Federal Family Education Loan Program and William D. Ford Federal Direct Loan Program

SUMMARY: The Secretary proposes to amend the Federal Family Education

Loan (FFEL) Program regulations and the William D. Ford Federal Direct

Loan (Direct Loan) Program regulations to modify requirements in these

programs. These proposed modifications are intended to eliminate

certain differences in the requirements of the FFEL and Direct Loan

programs and to reduce burden.

DATES: Comments must be received on or before November 3, 1997.

ADDRESSES: All comments concerning these proposed regulations should be

addressed to: Mr. Kenneth Smith, U.S. Department of Education, P.O. Box

23272, Washington, DC 20026-3272, or to the following internet address:

[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 should 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 above.

FOR FURTHER INFORMATION CONTACT: Mr. Kenneth Smith, U.S. Department of

Education, 600 Independence Avenue, SW, ROB-3, Room 3045, Washington,

DC 20202-5346, 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.

Individuals with disabilities may obtain this document in an

alternate format (e.g., Braille, large print, audiotape, or computer

diskette) on request to the contact person listed in the preceding

paragraph.

SUPPLEMENTARY INFORMATION: Section 455(a) of the Higher Education Act

of 1965, as amended (HEA), provides that, unless otherwise specified in

statute, Federal Direct Stafford/Ford (Direct Subsidized) Loans,

Federal Direct Unsubsidized Stafford/Ford (Direct Unsubsidized) Loans,

and Federal Direct PLUS (Direct PLUS) Loans shall have the same terms,

conditions, and benefits, and be available in the same amounts, as

Federal Stafford Loans, Federal Unsubsidized Stafford Loans, and

Federal PLUS Loans.

The Direct Loan Program regulations (34 CFR part 685) provide

terms, conditions, benefits, and amounts for Direct Subsidized Loans,

Direct Unsubsidized Loans, and Direct PLUS Loans. The FFEL Program

regulations (34 CFR part 682) provide terms, conditions, benefits, and

amounts for Federal Stafford Loans, Federal Unsubsidized Stafford

Loans, and Federal PLUS Loans.

The Secretary is proposing to amend 34 CFR parts 682 and 685 to

change certain requirements and procedures in the FFEL and Direct Loan

programs. These proposed changes are intended to eliminate certain

differences in the requirements of these programs and to reduce burden

on program participants.

A summary of each proposed change is provided below, in the order

of its first occurrence in the proposed regulatory text.

Sections 682.201 and 685.301 Students With Need of $200 or Less

Under FFELP regulations, at Sec. 682.201(a)(2)(i), a student with a

calculated need of $200 or less is not required to file an application

for a Subsidized Stafford Loan with a lender before applying for a

Federal Supplemental Loans for Students (SLS) loan. The final rule for

these proposed regulations would include a technical correction to

apply Sec. 682.201(a)(2)(i) to a borrower's application for an

Unsubsidized Stafford loan, because Unsubsidized Stafford loans are

effectively the replacement for SLS loans. This technical correction

reflects a long-standing FFEL Program policy and has been included in

this NPRM so that changes to FFEL and Direct Loan program regulatory

text are made simultaneously.

Essentially, this technical correction to Sec. 682.201(a)(2)(i)

clarifies a method by which a school participating in the FFEL Program

may choose not to certify a Subsidized Stafford Loan for a student with

a calculated need of $200 or less, and may instead certify an

Unsubsidized Stafford Loan that includes the amount of $200 or less

that would have been awarded in the Subsidized Stafford Loan.

This provision is necessary to avoid processing delays and

increased costs in delivering funds to students. Because of the

proportionally higher cost of small loans, many lenders under the FFEL

Program do not make loans of $200 or less. Without this provision, a

school would be required to submit an application to a lender for a

Subsidized Stafford Loan amount when it is already aware that the loan

will be refused by the lender.

To make the practices of schools participating in the FFEL and

Direct Loan programs more consistent, the Secretary proposes to

establish a provision for the Direct Loan Program similar to that

described above for the FFEL Program. The proposed regulations would

allow, but not require, a school to choose not to originate a Direct

Subsidized Loan for a student with a calculated need of $200 or less.

