On November 1, 2002, the Secretary published a final regulation in the
Federal Register as a result of the efforts of this year's round of negotiated
rulemaking. There is very little change from the proposed regulations,
but the preamble provides additional insight into the meaning of the regulatory
language. These regulations are the result of the Fed.Up process for regulatory
burden reduction, and address many of the issues of concern to CCA members.
The date on which these regulations must be implemented
is July 1, 2003, except for the GEAR-UP regulations, which will become
effective 30 days after publication. However, as requested by many of
the commenters, including CCA, the Secretary has designated these regulations
for early implementation as of the date of publication at your discretion.
The following regulations are subject to conditions for early implementation,
which are discussed in detail in the summary:
Please note that this summary provides information on the issues that
we believe are most important to the entire CCA membership. However, it
is not possible in a summary to include every nuance and detail, and therefore
this is not intended as a substitute for reading the entire regulation,
including the preamble. You may access the actual final regulation from
the Department of Education web site at the following address:
http://www.ifap.ed.gov/fregisters/FR1101200203.html
If you have questions about these summaries, please contact
Nancy Broff at (202) 336-6755 or nancyb@career.org
or Tammy Zimmer at (202) 336-6839 or tammyz@career.org.
Final Regulations
Program Issues Regulations
Branch Campuses (2-Year Rule)
Section
600.8
The new language clarifies that the statutory
provision stating that a branch campus of an institution must operate
as a branch for two years before it may be designated as a main campus
applies only to proprietary institutions of higher education and postsecondary
vocational institutions. This change is simply to conform to statutory
language.
Change of Ownership (Family Member)
Sections 600.21,
600.31,
and 668.174
The new regulation expands the definition of
"family member" to include grandchildren, a spouse's children and grandchildren,
and family members resulting from marriage or remarriage.
The new regulation exempts changes of ownership among
family members from the change of ownership regulations without requiring
the death or retirement of the family member who is distributing all or
part of his or her ownership, as long as the transfer is reported to the
Department under Section 600.21(a)(6). The excluded transfer applies to
the owner's equity interest or partnership interest in the entity that
is covered by the change in ownership requirement, which may be the institution
signing the PPA as a corporation or as a sole proprietorship, the institution's
parent corporation, or other entity such as a partnership. The Department
intends by this language to clarify that the exemption applies when an
owner transfers part of all of his or her ownership of the institution
as a whole to a family member, but not when an owner spins off only certain
assets of the institution.
Note that the regulation does not require the
family member acquiring the ownership to have previously worked at the
institution.
The new regulation also clarifies that the
exemption for transfer of ownership upon death or retirement of an owner
to a manager who has an ownership stake in the institution applies only
when the manager has held the ownership for at least two years.
Definition of Academic Year - "12-hour Rule"
Sections 668.2,
668.3,
and 668.8
The new regulation eliminates the distinction
between standard term programs and programs that are non-standard term
or non-term in the definition of a week of instructional time. Instead
of defining a week of instructional time for non-standard term and non-term
programs as a week in which at least 12 hours of regularly scheduled instruction
or examinations occurs, the new rule defines a week of instructional time
as a week in which at least one day of regularly scheduled instruction
or examination occurs for all programs.
The Department does not in the regulations define
explicitly what constitutes a day of instruction. However, the preamble
states that "the measure should be whether the institution can demonstrate
that the activities that make up a day of instruction are reasonable in
both content and time." The preamble also notes that the Department will
rely upon determinations of the accrediting agency on this issue.
The preamble does specifically state that an institution
cannot meet the requirements of this regulation by having an average of
one day of instruction per week over the course of the program. In order
for any week to count as a week of instructional time for purposes of
the 30-week academic year, that week must include at least one day of
instructional time.
