[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Rules and Regulations]
[Pages 60490-60498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30117]
[[Page 60489]]
_______________________________________________________________________
Part IX
Department of Education
_______________________________________________________________________
34 CFR Part 668, et al.
Postsecondary Education: Student Assistance General Provision; Final
Rule
Federal Register / Vol. 61, No. 230 / Wednesday, November 27, 1996 /
Rules and Regulations
[[Page 60490]]
DEPARTMENT OF EDUCATION
34 CFR Parts 668, 674, 675, 676, 682, 685, and 690
RIN 1840-AC39
Student Assistance General Provisions
AGENCY: Department of Education.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: The Secretary amends the Student Assistance General Provisions
regulations, 34 CFR Part 668, to implement an amendment made to the
General Education Provisions Act (GEPA) by the Improving America's
Schools Act of 1994 (IASA). That amendment decreased from five years to
three years the length of time that a recipient of federal funds is
required to maintain records. In addition, the Secretary is
consolidating and clarifying existing records retention rules, and
reducing administrative burden on institutions.
DATES: Effective Date: These regulations take effect July 1, 1997.
However, affected parties do not have to comply with the information
collection requirements in Sec. 668.24 until the Department of
Education publishes in the Federal Register the control numbers
assigned by the Office of Management and Budget (OMB) to these
information collection requirements. Publication of the control numbers
notifies the public that OMB has approved these information collection
requirements under the Paperwork Reduction Act of 1995.
FOR FURTHER INFORMATION CONTACT: Paula Husselmann or Kenneth Smith,
U.S. Department of Education, 600 Independence Avenue, SW, ROB-3, Room
3045, Washington, DC 20202-5346. The telephone number for Paula
Husselmann is (202)708-4902. The telephone number for Kenneth Smith is
(202)708-9406. 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: On September 13, 1996, the Secretary
published a notice of proposed rulemaking (NPRM) for the Student
Assistance General Provisions (Part 668) in the Federal Register (61 FR
48564-48569). The NPRM included a discussion of the major issues
surrounding the proposed changes that will not be repeated here. The
following list summarizes those issues and identifies the pages of the
preamble to the NPRM on which a discussion of those changes can be
found:
Section 668.24 Record Retention and Examinations
The Secretary proposed to reduce from five years to three years the
length of time that a recipient of title IV, HEA program funds must
maintain records. (page 48564)
The Secretary proposed that the recordkeeping period should be the
same for all programs, to the extent possible. The Secretary proposed
as a general rule that, other than records relating to student loans,
an institution must keep records relating to its administration of a
title IV, HEA program for an award year for three years after the end
of that award year. (page 48564)
The Secretary proposed the following requirements for certain types
of records that do not fit within the general rule. With regard to
records relating to student loans under the FFEL Program and the
William D. Ford Federal Direct Loan (Direct Loan) Program, the
Secretary proposed that an institution keep those records for three
years after the end of the award year in which the student borrower
last attended the institution. (page 48564)
The Secretary proposed that an institution keep loan records
relating to the repayment of Federal Perkins Loans in accordance with
the regulations governing that program, 34 CFR 674.19. (page 48564)
The Secretary proposed that an institution keep the Fiscal
Operations Report and Application to Participate in the Federal Perkins
Loan, Federal Supplemental Educational Opportunity Grant (FSEOG), and
Federal Work-Study (FWS) Programs (FISAP) and the records supporting
information contained in a FISAP, including income grid information,
for three years after the end of the award year in which the FISAP was
submitted. (page 48564)
The Secretary proposed to accommodate new technology by allowing an
institution to satisfy its recordkeeping requirements under various
electronic formats. The Secretary proposed that all record information,
except those records required to be retained in electronic format, be
retrievable in a coherent hard copy or in other media format acceptable
to the Secretary. (pages 48564-48565)
The Secretary proposed that an institution make its records readily
available for review at an institutional location designated by the
Secretary. (page 48565)
Analysis of Comments and Changes
In response to the Secretary's invitation in the NPRM, thirty-three
parties submitted comments on the proposed regulations. The Secretary
notes that many of the commenters are groups representing significant
numbers of people and entities. Therefore, when the Secretary refers to
a commenter, the Secretary is, in most cases, referring to groups of
individuals or entities.
An analysis of the comments and of the changes in the regulations
since publication of the NPRM is published as an appendix to these
final regulations. Substantive issues are discussed under the section
of the regulations to which they pertain. Technical and other minor
changes--and suggested changes the Secretary is not legally authorized
to make under the applicable statutory authority--generally are not
addressed.
Assessment of Educational Impact
In the notice of proposed rulemaking, the Secretary requested
comments on whether the proposed regulations would require transmission
of information that is being gathered by or is available from any other
agency or authority of the United States.
Based on the response to the proposed rules and on its own review,
the Department has determined that the regulations in this document do
not require transmission of information that is being gathered by or is
available from any other agency or authority of the United States. This
issue is further discussed in the Appendix to these regulations, under
the analysis of comments and changes for Sec. 668.24, ``General''
comments, and for Sec. 682.414(a)(3).
List of Subjects
34 CFR Part 668
Administrative practice and procedure, Colleges and universities,
Consumer protection, Education, Grant programs--education, Loan
programs--education, Reporting and recordkeeping requirements, Student
aid.
34 CFR Part 674
Loan programs--education, Reporting and recordkeeping requirements,
Student aid.
34 CFR Part 675
Colleges and universities, Employment, Grant programs--education,
Reporting and recordkeeping requirements, Student aid.
34 CFR Part 676
Grant programs--education, Reporting and recordkeeping
requirements, Student aid.
