[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Proposed Rules]
[Pages 49130-49134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23125]
[[Page 49129]]
_______________________________________________________________________
Part VI
Department of Education
_______________________________________________________________________
34 CFR Part 682
Federal Family Education Loan Program; Proposed Rule
Federal Register / Vol. 60, No.183 / Thursday, September 21, 1995 /
Proposed Rules
[[Page 49130]]
DEPARTMENT OF EDUCATION
34 CFR Part 682
RIN 1840-AC21
Federal Family Education Loan Program
AGENCY: Department of Education.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Secretary proposes to amend the regulations governing the
Federal Family Education Loan (FFEL) Program. The FFEL regulations
govern the Federal Stafford Loan Program, the Federal Supplemental
Loans for Students (Federal SLS) Program, the Federal PLUS Program, and
the Federal Consolidation Loan Program, collectively referred to as the
Federal Family Education Loan Program. The Federal Stafford Loan, the
Federal SLS, the Federal PLUS and the Federal Consolidation Loan
programs are hereinafter referred to as the Stafford, SLS, PLUS and
Consolidation Loan programs. The Secretary is proposing to make changes
to the FFEL Program regulations to reflect policies and procedures
implemented in the William D. Ford Federal Direct Student Loan Program,
hereinafter referred to as the Direct Loan Program.
DATES: Comments must be received on or before October 23, 1995.
ADDRESSES: All comments concerning these proposed regulations should be
addressed to Pamela A. Moran, U.S. Department of Education, Post Office
Box 23272, Washington, DC 20026-3272. Comments may also be sent through
the internet to ffel__conform@ed.gov.
To ensure that public comments have maximum effect in developing
the final regulations, the Department urges that each comment clearly
identify the specific section or sections of the regulations that the
comment addresses and that comments be in the same order as the
regulations.
Comments that concern information collection requirements must be
sent to the Office of Management and Budget at the address listed in
the Paperwork Reduction Act section of this preamble. A copy of those
comments may also be sent to the Department representative named in the
preceding paragraph.
FOR FURTHER INFORMATION CONTACT: Barbara Bauman, Program Specialist,
Loans Branch, Policy Development Division, Policy, Training, and
Analysis Service, U.S. Department of Education, 600 Independence
Avenue, SW. (room 3053, 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 amend 34 CFR Part 682 of the
Department's regulations to adopt certain policies and procedures that
have been used in the Direct Loan Program.
On October 7, 1994, the Secretary published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register (59 FR 51346) proposing
changes to the FFEL regulations to reflect certain policy decisions
made during development of the Direct Loan regulations. The comments on
the NPRM suggested additional changes to those included in the proposed
rule. In publishing the final regulations on November 29, 1994 (59 FR
61210), the Secretary stated that he needed to further evaluate the
implications of these additional changes. This NPRM proposes to adopt
many of the suggestions made by those comments. The Secretary believes
these regulations will streamline and improve the efficiency of the
FFEL program.
By improving the efficiency of the FFEL Program, these proposed
regulations will enhance opportunities for postsecondary education.
Encouraging students to graduate from high school and to pursue high
quality postsecondary education are important elements of the National
Education Goals.
The student aid programs also enable both current and future
workers to have the opportunity to acquire both basic and
technologically-advanced skills needed for today's and tomorrow's
workplace. These programs provide the financial means for an increasing
number of Americans to receive an education that will prepare them to
think critically, communicate effectively, and solve problems
efficiently, as called for in the National Education Goals.
Proposed Regulatory Changes
The Secretary proposes to amend the following sections of the
regulations to reflect changes needed to conform the FFEL Program to
the final regulations for the Direct Loan Program. Those changes not
related to the Direct Loan Program are otherwise noted.
Section 682.200 Definitions
Satisfactory repayment arrangement--The Secretary, in order to
reflect a recent statutory change made by the Higher Education
Technical Amendments of 1993, Public Law 103-208, proposes to amend the
regulations to clarify that a borrower may make satisfactory repayment
arrangements on a defaulted FFEL debt for purposes of regaining Title
IV eligibility only one time.
