[Federal Register Volume 65, Number 155 (Thursday, August 10, 2000)]
[Proposed Rules]
[Pages 49124-49132]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-20035]



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Part III





Department of Education





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34 CFR Parts 682 and 685



Federal Family Education Loan Program and William D. Ford Federal 
Direct Loan Program; Proposed Rule

  Federal Register / Vol. 65, No. 155 / Thursday, August 10, 2000 / 
Proposed Rules  

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DEPARTMENT OF EDUCATION

34 CFR Parts 682 and 685

RIN 1845-AA11


Federal Family Education Loan Program and William D. Ford Federal 
Direct Loan Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the Federal Family Education 
Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct 
Loan) Program regulations. These proposed regulations are needed to 
implement changes made to the Higher Education Act of 1965, as amended, 
(HEA) by the Higher Education Amendments of 1998 (1998 Amendments). The 
proposed regulations are necessary to implement the teacher loan 
forgiveness programs in the FFEL and Direct Loan programs that were 
included in the 1998 Amendments. In addition, these proposed 
regulations contain conforming changes for both the FFEL Program and 
the Direct Loan Program, as well as technical amendments to the Direct 
Loan Program regulations.

DATES: We must receive your comments on or before September 25, 2000.

ADDRESSES: Address all comments concerning these proposed regulations 
to Ms. Beth Grebeldinger and Mr. Don Watson, U.S. Department of 
Education, PO Box 23272, Washington, DC 20026-3272. If you prefer to 
send your comments through the Internet, use the following address: 
[email protected]
    If you want to comment on the information collection requirements, 
you must send your comments to the Office of Management and Budget at 
the address listed in the Paperwork Reduction Act section of this 
preamble. You may also send a copy of these comments to the Department 
representatives named in this section.

FOR FURTHER INFORMATION CONTACT: For the FFEL Program, Ms. Beth 
Grebeldinger, or for the Direct Loan Program, Mr. Don Watson, U.S. 
Department of Education, 400 Maryland Avenue, SW., Room 3045, Regional 
Office Building #3, Washington, DC 20202-5346. 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 one of the contact persons listed in the 
preceding paragraph.

SUPPLEMENTARY INFORMATION:

Invitation To Comment

    We invite you to submit comments regarding these proposed 
regulations. To ensure that your comments have maximum effect in 
developing the final regulations, we urge you to identify clearly the 
specific section or sections of the proposed regulations that each of 
your comments addresses and to arrange your comments in the same order 
as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Order 12866 and its overall requirement of 
reducing regulatory burden that might result from these proposed 
regulations. Please let us know of any further opportunities we should 
take to reduce potential costs or increase potential benefits while 
preserving the effective and efficient administration of the program.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations 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.

Assistance to Individuals With Disabilities in Reviewing the 
Rulemaking Record

    On request, we will supply 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 record for these proposed regulations. If you want to 
schedule an appointment for this type of aid, you may call (202) 205-
8113 or (202) 260-9895. If you use a TDD, you may call the Federal 
Information Relay Service at 1-800-877-8339.

Negotiated Rulemaking

    Section 492 of the HEA requires that, before publishing any 
proposed regulations for programs under Title IV of the HEA, the 
Secretary obtain public involvement in the development of the proposed 
regulations. After obtaining advice and recommendations, the Secretary 
must conduct a negotiated rulemaking process to develop the proposed 
regulations. All published proposed regulations must conform to 
agreements resulting from the negotiated rulemaking process unless the 
Secretary reopens the negotiated rulemaking process or provides a 
written explanation to the participants in that process why the 
Secretary has decided to depart from the agreements.
    To obtain public involvement in the development of the proposed 
regulations, we held listening sessions in Washington, DC, Atlanta, 
Chicago, and San Francisco. Four half-day sessions were held on 
September 13 and 14, 1999, in Washington, DC. In addition, we held 
three regional sessions in Atlanta on September 17, in Chicago on 
September 24, and in San Francisco on September 27, 1999. The Office of 
Student Financial Assistance's Customer Service Task Force also 
conducted listening sessions to obtain public involvement in the 
development of our regulations.
    We then published a notice in the Federal Register (64 FR 73458, 
December 30, 1999) to announce our intention to establish two 
negotiated rulemaking committees to draft proposed regulations 
affecting Title IV of the HEA. The notice requested nominations for 
participants from anyone who believed that his or her organization or 
group should participate in this negotiated rulemaking process. The 
notice announced that we would select participants for the process from 
the nominees of those organizations or groups. The notice also 
announced a tentative list of issues that each committee would 
negotiate.
    Once the two committees were established, they met to develop 
proposed regulations over the course of several months, beginning in 
February. The proposed regulations contained in this NPRM reflect the 
final consensus of Negotiating Committee I (committee), which was made 
up of the following members:

American Association of Collegiate Registrars and Admission Officers
American Association of Cosmetology Schools
American Association of State Colleges and Universities (in coalition 
with American Association of Community Colleges)
American Council on Education
Career College Association
Coalition of Higher Education Assistance Organizations
Consumer Bankers Association
Education Finance Council
Education Loan Management Resources
Legal Services
National Association of College and University Business Officers
National Association of Independent Colleges and Universities
National Association of State Universities and Land-Grant Colleges

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National Association of Student Financial Aid Administrators
National Association of Student Loan Administrators
National Council of Higher Education Loan Programs
National Direct Student Loan Coalition
Sallie Mae, Inc.
Student Loan Servicing Alliance
The College Fund/United Negro College Fund
United States Department of Education
United States Student Association
United States Public Interest Research Group

    As stated in the committee protocols, consensus means that there 
must be no dissent by any member in order for the committee to be 
considered to have reached agreement. Consensus was reached on all of 
the proposed regulations in this document.

