[Federal Register Volume 68, Number 250 (Wednesday, December 31, 2003)]
[Rules and Regulations]
[Pages 75427-75430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-32062]


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DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682, and 685

RIN 1840-AC84


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

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule.

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SUMMARY: This document contains technical corrections to the 
regulations governing the Federal Perkins Loan (Perkins) Program, the 
Federal Family Education Loan (FFEL) Program, and the William D. Ford 
Federal Direct Loan (Direct Loan) Program. These amendments are needed 
to correct technical errors in the regulations, remove or modify 
language in the regulations that is now obsolete or outdated due to 
prior changes to the Higher Education Act of 1965, as amended (HEA), 
and the regulations, and where appropriate, provide consistent language 
in the regulations for the three loan programs.

EFFECTIVE DATE: These regulations are effective January 30, 2004.

FOR FURTHER INFORMATION CONTACT: For the Perkins and FFEL programs: Mr. 
Brian Smith, U.S. Department of Education, 1990 K Street, NW., (8th 
Floor) Washington, DC 20006, Telephone: (202) 502-7551, or via the 
Internet: [email protected].
    For the Direct Loan Program: Ms. Nicki Meoli, U.S. Department of 
Education, 1990 K Street, NW., (8th Floor) Washington, DC 20006, 
Telephone: (202) 377-4031, or via the Internet: [email protected].
    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 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to one of the contact persons listed under FOR 
FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: These final regulations make technical 
corrections to the existing regulations for the Perkins, FFEL, and 
Direct Loan programs in 34 CFR parts 674, 682, and 685. The existing 
regulations contain technical errors, erroneous cross-references, and 
language that is inconsistent with other regulations and the provisions 
of the HEA. These final regulations make the technical corrections, 
correct the cross-references, and remove or modify language that is 
obsolete, outdated, or otherwise inconsistent with other regulations 
and the HEA.

Waiver of Proposed Rulemaking and Negotiated Rulemaking

    Under the Administrative Procedure Act (5 U.S.C. 553), the 
Department generally offers interested parties the opportunity to 
comment on proposed regulations. However, these regulations merely 
reflect needed technical corrections to the Perkins, FFEL, and Direct 
Loan program regulations. These corrections do not affect the 
substantive rights or obligations of individuals or institutions and do 
not establish or affect substantive policy. Thus, the Secretary has 
concluded that these regulations are technical in nature and do not 
necessitate public comment. Therefore, under 5 U.S.C. 553(b)(B), the 
Secretary has determined that proposed regulations (and, accordingly, 
negotiated rulemaking under section 492(b)(2) of the HEA) are 
unnecessary and contrary to the public interest.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
The small entities that are affected by these regulations are small 
institutions of higher education. These regulations also affect lenders 
and guaranty agencies that participate in the title IV, HEA programs, 
and individual loan borrowers. These regulations contain technical 
corrections to current regulations. The changes will not have a 
significant economic impact on any of the entities affected.

Paperwork Reduction Act of 1995

    These regulations do not contain any information collection 
requirements.

Assessment of Educational Impact

    Based on our own 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 the following site: 
www.ed.gov/news/fedregister.
    To use PDF you must have Adobe Acrobat Reader, which is available 
free at this site. 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.
    You may also view this document in PDF at the following site: 
ifap.ed.gov.

    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.gpoaccess.gov/nara/index.html.


(Catalog of Federal Domestic Assistance Numbers: 84.032 Federal 
Family Education Loan Program; 84.038 Federal Perkins Loan Program; 
and 84.268 William D. Ford Federal Direct Loan Program)

List of Subjects in 34 CFR Parts 674, 682, and 685

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


[[Page 75428]]


    Dated: December 23, 2003.
Sally L. Stroup,
Assistant Secretary, Office of Postsecondary Education.

