[Federal Register Volume 74, Number 208 (Thursday, October 29, 2009)]
[Rules and Regulations]
[Pages 55972-56006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-25190]
[[Page 55971]]
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Part III
Department of Education
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34 CFR Parts 673, 674, 682, et al.
Federal Perkins Loan Program, Federal Family Education Loan Program,
and William D. Ford Federal Direct Loan Program; Final Rule
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 /
Rules and Regulations
[[Page 55972]]
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DEPARTMENT OF EDUCATION
34 CFR Parts 673, 674, 682, and 685
RIN 1840-AC98
[Docket ID ED-2009-OPE-0004]
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 regulations.
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SUMMARY: The Secretary amends the Federal Perkins Loan (Perkins Loan)
Program, Federal Family Education Loan (FFEL) Program, and William D.
Ford Federal Direct Loan (Direct Loan) Program regulations to implement
provisions of the Higher Education Act of 1965 (HEA), as amended by the
Higher Education Opportunity Act of 2008 (HEOA), and other recently
enacted legislation.
DATES: Effective Date: These regulations are effective July 1, 2010.
Implementation Date: The Secretary has determined, in accordance
with section 482(c)(2)(A) of the Higher Education Act of 1965, as
amended (HEA)(20 U.S.C. 1089(c)(2)(A)), that lenders, guaranty
agencies, and loan servicers that administer the FFEL and Direct Loan
programs may, at their discretion, choose to implement the new
provisions in Sec. Sec. 682.211(f) and 685.205(b) governing
administrative forbearances for PLUS loans on or after November 1,
2009. For further information, see the section entitled Implementation
Date of These Regulations in the SUPPLEMENTARY INFORMATION section of
this preamble.
FOR FURTHER INFORMATION CONTACT: For information related to total and
permanent disability loan discharges, Jon Utz or Pamela Moran.
Telephone: (202) 377-4040 or (202) 502-7732 or via the Internet at:
[email protected] or [email protected]. For information related to FFEL
and Direct Loan teacher loan forgiveness, Donald Conner or Jon Utz.
Telephone: (202) 502-7818 or (202) 377-4040 or via the Internet at:
[email protected] or [email protected]. For information related to all
other provisions included in these final regulations, Pamela Moran.
Telephone: (202) 502-7732 or via the Internet at: [email protected].
If you use a telecommunications device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
Individuals with disabilities can obtain this document in an
accessible format (e.g., braille, large print, audiotape, or computer
diskette) on request to the contact person listed in this section.
SUPPLEMENTARY INFORMATION: On July 23, 2009, the Secretary published a
notice of proposed rulemaking (NPRM) for the Perkins Loan, FFEL, and
Direct Loan Programs in the Federal Register (74 FR 36556).
In the preamble to the NPRM, the Secretary discussed on pages 36558
through 36575 the major regulations proposed in that document to
implement provisions of the HEOA, including the following:
Amending Sec. Sec. 674.51(aa) and 682.200(b) by revising
the definition of ``totally and permanently disabled'' for title IV
loan discharges to incorporate statutory changes made by the HEOA,
including a separate total and permanent disability standard for
certain veterans, and adding a definition of ``substantial gainful
activity'' in Sec. Sec. 674.51(x) and 685.200(b) to explain the
meaning of that term as used in the revised definition of totally and
permanently disabled. The changes to Sec. 674.51(aa) and Sec.
674.51(x) appear in final regulations published in the Federal Register
on October 28, 2009 (RIN 1840-AC95).
Amending Sec. Sec. 674.61(b), 682.402(c)(2) through (7),
and 685.213(b) by revising the process for discharging a borrower's
title IV loans due to total and permanent disability to reflect the
revised definition of totally and permanently disabled, including the
establishment of a separate discharge process for certain veterans.
Amending Sec. Sec. 674.9(g), 682.201(a), and 685.200(a)
by making conforming changes to the borrower eligibility regulations
needed to effectively implement the new total and permanent disability
loan discharge process in Sec. Sec. 674.61(b), 682.402(c)(2) through
(7), and 685.213(b).
Amending Sec. Sec. 682.201(e) and 685.220(d) to provide
that a borrower with only FFEL Program loans may consolidate those
loans into the Direct Loan Program to use the no accrual of interest
benefit for active duty military service members.
Amending Sec. 682.206(f) to require FFEL Program lenders
to inform borrowers that by applying for a Consolidation loan, the
borrower is not obligated to agree to take the loan, and to provide
borrowers with a 10-day period to cancel the Consolidation loan.
Amending Sec. Sec. 682.210 and 685.204 to provide that:
(1) A parent PLUS borrower may receive a deferment on a PLUS loan first
disbursed on or after July 1, 2008 while the dependent student for whom
the loan was obtained is enrolled on at least a half-time basis at an
eligible institution, and during the 6-month period after the student
ceases to be enrolled at least half time; and (2) a graduate or
professional student PLUS borrower may receive a deferment on a PLUS
loan first disbursed on or after July 1, 2008 during the 6-month period
after the student ceases to be enrolled on at least a half-time basis
at an eligible institution.
Amending Sec. 682.202(b) to provide that a lender may
capitalize PLUS loan interest that has accrued from the date of the
first disbursement until the date the repayment period begins, and
making a corresponding change in Sec. 685.202(b) to provide that the
Secretary may capitalize interest on a PLUS loan when the loan enters
repayment.
Amending Sec. Sec. 682.211(f) and 685.205(b) to provide
that a FFEL lender or the Secretary (for a Direct Loan) may grant an
administrative forbearance on a borrower's PLUS loans that were first
disbursed before July 1, 2008 to align the repayment begin date of
those loans with the borrower's PLUS loans first disbursed on or after
July 1, 2008 that are eligible for the new PLUS loan deferments in
Sec. Sec. 682.210 and 685.204.
Amending Sec. Sec. 682.202 and 685.202 to provide that
any FFEL or Direct Loan program loans of a military servicemember that
were incurred before the servicemember entered military service are
subject to the provision in section 207 of the Servicemembers Civil
Relief Act (50 U.S.C. 527) (SCRA) that limits the interest rate on a
loan to six percent during periods of active duty service. In addition,
Sec. 682.302 was amended to provide that for FFEL Program loans first
disbursed on or after July 1, 2008 that are subject to the SCRA
interest rate cap, a lender's special allowance payment is calculated
as it otherwise would be under program requirements, except that the
applicable interest rate is six percent.
Amending Sec. Sec. 682.210(c)(1) and
685.204(b)(1)(iii)(A) to provide that a FFEL lender or the Secretary
(for a Direct Loan) may grant an in-school deferment based on
confirmation of the borrower's enrollment status through the National
Student Loan Data System (NSLDS), if requested by the borrower's
school.
Amending Sec. 682.210(a)(3) to require a lender to notify
a borrower of an unsubsidized loan, at or before the time a deferment
is granted, that he or she has the option to pay the interest that
accrues on the loan during the
[[Page 55973]]
deferment or to cancel the deferment, and to provide the borrower with
information on the impact of interest capitalization if accrued
interest is not paid. A comparable change was made in Sec.
685.204(b)(1)(ii)(B) to provide for the same information to be given to
Direct Loan borrowers.
Amending Sec. Sec. 682.215(a) and 685.221(a) by revising
the definition of partial financial hardship for the purpose of
determining a borrower's eligibility to repay under the income-based
repayment (IBR) plan. The revised definition specifies that the annual
amount due on a borrower's eligible loans (under a standard repayment
plan with a 10-year repayment period) for purposes of determining
whether a borrower has a partial financial hardship is calculated based
on the greater of: (1) The amount owed on the eligible loans when the
borrower initially entered repayment; or (2) the amount owed when the
borrower selected the IBR plan.
Amending Sec. Sec. 682.215(b)(1) and 685.221(b)(2) to
provide that if a borrower who requests the IBR plan and the borrower's
spouse both have eligible loans and file a joint Federal tax return,
the calculated IBR partial financial hardship payment amount for each
borrower would be adjusted based on each borrower's percentage of the
couple's total eligible loan debt.
Amending Sec. Sec. 682.216 and 685.217 to specify that an
otherwise eligible borrower may qualify for teacher loan forgiveness
based on teaching service performed as an employee of an eligible
educational service agency. The proposed regulations also added HEOA
prohibitions on receiving loan forgiveness under the FFEL or Direct
Loan teacher loan forgiveness programs and certain other loan
forgiveness programs for the same period of teaching service.
Amending Sec. Sec. 682.405(a) and 685.211(f) to provide
that a borrower may not rehabilitate a defaulted FFEL or Direct Loan
program loan more than once. The proposed regulations also amended
Sec. 682.405(b)(1)(iii) to clarify that both the guaranty agency and
its agents must comply with the requirements in that section when
determining what constitutes a ``reasonable and affordable'' payment
amount for loan rehabilitation purposes.
Amending Sec. Sec. 682.200(b) and 682.401(e) by
incorporating new prohibited and permissible activities by lenders and
guaranty agencies that were added to the HEA by the HEOA.
Amending Sec. 682.205 by adding new disclosure
requirements for FFEL Program lenders that were added by the HEOA, and
by reorganizing the existing disclosure provisions to accommodate the
new disclosure requirements and more clearly distinguish the various
disclosures that are required at various points during the lifecycle of
a loan.
Amending Sec. 682.208(e) to specify additional
information that must be provided to a borrower if the assignment or
transfer of ownership interest on a FFEL Program loan results in a
change in the identity of the party to whom the borrower must send
subsequent payments.
Amending Sec. 682.211(e) to require a lender, at the time
a borrower is granted a forbearance, to provide the borrower with
information on the impact of interest capitalization, and to contact
the borrower at least once every 180 days during any period of
forbearance and provide additional information on the impact of
forbearance on the borrower's loan.
Amending Sec. 682.305(c) to require that a FFEL school
lender or an eligible lender trustee (ELT) originating loans on behalf
of a school submit an annual compliance audit to the Secretary,
regardless of the dollar volume of loans originated. The proposed
regulations also specify the requirements that the annual audit must
meet.
Adding a new Sec. 682.401(g) to implement a statutory
requirement for a guaranty agency to work with the schools that it
serves to develop and make available to students and their families
high-quality educational materials that provide training in budgeting
and financial management.
Amending Sec. 682.405 to require a guaranty agency to
make available financial and economic education materials, including
debt management information, to any borrower who has rehabilitated a
defaulted loan.
Amending Sec. 682.405(b) to require the prior holder of a
previously defaulted loan that has been rehabilitated, in addition to
the guaranty agency, to request that any consumer reporting agency to
which the default was reported remove the default from the borrower's
credit history. The proposed regulations also provided more detailed
reporting deadlines for the guaranty agency and prior loan holder to
request that the default be removed from the borrower's credit history,
and reduced the period for these actions to be completed.
Amending Sec. 682.410(b) by expanding the information
that a guaranty agency must provide to a borrower who is in default,
and by adding a requirement that the guaranty agency provide this same
information to a defaulted borrower in a second notice that the
guaranty agency must send as part of its collection efforts.
Amending Sec. 682.200(b) by removing the definition of
``National credit bureau'' and replacing it with a definition of
``Nationwide consumer reporting agency''. The proposed regulations also
replaced all references to ``credit bureau'' in Sec. 682.410(b)(5) and
(b)(6) with ``consumer reporting agency''.
There are no significant differences between the NPRM and these
final regulations resulting from public comments.
In addition to the changes necessary to implement provisions of the
HEOA, these final regulations also incorporate certain changes made to
the HEA by Public Law 111-39, enacted on July 1, 2009, and by the
Ensuring Continued Access to Student Loans Act of 2008 (Pub. L. 110-
227) (ECASLA), enacted on May 7, 2008. These changes are:
Amending the definition of ``estimated financial
assistance'' (EFA) in Sec. Sec. 673.5(c), 682.200(b), and 685.102(b).
The HEOA amended section 480(j)(1) of the HEA to exclude Federal
veterans' education benefits, as defined in section 480(c) of the HEA,
from the definition of EFA for the Title IV student assistance
programs. Public Law 111-39 made technical corrections to the HEA that,
among other things, updated the list of Federal veterans' education
benefits that are excluded from EFA and excluded the new Iraq and
Afghanistan Service Grants from the definition of EFA. We have made
technical changes to the definition of EFA in Sec. Sec. 673.5(c),
682.200(b), and 685.102(b) to reflect these recent changes to the HEA.
We have also made a few technical changes to clarify and standardize
the current EFA definitions.
Amending the lists of prohibited activities in Sec. Sec.
682.200 and 682.401 to reflect a change made by Public Law 111-39 that
allows FFEL Program lenders and guaranty agencies to provide in-person
entrance counseling as well as exit counseling to borrowers.
Amending Sec. Sec. 682.216 and 685.217 to reflect a
technical correction made by Public Law 111-39 to the provisions that
prohibit a borrower from receiving, for the same teaching service, loan
forgiveness under the FFEL or Direct Loan teacher loan forgiveness
programs and certain other loan forgiveness programs.
Amending Sec. Sec. 682.204 and 685.203 to reflect the
changes to the annual and aggregate loan limits for unsubsidized
Stafford Loans in both the FFEL and Direct Loan programs that were made
by ECASLA.
[[Page 55974]]
In addition to the changes related to Public Law 111-39 and ECASLA
that are discussed above, these final regulations make a number of
minor technical corrections and conforming changes. Changes that are
statutory or that involve only minor technical corrections are
generally not discussed in the Analysis of Comments and Changes
section.
Waiver of Proposed Rulemaking and Negotiated Rulemaking Regulations
Implementing the HEOA
Under the Administrative Procedure Act (APA) (5 U.S.C. 553), the
Department is generally required to publish an NPRM and provide the
public with an opportunity to comment on proposed regulations prior to
issuing final regulations. In addition, all Department regulations for
programs authorized under title IV of the HEA are subject to the
negotiated rulemaking requirements of section 492 of the HEA. However,
the APA provides that an agency is not required to conduct notice-and-
comment rulemaking when the agency for good cause finds that notice and
comment are impracticable, unnecessary or contrary to the public
interest. Similarly, section 492 of the HEA provides that the Secretary
is not required to conduct negotiated rulemaking for title IV, HEA
program regulations if the Secretary determines that applying that
requirement is impracticable, unnecessary or contrary to the public
interest within the meaning of the APA.
Although the regulations implementing the changes made by Public
Law 111-39 and ECASLA are subject to the APA's notice-and-comment and
the HEA's negotiated rulemaking requirements, the Secretary has
determined that it is unnecessary to conduct negotiated rulemaking or
notice-and-comment rulemaking on the limited regulatory changes. These
changes simply reflect statutory changes made by Public Law 111-39 and
ECASLA that are already effective. The Secretary does not have
discretion as to whether or how to implement these changes.
Implementation Date of These Regulations
Section 482(c) of the HEA requires that regulations affecting
programs under title IV of the HEA be published in final form by
November 1 prior to the start of the award year (July 1) to which they
apply. However, that section also permits the Secretary to designate
any regulation as one that an entity subject to the regulation may
choose to implement earlier and the conditions under which the entity
may implement the provisions early.
Consistent with the intent of this regulatory effort to strengthen
and improve the administration of the title IV, HEA programs, the
Secretary is using the authority granted him under section 482(c) of
the HEA to designate the new provisions in Sec. Sec. 682.211(f) and
685.205(b) governing administrative forbearances for PLUS loans for
early implementation at the discretion of each lender, guaranty agency,
or servicer, as appropriate.
Analysis of Comments and Changes
Except as noted above in regard to the limited regulations
implementing provisions of Public Law 111-39 and ECASLA, 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 must 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 proposed regulations
must conform to agreements resulting from the negotiated rulemaking
process unless the Secretary reopens that process or explains any
departure from the agreements to the negotiated rulemaking
participants.
These regulations were published in proposed form on July 23, 2009,
in conformance with the consensus of the negotiated rulemaking
committee. Under the committee's protocols, consensus meant that no
member of the committee dissented from the agreed-upon language. The
Secretary invited comments on the proposed regulations by August 24.
Eighteen parties submitted comments, many of which were substantially
similar. The commenters generally supported the proposed regulations.
An analysis of the comments and the changes in the regulations since
publication of the NPRM follows.
We group major issues according to subject, with appropriate
sections of the regulations referenced in parentheses. We discuss other
substantive issues under the sections of the regulations to which they
pertain. Generally, we do not address minor, non-substantive changes,
recommended changes that the law does not authorize the Secretary to
make, or comments pertaining to operational processes. We also do not
address comments pertaining to issues that were not within the scope of
the NPRM.
Total and Permanent Disability Loan Discharges (Sec. Sec. 674.61(b)
and (c), 682.402(c), and 685.213)
Comment: One commenter noted that there are a significant number of
United States citizens who live abroad and suggested that the
regulations be revised to allow a disabled borrower living overseas to
submit an application for a total and permanent disability discharge
certified by a physician who is licensed to practice in the foreign
country where the borrower resides.
Discussion: The proposed regulations retained the current
regulatory requirement that the physician who certifies a total and
permanent disability discharge application must be a doctor of medicine
or osteopathy who is legally authorized to practice in a State. The
term ``State'' is defined in section 103(23) of the HEA to include the
States of the United States, the District of Columbia, Puerto Rico,
Guam, Samoa, the U.S. Virgin Islands, the Northern Mariana Islands and
the Freely Associated States (the Marshall Islands, Micronesia and
Palau). The total and permanent disability discharge application
requires the certifying physician to identify the State in which he or
she is licensed to practice, and to provide his or her professional
license number.
In June 1999, the Department of Education's Inspector General (IG)
issued a report that identified a number of weaknesses in the
procedures for determining eligibility for total and permanent
disability loan discharge and concluded that inappropriate discharges
were being granted as a result of those weaknesses. In the years since
the IG's report, the Department has revised the total and permanent
disability discharge regulations and taken other measures to strengthen
the procedures for determining a borrower's eligibility for discharge,
including verification through State records of a physician's license
to practice. This verification is conducted for each total and
permanent disability discharge application that the Department reviews.
Licensure requirements for physicians in foreign countries may differ
significantly from the requirements in the United States, or in some
countries may not exist. It would not be possible for the Department to
verify a physician's license to practice in a foreign country, even if
a country requires its physicians to be licensed. The Department also
follows up with physicians who certified an application but did not
provide sufficient information concerning the borrower's medical
condition. Having to contact and
[[Page 55975]]
communicate with physicians in foreign countries would be difficult in
many cases.
For these reasons, the Department believes that it is important to
retain the requirement that a physician who certifies a total and
permanent disability discharge application must be licensed to practice
in a State.
Changes: None.
Comment: One commenter believed that the preamble to the NPRM
indicated that the Department's standard for determining disability is
essentially the same as the standard used in the Social Security
Disability Insurance (SSDI) program, and suggested that the process of
determining a borrower's eligibility for total and permanent disability
discharge could be made more efficient if the Department provided an
electronic means for a borrower to report that he or she is receiving
SSDI benefits.
Discussion: The commenter's understanding of the preamble
discussion in the NPRM is incorrect. In the preamble to the NPRM, the
Department explained that the proposed definition of substantial
gainful activity--not the definition of totally and permanently
disabled--is based, in part, on the definition of substantial gainful
activity that is used by the Social Security Administration (SSA) to
determine whether an individual is eligible for Social Security
disability benefits. The NPRM included the definition of totally and
permanently disabled that was added to the HEA by the HEOA. This new
statutory standard does not correspond to any of the disability
standards used by the SSA for determining an individual's eligibility
for Social Security disability benefits. An individual who receives SSA
disability benefits may not qualify as totally and permanently disabled
under the definition of that term in the HEA.
Changes: None.
Comment: Two commenters recommended that the Department revise the
total and permanent disability discharge regulations to use the poverty
guideline amount for a borrower's actual family size to determine
whether the borrower's annual employment earnings during the post-
discharge monitoring period demonstrated that the borrower was not
totally and permanently disabled. One of the commenters stated that
borrowers with larger families should be allowed to earn more income
during the post-discharge monitoring period. This commenter suggested
that any concerns about potential borrower confusion over the use of a
variable standard based on actual family size could be resolved by
annually posting an updated poverty guideline chart on a Department Web
site.
Discussion: During the negotiated rulemaking sessions, the
Department initially proposed an annual earnings standard based on the
poverty guideline amount for the borrower's actual family size because
we believed that it would be more equitable for borrowers with a family
size greater than two. The Department's original proposal would have
been a change from the employment earnings standard under the current
total and permanent disability discharge regulations, which provide
that a conditionally discharged loan will be removed from conditional
discharge status if a borrower has annual employment earnings during
the conditional discharge period that exceed the poverty guideline
amount for a family of two, regardless of the borrower's actual family
size. However, during the negotiated rulemaking sessions, some of the
non-Federal negotiators, including the student and legal aid
representatives, felt strongly that it would be better to continue to
use the poverty guideline amount for a family of two. These negotiators
noted that a borrower's family size could change during the three-year
post-discharge monitoring period, and in such cases the borrower would
have to monitor changes in the employment earnings limit. They believed
that a changing standard would be confusing and could result in a
borrower inadvertently exceeding the employment earnings limit. These
negotiators urged the Department to retain the current fixed standard
based on a family size of two. The Department agreed that retaining a
fixed employment earnings limit based on the poverty guideline amount
for a family of two during the entire post-discharge monitoring period
would be less confusing for borrowers and simpler to administer.
Changes: None.
Comment: Several commenters noted that under the proposed
regulations in Sec. 682.402(c)(8) governing total and permanent
disability discharges for certain veterans, if the Department
determines that a veteran is eligible for a loan discharge, the
guaranty agency is responsible for notifying the veteran that the
veteran has no obligation to make further payments on the loan. These
commenters recommended that the regulations be revised to provide that
the lender, rather than the guaranty agency, would notify the veteran
of his or her eligibility for discharge. The commenters believed that
it would be simpler to require the lender to make this notification,
since the proposed regulations already require the lender to refund any
payments received on the loan after the date of the Department of
Veterans Affairs disability determination, and the lender would
therefore already be communicating with the borrower for this purpose.
The commenters further noted that this approach would be more
consistent with the proposed regulations governing the general process
for total and permanent disability discharges for other borrowers.
Under those regulations, the lender notifies a borrower that his or her
loan has been assigned to the Department for a determination of
discharge eligibility, and that no further payments are required.
Discussion: The Department agrees with the commenters.
Changes: Section 682.402(c)(8)(ii)(F) has been revised to specify
that upon receipt of the claim payment from the guaranty agency (after
the Department has notified the guaranty agency that a veteran is
eligible for a discharge), the lender notifies the veteran that the
veteran's obligation to make any further payments on the loan has been
discharged.
Comment: Several commenters recommended that the changes to the
total and permanent disability discharge definition and process should
be made effective for discharge applications received on or after July
1, 2010. The commenters believed that using the application receipt
date as the effective date for the changes would benefit borrowers who
may not qualify for discharge based on the current definition of
totally and permanently disabled, and would provide a clearly defined
transition point for processing discharge applications under the new
regulations.
Discussion: Under these final regulations, the new definition of
totally and permanently disabled and the new discharge process are
effective for discharge applications received on or after July 1, 2010.
Disability discharge applications from borrowers other than qualified
veterans that are received prior to July 1, 2010 will be processed
under the current regulations and borrower eligibility will be
determined based on the current definition of totally and permanently
disabled. Veterans who provide documentation that they have been
determined by the Secretary of Veterans Affairs to be unemployable due
to a service-connected disability will have their discharge
applications processed under the separate procedures that the
Department has already implemented for these
[[Page 55976]]
borrowers in accordance with the requirements of the HEOA.
Changes: None.
Comment: One commenter expressed concerns that many disabled
military borrowers are unaware that they may qualify for total and
permanent disability discharge of their loans because of widespread
problems with a lack of information about this benefit from both FFEL
Program lenders and the Department. The commenter recommended a number
of operational measures that lenders, the Department, the Department of
Defense, and the Department of Veterans Affairs should take to help
ensure that disabled military borrowers are made aware of the total and
permanent disability loan discharge provision. The commenter also
recommended that loan amounts discharged due to total and permanent
disability should not be treated as taxable income, since this presents
a financial hardship for disabled borrowers with low incomes.
Discussion: The Department provides information about total and
permanent disability discharges on the master promissory notes that are
signed by all borrowers in all three title IV loan programs. Further,
information about total and permanent disability discharges is also
available on Department Web sites, such as Student Aid on the Web
(http://www.studentaid.ed.gov) and the Direct Loan Program Web site
(http://www.ed.gov/DirectLoan), as well as Web sites maintained by many
FFEL Program lenders. Moreover, customer service representatives for
the Department have been given information about the disability
discharge process and can provide this information to borrowers. These
efforts do not have to be addressed in the Department's regulations.