Payment Periods
Sections
668.4,
682.603,
685.301, and 690.75
The payment period definitions are modified
to ensure that, in addition to completion of credit hours, there is an
element of calendar time in nonterm programs that must be met before subsequent
disbursements of Title IV aid can be made. A non-term credit-hour program
must have payment periods that include both the required number of credit
hours in an academic year or program (usually half) and the required number
of weeks of instruction (usually half of an academic year or half of the
program length). The disbursement rules treat non-standard term programs
like standard term programs, and require only non-term programs to use
this new rule.
In addition, the regulations clarify the definition
of a payment period to specifically address the situation when a student
withdraws from a clock hour program or a credit hour non-term program
during a payment period, but then returns. The regulation provides
that if the student returns to the same program at the same institution
within 180 calendar days of the original withdrawal, the student is considered
to be in the same payment period he or she was in at the time of withdrawal.
The institution could re-disburse any funds it had previously returned
to the Title IV programs, including any overpayment it had collected from
the student. The student would have to complete the remaining clock or
credit hours in that payment period before starting a new payment period
and receiving Title IV aid for that new payment period. In calculating
the aid to re-disburse, the cost of attendance would be the costs as calculated
for the payment period before the student withdrew.
If, however, the student transfers to a different
program or re-enrolls more than 180 days later, the institution starts
a new series of payment periods.
The preamble addresses several issues related to
the implementation of this new provision. The first example addresses
the situation where the 180- day period crosses over into the next award
year. In the case of a payment period that was originally scheduled to
begin and end in one award year, but the student re-enrolls after the
new award year has begun, any Title IV funds that will be disbursed to
the student should be paid from the original award year. If, on the other
hand, the original payment period was scheduled to be a crossover payment
period, and the institution had paid or planned to pay the student from
the second award year, then any required disbursements in the resumed
payment period would remain in the second award year.
The preamble notes that even if the student's stop-out
causes more than six months of the recalculated payment period to fall
into the second award year, the original decision to place the payment
period in the first award year will remain valid based on the fact that
at the time of the original decision, less than six months of the payment
period was scheduled to fall into the second award year.
A second example concerns the situation if a student
withdraws, re-enters within 180 days, then withdraws again. Here, a new
return of federal funds calculation must be made based on the second withdrawal
date, using the full payment period and the full amount of Title IV aid
for the payment period.
If the student withdraws and re-enters before the
institution has processed the return, the institution is not required
to return the funds. The Secretary notes, however, that the institution
is expected to begin the return of funds process immediately upon determining
that a student has withdrawn.
Program Participation Agreement Incentive Compensation
Section
668.14
The new regulation clarifies the prohibition
on providing incentive compensation based on success in securing enrollments
or financial aid by creating a series of safe harbors. In addition, the
Department has included in the Preamble an explanation of the "purposive
reading" concept behind the safe harbors, so that institutions will have
some guidance if they choose to construct compensation plans outside of
the safe harbors. This concept is based on the Secretary's reading of
the intent of Congress as being to prevent an institution from providing
incentives to its staff to enroll unqualified students.
The safe harbors are divided into two categories.
The first safe harbor describes the conditions under which an institution
may pay compensation without that compensation being considered an incentive
payment. The remaining eleven safe harbors describe the conditions under
which an insti- tution may make an incentive payment to a covered person
or entity that could be construed as based upon securing enrollments.
The safe harbor provisions follow:
|
(A)
|
The payment of fixed compensation,
such as a fixed annual salary or hourly wage, as long as
that compensation is not adjusted, up or down, more
than twice during any twelve month period, and any adjustment
is not based solely on the number of students recruited, admitted,
enrolled, or awarded financial aid. For this purpose,
an increase in fixed compensation resulting from a cost
of living increase (COLA) that is paid to all or substantially
all full-time employees is not considered an adjustment.
However, pay adjustments to an individual for any reason, including
promotion, are included.
The preamble notes that an institution
may have a written policy that denies cost of living increases
to poorly performing employees. That policy would not disqualify
a cost of living increase from being included under this safe
harbor unless the policy has the effect of no longer applying
the COLA to "all or substantially all" employees, and there is
some connection to student recruitment that is not otherwise within
one of the safe harbors.
