Department of Education by mikeholy

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									                                                                                                                                         Thursday,
                                                                                                                                         July 23, 2009




                                                                                                                                         Part II

                                                                                                                                         Department of
                                                                                                                                         Education
                                                                                                                                         34 CFR Parts 674, 682, and 685
                                                                                                                                         Federal Perkins Loan Program, Federal
                                                                                                                                         Family Education Loan Program, and
                                                                                                                                         William D. Ford Federal Direct Loan
                                                                                                                                         Program; Proposed Rule
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                                                   36556                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   DEPARTMENT OF EDUCATION                                  Education, 1990 K Street, NW., Room                   School-based Loans Issues negotiated all
                                                                                                            8033, Washington, DC 20006–8502.                      other changes in this section.
                                                   [Docket ID ED–2009–OPE–0004]                                                                                      We have included all proposed
                                                                                                            Telephone: (202) 502–7732 or via the
                                                   34 CFR Parts 674, 682, and 685                           Internet at: pamela.moran@ed.gov.                     changes to 34 CFR 674.51 in this NPRM
                                                                                                              If you use a telecommunications                     as well as in the NPRM that we are
                                                   RIN 1840–AC98                                            device for the deaf, call the Federal                 publishing as a result of the negotiations
                                                                                                            Relay Service (FRS), toll free, at 1–800–             of Team II—School-based Loans Issues.
                                                   Federal Perkins Loan Program, Federal                    877–8339.                                             However, we ask that when submitting
                                                   Family Education Loan Program, and                         Individuals with disabilities can                   your comments on the proposed
                                                   William D. Ford Federal Direct Loan                      obtain this document in an accessible                 changes to 34 CFR 674.51, you submit
                                                   Program                                                  format (e.g., Braille, large print,                   any comments on the proposed
                                                   AGENCY: Office of Postsecondary                          audiotape, or computer diskette) on                   definitions of ‘‘substantial gainful
                                                   Education, Department of Education.                      request to the contact person listed                  activity’’ and ‘‘total and permanent
                                                                                                            under FOR FURTHER INFORMATION                         disability’’ in the docket (Docket ID ED–
                                                   ACTION: Notice of proposed rulemaking.
                                                                                                            CONTACT.                                              2009–OPE–0004) for this NPRM.
                                                   SUMMARY: The Secretary proposes to                                                                             Comments on all other provisions in
                                                                                                            SUPPLEMENTARY INFORMATION:
                                                   amend the Federal Perkins Loan                                                                                 this section should be submitted in the
                                                   (Perkins Loan) Program, Federal Family                   Invitation to Comment                                 docket (Docket ID ED–2009–OPE–0003)
                                                   Education Loan (FFEL) Program, and                                                                             for the Team II—School-based Loans
                                                                                                               As outlined in the section of this
                                                   William D. Ford Federal Direct Loan                                                                            Issues NPRM.
                                                                                                            notice entitled ‘‘Negotiated                             During and after the comment period,
                                                   (Direct Loan) Program regulations.                       Rulemaking,’’ significant public
                                                   These proposed regulations are needed                                                                          you may inspect all public comments
                                                                                                            participation, through six public                     about these proposed regulations by
                                                   to implement provisions of the Higher                    hearings and three negotiated
                                                   Education Act of 1965 (HEA), as                                                                                accessing Regulations.gov. You may also
                                                                                                            rulemaking sessions, has occurred in                  inspect the comments in person in
                                                   amended by the Higher Education                          developing this notice of proposed
                                                   Opportunity Act of 2008 (HEOA).                                                                                Room 8033, 1990 K Street, NW.,
                                                                                                            rulemaking (NPRM). In accordance with                 Washington, DC between the hours of
                                                   DATES: We must receive your comments                     the requirements of the Administrative                8:30 a.m. and 4:00 p.m. Eastern Time,
                                                   on or before August 24, 2009.                            Procedure Act, the Department invites                 Monday through Friday of each week
                                                   ADDRESSES: Submit your comments                          you to submit comments regarding these                except Federal holidays.
                                                   through the Federal eRulemaking Portal                   proposed regulations on or before
                                                   or via postal mail, commercial delivery,                 August 24, 2009. To ensure that your                  Assistance to Individuals With
                                                   or hand delivery. We will not accept                     comments have maximum effect in                       Disabilities in Reviewing the
                                                   comments by fax or by e-mail. Please                     developing the final regulations, we                  Rulemaking Record
                                                   submit your comments only one time, in                   urge you to identify clearly the specific               On request, we will supply an
                                                   order to ensure that we do not receive                   section or sections of the proposed                   appropriate aid, such as a reader or
                                                   duplicate copies. In addition, please                    regulations that each of your comments                print magnifier, to an individual with a
                                                   include the Docket ID at the top of your                 addresses and to arrange your comments                disability who needs assistance to
                                                   comments.                                                in the same order as the proposed                     review the comments or other
                                                     • Federal eRulemaking Portal: Go to                    regulations.                                          documents in the public rulemaking
                                                   http://www.regulations.gov to submit                        We invite you to assist us in                      record for these proposed regulations. If
                                                   your comments electronically.                            complying with the specific                           you want to schedule an appointment
                                                   Information on using Regulations.gov,                    requirements of Executive Order 12866,                for this type of aid, please contact the
                                                   including instructions for accessing                     including its overall requirements to                 person listed under FOR FURTHER
                                                   agency documents, submitting                             assess both the costs and the benefits of             INFORMATION CONTACT.
                                                   comments, and viewing the docket, is                     the proposed regulations and feasible
                                                                                                            alternatives, and to make a reasoned                  Negotiated Rulemaking
                                                   available on the site under ‘‘How To Use
                                                   This Site.’’                                             determination that the benefits of these                 Section 492 of the HEA requires the
                                                     • Postal Mail, Commercial Delivery,                    proposed regulations justify their costs.             Secretary, before publishing any
                                                   or Hand Delivery.                                        Please let us know of any further                     proposed regulations for programs
                                                     If you mail or deliver your comments                   opportunities we should take to reduce                authorized by title IV of the HEA, to
                                                   about these proposed regulations,                        potential costs or increase potential                 obtain public involvement in the
                                                   address them to Pamela Moran, U.S.                       benefits while preserving the effective               development of the proposed
                                                   Department of Education, 1990 K Street,                  and efficient administration of the                   regulations. After obtaining advice and
                                                   NW., room 8033, Washington, DC                           programs.                                             recommendations from the public,
                                                   20006–8502.                                                 As noted elsewhere in this NPRM,                   including individuals and
                                                     Privacy Note: The Department’s policy for
                                                                                                            two of the Department’s negotiated                    representatives of groups involved in
                                                   comments received from members of the                    rulemaking committees considered                      the Federal student assistance programs,
                                                   public (including those comments submitted               proposed revisions to 34 CFR 674.51,                  the Secretary must subject the proposed
                                                   by mail, commercial delivery, or hand                    Special Definitions, in Subpart D of the              regulations to a negotiated rulemaking
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                                                   delivery) is to make these submissions                   Federal Perkins Loan Program                          process. All proposed regulations that
                                                   available for public viewing in their entirety           regulations. Team I—Loans-Lender                      the Department publishes on which the
                                                   on the Federal eRulemaking Portal at http://             General Loan Issues, the negotiating                  negotiators reached consensus must
                                                   www.regulations.gov. Therefore, commenters               committee responsible for regulations                 conform to final agreements resulting
                                                   should be careful to include in their                    involving issues related to lender and                from that process unless the Secretary
                                                   comments only information that they wish to
                                                   make publicly available on the Internet.
                                                                                                            general loan issues, negotiated the                   reopens the process or provides a
                                                                                                            proposed definitions of ‘‘substantial                 written explanation to the participants
                                                   FOR FURTHER INFORMATION CONTACT:                         gainful activity’’ and ‘‘permanent and                stating why the Secretary has decided to
                                                   Pamela Moran, U.S. Department of                         total disability.’’ Team II—Loans-                    depart from the agreements. Further


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36557

                                                   information on the negotiated                            the proposed regulations overlapped,                    Group; United States Student
                                                   rulemaking process can be found at:                      the work of Loans Team II.1                             Association; University of Maryland
                                                   http://www.ed.gov/policy/highered/leg/                      The Department developed a list of                   Student Government Association; The
                                                   hea08/index.html.                                        proposed regulatory provisions from                     Greenlining Institute);
                                                      On September 8, 2008, the                             advice and recommendations submitted                       • Representing legal assistance
                                                   Department published a notice in the                     by individuals and organizations as                     organizations that represent students
                                                   Federal Register (73 FR 51990)                           testimony to the Department in a series                 and borrowers: Deanne Loonin, primary,
                                                   announcing our intent to establish                       of six public hearings held on:                         and Lauren Saunders, alternate
                                                   negotiated rulemaking committees to                         • September 19, 2008, at the Texas                   (National Consumer Law Center);
                                                   develop proposed regulations to (1)                      Christian University, in Fort Worth,                       • Representing 2-year public
                                                   implement the changes made to the                        Texas.                                                  institutions: George Chin, primary
                                                   HEA by the Higher Education                                 • September 29, 2008, at the                         (American Association of State Colleges
                                                   Opportunity Act of 2008 (HEOA, Pub. L.                   University of Rhode Island, in                          and Universities);
                                                   110–315) that affected programs                          Providence, Rhode Island.                                  • Representing 4-year public
                                                   authorized under title IV of the HEA,                       • October 2, 2008, at the Pepperdine                 institutions: Carrie Steere-Salazar,
                                                   and (2) possibly address the provision                   University, in Malibu, California.                      primary, and Kris Wright, alternate
                                                   added to section 207(c) of the HEA by                       • October 6, 2008, at Johnson C.                     (Association of American Medical
                                                   the HEOA regarding the prohibition on                    Smith University, in Charlotte, North                   Colleges; National Direct Loan
                                                   a teacher preparation program from                       Carolina.                                               Coalition);
                                                   which the State has withdrawn approval                      • October 8, 2008, at the U.S.                          • Representing private, nonprofit
                                                   or terminated financial support from                     Department of Education, in                             institutions of higher education: Heather
                                                   accepting or enrolling any student who                   Washington, DC.                                         McDonnell, primary, and Bonnie Lee
                                                   received title IV aid.                                      • October 15, 2008, at Cuyahoga                      Behm, alternate (National Association of
                                                      On December 31, 2008, the                             Community College, in Warrensville                      Student Financial Aid Administrators;
                                                   Department published a notice in the                     Heights, Ohio.                                          Pennsylvania Association of Student
                                                   Federal Register (73 FR 80314)                              In addition, the Department accepted                 Financial Aid Administrators);
                                                   announcing our intent to establish up to                 written comments on possible                               • Representing private, for-profit
                                                   five negotiated rulemaking committees                    regulations submitted directly to the                   institutions of higher education: Thomas
                                                   to prepare proposed regulations. The                     Department by interested parties and                    A. Babel, primary, and William Leach,
                                                   notice indicated that no requests from                   organizations. A summary of all                         alternate (DeVry University; Career
                                                   the public were received to negotiate the                comments received orally and in writing                 College Association);
                                                   provision added to section 207(c) of the                 is posted as background material in the                    • Representing guaranty agencies:
                                                   HEA. The Secretary determined it was                     docket for this NPRM. Transcripts of the                Mary Mowdy, primary, and Dick
                                                   not necessary to issue regulations in that               regional meetings can be accessed at:                   George, alternate (Oklahoma State
                                                   area and therefore did not submit that                   http://www.ed.gov/policy/highered/leg/                  Regents for Higher Education; National
                                                   issue to a negotiated rulemaking                         hea08/index.html. The Department also                   Council of Higher Education Loan
                                                   committee. The five committees that                      identified issues for discussion and                    Programs (NCHELP));
                                                   were established were: (1) A committee                   negotiation.                                               • Representing for-profit lenders:
                                                   on lender and general loan issues (Loans                    At its first meeting, the Loans Team                 Brenda Dillon, primary, and Tom
                                                   Team I); (2) a committee on school-                      I Committee reached agreement on its                    Levandowski, alternate (NCHELP;
                                                   based loan issues (Loans Team II); (3) a                 protocols and proposed agenda. The                      Consumer Bankers Association);
                                                   committee on accreditation; (4) a                        agenda included the statutory changes                      • Representing not-for-profit lenders:
                                                   committee on discretionary grant                         identified for the Committee’s                          Cheryl Hughes, primary, and Scott
                                                   programs; and (5) a committee on                         consideration. In addition, at the second               Giles, alternate (NCHELP; Education
                                                   general and non-loan programmatic                        meeting of the Committee, the                           Finance Council (EFC));
                                                   issues. The notice informed the public                   negotiators agreed by consensus to add                     • Representing credit unions: Michael
                                                   that, due to the large volume of changes                 two additional agenda items affecting                   Kim, primary, and Rhonda Summerbell,
                                                   made by the HEOA that needed to be                       the determination of eligibility and                    alternate (Coalition of the following
                                                   implemented through negotiated                           calculation of borrower payment                         credit unions: University Federal Credit
                                                   rulemaking, not all provisions would be                  amounts under the income-based                          Union, USC Credit Union, UW Credit
                                                   addressed during this round of                           repayment plan in the FFEL and Direct                   Union, Navy Federal Credit Union,
                                                   committee meetings. The notice                           Loan programs that becomes available to                 Notre Dame Federal Credit Union);
                                                   requested nominations of individuals                     borrowers on July 1, 2009.                                 • Representing lender servicers:
                                                   for membership on the committees who                        The Loans Team I Committee                           Diane Freundel, primary, and Wanda
                                                   could represent the interests                            members (and the organizations they                     Hall, alternate (EFC; NCHELP; Student
                                                   significantly affected by the proposed                   represented) included the following:                    Loan Servicing Alliance); and
                                                   regulations and had demonstrated                            • Representing students: Jonathan S.                    • Representing the U.S. Department
                                                   expertise or experience in the relevant                  Sachs, primary, and Adam Briones,                       of Education: Pam Moran.
                                                   subjects under negotiation.                              alternate (U.S. Public Interest Research                   The Committee’s protocols provided
                                                      Loans Team I met in three sessions to                                                                         that the committee would operate by
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                                                   develop proposed regulations: Session                      1 As discussed elsewhere in this preamble, Loans      consensus, meaning there must be no
                                                   1, February 23–25, 2009; session 2,                      Team II was responsible for negotiating the             dissent by any member in order for the
                                                                                                            following provisions, which appear in this NPRM:
                                                   March 30–April 1, 2009; and session 3,                   34 CFR 674.51, definitions of the terms child with
                                                                                                                                                                    committee to be considered to have
                                                   May 4–6, 2009. These proposed                            a disability, community defender organizations,         reached agreement. Under the protocols,
                                                   regulations relate to the administration                 educational service agency, faculty member at a         if the Committee reaches final
                                                   of the Federal student loan programs.                    Tribal College or University, Federal public            consensus on all issues, the Department
                                                                                                            defender organization, firefighter, infant or toddler
                                                   This NPRM resulted primarily from the                    with a disability, librarian with a master’s degree,
                                                                                                                                                                    will use the consensus-based language
                                                   work of Loans Team I and, in a couple                    speech language pathologist with a master’s degree,     in the proposed regulations and
                                                   of instances where the subject matter of                 and Tribal College or University.                       committee members and the


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                                                   36558                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   organizations whom they represent will                   on the definitions negotiated by the                  guaranty agencies and lenders in the
                                                   refrain from commenting negatively on                    other team should be submitted in                     FFEL Program;
                                                   the package, except where provided for                   response to the NPRM published as a                      • Revised and expanded disclosure
                                                   in the agreed upon protocols.                            result of the other team’s negotiations.              requirements for FFEL Program lenders
                                                      During its meetings, the Loans Team                     More information on the work of                     at the time of or prior to loan
                                                   I Committee reviewed and discussed                       Team I can be found at http://                        disbursement and during the loan
                                                   drafts of the proposed regulations. At                   www.ed.gov/policy/highered/reg/                       repayment period;
                                                   the final meeting in May 2009, the                       hearulemaking/2009/loans-lender.html                     • An expansion of the information
                                                   Committee reached consensus on the                       and more information on the work of                   that must be provided to a FFEL
                                                   proposed regulations in this document,                   Team II can be found at http://                       borrower when the transfer, sale, or
                                                   with the exception of those definitions                  www.ed.gov/policy/highered/reg/                       assignment of the borrower’s loan
                                                   included in 34 CFR 674.51 that were                      hearulemaking/2009/loans-school-                      results in a change in the identity of the
                                                   negotiated by Loans Team II, as                          based.                                                party to whom payments and
                                                   discussed elsewhere in this notice.                                                                            communications must be sent;
                                                      In addition to the proposed                           Summary of Proposed Changes                              • Revised forbearance disclosure
                                                   regulations considered by Loans Team I,                     These proposed regulations would                   requirements related to interest
                                                   this NPRM also includes some                             implement general and lender-based                    capitalization for FFEL lenders;
                                                   additional definitions that appear in 34                 loan provisions of the HEA, as amended                   • Revised regulations related to the
                                                   CFR 674.51 (Special Definitions). Only                   by the HEOA, that include:                            audit requirements for a FFEL school
                                                   the definitions of ‘‘substantial gainful                    • A revised definition of ‘‘totally and            lender or an eligible lender trustee that
                                                   activity’’ and ‘‘total and permanent                     permanently disabled’’ for purposes of                originates FFEL loans for a school or
                                                   disability’’ were included in the                        discharging a borrower’s title IV loans               school-affiliated organization;
                                                   proposed regulations agreed to by Loans                  and a revised disability discharge                       • A new requirement for guaranty
                                                   Team I. The remaining definitions in                     process;                                              agencies to work with the schools that
                                                   this section were added or amended as                       • Expansion of the conditions under                they serve to develop and make
                                                   part of the negotiations of Loans Team                   which a borrower with only FFEL loans                 available to students and their families
                                                   II, but are being included here to                       may consolidate those loans into a                    consumer education materials related to
                                                   provide context for the changes to this                  Direct Consolidation Loan;                            budgeting and financial management;
                                                   section.                                                                                                          • A new requirement for guaranty
                                                                                                               • Additional disclosures for FFEL
                                                      Team I and Team II were advised that,                                                                       agencies to make available certain
                                                   to ensure transparency and ease of use                   and Direct consolidation loan
                                                                                                            applicants, and a new requirement for                 financial and economic education
                                                   for public commenters, the Department
                                                                                                            FFEL Consolidation loan lenders to                    materials to borrowers who have
                                                   would propose the entirety of 34 CFR
                                                                                                            notify borrowers who have applied for                 rehabilitated defaulted loans;
                                                   part 601 in a single NPRM. Given Team
                                                                                                            a Consolidation loan that they may                       • Revised consumer credit reporting
                                                   I’s consensus, which included
                                                                                                            cancel the loan within a specified time               requirements for guaranty agencies and
                                                   consensus on the definitions of the
                                                                                                            period;                                               prior loan holders after a borrower has
                                                   terms lender and private education loan
                                                   in proposed § 601.2 as well as the                          • An additional method for granting                rehabilitated a defaulted loan; and
                                                                                                            in-school deferments on FFEL or Direct                   • Revised requirements related to the
                                                   requirements in § 601.40, Team I
                                                                                                            Loan program loans, and a new                         notifications that guaranty agencies
                                                   members were advised that they may
                                                                                                            notification requirement for FFEL                     must send to borrowers with defaulted
                                                   not comment negatively on the
                                                                                                            lenders when granting a borrower a                    loans.
                                                   provisions they negotiated
                                                   notwithstanding that they would appear                   deferment on an unsubsidized loan;                    Significant Proposed Regulations
                                                   in Team II’s NPRM. Likewise, Team II                        • New in-school deferment
                                                                                                            provisions for PLUS loan borrowers and                  We group major issues according to
                                                   members were advised that, while they
                                                                                                            related changes to administrative                     subject, with appropriate sections of the
                                                   may not comment negatively on the
                                                                                                            forbearance provisions;                               proposed regulations referenced in
                                                   majority of proposed 34 CFR part 601 as
                                                                                                               • Clarification of PLUS loan interest              parentheses, beginning with issues that
                                                   a result of their consensus agreement,
                                                                                                            capitalization provisions;                            apply to all three title IV loan programs,
                                                   they may comment on the definitions of
                                                                                                               • A revised definition of ‘‘partial                followed by issues that apply to the
                                                   lender and private education loan as
                                                                                                            financial hardship’’ for purposes of                  FFEL and Direct Loan programs, and
                                                   well as proposed § 601.40.
                                                      With regard to the proposed changes                   determining eligibility for the income-               then issues that apply only to the FFEL
                                                   to § 674.51, the Department determined                   based repayment (IBR) plan in the FFEL                Program. We discuss substantive issues
                                                   that it would be helpful for the public                  and Direct Loan programs, and revised                 under the sections of the proposed
                                                   to be able to view all proposed changes                  regulations for determining the IBR                   regulations to which they pertain.
                                                   to this special definitions section for the              payment amount;                                       Generally, we do not address proposed
                                                   Perkins Program in both Team I’s NPRM                       • An expansion of the eligibility                  regulatory provisions that are technical
                                                   and Team II’s NPRM. Team I and Team                      requirements for teacher loan                         or otherwise minor in effect.
                                                   II were advised that the proposed                        forgiveness in the FFEL and Direct Loan               Total and Permanent Disability Loan
                                                   changes to § 674.51 would appear in                      programs to allow borrowers who                       Discharges
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                                                   their entirety in both documents to                      perform qualifying teaching service at
                                                   provide context and enhance                              an eligible educational service agency to             Definitions (§§ 674.51 and 682.200(b))
                                                   understanding of both committees’                        receive forgiveness;                                    Statute: Prior to the enactment of the
                                                   proposed changes to this section. Each                      • A revision of the regulations related            HEOA, the HEA provided that a Perkins
                                                   team was advised by its respective                       to loan rehabilitation to provide that a              Loan, FFEL, or Direct Loan could be
                                                   Federal negotiator that its consensus                    FFEL or Direct Loan borrower may                      discharged if the borrower had a total
                                                   agreement did not apply to the                           rehabilitate a defaulted loan only once;              and permanent disability as determined
                                                   definitions negotiated by the other team                    • Revisions to the regulations                     in accordance with the regulations of
                                                   and that any comments they may have                      governing prohibited inducements by                   the Secretary. The HEOA amended


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36559

                                                   sections 437(a) and 464(c)(1)(F) of the                     Reasons: The proposed regulations                  provide for the discharge of a borrower’s
                                                   HEA to provide for the discharge of a                    reflect the new statutory definition of               title IV loans if the borrower becomes
                                                   borrower’s title IV loans if the borrower                totally and permanently disabled.                     totally and permanently disabled. Those
                                                   becomes totally and permanently                          Although the HEA provides that a                      provisions also authorize the Secretary
                                                   disabled in accordance with the                          borrower may be considered totally and                to promulgate regulations to reinstate a
                                                   Secretary’s regulations, or if the                       permanently disabled either in                        borrower’s obligation to repay a loan
                                                   borrower is unable to engage in any                      accordance with the Secretary’s                       that was discharged due to disability if,
                                                   substantial gainful activity by reason of                regulations or under the standards                    after the discharge, the borrower
                                                   any medically determinable physical or                   specified in sections 437(a) and                      receives another title IV loan or has
                                                   mental impairment that can be expected                   464(c)(1)(F) of the HEA as described                  earned income in excess of the poverty
                                                   to result in death, has lasted for a                     above, the Department has decided to                  line, or under other circumstances that
                                                   continuous period of not less than 60                    use only the new specific statutory                   the Secretary determines to be
                                                   months, or can be expected to last for                   substantial gainful activity standard.                necessary.
                                                   a continuous period of not less than 60                  The Department has decided not to add                    Current Regulations: Under current
                                                   months.                                                  any additional regulatory standards.                  regulations, a borrower applies for a
                                                      The HEOA further amended sections                     Therefore, the proposed revised                       total and permanent disability discharge
                                                   437(a) and 464(c)(1)(F) of the HEA by                    definition of total and permanent                     of a title IV loan by submitting a
                                                   establishing a separate total and                        disability reflects only the statutory total          completed loan discharge application
                                                   permanent disability standard for                        and permanent disability standards that               that has been certified by a physician to
                                                   certain veterans. Specifically, the HEA                  were added to the HEA by the HEOA.                    the borrower’s loan holder. For Perkins
                                                   now provides that a borrower who is a                       The proposed definition of substantial             Loans, the loan holder is the Perkins
                                                   military veteran is considered totally                   gainful activity is based, in part, on the            school lender. For FFEL loans, the
                                                   and permanently disabled for title IV                    definition of substantial gainful activity            holder is the lender or, if a default claim
                                                   loan discharge purposes if the borrower                  that the Social Security Administration               has been paid on the loan, the guaranty
                                                   provides documentation showing that                      (SSA) uses in connection with                         agency. For Direct Loans and for Perkins
                                                   he or she has been determined by the                     determining an individual’s eligibility               or FFEL loans that have been assigned
                                                   Secretary of Veterans Affairs to be                      for Social Security disability benefits.              to the Secretary, the loan holder is the
                                                   unemployable due to a service-                           However, the Department’s proposed                    Department.
                                                   connected disability. A borrower who                     definition relies solely on a medical                    For a Perkins loan held by a school,
                                                   provides such documentation is not                       determination and, unlike SSA’s                       if the loan holder determines that the
                                                   required to present additional                           definition, does not require a physician              information provided on the discharge
                                                   documentation for purposes of                            to consider whether a borrower can earn
                                                                                                                                                                  application supports the conclusion that
                                                   establishing eligibility for loan                        more than a specified amount. The
                                                                                                                                                                  the borrower is totally and permanently
                                                   discharge based on total and permanent                   Department does not believe that, for
                                                                                                                                                                  disabled in accordance with the current
                                                   disability.                                              purposes of the discharge, it is
                                                      Current Regulations: The current                                                                            regulatory definition, the loan holder
                                                                                                            necessary for a physician to evaluate
                                                   regulations governing the Perkins, FFEL,                                                                       assigns the loan to the Secretary.
                                                                                                            whether a borrower is able to earn more
                                                   and Direct Loan programs define ‘‘total                  than a specified amount each year.                       For a FFEL loan that is held by a
                                                   and permanent disability’’ as the                           Some of the non-Federal negotiators                lender, if the lender determines that the
                                                   condition of an individual who is                        asked for clarification of the reference to           discharge application supports the
                                                   unable to work and earn money because                    work performed ‘‘for profit’’ in the                  conclusion that the borrower is totally
                                                   of an injury or illness that is expected                 proposed definition of substantial                    and permanently disabled, the lender
                                                   to continue indefinitely or result in                    gainful activity. They expressed                      files a disability discharge claim with
                                                   death. Current regulations do not define                 concerns that the term ‘‘profit’’ would               the guaranty agency. The guaranty
                                                   ‘‘substantial gainful activity.’’                        include income from sources other than                agency reviews the borrower’s
                                                      Proposed Regulations: Proposed                        employment. The Department explained                  application, and if the guaranty agency
                                                   §§ 674.51(aa) and 682.200(b) would                       that the reference to work performed for              concurs with the lender’s preliminary
                                                   define total and permanent disability as                 profit was borrowed from the SSA’s                    determination of discharge eligibility, it
                                                   the condition of an individual who: (1)                  definition of substantial gainful activity            pays the lender’s discharge claim and
                                                   Is unable to engage in any substantial                   and is intended to cover self-employed                assigns the loan to the Secretary.
                                                   gainful activity by reason of any                        individuals who are not paid by an                       Once the loan has been assigned, the
                                                   medically determinable physical or                       employer. The Department further noted                Secretary reviews the loan discharge
                                                   mental impairment that can be expected                   that the proposed definition of                       application and makes an initial
                                                   to result in death, has lasted for a                     substantial gainful activity refers to                determination of the borrower’s
                                                   continuous period of not less than 60                    ‘‘work’’ performed for pay or profit. The             eligibility for discharge. For Direct
                                                   months, or can be expected to last for                   term ‘‘work performed for profit’’ does               Loans or for Perkins or FFEL loans that
                                                   a continuous period of not less than 60                  not refer to income from sources other                were already held by the Secretary, the
                                                   months; or (2) is a veteran and who has                  than employment (including self                       Secretary’s review is the initial review
                                                   been determined by the Secretary of                      employment) and non-employment                        of the borrower’s loan discharge
                                                   Veterans Affairs to be unemployable                      income will not be considered when                    application.
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                                                   due to a service-connected disability.                   determining whether a borrower is                        If the Secretary concludes that the
                                                      The proposed regulations would also                   capable of substantial gainful activity.              information on the discharge
                                                   add a definition of substantial gainful                                                                        application does not support the
                                                   activity in §§ 674.51(x) and 682.200(b).                 Discharge Process for Borrowers Other                 conclusion that the borrower is eligible
                                                   The proposed definition would specify                    Than Certain Veterans (§§ 674.61(b),                  for a total and permanent disability
                                                   that substantial gainful activity means a                682.402(c)(2) Through (c)(7), and                     discharge, the Secretary notifies the
                                                   level of work performed for pay or profit                685.213(b))                                           borrower that the discharge request has
                                                   that involves doing significant physical                   Statute: Sections 437(a)(1) and 464(k)              been denied and that the loan is due
                                                   or mental activities, or both.                           of the HEA, as amended by the HEOA,                   and payable to the Secretary under the


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                                                   36560                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   terms and conditions of the promissory                   section covers the general discharge                  loan or TEACH Grant; (2) has earnings
                                                   note.                                                    process for other borrowers.                          from employment that exceed the
                                                      If the Secretary determines that the                     The general discharge process                      poverty line amount for a family of two;
                                                   borrower appears to meet the eligibility                 included in these proposed regulations                or (3) fails to ensure that the full amount
                                                   requirements for a total and permanent                   is similar in some respects to the                    of any title IV loan or TEACH Grant
                                                   disability discharge, the Secretary grants               discharge process under the current                   disbursement made after the discharge
                                                   the borrower a conditional discharge for                 regulations. However, instead of using                date for a loan or TEACH Grant the
                                                   a period of up to three years, beginning                 the current conditional discharge                     borrower received prior to the discharge
                                                   on the date the physician certified the                  process, the Secretary would discharge                date is returned to the holder or to the
                                                   borrower’s discharge application.                        a borrower’s obligation to repay a loan               Secretary, as applicable, within 120
                                                   During the conditional discharge period,                 after determining that the borrower                   days of the disbursement date. If a
                                                   the borrower is not required to make                     meets the discharge eligibility                       borrower’s obligation to repay a loan is
                                                   any payments on the loan and no                          requirements. The Secretary would then                reinstated, the borrower is not charged
                                                   interest accrues on the loan. The                        reinstate the borrower’s obligation to                interest for the period from the
                                                   Secretary grants a final discharge if,                   repay the loan if the borrower fails to               discharge date to the date of the
                                                   during and at the end of the conditional                 meet certain requirements during a post-              reinstatement.
                                                   discharge period, the borrower: (1) Does                 discharge monitoring period.                             The proposed regulations would also
                                                   not receive a new title IV loan or a                        Under the proposed regulations, a                  provide that, if a borrower received a
                                                   Teacher Education Assistance for                         borrower who wishes to apply for a total              title IV loan or TEACH Grant before the
                                                   College and Higher Education (TEACH)                     and permanent disability loan discharge               date the physician certified the loan
                                                   Grant; (2) does not have earnings from                   would submit to his or her loan holders               discharge application and a
                                                   employment that exceed the poverty                       a completed loan discharge application                disbursement of that loan or grant is
                                                   line amount for a family of two; and (3)                 that has been certified by a physician.               made after the date of the physician’s
                                                   ensures that the full amount of any title                The loan holder review process would                  certification but before the date the
                                                                                                            be the same as under the current                      Secretary grants the discharge, the
                                                   IV loan disbursement made after the
                                                                                                            regulations. If the loan holder and, if               processing of the borrower’s loan
                                                   physician’s certification date for a loan
                                                                                                            applicable, the guaranty agency                       discharge request will be suspended
                                                   the borrower received prior to the
                                                                                                            determine that the information provided               until the borrower ensures that the full
                                                   physician’s certification date is returned
                                                                                                            on the discharge application supports                 amount of the disbursement has been
                                                   to the holder within 120 days of the
                                                                                                            the conclusion that the borrower is                   returned to the loan holder or to the
                                                   disbursement date. After granting a final
                                                                                                            totally and permanently disabled in                   Secretary, as applicable.
                                                   discharge of a loan, the Secretary
                                                                                                            accordance with the regulatory                           Finally, the proposed regulations
                                                   returns to the sender any payments on
                                                                                                            definition, the loan would be assigned                would provide that if a borrower’s
                                                   the loan that were received after the
                                                                                                            to the Secretary, as under the current                obligation to repay a loan is reinstated
                                                   physician’s certification date.                          regulations. The Secretary would then                 after a total and permanent disability
                                                      If at any time during or at the end of                review the loan discharge application                 discharge, the Secretary will notify the
                                                   the conditional discharge period the                     and make a determination of the                       borrower of the reinstatement. The
                                                   borrower fails to meet one of the                        borrower’s eligibility for discharge. As              notification will provide the borrower
                                                   requirements for a final discharge, the                  under the current regulations, the                    with the reason or reasons for the
                                                   Secretary ends the conditional discharge                 Secretary’s review would be the initial               reinstatement, an explanation that the
                                                   period and resumes collection activity                   review of the borrower’s discharge                    first loan payment following
                                                   on the loan. The borrower is not charged                 application in the case of a Direct Loan              reinstatement will be due no earlier
                                                   interest for the period during which the                 or a Perkins or FFEL loan that is already             than 60 days after the date of the
                                                   loan was conditionally discharged.                       held by the Secretary.                                notification, and information on how
                                                      Proposed Regulations: The proposed                       If the Secretary concludes that the                the borrower may contact the
                                                   regulations would establish two                          information on the discharge                          Department if the borrower has
                                                   separate loan discharge processes, one                   application does not support the                      questions about the reinstatement or
                                                   for veterans who have been determined                    conclusion that the borrower is eligible              believes that the obligation to repay the
                                                   by the Secretary of Veterans Affairs to                  for a total and permanent disability loan             loan was reinstated based on incorrect
                                                   be unemployable due to a service-                        discharge, the Secretary would notify                 information.
                                                   connected disability, and a different                    the borrower that the discharge request                  Reasons: The proposed regulations
                                                   process (the general discharge process)                  has been denied and that the loan is due              reflect the statutory provisions that
                                                   for borrowers who have been                              and payable to the Secretary under the                authorize the Secretary to reinstate a
                                                   determined (as certified by a physician)                 terms and conditions of the promissory                borrower’s obligation to repay a
                                                   to be unable to engage in substantial                    note.                                                 previously discharged loan under
                                                   gainful activity due to a physical or                       Under the proposed regulations, if the             certain conditions. Under the proposed
                                                   mental impairment that can be expected                   Secretary determines that the borrower                regulations, the general discharge
                                                   to result in death or that has lasted for                meets the eligibility requirements for a              process would, in many respects, be
                                                   a continuous period of not less than 60                  total and permanent disability                        similar to the discharge process under
                                                   months, or that can be expected to last                  discharge, the Secretary would grant a                the current regulations. The non-Federal
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                                                   for a continuous period of not less than                 final discharge and return to the sender              negotiators were generally supportive of
                                                   60 months. The discharge process for                     any payments on the loan that were                    this approach. The most significant
                                                   veterans who have been determined to                     received after the physician’s                        difference between the proposed and
                                                   be unemployable due to a service-                        certification date. At the same time, the             current regulations is that the current
                                                   connected disability is discussed below                  Secretary would notify the borrower                   conditional discharge process will be
                                                   under the heading ‘‘Discharge Process                    that the borrower’s obligation to repay               replaced by a process in which the
                                                   for Veterans Who Have Been                               the loan will be reinstated if, within                Secretary discharges the borrower’s
                                                   Determined to be Unemployable Due to                     three years from the discharge date, the              obligation to repay the loan after
                                                   a Service-Connected Disability.’’ This                   borrower: (1) Receives a new title IV                 determining that the borrower is totally


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36561

                                                   and permanently disabled, but                            a family of two, regardless of the                    or TEACH Grant disbursement made
                                                   reinstates the borrower’s repayment                      borrower’s actual family size. The                    during the post-discharge monitoring
                                                   obligation if the borrower fails to meet                 Department believed that the proposed                 period for a loan or TEACH Grant
                                                   certain requirements during a 3-year                     change to a standard based on the                     received prior to the discharge date is
                                                   post-discharge monitoring period. The                    borrower’s actual family size would be                returned to the loan holder within 120
                                                   proposed 3-year post-discharge                           more equitable, as it would allow a                   days of the disbursement date. The
                                                   monitoring period is consistent with the                 borrower with a family size greater than              proposed regulations would include
                                                   current 3-year conditional discharge                     two to have a higher level of                         TEACH Grant disbursements in this
                                                   period, and the conditions that would                    employment earnings during the post-                  provision because a condition for
                                                   result in the reinstatement of a                         discharge monitoring period without                   receiving a TEACH Grant is that the
                                                   borrower’s obligation to repay a                         being subject to reinstatement of the                 student must agree to complete a
                                                   previously discharged loan are                           borrower’s repayment obligation on the                teaching service obligation. A student
                                                   essentially the same as the conditions                   discharged loan. However, some non-                   who accepts a TEACH Grant
                                                   that, under the current regulations,                     Federal negotiators expressed concerns                presumably would not be totally and
                                                   result in a conditionally discharged loan                that the proposed change to an                        permanently disabled, as this condition
                                                   being returned to repayment status.                      employment earnings standard based on                 would preclude the student from
                                                      The Department initially proposed a                   actual family size would be confusing to              completing the TEACH Grant service
                                                   5-year post-discharge monitoring period                  borrowers, since a borrower’s family                  obligation.
                                                   and also proposed that upon the                          size could change during the post-                      The Committee also discussed the
                                                   reinstatement of a borrower’s obligation                 discharge monitoring period. These                    possible effect on a borrower’s discharge
                                                   to repay a previously discharged loan                    non-Federal negotiators believed that it              request of a disbursement being made
                                                   for failure to meet one of the post-                     would be preferable to maintain the                   during the period between the
                                                   discharge requirements, the borrower                     current standard based on a family size               physician’s certification date and the
                                                   would be charged interest for the period                 of two, so that a borrower would not                  discharge date for a loan or TEACH
                                                   from the date of discharge to the                        need to monitor changes in the                        Grant received prior to the physician’s
                                                   reinstatement date. The non-Federal                      employment earnings limit if the                      certification date. This issue does not
                                                   negotiators did not support these                        borrower’s family size increased or                   arise under the current regulations
                                                   proposals. Some negotiators questioned                   decreased during the post-discharge                   because of the structure of the
                                                   the basis for having a 5-year post-                      monitoring period. The Department                     conditional discharge period. Based on
                                                   discharge monitoring period, since                       agreed.                                               these discussions, the Department
                                                   under current regulations the                                                                                  revised the proposed regulations to
                                                   conditional discharge period is only                        The Department’s initial proposed                  provide that if a disbursement of a title
                                                   three years. With regard to the                          regulations did not include a provision               IV loan or TEACH Grant is made during
                                                   Department’s initial proposal to charge                  comparable to the provision in current                the period between the physician’s
                                                   interest from the discharge date if a                    regulations that addresses the treatment              certification date and the discharge date,
                                                   borrower’s obligation to repay a                         of a title IV loan disbursement made                  the processing of the borrower’s loan
                                                   discharged loan is reinstated, the non-                  during the conditional discharge period               discharge request will be suspended
                                                   Federal negotiators noted that, under                    for a loan the borrower received prior to             until the borrower ensures that the
                                                   current regulations, a borrower is not                   the physician’s certification date. Under             disbursement is returned to the loan
                                                   charged interest from the conditional                    the current regulations, a borrower is                holder or the Secretary, as applicable.
                                                   discharge date if a conditionally                        ineligible for a final discharge unless the             Finally, some of the non-Federal
                                                   discharged loan is returned to                           borrower ensures that such a                          negotiators expressed concern that the
                                                   repayment status before the end of the                   disbursement is returned to the loan                  Department’s initial proposal did not
                                                   conditional discharge period. After                      holder within 120 days of the                         explicitly provide that the Secretary
                                                   further consideration of the non-Federal                 disbursement date. The Department                     would notify a borrower who fails to
                                                   negotiators’ concerns, the Department                    initially did not include a similar                   meet one of the eligibility requirements
                                                   revised the proposed regulations by                      provision in the proposed regulations                 during the post-discharge monitoring
                                                   changing the post-discharge monitoring                   because the current regulatory provision              period that the borrower’s obligation to
                                                   period from five years to three years,                   is tied to the conditional discharge                  repay the discharged loan has been
                                                   and by removing the provision that                       period, which would be eliminated                     reinstated. The Department’s regulations
                                                   would have required a borrower to pay                    under the proposed regulations. Under                 generally do not specifically address the
                                                   interest from the date of discharge if the               the proposed regulations, the post-                   actions of the Department, but the non-
                                                   borrower’s repayment obligation is                       discharge monitoring period begins on a               Federal negotiators strongly urged the
                                                   reinstated.                                              later date than the current conditional               Department to include such a provision
                                                      The Department also initially                         discharge period, and a disbursement of               in the proposed regulations. These
                                                   proposed that one of the conditions for                  a title IV loan received prior to the                 negotiators also requested that the
                                                   reinstatement of a borrower’s obligation                 physician’s certification date is less                proposed regulations specify that the
                                                   to repay a previously discharged loan                    likely to occur. However, some non-                   Secretary’s notification of reinstatement
                                                   would be if the borrower had annual                      Federal negotiators noted that this                   will tell borrowers the reason for the
                                                   earnings from employment during the                      situation could still arise under the                 reinstatement and provide the borrower
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                                                   post-discharge monitoring period that                    proposed regulations and recommended                  with information on how to contact an
                                                   exceeded the poverty guideline amount                    that the proposed regulations be revised              appropriate office or official if they have
                                                   for the borrower’s family size. Current                  to include a provision comparable to the              questions or believe that the
                                                   regulations provide that a conditionally                 provision in the current regulations. The             reinstatement was based on incorrect
                                                   discharged loan is returned to                           Department agreed. The proposed                       information. The Department agreed to
                                                   repayment status if the borrower has                     regulations would provide that a                      add to the proposed regulations a
                                                   employment earnings during the                           borrower’s obligation to repay a                      provision stating that the Secretary will
                                                   conditional discharge period that                        discharged loan will not be reinstated if             notify a borrower that his or her
                                                   exceed the poverty guideline amount for                  the borrower ensures that a title IV loan             obligation to repay a previously


