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Issue Paper #1

Proposed Regulatory Language

Loans Group

Issue: Changes to the Income Contingent Repayment (ICR) Plan

Statutory Cites:   §§455(d)(1)(d) and 455(e)

Regulatory Cites: §§685.208(k) and 685.209

Summary of Issue:

Section 455(d)(1)(D) of the HEA authorizes the Secretary to offer an ICR plan with varying annual

repayment amounts based on the income of the borrower, paid over an extended period of time

prescribed by the Secretary, not to exceed 25 years. Section 455(e) authorizes the Secretary to establish

ICR plan repayment schedules through regulations. Under current regulations, the annual amount

payable under the ICR plan may not exceed 20% of a borrower’s discretionary income, and the

maximum ICR repayment period is 25 years. If a loan has not been repaid at the end of the 25‐year

period, the unpaid portion of the loan is canceled.  

The President’s “Pay As You Earn” student loan repayment initiative would cap the annual payments for

new borrowers in 2008 who receive a loan in 2012 and who repay under the ICR plan at 10% of

discretionary income, and reduce the maximum repayment period to 20 years. Any loan amount

remaining at the end of the 20‐year repayment period would be canceled.  

Loan Committee members also requested that the regulations clarify the process under which a

borrower who meets the requirement for cancellation of the unpaid portion of the loan after either 20

or 25 years would receive that benefit.  The Committee members stated that it is unclear whether

borrowers would be responsible for requesting  the cancellation when they believe they qualify or

whether ED loan servicers will track a borrower’s time in repayment under the plan and either notify

borrowers of the steps they must take to request the cancellation or that the cancellation has taken

place.    
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Issue Paper #2

Proposed Regulatory Language

Loans Group

Issue:     Changes to the Income‐Based Repayment (IBR) Plan

Statutory Cite:    §493C

Regulatory Cites: §§682.215 and 685.221

Summary of Issue:

Statutory changes

To qualify for the IBR Plan and to continue to make income‐based payments under that plan, a borrower

must have a partial financial hardship. Under the law and regulations that currently govern IBR , a

borrower is considered to have a partial financial hardship if the annual amount due on the borrower’s

eligible William D. Ford Federal Direct Loan (Direct Loan) and Federal Family Education Loan (FFEL)

Program loans, as calculated based on a 10‐year standard repayment plan, exceeds 15% of the

difference between the borrower’s adjusted gross income (AGI) and 150% of the annual poverty

guideline amount for the borrower’s family size. During any period when a borrower repaying under the

IBR Plan has a partial financial hardship, the borrower’s monthly loan payment may not exceed 15% of

the difference between the borrower’s AGI and 150% of the poverty guideline amount for the

borrower’s family size, divided by 12.  

Currently, the maximum repayment period under the IBR Plan is 25 years. A borrower who has

participated in the IBR Plan qualifies for forgiveness of any remaining loan balance after making the

equivalent of 25 years of payments through a combination of qualifying monthly payments and periods

of economic hardship deferment.  

The SAFRA Act included in the Health Care and Reconciliation Act of 2010 (Public Law 111‐152) amended

§493C to make the following changes to the IBR Plan for new borrowers on or after July 1, 2014:

• The percentage used in the formula for determining whether a borrower has a partial financial

hardship and for calculating the maximum IBR monthly payment amount during periods of

partial financial hardship, as described above, is 10% rather than 15%.  

• The maximum repayment period under the IBR Plan is 20 years rather than 25 years. Borrowers

will qualify for loan forgiveness after making the equivalent of 20 years of payments through a

combination of qualifying monthly payments and periods of economic hardship deferment.

The changes made by the HCERA apply only to new borrowers on or after July 1, 2014. For all other

borrowers repaying under IBR, the current IBR Plan requirements in these areas will continue to apply.  
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The Department will incorporate the SAFRA Act changes for new borrowers in the Direct Loan and FFEL

program IBR Plan regulations.

Other changes

• Annual IBR partial financial hardship assessment

Under current regulations, a borrower’s loan holder determines whether a borrower has a

partial financial hardship to initially qualify for the IBR Plan and annually thereafter, based on

the date the borrower was initially determined eligible for IBR, for each year the borrower

remains on IBR. To make the initial and annual determinations, the loan holder asks the

borrower to provide documentation of the borrower’s AGI (or consent for the Internal Revenue

Service to disclose the borrower’s AGI to the loan holder) or, in some cases, alternative

documentation of the borrower’s income. Borrowers are also required to provide an initial and

annual certification of their family size.  

If a borrower who is repaying under IBR does not provide the annual income information

required to determine whether the borrower continues to have a partial financial hardship, the

borrower may remain on the IBR Plan, but the borrower’s monthly loan payment is recalculated

and is no longer based on the borrower’s income. The recalculated payment is the amount the

borrower would pay under a 10‐year standard repayment plan, based on the amount owed on

the borrower’s eligible loans at the time the borrower began repayment on the loans under IBR.

The repayment period based on the recalculated payment may exceed 10 years. If a borrower

does not annually certify family size, the loan holder assumes a family size of one.  

Current regulations do not require loan holders to notify borrowers in advance of the annual

requirement to provide income information and certify family size, nor do they specify a

timeframe for the borrower to provide the required information before the borrower’s payment

is recalculated. The Department has received public comments indicating that not all loan

holders notify borrowers in advance of the annual documentation requirement, and that there

are also inconsistencies in the amount of time that loan holders allow for borrowers to provide

the required information before recalculating their IBR payments. As a result, some borrowers

who still have a partial financial hardship are placed on the recalculated IBR payment because

they were not aware that it was time for their annual re‐evaluation, or because they were not

given sufficient time to provide the required income documentation.

• Repayment options for borrowers who leave the IBR Plan  

The law and regulations provide that a borrower who no longer wishes to repay under the IBR

Plan must pay under the standard repayment plan, but do not address a borrower’s options for

changing to a different repayment plan after leaving IBR and initially being placed on the

standard repayment plan. Section 428(b)(1)(D)(ii) of the HEA provides that a FFEL Program

borrower may change repayment plans annually. Section 455(d)(3) of the HEA provides that a

Direct Loan Program borrower may change repayment plans under terms and conditions
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established by the Secretary. To acknowledge both the statutory requirement in §493C that a

borrower who leaves the IBR Plan must repay under the standard repayment plan and the other

statutory provisions cited above that allow a borrower to change repayment plans, the

Department has issued subregulatory guidance stating that a borrower who leaves the IBR Plan

and is placed on the standard repayment plan may change to a different repayment plan after

making one full payment under the standard repayment plan. However, the Department has

received comments indicating that many borrowers and loan holders are not aware of this

policy, resulting in inconsistent treatment of borrowers. The Department will propose to reflect

the subregulatory guidance in the regulations.

