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Final Rule: Peace Corps Deferments and Perkins Loan

FR part
IV
Attachments:
PublicationDate: 10/25/99
FRPart: IV
RegPartsAffected:
PageNumbers: 57527-57531
Summary: Final Rule: Peace Corps Deferments and Perkins Loan
CommentDueDate:

  
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[


[Federal Register: October 25, 1999 (Volume 64, Number 205)]
[Rules and Regulations]
[Page 57527-57531]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25oc99-12]


[[Page 57527]]

_______________________________________________________________________

Part IV





Department of Education





_______________________________________________________________________



34 CFR Parts 674 and 682



Federal Perkins Loan Program and Federal Family Education Loan Program;
Final Rule


[[Page 57528]]



DEPARTMENT OF EDUCATION

34 CFR Parts 674 and 682


Federal Perkins Loan Program and Federal Family Education Loan
Program

AGENCY: Department of Education.

ACTION: Final regulations.

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

SUMMARY: The Secretary amends the Federal Perkins Loan and Federal
Family Education Loan (FFEL) program regulations by adding criteria
that allow Peace Corps volunteers who are ineligible for deferment or
cancellation of their federal student loans based solely on Peace Corps
service to automatically qualify for economic hardship deferments while
they are serving in the Peace Corps. This change also applies to the
William D. Ford Federal Direct Loan (Direct Loan) Program in accordance
with Sec. 685.204(b)(3) of the Direct Loan Program regulations, which
references the standards set forth in Sec. 682.210(s) of the FFEL
Program regulations in establishing a Direct Loan borrower's
eligibility for an economic hardship deferment.
The Secretary also amends the Federal Perkins Loan Program
regulations to eliminate the provision that requires a borrower to
submit a request for a loan deferment, including a deferment in
anticipation of cancellation, in writing.

DATES: Effective Date: These regulations are effective July 1, 2000.
Implementation Date: The Secretary has determined, in accordance
with section 482(c)(2)(A) of the Higher Education Act of 1965, that
institutions that participate in the Federal Perkins Loan Program and
lenders and guaranty agencies that participate in the FFEL Programs
may, at their discretion, choose to implement the provisions of
Secs. 674.34, 674.38, and 682.210 as amended by these final
regulations, on or after October 25, 1999. For further information see
``Implementation Date of These Regulations'' under the SUPPLEMENTARY
INFORMATION section of this preamble.

FOR FURTHER INFORMATION CONTACT:
1. For the Federal Perkins Loan Program: Vanessa Freeman, U.S.
Department of Education, 400 Maryland Avenue, SW, ROB-3, Room 3045,
Washington, DC 20202-5447. Telephone: (202) 708-8242.
2. For the FFEL Program: George Harris, U.S. Department of
Education, 400 Maryland Avenue, SW, ROB-3, Room 3045, Washington, DC
20202-5447. Telephone: (202) 708-8242.
3. For the Direct Loan Program: Jon Utz, U.S. Department of
Education, 400 Maryland Avenue, SW, ROB-3, Room 3045, Washington, DC
20202-5447. Telephone: (202) 708-8242.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
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 persons listed in the preceding
paragraphs.

SUPPLEMENTARY INFORMATION: On September 17, 1998, the Secretary
published a notice of proposed rulemaking (NPRM) for the Federal
Perkins Loan Program and FFEL Program regulations in the Federal
Register (63 FR 49798).
The NPRM included a discussion of the issues surrounding the
proposed changes that are not repeated here. The following changes were
proposed:
Amending Secs. 674.34(e)(2) and 682.210(s)(6)(ii) to add criteria
that allow borrowers to qualify automatically for economic hardship
deferments while they are serving in the Peace Corps.
Amending Secs. 674.38(d) and 682.210(s)(6) to allow borrowers to
receive economic hardship deferments for longer than a one-year period
for each request while serving as Peace Corps volunteers.
Amending Sec. 674.38(a) to eliminate the requirement that a
borrower must submit a deferment or postponement request in writing.

