Vol. 78 Friday, 

No. 212 November 1, 2013 

Part II 

Department of Education 

34 CFR Parts 668, 674, 682, and 685 

Student Assistance General Provisions, Federal Perkins Loan Program, 

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

Direct Loan Program; Final Rule 

mstockstill on DSK4VPTVN1PROD with RULES2

65768 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

DEPARTMENT OF EDUCATION 

34 CFR Parts 668, 674, 682, and 685 

RIN 1840–AD12 

[Docket ID ED–2013–OPE–0063] 

Student Assistance General 

Provisions, Federal Perkins Loan 

Program, Federal Family Education 

Loan Program, and William D. Ford 

Federal Direct Loan Program 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Final regulations. 

SUMMARY: The Secretary amends the 

Student Assistance General Provisions, 

Federal Perkins Loan (Perkins Loan) 

Program, Federal Family Education 

Loan (FFEL) Program, and William D. 

Ford Federal Direct Loan (Direct Loan) 

Program regulations. These final 

regulations will: Amend the FFEL and 

Direct Loan program regulations to 

reflect changes made to the Higher 

Education Act of 1965, as amended 

(HEA), by the SAFRA Act included in 

the Health Care and Education 

Reconciliation Act of 2010; incorporate 

statutory changes to interest rates and 

other recent statutory changes in the 

Direct Loan Program regulations; 

update, strengthen, and clarify various 

areas of the Student Assistance General 

Provisions, Perkins Loan, FFEL, and 

Direct Loan program regulations; and 

provide for greater consistency in the 

regulations governing the title IV, HEA 

student loan programs. These final 

regulations will ensure that the title IV, 

HEA Federal student aid programs 

operate as efficiently as possible. 

DATES: Effective date: These regulations 

are effective July 1, 2014. 

Implementation dates: For 

implementation dates, see the 

Implementation Date of These 

Regulations section of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: For 

further information related to loan 

rehabilitation reasonable and affordable 

payments, contact Brian Smith or 

Pamela Moran at (202)–502–7551 or 

(202)–502–7732 or by email at: 

Brian.Smith@ed.gov or Pamela.Moran@

ed.gov. For further information related 

to administrative wage garnishment, 

contact Nathan Arnold or Pamela Moran 

at (202)–219–7134 or (202)–502–7732 or 

by email at: Nathan.Arnold@ed.gov or 

Pamela.Moran@ed.gov. For further 

information related to Federal Perkins 

Loan program changes, contact Gail 

McLarnon or Brian Smith at (202)–219– 

7048 or (202)–502–7551 or by email at: 

Gail.McLarnon@ed.gov or Brian.Smith@

ed.gov. For further information related 

to Direct Loan program changes, contact 

Gail McLarnon, Jon Utz, or Pamela 

Moran at (202)–219–7048, (202)–377– 

4040, or (202)–502–7732 or by email at: 

Gail.McLarnon@ed.gov, Jon.Utz@ed.gov, 

or Pamela.Moran@ed.gov. For further 

information on FFEL program changes, 

contact Pamela Moran or Nathan Arnold 

at (202)–502–7732 or 202–219–7134 or 

by email at: Pamela.Moran@ed.gov or 

Nathan.Arnold@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD) or a text 

telephone (TTY), call the Federal Relay 

Service (FRS), toll free, at 1–800–877– 

8339. 

SUPPLEMENTARY INFORMATION: 

Executive Summary: 

Purpose of This Regulatory Action: 

These final regulations address issues 

arising from the changes made to the 

HEA by the SAFRA Act, included in the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152). The SAFRA Act ended the 

origination of new loans under the FFEL 

Program after June 30, 2010. With this 

change, all new Stafford, PLUS, and 

Consolidation loans with a first 

disbursement on or after July 1, 2010, 

are now made under the Direct Loan 

Program. Because all new loans are 

being made under the Direct Loan 

Program, these final regulations amend 

the FFEL Program regulations in 34 CFR 

part 682 by removing provisions related 

to the making of new loans. The final 

regulations also reflect changes made to 

interest rates in the Direct Loan program 

by the Bipartisan Student Loan 

Certainty Act of 2013 (Pub. L. 113–28). 

In addition, the regulations amend the 

Direct Loan Program regulations in 34 

CFR part 685 by adding detailed 

regulations in areas where the Direct 

Loan Program regulations crossreference the FFEL Program regulations. 

The regulations also strengthen and 

clarify provisions of the Perkins Loan, 

FFEL, and Direct Loan program 

regulations including, but not limited 

to, regulations governing: deferments, 

forbearances, loan cancellation, 

rehabilitation of defaulted loans, 

administrative wage garnishment, and 

satisfactory repayment arrangements. 

The regulations also make the rules 

governing the various title IV, HEA loan 

programs more consistent. 

Summary of the Major Provisions of 

This Regulatory Action: The final 

regulations— 

• Raise the participation rate index 

ceiling applicable to institutions that 

have a single three-year cohort default 

rate of over 40 percent for purposes of 

challenges to, and appeals from, 

sanctions based on that default rate. (34 

CFR 668.204(c) and 668.214(a) and (d)) 

• Clarify the Perkins Loan, FFEL, and 

Direct Loan program regulations to 

provide that a borrower who makes six 

payments in the course of rehabilitating 

a defaulted loan, but who does not seek 

additional title IV aid, will not be 

considered to have used the one-timeonly opportunity to regain title IV 

eligibility by making satisfactory 

repayment arrangements. The 

regulations also define the term 

‘‘satisfactory repayment arrangement’’ 

more consistently across the title IV, 

HEA loan programs. (34 CFR 674.2(b), 

674.9(k), 682.200(b), 685.102(b), and 

685.200(d)) 

• Amend the closed school discharge 

provisions in the Perkins Loan, FFEL, 

and Direct Loan program regulations to 

specify that a borrower may qualify for 

a loan discharge if the borrower 

withdrew from school not more than 

120 days before the school closed, 

instead of the current 90-day standard. 

The regulations also add examples of 

the types of exceptional circumstances 

under which the Department may 

extend the 120-day window. (34 CFR 

674.33(g), 682.402(d), and 685.214) 

• Update the FFEL and Direct Loan 

program enrollment status reporting 

requirements for institutions to reflect 

current processes and eliminate obsolete 

terms and procedures. The regulations 

also add comparable enrollment status 

reporting provisions to the Perkins Loan 

Program regulations. (34 CFR 674.19(f), 

682.605, 682.610(c), and 685.309(b)) 

• Revise the terms under which a 

guaranty agency in the FFEL Program 

may authorize a lender to grant 

forbearance to permit a borrower or 

endorser to resume honoring the 

agreement to repay a debt after default 

but prior to claim payment to require 

either a signed written agreement to 

repay or an oral affirmation of the 

borrower’s or endorser’s obligation to 

repay the debt. The regulations provide 

that if a forbearance is granted based on 

the borrower’s or endorser’s oral request 

and affirmation of the obligation, the 

forbearance is limited to 120 days and 

cannot be granted for consecutive 

periods. In addition, the lender must 

orally review with the borrower the 

terms and conditions of the forbearance 

and send a notice to the borrower or 

endorser that confirms the terms of the 

forbearance. The regulations also define 

the term ‘‘affirmation.’’ Finally, the 

regulations also add comparable 

provisions to the Direct Loan Program 

regulations. (34 CFR 682.211(d) and 

685.205(a)(8)) 

• Require that lenders grant 

forbearance to FFEL borrowers who are 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65769 

performing service that qualifies them 

for loan repayment under the 

Department of Defense student loan 

repayment programs in addition to the 

program authorized by 10 U.S.C. 2171 

(which is currently referenced in the 

regulations). A comparable forbearance 

provision is added to the Direct Loan 

Program regulations. (34 CFR 682.211(h) 

and 685.205(a)(9)) 

• Authorize a lender to grant an 

administrative forbearance to a FFEL 

borrower who is delinquent at the 

beginning of an authorized period of 

forbearance and add a corresponding 

provision to the Direct Loan Program 

regulations. (34 CFR 682.211(f) and 

685.205(b)(2)) 

• Provide that the Secretary, in both 

the FFEL and Direct Loan programs, and 

the guaranty agency, in the FFEL 

Program, once the rehabilitation 

discussion has begun, initially considers 

a borrower’s reasonable and affordable 

loan rehabilitation payment amount to 

equal 15 percent of the amount by 

which the borrower’s Adjusted Gross 

Income (AGI) exceeds 150 percent of the 

poverty guideline amount applicable to 

the borrower’s family size and State, 

divided by 12. If the amount determined 

using this calculation is less than $5, the 

borrower’s monthly rehabilitation 

payment is $5. (34 CFR 682.405(b) and 

685.211(f)) 

• Specify in the FFEL and Direct 

Loan program regulations that a 

reasonable and affordable loan 

rehabilitation payment amount must not 

be a required minimum payment 

(except that a payment amount 

calculated as described in the 

immediately preceding paragraph may 

not be less than $5), a percentage of the 

borrower’s total loan balance, or an 

amount based on other criteria 

unrelated to the borrower’s total 

financial circumstances. (Note that these 

changes to the loan rehabilitation 

reasonable and affordable payment 

amount calculation do not prohibit the 

Secretary, his designee, or a guaranty 

agency from discussing other payment 

arrangements with the borrower, 

including payment of the full defaulted 

loan balance or payment of the 

defaulted loan through consolidation, 

outside of the context of the loan 

rehabilitation program and its 

associated requirements.) (34 CFR 

682.405(b) and 685.211(f)) 

• Require that the Secretary, in the 

FFEL and Direct Loan programs, or the 

guaranty agency, in the FFEL Program, 

provide the borrower with a written 

rehabilitation agreement within 15 

business days of the determination of 

the borrower’s reasonable and affordable 

payment amount along with a 

comprehensive description of the 

borrower’s rights, the terms and 

conditions of the payments, the effects 

of loan rehabilitation, and, for a FFEL 

borrower, the treatment of unpaid 

collection costs. (34 CFR 682.405(b) and 

685.211(f)) 

• Provide that, if the borrower objects 

to the initial payment amount 

determined by the Secretary or the 

guaranty agency, the Secretary or the 

guaranty agency will recalculate the 

amount of the borrower’s rehabilitation 

payment based on the borrower’s and, if 

applicable, the borrower’s spouse’s 

current disposable income, family size, 

and reasonable and necessary expenses. 

The information about income and 

expenses needed to determine the 

alternative reasonable and affordable 

payment amount will be provided by 

the borrower to the Secretary or the 

guaranty agency on a form approved by 

the Secretary and, if requested, with 

supporting documentation from the 

borrower or other sources. (34 CFR 

682.405(b) and 685.211(f)) 

• Provide that, while the borrower is 

making payments under a rehabilitation 

agreement, the Secretary and the 

guaranty agency will limit contact with 

the borrower to collection activities 

required by law or regulation and 

communications that support the 

rehabilitation. (34 CFR 682.405(b) and 

685.211(f)) 

• Amend the Direct Loan and FFEL 

program regulations to provide that, 

when a loan is being collected by 

administrative wage garnishment 

(AWG), the Secretary or the guaranty 

agency, respectively, will suspend AWG 

after the borrower makes five qualifying 

monthly payments under a loan 

rehabilitation agreement, unless the 

borrower requests that AWG continue. 

(34 CFR 682.405(a) and 685.211(f)) 

• Incorporate into the Perkins Loan 

Program the same eligibility criteria 

used in the Direct Loan and FFEL 

programs to define an ‘‘eligible graduate 

fellowship program’’ and to establish 

the eligibility of a Perkins Loan 

borrower for a graduate fellowship 

deferment. (34 CFR 674.34(f)) 

• Eliminate the debt-to-income 

economic hardship deferment category 

in the Perkins Loan Program. (34 CFR 

674.34(e)) 

• Modify the rehabilitation provisions 

in the Perkins Loan Program regulations 

to define the term ‘‘on-time’’ as it relates 

to the series of payments required to 

successfully rehabilitate a defaulted 

loan. (34 CFR 674.39(a)(2)) 

• Allow assignment of a Perkins Loan 

to the Secretary without the borrower’s 

Social Security Number if the loan was 

made before September 13, 1982. (34 

CFR 674.50(e)(1)) 

• Permit a Perkins Loan borrower 

who is unable to complete the second 

half of an academic year of teaching due 

to a condition covered under the Family 

and Medical Leave Act (FMLA) to still 

count that year as eligible teaching 

service for loan cancellation purposes, if 

the borrower’s employer considers the 

borrower to have fulfilled the teacher 

contract requirements for that academic 

year. (34 CFR 674.52(c)(1)) 

• Permit a Perkins Loan borrower 

who is unable to complete a full year of 

eligible public service due to a 

condition that is covered under the 

FMLA to count that year as a full year 

of public service for loan cancellation 

purposes if the borrower completes at 

least six months of consecutive eligible 

service. (34 CFR 674.52(c)(2)) 

• Specify that, if a Perkins Loan 

borrower who is performing service that 

qualifies the borrower for loan 

cancellation at a cancellation rate 

progression of 15 percent for the first 

and second years of qualifying service, 

20 percent for the third and fourth years 

of qualifying service, and 30 percent for 

the fifth year of qualifying service, takes 

a job in a different field that qualifies 

the borrower under a different 

cancellation category that provides loan 

cancellation at the same cancellation 

rate progression as the prior category, 

the borrower’s cancellation rate under 

the new cancellation category will 

continue from the last year the borrower 

received a cancellation under the former 

cancellation category, rather than 

starting over at the first-year 

cancellation rate. (34 CFR 674.52(g)) 

• Change the timeframe for FFEL 

lenders to send the required repayment 

disclosure for borrowers who are 60 

days delinquent from five calendar days 

to five business days after the date the 

borrower becomes 60 days delinquent. 

(34 CFR 682.205(a)(5)) 

• Amend the FFEL Program 

regulations to provide that a lender does 

not have to send a repayment disclosure 

to a borrower who is having difficulty 

making payments if the borrower’s 

difficulty has been resolved through 

contact resulting from an earlier 

disclosure or from other contact 

between the lender and the borrower. 

(34 CFR 682.205(a)(4)) 

• Amend the regulations governing 

AWG to reflect the borrower’s right to 

request a hearing on the enforceability 

of the debt and to allow the borrower to 

object to the amount or rate of AWG 

withholding if such withholding would 

cause financial hardship to the 

borrower. (34 CFR 682.410(b)(9)) 

mstockstill on DSK4VPTVN1PROD with RULES2

65770 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

• Revise the regulations governing 

AWG to conform the requirements for 

borrowers whose defaulted loans are 

held by a guaranty agency to the rules 

and procedures used by the Secretary. 

(34 CFR 682.410(b)(9)) 

• Amend the regulations governing 

AWG to incorporate existing policy 

guidance related to third-party servicers 

or collection contractors retained by 

guaranty agencies. (34 CFR 

682.410(b)(9)) 

• Amend the regulations governing 

AWG to more clearly describe the 

process, from the initial garnishment 

notice to withholding. (34 CFR 

682.410(b)(9)) 

• Amend the regulations governing 

AWG to better reflect due process 

requirements and to specify the 

functions, delegations of authority, 

recordkeeping requirements, and 

permissible activities of guaranty 

agencies and third-party servicers or 

collection contractors. (34 CFR 

682.410(b)(9)) 

• Clarify the limitations on the 

amount that may be subject to AWG if 

a guaranty agency is garnishing pay 

from a borrower who is not already 

subject to a withholding order or from 

a borrower who is already subject to one 

or more withholding orders. The 

regulations will also permit a greater 

amount or percentage to be withheld 

with the borrower’s consent. (34 CFR 

682.410(b)(9)) 

• Require that for a borrower to 

receive a hearing before AWG begins, 

the borrower’s written request for a 

hearing must be received on or before 

the 30th day following the date the 

garnishment notice was sent, and 

remove a rule providing that a borrower 

is considered to have received a 

garnishment notice five days following 

the date of the notice. (34 CFR 

682.410(b)(9)) 

• Provide that if a borrower’s written 

request for a hearing is received by the 

guaranty agency after the 30th day 

following the date of the garnishment 

notice, the agency must provide the 

borrower a hearing and issue a decision 

within 60 days following receipt of the 

request. If a decision is not rendered 

within 60 days, the guaranty agency 

must suspend the order beginning on 

the 61st day after the hearing request 

was received until a hearing is provided 

and a decision is rendered. (34 CFR 

682.410(b)(9)) 

• Amend the FFEL Program 

regulations to: specify the contents of an 

AWG notice; describe how an AWG 

hearing is administered, including 

provisions for the submission of 

additional evidence and the granting of 

continuances; provide for the 

withholding order to end by either 

rescission or full recovery of amounts 

owed by the borrower; and clarify that 

a borrower who wishes to object that he 

or she is not subject to garnishment 

because of involuntary separation bears 

the burden of raising and proving that 

claim. (34 CFR 682.410(b)(9)) 

• Eliminate provisions in the FFEL 

Program regulations governing loan 

origination and disbursement and 

related requirements and activities 

except for certain school-based 

requirements and related activities. (34 

CFR Part 682) 

• Eliminate obsolete provisions that 

do not reflect the current procedures in 

the FFEL Program. (34 CFR Part 682) 

• Make necessary conforming 

changes in various FFEL Program 

provisions to update the regulations. (34 

CFR Part 682) 

• In the Direct Loan Program 

regulations, modify the exception to the 

minimum loan period requirement for 

clock-hour and certain non-standard 

term programs that allows a school, in 

certain transfer student situations, to 

originate a loan for a period shorter than 

the lesser of the academic year or 

program length only if the school 

accepts credit or clock hours from the 

school that the student was previously 

attending. The regulations remove the 

provision that limits this exception to 

situations in which the school into 

which the student transfers accepts 

credit or clock hours from the prior 

school. (34 CFR 685.301(a)(10)) 

• Add detailed regulations to 34 CFR 

part 685 in areas where the Direct Loan 

Program regulations cross-reference the 

FFEL Program regulations. (34 CFR Part 

685) 

• Remove obsolete provisions that do 

not reflect current procedures used in 

administering the Direct Loan Program. 

(34 CFR Part 685) 

• Revise the Direct Loan Program 

regulations to reflect the impact of the 

SAFRA Act, the Bipartisan Student 

Loan Certainty Act of 2013, and other 

recent statutory changes. (34 CFR Part 

685) 

Chart 1 summarizes the final 

regulations and related benefits, costs, 

and transfers that are discussed in more 

detail in the Regulatory Impact Analysis 

section of this preamble. Significant 

benefits of these final regulations 

include a clearer process for 

determining a reasonable and affordable 

payment for loan rehabilitation that 

should result in more consistent 

treatment of borrowers, the elimination 

of FFEL Program regulations that are no 

longer needed, the expansion of the 

period during which a borrower who 

withdraws from a school prior to its 

closure may qualify for a closed school 

discharge, and additional changes to 

promote transparency and efficiency in 

the administration of the Federal 

student loan programs. The estimated 

net budget impact of the regulations is 

$2.8 to $3.4 million over ten years from 

2013–2022, driven by the expansion of 

the time period for eligibility for a 

closed school discharge. As shown in 

the Accounting Statement within the 

Regulatory Impact Analysis of these 

final regulations, the annualized 

estimated transfer from the Federal 

government to borrowers associated 

with the statutory changes to Direct 

Loan interest rates is $1.2 billion at a 7 

percent discount rate and $467 million 

at a 3 percent discount rate. For some 

future cohorts, depending on the cost of 

funds of the Federal government, the 

transfer may be reversed and the 

students would have higher interest 

rates than if the PB2014 baseline 

assumed rates of 6.8 percent for Direct 

Subsidized Loans and Direct 

Unsubsidized Loans and 7.9 percent for 

Direct PLUS Loans had continued in 

effect. 

CHART 1—SUMMARY OF THE FINAL REGULATIONS

Issue and key features Benefits Cost/transfers 

Three-Year Cohort Default Rate Participation 

Rate Index Challenges and Appeals (34 CFR 

668.204 and 668.214).

Raises the Participation Rate Index ceiling for 

purposes of challenges to and appeals from 

sanctions based on one three-year cohort default rate of over 40 percent from 0.06015 to 

0.0832. 

More schools with low Title IV participation 

but high default rates (above 40%) will be 

able to appeal their loss of Title IV eligibility. This is important as the change from 

a 2-year to a 3-year cohort default rate is 

predicted to leave many schools ineligible 

to appeal their sanctions under the previous 

regulations.

No significant costs projected. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65771 

CHART 1—SUMMARY OF THE FINAL REGULATIONS—Continued 

Issue and key features Benefits Cost/transfers 

Perkins Loan, FFEL, and Direct Loan Programs: Satisfactory Repayment Arrangements (34 CFR 674.2(b), 674.9(k), 

682.200(b), 685.102(b), and 685.200).

Makes the definitions of ‘‘satisfactory repayment arrangement’’ more consistent across 

the three title IV student loan programs. 

Creates a consistent standard across the 

three loan programs and adds clarity to the 

regulations regarding defaulted loan rehabilitation.

No significant costs projected. 

Closed School Discharge (34 CFR 674.33(g), 

682.402(d), and 685.214).

Extends the current 90-day window for students 

who leave before a school closes to 120 

days and adds examples of the types of exceptional circumstances under which the Department may extend the 120-day window. 

Expanding the window an extra 30 days will 

provide discharges to students who failed to 

meet the 90-day criteria but withdrew from 

a program as it was preparing to close. Citing clear examples of exceptional circumstances adds clarity to the loan regulations and gives borrowers a basis on which 

to make educated decisions.

We estimate these changes to have a cost of 

approximately $3.1 million over 10 years as 

the pool of borrowers eligible for discharge 

will increase. 

School Enrollment Status Reporting Requirements (34 CFR 674.19, 682.605, 682.610, 

and 685.309).

Revises the regulations to reflect the current 

processes by which schools receive and report student enrollment status information 

and provides the Secretary with greater flexibility to modify enrollment reporting procedures in the future. 

Improves the Department’s information collection process and supports a more efficient 

loan servicing process.

No significant costs projected. 

Forbearance for Borrowers Who are 270 or 

More Days Delinquent Prior to Guaranty 

Agency Default Claim Payment or Transfer 

by the Department to Collection Status (34 

CFR 682.211(d) and 685.205).

Requires lenders to send a notice within 30 

days of a forbearance agreement to the borrower if the agreement is based on an oral 

request or agreement. 

Creates a consistent standard across the loan 

programs and ensures that borrowers are 

fully informed of the details of their forbearance agreement. Borrowers will have to affirm their commitment to repay and acknowledge their debt, which may improve 

the probability of full repayment.

No significant costs projected. 

Forbearance Provisions for Borrowers Receiving Department of Defense Student Loan Repayment Benefits (34 CFR 682.211(h) and 

685.205).

Requires that lenders grant forbearance to borrowers who are performing service that qualifies them for loan repayment under the Department of Defense student loan repayment 

programs authorized by 10 U.S.C. 2171, 

2173, or 2174, or under any other student 

loan repayment program administered by the 

Department of Defense. 

Creates consistency across loan programs .... No significant costs projected. 

Borrowers Who Are Delinquent When an Authorized Forbearance Is Granted (34 CFR 

682.211(f) and 685.205).

Authorizes lenders to grant an administrative 

forbearance to a borrower who is delinquent 

at the beginning of an authorized period of 

forbearance. 

Borrowers who opt to use forbearance will not 

have to worry about having a delinquent repayment status upon exiting forbearance.

No significant costs projected. 

Loan Rehabilitation Agreement: Reasonable 

and Affordable Payment Standard (34 CFR 

682.405(b) and 685.211(f)).

Establishes standards for determining a ‘‘reasonable and affordable’’ loan repayment for 

rehabilitation purposes. 

Reduces the burden on defaulted borrowers 

who are attempting to rehabilitate their 

loans and adds transparency to the process. This will possibly increase the percentage of defaulted borrowers that complete 

the rehabilitation process and fully repay 

their loans.

No significant costs projected. 

Loan Rehabilitation Agreement: Treatment of 

Borrowers Subject to Administrative Wage 

Garnishment (34 CFR 682.405(a) and 

685.211(f)).

Suspends AWG after a borrower has made five 

qualifying payments under a loan rehabilitation agreement. 

Provides financial relief to borrowers whose 

loans are being collected through AWG but 

who are taking positive steps to repay their 

loans.

No significant costs projected. 

mstockstill on DSK4VPTVN1PROD with RULES2

65772 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

CHART 1—SUMMARY OF THE FINAL REGULATIONS—Continued 

Issue and key features Benefits Cost/transfers 

Federal Perkins Loan Graduate Fellowship 

Deferment Eligibility (34 CFR 674.34(b)(1) 

and (f)).

Requires schools that participate in the Perkins 

Loan Program to use the same eligibility criteria that are used in the FFEL Program 

(under § 682.210(d)) to define an eligible 

graduate fellowship program and to establish 

the eligibility of a Perkins Loan borrower for a 

graduate fellowship deferment. 

Creates consistency across loan programs .... No significant costs projected. 

Federal Perkins Loan Economic Hardship 

Deferment Debt-to-Income Ratio Provision 

(34 CFR 674.34(e)(4)).

Eliminates an inconsistency between the economic hardship deferment eligibility criteria in 

the Perkins Loan program and the eligibility 

criteria in the Direct Loan and FFEL programs. 

Creates consistency across loan programs .... No significant costs projected. 

Federal Perkins Loan Standard for On-time 

Loan Rehabilitation Payment (34 CFR 

674.39(a)(2)).

Identifies what is considered an ‘‘on-time’’ loan 

payment for rehabilitation purposes within the 

Perkins Loan program. 

Creates consistency across loan programs .... No significant costs projected. 

Social Security Number Requirement (SSN) for 

Assignment of Defaulted Federal Perkins 

Loans to the United States (34 CFR 

674.50(e)(1)).

Allows assignment of a Perkins Loan without 

the borrower’s SSN if the loan was made before September 13, 1982. 

Makes the administration of Perkins Loans 

less burdensome by bringing the regulations more in line with past practices.

No significant costs projected. 

Federal Perkins Loan Break in Cancellation 

Service Due to a Condition Covered under 

the Family and Medical Leave Act (34 CFR 

674.52(c)(1)).

Allows a Perkins Loan borrower who is unable 

to complete a second half of an academic 

year of teaching or a full year of public service due to a condition covered under the 

Family Medical and Leave Act to still count 

that year as a full year of service if the borrower’s employer considers the borrower to 

have fulfilled the requirements for that year. 

Adds consistency across the loan programs. It 

also provides leniency for eligible borrowers 

who are unable to complete their service 

requirements because of injury or illness.

No significant costs projected. 

Federal Perkins Loan Cancellation Rate Progression (34 CFR 674.52(g), 674.53(d), 

674.56(h), 674.57(c)(2), and 674.59(c)(2)).

Allows borrowers to continue their progression 

toward full loan cancellation when they 

change jobs to a position with the same cancellation eligibility requirements. 

Borrowers who are progressing toward loan 

cancellation based on employment in a particular field who switch jobs will no longer 

lose credit for their time served as along as 

the new job has the same loan cancellation 

eligibility.

No significant costs projected. 

FFEL Lender Repayment Disclosures for Borrowers Who Are 60 Days Delinquent (34 

CFR 682.205(a)(5)).

Changes the requirement that FFEL Lenders 

have to provide a repayment disclosure to a 

borrower from five calendar days after the 

date the borrower becomes 60 days delinquent to five business days after that date. 

Reduces the burden on FFEL lenders by accounting for holidays and weekends.No significant costs projected. 

FFEL Lender Repayment Disclosures to Borrowers Who Are Having Difficulty Making 

Payments (34 CFR 682.205(a)(4)).

Removes requirement that a FFEL lender provide a borrower with a disclosure upon notification from the borrower that he or she is 

having trouble making payments, if the borrower’s difficulty has been previously resolved. 

Reduces the paperwork burden on FFEL 

lenders.

No significant costs projected. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65773 

CHART 1—SUMMARY OF THE FINAL REGULATIONS—Continued 

Issue and key features Benefits Cost/transfers 

Administrative Wage Garnishment of the Disposable Pay of Defaulted FFEL Program Borrowers (34 CFR 682.410(b)).

Borrower Hearing Opportunities on the Enforceability of the Debt and a Borrower’s Claim of 

Financial Hardship (34 CFR 682.410(b)(9)(i)). 

Changes the regulations regarding Administrative Wage Garnishments (AWG) for FFEL 

borrowers to align with the rules governing 

AWG for Department-held loans. 

Ensures that borrowers who object to the proposed AWG have an appropriate opportunity to challenge the existence or amount 

of the debt or to demonstrate that the withholding would cause financial hardship.

No significant costs projected. 

Use of Third-Party Contractors in AWG Hearings (34 CFR 682.410(b)(9)).Ensures borrowers receive impartial hearings No significant costs projected. 

Adds language to clarify that an AWG hearing 

official may not be under the supervision or 

control of the guaranty agency or of a thirdparty servicer or contractor employed by the 

agency. 

Amount or Rate of Wage Withholding (34 CFR 

682.410(b)(9)).

Provides clarity to loan program ...................... No significant costs projected. 

Adds language to clarify the maximum amount 

that may be withheld during AWG. 

Borrower Hearing Requests (34 CFR 

682.410(b)(9)).

Changes the notification timelines regarding 

AWG hearing requests. 

Provides borrowers with more time to request 

hearings.

No significant costs projected. 

Modification of the FFEL Program Regulations 

(34 CFR part 682).

Modifies the FFEL Program regulations to remove provisions that are obsolete because of 

the implementation of the SAFRA Act. 

Provides clarity to lenders, guaranty agencies, 

financial aid administrators and borrowers.

No significant costs projected. 

Minimum Loan Period for Transfer Students in 

Non-Term and Certain Non-Standard Term 

Programs (34 CFR 685.301).

Allows students who transfer into non-term and 

certain non-standard term programs during 

the middle of an academic year, to be eligible 

for a Direct Loan to cover the remainder of 

the academic year (within annual loan limits) 

regardless of whether the new academic program accepts credits from the prior program. 

Borrowers will no longer have to worry about 

the ramifications of transferring to a school 

that does not accept credit or clock hours 

from the previous school.

No significant costs projected. 

Modification of the Direct Loan Program Regulations (34 CFR part 685).

Modifies the Direct Loan Program regulations to 

remove provisions that are obsolete because 

of the implementation of the SAFRA Act and 

to add necessary language to replace crossreferences and reflect program requirements. 

Adding consistency to regulations and removing inapplicable regulations dealing with Direct Loans will provide clarity to program 

participants.

No significant costs projected. 

On July 29, 2013 the Secretary 

published a notice of proposed 

rulemaking (NPRM) for these 

regulations in the Federal Register (78 

FR 45618). The final regulations contain 

several changes from the NPRM. We 

fully explain the changes in the 

Analysis of Comments and Changes 

section of the preamble that follows. 

Implementation Date of These 

Regulations 

Section 482(c) of the HEA requires 

that regulations affecting programs 

under title IV of the HEA be published 

in final form by November 1, prior to 

the start of the award year (July 1) to 

which they apply. However, that section 

also permits the Secretary to designate 

any regulation as one that an entity 

subject to the regulations may choose to 

implement earlier and the conditions for 

early implementation. 

Consistent with the Department’s 

objective to improve servicing processes 

for title IV borrowers, the Secretary is 

exercising his authority under section 

482(c) to designate the following new 

and amended regulations included in 

this document for early implementation 

beginning on November 1, 2013, at the 

discretion of each loan holder, guaranty 

agency, or institution, as applicable: 

(1) Section 674.2(b). 

(2) Section 674.9(k). 

(3) Section 674.39(a)(2). 

(4) Section 674.52(c) and (g). 

(5) Section 682.205(a)(4). 

(6) Section 682.205(a)(5). 

(7) Section 682.211(d). 

(8) Section 682.211(f). 

(9) Section 682.211(h). 

(10) Section 682.410(b)(9). 

(11) Section 685.301(a)(10). 

The Secretary also intends to 

implement early provisions in 34 CFR 

685.205 comparable to the provisions in 

34 CFR 682.205(a)(4) and (5). 

Analysis of Comments and Changes 

In response to the Secretary’s 

invitation in the NPRM, 25 parties 

submitted comments on the proposed 

regulations. An analysis of the 

comments and of the changes in the 

regulations since publication of the 

NPRM follows. 

We group major issues according to 

subject, with appropriate sections of the 

regulations referenced in parentheses. 

mstockstill on DSK4VPTVN1PROD with RULES2

65774 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

We discuss other substantive issues 

under the sections of the proposed 

regulations to which they pertain. 

Generally, we do not address technical 

or other minor changes. 

We received recommendations from 

some commenters to make numerous 

technical changes, including changes 

that would provide for greater 

consistency in the regulations of the 

Perkins Loan, FFEL, and Direct Loan 

programs. We will consider these 

changes for inclusion in future technical 

corrections. 

Finally, we note that although the 

amendatory language in the NPRM 

included a series of individual revisions 

to certain parts of 34 CFR 685.220 and 

34 CFR 685.301 as part of the overall 

modification of the Direct Loan Program 

regulations, these final regulations 

restate §§ 685.220 and 685.301 in their 

entirety for greater clarity. However, we 

have made no changes to these sections 

other than those that were proposed in 

the NPRM. 

Student Assistance General Provisions 

Issue 

Three-Year Cohort Default Rate 

Participation Rate Index Challenges and 

Appeals (34 CFR 668.204 and 668.214) 

Comments: Several commenters 

agreed with the proposed change to 

raise the participation rate index (PRI) 

ceiling applicable to institutions that 

have a single three-year cohort default 

rate (CDR) of over 40 percent. One 

commenter stated that continuity and 

consistency among and between various 

portions of the regulations, as evidenced 

by this change, were important and also 

commended the Department for 

clarifying that all types of institutions 

were eligible to challenge and appeal 

their respective rates using the criteria. 

Another commenter requested that 

the Department change the PRI appeal 

requirements to allow a PRI appeal to be 

made annually for each published rate. 

The commenter believed this would 

dissuade community colleges from 

discontinuing participation in the Direct 

Loan program for the purpose of 

preventing the loss of eligibility for the 

Pell Grant Program based on high CDRs. 

Discussion: We appreciate the 

commenters’ support of this change. 

However, we do not agree with the 

proposal that we allow institutions to 

file a PRI appeal annually, whether or 

not the institution would be subject to 

a sanction. This proposal would impose 

an unmanageable workload on the 

Department and is not necessary to 

protect institutions. Evaluating a PRI 

appeal is a time-consuming, laborintensive process. The recommended 

change would require the Department to 

consider a significantly higher number 

of PRI appeals than under the current 

process, which would delay decisions 

for institutions that are potentially 

subject to sanctions. Moreover, the 

Department believes institutions have 

ample opportunity to demonstrate in a 

timely manner that they qualify for 

relief from sanctions based on their PRI. 

Current regulations permit institutions 

to bring a PRI appeal not only when an 

official rate leading to sanctions is 

published, but also seven months 

earlier, at the draft rate stage, when the 

loss of eligibility is not imminent. At the 

draft rate stage, just as at the official rate 

stage, the institution may challenge the 

draft CDR and file a PRI challenge with 

respect to any or all of the official rates 

that would support a loss of eligibility. 

A successful PRI challenge to an 

official rate at the draft rate stage has the 

same impact as a successful challenge 

later in the process. Thus, institutions 

already have sufficient opportunity to 

file a meaningful appeal. 

Changes: None. 

Perkins Loan, FFEL, and Direct Loan 

Program Issues 

Satisfactory Repayment Arrangements 

(34 CFR 674.2(b), 674.9(k), 682.200(b), 

685.102(b) and 685.200(d)) 

Comments: Two commenters 

expressed support for the effort to make 

the ‘‘satisfactory repayment 

arrangements’’ definitions more 

consistent across the Perkins Loan, 

FFEL, and Direct Loan programs. These 

commenters believed that a consistent 

definition of an ‘‘on-time’’ payment as a 

payment made within 20 days of the 

due date would be helpful to borrowers. 

However, these commenters also 

expressed a concern with the 

requirement that the payments be ‘‘full’’ 

payments. These commenters believe 

that the term ‘‘full’’ is too vague and 

open to interpretation. These 

commenters recommended replacing 

the term ‘‘full’’ with the term 

‘‘approved’’ in the ‘‘satisfactory 

repayment arrangement’’ definitions. 

These commenters also suggested 

aligning the number of payments 

needed to regain title IV eligibility 

under satisfactory repayment 

arrangements with the number of 

payments needed to rehabilitate a loan. 

These commenters felt that allowing a 

borrower to obtain new title IV loans 

after six qualifying payments made 

under satisfactory repayment 

arrangements is not in the borrower’s 

best interests. 

Discussion: We thank the commenters 

for their support of the proposed 

changes to the Perkins Loan, FFEL, and 

Direct Loan program definitions of 

‘‘satisfactory repayment arrangements.’’ 

However, we do not agree with their 

recommendation to require that 

payments made under satisfactory 

repayment arrangements be ‘‘approved’’ 

payments rather than ‘‘full’’ payments. 

We believe that the term ‘‘full’’ is selfexplanatory when referring to a 

payment made on a loan. In addition, 

replacing the long-standing term ‘‘full’’ 

with the term ‘‘approved’’ might be 

interpreted as a change in the 

requirement, rather than just a change in 

terminology. 

The number of payments required 

under satisfactory repayment 

arrangements and the number of 

payments required under a 

rehabilitation agreement are established 

by statute. Section 428F(a)(1)(A) of the 

HEA requires nine payments under a 

rehabilitation agreement. Section 

428F(b) requires six payments to meet 

the requirements for satisfactory 

repayment arrangements. The 

Department does not have the authority 

to change these requirements. 

Changes: None. 

Closed School Discharge (34 CFR 

674.33(g), 682.402(d), and 685.214) 

Comments: One commenter 

commended the Department for 

proposing changes to the closed school 

discharge provisions. The commenter 

noted that extending the 90-day window 

for students who cease enrollment 

before a school closes to 120 days will 

help students avoid hardships, such as 

repaying loans received for programs 

they are unable to complete through no 

fault of their own. This same commenter 

also expressed support and thanked the 

Department for adding examples of 

exceptional circumstances under which 

the Department may extend the 120-day 

window for affected borrowers. 

However, this commenter also 

recommended that the Department 

provide the benefit of a closed school 

discharge to borrowers enrolled in a 

program that is discontinued at a school 

that continues to operate, especially in 

the case of a school that offers many of 

its programs online or through distance 

education. 

Lastly, another commenter 

commended the Department for 

proposing changes to the closed school 

discharge provisions and supported the 

Department’s position to limit the 

discharge to closed schools only and not 

to discontinued programs. 

Discussion: The Department 

appreciates the commenters’ support for 

its proposed changes to the closed 

school discharge provisions. In response 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65775 

to the request that the Department 

provide the benefit of a closed school 

discharge to borrowers enrolled in a 

discontinued program at a school that 

continues to operate, we note that 

sections 437(c)(1) and 464(g) of the HEA 

require that the school must close in 

order for a borrower to be eligible for the 

discharge. The statute does not provide 

for a loan discharge when only a 

program, either traditional or distance, 

is discontinued. We also note that the 

Department does not consider a distance 

education program to be a separate 

location of a school for title IV eligibility 

purposes. A location is a physical site 

where a student can receive instruction 

in 50 percent or more of an eligible 

program. If a school offers online 

programs, the online programs are 

considered to be associated with the 

main campus of the school. Thus, a 

borrower enrolled in an online course 

would be eligible for a closed school 

discharge if the main campus of the 

school closes. 

Changes: None. 

FFEL and Direct Loan Program Issues 

Forbearance for Borrowers Who Are 270 

or More Days Delinquent Prior to 

Guaranty Agency Default Claim 

Payment or Transfer by the Department 

to Collections Status (34 CFR 682.211(d) 

and 685.205(a)(8)) 

Comments: Several commenters 

supported the proposed requirement 

that a lender that grants a forbearance 

based on an oral request and affirmation 

by a borrower who is 270 or more days 

delinquent must review with the 

borrower the terms and conditions and 

consequences of the forbearance and 

must provide the borrower with written 

confirmation of the terms of the 

forbearance agreement within 30 days of 

the agreement. However, the 

commenters expressed concern about 

limiting the forbearance for such 

borrowers to one 120-day period. The 

commenters believed that the current 

economy and pending healthcare reform 

could leave many borrowers 

underemployed or with other temporary 

situations that cannot be resolved 

within 120 days. The commenters 

recommended that the forbearance 

period be extended from 120 to 180 

days. 

One commenter urged the Department 

to revise these proposed regulations to 

prohibit a borrower from receiving 

additional forbearances unless the 

borrower can demonstrate a reasonable 

prospect of increased income in the 

foreseeable future. The commenter also 

recommended that the written notice 

sent to the borrower to confirm the 

terms of the 120-day forbearance 

agreement include information on other 

repayment options and on how the 

borrower can exit forbearance. 

Discussion: The Department disagrees 

with the commenters’ recommendation 

that the 120-day, non-serial forbearance 

that may be granted based on a 

defaulted borrower’s oral request and 

affirmation be expanded to 180 days. 

We believe that the 120-day forbearance 

period provides sufficient time for the 

borrower to avoid the negative 

consequences of default by submitting a 

written forbearance request and 

affirmation that would result in a 

forbearance period of up to 12 months, 

documenting deferment eligibility, or 

changing to a different repayment plan, 

so the borrower can successfully 

manage and repay the loan. 

The Department recognizes that 

schools are required to conduct entrance 

and exit counseling with their 

borrowers, and through that process, to 

educate their borrowers on the terms 

and conditions of the loans and the 

program benefits available to assist them 

in repaying their loans. We are aware 

that many schools are working to 

enhance and expand loan-based 

counseling with their students over the 

period of their enrollment at the school 

and support those efforts. The 

Department has also seen evidence, 

however, both during and following the 

negotiated rulemaking sessions, that 

some institutions are aggressively 

pursuing their former students to 

compel them to request forbearance on 

their loans, primarily during the cohort 

period when the institution is 

accountable for student loan defaults. 

As stated in the preamble to the NPRM, 

the limits on the 120-day forbearance 

based on an oral request for a borrower 

who is 270 days or more delinquent are 

intended to address potential abuse in 

this area and to prevent the use of serial 

forbearances based on oral requests. 

We disagree with the commenter who 

suggested that a borrower receiving the 

120-day, non-serial forbearance should 

be denied access to subsequent 

discretionary or mandatory forbearances 

unless the borrower can demonstrate 

increased income in the foreseeable 

future. Section 428(c)(3) of the HEA, 

which contains the eligibility criteria for 

discretionary and mandatory 

forbearances in the Direct Loan and 

FFEL programs, does not support the 

use of the borrower’s demonstrated 

future earnings as a basis for granting 

forbearance. However, we agree with the 

commenter that the other repayment 

options orally reviewed with the 

borrower at the time the forbearance is 

granted should be included in the 

confirming notice sent to the borrower. 

Changes: Sections 682.211(d)(2)(iii) 

and 685.205(a)(8)(ii)(B) of the FFEL and 

Direct Loan program regulations, 

respectively, have been revised to 

require that information on all other 

repayment options be included in the 

notice sent to the borrower to confirm 

the terms of the forbearance. 

Forbearance Provisions for Borrowers 

Receiving Department of Defense 

Student Loan Repayment Benefits (34 

CFR 682.211(h) and 685.205(a)(9)) 

Comments: Commenters supported 

the proposed change to ensure that 

lenders grant appropriate forbearances 

to borrowers who are performing 

eligible service to qualify for student 

loan repayment under authorized 

Department of Defense loan repayment 

programs. 

Discussion: We appreciate the 

commenters’ support for this regulatory 

change. 

Changes: None. 

Borrowers Who Are Delinquent When an 

Authorized Forbearance Is Granted (34 

CFR 682.211(f) and 682.205(b)(2)) 

Comments: Several commenters 

supported the proposed change to the 

regulations to authorize FFEL lenders to 

grant administrative forbearance to a 

borrower who is delinquent at the 

beginning of an authorized period of 

forbearance and the corresponding 

change to the Direct Loan regulations. 

The commenters expressed concern, 

however, that this authority would 

provide the Department’s loan servicers 

an opportunity to use forbearances to 

increase the percentage of Federal loans 

that they service. The commenters urged 

the Department to ensure that all 

delinquent borrowers are treated 

similarly by requiring the servicer to 

discuss the terms and conditions and 

consequences of the forbearance with 

the borrower and subsequently provide 

written confirmation of the terms and 

other pertinent information, as was 

proposed in the NPRM for borrowers 

who are 270 or more days delinquent. 

Discussion: The additional authority 

for FFEL lenders and the Department in 

the Direct Loan Program to grant 

administrative forbearance to eliminate 

a period of delinquency that pre-dates 

the start of an authorized forbearance 

period is used only in conjunction with 

an authorized period of forbearance for 

which the borrower qualifies. The use of 

forbearance in this circumstance 

prevents a borrower from reentering 

repayment up to 12 months later in a 

delinquent status, at the end of the 

authorized forbearance period. 

mstockstill on DSK4VPTVN1PROD with RULES2

65776 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

Borrowers granted authorized 

forbearances are provided with 

pertinent disclosures that also apply to 

the period of administrative 

forbearance. Therefore, we do not agree 

with the commenters’ suggestion that 

we specifically require additional 

disclosures. 

Changes: None. 

Loan Rehabilitation Agreement: 

Reasonable and Affordable Payment 

Standard (34 CFR 682.405(b) and 

685.211(f)) 

Comments: Several commenters 

expressed support for the proposed 

regulations in §§ 682.405(b)(1) and 

685.211(f)(1) that would require a 

guaranty agency and the Department to 

determine a FFEL or Direct Loan 

program borrower’s rehabilitation 

payment amount based on the 

borrower’s, and if applicable the 

borrower’s spouse’s, current disposable 

income, family size, and reasonable and 

necessary expenses. 

As discussed below, several 

commenters raised a number of 

objections to the process that a guaranty 

agency and the Department would 

follow to determine a borrower’s 

reasonable and affordable rehabilitation 

payment. 

Several commenters were critical of 

the proposed regulations. These 

commenters believed that the 

requirements in the proposed 

regulations would delay and hinder the 

rehabilitation process. These 

commenters expressed concern that 

requesting financial documents and 

information from borrowers would 

burden the process, create confusion, 

and invade the privacy of the borrower. 

They stated that often borrowers default 

because they do not complete 

paperwork and meet deadlines. In the 

view of these commenters, the proposed 

regulatory requirements would impede 

the ability of collection agencies to get 

borrowers to participate in the loan 

rehabilitation program. One of these 

commenters recommended that the 

proposed regulations not be 

implemented at all due to the amount of 

paperwork a borrower would be 

required to complete to enter into a loan 

rehabilitation agreement. 

Several commenters stated that the 

determination of a ‘‘reasonable and 

affordable’’ payment amount can often 

be accomplished in a telephone 

conversation in which a borrower’s 

overall financial circumstances are 

evaluated to establish an acceptable 

payment amount. In these discussions, 

the commenters asserted, the borrower’s 

own assessment of his or her total 

financial circumstances and ability to 

pay the requested amount serves as the 

basis for the guaranty agency or 

Department’s determination that the 

payment amount is reasonable and 

affordable. These commenters believed 

that this would be a fair conclusion, 

since the borrower understands his or 

her financial resources and constraints 

better than others. According to the 

commenters, guaranty agencies find that 

nearly half of borrowers seeking 

rehabilitation are able to obtain what the 

guaranty agencies term reasonable and 

affordable payment amounts in this 

manner. 

Another commenter, however, argued 

that, since debt collectors are paid based 

on a share of revenue collected, Federal 

student loan servicers have little 

incentive to offer reasonable and 

affordable rehabilitation payments that 

are based on an objective analysis of the 

borrower’s financial circumstances. 

Instead, the incentive is to push 

borrowers to make as large a payment as 

possible, regardless of whether the 

payment is either reasonable or 

affordable. Another commenter 

reiterated this point, stating that private 

collection agencies—including the 

Department’s own collection 

contractors—use a balance-sensitive 

repayment approach for making an 

initial determination of a borrower’s 

rehabilitation payment amount. Under a 

balance-sensitive repayment approach, 

the payment amount offered to the 

borrower is based on the outstanding 

balance of the loan, and does not take 

into consideration the borrower’s 

financial circumstances. In such cases, 

the commenter asserted, the borrower 

may feel pressured to agree to a loan 

rehabilitation payment amount that is 

unaffordable, and the rehabilitation will 

ultimately be unsuccessful. 

Several commenters raised concerns 

with regard to use of the Department’s 

proposed Financial Disclosure for 

Reasonable and Affordable 

Rehabilitation Payments form for 

collecting financial and other 

information from borrowers seeking to 

rehabilitate their loans. These concerns 

can be summarized as follows: 

• The commenters asserted that use 

of the form in all cases would be 

inconsistent with the Department’s goal 

of providing an improved and more 

consistent loan rehabilitation process 

for FFEL and Direct Loan borrowers. 

The commenters believed that the 

Department can achieve the same goal 

by emphasizing to its own staff and 

collection agencies, as well as to 

guaranty agencies and their collection 

agencies, the importance of complying 

with all applicable statutory and 

regulatory requirements. In the view of 

these commenters, requiring the use of 

the form only in the absence of an 

agreement between the borrower and 

the loan holder on a reasonable and 

affordable repayment amount would 

provide targeted help to such borrowers. 

The commenters stated that collecting 

personal and financial information from 

every borrower who requests loan 

rehabilitation would be unreasonable 

and unwarranted. 

• The commenters believed that the 

use of the form would work against the 

Department’s goal of increasing 

borrower participation in the loan 

rehabilitation program. The commenters 

stated that many borrowers would not 

complete the form, and that the 

proposed regulations would actually 

decrease the percentage of borrowers 

attempting to rehabilitate their loans. 

• The commenters expressed 

concerns that use of the form would 

infringe on the privacy of the borrowers, 

requiring them to provide highly 

sensitive information either to a 

guaranty agency or to the Department, 

even if the borrower has already agreed 

to a repayment amount. 

• The commenters believed that the 

requirements in the proposed 

regulations would impose an additional 

impediment to borrowers seeking to 

regain Title IV eligibility while 

rehabilitating defaulted loans. 

• The commenters were also 

concerned that use of the form would 

impose an enormous administrative 

burden on all parties. 

Several commenters stated that they 

believed that the regulatory 

requirements that were negotiated and 

agreed to during the negotiated 

rulemaking session should only be 

triggered if the borrower objected to the 

repayment amount offered by the 

collection agency or the guaranty 

agency. They stated that this type of 

borrower feedback has always been a 

trigger event for collecting additional 

financial information to determine 

reasonable and affordable payments, 

and asserted that no change to this 

trigger event was discussed during 

negotiations. These commenters 

claimed that the process for determining 

reasonable and affordable rehabilitation 

payment amounts provided for in the 

consensus regulatory language and 

described in the NPRM was not 

consistent with their understanding of 

what was agreed to during the 

negotiated rulemaking sessions. 

Another commenter had a different 

understanding of the proposed rules 

that had been agreed to by the 

negotiated rulemaking committee. This 

commenter stated that the consensus 

regulatory language would require loan 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65777 

servicers, loan holders, and debt 

collectors to use the form collecting 

financial disclosure information from 

the borrower for every borrower who 

seeks to rehabilitate a loan. This 

commenter pointed out that the 

proposed regulatory language agreed to 

by the negotiating committee states that 

a borrower’s reasonable and affordable 

repayment amount must be based 

‘‘solely’’ on information provided on the 

form and, if requested, supporting 

documentation. The proposed 

regulations describe a process in which 

a borrower who objects to the payment 

amount determined through use of the 

form is then offered a rehabilitation 

payment amount that is calculated using 

the same formula used for determining 

payments under IBR. This commenter 

stated that during the rulemaking 

negotiations, the commenter supported 

the consensus regulatory language 

because the proposed regulations would 

provide a standardized process to 

ensure that rehabilitation amounts are 

determined solely by looking at a 

borrower’s financial circumstances. This 

commenter recommended that the 

Department issue guidance to clarify 

that an offer of a rehabilitation payment 

amount must be based solely on 

information provided by the borrower. 

This commenter also noted that some 

negotiators had proposed during the 

negotiations that the initial 

rehabilitation payment amount offered 

should be determined using the IBR 

formula. This commenter recommended 

that, if the borrower is unable to 

complete the form, the loan holder 

should continue the rehabilitation 

process by determining the payment 

amount using this approach. 

Another commenter expressed 

concerns about the complexity of the 

proposed form, and suggested that if the 

payment calculated using the IBR 

formula was the initial offer to a 

borrower, the form would only be 

needed for borrowers who object to that 

initial payment amount. The commenter 

stated that a payment amount calculated 

using this approach would be 

acceptable to most borrowers, and 

would therefore significantly reduce the 

number of borrowers who would need 

to use the financial disclosure form. 

Discussion: In response to the 

numerous comments we received 

expressing concerns about the amount 

of personal financial information a 

borrower requesting loan rehabilitation 

would have to provide under the 

proposed regulations, we have modified 

the final regulations to provide that as 

the first step in the loan rehabilitation 

process, the lender, loan servicer or the 

Department will calculate a loan 

rehabilitation payment amount by using 

the IBR payment formula that provides 

for a monthly payment equal to 15 

percent of the amount by which the 

borrower’s AGI exceeds 150 percent of 

the poverty guideline amount applicable 

to the borrower’s State and family size, 

divided by 12. Throughout the 

remainder of this preamble, we refer to 

this as the ‘‘15 percent formula.’’ To 

ensure consistent treatment of all 

defaulted borrowers, the initial loan 

rehabilitation payment amount will be 

calculated in all cases using the 15 

percent formula, as described earlier. 

For new borrowers on or after July 1, 

2014, who are repaying non-defaulted 

Direct Loans under the IBR plan, the 

IBR plan payment amount is equal to 10 

percent of the amount by which the 

borrower’s AGI exceeds 150 percent of 

the poverty guideline amount applicable 

to the borrower’s State and family size. 

However, this 10 percent IBR formula 

will not be used in the initial 

determination of a reasonable and 

affordable loan rehabilitation payment 

amount on a defaulted loan. 

It is important to note that loan 

rehabilitation payments calculated by 

using the 15 percent formula are not 

payments that are made under the IBR 

plan. This means, for example, that such 

payments do not count toward IBR plan 

loan forgiveness, nor do they count as 

qualifying payments for purposes of 

public service loan forgiveness in the 

Direct Loan Program. 

Under these final regulations, a loan 

rehabilitation payment amount based on 

the information collected on the 

Financial Disclosure for Reasonable and 

Affordable Payments form will only be 

calculated if the borrower objects to the 

payment amount based on the 15 

percent formula. If the borrower does 

object to the payment amount calculated 

based on this formula and requests that 

a rehabilitation payment amount be 

calculated based on information on the 

form, the borrower can choose which 

payment amount to accept. We expect 

that the payment amount based on the 

15 percent formula will in most cases be 

less than the payment amount under a 

standard 10-year repayment plan, and 

will be acceptable to most borrowers. 

Therefore, this approach should 

significantly reduce the number of 

borrowers who will be required to 

complete the financial disclosure form. 

We believe that this change will address 

concerns raised by consumer advocates, 

student groups, guaranty agencies, and 

collection agencies alike that the 

financial disclosure information 

required under the proposed regulations 

would be overly burdensome for 

borrowers requesting loan 

rehabilitation. 

Specifically, with regard to 

commenters’ concerns that the proposed 

regulations would create confusion, add 

burden to the process, or invade the 

privacy of the borrower, we believe the 

revised process in the final regulations 

is clear and understandable. The revised 

process significantly reduces burden by 

limiting the use of the form, and 

appropriately balances the borrower’s 

privacy with the need to verify 

information. The final regulations assist 

with privacy concerns by limiting the 

information borrowers are required to 

provide—only requiring the use of the 

Financial Disclosure for Reasonable and 

Affordable Payments for those 

borrowers who object to the monthly 

payment amount determined based on 

the 15 percent formula. 

Commenters were concerned that the 

paperwork burden associated with the 

use of the financial disclosure form 

would impede the ability of collection 

agencies to get borrowers to participate 

in the loan rehabilitation program. Our 

revisions to the proposed regulations 

significantly reduce the paperwork 

burden on borrowers because, again, 

they will only need to provide the 

Financial Disclosure for Reasonable and 

Affordable Payments form if they object 

to the payment amount based on the 15 

percent formula. 

Some commenters stated that reliance 

on the oral statements of the borrower 

should be sufficient to determine the 

‘‘reasonable and affordable’’ payment 

amount, and that there should be no 

need for further documentation or 

verification. Other commenters had the 

opposite opinion, sharing concern that 

loan servicers may push borrowers to 

agree to payments that are not 

reasonable and affordable. We believe 

our approach balances applicable 

equities, burden, verification that 

payment is reasonable and affordable, 

and privacy concerns. 

With regard to the comments about 

the agreements reached at the negotiated 

rulemaking sessions, we believe the 

NPRM was consistent with the 

consensus reached through negotiated 

rulemaking. Commenters did seem to 

have different understandings of what 

the NPRM language meant; we believe 

our revised regulations provide a clear, 

understandable process. 