Instead, a school participating in the Direct Loan Program would be

able to originate a Direct Unsubsidized Loan that includes the $200 or

less that would have been originated as a Direct Subsidized Loan. For

example, a student with a cost of attendance of $2,000, estimated

financial assistance of $0, and an expected family contribution of

$1,850 would have a calculated need of $150. The school could choose to

originate one Direct Unsubsidized Loan for $2,000 for this student,

rather than a Direct Subsidized Loan for $150 and a Direct Unsubsidized

Loan for $1,850.

This proposal is consistent with guidance provided in the preamble

to the Direct Loan Program final rule published in the Federal Register

on December 1, 1994 (59 FR 61669), in which the Secretary stated that

``an institution may establish a minimum loan amount.'' The proposed

regulations would provide a ceiling of $200 to the ``minimum loan

amount'' allowed in that preamble language, and would provide a

regulatory basis for this action by a school. It is important to note

that the Department has not established a minimum Direct Loan amount

that it will process, and a school participating in the Direct Loan

Program may continue to originate loans of $200 or less to meet

borrower needs.

The Secretary realizes that an additional interest cost is incurred

by a student who is awarded an amount in an unsubsidized loan rather

than in a subsidized loan, even if the loan amount is $200 or less,

because the government does not charge interest on a subsidized loan if

it is not in repayment status or in a deferment. The Department

estimates a maximum cost to a student of $66, for interest accruing on

$200 over four years. However, this provision

[[Page 50463]]

was established for a school participating in the FFEL Program for the

reasons described above, and it is proposed for a school participating

in the Direct Loan Program to provide parity with the FFEL Program and

to allow a school to control its administrative costs in making loans.

The Secretary expects the proposed regulations to have little actual

effect on costs to borrowers for receiving FFEL or Direct Loan program

funds because current FFEL Program policy would remain unchanged and

current Direct Loan Program policy would only be defined in

regulations. The only change to current Direct Loan Program policy in

the proposed regulations is the provision of a $200 limit to replace

the currently unspecified ``minimum loan amount,'' so a school would no

longer be able to establish a minimum loan amount higher than $200.

Sections 682.202(c)(5), 682.401(b)(10), and 685.202(c)(4) Refund of

FFEL Program Origination Fees and Insurance Premiums and of Direct Loan

Program Loan Fees

Under Sec. 682.202(c)(5), a lender must refund, by a credit against

the borrower's loan balance, the applicable portion of the origination

fee previously deducted from the loan if (1) the borrower repays a

portion of the loan within 120 days of disbursement, (2) the funds are

not delivered within 120 days of disbursement, or (3) the funds are

returned by the school to the lender.1 Similarly, under

Sec. 682.401(b)(10)(vi)(B), a lender must refund the applicable portion

of the insurance premium previously deducted by application to the

borrower's account if (1) the loan is paid in full within 120 days of

disbursement, (2) the loan check has not been negotiated within 120

days of disbursement, or (3) the loan or a portion of a loan is

returned by the school to the lender. Direct Loan Program regulations

at Sec. 685.202(c)(4) provide for the refund of the applicable portion

of the loan fee previously deducted from the loan if a portion of the

loan is repaid within 120 days or should have been repaid by the school

within 120 days of disbursement.

---------------------------------------------------------------------------

\1\ The introductory language for Sec. 682.202(c)(5) is

incorrect as published in the Code of Federal Regulations (CFR),

revised as of July 1, 1996. The CFR reflects the final rule

published in the Federal Register on May 17, 1994 (59 FR 25745).

However, a correction to the May 17, 1994, rule was published on

July 13, 1994 (59 FR 35625). The correction was not included in the

current CFR. To ensure that the correct introductory language is

properly reflected in regulations, it is included in this NPRM and

will be included in the final rule as a technical correction.

---------------------------------------------------------------------------

The Secretary proposes to revise Secs. 682.202(c)(5)(i),

682.401(b)(10)(vi)(B)(1), and 685.202(c)(4) to provide that the

applicable portion of the origination fee, insurance premium, or loan

fee is to be repaid or returned in cases in which loan funds are

returned by the school in order to comply with the HEA or with

applicable regulations.

