Postsecondary education: Federal Perkins Loan Program, et al.; technical amendments,

[Federal Register: December 31, 2003 (Volume 68, Number 250)]

[Rules and Regulations]

[Page 75427-75430]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr31de03-20]

DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682, and 685

RIN 1840-AC84

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

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule.

SUMMARY: This document contains technical corrections to the regulations governing the Federal Perkins Loan (Perkins) Program, the Federal Family Education Loan (FFEL) Program, and the William D. Ford Federal Direct Loan (Direct Loan) Program. These amendments are needed to correct technical errors in the regulations, remove or modify language in the regulations that is now obsolete or outdated due to prior changes to the Higher Education Act of 1965, as amended (HEA), and the regulations, and where appropriate, provide consistent language in the regulations for the three loan programs.

EFFECTIVE DATE: These regulations are effective January 30, 2004.

FOR FURTHER INFORMATION CONTACT: For the Perkins and FFEL programs: Mr. Brian Smith, U.S. Department of Education, 1990 K Street, NW., (8th Floor) Washington, DC 20006, Telephone: (202) 502-7551, or via the Internet: Brian.Smith@ed.gov.

For the Direct Loan Program: Ms. Nicki Meoli, U.S. Department of Education, 1990 K Street, NW., (8th Floor) Washington, DC 20006, Telephone: (202) 377-4031, or via the Internet: Nicki.Meoli@ed.gov.

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 one of the contact persons listed under FOR FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: These final regulations make technical corrections to the existing regulations for the Perkins, FFEL, and Direct Loan programs in 34 CFR parts 674, 682, and 685. The existing regulations contain technical errors, erroneous cross-references, and language that is inconsistent with other regulations and the provisions of the HEA. These final regulations make the technical corrections, correct the cross-references, and remove or modify language that is obsolete, outdated, or otherwise inconsistent with other regulations and the HEA.

Waiver of Proposed Rulemaking and Negotiated Rulemaking

Under the Administrative Procedure Act (5 U.S.C. 553), the Department generally offers interested parties the opportunity to comment on proposed regulations. However, these regulations merely reflect needed technical corrections to the Perkins, FFEL, and Direct Loan program regulations. These corrections do not affect the substantive rights or obligations of individuals or institutions and do not establish or affect substantive policy. Thus, the Secretary has concluded that these regulations are technical in nature and do not necessitate public comment. Therefore, under 5 U.S.C. 553(b)(B), the Secretary has determined that proposed regulations (and, accordingly, negotiated rulemaking under section 492(b)(2) of the HEA) are unnecessary and contrary to the public interest.

Regulatory Flexibility Act Certification

The Secretary certifies that these regulations will not have a significant economic impact on a substantial number of small entities. The small entities that are affected by these regulations are small institutions of higher education. These regulations also affect lenders and guaranty agencies that participate in the title IV, HEA programs, and individual loan borrowers. These regulations contain technical corrections to current regulations. The changes will not have a significant economic impact on any of the entities affected.

Paperwork Reduction Act of 1995

These regulations do not contain any information collection requirements.

Assessment of Educational Impact

Based on our own 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, as well as all other Department of Education documents published in the Federal Register, in text or Adobe Portable Document Format (PDF) on the Internet at the following site: http://www.ed.gov/news/fedregister.

To use PDF you must have Adobe Acrobat Reader, which is available free at this site. If you have questions about using PDF, call the U.S. Government Printing Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC, area at (202) 512-1530.

You may also view this document in PDF at the following site: ifap.ed.gov.

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.gpoaccess.gov/nara/index.html .

(Catalog of Federal Domestic Assistance Numbers: 84.032 Federal Family Education Loan Program; 84.038 Federal Perkins Loan Program; and 84.268 William D. Ford Federal Direct Loan Program)

List of Subjects in 34 CFR Parts 674, 682, and 685

Administrative practice and procedure, Colleges and universities, Education, Loan programs-education, Reporting and recordkeeping requirements, Student aid, Vocational education.

