Final Rule: Peace Corps Deferments and Perkins Loan

[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