0
For the reasons discussed in the preamble, the Secretary amends title 
34 of the Code of Federal Regulations parts 674, 682, and 685 as 
follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0
1. The authority citation for part 674 continues to read as follows:

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


0
2. Section 674.5 is amended by:
0
A. In paragraph (c)(3)(i)(D), adding the word ``or'' after the semi-
colon.
0
B. In paragraph (c)(3)(i)(E), removing ``; or'' and adding, in its 
place, a period.
0
C. Removing paragraph (c)(3)(i)(F).
0
D. In paragraph (c)(3)(ii)(C), removing the word ``or''.
0
E. In paragraph (c)(3)(ii)(D), removing the period and adding, in its 
place, ``; or''.
0
F. Adding a new paragraph (c)(3)(ii)(E).
0
The addition reads as follows:


Sec.  674.5  Federal Perkins Loan program cohort default rate and 
penalties.

* * * * *
    (c) * * *
    (3) * * *
    (ii) * * *
    (E) Assigned to and conditionally discharged by the Secretary in 
accordance with Sec.  674.61(b).
* * * * *

0
3. Section 674.61 is amended by revising the section heading to read as 
follows:


Sec.  674.61  Discharge for death or disability.

* * * * *

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

0
4. The authority citation for part 682 continues to read as follows:

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


Sec.  682.102  [Amended]

0
5. Section 682.102(e)(1) is amended by removing from the last sentence 
the words ``nursing professions or perform certain kinds of national or 
community service'', and adding, in their place, the words ``child care 
professions''.

0
6. Section 682.201 is amended by revising paragraphs (b)(1)(vi) and 
(vii) and (b)(2), removing paragraph (b)(1)(viii), and adding paragraph 
(b)(3) to read as follows:


Sec.  682.201  Eligible borrowers.

* * * * *
    (b) * * *
    (1) * * *
    (vi) Meets the requirements of paragraphs (a)(4), (a)(5), (a)(6), 
and (a)(7) of this section, as applicable; and
    (vii) In the case of a Federal PLUS loan made on or after July 1, 
1993, does not have an adverse credit history or obtains an endorser 
who has been determined not to have an adverse credit history as 
provided in paragraph (b)(2)(ii) of this section.
    (2)(i) For purposes of this section, the lender must obtain a 
credit report on each applicant from at least one national credit 
bureau. The credit report must be secured within a timeframe that would 
ensure the most accurate, current representation of the borrower's 
credit history before the first day of the period of enrollment for 
which the loan is intended.
    (ii) Unless the lender determines that extenuating circumstances 
existed, the lender must consider each applicant to have an adverse 
credit history based on the credit report if--
    (A) The applicant is considered 90 or more days delinquent on the 
repayment of a debt; or
    (B) The applicant has been the subject of a default determination, 
bankruptcy discharge, foreclosure, repossession, tax lien, wage 
garnishment, or write-off of a Title IV debt, during the five years 
preceding the date of the credit report.
    (iii) Nothing in this paragraph precludes the lender from 
establishing more restrictive credit standards to determine whether the 
applicant has an adverse credit history.
    (iv) The absence of any credit history is not an indication that 
the applicant has an adverse credit history and is not to be used as a 
reason to deny a PLUS loan to that applicant.
    (v) The lender must retain a record of its basis for determining 
that extenuating circumstances existed. This record may include, but is 
not limited to, an updated credit report, a statement from the creditor 
that the borrower has made satisfactory arrangements to repay the debt, 
or a satisfactory statement from the borrower explaining any 
delinquencies with outstanding balances of less than $500.
    (3) For purposes of paragraph (b)(1) of this section, a ``parent'' 
includes the individuals described in the definition of ``parent'' in 
34 CFR 668.2 and the spouse of a parent who remarried, if that spouse's 
income and assets would have been taken into account when calculating a 
dependent student's expected family contribution.
* * * * *

0
7. Section 682.206 is amended by revising paragraph (e)(1) to read as 
follows:


Sec.  682.206  Due diligence in making a loan.