Significant Proposed Regulations

    We discuss substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
proposed regulatory provisions that are technical or otherwise minor in 
effect.

Teacher Loan Forgiveness Program

    Statute: The 1998 Amendments create teacher loan forgiveness 
programs for borrowers in the FFEL and Direct Loan programs. The loan 
forgiveness programs are intended to encourage individuals to enter and 
continue teaching in elementary and secondary schools in areas 
designated as low income.
    Current Regulations: Regulations for these programs do not exist 
because these loan forgiveness programs were created by the 1998 
Amendments.

Proposed Regulations: General

    The proposed regulations would implement new sections 428J and 460 
of the HEA that created teacher loan forgiveness programs under the 
FFEL and Direct Loan programs. Under these provisions, certain new 
borrowers in the FFEL and Direct Loan programs may have up to $5,000 of 
their loans forgiven after teaching for five consecutive, complete 
academic years in low-income schools that meet specified criteria. The 
proposed regulations define a new borrower, for purposes of the loan 
forgiveness programs, as someone who has no outstanding loan balance 
under the Federal Family Education Loan (FFEL) Program or the William 
D. Ford Federal Direct Loan (Direct Loan) Program on October 1, 1998 or 
who has no outstanding loan balance on the date he or she obtains a 
loan after October 1, 1998. October 1, 1998 was the effective date of 
the teacher loan forgiveness provision. The HEA authorizes the 
forgiveness of up to a total of $5,000 in Federal Stafford subsidized 
and unsubsidized loans, Direct Subsidized Loans, and Direct 
Unsubsidized Loans. In addition, Consolidation loans under the FFEL and 
Direct Loan programs may be forgiven under certain conditions. Loan 
forgiveness under these programs is not available for amounts borrowed 
under the Federal PLUS and Direct PLUS loan programs.
    Under the proposed regulations, to qualify for loan forgiveness, 
the borrower must have been employed as a full-time teacher for five 
consecutive complete academic years, at least one of which was after 
the 1997-1998 academic year. Under certain conditions a borrower, who 
is in the process of completing his or her five consecutive years of 
teaching, may request and will receive a forbearance in anticipation of 
receiving loan forgiveness.
    Reasons: These regulations are needed to implement the new teacher 
loan forgiveness programs and to inform the public, students, loan 
holders, and institutions of the teacher loan forgiveness programs and 
their requirements. The terms of the programs and requirements are 
fully discussed in the following sections of the proposed regulations.

Sections 682.211(h)(2) and (3), 682.215(e), and 685.205(a)(5) 
Forbearance

    Proposed Regulations: The proposed regulations allow some borrowers 
to request a forbearance while awaiting loan forgiveness. Generally, 
during a forbearance, the borrower is not required to make payments and 
interest continues to accrue. Any unpaid interest that accrues on an 
FFEL loan during forbearance will be added to the principal 
(capitalized) in accordance with section 682.202(b). In the Direct Loan 
program any unpaid interest that accrues will be capitalized at the end 
of the forbearance.
    These proposed regulations would allow borrowers to request a 
forbearance while performing qualifying teaching service. The proposed 
regulations require a loan holder to grant an annual forbearance to a 
borrower if the loan holder determines that the expected cancellation 
will satisfy the anticipated remaining outstanding balance on the loan 
at the end of the period of qualified teaching and if the borrower 
provides the loan holder with a statement certifying his or her intent 
to satisfy the five-year teaching requirement. Forbearance may be 
granted for a full 12 month period, even if the teaching service is 
less than 12 months.
    These proposed regulations also allow borrowers who qualify for 
teacher loan forgiveness to receive forbearance on their qualifying 
FFEL loans or Direct Loans during the submission and processing of 
their applications for teacher loan forgiveness.
    Reasons: During negotiations, some non-federal negotiators 
suggested that some borrowers who were required to continue making 
payments on their loans during the five-year teaching requirement might 
actually pay their way out of the cancellation benefit since the 
statute prohibits the refunding of payments made prior to the 
cancellation. We agree that this would not be an appropriate result and 
have proposed that the borrower would be permitted to request 
forbearance each year during the five-year teaching period. Under this 
proposal, the borrower must request the annual forbearance and the loan 
holder must grant it if the loan holder believes that the cancellation 
will eliminate the borrower's remaining loan balance. This forbearance 
applies only to borrowers whose anticipated loan balance, with the 
forbearance, at the end of the five-year period of qualifying teaching 
will be $5,000 or less. We would also encourage loan holders to offer a 
borrower who has a higher loan balance any deferments or forbearances 
for which the borrower may qualify.
    The committee also decided that borrowers who qualify for teacher 
loan forgiveness should be able to receive a forbearance during the 
period needed for submission and processing of their applications for 
the loan forgiveness. This would be consistent with the processing of 
similar applications for relief such as closed school and false 
certification.

Sections 682.215(b) and 685.217(b) Definitions

    Proposed Regulations: The proposed regulations provide specific 
definitions for the terms ``academic year'', ``elementary schools'', 
``full-time'', ``secondary schools'', and ``teacher''. Of particular 
interest during negotiated rulemaking were the proposed definitions of 
``academic year'' and ``teacher''. These proposed definitions define an 
``academic year'' specifically for purposes of the teacher loan 
forgiveness programs and address issues related to borrowers who teach 
at more than one school during a year, or for two consecutive halves of 
two school years. The negotiators agreed to specifically include 
Special Education teachers in the proposed definition for ``teacher''.

