Student Assistance General Provisions

SUMMARY: On September 20, 1996, the Department of Education published

in the Federal Register a notice of proposed rulemaking (NPRM) for the

Student Assistance General Provisions (34 CFR Part 668) regarding

standards of financial responsibility (60 FR 49552-49574). The proposed

standards would apply to all institutions that participate in a program

authorized by title IV of the Higher Education Act of 1965, as amended

(title IV, HEA programs), and to third-party servicers that enter into

a contract with a lender or guarantee agency to administer any aspect

of that lender's or agency's Federal Family Education Loan (FFEL)

programs.

Many commenters responding to the NPRM requested that the Secretary

extend the comment period to give institutions, higher education

associations, and other interested parties more time to evaluate

further the proposed ratio methodology and standards, and to prepare

substantive comments and recommendations based on that additional

analysis. The Secretary agrees that more time is needed to evaluate the

proposed ratio methodology and standards, as well as the proposed rules

regarding changes of ownership, and that additional public comment

would improve the quality of information available for rulemaking.

Therefore, the Secretary is reopening for 60 days the comment period

for the following parts of the September 20, 1996 NPRM:

The proposed Subpart L.

The proposed Appendix F.

Paragraphs (e)-(h) of the proposed Sec. 668.23 (the

repayment standards formerly contained in Sec. 668.24).

DATES: Comments must be received on or before February 18, 1997.

ADDRESSES: All comments concerning this notice or the notice of

proposed rulemaking should be addressed to Mr. David Lorenzo, U.S.

Department of Education, P.O. Box 23272, Washington, D.C. 20026, or to

the following internet address: [email protected]

FOR FURTHER INFORMATION CONTACT: Mr. David Lorenzo or Mr. John Kolotos,

U.S. Department of Education, 600 Independence Avenue, S.W., Room 3045

ROB-3, Washington, D.C. 20202, telephone (202) 708-7888. 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 standard time, Monday through Friday.

Background

On November 29, 1996, the Secretary published final regulations

amending Secs. 668.15 and 668.23 of the Student Assistance General

Provisions. In that document, the Secretary indicated that the

Department would reopen the comment period for several parts of the

September 20, 1996 NPRM. The parts for which the comment period is

reopened are indicated above. The Secretary is not reopening the

comment period for those parts of the September 20, 1996 NPRM on which

final regulations were published on November 29 and which are not

listed above.

The Secretary is particularly interested in receiving comments on

the following topics. These topics were originally raised in the NPRM

and noted by commenters as areas of special concern. The Secretary is

seeking additional comment and recommendations on these issues that

more fully reflect the commenters' positions:

The utility and appropriateness of the proposed ratio

methodology for evaluating the financial condition of participating

institutions. The Secretary is interested in specific comments on how

the various ratios may be improved, as well as comments on the

weighting mechanism, strength factors, and composite score standard.

The Secretary is particularly interested in suggestions that would

improve the way the proposed ratio methodology may be used to judge the

financial health of an institution that has not incurred debt, given

the fact that an institution may have no debt either because it has

avoided debt as a management strategy, or because it is in such poor

financial condition that it cannot secure credit.

Ways in which a public institution may demonstrate that it

is backed by the full faith and credit of a state or equivalent

governmental entity, as an alternative means under which a public

institution may satisfy the statutory requirement that it is

financially responsible.

Ways to streamline the process by which the Secretary

determines that an institution may retain or resume participation in

title IV, HEA programs during or after a change of ownership. The

Secretary is looking for suggestions outlining steps the Department may

take to shorten or eliminate funding interruptions to students while

protecting title IV, HEA program funds.

The impact on financial statements of the new accounting

standards contained in the Financial Accounting Standards Board's

Statements of Financial Accounting Standards 116 and 117. The Secretary

particularly requests comments from institutions that have already

adopted those new accounting standards.

Whether the proposed ratio methodology is appropriate for

evaluating the financial responsibility of third-party servicers that

enter into a contract with a lender or guarantee agency to administer

any aspect of that lender's or agency's FFEL programs. Commenters are

encouraged to submit concrete suggestions for possible revisions to the

proposed ratio methodology and standards, or for an alternative

methodology or standards, if the commenters do not agree that the

proposed ratio methodology and standards are appropriate for these

servicers.

At present, the Secretary does not have a data base of

third-party servicer financial statements to use while evaluating

comments on the proposed ratio methodology and standards as they apply

to third-party servicers. In order to help the Secretary evaluate

comments on the proposed ratio methodology and standards as they apply

to third-party servicers, and any suggested revisions or alternatives

to the proposed ratio methodology and standards, the Secretary

encourages third-party servicers to submit their latest audited

financial statement along with their comments.

Dated: December 12, 1996.

David A. Longanecker,

Assistant Secretary for Postsecondary Education.

[FR Doc. 96-32047 Filed 12-17-96; 8:45 am]

BILLING CODE 4000-01-P