For example, the applicable portion of the origination fee,

insurance premium, or loan fee would be repaid or returned to a

borrower if during a program review it was determined that a school

should have paid a larger refund to a student, even if that refund

should have occurred more than 120 days after the disbursement was

made. On the other hand, the applicable portion of the origination fee,

insurance premium, or loan fee would not be repaid or returned to a

borrower if a school assists the borrower by forwarding a prepayment to

the lender more than 120 days after disbursement. In this example, the

school would not be returning the funds in order to comply with the HEA

or with applicable regulations; it would be returning the funds to

comply with the borrower's request.

This proposed revision clarifies current FFEL requirements.

Further, it expands the circumstances under which the Secretary would

reduce the Direct Loan Program loan fee charged to borrowers by

removing the requirement that the repayment should have been made

within 120 days of disbursement. Under the proposed provision, students

in both the FFEL and Direct Loan programs would receive the same

benefits.

Sections 682.402 and 685.212 Discharge of a Loan

Under Sec. 682.402(c)(1), FFEL Program regulations provide for the

discharge of a borrower's or endorser's obligation to repay a

Consolidation Loan, due to a total and permanent disability, for a

borrower who became disabled (or whose condition substantially

deteriorated, so as to render the borrower totally and permanently

disabled) after applying for all of the Consolidation Loan's underlying

loans. This discharge is made even if a borrower's condition did not

substantially deteriorate after the borrower applied for the

Consolidation Loan itself. Corresponding Direct Loan Program

regulations, at Sec. 685.212(b), do not allow for a discharge of a loan

obligation for a Direct Consolidation Loan if the borrower did not

become disabled (or whose condition did not substantially deteriorate,

so as to render the borrower totally and permanently disabled) after

the Direct Consolidation Loan was made.

For example, a borrower who received several loans, then became

totally and permanently disabled, and then consolidated those loans

into a Direct Consolidation Loan, remains obligated to repay the loan.

Under current Direct Loan Program regulations, a borrower is not

considered totally and permanently disabled on the basis of a condition

that existed at the time the borrower applied for the consolidation

loan, unless the borrower's condition substantially deteriorated after

the loan was made so as to render the borrower totally and permanently

disabled. In the example above, since the borrower's condition existed

at the time the borrower applied for the Direct Consolidation Loan and

did not substantially deteriorate after the Direct Consolidation Loan

was made, the borrower would remain obligated to repay the loan. By

contrast, corresponding FFEL regulations would allow a discharge of the

borrower's obligation to make further payments on the loan.

The Secretary proposes to revise Direct Loan Program regulations to

provide the same discharge conditions for a Direct Consolidation Loan

as are currently provided for an FFELP Consolidation Loan. Because

there has been some confusion regarding the FFEL rule on this issue,

the Secretary also proposes to clarify the current FFEL Program

provision and to make a conforming change to regulations at

Sec. 682.402(k)(2)(iii).

Sections 682.604(g)(2) and 685.304(b)(2) Exit Counseling

Section 485(b)(1)(A)(i) of the HEA requires a school to inform a

student of ``the average anticipated monthly repayments'' during exit

counseling. For an FFEL borrower, under Sec. 682.604(g)(2)(i), a school

is required to base the calculation of this amount on an average

indebtedness for students at that school. Direct Loan Program

regulations, at Sec. 685.304(b)(2)(i), go beyond the requirements in

FFEL regulations and require a school to base its calculation of this

amount on the individual student's actual indebtedness.

The Secretary proposes to revise both FFEL and Direct Loan program

regulations to allow a school to base its calculation of this amount

upon either the student's individual indebtedness or upon the average

indebtedness of students who have obtained loans for attendance at that

school or in the borrower's program of study. This change would provide

more flexibility in both loan programs, would promote

[[Page 50464]]

consistency in exit counseling, and would reduce burden for schools

participating in both the FFEL and the Direct Loan programs.

A Direct Loan borrower's ability to make an informed choice when

selecting a repayment plan is not lessened by this change. A school

participating in the Direct Loan Program may, and is encouraged to,

continue to receive information regarding an individual borrower's

anticipated Direct Loan Program monthly repayment amount for

distribution to the borrower during exit counseling. If a borrower does

not select a repayment plan by the 60th day of the loan's grace period,

he or she is sent the individualized information by the Direct Loan

Servicer. In addition, the individualized repayment information is

always available to a borrower who calls the Direct Loan Servicer, both

when the borrower is selecting an initial repayment plan and when the

borrower is considering a change from one plan to another.