Implementation Date of These Regulations

Section 482(c) of the Higher Education Act of 1965, as amended (20
U.S.C. 1089(c)) requires that regulations affecting programs under
title IV of the Act be published in final form by November 1 prior to
the start of the award year in which they apply. However, that section
also permits the Secretary to designate any regulation as one that an
entity subject to the regulation may choose to implement earlier. If
the Secretary designates a regulation for early implementation, he may
specify when and under what conditions the entity may implement it.
Under this authority, the Secretary has designated the following
regulations for early implementation:
Sections 674.34, 674.38 and 682.210--In Dear Colleague letter GEN-
98-16, the Secretary provided interim procedures to be used by FFEL
loan holders and postsecondary institutions in granting economic
hardship deferments to Peace Corps volunteers until final regulations
were published. Institutions that participate in the Federal Perkins
Loans Program and guaranty agencies and lenders that participate in the
FFEL program may, now at their discretion, choose to implement the
provisions of Secs. 674.34, and 682.210 upon October 25, 1999.
Institutions that participate in the Federal Perkins Loan Program may
implement the provisions of Sec. 674.38 that eliminate the written
request for a deferment in the Perkins Loan Program upon October 25,
1999.
These final regulations contain changes from the NPRM that are
explained in the Analysis of Comments and Changes that follows.

Analysis of Comments and Changes

In response to the Secretary's invitation in the NPRM, 10 parties
submitted comments on the proposed regulations. An analysis of the
comments and of the changes in the regulations since the publication of
the NPRM follows.
We discuss substantive issues under the sections of the regulations
to which they pertain. Generally, we do not address technical and other
minor changes in the proposed regulations, and we do not respond to
comments suggesting changes that the Secretary is not authorized by law
to make.

General

Comments: All of the commenters who addressed the Secretary's
proposal to simplify the economic hardship deferment application
process for certain Peace Corps volunteers supported the proposed
changes.
Discussion: The Secretary appreciates the commenters' support for
the proposed changes and believes they will encourage and support Peace
Corps service.
Changes: None.

Sections 674.34 and 682.210 Deferment

Comments: Several commenters noted that the proposed placement of
the new provision in Secs. 674.34(e)(2) and 682.210(s)(6)(ii) appears
to require a borrower to provide evidence that he or she is receiving
payment from the Peace Corps rather than indicating clearly that the
information required to establish a borrower's eligibility for the
deferment is documentation from the Peace Corps that the borrower is
serving (or will serve) as a Peace Corps volunteer. The commenters
suggested that the regulatory language be revised to indicate that a
borrower must provide documentation showing that he or she

[[Page 57529]]

