[Federal Register: November 1, 1999 (Volume 64, Number 210)]
[Rules and Regulations]
[Page 58937-58972]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no99-14]
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Part III
Department of Education
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34 CFR Parts 682 and 685
Federal Family Education Loan Program and William D. Ford Federal
Direct Loan Program; Final Rule
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DEPARTMENT OF EDUCATION
34 CFR Parts 682 and 685
RIN 1845-AA00
Federal Family Education Loan Program and William D. Ford Federal
Direct Loan Program
AGENCY: Department of Education.
ACTION: Final regulations.
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SUMMARY: The Secretary amends the Federal Family Education Loan (FFEL)
Program regulations and the William D. Ford Federal Direct Loan (Direct
Loan) Program regulations. These final regulations are needed to
implement recently enacted changes to the Higher Education Act of 1965,
as amended (HEA) made by the Higher Education Amendments of 1998 (1998
Amendments). The final regulations deal with provisions of the 1998
Amendments that affect FFEL borrowers, schools, lenders, and guaranty
agencies and Direct Loan borrowers and schools. These final regulations
seek to improve the efficiency of Federal student aid programs, and, by
so doing, to improve their capacity to enhance opportunities for
postsecondary education.
DATES: Effective Date: These regulations are effective July 1, 2000.
Implementation Date: The Secretary has determined, in accordance
with section 482(c)(2)(A) of the HEA (20 U.S.C. 1089(c)(2)(A)), that
FFEL and Direct Loan program participants may, at their discretion,
choose to implement certain provisions of Secs. 682.102, 682.200,
682.202, 682.206, 682.401, 682.402, 682.406, 682.409, 682.414, 682.604,
682.610, 685.102, 685.201, 685.304, and 685.402 on or after November 1,
1999. For further information see ``Implementation Date of These
Regulations'' under the SUPPLEMENTARY INFORMATION section of this
preamble.
FOR FURTHER INFORMATION CONTACT: For the FFEL Program, Ms. Patsy
Beavan, or for the Direct Loan Program, Ms. Nicki Meoli, U.S.
Department of Education, 400 Maryland Avenue, SW., Room 3045, Regional
Office Building 3, Washington, DC 20202-5346. Telephone: (202) 708-
8242. If you use a telecommunications device for the deaf (TDD), you
may call the Federal Information Relay Service (FIRS) at 1-800-877-
8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to one of the contact persons listed in the
preceding paragraph.
SUPPLEMENTARY INFORMATION: These regulations implement certain changes
made to the HEA by the 1998 Amendments (Pub. L. 105-244) that affect
the FFEL and Direct Loan programs.
On August 10, 1999, the Secretary published a notice of proposed
rulemaking (NPRM) for the FFEL and Direct Loan programs in the Federal
Register (64 FR 43428). In the preamble to the NPRM, the Secretary
discussed on pages 43429 to 43438 the following proposed changes:
FFEL Program Changes
* Amending Sec. 682.102(a) to require the use of the Free
Application for Federal Student Aid (FAFSA) as the application for FFEL
subsidized and unsubsidized Stafford loans beginning in academic year
1999-2000 and to reflect the use of a Master Promissory Note (MPN) that
would allow borrowers to receive, in addition to an initial loan,
additional loans for the same or subsequent periods.
* Amending Sec. 682.200(b) to revise the definition of
``Lender'' to permit lenders to provide assistance to schools that is
comparable to the kinds of assistance provided by the Secretary under,
or in furtherance of, the Direct Loan Program.
* Amending Sec. 682.201(c)(1)(i)(D) and (E) to prohibit a
borrower from receiving an FFEL Consolidation loan to repay a loan made
under the HEA on which the borrower is subject to a judgment secured
through litigation or to an administrative wage garnishment order.
* Amending Sec. 682.201(c)(1)(iv)(B) to permit a borrower
who has multiple FFEL Program holders to apply to any eligible FFEL
lender for an FFEL Consolidation loan.
* Amending Sec. 682.201(d)(2) to expand the universe of
loans that may be included in an FFEL Consolidation loan.
* Amending Sec. 682.202(a) to include the interest rate
formulas that apply to subsidized Stafford, unsubsidized Stafford, and
PLUS loans that are first disbursed on or after October 1, 1998 and
before July 1, 2003 and interest rate formulas for Consolidation loans.
* Amending Sec. 682.202(b) to reflect that a lender may add
accrued interest to the principal (capitalization) of an unsubsidized
Stafford loan only when the loan enters repayment, at the expiration of
a period of authorized deferment, at the expiration of a period of
authorized forbearance, and when the borrower defaults. This section
also provides that, for loans first disbursed on or after July 1, 2000,
periods of forbearance on both subsidized and unsubsidized Stafford
loans would be covered by the new capitalization rules.
* Amending Sec. 682.202(c) to permit a lender to assess a
lower origination fee to a borrower demonstrating ``greater financial
need,'' as determined by the borrower's adjusted gross income and to
allow a lender to consider a borrower as demonstrating greater
financial need if--
* The borrower's expected family contribution (EFC) used to
determine eligibility for the loan is equal to or less than the maximum
qualifying EFC for a Federal Pell Grant at the time the loan is
certified;
* The borrower qualifies for a subsidized Stafford loan; or
* The borrower qualifies according to a comparable
alternative standard approved by the Secretary.
* Amending Sec. 682.206 to conform to changes made in
Sec. 682.603 related to loan certification of borrower eligibility by
the school and Sec. 682.401 related to the use of the MPN.
* Amending Sec. 682.207 to require lenders to disburse loans
in a single installment (rather than in multiple installments as
generally required) if so directed by a school that meets the criteria
specified in Sec. 682.604.
* Amending Sec. 682.209(a)(7)(ix) to require a lender to
offer new FFEL borrowers, including FFEL Consolidation loan borrowers,
whose total outstanding FFEL loans exceed $30,000, an extended
repayment plan with fixed or graduated repayment amounts to be paid
over a period not to exceed 25 years.
* Amending Sec. 682.301(a)(3) to include the authority for
payment of interest subsidy during a period of authorized deferment on
the portion of an FFEL Consolidation loan that repaid a subsidized FFEL
or Direct Loan program loan.
* Amending Sec. 682.402(h)(1)(iv) to provide that a lack of
evidence of a borrower's confirmation for subsequent loans made under
an MPN will not lead to a denial of claim payment to the lender unless
the loan is found to be unenforceable.
* Amending Sec. 682.402(i)(1)(i) to reflect amendments to
the Bankruptcy Code that eliminated the seven-year repayment standard
for discharge of FFEL Program loans for bankruptcy petitions filed on
or after October 8, 1998 and establish undue hardship as the only
criteria for a bankruptcy discharge.
* Amending Sec. 682.402(i)(1)(iv) to revise lender and
guaranty agency claim filing procedures related to loans for which
bankruptcy petitions are filed.
[[Page 58939]]
* Amending Sec. 682.414(a)(4) and (5) to require lenders to
maintain documentation of the confirmation processes the lender and the
school used for subsequent loans under an MPN and specify that a lender
or guaranty agency may, to accommodate the MPN process, retain a true
and exact copy of the promissory note rather than the original note.
* Amending Sec. 682.603(b) to require a school to certify
only the loan amount for which the borrower is eligible and to provide
a disbursement schedule to the lender.
FFEL and Direct Loan Program Changes
* Amending Secs. 682.200(b) and 685.102(b) to--
* Reflect that the length of time a borrower is
delinquent before a default occurs on an FFEL or Direct Loan program
loan is 270 days for a loan repayable in monthly installments and 330
days for FFEL Program loans repayable less frequently than monthly;
* Reflect that schools now are required to include
veterans' educational benefits paid under Chapter 30 of Title 38 of the
United States Code and national service education awards or post-
service benefits under Title I of the National and Community Service
Act of 1990 (Americorps) as estimated financial assistance for the
purpose of determining a borrower's eligibility for unsubsidized FFEL
and Direct Loan program loans; and
* Define the term ``master promissory note'' (MPN) as a
promissory note under which a borrower may receive loans for a single
academic year or multiple academic years.
* Amending Secs. 682.204 and 685.203 to modify the method
for calculating the reduced annual loan limits that apply to FFEL and
Direct Loan borrowers enrolled in programs of study or remaining
balances of programs of study that are less than an academic year in
length and to specify annual loan limits for non-degree preparatory and
teaching credential coursework.
* Amending Secs. 682.207(e), 682.603(g), 682.604(c),
685.301(b) and 685.303(b) to reflect that an FFEL or Direct loan
program school is exempt from the multiple disbursement requirement for
single-term loans and the delayed delivery requirement if--
* The school's FFEL cohort default rate, Direct Loan
Program cohort rate, or weighted average cohort rate is less than 10
percent for each of the three most recent fiscal years for which data
are available; or
* The school is certifying or originating a loan to
cover the cost of attendance in a study abroad program and has an FFEL
cohort default rate, Direct Loan Program cohort rate, or weighted
average cohort rate of less than five percent for the single most
recent fiscal year for which data are available.
* Amending Secs. 682.209(a)(6) and 685.207(b) and (c) to
exclude certain periods of service by a borrower in the Armed Forces
from the six-month grace period for FFEL and Direct Loan program
borrowers.
* Amending Secs. 682.210(c) and 685.204(b) to reflect that
FFEL lenders and the Secretary may determine a borrower's eligibility
for an in-school deferment when--
* The borrower submits a request for deferment along
with documentation verifying the borrower's eligibility for the
deferment to the borrower's FFEL lender, or the Secretary for a Direct
Loan;
* The borrower's FFEL lender, or the Secretary for a
Direct Loan, receives either a newly completed loan certification or,
as part of the MPN process, information from the borrower's school
indicating that the borrower is eligible to receive a new loan; or
* The borrower's FFEL lender, or the Secretary for a
Direct Loan, 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.
* Amending Sec. 682.210(h) to permit borrowers who are
eligible for unemployment insurance benefits to submit evidence of
their eligibility for the benefits to their FFEL lender, or to the
Secretary for a Direct Loan (see Sec. 685.204(b)(2)), to qualify for
initial and subsequent periods of an unemployment deferment.
* Amending Secs. 682.211(f)(9) and 685.205(b)(9) to permit
an FFEL lender, and the Secretary for a Direct Loan, to grant a
forbearance to a borrower for a period not to exceed 60 days after the
borrower requests a deferment, a forbearance, a change in repayment
plan, or a consolidation loan.
* Amending Secs. 682.401(d) and 685.402 to state the
requirements that a school must meet to be authorized to use a single
MPN as the basis for multiple loans obtained by a borrower.
* Amending Secs. 682.402, 685.212, and 685.215 to provide
for discharge of the amount of a borrower's FFEL or Direct Loan program
loan disbursed on or after January 1, 1986 that should have been
refunded by the borrower's school.
* Amending Secs. 682.604(f) and (g) and 685.304(a) and (b)
to permit schools to use electronic means to provide initial counseling
and exit counseling to borrowers and to require two additional
counseling elements based on new statutory initiatives.
* Amending Sec. 685.300 to provide schools the option to
participate in one or more of the loan programs (subsidized,
unsubsidized, and PLUS) under the FFEL and Direct Loan programs.
These final regulations contain several changes from the NPRM. We
fully explain these changes in the Analysis of Comments and Changes
elsewhere in this preamble.
Implementation Date of These Regulations
Section 482(c) of the HEA requires that regulations affecting
programs under Title IV of the HEA be published in final form by
November 1 prior to the start of the award year (which begins July 1)
in which they apply. However, that section also permits the Secretary
to designate any regulation as one that an entity subject to the
regulation may choose to implement earlier. If the Secretary designates
a regulation for early implementation, he may specify when and under
what conditions the entity may implement it. Under this authority, the
Secretary has designated the following regulations for early
implementation:
Secs. 682.102, 682.200, 682.206, 682.401, 682.402, 682.406,
682.409, 682.414, 682.604, 682.610, 685.102(b), 685.201(a), and
685.402(f)--Upon publication, the provisions in these regulations
related to the Master Promissory Note (MPN) may be implemented by
borrowers, schools, lenders, and guaranty agencies in the FFEL Program
and borrowers and schools in the Direct Loan Program at their
discretion. This means that participants in both the FFEL and Direct
Loan programs may begin using a single MPN as the basis for multiple
loans obtained by a borrower as long as they do so consistent with all
regulatory provisions and accompanying discussion related to use of the
MPN that are included in this final rule.
Section 682.200(b) Definition of Lender--Upon publication, these
regulations may be implemented by FFEL lenders at their discretion.
This means that FFEL lenders may provide assistance to schools
comparable to the kinds of assistance provided by the Secretary to
schools under, or in furtherance of, the Direct Loan Program.