* * * * *
    (e) * * *
    (1) A FFEL Program loan must be made without security or 
endorsement, except as provided in paragraph (e)(2) of this section.
* * * * *

0
8. Section 682.207 is amended by:
0
A. Removing paragraph (b)(1)(vi) immediately following paragraph 
(b)(1)(iii).
0
B. Adding a paragraph (b)(1)(iv).
0
C. In paragraph (b)(1)(v)(B)(1), in the first sentence, removing the 
word ``a'' and adding, in its place, the word ``an''.
0
D. In paragraph (b)(1)(vi), removing the reference to ``(f)(1)'' and 
adding, in its place, the reference ``(f)''.
0
E. Adding a paragraph (b)(2).
    The additions read as follows:


Sec.  682.207  Due diligence in disbursing a loan.

* * * * *
    (b) * * *
    (1) * * *
    (iv) Shall require an escrow agent to disburse loan proceeds no 
later than 21 days after the agent receives the proceeds from the 
lender.
* * * * *
    (2) Except as provided in paragraph (b)(1)(v)(C)(2) of this 
section, neither a lender nor a school may obtain a borrower's power-
of-attorney or other authorization to endorse or otherwise approve the 
cashing of a loan check or the release of funds disbursed by electronic 
funds transfer, nor may a borrower provide this power-of-attorney or 
authorization to anyone else. However, the school may present the loan 
check to a financial institution for deposit in an account of the 
borrower pursuant to the borrower's endorsement or written 
certification under paragraph (b)(1)(ii)(A) of this section.
* * * * *

0
9. Section 682.209 is amended by:
0
A. In paragraph (a)(2)(v), removing the reference to ``(a)(2)(i)'' and 
adding, in its place, the reference to ``(a)(2)(ii)''.
0
B. Revising paragraph (a)(3)(ii)(B).
    The revision reads as follows:


Sec.  682.209  Repayment of a loan.

    (a) * * *
    (3) * * *
    (ii) * * *
    (B) 60 days from the expiration of a deferment or forbearance 
period;
* * * * *

[[Page 75429]]

Sec.  682.210  [Amended]

0
10. Section 682.210 is amended in paragraph (c)(5), by adding the word 
``or'' after the first occurrence of the word ``internship''.

0
11. Section 682.211 is amended by:
0
A. In paragraph (a)(4), removing the reference to ``(f)(9)'' and 
adding, in its place, the reference to ``(f)(10)''.
0
B. Revising paragraph (f)(3).
0
C. In paragraph (f)(4), removing the period and adding, in its place, a 
semi-colon.
0
D. In paragraph (f)(7), removing the word ``or'' after the semi-colon.
0
E. In paragraph (f)(8), removing the period and adding, in its place, a 
semi-colon.
0
F. In paragraph (f)(9), removing the figure ``45'' and adding, in its 
place, the figure ``60''; and removing the period and adding, in its 
place, a semi-colon.
0
G. In paragraph (f)(10), removing the period at the end of the last 
sentence and adding, in its place, ``; or''.
    The revision reads as follows:


Sec.  682.211  Forbearance.

* * * * *
    (f) * * *
    (3) For the period beginning when the borrower entered repayment 
without the lender's knowledge until the first payment due date was 
established;
* * * * *


Sec.  682.213  [Amended]

0
12. Section 682.213 is amended, in the first sentence, by removing the 
word ``principle'' and adding, in its place, the word ``principal''.

0
13. Section 682.302 is amended by revising paragraph (b)(1) to read as 
follows:


Sec.  682.302  Payment of special allowance on FFEL loans.

* * * * *
    (b) * * *
    (1) Except for nonsubsidized Federal Stafford loans disbursed on or 
after October 1, 1981, for periods of enrollment beginning prior to 
October 1, 1992, FFEL loans that otherwise meet program requirements 
are eligible for special allowance payments as provided in paragraphs 
(b)(2), (b)(3), and (e) of this section.
* * * * *


Sec.  682.401  [Amended]

0
14. Section 682.401 is amended by:
0
A. In paragraph (b)(6)(i), removing the reference to ``Sec.  682.600'' 
and adding, in its place, the reference to ``Sec.  668.14(a)''.
0
B. In paragraph (e), in the introductory sentence, removing the word 
``be'' and adding, in its place, the word ``not''.


