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(GEN-01-11) (GEN-01-11) Recent Terrorist Attacks - Relief for Borrowers in the Title IV Loan Programs

Publication Date: September 2001

DCL ID: GEN-01-11

Summary: Recent Terrorist Attacks - Relief for Borrowers in the Title IV Loan Programs


GEN-01-11
September 2001

Subject: Recent Terrorist Attacks - Relief for Borrowers in the Title IV Loan Programs


Summary: This letter is the first of a series that will provide guidance regarding the administration of the federal student aid programs authorized under Title IV of the Higher Education Act as a result of the terrorist attacks on the United States. The first three letters (this letter and ones that will address institutional reporting deadlines and the treatment of students and borrowers who are affected by their call to active military duty) should be available by the end of this week. We will also publish a letter that will comprehensively address other issues that relate to regulatory and administrative relief for those affected by the terrorist attacks.

This letter specifically addresses the immediate needs of borrowers who are in repayment on
a loan under the Federal Family Education Loan (FFEL), the William D. Ford Federal Direct Loan (Direct Loan), and Federal Perkins Loan programs.

Dear Colleague:

On September 11, 2001, President Bush designated all five boroughs of New York City (The Bronx, Brooklyn, Manhattan, Queens and Staten Island) as eligible for national disaster assistance. There may be borrowers affected by the attacks who will need assistance with their loan obligation.

The following provides guidance to Title IV loan holders on the granting of forbearances and discharges to affected borrowers. It also provides guidance on the treatment of defaulted borrowers who have been affected by the disaster.

Forbearance in the FFEL and Direct Loan Programs

Forbearance for borrowers who reside or work in the designated disaster area

Until it can be determined whether a borrower qualifies for a deferment or discharge because of disruptions caused by the terrorist attacks, the Secretary is authorizing FFEL lenders to grant mandatory administrative forbearance to certain borrowers (or endorsers, if applicable) who either reside in or, to the extent the lender has knowledge, work in the designated disaster area (New York City). Mandatory administrative forbearance does not require either a request or documentation from the borrower. This period of mandatory administrative forbearance is effective from September 11, 2001 through January 31, 2002. The Secretary is granting administrative forbearance to similarly situated Direct Loan borrowers for the same period. See 34 CFR 682.211(i)(2)(i) and 34 CFR 685.205(b)(8).

Borrowers must be notified that an administrative forbearance has been granted to allow them to pursue other potential program benefits that may be available to them or to ask for resumption of normal billing and payment schedules. Forbearance beyond January 31, 2002 may be granted only based on supporting documentation and with a written forbearance agreement with the borrower.

Forbearance for other borrowers

Based upon the request of the affected borrower, the borrower's family or another reliable source, borrowers who have been impacted by the terrorist attacks (other than those who reside or work in New York City) should be granted forbearance for a period that ends no later than January 31, 2002 without supporting documentation and without a written forbearance agreement. The reasons for granting the forbearance should be documented in the borrower's loan records. Forbearance beyond the initial period will require supporting documentation and a written agreement with the borrower.

During the initial forbearance process, lenders are encouraged to examine the borrower's eligibility for available deferment or discharge benefits.

Defaulted Borrowers in the FFEL and Direct Loan Programs

The Secretary will, without a request from the borrower, curtail collection activities from September 11, 2001 through January 31, 2002 for defaulted borrowers who reside or work in the designated disaster area (New York City) and authorizes guaranty agencies in the FFEL Program to do the same for their defaulted borrowers. For other defaulted borrowers who have been impacted by the disaster the Secretary will and guaranty agencies may, upon request of the borrower, curtail collection activities for a period that ends no later than January 31, 2002.

Forbearance in the Federal Perkins Loan Program

Perkins Loan borrowers who reside or work in the designated disaster area (New York City) should be granted a forbearance without a borrower request or written forbearance agreement from September 11, 2001 through January 31, 2002. Borrowers must be notified that a forbearance has been granted to allow them to pursue other potential program benefits that may be available to them. Forbearance beyond this period may be granted only based on a written request of the borrower, supporting documentation and with a written forbearance agreement with the borrower.

Collection efforts on the accounts of defaulted borrowers in the designated areas may be discontinued from September 11, 2001 through January 31, 2002.

For other affected borrowers, forbearance should be granted for a period that ends no later than January 31, 2002 based on the request of the borrower, the borrower's family or another reliable source (which need not be in writing) and without supporting documentation and without a written forbearance agreement. Forbearance beyond the initial period will require supporting documentation and a written forbearance agreement with the borrower.

For defaulted borrowers, upon request of the borrower, the school may discontinue collection efforts for a period that ends no later than January 31, 2002.

Discharges

The Secretary encourages FFEL lenders (without approval from the Secretary or from the guaranty agency), guaranty agencies, and Perkins schools to use "reliable information" of a borrower's (or the dependent student in the case of a PLUS loan) death due to the terrorist attacks, as the information becomes available, to immediately suspend collection activities without contacting the borrower's family for whatever period is necessary in order to process a death discharge. The Secretary reminds guaranty agencies and schools that they may grant a death discharge on the basis of exceptional circumstances using reliable documentation other than an original or certified copy of a death certificate.

"Other reliable documentation" may include, but is not limited to, obituary notices and published listings of the dead provided by a Federal, State, or local government entity, or by one of the affected airlines. The Secretary will implement these same guidelines for the Direct Loan Program and for other loans held by the Department.

Guaranty agencies and schools are encouraged, at a later date, to obtain a certified copy of the death certificate if one is available through alternative sources without contacting the borrower's family.

Due Diligence Timelines

Due to disruptions in mail and other communications throughout the country, the Secretary will, for the period of September 11, 2001 through October 31, 2001 or later if the Secretary determines that these disruptions still exist, not enforce time sensitive deadlines that lenders and guaranty agencies in the FFEL Program and institutions in the Perkins Loan Program normally are required to comply with in their loan due diligence activities.

I want to thank you in advance for serving those borrowers who have been impacted by these terrible tragedies.

Sincerely,

William D. Hansen
Deputy Secretary

Last Modified: 09/16/2001