[[Page 60491]]
34 CFR Parts 682 and 685
Administrative practice and procedure, Colleges and universities,
Loan programs--education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
34 CFR Part 690
Colleges and universities, Education of disadvantaged, Grant
programs--education, Reporting and recordkeeping requirements, Student
aid, Vocational education.
(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal
Supplemental Educational Opportunity Grant Program; 84.032 Federal
Stafford Loan Program; 84.032 Federal PLUS Program; 84.032 Federal
Supplemental Loans for Students Programs; 84.033 Federal Work-Study
Program; 84.038 Federal Perkins Loan Program 84.063 Federal Pell
Grant Program; 84.069 State Student Incentive Grant Program; 84.268
Federal Direct Student Loan Program; and 84.272 National Early
Intervention Scholarship and Partnership Program. Catalog of Federal
Domestic Assistance Number for the Presidential Access Scholarship
Program has not been assigned.)
Dated: November 20, 1996.
Richard W. Riley,
Secretary of Education.
The Secretary amends Parts 668, 674, 675, 676, 682, 685, and 690 of
Title 34 of the Code of Federal Regulations as follows:
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
1. The authority citation for Part 668 continues to read as
follows:
Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1094, 1099c, and
1141, unless otherwise noted.
2. Section 668.24 is revised to read as follows:
Sec. 668.24 Record retention and examinations.
(a) Program records. An institution shall establish and maintain,
on a current basis, any application for title IV, HEA program funds and
program records that document--
(1) Its eligibility to participate in the title IV, HEA programs;
(2) The eligibility of its educational programs for title IV, HEA
program funds;
(3) Its administration of the title IV, HEA programs in accordance
with all applicable requirements;
(4) Its financial responsibility, as specified in this part;
(5) Information included in any application for title IV, HEA
program funds; and
(6) Its disbursement and delivery of title IV, HEA program funds.
(b) Fiscal records. (1) An institution shall account for the
receipt and expenditure of title IV, HEA program funds in accordance
with generally accepted accounting principles.
(2) An institution shall establish and maintain on a current
basis--
(i) Financial records that reflect each HEA, title IV program
transaction; and
(ii) General ledger control accounts and related subsidiary
accounts that identify each title IV, HEA program transaction and
separate those transactions from all other institutional financial
activity.
(c) Required records. (1) The records that an institution must
maintain in order to comply with the provisions of this section include
but are not limited to--
(i) The Student Aid Report (SAR) or Institutional Student
Information Record (ISIR) used to determine eligibility for title IV,
HEA program funds;
(ii) Application data submitted to the Secretary, lender, or
guaranty agency by the institution on behalf of the student or parent;
(iii) Documentation of each student's or parent borrower's
eligibility for title IV, HEA program funds;
(iv) Documentation relating to each student's or parent borrower's
receipt of title IV, HEA program funds, including but not limited to
documentation of--
(A) The amount of the grant, loan, or FWS award; its payment
period; its loan period, if appropriate; and the calculations used to
determine the amount of the grant, loan, or FWS award;
(B) The date and amount of each disbursement or delivery of grant
or loan funds, and the date and amount of each payment of FWS wages;
(C) The amount, date, and basis of the institution's calculation of
any refunds or overpayments due to or on behalf of the student; and
(D) The payment of any refund or overpayment to the title IV, HEA
program fund, a lender, or the Secretary, as appropriate;
(v) Documentation of and information collected at any initial or
exit loan counseling required by applicable program regulations;
(vi) Reports and forms used by the institution in its participation
in a title IV, HEA program, and any records needed to verify data that
appear in those reports and forms; and
(vii) Documentation supporting the institution's calculations of
its completion or graduation rates under Secs. 668.46 and 668.49.
(2) In addition to the records required under this part--
(i) Participants in the Federal Perkins Loan Program shall follow
procedures established in 34 CFR 674.19 for documentation of repayment
history for that program;
(ii) Participants in the FWS Program shall follow procedures
established in 34 CFR 675.19 for documentation of work, earnings, and
payroll transactions for that program; and
(iii) Participants in the FFEL Program shall follow procedures
established in 34 CFR 682.610 for documentation of additional loan
record requirements for that program.
(d) General. (1) An institution shall maintain required records in
a systematically organized manner.
(2) An institution shall make its records readily available for
review by the Secretary or the Secretary's authorized representative at
an institutional location designated by the Secretary or the
Secretary's authorized representative.
(3) An institution may keep required records in hard copy or in
microform, computer file, optical disk, CD-ROM, or other media formats,
provided that--
(i) Except for the records described in paragraph (d)(3)(ii) of
this section, all record information must be retrievable in a coherent
hard copy format or in other media formats acceptable to the Secretary;
(ii) An institution shall maintain the Student Aid Report (SAR) or
Institutional Student Information Record (ISIR) used to determine
eligibility for title IV, HEA program funds in the format in which it
was received by the institution, except that the SAR may be maintained
in an imaged media format;
(iii) Any imaged media format used to maintain required records
must be capable of reproducing an accurate, legible, and complete copy
of the original document, and, when printed, this copy must be
approximately the same size as the original document;
(iv) Any document that contains a signature, seal, certification,
or any other image or mark required to validate the authenticity of its
information must be maintained in its original hard copy or in an
imaged media format; and
(v) Participants in the Federal Perkins Loan Program shall follow
procedures established in 34 CFR 674.19 for maintaining the original
promissory notes and repayment schedules for that program.
(4) If an institution closes, stops providing educational programs,
is terminated or suspended from the title IV, HEA programs, or
undergoes a change of ownership that results in a
[[Page 60492]]
change of control as described in 34 CFR 600.31, it shall provide for--
(i) The retention of required records; and
(ii) Access to those records, for inspection and copying, by the
Secretary or the Secretary's authorized representative, and, for a
school participating in the FFEL Program, the appropriate guaranty
agency.
