Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

The Secretary proposes to amend the Federal Family Education Loan (FFEL) Program regulations and the William D. Ford Federal Direct Loan (Direct Loan) Program regulations to modify requirements in these programs. These proposed modifications are intended

FR part
VI
Attachments:
PublicationDate: 9/25/97
FRPart: VI
RegPartsAffected:
PageNumbers: 50461-50466
Summary: The Secretary proposes to amend the Federal Family Education Loan (FFEL) Program regulations and the William D. Ford Federal Direct Loan (Direct Loan) Program regulations to modify requirements in these programs. These proposed modifications are intended to eliminate certain differences in the requirements of the FFEL and Direct Loan programs and to reduce burden.
CommentDueDate: 11/3/97

  
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[


[Federal Register: September 25, 1997 (Volume 62, Number 186)]
[Proposed Rules]
[Page 50461-50466]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25se97-28]


[[Page 50461]]

_______________________________________________________________________

Part VI





Department of Education





_______________________________________________________________________



34 CFR Parts 682 and 685



Federal Family Education Loan Program and William D. Ford Federal
Direct Loan Program; Proposed Rule


[[Page 50462]]



DEPARTMENT OF EDUCATION

34 CFR Parts 682 and 685

RIN 1840-AC45


Federal Family Education Loan Program and William D. Ford Federal
Direct Loan Program

AGENCY: Department of Education.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Secretary proposes to amend the Federal Family Education
Loan (FFEL) Program regulations and the William D. Ford Federal Direct
Loan (Direct Loan) Program regulations to modify requirements in these
programs. These proposed modifications are intended to eliminate
certain differences in the requirements of the FFEL and Direct Loan
programs and to reduce burden.

DATES: Comments must be received on or before November 3, 1997.

ADDRESSES: All comments concerning these proposed regulations should be
addressed to: Mr. Kenneth Smith, U.S. Department of Education, P.O. Box
23272, Washington, DC 20026-3272, or to the following internet address:
parity@ed.gov.
To ensure that public comments have maximum effect in developing
the final regulations, the Department urges that each comment clearly
identify the specific section or sections of the regulations that the
comment addresses and that comments be in the same order as the
regulations.
Comments that concern information collection requirements should be
sent to the Office of Management and Budget at the address listed in
the Paperwork Reduction Act section of this preamble. A copy of those
comments may also be sent to the Department representative named above.

FOR FURTHER INFORMATION CONTACT: Mr. Kenneth Smith, U.S. Department of
Education, 600 Independence Avenue, SW, ROB-3, Room 3045, Washington,
DC 20202-5346, telephone 202-708-8242. Individuals who use a
telecommunications device for the deaf (TDD) may call the Federal
Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8
p.m., Eastern time, Monday through Friday.
Individuals with disabilities may obtain this document in an
alternate format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person listed in the preceding
paragraph.

SUPPLEMENTARY INFORMATION: Section 455(a) of the Higher Education Act
of 1965, as amended (HEA), provides that, unless otherwise specified in
statute, Federal Direct Stafford/Ford (Direct Subsidized) Loans,
Federal Direct Unsubsidized Stafford/Ford (Direct Unsubsidized) Loans,
and Federal Direct PLUS (Direct PLUS) Loans shall have the same terms,
conditions, and benefits, and be available in the same amounts, as
Federal Stafford Loans, Federal Unsubsidized Stafford Loans, and
Federal PLUS Loans.
The Direct Loan Program regulations (34 CFR part 685) provide
terms, conditions, benefits, and amounts for Direct Subsidized Loans,
Direct Unsubsidized Loans, and Direct PLUS Loans. The FFEL Program
regulations (34 CFR part 682) provide terms, conditions, benefits, and
amounts for Federal Stafford Loans, Federal Unsubsidized Stafford
Loans, and Federal PLUS Loans.
The Secretary is proposing to amend 34 CFR parts 682 and 685 to
change certain requirements and procedures in the FFEL and Direct Loan
programs. These proposed changes are intended to eliminate certain
differences in the requirements of these programs and to reduce burden
on program participants.
A summary of each proposed change is provided below, in the order
of its first occurrence in the proposed regulatory text.