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                                                   36562                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   discharged loan has been reinstated.                     to be unemployable due to a service-                  to make any further payments on the
                                                   The proposed regulations also provide                    connected disability. The borrower                    loan has been discharged. Upon receipt
                                                   that the notification of reinstatement                   would not be required to have a                       of the claim payment from the guaranty
                                                   will include the reason or reasons for                   physician certify the loan discharge                  agency, the lender would return any
                                                   the reinstatement, an explanation that                   application, and would not be required                payments on the loan received on or
                                                   the first payment due date on the loan                   to provide any additional                             after the effective date of the VA’s
                                                   following reinstatement will be no                       documentation related to the borrower’s               determination to the person who made
                                                   earlier than 60 days after the date of the               service-connected disability.                         the payments. There would be no post-
                                                   notification of reinstatement, and                          If the documentation from the VA                   discharge monitoring period for a
                                                   information on how the borrower may                      does not indicate that the borrower has               borrower who receives a total and
                                                   contact the Department if he or she has                  been determined to be unemployable                    permanent disability discharge through
                                                   questions about the reinstatement or                     due to a service-connected disability,                this process, and the borrower would
                                                   believes that the obligation to repay the                the loan holder would deny the                        not be subject to reinstatement of his or
                                                   loan was reinstated based on incorrect                   borrower’s discharge request. However,                her obligation to repay the discharged
                                                   information.                                             if the documentation indicates that the               loan based on post-discharge
                                                     The Department also agreed to take                     borrower may be totally and                           employment earnings or receipt of a
                                                   steps to further improve its notices to                  permanently disabled under the general                new title IV loan or TEACH Grant. The
                                                   borrowers who have applied for or                        definition of a total and permanent                   same discharge process would apply to
                                                   received disability discharges under the                 disability, the loan holder would inform              borrowers with Direct Loans or Perkins
                                                   proposed regulations to more clearly                     the borrower that he or she may reapply               or FFEL loans that are held by the
                                                   explain the discharge process and the                    for a loan discharge under the general                Department.
                                                   borrower’s rights and responsibilities                   procedures for a disability discharge.                   If the Secretary determines, based on
                                                   with respect to that process. In                            If the documentation indicates that                a review of the documentation from the
                                                   particular, the Department intends to                    the VA has determined that a Perkins                  VA, that the borrower does not meet the
                                                   take steps to develop a process to                       Loan borrower is unemployable due to                  standard for a disability discharge, the
                                                   acknowledge receipt of a borrower’s                      a service-connected disability, the                   Secretary would notify the Perkins Loan
                                                   submission of a request that the                         Perkins school loan holder would                      school or guaranty agency of that
                                                   Department reconsider its determination                  submit a copy of the borrower’s                       decision, and collection on the loan
                                                   and to provide borrowers with                            discharge application and supporting                  would resume.
                                                   information on the Secretary’s process                   documentation to the Secretary, and                      Reasons: The proposed regulations
                                                   for considering such requests and how                    would notify the borrower that the                    are necessary to implement the statutory
                                                   the borrower will be made aware of the                   discharge request has been referred to                total and permanent disability discharge
                                                   Secretary’s decision.                                    the Secretary for a determination of                  standard for certain veterans.
                                                                                                            eligibility. In the case of a FFEL loan
                                                   Discharge Process for Veterans Who                                                                             Borrower Eligibility for New Title IV
                                                                                                            that is held by a lender, the lender
                                                   Have Been Determined To Be                                                                                     Loans After a Prior Total and
                                                                                                            would refer the borrower’s application
                                                   Unemployable Due to a Service-                                                                                 Permanent Disability Discharge
                                                                                                            to the guaranty agency and file a
                                                   Connected Disability (§§ 674.61(c),                                                                            (§§ 674.9(g), 682.201(a), and 685.200(a))
                                                                                                            disability discharge claim with the
                                                   682.402(c)(8), and 685.213(c))                           agency. If the guaranty agency agrees                    Statute: The HEA does not specify
                                                      Statute: The HEOA added sections                      that the VA documentation shows the                   eligibility requirements for borrowers
                                                   437(a)(2) and 464(c)(1)(F)(iv) to the HEA                borrower has been determined to be                    who apply for a new title IV loan after
                                                   to provide that a borrower who has been                  unemployable due to a service-                        a prior loan has been discharged due to
                                                   determined by the Secretary of Veterans                  connected disability, the guaranty                    a total and permanent disability.
                                                   Affairs (VA) to be unemployable due to                   agency would refer the borrower’s                        Current Regulations: Under the
                                                   a service-connected disability and who                   application to the Secretary. In contrast             current regulations in the Perkins, FFEL,
                                                   provides documentation of that                           to the general discharge procedures, the              and Direct Loan programs, a borrower
                                                   determination to the Secretary is to be                  borrower’s loan would not be assigned                 whose prior title IV loan was discharged
                                                   considered totally and permanently                       to the Secretary.                                     due to a total and permanent disability
                                                   disabled for the purpose of discharging                     Under the proposed regulations, if the             must meet certain requirements before
                                                   the borrower’s title IV loans. Section                   Secretary determines that the borrower                receiving a new loan. Specifically, the
                                                   437(a)(2) of the HEA further specifies                   meets the total and permanent disability              borrower must: (1) Provide a
                                                   that a borrower who provides such                        standard based on a determination by                  certification from a physician that the
                                                   documentation may not be required to                     the VA that the borrower is                           borrower is able to engage in substantial
                                                   present additional documentation for                     unemployable due to a service-                        gainful activity; and (2) sign a statement
                                                   the purpose of determining eligibility                   connected disability, the Secretary                   acknowledging that any new loan the
                                                   for a total and permanent disability loan                would notify the Perkins Loan school or               borrower receives cannot be discharged
                                                   discharge.                                               guaranty agency that the borrower is                  in the future based on any present
                                                      Proposed Regulations: The proposed                    eligible for a total and permanent                    condition, unless that condition
                                                   regulations would establish a separate                   disability loan discharge. The Perkins                substantially deteriorates. In addition, if
                                                   discharge application process for                        Loan school would then discharge the                  a borrower’s prior loan is in a
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                                                   borrowers who provide documentation                      borrower’s loan and return to the sender              conditional discharge status, the
                                                   showing that they have been determined                   any payments on the loan that were                    conditionally discharged loan must be
                                                   by the VA to be unemployable due to a                    received on or after the effective date of            returned to repayment status before the
                                                   service-connected disability. Under the                  the VA’s determination that the                       borrower may receive a new loan.
                                                   proposed regulations, the borrower                       borrower is unemployable due to a                        Proposed Regulations: The proposed
                                                   would submit to the loan holder a loan                   service-connected disability. The                     regulations would retain the current
                                                   discharge application accompanied by                     guaranty agency would pay the lender’s                requirement that, to receive a new title
                                                   documentation from the VA showing                        disability discharge claim and notify the             IV loan after a disability discharge, a
                                                   that the borrower has been determined                    borrower that the borrower’s obligation               borrower would have to obtain a


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                         36563

                                                   certification from a physician that the                  Consolidation loans. In particular, a                 requirement that the lender provide a
                                                   borrower is able to engage in substantial                lender must inform the borrower that by               Consolidation loan borrower a period of
                                                   gainful activity, and acknowledge that                   applying for a Consolidation loan, the                not less than 10 days, from the date the
                                                   the new loan may not be discharged in                    borrower is not obligated to take the                 borrower is notified by the lender that
                                                   the future based on any present                          loan.                                                 it is ready to make the Consolidation
                                                   condition unless the condition                              Current regulations: Section 682.201               loan, to cancel the loan. The proposed
                                                   substantially deteriorates. The proposed                 of the regulations establishes the                    regulations would require the lender to
                                                   regulations would also provide that if a                 eligibility requirements for borrowers                send the notice of the option to cancel
                                                   borrower receives a new title IV loan                    seeking a FFEL Consolidation loan.                    the loan to the borrower before making
                                                   within three years of the date that a                    Section 685.220 of the current                        any payments to pay off a loan with the
                                                   prior title IV loan or TEACH Grant                       regulations establishes the eligibility               proceeds of a Consolidation loan.
                                                   service obligation was discharged on the                 requirements for a borrower seeking a                    Reasons: The proposed changes to
                                                   basis of the borrower’s disability, the                  Direct Consolidation Loan. Current                    §§ 682.201(e) and 685.220(d) are being
                                                   borrower would be required to resume                     regulations permit borrowers who have                 made to implement statutory
                                                   repayment on the previously discharged                   only FFEL loans to consolidate those                  requirements. The proposed change to
                                                   loan or acknowledge that he or she is                    loans into a Direct Consolidation Loan                § 682.206(f) is being made to ensure that
                                                   again subject to the terms of the TEACH                  to obtain an income contingent                        borrowers are given an appropriate
                                                   Grant agreement to serve before                          repayment plan or to qualify for the                  opportunity to cancel a Consolidation
                                                   receiving the new loan.                                  Public Service Loan Forgiveness                       loan for which they may have applied.
                                                      The current total and permanent                       Program. In addition, FFEL borrowers                     The HEOA instituted several new
                                                   disability discharge regulations will                    whose loans have been submitted to the                disclosure requirements for lenders and
                                                   continue to apply to any borrower                        guaranty agency for default aversion                  established very specific disclosures
                                                   whose loan discharge application is                      assistance may apply for a Direct                     requirements for lenders making a
                                                   received prior to the effective date of                  Consolidation Loan.                                   Consolidation loan. In particular, the
                                                   any final regulations published as a                        Section 682.206(f) of the current                  HEOA requires a lender to inform a
                                                   result of this NPRM. Therefore, the                      regulations includes requirements for                 Consolidation loan applicant that
                                                   proposed regulations would retain the                    lenders in the making of FFEL                         applying for the loan does not obligate
                                                   current provision that requires a loan in                Consolidation loans. Those                            the borrower to agree to take the loan.
                                                   a conditional discharge status to be                     requirements include the requirement                  The Department determined that it was
                                                   returned to repayment status before a                    that the lender obtain lender verification            important to ensure that borrowers are
                                                   borrower who received a conditional                      certifications from the holders of the                given both a clear explanation of the
                                                   discharge may receive a new loan.                        loans to be repaid by the Consolidation               process for canceling a Consolidation
                                                      Reasons: The changes to the borrower                  loan.                                                 loan and the time frame within which
                                                   eligibility regulations are conforming                      Proposed regulations: The proposed                 they may exercise their right to cancel
                                                   changes that are needed to effectively                   regulations would amend §§ 682.201(e)                 the loan. Therefore, the Department is
                                                   implement the new total and permanent                    and 685.220(d) to include an additional               proposing language in § 682.206(f)
                                                   disability loan discharge process.                       condition under which a borrower with                 providing borrowers with a 10-day
                                                                                                            only FFEL loans may consolidate those                 period, before a Consolidation loan is
                                                   Consolidation Loans (§§ 682.201(e),                      loans into a Direct Consolidation Loan.               made, during which the borrower could
                                                   682.206(f) and 685.220(d))                               The proposed regulations would                        reconsider the Consolidation loan and
                                                     Statute: The HEOA amended sections                     provide that a borrower with only FFEL                cancel the loan if appropriate.
                                                   428C(a)(3)(B)(i)(V) and 428C(b)(5) of the                loans may consolidate into the Direct                    There were a number of issues raised
                                                   HEA to provide that FFEL loan                            Loan Program to use the no accrual of                 by the negotiators regarding this
                                                   borrowers may consolidate their loans                    interest benefit for active duty military             provision. Some non-Federal negotiators
                                                   into a Direct Consolidation Loan for the                 service personnel.                                    expressed concern about the
                                                   purpose of using the no interest accrual                    The proposed regulations would also                Department’s original proposal to
                                                   benefit for active duty service members,                 incorporate into the regulations a                    provide a five-day period for a borrower
                                                   which is only available in the Direct                    statutory change made by the College                  to cancel the loan with the lender.
                                                   Loan Program. This benefit provides                      Cost Reduction and Access Act of 2007                 These non-Federal negotiators did not
                                                   that interest will not accrue on the                     (CCRAA) that is not currently reflected               think the initial proposal provided
                                                   Direct Loan of an eligible military                      in the Department’s regulations.                      enough clarity as to the date on which
                                                   borrower for a period of not more than                   Specifically, the proposed regulations                the five-day period would begin. One
                                                   60 months while the borrower is serving                  would provide that a borrower may                     non-Federal negotiator indicated that
                                                   on active duty during a war or other                     consolidate a FFEL Consolidation loan                 the consolidation process is highly
                                                   military operation or national                           into the Direct Loan Program without                  automated and if the servicer of the
                                                   emergency, or performing qualifying                      including another eligible loan in the                loans to be consolidated is also the
                                                   National Guard duty during a war or                      consolidation if the FFEL Consolidation               servicer or lender for the Consolidation
                                                   other military operation or national                     loan is in default, or if the borrower                loan, the loan process could be
                                                   emergency, and is serving in an area of                  wishes to obtain an income-based                      completed in as little as 24–48 hours.
                                                   hostilities in which service qualifies for               repayment plan.                                       The Department was asked to provide
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                                                   special pay under section 310 of title 37                   The proposed regulations would also                an opportunity for a borrower to waive
                                                   of the United States Code.                               modify section 682.206(f) to incorporate              his or her right to cancel the loan to
                                                     The HEOA also amended section 433                      a new requirement that is needed to                   allow the process to occur more quickly
                                                   of the HEA by adding a separate set of                   fully implement § 682.205(i)(7), which                if the borrower chose to do so.
                                                   disclosures for Consolidation loan                       requires lenders to inform borrowers                     During the negotiations, the
                                                   borrowers. At the time a lender provides                 that, by applying for the Consolidation               Department described how the Direct
                                                   a Consolidation loan application to a                    loan, the borrower is not obligated to                Loan Program currently provides
                                                   prospective borrower, it must provide                    agree to take the loan. Section 682.206(f)            borrowers an opportunity to affirm their
                                                   specific information about                               would be amended to include a                         decision to take a Consolidation loan.


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                                                   36564                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   Based on the practice in the Direct Loan                 the period while the student on whose                 ceases to be enrolled on at least a half-
                                                   Program, the Department proposed                         behalf the loan was obtained is enrolled              time basis.
                                                   revised language establishing a                          at an eligible institution on at least a                 The proposed regulations would
                                                   timeframe for a borrower to cancel a                     half-time basis, and during the 6-month               revise the interest capitalization
                                                   Consolidation loan that would be                         period that begins on the later of the day            provisions in § 682.202(b) to provide
                                                   similar to the timeframe in the Direct                   after the student ceases to be enrolled               that a lender may capitalize interest on
                                                   Loan Program, and that would be clear                    on at least a half-time basis or, if the              a PLUS loan that has accrued from the
                                                   and understandable to all participants.                  parent borrower is also a student, the                date of the first disbursement until the
                                                   The language in proposed                                 day after the parent ceases to be                     date the repayment period begins, and
                                                   § 682.206(f)(ii) reflects the revised                    enrolled on at least a half-time basis. A             would make a corresponding change in
                                                   proposal.                                                graduate or professional student PLUS                 the Direct Loan Program regulations by
                                                      The Department strongly believes that                 borrower may defer repayment of a                     revising § 685.202(b) to provide that the
                                                   the HEA clearly intends that a standard                  PLUS loan first disbursed on or after                 Secretary may capitalize unpaid interest
                                                   process should be established to provide                 July 1, 2008 during the 6-month period                on a PLUS loan when the loan enters
                                                   a Consolidation loan applicant with the                  that begins on the day after the student              repayment.
                                                   opportunity to cancel the application for                ceases to be enrolled at an eligible                     Finally, the proposed regulations
                                                   the loan. The Department believes the                    institution on at least a half-time basis.            would add a new administrative
                                                   proposed regulatory language reflects an                    The HEA does not address the                       forbearance provision to § 682.211(f)
                                                   appropriate balance between allowing                     capitalization of interest on a PLUS loan             allowing a lender to grant a forbearance,
                                                   the borrower sufficient time to make an                  that accrues during the period from the               upon notice to the borrower, on a
                                                   informed determination about moving                      date of the first disbursement until the              borrower’s PLUS loans first disbursed
                                                   forward with the process for a                           date the repayment period begins.                     before July 1, 2008 to align repayment
                                                   Consolidation loan while not                                                                                   with a borrower’s PLUS loans first
                                                                                                               Current Regulations: Current
                                                   unnecessarily delaying its completion.                                                                         disbursed on or after July 1, 2008, or
                                                                                                            regulations do not address the
                                                   The Department does not agree with the                                                                         with a borrower’s Stafford Loans that
                                                                                                            capitalization of interest on a PLUS loan
                                                   recommendation that the regulations                                                                            are subject to a grace period. The lender
                                                                                                            that accrues from the date of the first
                                                   provide an opportunity for a borrower to                                                                       would be required to notify the
                                                                                                            disbursement until the date the
                                                   waive the right to cancel a                                                                                    borrower that he or she has the option
                                                                                                            repayment period begins.
                                                   Consolidation loan if the borrower                                                                             to cancel the forbearance and to
                                                                                                               Proposed Regulations: The proposed                 continue paying on the loan. A
                                                   wants the consolidation process to
                                                                                                            regulations would revise §§ 682.210 and               corresponding administrative
                                                   occur more quickly. The Department
                                                                                                            685.204 to provide that, upon the                     forbearance provision would be added
                                                   believes that the 10-day cancellation
                                                                                                            request of the borrower, a parent PLUS                to § 685.205(b) in the Direct Loan
                                                   period provides appropriate protection
                                                                                                            borrower must be granted a deferment                  Program regulations.
                                                   to the borrower. Accordingly, under the
                                                   proposed regulations, the 10-day                         on a PLUS loan first disbursed on or                     Reasons: The proposed PLUS loan
                                                   cancellation period may not be waived                    after July 1, 2008, during the period                 deferment regulations implement
                                                   by the borrower.                                         when the student on whose behalf the                  statutory provisions that were added to
                                                      One non-Federal negotiator asked if                   loan was obtained is enrolled on at least             the HEA by the HEOA.
                                                   the proposed cancellation notification                   a half-time basis at an eligible                         The Department is proposing to
                                                   requirement would apply to a request by                  institution, and during the 6-month                   amend the current interest
                                                   a borrower to add loans to an existing                   period that begins on the later of the day            capitalization provisions for PLUS loans
                                                   Consolidation loan during a 180-day                      after the student ceases to be enrolled               to reflect current practice with regard to
                                                   period as permitted by the HEA. The                      on at least a half-time basis or, if the              capitalization of unpaid loan interest
                                                   negotiator was concerned that if the                     parent borrower is also a student, the                that accrues from the date of the first
                                                   requirement applied to requests to add                   day after the parent ceases to be                     disbursement until the date the loan
                                                   loans to an existing Consolidation loan,                 enrolled on at least a half-time basis.               enters repayment.
                                                   it could have a negative consequence to                     For graduate and professional student                 The proposed new administrative
                                                   a borrower if a loan was inadvertently                   PLUS borrowers, the proposed                          forbearance provision reflects a
                                                   left out of the consolidation process and                regulations would provide that a                      recommendation from one of the non-
                                                   simply needed to be added. The                           borrower may be granted a deferment on                Federal negotiators. This negotiator was
                                                   Department agreed that once the loan is                  a PLUS loan first disbursed on or after               concerned that PLUS loan borrowers,
                                                   made, the 10-day waiting period does                     July 1, 2008 during the 6-month period                particularly student PLUS loan
                                                   not apply if the borrower adds                           that begins on the day after the student              borrowers, who have both PLUS loans
                                                   additional loans during the permitted                    ceases to be enrolled on at least a half-             first disbursed before July 1, 2008 and
                                                   180-day period.                                          time basis at an eligible institution. If a           PLUS loans first disbursed on or after
                                                                                                            lender or the Secretary grants an in-                 July 1, 2008 may believe that all of their
                                                   In-School Deferments, Interest                           school deferment on a student PLUS                    PLUS loans are eligible for the new 6-
                                                   Capitalization, and Administrative                       loan based on information from the                    month post-enrollment deferment
                                                   Forbearance for PLUS Loans                               borrower’s school about the borrower’s                period. However, this deferment is only
                                                   (§§ 682.202(b), 682.210(v), 682.211(f),                  eligibility for a new loan, student status            available on PLUS loans first disbursed
                                                   685.202(b), 685.204(g), and 685.205(b))
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                                                                                                            information from the school or                        on or after July 1, 2008. Because the 6-
                                                     Statute: Section 428B(d) of the HEA,                   information from the National Student                 month post-enrollment deferment for
                                                   as amended by the HEOA, adds new in-                     Loan Data System (NSLDS) confirming                   student PLUS loans first disbursed on or
                                                   school deferment provisions for PLUS                     the borrower’s half-time enrollment                   after July 1, 2008 may be granted
                                                   loans first disbursed on or after July 1,                status, the in-school deferment period                automatically as an extension of the
                                                   2008. Specifically, the HEA provides                     for a student PLUS loan first disbursed               borrower’s in-school deferment period,
                                                   that a parent PLUS borrower may defer                    on or after July 1, 2008 would include                a student PLUS borrower who also has
                                                   repayment of a PLUS loan first                           the 6-month period that begins on the                 pre-July 1, 2008 PLUS loans may not
                                                   disbursed on or after July 1, 2008 during                day after the student PLUS borrower                   understand that the loans first disbursed


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                          36565

                                                   before July 1, 2008 do not qualify for the                  Reasons: The proposed regulations                     Current Regulations: Section
                                                   post-enrollment deferment, and the in-                   are necessary to reflect statutory                    682.210(c)(1) of the current FFEL
                                                   school deferment period on such loans                    requirements.                                         regulations specifies that a lender must
                                                   will end when the student ceases to be                      During the negotiations, the                       grant an in-school deferment when a
                                                   enrolled on at least a half-time basis.                  Department clarified that for                         borrower requests and submits
                                                   The non-Federal negotiator asked the                     determining compliance with this                      supporting documentation for the
                                                   Department to consider amending the                      provision, interest under the SCRA                    deferment or when the lender receives
                                                   regulations to provide for the alignment                 includes service charges, renewal                     information from the school on a
                                                   of repayment of a borrower’s PLUS                        charges, fees, or any other charges                   borrower’s eligibility for an in-school
                                                   loans first disbursed before July 1, 2008                (except bona fide insurance) with                     deferment in connection with the
                                                   with a borrower’s PLUS loans first                       respect to an obligation or liability. The            borrower’s receipt of a new loan, or
                                                   disbursed on or after July 1, 2008, and                  Department also noted that a lender is                when the lender receives student status
                                                   with a borrower’s Stafford Loans that                    prohibited from assessing a borrower                  information, directly or indirectly, from
                                                   have a grace period, so that the borrower                who is subject to the SCRA interest rate              the borrower’s school indicating the
                                                   would begin making payments on all of                    cap an additional charge after the                    borrower’s eligibility for the deferment.
                                                   the loans at the same time. The                          borrower’s period of active duty military             Section 685.204(b)(1) of the Direct Loan
                                                   Department agreed.                                       service that is equal to the difference               program regulations contains
                                                                                                            between the otherwise applicable                      comparable provisions.
                                                   Applicability of the Servicemembers                      interest rate on the FFEL loan and the                   Section 682.210(c)(2) of the FFEL
                                                   Civil Relief Act (SCRA) to FFEL and                      six percent cap.                                      regulations requires the lender, when
                                                   Direct Loan Program Loans (§§ 682.202,                                                                         granting an in-school deferment on a
                                                                                                               In response to questions from the
                                                   682.302, and 685.202)                                                                                          FFEL program loan based on
                                                                                                            negotiators, the Department also
                                                                                                                                                                  information provided by the school, to
                                                     Statute: The HEOA amended section                      clarified that the SCRA interest rate cap
                                                                                                                                                                  notify the borrower that the deferment
                                                   428(d) of the HEA to provide that FFEL                   applies to the loan, not to the borrower.
                                                                                                                                                                  has been granted and that the borrower
                                                   and Direct Loan program loans are                        As long as the debt was incurred before
                                                                                                                                                                  has the option to pay the accruing
                                                   subject to the provision in section 207                  the borrower’s military service began,
                                                                                                                                                                  interest on an unsubsidized loan or to
                                                   of the Servicemembers Civil Relief Act                   the interest rate cap applies to any joint
                                                                                                                                                                  cancel the deferment and continue
                                                   (50 U.S.C. 527) (SCRA) that limits the                   consolidation loan or other co-borrowed               paying on the loan. The lender is also
                                                   interest rate on a borrower’s loan to six                loan, and applies to a PLUS loan made                 required to include in the notice an
                                                   percent during periods of active duty                    to a borrower with an endorser even if                explanation of the consequences of
                                                   military service. The limitation applies                 only one of the individuals is                        those options. Under
                                                   to loans incurred by the servicemember,                  performing active duty military service.              § 685.204(b)(1)(iii)(B) of the Direct Loan
                                                   or by the servicemember and the                          For purposes of this restriction, a loan              regulations, the Secretary notifies the
                                                   servicemember’s spouse jointly, before                   is considered incurred by an endorser                 borrower after granting an in-school
                                                   the servicemember entered military                       when the Endorser Addendum to the                     deferment based on information
                                                   service. Section 438 of the HEA was also                 PLUS Loan Master Promissory Note is                   provided by the school that the
                                                   amended to specify that, for any FFEL                    signed, and the requirement that the                  borrower has the option to continue
                                                   program loan first disbursed on or after                 debt be incurred before military service              paying on the loan, and that if the
                                                                                                            is based on that date. The debt-before-               borrower elects to cancel the deferment,
                                                   July 1, 2008 that is subject to the six
                                                                                                            service date on a consolidation loan is               the borrower may pay the principal and
                                                   percent interest rate limit of the SCRA,
                                                                                                            the date the consolidation loan was                   interest payments that were deferred. If
                                                   the interest rate used to calculate the
                                                                                                            made as a new debt, not the                           the borrower fails to do so, the Secretary
                                                   lender’s special allowance payment is
                                                                                                            disbursement date of the loans repaid by              applies a deferment and capitalizes the
                                                   the rate that is determined in
                                                                                                            the consolidation loan.                               interest that accrued during the period
                                                   accordance with the SCRA.
                                                                                                            In-School Deferment (§§ 682.210(a),                   in which payments were not made.
                                                     Proposed Regulations: The proposed                                                                              Proposed Regulations: The proposed
                                                   regulations would revise §§ 682.202 and                  682.210(c)(1), and 685.204(b)(1))
                                                                                                                                                                  regulations would revise
                                                   685.202 to provide that, effective August                  Statute: Section 428(b)(1)(Y) of the                §§ 682.210(c)(1) and
                                                   14, 2008, upon a loan holder’s receipt of                HEA was amended by the HEOA to                        685.204(b)(1)(iii)(A) to reflect the
                                                   a written request from a borrower and                    include an additional method for                      additional statutory method a lender or
                                                   a copy of the borrower’s military orders,                granting an in-school deferment on a                  the Secretary may use to grant an in-
                                                   the maximum interest rate (as defined in                 FFEL or Direct Loan. A loan holder may                school deferment, based on
                                                   50 U.S.C. 527, App, section 207(d)) that                 grant an in-school deferment based on                 confirmation of the borrower’s half-time
                                                   may be charged on FFEL or Direct Loan                    the lender’s confirmation of the                      enrollment status through the use of
                                                   program loans made prior to the                          borrower’s half-time enrollment status                NSLDS if requested by the borrower’s
                                                   borrower entering active duty status is                  through the use of NSLDS, if the                      school. The proposed regulations would
                                                   six percent while the borrower is on                     confirmation is requested by the                      also revise § 682.210(a)(3) of the FFEL
                                                   active duty status. The proposed                         institution of higher education. A new                regulations to provide that if a borrower
                                                   regulations would also revise § 682.302                  provision was also added to the HEA to                is responsible for the interest on a loan
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                                                   of the FFEL regulations by adding a new                  require a lender, at the time the lender              during a deferment period, the lender, at
                                                   paragraph (h) that specifies that for                    grants a deferment to a borrower with an              or before the time the deferment is
                                                   FFEL loans first disbursed on or after                   unsubsidized Stafford Loan, to provide                granted, must notify the borrower that
                                                   July 1, 2008, that are subject to the                    the borrower with information to assist               he or she has the option to pay the
                                                   SCRA interest rate cap, a FFEL lender’s                  the borrower in understanding the                     accruing interest or cancel the
                                                   special allowance payment is calculated                  impact of capitalization of interest on               deferment and continue paying on the
                                                   as it otherwise would be under program                   the borrower’s loan principal and on the              loan. The lender would also be required
                                                   requirements, except that the applicable                 total amount of interest to be paid                   to provide information, including an
                                                   interest rate used is six percent.                       during the life of the loan.                          example, on the impact on a borrower’s


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                                                   36566                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   loan debt of capitalization of accrued                   amount due on all of the borrower’s                   used for the 48 contiguous States. The
                                                   unpaid interest and on the total amount                  eligible FFEL and Direct Loans (as                    term eligible loan reflects the statutory
                                                   of interest to be paid over the life of the              calculated under a standard repayment                 definition.
                                                   loan. A similar notification provision                   plan based on a 10-year repayment                        Proposed Regulations: The proposed
                                                   that applied only to the granting of in-                 period) exceeds 15 percent of the                     regulations would specify that the
                                                   school deferments would be removed                       difference between the borrower’s (and,               annual amount due on a borrower’s
                                                   from § 682.210(c)(2) of the FFEL                         if applicable, the borrower’s spouse’s)               eligible loans for purposes of
                                                   regulations. A comparable change                         adjusted gross income (AGI) and 150                   determining whether the borrower has a
                                                   would be made in § 685.204(b)(1)(iii)(B)                 percent of the poverty guideline for the              partial financial hardship is the greater
                                                   of the Direct Loan regulations to provide                borrower’s family size. If a married                  of the amount due on the eligible loans
                                                   that borrowers will be notified of their                 borrower files a separate Federal income              as calculated under a standard
                                                   option to cancel a deferment and                         tax return, section 493C(d) of the HEA                repayment plan with a 10-year
                                                   continue paying on the loan and will be                  provides that only the borrower’s                     repayment period when the borrower
                                                   provided with information on the                         income and eligible student loan debt                 initially entered repayment on those
                                                   impact of capitalization, including an                   are used in determining the amount of                 loans, or the annual amount due on
                                                   example.                                                 the borrower’s payment under the IBR                  those loans as calculated under a
                                                      Reasons: The proposed changes are                     plan. An eligible loan under section                  standard repayment plan with a 10-year
                                                   necessary to reflect the statutory                       493C(a)(3) is any loan made, insured, or              repayment period when the borrower
                                                   changes made by the HEOA that affect                     guaranteed under the FFEL and Direct                  elects the IBR plan. The proposed
                                                   the process for granting in-school                       Loan programs other than parent PLUS                  regulations would also provide that
                                                   deferments in the FFEL and Direct Loan                   loans made under the FFEL and Direct                  when a married borrower and his or her
                                                   programs and that require that                           Loan programs and consolidation loans                 spouse file a joint tax return with the
                                                   additional information be provided so                    under both programs that repaid parent                IRS and both the borrower and the
                                                   that borrowers better understand the                     PLUS loans.                                           spouse have eligible loans, the joint AGI
                                                   impact of the capitalization of interest                                                                       and the total amount of the borrower’s
                                                                                                               Current Regulations: The current
                                                   on the total cost of the loan. At the                                                                          and spouse’s eligible loans will be used
                                                                                                            regulations reflect the statutory
                                                   request of the negotiators, the                                                                                in determining whether each borrower
                                                                                                            definition of the term partial financial
                                                   Department clarified that the use of                                                                           has a partial financial hardship.
                                                                                                            hardship and define the terms ‘‘AGI,’’                   Reasons: In the regulations governing
                                                   NSLDS, at the request of a borrower’s                    ‘‘family size,’’ and ‘‘poverty guideline’’
                                                   school, to confirm a borrower’s                                                                                the IBR Plan, the Department provided
                                                                                                            consistent with the use of those terms in             that, when determining a borrower’s
                                                   enrollment status is an additional                       § 682.210 for purposes of determining a
                                                   method for granting in-school                                                                                  partial financial hardship for purposes
                                                                                                            borrower’s eligibility for an economic                of IBR, the loan holder should compare
                                                   deferments and does not replace other                    hardship deferment. AGI means the
                                                   pre-existing methods. In-school                                                                                the annual amount the borrower would
                                                                                                            income reported by the borrower to the                pay on the borrower’s eligible loans at
                                                   deferments may continue to be granted                    Internal Revenue Service (IRS). For a
                                                   by a lender consistent with the                                                                                the time the borrower initially entered
                                                                                                            married borrower filing jointly, AGI                  repayment on the total outstanding
                                                   requirements of § 682.210(s)(1)(iii) and                 includes both the borrower’s and
                                                   based on student status information                                                                            balance of those loans, based on a
                                                                                                            spouse’s income. If a married borrower                standard repayment over a 10-year
                                                   provided directly or indirectly by a                     files a separate Federal tax return, AGI              repayment period, to the annual amount
                                                   school, including status information                     includes only the borrower’s income. A                a borrower would pay under the
                                                   reported to NSLDS, without a specific                    borrower’s family size includes the                   provisions of the IBR plan. During the
                                                   request from the school.                                 borrower, the borrower’s spouse and the
                                                      The Department also clarified that the                                                                      negotiations, a non-Federal negotiator
                                                                                                            borrower’s children (including unborn                 pointed out that always using the
                                                   information provided to borrowers on                     children who will be born during the
                                                   the impact of capitalization of accruing                                                                       annual amount the borrower would pay
                                                                                                            year the borrower certifies family size),             based on the outstanding balance of the
                                                   unpaid interest during deferment                         if the children receive more than half                loans when the borrower initially
                                                   periods, including the example, may be                   their support from the borrower for the               entered repayment disadvantages those
                                                   general in nature rather than borrower-                  year the borrower certifies family size.              borrowers whose outstanding balance
                                                   specific. The Department also agreed                     Other individuals are included in family              has increased from the date the
                                                   with a proposal from some non-Federal                    size if, at the time the borrower certifies           borrower initially entered repayment
                                                   negotiators that it would be helpful to                  family size, those other individuals live             until the date the borrower requests IBR.
                                                   borrowers to provide the required                        with the borrower and receive more                    This is particularly true for borrowers
                                                   information on capitalization when the                   than half their support for the year the              who have experienced significant
                                                   borrower applies for the deferment, by                   borrower certifies family size. Support               difficulty repaying the loans,
                                                   including it in standardized deferment                   includes money, gifts, loans, housing,                particularly unsubsidized loans, and
                                                   forms, rather than only providing the                    food, clothes, car, medical and dental                who have used deferments and
                                                   information when the borrower is                         care, and payment of college costs. The               forbearances to avoid delinquency, with
                                                   granted the deferment.                                   poverty guideline is the income                       the result that their outstanding loan
                                                   Income-Based Repayment (IBR) Plan                        categorized by State and family size in               principal balance has increased due to
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                                                   (§§ 682.215 and 685.221)                                 the poverty guidelines published                      capitalized interest. The Department
                                                                                                            annually by the United States                         and the other negotiators agreed that a
                                                   Definition of Partial Financial Hardship                 Department of Health and Human                        borrower whose outstanding balance
                                                   (§§ 682.215(a)(4) and 685.221(a)(4))                     Services pursuant to 42 U.S.C. 9902(2).               has increased rather than decreased
                                                      Statute: Section 493C(a)(3) of the HEA                If the borrower is not a resident of a                during the repayment period prior to the
                                                   provides that a borrower has a partial                   State identified in the poverty                       borrower’s request for IBR should be
                                                   financial hardship, for the purpose of                   guidelines, the poverty guideline to be               given the benefit of having partial
                                                   establishing eligibility for the income-                 used for the borrower is the poverty                  financial hardship determined based on
                                                   based repayment (IBR) plan, if the                       guideline (for the relevant family size)              the annual amount due, as calculated


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                         36567

