferment.
(1) A Direct Loan borrower is eligible for
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a deferment for 13 months following the
conclusion of the borrower’s active duty
military service and any applicable
grace period if—
(i) The borrower is a member of the
National Guard or other reserve
component of the Armed Forces of the
United States or a member of such
forces in retired status; and
(ii) The borrower was enrolled on at
least a half-time basis in a program of
instruction at an eligible institution at
the time, or within six months prior to
the time, the borrower was called to
active duty.
(2) As used in paragraph (i)(1) of this
section, ‘‘active duty’’ means active duty
as defined in 10 U.S.C. 101(d)(1) for at
least a 30-day period, except that—
(i) Active duty includes active State
duty for members of the National Guard
under which a Governor activates
National Guard personnel based on
State statute or policy and the activities
of the National Guard are paid for with
State funds;
(ii) Active duty includes full-time
National Guard duty under which a
Governor is authorized, with the
approval of the President or the U.S.
Secretary of Defense, to order a member
to State active duty and the activities of
the National Guard are paid for with
Federal funds;
(iii) Active duty does not include
active duty for training or attendance at
a service school; and
(iv) Active duty does not include
employment in a full-time, permanent
position in the National Guard unless
the borrower employed in such a
position is reassigned to active duty
under paragraph (i)(2)(i) of this section
or full-time National Guard duty under
paragraph (i)(2)(ii) of this section.
(3) If the borrower returns to enrolled
student status on at least a half-time
basis during the grace period or the 13month deferment period, the deferment
expires at the time the borrower returns
to enrolled student status on at least a
half-time basis.
(4) If a borrower qualifies for both a
military service deferment and a postactive duty student deferment, the 180day post-demobilization military service
deferment period and the 13-month
post-active duty student deferment
period apply concurrently.
(j) Additional deferments for Direct
Loan borrowers with FFEL Program
loans made before July 1, 1993. If, at the
time of application for a borrower’s first
Direct Loan, a borrower has an
outstanding balance of principal or
interest owing on any FFEL Program
loan that was made, insured, or
guaranteed prior to July 1, 1993, the
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borrower is eligible for a deferment
during—
(1) The periods described in
paragraphs (b) through (i) of this
section; and
(2) The periods described in 34 CFR
682.210(b), including those periods that
apply to a ‘‘new borrower’’ as that term
is defined in 34 CFR 682.210(b)(7).
(Approved by the Office of Management
and Budget under control number 1845–
0021)
(Authority: 20 U.S.C. 1087a et seq.)
89. Section 685.205 is amended by:
A. In paragraph (a)(4), removing the
word ‘‘or’’ that appears after the
punctuation ‘‘;’’.
■ B. Revising paragraph (a)(5).
■ C. Adding new paragraphs (a)(8) and
(a)(9).
■ D. In paragraph (b)(2), removing the
words ‘‘authorized deferment period’’
and adding, in their place, the words
‘‘authorized deferment or forbearance
period’’.
The additions read as follows:
■
■
§ 685.205
Forbearance.
(a) * * *
(5)(i) The borrower is performing the
type of service that would qualify the
borrower for loan forgiveness under the
requirements of the teacher loan
forgiveness program in § 685.217.
(ii) Before a forbearance is granted
under § 685.205(a)(5)(i), the borrower
must—
(A) Submit documentation for the
period of the annual forbearance request
showing the beginning and ending dates
that the borrower is expected to
perform, for that year, the type of
service described in § 685.217(c); and
(B) Certify the borrower’s intent to
satisfy the requirements of § 685.217(c).
(iii) The Secretary grants forbearance
under paragraph (a)(5) of this section
only if the Secretary believes, at the
time of the borrower’s annual request,
that the expected forgiveness amount
under § 685.217(d) will satisfy the
anticipated remaining outstanding
balance on the borrower’s loan at the
time of the expected forgiveness;
*
*
*
*
*
(8)(i) The Secretary may grant a
forbearance to permit a borrower or
endorser to resume honoring the
agreement to repay the debt after
default. The terms of the forbearance
agreement in this situation must include
a new agreement to repay the debt
signed by the borrower or endorser or a
written or oral affirmation of the
borrower’s or endorser’s obligation to
repay the debt.
(ii) If the forbearance is based on the
borrower’s or endorser’s oral affirmation
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of the obligation to repay the debt, the
forbearance period is limited to 120
days, such a forbearance is not granted
consecutively, and the Secretary will—
(A) Orally review with the borrower
the terms and conditions of the
forbearance, including the consequences
of interest capitalization, and other
repayment options available to the
borrower;
(B) Send a notice to the borrower or
endorser that confirms the terms of the
forbearance and the borrower’s or
endorser’s affirmation of the obligation
to repay the debt; and
(C) Retain a record of the terms of the
forbearance and affirmation in the
borrower’s or endorser’s file.
(iii) For purposes of this section, an
‘‘affirmation’’ means an
acknowledgement of the loan by the
borrower or endorser in a legally
binding manner. The form of the
affirmation may include, but is not
limited to the borrower’s or endorser’s—
(A) New signed repayment agreement
or schedule, or another form of signed
agreement to repay the debt;
(B) Oral acknowledgement and
agreement to repay the debt
documented by the Secretary in the
borrower’s or endorser’s file and
confirmed by the Secretary in a notice
to the borrower; or
(C) A payment made on the loan by
the borrower or endorser.
(9)(i) The borrower is performing the
type of service that would qualify the
borrower for a partial repayment of his
or her loan under the Student Loan
Repayment Programs administered by
the Department of Defense under 10
U.S.C. 2171, 2173, 2174, or any other
student loan repayment programs
administered by the Department of
Defense.
(ii) To receive a forbearance under
this paragraph, the borrower must
submit documentation showing the time
period during which the Department of
Defense considers the borrower to be
eligible for a partial repayment of his or
her loan under a student loan
repayment program.
*
*
*
*
*
§ 685.206
[Amended]
90. Section 685.206 is amended by:
A. In the introductory text of
paragraph (a), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ B. In paragraph (b)(1), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ C. In paragraph (b)(2), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
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■
■
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D. In paragraph (c)(1)(iv), removing
the words ‘‘Credit bureau’’ and adding,
in their place, the words ‘‘Consumer
reporting agency’’.
■ E. In paragraph (c)(2)(iii), removing
the words ‘‘credit bureaus’’ and adding,
in their place, the words ‘‘consumer
reporting agencies’’.
■ 91. Section 685.207 is amended by:
■ A. Revising paragraph (a)(2).
■ B. Adding a new paragraph (a)(3).
■ C. In paragraph (b)(1)(ii), removing the
citation ‘‘§ 685.204’’ and adding, in its
place, the citation ’’§ 685.204(b)’’.
■ D. Revising paragraph (b)(3).
The revisions and addition read as
follows:
■
§ 685.207
Obligation to repay.
(a) * * *
(2) The borrower’s repayment of a
Direct Loan may also be subject to the
deferment provisions in § 685.204, the
forbearance provisions in § 685.205, the
discharge provisions in § 685.212, and
the loan forgiveness provisions in
§§ 685.217 and 685.219.
(3) A borrower’s first payment on a
Direct Loan is due within 60 days of the
beginning date of the repayment period
as determined in accordance with
paragraph (b), (c), (d), or (e) of this
section.
(b) * * *
(3)(i) A borrower is not obligated to
pay interest on a Direct Subsidized Loan
during periods when the borrower is
enrolled at an eligible school on at least
a half-time basis unless the borrower is
required to make payments on the loan
during those periods under paragraph
(b)(1) of this section.
(ii) Except as provided in paragraph
(b)(3)(iii) of this section, a borrower is
not obligated to pay interest on a Direct
Subsidized Loan during grace periods.
(iii) In the case of a Direct Subsidized
Loan for which the first disbursement is
made on or after July 1, 2012 and before
July 1, 2014, a borrower is responsible
for the interest that accrues during the
grace period.
*
*
*
*
*
§ 685.208
[Amended]
92. Section 685.208 is amended by:
A. In paragraph (a)(5), removing the
words ‘‘income contingent’’ and adding,
in their place, the words ‘‘incomecontingent’’.
■ B. In paragraph (j)(1), removing the
word ‘‘then’’ and adding, in its place,
the word ‘‘than’’.
■ C. In paragraph (m)(1), adding the
words ‘‘or, for a new borrower as of July
1, 2014, as defined in § 685.221(a)(4), 10
percent’’ immediately after the words
‘‘15 percent’’.
■ 93. Section 685.210 is amended by:
■
■
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A. Revising paragraph (a)(2).
B. Revising the introductory text of
paragraph (b)(1).
■ C. Revising paragraph (b)(1)(i).
■ D. In paragraph (b)(2)(i), removing the
words ‘‘income contingent’’ and adding,
in their place, the words ‘‘incomecontingent’’.
The revisions read as follows:
■
■
§ 685.210
Choice of repayment plan.
(a) * * *
(2) If a borrower does not select a
repayment plan, the Secretary
designates the standard repayment plan
described in § 685.208(b) or (c) for the
borrower, as applicable.
(b) * * *
(1) A borrower may change repayment
plans at any time after the loan has
entered repayment by notifying the
Secretary. However, a borrower who is
repaying a defaulted loan under an
income-contingent repayment plan or
the income-based repayment plan in
accordance with § 685.211(d)(3)(ii), or
who is repaying a Direct Consolidation
Loan under the income-contingent
repayment plan or the income-based
repayment plan in accordance with
§ 685.220(d)(1)(ii)(A)(3) may not change
to another repayment plan unless—
(i) The borrower was required to and
did make a payment under the incomecontingent repayment plan or incomebased repayment plan in each of the
prior three months; or
*
*
*
*
*
■ 94. Section 685.211 is amended by:
■ A. In paragraph (d)(3)(i), removing the
words ‘‘national credit bureaus’’ and
adding, in their place, the words
‘‘nationwide consumer reporting
agencies’’.
■ B. In paragraph (d)(3)(ii), removing
the words ‘‘income contingent’’ and
adding, in their place, the words
‘‘income-contingent’’.
■ C. Revising paragraph (f).
The revision reads as follows:
§ 685.211 Miscellaneous repayment
provisions.
*
*
*
*
*
(f) Rehabilitation of defaulted loans.
(1) A defaulted Direct Loan, except for
a loan on which a judgment has been
obtained, is rehabilitated if the borrower
makes 9 voluntary, reasonable and
affordable monthly payments within 20
days of the due date during 10
consecutive months. The Secretary
determines the amount of a borrower’s
reasonable and affordable payment on
the basis of a borrower’s total financial
circumstances.
(i) For the purposes of this section,
the borrower’s reasonable and affordable
payment amount, as determined by the
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Secretary, is based solely on information
provided on a form approved by the
Secretary and, if requested, supporting
documentation from the borrower and
other sources, and considers—
(A) The borrower’s, and if applicable,
the spouse’s current disposable income,
including public assistance payments,
and other income received by the
borrower and the spouse, such as
welfare benefits, Social Security
benefits, Supplemental Security Income,
and workers’ compensation. Spousal
income is not considered if the spouse
does not contribute to the borrower’s
household income;
(B) Family size as defined in
§ 685.221(a)(3); and
(C) Reasonable and necessary
expenses, which include—
(1) Food;
(2) Housing;
(3) Utilities;
(4) Basic communication expenses;
(5) Necessary medical and dental
costs;
(6) Necessary insurance costs;
(7) Transportation costs;
(8) Dependent care and other workrelated expenses;
(9) Legally required child and spousal
support;
(10) Other title IV and non-title IV
student loan payments; and
(11) Other expenses approved by the
Secretary.
(ii) The reasonable and affordable
payment amount must not be—
(A) A required minimum loan
payment amount (e.g. $50) if the
Secretary determines that a smaller
amount is reasonable and affordable;
(B) A percentage of the borrower’s
total loan balance; or
(C) Based on other criteria unrelated
to the borrower’s total financial
circumstances.
(iii) Within 15 business days of the
Secretary’s determination of the
borrower’s reasonable and affordable
payment amount, the Secretary provides
the borrower with a written
rehabilitation agreement which includes
the borrower’s reasonable and affordable
payment amount, a prominent statement
that the borrower may object orally or in
writing to the reasonable and affordable
payment amount with the method and
timeframe for raising such an objection,
and an explanation of any other terms
and conditions applicable to the
required series of payments that must be
made. The Secretary does not impose
any other conditions unrelated to the
amount or timing of the rehabilitation
payments in the rehabilitation
agreement. The written rehabilitation
agreement informs the borrower of the
effects of having the loans rehabilitated
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(e.g., removal of the record of default
from the borrower’s credit history and
return to normal repayment).