(e) Record retention. Unless otherwise directed by the Secretary--
(1) An institution shall keep records relating to its administration of
the Federal Perkins Loan, FWS, FSEOG, or Federal Pell Grant Program for
three years after the end of the award year for which the aid was
awarded and disbursed under those programs, provided that an
institution shall keep--
(i) The Fiscal Operations Report and Application to Participate in
the Federal Perkins Loan, FSEOG, and FWS Programs (FISAP), and any
records necessary to support the data contained in the FISAP, including
``income grid information,'' for three years after the end of the award
year in which the FISAP is submitted; and
(ii) Repayment records for a Federal Perkins loan, including
records relating to cancellation and deferment requests, in accordance
with the provisions of 34 CFR 674.19;
(2)(i) An institution shall keep records relating to a student or
parent borrower's eligibility and participation in the FFEL or Direct
Loan Program for three years after the end of the award year in which
the student last attended the institution; and
(ii) An institution shall keep all other records relating to its
participation in the FFEL or Direct Loan Program, including records of
any other reports or forms, for three years after the end of the award
year in which the records are submitted; and
(3) An institution shall keep all records involved in any loan,
claim, or expenditure questioned by a title IV, HEA program audit,
program review, investigation, or other review until the later of--
(i) The resolution of that questioned loan, claim, or expenditure;
or
(ii) The end of the retention period applicable to the record.
(f) Examination of records. (1) An institution that participates in
any title IV, HEA program and the institution's third-party servicer,
if any, shall cooperate with an independent auditor, the Secretary, the
Department of Education's Inspector General, the Comptroller General of
the United States, or their authorized representatives, a guaranty
agency in whose program the institution participates, and the
institution's accrediting agency, in the conduct of audits,
investigations, program reviews, or other reviews authorized by law.
(2) The institution and servicer must cooperate by--
(i) Providing timely access, for examination and copying, to
requested records, including but not limited to computerized records
and records reflecting transactions with any financial institution with
which the institution or servicer deposits or has deposited any title
IV, HEA program funds, and to any pertinent books, documents, papers,
or computer programs; and
(ii) Providing reasonable access to personnel associated with the
institution's or servicer's administration of the title IV, HEA
programs for the purpose of obtaining relevant information.
(3) The Secretary considers that an institution or servicer has
failed to provide reasonable access to personnel under paragraph
(f)(2)(ii) of this section if the institution or servicer--
(i) Refuses to allow those personnel to supply all relevant
information;
(ii) Permits interviews with those personnel only if the
institution's or servicer's management is present; or
(iii) Permits interviews with those personnel only if the
interviews are tape recorded by the institution or servicer.
(4) Upon request of the Secretary, or a lender or guaranty agency
in the case of a borrower under the FFEL Program, an institution or
servicer promptly shall provide the requester with any information the
institution or servicer has respecting the last known address, full
name, telephone number, enrollment information, employer, and employer
address of a recipient of title IV funds who attends or attended the
institution.
(Authority: 20 U.S.C. 1070a, 1070b, 1078, 1078-1, 1078-2, 1078-3,
1082, 1087, 1087a et seq., 1087cc, 1087hh, 1088, 1094, 1099c, 1141,
1232f; 42 U.S.C. 2753; and section 4 of Pub. L. 95-452, 92 Stat.
1101-1109)
Sec. 668.25 [Amended]
3. Section 668.25(c)(4)(i) is amended by removing
``Sec. 668.23(h)'' and adding, in its place, ``Sec. 668.24''.
Sec. 668.26 [Amended]
4. Section 668.26(b)(3) is amended by removing the word ``five''
and adding, in its place, the word ``three''.
PART 674--FEDERAL PERKINS LOAN PROGRAM
5. The authority citation for Part 674 continues to read as
follows:
Authority: 20 U.S.C. 1087aa-1087ii and 20 U.S.C. 421-429, unless
otherwise noted.
6. Section 674.19 is amended by revising paragraph (d); removing
paragraph (e)(4)(v) and redesignating paragraph (e)(4)(vi) as paragraph
(e)(4)(v); and revising paragraphs (e)(1) and (e)(3), and the heading
of paragraph (e)(4) to read as follows:
Sec. 674.19 Fiscal procedures and records.
* * * * *
(d) Records and reporting. (1) An institution shall establish and
maintain program and fiscal records that are reconciled at least
monthly.
(2) Each year an institution shall submit a Fiscal Operations
Report plus other information the Secretary requires. The institution
shall insure that the information reported is accurate and shall submit
it on the form and at the time specified by the Secretary.
(e) * * *
(1) Records. An institution shall follow the record retention and
examination provisions in this part and in 34 CFR 668.24.
* * * * *
(3) Period of retention of repayment records. An institution shall
retain repayment records, including cancellation and deferment
requests, for at least three years from the date on which a loan is
assigned to the Department of Education, canceled, or repaid.
(4) Manner of retention of promissory notes and repayment
schedules.
* * * * *
PART 675--FEDERAL WORK-STUDY PROGRAMS
7. The authority citation for Part 675 continues to read as
follows:
Authority: 42 U.S.C. 2571-2756b, unless otherwise noted.
8. Section 675.19 is amended by removing paragraphs (b)(2)(v)
through (b)(2)(vii), (b)(4), (b)(5), and (c); adding the word ``and''
at the end of paragraph (b)(2)(iii); removing the semicolon at the end
of paragraph (b)(2)(iv), and adding, in its place, a period; and
revising paragraph (b)(1) to read as follows:
Sec. 675.19 Fiscal procedures and records.
* * * * *
(b) * * *
(1) An institution shall follow the record retention and
examination provisions in this part and in 34 CFR 668.24.
