[Federal Register Volume 59, Number 57 (Thursday, March 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6944]
[[Page Unknown]]
[Federal Register: March 24, 1994]
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Part VI
Department of Education
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34 CFR Part 682
Federal Family Education Loan Program; Proposed Rule
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DEPARTMENT OF EDUCATION
34 CFR Part 682
RIN 1840-AB99
Federal Family Education Loan Program
AGENCY: Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary proposes to amend the regulations governing the
Federal Family Education Loan (FFEL) Program. The FFEL Program consists
of the Federal Stafford, Federal Supplemental Loans for Students (SLS),
Federal PLUS, and the Federal Consolidation Loan programs. These
amendments are needed to implement changes made to the Higher Education
Act of 1965 (HEA) as amended by the Higher Education Amendments of
1992. The proposed regulations would enhance the ability of lenders and
guaranty agencies to service and collect FFEL Program loans.
DATES: Comments must be received on or before April 25, 1994.
ADDRESSES: All comments concerning these proposed regulations 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.
A copy of any comments that concern information collection
requirements should also be sent to the Office of Management and Budget
at the address listed in the Paperwork Reduction Act section of this
preamble.
FOR FURTHER INFORMATION CONTACT: George Harris, Senior 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 telecommunications
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:
Background
The Secretary is proposing to revise 34 CFR part 682 to implement
changes made to the HEA by the Higher Education Amendments of 1992
(Pub. L. 102-325), enacted July 23, 1992. These regulations seek to
improve the efficiency of Federal student aid programs, and, by so
doing, to improve their capacity to enhance opportunities for
postsecondary education.
Summary of Comments From Regional Meetings
In compliance with section 492(a) of the HEA, the Secretary
convened regional meetings during September 1992 to obtain public
involvement in the development of these proposed regulations. The
purpose of the meetings was to ``provide for a comprehensive discussion
and exchange of information concerning the implementation'' of certain
parts of Public Law 102-325. In addition, attendees of the regional
meetings were asked to nominate individuals to act as negotiators in
the negotiated rulemaking process required by section 492(b) of the
HEA.
The regional meetings were conducted for two days each in San
Francisco, California; New York, New York; Atlanta, Georgia; and Kansas
City, Missouri during September 1992. Each participant at the regional
meetings was assigned to one of six groups which were asked to discuss
particular issue areas identified by the Department. Each group at the
regional meetings prepared a report of its discussion and
recommendations and those reports were presented to the Department for
consideration during the preparation of the proposed regulations.
At each regional meeting, groups discussed the statutory changes
relating to repayment of loans that are addressed in these proposed
regulations. The Department considered the comments received during the
regional meetings in preparing draft proposed regulations. Below is a
summary of the information received and the proposals made to the
Secretary during the regional meetings relating to these proposed
regulations.
Repayment Plans--Public Law 102-325 amended section 428(b)(1)(E) to
require that borrowers be offered income-sensitive repayment plans.
Participants at all of the regional meetings discussed whether lenders
were required to provide both graduated and income-sensitive repayment
plans to all borrowers or whether lenders had some discretion, but none
of the groups reached an agreement.
Participants at the meetings also discussed what documentation
should be considered in determining an income-sensitive repayment
schedule. The participants at the Atlanta and Kansas City meetings
recommended that the lender be permitted to rely on the borrower's
self-certification of income, while participants at the San Francisco
meeting recommended that the borrower be required to submit
documentation reflecting income to the lender every three years.
Participants at the Atlanta and San Francisco meetings also recommended
that borrowers be permitted to change repayment plans during the
repayment period, but participants at the Kansas City meeting
recommended that the lender be given flexibility to determine the
borrower's repayment schedule without regulatory restrictions.
Deferments--Public Law 102-325 substantially modified the
deferments available to borrowers under the FFEL Program. The
deferments for borrowers who are in school or unemployed were only
slightly modified, but the other specific deferments in prior law were
eliminated and replaced by a deferment for periods (up to three years)
in which the borrower has or will have an economic hardship.
There was extensive discussion at all of the regional meetings
regarding the appropriate criteria for an economic hardship deferment.