Note also that in a change from the
proposed regulation, the COLA may be limited to full-time employees.
In response to a commenter, the Secretary
noted that the word "solely" as related to salary adjustments
is used in its dictionary definition.
Finally, the Secretary noted
in the preamble that if the basic compensation of an employee
would not be an incentive payment, neither would overtime
pay and benefits required under the Fair Labor Standards
Act.
|
| (B) |
Compensation to recruiters based upon their recruitment of students
who enroll only in programs that are not eligible programs under
the Title IV, HEA programs.
|
| (C) |
Compensation to recruiters who arrange contracts between the institution
and an employer under which the employer's employees enroll in
the institution, and the employer pays directly or by reimbursement
50 percent or more of the tuition and fees charged to its
employees; provided that compensation is not based upon the
number of employees who enroll in the institution, or the
revenue they generate, and the recruiters have no contact
with the employees. Contact that is necessary for the recruiter
to obtain the contract is not prohibited contact under this provision.
|
| (D) |
Compensation to all or substantially all of the institution's
fulltime professional and administrative employees as part of
a profit-sharing plan, or substantially all of the full-time employees
at the same organizational level, except that an organizational
level may not consist predominantly of recruiters, admissions
staff, or financial aid staff.
An organizational level at a multi-school institution may be
one of those institutions.
The language in the final regulation is modified to reflect that
the safe harbor applies only if the profit sharing or bonus payment
is substantially the same amount or the same percentage of salary
or wages. That is, if using a percentage, it must be exactly the
same percentage for all those employees within an organizational
level, but the percentages may differ between organizational levels.
|
| (E) |
Compensation that is based upon students successfully completing
their educational programs or one academic year of their educational
programs, whichever is shorter. For this purpose, successful completion
of an academic year means that the student has earned at least
24 semester or trimester credit hours or 36 quarter credit hours,
or has successfully completed at least 900 clock hours of instruction.
In determining successful completion of an academic year, all
of the credits must have been earned at the institution as a result
of taking courses at the institution. Credits that are transferred,
earned through tests or life experience may not be counted. However,
there is no time element to this safe harbor; it applies once
a student has earned an academic year's worth of credits or clock
hours, regardless of the amount of calendar time that has taken.
The one academic year criterion is a minimum; longer periods
are permissible. In addition, you may pay a bonus for each academic
year a student completes.
|
| (F) |
Compensation paid to employees who perform "pre-enrollment" activities
of a clerical nature, such as answering telephone calls, referring
inquiries, or distributing institutional materials.
Several commenters requested that additional types of preenrollment
activities be covered under this safe harbor. The Secretary declined
to expand this provision, and in fact the regulatory language
is modified to require that the pre-enrollment activities be clerical
in nature. Soliciting students for interviews is not included
in this safe harbor; in fact, the Secretary views this as a core
recruiting activity.
Note also that the Secretary cautions institutions against using
this safe harbor to provide incentive compensation to recruiters,
noting that "it would be very difficult for an institution to
document that it was paying a bonus based upon enrollments to
a recruiter solely for clerical pre-enrollment activities."
|
| (G) |
Compensation to managerial or supervisory employees who do not
directly manage or supervise employees who are directly involved
in recruiting or admissions activities, or the awarding of Title
IV, HEA program funds.
|
| (H) |
The awarding of token gifts to the institution's students or
alumni, provided that the gifts are not in the form of money,
no more than one gift is provided annually to an individual, and
the cost of the gift is less than $100.
|
| (I) |
Profit distributions proportionately based upon an individual's
ownership interest in the institution.
|
| (J) |
Compensation paid for Internet-based recruitment and admission
activities that provide information about the institution to prospective
students, refer prospective students to institutions, or permit
them to apply for admission on-line.
The language is changed to include referring prospective students
in the safe harbor. As noted in the preamble, the Secretary believes
that the use of the Internet is outside the scope of the incentive
compensation provision, and this addition is intended to highlight
another permissible activity.
|
| (K) |
Payments to third parties, including tuition sharing arrangements,
that deliver various services to the institution, provided that
none of the services involve recruiting or admission activities,
or the awarding of Title IV, HEA program funds.
