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Issue 8: Conforming Amendatory Language

5/5/2009

Issue 8 Conforming Amendatory Language

Team II – School-based Loan Issues

x. Section 682.604 is amended by:

A. Revising paragraph (c)(5).

B. Revising paragraph (c)(8).

The revisions read as follows:

§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 (c)(5)(ii) of 

this section, the school in which the student is enrolled 

has a cohort default rate, calculated under subpart M of 34 
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Issue 8: Conforming Amendatory Language

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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

(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) through (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-
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Issue 8: Conforming Amendatory Language

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based schools or schools with non-standard terms, 4 months; 

and

(B)(1) Except as provided in paragraph 

(c)(8)(i)(B)(2) of this section, 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.

* * * * *

x. Section 685.301(b)(8) is amended by:
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Issue 8: Conforming Amendatory Language

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A. Revising paragraph (b)(8)(i).

B. Revising paragraph (b)(8)(ii) to add the words “or 

subpart N” after the words “under subpart M”.

C. Revising paragraph (b)(8)(iii) to add the words 

“or subpart N” after the words “under subpart M”.

The revisions read as follows:

§685.301 Origination of a loan by a Direct Loan Program 

school.

* * * * *

(b) * * *

(8)(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 

(b)(8)(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;

(ii) For loan disbursements made on or after October 

1, 2011, the school in which the student is enrolled has a 
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Issue 8: Conforming Amendatory Language

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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 
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Issue 8: Conforming Amendatory Language

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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.

* * * * *

§685.303(b)(4) [Amended]

x. Section 685.303(b)(4) is amended by:

A. Redesignating paragraph (b)(4)(i)(A) as paragraph 

(b)(4)(i)(A)(1).

B. Revising paragraph (b)(4)(i)(A)(1) to read as 

follows:

(A)(1) Except as provided in paragraph (b)(4)(i)(A)(2)

of this section, 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

C. Revising paragraph (b)(4)(ii) to add the words “or 

subpart N” after the words “under subpart M”.

D. Revising paragraph (b)(4)(iii) to remove the words 

“Subpart M” and add in their place the words “subpart M or 

subpart N”.
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Issue 8: Conforming Amendatory Language

5/5/2009