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    Reasons: Most of the definitions used in the proposed teacher loan 
forgiveness program regulations are the same or similar to definitions 
used in the Federal Perkins Loan Program's teacher forgiveness program. 
Use of these definitions was requested by some of the non-federal 
negotiators so that there would be consistency of terms for loan 
forgiveness throughout the various Title IV federal student loan 
programs.
    Several non-federal negotiators objected to our proposed definition 
of an ``academic year''. These negotiators saw it as an attempt by the 
Secretary to regulate in an area that should be left to local school 
authorities. While we do not intend to regulate a school's academic 
calendar, we believe that clarity in this area is needed to ensure 
equal treatment of all borrowers in the teacher loan forgiveness 
programs. The committee ultimately reached consensus on these proposed 
regulations that include in the definition of an academic year a 
requirement that nine months would be considered an academic year for a 
borrower who teaches in a year-round program of instruction.

Sections 682.215(c) and 685.217(c) Borrower Eligibility

    Statute: Sections 428J(b)&(g) and 460(b)&(g) of the HEA specify the 
requirements for borrowers to qualify for teacher loan forgiveness.
    Proposed Regulations: The proposed regulations provide that the new 
borrower must have been employed full-time for five consecutive 
complete years in a low-income elementary or secondary school that has 
been listed in a designated Department directory. Consistent with the 
statute, those low-income elementary or secondary schools are ones that 
are in a school district that qualifies for funds under title I of the 
Elementary and Secondary Education Act and have more than 30 percent of 
their total enrollment made up of children who qualify for services 
provided under title I.
    The proposed regulations also reflect the statute and provide that 
if the school at which the borrower is employed meets the requirements 
of a low-income school at the outset of the borrower's qualifying 
teaching service at that school, then subsequent years of qualified 
teaching at that school count, even if the school loses its low-income 
status.
    The proposed regulations also provide that the borrower must have 
been employed as a full-time teacher for five consecutive complete 
academic years, at least one of which was after the 1997-1998 academic 
year.
    The proposed regulations also reflect the statutory requirements 
that elementary school teachers must demonstrate teaching skills in 
certain areas and that secondary school teachers teach in areas that 
are relevant to their academic major.
    The proposed regulations describe certain conditions that would not 
constitute a break in the required five consecutive complete years of 
qualified teaching. These circumstances include a return to 
postsecondary education that is directly related to the qualifying 
teaching service, a condition covered under the Family and Medical 
Leave Act of 1993, or a call or order to active duty status for a 
member of a reserve component of the Armed Forces.
    In addition, the proposed regulations permit a borrower to meet the 
required five-year qualified teaching service requirement if the 
borrower teaches at more than one qualifying school during an academic 
year.
    The proposed regulations also reflect the statutory limitations 
that provide that a defaulted loan may not be forgiven under these 
programs. A defaulted loan on which satisfactory repayment arrangements 
have been made is eligible for forgiveness. However the proposed 
regulations do not prohibit borrowers with defaulted loans from 
receiving the benefits of the teacher loan forgiveness on any of their 
non-defaulted loans.
    They also reflect the statutory provision that a borrower may not 
use the same qualifying teaching service to obtain benefits under the 
FFEL and Direct Loan forgiveness programs and a benefit for service the 
AmeriCorp program operated by the Corporation for National Service.
    Reasons: During the negotiations, we originally proposed that the 
first year of qualifying teaching service begin with or after the 1998-
1999 academic year. We believed that this approach was most consistent 
with the purpose of the law which is to encourage individuals to 
``enter and continue'' in the teaching profession. Since the loan 
forgiveness provision was enacted into law during the 1998-1999 
academic year, we concluded that loan forgiveness would not have been 
an incentive to enter the teaching profession for borrowers who were 
teaching prior to that date. Additionally, we were concerned that the 
legislative history, including the cost estimate for the program, could 
indicate that Congress intended for 1998-1999 to be the first academic 
year of any qualified teaching.
    Some non-federal negotiators, however, argued that the qualifying 
teaching service should include periods before the 1998-1999 academic 
year. These negotiators argued that the purpose of the law is not only 
to encourage borrowers to enter the teaching profession, but also to 
encourage other borrowers, who were already teaching in low-income 
schools, to continue doing so. They also noted that although the law 
provides that the teacher must be a new borrower on or after October 1, 
1998 and that there must be five consecutive complete years of 
teaching, the law does not specifically state when the five years of 
teaching must begin.
    Based on the arguments put forward by the non-federal negotiators, 
we agreed to propose loan forgiveness for qualified borrowers who have 
been employed as full-time teachers for five consecutive complete 
academic years as long as one of the years is after the 1997-1998 
academic year.
    The provisions included in the proposed regulations related to the 
specific teaching preparation and abilities of the elementary or 
secondary teacher reflect the language in sections 428J(b)(1)(B)&(C) 
and 460(b)(1)(A)(ii)&(iii) of the HEA.
    The draft regulations include three exemptions that prevent certain 
specified periods during which the borrower does not teach from 
breaking the five consecutive years needed to qualify for the loan 
forgiveness. The negotiators determined that these specific breaks in 
teaching should not disrupt the borrower's otherwise consecutive 
complete pattern of service. Two of these exceptions were adopted by 
the committee in recognition of the fact that these circumstances are 
outside of the borrower's control and do not reflect a choice by the 
borrower to leave qualified teaching. These particular circumstances 
are a condition covered under the Family and Medical Leave Act of 1993, 
or a call or order to active duty status for a member of a reserve 
component of the Armed Forces. The third exemption is the borrower's 
return to postsecondary education that is directly related to the 
qualifying teaching service. This exception was included to directly 
support one of the fundamental purposes of the teacher loan forgiveness 
provision--to encourage teachers to continue teaching.
    These proposed regulations would also allow a borrower to teach at 
more than one qualified school and meet the requirement for full-time 
teaching. This provision was requested by many of the non-federal 
negotiators and mirrors a provision in the Federal Perkins Loan 
Program.

