[Federal Register Volume 64, Number 205 (Monday, October 25, 1999)]
[Rules and Regulations]
[Pages 57528-57531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27728]



[[Page 57527]]

_______________________________________________________________________

Part IV





Department of Education





_______________________________________________________________________



34 CFR Parts 674 and 682



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

  Federal Register / Vol. 64, No. 205 / Monday, October 25, 1999 / 
Rules and Regulations  

[[Page 57528]]



DEPARTMENT OF EDUCATION

34 CFR Parts 674 and 682


Federal Perkins Loan Program and Federal Family Education Loan 
Program

AGENCY: Department of Education.

ACTION: Final regulations.

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

SUMMARY: The Secretary amends the Federal Perkins Loan and Federal 
Family Education Loan (FFEL) program regulations by adding criteria 
that allow Peace Corps volunteers who are ineligible for deferment or 
cancellation of their federal student loans based solely on Peace Corps 
service to automatically qualify for economic hardship deferments while 
they are serving in the Peace Corps. This change also applies to the 
William D. Ford Federal Direct Loan (Direct Loan) Program in accordance 
with Sec. 685.204(b)(3) of the Direct Loan Program regulations, which 
references the standards set forth in Sec. 682.210(s) of the FFEL 
Program regulations in establishing a Direct Loan borrower's 
eligibility for an economic hardship deferment.
    The Secretary also amends the Federal Perkins Loan Program 
regulations to eliminate the provision that requires a borrower to 
submit a request for a loan deferment, including a deferment in 
anticipation of cancellation, in writing.

DATES: Effective Date: These regulations are effective July 1, 2000.
    Implementation Date: The Secretary has determined, in accordance 
with section 482(c)(2)(A) of the Higher Education Act of 1965, that 
institutions that participate in the Federal Perkins Loan Program and 
lenders and guaranty agencies that participate in the FFEL Programs 
may, at their discretion, choose to implement the provisions of 
Secs. 674.34, 674.38, and 682.210 as amended by these final 
regulations, on or after October 25, 1999. For further information see 
``Implementation Date of These Regulations'' under the SUPPLEMENTARY 
INFORMATION section of this preamble.

FOR FURTHER INFORMATION CONTACT:
    1. For the Federal Perkins Loan Program: Vanessa Freeman, U.S. 
Department of Education, 400 Maryland Avenue, SW, ROB-3, Room 3045, 
Washington, DC 20202-5447. Telephone: (202) 708-8242.
    2. For the FFEL Program: George Harris, U.S. Department of 
Education, 400 Maryland Avenue, SW, ROB-3, Room 3045, Washington, DC 
20202-5447. Telephone: (202) 708-8242.
    3. For the Direct Loan Program: Jon Utz, U.S. Department of 
Education, 400 Maryland Avenue, SW, ROB-3, Room 3045, Washington, DC 
20202-5447. Telephone: (202) 708-8242.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
    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 
paragraphs.

SUPPLEMENTARY INFORMATION: On September 17, 1998, the Secretary 
published a notice of proposed rulemaking (NPRM) for the Federal 
Perkins Loan Program and FFEL Program regulations in the Federal 
Register (63 FR 49798).
    The NPRM included a discussion of the issues surrounding the 
proposed changes that are not repeated here. The following changes were 
proposed:
    Amending Secs. 674.34(e)(2) and 682.210(s)(6)(ii) to add criteria 
that allow borrowers to qualify automatically for economic hardship 
deferments while they are serving in the Peace Corps.
    Amending Secs. 674.38(d) and 682.210(s)(6) to allow borrowers to 
receive economic hardship deferments for longer than a one-year period 
for each request while serving as Peace Corps volunteers.
    Amending Sec. 674.38(a) to eliminate the requirement that a 
borrower must submit a deferment or postponement request in writing.