• Process for Borrower Receipt of Forgiveness After 20 or 25 Years of Repayment

The law and regulations provide that a borrower qualifies for forgiveness of any remaining loan

balance after making the equivalent of 25 years of payments (20 years for new borrowers on or

after July 1, 2014) through a combination of qualifying monthly payments and periods of

economic hardship deferment.  Loan Committee members requested that the regulations clarify

the process under which a borrower who meets the requirements for loan forgiveness of the

unpaid portion of the loan would receive that benefit.  The Committee members stated that it is

unclear whether borrowers would be responsible for requesting the forgiveness when they

believe they qualify or whether lenders/loan servicers would be required to track a borrower’s

time in repayment for this purpose and either notify borrowers of the steps they must take to

request the forgiveness or that the cancellation has taken place.  
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Issue Paper #3

Proposed Regulatory Language

Loans Group

Issue: FFEL Lender Repayment Disclosures: Borrowers Who Are Having Difficulty

Making Payments and Borrowers Who Are 60‐Days Delinquent

Statutory Cite:    §433(e)(3)

Regulatory Cite: §682.205(c)(4) and (5)

Summary of Issue:

Lenders in the FFEL program must provide a repayment disclosure to borrowers who notify the lender

that they are having difficulty making payment and those who are 60 days delinquent in making

required student loan payments.

Current regulations stipulate that the disclosure to borrowers who are having difficulty making

payments must be provided each time the borrower contacts the lender and must provide the borrower

with a description of the repayment plans available to the borrower and how the borrower may request

a change in repayment plan; a description of the requirements for requesting forbearance on the loan

and any associated costs; and a description of the options available to the borrower to avoid default and

any associated fees or costs.   

The 60‐day delinquent notice must be sent within five days of the date the borrower becomes 60 days

delinquent. For this purpose, five days means five calendar days. The notice must include: the date on

which the loan will default if no payment is made; the minimum payment the borrower must make as of

the date of the notice to avoid default (including the amount required to bring the loan current or to pay

it in full); a description of the options available to the borrower to avoid default (including deferment

and forbearance) and any fees and costs associated with those options; any options for discharging the

loan; and any additional resources, including ED’s Office of the Ombudsman, that may be available to

the borrower for advice and assistance on loan repayment.  

FFEL lenders and lender servicers have noted that because disclosure notices are often system‐

generated and sent automatically on a fixed schedule, in some cases the 60‐day delinquency disclosure

may not be sent until more than five calendar days after the 60th day of delinquency, in violation of the

regulations. For example, if a borrower’s 60th day of delinquency falls on a weekend, but a lender’s

system generates disclosures only on business days, the 60‐day delinquency disclosure may not be sent

within the regulatory timeframe.

For the required disclosure to borrowers who are having difficulty making payment, the lenders and

lender servicers have also noted that the requirement to generate a disclosure as a result of every

borrower contact is redundant and confusing to the borrower if contact with the borrower, whether

borrower initiated as the result of an earlier disclosure or the product of lender outreach efforts, has
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addressed the borrower’s repayment problem.  The Loan Committee agreed to examine the timing and

triggering mechanism for this required disclosure when borrower contact has already addressed the

borrower’s repayment difficulty.   
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Issue Paper #4

Proposed Regulatory Language  

Loans Group

Issue: Forbearance Provisions for Borrowers Receiving Department of Defense Student

Loan Repayment Benefits  

Statutory Cite:    §428(c)(3)

Regulatory Cites: §§682.211(h)(2)(ii)(B) and 685.205  

Summary of Issue:   

Section 428(c)(3)(A)(i)(IV) of the HEA specifies that forbearance must be granted to FFEL borrowers who

are eligible for and will receive partial repayment on his or her FFEL loans under the Department of

Defense (DOD) repayment benefit program authorized in section 2174 of title 10, United States Code for

service in the Armed Forces. This mandatory forbearance is reflected in 34 CFR 682.211(h)(2)(ii)(B) of

the FFEL regulations. The same HEA provision also applies to Direct Loan borrowers, but is not included

in the Direct Loan forbearance regulations in 34 CFR 685.205. In addition, commenters have requested

that this same forbearance provision be applied to borrowers receiving student loan repayment benefits

under other DOD student loan repayment programs.  
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Issue Paper #5

Proposed Regulatory Language  

Loans Group

Issue: Borrowers who are Delinquent when Authorized Forbearance is Granted  

Statutory Cite:    §428(c)(3)

Regulatory Cites: §§682.211(f) and 685.205(b)

Summary of Issue:

FFEL lenders are authorized to grant administrative forbearance, a form of forbearance that does not

require documentation from the borrower, at the end of a deferment period if the borrower was

delinquent on repayment of the loan at the beginning of the deferment period. This policy ensures that

the borrower is current on the loan when he or she resumes making payments upon conclusion of the

deferment. The first payment after the end of the deferment must be due no later than 60 days after

the end of the deferment. FFEL lenders are not similarly authorized to grant administrative forbearance

if the borrower is delinquent at the beginning of a period of non‐mandatory authorized forbearance.

Unless the borrower provides a basis for the lender to extend the authorized forbearance period

retroactively to eliminate the delinquency that existed at the beginning of the forbearance period, the

borrower will remain delinquent at the end of the authorized forbearance period. Periods of

administrative forbearance and authorized forbearance generally involve capitalization of accrued,

unpaid interest unless the borrower pays the accruing interest during the authorized forbearance

period.  

In the Direct Loan program, the circumstances under which ED may grant administrative forbearance

without requiring documentation from the borrower under 34 CFR 685.205(b) include, but are not

limited to, periods of delinquency that exist when a borrower enters a period of authorized deferment.

Because the list of circumstances under which ED may grant administrative forbearance to Direct Loan

borrowers is not exclusive, ED may grant administrative forbearance to reduce or eliminate a

delinquency that exists when a borrower enters a period of authorized forbearance on a Direct Loan.