                                                   under a standard repayment plan with                     a borrower’s spouse both have eligible                National Need program authorized by
                                                   a 10-year repayment period, on the                       loans and filed a joint Federal tax                   section 428K of the HEA.
                                                   borrower’s increased outstanding loan                    return, each borrower’s percentage of                    Current Regulations: Under current
                                                   principal balance.                                       the couple’s total eligible loan debt                 regulations, an otherwise eligible FFEL
                                                      The Department also proposed a                        would be determined, and the                          or Direct Loan borrower may qualify for
                                                   change related to how eligibility for                    calculated partial financial hardship                 teacher loan forgiveness only by
                                                   partial financial hardship is determined                 payment amount for each borrower                      performing qualifying teaching service
                                                   for married borrowers who file a joint                   would be adjusted by multiplying the                  in an eligible elementary or secondary
                                                   Federal tax return and who both have                     payment by the applicable borrower’s                  school that serves low-income families.
                                                   eligible loans. The proposed change                      percentage. As with other borrowers,                  Borrowers who teach at a location
                                                   would ensure that if both borrowers                      each borrower’s adjusted payment                      operated by an educational service
                                                   qualify for IBR, their combined payment                  amount would be further adjusted if the               agency are not eligible for loan
                                                   amounts will not exceed the 15 percent                   borrower’s loans are held by multiple                 forgiveness.
                                                   threshold under the IBR plan. The                        holders. In this case, the adjusted                      Current regulations prohibit a
                                                   Department initially proposed the use of                 payment amount would be multiplied                    borrower from receiving loan
                                                   each individual borrower’s portion of                    by the percentage of the borrower’s total             forgiveness for the same teaching
                                                   the joint AGI and eligible loan amount                   outstanding principal amount of eligible              service under either the FFEL or Direct
                                                   to determine eligibility for IBR. After                  loans that are held by the loan holder.               Loan teacher loan forgiveness programs
                                                   additional discussion, however, the                         Reasons: Without the proposed                      and under subtitle D of title I of the
                                                   Department and the negotiators agreed                    payment adjustment based on the                       National and Community Service Act of
                                                   that this approach would impose a                        borrower’s percentage of the combined                 1990. A borrower who has both FFEL
                                                   significant burden on borrowers, who                     eligible loan debt of the borrower and                and Direct Loan program loans may not
                                                   would be required to submit additional                   his or her spouse that is used to                     receive more than the maximum loan
                                                   documentation to identify their                          calculate the partial financial hardship              forgiveness amount on the borrower’s
                                                   individual portion of any joint income,                  of both borrowers, the borrower’s                     combined outstanding FFEL and Direct
                                                   and would also require the loan holder                   monthly payment amount could exceed                   Loan balance, but is not otherwise
                                                   to determine each borrower’s eligibility                 the statutory maximum amount the                      prohibited from receiving forgiveness
                                                   using a manual (instead of an                            borrower can be required to pay.                      under both the FFEL and Direct Loan
                                                   automated) process. The Department                                                                             teacher loan forgiveness programs for
                                                                                                            FFEL and Direct Loan Program Teacher                  the same qualifying teaching service.
                                                   and the negotiators agreed to adopt a
                                                                                                            Loan Forgiveness (§§ 682.216 and                         Proposed Regulations: The proposed
                                                   suggestion by one of the non-Federal
                                                                                                            685.217)                                              regulations would allow a borrower who
                                                   negotiators to use the joint AGI and the
                                                   annual amount due on both the                              Statute: The HEOA amended the                       otherwise meets the eligibility
                                                   borrower’s and the spouse’s eligible                     FFEL and Direct Loan teacher loan                     requirements for teacher loan
                                                   loans to determine eligibility for IBR                   forgiveness provisions in sections 428J               forgiveness to receive forgiveness based
                                                   and the partial financial hardship                       and 460 of the HEA to specify that an                 on teaching service performed at one or
                                                   payment amount. That payment amount                      otherwise eligible borrower may qualify               more locations of an eligible educational
                                                   would then be adjusted based on the                      for teacher loan forgiveness based on                 service agency that serves low-income
                                                   percentage of the combined total eligible                teaching service performed at a location              families. A borrower could also qualify
                                                   loan debt attributable to each individual                operated by an educational service                    based on teaching service performed at
                                                   borrower, with a further adjustment if                   agency if the educational service agency              a combination of eligible elementary or
                                                   the borrower has multiple loan holders.                  meets the eligibility criteria that apply             secondary schools and eligible
                                                                                                            to elementary or secondary schools for                educational service agencies. To be
                                                   Income-Based Payment Amount                              teacher loan forgiveness purposes. In                 considered eligible service for teacher
                                                   (§§ 682.215(b)(1) and 685.221(b)(2))                     the case of a teacher who is employed                 loan forgiveness purposes, an
                                                      Statute: Under section 493C(b)(1) of                  by an educational service agency, the                 educational service agency would have
                                                   the HEA, the monthly payment amount                      HEA provides that the chief                           to meet the same eligibility
                                                   for a borrower who has a partial                         administrative officer of the educational             requirements that apply to elementary
                                                   financial hardship is determined by                      service agency must certify the                       and secondary schools under current
                                                   calculating 15 percent of the amount                     borrower’s qualifying teaching service.               regulations. For a borrower employed at
                                                   obtained by subtracting 150 percent of                     The HEOA also amended the teacher                   an eligible educational service agency,
                                                   the poverty guideline amount for the                     loan forgiveness provisions to prohibit a             the borrower’s qualifying teaching
                                                   borrower’s family size from the                          borrower from receiving double benefits               service would have to be certified by the
                                                   borrower’s AGI, and then dividing this                   for the same teaching service. The HEA                chief administrative officer of the
                                                   amount by 12.                                            now prohibits a borrower from receiving               educational service agency.
                                                      Current Regulations: Sections                         loan forgiveness under both the FFEL                     Under the proposed regulations,
                                                   682.215(b) and 685.221(b) provide that                   and Direct Loan teacher loan forgiveness              qualifying teaching service performed at
                                                   if a borrower’s eligible loans are held by               programs for the same qualifying                      an eligible educational service agency
                                                   more than one holder, the loan holder                    teaching service. In addition, a borrower             could be counted toward the required
                                                   must adjust the amount of a borrower’s                   may not receive loan forgiveness                      five consecutive complete years of full-
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                                                   calculated monthly payment. The                          benefits for the same teaching service                time teaching only if the consecutive
                                                   borrower’s adjusted monthly payment is                   under either the FFEL or Direct Loan                  five-year period includes qualifying
                                                   determined by multiplying the                            teacher loan forgiveness programs and                 teaching service performed at an eligible
                                                   calculated monthly payment amount by                     the Direct Loan public service loan                   educational service agency after the
                                                   the percentage of the total outstanding                  forgiveness program (§ 685.219), subtitle             2007–2008 academic year.
                                                   principal amount of eligible loans that                  D of title I of the National and                         The proposed regulations would
                                                   are held by that holder.                                 Community Service Act of 1990 (the                    define the term ‘‘educational service
                                                      Proposed Regulations: Under the                       AmeriCorps program), or the Loan                      agency’’ as a regional multiservice
                                                   proposed regulations, if a borrower and                  Forgiveness for Service in Areas of                   agency authorized by State law to


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                                                   36568                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   develop, manage, and provide services                    regulations to provide that the required              regulatory requirements for determining
                                                   or programs to local educational                         five complete consecutive years of                    reasonable and affordable payments.
                                                   agencies, as defined in section 9101 of                  teaching may include any combination                     The Department’s original proposed
                                                   the Elementary and Secondary                             of qualifying teaching service at an                  regulations specified only that a
                                                   Education Act of 1965, as amended.                       eligible elementary or secondary school               borrower is prohibited from
                                                      Finally, the proposed regulations                     or at an eligible educational service                 rehabilitating a defaulted loan more
                                                   would prohibit a borrower from                           agency, but teaching at an educational                than once. Several non-Federal
                                                   receiving loan forgiveness under both                    service agency may be counted toward                  negotiators expressed the view that the
                                                   the FFEL and Direct Loan teacher loan                    the five years only if the consecutive                Department’s interpretation of the
                                                   forgiveness programs for the same                        five-year period includes qualifying                  statutory effective date of August 14,
                                                   teaching service, or from receiving loan                 teaching at an eligible educational                   2008 for this provision should be
                                                   forgiveness for the same teaching                        service agency performed after the                    included in the regulations or discussed
                                                   service under either the FFEL or Direct                  2007–2008 academic year.                              in the preamble to the proposed
                                                   Loan teacher loan forgiveness programs                                                                         regulations. The non-Federal negotiators
                                                   and: (1) The Direct Loan public service                  Eligibility for Rehabilitation of                     also requested that the Department
                                                   loan forgiveness program in § 685.219;                   Defaulted FFEL and Direct Loans                       identify in the regulations the triggering
                                                   (2) subtitle D of title I of the National                (§§ 682.405(a) and (b)(1)(iii) and                    event that results in a borrower’s
                                                   and Community Service Act of 1990; or                    685.211(f))                                           inability to rehabilitate the loan again.
                                                   (3) the Loan Forgiveness for Service in                     Statute: Section 428F(a) of the HEA                The Department agreed and revised the
                                                   Areas of National Need program                           was amended by the HEOA to prohibit                   proposed regulations to specify that the
                                                   authorized by section 428K of the HEA.                   a borrower from rehabilitating a                      one-time limit on rehabilitation applies
                                                      Reasons: The proposed changes                         defaulted loan more than once.                        only to a defaulted loan that was
                                                   reflect statutory requirements.                             Current Regulations: The regulations               rehabilitated on or after August 14,
                                                      One of the non-Federal negotiators                    in §§ 682.405 and 685.211 provide for                 2008. A borrower who rehabilitated a
                                                   noted that some teachers do not have a                   the rehabilitation of defaulted FFEL and              defaulted loan before that date, and later
                                                   fixed location of employment but                         Direct Loan program loans after a                     defaults again on the loan, could
                                                   instead perform qualifying teaching                      borrower makes nine voluntary,                        rehabilitate that loan again. However, if
                                                   service at multiple eligible elementary                  reasonable and affordable payments to                 the borrower rehabilitates the loan a
                                                   or secondary schools, or at multiple                     the guaranty agency holding the                       second time, the loan would become
                                                   eligible educational service agencies.                   defaulted loan, or to the Secretary in the            subject to the limit. The Department
                                                   This negotiator requested clarification                  case of a defaulted Direct Loan. After                also revised the proposed regulations to
                                                   that such ‘‘traveling’’ teachers, if                     the borrower meets the payment                        specify that the triggering event for the
                                                   otherwise eligible, would qualify for                    requirements to reestablish a successful              application of the one-time
                                                   loan forgiveness if they are not actually                repayment pattern, a defaulted FFEL                   rehabilitation limit on a loan is the
                                                   employed by the individual schools or                    loan is rehabilitated upon resale of the              borrower’s return to a default status on
                                                   educational service agencies where they                  loan to an eligible FFEL lender, at                   that previously rehabilitated loan.
                                                   teach. The Department agreed that such                   which time the borrower returns to                       Another non-Federal negotiator
                                                   teachers, if otherwise eligible, would                   normal repayment servicing. In the                    expressed concern about the process for
                                                   qualify for teacher loan forgiveness. The                Direct Loan Program, after the borrower               determining payment amounts for
                                                   current and proposed regulations                         meets the payment requirements, the                   rehabilitation. The negotiator stated that
                                                   provide that a borrower’s qualifying                     loan is transferred from a default                    there was no consistent, standardized
                                                   teaching service must be performed ‘‘in’’                collection status to a normal repayment               approach to determining ‘‘reasonable
                                                   or ‘‘at’’ an eligible elementary or                      servicing status. Current regulations do              and affordable’’ borrower payments for
                                                   secondary school or eligible educational                 not include a limit on the number of                  purposes of loan rehabilitation across
                                                   service agency and do not rely on the                    times a borrower may rehabilitate a                   the guaranty agencies and their agents.
                                                   identity of the employer.                                defaulted loan.                                       The negotiator stated that some agencies
                                                      The Department’s initial proposed                        Proposed Regulations: The proposed                 and agents demanded a specified
                                                   regulations allowed qualifying teaching                  regulations would amend                               percentage or payment amount without
                                                   service performed at an eligible                         §§ 682.405(a)(3) and 685.211(f)(3) to                 apparent regard to the borrower’s
                                                   educational service agency to be                         provide that for any loan that is                     financial circumstances, in violation of
                                                   counted toward a borrower’s required                     rehabilitated on or after August 14,                  the HEA, and expressed the view that
                                                   five complete consecutive years of                       2008, the borrower may not rehabilitate               this perhaps represented a program
                                                   teaching service only if the service was                 the loan again if the loan returns to a               compliance issue. The Department
                                                   performed after August 14, 2008, the                     default status following the                          stated its belief that the requirements for
                                                   date of enactment of the HEOA. One of                    rehabilitation.                                       determining reasonable and affordable
                                                   the non-Federal negotiators argued that                     The proposed regulations would also                borrower payments were already
                                                   the amendments to the teacher loan                       amend § 682.405(b)(1)(iii) to clarify that            sufficiently detailed and explicit in
                                                   forgiveness provisions of the HEA were                   the guaranty agency and its agents must               § 682.405(b)(1)(iii). However, the
                                                   intended to apply retroactively to                       comply with the requirements of that                  Department agreed to revise the lead-in
                                                   October 1, 1998, the date of enactment                   section when determining a borrower’s                 language to this regulation to make it
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                                                   of the FFEL and Direct Loan teacher                      ‘‘reasonable and affordable’’ payment                 clear that a guaranty agency and all of
                                                   loan forgiveness provisions. However,                    amount for loan rehabilitation purposes.              its agents are subject to the requirements
                                                   the Department does not agree with this                     Reasons: The proposed regulations                  of § 682.405(b)(1)(iii) when determining
                                                   interpretation of the law. The                           are necessary to reflect the change in                a borrower’s reasonable and affordable
                                                   Department noted that Congress has                       section 428F(a) of the HEA that                       payment amount for purposes of loan
                                                   specifically made other changes to the                   prohibits a borrower from rehabilitating              rehabilitation. This clarifying change is
                                                   HEA retroactive, but chose not to do so                  a defaulted loan more than once, and to               intended to ensure compliance with this
                                                   in this case. However, the Department                    clarify that guaranty agencies and their              requirement by a guaranty agency and
                                                   agreed to revise the proposed                            agents must comply with current                       all of the agency’s agents, particularly


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36569

                                                   collection agents that may be working                    technical assistance provided by the                  employees to secure applicants for FFEL
                                                   with defaulted borrowers.                                Department to schools participating in                loans, or to any lender, agent, or
                                                                                                            the Direct Loan Program.                              independent contractor of any lender or
                                                   Guaranty Agency and Lender                                  Current Regulations: Prohibited                    guaranty agency to administer or market
                                                   Prohibited Inducements (§§ 682.200(b)                    activities by lenders and guaranty                    FFEL loans for the purpose of securing
                                                   and 682.401(e))                                          agencies are specified in current                     designation as the insurer of the loans.
                                                      Statute: Section 435(d)(5) of the HEA                 regulations in §§ 682.200(b) and                      A guaranty agency would not be
                                                   provides that, after notice and an                       682.401(e), respectively. These                       permitted to pay travel and lodging
                                                   opportunity for a hearing, the Secretary                 regulations were amended in 2007 and                  costs of school employees to attend
                                                   may disqualify a FFEL lender from                        provide lists of prohibited and                       training conducted by the agency. The
                                                   participation in the FFEL Program if it                  permissible activities by lenders and                 proposed regulations would allow for
                                                   is determined that the lender engaged in                 guaranty agencies. The regulations                    the reimbursement of reasonable
                                                   certain prohibited activities to secure                  governing the activities of lenders and               expenses incurred by school employees
                                                   applicants for FFEL loans. These                         guaranty agencies are different, most                 to participate in an agency’s advisory
                                                   prohibited activities include offering,                  specifically in the area of training for              committee or governing board activity.
                                                   directly or indirectly, points, premiums,                schools (a guaranty agency may pay for                   The proposed regulations would
                                                   payments, prizes, stock or other                         travel and lodging for school personnel               prohibit lenders or guaranty agencies
                                                   securities, travel, entertainment                        to attend training programs). The                     from providing staffing services to
                                                   expenses, tuition payment or                             current regulations also permit guaranty              schools under any conditions. Finally,
                                                   reimbursement, providing information                     agencies to pay school officials to                   the proposed regulations would revise
                                                   technology at below-market value, and                    participate on governing boards or                    the provision that allows a lender or
                                                   providing additional financial aid funds                 advisory committees.                                  guaranty agency to provide assistance to
                                                   to any institution of higher education or                   Proposed Regulations: The proposed                 schools comparable to the assistance
                                                   its employees. Lenders are prohibited                    regulations would incorporate all of the              that the Secretary provides to schools
                                                   from entering into any type of                           new prohibited and permitted activities               under the Direct Loan Program by
                                                   consulting arrangement or other type of                  for lenders and guaranty agencies as                  clarifying that the assistance to schools
                                                   contract to provide services to a lender                 specified in the HEA. Section                         that may be provided is ‘‘technical’’
                                                   with an employee who is employed in                      682.200(b)(5) of the proposed                         assistance comparable to the technical
                                                   an institution’s financial aid office or                 regulations specifically addresses the                assistance that the Secretary provides to
                                                   who otherwise has responsibility over                    prohibition on lenders providing                      Direct Loan schools.
                                                   student loans or other student aid. The                  processing, referral or finder fees and                  Reasons: The proposed changes to the
                                                   HEA also prohibits lenders from                          expands the prohibition of such                       prohibited inducement regulations for
                                                   performing any function for an                           payments to institutions, employees of                both lenders and guaranty agencies
                                                   institution of higher education that is a                the institutions or to any other party,               reflect statutory changes made by the
                                                   required function for that institution                   including a school-affiliated                         HEOA.
                                                   under title IV of the HEA, other than                    organization or its employees, to secure                 During the negotiated rulemaking
                                                   exit counseling.                                         FFEL loans. The payment of stock,                     discussions, non-Federal negotiators
                                                      Similarly, section 428(b)(3) of the                   securities or tuition reimbursements is               raised a concern about the prohibition
                                                   HEA restricts guaranty agencies from                     also a prohibited inducement. The                     on lenders and guaranty agencies paying
                                                   offering inducements or engaging in                      proposed regulations prohibit a lender                processing fees. Some negotiators asked
                                                   certain prohibited activities to secure                  from providing compensation for                       the Department to clarify the term
                                                   applicants for FFEL loans or to secure                   service on a lender advisory board,                   ‘‘processing fees.’’ The negotiators were
                                                   the designation as the insurer of loans.                 commission or other group to an                       concerned that a broad definition could
                                                   Guaranty agencies are prohibited from                    employee who is employed in an                        include permissible borrower benefits
                                                   offering, directly or indirectly,                        institution’s financial aid office or to an           on FFEL loans. The Department
                                                   premiums, payments, stock or other                       institutional employee with                           clarified that, in this context, processing
                                                   securities, prizes, travel, entertainment                responsibility for student loans or other             fees do not include permissible
                                                   expenses, tuition payments or                            financial aid, but would permit the                   borrower benefit programs for student
                                                   reimbursements to any institution of                     lender to reimburse the employee for                  and parent borrowers that may be
                                                   higher education or to any employee of                   reasonable expenses related to service                provided by lenders and guarantors to
                                                   the institution to secure FFEL loan                      on the board, commission or group. The                reduce the cost of borrowing for
                                                   applications; or to lenders or their                     proposed regulations also specifically                students and parents.
                                                   agents or employees, or to an                            prohibit a lender from performing any                    Another non-Federal negotiator raised
                                                   independent contractor of any lender or                  function for a school that is a                       a concern that standard commercial
                                                   guaranty agency to administer or market                  requirement of the school except for exit             practices may be affected by the
                                                   FFEL loans for the purpose of securing                   counseling.                                           prohibition on inducements with regard
                                                   the designation of insurer of the loans.                    Section 682.401(e) of the proposed                 to the payment of processing fees. The
                                                   In addition, a guaranty agency may not                   regulations, which governs guaranty                   Department made it clear that these
                                                   conduct fraudulent or misleading                         agency prohibited inducements,                        regulations are not intended to thwart
                                                   advertising concerning loan availability,                generally mirrors the proposed                        standard business practices unless there
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                                                   terms or conditions and, like lenders,                   regulations for lenders. The proposed                 is a quid-pro-quo under which a lender
                                                   guaranty agencies may not perform for                    regulations would prohibit guaranty                   pays the processing fees to secure loan
                                                   an institution of higher education any                   agencies from performing any function                 applications or volume. The Department
                                                   function the institution is required to                  required by a school under title IV                   believes that these proposed regulations
                                                   perform under title IV, other than exit                  except for exit counseling. Guaranty                  appropriately implement the statute and
                                                   counseling. The statute allows both                      agencies would be prohibited from                     will not interfere with standard
                                                   lenders and guarantors to provide                        providing any payments of stock,                      commercial business practices.
                                                   technical assistance to an institution of                securities or tuition reimbursement to                   Another negotiator raised a concern
                                                   higher education comparable to the                       any institution of higher education or its            about what would be deemed


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                                                   36570                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   ‘‘reasonable’’ with regard to the                        repayment is to begin; the borrower’s                    Finally, the HEA requires lenders to
                                                   payment of reasonable costs in                           repayment schedule; special loan                      provide a separate disclosure for
                                                   association with lenders and guaranty                    repayment benefits offered on the loan,               borrowers applying for Consolidation
                                                   agencies paying for items such as meals                  including those contingent on                         loans. When a lender provides a
                                                   or refreshments. The Department                          repayment behavior; any limitations on                borrower with an application for a
                                                   believes that the regulations are clear in               a repayment benefit provided by the                   Consolidation loan, the lender must
                                                   their intent and that the determination                  lender; information on how a borrower                 disclose information about the loan
                                                   of reasonable costs should be                            may lose eligibility for the repayment                including: Whether or not consolidation
                                                   considered carefully by FFEL                             benefit and whether and how the                       will result in a loss of loan benefits for
                                                   participants and viewed in light of what                 borrower can regain eligibility for the               the borrower, including loan
                                                   was deemed by the negotiators the                        benefit; a description of how the                     forgiveness, cancellation, deferment or a
                                                   ‘‘prudent person test.’’                                 borrower can avoid or be removed from                 reduced interest rate; and if the
                                                                                                            default; and any additional resources                 borrower is consolidating a Perkins
                                                   Disclosure Requirements for Lenders
                                                                                                            available to the borrower to assist in                Loan, that the borrower will lose
                                                   (§ 682.205)
                                                                                                            loan repayment.                                       interest free periods available on the
                                                      Statute: Section 433 of the HEA                          While the borrower is in repayment                 Perkins Loan while the borrower is
                                                   requires lenders to provide borrowers a                  on the loan, the lender must                          enrolled in school at least half-time, in
                                                   series of informational disclosures                      periodically provide additional                       the grace period or in deferment, and
                                                   throughout the life of a loan. Specific                  disclosure information to the borrower.               that the borrower will lose cancellation
                                                   types of disclosures are required based                  The lender must provide the borrower                  benefits available in the Perkins Loan
                                                   on the borrower’s status within the                      with a bill or statement that corresponds             Program. The lender must also provide
                                                   borrowing process, i.e., at or before                    to each payment installment time period               the borrower with: A list of the Perkins
                                                   disbursement, at or before repayment,                    in which a payment is due. That bill or               Loan cancellation benefits that would
                                                   during repayment, during delinquency,                    statement must also include: The                      no longer, upon consolidation, be
                                                   at a time the borrower may be having                     borrower’s original principal loan                    available to the borrower; information
                                                   difficulty making payments, and when                     amount; the borrower’s current balance,               about repayment plans available;
                                                   the borrower considers taking out a                      as of the time of the bill or statement;              information about the borrower’s option
                                                   Consolidation loan. Lenders are                          the interest rate on the loan; the                    to prepay the Consolidation loan or pay
                                                   required to make these required                          aggregate amount the borrower has paid                on a shorter repayment schedule; and a
                                                   disclosures simple and understandable                    on the loan, including the amount of                  notice that applying for the
                                                   for the borrower.                                        interest and fees and the amount paid                 Consolidation loan does not obligate the
                                                      The information the lender must                       against the balance; a description of any             borrower to agree to take the loan.
                                                   disclose to the borrower at or before                    fees charged on the loan; the date by                    Current Regulations: Section 682.205
                                                   disbursement of the loan includes:                       which the borrower must make a                        of the current regulations reflects the
                                                   Contact information for the lender; the                  payment to avoid additional fees; and a               pre-HEOA requirements for lender
                                                   amount of any charges on the loan,                       reminder that the borrower has the                    disclosures. Lenders are required to
                                                   including origination fees and the                       option to change repayment plans as                   provide information to borrowers at or
                                                   Federal default fee; the interest rate on                well as a list of available repayment                 before the time of loan disbursement,
                                                   the loan; the annual and aggregate                       plans.                                                and at or prior to the beginning of
                                                   maximum amount that may be                                  The HEA also requires lenders to                   repayment. Information that must be
                                                   borrowed, when repayment is required                     make certain disclosures to borrowers                 disclosed at or prior to disbursement
                                                   and when interest must be paid, as well                  who are having difficulty making                      includes: The lender’s name and contact
                                                   as the borrower’s right to prepay all or                 payments, including: A description of                 information; the principal amount of the
                                                   part of the loan at any time without                     the repayment plans available to the                  loan; the amount of charges to be
                                                   penalty; a statement summarizing the                     borrower and information as to how the                collected by the lender, including the
                                                   circumstances in which a borrower may                    borrower may request a change in his or               origination fee and if those charges will
                                                   obtain a deferment or forbearance; and                   her repayment plan; the requirements                  be deducted from the loan; the
                                                   the options for and requirements for                     for obtaining forbearance including any               minimum and maximum number of
                                                   forgiveness of the loan. For borrowers of                cost or fees associated with forbearance;             years for repayment; deferment options;
                                                   unsubsidized Stafford loans or                           and a description of the options for the              collection costs; and the possible effects
                                                   borrowers of student PLUS loans, the                     borrower to avoid default and any fees                of accepting the loan on the borrower’s
                                                   lender must also provide information                     or costs associated with each option.                 eligibility for other aid. The regulations
                                                   about the borrower’s right to pay the                       If a borrower is 60 or more days                   also require borrowers to be made aware
                                                   interest on the loan while the borrower                  delinquent in making payments, the                    that information concerning the loan,
                                                   is in school and, if interest is not paid,               lender must provide the borrower with                 including the date of disbursement and
                                                   when and how often the lender will                       information including: The date on                    the amount of the loan, will be reported
                                                   capitalize the interest. For parent PLUS                 which the loan will default if no                     to a national credit bureau.
                                                   loan borrowers, the lender must provide                  payments are made; the minimum                           Information that must be disclosed at
                                                   information about how the parent may                     payment the borrower must make to                     or prior to repayment includes: The
                                                   defer payment on the loan while the                      avoid default; a description of the                   scheduled date repayment is to begin;
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                                                   student on whose behalf the parent                       options available to the borrower to                  the estimated balance on the loan,
                                                   borrowed is in school at least half-time.                avoid default and any fees or costs                   including estimated interest to be
                                                      The disclosure information that the                   associated with each option; discharge                capitalized; the interest rate on the loan;
                                                   lender must provide to the borrower at                   options to which the borrower may be                  an explanation of fees that may accrue
                                                   or before the borrower begins repayment                  entitled; and information about any                   or be charged during the repayment
                                                   includes: The scheduled date repayment                   additional resources available to the                 period; and an explanation of special
                                                   is to begin; the estimated balance,                      borrower, including the Department’s                  options the borrower may have for
                                                   including the amount of interest to be                   Ombudsman’s Office, to assist the                     consolidating or refinancing the loans
                                                   capitalized as of the date on which                      borrower in loan repayment.                           and the terms of those options.


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36571

                                                      Proposed Regulations: Section                         advocates and counselors, and the                     circumstances, or if the information
                                                   682.205 of the proposed regulations                      Department’s Ombudsman.                               could be general and outline the options
                                                   would retain the current regulatory                        Proposed § 682.205(c)(3) requires                   for any borrower to avoid default or to
                                                   language as to required disclosures, but                 lenders to provide specific repayment                 bring a loan out of default. In
                                                   would reorganize this section to                         information to the borrower with a bill               discussions with the negotiators, the
                                                   accommodate the new disclosure                           or statement that corresponds to each                 Department agreed it would be
                                                   requirements added by the HEOA. The                      payment installment time period in                    permissible for this information, i.e.,
                                                   HEOA added additional disclosures by                     which a payment is due. That                          how a borrower can avoid or remove a
                                                   lenders before disbursement and                          information must include: The original                default status, to be general, since other
                                                   provided for new requirements at                         principal amount of the borrower’s loan;              required disclosures will provide the
                                                   differing points in the repayment cycle                  the current balance as of the time of the             borrower with specific information
                                                   of the borrower. The HEOA also added                     bill or statement; the interest rate on the           pertaining to their individual
                                                   a separate set of disclosures specifically               loan; the interest paid by the borrower               circumstances and account information.
                                                   for Consolidation loan borrowers.                        since the last statement or bill; aggregate              Negotiators raised questions about the
                                                      The proposed regulations would                        totals paid; and a description of each fee            disclosures required in
                                                   incorporate the requirement for new                      the borrower has been charged for the                 § 682.205(c)(2)(xiv) and what
                                                   disclosures by the lender at or prior to                 most recent period. The borrower must                 information would need to be included.
                                                   disbursement of the loan. In regard to                   be told the date by which payments                    The Department believes that these
                                                   unsubsidized loans, these disclosures                    must be made to avoid additional fees                 disclosures should provide borrowers
                                                   must include: An explanation that the                    and the amount of that payment and the                with information about an additional set
                                                   borrower may pay accruing interest                       fees. Finally, the lender must remind                 of tools that are available to help them
                                                   while in school and, if the interest is not              the borrower of the option to change                  manage their student loan debt. In doing
                                                   paid, when and how often it will be                      repayment plans and what plans are                    so, lenders need to ensure that
                                                   capitalized; for parent PLUS borrowers,                  available with a link to the Department’s             borrowers are aware of any appropriate
                                                   an explanation that the payment may be                   Web site for that repayment plan                      Web sites, organizations, and counseling
                                                   deferred while the student on whose                      information.                                          services of which the lender is aware
                                                                                                              Proposed § 682.205(c)(4) adds a new                 and that can be of assistance to
                                                   behalf the parent borrowed is in school
                                                                                                            section of required disclosures for                   borrowers when managing the
                                                   as well as, if the interest is capitalized,
                                                                                                            borrowers who contact the lender and                  repayment of their debt. The
                                                   when and how often it will be
                                                                                                            inform the lender that they are having                Department agreed to provide lenders a
                                                   capitalized; information on
                                                                                                            difficulty making their required                      Web link to its Ombudsman’s Office.
                                                   forbearances; and a description of loan
                                                                                                            payments. Lenders must inform these                   Lenders may provide borrowers seeking
                                                   forgiveness options and the
                                                                                                            borrowers of the repayment plans                      to reach the Department’s Ombudsman’s
                                                   requirements to receive forgiveness.
                                                                                                            available, the requirements for                       Office with the following link: http://
                                                      The HEOA also changed the                             forbearance and the options available to              www.ombudsman.ed.gov/.
                                                   numerous references to ‘‘credit bureaus’’                avoid default as well as any fees or costs               Some non-Federal negotiators also
                                                   to refer to ‘‘consumer reporting                         associated with those options.                        asked for clarification of when a lender
                                                   agencies’’ and the proposed regulations                    Proposed § 682.205(c)(5) adds a new                 must send the disclosure that is
                                                   reflect that change.                                     section on the required disclosures for               required at or prior to repayment, in
                                                      To incorporate the many new                           borrowers who are 60-days delinquent                  accordance with § 685.205(c)(1), in the
                                                   disclosures required during the                          on repayment of their loans. Lenders                  case of a PLUS loan that immediately
                                                   repayment period of a loan for a                         must provide borrowers who are 60-                    enters an in-school deferment status
                                                   borrower, the proposed regulations                       days delinquent with information                      upon the start of the repayment period.
                                                   reorganize § 682.205(c) to better separate               regarding the date on which the loan                  Specifically, the negotiators asked if the
                                                   and distinguish the different                            will default if no payment is made, the               lender should wait until the end of the
                                                   disclosures.                                             minimum payment to avoid default, and                 in-school deferment period (and any
                                                      Under proposed § 682.205(c)(2), the                   the payment amount that would bring                   post-enrollment deferment period, if
                                                   lender must disclose to the borrower:                    the loan to a current status or pay the               applicable) before sending the
                                                   Information on any special loan                          loan in full. Lenders must inform                     disclosure, or if the lender would be
                                                   repayment benefits available, the                        borrowers about: The options for                      required to send the disclosure when
                                                   requirements to maintain the benefit,                    avoiding default, including deferments                the loan has been fully disbursed. The
                                                   and the impact on the borrower’s overall                 and forbearance; any costs associated                 Department noted that a PLUS loan
                                                   repayment; and any limitations                           with those options; and any opportunity               enters the repayment period on the date
                                                   associated with the benefit and the                      for loan discharge the borrower may                   that the final disbursement of the loan
                                                   circumstances that would cause the                       have. The notice required by                          is made. Therefore, the disclosure that
                                                   borrower to lose the benefit, as well as                 § 682.205(c)(5) must be sent to the                   is required at or prior to repayment
                                                   how the borrower may be able to regain                   borrower within five days of the                      must be sent at or before the time of the
                                                   the benefit. The lender must also                        borrower becoming 60-days delinquent,                 final loan disbursement rather than at
                                                   provide a borrower with the list of                      unless the lender has sent the notice                 the end of the deferment period.
                                                   repayment plans available and remind                     within the previous 120 days.                            A non-Federal negotiator raised a
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                                                   the borrower that he or she may change                     Reasons: The proposed regulations                   concern about flexibility in the
                                                   plans at least once a year. The borrower                 implement statutory requirements.                     distribution of the disclosures required
                                                   must be informed about how to avoid                        Negotiators discussed how these                     in this section of the regulations in light
                                                   default and, if the borrower is in default,              disclosures could best be managed in a                of the regulatory authority in 34 CFR
                                                   how to get out of default. The lender                    way that will be most beneficial to                   682.205(f) that allows a lender to
                                                   must also provide the borrower with                      borrowers. Negotiators asked if the                   provide disclosures through written or
                                                   information about additional resources                   information required under                            electronic means. The negotiator wanted
                                                   available to assist in loan repayment,                   § 682.205(c)(2)(xiii) needed to be                    to ensure that lenders may provide the
                                                   including nonprofit organizations,                       specific to the individual borrower’s                 disclosures using the method best suited


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                                                   36572                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   to the borrower’s repayment method.                      provided the required information in a                purpose to mean any kind of transfer of
                                                   The negotiator asked the Department to                   manner that best serves both statutory                an interest in the loan, including a
                                                   clarify that a lender would be able to                   intent and the needs of the borrower.                 pledge of such an interest as security.
                                                   provide the required disclosures                           Negotiators representing the student                The notification requirements apply if
                                                   through secure e-mail or electronic links                loan industry raised a concern about the              the borrower is in the grace period or
                                                   to the borrower’s account-specific                       impact of the distribution of the                     has entered repayment on the loan. The
                                                   information.                                             disclosures required by proposed                      assignee, or the assignor on the
                                                      The Department is concerned that the                  § 682.205(c)(3), those that are required              assignee’s behalf, must also notify the
                                                   purpose of the statute would not be                      during repayment, on their current loan               guaranty agency of the assignment, and
                                                   served if a lender simply provides a                     servicing systems. The Department                     the name, address, and telephone
                                                   general electronic source for a borrower                 expects that the disclosures required by              number of the assignee within 45 days
                                                   to retrieve the required disclosure                      § 682.205(c)(3) will be provided in                   of the date the assignee acquires a
                                                   information. Lenders may use                             accordance with the lender’s or                       legally enforceable right to receive
                                                   appropriate electronic methods to                        servicer’s current account organizational             payment on the loan.
                                                   provide the required disclosure                          practices. The disclosures may be                        Proposed Regulations: The proposed
                                                   information directly to the borrower.                    provided by account or by borrower.                   regulations incorporate the additional
                                                   For example, if the lender sends an e-                   The Department understands that                       information specified in the HEA that
                                                   mail to the borrower containing the                      lenders and servicers have developed                  must be provided to a borrower if the
                                                   required general disclosures as well as                  systems to comply with disclosure                     assignment or transfer of ownership
                                                   a secure link to allow the borrower to                   requirements during repayment and                     interest on a FFEL Program loan results
                                                   obtain specific account information, the                 does not intend to require lenders and                in a change in the identity of the party
                                                   lender will have met the requirement.                    servicers to unnecessarily alter those                to whom subsequent payments must be
                                                   However, if the lender receives                          systems. Therefore, lenders and                       sent. The date on which the current
                                                   information that the e-mail address used                 servicers may make the disclosures                    servicer will stop accepting payments is
                                                   is no longer valid or not the borrower’s,                pursuant to § 682.205(c)(3) by loan, by               required only if that is applicable.
                                                   the lender must take appropriate action                  account, or by borrower.                                 Reasons: The proposed regulations
                                                   as it would in situations when a mailing                                                                       reflect the HEOA changes to the HEA.
                                                                                                            Information to Borrowers Upon                         Notification of the date on which the
                                                   address used to communicate with the
                                                                                                            Transfer, Sale or Assignment of a FFEL                current servicer will stop accepting
                                                   borrower is determined to be incorrect.
                                                                                                            Program Loan (§ 682.208(e))                           payments is not required if the servicer
                                                   Similarly, a lender may mail the
                                                   required general disclosures to a                           Statute: Section 428(b)(2)(F)(i) of the            continues to accept payments
                                                   borrower with information about a                        HEA was amended by the HEOA to                        throughout the assignment process and
                                                   secure Web site for the borrower to                      require that a borrower be provided                   forwards them on to the assignee. Non-
                                                   access specific personal account                         with additional information when the                  Federal negotiators with knowledge of
                                                   information. If no return mail or                        transfer, sale, or assignment of the                  loan servicing practices indicated that
                                                   evidence of a bad address is received by                 borrower’s FFEL loan results in a                     loan servicers do not stop accepting
                                                   the lender, the lender may assume the                    change in the identity of the party to                borrower payments during sales,
                                                   mail has been received. Thus, we are                     whom payments and communications                      transfers, and assignment.
                                                   proposing to treat these electronic                      must be sent. The borrower must now
                                                                                                            be notified of the effective date of the              Forbearance (§ 682.211)
                                                   disclosures similarly to mailed
                                                   disclosures.                                             assignment or transfer of the loan, the                  Statute: Section 428(c)(3)(C) of the
                                                      Many non-Federal negotiators assured                  date that the current loan servicer will              HEA outlines what disclosures the
                                                   the Department that the required                         stop accepting the borrower’s payments,               lender must make to the borrower upon
                                                   disclosure information, particularly the                 and the date the new loan servicer will               granting forbearance and during a
                                                   borrower-specific account information,                   begin accepting those payments.                       forbearance period. The HEA requires
                                                   could be provided through secure                            Current Regulations: Current FFEL                  lenders to provide a borrower with
                                                   means and could provide confirmation                     Program regulations require that if the               information regarding the impact that
                                                   that the borrower has accessed the                       assignment of a FFEL Program loan                     capitalizing interest will have on the
                                                   information. The Department is not                       results in a change in the identity of the            loan and the total balance to be repaid.
                                                   requiring lenders to document that the                   party to whom the borrower must send                  It requires lenders to provide additional
                                                   borrower has accessed the information,                   subsequent payments, the assignor and                 disclosures to borrowers during a
                                                   but would encourage lenders to do so to                  the assignee of the loan must, within 45              forbearance period, including the
                                                   help identify borrowers who may need                     days from the date the assignee acquires              amount of interest that will be
                                                   additional contact.                                      the legally enforceable right to receive              capitalized, the date on which
                                                      The Department does not agree with                    payment from the borrower on the                      capitalization will occur and the option
                                                   the suggestion that it would be                          assigned loan, provide the borrower                   of the borrower to pay the interest that
                                                   sufficient for a lender to provide general               with a notice, either jointly or                      has accrued before the interest is
                                                   instructions on a statement, bill, coupon                separately, that informs the borrower of              capitalized.
                                                   or other form (electronically or by mail)                the assignment, the identity of the party                Current Regulations: Current
                                                   to a borrower that directs the borrower                  to which the loan is assigned, the name               § 682.211(e) requires the lender to
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                                                   to a particular Web site for disclosure                  and address of the party to whom the                  contact a borrower at least once every
                                                   information. This approach would not                     borrower must send subsequent                         six months during a period of
                                                   fulfill the intent of the statute or serve               payments or communications, and the                   forbearance only when the forbearance
                                                   the borrower. The Department fully                       telephone numbers of both the assignor                involves the cessation of all payments.
                                                   supports the appropriate use of                          and assignee. If a separate notice is sent            The lender must provide the borrower
                                                   electronic communication with a                          by each party, each notice must indicate              with a reminder of the obligation to
                                                   borrower, but the Department must also                   that a corresponding notice will be sent              repay the loan, the amount of principal
                                                   ensure the statute is properly                           by the other party. The current                       and interest on the loan, the fact that
                                                   implemented and that borrowers are                       regulations define assignment for this                interest will continue to accrue and the


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                          36573

