[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Proposed Rules]
[Pages 49130-49134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23125]




[[Page 49129]]

_______________________________________________________________________

Part VI





Department of Education





_______________________________________________________________________



34 CFR Part 682



Federal Family Education Loan Program; Proposed Rule

  Federal Register / Vol. 60, No.183 / Thursday, September 21, 1995 / 
Proposed Rules  

[[Page 49130]]


DEPARTMENT OF EDUCATION

34 CFR Part 682

RIN 1840-AC21


Federal Family Education Loan Program

AGENCY: Department of Education.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

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. The Secretary is proposing to make changes 
to the FFEL Program regulations to reflect policies and procedures 
implemented in the William D. Ford Federal Direct Student Loan Program, 
hereinafter referred to as the Direct Loan Program.

DATES: Comments must be received on or before October 23, 1995.

ADDRESSES: All comments concerning these proposed regulations should be 
addressed to Pamela A. Moran, U.S. Department of Education, Post Office 
Box 23272, Washington, DC 20026-3272. Comments may also be sent through 
the internet to [email protected].
    To ensure that public comments have maximum effect in developing 
the final regulations, the Department urges that each comment clearly 
identify the specific section or sections of the regulations that the 
comment addresses and that comments be in the same order as the 
regulations.
    Comments that concern information collection requirements must be 
sent to the Office of Management and Budget at the address listed in 
the Paperwork Reduction Act section of this preamble. A copy of those 
comments may also be sent to the Department representative named in the 
preceding paragraph.

FOR FURTHER INFORMATION CONTACT: Barbara Bauman, Program Specialist, 
Loans Branch, Policy Development Division, Policy, Training, and 
Analysis Service, U.S. Department of Education, 600 Independence 
Avenue, SW. (room 3053, 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 adopt certain policies and procedures that 
have been used in the Direct Loan Program.
    On October 7, 1994, the Secretary published a Notice of Proposed 
Rulemaking (NPRM) in the Federal Register (59 FR 51346) proposing 
changes to the FFEL regulations to reflect certain policy decisions 
made during development of the Direct Loan regulations. The comments on 
the NPRM suggested additional changes to those included in the proposed 
rule. In publishing the final regulations on November 29, 1994 (59 FR 
61210), the Secretary stated that he needed to further evaluate the 
implications of these additional changes. This NPRM proposes to adopt 
many of the suggestions made by those comments. The Secretary believes 
these regulations will streamline and improve the efficiency of the 
FFEL program.
    By improving the efficiency of the FFEL Program, these proposed 
regulations will 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. These programs 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 final regulations for the Direct Loan Program. Those changes not 
related to the Direct Loan Program are otherwise noted.

Section 682.200 Definitions

    Satisfactory repayment arrangement--The Secretary, in order to 
reflect a recent statutory change made by the Higher Education 
Technical Amendments of 1993, Public Law 103-208, proposes to amend the 
regulations to clarify that a borrower may make satisfactory repayment 
arrangements on a defaulted FFEL debt for purposes of regaining Title 
IV eligibility only one time.

Section 682.201 Eligible Borrowers

    Section 682.201(c)(1)(iii)(D)--In order to align the FFEL Program 
with the Direct Loan Program regulations, the Secretary proposes to 
allow a borrower in a default status to be eligible for a consolidation 
loan if the borrower either makes satisfactory repayment arrangements 
as that term is defined or agrees to repay the consolidation loan under 
an income-sensitive repayment plan.

Section 682.207 Due Diligence in Disbursing a Loan

    Section 682.207(c)(4)--The Secretary proposes, in order to conform 
to Direct Loan Program regulations and to reflect current FFEL policy, 
to allow a loan to be disbursed in a single installment, if at least 
one-half of the loan period has elapsed before the first disbursement 
is made.
    Section 682.207(d)(2)(iii)--The Secretary proposes to clarify that 
a lender has an additional 30-day period to make a late disbursement of 
a loan if the school documents a borrower's exceptional circumstances. 
Previously, the regulations suggested that documentation of the 
exceptional circumstances was required for all late disbursements.
    The Secretary also proposes to remove the references in 
Sec. 682.207 and Sec. 682.604 providing for lender or guaranty agency 
options regarding disbursement policies, so that every eligible student 
is assured certain opportunities with the approval of the school.

