DCLPublicationDate: 1/1/95 DCLID: 95-L-175 AwardYear: Summary: This letter provides information to postsecondary institutions and to guaranty agencies and lenders in the Federal Family Education Loan Program (FFELP) to assist students and institutions in areas designated as natural disaster areas due to the October floods in Texas. The guidance offered in this letter is similar to that provided after the floods in the Southeast earlier this year. January 1995 GEN-95-1 95-G-276 95-L-175 SUMMARY: This letter provides information to postsecondary institutions and to guaranty agencies and lenders in the Federal Family Education Loan Program (FFELP) to assist students and institutions in areas designated as natural disaster areas due to the October floods in Texas. The guidance offered in this letter is similar to that provided after the floods in the Southeast earlier this year. Dear Colleague: The Secretary recognizes the severe impact that the October floods in Texas have had on institutions and their students located in Presidentially declared natural disaster areas. As he has done on similar occasions in the past, the Secretary wishes to assist institutions and students in their recovery from the effects of this disaster by providing certain regulatory relief to institutions in their administration of the Title IV student financial aid programs. This relief is applicable to the 1994-95 award period (July 1, 1994 to June 30, 1995). This action is taken in anticipation of a Notice to be published in the Federal Register. This regulatory relief applies to institutions located in the designated natural disaster areas in Texas that were unable to maintain normal operations due to the disaster and to individuals (and their families) who, at the time of the disaster, were residing, attending an institution of higher education, or employed in the designated natural disaster areas as declared by President Clinton. (Please refer to the enclosed listing of those counties currently declared as disaster areas.) An institution that deviates from otherwise required actions in its administration of the Title IV programs on the basis of guidance offered within this letter must document the action being taken. The Secretary provides the following guidance and enforcement relief from regulatory requirements: General Provisions - Satisfactory Academic Progress (§668.7(c) and §668.16(e)). The Secretary will not enforce satisfactory academic progress standards in the situation in which a student may not be able to complete course requirements because he or she is a victim of the disaster and may not, for that reason, receive credit and fails to meet the institution's satisfactory academic progress standards. In this situation, the Secretary encourages the institution to refrain from applying its satisfactory academic progress standards at least where their application would disqualify a student from receiving Title IV aid. The institution must, in this case, document in the student's file that the student's failure to maintain satisfactory academic progress was due to the natural disaster. - Tuition Refunds or Credits (§668.22 and 34 CFR Part 668, Appendix A) . The Secretary strongly encourages an institution to provide a full refund of required tuition and fees or a credit in a comparable amount against future tuition and fees to a student who has been unable to complete course requirements because he or she is a victim of the disaster. - Professional Judgment (20 U.S.C. 1087tt). (1) Section 479A of the Higher Education Act of 1965, as amended, specifically gives the financial aid administrator (FAA) the authority to use professional judgment to make adjustments on a "case-by-case" basis to the cost of attendance or to the values of the items used in calculating the expected contribution toward meeting the student's cost of attendance to reflect the student's special circumstances. The use of professional judgment in Federal need analysis is discussed in Chapter 2 of the Federal Student Financial Aid Handbook and in Part II of the Counselor's Handbook for Postsecondary Schools. (2) Campus-Based and FFEL Programs. The Secretary is encouraging FAAs to use their professional judgment in determining whether to make adjustments to the data used to calculate a student's expected family contribution in order to reflect more accurately his or her financial need and provide some relief to a student whose need requirements may have changed due to the economic losses caused by the disaster. An FAA still must make adjustments on a "case-by-case" basis and clearly document the student's file with the reasons for any adjustment. (3) Federal Pell Grant Program. There are no special conditions on which to "adjust" a student's expected family contribution when the student suffers, or the student's family suffers, economic loss through a natural disaster. Instead, as in the case with the other Title IV student financial aid programs, to provide relief for disaster area victims, the Secretary is encouraging FAAs to use their professional judgment to determine whether adjustments to a student's data will more accurately reflect a student's personal circumstances. An FAA must make adjustments on a "case-by-case" basis and clearly document the student's file with the reasons for any adjustment. If the FAA makes adjustments to a student's data, the SAR must be returned to the Title IV application processing system, or reported to the Central Processing System (CPS) through the Electronic Data Exchange. The adjusted data will then be processed through the CPS, and a new expected family contribution (EFC) will be calculated. Please note that if a student is not and is unlikely to become eligible for a Federal Pell Grant, an institution need not