The commenter's proposal regarding the tax treatment of discharged loan
amounts would require a statutory change in the Internal Revenue Code
and cannot be addressed through these regulations.
Changes: None.
Comment: One commenter requested clarification of the provisions in
Sec. Sec. 674.9(g), 682.201(a), and 685.200(a) that require a borrower
who requests a new title IV loan after receiving a total and permanent
disability discharge on a prior loan to: (1) Provide a physician's
certification that he or she is able to engage in substantial gainful
activity; and (2) acknowledge that the new loan may not be discharged
in the future based on any medical condition present at the time the
new loan is made, unless that condition substantially deteriorates.
Specifically, the commenter asked if these requirements apply to all
borrowers who received a prior total and permanent disability
discharge, regardless of whether the discharge was granted under the
general discharge procedures or the special procedures for certain
veterans.
Discussion: The requirements for receiving a new loan after having
a loan discharged due to total and permanent disability apply to all
borrowers, regardless of whether the discharge was granted under the
general discharge process or the special discharge process for certain
veterans. These requirements are intended to assure that the borrower
is likely to repay the loan in accordance with the promissory note that
the borrower signs for the new loan.
Changes: None.
Comment: One commenter recommended that current Sec.
682.201(a)(6), which specifies the additional eligibility requirements
that must be met by a borrower who requests a new loan following a
final discharge of a prior title IV loan due to a total and permanent
disability, also be applied to a borrower who is requesting a new loan
after receiving a final discharge of a TEACH Grant service obligation
due to a total and permanent disability. The commenter believed that an
individual who wants to receive a new loan after previously receiving a
final total and permanent disability discharge should have to meet the
same eligibility requirements, regardless of whether the prior
disability discharge involved a title IV loan or a TEACH Grant service
obligation.
The commenter also asked if the Department's National Student Loan
Data System (NSLDS) will indicate that a TEACH Grant service obligation
has been discharged due to a total and permanent disability, just as it
currently identifies title IV loans that have been discharged due to a
total and permanent disability.
Discussion: The Department agrees that a borrower who requests a
new title IV loan after previously receiving a final total and
permanent disability discharge of a TEACH Grant service obligation
should be subject to the same eligibility requirements as a borrower
who previously received a final total and permanent disability
discharge of a title IV loan. NSLDS does identify TEACH Grant service
obligations that have been discharged based on the grant recipient's
total and permanent disability.
Changes: Section 682.201(a)(6) has been revised by adding a
reference to TEACH Grant service obligations. Corresponding changes
have also been made in Sec. Sec. 674.9(g) and 685.200(a)(1)(iv).
Comment: One commenter raised concerns about the requirement in
current Sec. 682.402(h)(1)(i)(B) as it relates to the proposed
regulations in Sec. 682.402(c)(8) that govern the total and permanent
disability discharge process for certain veterans. Under current Sec.
682.402(h)(1)(i)(B), a guaranty agency must promptly review a
disability discharge claim filed by a lender and pay an approved claim
within 90 days after the claim was filed. The commenter believed that
this deadline is reasonable in the case of a disability claim processed
under the standard discharge process in proposed Sec. 682.402(c)(1)
through (7), since all of the actions that are required to pay a
lender's claim are entirely under the guaranty agency's control.
However, the commenter noted that under the separate discharge process
for certain veterans in proposed Sec. 682.402(c)(8), a guaranty agency
cannot pay a lender's disability claim until the Department has
reviewed the veteran's discharge request and notified the guaranty
agency that the veteran is eligible for discharge. Therefore, a delay
in the Department's review of a veteran's discharge request could
prevent a guaranty agency from meeting the 90-day time limit in current
Sec. 682.402(h)(1)(i)(B). The commenter recommended that the
Department amend current Sec. 682.402(h)(1)(i)(B) to provide one
deadline for a guaranty agency to review a disability claim involving a
veteran's discharge request and either refer the discharge application
and any supporting documentation to the Department or return it to the
lender, and a separate deadline for the guaranty agency to either pay
or return the claim, as applicable, after being notified by the
Department that the veteran is or is not eligible for discharge.
Discussion: The Department agrees with the commenter.
Changes: Section 682.402(h)(1) has been revised to provide that a
guaranty agency must review a disability claim based on a veteran's
discharge request under Sec. 682.402(c)(8) and either submit the
request to the Department or return the claim to the lender within 45
days after the claim was filed, and must pay the claim or return the
claim to the lender within 45 days after being notified by the
Department of the veteran's eligibility or ineligibility for discharge.
Consolidation Loans (Sec. 682.201(e))
Comment: One commenter asked that the regulations clarify which
FFEL Program loans are eligible for the Direct
[[Page 55977]]
Loan Program's no accrual of interest benefit for active duty military
service members after a FFEL borrower consolidates the loans into the
Direct Loan Program. The commenter believed the language in the
proposed regulations did not adequately address this issue and
suggested that the regulations be amended to include the clarifying
language contained in the Department's Stafford Loan Master Promissory
Note (MPN).
Discussion: The Department agrees with the commenter that the
regulatory language defining which loans are eligible for the no
accrual of interest benefit should be clarified and that it is
appropriate to use the Stafford Loan MPN language as a model. The
Stafford Loan MPN informs borrowers that a FFEL Program loan that was
first disbursed on or after October 1, 2008, including a Federal
Consolidation Loan that repaid FFEL or Direct Loan program loans first
disbursed on or after October 1, 2008, may be consolidated into the
Direct Loan Program to take advantage of the no accrual of interest
benefit for active duty military service members, and explains that no
interest will be charged on the portion of the new Direct Consolidation
Loan that repaid FFEL or Direct Loan program loans first disbursed on
or after October 1, 2008 during periods of qualifying active duty
military service (for up to 60 months). A Federal Consolidation Loan
that repaid some loans that were first disbursed on or after October 1,
2008 and other loans that were first disbursed before that date may be
consolidated into the Direct Loan Program to take advantage of the no
accrual of interest benefit, but the benefit will apply only to the
portion of the Direct Consolidation Loan that is attributable to the
loans repaid by the Federal Consolidation Loan that were first
disbursed on or after October 1, 2008.
Changes: Section 682.201(e)(5) has been revised to include language
specifying that FFEL Program loans first disbursed on or after October
1, 2008 (including Consolidation loans that repaid FFEL or Direct loans
first disbursed on or after October 1, 2008) are eligible for the no
accrual of interest benefit when included in a Federal Direct
Consolidation Loan.
In-School Deferments for PLUS Loans (Sec. 682.210)
Comment: One commenter raised an issue concerning proposed Sec.
682.210(v)(1)(ii), which provides that if a lender grants an in-school
deferment on a student PLUS loan first disbursed on or after July 1,
2008 based on enrollment information that confirms the borrower's
eligibility for the deferment, the deferment period includes the
additional 6-month post-enrollment deferment period that begins when
the student ceases to be enrolled on at least a half-time basis. The
commenter believed that the regulations should not specify the
operational method by which a lender processes a deferment, and
recommended that the regulatory language be revised to provide that a
lender may process the 6-month post-enrollment deferment as either an
extension of the in-school deferment period, or a separate deferment
period that begins when the student ceases to be enrolled at least half
time.
Discussion: The regulatory language stating that the deferment
period ``includes'' the 6-month post-enrollment deferment is intended
to clarify that if a lender grants an in-school deferment on a student
PLUS loan first disbursed on or after July 1, 2008 based on enrollment
status information, the 6-month post enrollment deferment may be
granted without a separate request from the borrower. The regulatory
language does not dictate the operational details of how a lender
processes the post-enrollment deferment.
Changes: None.
Deferment (Sec. Sec. 682.210 and 682.204)
Comment: One commenter raised an issue concerning the discussion of
proposed Sec. 682.210(a)(3)(ii) in the preamble to the NPRM. This
provision requires a FFEL Program lender, at or before the time a
deferment is granted to a borrower who is responsible for paying the
interest on a loan during the deferment, to notify the borrower of
certain information, including the borrower's option to pay the
interest that accrues during the deferment or to cancel the deferment
and continue paying on the loan. The Department stated in the preamble
that a comparable change would be made to Sec.
685.204(b)(1)(iii)(B)(2) to provide that Direct Loan borrowers will be
notified of their right to cancel a deferment and continue paying on
the loan. The commenter noted, however, that the corresponding Direct
Loan provision does not specifically say that borrowers will be
notified of the option to pay the accruing interest during a deferment
period, and recommended that this be added to ensure that Direct Loan
borrowers receive the same information as FFEL borrowers.
Discussion: Regulations are issued to govern the activities of
third parties; in general, the Secretary does not issue regulations to
control the Department's activities. Direct Loan Program borrowers are
notified of their option to pay the interest that accrues during a
deferment on the Direct Loan Program deferment request forms and in the
correspondence borrowers receive when a deferment is granted.
Changes: None.
Comment: Several commenters raised a concern about language in the
preamble to the NPRM that describes the requirement for a lender to
inform a borrower, at or before the time a deferment is granted, that
the borrower has the option to pay the accruing interest or cancel the
deferment and continue to pay on the loan. The commenters noted that,
during the negotiated rulemaking process, the Department agreed that it
would be helpful for a borrower to receive this information at the time
of application for the deferment, and that including the required
information in the Department-approved, standardized deferment forms
would satisfy the notification requirement. The commenters were
concerned that the discussion in the preamble could be misinterpreted
to suggest that a lender must provide the information both at the time
the borrower requests the deferment and at the time the lender grants
the deferment.
Discussion: The Department did not intend to imply a change in the
meaning of the language in the regulations through the preamble
discussion. As stated in Sec. 682.210(a)(3)(ii), the lender may
provide the required information ``at or prior to the time the
deferment is granted.'' Providing the required information to the
borrower as part of the standardized deferment application at the time
the borrower requests the deferment satisfies the regulatory
notification requirement. The lender may, but is not required to, also
provide the information at the time the deferment is granted.
Changes: None.
Income-Based Repayment (IBR) Plan
Comment: Some commenters praised the Department for proposing
changes to the IBR regulations to address the calculation of partial
financial hardship for borrowers whose outstanding loan balances
increase rather than decrease while they repay their loans under
another repayment plan prior to requesting IBR, and for married
borrowers who file joint tax returns with the IRS and who both have
eligible education loans. One commenter noted, however, that the
Department had amended the Direct Loan regulations to allow a borrower
who wants to repay a defaulted FFELP loan with a Direct
[[Page 55978]]
Consolidation Loan to agree to pay the Direct Consolidation Loan under
the IBR Plan, but did not make a comparable change in Sec.
682.201(d)(1)(i)(A). The commenter requested that a technical
correction be made to insert a reference to IBR in the corresponding
FFEL provision so that comparable terms and conditions apply to
borrowers in both programs.
Discussion: The commenter is correct that this change should be
reflected in the FFEL Program regulations. The Department agrees that
comparable terms and conditions should apply for this purpose for
borrowers in both the FFEL and Direct Loan programs.
Changes: Section 682.201(d)(1)(i)(A) has been revised to provide
that a borrower may consolidate a defaulted loan if he or she agrees to
repay the FFEL Consolidation loan under either the income-sensitive
repayment plan or the income-based repayment plan.
FFEL and Direct Loan Program Teacher Loan Forgiveness (Sec. Sec.
682.216 and 685.217)
Comment: One commenter noted that under the proposed regulations,
an educational service agency is considered an eligible educational
service agency for teacher loan forgiveness purposes only if the agency
meets the same eligibility requirements as elementary and secondary
schools under current regulations, including the requirement to be
listed in the Department's Annual Directory of Designated Low-Income
Schools (Low-Income School Directory). The commenter asked for
clarification as to whether an otherwise eligible teacher who is
employed by an educational service agency that is not listed in the
Low-Income School Directory would qualify for teacher loan forgiveness
if the teacher taught for five complete, consecutive academic years at
an elementary or secondary school that is included in the Low-Income
School Directory.
Discussion: The proposed regulations allow a teacher to qualify for
loan forgiveness if he or she is employed as a full-time teacher for
five consecutive complete academic years at an eligible elementary or
secondary school or by an eligible educational service agency, and
meets the other eligibility requirements of the teacher loan
forgiveness program. An otherwise eligible teacher who is employed by
an educational service agency, but who teaches at a low-income
elementary or secondary school that is not operated by the educational
service agency, may qualify for loan forgiveness if either the
educational service agency or the school where the individual performs
qualifying teaching service is listed in the Low-Income School
Directory.
Changes: None.
Comment: One commenter asked for clarification as to who the
appropriate certifying official would be for purposes of certifying the
loan forgiveness application of a ``traveling'' teacher who, as
discussed in the preamble to the NPRM, does not have a fixed location
of employment, but instead performs qualifying teaching service at
multiple eligible schools or eligible educational service agencies, and
who may not actually be employed by the schools or educational service
agencies where he or she teaches. The commenter believed that the
reference in the NPRM to not having a fixed location of employment
would imply that a traveling teacher is an independent contractor who
is not actually employed by any school or educational service agency.
Discussion: In the preamble to the NPRM, the Department indicated
that ``traveling'' teachers who do not have a fixed location of
employment, but who perform qualifying teaching service at multiple
eligible elementary or secondary schools, or at multiple eligible
educational service agencies, may (if otherwise eligible) qualify for
teacher loan forgiveness even though they are not employees of the
schools or educational service agencies where they teach. The reference
to not having a fixed location of employment was not intended to
suggest that a traveling teacher would be an independent contractor. A
traveling teacher may be an employee of a particular school, school
district, or educational service agency and provide teaching services
at various schools or locations operated by educational service
agencies. For purposes of certifying such a teacher's loan forgiveness
application, the certifying official must be someone who has access to
employment records that establish the teacher's eligibility for loan
forgiveness, and who is authorized to verify the teacher's qualifying
employment. The appropriate certifying official may vary depending on
individual employment circumstances. The certifying official could be
someone at the borrower's actual employer, or someone at the location
where the borrower performed the qualifying teaching service.
Changes: None.
Comment: Several commenters stated that there appears to be a
conflict between the preamble of the NPRM and the proposed regulatory
language with regard to the conditions under which qualifying teaching
service performed at an eligible educational service agency prior to
the date of enactment of the HEOA may be counted toward the required
five complete consecutive years of teaching service. The preamble
states that the required five complete consecutive years may include
any combination of teaching at eligible elementary or secondary schools
or eligible educational service agencies, but that teaching at an
educational service agency may be counted toward the five years only if
the consecutive five years includes qualifying service at an eligible
educational service agency performed after the 2007-2008 academic year.
The proposed regulatory language in Sec. Sec. 682.216(a)(2) and
685.217(a)(2) states that for teaching service performed by an employee
of an eligible educational service agency, at least one of the five
consecutive complete academic years must have been after the 2007-2008
academic year.
The commenters noted that the regulatory requirement for ``at least
one'' of the complete academic years to have been after the 2007-2008
academic year could be interpreted to mean that for any years of
teaching at an eligible educational service agency prior to the
enactment of the HEOA to count toward the required five consecutive
years, a borrower must have completed a full year of teaching at an
eligible educational service agency after the 2007-2008 academic year.
They believed this approach would be contrary to the agreement reached
during the negotiated rulemaking process and the preamble to the NPRM.
The commenters interpreted the preamble language to mean that
qualifying teaching service performed by an employee of an educational
service agency prior to the enactment of the HEOA would count toward
the required five consecutive years as long as the five-year period
includes any period of qualifying teaching at an eligible educational
service agency after the 2007-2008 academic year, even if the
qualifying service at an educational service agency after the 2007-2008
academic year is less than a full academic year. For example, the
preamble language would allow a borrower who performed qualifying
teaching service at an eligible educational service agency for four
complete consecutive academic years from 2004-2005 through 2007-2008 to
count those years toward the required five consecutive years if, during
the 2008-2009 academic year, the borrower taught for half of the year
at an eligible educational service agency and the other half of the
year at an eligible elementary or secondary school. The
[[Page 55979]]
commenters recommended that proposed Sec. 682.216(a)(2) be revised to
reflect the language in the preamble.
Discussion: Proposed Sec. 682.216(a)(2) was intended to be
consistent with the preamble to the NPRM regarding the eligibility of
teaching service performed by an employee of an educational service
agency prior to the date of enactment of the HEOA. However, the
Department agrees with the commenters that the regulatory language
could be misinterpreted.
Changes: Sections 682.216(a)(2) and 685.217(a)(2) have been revised
to reflect the language in the preamble to the NPRM. Conforming changes
have also been made in Sec. Sec. 682.216(c)(3)(iii) and (c)(4)(iii),
and 685.217(c)(3)(iii) and (c)(4)(iii).
Eligibility for Rehabilitation of Defaulted FFEL and Direct Loans
(Sec. Sec. 682.405(a) and (b)(1)(iii) and 685.211(f))
Comment: One commenter agreed with the Department's interpretation
that the limit on rehabilitation of defaulted loans to one opportunity
applies to each loan, but requested further clarification on the
application of the limit. The commenter asked whether a borrower who
successfully rehabilitates a defaulted loan, consolidates that loan,
and then subsequently defaults on the consolidation loan would be
eligible to rehabilitate the consolidation loan. The commenter believed
the borrower should be eligible to rehabilitate the consolidation loan
because the previously rehabilitated loan was in good standing when it
was consolidated.
Discussion: A consolidation loan is a new loan. In the commenter's
example, the borrower's previously rehabilitated loan was paid in full
through the consolidation process and has no bearing on the borrower's
eligibility for rehabilitation of the consolidation loan. The
Department agrees that the borrower is eligible to rehabilitate the
defaulted consolidation loan, but does not believe it is necessary to
separately address the treatment of consolidation loans in the
regulations.
Changes: None.
Definition of Lender (Sec. 682.200(b))
Comment: One commenter asked whether the term ``other group'' in
paragraph (5)(i)(A)(6) of the prohibited inducement provisions of the
proposed definition of ``lender'' includes a lender's board of
directors. The commenter asked the Department to clarify that a
lender's board of directors would be covered by the prohibition even if
the Department decided not to define the term.
Discussion: The term ``other group'' is not defined in the HEA. The
Department agrees, however, that service on a lender's board of
directors is one of the groups established by a lender that would be
covered under the provision. The Department declines to define the term
``other group'' and does not believe it is possible to provide an all-
inclusive listing of the possible types of groups a lender may
establish that would be covered by the prohibition.
Changes: None.
Lender Disclosures (Sec. 682.205)
Comment: One commenter raised concerns about the number of new and
revised borrower disclosures that lenders must provide under proposed
Sec. 682.205. The commenter indicated that his organization would need
substantial time to prepare the disclosures, train its staff, and make
necessary data processing changes to implement the regulations. The
commenter requested that the Department extend the effective date of
the lender disclosure provisions to one year after the final
regulations are issued.
Discussion: The Department notes that the new and revised borrower
disclosures included in the proposed regulations are required as a
result of the enactment of the HEOA and became effective in most cases
on August 14, 2008. Lenders are expected to comply with the
requirements to the extent possible until these implementing
regulations become effective on July 1, 2010. The Department believes
that providing information to borrowers, particularly those who are
having difficulty making payments or who are past due on their
payments, is critical, and therefore declines to delay the July 1,
2010, effective date of these implementing regulations.
Changes: None.
Comment: Several commenters requested a change to Sec.
682.205(c)(4) of the proposed regulations, which describes the
information that must be provided to borrowers who contact their
lenders indicating that they are having difficulty making their
payments. The commenters were concerned that sending the required
information repeatedly to a borrower if the borrower contacts the
lender more than once over a short period of time would be ineffective
and could confuse the borrower. The commenters requested that the
Department require the lender to send the disclosure only if the lender
had not sent one to the borrower within the previous 120 days. The
commenters believed that this change would be comparable to a change
agreed to during the negotiations related to the frequency of the
required disclosure for borrowers who fall 60 days behind in making
payments. The Department agreed that, in that situation, it was not
beneficial to send multiple disclosures to a borrower who was rolling
in and out of a 60-day delinquency status and, as a result, the
proposed regulations do not require a lender to continue to send the
60-day delinquency disclosure if one was sent to the borrower within
the previous 120 days.
Discussion: The Department does not agree that the disclosure
required under Sec. 682.205(c)(4) when a borrower contacts the lender
indicating he or she is having difficulty making payments is comparable
to the disclosure of information in the 60-day delinquency situation.
The 60-day delinquency disclosure is automatically triggered by the
borrower's delinquency status and is in addition to other lender due
diligence contacts with the borrower required under Sec. 682.411 of
the FFEL regulations. In the case of a borrower having difficulty
making payments, the borrower triggers the disclosure by contacting the
lender and requesting assistance. Under these circumstances, we believe
a lender has a responsibility and an obligation to assist the borrower
by providing information as frequently as necessary to assist that
borrower. The Department disagrees that the situations are comparable
and declines to make the change requested by the commenters.
Changes: None.
Executive Order 12866
Regulatory Impact Analysis
Under Executive Order 12866, the Secretary must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive order and subject to review by the Office
of Management and Budget (OMB). Section 3(f) of Executive Order 12866
defines a ``significant regulatory action'' as an action likely to
result in a rule that may (1) have an annual effect on the economy of
$100 million or more, or adversely affect a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or Tribal governments or communities in a
material way (also referred to as an ``economically significant''
rule); (2) create serious inconsistency or otherwise interfere with an
action taken or planned by another agency; (3) materially alter the
budgetary impacts of entitlement grants, user fees, or loan
[[Page 55980]]
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
order.
Pursuant to the terms of the Executive order, it has been
determined this regulatory action will not have an annual effect on the
economy of more than $100 million. Therefore, this action is not
``economically significant'' and subject to OMB review under section
3(f)(1) of Executive Order 12866. Notwithstanding this determination,
the Secretary has assessed the potential costs and benefits of this
regulatory action and has determined that the benefits justify the
costs.
Need for Federal Regulatory Action
As discussed in the NPRM, these regulations are needed to implement
provisions of the HEA, as amended by the HEOA, particularly related to
changes related to loan discharge, deferment, consolidation,
rehabilitation, and repayment plan provisions, and the addition of a
new Part E to title I of the HEA, which establishes extensive new
disclosure requirements for lenders and institutions participating in
Federal and private student loan programs.
Regulatory Alternatives Considered
Regulatory alternatives were considered as part of the rulemaking
process. These alternatives were reviewed in detail in the preamble to
the NPRM under both the Regulatory Impact Analysis and the Reasons
sections accompanying the discussion of each proposed regulatory
provision. To the extent that they were addressed in response to
comments received on the NPRM, alternatives are also considered
elsewhere in the preamble to these final regulations under the
Discussion sections related to each provision. No comments were
received related to the Regulatory Impact Analysis discussion of these
alternatives.
As discussed above in the Analysis of Comments and Changes section,
these final regulations reflect statutory amendments included in the
HEOA and minor revisions in response to public comments. In most cases,
these revisions were technical in nature and intended to address
drafting issues or provide additional clarity. Other changes, such as
the requirement that lenders rather than guaranty agencies notify
veterans whose loans have been discharged that their obligation to make
any further payments has been discharged, were made to simplify and
standardize program operations. None of these changes result in
revisions to cost estimates prepared for and discussed in the
Regulatory Impact Analysis of the NPRM.
Benefits
As discussed in the NPRM, benefits provided in these proposed
regulations include greater transparency for borrowers participating in
the Federal and private student loan programs; clearer guidelines on
acceptable behavior by and relationships among institutions
participating in the student loan programs; improvements to the IBR
plan, particularly for married borrowers; a simpler process for
obtaining loan discharges due to total and permanent disability; and
expanded eligibility for Teacher Loan forgiveness benefits. It is
difficult to quantify benefits related to the new institutional and
lender requirements, as there is little specific data available on
either the extent of improper or questionable relationships between
institutions and lenders prior to the HEOA or of the harm such
relationships actually caused for either borrowers, institutions, or
the Federal taxpayer. In the NPRM, the Department requested comments or
data that would support a more rigorous analysis of the impact of these
provisions. No comments or additional data were received.
Benefits under these regulations flow directly from statutory
changes included in the HEOA; they are not materially affected by
discretionary choices exercised by the Department in developing these
regulations, or by changes made in response to comments on the NPRM. As
noted in the Regulatory Impact Analysis in the NPRM, these proposed
provisions result in net costs to the government of $192.7 million over
2009-2013.