With regard to comments about a 

‘‘trigger event,’’ we believe that it would 

defeat the purpose of the proposed 

regulations if the regulations only 

applied in cases when a borrower and 

loan holder are unable to agree to a loan 

rehabilitation payment amount. The 

intent of the regulations is to 

mstockstill on DSK4VPTVN1PROD with RULES2

65778 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

standardize the process for determining 

rehabilitation payment amounts. The 

commenter states that loan holders and 

borrowers are able to agree to loan 

rehabilitation payment amounts 50 

percent of the time. If this figure is 

accurate, and the trigger for the 

rehabilitation payment amount 

regulations was the failure of the 

borrower and loan holder to come to an 

agreement, the loan rehabilitation 

regulations would only apply to half of 

the borrowers who apply for 

rehabilitation. 

We note that nothing in these 

regulations precludes a defaulted 

borrower from resolving the default by 

repaying the loan in full. A qualified 

defaulted borrower may also, under 

certain conditions, repay a defaulted 

loan through a new Direct Consolidation 

Loan. Some defaulted borrowers may 

also qualify for a loan discharge. The 

regulations do not prohibit the 

Secretary, his designee, or a guaranty 

agency from discussing these other 

payment arrangements with the 

borrower outside of the context of the 

loan rehabilitation program and its 

associated requirements. 

Changes: We have revised 

§§ 682.405(b)(1)(iii) and 685.211(f)(1)(i) 

to specify that the initial loan 

rehabilitation payment amount 

determined by a guaranty agency or the 

Secretary equals 15 percent of the 

amount by which the borrower’s 

Adjusted Gross Income (AGI) exceeds 

150 percent of the poverty guideline 

amount applicable to the borrower’s 

family size and State, divided by 12, 

except that if this amount is less than 

$5, the borrower’s monthly 

rehabilitation payment is $5. 

We have revised §§ 682.405(b)(1)(vii) 

and 685.211(f)(3) to specify that if the 

borrower objects to the initial payment 

amount, a second loan rehabilitation 

payment amount is determined by 

recalculating the payment amount based 

solely on the information provided on 

the Financial Disclosure for Reasonable 

and Affordable Payments form and, if 

requested, supporting documentation 

from the borrower and other sources. 

Comments: In the NPRM, the 

Department identified several categories 

of expenses in proposed 

§§ 682.405(b)(1)(i)(C) and 

685.211(f)(1)(i)(C) that the guaranty 

agencies and the Department would use 

to evaluate a borrower’s monthly 

‘‘reasonable and necessary expenses.’’ 

Although the proposed regulations did 

not stipulate standardized amounts that 

a borrower might claim in each of these 

categories, the Secretary invited 

comment on whether the regulations 

should specify standardized amounts, 

such as those used in the IRS National 

Standards. Commenters representing 

both guaranty agencies and consumer 

groups opposed this idea. 

Several commenters noted that the 

topic of standardization was discussed 

at length during the negotiations, and 

noted that an overly rigid framework for 

making these determinations would 

likely eliminate the rehabilitation 

opportunity for those whose financial 

circumstances do not exactly fit within 

the framework. They pointed out that, 

as the Secretary noted in the preamble 

to the NPRM, preserving appropriate 

flexibility in the methodology is 

important to enable guaranty agencies 

and the Department to ensure that a 

reasonable and affordable payment is 

available to all borrowers. These 

commenters contended that allowing 

flexibility in this regard strengthens the 

effectiveness of the regulations in 

determining reasonable and affordable 

payment amounts. These commenters 

stated that the negotiated rulemaking 

committee decided not to propose a 

standardized methodology. These 

commenters reiterated that position in 

response to the Secretary’s invitation to 

comment. 

In a separate comment, another 

commenter recommended that the 

Department not use standardized 

national standards for expense amounts. 

This commenter stated that, to the 

extent that the consensus regulatory 

language reflected an agreement that a 

combination of standardized and 

tailored payment options would best 

meet the needs of borrowers, 

standardizing the more tailored 

approach would be a step in the wrong 

direction. 

Discussion: We thank the commenters 

for responding to the invitation to 

comment on this proposal in the NPRM. 

We agree with their view that the final 

regulations should preserve the 

flexibility to determine reasonable and 

affordable rehabilitation payment 

amounts based on the borrower’s 

financial information, which the 

proposed regulations provided. 

Changes: None. 

Comments: One commenter expressed 

concern about proposed 

§ 682.405(b)(1)(v) and 

§ 685.211(f)(1)(iii), which would 

provide borrowers with an opportunity 

to object to an offer of a reasonable and 

affordable payment amount that is 

presented to the borrower in a written 

rehabilitation agreement. The 

commenter stated that many borrowers 

will be offered payment amounts orally, 

and believed that these borrowers 

should be able to object to the offered 

payment amount at that point. This 

commenter noted that requiring 

borrowers to wait until they receive a 

written offer will only delay or deter the 

borrowers from rehabilitating their 

loans. 

Discussion: We agree that a loan 

servicer may make a first offer of the 

rehabilitation payment amount based on 

the 15 percent IBR formula to a 

borrower orally. If the borrower agrees 

to the payment amount, the borrower 

would have to follow up on the 

conversation by providing the loan 

holder with the documentation required 

to calculate a payment amount under 

that formula. Consistent with 

§§ 682.405(b)(1)(iii) and 685.211(f)(3), 

the borrower may object to the initial 

offer at the time it is made. 

Changes: We have revised 

§ 682.405(b)(1)(iv) and § 685.211(f)(1)(ii) 

to specify that a guaranty agency or the 

Department may calculate a payment 

amount based on information provided 

orally by the borrower, and may provide 

the borrower with a rehabilitation 

agreement using that amount. We have 

also specified in revised 

§§ 682.405(b)(1)(iv) and 685.211(f)(1)(ii) 

that if the borrower does not provide the 

guaranty agency or the Department with 

the documentation required to calculate 

the payment amount using the 15 

percent formula or to confirm the 

information provided orally on which 

the Secretary or the guaranty agency 

calculated the payment amount, the 

rehabilitation agreement entered into for 

that amount is null and void. 

Comments: We received several 

comments on §§ 682.405(b)(1)(v) and 

685.211(f)(1)(iii). Section 

682.405(b)(1)(v) of the proposed 

regulations stated that a guaranty agency 

‘‘may not impose any other conditions 

unrelated to the amount or timing of the 

rehabilitation payments’’ in a 

rehabilitation agreement. Section 

685.211(f)(1)(iii) of the proposed 

regulations provided that the Secretary 

would not impose such conditions in 

rehabilitation agreements for Direct 

Loans. Several commenters stated that 

some guaranty agencies currently 

require a borrower’s written 

acknowledgement of the borrower’s 

understanding of the terms and 

conditions of rehabilitation, which these 

commenters stated is a prudent practice 

when establishing a new repayment 

agreement with a borrower. In such 

cases, the borrower may be required to 

sign and return the agreement or 

provide a separate, signed authorization 

statement acknowledging, at a 

minimum, that collection costs will be 

added to the loan balance at the time the 

rehabilitated loan is purchased by an 

eligible lender. These commenters 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65779 

believed that this requirement for the 

borrower to review and acknowledge 

the information provided in the 

rehabilitation agreement underscores 

the importance of rehabilitation as a 

one-time opportunity to remove loans 

from default status. It also reduces the 

possibility of misunderstandings about 

the terms of the loan rehabilitation and 

related risks for guaranty agencies in the 

event of a dispute concerning the 

applicable repayment terms and 

conditions, costs, and benefits of loan 

rehabilitation. 

Commenters noted that guaranty 

agencies may also currently require a 

borrower to provide updated references 

and contact information to facilitate the 

loan rehabilitation process. The 

commenters stated that this provides a 

purchasing lender with important 

default prevention information, if 

needed, since the borrower’s contact 

information may be incomplete or 

outdated and the references provided in 

the promissory note may no longer be 

valid. This enhances a guaranty 

agency’s ability to sell the borrower’s 

rehabilitation-eligible loans. These 

commenters requested confirmation 

from the Department that the proposed 

regulations would not preclude 

guaranty agencies from continuing these 

practices. 

Discussion: The limitation in the 

proposed rule that would preclude a 

guaranty agency from imposing any 

additional conditions on loan 

rehabilitation unrelated to the amount 

or timing of rehabilitation payments was 

not intended to prohibit the agency from 

requiring borrowers to acknowledge the 

terms and conditions of the 

rehabilitation in writing, or from 

requiring borrowers to provide updated 

contact information when the loan 

rehabilitation agreement is signed. 

Requiring the borrower to acknowledge 

such disclosure information, or to 

provide such contact information, 

would be helpful to the borrower. It 

would help to ensure that the borrower 

understands the rehabilitation 

agreement, and, where necessary, 

facilitate the sale of the loan to a FFEL 

loan holder. 

Changes: None. 

Comments: There were several 

comments on proposed 

§§ 682.405(b)(1)(vi) and 685.211(f)(3) in 

the proposed regulations. These 

commenters stated that the terms ‘‘IBR 

formula’’ or ‘‘IBR calculation’’ should 

not be used in connection with 

describing the method used to 

determine a reasonable and affordable 

rehabilitation payment amount. These 

commenters believed that using these 

terms would cause significant confusion 

for borrowers, since payments made 

towards loan rehabilitation do not count 

as IBR payments. These commenters 

recommended using the term 

‘‘alternative payment amount’’ or 

‘‘APA’’ to refer to this formula. 

These commenters also noted that 

proposed §§ 682.405(b)(1)(vi) and 

685.211(f)(5) include a cross-reference 

to the IBR regulations at § 682.215(b)(1), 

§ 685.221(b)(1), and § 685.221(b)(2). 

Those regulations include other 

requirements in addition to the IBR 

payment amount formula. These 

commenters believed that using the 

broad cross reference could be 

interpreted as incorporating these other 

provisions not specifically related to the 

formula as applying to the rehabilitation 

requirements as well. 

These commenters recommended that 

the Department include the ‘‘alternative 

payment amount’’ formula directly in 

the loan rehabilitation regulations, 

rather than cross-referencing the IBR 

regulations. 

Discussion: As discussed earlier in 

this preamble, in the final regulations 

we have switched the order in which 

the rehabilitation payment amounts are 

determined and offered to borrowers. 

Under the final regulations, the payment 

amount based on the 15 percent formula 

will be the first offer to the borrower, 

and the payment amount based on 

information provided on the financial 

disclosure form will be the second offer. 

The borrower may choose which 

payment amount to accept. Since the 15 

percent formula payment will be the 

first payment amount offered during 

rehabilitation discussions, it would not 

be accurate to refer to it as the 

‘‘alternative payment amount.’’ 

We agree with the commenters that 

we do not intend the extensive and 

detailed requirements in 

§§ 682.215(b)(1), 685.221(b)(1), and 

685.221(b)(2) of the IBR regulations to 

apply to determining a loan 

rehabilitation payment amount. 

Replacing the cross-references with the 

15 percent formula will make the loan 

rehabilitation regulations simpler and 

clearer. In addition, eliminating the 

cross-references may reduce the 

potential for borrowers to confuse 

rehabilitation payments based on the 15 

percent formula with payments made by 

a non-defaulted borrower under the IBR 

plan. Eliminating the cross-references 

also clarifies that the initial 

rehabilitation payment amount for a 

‘‘new borrower’’ as defined in 

§ 685.221(a)(4) of the IBR plan 

regulations would not be calculated 

using the 10 percent IBR formula as 

described in § 685.221(b)(1) of the IBR 

plan regulations. Regardless of how a 

loan rehabilitation payment amount is 

determined, a rehabilitation payment 

does not qualify as an IBR plan payment 

and does not count toward IBR plan 

loan forgiveness or for any other 

purposes for which a qualifying 

payment made under the IBR plan on a 

non-defaulted loan might count, such as 

for public service loan forgiveness in the 

Direct Loan Program. 

Changes: We have replaced the crossreferences in §§ 682.405(b)(1)(iii) and 

685.211(f)(1)(i) with the 15 percent 

formula. 

Comments: In the NPRM, the 

Secretary invited comment on proposed 

§§ 682.405(b)(1)(vii) and 685.211(f)(5), 

which would provide that a loan 

rehabilitation does not go forward if the 

borrower fails to provide the 

documentation required for the payment 

amount to be calculated. The Secretary 

asked if it would be appropriate to make 

a change in the final regulations to 

require a borrower to submit 

information needed to recalculate the 

borrower’s reasonable and affordable 

rehabilitation payment amount only if 

new information is required beyond 

what the borrower provided when he or 

she initially requested loan 

rehabilitation. Several commenters 

responded to this invitation for 

comment, and all supported making this 

change in the final regulations. One 

commenter requested that the 

Department’s final regulations be 

flexible enough to cover the following 

scenarios: 

• Some information or 

documentation originally submitted by 

the borrower is illegible or difficult to 

understand, and needs to be requested 

again or explained. 

• Significant time passes between the 

borrower’s initial request for 

rehabilitation and the borrower’s 

subsequent request for a recalculated 

payment amount, so a verification of 

critical information may be needed to 

determine an appropriate payment 

amount. 

• The borrower realizes after 

submitting the original information/

documentation that the submission was 

incomplete or inaccurate, and that 

additional information or 

documentation is needed by the loan 

holder to determine an appropriate 

payment amount. 

Discussion: As discussed earlier in 

this preamble, we have switched the 

order in which rehabilitation payment 

amounts are offered to borrowers. Under 

the final regulations, a payment amount 

calculated using the 15 percent formula 

will be the basis for the first offer. If the 

borrower objects to that amount, the 

guaranty agency or the Department will 

mstockstill on DSK4VPTVN1PROD with RULES2

65780 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

calculate a payment amount based on 

detailed financial information provided 

by the borrower, and the borrower may 

then choose between the two payment 

amounts. Except when the loan is being 

collected by AWG, it is extremely 

unlikely that the loan holder will 

already have the detailed financial 

information requested on the form. 

Therefore, there is no need to make the 

requested change. 

Changes: None. 

Comments: One commenter expressed 

support for the provision in proposed 

§ 682.405(b)(1)(x) that would limit 

guaranty agency contact with a borrower 

during the rehabilitation period to 

collection activities required by law and 

communications with the borrower that 

support the rehabilitation. 

Discussion: We appreciate the 

commenter’s support. We also note that 

this provision, in §§ 682.405(b)(1)(xi) 

and § 685.211(f)(7), does not prohibit 

guaranty agencies or the Secretary from 

contacting borrowers to remind them 

when the next payment is due or, in 

appropriate circumstances, to inquire 

about any missed payments. The intent 

of such calls is to ensure that the 

borrower maintains the consecutive 

monthly payment stream required to 

successfully rehabilitate a loan. Contacts 

of this type between a guaranty agency 

or the Secretary and a borrower are 

‘‘communications that support the 

rehabilitation.’’ 

Changes: None. 

Loan Rehabilitation Agreement: 

Treatment of Borrowers Subject to 

Administrative Wage Garnishment (34 

CFR 682.405(a) and 685.211(f)) 

Comments: Three commenters 

expressed support for the proposed 

regulations in §§ 682.405(a)(3) and 

685.211(f)(12)(i) that would suspend 

payments made through administrative 

wage garnishment (AWG) for borrowers 

who make five qualifying payments 

under a loan rehabilitation agreement. 

These commenters felt that this step 

would be a reward and an incentive for 

borrowers and would encourage 

defaulted borrowers to rehabilitate their 

loans. 

Several commenters stated that 

proposed § 682.405(a)(3) appears to 

assume that a guaranty agency would 

not be required to suspend the 

borrower’s current garnishment order 

for another reason prior to receipt of the 

borrower’s fifth loan rehabilitation 

payment. However, these commenters 

noted that this may not always be the 

case under the current and proposed 

AWG regulations in § 682.410(b)(9). For 

instance, if a borrower does not request 

a hearing prior to the initiation of AWG, 

but does so shortly after AWG 

commences, the AWG hearing process 

would occur during the period of the 

borrower’s first five payments under a 

loan rehabilitation agreement and could 

result in a required suspension of the 

garnishment order during that time. 

These commenters recommended that 

§ 682.405(a)(3) be modified to include a 

reference to § 682.410(b)(9) to clarify 

that a guaranty agency may suspend a 

garnishment order for a borrower 

pursuing loan rehabilitation prior to 

receipt of the borrower’s fifth 

rehabilitation payment, if required to do 

so for another reason in accordance with 

§ 682.410(b)(9). 

Discussion: We agree with the 

commenters. The proposed regulations 

governing suspension of AWG payments 

after a borrower makes five qualifying 

rehabilitation payments were not 

intended to preclude guaranty agencies 

or the Department from suspending 

AWG collection for reasons unrelated to 

the loan rehabilitation before the 

borrower makes a fifth qualifying loan 

rehabilitation payment. As the 

commenters noted, a guaranty agency 

may receive a notice to suspend AWG 

due to other reasons, as specified in 

§ 682.410(b)(9) of the AWG regulations. 

Changes: We have revised 

§ 682.405(a)(3)(i) to specify that the 

requirement that a guaranty agency 

continue collecting a loan by AWG until 

the borrower makes five qualifying 

monthly rehabilitation payments does 

not apply if the guaranty agency is 

precluded from collecting through AWG 

under § 682.410(b)(9)(i), and have made 

a comparable change in 

§ 685.211(f)(11)(i) of the Direct Loan 

regulations. 

Modification of the FFEL Program and 

Direct Loan Program Regulations: 

Counseling Borrowers (34 CFR 

682.604(a) and 685.304(b)) 

Comments: One commenter expressed 

support for the proposed changes to the 

exit counseling regulations that would 

allow a school to send written 

counseling materials to a student 

borrower by email when the student has 

withdrawn without notice to the school 

or failed to complete required exit 

counseling. However, the commenter 

believed that the wording of proposed 

§§ 682.604(a)(1) and 685.304(b)(3) could 

be misinterpreted, as it could be read to 

mean either that a student must provide 

an email address to the school within 30 

days after the school learns that the 

student has withdrawn, or that the 

school must provide the written 

counseling materials to the student by 

email within 30 days after learning of 

the student’s withdrawal. The 

commenter assumed that the second 

interpretation is what was intended, and 

recommended that the regulatory 

language be revised to make this clear. 

The same commenter also noted that 

in the preamble to the NPRM, the 

Department indicated that the proposed 

changes in §§ 682.604(a)(1) and 

685.304(b)(3) allowing schools to send 

written counseling materials to an email 

address provided by the student 

borrower in certain cases reflected 

existing guidance included in the 

Department’s Federal Student Aid 

Handbook. The commenter pointed out 

that the guidance in the Federal Student 

Loan Handbook clarifies that if a school 

sends exit counseling materials to a 

student by email, the school must use 

the student’s ‘‘home (not school) email 

address,’’ if the school has that address. 

The commenter recommended that the 

Department include in the regulations 

this prohibition on sending the 

counseling materials to the student 

borrower’s school email address, but 

stated that there should be no reason to 

limit schools to sending exit counseling 

materials only to a student’s ‘‘home’’ 

email address. The commenter stated 

that as long as the school does not send 

the counseling materials to an email 

address associated with its own 

institution, it should be able to send the 

materials to the student’s home or work 

email address, or even to an email 

address for the student at another 

institution where the student is in 

attendance. 

Discussion: The Department 

appreciates the commenter’s support of 

the changes to the exit counseling 

regulations. With regard to the intent of 

the wording of proposed 

§§ 682.604(a)(1) and 685.304(b)(3), the 

commenter’s understanding is correct. 

The school must send the counseling 

materials within 30 days after learning 

that the student borrower has 

withdrawn or failed to complete the 

required exit counseling. 

The Department agrees with the 

recommendation to incorporate into the 

regulations the statement in the Federal 

Student Aid Handbook clarifying that 

written counseling materials may not be 

sent to a student borrower’s email 

address at the same school that is 

sending the materials. We also agree 

that schools should not be limited to 

sending the counseling materials to the 

student’s ‘‘home’’ email address. 

However, we note that the proposed 

regulations did not include this 

limitation. The proposed regulations 

stated that the written counseling 

materials could be sent to ‘‘an email 

address provided by the borrower.’’ 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65781 

Changes: We have revised 

§§ 682.604(a)(1) and 685.304(b)(3) to 

clarify that the school must send the 

counseling materials within 30 days 

after learning that the student borrower 

has withdrawn or failed to complete the 

required exit counseling, and that the 

counseling materials may not be sent to 

a student’s email address at the same 

school that is sending the materials. 

FFEL Program Issues 

FFEL Lender Repayment Disclosures to 

Borrowers Who Are 60 Days Delinquent 

or Who Are Having Difficulty Making 

Payments (34 CFR 682.205(a)(4)) 

Comments: One commenter agreed 

with the proposed change to provide 

lenders with five business days rather 

than the five calendar days specified in 

current regulations to send the required 

disclosure to a borrower who is 60 days 

delinquent. The commenter also 

supported the proposed change to 

provide that a lender does not have to 

send the required disclosure when a 

borrower is having difficulty making 

payments if the borrower’s difficulty 

had already been resolved based on an 

earlier communication between the 

lender and the borrower. The 

commenter agreed that multiple 

disclosures would confuse the borrower. 

Discussion: The Secretary appreciates 

the commenter’s support. 

Changes: None. 

Administrative Wage Garnishment of 

the Disposable Pay of Defaulted FFEL 

Program Borrowers (34 CFR 682.410(b)) 

Borrower Hearing Opportunities on the 

Enforceability of the Debt and a 

Borrower’s Claim of Financial Hardship 

(34 CFR 682.410(b)(9)(i)) 

Comments: One commenter noted 

support for the changes made to the 

FFEL administrative wage garnishment 

regulations in the NPRM. 

Discussion: The Department 

appreciates the commenter’s support for 

the revised regulatory language. 

Changes: None. 

Comments: Under proposed 

§ 682.410(b)(9)(i)(F)(2)(iv), if a hearing 

official upholds a borrower’s objection 

to the amount or rate of withholding, a 

guaranty agency ‘‘may’’ order a lesser 

rate or amount that would allow the 

borrower to meet basic living expenses. 

On pages 45641 and 45642 of the 

NPRM, we pointed out that this 

provision differs from the rules 

governing AWG for Department-held 

loans at 34 CFR part 34, and that, in the 

latter regulations, the word ‘‘must’’ is 

used instead. We invited comments on 

whether it was preferable to use ‘‘must’’ 

rather than ‘‘may’’. One commenter 

supported the consensus language in the 

NPRM without further explanation. 

Another commenter agreed with the 

Department’s suggestion that ‘‘must’’ 

was a preferable term because a hearing 

official’s financial hardship 

determination and decision regarding 

the amount or rate of withholding 

should be binding on the guaranty 

agency issuing a withholding order, and 

because the regulatory language for 

guaranty agencies and the Department 

should be consistent. 

Discussion: We agree with the 

commenter who expressed support for 

changing the term ‘‘may’’ to ‘‘must.’’ Not 

only is it important to ensure that 

substantive provisions of the FFEL 

Program AWG regulations are 

consistent, to the extent practicable, 

with the rules governing AWG for 

Department-held loans, use of the term 

‘‘must’’ would provide more equitable 

treatment for borrowers who are subject 

to AWG. Furthermore, use of the term 

‘‘must’’ would ensure that borrowers 

who receive an opportunity for an 

independent determination of a 

financial hardship objection will have 

that determination followed by the 

guaranty agency issuing a withholding 

order. The decision of the hearing 

official binds the guaranty agency or the 

Secretary as to the maximum amount 

that may be ordered withheld from the 

borrower’s wages and neither has 

discretion to order that a greater amount 

be withheld. 

Changes: We have changed ‘‘may’’ to 

‘‘must’’ in § 682.410(b)(9)(i)(F)(2)(iv). 

Comments: On page 45641 of the 

NPRM, when discussing the 

determination of whether a withholding 

amount would cause a financial 

hardship to a borrower, we invited 

comments on whether the term 

‘‘National Standards’’ used in the 

proposed rules should be changed to 

‘‘Collection Financial Standards’’ in the 

final rules to conform to the term used 

by the IRS to refer to such standards. 

One commenter expressed support for 

making this change in the final rule, 

stating that the term ‘‘Collection 

Financial Standards’’ more accurately 

reflects all living expense category 

standards used in determining whether 

a withholding amount would cause a 

financial hardship for the borrower. 

Discussion: We agree with the 

commenter’s reasons for changing the 

term to ‘‘Collection Financial 

Standards.’’ The IRS, which 

promulgates the standards, uses the 

term to include both what the IRS calls 

the ‘‘National Standards’’ (food, etc.) as 

well as the regionalized Housing and 

Utilities Standards and Transportation 

Standards. The latter include average 

amounts spent for housing, utilities, and 

transportation, which represent a 

significant portion of borrowers’ living 

expenses. The term ‘‘Collection 

Financial Standards’’ is the correct title 

of the IRS Standards that hearing 

officials must use when determining the 

financial hardship for borrowers. 

Changes: We have changed the three 

uses of the term ‘‘National Standards’’ to 

‘‘Collection Financial Standards’’ in 

§ 682.410(b)(9)(i)(F)(2)(ii) and (iii). 

Comments: A commenter noted that 

proposed § 682.410(b)(9)(i) does not 

address a situation in which a guaranty 

agency may be required to suspend a 

withholding order. Under proposed 

§ 682.405(a)(3), a borrower who makes 

five qualifying payments under a 

rehabilitation agreement can request 

that the agency suspend a withholding 

order. The commenter suggested 

including a cross-reference in the AWG 

regulations to § 682.405(a)(3) and a brief 

description of a borrower’s right to 

request suspension under that 

provision. 

Discussion: We agree with the 

commenter’s suggestion and believe that 

including such a reference in 

§ 682.410(b)(9)(i) would be beneficial. 

All AWG regulatory provisions are 

located or referenced in § 682.410(b)(9) 

to minimize confusion. 

Changes: We have added a new 

§ 682.410(b)(9)(i)(V) to include a crossreference to § 682.405(a)(3) and describe 

the possible suspension of the 

withholding order. 

Comments: A commenter noted that 

in proposed § 682.410(b)(9)(ii)(G), the 

Department defines a withholding order 

as the order a guaranty agency sends to 

an employer directing the employer to 

withhold the pay of the employed 

borrower. However, the commenter also 

noted that the Department states that 

such an order may also be referred to as 

a ‘‘wage garnishment order’’ or 

‘‘garnishment order.’’ The commenter 

suggested that only one of these terms 

be used to avoid confusion with other 

communications sent by the agency. 

Discussion: In the proposed 

regulations, the Department 

distinguished between an ‘‘order,’’ 

which is the term for the mandate 

issued to the employer requiring the 

employer to withhold from the 

borrower’s wages, and a ‘‘notice,’’ which 

refers to the warning sent to the 

borrower to alert the borrower that the 

agency is preparing to enforce the loan 

by garnishment of the borrower’s wages. 

Because these two communications are 

readily distinguished by the use of the 

term ‘‘order’’ to refer to the legallybinding mandate and ‘‘notice’’ to refer 

to correspondence sent to the borrower, 

mstockstill on DSK4VPTVN1PROD with RULES2

65782 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

we do not believe that alternative use of 

the term ‘‘garnishment’’ or 

‘‘withholding’’ prior to ‘‘order’’ will 

cause any confusion. 

Changes: None. 

Comments: A commenter stated that 

the proposed rule would allow 

borrowers two new bases on which they 

may object to AWG in the FFEL 

program: Enforceability of the debt and 

financial hardship. The commenter 

further asserted that the HEA does not 

specifically name these as permissible 

objections, but acknowledges that 

borrowers have been permitted to use 

these objections. The commenter further 

expressed concern that AWG hearing 

officials are unqualified to make legal 

determinations of loan enforceability. 

The commenter therefore requested a 

standardized appeal process if a hearing 

official makes an enforceability 

determination that the guaranty agency 

believes is erroneous. 

Discussion: First, we note that the 

commenter is incorrect in asserting that 

section 488A of the HEA does not 

provide borrowers with the right to 

object to AWG on the basis of claims 

that the debt is not enforceable or on the 

basis of financial hardship. We address 

these issues in turn. 

Second, Section 488A(a)(5) provides 

borrowers the opportunity for a hearing 

concerning ‘‘the existence or the amount 

of the debt.’’ 20 U.S.C. 1095a(a)(5). It is 

not clear which objections the 

commenter considers the HEA to permit 

the borrower to raise in the hearing, but 

the statute is clear that if the borrower 

objects to the existence or amount of the 

debt claimed by the loan holder, the 

hearing official must determine whether 

the debt in question is enforceable, and 

if so, what amount is enforceable. In the 

context of section 488A of the HEA, 

determining whether a debt ‘‘exists’’ 

entails more than a bookkeeping test of 

assuring that all amounts disbursed and 

payments received have been correctly 

totaled. To reduce the hearing process to 

a bookkeeping exercise is to suggest that 

section 488A of the HEA empowers a 

guarantor to issue a legally-binding 

order that an individual’s wages be 

withheld to collect a claim that 

applicable law would bar the guarantor 

from enforcing in any other proceeding, 

such as a suit on the debt. Section 488A 

of the HEA authorizes collection by 

non-judicial wage garnishment 

‘‘notwithstanding any provision of State 

law.’’ 20 U.S.C. 1095a. That provision 

does no more than preempt those State 

laws that would require a creditor to 

obtain a judicial writ in order to garnish 

wages. Nothing in the language of 

section 488A of the HEA suggests that 

the statute preempts other applicable, 

non-preempted State law (e.g., forgery 

or prior compromise) or Federal law 

(e.g., discharge in bankruptcy) that 

would bar enforcement of the claim 

against the individual. 

For this reason, it is the responsibility 

of guaranty agencies to ensure that AWG 

hearing officials are qualified to make 

reasoned determinations regarding the 

enforceability of Federal student loan 

debts. Furthermore, prior to an AWG 

hearing, a guaranty agency should have 

already made a determination on the 

enforceability of the debt. Section 

682.406(a) requires an agency to 

carefully evaluate that all due diligence 

requirements were met and that the debt 

is legally enforceable before requesting 

a reinsurance payment on a loan. 

In addition, promptly after paying the 

default claim, the guarantor must give 

the borrower notice of its intent to 

collect the loan and report the default to 

credit bureaus, and to provide ‘‘an 

opportunity for an administrative 

review of the legal enforceability or 

past-due status of the loan.’’ 34 CFR 

682.410(b)(5)(ii)(D) and (b)(5)(vi)(I). 

Prior to an AWG hearing, the agency 

should have therefore made its own 

reasoned determination of the 

enforceability of the debt and have 

sufficient evidence supporting that 

determination. The new language added 

to the wage garnishment provisions is 

not a new consideration not already 

existing explicitly in these provisions 

and implicitly in the mandate to 

provide a hearing on the ‘‘existence’’ of 

the debt. 

Third, section 488A(a)(5) of the HEA 

provides borrowers with an opportunity 

for a hearing ‘‘on the terms of the 

repayment schedule’’ if that schedule is 

set by order and not by an agreement 

with the borrower, as provided in 

section 488A(a)(4) of the HEA. The only 

interpretation of this provision that 

implements the objective of the statute 

is that the basis for such objection must 

be a claim that withholding the full 15 

percent would cause financial hardship. 

The Department has consistently 

interpreted that phrase, and the 

identical language in 5 U.S.C. 5514, 

which authorizes Federal Salary Offset 

and from which this provision appears 

to have originated, to so provide. See, 

e.g., 68 FR 8142, 8151 (Feb. 19, 2003) 

and 67 FR 18072, 18073 (April 12, 

2002). In establishing the terms of the 

repayment schedule, a determination 

must be made as to whether the 

proposed withholding order would be 

excessive in light of the borrower’s 

reasonable and necessary living 

expenses. 

Finally, with regard to the comment 

that the Department should establish an 

administrative appeal procedure to be 

available for review of hearing official 

decisions that the guarantor believes to 

be erroneous, the Department notes first 

that in some instances, State law 

applicable to the administrative 

proceedings of State agencies may 

provide such an appellate review 

procedure, and those laws may provide 

an opportunity for borrowers or 

guarantors to challenge decisions of 

hearing officials. Those guarantors that 

are not State agencies subject to this 

kind of administrative appeal regime are 

in no different posture than the 

Department itself, which has no 

opportunity to appeal adverse rulings by 

independent hearing officials with 

regard to proposed salary offsets to 

collect from Federal employees under 5 

U.S.C. 5415. Federal employees who 

dispute the hearing official’s ruling may 

sue the Department under the Federal 

Administrative Procedure Act to 

challenge that ruling. See, e.g., Sibley v. 

U.S. Department of Education, 913 F. 

Supp. 1181 (N.D. Ill. 1995), aff’d, 111 

F.3d 133 (7th Cir. 1997). Applicable law 

gives the Department no corresponding 

right to challenge and obtain a judicial 

review of an adverse ruling by a hearing 

official. The Department has not 

established any administrative appeal 

procedure for challenges to AWG 

hearing decisions made by Department 

staff, and has no resources sufficient to 

establish a Federal review process for 

AWG hearing decisions for loans held 

by guarantors. Moreover, regardless of 

the party that might decide such an 

appeal, fundamental fairness dictates 

that any administrative appeal process 

be available for borrowers as well as 

guarantors. 

Therefore, the proposed regulations at 

§ 682.410(b)(9) do not create new 

borrower objections; instead, the 

proposed changes would make the FFEL 

Program regulations consistent with 

existing Departmental regulations. 

Changes: None. 

Comments: A commenter noted that 

proposed § 682.410(b)(9)(i)(I) includes 

rules governing ex parte 

communications (communications 

where one or more parties to the hearing 

are not present) in AWG hearings and 

that the provision precludes ex parte 

communications on non-procedural 

matters. The commenter expressed 

concern that, as drafted, the proposed 

rule would unnecessarily impede the 

administration of the hearing process. 

The commenter also requested 

clarification that substantive ex parte 

communications during a hearing are 

permissible if the absent party has been 

given proper notice of the hearing. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65783 

Discussion: We agree with the 

commenter’s suggestions. The intention 

of the proposed provision was to ensure 

that both parties to the hearing are 

present and able to participate. 

However, we recognize that borrowers 

would not be disadvantaged by allowing 

certain administrative matters to be 

handled ex parte in addition to matters 

involving the time, place, and manner of 

the hearing as would be permitted 

under the proposed rule. 

We also agree that the hearing process 

should not be unnecessarily delayed 

due to the unexcused absence of one of 

the parties when proper notice of the 

hearing has been given to the absent 

party. Under the proposed rules, a 

guaranty agency is required to suspend 

a withholding order on the 61st day 

after a hearing request was received. 

Therefore, without allowing an ex parte 

hearing to proceed in such contexts, it 

would be possible for a party to 

effectively enforce the suspension of an 

AWG order by failing to appear for 

properly scheduled and noticed 

hearings, because such hearings could 

not proceed in the absence of one of the 

parties. 

Changes: We have revised 

§ 682.410(b)(9)(i)(I) to more generally 

convey the intent that communications 

on administrative matters not related to 

the substance of the AWG hearings may 

be conducted on an ex parte basis. We 

have also revised this section to allow 

an ex parte hearing to proceed if the 

parties have agreed on the time, place, 

and manner of the hearing and the 

borrower has been given proper notice 

of the same but does not appear for the 

hearing. 

Comments: A commenter stated that 

proposed § 682.410(b)(9)(i)(F)(1)(ii) and 

(b)(9)(i)(J) permit a borrower to raise 

new objections and provide additional 

evidence before the hearing is 

completed. The commenter further 

noted that while the hearing official 

may grant an extension of the 60-day 

decision deadline so the borrower may 

present additional evidence, the 

regulations do not allow extension of 

the deadline to raise objections. The 

commenter requested a clarification on 

whether the 60 day decision deadline 

could be extended for the latter purpose. 

Discussion: We agree with the 

commenter’s suggestion. If a borrower 

has not raised an objection to the AWG 

order but wishes to do so, the hearing 

official may grant an extension of the 

60-day deadline at his or her discretion. 

Changes: We have revised 

§ 682.410(b)(9)(i)(J)(1) to state that the 

borrower may request an extension of 

the 60-day deadline for purposes of 

raising an objection not previously 

raised. 

Comments: A commenter noted that 

proposed § 682.410(b)(9)(i)(J) permits a 

hearing official to grant extensions of 

the 60-day deadline for a decision to be 

rendered. The commenter further noted 

that while this deadline may be 

extended by the hearing official, there is 

no associated extension of the 

requirement under proposed 

§ 682.410(b)(9)(i)(H) that suspension of 

the withholding order occur if a 

decision is not rendered by the 61st day. 

The commenter requested that the 

regulations be modified to require that 

the suspension of the withholding order 

be delayed past the 61st day for a period 

equal to the number of days that the 

hearing deadline is delayed. 

Discussion: The purpose of 

suspending the withholding order 

beginning on the 61st day is to create an 

incentive for ensuring that the AWG 

hearing is completed and a decision 

issued on a timely basis. While the 

commenter is correct that 

§ 682.410(b)(9)(i)(J)(1) permits the 

hearing official to grant extensions of 

the 60-day deadline at the request of the 

borrower, § 682.410(b)(9)(i)(J)(2) 

requires the hearing official to grant an 

extension made at the request of a 

guaranty agency. Changing the 

regulations to be consistent with the 

commenter’s suggestion would create a 

scenario where a guaranty agency could 

request extensions that a hearing official 

would be compelled to grant, resulting 

in failure to suspend a withholding 

order long past the 61-day deadline 

required under the proposed 

regulations. Such a regulatory 

framework would eliminate the 

guaranty agency’s incentive to ensure a 

timely hearing. 

Changes: None. 

Comments: A commenter requested 

that the AWG regulations be modified to 

allow a borrower to request that AWG 

continue during the hearing process. 

The commenter noted that the proposed 

regulations governing loan 

rehabilitation provide for suspension of 

a garnishment order for a borrower 

pursuing loan rehabilitation, but allow 

the borrower to affirmatively request to 

remain in AWG while completing the 

loan rehabilitation process. The 

commenter stated that these two 

situations are comparable and that 

rather than automatically suspending a 

withholding order on the 61st day after 

the borrower’s hearing request, a 

borrower should be able to request that 

the order not be suspended. 

Discussion: We believe there are 

significant distinctions between the two 

situations the commenter describes. In 

many cases, the borrower seeking loan 

rehabilitation intends to pay the balance 

of his or her loan, and continuation of 

AWG in that context is one plausible 

mechanism by which a borrower would 

seek a reduced principal balance upon 

successful rehabilitation of the loan. 

However, a borrower objecting to the 

amount or existence of the debt or the 

rate of withholding would not, by 

definition, be interested in the 

continuation of AWG at the existing 

rate. In addition, we are concerned that 

providing the borrower the option to 

continue AWG may make the borrower 

feel pressured to accept the offer, or 

cause the borrower to fail to understand 

he or she has the option to decline it. 

Changes: None. 

Executive Orders 12866 and 13563 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether this 

regulatory action is ‘‘significant’’ and, 

therefore, subject to the requirements of 

the Executive order and subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as an action likely to 

result in a rule that may— 

(1) Have an annual effect on the 

economy of $100 million or more, or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); 

(2) Create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

stated in the Executive order. 

This regulatory action will have an 

annual effect on the economy of more 

than $100 million. It is estimated to 

reduce annual paperwork burden on 

entities participating in the Federal 

student loan programs by approximately 

$109 million. Therefore, this final 

regulatory action is economically 

significant and subject to review by 

OMB under section 3(f)(1) of Executive 

Order 12866. 

We have also reviewed these 

regulations pursuant to Executive Order 

13563, which supplements and 

explicitly reaffirms the principles, 

structures, and definitions governing 

mstockstill on DSK4VPTVN1PROD with RULES2

65784 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, Executive Order 

13563 requires that an agency— 

(1) Propose or adopt regulations only 

upon a reasoned determination that 

their benefits justify their costs 

(recognizing that some benefits and 

costs are difficult to quantify); 

(2) Tailor its regulations to impose the 

least burden on society, consistent with 

attaining regulatory objectives, taking 

into account, among other things, and to 

the extent practicable, the costs of 

cumulative regulations; 

(3) In choosing among alternative 

regulatory approaches, select those 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety, 

and other advantages; distributive 

impacts; and equity); 

(4) To the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and 

(5) Identify and assess available 

alternatives to direct regulation, 

including providing economic 

incentives to encourage the desired 

behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

Executive Order 13563 requires 

agencies ‘‘to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible.’’ The Office of 

Information and Regulatory Affairs 

within OMB emphasized that these 

techniques may include ‘‘identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes.’’ 

We are issuing these final regulations 

only upon a reasoned determination 

that their benefits justify their costs. In 

choosing among alternative regulatory 

approaches, we selected those 

approaches that maximize net benefits. 

Based on the analysis below, the 

Department believes that these final 

regulations are consistent with the 

principles in Executive Order 13563. 

We also have determined that this 

regulatory action will not unduly 

interfere with State, local, and tribal 

governments in the exercise of their 

governmental functions. 

In this regulatory impact analysis we 

discuss the need for regulatory action, 

the potential costs and benefits, net 

budget impacts, assumptions, 

limitations, and data sources, as well as 

regulatory alternatives we considered. 

Elsewhere in this section under 

Paperwork Reduction Act of 1995, we 

identify and explain burdens 

specifically associated with information 

collection requirements. 

The Need for Regulatory Action 

As detailed in the Notice of Proposed 

Rulemaking (NPRM) published July 29, 

2013, the Department is issuing these 

final regulations to clarify a number of 

issues related to the administration of 

the Federal student loan programs, to 

make the Direct Loan regulations 

comprehensive, to eliminate regulations 

in the FFEL Program that are no longer 

needed because origination of new FFEL 

loans ceased with the passage of the 

SAFRA Act, to reflect changes made to 

interest rates in the Direct Loan Program 

by the Bipartisan Student Loan 

Certainty Act of 2013, and to clarify the 

loan rehabilitation process for borrowers 

with defaulted student loans. 

The Secretary is revising the Direct 

Loan regulations to incorporate 

provisions from the FFEL regulations 

that were only cross-referenced. By 

incorporating the substantive provisions 

in the Direct Loan regulations instead of 

simply cross-referencing to the FFEL 

regulations, the Direct Loan regulations 

will be comprehensive. This is 

appropriate since the Direct Loan 

Program is now the primary Federal 

student loan program. The elimination 

of new loan originations in the FFEL 

Program means that many of the current 

FFEL Program regulations are no longer 

necessary. In addition, the final 

regulations improve consistency across 

the FFEL, Direct Loan and Perkins Loan 

programs. Previously, the different title 

IV loan programs were regulated and 

administered differently in areas where 

they could be consistent. The final 

regulations eliminate these differences 

where appropriate. 

The final regulations provide clarity 

and transparency to the administration 

of the loans programs. Over the years 

there have been consistent concerns that 

borrowers are unable to properly 

manage their Federal student loans 

because of confusion over their rights 

and options. This is particularly true for 

borrowers who are delinquent on their 

loans and borrowers who experience 

personal hardship. The final regulations 

clarify the rules for borrowers and help 

them gain a better understanding of 

their rights and responsibilities. Also, 

the final regulations provide better 

guidance to lenders and guaranty 

agencies about their roles and 

responsibilities in servicing Federal 

student loans. 

One area in which concerns have 

been raised about the consistent and 

appropriate treatment of borrowers is in 

the rehabilitation of defaulted loans. 

The Department wants to ensure that 

borrowers who wish to rehabilitate their 

defaulted loans are properly informed 

about their rights to ‘‘reasonable and 

affordable’’ payments and how a 

reasonable and affordable payment is 

determined. 

Prior regulations allowed a borrower 

with defaulted student loans to 

rehabilitate those loans by making nine 

full, on-time payments (within 20 days 

of the due date) over a 10-month period 

in an amount agreed to by the borrower 

and the loan holder (the Department for 

a defaulted Direct Loan, a guaranty 

agency or the Department for a 

defaulted FFEL Program loan). These 

regulations provided that the payment 

amount required by the guaranty agency 

or the Secretary must be reasonable and 

affordable. However, as described in the 

NPRM published July 29, 2013, there 

have been complaints that guaranty 

agencies, the Department, and the debt 

collection agencies that collect Federal 

student loans require payments that 

exceed this standard. 

The Secretary believes that providing 

borrowers with an improved process to 

rehabilitate a defaulted loan is in the 

best interests of the taxpayers and the 

borrower. Defaulted borrowers continue 

to accrue interest on the debt and are 

charged collection costs. In addition, the 

default harms their credit scores, and 

the borrowers may have trouble 

purchasing homes or obtaining auto 

loans or other types of consumer credit. 

By improving the opportunities for 

defaulted borrowers to rehabilitate their 

student loans, the Department will not 

only improve the chances for collection 

of the full amount of the debt but also 

help some defaulted borrowers return to 

full economic participation. 

Some defaulted borrowers who may 

be interested in rehabilitating their 

defaulted loans are also subject to 

administrative wage garnishment 

(AWG). Those borrowers may be 

discouraged from trying to fully 

rehabilitate their loans because they fear 

that they will not be able to make loan 

payments in addition to the amount 

garnished. Through these final 

regulations, the Department aims to add 

clarity to the AWG process so that 

affected borrowers will understand what 

is required for AWG to be suspended. 

Discussion of Costs, Benefits, and 

Transfers 

Adding clarity to the loan 

rehabilitation process offers many 

benefits. The Department believes that 

rehabilitation offers benefits for 

students, the Department, and the 

Nation. Defaulted borrowers may be 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65785 

more willing to complete the 

rehabilitation process. Defaulted 

borrowers may see significant 

improvements in their credit scores and 

purchasing power. As these borrowers 

become bigger participants in the 

economy, an improved loan 

rehabilitation process should support 

positive growth. 

Improved loan rehabilitation rates 

will also allow the Department and 

collection agencies to concentrate their 

collection efforts on non-paying 

borrowers. In general, the more student 

loan accounts that are active and 

current, the better for the programs. The 

Department believes these regulatory 

changes will help ensure that the 

Federal student loan programs remain 

strong and support maximum access to 

higher education for American students. 

As detailed in the NPRM, loan 

rehabilitations have steadily increased 

over the past decade, from just over 

$223 million in defaulted Federal 

student loan debt in FY 2001 to $5 

billion in FY 2011. Loan rehabilitations 

as a share of collections rose from 

approximately 4.4 percent in FY 2001 to 

43.0 percent in FY 2011. Part of the 

increase in loan rehabilitation can be 

linked to growing enrollment, rising 

tuition, and two economic slowdowns, 

all of which led to more student loan 

borrowing. However, the higher 

percentage of total collections that 

comes from loan rehabilitation shows 

that the Department and guaranty 

agencies are working with borrowers to 

help them take advantage of the 

opportunity for loan rehabilitation. 

Even though these final regulations 

could possibly result in lower payment 

amounts for borrowers while they are 

rehabilitating their defaulted loans, the 

borrowers would still be responsible for 

paying their entire debt. Furthermore, 

even if loan rehabilitation payments are 

lowered on average across the board, the 

Department believes that the overall 

benefits of having more borrowers 

current in their debt payments will 

outweigh any short-term cost of reduced 

payments. 

Overall, the true monetary effect of 

these final regulations will depend 

heavily on various factors. The 

Department has implemented changes 

to its income-driven repayment options 

and expects these changes to help slow 

a rising default rate by offering 

improved payment management options 

to borrowers. Also, as the economy 

continues to improve, the default rate 

may drop as more borrowers find 

employment. 

Outside of loan rehabilitation, the 

regulations would provide many 

additional benefits to borrowers and 

promote a more efficient and 

transparent Federal student loan 

program. 

By expanding from 90 to 120 days the 

window during which a borrower may 

qualify for a closed school loan 

discharge after withdrawing from a 

school that eventually closes, the 

number of borrowers who qualify for the 

discharge may increase. However, 

school closures are a relatively rare 

occurrence. In 2007, 43 schools 

participating in the title IV programs 

closed. This number dropped to 30 in 

2008 and to 18 in 2011. While the 

extended window may mean that more 

borrowers qualify for a closed school 

discharge, we do not believe the 

extension will result in a significant 

increased cost. In 2011, 214 borrowers 

received closed school loan discharges 

for loans valued at approximately 

$870,000. This was an increase from the 

2010 numbers of 50 borrowers with a 

loan value of $467,000, but still 

represents a very small portion of 

outstanding federal student loans. 

The expansion of circumstances in 

which lenders may grant administrative 

forbearance gives the Department and 

FFEL lenders more flexibility in dealing 

with defaulted borrowers. These 

revisions also clarify the eligibility 

criteria for forbearances and promote a 

more transparent loan program. 

Borrowers will see other benefits 

under these final regulations as well. 

The changes to the AWG hearing 

process will help borrowers gain a better 

understanding of their rights and 

responsibilities in that process and 

ensure that borrowers are treated 

consistently by guaranty agencies and 

the Department. Additionally, the 

revisions to § 685.301 will allow 

students who transfer from one school 

into non-term or certain standard nonterm programs at a different school 

during the middle of an academic year 

to initially be eligible for a Direct Loan 

to cover the remainder of the academic 

year that began at the prior school (up 

to their remaining eligibility under the 

annual loan limits), regardless of 

whether the new school accepts credits 

from the prior school. 

The final regulations also reflect 

changes made to interest rates in the 

Direct Loan Program by the Bipartisan 

Student Loan Certainty Act of 2013 

(Pub. L. 113–28). As detailed in 

§ 685.202, under this Act interest rates 

will be determined each June for new 

loans being made for the upcoming 

award year, which runs from July 1 to 

the following June 30. Each loan will 

have a fixed interest rate for the life of 

the loan based on rates for specific 

Treasury bills or bonds, an add-on 

determined by a combination of loan 

type and undergraduate or graduate 

student status, and an interest rate cap. 

For example, the interest rate for Direct 

Subsidized and Unsubsidized Loans 

made to undergraduates with a first 

disbursement date on or after July 1, 

2013, and before July 1, 2014, is 3.86 

percent, based on the bond equivalent 

rate of 91-day Treasury bills auctioned 

at the final auction held prior to that 

June 1 plus 2.05 percentage points. The 

interest rate for Direct Subsidized Loans 

and Direct Unsubsidized Loans made to 

undergraduate students is capped at 

8.25 percent. Under this policy, 

borrowers can benefit from lower 

interest rates while having the certainty 

of a fixed rate and a cap on the 

maximum interest rate as Federal 

borrowing costs vary in the future. If 

Federal borrowing costs rise in the 

future, borrowers with loans in later 

cohorts may have interest rates greater 

than would have been the case if the 

interest rates prior to the enactment of 

the Bipartisan Student Loan Certainty 

Act of 2013, had remained in effect, so 

the inclusion of the caps for various 

loan types limits future borrowers’ 

exposure to interest rate increases. 

Overall, these final regulations 

strengthen the Federal student loan 

programs and help support the 

American postsecondary education 

system. As more and more students now 

depend on student loans to pay for their 

college education, it is essential that 

borrowers fully understand the rights 

and responsibilities that are a part of 

their student loan obligations. It is also 

essential that the student loan programs 

operate as efficiently as possible. These 

revisions are part of the Department’s 

commitment to running efficient loan 

programs that support more than ten 

million students per year. This number 

will grow as the country pursues the 

President’s 2020 goal of leading the 

world in college degree attainment. 

Keeping a strong higher education 

system will be essential to America 

maintaining its economic advantage in 

the world. 

Regulatory Alternatives Considered and 

Analysis of Significant Comments 

We discussed the regulatory 

alternatives we considered in the NPRM 

(78 FR 45668). Further, as discussed in 

the Analysis of Comments and Changes 

section of this preamble, 25 comments 

were received in the comment period 

following publication of the NPRM that 

ended August 28, 2013. These 

comments covered a range of issues, 

including suggestions for technical 

changes to the FFEL and Direct Loan 

regulations. The process for determining 

mstockstill on DSK4VPTVN1PROD with RULES2

65786 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

a reasonable and affordable payment 

amount in loan rehabilitation received 

the most comment. 

In particular, several commenters 

suggested switching the order of the two 

methods for determining the reasonable 

and affordable payment amount for loan 

rehabilitation so that the 15 percent 

formula would be used first, and only 

borrowers who object to the amount 

calculated under this formula would 

need to provide detailed financial 

information. Consumer advocates and 

commenters representing collection 

agencies agreed that the amount of 

information required by the proposed 

financial information form could deter 

borrowers from pursuing loan 

rehabilitation. The primary use of the 15 

percent formula will allow the borrower 

and the collection agency to determine 

a reasonable and affordable payment 

over the phone based on the borrower’s 

income and family size, subject to later 

confirmation once the borrower 

provides required documentation. We 

agreed with these comments and 

adopted this approach in the final rule. 

In addition to the comments 

proposing using the 15 percent formula 

first, we considered the suggestion that 

an agency should be able to negotiate a 

reasonable and affordable payment with 

the borrower on the phone so that the 

loan rehabilitation process could be 

initiated when they have the first 

discussion about rehabilitation with a 

borrower. The Department agrees that it 

is important to be able to offer a 

borrower a reasonable and affordable 

payment amount during the initial 

discussion of loan rehabilitation but 

believes that use of the 15 percent 

formula, with documentation to follow, 

as the first option allows this possibility 

while ensuring consistent treatment of 

borrowers seeking loan rehabilitation. 

Net Budget Impacts 

As detailed in the NPRM, the final 

regulations are estimated to have a net 

budget impact of $2.8 to $3.4 million 

over ten years from 2013–2022 driven 

by the expansion of the time period for 

eligibility for a closed school discharge. 

Consistent with the requirements of the 

Credit Reform Act of 1990, budget cost 

estimates for the student loan programs 

reflect the estimated net present value of 

all future non-administrative Federal 

costs associated with a cohort of loans. 

A cohort reflects all loans originated in 

a given fiscal year. 

In general, these estimates were 

developed using the Office of 

Management and Budget’s (OMB’s) 

credit subsidy calculator. The calculator 

takes projected future cash flows from 

the Department’s student loan cost 

estimation model and produces 

discounted subsidy rates reflecting the 

net present value of all future Federal 

costs associated with awards made in a 

given fiscal year. Values are calculated 

using a ‘‘basket of zeros’’ methodology 

under which each cash flow is 

discounted using the interest rate of a 

zero-coupon Treasury bond with the 

same maturity as that cash flow. To 

ensure comparability across programs, 

this methodology is incorporated into 

the calculator and used Government 

wide to develop estimates of the Federal 

cost of credit programs. Accordingly, 

the Department believes it is the 

appropriate methodology to use in 

developing estimates for these 

regulations. That said, in developing the 

following Accounting Statement, the 

Department consulted with OMB on 

how to integrate our discounting 

methodology with the discounting 

methodology traditionally used in 

developing regulatory impact analyses. 

Absent evidence of the effect of these 

regulations on student behavior, budget 

cost estimates were based on behavior 

as reflected in various Department data 

sets and longitudinal surveys listed 

under Assumptions, Limitations, and 

Data Sources. Student loan cost 

estimates are developed across five risk 

categories: Students at less than fouryear for-profit institutions, students at 

less than four-year public and non-profit 

institutions, freshmen/sophomores at 

four-year institutions, juniors/seniors at 

four-year institutions, and graduate 

students. Risk categories have separate 

assumptions based on the historical 

pattern of behavior—for example, the 

likelihood of default or the likelihood to 

use statutory deferment or discharge 

benefits—of borrowers in each category. 

Closed School Discharge 

The primary budget impact of the 

final regulations relates to the extension 

of the time period for a closed school 

discharge. The final regulations extend 

the previous 90-day period for a closed 

school discharge to a 120-day period 

and provide examples of what qualifies 

as an exceptional circumstance under 

which the Secretary may provide a 

further extension. We estimate these 

changes to have a cost of approximately 

$3.1 million over 10 years as the pool 

of borrowers eligible for discharge will 

increase. The costs are limited by the 

small number of closed schools, the 

availability of teach-outs, and the 

assignment of recoveries to the 

Department. In the NPRM, the 

Department estimated that extending 

the window to 120 days would result in 

an additional 100 students receiving 

closed school discharges totaling 

approximately $400,000 annually. The 

Department requested comments about 

the assumptions and estimates for this 

provision. We did not receive any 

comments and did not make any 

changes to the closed school discharge 

regulations. 

Loan Rehabilitation 

Two areas related to loan 

rehabilitation affected by the final 

regulations are the determination of the 

reasonable and affordable payment for 

loan rehabilitation and the limitations 

on the use of AWG while a borrower is 

attempting to rehabilitate a defaulted 

loan. While the regulatory changes in 

both areas would change the period of 

time and sources of payments the 

Department receives, the Department 

does not estimate that the regulations 

would have any significant budget 

impact. 

The final regulations refine the 

process for determining the reasonable 

and affordable payment for loan 

rehabilitation to improve consistency 

across the title IV loan programs. The 

prior regulations for the FFEL Program 

require guaranty agencies to negotiate a 

reasonable and affordable payment for 

loan rehabilitation with the borrower 

that takes into account all of the 

borrower’s financial circumstances. The 

Direct Loan Program did not have 

similar provisions, but the program does 

have a similar process for receiving 

income and expense information and 

negotiating a payment with the 

borrower. Over the past months, the 

Department developed a tool 

incorporating the 15 percent formula in 

determining reasonable and affordable 

payments that has helped increase loan 

rehabilitations. As discussed in the 

Regulatory Alternatives Considered and 

Analysis of Comments and Changes 

sections of this preamble, the 

Department has agreed to reverse the 

order of the methods for determining a 

reasonable and affordable payment so 

that the 15 percent formula comes first. 

