[Federal Register Volume 59, Number 71 (Wednesday, April 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8889]


[[Page Unknown]]

[Federal Register: April 13, 1994]


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Part IV





Department of Education





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34 CFR Part 668 et al.




Student Assistance General Provisions, Federal Perkins Loan, Federal 
Work-Study, Federal Supplemental Educational Opportunity Grant; Final 
Rule
DEPARTMENT OF EDUCATION

34 CFR Parts 668, 674, 675, 676, 682, 685, and 690

 
Student Assistance General Provisions, Federal Perkins Loan, 
Federal Work-Study, Federal Supplemental Educational Opportunity Grant, 
Federal Family Education Loan, Federal Direct Student Loan, and Federal 
Pell Grant Programs

AGENCY: Department of Education.

ACTION: Notice of relief from regulatory provisions.

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SUMMARY: The Secretary of Education announces regulatory relief from 
specific regulations governing the Federal Perkins Loan, Federal Work-
Study (FWS), Federal Supplemental Educational Opportunity Grant 
(FSEOG), Federal Family Education Loan (FFEL), Federal Direct Student 
Loan, and Federal Pell Grant programs, for the 1993-94 and 1994-95 
award years, to assist institutions and individuals who suffered 
financial harm from the California earthquake of January 1994.

EFFECTIVE DATE: This notice takes effect either 45 days after 
publication in the Federal Register or later if the Congress takes 
certain adjournments. If you want to know the effective date of this 
notice, call or write the Department of Education contact person. A 
document announcing the effective date will be published in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Kathy S. Gause, Senior Program 
Specialist, Grants Branch, Division of Policy Development, Policy, 
Training, and Analysis Service, U.S. Department of Education, 400 
Maryland Avenue SW., (Regional Office Building 3, room 4018), 
Washington, DC 20202-5447. Telephone (202) 708-4690. Individuals who 
use a telecommunications device for the deaf (TDD) may call the Federal 
Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 
p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: Many institutions of higher education, 
student financial aid applicants, and recipients have been adversely 
affected by the earthquake in California. The President signed the 
Emergency Supplemental Appropriations Act of 1994 (Pub. L. 103-211) on 
February 12, 1994. The Act authorizes the Secretary to reallocate any 
excess funds under the Federal Perkins Loan and the FWS programs from 
the 1993-94 award year to assist individuals who suffered financial 
harm as a result of the California earthquake of January 1994. The 
Secretary has the authority to reallocate these funds only to 
institutions for use in the 1994-95 award year. Institutions will be 
informed of the application procedures for obtaining reallocated funds 
to assist California earthquake victims in a letter issued by the 
Department to financial aid administrators.
    The Emergency Supplemental Appropriations Act of 1994, however, 
does not expressly authorize the reallocation of funds returned under 
the FSEOG Program. The Higher Education Act of 1965, as amended (HEA), 
in section 413D permits the Secretary, in accordance with regulations, 
to reallocate excess FSEOG funds returned by an institution to other 
institutions. Under current FSEOG regulations (34 CFR 676.4), the 
Secretary reallocates funds on a pro rata basis, i.e., the amount of an 
institution's fair-share shortfall as a percentage of the fair-share 
shortfalls of all participating institutions with an unmet FSEOG 
request. The Secretary has decided to promulgate standards to allow 
excess funds under the FSEOG Program from the 1993-94 award year to be 
reallocated during the 1994-95 award year to assist students adversely 
affected by the California earthquake. The funds will be reallocated to 
institutions that enroll students adversely affected by the earthquake 
and submit applications in the format required by the Secretary. If the 
total funds requested exceed the total funds available, the funds will 
then be reallocated on a pro rata basis only among these institutions 
to provide assistance to students whose financial need has increased as 
a result of the 1994 California earthquake.
    The Secretary recognizes the severe impact the earthquake has had 
on institutions and their students located in the designated natural 
disaster areas. Many institutions and individuals adversely affected by 
the earthquake are facing immediate problems concerning the 
disbursement and repayment of student loans.
    The Title IV student financial aid programs affected by this notice 
are the FFEL Program (consisting of the Federal Stafford Loan Program, 
the Federal Supplemental Loans for Students (SLS) Program, the Federal 
PLUS Program, and the Federal Consolidation Loan Program); the Federal 
Direct Student Loan Program; the Federal Pell Grant Program; and the 
Federal Perkins Loan, FWS, and FSEOG programs (known collectively as 
the campus-based programs). To assist both institutions and 
individuals, this notice also provides certain regulatory relief to 
institutions in their administration of these student financial aid 
programs.
    The Secretary has already provided certain regulatory relief to 
lenders and guaranty agencies in the FFEL Program under section 
432(a)(6) of the HEA and 34 CFR 682.406(b) and 682.413(f). The guaranty 
agency directors were informed of this relief in a letter dated January 
31, 1994.