Costs
As discussed extensively in the Regulatory Impact Analysis in the
NPRM, many of the statutory provisions implemented though these
regulations will require regulated entities to develop new disclosures
and other materials, as well as accompanying dissemination processes.
Other regulations generally would require discrete changes in specific
parameters associated with existing guidance--such as changes to the
process for loan discharges, IBR, and various deferment and forbearance
benefits--rather than wholly new requirements. In total, these changes
are estimated to increase burden on entities participating in the FFEL
program by 1,313,964 hours. Of this increased burden, 1,184,115 hours
are associated with lenders, 110,360 hours with guaranty agencies, and
7,200 hours with institutions. An additional 12,289 hours are
associated with borrowers, generally reflecting the time required to
read new disclosures or submit required information.
For lenders, over half of the additional burden--798,000 hours--is
related to the requirement to provide additional disclosures to
borrowers who are over 60 days delinquent or are otherwise having
trouble making repayments. Another 216,000 hours are associated with
new requirements related to the provision of administrative
forbearances. Roughly 90,000 hours in new burden are related to changes
in the methodology for calculating income-based repayments. The balance
of additional burden is spread across a number of minor changes made by
these regulations.
For guaranty agencies, virtually the entire additional burden
relates to new requirements to provide information to borrowers who are
in default or have rehabilitated their loans after being in default.
Other minor additional burden for guaranty agencies results from new
requirements to provide consumer information.
The monetized cost of this additional burden, using loaded wage
data developed by the Bureau of Labor Statistics, is $24,334,225, of
which $21.95 million is associated with lenders, $2.05 million with
guaranty agencies, $0.2 million with borrowers, and $0.13 million with
schools. Given the large number of entities affected by these
provisions, actual burden on individual entities is not substantial.
Because data underlying many of these burden estimates was limited,
in the NPRM, the Department requested comments and supporting
information for use in developing more robust estimates. In particular,
we asked institutions to provide detailed data on actual staffing and
system costs associated with implementing these regulations. No
comments or additional data were received.
Net Budget Impacts
As discussed more fully in the Regulatory Impact Analysis of the
NPRM, HEOA provisions implemented by these regulations are estimated to
have a net budget impact of $34.7 million in 2009 and $192.7 million
over FY 2009-2013. (The estimated impact for 2009 does not include
$144.2 million in costs related to loans originated in prior fiscal
years.) Consistent with the requirements of the Credit Reform Act of
1990, budget cost estimates for the student loan programs reflect the
estimated net present value of
[[Page 55981]]
all future non-administrative Federal costs associated with a cohort of
loans. (A cohort reflects all loans originated in a given fiscal year.)
The budgetary impact of these regulations is largely driven by
statutory changes involving teacher loan forgiveness, loan discharges,
and IBR. The Department estimates no budgetary impact for other
provisions included in these regulations; there is no data indicating
that the new requirements related to improper inducements and
additional loan disclosures will have any impact on the volume or
composition of Federal student loans.
Assumptions, Limitations, and Data Sources
As noted in the NPRM, because these regulations would largely
restate statutory requirements that would be self-implementing in the
absence of regulatory action, impact estimates provided in the
preceding section reflect a pre-statutory baseline in which the HEOA
changes implemented in these proposed regulations do not exist. Costs
have been quantified for five years.
In developing these estimates, a wide range of data sources were
used, including data from the NSLDS; operational and financial data
from Department systems; and data from a range of surveys conducted by
the National Center for Education Statistics, such as the 2004 National
Postsecondary Student Aid Survey, the 1994 National Education
Longitudinal Study, and the 1996 Beginning Postsecondary Student
Survey. Data from other sources, such as the Census Bureau, were also
used.
Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and
explain burdens specifically associated with information collection
requirements. See the heading Paperwork Reduction Act of 1995.
Accounting Statement
In Table 2 below, we have prepared an accounting statement showing
the classification of the expenditures associated with the provisions
of these proposed regulations. This table provides our best estimate of
the changes in Federal student aid payments as a result of these
proposed regulations. Expenditures are classified as transfers from the
Federal government to student loan borrowers (for expanded loan
discharges, teacher loan forgiveness payments).
Table 2--Accounting Statement: Classification of Estimated Expenditures
[In millions]
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers......... $57.
From Whom To Whom?..................... Federal Government to Student
Loan Borrowers.
------------------------------------------------------------------------
Regulatory Flexibility Act Certification
The Secretary certifies that these regulations would not have a
significant economic impact on a substantial number of small entities.
These regulations would affect institutions of higher education,
lenders, and guaranty agencies that participate in Title IV, HEA
programs and individual students and loan borrowers. The U.S. Small
Business Administration Size Standards define institutions and lenders
as ``small entities'' if they are for-profit or nonprofit institutions
with total annual revenue below $5,000,000 or if they are institutions
controlled by small governmental jurisdictions, which are comprised of
cities, counties, towns, townships, villages, school districts, or
special districts, with a population of less than 50,000.
As discussed in more detail in the Regulatory Flexibility Act
section of the NPRM, data from the Integrated Postsecondary Education
Data System (IPEDS) indicate that roughly 1,200 institutions
participating in the FFEL program meet the definition of ``small
entities.'' Institutional burden stemming from these regulations is
associated with audit requirements for schools serving as lenders.
Institutions meeting the definition of small entities are extremely
unlikely to act as lenders in the FFEL program. Accordingly, new
requirements imposed under these regulations are not expected to impose
significant new costs on these institutions.
The Department believes few if any lenders participating in the
FFEL program have revenues of less than $5 million. Lenders of this
size are extremely unlikely to engage in the type of activities--
inducements, etc.--governed by these regulations. Accordingly, the
Department has determined that the regulations did not represent a
significant burden on small lenders.
Guaranty agencies are State and private nonprofit entities that act
as agents of the Federal government, and as such are not considered
``small entities'' under the Regulatory Flexibility Act. The impact of
the regulations on individuals is not subject to the Regulatory
Flexibility Act.
In the NPRM, the Secretary invited comments from small institutions
and lenders as to whether they believe the proposed changes would have
a significant economic impact on them. No comments were received.
Paperwork Reduction Act of 1995
Sections 674.61, 682.202, 682.205, 682.206, 682.208, 682.210,
682.211, 682.216, 682.302, 682.305, 682.401, 682.402, 682.410, 682.601,
685.202, 685.204, 685.205, 685.213, and 685.217 contain information
collection requirements. 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.
Sections 674.61, 682.402, and 685.213--Total and Permanent Disability
Loan Discharges
The final regulations revise the loan discharge process for
borrowers seeking to have their title IV loans discharged based on a
total and permanent disability. The changes to the loan discharge
process affect borrowers, loan holders (and their servicers), and
guaranty agencies.
The burden hour estimate associated with the current total and
permanent disability loan discharge provisions is reported under OMB
Control Number 1845-0065 (Discharge Application: Total and Permanent
Disability). The Department does not expect these changes to increase
the burden for this collection. However, the Department will need to
revise the Discharge Application: Total and Permanent Disability
currently approved under 1845-0065 to reflect these final regulations.
The Department will submit a revised form for clearance after the final
regulations have been published. The revised form will not be needed
until July 1, 2010, the effective date of the final regulations.
[[Page 55982]]
In response to public comments, the Department revised Sec.
682.402(c)(8)(ii)(F) to specify that upon receipt of a claim payment
from the guaranty agency (after the Department has notified the
guaranty agency that a borrower is eligible for a discharge under the
separate discharge process for certain veterans), the lender notifies
the veteran that the veteran's obligation to make any further payments
on the loan has been discharged. Under the proposed regulations, the
guaranty agency would have been responsible for notifying the veteran
of the discharge. This change from the proposed regulations has no
effect on burden for lenders or guaranty agencies, as it simply makes
the borrower notification process under the special discharge
procedures for veterans consistent with the general discharge
procedures for other borrowers and the notification requirements under
existing regulations.
Section 682.206--Consolidation Loans
The final regulations revise Sec. 682.206(f) to incorporate a new
requirement that is needed to fully implement proposed Sec.
682.205(i)(7), which requires lenders to inform borrowers that, by
applying for the Consolidation loan, the borrower is not obligated to
take the loan. Specifically, Sec. 682.206(f) is revised to include a
requirement that the lender provide a Consolidation loan borrower a
period of not less than 10 days, from the date the borrower is notified
by the lender that it is ready to make the Consolidation loan, to
cancel the loan. The final regulations require the lender to send the
notice of the option to cancel the loan to the borrower before making
any payments to pay off a loan with the proceeds of a Consolidation
loan.
We estimate that these changes will increase burden for borrowers
by 10,032 hours and for loan holders (and their servicers) by 54,552
hours for a total increase in burden of 64,584 hours in OMB Control
Number 1845-0020.
Sections 682.210, 682.211, 685.204 and 685.205--In-School Deferments
and Administrative Forbearance for PLUS Loans
The final regulations revise Sec. Sec. 682.210 and 685.204 to
reflect statutory deferment provisions for FFEL and Direct PLUS loan
borrowers with loans first disbursed on or after July 1, 2008. Upon the
request of the borrower, a parent PLUS borrower must be granted a
deferment on a PLUS loan first disbursed on or after July 1, 2008,
during the period when the student on whose behalf the loan was
obtained is enrolled on at least a half-time basis at an eligible
institution, and during the 6-month period that begins on the later of
the day after the student ceases to be enrolled on at least a half-time
basis or, if the parent borrower is also a student, the day after the
parent ceases to be enrolled on at least a half-time basis.
For graduate and professional student PLUS borrowers, the final
regulations provide that a borrower may be granted a deferment on a
PLUS loan first disbursed on or after July 1, 2008 during the 6-month
period that begins on the day after the student ceases to be enrolled
on at least a half-time basis at an eligible institution. If a lender
or the Secretary grants an in-school deferment on a student PLUS loan
based on information from the borrower's school about the borrower's
eligibility for a new loan, student status information from the school
or information from NSLDS confirming the borrower's half-time
enrollment status, the in-school deferment period for a student PLUS
loan first disbursed on or after July 1, 2008 would include the 6-month
period that begins on the day after the student PLUS borrower ceases to
be enrolled on at least a half-time basis.
The final regulations also add a new administrative forbearance
provision to Sec. 682.211(f) allowing a lender to grant a forbearance,
upon notice to the borrower, on a borrower's PLUS loans first disbursed
before July 1, 2008 to align repayment of the loans with a borrower's
PLUS loans first disbursed on or after July 1, 2008, or with a
borrower's Stafford loans that are subject to a grace period. The
lender is required to notify the borrower that he or she has the option
to cancel the forbearance and to continue paying on the loan. A
corresponding administrative forbearance provision will be added to
Sec. 685.205(b) in the Direct Loan Program regulations.
The changes to Sec. Sec. 682.210 and 685.204 affect borrowers and
loan holders (and their servicers). The new deferment provisions for
certain PLUS borrowers are expected to increase the number of borrowers
who apply for deferments. Because these statutory provisions could be
implemented without regulations, the FFEL and Direct Loan deferment
request forms were previously revised to include the new deferments for
PLUS borrowers and have been approved under OMB Control Numbers 1845-
0005 (FFEL Program Deferment Request Forms) and 1845-0011 (Direct Loan
Program Deferment Request Forms). The increased burden associated with
the final regulatory changes is reflected in the burden estimates
reported under those control numbers.
We estimate that the final regulations in Sec. 682.211(e) related
to administrative forbearances will increase burden for loan holders by
14,440 hours in OMB Control Number 1845-0020.
Sections 682.215 and 685.221--Income-Based Repayment (IBR) Plan
The final regulations revise the definition of partial financial
hardship in Sec. 682.215(a)(4) and 685.221(a)(4) to specify that the
annual amount due on a borrower's eligible loans for purposes of
determining whether the borrower has a partial financial hardship is
the greater of the amount due on the eligible loans when the borrower
initially entered repayment on those loans, or the amount due on those
loans when the borrower elects the IBR plan. The final regulations also
provide that when a married borrower and his or her spouse file a joint
Federal tax return with the IRS and both the borrower and the spouse
have eligible loans, the joint AGI and the total amount of the
borrower's and spouse's eligible loans will be used in determining
whether each borrower has a partial financial hardship.
The final regulations revise Sec. Sec. 682.215(b)(1) and
685.221(b)(2) to provide that if a borrower and a borrower's spouse
both have eligible loans and filed a joint Federal tax return, each
borrower's percentage of the couple's total eligible loan debt would be
determined, and the calculated partial financial hardship payment
amount for each borrower would be adjusted by multiplying the payment
by the applicable borrower's percentage. As with all other borrowers,
each borrower's adjusted payment amount would be further adjusted if
the borrower's loans are held by multiple holders.
We estimate that the final regulations will increase burden for
loan holders by 90,286 hours in OMB Control Number 1845-0020.
Sections 682.202, 682.302, and 685.202--Applicability of the
Servicemembers Civil Relief Act (SCRA) to FFEL and Direct Loan Program
Loans
The final regulations revise Sec. Sec. 682.202 and 685.202 to
provide that, effective August 14, 2008, upon a loan holder's receipt
of a written request from a borrower and a copy of the borrower's
military orders, the maximum interest rate (as defined in 50 U.S.C.
527, App, section 207(d)) that may be charged on FFEL or Direct Loan
program loans made prior to the borrower entering active duty status is
six percent while the borrower is on active duty status. The final
regulations
[[Page 55983]]
would also revise Sec. 682.302 of the FFEL regulations by adding a new
paragraph (h) that specifies that, for FFEL loans first disbursed on or
after July 1, 2008, that are subject to the SCRA interest rate cap, the
FFEL lender's special allowance payment is calculated as it otherwise
would be under program requirements, except that the applicable
interest rate used is six percent.
We estimate that the final regulations will increase burden for
borrowers by 1,694 hours and for loan holders by 542 hours in new OMB
Control Number 1845-XXX1. We estimate that the final regulations will
increase burden for borrowers by 563 hours in new OMB Control Number
1845-XXX2.
Sections 682.210 and 685.204--In-School Deferment
The final regulations revise Sec. 682.210(a)(3) of the FFEL
regulations to provide that if a borrower is responsible for the
interest on a loan during a deferment period, the lender, at or before
the time the deferment is granted, must notify the borrower that he or
she has the option to pay the accruing interest or cancel the deferment
and continue paying on the loan. The lender is also required to provide
information, including an example, on the impact on a borrower's loan
debt of capitalization of accrued unpaid interest and on the total
amount of interest to be paid over the life of the loan. A similar
notification provision that applied only to the granting of in-school
deferments is removed from Sec. 682.210(c)(2) of the FFEL regulations.
A comparable change is made in Sec. 685.204(b)(1)(iii)(B) of the
Direct Loan regulations to provide that borrowers will be notified of
their option to cancel a deferment and continue paying on the loan and
will be provided with information on the impact of capitalization,
including an example.
The changes to Sec. Sec. 682.210 and 685.204 affect borrowers and
loan holders (and their servicers). The FFEL and Direct Loan deferment
request forms currently approved under OMB Control Numbers 1845-0005
and 1845-0011 already include the information that a loan holder must
provide to a borrower at or before the time a deferment is granted, as
described above. Therefore, there is no increase in burden associated
with the final regulations.
Sections 682.216 and 685.217--FFEL and Direct Loan Program Teacher Loan
Forgiveness
The final regulations allow a borrower who otherwise meets the
eligibility requirements for teacher loan forgiveness to receive
forgiveness based on teaching service performed at one or more eligible
elementary or secondary schools that serve low-income families, or one
or more eligible educational service agencies that serve low-income
families. A borrower can also qualify based on teaching service
performed at a combination of eligible elementary or secondary schools
and eligible educational service agencies. To be considered eligible
for teacher loan forgiveness purposes, an educational service agency
has to meet the same eligibility requirements that apply to elementary
and secondary schools.
These changes will increase the number of borrowers who are
eligible for teacher loan forgiveness, and will require a revision of
the FFEL and Direct Loan Program Teacher Loan Forgiveness Application
that is currently approved under OMB Control Number 1845-0059. The
Department will submit a change request for 1845-0059 (including an
adjustment to the burden hours associated with this collection) after
the final regulations have been published.
Section 682.205--Disclosure Requirements for Lenders
The final regulations reorganize and expand Sec. 682.205 to
reflect new disclosure requirements added by the HEOA. The HEOA added
additional disclosures by lenders before disbursement and requires new
disclosures at differing points in the borrower's repayment cycle. The
HEOA also added a separate set of disclosures specifically for
Consolidation loan borrowers.
We estimate that the final regulations will increase burden for
loan holders (and their servicers) by 797,661 hours in OMB Control
Number 1845-0020.
Section 682.208--Information to Borrowers Upon Transfer, Sale or
Assignment of a FFEL Program Loan
The final regulations incorporate three additional information
items specified in the HEA that must be provided to a borrower if the
assignment or transfer of an ownership interest in a FFEL program loan
results in a change in the identity of the party to whom subsequent
payments must be sent. The three additional data items are: (1) The
effective date of the assignment or transfer of the loan; (2) the date
on which the current loan servicer will cease accepting payments; and
(3) the date on which the new loan servicer will begin accepting
payments. The date on which the current servicer will stop accepting
payments is required only if that is applicable.
Loan holders are already required, under current regulations, to
provide certain information to a borrower if the assignment of a FFEL
Program loan results in a change in the identity of the party to whom
the borrower must send payments. The final regulations merely add three
additional items to the notice that a loan holder is already required
to provide. Therefore, the Department believes that the final
regulations will not significantly increase burden for loan holders
(and their servicers) in OMB Control Number 1845-0020.
Section 682.211--Forbearance
Section 682.211(e) of the final regulations requires the lender, at
the time the borrower is granted a forbearance, to give the borrower
information about the impact of capitalization of interest on the loan
and the total amount to be repaid over the life of the loan. The final
regulations also require the lender to contact the borrower at least
once every 180 days during any period of forbearance and to give the
borrower or endorser more specific information, in conjunction with
that required under existing regulations, as to the impact of
forbearance on the loan. This information includes the amount of
interest that will be capitalized and when that capitalization will
take place and the option of the borrower or endorser to pay the
interest that has accrued before it is capitalized.
We estimate that the final regulations will increase burden for
loan holders (and their servicers) by 215,734 hours in OMB Control
Number 1845-0020.
Sections 682.305 and 682.601--Audit Requirements for a FFEL School
Lender or an Eligible Lender Trustee (ELT)
The final regulations revise Sec. 682.305(c) to require that a
FFEL school lender, or a lender serving as a trustee on behalf of a
school or school-affiliated organization for the purpose of originating
loans, submit an annual compliance audit to the Department regardless
of the dollar volume of loans originated. The final regulations also
require that the audit be conducted by a qualified, independent
organization or person. Section 682.305(c)(2)(vii) governs the
compliance audit of a school or school-affiliated organization lender
trustee. The final regulations require that the trustee's audit include
a determination that the school for whom the lender serves as trustee
used all the proceeds from special allowance payments, interest
subsidies received from the Department, and any proceeds from the sale
or other disposition of the loans originated through the lender for
[[Page 55984]]
need-based grants, and that those funds supplemented, but did not
supplant, other Federal or non-Federal funds otherwise available to the
school to make need-based grants to its students. The final regulations
also require that the audit determine that no more than a reasonable
portion of the payments and proceeds from the loans were used for
direct administrative expenses in accordance with Sec. 682.601(b) of
the current regulations. These same requirements with regard to annual
compliance audit determinations were also added to the FFEL school
lender audit requirements in Sec. 682.601(a)(7) of the regulations.
We estimate that the final regulations will increase burden for
institutions by 7,200 hours and for loan holders (and their servicers)
by 10,900 hours for a total increase in burden of 18,100 hours in OMB
Control Number 1845-0020.
Section 682.401--Consumer Education Information Provided by Guaranty
Agencies
The final regulations require a guaranty agency to work with the
schools that it serves to develop and make available high-quality
educational materials and programs that provide training for students
and their families in budgeting and financial management, including
debt management and other aspects of financial literacy, such as the
cost of using high-interest loans to pay for postsecondary education,
and how budgeting and financial management relate to the title IV
student loan programs.
We estimate that the final regulations will increase burden for
institutions and guaranty agencies by 8,748 hours in OMB Control Number
1845-0020.
Section 682.405--Financial and Economic Literacy for Rehabilitated
Borrowers
The final regulations revise Sec. 682.405, regarding loan
rehabilitation agreements, by adding a provision requiring guaranty
agencies to make available financial and economic education materials,
including debt management information, to any borrower who has
rehabilitated a defaulted loan.
We estimate that the final regulations will increase burden for
guaranty agencies by 24,427 hours in OMB Control Number 1845-0020.
Section 682.405--Consumer Credit Reporting Following Loan
Rehabilitation
If a borrower successfully rehabilitates a previously defaulted
loan, the final regulations require the prior holder of the loan, in
addition to the guaranty agency, to request that a consumer reporting
agency to which the default was reported remove the default from the
borrower's credit history. The final regulations also provide more
detailed reporting deadlines for the guaranty agency and prior loan
holder to request removal of the report of the default from the
borrower's credit history, and reduce the overall period for this
activity from 90 to 75 days.
We estimate that the final regulations will increase burden for
guaranty agencies by 18,392 hours in OMB Control Number 1845-0020.
Section 682.410--Notifications to Borrowers in Default
The final regulations expand the information that must be provided
in the notice required under Sec. 682.410(b)(5)(ii) to include
information on the options that are available to the borrower to remove
the loan from default, including an explanation of the fees and
conditions associated with each option. The final regulations also
require a guaranty agency to provide this same information to a
defaulted borrower in a second notice that the guaranty agency must
send as part of its required collection efforts on a defaulted loan
under Sec. 682.410(b)(6). The second notice has to be sent within a
reasonable time after the end of the period during which the borrower
may request an administrative review as specified in Sec.
682.410(b)(5)(iv)(B) or, if the borrower has requested an
administrative review, within a reasonable time following the
conclusion of the administrative review.
We estimate that the final regulations will increase burden for
guaranty agencies by 58,793 hours in OMB Control Number 1845-0020.
Consistent with the discussion above, the following chart describes
the sections of the final regulations involving information
collections, the information being collected, and the collections that
the Department submitted to the Office of Management and Budget for
approval and public comment under the Paperwork Reduction Act.
----------------------------------------------------------------------------------------------------------------
Regulatory section Information collection Collection
----------------------------------------------------------------------------------------------------------------
674.61, 682.402, and 685.213....... The final regulations revise the loan OMB 1845-0065. The Discharge
discharge process for borrowers Application: Total and Permanent
seeking to have their title IV loans Disability that is currently
discharged based on total and approved under 1845-0065 will be
permanent disability. Borrowers who revised to reflect the final
apply for a total and permanent regulations that will be published
disability discharge must complete a by November 1, 2009. The Department
discharge application that collects will submit a revised form for
the information needed to determine clearance after the final
their eligibility for discharge. regulations have been published.
The revised form will not be needed
until July 1, 2010, the effective
date of the final regulations.
682.206............................ Sec. 682.206(f) is amended to OMB 1845-0020. There will be an
include a requirement that the increase in burden of 64,584 hours.
lender provide a Consolidation loan
borrower a period of not less than
10 days, from the date the borrower
is notified by the lender that it is
ready to make the Consolidation
loan, to cancel the loan.
682.210, 682.211, 685.204 and The final regulations implement the OMB 1845-0005, 1845-0011 and 1845-
685.205. new deferment provisions for FFEL 0020. The FFEL and Direct Loan
and Direct PLUS loan borrowers with deferment request forms were
loans first disbursed on or after previously revised to include the
July 1, 2008 that were added to the new deferments for PLUS borrowers
HEA by the HEOA. A loan holder must and have been approved under OMB
collect the information needed to Control Numbers 1845-0005 (FFEL)
determine that a borrower is and 1845-0011 (Direct Loan). There
eligible for a deferment. will be an increase in burden of
14,440 hours in OMB 1845-0020.
[[Page 55985]]
682.202, 682.302, and 685.202...... The final regulations provide that, OMB 1845-XXX1 and 1845-XXX2. These
effective August 14, 2008, upon a are new collections. A separate 60-
loan holder's receipt of a written day Federal Register Notice has
request from a borrower and a copy been published to solicit comments.
of the borrower's military orders, In OMB 1845-XXX1 there will be an
the maximum interest rate that may increase in burden of 2,236 hours.
be charged on FFEL or Direct Loan In OMB 1845-XXX there will be an
program loans made prior to the increase in burden of 563 hours.
borrower entering active duty status
is six percent while the borrower is
on active duty status.