                                                   borrower’s or endorser’s option to                       more than a reasonable portion of the                 the lender serves as trustee used all the
                                                   cancel the forbearance at any time.                      proceeds were used for direct                         proceeds from special allowance
                                                      Proposed Regulations: Section                         administrative expenses; and that the                 payments, interest subsidies received
                                                   682.211(e) of the proposed regulations                   need-based grants made from the                       from the Department, and any proceeds
                                                   would require the lender, at the time the                proceeds supplemented and did not                     from the sale or other disposition of the
                                                   borrower is granted a forbearance, to                    supplant Federal and non-Federal funds                loans originated through the lender for
                                                   give the borrower information about the                  that would otherwise have been used by                need-based grants, and that those funds
                                                   impact of capitalization of interest on                  the school for need-based grant                       supplemented, but did not supplant,
                                                   the loan and the total amount to be                      programs.                                             other Federal or non-Federal funds
                                                   repaid over the life of the loan. The                       Current Regulations: Section                       otherwise available to the school to
                                                   proposed regulations would also require                  682.305(c) of the FFEL Program                        make need-based grants to its students.
                                                   the lender to contact the borrower at                    regulations requires all FFEL lenders                 The proposed regulations also require
                                                   least once every 180 days during any                     that originate or hold at least $5 million            that the audit must determine that no
                                                   period of forbearance and to give the                    in FFEL loans during the lender’s fiscal              more than a reasonable portion of the
                                                   borrower or endorser more specific                       year to complete and submit to the                    payments and proceeds from the loans
                                                   information, in conjunction with that                    Department an independent annual                      were used for direct administrative
                                                   required under previous regulations, as                  compliance audit for that year. The                   expenses in accordance with
                                                   to the impact of forbearance on the loan.                audit must be completed by a qualified,               § 682.601(b) of the current regulations.
                                                   This information includes the amount of                  independent organization or person.                   These same requirements with regard to
                                                   interest that will be capitalized and                    Section 682.601(a)(7) requires a school               annual compliance audit determinations
                                                   when that capitalization will take place                 that makes or originates FFEL loans,                  were also added to the FFEL school
                                                   and the option of the borrower or                        regardless of the dollar volume, to                   lender audit requirements in
                                                   endorser to pay the interest that has                    submit an annual compliance audit to                  § 682.601(a)(7) of the regulations.
                                                   accrued before it is capitalized.                        the Department. For a school that is not                 Reasons: The proposed regulations
                                                      Reasons: The proposed regulations                     a governmental entity or a nonprofit                  reflect the HEOA changes made to the
                                                   implement statutory requirements.                        organization, the audit must examine                  HEA provisions governing the
                                                      Some negotiators asked the                            the school lender’s compliance with the               compliance audit of a FFEL school
                                                   Department to clarify the new                            HEA and applicable regulations,                       lender or an eligible FFEL lender in its
                                                   forbearance disclosure requirement as                    examine the school lender’s financial                 capacity as trustee for a school or
                                                   they relate to administrative                            management of its FFEL Program                        school-affiliated organization for the
                                                   forbearances. Some negotiators were                      activities, and be conducted in                       purpose of making FFEL loans. The
                                                   concerned that lenders will not be able                  accordance with the standards for audits              audit determination will ensure that
                                                   to satisfy the disclosure requirements if                issued by the United States Government                funds received by a school as a lender
                                                   an administrative forbearance is granted                 Accountability Office’s Government                    or through an ELT arrangement with an
                                                   to provide a borrower assistance with a                  Auditing Standard using the procedures                eligible FFEL lender will be used to
                                                   situation occurring in the past. The                     outlined in an audit guide produced by                benefit students enrolled at the school
                                                   Department agreed with the other                         the Department’s Office of Inspector                  as intended by the HEA.
                                                   negotiators that if an administrative                    General. For a school lender that is a
                                                   forbearance is granted retroactively, the                                                                      Consumer Education Information
                                                                                                            governmental entity or a nonprofit
                                                   lender need not go back in time to                                                                             Provided by Guaranty Agencies
                                                                                                            organization, the audit must meet the
                                                   provide the required information                                                                               (§ 682.401(g))
                                                                                                            same standards as audits for other
                                                   retroactively. Lenders must, however,                    school lenders and be conducted in                       Statute: The HEOA added a new
                                                   contact the borrower as required going                   accordance with chapter 75 of title 31 of             section 433A to the HEA that requires
                                                   forward from the date the lender                         the United States Code. In addition, in               a guaranty agency to work with the
                                                   applied the forbearance.                                 years in which student financial aid is               schools that it serves to develop and
                                                                                                            not audited as a ‘‘Major Program,’’ as                make available high-quality educational
                                                   Audit Requirement for a FFEL School                                                                            materials and programs that provide
                                                   Lender or an Eligible Lender Trustee                     defined under 31 U.S.C. 7501, the
                                                                                                            school’s lending activities, regardless of            training for students and their families
                                                   (ELT) That Originates FFEL Loans for a                                                                         in budgeting and financial management,
                                                   School or School-Affiliated                              dollar amount, must be included in the
                                                                                                            audit as a Major Program.                             including debt management and other
                                                   Organization (§§ 682.305(c) and                                                                                aspects of financial literacy, such as the
                                                                                                               Proposed Regulations: The proposed
                                                   682.601(a)(7))                                                                                                 cost of using high-interest loans to pay
                                                                                                            regulations would revise § 682.305(c) to
                                                      Statute: The HEOA added section                       require that a FFEL school lender, or a               for postsecondary education, and how
                                                   435(d)(8) to the HEA which requires any                  lender serving as a trustee on behalf of              budgeting and financial management
                                                   school that serves as a FFEL lender or                   a school or school-affiliated                         relate to the title IV student loan
                                                   any eligible lender that serves as an                    organization for the purpose of                       programs. The HEA requires these
                                                   Eligible Lender Trustee (ELT) for a                      originating loans, submit an annual                   programs and materials to be in formats
                                                   school or school-affiliated organization                 compliance audit to the Department                    that are simple and understandable to
                                                   for the purpose of making FFEL loans to                  regardless of the dollar volume of loans              students and their families, and
                                                   complete and submit annually to the                      originated. The proposed regulations                  specifies that they must be provided
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                                                   Secretary a compliance audit. The                        also require that the audit be conducted              before, during, and after a student’s
                                                   compliance audit must determine that                     by a qualified, independent organization              enrollment at an institution of higher
                                                   the school or lender: Used all proceeds                  or person. A new proposed                             education. A guaranty agency’s
                                                   from special allowance payments,                         § 682.305(c)(2)(vii) would govern the                 activities under section 433A are
                                                   borrower interest payments, interest                     compliance audit of a school or school-               considered default reduction activities
                                                   subsidy payments received from the                       affiliated organization’s lender trustee.             for the purposes of section 422 of the
                                                   Department and any proceeds from the                     The proposed regulations require that                 HEA.
                                                   sale or other disposition of the loans                   the trustee’s audit include a                            A guaranty agency is not prohibited
                                                   originated for need-based grants; that no                determination that the school for whom                from using existing activities, programs,


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                                                   36574                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   and materials to meet the requirements                   Consumer Credit Reporting Following                   reporting to the consumer reporting
                                                   of section 433A, and may provide                         Loan Rehabilitation (§ 682.405(b)(1)(iii)             organizations from the current 90 days
                                                   programs or materials similar to the                     and (b)(3))                                           to 45 days without separate reporting
                                                   programs and materials required by                          Statute: Section 428F(a)(1)(A) of the              deadlines for the guaranty agency and
                                                   section 433A to schools that participate                 HEA was amended by the HEOA to                        loan holder. Several non-Federal
                                                   only in the Direct Loan Program.                         require that, upon sale of a rehabilitated            negotiators expressed concern that 45
                                                      A lender or loan servicer may also                    loan to an eligible lender, the guaranty              days did not provide sufficient time for
                                                   provide outreach or financial aid                        agency or other holder of the loan must               both parties to report to consumer
                                                   literacy information in accordance with                  request any consumer reporting agency                 reporting agencies and noted that the
                                                   the requirements of section 433A.                                                                              prior loan holder would not be aware
                                                                                                            to which the guaranty agency or holder
                                                      Proposed Regulations: The proposed                                                                          that it was required to initiate such a
                                                                                                            had reported the default of the loan to
                                                   regulations would reflect the                                                                                  request unless it was informed by the
                                                                                                            remove the record of default from the
                                                   requirements of section 433A of the                                                                            guaranty agency of the sale. These
                                                                                                            borrower’s credit history.
                                                   HEA as described above.                                                                                        negotiators also recommended that
                                                                                                               Current Regulations: Section
                                                      Reasons: The proposed changes are                                                                           separate deadlines be established for the
                                                                                                            682.405(b)(3) of the FFEL regulations
                                                   necessary to reflect a statutory                                                                               guaranty agency and the loan holder so
                                                                                                            states that the guaranty agency must
                                                   requirement.                                                                                                   that one party’s failure to meet the
                                                                                                            report to all national credit bureaus
                                                                                                                                                                  deadline would not result in a
                                                   Financial and Economic Literacy for                      within 90 days of the date the loan was
                                                                                                                                                                  compliance failure for both parties. A
                                                   Rehabilitated Borrowers (§ 682.405)                      rehabilitated that the loan is no longer
                                                                                                                                                                  non-Federal negotiator familiar with
                                                                                                            in a default status and that the default
                                                      Statute: The HEOA amended section                                                                           guaranty agency requirements also
                                                                                                            is to be removed from the borrower’s
                                                   428F of the HEA to require a guaranty                                                                          requested that the Department clarify a
                                                                                                            credit history.
                                                   agency to make available financial and                                                                         guaranty agency’s responsibilities when
                                                                                                               Proposed Regulations: The proposed
                                                   economic education materials for a                                                                             the prior loan holder that reported the
                                                                                                            regulations would require the prior
                                                   borrower who has rehabilitated a                                                                               default was no longer in existence. The
                                                                                                            holder of the loan, in addition to the
                                                   defaulted loan.                                                                                                negotiators discussed consumer credit
                                                                                                            guaranty agency, to request that a
                                                      Proposed Regulations: The proposed                                                                          reporting in greater detail, with the
                                                                                                            consumer reporting agency to which the                Federal negotiator providing an
                                                   regulations would revise § 682.405,                      default was reported remove the default
                                                   regarding loan rehabilitation                                                                                  overview of the process and information
                                                                                                            from the borrower’s credit history. The               on the Department’s consumer credit
                                                   agreements, by adding a provision                        proposed regulations would also
                                                   requiring guaranty agencies to make                                                                            reporting process for rehabilitated Direct
                                                                                                            provide more detailed reporting                       Loans. In both the FFEL and Direct Loan
                                                   available financial and economic                         deadlines for the guaranty agency and
                                                   education materials, including debt                                                                            programs a record of the default, or an
                                                                                                            the prior loan holder to request removal              equivalent reporting code, is reported by
                                                   management information, to any                           of the report of the default from the                 the loan holder (in FFEL) or the Direct
                                                   borrower who has rehabilitated a                         borrower’s credit history, and would                  Loan servicer and by the guaranty
                                                   defaulted loan.                                          reduce the overall period for this                    agency (in FFEL) or the Department’s
                                                      Reasons: The proposed change is                       activity from 90 to 75 days. Under the                debt collection unit (in Direct Loans)
                                                   necessary to implement a statutory                       proposed regulations, the guaranty                    and that neither the Department nor a
                                                   requirement. Some of the non-Federal                     agency must, within 45 days of the sale               guaranty agency has the authority to
                                                   negotiators requested clarification of the               of the rehabilitated loan to an eligible              request deletion by the consumer
                                                   methods by which a guaranty agency                       lender, request that the consumer                     reporting organization of another
                                                   may make the required information                        reporting agency remove the record of                 creditor’s reported ‘‘trade line.’’ If the
                                                   available to borrowers who have                          default from the borrower’s credit                    loan holder that reported a default
                                                   rehabilitated a defaulted loan. One non-                 history and notify the prior holder of the            insurance claim no longer exists, the
                                                   Federal negotiator representing students                 loan rehabilitation. The proposed                     borrower’s recourse is to directly
                                                   asked for clarification that the required                regulations would require the prior                   request that the consumer reporting
                                                   information must be provided to                          holder of the loan, within 30 days of the             organization remove the defunct loan
                                                   individual borrowers who have                            guaranty agency’s notification of the                 holder’s reported record of default or its
                                                   rehabilitated defaulted loans, and not                   loan’s rehabilitation, to request that the            equivalent from the borrower’s credit
                                                   simply made available on a guaranty                      consumer reporting agency remove the                  history. The Department expects
                                                   agency’s Web site or in other general                    loan holder’s default claim record or its             guaranty agencies to assist borrowers to
                                                   materials.                                               equivalent from the borrower’s credit                 the extent possible under these
                                                      The Department confirmed that a                       history.                                              circumstances by informing the
                                                   guaranty agency must provide the                            Reasons: The proposed regulations                  borrower of the identity of the prior
                                                   required financial and economic                          incorporate the HEOA changes to the                   holder and of the borrower’s right to
                                                   education materials to each individual                   HEA provisions governing default                      directly request removal of the default
                                                   borrower who has rehabilitated a                         rehabilitation-related reporting to                   by the consumer reporting agency.
                                                   defaulted loan. A guaranty agency may                    consumer reporting agencies.                          However, the Department understands
                                                   provide the required information to                      Establishing specific deadlines for a                 that a guaranty agency’s ability to assist
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                                                   individual borrowers by mailing written                  guaranty agency’s notice to the prior                 borrowers is limited in this area.
                                                   materials or through electronic means.                   holder and for the guaranty agency and
                                                   The materials may provide general                        loan holder to make their requests to                 Notifications to Borrowers in Default
                                                   financial and economic education                         consumer reporting agencies will ensure               and Definition of Nationwide Consumer
                                                   information that would be applicable to                  that affected borrowers receive the                   Reporting Agency (§§ 682.410(b) and
                                                   any borrower, including information on                   primary loan rehabilitation benefit in a              682.200(b))
                                                   debt management, and need not be                         timely and efficient manner.                            Statute: The HEOA amended section
                                                   specific to the individual borrower’s                       The Department initially proposed                  428(k) of the HEA by adding a
                                                   circumstances.                                           reducing the overall timeframe for                    requirement for guaranty agencies that


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                                                   have received a default claim from a                     agency refers to the definition of this               provisions through proposed
                                                   lender to provide the defaulted                          term in the Fair Credit Reporting Act.                regulations:
                                                   borrower with at least two separate                                                                               Total and permanent disability
                                                                                                            Executive Order 12866                                 discharges: The Secretary determined
                                                   notices, using simple and
                                                   understandable terms, that explain, at a                 Regulatory Impact Analysis                            that the monitoring period after a
                                                   minimum, the borrower’s options for                                                                            borrower receives a discharge due to
                                                   removing the loan from default, and the                     Under Executive Order 12866, the                   total and permanent disability would be
                                                   fees and conditions associated with                      Secretary must determine whether the                  three years; that interest would not
                                                   each option.                                             regulatory action is ‘‘significant’’ and              accrue during this period for loans that
                                                      The HEOA also changed all current                     therefore subject to the requirements of              are ultimately reinstated; that the
                                                   references to ‘‘credit bureaus’’ in the                  the Executive Order and subject to                    employment earnings standard would
                                                   HEA to ‘‘consumer reporting agencies.’’                  review by the OMB. Section 3(f) of                    be based on the poverty guideline
                                                      Current Regulations: Section                          Executive Order 12866 defines a                       amount for a family of two; that, for
                                                   682.410(b)(5)(ii) requires a guaranty                    ‘‘significant regulatory action’’ as an               student loan and TEACH grant
                                                   agency, after it pays a default claim on                 action likely to result in a rule that may            disbursements received during the
                                                   a loan but before it reports the default                 (1) have an annual effect on the                      monitoring period, a borrower’s
                                                   to a credit bureau or assesses collection                economy of $100 million or more, or                   obligation to repay a discharged loan
                                                   costs against the borrower, to provide                   adversely affect a sector of the economy,             will not be reinstated if funds are
                                                   the borrower, within a specified                         productivity, competition, jobs, the                  returned to the holder within 120 days
                                                   timeframe, with a notice that advises the                environment, public health or safety, or              of the disbursement date; and that the
                                                   borrower of the actions that will be                     State, local or Tribal governments or                 Secretary will provide certain
                                                   taken with regard to the default claim                   communities in a material way (also                   information to a borrower as part of a
                                                   and explains the borrower’s rights in                    referred to as an ‘‘economically                      notification to the borrower that his or
                                                   connection with the claim. Section                       significant’’ rule); (2) create serious               her obligation to repay a previously
                                                   682.410(b)(6) specifies the collection                   inconsistency or otherwise interfere                  discharged loan has been reinstated.
                                                   efforts that a guaranty agency must take                 with an action taken or planned by                       Opportunity to cancel a consolidation
                                                   on a defaulted loan.                                     another agency; (3) materially alter the              loan: The Secretary would require
                                                      Proposed Regulations: The proposed                    budgetary impacts of entitlement grants,              lenders to provide a Consolidation loan
                                                   regulations would expand the                             user fees, or loan programs or the rights             borrower a period of not less than 10
                                                   information that must be provided in                     and obligations of recipients thereof; or             days, from the date the borrower is
                                                   the notice required under                                (4) raise novel legal or policy issues                notified the lender is ready to make the
                                                   § 682.410(b)(5)(ii) to include                           arising out of legal mandates, the                    Consolidation loan, to cancel the loan.
                                                   information on the options that are                      President’s priorities, or the principles                PLUS loan deferment: The Secretary
                                                   available to the borrower to remove the                  set forth in the Executive order.                     aligned the repayment of a borrower’s
                                                   loan from default, including an                             Pursuant to the terms of the Executive             PLUS loans first disbursed before July 1,
                                                   explanation of the fees and conditions                   order, it has been determined this                    2008, with a borrower’s PLUS loans first
                                                   associated with each option. The                         proposed regulatory action will not have              disbursed on or after July 1, 2008, and
                                                   proposed regulations would also require                  an annual effect on the economy of                    with a borrower’s Stafford Loans that
                                                   a guaranty agency to provide this same                   more than $100 million. Therefore, this               have a grace period, so that the borrower
                                                   information to a defaulted borrower in                                                                         would begin making payments on all of
                                                                                                            action is not ‘‘economically significant’’
                                                   a second notice that the guaranty agency                                                                       the loans at the same time.
                                                                                                            and subject to OMB review under
                                                   must send as part of its required                                                                                 Income-based repayment: The
                                                                                                            section 3(f)(1) of Executive Order 12866.
                                                   collection efforts on a defaulted loan                                                                         Secretary determined that a borrower
                                                                                                            Notwithstanding this determination, the
                                                   under § 682.410(b)(6). The second                                                                              whose outstanding balance has
                                                                                                            Secretary has assessed the potential
                                                   notice would have to be sent within a                                                                          increased rather than decreased
                                                                                                            costs and benefits of this regulatory
                                                   reasonable time after the end of the                                                                           throughout the repayment period prior
                                                                                                            action and has determined that the
                                                   period during which the borrower may                                                                           to the borrower’s request for IBR should
                                                                                                            benefits justify the costs.
                                                   request an administrative review as                                                                            be given the benefit of determining
                                                   specified in § 682.410(b)(5)(iv)(B) or, if               Need for Federal Regulatory Action                    partial financial hardship based on the
                                                   the borrower has requested an                                                                                  borrower’s increased outstanding loan
                                                   administrative review, within a                            These proposed regulations are                      principal balance.
                                                   reasonable time following the                            needed to implement provisions of the                    The Secretary would require that, for
                                                   conclusion of the administrative review.                 HEA, as amended by the HEOA,                          married borrowers, joint AGI and the
                                                      The proposed regulations would also                   particularly related to changes related to            annual amount due on both the
                                                   remove the definition of National credit                 loan discharge, deferment,                            borrower’s and the spouse’s eligible
                                                   bureau from § 682.200(b) and replace it                  consolidation, rehabilitation, and                    loans be used to determine eligibility for
                                                   with a definition of Nationwide                          repayment plan provisions, and the                    IBR and the partial financial hardship
                                                   consumer reporting agency, and would                     addition of a new Part E to title I of the            payment amount. That payment amount
                                                   replace all references to ‘‘credit bureau’’              HEA which establishes extensive new                   would then be adjusted based on the
                                                   with ‘‘consumer reporting agency’’                       disclosure requirements for lenders and               percentage of the combined total eligible
                                                                                                            institutions participating in Federal and
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                                                   throughout § 682.410(b)(5) and (b)(6).                                                                         loan debt attributable to each individual
                                                   The proposed regulations would specify                   private student loan programs.                        borrower, with a further adjustment if
                                                   that a nationwide consumer reporting                       In general, these proposed regulations              the borrower has multiple loan holders.
                                                   agency is a consumer reporting agency                    simply restate specific HEOA                             Teacher loan forgiveness: The
                                                   as defined in 15 U.S.C. 1681a.                           requirements, in many cases using                     Secretary determined that the five
                                                      Reasons: The proposed changes in                      language drawn directly from the                      complete consecutive years of teaching
                                                   § 682.410(b) reflect statutory                           statute. In the following areas, the                  required to qualify for loan forgiveness
                                                   requirements. The proposed definition                    Secretary has exercised limited                       may include any combination of
                                                   of nationwide consumer reporting                         discretion in implementing the HEOA                   qualifying teaching service at an eligible


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                                                   elementary or secondary school or at an                  years to three years, and by removing                 date and the discharge date, the
                                                   eligible educational service agency, but                 the provision that would have required                processing of the borrower’s loan
                                                   teaching at an educational service                       a borrower to pay interest from the date              discharge request will be suspended
                                                   agency may be counted toward the five                    of discharge if the borrower’s repayment              until the borrower ensures the
                                                   years only if the consecutive five-year                  obligation is reinstated.                             disbursement is returned to the loan
                                                   period includes qualifying teaching at                      Under the Department’s initial                     holder or the Secretary, as applicable.
                                                   an eligible educational service agency                   proposal, a borrower’s obligation to                     Lastly, the Department’s initial
                                                   performed after the 2007–2008                            repay a previously discharged loan                    proposal did not explicitly provide that
                                                   academic year.                                           would be reinstated if the borrower’s                 the Secretary would notify a borrower
                                                      Forbearance: The Secretary                            annual earnings from employment                       who fails to meet one of the eligibility
                                                   determined that, if an administrative                    during the monitoring period exceeded                 requirements during the post-discharge
                                                   forbearance is granted retroactively, the                the poverty guideline amount for the                  monitoring period that the borrower’s
                                                   lender need not go back in time to                       borrower’s family size. Non-Federal                   obligation to repay the discharged loan
                                                   provide the required information                         negotiators raised concerns about this                has been reinstated. In response to
                                                   retroactively. Lenders must, however,                    proposal, noting that while the                       serious concerns from non-Federal
                                                   contact the borrower as required going                   proposed approach could be seen as                    negotiators, the Department agreed to
                                                   forward from the date the lender                         more equitable than the current                       add a provision to the proposed
                                                   applied the forbearance.                                 regulatory approach—under which the                   regulations stating the Secretary will
                                                      Consumer credit reporting after loan                  criteria for the reinstatement of a loan is           notify a borrower that his or her
                                                   rehabilitation: The Secretary                            tied to poverty guideline amount for a                obligation to repay a previously
                                                   determined that guaranty agencies must,                  family of two, regardless of the                      discharged loan has been reinstated, and
                                                   within 45 days of the sale of the                        borrower’s actual family size—it also                 that the notification of reinstatement
                                                   rehabilitated loan to an eligible lender,                could be confusing to borrowers, since                will explain why the obligation was
                                                   request that the consumer reporting                      a borrower’s family size could change                 reinstated, that the first payment due
                                                   agency remove the record of default                      during the post-discharge monitoring                  date following reinstatement will be no
                                                   from the borrower’s credit history and                   period. These negotiators argued that                 earlier than 60 days after the date of the
                                                   notify the prior holder of the loan                      the current standard based on a family                notification of reinstatement, and how
                                                   rehabilitation. The Secretary also                       size of two would be preferable, as it                the borrower may contact the
                                                   determined that the prior holder of the                  would eliminate the need for borrowers                Department if he or she has questions or
                                                   loan, within 30 days of the guaranty                     to monitor changes in the employment                  believes the obligation to repay was
                                                   agency’s notification of the loan’s                      earnings limit during the post-discharge              reinstated based on incorrect
                                                   rehabilitation, must request that the                    monitoring period. The Department                     information.
                                                   consumer reporting agency remove the                     agreed.                                                  Opportunity to cancel a consolidation
                                                   loan holder’s default claim record or its                   Non-Federal negotiators also raised                loan: A number of non-Federal
                                                   equivalent from the borrower’s credit                    concerns about the treatment of a title               negotiators raised concerns about the
                                                   history.                                                 IV loan disbursement made during the                  requirement that lenders provide
                                                      The following section addresses the                   post-discharge monitoring period for a                Consolidation loan borrowers an
                                                   alternatives that the Secretary                          loan the borrower received prior to the               explicit period of time to cancel the loan
                                                   considered in implementing these                         physician’s certification date. The                   after the date the borrower is notified
                                                   discretionary portions of the HEOA                       Department initially did address this                 that the lender is ready to make the
                                                   provisions. These alternatives are also                  issue in the proposed regulations                     Consolidation loan. These negotiators
                                                   discussed in more detail in the Reasons                  because the current regulatory                        argued that the Department’s original
                                                   sections of this preamble related to the                 provision, under which a borrower is                  proposal to provide a five-day period for
                                                   specific regulatory provisions.                          ineligible for a final discharge unless the           a borrower to cancel the loan with the
                                                                                                            borrower ensures that such a                          lender lacked clarity and did not fully
                                                   Regulatory Alternatives Considered
                                                                                                            disbursement is returned to the loan                  recognize the highly automated
                                                     Total and permanent disability                         holder within 120 days of the                         consolidation process in which some
                                                   discharges: The Department’s initial                     disbursement date, is tied to the                     loans could be fully processed in as
                                                   proposals included a 5-year post-                        conditional discharge period, which                   little as 24–48 hours. One negotiator
                                                   discharge monitoring period and                          would be eliminated under the                         suggested that the Department provide
                                                   interest charges for the period from the                 proposed regulations. After considering               borrowers with the opportunity to
                                                   date of discharge to the reinstatement                   the concerns of the non-Federal                       expedite processing by waiving their
                                                   date when a borrower’s obligation to                     negotiators, the Department agreed to                 right to cancel the loan. After
                                                   repay a previously discharged loan is                    change the proposed regulations to                    considering these concerns and
                                                   reinstated for failure to meet one of the                provide that a borrower’s obligation to               suggestions, the Department proposed
                                                   post-discharge requirements. Non-                        repay a discharged loan will not be                   revised language establishing a
                                                   Federal negotiators did not support                      reinstated if the borrower ensures that a             timeframe for a borrower to cancel a
                                                   these proposals, questioning the                         title IV loan or TEACH Grant                          Consolidation loan that would be
                                                   rationale for changing the current                       disbursement made during the post-                    similar to the operational timeframe
                                                   policies—under which the conditional                     discharge monitoring period for a loan                used in the Direct Loan Program, which
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                                                   discharge period is three years and                      or TEACH Grant received prior to the                  would be clear and understandable to
                                                   interest is not charged for reinstated                   discharge date is returned to the loan                all participants. This revised proposal is
                                                   loans during the conditional period—in                   holder within 120 days of the                         reflected in the proposed regulations.
                                                   the absence of a specific statutory                      disbursement date. The Department also                   PLUS loan deferment: A non-Federal
                                                   requirement to do so. After considering                  agreed to revise the proposed                         negotiator raised concerns that, under
                                                   the negotiators’ concerns, the                           regulations to provide that if a                      the Department’s original proposal,
                                                   Department revised the proposed                          disbursement of a title IV loan or                    borrowers with PLUS loans first
                                                   regulations by changing the post-                        TEACH Grant is made during the period                 disbursed before July 1, 2008, and PLUS
                                                   discharge monitoring period from five                    between the physician’s certification                 loans first disbursed on or after July 1,


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                                                   2008, could erroneously believe that all                 borrower’s and the spouse’s eligible                  FFEL and Direct Loan teacher loan
                                                   their PLUS loans are eligible for the new                loans, with the payment amount                        forgiveness provisions. While the
                                                   6-month post-enrollment deferment                        adjusted based on the percentage of the               Department did not agree with this
                                                   period, which is actually only available                 combined total eligible loan debt                     interpretation of the HEOA, the
                                                   on PLUS loans first disbursed on or after                attributable to each individual borrower              proposed regulations were revised to
                                                   July 1, 2008. This negotiator suggested,                 and with a further adjustment for                     provide that the required five complete
                                                   and the Department agreed, that the                      borrowers with multiple loan holders.                 consecutive years of teaching may
                                                   proposed regulations be revised to                          The alternatives adopted would                     include any combination of qualifying
                                                   provide an administrative forbearance                    increase Federal costs for fiscal years               teaching service at an eligible
                                                   that would allow a lender to align                       2009 through 2019 related to the IBR                  elementary or secondary school or at an
                                                   repayment of a borrower’s PLUS loans                     program by an estimated $101 million                  eligible educational service agency,
                                                   first disbursed before July 1, 2008 with                 compared with baseline estimated costs                provided the consecutive five-year
                                                   a borrower’s PLUS loans first disbursed                  for the original authorizing legislation.             period includes qualifying teaching at
                                                   on or after July 1, 2008, and with a                     (These costs include the impact of the                an eligible educational service agency
                                                   borrower’s Stafford Loans that have a                    proposed changes on loans made prior                  performed after the 2007–2008
                                                   grace period.                                            to FY 2009.) The Department does not                  academic year.
                                                      Income-based repayment: A non-                        forecast any new borrowers will choose                   Forbearance: Some non-Federal
                                                   Federal negotiator noted that borrowers                  the IBR repayment schedule beyond                     negotiators raised concerns that lenders
                                                   whose outstanding loan balance                           those assumed in the baseline because                 will not be able to satisfy disclosure
                                                   increased after they initially entered                   the alternatives adopted were relatively              requirements if an administrative
                                                   repayment and before they request IBR                    minor and, therefore, not likely to                   forbearance is granted to assist a
                                                   would be disadvantaged under the                         change borrowers’ repayment choices.                  borrower with a situation occurring in
                                                   Department’s original proposal to                        Projected costs were determined based                 the past. The Department, after
                                                   always base a borrower’s annual                          on those borrowers from the 1994                      discussions with other negotiators,
                                                   payment amount on the outstanding                        through 2019 cohorts already assumed                  agreed that if an administrative
                                                   balance when the borrower initially                      to choose the IBR repayment schedule.                 forbearance is granted retroactively, the
                                                   entered repayment. The negotiator                        Estimates were derived using data from                lender need not go back in time to
                                                   argued that borrowers who have had                       the Department’s Direct Loan servicing                provide the required information
                                                   difficulty repaying the loan and who                     system on borrowers who have chosen                   retroactively. The lender must, however,
                                                   have taken advantage of deferments and                   income-contingent repayment, merged                   contact the borrower as required going
                                                   forbearances to avoid delinquency                        with a statistically significant sample of            forward from the date the lender
                                                   would be particularly disadvantaged as                   National Student Loan Data System                     applied the forbearance.
                                                   their outstanding loan principal balance                 data. Current Population Survey data                     Consumer credit reporting after loan
                                                   would have increased due to capitalized                  from the Census Bureau was used to                    rehabilitation: The Department initially
                                                   interest. After considering these factors,               project borrower incomes. Estimated                   proposed reducing the overall
                                                   the Department agreed that, for a                        loan volume associated with borrowers                 timeframe for both guaranty agency and
                                                   borrower whose outstanding balance                       affected by the alternatives adopted is               loan holder reporting to the consumer
                                                   has increased during the repayment                       $93 billion over 1994 through 2019.                   reporting organizations from the current
                                                   period prior to the borrower’s request                      While the cost of these provisions                 90 days to 45 days. Non-Federal
                                                   for IBR, the determination of partial                    would normally need to be offset, the                 negotiators argued that 45 days was not
                                                   financial hardship should be based on                    Department requested and the Office of                enough time for both parties to report to
                                                   the borrower’s increased outstanding                     Management and Budget granted an                      consumer reporting agencies, noting
                                                   loan principal balance.                                  exception to budget neutrality                        that the prior loan holder would be
                                                      The Department also considered                        requirements. This exception reflects                 unaware of the requirement until
                                                   alternative approaches for determining                   the relatively small cost of the                      informed by the guaranty agency of the
                                                   eligibility for partial financial hardship               provisions and the fact that in their                 sale. These negotiators recommended
                                                   for married borrowers who file a joint                   absence borrowers would be harmed by                  separate deadlines for the guaranty
                                                   Federal tax return and who both have                     having unduly high payment amounts                    agency and the loan holder to ensure
                                                   eligible loans. The Department initially                 or being denied access to IBR entirely.               that one party’s failure to comply with
                                                   proposed using each individual                           This harm would be most significant to                the deadline would not result in a
                                                   borrower’s portion of the joint AGI and                  married borrowers with significant                    compliance failure for both parties.
                                                   eligible loan amount to determine                        student loan debt, including those                    After consideration of these concerns,
                                                   eligibility for IBR. Following                           engaged in public service careers, which              the Department agreed to an alternative
                                                   discussions with non-Federal                             often pay less than comparable jobs in                approach that would reduce the overall
                                                   negotiators, the Department determined                   the private sector.                                   period for this activity from 90 to 75
                                                   that this approach would impose                             Teacher loan forgiveness: The                      days. Under this alternative approach,
                                                   significant burdens both on borrowers,                   Department’s initial proposal allowed                 the guaranty agency must, within 45
                                                   who would be required to submit                          only qualifying teaching service                      days of the sale of the rehabilitated loan
                                                   additional documentation to identify                     performed at an eligible educational                  to an eligible lender, request that the
                                                   the individual portion of any joint                      service agency after August 14, 2008,                 consumer reporting agency remove the
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                                                   income, and loan holders, who would                      the date of enactment of the HEOA, to                 record of default from the borrower’s
                                                   need to determine each borrower’s                        be counted toward a borrower’s required               credit history and notify the prior
                                                   eligibility using a manual process                       five complete consecutive years of                    holder of the loan rehabilitation. The
                                                   (rather than automated process). As an                   teaching service. A non-Federal                       proposed regulations would require the
                                                   alternative, the Department agreed to                    negotiator argued that this approach was              prior holder of the loan, within 30 days
                                                   adopt a non-Federal negotiator’s                         too restrictive, and that the HEOA’s                  of the guaranty agency’s notification of
                                                   suggestion to determine eligibility for                  provisions in this area were intended to              the loan’s rehabilitation, to request that
                                                   IBR using married borrowers’ joint AGI                   apply retroactively to October 1, 1998,               the consumer reporting agency remove
                                                   and the annual amount due on both the                    the date of enactment of the original                 the loan holder’s default claim record or


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                                                   its equivalent from the borrower’s credit                hours with guaranty agencies, and 7,200               the burden of developing and
                                                   history.                                                 hours with institutions. An additional                distributing the new disclosures is
                                                                                                            12,289 hours are associated with                      estimated to be .17 hours per borrower,
                                                   Benefits
                                                                                                            borrowers, generally reflecting the time              for a total burden of 797,661 hours for
                                                      Benefits provided in these proposed                   required to read new disclosures or                   this provision. Using the lender rate of
                                                   regulations include greater transparency                 submit required information. The                      $18.54 per hour, the cost associated
                                                   for borrowers participating in the                       monetized cost of this additional                     with this provision is $14.8 million.
                                                   Federal and private student loan                         burden, using loaded wage data                           The next highest number of burden
                                                   programs; clearer guidelines on                          developed by the Bureau of Labor                      hours is associated with proposed
                                                   acceptable behavior by and                               Statistics, is $24,334,225.                           § 682.211, which specifies lender
                                                   relationships among institutions                            While there is additional burden                   disclosure requirements related to
                                                   participating in the student loan                        associated with a range of proposed                   forbearance and creates a new
                                                   programs; improvements to the IBR                        provisions in this NPRM, nearly 95                    administrative forbearance to align
                                                   plan, particularly for married borrowers;                percent of the burden hours associated                repayment of PLUS loans. Lenders must
                                                   a simpler process for obtaining loan                     with this package result from six                     disclose the effect of interest
                                                   discharges due to total and permanent                    provisions, all with a burden greater                 capitalization and the total to be repaid
                                                   disability; and expanded eligibility for                 than 20,000 hours. In estimating the cost             during the life of a loan under this
                                                   Teacher Loan forgiveness benefits. It is                 of these provisions, the Department                   provision. An estimated 215,734
                                                   difficult to quantify benefits related to                used wage information from the Bureau                 borrowers are affected by this provision,
                                                   the new institutional and lender                         of Labor Statistics. For lenders,                     and the hour burden on lenders is
                                                   requirements, as there is little specific                institutions, and guaranty agencies, the              estimated to be .03 hours per borrower,
                                                   data available on either the extent of                   May 2009 total private non-agricultural               for a total of 215,734 hours. Therefore,
                                                   improper or questionable relationships                   average hourly earnings of $18.54 was                 the cost associated with this provision
                                                   between institutions and lenders prior                   used as the hourly rate to monetize the               is approximately $4.0 million.
                                                   to the HEOA or of the harm such                          burden of these provisions. For                          An estimated 90,286 burden hours are
                                                   relationships actually caused for either                 borrowers, the first quarter 2009 median              associated with § 682.215 and § 685.221,
                                                   borrowers, institutions, or the Federal                  weekly earnings for full-time wage and                the provisions related to the definition
                                                   taxpayer. The extent these relationships                 salary workers by age range were used.                of partial financial hardship and the
                                                   prevented borrowers from accessing the                   This was weighted to reflect the age                  calculation of the borrower’s payment
                                                   most favorable loan terms, however, is                   profile of the student loan portfolio,                under income-based repayment plans.
                                                   likely to have changed in any case since                 with 50 percent of the portfolio assigned             The change in the method of calculating
                                                   recent shifts in economic conditions                     to the 20-to-24 age category and 50                   an income-based repayment will
                                                   and lender net revenues have greatly                     percent to the 25-to-34 age category.                 increase burden to loan holders by .08
                                                   reduced the availability of borrower                     Using median weekly earnings of $472                  hours per borrower. The number of
                                                   benefits in the FFEL program. The                        for workers in the 20-to-24 age category              borrowers expected to qualify for IBR is
                                                   Department is interested in receiving                    and $674 for workers in the 25-to-34 age              1,128,579, generating a total burden of
                                                   comments or data that would support a                    category and assuming a 35-hour work                  90,286. Using the lender rate, the cost
                                                   more rigorous analysis of the impact of                  week, the Department calculated an                    associated with this provision is $1.7
                                                   these provisions.                                        hourly rate of $16.37 to use in                       million.
                                                      These benefits all flow directly from                 monetizing the burden on borrowers.                      Another provision that has an
                                                   statutory changes included in the                        The following discussion provides                     estimated burden greater than 20,000
                                                   HEOA; they are not materially affected                   additional detail on the impact of these              hours is § 682.206, which requires
                                                   by discretionary choices exercised by                    provisions.                                           lenders to offer consolidation borrowers
                                                   the Department in developing these                          The greatest number of burden hours                a 10-day cancellation period. The
                                                   regulations. As discussed in greater                     is associated with proposed § 682.205,                burden of this provision falls on
                                                   detail under Net Budget Impacts, these                   which implements new statutory                        borrowers, who have to read the
                                                   proposed provisions result in net costs                  requirements for lenders to disclose                  disclosure about cancellations and act if
                                                   to the government of $192.7 million                      specified information to borrowers                    they want to pursue that option, and
                                                   over 2009–2013.                                          throughout the life-cycle of the loan.                lenders, who have to provide the
                                                                                                            These required disclosures include                    disclosure about cancellation and delay
                                                   Costs                                                                                                          loan processing to allow cancellations.
                                                                                                            information about a 10-day cancellation
                                                     Many of the statutory provisions                       period for consolidation loans, the                   An estimated 10,032 FFEL
                                                   implemented though this NPRM will                        availability of forbearance and its                   consolidation borrowers are affected by
                                                   require regulated entities to develop                    effects, discharge options, repayment                 this provision, with an estimated
                                                   new disclosures and other materials, as                  plans, and resources available to                     burden of one hour for a total of 10,032
                                                   well as accompanying dissemination                       borrowers, among others. The                          hours. For lenders, the burden of
                                                   processes. Other proposed regulations                    Department determined that the lenders                providing application disclosures to
                                                   generally would require discrete                         will have increased burden due to the                 approximately 670,753 potential
                                                   changes in specific parameters                           additional disclosures for two groups of              consolidation loan applicants and
                                                   associated with existing guidance—such                   borrowers: Borrowers that are having                  information about cancellations to
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                                                   as changes to the process for loan                       difficulty making payments, and                       approximately 11,147 consolidated
                                                   discharges, IBR, and various deferment                   borrowers that are 60-days delinquent.                borrowers, calculated at a rate of .08
                                                   and forbearance benefits—rather than                     There is no additional burden                         hours per borrower, totals 54,552 hours.
                                                   wholly new requirements. In total, these                 associated with the disclosures that loan             Applying the appropriate rates for
                                                   changes are estimated to increase                        holders are already required to make to               borrowers and lenders, the total cost
                                                   burden on entities participating in the                  borrowers prior to and during                         associated with this provision is $1.2
                                                   FFEL program by 1,313,964 hours. Of                      repayment. An estimated 4,692,126                     million.
                                                   this increased burden, 1,184,115 hours                   borrowers fall within these two                          An estimated 58,793 burden hours are
                                                   are associated with lenders, 110,360                     categories with additional burden, and                associated with § 682.410, the provision


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                          36579

                                                   requiring guaranty agencies to provide                   Net Budget Impacts                                    schools, and graduate students. Risk
                                                   certain notifications to borrowers who                      HEOA provisions implemented by                     categories have separate assumptions
                                                   are in default. Guaranty agency default                  these regulations are estimated to have               based on the historical pattern of
                                                   notices must include information on the                  a net budget impact of $34.7 million in               behavior—for example, the likelihood of
                                                   options that are available to the                        2009 and $192.7 million over FY 2009–                 default or the likelihood to use statutory
                                                   borrower to remove the loan from                         2013. (The estimated impact for 2009                  deferment or discharge benefits—of
                                                   default, including an explanation of the                 does not include $144.2 million in costs              borrowers in each category.
                                                   fees and conditions associated with                      related to loans originated in prior fiscal             The budgetary impact of the proposed
                                                   each option. Approximately 734,918                       years.) Consistent with the requirements              regulations is largely driven by statutory
                                                   borrowers in default are affected by this                of the Credit Reform Act of 1990, budget              changes involving teacher loan
                                                   provision, with a burden of .08 hours                    cost estimates for the student loan                   forgiveness, loan discharges, and IBR.
                                                   per borrower. At the guaranty agency                     programs reflect the estimated net                    The Department estimates no budgetary
                                                   rate of $18.54 per hour, the cost                        present value of all future non-                      impact for other proposed regulations
                                                   associated with this provision totals                    administrative Federal costs associated
                                                   $1.1 million.                                                                                                  included in this NPRM; there is no data
                                                                                                            with a cohort of loans. (A cohort reflects            indicating that the new requirements
                                                     The final provision estimated to result                all loans originated in a given fiscal                related to improper inducements and
                                                   in over 20,000 burden hours is                           year.)                                                additional loan disclosures will have
                                                   § 682.405, which requires guaranty                          These estimates were developed using
                                                   agencies to provide certain information                                                                        any impact on the volume or
                                                                                                            the Office of Management and Budget’s                 composition of Federal student loans.
                                                   to borrowers who have rehabilitated                      (OMB’s) Credit Subsidy Calculator.
                                                   defaulted loans. Guaranty agencies are                   (This calculator will also be used for re-            Assumptions, Limitations, and Data
                                                   required to provide financial and                        estimates of prior-year costs, which will             Sources
                                                   economic educational materials to                        be performed each year beginning in FY
                                                   borrowers who have rehabilitated loans.                  2009). The OMB calculator takes                          Because these proposed regulations
                                                   Given an estimated 143,687                               projected future cash flows from the                  would largely restate statutory
                                                   rehabilitated loans and an increase in                   Department’s student loan cost                        requirements that would be self-
                                                   burden of .17 hours per loan, the burden                 estimation model and produces                         implementing in the absence of
                                                   hours associated with this provision                     discounted subsidy rates reflecting the               regulatory action, impact estimates
                                                   total 24,427. Applying the guaranty                      net present value of all future Federal               provided in the preceding section reflect
                                                   agency rate, the cost associated with this               costs associated with awards made in a                a pre-statutory baseline in which the
                                                   provision totals $0.5 million.                           given fiscal year. Values are calculated              HEOA changes implemented in these
                                                     The other provisions that increase                     using a ‘‘basket of zeros’’ methodology               proposed regulations do not exist. Costs
                                                   burden and associated costs are                          under which each cash flow is                         have been quantified for five years. In
                                                   relatively minor, especially when                        discounted using the interest rate of a               general, these estimates should be
                                                   looked at for an individual entity rather                zero-coupon Treasury bond with the                    considered preliminary; they will be
                                                   than in total. In general, entities wishing              same maturity as that cash flow. To                   reevaluated in light of any comments or
                                                   to continue to participate in the student                ensure comparability across programs,                 information received by the Department
                                                   aid programs have already absorbed                       this methodology is incorporated into                 prior to the publication of the final
                                                   most of the administrative costs related                 the calculator and used government-                   regulations. The final regulations will
                                                   to implementing these provisions.                        wide to develop estimates of the Federal              incorporate this information in a revised
                                                   Marginal costs over this baseline are                    cost of credit programs. Accordingly,                 analysis.
                                                   primarily related to one-time system                     the Department believes it is the                        In developing these estimates, a wide
                                                   changes that, while possibly significant                 appropriate methodology to use in                     range of data sources was used,
                                                   for some entities, are an unavoidable—                   developing estimates for these                        including data from the NSLDS;
                                                   and in most cases minor—cost of                          regulations. That said, however, in                   operational and financial data from
                                                   continued program participation.                         developing the Accounting Statement                   Department systems; and data from a
                                                   Additional workload would normally be                    included below, the Department                        range of surveys conducted by the
                                                   expected to result in estimated costs                    consulted with OMB on how to
                                                   associated with either the hiring of                                                                           National Center for Education Statistics,
                                                                                                            integrate our discounting methodology                 such as the 2004 National
                                                   additional employees or opportunity                      with the discounting methodology
                                                   costs related to the reassignment of                                                                           Postsecondary Student Aid Survey, the
                                                                                                            traditionally used in developing
                                                   existing staff from other activities.                                                                          1994 National Education Longitudinal
                                                                                                            regulatory impact analyses.
                                                                                                                                                                  Study, and the 1996 Beginning
                                                     Given the limited data available, the                     Absent evidence on the impact of
                                                                                                                                                                  Postsecondary Student Survey. Data
                                                   Department is interested in comments                     these regulations on student behavior,
                                                   and supporting information related to                    budget cost estimates were based on                   from other sources, such as the Census
                                                   possible burden stemming from the                        behavior as reflected in various                      Bureau, were also used. Data on
                                                   proposed regulations. In particular, we                  Department data sets and longitudinal                 administrative burden at participating
                                                   ask institutions to provide detailed data                surveys listed under Assumptions,                     schools, lenders, guaranty agencies, and
                                                   on actual staffing and system costs                      Limitations, and Data Sources. Program                third-party servicers are extremely
                                                                                                                                                                  limited; accordingly, as noted above, the
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                                                   associated with implementing these                       cost estimates were generated by
                                                   proposed regulations; data on the                        running projected cash flows related to               Department is particularly interested in
                                                   implementation of proposed regulations                   each provision through the                            comments in this area.
                                                   regarding the adoption and distribution                  Department’s student loan cost                           Elsewhere in this SUPPLEMENTARY
                                                   of required disclosures would be                         estimation model. Student loan cost                   INFORMATION section we identify and
                                                   especially helpful. Estimates included                   estimates are developed across five risk              explain burdens specifically associated
                                                   in this notice will be reevaluated based                 categories: Proprietary schools, two-year             with information collection
                                                   on any information received during the                   schools, freshmen/sophomores at four-                 requirements. See the heading
                                                   public comment period.                                   year schools, juniors/seniors at four-year            Paperwork Reduction Act of 1995.


