[Federal Register Volume 65, Number 212 (Wednesday, November 1, 2000)]
[Rules and Regulations]
[Pages 65624-65630]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27737]



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Part VI





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; Final Rule

  Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / 
Rules and Regulations  

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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: Final regulations.

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

DATES: These regulations are effective July 1, 2001.

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: These regulations implement certain changes 
made to the HEA by the 1998 Amendments (Pub.L. 105-244) that affect the 
FFEL and Direct Loan programs.
    On August 10, 2000, the Secretary published a notice of proposed 
rulemaking (NPRM) for the FFEL and Direct Loan programs in the Federal 
Register (65 FR 49124).
    In the preamble to the NPRM, on pages 49125 to 49127, the Secretary 
discussed the proposed regulations that would implement the teacher 
loan forgiveness program in the FFEL and Direct Loan programs. These 
include the following:
    Amending Secs. 682.211(h)(2) and (3), 682.215(e), 685.205(a)(5), 
and 685.205(b)(6) to allow some borrowers to request forbearance while 
performing qualifying teaching service, and during the submission and 
processing of their applications for teacher loan forgiveness.
    Amending Secs. 682.215(a), 685.212(h), and 685.217(a) to reflect 
sections 428J and 460 of the HEA, which established teacher loan 
forgiveness programs for certain borrowers in the FFEL Direct Loan 
programs.
    Amending Secs. 682.215(b) and 685.217(b) to provide specific 
definitions for the terms ``academic year'', ``elementary school'', 
``full-time'', ``secondary school'', and ``teacher'' for purposes of 
the teacher loan forgiveness program.
    Amending Secs. 682.215(c) and 685.217(c) to provide that to qualify 
for the teacher loan forgiveness program a 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.
    Amending Secs. 682.215(d) and 685.217(d) to provide that $5,000 is 
the maximum amount that may be forgiven for an individual teacher under 
these programs.
    Amending Secs. 682.215(f) and 685.217(e) to explain the application 
process for both the borrower and the loan holder.

Analysis of Comments and Changes

    The regulations in this document were developed through the use of 
negotiated rulemaking. Section 492 of the HEA requires that, before 
publishing any proposed regulations to implement 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.
    These regulations were published in proposed form on August 10, 
2000, following completion of the negotiated rulemaking process. The 
Secretary invited comments on the proposed regulations by September 25, 
2000. 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 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--and suggested changes the law does not authorize the 
Secretary to make.

Section 682.215(a)--General

    Comment: One commenter requested additional information regarding 
the regulatory requirement that the loan for which the borrower is 
requesting forgiveness must have been made prior to the end of the 
fifth year of qualifying teaching service.
    Discussion: The regulations require that the loan for which 
forgiveness is sought must have been made prior to the end of the five-
year qualifying teaching service. This requirement was included to be 
consistent with the stated intent of the statute that the teacher loan 
forgiveness programs encourage individuals to enter and continue in the 
teaching profession. We believe that there needs to be a safeguard 
against the possibility that a borrower, who after meeting the teaching 
requirements of the forgiveness program, quits teaching, returns to 
school to train for another profession and then asks to have $5,000 in 
loans for the new training forgiven based on that earlier teaching. To 
avoid this situation, the regulations require that loans for which 
forgiveness is being sought must have been made prior to the end of the 
qualifying five-year teaching service.
    Changes: None.
    Comment: Four commenters recommended modifying Sec. 682.215(a) to 
clarify that $5,000 is the total amount for all loans that a borrower 
may be eligible to have forgiven, not a per program amount.
    Discussion: We agree that the regulations would be clearer with the 
recommended change.
    Change: We have revised the language in both Sec. 682.215(a) and 
Sec. 685.217(a) to state that the combined total forgiveness limit is 
$5,000 for loans in the FFEL or Direct Loan programs.

