[Federal Register Volume 59, Number 194 (Friday, October 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24853]


[[Page Unknown]]

[Federal Register: October 7, 1994]


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Part V





Department of Education





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34 CFR Part 682




Federal Family Education Loan Program; Proposed Rule
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DEPARTMENT OF EDUCATION

34 CFR Part 682

RIN 1840-AC12

 
Federal Family Education Loan Program

AGENCY: Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the regulations governing the 
Federal Family Education Loan (FFEL) Program. The FFEL regulations 
govern the Federal Stafford Loan Program, the Federal Supplemental 
Loans for Students (Federal SLS) Program, the Federal PLUS Program, and 
the Federal Consolidation Loan Program, collectively referred to as the 
Federal Family Education Loan Program. The Federal Stafford Loan, the 
Federal SLS, the Federal PLUS and the Federal Consolidation Loan 
programs are hereinafter referred to as the Stafford, SLS, PLUS and 
Consolidation Loan programs. These amendments are needed to conform the 
FFEL Program regulations to reflect policy decisions made by the 
Secretary during development of regulations for the Federal Direct 
Student Loan Program, hereinafter referred to as the ``Direct Loan 
Program.''

DATES: Comments must be received on or before November 7, 1994.

ADDRESSES: All comments concerning these proposed regulations should be 
addressed to Pamela A. Moran, Chief, Loans Branch, Division of Policy 
Development, Policy, Training, and Analysis Service, U.S. Department of 
Education, 600 Independence Avenue, S.W. (room 4310, ROB-3), 
Washington, DC 20202-5449.
    A copy of any comments that concern information collection 
requirements should also be sent to the Office of Management and Budget 
at the address listed in the Paperwork Reduction Act section of this 
preamble.

FOR FURTHER INFORMATION CONTACT: Barbara Bauman, Program Specialist, 
Loans Branch, Division of Policy Development, Policy, Training, and 
Analysis Service, U.S. Department of Education, 600 Independence 
Avenue, S.W. (room 4310, ROB-3), Washington, DC 20202-5449. Telephone: 
(202) 708-8242. 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:

Background

    The Secretary is proposing to amend 34 CFR Part 682 of the 
Department's regulations to reflect certain policy decisions made 
during development of regulations for the Direct Loan Program.
    As required by section 492(a) of the Higher Education Act of 1965, 
as amended, (HEA) the Secretary convened a negotiated rulemaking 
committee to develop proposed rules for the second and subsequent years 
of the Direct Loan Program. During the negotiated rulemaking process, 
the Department, at the request of the negotiators, agreed to make 
changes in the FFEL Program to conform to policies and procedures 
adopted in the Direct Loan Program, wherever possible, to provide a 
consistent approach in both programs. In addition, some of these 
changes are necessary to ensure that the terms, conditions and benefits 
of FFEL Program loans and Direct Loans are the same, in accordance with 
Section 455(a)(1) of the HEA. These proposed regulations reflect those 
changes that would affect the FFEL Program. In addition, the Secretary 
invites comments on other provisions of the FFEL Program regulations 
that should be revised to conform with the Direct Loan Program 
provisions. The proposed Direct Loan Program regulations were published 
as a separate Notice of Proposed Rulemaking on August 18, 1994, 59 FR 
42646.
    This NPRM also proposes to delete certain regulatory provisions in 
34 CFR Part 682 which duplicate or conflict with other regulations. 
Specifically, the Secretary proposes to delete regulations governing 
the determination of a student's withdrawal date and institutional 
refund policies.
    These regulations will improve the efficiency of the Federal 
student aid programs and, by so doing, improve their capacity to 
enhance opportunities for postsecondary education. Encouraging students 
to graduate from high school and to pursue high quality postsecondary 
education are important elements of the National Education Goals.
    The student aid programs also enable both current and future 
workers to have the opportunity to acquire both basic and 
technologically advanced skills needed for today's and tomorrow's 
workplace. They provide the financial means for an increasing number of 
Americans to receive an education that will prepare them to think 
critically, communicate effectively, and solve problems efficiently, as 
called for in the National Education Goals.