682.210 and 685.204................ The final regulations require a loan OMB 1845-0005 and 1845-0011. These
holder to provide information about collections (FFEL and Direct Loan
interest capitalization to a Program deferment request forms)
borrower prior to or at the time of were previously revised to include
granting a deferment on an the required information about
unsubsidized loan. interest capitalization and have
been approved by OMB.
682.215 and 685.221................ The final regulations revise the OMB 1845-0020. There will be an
definition of partial financial increase in burden of 90,286 hours.
hardship for purposes of determining
a borrower's eligibility for the
income-based repayment plan and
would also revise the provisions
governing a loan holder's
calculation of a borrower's income-
based payment amount.
682.216 and 685.217................ The final regulations expand OMB 1845-0059. The final regulations
eligibility for teacher loan require a revision of the FFEL and
forgiveness to allow a borrower who Direct Loan Program Teacher Loan
otherwise meets the loan forgiveness Forgiveness Application currently
eligibility requirements to receive approved under OMB Control Number
forgiveness based on teaching 1845-0059. The Department will
service performed at one or more submit a change request for 1845-
eligible educational service 0059 (including an adjustment to
agencies that serve low-income the burden hours associated with
families. this collection) after the final
regulations have been published.
682.205............................ The final regulations implement new OMB 1845-0020. There will be an
statutory requirements for lenders increase in burden of 797,661
to disclose certain information to hours.
borrowers at various points during
the lifecycle of a borrower's loan.
The proposed regulations also add
new lender disclosure requirements
for consolidation loan borrowers.
682.208............................ The final regulations incorporate OMB 1845-0020. There will be no
three additional information items change in burden hours.
that must be provided to a borrower
if the assignment or transfer of an
ownership interest in a FFEL program
loan results in a change in the
identity of the party to whom
subsequent payments must be sent.
682.211............................ The final regulations require the OMB 1845-0020. There will be an
lender, at the time the borrower is increase in burden of 215,734
granted a forbearance, to give the hours.
borrower information about the
impact of capitalization of interest
on the loan and the total to be
repaid over the life of the loan.
682.305 and 682.601................ The final regulations amend Sec. OMB 1845-0020. There will be an
682.305(c) to require that a FFEL increase in burden of 181,100
school lender, or a lender serving hours.
as a trustee on behalf of a school
or school-affiliated organization
for the purpose of originating
loans, submit an annual compliance
audit to the Department regardless
of the dollar volume of loans
originated.
682.401............................ The final regulations require OMB 1845-0020. There will be an
guaranty agencies to work with the increase in burden of 8,748 hours.
schools that it serves to develop
and make available high-quality
educational materials and programs
to provide training for students and
their families in budgeting and
financial management, including debt
management and other aspects of
financial literacy, such as the cost
of using high-interest loans to pay
for postsecondary education, and how
budgeting and financial management
relate to the title IV student loan
programs.
682.405............................ The final regulations require OMB 1845-0020. There will be an
guaranty agencies to provide certain increase in burden of 24,427 hours.
information to borrowers who have
rehabilitated defaulted loans.
682.405............................ The final regulations require the OMB 1845-0020. There will be an
prior holder of a previously increase in burden of 18,392 hours.
defaulted loan, in addition to the
guaranty agency, to request that
consumer reporting agencies remove
the record of the default from the
borrower's credit history after the
borrower has successfully
rehabilitated the loan.
682.410............................ The final regulations require OMB 1845-0020. There will be an
guaranty agencies to provide certain increase in burden of 58,793 hours.
additional notifications to
borrowers who are in default.
----------------------------------------------------------------------------------------------------------------
[[Page 55986]]
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:
http://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.
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 Number: 84.032 Federal
Family Education Loan Program; 84.037 Federal Perkins Loan Program;
and 84.268 William D. Ford Federal Direct Loan Program)
List of Subjects in 34 CFR Parts 673, 674, 682, and 685
Administrative practice and procedure, Colleges and universities,
Education, Loan programs--education, Reporting and recordkeeping
requirements, Student aid, and Vocational education.
Dated: October 15, 2009.
Arne Duncan,
Secretary of Education.
0
For the reasons discussed in the preamble, the Secretary amends parts
673, 674, 682, and 685 of title 34 of the Code of Federal Regulations
as follows:
PART 673--GENERAL PROVISIONS FOR THE FEDERAL PERKINS LOAN PROGRAM,
FEDERAL WORK-STUDY PROGRAM, AND FEDERAL SUPPLEMENTAL EDUCATIONAL
OPPORTUNITY GRANT PROGRAM
0
1. The authority citation for part 673 continues to read as follows:
Authority: 20 U.S.C. 421-429, 1070b-1070b-3, 1070g, 1087aa-
1087ii, 42 U.S.C. 2751-2756b, unless otherwise noted.
0
2. Section 673.5(c) is amended by:
0
A. Revising paragraph (c)(1)(v).
0
B. In paragraph (c)(1)(vi), removing the words ``and ROTC
scholarships''.
0
C. Revising paragraph (c)(1)(ix).
0
D. In paragraph (c)(2)(iii), removing the word ``and'' immediately
after the semicolon at the end of the paragraph.
0
E. In paragraph (c)(2)(iv), removing the words ``this part'' and
adding, in their place, the words ``a title IV, HEA program,'' and
removing the punctuation ``.'' at the end of the paragraph and adding,
in its place, the punctuation ``;''.
0
F. Adding a new paragraph (c)(2)(v).
0
G. Adding a new paragraph (c)(2)(vi).
0
H. In paragraph (c)(3), removing the words ``veterans education
benefits paid under Chapter 30 of title 38 of the United States Code
(Montgomery GI Bill-Active Duty) and''.
The revisions and additions read as follows:
Sec. 673.5 Overaward.
(c) * * *
(1) * * *
(v) Grants, including FSEOGs, State grants, Academic
Competitiveness Grants, and National SMART Grants;
* * * * *
(ix) Except as provided in paragraph (c)(2)(v) of this section,
veterans' education benefits;
* * * * *
(2) * * *
(v) Federal veterans' education benefits paid under--
(A) Chapter 103 of title 10, United States Code (Senior Reserve
Officers' Training Corps);
(B) Chapter 106A of title 10, United States Code (Educational
Assistance for Persons Enlisting for Active Duty);
(C) Chapter 1606 of title 10, United States Code (Selected Reserve
Educational Assistance Program);
(D) Chapter 1607 of title 10, United States Code (Educational
Assistance Program for Reserve Component Members Supporting Contingency
Operations and Certain Other Operations);
(E) Chapter 30 of title 38, United States Code (All-Volunteer Force
Educational Assistance Program, also known as the ``Montgomery GI
Bill--active duty'');
(F) Chapter 31 of title 38, United States Code (Training and
Rehabilitation for Veterans with Service-Connected Disabilities);
(G) Chapter 32 of title 38, United States Code (Post-Vietnam Era
Veterans' Educational Assistance Program);
(H) Chapter 33 of title 38, United States Code (Post 9/11
Educational Assistance);
(I) Chapter 35 of title 38, United States Code (Survivors' and
Dependents' Educational Assistance Program);
(J) Section 903 of the Department of Defense Authorization Act,
1981 (10 U.S.C. 2141 note) (Educational Assistance Pilot Program);
(K) Section 156(b) of the ``Joint Resolution making further
continuing appropriations and providing for productive employment for
the fiscal year 1983, and for other purposes'' (42 U.S.C. 402 note)
(Restored Entitlement Program for Survivors, also known as ``Quayle
benefits'');
(L) The provisions of chapter 3 of title 37, United States Code,
related to subsistence allowances for members of the Reserve Officers
Training Corps; and
(M) Any program that the Secretary may determine is covered by
section 480(c)(2) of the HEA; and
(vi) Iraq and Afghanistan Service Grants made under section 420R of
the HEA.
* * * * *
PART 674--FEDERAL PERKINS LOAN PROGRAM
0
3. 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
4. Section 674.9 is amended by:
0
A. Revising paragraph (g).
0
B. In the introductory text of paragraph (h), removing the words
``based on'' and adding, in their place, the word ``after'', and adding
the words ``based on a discharge request received prior to July 1,
2010'' immediately after the word ``disabled''.
0
C. In paragraph (h)(1), removing the words ``paragraphs (h)(1) and
(h)(2)'' and adding, in their place, the words ``paragraphs (g)(1) and
(g)(2)''.
0
D. In paragraph (h)(2)(ii), removing the words ``, as described in
Sec. 674.61(b)(9)'' immediately after the word ``period''.
0
E. In the second sentence of paragraph (i), removing the words
``described in Sec. Sec. 674.61(b), 682.402(c), or 685.213(a)''
immediately after the word ``period''.
The revision reads as follows:
Sec. 674.9 Student eligibility.
* * * * *
(g) In the case of a borrower whose prior loan under title IV of
the Act or whose TEACH Grant service obligation was discharged after a
final determination of total and permanent disability--
(1) Obtains a certification from a physician that the borrower is
able to engage in substantial gainful activity;
(2) Signs a statement acknowledging that any new Federal Perkins
Loan the borrower receives cannot be discharged
[[Page 55987]]
in the future on the basis of any present impairment, unless that
condition substantially deteriorates; and
(3) If the borrower receives a new Federal Perkins Loan within
three years of the date that any previous title IV loan or TEACH Grant
service obligation was discharged due to a total and permanent
disability in accordance with Sec. 674.61(b)(3)(i), 34 CFR 682.402(c),
34 CFR 685.213, or 34 CFR 686.42(b) based on a discharge request
received on or after July 1, 2010, resumes repayment on the previously
discharged loan in accordance with Sec. 674.61(b)(5), 34 CFR
682.402(c)(5), or 34 CFR 685.213(b)(4), or acknowledges that he or she
is once again subject to the terms of the TEACH Grant agreement to
serve before receiving the new loan.
* * * * *
0
5-6. Section 674.61 is amended by:
0
A. Revising paragraph (b).
0
B. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e),
respectively.
0
C. Adding a new paragraph (c).
The revision and addition read as follows:
Sec. 674.61 Discharge for death or disability.
* * * * *
(b) Total and permanent disability as defined in Sec.
674.51(aa)(1)--
(1) General. A borrower's Defense, NDSL, or Perkins loan is
discharged if the borrower becomes totally and permanently disabled, as
defined in Sec. 674.51(aa)(1), and satisfies the additional
eligibility requirements contained in this section.
(2) Discharge application process for borrowers who have a total
and permanent disability as defined in Sec. 674.51(aa)(1). (i) To
qualify for discharge of a Defense, NDSL, or Perkins loan based on a
total and permanent disability as defined in Sec. 674.51(aa)(1), a
borrower must submit a discharge application approved by the Secretary
to the institution that holds the loan.
(ii) The application must contain a certification by a physician,
who is a doctor of medicine or osteopathy legally authorized to
practice in a State, that the borrower is totally and permanently
disabled as defined in Sec. 674.51(aa)(1).
(iii) The borrower must submit the application to the institution
within 90 days of the date the physician certifies the application.
(iv) Upon receiving the borrower's complete application, the
institution must suspend collection activity on the loan and inform the
borrower that--
(A) The institution will review the application and assign the loan
to the Secretary for an eligibility determination if the institution
determines that the certification supports the conclusion that the
borrower is totally and permanently disabled, as defined in Sec.
674.51(aa)(1);
(B) The institution will resume collection on the loan if the
institution determines that the certification does not support the
conclusion that the borrower is totally and permanently disabled; and
(C) If the Secretary discharges the loan based on a determination
that the borrower is totally and permanently disabled, as defined in
Sec. 674.51(aa)(1), the Secretary will reinstate the borrower's
obligation to repay the loan if, within three years after the date the
Secretary granted the discharge, the borrower--
(1) Has annual earnings from employment that exceed 100 percent of
the poverty guideline for a family of two, as published annually by the
United States Department of Health and Human Services pursuant to 42
U.S.C. 9902(2);
(2) Receives a new TEACH Grant or a new loan under the Perkins,
FFEL, or Direct Loan programs, except for a FFEL or Direct
Consolidation Loan that includes loans that were not discharged; or
(3) Fails to ensure that the full amount of any disbursement of a
Title IV loan or TEACH Grant received prior to the discharge date that
is made during the three-year period following the discharge date is
returned to the loan holder or to the Secretary, as applicable, within
120 days of the disbursement date.
(v) If, after reviewing the borrower's application, the institution
determines that the application is complete and supports the conclusion
that the borrower is totally and permanently disabled as defined in
Sec. 674.51(aa)(1), the institution must assign the loan to the
Secretary.
(vi) At the time the loan is assigned to the Secretary, the
institution must notify the borrower that the loan has been assigned to
the Secretary for determination of eligibility for a total and
permanent disability discharge and that no payments are due on the
loan.
(3) Secretary's eligibility determination. (i) If the Secretary
determines that the borrower is totally and permanently disabled as
defined in Sec. 674.51(aa)(1), the Secretary discharges the borrower's
obligation to make further payments on the loan and notifies the
borrower that the loan has been discharged. The notification to the
borrower explains the terms and conditions under which the borrower's
obligation to repay the loan will be reinstated, as specified in
paragraph (b)(5) of this section.
(ii) If the Secretary determines that the certification provided by
the borrower does not support the conclusion that the borrower is
totally and permanently disabled as defined in Sec. 674.51(aa)(1), the
Secretary notifies the borrower that the application for a disability
discharge has been denied, and that the loan is due and payable to the
Secretary under the terms of the promissory note.
(iii) The Secretary reserves the right to require the borrower to
submit additional medical evidence if the Secretary determines that the
borrower's application does not conclusively prove that the borrower is
totally and permanently disabled as defined in Sec. 674.51(aa)(1). As
part of the Secretary's review of the borrower's discharge application,
the Secretary may arrange for an additional review of the borrower's
condition by an independent physician at no expense to the borrower.
(4) Treatment of disbursements made during the period from the date
of the physician's certification until the date of discharge. If a
borrower received a Title IV loan or TEACH Grant prior to the date the
physician certified the borrower's discharge application and a
disbursement of that loan or grant is made during the period from the
date of the physician's certification until the date the Secretary
grants a discharge under this section, the processing of the borrower's
loan discharge request will be suspended until the borrower ensures
that the full amount of the disbursement has been returned to the loan
holder or to the Secretary, as applicable.
(5) Conditions for reinstatement of a loan after a total and
permanent disability discharge. (i) The Secretary reinstates a
borrower's obligation to repay a loan that was discharged in accordance
with paragraph (b)(3)(i) of this section if, within three years after
the date the Secretary granted the discharge, the borrower--
(A) Has annual earnings from employment that exceed 100 percent of
the poverty guideline for a family of two, as published annually by the
United States Department of Health and Human Services pursuant to 42
U.S.C. 9902(2);
(B) Receives a new TEACH Grant or a new loan under the Perkins,
FFEL or Direct Loan programs, except for a FFEL or Direct Consolidation
Loan that includes loans that were not discharged; or
(C) Fails to ensure that the full amount of any disbursement of a
Title IV loan or TEACH Grant received prior
[[Page 55988]]
to the discharge date that is made during the three-year period
following the discharge date is returned to the loan holder or to the
Secretary, as applicable, within 120 days of the disbursement date.
(ii) If a borrower's obligation to repay a loan is reinstated, the
Secretary--
(A) Notifies the borrower that the borrower's obligation to repay
the loan has been reinstated; and
(B) Does not require the borrower to pay interest on the loan for
the period from the date the loan was discharged until the date the
borrower's obligation to repay the loan was reinstated.
(iii) The Secretary's notification under paragraph (b)(5)(ii)(A) of
this section will include--
(A) The reason or reasons for the reinstatement;
(B) An explanation that the first payment due date on the loan
following reinstatement will be no earlier than 60 days after the date
of the notification of reinstatement; and
(C) Information on how the borrower may contact the Secretary if
the borrower has questions about the reinstatement or believes that the
obligation to repay the loan was reinstated based on incorrect
information.
(6) Borrower's responsibilities after a total and permanent
disability discharge. During the three-year period described in
paragraph (b)(5)(i) of this section, the borrower or, if applicable,
the borrower's representative--
(i) Must promptly notify the Secretary of any changes in address or
phone number;
(ii) Must promptly notify the Secretary if the borrower's annual
earnings from employment exceed the amount specified in paragraph
(b)(5)(i)(A) of this section; and
(iii) Must provide the Secretary, upon request, with documentation
of the borrower's annual earnings from employment.
(7) Payments received after the physician's certification of total
and permanent disability. (i) If, after the date the physician
certifies the borrower's loan discharge application, the institution
receives any payments from or on behalf of the borrower on or
attributable to a loan that was assigned to the Secretary for
determination of eligibility for a total and permanent disability
discharge, the institution must forward those payments to the Secretary
for crediting to the borrower's account.
(ii) At the same time that the institution forwards the payment, it
must notify the borrower that there is no obligation to make payments
on the loan prior to the Secretary's determination of eligibility for a
total and permanent disability discharge, unless the Secretary directs
the borrower otherwise.
(iii) When the Secretary makes a determination to discharge the
loan, the Secretary returns any payments received on the loan after the
date the physician certified the borrower's loan discharge application
to the person who made the payments on the loan.
(c) Total and permanent disability discharges for veterans--(1)
General. A veteran's Defense, NDSL, or Perkins loan will be discharged
if the veteran is totally and permanently disabled, as defined in Sec.
674.51(aa)(2).
(2) Discharge application process for veterans who have a total and
permanent disability as defined in Sec. 674.51(aa)(2). (i) To qualify
for discharge of a Defense, NDSL, or Perkins loan based on a total and
permanent disability as defined in Sec. 674.51(aa)(2), a veteran must
submit a discharge application approved by the Secretary to the
institution that holds the loan.
(ii) With the application, the veteran must submit documentation
from the Department of Veterans Affairs showing that the Department of
Veterans Affairs has determined that the veteran is unemployable due to
a service-connected disability. The veteran will not be required to
provide any additional documentation related to the veteran's
disability.
(iii) Upon receiving the veteran's completed application and the
required documentation from the Department of Veterans Affairs, the
institution must suspend collection activity on the loan and inform the
veteran that--
(A) The institution will review the application and submit the
application and supporting documentation to the Secretary for an
eligibility determination if the documentation from the Department of
Veterans Affairs indicates that the veteran is totally and permanently
disabled as defined in Sec. 674.51(aa)(2);
(B) The institution will resume collection on the loan if the
documentation from the Department of Veterans Affairs does not indicate
that the veteran is totally and permanently disabled as defined in
Sec. 674.51(aa)(2); and
(C) If the documentation from the Department of Veterans Affairs
does not indicate that the veteran is totally and permanently disabled
as defined in Sec. 674.51(aa)(2), but the documentation indicates that
the veteran may be totally and permanently disabled as defined in Sec.
674.51(aa)(1), the veteran may reapply for a total and permanent
disability discharge in accordance with the procedures described in
Sec. 674.61(b).
(iv) If the documentation from the Department of Veterans Affairs
indicates that the veteran is totally and permanently disabled as
defined in Sec. 674.51(aa)(2), the institution must submit a copy of
the veteran's application and the documentation from the Department of
Veterans Affairs to the Secretary. At the time the application and
documentation are submitted to the Secretary, the institution must
notify the veteran that the veteran's discharge request has been
referred to the Secretary for determination of discharge eligibility
and that no payments are due on the loan.
(v) If the documentation from the Department of Veterans Affairs
does not indicate that the veteran is totally and permanently disabled
as defined in Sec. 674.51(aa)(2), the institution must resume
collection on the loan.
(3) Secretary's determination of eligibility. (i) If the Secretary
determines, based on a review of the documentation from the Department
of Veterans Affairs, that the veteran is totally and permanently
disabled as defined in Sec. 674.51(aa)(2), the Secretary notifies the
institution of this determination, and the institution must--
(A) Discharge the veteran's obligation to make further payments on
the loan; and
(B) Return to the person who made the payments on the loan any
payments received on or after the effective date of the determination
by the Department of Veterans Affairs that the veteran is unemployable
due to a service-connected disability.
(ii) If the Secretary determines, based on a review of the
documentation from the Department of Veterans Affairs, that the veteran
is not totally and permanently disabled as defined in Sec.
674.51(aa)(2), the Secretary notifies the institution of this
determination, and the institution must resume collection on the loan.
* * * * *
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
0
7. The authority citation for part 682 continues to read as follows:
Authority: 20 U.S.C. 1071 to 1087-2 unless otherwise noted.
0
8. Section 682.200(b) is amended by:
0
A. In the definition of ``Estimated financial assistance,'' revising
paragraphs (1)(i) and (ii).
0
B. In the definition of ``Estimated financial assistance,'' removing
[[Page 55989]]
paragraphs (1)(iii) and (iv), and redesignating paragraphs (1)(v),
(vi), (vii), and (viii) as paragraphs (1)(iii), (iv), (v), and (vi),
respectively.
0
C. In paragraph (2)(i) of the definition of ``Estimated financial
assistance,'' removing the word ``is'' in the second sentence and
adding, in its place, the words ``must be''.
0
D. In paragraph (2)(iii) of the definition of ``Estimated financial
assistance,'' removing the words ``veterans' educational benefits paid
under chapter 30 of title 38 of the United States Code (Montgomery GI
Bill--Active Duty) and''.
0
E. In paragraph (2)(v) of the definition of ``Estimated financial
assistance,'' removing the word ``and'' after the semicolon at the end
of the paragraph.
0
F. In paragraph (2)(vi) of the definition of ``Estimated financial
assistance,'' removing the words ``this title'' in the first sentence
and adding, in their place, the words ``a title IV, HEA program'', and
removing the punctuation ``.'' at the end of the paragraph and adding,
in its place, the punctuation ``;''.
0
G. In the definition of ``Estimated financial assistance,'' adding new
paragraphs (2)(vii) and (viii).
0
H. Revising paragraph (5) of the definition of ``Lender.''
0
I. Removing the definition of ``National credit bureau.''
0
J. Adding a definition of ``Nationwide consumer reporting agency.''
0
K. Adding a definition of ``Substantial gainful activity.''
0
L. Revising the definition of ``Totally and permanently disabled.''
The revisions and additions read as follows:
Sec. 682.200 Definitions.
* * * * *
(b) * * *
Estimated financial assistance. (1) * * *
(i) Except as provided in paragraph (2)(iii) of this definition,
national service education awards or post-service benefits under title
I of the National and Community Service Act of 1990 (AmeriCorps);
(ii) Except as provided in paragraph (2)(vii) of this definition,
veterans' education benefits;
* * * * *
(2) * * *
(vii) Federal veterans' education benefits paid under--
(A) Chapter 103 of title 10, United States Code (Senior Reserve
Officers' Training Corps);
(B) Chapter 106A of title 10, United States Code (Educational
Assistance for Persons Enlisting for Active Duty);
(C) Chapter 1606 of title 10, United States Code (Selected Reserve
Educational Assistance Program);
(D) Chapter 1607 of title 10, United States Code (Educational
Assistance Program for Reserve Component Members Supporting Contingency
Operations and Certain Other Operations);
(E) Chapter 30 of title 38, United States Code (All-Volunteer Force
Educational Assistance Program, also known as the ``Montgomery GI
Bill--active duty'');
(F) Chapter 31 of title 38, United States Code (Training and
Rehabilitation for Veterans with Service-Connected Disabilities);
(G) Chapter 32 of title 38, United States Code (Post-Vietnam Era
Veterans' Educational Assistance Program);
(H) Chapter 33 of title 38, United States Code (Post 9/11
Educational Assistance);
(I) Chapter 35 of title 38, United States Code (Survivors' and
Dependents' Educational Assistance Program);
(J) Section 903 of the Department of Defense Authorization Act,
1981 (10 U.S.C. 2141 note) (Educational Assistance Pilot Program);
(K) Section 156(b) of the ``Joint Resolution making further
continuing appropriations and providing for productive employment for
the fiscal year 1983, and for other purposes'' (42 U.S.C. 402 note)
(Restored Entitlement Program for Survivors, also known as ``Quayle
benefits'');
(L) The provisions of chapter 3 of title 37, United States Code,
related to subsistence allowances for members of the Reserve Officers
Training Corps; and
(M) Any program that the Secretary may determine is covered by
section 480(c)(2) of the HEA; and
(viii) Iraq and Afghanistan Service Grants made under section 420R
of the HEA.