With approximately $1.72 billion in 

defaulted loan balances rehabilitated by 

the Department in FY 2012, loan 

rehabilitation is a valuable collections 

tool that also allows borrowers to 

improve their credit history and regain 

eligibility for title IV, HEA Federal 

student aid. The Department and 

guaranty agencies have emphasized 

keeping the loan rehabilitation payment 

amount close to the payment the 

borrower will have to make following 

rehabilitation to avoid significant 

increases in the required payment. The 

availability of income-driven repayment 

plans after rehabilitation of the loan 

expands the range of payments possible 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65787 

during rehabilitation that would be in 

line with post-rehabilitation payments 

(although payments made under a loan 

rehabilitation agreement that are based 

on the 15 percent formula do not count 

toward IBR plan loan forgiveness if a 

borrower who has successfully 

rehabilitated a defaulted loan chooses to 

repay under the IBR plan postrehabilitation). This new standard may 

also help decrease the number of 

borrowers who re-default, as the 

required loan rehabilitation plan 

payment amount should be very similar 

to the payment amount they make when 

they return to regular repayment. The 

final regulations use the 15 percent 

formula for initial determination of a 

reasonable and affordable loan 

rehabilitation payment, and allow 

borrowers to object to that payment 

through use of a standardized form that 

accounts for the borrower’s income and 

expenses to obtain an alternative 

amount. A borrower may choose 

between the two proposed payment 

amounts. 

For individual borrowers, the 

payment offered as a rehabilitation 

amount calculated using the 15 percent 

formula might be less than what the 

Department would determine to be 

appropriate based on an assessment of 

the borrower’s income and expenses or 

through negotiation with the borrower 

without use of a formula. If this is the 

case, the Department would collect less 

money during the months the borrower 

attempts loan rehabilitation, but the 

borrower would still owe the remaining 

balance after rehabilitation. In addition, 

to the extent lower payments encourage 

borrowers to complete loan 

rehabilitation and continue payments 

they otherwise would not make, the 

final regulations may increase total 

payments over the life of the loan for 

some borrowers. The likelihood of 

borrowers paying less, the same, or 

more over the life of a loan over time as 

a result of the changes in defining a 

reasonable and affordable payment is 

uncertain, but the Department does not 

expect it to have an appreciable budget 

impact. 

Perkins Loans Provisions 

The final regulations also address a 

few areas related to the Perkins Loan 

Program including: Revising 

cancellation progression rates; 

modifying the treatment of healthrelated breaks in service for certain loan 

cancellations; making the eligibility for 

a graduate fellowship deferment 

consistent with FFEL and Direct Loan 

program criteria; making a technical 

correction to eliminate the debt-toincome economic hardship deferment 

category for borrowers working less than 

full-time; defining ‘‘on-time’’ for 

rehabilitation payments; and allowing 

assignment to the Department of Perkins 

Loans made before September 13, 1982, 

without the borrower’s Social Security 

Number (SSN). No changes were made 

to these provisions as a result of 

comments on the NPRM. The 

Department does not estimate a 

significant budget impact from these 

provisions. No appropriations have been 

made to support the Perkins Loan 

Program since 2008, and institutions 

make loans from payments made on 

their portfolios of existing loans. The 

effect on the Federal budget of increased 

costs in the Perkins Loan Program is a 

possible reduction of Federal Perkins 

Loan assets available to be recalled in 

future years. 

The slight changes in timing 

associated with defining the on-time 

payment standard at 20 days is not 

expected to change the number of 

borrowers successfully rehabilitating 

their Perkins loans or the ultimate 

amount collected from those borrowers, 

so no budget impact is expected. The 

ability to assign loans to the Department 

without the borrower’s SSN may 

facilitate some institutions leaving the 

program and, if the Department is able 

to collect on those loans, result in some 

small additional revenues. 

These final regulations change the 

Department’s longstanding policy that a 

borrower who switches jobs which 

qualify for loan cancellation under the 

Perkins Loan Program results in the 

borrower returning to the first-year 

cancellation rate. Instead, the final 

regulations allow borrowers who switch 

between cancellation categories with the 

same rate of progression to continue the 

progression from the last year under the 

prior category; however, the borrower 

returns to the first-year cancellation rate 

if the borrower switches to a category 

with a different progression rate. While 

some borrowers may be able to 

accelerate cancellation of their loans or 

achieve full cancellation, the nature of 

the categories affected by the policy 

change limits the likelihood of 

borrowers switching between them. To 

the extent a small number of borrowers 

do switch and maintain their 

progression rate instead of falling back 

to year one, the primary effect is on the 

timing of cancellation received, not the 

amount. 

Additionally, the final regulations 

change the current Perkins Loan 

treatment of a break in teaching service 

for pregnancy or illness. Previously, to 

receive credit for a year of teaching 

service the borrower had to complete 

the first half of the academic year, begin 

the second half, and have the employer 

agree that the teacher fulfilled that year 

of the contract. In the FFEL and Direct 

Loan programs, the regulations provide 

that if a borrower was unable to 

complete the second half of the year of 

teaching for reasons covered by the 

FMLA, the service could count towards 

cancellation if the employer agreed the 

contract has been fulfilled for the year. 

The final regulations apply the 

FMLA-related break-in-service 

exception to all Perkins Loan 

cancellation categories, not just 

teachers. As Perkins loan cancellation 

does not require consecutive service, the 

Department expects this provision may 

allow some borrowers to receive credit 

for a year that would not otherwise have 

counted as service and speed up the 

ultimate cancellation of the loan, but it 

will not significantly expand the 

number of borrowers who achieve loan 

cancellation as their next year of service 

could qualify instead. These 

cancellation provisions may affect the 

timing of when borrowers achieve 

cancellation, but the Department does 

not estimate that they will significantly 

increase the overall amount cancelled. 

Additional Provisions 

Many of the final regulations have no 

impact on the Federal budget as they 

reflect statutory changes already 

incorporated into the budget baseline or 

clarify existing practices. These final 

regulations reflect changes made to 

interest rates in the Direct Loan Program 

by the Bipartisan Student Loan 

Certainty Act of 2013. These final 

regulations eliminate many regulations 

relating to the origination and 

administration of FFEL Program loans. 

Those regulations became irrelevant 

when new FFEL Program loan 

originations ended as of July 1, 2010. 

Any costs or savings resulting from the 

end of FFEL Program loan originations 

were attributed to the SAFRA Act, so 

there is no estimated budget impact 

from these provisions. The budget 

impact of these changes was already 

incorporated into the budget baseline. 

Updates were also made to the Direct 

Loan regulations to incorporate specific 

provisions that previously were 

included in the Direct Loan regulations 

by cross-reference to the FFEL 

regulations. The restructuring of the 

Direct Loan regulations to remove 

references to the FFEL Program 

regulations or to reflect current practices 

is not estimated to have a budget 

impact. 

mstockstill on DSK4VPTVN1PROD with RULES2

65788 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

Assumptions, Limitations, and Data 

Sources 

In developing these estimates, a wide 

range of data sources was used, 

including data from the National 

Student Loan Data System; operational 

and financial data from Department of 

Education systems, including especially 

the Fiscal Operations Report and 

Application to Participate (FISAP); and 

data from a range of surveys conducted 

by the National Center for Education 

Statistics, such as the 2008 National 

Postsecondary Student Aid Survey and 

the 2004 Beginning Postsecondary 

Student Survey. Data from other 

sources, such as the U.S. Census 

Bureau, were also used. 

Accounting Statement 

As required by OMB Circular A–4 

(available at http://

www.whitehouse.gov/sites/default/files/

omb/assets/omb/circulars/a004/a4.pdf), in Table 1, we have prepared an 

accounting statement showing the 

classification of the expenditures 

associated with the provisions of these 

regulations. This table provides our best 

estimate of the changes in Federal 

student aid payments as a result of these 

regulations. Expenditures are classified 

as transfers from the Federal 

Government to student loan borrowers. 

The transfers with respect to the change 

in interest rate policy use the 

annualized outlays as estimated by the 

Congressional Budget Office (CBO) and 

discounted to 2013 at 7 percent and 3 

percent. While the Department generally 

does not use estimated outlays from 

CBO in evaluating regulations, the 

interest rate policy changes included in 

these final regulations are statutory and 

the Department determined that this 

approach would be appropriate in this 

instance. 

TABLE 1—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES

[In millions] 

Category 

Benefits 

7% 3% 

Greater consistency between the title IV loan programs ........................................................................................ Not Quantified 

Category Costs 

7% 3% 

Costs of compliance with paperwork requirements ................................................................................................ ¥$109.1 ¥$109.8 

Category Transfers 

7% 3% 

Reduced payments to Federal Government from additional borrowers receiving closed school discharges ........ $0.40 $0.40 

Statutory changes to the Direct Loan interest rates: Difference in transfer payments from borrowers to the 

Federal government against a baseline prior to the enactment of the Bipartisan Student Loan Certainty Act 

of 2013 ................................................................................................................................................................. $1,168 $467 

See the Paperwork Reduction Act of 

1995 section of this document for 

further information on the $109.1 

million reduction in costs of compliance 

with paperwork requirements. 

Final Regulatory Flexibility Analysis 

These regulations affect institutions 

that participate in the title IV, HEA 

programs, including alternative 

certification programs not housed at 

institutions, and individual borrowers. 

The U.S. Small Business Administration 

(SBA) Size Standards define for-profit 

institutions as ‘‘small businesses’’ if 

they are independently owned and 

operated and not dominant in their field 

of operation with total annual revenue 

below $7,000,000. The SBA Size 

Standards define nonprofit institutions 

as small organizations if they are 

independently owned and operated and 

not dominant in their field of operation, 

or as small entities if they are 

institutions controlled by governmental 

entities with populations below 50,000. 

The revenues involved in the sector 

affected by these regulations, and the 

concentration of ownership of 

institutions by private owners or public 

systems means that the number of title 

IV, HEA eligible institutions that are 

small entities would be limited but for 

the fact that the nonprofit entities fit 

within the definition of a small 

organization regardless of revenue. 

Given the definitions above, several of 

the entities subject to the proposed 

regulations are small, leading to the 

preparation of this analysis. 

Description of the Reasons That Action 

by the Agency Is Being Considered 

With these regulations, the 

Department removes certain regulations 

governing the FFEL Program that are no 

longer needed and revises Direct Loan 

Program regulations to ensure that they 

are comprehensive and to add 

consistency and clarity to all regulations 

governing student loans by revising 

where applicable. Through these 

regulations, the Department also 

provides clarity to the loan 

rehabilitation process for borrowers 

with defaulted student loans. 

Succinct Statement of the Objectives of, 

and Legal Basis for, the Regulations 

The final regulations amend the FFEL 

and Direct Loan program regulations to: 

reflect changes made to the HEA by the 

SAFRA Act; incorporate other statutory 

changes in the Direct Loan Program 

regulations; update, strengthen, and 

clarify various areas of the Student 

Assistance General Provisions, Perkins 

Loan, FFEL, and Direct Loan program 

regulations; and provide for greater 

consistency in the regulations governing 

title IV, HEA student loan programs. 

In addition, on January 21, 2011, 

President Obama issued Executive 

Order 13563, ‘‘Improving Regulation 

and Regulatory Review’’ (76 FR 3821). 

The order requires all Federal agencies 

to ‘‘consider how best to promote 

retrospective analysis of rules that may 

be outmoded, ineffective, insufficient, 

or excessively burdensome, and to 

modify, streamline, expand, or repeal 

them in accordance with what has been 

learned.’’ Accordingly, on August 22, 

2011, the Department issued its Plan for 

Retrospective Analysis of Existing 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65789 

Regulations. (See ed.gov/policy/gen/reg/ 

retrospective-analysis/index.html). 

Our plan identified a number of 

regulatory initiatives for retrospective 

review and analysis. One of those 

initiatives was transitioning from the 

FFEL Program, under which new loans 

ceased on July 1, 2010, to the Direct 

Loan Program. These final regulations 

remove obsolete FFEL Program 

regulations. 

Description of and, Where Feasible, an 

Estimate of the Number of Small 

Entities to Which the Regulations Will 

Apply 

The final regulations affect several 

categories of entities involved in the 

administration and servicing of Federal 

student loans. Many of the regulations 

relate to notifications, servicing, or 

collection activities done by loan 

servicers or entities acting for the 

Federal government. The Department 

does not expect these entities to meet 

the applicable definition of ‘‘small 

entity.’’ The final regulations related to 

Perkins Loans will affect the institutions 

that participate in the program, some of 

which would be classified as small 

entities. As discussed above, private 

non-profit institutions that do not 

dominate in their field are defined as 

small entities and a few other 

institutions that participate in the 

Perkins Loan Program do not have 

revenues above $7 million and are also 

categorized as small entities. Table 2 

summarizes AY 2010–11 Perkins loan 

disbursements by institutions that 

qualify as small entities. Based on the 

definition of non-profit institutions as 

small entities, approximately 59 percent 

of institutions that disbursed Perkins 

loans in AY2010–11 were small entities. 

TABLE 2—AY2010–11 PERKINS LOAN DISBURSEMENT SUMMARY

AY2010–11 Public Non-profit For-profit Total 

Perkins Loan Institutions with disbursements ................................................. 545 874 107 1526 

Small entities with Perkins disbursements ...................................................... 2 874 25 901 

% of small entities by control ........................................................................... 0.4% 100.0% 23.4% 59.0% 

Overall Disbursements .................................................................................... 387,694,908 448,589,990 20,332,961 856,617,859 

% by control ..................................................................................................... 45.26% 52.37% 2.37% 100% 

Amounts at Small Entities ............................................................................... 53,467 448,589,990 1,012,596 2,808,851 

In the NPRM, the Secretary invited 

comments from small entities as to 

whether they believe the proposed 

changes would have a significant 

economic impact on them. We did not 

receive any comments. 

Description of the Projected Reporting, 

Recordkeeping and Other Compliance 

Requirements of the Regulations, 

Including an Estimate of the Classes of 

Small Entities That Will Be Subject to 

the Requirement and the Type of 

Professional Skills Necessary for 

Preparation of the Report or Record 

The various provisions in the final 

regulations will modify or increase the 

paperwork burden on entities 

participating in the FFEL, Direct Loan, 

or Perkins Loan programs, as described 

in the Paperwork Reduction Act section. 

Much of this burden is associated with 

borrowers or the Department and its 

agents and therefore does not affect 

small entities. Table 3 summarizes the 

estimated burden on small entities, 

primarily institutions and guaranty 

agencies, from the paperwork 

requirements associated with the final 

regulations. As discussed in the 

Paperwork Reduction Act section of this 

preamble, several of the provisions 

reduce the estimated burden on 

institutions, lenders, and guaranty 

agencies from the elimination of 

regulatory provisions or changes to 

requirements and this is reflected by the 

negative numbers in the table. 

TABLE 3—SUMMARY OF PAPERWORK REQUIREMENTS FOR SMALL ENTITIES

Description OMB Control 

No. 

Small entity 

hours 

Cost 

($) 

Cost per 

small entity 

FFEL forbearance ............................................................................................ 1845–0020 264 6,497 650 

Reasonable and Affordable loan rehab ........................................................... 1845–0020 69,161 1,702,052 154,732 

Suspension of AWG for rehab borrowers ....................................................... 1845–0020 1,257 30,935 2,812 

School Enrollment Status Reporting ............................................................... 1845–0019 24,342 599,068 54,461 

Deferment of repayment—Federal Perkins Loans—definition of eligible 

graduate fellowship programs ...................................................................... 1845–0019 175 4,316 22 

AWG 3rd party contractors; hearing requests, and hearing administration .... 1845–0020 57,568 1,416,748 128,795 

Lender disclosure ............................................................................................ 1845–0020 (20,461) (503,556) (50,356) 

Due diligence in making a loan ....................................................................... 1845–0020 (40,923) (1,007,112) (100,711) 

Equal credit—removal of provision .................................................................. 1845–0020 (40,923) (1,007,112) (100,711) 

Eligibility for interest benefits ........................................................................... 1845–0020 (40,923) (1,007,112) (100,711) 

Basic program agreement ............................................................................... 1845–0020 (11,174) (274,982) (27,498) 

Records, reports, inspection requirements for GA programs .......................... 1845–0020 (5,587) (137,495) (12,500) 

Prohibited use of Operating Fund when it contains Federal Fund assets— 

removal of provision ..................................................................................... 1845–0020 (111,739) (2,749,889) (249,990) 

Funds transferred to Operating Fund by a GA—removal of provision ........... 1845–0020 (111,739) (2,749,889) (249,990) 

FISL loan related—removal of provisions ....................................................... 1845–0020 (163,692) (4,028,450) (884.40) 

School as lender—removal of provision .......................................................... 1845–0020 (206,534) (5,082,791) (1,115.87) 

Exit counseling ................................................................................................. 1845–0020 (134,247) (3,303,819) (725.32) 

mstockstill on DSK4VPTVN1PROD with RULES2

65790 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

TABLE 3—SUMMARY OF PAPERWORK REQUIREMENTS FOR SMALL ENTITIES—Continued 

Description OMB Control 

No. 

Small entity 

hours 

Cost 

($) 

Cost per 

small entity 

Disqualification review of limitation, suspension, and termination actions 

taken by GA against a school—removal of provision .................................. 1845–0020 (111,739) (2,749,889) (249,990) 

Identification, to the Extent Practicable, 

of All Relevant Federal Regulations 

That May Duplicate, Overlap or Conflict 

With the Proposed Regulation 

The proposed regulations are unlikely 

to conflict with or duplicate existing 

Federal regulations. 

Alternatives Considered 

As described above, the Department 

participated in negotiated rulemaking in 

developing the proposed regulations, 

reviewed comments received in 

response to the NPRM published July 

29, 2013, and considered a number of 

options for some of the provisions. In 

particular, the Department reversed the 

order of the use of the 15 percent 

formula and the standard form in 

determining a reasonable and affordable 

payment for loan rehabilitation, but that 

is not expected to affect small entities. 

No alternatives were aimed specifically 

at small entities. 

Paperwork Reduction Act of 1995 

Sections 674.19, 674.33, 674.34, 

682.102, 682.200, 682.205, 682.206, 

682.208, 682.209, 682.210, 682.211, 

682.212, 682.214, 682.216, 682.301, 

682.305, 682.401, 682.402, 682.404, 

682.405, 682.406, 682.409, 682.410, 

682.411, 682.412, 682.414, 682.417, 

682.418, 682.421, 682.507, 682.508, 

682.511, 682.515, 682.602, 682.603, 

682.604, 682.605, 682.610, 682.711, 

682.712, 682.713, 685.205, 685.211, 

685.214, contain information collection 

requirements. Under the Paperwork 

Reduction Act of 1995 (PRA) (44 U.S.C. 

3507(d)), the Department of Education 

has submitted a copy of these sections, 

related forms, and Information 

Collection Requests (ICRs) to the Office 

of Management and Budget (OMB) for 

its review. 

The OMB Control numbers associated 

with the final regulations and related 

forms are 1845–0015, 1845–0019, 1845– 

0020, and 1845–0119 (identified as 

1845—NEW2 in the NPRM). 

In the NPRM, the Department 

included a draft version of the Financial 

Disclosure for Reasonable and 

Affordable Payments form (1845–0120, 

identified as 1845—NEW1 in the 

NPRM) and calculated estimated burden 

for the completion and review of that 

version. The Department received 

extensive and detailed comments from 

the public on the draft form, including 

all aspects of the form and its intended 

use. We will require significant time to 

properly analyze these comments and, if 

appropriate, rework the form to address 

them. To allow the time to carefully 

consider public comment and take 

necessary action, we will address 

comments and burden relating to the 

Financial Disclosure for Reasonable and 

Affordable Payments form in a separate 

Federal Register notice that will be 

published after these final regulations. 

A Federal agency may not conduct or 

sponsor a collection of information 

unless OMB approves the collection 

under the PRA and the corresponding 

information collection instrument 

displays a currently valid OMB control 

number. Notwithstanding any other 

provision of law, no person is required 

to comply with, or is subject to penalty 

for failure to comply with, a collection 

of information if the collection 

instrument does not display a currently 

valid OMB control number. 

Sections 682.211 and 685.205— 

Forbearance 

The final regulations amend the 

current FFEL Program regulations to 

authorize a lender, prior to resolving a 

default claim payment, to grant 

forbearance to a borrower or endorser 

who is in default on a loan based on the 

borrower’s or endorser’s oral request. 

The current regulations require 

borrowers to submit a written request 

for forbearance. The burden calculations 

address only the added burden created 

by accepting oral requests for 

forbearance. These final regulations 

provide that a forbearance agreement in 

this situation must include a new 

agreement to repay the debt signed by 

the borrower or endorser (as required 

under the current regulations), or a 

written or oral affirmation of the 

borrower’s or endorser’s obligation to 

repay the debt. The final regulations 

define ‘‘affirmation’’ for this purpose to 

be an acknowledgment of the loan by 

the borrower or endorser in a legally 

binding manner that can take the form 

of: (1) A new signed repayment 

agreement or schedule, or another form 

of signed agreement to repay the debt 

(as under current regulations); (2) an 

oral acknowledgment and agreement to 

repay the debt that is documented by 

the lender in the borrower’s or 

endorser’s file and confirmed by the 

lender in a notice to the borrower; or (3) 

a payment made on the loan by the 

borrower or endorser. The final 

regulations also specify that if a 

forbearance in this situation is based on 

the borrower’s or endorser’s oral request 

and affirmation, the lender must orally 

review with the borrower the terms and 

conditions of the forbearance. The 

lender must also send the borrower or 

endorser a notice that confirms the 

terms of the forbearance and the 

borrower’s or endorser’s affirmation of 

the obligation to make the first payment 

under the forbearance agreement within 

30 days after entering into that 

agreement. The final regulations require 

the lender to retain a record of the terms 

and conditions of the forbearance and 

affirmation in the borrower’s or 

endorser’s file. 

For the 2011 calendar year, the last 

year for which data are available, we 

estimate that 172,915 FFEL borrowers 

requested forbearance after defaulting 

on a loan. Of that number, 49,350 

borrowers have FFEL program loans 

held by lenders. Of those borrowers, we 

estimate that 25 percent (12,338 

borrowers) will exercise the option in 

these final regulations to orally 

acknowledge the debt and agree to repay 

the debt. The remaining 123,565 loans 

for which we estimate borrowers will 

request forbearance after defaulting will 

be held by the Department. We estimate 

that 25 percent of those borrowers 

(30,891 borrowers) who request 

forbearance from the Department will 

exercise the option to orally 

acknowledge the debt and agree to repay 

the debt, as would be authorized under 

these final regulations. Because OMB 

requires Federal agencies to account for 

burden imposed on non-Federal entities 

separately by type, i.e. public, not-forprofit, and for-profit, the following 

analysis of the burden imposed on 

lenders other than the Department is 

broken down by the types of entities. 

Note that State guaranty agencies are 

covered under the ‘‘public’’ type of 

entities. 

Of the FFEL Program loans held by 

lenders, we estimate that public holders 

(State guaranty agencies) will have two 

FFEL borrowers who seek to orally 

acknowledge a defaulted FFEL Program 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65791 

loan. On average, we estimate that it 

will take the lender 0.17 hours (10 

minutes) per oral acknowledgment to 

orally review with the borrower the 

terms and conditions of the forbearance 

and document the conversation and 

place that documentation in the 

borrower’s or endorser’s file. For public 

holders, we estimate that burden will 

increase by 0.34 hours (two borrowers 

multiplied by 0.17 hours per oral 

forbearance request). 

Of the FFEL Program loans, we 

estimate that not-for-profit holders will 

have 1,551 FFEL borrowers who seek an 

oral forbearance on a defaulted FFEL 

program loan. On average, we estimate 

that it will take the lender 0.17 hours 

(10 minutes) per oral acknowledgment 

to orally review with the borrower the 

terms and conditions of the forbearance 

and document the conversation and 

place that documentation in the 

borrower’s or endorser’s file. For notfor-profit holders, we estimate that 

burden will increase by 264 hours 

(1,551 borrowers multiplied by 0.17 

hours per oral forbearance request). 

Of the FFEL Program loans, we 

estimate that for-profit holders will have 

10,785 FFEL borrowers who seek an oral 

forbearance on a defaulted FFEL 

Program loan. On average, we estimate 

that it will take the lender 0.17 hours 

(10 minutes) per oral acknowledgment 

to orally review with the borrower the 

terms and conditions of the forbearance 

and document the conversation and 

place that documentation in the 

borrower’s or endorser’s file. We 

estimate that burden will increase by 

1,833 hours (10,785 borrowers 

multiplied by 0.17 hours per oral 

forbearance request) at for-profit 

holders. 

We estimate there will be an equal 

amount of burden on the borrower 

engaged in the oral acknowledgement 

and agreement to repay the debt request 

with the lender. The oral 

acknowledgment process will increase 

burden by 7,349 hours for all FFEL 

borrowers (12,338 held by lenders and 

30,891 Department-held = 43,229 

borrowers multiplied by 0.17 hours per 

oral forbearance request). Since there is 

no FFEL general forbearance form 

approved by OMB, the final regulations 

will impose new burden. 

Collectively, we estimate that these 

final FFEL forbearance regulations will 

increase burden by 9,446 hours under 

OMB Control Number 1845–0020. 

The final regulations will amend the 

current Direct Loan Program regulations 

to authorize the Secretary, prior to the 

loan being transferred to the 

Department’s default collections office, 

to grant forbearance to a borrower or 

endorser who is in default on a loan 

based on the borrower’s or endorser’s 

oral request. The final regulations 

provide that a forbearance agreement in 

this situation must include a new 

agreement to repay the debt signed by 

the borrower or endorser (as required 

under the current regulations), or a 

written or oral affirmation of the 

borrower’s or endorser’s obligation to 

repay the debt. The final regulations 

define ‘‘affirmation’’ for this purpose to 

be an acknowledgment of the loan by 

the borrower or endorser in a legally 

binding manner that can take the form 

of: (1) A new signed repayment 

agreement or schedule, or another form 

of signed agreement to repay the debt 

(as under current regulations); (2) an 

oral acknowledgment and agreement to 

repay the debt that is documented by 

the Secretary in the borrower’s or 

endorser’s file and confirmed by the 

Secretary in a notice to the borrower; or 

(3) a payment made on the loan by the 

borrower or endorser. The final 

regulations also specify that if a 

forbearance in this situation is based on 

the borrower’s or endorser’s oral request 

and affirmation, the Secretary must 

orally review with the borrower the 

terms and conditions of the forbearance, 

and that the Secretary must send the 

borrower or endorser a notice that 

confirms the terms of the forbearance 

and the borrower’s or endorser’s 

affirmation of the obligation to make the 

first payment under the agreement 

within 30 days after entering into that 

agreement. The final regulations require 

the Secretary to retain a record of the 

terms and conditions of the forbearance 

and affirmation in the borrower’s or 

endorser’s file. 

For the 2011 calendar year, 62,905 

Direct Loan borrowers requested 

forbearance after defaulting on a loan. 

Of that number, we estimate that 25 

percent (15,726 borrowers) will have 

exercised an option to orally 

acknowledge the debt and agree to repay 

the debt. On average, we estimate that 

it would take a borrower 0.17 hours (10 

minutes) per oral acknowledgment to 

listen to the list of terms and conditions 

of the forbearance as they are reviewed 

with the borrower. The burden 

associated with the completion of the 

General Forbearance Request form, 

OMB 1845–0031, is estimated to average 

0.2 hours (12 minutes). Therefore, the 

net reduction in burden to provide an 

oral acknowledgement rather than 

complete the form is the difference of 

the two or 0.03 hours (0.20 hours minus 

0.17 hours or 2 minutes) per oral 

forbearance. 

We estimate that burden will decrease 

by 472 hours (15,726 borrowers 

multiplied by 0.03 hours per oral 

forbearance) under OMB Control 

Number 1845–0119. 

Sections 682.405(b) and 685.211(f)— 

Reasonable and Affordable Loan 

Rehabilitation Agreement 

The final regulations will add new 

§§ 682.405(b)(1)(iii) and 685.211(f)(1)(i), 

requiring a guaranty agency and the 

Secretary, respectively, to first offer a 

reasonable and affordable loan 

rehabilitation payment amount on a 

defaulted loan as determined using the 

15 percent formula (i.e., the amount 

equal to 15 percent of the amount by 

which the borrower’s Adjusted Gross 

Income (AGI) exceeds 150 percent of the 

poverty guideline amount applicable to 

the borrower’s family size and State, 

divided by 12), except that if this 

amount is less than $5, the borrower’s 

monthly rehabilitation payment is $5. If 

the borrower does not provide the 

documentation required to confirm the 

calculated monthly payment under this 

formula to the guaranty agency or the 

Secretary, the rehabilitation agreement 

would be null and void. 

In calendar year 2011, there were 

approximately 299,159 FFEL borrowers 

(192,029 borrowers whose FFEL 

program loans are held by lenders and 

107,130 FFEL program borrowers whose 

loans are held by the Department) who 

requested and received a loan 

rehabilitation agreement for their 

defaulted loans. We estimate that of the 

192,029 FFEL loans held by lenders, 

66,283 loans are held by state guaranty 

agencies and 125,746 loans are held by 

not-for-profit guaranty agencies, with 

the remaining 107,130 loans (299,159 

minus 192,029) held by the Department. 

In calendar year 2011, there were 

approximately 92,870 Direct Loan 

borrowers that requested and received a 

loan rehabilitation agreement for their 

defaulted loans. 

Under these final regulations, we 

estimate that the 66,283 FFEL borrowers 

whose loans are held by state guaranty 

agencies will request rehabilitation of 

their defaulted loans using the 15 

percent formula and submit the required 

documentation. We estimate that on 

average each borrower will take 0.33 

hours (20 minutes) to gather, copy and 

submit the required documentation. We 

estimate that burden will increase by 

21,873 hours (66,283 borrowers 

submitting documentation multiplied 

by 0.33 hours per loan rehabilitation 

request) under OMB Control Number 

1845–0020. 

Under these final regulations, we 

estimate that the 125,746 FFEL 

borrowers whose loans are held by notfor-profit guaranty agencies will request 

mstockstill on DSK4VPTVN1PROD with RULES2

65792 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

rehabilitation of their defaulted loans 

using the 15 percent formula and 

submitting the required documentation 

to confirm the monthly repayment 

amount. We estimate that on average 

each borrower will take 0.33 hours (20 

minutes) to gather, copy and submit the 

required documentation. We estimate 

that burden will increase by 41,496 

hours (125,746 borrowers submitting 

documentation verifying IBR calculation 

multiplied by 0.33 hours per loan 

rehabilitation request) under OMB 

Control Number 1845–0020. 

Under these final regulations, we 

estimate that the 107,130 FFEL 

borrowers whose loans are held by the 

Department will request rehabilitation 

of their defaulted loans using the 15 

percent formula and submitting the 

required documentation to confirm the 

monthly repayment amount. We 

estimate that on average each borrower 

will take 0.33 hours (20 minutes) to 

gather, copy and submit the required 

documentation. We estimate that 

burden will increase by 35,353 hours 

(107,130 borrowers submitting 

documentation verifying the calculation 

multiplied by 0.33 hours per loan 

rehabilitation request) under OMB 

Control Number 1845–0020. 

Under these final regulations, we 

estimate that the 92,870 Direct Loan 

borrowers whose loans are held by the 

Department will request rehabilitation 

of their defaulted loans using the 15 

percent formula and submitting the 

required documentation to confirm the 

monthly repayment amount. We 

estimate that on average each borrower 

will take 0.33 hours (20 minutes) to 

collect, copy and submit the required 

documentation. We estimate that 

burden will increase by 30,647 hours 

(92,870 borrowers submitting 

documentation verifying the 15 percent 

formula calculation multiplied by 0.33 

hours per loan rehabilitation request) 

under OMB Control Number 1845–0119. 

We estimate that to review the 

supporting documentation submitted, it 

would take the guaranty agency on 

average 0.17 hours (10 minutes) to 

review the supporting documentation 

from the borrower. Under these final 

regulations, we estimate that burden 

will increase by 23,645 hours (192,029 

borrowers requesting loan rehabilitation 

multiplied by 0.17 hours per document 

review) under OMB Control Number 

1845–0020. 

Sections 682.405(b)(1)(vii) and 

685.211(f)(3) will require a guaranty 

agency and the Secretary to recalculate 

the borrower’s rehabilitation payment 

amount if the borrower objects to the 

payment amount contained in the 

written repayment agreement that the 

guaranty agency or the Secretary sent to 

the borrower based on the 15 percent 

formula calculation. 

Of the 299,159 FFEL borrowers in 

calendar year 2011 who requested 

rehabilitation of their defaulted loans, 

we estimate that 12 percent or 35,899 

borrowers will raise an objection to the 

initial determination of the reasonable 

and affordable monthly payment 

amount by the guaranty agency or the 

Secretary. We estimate that each 

objection will entail a phone 

conversation or email that would span 

on average 0.17 hours (10 minutes). This 

will increase burden to the borrowers 

for a total of 6,103 hours (35,899 

borrowers objecting to the initial 

determination of the reasonable and 

affordable payment amount multiplied 

by 0.17 hours per loan rehabilitation 

request) under OMB Control Number 

1845–0020. 

Of the 92,870 Direct Loan borrowers 

in calendar year 2011 who requested 

loan rehabilitation of their defaulted 

loans, we estimate that 11,144 Direct 

Loan borrowers will raise an objection 

to the initial determination of the 

reasonable and affordable monthly 

payment amount. We estimate that each 

objection will entail a phone 

conversation or email that would span 

on average 0.17 hours (10 minutes). This 

would increase burden to the borrowers 

for a total of 1,894 hours (11,144 

borrowers objecting to the initial 

determination of the reasonable and 

affordable payment amount multiplied 

by 0.17 hours per loan rehabilitation 

request) under OMB Control Number 

1845–0119. 

Sections 682.405(b)(1)(vii) and 

685.211(f)(5) will require a borrower 

who objects to the monthly repayment 

amount contained in the written 

repayment agreement based on the 15 

percent formula to provide the guaranty 

agency or the Secretary the information 

needed to calculate a monthly payment 

amount by completing the reasonable 

and affordable rehabilitation payment 

form. If the borrower does not provide 

this information to the guaranty agency 

or the Secretary, no rehabilitation 

agreement would exist with the 

borrower, and the guaranty agency or 

the Secretary will not proceed with the 

rehabilitation. 

Sections 682.405(b)(1)(x) and 

685.211(f)(6) will require the Secretary 

or the guaranty agency, upon the 

borrower’s request, to adjust the 

borrower’s monthly rehabilitation 

payment due to a change in the 

borrower’s financial circumstances. The 

borrower will be required to provide 

documentation supporting the request. 

We estimate that 10 percent of the 

299,159 FFEL borrowers who requested 

rehabilitation of their defaulted loans 

(29,916 FFEL borrowers, 19,203 of 

whom have FFEL program loans that are 

held by lenders and 10,713 of whom 

have FFEL program loans that are held 

by the Department) will have a change 

in their financial circumstances in the 

initial year the proposed regulation is 

implemented. We estimate that on 

average each borrower will take 0.33 

hours (20 minutes) to collect, copy, and 

submit the required documentation. We 

estimate that burden will increase by 

9,872 hours (29,916 borrowers with 

changes in financial circumstances 

multiplied by 0.33 hours per loan 

rehabilitation request) under OMB 

Control Number 1845–0020. 

Of the 19,203 borrowers with FFEL 

loans held by lenders, 6,628 are held by 

public guaranty agencies and 12,575 are 

held by not-for-profit guaranty agencies. 

Under these final regulations, we 

estimate 6,628 FFEL borrowers whose 

loans are held by public guaranty 

agencies will have a change in their 

financial circumstances in the initial 

year the proposed regulation is 

implemented. We estimate that for each 

request submitted it will take on average 

0.5 hours (30 minutes) for the guaranty 

agency to review and process the 

request. Under these final regulations, 

we estimate that burden will increase by 

3,314 hours (6,628 borrowers requesting 

loan rehabilitation multiplied 0.5 hours 

per loan rehabilitation request equals 

3,314 hours) under OMB Control 

Number 1845–0020. 

Under these final regulations, we 

estimate that 12,575 FFEL borrowers 

whose loans are held by not-for-profit 

guaranty agencies will request a change 

in their reasonable and affordable 

payment amount due to changed 

financial circumstances in the initial 

year the final regulation is 

implemented. We estimate that for each 

request submitted it will take on average 

0.5 hours (30 minutes) for the guaranty 

agency to review and process the 

request for a change in the payment 

amount. Under these final regulations, 

we estimate that burden will increase by 

6,288 hours (12,575 borrowers 

requesting a change in the loan 

rehabilitation payment amount 

multiplied by 0.5 hours per request) 

under OMB Control Number 1845–0020. 

We estimate that 10 percent of Direct 

Loan borrowers who are rehabilitating 

their defaulted loans (9,287 Direct Loan 

borrowers) will request a change in the 

reasonable and affordable payment 

amount due to a change in their 

financial circumstances in the initial 

year the final regulation is 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65793 

implemented. We estimate that on 

average each borrower will take 0.33 

hours (20 minutes) to collect, copy, and 

submit the required documentation. We 

estimate that burden will increase by 

3,065 hours (9,287 borrowers requesting 

a change in the reasonable and 

affordable payment amount multiplied 

by 0.33 hours per payment change 

request equals 3,065 hours) under OMB 

Control Number 1845–0119. 

Sections 682.405(a) and 685.211(f)— 

Suspension of Administrative Wage 

Garnishment for Borrowers 

Rehabilitating Defaulted Loans 

The final regulations will add new 

§§ 682.405(a)(3)(i) and 685.211(f)(12)(i) 

to the FFEL and Direct Loan program 

regulations requiring a guaranty agency 

or the Secretary, respectively, to 

suspend collecting on a defaulted loan 

through Administrative Wage 

Garnishment (AWG) after the borrower 

makes five qualifying payments under a 

loan rehabilitation agreement. The 

guaranty agency or the Secretary will 

not be permitted to suspend AWG prior 

to the fifth payment (unless otherwise 

required to do so), and, after the fifth 

payment, the borrower will have the 

option to request that the guaranty 

agency or the Secretary continue 

collecting on the loan through AWG 

while the borrower makes voluntary 

payments under the rehabilitation 

agreement. 

Under § 682.405(a)(3)(ii), we estimate 

that state guaranty agencies will have 

663 FFEL borrowers from whom they 

will be collecting payments through 

AWG while the borrower is also making 

voluntary repayments to rehabilitate the 

loan. After the borrower has made five 

qualifying voluntary loan payments (in 

addition to the AWG payments) the 

holder would suspend AWG. We 

estimate that on average each 

suspension of AWG would take one 

hour (60 minutes). We estimate that 

burden would increase by 663 hours 

(663 borrower requests multiplied by 

one hour per AWG suspension equals 

663 hours) under OMB Control Number 

1845–0020. 

Under § 682.405(a)(3)(ii), we estimate 

that not-for-profit guaranty agencies will 

have 1,257 FFEL borrowers from whom 

they will be collecting payments using 

AWG while the borrower is also making 

voluntary repayments to rehabilitate the 

loan. After the borrower has made five 

qualifying voluntary loan payments (in 

addition to the AWG payments) the 

holder would suspend AWG. We 

estimate that on average each 

suspension of AWG would take one 

hour (60 minutes). We estimate that 

burden would increase by 1,257 hours 

(1,257 borrower requests multiplied by 

one hour per AWG suspension equals 

1,257 hours) under OMB Control 

Number 1845–0020. 

Any burden under § 685.211(f)(12)(i) 

is attributable to the Department and 

therefore not a part of this burden 

assessment of affected entities. 

Collectively, the changes in 

§ 682.405(a) and (b) will increase 

burden by 149,864 hours in OMB 

Control Number 1845–0020. 

Collectively, the changes in 

§ 685.211(f) will increase burden by 

35,606 hours in OMB Control Number 

1845–0119. 

Sections 674.33(g), 682.402(d), and 

685.214—Closed School Discharge 

The final regulations at 

§§ 674.33(a)(4)(i)(B), 682.402(d)(1), and 

685.214(c)(1)(iii) will extend, for 

purposes of the closed school discharge, 

the current 90-day period to 120-days 

for students who leave before a school 

closes and add examples of the types of 

exceptional circumstances under which 

the Department may extend the 120-day 

window. 

During the 2011 calendar year, no 

Perkins Loan borrowers received closed 

school loan discharges. We estimate that 

15 Perkins Loan borrowers submitted 

applications for closed school 

discharges. We estimate that the average 

burden per response is 0.5 hours (30 

minutes) for each loan discharge 

application and that by expanding the 

period from 90 days to 120 days prior 

to school closure for students who had 

withdrawn to apply for a closed school 

loan discharge will increase the number 

of applicants by 20 percent. As a result 

there will be an estimated 18 

applications under the final regulation 

for a total increase in burden of 2 hours 

(18 borrowers applying for loan 

discharge multiplied by 0.5 hours per 

application minus 15 borrowers 

applying for loan discharge under 

current regulations multiplied by 0.5 

hours per application) under OMB 

Control Number 1845–0015. 

During the 2011 calendar year, 163 

FFEL borrowers received closed school 

loan discharges. We estimate that 230 

FFEL borrowers submitted applications 

for discharge. We estimate that the 

average burden per response is 0.5 

hours (30 minutes) for each loan 

discharge application and that by 

expanding the period from 90 days to 

120 days prior to school closure for 

students who had withdrawn to apply 

for a closed school loan discharge will 

increase the number of applicants by 20 

percent. As a result there will be 276 

applications under the final regulation 

for a total increase in burden of 23 hours 

(276 borrowers applying for loan 

discharge multiplied by 0.5 hours per 

application minus 230 borrowers 

applying for loan discharge under 

current regulations multiplied by 0.5 

hours per application) under OMB 

Control Number 1845–0015. 

During the 2011 calendar year, 128 

Direct Loan borrowers received closed 

school loan discharges. We estimate that 

295 Direct Loan borrowers submitted 

applications for discharge. We estimate 

that the average burden per response is 

0.5 hours (30 minutes) for each loan 

discharge application and that by 

expanding the period from 90 days to 

120 days prior to school closure for 

students who had withdrawn to apply 

for a closed school loan discharge will 

increase the number of applicants by 20 

percent, thus totaling 354 applications 

under the final regulation for a total 

increase in burden of 29 hours (354 

borrowers applying for loan discharge 

multiplied by 0.5 hours per application 

minus 295 borrowers applying for loan 

discharge under current regulations 

multiplied by 0.5 hours per application) 

under OMB Control Number 1845–0015. 

Collectively, the total increase in 

burden is 54 hours under OMB Control 

Number 1845–0015. The changes 

associated with the elongation of the 

period prior to school closure from 90 

days to 120 days for students who had 

withdrawn to apply for a closed school 

loan discharge is non-substantive and as 

such, we will submit a Form 83–C to 

OMB to make this change. 

Sections 674.19, 682.610, and 685.309— 

School Enrollment Status Reporting 

Requirements 

For the Federal Perkins Loan program, 

the final regulations would add a new 

§ 674.19(f) with the heading 

‘‘enrollment reporting process.’’ Section 

674.19(f)(1) will provide that, upon 

receipt of an enrollment report from the 

Secretary, an institution must update all 

information included in the report and 

return the report to the Secretary in the 

manner and format prescribed by the 

Secretary and within the timeframe 

prescribed by the Secretary. Section 

674.19(f)(2) will provide that, unless it 

expects to submit its subsequent 

updated enrollment report to the 

Secretary within the next 60 days, an 

institution must notify the Secretary 

within 30 days after: (1) The date the 

school discovers that a loan under title 

IV of the HEA was made to a student 

who was enrolled or accepted for 

enrollment at the institution, and the 

student has ceased to be enrolled on at 

least a half-time basis, or has failed to 

enroll on at least a half-time basis for 

the period for which the loan was 

mstockstill on DSK4VPTVN1PROD with RULES2

65794 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

intended; or (2) the date the school 

discovers that a student who is enrolled 

at the institution and who received a 

loan under title IV of the HEA has 

changed his or her permanent address. 

Because the Secretary already receives 

enrollment information on Federal 

Perkins Loan borrowers who also have 

a FFEL loan or a Direct Loan, the 

additional burden associated with 

sending enrollment reports to 

institutions for the Federal Perkins Loan 

Program is only associated with those 

Federal Perkins Loan borrowers whose 

only loan received under title IV of the 

HEA is a Federal Perkins Loan and who 

are enrolled on at least a half-time basis 

or who had recently changed enrollment 

status. 

In the 2011 calendar year, there were 

2,070,514 Federal Perkins Loan 

borrowers. Of the 2,070,514 Federal 

Perkins Loan borrowers, 240,959 

borrowers have a Federal Perkins Loan 

as the only loan received under title IV 

of the HEA. Of the 240,959 borrowers, 

53 percent (127,708 borrowers) were 

enrolled at least half-time or had 

recently changed enrollment status. The 

Secretary will be sending enrollment 

reports to each of the institutions 

approximately every 60 days or 6 

reports per year. We estimate that on 

average the completion and submission 

of an enrollment report will take 0.05 

hours (3 minutes) per borrower. Burden 

will increase by 38,312 hours (127,708 

borrowers multiplied by 0.05 hours per 

borrower multiplied by 6 reports per 

year) under OMB Control Number 

1845–0019. 

For the 2011 calendar year 51 percent 

of the Federal Perkins loan borrowers or 

65,131 affected borrowers were at public 

institutions, therefore we estimate that 

burden will increase for public 

institutions by 19,539 hours (38,312 

hours multiplied by 0.51) under OMB 

1845–0019. 

For the 2011 calendar year 45 percent 

of the Federal Perkins loan borrowers or 

57,469 affected borrowers were at 

private not-for-profit institutions, 

therefore we estimate that burden will 

increase for private not-for-profit 

institutions by 17,240 hours (38,312 

hours multiplied by 0.45) under OMB 

1845–0019. 

For the 2011 calendar year 4 percent 

of the Federal Perkins loan borrowers or 

5,108 affected borrowers were at 

proprietary institutions, therefore we 

estimate that burden will increase for 

proprietary institutions by 1,533 hours 

(38,312 hours multiplied by 0.04) under 

OMB 1845–0019. 

Collectively, the final regulatory 

changes to § 674.19 will increase burden 

by 38,312 hours for 127,708 affected 

borrowers under OMB 1845–0019. 

For the FFEL Program, the final 

regulations will replace the term 

‘‘student status confirmation reports’’ in 

§ 682.610(c) with the term ‘‘enrollment 

reporting process,’’ and will revise 

§ 682.610(c)(1) to provide that upon 

receipt of an enrollment report from the 

Secretary, a school must update all 

information included in the report and 

return the report to the Secretary in the 

manner and format prescribed by the 

Secretary and within the timeframe 

specified by the Secretary. Institutions 

currently participating in the FFEL or 

Direct Loan programs will continue to 

report enrollment to the Secretary and 

the lender. Because the only change 

regarding the FFEL Program reporting is 

in the definition of the reporting 

requirement, there is no change in 

burden for institutions participating in 

the FFEL and Direct Loan programs. 

Section 674.34—Deferment of 

Repayment—Federal Perkins Loans 

The final regulations in § 674.34(f)(1) 

will require schools that participate in 

the Perkins Loan Program to use the 

same eligibility criteria to define an 

eligible graduate fellowship program 

and to establish the eligibility of a 

borrower for a graduate fellowship 

deferment that lenders and the 

Department use in the FFEL and Direct 

Loan programs, respectively. The final 

regulations will require that a borrower 

provide the institution with a statement 

from an authorized official of the 

borrower’s graduate fellowship program 

certifying: (1) That the borrower holds at 

least a bachelor’s degree; and (2) the 

borrower’s anticipated completion date 

of the program. In calendar year 2011 

there were 1,104 Perkins borrowers who 

applied for a graduate fellowship 

deferment. We estimate that on average 

it will take the borrower 0.25 hours (15 

minutes) to obtain the certification from 

an authorized official of the graduate 

fellowship program and to complete and 

submit the Perkins Loan deferment form 

multiplied by an estimated 1,104 

deferment applications equals 276 hours 

of increased burden to borrowers under 

OMB Control Number 1845–0019. 

For the 2011 calendar year 51 percent 

of the Federal Perkins Loan borrowers 

or 563 affected borrowers were at public 

institutions, therefore we estimate that 

burden will increase for authorizing 

officials at public institutions by 141 

hours (1,104 applications multiplied by 

0.51 multiplied by 0.25 hours per 

certification) under OMB 1845–0019. 

For the 2011 calendar year 45 percent 

of the Federal Perkins Loan borrowers 

or 497 affected borrowers were at 

private not-for-profit institutions, 

therefore we estimate that burden will 

increase authorizing officials at for 

private not-for-profit institutions by 124 

hours (1,104 applications multiplied by 

0.45 multiplied by 0.25 hours per 

certification) under OMB 1845–0019. 

For the 2011 calendar year 4 percent 

of the Federal Perkins Loan borrowers 

or 44 affected borrowers were at 

proprietary institutions, therefore we 

estimate that burden will increase for 

private not-for-profit institutions by 11 

hours (1,104 applications multiplied by 

0.04 multiplied by 0.25 hours per 

certification) under OMB 1845–0019. 

Collectively, the final regulatory 

changes to § 674.34 will increase burden 

by 552 hours under OMB 1845–0019. 

Section 682.410(b)(9)(i)(T)(2)— 

Administrative Wage Garnishment 

(AWG)—Use of Third-Party Contractors 

The final regulations will also add a 

new § 682.410(b)(9)(i)(T) to the 

regulations, which specifies the 

functions that may be performed by a 

third-party servicer or collection 

contractor employed by the guaranty 

agency for services needed in the AWG 

process. The final regulations make 

clear that the guaranty agency may not 

delegate to any third party the decision 

to order withholding of an individual 

borrower’s wages, and must create and 

retain records to demonstrate that each 

order issued has been individually 

authorized by an appropriate official of 

the guaranty agency. The final 

regulations also specify the manner by 

which a withholding order may be sent 

to employers and the permissible 

activities that may be performed by a 

third-party servicer or collection 

contractor employed by the guaranty 

agency with respect to withholding 

orders. Only an authorized official of 

the guaranty agency may determine that 

an individual withholding order is to be 

issued. The guarantor must record the 

official’s determination for each order it 

issues by either including the official’s 

signature on the order, or by retaining 

in the agency’s records the identity of 

the approving official, the date of the 

approval, the amount or rate of the 

order, the name and address of the 

employer to whom the order was issued, 

and the debt for which the order was 

issued. 

In calendar year 2011, we estimate 

there were 84,293 FFEL Program 

borrowers whose loans were held by 

state guaranty agencies and for which 

the guaranty agency had initiated AWG. 

We estimate that on average the 

guaranty agency will take 0.25 hours (15 

minutes) to meet the recordkeeping 

requirements specified above. Total 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65795 

burden hours will increase by 21,073 

hours (84,293 multiplied by 0.25 hours) 

under OMB 1845–0020. 

In calendar year 2011, we estimate 

there were 159,912 FFEL borrowers 

whose loans were held by not-for-profit 

guaranty agencies and for which the 

guaranty agency had initiated AWG. We 

estimate that on average the guaranty 

agency will take 0.25 hours (15 minutes) 

to meet the recordkeeping requirements 

specified above. Total burden hours will 

increase by 39,978 hours (159,912 

multiplied by 0.25 hours) under OMB 

1845–0020. 

The final changes in 

§ 682.410(b)(9)(i)(T)(2) will increase 

burden by 61,051 hours under OMB 

Control Number 1845–0020. 

Section 682.410(b)(9)(i)(H)— 

Administrative Wage Garnishment 

(AWG)—Borrower Hearing Requests 

The final regulations will also replace 

§ 682.410(b)(9)(i)(L) of the FFEL 

Program regulations with 

§ 682.410(b)(9)(i)(H) to provide that if a 

borrower’s written request for a hearing 

is received by the guaranty agency after 

the 30th day following the date of the 

garnishment notice and a decision is not 

rendered within 60 days following 

receipt of the borrower’s written request 

for a hearing, the guaranty agency must 

suspend the order beginning on the 61st 

day after the hearing request was 

received until a hearing is provided and 

a decision is rendered. 

If a borrower does not request a 

hearing within the 30-day time limit, 

the guaranty agency must go forward 

with the AWG. However, if a borrower 

does eventually request a hearing, a 

guaranty agency would still be required 

to provide one in sufficient time to have 

a decision issued within 60 days of the 

request. The Department added a 

provision specifying that if this hearing 

is not provided and a decision issued 

within 60 days, then the agency must 

suspend the AWG order beginning on 

the 61st day until a decision is issued. 

In calendar year 2011, we estimate 

there were 84,293 FFEL borrowers 

whose loans were held by state guaranty 

agencies and for which the agencies had 

initiated AWG. We estimate that 10 

percent of these borrowers (8,429) will 

request a hearing and that in 10 percent 

of those cases (843) a decision will not 

be rendered until after 60 days 

following the receipt of the borrower’s 

request. On average, we estimate that it 

will take one hour (60 minutes) to 

suspend an administrative wage 

garnishment order. The total increase in 

burden will be 843 hours (843 FFEL 

borrowers undergoing AWG who 

requested a hearing where a decision 

was not rendered until after 60 days 

following the receipt of the borrower’s 

request multiplied by one hour per 

suspension) under OMB 1845–0020. 

In calendar year 2011, we estimate 

there were 159,912 FFEL borrowers 

whose loans where held by not-forprofit guaranty agencies and for which 

the agencies had initiated AWG. We 

estimate that 10 percent of these 

borrowers (15,991) will request a 

hearing and that in 10 percent of those 

cases (1,599) a decision will not be 

rendered until after 60 days following 

the receipt of the borrower’s request. On 

average, we estimate that it will take one 

hour (60 minutes) to suspend an 

administrative wage garnishment order. 

The total increase in burden will be 

1,599 hours (1,599 FFEL borrowers 

undergoing AWG who requested a 

hearing where a decision was not 

rendered until after 60 days following 

the receipt of the borrower’s request 

multiplied by one hour per suspension) 

under OMB 1845–0020. 

Collectively, the final changes in 

§ 682.410(b)(9)(i)(H) will increase 

burden by 2,442 hours in OMB Control 

Number 1845–0020. 

Section 682.410(b)(9)(i)(J)— 

Administrative Wage Garnishment 

(AWG)—Hearing Administration 

The final regulations will add new 

paragraph (b)(9)(i)(J) and will provide 

for the manner by which the hearing is 

administered and certain provisions 

relating to bringing forth additional 

evidence and continuances. 

Specifically, the final regulations will 

require that the hearing be conducted as 

an informal proceeding, require 

witnesses in an oral hearing to testify 

under oath or affirmation, and require 

maintenance of a summary record of the 

hearing. The final regulations will also 

allow the borrower to request a 

continuance to submit additional 

evidence. 

In calendar year 2011, we estimate 

there were 84,293 FFEL borrowers 

whose loans where held by state 

guaranty agencies and for which the 

agencies had initiated AWG. We 

estimate that 10 percent of these 

borrowers (8,429) will request a hearing. 

We estimate that on average each 

summary record will take one hour (60 

minutes). The total burden increase for 

this recordkeeping will be 8,429 hours 

(8,429 hearings multiplied by one hour 

per hearing) under OMB 1845–0020. 

In calendar year 2011, we estimate 

there were 159,912 FFEL borrowers 

whose loans where held by not-forprofit guaranty agencies and for which 

the agencies had initiated AWG. We 

estimate that 10 percent of these 

borrowers (15,991) will request a 

hearing. We estimate that on average 

each summary record will take one hour 

(60 minutes). The total burden increase 

for this recordkeeping will be 15,991 

hours (15,991 hearings multiplied by 

one hour per hearing) under OMB 1845– 

0020. 

Collectively, the changes in 

§ 682.410(b)(9)(i)(J) will increase burden 

by 24,420 hours in OMB Control 

Number 1845–0020. 

Section 682.410(b)(9)(i)(Q)— 

Administrative Wage Garnishment 

(AWG)—Recent Reemployment After 

Involuntary Unemployment 

Section 682.410(b)(9)(i)(Q) will clarify 

that a borrower who wishes to object to 

AWG on the basis that he or she is not 

subject to garnishment because of recent 

reemployment after involuntary 

separation, bears the burden of raising 

and proving that claim. 

In calendar year 2011, we estimate 

that there were 84,293 FFEL borrowers 

whose loans where held by state 

guaranty agencies and for which the 

agencies had initiated AWG. Of that 

number, we estimate that 8 percent 

(6,743) became unemployed 

involuntarily. Furthermore, we estimate 

that a sub-group of those who became 

unemployed involuntarily, 5 percent 

(337), gained subsequent reemployment. 