[[Page 75428]]

Dated: December 23, 2003. Sally L. Stroup, Assistant Secretary, Office of Postsecondary Education.

0 For the reasons discussed in the preamble, the Secretary amends title 34 of the Code of Federal Regulations parts 674, 682, and 685 as follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0 1. The authority citation for part 674 continues to read as follows:

Authority: 20 U.S.C. 1087aa-1087hh and 20 U.S.C. 421-429, unless otherwise noted.

0 2. Section 674.5 is amended by: 0 A. In paragraph (c)(3)(i)(D), adding the word ``or'' after the semi- colon. 0 B. In paragraph (c)(3)(i)(E), removing ``; or'' and adding, in its place, a period. 0 C. Removing paragraph (c)(3)(i)(F). 0 D. In paragraph (c)(3)(ii)(C), removing the word ``or''. 0 E. In paragraph (c)(3)(ii)(D), removing the period and adding, in its place, ``; or''. 0 F. Adding a new paragraph (c)(3)(ii)(E). 0 The addition reads as follows:

Sec. 674.5 Federal Perkins Loan program cohort default rate and penalties.

* * * * *

(c) * * *

(3) * * *

(ii) * * *

(E) Assigned to and conditionally discharged by the Secretary in accordance with Sec. 674.61(b). * * * * *

0 3. Section 674.61 is amended by revising the section heading to read as follows:

Sec. 674.61 Discharge for death or disability.

* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

0 4. The authority citation for part 682 continues to read as follows:

Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.

Sec. 682.102 [Amended]

0 5. Section 682.102(e)(1) is amended by removing from the last sentence the words ``nursing professions or perform certain kinds of national or community service'', and adding, in their place, the words ``child care professions''.

0 6. Section 682.201 is amended by revising paragraphs (b)(1)(vi) and (vii) and (b)(2), removing paragraph (b)(1)(viii), and adding paragraph (b)(3) to read as follows:

Sec. 682.201 Eligible borrowers.

* * * * *

(b) * * *

(1) * * *

(vi) Meets the requirements of paragraphs (a)(4), (a)(5), (a)(6), and (a)(7) of this section, as applicable; and

(vii) In the case of a Federal PLUS loan made on or after July 1, 1993, does not have an adverse credit history or obtains an endorser who has been determined not to have an adverse credit history as provided in paragraph (b)(2)(ii) of this section.

(2)(i) For purposes of this section, the lender must obtain a credit report on each applicant from at least one national credit bureau. The credit report must be secured within a timeframe that would ensure the most accurate, current representation of the borrower's credit history before the first day of the period of enrollment for which the loan is intended.

(ii) Unless the lender determines that extenuating circumstances existed, the lender must consider each applicant to have an adverse credit history based on the credit report if--

(A) The applicant is considered 90 or more days delinquent on the repayment of a debt; or

(B) The applicant has been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt, during the five years preceding the date of the credit report.

(iii) Nothing in this paragraph precludes the lender from establishing more restrictive credit standards to determine whether the applicant has an adverse credit history.

(iv) The absence of any credit history is not an indication that the applicant has an adverse credit history and is not to be used as a reason to deny a PLUS loan to that applicant.

(v) The lender must retain a record of its basis for determining that extenuating circumstances existed. This record may include, but is not limited to, an updated credit report, a statement from the creditor that the borrower has made satisfactory arrangements to repay the debt, or a satisfactory statement from the borrower explaining any delinquencies with outstanding balances of less than $500.

(3) For purposes of paragraph (b)(1) of this section, a ``parent'' includes the individuals described in the definition of ``parent'' in 34 CFR 668.2 and the spouse of a parent who remarried, if that spouse's income and assets would have been taken into account when calculating a dependent student's expected family contribution. * * * * *

0 7. Section 682.206 is amended by revising paragraph (e)(1) to read as follows:

Sec. 682.206 Due diligence in making a loan.

