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(GEN-95-20) Guidance for helping Title IV participants affected by the recent floods in California.

DCLPublicationDate: 4/1/95
DCLID: GEN-95-20
AwardYear:
Summary: Guidance for helping Title IV participants affected by the recent floods in California.


April 1995
GEN-95-20

SUBJECT: Guidance for helping Title IV participants
affected by the recent floods in California.

REFERENCE: This information supplements the guidance given in
Chapters 2-10, Federal Student Financial Aid Handbook.

Dear Colleague:

The Secretary recognizes the severe impact that the floods in
California have had on Title IV participants located in
Presidentially declared natural disaster areas. As he has done
on similar occasions in the past, (for example, after the floods
in Texas in 1994), the Secretary wishes to assist the victims of
the flooding in their recovery by providing certain regulatory
relief to schools, lenders, and guaranty agencies in their
administration of the student financial aid programs under Title
IV of the Higher Education Act of 1965, as amended (HEA). This
relief is applicable to the 1994-95 award period (July 1, 1994 to
June 30, 1995), and is taken in anticipation of a Notice to be
published in the Federal Register.

This regulatory relief applies to individuals (and their
families) employed in, or attending a school located in a
disaster area designated by President Clinton, and to schools,
lenders, and guaranty agencies that were unable to maintain their
normal participation and interactions with Title IV participants
because of the flooding in those disaster areas. Please refer to
the enclosed list of the counties currently declared as disaster
areas. [Note: updates to the list 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.]

A Title IV participant 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: [Note: discussions are
presented alphabetically by topic within each of the program
areas.]

General Provisions (All Title IV Programs)

- Agreements to Permit Study at Another School (§600.9). If a
school is unable to continue to provide a student's eligible
program because of the disaster, the Secretary strongly
encourages the school to establish a contractual or
consortium agreement with another school to enable the
student to continue to receive Title IV aid while studying
at the second school. 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
school enters into an agreement with another eligible school
for this purpose.

- 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
a school determine the withdrawal date for a student if the
school is unable, because of the disaster, to make that
determination within the required timeframe. The school
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.

- 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 a school temporarily failed to meet the standards of
fiscal and administrative capability and the school
indicates that this failure was the result of the disaster,
the Secretary will carefully consider those circumstances
described by the school. He will examine each situation on
a "case-by-case" basis and make a determination as part of
the audit or program review resolution process. A short-
term, temporary closure of a school will not, in itself,
cause the school to lose its eligibility.

- Lost Student Records (§668.23). The Secretary recognizes
that, because of the disaster, records and documentation
schools in the disaster area are required to keep on file
may no longer be available or legible. Affected schools 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
school must document that the records were lost due to the
disaster.

- Need 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 expected
family contribution (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.

- Professional Judgment. Section 479A of the HEA 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 EFC 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.

For the Campus-Based, Direct Loan, and Federal Family
Education Loan (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 EFC 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.

For the Federal Pell Grant Program, there are no special
conditions on which to "adjust" a student's EFC 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 EFC will
be calculated. Please note that if a student is not
eligible and is unlikely to become eligible for a Federal
Pell Grant, a school need not resubmit professional judgment
adjustments through the CPS.

- Satisfactory Academic Progress [34 CFR 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
school's satisfactory academic progress standards. In this
situation, the Secretary encourages the school to refrain
from applying its satisfactory academic progress standards
at least where their application would disqualify a student
from receiving Title IV aid. The school 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.

- Transfer Students (§668.19). The school 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 school 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 school
affected by this situation should document that the
information is unavailable due to the disaster.

- Tuition Refunds or Credits (§668.22 and Appendix A). The
Secretary strongly encourages a school 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.

- 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. A school
must document the student's file when it does not perform
verification for this reason. For these students,
Verification Status Code "S" may be used to report a Federal
Pell Grant disbursement.

Campus-Based Programs

Federal Work-Study (FWS) Program

- Community Services (§675.2). The Secretary encourages
schools to employ its FWS students in the cleanup and relief
efforts for the communities affected by the disaster. These
efforts would be considered part of the school'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 school 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 not require a school to
comply with §674.42(b) requiring a school to make contact
with the borrower during an initial or post-deferment grace
period. A school 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. A school may
suspend the collection activities for borrowers already in
default at the time of the natural disaster. A school 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 school 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. A school
must document this deferment in the borrower's file.

Federal Family Education Loan (FFEL) Program

- 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 school was interrupted due to the disaster
to be (or have been) in an "in-school" status and to
continue in that status until the school 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 school 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 school shall be treated as if the
loan continues in an in-school deferment status during this
same period of disaster-related nonattendance.

- Guaranty Agency and Lender Disbursement of Loan Proceeds.
The Secretary authorizes lenders not to disburse loan checks
to schools 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 a school 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 schools. Schools 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 school's
new academic schedule.