We estimate that the average amount of 

time for each borrower subject to AWG 

in this sub-group to provide 

documentation that supports their claim 

to not be subject to AWG due to their 

recent reemployment to be 0.5 hours. 

The increased burden to provide 

documentation that will support the 

borrower’s claim that he not be subject 

to AWG due to recent reemployment is 

169 hours (337 borrowers whose student 

loans were being collected by AWG, 

who became unemployed involuntarily, 

but subsequently gained reemployment 

multiplied by 0.5 hours per claim) 

under OMB 1845–0020. 

In calendar year 2011, we estimate 

that there were 159,912 FFEL borrowers 

whose loans where held by not-forprofit guaranty agencies and for which 

the agencies had initiated AWG. Of that 

number, we estimate that 8 percent 

(12,793) became unemployed 

involuntarily. Furthermore, we estimate 

that a sub-group of those who became 

unemployed involuntarily, 5 percent 

(640), gained subsequent reemployment. 

We estimate that the average amount of 

time for each borrower subject to AWG 

in this sub-group to provide 

documentation that supports their claim 

to not be subject to AWG due to their 

recent reemployment to be 0.5 hours. 

The total amount of increased burden to 

mstockstill on DSK4VPTVN1PROD with RULES2

65796 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

provide documentation that will 

support the borrower’s claim that he not 

be subject to AWG due to recent 

reemployment is 320 hours (640 

borrowers whose loans were being 

collected by AWG, who became 

employed involuntarily, but 

subsequently gained reemployment 

multiplied by 0.5 hours per claim) 

under OMB 1845–0020. 

The final changes in 

§ 682.410(b)(9)(i)(Q) will collectively 

increase burden by 489 hours in OMB 

Control Number 1845–0020. 

Collectively, the final changes in all 

subparagraphs of § 682.410(b)(9) will 

increase burden by 88,402 hours in 

OMB Control Number 1845–0020. 

Repeal of Unnecessary FFEL Program 

Regulations 

The language in these final 

regulations removes provisions from 34 

CFR part 682 that are no longer required 

as a result of the SAFRA Act included 

in the Health Care and Reconciliation 

Act of 2010. One of the provisions of the 

SAFRA Act was the termination, as of 

July 1, 2010, of the authority for lenders 

to make new loans under the FFEL 

Program. These final regulations will 

remove the FFEL provisions that are 

now unnecessary in light of this change 

and would also make technical and 

conforming changes. A number of the 

final technical and conforming changes 

in 34 CFR Part 682 are for clarity, others 

are due to the elimination of crossreferences. 

Typically, the results of negotiated 

rulemaking produce some regulatory 

changes that correspond to reporting or 

recordkeeping burden on affected 

entities such as borrowers, lenders, or 

guaranty agencies. The primary 

information collection associated with 

34 CFR Part 682 is the currently 

approved OMB 1845–0020. Unlike other 

newly proposed regulations where the 

resultant final regulation would either 

increase or decrease burden as a result 

of the change in a regulation, this 

expansive effort to eliminate unneeded 

regulations includes more wholesale 

changes being made to 34 CFR Part 682. 

As a result, the entire history of burden 

associated with OMB 1845–0020 was 

examined. While the burden 

assessments for OMB 1845–0020 stretch 

back over 13 years, the necessary level 

of detail does not exist to disaggregate 

the amount of the currently approved 

amount of burden in this collection into 

its corresponding subsections of 34 CFR 

Part 682. 

Therefore, a new methodology to 

calculate burden is required. We are 

able to establish that there are 38 

subsections of 34 CFR Part 682 that have 

burden under OMB 1845–0020. We 

divided the total of the currently 

approved burden hours of 12,352,197 

hours by the 38 affected subsections 

which on average yields 325,058 hours 

per affected subsection. 

Each of the subsections listed below 

will use this number of burden hours as 

a starting point. The final changes as 

provided below explain the burden 

impact. 

The specific number of respondents 

from the affected entities is similarly 

unavailable, so we have established a 

percentage based on the number of 

borrowers per loan type to distribute the 

number of respondents across the 

affected entities. 

Section 682.102—Repaying a Loan 

The final regulations will amend the 

section heading, remove § 682.102(a) 

through (d), which describe the 

application process for Stafford, PLUS, 

and Consolidation loans, and 

redesignate the paragraphs in current 

§ 682.102(e), which describes the loan 

repayment process, as § 682.102(a)–(g). 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.200—Definitions—Lender 

The final regulations will remove the 

provisions of current § 682.601(a)(3), 

(a)(5), and (a)(7), and place these 

provisions into paragraph (8) of the 

definition of ‘‘Lender’’ in § 682.200(b). 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.205—Disclosure 

Requirements for Lenders 

The final regulations will remove 

§ 682.205(a) (the initial disclosure 

statement), (b) (statement of borrower 

rights and responsibilities), (g) (plain 

language disclosure), and (i) (separate 

disclosure for Consolidation loans) from 

the FFEL Program regulations and 

renumber the remaining provisions. The 

remaining provisions include providing 

repayment information, providing 

required disclosures during the 

repayment period, and providing 

required disclosures for borrowers 

having difficulty making payments. 

The final changes will decrease the 

required burden by 162,529 hours, and 

therefore the current burden hours will 

decrease from 325,058 hours to 162,529 

hours under OMB Control Number 

1845–0020. 

Section 682.206—Due Diligence in 

Making a Loan 

The final regulations will remove 

§ 682.206 from the FFEL regulations. 

The SAFRA Act eliminated the 

authority to make new FFEL Program 

loans, including FFEL Consolidation 

loans. As a result, the requirements 

governing the making of new FFEL 

Program loans are no longer needed and 

the previous burden associated with the 

making of a loan by a lender will be 

removed. 

The final change will remove all of 

the prior assessment of 325,058 hours of 

burden associated under OMB Control 

Number 1845–0020, and therefore 

burden will decrease by 325,058 hours 

for a total of 0 hours. 

Section 682.208—Due Diligence in 

Servicing a Loan 

The final regulations will replace the 

term ‘‘national credit bureau(s)’’ with 

‘‘nationwide consumer reporting 

agency(ies)’’ to more accurately reflect 

the reporting requirements. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.209—Repayment of a Loan 

The final regulations will amend 

§ 682.209(a)(3)(i) by adding a new 

paragraph that specifies that borrowers 

with fixed interest rates on their 

Stafford loans enter repayment on those 

loans the day after six months following 

the date the borrower was no longer 

enrolled on at least a half-time basis. 

The final regulations will remove 

current § 682.209(e) through (g) and (j) 

from the regulations and re-designate 

the remaining paragraphs as paragraphs 

(e)-(g). Redesignated § 682.209(e) 

(current paragraph (h)) will be amended 

to specify that a FFEL Consolidation 

loan borrower repaying under the IBR 

plan may make a scheduled monthly 

payment of less than the interest that 

accrues on the loan. 

The final changes will decrease the 

burden by 65,012 hours, and therefore 

the current burden assessment will 

decrease from 325,058 to 260,046 hours 

under OMB Control Number 1845–0020. 

Section 682.210—Deferment 

The final regulations will amend 

§ 682.210(a)(4) of the regulations to 

provide that a borrower’s representative 

may request a military service 

deferment on behalf of the borrower. In 

§ 682.210(b), the introductory language 

in paragraphs (b)(1) through (6) of 

§ 682.210 was revised to identify the 

cohort of borrowers to which each 

paragraph applies. Throughout 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65797 

§ 682.210(b) cross-references were 

added to the eligibility criteria that are 

applicable to deferments available to 

these borrowers. The final regulations 

also amend § 682.210(s)(2) by removing 

the exception clause at the end of the 

provision, and amend § 682.210(u)(5) by 

replacing the words ‘‘military active’’ 

with ‘‘post-active’’. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.211—Forbearance 

Substantive changes in this section 

have been identified earlier which 

added 9,446 hours of burden to OMB 

Control Number 1845–0020. There were 

no further changes to this section that 

will alter the prior burden assessment of 

325,058 hours under OMB Control 

Number 1845–0020. 

Collectively, the final changes will 

increase the burden assessment from 

325,058 by 9,446 hours (as identified 

earlier) for a total of 334,504 hours 

under OMB Control Number 1845–0020. 

Section 682.212—Prohibited 

Transactions 

There is no change to the current 

language in this section of the 

regulations, however the current burden 

referenced in OMB Control Number 

1845–0020 is incorrectly calculated. 

This section primarily defines 

‘‘prohibited transactions,’’ but does not 

impose recordkeeping or reporting 

requirements upon entities and thus 

does not impose burden. Therefore, 

these final regulations remove the 

325,058 hours of burden that was 

previously incorrectly attributed to this 

section of the regulations. While 

subsection 34 CFR 682.212(h) provides 

that an institution, at its option, may 

make available a list of recommended or 

suggested lenders, the burden associated 

with that reporting is accounted for in 

§§ 601.10 and 668.14. 

We removed the prior burden 

assessment of 325,058 hours under 

OMB Control Number 1845–0020, and 

therefore burden will decrease by 

325,058 hours for a total of 0 hours. 

Section 682.214—Compliance With 

Equal Credit Opportunity Requirements 

The final regulations will remove 

§ 682.214 from the FFEL regulations. 

The SAFRA Act ended the making of 

new FFEL loans and therefore these 

requirements can be eliminated from the 

FFEL regulations. 

The change in the final regulation will 

remove the prior burden assessment of 

325,058 hours under OMB Control 

Number 1845–0020, and therefore 

burden will decrease by 325,058 hours 

for a total of 0 hours. 

Section 682.216—Teacher Loan 

Forgiveness Program 

The final regulations provide for 

minor language changes. 

These changes in the final regulations 

will not alter the prior burden 

assessment of 325,058 hours under 

OMB Control Number 1845–0020. 

Section 682.301—Eligibility of 

Borrowers for Interest Benefits on 

Stafford and Consolidation Loans 

The final regulations will remove 

§ 682.301(c) from the regulations. The 

SAFRA Act ended the making of new 

FFEL Program loans and this provision 

related to determining borrower 

eligibility for the interest subsidy on 

new loans would be eliminated. 

The change in the final regulations 

will remove the prior burden 

assessment of 325,058 hours under 

OMB Control Number 1845–0020, and 

therefore burden would decrease by 

325,058 hours for a total of 0 hours 

under this section. 

Section 682.305—Procedures for 

Payment of Interest Benefits and Special 

Allowance and Collection of Origination 

and Loan Fees 

Section 682.305(c)(1)(ii) specifies that, 

regardless of the dollar volume of loans 

originated or held, a school lender or an 

eligible lender serving as trustee for a 

school or school-affiliated organization 

originating FFEL Program loans as a 

lender must submit an independent 

compliance audit to the Department 

each year. The final regulations will 

remove the reference to FFEL lenders 

originating loans. The final regulations 

will also remove the language specifying 

that a school and lender serving as a 

trustee for a school must submit an 

independent compliance audit to the 

Department each year. 

The number of school lenders or 

lenders serving as a trustee on behalf of 

a school or a school affiliated 

organization whose purpose is to 

originate loans for which the final 

regulations will provide relief is so 

small as to not be substantive. As a 

result, these final changes will not alter 

the prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.401—Basic Program 

Agreement 

The final regulations will remove 

from § 682.401 language that addresses 

new loan originations, the process 

supporting loan origination, and a 

guaranty agency’s efforts to secure new 

loan volume. These provisions can be 

eliminated from the FFEL Program 

regulations because no new FFEL loans 

are being made. The remaining 

provisions proposed for elimination 

relate to school eligibility to participate 

in a guaranty agency’s program and the 

authority of an agency to limit, suspend, 

or terminate a school from its program. 

For purposes of new loans, schools now 

participate only in the Direct Loan 

Program. Any future actions to limit, 

suspend, or terminate a school’s 

participation in the student loan 

programs would be undertaken by the 

Department under 34 CFR part 668, 

subpart G. Therefore, § 682.401(b)(6) can 

also be eliminated from the FFEL 

Program regulations. 

The final changes will decrease the 

burden related to FFEL processes by 

32,506 hours, and therefore the current 

burden hours will decrease from 

325,058 hours by 32,506 hours to 

292,552 hours under OMB Control 

Number 1845–0020. 

Section 682.402—Death, Disability, 

Closed School, False Certification, 

Unpaid Refunds, and Bankruptcy 

Payments 

Substantive changes in this section 

have been identified earlier under OMB 

1845–0015. There were no further 

changes to this section that impacted 

the burden under OMB 1845–0020. 

As a result, the prior burden 

assessment of 325,058 hours under 

OMB Control Number 1845–0020 will 

not be altered. 

Section 682.404—Federal rEinsurance 

Agreement 

The final regulations will make 

conforming language changes required 

due to the elimination of previous crossreferences or obsolete requirements. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.405—Loan Rehabilitation 

Agreement 

Substantive changes in this section 

have been identified earlier. There were 

no further changes to this section. 

The substantive changes would be in 

addition to the previous burden 

assessment of 325,058 hours under 

OMB Control Number 1845–0020 and 

the earlier assessment increases burden 

by 135,359 hours in OMB 1845–0020 for 

a total burden of 460,417 hours. 

mstockstill on DSK4VPTVN1PROD with RULES2

65798 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

Section 682.406—Conditions for Claim 

Payments From the Federal Fund and 

for Reinsurance Coverage 

The final regulations will make a 

minor wording change due to the 

elimination of previous cross-references 

and add an ending date coinciding with 

the implementation of the SAFRA Act, 

which ended the making of new FFEL 

Program loans. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.409—Mandatory 

Assignment by Guaranty Agencies of 

Defaulted Loans to the Secretary 

The final regulations will make no 

changes to this section of the 

regulations. 

These final regulations will not alter 

the prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.410—Fiscal, 

Administrative, and Enforcement 

Requirements 

Apart from the earlier discussion of 

the changes made to the administrative 

wage garnishment provisions in this 

section of the regulations, the final 

regulations will only make minor 

wording changes to correct crossreferences and delete obsolete 

references. 

Substantive changes in this section 

have been identified earlier. There are 

no further changes to this section. These 

final changes will not alter the prior 

burden assessment of 325,058 hours 

under OMB Control Number 1845–0020 

and the earlier assessment that 

increased burden by 88,402 hours in 

OMB 1845–0020 for a total of 413,460 

hours. 

Section 682.411—Lender Due Diligence 

in Collecting Guaranty Agency Loans 

The final regulations will make a 

minor wording change. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.412—Consequences of the 

Failure of a Borrower or Student To 

Establish Eligibility 

The final regulations will make a 

minor wording change. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.414—Records, Reports, and 

Inspection Requirements for Guaranty 

Agency Programs 

The final regulations will make minor 

wording changes. One of the minor 

wording changes will eliminate a 

reporting category from annual guaranty 

agency reporting requirement. Under 

§ 682.414, annually, for each State in 

which it operates, a guaranty agency 

report of the total guaranteed loan 

volume, default volume, and default 

rate does not have to be categorized by 

schools for all loans guaranteed after 

December 31, 1980. We estimate that 

this reduction in reporting categories 

will decrease the previous burden 

assessment by 16,253 hours, and 

therefore the current burden of 325,058 

would decrease to 308,805 hours under 

OMB Control Number 1845–0020. 

Section 682.417—Determination of 

Federal Funds or Assets To Be Returned 

The final regulations make no changes 

to this section of the regulations. These 

changes in the final regulations will not 

alter the prior burden assessment of 

325,058 hours under OMB Control 

Number 1845–0020. 

Section 682.418—Prohibited Uses of the 

Assets of the Operating Fund During 

Periods in Which the Operating Fund 

Contains Transferred Funds Owed to 

the Federal Fund 

The final regulations will remove 

§ 682.418 from the FFEL regulations. 

The final change will remove the prior 

burden assessment of 325,058 hours 

under OMB Control Number 1845–0020, 

and therefore burden will be decreased 

by 325,058 hours for a total of 0 hours 

based on the elimination of the prior 

FFEL requirements. 

Section 682.421—Funds Transferred 

From the Federal Fund to the Operating 

Fund by a Guaranty Agency 

The final regulations will remove 

§ 682.421 from the FFEL regulations. 

The final change will remove the prior 

burden assessment of 325,058 hours 

under OMB Control Number 1845–0020, 

and therefore burden will decrease by 

325,058 hours for a total of 0 hours 

based on the elimination of the prior 

FFEL requirements. 

Section 682.507—Due Diligence in 

Collecting a Loan 

Section 682.508—Assignment of a Loan 

Section 682.511—Procedures for Filing 

a Claim 

Section 682.515—Records, Reports, and 

Inspection Requirements for Federal 

GSL Program Lenders 

The final regulations will remove all 

of the regulations under Part 682, 

subpart E (§§ 682.500 through 682.515) 

and reserve the subpart. The final 

regulations will also remove FISLrelated Appendix C to part 682 from the 

regulations. 

The change in the final regulations 

will remove the prior burden 

assessment of 1,300,232 hours under 

OMB Control Number 1845–0020, and 

therefore burden will decrease by 

325,058 hours for each of these four 

sections and decrease burden by 

1,300,232 hours for a total of 0 hours 

based on the elimination of the prior 

FFEL requirements. 

Section 682.602—Rules for a School or 

School-Affiliated Organization That 

Makes or Originates Loans Through an 

Eligible Lender Trustee 

The final regulations will remove 

§ 682.602 from the FFEL regulations. 

The final change will remove the prior 

burden assessment of 325,058 hours 

under OMB Control Number 1845–0020, 

and therefore burden will decrease by 

325,058 hours for a total of 0 hours 

based on the elimination of the prior 

FFEL requirements. 

Section 682.603—Certification by a 

School That Participated in Connection 

With a Loan Application 

The final regulations will make 

conforming language changes required 

due to the elimination of a crossreference and reorganization due to a 

deletion of previous requirements. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.604—Processing the 

Borrower’s Loan Proceeds and 

Counseling Borrowers (Required Exit 

Counseling for Borrowers) 

The final regulations will change the 

heading of § 682.604, remove current 

paragraph (a), remove and reserve 

paragraph (b), and remove paragraphs 

(c) through (f) and (h). The final 

regulations will also redesignate current 

paragraph (g) as paragraph (a). Newly 

redesignated § 682.604(a)(1) will be 

amended to include another option for 

providing exit counseling to a student 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65799 

borrower who withdraws without the 

school’s knowledge or fails to complete 

required exit counseling. In addition to 

the existing options described under 

‘‘Current Regulations,’’ a school could 

also send written counseling materials 

to an email address provided by the 

student borrower. Newly redesignated 

§ 682.604(a)(2) will be amended by 

replacing cross-references to current 

paragraph (a), which we are removing, 

with the substantive information 

contained in the cross-referenced 

provision that must be included in the 

counseling. A new paragraph (a)(5) will 

also be added to newly redesignated 

§ 682.604(a) to clarify that: (1) A 

school’s compliance with the Direct 

Loan Program exit counseling 

requirements in 34 CFR 685.304(b) 

satisfies the FFEL exit counseling 

requirements for student borrowers who 

received both FFEL and Direct Loan 

program loans for attendance at the 

school if the school provides the 

information required by 

§ 682.604(a)(2)(i) and (a)(2)(ii); and (2) a 

student’s completion of interactive exit 

counseling offered by the Secretary 

meets both the FFEL exit counseling 

requirements and the Direct Loan exit 

counseling requirements in 34 CFR 

685.304(b). 

The changes in the final regulations 

will decrease the previous burden 

assessment of 325,058 hours by 211,288 

hours, and therefore the current burden 

of 325,058 hours will decrease to 

113,770 hours under OMB Control 

Number 1845–0020 because the burden 

associated with new FFEL Program 

loans will be eliminated. 

Section 682.605—Determining the Date 

of a Student’s Withdrawal 

The final regulations will not make 

any changes to this section. These final 

regulations will not alter the prior 

burden assessment of 325,058 hours 

under OMB Control Number 1845–0020. 

Section 682.610—Administrative and 

Fiscal Requirements for Schools That 

Participated 

Apart from the earlier discussion of 

the changes made to this section, the 

final regulations will only make minor 

wording changes. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.711—Reinstatement After 

Termination 

The final regulations will remove the 

language regarding the loss of a school 

lender’s participation upon the loss of 

the school’s eligibility to participate in 

the Title IV, Federal student financial 

aid programs. 

These final changes will not alter the 

prior burden assessment of 325,058 

hours under OMB Control Number 

1845–0020. 

Section 682.712—Disqualification 

Review of Limitation, Suspension, and 

Termination Actions Taken by 

Guarantee Agencies Against Lenders 

The final regulations will remove a 

cross-reference to a section proposed for 

deletion. These final changes will not 

alter the prior burden assessment of 

325,058 hours under OMB Control 

Number 1845–0020. 

Section 682.713—Disqualification 

Review of Limitation, Suspension, and 

Termination Actions Taken by Guaranty 

Agencies Against a School 

The final regulations will remove 

§ 682.713 from the FFEL Program 

regulations. The change in the final 

regulations will remove the prior 

burden assessment of 325,058 hours 

under OMB Control Number 1845–0020, 

therefore burden will decrease by 

325,058 hours for a total of 0 hours 

based upon the elimination of the prior 

FFEL requirements. 

Consistent with the discussion above, 

the following chart describes the 

sections of the final regulations 

involving information collections, the 

information being collected, and the 

collections that the Department will 

submit to the Office of Management and 

Budget for approval and public 

comment under the Paperwork 

Reduction Act, and the estimated costs 

associated with the information 

collections. The monetized net savings 

from of the reduced burden on lender/ 

guaranty agencies, institutions, and 

borrowers using wage data developed 

using BLS data, available at http://

www.bls.gov/ncs/ect/sp/ecsuphst.pdf, is 

¥$108,767,761 as shown in the chart 

below. This cost was based on an hourly 

rate of $24.61. 

COLLECTION OF INFORMATION

Regulatory section Information collection OMB Control No. and estimated change 

in burden 

Estimated 

costs 

§ 682.211 Forbearance .......................... These final regulations amend the current FFEL regulations to authorize a 

lender to grant forbearance to a borrower who is in default on a loan, but 

prior to a default claim payment based 

on the borrower’s oral request. The 

lender must orally review with the borrower the terms and conditions of the 

forbearance and send a notice confirming the terms within 30 days of the 

oral agreement.

OMB 1845–0020 ......................................

The Department estimates that the burden will increase by 9,446 hours. 

$232,466. 

§ 685.205 Forbearance .......................... These final regulations amend the current Direct Loan regulations to authorize the Secretary to grant forbearance 

to a borrower who is in default on a 

loan, but prior to a default claim payment based on the borrower’s oral request. The Secretary must orally review with the borrower the terms and 

conditions of the forbearance and send 

a notice confirming the terms within 30 

days of the oral agreement.

OMB 1845–0119 ......................................

The Department estimates that the burden will decrease by 472 hours. 

¥$11,616. 

mstockstill on DSK4VPTVN1PROD with RULES2

65800 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

COLLECTION OF INFORMATION—Continued 

Regulatory section Information collection OMB Control No. and estimated change 

in burden 

Estimated 

costs 

§ 682.405(b) Loan rehabilitation agreement.The final regulations require the guaranty 

agency to base determinations of reasonable and affordable rehabilitation 

payment amounts of defaulted loans 

on information provided on an OMBapproved form, and if requested, supporting documentation.

OMB 1845–0020 ......................................

The Department estimates that the burden will increase by 149,864 hours. 

$3,688,153. 

§ 685.211(f) Loan rehabilitation agreement.The final regulations require the Secretary to base determinations of reasonable and affordable rehabilitation 

payment amounts of defaulted loans 

on information provided on an OMBapproved form, and if requested, supporting documentation.

OMB 1845–0119 ......................................

The Department estimates that the burden will increase by 35,606 hours. 

$876,264. 

§ 674.33, § 682.402, § 685.214 Closed 

school discharge form.

The final regulations extend the current 

90-day window to 120-days for students who leave before a school 

closes may apply for a discharge of a 

title IV, HEA loan.

OMB 1845–0015 ......................................

The Department estimates that the burden will increase by 54 hours. 

$1,329. 

§ 674.19 School enrollment status reporting.The final regulations add a new section 

requiring institutions that participate in 

the Federal Perkins Loan program to, 

upon receipt of an enrollment report 

from the Secretary, update all information included in the report, and return it 

to the Secretary in the manner and format and within the timeframe prescribed by the Secretary.

OMB 1845–0019 ......................................

The Department estimates that the burden will increase by 38,312 hours. 

$942,858. 

§ 674.34 Deferment of repayment— 

Federal Perkins Loans.

The final regulations require schools that 

participate in the Perkins Loan Program to use the same eligibility criteria 

that FFEL lenders and the Department 

use to define an eligible graduate fellowship program and to establish the 

eligibility of a Perkins Loan borrower 

for a graduate fellowship deferment.

OMB 1845–0019 ......................................

The Department estimates that the burden will increase by 276 hours. 

$13,585. 

§ 682.410 Fiscal, administrative and enforcement requirements.The final regulations: 

• Add a new section to specify the 

functions that may be performed 

by a third-party servicer or collection contractor employed by a 

guaranty agency (GA) for administrative wage garnishment (AWG) 

purposes; 

OMB 1845–0020 ......................................

The Department estimates that the burden will increase by 88,402 hours. 

$2,175,573. 

• Replace a section of the regulations with a new section to provide 

that if a borrower’s written request 

for a hearing is received by the 

GA after the 30th day following 

the date of the garnishment notice 

and a decision is not rendered 

within 60 days following receipt of 

a borrower’s written request the 

GA must suspend the AWG order 

beginning on the 61st day after 

the request was received until the 

hearing is provided and a decision 

rendered; 

• Provide for the manner by which 

the hearing is administered and 

certain provisions relating to bringing forth additional evidence and 

continuances; and 

• Clarify that a borrower who wishes to object that they are not subject to garnishment because of recent reemployment after involuntary separation bears the burden 

of raising and proving the claim. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65801 

COLLECTION OF INFORMATION—Continued 

Regulatory section Information collection OMB Control No. and estimated change 

in burden 

Estimated 

costs 

§ 682.102 Obtaining and repaying a 

loan.

The final regulations: 

• Amend the section heading; 

• Remove the section of the regulations that describes the application 

process for FFEL loans; and 

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No Change. 

• Re-designates the paragraphs describing the loan repayment process. 

§ 682.200 Definitions—Lender ............... The final regulations make a conforming 

change to the definition of ‘‘Lender’’ 

due to the elimination of § 682.601.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.205 Disclosure Requirements for 

Lenders.

The final regulations remove regulations 

governing required lender disclosures 

to borrowers that are provided when 

new loans are made.

The remaining provisions include providing repayment information, providing required disclosures during the 

repayment period, and providing required disclosures for borrowers having difficulty making payments. 

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 162,529 hours to 

162,529 hours. 

¥$3,999,839. 

§ 682.206 Due Diligence in making a 

loan.

The final regulations remove § 682.206 

from the FFEL regulations. The 

SAFRA Act eliminated the authority to 

make new FFEL Program loans, including FFEL consolidation loans.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥$7,999,677. 

§ 682.208 Due diligence in servicing a 

loan.

The final regulations replace the term 

‘‘national credit bureau(s)’’ with ‘‘nationwide consumer reporting agency(ies)’’ to more accurately reflect the 

appropriate legal terms.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.209 Repayment of a loan ............ The final regulations amend 

§ 682.209(a)(3)(i) by adding a new 

paragraph which specifies that borrowers with fixed interest rates on their 

Stafford loans enter repayment on 

those loans the day after six months 

following the date the borrower was no 

longer enrolled on at least a half-time 

basis.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease from 325,058 by 

65,012 hours to 260,046 hours. 

¥$1,599,945. 

The final regulations remove current 

§§ 682.209(e)–(g) and (j) from the regulations and re-designate the remaining paragraphs as paragraphs (e)–(g). 

Re-designated § 682.209(e) (current 

paragraph (h)) is amended to specify 

that a FFEL Consolidation loan borrower repaying under the incomebased repayment plan may make a 

scheduled monthly payment of less 

than the interest that accrues on the 

loan. 

§ 682.210 Deferment ............................. The final regulations amend the 

deferment regulations to provide that a 

borrower’s representative may request 

a military service deferment on behalf 

of the borrower.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

In § 682.210(b), the introductory language is revised to identify the cohort 

of borrowers to which each paragraph 

applies. 

Throughout § 682.210(b) cross-references are added to the eligibility criteria that are applicable to deferments 

available to these borrowers. The final 

regulations remove the exception 

clause at the end of the provision, and 

replace the words ‘‘military active’’ with 

the word ‘‘post-active’’. 

mstockstill on DSK4VPTVN1PROD with RULES2

65802 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

COLLECTION OF INFORMATION—Continued 

Regulatory section Information collection OMB Control No. and estimated change 

in burden 

Estimated 

costs 

§ 682.211 Forbearance .......................... Substantive changes in this section have 

been identified earlier.

The additional amendments to the regulations allow a lender to grant forbearance to a borrower who is delinquent 

at the beginning of a period of nonmandatory authorized forbearance. 

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

(NOTE: Other earlier changes increased 

burden by 9,446 hours for a total of 

334,504 hours.) 

No change. 

§ 682.212 Prohibited transactions ......... There is no change to the current language in this section of the regulations. However the current burden referenced in OMB Control Number 

1845–0020 is incorrect.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.214 Compliance with equal credit 

opportunity requirements.

The final regulations remove § 682.214 

from the FFEL regulations. The 

SAFRA Act ended the making of new 

FFEL loans and therefore these requirements can be eliminated from the 

FFEL regulations.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.216 Teacher loan forgiveness 

program.

The final regulations provide for minor 

language changes.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.301 Eligibility of borrowers for interest benefits on Stafford and Consolidation Loans.The final regulations remove 

§ 682.301(c) from the regulations. The 

SAFRA Act ended the making of new 

FFEL loans and this provision related 

to determining borrower eligibility for 

the interest subsidy on new loans will 

be eliminated.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.305 Procedures for payment of 

interest benefits and special allowance 

and collection of origination and loan 

fees.

Section 682.305(c)(1)(ii) specifies that, 

regardless of the dollar volume of 

loans originated or held, a school lender or an eligible lender serving as 

trustee for a school or school-affiliated 

organization originating FFEL loans as 

a lender must submit an independent 

compliance audit to the Department 

each year. The final regulations will remove the reference to FFEL lenders 

originating loans.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.401 Basic Program Agreement .... The final regulations remove from 

§ 682.401 language addressing new 

loan originations, the process for loan 

origination, and a guaranty agency’s 

efforts to secure new loan volume. 

These provisions can be eliminated 

from the FFEL regulations because no 

new FFEL loans are being made.

OMB 1845–0020 ......................................

The Department estimates that the burden of 325,058 hours will decrease by 

32,506 to 292,552 hours. 

¥799,973. 

The remaining provisions that are eliminated relate to school eligibility to participate in a guaranty agency’s program and the authority of an agency to 

limit, suspend, or terminate a school 

from its program. For purposes of new 

loans, schools now participate only in 

the Direct Loan Program. Any future 

actions to limit, suspend, or terminate 

a school’s participation in the student 

loan programs will be undertaken by 

the Department under 34 CFR part 

668, subpart G. 

§ 682.402 Death, disability, closed 

school, false certification, unpaid refunds, and bankruptcy payments.

Substantive changes in this section have 

been identified earlier. There are no 

further changes to this section.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.404 Federal reinsurance agreement.The final regulations make conforming 

language changes required due to the 

elimination of previous cross references or obsolete requirements.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.405 Loan rehabilitation agreement.Substantive changes in this section have 

been identified earlier. There were no 

further changes to this section.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65803 

COLLECTION OF INFORMATION—Continued 

Regulatory section Information collection OMB Control No. and estimated change 

in burden 

Estimated 

costs 

§ 682.406 Conditions for claim payments from the Federal Fund and for 

reinsurance coverage.

The final regulations make a minor wording change due to the elimination of 

previous cross-references and add an 

ending date coinciding with the implementation of the SAFRA Act, which 

ended the making of new FFEL loans.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.409 Mandatory assignment by 

guaranty agencies of defaulted loans 

to the Secretary.

The final regulations make no changes 

to this section of the regulations.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.410 Fiscal, administrative, and 

enforcement requirements.

Apart from the earlier discussion of the 

changes made to the administrative 

wage garnishment provisions of this 

section of the regulations, the final regulations would only make minor wording changes to conform to cross reference changes and delete obsolete 

references.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

(NOTE: Other earlier changes to the Administrative Wage Garnishment regulations increase burden by 88,402 hours 

for a total of 413,460 hours.) 

No change. 

§ 682.411 Lender due diligence in collecting guaranty agency loans.The final regulations make a minor wording change.OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.412 Consequences of the failure 

of a borrower or student to establish 

eligibility.

The final regulations make a minor wording change.OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.414 Records, reports, and inspection requirements for guaranty agency 

programs.

The final regulations make a minor wording change.OMB 1845–0020 ......................................

The Department estimates that the burden will decrease from 325,058 hours 

by 16,253 hours for a total of 308,805 

hours. 

¥$399,986. 

§ 682.417 Determination of Federal 

funds or assets to be returned.

The final regulations make a minor wording change.OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.418 Prohibited uses of the assets 

of the Operating Fund during periods 

in which the Operating Fund contains 

transferred funds owed to the Federal 

Fund.

The final regulations remove § 682.418 

from the FFEL regulations.

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden..

¥$7,999,677. 

§ 682.421 Funds transferred from the 

Federal Fund to the Operating Fund by 

a guaranty agency.

The final regulations remove § 682.421 

from the FFEL regulations.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.507 Due diligence in collecting a 

loan.

The final regulations remove all of the 

regulations under subpart E 

(§§ 682.500 through 682.515) and reserve the subpart.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.508 Assignment of a loan ............ The final regulations remove all of the 

regulations under subpart E 

(§§ 682.500 through 682.515) and reserve the subpart.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.511 Procedures for filing a claim The final regulations remove all of the 

regulations under subpart E 

(§§ 682.500 through 682.515) and reserve the subpart.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.515 Records, reports, and inspection requirements for Federal GSL program lenders.The final regulations remove all of the 

regulations under subpart E 

(§§ 682.500 through 682.515) and reserve the subpart.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.602 Rules for a school or schoolaffiliated organization that makes or 

originates loans through an eligible 

lender trustee.

The final regulations remove § 682.602 

from the FFEL regulations.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

§ 682.603 Certification by a school that 

participated in connection with a loan 

application.

The final regulations make conforming 

language changes required due to the 

elimination of a cross reference and 

reorganization due to a deletion of previous requirements.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

mstockstill on DSK4VPTVN1PROD with RULES2

65804 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

COLLECTION OF INFORMATION—Continued 

Regulatory section Information collection OMB Control No. and estimated change 

in burden 

Estimated 

costs 

§ 682.604 Processing the borrower’s 

loan proceeds and counseling borrowers (Required exit counseling for 

borrowers).

The final regulations remove, reserve, 

and redesignate paragraphs to illustrate the counseling requirements, specifically the exit counseling requirements.

OMB 1845–0020 ......................................

OMB 1845–0020 

The Department estimates that the burden will decrease from 325,058 by 

211,288 hours for a total of 113,770 

hours. 

¥$5,199,798. 

§ 682.605 Determining the date of a 

student’s withdrawal.

The Secretary is not changing the language in this section.OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.610 Administrative and fiscal requirements for schools that participated.The final regulations only make minor 

wording changes.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.711 Reinstatement after termination.The final regulations remove the language regarding the loss of a school 

lender’s participation upon the loss of 

the school’s eligibility to participate in 

the Title IV, Federal student financial 

assistance programs.

OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.712 Disqualification review of limitation, suspension, and termination actions taken by guaranty agencies 

against lenders.

The final regulations remove a cross-reference to a section proposed for deletion.OMB 1845–0020 ......................................

The Department estimates that the burden will remain 325,058 hours. 

No change. 

§ 682.713 Disqualification review of limitation, suspension, and termination actions taken by guaranty agencies 

against a school.

The final regulations remove § 682.713 

from the FFEL regulations.

OMB 1845–0020 ......................................

The Department estimates that the burden will decrease by 325,058 hours to 

0 hours of burden. 

¥7,999,677. 

The total burden hours and change in 

burden hours associated with each OMB 

Control number affected by these final 

regulations follows: 

Control No. 

Total 

burden 

hours 

Change in 

burden 

hours 

1845–0015 ........ 14,828 +54 

1845–0019 ........ 6,247,152 +38,864 

1845–0020 ........ 8,211,632 ¥4,169,582 

1845–0119 ........ 35,606 +36,078 

Total ........... 14,509,690 ¥4,094,586 

Assessment of Educational Impact 

In the NPRM we requested comments 

on whether the proposed regulations 

would require transmission of 

information that any other agency or 

authority of the United States gathers or 

makes available. 

Based on the response to the NPRM 

and our review, we have determined 

that these final regulations do not 

require transmission of information that 

any other agency or authority of the 

United States gathers or makes 

available. 

Accessible Format: Individuals with 

disabilities can obtain this document in 

an accessible format (e.g., braille, large 

print, audiotape, or compact disc) on 

request to the program contact person 

listed under FOR FURTHER INFORMATION

CONTACT. 

Electronic Access to This Document: 

The official version of this document is 

the document published in the Federal 

Register. Free Internet access to the 

official edition of the Federal Register 

and the Code of Federal Regulations is 

available via the Federal Digital System 

at: www.gpo.gov/fdsys. At this site you 

can view this document, as well as all 

other documents of this Department 

published in the Federal Register, in 

text or Adobe Portable Document 

Format (PDF). To use PDF you must 

have Adobe Acrobat Reader, which is 

available free at this site. 

You may also access documents of the 

Department published in the Federal 

Register by using the article search 

feature at: www.federalregister.gov. 

Specifically, through the advanced 

search feature at this site, you can limit 

your search to documents published by 

the Department. (Catalog of Federal 

Domestic Assistance Numbers: 84.032 

Federal Family Education Loan 

Program; 84.038 Federal Perkins Loan 

Program; 84.268 William D. Ford 

Federal Direct Loan Program) 

List of Subjects in 34 CFR Parts 668, 

674, 682, and 685 

Administrative practice and 

procedure, Colleges and universities, 

Education, Loan programs—education, 

Reporting and recordkeeping 

requirements, Student aid, Vocational 

education. 

Dated: October 23, 2013. 

Arne Duncan, 

Secretary of Education. 

For the reasons discussed in the 

preamble, the Secretary amends parts 

668, 674, 682, and 685 of title 34 of the 

Code of Federal Regulations as follows: 

PART 668—STUDENT ASSISTANCE 

GENERAL PROVISIONS 

■ 1. The authority citation for part 668 

continues to read as follows: 

Authority: 20 U.S.C. 1001, 1002, 1003, 

1070, 1085, 1088, 1091, 1092, 1094, 1099c, 

and 1099c–1, unless otherwise noted. 

§ 668.204 [Amended] 

■ 2. Section 668.204(c)(1)(i) is amended 

by removing the figure ‘‘0.06015’’ and 

adding, in its place, the figure ‘‘0.0832’’. 

§ 668.214 [Amended] 

■ 3. Section 668.214 is amended by: 

■ A. In paragraph (a)(1), removing the 

figure ‘‘0.06015’’ and adding, in its 

place, the figure ‘‘0.0832’’. 

■ B. In paragraph (d)(2), removing the 

words ‘‘0.06015 or 0.0625’’ and adding, 

in their place, the words ‘‘0.0832 or 

0.0625, as applicable’’. 

PART 674—FEDERAL PERKINS LOAN 

PROGRAM 

■ 4. The authority citation for part 674 

continues to read as follows: 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65805 

Authority: 20 U.S.C. 1070g, 1087aa– 

1087hh, unless otherwise noted. 

■ 5. Section 674.2(b) is amended by 

revising the definition of ‘‘Satisfactory 

repayment arrangement’’ to read as 

follows: 

§ 674.2 Definitions. 

* * * * * 

(b) * * * 

Satisfactory repayment arrangement: 

(1) For purposes of regaining eligibility 

for grant, loan, or work assistance under 

title IV of the HEA, to the extent that the 

borrower is otherwise eligible, the 

making of six on-time, consecutive, 

voluntary, full monthly payments on a 

defaulted loan. ‘‘On-time’’ means a 

payment made within 20 days of the 

scheduled due date. A borrower may 

obtain the benefit of this paragraph with 

respect to renewed eligibility once. 

(2) Voluntary payments are payments 

made directly by the borrower, and do 

not include payments obtained by 

income tax offset, garnishment, or 

income or asset execution. 

(3) A borrower has not used the one 

opportunity to renew eligibility for title 

IV assistance if the borrower makes six 

consecutive, on-time, voluntary, full 

monthly payments under an agreement 

to rehabilitate a defaulted loan, but does 

not receive additional title IV assistance 

prior to defaulting on that loan again. 

* * * * * 

■ 6. Section 674.9 is amended by: 

■ A. In paragraph (j)(1), removing the 

word ‘‘those’’. 

■ B. Redesignating paragraph (k) as 

paragraph (l). 

■ C. Adding a new paragraph (k). 

The addition reads as follows: 

§ 674.9 Student eligibility. 

* * * * * 

(k) In the case of a borrower who is 

in default on an FFEL Program or a 

Direct Loan Program loan, makes 

satisfactory repayment arrangements as 

defined in 34 CFR 682.200(b) or 

685.102(b) on the defaulted loan, as 

determined by the loan holder; and 

* * * * * 

■ 7. Section 674.19 is amended by 

adding a new paragraph (f) to read as 

follows: 

§ 674.19 Fiscal procedures and records. 

* * * * * 

(f) Enrollment reporting process. (1) 

Upon receipt of an enrollment report 

from the Secretary, an institution must 

update all information included in the 

report and return the report to the 

Secretary— 

(i) In the manner and format 

prescribed by the Secretary; and 

(ii) Within the timeframe specified by 

the Secretary. 

(2) Unless it expects to submit its next 

updated enrollment report to the 

Secretary within the next 60 days, an 

institution must notify the Secretary 

within 30 days after the date the school 

discovers that— 

(i) A loan under title IV of the HEA 

was made to a student who was enrolled 

or accepted for enrollment at the 

institution, and the student has ceased 

to be enrolled on at least a half-time 

basis or failed to enroll on at least a halftime basis for the period for which the 

loan was intended; or 

(ii) A student who is enrolled at the 

institution and who received a loan 

under title IV of the HEA has changed 

his or her permanent address. 

* * * * * 

■ 8. Section 674.33 is amended by: 

■ A. Revising paragraph (g)(4)(i)(B). 

■ B. In paragraph (g)(8)(i), removing the 

figure ‘‘90’’ and adding, in its place, the 

figure ‘‘120’’. 

The revision reads as follows: 

§ 674.33 Repayment. 

* * * * * 

(g) * * * 

(4) * * * 

(i) * * * 

(B) Did not complete the program of 

study at that school because the school 

closed while the student was enrolled, 

or the student withdrew from the school 

not more than 120 days before the 

school closed. The Secretary may 

extend the 120-day period if the 

Secretary determines that exceptional 

circumstances related to the school’s 

closing justify an extension. Exceptional 

circumstances for this purpose may 

include, but are not limited to: the 

school’s loss of accreditation; The 

school’s discontinuation of the majority 

of its academic programs; action by the 

State to revoke the school’s license to 

operate or award academic credentials 

in the State; or a finding by a State or 

Federal government agency that the 

school violated State or Federal law; 

and 

* * * * * 

■ 9. Section 674.34 is amended by: 

■ A. In the introductory text of 

paragraph (e), removing the reference 

‘‘(e)(5)’’ and adding, in its place, the 

reference ‘‘(e)(4)’’, each time it appears. 

■ B. Removing paragraph (e)(4). 

■ C. Redesignating paragraph (e)(5) as 

paragraph (e)(4). 

■ D. Removing paragraph (e)(6). 

■ E. Redesignating paragraphs (e)(7) and 

(e)(8) as paragraphs (e)(5) and (e)(6), 

respectively. 

■ F. In newly redesignated paragraph 

(e)(5), removing the words ‘‘paragraphs 

(e)(3) and (e)(4)’’ and adding, in their 

place, the words ‘‘paragraph (e)(3)’’. 

■ G. Removing paragraph (e)(9). 

■ H. Revising paragraph (f) to read as 

follows: 

§ 674.34 Deferment of repayment—Federal 

Perkins loans, NDSLs and Defense loans. 

* * * * * 

(f)(1) To qualify for a deferment for 

study as part of a graduate fellowship 

program pursuant to paragraph (b)(1)(ii) 

of this section, a borrower must provide 

the institution with a statement from an 

authorized official of the borrower’s 

graduate fellowship program 

certifying— 

(i) That the borrower holds at least a 

baccalaureate degree conferred by an 

institution of higher education; 

(ii) That the borrower has been 

accepted or recommended by an 

institution of higher education for 

acceptance on a full-time basis into an 

eligible graduate fellowship program; 

and 

(iii) The borrower’s anticipated 

completion date in the program. 

(2) For purposes of paragraph (b)(1)(ii) 

of this section, an eligible graduate 

fellowship program is a fellowship 

program that— 

(i) Provides sufficient financial 

support to graduate fellows to allow for 

full-time study for at least six months; 

(ii) Requires a written statement from 

each applicant explaining the 

applicant’s objectives before the award 

of that financial support; 

(iii) Requires a graduate fellow to 

submit periodic reports, projects, or 

evidence of the fellow’s progress; and 

(iv) In the case of a course of study at 

a foreign university, accepts the course 

of study for completion of the 

fellowship program. 

* * * * * 

■ 10. Section 674.39 is amended by 

revising paragraph (a)(2) to read as 

follows: 

§ 674.39 Loan rehabilitation. 

(a) * * * 

(2) A loan is rehabilitated if the 

borrower— 

(i) Requests rehabilitation; and 

(ii) Makes a full monthly payment— 

as determined by the institution— 

within 20 days of the due date, each 

month for 9 consecutive months. 

* * * * * 

§ 674.50 [Amended] 

■ 11. Section 674.50(e)(1) is amended 

by removing the words ‘‘is submitted for 

assignment under 674.8(d)(3)’’ and 

adding, in their place, the words ‘‘was 

made before September 13, 1982’’. 

■ 12. Section 674.52 is amended by: 

mstockstill on DSK4VPTVN1PROD with RULES2

65806 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

■ A. Removing paragraph (b)(2). 

■ B. Redesignating paragraph (b)(1)(i) as 

paragraph (b)(1). 

■ C. Redesignating paragraph (b)(1)(ii) 

as paragraph (b)(2). 

■ D. Redesignating paragraphs (c), (d), 

and (e) as paragraphs (d), (e), and (f), 

respectively. 

■ E. Adding a new paragraph (c). 

■ F. Adding a new paragraph (g). 

The additions read as follows: 

§ 674.52 Cancellation procedures. 

* * * * * 

(c) Break in service. (1) If the borrower 

is unable to complete an academic year 

of eligible teaching service due to a 

condition that is covered under the 

Family and Medical Leave Act of 1993 

(FMLA) (29 U.S.C. 2601, et seq.), the 

borrower still qualifies for the 

cancellation if— 

(i) The borrower completes one half of 

the academic year; and 

(ii) The borrower’s employer 

considers the borrower to have fulfilled 

his or her contract requirements for the 

academic year for purposes of salary 

increases, tenure, and retirement. 

(2) If the borrower is unable to 

complete a year of eligible service under 

§§ 674.56, 674.57, 674.59, or 674.60 due 

to a condition that is covered under the 

FMLA, the borrower still qualifies for 

the cancellation if the borrower 

completes at least six consecutive 

months of eligible service. 

* * * * * 

(g) Switching cancellation categories. 

A borrower who qualifies for a 

cancellation under one of the 

cancellation categories in §§ 674.53, 

674.56, 674.57, or 674.59 receives 

cancellation of 15 percent of the original 

principal for the first and second years 

of qualifying service, 20 percent of the 

original principal for the third and 

fourth years of qualifying service, and 

30 percent of the original principal for 

the fifth year of qualifying service. If, 

after the first, second, third, or fourth 

complete year of qualifying service— 

(1) The borrower switches to a 

position that qualifies the borrower for 

cancellation under a different 

cancellation category under §§ 674.53, 

674.56, 674.57, or 674.59, the borrower’s 

cancellation rate progression continues 

from the last year the borrower received 

a cancellation under the former 

cancellation category; or 

(2) The borrower switches to a 

position that qualifies the borrower for 

cancellation under a different 

cancellation category under §§ 674.58 or 

674.60, the borrower’s cancellation rate 

progression under the new cancellation 

category begins at the year one 

cancellation rates specified in 

§§ 674.58(b) or 674.60(b), respectively. 

* * * * * 

PART 682—FEDERAL FAMILY 

EDUCATION LOAN (FFEL) PROGRAM 

■ 13. The authority citation for part 682 

continues to read as follows: 

Authority: 20 U.S.C. 1071 to 1087–2, 

unless otherwise noted. 

■ 14. Section 682.100 is amended by: 

■ A. Revising the introductory text of 

paragraph (a). 

■ B. In paragraph (a)(1), removing the 

word ‘‘encourages’’ and adding, in its 

place, the word ‘‘encouraged’’. 

■ C. In the first sentence of paragraph 

(a)(3), removing the word ‘‘encourages’’ 

and adding, in its place, the word 

‘‘encouraged’’. 

■ D. Revising the last sentence of 

paragraph (a)(3). 

■ E. In paragraph (a)(4), removing the 

word ‘‘encourages’’ and adding, in its 

place, the word ‘‘encouraged’’. 

■ F. In paragraph (a)(4), adding the 

words ‘‘and prior to July 1, 2010’’ in the 

last sentence between the date 

‘‘November 13, 1997’’ and the 

punctuation ‘‘.’’. 

■ G. Revising paragraph (b)(2)(iii). 

The revisions read as follows: 

§ 682.100 The Federal Family Education 

Loan programs. 

(a) This part governs the following 

four programs collectively referred to in 

these regulations as ‘‘the Federal Family 

Education Loan (FFEL) programs,’’ in 

which lenders used their own funds 

prior to July 1, 2010, to make loans to 

enable a student or his or her parents to 

pay the costs of the student’s attendance 

at postsecondary schools. 

* * * * * 

(3) * * * The PLUS Program also 

provided for making loans to graduate 

and professional students on or after 

July 1, 2006 and prior to July 1, 2010. 

* * * * * 

(b) * * * 

(2) * * * 

(iii) The Federal GSL programs were 

authorized to operate in States not 

served by a guaranty agency program. In 

addition, the FISL and Federal SLS (as 

in effect for periods of enrollment that 

began prior to July 1, 1994) programs 

were authorized, under limited 

circumstances, to operate in States in 

which a guaranty agency program did 

not serve all eligible students. 

* * * * * 

■ 15. Section 682.101 is amended by: 

■ A. Adding introductory text to this 

section. 

■ B. In paragraph (a), removing the 

words ‘‘may make loans.’’ and adding, 

in their place, the words ‘‘made loans 

prior to July 1, 2010.’’ 

■ C. In paragraph (b), removing the 

words ‘‘may participate’’ and adding, in 

their place, the word ‘‘participated’’. 

■ D. Revising paragraph (c). 

The addition and revision read as 

follows: 

§ 682.101 Participation in the FFEL 

programs. 

The following entities and persons 

participate in the FFEL programs: 

* * * * * 

(c) Students who met certain 

requirements, including enrollment at a 

participating school, borrowed under 

the Stafford Loan Program prior to July 

1, 2010 and, for periods of enrollment 

that began prior to July 1, 1994, the SLS 

program. Parents of eligible dependent 

undergraduate students borrowed under 

the PLUS Program prior to July 1, 2010. 

Borrowers with outstanding Stafford, 

SLS, FISL, Perkins, HPSL, HEAL, ALAS, 

PLUS, or Nursing Student Loan Program 

loans borrowed under the Consolidation 

Loan Program prior to July 1, 2010. The 

PLUS Program also provided for making 

loans to graduate and professional 

students on or after July 1, 2006 and 

prior to July 1, 2010. 

* * * * * 

■ 16. Section 682.102 is amended by: 

■ A. Revising the section heading. 

■ B. Removing paragraphs (a), (c), and 

(d). 

■ C. In the introductory text of 

paragraph (e), removing the paragraph 

heading. 

■ D. Redesignating paragraphs (e)(1) 

through (e)(7) as paragraphs (a) through 

(g), respectively. 

■ E. In newly redesignated paragraph 

(a), revising the last sentence. 

■ F. In newly redesignated paragraph 

(b), removing the words ‘‘on a Stafford 

Loan’’. 

The revisions read as follows: 

§ 682.102 Repaying a loan. 

(a) * * * The obligation to repay all 

or a portion of a loan may be forgiven 

for Stafford Loan borrowers who enter 

certain areas of the teaching profession. 

* * * * * 

§ 682.103 [Amended] 

■ 17. Section 682.103(c) is amended by 

removing the letter and the punctuation 

‘‘E,’’. 

■ 18. Section 682.200 is amended by: 

■ A. In paragraph (a)(1) introductory 

text, removing the words ‘‘subpart A 

of’’. 

■ B. In paragraph (a)(1), removing from 

the list, the terms Academic 

Competitiveness Grant (ACG) Program, 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65807 

Graduate and professional student, 

Leveraging Educational Assistance 

Partnership (LEAP) Program, National 

Science and Mathematics Access to 

Retain Talent Grant (National SMART 

Grant) Program, Supplemental 

Educational Opportunity Grant (SEOG) 

Program, and Supplemental Loans for 

Students (SLS) Program. 

■ C. In paragraph (a)(1), adding to the 

list, in alphabetical order, the terms 

Federal Supplemental Educational 

Opportunity Grant (SEOG) Program, 

Federal Supplemental Loans for 

Students (SLS) Program, and Graduate 

or professional student. 

■ D. In paragraph (b), in the definition 

of Authority, removing the words 

‘‘making or purchasing’’ and adding, in 

their place, the word ‘‘purchase’’. 

■ E. In paragraph (b), in the definition 

of Borrower, removing the word ‘‘is’’ 

and adding, in its place, the word 

‘‘was’’. 

■ F. In paragraph (b), in the definition 

of Estimated financial assistance, in 

paragraph (1)(vi), removing the words 

‘‘Academic Competitiveness Grant, 

National SMART Grant,’’. 

■ G. In paragraph (b), in the definition 

of Lender, revising paragraph 

(5)(i)(A)(10). 

■ H. In paragraph (b), in the definition 

of Lender, revising paragraph (8). 

■ I. In paragraph (b), revising the 

definition of Nationwide consumer 

reporting agency. 

■ J. In paragraph (b), revising the 

definition of Satisfactory repayment 

arrangement. 

The revisions read as follows: 

§ 682.200 Definitions. 

* * * * * 

(b) * * * 

Lender 

* * * * * 

(5) * * * 

(i) * * * 

(A) * * * 

(10) Performance of, or payment to 

another third party to perform, any 

school function required under title IV, 

except that the lender may perform 

entrance counseling and, as provided in 

§ 682.604(a), exit counseling, and may 

provide services to participating foreign 

schools at the direction of the Secretary, 

as a third-party servicer; and 

* * * * * 

(8) As of January 1, 2007, and for 

loans first disbursed on or after that date 

under a trustee arrangement, an eligible 

lender operating as a trustee under a 

contract entered into on or before 

September 30, 2006, and which 

continues in effect with a school or a 

school-affiliated organization— 

(i) Must not— 

(A) Make a loan to any undergraduate 

student; 

(B) Make a loan other than a Federal 

Stafford loan to a graduate or 

professional student; or 

(C) Make a loan to a borrower who is 

not enrolled at that school; 

(ii) Must offer loans that carry an 

origination fee or an interest rate, or 

both, that are less than the fee or rate 

authorized under the provisions of the 

Act; and 

(iii) Must, for any fiscal year 

beginning on or after July 1, 2006 in 

which the school engages in activities as 

an eligible lender, submit an annual 

compliance audit that satisfies the 

following requirements: 

(A) With regard to a school that is a 

governmental entity or a nonprofit 

organization, the audit must be 

conducted in accordance with 

§ 682.305(c)(2)(v) and chapter 75 of title 

31, United States Code, and in addition, 

during years when the student financial 

aid cluster (as defined in Office of 

Management and Budget Circular A– 

133, Appendix B, Compliance 

Supplement) is not audited as a ‘‘major 

program’’ (as defined under 31 U.S.C. 

7501) must, without regard to the 

amount of loans made, include in such 

audit the school’s lending activities as a 

major program. 

(B) With regard to a school that is not 

a governmental entity or a nonprofit 

organization, the audit must be 

conducted annually in accordance with 

§ 682.305(c)(2)(i) through (iii). 

(C) With regard to any school, the 

audit must include a determination 

that— 

(1) The school used all payments and 

proceeds (i.e., special allowance and 

interest payments from borrowers, 

interest subsidy payments, proceeds 

from the sale or other disposition of 

loans) from the loans for need-based 

grant programs; 

(2) Those need-based grants 

supplemented, rather than supplanted, 

the institution’s use of non-Federal 

funds for such grants; and 

(3) The school used no more than a 

reasonable portion of payments and 

proceeds from the loans for direct 

administrative expenses. 