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Sections 682.215(d) and 685.217(d) Forgiveness Amount

    Statute: Sections 428J(c) and 460(c)(1) include specific provisions 
governing the amount of loans that may be forgiven and specify which 
loans are eligible for forgiveness.
    Proposed Regulations: These proposed regulations reflect the 
statute and provide that $5,000 is the maximum amount that may be 
forgiven for an individual teacher under these programs. The $5,000 
includes principal, including any interest that has been capitalized, 
and any accrued interest outstanding at the time of forgiveness. These 
proposed regulations also reflect the statutory provisions which allow 
certain portions of consolidation loans to be forgiven and that 
prohibit any refund of payments that the borrower may have made toward 
a qualifying loan. Finally, they make clear that the $5,000 maximum 
loan forgiveness amount applies to all of a borrower's qualifying loans 
including loans under both the FFEL and Direct Loan programs.
    Reasons: These proposed regulations reflect the requirements of the 
statute.

Sections 682.215(f) and 685.217(e) Application and Processing

    Proposed Regulations: These provisions explain the application 
process for both the borrower and the lender or holder. They include 
the steps the holder must take to inform the borrower of the status of 
a forgiveness application and, in the case of the FFEL Program, the 
steps that the holder and guaranty agency must take for coordination of 
payment of the forgiveness amount.
    On the application, borrowers will be required to certify whether 
or not they have another pending application for teacher loan 
forgiveness under either the FFEL Program or the Direct Loan Program. 
If they have applied for loan forgiveness in both programs, the 
proposed regulations clarify that the total combined loan forgiveness 
amount cannot exceed $5,000.
    Reasons: The proposed regulations for teacher loan forgiveness are 
generally consistent in both the FFEL and the Direct Loan programs. The 
negotiators agreed that having consistent rules in both programs would 
help to ensure consistent administration and fair treatment for all 
borrowers. Accordingly, all borrowers will be required to submit a 
completed application for teacher loan forgiveness.
    A borrower must provide the certification concerning multiple 
applications to ensure that the borrower is not receiving benefits for 
which he or she is not eligible to receive under the HEA.

Executive Order 12866:

1. Potential Costs and Benefits

    Under Executive Order 12866, we have 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 we have 
determined as necessary for administering these programs effectively 
and efficiently.
    These proposed regulations implement a program under which 
borrowers who serve for five consecutive, complete, school years as 
teachers in certain high-poverty schools qualify for up to $5,000 in 
loan forgiveness benefits. In assessing the potential costs and 
benefits--both quantitative and qualitative--of this regulatory action, 
we have determined that the benefits would justify the costs.

2. Clarity of the Regulations

    Executive Order 12866 and the President's Memorandum of June 1, 
1998 on ``Plain Language in Government Writing'' require each agency to 
write regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following:
     Are the requirements in the proposed regulations clearly 
stated?
     Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
     Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec. '' and a numbered heading; for example, 
Sec. 685.217(d) Forgiveness Amount.)
     Could the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in 
making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    Send any comments that concern how the Department could make these 
proposed regulations easier to understand to the person listed in the 
ADDRESSES section of the preamble.

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. These proposed regulations would affect individual FFEL and 
Direct Loan borrowers, who are not considered ``small entities'' under 
the Regulatory Flexibility Act.
    The Secretary invites comments on this determination, and welcomes 
proposals on any significant alternatives that would satisfy the same 
legal and policy objectives of these proposals while minimizing the 
economic impact on small entities.

Paperwork Reduction Act of 1995

    Sections 682.211 and 682.215(c) in FFEL Program and Secs. 685.205 
and 685.217 in Direct Loans contain an information collection 
requirement. Under 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 Family Education Loan Program 
and William D. Ford Federal Direct Loan Program.

Section 682.211  Forbearance

    This proposed provision would allow a borrower who is a teacher to 
receive a forbearance during the period in which the borrower is 
completing the teaching requirements for teacher loan forgiveness. This 
provision has information collection requirements that would affect 
borrowers. Borrowers will be required to complete a form certifying 
their eligibility for the forbearance and agreeing to the terms of the 
forbearance. We will develop a form following publication of the final 
regulations and, when cleared, the form will account for the burden to 
the borrowers.

Section 682.215  Teacher Loan Forgiveness

    This proposed provision would allow a borrower who is a teacher and 
who meets certain requirements to have up to $5,000 of his or her loan 
debt forgiven. This provision has information collection requirements 
that would affect borrowers and lenders. The burden for lenders is 
currently included in our current inventory based on the prior teaching 
loan forgiveness program. Borrowers will be required to complete a form 
to apply for teacher loan forgiveness. This form will be developed 
following publication of the

[[Page 49128]]

final regulations and, when cleared, will account for the burden to the 
borrowers.

Section 685.205  Forbearance

    This proposed provision would allow a borrower who is a teacher to 
receive a forbearance during the period in which the borrower is 
completing the teaching requirements for teacher loan forgiveness. This 
provision has information collection requirements that would affect 
borrowers. Borrowers will be required to complete a form certifying 
their eligibility for the forbearance and agreeing to the terms of the 
forbearance. We will modify our current General Forbearance Request 
form (OMB No. 1845-0031) following publication of the final regulations 
and, when cleared, the form will account for the burden to the 
borrowers.

Section 685.217  Teacher Loan Forgiveness

    This proposed provision would allow a borrower who is a teacher and 
who meets certain requirements to have up to $5,000 of his or her loan 
debt forgiven. This provision has information collection requirements 
that would affect borrowers. Borrowers will be required to complete a 
form to apply for teacher loan forgiveness. This form will be developed 
following publication of the final regulations and, when cleared, will 
account for the burden to the borrowers.
    If you want to comment on the information collection requirements, 
please send your comments 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. You 
may also send a copy of these comments to the Department representative 
named in the ADDRESSES section of this preamble.
    We consider your comments on these proposed collections of 
information in--
     Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology; e.g., permitting electronic submission of 
responses.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, to ensure that OMB gives your comments full consideration, 
it is important that OMB receives the comments within 30 days of 
publication. This does not affect the deadline for your comments to us 
on the proposed regulations.