resubmit professional judgment adjustments through the CPS. - Verification (34 CFR 668 Subpart E). The Secretary will not enforce the verification requirements during the award year for those applicants selected for verification whose records were lost or destroyed because of the disaster. An institution must document the student's file when it does not perform verification for this reason. For these students, Verification Sttus Code "S" may be used to report a Federal Pell Grant disbursement. - Determining the Date of a Student's Withdrawal (§668.22(i)(1)(ii)). The Secretary will not enforce the regulatory deadlines for complying with the requirement that an institution determine the withdrawal date for a student if the institution is unable, because of the disaster, to make that determination within the required timeframe. The institution will be required to determine that the student has withdrawn WITHIN 60 DAYS (instead of 30 days) after the expiration of the earlier of the period of enrollment for which the student has been charged, the academic year in which the student withdrew, or the educational program from which the student withdrew. - Lost Student Records (§668.23). The Secretary recognizes that, because of the disaster, records and documentation institutions in the disaster area are required to keep on file may no longer be available or legible. Affected institutions are required to attempt to reconstruct financial aid application data and award data lost because of the disaster but will not be held responsible for records and documentation that, because of disaster damage, cannot be reconstructed. The institution must document that the records were lost due to the disaster. - Institutional Eligibility, Administrative Capability, and Financial Responsibility (§600.40(a),§668.15, and §668.16). If, in future program reviews or audits, the Secretary finds that an institution temporarily failed to meet the standards of fiscal and administrative capability and the institution indicates that this failure was the result of the disaster, the Secretary will carefully consider those circumstances described by the institution. He will examine each situation on a "case-by-case" basis and make a determination as part of the audit or program eview resolution process. A short-term, temporary closure of an institution will not, in itself, cause the institution to lose its eligibility. - Transfer Students (§668.19). The institution to which a student is transferring must make an effort to obtain the records and documentation required to disburse or deliver Title IV aid. If this information is not available as a result of damage caused by the disaster, the institution to which the student transferred will not be held responsible for collecting the information nor will the student be held responsible for providing the information. Any institution affected by this situation should document that the information is unavailable due to the disaster. - Agreements to Permit Study at Another Institution (§600.9). If an institution is unable to continue to provide a student's eligible program because of the disaster, the Secretary strongly encourages the institution to establish a contractual or consortium agreement with another institution to enable the student to continue to receive Title IV aid while studying at the second institution. The requirements for such an agreement are found in §600.9 of the Institutional Eligibility regulations. Generally, an eligible "home institution" following these requirements will not face potential liabilities concerning written agreements if the institution enters into an agreement with another eligible institution for this purpose. Determination of Need - Needs Analysis. No special aid received by victims of the disaster from the Federal Government or the State for the purpose of providing financial relief will be counted as income for the purposes of calculating a family's EFC. This aid may take the form of grants or low-interest loans. - Other Resources. No special aid received by the victims of the disaster from the Federal Government or the State for the purpose of providing financial relief will be counted as other resources or estimated financial assistance for the purposes of determining need. This aid may take the form of grants or low-interest loans. Federal Pell Grant Program - Reporting Deadlines (Notices of Deadline Dates). The Secretary will consider carefully, on a "case-by-case" basis, the effect of the disaster on any institution's ability to meet required Federal Pell Grant reporting deadlines. Campus-Based Programs FWS Program - Community Services (§675.2). The Secretary encourages institutions to employ its Federal Work-Study (FWS) students in the cleanup and relief efforts for the communities affected by the disaster. These efforts would be considered part of the institution's community services activities under the FWS Program. Federal Perkins Loan Program - Borrowers in an "In-School" Status (§674.31). The Secretary will consider that any borrower who was in an "in-school" status at the time of the natural disaster and was unable to complete course requirements or enroll in classes will continue to be in an "in-school" status until such time as the borrower withdraws, or until the end of the 1994-95 award period, whichever is later. The institution should document this reason for continued "in-school" status in the student's file. - Borrowers in Initial or Post-Deferment Grace Periods (§674.42). The Secretary will notrequire an institution to comply with §674.42(b) requiring an institution to make contact with the borrower during an initial or post-deferment grace period. An institution must document the reason for suspension of these activities in the