* * * * * 

Nationwide consumer reporting 

agency. A consumer reporting agency 

that compiles and maintains files on 

consumers on a nationwide basis and as 

defined in 15 U.S.C. 1681a(p). 

* * * * * 

Satisfactory repayment arrangement. 

(1) For purposes of regaining eligibility 

under the title IV student financial 

assistance programs, the making of six 

consecutive, on-time, voluntary full 

monthly payments on a defaulted loan. 

A borrower may only obtain the benefit 

of this paragraph with respect to 

renewed eligibility once. 

(2) The required full monthly 

payment amount may not be more than 

is reasonable and affordable based on 

the borrower’s total financial 

circumstances. Voluntary payments are 

payments made directly by the 

borrower, and do not include payments 

obtained by income tax off-set, 

garnishment, or income or asset 

execution. ‘‘On-time’’ means a payment 

received by the Secretary or a guaranty 

agency or its agent within 20 days of the 

scheduled due date. 

(3) A borrower has not used the one 

opportunity to renew eligibility for title 

IV assistance if the borrower makes six 

consecutive, on-time, voluntary, full 

monthly payments under an agreement 

to rehabilitate a defaulted loan but does 

not receive additional title IV assistance 

prior to defaulting on that loan again. 

* * * * * 

§ 682.201 [Amended] 

■ 19. Section 682.201 is amended by: 

■ A. In paragraph (a) introductory text, 

removing the words ‘‘made under 

§ 682.209(e) or (f)’’. 

■ B. In paragraph (a)(4)(ii) introductory 

text, adding the words ‘‘paragraph (a)(4) 

of’’ between the words ‘‘of’’ and ‘‘this’’. 

■ C. In paragraph (a)(6) introductory 

text, removing the word ‘‘student’’ and 

adding, in its place, the word 

‘‘borrower’’. 

■ D. In paragraph (c)(2)(i), removing the 

words ‘‘credit bureau’’ and adding, in 

their place, the words ‘‘consumer 

reporting agency’’. 

■ 20. Section 682.202 is amended by: 

■ A. Revising paragraphs (a)(1)(i), 

(a)(1)(ii) introductory text, (a)(1)(iii), 

(a)(1)(iv), (a)(1)(v), and (a)(1)(vi) 

introductory text. 

■ B. In paragraph (a)(1)(vii) introductory 

text, removing the first occurrence of the 

word ‘‘is’’ and adding, in its place, the 

word ‘‘was’’. 

■ C. In paragraph (a)(1)(viii) 

introductory text, removing the first 

occurrence of the word ‘‘is’’ and adding, 

in its place, the word ‘‘was’’. 

■ D. In paragraph (a)(1)(ix), removing 

the first occurrence of the word ‘‘is’’ and 

adding, in its place, the word ‘‘was’’. 

■ E. In paragraph (a)(1)(x) introductory 

text, removing the word ‘‘is’’ and 

adding, in its place, the word ‘‘was’’. 

■ F. Removing paragraphs (a)(1)(x)(D) 

and (a)(1)(x)(E). 

■ G. In paragraph (a)(2)(ii) introductory 

text, removing the words ‘‘loan made 

mstockstill on DSK4VPTVN1PROD with RULES2

65808 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

under § 682.209(e) or (f)’’ and adding, in 

their place, the words ‘‘refinanced PLUS 

loan’’. 

■ H. In paragraph (a)(2)(iv) introductory 

text, removing the first occurrence of the 

word ‘‘is’’ and adding, in its place, the 

word ‘‘was’’. 

■ I. In paragraph (a)(2)(v) introductory 

text, removing the first occurrence of the 

word ‘‘is’’ and adding, in its place, the 

word ‘‘was’’. 

■ J. In paragraph (a)(3)(ii) introductory 

text, removing the words ‘‘loan made 

under § 682.209(e) or (f)’’ and adding, in 

their place, the words ‘‘refinanced SLS 

loan’’. 

■ K. In paragraph (a)(4)(iv) introductory 

text, adding the words ‘‘and prior to July 

1, 2010’’ after the date ‘‘1998’’ and 

before the punctuation ‘‘,’’. 

■ L. In paragraph (a)(4)(v), adding the 

words ‘‘and prior to July 1, 2010’’ after 

the date ‘‘1997’’ and before the 

punctuation ‘‘,’’. 

■ M. In paragraph (a)(7)(iii)(A), 

removing the citation ‘‘(a)(6)(ii)’’ and 

adding, in its place, the citation 

‘‘(a)(7)(i)’’. 

■ N. In paragraph (b)(1), adding the 

words ‘‘or Federal default fees’’ between 

the words ‘‘premiums’’ and ‘‘to’’. 

■ O. Removing paragraph (c)(1)(vi). 

■ P. Redesignating paragraph (c)(1)(vii) 

as paragraph (c)(1)(vi). 

■ Q. In paragraphs (c)(5), (c)(6), and the 

introductory text of paragraph (c)(7), 

removing the word ‘‘Shall’’ and adding, 

in its place, the words ‘‘A lender must’’. 

■ R. In paragraph (c)(7)(iv), removing 

the words ‘‘in accordance with 

§ 682.207(b)(1)(ii)(B) and (C)’’. 

■ S. In paragraph (d)(2), removing the 

words ‘‘, other than an SLS or PLUS 

loan refinanced under § 682.209(e) or 

(f)’’ and adding, in their place, the 

words ‘‘and prior to July 1, 2010’’. 

■ T. Removing paragraph (e). 

■ U. Redesignating paragraphs (f) 

through (h) as paragraphs (e) through 

(g), respectively. 

■ V. In newly redesignated paragraph 

(e)(1), removing the citation ‘‘(f)(2)’’ and 

adding, in its place, the citation ‘‘(e)(2)’’. 

■ W. In newly redesignated paragraph 

(f)(1)(i), removing ‘‘Attorney’s’’ and 

adding, in its place, ‘‘Attorney’’. 

■ X. In newly redesignated paragraph 

(f)(2), removing the citation ‘‘(g)(1)’’ and 

adding, in its place, the citation ‘‘(f)(1)’’. 

The revisions read as follows: 

§ 682.202 Permissible charges by lenders 

to borrowers. 

* * * * * 

(a) * * * 

(1) * * * 

(i) For loans made prior to July 1, 

1994, if the borrower, on the date the 

promissory note evidencing the loan 

was signed, had an outstanding balance 

of principal or interest on a previous 

Stafford loan, the interest rate is the 

applicable interest rate on that previous 

Stafford loan. 

(ii) If the borrower, on the date the 

promissory note evidencing the loan 

was signed, had no outstanding balance 

on any FFEL Program loan, and the first 

disbursement was made— 

* * * * * 

(iii) For a Stafford loan for which the 

first disbursement was made before 

October 1, 1992— 

(A) If the borrower, on the date the 

promissory note was signed, had no 

outstanding balance on a Stafford loan 

but had an outstanding balance of 

principal or interest on a PLUS or SLS 

loan made for a period of enrollment 

beginning before July 1, 1988, or on a 

Consolidation loan that repaid a loan 

made for a period of enrollment 

beginning before July 1, 1988, the 

interest rate is 8 percent; or 

(B) If the borrower, on the date the 

promissory note evidencing the loan 

was signed, had an outstanding balance 

of principal or interest on a PLUS or 

SLS loan made for a period of 

enrollment beginning on or after July 1, 

1988, or on a Consolidation loan that 

repaid a loan made for a period of 

enrollment beginning on or after July 1, 

1988, the interest rate is 8 percent until 

48 months elapse after the repayment 

period begins, and 10 percent thereafter. 

(iv) For a Stafford loan for which the 

first disbursement was made on or after 

October 1, 1992, but before December 

20, 1993, if the borrower, on the date the 

promissory note evidencing the loan 

was signed, had no outstanding balance 

on a Stafford loan but had an 

outstanding balance of principal or 

interest on a PLUS, SLS, or 

Consolidation loan, the interest rate is 8 

percent. 

(v) For a Stafford loan for which the 

first disbursement was made on or after 

December 20, 1993 and prior to July 1, 

1994, if the borrower, on the date the 

promissory note was signed, had no 

outstanding balance on a Stafford loan 

but had an outstanding balance of 

principal or interest on a PLUS, SLS, or 

Consolidation loan, the interest rate is 

the rate provided in paragraph 

(a)(1)(ii)(B) of this section. 

(vi) For a Stafford loan for which the 

first disbursement was made on or after 

July 1, 1994 and prior to July 1, 1995, 

for a period of enrollment that included 

or began on or after July 1, 1994, the 

interest rate is a variable rate, applicable 

to each July 1–June 30 period, that 

equals the lesser of— 

* * * * * 

■ 21. Section 682.204 is amended by: 

■ A. In paragraph (a) introductory text, 

removing the words ‘‘Federal Direct 

Stafford/Ford’’ and adding, in their 

place, the words ‘‘Direct Subsidized’’. 

■ B. In paragraphs (a)(1)(i) and (a)(1)(ii), 

removing the words ‘‘$2,625, or, for a 

loan disbursed on or after July 1, 2007, 

$3,500,’’ and adding, in their place, the 

figure ‘‘$3,500’’. 

■ C. Revising paragraph (a)(1)(iii). 

■ D. In paragraph (a)(2) introductory 

text, removing the words ‘‘Federal 

Direct Stafford/Ford’’ and adding, in 

their place, the words ‘‘Direct 

Subsidized’’. 

■ E. In paragraphs (a)(2)(i) and (a)(2)(ii), 

removing the words ‘‘$3,500, or, for a 

loan disbursed on or after July 1, 2007, 

$4,500,’’ and adding, in their place, the 

figure ‘‘$4,500’’. 

■ F. In paragraph (a)(3) introductory 

text, removing the words ‘‘Federal 

Direct Stafford/Ford’’ and adding, in 

their place, the words ‘‘Direct 

Subsidized’’. 

■ G. Revising paragraph (a)(5). 

■ H. In paragraph (a)(6) introductory 

text and paragraph (a)(7), removing the 

words ‘‘Federal Direct Stafford/Ford’’ 

and adding, in their place, the words 

‘‘Direct Subsidized’’. 

■ I. In paragraph (b) introductory text, 

removing the words ‘‘Federal Direct 

Stafford/Ford’’, and adding, in their 

place, the words ‘‘Direct Subsidized’’. 

■ J. Revising paragraph (c)(1). 

■ K. Revising paragraph (c)(2). 

■ L. In paragraph (d) introductory text, 

removing the word ‘‘additional’’ that 

appears after the word ‘‘borrow’’. 

■ M. In paragraph (d) introductory text, 

removing the words ‘‘Federal Direct 

Unsubsidized Stafford/Ford’’ and 

adding, in their place, the words ‘‘Direct 

Unsubsidized’’. 

■ N. In paragraphs (d)(1)(i), (d)(1)(ii), 

(d)(2)(i), and (d)(2)(ii), removing the 

words ‘‘$4,000, or, for a loan first 

disbursed on or after July 1, 2008, 

$6,000,’’ and adding, in their place, the 

figure ‘‘$6,000’’. 

■ O. Revising paragraph (d)(1)(iii). 

■ P. In paragraphs (d)(3)(i) and (d)(3)(ii), 

removing the words ‘‘$5,000, or, for a 

loan first disbursed on or after July 1, 

2008, $7,000,’’ and adding, in their 

place, the figure ‘‘$7,000’’. 

■ Q. In paragraph (d)(5), removing the 

words ‘‘$10,000, or, for a loan disbursed 

on or after July 1, 2007,’’. 

■ R. In paragraph (d)(6)(i), removing the 

words ‘‘$4,000, or, for a loan first 

disbursed on or after July 1, 2008, 

$6,000,’’ and adding, in their place, the 

figure ‘‘$6,000’’. 

■ S. In paragraph (d)(6)(ii), removing the 

words ‘‘$5,000, or, for a loan disbursed 

on or after July 1, 2007, $7,000,’’ and 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65809 

adding, in their place, the figure 

‘‘$7,000’’. 

■ T. In paragraph (d)(6)(iii), removing 

the words ‘‘$5,000, or, for a loan 

disbursed on or after July 1, 2007,’’. 

■ U. Revising paragraph (e). 

■ V. Removing paragraph (f). 

■ W. Redesignating paragraphs (g) 

through (m) as paragraphs (f) through 

(l), respectively. 

■ X. In newly redesignated paragraph 

(l), removing the citation ‘‘(d), (e), and 

(f)’’ and adding, in its place, the citation 

‘‘(d), and (e)’’. 

The revisions read as follows: 

§ 682.204 Maximum loan amounts. 

(a) * * * 

(1) * * * 

(iii) For a program of study that is less 

than a full academic year in length, the 

amount that is the same ratio to $3,500 

as the lesser of the— 

* * * * * 

(5) In the case of a graduate or 

professional student, the total amount 

the student may borrow for loans made 

prior to July 1, 2010 for any academic 

year of study under the Stafford Loan 

Program, in combination with any 

amount borrowed under the Direct 

Subsidized Loan Program, may not 

exceed $8,500. 

* * * * * 

(c) * * * 

(1) Except for a dependent 

undergraduate student who qualifies for 

additional Unsubsidized Stafford Loan 

funds because the student’s parents are 

unable to borrow under the PLUS Loan 

Program, as described in paragraph (d) 

of this section, the total amount the 

dependent undergraduate student may 

borrow for any academic year under the 

Unsubsidized Stafford Loan Program in 

combination with the Direct 

Unsubsidized Loan Program is the same 

amount determined under paragraph (a) 

of this section, less any amount received 

under the Stafford Loan Program or the 

Direct Subsidized Loan program, plus— 

(i) $2,000, for a program of study of 

at least a full academic year in length. 

(ii) For a program of study that is at 

least one academic year or more in 

length with less than a full academic 

year remaining, the amount that is the 

same ratio to $2,000 as the— 

(iii) For a program of study that is less 

than a full academic year in length, the 

amount that is the same ratio to $2,000 

as the lesser of the— 


mstockstill on DSK4VPTVN1PROD with RULES2ER01NO13.000</GPH> ER01NO13.001</GPH>
65810 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(2) In the case of an independent 

undergraduate student, a graduate or 

professional student, or certain 

dependent undergraduate students 

under the conditions specified in 

§ 682.201(a)(3), the total amount the 

student may borrow for any period of 

enrollment under the Unsubsidized 

Stafford Loan and Direct Unsubsidized 

Loan programs may not exceed the 

amounts determined under paragraph 

(a) of this section less any amount 

received under the Federal Stafford 

Loan Program or the Direct Subsidized 

Loan Program, in combination with the 

amounts determined under paragraph 

(d) of this section. 

(d) * * * 

(1) * * * 

(iii) For a program of study that is less 

than a full academic year in length, an 

amount that is the same ratio to $6,000 

as the lesser of— 

* * * * * 

(e) Combined Federal Stafford, SLS 

and Federal Unsubsidized Stafford Loan 

Program aggregate limits. The aggregate 

unpaid principal amount of Stafford 

Loans, Direct Subsidized Loans, 

Unsubsidized Stafford Loans, Direct 

Unsubsidized Loans and SLS Loans, but 

excluding the amount of capitalized 

interest, may not exceed the following: 

(1) $31,000 for a dependent 

undergraduate student. 

(2) $57,500 for an independent 

undergraduate student or a dependent 

undergraduate student under the 

conditions specified in § 682.201(a)(3). 

(3) $138,500 for a graduate or 

professional student. 

* * * * * 

■ 22. Section 682.205 is amended by: 

■ A. Removing paragraphs (a), (b), (g), 

and (i). 

■ B. Redesignating paragraphs (c), (d), 

(e), (f), (h), and (j) as paragraphs (a), (b), 

(c), (d), (e), and (f), respectively. 

■ C. In newly redesignated paragraph 

(a)(1), removing the citation ‘‘(c)(2)’’ and 

adding, in its place, the citation ‘‘(a)(2)’’. 

■ D. In newly redesignated paragraph 

(a)(3) introductory text, removing the 

citation ‘‘(c)(1)’’ and adding, in its place, 

the citation ‘‘(a)(1)’’. 

■ E. Revising newly redesignated 

paragraph (a)(4). 

■ F. In newly redesignated paragraph 

(a)(5)(ii), adding the word ‘‘business’’ 

after the word ‘‘five’’. 

■ G. In newly redesignated paragraph 

(b), removing the citation ‘‘(c)(2)(viii)’’ 

and adding, in its place, the citation 

‘‘(a)(2)(viii)’’. 

■ H. In newly redesignated paragraph 

(e)(2), removing the citation ‘‘(h)(1)’’ and 

adding, in its place, the citation ‘‘(e)(1)’’. 

The revision reads as follows: 

§ 682.205 Disclosure requirements for 

lenders. 

(a) * * * 

(4) Required disclosures for borrowers 

having difficulty making payments. (i) 

Except as provided in paragraph 

(a)(4)(ii) of this section, the lender must 


mstockstill on DSK4VPTVN1PROD with RULES2ER01NO13.002</GPH> ER01NO13.003</GPH>
Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65811 

provide a borrower who has notified the 

lender that he or she is having difficulty 

making payments with— 

(A) A description of the repayment 

plans available to the borrower, and 

how the borrower may request a change 

in repayment plan; 

(B) A description of the requirements 

for obtaining forbearance on the loan 

and any costs associated with 

forbearance; and 

(C) A description of the options 

available to the borrower to avoid 

default and any fees or costs associated 

with those options. 

(ii) A disclosure under paragraph 

(a)(4)(i) of this section is not required if 

the borrower’s difficulty has been 

resolved through contact with the 

borrower resulting from an earlier 

disclosure or other communication 

between the lender and the borrower. 

* * * * * 

§ 682.206 [Removed and Reserved] 

■ 23. Section 682.206 is removed and 

reserved. 

§ 682.207 [Removed and Reserved] 

■ 24. Section 682.207 is removed and 

reserved. 

§ 682.208 [Amended] 

■ 25. Section 682.208 is amended by: 

■ A. In paragraph (a), removing the 

words ‘‘national credit bureaus’’ and 

adding, in their place, the words 

‘‘nationwide consumer reporting 

agencies’’. 

■ B. In paragraph (b)(1) introductory 

text, removing the words ‘‘at least one 

national credit bureau’’ and adding, in 

their place, the words ‘‘each nationwide 

consumer reporting agency’’. 

■ C. In paragraph (b)(2), removing the 

words ‘‘at least one national credit 

bureau’’ and adding, in their place, the 

words ‘‘each nationwide consumer 

reporting agency’’. 

■ D. In paragraph (b)(3) introductory 

text, removing both occurrences of the 

words ‘‘credit bureau’’ and adding, in 

their place, the words ‘‘consumer 

reporting agency’’. 

■ E. In paragraph (b)(3)(i)(A), removing 

the words ‘‘credit bureau’’ and adding, 

in their place, the words ‘‘consumer 

reporting agency’’. 

■ F. In paragraph (e)(3), removing the 

citation ‘‘§ 682.401(b)(17)(ii)’’ and 

adding, in its place, the citation 

‘‘§ 682.401(b)(8)(ii)’’. 

■ G. In paragraph (g), removing the 

citation ‘‘§ 682.411(g)’’ and adding, in 

its place, the citation ‘‘§ 682.411(h)’’. 

■ 26. Section 682.209 is amended by: 

■ A. In paragraph (a)(3)(i)(B), removing 

the word ‘‘and’’. 

■ B. In paragraph (a)(3)(i)(C), removing 

the punctuation ‘‘.’’ and adding, in its 

place, the punctuation and the word ‘‘; 

and’’. 

■ C. Adding a new paragraph 

(a)(3)(i)(D). 

■ D. In paragraph (a)(3)(ii)(E), removing 

the citation ‘‘§ 682.205(c)(1)’’ and 

adding, in its place, the citation 

‘‘§ 682.205(a)(1)’’. 

■ E. In paragraph (b)(2)(ii), revising the 

last sentence. 

■ F. Removing paragraphs (e), (f), (g), 

and (j). 

■ G. Redesignating paragraphs (h), (i), 

and (k) as paragraphs (e), (f), and (g), 

respectively. 

■ H. In newly redesignated paragraph 

(e)(3) introductory text, removing the 

citation ‘‘(h)(2)’’ and adding, in its 

place, the citation ‘‘(e)(2)’’. 

■ I. In newly redesignated paragraph 

(e)(4)(ii), removing the word ‘‘Must’’ 

and adding, in its place, the words 

‘‘Except in the case of an income-based 

repayment schedule, must’’. 

■ J. In newly redesignated paragraph 

(e)(5), removing the citation ‘‘(h)(2)’’ and 

adding, in its place, the citation ‘‘(e)(2)’’. 

■ K. In newly redesignated paragraph 

(f)(2)(i), removing the words ‘‘under 

§ 682.209(f)’’. 

■ L. In newly redesignated paragraph 

(f)(2)(ii), removing the citation ‘‘(i)(2)(i)’’ 

and adding, in its place, the citation 

‘‘(f)(2)(i)’’. 

The addition and revision read as 

follows: 

§ 682.209 Repayment of a loan. 

(a) * * * 

(3) * * * 

(i) * * * 

(D) For a borrower with a loan for 

which the applicable interest rate is 

fixed at 6.0 percent per year, 5.6 percent 

per year, or 6.8 percent per year, the day 

after 6 months following the date on 

which the borrower is no longer 

enrolled on at least a half-time basis at 

an institution of higher education. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) * * * Information related to next 

scheduled payment due date need not 

be provided to borrowers making such 

prepayments while in an in-school, 

grace, deferment, or forbearance period 

when payments are not due. 

* * * * * 

■ 27. Section 682.210 is amended by: 

■ A. In paragraph (a)(4), adding the 

words and punctuation ‘‘, or the 

borrower’s representative for purposes 

of paragraphs (i) and (t) of this section,’’ 

between the words ‘‘borrower’’ and 

‘‘must’’. 

■ B. Revising paragraph (b). 

■ C. In paragraph (n)(1) introductory 

text, removing the words and citations 

‘‘paragraphs (b)(2)(v) or (b)(5)(iii)’’ and 

adding, in their place, the word and 

citation ‘‘paragraph (b)(3)(iv)’’. 

■ D. In paragraph (n)(2), removing the 

citation ‘‘(b)(2)(v)’’ and adding, in its 

place, the citation ‘‘(b)(3)(iv)’’. 

■ E. In paragraph (o)(1) introductory 

text, removing the citation ‘‘(b)(3)’’ and 

adding, in its place, the citation 

‘‘(b)(3)(i)’’. 

■ F. In paragraph (q)(1) introductory 

text, removing the citation ‘‘(b)(5)(ii)’’ 

and adding, in its place, the citation 

‘‘(b)(3)(iii)’’. 

■ G. In paragraph (r)(1) introductory 

text, removing the citation ‘‘(b)(5)(iv)’’ 

and adding, in its place, the citation 

‘‘(b)(3)(v)’’. 

■ H. In paragraph (s)(2), removing the 

punctuation and the words ‘‘, except 

that the borrower is not required to 

obtain a Stafford or SLS loan for the 

period of enrollment covered by the 

deferment’’. 

■ I. In paragraph (s)(6) introductory text, 

removing both occurrences of the 

citation ‘‘(s)(6)(vi)’’ and adding, in their 

place, the citation ‘‘(s)(6)(iv)’’. 

■ J. In paragraph (u)(5), removing both 

occurrences of the words ‘‘military 

active’’ and adding, in their place, the 

words ‘‘post-active’’. 

The revision reads as follows: 

§ 682.210 Deferment. 

* * * * * 

(b) Authorized deferments for 

borrowers prior to July 1, 1993—(1) For 

all borrowers who are not new borrowers 

on or after July 1, 1993. Deferment is 

authorized for a FFEL borrower during 

any period when the borrower is— 

(i) Except as provided in paragraph 

(b)(4) of this section, engaged in fulltime study at a school in accordance 

with paragraph (c) of this section; 

(ii) Engaged in a course of study 

under an eligible graduate fellowship 

program in accordance with paragraph 

(d) of this section; 

(iii) Engaged in a rehabilitation 

training program for disabled 

individuals in accordance with 

paragraph (e) of this section; 

(iv) Temporarily totally disabled in 

accordance with paragraph (f) of this 

section, or unable to secure employment 

because the borrower is caring for a 

spouse or other dependent who is 

disabled and requires continuous 

nursing or similar services for up to 

three years in accordance with 

paragraph (g) of this section; or 

(v) Conscientiously seeking, but 

unable to find, full-time employment in 

the United States, for up to two years, 

mstockstill on DSK4VPTVN1PROD with RULES2

65812 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

in accordance with paragraph (h) of this 

section. 

(2) For all Stafford and SLS borrowers 

who are not new borrowers on or after 

July 1, 1993, and for parent PLUS loans 

made before August 15, 1983. 

Deferment is authorized during any 

period when the borrower is— 

(i) On active duty status in the United 

States Armed Forces in accordance with 

paragraph (i) of this section, or an 

officer in the Commissioned Corps of 

the United States Public Health Service 

in accordance with paragraph (j) of this 

section, for up to three years (including 

any period during which the borrower 

received a deferment authorized under 

paragraph (b)(3)(ii) of this section); 

(ii) A full-time volunteer under the 

Peace Corps Act, for up to three years, 

in accordance with paragraph (k) of this 

section; 

(iii) A full-time volunteer under title 

I of the Domestic Volunteer Service Act 

of 1973 (ACTION programs), for up to 

three years, in accordance with 

paragraph (l) of this section; 

(iv) A full-time volunteer for a taxexempt organization, for up to three 

years, in accordance with paragraph (m) 

of this section; or 

(v) Engaged in an internship or 

residency program, in accordance with 

paragraph (n) of this section, for up to 

two years (including any period during 

which the borrower received a 

deferment authorized under paragraph 

(b)(3)(iv) of this section). 

(3) For new Stafford or SLS borrowers 

on or after July 1, 1987 but before July 

1, 1993. Deferment is authorized— 

(i) In accordance with paragraph (o) of 

this section, if the borrower has been 

enrolled on at least a half-time basis at 

an institution of higher education 

during the six months preceding the 

beginning of the deferment, for a period 

of up to six months during which the 

borrower is— 

(A)(1) Pregnant; 

(2) Caring for his or her newborn 

child; or 

(3) Caring for a child immediately 

following the placement of the child 

with the borrower before or immediately 

following adoption; and 

(B) Not attending a school or gainfully 

employed; 

(ii) During a period when the 

borrower is on active duty status in the 

National Oceanic and Atmospheric 

Administration Corps, for up to three 

years, in accordance with paragraph (p) 

of this section, (including any period 

during which the borrower received a 

deferment authorized under paragraph 

(b)(2)(i) of this section); 

(iii) During a period of up to three 

years when the borrower is serving as a 

full-time teacher in a public or nonprofit private elementary or secondary 

school in a teacher shortage area 

designated by the Secretary under 

paragraph (q) of this section; 

(iv) During a period when the 

borrower is engaged in an internship or 

residency program, for up to two years, 

in accordance with paragraph (n) of this 

section, (including any period during 

which the borrower received a 

deferment authorized under paragraph 

(b)(2)(v) of this section); or 

(v) When a mother who has 

preschool-age children (i.e., children 

who have not enrolled in first grade) 

and who is earning not more than $1 per 

hour above the Federal minimum wage, 

for up to 12 months of employment, and 

who began that full-time employment 

within one year of entering or reentering the work force, in accordance 

with paragraph (r) of this section. Fulltime employment involves at least 30 

hours of work a week and it is expected 

to last at least 3 months. 

(4) For new Stafford or SLS borrowers 

on or after July 1, 1987. Deferment is 

authorized during periods when the 

borrower is engaged in at least half-time 

study at a school in accordance with 

paragraph (b) of this section. 

(5) For new parent PLUS borrowers on 

or after July 1, 1987 and before July 1, 

1993. Deferment is authorized during 

any period when a student on whose 

behalf the parent borrower received the 

loan— 

(i) Is not independent as defined in 

section 480(d) of the Act; and 

(ii) Meets the conditions and provides 

the required documentation, for any of 

the deferments described in paragraphs 

(b)(1)(i) through (iii) and (b)(4) of this 

section. 

(6) Definition of a new borrower. For 

purposes of paragraphs (b)(3), (b)(4), and 

(b)(5) of this section, a ‘‘new borrower’’ 

with respect to a loan is a borrower 

who, on the date he or she signs the 

promissory note, has no outstanding 

balance on— 

(i) A Stafford, SLS, or PLUS loan 

made prior to July 1, 1987 for a period 

of enrollment beginning prior to July 1, 

1987; or 

(ii) A Consolidation loan that repaid 

a loan made prior to July 1, 1987 and 

for a period of enrollment beginning 

prior to July 1, 1987. 

* * * * * 

■ 28. Section 682.211 is amended by: 

■ A. In paragraph (a)(4), removing the 

citation ‘‘(f)(10)’’ and adding, in its 

place, the citation ‘‘(f)(11)’’. 

■ B. Revising paragraphs (c) and (d). 

■ C. In paragraph (f)(2), removing the 

words ‘‘or an administrative forbearance 

period as specified under paragraph 

(f)(11) or (i)(2) of this section;’’ and 

adding, in their place, the words ‘‘or an 

authorized period of forbearance;’’. 

■ D. In paragraph (f)(6), removing the 

words ‘‘credit bureau’’ and adding, in 

their place, the words ‘‘consumer 

reporting agency’’. 

■ E. In paragraph (h)(2)(ii)(B), removing 

the words ‘‘10 U.S.C. 2171; or’’ and 

adding, in their place, the words ‘‘10 

U.S.C. 2171, 2173, 2174 or any other 

student loan repayment programs 

administered by the Department of 

Defense; or’’. 

■ F. In paragraph (h)(2)(ii)(C), removing 

the citation ‘‘§ 682.215’’ and adding, in 

its place, the citation ‘‘§ 682.216’’. 

■ G. In paragraph (h)(4)(iii)(A), 

removing the citation ‘‘§ 682.215(c)’’ 

and adding, in its place the citation 

‘‘§ 682.216(c)’’. 

■ H. In paragraph (h)(4)(iii)(B), 

removing the citation ‘‘§ 682.215(c)’’ 

and adding, in its place the citation 

‘‘§ 682.216(c)’’. 

The revisions read as follows: 

§ 682.211 Forbearance. 

* * * * * 

(c) Except as provided in paragraph 

(d)(2) of this section, a lender may grant 

forbearance for a period of up to one 

year at a time if both the borrower or 

endorser and an authorized official of 

the lender agree to the terms of the 

forbearance. If the borrower or endorser 

requests the forbearance orally and the 

lender and the borrower or endorser 

agree to the terms of the forbearance 

orally, the lender must notify the 

borrower or endorser of the terms 

within 30 days of that agreement. 

(d)(1) A guaranty agency may 

authorize a lender to grant forbearance 

to permit a borrower or endorser to 

resume honoring the agreement to repay 

the debt after default but prior to claim 

payment. The forbearance agreement in 

this situation must include a new 

agreement to repay the debt signed by 

the borrower or endorser or a written or 

oral affirmation of the borrower’s or 

endorser’s obligation to repay the debt. 

(2) If the forbearance is based on the 

borrower’s or endorser’s oral request 

and affirmation of the obligation to 

repay the debt— 

(i) The forbearance period is limited 

to a period of 120 days; 

(ii) Such a forbearance cannot be 

granted consecutively; 

(iii) The lender must orally review 

with the borrower the terms and 

conditions of the forbearance, including 

the consequences of interest 

capitalization, and all other repayment 

options available to the borrower; and 

(iv) The lender must— 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65813 

(A) Send a notice to the borrower or 

endorser, as provided in paragraph (c) of 

this section, that confirms the terms of 

the forbearance and the borrower’s or 

endorser’s affirmation of the obligation 

to repay the debt, and includes 

information on all other repayment 

options available to the borrower, and 

(B) Retain a record of the terms of the 

forbearance and affirmation in the 

borrower’s or endorser’s file. 

(3) For purposes of this section, an 

‘‘affirmation’’ means an 

acknowledgement of the loan by the 

borrower or endorser in a legally 

binding manner. The form of the 

affirmation may include, but is not 

limited to, the borrower’s or 

endorser’s— 

(i) New signed repayment agreement 

or schedule, or another form of signed 

agreement to repay the debt; 

(ii) Oral acknowledgment and 

agreement to repay the debt 

documented by the lender in the 

borrower’s or endorser’s file and 

confirmed by the lender in a notice to 

the borrower; or 

(iii) A payment made on the loan by 

the borrower or endorser. 

* * * * * 

§ 682.214 [Removed and Reserved] 

■ 29. Section 682.214 is removed and 

reserved. 

■ 30. Section 682.216 is amended by: 

■ A. In paragraph (a)(2)(iii), removing 

the first occurrence of the word ‘‘at’’ and 

adding, in its place, the word ‘‘for’’. 

■ B. In paragraph (a)(4)(i), removing the 

second occurrence of the word ‘‘at’’ and 

adding, in its place, the word ‘‘for’’. 

■ C. In paragraph (c)(1) introductory 

text, removing the words ‘‘at an 

educational’’ and adding, in their place, 

the words ‘‘for an educational’’. 

■ D. In paragraph (c)(1)(iii), removing 

the final sentence. 

■ E. Redesignating paragraphs (c)(2) 

through (c)(11) as paragraphs (c)(3) 

through (c)(12), respectively. 

■ F. Adding a new paragraph (c)(2). 

■ G. In newly redesignated paragraph 

(c)(4)(ii)(A), removing the words ‘‘at an 

eligible educational’’ and adding, in 

their place, the words ‘‘for an eligible 

educational’’. 

■ H. In newly redesignated paragraph 

(c)(4)(ii)(B), adding the words ‘‘for an’’ 

immediately before the words 

‘‘educational service agency’’. 

■ I. In newly redesignated paragraph 

(c)(4)(iii), removing the first occurrence 

of the word ‘‘at’’ and adding, in its 

place, the word ‘‘for’’. 

■ J. In newly redesignated paragraph 

(c)(5)(i), adding the words ‘‘for an’’ 

immediately before the words 

‘‘educational service’’. 

■ K. In newly redesignated paragraph 

(c)(5)(ii)(A), removing the words 

‘‘students at an eligible’’ and adding, in 

their place, the words ‘‘students for an 

eligible’’. 

■ L. In newly redesignated paragraph 

(c)(5)(ii)(B), adding the words ‘‘for an’’ 

immediately before the words 

‘‘educational service’’. 

■ M. In newly redesignated paragraph 

(c)(5)(iii), removing the first occurrence 

of the word ‘‘at’’ and adding, in its place 

the word ‘‘for’’. 

■ N. In newly redesignated paragraph 

(c)(10), removing the second occurrence 

of the word ‘‘at’’ and adding, in its 

place, the word ‘‘for’’. 

■ O. In paragraphs (d)(1) and (d)(2), 

removing the words and citations 

‘‘paragraphs (c)(3)(ii) or (c)(4)(ii)’’ and 

adding, in their place, the words and 

citations ‘‘paragraph (c)(4)(ii) or 

(c)(5)(ii)’’. 

■ P. In the heading of paragraph (e), 

removing the word ‘‘discharge’’ and 

adding in its place, the word 

‘‘forgiveness’’. 

■ Q. In paragraph (e)(1)(i), removing the 

citation ‘‘(h)(3)(iii)’’ and adding, in its 

place, the citation ‘‘(h)(4)(iii)’’. 

■ R. In paragraph (e)(1)(iii), removing 

the word ‘‘discharge’’ and adding, in its 

place, the word ‘‘forgiveness’’. 

■ S. Revising paragraphs (f)(2)(i) and 

(f)(2)(ii). 

■ T. In paragraph (f)(2)(iii), removing 

both occurrences of the word 

‘‘discharged’’ and adding, in their place, 

the words ‘‘loan forgiveness’’. 

■ U. In paragraph (f)(3)(ii), removing 

both occurrences of the word 

‘‘discharge’’ and adding, in their place, 

the words ‘‘loan forgiveness’’. 

■ V. In paragraph (f)(4), removing both 

occurrences of the word ‘‘discharge’’ 

and adding, in their place, the words 

‘‘loan forgiveness’’. 

■ W. In paragraph (f)(5), removing the 

word ‘‘discharge’’. 

■ X. Revising paragraph (g). 

The additions and revisions read as 

follows: 

§ 682.216 Teacher loan forgiveness 

program. 

* * * * * 

(c) * * * 

(2) The Secretary considers all 

elementary and secondary schools 

operated by the Bureau of Indian 

Education (BIE) or operated on Indian 

reservations by Indian tribal groups 

under contract with the BIE to qualify 

as schools serving low-income students. 

* * * * * 

(f) * * * 

(2) * * * 

(i) The holder must file a request for 

payment with the guaranty agency on a 

teacher loan forgiveness amount no later 

than 60 days after the receipt, from the 

borrower, of a completed teacher loan 

forgiveness application. 

(ii) When filing a request for payment 

on a teacher loan forgiveness, the holder 

must provide the guaranty agency with 

the completed loan forgiveness 

application submitted by the borrower 

and any required supporting 

documentation. 

* * * * * 

(g) Claims for reimbursement from the 

Secretary on loans held by guaranty 

agencies. In the case of a teacher loan 

forgiveness applied to a defaulted loan 

held by the guaranty agency, the 

Secretary pays the guaranty agency a 

percentage of the amount forgiven that 

is equal to the complement of the 

reinsurance percentage paid on the loan. 

The payment of up to $5,000, or up to 

$17,500, may also include interest that 

accrues on the forgiveness amount 

during the period from the date on 

which the guaranty agency received 

payment from the Secretary on a default 

claim to the date on which the guaranty 

agency determines that the borrower is 

eligible for the teacher loan forgiveness. 

* * * * * 

§ 682.300 [Amended] 

■ 31. Section 682.300 is amended by: 

■ A. In paragraph (b)(2)(ii) introductory 

text, removing the words ‘‘, except as 

provided in paragraph (c)(4) of this 

section’’. 

■ B. In paragraph (b)(2)(ii)(B), removing 

the words ‘‘in accordance with 

§ 682.207(b)(1)(ii)(B) and (C)’’. 

■ C. In paragraph (c)(1), adding the 

word ‘‘or’’ after the punctuation ‘‘;’’. 

■ D. In paragraph (c)(2), removing the 

punctuation ‘‘;’’ and adding, in its place, 

the punctuation ‘‘.’’. 

■ E. Removing paragraphs (c)(3) and 

(c)(4). 

§ 682.301 [Amended] 

■ 32. Section 682.301 is amended by 

removing paragraph (c). 

■ 33. Section 682.302 is amended by: 

■ A. In paragraph (b)(3) introductory 

text, adding the words ‘‘and prior to July 

1, 2010’’ after the date ‘‘1992’’ and 

before the punctuation ‘‘,’’. 

■ B. In paragraph (d)(1)(vi)(B), removing 

the words ‘‘the loan proceeds disbursed 

by electronic funds transfer or master 

check in accordance with 

§ 682.207(b)(1)(ii)(B) and (C)’’ and 

adding, in their place, the words ‘‘The 

loan proceeds disbursed by electronic 

funds transfer or master check’’. 

■ C. In paragraph (d)(2) introductory 

text, adding the words ‘‘and prior to July 

1, 2010’’ after the date ‘‘1992’’ and 

before the punctuation ‘‘,’’. 

mstockstill on DSK4VPTVN1PROD with RULES2

65814 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

■ D. In paragraph (e)(1)(i), removing the 

citation ‘‘§ 682.800’’ and adding, in its 

place, the words ‘‘section 438(e) of the 

Act’’. 

■ E. Revising paragraph (f)(3)(viii)(B). 

■ F. In paragraph (f)(3)(x)(B)(3), 

removing the citation ‘‘503(c)(3)’’ and 

adding, in its place, the citation 

‘‘501(c)(3)’’. 

The revision reads as follows: 

§ 682.302 Payment of special allowance on 

FFEL loans. 

* * * * * 

(f) * * * 

(3) * * * 

(viii) * * * 

(B) Fees are reasonable and customary 

for purposes of paragraph (f)(3)(viii) of 

this section, if they do not exceed the 

amounts received by the trustee for 

similar services with regard to similar 

portfolios of loans of that State or nonprofit entity or its related special 

purpose entity that are not eligible to 

receive special allowance at the rate 

established under paragraph (f)(2) of 

this section, or if they do not exceed an 

amount as determined by such other 

method requested by the State or nonprofit entity that the Secretary considers 

reliable. 

* * * * * 

§ 682.305 [Amended] 

■ 34. Section 682.305 is amended by: 

■ A. In paragraph (a)(3)(ii)(B), by adding 

the words ‘‘and prior to July 1, 2010’’ 

after the date ‘‘2007’’ and before the 

punctuation ‘‘,’’. 

■ B. In paragraph (c)(1)(i), removing the 

words ‘‘originating or’’. 

■ C. Removing paragraph (c)(1)(ii). 

■ D. Redesignating paragraph (c)(1)(iii) 

as paragraph (c)(1)(ii). 

■ E. In paragraph (c)(2)(iv), adding the 

word ‘‘and’’ as the last word in the 

paragraph, immediately following the 

punctuation ‘‘;’’. 

■ F. In paragraph (c)(2)(v), removing the 

final punctuation ‘‘;’’ and adding, in its 

place, the punctuation ‘‘.’’. 

■ G. Removing paragraphs (c)(2)(vi) and 

(c)(2)(vii). 

■ 35. Section 682.400 is amended by 

revising paragraph (b)(1)(i) to read as 

follows: 

§ 682.400 Agreements between a guaranty 

agency and the Secretary. 

* * * * * 

(b) * * * 

(1) * * * 

(i) Borrowers whose Stafford or 

Consolidation loans are guaranteed by 

the agency may qualify for interest 

benefits that are paid to the lender on 

the borrower’s behalf under § 682.301; 

and 

* * * * * 

■ 36. Section 682.401 is amended by: 

■ A. Removing paragraphs (b)(1), (b)(2), 

and (b)(3). 

■ B. Redesignating paragraph (b)(4) as 

paragraph (b)(1). 

■ C. In newly redesignated paragraph 

(b)(1) introductory text, removing the 

citation ‘‘(b)(4)’’ and adding, in its place, 

the citation ‘‘(b)(1)’’. 

■ D. Removing paragraphs (b)(5) and 

(b)(6). 

■ E. Redesignating paragraph (b)(7) as 

paragraph (b)(2). 

■ F. Removing paragraphs (b)(8) and 

(b)(9). 

■ G. Redesignating paragraphs (b)(10) 

and (b)(11) as paragraphs (b)(3) and 

(b)(4), respectively. 

■ H. In newly redesignated paragraph 

(b)(3)(i) introductory text, removing the 

words ‘‘SLS or PLUS loans refinanced 

under § 682.209(e) or (f)’’ and adding, in 

their place, the words ‘‘refinanced SLS 

or PLUS loans’’. 

■ I. In newly redesignated paragraph 

(b)(3)(iv)(C), adding the words ‘‘and 

prior to July 1, 2010’’ between the date 

‘‘2006’’ and the punctuation ‘‘.’’. 

■ J. In newly redesignated paragraph 

(b)(3)(vi)(B)(4), removing the words ‘‘in 

accordance with § 682.207(b)(1)(ii)(B) 

and (C)’’. 

■ K. Removing paragraphs (b)(12) and 

(b)(13). 

■ L. Redesignating paragraphs (b)(14) 

through (b)(29) as paragraphs (b)(5) 

through (b)(20), respectively. 

■ M. In newly redesignated paragraph 

(b)(6), adding the words ‘‘and N’’ 

between the letter ‘‘M’’ and the word 

‘‘of’’. 

■ N. In newly redesignated paragraph 

(b)(8)(i) introductory text, removing the 

citation ‘‘(b)(17)(iii)’’ and adding, in its 

place, the citation ‘‘(b)(8)(iii)’’. 

■ O. In newly redesignated paragraph 

(b)(8)(iii), removing the citation 

‘‘(b)(17)(i)’’ and adding, in its place, the 

citation ‘‘(b)(8)(i)’’. 

■ P. In newly redesignated paragraph 

(b)(10)(i)(B), removing the words 

‘‘School and lender’’ and adding, in 

their place, the word ‘‘Lender’’. 

■ Q. In newly redesignated paragraph 

(b)(10)(i)(C), removing the words 

‘‘school and’’. 

■ R. In newly redesignated paragraph 

(b)(10)(i)(D), removing the words 

‘‘school or’’. 

■ S. In newly redesignated paragraph 

(b)(11) introductory text, adding the 

word ‘‘of’’ between the words ‘‘days’’ 

and ‘‘any’’. 

■ T. In newly redesignated paragraph 

(b)(14)(ii), removing the citation 

‘‘(b)(23)(i)’’ and adding, in its place, the 

citation ‘‘(b)(14)(i)’’. 

■ U. In newly redesignated paragraph 

(b)(18)(i), removing the word ‘‘Federal’’ 

and adding, in its place, the word 

‘‘Direct’’. 

■ V. Removing newly redesignated 

paragraph (b)(18)(ii). 

■ W. Further redesignating newly 

redesignated paragraphs (b)(18)(iii) 

through (v) as paragraphs (b)(18)(ii) 

through (iv), respectively. 

■ X. Revising newly redesignated 

paragraph (b)(18)(iii). 

■ Y. Removing paragraph (c). 

■ Z. Redesignating paragraph (d) as 

paragraph (c). 

■ AA. In newly redesignated paragraph 

(c)(2), removing the citation ‘‘(d)(1)’’ and 

adding, in its place, the citation ‘‘(c)(1)’’. 

■ BB. In newly redesignated paragraph 

(c)(3), adding a final sentence to the end 

of the paragraph. 

■ CC. Removing newly redesignated 

paragraph (c)(4). 

■ DD. Further redesignating newly 

redesignated paragraphs (c)(5) and (c)(6) 

as paragraphs (c)(4) and (c)(5), 

respectively. 

■ EE. Removing paragraph (e). 

■ FF. Redesignating paragraphs (f) and 

(g) as paragraphs (d) and (e), 

respectively. 

■ GG. In newly redesignated paragraph 

(d)(2), removing the word ‘‘HEA’’ and 

adding, in its place, the word ‘‘Act’’. 

■ HH. In newly redesignated paragraph 

(e)(1), removing the word ‘‘participate’’ 

and adding, in its place, the word 

‘‘participated’’. 

■ II. In newly redesignated paragraph 

(e)(2), removing the citation ‘‘(g)(1)’’ and 

adding, in its place, the citation ‘‘(e)(1)’’. 

■ JJ. In newly redesignated paragraph 

(e)(4), removing the citation ‘‘(g)(1)’’ and 

adding, in its place, the citation ‘‘(e)(1)’’. 

The revision and addition read as 

follows: 

§ 682.401 Basic program agreement. 

* * * * * 

(b) * * * 

(18) * * * 

(iii) On or after October 1, 2009, when 

returning proceeds to the Secretary from 

the consolidation of a defaulted loan 

that is paid off with excess 

consolidation proceeds as defined in 

paragraph (b)(18)(iv) of this section, a 

guaranty agency must remit the entire 

amount of collection costs repaid 

through the consolidation loan. 

* * * * * 

(c) * * * 

(3) * * * Each loan made under an 

MPN is enforceable in accordance with 

the terms of the MPN and is eligible for 

claim payment based on a true and 

exact copy of such MPN. 

* * * * * 

■ 37. Section 682.402 is amended by: 

■ A. In paragraph (a)(5)(ii), removing 

the words ‘‘credit bureau’’ and adding, 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65815 

in their place, the words ‘‘consumer 

reporting agency’’. 

■ B. Revising paragraph (d)(1)(i). 

■ C. In paragraph (d)(3)(ii)(B), by 

removing the figure ‘‘90’’ and adding, in 

its place, the figure ‘‘120’’. 

■ D. In paragraphs (d)(6)(i)(C), 

(d)(6)(i)(D) introductory text, 

(d)(6)(i)(D)(2), (d)(6)(i)(H)(3), (d)(6)(ii)(B) 

introductory text, (d)(6)(ii)(B)(2), and 

(d)(6)(ii)(F)(3), by removing the figure 

‘‘90’’ each time it appears and adding, 

in its place, the figure ‘‘120’’. 

■ E. In paragraph (d)(7)(iv), removing 

the words ‘‘credit bureaus’’ and adding, 

in their place, the words ‘‘consumer 

reporting agencies’’. 

■ F. In paragraph (d)(8)(i), removing the 

citation ‘‘34 CFR 685.213’’ and adding, 

in its place, the citation ‘‘34 CFR 

685.214’’. 

■ G. In paragraph (e)(3) introductory 

text, removing the citation ‘‘(e)(14)’’ and 

adding, in its place, the citation 

‘‘(e)(15)’’. 

■ H. In paragraph (e)(3)(v)(C), removing 

the word ‘‘identify’’ and adding, in its 

place, the word ‘‘identity’’. 

■ I. In paragraph (e)(12)(v) introductory 

text, removing the words ‘‘credit 

bureaus’’ and adding, in their place, the 

words ‘‘consumer reporting agencies’’. 

■ J. In paragraphs (l)(1), (l)(2)(ii), and 

(l)(3)(i), adding the words ‘‘or Federal 

default fees’’ between the word 

‘‘premiums’’ and the punctuation ’’)’’. 

■ K. In paragraph (n)(2), adding the 

words ‘‘or Federal default fees’’ between 

the word ‘‘premiums’’ and the 

punctuation ’’)’’. 

The revision reads as follows: 

§ 682.402 Death, disability, closed school, 

false certification, unpaid refunds, and 

bankruptcy payments. 

* * * * * 

(d) * * * 

(1) * * * 

(i) The Secretary reimburses the 

holder of a loan received by a borrower 

on or after January 1, 1986, and 

discharges the borrower’s obligation 

with respect to the loan in accordance 

with the provisions of paragraph (d) of 

this section, if the borrower (or the 

student for whom a parent received a 

PLUS loan) could not complete the 

program of study for which the loan was 

intended because the school at which 

the borrower (or student) was enrolled 

closed, or the borrower (or student) 

withdrew from the school not more than 

120 days prior to the date the school 

closed. The Secretary may extend the 

120-day period if the Secretary 

determines that exceptional 

circumstances related to a school’s 

closing justify an extension. Exceptional 

circumstances for this purpose may 

include, but are not limited to: the 

school’s loss of accreditation; the 

school’s discontinuation of the majority 

of its academic programs; action by the 

State to revoke the school’s license to 

operate or award academic credentials 

in the State; or a finding by a State or 

Federal government agency that the 

school violated State or Federal law. 

* * * * * 

§ 682.403 [Removed and Reserved] 

■ 38. Section 682.403 is removed and 

reserved. 

■ 39. Section 682.404 is amended by: 

■ A. Revising paragraph (b)(3)(ii). 

■ B. In paragraph (b)(3)(iii), adding the 

word ‘‘or’’ after the punctuation ‘‘;’’. 

■ C. In paragraph (b)(4)(ii)(G)(2), 

removing the words ‘‘is consistent with 

§ 682.509(a)(1)’’ and adding, in their 

place, the words ‘‘addresses the 

condition identified in paragraph 

(b)(3)(ii) of this section’’. 

■ D. In paragraph (d)(1) introductory 

text, removing the words ‘‘made under 

§ 682.209(e), (f) and (h),’’ and adding, in 

their place the words ‘‘that were 

refinanced pursuant to section 

428B(e)(2) and (3) of the Act,’’. 

■ E. Removing paragraph (h). 

■ F. Redesignating paragraphs (i) 

through (l) as paragraphs (h) through (k), 

respectively. 

■ G. In newly redesignated paragraph 

(j)(3)(i), removing the parenthetical 

‘‘(k)(2)(i)’’ and adding, in its place, the 

parenthetical ‘‘(j)(2)(i)’’. 

■ H. In newly redesignated paragraph 

(j)(3)(ii), removing the citation 

‘‘(k)(2)(ii)’’ and adding, in its place, the 

citation ‘‘(j)(2)(ii)’’. 

The revision reads as follows: 

§ 682.404 Federal reinsurance agreement. 

* * * * * 

(b) * * * 

(3) * * * 

(ii) Under a policy established by the 

agency that addresses instances in 

which, for a non-school originated loan, 

a lender learns that the school 

terminated its teaching activities while 

a student was enrolled during the 

academic period covered by the loan; 

* * * * * 

■ 40. Section 682.405 is amended by: 

■ A. In the introductory text of 

paragraph (a)(2)(i), adding the word 

‘‘qualifying’’ between the words ‘‘ten’’ 

and ‘‘payments’’. 

■ B. Revising the introductory text of 

paragraph (a)(2)(i)(A). 

■ C. Redesignating paragraph (a)(3) as 

paragraph (a)(4). 

■ D. Adding a new paragraph (a)(3). 

■ E. Revising paragraph (b)(1). 

The revisions and addition read as 

follows: 

§ 682.405 Loan rehabilitation agreement. 

(a) * * * 

(2) * * * 

(i) * * * 

(A) A qualifying payment is— 

* * * * * 

(3)(i) If a borrower’s loan is being 

collected by administrative wage 

garnishment while the borrower is also 

making monthly payments on the same 

loan under a loan rehabilitation 

agreement, the guaranty agency must 

continue collecting the loan by 

administrative wage garnishment until 

the borrower makes five qualifying 

monthly payments under the 

rehabilitation agreement, unless the 

guaranty agency is otherwise precluded 

from doing so under § 682.410(b)(9). 

(ii) After the borrower makes the fifth 

qualifying monthly payment, the 

guaranty agency must, unless otherwise 

directed by the borrower, suspend the 

garnishment order issued to the 

borrower’s employer. 

(iii) A borrower may only obtain the 

benefit of a suspension of administrative 

wage garnishment while also attempting 

to rehabilitate a defaulted loan once. 

* * * * * 

(b) * * * 

(1) A borrower may request 

rehabilitation of the borrower’s 

defaulted loan held by the guaranty 

agency. In order to be eligible for 

rehabilitation of the loan, the borrower 

must voluntarily make at least 9 of the 

10 payments required under a monthly 

repayment agreement. 

(i) Each payment must be— 

(A) Made voluntarily; 

(B) For the full amount required; 

(C) Received within 20 days of the 

due date for the payment; and 

(D) Reasonable and affordable. 

(ii) All 9 payments must be received 

within a 10-month period that begins 

with the month in which the first 

required due date falls and ends with 

the ninth consecutive calendar month 

following that month. 

(iii) The guaranty agency initially 

considers the borrower’s reasonable and 

affordable payment amount to be an 

amount equal to 15 percent of the 

amount by which the borrower’s 

Adjusted Gross Income (AGI) exceeds 

150 percent of the poverty guideline 

amount applicable to the borrower’s 

family size and State, divided by 12, 

except that if this amount is less than 

$5, the borrower’s monthly 

rehabilitation payment is $5. 

(iv) The guaranty agency or its agents 

may calculate the payment amount 

based on information provided orally by 

the borrower or the borrower’s 

representative and provide the borrower 

mstockstill on DSK4VPTVN1PROD with RULES2

65816 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

with a rehabilitation agreement using 

that amount. The guaranty agency must 

request documentation from the 

borrower to confirm the borrower’s AGI 

and family size. If the borrower does not 

provide the guaranty agency or its 

agents with any documentation 

requested by the guaranty agency to 

calculate or confirm the reasonable and 

affordable payment amount, within a 

reasonable time deadline set by the 

guaranty agency or its agent, the 

rehabilitation agreement provided is 

null and void. 

(v) The reasonable and affordable 

payment amount calculated under this 

section must not be— 

(A) A required minimum loan 

payment amount (e.g., $50) if the agency 

determines that a smaller amount is 

reasonable and affordable; 

(B) A percentage of the borrower’s 

total loan balance; or 

(C) Based on other criteria unrelated 

to the borrower’s total financial 

circumstances. 

(vi) Within 15 business days of its 

determination of the borrower’s loan 

rehabilitation payment amount, the 

guaranty agency must provide the 

borrower with a written rehabilitation 

agreement which includes the 

borrower’s payment amount calculated 

under paragraph (b)(1)(iii), a prominent 

statement that the borrower may object 

orally or in writing to the payment 

amount, with the method and timeframe 

for raising such an objection, and an 

explanation of any other terms and 

conditions applicable to the required 

series of payments that must be made 

before the borrower’s account can be 

considered for repurchase by an eligible 

lender (i.e., rehabilitated). To accept the 

agreement, the borrower must sign and 

return the agreement or accept the 

agreement electronically under a 

process provided by the agency. The 

agency may not impose any other 

conditions unrelated to the amount or 

timing of the rehabilitation payments in 

the rehabilitation agreement. The 

written rehabilitation agreement must 

inform the borrower— 

(A) Of the effects of having the loans 

rehabilitated (e.g., removal of the record 

of default from the borrower’s credit 

history and return to normal 

repayment); 

(B) Of the amount of any collection 

costs to be added to the unpaid 

principal of the loan when the loan is 

sold to an eligible lender, which may 

not exceed 18.5 percent of the unpaid 

principal and accrued interest on the 

loan at the time of the sale; and 

(C) That the rehabilitation agreement 

is null and void if the borrower fails to 

provide the documentation required to 

confirm the monthly payment 

calculated under paragraph (b)(1)(iii) of 

this section. 