Section 682.202(c)--Upon publication, these regulations may be
implemented by FFEL lenders at their discretion. This means that FFEL
lenders may assess a lower origination fee to a borrower demonstrating
``greater
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financial need'' as provided in these regulations.
Section 682.604(f)(2)(i), 682.604(g)(2)(vii), 685.304(a)(3)(i), and
685.304(b)(4)(vii)--Upon publication, these regulations may be
implemented by FFEL and Direct Loan program schools at their
discretion. This means that schools may explain the use of an MPN
during initial counseling and review information on the availability of
the Department's Student Loan Ombudsman's office during exit
counseling.
Analysis of Comments and Changes
The regulations in this document were developed through the use of
negotiated rulemaking. Section 492 of the HEA requires that, before
publishing any proposed regulations to implement programs under Title
IV of the HEA, the Secretary obtain public involvement in the
development of the proposed regulations. After obtaining advice and
recommendations, the Secretary must conduct a negotiated rulemaking
process to develop the proposed regulations. All proposed regulations
must conform to agreements resulting from the negotiated rulemaking
process unless the Secretary reopens that process or explains any
departure from the agreements to the negotiated rulemaking
participants.
These regulations were published in proposed form on August 10,
1999 in conformance with the consensus of the negotiated rulemaking
committee. Under the committee's protocols, consensus meant that no
member of the committee dissented from the agreed-upon language. The
Secretary invited comments on the proposed regulations by September 15,
1999 and several comments were received. An analysis of the comments
and of the changes in the proposed regulations follows.
We discuss substantive issues under the sections of the regulations
to which they pertain. Generally, we do not address technical and other
minor changes--and suggested changes the law does not authorize the
Secretary to make.
These final regulations address changes that are specific to the
FFEL Program and changes that are common to both the FFEL and Direct
Loan programs. The following analysis begins with comments and changes
that affect only the FFEL Program, followed by comments and changes
that affect both the FFEL and Direct Loan programs.
Federal Family Education Loan Program
Section 682.102--Consolidation Loan Application
Comment: Several commenters representing guaranty agencies,
lenders, and servicers recommended that we clarify Sec. 682.102(d) to
explain which holder(s) must be contacted for a Consolidation loan when
a married couple wants to jointly consolidate their loans. The
commenters suggested that the proposed language appears to require a
married couple seeking a joint Consolidation loan to contact all the
holders for one of the applicant's loans before being able to
consolidate if either or both applicants have multiple holders.
Discussion: We agree that this language needs to be revised to be
consistent with Sec. 682.201(c)(2)(ii). If each of the applicants has
only one holder, then only the holder for one of the applicants must be
contacted. If either or both applicants have multiple loan holders, the
applicants are permitted to submit the application to any lender
participating in the Consolidation Loan Program.
Change: We have revised Sec. 682.102(d) to clarify the application
requirements for married borrowers who want a joint Consolidation loan.
Section 682.200--Definitions
Lender-Prohibited Inducements
Comment: A commenter representing a guaranty agency suggested that
we clarify that the inducement provision applies only to originating
lenders.
Discussion: We do not believe that the inducement prohibition
applies only to originating lenders. The HEA clearly states that the
term ``eligible lender'' does not include any lender that offers,
directly or indirectly, points, premiums, payments or other
inducements, to any educational institution or individual in order to
secure applicants. The statute does not distinguish between originating
lenders and other loan holders.
Change: None.
Repayment Period
Comment: Some commenters recommended that we clarify that the 25-
year extended repayment schedule is available to PLUS loan borrowers.
Discussion: We agree with the commenters.
Change: We have revised the definition of ``Repayment period'' in
Sec. 682.200(b) to specifically reference PLUS loan borrowers.
Section 682.201--Eligible Borrowers
Consolidation Loans
Comment: Some commenters suggested that Sec. 682.201(c)(1) should
be restructured to clarify that loans subject to litigation or
administrative wage garnishment are eligible for inclusion in a
Consolidation loan (including during the 180-day period for adding
loans to a Consolidation loan) once the judgment or wage garnishment
order is vacated, even if the judgment or order is in place at the time
the borrower applies for the Consolidation loan. The commenters pointed
out that the restriction in section 428C(a)(3)(A)(ii) of the HEA need
not be read to apply to the prohibition against consolidating loans
which are subject to a judgment or wage garnishment order contained in
section 428C(a)(3)(A)(i) of the HEA. Instead, the restriction applies
only to defining an eligible borrower's status on the loans to be
consolidated. The commenters believe this clarification will ensure
that a borrower is not prevented from consolidating a loan which was
subject to a judgment or wage garnishment order at the time of
application, provided the order is vacated prior to consolidating the
loan and will also protect the federal fiscal interest by allowing the
guarantor to ensure that the borrower has completed the application
process before the guarantor cancels the judgment or garnishment order.
Discussion: We agree with the commenters that this change will
preserve a borrower's eligibility to consolidate while protecting the
federal fiscal interest. We agree with the commenters that it is
prudent for the holder to delay vacating a judgment or canceling a wage
garnishment order until after the borrower has completed the
consolidation process. We understand the commenters' concern that if a
borrower applies for a Consolidation loan and the holder vacates the
loan prior to the consolidation, the borrower may not follow through.
Change: We have revised Sec. 682.201(c)(1) to permit lenders to
consolidate loans based on the status of the loans at the time of
consolidation, not the time of application.
Comment: Some commenters stated that they believed that proposed
Sec. 682.201(d), that specifies when a borrower's eligibility to
receive a Consolidation loan terminates, conflicts with Sec. 682.201(e)
that specifies when a Consolidation loan borrower may consolidate an
existing Consolidation loan. The commenters believe it is unclear
whether the permission to consolidate a Consolidation loan in
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paragraph (e) overrides paragraph (d)(1), which states that a
borrower's eligibility to obtain a new Consolidation loan is terminated
upon receipt of a Consolidation loan except where the borrower receives
a new loan after the date of the original consolidation. The commenters
also suggested that we clarify that a married couple may consolidate
their individual Consolidation loans into a single joint Consolidation
loan.
Discussion: As reflected in Sec. 682.201(e), a Consolidation loan
borrower may obtain a new Consolidation loan if the borrower
consolidates the outstanding Consolidation loan with at least one other
eligible loan. A borrower is not required to obtain a new loan in order
to consolidate. Also, as the commenters noted, a married couple may
consolidate their respective Consolidation loans into a single joint
Consolidation loan without either borrower being required to obtain a
new loan.
Change: We have restructured Sec. 682.201(d) and (e) to clarify the
circumstances under which borrowers may consolidate an outstanding
Consolidation loan to address the commenters' concerns.
Section 682.202--Permissible Charges by Lenders to Borrowers Interest
Rates
Comment: Several commenters recommended that
Sec. 682.202(a)(1)(vii) be revised to specify that the interest rate
formula included in this paragraph applies to a Stafford loan for which
the first disbursement was made on or after July 1, 1995 and prior to
July 1, 1998 without reference to the period of enrollment for which
the loan was made. The commenters pointed out that although Dear
Colleague Letter 93-L-161 (dated November 1993), which summarized the
interest rate change for the period July 1, 1995 and prior to July 1,
1998, included a reference to the period of enrollment for Stafford
loans made on or after July 1, 1995 (as well as for loans made on or
after July 1, 1998), subsequent guidance issued by the Department
(e.g., annual memoranda regarding applicable interest rates) did not
include this reference for the 1995-1998 period.
Discussion: We agree with the commenters.
Change: We have revised Sec. 682.202(a)(1)(vii) to delete reference
to a period of enrollment that includes or begins on or after July 1,
1995.
Comment: Several commenters suggested that Sec. 682.202(a)(3)(iii)
be revised to delete the reference in the SLS interest rate formula to
``the period of enrollment that began prior to July 1, 1994'' because
this paragraph applied to SLS loans made on or after October 1, 1992
through the cessation of the SLS Program on July 1, 1994. The
commenters pointed out that Dear Colleague Letter 93-L-161 (dated
November 1993), summarizing Public Law 103-66, specified that the
termination of the SLS program was effective for periods of enrollment
that began on or after July 1, 1994, without regard to the loan
disbursement date.
Discussion: We agree with the commenters.
Change: We have removed the technical change proposed in
Sec. 682.202(a)(3)(iii) in the NPRM referencing loans disbursed prior
to July 1, 1994.
Comment: In response to the Secretary's request for comments on how
to make these proposed regulations easier to understand, a major
association representing credit unions suggested that for clarity, we
provide an example to clarify the regulatory requirement to use
weighted average interest rates for Consolidation loans.
Discussion: The weighted average interest rate used for
Consolidation loans in both the FFEL and Direct Loan programs should be
calculated based on the interest rates that apply to the loans being
consolidated at the time the loan holders complete the verification
certificates. In making the calculation, it is important to note that
an interest rate that is lower than the repayment period rate applies
to most subsidized and unsubsidized Stafford loans in the FFEL and
Direct Loan programs during the in-school, grace, and deferment
periods. This affects the calculation of the weighted average interest
rate. If, for example, a loan is in a grace period at the time the loan
holder completes the verification certificate, the lower grace period
interest rate would be used in the calculation of the weighted average
interest rate on the Consolidation loan. Conversely, if the borrower
applies for a Consolidation loan after entering repayment on a loan,
the higher repayment interest rate of the loan being consolidated would
be used in calculating the weighted average interest rate on the
Consolidation loan.
The weighted average interest rate is a single interest rate that
is calculated by using the borrower's loan balances and the current
annual interest rate for each of the borrower's loans.
For example: A borrower has two subsidized Federal Stafford Loans,
one for $10,000 and the other for $5,000, both with an interest rate of
8.25 percent. The borrower also has a $3,500 unsubsidized Federal
Stafford Loan with an interest rate of 7.46 percent and a $3,000
Federal Perkins Loan with a 5.0 percent interest rate. The borrower
consolidates these loans.
The following steps outline one way to calculate the weighted
average interest rate:
1. Multiply the balance of each loan being consolidated by the
interest rate that applies to that loan at the time the verification
certificate is completed.
2. Add the calculated interest amounts for all loans being
consolidated ($1,648.60).
3. Add the loan balances for all loans being consolidated
($21,500).
4. Divide the sum of the calculated interest amounts by the sum of
the loan balance amounts (7.66%).
5. Round the quotient (the answer to Step 4) to the nearest higher
one-eighth of one percent (7.75%).
6. Compare the result in Step 5 to the 8.25% maximum interest rate
and determine which is lower. The lower of the two rates is the
borrower's fixed interest rate for the Consolidation loan.
The weighted average interest rate for the borrower in this example
is 7.75%.
Change: None.
Origination Fee
Comment: Several commenters pointed out that in
Sec. 682.202(c)(2)(i) the term ``minimum'' was incorrectly used rather
than ``maximum'' when referencing the criteria for charging a lower
origination fee to some borrowers.
Discussion: We agree with the commenters that the term ``minimum''
was inadvertently used and is not consistent with the language in the
preamble to the NPRM. To be eligible for a lower origination fee under
this provision, the borrower's EFC used to determine the eligibility
for the loan must be equal to or less than the maximum qualifying EFC
for a Federal Pell Grant at the time the loan is certified.
Change: We have revised Sec. 682.202(c)(2)(i) to replace
``minimum'' with ``maximum.''
Comment: Two commenters representing national lenders objected to
proposed Sec. 682.202(c)(4) that would provide that, for purposes of
determining whether a lender is charging all similarly situated
borrowers the same origination fee, all lenders under common ownership,
including ownership by a common holding company, constitute a single
lender. The commenters argued that this provision violates the plain
language of the HEA and conflicts with Congressional intent and settled
administrative policy underlying the Federal banking laws. They further
stated that this provision is
[[Page 58942]]
not needed to prevent manipulation of bank subsidiaries of bank holding
companies to circumvent the nondiscrimination provision. They stated
that it unfairly places subsidiaries of large bank holding companies at
a competitive disadvantage in specific geographic areas in which they
provide loans. The commenters also argued that the proposed regulations
will eliminate competition in the FFEL program, providing some state
secondary markets or primary lenders a stranglehold in certain states.
They contended that subsidiaries that previously have maintained
separate origination fee discount policies to compete in state or
regional markets would be required to apply one fee policy across the
country, leaving them no choice but to withdraw from certain markets.
One of the commenters noted that they had maintained a system-wide
policy for their subsidiaries which was geographically based, allowing
the particular subsidiary to establish its policy in its geographical
area and they recommended that the Secretary not disregard such
systems, particularly those that predate the enactment of the
nondiscrimination provision.
