**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 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 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 term-based 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 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.

* * * * *

##### § 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 term-based 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 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 subpart M **or subpart N** of 34 CFR part 668, that causes the school to no longer meet the qualifications outlined in that paragraph.

##### § 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**

(*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.

(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.

10

Issue 8 Conforming Language

5/14/2009