Section 682.201 Eligible Borrowers
Section 682.201(c)(1)(iii)(D)--In order to align the FFEL Program
with the Direct Loan Program regulations, the Secretary proposes to
allow a borrower in a default status to be eligible for a consolidation
loan if the borrower either makes satisfactory repayment arrangements
as that term is defined or agrees to repay the consolidation loan under
an income-sensitive repayment plan.
Section 682.207 Due Diligence in Disbursing a Loan
Section 682.207(c)(4)--The Secretary proposes, in order to conform
to Direct Loan Program regulations and to reflect current FFEL policy,
to allow a loan to be disbursed in a single installment, if at least
one-half of the loan period has elapsed before the first disbursement
is made.
Section 682.207(d)(2)(iii)--The Secretary proposes to clarify that
a lender has an additional 30-day period to make a late disbursement of
a loan if the school documents a borrower's exceptional circumstances.
Previously, the regulations suggested that documentation of the
exceptional circumstances was required for all late disbursements.
The Secretary also proposes to remove the references in
Sec. 682.207 and Sec. 682.604 providing for lender or guaranty agency
options regarding disbursement policies, so that every eligible student
is assured certain opportunities with the approval of the school.
Section 682.209 Payment Application and Prepayment
Section 682.209(b)(2)--The Secretary further clarifies that this
section deals with the application of payments and how to deal with
prepayments. The Secretary proposes to require a lender who receives a
prepayment (made by a borrower without the borrower's specific
instructions as to how to apply the proceeds) in an amount that equals
or exceeds the borrower's scheduled monthly repayment amount to apply
that amount to future installment payments on the loan by advancing the
borrower's next payment due date. The Secretary proposes this change
[[Page 49131]]
(previously left to the lender's discretion and allowed only in
situations where a borrower's payment exceeded 3 full payments) to
conform to current Direct Loan Program policies and so that all
borrowers are treated equally.
Section 682.210 Deferment
Section 682.210(a)(8)--The Secretary proposes to clarify that a
defaulted borrower is eligible for a deferment only if the borrower has
made satisfactory repayment arrangements with the lender prior to the
lender's filing of a default claim on the loan.
Section 682.211 Forbearance
Section 682.211(f)(9)--The Secretary proposes to allow a lender to
provide administrative forbearance in situations where a borrower ends
a period of eligible deferment in delinquent status.
Section 682.401 Basic Program Agreement
Section 682.401(b)(10)(vi)(B)(1)--The Secretary proposes that in
instances where a loan or a portion of a loan is returned by the school
at any time to a lender, the lender shall refund to the borrower the
premium attributable to each disbursement of the loan.
Section 682.402 Death, Disability, Closed School, False Certification,
and Bankruptcy Payments
Section 682.402--The Secretary proposes to clarify that a lender
must return any payments made by or on behalf of the borrower after the
date that the borrower became totally and permanently disabled as
certified by a physician. At the same time that the lender returns the
payments to the borrower or sender, the lender must notify the borrower
or sender that there is no obligation to repay that loan.
Also, the Secretary proposes, in order to conform with the Direct
Loan Program, that if a guaranty agency receives any payments from a
borrower or a borrower's representative for a loan discharged in
bankruptcy on which the Secretary previously paid a claim, the agency
must return 100% of these payments to the borrower. Previously these
payments were remitted to the Secretary. At the same time that the
guaranty agency returns the payments to the borrower or representative
the agency must notify the borrower that there is no obligation to
repay that loan.
Section 682.412 Consequences of the Failure of a Borrower or Student To
Establish Eligibility
Section 682.412(c)--The Secretary is making a change in the
regulations to clarify that a borrower has 30 days from the date a
final demand letter is sent by the lender in which to repay an amount
for which the borrower was ineligible.
Section 682.603 Certification by a Participating School in Connection
With a Loan Application
Section 682.603 (f) and (g)--The Secretary proposes this change to
conform to language in the Direct Loan Program regulations.
Section 682.605 Determining the Date of a Student's Withdrawal.
Section 682.605(c)--The Secretary is reinserting language that was
inadvertently deleted during the development of the November 29, 1994
final regulations regarding the determination of the date of a
student's withdrawal for purposes other than calculating a refund.