Payment of fees for marketing and advertising is not considered
to be recruiting.
|
| (L) |
Payments to third parties, including
tuition sharing arrangements, that deliver various services to the
institution, even if one of the services involves recruiting or
admission activities or the awarding of Title IV, HEA program funds,
provided that the individuals performing the recruitment or admission
activities, or the awarding of Title IV, HEA program funds, are
not compensated in a manner that would be impermissible under paragraph
(b)(22) of this section. |
Institutions Required to Take Attendance
Section
668.22
The new regulation clarifies that, in determining
whether an institution is required by an outside entity to take attendance,
the Department will defer to the agency to interpret its own requirements.
If the outside agency requires the taking of attendance for a period of
time, then the institution is considered to be required to take attendance
for that period. Similarly, if an outside agency requires the taking of
attendance for a particular group of students, then the institution is
considered to be required to take attendance for that group of students.
In the circumstance of an institution that is required
to take attendance for a limited period of time, a student who is not
in attendance at the end of the attendance-taking period would have her
date of withdrawal determined according to the requirements for an institution
that is required to take attendance. If the institution can document that
the student attended past the end of the attendance-taking period, then
the withdrawal date is determined under the rules for an institution that
is not required to take attendance.
An institution must apply these provisions to all
students who withdraw on or after the institution's implementation of
this regulation.
Note that in the preamble to the proposed regulation,
the Secretary noted that when an institution administratively withdraws
a student from all of his or her classes, the student is considered to
have officially withdrawn as of the date of that administrative withdrawal,
whether or not the institution is required to take attendance.
Leaves of Absence
Section
668.22
The new regulation simplifies the leave of absence
provision to allow multiple leaves of absence, so long as the total number
of days of leave in a 12- month period does not exceed 180. The student
must provide a written request for the leave of absence, which must include
the reason for the request.
A student may return and repeat some coursework
as long as the student does not incur additional charges. The period when
the student is repeating coursework is considered part of the leave and
is subject to the 180- day limit.
A change was made in response to a request
that will allow students in a non-term or clock hour program additional
flexibility. These students need not complete the exact same coursework
that was begun prior to the leave. The Secretary agreed to this change
based upon the assumption that nonterm courses may be taught in modules
that would allow a student to pick up at a different point, then cycle
back later to the missed coursework. Whether these students resume at
the same or a different point, the student must complete the payment period
and coursework from the interrupted payment period before becoming eligible
for additional Title IV aid.
An institution must apply these provisions
to all students granted a leave of absence on or after the institution's
implementation of this regulation.
Expiration of ATB Tests
Sections 668.32
and 668.151
This change eliminates the 12-month time
limit applied to passing scores on an Ability-to-Benefit test (ATB). Instead,
ATB passing test scores are acceptable indefinitely, just as a GED is.
Additionally, clarifications added to the regulations make it explicit
that an institution may use the results of an approved test that are received
from the test publisher or an assessment center, so that a student who
transfers to a different institution may use the original test results
obtained from the publisher or test center for the purpose of establishing
Title IV eligibility.
Overpayment
Sections 668.35,
673.5,
and 690.79
The overpayment policy is now consistent
for all Title IV grant and Perkins Loan overpayments. A student does not
lose eligibility for Title IV or have to repay a grant overpayment resulting
from withdrawal if the total amount of the overpayment due is less than
$25 and is not the remaining balance after the application of prior payments
or institutional credit balances. The $25 threshold applies as long as
the overpayment is not due to institutional error, and does not apply
to amounts for which the institution is liable. The student is, however,
responsible for paying the balance when the overpayment is the result
of applying the $300 campus-based overaward threshold to an FSEOG or perkins
loan overaward.