Intergovernmental Review

    These programs are not subject to Executive Order 12372 and the 
regulations in 34 CFR 79.

Assessment of Educational Impact

    The Secretary particularly requests comments on whether these 
proposed regulations would 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://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, D.C., 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 Federal 
Family Education Loan Program, and 84.268 William D. Ford Federal 
Direct Loan Program)

List of Subjects in 34 CFR Parts 682 and 685

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

    Dated: July 27, 2000.
Richard W. Riley,
Secretary of Education.
    For the reasons stated in the preamble, the Secretary proposes to 
amend title 34 of the Code of Federal Regulations by revising parts 682 
and 685 as follows:

PART 682--FEDERAL FAMILY EDUCATION LOAN PROGRAM

    (1) The authority citation for part 682 continues to read as 
follows:

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

    2. Section 682.211 is amended as follows:
    A. In paragraph (h)(2)(ii)(B), by removing the period at the end 
and adding in its place, ``; or''.
    B. By adding a new paragraph (h)(2)(ii)(C).
    C. By adding a new paragraph (h)(3)(iii).
    The additions and revisions read as follows:


Sec. 682.211  Forbearance.

* * * * *
    (h) * * *
    (2) * * *
    (ii) * * *
    (C) Is performing the type of service that would qualify the 
borrower for loan forgiveness and associated forbearance under the 
requirements of the Teacher loan forgiveness program in Sec. 682.215.
* * * * *
    (3) * * *
    (iii) Before granting a forbearance to a borrower under paragraph 
(h)(2)(ii)(C) of this section, the lender must require the borrower 
to--
    (A) Submit documentation for the period of the annual forbearance 
request showing the beginning and anticipated ending dates that the 
borrower is expected to perform, for that year, the type of service 
described in Sec. 682.215(c); and
    (B) Certify the borrower's intent to satisfy the requirements of 
Sec. 682.215(c).
* * * * *
    3. A new Sec. 682.215 is added to read as follows:


Sec. 682.215  Teacher loan forgiveness program.

    (a) General. The Teacher loan forgiveness program is intended to 
encourage individuals to enter and continue in the teaching profession. 
For new borrowers, the Secretary repays up to $5,000 of subsidized and 
unsubsidized Federal Stafford Loans, Direct Subsidized Loans, Direct 
Unsubsidized Loans, and in certain cases, Federal Consolidation Loans 
or

[[Page 49129]]

Direct Consolidation Loans. The forgiveness program is only available 
to a borrower who has no outstanding loan balance under the Federal 
Family Education Loan (FFEL) Program or the William D. Ford Federal 
Direct Loan (Direct Loan) Program on October 1, 1998 or who has no 
outstanding loan balance on the date he or she obtains a loan after 
October 1, 1998. In addition, the borrower must have been employed as a 
full-time teacher for five consecutive complete academic years, at 
least one of which was after the 1997-1998 academic year, in certain 
eligible elementary or secondary schools that serve low-income 
families. The loan for which forgiveness is sought must have been made 
prior to the end of the borrower's fifth year of qualifying teaching 
service.
    (b) Definitions. The following definitions apply to this section:
    Academic year means one complete school year at the same school, or 
two complete and consecutive half years at different schools, or two 
complete and consecutive half years from different school years at 
either the same school or different schools. Half years exclude summer 
sessions and generally fall within a twelve-month period. For schools 
that have a year-round program of instruction, nine months is 
considered an academic year.
    Elementary school means a public or nonprofit private school that 
provides elementary education as determined by State law or the 
Secretary if that school is not in a State.
    Full-time means the standard used by a State in defining full-time 
employment as a teacher. For a borrower teaching in more than one 
school, the determination of full-time is based on the combination of 
all qualifying employment.
    Secondary school means a public or nonprofit private school that 
provides secondary education as determined by State law or the 
Secretary if the school is not in a State.
    Teacher means a person who provides direct classroom teaching or 
classroom-type teaching in a non-classroom setting, including Special 
Education teachers.
    (c) Borrower eligibility. (1) A borrower may obtain loan 
forgiveness under this program if he or she has been employed as a 
full-time teacher for five consecutive complete academic years, at 
least one of which was after the 1997-1998 academic year, in an 
elementary or secondary school that--
    (i) Is in a school district that qualifies for funds under title I 
of the Elementary and Secondary Education Act of 1965, as amended;
    (ii) Has been selected by the Secretary based on a determination 
that more than 30 percent of the school's total enrollment is made up 
of children who qualify for services provided under title I; and
    (iii) Is listed in the Annual Directory of Designated Low-Income 
Schools for Teacher Cancellation Benefits. If this directory is not 
available before May 1 of any year, the previous year's directory may 
be used.
    (2) If the school at which the borrower is employed meets the 
requirements specified in paragraph (c)(1) of this section for at least 
one year of the borrower's five consecutive complete academic years of 
teaching and the school fails to meet those requirements in subsequent 
years, those subsequent years of teaching qualify for purposes of this 
section for that borrower.
    (3) A borrower who is employed as an elementary school teacher must 
demonstrate knowledge and teaching skills in reading, writing, 
mathematics, and other areas of the elementary school curriculum, as 
certified by the chief administrative officer of the school in which 
the borrower was employed.
    (4) A borrower who is employed as a secondary school teacher must 
teach in a subject area that is relevant to the borrower's academic 
major as certified by the chief administrative officer of the school in 
which the borrower was employed.
    (5) The academic year may be counted as one of the borrower's five 
consecutive complete academic years if the borrower completes at least 
one-half of the academic year and the borrower's employer considers the 
borrower to have fulfilled his or her contract requirements for the 
academic year for the purposes of salary increases, tenure, and 
retirement if the borrower is unable to complete an academic year due 
to--
    (i) A return to postsecondary education, on at least a half-time 
basis, that is directly related to the performance of the service 
described in this section;
    (ii) A condition that is covered under the Family and Medical Leave 
Act of 1993 (FMLA) (19 U.S.C. 2654); or
    (iii) A call or order to active duty status for more than 30 days 
as a member of a reserve component of the Armed Forces named in section 
10101 of title 10, United States Code.
    (6) A borrower's period of postsecondary education, qualifying FMLA 
condition, or military active duty as described in paragraph (c)(5)(i), 
(ii), and (iii) of this section does not constitute a break in the 
required five consecutive years of qualifying teaching service.
    (7) A borrower who taught in more than one qualified school during 
an academic year and demonstrates that the combined teaching was the 
equivalent of full-time, as supported by the certification of one or 
more of the chief administrative officers of the schools involved, is 
considered to have completed one academic year of qualified teaching.
    (8) A borrower is not eligible for teacher loan forgiveness on a 
defaulted loan unless the borrower has made satisfactory repayment 
arrangements to re-establish title IV eligibility, as defined in 
Sec. 682.200.
    (9) A borrower may not receive loan forgiveness for qualifying 
teaching service under this section if the borrower receives a benefit 
for the same teaching service under subtitle D of title I of the 
National and Community Service Act of 1990.
    (d) Forgiveness amount. (1) A qualified borrower is eligible for 
forgiveness of up to $5,000 of the aggregate amount of a borrower's 
subsidized or unsubsidized Federal Stafford or Federal Consolidation 
Loan obligation that is outstanding after the borrower completes his or 
her fifth consecutive complete academic year of teaching as described 
in paragraph (c) of this section. Only the portion of the consolidation 
loan that was used to repay the outstanding portions of a subsidized or 
unsubsidized Federal Stafford loan, a Direct Subsidized Loan, or a 
Direct Unsubsidized Loan qualifies for loan forgiveness under this 
section.
    (2) A borrower may not receive more than a total of $5,000 in loan 
forgiveness under both this section and under section 34 CFR 685.217.
    (3) The holder does not refund payments that were received from a 
borrower who qualifies for loan forgiveness under this section.
    (e) Authorized forbearance during qualifying teaching service and 
discharge processing. (1) At the borrower's request, a lender grants a 
forbearance--
    (i) Under Sec. 682.211(h)(2)(ii)(C) and (h)(3)(iii), in annual 
increments during each of the five years of qualifying teaching 
service, if the lender believes that the cancellation amount will 
satisfy the anticipated remaining outstanding balance on the loan at 
the time of the expected cancellation;
    (ii) For a period not to exceed 60 days while the lender is 
awaiting a completed teacher loan forgiveness application from the 
borrower; or
    (iii) For the period beginning on the date the lender receives a 
completed loan forgiveness application to the date the lender receives 
either a denial of the

