[Federal Register Volume 63, Number 180 (Thursday, September 17, 1998)]
[Proposed Rules]
[Pages 49798-49801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24866]



[[Page 49797]]

_______________________________________________________________________

Part IV





Department of Education





_______________________________________________________________________



34 CFR Parts 674 and 682



Federal Perkins Loan Program and Federal Family Education Loan Program; 
Proposed Rule

  Federal Register / Vol. 63, No. 180 / Thursday, September 17, 1998 / 
Proposed Rules  

[[Page 49798]]



DEPARTMENT OF EDUCATION

34 CFR Parts 674 and 682


Federal Perkins Loan Program and Federal Family Education Loan 
Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: In order to simplify the economic hardship deferment 
application process for those Peace Corps volunteers who are ineligible 
for deferment or cancellation of their federal student loans based 
solely on service in the Peace Corps, the Secretary proposes to amend 
the Federal Perkins Loan and Federal Family Education Loan (FFEL) 
program regulations by adding criteria that will allow Peace Corps 
volunteers to automatically qualify for economic hardship deferments 
while they are serving in the Peace Corps. The proposed changes will 
also apply to the William D. Ford Federal Direct Loan (Direct Loan) 
Program.
    The Secretary also proposes to amend the Federal Perkins Loan 
Program regulations by eliminating provisions that require borrowers to 
submit requests for loan deferments and postponements in writing. The 
proposed changes will make the Federal Perkins Loan Program 
requirements more consistent with the requirements that apply in the 
FFEL and Direct Loan programs.

DATES: Comments must be received on or before October 30, 1998.

ADDRESSES: All comments concerning these proposed regulations should be 
addressed to: Mr. Jon Utz, U.S. Department of Education, PO Box 23272, 
Washington, DC 20026-3272, or to the following internet address: 
[email protected]
You must include the term ``Peace Corps'' in the subject line of your 
electronic message.
    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 these 
comments may also be sent to the Department representative named in 
this section.

FOR FURTHER INFORMATION CONTACT:
    1. For the Federal Perkins Loan Program: Ms. Sylvia Ross, U.S. 
Department of Education, 600 Independence Avenue, SW, ROB-3, Room 3045, 
Washington, DC 20026-3272, telephone 202-708-8242.
    2. For the FFEL Program: Mr. George Harris, U.S. Department of 
Education, 600 Independence Avenue, SW, ROB-3, Room 3045, Washington, 
DC 20026-3272, telephone 202-708-8242.
    3. For the Direct Loan Program: Mr. Jon Utz, Department of 
Education, 600 Independence Avenue, SW, ROB-3, Room 3045, Washington, 
DC 20026-3272, 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.
    Individuals with disabilities may obtain this document in an 
alternate format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact persons listed in the preceding 
paragraph.

SUPPLEMENTARY INFORMATION:

Invitation to Comment

    Interested persons are invited to submit comments and 
recommendations regarding these proposed regulations.
    To ensure that public comments have maximum effect in developing 
the final regulations, the Department urges commenters to identify 
clearly the specific section or sections of the proposed regulations 
that each comment addresses and to arrange comments in the same order 
as the 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 3045, Regional Office Building 3, 7th and D Streets, 
SW, Washington, DC, between the hours of 8:30 a.m. and 4 p.m., Eastern 
Time, Monday through Friday of each week except Federal holidays.
    On request the Department supplies an appropriate aid, such as a 
reader or print magnifier, to an individual with a disability who needs 
assistance to review the comments or other documents in the public 
rulemaking docket for these proposed regulations. An individual with a 
disability who wants to schedule an appointment for this type of aid 
may call (202) 205-8113 or (202) 260-9895. An individual who uses a TDD 
may call the Federal Information Relay Service at 1-800-877-8339, 
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.
    To assist the Department in complying with the specific 
requirements of Executive Order 12866 and its overall requirement of 
reducing regulatory burden, the Secretary invites comments on whether 
there may be further opportunities to reduce any regulatory burdens 
found in these proposed regulations.