Participants at each of the regional meetings supported a different
standard for economic hardship: participants at the New York meeting
concluded that income below the minimum wage should be used as the
standard for economic hardship; participants at the Atlanta meeting
recommended that borrowers who relied on public assistance and
borrowers whose income did not exceed certain levels or whose debts
exceeded their income should be considered as satisfying the economic
hardship criteria; the San Francisco attendees recommended that the
Department consider a variety of factors in defining economic hardship,
including the ratio of debt payment to income, poverty level based on
family size, and any disabilities the borrower may have. The Kansas
City participants also recommended consideration of poverty level and
analysis of debt and income.
Participants at all of the meetings generally recommended that the
deferment be approved for one year at a time. However, there were
significant differences in the recommendations relating to the
documentation requirements. Participants at the Atlanta meeting
identified specific documents that the attendees believed should be
submitted to support a request for an economic hardship deferment;
participants at the New York meeting recommended that the Department
require ``reasonable, appropriate'' documentation; the attendees at the
San Francisco meeting recommended that the regulations not require the
borrower to provide documentation with the application for a deferment
but permit the lender to require supporting documentation; and
attendees at the Kansas City meeting recommended that the borrower be
allowed to self-certify eligibility for the deferment.
Forbearance based on income-to-debt ratio--The Department initially
interpreted section 428(b)(1)(V)(ii) of the HEA to provide that the
mandatory forbearance for borrowers with a debt burden under Title IV
of the Act that equals or exceeds 20 percent of the borrower's gross
income applied only to medical and dental interns. Attendees at the
regional meeting in Kansas City disagreed with this view and
recommended that the Department's regulations permit all borrowers who
meet the debt burden criteria to receive the forbearance. Participants
at the meeting in New York agreed with the Department's interpretation
but recommended that lenders be given the discretion to apply the debt
burden standard to all borrowers. Participants at all of the regional
meetings recommended that the regulations permit lenders to base a
decision regarding forbearance on income and debt information certified
by the borrower. The attendees at the Atlanta meeting specifically
recommended that the regulations permit the decision on forbearance to
be based on the borrower's anticipated income for the next 12 months
rather than relying on past income records.
Forbearance--General Requirements--Public Law 102-325 amended
section 428(c)(3) of the HEA to make changes in the requirements for
forbearance in the FFEL Program. Participants at all of the regional
meetings agreed that the Department should allow the lender discretion
as to when to approve changes in an existing forbearance arrangement
and recommended that borrower-certified information should be
sufficient to support the granting of a forbearance. In addition,
attendees at the regional meetings agreed that the period of
forbearance should not be counted against the borrower's limited
repayment period.
However, there was disagreement among the meeting participants on
other issues. Participants at the Kansas City regional meeting
recommended the use of a single national forbearance application form,
while attendees at the Atlanta meeting recommended the use of ``local''
forms and the attendees at the San Francisco meeting recommended the
continuation of current procedures. There was also disagreement as to
whether a forbearance should be available to take a loan out of
default--attendees at the Kansas City and Atlanta meetings agreed that
forbearance should be available for this purpose while attendees at the
New York meeting recommended that a forbearance be available only until
a default claim is submitted on the loan.
Finally, participants at all of the regional meetings identified a
number of situations in which the regulations could require a lender to
provide administrative forbearance. Participants at all of the
meetings, except Atlanta, recommended that notice to the borrower of
administrative forbearance be required, but participants at all the
meetings also recommended that the regulations not require the borrower
to agree to the forbearance.
Negotiated Rulemaking
After completion of the regional meetings, the Department prepared
draft proposed regulations to implement the provisions of Public Law
102-325 relating to the FFEL Program. In accordance with the
requirements of section 492(b) of the HEA, those regulations were
submitted to a negotiated rulemaking process. During the weeks of
January 4-8 and February 1-5, 1993, the Department met with negotiators
selected from among individuals nominated by attendees at the regional
meetings.
The discussion below of the proposed regulations reflects those
areas where the negotiators reached a consensus and the proposed
regulations reflect that agreement. The discussion below also indicates
where consensus was not reached during the negotiations. However, the
negotiators did not choose to discuss every part of these proposed
regulations. Accordingly, the discussion below of those issues not
discussed during the negotiations reflects only the views of the
Secretary.
