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4000-01-U

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 
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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 e-mail 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 e-mail 

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 e-mail at: Gail.McLarnon@ed.gov or 

Brian.Smith@ed.gov. For further information related to Direct 
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Loan program changes, contact Gail McLarnon, Jon Utz, or 

Pamela Moran at (202)-219-7048, (202)-377-4040, or (202)-502-

7732 or by e-mail 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 e-mail 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 
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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 cross-reference 

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 
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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 onetime-only 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)
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 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 
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“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 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
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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 
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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 
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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 
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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))
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 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))
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 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))

 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))
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 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 
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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 
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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. 
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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 crossreference 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 
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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 More schools with low No significant 
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Issue and Key Features Benefits Cost/Transfers

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

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

costs projected.

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 

Improves the 

Department’s 

information collection 

process and supports a 

more efficient loan 

servicing process. 

No significant 

costs projected.
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Issue and Key Features Benefits Cost/Transfers

procedures in the future.

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 

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 

No significant 

costs projected.
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Issue and Key Features Benefits Cost/Transfers

determining a "reasonable 

and affordable" loan 

repayment for rehabilitation 

purposes. 

defaulted borrowers 

that complete the 

rehabilitation process 

and fully repay their 

loans.

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.

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 

Creates consistency 

across loan programs.

No significant 

costs projected.
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Issue and Key Features Benefits Cost/Transfers

payment for rehabilitation 

purposes within the Perkins 

Loan program.

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 

Reduces the burden on 

FFEL lenders by 

accounting for 

holidays and weekends.

No significant 

costs projected.
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23

Issue and Key Features Benefits Cost/Transfers

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.

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.

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))

Adds language to clarify 

that an AWG hearing official 

may not be under the 

supervision or control of 

the guaranty agency or of a 

third-party servicer or 

contractor employed by the 

agency.

Ensures borrowers 

receive impartial 

hearings.

No significant 

costs projected.

Amount or Rate of Wage 

Withholding 

Provides clarity to 

loan program.

No significant 

costs projected.
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Issue and Key Features Benefits Cost/Transfers

(34 CFR 682.410(b)(9))

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 NonTerm and Certain NonStandard 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.
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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: 
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(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 684.410(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. We discuss other substantive issues under the 

sections of the proposed regulations to which they pertain. 
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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 
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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, 

labor-intensive process. The recommended change would 

require the Department to consider a significantly higher

number of PRI appeals than under the current process, which 
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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” 
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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 
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satisfactory repayment arrangements be “approved” payments 

rather than “full” payments. We believe that the term 

“full” is self-explanatory 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 
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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 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 
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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 
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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 
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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 
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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 
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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 
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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. 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.
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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
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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 
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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 balancesensitive 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.
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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 
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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.
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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 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
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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 
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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
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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.
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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 
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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 
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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 standardize the process for determining 

rehabilitation payment amounts. The commenter states that 

loan holders and borrowers are able to agree to loan
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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 
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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.
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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 
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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. 
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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.
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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 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 
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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 
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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.
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These commenters also noted that proposed 

§§682.405(b)(1)(vi) and 685.211(f)(5) include a crossreference 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 crossreferencing 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 
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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 
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non-defaulted loan might count, such as for public service 

loan forgiveness in the Direct Loan Program. 

Changes: We have replaced the cross-references 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 
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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 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 
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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.
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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 
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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 
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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. 
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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. 
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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.”

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 
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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.
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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 
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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 Departmentheld 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.
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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 
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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.
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Changes: We have added a new §682.410(b)(9)(i)(V) to 

include a cross-reference 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 
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sent to the borrower, 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. 
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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 
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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 pastdue status of the loan.” 34 CFR §682.410(b)(5)(ii)(D) and

(vi)(I). Prior to an AWG hearing, the agency should have 
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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 Fed. Reg. 8142, 8151 (Feb. 19, 2003) and 67 Fed. 

Reg. 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 
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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 
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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 nonprocedural matters. The commenter expressed concern that,

as drafted, the proposed rule would unnecessarily impede 

the administration of the hearing process. The commenter 
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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.