* * * * *
[[Page 60493]]
PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT
PROGRAM
9. The authority citation for Part 676 continues to read as
follows:
Authority: 20 U.S.C. 1070b-1070b-3, unless otherwise noted.
10. Section 676.19 is amended by removing paragraph (c); and
revising paragraph (b) to read as follows:
Sec. 676.19 Fiscal procedures and records.
* * * * *
(b) Records and reporting. (1) An institution shall follow the
record retention and examination provisions in this part and in 34 CFR
668.24.
(2) An institution shall establish and maintain program and fiscal
records that are reconciled at least monthly.
(3) Each year an institution shall submit a Fiscal Operations
Report plus other information the Secretary requires. The institution
shall insure that the information reported is accurate and shall submit
it on the form and at the time specified by the Secretary.
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
11. The authority citation for Part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
12. Section 682.414 is amended by revising paragraph (a)(2);
redesignating paragraphs (a)(3) and (a)(4) as paragraphs (a)(4) and
(a)(5), respectively; adding a new paragraph (a)(3); removing the
citation ``(a)(3)(iv)'' in redesignated paragraph (a)(4)(iii), and
adding, in its place, ``(a)(4)(iv)''; adding the words ``required under
Sec. 682.305(c)'' after the words ``audit report'' in redesignated
paragraph (a)(4)(iv); removing ``paragraphs (a)(3)(ii)(C)-(K) of this
section on microfilm, optical disk, or other machine readable format''
in redesignated paragraph (a)(5)(i), and adding, in its place,
``paragraphs (a)(4)(ii)(C)-(K) of this section in accordance with 34
CFR 668.24(d)(3) (i) through (iv)''; removing paragraph (c)
introductory text; removing paragraphs (c)(1) and (c)(2); adding a new
paragraph (c)(1); redesignating paragraph (c)(3) as (c)(2); removing
``Sec. 682.401(b) (19) and (20)'' in redesignated paragraph (c)(2), and
adding in its place, ``Sec. 682.401(b) (21) and (22)'' to read as
follows:
Sec. 682.414 Records, reports, and inspection requirements for
guaranty agency programs.
(a) * * *
(2) The guaranty agency shall retain records for each loan for at
least five years after the loan is paid in full or has been determined
to be uncollectible in accordance with the agency's write-off
procedures. However, in particular cases the Secretary may require the
retention of records beyond this minimum period. For the purpose of
this section, the term ``paid in full'' includes loans paid by the
Secretary due to the borrower's death (or student's death in the case
of a PLUS loan), the borrower's permanent and total disability or
bankruptcy, the discharge of the borrower's loan obligation because of
attendance at a closed school, or because the student's eligibility to
borrow had been falsely certified by the school.
(3) A guaranty agency shall retain a copy of the audit report
required under Sec. 682.410(b) for not less than five years after the
report is issued.
* * * * *
(c) Inspection requirements. (1) For purposes of examination of
records, references to an institution in 34 CFR 668.24(f) (1) through
(3) shall mean a guaranty agency or its agent.
* * * * *
13. Section 682.610 is amended by revising paragraphs (a) and (b);
removing the word ``or'' at the end of paragraph (c)(2)(ii); removing
the period at the end of paragraph (c)(2)(iii), and adding, in its
place, ``; or''; redesignating paragraph (f)(2) as paragraph
(c)(2)(iv); removing the words ``the school'' the first time they
appear in redesignated paragraph (c)(2)(iv), and adding, in their
place, ``it''; removing the words ``the school shall notify the holder
of the loan within 30 days thereafter, either directly or through the
guaranty agency'' in redesignated paragraph (c)(2)(iv); and removing
paragraphs (d), (e), and (f) to read as follows:
Sec. 682.610 Administrative and fiscal requirements for participating
schools.
(a) General. Each school shall--
(1) Establish and maintain proper administrative and fiscal
procedures and all necessary records as set forth in the regulations in
this part and in 34 CFR part 668;
(2) Follow the record retention and examination provisions in this
part and in 34 CFR 668.24; and
(3) Submit all reports required by this part and 34 CFR part 668 to
the Secretary.
(b) Loan record requirements. In addition to records required by 34
CFR part 668, for each Stafford, SLS, or PLUS loan received by or on
behalf of its students, a school shall maintain a copy of the loan
application or data electronically submitted to the lender, that
includes--
(1) The name of the lender;
(2) The address of the lender;
(3) The amount of the loan and the period of enrollment for which
the loan was intended;
(4) For loans delivered to the school by check, the date the school
endorsed each loan check, if required;
(5) The date or dates of delivery of the loan proceeds by the
school to the student or to the parent borrower; and
(6) For loans delivered by electronic funds transfer or master
check, a copy of the borrower's written authorization required under
Sec. 682.604(c)(3) to deliver the initial and subsequent disbursements
of each FFEL program loan.
* * * * *
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
14. The authority citation for Part 685 continues to read as
follows:
Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.
15. Section 685.309 is amended by revising paragraphs (a)(1), (c),
and (d); removing paragraphs (e), (f), and (g); redesignating
paragraphs (h), (i), and (j) as paragraphs (e), (f), and (g),
respectively to read as follows:
Sec. 685.309 Administrative and fiscal control and fund accounting
requirements for schools participating in the Direct Loan Program.
(a) * * *
(1) Establish and maintain proper administrative and fiscal
procedures and all necessary records as set forth in this part and in
34 CFR part 668; and
* * * * *
(c) Record retention requirements. An institution shall follow the
record retention and examination requirements in this part and in 34
CFR 668.24.
(d) Accounting requirements. A school shall follow accounting
requirements in 34 CFR 668.24(b).
* * * * *
PART 690--FEDERAL PELL GRANT PROGRAM
16. The authority citation for Part 690 continues to read as
follows:
Authority: 20 U.S.C. 1070a, unless otherwise noted.