Implementation Date of These Regulations

    Section 482(c) of the Higher Education Act of 1965, as amended (20 
U.S.C. 1089(c)) requires that regulations affecting programs under 
title IV of the Act be published in final form by November 1 prior to 
the start of the award year in which they apply. However, that section 
also permits the Secretary to designate any regulation as one that an 
entity subject to the regulation may choose to implement earlier. If 
the Secretary designates a regulation for early implementation, he may 
specify when and under what conditions the entity may implement it. 
Under this authority, the Secretary has designated the following 
regulations for early implementation:
    Sections 674.34, 674.38 and 682.210--In Dear Colleague letter GEN-
98-16, the Secretary provided interim procedures to be used by FFEL 
loan holders and postsecondary institutions in granting economic 
hardship deferments to Peace Corps volunteers until final regulations 
were published. Institutions that participate in the Federal Perkins 
Loans Program and guaranty agencies and lenders that participate in the 
FFEL program may, now at their discretion, choose to implement the 
provisions of Secs. 674.34, and 682.210 upon October 25, 1999. 
Institutions that participate in the Federal Perkins Loan Program may 
implement the provisions of Sec. 674.38 that eliminate the written 
request for a deferment in the Perkins Loan Program upon October 25, 
1999.
    These final regulations contain changes from the NPRM that are 
explained in the Analysis of Comments and Changes that follows.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM, 10 parties 
submitted comments on the proposed regulations. An analysis of the 
comments and of the changes in the regulations since the publication of 
the NPRM follows.
    We discuss substantive issues under the sections of the regulations 
to which they pertain. Generally, we do not address technical and other 
minor changes in the proposed regulations, and we do not respond to 
comments suggesting changes that the Secretary is not authorized by law 
to make.

General

    Comments: All of the commenters who addressed the Secretary's 
proposal to simplify the economic hardship deferment application 
process for certain Peace Corps volunteers supported the proposed 
changes.
    Discussion: The Secretary appreciates the commenters' support for 
the proposed changes and believes they will encourage and support Peace 
Corps service.
    Changes: None.

Sections 674.34 and 682.210  Deferment

    Comments: Several commenters noted that the proposed placement of 
the new provision in Secs. 674.34(e)(2) and 682.210(s)(6)(ii) appears 
to require a borrower to provide evidence that he or she is receiving 
payment from the Peace Corps rather than indicating clearly that the 
information required to establish a borrower's eligibility for the 
deferment is documentation from the Peace Corps that the borrower is 
serving (or will serve) as a Peace Corps volunteer. The commenters 
suggested that the regulatory language be revised to indicate that a 
borrower must provide documentation showing that he or she

[[Page 57529]]