Under Sec. 685.304(b)(2) (ii) and (iii), a school is required to

review available repayment options with a borrower and to provide the

borrower with options concerning debt-management strategies. Should

these proposed regulations be included in the final rule, to comply

with Sec. 685.304(b)(2) (ii) and (iii), a school that chooses not to

provide the individualized repayment information to a student would be

expected to advise the student of the availability of this information

at the student's Direct Loan servicer and of its usefulness in

selecting the most appropriate repayment plan.

The Secretary requests specific comments on whether the timing and

availability of the individualized Direct Loan Program repayment

information, as described above, provides all Direct Loan Program

borrowers with an adequate opportunity to select the most appropriate

repayment plan. In particular, the Secretary requests comments on the

ability of a borrower to make an informed choice when selecting a

repayment plan if he or she does not receive individualized information

until the 60th day of the loan's grace period because his or her school

has chosen to supply repayment information based on average

indebtedness during its exit counseling.

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 these programs 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 proposed 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 comments

on whether there may be further opportunities to reduce any potential

costs or increase potential benefits resulting from these regulations

without impeding the effective and efficient administration of these

programs.

Summary of Potential Costs and Benefits

Potential costs and benefits of these proposed regulations are

discussed elsewhere in this preamble under the following heading:

Regulatory Flexibility Act Certification, and in the information stated

previously under Supplementary Information.

2. Clarity of Regulations

Executive Order 12866 requires each agency to write regulations

that are easy to understand.

The Secretary invites comments on how to make these 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. 668.24 Records retention and

examinations.) (4) Is the description of the proposed regulations in

the ``Supplementary Information'' section of this preamble helpful in

understanding the proposed regulations? How could this description be

more helpful in making the proposed 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 Mr.

Stanley M. Cohen, Regulations Quality Officer, U.S. Department of

Education, 600 Independence Avenue, SW, Room 5121, FOB-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. Small entities affected by these proposed regulations are

small schools and loan holders participating in the federal student

loan programs.

The provisions of this regulation provide added flexibility to

schools and loan holders, or reduce the administrative burden on

schools. Thus, no significant adverse economic impacts on small

entities are expected to occur.

The Secretary particularly invites comments on the effect that

these proposed regulations would have on small entities.

Paperwork Reduction Act of 1995

Section 685.212 contains 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 this section to the

Office of Management and Budget (OMB) for its review.

Collection of Information: William D. Ford Federal Direct Loan

Program--685.212--Discharge of a loan obligation. The Secretary

proposes to provide for the discharge of a Direct Consolidation Loan

due to a total and permanent disability for a borrower who would be

eligible for the discharge of all the loans that were included in the

Direct Consolidation Loan if those loans had not been consolidated. The

Department may require additional certifications and information

concerning the underlying loans in order to provide this benefit to the

borrower. Annual public reporting burden for this collection of

information is estimated to average 0.2 hours per response for 180

respondents, including the time for reviewing instructions, searching

existing data sources, gathering and maintaining the data needed, and

[[Page 50465]]

completing and reviewing the collection of information. The total

estimated annual recordkeeping and reporting burden hours equals 36

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 10235, New Executive

Office Building, Washington, D.C. 20503; Attention: Desk Officer for

the 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

utility;

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 of 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 3045, Regional Office Building 3, 7th and D Streets,

SW, Washington, DC, between the hours of 8:30 a.m. and 4:00 p.m.,

Monday through Friday of each week, except Federal holidays.

On request the Department supplies an appropriate aid, such as a

reader or print magnifier, to an individual with a disability who needs

assistance to review the comments or other documents in the public

rulemaking docket for these proposed regulations. An individual with a

disability who wants to schedule an appointment for this type of aid

may call (202) 205-8113 or (202) 260-9895. An individual who uses a TDD

may call the Federal Information Relay Service at 1-800-877-8339,

between 8 a.m., and 8 p.m., Eastern time, Monday through Friday.