Discussion: In light of the commenters' concerns, we have
reconsidered the manner in which the proposed regulation would have
applied the origination fee non-discrimination provisions. We do not
believe that implementing this provision of the law to ensure greater
equality in the origination fees assessed to similarly situated FFEL
borrowers should have the unintended negative consequence of reducing
competition in the FFEL Program and limiting a borrower's choice of a
lender. We believe that another approach to applying the provision
could be used to prevent manipulation with intent to circumvent the law
while preserving lender choice, access, and competition. Therefore, we
have decided that a state-based rather than a nationwide approach to
applying the origination fee non-discrimination provision should be
used. We believe that a state-based approach to applying the provision
will prevent manipulation by lenders with the intent to circumvent the
law while preserving lender choice, access, and competition in the FFEL
Program. Moreover, we believe that a state-based application of the
requirements addresses the commenters' concerns that national and
multi-state lenders will be prevented from competing effectively and
may be forced to leave certain markets.
Change: Section 682.202(c) has been revised to clarify the
definition of lender to provide that any lending entity, including any
multi-state lending entity, that makes loans in a particular state,
must apply any policy of lower origination fees consistently to all
borrowers residing in that state or who attend school in that state.
Comment: One commenter recommended that we clarify the
documentation a lender should use to demonstrate the borrower's
``greater financial need'' for origination fee discount purposes.
Discussion: We believe that it is important to provide lenders with
flexibility in this area and therefore decline to regulate
documentation standards that a lender must use to determine greater
financial need.
Change: None
Section 682.206--Due Diligence in Making a Loan
Comment: Some commenters recommended that Sec. 682.206(a)(1) be
revised to clarify that the lender's responsibilities and obligations
in the loan making process with respect to having a borrower complete
and sign the promissory note applies only to a borrower with subsequent
loans (rather than ``multiple'' loans) made under a ``valid'' MPN.
Discussion: We agree with the commenters that the use of the term
``subsequent'' loans is more appropriate than using the term
``multiple'' loans. However, we believe it is unnecessary to specify
that the MPN is ``valid'' because a lender has no basis for relying on
an invalid or expired MPN for any reason.
Change: We have revised Sec. 682.206(a) by substituting
``subsequent'' for ``multiple.''
Section 682.209--Repayment of a Loan
Comment: Several commenters recommended that Sec. 682.209(a)(7)(ix)
be restructured to clarify that only those borrowers who first obtained
an FFEL Program loan on or after October 7, 1998 and with outstanding
debt totaling more than $30,000 qualify for the extended repayment
plan. The commenters suggested that, as proposed, the regulations do
not fully define the eligibility criteria for an extended repayment
plan.
Discussion: We agree with the commenters.
Change: We have revised Sec. 682.209(a)(7)(ix) to clearly provide
that, under an extended repayment schedule, a new borrower whose total
outstanding principal and interest in FFEL loans exceeds $30,000 may
repay the loan on a fixed annual or graduated repayment plan for a
period that may not exceed 25 years.
Comment: Several commenters suggested that Sec. 682.209(a)(8)(i)
and (ii), governing the period of time to repay a loan, be revised to
include reference to the 25-year extended repayment plan.
Discussion: We agree with the commenters.
Change: We have revised both paragraphs to provide for repayment of
25 years under an extended repayment plan.
Comment: Several commenters suggested that Sec. 682.209(h)(3)(ii)
be revised to clarify that defaulted Title IV loans on which
satisfactory repayment arrangements have not been made may not be taken
into consideration when determining the maximum repayment period on a
Consolidation loan.
Discussion: We believe that the regulations clearly state that only
a defaulted Title IV loan on which satisfactory repayment arrangements
have been made may be included for purposes of establishing the maximum
repayment period for a Consolidation loan. Otherwise, the regulations
specify that all defaulted loans, including non-Title IV loans, may not
be included in the determination of the maximum repayment period.
However, to clarify this point, we will specify in the regulations that
the balance used in making this determination may not include ``any
defaulted loans.''
Change: We have inserted the word ``any'' before ``defaulted
loans'' in Sec. 682.209(h)(3)(ii).
Section 682.210--Deferment
Comment: Several commenters noted that proposed Sec. 682.210(a)(3)
indicates that interest may be paid by the Secretary for all or a
portion of a qualifying Consolidation loan that meets the requirements
under Sec. 682.301 when the loan is made. These commenters recommended
that the reference to ``when the loan is made'' be deleted. The
commenters stated their belief that this phrase was carried over from
the existing provision which addresses Stafford loans only and could be
misunderstood as an indication that loans added within the 180-day
period following the date a Consolidation loan is made may not be
eligible for interest benefits.
Discussion: We agree with the commenters that the phrase ``when the
loan is made'' could be misunderstood to exclude from interest subsidy
loans added to a Consolidation loan within the 180-day period following
the date the Consolidation loan is made.
Change: We have revised Sec. 682.210(a)(3) by deleting the phrase
``when the loan is made.''
[[Page 58943]]
Comment: Some commenters stated that the parenthetical phrase
``(unless based on the dependent's status)'' following reference to the
PLUS program in Sec. 682.210(c)(5) is irrelevant and should be removed.
The commenters suggested this deletion is appropriate because borrowers
serving in a medical internship or residency program are prohibited by
law from receiving an in-school deferment, regardless of whether the
deferment is on the borrower's loan based on his or her own service, or
on a parent borrower's loan based on his or her dependent's service in
the internship or residency program.
Discussion: We disagree with the commenters. The parenthetical
exception relates to the eligibility of a parent PLUS borrower to defer
a PLUS loan based on their dependent son or daughter's attendance in
school. We have never interpreted the prohibition to apply to an
intern's or resident's eligibility to defer a parent PLUS loan based on
the intern's or resident's dependent's in-school status.
Change: None.
Section 682.301--Eligibility of Borrowers for Interest Benefits on
Stafford and Consolidation Loans
Comment: Several commenters suggested that Sec. 682.301(a)(3)(ii)
should be revised to clarify that to qualify for interest benefits, a
Consolidation loan made on or after August 10, 1993, but prior to
November 13, 1997, must have been comprised solely of subsidized loans.
The commenters believe that this provision might be misinterpreted to
include Consolidation loans that include but are not solely comprised
of subsidized Stafford loans.
Discussion: We do not agree that the term ``solely'' needs to be
added to provide clarity. However, we have determined that moving the
word ``only'' would clarify the regulations.
Change: We have revised Sec. 682.301(a)(3)(ii) to clarify that a
Consolidation loan borrower qualifies for interest benefits if the loan
application was received on or after August 10, 1993, but prior to
November 13, 1997 and if the loan consolidates only subsidized Stafford
loans.
Comment: Numerous commenters representing lenders, guaranty
agencies, servicers, and secondary markets recommended that
Sec. 682.301(a)(iii) be restructured to separately reflect the
statutory provision governing the eligibility of Consolidation loans
made on or after November 13, 1997 and on or after July 1, 2000 for
interest subsidies. The commenters indicated that conflicting guidance
has been disseminated since November 13, 1997 regarding the loan types
that may comprise the subsidized portion of a Consolidation loan for
interest subsidy purposes, specifically whether it includes all
subsidized FFEL loans or only subsidized Stafford loans. These
commenters suggest that the final regulations should clarify that
lenders are permitted to follow either of these two approaches for
loans made on or after November 13, 1997 and prior to July 1, 2000. The
commenters further recommended that the final regulations should
clarify that any regulatory provision authorizing use of either
approach may be implemented earlier than July 1, 2000.
Discussion: We understand that lenders may have received differing
guidance on the scope of the interest subsidy available to FFEL
Consolidation loan borrowers after the enactment of the Emergency
Student Loan Consolidation Act of 1997 (Pub. L. 105-78). However, we
have identified only a small subset of borrowers, specifically
subsidized Consolidation loan borrowers who include their Consolidation
loans in a subsequent Consolidation loan, as potentially affected by
the difference in guidance. The commenters did not present any evidence
that the differing guidance for this very small group of borrowers
represents a problem. We do not believe that this speculative small
problem necessitates making a change in the regulations. However, we
remind lenders that we are available to provide technical assistance on
a case-by-case basis should it be necessary.
Change: None.
Section 682.401--Basic Program Agreement
Comment: Several commenters recommended that Sec. 682.401(b)(5)(i)
be revised to remove reference to an ``application'' as it regards the
borrower's right to indicate a preferred lender and instead include a
reference to other information submitted during the loan origination
process. The commenters pointed out that there is not, under the MPN
process, a specific document entitled ``application.''
Discussion: We agree with the commenters. The item allowing the
borrower to indicate a preferred lender is now contained on the MPN.
Change: We have revised Sec. 682.401(b)(5)(i) to delete the word
``application'' and replace it with ``in other written or electronic
documentation submitted during the loan origination process.''
Comment: Several commenters recommended that
Sec. 682.401(b)(5)(ii)(D) be removed to eliminate the requirement that
the borrower provide information from the school demonstrating the
borrower's eligibility for the loan and providing the maximum loan
amount that the student may borrow. The commenters noted that this data
flow is inconsistent with changes made to the HEA by the 1998
Amendments.
Discussion: Although the HEA no longer requires the student to
provide, through the school, information on the student's eligibility
for the loan, the school must still provide the loan amount. We will
revise the regulations to reflect this change.
Change: We have revised Sec. 682.401(b)(5)(C) (formerly
Sec. 682.401(b)(5)(D)) to indicate that the borrower must provide to
the lender information from the school on the maximum amount that may
be borrowed by or on behalf of the student.
Section 682.406--Conditions of Reinsurance Coverage
Comment: One commenter representing a guaranty agency pointed out
that this section does not reference the reduced rebate fee on
Consolidation loans that was effective for Consolidation loans based on
applications received on or after October 1, 1998 through January 31,
1999. The commenter noted that the current regulations indicate that
the interest payment rebate fee of 1.05 percent applies to all
Consolidation loans disbursed on or after October 1, 1993. The 1998
Amendments reduced the fee to 0.62 percent for loans made on
applications received from October 1, 1998 through January 31, 1999.
Discussion: We agree with the commenter that the regulations should
reflect the reduced rebate fee that applied to Consolidation loans
based on applications received from October 1, 1998 through January 31,
1999.
Change: We have revised Sec. 682.406 to incorporate the reduced fee
of 0.62 percent on Consolidation loans for this period.
Section 682.414--Records, Reports, and Inspection Requirements for
Guaranty Agency Programs
Comment: Many commenters representing lenders, guaranty agencies,
servicers, and secondary markets recommended that the regulations be
changed to clearly state that returning a true and exact copy of the
original promissory note to the borrower has the same standing as the
original promissory note. The commenters suggested that the regulations
should be revised to indicate that the true and
[[Page 58944]]
exact copy shall be admissible as evidence in all state and federal
courts notwithstanding any provision of state law to the contrary. The
commenters further suggested that the regulations reflect that the
lender may send a notice to the borrower in place of the original MPN
when a loan made under an MPN is paid in full by or on behalf of the
borrower. The commenters stated that they believe that sending the
notice effectively preempts any state law requiring the lender to send
the borrower the original or a copy of the promissory note and
recommended that the Secretary provide an explanation of this position
in the final regulations to ensure that this preemption is fully
understood.
Discussion: Section 432(m)(1)(D) of the HEA, as added by the 1998
Amendments, specifically states that notwithstanding any other
provision of law, each loan made under an MPN shall be separately
enforceable in all Federal and State courts on the basis of an original
or copy of the MPN. Therefore, the statute itself has the effect of
preempting state law and it is not necessary for the Secretary to
regulate further in this area. The regulations also allow the lender to
send a notice to a borrower that informs the borrower that the loan is
paid in full. Indeed, this approach must be used with the MPN process,
which provides for the making of multiple loans with different
repayment dates and which may be held by different loan holders using a
single note.
Change: None.
FFEL and Direct Loan Programs
Sections 682.200 and 685.102--Definition of Estimated Financial
Assistance
Comment: One commenter representing a school stated that the
different treatment of veterans' educational benefits paid under
Chapter 30 of Title 38 of the United States Code and national service
education awards or post-service benefits under Title I of the National
and Community Service Act of 1990 (Americorps) in determining a
student's eligibility for subsidized FFEL and Direct Loan program loans
and in determining a student's eligibility for unsubsidized loans is
administratively burdensome to schools. To reduce the administrative
burden on schools, the commenter recommended that we treat all
resources the same way for all Title IV programs. Another commenter
representing FFEL guaranty agencies noted the discrepant treatment
between subsidized and unsubsidized loans as it applies to Americorps
benefits and encouraged the Secretary to pursue a legislative change
that would allow schools to exclude Americorps benefits when
determining a borrower's eligibility for unsubsidized, as well as
subsidized, FFEL and Direct Loan program loans.