Section 682.215(c)--Borrower Eligibility

    Comment: Four commenters stated that they believed that the 
discussion in the preamble to the NPRM, regarding when the borrower's 
qualifying teaching at the school begins, seemed contradictory to the 
statute and the proposed regulations and requested clarification.
    Discussion: To clarify, if the school at which a borrower is 
performing qualifying teaching is not a designated eligible low-income 
school when the borrower begins the teaching service, but becomes such 
a school while the borrower is performing qualifying

[[Page 65625]]

teaching, the required five years begins from the point that the school 
gains the designated eligible low-income school status. Any years of 
teaching prior to that designation do not apply to the five complete, 
consecutive years required for forgiveness. On the other hand, if an 
eligible, designated school loses its designation while the borrower is 
teaching there, any continuous subsequent years of qualified teaching 
service at that same school may be included in the five-year 
requirement.
    Change: None.
    Comment: Three commenters suggested specifically including criteria 
to Sec. 682.215(c)(3) and (4) to make special education teachers 
eligible for the loan forgiveness based solely on their role as a 
special education teacher.
    Discussion: The regulations that the commenters wish to revise are 
based directly on the statute and the requested change is not supported 
by the statutory language. Special education teaching is not one of the 
specific criteria included in the statute, but the teacher may qualify 
for the loan forgiveness program if the qualifying teaching otherwise 
meets the statutory requirements. The regulations do specifically 
include special education teachers in the definition of a teacher, so 
if a special education teacher met the other criteria in paragraphs 
(c)(3) or (c)(4), he or she could be eligible for teacher loan 
forgiveness.
    Change: None.
    Comment: One commenter suggested that the regulations provide 
certification criteria for school officials to follow to ensure 
consistent, objective and fair determinations of a teacher's 
eligibility to participate in the loan forgiveness program.
    Discussion: We do not see a need for such regulatory guidance. The 
statute requires that the chief administrative officer of the school 
determine that a borrower has met the criteria outlined in the statute 
and the regulations. We believe that the criteria are sufficiently 
clear and that school administrators will be able to provide the needed 
certifications. Our experience with the certifications used in the 
Federal Perkins Loan Program, while based on slightly different 
eligibility criteria, has shown that school administrators can apply 
the required standards without prescriptive regulatory guidance.
    Change: None.
    Comment: One commenter indicated that Sec. 682.215(c)(5) did not 
address ``gaps'' that may occur between the end of an accepted 
condition that would not constitute a ``break'' in the consecutive 
complete years of teaching required by the law and the resumption of 
qualified teaching. This commenter requested that these regulations 
allow borrowers to delay their return to qualifying teaching service to 
the beginning of the next academic year if necessary, as was done in 
connection with the special grace period for borrowers returning from 
active duty military service.
    Discussion: We agree that due to the scheduling of academic years, 
it may be impossible for a teacher to resume teaching immediately at 
the conclusion of one of the exempted conditions. Such ``gap'' periods 
should not penalize a borrower who met an exempted condition.
    Change: We have made a change in Secs. 682.215(c)(6) and 
685.217(c)(6) to ensure that these gaps are not treated as a break in 
qualifying service.
    Comment: One commenter suggested an expansion of conditions that 
would not constitute a break in the consecutive, complete qualifying 
teaching service. The commenter argued that there are other conditions 
over which the teacher has no control. Among the conditions suggested 
were: periods of protracted labor disputes, natural disasters or 
emergencies, and funding shortfalls.
    Discussion: While we acknowledge that these conditions are events 
over which the teacher may have no control, it was not our intent to 
address every possible event that could disrupt the school year. We 
believe that if the events listed by the commenter occur, the school or 
school district would extend the academic year or declare that the 
academic year has been completed early. Either of these results would 
qualify the year as a complete academic year for purposes of teacher 
loan forgiveness.
    Change: None.
    Comment: One commenter suggested that the school's certifying chief 
administrative official should have greater flexibility in determining 
the relationship of the studies the borrower undertakes in returning to 
postsecondary education while taking a break in their qualifying 
teaching if the borrower returns to qualifying teaching.
    Discussion: We believe that it is appropriate to require that the 
teacher undertake education that is ``directly related'' to the 
performance of the service that the statute wants to support. We do not 
think it would be appropriate to allow the borrower to engage in 
postsecondary education that is unrelated to the performance of the 
qualifying service and still receive the loan forgiveness.
    Change: None.