(vii) If the borrower objects to the 

monthly payment amount determined 

under paragraph (b)(1)(iii) of this 

section, the guaranty agency or its 

agents must recalculate the payment 

amount based solely on information 

provided on a form approved by the 

Secretary and, if requested, supporting 

documentation from the borrower and 

other sources, and must consider— 

(A) The borrower’s, and if applicable, 

the spouse’s current disposable income, 

including public assistance payments, 

and other income received by the 

borrower and the spouse, such as 

welfare benefits, Social Security 

benefits, Supplemental Security Income, 

and workers’ compensation. Spousal 

income is not considered if the spouse 

does not contribute to the borrower’s 

household income; 

(B) Family size as defined in 

§ 682.215(a)(3); and 

(C) Reasonable and necessary 

expenses, which include— 

(1) Food; 

(2) Housing; 

(3) Utilities; 

(4) Basic communication expenses; 

(5) Necessary medical and dental 

costs; 

(6) Necessary insurance costs; 

(7) Transportation costs; 

(8) Dependent care and other workrelated expenses; 

(9) Legally required child and spousal 

support; 

(10) Other title IV and non-title IV 

student loan payments; and 

(11) Other expenses approved by the 

Secretary. 

(viii) The guaranty agency must 

provide the borrower with a new 

written rehabilitation agreement 

confirming the borrower’s recalculated 

reasonable and affordable payment 

amount within the timeframe specified 

in paragraph (b)(1)(vii) of this section. 

To accept the agreement, the borrower 

must sign and return the agreement or 

accept the agreement electronically 

under a process provided by the agency. 

(ix) The agency must include any 

payment made under § 682.401(b)(1) in 

determining whether the 9 out of 10 

payments required under paragraph 

(b)(1) of this section have been made. 

(x) A borrower may request that the 

monthly payment amount be adjusted 

due to a change in the borrower’s total 

financial circumstances only upon 

providing the documentation specified 

in paragraph (b)(1)(vii) of this section. 

(xi) During the rehabilitation period, 

the guaranty agency must limit contact 

with the borrower on the loan being 

rehabilitated to collection activities that 

are required by law or regulation and to 

communications that support the 

rehabilitation. 

* * * * * 

§ 682.406 [Amended] 

■ 41. Section 682.406 is amended by: 

■ A. In paragraph (a)(2)(ii), removing 

the words ‘‘in accordance with 

§ 682.207(b)(1)(ii)(B) and (C)’’. 

■ B. In paragraph (a)(12)(iv), adding the 

words ‘‘and prior to July 1, 2010’’ after 

the date ‘‘1999’’ and before the 

punctuation ‘‘,’’. 

§ 682.407 [Amended] 

■ 42. Section 682.407(e)(1)(ii) is 

amended by removing the figure ‘‘24’’ 

the first time it appears and adding, in 

its place, the figure ‘‘72’’. 

§ 682.408 [Removed and Reserved] 

■ 43. Section 682.408 is removed and 

reserved. 

§ 682.409 [Amended] 

■ 44. Section 682.409 is amended by: 

■ A. In paragraph (a)(2)(i), removing the 

citation ‘‘§ 682.401(b)(4)’’ and adding, in 

its place, the citation ‘‘§ 682.401(b)(1)’’. 

■ B. In paragraph (a)(3)(i)(B), removing 

the citation ‘‘§ 682.401(b)(4)’’ and 

adding, in its place, the citation 

‘‘§ 682.401(b)(1)’’. 

■ 45. Section 682.410 is amended by: 

■ A. Revising the introductory text of 

paragraph (a)(2). 

■ B. In paragraph (a)(2)(ii) introductory 

text, removing the word ‘‘preclaims’’ 

and adding, in its place, the words 

‘‘default aversion’’. 

■ C. In paragraph (b)(2) introductory 

text, removing the citation 

‘‘§§ 682.401(b)(27) and 

682.405(b)(1)(iv)’’ and adding, in its 

place, the citation ‘‘§§ 682.401(b)(18)(i) 

and 682.405(b)(1)(iv)(B)’’. 

■ D. In paragraph (b)(5)(i) introductory 

text, removing the citation ‘‘(b)(6)(v)’’ 

and adding, in its place, the citation 

‘‘(b)(6)(ii)’’. 

■ E. In paragraph (b)(7)(i), removing the 

words ‘‘conditions described in 

§ 682.509(a)(1)’’ and adding, in their 

place, the words ‘‘condition described 

in § 682.404(b)(3)(ii)’’. 

■ F. In paragraph (b)(7)(ii)(A), removing 

the words ‘‘credit bureau’’ and adding, 

in their place, the words ‘‘consumer 

reporting agency’’. 

■ G. Revising paragraph (b)(9). 

■ H. In paragraph (c)(1)(i)(A) 

introductory text, removing the words 

‘‘made or’’. 

■ I. In paragraph (c)(1)(i)(A)(1), 

removing the words ‘‘in that year’’. 

■ J. In paragraph (c)(1)(i)(A)(2), 

removing the words ‘‘in that year’’. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65817 

■ K. Revising paragraph (c)(1)(i)(C). 

■ L. In paragraph (c)(1)(ii), removing the 

citation ‘‘(c)(1)(A)–(C)’’ and adding, in 

its place, the citation ‘‘(c)(1)(i)(A)–(C)’’. 

■ M. Removing paragraph (c)(4). 

■ N. Redesignating paragraphs (c)(5) 

through (c)(11) as paragraphs (c)(4) 

through (c)(10), respectively. 

■ O. In newly redesignated paragraphs 

(c)(8)(i) and (c)(8)(ii), adding the words 

‘‘title IV eligibility of a’’ between the 

words ‘‘or’’ and ‘‘school’’. 

■ P. Revising newly redesignated 

paragraph (c)(10) introductory text. 

The revisions read as follows: 

§ 682.410 Fiscal, administrative, and 

enforcement requirements. 

(a) * * * 

(2) Uses of reserve fund assets. A 

guaranty agency may use the assets of 

the reserve fund established under 

paragraph (a)(1) of this section to pay 

only— 

* * * * * 

(b) * * * 

(9) Administrative garnishment. (i) If 

a guaranty agency decides to garnish the 

disposable pay of a borrower who is not 

making payments on a loan held by the 

agency, on which the Secretary has paid 

a reinsurance claim, it must do so in 

accordance with the following 

procedures: 

(A) At least 30 days before the 

initiation of garnishment proceedings, 

the guaranty agency must mail to the 

borrower’s last known address, a written 

notice described in paragraph 

(b)(9)(i)(B) of this section. 

(B) The notice must describe— 

(1) The nature and amount of the 

debt; 

(2) The intention of the agency to 

collect the debt through deductions 

from disposable pay; 

(3) An explanation of the borrower’s 

rights; 

(4) The deadlines by which a 

borrower must exercise those rights; and 

(5) The consequences of failure to 

exercise those rights in a timely manner. 

(C) The guaranty agency must offer 

the borrower an opportunity to inspect 

and copy agency records related to the 

debt. 

(D) The guaranty agency must offer 

the borrower an opportunity to enter 

into a written repayment agreement 

with the agency under terms agreeable 

to the agency. 

(E)(1) The guaranty agency must offer 

the borrower an opportunity for a 

hearing in accordance with paragraphs 

(b)(9)(i)(F) through (J) of this section and 

other guidance provided by the 

Secretary, for any objection regarding 

the existence, amount, or enforceability 

of the debt, and any objection that 

withholding from the borrower’s 

disposable pay in the amount or at the 

rate proposed in the notice would cause 

financial hardship to the borrower. 

(2) The borrower must request a 

hearing in writing. At the borrower’s 

option, the hearing may be oral or 

written. The time and location of the 

hearing is established by the guaranty 

agency. An oral hearing may, at the 

borrower’s option, be conducted either 

in-person or by telephone conference. 

The agency notifies the borrower of the 

process for arranging the time and 

location of an oral hearing. All 

telephonic charges are the responsibility 

of the agency. All travel expenses 

incurred by the borrower in connection 

with an in-person oral hearing are the 

responsibility of the borrower. 

(F)(1) If the borrower submits a 

written request for a hearing on the 

existence, amount, or enforceability of 

the debt— 

(i) The guaranty agency must provide 

evidence of the existence of the debt. If 

the agency provides evidence of the 

existence of the debt, the borrower must 

prove by the preponderance of the 

evidence that no debt exists, the debt is 

not enforceable under applicable law, 

the amount the guaranty agency claims 

the borrower owes is incorrect, 

including that any amount of collection 

costs assessed to the borrower exceeds 

the limits established under 

§ 682.410(b)(2), or the debt is not 

delinquent; and 

(ii) The borrower may raise any of the 

objections described in paragraph 

(b)(9)(i)(F)(1)(i) of this section not raised 

in the written request, but must do so 

before a hearing is completed. For 

purposes of this paragraph, a hearing is 

completed when the record is closed 

and the hearing official notifies the 

parties that no additional evidence or 

objections will be accepted. 

(2) If the borrower submits a written 

request for a hearing on an objection 

that withholding in the amount or at the 

rate that the agency proposed in its 

notice would cause financial hardship 

to the borrower and the borrower’s 

spouse and dependents— 

(i) The borrower bears the burden of 

proving the claim of financial hardship 

by a preponderance of the credible 

evidence by providing credible 

documentation that the amount of 

wages proposed in the notice would 

leave the borrower unable to meet basic 

living expenses of the borrower, the 

borrower’s spouse, and the borrower’s 

dependents. The documentation must 

show the amount of the costs incurred 

for basic living expenses and the income 

available from any source to meet those 

expenses; 

(ii) The borrower’s claim of financial 

hardship must be evaluated by 

comparing the amounts that the 

borrower proves are being incurred for 

basic living expenses against the 

amounts spent for basic living expenses 

by families of the same size as the 

borrower’s. For the purposes of this 

section, the standards published by the 

Internal Revenue Service under 26 

U.S.C. 7122(d)(2) (the ’’Collection 

Financial Standards’’) establish the 

average amounts spent for basic living 

expenses for families of the same size as 

the borrower’s family; 

(iii) The amount that the borrower 

proves is incurred for a type of basic 

living expense is considered to be 

reasonable to the extent that the amount 

does not exceed the amount spent for 

that expense by families of the same size 

according to the Collection Financial 

Standards. If the borrower claims an 

amount for any basic living expense that 

exceeds the amount in the Collection 

Financial Standards, the borrower must 

prove that the amount claimed is 

reasonable and necessary; 

(iv) If the borrower’s objection to the 

rate or amount proposed in the notice is 

upheld in part, the garnishment must be 

ordered at a lesser rate or amount, that 

is determined will allow the borrower to 

meet basic living expenses proven to be 

reasonable and necessary. If this 

financial hardship determination is 

made after a garnishment order is 

already in effect, the guaranty agency 

must notify the borrower’s employer of 

any change required by the 

determination in the amount to be 

withheld or the rate of withholding 

under that order; and 

(v) A determination by a hearing 

official that financial hardship would 

result from garnishment is effective for 

a period not longer than six months 

after the date of the finding. After this 

period, the guaranty agency may require 

the borrower to submit current 

information regarding the borrower’s 

family income and living expenses. If 

the borrower fails to submit current 

information within 30 days of this 

request, or the guaranty agency 

concludes from a review of the available 

evidence that garnishment should now 

begin or the rate or the amount of an 

outstanding withholding should be 

increased, the guaranty agency must 

notify the borrower and provide the 

borrower with an opportunity to contest 

the determination and obtain a hearing 

on the objection under the procedures 

in paragraph (b)(9)(i) of this section. 

(G) If the borrower’s written request 

for a hearing is received by the guaranty 

agency on or before the 30th day 

following the date of the notice 

mstockstill on DSK4VPTVN1PROD with RULES2

65818 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

described in paragraph (b)(9)(i)(B) of 

this section, the guaranty agency may 

not issue a withholding order until the 

borrower has been provided the 

requested hearing and a decision has 

been rendered. The guaranty agency 

must provide a hearing to the borrower 

in sufficient time to permit a decision, 

in accordance with the procedures that 

the agency may prescribe, to be 

rendered within 60 days. 

(H) If the borrower’s written request 

for a hearing is received by the guaranty 

agency after the 30th day following the 

date of the notice described in 

paragraph (b)(9)(i)(B) of this section, the 

guaranty agency must provide a hearing 

to the borrower in sufficient time that a 

decision, in accordance with the 

procedures that the agency may 

prescribe, may be rendered within 60 

days, but may not delay issuance of a 

withholding order unless the agency 

determines that the delay in filing the 

request was caused by factors over 

which the borrower had no control, or 

the agency receives information that the 

agency believes justifies a delay or 

cancellation of the withholding order. If 

a decision is not rendered within 60 

days following receipt of a borrower’s 

written request for a hearing, the 

guaranty agency must suspend the order 

beginning on the 61st day after the 

hearing request was received until a 

hearing is provided and a decision is 

rendered. 

(I) The hearing official appointed by 

the agency to conduct the hearing may 

be any qualified individual, including 

an administrative law judge. Under no 

circumstance may the hearing official be 

under the supervision or control of the 

head of the guaranty agency or of a 

third-party servicer or collection 

contractor employed by the agency. 

Payment of compensation by the 

guaranty agency, third-party servicer, or 

collection contractor employed by the 

agency to the hearing official for service 

as a hearing official does not constitute 

impermissible supervision or control 

under this paragraph. The guaranty 

agency must ensure that, except as 

needed to arrange for administrative 

matters pertaining to the hearing, 

including the type of hearing requested 

by the borrower, the time, place, and 

manner of conducting an oral hearing, 

and post-hearing matters such as 

issuance of a hearing decision, all oral 

communications between the hearing 

official and any representative of the 

guaranty agency or with the borrower 

are made within the hearing of the other 

party, and that copies of any written 

communication with either party are 

promptly provided to the other party. 

This paragraph does not preclude a 

hearing in the absence of one of the 

parties if the borrower is given proper 

notice of the hearing, both parties have 

agreed on the time, place, and manner 

of the hearing, and one of the parties 

fails to attend. 

(J) The hearing official must conduct 

any hearing as an informal proceeding, 

require witnesses in an oral hearing to 

testify under oath or affirmation, and 

maintain a summary record of any 

hearing. The hearing official must issue 

a final written decision at the earliest 

practicable date, but not later than 60 

days after the guaranty agency’s receipt 

of the borrower’s hearing request. 

However— 

(1) The borrower may request an 

extension of that deadline for a 

reasonable period, as determined by the 

hearing official, for the purpose of 

submitting additional evidence or 

raising a new objection described in 

paragraph (b)(9)(i)(F)(1)(ii) of this 

section; and 

(2) The agency may request, and the 

hearing official must grant, a reasonable 

extension of time sufficient to enable 

the guaranty agency to evaluate and 

respond to any such additional evidence 

or any objections raised pursuant to 

paragraph (b)(9)(i)(F)(1)(ii) of this 

section. 

(K) An employer served with a 

garnishment order from the guaranty 

agency with respect to a borrower 

whose wages are not then subject to a 

withholding order of any kind must 

deduct and pay to the agency from a 

borrower’s disposable pay an amount 

that does not exceed the smallest of— 

(1) The amount specified in the 

guaranty agency order; 

(2) The amount permitted by section 

488A(a)(1) of the Act, which is 15 

percent of the borrower’s disposable 

pay; or 

(3) The amount permitted by 15 

U.S.C. 1673(a)(2), which is the amount 

by which the borrower’s disposable pay 

exceeds 30 times the minimum wage. 

(L) If a borrower’s pay is subject to 

more than one garnishment order— 

(1) Unless other Federal law requires 

a different priority, the employer must 

pay the agency the amount calculated 

under paragraph (b)(9)(i)(K) of this 

section before the employer complies 

with any later garnishment orders, 

except a family support withholding 

order; 

(2) If an employer is withholding from 

a borrower’s pay based on a 

garnishment order served on the 

employer before the guaranty agency’s 

order, or if a withholding order for 

family support is served on an employer 

at any time, the employer must comply 

with the agency’s garnishment order by 

withholding an amount that is the lesser 

of— 

(i) The amount specified in the 

guaranty agency order; or 

(ii) The amount calculated under 

paragraph (b)(9)(i)(L)(3) of this section 

less the amount or amounts withheld 

under the garnishment order or orders 

that have priority over the agency’s 

order; and 

(3) The cumulative withholding for all 

garnishment orders issued by guaranty 

agencies may not exceed, for an 

individual borrower, the amount 

permitted by 15 U.S.C. 1673, which is 

the lesser of 25 percent of the borrower’s 

disposable pay or the amount by which 

the borrower’s disposable pay exceeds 

30 times the minimum wage. If a 

borrower owes debts to one or more 

guaranty agencies, each agency may 

issue a garnishment order to enforce 

each of those debts, but no single agency 

may order a total amount exceeding 15 

percent of the disposable pay of a 

borrower to be withheld. The employer 

must honor these orders as provided in 

paragraphs (b)(9)(i)(L)(1) and (2) of this 

section. 

(M) Notwithstanding paragraphs 

(b)(9)(i)(K) and (L) of this section, an 

employer may withhold and pay a 

greater amount than required under the 

order if the borrower gives the employer 

written consent. 

(N) A borrower may, at any time, raise 

an objection to the amount or the rate 

of withholding specified in the guaranty 

agency’s order to the borrower’s 

employer on the ground of financial 

hardship. However, the guaranty agency 

is not required to consider such an 

objection and provide the borrower with 

a hearing until at least six months after 

the agency issued the most recent 

garnishment order, either one for which 

the borrower did not request a hearing 

or one that was issued after a hardshiprelated hearing determination. The 

agency may provide a hearing in 

extraordinary circumstances earlier than 

six months if the borrower’s request for 

review shows that the borrower’s 

financial circumstances have 

substantially changed after the 

garnishment notice because of an event 

such as injury, divorce, or catastrophic 

illness. 

(O) A garnishment order is effective 

until the guaranty agency rescinds the 

order or the agency has fully recovered 

the amounts owed by the borrower, 

including interest, late fees, and 

collections costs. If an employer is 

unable to honor a garnishment order 

because the amount available for 

garnishment is insufficient to pay any 

portion of the amount stated in the 

order, the employer must notify the 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65819 

agency and comply with the order when 

sufficient disposable pay is available. 

Upon full recovery of the debt, the 

agency must send the borrower’s 

employer notification to stop wage 

withholding. 

(P) The guaranty agency must sue any 

employer for any amount that the 

employer, after receipt of the 

withholding order provided by the 

agency under paragraph (b)(9)(i)(R) of 

this section, fails to withhold from 

wages owed and payable to an employee 

under the employer’s normal pay and 

disbursement cycle. 

(Q) The guaranty agency may not 

garnish the wages of a borrower whom 

it knows has been involuntarily 

separated from employment until the 

borrower has been reemployed 

continuously for at least 12 months. The 

borrower has the burden of informing 

the guaranty agency of the 

circumstances surrounding the 

borrower’s involuntary separation from 

employment. 

(R) Unless the guaranty agency 

receives information that the agency 

believes justifies a delay or cancellation 

of the withholding order, it must send 

a withholding order to the employer 

within 20 days after the borrower fails 

to make a timely request for a hearing, 

or, if a timely request for a hearing is 

made by the borrower, within 20 days 

after a final decision is made by the 

agency to proceed with garnishment. 

(S) The notice given to the employer 

under paragraph (b)(9)(i)(R) of this 

section must contain only the 

information as may be necessary for the 

employer to comply with the 

withholding order and to ensure proper 

credit for payments received. At a 

minimum, the notice given to the 

employer includes the borrower’s name, 

address, and Social Security Number, as 

well as instructions for withholding and 

information as to where the employer 

must send payments. 

(T)(1) A guaranty agency may use a 

third-party servicer or collection 

contractor to perform administrative 

activities associated with administrative 

wage garnishment, but may not allow 

such a party to conduct required 

hearings or to determine that a 

withholding order is to be issued. 

Subject to the limitations of paragraphs 

(b)(9)(i)(T)(2) and (3) of this section, 

administrative activities associated with 

administrative wage garnishment may 

include but are not limited to— 

(i) Identifying to the agency suitable 

candidates for wage garnishment 

pursuant to agency standards; 

(ii) Obtaining employment 

information for the purposes of 

garnishment; 

(iii) Sending candidates selected for 

garnishment by the agency notices 

prescribed by the agency; 

(iv) Negotiating alternative repayment 

arrangements with borrowers; 

(v) Responding to inquiries from 

notified borrowers; 

(vi) Receiving garnishment payments 

on behalf of the agency; 

(vii) Arranging for the retention of 

hearing officials and for the conduct of 

hearings on behalf of the agency; 

(viii) Providing information to 

borrowers or hearing officials on the 

process or conduct of hearings; and 

(ix) Sending garnishment orders and 

other communications to employers on 

behalf of the agency. 

(2) Only an authorized official of the 

agency may determine that an 

individual withholding order is to be 

issued. The guarantor must record the 

official’s determination for each order it 

issues, including any order which it 

causes to be prepared or mailed by a 

third-party servicer or collection 

contractor. The guarantor must evidence 

the official’s approval, either by 

including the official’s signature on the 

order or, if the agency uses a form of 

withholding order that does not provide 

for execution by signature, by retaining 

in the agency’s records the identity of 

the approving official, the date of the 

approval, the amount or rate of the 

order, the name and address of the 

employer to whom the order was issued, 

and the debt for which the order was 

issued. 

(3) The withholding order must 

identify the guaranty agency as the 

holder of the debt, as the issuer of the 

order, and as the sole party legally 

authorized to issue the withholding 

order. If a guaranty agency uses a thirdparty servicer or collection contractor to 

prepare and mail a withholding order 

that includes the name of the servicer or 

contractor that prepared or mailed the 

order, the guaranty agency must also 

ensure that the order contains no 

captions or representations that the 

servicer or contractor is the party that 

issued, or was empowered by Federal 

law or by the agency to issue, the 

withholding order. 

(U) As specified in section 488A(a)(8) 

of the Act, the borrower may seek 

judicial relief, including punitive 

damages, if the employer discharges, 

refuses to employ, or takes disciplinary 

action against the borrower due to the 

issuance of a withholding order. 

(V) A guaranty agency is required to 

suspend a garnishment order when the 

agency receives a borrower’s fifth 

qualifying payment under a loan 

rehabilitation agreement with the 

agency, unless otherwise directed by the 

borrower, in accordance with 

§ 682.405(a)(3). 

(ii) For purposes of paragraph (b)(9) of 

this section— 

(A) ‘‘Borrower’’ includes all endorsers 

on a loan; 

(B) ‘‘Day’’ means calendar day; 

(C) ‘‘Disposable pay’’ means that part 

of a borrower’s compensation for 

personal services, whether or not 

denominated as wages from an 

employer, that remains after the 

deduction of health insurance 

premiums and any amounts required by 

law to be withheld, and includes, but is 

not limited to, salary, bonuses, 

commissions, or vacation pay. 

‘‘Amounts required by law to be 

withheld’’ include amounts for 

deductions such as Social Security taxes 

and withholding taxes, but do not 

include any amount withheld under a 

court order or other withholding order. 

All references to an amount of 

disposable pay refer to disposable pay 

calculated for a single week; 

(D) ‘‘Employer’’ means a person or 

entity that employs the services of 

another and that pays the latter’s wages 

or salary and includes, but is not limited 

to, State and local governments, but 

does not include an agency of the 

Federal Government; 

(E) ‘‘Financial hardship’’ means an 

inability to meet basic living expenses 

for goods and services necessary for the 

survival of the borrower and the 

borrower’s spouse and dependents; 

(F) ‘‘Garnishment’’ means the process 

of withholding amounts from an 

employee’s disposable pay and paying 

those amounts to a creditor in 

satisfaction of a withholding order; and 

(G) ‘‘Withholding order’’ means any 

order for withholding or garnishment of 

pay issued by the guaranty agency and 

may also be referred to as ‘‘wage 

garnishment order’’ or ‘‘garnishment 

order.’’ 

* * * * * 

(c) * * * 

(1) * * * 

(i) * * * 

(C) Each school that participated in 

the guaranty agency’s program, located 

in a State for which the guaranty agency 

is the principal guaranty agency, that 

has a cohort default rate, as described in 

subpart M of 34 CFR part 668, that 

includes FFEL Program loans, for either 

of the 2 immediately preceding fiscal 

years, as defined in 34 CFR 668.182, 

that exceeds 20 percent, unless the 

school is under a mandate from the 

Secretary under subpart M of 34 CFR 

part 668 to take specific default 

reduction measures or if the total dollar 

amount of loans entering repayment in 

mstockstill on DSK4VPTVN1PROD with RULES2

65820 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

each fiscal year on which the cohort 

default rate of over 20 percent is based 

does not exceed $100,000; or 

* * * * * 

(10) Taking prompt action to protect 

the rights of borrowers and the Federal 

fiscal interest respecting loans that the 

agency has guaranteed when the agency 

learns that a school that participated in 

the FFEL Program or a holder of loans 

participating in the program is 

experiencing problems that threaten the 

solvency of the school or holder, 

including— 

* * * * * 

§ 682.411 [Amended] 

■ 46. Section 682.411 is amended by: 

■ A. In paragraph (d)(2), removing the 

words ‘‘all national credit bureaus’’ and 

adding, in their place, the words ‘‘each 

nationwide consumer reporting 

agency’’. 

■ B. In paragraph (f), removing the 

words ‘‘a national credit bureau’’ and 

adding, in their place, the words ‘‘each 

nationwide consumer reporting 

agency’’. 

■ C. In paragraph (n)(2), removing the 

words ‘‘a national credit bureau’’ and 

adding, in their place, the words ‘‘each 

nationwide consumer reporting 

agency’’. 

■ D. In paragraph (o)(2), removing the 

words ‘‘credit bureau’’ and adding, in 

their place, the words ‘‘consumer 

reporting agency’’. 

§ 682.412 [Amended] 

■ 47. Section 682.412(a)(2) is amended 

by removing the words ‘‘as provided 

under § 682.301’’. 

■ 48. Section 682.413 is amended by: 

■ A. In paragraph (c)(1)(vi), removing 

the words ‘‘certification required under 

§ 682.206(f)(1)’’ and adding, in their 

place the words ‘‘required lender 

verification certification’’. 

■ B. Revising the first sentence of 

paragraph (h). 

The revision reads as follows: 

§ 682.413 Remedial actions. 

* * * * * 

(h) In any action to require repayment 

of funds or to withhold funds from a 

guaranty agency, or to limit, suspend, or 

terminate a guaranty agency based on a 

violation of section 428(b)(3) of the Act, 

if the Secretary finds that the guaranty 

agency provided or offered the 

prohibited payments or activities, the 

Secretary applies a rebuttable 

presumption that the payments or 

activities were offered or provided to 

secure applications for FFEL loans or to 

secure FFEL loan volume. * * * 

* * * * * 

§ 682.414 [Amended] 

■ 49. Section 682.414 is amended by: 

■ A. In paragraph (a)(1)(ii)(D), removing 

the words ‘‘credit bureau’’ and adding, 

in their place, the words ‘‘consumer 

reporting agency’’. 

■ B. In paragraph (a)(4)(ii)(J), removing 

the words ‘‘credit bureau’’ and adding, 

in their place, the words ‘‘consumer 

reporting agency’’. 

■ C. In paragraph (a)(6)(ii)(D), removing 

the word ‘‘is’’ and adding, in its place, 

the word ‘‘it’’. 

■ D. Removing paragraph (b)(2)(i). 

■ E. Redesignating paragraphs (b)(2)(ii) 

through (b)(2)(iv), as (b)(2)(i) through 

(b)(2)(iii), respectively. 

■ F. In paragraph (b)(3)(i), removing the 

words ‘‘schools and’’. 

■ G. In paragraph (b)(3)(ii), removing 

the words ‘‘schools and’’. 

■ H. In paragraph (b)(3)(iii), removing 

the words ‘‘school or’’. 

■ I. In paragraph (c)(2), removing the 

citation ‘‘§ 682.401(b)(21) and (22)’’ and 

adding, in its place, the citation 

‘‘§ 682.401(b)(12) and (13)’’. 

§ 682.416 [Amended] 

■ 50. Section 682.416(d)(2) is amended 

by removing the word ‘‘Title’’ and 

adding, in its place, the word ‘‘title’’. 

§ 682.418 [Removed and Reserved] 

■ 51. Section 682.418 is removed and 

reserved. 

§ 682.419 [Amended] 

■ 52. Section 682.419 is amended by: 

■ A. In paragraph (b)(8), removing the 

words ‘‘, in accordance with § 682.420’’. 

■ B. In paragraph (c)(6), removing the 

citation ‘‘§ 682.421’’ and adding, in its 

place, the citation ‘‘section 422A(f) of 

the Act’’. 

§ 682.420 [Removed and Reserved] 

■ 53. Section 682.420 is removed and 

reserved. 

§ 682.421 [Removed and Reserved] 

■ 54. Section 682.421 is removed and 

reserved. 

§ 682.422 [Removed and Reserved] 

■ 55. Section 682.422 is removed and 

reserved. 

§ 682.423 [Amended] 

■ 56. Section 682.423 is amended by: 

■ A. In the second sentence of 

paragraph (a), adding the word ‘‘may’’ 

between the words ‘‘that’’ and ‘‘have’’. 

■ B. In paragraph (a), removing the last 

sentence. 

Subpart E—[Removed and Reserved] 

■ 57. Remove and reserve subpart E of 

part 682. 

Subpart F—Requirements, Standards, 

and Payments for Schools That 

Participated in the FFEL Program 

■ 58. Revise the heading to subpart F of 

part 682 to read as set forth above. 

§ 682.601 [Removed and Reserved] 

■ 59. Section 682.601 is removed and 

reserved. 

§ 682.602 [Removed and Reserved] 

■ 60. Section 682.602 is removed and 

reserved. 

■ 61. Section 682.603 is amended by: 

■ A. Revising the section heading. 

■ B. In paragraph (b)(3), removing the 

citation ‘‘§ 682.604(c)’’ and adding, in 

its place, the citation ‘‘section 428G of 

the Act’’. 

■ C. Revising paragraphs (g), (h), and (i). 

■ D. Revising the first of the two 

paragraphs that are both designated as 

paragraph (j). 

■ E. Removing the second of the two 

paragraphs that are both designated as 

paragraph (j). 

■ F. Adding paragraphs (k) and (l). 

The revisions and additions read as 

follows: 

§ 682.603 Certification by a school that 

participated in the FFEL Program in 

connection with a loan application. 

* * * * * 

(g) The maximum period for which a 

school may certify a loan application 

is— 

(1) Generally an academic year, as 

defined by 34 CFR 668.3, except that a 

guaranty agency may allow a school to 

use a longer period of time, 

corresponding to the period to which 

the agency applies the annual loan 

limits; or 

(2) For a defaulted borrower who has 

regained eligibility under 

§ 682.401(b)(1), the academic year in 

which the borrower regained eligibility. 

(h) In certifying a Stafford or 

Unsubsidized Stafford loan amount in 

accordance with § 682.204— 

(1) A program of study must be 

considered at least one full academic 

year if— 

(i) The number of weeks of 

instructional time is at least 30 weeks; 

and 

(ii) The number of clock hours is a 

least 900, the number of semester or 

trimester hours is at least 24, or the 

number of quarter hours is at least 36; 

(2) A program of study must be 

considered two-thirds (2/3) of an 

academic year if— 

(i) The number of weeks of 

instructional time is at least 20 weeks; 

and 

(ii) The number of clock hours is at 

least 600, the number of semester or 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65821 

trimester hours is at least 16, or the 

number of quarter hours is at least 24; 

(3) A program of study must be 

considered one-third (1⁄3) of an 

academic year if— 

(i) The number of weeks of 

instructional time is at least 10 weeks; 

and 

(ii) The number of clock hours is at 

least 300, the number of semester or 

trimester hours is at least 8, or the 

number of quarter hours is at least 12; 

and 

(4) In prorating a loan amount for a 

student enrolled in a program of study 

with less than a full academic year 

remaining, the school need not 

recalculate the amount of the loan if the 

number of hours for which an eligible 

student is enrolled changes after the 

school certifies the loan. 

(i)(1) If a school measures academic 

progress in an educational program in 

credit hours and uses either standard 

terms (semesters, trimesters, or quarters) 

or nonstandard terms that are 

substantially equal in length, and each 

term is at least nine weeks of 

instructional time in length, a student is 

considered to have completed an 

academic year and progresses to the 

next annual loan limit when the 

academic year calendar period has 

elapsed. 

(2) If a school measures academic 

progress in an educational program in 

credit hours and uses nonstandard 

terms that are not substantially equal in 

length or each term is not at least nine 

weeks of instructional time in length, or 

measures academic progress in credit 

hours and does not have academic 

terms, a student is considered to have 

completed an academic year and 

progresses to the next annual loan limit 

at the later of— 

(i) The student’s completion of the 

weeks of instructional time in the 

student’s academic year; or 

(ii) The date, as determined by the 

school, that the student has successfully 

completed the academic coursework in 

the student’s academic year. 

(3) If a school measures academic 

progress in an educational program in 

clock hours, a student is considered to 

have completed an academic year and 

progresses to the next annual loan limit 

at the later of— 

(i) The student’s completion of the 

weeks of instructional time in the 

student’s academic year; or 

(ii) The date, as determined by the 

school, that the student has successfully 

completed the clock hours in the 

student’s academic year. 

(4) For purposes of this section, terms 

in a loan period are substantially equal 

in length if no term in the loan period 

is more than two weeks of instructional 

time longer than any other term in that 

loan period. 

(j)(1) A school must cease certifying 

loans based on the exceptions in section 

428G(a)(3) of the Act no later than— 

(i) 30 days after the date the school 

receives notification from the Secretary 

of an FFEL cohort default rate, 

calculated under subpart M of 34 CFR 

part 668, that causes the school to no 

longer meet the qualifications outlined 

in those paragraphs; or 

(ii) October 1, 2002. 

(2) A school must cease certifying 

loans based on the exceptions in section 

428G(a)(3) of the Act no later than 30 

days after the date the school receives 

notification from the Secretary of an 

FFEL cohort default rate, calculated 

under subpart M of 34 CFR part 668, 

that causes the school to no longer meet 

the qualifications outlined in those 

paragraphs. 

(k) A school may not assess the 

borrower, or the student in the case of 

a parent PLUS loan, a fee for the 

completion or certification of any FFEL 

Program form or information or for 

providing any information necessary for 

a student or parent to receive a loan 

under part B of the Act or any benefits 

associated with such a loan. 

(l) Pursuant to paragraph (b)(3) of this 

section, a school may not request the 

disbursement by the lender for loan 

proceeds earlier than the period 

specified in 34 CFR 668.167. 

* * * * * 

■ 62. Section 682.604 is amended by: 

■ A. Revising the section heading. 

■ B. Removing paragraphs (a), (c), (d), 

(e), (f), (h), and (i). 

■ C. Redesignating paragraph (g) as 

paragraph (a). 

■ D. Removing and reserving paragraph 

(b). 

■ E. Revising newly redesignated 

paragraph (a)(1). 

■ F. Removing newly redesignated 

paragraph (a)(2)(vi). 

■ G. Further redesignating newly 

redesignated paragraphs (a)(2)(vii) 

through (a)(2)(xii) as paragraphs 

(a)(2)(ix) through (a)(2)(xiv), 

respectively. 

■ H. Adding new paragraphs (a)(2)(vi) 

through (a)(2)(viii). 

■ I. Adding new paragraph (a)(5). 

The revisions and additions read as 

follows: 

§ 682.604 Required exit counseling for 

borrowers. 

(a) * * * 

(1) A school must ensure that exit 

counseling is conducted with each 

Stafford Loan borrower and graduate or 

professional student PLUS Loan 

borrower either in person, by 

audiovisual presentation, or by 

interactive electronic means. In each 

case, the school must ensure that this 

counseling is conducted shortly before 

the student borrower ceases at least halftime study at the school, and that an 

individual with expertise in the title IV 

programs is reasonably available shortly 

after the counseling to answer the 

student borrower’s questions. As an 

alternative, in the case of a student 

borrower enrolled in a correspondence 

program or a study-abroad program that 

the home institution approves for credit, 

written counseling materials may be 

provided by mail within 30 days after 

the student borrower completes the 

program. If a student borrower 

withdraws from school without the 

school’s prior knowledge or fails to 

complete an exit counseling session as 

required, the school must, within 30 

days after learning that the student 

borrower has withdrawn from school or 

failed to complete the exit counseling as 

required, ensure that exit counseling is 

provided through interactive electronic 

means, by mailing written counseling 

materials to the student borrower at the 

student borrower’s last known address, 

or by sending written counseling 

materials to an email address provided 

by the student borrower that is not an 

email address associated with the 

school sending the counseling materials. 

(2) * * * 

(vi) Explain to the borrower the use of 

a Master Promissory Note; 

(vii) Emphasize to the student 

borrower the seriousness and 

importance of the repayment obligation 

the borrower has assumed; 

(viii) Emphasize to the student 

borrower that the full amount of the 

loan (other than a loan made or 

originated by the school) must be repaid 

in full even if the student borrower does 

not complete the program, does not 

complete the program within the regular 

time for program completion, is unable 

to obtain employment upon completion, 

or is otherwise dissatisfied with or does 

not receive the educational or other 

services that the student borrower 

purchased from the school; 

* * * * * 

(5)(i) For students who have received 

both FFEL Program and Direct Loan 

Program loans for attendance at a 

school, the school’s compliance with 

the exit counseling requirements in 34 

CFR 685.304(b) satisfies the 

requirements of this section if the 

school ensures that the exit counseling 

also provides the borrower with the 

information described in paragraphs 

(a)(2)(i) and (a)(2)(ii) of this section. 

mstockstill on DSK4VPTVN1PROD with RULES2

65822 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(ii) A student’s completion of 

electronic interactive exit counseling 

offered by the Secretary satisfies the 

requirements of this section, and for 

students who have also received Direct 

Loan Program loans for attendance at 

the school, the requirements of 34 CFR 

685.304(b). 

* * * * * 

§ 682.605 [Amended] 

■ 63. Section 682.605 is amended by: 

■ A. In paragraph (b), adding the words 

‘‘and the Secretary’’ between the words 

‘‘lender’’ and ‘‘the date’’. 

■ B. In paragraph (c), adding the words 

‘‘and the Secretary’’ between the word 

‘‘lender’’ and the punctuation ‘‘,’’. 

§ 682.608 [Removed and Reserved] 

■ 64. Section 682.608 is removed and 

reserved. 

■ 65. Section 682.610 is amended by: 

■ A. Revising the section heading. 

■ B. Revising paragraph (b)(5). 

■ C. Revising paragraph (c). 

The revisions read as follows: 

§ 682.610 Administrative and fiscal 

requirements for schools that participated 

in the FFEL Program. 

* * * * * 

(b) * * * 

(5) For loans delivered by electronic 

funds transfer or master check, a copy 

of the borrower’s required written 

authorization, if it was not provided in 

the loan application or MPN, to deliver 

the initial and subsequent 

disbursements of each FFEL Program 

loan; and 

* * * * * 

(c) Enrollment reporting process. (1) 

Upon receipt of an enrollment report 

from the Secretary, a school must 

update all information included in the 

report and return the report to the 

Secretary— 

(i) In the manner and format 

prescribed by the Secretary; and 

(ii) Within the timeframe specified by 

the Secretary. 

(2) Unless it expects to submit its next 

updated enrollment report to the 

Secretary within the next 60 days, a 

school must notify the Secretary within 

30 days after the date that the school 

discovers that— 

(i) A loan under title IV of the Act was 

made to or on behalf of a student who 

was enrolled or accepted for enrollment 

at the school, and the student has 

ceased to be enrolled on at least a halftime basis or failed to enroll on at least 

a half-time basis for the period for 

which the loan was intended; or 

(ii) A student who is enrolled at the 

school and who received a loan under 

title IV of the Act has changed his or her 

permanent address. 

* * * * * 

Subpart G—Limitation, Suspension, or 

Termination of Lender or Third-Party 

Servicer Eligibility and Disqualification 

of Lenders 

■ 66. The heading of subpart G of part 

682 is revised to read as set forth above. 

§ 682.700 [Amended] 

■ 67. Section 682.700 is amended by: 

■ A. In paragraph (a), removing the 

words ‘‘or school’’ and the word and 

citation ‘‘and (h)(3)’’ in the final 

sentence. 

■ B. In paragraph (b)(1)(ii), adding the 

word ‘‘or’’ after the punctuation ‘‘;’’. 

■ C. Removing paragraph (b)(2). 

■ D. Redesignating paragraph (b)(3) as 

paragraph (b)(2). 

■ E. In paragraph (c), removing the 

words ‘‘or schools’’. 

■ 68. Section 682.701 is amended by 

revising the definition of 

‘‘Disqualification’’ to read as follows: 

§ 682.701 Definitions of terms used in this 

subpart. 

* * * * * 

Disqualification. The removal of a 

lender’s eligibility for an indefinite 

period of time by the Secretary on 

review of limitation, suspension, or 

termination action taken against the 

lender by a guaranty agency. 

* * * * * 

■ 69. Section 682.702 is amended by: 

■ A. In paragraph (a), removing the 

words ‘‘in paragraph (d) of this section 

and’’. 

■ B. Revising paragraph (b)(1). 

■ C. Removing paragraph (b)(2). 

■ D. Redesignating paragraph (b)(3) as 

paragraph (b)(2). 

■ E. Removing paragraph (d). 

The revision reads as follows: 

§ 682.702 Effect on participation. 

* * * * * 

(b) * * * 

(1) A limit on the number or total 

amount of loans that a lender may 

purchase or hold under the FFEL 

Program; or 

* * * * * 

§ 682.704 [Amended] 

■ 70. Section 682.704(a) introductory 

text is amended, by removing the words 

‘‘stop the issuance of guarantee 

commitments by the Secretary and 

guarantee agencies and to’’. 

§ 682.705 [Amended] 

■ 71. Section 682.705 is amended by: 

■ A. In paragraph (a)(1) introductory 

text, removing the words ‘‘new loan 

made by the lender or’’. 

■ B. In paragraph (b)(2)(v), removing the 

words ‘‘, except as provided in 

paragraph (c)(9) of this section,’’. 

■ C. Removing paragraph (c). 

§ 682.706 [Amended] 

■ 72. Section 682.706 is amended by 

removing paragraph (d). 

■ 73. Section 682.709 is amended by 

adding paragraph (d) to read as follows: 

§ 682.709 Reimbursements, refunds, and 

offsets. 

* * * * * 

(d) In any action under this part based 

on a violation of the prohibitions in 

section 435(d)(5) of the Act, if the 

Secretary, the designated Department 

official, or the hearing official finds that 

the lender provided or offered the 

payments or activities described in 

paragraph (5)(i) of the definition of 

‘‘lender’’ in § 682.200(b), the Secretary 

or the official applies a rebuttable 

presumption that the payments or 

activities were offered or provided to 

secure applications for FFEL loans. To 

reverse the presumption, the lender 

must present evidence that the activities 

or payments were provided for a reason 

unrelated to securing applications for 

FFEL loans or securing FFEL loan 

volume. 

* * * * * 

§ 682.711 [Amended] 

■ 74. Section 682.711 is amended by: 

■ A. Removing paragraph (c). 

■ B. Redesignating paragraphs (d) and 

(e) as paragraphs (c) and (d), 

respectively. 

■ C. In newly redesignated paragraph 

(d)(2), removing the citation ‘‘(d)(3)’’ 

and adding, in its place, the citation 

‘‘(c)(3)’’. 

■ D. In newly redesignated paragraph 

(d)(2), removing the citation ‘‘(e)(1)’’ and 

adding, in its place, the citation 

‘‘(d)(1)’’. 

§ 682.712 [Amended] 

■ 75. Section 682.712 is amended by: 

■ A. In paragraph (g)(2), removing the 

parenthetical ‘‘(j)’’ and adding, in its 

place, the parenthetical ‘‘(i)’’. 

■ B. In paragraph (h)(2) and in 

paragraph (h)(3) introductory text, 

removing the parenthetical ‘‘(j)’’ and 

adding, in its place, the parenthetical 

‘‘(i)’’. 

■ C. Removing paragraph (i). 

■ D. Redesignating paragraph (j) as 

paragraph (i). 

§ 682.713 [Removed and Reserved] 

■ 76. Section 682.713 is removed and 

reserved. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65823 

Subpart H of Part 682 [Removed and 

Reserved] 

■ 77. Remove and reserve subpart H of 

part 682. 

Appendix C to Part 682 [Removed and 

Reserved] 

■ 78. Appendix C to part 682 is removed 

and reserved. 

Appendix D to Part 682 [Amended] 

■ 79. In appendix D to part 682, 

paragraph (3) of the introduction is 

amended by removing the final citation 

‘‘34 CFR 682.401(d)’’ and adding, in its 

place, the citation ‘‘34 CFR 682.401(c)’’. 

PART 685—WILLIAM D. FORD 

FEDERAL DIRECT LOAN PROGRAM 

■ 80. The authority citation for part 685 

continues to read as follows: 

Authority: 20 U.S.C. 1070g, 1087a, et seq., 

unless otherwise noted. 

■ 81. Section 685.100 is amended by: 

■ A. Revising paragraph (a). 

■ B. In paragraph (b), removing the 

words ‘‘has been selected by the 

Secretary to participate’’ and adding, in 

their place, the word ‘‘participates’’. 

■ C. Revising paragraph (c). 

The revisions read as follows: 

§ 685.100 The William D. Ford Federal 

Direct Loan Program. 

(a) Under the William D. Ford Federal 

Direct Loan (Direct Loan) Program 

(formerly known as the Federal Direct 

Student Loan Program), the Secretary 

makes loans to enable a student or 

parent to pay the costs of the student’s 

attendance at a postsecondary school. 

This part governs the Federal Direct 

Stafford/Ford Loan Program, the Federal 

Direct Unsubsidized Stafford/Ford Loan 

Program, the Federal Direct PLUS 

Program, and the Federal Direct 

Consolidation Loan Program. The 

Secretary makes loans under the 

following program components: 

(1)(i) Federal Direct Stafford/Ford 

Loan Program (Direct Subsidized Loan 

Program), which provides loans to 

undergraduate, graduate, and 

professional students. Loans made 

under this program are referred to as 

Direct Subsidized Loans. Except as 

provided in paragraph (a)(1)(ii) of this 

section, the Secretary subsidizes the 

interest while the borrower is in an inschool, grace, or deferment period. 

Graduate and professional students are 

not eligible to receive Direct Subsidized 

Loans for any period of enrollment 

beginning on or after July 1, 2012. 

(ii) The Secretary does not subsidize 

the interest that accrues during the grace 

period on any Direct Subsidized Loan 

for which the first disbursement is made 

on or after July 1, 2012 and before July 

1, 2014. 

(2) Federal Direct Unsubsidized 

Stafford/Ford Loan Program (Direct 

Unsubsidized Loan Program), which 

provides loans to undergraduate, 

graduate and professional students. 

Loans made under this program are 

referred to as Direct Unsubsidized 

Loans. The borrower is responsible for 

the interest that accrues during any 

period. 

(3) Federal Direct PLUS Program 

(Direct PLUS Loan Program), which 

provides loans to parents of dependent 

students and to graduate or professional 

students. Loans made under this 

program are referred to as Direct PLUS 

Loans. The borrower is responsible for 

the interest that accrues during any 

period. 

(4) Federal Direct Consolidation Loan 

Program (Direct Consolidation Loan 

Program), which provides loans to 

borrowers to consolidate certain Federal 

educational loans. Loans made under 

this program are referred to as Direct 

Consolidation Loans. 

* * * * * 

(c) The Secretary makes a Direct 

Consolidation Loan only to a borrower 

who is consolidating at least one loan 

made under the Direct Loan Program or 

the Federal Family Education Loan 

(FFEL) Program. 

* * * * * 

■ 82. Section 685.101 is revised to read 

as follows: 

§ 685.101 Participation in the Direct Loan 

Program. 

(a) Colleges, universities, graduate 

and professional schools, vocational 

schools, and proprietary schools may 

participate in the Direct Loan Program. 

Participation in the Direct Loan Program 

enables an eligible student or parent to 

obtain a loan to pay for the student’s 

cost of attendance at the school. 

(b)(1) An eligible undergraduate 

student who is enrolled at a school 

participating in the Direct Loan Program 

may borrow under the Direct Subsidized 

Loan and Direct Unsubsidized Loan 

programs. 

(2) An eligible graduate or 

professional student enrolled at a school 

participating in the Direct Loan Program 

may borrow under the Direct Subsidized 

Loan, Direct Unsubsidized Loan, and 

Direct PLUS Loan programs, except that 

a graduate or professional student may 

not borrow under the Direct Subsidized 

Loan Program for any period of 

enrollment beginning on or after July 1, 

2012. 

(3) An eligible parent of an eligible 

dependent student enrolled at a school 

participating in the Direct Loan Program 

may borrow under the Direct PLUS 

Loan Program. 

(Authority: 20 U.S.C. 1087a et seq.) 

■ 83. Section 685.102 is amended by: 

■ A. In paragraph (a)(1) introductory 

text, removing the words ‘‘subpart A 

of’’. 

■ B. In paragraph (a)(1), removing the 

terms ‘‘Academic Competitiveness 

Grant (ACG) Program’’, ‘‘Disburse’’, 

‘‘Federal Direct Student Loan Program 

(Direct Loan Program)’’, ‘‘Leveraging 

Educational Assistance Partnership 

Program’’, ‘‘National Science and 

Mathematics Access to Retain Talent 

Grant (National SMART Grant) 

Program’’, and ‘‘State’’. 

■ C. In paragraph (a)(1), adding the 

terms ‘‘Disbursement’’ and ‘‘William D. 

Ford Federal Direct Loan (Direct Loan) 

Program’’ in alphabetical order. 

■ D. In paragraph (a)(2), adding the 

terms ‘‘Correspondence course’’ and 

‘‘State’’ in alphabetical order. 

■ E. In paragraph (a)(2), removing the 

term ‘‘Program of study by 

correspondence’’. 

■ F. Removing paragraph (a)(3). 

■ G. In paragraph (b), adding the 

definitions of ‘‘Act’’, ‘‘Endorser’’, 

‘‘Federal Insured Student Loan 

Program’’, ‘‘Federal Stafford Loan 

Program’’, ‘‘Guaranty agency’’, 

‘‘Holder’’, ‘‘Lender’’, ‘‘Nationwide 

consumer reporting agency’’, 

‘‘Substantial gainful activity’’, and 

‘‘Totally and permanently disabled’’, in 

alphabetical order. 

■ H. In paragraph (b), removing the 

definitions of ‘‘Alternative originator’’, 

‘‘Consortium’’, ‘‘School origination 

option 1’’, ‘‘School origination option 

2’’, ‘‘Servicer’’, and ‘‘Standard 

origination’’. 

■ I. In paragraph (b), in the definition of 

‘‘Estimated financial assistance’’, 

revising paragraphs (1)(vi) and (2)(i). 

■ J. In paragraph (b), in the heading of 

the definition of ‘‘Federal Direct 

Consolidation Loan Program:’’, adding 

the words ‘‘(Direct Consolidation Loan 

Program)’’ immediately before the 

punctuation ‘‘:’’. 

■ K. In paragraph (b), in paragraph (4) 

of the definition of ‘‘Federal Direct 

Consolidation Loan Program’’, removing 

the words ‘‘The term’’ in the first 

sentence and adding, in their place, the 

words ‘‘In the case of a Direct 

Consolidation Loan that entered 

repayment prior to July 1, 2006, the 

term’’. 

■ L. In paragraph (b), in the heading of 

the definition of ‘‘Federal Direct PLUS 

Program:’’, adding the words ‘‘(Direct 

PLUS Loan Program)’’ immediately 

before the punctuation ‘‘:’’. 

mstockstill on DSK4VPTVN1PROD with RULES2

65824 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

■ M. In paragraph (b), revising the 

definition of ‘‘Federal Direct Stafford/

Ford Loan Program’’. 

■ N. In paragraph (b), in the heading of 

the definition of ‘‘Federal Direct 

Unsubsidized Stafford/Ford Loan 

Program:’’, adding the words ‘‘(Direct 

Unsubsidized Loan Program)’’ 

immediately before the punctuation ‘‘:’’. 

■ O. In paragraph (b), revising the 

definition of ‘‘Grace period’’. 

■ P. In paragraph (b), in the definition 

of ‘‘Master Promissory Note (MPN)’’, 

adding a new paragraph (4). 

■ Q. In paragraph (b), revising the 

definition of ‘‘Satisfactory repayment 

arrangement’’. 

The revisions and additions read as 

follows: 

§ 685.102 Definitions. 

* * * * * 

(b) * * * 

Act: The Higher Education Act of 1965, as 

amended, 20 U.S.C. 1071 et seq. 

* * * * * 

Endorser: An individual who signs a 

promissory note and agrees to repay the loan 

in the event that the borrower does not. 

Estimated financial assistance: 

(1) * * * 

(vi) The estimated amount of other Federal 

student financial aid, including but not 

limited to a Federal Pell Grant, campus-based 

aid, and the gross amount (including fees) of 

subsidized and unsubsidized Federal 

Stafford Loans, Direct Subsidized and 

Unsubsidized Loans, and Federal PLUS or 

Direct PLUS Loans. 

(2) * * * 

(i) Those amounts used to replace the 

expected family contribution (EFC), 

including the amounts of any TEACH Grants, 

unsubsidized Federal Stafford Loans or 

Direct Unsubsidized Loans, Federal PLUS or 

Direct PLUS Loans, and non-federal nonneed-based loans, including private, statesponsored, and institutional loans. However, 

if the sum of the amounts received that are 

being used to replace the student’s EFC 

exceed the EFC, the excess amount must be 

treated as estimated financial assistance; 

* * * * * 

Federal Direct Stafford/Ford Loan Program 

(Direct Subsidized Loan Program): A loan 

program authorized by title IV, part D of the 

Act that provides loans to undergraduate, 

graduate, and professional students attending 

Direct Loan Program schools, and one of the 

components of the Direct Loan Program. The 

Secretary subsidizes the interest while the 

borrower is in an in-school, grace, or 

deferment period, except that the Secretary 

does not subsidize the interest that accrues 

during the grace period on a loan for which 

the first disbursement is made on or after July 

1, 2012 and before July 1, 2014. Loans made 

under this program are referred to as Direct 

Subsidized Loans. Graduate and professional 

students are not eligible to receive Direct 

Subsidized Loans for any period of 

enrollment beginning on or after July 1, 2012. 

* * * * * 

Federal Insured Student Loan Program: 

The loan program authorized by title IV, part 

B of the Act under which the Secretary 

directly insures lenders against losses. 

Federal Stafford Loan Program: The loan 

program authorized by title IV, part B of the 

Act which encouraged the making of 

subsidized and unsubsidized loans to 

undergraduate, graduate, and professional 

students and is one of the Federal Family 

Education Loan programs. 

Grace period: A six-month period that 

begins on the day after a Direct Subsidized 

Loan borrower, a Direct Unsubsidized Loan 

borrower, or, in some cases, a Direct 

Consolidation Loan borrower whose 

consolidation application was received 

before July 1, 2006, ceases to be enrolled as 

at least a half-time student at an eligible 

institution and ends on the day before the 

repayment period begins. 

Guaranty agency: A State or private 

nonprofit organization that has an agreement 

with the Secretary under which it will 

administer a loan guarantee program under 

the Act. 

Holder: The entity that owns a loan. For a 

FFEL Program loan, the term ‘‘holder’’ refers 

to an eligible lender owning a FFEL Program 

loan, including a Federal or State agency or 

an organization or corporation acting on 

behalf of such an agency and acting as a 

conservator, liquidator, or receiver of an 

eligible lender. 

* * * * * 

Lender: As used in this part, the term 

‘‘lender’’ has the meaning specified in 

section 435(d) of the Act for purposes of the 

FFEL Program. 

* * * * * 

Master Promissory Note (MPN): 

* * * * * 

(4) Unless the Secretary determines 

otherwise, a school may use a single MPN as 

the basis for all loans borrowed by a student 

or parent borrower for attendance at that 

school. If a school is not authorized by the 

Secretary for multi-year use of the MPN, a 

student or parent borrower must sign a new 

MPN for each academic year. 

Nationwide consumer reporting agency: A 

consumer reporting agency as defined in 15 

U.S.C. 1681a(p). 

* * * * * 

Satisfactory repayment arrangement: (1) 

For the purpose of regaining eligibility under 

section 428F(b) of the HEA, the making of six 

consecutive, voluntary, on-time, full monthly 

payments on a defaulted loan. A borrower 

may only obtain the benefit of this paragraph 

with respect to renewed eligibility once. 

(2) For the purpose of consolidating a 

defaulted loan under 

§ 685.220(d)(1)(ii)(A)(3)— 

(i) The making of three consecutive, 

voluntary, on-time, full monthly payments 

on a defaulted loan prior to consolidation; or 

(ii) Agreeing to repay the Direct 

Consolidation Loan under one of the incomecontingent repayment plans described in 

§ 685.209 or the income-based repayment 

plan described in § 685.221. 

(3) For the purpose of paragraph (2)(i) of 

this definition, the required monthly 

payment amount may not be more than is 

reasonable and affordable based on the 

borrower’s total financial circumstances. 