General

    The Peace Corps has requested that the Secretary provide a less 
burdensome means for borrowers who are not eligible for a statutory 
loan deferment or cancellation based on Peace Corps service to apply 
for economic hardship deferments of their federal student loans while 
serving in the Peace Corps. The Secretary believes that the service 
performed by Peace Corps volunteers is important to the national 
interest, and is proposing to amend the economic hardship deferment 
eligibility criteria in the federal student loan programs in response 
to that request. The Secretary is also proposing changes that will make 
the requirements for requesting a loan deferment or postponement in the 
Federal Perkins Loan Program more consistent with the requirements that 
apply in the FFEL and Direct Loan programs. A discussion of each 
proposed change is provided below.

Sections 674.34 and 682.210 Deferment

    In the Federal Perkins Loan Program, which includes National 
Defense Student Loans (Defense Loans), National Direct Student Loans 
(NDSLs), and Federal Perkins Loans, the vast majority of borrowers are 
eligible for categorical deferments based on service as Peace Corps 
volunteers. Specifically, all Defense Loan borrowers, borrowers with 
NDSLs made before July 1, 1993, and all Federal Perkins Loan borrowers 
may defer repayment while serving as Peace Corps volunteers. For 
Federal Perkins Loan borrowers only, service as a Peace Corps volunteer 
also qualifies a borrower for loan cancellation. In the FFEL and Direct 
Loan programs, certain borrowers who received loans prior to July 1, 
1993 are entitled by law to defer repayment of their loans while 
serving as Peace Corps volunteers.
    Borrowers who are ineligible for loan deferment or cancellation 
based on service as Peace Corps volunteers are: (1) The small number of 
borrowers who received NDSLs on or after July 1, 1993; (2) FFEL Program 
borrowers who received loans first disbursed on or after July 1, 1993 
and who, at the time they obtained those loans, had no outstanding 
balance on any FFEL Program loan made before that date; and (3) Direct 
Loan Program borrowers who, at the time they received their first 
Direct Loans, had no outstanding balance on any FFEL Program loan made 
before July 1, 1993. In all three loan programs, borrowers who wish to 
defer repayment of their loans while serving as Peace Corps volunteers, 
but

[[Page 49799]]