[[Page 49130]]

request or the loan discharge amount from the guaranty agency, in 
accordance with paragraph (f) of this section.
    (2) At the conclusion of a forbearance authorized under paragraph 
(e)(1) of this section, the lender must resume collection activities 
and may capitalize any interest accrued and not paid during the 
forbearance period in accordance with Sec. 682.202(b).
    (3) Nothing in paragraph (e) of this section restricts holders from 
offering other forbearance options to borrowers who do not meet the 
requirements of paragraph (e)(1)(i) of this section.
    (f) Application and processing. (1) A borrower, after completing 
the qualifying teaching service, requests loan forgiveness from the 
holder of the loan on a form approved by the Secretary.
    (2)(i) The holder must file a request for payment with the guaranty 
agency on a teacher forgiveness discharge no later than 60 days after 
the receipt, from the borrower, of a completed teacher loan forgiveness 
application form including the certification form or forms submitted by 
the borrower and certified by the appropriate official or officials, as 
described in paragraph (c)(3) or (c)(4) of this section.
    (ii) When filing a request for payment on a teacher forgiveness 
discharge, the holder must provide the guaranty agency with the 
completed loan forgiveness application submitted by the borrower and 
any required supporting documentation.
    (3)(i) Within 45 days of receiving the holder's request for 
payment, the guaranty agency must determine if the borrower meets the 
eligibility requirements for loan forgiveness under this section and 
must notify the holder of its determination of the borrower's 
eligibility for loan forgiveness under this section.
    (ii) If the guaranty agency approves the discharge, it must, within 
the same 45-day period, pay the holder the amount of the discharge, up 
to $5,000, subject to paragraphs (c)(9) and (d)(2) of this section.
    (4) After being notified by the guaranty agency of its 
determination of the eligibility of the borrower for the discharge, the 
holder must, within 30 days, inform the borrower of the determination. 
If the discharge is approved, the lender must also provide the borrower 
with information regarding any new repayment terms of remaining loan 
balances.
    (5) Unless otherwise instructed by the borrower, the holder must 
apply the proceeds of the teacher forgiveness discharge first to any 
outstanding unsubsidized Federal Stafford loan balances, next to any 
outstanding subsidized Federal Stafford loan balances, and lastly to 
any outstanding Federal Consolidation loan balances. (Authority: 20 
U.S.C. 1078-10)

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

    4. The authority citation for Part 685 continues to read as 
follows:

    Authority: 20 U.S.C. 1087 et seq., unless otherwise noted.


Sec. 658.102  [Amended]

    5. Section 685.102(b) is amended in paragraph (2) of the definition 
of ``Satisfactory repayment arrangement'' by removing the reference to 
``34 CFR 685.215(d)(1)(ii)(E)'' and adding, in its place, ``34 CFR 
685.220(d)(1)(ii)(E)''.


