Team I
Lender and Guaranty Agency Issues

Fifth Meeting
May 17-18, 1999
Washington, DC

This meeting, the Team's final meeting, commenced at approximately 8:30 a.m. on May 17, 1999, as scheduled and adjourned on May 18, 1999, at approximately 5:00 p.m.

All members except the Legal Services Coalition, the U.S. Public Interest Research Group, and the National Association of State Universities and Land Grant Colleges, and the Facilitators were present. The summary of the Team's fourth meeting was approved as circulated.

The meeting's main subjects of discussion were revised draft regulations distributed by the Department of Education on the basis that tentative agreements had been achieved on all issues before the Team at its fourth meeting. Some revisions of this draft were agreed upon and final consensus was formally achieved on the entire draft as modified.

The next item on the Team's agenda was discussion of certain "elective" regulatory provisions submitted per the invitation of the Department of Education. The Federal negotiator agreed, subject to Department approval, to include in its NPRM any such provisions that were supported by consensus. The only such provisions placed before the Team were 19 proposed amendments (numbered 1-19) submitted by a particular group of Team members. Of these, the following were supported by a consensus, at least in concept, as modified in these discussions.

1. Exempt in-school deferments from the 6-month retroactive limit and thus permit them to be retroactively effective as of the date the borrower first qualified for the deferment.
4. Authorize lenders to grant a 90-day administrative forbearance upon request of borrowers who advise that their ability to repay has been affected by a natural disaster.
5. Delete the Loan Forgiveness Demonstration Program in section 682.215. The program was never funded and has been repealed.
6. Authorize lenders and guarantors to suspend collection efforts against co-makers and endorsers during periods of mandatory stay when the borrower files a bankruptcy petition.
9. Authorize lenders and guarantors to grant a closed school discharge to an FFEL borrower without receiving an application for discharge from the borrower if the borrower previously had a Perkins or Direct Loan discharged based on closure of the same school. In addition, permit the guaranty agency to grant closed school discharges if the guaranty agency has information that borrowers qualify for the discharge and the Secretary approves.
10. Modify the current anti-discrimination provision for secondary markets (Authority) to specify that the Authority is considered to have adopted a discriminatory policy if the Authority makes or acquires loans made or guaranteed by an affiliate of the Authority which discriminates, unless the Authority makes arrangements for loans from another source to serve borrowers excluded by the discriminatory policy.
11. Include a discussion in the preamble indicating the Secretary's willingness to authorize lenders to experiment with different due diligence structures.
15. Authorize lenders to grant administrative forbearance, when granting a mandatory forbearance, to resolve a borrower's delinquency not covered by the mandatory forbearance.
16. Reduce the records retention period from 5 years to 3 years for lenders for loans paid-in-full by the borrower. The record retention period will remain 5 years for all other loans.
17. At the request of a school, authorize lenders to make subsequent disbursements of FFEL loans, following the return of a first disbursement, if the borrower remains eligible for the subsequent disbursements. Currently, the entire loan is cancelled upon return of the first disbursement and the student is required to reapply if subsequent disbursements are desired.

The Department of Education indicated that it would circulate final drafts of all provisions to the Team members as soon as they are prepared and that preamble drafts would probably be circulated within 10 to 14 days. Although the preamble was not subject to negotiations, the Department welcomed the members' comments. The Facilitators stated that this meeting summary would also be circulated and that revision suggestions should be submitted promptly to the Department, but no formal process for approval would be followed.

The Facilitators, the Department of Education, and other Team members congratulated the Team on achieving final consensus on the entire NPRM placed before it, and expressed their thanks for the collaborative approach taken by all members.

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