is serving or has agreed to serve as a Peace Corps volunteer.
Discussion: In the preamble to the NPRM and in Dear Colleague
letter GEN 98-16, we indicated that evidence of a borrower's
eligibility for an economic hardship deferment under the new provision
is provided by documentation from the Peace Corps showing that the
borrower will be or is serving as a Peace Corps volunteer. It was not
our intent to require a borrower to provide documentation that he or
she is actually receiving payments from the Peace Corps. However, we
agree with the commenters that the regulatory language proposed in the
NPRM could be misinterpreted.
Changes: The paragraph establishing Peace Corps service as a
criterion for receipt of an economic hardship deferment has been
removed from Secs. 674.34(e)(2) and 682.210(s)(6)(ii) and made a
separate paragraph in each part that clarifies that the borrower is not
required to provide evidence of receiving payment from the Peace Corps
to establish eligibility for the economic hardship deferment.
Comments: Several commenters felt that the proposed language
amending Sections 674.34(e) and 682.210(s)(6) did not define clearly
the intended deferment period as the borrower's term of service in the
Peace Corps, not to exceed the statutory maximum of three years. The
commenters noted that the proposed language stated only that an
economic hardship deferment under the new provision for Peace Corps
volunteers may be granted for longer than one year at a time. The
commenters suggested that the regulatory language be revised to
indicate that the deferment period covers a borrower's full term of
service in the Peace Corps or the borrower's remaining period of
economic hardship deferment eligibility, not to exceed the three-year
statutory maximum.
Discussion: As discussed in the preamble to the NPRM and in Dear
Colleague letter GEN-98-16, the deferment period for an economic
hardship deferment granted to Peace Corps volunteers under the new
provision is intended to be for the borrower's full term of service, up
to the statutory maximum of three years. We agree with the commenters
that the regulatory language proposed in the NPRM may not convey
clearly the intended deferment period.
Changes: Sections 674.34(e) and 682.210(s)(6) have been revised to
clarify that the period of an economic hardship deferment under the new
provision is the lesser of the borrower's full term of service in the
Peace Corps or the borrower's remaining period of economic hardship
deferment eligibility under the statutory three-year maximum.
Comments: Several commenters expressed concern that the Peace Corps
certification form the borrower receives from the Peace Corps at pre-
service orientation sessions, and that certifies that the borrower will
be serving as a Peace Corps volunteer, does not include the borrower's
dates of service. The commenters believe that without information on
the beginning and ending dates of the borrower's service, they will not
have sufficient documentation to process an economic hardship deferment
for the appropriate period of time. The commenters suggested that the
Peace Corps certification document that was attached to Dear Colleague
letter GEN-98-16 be revised to include the beginning and ending dates
of the borrower's service to make the form consistent with the
regulatory changes proposed in the NPRM.
Discussion: We agree that the documentation the Peace Corps
supplies to the borrower supporting the borrower's request for
deferment should include the beginning and ending dates of the
borrower's Peace Corps service. We also believe that the Peace Corps
certification form, which was originally developed to support only a
borrower's request for the categorical Peace Corps deferment, should be
revised to support both borrowers who apply for the categorical
deferment and those that apply for an economic hardship deferment based
on Peace Corps service.
Changes: The Peace Corp certification form has been revised to
include the borrower's dates of service and to make it suitable for use
as supporting documentation of Peace Corps service for both categories
of borrowers serving in the Peace Corps.
Comments: Two commenters noted that the proposed regulations would
permit borrowers to receive economic hardship deferments for their full
term of service in the Peace Corps without having to reapply each year.
These commenters expressed concern about the potential for fraud by
borrowers who do not complete their term of service and felt that a
system should be established to notify loan holders of a borrower's
continuation in or termination from Peace Corps service. One of the
commenters recommended that loan holders receive verification of a
borrower's continued service in the Peace Corps annually before
authorizing an extension of the borrower's deferment. The other
commenter was concerned particularly about potential for fraud by
borrowers who are eligible for loan cancellation in the Federal Perkins
Loan Program based on their service as Peace Corps volunteers, and
believed that borrowers should continue to be required to provide
documentation of both the beginning and termination dates of their
service.
Discussion: We appreciate the commenters' concerns regarding fraud
in the case of borrowers who terminate their Peace Corps service early.
However, we believe that requiring borrowers who receive economic
hardship deferments based on their Peace Corps service to provide
documentation annually to their loan holders essentially eliminates one
of major benefits provided by the proposal to Peace Corps volunteers.
Borrowers are clearly told, both on the deferment request forms used in
the FFEL and Direct Loan programs and on the revised Peace Corps
service certification form, that they must immediately notify their
loan holders if they leave the Peace Corps before the projected
termination date shown on their Peace Corps certification form. The new
economic hardship deferment provisions for Peace Corps volunteers do
not change this borrower responsibility.
We did not propose to eliminate the requirement that the loan
holder make an annual determination of a borrower's eligibility for a
categorical Peace Corp deferment in the FFEL and the Federal Direct
Loan Programs, or for a deferment or cancellation, or both, based on
Peace Corps service in the Federal Perkins Loan Program. We believe,
however, that the same benefits of a less burdensome deferment and
cancellation application process should be extended to all Peace Corps
volunteers.
Changes: Sections 674.38(d) and 682.210(k) are amended to authorize
a loan holder to grant a categorical deferment, including a deferment
in anticipation of cancellation in the Federal Perkins Loan Program,
for the borrower's full term of service in the Peace Corps, not to
exceed three years.

Section 674.38 Deferment Procedures

Comments: Many commenters supported our proposal to eliminate the
written request for deferment in the Federal Perkins Loan Program. The
commenters believe that telephone or electronic requests by the
borrower to the institution are an appropriate means for the borrower
to request a deferment. They also stated that uniformity among the
title IV loan program regulations, where possible, is beneficial for
both institutions and borrowers.
All of the commenters, however, expressed concern about the
disparities

[[Page 57530]]

that remain between the FFEL, Direct Loan, and Federal Perkins Loan
Programs with regard to the processing of in-school deferments. Several
commenters indicated that, in the FFEL and Direct Loan programs, a
lender may use a certified loan application, a form certified by the
borrower's school, or other data it receives from the Student Status
Confirmation Report (SSCR) or another third-party servicer verifying
the borrower's in-school status as sufficient documentation to initiate
and process an in-school deferment. In these instances, the student
borrower is not required to make a specific request for the deferment.
The commenters pointed out that under the regulations proposed by the
Secretary for the Federal Perkins Loan Program, borrowers would still
be required to contact the institution to request an in-school
deferment.
Discussion: We agree that consistency between the various title IV
student loan programs is an important goal. We also believe that the
use of technology to reduce administrative burden for institutions is
equally important. We further agree that the regulatory changes
proposed to facilitate the processing of in-school deferments in the
Federal Perkins Loan Program may not provide schools with enough
flexibility in the processing of those deferments.
After examining the applicability of the methods used in the FFEL
and Direct Loan Program to the Federal Perkins Loan Program, we have
decided that use of a certified loan application to initiate the in-
school deferment process is impractical because there is no separate
Federal Perkins Loan application to use for this process. However, we
believe that data verifying the borrower's in-school enrollment status,
either from a third-party servicer or from the school in which the
borrower is enrolled, is sufficient documentation for a school
participating in the Federal Perkins Loan Program to grant an in-school
deferment. To preserve the borrower's ability to participate in the
deferment process, we also believe that the institution should notify
the borrower when it grants a deferment in this manner to provide the
borrower with the option to decline the deferment and to continue
paying on the loan.
Changes: A provision has been added to Sec. 674.38(a) to allow an
institution to determine a borrower's eligibility and grant an in-
school deferment based on the institution's receipt of student
enrollment information from the school in which the borrower is
enrolled or from a third-party servicer. The institution must notify
the borrower that a deferment has been granted and provide the borrower
with the option to continue paying on the loan.