* * * * *

(e) * * *

(1) A FFEL Program loan must be made without security or endorsement, except as provided in paragraph (e)(2) of this section. * * * * *

0 8. Section 682.207 is amended by: 0 A. Removing paragraph (b)(1)(vi) immediately following paragraph (b)(1)(iii). 0 B. Adding a paragraph (b)(1)(iv). 0 C. In paragraph (b)(1)(v)(B)(1), in the first sentence, removing the word ``a'' and adding, in its place, the word ``an''. 0 D. In paragraph (b)(1)(vi), removing the reference to ``(f)(1)'' and adding, in its place, the reference ``(f)''. 0 E. Adding a paragraph (b)(2).

The additions read as follows:

Sec. 682.207 Due diligence in disbursing a loan.

* * * * *

(b) * * *

(1) * * *

(iv) Shall require an escrow agent to disburse loan proceeds no later than 21 days after the agent receives the proceeds from the lender. * * * * *

(2) Except as provided in paragraph (b)(1)(v)(C)(2) of this section, neither a lender nor a school may obtain a borrower's power- of-attorney or other authorization to endorse or otherwise approve the cashing of a loan check or the release of funds disbursed by electronic funds transfer, nor may a borrower provide this power-of-attorney or authorization to anyone else. However, the school may present the loan check to a financial institution for deposit in an account of the borrower pursuant to the borrower's endorsement or written certification under paragraph (b)(1)(ii)(A) of this section. * * * * *

0 9. Section 682.209 is amended by: 0 A. In paragraph (a)(2)(v), removing the reference to ``(a)(2)(i)'' and adding, in its place, the reference to ``(a)(2)(ii)''. 0 B. Revising paragraph (a)(3)(ii)(B).

The revision reads as follows:

Sec. 682.209 Repayment of a loan.

(a) * * *

(3) * * *

(ii) * * *

(B) 60 days from the expiration of a deferment or forbearance period; * * * * *

[[Page 75429]]

Sec. 682.210 [Amended]

0 10. Section 682.210 is amended in paragraph (c)(5), by adding the word ``or'' after the first occurrence of the word ``internship''.

0 11. Section 682.211 is amended by: 0 A. In paragraph (a)(4), removing the reference to ``(f)(9)'' and adding, in its place, the reference to ``(f)(10)''. 0 B. Revising paragraph (f)(3). 0 C. In paragraph (f)(4), removing the period and adding, in its place, a semi-colon. 0 D. In paragraph (f)(7), removing the word ``or'' after the semi-colon. 0 E. In paragraph (f)(8), removing the period and adding, in its place, a semi-colon. 0 F. In paragraph (f)(9), removing the figure ``45'' and adding, in its place, the figure ``60''; and removing the period and adding, in its place, a semi-colon. 0 G. In paragraph (f)(10), removing the period at the end of the last sentence and adding, in its place, ``; or''.

The revision reads as follows:

Sec. 682.211 Forbearance.

* * * * *

(f) * * *

(3) For the period beginning when the borrower entered repayment without the lender's knowledge until the first payment due date was established; * * * * *

Sec. 682.213 [Amended]

0 12. Section 682.213 is amended, in the first sentence, by removing the word ``principle'' and adding, in its place, the word ``principal''.

0 13. Section 682.302 is amended by revising paragraph (b)(1) to read as follows:

Sec. 682.302 Payment of special allowance on FFEL loans.

* * * * *

(b) * * *

(1) Except for nonsubsidized Federal Stafford loans disbursed on or after October 1, 1981, for periods of enrollment beginning prior to October 1, 1992, FFEL loans that otherwise meet program requirements are eligible for special allowance payments as provided in paragraphs (b)(2), (b)(3), and (e) of this section. * * * * *

Sec. 682.401 [Amended]

0 14. Section 682.401 is amended by: 0 A. In paragraph (b)(6)(i), removing the reference to ``Sec. 682.600'' and adding, in its place, the reference to ``Sec. 668.14(a)''. 0 B. In paragraph (e), in the introductory sentence, removing the word ``be'' and adding, in its place, the word ``not''.