* * * * *
Lender. * * *
(5)(i) The term eligible lender does not include any lender that
the Secretary determines, after notice and opportunity for a hearing
before a designated Department official, has, directly or through an
agent or contractor--
(A) Except as provided in paragraph (5)(ii) of this definition,
offered, directly or indirectly, points, premiums, payments (including
payments for referrals, finder fees or processing fees), or other
inducements to any school, any employee of a school, or any individual
or entity in order to secure applications for FFEL loans or FFEL loan
volume. This includes but is not limited to--
(1) Payments or offerings of other benefits, including prizes or
additional financial aid funds, to a prospective borrower or to a
school or school employee in exchange for applying for or accepting a
FFEL loan from the lender;
(2) Payments or other benefits, including payments of stock or
other securities, tuition payments or reimbursements, to a school, a
school employee, any school-affiliated organization, or to any other
individual in exchange for FFEL loan applications, application
referrals, or a specified volume or dollar amount of loans made, or
placement on a school's list of recommended or suggested lenders;
(3) Payments or other benefits provided to a student at a school
who acts as the lender's representative to secure FFEL loan
applications from individual prospective borrowers, unless the student
is also employed by the lender for other purposes and discloses that
employment to school administrators and to prospective borrowers;
(4) Payments or other benefits to a loan solicitor or sales
representative of a lender who visits schools to solicit individual
prospective borrowers to apply for FFEL loans from the lender;
(5) Payment to another lender or any other party, including a
school, a school employee, or a school-affiliated organization or its
employees, of referral fees, finder fees or processing fees, except
those processing fees necessary to comply with Federal or State law;
(6) Compensation to an employee of a school's financial aid office
or other employee who has responsibilities with respect to student
loans or other financial aid provided by the school or compensation to
a school-affiliated organization or its employees, to serve on a
lender's advisory board, commission or other group established by the
lender, except that the lender may reimburse the employee for
reasonable expenses incurred in providing the service;
(7) Payment of conference or training registration, travel, and
lodging costs for an employee of a school or school-affiliated
organization;
(8) Payment of entertainment expenses, including expenses for
private hospitality suites, tickets to shows or sporting events, meals,
alcoholic beverages, and any lodging, rental, transportation, and other
gratuities related to lender-sponsored activities for employees of a
school or a school-affiliated organization;
(9) Philanthropic activities, including providing scholarships,
grants, restricted gifts, or financial contributions in exchange for
FFEL loan applications or application referrals, or
[[Page 55990]]
a specified volume or dollar amount of FFEL loans made, or placement on
a school's list of recommended or suggested lenders;
(10) Performance of, or payment to another third party to perform,
any school function required under title IV, except that the lender may
perform entrance counseling as provided in Sec. 682.604(f) and exit
counseling as provided in Sec. 682.604(g), and may provide services to
participating foreign schools at the direction of the Secretary, as a
third-party servicer; and
(11) Any type of consulting arrangement or other contract with an
employee of a financial aid office at a school, or an employee of a
school who otherwise has responsibilities with respect to student loans
or other financial aid provided by the school under which the employee
would provide services to the lender.
(B) Conducted unsolicited mailings, by postal or electronic means,
of student loan application forms to students enrolled in secondary
schools or postsecondary institutions or to family members of such
students, except to a student or borrower who previously has received a
FFEL loan from the lender;
(C) Offered, directly or indirectly, a FFEL loan to a prospective
borrower to induce the purchase of a policy of insurance or other
product or service by the borrower or other person; or
(D) Engaged in fraudulent or misleading advertising with respect to
its FFEL loan activities.
(ii) Notwithstanding paragraph (5)(i) of this definition, a lender,
in carrying out its role in the FFEL program and in attempting to
provide better service, may provide--
(A) Technical assistance to a school that is comparable to the
kinds of technical assistance provided to a school by the Secretary
under the Direct Loan program, as identified by the Secretary in a
public announcement, such as a notice in the Federal Register;
(B) Support of and participation in a school's or a guaranty
agency's student aid and financial literacy-related outreach
activities, including in-person entrance and exit counseling, as long
as the name of the entity that developed and paid for any materials is
provided to the participants and the lender does not promote its
student loan or other products;
(C) Meals, refreshments, and receptions that are reasonable in cost
and scheduled in conjunction with training, meeting, or conference
events if those meals, refreshments, or receptions are open to all
training, meeting, or conference attendees;
(D) Toll-free telephone numbers for use by schools or others to
obtain information about FFEL loans and free data transmission service
for use by schools to electronically submit applicant loan processing
information or student status confirmation data;
(E) A reduced origination fee in accordance with Sec. 682.202(c);
(F) A reduced interest rate as provided under the Act;
(G) Payment of Federal default fees in accordance with the Act;
(H) Purchase of a loan made by another lender at a premium;
(I) Other benefits to a borrower under a repayment incentive
program that requires, at a minimum, one or more scheduled payments to
receive or retain the benefit or under a loan forgiveness program for
public service or other targeted purposes approved by the Secretary,
provided these benefits are not marketed to secure loan applications or
loan guarantees;
(J) Items of nominal value to schools, school-affiliated
organizations, and borrowers that are offered as a form of generalized
marketing or advertising, or to create good will; and
(K) Other services as identified and approved by the Secretary
through a public announcement, such as a notice in the Federal
Register.
(iii) For the purposes of this paragraph (5)--
(A) The term ``school-affiliated organization'' is defined in Sec.
682.200.
(B) The term ``applications'' includes the Free Application for
Federal Student Aid (FAFSA), FFEL loan master promissory notes, and
FFEL Consolidation loan application and promissory notes.
(C) The term ``other benefits'' includes, but is not limited to,
preferential rates for or access to the lender's other financial
products, information technology equipment, or non-loan processing or
non-financial aid-related computer software at below market rental or
purchase cost, and printing and distribution of college catalogs and
other materials at reduced or no cost.
* * * * *
Nationwide consumer reporting agency. A consumer reporting agency
as defined in 15 U.S.C. 1681a.
* * * * *
Substantial gainful activity. A level of work performed for pay or
profit that involves doing significant physical or mental activities,
or a combination of both.
* * * * *
Totally and permanently disabled. The condition of an individual
who--
(1) Is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment
that--
(i) Can be expected to result in death;
(ii) Has lasted for a continuous period of not less than 60 months;
or
(iii) Can be expected to last for a continuous period of not less
than 60 months; or
(2) Has been determined by the Secretary of Veterans Affairs to be
unemployable due to a service-connected disability.
* * * * *
0
9. Section 682.201 is amended by:
0
A. In paragraph (a)(4)(i), removing the words ``legal costs, and late
charges'' and adding, in their place, the words ``court costs, attorney
fees, and late charges''.
0
B. In paragraph (a)(5), removing the words ``under Sec. 682.402(c)''.
0
C. In the introductory text of paragraph (a)(6), adding the words ``or
whose TEACH Grant service obligation'' immediately after the word
``Act''.
0
D. Revising paragraph (a)(6)(iii).
0
E. In the introductory text of paragraph (a)(7), removing the words
``based on'' and adding, in their place, the word ``after'', and adding
the words ``based on a discharge request received prior to July 1,
2010'' immediately after the word ``disabled''.
0
F. In paragraph (a)(7)(ii)(B), removing the words ``, as described in
paragraph 682.402(c)(16)''.
0
G. In paragraph (d)(1)(i)(A)(3), adding the words ``or the income-based
repayment plan described in Sec. 682.215'' immediately after the
reference ``Sec. 682.209(a)(6)(iii)''.
0
H. In paragraph (e)(4), adding the words ``is in default or''
immediately after the first appearance of the words ``consolidation
loan'' and adding the words ``or an income-based repayment plan''
immediately after the words ``income contingent repayment plan''.
0
I. Revising paragraph (e)(5).
The revisions read as follows:
Sec. 682.201 Eligible borrowers.
(a) * * *
(6) * * *
(iii) If a borrower receives a new FFEL loan, other than a Federal
Consolidation Loan, within three years of the date that any previous
title IV loan or TEACH Grant service obligation was discharged due to a
total and permanent disability in accordance with Sec.
682.402(c)(3)(ii), 34 CFR 674.61(b)(3)(i), 34 CFR 685.213, or 34 CFR
686.42(b) based on a discharge request received on or after July 1,
2010, resume repayment on the previously discharged loan in
[[Page 55991]]
accordance with Sec. 682.402(c)(5), 34 CFR 674.61(b)(5), or 34 CFR
685.213(b)(4), or acknowledge that he or she is once again subject to
the terms of the TEACH Grant agreement to serve before receiving the
new loan.
* * * * *
(e) * * *
(5) A FFEL borrower may consolidate his or her loans (including a
FFEL Consolidation Loan) into the Federal Direct Consolidation Loan
Program for the purpose of using--
(i) The Public Service Loan Forgiveness Program; or
(ii) For FFEL Program loans first disbursed on or after October 1,
2008 (including Federal Consolidation Loans that repaid FFEL or Direct
Loan program Loans first disbursed on or after October 1, 2008), the no
accrual of interest benefit for active duty service members.
0
10. Section 682.202 is amended by:
0
A. In the introductory text of paragraph (a), adding the words ``and
(a)(8)'' after the reference ``(a)(4)''.
0
B. Adding a new paragraph (a)(8).
0
C. In paragraph (b)(2)(i), adding the words ``or, for a PLUS loan, for
the period from the date the first disbursement was made to the date
the repayment period begins'' immediately before the semicolon.
The addition reads as follows:
Sec. 682.202 Permissible charges by lenders to borrowers.
* * * * *
(a) * * *
(8) Applicability of the Servicemembers Civil Relief Act (50 U.S.C
527, App. sec. 207). Notwithstanding paragraphs (a)(1) through (a)(4)
of this section, effective August 14, 2008, upon the loan holder's
receipt of the borrower's written request and a copy of the borrower's
military orders, the maximum interest rate, as defined in 50 U.S.C.
527, App. section 207(d), on FFEL Program loans made prior to the
borrower entering active duty status is 6 percent while the borrower is
on active duty military service.
* * * * *
0
11. Section 682.204 is amended by:
0
A. Revising paragraph (c)(1).
0
B. Revising paragraph (d) introductory text.
0
C. In paragraph (d)(1)(i), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
D. In paragraph (d)(1)(ii), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
E. In paragraph (d)(1)(iii), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
F. In paragraph (d)(2)(i), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
G. In paragraph (d)(2)(ii), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$,4000''.
0
H. In paragraph (d)(3)(i), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $7,000,'' immediately after
``$5,000''.
0
I. In paragraph (d)(3)(ii), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $7,000,'' immediately after
``$5,000''.
0
J. In paragraph (d)(6)(i), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
K. Adding a new paragraph (d)(9).
0
L. Redesignating paragraphs (e)(1) and (e)(2) as paragraphs (e)(2) and
(e)(3), respectively.
0
M. Adding a new paragraph (e)(1).
0
N. Revising newly redesignated paragraph (e)(2).
The revisions and additions read as follows:
Sec. 682.204 Maximum loan amounts.
* * * * *
(c) Unsubsidized Stafford Loan Program. (1) In the case of a
dependent undergraduate student--
(i) For a loan first disbursed before July 1, 2008, the total
amount the student may borrow for any period of study under the
Unsubsidized Stafford Loan Program in combination with the Federal
Direct Unsubsidized Stafford/Ford Loan Program is the same as the
amount determined under paragraph (a) of this section, less any amount
received under the Stafford Loan Program or the Federal Direct
Stafford/Ford Loan Program.
(ii) Except for a dependent undergraduate who qualifies for
additional Unsubsidized Stafford Loan funds under paragraph (d) of this
section in accordance with the conditions specified in Sec.
682.201(a)(3), for a loan first disbursed on or after July 1, 2008, the
total amount the student may borrow for any period of study under the
Unsubsidized Stafford Loan Program in combination with the Federal
Direct Unsubsidized Stafford/Ford Loan Program is the same as the
amount determined under paragraph (a) of this section, less any amount
received under the Stafford Loan Program or the Federal Direct
Stafford/Ford Loan Program, plus--
(A) $2,000, for a program of study of at least a full academic year
in length.
(B) For a program of study that is at one academic year or more in
length with less than a full academic year remaining, the amount that
is the same ratio to $2,000 as the--
[GRAPHIC] [TIFF OMITTED] TR29OC09.000
(C) For a program of study that is less than a full academic year
in length, the amount that is the same ratio to $2,000 as the lesser of
the--
[GRAPHIC] [TIFF OMITTED] TR29OC09.001
[[Page 55992]]
or
[GRAPHIC] [TIFF OMITTED] TR29OC09.002
* * * * *
(d) Additional eligibility under the Unsubsidized Stafford Loan
Program. An independent undergraduate student, graduate or professional
student, and certain dependent undergraduate students under the
conditions specified in Sec. 682.201(a)(3) may borrow additional
amounts under the Unsubsidized Stafford Loan Program in addition to any
amount borrowed under paragraphs (a) and (c) of this section, except as
provided in paragraph (d)(9) of this section. The additional amount
that such a student may borrow for any academic year of study under the
Unsubsidized Stafford Loan Program in combination with the Federal
Direct Unsubsidized Stafford/Ford Loan Program, in addition to the
amounts allowed under paragraphs (a) and (c) of this section, except as
provided in paragraph (d)(9) of this section for certain dependent
undergraduate students--
* * * * *
(9) A dependent undergraduate student who qualifies for the
additional Unsubsidized Stafford Loan amounts under this section in
accordance with the conditions specified in Sec. 682.201(a)(3) is not
eligible to receive the additional Unsubsidized Stafford Loan amounts
under paragraph (c)(1)(ii) of this section.
(e) * * *
(1) $23,000, or, effective July 1, 2008, $31,000, for a dependent
undergraduate student.
(2) $46,000, or, effective July 1, 2008, $57,500, for an
independent undergraduate student or a dependent undergraduate student
under the conditions specified in Sec. 682.201(a)(3).
* * * * *
0
12. Section 682.205 is amended by:
0
A. In paragraph (a)(2)(vi), removing the words ``insurance premium''
and adding, in their place, the words ``Federal default fee'', and
adding, immediately before the semicolon, the words ``or paid by the
lender''.
0
B. In paragraph (a)(2)(ix), removing the words ``a national credit
bureau'' and adding, in their place, the words ``each nationwide
consumer reporting agency''.
0
C. In paragraph (a)(2)(x), adding, immediately before the semicolon,
the words ``, and a description of the types of repayment plans
available''.
0
D. In paragraph (a)(2)(xvi), removing the words ``a national credit
bureau'' and adding, in their place, the words ``each nationwide
consumer reporting agency''.
0
E. In paragraph (a)(2)(xviii), removing the words ``in the making or''
and adding, in their place, the words ``during repayment or in the'';
adding the words ``including any fees the borrower may be charged''
immediately after the words ``the loan''; and removing the words ``;
and'' at the end of the paragraph and adding, in their place, the
punctuation ``;''.
0
F. In paragraph (a)(2)(xx), removing the punctuation ``.'' at the end
of the paragraph and adding, in its place, the punctuation ``;''.
0
G. Adding new paragraphs (a)(2)(xxi), (a)(2)(xxii), (a)(2)(xxiii), and
(a)(2)(xxiv).
0
H. In paragraph (b), in the second sentence, adding the words ``, and
that the default will be reported to each nationwide consumer reporting
agency'' immediately after the word ``loan''.
0
I. In paragraph (c), in the heading, removing the words ``Disclosure of
repayment'' and adding, in their place, the word ``Repayment''.
0
J. In paragraph (c)(1), adding the heading ``Disclosures at or prior to
repayment.'' immediately after the paragraph designation ``(1)'';
removing the words ``Federal SLS'' and adding, in their place, the
words ``Federal PLUS''; and removing the words ``240 days'' and adding,
in their place, the words ``150 days''.
0
K. In paragraph (c)(2)(ii), adding the words ``, or a deferment under
Sec. 682.210(v), if applicable, is to end'' immediately after the word
``begin'' at the end of the sentence.
0
L. In paragraph (c)(2)(iii), adding the words ``a deferment under Sec.
682.210(v), if applicable, is to end,'' immediately after the words
``begin''.
0
M. In paragraph (c)(2)(vi), adding the words ``based on the repayment
schedule selected by the borrower'' immediately after the word
``payments''.
0
N. In paragraph (c)(2)(viii), removing the words ``; and'' and adding,
in their place, the words ``, and if interest has been paid, the amount
of interest paid;''.
0
O. In paragraph (c)(2)(ix), removing the punctuation ``.'' at the end
of the sentence and adding, in its place, the punctuation ``;''.
0
P. Adding new paragraphs (c)(2)(x), (c)(2)(xi), (c)(2)(xii),
(c)(2)(xiii) and (c)(2)(xiv).
0
Q. Adding new paragraphs (c)(3), (c)(4) and (c)(5).
0
R. In paragraph (d), adding the words ``Federal Unsubsidized Stafford
loan or a'' immediately after the words ``In the case of a'' at the
beginning of the first sentence; removing the words ``the student'' in
the first sentence and adding, in their place, the words ``the borrower
or student on whose behalf the loan is made''; and removing the words
``PLUS promissory note'' in the last sentence and adding, in their
place, the words ``Stafford and PLUS promissory notes''.
0
S. Adding new paragraph (i).
0
T. Adding new paragraph (j).
The additions read as follows:
Sec. 682.205 Disclosure requirements for lenders.
(a) * * *
(2) * * *
(xxi) For unsubsidized Stafford or student PLUS borrowers, an
explanation that the borrower may pay the interest while in school and,
if the interest is not paid by the borrower while in school, when and
how often the interest will be capitalized;
(xxii) For parent PLUS borrowers, an explanation that the parent
may defer payment on the loan while the student on whose behalf the
parent borrowed is enrolled at least half-time and, if the parent does
not pay interest while the student is in school, when and how often
interest will be capitalized, and that the parent may be eligible for a
deferment on the loan if the parent is enrolled at least half-time;
(xxiii) A statement summarizing the circumstances in which a
borrower may obtain forbearance on the loan; and
(xxiv) A description of the options available for forgiveness of
the loan and the requirements to obtain that forgiveness.
* * * * *
(c) * * *
(2) * * *
(x) Information on any special loan repayment benefits offered on
the loan, including benefits that are contingent on repayment behavior,
and any other special loan repayment benefits for which the borrower
may be eligible that would reduce the amount or length of repayment;
and at the request of the borrower, an explanation of the effect of a
reduced interest rate on the borrower's total payoff amount and time
for repayment;
(xi) If the lender provides a repayment benefit, any limitations on
that benefit, any circumstances in which the borrower could lose that
benefit, and whether and how the borrower may regain eligibility for
the repayment benefit;
(xii) A description of all the repayment plans available to the
borrower and a statement that the borrower may change plans during the
repayment period at least annually;
(xiii) A description of the options available to the borrower to
avoid or be
[[Page 55993]]
removed from default, as well as any fees associated with those
options; and
(xiv) Any additional resources, including nonprofit organizations,
advocates and counselors, including the Department of Education's
Student Loan Ombudsman, the lender is aware of where the borrower may
obtain additional advice and assistance on loan repayment.
(3) Required disclosures during repayment. In addition to the
disclosures required in paragraph (c)(1) of this section, the lender
must provide the borrower of a FFEL loan with a bill or statement that
corresponds to each payment installment time period in which a payment
is due that includes in simple and understandable terms--
(i) The original principal amount of the borrower's loan;
(ii) The borrower's current balance, as of the time of the bill or
statement;
(iii) The interest rate on the loan;
(iv) The total amount of interest for the preceding installment
paid by the borrower;
(v) The aggregate amount paid by the borrower on the loan, and
separately identifying the amount the borrower has paid in interest on
the loan, the amount of fees the borrower has paid on the loan, and the
amount paid against the balance in principal;
(vi) A description of each fee the borrower has been charged for
the most recent preceding installment time period;
(vii) The date by which a payment must be made to avoid additional
fees and the amount of that payment and the fees;
(viii) The lender's or servicer's address and toll-free telephone
number for repayment options, payments and billing error purposes; and
(ix) A reminder that the borrower may change repayment plans, a
list of all of the repayment plans that are available to the borrower,
a link to the Department of Education's Web site for repayment plan
information, and directions on how the borrower may request a change in
repayment plans from the lender.
(4) Required disclosures for borrowers having difficulty making
payments. The lender shall provide a borrower who has notified the
lender that he or she is having difficulty making payments with--
(i) A description of the repayment plans available to the borrower,
and how the borrower may request a change in repayment plan;
(ii) A description of the requirements for obtaining forbearance on
the loan and any costs associated with forbearance; and
(iii) A description of the options available to the borrower to
avoid default and any fees or costs associated with those options.
(5) Required disclosures for borrowers who are 60-days delinquent
in making payments on a loan. (i) The lender shall provide to a
borrower who is 60 days delinquent in making required payments a notice
of--
(A) The date on which the loan will default if no payment is made;
(B) The minimum payment the borrower must make, as of the date of
the notice, to avoid default, including the payment amount needed to
bring the loan current or payment in full;
(C) A description of the options available to the borrower to avoid
default, including deferment and forbearance and any fees and costs
associated with those options;
(D) Any options for discharging the loan that may be available to
the borrower; and
(E) Any additional resources, including nonprofit organizations,
advocates and counselors, including the Department of Education's
Student Loan Ombudsman, the lender is aware of where the borrower may
obtain additional advice and assistance on loan repayment.
(ii) The notice must be sent within five days of the date the
borrower becomes 60 days delinquent, unless the lender has sent such a
notice within the previous 120 days.
* * * * *
(i) Separate disclosure for Consolidation loans. At the time the
lender provides a Consolidation loan application to a prospective
borrower, it must disclose to the prospective borrower, in simple and
understandable terms--
(1) Whether consolidation will result in a loss of loan benefits,
including, but not limited to, loan forgiveness, cancellation,
deferment, or a reduced interest rate on FFEL or Direct Loans repaid
through consolidation;
(2) If a borrower is repaying a Federal Perkins Loan with the
Consolidation loan, that the borrower will lose--
(i) The interest-free periods available on the Perkins Loan while
the borrower is enrolled in-school at least half-time, in the grace
period, or in a deferment period; and
(ii) The cancellation benefits on the Perkins Loan. The lender must
provide to the borrower a list of the Perkins Loan cancellation
benefits that would not be available on the Consolidation loan.
(3) The repayment plans available to the borrower;
(4) The borrower's options to prepay the Consolidation loan, to pay
the loan on a shorter repayment schedule, and to change repayment
plans;
(5) That the borrower benefit programs for a Consolidation loan
vary among lenders;
(6) The consequences of default on the Consolidation loan; and
(7) That applying for the Consolidation loan does not obligate the
borrower to agree to take the Consolidation loan, and the process and
deadline by which the borrower may cancel the Consolidation loan.
(j) Disclosure procedures when a borrower's address is not
available. If a lender receives information indicating it does not know
the borrower's current address, the lender is excused from providing
disclosure information under this section unless it receives
communication indicating a valid borrower address before the 241st day
of delinquency, at which point the lender must resume providing the
installment bill or statement, and any other disclosure information
required under this section not previously provided.
0
13. Section 682.206 is amended by revising paragraph (f) to read as
follows:
Sec. 682.206 Due diligence in making a loan.
* * * * *
(f) Additional requirements for Consolidation loans. (1) Prior to
making any payments to pay off a loan with the proceeds of a
Consolidation loan, the lender shall--
(i) Obtain from the holder of each loan to be consolidated a
certification with respect to the loan held by the holder that--
(A) The loan is a legal, valid, and binding obligation of the
borrower;
(B) The loan was made and serviced in compliance with applicable
laws and regulations; and
(C) In the case of a FFEL loan, that the guarantee on the loan is
in full force and effect; and
(ii) Consistent with the requirements of Sec. 682.205(i)(7),
notify the borrower, upon receipt of all information necessary to make
the Consolidation loan, of the borrower's option to cancel the
Consolidation loan, and the deadline by which the borrower must notify
the lender that he or she wishes to cancel the loan. The lender must
allow the borrower no less than 10 days from the date of the notice to
cancel the loan.
(2) The Consolidation loan lender may rely in good faith on the
certification provided under paragraph (f)(1)(i) of this section by the
holder of a loan to be consolidated.
0
14. Section 682.208 is amended by:
[[Page 55994]]
0
A. In paragraph (e)(1) introductory text, adding the words ``or
transfer of ownership interest'' immediately after the word
``assignment''.
0
B. In paragraph (e)(1)(iii), removing the word ``and'' after the
semicolon.
0
C. In paragraph (e)(1)(iv), removing the punctuation ``.'' at the end
of the paragraph and adding, in its place, the punctuation ``;''.
0
D. Adding new paragraphs (e)(1)(v), (vi), and (vii).
The additions read as follows:
Sec. 682.208 Due diligence in servicing a loan.