Section 682.209 Payment Application and Prepayment

    Section 682.209(b)(2)--The Secretary further clarifies that this 
section deals with the application of payments and how to deal with 
prepayments. The Secretary proposes to require a lender who receives a 
prepayment (made by a borrower without the borrower's specific 
instructions as to how to apply the proceeds) in an amount that equals 
or exceeds the borrower's scheduled monthly repayment amount to apply 
that amount to future installment payments on the loan by advancing the 
borrower's next payment due date. The Secretary proposes this change 

[[Page 49131]]
(previously left to the lender's discretion and allowed only in 
situations where a borrower's payment exceeded 3 full payments) to 
conform to current Direct Loan Program policies and so that all 
borrowers are treated equally.

Section 682.210 Deferment

    Section 682.210(a)(8)--The Secretary proposes to clarify that a 
defaulted borrower is eligible for a deferment only if the borrower has 
made satisfactory repayment arrangements with the lender prior to the 
lender's filing of a default claim on the loan.

Section 682.211 Forbearance

    Section 682.211(f)(9)--The Secretary proposes to allow a lender to 
provide administrative forbearance in situations where a borrower ends 
a period of eligible deferment in delinquent status.
    Section 682.401 Basic Program Agreement
    Section 682.401(b)(10)(vi)(B)(1)--The Secretary proposes that in 
instances where a loan or a portion of a loan is returned by the school 
at any time to a lender, the lender shall refund to the borrower the 
premium attributable to each disbursement of the loan.

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

    Section 682.402--The Secretary proposes to clarify that a lender 
must return any payments made by or on behalf of the borrower after the 
date that the borrower became totally and permanently disabled as 
certified by a physician. At the same time that the lender returns the 
payments to the borrower or sender, the lender must notify the borrower 
or sender that there is no obligation to repay that loan.
    Also, the Secretary proposes, in order to conform with the Direct 
Loan Program, that if a guaranty agency receives any payments from a 
borrower or a borrower's representative for a loan discharged in 
bankruptcy on which the Secretary previously paid a claim, the agency 
must return 100% of these payments to the borrower. Previously these 
payments were remitted to the Secretary. At the same time that the 
guaranty agency returns the payments to the borrower or representative 
the agency must notify the borrower that there is no obligation to 
repay that loan.

Section 682.412 Consequences of the Failure of a Borrower or Student To 
Establish Eligibility

    Section 682.412(c)--The Secretary is making a change in the 
regulations to clarify that a borrower has 30 days from the date a 
final demand letter is sent by the lender in which to repay an amount 
for which the borrower was ineligible.

Section 682.603 Certification by a Participating School in Connection 
With a Loan Application

    Section 682.603 (f) and (g)--The Secretary proposes this change to 
conform to language in the Direct Loan Program regulations.

Section 682.605 Determining the Date of a Student's Withdrawal.

    Section 682.605(c)--The Secretary is reinserting language that was 
inadvertently deleted during the development of the November 29, 1994 
final regulations regarding the determination of the date of a 
student's withdrawal for purposes other than calculating a refund.

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 1995.
    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 
exercise 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 SW. (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 1995

    Sections 682.207, 682.209, 682.210, 682.211, 682.401, 682.402, 
682.412, 682.603, 682.604 and 682.605 contain information collection 
requirements. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), the Department of Education has submitted a copy of 
these sections to the Office of 