Discussion: We realize that the different treatment of veterans'
educational benefits paid under Chapter 30 of Title 38 of the United
States Code and Americorps benefits in determining a student's
eligibility for subsidized FFEL and Direct Loan program loans and in
determining a student's eligibility for unsubsidized loans complicates
award packaging and may be administratively burdensome to schools.
However, this different treatment is required by Section 480(j) of the
HEA.
Change: None.
Comment: A commenter pointed out that there are two versions of the
Montgomery GI Bill--active duty and reserve--and suggested that it
would be helpful to clarify that Chapter 30 of Title 38 of the United
States Code is the active duty version.
Discussion: We agree with this suggestion.
Change: We have revised the definition of estimated financial
assistance in Secs. 682.200(b) and 685.102(b) to clarify that Chapter
30 of Title 38 of the United States Code is the active duty version of
the Montgomery GI Bill.
Sections 682.204 and 685.203--Loan Limits
Comment: One commenter representing a school suggested an
alternative method for determining prorated loan amounts instead of the
method proposed in the NPRM. The alternative method recommended by the
commenter included looking at the maximum annual loan limit, dividing
by the number of terms in the year, and then multiplying by the number
of terms during which the borrower was enrolled half time or more.
Another school commenter believed that the rationale for prorating
the loan amounts of graduating seniors in a program of undergraduate
education is unclear. This commenter noted that the statute indicates
that ``if such student is enrolled in a program of undergraduate
education which is less than one academic year,'' proration is
required. The commenter did not believe that a student who is in the
final term of a program of undergraduate education that is greater than
one academic year meets this criteria. This commenter also pointed out
that borrowers other than graduating seniors may be eligible to receive
up to the full applicable annual loan limit depending upon costs and
other financial assistance regardless of whether or not the borrower is
enrolled less than full-time or for one term only. The commenter
believes that the Department should be concerned about overborrowing
before the borrower reaches the final term if the rationale for
prorating the loan amounts of graduating seniors is to ensure that loan
amounts do not unnecessarily inflate debt levels.
Another commenter representing a school observed that the proposed
regulations do not provide for consistent treatment of loan proration
for programs or remainder of programs of less than an academic year.
The commenter believes the regulations contradict the language in the
1998 Amendments that specifically requires the use of semester,
trimester, quarter, or clock hours when prorating the loan limits for
programs or portions of programs that are less than a full academic
year. This commenter stated that the regulations should reflect the HEA
by prorating the total amount the student may borrow for a program of
study that is less than a full academic year in length or a portion of
a program that is less than a full academic year in length by using the
relationship of the program credit to that of a full academic year. The
commenter believes that this simplified proration should be used for
all years of undergraduate students applied to the appropriate full
academic year limits.
Discussion: Although we appreciate the suggestion of an alternative
method for loan proration, the loan proration requirements, including
the method of calculating prorated loan amounts, is statutory. As a
result, the regulations mirror the statute as closely as possible, and
alternative methods of calculation cannot be considered without
statutory change. The application of loan proration to borrowers in
their final term of their undergraduate programs is also statutory and
was retained by the 1998 Amendments. The approach to loan proration for
programs or portions of programs of less than an academic year
recommended by the final commenter would result in some students
receiving a full annual loan limit for a program that is less than an
academic year as that term is defined in statute. The 1998 Amendments
clarified that annual loan limits are authorized for an academic year
as that term is defined in section 481(a)(2) of the HEA. The definition
contains a minimum standard of instructional time and academic
coursework. A program that does not meet both of these statutory
standards for an academic year is clearly
[[Page 58945]]
less than an academic year, and students enrolled in such a program are
not eligible to receive a full annual loan amount. The strictly
proportional calculation recommended by the commenter would result in a
full annual loan amount for students in programs that meet the academic
coursework standard of the definition in section 481(a)(2) of the HEA,
but do not meet the standard for instructional time. We do not believe
that this result would be consistent with Congressional intent. A
proportional loan amount calculated as a ratio of the academic credit
to the academic year is used for remaining portions of programs of less
than an academic year. Under these circumstances, the borrower is
completing a program that is longer than an academic year and therefore
examining the remaining portion of the program against both standards
of the academic year is not applicable.
Change: None
Comment: Several commenters pointed out that Sec. 682.204 (a)(2) of
the proposed regulations addressed students enrolled in one-year
programs with less than a full academic year remaining, but did not
cover remaining balances of less than an academic year for other
programs.
Discussion: The commenters are correct that this section does not
address students enrolled in programs of study with less than a full
academic year remaining. Rather, it addressed only students in one-year
programs of study with less than an academic year remaining. We believe
that revising the regulations to include a provision for students in
remaining balances of programs, as the commenters suggest, will
satisfactorily address both groups of students.
Change: We have revised Secs. 682.204(d)(2) and 685.203(c)(2) to
provide for an additional unsubsidized annual Stafford loan amount for
students enrolled in programs of study with less than a full academic
year remaining to complete the program. We have deleted reference to a
one-year program with less than a full academic year remaining in
Secs. 682.204(d)(2) and 685.203(c)(2).
Sections 682.209 and 685.207--Grace Period for Military Service
Comment: Several commenters representing FFEL lenders, servicers,
and guaranty agencies pointed out that the preamble discussion in the
NPRM indicated that borrowers who qualified for the exclusion of
certain periods of service in the Armed Forces from the six-month grace
period would be required to re-enroll within 12 months of their return
from active duty service. While the commenters agreed that 12 months
may be a reasonable amount of time to re-enroll, they noted that the
requirement was not included in the proposed regulations and requested
that we not limit the period to 12 months in the final regulations. A
commenter representing a school supported our acknowledgement that some
borrowers may need more time than others to re-enroll in the next
available regular enrollment period and the proposal to restore the
full six-month grace period to borrowers whose loans were in the grace
period when the borrowers were called to active duty.
Discussion: The commenters are correct that the proposed
regulations did not include the requirement that the period necessary
for a borrower to resume enrollment at the next available regular
enrollment period when the borrower returns from active duty service be
limited to 12 months. As discussed in the preamble to the NPRM, the
time period in which a borrower needs to re-enroll in the ``next
available regular enrollment period'' after returning from active duty
service may need to be longer for some borrowers than others,
especially if the borrower is pursuing a non-traditional academic
program, and given the fact that the borrower may not re-enroll in the
same program when returning from active duty. The Secretary generally
believes that twelve months allows more than ample time for the
majority of borrowers to re-enroll and provides a reasonable limit
(within the three-year total exclusion limitation) on the amount of
time that may be excluded from a borrower's six-month grace period.
However, in keeping with the agreement reached during negotiated
rulemaking, the Secretary has not included this limitation in the
regulations.
Change: None.
Sections 682.210 and 685.204--Deferment
In-School Deferment
Comment: Commenters representing FFEL lenders and guaranty agencies
suggested that the rules regarding the end date for an in-school
deferment be removed from Sec. 682.210(a) because paragraph (a)
provides general information applicable to all deferments and should
not contain information specific to a particular deferment. The
commenters believed that information related to the in-school deferment
end date should be contained within the in-school deferment section in
Sec. 682.210(c)(3). The commenters also requested that we revise
Sec. 682.210(c)(3) to reflect that valid enrollment information may be
received by lenders using an electronic format rather than a form as
the proposed regulatory language suggests.
Discussion: We do not agree with the commenters that information
about the end date for an in-school deferment should be removed from
Sec. 682.210(a). We believe this information is correctly placed
because it is contained in a provision that outlines when authorized
deferment periods end. However, we agree that the process information
included in the proposed regulatory language would be better placed in
Sec. 682.210(c)(3). We also agree with the commenters that the proposed
regulatory language in Sec. 682.210(c)(3) should be revised to reflect
that valid enrollment information may be received by lenders
electronically.
Change: We have moved the in-school deferment process information
from Sec. 682.210(a)(6)(iv) to Sec. 682.210(c)(3). We also believe that
the revisions to Sec. 682.210(c)(3) accommodate the use of electronics
to provide valid enrollment information.
Comment: A commenter representing a guaranty agency requested
clarification that both FFEL lenders, and the Secretary for Direct
Loans, may process an in-school deferment based on student status
information that does not come directly from the borrower's school. The
commenter pointed out that the proposed regulatory language did not
make it clear that the student status information may be received
directly or indirectly from the school.
Discussion: As stated in the preamble to the NPRM, a borrower's
FFEL lender, or the Secretary for Direct Loans, may determine that a
borrower is eligible for an in-school deferment based upon student
status information received from the borrower's school, either directly
or indirectly, indicating that the borrower is enrolled on at least a
half-time basis. The lender or the Secretary could receive school-
provided information directly, through the SSCR process of the National
Student Loan Data System (NSLDS), or from a third-party servicer.
Regardless of whether the lender or the Secretary receives the student
status information directly or indirectly, the information must
originate with the school. We agree with the commenter that the
regulations should reflect the fact that student status information may
be received directly or indirectly from the school.
Change: We have revised Secs. 682.210(c)(1)(iii) and
685.204(b)(1)(iii)(A)(3) to reflect that student status information
received directly or indirectly from a school may
[[Page 58946]]
be used to determine a borrower's in-school deferment eligibility.
Comment: A commenter representing a school supported the proposal
to require notice to borrowers of their option while they are in school
to pay the interest that accrues on an unsubsidized loan during an in-
school deferment period or cancel the deferment entirely and pay on the
loan. The commenter requested that we also require that the notice
include information about the consequences of selecting those options--
in particular that paying accruing interest during the deferment or
paying on the loan rather than taking the deferment may result in lower
total payments over the life of the loan. Another commenter
representing a guaranty agency stated that the proposed regulatory
language did not provide sufficient guidance to lenders about how to
deal with what may appear to be due diligence gaps that may result from
a borrower electing to cancel an in-school deferment that was
automatically applied by the lender and then not making the required
payments on the loan. The commenter noted that during the negotiated
rulemaking sessions we stated that lenders were not allowed to apply an
administrative forbearance in these situations and requested that we
make this point more explicit in the regulations.
Discussion: We agree with the commenter that it would be helpful to
borrowers if information about the consequences of the options was
included in the notice sent to borrowers when an in-school deferment is
applied automatically. For example, the notice should explain to
borrowers that unpaid interest that accrues on their unsubsidized loans
will be capitalized at the end of the deferment period and inform them
that by paying the interest during the deferment period they may reduce
the total amount they pay over the life of the loan.
In response to the commenter who requested that we state more
explicitly how lenders should deal with possible due diligence gaps
that may result from a borrower electing to cancel an in-school
deferment that was automatically applied by the lender and then not
making the required payments on the loan, we defer to the agreement
reached by the negotiated rulemaking committee that we not regulate the
action lenders must take in this situation. As discussed during
negotiations, this decision seems appropriate given the infrequent
nature of these situations. We expect lenders to take actions
appropriate to the unique circumstances of each borrower's situation
and remind lenders that we are available to provide technical
assistance on a case-by-case basis should it be necessary.
Change: We have revised Sec. 682.210(c)(2) to reflect that the
notice a lender sends to a borrower when an in-school deferment is
applied automatically must include an explanation of the consequences
of the options presented to the borrower in the notice.
Unemployment Deferment
Comment: Several commenters responded to the Secretary's request
for comment as to whether the minimum documentation items for
determining a borrower's eligibility for an unemployment deferment
based on the borrower's eligibility for unemployment insurance benefits
should be included in the final regulations. Generally, commenters
representing FFEL lenders, servicers, and guaranty agencies did not
believe that minimum documentation requirements should be prescribed in
regulations and supported no change to the proposed regulations. One of
the commenters representing servicers stated that unless there is
evidence showing that all states include certain data elements on check
stubs or other types of documentation related to eligibility for
unemployment insurance benefits, the final regulations should not
include minimum documentation requirements. A commenter representing a
guaranty agency did, however, support prescribing minimum documentation
requirements in regulations provided that the requirements were
developed with community involvement. Another commenter representing
credit unions stated that the minimum documentation items discussed by
the negotiated rulemaking committee and presented in the preamble to
the NPRM appeared reasonable, but did not comment on whether the items
should be prescribed in regulations.
Discussion: In response to the overwhelming support for not
prescribing minimum documentation requirements in the regulations, we
have decided not to make changes in the final regulations. We are
basing this decision on the fact that a borrower must provide evidence
of his or her eligibility for unemployment insurance benefits to his or
her lender, or the Secretary for Direct Loans, in order to qualify for
an unemployment deferment based on eligibility for unemployment
insurance benefits. As agreed during negotiations, the evidence of a
borrower's eligibility for unemployment insurance benefits must prove
that the borrower is eligible to receive unemployment insurance
benefits for the period for which he or she is requesting an
unemployment deferment. We acknowledge that there are no uniform
documentation requirements for unemployment insurance benefits.