* * * * *
(e) * * *
(1) * * *
(v) The effective date of the assignment or transfer of the loan;
(vi) The date, if applicable, on which the current loan servicer
will stop accepting payments; and
(vii) The date on which the new loan servicer will begin accepting
payments.
* * * * *
Sec. 682.209 [Amended]
0
15. Section 682.209 is amended in paragraph (a)(2)(v) by removing the
reference ``(a)(2)(ii)'' and adding, in its place, the reference
``(a)(2)(i)''.
0
16. Section 682.210 is amended by:
0
A. In paragraph (a)(1)(i), adding the words ``and paragraphs (s)
through (v)'' after the words ``paragraph (b)''.
0
B. Revising paragraph (a)(3).
0
C. In paragraph (a)(4), removing the words ``paragraphs (c)(1)(ii) and
(iii)'' and adding, in their place, the words ``paragraphs (c)(1)(ii),
(iii), and (iv)''.
0
D. In paragraph (c)(1)(ii), removing the word ``or'' at the end of the
paragraph.
0
E. In paragraph (c)(1)(iii), removing the punctuation ``.'' and adding,
in its place, ``; or'' at the end of the paragraph.
0
F. Adding a new paragraph (c)(1)(iv).
0
G. Revising paragraph (c)(2).
0
H. In paragraph (c)(3), removing the word ``SSCR'' and adding, in its
place, the words ``Student Status Confirmation Report''.
0
I. Adding a new paragraph (v).
The revisions and additions read as follows:
Sec. 682.210 Deferment.
(a) * * *
(3)(i) Interest accrues and is paid by--
(A) The Secretary during the deferment period for a subsidized
Stafford loan and for all or a portion of a Consolidation loan that
qualifies for interest benefits under Sec. 682.301; or
(B) The borrower during the deferment period and, as applicable,
the post-deferment grace period, on all other loans.
(ii) A borrower who is responsible for payment of interest during a
deferment period must be notified by the lender, at or before the time
the deferment is granted, that the borrower has the option to pay the
accruing interest or cancel the deferment and continue paying on the
loan. The lender must also provide information, including an example,
on the impact of capitalization of accrued, unpaid interest on loan
principal, and on the total amount of interest to be paid over the life
of the loan.
* * * * *
(c) * * *
(1) * * *
(iv) The lender confirms a borrower's half-time enrollment status
through the use of the National Student Loan Data System if requested
to do so by the school the borrower is attending.
(2) The lender must notify the borrower that a deferment has been
granted based on paragraphs (c)(1)(ii), (iii), or (iv) of this section
and that the borrower has the option to cancel the deferment and
continue paying on the loan.
* * * * *
(v) In-school deferments for PLUS loan borrowers with loans first
disbursed on or after July 1, 2008. (1)(i) A student PLUS borrower is
entitled to a deferment on a PLUS loan first disbursed on or after July
1, 2008 during the 6-month period that begins on the day after the
student ceases to be enrolled on at least a half-time basis at an
eligible institution.
(ii) If a lender grants an in-school deferment to a student PLUS
borrower based on Sec. 682.210(c)(1)(ii), (iii), or (iv), the
deferment period for a PLUS loan first disbursed on or after July 1,
2008 includes the 6-month post-enrollment period described in paragraph
(v)(1)(i) of this section. The notice required by Sec. 682.210(c)(2)
must inform the borrower that the in-school deferment on a PLUS loan
first disbursed on or after July 1, 2008 will end six months after the
day the borrower ceases to be enrolled on at least a half-time basis.
(2) Upon the request of the borrower, an eligible parent PLUS
borrower must be granted a deferment on a PLUS loan first disbursed on
or after July 1, 2008--
(i) During the period when the student on whose behalf the loan was
obtained is enrolled at an eligible institution on at least a half-time
basis; and
(ii) During the 6-month period that begins on the later of the day
after the student on whose behalf the loan was obtained ceases to be
enrolled on at least a half-time basis or, if the parent borrower is
also a student, the day after the parent borrower ceases to be enrolled
on at least a half-time basis.
0
17. Section 682.211 is amended by:
0
A. Revising paragraph (e).
0
B. In paragraph (f)(11), removing the word ``or'' at the end of the
paragraph.
0
C. In paragraph (f)(12), removing the punctuation ``.'' at the end of
the paragraph and adding, in its place, the punctuation ``;''.
0
D. In paragraph (f)(13), removing the punctuation ``.'' at the end of
the paragraph and adding, in its place, the punctuation ``;''.
0
E. In paragraph (f)(14), removing the punctuation ``.'' at the end of
the paragraph and adding, in its place, ``; or''.
0
F. Adding new paragraph (f)(15).
The revisions and additions read as follows:
Sec. 682.211 Forbearance.
* * * * *
(e)(1) At the time of granting a borrower or endorser a
forbearance, the lender must provide the borrower or endorser with
information to assist the borrower or endorser in understanding the
impact of capitalization of interest on the loan principal and total
interest to be paid over the life of the loan; and
(2) At least once every 180 days during the period of forbearance,
the lender must contact the borrower or endorser to inform the borrower
or endorser of--
(i) The outstanding obligation to repay;
(ii) The amount of the unpaid principal balance and any unpaid
interest that has accrued on the loan since the last notice provided to
the borrower or endorser under this paragraph;
(iii) The fact that interest will accrue on the loan for the full
term of the forbearance;
(iv) The amount of interest that will be capitalized, as of the
date of the notice, and the date capitalization will occur;
(v) The option of the borrower or endorser to pay the interest that
has accrued before the interest is capitalized; and
(vi) The borrower's or endorser's option to discontinue the
forbearance at any time.
(f) * * *
(15) For PLUS loans first disbursed before July 1, 2008, to align
repayment with a borrower's PLUS loans that were first disbursed on or
after July 1, 2008, or with Stafford Loans that are subject to a grace
period under Sec. 682.209(a)(3). The notice specified in paragraph (f)
introductory text of this section must
[[Page 55995]]
inform the borrower that the borrower has the option to cancel the
forbearance and continue paying on the loan.
* * * * *
0
18. Section 682.215 is amended by:
0
A. Revising paragraph (a)(4).
0
B. In paragraph (b)(1), removing the words ``Except as provided under
paragraph (b)(1)(i), (b)(1)(ii), and (b)(1)(iii) of this section, the''
in the second sentence and adding, in their place, the word ``The''.
0
C. In paragraph (b)(1)(i), removing the word ``The'' at the beginning
of the paragraph and adding, in its place, the words ``Except for
borrowers provided for in paragraph (b)(1)(ii) of this section, the''.
0
D. Redesignating paragraphs (b)(1)(ii) and (b)(1)(iii) as paragraphs
(b)(1)(iii) and (b)(1)(iv), respectively.
0
E. Adding a new paragraph (b)(1)(ii).
0
F. In newly redesignated paragraph (b)(1)(iii), removing the words ``or
(b)(1)(i)'' and adding, in their place, the words ``, (b)(1)(i), or
(b)(1)(ii)''.
0
G. In newly redesignated paragraph (b)(1)(iv), removing the words ``or
(b)(1)(i)'' and adding, in their place, the words ``, (b)(1)(i), or
(b)(1)(ii)''.
0
H. In paragraph (b)(2), removing the words ``(b)(1)(ii) and (iii)'' in
the second sentence and adding, in their place, the words ``(b)(1)(iii)
and (iv)''.
The revision and addition reads as follows:
Sec. 682.215 Income-based repayment plan.
(a) * * *
(4) Partial financial hardship means a circumstance in which--
(i) For an unmarried borrower or a married borrower who files an
individual Federal tax return, the annual amount due on all of the
borrower's eligible loans, as calculated under a standard repayment
plan based on a 10-year repayment period, using the greater of the
amount due at the time the borrower initially entered repayment or at
the time the borrower elects the income-based repayment plan, exceeds
15 percent of the difference between the borrower's AGI and 150 percent
of the poverty guideline for the borrower's family size; or
(ii) For a married borrower who files a joint Federal tax return
with his or her spouse, the annual amount due on all of the borrower's
eligible loans and, if applicable, the spouse's eligible loans, as
calculated under a standard repayment plan based on a 10-year repayment
period, using the greater of the amount due at the time the loans
initially entered repayment or at the time the borrower or spouse
elects the income-based repayment plan, exceeds 15 percent of the
difference between the borrower's and spouse's AGI, and 150 percent of
the poverty guideline for the borrower's family size.
* * * * *
(b) * * *
(1) * * *
(ii) Both the borrower and the borrower's spouse have eligible
loans and filed a joint Federal tax return, in which case the loan
holder determines--
(A) Each borrower's percentage of the couple's total eligible loan
debt;
(B) The adjusted monthly payment for each borrower by multiplying
the calculated payment by the percentage determined in paragraph
(b)(1)(ii)(A) of this section; and
(C) If the borrower's loans are held by multiple holders, the
borrower's adjusted monthly payment by multiplying the payment
determined in paragraph (b)(1)(ii)(B) of this section by the percentage
of the total outstanding principal amount of eligible loans that are
held by the loan holder;
* * * * *
0
19. Section 682.216 is amended by:
0
A. Revising paragraph (a).
0
B. In paragraph (b), adding, in alphabetical order, a definition of
Educational service agency.
0
C. Revising the introductory text of paragraph (c)(1).
0
D. In paragraph (c)(1)(ii), adding the words ``or educational service
agency's'' immediately after the words ``the school's''.
0
E. In paragraph (c)(1)(iii), removing the words ``Bureau of Indian
Affairs (BIA)'' and adding, in their place, the words ``Bureau of
Indian Education (BIE)'', and removing the words ``the BIA'' and
adding, in their place, the words ``the BIE''.
0
F. In paragraph (c)(2), adding the words ``or educational service
agency'' immediately after the words ``If the school'' at the beginning
of the paragraph, and removing the words ``the school'' immediately
after the words ``teaching and''.
0
G. In paragraph (c)(3)(i)(A), removing the words ``in which'' and
adding, in their place, the words ``or educational service agency
where''.
0
H. In paragraph (c)(3)(i)(B), removing the words ``in which'' and
adding, in their place, the words ``or educational service agency
where''.
0
I. In paragraph (c)(3)(ii)(A), removing the word ``in'' and adding, in
its place, the word ``at'', and adding the words ``, or taught
mathematics or science to secondary school students on a full-time
basis at an eligible educational service agency,'' immediately after
the words ``secondary school''.
0
J. In paragraph (c)(3)(ii)(B), removing the word ``in'' the first time
it appears and adding, in its place, the word ``at'', and adding the
words ``or educational service agency'' immediately after the words
``secondary school'' the first time they appear.
0
K. Adding a new paragraph (c)(3)(iii).
0
L. In paragraph (c)(4)(i), removing the word ``in'' and adding, in its
place, the word ``at'', and adding the words ``or educational service
agency'' immediately after the words ``secondary school'' the first
time they appear.
0
M. In paragraph (c)(4)(ii)(A), removing the word ``in'' and adding, in
its place, the word ``at'', and adding the words ``, or taught
mathematics or science on a full-time basis to secondary school
students at an eligible educational service agency,'' immediately after
the words ``secondary school''.
0
N. In paragraph (c)(4)(ii)(B), removing the word ``in'' the first time
it appears and adding, in its place, the word ``at'', and by adding the
words ``or educational service agency'' immediately after the words
``secondary school'' the first time they appear.
0
O. Adding a new paragraph (c)(4)(iii).
0
P. Revising paragraph (c)(9).
0
Q. Revising paragraph (c)(11).
The revisions and additions read as follows:
Sec. 682.216 Teacher loan forgiveness program.
(a) General. (1) The teacher loan forgiveness program is intended
to encourage individuals to enter and continue in the teaching
profession. For new borrowers, the Secretary repays the amount
specified in this paragraph on the borrower's 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.
(2)(i) The borrower must have been employed at an eligible
elementary or secondary school that serves low-income families or by an
educational service agency that serves low-income families as a full-
time teacher for five consecutive complete academic years. The required
five years of teaching may include any combination of qualifying
teaching service at an eligible elementary or secondary school or an
eligible educational service agency.
[[Page 55996]]
(ii) Teaching at an eligible elementary or secondary school may be
counted toward the required five consecutive complete academic years
only if at least one year of teaching was after the 1997-1998 academic
year.
(iii) Teaching at an educational service agency may be counted
toward the required five consecutive complete academic years only if
the consecutive five-year period includes qualifying service at an
eligible educational service agency performed after the 2007-2008
academic year.
(3) All borrowers eligible for teacher loan forgiveness may receive
loan forgiveness of up to a combined total of $5,000 on the borrower's
eligible FFEL and Direct Loan Program loans.
(4) A borrower may receive loan forgiveness of up to a combined
total of $17,500 on the borrower's eligible FFEL and Direct Loan
Program loans if the borrower was employed for five consecutive years--
(i) At an eligible secondary school as a highly qualified
mathematics or science teacher, or at an eligible educational service
agency as a highly qualified teacher of mathematics or science to
secondary school students; or
(ii) At an eligible elementary or secondary school or educational
service agency as a special education teacher.
(5) The loan for which the borrower is seeking forgiveness must
have been made prior to the end of the borrower's fifth year of
qualifying teaching service.
(b) * * *
Educational service agency means a regional public multiservice
agency authorized by State statute to develop, manage, and provide
services or programs to local educational agencies, as defined in
section 9101 of the Elementary and Secondary Education Act of 1965, as
amended.
* * * * *
(c) * * *
(1) A borrower who has been employed at an elementary or secondary
school or at an educational service agency as a full-time teacher for
five consecutive complete academic years may obtain loan forgiveness
under this program if the elementary or secondary school or educational
service agency--
* * * * *
(3) * * *
(iii) Teaching service performed at an eligible educational service
agency may be counted toward the required five years of teaching only
if the consecutive five-year period includes qualifying service at an
eligible educational service agency performed after the 2007-2008
academic year.
(4) * * *
(iii) Teaching service performed at an eligible educational service
agency may be counted toward the required five years of teaching only
if the consecutive five-year period includes qualifying service at an
eligible educational service agency performed after the 2007-2008
academic year.
* * * * *
(9) A borrower who was employed as a teacher at more than one
qualifying school, at more than one qualifying educational service
agency, or at a combination of both 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 or educational service agencies
involved, is considered to have completed one academic year of
qualifying teaching.
* * * * *
(11) A borrower may not receive loan forgiveness for the same
qualifying teaching service under this section if the borrower receives
a benefit for the same teaching service under--
(i) Subtitle D of title I of the National and Community Service Act
of 1990;
(ii) 34 CFR 685.219; or
(iii) Section 428K of the Act.
* * * * *
0
20. Section 682.302 is amended by adding a new paragraph (h) to read as
follows:
Sec. 682.302 Payment of special allowance on FFEL loans.
* * * * *
(h) Calculation of special allowance payments for loans subject to
the Servicemembers Civil Relief Act (50 U.S.C. 527, App. sec. 207). For
FFEL Program loans first disbursed on or after July 1, 2008 that are
subject to the interest rate limit under the Servicemembers Civil
Relief Act, special allowance is calculated in accordance with
paragraphs (c) and (f) of this section, except the applicable interest
rate for this purpose shall be 6 percent.
0
21. Section 682.305 is amended by:
0
A. Revising paragraph (c)(1).
0
B. In paragraph (c)(2)(v), removing the word ``and'' immediately after
the semicolon.
0
C. In paragraph (c)(2)(vi), removing the punctuation ``.'' at the end
of the paragraph and adding, in its place, the words ``; and''.
0
D. Redesignating paragraph (c)(2)(vii) as paragraph (c)(3).
0
E. Adding a new paragraph (c)(2)(vii).
The revision and addition read as follows:
Sec. 682.305 Procedures for payment of interest benefits and special
allowance and collection of origination and loan fees.
* * * * *
(c) Independent audits. (1)(i) A lender originating or holding more
than $5 million in FFEL loans during its fiscal year must submit an
independent annual compliance audit for that year, conducted by a
qualified independent organization or person.
(ii) Notwithstanding the dollar volume of loans originated or held,
a school lender under Sec. 682.601 or a lender serving as trustee on
behalf of a school or a school-affiliated organization for the purpose
of originating loans must submit an independent annual compliance audit
for that year, conducted by a qualified independent organization or
person.
(iii) The Secretary may, following written notice, suspend the
payment of interest benefits and special allowance to a lender that
does not submit its audit within the time period prescribed in
paragraph (c)(2) of this section.
(2) * * *
(vii) With regard to a lender serving as a trustee for the purpose
of originating loans for a school or school-affiliated organization,
the audit must include a determination that--
(A) Except as provided in paragraph (c)(2)(vii)(B) of this section,
the school used all proceeds from special allowance payments, interest
subsidies received from the Department, and any proceeds from the sale
or other disposition of the loans originated through the lender for
need-based grant programs and that those funds supplemented, but did
not supplant, other Federal or non-Federal funds otherwise available to
be used to make need-based grants to its students; and
(B) The lender used no more than a reasonable portion of payments
and proceeds from the loans for direct administrative expenses in
accordance with Sec. 682.601(b), with all references to eligible
school lender understood to mean a lender in its capacity as trustee on
behalf of a school or school-affiliated organization for the purpose of
originating loans.
* * * * *
0
22. Section 682.401 is amended by:
0
A. In paragraph (e)(1)(i), adding the words ``stock or other
securities, tuition payment or reimbursement'' immediately after the
word ``payment'', and by adding the words ``, or any individual or
entity,'' immediately after the words ``school-affiliated
organization'' the second time they appear.
[[Page 55997]]
0
B. In paragraph (e)(1)(i)(D), adding the words ``travel or''
immediately after the words ``Payment of''.
0
C. Revising paragraph (e)(1)(i)(F).
0
D. In paragraph (e)(1)(iii)(C), removing the word ``and'' immediately
after the semicolon.
0
E. In paragraph (e)(1)(iii)(D), removing the punctuation ``.'' at the
end of the paragraph and adding, in its place, the punctuation ``;''.
0
F. Adding new paragraphs (e)(1)(iii)(E), (F), and (G).
0
G. In paragraph (e)(1)(v), adding the words ``, terms or conditions''
immediately after the word ``availability''.
0
H. In paragraph (e)(2)(i), removing the word ``Assistance'' at the
beginning of the paragraph and adding, in its place, the words
``Technical assistance'', and removing the words ``that provided'' and
adding, in their place, the words ``the technical assistance
provided''.
0
I. In paragraph (e)(2)(ii), adding the words ``and 433A'' immediately
after the reference to ``422(h)(4)(B)''.
0
J. In paragraph (e)(2)(iii), removing the word ``excluding'' and
adding, in its place, the word ``including'', and removing the word
``initial'' and adding, in its place, the word ``entrance''.
0
K. Revising paragraph (e)(2)(vi).
0
L. In paragraph (e)(3)(iii), removing the words ``The terms'' and
adding, in their place, the words ``The term'', and removing the words
``computer hardware'' and adding, in their place, the words
``information technology equipment''.
0
M. Removing paragraph (e)(3)(v).
0
N. Adding a new paragraph (g).
The revision and additions read as follows:
Sec. 682.401 Basic program agreement.
* * * * *
(e) * * *
(1) * * *
(i) * * *
(F) Performance of, or payment to a third party to perform, any
school function required under title IV, except that the guaranty
agency may provide entrance counseling as provided in Sec. 682.604(f)
and exit counseling as provided in Sec. 682.604(g), and may provide
services to participating foreign schools at the direction of the
Secretary, as a third-party servicer.
* * * * *
(iii) * * *
(E) Providing or reimbursing travel or entertainment expenses;
(F) Providing or reimbursing tuition payments or expenses; and
(G) Offering prizes, or providing payments of stocks or other
securities.
* * * * *
(2) * * *
(vi) Reimbursement of reasonable expenses incurred by school
employees to participate in the activities of an agency's governing
board, a standing official advisory committee, or in support of other
official activities of the agency;
* * * * *
(g)(1) A guaranty agency must work with schools that participate in
its program to develop and make available high-quality educational
materials and programs that provide training to students and their
families in budgeting and financial management, including debt
management and other aspects of financial literacy, such as the cost of
using high-interest loans to pay for postsecondary education, and how
budgeting and financial management relate to the title IV student loan
programs.
(2) The materials and programs described in paragraph (g)(1) of
this section must be in formats that are simple and understandable to
students and their families, and must be made available to students and
their families by the guaranty agency before, during, and after a
student's enrollment at an institution of higher education.
(3) A guaranty agency may provide similar programs and materials to
an institution that participates only in the William D. Ford Federal
Direct Loan Program.
(4) A lender or loan servicer may also provide an institution with
outreach and financial literacy information consistent with the
requirements of paragraphs (g)(1) and (2) of this section.
0
23. Section 682.402 is amended by:
0
A. Revising paragraph (c).
0
B. In paragraph (h)(1)(i), removing the word ``The'' at the beginning
of the sentence and adding, in its place, the words ``Except as
provided in paragraph (h)(1)(v) of this section, the''.
0
C. Adding a new paragraph (h)(1)(v).
The revision and addition read as follows:
Sec. 682.402 Death, disability, closed school, false certification,
unpaid refunds, and bankruptcy payments.
* * * * *
(c)(1) Total and permanent disability. (i) A borrower's loan is
discharged if the borrower becomes totally and permanently disabled, as
defined in Sec. 682.200(b), and satisfies the eligibility requirements
in this section.
(ii) For a borrower who becomes totally and permanently disabled as
described in paragraph (1) of the definition of that term in Sec.
682.200(b), the borrower's loan discharge application is processed in
accordance with paragraphs (c)(2) through (7) of this section.
(iii) For a veteran who is totally and permanently disabled as
described in paragraph (2) of the definition of that term in Sec.
682.200(b), the veteran's loan discharge application is processed in
accordance with paragraph (c)(8) of this section.
(2) Discharge application process for a borrower who is totally and
permanently disabled as described in paragraph (1) of the definition of
that term in Sec. 682.200(b). After being notified by the borrower or
the borrower's representative that the borrower claims to be totally
and permanently disabled, the lender promptly requests that the
borrower or the borrower's representative submit a discharge
application to the lender on a form approved by the Secretary. The
application must contain a certification by a physician, who is a
doctor of medicine or osteopathy legally authorized to practice in a
State, that the borrower is totally and permanently disabled as
described in paragraph (1) of the definition of that term in Sec.
682.200(b). The borrower must submit the application to the lender
within 90 days of the date the physician certifies the application. If
the lender and guaranty agency approve the discharge claim under the
procedures described in paragraph (c)(7) of this section, the guaranty
agency must assign the loan to the Secretary.
(3) Secretary's eligibility determination. (i) If, after reviewing
the borrower's application, the Secretary determines that the
certification provided by the borrower supports the conclusion that the
borrower is totally and permanently disabled, as described in paragraph
(1) of the definition of that term in Sec. 682.200(b), the borrower is
considered totally and permanently disabled as of the date the
physician certifies the borrower's application.
(ii) Upon making a determination that the borrower is totally and
permanently disabled as described in paragraph (1) of the definition of
that term in Sec. 682.200(b), the Secretary discharges the borrower's
obligation to make further payments on the loan and notifies the
borrower that the loan has been discharged. Any payments received after
the date the physician certified the borrower's loan discharge
application are returned to the person who made the payments on the
loan. The notification to the borrower explains the terms and
conditions under which the borrower's obligation to repay the loan will
be reinstated, as specified in paragraph (c)(5)(i) of this section.
[[Page 55998]]
(iii) If the Secretary determines that the certification provided
by the borrower does not support the conclusion that the borrower is
totally and permanently disabled as described in paragraph (1) of the
definition of that term in Sec. 682.200(b), the Secretary notifies the
borrower that the application for a disability discharge has been
denied and that the loan is due and payable to the Secretary under the
terms of the promissory note.
(iv) The Secretary reserves the right to require the borrower to
submit additional medical evidence if the Secretary determines that the
borrower's application does not conclusively prove that the borrower is
totally and permanently disabled as described in paragraph (1) of the
definition of that term in Sec. 682.200(b). As part of the Secretary's
review of the borrower's discharge application, the Secretary may
arrange for an additional review of the borrower's condition by an
independent physician at no expense to the borrower.
(4) Treatment of disbursements made during the period from the date
of the physician's certification until the date of discharge. If a
borrower received a Title IV loan or TEACH Grant prior to the date the
physician certified the borrower's discharge application and a
disbursement of that loan or grant is made during the period from the
date of the physician's certification until the date the Secretary
grants a discharge under this section, the processing of the borrower's
loan discharge request will be suspended until the borrower ensures
that the full amount of the disbursement has been returned to the loan
holder or to the Secretary, as applicable.