Sec. 682.402 [Amended]

0 15. Section 682.402 is amended by: 0 A. In paragraph (k)(5)(i), removing the word ``dies'' and adding, in its place, the word ``died''. 0 B. In paragraph (r)(1), in the first sentence, removing the word ``as'' and adding, in its place, the word ``has''.

0 16. Section 682.405 is amended by revising paragraph (b)(3) to read as follows:

Sec. 682.405 Loan rehabilitation agreement.

* * * * *

(b) * * *

(3) An eligible lender purchasing a rehabilitated loan must establish a repayment schedule that meets the same requirements that are applicable to other FFEL Program loans made under the same loan type and provides for the borrower to make monthly payments at least as great as the average of the 12 consecutive monthly payments received by the guaranty agency. The lender must treat the first payment made under the 12 consecutive payments as the first payment under the applicable maximum repayment term, as defined under Sec. 682.209(a) or (h). For Consolidation loans, the maximum repayment term is based on the balance outstanding at the time of loan rehabilitation.

Sec. 682.410 [Amended]

0 17. Section 682.410(c)(1)(i)(B) is amended by removing the words ``as defined in Sec. 682.800(d)''.

Sec. 682.415 [Amended]

0 18. Section 682.415 is amended by: 0 A. In paragraph (c)(2)(i), removing the reference to ``Sec. Sec. 682.410(b)(6)(i) through (xii)'' and adding, in its place, the reference to ``Sec. Sec. 682.410(b)(6)(i) through (vi)''. 0 B. In paragraph (c)(4), in the first sentence, removing the reference to ``Sec. Sec. 682.410(b)(6)(i) through (xii)'' and adding, in its place, the reference to ``Sec. Sec. 682.410(b)(6)(i) through (vi)''. 0 C. In paragraph (c)(6)(i), in the first sentence, removing the reference to ``Sec. Sec. 682.410(b)(6)(i) through (xii)'' and adding, in its place, the reference to ``Sec. Sec. 682.410(b)(6)(i) through (vi)''. 0 D. In paragraph (d)(1), removing the reference to ``Sec. Sec. 682.410(b)(6)(i) through (xii)'' and adding, in its place, the reference to ``Sec. Sec. 682.410(b)(6)(i) through (vi)''.

Sec. 682.505 [Amended]

0 19. Section 682.505 is amended by: 0 A. Revising the paragraph immediately after paragraph (b), by adding ``(c)'' before the heading ``FISL loans--insurance premium calculation.''. 0 B. Revising the paragraph immediately after paragraph (e)(2)(ii), by adding ``(f)'' before the heading ``Collection from borrowers.''.

Sec. 682.603 [Amended]

0 20. Section 682.603(e) is amended, in the introductory sentence, by removing the word ``student'' and adding, in its place, the word ``borrower''.

0 21. Section 682.604 is amended by: 0 A. Revising paragraph (b)(2)(i). 0 B. In paragraph (d)(4), revising the introductory sentence. 0 C. In paragraph (g)(2)(iv), removing the reference to ``paragraph (f)(2)'' and adding, in its place, the reference to ``paragraphs (f)(2)(i) through (f)(2)(iv)''.

