Federal Family Education Loan Program

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 [email protected].

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