Summary: Loan discharges based on improper determination that a student had the ability- to-benefit (ATB) from the school's training.
SUBJECT: Loan discharges based on improper
determination that a student had the ability-
to-benefit (ATB) from the school's training.
REFERENCE: 34 CFR 682.402(e) and §685.214(a)
Section 437(c)(1) of the Higher Education Act of 1965, as
amended (HEA) provides for the discharge of a
borrower's loan obligation under the Federal Family
Education Loan (FFEL) Program, and §455(a)(1) makes
this relief available under the William D. Ford Federal
Direct Loan Program, if the student's eligibility to borrow
was falsely certified by the school. In September 1994,
initial guidance concerning these loan discharges was
provided in "Dear Colleague" Letter 94-L-166/G-256
issued to lenders and guaranty agencies in the FFEL
Program. However, in the area of discharges
based on a school's defective determination of a student's
ability-to-benefit (ATB), the "Dear Colleague" Letter
promised more detailed guidance concerning those
This letter addresses some common questions about
discharges based on improper ATB determinations that
have been asked by borrowers, lenders, guaranty
agencies, and other parties. The Department
intends to apply the guidance in this letter to similar false
certification discharges in the William D. Ford Federal
Direct Loan Program.
Thank you for ensuring that the intent of the false
certification discharge provision is achieved. For further
information, you may contact the Department's Customer
Support Inquiry Service between the hours of 9:00 AM
and 5:00 PM Eastern Time, at 1-800-433-7327. After
hours calls will be accepted by an automated voice
response system. Callers leaving their name and phone
number will receive a return call the next business day.
You may FAX your inquiry to the Customer Support
Inquiry Service at any time by calling (202) 260-4199.
Elizabeth M. Hicks
Deputy Assistant Secretary
for Student Financial Assistance..