However, to fulfill the documentation requirement for the unemployment
deferment, we believe that, at a minimum, the documentation should
include the borrower's name, address, and social security number and
the effective dates of the borrower's eligibility to receive
unemployment insurance benefits.
Change: None.
Comment: Commenters representing FFEL lenders, servicers, and
guaranty agencies expressed their belief that the regulatory
requirement that the unemployment deferment end date be within six
months of the certification date should apply regardless of whether the
deferment is being granted as a result of the borrower submitting
evidence of his or her eligibility for unemployment insurance benefits
or as a result of the borrower submitting a written certification of
eligibility (i.e., a completed unemployment deferment request form).
Discussion: We agree with the commenters. However, we note that the
reference to ``certification date'' is not applicable if a deferment is
granted based on a borrower's submission of evidence of his or her
eligibility for unemployment insurance benefits. In this case, the
unemployment deferment end date would be within six months of the date
the borrower submits evidence of his or her eligibility for
unemployment insurance benefits.
Change: We have revised Sec. 682.210(h) to reflect that the
unemployment deferment end date provision applies to both methods by
which a borrower may qualify for an unemployment deferment.
Sections 682.211 and 685.205--Forbearance
Comment: Commenters representing FFEL lenders, servicers, and
guaranty agencies expressed their belief that the final regulations
should accurately and consistently reflect the elimination of the
requirement that forbearance terms be agreed to in writing. The
commenters pointed out that the requirement had been removed from
Sec. 682.211(b) but had not been removed from Sec. 682.211(c) of the
proposed regulations.
Discussion: The 1998 Amendments eliminated the requirement that the
borrower's request for forbearance be in writing; however, the 1998
Amendments did not eliminate the requirement that forbearance terms be
agreed to in writing. Section 428(c)(3)(A)(i) of the HEA continues to
[[Page 58947]]
require that forbearance terms be agreed to in writing. A forbearance
changes the repayment terms on the borrower's loan and therefore needs
to be agreed to in writing. The change we proposed to Sec. 682.211(b)
to remove the requirement that forbearance terms be agreed to in
writing is incorrect. Both Sec. 682.211(b) and Sec. 682.211(c) need to
accurately reflect that forbearance terms must be agreed to in writing.
The only reference in the regulations to a borrower's written request
for a forbearance, contained in Sec. 682.211(h), is being deleted from
the regulations.
Change: We have revised Secs. 682.211(b) and (c) to accurately and
consistently reflect that forbearance terms must be agreed to in
writing.
Sections 682.401 and 685.402--Master Promissory Note
Comment: A commenter representing a guaranty agency requested that
we change the proposed regulatory language in Sec. 682.401(b)(5) to
ensure that if a student or parent borrower does not indicate a choice
of lender on the promissory note or application a lender will not be
assigned automatically to the borrower. The commenter was concerned
that borrowers would not be entitled to choose their lenders.
Discussion: The FFEL promissory notes and applications have always
given the borrower the option to choose a lender. That option will not
be impacted by the implementation of the Master Promissory Note (MPN).
If a borrower does not provide a choice of lender on the promissory
note, a lender will not be assigned. The borrower must work with the
school to choose a lender. Section 432(m)(1)(B) of the HEA requires
that the borrower be permitted to choose his or her lender.
Change: None.
Comment: A commenter representing servicers in the FFEL Program
requested that we make a conforming change in Sec. 682.401(d)(3) to
reflect that under the MPN process guaranty agencies are no longer
bound to the use of a common application form.
Discussion: While it is true that an application form is no longer
required for Stafford loans in the FFEL Program, section 432(m)(1)(A)
of the HEA retains a reference to common application forms, as well as
including references to promissory notes and the MPN. We believe that
the regulations should retain reference to common application forms
because a common PLUS loan application remains in use until an approved
MPN for PLUS loans can be developed and a common Consolidation loan
application will be used indefinitely. By mirroring the statutory
language in the final regulations, we believe that all possible options
are covered.
Change: We have revised Sec. 682.401(d)(3) to more closely reflect
the statutory language that governs the forms guaranty agencies must
use.
Comment: A commenter representing a consumer organization expressed
the view that the proposed regulations related to the criteria a school
must meet to be authorized to use the multi-year feature of the MPN
were too broadly stated and suggested changes that included requiring
the Secretary's written authorization for multi-year use of the MPN by
a school. A commenter representing a two-year public institution wanted
to know what other criteria the Secretary would use to approve the use
of the MPN by schools other than four-year and graduate/professional
schools. Another commenter representing a credit union suggested that
this criteria should be the same as that used for four-year and
graduate/professional schools.
Discussion: We have carefully considered the suggested language
recommended by the commenter who believed that the proposed regulations
governing the criteria a school must meet to be authorized to use the
multi-year feature of the MPN are too broad and agree with a couple of
the commenter's proposed changes. Specifically, we agree with more
explicitly linking approval to use the multi-year feature of the MPN to
the required criteria listed in the regulations and reinforcing the
fact that the criteria are not all inclusive and will be applied, as
appropriate, for the type of institution. However, we do not agree with
the proposal to require the Secretary's written authorization for
multi-year use of the MPN by every school.
In response to the request for information about the criteria we
will use to approve the use of the MPN by schools other than four-year
and graduate/professional schools, we repeat our statement in the
preamble to the NPRM stating our intention to establish and announce
criteria and a process that we will use after publication of these
final regulations.
Change: We have revised Secs. 682.401(d)(4)(ii) to more
specifically link approval to use the multi-year feature of the MPN to
the required criteria and reinforce the fact that the listed criteria
are not all inclusive. The Direct Loan regulations already reflect
these policies and do not need to be changed.
Comment: A commenter representing a consumer organization requested
that we confirm that borrowers are entitled to assert a defense against
repayment of any one of the loans made under an MPN. This commenter
also expressed concern that the 10-year limit on the use of a single
MPN established in the proposed regulations is too long a period from a
consumer standpoint and requested that we change the maximum period to
five years. The commenter expressed the belief that the 10-year period
may serve the financial community well but does not serve young student
borrowers well because they are subject to making unwise decisions,
uneducated about how to cancel promissory notes, and potential targets
for fraud and abuse. The commenter believed that the minimal bother of
signing a new MPN after five years was far outweighed by the benefit of
ensuring better borrower control of the loan process and education
about the loan obligation.
Discussion: As the regulations specify, each loan made under an MPN
is enforceable in accordance with the terms of the MPN. Therefore, a
borrower would be entitled to assert a defense against repayment on
each loan made under the MPN, based on any act or omission of a school
attended by the student that would give rise to a cause of action
against the school under applicable state law.
In response to the commenter's concern about the fact that an MPN
may be valid for a period of up to 10 years, we agree with the
commenter that ensuring borrower control of the loan process and
understanding of the loan obligation are of utmost importance and that
lengthy gaps in time between obtaining loans under an MPN may not
always support these objectives. The Secretary is committed to
monitoring use of the MPN with regard to these concerns and to
evaluating options for changes to the 10-year MPN standard that is in
these final regulations.
Change: None.
Comment: A commenter representing servicers in the FFEL Program
requested that we change the proposed regulations to allow the 10-year
MPN period to be based on either the date the borrower signs the MPN or
the date the lender receives the MPN for processing if the borrower
fails to date the MPN.
Discussion: We do not agree with the commenter's proposed change
because we do not believe it is desirable for lenders or the Secretary
to accept a signed MPN that has not been dated by the borrower.
Acceptance of an MPN that has not been dated by the borrower may
negatively affect the borrower and possibly threaten the legal
enforceability of the MPN.
[[Page 58948]]
Change: None.
Comment: A commenter representing a guaranty agency noted that the
proposed MPN regulatory language indicated that we have begun
development of an MPN for PLUS loans and encouraged us to work with
FFEL Program participants to clarify provisions and maximize benefits
for borrowers. The commenter also asked if it is our intention to allow
a PLUS MPN to cover all loans that a parent borrower obtains on behalf
of all of that parent's dependent children or require a separate MPN
for loans made on behalf of each dependent child. Another commenter
representing a different guaranty agency requested that references to
parent borrowers in the provisions related to the MPN in the Direct
Loan Program regulations be removed until an MPN for PLUS loans is
approved.
Discussion: Development of an MPN for PLUS loans has begun. To
date, work groups have been involved in the initial tasks associated
with developing a PLUS MPN; however, as the development expands beyond
this stage, we intend that FFEL and Direct Loan program participants
and other interested parties will have input into the process. We
acknowledge that there are special operational considerations that need
to be taken into account with an MPN for PLUS loans. As we work with
program participants and others to develop the PLUS MPN, we will
address issues such as the applicability of the PLUS MPN to loans made
for one or more dependent children of a parent borrower. We believe
that it is appropriate to include reference to parent borrowers in the
regulations related to the MPN since approval of an MPN for PLUS loans
will occur in the near future.
Change: None.
Comment: Commenters representing two different guaranty agencies
requested changes in the proposed regulations that prescribe when an
FFEL or Direct Loan program school that is not authorized by the
Secretary for multi-year use of the MPN must obtain a new MPN from the
borrower. One commenter suggested that the FFEL provision indicates
that a borrower must complete a new promissory note for each academic
year. The other commenter wanted the Direct Loan provision to indicate
that a borrower must complete a new promissory note for each period of
enrollment.
Discussion: In the FFEL program, loans are made in accordance with
the period of enrollment certified by the school, and an MPN is defined
as a promissory note under which a borrower may receive loans for a
single period of enrollment or multiple periods of enrollment.
Therefore, at an FFEL Program school that is not authorized by the
Secretary for multi-year use of the MPN, a borrower must complete a new
promissory note for each period of enrollment. In the Direct Loan
Program, however, loan origination can be tracked to an academic year,
and an MPN is defined as a promissory note under which a borrower may
receive loans for a single academic year or multiple academic years.
Therefore, at a Direct Loan Program school that is not authorized by
the Secretary for multi-year use of the MPN, a borrower must complete a
new promissory note for each academic year. We believe that the
operational differences in the FFEL and Direct Loan programs
necessitate differences in the regulations in this area.
Change: None.
Comment: We received several comments related to the confirmation
process or processes that schools which are authorized to use a single
MPN as the basis for multiple loans obtained by a particular borrower
must develop and document along with the FFEL lender or the Secretary
to ensure that a borrower wants subsequent loans made under the MPN.
Commenters representing the legal services negotiators on the
negotiated rulemaking committee, a consumer organization, and a school
association expressed their strong opposition to authorizing the
implementation of confirmation processes that allow passive
notification with a negative option (i.e., the borrower must take the
initiative to reject a new loan under an MPN based on a notice) and
requested that we reconsider our approval of passive confirmation
processes. The commenters requested that we require confirmation
processes that mandate a positive act by the borrower that, at a
minimum, identifies the borrower as the initiator of the loan and
confirms the type and amount of the new loan, as well as the total
amount borrowed. The commenters suggested that properly implemented
electronic signatures and written signatures would be acceptable
confirmation methods. These commenters expressed their belief that
failure to affirmatively solicit a borrower's authorization before
originating new loans is an open invitation for abuse and counters the
collective goal of encouraging responsible borrowing by informed
students. The commenters stated that the technology necessary to
develop active confirmation processes that impose a minimal burden on
borrowers, schools, lenders, and the Secretary exists, and in some
cases (i.e.; PIN numbers), has been in use for 20 years. The commenters
also suggested that the legal enforceability of loans made using the
multi-year feature of the MPN without active confirmation processes may
be questioned in the future when courts will be faced with whether to
permit enforcing collection of loans that were neither actively
requested nor clearly and affirmatively confirmed by the borrower.
A commenter representing servicers in the FFEL Program requested
that we clarify that schools and lenders may utilize passive
confirmation (i.e., notification) until such time as the proper
processes and systems enhancements can be made by schools and lenders
to implement active confirmation processes. Another commenter
representing a school suggested that we practice restraint in the area
of confirmation. This commenter stated that requiring confirmation once
a year should be sufficient since borrowers always have the option of
canceling or returning all or a portion of a loan.
Discussion: We are aware that there are strong differing views
related to the implementation of the confirmation process required by
statute that schools and lenders or the Secretary must develop and
document to ensure that a borrower wants subsequent loans under an MPN.
We also acknowledge the concerns of the commenters representing
consumers regarding confirmation processes that do not require a
positive action by a borrower to obtain subsequent loans under the MPN.