Proposed Regulatory Changes
Section 682.209 Repayment of a Loan
The proposed regulations implement the provisions of section
428(b)(1)(E)(i) of the HEA in requiring lenders to offer income-
sensitive or graduated repayment schedules to borrowers. In developing
criteria to be used by lenders when establishing income-sensitive
repayment schedules, the Secretary believes that borrowers should be
required to provide documentation of income. The Secretary therefore
proposes that lenders request at least a copy of the borrower's most
recent Federal income tax return if one had been filed within eight
months prior to the date it is requested by the lender, and evidence
showing the amount of the borrower's most recent monthly disposable
income, including, if applicable, pay statements from employers and
documentation of any income received by the borrower from other
parties.
In addition, the Secretary does not believe it would be helpful to
the borrower or in the interests of the taxpayer if the borrower's
monthly payment amount is not changed whenever there is a significant
increase in the borrower's income. Therefore, the proposed regulations
require an adjustment in the monthly payment amount if the borrower's
disposable income, for each of three consecutive months, exceeds twice
the income upon which the payment amount is based. Similarly, if the
borrower experiences a comparable decrease in disposable income, the
Secretary strongly encourages a lender to grant a forbearance to a
borrower who asks the lender for assistance, but who is ineligible for
a deferment. In a notice of proposed rulemaking published in the
Federal Register on March 16, 1994 (59 FR 12484), the Secretary also
proposes to define ``disposable income'' in Sec. 682.200(b) as that
part of a borrower's compensation from an employer or other income from
any source that remains after the deduction of any amounts required by
law to be withheld.
The Secretary does not believe it would be helpful to the borrower
or in the interests of the taxpayer if the borrower's monthly payment
amount is dramatically increased in the later stages of the maximum
repayment period to accommodate payments that are too small in earlier
years. The proposed regulations prohibit a lender from establishing a
graduated repayment plan that schedules any single installment to be
greater than three times the amount of any other scheduled installment.
Under an income-sensitive repayment schedule, the borrower's payment
amount is adjusted at least annually. Given the fact that some
borrowers may experience wide fluctuations in their income from year-
to-year, a strict adherence to the ``three times'' rule in the case of
an annual adjustment to a borrower's income-sensitive repayment
schedule would not always permit the intention of a true income-
sensitive schedule to be achieved. However, the Secretary encourages
lenders, whenever feasible, to attempt to establish a borrower's
income-sensitive repayment amount within the ``three times'' rule. To
implement these requirements, the proposed regulations would permit a
lender to grant forbearance (which does not count against the maximum
10-year repayment period) under 34 CFR 682.211 for a period up to 3
years if the effect of an income-sensitive repayment schedule causes
the extension of the maximum repayment term of the loan.
Finally, the Secretary proposes that a fixed-amount repayment
schedule be used if a borrower fails to indicate a choice of repayment
schedules, or fails to maintain eligibility for an income-sensitive
repayment schedule.
The Secretary estimates that lenders collectively will need an
additional 20,000 hours to comply with the statutory requirement that
income-sensitive repayment schedules be offered to most borrowers. The
income documentation required from borrowers (the borrower's most
recent Federal income tax return if one had been filed within six
months prior to the date it is requested by the lender, and evidence
showing the amount of the borrower's most recent monthly disposable
income) is needed to obtain verifiable data to accurately determine the
amount of the borrower's installment payment.
Section 682.210 Deferment
The proposed regulations implement the requirements of section
428(b)(1)(M)(iii) of the HEA. During the negotiations, a point of
contention was the requirements a borrower must meet to qualify for an
economic hardship deferment. In developing criteria to be used by
lenders when granting an economic hardship deferment to a borrower
based on the borrower's income and debt-to-income ratio, as required by
section 435(o)(2) of the HEA, the Secretary believes that borrowers
should be required to provide documentation of income. The Secretary
therefore proposes that lenders obtain at least a copy of the
borrower's most recent Federal income tax return if one had been filed
within six months prior to the date it is requested, and evidence
showing the amount of the borrower's most recent monthly disposable
income.
In addition, the Secretary does not believe it would be helpful to
the borrower or in the interests of the taxpayer if a borrower who has
the means to repay the loan does not do so. Therefore, the Secretary
proposes an income limitation on a borrower who requests an economic
hardship deferment based on income and debt-to-income ratio. The
Secretary believes the income cap in the proposed regulations--no more
than four times the minimum wage or four times the poverty line for a
family of two--is reasonable.