17. Section 690.81 is amended by revising paragraph (a) to read as
follows:
Sec. 690.81 Fiscal control and fund accounting procedures.
(a) An institution shall follow provisions for maintaining general
fiscal
[[Page 60494]]
records in this part and in 34 CFR 668.24(b).
* * * * *
18. Section 690.82 is revised to read as follows:
Sec. 690.82 Maintenance and retention of records.
(a) An institution shall follow the record retention and
examination provisions in this part and in 34 CFR 668.24.
(b) For any disputed expenditures in any award year for which the
institution cannot provide records, the Secretary determines the final
authorized level of expenditures.
(Approved by the Office of Management and Budget under control
number 1840-0681)
(Authority: 20 U.S.C. 1070a, 1232f)
Appendix--Analysis of Comments and Changes
(Note: This Appendix will not be codified in the Code of Federal
Regulations.)
Section 668.24 Record retention and examinations--General
Comments: Most of the commenters applauded the Secretary for his
efforts to reduce the record retention requirements for institutions.
The commenters encouraged the Secretary to continue to examine
regulations for standardization among provisions, and to maintain the
dual goals of data and program integrity and burden reduction.
Organizations representing institutions and other participants in the
title IV, HEA programs expressed their gratitude for the reduction in
the amount of time that a recipient of federal funds must maintain
records, and for the Secretary's efforts to consolidate and clarify
existing record retention rules.
Two commenters indicated that the reduced time period should be
accompanied by a reduction in the number of records that institutions
are required to retain. The commenters encouraged the Secretary to
review the data available in the Department's various databases,
identify duplication of data collection, and seek to transfer data
maintenance from institutions to the Department in an effort to reduce
administrative burden on institutions.
Some commenters preferred that records be retained longer than
three years and asked the Secretary to encourage institutions to retain
records for a longer period. The commenters believe that the National
Student Loan Data System and other technological initiatives will
facilitate the retention of records for an indefinite period of time.
Some commenters approved of the inclusion of a more comprehensive list
of records in the SFA Handbook; one commenter recommended that the
Secretary also include the list in the Audit Guide, Compliance Audits
(Attestation Engagements) of Federal Student Financial Assistance
Programs at Participating Institutions.
Discussion: The Secretary appreciates the commenters' responses and
will continue to evaluate regulations for burden reduction. The
Secretary agrees that a more comprehensive list of records should be
included in the Audit Guide. The Secretary does not agree that an
institution does not have to maintain records that it has provided to
ED databases because institutions are responsible for maintaining the
records necessary to show their compliance with applicable statutes and
regulations and their expenditure of title IV, HEA program funds.
Changes: None.
Section 668.24(a) Program Records
Comments: One commenter recommended that paragraph (a)(5) of this
section be removed. The commenter explained that the application
information requirement is provided for in the introductory language of
paragraph (a) and is, therefore, redundant under (a)(5).
Discussion: The Secretary does not agree that paragraph (a)(5)
repeats the introductory language of paragraph (a). The introductory
language refers to the application itself, while paragraph (a)(5)
refers to program records that document the information included in an
application.
Changes: None.
Section 668.24(c) Required Records
Comments: A few commenters recommended that proof of high school
diploma, GED, or documentation of ``ability-to-benefit'' be added to
the list of required records under this paragraph. A number of
commenters expressed concern over the use of the term ``disbursement''
in paragraph (c)(1)(iv)(B) because of the difference between its use
for the FFEL Program and its use for other title IV, HEA programs. (In
the FFEL Program, lenders ``disburse'' loan proceeds to a borrower's
institution and the institution ``delivers'' those proceeds to the
borrower.) One commenter recommended that this provision list various
documents currently included in Sec. 682.610 of the FFELP regulations.
A few commenters recommended that the Secretary incorporate a reference
to the Direct Loan Program regulations. One commenter recommended that
the Secretary establish a future effective date for implementation of
these regulations.
Discussion: Records documenting that a student has a high school
diploma, GED, or the ability-to-benefit are covered in paragraph
(c)(1)(iii), student eligibility records. The Secretary believes that
it is not necessary to list them separately in this section.
The Secretary agrees with the commenters that the reference to
disbursement should be expanded to include FFEL proceeds that are
delivered to students and parents. The Secretary did not add the
recommended FFELP items to the list of documentation because that would
not be in keeping with the intent of these regulations to simplify and
consolidate provisions. The Secretary did not reference the Direct Loan
Program in this provision because there is no comparable provision
under the Direct Loan Program. With respect to the effective date,
these regulations will take effect July 1, 1997.
Changes: The Secretary has revised Sec. 668.24(c)(1)(iv)(B) to
include delivery of FFELP loan proceeds.
Section 668.24(d) General Requirements
Comments: One commenter requested clarification concerning the
retention of records in a systematically organized manner. The
commenter requested assurance that the Secretary is simply restating
current policy and is not attempting to tell institutions how to keep
files.
Discussion: The Secretary is simply restating current requirements
and current policy. The Secretary is not attempting to tell
institutions how to keep files to comply with this requirement.
Changes: None.
Comments: Many commenters addressed the proposal that an
institution maintain an electronic record in the format in which it was
originally received or transmitted. The commenters overwhelmingly
objected to the proposal, indicating that it was expensive,
duplicative, time-consuming, and inconsistent with technological
innovation. The commenters suggested that it should be sufficient for
institutions to reproduce, on request, the data contained in the
records of each title IV transaction that it has sent or received
electronically.
Some commenters recommended that the Secretary add lenders and
guarantors specifically to Sec. 668.24(d)(4) for access to records.