Commenters have asked ED to authorize FFEL lenders to grant administrative forbearance to FFEL

borrowers under the same circumstances.  
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Issue Paper #6

Proposed Regulatory Language  

Loans Group

Issue: Forbearance for Post‐270 day Defaulted Loan Borrowers Prior to Lender Claim

Payment or Transfer to ED Default Collections

Statutory Cite:    §428(c)(3)

Regulatory Cites: §§682.211(f)(2) and 685.205

Summary of Issue:

The HEA provides that a Direct Loan or FFEL borrower is in default on repayment of a loan that is

repayable in monthly installments if the borrower fails to make scheduled payments when due and that

failure persists for 270 days. Even after a borrower is in default on a loan, the Department of Education

(ED) and FFEL lenders may work with borrowers to eliminate the default or reduce the borrower’s level

of delinquency through a deferment or forbearance before the FFEL lender must submit a default claim

to the guaranty agency or the ED loan servicer transfers the loan to ED’s Debt Collection Division. Under

34 CFR 682.211(d), as part of the forbearance agreement between the FFEL lender and the defaulted

borrower, the borrower must sign a new agreement to repay the debt, which constitutes the borrower’s

reaffirmation of his or her obligation to repay the loan. Defaulted borrowers in the Direct Loan program

are not required to sign a new repayment agreement or otherwise reaffirm the debt when forbearance

is granted under the same circumstances. Commenters requested that ED eliminate the signed

repayment agreement requirement from the FFEL regulations.
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Issue Paper #7

Proposed Regulatory Language

Loans Group

Issue: Minimum Loan Period for Transfer Students in Non‐Term and Certain Non‐

Standard Term Programs

Statutory Cite:    N/A

Regulatory Cites: §685.301(a)(9) [refers to §685.301(a)(9) as contained within the second Editorial

Note following §685.301 in 34 CFR Part 685, revised as of July 1, 2011]

Summary of Issue:

For a school that measures academic progress in credit hours and uses a semester, trimester, or quarter

system, or has terms that are substantially equal in length, with no term less than 9 weeks in length, the

minimum period for which a school may originate a Direct Loan is a single academic term.

For 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 9 weeks in length, current regulations provide that,

in general, the minimum period for which the school may originate a Direct Loan is the lesser of (1) the

length of the student’s program at the school (or the remaining portion of the program), or (2) the

academic year as defined by the school. The regulations provide an exception to this requirement only

in the case of a student who transfers into a school with credit or clock hours from another school, and

the loan period at the prior school overlaps the loan period at the new school. In this circumstance, the

new school may originate a loan for the remaining balance of the program or academic year that started

at the prior school, in an amount up to the balance of the borrower’s annual loan limit remaining after

subtracting the amount borrowed for attendance at the prior school. After this initial loan period, the

student becomes eligible for a new annual loan limit, with a new loan period corresponding to the lesser

of the program (or remaining portion of the program) or academic year at the new school.  

The exception described above was added to the Direct Loan Program regulations by a Final Rule

published on November 1, 2007 (72 FR 62014). Prior to this regulatory change, the minimum loan period

for a student who transferred into a clock hour program or non‐term credit hour program with an

overlapping loan period was, in all cases, the lesser of the length of the student’s program (or remaining

portion of the program) at the new school, or the academic year at the new school.  

The exception to the minimum loan period rule applies only if the new school accepts clock or credit

hours from the prior school. If the new school does not accept any transfer hours from the prior school,

the regulatory exception does not apply and the transfer student is limited to receiving no more than

the remaining balance under the applicable annual loan limit for the entire program or academic year at

the new school, whichever is less. The limited scope of the exception provides no benefit to most

transfer students and may in some cases discourage students from transferring to different schools.
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Issue Paper #8

Proposed Regulatory Language

Loans Group

Issue: “Reasonable and Affordable” Payment Standard for Rehabilitation of Defaulted

Direct Loan and FFEL Program Loans

Statutory Cites:   §428F(a)

Regulatory Cites: §§682.405(b)(1)(iii) and 685.211(f)

Summary of Issue:

Loan rehabilitation programs authorized for borrowers who have defaulted on Direct Loan and FFEL

program loans provide that a borrower is eligible for rehabilitation if the borrower makes 9 voluntary,

reasonable and affordable payments within 20 days of the scheduled due date during 10 consecutive

months. After a Direct Loan borrower makes the qualifying payments, the borrower’s loan is

rehabilitated when the loan is transferred from the Department of Education’s (ED) Debt Collection

Division back to ED loan servicing to resume normal repayment. A FFEL borrower’s defaulted loan is not

rehabilitated under §428F(a) of the Higher Education Act until the guaranty agency holding the

defaulted loan sells the loan to an eligible lender. Only then does the borrower return to normal

repayment on the FFEL program loan. Guaranty agencies are only required to sell loans to rehabilitate

them if such a sale “is practicable.” If a guaranty agency is unable to sell the loan, the loan remains in

default status and the borrower continues repaying the guaranty agency that holds the loan.  

Section 428F(a)(1)(A) of the HEA specifies that under a rehabilitation agreement with a borrower, the

guaranty agency and ED may not demand a monthly payment amount that is more than is reasonable

and affordable based on a borrower’s total financial circumstances. The FFEL program regulations at 34

CFR 682.405(b)(1)(iii) provide that a guaranty agency’s determination of reasonable and affordable for

purposes of loan rehabilitation must include consideration of the borrower’s (and spouse’s, if

applicable) disposable income and reasonable and necessary expenses of the borrower (and spouse and

other dependents, if applicable). These expenses include, but are not limited to, housing, utilities, food,

medical costs, work‐related expenses, dependent care costs and other Title IV repayment. A guaranty

agency may not establish a minimum payment amount if the agency determines that a smaller amount

is reasonable and affordable. If the agency determines that the reasonable and affordable payment is

less than $50, or the monthly accrued interest on the loan the agency must include documentation in

the borrower’s file of the basis for the determination. In the Direct Loan Program, 34 CFR 685.211(f) also

provides that payments under a rehabilitation agreement must be reasonable and affordable, but the

Direct Loan regulations do not prescribe the factors that ED must consider when determining what

constitutes a reasonable and affordable payment.  