is serving or has agreed to serve as a Peace Corps volunteer.
    Discussion: In the preamble to the NPRM and in Dear Colleague 
letter GEN 98-16, we indicated that evidence of a borrower's 
eligibility for an economic hardship deferment under the new provision 
is provided by documentation from the Peace Corps showing that the 
borrower will be or is serving as a Peace Corps volunteer. It was not 
our intent to require a borrower to provide documentation that he or 
she is actually receiving payments from the Peace Corps. However, we 
agree with the commenters that the regulatory language proposed in the 
NPRM could be misinterpreted.
    Changes: The paragraph establishing Peace Corps service as a 
criterion for receipt of an economic hardship deferment has been 
removed from Secs. 674.34(e)(2) and 682.210(s)(6)(ii) and made a 
separate paragraph in each part that clarifies that the borrower is not 
required to provide evidence of receiving payment from the Peace Corps 
to establish eligibility for the economic hardship deferment.
    Comments: Several commenters felt that the proposed language 
amending Sections 674.34(e) and 682.210(s)(6) did not define clearly 
the intended deferment period as the borrower's term of service in the 
Peace Corps, not to exceed the statutory maximum of three years. The 
commenters noted that the proposed language stated only that an 
economic hardship deferment under the new provision for Peace Corps 
volunteers may be granted for longer than one year at a time. The 
commenters suggested that the regulatory language be revised to 
indicate that the deferment period covers a borrower's full term of 
service in the Peace Corps or the borrower's remaining period of 
economic hardship deferment eligibility, not to exceed the three-year 
statutory maximum.
    Discussion: As discussed in the preamble to the NPRM and in Dear 
Colleague letter GEN-98-16, the deferment period for an economic 
hardship deferment granted to Peace Corps volunteers under the new 
provision is intended to be for the borrower's full term of service, up 
to the statutory maximum of three years. We agree with the commenters 
that the regulatory language proposed in the NPRM may not convey 
clearly the intended deferment period.
    Changes: Sections 674.34(e) and 682.210(s)(6) have been revised to 
clarify that the period of an economic hardship deferment under the new 
provision is the lesser of the borrower's full term of service in the 
Peace Corps or the borrower's remaining period of economic hardship 
deferment eligibility under the statutory three-year maximum.
    Comments: Several commenters expressed concern that the Peace Corps 
certification form the borrower receives from the Peace Corps at pre-
service orientation sessions, and that certifies that the borrower will 
be serving as a Peace Corps volunteer, does not include the borrower's 
dates of service. The commenters believe that without information on 
the beginning and ending dates of the borrower's service, they will not 
have sufficient documentation to process an economic hardship deferment 
for the appropriate period of time. The commenters suggested that the 
Peace Corps certification document that was attached to Dear Colleague 
letter GEN-98-16 be revised to include the beginning and ending dates 
of the borrower's service to make the form consistent with the 
regulatory changes proposed in the NPRM.
    Discussion: We agree that the documentation the Peace Corps 
supplies to the borrower supporting the borrower's request for 
deferment should include the beginning and ending dates of the 
borrower's Peace Corps service. We also believe that the Peace Corps 
certification form, which was originally developed to support only a 
borrower's request for the categorical Peace Corps deferment, should be 
revised to support both borrowers who apply for the categorical 
deferment and those that apply for an economic hardship deferment based 
on Peace Corps service.
    Changes: The Peace Corp certification form has been revised to 
include the borrower's dates of service and to make it suitable for use 
as supporting documentation of Peace Corps service for both categories 
of borrowers serving in the Peace Corps.
    Comments: Two commenters noted that the proposed regulations would 
permit borrowers to receive economic hardship deferments for their full 
term of service in the Peace Corps without having to reapply each year. 
These commenters expressed concern about the potential for fraud by 
borrowers who do not complete their term of service and felt that a 
system should be established to notify loan holders of a borrower's 
continuation in or termination from Peace Corps service. One of the 
commenters recommended that loan holders receive verification of a 
borrower's continued service in the Peace Corps annually before 
authorizing an extension of the borrower's deferment. The other 
commenter was concerned particularly about potential for fraud by 
borrowers who are eligible for loan cancellation in the Federal Perkins 
Loan Program based on their service as Peace Corps volunteers, and 
believed that borrowers should continue to be required to provide 
documentation of both the beginning and termination dates of their 
service.
    Discussion: We appreciate the commenters' concerns regarding fraud 
in the case of borrowers who terminate their Peace Corps service early. 
However, we believe that requiring borrowers who receive economic 
hardship deferments based on their Peace Corps service to provide 
documentation annually to their loan holders essentially eliminates one 
of major benefits provided by the proposal to Peace Corps volunteers. 
Borrowers are clearly told, both on the deferment request forms used in 
the FFEL and Direct Loan programs and on the revised Peace Corps 
service certification form, that they must immediately notify their 
loan holders if they leave the Peace Corps before the projected 
termination date shown on their Peace Corps certification form. The new 
economic hardship deferment provisions for Peace Corps volunteers do 
not change this borrower responsibility.
    We did not propose to eliminate the requirement that the loan 
holder make an annual determination of a borrower's eligibility for a 
categorical Peace Corp deferment in the FFEL and the Federal Direct 
Loan Programs, or for a deferment or cancellation, or both, based on 
Peace Corps service in the Federal Perkins Loan Program. We believe, 
however, that the same benefits of a less burdensome deferment and 
cancellation application process should be extended to all Peace Corps 
volunteers.
    Changes: Sections 674.38(d) and 682.210(k) are amended to authorize 
a loan holder to grant a categorical deferment, including a deferment 
in anticipation of cancellation in the Federal Perkins Loan Program, 
for the borrower's full term of service in the Peace Corps, not to 
exceed three years.

Section 674.38 Deferment Procedures

    Comments: Many commenters supported our proposal to eliminate the 
written request for deferment in the Federal Perkins Loan Program. The 
commenters believe that telephone or electronic requests by the 
borrower to the institution are an appropriate means for the borrower 
to request a deferment. They also stated that uniformity among the 
title IV loan program regulations, where possible, is beneficial for 
both institutions and borrowers.
    All of the commenters, however, expressed concern about the 
disparities