Sec.  682.402  [Amended]

0
15. Section 682.402 is amended by:
0
A. In paragraph (k)(5)(i), removing the word ``dies'' and adding, in 
its place, the word ``died''.
0
B. In paragraph (r)(1), in the first sentence, removing the word ``as'' 
and adding, in its place, the word ``has''.

0
16. Section 682.405 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  682.405  Loan rehabilitation agreement.

* * * * *
    (b) * * *
    (3) An eligible lender purchasing a rehabilitated loan must 
establish a repayment schedule that meets the same requirements that 
are applicable to other FFEL Program loans made under the same loan 
type and provides for the borrower to make monthly payments at least as 
great as the average of the 12 consecutive monthly payments received by 
the guaranty agency. The lender must treat the first payment made under 
the 12 consecutive payments as the first payment under the applicable 
maximum repayment term, as defined under Sec.  682.209(a) or (h). For 
Consolidation loans, the maximum repayment term is based on the balance 
outstanding at the time of loan rehabilitation.


Sec.  682.410  [Amended]

0
17. Section 682.410(c)(1)(i)(B) is amended by removing the words ``as 
defined in Sec.  682.800(d)''.


Sec.  682.415  [Amended]

0
18. Section 682.415 is amended by:
0
A. In paragraph (c)(2)(i), removing the reference to ``Sec. Sec.  
682.410(b)(6)(i) through (xii)'' and adding, in its place, the 
reference to ``Sec. Sec.  682.410(b)(6)(i) through (vi)''.
0
B. In paragraph (c)(4), in the first sentence, removing the reference 
to ``Sec. Sec.  682.410(b)(6)(i) through (xii)'' and adding, in its 
place, the reference to ``Sec. Sec.  682.410(b)(6)(i) through (vi)''.
0
C. In paragraph (c)(6)(i), in the first sentence, removing the 
reference to ``Sec. Sec.  682.410(b)(6)(i) through (xii)'' and adding, 
in its place, the reference to ``Sec. Sec.  682.410(b)(6)(i) through 
(vi)''.
0
D. In paragraph (d)(1), removing the reference to ``Sec. Sec.  
682.410(b)(6)(i) through (xii)'' and adding, in its place, the 
reference to ``Sec. Sec.  682.410(b)(6)(i) through (vi)''.


Sec.  682.505  [Amended]

0
19. Section 682.505 is amended by:
0
A. Revising the paragraph immediately after paragraph (b), by adding 
``(c)'' before the heading ``FISL loans--insurance premium 
calculation.''.
0
B. Revising the paragraph immediately after paragraph (e)(2)(ii), by 
adding ``(f)'' before the heading ``Collection from borrowers.''.


Sec.  682.603  [Amended]

0
20. Section 682.603(e) is amended, in the introductory sentence, by 
removing the word ``student'' and adding, in its place, the word 
``borrower''.

0
21. Section 682.604 is amended by:
0
A. Revising paragraph (b)(2)(i).
0
B. In paragraph (d)(4), revising the introductory sentence.
0
C. In paragraph (g)(2)(iv), removing the reference to ``paragraph 
(f)(2)'' and adding, in its place, the reference to ``paragraphs 
(f)(2)(i) through (f)(2)(iv)''.
    The revisions read as follows:


Sec.  682.604  Processing the borrower's loan proceeds and counseling 
borrowers.

