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| **DCLPublicationDate: 4/1/95DCLID: GEN-95-20AwardYear: Summary: Guidance for helping Title IV participants affected by the recent floods in California.**April 1995GEN-95-20SUBJECT:  Guidance for helping Title IV participantsaffected by the recent floods in California.REFERENCE:  This information supplements the guidance given inChapters 2-10, Federal Student Financial Aid Handbook.Dear Colleague:The Secretary recognizes the severe impact that the floods inCalifornia have had on Title IV participants located inPresidentially declared natural disaster areas.  As he has doneon similar occasions in the past, (for example, after the floodsin Texas in 1994), the Secretary wishes to assist the victims ofthe flooding in their recovery by providing certain regulatoryrelief to schools, lenders, and guaranty agencies in theiradministration of the student financial aid programs under TitleIV of the Higher Education Act of 1965, as amended (HEA).  Thisrelief is applicable to the 1994-95 award period (July 1, 1994 toJune 30, 1995), and is taken in anticipation of a Notice to bepublished in the Federal Register.This regulatory relief applies to individuals (and theirfamilies) employed in, or attending a school located in adisaster area designated by President Clinton, and to schools,lenders, and guaranty agencies that were unable to maintain theirnormal participation and interactions with Title IV participantsbecause of the flooding in those disaster areas.  Please refer tothe enclosed list of the counties currently declared as disasterareas.  [Note: updates to the list may be obtained by calling theDepartment's toll-free number at 1-800-433-3243, Monday throughFriday from 9:00 a.m. to 5:30 p.m. Eastern time.]A Title IV participant that deviates from otherwise requiredactions in its administration of the Title IV programs on thebasis of guidance offered within this letter must document theaction being taken.The Secretary provides the following guidance and enforcementrelief from regulatory requirements:  [Note: discussions arepresented alphabetically by topic within each of the programareas.]General Provisions (All Title IV Programs)-    Agreements to Permit Study at Another School (§600.9).  If a     school is unable to continue to provide a student's eligible     program because of the disaster, the Secretary strongly     encourages the school to establish a contractual or     consortium agreement with another school to enable the     student to continue to receive Title IV aid while studying     at the second school.  The requirements for such an     agreement are found in §600.9 of the Institutional     Eligibility regulations.  Generally, an eligible "home     institution" following these requirements will not face     potential liabilities concerning written agreements if the     school enters into an agreement with another eligible school     for this purpose.-    Determining the Date of a Student's Withdrawal     [§668.22(i)(1)(ii)].  The Secretary will not enforce the     regulatory deadlines for complying with the requirement that     a school determine the withdrawal date for a student if the     school is unable, because of the disaster, to make that     determination within the required timeframe.  The school     will be required to determine that the student has withdrawn     WITHIN 60 DAYS (instead of 30 days) after the expiration of     the earlier of the period of enrollment for which the     student has been charged, the academic year in which the     student withdrew, or the educational program from which the     student withdrew.-    Institutional Eligibility, Administrative Capability, and     Financial Responsibility (§600.40(a),§668.15, and §668.16).     If, in future program reviews or audits, the Secretary finds     that a school temporarily failed to meet the standards of     fiscal and administrative capability and the school     indicates that this failure was the result of the disaster,     the Secretary will carefully consider those circumstances     described by the school.  He will examine each situation on     a "case-by-case" basis and make a determination as part of     the audit or program review resolution process.  A short-     term, temporary closure of a school will not, in itself,     cause the school to lose its eligibility.-    Lost Student Records (§668.23).  The Secretary recognizes     that, because of the disaster, records and documentation     schools in the disaster area are required to keep on file     may no longer be available or legible.  Affected schools are     required to attempt to reconstruct financial aid application     data and award data lost because of the disaster but will     not be held responsible for records and documentation that,     because of disaster damage, cannot be reconstructed.  The     school must document that the records were lost due to the     disaster.-    Need Analysis.  No special aid received by victims of the     disaster from the Federal Government or the State for the     purpose of providing financial relief will be counted as     income for the purposes of calculating a family's expected     family contribution (EFC).  This aid may take the form of     grants or low-interest loans.-    Other Resources.  No special aid received by the victims of     the disaster from the Federal Government or the State for     the purpose of providing financial relief will be counted as     other resources or estimated financial assistance for the     purposes of determining need.  This aid may take the form of     grants or low-interest loans.-    Professional Judgment.  Section 479A of the HEA specifically     gives the financial aid administrator (FAA) the authority to     use professional judgment to make adjustments on a "case-by-     case" basis to the cost of attendance or to the values of     the items used in calculating the EFC toward meeting the     student's cost of attendance to reflect the student's     special circumstances.  