The public, at the regional meetings in September, and through its
negotiators, did not agree on the definition of ``debt'' or the precise
ratio to be used when comparing debt to income. In the Secretary's
view, it would not be appropriate to include all debts that a borrower
owed in developing the debt-to-income ratio. In a related section of
the HEA (section 437A(c)) that evaluates a borrower's debt-to-income
ratio to determine if a borrower has a high risk of defaulting on a
loan, only the borrower's FFEL Program debts are considered. Therefore,
the Secretary believes that for the purpose of establishing the
borrower's eligibility for an economic hardship deferment, a similar
evaluation should be used. The proposed regulations reflect the
Secretary's belief that the calculation of ``debt'' for this purpose
should include only the monthly amount due on the borrower's non-
defaulted education loans that were obtained through a program
administered by any agency of the Federal government. Given the ease
with which borrowers can remove a default status from an FFEL Program
loan through a guaranty agency's loan rehabilitation program, a
conscientious borrower with a defaulted FFEL Program loan is not likely
to be harmed by this restriction solely because of the defaulted loan.
As for the debt-to-income ratio to be used, the Secretary notes
that the HEA has created a mandatory forbearance for a borrower who has
a Title IV debt-to-income ratio that equals or exceeds 20 percent.
Since a deferment during which the borrower's interest is paid by the
federal government provides a much greater financial benefit to a
borrower than a forbearance, it would be logical to establish a similar
standard for a borrower to meet to qualify for a deferment. Therefore,
in the Secretary's opinion, the 20 percent ratio is appropriate.
The Secretary estimates that lenders collectively will need an
additional 14,000 hours to process the statutorily required economic
hardship deferments for borrowers.
The income and debt documentation required from borrowers (the
borrower's most recent Federal income tax return if one had been filed
within six months prior to the date it is requested by the lender;
evidence showing the amount of the borrower's most recent monthly
disposable income; and evidence showing the most recent monthly amount
due on the borrower's non-defaulted education loans (or eligible
defaulted loans) that were obtained through a Federal program) is
needed to obtain verifiable data to accurately determine the borrower's
eligibility to receive an economic hardship deferment.
Section 682.211 Forbearance
Consistent with the rationale expressed earlier with regard to
income-sensitive repayment schedules and economic hardship deferments,
the Secretary does not believe it would be helpful to the borrower or
in the interests of the taxpayer if a borrower who has the means to
repay the loan does not do so. The Secretary proposes that, in order to
qualify for a mandatory general forbearance under Sec. 682.211(i)(2)--
which permits a borrower to postpone making scheduled loan payments--a
borrower should be required to provide at least a copy of his or her
most recent Federal income tax return if one had been filed within six
months prior to the date the forbearance is requested, and evidence
showing the amount of the borrower's most recent monthly disposable
income. In conformance with section 428(b)(1)(V) of the HEA, this
requirement does not apply if the borrower is a medical or dental
intern or resident, as described in Sec. 682.211(i)(1).
Based on comments received at the regional meetings and other
information provided to the Secretary from other sources, the Secretary
has concluded that the public's views concerning the general
applicability of the use of an administrative forbearance to assist a
borrower in avoiding default should be reflected in the proposed
regulations. The Secretary agrees that it would be in the best
interests of borrowers and taxpayers to require lenders to grant
administrative forbearance to borrowers or endorsers under the
exceptional conditions described in Sec. 682.211(j), such as
emergencies and national disasters, whereas the granting of the
forbearances authorized under Sec. 682.211(f) is best left to the
judgement of the lender on a case-by-case basis. The proposed
regulations would permit a lender to grant forbearance under
Sec. 682.211 for a period of up to 3 years if the effect of an income-
sensitive repayment schedule causes the extension of the maximum
repayment term of the loan, and up to one year if the effect of a
variable interest rate on a fixed-amount or graduated repayment
schedule similarly causes the extension of the maximum repayment term.
The Secretary estimates that lenders collectively will need an
additional 15,000 hours to process mandatory forbearances for
borrowers. The income and debt documentation required from borrowers
(the borrower's most recent Federal income tax return if one had been
filed within six months prior to the date it is requested by the
lender; evidence showing the amount of the borrower's most recent
monthly disposable income; and evidence showing the most recent monthly
amount due on the borrower or endorser's Title IV loans) is needed to
obtain verifiable data to accurately determine the borrower or
endorser's eligibility to receive a mandatory forbearance.
