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The Secretary of Education amends Sec. 685.212(c) of the William D. Ford Federal Direct Loan (Direct Loan) Program final regulations to correct a technical error. These regulations apply to loans under the Federal Direct Stafford/Ford Loan (Direct Subsid

FR part
IV
Attachments:
PublicationDate: 6/3/97
FRPart: IV
RegPartsAffected: (12/31/96)(R)685.212
PageNumbers: 30411-30412
Summary: The Secretary of Education amends Sec. 685.212(c) of the William D. Ford Federal Direct Loan (Direct Loan) Program final regulations to correct a technical error. These regulations apply to loans under the Federal Direct Stafford/Ford Loan (Direct Subsidized Loan) Program, the Federal Direct Unsubsidized Stafford/Ford Loan (Direct Unsubsidized Loan) Program, the Federal Direct PLUS Loan (Direct PLUS Loan) Program, and the Federal Direct Consolidation Loan (Direct Consolidation Loan) Program, collectively referred to as the Direct Loan Program. The Secretary is amending these regulations to require that an endorser of a Direct PLUS Loan or a Direct PLUS Consolidation Loan is obligated to repay that Direct Loan when the borrower's obligation to repay is discharged in bankruptcy.
CommentDueDate:

  
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[Federal Register: June 3, 1997 (Volume 62, Number 106)]
[Rules and Regulations]
[Page 30411-30412]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jn97-21]


[[Page 30411]]

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Part IV





Department of Education





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34 CFR Part 685



William D. Ford Federal Direct Loan Program; Rule


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DEPARTMENT OF EDUCATION

34 CFR Part 685

RIN 1840-AC42


William D. Ford Federal Direct Loan Program

AGENCY: Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary of Education amends Sec. 685.212(c) of the
William D. Ford Federal Direct Loan (Direct Loan) Program final
regulations to correct a technical error. These regulations apply to
loans under the Federal Direct Stafford/Ford Loan (Direct Subsidized
Loan) Program, the Federal Direct Unsubsidized Stafford/Ford Loan
(Direct Unsubsidized Loan) Program, the Federal Direct PLUS Loan
(Direct PLUS Loan) Program, and the Federal Direct Consolidation Loan
(Direct Consolidation Loan) Program, collectively referred to as the
Direct Loan Program. The Secretary is amending these regulations to
require that an endorser of a Direct PLUS Loan or a Direct PLUS
Consolidation Loan is obligated to repay that Direct Loan when the
borrower's obligation to repay is discharged in bankruptcy.

EFFECTIVE DATE: These regulations take effect June 3, 1997.

FOR FURTHER INFORMATION CONTACT: Mr. Jon Utz, Program Specialist, U.S.
Department of Education, 600 Independence Avenue, S.W. (ROB-3, Room
3045), Washington, DC 20202-5400. 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.

SUPPLEMENTARY INFORMATION:

Background

The Direct Loan Program regulations at 34 CFR 685.212(c) provide
that the Secretary does not require a borrower or any endorser to make
any further payments on a loan if the borrower's obligation to repay
that loan is discharged in bankruptcy. The Secretary has determined
that the regulation is inconsistent with applicable statutory
requirements. Section 455(a)(1) of the Higher Education Act of 1965, as
amended (HEA), generally requires that loans made to student and parent
borrowers under the Direct Loan and Federal Family Education Loan
(FFEL) Programs have the same terms, conditions, and benefits, unless
otherwise specified. Regulations governing the FFEL Program conform to
the general rule that a bankruptcy discharge relieves the debtor of his
or her personal liability to repay the debt but does not discharge the
obligation of a cosigner or endorser to repay the discharged debt. The
HEA does not suggest that a Direct Loan endorser should be treated
differently than an endorser of a FFEL loan when the borrower declares
bankruptcy, and it was not the Secretary's intent to establish
different treatment. Accordingly, the Secretary is amending
Sec. 685.212(c) to ensure that endorsers in the Direct Loan Program are
subject to the same rules that apply to endorsers in the FFEL Program.
Since this amendment merely makes a technical correction needed to
conform the regulations with statutory requirements, it is not subject
to a delayed effective date.

Waiver of Proposed Rulemaking

In accordance with the Administrative Procedure Act, 5 U.S.C. 553,
it is the practice of the Secretary to offer interested parties the
opportunity to comment on proposed regulations. However, the regulatory
changes in this document are necessary in order to amend a regulation
that, as a result of a technical error, is inconsistent with a
statutory requirement that Direct Loans have the same terms,
conditions, and benefits as loans made to borrowers under the FFEL
Program, unless otherwise specified by the statute. The Secretary did
not intend or have discretion to exempt endorsers in the Direct Loan
Program from a requirement that applies to endorsers in the FFEL
Program. Since this regulatory amendment corrects an error in
implementing a statutory requirement, the Secretary has determined that
the publication of a proposed rule is unnecessary and contrary to the
public interest under 5 U.S.C. 553(b)(B). For the same reasons, the
Secretary waives the 30-day delayed effective date under 5 U.S.C.
553(d).

Paperwork Reduction Act of 1995

These regulations have been examined under the Paperwork Reduction
Act of 1995 and have been found to contain no information collection
requirements.

Regulatory Flexibility Act Certification

The Secretary certifies that these regulations will not have a
significant economic impact on any small entities under the Regulatory
Flexibility Act. These regulations amend current regulations that are
inconsistent with a statutory requirement. The regulations will affect
endorsers of loans that are discharged in bankruptcy. Endorsers are not
considered to be small entities under the Regulatory Flexibility Act.

Assessment of Educational Impact

The Secretary has determined that the regulations in this document
would not require transmission of information that is being gathered by
or is available from any other agency or authority of the United
States.

List of Subjects in 34 CFR Part 685

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

Dated: May 22, 1997.
David A. Longanecker,
Assistant Secretary for Postsecondary Education.
(Catalog of Federal Domestic Assistance Number: 84.268, William D.
Ford, Federal Direct Loan Program.)

The Secretary amends part 685 of title 34 of the Code of Federal
Regulations as follows:

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

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

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

2. Section 685.212, paragraph (c), is amended by removing the words
``or any endorser''.

[FR Doc. 97-14357 Filed 6-2-97; 8:45 am]
BILLING CODE 4000-01-P




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Last Modified: 08/02/1998