Late Disbursements
Section
668.164
The new regulation clarifies and makes substantive
changes to the regulation governing late disbursements of Title IV aid
to students. First, an institution may to make a late disbursement if
the Secretary had processed a SAR or ISIR with an official EFC while the
student was still eligible (with an exception in the case of a PLUS loan).
An additional 30 days are provided for the institution to make the late
disbursement, bringing the time period to 120 days. After 120 days, an
institution may go to the Department to request permission to make the
late disbursement.
The regulation clarifies the requirement that an
institution must make any required post-withdrawal disbursement under
Section 668.22, and adds language requiring that an institution must offer
a late disbursement to a student who completed a payment or loan period.
However, the preamble notes that if the institution believes that a late
disbursement is not needed or may increase the risk of default, it may
caution the student about possible negative consequences in the offer.
The final regulations make two conforming changes
to other regulations. First, section 668.22(a)(4)(ii)(B) increases from
90 to 120 days the time within which an institution must make a post-withdrawal
disbursement. Second, section 690.61(b) has been changed to exempt a student
who otherwise qualifies for a late disbursement, from the requirement
that the student submit a valid SAR/ISIR while still enrolled. The deadline
date for receiving a valid SAR/ISIR for a late disbursement of Pell is
now found in section 668.164(g)(4).
Notices and Authorizations
Section
668.165
This is a clarifying change that eliminates
the requirement that an institution must confirm the receipt of a notice
sent electronically when an institution credits a student's account with
Title IV loan funds.
Timely Return of Funds
Sections
668.171 and 668.173
The new regulation codifies in regulation that
an institution that is making a return of federal funds to a loan holder
by paper check must issue and mail the check within 30 days of the date
of determination of withdrawal, and that this will be tested by determining
whether the check had been endorsed by the FFEL lender or the Secretary
within 45 days.
The preamble notes that an institution may
under some circumstances use the unearned funds of withdrawn students
to make disbursements to additional eligible students. In this situation,
the transfer or deposit into the account must be made within 30 days and
there must be a clear audit trail. Please read this section of the preamble
carefully if your institution chooses to use this method.
There is a review process allowing an institution
to submit additional information showing that refunds had been made in
a timely manner or that exceptional circumstances beyond the institution's
control prevented the timely return, in order to possibly avoid posting
a letter of credit.
The minimum number of late refunds that will trigger
a letter of credit requirement is increased from one to two (still representing
at least 5% of the sample of student records audited or reviewed).
Finally, an institution is not required to post
a letter of credit for an amount less than $5,000, so long as the institution
can demonstrate that it maintains cash reserves of at least $5,000.
Federal Work-Study at For-Profit Institutions
Sections 675.2
and 675.21
These regulatory changes broaden and clarify
what types of jobs students employed under the FWS program at proprietary
institutions may hold. The definition of student services is broadened
to include positions in financial aid, the library, peer guidance counseling,
assisting an instructor with curriculum-related activities, security,
and social, health, and tutorial services. A work-study student may serve
as a teaching assistant, but may not be hired as an instructor.
The new regulation also clarifies that student service
positions do not have to involve direct interaction with the students.
The position may not provide services solely to former students, but may
involve providing services to both currently enrolled and former students.
The preamble gave as an example that a FWS student may work in the placement
office as long as that student's job is to help current students as well
as alumni prepare resumes and find potential employers.
Gear Up
Section
694.10
The changes revise packaging requirements. The
requirement that institutions award student financial assistance in an
established order for Gear Up recipients has been removed. Additionally,
the new regulation clarifies that a Gear Up scholarship would not be considered
in the determination of a student's eligibility for other Title IV grant
assistance.
Loan Program Regulations
Consolidation Loan Benefits
Sections 682.402,
685.212,
and 685.220
These regulatory changes extend loan discharge
benefits to borrowers who consolidate their Title IV loans that they would
have received if they had not consolidated the loans. If a married couple
consolidates their loans, and one of the spouses should die or become
totally and permanently disabled, the portion of the loan attributable
to that borrower can now be discharged. If a consolidation loan includes
a PLUS loan, and the dependent for whom the loan was taken out should
die, the portion of the loan that is that student's can be discharged.