Covered Individuals

    This notice is intended to assist institutions and individuals that 
have been adversely affected by the California earthquake of January 
1994. This notice will apply to institutions that were unable to 
maintain normal operations because they were located in Los Angeles, 
Orange, or Ventura Counties on the date on which the President declared 
the existence of a major disaster. This notice of relief also applies 
only to individuals who suffered financial harm from the disaster and, 
at the time the disaster occurred, were residing, attending an 
institution of higher education, or employed in the counties designated 
as disaster areas (or, in the case of an individual who is a dependent 
student, whose parent or stepparent suffered financial harm from such 
disaster and resided or was employed in such an area at that time). 
This notice of regulatory relief will be applicable for awards made 
under the Title IV programs and collection activities conducted under 
the Federal Perkins Loan Program during the 1993-94 and 1994-95 award 
years (the periods from July 1, 1993 to June 30, 1994 and July 1, 1994 
to June 30, 1995).

    Note: For further updates to the list of designated disaster 
areas, institutions may contact the Department on its toll-free 
number at 1-800-433-3243 between 9 a.m. and 5:30 p.m., Eastern time, 
Monday through Friday. Individuals who use a telecommunications 
device for the deaf (TDD) may call 1-800-730-8913 between 9 a.m. and 
5:30 p.m., Eastern time, Monday through Friday.

    The Secretary provides the following enforcement relief from the 
regulations governing the student financial aid programs under Title IV 
of the HEA:

I. 34 CFR Part 668--Student Assistance General Provisions

A. 34 CFR 668.19  Financial Aid Transcript

    Under current regulations, before a student who previously attended 
another eligible institution may receive any Title IV, HEA program 
funds, the institution to which the student is transferring must make 
an effort to obtain the student's financial aid transcript. The 
Secretary is waiving the requirement to obtain financial aid 
transcripts before disbursing funds for individuals who attended 
institutions covered by this notice for the 1993-94 and 1994-95 award 
years. If the financial aid transcript is not available as a result of 
damage caused by the California earthquake, the institution may 
disburse Title IV funds. Any institution affected by this situation 
must document in the student's file that the financial aid transcript 
is unavailable due to damage stemming from the natural disaster. In 
addition, the student will still be expected to provide statements 
concerning all prior financial aid received, and the institution will 
be expected to retain this information in the student's file.

B. 34 CFR 668.51-668.61  Subpart E--Selection of Applicants for 
Verification

    The Secretary is waiving verification requirements under 34 CFR 
668.51-668.61 during the 1993-94 and 1994-95 award years for those 
applicants who are selected for verification and whose records were 
lost or destroyed because of the California earthquake. The institution 
must document in the student's file that the records are unavailable 
due to damage stemming from the natural disaster. For these students, 
Verification Status Code ``S'' may be used when reporting a Federal 
Pell Grant disbursement.

II. 34 CFR Part 690--Federal Pell Grant Program

34 CFR 690.83  Submission of Reports

    The Secretary modifies the deadline in 34 CFR 690.83(a)(1)(i) that 
an institution submit all SAR Payment Vouchers (or the equivalent) for 
an award year by September 30 following the end of the award year in 
which the grant is made. The Secretary will extend this reporting date, 
on a ``case-by-case'' basis, for institutions affected by the 
California earthquake.

