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(95-G-280) Guidance for helping Title IV participants affected by the recent May 1995 floods in Illinois, Louisiana, Mississippi and Missouri.

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

Last Modified: 06/30/1995