You are seeing our new document Reader view. Click here to revert. Feel free to leave us feedback on this feature here.

Embed Doc
Copy Link
Readcast
Collections

CommentGo Back

Download

Friday,November 1, 2002

Part III

Department of Education

34 CFR Parts 600, 668, et al.Federal Student Aid Programs; Final Rule

VerDate 0ct<09>2002 15:45 Oct 31, 2002Jkt 200001PO 00000Frm 00001Fmt 4717Sfmt 4717E:\FR\FM\01NOR3.SGM01NOR3

67048

Federal Register

/Vol. 67, No. 212/Friday, November 1, 2002/Rules and Regulations

DEPARTMENT OF EDUCATION34 CFR Parts 600, 668, 673, 674, 675,682, 685, 690, and 694

RIN 1845–AA23

Federal Student Aid Programs

AGENCY

Office of PostsecondaryEducation, Department of Education.

ACTION

Final regulations.

SUMMARY

The Secretary amends theInstitutional Eligibility Under theHigher Education Act of 1965, asAmended; Student Assistance GeneralProvisions; General Provisions for theFederal Perkins Loan Program, FederalWork-Study Program, and FederalSupplemental Educational OpportunityGrant Program; Federal Perkins Loan(Perkins Loan) Program; Federal Work-Study (FWS) Programs; Federal FamilyEducation Loan (FFEL) Program;William D. Ford Federal Direct Loan(Direct Loan) Program; Federal PellGrant Program; and Gaining EarlyAwareness and Readiness forUndergraduate Programs (GEAR UP)regulations. The Secretary is amendingthese regulations to reduceadministrative burden for programparticipants, and to provide them withgreater flexibility to serve students and borrowers.

DATES

Effective Date:

Except for theamendment to section 694.10, theseregulations are effective July 1, 2003.The amendment to section 694.10 becomes effective December 2, 2002.

Implementation Date:

The Secretaryhas determined, in accordance withsection 482(c)(2)(A) of the HigherEducation Act of 1965, as amended(HEA) (20 U.S.C. 1089(c)(2)(A)), thatinstitutions, lenders, guaranty agencies,and state grant agencies that administerTitle IV, HEA programs may, at theirdiscretion, choose to implement all of the provisions of these final rules on orafter November 1, 2002. For furtherinformation, see ‘‘Implementation Dateof These Regulations’’ under the

SUPPLEMENTARY INFORMATION

section of this preamble.

FOR FURTHER INFORMATION CONTACT

Forprovisions related to the Title IV loanprograms (Perkins Loan Program, FFELProgram, and Direct Loan Program): Ms.Gail McLarnon, U.S. Department of Education, 1990 K Street, NW, (8thFloor) Washington, DC 20006,Telephone: (202) 219–7048 or via theInternet:

Gail.McLarnon@ed.gov.

For other provisions: Ms. WendyMacias, U.S. Department of Education,1990 K Street, NW, (8th Floor),Washington, DC, 20006, Telephone:(202) 502–7526 or via the Internet:

Wendy.Macias@ed.gov.

If you use a telecommunicationsdevice for the deaf (TDD), you may callthe Federal Information Relay Service(FIRS) at 1–800–877–8339.Individuals with disabilities mayobtain this document in an alternativeformat (

e.g.

, Braille, large print,audiotape, or computer diskette) onrequest to the contact person listedunder

FOR FURTHER INFORMATION

CONTACT

SUPPLEMENTARY INFORMATION

On August6, 2002, and August 8, 2002, theSecretary published in the

FederalRegister

two separate notices of proposed rulemaking (NPRMs) (67 FR51036 and 67 FR 51718, respectively)for the Federal student assistanceprograms authorized by Title IV of theHEA. This document contains the finalregulations for the rules that wereproposed in both of these NPRMs.The August 6, 2002 NPRM includedproposed rules for the StudentAssistance General Provisions, PerkinsLoan Program, FFEL Program, andDirect Loan Program regulations.In the preamble to the August 6, 2002NPRM, the Secretary discussed on pages51037 through 51046 the major changesproposed to improve the Federalstudent assistance programs. Theseincluded the following:

•

Amending §668.35 to state theconditions under which a borrower whois subject to a judgment obtained on aTitle IV loan may regain eligibility foradditional Title IV student financialassistance. [page 51037]

•

Amending §§674.39, 682.405, and685.211 to exclude from rehabilitationdefaulted Perkins Loan, FFEL, andDirect Loan program loans on which ajudgment has been obtained. [page51037]

•

Amending §§674.19, 682.402, and682.414 to clarify the record retentionrequirements for promissory notesunder the Perkins Loan and FFELprograms. [page 51038]