III. 34 CFR Part 674 and 676--Federal Perkins Loan and FSEOG 
Programs

A. Federal Perkins Loan Program

1. 34 CFR 674.31  Promissory Note
    Under 34 CFR 674.31(b)(2), the terms of a student's promissory note 
require that repayment of a loan must begin six (6) or nine (9) months 
after a borrower ceases to be at least a half-time regular student and 
that the repayment period normally ends 10 years later. The Secretary 
is modifying this provision that specifies the commencement of a 
borrower's repayment period to provide that any borrower who was in an 
``in-school'' status at the time the natural disaster occurred and was 
unable to complete course requirements or enroll in classes due to the 
earthquake will continue to be in an ``in-school'' status until such 
time as the borrower withdraws or until the end of the 1993-94 award 
year, whichever is earlier. The institution must document this reason 
for continued ``in-school'' status in the student's file.
2. 34 CFR 674.42  Contact With the Borrower
    The Secretary will not require an institution to comply with the 
provisions of Sec. 674.42(b) that require an institution to make 
contact with the borrower during an initial or postdeferment grace 
period if that grace period coincides with the California earthquake. 
These requirements shall be suspended for a period of time not to 
exceed the earlier of either the date on which the institution is able 
to resume normal contact with the borrower or June 30, 1994. An 
institution must document the reason for suspension of these activities 
in the borrower's file.
3. 34 CFR 674.41-674.50  Subpart C--Due Diligence
    The Secretary will not enforce 34 CFR part 674, subpart C--Due 
Diligence. An institution may suspend the collection activities for 
borrowers already in default at the time of the natural disaster. These 
requirements shall resume on July 1, 1994. An institution must document 
the reason for suspension of these activities in the borrower's file.
4. 34 CFR 674.34-674.37  Deferment of Repayment
    The Secretary modifies the provisions for hardship deferment in 34 
CFR 674.34(i), 674.35(e), and 674.36(e) and authorizes an institution 
to grant an administrative hardship deferment to a borrower who is in 
repayment at the time of the natural disaster but who is unable to 
continue to repay the loan due to the disaster. Interest will accrue 
during any period of administrative hardship deferment. 34 CFR 674.37 
requires that a borrower submit a written request for deferment. Under 
this administrative hardship deferment, a borrower may request this 
deferment orally and will not be required to submit a deferment 
documentation form to be considered eligible for this deferment. The 
administrative hardship deferment may be granted for a period of time 
not to exceed the earlier of either the date on which the borrower is 
able to resume making payments on the loan or June 30, 1995. 
Documentation must be maintained according to the governing 
regulations.

B. FSEOG Program

34 CFR 676.4  Allocation and Reallocation
    For the 1994-95 award year, FSEOG funds returned by institutions 
from the 1993-94 award year will be reallocated to institutions that 
enroll students adversely affected by the 1994 California earthquake 
and submit applications in the format required by the Secretary. If the 
total funds requested exceed the total amount of funds available, the 
funds will then be reallocated on a pro rata basis only among these 
institutions to provide assistance to students whose financial need has 
increased as a result of the earthquake.

IV. 34 CFR Part 682--Federal Family Education Loan (FFEL) Program

A. 34 CFR 682.604  Processing the Borrower's Loan Proceeds and 
Counseling Borrowers

    To assist affected individuals, the Secretary modifies the 
requirement in 34 CFR 682.604(c)(2) that loan proceeds be delivered to 
the borrower within 45 days of the institution's receipt of the check 
but will instead permit the institution to deliver loan proceeds to the 
borrower up to 120 days from the institution's receipt of the check. 
Documentation must be maintained according to the governing 
regulations. The Department still expects delivery of a borrower's loan 
proceeds as soon as possible.
    Also, because some institutions may have to delay opening or have 
ceased operation for an undetermined period of time, the Secretary 
authorizes lenders not to disburse loan checks to institutions or to 
parent PLUS borrowers in the affected areas until the lenders receive 
revised disbursement schedules from the affected institutions. The 
Secretary instructs guaranty agencies and lenders to revise information 
on loan periods, graduation dates, and so forth, on the loan 
applications related to these disbursements as the information becomes 
available. This change means that a borrower need not reapply for the 
loan. This change also will allow a student to receive his or her loan 
proceeds according to a schedule that fits the institution's new 
academic schedule.