Executive Order 12866
1. Assessment of Costs and Benefits
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. Burdens specifically associated with information
collection requirements, if any, are identified and explained elsewhere
in this preamble under the heading Paperwork Reduction Act of 1995.
In assessing the potential costs and benefits--both quantitative
and qualitative--of these proposed regulations, the Secretary has
determined that the benefits of the regulations justify the costs.
The Secretary has also determined that this regulatory action does
not unduly 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.
2. Clarity of the Regulations
Executive Order 12866 requires each agency to write regulations
that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following: (1) Are the requirements in the proposed regulations
clearly stated? (2) Do the regulations contain technical terms or other
wording that interferes with their clarity? (3) Does the format of the
regulations (grouping and order of sections, use of headings,
paragraphing, etc.) aid or reduce their clarity? Would the regulations
be easier to understand if they were divided into more (but shorter)
sections? (A ``section'' is preceded by the symbol ``Sec. '' and a
numbered heading; for example, Sec. 682.200 Definitions.) (4) Is the
description of the regulations in the ``Supplementary Information''
section of this preamble helpful in understanding the regulations? How
could this description be more helpful in making the regulations easier
to understand? (5) What else could the Department do to make the
regulations easier to understand?
A copy of any comments that concern how the Department could make
these proposed regulations easier to understand should be sent to
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of
Education, 600 Independence Avenue SW. (Room 5100, FB-10), Washington,
DC 20202-2241.
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.
While the statute requires that the Secretary regulate certain
actions that must be taken by various program participants, these
requirements would not have a significant impact because they would not
impose excessive regulatory burdens or require unnecessary Federal
supervision. The regulations would impose minimal additional
requirements to protect the Federal fiscal interest, as well as the
interests of the borrowers under the programs.
Paperwork Reduction Act of 1995
Sections 682.207, 682.209, 682.210, 682.211, 682.401, 682.402,
682.412, 682.603, 682.604 and 682.605 contain information collection
requirements. As required by 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
[[Page 49132]]
Management and Budget (OMB) for its review.
Collection of Information: Federal Family Education Loan Program.
Documentation and notification requirements.
These regulations require institutions to document a borrower's
exceptional circumstances in instances where a lender disburses a loan
within 30 days beyond the usual 60-day period. A lender is now required
to advance a borrower's due date for repayment if a borrower doesn't
indicate how a payment that equals or exceeds a scheduled monthly
payment should be applied. In those instances, these regulations
require the lender to notify the borrower that the payment has been
applied in such a manner and the next payment due date. A lender or
guaranty agency must now return any payments made by or on behalf of
the borrower after the date that the borrower became totally and
permanently disabled as certified by a physician and if a guaranty
agency receives any payments from a borrower or a borrower's
representative for a loan discharged in bankruptcy on which the
Secretary previously paid a claim, the agency must return 100% of the
payments to the borrower. In both of these circumstances, a lender and
guaranty agency must also notify the borrower that there is no
obligation to repay that loan.
There is no annual frequency of reporting this information to the
Department. However, the recordkeeping burden for this collection of
information is estimated to average 1 hour per response for 12,803,255
respondents, including the time for documenting circumstances,
researching existing data sources, gathering and maintaining the data
needed, and generating and processing the collection of information.
The total annual recordkeeping burden equals 12,803,255 hours.
These regulations affect the business, for-profit and not-for-
profit entities that participate in the Title IV Federal student aid
programs.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, Room 10235, New Executive Office
Building, Washington, DC 20503; Attention: Desk Officer for U.S.
Department of Education.
The Department considers comments by the public on this proposed
collection of information in--
Evaluating whether the proposed collection of information
is necessary for the proper performance of the functions of the
Department, including whether the information will have practical use;
Evaluating the accuracy of the Department's estimate of
the burden of the proposed collection of information, including the
validity of the methodology and assumptions used;
Enhancing the quality, usefulness, and clarity of the
information to be collected; and
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology; e.g., permitting
electronic submission of responses.
OMB is required to make a decision concerning the collection of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment to OMB is best assured of having its full effect
if OMB receives it within 30 days of publication. This does not affect
the deadline for the public to comment to the Department on the
proposed regulations.