Sec. 658.200  [Amended]

    6. Section 685.200 is amended by:
    A. Removing from paragraph (a)(1)(v) ``34 CFR 668.7(b)'' and 
adding, in its place, ``34 CFR 668.32(e)(2) or (3)''.
    B. Removing from paragraph (b)(1)(iv) ``34 CFR 668.7'' and adding, 
in its place ``34 CFR 668.32(g)''.
    C. Removing, from paragraph (c), ``Sec. 685.215(d)(1)(ii)(F)'' and 
adding, in its place, ``685.220(d)(1)(ii)(F)''.


Sec. 685.201  [Amended]

    7. Section 685.201(c)(2) is amended by removing the reference to 
``Sec. 685.216'' and by adding, in its place ``Sec. 685.220''.
    8. Section 685.205 is amended by:
    A. Redesignating paragraph (a)(5) as (a)(6).
    B. Adding a new paragraph (a)(5).
    C. Removing from paragraph (b)(6)(i) the reference to 
``Sec. 685.213'' and adding, in its place, ``Sec. 685.214''.
    D. Removing from paragraph (b)(6)(ii) the reference to 
``Sec. 685.214'' and adding, in its place, ``Sec. 685.215''.
    E. Removing from paragraph (b)(6)(iii) the reference to 
``Sec. 685.215; or'' and adding, in its place, ``Sec. 685.216;''.
    F. By redesignating paragraph (b)(6)(iv), as paragraph (b)(6)(v).
    G. By adding a new paragraph (b)(6)(iv).
    The additions read as follows:


Sec. 685.205  Forbearance.

    (a) * * *
    (5) The borrower--
    (i) Is performing the type of service that would qualify the 
borrower for loan forgiveness under the requirements of the Teacher 
loan forgiveness program in Sec. 685.217; and
    (ii) Is required, by the Secretary, before a forbearance is granted 
under Sec. 685.205(a)(5)(i) to--
    (A) Submit documentation for the period of the annual forbearance 
request showing the beginning and ending dates that the borrower is 
expected to perform, for that year, the type of service described in 
Sec. 685.217(c); and
    (B) Certify the borrower's intent to satisfy the requirements of 
Sec. 685.217(c).
* * * * *
    (b) * * *
    (6) * * *
    (iv) Under Sec. 685.217; or
* * * * *


Sec. 685.210  [Amended]

    9. Section 685.210(b)(2)(ii) is amended by removing the reference 
to ``Sec. 685.209(d)(2)'' and by adding, in its place 
``Sec. 685.209(c)(4)''.


Sec. 685.211  [Amended]

    10. Section 685.211(e)(4) is amended by removing the reference to 
``Sec. 685.215'' and by adding, in its place, ``Sec. 685.220''.


Sec. 685.212  [Amended]

    11. Section 685.212 is amended by:
    A. Removing from paragraph (d) the reference to ``Sec. 685.213'' 
and adding, in its place, ``Sec. 685.214''.
    B. Removing from paragraph (e) the reference to ``Sec. 685.214'' 
and adding, in its place, ``Sec. 685.215''.
    C. Removing from paragraph (f) the reference to ``Sec. 685.215'' 
and adding, in its place, ``Sec. 685.216''.
    D. By adding a new paragraph (h).
    The addition reads as follows:


Sec. 685.212  Discharge of a loan obligation.

* * * * *
    (h) Teacher loan forgiveness program. If a new borrower meets the 
requirements in Sec. 685.217, the Secretary repays up to $5,000 of the 
borrower's Direct Subsidized Loans, Direct Unsubsidized Loans, and, in 
certain cases, Direct Consolidation Loans.
* * * * *


Sec. 685.215  [Amended]

    12. In Sec. 685.215, paragraph (c)(5)(ii) is amended by removing 
the references to ``Sec. 685.213(d)'' and ``Sec. 685.213(e)'' and 
adding, in their place, ``Sec. 685.214(d)'' and ``Sec. 685.214(e)'', 
respectively.


Sec. 685.216  [Amended]

    13. In Sec. 685.216, paragraph (c)(1)(iii)(B) is amended by 
removing the references to ``Sec. 685.213(d)'' and ``Sec. 685.213(e)'' 
and adding, in their place, ``Sec. 685.214(d)'' and 
``Sec. 685.214(e)'', respectively.
    14. A new Sec. 685.217 is added to read as follows:


Sec. 685.217  Teacher loan forgiveness program.

    (a) General. The Teacher loan forgiveness program is intended to

[[Page 49131]]