To assist the Department in complying with the specific

requirements of Executive Order 12866 and its overall requirement of

reducing regulatory burden, the Secretary invites comments on whether

there may be further opportunities to reduce any regulatory burdens

found in these proposed regulations.

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.

Electronic Access to This Document

Anyone may view this document, as well as all other Department of

Education documents published in the Federal Register, in text or

portable document format (pdf) on the World Wide Web at either of the

following sites:

http://ocfo.ed.gov/fedreg.htm

http://www.ed.gov/news.html

To use the pdf you must have the Adobe Acrobat Reader Program with

Search, which is available free at either of the previous sites. If you

have questions about using the pdf, call the U.S. Government Printing

Office toll free at 1-888-293-6498.

Anyone may also view these documents in text copy only on an

electronic bulletin board of the Department. Telephone: (202) 219-1511

or, toll free, 1-800-222-4922. The documents are located under Option

G--Files/Announcements, Bulletins and Press Releases.

Note: The official version of this document is the document

published in the Federal Register.

List of Subjects in 34 CFR Parts 682 and 685

Administrative practice and procedure, Colleges and universities,

Loan programs-education, Reporting and recordkeeping requirements,

Student aid, Vocational education.

(Catalog of Federal Domestic Assistance Numbers: 84.032: Federal

Stafford Loan Program; 84.032: Federal PLUS Program; 84.032: Federal

Supplemental Loans for Students Programs; 84.033 and 84.268: Federal

Direct Student Loan Program.)

Dated: September 17, 1997.

Richard W. Riley,

Secretary of Education.

The Secretary proposes to amend parts 682 and 685 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.

Sec. 682.201 [Amended]

2. Section 682.201 is amended by removing the words ``receive an

SLS loan'' in the introductory language of paragraph (a) and adding, in

their place, ``receive an unsubsidized Stafford loan''; by removing the

acronym ``SLS'' in paragraph (a)(1) and adding, in its place,

``unsubsidized Stafford''; by removing the words ``who, for a period of

enrollment that begins prior to July 1, 1994, seeks an SLS'' in the

introductory language to paragraph (a)(2) and adding, in their place,

``who seeks an unsubsidized Stafford''; and by removing the acronym

``SLS'' in paragraph (a)(3) and adding, in its place, ``unsubsidized

Stafford''.

3. Section 682.202 is amended by revising paragraph (c)(5) to read

as follows:

Sec. 682.202 Permissible charges by lenders to borrowers.

* * * * *

(c) * * *

(5) Shall refund by a credit against the borrower's loan balance

the portion of the origination fee previously deducted from the loan

that is attributable to any portion of the loan that is--

(i) Returned by a school to a lender in order to comply with the

Act or with applicable regulations;

(ii) Repaid or returned within 120 days of disbursement; or

(iii) Not delivered within 120 days of disbursement.

* * * * *

4. Section 682.401 is amended by revising paragraphs

(b)(10)(vi)(B)(1) and (b)(10)(vi)(B)(2) to read as follows:

Sec. 682.401 Basic program agreement.

* * * * *

(b) * * *

(10) * * *

(vi) * * *

(B) * * *

(1) The loan or a portion of the loan is returned by the school to

the lender

[[Page 50466]]

in order to comply with the Act or with applicable regulations;

(2) Within 120 days of disbursement, the loan or a portion of the

loan is repaid;

* * * * *

5. Section 682.402 is amended by revising paragraph (c)(1) and by

removing the words ``become totally and permanently disabled since

applying for the Consolidation loan'' in paragraph (k)(2)(iii) and

adding, in their place, ``is determined to be totally and permanently

disabled under Sec. 682.402(c)'', to read as follows:

Sec. 682.402 Death, disability, closed school, false certification,

and bankruptcy payments.

* * * * *

(c) Total and permanent disability. (1) (i) If a lender determines

that an individual borrower has become totally and permanently

disabled, the obligation of the borrower and any endorser to make any

further payments on the loan is discharged.

(ii) Except as provided in paragraph (c)(1)(iii)(A) of this

section, a borrower is not considered totally and permanently disabled

based on a condition that existed at the time the borrower applied for

the loan unless the borrower's condition substantially deteriorated

after the loan was made so as to render the borrower totally and

permanently disabled.