Executive Order 12866
These proposed regulations have been reviewed in accordance with
Executive Order 12866. Under the terms of the order the Secretary has
assessed the potential costs and benefits of this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those determined by the
Secretary to be necessary for administering this program effectively
and efficiently, as discussed in those sections of the preamble that
relate to specific sections of the regulations. Burdens specifically
associated with information collection requirements, if any, are
identified and explained elsewhere in this preamble under the heading
Paperwork Reduction Act of 1980.
In assessing the potential costs and benefits--both quantitative
and qualitative--of these proposed regulations, the Secretary has
determined that the benefits of the proposed regulations justify the
costs, and do not interfere with state, local, and tribal governments
in the exercise of their governmental functions.
To assist the Department in complying with the specific
requirements of Executive Order 12866, the Secretary invites comment on
whether there may be further opportunities to reduce any potential
costs or increase potential benefits resulting from these proposed
regulations without impeding the effective and efficient administration
of the program.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities.
Certain reporting, recordkeeping, and compliance requirements are
imposed on lenders by the regulations. These requirements, however,
would not have a significant impact because they would not impose
excessive regulatory burdens or require unnecessary federal
supervision.
Paperwork Reduction Act of 1980
Sections 682.209, 682.210, and 682.211 contain information
collection requirements. As required by the Paperwork Reduction Act of
1980, the Department of Education will submit a copy of these sections
to the Office of Management and Budget (OMB) for its review. (44 U.S.C.
3504(h))
These regulations affect lenders that participate in the FFEL
Program. The Department needs and uses the information to properly
carry out its responsibility to administer certain aspects of the HEA.
Annual public reporting burden for this collection of information
by approximately 7,500 lending institutions participating in the FFEL
Program is expected to increase by a total of 49,000 hours. The
collection and reporting of the information in Sec. 682.209(a) is
expected to occur two million times per year, with each occurrence
requiring lender processing time of 0.01 hours, for a total increase of
20,000 hours. The collection and reporting of the information in
Sec. 682.210(s)(6) is expected to occur 1.4 million times per year,
with each occurrence requiring lender processing time of 0.01 hours,
for a total increase of 14,000 hours. The collection and reporting of
the information in Sec. 682.211 (i) and (j) is expected to occur 1.5
million times per year, with each occurrence requiring lender
processing time of 0.01 hours, for a total increase of 15,000 hours.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, OMB, Room 3002, New Executive
Office Building, Washington, DC 20503; Attention: Daniel J. Chenok.
Invitation To Comment
Interested persons are invited to submit comments and
recommendations regarding these proposed regulations.
All comments submitted in response to these proposed regulations
will be available for public inspection, during and after the comment
period, in ROB-3, room 4310, 7th and D Streets, SW., Washington, DC,
between the hours of 8:30 a.m. and 4 p.m., Monday through Friday of
each week except federal holidays.
Assessment of Educational Impact
The Secretary particularly requests comments on whether the
proposed regulations in this document would require transmission of
information that is being gathered by or is available from any other
agency or authority of the United States.
List of Subjects in 34 CFR Part 682
Administrative practice and procedure, Colleges and universities,
Education, Loan programs--education, Student aid, Vocational education.
(Catalog of Federal Domestic Assistance Numbers: 84.032 Federal
Family Education Loan Program)
Dated: January 13, 1994.
Richard W. Riley,
Secretary of Education.
The Secretary proposes to amend part 682 of title IV of the Code of
Federal Regulations, to read as follows:
PART 682--FEDERAL FAMILY EDUCATION LOAN PROGRAM
1. The authority citation for part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
2. Section 682.209 has been amended by adding paragraphs (a)(6)
(iii) through (viii) and revising paragraphs (a)(7)(ii) and (h)(4)(ii)
to read as follows:
Sec. 682.209 Repayment of a loan.