Sections 682.201 and 685.301 Students With Need of $200 or Less

Under FFELP regulations, at Sec. 682.201(a)(2)(i), a student with a
calculated need of $200 or less is not required to file an application
for a Subsidized Stafford Loan with a lender before applying for a
Federal Supplemental Loans for Students (SLS) loan. The final rule for
these proposed regulations would include a technical correction to
apply Sec. 682.201(a)(2)(i) to a borrower's application for an
Unsubsidized Stafford loan, because Unsubsidized Stafford loans are
effectively the replacement for SLS loans. This technical correction
reflects a long-standing FFEL Program policy and has been included in
this NPRM so that changes to FFEL and Direct Loan program regulatory
text are made simultaneously.
Essentially, this technical correction to Sec. 682.201(a)(2)(i)
clarifies a method by which a school participating in the FFEL Program
may choose not to certify a Subsidized Stafford Loan for a student with
a calculated need of $200 or less, and may instead certify an
Unsubsidized Stafford Loan that includes the amount of $200 or less
that would have been awarded in the Subsidized Stafford Loan.
This provision is necessary to avoid processing delays and
increased costs in delivering funds to students. Because of the
proportionally higher cost of small loans, many lenders under the FFEL
Program do not make loans of $200 or less. Without this provision, a
school would be required to submit an application to a lender for a
Subsidized Stafford Loan amount when it is already aware that the loan
will be refused by the lender.
To make the practices of schools participating in the FFEL and
Direct Loan programs more consistent, the Secretary proposes to
establish a provision for the Direct Loan Program similar to that
described above for the FFEL Program. The proposed regulations would
allow, but not require, a school to choose not to originate a Direct
Subsidized Loan for a student with a calculated need of $200 or less.
Instead, a school participating in the Direct Loan Program would be
able to originate a Direct Unsubsidized Loan that includes the $200 or
less that would have been originated as a Direct Subsidized Loan. For
example, a student with a cost of attendance of $2,000, estimated
financial assistance of $0, and an expected family contribution of
$1,850 would have a calculated need of $150. The school could choose to
originate one Direct Unsubsidized Loan for $2,000 for this student,
rather than a Direct Subsidized Loan for $150 and a Direct Unsubsidized
Loan for $1,850.
This proposal is consistent with guidance provided in the preamble
to the Direct Loan Program final rule published in the Federal Register
on December 1, 1994 (59 FR 61669), in which the Secretary stated that
``an institution may establish a minimum loan amount.'' The proposed
regulations would provide a ceiling of $200 to the ``minimum loan
amount'' allowed in that preamble language, and would provide a
regulatory basis for this action by a school. It is important to note
that the Department has not established a minimum Direct Loan amount
that it will process, and a school participating in the Direct Loan
Program may continue to originate loans of $200 or less to meet
borrower needs.
The Secretary realizes that an additional interest cost is incurred
by a student who is awarded an amount in an unsubsidized loan rather
than in a subsidized loan, even if the loan amount is $200 or less,
because the government does not charge interest on a subsidized loan if
it is not in repayment status or in a deferment. The Department
estimates a maximum cost to a student of $66, for interest accruing on
$200 over four years. However, this provision

[[Page 50463]]

was established for a school participating in the FFEL Program for the
reasons described above, and it is proposed for a school participating
in the Direct Loan Program to provide parity with the FFEL Program and
to allow a school to control its administrative costs in making loans.
The Secretary expects the proposed regulations to have little actual
effect on costs to borrowers for receiving FFEL or Direct Loan program
funds because current FFEL Program policy would remain unchanged and
current Direct Loan Program policy would only be defined in
regulations. The only change to current Direct Loan Program policy in
the proposed regulations is the provision of a $200 limit to replace
the currently unspecified ``minimum loan amount,'' so a school would no
longer be able to establish a minimum loan amount higher than $200.