who are ineligible for a deferment or cancellation based on Peace Corps 
service, may apply for deferments based on economic hardship.
    The Peace Corps has brought to the Secretary's attention the fact 
that Peace Corps volunteers who are ineligible for loan deferment or 
cancellation based on Peace Corps service qualify for economic hardship 
deferments in the federal student loan programs based on the low 
monthly stipends that they receive. However, the Peace Corps believes 
that the unique circumstances under which Peace Corps volunteers 
serve--in foreign countries, often in inaccessible areas--make it 
difficult for them to apply for economic hardship deferments in 
accordance with the requirements imposed by current regulations.
    Section 674.34(e) of the Federal Perkins Loan Program regulations 
establishes the economic hardship deferment eligibility criteria for 
borrowers with Federal Perkins Loans and NDSLs made on or after July 1, 
1993. Section 682.210(s)(6) of the FFEL Program regulations establishes 
the criteria by which a ``new borrower'' as defined under 
Sec. 682.210(s) is eligible for an economic hardship deferment. In 
accordance with Sec. 685.204(b)(3)(ii) of the Direct Loan Program 
regulations, economic hardship deferment eligibility for all Direct 
Loan borrowers is based on the standards set forth in the FFEL Program 
regulations at Sec. 682.210(s)(6).
    Under Sec. 674.34(e)(3) and Sec. 682.210(s)(6)(iii), borrowers are 
eligible for an economic hardship deferment if they are working full-
time and earning a total monthly gross income that does not exceed the 
greater of the minimum wage rate described in section 6 of the Fair 
Labor Standards Act of 1938, or 100 percent of the poverty line for a 
family of two, as determined in accordance with section 673(2) of the 
Community Service Block Grant Act. Peace Corps volunteers currently 
receive monthly living stipends and other smaller allowances that vary 
according to the country to which they are assigned. Based on an 
analysis of data provided by the Peace Corps and current minimum wage 
rate and poverty line amounts, the Secretary has determined that Peace 
Corps volunteers meet the criteria for economic hardship deferment 
under Sec. 674.34(e)(3) and Sec. 682.210(s)(6)(iii).
    Federal Perkins Loan Program borrowers who apply for an economic 
hardship deferment based on the income requirements specified in 
Sec. 674.34(e)(3) are required by Sec. 674.34(e) to provide 
documentation showing that they meet those requirements. In accordance 
with Sec. 682.210(s)(6)(vii) of the FFEL Program regulations, FFEL and 
Direct Loan borrowers who apply for an economic hardship deferment 
under Sec. 682.210(s)(6)(iii) are required to submit evidence showing 
the amount of their most recent total monthly gross income. In all 
three loan programs, economic hardship deferments are limited to 
periods of up to one year at a time that, collectively, do not exceed 
three years. See Sec. 674.34(e), Sec. 674.38(d), and 
Sec. 682.210(s)(6). The maximum three year limitation is mandated by 
sections 428(b)(1)(M)(iii), 455(f)(2)(C), and 464(c)(2)(A)(iii) of the 
Higher Education Act of 1965, as amended (the HEA). A borrower who 
applies for a subsequent period of economic hardship deferment that 
begins less than one year after a deferment granted under 
Sec. 674.34(e)(3) or Sec. 682.210(s)(6)(iii) is required by 
Sec. 674.34(e)(7) and Sec. 682.210(s)(6)(viii) to provide a copy of the 
borrower's federal income tax return, if a tax return was filed within 
eight months prior to the date of the deferment request.
    Peace Corps volunteers generally do not have documentation of the 
amount of their monthly stipend for living expenses prior to beginning 
their volunteer service. Since Peace Corps volunteers serve overseas, 
often in remote areas of underdeveloped countries, the current 
requirement that borrowers submit documentation of their most recent 
monthly gross income when applying for economic hardship deferments 
presents significant logistical difficulties for many volunteers. For 
the same reason, the provisions that limit individual economic hardship 
deferments to periods of one year at a time are burdensome for Peace 
Corps volunteers, who normally serve for a period of 27 months. Under 
current regulatory requirements, they must reapply for an economic 
hardship deferment each year, and must submit additional income 
documentation with each deferment request.
    The Secretary has the authority under Sec. 435(o) of the HEA to 
establish criteria by which borrowers may qualify for economic hardship 
deferments in the Federal Perkins Loan, FFEL, and Direct Loan programs. 
Because Peace Corps volunteers meet current regulatory requirements for 
economic hardship deferments based on the modest stipends that they 
receive, and because of the unique circumstances under which they 
serve, the Secretary believes that it is appropriate and in the 
national interest to establish new criteria that will make it easier 
for Peace Corps volunteers to apply for economic hardship deferments. 
The new economic hardship criteria that the Secretary is proposing are 
consistent with this provision of the HEA.
    The proposed changes will allow Peace Corps volunteers who are 
ineligible for deferment or cancellation based on Peace Corps service 
to qualify for economic hardship deferments simply by providing 
documentation showing that they will be serving as Peace Corps 
volunteers. Since this documentation will be available to Peace Corps 
volunteers at pre-service orientation sessions, they will be able to 
apply for economic hardship deferments while still in the United 
States. In addition, the Secretary is proposing to eliminate the one-
year-at-a-time restriction for economic hardship deferments based on 
service as a Peace Corps volunteer. This will allow Peace Corps 
volunteers who have not previously received economic hardship 
deferments to defer repayment of their loans for up to three years, or 
for their full term of service in the Peace Corps, whichever is less, 
without having to reapply each year. Peace Corps volunteers who have 
received previous economic hardship deferments may defer repayment of 
their loans for up to their remaining period of eligibility under the 
statutory three-year limitation, or for their full term of service, 
whichever is less.