B. 34 CFR 682.605  Determining the Date of a Student's Withdrawal

    The Secretary modifies the requirement in 34 CFR 682.605(b) to 
permit an institution affected by the disaster to determine that the 
student has withdrawn within 90 days (instead of 45) after the 
expiration of the academic term for an institution that uses academic 
terms, except that 60 days (instead of 30) after the first day of the 
next scheduled term may be used in the case of a summer break, and 50 
days (instead of 25) after the student's last date of attendance may be 
used for an institution that measures academic progress in clock hours 
or credit hours, but does not use a semester, trimester, or quarter 
system.

C. 34 CFR 682.607  Payment of a Refund to a Lender

    The Secretary modifies the deadlines by which an affected 
institution shall pay a refund that is due to a lender, within 60 days 
after the student's withdrawal as determined under 34 CFR 
682.605(b)(1)-(3) or within 30 days in the case of a student who does 
not return to the institution at the expiration of an approved leave of 
absence under 34 CFR 682.605(c). Instead, the Secretary will require 
the institution to pay a refund to the lender within 120 days (instead 
of 60) after the student's withdrawal or within 60 days (instead of 30) 
after the last day of the leave of absence.

D. 34 CFR 682.610  Records, Reports, and Inspection Requirements for 
Participating Schools

    The Secretary modifies the deadline in 34 CFR 682.610(c) that an 
institution complete and submit required Student Status Confirmation 
Reports (SSCRs) to the Secretary or guaranty agency within 30 days of 
the institution's receipt of the report but will instead require 
completion and submission of these reports within 90 days. Reports of 
changes of borrower status if the institution does not expect to submit 
its next SSCR within the next 60 days may also be submitted within 90 
days (instead of 30 days).

Waiver of Rulemaking

    In accordance with section 431(b)(2)(A) of the General Education 
Provisions Act, 20 U.S.C. 1232(b)(2)(A), and the Administrative 
Procedure Act, 5 U.S.C. 553, it is the practice of the Secretary to 
offer interested parties the opportunity to comment on proposed 
regulations. However, the severe impact of the earthquake in California 
has caused a national emergency that has been recognized by the 
Congress. The Secretary, recognizing the severe devastation of the 
California earthquake victims, finds that soliciting further public 
comment with respect to this notice of relief from regulatory 
requirements is impracticable and contrary to the public interest under 
5 U.S.C. 553(b)(B).

Executive Order 12866

    This notice has been reviewed in accordance with Executive Order 
12866. Under the terms of the order the Secretary has assessed the 
potential costs and benefits of this regulatory action.
    The potential costs associated with this notice are those resulting 
from statutory requirements and those determined necessary for 
providing emergency relief during a natural disaster. This notice 
provides relief from administrative burden associated with information 
collection requirements.

Regulatory Flexibility Act Certification

    The Secretary certifies that this notice will not have a 
significant economic impact on a substantial number of small entities. 
The small entities affected by this notice are small institutions of 
postsecondary education. This notice provides temporary regulatory 
relief and will not increase institutions' workload or costs associated 
with administering the Title IV, HEA programs. It will therefore not 
have a significant economic impact on the entities affected.

Assessment of Educational Impact

    The Secretary has determined that this document does not require 
transmission of information that is being gathered by or is available 
from any other agency or authority of the United States.

(Catalog of Federal Domestic Assistance Numbers: 84.032 Federal 
Family Education Loan Program; 84.038 Federal Perkins Loan Program; 
84.007 Federal Supplemental Educational Opportunity Grant Program; 
84.033 Federal Work-Study Program; 84.063 Federal Pell Grant 
Program; 84.268 Federal Direct Student Loan Program)

    Dated: April 8, 1994.
Richard W. Riley,
Secretary of Education.
[FR Doc. 94-8889 Filed 4-12-94; 8:45 am]
BILLING CODE 4000-01-P