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

    Comment: Three commenters suggested changing the regulations to 
clarify that a borrower with a consolidation loan qualifies for loan 
forgiveness only if the consolidation loan is outstanding and the 
forgiveness amount relates to a qualifying loan (a subsidized or 
unsubsidized loan made under the FFEL Program or the Direct Loan 
Program) that was repaid by the Consolidation Loan.
    Discussion: We agree that the regulations need to be clarified to 
describe the relationship between the consolidation loan and the 
underlying loans for purposes of the loan forgiveness.
    Change: We have changed Secs. 682.215(d)(1) and 685.217(d)(1) to 
clarify how loan forgiveness affects consolidation loans.
    Comment: Three commenters suggested clarifying that the forgiveness 
amount total of $5,000 includes both outstanding principal and accrued 
interest.
    Discussion: We agree that this change would clarify the 
regulations.
    Change: We have made the suggested change to Secs. 682.215(d)(2) 
and 685.217(d)(2) to clarify that the forgiveness amount limit of 
$5,000 applies to both outstanding principal and accrued interest.
    Comment: Four commenters suggested revising Sec. 682.215(d)(3) to 
clarify that payments received from a borrower or on behalf of a 
borrower would not be refunded as directed in the statute.
    Discussion: Proposed Secs. 682.215(d)(3) and 685.217(d)(3) reflect 
the statutory provision that payments received from a borrower are not 
refunded if the borrower qualifies for loan forgiveness. However, the 
statutory provision also applies to payments made on behalf of the 
borrower and we agree with the commenters that the regulations should 
make it clear that payments made on the borrower's behalf also will not 
be refunded.
    Change: We have modified Secs. 682.215(d)(3) and 685.217(d)(3) to 
clarify that payments made on a borrower's behalf are not returned if 
the borrower qualifies for loan forgiveness.

Section 682.215(e)--Authorized Forbearance During Qualifying Teaching 
Service and Discharge Processing

    Comment: Two commenters questioned the interchangeable use of 
``holder'' and ``lender'' in the FFEL proposed regulations. They argued 
that