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.
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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 (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.
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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
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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.
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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 
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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 
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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 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);
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(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.
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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 
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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 
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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 
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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 
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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 

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 
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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 
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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
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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 non-term programs 

at a different school during the middle of an academic year 

to initially be eligible for a Direct Loan to cover the 
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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. 
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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 
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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 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 
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100

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
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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 
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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 four-year 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.
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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 
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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 
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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 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 post-rehabilitation). This new standard may also 

help decrease the number of borrowers who re-default, as 
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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
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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 

health-related 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-to-income 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 
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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 
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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-inservice exception to all Perkins Loan cancellation 

categories, not just teachers. As Perkins loan 
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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 
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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.

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
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As required by OMB Circular A-4 (available at 

http://www.whitehouse.gov/sites/default/files/omb/assets/om

b/circulars/a004/a-4.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 Not Quantified
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title IV loan programs.

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
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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
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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, 
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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 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 
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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 53,467 
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Entities 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 
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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 

Number

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, 

1845-

0020 57,568 1,416,748 128,795 
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and hearing 

administration

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)
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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)

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 
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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, 
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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 
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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); 
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(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
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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-for-profit, 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 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 
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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-forprofit 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 

not-for-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 
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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 
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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 
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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
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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-
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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 not-forprofit guaranty agencies 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 
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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 
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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 
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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.
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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 
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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 
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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 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 
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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 
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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-forprofit 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. 
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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 
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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.
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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. 
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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 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 
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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.
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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 
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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) 
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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 
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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 
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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 burden 

hours will increase by 21,073 hours (84,293 multiplied by 

0.25 hours) under OMB 1845-0020. 
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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 
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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 
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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-for-profit 

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
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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-for-profit 

guaranty agencies and for which the agencies had initiated 
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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 
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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 
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hours. The total amount of increased burden to 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 
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number of the final technical and conforming changes in 34 

CFR Part 682 are for clarity, others are due to the 

elimination of cross-references. 

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 
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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.
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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.
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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 
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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 §682.210(b) cross-references were 

added to the eligibility criteria that are applicable to 
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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. 
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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 
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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.
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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 
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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. 
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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.

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 
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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 cross-references 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 
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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. 
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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 
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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 FISL-related 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
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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.
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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 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 
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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.
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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.
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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. 
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Collection of Information

Regulatory 

Section Information Collection OMB Control Number 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

§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 

The final regulations 

require the Secretary 

to base determinations 

of reasonable and 

affordable 

OMB 1845-0119

The Department estimates that 

the burden will increase by 

$876,264
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

agreement rehabilitation payment 

amounts of defaulted 

loans on information 

provided on an OMBapproved form, and if 

requested, supporting 

documentation.

35,606 hours. 

§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 

OMB 1845-0020

The Department estimates that 

the burden will increase by 

88,402 hours. 

$2,175,573
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

garnishment (AWG) 

purposes; 

 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.

§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 

OMB 1845-0020

The Department estimates that 

the burden will remain 325,058 

hours. 

No Change
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

for FFEL loans; and 

 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 

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
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

after six months 

following the date the 

borrower was no longer 

enrolled on at least a 

half-time basis. 

The final regulations 

remove current 

§§682.209(e)-(g) and 

(j) from the 

regulations and redesignate 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 income-based 

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. 

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 “postactive”.

OMB 1845-0020

The Department estimates that 

the burden will remain 325,058 

hours.

No change
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Regulatory 

Section Information Collection OMB Control Number 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 non-mandatory 

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 schoolaffiliated 

OMB 1845-0020

The Department estimates that 

the burden will remain 325,058 

hours.

No change
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

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. 

§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. 

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. 

OMB 1845-0020

The Department estimates that 

the burden of 325,058 hours 

will decrease by 32,506 to 

292,552 hours.

-799,973

§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
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

§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

§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 crossreferences 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 

The final regulations 

make a minor wording 

change.

OMB 1845-0020

The Department estimates that 

the burden will remain 325,058 

No change
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

student to 

establish 

eligibility

hours.