Section 674.39 Postponement of Loan Repayments in Anticipation of
Cancellation of Loans Made Before July 1, 1993.

Comments: Many commenters supported the Secretary's proposal to
eliminate the written request for postponement of repayment in
anticipation of cancellation for loans made under the Federal Perkins
Loan Program before July 1, 1993.
Discussion: The Secretary published a notice of proposed rulemaking
(NPRM) on July 29, 1999, in accordance with the Higher Education
Amendments of 1998 (Pub. L. 105-244), that extends a deferment in
anticipation of cancellation to all borrowers with a loan made under
the Federal Perkins Loan Program. Because the extension of a deferment
in anticipation of cancellation would eliminate the need for a
postponement, the NPRM proposed to eliminate Sec. 674.39 in its
entirety from the Federal Perkins Loan Program regulations.
Changes: Proposed amendatory language with respect to Sec. 674.39
has been eliminated from these final regulations.

Executive Order 12866

We have reviewed these final regulations in accordance with
Executive Order 12866. Under the terms of the order, we have assessed
the potential costs and benefits of this regulatory action.
The potential costs associated with the final regulations are those
resulting from statutory requirements and those we have determined are
necessary for administering these programs effectively and efficiently.
Burden specifically associated with information collection
requirements, if any, was identified and explained in the preamble to
the NPRM.
In assessing the potential costs and benefits, both quantitative
and qualitative, of these final regulations, we have determined that
the benefits of the 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.
The potential costs and benefits of these final regulations were
discussed in the preamble to the NPRM (63 FR 49800).

Paperwork Reduction Act of 1995

These regulations do not contain any information collection
requirements.

Intergovernmental Review

The Federal Perkins Loan, Federal Family Education Loan, and
William D. Ford Federal Direct Loan programs are not subject to the
requirements of Executive Order 12372 and the regulations in 34 CFR
part 79.

Assessment of Educational Impact

In the NPRM, we requested comments on whether the proposed
regulations would require transmission of information that any other
agency or authority of the United States gathers or makes available.
Based on the responses to the NPRM and on our review, we have
determined that the regulations do not require transmission of
information that any other agency or authority of the United States
gathers or makes available.

Electronic Access to This Document

You may view this document in text or Adobe Portable Document
Format (PDF) on the Internet at the following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/legislation/HEA/rulemaking/
http://ifap.ed.gov/csb--html/fedlreg.htm

To use the PDF, you must have the Adobe Acrobat Reader Program with
Search, which is available free at the first of the previous sites. If
you have questions about using the PDF, call the U.S. Government
Printing Office (GPO), toll free, at 1-888-293-6498; or in the
Washington, DC, area at (202) 512-1530.

Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://
www.access.gpo.gov/nara/index.html.

(Catalog of Federal Domestic Assistance Numbers: 84.032 Stafford
Loan Program; 84.032 PLUS Program; 84.032 Supplemental Loans for
Students Program; 84.038 Federal Perkins Loan Program; and 84.268
William D. Ford Federal Direct Loan Program)

List of Subjects in 34 CFR Parts 674 and 682

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

Dated: October 19, 1999.
Richard W. Riley
Secretary of Education.
For the reasons stated in the preamble, the Secretary amends parts
674 and 682 of the Code of Federal Regulations as follows:

[[Page 57531]]

PART 674--FEDERAL PERKINS LOAN PROGRAM

1. The authority citation for part 674 continues to read as follows
by:

Authority: 20 U.S.C. 1087aa-1087ii and 20 U.S.C. 421-429, unless
otherwise noted.

