02-22113. Federal Family Education Loan (FFEL) Program and William D. Ford Federal Direct Loan (Direct Loan) Program

AGENCY:

Office of Postsecondary Education, Department of Education.

ACTION:

Notice of child care provider loan forgiveness demonstration program for fiscal year (FY) 2002.

SUMMARY:

The Secretary announces the eligibility criteria and procedures for implementation of the child care provider loan forgiveness demonstration program authorized by section 428K of the Higher Education Act of 1965, as amended (HEA), for FY 2002. Under the demonstration program, some child care providers may have a portion of their student loans forgiven for continued work in certain child care facilities each year up to 5 years.

This notice explains the criteria for both new applicants and for borrowers who have previously applied for, and received, loan forgiveness under this loan forgiveness program during a prior fiscal year. For the purpose of program administration, borrowers who have previously applied for, and received, loan forgiveness under this loan forgiveness program during a prior fiscal year are called “renewal applicants”.

EFFECTIVE DATE:

This notice is effective August 29, 2002.

Deadline for Submission of Applications: If you are a new applicant, the demonstration program will accept completed Child Care Provider Loan Forgiveness Applications until such time as the funds appropriated for the current fiscal year 2002 have been fully committed.

Eligible New Applicants:

(A) To qualify for the child care provider loan forgiveness demonstration program, an applicant must:

(1) Be a new borrower with eligible loans, in the FFEL or Direct Loan Programs, as defined in the “Program Definitions” section of this notice;

(2) Have received an associate or bachelor's degree in the field of early childhood education or child care that was awarded by an institution of higher education after October 7, 1998; and

(3) After receiving an associate's or bachelor's degree in early childhood education or child care, have worked full-time for at least two consecutive years preceding the year during which forgiveness is requested as a child care provider in a facility that serves a low-income community.

(B) A borrower may not receive benefits for the same child care service under both subtitles D of title I of the National and Community Service Act of 1990 (Americorps) and this demonstration program.

Renewal Applicants Who Received a Partial Forgiveness in FY 2001:

(A) To qualify for further loan forgiveness under the Child Care Provider Loan Forgiveness Demonstration Program, a borrower must:

(1) Have been determined previously to meet the eligibility requirements for a forgiveness as described in this notice and continues to meet those criteria; and

(2) Have completed the third consecutive year of full-time employment as a provider in a child care facility that serves a low-income community.

FOR FURTHER INFORMATION CONTACT:

Mr. Don Watson at the U.S. Department of Education, 830 First Street NE., Washington, DC 20202-5346. Telephone: [phone]. To receive an application, you may call the Child Care Provider Loan Forgiveness support desk toll free at 1-888-562-7002. You may also write to the Child Care Provider Loan Forgiveness Program to receive an application at, P.O. Box 4639, Utica, NY 13504-4639. In addition, free Internet access to the application and forbearance forms are available, in Adobe Portable Document Format (PDF) at the following site: http://www.ed.gov/​offices/​OSFAP/​Students/​.

If you use a telecommunications device for the deaf (TDD), you may call the Federal Information Relay Service (FIRS) at 1-800-877-8339.

Individuals with disabilities may obtain this document in an alternative format (e.g., Braille, large print, audiotape, or computer diskette) on request to the program contact persons listed under FOR FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:

Background

This notice announces the continuation of the demonstration program, first implemented in FY 2001, of loan forgiveness for child care providers as authorized under section 428K of the HEA. The HEA authorizes the Secretary, contingent upon the availability of annual appropriations, to undertake a loan forgiveness demonstration program for borrowers under the FFEL and the Direct Loan programs who have received an associate's or bachelor's degree in early childhood education or child care and who are providing full-time child care services in child care facilities that serve certain low income communities. The child care provider loan forgiveness demonstration program is intended to bring more highly trained individuals into the early child care profession and to retain those providers for longer periods of time. The Congress has appropriated $1,000,000 for new applicants under the demonstration program for fiscal year 2002. As described in the notice published in the Federal Register on July 27, 2001 (66 FR 39263-39265), the Secretary committed funds from the FY 2001 appropriation for this demonstration program to cover the full five years of loan forgiveness for borrowers who were granted loan forgiveness during that fiscal year. Thus, any additional forgiveness granted to borrowers who received forgiveness during FY 2001 will be funded from FY 2001 appropriations and not from FY 2002 appropriations.

