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(Disaster Letter-99-28) Discontinuation of "Disaster Letters"

DCLPublicationDate: 8/5/99
DCLID: Disaster Letter-99-28
AwardYear:
Summary: Discontinuation of "Disaster Letters"


August 5, 1999

Disaster Letter 99 - 28: RE: Discontinuation of “Disaster Letters”


Dear Guaranty Agency Director:

On August 3, a notice of proposed rulemaking (NPRM) was published in the Federal Register (FR 64, No. 148, pages 42176-42203) which, among other things, proposed to modify and incorporate into the Federal Family Education Loan regulations the Department's policy of permitting lenders and guaranty agencies to grant an administrative forbearance to assist borrowers who have been affected by natural disasters. A major change from our current procedure of notifying you about the numerous natural disaster declarations issued by the Federal Emergency Management Agency (FEMA) is that the NPRM proposes to let loan holders make the determination of whether a natural disaster had occurred. There would be no requirement that the natural disaster area be one that qualifies under FEMA’s “Individual Assistance Program.” Since loan holders would decide what constituted a natural disaster for purposes of an administrative forbearance, the “Disaster Letter” notifications we have been sending to you will no longer be needed and will be discontinued.

This change in the NPRM was recommended by negotiators during the negotiated rulemaking meetings that developed the NPRM. It was approved without objection by the Department and all of the negotiators, who represented lenders, servicers, guaranty agencies, schools, borrower interest groups, and other parties. In light of this universal approval, we believe it is appropriate to revise our existing policy immediately, so that you can begin to use the NPRM’s proposals now to assist borrowers affected by natural disasters. Effective immediately, loan holders will decide what constitutes a natural disaster for purposes of an administrative forbearance, and may grant an administrative forbearance to borrowers who contact them asking for temporary relief from their loan obligations because they have been adversely affected by a natural disaster. The holder may grant a forbearance for up to 3 months based on the borrower's oral or written request for assistance, and must document the reasons why it granted the forbearance in the borrower's loan file, but does not need to obtain supporting documentation or a signed written agreement from the borrower to justify a forbearance for the initial 3-month period. However, a continuation of the forbearance past the initial 3-month period will require supporting documentation and a written agreement from the borrower.

This letter has also been sent to each regional office of the Department, plus the National Council of Higher Education Loan Programs, Inc., the Consumer Bankers Association, the National Association of Student Financial Aid Administrators, and the Student Loan Servicing Alliance. Please contact me at (202) 708-8242 if you have any questions.

Sincerely,


Patricia Newcombe
Chief, Policy Section
Federal Family Education Loan Program
Program Development Division
Office of Student Financial Assistance

Last Modified: 08/05/1999