2. Section 674.34 is amended as follows by:
A. Revising paragraph (e) introductory text.
B. Redesignating paragraphs (e)(6), (e)(7), (e)(8), and (e)(9) as
(e)(7), (e)(8), (e)(9), and (e)(10), respectively.
C. Removing the word ``or'' at the end of paragraph(e)(4).
D. Removing the semicolon at the end of paragraph (e)(1), (e)(2),
and (e)(3) and adding, in its place, a period.
E. Adding a new paragraph (e)(6).


Sec. 674.34 Deferment of repayment--Federal Perkins loans and Direct
loans made on or after July 1, 1993.

* * * * *
(e) The borrower need not repay principal, and interest does not
accrue, for periods of up to one year at a time (except that a
deferment under paragraph (e)(6) of this section may be granted for the
lesser of the borrower's full term of service in the Peace Corps or the
borrower's remaining period of economic hardship deferment eligibility)
that, collectively, do not exceed 3 years, during which the borrower is
suffering an economic hardship, if the borrower provides documentation
satisfactory to the institution showing that the borrower is within any
of the categories described in paragraphs (e)(1) through (e)(6) of this
section.
* * * * *
(6) Is serving as a volunteer in the Peace Corps.
* * * * *
3. Section 674.38 is amended by redesignating paragraph (a)(2) as
paragraph (a)(3), adding new paragraph (a)(2), and by revising
paragraphs (a)(1) and (d) to read as follows:


Sec. 674.38 Deferment procedures.

(a)(1) Except as provided in paragraph (a)(2)of this section, a
borrower must request the deferment and provide the institution with
all information and documents required by the institution by the date
that the institution establishes.
(2) In the case of an in school deferment, the institution may
grant the deferment based on student enrollment information showing
that a borrower is enrolled as a regular student on at least a half-
time basis, if the institution notifies the borrower of the deferment
and of the borrower's option to cancel the deferment and continue
paying on the loan.
* * * * *
(d) The institution must determine the continued eligibility of a
borrower for a deferment at least annually, except that a borrower
engaged in service described in Secs. 674.34(e)(6), 674.35(c)(3),
674.36(c)(2), 674.37(c)(2), and Sec. 674.60(a)(1) must be granted a
deferment for the lesser of the borrower's full term of service in the
Peace Corps, or the borrower's remaining period of eligibility for a
deferment under Sec. 674.34(e), not to exceed 3 years.

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

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

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

5. Section 682.210 is amended by:
A. Redesignating paragraph (k) introductory text, following the
heading Peace Corps deferment., (k)(1), (k)(2), and (k)(3) as
paragraphs (k)(1),(k)(1)(i),(k)(1)(ii), and (k)(1)(iii), respectively.
B. Adding new paragraph (k)(2).
C. Revising paragraph (s)(6) introductory text.
D. Redesignating paragraphs (s)(6)(vi), (vii), (viii), (ix), and
(x) as paragraphs (s)(6)(vii), (viii), (ix), (x), and (xi),
respectively.
E. By removing ``; or'' at the end of paragraph (s)(6)(iv), and
adding, in its place, a period.
F. Removing the semicolon at the end of paragraphs (s)(6)(i),
(s)(6)(ii), and (s)(6)(iii), and adding, in its place a period.
G. Removing ``(s)(6)(ix)'' in newly redesignated paragraphs (s)(6)
(viii) and (ix) and by adding, its place, ``(s)(6)(x)''.
H. Adding a new paragraph (s)(6)(vi).


Sec. 682.210 Deferment

* * * * *
(k) * * *
(2) The lender must grant a deferment for the borrower's full term
of service in the Peace Corps, not to exceed three years.
* * * * *
(s) * * *
(6) Economic hardship deferment. An eligible borrower is entitled
to an economic hardship deferment for periods of up to one year at a
time that, collectively, do not exceed 3 years (except that a borrower
who receives a deferment under paragraph (s)(6)(vi) of this section is
entitled to an economic hardship deferment for the lesser of the
borrower's full term of service in the Peace Corps or the borrower's
remaining period of economic hardship deferment eligibility under the
3-year maximum), if the borrower provides documentation satisfactory to
the lender showing that the borrower is within any of the categories
described in paragraphs (s)(6)(I) through (s)(6)(vi) of this section.
* * * * *
(vi) Is serving as a volunteer in the Peace Corps.
* * * * *
[FR Doc. 99-27728 Filed 10-22-99; 8:45 am]
BILLING CODE 4000-01-P




]

Last Modified: 10/26/1999