The income‐based repayment (IBR) plan, which provides for a monthly loan payment that is affordable

based on a borrower’s income and family size, became available to borrowers in the Direct Loan and
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FFEL programs on July 1, 2009. Borrowers who have rehabilitated their defaulted loans may request to

repay under the IBR plan once they return to normal repayment on the loan. Commenters have

recommended that ED use the IBR repayment formula in 34 CFR 682.215(b)(1) to determine what is a

reasonable and affordable payment for loan rehabilitation purposes to simplify and standardize the

process for borrowers. Note, however, that there is no minimum payment amount under IBR.  In some

cases, a borrower’s calculated monthly payment under IBR may be $0.00.
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Issue Paper #9

Proposed Regulatory Language

Loans Group

Issue: Rehabilitation of Defaulted Direct Loan and FFEL Program Loans: Treatment of

Borrowers Subject to Administrative Wage Garnishment  

Statutory Cite:    §428F(a)

Regulatory Cites: §§682.405(a)(2)(i) and 685.211(f)

Summary of Issue:

Loan rehabilitation programs for Direct Loan and FFEL program borrowers who have defaulted on their

loans require borrowers to make 9 voluntary, reasonable, and affordable payments within 20 days of

the due date during 10 consecutive months. Payments made through administrative wage garnishment

(AWG) do not qualify as voluntary payments. Borrowers are not subject to AWG unless they have

defaulted on the loan and other efforts to collect the loan have been unsuccessful.  

For loans held by the Department of Education (ED), if a borrower is subject to AWG at the time the

borrower attempts to rehabilitate a defaulted loan, AWG continues while the borrower makes the series

of voluntary payments necessary to rehabilitate the loan. The reasonable and affordable voluntary

payments the borrower must make to qualify for rehabilitation must be over and above the payments

secured through the AWG process. The same requirements apply to guaranty agency–held defaulted

loans which are subject to AWG.   

Loan rehabilitation provides borrowers who have defaulted on a Direct Loan or FFEL program loan the

opportunity to reaffirm their intention to repay the defaulted loan and to establish a successful

repayment history sufficient to support returning the borrower to normal repayment, with its associated

benefits, and to remove the record of the default from the borrower’s credit report. For AWG defaulted

borrowers, ED is examining whether concurrent voluntary borrower payments and involuntary AWG

payments should continue for the entire period it takes the borrower to qualify for loan rehabilitation

and, given the greater risk of re‐default associated with these borrowers, whether any relaxation of the

current double payment requirement should be limited.
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Issue Paper #10

Proposed Regulatory Language

Loans Group

Issue: Participation Rate Index Appeal for Single Cohort Default Rate Loss of Eligibility

to Participate in the Direct Loan Program

Statutory Cites:   N/A

Regulatory Cites: Subpart N‐Cohort Default Rates; §§668.206(a)(1) and 668.214(a)(1)

Summary of Issue:

The HEOA of 2008 amended the definition of “cohort default rate” in section 435(m) of the HEA to

provide for the calculation of a three‐year institutional cohort default rate (CDR). The HEOA specified a

transition period for the use of three‐year CDRs as a basis for institutional CDR sanctions, and provides

that no sanctions will be imposed on institutions using a three‐year CDR until three consecutive years of

three‐year CDRs are available. Sanctions will be imposed using three consecutive years of three‐year

CDRs for the first time in late 2014. Until that time, two‐year CDRs will continue to be the basis for

institutional CDR sanctions.  

Section 435(a) (2) of the HEA was also amended, increasing the threshold for CDR sanctions to 30% for

FY 2012 and beyond, amending existing CDR institutional data adjustment and appeal criteria, and

adding new appeal criteria. The “participation rate index” (PRI) appeal standard specified in section

435(a)(8) of the HEA was increased from 0.0375 to 0.0625 for fiscal years beginning on or after October

1, 2011. Under the PRI provision, an institution may demonstrate that it should not be subject to

statutory CDR‐related sanctions because the number of borrowers that make up its CDR are a small part

of the number of its regular students who were enrolled on at least a half‐time basis. The amendment

made by the HEOA permits schools to have a higher percentage of borrowers than before and still

qualify for relief from sanctions through a PRI appeal.

In addition to the statutory CDR sanctions, the Department’s CDR regulations have always included a

regulatory sanction if an institution’s CDR for a single year exceeds a certain threshold. The 40%

threshold that has been applicable to two‐year CDRs in the regulations has been retained as the single‐

year rate threshold for three‐year CDR sanctions under Subpart N of Part 668 of the Department’s

regulations. The Department’s CDR regulations have also provided for a PRI appeal to the regulatory

single‐year CDR sanction. The PRI appeal for a single‐year CDR sanction is included in the regulations

governing three‐year CDRs, but, as commenters have pointed out, the PRI remains the 0.06015

applicable to PRI appeals of two‐year CDR single‐year rate sanctions and was not adjusted to reflect the

increased PRI in the HEA.
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Issue Paper #11

Proposed Regulatory Language

Loans Group

Issue: Repeal of unnecessary FFEL Program regulations

Statutory cites:   HEA Part B

Regulatory cites: 34 CFR Part 682

Summary of issue:

The SAFRA Act included in the Health Care and Education Reconciliation Act of 2010 (Public Law 111‐

152) amended Part B of the HEA to provide that no new loans could be made under the FFEL Program

after June 30, 2010. Accordingly, all new Stafford, PLUS, and Consolidation loans have been made

through the Direct Loan Program since July 1, 2010. As a result of this change, certain sections of the

FFEL Program regulations (or portions of certain sections) containing provisions related to the making

and disbursement of new loans may no longer be needed. Certain other provisions may also be

obsolete. Removal of these unnecessary provisions would simplify the FFEL Program regulations.

The FFEL Program regulations also require minor technical and conforming changes in various areas to

correct errors and reflect the impact of the SAFRA Act. There may also be areas of the FFEL Program

regulations that could be made easier to read by restructuring the current regulatory language, without

changing the content (e.g., deferment provisions).  
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Issue Paper #12

Proposed Regulatory Language

Loans Group

Issue: Modification of Direct Loan Program regulations

Statutory cites:   HEA Part D

Regulatory cites: 34 CFR Part 685

Summary of issue:

The current Direct Loan Program regulations include cross‐references to the FFEL Program regulations

for certain provisions that apply in both loan programs (in particular, definitions of various terms and

the eligibility requirements for certain deferments). Adding these provisions to 34 CFR 685 would allow

the Direct Loan Program regulations to stand on their own, eliminating the need to refer to 34 CFR 682

for terms and conditions that apply to Direct Loans. The current Direct Loan Program regulations also

include certain provisions that are no longer consistent with current procedures used in administering

the Direct Loan Program and may need to be updated (e.g., definitions of the different school

origination options).