‘‘On-time’’ means a payment made within 20 

days of the scheduled due date, and 

voluntary payments are payments made 

directly by the borrower and do not include 

payments obtained by Federal offset, 

garnishment, or income or asset execution. 

(4) A borrower has not used the one 

opportunity to renew eligibility for title IV 

assistance if the borrower makes six 

consecutive, on-time, voluntary, full monthly 

payments under an agreement to rehabilitate 

a defaulted loan, but does not receive 

additional title IV assistance prior to 

defaulting on that loan again. 

Substantial gainful activity: A level of 

work performed for pay or profit that 

involves doing significant physical or mental 

activities, or a combination of both. 

Totally and permanently disabled: The 

condition of an individual who— 

(1) Is unable to engage in any substantial 

gainful activity by reason of any medically 

determinable physical or mental impairment 

that— 

(i) Can be expected to result in death; 

(ii) Has lasted for a continuous period of 

not less than 60 months; or 

(iii) Can be expected to last for a 

continuous period of not less than 60 

months; or 

(2) Has been determined by the Secretary 

of Veterans Affairs to be unemployable due 

to a service-connected disability. 

* * * * * 

■ 84. Section 685.200 is amended by: 

■ A. Revising paragraph (a)(1)(iv). 

■ B. Revising paragraph (a)(1)(v). 

■ C. Revising paragraph (b)(4). 

■ D. In paragraph (c)(1)(vii)(C), adding 

the word ‘‘paragraph’’ immediately 

before the citation ‘‘(c)(1)(vii)(A)’’. 

■ E. Adding a new paragraph 

(c)(1)(vii)(D). 

■ F. Revising paragraph (d). 

The revisions and addition read as 

follows: 

§ 685.200 Borrower eligibility. 

(a) * * * 

(1) * * * 

(iv) In the case of a borrower whose 

previous loan or TEACH Grant service 

obligation was discharged due to total 

and permanent disability, the student— 

(A) In the case of a borrower whose 

prior loan under title IV of the Act or 

TEACH Grant service obligation was 

discharged after a final determination of 

total and permanent disability, the 

borrower— 

(1) Obtains a certification from a 

physician that the borrower is able to 

engage in substantial gainful activity; 

and 

(2) Signs a statement acknowledging 

that neither the new Direct Loan the 

borrower receives nor any previously 

discharged loan on which the borrower 

is required to resume payment in 

accordance with paragraph (a)(1)(iv)(B) 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65825 

of this section can be discharged in the 

future on the basis of any impairment 

present when the new loan is made, 

unless that impairment substantially 

deteriorates; 

(B) In the case of a borrower who 

receives a new Direct Loan, other than 

a Direct Consolidation Loan, within 

three years of the date that any previous 

title IV loan or TEACH Grant service 

obligation was discharged due to a total 

and permanent disability in accordance 

with § 685.213(b)(4)(iii), 34 CFR 

674.61(b)(3)(v), 34 CFR 

682.402(c)(3)(iv), or 34 CFR 686.42(b) 

based on a discharge request received 

on or after July 1, 2010, the borrower 

resumes repayment on the previously 

discharged loan in accordance with 

§ 685.213(b)(7), 34 CFR 674.61(b)(6), or 

34 CFR 682.402(c)(6), or acknowledges 

that he or she is once again subject to 

the terms of the TEACH Grant 

agreement to serve before receiving the 

new loan; and 

(C) In the case of a borrower whose 

prior loan under title IV of the Act was 

conditionally discharged after an initial 

determination that the borrower was 

totally and permanently disabled based 

on a discharge request received prior to 

July 1, 2010— 

(1) The suspension of collection 

activity on the prior loan has been 

lifted; 

(2) The borrower complies with the 

requirement in paragraph (a)(1)(iv)(A)(1) 

of this section; 

(3) The borrower signs a statement 

acknowledging that neither the new 

Direct Loan the borrower receives nor 

the loan that has been conditionally 

discharged prior to a final determination 

of total and permanent disability can be 

discharged in the future on the basis of 

any impairment present when the 

borrower applied for a total and 

permanent disability discharge or when 

the new loan is made, unless that 

impairment substantially deteriorates; 

and 

(4) The borrower signs a statement 

acknowledging that the suspension of 

collection activity on the prior loan will 

be lifted. 

(v) In the case of a student who was 

enrolled in a program of study prior to 

July 1, 2012 and who seeks a loan but 

does not have a certificate of graduation 

from a school providing secondary 

education or the recognized equivalent 

of such a certificate, the student meets 

the requirements under 34 CFR 

668.32(e)(2), (3), (4), or (5). 

* * * * * 

(b) * * * 

(4) The student has received a 

determination of his or her annual loan 

maximum eligibility under the Direct 

Unsubsidized Loan Program and, for 

periods of enrollment beginning before 

July 1, 2012, the Direct Subsidized Loan 

Program; and 

* * * * * 

(c) * * * 

(1) * * * 

(vii) * * * 

(D) For the purposes of paragraph 

(c)(1)(vii)(A)(3) of this section, the 

Secretary may determine that 

extenuating circumstances exist based 

on documentation that includes, but is 

not limited to, an updated credit report, 

a statement from the creditor that the 

borrower has made satisfactory 

arrangements to repay the debt, or a 

satisfactory statement from the borrower 

explaining any delinquencies with 

outstanding balances of less than $500. 

* * * * * 

(d) Defaulted Perkins, FFEL, and 

Direct Loan program borrowers. Except 

as noted in § 685.220(d)(1)(ii)(A)(3), in 

the case of a student or parent borrower 

who is currently in default on a Perkins, 

FFEL, or Direct Loan program loan, the 

borrower must make satisfactory 

repayment arrangements, as described 

in paragraph (1) of the definition of that 

term under § 685.102(b), on the 

defaulted loan. 

* * * * * 

■ 85. Section 685.201 is amended by: 

■ A. Revising paragraph (a)(2). 

■ B. Revising paragraph (b). 

■ C. Revising paragraph (c)(1). 

■ D. In paragraph (c)(2), removing the 

word ‘‘Servicer’’ and adding, in its 

place, the word ‘‘Secretary’’. 

The revisions read as follows: 

§ 685.201 Obtaining a loan. 

(a) * * * 

(2) If the student is eligible for a 

Direct Subsidized Loan or a Direct 

Unsubsidized Loan, the school in which 

the student is enrolled must perform the 

following functions: 

(i) Create a loan origination record 

and transmit the record to the Secretary. 

(ii) Ensure that the loan is supported 

by a completed Master Promissory Note 

(MPN) and, if applicable, transmit the 

MPN to the Secretary. 

(iii) In accordance with 34 CFR 

668.162, draw down funds or receive 

funds from the Secretary, and disburse 

the funds to the student. 

(b) Application for a Direct PLUS 

Loan. (1) For a parent to obtain a Direct 

PLUS Loan, the parent must complete 

the Direct PLUS Loan MPN and the 

dependent student on whose behalf the 

parent is borrowing must complete a 

Free Application for Federal Student 

Aid and submit it in accordance with 

instructions in the application. 

(2) For a graduate or professional 

student to apply for a Direct PLUS Loan, 

the student must complete a Free 

Application for Federal Student Aid and 

submit it in accordance with 

instructions in the application. The 

graduate or professional student must 

also complete the Direct PLUS Loan 

MPN. 

(3) For either a parent or student 

PLUS borrower, as applicable, the 

school must complete its portion of the 

Direct PLUS Loan MPN and, if 

applicable, submit it to the Secretary. 

The Secretary makes a determination as 

to whether the parent or graduate or 

professional student has an adverse 

credit history. The school performs the 

functions described in paragraph (a)(2) 

of this section. 

(c) * * * 

(1) To obtain a Direct Consolidation 

Loan, the applicant must complete the 

application and promissory note and 

submit it to the Secretary. The 

application and promissory note sets 

forth the terms and conditions of the 

Direct Consolidation Loan and informs 

the applicant how to contact the 

Secretary. The Secretary answers 

questions regarding the process of 

applying for a Direct Consolidation 

Loan and provides information about 

the terms and conditions of both Direct 

Consolidation Loans and the types of 

loans that may be consolidated. 

* * * * * 

■ 86. Section 685.202 is amended by: 

■ A. Revising paragraph (a). 

■ B. Revising paragraph (b)(2). 

The revisions read as follows: 

§ 685.202 Charges for which Direct Loan 

Program borrowers are responsible. 

(a) Interest—(1) Interest rate for Direct 

Subsidized Loans and Direct 

Unsubsidized Loans first disbursed 

before July 1, 1995. During all periods, 

the interest rate during any twelvemonth period beginning on July 1 and 

ending on June 30 is determined on the 

June 1 immediately preceding that 

period. The interest rate is equal to the 

bond equivalent rate of 91-day Treasury 

bills auctioned at the final auction held 

prior to that June 1 plus 3.1 percentage 

points, but does not exceed 8.25 

percent. 

(2) Interest rate for Direct Subsidized 

Loans and Direct Unsubsidized Loans 

first disbursed on or after July 1, 1995, 

and before July 1, 1998. (i) During the 

in-school, grace, and deferment periods. 

The interest rate during any twelvemonth period beginning on July 1 and 

ending on June 30 is determined on the 

June 1 immediately preceding that 

period. The interest rate is equal to the 

bond equivalent rate of 91-day Treasury 

mstockstill on DSK4VPTVN1PROD with RULES2

65826 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

bills auctioned at the final auction held 

prior to that June 1 plus 2.5 percentage 

points, but does not exceed 8.25 

percent. 

(ii) During all other periods. The 

interest rate during any twelve-month 

period beginning on July 1 and ending 

on June 30 is determined on the June 1 

immediately preceding that period. The 

interest rate is equal to the bond 

equivalent rate of 91-day Treasury bills 

auctioned at the final auction held prior 

to that June 1 plus 3.1 percentage 

points, but does not exceed 8.25 

percent. 

(3) Interest Rate for Direct Subsidized 

Loans and Direct Subsidized Loans first 

disbursed on or after July 1, 1998, and 

before July 1, 2006. (i) During the inschool, grace, and deferment periods. 

The interest rate during any twelvemonth period beginning on July 1 and 

ending on June 30 is determined on the 

June 1 immediately preceding that 

period. The interest rate is equal to the 

bond equivalent rate of 91-day Treasury 

bills auctioned at the final auction held 

prior to that June 1 plus 1.7 percentage 

points, but does not exceed 8.25 

percent. 

(ii) During all other periods. The 

interest rate during any twelve-month 

period beginning on July 1 and ending 

on June 30 is determined on the June 1 

immediately preceding that period. The 

interest rate is equal to the bond 

equivalent rate of 91-day Treasury bills 

auctioned at the final auction held prior 

to that June 1 plus 2.3 percentage 

points, but does not exceed 8.25 

percent. 

(4) Interest rate for Direct Subsidized 

Loans made to undergraduate students 

for which the first disbursement is made 

on or after July 1, 2006, and before July 

1, 2013. For a loan for which the first 

disbursement is made: 

(i) On or after July 1, 2006, and before 

July 1, 2008, the interest rate is 6.8 

percent on the unpaid principal balance 

of the loan. 

(ii) On or after July 1, 2008, and before 

July 1, 2009, the interest rate is 6 

percent on the unpaid principal balance 

of the loan. 

(iii) On or after July 1, 2009, and 

before July 1, 2010, the interest rate is 

5.6 percent on the unpaid principal 

balance of the loan. 

(iv) On or after July 1, 2010, and 

before July 1, 2011, the interest rate is 

4.5 percent on the unpaid principal 

balance of the loan. 

(v) On or after July 1, 2011, and before 

July 1, 2013, the interest rate is 3.4 

percent on the unpaid balance of the 

loan. 

(5) Interest rate for Direct Subsidized 

Loans made to graduate or professional 

students for which the first 

disbursement is made on or after July 1, 

2006, and before July 1, 2012. The 

interest rate is 6.8 percent. 

(6) Interest rate for Direct 

Unsubsidized Loans first disbursed on 

or after July 1, 2006, and before July 1, 

2013. The interest rate is 6.8 percent. 

(7) Interest rate for Direct Subsidized 

Loans and Direct Unsubsidized Loans 

made to undergraduate students for 

which the first disbursement is made on 

or after July 1, 2013. The interest rate for 

loans first disbursed during any 12- 

month period beginning on July 1 and 

ending on June 30 is determined on the 

June 1 preceding that period and is a 

fixed rate for the life of the loan. The 

interest rate is the lesser of— 

(i) A rate equal to the high yield of the 

10-year Treasury note auctioned at the 

final auction held prior to the June 1 

preceding the 12-month period, plus 

2.05 percentage points, or 

(ii) 8.25 percent. 

(8) Interest rate for Direct 

Unsubsidized Loans made to graduate 

or professional students for which the 

first disbursement is made on or after 

July 1, 2013. The interest rate for loans 

first disbursed during any 12-month 

period beginning on July 1 and ending 

on June 30 is determined on the June 1 

preceding that period and is a fixed rate 

for the life of the loan. The interest rate 

is the lesser of— 

(i) A rate equal to the high yield of the 

10-year Treasury note auctioned at the 

final auction held prior to the June 1 

preceding the 12-month period, plus 3.6 

percentage points, or 

(ii) 9.5 percent. 

(9) Interest rate for Direct PLUS 

Loans. (i) Direct PLUS Loans first 

disbursed before July 1, 1998. (A) 

Interest rates for periods ending before 

July 1, 2001. During all periods, the 

interest rate during any twelve-month 

period beginning on July 1 and ending 

on June 30 is determined on the June 1 

preceding that period. The interest rate 

is equal to the bond equivalent rate of 

52-week Treasury bills auctioned at the 

final auction held prior to that June 1 

plus 3.1 percentage points, but does not 

exceed 9 percent. 

(B) Interest rates for periods beginning 

on or after July 1, 2001. During all 

periods, the interest rate during any 

twelve-month period beginning on July 

1 and ending on June 30 is determined 

on the June 26 preceding that period. 

The interest rate is equal to the weekly 

average 1-year constant maturity 

Treasury yield, as published by the 

Board of Governors of the Federal 

Reserve System, for the last calendar 

week ending on or before that June 26 

plus 3.1 percentage points, but does not 

exceed 9 percent. 

(ii) Direct PLUS Loans first disbursed 

on or after July 1, 1998, and before July 

1, 2006. During all periods, the interest 

rate during any twelve-month period 

beginning on July 1 and ending on June 

30 is determined on the June 1 

preceding that period. The interest rate 

is equal to the bond equivalent rate of 

91-day Treasury bills auctioned at the 

final auction held prior to that June 1 

plus 3.1 percentage points, but does not 

exceed 9 percent. 

(iii) Direct PLUS Loans first disbursed 

on or after July 1, 2006, and before July 

1, 2013. The interest rate is 7.9 percent. 

(iv) Direct PLUS Loans first disbursed 

on or after July 1, 2013. The interest rate 

for loans first disbursed during any 12- 

month period beginning on July 1 and 

ending on June 30 is determined on the 

June 1 preceding that period and is a 

fixed rate for the life of the loan. The 

interest rate is the lesser of— 

(A) A rate equal to the high yield of 

the 10-year Treasury note auctioned at 

the final auction held prior to the June 

1 preceding the 12-month period, plus 

4.6 percentage points, or 

(B) 10.5 percent. 

(10) Interest rate for Direct 

Consolidation Loans—(i) Interest rate 

for Direct Subsidized Consolidation 

Loans and Direct Unsubsidized 

Consolidation Loans. (A) Loans first 

disbursed before July 1, 1995. The 

interest rate is the rate established for 

Direct Subsidized Loans and Direct 

Unsubsidized Loans in paragraph (a)(1) 

of this section. 

(B) Loans first disbursed on or after 

July 1, 1995, and before July 1, 1998. 

The interest rate is the rate established 

for Direct Subsidized Loans and Direct 

Unsubsidized Loans in paragraph (a)(2) 

of this section. 

(C) Loans for which the first 

disbursement is made on or after July 1, 

1998, and prior to October 1, 1998, and 

loans for which the disbursement is 

made on or after October 1, 1998, for 

which the consolidation application was 

received by the Secretary before October 

1, 1998. The interest rate is the rate 

established for Direct Subsidized Loans 

and Direct Unsubsidized Loans in 

paragraph (a)(3) of this section. 

(D) Loans for which the consolidation 

application is received by the Secretary 

on or after October 1, 1998, and before 

February 1, 1999. During all periods, the 

interest rate during any twelve-month 

period beginning on July 1 and ending 

on June 30 is determined on the June 1 

immediately preceding that period. The 

interest rate is equal to the bond 

equivalent rate of 91-day Treasury bills 

auctioned at the final auction held prior 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65827 

to that June 1 plus 2.3 percentage 

points, but does not exceed 8.25 

percent. 

(E) Loans for which the consolidation 

application is received by the Secretary 

on or after February 1, 1999, and before 

July 1, 2013. During all periods, the 

interest rate is based on the weighted 

average of the interest rates on the loans 

being consolidated, rounded to the 

nearest higher one-eighth of one 

percent, but does not exceed 8.25 

percent. 

(F) Loans for which the consolidation 

application is received by the Secretary 

on or after July 1, 2013. During all 

periods, the interest rate is based on the 

weighted average of the interest rates on 

the loans being consolidated, rounded 

to the nearest higher one-eighth of one 

percent. 

(ii) Interest rate for Direct PLUS 

Consolidation Loans. (A) Loans first 

disbursed before July 1, 1998. The 

interest rate is the rate established for 

Direct PLUS Loans in paragraph (a)(9)(i) 

of this section. 

(B) Loans for which the first 

disbursement is made on or after July 1, 

1998, and prior to October 1, 1998, and 

loans for which the disbursement is 

made on or after October 1, 1998, for 

which the consolidation application was 

received by the Secretary before October 

1, 1998. The interest rate is the rate 

established for Direct PLUS Loans in 

paragraph (a)(9)(ii) of this section. 

(C) Loans for which the consolidation 

application is received by the Secretary 

on or after October 1, 1998, and before 

February 1, 1999. During all periods, the 

interest rate during any twelve-month 

period beginning on July 1 and ending 

on June 30 is determined on the June 1 

immediately preceding that period. The 

interest rate is equal to the bond 

equivalent rate of 91-day Treasury bills 

auctioned at the final auction held prior 

to that June 1 plus 2.3 percentage 

points, but does not exceed 8.25 

percent. 

(D) Loans for which the consolidation 

application is received by the Secretary 

on or after February 1, 1999, and before 

July 1, 2006. During all periods, the 

interest rate is based on the weighted 

average of the interest rates on the loans 

being consolidated, rounded to the 

nearest higher one-eighth of one 

percent, but does not exceed 8.25 

percent. 

(11) Applicability of the 

Servicemembers Civil Relief Act (50 

U.S.C. 527, App. sec. 207). 

Notwithstanding paragraphs (a)(1) 

through (10) of this section, effective 

August 14, 2008, upon the Secretary’s 

receipt of a borrower’s written request 

and a copy of the borrower’s military 

orders, the maximum interest rate, as 

defined in 50 U.S.C. 527, App. section 

207(d), on Direct Loan Program loans 

made prior to the borrower entering 

active duty status is 6 percent while the 

borrower is on active duty military 

service. 

(b) * * * 

(2) For a Direct Unsubsidized Loan, a 

Direct Unsubsidized Consolidation Loan 

that qualifies for a grace period under 

the regulations that were in effect for 

consolidation applications received 

before July 1, 2006, a Direct PLUS Loan, 

or for a Direct Subsidized Loan for 

which the first disbursement is made on 

or after July 1, 2012, and before July 1, 

2014, the Secretary may capitalize the 

unpaid interest that accrues on the loan 

when the borrower enters repayment. 

* * * * * 

■ 87. Section 685.203 is amended by: 

■ A. Revising the introductory text of 

paragraph (a)(1). 

■ B. In paragraphs (a)(1)(i), (a)(1)(ii), and 

(a)(1)(iii), removing the words ‘‘$2,625, 

or, for a loan disbursed on or after July 

1, 2007, $3,500,’’ and adding, in their 

place, the figure ‘‘$3,500’’. 

■ C. Revising the introductory text of 

paragraph (a)(2). 

■ D. In paragraphs (a)(2)(i) and (a)(2)(ii), 

removing the words ‘‘$3,500, or, for a 

loan disbursed on or after July 1, 2007, 

$4,500,’’ and adding, in their place, the 

figure ‘‘$4,500’’. 

■ E. Revising the introductory text of 

paragraph (a)(3). 

■ F. Revising paragraph (a)(5). 

■ G. Revising the introductory text of 

paragraph (a)(6). 

■ H. Revising paragraph (a)(7). 

■ I. Revising paragraph (b). 

■ J. In paragraph (c)(1)(i), removing the 

words ‘‘Federal Direct Unsubsidized 

Loan Program’’ and adding, in their 

place, the words ‘‘Direct Unsubsidized 

Loan Program’’. 

■ K. Revising paragraph (c)(1)(ii). 

■ L. In paragraph (c)(1)(iii), in the last 

sentence, removing the words ‘‘Federal 

PLUS Loan or’’. 

■ M. Revising the introductory text of 

paragraph (c)(2). 

■ N. In paragraphs (c)(2)(i)(A), 

(c)(2)(i)(B), (c)(2)(i)(C), (c)(2)(ii)(A), and 

(c)(2)(ii)(B), removing the words 

‘‘$4,000, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ and 

adding, in their place, the figure 

‘‘$6,000’’. 

■ O. In paragraphs (c)(2)(iii)(A) and 

(c)(2)(iii)(B), removing the words 

‘‘$5,000, or, for a loan first disbursed on 

or after July 1, 2008, $7,000,’’ and 

adding, in their place, the figure 

‘‘$7,000’’. 

■ P. In paragraph (c)(2)(v), removing the 

words ‘‘$10,000, or, for a loan disbursed 

on or after July 1, 2007,’’. 

■ Q. In paragraph (c)(2)(vi)(A), removing 

the words ‘‘$4,000, or, for a loan first 

disbursed on or after July 1, 2008, 

$6,000,’’ and adding, in their place, the 

figure ‘‘$6,000’’. 

■ R. In paragraph (c)(2)(vi)(B), removing 

the words ‘‘$5,000, or, for a loan 

disbursed on or after July 1, 2007, 

$7,000,’’ and adding, in their place, the 

figure ‘‘$7,000’’. 

■ S. In paragraph (c)(2)(vii), removing 

the words ‘‘$5,000, or, for a loan 

disbursed on or after July 1, 2007,’’. 

■ T. Revising the introductory text of 

paragraph (d). 

■ U. Revising paragraph (e). 

■ V. In paragraph (i)(1), adding the word 

‘‘Subsidized’’ immediately before the 

words ‘‘Federal Stafford Loans’’. 

■ W. In paragraph (i)(2), removing the 

words ‘‘Federal Unsubsidized Stafford 

Loans’’ and adding, in their place, the 

words ‘‘Unsubsidized Federal Stafford 

Loans’’. 

The revisions read as follows: 

§ 685.203 Loan limits. 

(a) * * * 

(1) In the case of an undergraduate 

student who has not successfully 

completed the first year of a program of 

undergraduate education, the total 

amount the student may borrow for any 

academic year of study under the Direct 

Subsidized Loan Program may not 

exceed the following: 

* * * * * 

(2) In the case of an undergraduate 

student who has successfully completed 

the first year of an undergraduate 

program but has not successfully 

completed the second year of an 

undergraduate program, the total 

amount the student may borrow for any 

academic year of study under the Direct 

Subsidized Loan Program may not 

exceed the following: 

* * * * * 

(3) In the case of an undergraduate 

student who has successfully completed 

the first and second years of a program 

of study of undergraduate education but 

has not successfully completed the 

remainder of the program, the total 

amount the student may borrow for any 

academic year of study under the Direct 

Subsidized Loan Program may not 

exceed the following: 

* * * * * 

(5) In the case of a graduate or 

professional student for periods of 

enrollment beginning before July 1, 

2012, the total amount the student may 

borrow for any academic year of study 

under the Direct Subsidized Loan 

Program may not exceed $8,500. 

mstockstill on DSK4VPTVN1PROD with RULES2

65828 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(6) In the case of a student enrolled 

for no longer than one consecutive 12- 

month period in a course of study 

necessary for enrollment in a program 

leading to a degree or a certificate, the 

total amount the student may borrow for 

any academic year of study under the 

Direct Subsidized Loan Program may 

not exceed the following: 

* * * * * 

(7) In the case of a student who has 

obtained a baccalaureate degree and is 

enrolled or accepted for enrollment in 

coursework necessary for a professional 

credential or certification from a State 

that is required for employment as a 

teacher in an elementary or secondary 

school in that State, the total amount the 

student may borrow for any academic 

year of study under the Direct 

Subsidized Loan Program may not 

exceed $5,500. 

* * * * * 

(b) Direct Unsubsidized Loans. (1) In 

the case of a dependent undergraduate 

student, except as provided in 

paragraph (c)(3) of this section, the total 

amount a student may borrow for any 

academic year of study under the Direct 

Unsubsidized Loan Program is the same 

as the amount determined under 

paragraph (a) of this section, less any 

amount received under the Direct 

Subsidized Loan Program, plus— 

(i) $2,000 for a program of study of at 

least a full academic year in length. 

(ii) For a program of study that is one 

academic year or more in length with 

less than a full academic year 

remaining, the amount that is the same 

ratio to $2,000 as the— 

(iii) For a program of study that is less 

than a full academic year in length, the 

amount that is the same ratio to $2,000 

as the lesser of the— 

(2)(i) In the case of an independent 

undergraduate student or certain 

dependent undergraduate students 

under the conditions specified in 

paragraph (c)(1)(ii) of this section, 

except as provided in paragraph (c)(3) of 

this section, the total amount the 

student may borrow for any period of 

enrollment under the Direct 

Unsubsidized Loan Program may not 

exceed the amounts determined under 

paragraph (a) of this section less any 

amount received under the Direct 

Subsidized Loan Program in 

combination with the amounts 

determined under paragraph (c) of this 

section. 

(ii) In the case of a graduate or 

professional student for a period of 

enrollment beginning before July 1, 

2012, the total amount the student may 

borrow for any academic year of study 

under the Direct Unsubsidized Loan 

Program may not exceed the amount 

determined under paragraph (a)(5) of 

this section, less any amount received 

under the Direct Subsidized Loan 

Program. 

(iii) In the case of a graduate or 

professional student for a period of 

enrollment beginning on or after July 1, 

2012, the total amount the student may 

borrow for any academic year of study 

under the Direct Unsubsidized Loan 

Program may not exceed $8,500. 

(c) * * * 

(1) * * * 

(ii) In order for a dependent 

undergraduate student to receive this 

additional loan amount, the financial 

aid administrator must determine that 

the student’s parent likely will be 

precluded by exceptional circumstances 

from borrowing under the Direct PLUS 

Loan Program and the student’s family 

is otherwise unable to provide the 

student’s expected family contribution. 

The financial aid administrator must 

base the determination on a review of 

the family financial information 

provided by the student and 

consideration of the student’s debt 


mstockstill on DSK4VPTVN1PROD with RULES2ER01NO13.004</GPH> ER01NO13.005</GPH>
Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65829 

burden and must document the 

determination in the school’s file. 

* * * * * 

(2) The additional amount that a 

student described in paragraph (c)(1)(i) 

of this section may borrow under the 

Direct Unsubsidized Loan Program for 

any academic year of study may not 

exceed the following: 

* * * * * 

(d) Aggregate limits for subsidized 

loans. The aggregate unpaid principal 

amount of all Direct Subsidized Loans 

and Subsidized Federal Stafford Loans 

made to a student but excluding the 

amount of capitalized interest may not 

exceed the following: 

* * * * * 

(e) Aggregate limits for unsubsidized 

loans. The total amount of Direct 

Unsubsidized Loans, Unsubsidized 

Federal Stafford Loans, and Federal SLS 

Loans, excluding the amount of 

capitalized interest, may not exceed the 

following: 

(1) For a dependent undergraduate 

student, $31,000 minus any Direct 

Subsidized Loan and Subsidized 

Federal Stafford Loan amounts, unless 

the student qualifies under paragraph 

(c) of this section for additional 

eligibility or qualified for that additional 

eligibility under the Federal SLS 

Program. 

(2) For an independent undergraduate 

or a dependent undergraduate who 

qualifies for additional eligibility under 

paragraph (c) of this section or qualified 

for this additional eligibility under the 

Federal SLS Program, $57,500 minus 

any Direct Subsidized Loan and 

Subsidized Federal Stafford Loan 

amounts. 

(3) For a graduate or professional 

student, $138,500, including any loans 

for undergraduate study, minus any 

Direct Subsidized Loan, Subsidized 

Federal Stafford Loan, and Federal SLS 

Program loan amounts. 

* * * * * 

■ 88. Section 685.204 is revised to read 

as follows: 

§ 685.204 Deferment. 

(a) General. (1) A Direct Subsidized 

Loan or Direct Subsidized Consolidation 

Loan borrower who meets the 

requirements described in paragraphs 

(b), (d), (e), (f), (g), (h), (i), or (j) of this 

section is eligible for a deferment during 

which periodic installments of principal 

and interest need not be paid. 

(2) A Direct Unsubsidized Loan, 

Direct Unsubsidized Consolidation 

Loan, Direct PLUS Loan, or Direct PLUS 

Consolidation Loan borrower who meets 

the requirements described in 

paragraphs (b) through (j) of this section 

is eligible for a deferment during which 

periodic installments of principal need 

not be paid but interest does accrue and 

is capitalized or paid by the borrower. 

At or before the time a deferment is 

granted, the Secretary provides 

information, including an example, to 

assist the borrower in understanding the 

impact of capitalization of accrued, 

unpaid interest on the borrower’s loan 

principal and on the total amount of 

interest to be paid over the life of the 

loan. 

(3) A borrower whose loan is in 

default is not eligible for a deferment, 

unless the borrower has made payment 

arrangements satisfactory to the 

Secretary. 

(4)(i) To receive a deferment, except 

as provided for in-school deferments 

under paragraphs (b)(2)(ii) through (iv) 

of this section, the borrower must 

request the deferment and, except as 

provided in paragraph (a)(5)(i) of this 

section, provide the Secretary with all 

information and documents required to 

establish eligibility for the deferment. 

(ii) In the case of a military service 

deferment under paragraph (h) of this 

section, a borrower’s representative may 

request the deferment and provide the 

required information and documents on 

behalf of the borrower. If the Secretary 

grants a military service deferment 

based on a request from a borrower’s 

representative, the Secretary notifies the 

borrower that the deferment has been 

granted and that the borrower has the 

option to cancel the deferment and 

continue to make payments on the loan. 

The Secretary may also notify the 

borrower’s representative of the 

outcome of the deferment request. 

(5)(i) After receiving a borrower’s 

written or verbal request for a 

deferment, the Secretary may grant a 

graduate fellowship deferment under 

paragraph (d), a rehabilitation training 

deferment under paragraph (e), an 

unemployment deferment under 

paragraph (f), an economic hardship 

deferment under paragraph (g), a 

military service deferment under 

paragraph (h), or a post-active duty 

student deferment under paragraph (i) 

of this section if the Secretary confirms 

that the borrower has received a 

deferment on a FFEL Program loan for 

the same reason and during the same 

time period. 

(ii) The Secretary will grant a 

deferment based on the information 

obtained under paragraph (a)(5)(i) of 

this section when determining a 

borrower’s eligibility for a deferment, 

unless the Secretary, as of the date of 

the determination, has information 

indicating that the borrower does not 

qualify for the deferment. The Secretary 

will resolve any discrepant information 

before granting a deferment under 

paragraph (a)(5)(i) of this section. 

(iii) If the Secretary grants a deferment 

under paragraph (a)(5)(i) of this section, 

the Secretary notifies the borrower that 

the deferment has been granted and that 

the borrower has the option to cancel 

the deferment and continue to make 

payments on the loan. 

(b) In-school deferment. (1) A Direct 

Loan borrower is eligible for a 

deferment during any period during 

which— 

(i) The borrower is carrying at least 

one-half the normal full-time work load 

for the course of study that the borrower 

is pursuing, as determined by the 

eligible school the borrower is 

attending; and 

(ii) The borrower is not serving in a 

medical internship or residency 

program, except for a residency program 

in dentistry. 

(2) For the purpose of paragraph (b)(1) 

of this section, the Secretary processes 

a deferment when— 

(i) The borrower submits a request to 

the Secretary along with documentation 

verifying the borrower’s eligibility; 

(ii) The Secretary receives information 

from the borrower’s school indicating 

that the borrower is eligible to receive 

a new loan; 

(iii) The Secretary receives student 

status information from the borrower’s 

school, either directly or indirectly, 

indicating that the borrower is enrolled 

on at least a half-time basis; or 

(iv) The Secretary confirms a 

borrower’s half-time enrollment status 

through the use of the National Student 

Loan Data System if requested to do so 

by the school the borrower is attending. 

(3)(i) Upon notification by the 

Secretary that a deferment has been 

granted based on paragraph (b)(2)(ii), 

(iii), or (iv) of this section, the borrower 

has the option to cancel the deferment 

and continue to make payments on the 

loan. 

(ii) If the borrower elects to cancel the 

deferment and continue to make 

payments on the loan, the borrower has 

the option to make the principal and 

interest payments that were deferred. If 

the borrower does not make the 

payments, the Secretary applies a 

deferment for the period in which 

payments were not made and capitalizes 

the interest. 

(c) In-school deferments for Direct 

PLUS Loan borrowers with loans first 

disbursed on or after July 1, 2008. (1)(i) 

A student Direct PLUS Loan borrower is 

eligible for a deferment on a Direct 

PLUS Loan first disbursed on or after 

July 1, 2008 during the six-month 

period that begins on the day after the 

mstockstill on DSK4VPTVN1PROD with RULES2

65830 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

student ceases to be enrolled on at least 

a half-time basis at an eligible 

institution. 

(ii) If the Secretary grants an in-school 

deferment to a student Direct PLUS 

Loan borrower in accordance with 

§ 685.204(b)(2)(ii), (iii), or (iv), the 

deferment period for a Direct PLUS 

Loan first disbursed on or after July 1, 

2008 includes the six-month postenrollment period described in 

paragraph (c)(1)(i) of this section. 

(2) A parent Direct PLUS Loan 

borrower is eligible for a deferment on 

a Direct PLUS Loan first disbursed on or 

after July 1, 2008— 

(i) Upon the request of the borrower, 

during the period when the student on 

whose behalf the loan was obtained is 

enrolled at an eligible institution on at 

least a half-time basis; and 

(ii) Upon the request of the borrower, 

during the six-month period that begins 

on the later of the day after the student 

on whose behalf the loan was obtained 

ceases to be enrolled on at least a halftime basis or, if the parent borrower is 

also a student, the day after the parent 

borrower ceases to be enrolled on at 

least a half-time basis. 

(d) Graduate fellowship deferment. (1) 

A Direct Loan borrower is eligible for a 

deferment during any period in which 

an authorized official of the borrower’s 

graduate fellowship program certifies 

that the borrower is pursuing a course 

of study pursuant to an eligible graduate 

fellowship program in accordance with 

paragraph (d)(2) of this section. 

(2)(i) To qualify for a deferment under 

paragraph (d)(1) of this section, a 

borrower must— 

(A) Hold at least a baccalaureate 

degree conferred by an institution of 

higher education; 

(B) Have been accepted or 

recommended by an institution of 

higher education for acceptance on a 

full-time basis into an eligible graduate 

fellowship program, as defined in 

paragraph (d)(2)(ii) of this section; and 

(C) Not be serving in a medical 

internship or residency program, except 

for a residency program in dentistry. 

(ii) An eligible graduate fellowship 

program is a fellowship program that— 

(A) Provides sufficient financial 

support to graduate fellows to allow for 

full-time study for at least six months; 

(B) Requires a written statement from 

each applicant explaining the 

applicant’s objectives before the award 

of that financial support; 

(C) Requires a graduate fellow to 

submit periodic reports, projects, or 

evidence of the fellow’s progress; and 

(D) In the case of a course of study at 

a foreign university, accepts the course 

of study for completion of the 

fellowship program. 

(e) Rehabilitation training program 

deferment. (1) A Direct Loan borrower is 

eligible for a deferment during any 

period in which an authorized official of 

the borrower’s rehabilitation training 

program certifies that the borrower is 

pursuing an eligible rehabilitation 

training program for individuals with 

disabilities in accordance with 

paragraph (e)(2) of this section. 

(2) For purposes of paragraph (e)(1) of 

this section, an eligible rehabilitation 

training program for disabled 

individuals is a program that— 

(i) Is licensed, approved, certified, or 

otherwise recognized as providing 

rehabilitation training to disabled 

individuals by— 

(A) A State agency with responsibility 

for vocational rehabilitation programs; 

(B) A State agency with responsibility 

for drug abuse treatment programs; 

(C) A State agency with responsibility 

for mental health services programs; 

(D) A State agency with responsibility 

for alcohol abuse treatment programs; or 

(E) The Department of Veterans 

Affairs; and 

(ii) Provides or will provide the 

borrower with rehabilitation services 

under a written plan that— 

(A) Is individualized to meet the 

borrower’s needs; 

(B) Specifies the date on which the 

services to the borrower are expected to 

end; and 

(C) Is structured in a way that requires 

a substantial commitment by the 

borrower to his or her rehabilitation. 

The Secretary considers a substantial 

commitment by the borrower to be a 

commitment of time and effort that 

normally would prevent an individual 

from engaging in full-time employment, 

either because of the number of hours 

that must be devoted to rehabilitation or 

because of the nature of the 

rehabilitation. For the purpose of this 

paragraph, full-time employment 

involves at least 30 hours of work per 

week and is expected to last at least 

three months. 

(f) Unemployment deferment. (1) A 

Direct Loan borrower is eligible for a 

deferment during periods that, 

collectively, do not exceed three years 

in which the borrower is seeking and 

unable to find full-time employment. 

(2) A borrower qualifies for an 

unemployment deferment by— 

(i) Providing evidence of eligibility for 

unemployment benefits to the Secretary; 

or 

(ii) Providing to the Secretary a 

written certification, or an equivalent as 

approved by the Secretary, that— 

(A) The borrower has registered with 

a public or private employment agency, 

if one is available to the borrower 

within a 50-mile radius of the 

borrower’s current address; and 

(B) For all requests beyond the initial 

request, the borrower has made at least 

six diligent attempts during the 

preceding six-month period to secure 

full-time employment. 

(3) For purposes of obtaining an 

unemployment deferment under 

paragraph (f)(2)(ii) of this section, the 

following rules apply: 

(i) A borrower may qualify for an 

unemployment deferment whether or 

not the borrower has been previously 

employed. 

(ii) An unemployment deferment is 

not justified if the borrower refuses to 

seek or accept employment in kinds of 

positions or at salary and responsibility 

levels for which the borrower feels 

overqualified by virtue of education or 

previous experience. 

(iii) Full-time employment involves at 

least 30 hours of work a week and is 

expected to last at least three months. 

(iv) The initial period of 

unemployment deferment may be 

granted for a period of unemployment 

beginning up to six months before the 

date the Secretary receives the 

borrower’s request, and may be granted 

for up to six months after that date. 

(4) The Secretary does not grant an 

unemployment deferment beyond the 

date that is six months after the date the 

borrower provides evidence of the 

borrower’s eligibility for unemployment 

insurance benefits under paragraph 

(f)(2)(i) of this section or the date the 

borrower provides the written 

certification, or an approved equivalent, 

under paragraph (f)(2)(ii) of this section. 

(g) Economic hardship deferment. 

(1)(i) A Direct Loan borrower is eligible 

for a deferment during periods that, 

collectively, do not exceed three years 

in which the borrower has experienced 

or will experience an economic 

hardship in accordance with paragraph 

(g)(2) of this section. 

(ii) An economic hardship deferment 

is granted for periods of up to one year 

at a time, except that a borrower who 

receives a deferment under paragraph 

(g)(2)(iv) of this section may receive an 

economic hardship deferment for the 

lesser of the borrower’s full term of 

service in the Peace Corps or the 

borrower’s remaining period of 

economic hardship deferment eligibility 

under the 3-year maximum. 

(2) A borrower qualifies for an 

economic hardship deferment if the 

borrower— 

(i) Has been granted an economic 

hardship deferment under either the 

FFEL or the Federal Perkins Loan 

programs for the period of time for 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65831 

which the borrower has requested an 

economic hardship deferment for his or 

her Direct Loan; 

(ii) Is receiving payment under a 

Federal or State public assistance 

program, such as Aid to Families with 

Dependent Children, Supplemental 

Security Income, Food Stamps, or State 

general public assistance; 

(iii) Is working full-time (as defined in 

paragraph (g)(3)(iii) of this section) and 

has a monthly income (as defined in 

paragraph (g)(3)(iv) of this section) that 

does not exceed the greater of (as 

calculated on a monthly basis)— 

(A) The minimum wage rate described 

in section 6 of the Fair Labor Standards 

Act of 1938; or 

(B) An amount equal to 150 percent 

of the poverty guideline applicable to 

the borrower’s family size (as defined in 

paragraph (g)(3)(v) of this section) as 

published annually by the Department 

of Health and Human Services pursuant 

to 42 U.S.C. 9902(2). If a borrower is not 

a resident of a State identified in the 

poverty guidelines, the poverty 

guideline to be used for the borrower is 

the poverty guideline (for the relevant 

family size) used for the 48 contiguous 

States; or 

(iv) Is serving as a volunteer in the 

Peace Corps. 

(3) The following rules apply to a 

deferment granted under paragraph 

(g)(2)(iii) of this section: 

(i) For an initial period of deferment, 

the Secretary requires the borrower to 

submit evidence showing the amount of 

the borrower’s monthly income. 

(ii) To qualify for a subsequent period 

of deferment that begins less than one 

year after the end of a period of 

deferment under paragraph (g)(2)(iii) of 

this section, the Secretary requires the 

borrower to submit evidence showing 

the amount of the borrower’s monthly 

income or a copy of the borrower’s most 

recently filed Federal income tax return. 

(iii) A borrower is considered to be 

working full-time if the borrower is 

expected to be employed for at least 

three consecutive months at 30 hours 

per week. 

(iv) A borrower’s monthly income is 

the gross amount of income received by 

the borrower from employment and 

from other sources, or one-twelfth of the 

borrower’s adjusted gross income, as 

recorded on the borrower’s most 

recently filed Federal income tax return. 

(v) Family size means the number that 

is determined by counting the borrower, 

the borrower’s spouse, and the 

borrower’s children, including unborn 

children who will be born during the 

period covered by the deferment, if the 

children receive more than half their 

support from the borrower. A borrower’s 

family size includes other individuals if, 

at the time the borrower requests the 

economic hardship deferment, the other 

individuals— 

(A) Live with the borrower; and 

(B) Receive more than half their 

support from the borrower and will 

continue to receive this support from 

the borrower for the year the borrower 

certifies family size. Support includes 

money, gifts, loans, housing, food, 

clothes, car, medical and dental care, 

and payment of college costs. 

(h) Military service deferment. (1) A 

Direct Loan borrower is eligible for a 

deferment during any period in which 

the borrower is— 

(i) Serving on active duty during a 

war or other military operation or 

national emergency, as defined in 

paragraph (h)(5) of this section; or 

(ii) Performing qualifying National 

Guard duty during a war or other 

military operation or national 

emergency, as defined in paragraph 

(h)(5) of this section. 

(2) For a borrower whose active duty 

service includes October 1, 2007, or 

begins on or after that date, the 

deferment period ends 180 days after 

the demobilization date for each period 

of the service described in paragraphs 

(h)(1)(i) and (h)(1)(ii) of this section. 

(3) Without supporting 

documentation, the military service 

deferment will be granted to an 

otherwise eligible borrower for a period 

not to exceed the initial 12 months from 

the date the qualifying eligible service 

began based on a request from the 

borrower or the borrower’s 

representative. 

(4) The provisions of paragraph (h) of 

this section do not authorize the 

refunding of any payments made by or 

on behalf of a borrower during a period 

for which the borrower qualified for a 

military service deferment. 

(5) As used in paragraph (h) of this 

section— 

(i) Serving on active duty during a war 

or other military operation or national 

emergency means service by an 

individual who is— 

(A) A Reserve of an Armed Force 

ordered to active duty under 10 U.S.C. 

12301(a), 12301(g), 12302, 12304, or 

12306; 

(B) A retired member of an Armed 

Force ordered to active duty under 10 

U.S.C. 688 for service in connection 

with a war or other military operation 

or national emergency, regardless of the 

location at which such active duty 

service is performed; or 

(C) Any other member of an Armed 

Force on active duty in connection with 

such emergency or subsequent actions 

or conditions who has been assigned to 

a duty station at a location other than 

the location at which the member is 

normally assigned; 

(ii) Qualifying National Guard duty 

during a war or other operation or 

national emergency means service as a 

member of the National Guard on fulltime National Guard duty, as defined in 

10 U.S.C. 101(d)(5) under a call to active 

service authorized by the President or 

the Secretary of Defense for a period of 

more than 30 consecutive days under 32 

U.S.C. 502(f) in connection with a war, 

other military operation, or national 

emergency declared by the President 

and supported by Federal funds; 

(iii) Active duty means active duty as 

defined in 10 U.S.C. 101(d)(1) except 

that it does not include active duty for 

training or attendance at a service 

school; 

(iv) Military operation means a 

contingency operation as defined in 10 

U.S.C. 101(a)(13); and 

(v) National emergency means the 

national emergency by reason of certain 

terrorist attacks declared by the 

President on September 14, 2001, or 

subsequent national emergencies 

declared by the President by reason of 

terrorist attacks. 

(i) Post-active duty student deferment. 

(1) A Direct Loan borrower is eligible for 

a deferment for 13 months following the 

conclusion of the borrower’s active duty 

military service and any applicable 

grace period if— 

(i) The borrower is a member of the 

National Guard or other reserve 

component of the Armed Forces of the 

United States or a member of such 

forces in retired status; and 

(ii) The borrower was enrolled on at 

least a half-time basis in a program of 

instruction at an eligible institution at 

the time, or within six months prior to 

the time, the borrower was called to 

active duty. 

(2) As used in paragraph (i)(1) of this 

section, ‘‘active duty’’ means active duty 

as defined in 10 U.S.C. 101(d)(1) for at 

least a 30-day period, except that— 

(i) Active duty includes active State 

duty for members of the National Guard 

under which a Governor activates 

National Guard personnel based on 

State statute or policy and the activities 

of the National Guard are paid for with 

State funds; 

(ii) Active duty includes full-time 

National Guard duty under which a 

Governor is authorized, with the 

approval of the President or the U.S. 

Secretary of Defense, to order a member 

to State active duty and the activities of 

the National Guard are paid for with 

Federal funds; 

mstockstill on DSK4VPTVN1PROD with RULES2

65832 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(iii) Active duty does not include 

active duty for training or attendance at 

a service school; and 

(iv) Active duty does not include 

employment in a full-time, permanent 

position in the National Guard unless 

the borrower employed in such a 

position is reassigned to active duty 

under paragraph (i)(2)(i) of this section 

or full-time National Guard duty under 

paragraph (i)(2)(ii) of this section. 

(3) If the borrower returns to enrolled 

student status on at least a half-time 

basis during the grace period or the 13- 

month deferment period, the deferment 

expires at the time the borrower returns 

to enrolled student status on at least a 

half-time basis. 

(4) If a borrower qualifies for both a 

military service deferment and a postactive duty student deferment, the 180- 

day post-demobilization military service 

deferment period and the 13-month 

post-active duty student deferment 

period apply concurrently. 

(j) Additional deferments for Direct 

Loan borrowers with FFEL Program 

loans made before July 1, 1993. If, at the 

time of application for a borrower’s first 

Direct Loan, a borrower has an 

outstanding balance of principal or 

interest owing on any FFEL Program 

loan that was made, insured, or 

guaranteed prior to July 1, 1993, the 

borrower is eligible for a deferment 

during— 

(1) The periods described in 

paragraphs (b) through (i) of this 

section; and 

(2) The periods described in 34 CFR 

682.210(b), including those periods that 

apply to a ‘‘new borrower’’ as that term 

is defined in 34 CFR 682.210(b)(7). 

(Approved by the Office of 

Management and Budget under control 

number 1845–0021) 

(Authority: 20 U.S.C. 1087a et seq.) 

■ 89. Section 685.205 is amended by: 

■ A. In paragraph (a)(4), removing the 

word ‘‘or’’ that appears after the 

punctuation ‘‘;’’. 

■ B. Revising paragraph (a)(5). 

■ C. Adding new paragraphs (a)(8) and 

(a)(9). 

■ D. In paragraph (b)(2), removing the 

words ‘‘authorized deferment period’’ 

and adding, in their place, the words 

‘‘authorized deferment or forbearance 

period’’. 

The additions read as follows: 

§ 685.205 Forbearance. 

(a) * * * 

(5)(i) The borrower is performing the 

type of service that would qualify the 

borrower for loan forgiveness under the 

requirements of the teacher loan 

forgiveness program in § 685.217. 

(ii) Before a forbearance is granted 

under § 685.205(a)(5)(i), the borrower 

must— 

(A) Submit documentation for the 

period of the annual forbearance request 

showing the beginning and ending dates 

that the borrower is expected to 

perform, for that year, the type of 

service described in § 685.217(c); and 

(B) Certify the borrower’s intent to 

satisfy the requirements of § 685.217(c). 

(iii) The Secretary grants forbearance 

under paragraph (a)(5) of this section 

only if the Secretary believes, at the 

time of the borrower’s annual request, 

that the expected forgiveness amount 

under § 685.217(d) will satisfy the 

anticipated remaining outstanding 

balance on the borrower’s loan at the 

time of the expected forgiveness; 

* * * * * 

(8)(i) The Secretary may grant a 

forbearance to permit a borrower or 

endorser to resume honoring the 

agreement to repay the debt after 

default. The terms of the forbearance 

agreement in this situation must include 

a new agreement to repay the debt 

signed by the borrower or endorser or a 

written or oral affirmation of the 

borrower’s or endorser’s obligation to 

repay the debt. 

(ii) If the forbearance is based on the 

borrower’s or endorser’s oral affirmation 

of the obligation to repay the debt, the 

forbearance period is limited to 120 

days, such a forbearance is not granted 

consecutively, and the Secretary will— 

(A) Orally review with the borrower 

the terms and conditions of the 

forbearance, including the consequences 

of interest capitalization, and all other 

repayment options available to the 

borrower; 

(B) Send a notice to the borrower or 

endorser that confirms the terms of the 

forbearance and the borrower’s or 

endorser’s affirmation of the obligation 

to repay the debt and that includes 

information on all other repayment 

options available to the borrower; and 

(C) Retain a record of the terms of the 

forbearance and affirmation in the 

borrower’s or endorser’s file. 

(iii) For purposes of this section, an 

‘‘affirmation’’ means an 

acknowledgement of the loan by the 

borrower or endorser in a legally 

binding manner. The form of the 

affirmation may include, but is not 

limited to, the borrower’s or 

endorser’s— 

(A) New signed repayment agreement 

or schedule, or another form of signed 

agreement to repay the debt; 

(B) Oral acknowledgement and 

agreement to repay the debt 

documented by the Secretary in the 

borrower’s or endorser’s file and 

confirmed by the Secretary in a notice 

to the borrower; or 

(C) A payment made on the loan by 

the borrower or endorser. 

(9)(i) The borrower is performing the 

type of service that would qualify the 

borrower for a partial repayment of his 

or her loan under the Student Loan 

Repayment Programs administered by 

the Department of Defense under 10 

U.S.C. 2171, 2173, 2174, or any other 

student loan repayment programs 

administered by the Department of 

Defense. 

(ii) To receive a forbearance under 

this paragraph, the borrower must 

submit documentation showing the time 

period during which the Department of 

Defense considers the borrower to be 

eligible for a partial repayment of his or 

her loan under a student loan 

repayment program. 

* * * * * 

§ 685.206 [Amended] 

■ 90. Section 685.206 is amended by: 

■ A. In the introductory text of 

paragraph (a), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ B. In paragraph (b)(1), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ C. In paragraph (b)(2), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ D. In paragraph (c)(1)(iv), removing 

the words ‘‘Credit bureau’’ and adding, 

in their place, the words ‘‘Consumer 

reporting agency’’. 

■ E. In paragraph (c)(2)(iii), removing 

the words ‘‘credit bureaus’’ and adding, 

in their place, the words ‘‘consumer 

reporting agencies’’. 

■ 91. Section 685.207 is amended by: 

■ A. Revising paragraph (a)(2). 

■ B. Adding a new paragraph (a)(3). 

■ C. In paragraph (b)(1)(ii), removing the 

citation ‘‘§ 685.204’’ and adding, in its 

place, the citation ’’§ 685.204(b)’’. 

■ D. Revising paragraph (b)(3). 

The revisions and addition read as 

follows: 

§ 685.207 Obligation to repay. 

(a) * * * 

(2) The borrower’s repayment of a 

Direct Loan may also be subject to the 

deferment provisions in § 685.204, the 

forbearance provisions in § 685.205, the 

discharge provisions in § 685.212, and 

the loan forgiveness provisions in 

§§ 685.217 and 685.219. 

(3) A borrower’s first payment on a 

Direct Loan is due within 60 days of the 

beginning date of the repayment period 

as determined in accordance with 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65833 

paragraph (b), (c), (d), or (e) of this 

section. 

(b) * * * 

(3)(i) A borrower is not obligated to 

pay interest on a Direct Subsidized Loan 

during periods when the borrower is 

enrolled at an eligible school on at least 

a half-time basis unless the borrower is 

required to make payments on the loan 

during those periods under paragraph 

(b)(1) of this section. 

(ii) Except as provided in paragraph 

(b)(3)(iii) of this section, a borrower is 

not obligated to pay interest on a Direct 

Subsidized Loan during grace periods. 

(iii) In the case of a Direct Subsidized 

Loan for which the first disbursement is 

made on or after July 1, 2012 and before 

July 1, 2014, a borrower is responsible 

for the interest that accrues during the 

grace period. 

* * * * * 

§ 685.208 [Amended] 

■ 92. Section 685.208 is amended by: 

■ A. In paragraph (a)(5), removing the 

words ‘‘income contingent’’ and adding, 

in their place, the words ‘‘incomecontingent’’. 

■ B. In paragraph (j)(1), removing the 

word ‘‘then’’ and adding, in its place, 

the word ‘‘than’’. 

■ C. In paragraph (m)(1), adding the 

words ‘‘or, for a new borrower as of July 

1, 2014, as defined in § 685.221(a)(4), 10 

percent’’ immediately after the words 

‘‘15 percent’’. 

■ 93. Section 685.210 is amended by: 

■ A. Revising paragraph (a)(2). 

■ B. Revising the introductory text of 

paragraph (b)(1). 

■ C. Revising paragraph (b)(1)(i). 

■ D. In paragraph (b)(2)(i), removing the 

words ‘‘income contingent’’ and adding, 

in their place, the words ‘‘incomecontingent’’. 

The revisions read as follows: 

§ 685.210 Choice of repayment plan. 

(a) * * * 

(2) If a borrower does not select a 

repayment plan, the Secretary 

designates the standard repayment plan 

described in § 685.208(b) or (c) for the 

borrower, as applicable. 

(b) * * * 

(1) A borrower may change repayment 

plans at any time after the loan has 

entered repayment by notifying the 

Secretary. However, a borrower who is 

repaying a defaulted loan under an 

income-contingent repayment plan or 

the income-based repayment plan in 

accordance with § 685.211(d)(3)(ii), or 

who is repaying a Direct Consolidation 

Loan under the income-contingent 

repayment plan or the income-based 

repayment plan in accordance with 

§ 685.220(d)(1)(ii)(A)(3) may not change 

to another repayment plan unless— 

(i) The borrower was required to and 

did make a payment under the incomecontingent repayment plan or incomebased repayment plan in each of the 

prior three months; or 

* * * * * 

■ 94. Section 685.211 is amended by: 

■ A. In paragraph (d)(3)(i), removing the 

words ‘‘national credit bureaus’’ and 

adding, in their place, the words 

‘‘nationwide consumer reporting 

agencies’’. 

■ B. In paragraph (d)(3)(ii), removing 

the words ‘‘income contingent’’ and 

adding, in their place, the words 

‘‘income-contingent’’. 

■ C. Revising paragraph (f). 

The revision reads as follows: 

§ 685.211 Miscellaneous repayment 

provisions. 

* * * * * 

(f) Rehabilitation of defaulted loans. 

(1) A defaulted Direct Loan, except for 

a loan on which a judgment has been 

obtained, is rehabilitated if the borrower 

makes 9 voluntary, reasonable and 

affordable monthly payments within 20 

days of the due date during 10 

consecutive months. The Secretary 

determines the amount of a borrower’s 

reasonable and affordable payment on 

the basis of a borrower’s total financial 

circumstances. 

(i) The Secretary initially considers 

the borrower’s reasonable and affordable 

payment amount to be an amount equal 

to 15 percent of the amount by which 

the borrower’s AGI exceeds 150 percent 

of the poverty guideline amount 

applicable to the borrower’s family size 

and State, divided by 12, except that if 

this amount is less than $5, the 

borrower’s monthly rehabilitation 

payment is $5. 