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 room 3053, Regional Office Building 3, 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, Reporting and recordkeeping
requirements, Student aid, Vocational education.
(Catalog of Federal Domestic Assistance Number 84.032, Federal
Family Education Loan Program)
Dated: September 13, 1995.
Richard W. Riley,
Secretary of Education.
The Secretary proposes to amend part 682 of title 34 of the Code of
Federal Regulations as follows:
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) 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 682.200, paragraph (b) is amended by revising paragraph
(1) of the definition of ``satisfactory repayment arrangement'' to read
as follows:
Sec. 682.200 Definitions.
* * * * *
(b) * * *
Satisfactory repayment arrangement. (1) For purposes of regaining
eligibility under section 428F (b) of the HEA, the making of six (6)
full monthly payments on a defaulted loan. A borrower may only obtain
the benefit of this paragraph with respect to renewed eligibility once.
* * * * *
3. Section 682.201 is amended by revising paragraph (c)(1)(iii)(C)
to read as follows:
Sec. 682.201 Eligible borrowers.
* * * * *
(c) * * *
(1) * * *
(iii) * * *
(C) In a default status and has either made satisfactory repayment
arrangements or has agreed to repay the consolidation loan under the
income sensitive repayment plan described in Sec. 682.209(a)(6)(viii).
* * * * *
4. Section 682.207 is amended by adding a new paragraph (c)(4) and
revising paragraphs (d)(1) and (d)(2)(iii) to read as follows:
Sec. 682.207 Due diligence in disbursing a loan.
* * * * *
(c) * * *
(4) If at least one-half of the loan period has elapsed when the
first disbursement is made, the loan may be disbursed in a single
installment.
(d)(1) A lender may disburse loan proceeds after the student has
ceased to be enrolled on at least a half-time basis or after the
expiration date of the period of enrollment for which the loan was
intended, in accordance with paragraphs (d)(2) and (3) of this section.
(2) * * *
(iii) In exceptional circumstances within 30 days after the period
[[Page 49133]]
described in paragraph (d)(2)(ii) of this section. The school shall
document the exceptional circumstances in the student's file.
* * * * *
5. Section 682.209 is amended by revising paragraph (b) to read as
follows:
Sec. 682.209 Repayment of a loan.
* * * * *
(b) Payment application and prepayment. (1) The lender may credit
the entire payment amount first to any late charges accrued or
collection costs and then to any outstanding interest and then to
outstanding principal.
(2)(i) The borrower may prepay the whole or any part of a loan at
any time without penalty.
(ii) If the prepayment amount equals or exceeds the monthly payment
amount under the repayment schedule established for the loan, the
lender shall apply the prepayment to future installments by advancing
the next payment due date, unless the borrower requests otherwise. If
the lender applies payments to future installments without the
borrower's request, it shall notify the borrower that the payments have
been so applied, and remind the borrower of the repayment obligation
and the next scheduled due date.
* * * * *
6. Section 682.210 is amended by revising paragraph (a)(8) to read
as follows:
Sec. 682.210 Deferment.
(a) * * *
(8) A borrower whose loan is in default is not eligible for a
deferment, unless the borrower has made satisfactory repayment
arrangements with the lender prior to the filing of a default claim.
* * * * *
7. Section 682.211 is amended by adding a new paragraph (f)(9) to
read as follows:
Sec. 682.211 Forbearance.
* * * * *
(f) * * *
(9) For a period of delinquency that may remain after a borrower
ends a period of deferment.
* * * * *
8. Section 682.401(b)(10)(vi)(B), introductory text, is amended by
adding a dash after the word ``if'', and by removing ``within 120 days
of disbursement''; redesignating paragraphs (B)(1), (B)(2), and (B)(3)
as paragraphs (B)(2), (B)(3), and (B)(4), respectively; at the
beginning of redesignated paragraphs (B)(2), (B)(3) and (B)(4) remove
``The'' and add, in its place, ``Within 120 days the''; and a new
paragraph (B)(1) is added to read as follows:
Sec. 682.401 Basic program agreement.