[[Page 57530]]

that remain between the FFEL, Direct Loan, and Federal Perkins Loan 
Programs with regard to the processing of in-school deferments. Several 
commenters indicated that, in the FFEL and Direct Loan programs, a 
lender may use a certified loan application, a form certified by the 
borrower's school, or other data it receives from the Student Status 
Confirmation Report (SSCR) or another third-party servicer verifying 
the borrower's in-school status as sufficient documentation to initiate 
and process an in-school deferment. In these instances, the student 
borrower is not required to make a specific request for the deferment. 
The commenters pointed out that under the regulations proposed by the 
Secretary for the Federal Perkins Loan Program, borrowers would still 
be required to contact the institution to request an in-school 
deferment.
    Discussion: We agree that consistency between the various title IV 
student loan programs is an important goal. We also believe that the 
use of technology to reduce administrative burden for institutions is 
equally important. We further agree that the regulatory changes 
proposed to facilitate the processing of in-school deferments in the 
Federal Perkins Loan Program may not provide schools with enough 
flexibility in the processing of those deferments.
    After examining the applicability of the methods used in the FFEL 
and Direct Loan Program to the Federal Perkins Loan Program, we have 
decided that use of a certified loan application to initiate the in-
school deferment process is impractical because there is no separate 
Federal Perkins Loan application to use for this process. However, we 
believe that data verifying the borrower's in-school enrollment status, 
either from a third-party servicer or from the school in which the 
borrower is enrolled, is sufficient documentation for a school 
participating in the Federal Perkins Loan Program to grant an in-school 
deferment. To preserve the borrower's ability to participate in the 
deferment process, we also believe that the institution should notify 
the borrower when it grants a deferment in this manner to provide the 
borrower with the option to decline the deferment and to continue 
paying on the loan.
    Changes: A provision has been added to Sec. 674.38(a) to allow an 
institution to determine a borrower's eligibility and grant an in-
school deferment based on the institution's receipt of student 
enrollment information from the school in which the borrower is 
enrolled or from a third-party servicer. The institution must notify 
the borrower that a deferment has been granted and provide the borrower 
with the option to continue paying on the loan.

Section 674.39 Postponement of Loan Repayments in Anticipation of 
Cancellation of Loans Made Before July 1, 1993.

    Comments: Many commenters supported the Secretary's proposal to 
eliminate the written request for postponement of repayment in 
anticipation of cancellation for loans made under the Federal Perkins 
Loan Program before July 1, 1993.
    Discussion: The Secretary published a notice of proposed rulemaking 
(NPRM) on July 29, 1999, in accordance with the Higher Education 
Amendments of 1998 (Pub. L. 105-244), that extends a deferment in 
anticipation of cancellation to all borrowers with a loan made under 
the Federal Perkins Loan Program. Because the extension of a deferment 
in anticipation of cancellation would eliminate the need for a 
postponement, the NPRM proposed to eliminate Sec. 674.39 in its 
entirety from the Federal Perkins Loan Program regulations.
    Changes: Proposed amendatory language with respect to Sec. 674.39 
has been eliminated from these final regulations.

Executive Order 12866

    We have reviewed these final regulations in accordance with 
Executive Order 12866. Under the terms of the order, we have assessed 
the potential costs and benefits of this regulatory action.
    The potential costs associated with the final regulations are those 
resulting from statutory requirements and those we have determined are 
necessary for administering these programs effectively and efficiently. 
Burden specifically associated with information collection 
requirements, if any, was identified and explained in the preamble to 
the NPRM.
    In assessing the potential costs and benefits, both quantitative 
and qualitative, of these final regulations, we have 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.
    The potential costs and benefits of these final regulations were 
discussed in the preamble to the NPRM (63 FR 49800).

Paperwork Reduction Act of 1995

    These regulations do not contain any information collection 
requirements.

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

    In the NPRM, we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the responses to the NPRM and on our review, we have 
determined that the regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Electronic Access to This Document

    You may view this document in text or Adobe Portable Document 
Format (PDF) on the Internet at the following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/legislation/HEA/rulemaking/
http://ifap.ed.gov/csb--html/fedlreg.htm

To use the PDF, you must have the Adobe Acrobat Reader Program with 
Search, which is available free at the first of the previous sites. If 
you have questions about using the PDF, call the U.S. Government 
Printing Office (GPO), toll free, at 1-888-293-6498; or in the 
Washington, DC, area at (202) 512-1530.

    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://
www.access.gpo.gov/nara/index.html.

