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Issue 8 Conforming Language

4/28/2009

Issue 8 Conforming Language

Team II – School-based Loan Issues

Origin: HEOA Section 427

Issue: Loan Disbursement Waivers and 

Exceptions Based on Institutional 

Cohort Default Rate

Statutory cites: HEA sections 428B(a)(4) and (b)(3)

Regulatory cites: §§682.604(c), 685.301(b), and 

685.303(b)

DCL GEN-08-12 cite: Pages 122-123

Regulatory language:

§ 682.604 Processing the borrower's loan proceeds and 

counseling borrowers.

* * * * *

(c) * * *

(5) A school may not release the first installment of 

a Stafford loan for endorsement to a student who is 

enrolled in the first year of an undergraduate program of 
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study and who has not previously received a Stafford, SLS, 

Direct Subsidized, or Direct Unsubsidized loan until 30 

days after the first day of the student's program of study 

unless—

(i) Except as provided in paragraph (ii), the The

school in which the student is enrolled 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 loans first disbursed 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

(ii)(iii) The school is an eligible home institution 

certifying a loan to cover the student's cost of attendance 

in a study abroad program and has a cohort default rate, 

calculated under either subpart M or subpart N of 34 CFR 
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part 668, of less than 5 percent for the single most recent 

fiscal year for which data are available.

(6) * * *

(7) * * *

(8) Notwithstanding the requirements of paragraphs 

(c)(6)–(c)(9) of this section, a school is not required to 

deliver loan proceeds in more than one installment if—

(i)(A) The student's loan period is not more than one 

semester, one trimester, one quarter, or, for non termbased schools or schools with non-standard terms, 4 months; 

and

(B)(1) Except as provided in paragraph (2), the The

school in which the student is enrolled 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

(2) 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 
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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

(ii) The school is an eligible home institution 

certifying a loan to cover the student's 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 5 percent for the single most recent fiscal 

year for which data are available.

* * * * *
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Issue 8 Conforming Language

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§ 685.301 Origination of a loan by a Direct Loan Program 

school.

* * * * *

(b) * * *

(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 termbased schools or schools with non-standard terms, 4 months; 

and

(2)(i) Except as provided in subparagraph (ii), the 

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;

(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 
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4/28/2009

each of the three most recent fiscal years, for which data 

are available.

(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 part 668, of 

less than 5 percent for the single most recent fiscal year 

for which data are available; or

(C) The school is not in a State.

(ii) Paragraphs (b)(8)(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 (A) or (B), as applicable.

(iii) Paragraph (b)(8)(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 
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subpart M or subpart N of 34 CFR part 668, that causes the 

school to no longer meet the qualifications outlined in 

that paragraph.
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Issue 8 Conforming Language

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§ 685.303 Processing loan proceeds.

* * * * *

(b) * * * 

(3) If a student does not begin attendance in the period of 

enrollment, disbursed loan proceeds must be handled in 

accordance with 34 CFR 668.21.

(4)(i) If a student is enrolled in the first year of an 

undergraduate program of study and has not previously 

received a Federal Stafford, Federal Supplemental Loans for 

Students, Direct Subsidized, or Direct Unsubsidized Loan, 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—

(A) (1) Except as provided in subparagraph (2), the The

school has a cohort default rate, calculated under subpart 

M of 34 CFR part 668, or weighted average cohort rate of 

less than 10 percent for each of the three most recent 

fiscal years for which data are available; or
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4/28/2009

(2) For loans first disbursed 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 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 Direct Loan Program cohort rate, FFEL 

cohort default rate, or weighted average cohort rate of 

less than 5 percent for the single most recent fiscal year 

for which data are available; or

(C) The school is not in a State.

(ii) Paragraphs (b)(4)(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 (A) or (B), as applicable.
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(iii) Paragraph (b)(4)(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 subpart M or subpart N of 34 CFR part 668, that 

causes the school to no longer meet the qualifications 

outlined in that paragraph.