* * * * *
(b) * * *
(10) * * *
(vi) * * *
(B) * * *
(1) The loan or a portion of a loan is returned by the school to
the lender;
* * * * *
9. Section 682.402 is amended by revising paragraph (c)(3);
removing ``(l)(2)'' in paragraph (l)(3) and adding, in its place,
``(l)(1)''; by revising paragraphs (l)(1) and (l)(2) to read as
follows:
Sec. 682.402 Death, disability, closed school, false certification,
and bankruptcy payments.
* * * * *
(c) * * *
(3) After receiving the physician's certification described in
paragraph (c)(2) of this section, the lender shall return to the
borrower any payments received by the lender after the date that the
borrower became totally and permanently disabled as certified by the
physician. At the same time that the lender returns the payment, it
shall notify the borrower that there is no obligation to repay a loan
discharged on the basis of disability.
* * * * *
(l) * * *
(1) If the guaranty agency receives any payments from or on behalf
of the borrower on or attributable to a loan that has been discharged
in bankruptcy on which the Secretary previously paid a bankruptcy
claim, the guaranty agency shall return 100 percent of these payments
to the sender. The guaranty agency shall promptly return, to the
sender, any payment on a cancelled or discharged loan made by the
sender and received after the Secretary pays a closed school or false
certification claim. At the same time that the agency returns the
payment, it shall notify the sender that there is no obligation to
repay a loan discharged on the basis of death, disability, bankruptcy,
false certification, or closing of the school.
(2) The guaranty agency shall remit to the Secretary all payments
received from a tuition recovery fund, performance bond, or other third
party with respect to a loan on which the Secretary previously paid a
closed school or false certification claim.
* * * * *
10. Section 682.412 is amended by revising paragraph (c) to read as
follows:
Sec. 682.412 Consequences of the failure of a borrower or student to
establish eligibility.
* * * * *
(c) In the final demand letter transmitted under paragraph (a) of
this section, the lender shall demand that within 30 days from the date
the letter is mailed the borrower repay in full any principal amount
for which the borrower is ineligible and any accrued interest,
including interest and all special allowance paid by the Secretary.
* * * * *
11. Section 682.603 is amended by adding a new paragraph (f)(4) and
by revising paragraph (g) to read as follows:
Sec. 682.603 Certification by a participating school in connection
with a loan application.
* * * * *
(f) * * *
(4) In prorating a loan amount for a student enrolled in a program
of study with less than a full academic year remaining, the school need
not recalculate the amount of the loan if the number of hours for which
an eligible student is enrolled changes after the school certifies the
loan.
(g) A school may not assess the borrower a fee for the completion
or certification of any FFEL Program forms or information or for
providing any information necessary for a student or parent to receive
a loan under part B of the Act or any benefits associated with such a
loan.
* * * * *
12. Section 682.604 is amended by removing paragraph (e)(3),
redesignating paragraph (e)(4) as paragraph (e)(3), in redesignated
paragraph (e)(3), introductory text, at the beginning of the paragraph,
removing ``If the lender or guaranty agency has not informed the school
that it prohibits a late disbursement as permitted by
Sec. 682.207(d)(2)(i), and'', and capitalizing the ``i'' in the word
``if''.
* * * * *
13. Section 682.605 is revised to read as follows:
Sec. 682.605 Determining the date of a student's withdrawal.
(a) Except in the case of a student who does not return for the
next scheduled term following a summer break, a school shall follow the
procedures in 34 CFR 668.22(j) for determining the student's date of
withdrawal. In a case of a summer break, the school must determine the
student's date of withdrawal no later than 30 days after the first day
of the next scheduled term.
(b) Except for students involved in a summer break as provided in
paragraph (a) of this section, the school shall use
[[Page 49134]]
the date determined under 34 CFR 668.22(j) for the purpose of reporting
to the lender the date that the student has withdrawn from the school
and for determining when a refund must be paid under 34 CFR 668.22.
(c) For the purpose of a school's reporting to a lender, a
student's withdrawal date is the month, day and year of the withdrawal
date.
[FR Doc. 95-23125 Filed 9-20-95; 8:45 am]
BILLING CODE 4000-01-P