The Direct Loan program regulations also require minor technical and conforming changes in various

areas to correct errors and reflect the impact of the SAFRA Act that was included in the Health Care and

Education Reconciliation Act of 2010 (Public Law 111‐152). The SAFRA Act amended Part B of the HEA to

provide that no new loans could be made under the FFEL Program after June 30, 2010. There may also

be areas of the Direct Loan Program regulations that could be made easier to read by restructuring the

current regulatory language, without changing the content (e.g., deferment provisions).  
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Issue Paper #13

Proposed Regulatory Language

Loans Group

Issue:     Total and Permanent Disability Discharge: Single Application Process

Statutory Cites:   §§437(a), 464(c)(1)(F), and 464(k)

Regulatory Cites: §§674.61(b), 682.402(c), 682.402(g), 682.402(h), 682.402(k), 682.402(r),

685.213, and 686.42(B)

Summary of Issue:

Currently, a Title IV loan borrower applying for a total and permanent disability (TPD) discharge must

submit a discharge application to each of the borrower’s loan holders. The loan holder then makes an

initial determination of the borrower’s eligibility for a TPD discharge. If the loan holder determines that

the discharge application supports the conclusion that the borrower appears to qualify for a TPD

discharge, the holder assigns the loan to the U.S. Department of Education (ED). For non‐defaulted FFEL

Program loans, both the loan holder and the guaranty agency must agree that the borrower appears to

qualify for a TPD discharge before the loan is assigned to ED. After accepting the assignment, ED makes

the final determination of whether the borrower qualifies for a discharge.   

For Direct Loans and other Title IV loans held by ED at the time the borrower applies for a TPD

discharge, the initial and final determinations of eligibility are made solely by ED. ED also makes all

eligibility determinations for TEACH Grant recipients who apply for a TPD discharge of their TEACH Grant

service obligations.  

Under a streamlined TPD discharge process, a borrower would submit one TPD discharge application

directly to ED. For borrowers with multiple Title IV loans, the process would be greatly simplified. Upon

receipt of a TPD application, ED would check the borrower’s loan history in NSLDS to make sure all loans

that would be eligible for a discharge are included in the TPD discharge review process.

The advantages of a single TPD discharge application process would include the following:   

• Simplification of the application process for borrowers.   

• A single point of contact for borrowers throughout the TPD discharge process.

• Reduction in the length of time needed to process TPD discharge applications.

• More consistency in TPD eligibility determinations.

However, there may also be disadvantages to implementing a single application process. All TPD

applications will now be reviewed by ED regardless of their completeness. ED will be required to

conduct more follow‐up with TPD applicants and their certifying physicians to correct simple errors that

currently the loan holder corrects before assigning the loan to ED. A single application process would

also remove one level of review of TPD discharge applications.   
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In addition, issues relating to the status of the loan during the TPD review process—such as if and when

the loan is assigned to ED and the timing of lender claim payments and guaranty agency reinsurance

payments in the FFEL program—would need to be addressed in the regulations.
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Issue Paper #14

Proposed Regulatory Language

Loans Group

Issue:     Total and Permanent Disability Discharge: Borrower Notification of Denial  

Statutory Cites:   §§437(a), 464(c)(1)(F), and 464(k)

Regulatory Cites: §§674.61(b)(3)(ii), 682.402(c)(3)(iii), and 685.213(b)(2)(iii)

Summary of Issue:

The regulations for the Perkins Loan, FFEL and Direct Loan programs governing discharges for total and

permanent disability (TPD) state that if the U.S. Department of Education (ED) determines that a

borrower does not qualify for a TPD discharge, ED notifies the borrower that the application for a TPD

discharge has been denied, and instructs the borrower to resume making payments on the loan. The

denial letters that ED currently sends to borrowers provide additional information beyond what is

specified in the regulations, such as the reason for the denial and an explanation of how a borrower may

request that the TPD discharge application be re‐evaluated.   

ED has received public comment recommending that the regulations governing TPD denials reflect the

information currently  included in ED’s TPD discharge denial letters and include additional information

(beyond what is currently included in the letters) that might be helpful to borrowers.    
20

Issue Paper #15

Proposed Regulatory Language

Loans Group

Issue: Total and Permanent Disability Discharge: Post‐Discharge Monitoring of

Employment Earnings  

Statutory Cites:   §§437(a), 464(c)(1)(F), and 464(k)

Regulatory Cites: §§674.61(b)(5)(i), 682.402(c)(5)(i)(A), and 685.213(b)(4)(i)(A)  

Summary of Issue:

After a total and permanent disability discharge has been granted, the borrower enters a 3‐year post

discharge monitoring period that begins on the date the loan was discharged. If, for any year during this

period, the borrower has annual earnings from employment that exceed the poverty guideline amount

for a family of two, the discharged loan is reinstated. A loan may also be reinstated if the borrower fails

to provide required documentation of employment earnings to the U.S. Department of Education (ED)

during the 3‐year post‐discharge monitoring period.  

Because the 3‐year post‐discharge monitoring period begins on the discharge date, in most cases it is

necessary for ED to obtain employment earnings information for two partial calendar years at the

beginning and end of the 3‐year period. For example, if a discharge was granted on June 30, 2011,

documentation of employment earnings will be needed for the periods July 1 to December 31, 2011, all

of 2012, all of 2013, and January 1, to June 30, 2014.

Documentation of employment earnings (or lack of earnings) is difficult to obtain for partial calendar

years. Borrowers have not filed income tax returns for a calendar year that isn’t over; social security

earnings statements only provide income information on a calendar‐year basis; and other

documentation of employment earnings that a borrower could provide for a partial calendar year may

be inconclusive. Monitoring a borrower’s post‐discharge employment earnings for three complete

calendar years beginning on January 1st of the year after the discharge was granted would make it easier

for borrowers to provide employment earnings documentation to ED, and would reduce the number of

borrowers whose loans are reinstated due to the borrower’s failure to provide such documentation.
21

Issue Paper #16

Proposed Regulatory Language

Loans Group

Issue:     Title IV Closed School Loan Discharge

Statutory Cites:   §§437(c)(1) and 464(g)

Regulatory Cites: §§674.33(g), 682.402(d), and 685.214

Summary of Issue:

Under current regulations, borrowers in the Federal Perkins Loan, Direct Loan, and FFEL programs (and

PLUS loan endorsers) may receive a loan discharge if the borrower (or the student on whose behalf a

parent borrowed) could not complete the program of study at the school because the school closed

while the borrower (or student) was enrolled, or the borrower (or student) withdrew from the school no

more than 90 days before the school closed.  