The use of professional judgment in     Federal need analysis is discussed in Chapter 2 of the     Federal Student Financial Aid Handbook and in Part II of the     Counselor's Handbook for Postsecondary Schools.     For the Campus-Based, Direct Loan, and Federal Family     Education Loan (FFEL) Programs, the Secretary is encouraging     FAAs to use their professional judgment in determining     whether to make adjustments to the data used to calculate a     student's EFC in order to reflect more accurately his or her     financial need and provide some relief to a student whose     need requirements may have changed due to the economic     losses caused by the disaster.  An FAA still must make     adjustments on a "case-by-case" basis and clearly document     the student's file with the reasons for any adjustment.     For the Federal Pell Grant Program, there are no special     conditions on which to "adjust" a student's EFC when the     student suffers, or the student's family suffers, economic     loss through a natural disaster.  Instead, as in the case     with the other Title IV student financial aid programs, to     provide relief for disaster area victims, the Secretary is     encouraging FAAs to use their professional judgment to     determine whether adjustments to a student's data will more     accurately reflect a student's personal circumstances.  An     FAA must make adjustments on a "case-by-case" basis and     clearly document the student's file with the reasons for any     adjustment.     If the FAA makes adjustments to a student's data, the SAR     must be returned to the Title IV application processing     system, or reported to the Central Processing System (CPS)     through the Electronic Data Exchange.  The adjusted data     will then be processed through the CPS, and a new EFC will     be calculated.  Please note that if a student is not     eligible and is unlikely to become eligible for a Federal     Pell Grant, a school need not resubmit professional judgment     adjustments through the CPS.-    Satisfactory Academic Progress [34 CFR 668.7(c) and     §668.16(e)].  The Secretary will not enforce satisfactory     academic progress standards in the situation in which a     student may not be able to complete course requirements     because he or she is a victim of the disaster and may not,     for that reason, receive credit and fails to meet the     school's satisfactory academic progress standards.  In this     situation, the Secretary encourages the school to refrain     from applying its satisfactory academic progress standards     at least where their application would disqualify a student     from receiving Title IV aid.  The school must, in this case,     document in the student's file that the student's failure to     maintain satisfactory academic progress was due to the     natural disaster.-    Transfer Students (§668.19).  The school to which a student     is transferring must make an effort to obtain the records     and documentation required to disburse or deliver Title IV     aid.  If this information is not available as a result of     damage caused by the disaster, the school to which the     student transferred will not be held responsible for     collecting the information nor will the student be held     responsible for providing the information.  Any school     affected by this situation should document that the     information is unavailable due to the disaster.-    Tuition Refunds or Credits (§668.22 and Appendix A).  The     Secretary strongly encourages a school to provide a full     refund of required tuition and fees or a credit in a     comparable amount against future tuition and fees to a     student who has been unable to complete course requirements     because he or she is a victim of the disaster.-    Verification (34 CFR 668 Subpart E).  The Secretary will not     enforce the verification requirements during the award year     for those applicants selected for verification whose records     were lost or destroyed because of the disaster.  A school     must document the student's file when it does not perform     verification for this reason.  For these students,     Verification Status Code "S" may be used to report a Federal     Pell Grant disbursement.Campus-Based Programs     Federal Work-Study (FWS) Program-    Community Services (§675.2).  The Secretary encourages     schools to employ its FWS students in the cleanup and relief     efforts for the communities affected by the disaster.  These     efforts would be considered part of the school's community     services activities under the FWS Program.     Federal Perkins Loan Program-    Borrowers in an "In-School" Status (§674.31).  The Secretary     will consider that any borrower who was in an "in-school"     status at the time of the natural disaster and was unable to     complete course requirements or enroll in classes will     continue to be in an "in-school" status until such time as     the borrower withdraws, or until the end of the 1994-95     award period, whichever is later.  The school should     document this reason for continued "in-school" status in the     student's file.-    Borrowers in Initial or Post-Deferment Grace Periods     (§674.42).  The Secretary will not require a school to     comply with §674.42(b) requiring a school to make contact     with the borrower during an initial or post-deferment grace     period.  A school must document the reason for suspension of     these activities in the borrower's file.-    Borrowers in Default-Due Diligence.  The Secretary will not     enforce 34 CFR 674 Subpart C - Due Diligence.  A school may     suspend the collection activities for borrowers already in     default at the time of the natural disaster.  A school must     document the reason for suspension of these activities in     the borrower's file.