Maintained for Historical Purposes

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

Technical corrections to the regulations governing the Federal Perkins Loan (Perkins) Program, the Federal Family Education Loan (FFEL) Program, and the William D. Ford Federal Direct Loan (Direct Loan) Program.

Publication Date: December 2003
FRPart:
RegPartsAffected:

Page Numbers: 75427-75430

Technical corrections to the regulations governing the Federal Perkins Loan (Perkins) Program,
the Federal Family Education Loan (FFEL) Program, and the William D. Ford Federal Direct Loan (Direct Loan) Program.

Posted on 12-31-2003


[Federal Register: December 31, 2003 (Volume 68, Number 250)]
[Rules and Regulations]              
[Page 75427-75430]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31de03-20]                        

=======================================================================


DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682, and 685

RIN 1840-AC84


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

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule.

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

SUMMARY: This document contains technical corrections to the
regulations governing the Federal Perkins Loan (Perkins) Program, the
Federal Family Education Loan (FFEL) Program, and the William D. Ford
Federal Direct Loan (Direct Loan) Program. These amendments are needed
to correct technical errors in the regulations, remove or modify
language in the regulations that is now obsolete or outdated due to
prior changes to the Higher Education Act of 1965, as amended (HEA),
and the regulations, and where appropriate, provide consistent language
in the regulations for the three loan programs.

EFFECTIVE DATE: These regulations are effective January 30, 2004.

FOR FURTHER INFORMATION CONTACT: For the Perkins and FFEL programs: Mr.
Brian Smith, U.S. Department of Education, 1990 K Street, NW., (8th
Floor) Washington, DC 20006, Telephone: (202) 502-7551, or via the
Internet:
Brian.Smith@ed.gov.
    For the Direct Loan Program: Ms. Nicki Meoli, U.S. Department of
Education, 1990 K Street, NW., (8th Floor) Washington, DC 20006,
Telephone: (202) 377-4031, or via the Internet:
Nicki.Meoli@ed.gov.
    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
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to one of the contact persons listed under FOR
FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: These final regulations make technical
corrections to the existing regulations for the Perkins, FFEL, and
Direct Loan programs in 34 CFR parts 674, 682, and 685. The existing
regulations contain technical errors, erroneous cross-references, and
language that is inconsistent with other regulations and the provisions
of the HEA. These final regulations make the technical corrections,
correct the cross-references, and remove or modify language that is
obsolete, outdated, or otherwise inconsistent with other regulations
and the HEA.

Waiver of Proposed Rulemaking and Negotiated Rulemaking

    Under the Administrative Procedure Act (5 U.S.C. 553), the
Department generally offers interested parties the opportunity to
comment on proposed regulations. However, these regulations merely
reflect needed technical corrections to the Perkins, FFEL, and Direct
Loan program regulations. These corrections do not affect the
substantive rights or obligations of individuals or institutions and do
not establish or affect substantive policy. Thus, the Secretary has
concluded that these regulations are technical in nature and do not
necessitate public comment. Therefore, under 5 U.S.C. 553(b)(B), the
Secretary has determined that proposed regulations (and, accordingly,
negotiated rulemaking under section 492(b)(2) of the HEA) are
unnecessary and contrary to the public interest.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have a
significant economic impact on a substantial number of small entities.
The small entities that are affected by these regulations are small
institutions of higher education. These regulations also affect lenders
and guaranty agencies that participate in the title IV, HEA programs,
and individual loan borrowers. These regulations contain technical
corrections to current regulations. The changes will not have a
significant economic impact on any of the entities affected.

Paperwork Reduction Act of 1995

    These regulations do not contain any information collection
requirements.

Assessment of Educational Impact

    Based on our own review, we have determined that these final
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, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
http://www.ed.gov/news/fedregister
.

    To use PDF you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using 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.
    You may also view this document in PDF at the following site:
ifap.ed.gov.

    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.gpoaccess.gov/nara/index.html

.