Under the demonstration program, new FFEL and Direct Loan borrowers (as defined in the “Program Definitions” section of this notice) may receive forgiveness of up to 100 percent of their total eligible loans made under the FFEL subsidized and unsubsidized Federal Stafford Loan, Direct Subsidized Loan, and Direct Unsubsidized Loan programs. A loan is eligible for forgiveness only if it (1) was made on or after October 7, 1998, the date of enactment of the Higher Education Amendments of 1998, which authorized the program; (2) was received for the purpose of obtaining an associate's or bachelor's degree in early childhood education or child care; and (3) was made before the beginning of qualifying service. Loan forgiveness is provided to eligible borrowers on a progressive basis (i.e., 20 percent of the total amount of loans following two years of service; 20 percent following the third year of service; and 30 percent following each of the fourth and fifth years of service) following completion of consecutive years of full-time child care employment in a child care facility serving a low-income community.

Under section 428K of the HEA, loan forgiveness is available to eligible borrowers on a first-come, first-served basis, contingent upon the availability of funds. Priority for loan forgiveness in subsequent fiscal years is given to borrowers who received loan forgiveness in the preceding fiscal year.

The Secretary is required to evaluate the success of the demonstration program in achieving the statutory goals of attracting and retaining highly trained individuals into the early child care profession. In order to perform this evaluation and to ensure priority for eligible applicants for subsequent-year funding, the Secretary is continuing his practice from last year of committing funds from the current fiscal year to cover the full five years of loan forgiveness for eligible new applicants.

Procedures

The Secretary has determined that the issuance of regulations to implement the loan forgiveness demonstration program for child care is not necessary at this time. Section 428K of the HEA creates the loan forgiveness for child care providers program as a demonstration program. Funding was provided for the second year of this demonstration program in the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act 2002, enacted on January 10, 2002 (Pub. L. 107-116), in which $1,000,000 was appropriated.

In light of the limited amount of funds available and the fact that the loan forgiveness program for child care providers is a demonstration program, the Secretary has decided to issue this notice to continue the loan forgiveness demonstration program for the 2002 application year and to explain the procedures for granting loan forgiveness to new applicants and renewal applicants for the 2002 application year. These procedures are based on the statutory language, and further regulations are not needed at this time.

Program Definitions

Child care facility means a facility, including a home, that provides child care services and meets applicable State or local government licensing, certification, approval, or registration requirements.

Child care services means activities and services for the education and care of children from birth through age five by an individual who has a degree in early childhood education.

Consecutive years of employment means maintaining full-time employment for successive, uninterrupted 12-month periods as a child care provider in an eligible facility.

Degree means an associate's or a bachelor's degree awarded by an institution of higher education.

Early childhood education means education in the areas of early child education, child care, or any other educational area related to child care that the Secretary determines appropriate.

Eligible loan means a loan made after October 7, 1998 to a new borrower under the subsidized or unsubsidized Federal Stafford Loan, Direct Subsidized Loan, or Direct Unsubsidized Loan programs and made for the purpose of obtaining the borrower's associate's or bachelor's degree in early childhood education or child care prior to employment as a child care provider.

Full-time employment means working as a child care provider in a child care facility at least 30 hours per week.

Institution of higher education means a public or nonprofit private institution of higher education as defined in section 101 of title I of the HEA.

Low-income community means a community in which at least 70 percent of the individuals are from families that earn less than 85 percent of the State median household income. For the purposes of this notice, the community comprises the children who receive child care at the facility.

New borrower means a borrower who had no outstanding loan balance under the FFEL or Direct Loan program on October 7, 1998, or who had no outstanding loan balance on the date that he or she obtains a loan after October 7, 1998.