§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, 

The final regulations 

remove all of the 

regulations under 

OMB 1845-0020

The Department estimates that 

-7,999,677
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

and inspection 

requirements for 

Federal GSL 

program lenders

subpart E (§§682.500 

through 682.515) and 

reserve the subpart.

the burden will decrease by

325,058 hours to 0 hours of 

burden. 

§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

§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 

OMB 1845-0020

The Department estimates that 

the burden will remain 325,058 

hours.

No change
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Regulatory 

Section Information Collection OMB Control Number and Estimated Change in Burden

Estimated 

Costs

assistance programs.

§682.712 

Disqualification 

review of 

limitation, 

suspension, and 

termination 

actions taken by 

guaranty agencies 

against lenders

The final regulations 

remove a crossreference 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 Number 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. 
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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, 
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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.
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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
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4. The authority citation for part 674 continues to 

read as follows:

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 ontime, 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.
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(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.
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* * * * * 

(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 half-time 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:
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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
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* * * * *

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 
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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
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(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:

A. Removing paragraph (b)(2).

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

(b)(1).
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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 
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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 
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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”.
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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) 
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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 
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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.
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(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, 

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.
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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 
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* * * * *

(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; 
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(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--
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(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. 
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(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”.
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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). 
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G. In paragraph (a)(2)(ii) introductory text, 

removing the words “loan made 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”. 
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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 the punctuation and letter “’s”.

X. In newly redesignated paragraph (f)(2), removing 

the citation “(g)(1)” and adding, in its place, the 

citation “(f)(1)”.
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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 
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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 
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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)(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”.
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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” 
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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 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,”.
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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--

Number of semester, trimester, quarter, or clock hours 

enrolled

Number of semester, trimester, quarter, or clock hours in 

academic year

or

Number of weeks enrolled

Number of weeks in academic year

* * * * *
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(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 
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academic year remaining, the amount that is the same ratio 

to $2,000 as the--

Number of semester, trimester, quarter, or clock hours 

enrolled

Number of semester, trimester, quarter, or clock hours in 

academic year

(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--

Number of semester, trimester, quarter, or clock hours 

enrolled

Number of semester, trimester, quarter, or clock hours in 

academic year

or

Number of weeks enrolled

Number of weeks in academic year

(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 
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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—-

Number of semester, trimester, quarter, or clock hours 

enrolled

Number of semester, trimester, quarter, or clock hours in 

academic year

or

Number of weeks enrolled

Number of weeks in academic year

* * * * * 

(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 
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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”.
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G. In newly redesignated paragraph (b), removing the 

parenthetical “(c)” and adding, in its place, the 

parenthetical “(a)”.

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 

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
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(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”.
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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).
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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)” and adding, 

in its place, the citation “(e)”. 

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)” and adding, in its place, the citation 

“(e)”.

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)”.
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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 
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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, adding the 

parenthetical “(i)” between the parenthetical “(3)” and the 

word “of”.

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”.
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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 full-time 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;
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(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, 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;
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(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 tax-exempt 

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
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(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 

non-profit 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 
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minimum wage, for up to 12 months of employment, and who 

began that full-time employment within one year of entering 

or re-entering the work force, in accordance with paragraph 

(r) of this section. Full-time 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 
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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 parenthetical 

“(10)” and adding, in its place, the parenthetical “(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 
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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.
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(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--

(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 
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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:
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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”.
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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) and (c)(4)(ii)” 

and adding, in their place, the words and citations 

“paragraph (c)(4)(ii) and (c)(5)(ii)”.

P. In paragraph (e) introductory text, removing the 

word “discharge” and adding in its place, the word 

“forgiveness”.
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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) * * *
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(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 
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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]
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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 “,”.

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 figure 

“503” and adding, in its place, the figure “501”.

The revision reads as follows:

§682.302 Payment of special allowance on FFEL loans.
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* * * * *

(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 non-profit 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 non-profit 

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).
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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 34 CFR 682.301; and

* * * * *

36. Section 682.401 is amended by:

A. Removing paragraphs (b)(1), (b)(2), and (b)(3).
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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).
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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 parenthetical “(17)” and 

adding, in its place, the parenthetical “(8)”.