While we do not agree necessarily that the legal enforceability of
loans made in connection with a confirmation process that does not
require a positive action by the borrower could be open to challenge,
it is the Secretary's goal to maintain and enhance a borrower's control
over the lending process in the MPN environment. To achieve this goal,
we would like to reiterate our intention to work with students,
schools, lenders, guaranty agencies, and other interested parties to
develop and implement confirmation processes that make use of the best
available technology in order to maintain and enhance borrower control
over the lending process, at the same time minimizing burden to schools
and lenders. While it is true that much of the technology needed to
develop enhanced borrower-control mechanisms exists today; lenders,
schools, servicers, and the Department need time to evaluate and
determine how best to integrate available technologies into the current
student loan delivery systems and procedures. Shortly after these final
[[Page 58949]]
regulations are published, we will begin discussions with the affected
parties to meet these goals.
At this time, lenders and schools may follow the guidance in the
Department's Dear Colleague Letters--GEN-98-25, November 1998 and GEN-
99-08, February 1999--in developing and documenting confirmation
processes. As technologies that enhance borrower control over the
lending process are developed or adapted for implementation, and
different methods of confirmation are tested, we will continue to issue
guidance regarding confirmation processes. Any guidelines will be
issued in accordance with applicable requirements of the Administrative
Procedure Act. As stated in the preamble to the NPRM, after evaluating
various confirmation processes, it is our ultimate plan to develop
regulations governing confirmation processes.
Change: None.
Sections 682.402 and 685.215--Unpaid Refund Discharge
Comment: One commenter representing a guaranty agency suggested
that the use of the term ``initial determination'' in the provision
that describes the additional documentation a borrower must provide
when requesting a review of a guaranty agency's determination on an
unpaid refund discharge request could be problematic if the borrower
appeals the guaranty agency's decision more than once. The commenter
believed that the wording of the proposed regulation could leave a
guaranty agency vulnerable to repeatedly having to examine the same
documentation submitted on second and subsequent appeals. The commenter
requested that we change the term ``initial determination'' to ``any
prior determination'' to clarify that in all cases a borrower may only
appeal a determination when the borrower has new documentation that was
not previously reviewed by the guaranty agency.
Discussion: We agree with the commenter.
Change: We have revised Sec. 682.402(l)(5)(vii)(A) to reflect that
a borrower may request a review of a guaranty agency's prior
determination on an unpaid refund discharge request only if the
borrower has additional documentation supporting the borrower's
eligibility that was not considered in any prior determination.
Comment: None.
Discussion: We have identified an inadvertent omission in the
provisions governing how a guaranty agency or the Secretary would
determine the amount eligible for discharge in cases in which
information showing the exact refund amount that was not made by the
school or the refund formula that should have been used by the school
to calculate a refund is not available. The guaranty agency or the
Secretary would use one of two surrogate formulas to calculate the
amount eligible for discharge depending on when the student failed to
attend, withdrew, or was terminated. In the proposed regulations, both
surrogate formulas neglected to take into account that, according to
refund policy, borrowers who completed 60 percent or more of the loan
period would not have been entitled to a refund and in turn would not
be eligible for an unpaid refund discharge.
Change: We have revised Secs. 682.402(o)(2) and 685.215(d)(2) to
correctly reflect in the surrogate formulas used to determine discharge
amounts that borrowers who completed 60 percent or more of the loan
period would not be eligible for an unpaid refund discharge.
Sections 682.603, 682.604, 685.301, and 685.303--Disbursement
Exemptions
Comment: Commenters representing FFEL guaranty agencies suggested
that we change the proposed regulations to reflect that a school must
cease to certify or originate loans based on authorized cohort default
rate related disbursement exemptions no later than 30 days after the
date the school receives notification that the school does not meet the
qualifications for the exemptions rather than 30 days after the date
the school is notified that it does not meet the qualifications for the
exemptions. The commenters believe that the phrase ``receives
notification'' is preferable to the phrase ``is notified'' because it
eliminates issues of timing.
Discussion: In either case, schools would have more than ample time
within which to comply with the provision. However, making the change
the commenters requested would be consistent with the regulations in
Sec. 668.17 governing cohort default rates and which use the date the
school receives the notification.
Change: We have revised Secs. 682.603(g), 685.301(b)(8)(ii), and
685.303(b)(4)(ii) to reflect that a school must cease to certify or
originate loans based on authorized cohort default rate related
disbursement exemptions no later than 30 days after the date the school
receives notification from the Secretary of an FFEL cohort default
rate, Direct Loan cohort rate, or weighted average cohort rate that
causes the school to longer meet the qualifications for the exemptions.
Comment: One commenter representing a guaranty agency requested
that we clarify what we mean by the term ``study abroad program'' in
the provisions describing the disbursement exemptions that apply to
schools certifying or originating loans to cover a student's cost of
attendance in a study abroad program. Another commenter representing
FFEL servicers suggested that we change the term ``postsecondary home
school'' to ``home institution.'' The commenter stated that the term
``home school,'' even in conjunction with the term ``postsecondary,''
is misleading and suggested that we use the term ``home institution''
because it has a long established meaning for purposes of student
financial assistance in connection with approved study abroad programs
in Sec. 682.207(b)(1)(v)(C). A third commenter representing a higher
education association that promotes study abroad programs stated that
there is confusion over the applicability of the disbursement
exemptions for schools certifying or originating loans to cover the
cost of attendance in study abroad programs. Specifically, the
commenter requested that we clarify that schools certifying or
originating loans to cover the cost of attendance in study abroad
programs may qualify for disbursement exemptions under either of the
two cohort default rate criteria included in the proposed regulations.
Discussion: The disbursement exemption provisions govern all
participating schools that meet specific criteria. Included under these
provisions are schools certifying or originating loans to cover the
cost of attendance for students participating in study abroad programs.
As pointed out by one of the commenters, these schools have been
consistently referred to in regulations as ``home institutions.''
Students in study abroad programs complete a portion or portions of
their study in a country other than the United States.
The commenter representing a higher education association that
promotes study abroad programs is correct that a school that is a home
institution certifying or originating a loan to cover the cost of
attendance in a study abroad program may qualify for the multiple
disbursement and delayed disbursement or delivery exemptions based on
either of the two cohort default rate criteria included in the proposed
regulations. Under the multiple disbursement exemption, the school
would be eligible to disburse loan proceeds in one installment if--
[[Page 58950]]
* The loan period is equal to or shorter than one semester,
one trimester, one quarter, or, for nonterm-based schools or schools
that use non-standard terms, four months; and
* The school has an FFEL cohort default rate, Direct Loan
Program cohort rate, or weighted average cohort rate of less than 10
percent for each of the three most recent fiscal years for which data
are available.
Additionally, the school would be eligible to disburse loan proceeds in
one installment to cover the cost of attendance in a study abroad
program for a loan period of any length if the school has an FFEL
cohort default rate, Direct Loan Program cohort rate, or weighted
average cohort rate of less than 5 percent for the single most recent
fiscal year for which data are available. Under the exemption for
delayed delivery or for disbursement for first-year, first-time
borrowers, a school certifying or originating a loan to cover the cost
of attendance in a study abroad program may deliver or disburse loan
proceeds to first-year, first-time borrowers without a 30-day delay
if--
* The school has an FFEL cohort default rate, Direct Loan
Program cohort rate, or weighted average cohort rate of less than 10
percent for each of the three most recent fiscal years for which data
are available; or
* The school has an FFEL cohort default rate, Direct Loan
Program cohort rate, or weighted average cohort rate of less than 5
percent for the single most recent fiscal year for which data are
available.
Change: We have revised Secs. 682.604(c)(5), 682.604(c)(10),
685.301(b)(8)(i)(B), and 685.303(b)(4)(i)(B) to reflect consistent use
of the term ``home institution'' when referring to a school certifying
or originating a loan to cover a student's cost of attendance in a
study abroad program.
Comment: To be consistent with statutory language, commenters
representing guaranty agencies recommended that we replace the term
``loan period'' with the term ``enrollment period'' in the regulation
that specifies the conditions for an exemption to the multiple
disbursement requirement for schools with an FFEL cohort default rate,
Direct Loan Program cohort rate, or weighted average cohort rate of
less than 10 percent for each of the three most recent fiscal years for
which data are available. Another commenter representing a guaranty
agency suggested that we clarify in the same provision that the
reference to a loan period that is four months in length applies only
to non term-based schools.
Discussion: While the commenters are correct that statute uses the
term ``enrollment period,'' we have used the term ``loan period'' to be
consistent with the wording in the other provisions of the FFEL and
Direct Loan program regulations into which this provision has been
added and therefore, decline to make the commenters' suggested change.
We also note that the terms ``enrollment period'' and ``loan period''
are interchangeable.
We agree with the suggestion that we clarify that loan periods that
are four months or less in length apply in the case of non term-based
schools. We also note that this provision would apply to schools that
use non-standard terms.
Change: We have revised Secs. 682.604(c)(10)(i)(A) and
685.301(b)(8)(i)(A)(1) to reflect that loan periods that are four
months or less in length apply in the case of non term-based schools
and schools that use non-standard terms.
Sections 682.604 and 685.304--Counseling Borrowers
Comment: A commenter representing a guaranty agency requested that
the proposed regulations be changed to reflect that schools are not
required to conduct exit counseling with all student borrowers. The
commenter maintained that only student borrowers who have a loan or
loans entering repayment when the borrower ceases at least half-time
enrollment are required to complete exit counseling and that borrowers
who return to school but do not receive a new loan or loans are not
subject to required exit counseling. This same commenter also suggested
that the final regulations should allow a school to conduct exit
counseling by mail at the request of a student borrower. The commenter
believed that such a provision would accommodate student borrowers who
know in advance that they will not be able to fulfill the exit
counseling requirement.
Discussion: The commenter is correct in pointing out that there may
be student borrowers in a school's population who reenroll in school
after they have entered repayment on their subsidized and unsubsidized
loans, and who do not obtain new subsidized and unsubsidized loans.
While it's true that these student borrowers already have entered
repayment on their subsidized and unsubsidized loans, we believe that
it would be beneficial for most student borrowers in this position to
complete exit counseling again because they would receive up-to-date
repayment information and refresh their knowledge about options such as
forbearance, deferment, and consolidation. However, we acknowledge that
it may not be possible for schools to identify these student borrowers.
We believe that the regulations offer the flexibility to permit schools
that can identify these student borrowers and choose to require exit
counseling for these borrowers to do so.
We do not agree with the commenter's suggestion that schools should
be allowed to mail counseling materials to student borrowers at their
request. While we appreciate that attending an in-person exit
counseling session may be difficult for some student borrowers, we
believe that allowing them the option to forgo participating in exit
counseling conducted by their schools in person, by audiovisual
presentation, or by interactive electronic means conflicts with the
statute. The variety of authorized exit counseling methods provides
schools with the necessary flexibility to accommodate the specific
needs of their student population and meet the statutory requirements.
Further, an alternative to conducting exit counseling in person, by
audiovisual presentation, or by interactive electronic means is allowed
for two categories of student borrowers who generally may not be able
to complete exit counseling through one of the authorized methods.
Schools may mail written counseling materials to student borrowers who
are enrolled in a correspondence program or a study-abroad program
approved for credit at the home institution. Schools also may provide
exit counseling either through interactive electronic means or by
mailing written counseling materials to student borrowers who withdraw
without a school's knowledge or who fail to complete the exit
counseling.
Change: None.
Comment: We received several comments related to schools providing
exit counseling through interactive electronic means. One commenter
representing a school requested that we reexamine the requirement that
counseling through electronic means be interactive. The commenter
believed that this was a very high standard and expressed uncertainty
as to how electronically the school could ensure that the student
borrower did anything more than open the message. This same commenter
also requested that we explain what we mean by ``electronic receipt''
and questioned its necessity when a receipt is not required if a school
sends counseling materials via U.S. mail. Another commenter
representing a school recommended that student borrowers should have
some allowance for errors in the final evaluation of whether or not
they have successfully completed exit counseling
[[Page 58951]]
through interactive electronic means. A third commenter representing
another school suggested that we should provide web-based exit
counseling for FFEL and Direct Loan program borrowers that would be
linked to the NSLDS. In the commenter's proposal, student borrowers
would benefit by being presented with a more complete and accurate
picture of their total loan indebtedness and borrowers and schools
would benefit by being relieved of the burdens of completing,
collecting, and submitting the required personal data.
Discussion: As we discussed in the preamble to the NPRM, we
purposely did not prescribe specific electronic means by which schools
can provide initial and exit counseling to FFEL and Direct Loan program
borrowers. During negotiated rulemaking, committee members representing
schools pointed out that there were many different electronic means
that schools could use to provide counseling and that new and improved
electronic means are continually becoming available. At the same time,
the committee agreed that it was important to ensure that the quality
of the counseling that schools provide to student borrowers is enhanced
rather than diminished by advancing technology. For these reasons, the
proposed regulations specified that the electronic means a school uses
to provide initial and exit counseling must be interactive, which at a
minimum, requires a school to take reasonable steps to ensure that each
student borrower receives the counseling materials and participates in
and completes the counseling.