(Catalog of Federal Domestic Assistance Numbers: 84.032 Federal
Family Education Loan 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, 682, and 685

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


[[Page 75428]]


    Dated: December 23, 2003.
Sally L. Stroup,
Assistant Secretary, Office of Postsecondary Education.

0
For the reasons discussed in the preamble, the Secretary amends title
34 of the Code of Federal Regulations parts 674, 682, and 685 as
follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0
1. The authority citation for part 674 continues to read as follows:

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


0
2. Section 674.5 is amended by:
0
A. In paragraph (c)(3)(i)(D), adding the word ``or'' after the semi-
colon.
0
B. In paragraph (c)(3)(i)(E), removing ``; or'' and adding, in its
place, a period.
0
C. Removing paragraph (c)(3)(i)(F).
0
D. In paragraph (c)(3)(ii)(C), removing the word ``or''.
0
E. In paragraph (c)(3)(ii)(D), removing the period and adding, in its
place, ``; or''.
0
F. Adding a new paragraph (c)(3)(ii)(E).
0
The addition reads as follows:


Sec.  674.5  Federal Perkins Loan program cohort default rate and
penalties.

* * * * *
    (c) * * *
    (3) * * *
    (ii) * * *
    (E) Assigned to and conditionally discharged by the Secretary in
accordance with Sec.  674.61(b).
* * * * *

0
3. Section 674.61 is amended by revising the section heading to read as
follows:


Sec.  674.61  Discharge for death or disability.

* * * * *

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

0
4. The authority citation for part 682 continues to read as follows:

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


Sec.  682.102  [Amended]

0
5. Section 682.102(e)(1) is amended by removing from the last sentence
the words ``nursing professions or perform certain kinds of national or
community service'', and adding, in their place, the words ``child care
professions''.

0
6. Section 682.201 is amended by revising paragraphs (b)(1)(vi) and
(vii) and (b)(2), removing paragraph (b)(1)(viii), and adding paragraph
(b)(3) to read as follows:


Sec.  682.201  Eligible borrowers.

* * * * *
    (b) * * *
    (1) * * *
    (vi) Meets the requirements of paragraphs (a)(4), (a)(5), (a)(6),
and (a)(7) of this section, as applicable; and
    (vii) In the case of a Federal PLUS loan made on or after July 1,
1993, does not have an adverse credit history or obtains an endorser
who has been determined not to have an adverse credit history as
provided in paragraph (b)(2)(ii) of this section.
    (2)(i) For purposes of this section, the lender must obtain a
credit report on each applicant from at least one national credit
bureau. The credit report must be secured within a timeframe that would
ensure the most accurate, current representation of the borrower's
credit history before the first day of the period of enrollment for
which the loan is intended.
    (ii) Unless the lender determines that extenuating circumstances
existed, the lender must consider each applicant to have an adverse
credit history based on the credit report if--
    (A) The applicant is considered 90 or more days delinquent on the
repayment of a debt; or
    (B) The applicant has been the subject of a default determination,
bankruptcy discharge, foreclosure, repossession, tax lien, wage
garnishment, or write-off of a Title IV debt, during the five years
preceding the date of the credit report.
    (iii) Nothing in this paragraph precludes the lender from
establishing more restrictive credit standards to determine whether the
applicant has an adverse credit history.
    (iv) The absence of any credit history is not an indication that
the applicant has an adverse credit history and is not to be used as a
reason to deny a PLUS loan to that applicant.
    (v) The lender must retain a record of its basis for determining
that extenuating circumstances existed. This record may include, but is
not limited to, an updated credit report, a statement from the creditor
that the borrower has made satisfactory arrangements to repay the debt,
or a satisfactory statement from the borrower explaining any
delinquencies with outstanding balances of less than $500.
    (3) For purposes of paragraph (b)(1) of this section, a ``parent''
includes the individuals described in the definition of ``parent'' in
34 CFR 668.2 and the spouse of a parent who remarried, if that spouse's
income and assets would have been taken into account when calculating a
dependent student's expected family contribution.
* * * * *

0
7. Section 682.206 is amended by revising paragraph (e)(1) to read as
follows:


Sec.  682.206  Due diligence in making a loan.