(2) The Secretary provides the
borrower with a written statement
confirming the borrower’s reasonable
and affordable payment amount, as
determined by the Secretary, and
explaining any other terms and
conditions applicable to the required
series of payments that must be made
before the borrower’s account can be
rehabilitated. The statement informs the
borrower that the borrower may object
to the terms and conditions of the
rehabilitation agreement, and explains
the method and timeframe for objecting
to the terms and conditions of the
rehabilitation agreement.
(3) If the borrower objects to the
monthly payment amount determined
under paragraph (f)(1) of this section,
the Secretary recalculates the payment
amount by using the monthly payment
calculation rules in § 685.221(b)(1) and
§ 685.221(b)(2), except that if the
calculated amount under these sections
is less than $5, the monthly
rehabilitation payment is $5.
(4) The Secretary provides the
borrower with a written statement
confirming the borrower’s recalculated
reasonable and affordable payment
amount.
(5) If the borrower objects to the
monthly payment amount determined
under paragraph (f)(1) of this section,
but does not provide the documentation
required to calculate a monthly payment
amount under § 685.221(b)(1) and
§ 685.221(b)(2), no rehabilitation
agreement exists between the borrower
and the Secretary, and the rehabilitation
does not proceed.
(6) The Secretary includes any
payment made under § 682.401(b)(1) in
determining whether the 9 out of 10
payments required under paragraph
(f)(1) of this section have been made.
(7) A borrower may request that the
monthly payment amount be adjusted
due to a change in the borrower’s total
financial circumstances only upon
providing the documentation specified
in paragraph (f)(1)(i) of this section.
(8) During the rehabilitation period,
the Secretary limits contact with the
borrower on the loan being rehabilitated
to collection activities that are required
by law or regulation and to
communications that support the
rehabilitation.
(9) If a defaulted loan is rehabilitated,
the Secretary instructs any consumer
reporting agency to which the default
was reported to remove the default from
the borrower’s credit history.
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(10) A defaulted Direct Loan on which
a judgment has been obtained may not
be rehabilitated.
(11) A Direct Loan obtained by fraud
for which the borrower has been
convicted of, or has pled nolo
contendere or guilty to, a crime
involving fraud in obtaining title IV,
HEA program assistance may not be
rehabilitated.
(12)(i) If a borrower’s loan is being
collected by administrative wage
garnishment while the borrower is also
making monthly payments on the same
loan under a loan rehabilitation
agreement, the Secretary continues
collecting the loan by administrative
wage garnishment until the borrower
makes five qualifying monthly
payments under the rehabilitation
agreement. After the borrower makes the
fifth qualifying monthly payment, the
Secretary, unless otherwise directed by
the borrower, suspends collecting the
loan by administrative wage
garnishment.
(ii) A borrower may only obtain the
benefit of a suspension of administrative
wage garnishment while also attempting
to rehabilitate a defaulted loan once.
(13) 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.
*
*
*
*
*
§ 685.212
[Amended]
95. Section 685.212 is amended by:
A. In paragraph (a)(3), removing the
words ‘‘Direct PLUS Consolidation
Loan’’ and adding, in their place, the
words ‘‘Direct Consolidation Loan’’.
■ B. In paragraph (b), removing the
citation ‘‘§ 685.213(c)’’ and adding, in
its place, the citation ‘‘§ 685.213’’.
■ 96. Section 685.214 is amended by:
■ A. Revising paragraph (a)(2)(ii).
■ B. Revising paragraph (b)(4).
■ C. Revising paragraph (c).
■ D. In paragraph (d)(1), removing the
word ‘‘shall’’ each time it appears and
adding, in its place, the word ‘‘must’’.
■ E. In paragraph (f)(1), removing the
number and words ‘‘90 days’’ and
adding, in their place, the number and
words ‘‘120 days’’.
The revisions read as follows:
■
■
§ 685.214
Closed school discharge.
(a) * * *
(2) * * *
(ii) ‘‘School’’ means a school’s main
campus or any location or branch of the
main campus, regardless of whether the
school or its location or branch is
considered eligible.
(b) * * *
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(4) The Secretary reports the
discharge of a loan under this section to
all consumer reporting agencies to
which the Secretary previously reported
the status of the loan, so as to delete all
adverse credit history assigned to the
loan.
(c) Borrower qualification for
discharge. (1) In order to qualify for
discharge of a loan under this section,
a borrower must submit to the Secretary
a written request and sworn statement,
and the factual assertions in the
statement must be true. The statement
need not be notarized but must be made
by the borrower under penalty of
perjury. In the statement, the borrower
must—
(i) State that the borrower (or the
student on whose behalf a parent
borrowed)—
(A) Received the proceeds of a loan,
in whole or in part, on or after January
1, 1986 to attend a school;
(B) Did not complete the program of
study at that school because the school
closed while the student was enrolled,
or the student withdrew from the school
not more than 120 days before the
school closed. The Secretary may
extend the 120-day period if the
Secretary determines that exceptional
circumstances related to a school’s
closing justify an extension. Exceptional
circumstances for this purpose may
include, but are not limited to: the
school’s loss of accreditation; the
school’s discontinuation of the majority
of its academic programs; action by the
State to revoke the school’s license to
operate or award academic credentials
in the State; or a finding by a State or
Federal government agency that the
school violated State or Federal law;
and
(C) Did not complete the program of
study through a teach-out at another
school or by transferring academic
credits or hours earned at the closed
school to another school;
(ii) State whether the borrower (or
student) has made a claim with respect
to the school’s closing with any third
party, such as the holder of a
performance bond or a tuition recovery
program, and, if so, the amount of any
payment received by the borrower (or
student) or credited to the borrower’s
loan obligation; and
(iii) State that the borrower (or
student)—
(A) Agrees to provide to the Secretary
upon request other documentation
reasonably available to the borrower
that demonstrates that the borrower
meets the qualifications for discharge
under this section; and
(B) Agrees to cooperate with the
Secretary in enforcement actions in
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accordance with paragraph (d) of this
section and to transfer any right to
recovery against a third party to the
Secretary in accordance with paragraph
(e) of this section.
(2) The Secretary may discharge a
loan under this section without an
application from the borrower if the
Secretary determines, based on
information in the Secretary’s
possession, that the borrower qualifies
for the discharge.
*
*
*
*
*
■ 97. Section 685.215 is amended by:
■ A. In paragraph (a)(1)(iv), removing
the citation ‘‘§ 682.402(e)(14)’’ and
adding, in its place, the words
‘‘paragraph (c)(4)(ii) of this section’’.
■ B. Revising paragraph (b)(5).
■ C. In the introductory text of
paragraph (c), removing the word
‘‘shall’’ each time it appears and adding,
in its place, the word ‘‘must’’.
■ D. In the introductory text of
paragraph (c)(1), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ E. In the introductory text of
paragraph (c)(2), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ F. In the introductory text of
paragraph (c)(3), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ G. Revising paragraph (c)(4).
■ H. In paragraph (c)(5), removing the
word ‘‘shall’’ and adding, it its place,
the word ‘‘must’’.
I. In the introductory text of paragraph
(c)(6), removing the word ‘‘shall’’ and
adding, in its place, the word ‘‘must’’.
The revisions read as follows:
§ 685.215 Discharge for false certification
of student eligibility or unauthorized
payment.
*
*
*
*
*
(b) * * *
(5) The Secretary reports the
discharge under this section to all
consumer reporting agencies to which
the Secretary previously reported the
status of the loan, so as to delete all
adverse credit history assigned to the
loan.
(c) * * *
(4) Identity theft. (i) In the case of an
individual whose eligibility to borrow
was falsely certified because he or she
was a victim of the crime of identity
theft and is requesting a discharge, the
individual must—
(A) Certify that the individual did not
sign the promissory note, or that any
other means of identification used to
obtain the loan was used without the
authorization of the individual claiming
relief;
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(B) Certify that the individual did not
receive or benefit from the proceeds of
the loan with knowledge that the loan
had been made without the
authorization of the individual;
(C) Provide a copy of a local, State, or
Federal court verdict or judgment that
conclusively determines that the
individual who is named as the
borrower of the loan was the victim of
a crime of identity theft; and
(D) If the judicial determination of the
crime does not expressly state that the
loan was obtained as a result of the
crime of identity theft, provide—
(1) Authentic specimens of the
signature of the individual, as provided
in paragraph (c)(2)(ii) of this section, or
of other means of identification of the
individual, as applicable, corresponding
to the means of identification falsely
used to obtain the loan; and
(2) A statement of facts that
demonstrate, to the satisfaction of the
Secretary, that eligibility for the loan in
question was falsely certified as a result
of the crime of identity theft committed
against that individual.
(ii)(A) For purposes of this section,
identity theft is defined as the
unauthorized use of the identifying
information of another individual that is
punishable under 18 U.S.C. 1028,
1028A, 1029, or 1030, or substantially
comparable State or local law.
(B) Identifying information includes,
but is not limited to—
(1) Name, Social Security number,
date of birth, official State or
government issued driver’s license or
identification number, alien registration
number, government passport number,
and employer or taxpayer identification
number;
(2) Unique biometric data, such as
fingerprints, voiceprint, retina or iris
image, or unique physical
representation;
(3) Unique electronic identification
number, address, or routing code; or
(4) Telecommunication identifying
information or access device (as defined
in 18 U.S.C. 1029(e)).
*
*
*
*
*
§ 685.216
[Amended]
98. Section 685.216(b)(2) is amended
by removing the word ‘‘credit’’ and
adding, in its place, the word
‘‘consumer’’.
■ 99. Section 685.217 is amended by:
■ A. Revising paragraph (a)(1).
■ B. In the last sentence of paragraph
(a)(2)(i), adding the word ‘‘for’’
immediately before the words ‘‘an
eligible educational service agency’’.
■ C. In paragraph (a)(2)(iii), removing
the word ‘‘at’’ each time it appears and
adding, in its place, the word ‘‘for’’.
■
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D. In paragraph (a)(3), removing the
words ‘‘FFEL and Direct Loan’’ and
adding, in their place, the words ‘‘Direct
Loan and FFEL’’.
■ E. In the introductory text of
paragraph (a)(4), removing the words
‘‘FFEL and Direct Loan’’ and adding, in
their place, the words ‘‘Direct Loan and
FFEL’’.
■ F. In paragraph (a)(4)(i), removing the
word ‘‘at’’ the second time it appears
and adding, in its place, the word ‘‘by’’.
■ G. In paragraph (a)(4)(ii), adding the
words ‘‘by an eligible’’ immediately
before the words ‘‘educational service
agency’’.
■ H. In the introductory text of
paragraph (c)(1), adding the word ‘‘by’’
immediately before the words ‘‘an
educational service agency’’.
■ I. In paragraph (c)(1)(iii), removing the
sentence ‘‘The Secretary considers all
elementary and secondary schools
operated by the Bureau of Indian
Education (BIE) or operated on Indian
reservations by Indian tribal groups
under contract with the BIE to qualify
as schools serving low-income
students.’’
■ J. Redesignating paragraphs (c)(2)
through (c)(11) as paragraphs (c)(3)
through (c)(12), respectively.
■ K. Adding a new paragraph (c)(2).
■ L. In redesignated paragraph
(c)(4)(ii)(A), removing the word ‘‘at’’ the
second time it appears and adding, in its
place, the word ‘‘for’’.
■ M. In redesignated paragraph
(c)(4)(ii)(B), adding the words ‘‘for an
eligible’’ immediately before the words
‘‘educational service agency’’.
■ N. In redesignated paragraph
(c)(4)(iii), removing the word ‘‘at’’ each
time it appears and adding, in its place,
the word ‘‘for’’.
■ O. In redesignated paragraph (c)(5)(i),
adding the words ‘‘for an eligible’’
immediately before the words
‘‘educational service agency’’.
■ P. In redesignated paragraph
(c)(5)(ii)(A), removing the word ‘‘at’’ the
second time it appears and adding, in its
place, the word ‘‘for’’.
