| DCLPublicationDate: 7/1/95 DCLID: 95-G-280 AwardYear: Summary: Guidance for helping Title IV participants affected by the recent May 1995 floods in Illinois, Louisiana, Mississippi and Missouri. July 1995 GEN-95-36 95-L-182 95-G-280 SUBJECT: Guidance for helping Title IV participants affected by the recent May 1995 floods in Illinois, Louisiana, Mississippi and Missouri. 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 recent floods in Illinois, Louisiana, Mississippi and Missouri 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 California in 1995), the Secretary wishes to assist the victims of the May 1995 floods in their recovery by providing certain regulatory relief to students, 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 generally applicable to the 1994-95 award period (July 1, 1994 to June 30, 1995). However, if specifically indicated, relief will be extended into the next award year (July 1, 1995 to June 30, 1996) 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. [Note: may apply to the 1995-96 award year.] - 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. [Note: may apply to the 1995-96 award year.] - 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. [Note: may apply to the 1995-96 award year.] - 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 usetheir 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 fails to meet the school's satisfactory academic progress standards due to the disaster. 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. [Note: may apply to the 1995-96 award year.] - 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. [Note: may apply to the 1995-96 award year.] 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 schoolshould 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 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. 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), lendersand 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, Elizabeth M. Hicks Deputy Assistant Secretary Enclosure Enclosure for Illinois, Louisiana, Mississippi and Missouri flood disaster letter, June 1995 ____________________________________________________ COUNTIES DESIGNATED BY PRESIDENT CLINTON AS DISASTER AREAS BECAUSE OF FLOODING IN 1995 ILLINOIS Madison St. Claire LOUISIANA Ascension Orleans (Ward 9) St. John the Baptist Assumption St. Bernard St. Tammany Jefferson St. Charles Tangipahoa LaFourche St. James Terrebonne MISSISSIPPI Hancock Jackson Harrison Pearl River MISSOURI Benton Gasconade St. Charles Boone Jefferson St. Claire Cole Johnson St. Genevieve Franklin Miller St. Louis |