[Federal Register Volume 59, Number 55 (Tuesday, March 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6592]
[[Page Unknown]]
[Federal Register: March 22, 1994]
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Part VI
Department of Education
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Office of the Secretary
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34 CFR Part 668
Standards for Participation in Title IV, HEA Programs; Proposed Rule
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DEPARTMENT OF EDUCATION
Office of the Secretary
34 CFR Part 668
Standards for Participation in Title IV, HEA Programs
AGENCY: Department of Education.
ACTION: Request for comments.
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SUMMARY: On December 20, 1993, the President signed Public Law 103-208,
the Higher Education Technical Amendments of 1993. This notice requests
public comments on how to implement certain provisions of the technical
amendments relating to the determination of school default rates.
DATES: Comments must be received on or before April 11, 1994.
ADDRESSES: All comments concerning this issue should be addressed to
Pamela A. Moran, Acting Chief, Loans Branch, Division of Policy
Development, Policy, Training, and Analysis Service, U.S. Department of
Education, 400 Maryland Avenue SW. (room 4310, ROB-3), Washington, DC
20202-5449.
FOR FURTHER INFORMATION CONTACT: Doug Laine, Program Specialist, Loans
Branch, Division of Policy Development, Policy, Training, and Analysis
Service, U.S. Department of Education, 400 Maryland Avenue SW. (room
4310, ROB-3), Washington, DC 20202-5449. Telephone (202) 708-8242.
Individuals who use a telecommunication device for the deaf (TDD) may
call the Federal Information Relay Service (FIRS) at 1-800-877-8339
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.
SUPPLEMENTARY INFORMATION: Section 2(c)(55) of Public Law 103-208
amends section 435 of the Higher Education Act of 1965, as amended (the
Act), 20 U.S.C. 1085. This section modifies the process governing
schools' appeals of their cohort default rates based on allegations of
improper loan servicing. This provision adds a new paragraph on appeals
based upon allegations of improper loan servicing to section 435(a) of
the Act stating that an institution that is subject to loss of
eligibility for the Federal Family Education Loan Program pursuant to
section 435(a)(2)(A); is subject to loss of eligibility for the Federal
Supplemental Loans for Students program pursuant to section 428A(a)(2);
or is an institution whose cohort default rate equals or exceeds 20
percent for the most recent year for which data are available, may
include in its appeal of such loss or rate a defense based on improper
loan servicing (in addition to other defenses). In any such appeal, the
Secretary shall take whatever steps are necessary to ensure that the
institution has access to a representative sample (as determined by the
Secretary) of the relevant loan servicing and collection records of the
affected guaranty agencies and loan servicers for a reasonable period
of time, not to exceed 30 days. The Secretary shall reduce the
institution's cohort default rate to reflect the percentage of
defaulted loans in the representative sample that are required to be
excluded pursuant to section 435(m)(1)(B) of the Act.
In making suggestions, commenters should also review section
435(m)(1)(B) of the Act, which states that in determining the number of
students who default before the end of the fiscal year, the Secretary
shall include only loans for which the Secretary or a guaranty agency
has paid claims for insurance. That section also provides that, in
considering appeals with respect to cohort default rates pursuant to
subsection (a)(3), the Secretary shall exclude any loans which, due to
improper servicing or collection, would, as demonstrated by the
evidence submitted in support of the institution's timely appeal to the
Secretary, result in an inaccurate or incomplete calculation of the
cohort default rate.
The Secretary intends to issue regulations establishing procedures
for schools to appeal their default rates based on improper loan
servicing. The Secretary intends to issue these procedures in an
interim final rule with a request for comments. This notice solicits
public help in developing such procedures. The Secretary invites public
comment on any aspect of implementing the statute, but in particular,
the Secretary would appreciate comments on the procedural issues
discussed below.
Pending the issuance of regulations, the Secretary will continue to
construe the Act in the course of adjudicating pending appeals based
upon allegations of improper loan servicing. Under Public Law 103-208,
the changes to sections 435(a)(3) and 435(m)(1)(B) of the Act apply
with respect to determinations (and appeals of determinations) of
cohort default rates for fiscal year 1989 and succeeding fiscal years.
The Act does not provide for reopening prior determinations.
1. Procedures for use in determining whether to exclude loans which
due to improper servicing or collection would result in an inaccurate
or incomplete calculation of a school's cohort default rate.
The Secretary would appreciate comments which suggest procedures
for the Secretary to use in determining whether to exclude any loans
which, due to improper servicing or collection would, as demonstrated
by the evidence submitted in support of the institution's timely appeal
to the Secretary, result in an inaccurate or incomplete calculation of
(the institution's) cohort default rate. The Secretary is particularly
interested in receiving suggestions for procedures which are clear and
concise and which will result in completion of the appeal process
within the statutory time frames. Commenters may also want to comment
on procedures the Secretary should follow in identifying loans the
inclusion of which would, due to improper servicing or collection,
result in an inaccurate or incomplete calculation of the cohort default
rate.
2. Procedures for sampling of loan servicing and collection
records.
The Secretary would appreciate comments which suggest a process for
selecting a representative sample of the relevant loan servicing and
collection records to be reviewed and identifying which records are
relevant. The Secretary notes that statistical sampling seems most
appropriate for this situation. The Secretary also notes that there are
different types of statistical sampling, and different sampling
procedures can result in different levels of accuracy. The Secretary
asks commenters to suggest the type and parameters of sampling and
provide reasons for any recommendations.
The Secretary also solicits ideas on the procedures for requesting
relevant loan servicing and collection records, and the time frame for
making such requests. The Act states that a school must have access to
a representative sample of the relevant loan servicing and collection
records for a reasonable period of time, not to exceed 30 days. The
Secretary is willing to consider a shorter time frame than 30 days.
3. Procedures for schools to review tape dump data provided by the
guaranty agencies to the Secretary for use in determining cohort
default rates.
Section 2(c)(60)(A) of Public Law 103-208 also amended section
435(m)(1)(A) of the Act to allow a school an opportunity to review and
correct the tape dump data for the school (which provides information
on the loans included in the calculation of the school's cohort default
rate) before the rates are calculated. The tape dump data is provided
by the guaranty agencies to the Secretary.
The Secretary also intends to issue appropriate regulations,
consistent with this amendment, establishing procedures and time frames
for institutions to request data from the guaranty agencies and resolve
discrepancies. This notice solicits public help in developing such
procedures and time frames, and in determining how they should relate
to other procedures for correcting data, specifically as found in 34
CFR 668.15(g)(1). The Secretary notes that the requirement for
precalculation review is not effective until October 1, 1994.
Regarding the procedures and time frames for review and correction
of data provided by the guaranty agencies, the Secretary is
particularly interested in suggested time frames that provide ample
opportunity for review and correction, but still allow the Secretary to
issue cohort default rates in a timely manner. In addition, the
Secretary is interested in public comment on the effect of such
precalculation reviews on further appeals by the institutions under 34
CFR 668.15(g)(1).
Dated: March 8, 1994.
David A. Longanecker,
Assistant Secretary for Postsecondary Education.
[FR Doc. 94-6592 Filed 3-21-94; 8:45 am]
BILLING CODE 4000-01-P