(a) * * *
(6) * * *
(iii) Not more than six months prior to the date that the
borrower's first payment is due, the lender shall offer a choice of a
fixed-amount, graduated, or income-sensitive repayment schedule to a
new borrower who receives a Stafford or SLS loan first disbursed on or
after July 1, 1993. For purposes of this section, a ``new borrower'' is
an individual who has no outstanding principal or interest balance on
an FFEL Program loan as of July 1, 1993 or on the date he or she
obtains a loan on or after July 1, 1993. This term also includes a
borrower who obtains a Federal Consolidation Loan on or after July 1,
1993 if the borrower has no other outstanding FFEL Program loan when
the Consolidation Loan is made. The lender shall also offer a choice of
repayment schedules to any individual whose Consolidation loan
application is received by the lender on or after January 1, 1993. The
Secretary encourages lenders to offer the choice of repayment schedules
to all other borrowers.
(iv) The repayment schedule must require that each payment equal at
least the interest that accrues during the interval between scheduled
payments.
(v) The lender shall require the borrower to repay the loan under a
fixed-amount repayment schedule described in paragraph (a)(6)(vi) of
this section if the borrower does not select, or does not qualify for,
an income-sensitive or a graduated repayment schedule.
(vi) Under a fixed-amount repayment schedule, the borrower is
scheduled to pay the same amount for each installment payment made
during the repayment period, except that the borrower's final payment
may be slightly more or less than the other payments.
(vii) Under a graduated repayment schedule, the amount of the
borrower's installment payment is scheduled to change (usually by
increasing) during the course of the repayment period. If a graduated
repayment schedule is established, it may not provide for any single
installment that is more than three times greater than any other
installment. An agreement as specified in paragraph (c)(1)(ii) of this
section is not required if the schedule provides for less than the
minimum annual payment amount specified in paragraph (c)(1)(i) of this
section.
(viii) (A) Under an income-sensitive repayment schedule, the amount
of the borrower's installment payment is adjusted annually, based on
the borrower's expected monthly disposable income, as defined in
Sec. 682.200(b), during the course of the repayment period. The
Secretary encourages lenders to develop income-sensitive repayment
schedules that do not result in any single installment that is more
than three times greater than any other installment.
(B) The lender shall inform the borrower that the loan must be
repaid within the time limits specified under paragraph (a)(7) of this
section.
(C) No earlier than 90 days prior to the due date of the borrower's
initial installment payment and subsequent annual payment adjustment
under an income-sensitive repayment schedule, the lender shall request
documentation from the borrower sufficient for the lender to make a
reasonable determination of what the borrower's payment amount should
be. The lender shall require the borrower to submit at least the
following documentation:
(1) Evidence showing the amount of the borrower's most recent
monthly disposable income from all sources, including, if applicable,
pay statements from employers and documentation of any income received
by the borrower from other parties.
(2) A copy of the borrower's Federal income tax return if the
borrower filed a tax return within eight months prior to the date the
lender requested it.
(D) If the borrower fails to provide the documentation described in
paragraph (a)(6)(viii)(C) of this section, the lender shall require the
borrower to repay the loan in accordance with either a fixed-amount or
a graduated repayment schedule.
(E) The agreement between the borrower and lender must specify that
if, at any time, the borrower's monthly disposable income for each of
three consecutive months exceeds twice the income upon which the
current installment amount is calculated, the borrower must inform the
lender of that fact within 30 days after receiving the income.
(F) Not later than 30 days after learning from the borrower or
other sources that the borrower's monthly disposable income has
exceeded twice the amount upon which the current installment amount is
calculated for each of three consecutive months, the lender shall
notify the borrower that, unless the borrower provides documentation
showing that information to be incorrect or, if it is correct, that the
borrower's monthly disposable income has since decreased to the level
that the payment amount had been based on, the amount of the borrower's
installment payment will be increased commensurately, beginning with
the second payment due after the date the lender notifies the borrower
of the new payment amount.
(7) * * *
(ii) If the borrower receives an authorized deferment or is granted
forbearance, as described in Sec. 682.210 or Sec. 682.211 respectively,
the periods of deferment or forbearance are excluded from
determinations of the 5-, 10-, and 15-year periods, and from the 12-,
15-, 20-, 25-, and 30-year periods for repayment of a Consolidation
loan pursuant to Sec. 682.208(h).
* * * * *
(h) * * *
(4) * * *
(ii) Does not include the unpaid balance on any loan on which the
borrower is in default, unless the borrower has made satisfactory
repayment arrangements with the holder to repay that loan.