O. In newly redesignated paragraph (b)(8)(iii), 

removing the parenthetical “(17)” and adding, in its place, 

the parenthetical “(8)”.

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 parenthetical “(23)” and adding, in its place, 

the parenthetical “(14)”. 
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U. In newly redesignated paragraph (b)(18)(i), 

removing the word “Federal” and adding, in its place, the 

word “Direct”.

V. In newly redesignated paragraph (b)(18), removing 

paragraph (b)(18)(ii).

W. In newly redesignated paragraph (b)(18), 

redesignating 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 parenthetical “(d)” and adding, in its place, the 

parenthetical “(c)”.

BB. In newly redesignated paragraph (c)(3), adding a 

final sentence to the end of the paragraph.

CC. In newly redesignated paragraph (c), removing 

paragraph (c)(4).

DD. In newly redesignated paragraph (c), 

redesignating paragraphs (c)(5) and (c)(6) as paragraphs 

(c)(4) and (c)(5), respectively.

EE. Removing paragraph (e).
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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 parenthetical “(g)” and adding, in its place, the 

parenthetical “(e)”.

JJ. In newly redesignated paragraph (e)(4), removing 

the parenthetical “(g)” and adding, in its place, the 

parenthetical “(e)”.

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 
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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, 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. Except for paragraphs (d)(6)(ii)(G)(1) and 

(d)(6)(ii)(G)(2), in paragraph (d)(6), 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”.
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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 parenthetical “(14)” and adding, in its place, the 

parenthetical “(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) * * * 
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(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.
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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 resdesignated paragraph (j)(3)(ii), 

removing the parenthetical “(k)(2)(ii)” and adding, in its 

place, the parenthetical “(j)(2)(ii)”.

The revision reads as follows:

§682.404 Federal reinsurance agreement.
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* * * * *

(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) * * * 
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(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 
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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 
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the borrower or the borrower’s representative and provide 

the borrower 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 
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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
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(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;
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(3) Utilities;

(4) Basic communication expenses;

(5) Necessary medical and dental costs;

(6) Necessary insurance costs;

(7) Transportation costs;

(8) Dependent care and other work-related 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.
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(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]
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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 adding, in its place, 

the citation “§682.401(b)(18)(i)”.

D. In paragraph (b)(5)(i) introductory text, removing 

the parenthetical “(b)(6)(v)” and adding, in its place, the 

parenthetical “(b)(6)(ii)”.

E. In paragraph (b)(7)(i), removing the words 

“conditions described in §682.509(a)(1)” and adding, in 
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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”.

K. Revising paragraph (c)(1)(i)(C).

L. In paragraph (c)(1)(ii), adding the parenthetical 

“(i)” between the parenthetical “(1)” and the parenthetical 

“(A)”.

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”.
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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;
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(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 
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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 
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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 
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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 
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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 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 
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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, 
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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 
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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 
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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 
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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 
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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 hardship-related 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 
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portion of the amount stated in the order, the employer 

must notify the 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 
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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;
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(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 
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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.
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(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 
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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, 
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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 

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”.
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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, 
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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. In paragraph (b)(2), 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”.
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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.
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§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.

58. Revising the heading to subpart F of part 682 to 

read as follows:

Subpart F -- Requirements, Standards, and Payments for 

Schools That Participated in the FFEL Program 

* * * * *

§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”.
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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--
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(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 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 
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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.
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(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.
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(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).
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D. Removing and reserving paragraph (b).

E. Revising newly redesignated paragraph (a)(1). 

F. Removing newly redesignated paragraph (a)(2)(vi).

G. In newly redesignated paragraph (a), redesignating 

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 half-time 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 
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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;
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(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.

(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). 
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* * * * *

§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 
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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 half-time 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.
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* * * * * 

66. The heading of subpart G of part 682 is revised 

to read as follows:

Subpart G--Limitation, Suspension, or Termination of Lender 

or Third-party Servicer Eligibility and Disqualification of 

Lenders

* * * * *

§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.