(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)

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: October 19, 1999.
Richard W. Riley
Secretary of Education.
    For the reasons stated in the preamble, the Secretary amends parts 
674 and 682 of the Code of Federal Regulations as follows:

[[Page 57531]]

PART 674--FEDERAL PERKINS LOAN PROGRAM

    1. The authority citation for part 674 continues to read as follows 
by:

    Authority: 20 U.S.C. 1087aa-1087ii and 20 U.S.C. 421-429, unless 
otherwise noted.

    2. Section 674.34 is amended as follows by:
    A. Revising paragraph (e) introductory text.
    B. Redesignating paragraphs (e)(6), (e)(7), (e)(8), and (e)(9) as 
(e)(7), (e)(8), (e)(9), and (e)(10), respectively.
    C. Removing the word ``or'' at the end of paragraph(e)(4).
    D. Removing the semicolon at the end of paragraph (e)(1), (e)(2), 
and (e)(3) and adding, in its place, a period.
    E. Adding a new paragraph (e)(6).


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 (e)(6) of this section may be granted for the 
lesser of the borrower's full term of service in the Peace Corps or the 
borrower's remaining period of economic hardship deferment eligibility) 
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 is within any 
of the categories described in paragraphs (e)(1) through (e)(6) of this 
section.
* * * * *
    (6) Is serving as a volunteer in the Peace Corps.
* * * * *
    3. Section 674.38 is amended by redesignating paragraph (a)(2) as 
paragraph (a)(3), adding new paragraph (a)(2), and by revising 
paragraphs (a)(1) and (d) to read as follows:


Sec. 674.38  Deferment procedures.

    (a)(1) Except as provided in paragraph (a)(2)of this section, a 
borrower must request the deferment and provide the institution with 
all information and documents required by the institution by the date 
that the institution establishes.
    (2) In the case of an in school deferment, the institution may 
grant the deferment based on student enrollment information showing 
that a borrower is enrolled as a regular student on at least a half-
time basis, if the institution notifies the borrower of the deferment 
and of the borrower's option to cancel the deferment and continue 
paying on the loan.
* * * * *
    (d) The institution must determine the continued eligibility of a 
borrower for a deferment at least annually, except that a borrower 
engaged in service described in Secs. 674.34(e)(6), 674.35(c)(3), 
674.36(c)(2), 674.37(c)(2), and Sec. 674.60(a)(1) must be granted a 
deferment for the lesser of the borrower's full term of service in the 
Peace Corps, or the borrower's remaining period of eligibility for a 
deferment under Sec. 674.34(e), not to exceed 3 years.

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

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

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

    5. Section 682.210 is amended by:
    A. Redesignating paragraph (k) introductory text, following the 
heading Peace Corps deferment., (k)(1), (k)(2), and (k)(3) as 
paragraphs (k)(1),(k)(1)(i),(k)(1)(ii), and (k)(1)(iii), respectively.
    B. Adding new paragraph (k)(2).
    C. Revising paragraph (s)(6) introductory text.
    D. Redesignating paragraphs (s)(6)(vi), (vii), (viii), (ix), and 
(x) as paragraphs (s)(6)(vii), (viii), (ix), (x), and (xi), 
respectively.
    E. By removing ``; or'' at the end of paragraph (s)(6)(iv), and 
adding, in its place, a period.
    F. Removing the semicolon at the end of paragraphs (s)(6)(i), 
(s)(6)(ii), and (s)(6)(iii), and adding, in its place a period.
    G. Removing ``(s)(6)(ix)'' in newly redesignated paragraphs (s)(6) 
(viii) and (ix) and by adding, its place, ``(s)(6)(x)''.
    H. Adding a new paragraph (s)(6)(vi).


Sec. 682.210  Deferment

* * * * *
    (k) * * *
    (2) The lender must grant a deferment for the borrower's full term 
of service in the Peace Corps, not to exceed three years.
* * * * *
    (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 that, collectively, do not exceed 3 years (except that a borrower 
who receives a deferment under paragraph (s)(6)(vi) of this section is 
entitled to an economic hardship deferment for the lesser of the 
borrower's full term of service in the Peace Corps or the borrower's 
remaining period of economic hardship deferment eligibility under the 
3-year maximum), if the borrower provides documentation satisfactory to 
the lender showing that the borrower is within any of the categories 
described in paragraphs (s)(6)(I) through (s)(6)(vi) of this section.
* * * * *
    (vi) Is serving as a volunteer in the Peace Corps.
* * * * *
[FR Doc. 99-27728 Filed 10-22-99; 8:45 am]
BILLING CODE 4000-01-P