encourage individuals to enter and continue in the teaching profession. 
For new borrowers, the Secretary will repay up to $5,000 of subsidized 
and unsubsidized Federal Stafford Loans, Direct Subsidized Loans, 
Direct Unsubsidized Loans, and, in certain cases, Federal Consolidation 
Loans or Direct Consolidation Loans. The forgiveness program is only 
available to a borrower who has no outstanding loan balance under the 
Federal Family Education Loan (FFEL) Program or the William D. Ford 
Federal Direct Loan (Direct Loan) Program on October 1, 1998 or who has 
no outstanding loan balance on the date he or she obtains a loan after 
October 1, 1998. In addition, the borrower must have been employed as a 
full-time teacher for five consecutive complete academic years, at 
least one of which was after the 1997-1998 academic year in certain 
eligible elementary or secondary schools that serve low-income 
families. The loan for which the borrower is seeking forgiveness must 
have been made prior to the end of the fifth year of qualifying 
teaching service.
    (b) Definitions. The following definitions apply to this section:
    Academic year means one complete school year at the same school, or 
two complete and consecutive half years at different schools, or two 
complete and consecutive half years from different school years at 
either the same school or different schools. Half years exclude summer 
sessions and generally fall within a twelve-month period. For schools 
that have a year-round program of instruction, a minimum of nine months 
is considered an academic year.
    Elementary school means a public or nonprofit private school that 
provides elementary education as determined by State law or the 
Secretary if that school is not in a State.
    Full-time means the standard used by a State in defining full-time 
employment as a teacher. For a borrower teaching in more than one 
school, the determination of full-time is based on the combination of 
all qualifying employment.
    Secondary school means a public or nonprofit private school that 
provides secondary education as determined by State law or the 
Secretary if the school is not in a State.
    Teacher means a person who provides direct classroom teaching or 
classroom-type teaching in a non-classroom setting, including Special 
Education teachers.
    (c) Borrower eligibility. (1) A borrower may obtain loan 
forgiveness under this program if he or she has been employed as a 
full-time teacher for five consecutive complete academic years, at 
least one of which was after the 1997-1998 academic year, in an 
elementary or secondary school that--
    (i) Is in a school district that qualifies for funds under title I 
of the Elementary and Secondary Education Act of 1965, as amended;
    (ii) Has been selected by the Secretary based on a determination 
that more than 30 percent of the school's total enrollment is made up 
of children who qualify for services provided under title I; or
    (iii) Is listed in the Annual Directory of Designated Low-Income 
Schools for Teacher Cancellation Benefits. If this directory is not 
available before May 1 of any year, the previous year's directory may 
be used.
    (2) If the school at which the borrower is employed meets the 
requirements specified in paragraph (c)(1) of this section for at least 
one year of the borrower's five consecutive complete academic years of 
teaching and the school failed to meet those requirements in subsequent 
years, those subsequent years of teaching qualify for purposes of this 
section for that borrower.
    (3) A borrower who is employed as an elementary school teacher must 
demonstrate knowledge and teaching skills in reading, writing, 
mathematics, and other areas of the elementary school curriculum, as 
certified by the chief administrative officer of the school in which 
the borrower was employed.
    (4) A borrower who is employed as a secondary school teacher must 
teach in a subject area that is relevant to the borrower's academic 
major as certified by the chief administrative officer of the school in 
which the borrower was employed.
    (5) The academic year may be counted as one of the borrower's five 
consecutive complete academic years if the borrower completes at least 
one-half of the academic year and the borrower's employer considers the 
borrower to have fulfilled his or her contract requirements for the 
academic year for the purposes of salary increases, tenure, and 
retirement if the borrower is unable to complete an academic year due 
to--
    (i) A return to postsecondary education, on at least a half-time 
basis, that is directly related to the performance of the service 
described in this section;
    (ii) A condition that is covered under the Family and Medical Leave 
Act of 1993 (FMLA) (19 U.S.C. 2654); or
    (iii) A call or order to active duty status for more than 30 days 
as a member of a reserve component of the Armed Forces named in section 
10101 of title 10, United States Code.
    (6) If a borrower meets the requirements of paragraph (c)(5) of 
this section, the borrower's period of postsecondary education, active 
duty, or qualifying FMLA condition does not constitute a break in the 
required five consecutive years of qualifying teaching service.
    (7) A borrower who teaches in more than one qualified school during 
an academic year and demonstrates that the combined teaching was the 
equivalent of full-time, as supported by the certification of one or 
more of the chief administrative officers of the schools involved, is 
considered to have completed one academic year of qualified teaching.
    (8) A borrower is not eligible for teacher loan forgiveness on a 
defaulted loan unless the borrower has made satisfactory repayment 
arrangements to re-establish title IV eligibility, as defined in 
Sec. 685.200(b).
    (9) A borrower may not receive loan forgiveness for qualifying 
teaching service under this section if the borrower receives a benefit 
for the same teaching service under subtitle D of title I of the 
National and Community Service Act of 1990.
    (d) Forgiveness amount. (1) A qualified borrower is eligible for 
forgiveness of up to $5,000 of the aggregate amount of a borrower's 
Direct Subsidized Loan, Direct Unsubsidized Loan, or Direct 
Consolidation Loan obligation that is outstanding after the borrower 
completes his or her fifth consecutive complete academic year of 
teaching as described in paragraph (c) of this section. Only the 
portion of a Direct Consolidation Loan that was used to repay the 
outstanding portion of a subsidized or unsubsidized Federal Stafford 
loan, a Direct Subsidized Loan, or a Direct Unsubsidized Loan qualifies 
for loan forgiveness under this section.
    (2) A borrower may not receive more than a total of $5,000 in loan 
forgiveness under both this section and 34 CFR 682.215.
    (3) The Secretary does not refund payments that were received from 
a borrower who qualifies for loan forgiveness under this section.
    (e) Application. (1) A borrower, after completing the qualifying 
teacher service, must request loan forgiveness from the Secretary on a 
form provided by the Secretary.
    (2) If the Secretary determines that the borrower meets the 
eligibility requirements for loan forgiveness under this section, the 
Secretary--
    (i) Notifies the borrower of this determination; and
    (ii) Unless otherwise instructed by the borrower, applies the 
proceeds of the

[[Page 49132]]

loan forgiveness first to any outstanding Direct Unsubsidized Loan 
balances, next to any outstanding Direct Subsidized Loan balances, any 
qualifying Direct Unsubsidized Consolidation Loan balances, and last to 
any qualifying outstanding Direct Subsidized Consolidation Loan 
balances.
    (3) If the Secretary determines that the borrower does not meet the 
eligibility requirements for loan forgiveness under this section, the 
Secretary notifies the borrower of this determination.


    Authority: 20 U.S.C. 1087a et seq.

Sec. 685.218  [Added and Removed]


Sec. 685.219  [Added and Removed]

    15. New Secs. 685.218 and 685.219 are added and reserved.
[FR Doc. 00-20035 Filed 8-9-00; 8:45 am]
BILLING CODE 4000-01-P