Sections 682.202(c)(5), 682.401(b)(10), and 685.202(c)(4) Refund of
FFEL Program Origination Fees and Insurance Premiums and of Direct Loan
Program Loan Fees

Under Sec. 682.202(c)(5), a lender must refund, by a credit against
the borrower's loan balance, the applicable portion of the origination
fee previously deducted from the loan if (1) the borrower repays a
portion of the loan within 120 days of disbursement, (2) the funds are
not delivered within 120 days of disbursement, or (3) the funds are
returned by the school to the lender.<SUP>1</SUP> Similarly, under
Sec. 682.401(b)(10)(vi)(B), a lender must refund the applicable portion
of the insurance premium previously deducted by application to the
borrower's account if (1) the loan is paid in full within 120 days of
disbursement, (2) the loan check has not been negotiated within 120
days of disbursement, or (3) the loan or a portion of a loan is
returned by the school to the lender. Direct Loan Program regulations
at Sec. 685.202(c)(4) provide for the refund of the applicable portion
of the loan fee previously deducted from the loan if a portion of the
loan is repaid within 120 days or should have been repaid by the school
within 120 days of disbursement.
---------------------------------------------------------------------------

\The introductory language for Sec. 682.202(c)(5) is
incorrect as published in the Code of Federal Regulations (CFR),
revised as of July 1, 1996. The CFR reflects the final rule
published in the Federal Register on May 17, 1994 (59 FR 25745).
However, a correction to the May 17, 1994, rule was published on
July 13, 1994 (59 FR 35625). The correction was not included in the
current CFR. To ensure that the correct introductory language is
properly reflected in regulations, it is included in this NPRM and
will be included in the final rule as a technical correction.
---------------------------------------------------------------------------

The Secretary proposes to revise Secs. 682.202(c)(5)(i),
682.401(b)(10)(vi)(B)(1), and 685.202(c)(4) to provide that the
applicable portion of the origination fee, insurance premium, or loan
fee is to be repaid or returned in cases in which loan funds are
returned by the school in order to comply with the HEA or with
applicable regulations.
For example, the applicable portion of the origination fee,
insurance premium, or loan fee would be repaid or returned to a
borrower if during a program review it was determined that a school
should have paid a larger refund to a student, even if that refund
should have occurred more than 120 days after the disbursement was
made. On the other hand, the applicable portion of the origination fee,
insurance premium, or loan fee would not be repaid or returned to a
borrower if a school assists the borrower by forwarding a prepayment to
the lender more than 120 days after disbursement. In this example, the
school would not be returning the funds in order to comply with the HEA
or with applicable regulations; it would be returning the funds to
comply with the borrower's request.
This proposed revision clarifies current FFEL requirements.
Further, it expands the circumstances under which the Secretary would
reduce the Direct Loan Program loan fee charged to borrowers by
removing the requirement that the repayment should have been made
within 120 days of disbursement. Under the proposed provision, students
in both the FFEL and Direct Loan programs would receive the same
benefits.

Sections 682.402 and 685.212 Discharge of a Loan

Under Sec. 682.402(c)(1), FFEL Program regulations provide for the
discharge of a borrower's or endorser's obligation to repay a
Consolidation Loan, due to a total and permanent disability, for a
borrower who became disabled (or whose condition substantially
deteriorated, so as to render the borrower totally and permanently
disabled) after applying for all of the Consolidation Loan's underlying
loans. This discharge is made even if a borrower's condition did not
substantially deteriorate after the borrower applied for the
Consolidation Loan itself. Corresponding Direct Loan Program
regulations, at Sec. 685.212(b), do not allow for a discharge of a loan
obligation for a Direct Consolidation Loan if the borrower did not
become disabled (or whose condition did not substantially deteriorate,
so as to render the borrower totally and permanently disabled) after
the Direct Consolidation Loan was made.
For example, a borrower who received several loans, then became
totally and permanently disabled, and then consolidated those loans
into a Direct Consolidation Loan, remains obligated to repay the loan.
Under current Direct Loan Program regulations, a borrower is not
considered totally and permanently disabled on the basis of a condition
that existed at the time the borrower applied for the consolidation
loan, unless the borrower's condition substantially deteriorated after
the loan was made so as to render the borrower totally and permanently
disabled. In the example above, since the borrower's condition existed
at the time the borrower applied for the Direct Consolidation Loan and
did not substantially deteriorate after the Direct Consolidation Loan
was made, the borrower would remain obligated to repay the loan. By
contrast, corresponding FFEL regulations would allow a discharge of the
borrower's obligation to make further payments on the loan.
The Secretary proposes to revise Direct Loan Program regulations to
provide the same discharge conditions for a Direct Consolidation Loan
as are currently provided for an FFELP Consolidation Loan. Because
there has been some confusion regarding the FFEL rule on this issue,
the Secretary also proposes to clarify the current FFEL Program
provision and to make a conforming change to regulations at
Sec. 682.402(k)(2)(iii).