Retention of Promissory Notes
Sections 674.19,
682.402, and 682.414
These regulations clarify how promissory notes
must be retained, and that they must be retained, along with repayment
schedules, until the loans are satisfied. Original paper promissory notes
and Master Promissory Notes and repayment schedules must be kept in locked,
fireproof containers. Promissory notes signed electronically must be stored
electronically in a format that is coherently retrievable. After the loan
obligation is satisfied, the institution shall return either the original
or a true and exact copy to the borrower, marked "paid in full," and shall
keep a copy of the note for the required time period.
Rehabilitation of Defaulted Loans
Sections 668.35,
674.39,
682.405,
and 685.211
This change gives discretion to institutions
and guarantors to allow student borrowers who have defaulted on their
federal student loans to be able to re-establish eligibility for Title
IV, HEA program assistance, even when a judgment has been obtained against
the defaulted loan. Institutions and lenders are now allowed the flexibility
to determine the conditions the judgment debtor must satisfy to become
eligible for additional Title IV, such as the number and amount of payments
necessary, as long as the arrangements include the borrower making at
least six consecutive, voluntary monthly payments. Voluntary payments
are defined as "payments made directly by the borrower, not including
payments made by Federal offset, garnishment, or income asset execution".
It includes payments made on the judgment.
It is important to note that the holder of a judgment
loan is not required to enter into agreements with judgment debtors that
will allow them to regain Title IV eligibility; rather, this regulatory
change grants the holders more flexibility in collecting debts and assisting
students in regaining eligibility. The minimum requirement that must be
met is six consecutive monthly repayments, but the judgment holder is
free to require stricter conditions to the borrower, with re-gaining Title
IV eligibility as a benefit for payment. An example is given in the preamble
where the judgment holder requires the entire balance of the loan to be
paid in full as the satisfactory arrangement for regaining Title IV eligibility.
Initial and Exit Counseling
Sections 674.42,
682.604,
and 685.304
These changes clarify that parties other than
the institution may provide loan counseling to borrowers, and that the
counseling may be conducted by "interactive electronic means." Additionally,
it makes the information that must be given to students at the counseling
sessions consistent across the three loan programs. In initial counseling,
it is required that borrowers be provided with sample monthly repayment
amounts. These repayment amounts may be based on either a range of student
indebtedness, or the average indebtedness of other borrowers in the student's
program of study at the institution.
Additionally, these regulations require that students
be provided with information about the National Student Loan Data System
(NSLDS) during exit counseling. They must be informed that NSLDS stores
information about their Title IV loans, and that they may access this
information at any time to review their loans. To meet this requirement,
institutions may supply student borrowers with the NSLDS web site and
toll-free telephone number.
FFEL and Direct Loan Loan
Loan Limits
Sections 682.204
and 685.203
These clarifying changes reinforce that
an institution may not link separate, stand-alone one-year programs to
allow students to become eligible for higher second-year loan limits,
even when the first program is a prerequisite for the second. The Department
has stated that institutions should instead join the two one-year programs
into a two-year program. Note that these regulations do not in any way
restrict an institution from determining a student's grade level based
on credits earned at another institution that are applied to the student's
program at the new institution.
Perkins Loan Program Changes
Master Promissory Note
Sections
674.2 and 674.16
This regulatory change allows for the use
of a Master Promissory Note (MPN) in the Perkins Loan program. Early implementation
note: The use of MPNs may be implemented as soon as the Secretary announces
the publication of an approved form, which will occur no later than July
1, 2003.
MPNs in the Perkins program will expire when the
student borrower sends written notice to the institution requesting no
more loans be made under the MPN; 12 months after the MPN is signed if
no disbursements are made; or ten years from the date the MPN is signed.
Perkins MPNs are a positive step creating consistency across the Title
IV loan programs.