(5) Conditions for reinstatement of a loan after a total and
permanent disability discharge. (i) The Secretary reinstates the
borrower's obligation to repay a loan that was discharged in accordance
with paragraph (c)(3)(ii) of this section if, within three years after
the date the Secretary granted the discharge, the borrower--
(A) Has annual earnings from employment that exceed 100 percent of
the poverty guideline for a family of two, as published annually by the
United States Department of Health and Human Services pursuant to 42
U.S.C. 9902(2);
(B) Receives a new TEACH Grant or a new loan under the Perkins,
FFEL, or Direct Loan programs, except for a FFEL or Direct
Consolidation Loan that includes loans that were not discharged; or
(C) Fails to ensure that the full amount of any disbursement of a
title IV loan or TEACH Grant received prior to the discharge date that
is made during the three-year period following the discharge date is
returned to the loan holder or to the Secretary, as applicable, within
120 days of the disbursement date.
(ii) If a borrower's obligation to repay a loan is reinstated, the
Secretary--
(A) Notifies the borrower that the borrower's obligation to repay
the loan has been reinstated; and
(B) Does not require the borrower to pay interest on the loan for
the period from the date the loan was discharged until the date the
borrower's obligation to repay the loan was reinstated.
(iii) The Secretary's notification under paragraph (c)(5)(ii)(A) of
this section will include--
(A) The reason or reasons for the reinstatement;
(B) An explanation that the first payment due date on the loan
following reinstatement will be no earlier than 60 days after the date
of the notification of reinstatement; and
(C) Information on how the borrower may contact the Secretary if
the borrower has questions about the reinstatement or believes that the
obligation to repay the loan was reinstated based on incorrect
information.
(6) Borrower's responsibilities after a total and permanent
disability discharge. During the three-year period described in
paragraph (c)(5)(i) of this section, the borrower or, if applicable,
the borrower's representative must--
(i) Promptly notify the Secretary of any changes in address or
phone number;
(ii) Promptly notify the Secretary if the borrower's annual
earnings from employment exceed the amount specified in paragraph
(c)(5)(i)(A) of this section; and
(iii) Provide the Secretary, upon request, with documentation of
the borrower's annual earnings from employment.
(7) Lender and guaranty agency actions. (i) After being notified by
a borrower or a borrower's representative that the borrower claims to
be totally and permanently disabled, the lender must continue
collection activities until it receives either the certification of
total and permanent disability from a physician or a letter from a
physician stating that the certification has been requested and that
additional time is needed to determine if the borrower is totally and
permanently disabled as described in paragraph (1) of the definition of
that term in Sec. 682.200(b). Except as provided in paragraph
(c)(7)(iii) of this section, after receiving the physician's
certification or letter the lender may not attempt to collect from the
borrower or any endorser.
(ii) The lender must submit a disability claim to the guaranty
agency if the borrower submits a certification by a physician and the
lender makes a determination that the certification supports the
conclusion that the borrower is totally and permanently disabled as
described in paragraph (1) of the definition of that term in Sec.
682.200(b).
(iii) If the lender determines that a borrower who claims to be
totally and permanently disabled is not totally and permanently
disabled as described in paragraph (1) of the definition of that term
in Sec. 682.200(b), or if the lender does not receive the physician's
certification of total and permanent disability within 60 days of the
receipt of the physician's letter requesting additional time, as
described in paragraph (c)(7)(i) of this section, the lender must
resume collection of the loan and is deemed to have exercised
forbearance of payment of both principal and interest from the date
collection activity was suspended. The lender may capitalize, in
accordance with Sec. 682.202(b), any interest accrued and not paid
during that period.
(iv) The guaranty agency must pay a claim submitted by the lender
if the guaranty agency has reviewed the application and determined that
it is complete and that it supports the conclusion that the borrower is
totally and permanently disabled as described in paragraph (1) of the
definition of that term in Sec. 682.200(b).
(v) If the guaranty agency does not pay the disability claim, the
guaranty agency must return the claim to the lender with an explanation
of the basis for the agency's denial of the claim. Upon receipt of the
returned claim, the lender must notify the borrower that the
application for a disability discharge has been denied, provide the
basis for the denial, and inform the borrower that the lender will
resume collection on the loan. The lender is deemed to have exercised
forbearance of both principal and interest from the date collection
activity was suspended until the first payment due date. The lender may
capitalize, in accordance with Sec. 682.202(b), any interest accrued
and not paid during that period.
(vi) If the guaranty agency pays the disability claim, the lender
must notify the borrower that--
(A) The loan will be assigned to the Secretary for determination of
eligibility for a total and permanent disability discharge and that no
payments are due on the loan; and
[[Page 55999]]
(B) If the Secretary discharges the loan based on a determination
that the borrower is totally and permanently disabled as described in
paragraph (1) of the definition of that term in Sec. 682.200(b), the
Secretary will reinstate the borrower's obligation to repay the loan
if, within three years after the date the Secretary granted the
discharge, the borrower--
(1) Receives annual earnings from employment that exceed 100
percent of the poverty guideline for a family of two, as published
annually by the United States Department of Health and Human Services
pursuant to 42 U.S.C. 9902(2);
(2) Receives a new TEACH Grant or a new title IV loan, except for a
FFEL or Direct Consolidation Loan that includes loans that were not
discharged; or
(3) Fails to ensure that the full amount of any disbursement of a
title IV loan or TEACH Grant received prior to the discharge date that
is made during the three-year period following the discharge date is
returned to the loan holder or to the Secretary, as applicable, within
120 days of the disbursement date.
(vii) After receiving a claim payment from the guaranty agency, the
lender must forward to the guaranty agency any payments subsequently
received from or on behalf of the borrower.
(viii) The Secretary reimburses the guaranty agency for a
disability claim paid to the lender after the agency pays the claim to
the lender.
(ix) The guaranty agency must assign the loan to the Secretary
after the guaranty agency pays the disability claim.
(8) Discharge application process for veterans who are totally and
permanently disabled as described in paragraph (2) of the definition of
that term in Sec. 682.200(b)--(i) General. After being notified by the
veteran or the veteran's representative that the veteran claims to be
totally and permanently disabled, the lender promptly requests that the
veteran or the veteran's representative submit a discharge application
to the lender, on a form approved by the Secretary. The application
must be accompanied by documentation from the Department of Veterans
Affairs showing that the Department of Veterans Affairs has determined
that the veteran is unemployable due to a service-connected disability.
The veteran will not be required to provide any additional
documentation related to the veteran's disability.
(ii) Lender and guaranty agency actions. (A) After being notified
by a veteran or a veteran's representative that the veteran claims to
be totally and permanently disabled as described in paragraph (2) of
the definition of that term in Sec. 682.200(b), the lender must
continue collection activities until it receives the veteran's
completed loan discharge application with the required documentation
from the Department of Veterans Affairs, as described in paragraph
(8)(i) of this section. Except as provided in paragraph (c)(8)(ii)(C)
of this section, the lender will not attempt to collect from the
veteran or any endorser after receiving the veteran's discharge
application and documentation from the Department of Veterans Affairs.
(B) If the veteran submits a completed loan discharge application
and the required documentation from the Department of Veterans Affairs,
and the documentation indicates that the veteran is totally and
permanently disabled as described in paragraph (2) of the definition of
that term in Sec. 682.200(b), the lender must submit a disability
claim to the guaranty agency.
(C) If the documentation from the Department of Veterans Affairs
does not indicate that the veteran is totally and permanently disabled
as described in paragraph (2) of the definition of that term in Sec.
682.200(b), the lender--
(1) Must resume collection and is deemed to have exercised
forbearance of payment of both principal and interest from the date
collection activity was suspended. The lender may capitalize, in
accordance with Sec. 682.202(b), any interest accrued and not paid
during that period.
(2) Must inform the veteran that he or she may reapply for a total
and permanent disability discharge in accordance with the procedures
described in Sec. 682.402(c)(2) through (c)(7), if the documentation
from the Department of Veterans Affairs does not indicate that the
veteran is totally and permanently disabled as described in paragraph
(2) of the definition of that term in Sec. 682.200(b), but indicates
that the veteran may be totally and permanently disabled as described
in paragraph (1) of the definition of that term.
(D) If the documentation from the Department of Veterans Affairs
indicates that the borrower is totally and permanently disabled as
described in paragraph (2) of the definition of that term in Sec.
682.200(b), the guaranty agency must submit a copy of the veteran's
discharge application and supporting documentation to the Secretary,
and must notify the veteran that the veteran's loan discharge request
has been referred to the Secretary for a determination of discharge
eligibility.
(E) If the documentation from the Department of Veterans Affairs
does not indicate that the veteran is totally and permanently disabled
as described in paragraph (2) of the definition of that term in Sec.
682.200(b), the guaranty agency does not pay the disability claim and
must return the claim to the lender with an explanation of the basis
for the agency's denial of the claim. Upon receipt of the returned
claim, the lender must notify the veteran that the application for a
disability discharge has been denied, provide the basis for the denial,
and inform the veteran that the lender will resume collection on the
loan. The lender is deemed to have exercised forbearance of both
principal and interest from the date collection activity was suspended
until the first payment due date. The lender may capitalize, in
accordance with Sec. 682.202(b), any interest accrued and not paid
during that period.
(F) If the Secretary determines, based on a review of the
documentation from the Department of Veterans Affairs, that the veteran
is totally and permanently disabled as described in paragraph (2) of
the definition of that term in Sec. 682.200(b), the Secretary notifies
the guaranty agency that the veteran is eligible for a total and
permanent disability discharge. Upon notification by the Secretary that
the veteran is eligible for a discharge, the guaranty agency pays the
disability discharge claim. Upon receipt of the claim payment from the
guaranty agency, the lender notifies the veteran that the veteran's
obligation to make any further payments on the loan has been discharged
and returns to the person who made the payments on the loan any
payments received on or after the effective date of the determination
by the Department of Veterans Affairs that the veteran is unemployable
due to a service-connected disability.
(G) If the Secretary determines, based on a review of the
documentation from the Department of Veterans Affairs, that the veteran
is not totally and permanently disabled as described in paragraph (2)
of the definition of that term in Sec. 682.200(b), the Secretary
notifies the guaranty agency of this determination. Upon notification
by the Secretary that the veteran is not eligible for a discharge, the
guaranty agency and the lender must follow the procedures described in
paragraph (c)(8)(ii)(E) of this section.
(H) The Secretary reimburses the guaranty agency for a disability
claim paid to the lender after the agency pays the claim to the lender.
* * * * *
[[Page 56000]]
(h) * * *
(1) * * *
(v) In the case of a disability claim based on a veteran's
discharge request processed in accordance with Sec. 682.402(c)(8), the
guaranty agency shall--
(A) Review the claim promptly and not later than 45 days after the
claim was filed by the lender submit the veteran's discharge
application and supporting documentation to the Secretary or return the
claim to the lender in accordance with Sec. 682.402(c)(8)(ii)(D) or
(E), as applicable; and
(B) Not later than 45 days after receiving notification from the
Secretary of the veteran's eligibility or ineligibility for discharge,
pay the claim or return the claim to the lender in accordance with
Sec. 682.402(c)(8)(ii)(F) or (G), as applicable.
* * * * *
0
24. Section 682.405 is amended by:
0
A. In paragraph (a)(3), adding a new sentence at the end of the
paragraph.
0
B. In paragraph (b)(1)(iii), adding the words ``by the guaranty agency
or its agents'' immediately after the word ``affordable''.
0
C. Revising paragraph (b)(3).
0
D. Adding a new paragraph (c).
The revision and additions read as follows:
Sec. 682.405 Loan rehabilitation agreement.
(a) * * *
(3) * * * Effective for any loan that is rehabilitated on or after
August 14, 2008, the borrower cannot rehabilitate the loan again if the
loan returns to default status following the rehabilitation.
(b) * * *
(3) Upon the sale of a rehabilitated loan to an eligible lender--
(i) The guaranty agency must, within 45 days of the sale--
(A) Provide notice to the prior holder of such sale, and
(B) Request that any consumer reporting agency to which the default
was reported remove the record of default from the borrower's credit
history.
(ii) The prior holder of the loan must, within 30 days of receiving
the notification from the guaranty agency, request that any consumer
reporting agency to which the default claim payment or other equivalent
record was reported remove such record from the borrower's credit
history.
* * * * *
(c) A guaranty agency must make available financial and economic
education materials, including debt management information, to any
borrower who has rehabilitated a defaulted loan in accordance with
paragraph (a)(2) of this section.
0
25. Section 682.410 is amended by:
0
A. In paragraph (b)(5), removing the heading ``Credit bureau reports''
and adding, in its place, the heading ``Reports to consumer reporting
agencies''.
0
B. In paragraph (b)(5)(i) introductory text, removing the words
``national credit bureaus'' at the end of the paragraph and adding, in
their place, the words ``nationwide consumer reporting agencies''.
0
C. In paragraph (b)(5)(ii) introductory text, removing the words
``credit bureau'' and adding, in their place, the words ``consumer
reporting agency'', and removing the reference ``(b)(6)(v)'' and
adding, in its place, the reference ``(b)(6)(ii)''.
0
D. In paragraph (b)(5)(iv)(A), removing the words ``credit bureaus''
and adding, in their place, the words ``consumer reporting agencies''.
0
E. In paragraph (b)(5)(vi)(F), removing the words ``national credit
bureaus'' and adding, in their place, the words ``nationwide consumer
reporting agencies''.
0
F. In paragraph (b)(5)(vi)(G), removing the words ``credit bureaus''
and adding, in their place, the words ``consumer reporting agencies''.
0
G. In paragraph (b)(5)(vi)(K), removing the word ``and'' at the end of
the paragraph.
0
H. In paragraph (b)(5)(vi)(L), removing the punctuation ``.'' at the
end of the paragraph and adding, in its place, the words ``; and''.
0
I. Adding a new paragraph (b)(5)(vi)(M).
0
J. Redesignating paragraphs (b)(6)(ii), (iii), (iv), (v), and (vi) as
paragraphs (b)(6)(v), (vi), (vii), (ii), and (iii) respectively.
0
K. In newly redesignated paragraph (b)(6)(iii), removing the reference
``(b)(6)(v)'' and adding, in its place, the reference ``(b)(6)(ii)'',
and removing the words ``national credit bureaus (if that is the
case)'' and adding, in their place, the words ``nationwide consumer
reporting agencies''.
0
L. Adding a new paragraph (b)(6)(iv).
0
M. In newly redesignated paragraph (b)(6)(vi), removing the reference
``(b)(6)(iv)'' and adding, in its place, the reference ``(b)(6)(vii)''.
The additions read as follows:
Sec. 682.410 Fiscal, administrative, and enforcement requirements.
* * * * *
(b) * * *
(5) * * *
(vi) * * *
(M) Inform the borrower of the options that are available to the
borrower to remove the loan from default, including an explanation of
the fees and conditions associated with each option.
* * * * *
(6) * * *
(iv) The agency must send a notice informing the borrower of the
options that are available to remove the loan from default, including
an explanation of the fees and conditions associated with each option.
This notice must be sent within a reasonable time after the end of the
period for requesting an administrative review as specified in
paragraph (b)(5)(iv)(B) of this section or, if the borrower has
requested an administrative review, within a reasonable time following
the conclusion of the administrative review.
* * * * *
0
26. Section 682.601 is amended by adding a new paragraph (a)(7)(iii) to
read as follows:
Sec. 682.601 Rules for a school that makes or originates loans.
(a) * * *
(7) * * *
(iii) With regard to any school, the audit must include a
determination that--
(A) Except as provided in paragraphs (a)(8) and (b) of this
section, the school used all payments and proceeds from the loans for
need-based grant programs;
(B) The school met the requirements of paragraph (c) of this
section in making the need-based grants; and
(C) The school used no more than a reasonable portion of payments
and proceeds from the loans for direct administrative expenses.
* * * * *
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
0
27. The authority citation for part 685 continues to read as follows:
Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.
0
28. In Sec. 685.102(b), the definition of ``Estimated financial
assistance'' is amended by:
0
A. Removing paragraphs (1)(ii), (iii), (iv), and (ix), and
redesignating paragraphs (1)(i), (v), (vi), (vii), and (viii) as
paragraphs (1)(ii), (iii), (iv), (v), and (vi), respectively.
0
B. Adding a new paragraph (1)(i) and revising newly redesignated
paragraph (1)(ii).
0
C. Adding the word ``and'' after the semicolon at the end of newly
redesignated paragraph (1)(v).
[[Page 56001]]
0
D. Removing the words ``; and'' at the end of newly redesignated
paragraph (1)(vi) and adding, in their place, the punctuation ``.''.
0
E. Removing paragraph (2)(iii), and redesignating paragraphs (2)(iv)
and (v) as paragraphs (2)(iii) and (iv), respectively.
0
F. In newly redesignated paragraph (2)(iii), removing the words
``veterans' educational benefits paid under chapter 30 of title 38 of
the United States Code (Montgomery GI Bill-Active Duty) and''.
0
G. In newly redesignated paragraph (2)(iv), removing the word ``and''
at the end of the paragraph.
0
H. Adding a new paragraph (2)(v).
0
I. In paragraph (2)(vi), removing the words ``this part'' in the first
sentence and adding, in their place, the words ``a title IV, HEA
program,'' and by removing the punctuation ``.'' at the end of the
paragraph and adding, in its place, the punctuation ``;''.
0
J. Adding new paragraphs (2)(vii) and (viii).
The revisions and additions read as follows:
Sec. 685.102 Definitions.
Estimated financial assistance. (1) * * *
(i) Except as provided in paragraph (2)(iii) of this definition,
national service education awards or post-service benefits under title
I of the National and Community Service Act of 1990 (AmeriCorps).
(ii) Except as provided in paragraph (2)(vii) of this definition,
veterans' education benefits;
* * * * *
(2) * * *
(v) Non-need-based employment earnings;
* * * * *
(vii) Federal veterans' education benefits paid under--
(A) Chapter 103 of title 10, United States Code (Senior Reserve
Officers' Training Corps);
(B) Chapter 106A of title 10, United States Code (Educational
Assistance for Persons Enlisting for Active Duty);
(C) Chapter 1606 of title 10, United States Code (Selected Reserve
Educational Assistance Program);
(D) Chapter 1607 of title 10, United States Code (Educational
Assistance Program for Reserve Component Members Supporting Contingency
Operations and Certain Other Operations);
(E) Chapter 30 of title 38, United States Code (All-Volunteer Force
Educational Assistance Program, also known as the ``Montgomery GI
Bill--active duty'');
(F) Chapter 31 of title 38, United States Code (Training and
Rehabilitation for Veterans with Service-Connected Disabilities);
(G) Chapter 32 of title 38, United States Code (Post-Vietnam Era
Veterans' Educational Assistance Program);
(H) Chapter 33 of title 38, United States Code (Post 9/11
Educational Assistance);
(I) Chapter 35 of title 38, United States Code (Survivors' and
Dependents' Educational Assistance Program);
(J) Section 903 of the Department of Defense Authorization Act,
1981 (10 U.S.C. 2141 note) (Educational Assistance Pilot Program);
(K) Section 156(b) of the ``Joint Resolution making further
continuing appropriations and providing for productive employment for
the fiscal year 1983, and for other purposes'' (42 U.S.C. 402 note)
(Restored Entitlement Program for Survivors, also known as ``Quayle
benefits'');
(L) The provisions of chapter 3 of title 37, United States Code,
related to subsistence allowances for members of the Reserve Officers
Training Corps; and
(M) Any program that the Secretary may determine is covered by
section 480(c)(2) of the HEA; and
(viii) Iraq and Afghanistan Service Grants made under section 420R
of the HEA.
* * * * *
0
29. Section 685.200 is amended by:
0
A. In the introductory text to paragraph (a)(1)(iv), adding the words
``or TEACH Grant service obligation'' immediately after the word
``loan''.
0
B. In the introductory text to paragraph (a)(1)(iv)(A), adding the
words ``or TEACH Grant service obligation'' immediately after the word
``Act''.
0
C. In paragraph (a)(1)(iv)(A)(1), removing the word ``and'' at the end
of the paragraph.
0
D. In paragraph (a)(1)(iv)(A)(2), removing the punctuation ``.'' at the
end of the paragraph and adding, in its place, the words ``; and''.
0
E. Adding a new paragraph (a)(1)(iv)(A)(3).
0
F. Removing paragraph (a)(1)(iv)(B).
0
G. Redesignating paragraph (a)(1)(iv)(C) as paragraph (a)(1)(iv)(B).
0
H. In the introductory text to newly redesignated paragraph
(a)(1)(iv)(B), removing the words ``based on'' and adding, in their
place, the word ``after'', and adding the words ``based on a discharge
request received prior to July 1, 2010'' immediately after the word
``disabled''.
The addition reads as follows:
Sec. 685.200 Borrower eligibility.
(a) * * *
(1) * * *
(iv) * * *
(A) * * *
(3) If the borrower receives a new Direct Loan, other than a Direct
Consolidation Loan, within three years of the date that any previous
title IV loan or TEACH Grant service obligation was discharged due to a
total and permanent disability in accordance with Sec. 685.213(b)(4),
34 CFR 674.61(b)(3)(i), 34 CFR 682.402(c), or 34 CFR 686.42(b) based on
a discharge request received on or after July 1, 2010, resumes
repayment on the previously discharged loan in accordance with Sec.
685.213(b)(3)(ii)(A), 34 CFR 674.61(b)(5), or 34 CFR 682.402(c)(5), or
acknowledges that he or she is once again subject to the terms of the
TEACH Grant agreement to serve before receiving the new loan.
* * * * *
0
30. Section 685.202 is amended by:
0
A. Adding a new paragraph (a)(4).
0
B. In paragraph (b)(2), removing the words ``the Secretary
capitalizes'' and adding, in their place, the words ``or for a Direct
PLUS Loan, the Secretary may capitalize''.
The addition reads as follows:
Sec. 685.202 Charges for which Direct Loan Program borrowers are
responsible.
(a) * * *
(4) Applicability of the Servicemembers Civil Relief Act (50 U.S.C.
527, App. sec. 207). Notwithstanding paragraphs (a)(1) through (3) of
this section, effective August 14, 2008, upon the Secretary's receipt
of a borrower's written request and a copy of the borrower's military
orders, the maximum interest rate, as defined in 50 U.S.C. 527, App.
section 207(d), on Direct Loan Program loans made prior to the borrower
entering active duty status is 6 percent while the borrower is on
active duty military service.
* * * * *
0
31. Section 685.203 is amended by:
0
A. In paragraph (a)(1)(iii), adding the punctuation ``,'' immediately
after ``$3,500''.
0
B. Revising paragraph (b).
0
C. In paragraph (c)(1)(i), adding the words ``, except as provided in
paragraph (c)(3) for certain dependent undergraduate students''
immediately after the words ``this section''.
0
D. In paragraph (c)(2)(i)(A), adding the words ``, or, for a loan first
disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
E. Removing paragraph (c)(2)(i)(B).
0
F. Redesignating paragraph (c)(2)(i)(C) as paragraph (c)(2)(i)(B).
[[Page 56002]]
0
G. In newly redesignated paragraph (c)(2)(i)(B), adding the words ``,
or, for a loan first disbursed on or after July 1, 2008, $6,000,''
immediately after $4,000''.
0
H. Redesignating paragraph (c)(2)(i)(D) as paragraph (c)(2)(i)(C).
0
I. In newly redesignated paragraph (c)(2)(i)(C), adding the words ``,
or, for a loan first disbursed on or after July 1, 2008, $6,000,''
immediately after ``$4,000''.
0
J. In paragraph (c)(2)(ii)(A), adding the words ``, or, for a loan
first disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
K. In paragraph (c)(2)(ii)(B), adding the words ``, or, for a loan
first disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
L. In paragraph (c)(2)(iii)(A), adding the words ``, or, for a loan
first disbursed on or after July 1, 2008, $7,000,'' immediately after
``$5,000''.
0
M. In paragraph (c)(2)(iii)(B), adding the words ``, or, for a loan
first disbursed on or after July 1, 2008, $7,000,'' immediately after
``$5,000''.
0
N. In paragraph (c)(2)(vi)(A), adding the words ``, or, for a loan
first disbursed on or after July 1, 2008, $6,000,'' immediately after
``$4,000''.
0
O. Adding a new paragraph (c)(3).
0
P. In paragraph (e)(1), adding the words ``, or, effective July 1,
2008, $31,000,'' immediately after ``$23,000''.