Proposed Regulatory Changes

    The Secretary proposes to amend the following sections of the 
regulations to reflect changes needed to conform the FFEL Program to 
the proposed regulations for the Direct Loan Program. Those changes not 
related to the Direct Loan Program are otherwise noted.

Section 682.200  Definitions

    Estimated cost of attendance--The Secretary proposes to delete this 
definition from this section. This definition will be added as an 
appendix to the Student Assistance General Provisions regulations at 34 
CFR Part 668.
    Estimated financial assistance--Language that was inadvertently 
deleted from the FFEL Program final regulations published on June 28, 
1994 (59 FR 33334) has been restored and slightly revised. This change 
would make the regulations consistent with the current definition in 
the Direct Loan Program NPRM and the definition previously included in 
the December 18, 1992 FFEL regulations, with a minor revision to 
reflect the 1993 statutory change that includes the amount of the 
origination fee and the insurance premium in calculating the student's 
cost of attendance.

Section 682.201  Eligible borrowers

    Section 682.201(a)(4)(i)--The Secretary proposes to remove the 
requirement that, to receive a new loan, a borrower must reaffirm any 
FFEL loan amount that previously was canceled due to the borrower's 
total and permanent disability.

Section 682.205  Disclosure requirements for lenders

    Section 682.205(a)(2)(ix)--The Secretary proposes to amend the 
regulations to require a lender to answer questions from borrowers 
regarding the loan application process and provide information about 
the terms and conditions for consolidating FFEL Program loans and the 
types of loans that may be consolidated. The Secretary believes that 
borrower access to this information is critical in light of the 
expanded repayment options available to consolidation loan borrowers. 
This proposed change is also consistent with the obligation assumed by 
the Direct Loan servicer in the Direct Loan Program that, although not 
specified in Direct Loan Program regulations, is assumed by the 
servicer as part of its contract with the Department.

Section 682.207  Due Diligence in Disbursing a Loan

    Section 682.207(d)(2)(iii)--With regard to late disbursements, the 
Secretary proposes to permit a lender in certain circumstances to make 
a late disbursement more than 60 days after the student ceases to be 
enrolled at the school on at least a half-time basis, or after the end 
of the period of enrollment, as applicable. However, a lender may make 
a late disbursement within 30 days after the standard 60-day period 
provided for in Sec. 682.207 only in documented exceptional 
circumstances, such as a student's serious, unexpected illness, with 
the prior approval of the guaranty agency. The Secretary has proposed a 
comparable provision in the Direct Loan Program.

Section 682.402  Death, Disability, Closed School, False Certification, 
and Bankruptcy Payments

    Section 682.402(e)(13)(iii)--The NPRM proposes to simplify the 
language of this provision to conform to the Direct Loan Program 
proposed regulations.

Section 682.602  Schedule Requirements for Courses of Study by 
Correspondence

    Section 682.602(a)--The Secretary has modified the language in this 
section to conform to the Direct Loan Program proposed regulations.

Section 682.604  Processing the Borrower's Loan Proceeds and Counseling 
Borrowers

    Section 682.604(d)(1)(ii)(B)--The Secretary proposes to modify the 
requirement that the school, as a fiduciary for the benefit of the 
student, must retain loan proceeds held at the student's request to 
assist the student in budgeting, in a designated trust account. 
Instead, the regulations propose to allow the school to maintain these 
funds in a separately-designated subsidiary account under its general 
bank account. The Secretary has proposed a comparable provision for the 
Direct Loan Program.
    Section 682.604(e)(4)--The Secretary proposes to allow a school no 
more than 45 days after the school's receipt of a late disbursement of 
loan proceeds to deliver those loan proceeds to the borrower.
    Section 682.604(f)(1)--The Secretary proposes to change the 
requirement for counseling first-time borrowers. A school will not be 
required to administer initial counseling to a student who has already 
borrowed under the FFEL or Direct Loan Program.