* * * * *
(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1079,
1082, 1085)
3. Section 682.210 has been amended by adding a new paragraph
(a)(11); by revising paragraph (c)(4); and adding a new paragraph (s)
to read as follows:
Sec. 682.210 Deferment.
(a) * * *
(11) If two individuals are jointly liable for repayment of a PLUS
loan or a Consolidation loan, the lender shall grant a request for
deferment only if both individuals meet the requirements of this
section.
* * * * *
(c) * * *
(4) A borrower serving in a medical internship residency program,
except for an internship in dentistry, is prohibited from receiving or
continuing deferment on a Stafford, SLS, or Consolidation loan under
paragraph (c) of this section.
* * * * *
(s) Deferments for new borrowers on or after July 1, 1993.
(1) General. A new borrower who receives an FFEL Program loan first
disbursed on or after July 1, 1993 is entitled to receive deferments
under paragraphs (s)(2) through (s)(6) of this section. For purposes of
this section, a ``new borrower'' is an individual who has no
outstanding principal or interest balance on an FFEL Program loan as of
July 1, 1993 or on the date he or she obtains a loan on or after July
1, 1993. This term also includes a borrower who obtains a Federal
Consolidation Loan on or after July 1, 1993 if the borrower has no
other outstanding FFEL Program loan when the Consolidation Loan was
made.
(2) Student deferment. An eligible borrower is entitled to a
deferment for half-time study in accordance with the rules prescribed
in Sec. 682.210(c), except that the borrower is not required to obtain
a Stafford or SLS loan for the period of enrollment covered by the
deferment.
(3) Graduate fellowship deferment. An eligible borrower is entitled
to a graduate fellowship deferment in accordance with the rules
prescribed in Sec. 682.210(d).
(4) Rehabilitation training program deferment. An eligible borrower
is entitled to a rehabilitation training program deferment in
accordance with the rules prescribed in Sec. 682.210(e).
(5) Unemployment deferment. An eligible borrower is entitled to an
unemployment deferment in accordance with the rules prescribed in
Sec. 682.210(h) for periods that, collectively, do not exceed 3 years.
(6) Economic hardship deferment. An eligible borrower is entitled
to an economic hardship deferment for periods of up to one year at a
time that, collectively, do not exceed 3 years if the borrower provides
documentation satisfactory to the lender showing that the borrower--
(i) Is working full-time and is earning an amount which does not
exceed the greater of--
(A) The minimum wage rate described in section 6 of the Fair Labor
Standards Act of 1938; or
(B) An amount equal to 100 percent of the poverty line for a family
of 2 as determined in accordance with section 673(2) of the Community
Service Block Grant Act; or
(ii) Is not receiving monthly disposable income, as defined in
Sec. 682.200(b), from all sources that is more than four times the
amount specified in paragraph (s)(6)(i) of this section, and the amount
of the borrower's payments each month (or a proportional share if the
payments are due less frequently than monthly) on education loans
obtained through a Federal program on which the borrower is not
considered by the holder of the loan to be in a default status, is
collectively equal to or greater than 20 percent of the borrower's
monthly disposable income. The lender shall require the borrower to
submit at least the following documentation to qualify for a deferment
under paragraph (s)(6)(ii) of this section:
(A) Evidence showing the amount of the borrower's most recent
monthly disposable income from all sources.
(B) A copy of the borrower's Federal income tax return if the
borrower filed a tax return within six months prior to the date the
deferment is requested.
(C) Evidence showing the most recent monthly amount due on the
borrower's non-defaulted education loans (or eligible defaulted loans)
that were obtained through a Federal program. For this purpose, a
borrower's defaulted education loan obtained through a Federal program
may be included only if the holder of the loan provides a written
statement that the borrower has made satisfactory arrangements to repay
the loan.
(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082,
1085)
4. Section 682.211 has been amended by redesignating paragraph
(a)(4) as (a)(5) and adding a new paragraph (a)(4); by adding new
paragraphs (f) (6) through (10); and by adding new paragraphs (i) and
(j) to read as follows:
Sec. 682.211 Forbearance.
(a) * * *
(4) If two individuals are jointly liable for repayment of a PLUS
loan or a Consolidation loan, the lender may grant forbearance on
repayment of the loan only if the ability of both individuals to make
scheduled payments has been impaired.