Sections 682.604(g)(2) and 685.304(b)(2) Exit Counseling

Section 485(b)(1)(A)(i) of the HEA requires a school to inform a
student of ``the average anticipated monthly repayments'' during exit
counseling. For an FFEL borrower, under Sec. 682.604(g)(2)(i), a school
is required to base the calculation of this amount on an average
indebtedness for students at that school. Direct Loan Program
regulations, at Sec. 685.304(b)(2)(i), go beyond the requirements in
FFEL regulations and require a school to base its calculation of this
amount on the individual student's actual indebtedness.
The Secretary proposes to revise both FFEL and Direct Loan program
regulations to allow a school to base its calculation of this amount
upon either the student's individual indebtedness or upon the average
indebtedness of students who have obtained loans for attendance at that
school or in the borrower's program of study. This change would provide
more flexibility in both loan programs, would promote

[[Page 50464]]

consistency in exit counseling, and would reduce burden for schools
participating in both the FFEL and the Direct Loan programs.
A Direct Loan borrower's ability to make an informed choice when
selecting a repayment plan is not lessened by this change. A school
participating in the Direct Loan Program may, and is encouraged to,
continue to receive information regarding an individual borrower's
anticipated Direct Loan Program monthly repayment amount for
distribution to the borrower during exit counseling. If a borrower does
not select a repayment plan by the 60th day of the loan's grace period,
he or she is sent the individualized information by the Direct Loan
Servicer. In addition, the individualized repayment information is
always available to a borrower who calls the Direct Loan Servicer, both
when the borrower is selecting an initial repayment plan and when the
borrower is considering a change from one plan to another.
Under Sec. 685.304(b)(2) (ii) and (iii), a school is required to
review available repayment options with a borrower and to provide the
borrower with options concerning debt-management strategies. Should
these proposed regulations be included in the final rule, to comply
with Sec. 685.304(b)(2) (ii) and (iii), a school that chooses not to
provide the individualized repayment information to a student would be
expected to advise the student of the availability of this information
at the student's Direct Loan servicer and of its usefulness in
selecting the most appropriate repayment plan.
The Secretary requests specific comments on whether the timing and
availability of the individualized Direct Loan Program repayment
information, as described above, provides all Direct Loan Program
borrowers with an adequate opportunity to select the most appropriate
repayment plan. In particular, the Secretary requests comments on the
ability of a borrower to make an informed choice when selecting a
repayment plan if he or she does not receive individualized information
until the 60th day of the loan's grace period because his or her school
has chosen to supply repayment information based on average
indebtedness during its exit counseling.

Executive Order 12866

1. Assessment of Costs and Benefits

These proposed regulations have been reviewed in accordance with
Executive Order 12866. Under the terms of the order the Secretary has
assessed the potential costs and benefits of this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those determined by the
Secretary to be necessary for administering these programs effectively
and efficiently. Burdens specifically associated with information
collection requirements, if any, are identified and explained elsewhere
in this preamble under the heading Paperwork Reduction Act of 1995.
In assessing the potential costs and benefits--both quantitative
and qualitative--of these proposed regulations, the Secretary has
determined that the benefits of the proposed regulations justify the
costs.
The Secretary has also determined that this regulatory action does
not unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
To assist the Department in complying with the specific
requirements of Executive Order 12866, the Secretary invites comments
on whether there may be further opportunities to reduce any potential
costs or increase potential benefits resulting from these regulations
without impeding the effective and efficient administration of these
programs.

Summary of Potential Costs and Benefits

Potential costs and benefits of these proposed regulations are
discussed elsewhere in this preamble under the following heading:
Regulatory Flexibility Act Certification, and in the information stated
previously under Supplementary Information.

