William D. Ford Federal Direct Loan Program

SUMMARY: The Secretary amends the regulations governing the William D.

Ford Federal Direct Loan (Direct Loan) Program. The amendment is a

result of a recently enacted change made to the Higher Education Act of

1965, as amended (HEA) by the Higher Education Amendments of 1998 (1998

Amendments). These final regulations reflect the Secretary's authority

to charge reduced interest rates on Direct Loan Program loans to

encourage on-time loan repayment.

DATES: Effective Date: These regulations are effective July 1, 2000.

Implementation Date: The Secretary has determined, in accordance

with section 482(c)(2)(A) of the HEA (20 U.S.C. 1089(c)(2)(A)), that

Direct Loan Program borrowers may, at their discretion, choose to

implement the provisions of Sec. 685.211(b) on or after November 1,

1999. For further information see ``Implementation Date of These

Regulations'' under the SUPPLEMENTARY INFORMATION section of this

preamble.

FOR FURTHER INFORMATION CONTACT: Ms. Nicki Meoli, U.S. Department of

Education, 400 Maryland Avenue, SW., ROB-3, Room 3045, Washington, DC

20202-5346. Telephone: (202) 708-8242. If you use a telecommunications

device for the deaf (TDD), you may call the Federal Information Relay

Service (FIRS) at 1-800-877-8339.

Individuals with disabilities may obtain this document in an

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

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

paragraph.

SUPPLEMENTARY INFORMATION:

These regulations address a change made to the HEA by the 1998

Amendments (Pub. L. 105-244) that affects the Direct Loan Program. On

June 16, 1999, the Secretary published a notice of proposed rulemaking

(NPRM) for the Direct Loan Program in the Federal Register (64 FR

32358). On August 24, 1999, the Secretary published final regulations

in the Federal Register (64 FR 46252) for all of the proposed

amendments in the NPRM except for the amendment to Sec. 685.211 that

would reflect the Secretary's authority to charge borrowers reduced

interest rates to encourage on-time loan repayment. Before publishing

final regulations on repayment incentives, the Secretary met certain

reporting procedures in section 455(b)(7) of the HEA. This final

regulation is the same as the proposed amendment to Sec. 685.211

published in the NPRM.

Implementation Date of These Regulations

Section 482(c) of the HEA requires that regulations affecting

programs under Title IV of the HEA be published in final form by

November 1 prior to the start of the award year in which they apply.

However, that section also permits the Secretary to designate any

regulation as one that an entity subject to the regulation may choose

to implement earlier. If the Secretary designates a regulation for

early implementation, he may specify when and under what conditions the

entity may implement it. Under this authority, the Secretary has

designated the following regulations for early implementation:

Sec. 685.211(b)--On or after November 1, 1999, these regulations

may be implemented by Direct Loan Program borrowers at their

discretion. This means that Direct Loan Program borrowers may receive a

reduced interest rate by choosing to repay their loans under a system

or on a schedule that meets requirements specified by the Secretary.

Analysis of Comments and Changes

The regulations in this document were developed through the use of

negotiated rulemaking. Section 492 of the HEA requires that, before

publishing any proposed regulations to implement programs under Title

IV of the HEA, the Secretary obtain public involvement in the

development of the proposed regulations. After obtaining advice and

recommendations, the Secretary must conduct a negotiated rulemaking

process to develop the proposed regulations. All proposed regulations

must conform to agreements resulting from the negotiated rulemaking

process unless the Secretary reopens that process or explains any

departure from the agreements to the negotiated rulemaking

participants.

These regulations were published in proposed form on June 16, 1999

in conformance with the consensus of the negotiated rulemaking

committee. Under the committee's protocols, consensus meant that no

member of the committee dissented from the agreed-upon language. The

Secretary invited comments on the proposed regulations by July 30, 1999

and several comments were received. An analysis of the comments

received on the proposed regulations for all of the provisions in the

NPRM except Sec. 685.211 was included in the preamble to the final

regulations the Secretary published on August 24, 1999. An analysis of

the comments received on the proposed changes to Sec. 685.211 follows.