(ii) The Secretary may calculate the 

payment amount based on information 

provided orally by the borrower or the 

borrower’s representative and provide 

the borrower with a rehabilitation 

agreement using that amount. The 

Secretary requires the borrower to 

provide documentation to confirm the 

borrower’s AGI and family size. If the 

borrower does not provide the Secretary 

with any documentation requested by 

the Secretary to calculate or confirm the 

reasonable and affordable payment 

amount within a reasonable time 

deadline set by the Secretary, the 

rehabilitation agreement provided is 

null and void. 

(iii) A reasonable and affordable 

payment amount is not— 

(A) A required minimum loan 

payment amount (e.g., $50) if the 

Secretary determines that a smaller 

amount is reasonable and affordable; 

(B) A percentage of the borrower’s 

total loan balance; or 

(C) Based on other criteria unrelated 

to the borrower’s total financial 

circumstances. 

(iv) Within 15 business days of the 

Secretary’s determination of the 

borrower’s loan rehabilitation payment 

amount, the Secretary provides the 

borrower with a written rehabilitation 

agreement which includes the 

borrower’s reasonable and affordable 

payment amount, a prominent statement 

that the borrower may object orally or in 

writing to the reasonable and affordable 

payment amount with the method and 

timeframe for raising such an objection, 

a statement that the rehabilitation is 

null and void if the borrower does not 

provide the documentation required to 

calculate the reasonable and affordable 

payment amount, and an explanation of 

any other terms and conditions 

applicable to the required series of 

payments that must be made. To accept 

the agreement, the borrower must sign 

and return the agreement or accept the 

agreement electronically under a 

process provided by the Secretary. The 

Secretary does not impose any other 

conditions unrelated to the amount or 

timing of the rehabilitation payments in 

the rehabilitation agreement. The 

written rehabilitation agreement informs 

the borrower of the effects of having the 

loans rehabilitated (e.g., removal of the 

record of default from the borrower’s 

credit history and return to normal 

repayment). 

(2) The Secretary provides the 

borrower with a written statement 

confirming the borrower’s reasonable 

and affordable payment amount, as 

determined by the Secretary, and 

explaining any other terms and 

conditions applicable to the required 

series of payments that must be made 

before the borrower’s account can be 

rehabilitated. The statement informs the 

borrower that the borrower may object 

to the terms and conditions of the 

rehabilitation agreement, and explains 

the method and timeframe for objecting 

to the terms and conditions of the 

rehabilitation agreement. 

(3) If the borrower objects to the 

monthly payment amount determined 

under paragraph (f)(1) of this section, 

the Secretary recalculates the payment 

based solely on information provided on 

a form approved by the Secretary and, 

if requested, supporting documentation 

from the borrower and other sources, 

and considers— 

(i) The borrower’s, and if applicable, 

the spouse’s current disposable income, 

including public assistance payments, 

mstockstill on DSK4VPTVN1PROD with RULES2

65834 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

and other income received by the 

borrower and the spouse, such as 

welfare benefits, Social Security 

benefits, Supplemental Security Income, 

and workers’ compensation. Spousal 

income is not considered if the spouse 

does not contribute to the borrower’s 

household income; 

(ii) Family size as defined in 

§ 685.221(a)(3); and 

(iii) Reasonable and necessary 

expenses, which include— 

(A) Food; 

(B) Housing; 

(C) Utilities; 

(D) Basic communication expenses; 

(E) Necessary medical and dental 

costs; 

(F) Necessary insurance costs; 

(G) Transportation costs; 

(H) Dependent care and other workrelated expenses; 

(I) Legally required child and spousal 

support; 

(J) Other title IV and non-title IV 

student loan payments; and 

(K) Other expenses approved by the 

Secretary. 

(4) The Secretary provides the 

borrower with a new written 

rehabilitation agreement confirming the 

borrower’s recalculated reasonable and 

affordable payment amount. To accept 

the agreement, the borrower must sign 

and return the agreement or accept the 

agreement electronically under a 

process provided by the Secretary. 

(5) The Secretary includes any 

payment made under paragraph (1) of 

the definition of ‘‘satisfactory repayment 

arrangement’’ in § 685.102(b) in 

determining whether the 9 out of 10 

payments required under paragraph 

(f)(1) of this section have been made. 

(6) A borrower may request that the 

monthly payment amount be adjusted 

due to a change in the borrower’s total 

financial circumstances only upon 

providing the documentation specified 

in paragraph (f)(3) of this section. 

(7) During the rehabilitation period, 

the Secretary limits contact with the 

borrower on the loan being rehabilitated 

to collection activities that are required 

by law or regulation and to 

communications that support the 

rehabilitation. 

(8) If a defaulted loan is rehabilitated, 

the Secretary instructs any consumer 

reporting agency to which the default 

was reported to remove the default from 

the borrower’s credit history. 

(9) A defaulted Direct Loan on which 

a judgment has been obtained may not 

be rehabilitated. 

(10) A Direct Loan obtained by fraud 

for which the borrower has been 

convicted of, or has pled nolo 

contendere or guilty to, a crime 

involving fraud in obtaining title IV, 

HEA program assistance may not be 

rehabilitated. 

(11)(i) If a borrower’s loan is being 

collected by administrative wage 

garnishment while the borrower is also 

making monthly payments on the same 

loan under a loan rehabilitation 

agreement, the Secretary continues 

collecting the loan by administrative 

wage garnishment until the borrower 

makes five qualifying monthly 

payments under the rehabilitation 

agreement, unless the Secretary is 

otherwise precluded from doing so. 

(ii) After the borrower makes the fifth 

qualifying monthly payment, the 

Secretary, unless otherwise directed by 

the borrower, suspends the garnishment 

order issued to the borrower’s employer. 

(iii) A borrower may only obtain the 

benefit of a suspension of administrative 

wage garnishment while also attempting 

to rehabilitate a defaulted loan once. 

(12) Effective for any defaulted Direct 

Loan that is rehabilitated on or after 

August 14, 2008, the borrower cannot 

rehabilitate the loan again if the loan 

returns to default status following the 

rehabilitation. 

* * * * * 

§ 685.212 [Amended] 

■ 95. Section 685.212 is amended by: 

■ A. In paragraph (a)(3), removing the 

words ‘‘Direct PLUS Consolidation 

Loan’’ and adding, in their place, the 

words ‘‘Direct Consolidation Loan’’. 

■ B. In paragraph (b), removing the 

citation ‘‘§ 685.213(c)’’ and adding, in 

its place, the citation ‘‘§ 685.213’’. 

■ 96. Section 685.214 is amended by: 

■ A. Revising paragraph (a)(2)(ii). 

■ B. Revising paragraph (b)(4). 

■ C. Revising paragraph (c). 

■ D. In paragraph (d)(1), removing the 

word ‘‘shall’’ each time it appears and 

adding, in its place, the word ‘‘must’’. 

■ E. In paragraph (f)(1), removing the 

number and words ‘‘90 days’’ and 

adding, in their place, the number and 

words ‘‘120 days’’. 

The revisions read as follows: 

§ 685.214 Closed school discharge. 

(a) * * * 

(2) * * * 

(ii) ‘‘School’’ means a school’s main 

campus or any location or branch of the 

main campus, regardless of whether the 

school or its location or branch is 

considered eligible. 

(b) * * * 

(4) The Secretary reports the 

discharge of a loan under this section to 

all consumer reporting agencies to 

which the Secretary previously reported 

the status of the loan, so as to delete all 

adverse credit history assigned to the 

loan. 

(c) Borrower qualification for 

discharge. (1) In order to qualify for 

discharge of a loan under this section, 

a borrower must submit to the Secretary 

a written request and sworn statement, 

and the factual assertions in the 

statement must be true. The statement 

need not be notarized but must be made 

by the borrower under penalty of 

perjury. In the statement, the borrower 

must— 

(i) State that the borrower (or the 

student on whose behalf a parent 

borrowed)— 

(A) Received the proceeds of a loan, 

in whole or in part, on or after January 

1, 1986 to attend a school; 

(B) Did not complete the program of 

study at that school because the school 

closed while the student was enrolled, 

or the student withdrew from the school 

not more than 120 days before the 

school closed. The Secretary may 

extend the 120-day period if the 

Secretary determines that exceptional 

circumstances related to a school’s 

closing justify an extension. Exceptional 

circumstances for this purpose may 

include, but are not limited to: the 

school’s loss of accreditation; the 

school’s discontinuation of the majority 

of its academic programs; action by the 

State to revoke the school’s license to 

operate or award academic credentials 

in the State; or a finding by a State or 

Federal government agency that the 

school violated State or Federal law; 

and 

(C) Did not complete the program of 

study through a teach-out at another 

school or by transferring academic 

credits or hours earned at the closed 

school to another school; 

(ii) State whether the borrower (or 

student) has made a claim with respect 

to the school’s closing with any third 

party, such as the holder of a 

performance bond or a tuition recovery 

program, and, if so, the amount of any 

payment received by the borrower (or 

student) or credited to the borrower’s 

loan obligation; and 

(iii) State that the borrower (or 

student)— 

(A) Agrees to provide to the Secretary 

upon request other documentation 

reasonably available to the borrower 

that demonstrates that the borrower 

meets the qualifications for discharge 

under this section; and 

(B) Agrees to cooperate with the 

Secretary in enforcement actions in 

accordance with paragraph (d) of this 

section and to transfer any right to 

recovery against a third party to the 

Secretary in accordance with paragraph 

(e) of this section. 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65835 

(2) The Secretary may discharge a 

loan under this section without an 

application from the borrower if the 

Secretary determines, based on 

information in the Secretary’s 

possession, that the borrower qualifies 

for the discharge. 

* * * * * 

■ 97. Section 685.215 is amended by: 

■ A. In paragraph (a)(1)(iv), removing 

the citation ‘‘§ 682.402(e)(14)’’ and 

adding, in its place, the words 

‘‘paragraph (c)(4)(ii) of this section’’. 

■ B. Revising paragraph (b)(5). 

■ C. In the introductory text of 

paragraph (c), removing the word 

‘‘shall’’ each time it appears and adding, 

in its place, the word ‘‘must’’. 

■ D. In the introductory text of 

paragraph (c)(1), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ E. In the introductory text of 

paragraph (c)(2), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ F. In the introductory text of 

paragraph (c)(3), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ G. Revising paragraph (c)(4). 

■ H. In paragraph (c)(5), removing the 

word ‘‘shall’’ and adding, it its place, 

the word ‘‘must’’. 

■ I. In the introductory text of paragraph 

(c)(6), removing the word ‘‘shall’’ and 

adding, in its place, the word ‘‘must’’. 

The revisions read as follows: 

§ 685.215 Discharge for false certification 

of student eligibility or unauthorized 

payment. 

* * * * * 

(b) * * * 

(5) The Secretary reports the 

discharge under this section to all 

consumer reporting agencies to which 

the Secretary previously reported the 

status of the loan, so as to delete all 

adverse credit history assigned to the 

loan. 

(c) * * * 

(4) Identity theft. (i) In the case of an 

individual whose eligibility to borrow 

was falsely certified because he or she 

was a victim of the crime of identity 

theft and is requesting a discharge, the 

individual must— 

(A) Certify that the individual did not 

sign the promissory note, or that any 

other means of identification used to 

obtain the loan was used without the 

authorization of the individual claiming 

relief; 

(B) Certify that the individual did not 

receive or benefit from the proceeds of 

the loan with knowledge that the loan 

had been made without the 

authorization of the individual; 

(C) Provide a copy of a local, State, or 

Federal court verdict or judgment that 

conclusively determines that the 

individual who is named as the 

borrower of the loan was the victim of 

a crime of identity theft; and 

(D) If the judicial determination of the 

crime does not expressly state that the 

loan was obtained as a result of the 

crime of identity theft, provide— 

(1) Authentic specimens of the 

signature of the individual, as provided 

in paragraph (c)(2)(ii) of this section, or 

of other means of identification of the 

individual, as applicable, corresponding 

to the means of identification falsely 

used to obtain the loan; and 

(2) A statement of facts that 

demonstrate, to the satisfaction of the 

Secretary, that eligibility for the loan in 

question was falsely certified as a result 

of the crime of identity theft committed 

against that individual. 

(ii)(A) For purposes of this section, 

identity theft is defined as the 

unauthorized use of the identifying 

information of another individual that is 

punishable under 18 U.S.C. 1028, 

1028A, 1029, or 1030, or substantially 

comparable State or local law. 

(B) Identifying information includes, 

but is not limited to— 

(1) Name, Social Security number, 

date of birth, official State or 

government issued driver’s license or 

identification number, alien registration 

number, government passport number, 

and employer or taxpayer identification 

number; 

(2) Unique biometric data, such as 

fingerprints, voiceprint, retina or iris 

image, or unique physical 

representation; 

(3) Unique electronic identification 

number, address, or routing code; or 

(4) Telecommunication identifying 

information or access device (as defined 

in 18 U.S.C. 1029(e)). 

* * * * * 

§ 685.216 [Amended] 

■ 98. Section 685.216(b)(2) is amended 

by removing the word ‘‘credit’’ and 

adding, in its place, the word 

‘‘consumer’’. 

■ 99. Section 685.217 is amended by: 

■ A. Revising paragraph (a)(1). 

■ B. In the last sentence of paragraph 

(a)(2)(i), adding the word ‘‘for’’ 

immediately before the words ‘‘an 

eligible educational service agency’’. 

■ C. In paragraph (a)(2)(iii), removing 

the word ‘‘at’’ each time it appears and 

adding, in its place, the word ‘‘for’’. 

■ D. In paragraph (a)(3), removing the 

words ‘‘FFEL and Direct Loan’’ and 

adding, in their place, the words ‘‘Direct 

Loan and FFEL’’. 

■ E. In the introductory text of 

paragraph (a)(4), removing the words 

‘‘FFEL and Direct Loan’’ and adding, in 

their place, the words ‘‘Direct Loan and 

FFEL’’. 

■ F. In paragraph (a)(4)(i), removing the 

word ‘‘at’’ the second time it appears 

and adding, in its place, the word ‘‘by’’. 

■ G. In paragraph (a)(4)(ii), adding the 

words ‘‘by an eligible’’ immediately 

before the words ‘‘educational service 

agency’’. 

■ H. In the introductory text of 

paragraph (c)(1), adding the word ‘‘by’’ 

immediately before the words ‘‘an 

educational service agency’’. 

■ I. In paragraph (c)(1)(iii), removing the 

last sentence. 

■ J. Redesignating paragraphs (c)(2) 

through (c)(11) as paragraphs (c)(3) 

through (c)(12), respectively. 

■ K. Adding a new paragraph (c)(2). 

■ L. In redesignated paragraph 

(c)(4)(ii)(A), removing the word ‘‘at’’ the 

second time it appears and adding, in its 

place, the word ‘‘for’’. 

■ M. In redesignated paragraph 

(c)(4)(ii)(B), adding the words ‘‘for an 

eligible’’ immediately before the words 

‘‘educational service agency’’. 

■ N. In redesignated paragraph 

(c)(4)(iii), removing the word ‘‘at’’ each 

time it appears and adding, in its place, 

the word ‘‘for’’. 

■ O. In redesignated paragraph (c)(5)(i), 

adding the words ‘‘for an eligible’’ 

immediately before the words 

‘‘educational service agency’’. 

■ P. In redesignated paragraph 

(c)(5)(ii)(A), removing the word ‘‘at’’ the 

second time it appears and adding, in its 

place, the word ‘‘for’’. 

■ Q. In redesignated paragraph 

(c)(5)(ii)(B), adding the words ‘‘for an 

eligible’’ immediately before the words 

‘‘educational service agency’’. 

■ R. In redesignated paragraph 

(c)(5)(iii), removing the word ‘‘at’’ each 

time it appears and adding, in its place, 

the word ‘‘for’’. 

■ S. Revising the introductory text of 

redesignated paragraph (c)(7). 

■ T. Revising redesignated paragraph 

(c)(9). 

■ U. Revising redesignated paragraph 

(c)(10). 

■ V. Adding a new paragraph (c)(13). 

■ W. Revising paragraph (d)(1). 

■ X. In paragraph (d)(2), removing the 

words ‘‘paragraphs (c)(3)(ii) or (c)(4)(ii)’’ 

and adding, in their place, the words 

‘‘paragraph (c)(4)(ii) or (c)(5)(ii)’’. 

The revisions and addition read as 

follows: 

§ 685.217 Teacher loan forgiveness 

program. 

(a) * * * 

(1) The teacher loan forgiveness 

program is intended to encourage 

mstockstill on DSK4VPTVN1PROD with RULES2

65836 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

individuals to enter and continue in the 

teaching profession. For new borrowers, 

the Secretary repays the amount 

specified in this paragraph (a) on the 

borrower’s Direct Subsidized Loans, 

Direct Unsubsidized Loans, Subsidized 

and Unsubsidized Federal Stafford 

Loans, and in certain cases, Direct 

Consolidation Loans or Federal 

Consolidation Loans. The forgiveness 

program is only available to a borrower 

who has no outstanding loan balance 

under the Direct Loan Program or the 

FFEL Program on October 1, 1998, or 

who has no outstanding loan balance on 

the date he or she obtains a loan after 

October 1, 1998. 

* * * * * 

(c) * * * 

(2) The Secretary considers all 

elementary and secondary schools 

operated by the Bureau of Indian 

Education (BIE) or operated on Indian 

reservations by Indian tribal groups 

under contract with the BIE to qualify 

as schools serving low-income students. 

* * * * * 

(7) For teacher loan forgiveness 

applications received by the Secretary 

on or after July 1, 2006, a teacher in a 

private, non-profit elementary or 

secondary school who is exempt from 

State certification requirements (unless 

otherwise applicable under State law) 

may qualify for loan forgiveness under 

paragraphs (c)(4)(ii) or (c)(5) of this 

section if— 

* * * * * 

(9) A borrower’s period of 

postsecondary education, qualifying 

FMLA condition, or military active duty 

as described in paragraph (c)(8) of this 

section, including the time necessary for 

the borrower to resume qualifying 

teaching no later than the beginning of 

the next regularly scheduled academic 

year, does not constitute a break in the 

required five consecutive years of 

qualifying teaching service. 

(10) A borrower who was employed as 

a teacher at more than one qualifying 

school, for more than one qualifying 

educational service agency, or a 

combination of both during an academic 

year and demonstrates that the 

combined teaching was the equivalent 

of full-time, as supported by the 

certification of one or more of the chief 

administrative officers of the schools or 

educational service agencies involved, 

is considered to have completed one 

academic year of qualifying teaching. 

* * * * * 

(13) A borrower may request 

forbearance during each of the five years 

of qualifying teaching service in 

accordance with § 685.205(a)(5). 

(d) * * * 

(1) A qualified borrower is eligible for 

forgiveness of up to $5,000, or up to 

$17,500 if the borrower meets the 

requirements of paragraph (c)(4)(ii) or 

(c)(5)(ii) of this section. The forgiveness 

amount is deducted from the aggregate 

amount of the borrower’s Direct 

Subsidized Loan or Direct Unsubsidized 

Loan or Direct Consolidation Loan 

obligation that is outstanding after the 

borrower completes his or her fifth 

consecutive complete academic year of 

teaching as described in paragraph (c) of 

this section. Only the outstanding 

portion of the Direct Consolidation Loan 

that was used to repay an eligible Direct 

Subsidized Loan, an eligible Direct 

Unsubsidized Loan, or an eligible 

Subsidized or Unsubsidized Federal 

Stafford Loan qualifies for loan 

forgiveness under this section. 

* * * * * 

■ 100. Section 685.218 is amended by: 

■ A. In paragraph (b)(4), removing the 

words ‘‘FFEL or Direct’’ and adding, in 

their place, the words ‘‘Direct or FFEL’’. 

■ B. Revising paragraph (d)(3). 

■ C. In paragraph (d)(6), removing the 

words ‘‘a Perkins Loan, a FFEL Program 

loan, or another Direct Loan’’ and 

adding, in their place, the words 

‘‘another Direct Loan, a FFEL Program 

Loan, or a Perkins Loan’’. 

■ D. In paragraph (d)(7), removing the 

words ‘‘a FFEL Program Loan or another 

Direct Loan’’ and adding, in their place, 

‘‘another Direct Loan or a FFEL Program 

Loan’’. 

■ E. In paragraph (e)(1)(ii), removing the 

number and word ‘‘24 hours’’ each time 

they appear and adding, in their place, 

the number and word ‘‘72 hours’’. 

■ F. Revising paragraph (f)(4)(iii). 

■ G. In paragraph (g)(2)(i), removing the 

words ‘‘Direct Loans’’ and adding, in 

their place, the words ‘‘Direct Loan’’. 

The revisions read as follows: 

§ 685.218 Discharge of student loan 

indebtedness for survivors of victims of the 

September 11, 2001, attacks. 

* * * * * 

(d) * * * 

(3) If the individual owed a Direct 

Loan, a FFEL Program Loan, or a 

Perkins Loan at the time of the terrorist 

attacks on September 11, 2001, 

documentation that the individual’s 

loans were discharged by the Secretary, 

the lender, or the institution due to 

death may be substituted for the original 

or certified copy of a death certificate. 

* * * * * 

(f) * * * 

(4) * * * 

(iii) Copies of approved joint Direct 

Loan or FFEL Consolidation Loan 

applications or an approved Direct or 

FFEL PLUS Loan application. 

* * * * * 

■ 101. Section 685.220 is revised to read 

as follows: 

§ 685.220 Consolidation. 

(a) Direct Consolidation Loans. A 

borrower may consolidate education 

loans made under certain Federal 

programs into a Direct Consolidation 

Loan. Loans consolidated into a Direct 

Consolidation Loan are discharged 

when the Direct Consolidation Loan is 

originated. 

(b) Loans eligible for consolidation. 

The following loans may be 

consolidated into a Direct Consolidation 

Loan: 

(1) Subsidized Federal Stafford Loans. 

(2) Guaranteed Student Loans. 

(3) Federal Insured Student Loans 

(FISL). 

(4) Direct Subsidized Loans. 

(5) Direct Subsidized Consolidation 

Loans. 

(6) Federal Perkins Loans. 

(7) National Direct Student Loans 

(NDSL). 

(8) National Defense Student Loans 

(NDSL). 

(9) Federal PLUS Loans. 

(10) Parent Loans for Undergraduate 

Students (PLUS). 

(11) Direct PLUS Loans. 

(12) Direct PLUS Consolidation 

Loans. 

(13) Federal Consolidation Loans. 

(14) Unsubsidized Federal Stafford 

Loans. 

(15) Federal Supplemental Loans for 

Students (SLS). 

(16) Direct Unsubsidized Loans. 

(17) Direct Unsubsidized 

Consolidation Loans. 

(18) Auxiliary Loans to Assist 

Students (ALAS). 

(19) Health Professions Student Loans 

(HPSL) and Loans for Disadvantaged 

Students (LDS) made under subpart II of 

part A of title VII of the Public Health 

Service Act. 

(20) Health Education Assistance 

Loans (HEAL). 

(21) Nursing loans made under 

subpart II of part B of title VIII of the 

Public Health Service Act. 

(c) Components of Direct 

Consolidation Loans. (1) Subsidized 

component of Direct Consolidation 

Loans. The term ‘‘Direct Subsidized 

Consolidation Loan’’ refers to the 

portion of a Direct Consolidation Loan 

attributable to— 

(i) The loans identified in paragraphs 

(b)(1) through (b)(5) of this section; and 

(ii) The portion of a Federal 

Consolidation Loan under paragraph 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65837 

(b)(13) of this section that is eligible for 

interest benefits during a deferment 

period under section 428C(b)(4)(C) of 

the Act. 

(2) Unsubsidized component of Direct 

Consolidation Loans. Except as 

provided in paragraph (c)(3) of this 

section, the term ‘‘Direct Unsubsidized 

Consolidation Loan’’ refers to the 

portion of a Direct Consolidation Loan 

attributable to— 

(i) The loans identified in paragraphs 

(b)(6) through (b)(12) of this section; 

(ii) The portion of a Federal 

Consolidation Loan under paragraph 

(b)(13) of this section that is not eligible 

for interest benefits during a deferment 

period under section 428C(b)(4)(C) of 

the Act; and 

(iii) The loans identified in 

paragraphs (b)(14) through (b)(21) of this 

section. 

(3) PLUS component of Direct 

Consolidation Loans. In the case of a 

Direct Consolidation Loan made before 

July 1, 2006, the term ‘‘Direct PLUS 

Consolidation Loan’’ refers to the 

portion of a Direct Consolidation Loan 

attributable to the loans identified in 

paragraphs (b)(9) through (b)(12) of this 

section. 

(d) Eligibility for a Direct 

Consolidation Loan. (1) A borrower may 

obtain a Direct Consolidation Loan if the 

borrower meets the following 

requirements: 

(i) The borrower consolidates at least 

one Direct Loan Program or FFEL 

Program loan. 

(ii) On the loans being consolidated, 

the borrower is— 

(A) At the time the borrower applies 

for the Direct Consolidation Loan— 

(1) In the grace period; 

(2) In a repayment period but not in 

default; or 

(3) In default but has made 

satisfactory repayment arrangements in 

accordance with paragraph (2) of the 

definition of that term in § 685.102(b); 

(B) Not subject to a judgment secured 

through litigation, unless the judgment 

has been vacated; or 

(C) Not subject to an order for wage 

garnishment under section 488A of the 

Act, unless the order has been lifted. 

(iii) The borrower agrees to notify the 

Secretary of any change in address. 

(2) A borrower may not consolidate a 

Direct Consolidation Loan or a Federal 

Consolidation Loan into a new 

consolidation loan under this section 

unless at least one additional eligible 

loan is included in the consolidation, 

except that a borrower may consolidate 

a Federal Consolidation Loan into a new 

consolidation loan under this section 

without including any additional loans 

if— 

(i) The borrower has a Federal 

Consolidation Loan that is in default or 

has been submitted to the guaranty 

agency by the lender for default 

aversion, and the borrower wants to 

consolidate the Federal Consolidation 

Loan into the Direct Loan Program for 

the purpose of obtaining an incomecontingent repayment plan or an 

income-based repayment plan; or 

(ii) The borrower has a Federal 

Consolidation Loan and the borrower 

wants to consolidate that loan into the 

Direct Loan Program for the purpose of 

using the Public Service Loan 

Forgiveness Program or the no accrual 

of interest benefit for active duty 

service. 

(3) Eligible loans received before or 

after the date a Direct Consolidation 

Loan is made may be added to a 

subsequent Direct Consolidation Loan. 

(e) Application for a Direct 

Consolidation Loan. To obtain a Direct 

Consolidation Loan, a borrower must 

submit a completed application to the 

Secretary. A borrower may add eligible 

loans to a Direct Consolidation Loan by 

submitting a request to the Secretary 

within 180 days after the date on which 

the Direct Consolidation Loan is 

originated. 

(f) Origination of a consolidation 

loan. (1)(i) The holder of a loan that a 

borrower wishes to consolidate into a 

Direct Loan must complete and return 

the Secretary’s request for certification 

of the amount owed within 10 business 

days of receipt or, if it is unable to 

provide the certification, provide to the 

Secretary a written explanation of the 

reasons for its inability to provide the 

certification. 

(ii) If the Secretary approves an 

application for a consolidation loan, the 

Secretary pays to each holder of a loan 

selected for consolidation the amount 

necessary to discharge the loan. 

(iii) For a Direct Loan Program or 

FFEL Program loan that is in default, the 

Secretary limits collection costs that 

may be charged to the borrower to a 

maximum of 18.5 percent of the 

outstanding principal and interest 

amount of the defaulted loan. For any 

other defaulted Federal education loan, 

all collection costs that are owed may be 

charged to the borrower. 

(2) Upon receipt of the proceeds of a 

Direct Consolidation Loan, the holder of 

a consolidated loan must promptly 

apply the proceeds to fully discharge 

the borrower’s obligation on the 

consolidated loan. The holder of a 

consolidated loan must notify the 

borrower that the loan has been paid in 

full. 

(3) The principal balance of a Direct 

Consolidation Loan is equal to the sum 

of the amounts paid to the holders of the 

consolidated loans. 

(4) If the amount paid by the Secretary 

to the holder of a consolidated loan 

exceeds the amount needed to discharge 

that loan, the holder of the consolidated 

loan must promptly refund the excess 

amount to the Secretary to be credited 

against the outstanding balance of the 

Direct Consolidation Loan. 

(5) If the amount paid by the Secretary 

to the holder of the consolidated loan is 

insufficient to discharge that loan, the 

holder must notify the Secretary in 

writing of the remaining amount due on 

the loan. The Secretary promptly pays 

the remaining amount due. 

(g) Interest rate. The interest rate on 

a Direct Subsidized Consolidation Loan 

or a Direct Unsubsidized Consolidation 

Loan is the rate established in 

§ 685.202(a)(10)(i). The interest rate on a 

Direct PLUS Consolidation Loan is the 

rate established in § 685.202(a)(10)(ii). 

(h) Repayment plans. A borrower may 

choose a repayment plan for a Direct 

Consolidation Loan in accordance with 

§ 685.208, and may change repayment 

plans in accordance with § 685.210(b). 

(i) Repayment period. (1) Except as 

noted in paragraph (i)(4) of this section, 

the repayment period for a Direct 

Consolidation Loan begins on the day 

the loan is disbursed. 

(2)(i) Borrowers who entered 

repayment before July 1, 2006. The 

Secretary determines the repayment 

period under § 685.208(i) on the basis of 

the outstanding balances on all of the 

borrower’s loans that are eligible for 

consolidation and the balances on other 

education loans except as provided in 

paragraphs (i)(3)(i), (ii), and (iii) of this 

section. 

(ii) Borrowers entering repayment on 

or after July 1, 2006. The Secretary 

determines the repayment period under 

§ 685.208(j) on the basis of the 

outstanding balances on all of the 

borrower’s loans that are eligible for 

consolidation and the balances on other 

education loans except as provided in 

paragraphs (i)(3)(i) through (iii) of this 

section. 

(3)(i) The total amount of outstanding 

balances on the other education loans 

used to determine the repayment period 

under §§ 685.208(i) and (j) may not 

exceed the amount of the Direct 

Consolidation Loan. 

(ii) The borrower may not be in 

default on the other education loan 

unless the borrower has made 

satisfactory repayment arrangements 

with the holder of the loan. 

(iii) The lender of the other 

educational loan may not be an 

individual. 

mstockstill on DSK4VPTVN1PROD with RULES2

65838 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(4) A Direct Consolidation Loan that 

was made based on an application 

received before July 1, 2006 receives a 

grace period if it includes a Direct Loan 

Program or FFEL Program loan for 

which the borrower was in an in-school 

period at the time of consolidation. The 

repayment period begins the day after 

the grace period ends. 

(j) Repayment schedule. (1) The 

Secretary provides a borrower of a 

Direct Consolidation Loan a repayment 

schedule before the borrower’s first 

payment is due. The repayment 

schedule identifies the borrower’s 

monthly repayment amount under the 

repayment plan selected. 

(2) If a borrower adds an eligible loan 

to the consolidation loan under 

paragraph (e) of this section, the 

Secretary makes appropriate 

adjustments to the borrower’s monthly 

repayment amount and repayment 

period. 

(k) Refunds and returns of title IV, 

HEA program funds received from 

schools. If a lender receives a refund or 

return of title IV, HEA program funds 

from a school on a loan that has been 

consolidated into a Direct Consolidation 

Loan, the lender must transmit the 

refund or return and an explanation of 

the source of the refund or return to the 

Secretary within 30 days of receipt. 

(l) Special provisions for joint 

consolidation loans. The provisions of 

paragraphs (l)(1) through (3) of this 

section apply to a Direct Consolidation 

Loan obtained by two married 

borrowers in accordance with the 

regulations that were in effect for 

consolidation applications received 

prior to July 1, 2006. 

(1) Deferment. To obtain a deferment 

on a joint Direct Consolidation Loan 

under § 685.204, both borrowers must 

meet the requirements of that section. 

(2) Forbearance. To obtain 

forbearance on a joint Direct 

Consolidation Loan under § 685.205, 

both borrowers must meet the 

requirements of that section. 

(3) Discharge. (i) If a borrower dies 

and the Secretary receives the 

documentation described in 

§ 685.212(a), the Secretary discharges an 

amount equal to the portion of the 

outstanding balance of the consolidation 

loan, as of the date of the borrower’s 

death, attributable to any of that 

borrower’s loans that were repaid by the 

consolidation loan. 

(ii) If a borrower meets the 

requirements for total and permanent 

disability discharge under § 685.212(b), 

the Secretary discharges an amount 

equal to the portion of the outstanding 

balance of the consolidation loan, as of 

the date the borrower became totally 

and permanently disabled, attributable 

to any of that borrower’s loans that were 

repaid by the consolidation loan. 

(iii) If a borrower meets the 

requirements for discharge under 

§ 685.212(d), (e), or (f) on a loan that 

was consolidated into a joint Direct 

Consolidation Loan, the Secretary 

discharges the portion of the 

consolidation loan equal to the amount 

of the loan that would be eligible for 

discharge under the provisions of 

§ 685.212(d), (e), or (f) as applicable, and 

that was repaid by the consolidation 

loan. 

(iv) If a borrower meets the 

requirements for loan forgiveness under 

§ 685.212(h) on a loan that was 

consolidated into a joint Direct 

Consolidation Loan, the Secretary 

repays the portion of the outstanding 

balance of the consolidation loan 

attributable to the loan that would be 

eligible for forgiveness under the 

provisions of § 685.212(h), and that was 

repaid by the consolidation loan. 

(Approved by the Office of 

Management and Budget under control 

number 1845–0021) 

(Authority: 20 U.S.C. 1078–8, 1087a et seq.) 

■ 102. Section 685.300 is amended by: 

■ A. Revising paragraph (a). 

■ B. In the introductory text of 

paragraph (b), removing the word 

‘‘shall’’ each time it appears and adding, 

in its place, the word ‘‘must’’. 

■ C. Removing paragraph (b)(8). 

■ D. Redesignating paragraphs (b)(5), 

(6), and (7) as paragraphs (b)(6), (7), and 

(8), respectively. 

■ E. Adding a new paragraph (b)(5). 

■ F. Revising paragraph (c). 

The revisions and addition read as 

follows: 

§ 685.300 Agreements between an eligible 

school and the Secretary for participation in 

the Direct Loan Program 

(a) General. Participation of a school 

in the Direct Loan Program means that 

eligible students at the school may 

receive Direct Loans. To participate in 

the Direct Loan Program, a school 

must— 

(1) Demonstrate to the satisfaction of 

the Secretary that the school meets the 

requirements for eligibility under the 

Act and applicable regulations; and 

(2) Enter into a written program 

participation agreement with the 

Secretary. 

(b) * * * 

(5) On a monthly basis, reconcile 

institutional records with Direct Loan 

funds received from the Secretary and 

Direct Loan disbursement records 

submitted to and accepted by the 

Secretary; 

* * * * * 

(c) Origination. A school that 

originates loans in the Direct Loan 

Program must originate loans to eligible 

students and parents in accordance with 

part D of the Act. The note or evidence 

of the borrower’s obligation on the loan 

originated by the school is the property 

of the Secretary. 

* * * * * 

■ 103. Section 685.301 is revised to read 

as follows: 

§ 685.301 Origination of a loan by a Direct 

Loan Program school. 

(a) Determining eligibility and loan 

amount. (1) A school participating in 

the Direct Loan Program must ensure 

that any information it provides to the 

Secretary in connection with loan 

origination is complete and accurate. A 

school must originate a Direct Loan 

while the student meets the borrower 

eligibility requirements of § 685.200. 

Except as provided in 34 CFR part 668, 

subpart E, a school may rely in good 

faith upon statements made by the 

borrower and, in the case of a parent 

Direct PLUS Loan borrower, the student 

and the parent borrower. 

(2) A school must provide to the 

Secretary borrower information that 

includes but is not limited to— 

(i) The borrower’s eligibility for a 

loan, as determined in accordance with 

§ 685.200 and § 685.203; 

(ii) The student’s loan amount; and 

(iii) The anticipated and actual 

disbursement date or dates and 

disbursement amounts of the loan 

proceeds, as determined in accordance 

with § 685.303(d). 

(3) Before originating a Direct PLUS 

Loan for a graduate or professional 

student borrower, the school must 

determine the borrower’s eligibility for 

a Direct Subsidized and a Direct 

Unsubsidized Loan. If the borrower is 

eligible for a Direct Subsidized or Direct 

Unsubsidized Loan, but has not 

requested the maximum Direct 

Subsidized or Direct Unsubsidized Loan 

amount for which the borrower is 

eligible, the school must— 

(i) Notify the graduate or professional 

student borrower of the maximum 

Direct Subsidized or Direct 

Unsubsidized Loan amount that he or 

she is eligible to receive and provide the 

borrower with a comparison of— 

(A) The maximum interest rate for a 

Direct Subsidized Loan and a Direct 

Unsubsidized Loan and the maximum 

interest rate for a Direct PLUS Loan; 

(B) Periods when interest accrues on 

a Direct Subsidized Loan and a Direct 

Unsubsidized Loan, and periods when 

interest accrues on a Direct PLUS Loan; 

and 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65839 

(C) The point at which a Direct 

Subsidized Loan and a Direct 

Unsubsidized Loan enters repayment, 

and the point at which a Direct PLUS 

Loan enters repayment; and 

(ii) Give the graduate or professional 

student borrower the opportunity to 

request the maximum Direct Subsidized 

or Direct Unsubsidized Loan amount for 

which the borrower is eligible. 

(4) A school may not originate a 

Direct Subsidized, Direct Unsubsidized, 

or Direct PLUS Loan, or a combination 

of loans, for an amount that— 

(i) The school has reason to know 

would result in the borrower exceeding 

the annual or maximum loan amounts 

in § 685.203; or 

(ii) Exceeds the student’s estimated 

cost of attendance less— 

(A) The student’s estimated financial 

assistance for that period; and 

(B) In the case of a Direct Subsidized 

Loan, the borrower’s expected family 

contribution for that period. 

(5)(i) A school determines a Direct 

Subsidized or Direct Unsubsidized Loan 

amount in accordance with § 685.203. 

(ii) When prorating a loan amount for 

a student enrolled in a program of study 

with less than a full academic year 

remaining, the school need not 

recalculate the amount of the loan if the 

number of hours for which an eligible 

student is enrolled changes after the 

school originates the loan. 

(6) The date of loan origination is the 

date a school creates the electronic loan 

origination record. 

(7) If a student has received a 

determination of need for a Direct 

Subsidized Loan that is $200 or less, a 

school may choose not to originate a 

Direct Subsidized Loan for that student 

and to include the amount as part of a 

Direct Unsubsidized Loan. 

(8) A school may refuse to originate a 

Direct Subsidized, Direct Unsubsidized, 

or Direct PLUS Loan or may reduce the 

borrower’s determination of need for the 

loan if the reason for that action is 

documented and provided to the 

borrower in writing, and if— 

(i) The determination is made on a 

case-by-case basis; 

(ii) The documentation supporting the 

determination is retained in the 

student’s file; and 

(iii) The school does not engage in 

any pattern or practice that results in a 

denial of a borrower’s access to Direct 

Loans because of the borrower’s race, 

gender, color, religion, national origin, 

age, disability status, or income. 

(9) A school may not assess a fee for 

the completion or certification of any 

Direct Loan Program forms or 

information or for the origination of a 

Direct Loan. 

(10)(i) The minimum period of 

enrollment for which a school may 

originate a Direct Loan is— 

(A) At a school that measures 

academic progress in credit hours and 

uses a semester, trimester, or quarter 

system, or that has terms that are 

substantially equal in length with no 

term less than nine weeks in length, a 

single academic term (e.g., a semester or 

quarter); or 

(B) Except as provided in paragraph 

(a)(10)(ii) or (iii) of this section, at a 

school that measures academic progress 

in clock hours, or measures academic 

progress in credit hours but does not use 

a semester, trimester, or quarter system 

and does not have terms that are 

substantially equal in length with no 

term less than nine weeks in length, the 

lesser of— 

(1) The length of the student’s 

program (or the remaining portion of 

that program if the student has less than 

the full program remaining) at the 

school; or 

(2) The academic year as defined by 

the school in accordance with 34 CFR 

668.3. 

(ii) For a student who transfers into a 

school from another school and the 

prior school originated a loan for a 

period of enrollment that overlaps the 

period of enrollment at the new school, 

the new school may originate a loan for 

the remaining portion of the program or 

academic year. In this case the school 

may originate a loan for an amount that 

does not exceed the remaining balance 

of the student’s annual loan limit. 

(iii) For a student who completes a 

program at a school, where the student’s 

last loan to complete that program had 

been for less than an academic year, and 

the student then begins a new program 

at the same school, the school may 

originate a loan for the remainder of the 

academic year. In this case the school 

may originate a loan for an amount that 

does not exceed the remaining balance 

of the student’s annual loan limit at the 

loan level associated with the new 

program. 

(iv) The maximum period for which a 

school may originate a Direct Loan is— 

(A) Generally an academic year, as 

defined by the school in accordance 

with 34 CFR 668.3, except that the 

school may use a longer period of time 

corresponding to the period to which 

the school applies the annual loan 

limits under § 685.203; or 

(B) For a defaulted borrower who has 

regained eligibility, the academic year 

in which the borrower regained 

eligibility. 

(b) Promissory note handling. (1) The 

Secretary provides promissory notes for 

use in the Direct Loan Program. A 

school may not modify, or make any 

additions to, the promissory note 

without the Secretary’s prior written 

approval. 

(2) A school that originates a loan 

must ensure that the loan is supported 

by a completed promissory note as proof 

of the borrower’s indebtedness. 

(c) Reporting to the Secretary. The 

Secretary accepts a student’s Payment 

Data that is submitted in accordance 

with procedures established through 

publication in the Federal Register, and 

that contains information the Secretary 

considers to be accurate in light of other 

available information including that 

previously provided by the student and 

the institution. (Approved by the Office 

of Management and Budget under 

control number 1845–0021) 

(Authority: 20 U.S.C. 1087a et seq.) 

■ 104. Section 685.303 is amended by: 

■ A. In paragraph (a), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ B. Revising paragraph (b)(1). 

■ C. Redesignating paragraphs (b)(2) 

through (b)(4) as paragraphs (b)(3) 

through (b)(5), respectively. 

■ D. Adding a new paragraph (b)(2). 

■ E. Revising redesignated paragraph 

(b)(3)(i). 

■ F. Revising redesignated paragraph 

(b)(3)(ii). 

■ G. Revising redesignated paragraph 

(b)(5)(i) introductory text. 

■ H. In redesignated paragraph 

(b)(5)(i)(A)(1), removing the citation 

‘‘(b)(4)(i)(A)(2)’’ and adding, in its place, 

the citation ‘‘(b)(5)(i)(A)(2)’’. 

■ I. Revising redesignated paragraph 

(b)(5)(ii). 

■ J. In redesignated paragraph (b)(5)(iii), 

removing the citation ‘‘(b)(4)(i)(B)’’ and 

adding, in its place, the citation 

‘‘(b)(5)(i)(B)’’. 

■ K. In paragraph (c), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ L. Redesignating paragraphs (d) and 

(e) as paragraphs (f) and (g), 

respectively. 

■ M. Adding a new paragraph (d). 

■ N. Adding a new paragraph (e). 

■ O. Revising redesignated paragraph 

(g). 

■ P. Adding an authority citation after 

the OMB control number parenthetical 

at the end of the section. 

The revisions and additions read as 

follows: 

§ 685.303 Processing loan proceeds. 

* * * * * 

(b) * * * 

(1) A school may not disburse loan 

proceeds to a borrower unless the 

borrower has executed a legally 

enforceable promissory note. 

mstockstill on DSK4VPTVN1PROD with RULES2

65840 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(2) The Secretary provides Direct 

Loan funds to a school in accordance 

with 34 CFR 668.162. 

(3)(i) Except in the case of a late 

disbursement under paragraph (f) of this 

section, or as provided in paragraph 

(b)(3)(iii) of this section, a school may 

disburse loan proceeds only to a 

student, or a parent in the case of a 

Direct PLUS Loan obtained by a parent 

borrower, if the school determines the 

student has continuously maintained 

eligibility in accordance with the 

provisions of § 685.200 from the 

beginning of the loan period for which 

the loan was intended. 

(ii) If a student delays attending 

school for a period of time, the school 

may consider that student to have 

maintained eligibility for the loan from 

the first day of the period of enrollment. 

However, the school must comply with 

the requirements under paragraph (b)(4) 

of this section. 

* * * * * 

(5)(i) If a student is enrolled in the 

first year of an undergraduate program 

of study and has not previously received 

a Direct Subsidized Loan, a Direct 

Unsubsidized Loan, a Subsidized or 

Unsubsidized Federal Stafford Loan, or 

a Federal Supplemental Loan for 

Students, a school may not disburse the 

proceeds of a Direct Subsidized or 

Direct Unsubsidized Loan until 30 days 

after the first day of the student’s 

program of study unless— 

* * * * * 

(ii) Paragraphs (b)(5)(i)(A) and (B) of 

this section do not apply to any loans 

originated by the school beginning 30 

days after the date the school receives 

notification from the Secretary of a 

cohort default rate, calculated under 

subpart M or subpart N of 34 CFR part 

668, that causes the school to no longer 

meet the qualifications outlined in 

paragraph (b)(5)(i)(A) or (B) of this 

section, as applicable. 

* * * * * 

(d) Determining disbursement dates 

and amounts. (1) Before disbursing a 

loan, a school must determine that all 

information required by the promissory 

note has been provided by the borrower 

and, if applicable, the student. 

(2) An institution must disburse the 

loan proceeds on a payment period 

basis in accordance with 34 CFR 

668.164(b). 

(3) Unless paragraph (d)(4) or (d)(6) of 

this section applies— 

(i) If a loan period is more than one 

payment period, the school must 

disburse loan proceeds at least once in 

each payment period; and 

(ii) If a loan period is one payment 

period, the school must make at least 

two disbursements during that payment 

period. 

(A) For a loan originated under 

§ 685.301(a)(10)(i)(A), the school may 

not make the second disbursement until 

the calendar midpoint between the first 

and last scheduled days of class of the 

loan period. 

(B) For a loan originated under 

§ 685.301(a)(10)(i)(B), the school may 

not make the second disbursement until 

the student successfully completes half 

of the number of credit hours or clock 

hours and half of the number of weeks 

of instructional time in the payment 

period. 

(4)(i) If one or more payment periods 

have elapsed before a school makes a 

disbursement, the school may include 

in the disbursement loan proceeds for 

completed payment periods. 

(ii) If the loan period is equal to one 

payment period and more than one-half 

of it has elapsed, the school may 

include in the disbursement loan 

proceeds for the entire payment period. 

(5) The school must disburse loan 

proceeds in substantially equal 

installments, and no installment may 

exceed one-half of the loan. 

(6)(i) A school is not required to make 

more than one disbursement if— 

(A)(1) The loan period is not more 

than one semester, one trimester, one 

quarter, or, for non term-based schools 

or schools with non-standard terms, 4 

months; and 

(2)(i) Except as provided in paragraph 

(d)(6)(i)(A)(2)(ii) of this section, the 

school has a cohort default rate, 

calculated under subpart M of 34 CFR 

part 668 of less than 10 percent for each 

of the three most recent fiscal years for 

which data are available; or 

(ii) For loan disbursements made on 

or after October 1, 2011, the school in 

which the student is enrolled has a 

cohort default rate, calculated under 

either subpart M or subpart N of 34 CFR 

part 668, of less than 15 percent for each 

of the three most recent fiscal years for 

which data are available; or 

(B) The school is an eligible home 

institution originating a loan to cover 

the cost of attendance in a study abroad 

program and has a cohort default rate, 

calculated under subpart M or subpart 

N of 34 CFR part 668, of less than five 

percent for the single most recent fiscal 

year for which data are available. 

(ii) Paragraphs (d)(6)(i)(A) and (B) of 

this section do not apply to any loans 

originated by the school beginning 30 

days after the date the school receives 

notification from the Secretary of a 

cohort default rate, calculated under 

subpart M or subpart N of 34 CFR part 

668, that causes the school to no longer 

meet the qualifications outlined in 

paragraph (d)(6)(i)(A) or (B) of this 

section, as applicable. 

(iii) Paragraph (d)(6)(i)(B) of this 

section does not apply to any loans 

originated by the school beginning 30 

days after the date the school receives 

notification from the Secretary of a 

cohort default rate, calculated under 

subpart M or subpart N of 34 CFR part 

668, that causes the school to no longer 

meet the qualifications outlined in that 

paragraph. 

(e) Annual loan limit progression 

based on completion of an academic 

year. (1) If a school measures academic 

progress in an educational program in 

credit hours and uses either standard 

terms (semesters, trimesters, or quarters) 

or nonstandard terms that are 

substantially equal in length, and each 

term is at least nine weeks of 

instructional time in length, a student is 

considered to have completed an 

academic year and progresses to the 

next annual loan limit when the 

academic year calendar period has 

elapsed. 

(2) If a school measures academic 

progress in an educational program in 

credit hours and uses nonstandard 

terms that are not substantially equal in 

length or each term is not at least nine 

weeks of instructional time in length, or 

measures academic progress in credit 

hours and does not have academic 

terms, a student is considered to have 

completed an academic year and 

progresses to the next annual loan limit 

at the later of— 

(i) The student’s completion of the 

weeks of instructional time in the 

student’s academic year; or 

(ii) The date, as determined by the 

school, that the student has successfully 

completed the academic coursework in 

the student’s academic year. 

(3) If a school measures academic 

progress in an educational program in 

clock hours, a student is considered to 

have completed an academic year and 

progresses to the next annual loan limit 

at the later of— 

(i) The student’s completion of the 

weeks of instructional time in the 

student’s academic year; or 

(ii) The date, as determined by the 

school, that the student has successfully 

completed the clock hours in the 

student’s academic year. 

(4) For purposes of this section, terms 

in a loan period are substantially equal 

in length if no term in the loan period 

is more than two weeks of instructional 

time longer than any other term in that 

loan period. 

* * * * * 

(g) Treatment of excess loan proceeds. 

Before the disbursement of any Direct 

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 65841 

Subsidized Loan, Direct Unsubsidized 

Loan, or Direct PLUS Loan proceeds, if 

a school learns that the borrower will 

receive or has received financial aid for 

the period of enrollment for which the 

loan was intended that exceeds the 

amount of assistance for which the 

student is eligible (except for Federal 

Work-Study Program funds up to $300), 

the school must reduce or eliminate the 

overaward by either— 

(1) Using the student’s Direct 

Unsubsidized Loan, Direct PLUS Loan, 

or State-sponsored or another nonFederal loan to cover the expected 

family contribution, if not already done; 

or 

(2) Reducing one or more subsequent 

disbursements to eliminate the 

overaward. 

* * * * * 

(Authority: 20 U.S.C. 1087a et seq.) 

■ 105. Section 685.304 is amended by: 

■ A. Revising paragraph (a)(1). 

■ B. In paragraph (a)(2), removing the 

words ‘‘prior Direct PLUS Loan or 

Federal PLUS Loan’’ and adding, in 

their place, the words ‘‘prior student 

Direct PLUS Loan or student Federal 

PLUS Loan’’. 

■ C. In paragraph (a)(7)(i)(A), removing 

the word ‘‘or’’ the first time it appears 

and adding, in its place, the word ‘‘of’’. 

■ D. Revising paragraph (a)(7)(iii). 

■ E. Revising paragraph (a)(7)(iv). 

■ F. Revising paragraph (b)(3). 

■ G. In paragraph (b)(4)(ii), removing 

the words ‘‘income contingent 

repayment plans’’ and adding, in their 

place, the words ‘‘income-contingent 

repayment’’. 

■ H. Adding a new paragraph (b)(8). 

The revisions and addition read as 

follows: 

§ 685.304 Counseling borrowers. 

(a) * * * 

(1) Except as provided in paragraph 

(a)(8) of this section, a school must 

ensure that entrance counseling is 

conducted with each Direct Subsidized 

Loan or Direct Unsubsidized Loan 

student borrower prior to making the 

first disbursement of the proceeds of a 

loan to a student borrower unless the 

student borrower has received a prior 

Direct Subsidized Loan, Direct 

Unsubsidized Loan, Subsidized or 

Unsubsidized Federal Stafford Loan, or 

Federal SLS Loan. 

* * * * * 

(7) * * * 

(iii) For a graduate or professional 

student Direct PLUS Loan borrower who 

has received a prior Direct Subsidized 

Loan, Direct Unsubsidized Loan, 

Subsidized Federal Stafford Loan, or 

Unsubsidized Federal Stafford Loan, 

provide the information specified in 

§ 685.301(a)(3)(i)(A) through (a)(3)(i)(C); 

and 

(iv) For a graduate or professional 

student Direct PLUS Loan borrower who 

has not received a prior Direct 

Subsidized Loan, Direct Unsubsidized 

Loan, Subsidized Federal Stafford Loan, 

or Unsubsidized Federal Stafford Loan, 

provide the information specified in 

paragraph (a)(6)(i) through paragraph 

(a)(6)(xii) of this section. 

* * * * * 

(b) * * * 

(3) If a student borrower withdraws 

from school without the school’s prior 

knowledge or fails to complete the exit 

counseling as required, exit counseling 

must, within 30 days after the school 

learns that the student borrower has 

withdrawn from school or failed to 

complete the exit counseling as 

required, be provided either through 

interactive electronic means, by mailing 

written counseling materials to the 

student borrower at the student 

borrower’s last known address, or by 

sending written counseling materials to 

an email address provided by the 

student borrower that is not an email 

address associated with the school 

sending the counseling materials. 

* * * * * 

(8)(i) For students who have received 

loans under both the FFEL Program and 

the Direct Loan Program for attendance 

at a school, the school’s compliance 

with the exit counseling requirements in 

paragraph (b) of this section satisfies the 

exit counseling requirements in 34 CFR 

682.604(a) if the school ensures that the 

exit counseling also provides the 

borrower with the information 

described in 34 CFR 682.604(a)(2)(i) and 

(ii). 

(ii) A student’s completion of 

electronic interactive exit counseling 

offered by the Secretary satisfies the 

requirements of paragraph (b) of this 

section and, for students who have also 

received FFEL Program loans for 

attendance at the school, 34 CFR 

682.604(a). 

* * * * * 

§ 685.305 [Amended] 

■ 106. Section 685.305 is amended by: 

■ A. In paragraph (a), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ B. In paragraph (b), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ C. In paragraph (c), removing the word 

‘‘shall’’ and adding, it its place, the 

word ‘‘must’’. 

§ 685.306 [Amended] 

■ 107. Section 685.306 is amended by: 

■ A. In paragraph (a)(1), removing the 

word ‘‘Shall’’ and adding, in its place, 

the word ‘‘Must’’. 

■ B. In paragraph (a)(2), removing the 

word ‘‘Shall’’ and adding, in its place, 

the word ‘‘Must’’. 

■ C. In paragraph (b), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

§ 685.307 [Amended] 

■ 108. Section 685.307(b) is amended by 

removing the word ‘‘shall’’ and adding, 

in its place, the word ‘‘must’’. 

■ 109. Section 685.309 is amended by: 

■ A. In the introductory text of 

paragraph (a), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ B. Revising paragraph (b). 

■ C. In paragraph (c), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ D. In paragraph (d), removing the 

word ‘‘shall’’ and adding, in its place, 

the word ‘‘must’’. 

■ E. In paragraph (e), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ F. In paragraph (f), removing the word 

‘‘shall’’ and adding, in its place, the 

word ‘‘must’’. 

■ G. In paragraph (g), removing the 

words ‘‘Except for funds paid to a 

school under section 452(b)(1) of the 

Act, funds’’ and adding, in their place, 

the word ‘‘Funds’’. 

The revision reads as follows: 

§ 685.309 Administrative and fiscal control 

and fund accounting requirements for 

schools participating in the Direct Loan 

Program. 

* * * * * 

(b) Enrollment reporting process. (1) 

Upon receipt of an enrollment report 

from the Secretary, a school must 

update all information included in the 

report and return the report to the 

Secretary— 

mstockstill on DSK4VPTVN1PROD with RULES2

65842 Federal Register / Vol. 78, No. 212 / Friday, November 1, 2013 / Rules and Regulations 

(i) In the manner and format 

prescribed by the Secretary; and 

(ii) Within the timeframe prescribed 

by the Secretary. 

(2) Unless it expects to submit its next 

updated enrollment report to the 

Secretary within the next 60 days, a 

school must notify the Secretary within 

30 days after the date the school 

discovers that— 

(i) A loan under title IV of the Act was 

made to or on behalf of a student who 

was enrolled or accepted for enrollment 

at the school, and the student has 

ceased to be enrolled on at least a halftime basis or failed to enroll on at least 

a half-time basis for the period for 

which the loan was intended; or 

(ii) A student who is enrolled at the 

school and who received a loan under 

title IV of the Act has changed his or her 

permanent address. 

* * * * * 

Subpart D [Removed and Reserved] 

■ 110. Subpart D of part 685 is removed 

and reserved. 

[FR Doc. 2013–25331 Filed 10–31–13; 8:45 am] 

BILLING CODE 4000–01–P 

mstockstill on DSK4VPTVN1PROD with RULES2