* * * * *
    (e) * * *
    (1) A FFEL Program loan must be made without security or
endorsement, except as provided in paragraph (e)(2) of this section.
* * * * *

0
8. Section 682.207 is amended by:
0
A. Removing paragraph (b)(1)(vi) immediately following paragraph
(b)(1)(iii).
0
B. Adding a paragraph (b)(1)(iv).
0
C. In paragraph (b)(1)(v)(B)(1), in the first sentence, removing the
word ``a'' and adding, in its place, the word ``an''.
0
D. In paragraph (b)(1)(vi), removing the reference to ``(f)(1)'' and
adding, in its place, the reference ``(f)''.
0
E. Adding a paragraph (b)(2).
    The additions read as follows:


Sec.  682.207  Due diligence in disbursing a loan.

* * * * *
    (b) * * *
    (1) * * *
    (iv) Shall require an escrow agent to disburse loan proceeds no
later than 21 days after the agent receives the proceeds from the
lender.
* * * * *
    (2) Except as provided in paragraph (b)(1)(v)(C)(2) of this
section, neither a lender nor a school may obtain a borrower's power-
of-attorney or other authorization to endorse or otherwise approve the
cashing of a loan check or the release of funds disbursed by electronic
funds transfer, nor may a borrower provide this power-of-attorney or
authorization to anyone else. However, the school may present the loan
check to a financial institution for deposit in an account of the
borrower pursuant to the borrower's endorsement or written
certification under paragraph (b)(1)(ii)(A) of this section.
* * * * *

0
9. Section 682.209 is amended by:
0
A. In paragraph (a)(2)(v), removing the reference to ``(a)(2)(i)'' and
adding, in its place, the reference to ``(a)(2)(ii)''.
0
B. Revising paragraph (a)(3)(ii)(B).
    The revision reads as follows:


Sec.  682.209  Repayment of a loan.

    (a) * * *
    (3) * * *
    (ii) * * *
    (B) 60 days from the expiration of a deferment or forbearance
period;
* * * * *

[[Page 75429]]

Sec.  682.210  [Amended]

0
10. Section 682.210 is amended in paragraph (c)(5), by adding the word
``or'' after the first occurrence of the word ``internship''.

0
11. Section 682.211 is amended by:
0
A. In paragraph (a)(4), removing the reference to ``(f)(9)'' and
adding, in its place, the reference to ``(f)(10)''.
0
B. Revising paragraph (f)(3).
0
C. In paragraph (f)(4), removing the period and adding, in its place, a
semi-colon.
0
D. In paragraph (f)(7), removing the word ``or'' after the semi-colon.
0
E. In paragraph (f)(8), removing the period and adding, in its place, a
semi-colon.
0
F. In paragraph (f)(9), removing the figure ``45'' and adding, in its
place, the figure ``60''; and removing the period and adding, in its
place, a semi-colon.
0
G. In paragraph (f)(10), removing the period at the end of the last
sentence and adding, in its place, ``; or''.
    The revision reads as follows:


Sec.  682.211  Forbearance.

* * * * *
    (f) * * *
    (3) For the period beginning when the borrower entered repayment
without the lender's knowledge until the first payment due date was
established;
* * * * *


Sec.  682.213  [Amended]

0
12. Section 682.213 is amended, in the first sentence, by removing the
word ``principle'' and adding, in its place, the word ``principal''.

0
13. Section 682.302 is amended by revising paragraph (b)(1) to read as
follows:


Sec.  682.302  Payment of special allowance on FFEL loans.

* * * * *
    (b) * * *
    (1) Except for nonsubsidized Federal Stafford loans disbursed on or
after October 1, 1981, for periods of enrollment beginning prior to
October 1, 1992, FFEL loans that otherwise meet program requirements
are eligible for special allowance payments as provided in paragraphs
(b)(2), (b)(3), and (e) of this section.
* * * * *


Sec.  682.401  [Amended]

0
14. Section 682.401 is amended by:
0
A. In paragraph (b)(6)(i), removing the reference to ``Sec.  682.600''
and adding, in its place, the reference to ``Sec.  668.14(a)''.
0
B. In paragraph (e), in the introductory sentence, removing the word
``be'' and adding, in its place, the word ``not''.