■ Q. In redesignated paragraph
(c)(5)(ii)(B), adding the words ‘‘for an
eligible’’ immediately before the words
‘‘educational service agency’’.
■ R. In redesignated paragraph
(c)(5)(iii), removing the word ‘‘at’’ each
time it appears and adding, in its place,
the word ‘‘for’’.
■ S. Revising the introductory text of
redesignated paragraph (c)(7).
■ T. Revising redesignated paragraph
(c)(9).
■ U. Revising redesignated paragraph
(c)(10).
■ V. Adding a new paragraph (c)(13).
■ W. Revising paragraph (d)(1).
tkelley on DSK3SPTVN1PROD with PROPOSALS2
■
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X. In paragraph (d)(2), removing the
words ‘‘paragraphs (c)(3)(ii) or (c)(4)(ii)’’
and adding, in their place, the words
‘‘paragraph (c)(4)(ii) or (c)(5)(ii)’’.
The revisions and addition read as
follows:
■
§ 685.217
program.
Teacher loan forgiveness
(a) * * *
(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 Direct Subsidized Loans,
Direct Unsubsidized Loans, Subsidized
and Unsubsidized Federal Stafford
Loans, and in certain cases, Direct
Consolidation Loans or Federal
Consolidation Loans. The forgiveness
program is only available to a borrower
who has no outstanding loan balance
under the Direct Loan Program or the
FFEL 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.
*
*
*
*
*
(c) * * *
(2) The Secretary considers all
elementary and secondary schools
operated by the Bureau of Indian
Education (BIE) or operated on Indian
reservations by Indian tribal groups
under contract with the BIE to qualify
as schools serving low-income students.
*
*
*
*
*
(7) For teacher loan forgiveness
applications received by the Secretary
on or after July 1, 2006, a teacher in a
private, non-profit elementary or
secondary school who is exempt from
State certification requirements (unless
otherwise applicable under State law)
may qualify for loan forgiveness under
paragraphs (c)(4)(ii) or (c)(5) of this
section if—
*
*
*
*
*
(9) A borrower’s period of
postsecondary education, qualifying
FMLA condition, or military active duty
as described in paragraph (c)(8) of this
section, including the time necessary for
the borrower to resume qualifying
teaching no later than the beginning of
the next regularly scheduled academic
year, does not constitute a break in the
required five consecutive years of
qualifying teaching service.
(10) A borrower who was employed as
a teacher at more than one qualifying
school, for more than one qualifying
educational service agency, or a
combination of both during an academic
year and demonstrates that the
combined teaching was the equivalent
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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.
*
*
*
*
*
(13) A borrower may request
forbearance during each of the five years
of qualifying teaching service in
accordance with § 685.205(a)(5).
(d) * * *
(1) A qualified borrower is eligible for
forgiveness of up to $5,000, or up to
$17,500 if the borrower meets the
requirements of paragraph (c)(4)(ii) or
(c)(5)(ii) of this section. The forgiveness
amount is deducted from the aggregate
amount of the borrower’s Direct
Subsidized Loan or Direct Unsubsidized
Loan or Direct Consolidation Loan
obligation that is outstanding after the
borrower completes his or her fifth
consecutive complete academic year of
teaching as described in paragraph (c) of
this section. Only the outstanding
portion of the Direct Consolidation Loan
that was used to repay an eligible Direct
Subsidized Loan, an eligible Direct
Unsubsidized Loan, or an eligible
Subsidized or Unsubsidized Federal
Stafford Loan qualifies for loan
forgiveness under this section.
*
*
*
*
*
■ 100. Section 685.218 is amended by:
■ A. In paragraph (b)(4), removing the
words ‘‘FFEL or Direct’’ and adding, in
their place, the words ‘‘Direct or FFEL’’.
■ B. Revising paragraph (d)(3).
■ C. In paragraph (d)(6), removing the
words ‘‘a Perkins Loan, a FFEL Program
loan, or another Direct Loan’’ and
adding, in their place, the words
‘‘another Direct Loan, a FFEL Program
Loan, or a Perkins Loan’’.
■ D. In paragraph (d)(7), removing the
words ‘‘a FFEL Program Loan or another
Direct Loan’’ and adding, in their place,
‘‘another Direct Loan or a FFEL Program
Loan’’.
■ E. In paragraph (e)(1)(ii), removing the
number and word ‘‘24 hours’’ each time
they appear and adding, in their place,
the number and word ‘‘72 hours’’.
■ F. Revising paragraph (f)(4)(iii).
■ G. In paragraph (g)(2)(i), removing the
words ‘‘Direct Loans’’ and adding, in
their place, the words ‘‘Direct Loan’’.
The revisions read as follows:
§ 685.218 Discharge of student loan
indebtedness for survivors of victims of the
September 11, 2001, attacks.
*
*
*
*
*
(d) * * *
(3) If the individual owed a Direct
Loan, a FFEL Program Loan, or a
Perkins Loan at the time of the terrorist
attacks on September 11, 2001,
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documentation that the individual’s
loans were discharged by the Secretary,
the lender, or the institution due to
death may be substituted for the original
or certified copy of a death certificate.
*
*
*
*
*
(f) * * *
(4) * * *
(iii) Copies of approved joint Direct
Loan or FFEL Consolidation Loan
applications or an approved Direct or
FFEL PLUS Loan application.
*
*
*
*
*
■ 101. Section 685.220, as amended by:
A. Revising paragraph (b).
■ B. Revising paragraph (c).
■ C. Revising paragraph (d).
■ D. In paragraph (e), removing the
word ‘‘shall’’ and adding, it its place,
the word ‘‘must’’.
■ E. In paragraph (f)(1)(i), removing the
word ‘‘shall’’ and adding, it its place,
the word ‘‘must’’.
■ F. Revising paragraph (f)(1)(iii).
■ G. In paragraph (f)(2), removing the
word ‘‘shall’’ each time it appears and
adding, in its place, the word ‘‘must’’.
■ H. In paragraph (f)(4), removing the
word ‘‘shall’’ and adding, it its place,
the word ‘‘must’’.
■ I. In paragraph (f)(5), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ J. Revising paragraph (h).
■ K. In paragraph (i)(2)(ii), removing the
words ‘‘(i)(3)(1) and (ii)’’ and adding, in
their place, the words ‘‘(i)(3)(i) through
(iii)’’.
■ L. Revising paragraph (i)(4).
■ M. In paragraph (k), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
The revisions read as follows:
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.220
Consolidation.
(a) * * *
(b) Loans eligible for consolidation.
The following loans may be
consolidated into a Direct Consolidation
Loan:
(1) Subsidized Federal Stafford Loans.
(2) Guaranteed Student Loans.
(3) Federal Insured Student Loans
(FISL).
(4) Direct Subsidized Loans.
(5) Direct Subsidized Consolidation
Loans.
(6) Federal Perkins Loans.
(7) National Direct Student Loans
(NDSL).
(8) National Defense Student Loans
(NDSL).
(9) Federal PLUS Loans.
(10) Parent Loans for Undergraduate
Students (PLUS).
(11) Direct PLUS Loans.
(12) Direct PLUS Consolidation
Loans.
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(13) Federal Consolidation Loans.
(14) Unsubsidized Federal Stafford
Loans.
(15) Federal Supplemental Loans for
Students (SLS).
(16) Direct Unsubsidized Loans.
(17) Direct Unsubsidized
Consolidation Loans.
(18) Auxiliary Loans to Assist
Students (ALAS).
(19) Health Professions Student Loans
(HPSL) and Loans for Disadvantaged
Students (LDS) made under subpart II of
part A of title VII of the Public Health
Service Act.
(20) Health Education Assistance
Loans (HEAL).
(21) Nursing loans made under
subpart II of part B of title VIII of the
Public Health Service Act.
(c) Components of Direct
Consolidation Loans. (1) Subsidized
component of Direct Consolidation
Loans. The term ‘‘Direct Subsidized
Consolidation Loan’’ refers to the
portion of a Direct Consolidation Loan
attributable to—
(i) The loans identified in paragraphs
(b)(1) through (b)(5) of this section; and
(ii) The portion of a Federal
Consolidation Loan under paragraph
(b)(13) of this section that is eligible for
interest benefits during a deferment
period under section 428C(b)(4)(C) of
the Act.
(2) Unsubsidized component of Direct
Consolidation Loans. Except as
provided in paragraph (c)(3) of this
section, the term ‘‘Direct Unsubsidized
Consolidation Loan’’ refers to the
portion of a Direct Consolidation Loan
attributable to—
(i) The loans identified in paragraphs
(b)(6) through (b)(12) of this section;
(ii) The portion of a Federal
Consolidation Loan under paragraph
(b)(13) of this section that is not eligible
for interest benefits during a deferment
period under section 428C(b)(4)(C) of
the Act; and
(iii) The loans identified in
paragraphs (b)(14) through (b)(21) of this
section.
(3) PLUS component of Direct
Consolidation Loans. In the case of a
Direct Consolidation Loan made before
July 1, 2006, the term ‘‘Direct PLUS
Consolidation Loan’’ refers to the
portion of a Direct Consolidation Loan
attributable to the loans identified in
paragraphs (b)(9) through (b)(12) of this
section.
(d) Eligibility for a Direct
Consolidation Loan. (1) A borrower may
obtain a Direct Consolidation Loan if the
borrower meets the following
requirements:
(i) The borrower consolidates at least
one Direct Loan Program or FFEL
Program loan.
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(ii) On the loans being consolidated,
the borrower is—
(A) At the time the borrower applies
for the Direct Consolidation Loan—
(1) In the grace period;
(2) In a repayment period but not in
default; or
(3) In default but has made
satisfactory repayment arrangements in
accordance with paragraph (2) of the
definition of that term in § 685.102(b);
(B) Not subject to a judgment secured
through litigation, unless the judgment
has been vacated; or
(C) Not subject to an order for wage
garnishment under section 488A of the
Act, unless the order has been lifted.
(iii) The borrower agrees to notify the
Secretary of any change in address.
(2) A borrower may not consolidate a
Direct Consolidation Loan or a Federal
Consolidation Loan into a new
consolidation loan under this section
unless at least one additional eligible
loan is included in the consolidation,
except that a borrower may consolidate
a Federal Consolidation Loan into a new
consolidation loan under this section
without including any additional loans
if—
(i) The borrower has a Federal
Consolidation Loan that is in default or
has been submitted to the guaranty
agency by the lender for default
aversion, and the borrower wants to
consolidate the Federal Consolidation
Loan into the Direct Loan Program for
the purpose of obtaining an incomecontingent repayment plan or an
income-based repayment plan; or
(ii) The borrower has a Federal
Consolidation Loan and the borrower
wants to consolidate that loan into the
Direct Loan Program for the purpose of
using the Public Service Loan
Forgiveness Program or the no accrual
of interest benefit for active duty
service.
(3) Eligible loans received before or
after the date a Direct Consolidation
Loan is made may be added to a
subsequent Direct Consolidation Loan.
*
*
*
*
*
(f) * * *
(1) * * *
(iii) For a Direct Loan Program or
FFEL Program loan that is in default, the
Secretary limits collection costs that
may be charged to the borrower to a
maximum of 18.5 percent of the
outstanding principal and interest
amount of the defaulted loan. For any
other defaulted Federal education loan,
all collection costs that are owed may be
charged to the borrower.
*
*
*
*
*
(h) Repayment plans. A borrower may
choose a repayment plan for a Direct
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Consolidation Loan in accordance with
§ 685.208, and may change repayment
plans in accordance with § 685.210(b).
(i) * * *
(4) A Direct Consolidation Loan that
was made based on an application
received before July 1, 2006 receives a
grace period if it includes a Direct Loan
Program or FFEL Program loan for
which the borrower was in an in-school
period at the time of consolidation. The
repayment period begins the day after
the grace period ends.
*
*
*
*
*
■ 102. Section 685.300 is amended by:
■ A. Revising paragraph (a).
■ B. In the introductory text of
paragraph (b), removing the word
‘‘shall’’ each time it appears and adding,
in its place, the word ‘‘must’’.
■ C. Removing paragraph (b)(8).
■ D. Redesignating paragraphs (b)(5),
(6), and (7) as paragraphs (b)(6), (7), and
(8), respectively.
■ E. Adding a new paragraph (b)(5).
■ F. Revising paragraph (c).
The revisions and addition read as
follows:
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.300 Agreements between an eligible
school and the Secretary for participation in
the Direct Loan Program.