2. Clarity of Regulations

Executive Order 12866 requires each agency to write regulations
that are easy to understand.
The Secretary invites comments on how to make these regulations
easier to understand, including answers to questions such as the
following: (1) Are the requirements in the proposed regulations clearly
stated? (2) Do the regulations contain technical terms or other wording
that interferes with their clarity? (3) Does the format of the
regulations (grouping and order of sections, use of headings,
paragraphing, etc.) aid or reduce their clarity? Would the regulations
be easier to understand if they were divided into more (but shorter)
sections? (A ``section'' is preceded by the symbol ``Sec. '' and a
numbered heading; for example, Sec. 668.24 Records retention and
examinations.) (4) Is the description of the proposed regulations in
the ``Supplementary Information'' section of this preamble helpful in
understanding the proposed regulations? How could this description be
more helpful in making the proposed regulations easier to understand?
(5) What else could the Department do to make the regulations easier to
understand?
A copy of any comments that concern how the Department could make
these proposed regulations easier to understand should be sent to Mr.
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of
Education, 600 Independence Avenue, SW, Room 5121, FOB-10, Washington,
DC 20202-2241.

Regulatory Flexibility Act Certification

The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. Small entities affected by these proposed regulations are
small schools and loan holders participating in the federal student
loan programs.
The provisions of this regulation provide added flexibility to
schools and loan holders, or reduce the administrative burden on
schools. Thus, no significant adverse economic impacts on small
entities are expected to occur.
The Secretary particularly invites comments on the effect that
these proposed regulations would have on small entities.

Paperwork Reduction Act of 1995

Section 685.212 contains information collection requirements. As
required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)),
the Department of Education has submitted a copy of this section to the
Office of Management and Budget (OMB) for its review.
Collection of Information: William D. Ford Federal Direct Loan
Program--685.212--Discharge of a loan obligation. The Secretary
proposes to provide for the discharge of a Direct Consolidation Loan
due to a total and permanent disability for a borrower who would be
eligible for the discharge of all the loans that were included in the
Direct Consolidation Loan if those loans had not been consolidated. The
Department may require additional certifications and information
concerning the underlying loans in order to provide this benefit to the
borrower. Annual public reporting burden for this collection of
information is estimated to average 0.2 hours per response for 180
respondents, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and

[[Page 50465]]

completing and reviewing the collection of information. The total
estimated annual recordkeeping and reporting burden hours equals 36
hours.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, OMB, Room 10235, New Executive
Office Building, Washington, D.C. 20503; Attention: Desk Officer for
the U.S. Department of Education.
The Department considers comments by the public on this proposed
collection of information in--
<bullet> Evaluating whether the proposed collection of information
is necessary for the proper performance of the functions of the
Department, including whether the information will have practical
utility;
<bullet> Evaluating the accuracy of the Department's estimate of
the burden of the proposed collection of information, including the
validity of the methodology and assumptions used;
<bullet> Enhancing the quality, usefulness, and clarity of the
information to be collected; and
<bullet> Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques of other forms of information technology; e.g., permitting
electronic submission of responses.
OMB is required to make a decision concerning the collection of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment to OMB is best assured of having its full effect
if OMB receives it within 30 days of publication. This does not affect
the deadline for the public to comment to the Department on the
proposed regulations.

Invitation To Comment

Interested persons are invited to submit comments and
recommendations regarding these proposed regulations.
All comments submitted in response to these proposed regulations
will be available for public inspection, during and after the comment
period, in Room 3045, Regional Office Building 3, 7th and D Streets,
SW, Washington, DC, between the hours of 8:30 a.m. and 4:00 p.m.,
Monday through Friday of each week, except Federal holidays.
On request the Department supplies an appropriate aid, such as a
reader or print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking docket for these proposed regulations. An individual with a
disability who wants to schedule an appointment for this type of aid
may call (202) 205-8113 or (202) 260-9895. An individual who uses a TDD
may call the Federal Information Relay Service at 1-800-877-8339,
between 8 a.m., and 8 p.m., Eastern time, Monday through Friday.
To assist the Department in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden, the Secretary invites comments on whether
there may be further opportunities to reduce any regulatory burdens
found in these proposed regulations.