The revisions read as follows:

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

* * * * *

(b) * * *

(2) * * *

(i) Except in the case of a late disbursement under paragraph (e) of this section or as provided in paragraph (b)(2)(iii) or (iv) of this section, a school may release the proceeds of any disbursement of a loan only to a student, or a parent in the case of a PLUS loan, if the school determines the student has continuously maintained eligibility in accordance with the provisions of Sec. 682.201 from the beginning of the loan period for which the loan was intended. * * * * *

(d) * * *

(4) If the school is unable for any other reason to document that a registered student attended school during the period of enrollment for which the loan is made, the school must determine the student's withdrawal date as required under Sec. 682.605, and by the deadline described in Sec. 682.607(c), shall notify the lender of the student's withdrawal, expulsion, or failure to attend school, if applicable, and return to the lender-- * * * * *

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

0 22. The authority citation for part 685 continues to read as follows:

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

Sec. 685.102 [Amended]

0 23. Section 685.102(b)(2)(i)(A) is amended to revise the definition of ``Estimated financial assistance'' by removing the words ``Direct PLUS Loan amounts'' and adding, in their place, the words ``PLUS loan amounts''.

[[Page 75430]]

Sec. 685.200 [Amended]

0 24. Section 685.200 is amended by: 0 A. In paragraph (a)(1)(iv)(C)(2), removing the words ``requirement in paragraph (a)(1)(iv)(A)(1)'' and adding, in their place, the words ``requirements in paragraphs (a)(1)(iv)(A)(1) and (2)''. 0 B. In paragraph (a)(1)(iv)(C)(3), removing the words ``neither the prior loan nor the Direct Loan that the borrower receives may'' and adding, in their place, the words ``the loan that has been conditionally discharged prior to a final determination of total and permanent disability cannot''.

Sec. 685.203 [Amended]

0 25. Section 685.203(b) is amended by removing the words ``Federal Unsubsidized Stafford/Ford Loan Program'' and adding, in their place, the words ``Federal Unsubsidized Stafford Loan Program''.

Sec. 685.205 [Amended]

0 26. Section 685.205(b)(3) is amended by adding the words ``without the Secretary's knowledge'' after the word ``repayment''.

0 27. Section 685.207 is amended by revising paragraph (f) to read as follows:

Sec. 685.207 Obligation to repay.

* * * * *

(f) Determining the date on which the grace period begins for a borrower in a correspondence program. For a borrower of a Direct Subsidized or Direct Unsubsidized Loan who is a correspondence student, the grace period specified in paragraphs (b)(2) and (c)(2) of this section begins on the earliest of--

(1) The day after the borrower completes the program;

(2) The day after withdrawal as determined pursuant to 34 CFR 668.22; or

(3) 60 days following the last day for completing the program as established by the school.

Sec. 685.210 [Amended]

0 28. Section 685.210(b)(1) is amended, in the second sentence, by removing the reference to ``Sec. 685.211(c)(3)(ii)'' and adding, in its place, the reference to ``Sec. 685.211(d)(3)(ii)''.

Sec. 685.220 [Amended]

0 29. Section 685.220 is amended by: 0 A. In paragraph (b)(1), adding the word ``Subsidized'' after the word ``Federal''. 0 B. In paragraph (d)(1)(ii)(F), removing the reference to ``Sec. 685.209(d)(5)'' and adding, in its place, the reference to ``Sec. 685.209(c)(7)''. 0 C. In paragraph (h)(2), removing the reference to ``(d)(1)(ii)(E)'' and adding, in its place, the reference to ``(d)(1)(ii)(F)''.

Sec. 685.301 [Amended]

0 30. Section 685.301 is amended by: 0 A. In paragraph (a)(4)(i), adding a period after``Sec. 685.203'' and removing the remainder of the sentence. 0 B. In paragraph (a)(7), removing the word ``student'' and adding, in its place, the word ``borrower''.

Sec. 685.302 [Removed and Reserved]

0 31. Section 685.302 is removed and reserved.

Sec. 685.303 [Amended]

0 32. Section 685.303 is amended in paragraph (b)(2)(i) by removing the words ``described in the promissory note'' and adding, in their place, the words ``for which the loan was intended''.

[FR Doc. 03-32062 Filed 12-30-03; 8:45 am]

BILLING CODE 4000-01-U