(a) General. Participation of a school
in the Direct Loan Program means that
eligible students at the school may
receive Direct Loans. To participate in
the Direct Loan Program, a school
must—
(1) Demonstrate to the satisfaction of
the Secretary that the school meets the
requirements for eligibility under the
Act and applicable regulations; and
(2) Enter into a written program
participation agreement with the
Secretary.
(b) * * *
(5) On a monthly basis, reconcile
institutional records with Direct Loan
funds received from the Secretary and
Direct Loan disbursement records
submitted to and accepted by the
Secretary;
*
*
*
*
*
(c) Origination. A school that
originates loans in the Direct Loan
Program must originate loans to eligible
students and parents in accordance with
part D of the Act. The note or evidence
of the borrower’s obligation on the loan
originated by the school is the property
of the Secretary.
*
*
*
*
*
■ 103. Section 685.301 is amended by:
■ A. In paragraph (a)(1), removing the
word ‘‘shall’’ each time it appears and
adding, in its place, the word ‘‘must’’.
■ B. In the introductory text of
paragraph (a)(2), removing the word
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‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ C. In paragraph (a)(2)(iii), adding the
words ‘‘, as determined in accordance
with § 685.303(d)’’ at the end of the
paragraph, immediately after the words
‘‘the loan proceeds’’.
■ D. Revising paragraph (a)(10).
■ E. Removing paragraphs (b) and (e).
■ F. Revising paragraph (c).
■ G. Redesignating paragraph (d) as
paragraph (b).
The revisions read as follows:
§ 685.301 Origination of a loan by a Direct
Loan Program school.
(a) * * *
(10)(i) The minimum period of
enrollment for which a school may
originate a Direct Loan is—
(A) At a school that measures
academic progress in credit hours and
uses a semester, trimester, or quarter
system, or that has terms that are
substantially equal in length with no
term less than nine weeks in length, a
single academic term (e.g., a semester or
quarter); or
(B) Except as provided in paragraph
(a)(10)(ii) or (iii) of this section, at a
school that measures academic progress
in clock hours, or measures academic
progress in credit hours but does not use
a semester, trimester, or quarter system
and does not have terms that are
substantially equal in length with no
term less than nine weeks in length, the
lesser of—
(1) The length of the student’s
program (or the remaining portion of
that program if the student has less than
the full program remaining) at the
school; or
(2) The academic year as defined by
the school in accordance with 34 CFR
668.3.
(ii) For a student who transfers into a
school from another school and the
prior school originated a loan for a
period of enrollment that overlaps the
period of enrollment at the new school,
the new school may originate a loan for
the remaining portion of the program or
academic year. In this case the school
may originate a loan for an amount that
does not exceed the remaining balance
of the student’s annual loan limit.
(iii) For a student who completes a
program at a school, where the student’s
last loan to complete that program had
been for less than an academic year, and
the student then begins a new program
at the same school, the school may
originate a loan for the remainder of the
academic year. In this case the school
may originate a loan for an amount that
does not exceed the remaining balance
of the student’s annual loan limit at the
loan level associated with the new
program.
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(iv) The maximum period for which a
school may originate a Direct Loan is—
(A) Generally an academic year, as
defined by the school in accordance
with 34 CFR 668.3, except that the
school may use a longer period of time
corresponding to the period to which
the school applies the annual loan
limits under § 685.203; or
(B) For a defaulted borrower who has
regained eligibility, the academic year
in which the borrower regained
eligibility.
*
*
*
*
*
(c) Reporting to the Secretary. The
Secretary accepts a student’s Payment
Data that is submitted in accordance
with procedures established through
publication in the Federal Register, and
that contains information the Secretary
considers to be accurate in light of other
available information including that
previously provided by the student and
the institution.
*
*
*
*
*
■ 104. Section 685.303 is amended by:
■ A. In paragraph (a), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ B. Revising paragraph (b)(1).
■ C. Redesignating paragraphs (b)(2)
through (b)(4) as paragraphs (b)(3)
through (b)(5), respectively.
■ D. Adding a new paragraph (b)(2).
■ E. Revising redesignated paragraph
(b)(3)(i).
■ F. Revising redesignated paragraph
(b)(3)(ii).
■ G. Revising redesignated paragraph
(b)(5)(i) introductory text.
■ H. In redesignated paragraph
(b)(5)(i)(A)(1), removing the citation
‘‘(b)(4)(i)(A)(2)’’ and adding, in its place,
the citation ‘‘(b)(5)(i)(A)(2)’’.
■ I. Revising redesignated paragraph
(b)(5)(ii).
■ J. In redesignated paragraph (b)(5)(iii),
removing the citation ‘‘(b)(4)(i)(B)’’ and
adding, in its place, the citation
‘‘(b)(5)(i)(B)’’.
■ K. In paragraph (c), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ L. Redesignating paragraphs (d) and
(e) as paragraphs (f) and (g),
respectively.
■ M. Adding a new paragraph (d).
■ N. Adding a new paragraph (e).
■ O. Revising redesignated paragraph
(g).
■ P. Adding an authority citation after
the OMB control number parenthetical
at the end of the section.
The revisions and additions read as
follows:
§ 685.303
*
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(b) * * *
(1) A school may not disburse loan
proceeds to a borrower unless the
borrower has executed a legally
enforceable promissory note.
(2) The Secretary provides Direct
Loan funds to a school in accordance
with 34 CFR 668.162.
(3)(i) Except in the case of a late
disbursement under paragraph (f) of this
section, or as provided in paragraph
(b)(3)(iii) of this section, a school may
disburse loan proceeds only to a
student, or a parent in the case of a
Direct PLUS Loan obtained by a parent
borrower, if the school determines the
student has continuously maintained
eligibility in accordance with the
provisions of § 685.200 from the
beginning of the loan period for which
the loan was intended.
(ii) If a student delays attending
school for a period of time, the school
may consider that student to have
maintained eligibility for the loan from
the first day of the period of enrollment.
However, the school must comply with
the requirements under paragraph (b)(4)
of this section.
*
*
*
*
*
(5)(i) If a student is enrolled in the
first year of an undergraduate program
of study and has not previously received
a Direct Subsidized Loan, a Direct
Unsubsidized Loan, a Subsidized or
Unsubsidized Federal Stafford Loan, or
a Federal Supplemental Loan for
Students, a school may not disburse the
proceeds of a Direct Subsidized or
Direct Unsubsidized Loan until 30 days
after the first day of the student’s
program of study unless—
*
*
*
*
*
(ii) Paragraphs (b)(5)(i)(A) and (B) of
this section do not apply to any loans
originated by the school beginning 30
days after the date the school receives
notification from the Secretary of a
cohort default rate, calculated under
subpart M or subpart N of 34 CFR part
668, that causes the school to no longer
meet the qualifications outlined in
paragraph (b)(5)(i)(A) or (B) of this
section, as applicable.
*
*
*
*
*
(d) Determining disbursement dates
and amounts. (1) Before disbursing a
loan, a school must determine that all
information required by the promissory
note has been provided by the borrower
and, if applicable, the student.
(2) An institution must disburse the
loan proceeds on a payment period
basis in accordance with 34 CFR
668.164(b).
(3) Unless paragraph (d)(4) or (d)(6) of
this section applies—
(i) If a loan period is more than one
payment period, the school must
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disburse loan proceeds at least once in
each payment period; and
(ii) If a loan period is one payment
period, the school must make at least
two disbursements during that payment
period.
(A) For a loan originated under
§ 685.301(a)(10)(i)(A), the school may
not make the second disbursement until
the calendar midpoint between the first
and last scheduled days of class of the
loan period.
(B) For a loan originated under
§ 685.301(a)(10)(i)(B), the school may
not make the second disbursement until
the student successfully completes half
of the number of credit hours or clock
hours and half of the number of weeks
of instructional time in the payment
period.
(4)(i) If one or more payment periods
have elapsed before a school makes a
disbursement, the school may include
in the disbursement loan proceeds for
completed payment periods.
(ii) If the loan period is equal to one
payment period and more than one-half
of it has elapsed, the school may
include in the disbursement loan
proceeds for the entire payment period.
(5) The school must disburse loan
proceeds in substantially equal
installments, and no installment may
exceed one-half of the loan.
(6)(i) A school is not required to make
more than one disbursement if—
(A)(1) The loan period is not more
than one semester, one trimester, one
quarter, or, for non term-based schools
or schools with non-standard terms, 4
months; and
(2)(i) Except as provided in paragraph
(d)(6)(i)(A)(2)(ii) of this section, the
school has a cohort default rate,
calculated under subpart M of 34 CFR
part 668 of less than 10 percent for each
of the three most recent fiscal years for
which data are available; or
(ii) For loan disbursements made on
or after October 1, 2011, the school in
which the student is enrolled has a
cohort default rate, calculated under
either subpart M or subpart N of 34 CFR
part 668, of less than 15 percent for each
of the three most recent fiscal years for
which data are available; or
(B) The school is an eligible home
institution originating a loan to cover
the cost of attendance in a study abroad
program and has a cohort default rate,
calculated under subpart M or subpart
N of 34 CFR part 668, of less than five
percent for the single most recent fiscal
year for which data are available.
(ii) Paragraphs (d)(6)(i)(A) and (B) of
this section do not apply to any loans
originated by the school beginning 30
days after the date the school receives
notification from the Secretary of a
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cohort default rate, calculated under
subpart M or subpart N of 34 CFR part
668, that causes the school to no longer
meet the qualifications outlined in
paragraph (d)(6)(i)(A) or (B) of this
section, as applicable.
(iii) Paragraph (d)(6)(i)(B) of this
section does not apply to any loans
originated by the school beginning 30
days after the date the school receives
notification from the Secretary of a
cohort default rate, calculated under
subpart M or subpart N of 34 CFR part
668, that causes the school to no longer
meet the qualifications outlined in that
paragraph.
(e) Annual loan limit progression
based on completion of an academic
year. (1) If a school measures academic
progress in an educational program in
credit hours and uses either standard
terms (semesters, trimesters, or quarters)
or nonstandard terms that are
substantially equal in length, and each
term is at least nine weeks of
instructional time in length, a student is
considered to have completed an
academic year and progresses to the
next annual loan limit when the
academic year calendar period has
elapsed.
(2) If a school measures academic
progress in an educational program in
credit hours and uses nonstandard
terms that are not substantially equal in
length or each term is not at least nine
weeks of instructional time in length, or
measures academic progress in credit
hours and does not have academic
terms, a student is considered to have
completed an academic year and
progresses to the next annual loan limit
at the later of—
(i) The student’s completion of the
weeks of instructional time in the
student’s academic year; or
(ii) The date, as determined by the
school, that the student has successfully
completed the academic coursework in
the student’s academic year.
(3) If a school measures academic
progress in an educational program in
clock hours, a student is considered to
have completed an academic year and
progresses to the next annual loan limit
at the later of—
(i) The student’s completion of the
weeks of instructional time in the
student’s academic year; or
(ii) The date, as determined by the
school, that the student has successfully
completed the clock hours in the
student’s academic year.
(4) For purposes of this section, terms
in a loan period are substantially equal
in length if no term in the loan period
is more than two weeks of instructional
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time longer than any other term in that
loan period.
*
*
*
*
*
(g) Treatment of excess loan proceeds.
Before the disbursement of any Direct
Subsidized Loan, Direct Unsubsidized
Loan, or Direct PLUS Loan proceeds, if
a school learns that the borrower will
receive or has received financial aid for
the period of enrollment for which the
loan was intended that exceeds the
amount of assistance for which the
student is eligible (except for Federal
Work-Study Program funds up to $300),
the school must reduce or eliminate the
overaward by either—
(1) Using the student’s Direct
Unsubsidized Loan, Direct PLUS Loan,
or State-sponsored or another nonFederal loan to cover the expected
family contribution, if not already done;
or
(2) Reducing one or more subsequent
disbursements to eliminate the
overaward.
*
*
*
*
*
(Authority: 20 U.S.C. 1087a et seq.)
105. Section 685.304 is amended by:
A. Revising paragraph (a)(1).
B. In paragraph (a)(2), removing the
words ‘‘prior Direct PLUS Loan or
Federal PLUS Loan’’ and adding, in
their place, the words ‘‘prior student
Direct PLUS Loan or student Federal
PLUS Loan’’.