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                                                   36580                       Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   Accounting Statement                                            have prepared an accounting statement                      student aid payments as a result of these
                                                                                                                   showing the classification of the                          proposed regulations. Expenditures are
                                                     As required by OMB Circular A–4                               expenditures associated with the                           classified as transfers from the Federal
                                                   (available at http://                                           provisions of these proposed                               government to student loan borrowers
                                                   www.Whitehouse.gov/omb/Circulars/                               regulations. This table provides our best                  (for expanded loan discharges, teacher
                                                   a004/a-4.pdf), in Table 2 below, we                             estimate of the changes in Federal                         loan forgiveness payments).

                                                                                TABLE 2—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES
                                                                                                                                          [In millions]

                                                                                            Category                                                                                  Transfers

                                                   Annualized Monetized Transfers ..............................................................    $57.
                                                   From Whom To Whom? ...........................................................................   Federal Government to Student Loan Borrowers.



                                                   Clarity of the Regulations                                      entities’’ if they are for-profit or                       entities’’ under the Regulatory
                                                      Executive Order 12866 and the                                nonprofit institutions with total annual                   Flexibility Act. The impact of the
                                                   Presidential memorandum ‘‘Plain                                 revenue below $5,000,000 or if they are                    proposed regulations on individuals is
                                                   Language in Government Writing’’                                institutions controlled by small                           not subject to the Regulatory Flexibility
                                                   require each agency to write regulations                        governmental jurisdictions, which are                      Act.
                                                   that are easy to understand.                                    comprised of cities, counties, towns,                        The Secretary invites comments from
                                                      The Secretary invites comments on                            townships, villages, school districts, or                  small institutions and lenders as to
                                                   how to make these proposed regulations                          special districts, with a population of                    whether they believe the proposed
                                                   easier to understand, including answers                         less than 50,000.                                          changes would have a significant
                                                   to questions such as the following:                                Based on data from the Integrated                       economic impact on them and, if so,
                                                      • Are the requirements in the                                Postsecondary Education Data System                        requests evidence to support that belief.
                                                   proposed regulations clearly stated?                            (IPEDS), roughly 1,200 institutions
                                                                                                                                                                              Paperwork Reduction Act of 1995
                                                      • Do the proposed regulations contain                        participating in the FFEL program meet
                                                   technical terms or other wording that                           the definition of ‘‘small entities.’’ More                   Proposed 674.61, 682.202, 682.205,
                                                   interferes with their clarity?                                  than half of these institutions are short-                 682.206, 682.208, 682.210, 682.211,
                                                      • Does the format of the proposed                            term, for-profit schools focusing on                       682.216, 682.302, 682.305, 682.401,
                                                   regulations (grouping and order of                              vocational training. Other affected small                  682.402, 682.410, 682.601, 685.202,
                                                   sections, use of headings, paragraphing,                        institutions include small community                       685.204, 685.205, 685.213, and 685.217
                                                   etc.) aid or reduce their clarity?                              colleges and Tribally controlled schools.                  contain information collection
                                                      • Would the proposed regulations be                          Burden on institutions associated with                     requirements. Under the Paperwork
                                                   easier to understand if we divided them                         these proposed regulations is associated                   Reduction Act of 1995 (44 U.S.C.
                                                   into more (but shorter) sections? (A                            with audit requirements for schools                        3507(d)), the Department of Education
                                                   ‘‘section’’ is preceded by the symbol ‘‘§’’                     serving as lenders. Institutions meeting                   has submitted a copy of these sections
                                                   and a numbered heading; for example,                            the definition of small entities are                       to the Office of Management and Budget
                                                   § 682.209 Repayment of a loan.)                                 extremely unlikely to act as lenders in                    (OMB) for its review.
                                                      • Could the description of the                               the FFEL program. Accordingly, new
                                                                                                                                                                              Sections 674.61, 682.402, and 685.213—
                                                   proposed regulations in the                                     requirements imposed under the
                                                                                                                                                                              Total and Permanent Disability Loan
                                                   SUPPLEMENTARY INFORMATION section of                            proposed regulations are not expected to
                                                                                                                                                                              Discharges
                                                   this preamble be more helpful in                                impose significant new costs on these
                                                   making the proposed regulations easier                          institutions.                                                 The proposed regulations would
                                                   to understand? If so, how?                                         The Department believes few if any                      revise the loan discharge process for
                                                      • What else could we do to make the                          lenders participating in the FFEL                          borrowers seeking to have their title IV
                                                   proposed regulations easier to                                  program have revenues of less than $5                      loans discharged based on a total and
                                                   understand?                                                     million. FFEL program activity is highly                   permanent disability. The proposed
                                                      To send any comments that concern                            concentrated among the largest lenders;                    changes to the loan discharge process
                                                   how the Department could make these                             should an extremely small number of                        affect borrowers, loan holders (and their
                                                   proposed regulations easier to                                  lenders that meet the threshold                            servicers), and guaranty agencies.
                                                   understand, see the instructions in the                         participate in the program, they likely                       The burden hour estimate associated
                                                   ADDRESSES section of this preamble.                             are making loans as a service to current                   with the current total and permanent
                                                                                                                   clients rather than soliciting new                         disability loan discharge provisions is
                                                   Regulatory Flexibility Act Certification                        business. This type of lender, with a                      reported under OMB Control Number
                                                     The Secretary certifies that these                            tangential relationship to Federal                         1845–0065 (Discharge Application:
                                                   proposed regulations would not have a                           student loans, is extremely unlikely to                    Total and Permanent Disability). The
                                                   significant economic impact on a                                engage in the type of activities—                          Department does not expect the
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                                                   substantial number of small entities.                           inducements, etc.—governed by these                        proposed changes to increase the
                                                   These proposed regulations would affect                         regulations. Accordingly, the                              burden for this collection. However, the
                                                   institutions of higher education,                               Department has determined that the                         Department will need to revise the
                                                   lenders, and guaranty agencies that                             regulations would not represent a                          Discharge Application: Total and
                                                   participate in Title IV, HEA programs                           significant burden on small lenders.                       Permanent Disability currently
                                                   and individual students and loan                                   Guaranty agencies are State and                         approved under 1845–0065 to reflect the
                                                   borrowers. The U.S. Small Business                              private nonprofit entities that act as                     final regulations that will be published
                                                   Administration Size Standards define                            agents of the Federal government, and                      by November 1, 2009. The Department
                                                   institutions and lenders as ‘‘small                             as such are not considered ‘‘small                         will submit a revised form for clearance


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                          36581

                                                   after the final regulations have been                    borrower’s school about the borrower’s                amount due on the eligible loans when
                                                   published. The revised form will not be                  eligibility for a new loan, student status            the borrower initially entered
                                                   needed until July 1, 2010, the effective                 information from the school or                        repayment on those loans, or the
                                                   date of the final regulations.                           information from NSLDS confirming the                 amount due on those loans when the
                                                                                                            borrower’s half-time enrollment status,               borrower elects the IBR plan. The
                                                   Section 682.206—Consolidation Loans
                                                                                                            the in-school deferment period for a                  proposed regulations would also
                                                      The proposed regulations would                        student PLUS loan first disbursed on or               provide that when a married borrower
                                                   revise § 682.206(f) to incorporate a new                 after July 1, 2008 would include the 6-               and his or her spouse file a joint Federal
                                                   requirement that is needed to fully                      month period that begins on the day                   tax return with the IRS and both the
                                                   implement proposed § 682.205(i)(7),                      after the student PLUS borrower ceases                borrower and the spouse have eligible
                                                   which requires lenders to inform                         to be enrolled on at least a half-time                loans, the joint AGI and the total
                                                   borrowers that, by applying for the                      basis.                                                amount of the borrower’s and spouse’s
                                                   Consolidation loan, the borrower is not                     The proposed regulations would also                eligible loans will be used in
                                                   obligated to take the loan. Specifically,                add a new administrative forbearance                  determining whether each borrower has
                                                   § 682.206(f) would be revised to include                 provision to § 682.211(f) allowing a                  a partial financial hardship.
                                                   a requirement that the lender provide a                  lender to grant a forbearance, upon                      The proposed regulations would
                                                   Consolidation loan borrower a period of                  notice to the borrower, on a borrower’s               revise §§ 682.215(b)(1)and 685.221(b)(2)
                                                   not less than 10 days, from the date the                 PLUS loans first disbursed before July 1,             to provide that if a borrower and a
                                                   borrower is notified by the lender that                  2008 to align repayment of the loans                  borrower’s spouse both have eligible
                                                   it is ready to make the Consolidation                    with a borrower’s PLUS loans first                    loans and filed a joint Federal tax
                                                   loan, to cancel the loan. The proposed                   disbursed on or after July 1, 2008, or                return, each borrower’s percentage of
                                                   regulations would require the lender to                  with a borrower’s Stafford loans that are             the couple’s total eligible loan debt
                                                   send the notice of the option to cancel                  subject to a grace period. The lender                 would be determined, and the
                                                   the loan to the borrower before making                   would be required to notify the                       calculated partial financial hardship
                                                   any payments to pay off a loan with the                  borrower that he or she has the option                payment amount for each borrower
                                                   proceeds of a Consolidation loan.                        to cancel the forbearance and to                      would be adjusted by multiplying the
                                                      We estimate that the proposed                         continue paying on the loan. A                        payment by the applicable borrower’s
                                                   changes will increase burden for                         corresponding administrative                          percentage. As with all other borrowers,
                                                   borrowers by 10,032 hours and for loan                   forbearance provision would be added                  each borrower’s adjusted payment
                                                   holders (and their servicers) by 54,552                  to § 685.205(b) in the Direct Loan                    amount would be further adjusted if the
                                                   hours for a total increase in burden of                  Program regulations.                                  borrower’s loans are held by multiple
                                                   64,584 hours in OMB Control Number                          The proposed changes to §§ 682.210                 holders.
                                                   1845–0020.                                               and 685.204 affect borrowers and loan                    We estimate that the proposed
                                                   Sections 682.210, 682.211, 685.204 and                   holders (and their servicers). The new                regulations will increase burden for loan
                                                   685.205—In-School Deferments and                         deferment provisions for certain PLUS                 holders by 90,286 hours in OMB Control
                                                                                                            borrowers are expected to increase the                Number 1845–0020.
                                                   Administrative Forbearance for PLUS
                                                                                                            number of borrowers who apply for
                                                   Loans                                                                                                          Sections 682.202, 682.302, and
                                                                                                            deferments. Because these statutory
                                                      The proposed regulations would                                                                              685.202—Applicability of the
                                                                                                            provisions could be implemented
                                                   revise §§ 682.210 and 685.204 to reflect                                                                       Servicemembers Civil Relief Act
                                                                                                            without regulations, the FFEL and
                                                   statutory deferment provisions for FFEL                                                                        (SCRA) to FFEL and Direct Loan
                                                                                                            Direct Loan deferment request forms
                                                   and Direct PLUS loan borrowers with                                                                            Program Loans
                                                                                                            were previously revised to include the
                                                   loans first disbursed on or after July 1,                new deferments for PLUS borrowers and                   The proposed regulations would
                                                   2008. Upon the request of the borrower,                  have been approved under OMB Control                  revise §§ 682.202 and 685.202 to
                                                   a parent PLUS borrower must be granted                   Numbers 1845–0005 (FFEL Program                       provide that, effective August 14, 2008,
                                                   a deferment on a PLUS loan first                         Deferment Request Forms) and 1845–                    upon a loan holder’s receipt of a written
                                                   disbursed on or after July 1, 2008,                      0011 (Direct Loan Program Deferment                   request from a borrower and a copy of
                                                   during the period when the student on                    Request Forms). The increased burden                  the borrower’s military orders, the
                                                   whose behalf the loan was obtained is                    associated with the proposed regulatory               maximum interest rate (as defined in 50
                                                   enrolled on at least a half-time basis at                changes is reflected in the burden                    U.S.C. 527, App, section 207(d)) that
                                                   an eligible institution, and during the 6-               estimates reported under those control                may be charged on FFEL or Direct Loan
                                                   month period that begins on the later of                 numbers.                                              program loans made prior to the
                                                   the day after the student ceases to be                      We estimate that the proposed                      borrower entering active duty status is
                                                   enrolled on at least a half-time basis or,               regulations in § 682.211(e) related to                six percent while the borrower is on
                                                   if the parent borrower is also a student,                administrative forbearances will                      active duty status. The proposed
                                                   the day after the parent ceases to be                    increase burden for loan holders by                   regulations would also revise § 682.302
                                                   enrolled on at least a half-time basis.                  14,440 hours in OMB Control Number                    of the FFEL regulations by adding a new
                                                      For graduate and professional student                 1845–0020.                                            paragraph (h) that specifies that, for
                                                   PLUS borrowers, the proposed                                                                                   FFEL loans first disbursed on or after
                                                   regulations would provide that a                         Sections 682.215 and 685.221—Income-                  July 1, 2008, that are subject to the
                                                                                                            Based Repayment (IBR) Plan
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                                                   borrower may be granted a deferment on                                                                         SCRA interest rate cap, the FFEL
                                                   a PLUS loan first disbursed on or after                     The proposed regulations would                     lender’s special allowance payment is
                                                   July 1, 2008 during the 6-month period                   revise the definition of partial financial            calculated as it otherwise would be
                                                   that begins on the day after the student                 hardship in § 682.215(a)(4) and                       under program requirements, except
                                                   ceases to be enrolled on at least a half-                685.221(a)(4) to specify that the annual              that the applicable interest rate used is
                                                   time basis at an eligible institution. If a              amount due on a borrower’s eligible                   six percent.
                                                   lender or the Secretary grants an in-                    loans for purposes of determining                       We estimate that the proposed
                                                   school deferment on a student PLUS                       whether the borrower has a partial                    regulations will increase burden for
                                                   loan based on information from the                       financial hardship is the greater of the              borrowers by 1,694 hours and for loan


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                                                   36582                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   holders by 542 hours in new OMB                          be considered eligible for teacher loan               Department believes that the proposed
                                                   Control Number 1845–XXX1. We                             forgiveness purposes, an educational                  regulations will not significantly
                                                   estimate that the proposed regulations                   service agency would have to meet the                 increase burden for loan holders (and
                                                   will increase burden for borrowers by                    same eligibility requirements that apply              their servicers) in OMB Control Number
                                                   563 hours in new OMB Control Number                      to elementary and secondary schools.                  1845–0020.
                                                   1845–XXX2.                                                  The proposed changes will increase
                                                                                                            the number of borrowers who are                       Section 682.211—Forbearance
                                                   Sections 682.210 and 685.204—In-                         eligible for teacher loan forgiveness, and               Section 682.211(e) of the proposed
                                                   School Deferment                                         will require a revision of the FFEL and               regulations would require the lender, at
                                                      The proposed regulations would                        Direct Loan Program Teacher Loan                      the time the borrower is granted a
                                                   revise § 682.210(a)(3) of the FFEL                       Forgiveness Application that is                       forbearance, to give the borrower
                                                   regulations to provide that if a borrower                currently approved under OMB Control                  information about the impact of
                                                   is responsible for the interest on a loan                Number 1845–0059. The Department                      capitalization of interest on the loan and
                                                   during a deferment period, the lender, at                will submit a change request for 1845–                the total amount to be repaid over the
                                                   or before the time the deferment is                      0059 (including an adjustment to the                  life of the loan. The proposed
                                                   granted, must notify the borrower that                   burden hours associated with this                     regulations would also require the
                                                   he or she has the option to pay the                      collection) after the final regulations               lender to contact the borrower at least
                                                   accruing interest or cancel the                          have been published.                                  once every 180 days during any period
                                                   deferment and continue paying on the                                                                           of forbearance and to give the borrower
                                                   loan. The lender would also be required                  Section 682.205—Disclosure                            or endorser more specific information,
                                                   to provide information, including an                     Requirements for Lenders                              in conjunction with that required under
                                                   example, on the impact on a borrower’s                     The proposed regulations would                      existing regulations, as to the impact of
                                                   loan debt of capitalization of accrued                   reorganize and expand § 682.205 to                    forbearance on the loan. This
                                                   unpaid interest and on the total amount                  reflect new disclosure requirements                   information includes the amount of
                                                   of interest to be paid over the life of the              added by the HEOA. The HEOA added                     interest that will be capitalized and
                                                   loan. A similar notification provision                   additional disclosures by lenders before              when that capitalization will take place
                                                   that applied only to the granting of in-                 disbursement and requires new                         and the option of the borrower or
                                                   school deferments would be removed                       disclosures at differing points in the                endorser to pay the interest that has
                                                   from § 682.210(c)(2) of the FFEL                         borrower’s repayment cycle. The HEOA                  accrued before it is capitalized.
                                                   regulations. A comparable change                         also added a separate set of disclosures                 We estimate that the proposed
                                                   would be made in § 685.204(b)(1)(iii)(B)                 specifically for Consolidation loan                   regulations will increase burden for loan
                                                   of the Direct Loan regulations to provide                borrowers.                                            holders (and their servicers) by 215,734
                                                   that borrowers will be notified of their                   We estimate that the proposed                       hours in OMB Control Number 1845–
                                                   option to cancel a deferment and                         regulations will increase burden for loan             0020.
                                                   continue paying on the loan and will be                  holders (and their servicers) by 797,661              Sections 682.305 and 682.601—Audit
                                                   provided with information on the                         hours in OMB Control Number 1845–                     Requirements for a FFEL School Lender
                                                   impact of capitalization, including an                   0020.                                                 or an Eligible Lender Trustee (ELT)
                                                   example.
                                                      The proposed changes to §§ 682.210                    Section 682.208—Information to                           The proposed regulations would
                                                   and 685.204 affect borrowers and loan                    Borrowers Upon Transfer, Sale or                      revise § 682.305(c) to require that a
                                                   holders (and their servicers). The FFEL                  Assignment of a FFEL Program Loan                     FFEL school lender, or a lender serving
                                                   and Direct Loan deferment request                           The proposed regulations incorporate               as a trustee on behalf of a school or
                                                   forms currently approved under OMB                       three additional information items                    school-affiliated organization for the
                                                   Control Numbers 1845–0005 and 1845–                      specified in the HEA that must be                     purpose of originating loans, submit an
                                                   0011 already include the information                     provided to a borrower if the assignment              annual compliance audit to the
                                                   that a loan holder must provide to a                     or transfer of an ownership interest in               Department regardless of the dollar
                                                   borrower at or before the time a                         a FFEL program loan results in a change               volume of loans originated. The
                                                   deferment is granted, as described                       in the identity of the party to whom                  proposed regulations also require that
                                                   above. Therefore, there is no increase in                subsequent payments must be sent. The                 the audit be conducted by a qualified,
                                                   burden associated with the proposed                      three additional data items are: (1) The              independent organization or person. A
                                                   regulations.                                             effective date of the assignment or                   new proposed § 682.305(c)(2)(vii) would
                                                                                                            transfer of the loan; (2) the date on                 govern the compliance audit of a school
                                                   Sections 682.216 and 685.217—FFEL                        which the current loan servicer will                  or school-affiliated organization lender
                                                   and Direct Loan Program Teacher Loan                     cease accepting payments; and (3) the                 trustee. The proposed regulations
                                                   Forgiveness                                              date on which the new loan servicer                   require that the trustee’s audit include
                                                      The proposed regulations would                        will begin accepting payments. The date               a determination that the school for
                                                   allow a borrower who otherwise meets                     on which the current servicer will stop               whom the lender serves as trustee used
                                                   the eligibility requirements for teacher                 accepting payments is required only if                all the proceeds from special allowance
                                                   loan forgiveness to receive forgiveness                  that is applicable.                                   payments, interest subsidies received
                                                   based on teaching service performed at                      Loan holders are already required,                 from the Department, and any proceeds
srobinson on DSKHWCL6B1PROD with PROPOSALS2




                                                   one or more eligible elementary or                       under current regulations, to provide                 from the sale or other disposition of the
                                                   secondary schools that serve low-                        certain information to a borrower if the              loans originated through the lender for
                                                   income families, or one or more eligible                 assignment of a FFEL Program loan                     need-based grants, and that those funds
                                                   educational service agencies that serve                  results in a change in the identity of the            supplemented, but did not supplant,
                                                   low-income families. A borrower could                    party to whom the borrower must send                  other Federal or non-Federal funds
                                                   also qualify based on teaching service                   payments. The proposed regulations                    otherwise available to the school to
                                                   performed at a combination of eligible                   merely add three additional items to the              make need-based grants to its students.
                                                   elementary or secondary schools and                      notice that a loan holder is already                  The proposed regulations also require
                                                   eligible educational service agencies. To                required to provide. Therefore, the                   that the audit determine that no more


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                                                                                 Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                             36583

                                                   than a reasonable portion of the                              Section 682.405—Financial and                         Section 682.410—Notifications to
                                                   payments and proceeds from the loans                          Economic Literacy for Rehabilitated                   Borrowers in Default
                                                   were used for direct administrative                           Borrowers                                                The proposed regulations would
                                                   expenses in accordance with                                     The proposed regulations would                      expand the information that must be
                                                   § 682.601(b) of the current regulations.                      revise § 682.405, regarding loan                      provided in the notice required under
                                                   These same requirements with regard to                        rehabilitation agreements, by adding a                § 682.410(b)(5)(ii) to include
                                                   annual compliance audit determinations                        provision requiring guaranty agencies to              information on the options that are
                                                   were also added to the FFEL school                            make available financial and economic                 available to the borrower to remove the
                                                   lender audit requirements in                                  education materials, including debt                   loan from default, including an
                                                   § 682.601(a)(7) of the regulations.                           management information, to any                        explanation of the fees and conditions
                                                     We estimate that the proposed                               borrower who has rehabilitated a                      associated with each option. The
                                                   regulations will increase burden for                          defaulted loan.                                       proposed regulations would also require
                                                   institutions by 7,200 hours and for loan                        We estimate that the proposed                       a guaranty agency to provide this same
                                                   holders (and their servicers) by 10,900                       regulations will increase burden for                  information to a defaulted borrower in
                                                   hours for a total increase in burden of                       guaranty agencies by 24,427 hours in                  a second notice that the guaranty agency
                                                   18,100 hours in OMB Control Number                            OMB Control Number 1845–0020.                         must send as part of its required
                                                   1845–0020.                                                                                                          collection efforts on a defaulted loan
                                                                                                                 Section 682.405—Consumer Credit                       under § 682.410(b)(6). The second
                                                   Section 682.401—Consumer Education                            Reporting Following Loan                              notice would have to be sent within a
                                                   Information Provided by Guaranty                              Rehabilitation                                        reasonable time after the end of the
                                                   Agencies                                                        If a borrower successfully                          period during which the borrower may
                                                                                                                 rehabilitates a previously defaulted                  request an administrative review as
                                                      The proposed regulations require
                                                                                                                 loan, the proposed regulations would                  specified in § 682.410(b)(5)(iv)(B) or, if
                                                   guaranty agencies to work with the
                                                                                                                 require the prior holder of the loan, in              the borrower has requested an
                                                   schools that it serves to develop and                         addition to the guaranty agency, to                   administrative review, within a
                                                   make available high-quality educational                       request that a consumer reporting                     reasonable time following the
                                                   materials and programs that provide                           agency to which the default was                       conclusion of the administrative review.
                                                   training for students and their families                      reported remove the default from the                     We estimate that the proposed
                                                   in budgeting and financial management,                        borrower’s credit history. The proposed               regulations will increase burden for
                                                   including debt management and other                           regulations would also provide more                   guaranty agencies by 58,793 hours in
                                                   aspects of financial literacy, such as the                    detailed reporting deadlines for the                  OMB Control Number 1845–0020.
                                                   cost of using high-interest loans to pay                      guaranty agency and prior loan holder                    Consistent with the discussion above,
                                                   for postsecondary education, and how                          to request removal of the report of the               the following chart describes the
                                                   budgeting and financial management                            default from the borrower’s credit                    sections of the proposed regulations
                                                   relate to the title IV student loan                           history, and would reduce the overall                 involving information collections, the
                                                   programs.                                                     period for this activity from 90 to 75                information being collected, and the
                                                      We estimate that the proposed                              days.                                                 collections that the Department will
                                                   regulations will increase burden for                            We estimate that the proposed                       submit to the Office of Management and
                                                   institutions and guaranty agencies by                         regulations will increase burden for                  Budget for approval and public
                                                   8,748 hours in OMB Control Number                             guaranty agencies by 18,392 hours in                  comment under the Paperwork
                                                   1845–0020.                                                    OMB Control Number 1845–0020.                         Reduction Act.

                                                         Regulatory section                                     Information collection                                                  Collection

                                                   674.61, 682.402, and                      The proposed regulations would revise the loan dis-              OMB 1845–0065. The Discharge Application: Total and
                                                     685.213.                                  charge process for borrowers seeking to have their              Permanent Disability that is currently approved under
                                                                                               title IV loans discharged based on total and perma-             1845–0065 will be revised to reflect the final regula-
                                                                                               nent disability. Borrowers who apply for a total and            tions that will be published by November 1, 2009.
                                                                                               permanent disability discharge must complete a dis-             The Department will submit a revised form for clear-
                                                                                               charge application that collects the information need-          ance after the final regulations have been published.
                                                                                               ed to determine their eligibility for discharge.                The revised form will not be needed until July 1,
                                                                                                                                                               2010, the effective date of the final regulations.
                                                   682.206 ...............................   § 682.206(f) would be amended to include a require-              OMB 1845–0020.
                                                                                                ment that the lender provide a Consolidation loan
                                                                                                borrower a period of not less than 10 days, from the
                                                                                                date the borrower is notified by the lender that it is
                                                                                                ready to make the Consolidation loan, to cancel the
                                                                                                loan.
                                                   682.210, 682.211, 685.204                 The proposed regulations implement new deferment                 OMB 1845–0005, 1845–0011 and 1845–0020. The
                                                     and 685.205.                               provisions for FFEL and Direct PLUS loan borrowers             FFEL and Direct Loan deferment request forms were
                                                                                                with loans first disbursed on or after July 1, 2008 that       previously revised to include the new deferments for
srobinson on DSKHWCL6B1PROD with PROPOSALS2




                                                                                                were added to the HEA by the HEOA. A loan holder               PLUS borrowers and have been approved under
                                                                                                must collect the information needed to determine that          OMB Control Numbers 1845–0005 (FFEL) and 1845–
                                                                                                a borrower is eligible for a deferment.                        0011 (Direct Loan).




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                                                   36584                         Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                         Regulatory section                                     Information collection                                                  Collection

                                                   682.202, 682.302, and                     The proposed regulations provide that, effective August          OMB 1845–XXX1 and 1845–XXX2. These will be new
                                                     685.202.                                  14, 2008, upon a loan holder’s receipt of a written re-         collections. A separate 60-day Federal Register No-
                                                                                               quest from a borrower and a copy of the borrower’s              tice will be published to solicit comments.
                                                                                               military orders, the maximum interest rate that may
                                                                                               be charged on FFEL or Direct Loan program loans
                                                                                               made prior to the borrower entering active duty status
                                                                                               is six percent while the borrower is on active duty
                                                                                               status.
                                                   682.210 and 685.204 ..........            The proposed regulations would require a loan holder             OMB 1845–0005 and 1845–0011. These collections
                                                                                               to provide information about interest capitalization to         (FFEL and Direct Loan Program deferment request
                                                                                               a borrower prior to or at the time of granting a                forms) were previously revised to include the required
                                                                                               deferment on an unsubsidized loan.                              information about interest capitalization and have
                                                                                                                                                               been approved by OMB.
                                                   682.215 and 685.221 ..........            The proposed regulations would revise the definition of          OMB 1845–0020.
                                                                                               partial financial hardship for purposes of determining
                                                                                               a borrower’s eligibility for the income-based repay-
                                                                                               ment plan and would also revise the provisions gov-
                                                                                               erning a loan holder’s calculation of a borrower’s in-
                                                                                               come-based payment amount.
                                                   682.216 and 685.217 ..........            The proposed regulations would expand eligibility for            OMB 1845–0059. The proposed changes will require a
                                                                                               teacher loan forgiveness to allow a borrower who oth-           revision of the FFEL and Direct Loan Program
                                                                                               erwise meets the loan forgiveness eligibility require-          Teacher Loan Forgiveness Application currently ap-
                                                                                               ments to receive forgiveness based on teaching serv-            proved under OMB Control Number 1845–0059. The
                                                                                               ice performed at one or more eligible educational               Department will submit a change request for 1845–
                                                                                               service agencies that serve low-income families.                0059 (including an adjustment to the burden hours
                                                                                                                                                               associated with this collection) after the final regula-
                                                                                                                                                               tions have been published.
                                                   682.205 ...............................   The proposed regulations implement new statutory re-             OMB 1845–0020.
                                                                                               quirements for lenders to disclosure certain informa-
                                                                                               tion to borrowers at various points during the lifecycle
                                                                                               of a borrower’s loan. The proposed regulations also
                                                                                               add new lender disclosure requirements for consoli-
                                                                                               dation loan borrowers.
                                                   682.208 ...............................   The proposed regulations incorporate three additional            OMB 1845–0020.
                                                                                               information items that must be provided to a borrower
                                                                                               if the assignment or transfer of an ownership interest
                                                                                               in a FFEL program loan results in a change in the
                                                                                               identity of the party to whom subsequent payments
                                                                                               must be sent.
                                                   682.211 ...............................   The proposed regulations would require the lender, at            OMB 1845–0020.
                                                                                               the time the borrower is granted a forbearance, to
                                                                                               give the borrower information about the impact of
                                                                                               capitalization of interest on the loan and the total to
                                                                                               be repaid over the life of the loan.
                                                   682.305 and 682.601 ..........            The proposed regulations would amend § 682.305(c) to             OMB 1845–0020.
                                                                                               require that a FFEL school lender, or a lender serving
                                                                                               as a trustee on behalf of a school or school-affiliated
                                                                                               organization for the purpose of originating loans, sub-
                                                                                               mit an annual compliance audit to the Department re-
                                                                                               gardless of the dollar volume of loans originated.
                                                   682.401 ...............................   The proposed regulations require guaranty agencies to            OMB 1845–0020.
                                                                                               work with the schools that it serves to develop and
                                                                                               make available high-quality educational materials and
                                                                                               programs to provide training for students and their
                                                                                               families in budgeting and financial management, in-
                                                                                               cluding debt management and other aspects of finan-
                                                                                               cial literacy, such as the cost of using high-interest
                                                                                               loans to pay for postsecondary education, and how
                                                                                               budgeting and financial management relate to the title
                                                                                               IV student loan programs.
                                                   682.405 ...............................   The proposed regulations would require guaranty agen-            OMB 1845–0020.
                                                                                               cies to provide certain information to borrowers who
                                                                                               have rehabilitated defaulted loans.
srobinson on DSKHWCL6B1PROD with PROPOSALS2




                                                   682.405 ...............................   The proposed regulations would require the prior holder          OMB 1845–0020.
                                                                                               of a previously defaulted loan, in addition to the guar-
                                                                                               anty agency, to request that consumer reporting
                                                                                               agencies remove the record of the default from the
                                                                                               borrower’s credit history after the borrower has suc-
                                                                                               cessfully rehabilitated the loan.
                                                   682.410 ...............................   The proposed regulations require guaranty agencies to            OMB 1845–0020.
                                                                                               provide certain additional notifications to borrowers
                                                                                               who are in default.