Discussion: The Secretary agrees with the points made by the
commenters with respect to maintaining electronically transmitted
records in the original format. However, the Secretary
[[Page 60495]]
believes that the Student Aid Report (SAR) or Institutional Student
Information Record (ISIR) used to determine eligibility for title IV,
HEA program funds should be retained by the institution in the format
in which it was received because, for program review purposes and audit
purposes, it is essential that these basic eligibility records be
available in a consistent, comprehensive, and verifiable format.
Because the SAR is a hard copy document, for the purposes of these
regulations it must be maintained in either its original hard copy
format or in an imaged format. The ISIR, an electronic record, must be
available in its original format, either as it was supplied by the
Department to the institution on a magnetic tape or cartridge or as it
was archived using EDExpress software supplied to the institution. This
enables the Secretary's representative to access the ISIR
electronically, to discriminate among data and to authenticate the
record. The information contained on the ISIR can be cross-checked or
verified against applicant information supplied by the student at the
central processor.
The Secretary does not believe that retention of an ISIR is
burdensome because by using EDExpress the institution maintains the
record during the applicable award year, and, after the award year has
ended, the institution has the ability, again using EDExpress, to
archive the data to a disk or other computer format. An institution
that receives ISIR's on magnetic tapes or cartridges can simply make a
copy of the file received from the Secretary.
The Secretary agrees to include guarantors in the provision
governing access to title IV, HEA records when an institution closes or
ceases providing educational programs. The Secretary does not agree to
include lenders in this provision. Lenders do not have the enforcement
and monitoring responsibilities which would necessitate their
inclusion.
Changes: Proposed Sec. 668.24(d)(3)(ii) has been changed to require
only that the SAR or ISIR used to determine eligibility for title IV,
HEA funds be retained in the format in which it was received, under the
conditions described above. In addition, guarantors have been added to
the access provision.
Comments: Several respondents commented on the issue of imaging
documents. Several commenters asked the Secretary to remind
institutions that an institution is not required to retain an original
or imaged copy of a FFELP or Direct Loan Program promissory note, and
that a photocopy or electronic record of data elements sent to the
lender or the Secretary is permitted under existing regulations. A few
commenters requested clarification of the storage requirement for
Perkins Loan promissory notes, and student aid records in general, vis-
a-vis imaging requirements. One commenter encouraged the Secretary to
require the maintenance of hard copy of promissory notes only if imaged
copies of promissory notes have not served the Secretary well in court.
Discussion: The commenters are correct that institutions are not
required to maintain an original or imaged copy of a promissory note
for FFELP or Direct Loan Program loans. The institution may maintain
the information needed to recreate the promissory note data in an
alternate format. However, the commenters should note that the formats
available to institutions for this retention are not restricted to the
commenter's list.
With respect to a Perkins promissory note, an institution may image
the note for administrative purposes, but retention of the original
promissory note is necessary for legal purposes. An institution should
refer to Sec. 674.19 of the Federal Perkins Loan regulations for
further guidance. The imaging provision applies to all other student
aid records.
Changes: None.
Section 668.24(e) Record Retention
Comments: Generally speaking, the commenters strongly supported the
reduction in the length of record retention. However, the commenters
differed in their approach to records for the loan programs. Some
commenters were concerned about the difference in retention
requirements among the title IV loan programs. Some commenters
recommended a longer retention period for Federal Perkins Loans, while
other commenters recommended a shorter retention period; e.g. three
years from the academic year in which the loan was made. A few
commenters suggested that the requirements be the same for all loan
programs; for example, bringing the Federal Perkins Loan Program into
alignment with the FFEL and Direct Loan Programs, and requiring the
retention of records until three years from the student's last day of
attendance.
Other commenters objected to the proposed loan retention record
requirements and requested that the Secretary remind institutions that
loan records may be retained longer than the regulations require,
particularly records related to loan proceeds disbursed by electronic
fund transfer (EFT). These commenters noted that the shorter period may
cause problems. For example, since a lender or guaranty agency may not
be aware of problems with a loan until repayment begins, institutions
may need to retain records to respond to borrower defenses, and records
may be needed to appeal a cohort default rate.
Some commenters contended that the FFELP and Direct Loan
requirements essentially nullify the reduction in retention
requirements because most institutions purge all records for a student
at one time. The commenters indicated that if a student obtained title
IV, HEA program grant funds, the record retention requirements for the
loan programs would in effect become the record retention requirement
for the grant programs because of the interrelation of all the title
IV, HEA programs.
One commenter recommended that only the data that the institution
used to process a loan application be retained. For example, the
institution would retain only the actual expected family contribution
(EFC) and estimated financial assistance (EFA); it would not have to
retain supporting documentation. One commenter recommended that the
Secretary encourage institutions to retain records for a longer period
for undergraduate students who are enrolled in extended programs.
Discussion: The Secretary carefully considered the various
recommendations by the commenters. While the Secretary would prefer to
have uniform requirements among all the title IV, HEA programs, the
nature of the FFEL and Direct Loan Programs require a different
treatment because problems may arise with regard to a loan many years
after the student received the loan. The separate timeframe helps
protect students from improper claims for repayment on loans by
allowing them access to institutional enrollment, eligibility, and
disbursement records; helps protect institutions against claims and
liabilities; and provides additional substantiation to the validity of
a loan when that loan is challenged.
With respect to the longer retention period for loans records
negating the shorter period required for other title IV, HEA programs,
this is not a change. This difference in requirements is unavoidable
given the interrelationship of the title IV, HEA programs.
The Secretary also reminds institutions that records may always be
retained longer than required by regulation.
Changes: None.
[[Page 60496]]
Comments: With regard to the retention of FISAP records for the
campus-based programs, commenters requested that the Secretary change
the retention requirement from three years after the end of the award
year in which the institution submits the FISAP to three years after
the year for which data are reported. Some commenters viewed the
proposed regulations as an increase rather than a decrease in retention
time from existing regulations.