* * * * *
(f) * * *
(6) For a period not to exceed 60 days after the lender receives
reliable information indicating that the borrower (or student in the
case of a PLUS loan) has died, or the borrower has become totally and
permanently disabled, until the lender receives documentation of death
or total and permanent disability, pursuant to Sec. 682.402 (b) or (c);
(7) For periods necessary for the Secretary or guaranty agency to
determine the borrower's eligibility for cancellation of the loan
because of attendance at a closed school or false certification of loan
eligibility, pursuant to Sec. 682.402 (d) or (e), or the borrower's or,
if applicable, endorser's bankruptcy, pursuant to Sec. 682.402(f);
(8) For a period of delinquency at the time a loan is sold or
transferred, if the borrower or endorser is less than 60 days
delinquent on the loan at the time of sale or transfer;
(9) For a period of up to one year in cases where the effect of a
variable interest rate on a fixed-amount or graduated repayment
schedule causes the extension of the maximum repayment term; or
(10) For a period of up to 3 years in cases where the effect of an
income-sensitive repayment schedule causes the extension of the maximum
repayment term.
* * * * *
(i) Mandatory forbearance.--(1) Medical or dental interns or
residents. Upon receipt of a written request and sufficient supporting
documentation from a borrower serving in a medical or dental internship
or residency program, a lender shall grant forbearance renewable at 12-
month intervals to a borrower who has exhausted his or her eligibility
for a deferment under Sec. 682.210(n), or whose promissory note does
not provide for such a deferment--
(i) For the length of time remaining in the borrower's medical or
dental internship or residency that must be successfully completed
before the borrower may begin professional practice or service; or
(ii) For the length of time that the borrower is serving in a
medical or dental internship or residency program leading to a degree
or certificate awarded by an institution of higher education, a
hospital, or a health care facility that offers postgraduate training.
(2) Borrowers who are not medical or dental interns or residents,
and endorsers. Upon receipt of a written request and sufficient
supporting documentation from an endorser, or from a borrower (other
than a borrower who is serving in a medical or dental internship or
residency described in paragraph (i)(1) of this section), a lender
shall grant forbearance in increments of up to one year, for periods
that, collectively, do not exceed three years, if the borrower or
endorser--
(i) Is currently obligated to make payments on Title IV loans; and
(ii) The amount of such payments each month (or a proportional
share if the payments are due less frequently than monthly) is
collectively equal to or greater than 20 percent of the borrower or
endorser's monthly disposable income.
(3) Documentation. Before granting a forbearance to a borrower or
endorser under paragraph (i)(2) of this section, the lender shall
require the borrower or endorser to submit at least the following
documentation:
(i) Evidence showing the amount of the borrower or endorser's most
recent monthly disposable income, as defined in Sec. 682.200(b).
(ii) A copy of the borrower or endorser's Federal income tax return
if the borrower or endorser filed a tax return within six months prior
to the date the forbearance is requested.
(iii) Evidence showing the most recent monthly amount due on the
borrower or endorser's Title IV loans.
(j) Mandatory administrative forbearance. (1) The lender shall
grant a mandatory automatic forbearance for the periods specified in
paragraph (j)(2) of this section until the lender is notified by the
Secretary or a guaranty agency that the forbearance period no longer
applies. The lender may not require a borrower who is eligible for an
automatic forbearance under this paragraph to submit a request or
supporting documentation.
(2) The lender is not required to notify the borrower (or endorser,
if applicable) at the time the forbearance is granted, but shall grant
a forbearance to a borrower or endorser during a period, and the 30
days following the period, when the lender is notified by the Secretary
that--
(i) Exceptional circumstances exist, such as a local or national
emergency or military mobilization; or
(ii) The geographical area in which the borrower or endorser
resides has been designated a disaster area by the president of the
United States or Mexico, the prime minister of Canada, or by a governor
of a state.
(3) As soon as feasible, or by the date specified by the Secretary,
the lender shall notify the borrower (or endorser, if applicable) that
the lender has granted a forbearance and the date that payments should
resume. The lender's notification shall state that the borrower or
endorser--
(i) May decline the forbearance and continue to be obligated to
make scheduled payments; or
(ii) Consents to making payments in accordance with the lender's
notification if the forbearance is not declined.
(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1080,
1082)
[FR Doc. 94-6944 Filed 3-23-94; 8:45 am]
BILLING CODE 4000-01-P