Section 674.38 (Deferment Procedures) and Sec. 674.39 (Postponement 
of Loan Repayments in Anticipation of Cancellation--Loans Made 
Before July 1, 1993)

    The Secretary believes that, to the extent possible, the 
requirements for requesting a deferment in the Federal Perkins Loan 
Program, the FFEL Program, and the Direct Loan Program should be the 
same. For this reason, the Secretary is proposing to amend Sec. 674.38 
and Sec. 674.39 by revising paragraph (a)(1) in each section to 
eliminate the requirement that a borrower request a deferment or 
postponement of repayment of a loan in writing. The Secretary believes 
that a telephone or electronic request to the institution from the 
borrower is sufficient to initiate the deferment/postponement process. 
The proposed changes reduce burden for both borrowers and institutions, 
and make the Federal Perkins Program regulations more consistent with 
the less restrictive regulations in the FFEL and Direct Loan programs.

[[Page 49800]]

Executive Order 12866

1. Potential 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 as necessary for administering these programs effectively and 
efficiently. Burdens specifically associated with information 
collection requirements 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 proposed regulations justify the 
costs.

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 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. 682.210 Deferment.) (4) Is the 
description of the proposed regulations in the ``Supplementary 
Information'' section of this preamble helpful in understanding the 
proposed regulations? How could this description be more helpful in 
making the proposed 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 Mr. 
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of 
Education, 600 Independence Avenue, SW, Room 5121, FB-10B, 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. The small entities affected by these proposed regulations are 
small schools and loan holders that participate in the federal student 
loan programs.
    The changes proposed in this regulation would reduce administrative 
burden on schools and loan holders by allowing them to process economic 
hardship deferments for eligible Peace Corps volunteers for more than 
one year at a time, and would provide schools participating in the 
Federal Perkins Loan Program with greater flexibility in processing 
deferment requests. Thus, the proposed regulations are not expected to 
have an adverse economic impact on small entities.
    The Secretary particularly invites comments on the effect that 
these proposed regulations would have on small entities.

Paperwork Reduction Act of 1995

    Sections 674.34 and 682.210 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 Management and Budget (OMB) for its 
review.
    Collection of Information: Federal Perkins Loan Program, Federal 
Family Education Loan Program, and William D. Ford Federal Direct Loan 
Program--Economic Hardship Deferments.
    There is no change to the current burden for this collection. The 
respondents affected by the proposed regulations (Peace Corps 
volunteers with federal student loans who are ineligible for loan 
deferment or cancellation based on Peace Corps service) may currently 
apply for economic hardship deferments in accordance with existing 
regulatory requirements. The proposed changes to the economic hardship 
deferment criteria are not expected to increase the number of 
respondents or significantly reduce the amount of time needed to 
respond. Although the documentation requirements for Peace Corps 
volunteers who apply for economic hardship deferments in the three 
federal student loan programs will be somewhat simplified, and Peace 
Corps volunteers will be required to apply only once instead of 
annually, the Secretary does not believe that the number of volunteers 
with student loans who apply for economic hardship deferments is large 
enough to significantly alter the total burden hours for this 
collection.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, OMB, 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 on those who are 
to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques of 
other forms of information technology; e.g., permitting electronic 
submission of responses.
    OMB is required to make a decision concerning 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.

Intergovernmental Review

    The Federal Perkins Loan, Federal Family Education Loan, and 
William D. Ford Federal Direct Loan programs are not subject to the 
requirements of Executive Order 12372 and the regulations in 34 CFR 
part 79.