- Lender and Guaranty Agency Due Diligence. *1* The Secretary
has decided that it is in the best interest of the flood
victims and the federal government to waive his right to
refuse to pay reinsurance to guaranty agencies or interest
and special allowance benefits to lenders under the
following circumstances:

A. Lenders and guaranty agencies servicing accounts of
borrowers residing in designated natural disaster areas
or who would be required to contact other entities
located in a designated natural disaster area who are
unable to maintain normal operations.

If a borrower resides in an area designated by the President
as a natural disaster area (see attached list of designated
counties), lenders and guaranty agencies are not required to
comply with any regulatory provision requiring the lender or
agency to contact the borrower in writing or by telephone
within specified timeframes. For example, contacts with a
delinquent or defaulted borrower (or endorser, if
applicable) of an FFEL Program loan, that normally would be
required under §682.410 and §682.411, may be suspended.
This waiver will apply to all such contacts that would
otherwise be required during the periods specified on the
list of counties. Lenders and guaranty agencies are
strongly encouraged to grant administrative forbearance to
all borrowers residing in the designated counties during
this period. All regulatory requirements shall resume on
the dates indicated on the list, beginning with the
activities that immediately follow those activities last
performed at the time the lender or guaranty agency
suspended its collection efforts.

If a lender or guaranty agency is able to maintain normal
business operations (regardless of its location), but would
normally be required to contact an entity (e.g., a school)
that is adversely affected by the flooding to the extent
that the entity to be contacted cannot maintain normal
business operations, the lender or guaranty agency is not
required to comply with any time-driven regulatory provision
with respect to that entity during the waiver period. All
regulatory requirements shall resume on the dates indicated
on the list, beginning with the activities that immediately
follow those activities last performed at the time the
lender or guaranty agency suspended its contact with the
entity.

B. Lenders and guaranty agencies located in a designated
natural disaster area who are unable to maintain normal
operations.

Lenders and guaranty agencies located in a designated
natural disaster area who are adversely affected by the
flooding to the extent that they cannot maintain normal
business operations, are not required to comply with
regulatory provisions that normally would require them to
perform a specific action in a prescribed period of time
during the waiver period. These provisions include the
time-driven requirements in §682.205, §682.207, §682.208,
§682.209, §682.402, §682.404, §682.406, §682.410, §682.411,
and §682.412 that relate to activities such as loan
disclosures, disbursement, servicing, repayment, claim
processing and filing deadlines, certain terms of the
federal reinsurance agreement, and due diligence
requirements. All regulatory requirements shall resume on
the dates indicated on the applicable listings, beginning
with the activities that immediately follow those activities
last performed at the time the lender or guaranty agency was
unable to comply with regulatory requirements because of the
flooding.

C. Waivers applicable to FFEL schools located in a
disaster area.

- 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 school 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 school 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.

- School'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 school's receipt of the check but will instead permit
the school to deliver loan proceeds to the borrower up to
120 days from the school's receipt of the check.

- Submission of Student Status Confirmation Reports
[§682.610(c)]. The Secretary will not enforce the deadline
that a school complete and submit required student status
confirmation reports to the Secretary or guaranty agency
within 30 days of the school'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 school does not expect to submit its next
report within the next 60 days may also be submitted WITHIN
90 DAYS (instead of 30 days).

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 school's ability to
meet required Federal Pell Grant reporting deadlines.

William D. Ford Federal Direct Loan Program

- Payment of a Refund to a Student or to the Secretary
(§668.22 and §685.305). The Secretary will not enforce the
deadlines by which an affected school must pay a refund that
is due to a student or to the Secretary after the student's
withdrawal as determined under §668.22(i). Instead, the
Secretary will require the school to pay a refund to the
student WITHIN 90 DAYS (instead of 30 days) and to the
Secretary WITHIN 120 DAYS (instead of 60 days) after the
student's withdrawal.

- Repayment of Direct Subsidized and Direct Unsubsidized Loans
(§685.204 and §685.207). The Secretary believes that it is
in the best interest of the Direct Loan Program to consider
each Direct Subsidized and Direct Unsubsidized loan that has
not entered repayment and that was not in a default status
on the date the borrower's attendance at the school was
interrupted due to the disaster to be (or have been) in an
"in-school" status and to continue in that status until the
school 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 Direct Subsidized and Direct Unsubsidized loan that had
entered repayment status and that is not in a default status
on the date the borrower's attendance at the school 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.

- Submission of Student Status Confirmation Reports
[§685.308(b)]. The Secretary will not enforce the deadline
that a school complete and submit required student status
confirmation reports to the Secretary within 30 days of the
school'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 school does
not expect to submit its next report 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 20202-5345
Telephone: (202) 708-9967 FAX: (202) 205-0786

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,


David A. Longanecker

Enclosure

*1* The guidance given in sections A and B below repeats the guidance
applicable to the counties that were declared disaster areas as of the date
(February 15) that the Department disseminated a "Dear Guaranty Agency
Director" letter to FFEL lenders, guaranty agencies, and other parties.
Enclosure for California flood disaster letter, April 1995

Attachment

Last Modified: 03/31/1995