■ C. In paragraph (a)(7)(i)(A), removing
the word ‘‘or’’ the first time it appears
and adding, in its place, the word ‘‘of’’.
■ D. Revising paragraph (a)(7)(iii).
■ E. Revising paragraph (a)(7)(iv).
■ F. Revising paragraph (b)(3).
■ G. In paragraph (b)(4)(ii), removing
the words ‘‘income contingent
repayment plans’’ and adding, in their
place, the words ‘‘income-contingent
repayment’’.
■ H. Adding a new paragraph (b)(8).
The revisions and addition read as
follows:
■
■
■
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.304
Counseling borrowers.
(a) * * *
(1) Except as provided in paragraph
(a)(8) of this section, a school must
ensure that entrance counseling is
conducted with each Direct Subsidized
Loan or Direct Unsubsidized Loan
student borrower prior to making the
first disbursement of the proceeds of a
loan to a student borrower unless the
student borrower has received a prior
Direct Subsidized Loan, Direct
Unsubsidized Loan, Subsidized or
Unsubsidized Federal Stafford Loan, or
Federal SLS Loan.
*
*
*
*
*
(7) * * *
(iii) For a graduate or professional
student PLUS Loan borrower who has
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18:48 Jul 26, 2013
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received a prior Direct Subsidized Loan,
Direct Unsubsidized Loan, Subsidized
Federal Stafford Loan, or Unsubsidized
Federal Stafford Loan, provide the
information specified in
§ 685.301(a)(3)(i)(A) through
§ 685.301(a)(3)(i)(C); and
(iv) For a graduate or professional
student PLUS Loan borrower who has
not received a prior Direct Subsidized
Loan, Direct Unsubsidized Loan,
Subsidized Federal Stafford Loan, or
Unsubsidized Federal Stafford Loan,
provide the information specified in
paragraph (a)(6)(i) through paragraph
(a)(6)(xii) of this section.
*
*
*
*
*
(b) * * *
(3) If a student borrower withdraws
from school without the school’s prior
knowledge or fails to complete the exit
counseling as required, exit counseling
must be provided either through
interactive electronic means, by mailing
written counseling materials to the
student borrower at the student
borrower’s last known address, or by
sending written counseling materials to
an email address provided by the
student borrower within 30 days after
the school learns that the student
borrower has withdrawn from school or
failed to complete the exit counseling as
required.
*
*
*
*
*
(8)(i) For students who have received
loans under both the FFEL Program and
the Direct Loan Program for attendance
at a school, the school’s compliance
with the exit counseling requirements in
paragraph (b) of this section satisfies the
exit counseling requirements in 34 CFR
682.604(a) if the school ensures that the
exit counseling also provides the
borrower with the information
described in 34 CFR 682.604(a)(2)(i) and
(ii).
(ii) A student’s completion of
electronic interactive exit counseling
offered by the Secretary satisfies the
requirements of paragraph (b) of this
section and, for students who have also
received FFEL Program loans for
attendance at the school, 34 CFR
682.604(a).
*
*
*
*
*
§ 685.305
[Amended]
106. Section 685.305 is amended by:
A. In paragraph (a), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ B. In paragraph (b), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ C. In paragraph (c), removing the word
‘‘shall’’ and adding, it its place, the
word ‘‘must’’.
■
■
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§ 685.306
45717
[Amended]
107. Section 685.306 is amended by:
A. In paragraph (a)(1), removing the
word ‘‘Shall’’ and adding, in its place,
the word ‘‘Must’’.
■ B. In paragraph (a)(2), removing the
word ‘‘Shall’’ and adding, in its place,
the word ‘‘Must’’.
■ C. In paragraph (b), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■
■
§ 685.307
[Amended]
108. Section 685.307(b) is amended by
removing the word ‘‘shall’’ and adding,
in its place, the word ‘‘must’’.
■ 109. Section 685.309 is amended by:
■ A. In the introductory text of
paragraph (a), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ B. Revising paragraph (b).
■ C. In paragraph (c), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ D. In paragraph (d), removing the
word ‘‘shall’’ and adding, in its place,
the word ‘‘must’’.
■ E. In paragraph (e), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ F. In paragraph (f), removing the word
‘‘shall’’ and adding, in its place, the
word ‘‘must’’.
■ G. In paragraph (g), removing the
words ‘‘Except for funds paid to a
school under section 452(b)(1) of the
Act, funds’’ and adding, in their place,
the word ‘‘Funds’’.
The revision reads as follows:
■
§ 685.309 Administrative and fiscal control
and fund accounting requirements for
schools participating in the Direct Loan
Program.
*
*
*
*
*
(b) Enrollment reporting process. (1)
Upon receipt of an enrollment report
from the Secretary, a school must
update all information included in the
report and return the report to the
Secretary—
(i) In the manner and format
prescribed by the Secretary; and
(ii) Within the timeframe prescribed
by the Secretary.
(2) Unless it expects to submit its next
updated enrollment report to the
Secretary within the next 60 days, a
school must notify the Secretary within
30 days after the date the school
discovers that—
(i) A loan under title IV of the Act was
made to or on behalf of a student who
was enrolled or accepted for enrollment
at the school, and the student has
ceased to be enrolled on at least a halftime basis or failed to enroll on at least
a half-time basis for the period for
which the loan was intended; or
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(ii) A student who is enrolled at the
school and who received a loan under
title IV of the Act has changed his or her
permanent address.
*
*
*
*
*
§ 685.400
[Removed and Reserved]
110. Section 685.400 is removed and
reserved.
■
§ 685.402
[Removed and Reserved]
111. Section 685.402 is removed and
reserved.
■
Appendix
Appendix A below summarizes proposed
technical changes to the FFEL Program
regulations in 34 CFR part 682, excluding
minor technical or conforming changes. A
document showing all proposed changes to
34 CFR part 682 that are included in this
notice of proposed rulemaking (NPRM) may
be found at http://www2.ed.gov/policy/
highered/reg/hearulemaking/2011/
loans.html.
Laws cited in Appendix A:
• Higher Education Act of 1965, as amended
(HEA)
• SAFRA Act (included in the Health Care
and Reconciliation Act of 2010 (HCERA))
(Pub. L. 111–152, enacted March 30, 2010)
• Higher Education Opportunity Act (HEOA)
(Pub. L. 110–315, enacted August 14, 2008)
Note: The following appendix will not
appear in the Code of Federal Regulations.
APPENDIX A—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 682
Section
Proposed change
General .............................................
Revise nomenclature as necessary to ensure consistent use of same terms to refer to Direct Loan
Program components in 34 CFR parts 682 and
685.
Where applicable, remove or revise language to reflect the elimination of authority to make new
FFEL Program loans effective July 1, 2010.
Change regulatory citations and redesignate paragraphs to conform with revisions, additions, and
deletions to the regulations.
Replace all references to ‘‘credit bureau’’ with
‘‘consumer reporting agency’’.
Correct spelling and grammatical errors.
Revise language to use past tense and to reflect
the elimination of authority to make new FFEL
Program loans effective July 1, 2010.
Revise language to use past tense and to reflect
the elimination of authority to make new FFEL
Program loans effective July 1, 2010.
Retitle the section and remove paragraphs (a)
through (d), which pertain to the application process to obtain a FFEL Program loan.
In paragraph (c), remove reference to deleted subpart E governing Federal Insured Student Loan
(FISL) Program.
§ 682.100 The Federal Family Education Loan programs.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 682.101 Participation in the FFEL
programs.
§ 682.102
a loan.
Obtaining and repaying
§ 682.103
Applicability of subparts
§ 682.200
Definitions ......................
§ 682.201 Eligible borrowers ..........
§ 682.202 Permissible charges by
lenders to borrowers.
§ 682.203 Responsible parties .......
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Reason
Remove reference to eliminated programs in
§ 682.200(a)(1) and elsewhere in the section and
reorder remaining listed terms in paragraph (a)(1)
In § 682.200(b), revise definitions of:.
• ’’Lender’’ to include audit requirements for a
trustee lender that operated on behalf of a
school or school-affiliated organization to
originate FFEL Program loans;
• ‘‘Nationwide consumer reporting agency’’ .....
• ‘‘Satisfactory repayment arrangements’’ to
replace reference to § 682.401(b)(4) with the
phrase ‘‘the title IV student assistance programs’’ and to remove current paragraph (2).
(See discussion of other proposed non-technical changes to the definition of ‘‘satisfactory repayment arrangements’’ in the ‘‘Significant Proposed Regulations’’ section of the
preamble to these regulations)
Minor technical changes ...........................................
Minor technical changes ...........................................
To ensure accuracy and consistency.
The SAFRA Act eliminated the authority to make
new FFEL Program loans effective July 1, 2010.
The SAFRA Act eliminated the authority to make
new FFEL Program loans effective July 1, 2010.
The SAFRA Act eliminated the authority to make
new FFEL Program loans effective July 1, 2010.
No new FISL Program loans have been made
since 1983 and very few of these loans are in repayment; therefore regulations governing the
FISL Program are no longer needed. Additionally,
the SAFRA Act eliminated the authority to make
any new loans under Part B of the HEA effective
July 1, 2010.
Changes to § 682.200(a)(1) to ensure accuracy.
Conforming change to ‘‘Lender’’ due to elimination
of § 682.601.
Revision to ‘‘Nationwide consumer reporting agency’’ to ensure accuracy with statutory citation and
distinguish a nationwide consumer reporting
agency from a local or regional agency and from
a nationwide specialty consumer reporting agency.
Revisions to ‘‘Satisfactory Repayment Arrangements’’ to ensure accuracy and clarity and to reflect elimination of authority to make FFEL Consolidation loans effective July 1, 2010.
Clarity/consistency/accuracy.
Clarity/consistency/accuracy.
No changes
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APPENDIX A—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 682—Continued
Section
§ 682.204
Maximum loan amounts
§ 682.205 Disclosure requirements
for lenders.
§ 682.206
a loan.
Due diligence in making
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 682.207 Due diligence
bursing a loan.
in
Proposed change
Reason
Remove language throughout the section that refers to loans first disbursed before July 1, 2008.
In paragraphs (a)(1)(iii), (c)(1)(iii), and (d)(1)(iii), replace the word ‘‘program’’ with the word ‘‘enrolled’’ in the fraction for prorating loan amounts
for programs of study less than a full academic
year in length.
Remove paragraph (f), as it pertains to the annual
loan limits in the SLS Program.
Remove regulations governing required lender disclosures to borrowers in § 682.205(a), (b), (g),
and (i) that are provided when new loans are
made.
See discussion of proposed non-technical changes
to the regulations governing lender disclosures to
FFEL borrowers under ‘‘FFEL Lender Disclosures
for Borrowers Who Are 60 Days Delinquent’’ and
‘‘FFEL Lender Repayment Disclosures to Borrowers Who Are Having Difficulty Making Payments’’ in the ‘‘Significant Proposed Regulations’’
section of the preamble to these regulations.
Remove this section .................................................
To remove historical references that are no longer
needed.
To ensure consistent treatment of students enrolled
in programs of less than a full academic year,
whether students are new or transfer students, or
are students admitted to a program with advanced standing.
To remove regulations that are no longer needed;
SLS program ended July 1, 1994.
The SAFRA Act eliminated the authority to make
new FFEL Program loans effective July 1, 2010.
dis-
Remove this section .................................................
§ 682.208 Due diligence in servicing a loan.
§ 682.209 Repayment of a loan .....
Minor technical changes ...........................................
§ 682.210
Deferment ......................
§ 682.211
Forbearance ..................
§ 682.212 Prohibited transactions ..
§ 682.213 Prohibition against the
use of the Rule of the 78s.
§ 682.214 Compliance with equal
credit opportunity requirements.
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Add new § 682.209(a)(3)(i)(D) explaining date repayment begins for borrowers with 6.0, 5.6, and
6.8 percent fixed interest rate loans.
Add exception to the repayment schedule requirements for consolidation loans in redesignated
§ 682.209(e)(4)(ii) for borrowers whose payment
can be less than the amount of accruing interest
under the income-based repayment plan.
Remove § 682.209(e) and (f) governing refinancing
of existing PLUS and SLS loans to secure a variable interest rate from the regulations.
Remove § 682.209(j) governing FFEL Consolidation
Loan lender certifications.
Add reference in § 682.210(a)(4) to the ability of a
representative to request a military deferment on
behalf of a borrower.