Renewal applicant means a FFEL or Direct Loan program borrower who has previously applied for, and received, loan forgiveness benefits under this loan forgiveness program in a prior fiscal year.

Forgiveness Amounts

(A) A borrower employed full-time as a child care provider may receive forgiveness of the borrower's eligible loans in the amount of:

(1) Twenty percent of the total amount of eligible loans after the second consecutive year (24 continuous months) of full-time employment;

(2) Twenty percent of the total amount of eligible loans after the third consecutive year (36 continuous months) of full-time employment; and

(3) Thirty percent of the total amount of eligible loans after each of the fourth and fifth consecutive years (48 and 60 continuous months respectively) of full-time employment.

(B) An eligible borrower not previously participating in the loan forgiveness program who secures an associate's or bachelor's degree in early childhood education or child care after previously graduating from an institution of higher education in an area other than early childhood education is eligible to receive forgiveness of the total amount of eligible loans received for a maximum of two academic years in pursuit of that early childhood education or child care degree, according to the percentages specified in paragraph (A) of this section.

(C) For each year of qualifying service, the Secretary forgives the percentage of the eligible loans plus the proportionate amount of interest that accrues on the loan.

(D) The loan holder does not refund payments that were received from, or paid on behalf of, a borrower who qualifies for loan forgiveness under this section.

Application Procedures for Cancellation and Payment Processing

(A) After completing the eligible child care service, a borrower may request loan forgiveness from the Secretary on a form approved by the Secretary and accompanied by any required supporting documentation.

(B) The Secretary, after receiving a completed and accurate application:

(1) Makes a loan forgiveness commitment to a qualified new applicant on a first-come, first-served basis according to the date that a complete and accurate application is received and contingent upon the availability of funds; and

(2) Reaffirms the prior commitment for a renewal applicant if the renewal applicant continues to meet the eligibility requirements.

(C) The Secretary notifies applicants of their eligibility or ineligibility for loan forgiveness and the amount that is being forgiven for that application year.

(D) If the Secretary approves the borrower's request for forgiveness of the loan, the Secretary forwards payment of the forgiven amount to the holder of the borrower's largest current outstanding unsubsidized loan, if any, for payment on that loan. If the borrower has no outstanding unsubsidized loans, the Secretary forwards the forgiven amount to the holder of the borrower's largest current outstanding subsidized loan.

(E) If the holder determines that the amount of the loan forgiveness payment received from the Secretary exceeds the remaining balance of the loan to which it is designated, the holder shall apply the remaining balance to another eligible loan of the borrower held by the holder. If the holder does not hold any of the borrower's other eligible loans, the lender shall refund the balance to the Secretary. If applicable, the Secretary then forwards the balance to another holder of the borrower's eligible loans.

Application Procedures for Forbearance

(A) At the written request of the borrower, the Secretary or the holder of eligible loans grants forbearance in annual increments to a borrower performing the type of service that would qualify the borrower for loan forgiveness, unless the borrower has been granted a deferment for that period of service.

(B) Before a new applicant receives forbearance for eligible child care service, the borrower must:

(1) Submit documentation to the Secretary or the holder for the period of the annual forbearance request showing the beginning and anticipated ending dates that the borrower is expected to perform, for that year, eligible child care service; and

(2) Certify the borrower's understanding that receiving forbearance for eligible service does not guarantee receipt of loan forgiveness benefits.

(C) Before a renewal applicant receives forbearance for eligible child care service, the renewal applicant must submit documentation to the Secretary or the holder for the period of the annual forbearance request showing the beginning and anticipated ending dates that the borrower is expected to perform, for that year, eligible child care service.

Electronic Access to This Document

You may view this document, as well as all other Department of Education documents published in the Federal Register, in text or Adobe Portable Document Format (PDF) on the Internet at the following site: www.ed.gov/​legislation/​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 [phone].

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.

Program Authority: 20 U.S.C. 1078-11.

Dated: August 26, 2002.

Sally L. Stroup,

Assistant Secretary, Office of Postsecondary Education.