Section 682.605 Determining the Date of a Student's Withdrawal

    Section 682.605--The Secretary proposes to revise this section to 
clarify that a school must determine the date of a student's withdrawal 
by following the procedures in 34 CFR 668.22(i). The Secretary proposes 
to delete the provisions regarding leaves of absence. The Secretary's 
regulations now provide in Sec. 668.22 that a student on a leave of 
absence is considered to have withdrawn for purposes of the refund 
calculation. Therefore, the Secretary believes that, for consistency, 
such a student should be considered withdrawn for all purposes.

Section 682.606 Refund Policy

    Section 682.606--The Secretary proposes to delete this section from 
the FFEL regulations. A school is required to follow the procedures in 
34 CFR 668.22 regarding refund policies for all of the Federal Title IV 
Student Financial Assistance Programs.

Section 682.607 Payment of a Refund to a Lender

    Section 682.607(c)--The Secretary proposes to revise the timely 
payment requirement to require a school to pay a refund to the lender 
within 30 days after the date the school determines that the student 
has withdrawn under 34 CFR 668.22(i). This change is proposed in order 
to conform to existing General Provisions Regulations.

Executive Order 12866

1. Assessment of Costs and Benefits.

    These proposed regulations have 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 the proposed regulations are 
those resulting from statutory requirements and those determined by the 
Secretary to be necessary for administering this program effectively 
and efficiently. Burdens specifically associated with information 
collection requirements, if any, are identified and explained elsewhere 
in this preamble under the heading Paperwork Reduction Act of 1980.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these proposed regulations, the Secretary has 
determined that the benefits of the regulations justify the costs.
    The Secretary has also determined that this regulatory action does 
not unduly interfere with State, local, and tribal governments in the 
exercises of their governmental functions.
    To assist the Department in complying with the specific 
requirements of Executive Order 12866, the Secretary invites comment on 
whether there may be further opportunities to reduce any potential 
costs or increase potential benefits resulting from these proposed 
regulations without impeding the effective and efficient administration 
of the program.

2. Clarity of the regulations.

    Executive Order 12866 requires each agency to write regulations 
that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following: (1) Are the requirements in the proposed regulations 
clearly stated? (2) Do the regulations contain technical terms or other 
wording that interferes with their clarity? (3) Does the format of the 
regulations (grouping and order of sections, use of headings, 
paragraphing, etc.) aid or reduce their clarity? Would the regulations 
be easier to understand if they were divided into more (but shorter) 
sections? (A ``section'' is preceded by the symbol ``Sec. '' and a 
numbered heading; for example, Sec. 682.200 Definitions.) (4) Is the 
description of the regulations in the ``Supplementary Information'' 
section of this preamble helpful in understanding the regulations? How 
could this description be more helpful in making the regulations easier 
to understand? (5) What else could the Department do to make the 
regulations easier to understand?
    A copy of any comments that concern how the Department could make 
these proposed regulations easier to understand should be sent to 
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of 
Education, 600 Independence Avenue, S.W. (Room 5100, FB-10), 
Washington, DC 20202-2241.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities.
    While the statute requires that the Secretary regulate certain 
actions that must be taken by various program participants, these 
requirements would not have a significant impact because they would not 
impose excessive regulatory burdens or require unnecessary Federal 
supervision. The regulations would impose minimal additional 
requirements to protect the Federal fiscal interest, as well as the 
interests of the borrowers under the programs.

Paperwork Reduction Act of 1980

    Sections 682.205, 682.602, 682.604, and 682.605 contain information 
collection requirements. As required by the Paperwork Reduction Act of 
1980, the Department will submit a copy of these proposed regulations 
to the Office of Management and Budget (OMB) for its review. (44 U.S.C. 
3504(h))
    Annual public reporting and recordkeeping burden is estimated to 
result in a reduction of 50 hours per 500 respondents, including the 
time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and reviewing the collection 
of information.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, room 10235, New Executive Office 
Building, Washington, DC 20503; Attention: Daniel J. Chenok.