-    Borrowers in Repayment (§674.34 - 674.36).  The Secretary     authorizes the school to grant an administrative hardship     deferment to a borrower who is in repayment at the time of     the natural disaster but is unable to continue to repay the     loan due to the disaster.  The legislation governing the     Perkins Loan Program requires that interest will accrue     during any period of administrative hardship deferment.  A     borrower may request this deferment orally, or in writing,     and will not be required to submit a deferment documentation     form to be considered eligible for this deferment.  A school     must document this deferment in the borrower's file.Federal Family Education Loan (FFEL) Program-    Converting the Borrower to Repayment (§682.209(a) and     §682.210).  The Secretary believes that it is in the best     interest of the FFEL Program to consider each Federal     Stafford loan that has not entered repayment and that was     not in a default status on the date the borrower's     attendance at the school was interrupted due to the disaster     to be (or have been) in an "in-school" status and to     continue in that status until the school resumes normal     operations.  This period of disaster-related nonattendance     should not require a borrower to enter or use any of his or     her grace period.     Each Federal Stafford loan that had entered repayment status     and that is not in a default status on the date the     borrower's attendance at the school was interrupted due to     disaster conditions is to be considered as in an in-school     deferment status during the period of disaster-related     nonattendance.  This interim period of nonattendance should     not force a borrower back into repayment.     A borrower whose FFEL loan was in an in-school deferment     status on the date the disaster conditions interrupted     normal operations at the school shall be treated as if the     loan continues in an in-school deferment status during this     same period of disaster-related nonattendance.-    Guaranty Agency and Lender Disbursement of Loan Proceeds.     The Secretary authorizes lenders not to disburse loan checks     to schools or to PLUS borrowers in the affected area     according to the originally established disbursement     schedules as required under §682.207(b)(1)(i)(B) if they     have been informed that a school has delayed opening for a     scheduled term or has ceased operations for an undetermined     period of time.  Lenders should await revised disbursement     schedules from the affected schools.  Schools are also urged     to request revised disbursement dates.     The Secretary instructs guaranty agencies and lenders to     revise information on loan periods, graduation dates, and so     forth, on the loan applications related to these     disbursements as the information becomes available.  This     instruction means that a borrower need not reapply for the     loan.  This also will allow a student to receive his or her     loan proceeds according to a schedule that fits the school's     new academic schedule.-    Lender and Guaranty Agency Due Diligence. *1*  The Secretary     has decided that it is in the best interest of the flood     victims and the federal government to waive his right to     refuse to pay reinsurance to guaranty agencies or interest     and special allowance benefits to lenders under the     following circumstances:     A.    Lenders and guaranty agencies servicing accounts of           borrowers residing in designated natural disaster areas           or who would be required to contact other entities           located in a designated natural disaster area who are           unable to maintain normal operations.     If a borrower resides in an area designated by the President     as a natural disaster area (see attached list of designated     counties), lenders and guaranty agencies are not required to     comply with any regulatory provision requiring the lender or     agency to contact the borrower in writing or by telephone     within specified timeframes.  For example, contacts with a     delinquent or defaulted borrower (or endorser, if     applicable) of an FFEL Program loan, that normally would be     required under §682.410 and §682.411, may be suspended.     This waiver will apply to all such contacts that would     otherwise be required during the periods specified on the     list of counties.  Lenders and guaranty agencies are     strongly encouraged to grant administrative forbearance to     all borrowers residing in the designated counties during     this period.  All regulatory requirements shall resume on     the dates indicated on the list, beginning with the     activities that immediately follow those activities last     performed at the time the lender or guaranty agency     suspended its collection efforts.     If a lender or guaranty agency is able to maintain normal     business operations (regardless of its location), but would     normally be required to contact an entity (e.g., a school)     that is adversely affected by the flooding to the extent     that the entity to be contacted cannot maintain normal     business operations, the lender or guaranty agency is not     required to comply with any time-driven regulatory provision     with respect to that entity during the waiver period.  All     regulatory requirements shall resume on the dates indicated     on the list, beginning with the activities that immediately     follow those activities last performed at the time the     lender or guaranty agency suspended its contact with the     entity.     B.    Lenders and guaranty agencies located in a designated           natural disaster area who are unable to maintain normal           operations.     