* * * * *
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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]
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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 
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(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 parenthetical “(d)” and adding, in its place, the 

parenthetical “(c)”.

D. In newly redesignated paragraph (d)(2), removing 

the parenthetical “(e)” and adding, in its place, the 

parenthetical “(d)”.

§682.712 [Amended]

75. Section 682.712 is amended by:
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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.

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.
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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 
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(a)(1)(ii) of this section, the Secretary subsidizes the 

interest while the borrower is in an in-school, 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 
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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 
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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.
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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 
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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 “:”.

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) * * *
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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 non-need-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;
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* * * * *

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 inschool, 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.
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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.

* * * * *
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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)--
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(i) The making of three consecutive, voluntary, ontime, full monthly payments on a defaulted loan prior to 

consolidation; or

(ii) Agreeing to repay the Direct Consolidation Loan 

under one of the income-contingent 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.
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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, as amended by final regulations 

published in the Federal Register on November 1, 2012 (77 

FR 66088) is further amended by:

A. Revising paragraph (a)(1)(iv).

B. Revising paragraph (a)(1)(v).

C. Revising paragraph (b)(4).
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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) of this 
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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;
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(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 
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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.
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* * * * *

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.
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(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 
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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 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 
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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 inschool, grace, and deferment 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 2.5 

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 in-school, 

grace, and deferment periods. The interest rate during any 
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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 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.
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(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 
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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. 
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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 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 
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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.
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(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 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 
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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.
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(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 
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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).
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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 
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333

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”.
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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 
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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.

(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 
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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--

Number of semester, trimester, quarter, or 

clock hours enrolled

Number of semester, trimester, quarter or 

clock hours in academic year
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(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--

Number of semester, trimester, quarter, or 

clock hours enrolled

Number of semester, trimester, quarter or 

clock hours in academic year

or

Number of weeks enrolled

Number of weeks in academic year

(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, 
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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 burden and must 

document the determination in the school's file.
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* * * * *

(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.
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(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 
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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 
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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 
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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--
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(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, 
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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 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 post-enrollment 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
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(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 half-time 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 fulltime basis into an eligible graduate fellowship program, as 

defined in paragraph (d)(2)(ii) of this section; and
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(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 
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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
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(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--
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(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 
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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.
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(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 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 
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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 fulltime 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 
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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
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(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--
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(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 full-time 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;
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(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 halftime 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.
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(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;

(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 
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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 post-active 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.)
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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).
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(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 
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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.
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(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”. 
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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 
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period as determined in accordance with 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”. 
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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) * * *
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(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 income-contingent repayment plan or 

income-based 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).
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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 
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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 
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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 
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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, 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;
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(F) Necessary insurance costs;

(G) Transportation costs;

(H) Dependent care and other work-related 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.
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(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. 
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(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). 
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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 
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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
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(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.

(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 
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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”. 
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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;
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(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 
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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).
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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 sentence 

“The Secretary considers all elementary and secondary 
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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.”

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”. 
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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 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 
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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--

* * * * *
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(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) * * *
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(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 
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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.
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* * * * *

(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.
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(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--
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(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 (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 
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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.
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(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 

income-contingent 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. 
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(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 
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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.
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(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 
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§ 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.

(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 
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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.
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(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) 
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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:
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§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.
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* * * * *

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).
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(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

(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 
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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.
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(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.
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(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.
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(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 
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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.)
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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).
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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.

(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.
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(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 
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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.
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(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
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(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 
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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 
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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.

* * * * *
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(g) Treatment of excess loan proceeds. Before the 

disbursement of any Direct 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 non-Federal 

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”. 
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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.

* * * * *
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(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 §685.301(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 
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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”. 
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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”.
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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--

(i) In the manner and format prescribed by the 

Secretary; and 

(ii) Within the timeframe prescribed by the 

Secretary.
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(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 half-time 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.

* * * * *

§685.400 [Removed and Reserved]

110. Section 685.400 is removed and reserved.

§685.402 [Removed and Reserved]

111. Section 685.402 is removed and reserved.