We believe that electronic counseling is equivalent to counseling
that a school conducts in person--it is not equivalent to mailing
written counseling materials, which is authorized as an alternative
only in specific situations. Therefore, we do not consider it
sufficient simply to ensure that the student borrower received and
``opened'' an electronic message that contained loan counseling
materials. At the same time, we do not want to dictate to schools how
they must design their electronic counseling so as to fulfill the
regulatory requirement that the counseling be interactive other than to
say that, by definition, the term ``interactive'' implies that feedback
is provided by the student borrower at some point or points during the
course of the counseling.
In response to the questions about electronic receipts, we would
like to clarify that any time a school conducts initial and exit
counseling by interactive electronic means, the school's documentation
that it fulfilled the initial and exit counseling requirements for each
student borrower must include proof that the borrower received the
materials. As stated in the preamble to the NPRM, this does not mean
that the school must receive a personal response from the student
borrower. Instead, the school can accept an automatic electronic
response acknowledging that the materials were received by the person
to whom they were addressed. These automatic electronic responses,
often called ``receipts,'' are a feature of most electronic mail
systems and are returned automatically to the sender when the recipient
receives the message. As discussed during negotiated rulemaking, it is
necessary to require proof that the student borrower received the
materials sent electronically because, unlike materials sent via U.S.
mail, there is no basic legal assumption that materials sent via
electronic mail are delivered to the person to whom the materials were
addressed.
We appreciate the interesting proposal for improving electronic
exit counseling submitted by one of the school commenters. As we work
to improve and integrate our systems, as well as service to our
customers, we will consider the commenter's proposal that we provide
web-based exit counseling for FFEL and Direct Loan program borrowers
that would be linked to NSLDS.
Change: None.
Executive Order 12866
We have reviewed these final regulations in accordance with
Executive Order 12866. Under the terms of this order, we have assessed
the potential costs and benefits of this regulatory action.
The potential costs associated with the final regulations are those
resulting from statutory requirements and those we have determined to
be necessary for administering these programs effectively and
efficiently.
In assessing the potential costs and benefits--both quantitative
and qualitative--of these final regulations, we have determined that
the benefits of the regulations would justify the costs.
We have also determined that this regulatory action would not
unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
We summarized the potential costs and benefits of these final
regulations on pages 43438 and 43439 in the preamble to the NPRM.
Paperwork Reduction Act of 1995
The Paperwork Reduction Act of 1995 does not require you to respond
to a collection of information unless it displays a valid OMB control
number. We display the valid OMB control numbers assigned to the
collections of information in these final regulations at the end of the
affected sections of the regulations.
Assessment of Educational Impact
In the NPRM, we requested comments on whether the proposed
regulations would require transmission of information that any other
agency or authority of the United States gathers or makes available.
Based on the response to the NPRM and on our review, we have
determined that these final regulations do not require transmission of
information that any other agency or authority of the United States
gathers or makes available.
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You may view this document in text or Adobe Portable Document
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To use the PDF you must have the Adobe Acrobat Reader Program with
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Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
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(Catalog of Federal Domestic Assistance Numbers: 84.032, Federal
Family Education Loan Program, and 84.268, William D. Ford Federal
Direct Loan Program)
List of Subjects in 34 CFR Parts 682 and 685
Administrative practice and procedure, Colleges and universities,
Education, Loan programs-education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
[[Page 58952]]
Richard W. Riley,
Secretary of Education.
For the reasons discussed in the preamble, the Secretary amends
title 34 of the Code of Federal Regulations by revising parts 682 and
685 as follows:
PART--682 FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
1. The authority citation for part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
Sec. 682.100 [Amended]
2. Section 682.100 paragraph (a)(2) is amended by removing
``encourages'', and by adding, in its place, ``encouraged''; in
paragraph (a)(4) by removing ``other loans, including loans:,'', and by
adding, in its place, ``loans''; by removing ``and'' before
``Nursing''; and by adding ``including Loans for Disadvantaged Students
(LDS)'', after ``(HPSL)''.
3. Section 682.100 paragraph (b)(2)(C) is amended by removing the
semi-colon before ``as''.
4. Section 682.102 paragraph (a) is revised; paragraph (b) is
removed and reserved; paragraph (d) is revised; and the Office of
Management and Budget control number is revised to read as follows:
Sec. 682.102 Obtaining and repaying a loan.
(a) Stafford loan application. Generally, to obtain a Stafford loan
a student requests a loan by completing the Free Application for
Federal Student Aid (FAFSA), or contacting the school, lender or
guarantor. The school determines and certifies the student's
eligibility for the loan. Prior to loan disbursement, the lender
obtains a loan guarantee from a guaranty agency or the Secretary and
the student completes a promissory note, unless the student has
previously completed a Master Promissory Note (MPN) that the lender may
use for the new loan.
(b) [Reserved]
* * * * *
(d) Consolidation loan application. To obtain a Consolidation loan,
a borrower completes an application and submits it to the lender
holding the borrower's FFEL Program loan or loans. If the borrower has
multiple holders of FFEL Program loans, or if the borrower's single
loan holder declines to make a Consolidation loan, or declines to make
one with income-sensitive repayment terms, the borrower may submit the
application to any lender participating in the Consolidation Loan
Program. In the case of a married couple seeking a Consolidation loan,
if at least one of the applicants has multiple holders, the applicants
may submit the application to any lender participating in the
Consolidation Loan Program. If both applicants have a single holder,
only the holder for one of the applicants must be contacted for
consolidation. If a lender decides to make the loan, the lender obtains
a loan guarantee from a guaranty agency or the Secretary.
* * * * *
(Approved by the Office of Management and Budget under control
number 1845-0020)
Sec. 682.103 [Amended]
5. Section 682.103 paragraph (a) is amended by removing the first
use of the term ``programs''.
6. Section 682.200(b) is amended as follows:
A. By amending the definitions of Default by revising paragraphs
(1) and (2); Estimated financial assistance by revising paragraphs
(1)(i), (2)(i)(B) and (C), and (2)(ii) and by adding (2)(iii).
B. By revising the definition of Holder.
C. In the definition of ``Lender,'' by revising paragraph (5)(i)
and by renumbering the second paragraph (5) as paragraph (6).
D. By adding a new definition ``Master promissory note (MPN)'' in
alphabetical order.
E. In the definition of ``Repayment period,'' in paragraph (1), by
adding ``,or 25 years under an extended repayment schedule,'', after
``10 years''; in paragraph (2), by adding ``or 25 years under an
extended repayment schedule,'', after ``10 years''; in paragraph (4),
by adding ``, or 25 years under an extended repayment schedule'', after
``10 years''.
F. By adding the Office of Management and Budget control number.
Sec. 682.200 Definitions.
* * * * *
(b) * * *
Default.
* * * * *
(1) 270 days for a loan repayable in monthly installments; or
(2) 330 days for a loan repayable in less frequent installments.
* * * * *
Estimated financial assistance.
(1) * * *
(i) Except as provided in paragraph (2)(iii) of this definition,
national service education awards or post-service benefits under title
I of the National and Community Service Act of 1990 and veterans'
educational benefits paid under chapters 30, 31, 32, and 35 of title 38
of the United States Code;
* * * * *
(2) * * *
(i) * * *
(A) * * *
(B) PLUS loan amounts; and
(C) Private and state-sponsored loan programs;
(ii) Federal Perkins loan and Federal Work-Study funds that the
school determines the student has declined; and
(iii) For the purpose of determining eligibility for a subsidized
Stafford loan, veterans' educational benefits paid under chapter 30 of
title 38 of the United States Code (Montgomery GI Bill--Active Duty)
and national service education awards or post-service benefits under
title I of the National and Community Service Act of 1990.
* * * * *
Holder. An eligible lender owning an 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.
* * * * *
(5) * * *
(i) Offered, directly or indirectly, points, premiums, payments, or
other inducements, to any school or other party to secure applicants
for FFEL loans, except that a lender is not prohibited from providing
assistance to schools comparable to the kinds of assistance provided by
the Secretary to schools under, or in furtherance of, the Federal
Direct Loan Program.
* * * * *
Master promissory note (MPN). A promissory note under which the
borrower may receive loans for a single period of enrollment or
multiple periods of enrollment.
* * * * *
(Approved by the Office of Management and Budget under control
number 1845-0020)
7. Section 682.201 is amended as follows:
A. By revising paragraph (a)(2).
B. By revising paragraph (c)(1); in paragraph (c)(2)(iii) by
removing ``(c)(1)(vi)'', and by adding in its place, ``(c)(1)(iv)'';
and by removing paragraphs (c)(3) and (c)(4).
C. By adding a new paragraph (d).
D. By adding a new paragraph (e).
Sec. 682.201 Eligible borrowers.
(a) * * *
(2) In the case of any student who seeks an unsubsidized Stafford
loan for
[[Page 58953]]
the cost of attendance at a school that participates in the Stafford
Loan Program, the student must--
(i) Receive a determination of need for a subsidized Stafford loan;
and
(ii) If the determination of need is in excess of $200, have made a
request to a lender for a subsidized Stafford loan;
* * * * *
(c) Consolidation program borrower. (1) An individual is eligible
to receive a Consolidation loan if the individual--
(i) On the loans being consolidated--
(A) Is, at the time of application for a Consolidation loan--
(1) In a grace period preceding repayment;
(2) In repayment status;
(3) In a default status and has either made satisfactory repayment
arrangements as defined in applicable program regulations or has agreed
to repay the consolidation loan under the income-sensitive repayment
plan described in Sec. 682.209(a)(7)(viii);
(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;
(ii) Certifies that no other application for a Consolidation loan
is pending;
(iii) Agrees to notify the holder of any changes in address; and
(iv)(A) Certifies that the lender holds at least one outstanding
loan that is being consolidated; or
(B) Applies to any eligible consolidation lender if the borrower--
(1) Has multiple holders of FFEL loans; or
(2) Has been unable to receive from the holder of the borrower's
outstanding loans, a Consolidation loan or a Consolidation loan with
income-sensitive repayment.
* * * * *
(d) A borrower's eligibility to receive a Consolidation loan
terminates upon receipt of a Consolidation loan except that--
(1) Eligible loans received prior to the date a Consolidation loan
was made and loans received during the 180-day period following the
date a Consolidation loan was made, may be added to the Consolidation
loan based on the borrower's request received by the lender during the
180-day period after the date the Consolidation loan was made;
(2) A borrower who receives an eligible loan after the date a
Consolidation loan is made may receive a subsequent Consolidation loan;
and
(3) A Consolidation loan borrower may consolidate an existing
Consolidation loan only if the borrower has at least one other eligible
loan made before or after the existing Consolidation loan that will be
consolidated.
(e) In the case of a married couple, the loans of a spouse that are
to be included in a Consolidation loan are considered eligible loans
for the other spouse.
(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082, and
1091)
8. Section 682.202 is amended as follows:
A. In paragraph (a)(1)(i) by removing ``If'' and by adding, in its
place, ``For loans made prior to July 1, 1994, if,''.
B. In paragraph (a)(1)(ii)(B) by adding ``and prior to July 1,
1994,'' after ``October 1, 1992''.
C. In paragraph (a)(1)(iii)(A) by removing ``evidencing the loan''.
D. In paragraph (a)(1)(iv) by adding ``but before December 20,
1993,'' after ``October 1, 1992''.
E. By adding new paragraphs (a)(1)(v) through (a)(1)(viii).
F. In paragraph (a)(2)(iii) introductory text, by adding ``and
prior to July 1, 1994,'' after ``October 1, 1992''.
G. By adding new paragraphs (a)(2)(iv) and (a)(2)(v).
H. In paragraph (a)(4) by adding ``(i)'' at the beginning of the
sentence before ``A Consolidation'', by adding ``made before July 1,
1994'' after ``loan'', by designating paragraph ``(i)'' as ``(A)'', by
designating paragraph ``(ii)'' as ``(B)'', by adding new paragraphs
(a)(4)(ii) through (a)(4)(v).
I. In paragraph (b)(1), by removing ``paragraph (b)(2) of''; and by
revising paragraph (b)(2).
J. In paragraph (b)(3) by removing ``, except that
capitalization'', and by adding in its place, ``. Capitalization''.
K. By removing paragraph (b)(5).
L. By redesignating paragraph (b)(4) as paragraph (b)(5); and by
adding a new paragraph (b)(4).