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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                                         36585

                                                     If you want to comment on the                          (Catalog of Federal Domestic Assistance               loan or TEACH Grant service obligation
                                                   proposed information collection                          Numbers: 84.032 Federal Family Education              was discharged due to a total and
                                                   requirements, please send your                           Loan Program; 84.038 Federal Perkins Loan             permanent disability in accordance with
                                                                                                            Program; 84.268 William D. Ford Federal
                                                   comments to the Office of Information                                                                          § 674.61(b)(3)(i), 34 CFR 682.402(c), 34
                                                                                                            Direct Loan Program)
                                                   and Regulatory Affairs, OMB, Attention:                                                                        CFR 685.213, or 34 CFR 686.42(b) based
                                                   Desk Officer for U.S. Department of                      List of Subjects in 34 CFR 674, 682 and               on a discharge request received on or
                                                   Education. Send these comments by                        685                                                   after July 1, 2010, resumes repayment
                                                   e-mail to OIRA_DOCKET@omb.eop.gov                          Administrative practice and                         on the previously discharged loan in
                                                   or by fax to (202) 395–6974. You may                     procedure, Colleges and universities,                 accordance with § 674.61(b)(5), 34 CFR
                                                   also send a copy of these comments to                    Education, Loan programs—education,                   682.402(c)(5), or 34 CFR 685.213(b)(4),
                                                   the Department contact named in the                      Reporting and recordkeeping                           or acknowledges that he or she is once
                                                   ADDRESSES section of this preamble.                      requirements, Student aid, Vocational                 again subject to the terms of the TEACH
                                                     We consider your comments on these                     education.                                            Grant agreement to serve before
                                                   proposed collections of information in—                                                                        receiving the new loan.
                                                     • Deciding whether the proposed                          Dated: July 13, 2009.
                                                                                                                                                                  *      *    *     *     *
                                                   collections are necessary for the proper                 Arne Duncan,
                                                                                                                                                                     3. Section 674.51 is amended by:
                                                   performance of our functions, including                  Secretary of Education.
                                                                                                                                                                     A. Revising paragraph (d).
                                                   whether the information will have                          For the reasons discussed in the
                                                   practical use;                                                                                                    B. Redesignating paragraphs (e)
                                                                                                            preamble, the Secretary proposes to                   through (s) as follows:
                                                     • Evaluating the accuracy of our                       amend 34 CFR chapter VI as follows:
                                                   estimate of the burden of the proposed
                                                                                                                                                                           Old paragraph                    New paragraph
                                                   collections, including the validity of our               PART 674—FEDERAL PERKINS LOAN
                                                   methodology and assumptions;                             PROGRAM                                               674.51(e) ...........................     674.51(f)
                                                     • Enhancing the quality, usefulness,                                                                         674.51(f) ............................    674.51(h)
                                                   and clarity of the information we                          1. The authority citation for part 674
                                                                                                                                                                  674.51(g) ...........................     674.51(l)
                                                   collect; and                                             continues to read as follows:                         674.51(h) ...........................     674.51(m)
                                                     • Minimizing the burden on those                         Authority: 20 U.S.C. 1087aa–1087hh and              674.51(i) .............................   674.51(n)
                                                   who must respond. This includes                          20 U.S.C. 421–429 unless otherwise noted.             674.51(j) .............................   674.51(p)
                                                   exploring the use of appropriate                                                                               674.51(k) ............................    674.51(q)
                                                                                                               2. Section 674.9 is amended by:                    674.51(l) .............................   674.51(r)
                                                   automated, electronic, mechanical, or                       A. Revising paragraph (g).                         674.51(m) ..........................      674.51(s)
                                                   other technological collection                              B. In the introductory text of                     674.51(n) ...........................     674.51(t)
                                                   techniques or other forms of information                 paragraph (h), removing the words                     674.51(o) ...........................     674.51(u)
                                                   technology; e.g., permitting electronic                  ‘‘based on’’ and adding, in their place,              674.51(p) ...........................     674.51(w)
                                                   submission of responses.                                 the word ‘‘after’’, and adding the words              674.51(q) ...........................     674.51(y)
                                                     OMB is required to make a decision                     ‘‘based on a discharge request received               674.51(r) ............................    674.51(z)
                                                   concerning the collections of                            prior to July 1, 2010’’ immediately after             674.51(s) ............................    674.51(aa)
                                                   information contained in these                           the word ‘‘disabled’’.
                                                   proposed regulations between 30 and 60                      C. In paragraph (h)(1), removing the                  C. Adding new paragraphs (e), (g), (i),
                                                   days after publication of this document                  words ‘‘paragraphs (h)(1) and (h)(2)’’                (j), (k), (o), (v), (x), and (bb).
                                                   in the Federal Register. Therefore, to                   and adding, in their place, the words                    D. In newly redesignated paragraph
                                                   ensure that OMB gives your comments                      ‘‘paragraphs (g)(1) and (g)(2)’’.                     (f), removing the number ‘‘672(2)’’, and
                                                   full consideration, it is important that                    D. In paragraph (h)(2)(ii), removing               adding, in its place, the number
                                                   OMB receives the comments within 30                      the words ‘‘, as described in                         ‘‘632(4)’’.
                                                   days of publication. This does not affect                § 674.61(b)(9)’’ immediately after the                   E. Revising newly redesignated
                                                   the deadline for your comments to us on                  word ‘‘period’’.                                      paragraph (n).
                                                   the proposed regulations.                                   E. In the second sentence of paragraph                F. In newly redesignated paragraph
                                                                                                            (i), removing the words ‘‘described in                (t), by removing the number ‘‘672(2)’’,
                                                   Electronic Access to This Document
                                                                                                            §§ 674.61(b), 682.402(e), or 685.213(a)’’             and adding, in its place, the number
                                                      You may view this document, as well                   immediately after the word ‘‘period’’.                ‘‘632’’.
                                                   as all other Department of Education                        The revision reads as follows:                        G. Revising newly redesignated
                                                   documents published in the Federal
                                                                                                            § 674.9   Student eligibility.                        paragraph (aa).
                                                   Register, in text or Adobe Portable
                                                   Document Format (PDF) on the Internet                    *     *      *    *     *                                H. Revising the authority citation that
                                                   at the following site: http://www.ed.gov/                  (g) In the case of a borrower whose                 appears at the end of the section.
                                                   news/fedregister.                                        prior loan under title IV of the Act was                 The revisions and additions read as
                                                      To use PDF you must have Adobe                        discharged after a final determination of             follows:
                                                   Acrobat Reader, which is available free                  total and permanent disability—                       § 674.51      Special definitions.
                                                   at this site. If you have questions about                  (1) Obtains a certification from a
                                                                                                            physician that the borrower is able to                *     *     *    *     *
                                                   using PDF, call the U.S. Government
                                                   Printing Office (GPO), toll free, at 1–                  engage in substantial gainful activity;                 (d) Child with a disability: A child or
srobinson on DSKHWCL6B1PROD with PROPOSALS2




                                                   888–293–6498; or in the Washington,                        (2) Signs a statement acknowledging                 youth from ages 3 through 21, inclusive,
                                                   DC, area at (202) 512–1530.                              that any new Federal Perkins Loan the                 who requires special education and
                                                                                                            borrower receives cannot be discharged                related services because he or she has
                                                      Note: The official version of this document                                                                 one or more disabilities as defined in
                                                   is the document published in the Federal
                                                                                                            in the future on the basis of any present
                                                                                                            impairment, unless that condition                     section 602(3) of the Individuals with
                                                   Register. Free Internet access to the official
                                                   edition of the Federal Register and the Code             substantially deteriorates; and                       Disabilities Education Act.
                                                   of Federal Regulations is available on GPO                 (3) If the borrower receives a new                    (e) Community defender
                                                   Access at: http://www.gpoaccess.gov/nara/                Federal Perkins Loan within three years               organizations: A defender organization
                                                   index.html.                                              of the date that any previous title IV                established in accordance with section


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                                                   36586                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   3006A(g)(2)(B) of title 18, United States                  (x) Substantial gainful activity: A                 authorized to practice in a State, that the
                                                   Code.                                                    level of work performed for pay or profit             borrower is totally and permanently
                                                   *       *    *     *     *                               that involves doing significant physical              disabled as defined in § 674.51(aa)(1).
                                                      (g) Educational service agency: A                     or mental activities, or a combination of                (iii) The borrower must submit the
                                                   regional public multi-service agency                     both.                                                 application to the institution within 90
                                                   authorized by State law to develop,                      *      *     *     *    *                             days of the date the physician certifies
                                                   manage, and provide services or                            (aa) Total and permanent disability:                the application.
                                                   programs to local educational agencies                   The condition of an individual who—                      (iv) Upon receiving the borrower’s
                                                   as defined in section 9101 of the                          (1) Is unable to engage in any                      complete application, the institution
                                                   Elementary and Secondary Education                       substantial gainful activity by reason of             must suspend collection activity on the
                                                   Act of 1965, as amended.                                 any medically determinable physical or                loan and inform the borrower that—
                                                                                                            mental impairment that—                                  (A) The institution will review the
                                                   *       *    *     *     *                                                                                     application and assign the loan to the
                                                      (i) Faculty member at a Tribal College                  (i) Can be expected to result in death;
                                                                                                              (ii) Has lasted for a continuous period             Secretary for an eligibility
                                                   or University: An educator or tenured
                                                                                                            of not less than 60 months; or                        determination if the institution
                                                   individual who is employed by a Tribal
                                                                                                              (iii) Can be expected to last for a                 determines that the certification
                                                   College or University, as that term is
                                                                                                            continuous period of not less than 60                 supports the conclusion that the
                                                   defined in section 316 of the HEA, to
                                                                                                            months; or                                            borrower is totally and permanently
                                                   teach, research, or perform
                                                                                                              (2) Has been determined by the                      disabled, as defined in § 674.51(aa)(1);
                                                   administrative functions. For purposes                                                                            (B) The institution will resume
                                                   of this definition an educator may be an                 Secretary of Veterans Affairs to be
                                                                                                                                                                  collection on the loan if the institution
                                                   instructor, lecturer, lab faculty, assistant             unemployable due to a service-
                                                                                                                                                                  determines that the certification does
                                                   professor, associate professor, or full                  connected disability.
                                                                                                                                                                  not support the conclusion that the
                                                   professor, dean or academic department                     (bb) Tribal College or University: An
                                                                                                                                                                  borrower is totally and permanently
                                                   head.                                                    institution that—
                                                                                                                                                                  disabled; and
                                                      (j) Federal public defender                             (1) Qualifies for funding under the                    (C) If the Secretary discharges the loan
                                                   organization: A defender organization                    Tribally Controlled Colleges and                      based on a determination that the
                                                   established in accordance with section                   Universities Assistance Act of 1978 (25               borrower is totally and permanently
                                                   3006A(g)(2)(A) of title 18, United States                U.S.C. 1801 et seq.) or the Navajo                    disabled, as defined in § 674.51(aa)(1),
                                                   Code.                                                    Community College Assistance Act of                   the Secretary will reinstate the
                                                      (k) Firefighter: A firefighter is an                  1978 (25 U.S.C. 640a note); or                        borrower’s obligation to repay the loan
                                                   individual who is employed by a                            (2) Is cited in section 532 of the                  if, within three years after the date the
                                                   Federal, State, or local firefighting                    Equity in Education Land Grant Status                 Secretary granted the discharge, the
                                                   agency to extinguish destructive fires; or               Act of 1994 (7 U.S.C. 301 note).                      borrower—
                                                   provide firefighting related services                    *      *     *     *    *                                (1) Has annual earnings from
                                                   such as—                                                   4. Section 674.61 is amended by:                    employment that exceed 100 percent of
                                                      (1) Providing community disaster                        A. Revising paragraph (b).                          the poverty line for a family of two, as
                                                   support and, as a first responder,                         B. Redesignating paragraphs (c) and                 determined in accordance with the
                                                   providing emergency medical services;                    (d) as paragraphs (d) and (e),
                                                      (2) Conducting search and rescue; or                                                                        Community Service Block Grant Act;
                                                      (3) Providing hazardous materials                     respectively.                                            (2) Receives a new TEACH Grant or a
                                                   mitigation (HAZMAT).                                       C. Adding a new paragraph (c).                      new loan under the Perkins, FFEL, or
                                                                                                              The revision and addition read as                   Direct Loan programs, except for an
                                                   *       *    *     *     *                               follows:                                              FFEL or Direct Consolidation Loan that
                                                      (n) Infant or toddler with a disability:
                                                                                                                                                                  includes loans that were not discharged;
                                                   An infant or toddler from birth to age 2,                § 674.61   Discharge for death or disability.
                                                                                                                                                                  or
                                                   inclusive, who needs early intervention                  *      *    *     *     *                                (3) Fails to ensure that the full amount
                                                   services for specified reasons, as defined                 (b) Total and permanent disability as               of any disbursement of a Title IV loan
                                                   in section 632(5)(A) of the Individuals                  defined in § 674.51(aa)(1)—                           or TEACH Grant received prior to the
                                                   with Disabilities Education Act.                           (1) General. A borrower’s Defense,                  discharge date that is made during the
                                                      (o) Librarian with a master’s degree: A               NDSL, or Perkins loan is discharged if                three-year period following the
                                                   librarian with a master’s degree is an                   the borrower becomes totally and                      discharge date is returned to the loan
                                                   information professional trained in                      permanently disabled, as defined in                   holder or to the Secretary, as applicable,
                                                   library or information science who has                   § 674.51(aa)(1), and satisfies the                    within 120 days of the disbursement
                                                   obtained a postgraduate academic                         additional eligibility requirements                   date.
                                                   degree in library science awarded after                  contained in this section.                               (v) If, after reviewing the borrower’s
                                                   the completion of an academic program                      (2) Discharge application process for               application, the institution determines
                                                   of up to six years in duration, excluding                borrowers who have a total and                        that the application is complete and
                                                   a doctorate or professional degree.                      permanent disability as defined in                    supports the conclusion that the
                                                   *       *    *     *     *                               § 674.51(aa)(1). (i) To qualify for                   borrower is totally and permanently
                                                      (v) Speech language pathologist with                  discharge of a Defense, NDSL, or                      disabled as defined in § 674.51(aa)(1),
                                                   a master’s degree: An individual who
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                                                                                                            Perkins loan based on a total and                     the institution must assign the loan to
                                                   evaluates or treats disorders that affect                permanent disability as defined in                    the Secretary.
                                                   a person’s speech, language, cognition,                  § 674.51(aa)(1), a borrower must submit                  (vi) At the time the loan is assigned
                                                   voice, swallowing and the rehabilitative                 a discharge application approved by the               to the Secretary, the institution must
                                                   or corrective treatment of physical or                   Secretary to the institution that holds               notify the borrower that the loan has
                                                   cognitive deficits/disorders resulting in                the loan.                                             been assigned to the Secretary for
                                                   difficulty with communication,                             (ii) The application must contain a                 determination of eligibility for a total
                                                   swallowing, or both.                                     certification by a physician, who is a                and permanent disability discharge and
                                                   *       *    *     *     *                               doctor of medicine or osteopathy legally              that no payments are due on the loan.


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                          36587

                                                     (3) Secretary’s eligibility                            determined in accordance with the                     eligibility for a total and permanent
                                                   determination. (i) If the Secretary                      Community Service Block Grant Act;                    disability discharge, the institution must
                                                   determines that the borrower is totally                     (B) Receives a new TEACH Grant or                  forward those payments to the Secretary
                                                   and permanently disabled as defined in                   a new loan under the Perkins, FFEL or                 for crediting to the borrower’s account.
                                                   § 674.51(aa)(1), the Secretary discharges                Direct Loan programs, except for an                      (ii) At the same time that the
                                                   the borrower’s obligation to make                        FFEL or Direct Consolidation Loan that                institution forwards the payment, it
                                                   further payments on the loan and                         includes loans that were not discharged;              must notify the borrower that there is no
                                                   notifies the borrower that the loan has                  or                                                    obligation to make payments on the loan
                                                   been discharged. The notification to the                    (C) Fails to ensure that the full                  prior to the Secretary’s determination of
                                                   borrower explains the terms and                          amount of any disbursement of a Title                 eligibility for a total and permanent
                                                   conditions under which the borrower’s                    IV loan or TEACH Grant received prior                 disability discharge, unless the
                                                   obligation to repay the loan will be                     to the discharge date that is made                    Secretary directs the borrower
                                                   reinstated, as specified in paragraph                    during the three-year period following                otherwise.
                                                   (b)(5) of this section.                                  the discharge date is returned to the                    (iii) When the Secretary makes a
                                                     (ii) If the Secretary determines that                  loan holder or to the Secretary, as                   determination to discharge the loan, the
                                                   the certification provided by the                        applicable, within 120 days of the                    Secretary returns any payments received
                                                   borrower does not support the                            disbursement date.                                    on the loan after the date the physician
                                                   conclusion that the borrower is totally                     (ii) If a borrower’s obligation to repay           certified the borrower’s loan discharge
                                                   and permanently disabled as defined in                   a loan is reinstated, the Secretary—                  application to the person who made the
                                                   § 674.51(aa)(1), the Secretary notifies the                 (A) Notifies the borrower that the loan            payments on the loan.
                                                   borrower that the application for a                      has been reinstated; and                                 (c) Total and permanent disability
                                                   disability discharge has been denied,                       (B) Does not require the borrower to               discharges for veterans—(1) General. A
                                                   and that the loan is due and payable to                  pay interest on the loan for the period               veteran’s Defense, NDSL, or Perkins
                                                   the Secretary under the terms of the                     from the date the loan was discharged                 loan will be discharged if the veteran is
                                                   promissory note.                                         until the date the loan was reinstated.               totally and permanently disabled, as
                                                                                                               (iii) The Secretary’s notification under           defined in § 674.51(aa)(2).
                                                     (iii) The Secretary reserves the right to                                                                       (2) Discharge application process for
                                                   require the borrower to submit                           paragraph (b)(5)(ii)(A) of this section
                                                                                                            will include—                                         veterans who have a total and
                                                   additional medical evidence if the                                                                             permanent disability as defined in
                                                                                                               (A) The reason or reasons for the
                                                   Secretary determines that the borrower’s                                                                       § 674.51(aa)(2). (i) To qualify for
                                                                                                            reinstatement;
                                                   application does not conclusively prove                     (B) An explanation that the first                  discharge of a Defense, NDSL, or
                                                   that the borrower is totally and                         payment due date on the loan following                Perkins loan based on a total and
                                                   permanently disabled as defined in                       reinstatement will be no earlier than 60              permanent disability as defined in
                                                   § 674.51(aa)(1). As part of the                          days after the date of the notification of            § 674.51(aa)(2), a veteran must submit a
                                                   Secretary’s review of the borrower’s                     reinstatement; and                                    discharge application approved by the
                                                   discharge application, the Secretary may                    (C) Information on how the borrower                Secretary to the institution that holds
                                                   arrange for an additional review of the                  may contact the Secretary if the                      the loan.
                                                   borrower’s condition by an independent                   borrower has questions about the                         (ii) With the application, the veteran
                                                   physician at no expense to the borrower.                 reinstatement or believes that the                    must submit documentation from the
                                                     (4) Treatment of disbursements made                    obligation to repay the loan was                      Department of Veterans Affairs showing
                                                   during the period from the date of the                   reinstated based on incorrect                         that the Department of Veterans Affairs
                                                   physician’s certification until the date of              information.                                          has determined that the veteran is
                                                   discharge. If a borrower received a Title                   (6) Borrower’s responsibilities after a            unemployable due to a service-
                                                   IV loan or TEACH Grant prior to the                      total and permanent disability                        connected disability. The veteran will
                                                   date the physician certified the                         discharge. During the three-year period               not be required to provide any
                                                   borrower’s discharge application and a                   described in paragraph (b)(5)(i) of this              additional documentation related to the
                                                   disbursement of that loan or grant is                    section, the borrower or, if applicable,              veteran’s disability.
                                                   made during the period from the date of                  the borrower’s representative—                           (iii) Upon receiving the veteran’s
                                                   the physician’s certification until the                     (i) Must promptly notify the Secretary             completed application and the required
                                                   date the Secretary grants a discharge                    of any changes in address or phone                    documentation from the Department of
                                                   under this section, the processing of the                number;                                               Veterans Affairs, the institution must
                                                   borrower’s loan discharge request will                      (ii) Must promptly notify the                      suspend collection activity on the loan
                                                   be suspended until the borrower                          Secretary if the borrower’s annual                    and inform the veteran that—
                                                   ensures that the full amount of the                      earnings from employment exceed the                      (A) The institution will review the
                                                   disbursement has been returned to the                    amount specified in paragraph                         application and submit the application
                                                   loan holder or to the Secretary, as                      (b)(5)(i)(A) of this section; and                     and supporting documentation to the
                                                   applicable.                                                 (iii) Must provide the Secretary, upon             Secretary for an eligibility
                                                     (5) Conditions for reinstatement of a                  request, with documentation of the                    determination if the documentation
                                                   loan after a total and permanent                         borrower’s annual earnings from                       from the Department of Veterans Affairs
                                                   disability discharge. (i) The Secretary                  employment.                                           indicates that the veteran is totally and
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                                                   reinstates a borrower’s obligation to                       (7) Payments received after the                    permanently disabled as defined in
                                                   repay a loan that was discharged in                      physician’s certification of total and                § 674.51(aa)(2);
                                                   accordance with paragraph (b)(3)(i) of                   permanent disability. (i) If, after the date             (B) The institution will resume
                                                   this section if, within three years after                the physician certifies the borrower’s                collection on the loan if the
                                                   the date the Secretary granted the                       loan discharge application, the                       documentation from the Department of
                                                   discharge, the borrower—                                 institution receives any payments from                Veterans Affairs does not indicate that
                                                     (A) Has annual earnings from                           or on behalf of the borrower on or                    the veteran is totally and permanently
                                                   employment that exceed 100 percent of                    attributable to a loan that was assigned              disabled as defined in § 674.51(aa)(2);
                                                   the poverty line for a family of two, as                 to the Secretary for determination of                 and


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                                                   36588                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                      (C) If the documentation from the                     PART 682—FEDERAL FAMILY                                  (4) Payments or other benefits to a
                                                   Department of Veterans Affairs does not                  EDUCATION LOAN (FFEL) PROGRAM                         loan solicitor or sales representative of
                                                   indicate that the veteran is totally and                                                                       a lender who visits schools to solicit
                                                                                                              5. The authority citation for part 682              individual prospective borrowers to
                                                   permanently disabled as defined in
                                                                                                            continues to read as follows:                         apply for FFEL loans from the lender;
                                                   § 674.51(aa)(2), but the documentation
                                                   indicates that the veteran may be totally                  Authority: 20 U.S.C. 1071–1087–2 unless                (5) Payment to another lender or any
                                                   and permanently disabled as defined in                   otherwise noted.                                      other party, including a school, a school
                                                   § 674.51(aa)(1), the veteran may reapply                    6. Section 682.200(b) is amended by:               employee, or a school-affiliated
                                                                                                               A. Revising paragraph (5) of the                   organization or its employees, of referral
                                                   for a total and permanent disability
                                                                                                            definition of ‘‘Lender.’’                             fees, finder fees or processing fees,
                                                   discharge in accordance with the
                                                                                                               B. Removing the definition of                      except those processing fees necessary
                                                   procedures described in § 674.61(b).                                                                           to comply with Federal or State law;
                                                                                                            ‘‘National credit bureau.’’
                                                      (iv) If the documentation from the                       C. Adding a definition of ‘‘Nationwide                (6) Compensation to an employee of a
                                                   Department of Veterans Affairs indicates                 consumer reporting agency.’’                          school’s financial aid office or other
                                                   that the veteran is totally and                             D. Adding a definition of ‘‘Substantial            employee who has responsibilities with
                                                   permanently disabled as defined in                       gainful activity.’’                                   respect to student loans or other
                                                   § 674.51(aa)(2), the institution must                       E. Revising the definition of ‘‘Totally            financial aid provided by the school or
                                                   submit a copy of the veteran’s                           and permanently disabled.’’                           compensation to a school-affiliated
                                                   application and the documentation from                      The revisions and additions read as                organization or its employees, to serve
                                                   the Department of Veterans Affairs to                    follows:                                              on a lender’s advisory board,
                                                   the Secretary. At the time the                                                                                 commission or other group established
                                                                                                            § 682.200    Definitions.                             by the lender, except that the lender
                                                   application and documentation are
                                                                                                            *      *     *      *    *                            may reimburse the employee for
                                                   submitted to the Secretary, the                             (b) * * *                                          reasonable expenses incurred in
                                                   institution must notify the veteran that                    Lender. * * *                                      providing the service;
                                                   the veteran’s discharge request has been                    (5)(i) The term eligible lender does not              (7) Payment of conference or training
                                                   referred to the Secretary for                            include any lender that the Secretary                 registration, travel, and lodging costs for
                                                   determination of discharge eligibility                   determines, after notice and opportunity              an employee of a school or school-
                                                   and that no payments are due on the                      for a hearing before a designated                     affiliated organization;
                                                   loan.                                                    Department official, has, directly or                    (8) Payment of entertainment
                                                      (v) If the documentation from the                     through an agent or contractor—                       expenses, including expenses for private
                                                   Department of Veterans Affairs does not                     (A) Except as provided in paragraph                hospitality suites, tickets to shows or
                                                   indicate that the veteran is totally and                 (5)(ii) of this definition, offered, directly         sporting events, meals, alcoholic
                                                   permanently disabled as defined in                       or indirectly, points, premiums,                      beverages, and any lodging, rental,
                                                                                                            payments (including payments for                      transportation, and other gratuities
                                                   § 674.51(aa)(2), the institution must
                                                                                                            referrals, finder fees or processing fees),           related to lender-sponsored activities for
                                                   resume collection on the loan.
                                                                                                            or other inducements to any school, any               employees of a school or a school-
                                                      (4) Secretary’s determination of                      employee of a school, or any other party              affiliated organization;
                                                   eligibility. (i) If the Secretary                        to secure applications for FFEL loans or                 (9) Philanthropic activities, including
                                                   determines, based on a review of the                     to secure FFEL loan volume. This                      providing scholarships, grants,
                                                   documentation from the Department of                     includes but is not limited to—                       restricted gifts, or financial
                                                   Veterans Affairs, that the veteran is                       (1) Payments or offerings of other                 contributions in exchange for FFEL loan
                                                   totally and permanently disabled as                      benefits, including prizes or additional              applications or application referrals, or
                                                   defined in § 674.51(aa)(2), the Secretary                financial aid funds, to a prospective                 a specified volume or dollar amount of
                                                   notifies the institution of this                         borrower or to a school or school                     FFEL loans made, or placement on a
                                                   determination, and the institution                       employee in exchange for applying for                 school’s list of recommended or
                                                   must—                                                    or accepting a FFEL loan from the                     suggested lenders;
                                                                                                            lender;                                                  (10) Performance of, or payment to
                                                      (A) Discharge the veteran’s obligation
                                                                                                               (2) Payments or other benefits,                    another third party to perform, any
                                                   to make further payments on the loan;                    including payments of stock or other                  school function required under title IV,
                                                   and                                                      securities, tuition payments or                       except that the lender may perform exit
                                                      (B) Return to the person who made                     reimbursements, to a school, a school                 counseling as provided in § 682.604(g),
                                                   the payments on the loan any payments                    employee, any school-affiliated                       and may provide services to
                                                   received on or after the effective date of               organization, or to any other individual              participating foreign schools at the
                                                   the determination by the Department of                   in exchange for FFEL loan applications,               direction of the Secretary, as a third-
                                                   Veterans Affairs that the veteran is                     application referrals, or a specified                 party servicer; and
                                                   unemployable due to a service-                           volume or dollar amount of loans made,                   (11) Any type of consulting
                                                   connected disability.                                    or placement on a school’s list of                    arrangement or other contract with an
                                                      (ii) If the Secretary determines, based               recommended or suggested lenders;                     employee of a financial aid office at a
                                                                                                               (3) Payments or other benefits                     school, or an employee of a school who
                                                   on a review of the documentation from
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                                                                                                            provided to a student at a school who                 otherwise has responsibilities with
                                                   the Department of Veterans Affairs, that
                                                                                                            acts as the lender’s representative to                respect to student loans or other
                                                   the veteran is not totally and                           secure FFEL loan applications from                    financial aid provided by the school
                                                   permanently disabled as defined in                       individual prospective borrowers,                     under which the employee would
                                                   § 674.51(aa)(2), the Secretary notifies the              unless the student is also employed by                provide services to the lender.
                                                   institution of this determination, and                   the lender for other purposes and                        (B) Conducted unsolicited mailings,
                                                   the institution must resume collection                   discloses that employment to school                   by postal or electronic means, of student
                                                   on the loan.                                             administrators and to prospective                     loan application forms to students
                                                   *       *     *      *     *                             borrowers;                                            enrolled in secondary schools or


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36589

                                                   postsecondary institutions or to family                  generalized marketing or advertising, or              ‘‘based on a discharge request received
                                                   members of such students, except to a                    to create good will; and                              prior to July 1, 2010’’ immediately after
                                                   student or borrower who previously has                      (K) Other services as identified and               the word ‘‘disabled’’.
                                                   received a FFEL loan from the lender;                    approved by the Secretary through a                      E. In paragraph (a)(7)(ii)(B), removing
                                                      (C) Offered, directly or indirectly, a                public announcement, such as a notice                 the words ‘‘, as described in paragraph
                                                   FFEL loan to a prospective borrower to                   in the Federal Register.                              682.402(c)(16)’’.
                                                   induce the purchase of a policy of                          (iii) For the purposes of this                        F. In paragraph (e)(4), adding the
                                                   insurance or other product or service by                 paragraph (5)—                                        words ‘‘is in default or’’ immediately
                                                   the borrower or other person; or                            (A) The term ‘‘school-affiliated                   after the first appearance of the words
                                                      (D) Engaged in fraudulent or                          organization’’ is defined in § 682.200.               ‘‘consolidation loan’’ and adding the
                                                   misleading advertising with respect to                      (B) The term ‘‘applications’’ includes             words ‘‘or an income-based repayment
                                                   its FFEL loan activities.                                the Free Application for Federal Student              plan’’ immediately after the words
                                                      (ii) Notwithstanding paragraph (5)(i)                 Aid (FAFSA), FFEL loan master                         ‘‘income contingent repayment plan’’.
                                                   of this definition, a lender, in carrying                promissory notes, and FFEL                               G. In paragraph (e)(5), adding the
                                                   out its role in the FFEL program and in                  Consolidation loan application and                    words ‘‘, or the no accrual of interest
                                                   attempting to provide better service,                    promissory notes.                                     benefit for active duty service’’
                                                   may provide—                                                (C) The term ‘‘other benefits’’                    immediately after the words ‘‘Public
                                                      (A) Technical assistance to a school                  includes, but is not limited to,                      Service Loan Forgiveness Program’’.
                                                   that is comparable to the kinds of                       preferential rates for or access to the                  The revision reads as follows:
                                                   technical assistance provided to a                       lender’s other financial products,
                                                   school by the Secretary under the Direct                 information technology equipment, or                  § 682.201    Eligible borrowers.
                                                   Loan program, as identified by the                       non-loan processing or non-financial                     (a) * * *
                                                   Secretary in a public announcement,                      aid-related computer software at below                   (6) * * *
                                                   such as a notice in the Federal Register;                market rental or purchase cost, and                      (iii) If a borrower receives a new FFEL
                                                      (B) Support of and participation in a                 printing and distribution of college                  loan within three years of the date that
                                                   school’s or a guaranty agency’s student                  catalogs and other materials at reduced               any previous title IV loan or TEACH
                                                   aid and financial literacy-related                       or no cost.                                           Grant service obligation was discharged
                                                   outreach activities, excluding in-person                                                                       due to a total and permanent disability
                                                                                                            *       *     *    *     *
                                                   entrance counseling, as long as the                         Nationwide consumer reporting                      in accordance with § 682.402(c)(3)(ii),
                                                   name of the entity that developed and                    agency. A consumer reporting agency as                34 CFR 674.61(b)(3)(i), 34 CFR 685.213,
                                                   paid for any materials is provided to the                defined in 15 U.S.C. 1681a.                           or 34 CFR 686.42(b) based on a
                                                   participants and the lender does not                                                                           discharge request received on or after
                                                                                                            *       *     *    *     *                            July 1, 2010, resume repayment on the
                                                   promote its student loan or other                           Substantial gainful activity. A level of
                                                   products;                                                                                                      previously discharged loan in
                                                                                                            work performed for pay or profit that                 accordance with § 682.402(c)(5), 34 CFR
                                                      (C) Meals, refreshments, and
                                                                                                            involves doing significant physical or                674.61(b)(5), or 34 CFR 685.213(b)(4), or
                                                   receptions that are reasonable in cost
                                                                                                            mental activities, or a combination of                acknowledge that he or she is once
                                                   and scheduled in conjunction with
                                                                                                            both.                                                 again subject to the terms of the TEACH
                                                   training, meeting, or conference events
                                                   if those meals, refreshments, or                         *       *     *    *     *                            Grant agreement to serve before
                                                   receptions are open to all training,                        Totally and permanently disabled.                  receiving the new loan.
                                                   meeting, or conference attendees;                        The condition of an individual who—                   *       *      *    *    *
                                                      (D) Toll-free telephone numbers for                      (1) Is unable to engage in any                        8. Section 682.202 is amended by:
                                                   use by schools or others to obtain                       substantial gainful activity by reason of                A. In the introductory text of
                                                   information about FFEL loans and free                    any medically determinable physical or                paragraph (a), adding the words ‘‘and
                                                   data transmission service for use by                     mental impairment that—                               (a)(8)’’ after the reference ‘‘(a)(4)’’.
                                                   schools to electronically submit                            (i) Can be expected to result in death;               B. Adding a new paragraph (a)(8).
                                                   applicant loan processing information                       (ii) Has lasted for a continuous period               C. In paragraph (b)(2)(i), adding the
                                                   or student status confirmation data;                     of not less than 60 months; or                        words ‘‘or, for a PLUS loan, for the
                                                      (E) A reduced origination fee in                         (iii) Can be expected to last for a                period from the date the first
                                                   accordance with § 682.202(c);                            continuous period of not less than 60                 disbursement was made to the date the
                                                      (F) A reduced interest rate as                        months; or                                            repayment period begins’’ immediately
                                                   provided under the Act;                                     (2) Has been determined by the                     before the semicolon.
                                                      (G) Payment of Federal default fees in                Secretary of Veterans Affairs to be                      The addition reads as follows:
                                                   accordance with the Act;                                 unemployable due to a service-
                                                      (H) Purchase of a loan made by                        connected disability.                                 § 682.202 Permissible charges by lenders
                                                   another lender at a premium;                             *       *     *    *     *                            to borrowers.
                                                      (I) Other benefits to a borrower under                   7. Section 682.201 is amended by:                  *     *     *     *     *
                                                   a repayment incentive program that                          A. In paragraph (a)(4)(i), removing the              (a) * * *
                                                   requires, at a minimum, one or more                      words ‘‘legal costs, and late charges’’                 (8) Applicability of the
                                                   scheduled payments to receive or retain                  and adding, in their place, the words                 Servicemembers Civil Relief Act (50
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                                                   the benefit or under a loan forgiveness                  ‘‘court costs, attorney fees, and late                U.S.C. 527, App. sec. 207).
                                                   program for public service or other                      charges’’.                                            Notwithstanding paragraphs (a)(1)
                                                   targeted purposes approved by the                           B. In paragraph (a)(5), removing the               through (a)(4) of this section, effective
                                                   Secretary, provided these benefits are                   words ‘‘under § 682.402(c)’’.                         August 14, 2008, upon the loan holder’s
                                                   not marketed to secure loan applications                    C. Revising paragraph (a)(6)(iii).                 receipt of the borrower’s written request
                                                   or loan guarantees;                                         D. In the introductory text of                     and a copy of the borrower’s military
                                                      (J) Items of nominal value to schools,                paragraph (a)(7), removing the words                  orders, the maximum interest rate, as
                                                   school-affiliated organizations, and                     ‘‘based on’’ and adding, in their place,              defined in 50 U.S.C. 527, App. section
                                                   borrowers that are offered as a form of                  the word ‘‘after’’, and adding the words              207(d), on FFEL Program loans made


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                                                   36590                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   prior to the borrower entering active                       M. In paragraph (c)(2)(vi), adding the             would reduce the amount or length of
                                                   duty status is 6 percent while the                       words ‘‘based on the repayment                        repayment; and at the request of the
                                                   borrower is on active duty military                      schedule selected by the borrower’’                   borrower, an explanation of the effect of
                                                   service.                                                 immediately after the word ‘‘payments’’.              a reduced interest rate on the borrower’s
                                                   *       *    *      *     *                                 N. In paragraph (c)(2)(viii), adding the           total payoff amount and time for
                                                      9. Section 682.205 is amended by:                     words ‘‘if interest has been paid, the                repayment;
                                                      A. In paragraph (a)(2)(vi), removing                  amount of interest paid’’ immediately                    (xi) If the lender provides a repayment
                                                   the words ‘‘insurance premium’’ and                      after the words ‘‘; and’’.                            benefit, any limitations on that benefit,
                                                   adding, in their place, the words                           O. In paragraph (c)(2)(ix), removing               any circumstances in which the
                                                   ‘‘Federal default fee’’, and adding,                     the punctuation ‘‘.’’ at the end of the               borrower could lose that benefit, and
                                                   immediately before the semicolon, the                    sentence and adding, in its place, the                whether and how the borrower may
                                                   words ‘‘or paid by the lender’’.                         punctuation ‘‘;’’.                                    regain eligibility for the repayment
                                                      B. In paragraph (a)(2)(ix), removing                     P. Adding new paragraphs (c)(2)(x),                benefit;
                                                   the words ‘‘a national credit bureau’’                   (c)(2)(xi), (c)(2)(xii), (c)(2)(xiii) and                (xii) A description of all the
                                                   and adding, in their place, the words                    (c)(2)(xiv).                                          repayment plans available to the
                                                   ‘‘each nationwide consumer reporting                        Q. Adding new paragraphs (c)(3),                   borrower and a statement that the
                                                   agency’’.                                                (c)(4) and (c)(5).                                    borrower may change plans during the
                                                      C. In paragraph (a)(2)(x), adding,                       R. In paragraph (d), adding the words              repayment period at least annually;
                                                   immediately before the semicolon, the                    ‘‘Federal Unsubsidized Stafford loan or                  (xiii) A description of the options
                                                   words ‘‘, and a description of the types                 a’’ immediately after the words ‘‘In the              available to the borrower to avoid or be
                                                   of repayment plans available’’.                          case of a’’ at the beginning of the first             removed from default, as well as any
                                                      D. In paragraph (a)(2)(xvi), removing                 sentence and removing the words ‘‘the                 fees associated with those options; and
                                                   the words ‘‘a national credit bureau’’                   student’’ in the first sentence and                      (xiv) Any additional resources,
                                                   and adding, in their place, the words                    adding, in their place, the words ‘‘the               including nonprofit organizations,
                                                   ‘‘each nationwide consumer reporting                     borrower or student on whose behalf the               advocates and counselors, including the
                                                   agency’’.                                                loan is made’’.                                       Department of Education’s Student Loan
                                                      E. In paragraph (a)(2)(xviii), removing                  S. Adding new paragraph (i).                       Ombudsman, the lender is aware of
                                                   the words ‘‘in the making or’’ and                          T. Adding new paragraph (j).                       where the borrower may obtain
                                                   adding, in their place, the words                           The additions read as follows:                     additional advice and assistance on loan
                                                   ‘‘during repayment or in the’’; adding                                                                         repayment.
                                                                                                            § 682.205    Disclosure requirements for
                                                   the words ‘‘including any fees the                                                                                (3) Required disclosures during
                                                                                                            lenders.
                                                   borrower may be charged’’ immediately                                                                          repayment. In addition to the
                                                   after the words ‘‘the loan,’’; and                         (a) * * *                                           disclosures required in paragraph (c)(1)
                                                   removing the words ‘‘; and’’ at the end                    (1) * * *                                           of this section, the lender must provide
                                                                                                              (2) * * *                                           the borrower of an FFEL loan with a bill
                                                   of the paragraph and adding, in their
                                                                                                              (xxi) For unsubsidized Stafford or
                                                   place, the punctuation ‘‘;’’.                                                                                  or statement that corresponds to each
                                                      F. In paragraph (a)(2)(xx), removing                  student PLUS borrowers, an explanation
                                                                                                                                                                  payment installment time period in
                                                   the punctuation ‘‘.’’ at the end of the                  that the borrower may pay the interest
                                                                                                                                                                  which a payment is due that includes in
                                                   paragraph and adding, in its place, the                  while in school and, if the interest is not
                                                                                                                                                                  simple and understandable terms—
                                                   punctuation ‘‘;’’.                                       paid by the borrower while in school,                    (i) The original principal amount of
                                                      G. Adding new paragraphs (a)(2)(xxi),                 when and how often the interest will be               the borrower’s loan;
                                                   (a)(2)(xxii), (a)(2)(xxiii), and (a)(2)(xxiv).           capitalized;                                             (ii) The borrower’s current balance, as
                                                      H. In paragraph (b), in the second                      (xxii) For parent PLUS borrowers, an                of the time of the bill or statement;
                                                   sentence, adding the words ‘‘, and that                  explanation that the parent may defer                    (iii) The interest rate on the loan;
                                                   the default will be reported to each                     payment on the loan while the student                    (iv) The total amount of interest for
                                                   nationwide consumer reporting agency’’                   on whose behalf the parent borrowed is                the preceding installment paid by the
                                                   immediately after the word ‘‘loan’’.                     enrolled at least half-time and, if the               borrower;
                                                      I. In paragraph (c), in the heading,                  parent does not pay interest while the                   (v) The aggregate amount paid by the
                                                   removing the words ‘‘Disclosure of                       student is in school, when and how                    borrower on the loan, and separately
                                                   repayment’’ and adding, in their place,                  often interest will be capitalized, and               identifying the amount the borrower has
                                                   the word ‘‘Repayment’’.                                  that the parent may be eligible for a                 paid in interest on the loan, the amount
                                                      J. In paragraph (c)(1), adding the                    deferment on the loan if the parent is                of fees the borrower has paid on the
                                                   heading ‘‘Disclosures at or prior to                     enrolled at least half-time;                          loan, and the amount paid against the
                                                   repayment.’’ immediately after the                         (xxiii) A statement summarizing the                 balance in principal;
                                                   paragraph designation ‘‘(1)’’; removing                  circumstances in which a borrower may                    (vi) A description of each fee the
                                                   the words ‘‘Federal SLS’’ and adding, in                 obtain forbearance on the loan; and                   borrower has been charged for the most
                                                   their place, the words ‘‘Federal PLUS’’;                   (xxiv) A description of the options                 recent preceding installment time
                                                   and removing the words ‘‘240 days’’ and                  available for forgiveness of the loan and             period;
                                                   adding, in their place, the words ‘‘150                  the requirements to obtain that                          (vii) The date by which a payment
                                                   days’’.                                                  forgiveness.                                          must be made to avoid additional fees
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                                                      K. In paragraph (c)(2)(ii), adding the                *     *     *     *     *                             and the amount of that payment and the
                                                   words ‘‘, or a deferment under                             (c) * * *                                           fees;
                                                   § 682.210(v), if applicable, is to end’’                   (2) * * *                                              (viii) The lender’s or servicer’s
                                                   immediately after the word ‘‘begin’’ at                    (x) Information on any special loan                 address and toll-free telephone number
                                                   the end of the sentence.                                 repayment benefits offered on the loan,               for repayment options, payments and
                                                      L. In paragraph (c)(2)(iii), adding the               including benefits that are contingent on             billing error purposes; and
                                                   words ‘‘a deferment under § 682.210(v),                  repayment behavior, and any other                        (ix) A reminder that the borrower may
                                                   if applicable, is to end,’’ immediately                  special loan repayment benefits for                   change repayment plans, a list of all of
                                                   after the word ‘‘begin’’.                                which the borrower may be eligible that               the repayment plans that are available to


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                              36591