Discussion: In the current regulations, institutions are required
to maintain the FISAP and the records supporting it for five years
after the FISAP's submission. Therefore, under the existing
regulations, assuming that an institution submitted its FISAP in
October, 1996, to request funds for the 1997-98 award year and to
report expenditures for the 1995-96 award year, the institution would
have to keep the FISAP and FISAP information until October, 2001.
While reducing the record retention period from five year to three
years, the Secretary also determined to standardize the period for
which institutions have to keep records and that standard period, to
the extent possible, runs from the end of an award year. However,
because institutions in a FISAP request funds in one award year, for
expenditure in the following award year, based on events in the
preceding award year, several alternative were possible to align the
FISAP and FISAP records to this standard.
The revised legal standard for keeping records requires an
institution to keep records for three years after the activity for
which funds are used. Thus, for example, when an institution submitted
a FISAP in October, 1996, for funds to be expended in award year 1997-
98, the Secretary could have proposed that the institution keep FISAP
and FISAP records until three years after the award year in which the
requested funds were used, i.e. June 30, 2001. However, consistent with
the purpose of reducing the record retention period, the Secretary has
chosen to require institutions to keep FISAP and FISAP records for
three years after the end of the award year in which the funds were
requested, i.e. June 30, 2000 in this example.
The commenters' suggestion that the record period begin after the
end of the award year on which the funds were based, i.e. June 30,
1999, three years after June 30, 1996, would amount to only a one-year
retention period for the year in which requested funds were expended,
and two years and nine months from the date the FISAP was submitted.
Moreover, that suggestion would allow the Department only one year
after the year in which funds were expended to review whether the
institution's income grid information supported the amount the
institution received and expended. The Secretary believes that such a
short period is inappropriate and unacceptable.
The recommendation that a common date be established for all
records created during an award year is available to institutions at
their option. An institutions is free to establish its own common date
for purging records as long as all minimum regulatory requirements are
met.
Changes: None.
Section 668.24(f) Examination of Records
Comments: Some commenters asked the Secretary to provide for a
review by guarantors whether or not the institution participates in the
FFEL Program when the review occurs. A few commenters asked the
Secretary to include a borrower's phone number and enrollment
information in the list of information that an institution must provide
to a requestor. A few commenters asked the Secretary to include
language to clarify that third party servicers must comply with these
regulations. One commenter recommended that instead of providing timely
access to the Secretary or his representative, the institution should
promptly provide that access.
Discussion: The Secretary would encourage an institution that no
longer participates in a guaranty agency's program under the FFEL
program to cooperate with a review by that guaranty agency, but since
the institution no longer participates in the program, the Secretary
will not impose this requirement.
Third-party servicers are specifically subject to the provisions of
paragraph (f). The requirements contained in paragraphs (a) through (e)
apply to participating institutions, and institutions are responsible
for complying with those requirements, regardless of whether they use a
third-party servicer. It is the responsibility of the institution to
make sure that its third-party servicer satisfies all the regulatory
requirements contained in paragraphs (a) through (e) because it will
suffer the consequence for the servicer's failure to comply.
The Secretary agrees with the suggestion of the commenters
regarding the provision of additional information. Finally, the
Secretary believes that the term ``timely access'' is sufficient to
ensure promptness and has, therefore, not changed the regulation to
accommodate this recommendation.
Changes: Section 668.24(f)(4) has been changed to include
information about a borrower's telephone number and enrollment status.
Section 682.414 Records, Reports, and Inspection Requirements for
Guaranty Agency Programs
Comments: Many commenters noted that while the record retention
requirement for institutions was reduced from five to three years, FFEL
Program lenders and guaranty agencies must continue to maintain their
records for five years under paragraph (a)(2). Commenters stated that a
three-year period is sufficient for enforceability, and asked that
record retention requirements for lenders and guaranty agencies be the
same as those for institutions.
One commenter believed that an inconsistency exists between this
NPRM and an FFEL program NPRM that was published in the Federal
Register on September 19, 1996 (61 FR 49382). The commenter noted that
in the September 19, 1996, NPRM, the Secretary considers guaranty
agencies to be trustees of the federal government and fiduciaries,
because they receive and process federal funds, but that for the
purposes of these regulations, guaranty agencies are not considered
recipients of program funds.
Other commenters stated that they understood that the amended GEPA
provisions did not apply to guaranty agencies and lenders. However they
indicated that the five-year record retention requirement imposed on
lenders and guaranty agencies was not statutorily required and
therefore the Secretary could reduce that period by regulation. Many of
the commenters who suggested a reduction in the record retention
requirements for lenders and guaranty agencies suggested that this
reduction be issued in a separate NPRM.
Discussion: The GEPA provision, 20 U.S.C. Sec. 1232f(a), applies
only to entities that receive federal funds through a grant, loan, or
similar process and hold federal funds for a period of time. Lenders
and guaranty agencies receive contractually required payments and funds
to which GEPA does not apply. Moreover, as a fiduciary, a guaranty
agency is held to a very strict standard of accountability and would be
well advised to maintain records for a long period. On the other hand,
the fact that the Secretary considers that a guaranty agency a
fiduciary does not make the guaranty agency a recipient of federal
funds under GEPA.
The records of lenders and guaranty agencies are critical in
enforcing the loan obligations of the borrower and for determining
institutional eligibility
[[Page 60497]]
under the FFEL Program. For example, a three-year limit on keeping
records would not provide adequate documentation for cohort default
rate servicing appeals, on which ED and institutions rely.
The Secretary remains committed to reducing burden and intends to
continue exploring effective ways of reducing the recordkeeping burden
of guaranty agencies and lenders. Though the requested change from five
years to three years of record retention is not made in these final
regulations, the Secretary will consider this suggestion along with
other options for reducing burden, and will propose any resulting
changes to regulations in a separate NPRM.