Borrower Repayment
Sections
674.33 and 674.42
This change requires an institution to coordinate
the minimum monthly repayment amount of a Federal Perkins Loan with other
institutions a student has received Perkins loans from only at the request
of the student. Institutions are required, during the exit interview process,
to inform students that they may request the coordination of multiple
Perkins repayments.
Copies of Promissory Notes
Section
674.42
This change eliminates the requirement that a copy of the signed promissory
note be given to the student during the exit interview. Instead, the student
must be provided with the contact information where s/he may obtain a
copy of the promissory note.
Credit Bureau Reporting
Section
674.45
These regulations have been revised to clarify
that institutions must report Perkins Loan accounts as being in default
to a national credit bureau as part of the collection procedures that
they are required to follow when a defaulted borrower does not respond
to the institution's billing procedures in a satisfactory manner.
Litigation
Section
674.46
There are two changes to this regulation, both
of which reduce the regulatory and administrative burden institutions
encounter in the Perkins program. First, institutions are now able to
review accounts for litigation once every two years, rather than annually
as was required in the past. Second, the threshold amount used to determine
if an account must be litigated has been raised to $500. This effectively
reduces the cost the institution incurs when trying to collect on defaulted
Perkins loans, and increases the chance of recovering funds.
Assignment of Loans
Section
674.50
This regulatory change makes it optional
for the Secretary to require reimbursement to the Perkins fund when an
institution makes the preliminary determination that a borrower may qualify
for a permanent and total disability discharge, or if the loan is unenforceable
because of an act or omission by the institution.
Write-Offs
Sections 674.9
and 674.47
This regulatory change allows institutions to
write-off Perkins Loan accounts of less than $25, or less than $50 if
the borrower has been billed for at least two years. The new language
also clarifies that a borrower whose balance has been written off has
no repayment obligation.
FFEL Program Changes
Repayment Requirements
Section
682.209
This change makes the first payment due date
for Stafford loans consistent with the timeframe regulations for the other
loan programs. Additionally, if a lender receives revised enrollment information
from an institution after it has provided the student borrower with the
required repayment information, and the new date is in the same month
and year as the one previously reported, the lender may use the previously
reported date and is not required to send new information to the student.
Finally, if a student borrower who previously
requested a repayment term of less than five years now wishes to extend
the repayment term, s/he no longer must make a "written notice" to the
lender. Instead, the borrower may "notify" the lender. This allows for
electronic or telephone notification.
Unemployment Deferment
Section 682.210
and by reference 685.204
These changes simplify the process for student
borrowers in repayment who are applying for an unemployment deferment.
The student may now provide the lender a written certification (or the
equivalent as approved by the Secretary) that s/he has registered with
an employment agency, if one is available within a 50-mile radius of the
borrower's residence. Additionally, to apply for an extension of the unemployment
deferment beyond the initial request, the borrower must certify that s/he
has made at least six "diligent attempts" at securing full-time employment
during the initial deferment period. Previously, borrowers had to supply
specific contact information of employment searches.
For borrowers with less than 10 years left
in repayment, lenders are now allowed to use the actual repayment term
remaining on a loan, and the actual payment amount (monthly or otherwise),
when determining a borrower's eligibility for an economic hardship deferment.
For borrowers with more than 10 years left in repayment, the lender will
use a payment amount proportional to a 10-year repayment schedule. This
will allow for a more precise determination of who is eligible for economic
hardship deferments, and assist students in avoiding defaulting on their
loans.
Direct Loan Program Changes
Definition of Default for Cohort Default Rate Calculations
Sections 668.183
and 668.193
This regulatory change changes the definition
of default for cohort default rate calculations in the Direct Loan program
by removing borrowers making payments under the income contingent repayment
plan as defaulters if their monthly payment of $15 or less does not cover
the accruing interest on the loan. This change removes an arbitrary distinction
between proprietary, non-degree granting institutions and other institutions
when calculating CDRs.
Expiration of Master Promissory Note
Section
685.102
This change makes it clear that no further loans
may be made under an MPN when the student borrower provides written notice
that s/he requests this.
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