[[Page 49132]]
Management and Budget (OMB) for its review.
    Collection of Information: Federal Family Education Loan Program. 
Documentation and notification requirements.
    These regulations require institutions to document a borrower's 
exceptional circumstances in instances where a lender disburses a loan 
within 30 days beyond the usual 60-day period. A lender is now required 
to advance a borrower's due date for repayment if a borrower doesn't 
indicate how a payment that equals or exceeds a scheduled monthly 
payment should be applied. In those instances, these regulations 
require the lender to notify the borrower that the payment has been 
applied in such a manner and the next payment due date. A lender or 
guaranty agency must now return any payments made by or on behalf of 
the borrower after the date that the borrower became totally and 
permanently disabled as certified by a physician and if a guaranty 
agency receives any payments from a borrower or a borrower's 
representative for a loan discharged in bankruptcy on which the 
Secretary previously paid a claim, the agency must return 100% of the 
payments to the borrower. In both of these circumstances, a lender and 
guaranty agency must also notify the borrower that there is no 
obligation to repay that loan.
    There is no annual frequency of reporting this information to the 
Department. However, the recordkeeping burden for this collection of 
information is estimated to average 1 hour per response for 12,803,255 
respondents, including the time for documenting circumstances, 
researching existing data sources, gathering and maintaining the data 
needed, and generating and processing the collection of information. 
The total annual recordkeeping burden equals 12,803,255 hours.
    These regulations affect the business, for-profit and not-for-
profit entities that participate in the Title IV Federal student aid 
programs.
    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: Desk Officer for U.S. 
Department of Education.
    The Department considers comments by the public on this proposed 
collection of information in--
     Evaluating whether the proposed collection of information 
is necessary for the proper performance of the functions of the 
Department, including whether the information will have practical use;
     Evaluating the accuracy of the Department's estimate of 
the burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology; e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to the Department on the 
proposed regulations.

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 3053, 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: September 13, 1995.
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 revising paragraph 
(1) of the definition of ``satisfactory repayment arrangement'' to read 
as follows:


Sec. 682.200  Definitions.

* * * * *
    (b) * * *
    Satisfactory repayment arrangement. (1) For purposes of regaining 
eligibility under section 428F (b) of the HEA, the making of six (6) 
full monthly payments on a defaulted loan. A borrower may only obtain 
the benefit of this paragraph with respect to renewed eligibility once.
* * * * *
    3. Section 682.201 is amended by revising paragraph (c)(1)(iii)(C) 
to read as follows:


Sec. 682.201  Eligible borrowers.

* * * * *
    (c) * * *
    (1) * * *
    (iii) * * *
    (C) In a default status and has either made satisfactory repayment 
arrangements or has agreed to repay the consolidation loan under the 
income sensitive repayment plan described in Sec. 682.209(a)(6)(viii).
* * * * *
    4. Section 682.207 is amended by adding a new paragraph (c)(4) and 
revising paragraphs (d)(1) and (d)(2)(iii) to read as follows:


Sec. 682.207  Due diligence in disbursing a loan.

* * * * *
    (c) * * *
    (4) If at least one-half of the loan period has elapsed when the 
first disbursement is made, the loan may be disbursed in a single 
installment.
    (d)(1) A lender may disburse loan proceeds after the student has 
ceased 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 
intended, in accordance with paragraphs (d)(2) and (3) of this section.
    (2) * * *
    (iii) In exceptional circumstances within 30 days after the period 

[[Page 49133]]
    described in paragraph (d)(2)(ii) of this section. The school shall 
document the exceptional circumstances in the student's file.
* * * * *
    5. Section 682.209 is amended by revising paragraph (b) to read as 
follows:


Sec. 682.209  Repayment of a loan.

* * * * *
    (b) Payment application and prepayment. (1) The lender may credit 
the entire payment amount first to any late charges accrued or 
collection costs and then to any outstanding interest and then to 
outstanding principal.
    (2)(i) The borrower may prepay the whole or any part of a loan at 
any time without penalty.
    (ii) If the prepayment amount equals or exceeds the monthly payment 
amount under the repayment schedule established for the loan, the 
lender shall apply the prepayment to future installments by advancing 
the next payment due date, unless the borrower requests otherwise. If 
the lender applies payments to future installments without the 
borrower's request, it shall notify the borrower that the payments have 
been so applied, and remind the borrower of the repayment obligation 
and the next scheduled due date.
* * * * *
    6. Section 682.210 is amended by revising paragraph (a)(8) to read 
as follows:


Sec. 682.210  Deferment.

    (a) * * *
    (8) A borrower whose loan is in default is not eligible for a 
deferment, unless the borrower has made satisfactory repayment 
arrangements with the lender prior to the filing of a default claim.
* * * * *
    7. Section 682.211 is amended by adding a new paragraph (f)(9) to 
read as follows:


Sec. 682.211  Forbearance.