•

Amending §§674.34, 682.210, and, by reference, 685.204, to modify the wayloan holders in the Perkins Loan, FFEL,and Direct Loan programs calculateFederal postsecondary educational loandebt for purposes of determining a borrower’s eligibility for an economichardship deferment. [page 51039]

•

Amending §§674.42, 682.604, and685.304 to clarify that entities otherthan the institution may provide initialand exit loan counseling on theinstitution’s behalf and to provideconsistency in the information that must be disclosed to borrowers. [page 51039]

•

Amending §§682.204 and 685.203to clarify loan limits for separate stand-alone programs in the FFEL and DirectLoan programs. [page 51039]

•

Amending §682.210 and, byreference, §685.204 to make it easier for borrowers in the FFEL and Direct Loanprograms to certify eligibility for anunemployment deferment. [page 51040]

•

Amending §§682.402, 685.212, and685.220 to expand the instances whereFFEL and Direct Loan program borrowers can have a portion of aconsolidation loan discharged. [page51040]

•

Amending §§674.2 and 674.16 toprovide for the use of a MasterPromissory Note (MPN) in the PerkinsLoan Program. [page 51041]

•

Amending §§674.9 and 674.47 tomodify the low-balance write-off options for institutions that participatein the Perkins Loan Program. [page51042]

•

Amending §674.17 to clarify thatwhen an institution participating in thePerkins Loan Program closes, orotherwise leaves the program, thatinstitution must assign its outstandingloans to the Secretary and liquidate itsPerkins Loan fund according to theSecretary’s instructions. [page 51042]

•

Amending §§674.33 and 674.42 toclarify the conditions under which aninstitution must coordinate minimumrepayment options when a Perkins Loan borrower has received loans from morethan one institution. [page 51042]

•

Amending §674.42 to provideflexibility to institutions that participatein the Perkins Loan Program inproviding copies of promissory notes to borrowers. [page 51042]

•

Amending §674.43 to provideinstitutions increased flexibility inassessing late fees in the Perkins LoanProgram. [page 51043]

•

Amending §674.45 to clarify whenan institution that participates in thePerkins Loan Program must report adefaulted account to a national credit bureau. [page 51043]

•

Amending §674.46 to simplify therequirements for an institution thatparticipates in the Perkins LoanProgram to determine if it shouldinitiate litigation against a defaulted borrower. [page 51043]

•

Amending §674.50 to provideconsistency within the regulations forthe assignment to the Secretary of Perkins loans. [page 51043]

•

Amending §682.200 to revise thedefinition of lender to clarify thetreatment of loans held by trusteelenders. [page 51044]

•

Amending §682.209 to allow anFFEL lender to establish a borrower’sfirst payment due date up to 60 daysafter the borrower enters repayment, toprovide increased flexibility to FFEL

VerDate 0ct<09>2002 15:45 Oct 31, 2002Jkt 200001PO 00000Frm 00002Fmt 4701Sfmt 4700E:\FR\FM\01NOR3.SGM01NOR3

67049

Federal Register

/Vol. 67, No. 212/Friday, November 1, 2002/Rules and Regulations

lenders when they receive updates to a borrower

’

s enrollment status from aninstitution, and to provide a simplifiedmethod for a borrower in the FFELProgram to ask a lender to increase thelength of the repayment period. [page51044]

•

Amending

682.211 to simplify theprocess by which a lender and a borrower in the FFEL Program mayagree to a discretionary forbearance.[page 51044]

•

Amending

682.402 to clarify thata State guaranty agency is not requiredto file a proof of claim in a bankruptcyfiling and may instruct lenders not tofile a proof of claim if filing a proof of claim would waive the State

’

s sovereignimmunity. [page 51045]

•

Amending

682.402 to provide thata guaranty agency may take up to 90days to review a total and permanentdisability discharge claim under theFFEL Program. [page 51045]

•

Amending

§§

668.183 and 668.193to revise, for purposes of calculating aninstitution

’

s cohort default rate, thedefinition of a defaulted loan. [page51045]

•

Amending

685.102 to modify theprovisions governing the expiration of aMaster Promissory Note in the DirectLoan Program. [page 51046]The August 8, 2002 NPRM includedproposed rules for the InstitutionalEligibility Under the Higher EducationAct of 1965, as Amended; StudentAssistance General Provisions; GeneralProvisions for the Federal Perkins LoanProgram, Federal Work-Study Program,and Federal Supplemental EducationalOpportunity Grant Program; FWSPrograms; FFEL Program; Direct LoanProgram; Federal Pell Grant Program;and GEAR UP regulations.In the preamble to the August 8, 2002NPRM, the Secretary discussed on pages51720 through 51733 the major changesproposed to improve the Federalstudent assistance programs. Theseincluded the following:

•

Amending

600.8 to reflect that thestatutory provision that a branchcampus must be in existence for twoyears before seeking to be designated asa main campus applies only toproprietary institutions of highereducation and postsecondary vocationalinstitutions. [page 51720]

•

Amending

§§

600.21, 600.31, and668.174 to provide clarification andadditional flexibility to the change of ownership provisions by expanding thedefinition of family members and broadening the transactions that are notconsidered to be a change of ownership.[page 51720]

•

Amending

§§

668.2, 668.3, and668.8 to remove the so-called

‘‘

12-hour

’’

rule that defined a week of instructionaltime for credit hour nonterm andnonstandard term educational programs.[page 51720]

•

Amending

§§

668.4, 682.603,685.301, and 690.75 to revise thedefinition of payment period for credithour nonterm educational programs andto clarify the definition of a paymentperiod when a student withdraws andthen returns to school. [page 51721]

•

Amending

668.14 to clarify thestatutory program participationagreement provision concerningincentive payment restrictions. [page51722]

•

Amending

668.22 to clarify whenan institution is considered to be onethat is required to take attendance forpurposes of determining a student

’

s lastdate of attendance. [page 51725]

•

Amending

668.22 to simplify thedefinition of a leave of absence and toallow for multiple leaves of absence notto exceed 180 days in any 12-monthperiod. [page 51726]

•

Amending

§§

668.35, 673.5, and690.79 to provide consistentrequirements for handling Title IVoverpayments, including a provisionunder which, in most cases, a studentwho owes an overpayment of a Title IVgrant or loan of less than $25 does notlose eligibility for additional Title IVaid. [page 51726]

•

Amending

§§

668.32 and 668.151 toeliminate the provision that limits theduration of a passing score on anapproved ability-to-benefit (ATB) test to12 months before a student initiallyreceives Title IV aid. [page 51728]

•

Amending

668.164 to clarify whenan institution is required to make a latedisbursement and to provide increasedflexibility for an institution to make alate disbursement to a student. [page51728]

•

Amending

668.165 to eliminatethe requirement that an institution mustconfirm the receipt of a notice sentelectronically to a student or parent.[page 51730]

•

Amending

§§

668.171 and 668.173to establish clear requirements forreturning unearned Title IV programfunds and the conditions under whichan institution must submit a letter of credit if it does not return those fundsin a timely manner. [page 51730]

•

Amending

§§

675.2 and 675.21 toprovide greater flexibility for theemployment of FWS students byproprietary institutions. [page 51731]

•

Amending

694.10 to removelanguage in the GEAR UP regulationsrelated to the packaging of GEAR UPscholarships by institutions. [page51732]We strongly encourage the reader torefer to the preambles of both theAugust 6, 2002, and August 8, 2002,NPRMs for a full discussion of thetopics proposed in those NPRMs andfinalized in this document.These final regulations contain a fewchanges from the NPRMs. We fullyexplain these changes in the

Analysis of Comments and Changes

elsewhere inthis preamble.

Implementation Date of TheseRegulations

Section 482(c) of the HEA requiresthat regulations affecting programsunder Title IV of the HEA be publishedin final form by November 1 prior to thestart of the award year (July 1) to whichthey apply. However, that section alsopermits the Secretary to designate anyregulation as one that an entity subjectto the regulation may choose toimplement earlier and the conditionsunder which the entity may implementthe provisions early.

Note:

Section 482 does not apply to theGEAR UP program (34 CFR part 694).

In response to our request in theNPRMs for suggestions on whichprovisions the Secretary shoulddesignate for early implementation,most of the commenters supportedmaking all of the provisions availablefor early implementation at thediscretion of the regulated entity.Therefore, consistent with the intent of this regulatory effort to reduce burdenand to provide greater flexibility, theSecretary is using the authority grantedhim under section 482(c) to designateall of the regulations subject to thatsection included in this document forearly implementation at the discretionof each institution, lender, guarantyagency, or state agency, as appropriate.In accordance with the authorityprovided by section 482(c) of the HEA,the Secretary has determined that forsome provisions, there are conditionsthat must be met in order for aninstitution, lender, guaranty agency, orstate agency, as appropriate, toimplement those provisions early. Theconditions are

—

Provision:

Sections 674.34 and682.210 that modify the formula used byTitle IV loan holders when calculatinga borrower

’

s eligibility for an economichardship deferment.

Condition:

Until the Secretary hasannounced the approval of reviseddeferment forms, loan holders mustprovide alternative methods by which borrowers provide them with the loandetail information needed to performthe calculation using the modifiedformula.