Invitation to Comment

    Interested persons are invited to submit comments and 
recommendations regarding these proposed regulations.
    All comments submitted in response to these proposed regulations 
will be available for public inspection, during and after the comment 
period, in room 4310, Regional Office Building 3, 7th and D Streets, 
SW., Washington, DC between the hours of 8:30 a.m. and 4 p.m., Monday 
through Friday of each week except federal holidays.

Assessment of Educational Impact

    The Secretary particularly requests comments on whether the 
proposed regulations in this document would require transmission of 
information that is being gathered by or is available from any other 
agency or authority of the United States.

List of Subjects in 34 CFR Part 682

    Administrative practice and procedure, Colleges and universities, 
Education, Loan programs-education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

(Catalog of Federal Domestic Assistance Number 84.032, Federal 
Family Education Loan Program)

    Dated: October 3, 1994.
Richard W. Riley,
Secretary of Education.

    The Secretary proposes to amend Part 682 of Title 34 of the Code of 
Federal Regulations 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.

    2. Section 682.200, paragraph (b) is amended by removing the 
definition of ``Estimated cost of attendance''; by amending the 
definition of ``Estimated financial assistance'', which will be 
effective July 1, 1995, by redesignating paragraph (1)(viii) as 
paragraph (1)(ix), and adding a new paragraph (1)(viii) to read as 
follows:


Sec. 682.200  Definitions.

* * * * *
    (b) * *
    Estimated financial assistance. (1) * * *
    (viii) If the student is applying for a loan to cover expenses 
incurred within the same enrollment period as that for which a prior 
FFEL was received, the amount of Stafford, SLS, and PLUS loan proceeds 
received by the borrower, including the amount of the origination fee 
and insurance premium, that were included in computing the borrower's 
estimated cost of attendance for the prior loan; and
* * * * *
    3. Section 682.201 is amended by revising paragraph (a)(4)(i) and 
paragraph (a)(5)(i) to read as follows:


Sec. 682.201  Eligible borrowers.

    (a) * * *
    (4)(i) Reaffirms any FFEL loan amount that previously was 
discharged in bankruptcy or that was written off.
* * * * *
    (5)(i) In the case of a borrower whose previous loan was cancelled 
due to total and permanent disability, the student must--
    (A) Obtain a certification from a physician that the borrower is 
able to engage in substantial gainful activity; and
    (B) Sign a statement acknowledging that the FFEL loan the borrower 
receives cannot be cancelled in the future on the basis of any 
impairment present when the new loan is made, unless that impairment 
substantially deteriorates.
* * * * *
    4. Section 682.205 is amended by revising paragraph (a)(2)(ix) to 
read as follows:


Sec. 682.205  Disclosure requirements for lenders.

    (a) * * *
    (2) * * *
    (ix) An explanation of any special options the borrower may have 
for consolidating or refinancing the loan. The lender shall answer 
questions regarding the process on applying for a consolidation loan 
and provide information about the terms and conditions of consolidation 
loans as well as the types of loans that may be consolidated.
* * * * *
    5. Section 682.207 is amended by removing the period at the end of 
paragraph (d)(2)(ii) and adding, in its place, ``;or''; and adding a 
new paragraph (d)(2)(iii) to read as follows:


Sec. 682.207  Due diligence in disbursing a loan.

* * * * *
    (d) * * *
    (2) * * *
    (iii) Within 90 days after the student ceases to be enrolled on at 
least a half-time basis or after the expiration date of the period of 
enrollment for which the loan was made, whichever is earlier, with the 
prior approval of the guaranty agency, based on a borrower's documented 
exceptional circumstances.
* * * * *
    6. Section 682.402 is amended by revising paragraphs (e)(1)(i)(A), 
(e)(13) heading, and (e)(13)(iii) to read as follows:


Sec. 682.402  Death, disability, closed school, false certification, 
and bankruptcy payments.