Identify the applicable borrower cohort in introductory language to § 682.210(b)(1)–(6) and add
cross-references to eligibility criteria in § 682.210
(c)–(r) for each deferment type available to these
borrowers.
See the discussion of proposed non-technical
changes in this section under ‘‘Forbearance for
Borrowers Who are 270 or More Days Delinquent
Prior to Guaranty Agency Default Claim Payment
or Transfer by the Department to Collection Status.’’ ‘‘Forbearance Provisions for Borrowers Receiving Department of Defense Student Loan Repayment Benefits,’’ and ‘‘Borrowers who are Delinquent When Forbearance is Granted’’ in the
‘‘Significant Proposed Regulations’’ section of the
preamble to these regulations.
No changes.
No changes.
Remove this section .................................................
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To remove regulations governing FFEL loan origination that are no longer needed as a result of
the SAFRA Act.
To remove regulations governing the disbursement
of new FFEL loans that are no longer needed as
a result of the SAFRA Act.
Clarity/consistency/accuracy.
To ensure consistency with the HEA.
To conform provision to the income-based repayment regulations.
To remove obsolete FFEL regulations.
To remove provisions related to making new FFEL
Consolidation Loans that are no longer needed
as a result of the SAFRA Act.
To clarify the ability of a representative to act on a
borrower’s behalf when the borrower is not available to request a military deferment.
To clarify the regulations by identifying the
deferment requirements and eligibility criteria applicable to the pre-July 1, 1993 cohort of borrowers.
To remove regulations related to lender compliance
with the Equal Credit Opportunity Act when making FFEL loans; these regulations are no longer
needed as a result of the SAFRA Act.
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APPENDIX A—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 682—Continued
Section
§ 682.215 Income-based
ment plan.
§ 682.216 Teacher
ness program.
loan
repay-
forgive-
§ 682.300 Payment of interest benefits on Stafford and Consolidation
loans.
§ 682.301 Eligibility of borrowers
for interest benefits on Stafford
and Consolidation loans.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 682.302 Payment of special allowance on FFEL loans.
§ 682.303 [Reserved] .....................
§ 682.304 Methods for computing
interest benefits and special allowance.
§ 682.305 Procedures for payment
of interest benefits and special allowance and collection of origination and loan fees.
Proposed change
Reason
See the changes to the regulations governing the
Income-Based Repayment Plan for FFEL borrowers in the final regulations published on November 1, 2012 (77 FR 66088).
In paragraphs (a) and (c), rephrase to state that a
borrower works ‘‘for’’ an educational service
agency, not ‘‘at’’ an educational service agency.
Redesignate last paragraph of § 682.216(c)(1)(iii)
as paragraph (2) and renumber subsequent paragraphs.
To clarify that a teacher who is employed by an
ESA may not always teach at an ESA facility.
Replace references to loan ‘‘discharge’’ throughout
the section with ‘‘loan forgiveness’’.
Remove reference to deleted § 682.207 in paragraph (b)(2)(ii)(B) and remove paragraphs (c)(3)
and (4) from the regulations.
Remove § 682.301(c) allowing use of unsubsidized
Federal, State-sponsored, and private loans to
cover expected family contribution when determining loan eligibility.
Minor technical changes ...........................................
Revise § 682.305(c) by deleting the phrase ‘‘originating or’’ in (c)(1)(i) and removing (c)(1)(ii), (vi),
and (vii) from the regulations.
Revise § 682.400(b)(1)(i) by replacing the word
‘‘and’’ with ‘‘or’’ and by removing the phrase ‘‘that
consolidate only subsidized loans’’ from the paragraph.
§ 682.401
ment.
In § 682.401, remove from the regulations ...............
VerDate Mar<15>2010
program
agree-
• § 682.401(b)(1)–(2), which pertain to annual
and aggregate loan limits;.
• § 682.401(b)(3), which specifies the duration
of a borrower’s eligibility for loans.
• § 682.401(b)(5), which describes borrower
responsibilities in the loan origination process.
• § 682.401(b)(6), which details school eligibility requirements to participate in a guaranty agency’s program, limits on that participation, and an agency’s authority to limit,
suspend and terminate a school’s participation.
• §§ 682.401(b)(8) and (b)(9), which outline
when a guaranty agency must guarantee
loans for students attending out-of-state
schools and for out-of-state residents.
• § 682.401(b)(12) and (b)(13), which authorize
an administrative fee for consolidation and
refinanced PLUS and SLS loans.
• § 682.401(c), which requires guaranty agencies to provide lender-of-last resort loan
origination services.
• § 682.401(d)(4), which details requirements
for use of the master promissory note(MPN);
and.
18:48 Jul 26, 2013
Clarity/consistency/accuracy.
N/A.
No changes.
§ 682.400 Agreements between a
guaranty agency and the Secretary.
Basic
To clarify that a borrower employed by the school
operated by the Bureau of Indian Affairs is not
subject to the requirements of § 682.216(1)(i)–
(iii).
To ensure consistency with the HEA and section
title.
To remove references to FFEL loan disbursement
and interest subsidy payments to lenders on
newly disbursed loans that are no longer needed
as a result of the SAFRA Act.
To remove provision related to new FFEL loan
origination that is no longer needed as a result of
the SAFRA Act.
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To remove reference to FFEL loan originations
when determining applicability of lender audit requirement to non-school lenders and to remove
school lender audit requirement from the regulations. School lender audit requirements are no
longer needed as the authority for new school
lenders and new FFEL loans no longer exists.
Audit requirements pertaining to lender trustees
for schools or school-affiliated organizations were
moved under the definition of ‘‘Lender’’ in
§ 682.200(b).
To ensure consistency with the HEA; Consolidation
Loan borrowers are eligible for interest subsidy
during certain periods on the portion of the Consolidation loan that repaid subsidized FFEL or Direct loans.
To remove provisions no longer needed as a result
of the SAFRA Act.
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APPENDIX A—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 682—Continued
Section
Proposed change
§ 682.402 Death, disability, closed
school, false certification, unpaid
refund, and bankruptcy payments.
for
• § 682.401(e), which details guaranty agency
prohibited activities to secure loan guarantees and other permissible activities..
In redesignated § 682.401(b)(3)(i), replace reference to deleted § 682.209 (e) and (f) with program
name
references;
in
paragraph
(b)(3)(vi)(B)(4), remove reference to deleted
§ 682.207; and in paragraph (b)(6), insert reference
to subpart N of 34 CFR part 668.
In redesignated § 682.401(b)(18), delete paragraph (b)(18)(ii), which references pre-October 1,
2006 loan consolidations.
For § 682.402(c), see the final regulations published
on November 1, 2012 (77 FR 66088) for significant changes to regulations governing discharge
based on total and permanent disability.
For § 682.402(d), see the discussion of proposed
non-technical changes to regulations governing
discharge based on school closure under
‘‘Closed School Discharge’’ in the ‘‘Significant
Proposed Regulations’’ section of the preamble
to these regulations.
In § 682.402(l)(1), (l)(2)(ii), (l)(3)(i), and (n)(2), revise language to include reference to ‘‘Federal
default fees’’ to fees included in an unpaid refund
discharge.
Remove this section .................................................
reinsurance
Minor technical changes ...........................................
rehabilitation
For proposed non-technical changes in § 682.405,
see the discussions under ‘‘Loan Rehabilitation
Agreement: Reasonable and Affordable Payment
Standard’’ and ‘‘Loan Rehabilitation Agreement:
Treatment of Borrowers Subject to Administrative
Wage Garnishment’’ in the ‘‘Significant Proposed
Regulations’’ section of the preamble to these
regulations.
In § 682.406(a)(2)(ii), remove reference to deleted
§ 682.207.
§ 682.403 Federal
claim payments.
§ 682.404 Federal
agreement.
§ 682.405 Loan
agreement.
advances
§ 682.406 Conditions for claim payments from the Federal Fund and
for reinsurance coverage.
§ 682.407 Discharge of student
loan indebtedness for survivors of
victims of the September 11,
2001, attacks.
§ 682.408 Loan
disbursement
through an escrow agent.
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§ 682.409 Mandatory assignment
by guaranty agencies of defaulted
loans to the Secretary.
§ 682.410 Fiscal,
administrative,
and enforcement requirements.
Reason
18:48 Jul 26, 2013
Delete obsolete regulations.
To ensure accuracy.
To remove obsolete provisions related to Federal
advances made to a State or guaranty agency.
Clarity/consistency/accuracy.
To ensure accuracy.
Minor technical change.
Remove this section .................................................
Minor technical change .............................................
In § 682.410(a)(2), remove reference to deleted
§ 682.418 and in paragraph (b)(7), replace reference to deleted § 682.509(a)(1) with reference
to § 682.404(b)(3)(ii).
In § 682.410(a)(2)(ii), replace the word ‘‘preclaims’’
with ‘‘default aversion’’.
For § 682.410(b)(9), see the discussion of proposed
non-technical changes under ‘‘Administrative
Wage Garnishment (AWG) of the Disposable Pay
of Defaulted FFEL Program Borrowers’’ in the
‘‘Significant Proposed Regulations’’ section of the
preamble to these regulations.
In § 682.410(c)(1)(i)(C), revise to limit scope of
guaranty agency reviews of schools.
In § 682.410(c), remove (c)(4), and in redesignated
paragraphs (c)(8) and (c)(10), make necessary
conforming changes.
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To ensure accuracy; required conforming changes.
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To remove regulations governing FFEL loan disbursement through an escrow agent that are no
longer needed as a result of the SAFRA Act.
Clarity/consistency/accuracy.
To ensure accuracy; required conforming changes.
To accurately reflect the HEA.
To limit required guaranty agency reviews of
schools that formerly participated in the FFEL
Program to those schools with two-year cohort
rates that include FFEL loans.
To remove provision no longer needed due to the
SAFRA Act and make required conforming
changes.
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Section
Proposed change
§ 682.411 Lender due diligence in
collecting guaranty agency loans.
§ 82.412 Consequences of the failure of a borrower or student to establish eligibility.
§ 682.413 Remedial actions ...........
§ 682.414 Records, reports, and inspection requirements for guaranty agency programs.
§ 682.415 [Reserved] .....................
§ 682.416 Requirements for thirdparty servicers and lenders contracting with third-party servicers.
§ 682.417 Determination of Federal
funds or assets to be returned.
§ 682.418 Prohibited uses of the
assets of the Operating Fund during periods in which the Operating
fund contains transferred funds
owed to the Federal Fund.
§ 682.419 Guaranty agency Federal Fund.
§ 682.420 Federal nonliquid assets
Minor technical changes ...........................................
Clarity/consistency/accuracy.
Minor technical change .............................................
Clarity/consistency/accuracy.
Minor technical changes ...........................................
Remove reference to ‘‘schools’’ in § 682.414(b)(2)
and (b)(3) governing required guaranty agency
reporting.
N/A.
No changes.
Clarity/consistency/accuracy.
To reflect a change to the HEA made by the
HEOA.
No changes.
Remove this section .................................................
To remove an obsolete section of the regulations
governing the uses of a guaranty agency’s Operating Fund when it contains funds transferred
from the agency’s Federal Fund.
Minor technical changes ...........................................
Clarity/consistency/accuracy.
Remove this section .................................................
To remove an obsolete section of the regulations
that govern a guaranty agency’s use of Federal
non-liquid assets.
To remove an obsolete section of the regulations
that govern the transfer of funds from a guaranty
agency’s Federal Fund to its Operating Fund.
To remove an obsolete section of the regulations
that govern a guaranty agency’s repayment of
funds transferred from its Federal Fund to its Operating Fund.
Clarity/consistency/accuracy.
§ 682.421 Funds transferred from
the Federal Fund to the Operating
Fund by a guaranty agency.
§ 682.422 Guaranty agency repayment of funds transferred from the
Federal Fund.
Remove this section .................................................
§ 682.423 Guaranty agency Operating Fund.
Subpart E—Federal Guaranteed
Student Loan Programs.
Minor technical changes ...........................................
§§ 682.500 to 682.515.
§ 682.600 [Reserved] .....................
§ 682.601 Rules for a school that
makes or originates loans.
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Reason
Remove this section .................................................
Remove and reserve this subpart ............................
N/A.
Remove this section .................................................
§ 682.602 Rules for a school or
school-affiliated organization that
makes or originates loans through
an eligible lender trustee.