Assessment of Educational Impact

The Secretary particularly requests comments on whether the
proposed regulations in this document would require transmission of
information that is being gathered by or is available from any other
agency or authority of the United States.

Electronic Access to This Document

Anyone may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or
portable document format (pdf) on the World Wide Web at either of the
following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html

To use the pdf you must have the Adobe Acrobat Reader Program with
Search, which is available free at either of the previous sites. If you
have questions about using the pdf, call the U.S. Government Printing
Office toll free at 1-888-293-6498.
Anyone may also view these documents in text copy only on an
electronic bulletin board of the Department. Telephone: (202) 219-1511
or, toll free, 1-800-222-4922. The documents are located under Option
G--Files/Announcements, Bulletins and Press Releases.

Note: The official version of this document is the document
published in the Federal Register.

List of Subjects in 34 CFR Parts 682 and 685

Administrative practice and procedure, Colleges and universities,
Loan programs-education, Reporting and recordkeeping requirements,
Student aid, Vocational education.

(Catalog of Federal Domestic Assistance Numbers: 84.032: Federal
Stafford Loan Program; 84.032: Federal PLUS Program; 84.032: Federal
Supplemental Loans for Students Programs; 84.033 and 84.268: Federal
Direct Student Loan Program.)

Dated: September 17, 1997.
Richard W. Riley,
Secretary of Education.

The Secretary proposes to amend parts 682 and 685 of title 34 of
the Code of Federal Regulations as follows:

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

1. The authority citation for part 682 continues to read as
follows:

Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.


Sec. 682.201 [Amended]

2. Section 682.201 is amended by removing the words ``receive an
SLS loan'' in the introductory language of paragraph (a) and adding, in
their place, ``receive an unsubsidized Stafford loan''; by removing the
acronym ``SLS'' in paragraph (a)(1) and adding, in its place,
``unsubsidized Stafford''; by removing the words ``who, for a period of
enrollment that begins prior to July 1, 1994, seeks an SLS'' in the
introductory language to paragraph (a)(2) and adding, in their place,
``who seeks an unsubsidized Stafford''; and by removing the acronym
``SLS'' in paragraph (a)(3) and adding, in its place, ``unsubsidized
Stafford''.
3. Section 682.202 is amended by revising paragraph (c)(5) to read
as follows:


Sec. 682.202 Permissible charges by lenders to borrowers.

* * * * *
(c) * * *
(5) Shall refund by a credit against the borrower's loan balance
the portion of the origination fee previously deducted from the loan
that is attributable to any portion of the loan that is--
(i) Returned by a school to a lender in order to comply with the
Act or with applicable regulations;
(ii) Repaid or returned within 120 days of disbursement; or
(iii) Not delivered within 120 days of disbursement.
* * * * *
4. Section 682.401 is amended by revising paragraphs
(b)(10)(vi)(B)(1) and (b)(10)(vi)(B)(2) to read as follows:


Sec. 682.401 Basic program agreement.

* * * * *
(b) * * *
(10) * * *
(vi) * * *
(B) * * *
(1) The loan or a portion of the loan is returned by the school to
the lender

[[Page 50466]]

in order to comply with the Act or with applicable regulations;
(2) Within 120 days of disbursement, the loan or a portion of the
loan is repaid;
* * * * *
5. Section 682.402 is amended by revising paragraph (c)(1) and by
removing the words ``become totally and permanently disabled since
applying for the Consolidation loan'' in paragraph (k)(2)(iii) and
adding, in their place, ``is determined to be totally and permanently
disabled under Sec. 682.402(c)'', to read as follows:


Sec. 682.402 Death, disability, closed school, false certification,
and bankruptcy payments.