* * * * *
    (e) * * *
    (1) * * *
    (i) * * *
    (A) Certified the student's eligibility for a FFEL Program loan on 
the basis of ability to benefit from its training and the student did 
not meet the applicable requirements described in 34 CFR Part 668 and 
section 484(d) of the Act, as applicable and as described in paragraph 
(e)(13) of this section; or
* * * * *
    (13) Requirements for certifying a borrower's eligibility for a 
loan.
* * * * *
    (iii) Notwithstanding paragraphs (e)(13)(i) and (ii) of this 
section, a student did not have the ability to benefit from training 
offered by the school if--
    (A) The school certified the eligibility of the student for a FFEL 
Program loan; and
    (B) At the time of certification, the student would not meet the 
requirements for employment (in the student's State of residence) in 
the occupation for which the training program supported by the loan was 
intended because of a physical or mental condition, age, or criminal 
record or other reason accepted by the Secretary.
* * * * *
    7. Section 682.602 is amended by revising the section heading; 
removing paragraph (c); redesignating paragraphs (a) and (b) as 
paragraphs (b) and (c) respectively; and adding a new paragraph (a) to 
read as follows:


Sec. 682.602  Schedule requirements for courses of study by 
correspondence.

    (a) This section provides guidance for schools that offer programs 
of study by correspondence for the purpose of determining enrollment 
status.
* * * * *
    8. Section 682.604 is amended by revising the last sentence of 
paragraph (d)(1)(ii)(B); by revising paragraph (e)(4) introductory 
text; and by revising paragraph (f)(1) to read as follows:


Sec. 682.604  Processing the borrower's loan proceeds and counseling 
borrowers.

* * * * *
    (d) * * *
    (1) * * *
    (ii) * * *
    (B) * * * The school shall maintain these funds in a separate 
account established solely for the purpose of holding students' funds 
and may not commingle them with other funds or use them for any other 
purpose.
* * * * *
    (e) * * *
    (4) If the lender or guaranty agency has not informed the school 
that it prohibits a late disbursement as permitted by 
Sec. 682.207(d)(2)(i), and if the total amount of the disbursement and 
all prior disbursements on the loan does not exceed that portion of the 
student's documented educational costs for the period of enrollment 
completed by the student before the earlier of the dates described in 
paragraph (e)(1) of this section, the school shall deliver the 
borrower's loan proceeds to the borrower not later than 45 days after 
the school's receipt of the funds. If the total amount of the late 
disbursement and all prior disbursements is greater than that portion 
of the borrower's documented educational charges, the school shall--
* * * * *
    (f) * * *
    (1) Except in the case of a student enrolled in a correspondence 
program or a study-abroad program approved for credit at the home 
institution, a school shall conduct initial counseling with each 
Stafford borrower either in person, by audiovisual presentation or by 
computer assisted technology. In each case, the school shall conduct 
this counseling prior to its release of the first disbursement of the 
proceeds of the first Stafford loan made to the borrower for attendance 
at the school, unless the borrower has received a prior Stafford, SLS 
or Direct loan, and shall ensure that an individual with expertise in 
the Title IV programs is reasonably available shortly after the 
counseling to answer the borrower's questions regarding those programs. 
In the case of a correspondence school or a student enrolled in a 
study-abroad program that the school approves for credit, the school 
shall provide the borrower with written counseling materials by mail 
prior to releasing those proceeds.
* * * * *
    9. Section 682.605 is revised to read as follows:


Sec. 682.605  Determining the date of a student's withdrawal.

    (a) A school shall follow the procedures in 34 CFR 668.22(i) for 
determining the student's date of withdrawal.
    (b) The school shall use the date determined under 34 CFR 668.22(i) 
for the purpose of reporting to the lender the date that the student 
has withdrawn from the school and for determining when a refund must be 
paid under 34 CFR 668.22.

(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1082, 1094)


Sec. 682.606  [Removed]

    10. Section 682.606 is removed and reserved.
    11. Section 682.607 is amended by revising paragraph (c)(1) to read 
as follows:


Sec. 682.607  Payment of a refund to a lender.

* * * * *
    (c) * * *
    (1) Within 30 days after the student's withdrawal as determined 
under 34 CFR 668.22(i).
* * * * *

Appendix A [Removed and Reserved]

    11. Appendix A to part 682 is removed and reserved.

[FR Doc. 94-24853 Filed 10-6-94; 8:45 am]
BILLING CODE 4000-01-P