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.

Electronic Access to This Document

    Anyone may view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or 
portable

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document format (pdf) on the World Wide Web at either of the following 
sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html

To use the pdf you must have the Adobe Acrobat Reader Program with 
Search, which is available free at either of the previous sites. If you 
have questions about using the pdf, call the U.S. Government Printing 
Office toll free at 1-888-293-6498.
    Anyone may also view these documents in text copy only on an 
electronic bulletin board of the Department. Telephone: (202) 219-1511 
or, toll free, 1-800-222-4922. The documents are located under Option 
G--Files/Announcements, Bulletins and Press Releases.

    Note: The official version of this document is the document 
published in the Federal Register.

List of Subjects in 34 CFR Parts 674 and 682

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

    Dated: September 10, 1998.
Richard W. Riley,
Secretary of Education.

(Catalog of Federal Domestic Assistance Numbers: 84.032 Stafford 
Loan Program; 84.032 PLUS Program; 84.032 Supplemental Loans for 
Students Program; 84.038 Federal Perkins Loan Program; and 84.268 
William D. Ford Federal Direct Loan Program)

    The Secretary proposes to amend parts 674 and 682 of title 34 of 
the Code of Federal Regulations as follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

    1. 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.

    2. Section 674.34 is amended by revising paragraphs (e) and (e)(2) 
to read as follows:


Sec. 674.34  Deferment of repayment--Federal Perkins loans and Direct 
Loans made on or after July 1, 1993.

* * * * *
    (e) The borrower need not repay principal, and interest does not 
accrue, for periods of up to one year at a time (except that a 
deferment under paragraph (2)(ii) of this section may be granted for 
longer than one year at a time) that, collectively, do not exceed 3 
years, during which the borrower is suffering an economic hardship, if 
the borrower provides documentation satisfactory to the institution 
showing that the borrower--
* * * * *
    (2) Is receiving payment--
    (i) Under a federal or state public assistance program, such as Aid 
to Families with Dependent Children, Supplemental Security Income, Food 
Stamps, or state general public assistance; or
    (ii) From the Peace Corps while serving as a Peace Corps volunteer;
* * * * *
    3. Section 674.38 is amended by revising paragraphs (a)(1) and (d) 
to read as follows:


Sec. 674.38  Deferment procedures.

    (a)(1) As a condition for receiving a deferment, a borrower shall 
request the deferment, and provide the institution with all information 
and documents required by the institution by the date that the 
institution establishes.
* * * * *
    (d) Except for a deferment under paragraph (2)(ii) of section 
674.34, the institution shall determine the continued eligibility of a 
borrower for a deferment at least annually.


Sec. 674.39  [Amended]

    4. Section 674.39, paragraph (a)(1), is amended by removing the 
words ``in writing''.

PART 682--FEDERAL FAMILY EDUCATION LOAN PROGRAM

    5. The authority citation for part 682 continues to read as 
follows:

    Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.

    6. Section 682.210 is amended by revising paragraph (s)(6) 
introductory text and (s)(6)(ii) to read as follows:


Sec. 682.210  Deferment.

* * * * *
    (s) * * *
    (6) Economic hardship deferment. An eligible borrower is entitled 
to an economic hardship deferment for periods of up to one year at a 
time (except that a deferment under paragraph (s)(6)(ii)(B) of this 
section may be granted for longer than one year at a time) that, 
collectively, do not exceed 3 years, if the borrower provides 
documentation satisfactory to the lender showing that the borrower--
* * * * *
    (ii) Is receiving payment--
    (A) Under a federal or state public assistance program, such as Aid 
to Families with Dependent Children, Supplemental Security Income, Food 
Stamps, or state general public assistance; or
    (B) From the Peace Corps while serving as a Peace Corps volunteer;
* * * * *
[FR Doc. 98-24866 Filed 9-16-98; 8:45 am]
BILLING CODE 4000-01-P