The regulations provide that the 90‐day period may be extended if the U.S. Department of Education

(ED) determines that exceptional circumstances related to the school closure justify an extension. The

school’s closure date is the date the school ceases to provide educational instruction in all of its

programs, as determined by ED. For closed school discharge purposes a “school” is 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 for title IV purposes.  

Public commenters suggested that the 90‐day window for student withdrawal prior to a school’s closure

date may be insufficient, because, in some cases, there may be indications of a school’s pending closure

that may prompt a student to withdraw more than 90 days prior to the school’s identified closure date.

The commenters also noted that ED has never specified or provided examples in the regulations of the

exceptional circumstances under which ED would extend the 90‐day window.
22

Issue Paper #17

Proposed Regulatory Language

Loans Group

Issue: Satisfactory Repayment Arrangements on Defaulted Title IV Loans for Borrowers

who also Rehabilitate the Loan

Statutory Cite:    §428F(b)

Regulatory Cites: §§674.2(b), 674.39(a)(2), 682.200(b), 682.405(a)(2)(i) and 685.102(b)

Summary of Issue:  

A borrower who has defaulted on a Title IV loan may regain eligibility for Title IV aid by making

satisfactory repayment arrangements on the defaulted loan. For this purpose, satisfactory repayment

arrangements are defined as making six consecutive on‐time monthly payments. A borrower may regain

Title IV eligibility by making satisfactory repayment arrangements on a defaulted loan only once.   

Defaulted borrowers also have the option of rehabilitating a defaulted Title IV loan by making a series of

on‐time, voluntary, full monthly payments as part of a rehabilitation agreement with the loan holder. To

rehabilitate a loan  in the Direct Loan or FFEL programs, borrowers are required to make 9 reasonable

and affordable payments within 20 days of the due date during 10 consecutive months. In the Perkins

Loan program, to rehabilitate a loan, a borrower is required to make 9 consecutive monthly payments.

In the course of making loan rehabilitation payments, a borrower could also make the six consecutive

on‐time monthly payments necessary to regain eligibility for Title IV aid. However, a borrower who is

working to rehabilitate a defaulted loan might not have plans to return to school or to seek additional

Title IV aid at the time the borrower makes the rehabilitation payments.  

Under the Department of Education’s current policy on the one‐time opportunity for making satisfactory

repayment arrangements, if a borrower re‐defaults on a loan that was previously rehabilitated, the

borrower is not considered to have already used up the  one‐time opportunity to make satisfactory

repayment arrangements. However, we understand that some program participants have interpreted

the law to provide that a borrower automatically makes satisfactory repayment arrangements at the

time the borrower rehabilitates a defaulted loan even if the borrower has no intent to receive additional

Title IV aid at that time and is unaware that he or she is using the one opportunity to make satisfactory

repayment arrangements afforded under the law. Under this interpretation, if a borrower re‐defaults on

a previously rehabilitated loan, the borrower has no other opportunity to make satisfactory repayment

arrangements to regain Title IV eligibility.

ED is examining whether the six consecutive, on‐time, monthly payments made as part of a

rehabilitation agreement should count as satisfactory repayment arrangement payments only if the

borrower and the loan holder agree that the payments are also intended to be satisfactory repayment

arrangements to regain Title IV aid eligibility and the borrower applied for and received such aid within a

reasonable time after making the six payments.  
23

Issue Paper #18

Proposed Regulatory Language

Loans Group

Issue: School Enrollment Status Reporting Requirements

Statutory Cites:   §§§428(b)(1)(P), 454(a)(1)(E)(i), and 487(a)(3) and (5)

Regulatory Cites: §§682.610(c) and 685.309(b)

Summary of Issue:

Current FFEL Program regulations require a school, upon receipt of a student status confirmation report

from the Secretary or a similar report from a guaranty agency, to complete and return the report to the

Secretary or guaranty agency, as appropriate. Unless the school expects to submit its next student status

confirmation report to the Secretary or guaranty agency within the next 60 days, current regulations

require a school to notify the guaranty agency or lender within 30 days if the school discovers that a

student who received a FFEL Program loan has changed his or her permanent address, or discovers that:

(1) a FFEL Program loan has been made to or on behalf of a student who enrolled at the school, but who

has ceased to be enrolled on at least a half‐time basis; (2) a loan has been made to or on behalf of a

student who has been accepted for enrollment, but who failed to enroll on at least half‐time basis; or (3)

a loan has been made on behalf of a full‐time student who has ceased to be enrolled on a full‐time basis.  

Current Direct Loan Program regulations include comparable requirements for schools to submit

student status confirmation reports and address and enrollment status changes to the Secretary, except

that there is no requirement for a school to report that a student who received a Direct Loan has ceased

to be enrolled on a full‐time basis. In addition, current Direct Loan Program regulations specify that the

Secretary provides student status confirmation reports to a school at least semi‐annually, and that the

Secretary may provide these reports in either paper or electronic format.  

Current Perkins Loan regulations do not include comparable requirements for enrollment status

reporting to the Department of Education for Perkins Loan borrowers. Some Perkins Loan participating

schools and Perkins loan servicers have indicated that having enrollment information on Perkins

borrowers from all schools would improve loan servicing in the Perkins program.   

The regulations for both the FFEL and Direct Loan programs reflect terminology and procedures that are

no longer consistent with current practices (e.g., the term “student status confirmation report,” the

means by which schools report enrollment information, and the references in the Direct Loan Program

regulations to the frequency with which the Secretary provides student status confirmation reports and

the format of those reports). In addition, the FFEL Program requirement for a school to report that a

student has ceased to be enrolled on a full‐time basis reflects an obsolete eligibility requirement.  
24

Issue Paper #19

Proposed Regulatory Language

Loans Group

Issue: Federal Perkins Loan Graduate Fellowship Deferment Eligibility

Statutory Cite: §464 (c)(2)(A)(i)(II)

Regulatory Cite: §674.34(f)  

Summary of Issue:

As specified in the Federal Student Aid (FSA) Handbook, the Department  of  Education (ED) uses the

eligibility criteria in §682.210(d) of the FFEL program regulations (which also apply to Direct Loan

Program borrowers) to determine if a Perkins borrower qualifies for a graduate fellowship deferment

(2010‐11 FSA Handbook, p. 6‐68). Perkins schools and their loan servicers are expected to use the same

criteria in making determinations of graduate fellowship deferment eligibility. Using the same eligibility

criteria in the Perkins program that is used in the FFEL and Direct Loan programs provides for consistent

borrower treatment across the three Title IV loan programs. However, the Perkins regulations do not

currently include or even cross‐reference the FFEL graduate fellowship deferment eligibility criteria.