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this practice creates consistency and accuracy problems.
    Discussion: We agree that it is important to use the terms 
``lender'' and ``holder'' carefully since the term ``holder'' includes 
parties who are not included in the definition of a lender.
    Change: Throughout these regulations we will use the term 
``holder'' since the obligations placed on the loan holders in the 
teacher loan forgiveness program do not just apply to lenders but to 
all loan holders.
    Comment: Four commenters proposed using the term ``must'' in 
Sec. 682.215(e)(1), as well as redesignating paragraphs. These changes 
would require a loan holder to provide an annual forbearance to a 
borrower for certain qualified periods without a request from the 
borrower. The commenters noted that a borrower is not required to 
request a forbearance in connection with other loan cancellation 
opportunities such as the unpaid refund, false certification, and 
closed school discharges.
    Discussion: The commenter incorrectly assumes that the regulations 
do not require the loan holder to grant a forbearance to a borrower who 
may qualify for the teacher loan forgiveness program. Section 
682.215(e)(1) includes a cross-reference to the mandatory forbearance 
section of the FFEL regulations. Therefore, the use of ``must'' is not 
necessary. We also do not agree with the commenter's suggestion that a 
borrower should not have to request the forbearance. This mandatory 
forbearance requires an annual request from the borrower, in part to 
allow the loan holder to ensure that the borrower still meets the 
qualifications for the discharge. The request also allows the borrower 
to certify his or her intent to satisfy the five-year teaching 
requirement. In addition, since the $5,000 discharge will not, for many 
borrowers, extinguish their entire debt, a borrower may determine that 
it is better to make payments for a period of time and not request the 
forbearance. The requirement for an annual request gives the borrower 
an opportunity to consider his or her options. As to the commenter's 
statement that other loan cancellation programs do not require a 
borrower request, we note that those loan cancellations are based on 
situations relating to the loan that would be reflected in records that 
are otherwise available to the holder. The borrower's qualification for 
a teacher loan forgiveness and the related forbearance would not be 
reflected in other information available to the loan holder.
    Change: None.
    Comment: Some commenters also suggested that lenders only be 
required to review the borrower's balance at the time the initial 
forbearance request is submitted instead of multiple times throughout 
the qualifying five-year teaching period.
    Discussion: As noted earlier, these regulations permit the borrower 
to request a forbearance for each year of the qualifying service. As 
discussed in the preamble to the NPRM, this mandatory forbearance was 
added to ensure that borrowers with a low balance loan who qualify for 
loan forgiveness would not lose the maximum benefit by continuing to 
make monthly payments. The annual request allows the lender to 
determine if capitalized interest will create an outstanding balance 
for the borrower at the end of the five-year period. It also provides 
an opportunity for the lender to counsel the borrower regarding the 
effects of capitalized interest and to advise the borrower of any 
balance that may remain outstanding at the conclusion of the qualifying 
teaching period.
    Change: None.
    Section 682.215(f)--Application and processing
    Comment: Three commenters suggested adding an additional cross-
reference to Sec. 682.215(f)(2)(i) to include all references to 
certifying officials. Another commenter suggested revising the language 
of Sec. 682.215(f)(2)(i) to make it clear that the application may 
include the certifications of the borrower and the appropriate chief 
administrative official or officials.
    Discussion: With respect to the comment about adding a cross-
reference, we believe that removing all cross-references is the better 
approach to address the commenters' concerns. We agree with the 
commenter who expressed concern that the proposed rule implied that 
there would be multiple application and certification forms.
    Change: Section 682.215(f)(2)(i) has been modified by removing the 
cross-references and broadening the language regarding the application 
to address the commenters' concerns.
    Comment: Three commenters recommended adding to the regulations a 
provision allowing late filing by a lender of the request for payment 
with the guaranty agency. One commenter suggested that for late filings 
the lender would be responsible for repaying the Secretary all interest 
and special allowance for the late period.
    Discussion: We agree and thank the commenters for pointing out this 
oversight.
    Change: A new paragraph (iii) has been added to Sec. 682.215(f)(2) 
to address the comments.
    Comment: One commenter suggested clarifying that forgiveness 
payments should first be applied to unsubsidized and then to subsidized 
Federal Consolidation loans.
    Discussion: The FFEL Program does not distinguish between 
subsidized and unsubsidized Federal Consolidation Loans. Thus, this 
change will not be made.
    Change: None
    Comment: One commenter requested an addition to the regulations to 
allow a guaranty agency that holds a defaulted loan that is eligible 
for this forgiveness to be able to recover from the Department the 
complement of the reinsurance percentage paid on the applicable loan 
amount. The commenter noted that this change would be consistent with 
the treatment provided in other loan discharge situations.
    Discussion: Since a defaulted loan for which the borrower has made 
satisfactory arrangement may be eligible for discharge under these 
programs, we agree with the commenter.
    Change: We have added a new paragraph (g) to Sec. 682.215 to 
reflect this correction.

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 as 
necessary for administering these programs effectively and efficiently. 
Elsewhere in this SUPPLEMENTARY INFORMATION section, we identify and 
explain any burdens specifically associated with information collection 
requirements.
    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.
    We have also determined that this regulatory action does not unduly 
interfere with State, local, and tribal governments in the exercise of 
their governmental functions.
    We summarized the potential costs and benefits of these final 
regulations in the preamble to the NPRM (65 FR 49127).

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 does not require you to respond 
to a

[[Page 65627]]

collection of information unless it displays a valid OMB control 
number. We display the valid OMB control number assigned to the 
collection of the information in these final regulations at the end of 
the affected section of the regulations.

Assessment of Educational Impact

    Based on the response to the NPRM and on our review, we have 
determined that these final 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, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at either the following 
sites:

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

To use PDF you must have Adobe Acrobat Reader, which is available free 
at either of the previous sites. If you have questions about using 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 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: October 24, 2000.
Richard W. Riley,
Secretary of Education.
    For the reasons stated in the preamble, the Secretary amends title 
34 of the Code of Federal Regulations by revising parts 682 and 685 as 
follows:

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

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

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


    2. Section 682.211 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).

(Approved by the Office of Management and Budget under control 
number 1845-0020)
* * * * *

    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 a combined total of 
$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 FFEL Program or the 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

[[Page 65628]]