Changes: None.
Comments: Many commenters asked for clarification of the provision
that ``in particular cases the Secretary may require the retention of
records beyond this minimum period.'' They questioned the purpose of
this provision, asked for clarification or examples of the specific
records that are intended, and also asked that the requirement either
be clarified or dropped.
Several commenters noted that Sec. 682.414(a)(4)(iii) provides a
requirement for lenders similar to that in Sec. 682.414(a)(2) and asked
that it be either clarified with examples or removed.
Discussion: Any record may be subject to this provision. For the
most part, the purpose of this requirement is the same as that for
Sec. 668.24(e)(3). It provides an additional retention period for
records involved in an audit, review, or investigation. It may also be
applied on a case-by-case basis, when the Secretary considers such an
extension necessary.
The requirement at Sec. 682.414(a)(2) was added as a technical
correction, to conform requirements for guaranty agencies to those of
lenders. As several commenters noted, this requirement exists in
previous regulations for lenders, and is included in these regulations
as Sec. 682.414(a)(4)(iii).
Changes: None.
Comments: Many commenters noted that the citation given in
paragraph (a)(3), ``Sec. 682.305(c),'' is a reference to a lender
audit, not to an audit of a guaranty agency. As the lender audits are
not available to the guaranty agencies, the commenters recommended
changing the citation to ``Sec. 682.410(b).''
Several commenters noted that if the citation were not an error,
they objected to its requirement. One commenter felt that this
requirement was unnecessary, as the audit report is provided to the
Secretary, and asked that the requirement be removed.
Discussion: The technical correction recommended is correct. As for
the commenter's feeling that the requirement to retain this information
caused unnecessary duplication, the Secretary does not agree. The
guaranty agency or lender is responsible for maintaining records
necessary to show its compliance with applicable statute and
regulations.
Changes: The cross-reference in Sec. 682.414(a)(3) to ``Sec.
682.305(c)'' is changed to Sec. 682.410(b).
Comments: One commenter asked that Sec. 682.414(a)(5)(i) be revised
to permit all loan records to be stored in electronic or imaged
formats. The commenter noted that this would be consistent with the
requirements for institutions in Sec. 668.24(d), and would recognize
advancements in technology.
Discussion: The records in question are the loan application and
the signed promissory note, including the repayment instrument. These
original, hard copy documents must be maintained in order to protect
the enforceability of the loan. Allowing these documents to be stored
in formats other than hard copy would not be consistent with the
requirements for other programs. This requirement for FFEL is
comparable to that for Federal Perkins Loans (see Sec. 674.19(e)(4))
and to the requirements for maintenance of Direct Loan Program
promissory notes by the Direct Loan Servicing Center. However, the
Secretary is continuing to monitor Courts' acceptance of other forms
and may make changes in this area in the future.
Changes: None.
Comments: Many commenters noted the provision in
Sec. 682.414(a)(5)(ii) that a lender or guaranty agency shall either
return the original note to the borrower or notify the borrower under
an alternate procedure that is acceptable under State law that the loan
is paid in full. The commenters asked that the Secretary preempt State
law in this instance and state that lenders and guaranty agencies shall
inform borrowers that their loans are paid in full through a written
notice. Commenters reasoned that this would protect the federal fiscal
interest from an enforceability standpoint and would standardize the
process.
One commenter asked that this paragraph be revised to allow lenders
to choose between the two options, and noted a risk of returning
promissory notes, that they might be returned in error, thus damaging
the enforceability of the loan, and that promissory notes for one or
more loans might be especially prone to this.
Discussion: The Secretary is merely moving this rule, not changing
its substance. The Secretary believes that the current rule remains
appropriate.
Changes: None.
Section 682.610 Administrative and Fiscal Requirements for
Participating Schools
Section 682.610(a) General
Comments: One commenter recommended that ``school'' in the
introduction to this paragraph be changed to ``institution,'' for
consistency.
Discussion: The word ``school'' is used in 34 CFR 682 to
distinguish between schools and other participants that could be
considered ``institutions'' (for example, a lender is a financial
institution). The use of the word ``school'' in this paragraph creates
no inconsistency.
Changes: None.
Section 682.610(b) Loan Record Requirements
Comments: Many commenters noted that PLUS loans are not included in
paragraph (b)(4), and believe that they have been omitted
unintentionally. The commenters ask that PLUS loans be included in this
paragraph, and that other provisions of Sec. 682.610(b)(4) be modified
to reflect that change.
Discussion: The Secretary agrees with the commenters.
Changes: Section 682.610(b) is revised to include PLUS loans.
Comments: Many commenters requested that ``master check'' be added
to language in Sec. 682.610(b)(6), which was designated as
Sec. 682.610(b)(4)(iii) in the NPRM, in order to codify the inclusion
of master check records for record retention purposes. One commenter
noted that the citation ``Sec. 682.604(c)(3)'' applies to both EFT and
master check.
[[Page 60498]]
Discussion: The Secretary agrees with the commenters.
Changes: Section 682.610(b)(6) has been amended to include master
checks.
Comments: Many commenters noted that Sec. 682.610(b)(9)(iv), as
designated in current regulations, remains unchanged in these
regulations, and request that ``master check'' be added to this
paragraph in order to codify the inclusion of master check records for
record retention.
Discussion: The commenters are in error. All of Sec. 682.610(b) is
replaced by new language in these final regulations; Sec. 682.610(b)(9)
has become Sec. 682.610(b)(6), which has been discussed earlier.
Changes: None.
[FR Doc. 96-30117 Filed 11-26-96; 8:45 am]
BILLING CODE 4000-01-P