Rather, Perkins regulations simply state that to qualify for a graduate fellowship deferment a borrower

“must provide the institution certification that the borrower has been accepted for or is engaged in full‐

time study in the institution's graduate fellowship program.”

Under the FFEL program regulations, an eligible graduate fellowship program is a program that:

• Provides sufficient financial support to allow for full‐time study for at least six months;

• Requires a written statement from each applicant explaining the applicant's objectives before

the award of that financial support;

• Requires a graduate fellow to submit periodic reports, projects, or evidence of the fellow's

progress; and

• In the case of a course of study at a foreign university, accepts the course of study for

completion of the fellowship program.

The FFEL regulations also require a statement signed by an official of the program certifying:

• That the borrower holds at least a baccalaureate degree conferred by an institution of higher

education;

• 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

• The borrower's anticipated completion date in the program.

ED is considering adding these criteria to the Perkins graduate fellowship deferment regulations.
25

Issue Paper #20

Proposed Regulatory Language

Loans Group

Issue: Social Security Number Requirement for Assignment of Federal Perkins Loans to

the Department of Education  

Statutory Cite:    N/A

Regulatory Cite: §674.50(e)(1)  

Summary of Issue:

Under current regulations, the Department of Education (ED) does not accept assignment of a Perkins

Loan if the school assigning the loan cannot provide a Social Security Number (SSN) for the borrower.

The exception in §674.50(e)(1) for loans assigned through mandatory assignment pursuant to

§674.8(d)(3) does not apply because ED no longer has the authority under the HEA to require

mandatory assignment of Perkins Loans under this regulatory provision.

Schools participating in the Perkins Loan program are required to liquidate their Perkins Loan portfolios

and assign all of their outstanding loans to ED if they close, undergo changes of ownership, voluntarily

leave the Perkins Loan program, or are terminated from the program. In the early years of the Perkins

Loan Program, schools were not required by ED to obtain SSNs from borrowers when awarding and

servicing Perkins Loans. As a result, schools often do not have SSNs for older loans in their Perkins

portfolios that were made during this period and that have proven over time to be uncollectible.

Because current regulations require schools to provide the SSNs of borrowers when assigning loans to

ED, schools that are liquidating their Perkins Loan portfolios are unable to assign these loans. Since ED

did not require collection of the borrowers’ SSNs when the loans were awarded, schools are not

considered to be out of compliance with Perkins Loan program requirements in this situation and are

not required to reimburse their Perkins Loan funds for the amount of these loans. In addition, schools

have only limited authority to write‐off federal student loan assets. Schools may only write‐off Perkins

Loans that have an outstanding balance of less than $50. Thus, these Perkins loans remain uncollectible

by either the school or ED, resulting in no return to the school’s Perkins fund to make new loans and no

return to the taxpayers.  

ED has worked over the last few years to streamline the Perkins liquidation process to facilitate required

liquidations and encourage voluntary liquidations. ED is unable to complete full liquidation of some

schools’ Perkins Loan portfolios without in some way relaxing the SSN requirement for Perkins Loans

assignments.   
26

Issue Paper #21

Proposed Regulatory Language

Loans Group

Issue: Federal Perkins Loan Cancellation Rate Progression Across Cancellation

Categories

Statutory Cite:    §465(a)(3)(A)

Regulatory Cites: §§674.52, 674.53(d), 674.56(h), 674.57(c)(2), 674.59(c)(2) and 674.60(b)

Summary of Issue:

Perkins Loan Program borrowers may receive cancellation of their Perkins Loans under various

cancellation categories. The cancellation categories include teaching in certain schools or subject areas,

employment in an eligible position in a child or family service agency, employment in an eligible position

in a law enforcement agency, and several other categories related to public service. The cancellation

rates are progressive, with a percentage of the principal balance of the borrower’s loan cancelled for

each year of eligible service. The cancellation rates are generally 15% for the 1st and 2nd years of service,

20% for the 3rd and 4th years of service, and 30% for the 5th year of service.

If a borrower changes jobs, and, as a result, switches from one cancellation category to another, the

cancellation rate progression starts over at the first ‐year service rate for the new cancellation category.

For example, if a borrower receives cancellation at the 15% rate for each of the first two years of

employment as a teacher, and then changes to a different job that qualifies the borrower for a child or

family service cancellation, the borrower will receive a 15% cancellation for his or her first year of

service as an employee of a child or family service agency, rather than the 20% cancellation the

borrower would have received for a 3rd year in an eligible teaching position.  

The requirement that a borrower who switches cancellation categories start over at the first‐year

cancellation rate is a longstanding policy, based on ED’s interpretation of the statutory and regulatory

provisions governing cancellations in the Perkins Loan program. However, this policy is not explicitly

addressed in the statute or regulations.  
27

Issue Paper #22

Proposed Regulatory Language

Loans Group

Issue: Federal Perkins Loan Economic Hardship Deferment Debt‐to‐Income Ratio

Provision

Statutory Cite:    §435(o)

Regulatory Cite: §674.34(e)(4)  

Summary of Issue:

The College Cost Reduction and Access Act (CCRAA) amended the definition of “economic hardship” in

§435(o) of the HEA by eliminating §435(o)(1)(B), which included a borrower who is working full‐time and

has a Federal educational debt burden that equals or exceeds 20 percent of the borrower’s adjusted

gross income (AGI), if the difference between the borrower’s AGI and the borrower’s Federal debt

burden is less than 220 percent of either the annual minimum wage or the poverty line.

The Department of Education published final regulations to implement the CCRAA on October 23, 2008.