* * * * *
    (b) * * *
    (2) * * *
    (i) Except in the case of a late disbursement under paragraph (e) 
of this section or as provided in paragraph (b)(2)(iii) or (iv) of this 
section, a school may release the proceeds of any disbursement of a 
loan only to a student, or a parent in the case of a PLUS loan, if the 
school determines the student has continuously maintained eligibility 
in accordance with the provisions of Sec.  682.201 from the beginning 
of the loan period for which the loan was intended.
* * * * *
    (d) * * *
    (4) If the school is unable for any other reason to document that a 
registered student attended school during the period of enrollment for 
which the loan is made, the school must determine the student's 
withdrawal date as required under Sec.  682.605, and by the deadline 
described in Sec.  682.607(c), shall notify the lender of the student's 
withdrawal, expulsion, or failure to attend school, if applicable, and 
return to the lender--
* * * * *

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

0
22. 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]

0
23. Section 685.102(b)(2)(i)(A) is amended to revise the definition of 
``Estimated financial assistance'' by removing the words ``Direct PLUS 
Loan amounts'' and adding, in their place, the words ``PLUS loan 
amounts''.

[[Page 75430]]

Sec.  685.200  [Amended]

0
24. Section 685.200 is amended by:
0
A. In paragraph (a)(1)(iv)(C)(2), removing the words ``requirement in 
paragraph (a)(1)(iv)(A)(1)'' and adding, in their place, the words 
``requirements in paragraphs (a)(1)(iv)(A)(1) and (2)''.
0
B. In paragraph (a)(1)(iv)(C)(3), removing the words ``neither the 
prior loan nor the Direct Loan that the borrower receives may'' and 
adding, in their place, the words ``the loan that has been 
conditionally discharged prior to a final determination of total and 
permanent disability cannot''.


Sec.  685.203  [Amended]

0
25. Section 685.203(b) is amended by removing the words ``Federal 
Unsubsidized Stafford/Ford Loan Program'' and adding, in their place, 
the words ``Federal Unsubsidized Stafford Loan Program''.


Sec.  685.205  [Amended]

0
26. Section 685.205(b)(3) is amended by adding the words ``without the 
Secretary's knowledge'' after the word ``repayment''.

0
27. Section 685.207 is amended by revising paragraph (f) to read as 
follows:


Sec.  685.207  Obligation to repay.

* * * * *
    (f) Determining the date on which the grace period begins for a 
borrower in a correspondence program. For a borrower of a Direct 
Subsidized or Direct Unsubsidized Loan who is a correspondence student, 
the grace period specified in paragraphs (b)(2) and (c)(2) of this 
section begins on the earliest of--
    (1) The day after the borrower completes the program;
    (2) The day after withdrawal as determined pursuant to 34 CFR 
668.22; or
    (3) 60 days following the last day for completing the program as 
established by the school.


Sec.  685.210  [Amended]

0
28. Section 685.210(b)(1) is amended, in the second sentence, by 
removing the reference to ``Sec.  685.211(c)(3)(ii)'' and adding, in 
its place, the reference to ``Sec.  685.211(d)(3)(ii)''.


Sec.  685.220  [Amended]

0
29. Section 685.220 is amended by:
0
A. In paragraph (b)(1), adding the word ``Subsidized'' after the word 
``Federal''.
0
B. In paragraph (d)(1)(ii)(F), removing the reference to ``Sec.  
685.209(d)(5)'' and adding, in its place, the reference to ``Sec.  
685.209(c)(7)''.
0
C. In paragraph (h)(2), removing the reference to ``(d)(1)(ii)(E)'' and 
adding, in its place, the reference to ``(d)(1)(ii)(F)''.


Sec.  685.301  [Amended]

0
30. Section 685.301 is amended by:
0
A. In paragraph (a)(4)(i), adding a period after``Sec.  685.203'' and 
removing the remainder of the sentence.
0
B. In paragraph (a)(7), removing the word ``student'' and adding, in 
its place, the word ``borrower''.


Sec.  685.302  [Removed and Reserved]

0
31. Section 685.302 is removed and reserved.


Sec.  685.303  [Amended]

0
32. Section 685.303 is amended in paragraph (b)(2)(i) by removing the 
words ``described in the promissory note'' and adding, in their place, 
the words ``for which the loan was intended''.

[FR Doc. 03-32062 Filed 12-30-03; 8:45 am]
BILLING CODE 4000-01-U