* * * * *
(c) Total and permanent disability. (1) (i) If a lender determines
that an individual borrower has become totally and permanently
disabled, the obligation of the borrower and any endorser to make any
further payments on the loan is discharged.
(ii) Except as provided in paragraph (c)(1)(iii)(A) of this
section, a borrower is not considered totally and permanently disabled
based on a condition that existed at the time the borrower applied for
the loan unless the borrower's condition substantially deteriorated
after the loan was made so as to render the borrower totally and
permanently disabled.
(iii)(A) For a Consolidation Loan, a borrower who would be
considered totally and permanently disabled under paragraphs (c)(1)(i)
and (ii) of this section for all loans that were included in the
Consolidation Loan, if those loans had not been consolidated, is
considered totally and permanently disabled.
(B) For the purposes of discharging a loan under paragraph
(c)(1)(iii)(A) of this section, provisions in paragraphs (c)(1) (i) and
(ii) of this section apply to all loans included in the Consolidation
Loan.
(C) If requested, a borrower seeking to discharge a loan obligation
under paragraph (c)(1)(iii)(A) of this section must provide the lender
with the disbursement dates of the underlying loans if the lender does
not possess that information.
* * * * *
6. Section 682.604 is amended by revising paragraph (g)(2)(i) to
read as follows:


Sec. 682.604 Processing the borrower's loan proceeds and counseling
borrowers.

* * * * *
(g) * * *
(2) * * *
(i) Inform the student of the average anticipated monthly repayment
amount based on the student's indebtedness or on the average
indebtedness of students who have obtained FFEL Program loans for
attendance at that school or in the borrower's program of study.
* * * * *

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

7. The authority citation for part 685 continues to read as
follows:

Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.

8. Section 685.202 is amended by revising paragraph (c)(4) to read
as follows:


Sec. 685.202 Charges for which Direct Loan Program borrowers are
responsible.

* * * * *
(c) * * *
(4) Applies to a borrower's loan balance the portion of the loan
fee previously deducted from the loan that is attributable to a
disbursement of the loan that is--
(i) Repaid or returned within 120 days of disbursement; or
(ii) Returned by a school in order to comply with the Act or with
applicable regulations.
9. Section 685.212 is amended by revising paragraph (b) to read as
follows:


Sec. 685.212 Discharge of a loan obligation.

* * * * *
(b) Total and permanent disability. (1) If the Secretary receives
acceptable documentation that a borrower has become totally and
permanently disabled, the Secretary discharges the obligation of the
borrower and any endorser to make any further payments on the loan.
(2) Except as provided in paragraph (b)(3)(i) of this section, a
borrower is not considered totally and permanently disabled based on a
condition that existed at the time the borrower applied for the loan
unless the borrower's condition substantially deteriorated after the
loan was made so as to render the borrower totally and permanently
disabled.
(3)(i) For a Direct Consolidation Loan, a borrower who would be
considered totally and permanently disabled under paragraphs (b) (1)
and (2) of this section for all loans that were included in the Direct
Consolidation Loan, if those loans had not been consolidated, is
considered totally and permanently disabled.
(ii) For the purposes of discharging a loan under paragraph
(b)(3)(i) of this section, provisions in paragraphs (b)(1) and (2) of
this section apply to all loans included in the Consolidation Loan.
(iii) If requested, a borrower seeking to discharge a loan
obligation under paragraph (b)(3)(i) of this section must provide the
Secretary with the disbursement dates of the underlying loans.
* * * * *
10. Section 685.301 is amended by redesignating paragraphs (a)(6)
and (a)(7) as paragraphs (a)(7) and (a)(8), respectively, and by adding
a new paragraph (a)(6) to read as follows:


Sec. 685.301 Origination of a loan by a Direct Loan Program school.

* * * * *
(a) * * *
(6) If a student has received a determination of need for a Direct
Subsidized Loan that is $200 or less, a school may choose not to
originate a Direct Subsidized Loan for that student and to include the
amount as part of a Direct Unsubsidized Loan.
* * * * *
11. Section 685.304 is amended by revising paragraph (b)(2)(i) to
read as follows:


Sec. 685.304 Counseling borrowers.

* * * * *
(b) * * *
(2) * * *
(i) Inform the student of the average anticipated monthly repayment
amount based on the student's indebtedness or on the average
indebtedness of students who have obtained Direct Subsidized or Direct
Unsubsidized Loans for attendance at that school or in the borrower's
program of study.
* * * * *
[FR Doc. 97-25377 Filed 9-24-97; 8:45 am]
BILLING CODE 4000-01-U




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Last Modified: 07/28/1998