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) of 
this section, including the time necessary for the borrower to resume 
qualifying teaching no later than the beginning of the next regularly 
scheduled academic year, does not constitute a break in the required 
five consecutive years of qualifying teaching service.
    (7) A borrower who taught in more than one qualifying 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 qualifying 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 outstanding portion of the 
consolidation loan that was used to repay an eligible subsidized or 
unsubsidized Federal Stafford loan, an eligible Direct Subsidized Loan, 
or an eligible 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 for outstanding principal and accrued interest under both 
this section and under section 34 CFR 685.217.
    (3) The holder does not refund payments that were received from or 
on behalf of 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 holder grants a 
forbearance--
    (i) Under Sec. 682.211(h)(2)(ii)(C) and (h)(3)(iii), in annual 
increments for each of the years of qualifying teaching service, if the 
holder believes, at the time of each annual request, that the expected 
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 holder is 
awaiting a completed teacher loan forgiveness application from the 
borrower; and
    (iii) For the period beginning on the date the holder receives a 
completed loan forgiveness application to the date the holder receives 
either a denial of the 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 holder 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.
    (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.
    (iii) If the holder files a request for payment later than 60 days 
after the receipt of the completed teacher loan forgiveness application 
form, interest that accrued on the loan after the expiration of the 60-
day filing period is ineligible for reimbursement by the Secretary, and 
the holder must repay all interest and special allowance received on 
the loan for periods after the expiration of the 60-day filing period. 
The holder cannot collect from the borrower any interest that is not 
paid by the Secretary under this paragraph.
    (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), (d)(1) 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 holder 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

[[Page 65629]]

unsubsidized Federal Stafford loan balances, next to any outstanding 
subsidized Federal Stafford loan balances, then to any eligible 
outstanding Federal Consolidation loan balances.
    (g) Claims for reimbursement from the Secretary on loans held by 
guaranty agencies. In the case of a teacher loan forgiveness discharge 
applied to a defaulted loan held by the guaranty agency, the Secretary 
pays the guaranty agency a percentage of the amount discharged that is 
equal to the complement of the reinsurance percentage paid on the loan. 
The payment of up to $5,000 may also include interest that accrues on 
the discharged amount during the period from the date on which the 
guaranty agency received payment from the Secretary on a default claim 
to the date on which the guaranty agency determines that the borrower 
is eligible for the teacher loan forgiveness discharge. (Approved by 
the Office of Management and Budget under control number 1845-0020)

(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. 1087a et seq., unless otherwise noted.


Sec. 685.102  [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. 685.200  [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

(Approved by the Office of Management and Budget under control 
number 1845-0021)
* * * * *


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''.

    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.


Secs. 685.214, 685.215, 685.216  [Redesignated as Secs. 685.215, 
685.216, and 685.220]

    12. Sections 685.214, 685.215, and 685.216 are redesignated as 
Secs. 685.215, 685.216, and 685.220, respectively.


Sec. 685.213  [Redesignated as Sec. 685.214, Sec. 685.213 Reserved]

    13. Section 685.213 is redesignated as Sec. 685.214, and 
Sec. 685.213 is reserved.


Sec. 685.215  [Amended]

    14. 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]

    15. 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.

    16. 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 
encourage individuals to enter and continue in the teaching profession. 
For new borrowers, the Secretary will repay up to a combined total of 
$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 FFEL Program or the 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 l, 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:

[[Page 65630]]

    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; 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 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 including the time necessary for the 
borrower to resume qualifying teaching no later than the beginning of 
the next regularly scheduled academic year, does not constitute a break 
in the required five consecutive years of qualifying teaching service.
    (7) A borrower who teaches in more than one qualifying 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 qualifying 
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 
outstanding portion of a Direct Consolidation Loan that was used to 
repay an eligible subsidized or unsubsidized Federal Stafford loan, an 
eligible Direct Subsidized Loan, or an eligible 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 for outstanding principal and accrued interest under both 
this section and 34 CFR Sec. 682.215.
    (3) The Secretary does not refund payments that were received from 
or on behalf of 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 loan forgiveness first to any outstanding Direct 
Unsubsidized Loan balances, next to any outstanding Direct Subsidized 
Loan balances, next to 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.

(Approved by the Office of Management and Budget under the control 
number 1845-0021)

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


Secs. 685.218, 685.219  [Added and Reserved]

    17. New Secs. 685.218 and 685.219 are added and reserved.

[FR Doc. 00-27737 Filed 10-31-00; 8:45 am]
BILLING CODE 4000-01-P