Lenders and guaranty agencies located in a designated     natural disaster area who are adversely affected by the     flooding to the extent that they cannot maintain normal     business operations, are not required to comply with     regulatory provisions that normally would require them to     perform a specific action in a prescribed period of time     during the waiver period.  These provisions include the     time-driven requirements in §682.205, §682.207, §682.208,     §682.209, §682.402, §682.404, §682.406, §682.410, §682.411,     and §682.412 that relate to activities such as loan     disclosures, disbursement, servicing, repayment, claim     processing and filing deadlines, certain terms of the     federal reinsurance agreement, and due diligence     requirements.  All regulatory requirements shall resume on     the dates indicated on the applicable listings, beginning     with the activities that immediately follow those activities     last performed at the time the lender or guaranty agency was     unable to comply with regulatory requirements because of the     flooding.     C.    Waivers applicable to FFEL schools located in a           disaster area.-    Payment of a Refund to a Student or to a Lender (§668.22 and     §682.607).  The Secretary will not enforce the deadlines by     which an affected school must pay a refund that is due to a     student or to a lender after the student's withdrawal as     determined under §668.22(i).  Instead, the Secretary will     require the school to pay a refund to the student WITHIN 90     DAYS (instead of 30 days) and to the lender WITHIN 120 DAYS     (instead of 60 days) after the student's withdrawal.-    School's Delivery of Loan Proceeds (§682.604).  The     Secretary will not enforce the requirement in §682.604 that     loan proceeds be delivered to the borrower within 45 days of     the school's receipt of the check but will instead permit     the school to deliver loan proceeds to the borrower up to     120 days from the school's receipt of the check.-    Submission of Student Status Confirmation Reports     [§682.610(c)].  The Secretary will not enforce the deadline     that a school complete and submit required student status     confirmation reports to the Secretary or guaranty agency     within 30 days of the school's receipt of the report but     will instead require completion and submission of these     reports WITHIN 90 DAYS.  Reports of changes of borrower     status if the school does not expect to submit its next     report within the next 60 days may also be submitted WITHIN     90 DAYS (instead of 30 days).Federal Pell Grant Program-    Reporting Deadlines (Notices of Deadline Dates).  The     Secretary will consider carefully, on a "case-by-case"     basis, the effect of the disaster on any school's ability to     meet required Federal Pell Grant reporting deadlines.William D. Ford Federal Direct Loan Program-    Payment of a Refund to a Student or to the Secretary     (§668.22 and §685.305).  The Secretary will not enforce the     deadlines by which an affected school must pay a refund that     is due to a student or to the Secretary after the student's     withdrawal as determined under §668.22(i).  Instead, the     Secretary will require the school to pay a refund to the     student WITHIN 90 DAYS (instead of 30 days) and to the     Secretary WITHIN 120 DAYS (instead of 60 days) after the     student's withdrawal.-    Repayment of Direct Subsidized and Direct Unsubsidized Loans     (§685.204 and §685.207).  The Secretary believes that it is     in the best interest of the Direct Loan Program to consider     each Direct Subsidized and Direct Unsubsidized loan that has     not entered repayment and that was not in a default status     on the date the borrower's attendance at the school was     interrupted due to the disaster to be (or have been) in an     "in-school" status and to continue in that status until the     school resumes normal operations.  This period of disaster-     related nonattendance should not require a borrower to enter     or use any of his or her grace period.     Each Direct Subsidized and Direct Unsubsidized loan that had     entered repayment status and that is not in a default status     on the date the borrower's attendance at the school was     interrupted due to disaster conditions is to be considered     as in an in-school deferment status during the period of     disaster-related nonattendance.  This interim period of     nonattendance should not force a borrower back into     repayment.-    Submission of Student Status Confirmation Reports     [§685.308(b)].  The Secretary will not enforce the deadline     that a school complete and submit required student status     confirmation reports to the Secretary within 30 days of the     school's receipt of the report but will instead require     completion and submission of these reports WITHIN 90 DAYS.     Reports of changes of borrower status, if the school does     not expect to submit its next report within the next 60     days, may also be submitted WITHIN 90 DAYS (instead of 30     days).For additional information or if you have any questions pleasecontact:                 Jeffrey Baker, Director                 Policy Development Division                 Student Financial Assistance Programs                 U.S. Department of Education                 600 Independence Avenue, SW                 Washington, DC  20202-5345                 Telephone: (202) 708-9967  FAX: (202) 205-0786We hope that these options for regulatory relief will be of useto you in assisting students whose families have been affected bythe disaster.Sincerely,David A. LonganeckerEnclosure*1*  The guidance given in sections A and B below repeats the guidanceapplicable to the counties that were declared disaster areas as of the date(February 15) that the Department disseminated a "Dear Guaranty AgencyDirector" letter to FFEL lenders, guaranty agencies, and other parties.Enclosure for California flood disaster letter, April 1995Attachment |
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