                                                   the borrower, a link to the Department                   cancellation, deferment, or a reduced                    (ii) Consistent with the requirements
                                                   of Education’s Web site for repayment                    interest rate on FFEL or Direct Loans                 of § 682.205(i)(7), notify the borrower,
                                                   plan information, and directions on how                  repaid through consolidation;                         upon receipt of all information
                                                   the borrower may request a change in                        (2) If a borrower is repaying a Federal            necessary to make the Consolidation
                                                   repayment plans from the lender.                         Perkins Loan with the Consolidation                   loan, of the borrower’s option to cancel
                                                      (4) Required disclosures for borrowers                loan, that the borrower will lose—                    the Consolidation loan, and the
                                                   having difficulty making payments. The                      (i) The interest-free periods available            deadline by which the borrower must
                                                   lender shall provide a borrower who has                  on the Perkins Loan while the borrower                notify the lender that he or she wishes
                                                   notified the lender that he or she is                    is enrolled in-school at least half-time,             to cancel the loan. The lender must
                                                   having difficulty making payments                        in the grace period, or in a deferment                allow the borrower no less than 10 days
                                                   with—                                                    period; and                                           from the date of the notice to cancel the
                                                      (i) A description of the repayment                       (ii) The cancellation benefits on the              loan.
                                                   plans available to the borrower, and                     Perkins Loan. The lender must provide                    (2) The Consolidation loan lender
                                                   how the borrower may request a change                    to the borrower a list of the Perkins                 may rely in good faith on the
                                                   in repayment plan;                                       Loan cancellation benefits that would                 certification provided under paragraph
                                                      (ii) A description of the requirements                not be available on the Consolidation                 (f)(1)(i) of this section by the holder of
                                                   for obtaining forbearance on the loan                    loan.                                                 a loan to be consolidated.
                                                                                                               (3) The repayment plans available to                  11. Section 682.208 is amended by:
                                                   and any costs associated with
                                                                                                            the borrower;                                            A. In paragraph (e)(1) introductory
                                                   forbearance; and
                                                                                                               (4) The borrower’s options to prepay               text, adding the words ‘‘or transfer of
                                                      (iii) A description of the options                    the Consolidation loan, to pay the loan
                                                   available to the borrower to avoid                                                                             ownership interest’’ immediately after
                                                                                                            on a shorter repayment schedule, and to               the word ‘‘assignment’’.
                                                   default and any fees or costs associated                 change repayment plans;
                                                   with those options.                                                                                               B. In paragraph (e)(1)(iii), removing
                                                                                                               (5) That the borrower benefit                      the word ‘‘and’’ after the semicolon.
                                                      (5) Required disclosures for borrowers                programs for a Consolidation loan vary
                                                   who are 60-days delinquent in making                                                                              C. In paragraph (e)(1)(iv), removing
                                                                                                            among lenders;                                        the punctuation ‘‘.’’ at the end of the
                                                   payments on a loan. (i) The lender shall                    (6) The consequences of default on
                                                   provide to a borrower who is 60 days                                                                           paragraph and adding, in its place, the
                                                                                                            the Consolidation loan; and                           punctuation ‘‘;’’.
                                                   delinquent in making required                               (7) That applying for the
                                                   payments a notice of—                                                                                             D. Adding new paragraphs (e)(1)(v),
                                                                                                            Consolidation loan does not obligate the              (vi), and (vii).
                                                      (A) The date on which the loan will                   borrower to agree to take the                            The additions read as follows:
                                                   default if no payment is made;                           Consolidation loan, and the process and
                                                      (B) The minimum payment the                           deadline by which the borrower may                    § 682.208    Due diligence in servicing a
                                                   borrower must make, as of the date of                    cancel the Consolidation loan.                        loan.
                                                   the notice, to avoid default, including                     (j) Disclosure procedures when a                   *     *    *      *    *
                                                   the payment amount needed to bring the                   borrower’s address is not available. If a               (e) * * *
                                                   loan current or payment in full;                         lender receives information indicating it               (1) * * *
                                                      (C) A description of the options                      does not know the borrower’s current                    (v) The effective date of the
                                                   available to the borrower to avoid                       address, the lender is excused from                   assignment or transfer of the loan;
                                                   default, including deferment and                         providing disclosure information under                  (vi) The date, if applicable, on which
                                                   forbearance and any fees and costs                       this section unless it receives                       the current loan servicer will stop
                                                   associated with those options;                           communication indicating a valid                      accepting payments; and
                                                      (D) Any options for discharging the                   borrower address before the 241st day of                (vii) The date on which the new loan
                                                   loan that may be available to the                        delinquency, at which point the lender                servicer will begin accepting payments.
                                                   borrower; and                                            must resume providing the installment                 *     *    *      *    *
                                                      (E) Any additional resources,                         bill or statement, and any other
                                                   including nonprofit organizations,                       disclosure information required under                 § 682.209    [Amended]
                                                   advocates and counselors, including the                  this section not previously provided.                    12. Section 682.209 is amended in
                                                   Department of Education’s Student Loan                      10. Section 682.206 is amended by                  paragraph (a)(2)(v) by removing the
                                                   Ombudsman, the lender is aware of                        revising paragraph (f) to read as follows:            reference ‘‘(a)(2)(ii)’’ and adding, in its
                                                   where the borrower may obtain                                                                                  place, the reference ‘‘(a)(2)(i)’’.
                                                                                                            § 682.206    Due diligence in making a loan.             13. Section 682.210 is amended by:
                                                   additional advice and assistance on loan
                                                   repayment.                                               *      *     *    *      *                               A. In paragraph (a)(1)(i), adding the
                                                                                                               (f) Additional requirements for                    words ‘‘and paragraphs (s) through (v)’’
                                                      (ii) The notice must be sent within
                                                                                                            Consolidation loans. (1) Prior to making              after the words ‘‘paragraph (b)’’.
                                                   five days of the date the borrower
                                                                                                            any payments to pay off a loan with the                  B. Revising paragraph (a)(3).
                                                   becomes 60 days delinquent, unless the
                                                                                                            proceeds of a Consolidation loan, the                    C. In paragraph (c)(1)(ii), removing the
                                                   lender has sent such a notice within the
                                                                                                            lender shall—                                         word ‘‘or’’ at the end of the paragraph.
                                                   previous 120 days.                                          (i) Obtain from the holder of each loan               D. In paragraph (c)(1)(iii), removing
                                                   *       *    *     *    *                                to be consolidated a certification with               the punctuation ‘‘.’’ and adding, in its
                                                      (i) Separate disclosure for                           respect to the loan held by the holder                place, ‘‘; or’’ at the end of the paragraph.
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                                                   Consolidation loans. At the time the                     that—                                                    E. Adding a new paragraph (c)(1)(iv).
                                                   lender provides a Consolidation loan                        (A) The loan is a legal, valid, and                   F. Revising paragraph (c)(2).
                                                   application to a prospective borrower, it                binding obligation of the borrower;                      G. In paragraph (c)(3), removing the
                                                   must disclose to the prospective                            (B) The loan was made and serviced                 word ‘‘SSCR’’ and adding, in its place,
                                                   borrower, in simple and understandable                   in compliance with applicable laws and                the words ‘‘Student Status Confirmation
                                                   terms—                                                   regulations; and                                      Report’’.
                                                      (1) Whether consolidation will result                    (C) In the case of a FFEL loan, that the              H. Adding a new paragraph (v).
                                                   in a loss of loan benefits, including, but               guarantee on the loan is in full force and               The revisions and additions read as
                                                   not limited to, loan forgiveness,                        effect; and                                           follows:


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                                                   36592                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   § 682.210   Deferment.                                   be granted a deferment on a PLUS loan                    (vi) The borrower’s or endorser’s
                                                      (a) * * *                                             first disbursed on or after July 1, 2008—             option to discontinue the forbearance at
                                                      (3)(i) Interest accrues and is paid by—                  (i) During the period when the                     any time.
                                                      (A) The Secretary during the                          student on whose behalf the loan was                     (f) * * *
                                                   deferment period for a subsidized                        obtained is enrolled at an eligible                      (15) For PLUS loans first disbursed
                                                   Stafford loan and for all or a portion of                institution on at least a half-time basis;            before July 1, 2008, to align repayment
                                                   a Consolidation loan that qualifies for                  and                                                   with a borrower’s PLUS loans that were
                                                   interest benefits under § 682.301; or                       (ii) During the 6-month period that                first disbursed on or after July 1, 2008,
                                                      (B) The borrower during the                           begins on the later of the day after the              or with Stafford Loans that are subject
                                                   deferment period and, as applicable, the                 student on whose behalf the loan was                  to a grace period under § 682.209(a)(3).
                                                   post-deferment grace period, on all                      obtained ceases to be enrolled on at                  The notice specified in paragraph (f)
                                                   other loans.                                             least a half-time basis or, if the parent             introductory text must inform the
                                                      (ii) A borrower who is responsible for                borrower is also a student, the day after             borrower that the borrower has the
                                                   payment of interest during a deferment                   the parent borrower ceases to be                      option to cancel the forbearance and
                                                   period must be notified by the lender,                   enrolled on at least a half-time basis.               continue paying on the loan.
                                                   at or before the time the deferment is                      14. Section 682.211 is amended by:                 *      *      *     *     *
                                                   granted, that the borrower has the                          A. Revising paragraph (e).                            15. Section 682.215 is amended by:
                                                   option to pay the accruing interest or                      B. In paragraph (f)(11), removing the                 A. Revising paragraph (a)(4).
                                                   cancel the deferment and continue                        word ‘‘or’’ at the end of the paragraph.                 B. In paragraph (b)(1), removing the
                                                   paying on the loan. The lender must                         C. In paragraph (f)(12), removing the              words ‘‘Except as provided under
                                                   also provide information, including an                   punctuation ‘‘.’’ at the end of the                   paragraph (b)(1)(i), (b)(1)(ii), and
                                                   example, on the impact of capitalization                 paragraph and adding, in its place, the               (b)(1)(iii) of this section, the’’ in the
                                                   of accrued, unpaid interest on loan                      punctuation ‘‘;’’.                                    second sentence and adding, in their
                                                   principal, and on the total amount of                       D. In paragraph (f)(13), removing the              place, the word ‘‘The’’.
                                                   interest to be paid over the life of the                 punctuation ‘‘.’’ at the end of the                      C. In paragraph (b)(1)(i), removing the
                                                   loan.                                                    paragraph and adding, in its place, the               word ‘‘The’’ at the beginning of the
                                                   *       *      *     *     *                             punctuation ‘‘;’’.                                    paragraph and adding, in its place, the
                                                      (c) * * *                                                E. In paragraph (f)(14), removing the              words ‘‘Except for borrowers provided
                                                      (1) * * *                                             punctuation ‘‘.’’ at the end of the                   for in paragraph (b)(1)(ii) of this section,
                                                      (iv) The lender confirms a borrower’s                 paragraph and adding, in its place, ‘‘;               the’’.
                                                   half-time enrollment status through the                  or’’.                                                    D. Redesignating paragraphs (b)(1)(ii)
                                                   use of the National Student Loan Data                       F. Adding new paragraph (f)(15).                   and (b)(1)(iii) as paragraphs (b)(1)(iii)
                                                   System if requested to do so by the                         The revisions and additions read as                and (b)(1)(iv), respectively.
                                                   school the borrower is attending.                        follows:                                                 E. Adding a new paragraph (b)(1)(ii).
                                                      (2) The lender must notify the                                                                                 F. In newly redesignated paragraph
                                                   borrower that a deferment has been                       § 682.211    Forbearance.                             (b)(1)(iii), removing the words ‘‘or
                                                   granted based on paragraphs (c)(1)(ii),                  *      *    *      *     *                            (b)(1)(i)’’ and adding, in their place, the
                                                   (iii), or (iv) of this section and that the                (e)(1) At the time of granting a                    words ‘‘, (b)(1)(i), or (b)(1)(ii)’’.
                                                   borrower has the option to cancel the                    borrower or endorser a forbearance, the                  G. In newly redesignated paragraph
                                                   deferment and continue paying on the                     lender must provide the borrower or                   (b)(1)(iv), removing the words ‘‘or
                                                   loan.                                                    endorser with information to assist the               (b)(1)(i)’’ and adding, in their place, the
                                                   *       *      *     *     *                             borrower or endorser in understanding                 words ‘‘, (b)(1)(i), or (b)(1)(ii)’’.
                                                      (v) In-school deferments for PLUS                     the impact of capitalization of interest                 H. In paragraph (b)(2), removing the
                                                   loan borrowers with loans first                          on the loan principal and total interest              words ‘‘(b)(1)(ii) and (iii)’’ in the second
                                                   disbursed on or after July 1, 2008. (1)(i)               to be paid over the life of the loan; and             sentence and adding, in their place, the
                                                   A student PLUS borrower is entitled to                     (2) At least once every 180 days                    words ‘‘(b)(1)(iii) and (iv)’’.
                                                                                                                                                                     The revision and addition reads as
                                                   a deferment on a PLUS loan first                         during the period of forbearance, the
                                                                                                                                                                  follows:
                                                   disbursed on or after July 1, 2008 during                lender must contact the borrower or
                                                   the 6-month period that begins on the                    endorser to inform the borrower or                    § 682.215    Income-based repayment plan.
                                                   day after the student ceases to be                       endorser of—                                             (a) * * *
                                                   enrolled on at least a half-time basis at                  (i) The outstanding obligation to                      (4) Partial financial hardship means a
                                                   an eligible institution.                                 repay;                                                circumstance in which—
                                                      (ii) If a lender grants an in-school                    (ii) The amount of the unpaid                          (i) For an unmarried borrower or a
                                                   deferment to a student PLUS borrower                     principal balance and any unpaid                      married borrower who files an
                                                   based on § 682.210(c)(1)(ii), (iii), or (iv),            interest that has accrued on the loan                 individual Federal tax return, the
                                                   the deferment period for a PLUS loan                     since the last notice provided to the                 annual amount due on all of the
                                                   first disbursed on or after July 1, 2008                 borrower or endorser under this                       borrower’s eligible loans, as calculated
                                                   includes the 6-month post-enrollment                     paragraph;                                            under a standard repayment plan based
                                                   period described in paragraph (v)(1)(i)                    (iii) The fact that interest will accrue            on a 10-year repayment period, using
                                                   of this section. The notice required by                  on the loan for the full term of the                  the greater of the amount due at the time
srobinson on DSKHWCL6B1PROD with PROPOSALS2




                                                   § 682.210(c)(2) must inform the                          forbearance;                                          the borrower initially entered
                                                   borrower that the in-school deferment                      (iv) The amount of interest that will               repayment or at the time the borrower
                                                   on a PLUS loan first disbursed on or                     be capitalized, as of the date of the                 elects the income-based repayment
                                                   after July 1, 2008 will end six months                   notice, and the date capitalization will              plan, exceeds 15 percent of the
                                                   after the day the borrower ceases to be                  occur;                                                difference between the borrower’s AGI
                                                   enrolled on at least a half-time basis.                    (v) The option of the borrower or                   and 150 percent of the poverty guideline
                                                      (2) Upon the request of the borrower,                 endorser to pay the interest that has                 for the borrower’s family size; or
                                                   an eligible parent PLUS borrower must                    accrued before the interest is                           (ii) For a married borrower who files
                                                                                                            capitalized; and                                      a joint Federal tax return with his or her


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                          36593

                                                   spouse, the annual amount due on all of                  their place, the words ‘‘or educational               income families or by an educational
                                                   the borrower’s eligible loans and, if                    service agency where’’.                               service agency that serves low-income
                                                   applicable, the spouse’s eligible loans,                    I. In paragraph (c)(3)(ii)(A), removing            families as a full-time teacher for five
                                                   as calculated under a standard                           the word ‘‘in’’ and adding, in its place,             consecutive complete academic years.
                                                   repayment plan based on a 10-year                        the word ‘‘at’’, and adding the words ‘‘,             For teaching service performed at an
                                                   repayment period, using the greater of                   or taught mathematics or science to                   eligible elementary or secondary school,
                                                   the amount due at the time the loans                     secondary school students on a full-time              at least one of the academic years must
                                                   initially entered repayment or at the                    basis at an eligible educational service              have been after the 1997–1998 academic
                                                   time the borrower or spouse elects the                   agency,’’ immediately after the words                 year. For teaching service performed by
                                                   income-based repayment plan, exceeds                     ‘‘secondary school’’.                                 an employee of an eligible educational
                                                   15 percent of the difference between the                    J. In paragraph (c)(3)(ii)(B), removing            service agency, at least one of the five
                                                   borrower’s and spouse’s AGI, and 150                     the word ‘‘in’’ the first time it appears             consecutive complete academic years
                                                   percent of the poverty guideline for the                 and adding, in its place, the word ‘‘at’’,            must have been after the 2007–2008
                                                   borrower’s family size.                                  and adding the words ‘‘or educational                 academic year.
                                                   *       *    *     *    *                                service agency’’ immediately after the                   (3) All borrowers eligible for teacher
                                                      (b) * * *                                             words ‘‘secondary school’’ the first time             loan forgiveness may receive loan
                                                      (1) * * *                                             they appear.                                          forgiveness of up to a combined total of
                                                      (ii) Both the borrower and the                           K. Adding a new paragraph (c)(3)(iii).             $5,000 on the borrower’s eligible FFEL
                                                   borrower’s spouse have eligible loans                       L. In paragraph (c)(4)(i), removing the            and Direct Loan Program loans.
                                                   and filed a joint Federal tax return, in                 word ‘‘in’’ and adding, in its place, the                (4) A borrower may receive loan
                                                   which case the loan holder                               word ‘‘at’’, and adding the words ‘‘or                forgiveness of up to a combined total of
                                                   determines—                                              educational service agency’’                          $17,500 on the borrower’s eligible FFEL
                                                      (A) Each borrower’s percentage of the                 immediately after the words ‘‘secondary               and Direct Loan Program loans if the
                                                   couple’s total eligible loan debt;                       school’’ the first time they appear.                  borrower was employed for five
                                                      (B) The adjusted monthly payment for                     M. In paragraph (c)(4)(ii)(A), removing            consecutive years—
                                                   each borrower by multiplying the                         the word ‘‘in’’ and adding, in its place,                (i) At an eligible secondary school as
                                                   calculated payment by the percentage                     the word ‘‘at’’, and adding the words ‘‘,             a highly qualified mathematics or
                                                   determined in paragraph (b)(1)(ii)(A) of                 or taught mathematics or science on a                 science teacher, or at an eligible
                                                   this section; and                                        full-time basis to secondary school                   educational service agency as a highly
                                                      (C) If the borrower’s loans are held by               students at an eligible educational                   qualified teacher of mathematics or
                                                   multiple holders, the borrower’s                         service agency,’’ immediately after the               science to secondary school students; or
                                                   adjusted monthly payment by                              words ‘‘secondary school’’.                              (ii) At an eligible elementary or
                                                   multiplying the payment determined in                       N. In paragraph (c)(4)(ii)(B), removing            secondary school or educational service
                                                   paragraph (b)(1)(ii)(B) of this section by               the word ‘‘in’’ the first time it appears             agency as a special education teacher.
                                                   the percentage of the total outstanding                  and adding, in its place, the word ‘‘at’’,               (5) The loan for which the borrower
                                                   principal amount of eligible loans that                  and by adding the words ‘‘or                          is seeking forgiveness must have been
                                                   are held by the loan holder;                             educational service agency’’                          made prior to the end of the borrower’s
                                                   *       *    *     *    *                                immediately after the words ‘‘secondary               fifth year of qualifying teaching service.
                                                      16. Section 682.216 is amended by:                    school’’ the first time they appear.                     (b) * * *
                                                      A. Revising paragraph (a).                               O. Adding a new paragraph (c)(4)(iii).                Educational service agency means a
                                                      B. In paragraph (b), adding, in                          P. Revising paragraph (c)(9).                      regional public multiservice agency
                                                   alphabetical order, a definition of                         Q. Revising paragraph (c)(11).                     authorized by State statute to develop,
                                                   Educational service agency.                                 The revisions and additions read as                manage, and provide services or
                                                      C. Revising the introductory text of                  follows:                                              programs to local educational agencies,
                                                   paragraph (c)(1).                                                                                              as defined in section 9101 of the
                                                      D. In paragraph (c)(1)(ii), adding the                § 682.216    Teacher loan forgiveness
                                                                                                            program.                                              Elementary and Secondary Education
                                                   words ‘‘or educational service agency’s’’
                                                                                                              (a) General. (1) The teacher loan                   Act of 1965, as amended.
                                                   immediately after the words ‘‘the
                                                   school’s’’.                                              forgiveness program is intended to                    *       *     *    *      *
                                                      E. In paragraph (c)(1)(iii), removing                 encourage individuals to enter and                       (c) * * *
                                                   the words ‘‘Bureau of Indian Affairs                     continue in the teaching profession. For                 (1) A borrower who has been
                                                   (BIA)’’ and adding, in their place, the                  new borrowers, the Secretary repays the               employed at an elementary or secondary
                                                   words ‘‘Bureau of Indian Education                       amount specified in this paragraph on                 school or at an educational service
                                                   (BIE)’’, and removing the words ‘‘the                    the borrower’s subsidized and                         agency as a full-time teacher for five
                                                   BIA’’ and adding, in their place, the                    unsubsidized Federal Stafford Loans,                  consecutive complete academic years
                                                   words ‘‘the BIE’’.                                       Direct Subsidized Loans, Direct                       may obtain loan forgiveness under this
                                                      F. In paragraph (c)(2), adding the                    Unsubsidized Loans, and in certain                    program if the elementary or secondary
                                                   words ‘‘or educational service agency’’                  cases, Federal Consolidation Loans or                 school or educational service agency—
                                                   immediately after the words ‘‘If the                     Direct Consolidation Loans. The                       * * *
                                                   school’’ at the beginning of the                         forgiveness program is only available to                 (3) * * *
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                                                   paragraph, and removing the words ‘‘the                  a borrower who has no outstanding loan                   (iii) For teaching service performed by
                                                   school’’ immediately after the words                     balance under the FFEL Program or the                 an employee of an eligible educational
                                                   ‘‘teaching and’’.                                        Direct Loan Program on October 1, 1998                service agency, at least one of the five
                                                      G. In paragraph (c)(3)(i)(A), removing                or who has no outstanding loan balance                consecutive complete academic years
                                                   the words ‘‘in which’’ and adding, in                    on the date he or she obtains a loan after            must have been after the 2007–2008
                                                   their place, the words ‘‘or educational                  October 1, 1998.                                      academic year.
                                                   service agency where’’.                                    (2) The borrower must have been                        (4) * * *
                                                      H. In paragraph (c)(3)(i)(B), removing                employed at an eligible elementary or                    (iii) For teaching service performed by
                                                   the words ‘‘in which’’ and adding, in                    secondary school that serves low-                     an employee of an eligible educational


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                                                   36594                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   service agency, at least one of the five                    (c) Independent audits. (1)(i) A lender               F. Adding new paragraphs
                                                   consecutive complete academic years                      originating or holding more than $5                   (e)(1)(iii)(E), (F), and (G).
                                                   must have been the 2008–2009                             million in FFEL loans during its fiscal                  G. In paragraph (e)(1)(v), adding the
                                                   academic year or a subsequent academic                   year must submit an independent                       words ‘‘, terms or conditions’’
                                                   year.                                                    annual compliance audit for that year,                immediately after the word
                                                   *       *    *     *      *                              conducted by a qualified independent                  ‘‘availability’’.
                                                      (9) A borrower who was employed as                    organization or person.                                  H. In paragraph (e)(2)(i), removing the
                                                   a teacher at more than one qualifying                       (ii) Notwithstanding the dollar                    word ‘‘Assistance’’ at the beginning of
                                                   school, at more than one qualifying                      volume of loans originated or held, a                 the paragraph and adding, in its place,
                                                   educational service agency, or at a                      school lender under § 682.601 or a                    the words ‘‘Technical assistance’’, and
                                                   combination of both during an academic                   lender serving as trustee on behalf of a              removing the words ‘‘that provided’’
                                                   year and demonstrates that the                           school or a school-affiliated                         and adding, in their place, the words
                                                   combined teaching was the equivalent                     organization for the purpose of                       ‘‘the technical assistance provided’’.
                                                   of full-time, as supported by the                        originating loans must submit an                         I. In paragraph (e)(2)(ii), adding the
                                                   certification of one or more of the chief                independent annual compliance audit                   words ‘‘and 433A’’ immediately after
                                                   administrative officers of the schools or                for that year, conducted by a qualified               the reference to ‘‘422(h)(4)(B)’’.
                                                   educational service agencies involved,                   independent organization or person.                      J. In paragraph (e)(2)(iii), removing the
                                                   is considered to have completed one                         (iii) The Secretary may, following                 words ‘‘initial and exit’’ and adding, in
                                                   academic year of qualifying teaching.                    written notice, suspend the payment of                their place, the word ‘‘entrance’’.
                                                                                                            interest benefits and special allowance                  K. Revising paragraph (e)(2)(vi).
                                                   *       *    *     *      *                                                                                       L. In paragraph (e)(3)(iii), removing
                                                                                                            to a lender that does not submit its audit
                                                      (11) A borrower may not receive loan                                                                        the words ‘‘The terms’’ and adding, in
                                                                                                            within the time period prescribed in
                                                   forgiveness for the same qualifying                                                                            their place, the words ‘‘The term’’, and
                                                                                                            paragraph (c)(2) of this section.
                                                   teaching service under this section if the                  (2) * * *                                          removing the words ‘‘computer
                                                   borrower receives a benefit for the same                    (vii) With regard to a lender serving              hardware’’ and adding, in their place,
                                                   teaching service under—                                  as a trustee for the purpose of                       the words ‘‘information technology
                                                      (i) 34 CFR 685.217;                                   originating loans for a school or school-             equipment’’.
                                                      (ii) Subtitle D of title I of the National                                                                     M. Removing paragraph (e)(3)(v).
                                                                                                            affiliated organization, the audit must
                                                   and Community Service Act of 1990;                                                                                N. Adding a new paragraph (g).
                                                                                                            include a determination that—
                                                      (iii) 34 CFR 685.219; or                                 (A) Except as provided in paragraph                   The revision and additions read as
                                                      (iv) Section 428K of the Act.                                                                               follows:
                                                                                                            (c)(2)(vii)(B) of this section, the school
                                                   *       *    *     *      *                              used all proceeds from special
                                                      17. Section 682.302 is amended by                                                                           § 682.401    Basic Program Agreement.
                                                                                                            allowance payments, interest subsidies
                                                   adding a new paragraph (h) to read as                    received from the Department, and any                 *       *    *     *     *
                                                   follows:                                                 proceeds from the sale or other                          (e) * * *
                                                                                                            disposition of the loans originated                      (1) * * *
                                                   § 682.302 Payment of special allowance on                                                                         (i) * * *
                                                   FFEL loans.                                              through the lender for need-based grant
                                                                                                                                                                     (F) Performance of, or payment to a
                                                   *      *     *    *     *                                programs and that those funds
                                                                                                                                                                  third party to perform, any school
                                                      (h) Calculation of special allowance                  supplemented, but did not supplant,
                                                                                                                                                                  function required under title IV, except
                                                   payments for loans subject to the                        other Federal or non-Federal funds
                                                                                                                                                                  that the guaranty agency may provide
                                                   Servicemembers Civil Relief Act (50                      otherwise available to be used to make
                                                                                                                                                                  exit counseling as provided in
                                                   U.S.C. 527, App. sec. 207). For FFEL                     need-based grants to its students; and
                                                                                                               (B) The lender used no more than a                 § 682.604(g), and may provide services
                                                   Program loans first disbursed on or after                                                                      to participating foreign schools at the
                                                   July 1, 2008 that are subject to the                     reasonable portion of payments and
                                                                                                            proceeds from the loans for direct                    direction of the Secretary, as a third-
                                                   interest rate limit under the                                                                                  party servicer.
                                                   Servicemembers Civil Relief Act, special                 administrative expenses in accordance
                                                                                                            with § 682.601(b), with all references to             *       *    *     *     *
                                                   allowance is calculated in accordance                                                                             (iii) * * *
                                                   with paragraphs (c) and (f) of this                      eligible school lender understood to
                                                                                                            mean a lender in its capacity as trustee                 (E) Providing or reimbursing travel or
                                                   section, except the applicable interest                                                                        entertainment expenses;
                                                   rate for this purpose shall be 6 percent.                on behalf of a school or school-affiliated
                                                                                                            organization for the purpose of                          (F) Providing or reimbursing tuition
                                                      18. Section 682.305 is amended by:                                                                          payments or expenses; and
                                                      A. Revising paragraph (c)(1).                         originating loans.
                                                                                                                                                                     (G) Offering prizes, or providing
                                                      B. In paragraph (c)(2)(v), removing the               *       *    *     *     *                            payments of stocks or other securities.
                                                   word ‘‘and’’ immediately after the                          19. Section 682.401 is amended by:
                                                                                                               A. In paragraph (e)(1)(i), adding the              *       *    *     *     *
                                                   semicolon                                                                                                         (g)(1) A guaranty agency must work
                                                      C. In paragraph (c)(2)(vi), removing                  words ‘‘stock or other securities, tuition
                                                                                                            payment or reimbursement’’                            with schools that participate in its
                                                   the punctuation ‘‘.’’ at the end of the
                                                                                                            immediately after the word ‘‘payment’’.               program to develop and make available
                                                   paragraph and adding, in its place, the
                                                                                                               B. In paragraph (e)(1)(i)(D), adding the           high-quality educational materials and
                                                   words ‘‘; and’’.
                                                                                                            words ‘‘travel or’’ immediately after the             programs that provide training to
                                                      D. Redesignating paragraph (c)(2)(vii)
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                                                                                                            words ‘‘Payment of’’.                                 students and their families in budgeting
                                                   as paragraph (c)(3).
                                                      E. Adding a new paragraph (c)(2)(vii).                   C. Revising paragraph (e)(1)(i)(F).                and financial management, including
                                                      The revision and addition read as                        D. In paragraph (e)(1)(iii)(C), removing           debt management and other aspects of
                                                   follows:                                                 the word ‘‘and’’ immediately after the                financial literacy, such as the cost of
                                                                                                            semicolon.                                            using high-interest loans to pay for
                                                   § 682.305 Procedures for payment of                         E. In paragraph (e)(1)(iii)(D), removing           postsecondary education, and how
                                                   interest benefits and special allowance and              the punctuation ‘‘.’’ at the end of the               budgeting and financial management
                                                   collection of origination and loan fees.                 paragraph and adding, in its place, the               relate to the title IV student loan
                                                   *      *     *       *       *                           punctuation ‘‘;’’.                                    programs.


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36595

                                                     (2) The materials and programs                         days of the date the physician certifies              borrower’s discharge application and a
                                                   described in paragraph (g)(1) of this                    the application. If the lender and                    disbursement of that loan or grant is
                                                   section must be in formats that are                      guaranty agency approve the discharge                 made during the period from the date of
                                                   simple and understandable to students                    claim under the procedures described in               the physician’s certification until the
                                                   and their families, and must be made                     paragraph (c)(7) of this section, the                 date the Secretary grants a discharge
                                                   available to students and their families                 guaranty agency must assign the loan to               under this section, the processing of the
                                                   by the guaranty agency before, during,                   the Secretary.                                        borrower’s loan discharge request will
                                                   and after a student’s enrollment at an                     (3) Secretary’s eligibility                         be suspended until the borrower
                                                   institution of higher education.                         determination. (i) If, after reviewing the            ensures that the full amount of the
                                                     (3) A guaranty agency may provide                      borrower’s application, the Secretary                 disbursement has been returned to the
                                                   similar programs and materials to an                     determines that the certification                     loan holder or to the Secretary, as
                                                   institution that participates only in the                provided by the borrower supports the                 applicable.
                                                   William D. Ford Federal Direct Loan                      conclusion that the borrower is totally                  (5) Conditions for reinstatement of a
                                                   Program.                                                 and permanently disabled, as described                loan after a total and permanent
                                                     (4) A lender or loan servicer may also                 in paragraph (1) of the definition of that            disability discharge. (i) The Secretary
                                                   provide an institution with outreach                     term in § 682.200(b), the borrower is                 reinstates the borrower’s obligation to
                                                   and financial literacy information                       considered totally and permanently                    repay a loan that was discharged in
                                                   consistent with the requirements of                      disabled as of the date the physician                 accordance with paragraph (c)(3)(ii) of
                                                   paragraphs (g)(1) and (2) of this section.               certifies the borrower’s application.                 this section if, within three years after
                                                     20. Section 682.402 is amended by                        (ii) Upon making a determination that               the date the Secretary granted the
                                                   revising paragraph (c) to read as follows:               the borrower is totally and permanently               discharge, the borrower—
                                                                                                            disabled as described in paragraph (1) of                (A) Has annual earnings from
                                                   § 682.402 Death, disability, closed school,              the definition of that term in                        employment that exceed 100 percent of
                                                   false certification, unpaid refunds, and                 § 682.200(b), the Secretary discharges
                                                   bankruptcy payments.                                                                                           the poverty line for a family of two, as
                                                                                                            the borrower’s obligation to make                     determined in accordance with the
                                                   *       *     *    *    *                                further payments on the loan and                      Community Service Block Grant Act;
                                                      (c)(1) Total and permanent disability.                notifies the borrower that the loan has                  (B) Receives a new TEACH Grant or
                                                   (i) A borrower’s loan is discharged if the               been discharged. Any payments                         a new loan under the Perkins, FFEL, or
                                                   borrower becomes totally and                             received after the date the physician                 Direct Loan programs, except for a FFEL
                                                   permanently disabled, as defined in                      certified the borrower’s loan discharge               or Direct Consolidation Loan that
                                                   § 682.200(b), and satisfies the eligibility              application are returned to the person                includes loans that were not discharged;
                                                   requirements in this section.                            who made the payments on the loan.                    or
                                                      (ii) For a borrower who becomes                       The notification to the borrower                         (C) Fails to ensure that the full
                                                   totally and permanently disabled as                      explains the terms and conditions under               amount of any disbursement of a title IV
                                                   described in paragraph (1) of the                        which the borrower’s obligation to repay              loan or TEACH Grant received prior to
                                                   definition of that term in § 682.200(b),                 the loan will be reinstated, as specified             the discharge date that is made during
                                                   the borrower’s loan discharge                            in paragraph (c)(5)(i) of this section.               the three-year period following the
                                                   application is processed in accordance                     (iii) If the Secretary determines that              discharge date is returned to the loan
                                                   with paragraphs (c)(2) through (7) of this               the certification provided by the                     holder or to the Secretary, as applicable,
                                                   section.                                                 borrower does not support the                         within 120 days of the disbursement
                                                      (iii) For a veteran who is totally and                conclusion that the borrower is totally               date.
                                                   permanently disabled as described in                     and permanently disabled as described                    (ii) If a borrower’s obligation to repay
                                                   paragraph (2) of the definition of that                  in paragraph (1) of the definition of that            a loan is reinstated, the Secretary—
                                                   term in § 682.200(b), the veteran’s loan                 term in § 682.200(b), the Secretary                      (A) Notifies the borrower that the loan
                                                   discharge application is processed in                    notifies the borrower that the                        has been reinstated; and
                                                   accordance with paragraph (c)(8) of this                 application for a disability discharge has               (B) Does not require the borrower to
                                                   section.                                                 been denied and that the loan is due                  pay interest on the loan for the period
                                                      (2) Discharge application process for                 and payable to the Secretary under the                from the date the loan was discharged
                                                   a borrower who is totally and                            terms of the promissory note.                         until the date the loan was reinstated.
                                                   permanently disabled as described in                       (iv) The Secretary reserves the right to               (iii) The Secretary’s notification under
                                                   paragraph (1) of the definition of that                  require the borrower to submit                        paragraph (c)(5)(ii)(A) of this section
                                                   term in § 682.200(b). After being                        additional medical evidence if the                    will include—
                                                   notified by the borrower or the                          Secretary determines that the borrower’s                 (A) The reason or reasons for the
                                                   borrower’s representative that the                       application does not conclusively prove               reinstatement;
                                                   borrower claims to be totally and                        that the borrower is totally and                         (B) An explanation that the first
                                                   permanently disabled, the lender                         permanently disabled as described in                  payment due date on the loan following
                                                   promptly requests that the borrower or                   paragraph (1) of the definition of that               reinstatement will be no earlier than 60
                                                   the borrower’s representative submit a                   term in § 682.200(b). As part of the                  days after the date of the notification of
                                                   discharge application to the lender on a                 Secretary’s review of the borrower’s                  reinstatement; and
                                                   form approved by the Secretary. The                      discharge application, the Secretary may                 (C) Information on how the borrower
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                                                   application must contain a certification                 arrange for an additional review of the               may contact the Secretary if the
                                                   by a physician, who is a doctor of                       borrower’s condition by an independent                borrower has questions about the
                                                   medicine or osteopathy legally                           physician at no expense to the borrower.              reinstatement or believes that the
                                                   authorized to practice in a State, that the                (4) Treatment of disbursements made                 obligation to repay the loan was
                                                   borrower is totally and permanently                      during the period from the date of the                reinstated based on incorrect
                                                   disabled as described in paragraph (1) of                physician’s certification until the date of           information.
                                                   the definition of that term in                           discharge. If a borrower received a Title                (6) Borrower’s responsibilities after a
                                                   § 682.200(b). The borrower must submit                   IV loan or TEACH Grant prior to the                   total and permanent disability
                                                   the application to the lender within 90                  date the physician certified the                      discharge. During the three-year period


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                                                   36596                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   described in paragraph (c)(5)(i) of this                 complete and that it supports the                        (ix) The guaranty agency must assign
                                                   section, the borrower or, if applicable,                 conclusion that the borrower is totally               the loan to the Secretary after the
                                                   the borrower’s representative must—                      and permanently disabled as described                 guaranty agency pays the disability
                                                      (i) Promptly notify the Secretary of                  in paragraph (1) of the definition of that            claim.
                                                   any changes in address or phone                          term in § 682.200(b).                                    (8) Discharge application process for
                                                   number;                                                     (v) If the guaranty agency does not                veterans who are totally and
                                                      (ii) Promptly notify the Secretary if                 pay the disability claim, the guaranty                permanently disabled as described in
                                                   the borrower’s annual earnings from                      agency must return the claim to the                   paragraph (2) of the definition of that
                                                   employment exceed the amount                             lender with an explanation of the basis               term in § 682.200(b)—(i) General. After
                                                   specified in paragraph (c)(5)(i)(A) of this              for the agency’s denial of the claim.                 being notified by the veteran or the
                                                   section; and                                             Upon receipt of the returned claim, the               veteran’s representative that the veteran
                                                      (iii) Provide the Secretary, upon                     lender must notify the borrower that the              claims to be totally and permanently
                                                   request, with documentation of the                       application for a disability discharge has            disabled, the lender promptly requests
                                                   borrower’s annual earnings from                          been denied, provide the basis for the                that the veteran or the veteran’s
                                                   employment.                                              denial, and inform the borrower that the              representative submit a discharge
                                                      (7) Lender and guaranty agency                        lender will resume collection on the                  application to the lender, on a form
                                                   actions. (i) After being notified by a                   loan. The lender is deemed to have                    approved by the Secretary. The
                                                   borrower or a borrower’s representative                  exercised forbearance of both principal               application must be accompanied by
                                                   that the borrower claims to be totally                   and interest from the date collection                 documentation from the Department of
                                                   and permanently disabled, the lender                     activity was suspended until the first                Veterans Affairs showing that the
                                                   must continue collection activities until                payment due date. The lender may                      Department of Veterans Affairs has
                                                   it receives either the certification of total            capitalize, in accordance with                        determined that the veteran is
                                                   and permanent disability from a                          § 682.202(b), any interest accrued and                unemployable due to a service-
                                                   physician or a letter from a physician                   not paid during that period.                          connected disability. The veteran will
                                                   stating that the certification has been                     (vi) If the guaranty agency pays the               not be required to provide any
                                                   requested and that additional time is                    disability claim, the lender must notify              additional documentation related to the
                                                   needed to determine if the borrower is                   the borrower that—                                    veteran’s disability.
                                                   totally and permanently disabled as                         (A) The loan will be assigned to the                  (ii) Lender and guaranty agency
                                                   described in paragraph (1) of the                        Secretary for determination of eligibility            actions. (A) After being notified by a
                                                   definition of that term in § 682.200(b).                 for a total and permanent disability                  veteran or a veteran’s representative that
                                                   Except as provided in paragraph                          discharge and that no payments are due                the veteran claims to be totally and
                                                   (c)(7)(iii) of this section, after receiving             on the loan; and                                      permanently disabled as described in
                                                   the physician’s certification or letter the                 (B) If the Secretary discharges the loan           paragraph (2) of the definition of that
                                                   lender may not attempt to collect from                   based on a determination that the                     term in § 682.200(b), the lender must
                                                   the borrower or any endorser.                            borrower is totally and permanently                   continue collection activities until it
                                                      (ii) The lender must submit a                         disabled as described in paragraph (1) of             receives the veteran’s completed loan
                                                   disability claim to the guaranty agency                  the definition of that term in                        discharge application with the required
                                                   if the borrower submits a certification                  § 682.200(b), the Secretary will reinstate            documentation from the Department of
                                                   by a physician and the lender makes a                    the borrower’s obligation to repay the                Veterans Affairs, as described in
                                                   determination that the certification                     loan if, within three years after the date            paragraph (8)(i) of this section. Except
                                                   supports the conclusion that the                         the Secretary granted the discharge, the              as provided in paragraph (c)(8)(ii)(C) of
                                                   borrower is totally and permanently                      borrower—                                             this section, the lender will not attempt
                                                   disabled as described in paragraph (1) of                   (1) Receives annual earnings from                  to collect from the veteran or any
                                                   the definition of that term in                           employment that exceed 100 percent of                 endorser after receiving the veteran’s
                                                   § 682.200(b).                                            the poverty line for a family of two, as              discharge application and
                                                      (iii) If the lender determines that a                 determined in accordance with the                     documentation from the Department of
                                                   borrower who claims to be totally and                    Community Services Block Grant;                       Veterans Affairs.
                                                   permanently disabled is not totally and                     (2) Receives a new TEACH Grant or a                   (B) If the veteran submits a completed
                                                   permanently disabled as described in                     new title IV loan, except for a FFEL or               loan discharge application and the
                                                   paragraph (1) of the definition of that                  Direct Consolidation Loan that includes               required documentation from the
                                                   term in § 682.200(b), or if the lender                   loans that were not discharged; or                    Department of Veterans Affairs, and the
                                                   does not receive the physician’s                            (3) Fails to ensure that the full amount           documentation indicates that the
                                                   certification of total and permanent                     of any disbursement of a title IV loan or             veteran is totally and permanently
                                                   disability within 60 days of the receipt                 TEACH Grant received prior to the                     disabled as described in paragraph (2) of
                                                   of the physician’s letter requesting                     discharge date that is made during the                the definition of that term in
                                                   additional time, as described in                         three-year period following the                       § 682.200(b), the lender must submit a
                                                   paragraph (c)(7)(i) of this section, the                 discharge date is returned to the loan                disability claim to the guaranty agency.
                                                   lender must resume collection of the                     holder or to the Secretary, as applicable,               (C) If the documentation from the
                                                   loan and is deemed to have exercised                     within 120 days of the disbursement                   Department of Veterans Affairs does not
                                                   forbearance of payment of both                           date.                                                 indicate that the veteran is totally and
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                                                   principal and interest from the date                        (vii) After receiving a claim payment              permanently disabled as described in
                                                   collection activity was suspended. The                   from the guaranty agency, the lender                  paragraph (2) of the definition of that
                                                   lender may capitalize, in accordance                     must forward to the guaranty agency                   term in § 682.200(b), the lender—
                                                   with § 682.202(b), any interest accrued                  any payments subsequently received                       (1) Must resume collection and is
                                                   and not paid during that period.                         from or on behalf of the borrower.                    deemed to have exercised forbearance of
                                                      (iv) The guaranty agency must pay a                      (viii) The Secretary reimburses the                payment of both principal and interest
                                                   claim submitted by the lender if the                     guaranty agency for a disability claim                from the date collection activity was
                                                   guaranty agency has reviewed the                         paid to the lender after the agency pays              suspended. The lender may capitalize,
                                                   application and determined that it is                    the claim to the lender.                              in accordance with § 682.202(b), any