Remove this section .................................................
§ 682.603 Certification by a participating school in connection with a
loan application.
In § 682.603(h), remove provisions in paragraph
(h)(1) that duplicate § 682.603(f)(1)(i) and redesignate current § 682.603(h)(2) as § 682.603(g).
Replace cross-references to deleted § 682.604 provisions in § 682.603((b)(3) and redesignated
§ 682.603(j)(1) and (2) with applicable statutory
citations.
Remove § 682.604 (a); remove and reserve paragraph (b); remove-paragraphs (c)–(f) and (h); and
redesignate paragraph (g) as paragraph (a).
§ 682.604 Processing
the
borrower’s loan proceeds and counseling borrowers.
Revise redesignated § 682.604(a) governing ‘‘exit
counseling’’ by:
• Adding another method for providing exit
counseling materials to students who withdraw or fail to complete exit counseling;
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To remove obsolete subpart that governs the Federal Insured Student Loan Program (FISL) under
which no loans have been made since 1983.
To remove regulations governing schools that make
or originate FFEL Program loans. No new FFEL
school lenders were authorized after February 7,
2006, and no new FFEL loans are authorized to
be made by any lender as a result of the SAFRA
Act, effective July 1, 2010.
To remove regulations governing schools and
school-affiliated organizations that originate or
hold FFEL Program loans as a lender through an
eligible lender trustee. No new trustee arrangements for this purpose are authorized after September 30, 2006, and no new FFEL loans are
authorized to be made by any lender as a result
of SAFRA Act, effective July 1, 2010.
To correct technical error in the regulatory section.
To ensure accuracy; required conforming changes.
To remove provisions governing school delivery of
loan disbursements and entrance counseling with
new borrowers that are no longer needed as a
result of the SAFRA Act and to make required
conforming changes.
To incorporate Department’s earlier policy guidance
and make necessary conforming changes.
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Section
Proposed change
§ 682.605 Determining the date of
a student’s withdrawal.
§ 682.606 [Reserved] .....................
§ 682.607 Payment of a refund or
a return of title IV, HEA program
funds to a lender upon a student’s
withdrawal.
§ 682.608 Termination
of
a
school’s lending eligibility.
§ 682.609 Remedial actions ...........
§ 682.610 Administrative and fiscal
requirements
for
participating
schools.
§ 682.611 [Reserved] .....................
Subpart G—Limitation, suspension,
or Termination of Lender or thirdparty Servicer Eligibility and Disqualification of Lenders and
Schools.
§ 682.700 Purpose and scope .......
§ 682.701 Definitions of terms used
in this subpart.
§ 682.702 Effect on participation ....
§ 682.703 Informal compliance procedures.
§ 682.704 Emergency action ..........
§ 682.705
Suspension proceedings
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 682.706 Limitation or termination
proceedings.
§ 682.707 Appeals in a limitation or
termination proceeding.
§ 682.708 Evidence of mailing and
receipt dates.
§ 682.709 Reimbursements,
refunds, and offsets.
§ 682.710 Removal of limitation .....
§ 682.711 Reinstatement after termination.
§ 682.712 Disqualification review of
limitation, suspension, and termination actions taken by guarantee
agencies against lenders.
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Reason
• Replacing cross-references to deleted provisions in paragraph (a)(2)(vi) with the content
of those cross-references; and
• Adding new paragraph (a)(5) to reflect earlier
guidance on school compliance with the exit
counseling requirements.
Minor technical changes ...........................................
Clarity/consistency/accuracy.
N/A.
No changes.
Remove this section .................................................
No changes.
For § 682.610(c), see the discussion of proposed
non-technical changes to regulations governing
student enrollment reporting under ’’School Enrollment Status Reporting Requirements’’ in the
‘‘Significant Proposed Regulations’’ section of the
preamble to these regulations.
Other minor technical changes .................................
N/A.
Revise title to subpart by deleting reference to
schools.
To remove section governing termination of a
school lender that is no longer needed in the regulations.
Clarity/consistency/accuracy.
Required conforming change; termination of
schools from loan programs became purview of
Department effective July 1, 2010.
Minor technical changes ...........................................
Minor technical change .............................................
Clarity/consistency/accuracy.
Clarity/consistency/accuracy.
In paragraph (b), remove reference to the number
or total amount of new loans in lender limitation
actions.
As a result of the SAFRA Act, limitation, suspension, and termination actions against lenders no
longer involve loss of ability to make new FFEL
loans or loan guarantees , or to receive benefits
on those loans, since no new FFEL Program
loans are being made.
Remove paragraph (d) referencing new loan guarantees and payment of lender benefits on new
loans; make related conforming change in
§ 682.702(a).
No changes.
In paragraph (a), remove reference to new loan
guarantee commitments.
Remove § 682.705(c) on the application of a ‘‘rebuttable presumption’’ in lender suspension proceedings based on prohibitions in section
435(d)(5) of the HEA.
Make other minor technical changes ........................
Remove § 682.706(d) that governs the application
of a ‘‘rebuttable assumption’’ in lender limitation
and termination proceedings based on prohibitions in section 435(d)(5).
No changes.
As a result of the SAFRA Act, emergency actions
against lenders no longer involve loss of guarantee commitments.
Use of ‘‘rebuttable presumption’’ in lender suspension actions applies only to existing loans and
lender activities prior to July 1, 2010. Moved to
§ 682.709(d).
Clarity/consistency/accuracy.
Use of ‘‘rebuttable presumption’’ in lender limitation
and termination proceedings applies only to existing loans and lender activities prior to July 1,
2010.
No changes.
Add ‘‘rebuttable presumption’’ provision that is
being removed from §§ 682.705 and 682.706 to
§ 682.709 as new paragraph(d).
No changes.
Remove § 682.711(c) governing school lender termination and reinstatement.
Remove § 682.712(i) referencing FISL program
standards that have been removed from the regulations.
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Use of ‘‘rebuttable presumption’’ in lender sanctions
applies only to existing loans and lender activities
prior to July 1, 2010.
To remove provision governing school lenders that
is no longer needed.
To ensure accuracy; required confirming change.
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APPENDIX A—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 682—Continued
Section
Proposed change
Reason
§ 682.713 Disqualification review of
limitation, suspension, and termination actions taken by guarantee
agencies against a school.
Subpart H—Special Allowance Payments on Loans Made or Purchased With Proceeds of Tax-Exempt Obligations.
§ 682.800 Prohibition against discrimination as a condition for receiving special allowance payments.
Appendix C to Part 682 ....................
Remove this section .................................................
To remove section governing Department review of
guaranty agency sanctions against schools that
is no longer needed, as Department will undertake all such actions.
To remove a section prohibiting discrimination
when making new loans with tax-exempt funds
that, as a result of SAFRA, is no longer needed
in the regulations.
Remove and reserve this appendix ..........................
Appendix D to Part 682 ....................
Minor technical change .............................................
Remove § 682.800 and reserve subpart H of part
682.
Appendix B below summarizes
proposed technical changes to the Direct
Loan Program regulations in 34 CFR
part 685, excluding minor technical or
conforming changes. A document
showing all proposed changes to 34 CFR
part 685 that are included in this NPRM
may be found at http://www2.ed.gov/
policy/highered/reg/hearulemaking/
2011/loans.html.
To remove the appendix containing provisions for
curing lender due diligence violations in the FISL
program.
To ensure accuracy and consistency.
Laws cited in Appendix B:
• Higher Education Act of 1965, as
amended (HEA)
• Consolidated Appropriations Act,
2012 (Pub. L. 112–74, enacted December
23, 2011)
• Budget Control Act of 2011 (BCA)
(Pub. L. 112–25, enacted August 2,
2011)
• SAFRA Act (included in the Health
Care and Reconciliation Act of 2010)
(Pub. L. 111–152, enacted March 30,
2010)
• Higher Education Opportunity Act
(HEOA) (Pub. L. 110–315, enacted
August 14, 2008)
Note: The following appendix will not
appear in the Code of Federal Regulations.
APPENDIX B—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 685
Section
Proposed change
General .............................................
Revise nomenclature as necessary to ensure that
the same terms are used to refer to Direct Loan
Program components and Direct Loan types
throughout 34 CFR part 685.
Where applicable, remove language that is no
longer needed due to the elimination of the authority for new FFEL Program loans after July 1,
2010.
Where applicable, remove or revise language that
does not reflect current procedures used in the
Direct Loan Program.
Replace all references to ‘‘credit bureau’’ with
‘‘consumer reporting agency’’
Revise § 685.100(a)(1) to specify that ......................
§ 685.100 The William D. Ford
Federal Direct Loan Program.
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§ 685.101 Participation in the Direct Loan Program.
§ 685.102
Definitions ......................
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Reason
• Graduate and professional students are not
eligible to receive Direct Subsidized Loans
effective for loan periods beginning on or
after July 1, 2012; and.
• The Secretary does not subsidize the interest that accrues during the grace period on
Direct Subsidized Loans for which the first
disbursement is made on or after July 1,
2012 and before July 1, 2014.
Revise § 685.101(b) to specify that graduate and
professional students are not eligible to receive
Direct Subsidized Loans effective for loan periods
beginning on or after July 1, 2012.
See the discussion of proposed technical changes
to the definitions in § 685.102 under ‘‘Modification
of Direct Loan Program Regulations: Definitions’’
in the ‘‘Significant Proposed Regulations’’ section
of the preamble to these proposed regulations.
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Greater clarity and consistency.
To reflect changes to the HEA made by the SAFRA
Act.
To ensure that the Direct Loan Program regulations
accurately reflect current processes.
To reflect a change to the HEA made by the
HEOA.
To reflect a change to the HEA made by the BCA.
To reflect a change to the HEA made by the Consolidated Appropriations Act, 2012.
To reflect a change to the HEA made by the BCA.
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APPENDIX B—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 685—Continued
Section
§ 685.103
§ 685.200
Proposed change
Applicability of subparts
Borrower eligibility .........
§ 685.201 Obtaining a loan ..............
§ 685.202 Charges for which borrowers are responsible.
tkelley on DSK3SPTVN1PROD with PROPOSALS2
§ 685.203
Loan limits .....................
§ 685.204
Deferment ......................
§ 685.205
Forbearance ..................
§ 685.206 Borrower responsibilities
and defenses.
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Reason
See the discussion of proposed non-technical
changes to the definition of ‘‘satisfactory repayment arrangement’’ in § 685.102(b) under ‘‘Satisfactory Repayment Arrangements’’ in the ‘‘Significant Proposed Regulations’’ section of the
preamble to these proposed regulations.
No changes.
In § 685.200(a)(1)(iv) introductory text, replace
‘‘cancelled’’ with ‘‘discharged’’.
Add language to § 685.200(a)(1)(iv)(B)(2) stating
that a borrower who receives a new loan after a
prior total and permanent disability (TPD) discharge must acknowledge that neither the new
loan nor any previously discharged loan that is
reinstated may be discharged in the future based
on an impairment that exists at the time the new
loan is made, unless the impairment substantially
deteriorates.
Revise § 685.200(a)(1)(v) to provide that this paragraph applies only to students who were enrolled
in a program of study prior to July 1, 2012.
In § 685.200(c)(1)(vi), add new paragraph D describing examples of extenuating circumstances
that the Secretary may consider in determining
that a borrower may receive a Direct PLUS Loan
despite having an adverse credit history.
In § 685.201(a) and (b), remove or revise language
as necessary. In § 685.201(b)(1), add language
stating that the dependent student on whose behalf a parent obtains a Direct PLUS Loan must
complete and submit a Free Application for Federal Student Aid (FAFSA).
In § 685.202(b)(2), add language stating that for a
Direct Subsidized Loan for which the first disbursement is made on or after July 1, 2012 and
before July 1, 2014, interest that accrues during
the grace period may be capitalized when the
loan enters repayment.
Throughout the section, remove references to loan
limits that were in effect prior to more recent statutory changes.
In § 685.203(a)(5) and (b)(2), revise language to reflect the elimination of subsidized loan eligibility
for graduate and professional students for loan
periods beginning on or after July 1, 2012.
See the discussion of proposed technical changes
in this section under ‘‘Modification of Direct Loan
Program Regulations: Deferment’’ in the ‘‘Significant Proposed Regulations’’ section of the preamble to these proposed regulations.