M. By revising the newly redesignated paragraph (b)(5).
N. By revising paragraphs (c)(1) and (c)(2).
O. By redesignating paragraphs (c)(3) through (c)(5) as paragraphs
(c)(5) through (c)(7); and by adding new paragraphs (c)(3) and (c)(4).
P. In redesignated paragraph (c)(5), by removing, ``an SLS or''.
Sec. 682.202 Permissible charges by lenders to borrowers.
(a) * * *
(1) * * *
(v) For a Stafford loan for which the first disbursement is made on
or after December 20, 1993 and prior to July 1, 1994, if the borrower,
on the date the promissory note is signed, has no outstanding balance
on a Stafford loan but has 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 is made
on or after July 1, 1994 and prior to July 1, 1995, for a period of
enrollment that includes or begins 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--
(A) The bond equivalent rate of the 91-day Treasury bills auctioned
at the final auction prior to the June 1 immediately preceding the July
1-June 30 period, plus 3.10; or
(B) 8.25 percent.
(vii) For a Stafford loan for which the first disbursement is made
on or after July 1, 1995 and prior to July 1, 1998 the interest rate is
a variable rate applicable to each July 1-June 30 period, that equals
the lesser of--
(A) The bond equivalent rate of the 91-day Treasury bills auctioned
at the final auction prior to the June 1 immediately preceding the July
1-June 30 period, plus 2.5 percent during the in-school, grace and
deferment period and 3.10 percent during repayment; or
(B) 8.25 percent.
(viii) For a Stafford loan for which the first disbursement is made
on or after July 1, 1998, the interest rate is a variable rate,
applicable to each July 1-June 30 period, that equals the lesser of--
(A) The bond equivalent rate of the 91-day Treasury bills auctioned
at the final auction prior to the June 1 immediately preceding the July
1-June 30 period plus 1.7 percent during the in-school, grace and
deferment periods and 2.3 percent during repayment; or
(B) 8.25 percent.
* * * * *
(2) * * *
(iv) For a loan for which the first disbursement is made on or
after July 1, 1994 and prior to July 1, 1998, the interest rate is a
variable rate applicable to each July 1-June 30 period, that equals the
lesser of--
(A) The bond equivalent rate of the 52-week Treasury bills
auctioned at the final auction prior to the June 1 immediately
preceding the July 1-June 30 period, plus 3.10 percent; or
(B) 9 percent.
(v) For a loan for which the first disbursement is made on or after
July 1, 1998, the interest rate is a variable rate, applicable to each
July 1-June 30 period, that equals the lesser of--
[[Page 58954]]
(A) The bond equivalent rate of the 91-day Treasury bills auctioned
at the final auction prior to the June 1 immediately preceding the July
1-June 30 period, plus 3.10 percent; or
(B) 9 percent.
* * * * *
(4) * * *
(ii) A Consolidation loan made on or after July 1, 1994, for which
the loan application was received by the lender before November 13,
1997, bears interest at the rate that is equal to the weighted average
of interest rates on the loans consolidated, rounded upward to the
nearest whole percent.
(iii) For a Consolidation loan for which the loan application was
received by the lender on or after November 13, 1997 and before October
1, 1998, the interest rate for the portion of the loan that
consolidated loans other than HEAL loans is a variable rate, applicable
to each July 1-June 30 period, that equals the lesser of--
(A) The bond equivalent rate of the 91-day Treasury bills auctioned
at the final auction held prior to June 1 of each year plus 3.10
percent; or
(B) 8.25 percent.
(iv) For a Consolidation loan for which the application was
received by the lender on or after October 1, 1998, the interest rate
for the portion of the loan that consolidated loans other than HEAL
loans is a fixed rate that is the lesser of--
(A) The weighted average of interest rates on the loans
consolidated, rounded to the nearest higher one-eighth of one percent;
or
(B) 8.25 percent.
(v) For a Consolidation loan for which the application was received
by the lender on or after November 13, 1997, the annual interest rate
applicable to the portion of each consolidation loan that repaid HEAL
loans is a variable rate adjusted annually on July 1 and must be equal
to the average of the bond equivalent rates of the 91-day Treasury
bills auctioned for the quarter ending June 30, plus 3 percent. There
is no maximum rate on this portion of the loan.
* * * * *
(b) * * *
(2) Except as provided in paragraph (b)(4) of this section, a
lender may capitalize interest payable by the borrower that has
accrued--
(i) For the period from the date the first disbursement was made to
the beginning date of the in-school period;
(ii) For the in-school or grace periods, or for a period needed to
align repayment of an SLS with a Stafford loan, if capitalization is
expressly authorized by the promissory note (or with the written
consent of the borrower);
(iii) For a period of authorized deferment;
(iv) For a period of authorized forbearance; or
(v) For the period from the date the first installment payment was
due until it was made.
* * * * *
(4)(i) For unsubsidized Stafford loans disbursed on or after
October 7, 1998 and prior to July 1, 2000, the lender may capitalize
the unpaid interest that accrues on the loan according to the
requirements of section 428H(e)(2) of the Act.
(ii) For Stafford loans first disbursed on or after July 1, 2000,
the lender may capitalize the unpaid interest--
(A) When the loan enters repayment;
(B) At the expiration of a period of authorized deferment;
(C) At the expiration of a period of authorized forbearance; and
(D) When the borrower defaults.
(5) For any borrower in an in-school or grace period or the period
needed to align repayment, deferment, or forbearance status, during
which the Secretary does not pay interest benefits and for which the
borrower has agreed to make payments of interest, the lender may
capitalize past due interest provided that the lender has notified the
borrower that the borrower's failure to resolve any delinquency
constitutes the borrower's consent to capitalization of delinquent
interest and all interest that will accrue through the remainder of
that period.
(c) Fees for FFEL Program loans.
(1) A lender may charge a borrower an origination fee on a Stafford
loan not to exceed 3 percent of the principal amount of the loan.
Except as provided in paragraph (c)(2) of this section, a lender must
charge all borrowers the same origination fee.
(2)(i) A lender may charge a lower origination fee than the amount
specified in paragraph (c)(1) of this section to a borrower whose
expected family contribution (EFC), used to determine eligibility for
the loan, is equal to or less than the maximum qualifying EFC for a
Federal Pell Grant at the time the loan is certified or to a borrower
who qualifies for a subsidized Stafford loan. A lender must charge all
such borrowers the same origination fee.
(ii) With the approval of the Secretary, a lender may use a
standard comparable to that defined in paragraph (c)(2)(i) of this
section.
(3) If a lender charges a lower origination fee on unsubsidized
loans under paragraph (c)(1) or (c)(2) of this section, the lender must
charge the same fee on subsidized loans.
(4)(i) For purposes of this paragraph (c), a lender is defined as:
(A) All entities under common ownership, including ownership by a
common holding company, that make loans to borrowers in a particular
state; and
(B) Any beneficial owner of loans that provides funds to an
eligible lender trustee to make loans on the beneficial owner's behalf
in a particular state.
(ii) If a lender as defined in paragraph(c)(4)(i) charges a lower
origination fee to any borrower in a particular state under paragraphs
(c)(1) or (c)(2) of this section, the lender must charge all such
borrowers who reside in that state or attend school in that state the
same origination fee.
* * * * *
9. Section 682.204 is amended as follows:
A. By revising paragraphs (a), (b), (c), (d), and (e).
B. In paragraph (f)(2)(i) by adding ``the following'', after
``exceed''.
C. In paragraph (f)(2)(ii) by adding ``the following'' after
``exceed''.
D. In paragraph (f)(2)(ii)(B) by removing ``and'', and by adding,
in its place, ``or''.
E. In paragraph (j), by removing the first ``or'' before ``HEAL''.
Sec. 682.204 Maximum loan amounts.
(a) Stafford Loan Program annual limits. (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 Stafford Loan
Program in combination with the Federal Direct Stafford/Ford Loan
Program may not exceed the following:
(i) $2,625 for a program of study of at least a full academic year
in length.
(ii) For a one-year program of study with less than a full academic
year remaining, the amount that is the same ratio to $2,625 as the--
[[Page 58955]]
[GRAPHIC] [TIFF OMITTED] TR01NO99.009
(iii) For a program of study that is less than a full academic year
in length, the amount that is the same ratio to $2,625 as the lesser of
the--
[GRAPHIC] [TIFF OMITTED] TR01NO99.010
(2) In the case of a 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
Stafford Loan Program in combination with the Federal Direct Stafford/
Ford Loan Program may not exceed the following:
(i) $3,500 for a program whose length is at least a full academic
year in length.
(ii) For a program of study with less than a full academic year
remaining, an amount that is the same ratio to $3,500 as the--
[GRAPHIC] [TIFF OMITTED] TR01NO99.011
(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 Stafford Loan Program in
combination with the Federal Direct Stafford/Ford Loan Program may not
exceed the following:
(i) $5,500 for a program whose length is at least an academic year
in length.
(ii) For a program of study with less than a full academic year
remaining, an amount that is the same ratio to $5,500 as the--
[GRAPHIC] [TIFF OMITTED] TR01NO99.012
(4) In the case of a student who has an associate or baccalaureate
degree that is required for admission into a program and who is not a
graduate or professional student, the total amount the student may
borrow for any academic year of study may not exceed the amounts in
paragraph (a)(3) of this section.
(5) In the case of a graduate or professional student, the total
amount the student may borrow for any academic year of study under the
Stafford Loan Program, in combination with any amount borrowed under
the Federal Direct Stafford/Ford Loan Program, may not exceed $8,500.
(6) In the case of a student enrolled for no longer than one
consecutive 12-month period in a course of study necessary for
enrollment in a program leading to a degree or certificate, the total
amount the student may borrow for any academic year of study under the
Stafford Loan Program in combination with the Federal Direct Stafford/
Ford Loan Program may not exceed the following:
(i) $2,625 for coursework necessary for enrollment in an
undergraduate degree or certificate program.
(ii) $5,500 for coursework necessary for enrollment in a graduate
or professional degree or certificate program for a student who has
obtained a baccalaureate degree.
(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 Stafford Loan Program in
combination with the Federal Direct Stafford/Ford Loan Program may not
exceed $5,500.
(b) Stafford Loan Program aggregate limits. The aggregate unpaid
principal amount of all Stafford Loan Program loans in combination with
loans received by the student under the Federal Direct Stafford/Ford
Loan Program, but excluding the amount of capitalized interest may not
exceed the following:
(1) $23,000 in the case of any student who has not successfully
completed a program of study at the undergraduate level.
(2) $65,500, in the case of a graduate or professional student,
including loans for undergraduate study.
(c) Unsubsidized Stafford Loan Program. (1) In the case of a
dependent undergraduate student, the total amount the student may
borrow for any period of study under the Unsubsidized Stafford Loan
Program in combination with the Federal Direct Unsubsidized Stafford/
Ford Loan Program is the same as the amount determined under paragraph
(a) of this section, less any amount received under the Stafford Loan
Program or the Federal Direct Stafford/Ford Loan Program.
(2) In the case of an independent undergraduate student, a graduate
or
[[Page 58956]]
professional student, or certain dependent undergraduate students, the
total amount the student may borrow for any period of enrollment under
the Unsubsidized Stafford Loan and Federal Direct Unsubsidized
Stafford/Ford 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 Federal Direct Stafford/Ford Loan
Program, in combination with the amounts determined under paragraph (d)
of this section.
(d) Additional eligibility under the Unsubsidized Stafford Loan
Program. In addition to any amount borrowed under paragraphs (a) and
(c) of this section, an independent undergraduate student, graduate or
professional student, and certain dependent undergraduate students may
borrow additional amounts under the Unsubsidized Stafford Loan Program.
The additional amount that such a student may borrow under the
Unsubsidized Stafford Loan Program in combination with the Federal
Direct Unsubsidized Stafford/Ford Loan Program, in addition to the
amounts allowed under paragraphs (b) and (c) of this section for any
academic year of study--
(1) In the case of a student who has not successfully completed the
first year of a program of undergraduate education, may not exceed the
following:
(i) $4,000 for a program of study of at least a full academic year.
(ii) For a one-year program of study with less than a full academic
year remaining, the amount that is the same ratio to $4,000 as the--
[GRAPHIC] [TIFF OMITTED] TR01NO99.013
(iii) For a program of study that is less than a full academic year
in length, an amount that is the same ratio to $4,000 as the lesser
of--
[GRAPHIC] [TIFF OMITTED] TR01NO99.014
(2) In the case of a student who has completed the first year of a
program of undergraduate education but has not successfully completed
the second year of a program of undergraduate education may not exceed
the following:
(i) $4,000 for a program of study of at least a full academic year
in length.
(ii) For a program of study with less than a full academic year
remaining, an amount that is the same ratio to $4,000 as the--
[GRAPHIC] [TIFF OMIT