borrower's file. - Borrowers in Default-Due Diligence. The Secretary will not enforce 34 CFR 674 Subpart C - Due Diligence. An institution may suspend the collection activities for borrowers already in default at the time of the natural disaster. An institution must document the reason for suspension of these activities in the borrower's file. - Borrowers in Repayment (§674.34-674.36). The Secretary authorizes the institution to grant an administrative hardship deferment to a borrower who is in repayment at the time of the natural disaster but is unable to continue to repay the loan due to the disaster. The legislation governing the Perkins Loan Program requires that interest will accrue during any period of administrative hardship deferment. A borrower may request this deferment orally, or in writing, and will not be required to submit a deferment documentation form to be considered eligible for this deferment. An institution must document this deferment in the borrower's file. FFEL Program - Institution's Delivery of Loan Proceeds (§682.604). The Secretary will not enforce the requirement in §682.604 that loan proceeds be delivered to the borrower within 45 days of the institution's receipt of the check but will instead permit the institution to deliver loan proceeds to the borrower up to 120 days from the institution's receipt of the check. - Guaranty Agency and Lender Disbursement of Loan Proceeds. The Secretary authorizes lenders not to disburse loan checks to institutions or to PLUS borrowers in the affected area according to the originally established disbursement schedules as required under §682.207(b)(1)(i)(B) if they have been informed that an institution has delayed opening for a scheduled term or has ceased operations for an undetermined period of time. Lenders should await revised disbursement schedules from the affected institutions. Institutions are also urged to request revised disbursement dates. The Secretary instructs guaranty agencies and lenders to revise information on loan periods, graduation dates, and so forth, on the loan applications related to these disbursements as the information becomes available. This instruction means that a borrower need not reapply for the loan. This also will allow a student to receive his or her loan proceeds according to a schedule that fits the institution's new academic schedule. - Converting the Borrower to Repayment (§682.209(a) and §682.210) The Secretary believes that it is in the best interest of the FFEL Program to consider each Federal Stafford loan that has not entered repayment and that was not in a default status on the date the borrower's attendance at the institution was interrupted due to the disaster to be (or have been) in an "in-school" status and to continue in that status until the institution resumes normal operations. THIS PERIOD OF DISASTER-RELATED NONATTENDANCE SHOULD NOT REQUIRE A BORROWER TO ENTER OR USE ANY OF HIS OR HER GRACE PERIOD. Each Federal Stafford loan that had entered repayment status and that is not in a default status on the date the borrower's attendance at the institution was interrupted due to disaster conditions is to be considered as in an in-school deferment status during the period of disaster-related nonattendance. THIS INTERIM PERIOD OF NONATTENDANCE SHOULD NOT FORCE A BORROWER BACK INTO REPAYMENT. A borrower whose FFEL loan was in an in-school deferment status on the date the disaster conditions interrupted normal operations at the institution shall be treated as if the loan continues in an in-school deferment status during this same period of disaster-related nonattendance. The Secretary will afford similar treatment to borrowers under the William D. Ford Federal Direct Loan Program. - Payment of a Refund to a Student or to a Lender (§668.22 and §682.607). The Secretary will not enforce the deadlines by which an affected institution must pay a refund that is due to a student or to a lender after the student's withdrawal as determined under §668.22(i). Instead, the Secretary will require the institution to pay a refund to the student WITHIN 90 DAYS (instead of 30 days) and to the lender WITHIN 120 DAYS (instead of 60 days) after the student's withdrawal. - Submission of Student Status Confirmation Reports (SSCR) (§682.610(c)). The Secretary will not enforce the deadline that an institution complete and submit required SSCRs to the Secretary or guaranty agency within 30 days of the institution's receipt of the report but will instead require completion and submission of these reports WITHIN 90 DAYS. Reports of changes of borrower status if the institution does not expect to submit its next SSCR within the next 60 days may also be submitted WITHIN 90 DAYS (instead of 30 days). For additional information or if you have any questions please contact: Jeffrey Baker, Director Policy Development Division Student Financial Assistance Programs U.S. Department of Education 600 Independence Avenue, SW Washington, DC 20202 (202) 708-9967 We hope that these options for regulatory relief will be of use to you in assisting students whose families have been affected by the disaster. Sincerely, William L. Moran Director, Student Assistance Programs Enclosure to flood disaster letter January 1995 COUNTIES DESIGNATED BY PRESIDENT CLINTON AS FLOOD DISASTER AREAS IN TEXAS - FALL 1994 Angelina Jasper Victoria Austin Jefferson Washington Bastrop Lee Waller Brazos Liberty Walker Brazoria Madison Wharton Burleson Matagorda Chambers Montgomery Fayette Nacagdoches Fort Bend Orange Galveston Polk Grimes San Augustine Hardin San Jacinto Harris Shelby Houston Trinity Jackson Tyler [Updates may be obtained by calling the Department's toll-free number at 1-800-433-3243, Monday through Friday from 9:00 a.m. to 5:30 p.m. Eastern time] |