Add new § 685.205(a)(5)(iii) describing the conditions under which a borrower may receive forbearance while performing qualifying teaching
service for loan forgiveness under § 685.217.
See the discussion of proposed non-technical
changes in this section under ‘‘Forbearance for
Borrowers Who are 270 or More Days Delinquent
Prior to Guaranty Agency Default Claim Payment
or Transfer by the Department to Collection Status,’’ ‘‘Forbearance Provisions for Borrowers Receiving Department of Defense Student Loan Repayment Benefits,’’ and ‘‘Borrowers Who are Delinquent when Authorized Forbearance is Granted’’ in the ‘‘Significant Proposed Regulations’’
section of the preamble to these proposed regulations.
Minor technical changes ...........................................
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Technical correction for consistency with terminology used in § 685.212 and § 685.213.
Technical correction; this provision was inadvertently omitted from final regulations published by
the Department on October 29, 2009 (74 FR
55972) and is consistent with the provision in
current § 685.200(a)(1)(iv)(B)(3) that applies to
borrowers who receive new loans within three
years of being granted a conditional TPD discharge under the regulations that were in effect
for TPD discharge applications received prior to
July 1, 2010.
To reflect a change to the HEA made by the Consolidated Appropriations Act, 2012.
For consistency with
§ 682.201(c)(2)(v).
the
FFEL
provision
in
To remove obsolete language and, where applicable, replace with updated language that reflects
current procedures in the Direct Loan Program.
In paragraph (b)(1), add language to reflect guidance provided in the Department’s Dear Colleague Letter GEN–11–07.
To reflect a change made by the Consolidated Appropriations Act, 2012, that eliminates the grace
period interest subsidy for Direct Subsidized
Loans with a first disbursement date on or after
July 1, 2012 and before July 1, 2014.
To simplify the loan limit regulations by removing
outdated language.
To reflect a change made by the BCA.
To reflect the Department’s longstanding policy in
the Direct Loan Program and for consistency with
the corresponding FFEL Program regulations in
§ 682.216(e).
Clarity/consistency/accuracy.
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APPENDIX B—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 685—Continued
Section
§ 685.207
§ 685.208
Obligation to repay ........
Repayment plans ..........
§ 685.209 Income-Contingent
payment Plan.
§ 685.210
plan.
Choice
of
repayment
§ 685.211 Miscellaneous
ment provisions.
§ 685.212
gation.
repay-
Discharge of a loan obli-
§ 685.213 Total and
disability discharge.
§ 685.214
Re-
permanent
Closed school discharge
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§ 685.215 Discharge for false certification of student eligibility or
unauthorized payment.
§ 685.216 Unpaid refund discharge
§ 685.217 Teacher loan forgiveness program.
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Proposed change
Reason
Add new § 685.207(a)(3) stating that a borrower’s
first payment is due within 60 days of a loan entering repayment.
In § 685.207(b)(3), add language to reflect the temporary elimination of the grace period interest
subsidy for Direct Subsidized Loans.
See the final regulations published on November 1,
2012 (77 FR 66088) for technical changes in
§ 685.208.
See the final regulations published on November 1,
2012 (77 FR 66088) for significant regulatory
changes in § 685.209.
In § 685.210(a)(2), add a cross-reference to the
standard repayment plan for Direct Consolidation
Loan borrowers entering repayment on/after July
1, 2006.
To reflect the Department’s longstanding policy in
regulations.
See the final regulations published on November 1,
2012 (77 FR 66088) for additional technical
changes in § 685.210(b)(2)(ii).
Minor technical changes in § 685.211(a) and (d) (including technical changes in § 685.211(a)(1) included in the final regulations published on November 1, 2012 (77 FR 66088).
For
proposed
non-technical
changes
in
§ 685.211(f), see the discussions under ‘‘Loan
Rehabilitation Agreement: Reasonable and Affordable Payment Standard’’ and ‘‘Loan Rehabilitation Agreement: Treatment of Borrowers Subject to Administrative Wage Garnishment’’ in the
‘‘Significant Proposed Regulations’’ section of the
preamble to these proposed regulations.
Minor technical changes (including technical
changes included in the final regulations published on November 1, 2012 (77 FR 66088).
See the final regulations published on November 1,
2012 (77 FR 66088) for significant regulatory
changes in § 685.213.
Revise § 685.214(a)(2)(ii) to clarify that the definition of ‘‘school’’ applies regardless of whether the
school or its location or branch is considered eligible.
Revise § 685.214(b)(4) to state that the Secretary
reports a discharge to consumer reporting agencies ‘‘so as to delete all adverse credit history assigned to the loan’’.
Add new § 685.214(c)(4) describing the conditions
under which the Secretary may grant a discharge
without an application from the borrower.
See the discussion of proposed non-technical
changes in § 685.214(c)(1)(ii) under ‘‘Closed
School Discharge’’ in the ‘‘Significant Proposed
Regulations’’ section of the preamble to these
proposed regulations.
In § 685.215(a)(1)(iv), remove the cross-reference
to the definition of ‘‘identity theft’’ in the FFEL
regulations;.
In § 685.215(c)(4), add the definition of ‘‘identity
theft’’ from § 682.402(e)(2)(iv) of the FFEL Program regulations.
Revise § 685.215(a)(5) to state that the Secretary
reports a discharge to consumer reporting agencies ‘‘so as to delete all adverse credit history assigned to the loan’’.
Minor technical changes ...........................................
Throughout section, replace references to employment ‘‘at’’ or teaching ‘‘at’’ an education service
agency (ESA) to employment ‘‘by’’ or teaching
‘‘for’’ an ESA.
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To reflect a change made by the Consolidated Appropriations Act, 2012.
To clarify that a Direct Consolidation Loan borrower
who does not select a repayment plan will be
placed on the standard repayment plan for Direct
Consolidation Loan borrowers described in
§ 685.208(c) rather than the standard repayment
plan with a maximum 10-year repayment period
described in § 685.208(b).
Clarity/consistency/accuracy.
Clarity/consistency/accuracy.
For consistency with the corresponding FFEL Program regulation in § 682.402(d)(1)(ii)(C).
For consistency with the corresponding FFEL Program regulation in § 682.402(d)(2)(iv).
For
consistency
with
§§ 685.215(c)(7),
685.216(c)(2), and 682.402(d)(8).
To eliminate the need to refer to the FFEL Program
regulations for the definition of ‘‘identity theft.’’
To eliminate the need to refer to the FFEL Program
regulations for the definition of ‘‘identity theft.’’
For consistency with the corresponding FFEL Program regulation in § 682.402(e)(2)(iv).
Clarity/consistency/accuracy.
To clarify that a teacher who is employed by an
ESA may not necessarily teach at the ESA itself.
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Section
§ 685.218 Discharge of student
loan indebtedness for survivors of
victims of the September 11,
2001, attacks.
§ 685.219 Public Service Loan Forgiveness.
§ 685.220 Consolidation .................
§ 685.221 Income-based
ment plan.
repay-
§ 685.300 Agreements between an
eligible school and the Secretary
for participation in the Direct Loan
Program.
§ 685.301 Origination of a loan by
a Direct Loan Program school.
Proposed change
Reason
Revise § 685.217(c)(1)(iii) by making the last sentence a new paragraph.
To clarify that Bureau of Indian Education schools
are not subject to the requirements in
§ 685.217(c)(1)(i)—(iii).
To reflect longstanding policy in the Direct Loan
Program and for consistency with the corresponding FFEL Program regulations in
§ 682.216(e).
Clarity/consistency/accuracy.
Add new § 685.217(c)(13) stating that borrowers
performing qualifying teaching service may request
forbearance
in
accordance
with
§ 685.205(a)(5).
Minor technical changes ...........................................
No changes.
See the discussion of proposed technical changes
under ‘‘Modification of Direct Loan Program Regulations: Consolidation’’ in the ‘‘Significant Proposed Regulations’’ section of the preamble to
these proposed regulations.
See the final regulations published on November 1,
2012 (77 FR 66088) for significant regulatory
changes in § 685.221.
In § 685.300(a), add new paragraph (5) stating that
schools must, on a monthly basis, reconcile institutional records with Direct Loan funds received
from the Secretary and Direct Loan disbursement
records submitted to and accepted by the Secretary.
Remove § 685.300(b)(8), which prohibits borrowers
from receiving the same type of loan under both
the Direct Loan Program and the FFEL Program
for the same period of enrollment at the same
school.
Move current § 685.301(b), which contains provisions for determining disbursement dates and
amounts, to § 685.303 as new paragraph
§ 685.303(d).
Move current § 685.301(c), which contains provisions for governing annual loan limit progression
based on completion of an academic year, to
§ 685.303 as new paragraph § 685.303(e).
Revise § 685.301(a)(10) ............................................
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In redesignated § 685.301(c), remove paragraph (2)
and redesignate paragraph (c)(1) as (c).
§ 685.302
§ 685.303
ceeds.
[Reserved] .....................
Processing loan pro-
§ 685.304
Counseling borrowers ...
§ 685.305 Determining the date of
a student’s withdrawal.
§ 685.306 Payment of a refund or
return of title IV, HEA program
funds to the Secretary.
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To reflect in the regulations an existing requirement
for schools participating in the Direct Loan Program.
To eliminate a provision that is no longer needed
due to the change made by the SAFRA Act providing that no new loans may be made under the
FFEL Program effective July 1, 2010.
These provisions are more appropriately included in
§ 685.303, which covers processing loan proceeds.
These provisions are more appropriately included in
§ 685.303, which covers processing loan proceeds.
To fix a technical error resulting from incorrect
amendatory language in final regulations published by the Department on November 1, 2007
(72 FR 62011 and 72 FR 62032).
To correct a technical error in the final regulations
published by the Department on October 29,
2010 (75 FR 66832). The intent of the regulations was to replace the original paragraphs
§ 685.301(c)(1) and (2) with the text in paragraph
(1), but paragraph (2) was inadvertently retained.
See the discussion of a proposed non-technical
change in § 685.301(a)(10)(ii) under ‘‘Minimum
loan period for transfer students in non-term and
certain non-standard term programs’’ in the ‘‘Significant Proposed Regulations’’ section of the
preamble to these proposed regulations.
N/A.
Add new § 685.303(d) and 685.303(e) that contain
the provisions currently in § 685.301(b) and
685.301(c).
See the discussion of technical changes under
‘‘Modification of Direct Loan Program Regulations: Counseling Borrowers’’ in the ‘‘Significant
Proposed Regulations’’ section of the preamble
to these proposed regulations.
Minor technical changes ...........................................
Clarity/consistency/accuracy.
Minor technical changes ...........................................
Clarity/consistency/accuracy.
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Refer to the proposed changes for § 685.301.
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Federal Register / Vol. 78, No. 145 / Monday, July 29, 2013 / Proposed Rules
APPENDIX B—SUMMARY OF PROPOSED TECHNICAL CHANGES TO 34 CFR PART 685—Continued
Section
Proposed change
§ 685.307 Withdrawal
procedure
for schools participating in the Direct Loan Program.
§ 685.308 Remedial actions ...........
§ 685.309 Administrative and fiscal
control and fund accounting requirements for schools participating in the Direct Loan Program.
Minor technical changes only ...................................
§ 685.400 School participation requirements.
§ 685.401 [Reserved] .....................
§ 685.402 Criteria for schools to
originate loans.
Reason
No changes.
In § 685.309(g), remove the words ‘‘Except for
funds paid to a school under section 452(b)(1) of
the Act’’.
See the discussion of proposed non-technical
changes in § 685.309(b) under ‘‘School Enrollment Status Reporting Requirements’’ in the
‘‘Significant Proposed Regulations’’ section of the
preamble to these proposed regulations.
Remove this section .................................................
N/A.
Remove this section .................................................
Clarity/consistency/accuracy.
Remove an obsolete reference to a statutory provision related to payment of administrative fees to
Direct Loan schools that was removed from the
HEA many years ago.
To remove obsolete provisions that no longer apply
to the Direct Loan Program.
With the exception of the provisions in § 685.402(f),
the provisions in this section are obsolete. The
provisions in § 685.402(f) related to the use of
the Master Promissory Note (MPN) would be updated to reflect current policy and incorporated in
the definition of MPN in § 685.102(b).
[FR Doc. 2013–15812 Filed 7–23–13; 11:15 am]
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| File Type | application/pdf |
| File Modified | 2013-07-27 |
| File Created | 2013-07-27 |