* * * * *
    (f) * * *
    (9) For a period of delinquency that may remain after a borrower 
ends a period of deferment.
* * * * *
    8. Section 682.401(b)(10)(vi)(B), introductory text, is amended by 
adding a dash after the word ``if'', and by removing ``within 120 days 
of disbursement''; redesignating paragraphs (B)(1), (B)(2), and (B)(3) 
as paragraphs (B)(2), (B)(3), and (B)(4), respectively; at the 
beginning of redesignated paragraphs (B)(2), (B)(3) and (B)(4) remove 
``The'' and add, in its place, ``Within 120 days the''; and a new 
paragraph (B)(1) is added to read as follows:


Sec. 682.401  Basic program agreement.

* * * * *
    (b) * * *
    (10) * * *
    (vi) * * *
    (B) * * *
    (1) The loan or a portion of a loan is returned by the school to 
the lender;
* * * * *
    9. Section 682.402 is amended by revising paragraph (c)(3); 
removing ``(l)(2)'' in paragraph (l)(3) and adding, in its place, 
``(l)(1)''; by revising paragraphs (l)(1) and (l)(2) to read as 
follows:


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

* * * * *
    (c) * * *
    (3) After receiving the physician's certification described in 
paragraph (c)(2) of this section, the lender shall return to the 
borrower any payments received by the lender after the date that the 
borrower became totally and permanently disabled as certified by the 
physician. At the same time that the lender returns the payment, it 
shall notify the borrower that there is no obligation to repay a loan 
discharged on the basis of disability.
* * * * *
    (l) * * *
    (1) If the guaranty agency receives any payments from or on behalf 
of the borrower on or attributable to a loan that has been discharged 
in bankruptcy on which the Secretary previously paid a bankruptcy 
claim, the guaranty agency shall return 100 percent of these payments 
to the sender. The guaranty agency shall promptly return, to the 
sender, any payment on a cancelled or discharged loan made by the 
sender and received after the Secretary pays a closed school or false 
certification claim. At the same time that the agency returns the 
payment, it shall notify the sender that there is no obligation to 
repay a loan discharged on the basis of death, disability, bankruptcy, 
false certification, or closing of the school.
    (2) The guaranty agency shall remit to the Secretary all payments 
received from a tuition recovery fund, performance bond, or other third 
party with respect to a loan on which the Secretary previously paid a 
closed school or false certification claim.
* * * * *
    10. Section 682.412 is amended by revising paragraph (c) to read as 
follows:


Sec. 682.412  Consequences of the failure of a borrower or student to 
establish eligibility.

* * * * *
    (c) In the final demand letter transmitted under paragraph (a) of 
this section, the lender shall demand that within 30 days from the date 
the letter is mailed the borrower repay in full any principal amount 
for which the borrower is ineligible and any accrued interest, 
including interest and all special allowance paid by the Secretary.
* * * * *
    11. Section 682.603 is amended by adding a new paragraph (f)(4) and 
by revising paragraph (g) to read as follows:


Sec. 682.603  Certification by a participating school in connection 
with a loan application.

* * * * *
    (f) * * *
    (4) In prorating a loan amount for a student enrolled in a program 
of study with less than a full academic year remaining, the school need 
not recalculate the amount of the loan if the number of hours for which 
an eligible student is enrolled changes after the school certifies the 
loan.
    (g) A school may not assess the borrower a fee for the completion 
or certification of any FFEL Program forms or information or for 
providing any information necessary for a student or parent to receive 
a loan under part B of the Act or any benefits associated with such a 
loan.
* * * * *
    12. Section 682.604 is amended by removing paragraph (e)(3), 
redesignating paragraph (e)(4) as paragraph (e)(3), in redesignated 
paragraph (e)(3), introductory text, at the beginning of the paragraph, 
removing ``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'', and capitalizing the ``i'' in the word 
``if''.
* * * * *
    13. Section 682.605 is revised to read as follows:


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

    (a) Except in the case of a student who does not return for the 
next scheduled term following a summer break, a school shall follow the 
procedures in 34 CFR 668.22(j) for determining the student's date of 
withdrawal. In a case of a summer break, the school must determine the 
student's date of withdrawal no later than 30 days after the first day 
of the next scheduled term.
    (b) Except for students involved in a summer break as provided in 
paragraph (a) of this section, the school shall use 

[[Page 49134]]
the date determined under 34 CFR 668.22(j) 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.
    (c) For the purpose of a school's reporting to a lender, a 
student's withdrawal date is the month, day and year of the withdrawal 
date.

[FR Doc. 95-23125 Filed 9-20-95; 8:45 am]
BILLING CODE 4000-01-P