The final regulations eliminated the debt‐to‐income economic hardship deferment category from the

Perkins, Direct Loan and FFEL regulations that was based on former §435(o)(1)(B) of the HEA. The final

regulations also eliminated a similar debt‐to‐income economic hardship deferment category for a

borrower who is working less than full‐time from the Direct Loan and FFEL regulations, but inadvertently

retained this category in the Perkins regulations, thus creating a disparity between the economic

hardship deferment eligibility criteria in the Perkins program and the eligibility criteria in the Direct Loan

and FFEL programs.
28

Issue Paper #23

Proposed Regulatory Language

Loans Group

   

Issue: Federal Perkins Loan Program:  Break in Cancellation Service Due to a Condition

Covered Under the Family and Medical Leave Act (29 U.S.C. 2601 et. seq.)

Statutory Cites:   §§465(a)(3)(A) and 465(a)(4)

Regulatory Cites: §§674.52(b)(2), 682.216(c)(7)(ii),  and 685.217(c)(7)(ii)  

Summary of Issue:   

A Perkins borrower must perform a complete year of eligible service to qualify for a partial cancellation

of a Perkins Loan.   The year of service can either be an academic year (for teacher and early childhood

education cancellations) or 12 consecutive months (for the other cancellation categories).  Under

§674.52(b)(2) of the Perkins regulations,  a partial academic year of eligible teaching service may qualify

a  Perkins borrower for  teacher cancellation if the teacher did not complete the second half of the

academic year due to an illness or pregnancy and if the borrower’s employer considers the borrower to

have fulfilled the teacher contract for the year. For the other cancellation categories, the Perkins

regulations provide no exceptions to the requirement for a borrower to perform 12 consecutive months

of service.  

There are similar provisions in the Direct Loan and FFEL teacher loan forgiveness regulations.  To qualify

for teacher loan forgiveness, a Direct Loan or FFEL borrower must perform 5 consecutive, complete

academic years of eligible teaching service.  If the borrower 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),

the teaching service may still count as a year of eligible teaching service if the borrower’s employer

considers the borrower to have fulfilled the teacher contract requirements for that academic year.    

Conditions covered under the FMLA include:

• the birth of a child and to care for the newborn child within one year of birth;  

• the placement with the employee of a child for adoption or foster care and to care for the newly

placed child within one year of placement;  

• to care for the employee’s spouse, child, or parent who has a serious health condition;  

• a serious health condition that makes the employee unable to perform the essential functions of

his or her job;  

• any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or

parent is a covered military member on “covered active duty;” and

• to care for a covered service member with a serious injury or illness who is the spouse, son

daughter, parent, or next of kin to the employee (military caregiver leave).  
29

The Department of Education is considering replacing the Perkins exception to the complete academic

year requirement due to illness or pregnancy with the Direct Loan/FFEL exception due to a condition

covered by the FMLA.  This would provide for more consistent treatment of similarly situated borrowers

who are performing teaching service that may qualify them for either Perkins teacher cancellation or

Direct Loan/FFEL teacher loan forgiveness.  

In addition, we are considering applying the exception for a condition covered under the FMLA to the

12‐consecutive months of eligible service requirement that applies to the other Perkins cancellation

categories.   
30

Issue Paper #24

Proposed Regulatory Language

Loans Group

   

Issue: Standard for On‐Time Rehabilitation Payments in the Federal Perkins Loan

Program    

Statutory Cites:   §§428F(a)(1)(A) and  464(h)(1)(A)

Regulatory Cites: §§674.39(a)(2),  682.405(a)(2)(A)(3),  and  685.211(f)(1)

Summary of Issue:

In the FFEL and Direct Loan programs, a qualifying payment made under a loan rehabilitation agreement

must be received “within 20 days of the due date” for the payment.  In the Perkins Loan program, there

is no uniform standard for a when a payment made under a loan rehabilitation agreement must be

received.  A rehabilitation payment in the Perkins Loan program must be on‐time “as determined by the

institution.”   The Perkins regulatory language reflects the statutory language for Perkins Loan

rehabilitation payments, which requires a borrower to make “9 on‐time, consecutive monthly payments

of amounts owed on the loan as determined by the institution.”

Schools may have different standards for when a rehabilitation payment qualifies as “on‐time.”  These

different standards can be confusing for borrowers who are rehabilitating Perkins Loans from different

schools, or are rehabilitating Perkins Loans as well as FFEL or Direct Loans.   The different institutional

standards for on‐time rehabilitation payments also make it difficult for collection agencies servicing

loans held by different Perkins schools to track qualifying loan rehabilitation payments.   

Non‐federal negotiators have proposed applying the standard for on‐time rehabilitation payments used

in the FFEL and Direct Loan programs to the Perkins Loan Program.
31

Issue Paper #25

Proposed Regulatory Language

Loans Group

Issue:   FFEL Program Administrative Wage Garnishment (AWG) Hearings for Defaulted

Borrowers

Statutory Cite:    §488A

Regulatory Cite: §682.410(b)(9)  

Summary of Issue:

Section 488A of the HEA authorizes the Secretary and guaranty agencies in the FFEL program to garnish

up to 15% of a defaulted borrower’s disposable income, unless the individual consents to a greater

percentage.  Borrowers that are subject to such garnishment must be provided with a notice no less

than 30 days prior to initiation of garnishment proceedings against the borrower informing the

borrower of the nature and the amount of the debt, the intention of the guaranty agency or Secretary,

as appropriate, to initiate garnishment, and an explanation of the rights of the individual.  The borrower

is also provided with an opportunity to inspect and copy records relating to the debt, the opportunity to

enter into a written agreement to repay the debt, and an opportunity for a hearing on the existence or

amount of the debt or the terms of the repayment schedule.  

Under FFEL program regulations governing AWG hearings, the hearing may be, at the borrower’s option

oral or written.  If a borrower’s written request for a hearing is received on or before the 15th day

following the borrower’s receipt of the notice, the hearing must be conducted before any garnishment

order may be issued to the borrower’s employer.   A hearing may be requested after that date so that a

decision may be rendered within 60 days but it does not delay the issuance of the withholding order to

the employer unless the guaranty agency determines that the delay in filing the request was beyond the

borrower’s control or the agency has received information that it believes justifies delaying or cancelling

the withholding order.   

Sub‐regulatory guidance provided to guaranty agencies on the conduct of AWG hearings also provides

for the guaranty agency’s consideration of whether the rate or amount of the proposed garnishment

would result in financial hardship to the borrower or the borrower’s dependents.  This factor of

consideration is not currently reflected in FFEL program regulations.  Loan Committee members asked

that the regulations governing AWG be revised to include this as part of the hearing requirement.