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36597

                                                   interest accrued and not paid during                     payments on the loan has been                         reported remove such record from the
                                                   that period.                                             discharged. Upon receipt of the claim                 borrower’s credit history.
                                                      (2) Must inform the veteran that he or                payment from the guaranty agency, the                 *      *      *    *      *
                                                   she may reapply for a total and                          lender returns to the person who made                    (c) A guaranty agency must make
                                                   permanent disability discharge in                        the payments on the loan any payments                 available financial and economic
                                                   accordance with the procedures                           received on or after the effective date of            education materials, including debt
                                                   described in § 682.402(c)(2) through                     the determination by the Department of                management information, to any
                                                   (c)(7), if the documentation from the                    Veterans Affairs that the veteran is                  borrower who has rehabilitated a
                                                   Department of Veterans Affairs does not                  unemployable due to a service-                        defaulted loan in accordance with
                                                   indicate that the veteran is totally and                 connected disability.                                 paragraph (a)(2) of this section.
                                                   permanently disabled as described in                        (G) If the Secretary determines, based                22. Section 682.410 is amended by:
                                                   paragraph (2) of the definition of that                  on a review of the documentation from                    A. In paragraph (b)(5), removing the
                                                   term in § 682.200(b), but indicates that                 the Department of Veterans Affairs, that              heading ‘‘Credit bureau reports’’ and
                                                   the veteran may be totally and                           the veteran is not totally and                        adding, in its place, the heading
                                                   permanently disabled as described in                     permanently disabled as described in                  ‘‘Reports to consumer reporting
                                                   paragraph (1) of the definition of that                  paragraph (2) of the definition of that               agencies’’.
                                                   term.                                                    term in § 682.200(b), the Secretary                      B. In paragraph (b)(5)(i), removing the
                                                      (D) If the documentation from the                     notifies the guaranty agency of this                  words ‘‘national credit bureaus’’ at the
                                                   Department of Veterans Affairs indicates                 determination. Upon notification by the               end of the paragraph and adding, in
                                                   that the borrower is totally and                         Secretary that the veteran is not eligible            their place, the words ‘‘nationwide
                                                   permanently disabled as described in                     for a discharge, the guaranty agency and              consumer reporting agencies’’.
                                                   paragraph (2) of the definition of that                  the lender must follow the procedures
                                                   term in § 682.200(b), the guaranty                                                                                C. In paragraph (b)(5)(ii), removing
                                                                                                            described in paragraph (c)(8)(ii)(E) of               the words ‘‘credit bureau’’ and adding,
                                                   agency must submit a copy of the
                                                                                                            this section.                                         in their place, the words ‘‘consumer
                                                   veteran’s discharge application and
                                                   supporting documentation to the                             (H) The Secretary reimburses the                   reporting agency’’, and removing the
                                                   Secretary, and must notify the veteran                   guaranty agency for a disability claim                reference ‘‘(b)(6)(v)’’ and adding, in its
                                                   that the veteran’s loan discharge request                paid to the lender after the agency pays              place, the reference ‘‘(b)(6)(ii)’’.
                                                   has been referred to the Secretary for a                 the claim to the lender.                                 D. In paragraph (b)(5)(iv)(A),
                                                   determination of discharge eligibility.                  *      *     *     *     *                            removing the words ‘‘credit bureaus’’
                                                      (E) If the documentation from the                        21. Section 682.405 is amended by:                 and adding, in their place, the words
                                                   Department of Veterans Affairs does not                     A. In paragraph (a)(3), adding the                 ‘‘consumer reporting agencies’’.
                                                   indicate that the veteran is totally and                 sentence ‘‘Effective for any loan that is                E. In paragraph (b)(5)(vi)(F), removing
                                                   permanently disabled as described in                     rehabilitated on or after August 14,                  the words ‘‘national credit bureaus’’ and
                                                   paragraph (2) of the definition of that                  2008, the borrower cannot rehabilitate                adding, in their place, the words
                                                   term in § 682.200(b), the guaranty                       the loan again if the loan returns to                 ‘‘nationwide consumer reporting
                                                   agency does not pay the disability claim                 default status following the                          agencies’’.
                                                   and must return the claim to the lender                  rehabilitation.’’ at the end of the                      F. In paragraph (b)(5)(vi)(G), removing
                                                   with an explanation of the basis for the                 paragraph.                                            the words ‘‘credit bureaus’’ and adding,
                                                   agency’s denial of the claim. Upon                          B. In paragraph (b)(1)(iii), adding the            in their place, the words ‘‘consumer
                                                   receipt of the returned claim, the lender                words ‘‘by the guaranty agency or its                 reporting agencies’’.
                                                   must notify the veteran that the                         agents’’ immediately after the word                      G. In paragraph (b)(5)(vi)(K), removing
                                                   application for a disability discharge has               ‘‘affordable’’.                                       the word ‘‘and’’ at the end of the
                                                   been denied, provide the basis for the                                                                         paragraph.
                                                                                                               C. Revising paragraph (b)(3).
                                                   denial, and inform the veteran that the                                                                           H. In paragraph (b)(5)(vi)(L), removing
                                                                                                               D. Adding a new paragraph (c).                     the punctuation ‘‘.’’ at the end of the
                                                   lender will resume collection on the
                                                   loan. The lender is deemed to have                          The revision and addition read as                  paragraph and adding, in its place, the
                                                   exercised forbearance of both principal                  follows:                                              words ‘‘; and’’.
                                                   and interest from the date collection                    § 682.405    Loan rehabilitation agreement.              I. Adding a new paragraph
                                                   activity was suspended until the first                                                                         (b)(5)(vi)(M).
                                                                                                            *      *    *     *    *
                                                   payment due date. The lender may                                                                                  J. Redesignating paragraph (b)(6)(ii) as
                                                                                                              (b) * * *                                           paragraph (b)(6)(v).
                                                   capitalize, in accordance with
                                                   § 682.202(b), any interest accrued and                     (3) (3) Upon the sale of a rehabilitated               K. Redesignating paragraph (b)(6)(iii)
                                                   not paid during that period.                             loan to an eligible lender—                           as paragraph (b)(6)(vi).
                                                      (F) If the Secretary determines, based                  (i) The guaranty agency must, within                   L. Redesignating paragraph (b)(6)(iv)
                                                   on a review of the documentation from                    45 days of the sale—                                  as paragraph (b)(6)(vii).
                                                   the Department of Veterans Affairs, that                   (A) Provide notice to the prior holder                 M. Redesignating paragraph (b)(6)(v)
                                                   the veteran is totally and permanently                   of such sale, and                                     as paragraph (b)(6)(ii).
                                                   disabled as described in paragraph (2) of                  (B) Request that any consumer                          N. Redesignating paragraph (b)(6)(vi)
                                                   the definition of that term in                           reporting agency to which the default                 as paragraph (b)(6)(iii).
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                                                   § 682.200(b), the Secretary notifies the                 was reported remove the record of                        O. In newly redesignated paragraph
                                                   guaranty agency that the veteran is                      default from the borrower’s credit                    (b)(6)(iii), removing the reference
                                                   eligible for a total and permanent                       history.                                              ‘‘(b)(6)(v)’’ and adding, in its place, the
                                                   disability discharge. Upon notification                    (ii) The prior holder of the loan must,             reference ‘‘(b)(6)(ii)’’, and removing the
                                                   by the Secretary that the veteran is                     within 30 days of receiving the                       words ‘‘national credit bureaus (if that
                                                   eligible for a discharge, the guaranty                   notification from the guaranty agency,                is the case)’’ and adding, in their place,
                                                   agency pays the disability discharge                     request that any consumer reporting                   the words ‘‘nationwide consumer
                                                   claim and notifies the veteran that the                  agency to which the default claim                     reporting agencies’’.
                                                   veteran’s obligation to make any further                 payment or other equivalent record was                   P. Adding a new paragraph (b)(6)(iv).


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                                                   36598                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                      Q. In newly redesignated paragraph                       B. In paragraph (a)(1)(iv)(A)(2),                  borrower is on active duty military
                                                   (b)(6)(vi), removing the reference                       removing the punctuation ‘‘.’’ at the end             service.
                                                   ‘‘(b)(6)(iv)’’ and adding, in its place, the             of the paragraph and adding, in its                   *      *     *     *     *
                                                   reference ‘‘(b)(6)(vii)’’.                               place, the words ‘‘; and’’.                              27. Section 685.204 is amended by:
                                                      The additions read as follows:                           C. Adding a new paragraph                             A. In paragraph (b)(1)(iii)(A)(2),
                                                                                                            (a)(1)(iv)(A)(3).                                     removing the word ‘‘or’’ at the end of
                                                   § 682.410 Fiscal, administrative, and
                                                   enforcement requirements.                                   D. Removing paragraph (a)(1)(iv)(B).               the paragraph.
                                                                                                               E. Redesignating paragraph                            B. In paragraph (b)(1)(iii)(A)(3),
                                                   *      *    *     *     *
                                                      (b) * * *                                             (a)(1)(iv)(C) as paragraph (a)(1)(iv)(B).             removing the punctuation ‘‘.’’ and
                                                      (5) * * *                                                F. In newly redesignated paragraph                 adding, in its place, ‘‘; or’’ at the end of
                                                      (vi) * * *                                            (a)(1)(iv)(B), removing the words ‘‘based             the paragraph.
                                                      (M) Inform the borrower of the                        on’’ and adding, in their place, the word                C. Adding a new paragraph
                                                   options that are available to the                        ‘‘after’’, and adding the words ‘‘based on            (b)(1)(iii)(A)(4).
                                                   borrower to remove the loan from                         a discharge request received prior to                    D. Revising paragraph (b)(1)(iii)(B).
                                                   default, including an explanation of the                 July 1, 2010’’ immediately after the                     E. Redesignating paragraphs (g) and
                                                   fees and conditions associated with                      word ‘‘disabled’’.                                    (h) as paragraphs (h) and (i),
                                                   each option.                                                The addition reads as follows:                     respectively.
                                                      (vii) * * *                                                                                                    F. In newly redesignated paragraph
                                                      (6) * * *                                             § 685.200    Borrower eligibility.
                                                                                                                                                                  (i)(3), removing the words ‘‘paragraph
                                                      (iv) The agency must send a notice                      (a) * * *                                           (h)(2)’’ each time they appear and
                                                   informing the borrower of the options                      (1) * * *                                           adding, in their place, the words
                                                   that are available to remove the loan                      (iv) * * *                                          ‘‘paragraph (i)(2)’’.
                                                   from default, including an explanation                     (A) * * *                                              G. In newly redesignated paragraph
                                                   of the fees and conditions associated                      (3) If the borrower receives a new                  (i)(4), removing the words ‘‘paragraph
                                                   with each option. This notice must be                    Direct Subsidized Loan or Direct                      (h)(2)’’ and adding, in their place, the
                                                   sent within a reasonable time after the                  Unsubsidized Loan within three years of               words ‘‘paragraph (i)(2)’’.
                                                   end of the period for requesting an                      the date that any previous title IV loan                 H. Adding a new paragraph (g).
                                                   administrative review as specified in                    or TEACH Grant service obligation was                    The revisions and additions read as
                                                   paragraph (b)(5)(iv)(B) of this section or,              discharged due to a total and permanent               follows:
                                                   if the borrower has requested an                         disability in accordance with
                                                   administrative review, within a                          § 685.213(b)(4), 34 CFR 674.61(b)(3)(i),              § 685.204    Deferment.
                                                   reasonable time following the                            34 CFR 682.402(c), or 34 CFR 686.42(b)                *      *     *      *     *
                                                   conclusion of the administrative review.                 based on a discharge request received                   (b) * * *
                                                   *      *    *     *     *                                on or after July 1, 2010, resumes                       (1)(i) * * *
                                                      23. Section 682.601 is amended by                     repayment on the previously discharged                  (iii)(A) * * *
                                                   adding a new paragraph (a)(7)(iii) to                    loan in accordance with                                 (4) The Secretary confirms a
                                                   read as follows:                                         § 685.213(b)(3)(ii)(A), 34 CFR                        borrower’s half-time enrollment status
                                                                                                            674.61(b)(5), or 34 CFR 682.402(c)(5), or             through the use of the National Student
                                                   § 682.601 Rules for a school that makes or                                                                     Loan Data System if requested to do so
                                                                                                            acknowledges that he or she is once
                                                   originates loans.                                                                                              by the school the borrower is attending.
                                                                                                            again subject to the terms of the TEACH
                                                      (a) * * *                                             Grant agreement to serve before                         (B)(1) Upon notification by the
                                                      (7) * * *                                                                                                   Secretary that a deferment has been
                                                      (iii) With regard to any school, the                  receiving the new loan.
                                                                                                            *     *      *    *     *                             granted based on paragraph
                                                   audit must include a determination                                                                             (b)(1)(iii)(A)(2), (3), or (4) of this section,
                                                   that—                                                      26. Section 685.202 is amended by:
                                                                                                              A. Adding a new paragraph (a)(4).                   the borrower has the option to cancel
                                                      (A) Except as provided in paragraphs
                                                                                                              B. In paragraph (b)(2), removing the                the deferment and continue paying on
                                                   (a)(8) and (b) of this section, the school
                                                                                                            words ‘‘the Secretary capitalizes’’ and               the loan.
                                                   used all payments and proceeds from
                                                                                                            adding, in their place, the words ‘‘or for              (2) If the borrower elects to cancel the
                                                   the loans for need-based grant programs;
                                                      (B) The school met the requirements                   a Direct PLUS Loan, the Secretary may                 deferment and continue paying on the
                                                   of paragraph (c) of this section in                      capitalize’’.                                         loan, the borrower has the option to
                                                   making the need-based grants; and                          The addition reads as follows:                      make the principal and interest
                                                      (C) The school used no more than a                                                                          payments that were deferred. If the
                                                   reasonable portion of payments and                       § 685.202 Charges for which Direct Loan               borrower does not make the payments,
                                                   proceeds from the loans for direct                       Program borrowers are responsible.                    the Secretary applies a deferment for the
                                                   administrative expenses.                                   (a) * * *                                           period in which payments were not
                                                                                                              (4) Applicability of the                            made and capitalizes the interest. The
                                                   *       *    *     *     *
                                                                                                            Servicemembers Civil Relief Act (50                   Secretary will provide information,
                                                   PART 685—WILLIAM D. FORD                                 U.S.C. 527, App. sec. 207).                           including an example, to assist the
                                                   FEDERAL DIRECT LOAN PROGRAM                              Notwithstanding paragraphs (a)(1)                     borrower in understanding the impact of
                                                                                                                                                                  capitalization of accrued, unpaid
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                                                                                                            through (3) of this section, effective
                                                     24. The authority citation for part 685                August 14, 2008, upon the Secretary’s                 interest on the borrower’s loan principal
                                                   continues to read as follows:                            receipt of a borrower’s written request               and on the total amount of interest to be
                                                     Authority: 20 U.S.C. 1087a et seq., unless             and a copy of the borrower’s military                 paid over the life of the loan.
                                                   otherwise noted.                                         orders, the maximum interest rate, as                 *      *     *      *     *
                                                     25. Section 685.200 is amended by:                     defined in 50 U.S.C. 527, App. section                  (g) In-school deferments for Direct
                                                     A. In paragraph (a)(1)(iv)(A)(1),                      207(d), on Direct Loan Program loans                  PLUS Loan borrowers with loans first
                                                   removing the word ‘‘and’’ at the end of                  made prior to the borrower entering                   disbursed on or after July 1, 2008. (1)(i)
                                                   the paragraph.                                           active duty status is 6 percent while the             A student Direct PLUS Loan borrower is


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                           36599

                                                   entitled to a deferment on a Direct PLUS                 § 685.211 Miscellaneous repayment                     total and permanent disability
                                                   Loan first disbursed on or after July 1,                 provisions.                                           discharge, as described in paragraph (1)
                                                   2008 during the 6-month period that                      *     *     *     *     *                             of the definition of that term in 34 CFR
                                                   begins on the day after the student                        (f) * * *                                           682.200(b), the borrower is considered
                                                   ceases to be enrolled on at least a half-                  (4) Effective for any defaulted Direct              totally and permanently disabled as of
                                                   time basis at an eligible institution.                   Loan that is rehabilitated on or after                the date the physician certifies the
                                                      (ii) If the Secretary grants an in-school             August 14, 2008, the borrower cannot                  borrower’s application.
                                                   deferment to a student Direct PLUS                       rehabilitate the loan again if the loan                 (ii) Upon making a determination that
                                                   Loan borrower based on                                   returns to default status following the               the borrower is totally and permanently
                                                   § 682.204(b)(1)(iii)(A)(2), (3), or (4), the             rehabilitation.                                       disabled, as described in paragraph (1)
                                                   deferment period for a Direct PLUS                         30. Section 685.213 is revised to read              of the definition of that term in 34 CFR
                                                   Loan first disbursed on or after July 1,                 as follows:                                           682.200(b), the Secretary discharges the
                                                   2008 includes the 6-month post-                                                                                borrower’s obligation to make any
                                                                                                            § 685.213 Total and permanent disability              further payments on the loan, notifies
                                                   enrollment period described in                           discharge.
                                                   paragraph (g)(1)(i) of this section.                                                                           the borrower that the loan has been
                                                                                                               (a) General. (1) A borrower’s Direct               discharged, and returns to the person
                                                      (2) Upon the request of the borrower,                 Loan is discharged if the borrower
                                                   an eligible parent Direct PLUS Loan                                                                            who made the payments on the loan any
                                                                                                            becomes totally and permanently                       payments received after the date the
                                                   borrower will receive a deferment on a                   disabled, as defined in 34 CFR
                                                   Direct PLUS Loan first disbursed on or                                                                         physician certified the borrower’s loan
                                                                                                            682.200(b), and satisfies the eligibility             discharge application. The notification
                                                   after July 1, 2008—                                      requirements in this section.                         to the borrower explains the terms and
                                                      (i) During the period when the                           (2) For a borrower who becomes                     conditions under which the borrower’s
                                                   student on whose behalf the loan was                     totally and permanently disabled as                   obligation to repay the loan will be
                                                   obtained is enrolled at an eligible                      described in paragraph (1) of the                     reinstated, as specified in paragraph
                                                   institution on at least a half-time basis;               definition of that term in 34 CFR                     (b)(4)(i) of this section.
                                                   and                                                      682.200(b), the borrower’s loan                         (iii) If the Secretary determines that
                                                      (ii) During the 6-month period that                   discharge application is processed in                 the certification provided by the
                                                   begins on the later of the day after the                 accordance with paragraph (b) of this                 borrower does not support the
                                                   student on whose behalf the loan was                     section.                                              conclusion that the borrower is totally
                                                   obtained ceases to be enrolled on at                        (3) For veterans who are totally and               and permanently disabled, as described
                                                   least a half-time basis or, if the parent                permanently disabled as described in                  in paragraph (1) of the definition of that
                                                   borrower is also a student, the day after                paragraph (2) of the definition of that               term in 34 CFR 682.200(b), the Secretary
                                                   the parent borrower ceases to be                         term in 34 CFR 682.200(b), the veteran’s              notifies the borrower that the
                                                   enrolled on at least a half-time basis.                  loan discharge application is processed               application for a disability discharge has
                                                   *       *     *     *     *                              in accordance with paragraph (c) of this              been denied, and that the loan is due
                                                      28. Section 685.205 is amended by:                    section.                                              and payable to the Secretary under the
                                                      A. In paragraph (b)(8), removing the                     (b) Discharge application process for              terms of the promissory note.
                                                   word ‘‘or’’ at the end of the paragraph.                 a borrower who is totally and                           (iv) The Secretary reserves the right to
                                                                                                            permanently disabled as described in                  require the borrower to submit
                                                      B. In paragraph (b)(9), removing the
                                                                                                            paragraph (1) of the definition of that               additional medical evidence if the
                                                   punctuation ‘‘.’’ at the end of the
                                                                                                            term in 34 CFR 682.200(b). (1) Borrower               Secretary determines that the borrower’s
                                                   paragraph and adding, in its place, ‘‘;
                                                                                                            application for discharge. To qualify for             application does not conclusively prove
                                                   or’’.
                                                                                                            a discharge of a Direct Loan based on a               that the borrower is totally and
                                                      C. Adding a new paragraph (b)(10) to
                                                                                                            total and permanent disability, a                     permanently disabled as described in
                                                   read as follows:
                                                                                                            borrower must submit a discharge                      paragraph (1) of the definition of that
                                                   § 685.205   Forbearance.                                 application to the Secretary on a form                term in 34 CFR 682.200(b). As part of
                                                   *      *    *      *    *                                approved by the Secretary. The                        the Secretary’s review of the borrower’s
                                                     (b) * * *                                              application must contain a certification              discharge application, the Secretary may
                                                                                                            by a physician, who is a doctor of                    arrange for an additional review of the
                                                     (10) For Direct PLUS Loans first
                                                                                                            medicine or osteopathy legally                        borrower’s condition by an independent
                                                   disbursed before July 1, 2008, to align
                                                                                                            authorized to practice in a State, that the           physician at no expense to the borrower.
                                                   repayment with a borrower’s Direct
                                                                                                            borrower is totally and permanently                     (3) Treatment of disbursements made
                                                   PLUS Loans that were first disbursed on
                                                                                                            disabled as described in paragraph (1) of             during the period from the date of the
                                                   or after July 1, 2008, or with Direct
                                                                                                            the definition of that term in 34 CFR                 physician’s certification until the date of
                                                   Subsidized Loans or Direct
                                                                                                            682.200(b). The borrower must submit                  discharge. If a borrower received a title
                                                   Unsubsidized Loans that have a grace
                                                                                                            the application to the Secretary within               IV loan or TEACH Grant prior to the
                                                   period in accordance with § 685.207(b)
                                                                                                            90 days of the date the physician                     date the physician certified the
                                                   or (c). The Secretary notifies the
                                                                                                            certifies the application. Upon receipt of            borrower’s discharge application and a
                                                   borrower that the borrower has the
                                                                                                            the borrower’s application, the Secretary             disbursement of that loan or grant is
                                                   option to cancel the forbearance and
                                                                                                            notifies the borrower that no payments                made during the period from the date of
                                                   continue paying on the loan.
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                                                                                                            are due on the loan while the Secretary               the physician’s certification until the
                                                   *      *    *      *    *                                determines the borrower’s eligibility for             date the Secretary grants a discharge
                                                     29. Section 685.211 is amended by:                     discharge.                                            under this section, the processing of the
                                                     A. In paragraph (f)(1), removing the                      (2) Determination of eligibility. (i) If,          borrower’s loan discharge request will
                                                   words ‘‘credit bureau’’ in the third                     after reviewing the borrower’s                        be suspended until the borrower
                                                   sentence and adding, in their place, the                 application, the Secretary determines                 ensures that the full amount of the
                                                   words ‘‘consumer reporting agency’’.                     that the certification provided by the                disbursement has been returned to the
                                                     B. Adding a new paragraph (f)(4).                      borrower supports the conclusion that                 loan holder or to the Secretary, as
                                                     The addition reads as follows:                         the borrower meets the criteria for a                 applicable.


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                                                   36600                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                      (4) Conditions for reinstatement of a                    (iii) Provide the Secretary, upon                  permanently disabled as described in
                                                   loan after a total and permanent                         request, with documentation of the                    paragraph (2) of the definition of that
                                                   disability discharge. (i) The Secretary                  borrower’s annual earnings from                       term in 34 CFR 682.200(b), but indicates
                                                   reinstates a borrower’s obligation to                    employment.                                           that the veteran may be totally and
                                                   repay a loan that was discharged in                         (c) Discharge application process for              permanently disabled as described in
                                                   accordance with paragraph (b)(2)(ii) of                  veterans who are totally and                          paragraph (1) of the definition of that
                                                   this section if, within three years after                permanently disabled as described in                  term.
                                                   the date the Secretary granted the                       paragraph (2) of the definition of that                  31. Section 685.217 is amended by:
                                                   discharge, the borrower—                                 term in 34 CFR 682.200(b).                               A. Revising paragraph (a).
                                                      (A) Has annual earnings from                             (1) Veteran’s application for                         B. In paragraph (b), adding a
                                                   employment that exceed 100 percent of                    discharge. To qualify for a discharge of              definition of Educational service
                                                   the poverty line for a family of two, as                 a Direct Loan based on a total and                    agency.
                                                   determined in accordance with the                        permanent disability as described in                     C. Revising the introductory text of
                                                   Community Service Block Grant Act;                       paragraph (2) of the definition of that               paragraph (c)(1).
                                                      (B) Receives a new TEACH Grant or                     term in 34 CFR 682.200(b), a veteran                     D. In paragraph (c)(1)(ii), adding the
                                                   a new loan under the Perkins, FFEL or                    must submit a discharge application to                words ‘‘or educational service agency’s’’
                                                   Direct Loan programs, except for a FFEL                  the Secretary on a form approved by the               immediately after the words ‘‘the
                                                   or Direct Consolidation Loan that                        Secretary. The application must be                    school’s’’.
                                                   includes loans that were not discharged;                 accompanied by documentation from                        E. In paragraph (c)(1)(iii), removing
                                                   or                                                       the Department of Veterans Affairs                    the words ‘‘Bureau of Indian Affairs
                                                      (C) Fails to ensure that the full                     showing that the Department of
                                                                                                                                                                  (BIA)’’ and adding, in their place, the
                                                   amount of any disbursement of a title IV                 Veterans Affairs has determined that the
                                                                                                                                                                  words ‘‘Bureau of Indian Education
                                                   loan or TEACH Grant received prior to                    veteran is unemployable due to a
                                                                                                                                                                  (BIE)’’, and removing the words ‘‘the
                                                   the discharge date that is made during                   service-connected disability. The
                                                                                                                                                                  BIA’’ and adding, in their place, the
                                                   the three-year period following the                      Secretary does not require the veteran to
                                                                                                                                                                  words ‘‘the BIE’’.
                                                   discharge date is returned to the loan                   provide any additional documentation
                                                                                                                                                                     F. In paragraph (c)(2), adding the
                                                   holder or to the Secretary, as applicable,               related to the veteran’s disability. Upon
                                                                                                                                                                  words ‘‘or educational service agency’’
                                                   within 120 days of the disbursement                      receipt of the veteran’s application, the
                                                                                                                                                                  immediately after the words ‘‘If the
                                                   date.                                                    Secretary notifies the veteran that no
                                                                                                            payments are due on the loan while the                school’’ at the beginning of the
                                                      (ii) If the borrower’s obligation to                                                                        paragraph, and removing the words ‘‘the
                                                   repay the loan is reinstated, the                        Secretary determines the veteran’s
                                                                                                            eligibility for discharge.                            school failed’’ and adding, in their
                                                   Secretary—                                                                                                     place, the word ‘‘fails’’.
                                                      (A) Notifies the borrower that the loan                  (2) Determination of eligibility. (i) If
                                                                                                            the Secretary determines, based on a                     G. In paragraph (c)(3)(i)(A), removing
                                                   has been reinstated; and
                                                                                                            review of the documentation from the                  the words ‘‘in which’’ and adding, in
                                                      (B) Does not require the borrower to
                                                                                                            Department of Veterans Affairs, that the              their place, the words ‘‘or educational
                                                   pay interest on the loan for the period
                                                                                                            veteran is totally and permanently                    service agency where’’.
                                                   from the date the loan was discharged
                                                                                                            disabled as described in paragraph (2) of                H. In paragraph (c)(3)(i)(B), removing
                                                   until the date the loan was reinstated.
                                                      (iii) The Secretary’s notification under              the definition of that term in                        the words ‘‘in which’’ and adding, in
                                                   paragraph (b)(4)(ii)(A) of this section                  § 682.200(b), the Secretary discharges                their place, the words ‘‘or educational
                                                   will include—                                            the veteran’s obligation to make any                  service agency where’’.
                                                      (A) The reason or reasons for the                     further payments on the loan and                         I. In paragraph (c)(3)(ii)(A), removing
                                                   reinstatement;                                           returns to the person who made the                    the word ‘‘in’’ and adding, in its place,
                                                      (B) An explanation that the first                     payments on the loan any payments                     the word ‘‘at’’, and adding the words ‘‘,
                                                   payment due date on the loan following                   received on or after the effective date of            or taught mathematics or science to
                                                   reinstatement will be no earlier than 60                 the determination by the Department of                secondary school students on a full-time
                                                   days after the date of the notification of               Veterans Affairs that the veteran is                  basis at an eligible educational service
                                                   reinstatement; and                                       unemployable due to a service-                        agency,’’ immediately after the words
                                                      (C) Information on how the borrower                   connected disability.                                 ‘‘secondary school’’.
                                                   may contact the Secretary if the                            (ii)(A) If the Secretary determines,                  J. In paragraph (c)(3)(ii)(B), removing
                                                   borrower has questions about the                         based on a review of the documentation                the word ‘‘in’’ the first time it appears
                                                   reinstatement or believes that the                       from the Department of Veterans Affairs,              and adding, in its place, the word ‘‘at’’,
                                                   obligation to repay the loan was                         that the veteran is not totally and                   and adding the words ‘‘or educational
                                                   reinstated based on incorrect                            permanently disabled as described in                  service agency’’ immediately after the
                                                   information.                                             paragraph (2) of the definition of that               words ‘‘secondary school’’ the first time
                                                      (5) Borrower’s responsibilities after a               term in 34 CFR 682.200(b), the Secretary              they appear.
                                                   total and permanent disability                           notifies the veteran that the application                K. Adding a new paragraph (c)(3)(iii).
                                                   discharge. During the three-year period                  for a disability discharge has been                      L. In paragraph (c)(4)(i), removing the
                                                   described in paragraph (b)(4)(i) of this                 denied, and that the loan is due and                  word ‘‘in’’ and adding, in its place, the
                                                   section, the borrower or, if applicable,                 payable to the Secretary under the terms              word ‘‘at’’, and adding the words ‘‘or
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                                                   the borrower’s representative must—                      of the promissory note.                               educational service agency’’
                                                      (i) Promptly notify the Secretary of                     (B) The Secretary notifies the veteran             immediately after the words ‘‘secondary
                                                   any changes in address or phone                          that he or she may reapply for a total                school’’ the first time they appear.
                                                   number;                                                  and permanent disability discharge in                    M. In paragraph (c)(4)(ii)(A), removing
                                                      (ii) Promptly notify the Secretary if                 accordance with the procedures                        the word ‘‘in’’ and adding, in its place,
                                                   the borrower’s annual earnings from                      described in paragraph (b) of this                    the word ‘‘at’’, and adding the words ‘‘,
                                                   employment exceed the amount                             section if the documentation from the                 or taught mathematics or science on a
                                                   specified in paragraph (b)(4)(i)(A) of this              Department of Veterans Affairs does not               full-time basis to secondary school
                                                   section; and                                             indicate that the veteran is totally and              students at an eligible educational


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                                                                            Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules                                            36601

                                                   service agency,’’ immediately after the                  qualified teacher of mathematics or                       (iv) Section 428K of the Act.
                                                   words ‘‘secondary school’’.                              science to secondary school students; or              *       *     *    *    *
                                                     N. In paragraph (c)(4)(ii)(B), removing                   (ii) At an eligible elementary or
                                                   the word ‘‘in’’ the first time it appears                secondary school or educational service               § 685.220    [Amended]
                                                   and adding, in its place, the word ‘‘at’’,               agency as a highly qualified special                    32. Section 685.220 is amended by:
                                                   and by adding the words ‘‘or                             education teacher.                                      A. In paragraph (d)(1)(i)(B)(3), adding
                                                   educational service agency’’                                (5) The loan for which the borrower                the words ‘‘or the no accrual of interest
                                                   immediately after the words ‘‘secondary                  is seeking forgiveness must have been                 benefit for active duty service’’
                                                   school’’ the first time they appear.                     made prior to the end of the borrower’s               immediately after the word ‘‘Program’’.
                                                     O. Adding a new paragraph (c)(4)(iii).                 fifth year of qualifying teaching service.              B. In paragraph (d)(1)(i)(B)(4), adding
                                                     P. Revising paragraph (c)(9).                             (b) * * *                                          the words ‘‘or an income-based
                                                     Q. Revising paragraph (c)(11).                            Educational service agency means a                 repayment plan’’ immediately after the
                                                     The revisions and additions read as                    regional public multiservice agency                   words ‘‘income contingent repayment
                                                   follows:                                                 authorized by State statute to develop,               plan’’.
                                                                                                            manage, and provide services or                         C. In paragraph (d)(1)(i)(B)(5), adding
                                                   § 685.217   Teacher loan forgiveness                     programs to local educational agencies,               the words ‘‘or the no accrual of interest
                                                   program.                                                 as defined in section 9101 of the                     benefit for active duty service’’
                                                      (a) General. (1) The teacher loan                     Elementary and Secondary Education                    immediately after the word ‘‘Program’’.
                                                   forgiveness program is intended to                       Act of 1965, as amended.                                33. Section 685.221 is amended by:
                                                   encourage individuals to enter and                       *       *     *    *      *                             A. Revising paragraph (a)(4).
                                                   continue in the teaching profession. For                    (c) * * *                                            B. In paragraph (b)(1), removing the
                                                   new borrowers, the Secretary repays the                     (1) A borrower who has been                        words ‘‘Except as provided under
                                                   amount specified in this paragraph on                    employed at an elementary or secondary                paragraph (b)(2) of this section, the’’ in
                                                   the borrower’s subsidized and                            school or an educational service agency               the second sentence and adding, in their
                                                   unsubsidized Federal Stafford Loans,                     as a full-time teacher for five                       place, the word ‘‘The’’.
                                                   Direct Subsidized Loans, Direct                          consecutive complete academic years                     C. In paragraph (b)(2)(i), removing the
                                                   Unsubsidized Loans, and in certain                       may obtain loan forgiveness under this                word ‘‘The’’ at the beginning of the
                                                   cases, Federal Consolidation Loans or                    program if the elementary or secondary                sentence and adding, in its place, the
                                                   Direct Consolidation Loans. The                          school or educational service agency—                 words ‘‘Except for borrowers provided
                                                   forgiveness program is only available to                 * * *                                                 for in paragraph (b)(2)(ii) of this section,
                                                   a borrower who has no outstanding loan                      (3) * * *                                          the’’.
                                                   balance under the FFEL Program or the                       (iii) For teaching service performed by              D. Redesignating paragraphs (b)(2)(ii)
                                                   Direct Loan Program on October 1, 1998                   an employee of an eligible educational                and (b)(2)(iii) as paragraphs (b)(2)(iii)
                                                   or who has no outstanding loan balance                   service agency, at least one of the five              and (b)(2)(iv), respectively.
                                                   on the date he or she obtains a loan after               consecutive complete academic years                     E. Adding a new paragraph (b)(2)(ii).
                                                   October 1, 1998.                                         must have been after the 2007–2008                      F. In newly redesignated paragraph
                                                                                                            academic year.                                        (b)(2)(iii), removing the words ‘‘or
                                                      (2) The borrower must have been
                                                                                                               (4) * * *                                          (b)(2)(i)’’ and adding, in their place, the
                                                   employed at an eligible elementary or
                                                                                                               (iii) For teaching service performed by            words ‘‘, (b)(2)(i), or (b)(2)(ii)’’.
                                                   secondary school that serves low-
                                                                                                            an employee of an eligible educational                  G. In newly redesignated paragraph
                                                   income families or by an educational
                                                                                                            service agency, at least one of the five              (b)(2)(iv), removing the words ‘‘or
                                                   service agency that serves low-income
                                                                                                            consecutive complete academic years                   (b)(2)(i)’’ and adding, in their place, the
                                                   families as a full-time teacher for five
                                                                                                            must have been after the 2007–2008                    words ‘‘, (b)(2)(i), or (b)(2)(ii)’’.
                                                   consecutive complete academic years.
                                                                                                            academic year.                                          The revision and addition read as
                                                   For teaching service performed at an
                                                                                                                                                                  follows:
                                                   eligible elementary or secondary school,                 *       *     *    *      *
                                                   at least one of the academic years must                     (9) A borrower who was employed as                 § 685.221    Income-based repayment plan.
                                                   have been after the 1997–1998 academic                   a teacher at more than one qualifying                    (a) * * *
                                                   year. For teaching service performed by                  school, at more than one qualifying                      (4) Partial financial hardship means a
                                                   an employee of an eligible educational                   educational service agency, or at a                   circumstance in which—
                                                   service agency, at least one of the five                 combination of both during an academic                   (i) For an unmarried borrower or a
                                                   consecutive complete academic years                      year and demonstrates that the                        married borrower who files an
                                                   must have been after the 2007–2008                       combined teaching was the equivalent                  individual Federal tax return, the
                                                   academic year.                                           of full-time, as supported by the                     annual amount due on all of the
                                                      (3) All borrowers eligible for teacher                certification of one or more of the chief             borrower’s eligible loans, as calculated
                                                   loan forgiveness may receive loan                        administrative officers of the schools or             under a standard repayment plan based
                                                   forgiveness of up to a combined total of                 educational service agencies involved,                on a 10-year repayment period, using
                                                   $5,000 on the borrower’s eligible FFEL                   is considered to have completed one                   the greater of the amount due at the time
                                                   and Direct Loan Program loans.                           academic year of qualifying teaching.                 the borrower initially entered
                                                      (4) A borrower may receive loan                       *       *     *    *      *                           repayment or at the time the borrower
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                                                   forgiveness of up to a combined total of                    (11) A borrower may not receive loan               elects the income-based repayment
                                                   $17,500 on the borrower’s eligible FFEL                  forgiveness for the same qualifying                   plan, exceeds 15 percent of the
                                                   and Direct Loan Program loans if the                     teaching service under this section if the            difference between the borrower’s AGI
                                                   borrower was employed for five                           borrower receives a benefit for the same              and 150 percent of the poverty guideline
                                                   consecutive years—                                       teaching service under—                               for the borrower’s family size; or
                                                      (i) At an eligible secondary school as                   (i) 34 CFR 682.216;                                   (ii) For a married borrower who files
                                                   a highly qualified mathematics or                           (ii) Subtitle D of title I of the National         a joint Federal tax return with his or her
                                                   science teacher, or at an eligible                       and Community Service Act of 1990;                    spouse, the annual amount due on all of
                                                   educational service agency as a highly                      (iii) 34 CFR 685.219; or                           the borrower’s eligible loans and, if


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                                                   36602                    Federal Register / Vol. 74, No. 140 / Thursday, July 23, 2009 / Proposed Rules

                                                   applicable, the spouse’s eligible loans,                   (b) * * *                                             (C) If the borrower’s loans are held by
                                                   as calculated under a standard                             (2) * * *                                           multiple holders, the borrower’s
                                                   repayment plan based on a 10-year                          (ii) Both the borrower and borrower’s               adjusted monthly Direct Loan payment
                                                   repayment period, using the greater of                   spouse have eligible loans and filed a                by multiplying the payment determined
                                                   the amount due at the time the loans                     joint Federal tax return, in which case               in paragraph (b)(2)(ii)(B) of this section
                                                   initially entered repayment or at the                    the Secretary determines—                             by the percentage of the outstanding
                                                                                                              (A) Each borrower’s percentage of the
                                                   time the borrower or spouse elects the                                                                         principal amount of eligible loans that
                                                                                                            couple’s total eligible loan debt;
                                                   income-based repayment plan, exceeds                       (B) The adjusted monthly payment for                are Direct Loans;
                                                   15 percent of the difference between the                 each borrower by multiplying the                      *     *     *     *     *
                                                   borrower’s and spouse’s AGI, and 150                     calculated payment by the percentage                  [FR Doc. E9–16952 Filed 7–22–09; 8:45 am]
                                                   percent of the poverty guideline for the                 determined in paragraph (b)(2)(ii)(A) of              BILLING CODE 4000–01–P
                                                   borrower’s family size.                                  this section; and
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