Sec.  682.402  [Amended]

0
15. Section 682.402 is amended by:
0
A. In paragraph (k)(5)(i), removing the word ``dies'' and adding, in
its place, the word ``died''.
0
B. In paragraph (r)(1), in the first sentence, removing the word ``as''
and adding, in its place, the word ``has''.

0
16. Section 682.405 is amended by revising paragraph (b)(3) to read as
follows:


Sec.  682.405  Loan rehabilitation agreement.

* * * * *
    (b) * * *
    (3) An eligible lender purchasing a rehabilitated loan must
establish a repayment schedule that meets the same requirements that
are applicable to other FFEL Program loans made under the same loan
type and provides for the borrower to make monthly payments at least as
great as the average of the 12 consecutive monthly payments received by
the guaranty agency. The lender must treat the first payment made under
the 12 consecutive payments as the first payment under the applicable
maximum repayment term, as defined under Sec.  682.209(a) or (h). For
Consolidation loans, the maximum repayment term is based on the balance
outstanding at the time of loan rehabilitation.


Sec.  682.410  [Amended]

0
17. Section 682.410(c)(1)(i)(B) is amended by removing the words ``as
defined in Sec.  682.800(d)''.


Sec.  682.415  [Amended]

0
18. Section 682.415 is amended by:
0
A. In paragraph (c)(2)(i), removing the reference to ``Sec. Sec. 
682.410(b)(6)(i) through (xii)'' and adding, in its place, the
reference to ``Sec. Sec.  682.410(b)(6)(i) through (vi)''.
0
B. In paragraph (c)(4), in the first sentence, removing the reference
to ``Sec. Sec.  682.410(b)(6)(i) through (xii)'' and adding, in its
place, the reference to ``Sec. Sec.  682.410(b)(6)(i) through (vi)''.
0
C. In paragraph (c)(6)(i), in the first sentence, removing the
reference to ``Sec. Sec.  682.410(b)(6)(i) through (xii)'' and adding,
in its place, the reference to ``Sec. Sec.  682.410(b)(6)(i) through
(vi)''.
0
D. In paragraph (d)(1), removing the reference to ``Sec. Sec. 
682.410(b)(6)(i) through (xii)'' and adding, in its place, the
reference to ``Sec. Sec.  682.410(b)(6)(i) through (vi)''.


Sec.  682.505  [Amended]

0
19. Section 682.505 is amended by:
0
A. Revising the paragraph immediately after paragraph (b), by adding
``(c)'' before the heading ``FISL loans--insurance premium
calculation.''.
0
B. Revising the paragraph immediately after paragraph (e)(2)(ii), by
adding ``(f)'' before the heading ``Collection from borrowers.''.


Sec.  682.603  [Amended]

0
20. Section 682.603(e) is amended, in the introductory sentence, by
removing the word ``student'' and adding, in its place, the word
``borrower''.

0
21. Section 682.604 is amended by:
0
A. Revising paragraph (b)(2)(i).
0
B. In paragraph (d)(4), revising the introductory sentence.
0
C. In paragraph (g)(2)(iv), removing the reference to ``paragraph
(f)(2)'' and adding, in its place, the reference to ``paragraphs
(f)(2)(i) through (f)(2)(iv)''.
    The revisions read as follows:


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

* * * * *
    (b) * * *
    (2) * * *
    (i) Except in the case of a late disbursement under paragraph (e)
of this section or as provided in paragraph (b)(2)(iii) or (iv) of this
section, a school may release the proceeds of any disbursement of a
loan only to a student, or a parent in the case of a PLUS loan, if the
school determines the student has continuously maintained eligibility
in accordance with the provisions of Sec.  682.201 from the beginning
of the loan period for which the loan was intended.
* * * * *
    (d) * * *
    (4) If the school is unable for any other reason to document that a
registered student attended school during the period of enrollment for
which the loan is made, the school must determine the student's
withdrawal date as required under Sec.  682.605, and by the deadline
described in Sec.  682.607(c), shall notify the lender of the student's
withdrawal, expulsion, or failure to attend school, if applicable, and
return to the lender--
* * * * *

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

0
22. The authority citation for part 685 continues to read as follows:


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


Sec.  685.102  [Amended]

0
23. Section 685.102(b)(2)(i)(A) is amended to revise the definition of
``Estimated financial assistance'' by removing the words ``Direct PLUS
Loan amounts'' and adding, in their place, the words ``PLUS loan
amounts''.

[[Page 75430]]

Sec.  685.200  [Amended]

0
24. Section 685.200 is amended by:
0
A. In paragraph (a)(1)(iv)(C)(2), removing the words ``requirement in
paragraph (a)(1)(iv)(A)(1)'' and adding, in their place, the words
``requirements in paragraphs (a)(1)(iv)(A)(1) and (2)''.
0

B. In paragraph (a)(1)(iv)(C)(3), removing the words ``neither the
prior loan nor the Direct Loan that the borrower receives may'' and
adding, in their place, the words ``the loan that has been
conditionally discharged prior to a final determination of total and
permanent disability cannot''.


Sec.  685.203  [Amended]

0
25. Section 685.203(b) is amended by removing the words ``Federal
Unsubsidized Stafford/Ford Loan Program'' and adding, in their place,
the words ``Federal Unsubsidized Stafford Loan Program''.


Sec.  685.205  [Amended]

0
26. Section 685.205(b)(3) is amended by adding the words ``without the
Secretary's knowledge'' after the word ``repayment''.

0
27. Section 685.207 is amended by revising paragraph (f) to read as
follows:


Sec.  685.207  Obligation to repay.

* * * * *
    (f) Determining the date on which the grace period begins for a
borrower in a correspondence program. For a borrower of a Direct
Subsidized or Direct Unsubsidized Loan who is a correspondence student,
the grace period specified in paragraphs (b)(2) and (c)(2) of this
section begins on the earliest of--
    (1) The day after the borrower completes the program;
    (2) The day after withdrawal as determined pursuant to 34 CFR
668.22; or
    (3) 60 days following the last day for completing the program as
established by the school.


Sec.  685.210  [Amended]

0
28. Section 685.210(b)(1) is amended, in the second sentence, by
removing the reference to ``Sec.  685.211(c)(3)(ii)'' and adding, in
its place, the reference to ``Sec.  685.211(d)(3)(ii)''.


Sec.  685.220  [Amended]

0
29. Section 685.220 is amended by:
0
A. In paragraph (b)(1), adding the word ``Subsidized'' after the word
``Federal''.
0
B. In paragraph (d)(1)(ii)(F), removing the reference to ``Sec. 
685.209(d)(5)'' and adding, in its place, the reference to ``Sec. 
685.209(c)(7)''.
0
C. In paragraph (h)(2), removing the reference to ``(d)(1)(ii)(E)'' and
adding, in its place, the reference to ``(d)(1)(ii)(F)''.


Sec.  685.301  [Amended]

0

30. Section 685.301 is amended by:
0
A. In paragraph (a)(4)(i), adding a period after``Sec.  685.203'' and
removing the remainder of the sentence.
0
B. In paragraph (a)(7), removing the word ``student'' and adding, in
its place, the word ``borrower''.


Sec.  685.302  [Removed and Reserved]

0
31. Section 685.302 is removed and reserved.


Sec.  685.303  [Amended]

0
32. Section 685.303 is amended in paragraph (b)(2)(i) by removing the
words ``described in the promissory note'' and adding, in their place,
the words ``for which the loan was intended''.


[FR Doc. 03-32062 Filed 12-30-03; 8:45 am]

Last Modified: 12/30/2003