0
Q. In paragraph (e)(2), adding the words ``, or, effective July 1,
2008, $57,500,'' immediately after ``$46,000''.
0
R. Adding a new paragraph (k).
The revisions and additions read as follows:
Sec. 685.203 Loan limits.
(a) * * *
(b) Direct Unsubsidized Loans. (1) In the case of a dependent
undergraduate student--
(i) For a loan first disbursed before July 1, 2008, the total
amount a student may borrow for any period of study under the Federal
Direct Unsubsidized Loan Program and the Federal Unsubsidized Stafford
Loan Program is the same as the amount determined under paragraph (a)
of this section, less any amount received under the Federal Direct
Stafford/Ford Loan Program or the Federal Stafford Loan Program.
(ii) Except as provided in paragraph (c)(3) of this section, for a
loan first disbursed on or after July 1, 2008, the total amount a
student may borrow for any period of study under the Federal Direct
Unsubsidized Stafford/Ford Loan Program in combination with the Federal
Unsubsidized Stafford Loan Program is the same as the amount determined
under paragraph (a) of this section, less any amount received under the
Federal Direct Stafford/Ford Loan Program or the Federal Stafford Loan
Program, plus--
(A) $2,000, for a program of study of at least a full academic year
in length.
(B) For a program of study that is one academic year or more in
length with less than a full academic year remaining, the amount that
is the same ratio to $2,000 as the--
[GRAPHIC] [TIFF OMITTED] TR29OC09.003
(C) For a program of study that is less than a full academic year
in length, the amount that is the same ratio to $2,000 as the lesser of
the--
[GRAPHIC] [TIFF OMITTED] TR29OC09.004
or
[GRAPHIC] [TIFF OMITTED] TR29OC09.005
(2) In the case of an independent undergraduate student, a graduate
or professional student, or certain dependent undergraduate students
under the conditions specified in paragraph (c)(1)(ii) of this section,
except as provided in paragraph (c)(3) of this section, the total
amount the student may borrow for any period of enrollment under the
Federal Direct Unsubsidized Stafford/Ford Loan and Federal Unsubsidized
Stafford Loan programs may not exceed the amounts determined under
paragraph (a) of this section less any amount received under the
Federal Direct Stafford/Ford Loan Program or the Federal Stafford Loan
Program, in combination with the amounts determined under paragraph (c)
of this section.
(c) * * *
(3) A dependent undergraduate student who qualifies for additional
Direct Unsubsidized Loan amounts under this section in accordance with
paragraph (c)(1)(ii) is not eligible to receive the additional Direct
Unsubsidized Loan amounts provided under paragraph (b)(1)(ii) of this
section.
* * * * *
(k) Any TEACH Grants that have been converted to Direct
Unsubsidized Loans are not counted against any annual or aggregate loan
limits under this section.
0
32. Section 685.204 is amended by:
0
A. In paragraph (b)(1)(iii)(A)(2), removing the word ``or'' at the end
of the paragraph.
0
B. In paragraph (b)(1)(iii)(A)(3), removing the punctuation ``.'' and
adding, in its place, ``; or'' at the end of the paragraph.
0
C. Adding a new paragraph (b)(1)(iii)(A)(4).
0
D. Revising paragraph (b)(1)(iii)(B).
0
E. Redesignating paragraphs (g) and (h) as paragraphs (h) and (i),
respectively.
0
F. In newly redesignated paragraph (i)(3), removing the words
``paragraph (h)(2)'' each time they appear and adding, in their place,
the words ``paragraph (i)(2)''.
0
G. In newly redesignated paragraph (i)(4), removing the words
``paragraph (h)(2)'' and adding, in their place, the words ``paragraph
(i)(2)''.
0
H. Adding a new paragraph (g).
The revisions and additions read as follows:
Sec. 685.204 Deferment.
* * * * *
(b) * * *
(1) * * *
(iii)(A) * * *
(4) The Secretary confirms a borrower's half-time enrollment status
through the use of the National Student Loan Data System if requested
to do so by the school the borrower is attending.
[[Page 56003]]
(B)(1) Upon notification by the Secretary that a deferment has been
granted based on paragraph (b)(1)(iii)(A)(2), (3), or (4) of this
section, the borrower has the option to cancel the deferment and
continue paying on the loan.
(2) If the borrower elects to cancel the deferment and continue
paying on the loan, the borrower has the option to make the principal
and interest payments that were deferred. If the borrower does not make
the payments, the Secretary applies a deferment for the period in which
payments were not made and capitalizes the interest. The Secretary will
provide information, including an example, to assist the borrower in
understanding the impact of capitalization of accrued, unpaid interest
on the borrower's loan principal and on the total amount of interest to
be paid over the life of the loan.
* * * * *
(g) In-school deferments for Direct PLUS Loan borrowers with loans
first disbursed on or after July 1, 2008. (1)(i) A student Direct PLUS
Loan borrower is entitled to a deferment on a Direct PLUS Loan first
disbursed on or after July 1, 2008 during the 6-month period that
begins on the day after the student ceases to be enrolled on at least a
half-time basis at an eligible institution.
(ii) If the Secretary grants an in-school deferment to a student
Direct PLUS Loan borrower based on Sec. 682.204(b)(1)(iii)(A)(2), (3),
or (4), the deferment period for a Direct PLUS Loan first disbursed on
or after July 1, 2008 includes the 6-month post-enrollment period
described in paragraph (g)(1)(i) of this section.
(2) Upon the request of the borrower, an eligible parent Direct
PLUS Loan borrower will receive a deferment on a Direct PLUS Loan first
disbursed on or after July 1, 2008--
(i) During the period when the student on whose behalf the loan was
obtained is enrolled at an eligible institution on at least a half-time
basis; and
(ii) During the 6-month period that begins on the later of the day
after the student on whose behalf the loan was obtained ceases to be
enrolled on at least a half-time basis or, if the parent borrower is
also a student, the day after the parent borrower ceases to be enrolled
on at least a half-time basis.
* * * * *
0
33. Section 685.205 is amended by:
0
A. In paragraph (b)(8), removing the word ``or'' at the end of the
paragraph.
0
B. In paragraph (b)(9), removing the punctuation ``.'' at the end of
the paragraph and adding, in its place, ``; or''.
0
C. Adding a new paragraph (b)(10) to read as follows:
Sec. 685.205 Forbearance.
* * * * *
(b) * * *
(10) For Direct PLUS Loans first disbursed before July 1, 2008, to
align repayment with a borrower's Direct PLUS Loans that were first
disbursed on or after July 1, 2008, or with Direct Subsidized Loans or
Direct Unsubsidized Loans that have a grace period in accordance with
Sec. 685.207(b) or (c). The Secretary notifies the borrower that the
borrower has the option to cancel the forbearance and continue paying
on the loan.
* * * * *
0
34. Section 685.211 is amended by:
0
A. In paragraph (f)(1), removing the words ``credit bureau'' in the
third sentence and adding, in their place, the words ``consumer
reporting agency''.
0
B. Adding a new paragraph (f)(4).
The addition reads as follows:
Sec. 685.211 Miscellaneous repayment provisions.
* * * * *
(f) * * *
(4) Effective for any defaulted Direct Loan that is rehabilitated
on or after August 14, 2008, the borrower cannot rehabilitate the loan
again if the loan returns to default status following the
rehabilitation.
0
35. Section 685.213 is revised to read as follows:
Sec. 685.213 Total and permanent disability discharge.
(a) General. (1) A borrower's Direct Loan is discharged if the
borrower becomes totally and permanently disabled, as defined in 34 CFR
682.200(b), and satisfies the eligibility requirements in this section.
(2) For a borrower who becomes totally and permanently disabled as
described in paragraph (1) of the definition of that term in 34 CFR
682.200(b), the borrower's loan discharge application is processed in
accordance with paragraph (b) of this section.
(3) For veterans who are totally and permanently disabled as
described in paragraph (2) of the definition of that term in 34 CFR
682.200(b), the veteran's loan discharge application is processed in
accordance with paragraph (c) of this section.
(b) Discharge application process for a borrower who is totally and
permanently disabled as described in paragraph (1) of the definition of
that term in 34 CFR 682.200(b). (1) Borrower application for discharge.
To qualify for a discharge of a Direct Loan based on a total and
permanent disability, a borrower must submit a discharge application to
the Secretary on a form approved by the Secretary. The application must
contain a certification by a physician, who is a doctor of medicine or
osteopathy legally authorized to practice in a State, that the borrower
is totally and permanently disabled as described in paragraph (1) of
the definition of that term in 34 CFR 682.200(b). The borrower must
submit the application to the Secretary within 90 days of the date the
physician certifies the application. Upon receipt of the borrower's
application, the Secretary notifies the borrower that no payments are
due on the loan while the Secretary determines the borrower's
eligibility for discharge.
(2) Determination of eligibility. (i) If, after reviewing the
borrower's application, the Secretary determines that the certification
provided by the borrower supports the conclusion that the borrower
meets the criteria for a total and permanent disability discharge, as
described in paragraph (1) of the definition of that term in 34 CFR
682.200(b), the borrower is considered totally and permanently disabled
as of the date the physician certifies the borrower's application.
(ii) Upon making a determination that the borrower is totally and
permanently disabled, as described in paragraph (1) of the definition
of that term in 34 CFR 682.200(b), the Secretary discharges the
borrower's obligation to make any further payments on the loan,
notifies the borrower that the loan has been discharged, and returns to
the person who made the payments on the loan any payments received
after the date the physician certified the borrower's loan discharge
application. The notification to the borrower explains the terms and
conditions under which the borrower's obligation to repay the loan will
be reinstated, as specified in paragraph (b)(4)(i) of this section.
(iii) If the Secretary determines that the certification provided
by the borrower does not support the conclusion that the borrower is
totally and permanently disabled, as described in paragraph (1) of the
definition of that term in 34 CFR 682.200(b), the Secretary notifies
the borrower that the application for a disability discharge has been
denied, and that the loan is due and payable to the Secretary under the
terms of the promissory note.
(iv) The Secretary reserves the right to require the borrower to
submit additional medical evidence if the
[[Page 56004]]
Secretary determines that the borrower's application does not
conclusively prove that the borrower is totally and permanently
disabled as described in paragraph (1) of the definition of that term
in 34 CFR 682.200(b). As part of the Secretary's review of the
borrower's discharge application, the Secretary may arrange for an
additional review of the borrower's condition by an independent
physician at no expense to the borrower.
(3) Treatment of disbursements made during the period from the date
of the physician's certification until the date of discharge. If a
borrower received a title IV loan or TEACH Grant prior to the date the
physician certified the borrower's discharge application and a
disbursement of that loan or grant is made during the period from the
date of the physician's certification until the date the Secretary
grants a discharge under this section, the processing of the borrower's
loan discharge request will be suspended until the borrower ensures
that the full amount of the disbursement has been returned to the loan
holder or to the Secretary, as applicable.
(4) Conditions for reinstatement of a loan after a total and
permanent disability discharge. (i) The Secretary reinstates a
borrower's obligation to repay a loan that was discharged in accordance
with paragraph (b)(2)(ii) of this section if, within three years after
the date the Secretary granted the discharge, the borrower--
(A) Has annual earnings from employment that exceed 100 percent of
the poverty guideline for a family of two, as published annually by the
United States Department of Health and Human Services pursuant to 42
U.S.C. 9902(2);
(B) Receives a new TEACH Grant or a new loan under the Perkins,
FFEL or Direct Loan programs, except for a FFEL or Direct Consolidation
Loan that includes loans that were not discharged; or
(C) Fails to ensure that the full amount of any disbursement of a
title IV loan or TEACH Grant received prior to the discharge date that
is made during the three-year period following the discharge date is
returned to the loan holder or to the Secretary, as applicable, within
120 days of the disbursement date.
(ii) If the borrower's obligation to repay the loan is reinstated,
the Secretary--
(A) Notifies the borrower that the borrower's obligation to repay
the loan has been reinstated; and
(B) Does not require the borrower to pay interest on the loan for
the period from the date the loan was discharged until the date the
borrower's obligation to repay the loan was reinstated.
(iii) The Secretary's notification under paragraph (b)(4)(ii)(A) of
this section will include--
(A) The reason or reasons for the reinstatement;
(B) An explanation that the first payment due date on the loan
following reinstatement will be no earlier than 60 days after the date
of the notification of reinstatement; and
(C) Information on how the borrower may contact the Secretary if
the borrower has questions about the reinstatement or believes that the
obligation to repay the loan was reinstated based on incorrect
information.
(5) Borrower's responsibilities after a total and permanent
disability discharge. During the three-year period described in
paragraph (b)(4)(i) of this section, the borrower or, if applicable,
the borrower's representative must--
(i) Promptly notify the Secretary of any changes in address or
phone number;
(ii) Promptly notify the Secretary if the borrower's annual
earnings from employment exceed the amount specified in paragraph
(b)(4)(i)(A) of this section; and
(iii) Provide the Secretary, upon request, with documentation of
the borrower's annual earnings from employment.
(c) Discharge application process for veterans who are totally and
permanently disabled as described in paragraph (2) of the definition of
that term in 34 CFR 682.200(b).
(1) Veteran's application for discharge. To qualify for a discharge
of a Direct Loan based on a total and permanent disability as described
in paragraph (2) of the definition of that term in 34 CFR 682.200(b), a
veteran must submit a discharge application to the Secretary on a form
approved by the Secretary. The application must be accompanied by
documentation from the Department of Veterans Affairs showing that the
Department of Veterans Affairs has determined that the veteran is
unemployable due to a service-connected disability. The Secretary does
not require the veteran to provide any additional documentation related
to the veteran's disability. Upon receipt of the veteran's application,
the Secretary notifies the veteran that no payments are due on the loan
while the Secretary determines the veteran's eligibility for discharge.
(2) Determination of eligibility. (i) If the Secretary determines,
based on a review of the documentation from the Department of Veterans
Affairs, that the veteran is totally and permanently disabled as
described in paragraph (2) of the definition of that term in Sec.
682.200(b), the Secretary discharges the veteran's obligation to make
any further payments on the loan and returns to the person who made the
payments on the loan any payments received on or after the effective
date of the determination by the Department of Veterans Affairs that
the veteran is unemployable due to a service-connected disability.
(ii)(A) If the Secretary determines, based on a review of the
documentation from the Department of Veterans Affairs, that the veteran
is not totally and permanently disabled as described in paragraph (2)
of the definition of that term in 34 CFR 682.200(b), the Secretary
notifies the veteran that the application for a disability discharge
has been denied, and that the loan is due and payable to the Secretary
under the terms of the promissory note.
(B) The Secretary notifies the veteran that he or she may reapply
for a total and permanent disability discharge in accordance with the
procedures described in paragraph (b) of this section if the
documentation from the Department of Veterans Affairs does not indicate
that the veteran is totally and permanently disabled as described in
paragraph (2) of the definition of that term in 34 CFR 682.200(b), but
indicates that the veteran may be totally and permanently disabled as
described in paragraph (1) of the definition of that term.
0
36. Section 685.217 is amended by:
0
A. Revising paragraph (a).
0
B. In paragraph (b), adding a definition of Educational service agency
in alphabetical order.
0
C. Revising the introductory text of paragraph (c)(1).
0
D. In paragraph (c)(1)(ii), adding the words ``or educational service
agency's'' immediately after the words ``the school's''.
0
E. In paragraph (c)(1)(iii), removing the words ``Bureau of Indian
Affairs (BIA)'' and adding, in their place, the words ``Bureau of
Indian Education (BIE)'', and removing the words ``the BIA'' and
adding, in their place, the words ``the BIE''.
0
F. In paragraph (c)(2), adding the words ``or educational service
agency'' immediately after the words ``If the school'' at the beginning
of the paragraph, and removing the words ``the school failed'' and
adding, in their place, the word ``fails''.
0
G. In paragraph (c)(3)(i)(A), removing the words ``in which'' and
adding, in their place, the words ``or educational service agency
where''.
[[Page 56005]]
0
H. In paragraph (c)(3)(i)(B), removing the words ``in which'' and
adding, in their place, the words ``or educational service agency
where''.
0
I. In paragraph (c)(3)(ii)(A), removing the word ``in'' and adding, in
its place, the word ``at'', and adding the words ``, or taught
mathematics or science to secondary school students on a full-time
basis at an eligible educational service agency,'' immediately after
the words ``secondary school''.
0
J. In paragraph (c)(3)(ii)(B), removing the word ``in'' the first time
it appears and adding, in its place, the word ``at'', and adding the
words ``or educational service agency'' immediately after the words
``secondary school'' the first time they appear.
0
K. Adding a new paragraph (c)(3)(iii).
0
L. In paragraph (c)(4)(i), removing the word ``in'' and adding, in its
place, the word ``at'', and adding the words ``or educational service
agency'' immediately after the words ``secondary school'' the first
time they appear.
0
M. In paragraph (c)(4)(ii)(A), removing the word ``in'' and adding, in
its place, the word ``at'', and adding the words ``, or taught
mathematics or science on a full-time basis to secondary school
students at an eligible educational service agency,'' immediately after
the words ``secondary school''.
0
N. In paragraph (c)(4)(ii)(B), removing the word ``in'' the first time
it appears and adding, in its place, the word ``at'', and by adding the
words ``or educational service agency'' immediately after the words
``secondary school'' the first time they appear.
0
O. Adding a new paragraph (c)(4)(iii).
0
P. Revising paragraph (c)(9).
0
Q. Revising paragraph (c)(11).
0
R. In paragraph (d)(2), removing the reference ``34 CFR 682.215'' and
adding, in its place, the reference ``34 CFR 682.216''.
The revisions and additions read as follows:
Sec. 685.217 Teacher loan forgiveness program.
(a) General. (1) The teacher loan forgiveness program is intended
to encourage individuals to enter and continue in the teaching
profession. For new borrowers, the Secretary repays the amount
specified in this paragraph (a) on the borrower's 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.
(2)(i) The borrower must have been employed at an eligible
elementary or secondary school that serves low-income families or by an
educational service agency that serves low-income families as a full-
time teacher for five consecutive complete academic years. The required
five years of teaching may include any combination of qualifying
teaching service at an eligible elementary or secondary school or an
eligible educational service agency.
(ii) Teaching at an eligible elementary or secondary school may be
counted toward the required five consecutive complete academic years
only if at least one year of teaching was after the 1997-1998 academic
year.
(iii) Teaching at an eligible educational service agency may be
counted toward the required five consecutive complete academic years
only if the consecutive five-year period includes qualifying service at
an eligible educational service agency performed after the 2007-2008
academic year.
(3) All borrowers eligible for teacher loan forgiveness may receive
loan forgiveness of up to a combined total of $5,000 on the borrower's
eligible FFEL and Direct Loan Program loans.
(4) A borrower may receive loan forgiveness of up to a combined
total of $17,500 on the borrower's eligible FFEL and Direct Loan
Program loans if the borrower was employed for five consecutive years--
(i) At an eligible secondary school as a highly qualified
mathematics or science teacher, or at an eligible educational service
agency as a highly qualified teacher of mathematics or science to
secondary school students; or
(ii) At an eligible elementary or secondary school or educational
service agency as a highly qualified special education teacher.
(5) The loan for which the borrower is seeking forgiveness must
have been made prior to the end of the borrower's fifth year of
qualifying teaching service.
(b) * * *
Educational service agency means a regional public multiservice
agency authorized by State statute to develop, manage, and provide
services or programs to local educational agencies, as defined in
section 9101 of the Elementary and Secondary Education Act of 1965, as
amended.
* * * * *
(c) * * *
(1) A borrower who has been employed at an elementary or secondary
school or an educational service agency as a full-time teacher for five
consecutive complete academic years may obtain loan forgiveness under
this program if the elementary or secondary school or educational
service agency--
* * * * *
(3) * * *
(iii) Teaching service performed at an eligible educational service
agency may be counted toward the required five years of teaching only
if the consecutive five-year period includes qualifying service at an
eligible educational service agency performed after the 2007-2008
academic year.
(4) * * *
(iii) Teaching service performed at an eligible educational service
agency may be counted toward the required five years of teaching only
if the consecutive five-year period includes qualifying service at an
eligible educational service agency performed after the 2007-2008
academic year.
* * * * *
(9) A borrower who was employed as a teacher at more than one
qualifying school, at more than one qualifying educational service
agency, or at a combination of both 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 or educational service agencies
involved, is considered to have completed one academic year of
qualifying teaching.
* * * * *
(11) A borrower may not receive loan forgiveness for the same
qualifying teaching service under this section if the borrower receives
a benefit for the same teaching service under--
(i) Subtitle D of title I of the National and Community Service Act
of 1990;
(ii) 34 CFR 685.219; or
(iii) Section 428K of the Act.
* * * * *
Sec. 685.219 [Amended]
0
37. Section 685.219 is amended in paragraph (b) by removing the words
``licensed or regulated health care'' in paragraph (5)(i) of the
definition of ``Public service organization'' and adding, in their
place, the words ``licensed or regulated child care''.
Sec. 685.220 [Amended]
0
38. Section 685.220 is amended by:
0
A. In paragraph (d)(1)(i)(B)(3), adding the words ``or the no accrual
of interest benefit for active duty service'' immediately after the
word ``Program''.
0
B. In paragraph (d)(1)(i)(B)(4), adding the words ``or an income-based
repayment plan'' immediately after the
[[Page 56006]]
words ``income contingent repayment plan''.
0
C. In paragraph (d)(1)(i)(B)(5), adding the words ``or the no accrual
of interest benefit for active duty service'' immediately after the
words ``Forgiveness Program''.
0
D. In paragraph (d)(1)(ii)(D), adding the words ``or the income-based
repayment plan described in Sec. 685.208(m),'' immediately after the
reference ``Sec. 685.208(k)''.
0
39. Section 685.221 is amended by:
0
A. Revising paragraph (a)(4).
0
B. In paragraph (b)(1), removing the words ``Except as provided under
paragraph (b)(2) of this section, the'' in the second sentence and
adding, in their place, the word ``The''.
0
C. In paragraph (b)(2)(i), removing the word ``The'' at the beginning
of the sentence and adding, in its place, the words ``Except for
borrowers provided for in paragraph (b)(2)(ii) of this section, the''.
0
D. Redesignating paragraphs (b)(2)(ii) and (b)(2)(iii) as paragraphs
(b)(2)(iii) and (b)(2)(iv), respectively.
0
E. Adding a new paragraph (b)(2)(ii).
0
F. In newly redesignated paragraph (b)(2)(iii), removing the words ``or
(b)(2)(i)'' and adding, in their place, the words ``, (b)(2)(i), or
(b)(2)(ii)''.
0
G. In newly redesignated paragraph (b)(2)(iv), removing the words ``or
(b)(2)(i)'' and adding, in their place, the words ``, (b)(2)(i), or
(b)(2)(ii)''.
The revision and addition read as follows:
Sec. 685.221 Income-based repayment plan.
(a) * * *
(4) Partial financial hardship means a circumstance in which--
(i) For an unmarried borrower or a married borrower who files an
individual Federal tax return, the annual amount due on all of the
borrower's eligible loans, as calculated under a standard repayment
plan based on a 10-year repayment period, using the greater of the
amount due at the time the borrower initially entered repayment or at
the time the borrower elects the income-based repayment plan, exceeds
15 percent of the difference between the borrower's AGI and 150 percent
of the poverty guideline for the borrower's family size; or
(ii) For a married borrower who files a joint Federal tax return
with his or her spouse, the annual amount due on all of the borrower's
eligible loans and, if applicable, the spouse's eligible loans, as
calculated under a standard repayment plan based on a 10-year repayment
period, using the greater of the amount due at the time the loans
initially entered repayment or at the time the borrower or spouse
elects the income-based repayment plan, exceeds 15 percent of the
difference between the borrower's and spouse's AGI, and 150 percent of
the poverty guideline for the borrower's family size.
* * * * *
(b) * * *
(2) * * *
(ii) Both the borrower and borrower's spouse have eligible loans
and filed a joint Federal tax return, in which case the Secretary
determines--
(A) Each borrower's percentage of the couple's total eligible loan
debt;
(B) The adjusted monthly payment for each borrower by multiplying
the calculated payment by the percentage determined in paragraph
(b)(2)(ii)(A) of this section; and
(C) If the borrower's loans are held by multiple holders, the
borrower's adjusted monthly Direct Loan payment by multiplying the
payment determined in paragraph (b)(2)(ii)(B) of this section by the
percentage of the outstanding principal amount of eligible loans that
are Direct Loans;
* * * * *
[FR Doc. E9-25190 Filed 10-28-09; 8:45 am]
BILLING CODE 4000-01-P