(iii)(A) For a Consolidation Loan, a borrower who would be

considered totally and permanently disabled under paragraphs (c)(1)(i)

and (ii) of this section for all loans that were included in the

Consolidation Loan, if those loans had not been consolidated, is

considered totally and permanently disabled.

(B) For the purposes of discharging a loan under paragraph

(c)(1)(iii)(A) of this section, provisions in paragraphs (c)(1) (i) and

(ii) of this section apply to all loans included in the Consolidation

Loan.

(C) If requested, a borrower seeking to discharge a loan obligation

under paragraph (c)(1)(iii)(A) of this section must provide the lender

with the disbursement dates of the underlying loans if the lender does

not possess that information.

* * * * *

6. Section 682.604 is amended by revising paragraph (g)(2)(i) to

read as follows:

Sec. 682.604 Processing the borrower's loan proceeds and counseling

borrowers.

* * * * *

(g) * * *

(2) * * *

(i) Inform the student of the average anticipated monthly repayment

amount based on the student's indebtedness or on the average

indebtedness of students who have obtained FFEL Program loans for

attendance at that school or in the borrower's program of study.

* * * * *

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

7. The authority citation for part 685 continues to read as

follows:

Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.

8. Section 685.202 is amended by revising paragraph (c)(4) to read

as follows:

Sec. 685.202 Charges for which Direct Loan Program borrowers are

responsible.

* * * * *

(c) * * *

(4) Applies to a borrower's loan balance the portion of the loan

fee previously deducted from the loan that is attributable to a

disbursement of the loan that is--

(i) Repaid or returned within 120 days of disbursement; or

(ii) Returned by a school in order to comply with the Act or with

applicable regulations.

9. Section 685.212 is amended by revising paragraph (b) to read as

follows:

Sec. 685.212 Discharge of a loan obligation.

* * * * *

(b) Total and permanent disability. (1) If the Secretary receives

acceptable documentation that a borrower has become totally and

permanently disabled, the Secretary discharges the obligation of the

borrower and any endorser to make any further payments on the loan.

(2) Except as provided in paragraph (b)(3)(i) of this section, a

borrower is not considered totally and permanently disabled based on a

condition that existed at the time the borrower applied for the loan

unless the borrower's condition substantially deteriorated after the

loan was made so as to render the borrower totally and permanently

disabled.

(3)(i) For a Direct Consolidation Loan, a borrower who would be

considered totally and permanently disabled under paragraphs (b) (1)

and (2) of this section for all loans that were included in the Direct

Consolidation Loan, if those loans had not been consolidated, is

considered totally and permanently disabled.

(ii) For the purposes of discharging a loan under paragraph

(b)(3)(i) of this section, provisions in paragraphs (b)(1) and (2) of

this section apply to all loans included in the Consolidation Loan.

(iii) If requested, a borrower seeking to discharge a loan

obligation under paragraph (b)(3)(i) of this section must provide the

Secretary with the disbursement dates of the underlying loans.

* * * * *

10. Section 685.301 is amended by redesignating paragraphs (a)(6)

and (a)(7) as paragraphs (a)(7) and (a)(8), respectively, and by adding

a new paragraph (a)(6) to read as follows:

Sec. 685.301 Origination of a loan by a Direct Loan Program school.

* * * * *

(a) * * *

(6) If a student has received a determination of need for a Direct

Subsidized Loan that is $200 or less, a school may choose not to

originate a Direct Subsidized Loan for that student and to include the

amount as part of a Direct Unsubsidized Loan.

* * * * *

11. Section 685.304 is amended by revising paragraph (b)(2)(i) to

read as follows:

Sec. 685.304 Counseling borrowers.

* * * * *

(b) * * *

(2) * * *

(i) Inform the student of the average anticipated monthly repayment

amount based on the student's indebtedness or on the average

indebtedness of students who have obtained Direct Subsidized or Direct

Unsubsidized Loans for attendance at that school or in the borrower's

program of study.

* * * * *

[FR Doc. 97-25377 Filed 9-24-97; 8:45 am]

BILLING CODE 4000-01-U