Generally, we do not address technical and other minor changes--and

suggested changes the law does not authorize the Secretary to make.

Repayment Incentives (Sec. 685.211(b))

Comments: A number of commenters representing individual schools

and associations of schools supported the proposed rule that would

reflect the Secretary's authority to charge reduced interest rates to

encourage on-time loan repayment. The commenters endorsed the proposed

regulation as a means of reducing costs to Direct Loan Program

borrowers in a way that previously had been available only to Federal

Family Education Loan (FFEL) Program borrowers.

Discussion: We appreciate the support expressed by the commmenters

for the proposed change to Sec. 685.211(b).

As the first step in implementing this regulation, the Secretary

will reduce the interest rate charged on Direct Loan Program loans for

borrowers repaying by means of automated account debiting. Beginning on

November 1, 1999, borrowers repaying their Direct Loan Program loans

via automated debiting of their personal checking, savings, or other

type of account at a financial institution will receive a .25 percent

reduction in the interest being charged on their loans.

Change: None.

Executive Order 12866

We have reviewed these final regulations in accordance with

Executive Order 12866. Under the terms of this order, we have assessed

the potential costs and benefits of this regulatory action.

The potential costs associated with the final regulations are those

resulting from statutory requirements and those we have determined as

necessary for administering this program effectively and efficiently.

In assessing the potential costs and benefits--both quantitative

and qualitative--of these final regulations, we have determined that

the benefits of the regulations would justify the costs.

We have also determined that this regulatory action would not

unduly interfere with State, local, and tribal

[[Page 57961]]

governments in the exercise of their governmental functions.

We summarized the potential costs and benefits of these final

regulations in the preamble to the NPRM on June 16, 1999 (64 FR 32360).

Paperwork Reduction Act of 1995

These regulations do not contain any information collection

requirements.

Assessment of Educational Impact

In the NPRM, we requested comments on whether the proposed

regulations would require transmission of information that any other

agency or authority of the United States gathers or makes available.

Based on the response to the NPRM and on our review, we have

determined that these final regulations do not require transmission of

information that any other agency or authority of the United States

gathers or makes available.

Electronic Access to This Document

You may view this document in text or Adobe Portable Document

Format (PDF) on the Internet at the following sites:

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

http://www.ed.gov/legislation/HEA/rulemaking/

http://ifap.ed.gov/csb__html/fedlreg.htm

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

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

you have questions about using the PDF, call the U.S. Government

Printing Office (GPO) toll free, at 1-888-293-6498; or in the

Washington, D.C., area at (202) 512-1530.

Note: The official version of this document is the document

published in the Federal Register. Free Internet access to the

official edition of the Federal Register and the Code of Federal

Regulations is available on GPO Access at:

http://www.access.gpo.gov/nara/index.html

(Catalog of Federal Domestic Assistance Number: 84.268 William D.

Ford Federal Direct Loan Program.)

List of Subjects in 34 CFR Part 685

Administrative practice and procedure, Colleges and universities,

Education, Loan programs-education, Student aid, Vocational education.

Dated: October 15, 1999.

Richard W. Riley,

Secretary of Education.

For the reasons discussed in the preamble, the Secretary amends

title 34 of the Code of Federal Regulations by amending Part 685 as

follows:

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

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

follows:

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

2. Section 685.211 is amended by redesignating paragraphs (b), (c),

(d), and (e) as paragraphs (c), (d), (e), and (f), respectively; by

adding a new paragraph (b); by removing the reference to ``(d)(1)'' in

the first sentence of newly redesignated paragraph (e)(2), and by

adding, in its place, ``(e)(1)''; and by removing the reference to

``(d)(2)'' in newly redesignated paragraph (e)(3), and by adding, in

its place, ``(e)(2)'' to read as follows:

Sec. 685.211 Miscellaneous repayment provisions.

* * * * *

(b) Repayment incentives. To encourage on-time repayment, the

Secretary may reduce the interest rate for a borrower who repays a loan

under a system or on a schedule that meets requirements specified by

the Secretary.

* * * * *

[FR Doc. 99-27719 Filed 10-26-99; 8:45 am]

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