50462 Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Proposed Rules

DEPARTMENT OF EDUCATION

34 CFR Parts 682 and 685

RIN 1840–AC45

Federal Family Education Loan

Program and William D. Ford Federal

Direct Loan Program

AGENCY: Department of Education.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Secretary proposes to

amend the Federal Family Education

Loan (FFEL) Program regulations and

the William D. Ford Federal Direct Loan

(Direct Loan) Program regulations to

modify requirements in these programs.

These proposed modifications are

intended to eliminate certain differences

in the requirements of the FFEL and

Direct Loan programs and to reduce

burden.

DATES: Comments must be received on

or before November 3, 1997.

ADDRESSES: All comments concerning

these proposed regulations should be

addressed to: Mr. Kenneth Smith, U.S.

Department of Education, P.O. Box

23272, Washington, DC 20026–3272, or

to the following internet address:

parity@ed.gov.

To ensure that public comments have

maximum effect in developing the final

regulations, the Department urges that

each comment clearly identify the

specific section or sections of the

regulations that the comment addresses

and that comments be in the same order

as the regulations.

Comments that concern information

collection requirements should be sent

to the Office of Management and Budget

at the address listed in the Paperwork

Reduction Act section of this preamble.

A copy of those comments may also be

sent to the Department representative

named above.

FOR FURTHER INFORMATION CONTACT: Mr.

Kenneth Smith, U.S. Department of

Education, 600 Independence Avenue,

SW, ROB–3, Room 3045, Washington,

DC 20202–5346, telephone 202–708–

8242. Individuals who use a

telecommunications device for the deaf

(TDD) may call the Federal Information

Relay Service (FIRS) at 1–800–877–8339

between 8 a.m. and 8 p.m., Eastern time,

Monday through Friday.

Individuals with disabilities may

obtain this document in an alternate

format (e.g., Braille, large print,

audiotape, or computer diskette) on

request to the contact person listed in

the preceding paragraph.

SUPPLEMENTARY INFORMATION: Section

455(a) of the Higher Education Act of

1965, as amended (HEA), provides that,

unless otherwise specified in statute,

Federal Direct Stafford/Ford (Direct

Subsidized) Loans, Federal Direct

Unsubsidized Stafford/Ford (Direct

Unsubsidized) Loans, and Federal

Direct PLUS (Direct PLUS) Loans shall

have the same terms, conditions, and

benefits, and be available in the same

amounts, as Federal Stafford Loans,

Federal Unsubsidized Stafford Loans,

and Federal PLUS Loans.

The Direct Loan Program regulations

(34 CFR part 685) provide terms,

conditions, benefits, and amounts for

Direct Subsidized Loans, Direct

Unsubsidized Loans, and Direct PLUS

Loans. The FFEL Program regulations

(34 CFR part 682) provide terms,

conditions, benefits, and amounts for

Federal Stafford Loans, Federal

Unsubsidized Stafford Loans, and

Federal PLUS Loans.

The Secretary is proposing to amend

34 CFR parts 682 and 685 to change

certain requirements and procedures in

the FFEL and Direct Loan programs.

These proposed changes are intended to

eliminate certain differences in the

requirements of these programs and to

reduce burden on program participants.

A summary of each proposed change

is provided below, in the order of its

first occurrence in the proposed

regulatory text.

Sections 682.201 and 685.301

Students With Need of $200 or Less

Under FFELP regulations, at

§ 682.201(a)(2)(i), a student with a

calculated need of $200 or less is not

required to file an application for a

Subsidized Stafford Loan with a lender

before applying for a Federal

Supplemental Loans for Students (SLS)

loan. The final rule for these proposed

regulations would include a technical

correction to apply § 682.201(a)(2)(i) to

a borrower’s application for an

Unsubsidized Stafford loan, because

Unsubsidized Stafford loans are

effectively the replacement for SLS

loans. This technical correction reflects

a long-standing FFEL Program policy

and has been included in this NPRM so

that changes to FFEL and Direct Loan

program regulatory text are made

simultaneously.

Essentially, this technical correction

to § 682.201(a)(2)(i) clarifies a method

by which a school participating in the

FFEL Program may choose not to certify

a Subsidized Stafford Loan for a student

with a calculated need of $200 or less,

and may instead certify an

Unsubsidized Stafford Loan that

includes the amount of $200 or less that

would have been awarded in the

Subsidized Stafford Loan.

This provision is necessary to avoid

processing delays and increased costs in

delivering funds to students. Because of

the proportionally higher cost of small

loans, many lenders under the FFEL

Program do not make loans of $200 or

less. Without this provision, a school

would be required to submit an

application to a lender for a Subsidized

Stafford Loan amount when it is already

aware that the loan will be refused by

the lender.

To make the practices of schools

participating in the FFEL and Direct

Loan programs more consistent, the

Secretary proposes to establish a

provision for the Direct Loan Program

similar to that described above for the

FFEL Program. The proposed

regulations would allow, but not

require, a school to choose not to

originate a Direct Subsidized Loan for a

student with a calculated need of $200

or less. Instead, a school participating in

the Direct Loan Program would be able

to originate a Direct Unsubsidized Loan

that includes the $200 or less that

would have been originated as a Direct

Subsidized Loan. For example, a

student with a cost of attendance of

$2,000, estimated financial assistance of

$0, and an expected family contribution

of $1,850 would have a calculated need

of $150. The school could choose to

originate one Direct Unsubsidized Loan

for $2,000 for this student, rather than

a Direct Subsidized Loan for $150 and

a Direct Unsubsidized Loan for $1,850.

This proposal is consistent with

guidance provided in the preamble to

the Direct Loan Program final rule

published in the Federal Register on

December 1, 1994 (59 FR 61669), in

which the Secretary stated that ‘‘an

institution may establish a minimum

loan amount.’’ The proposed regulations

would provide a ceiling of $200 to the

‘‘minimum loan amount’’ allowed in

that preamble language, and would

provide a regulatory basis for this action

by a school. It is important to note that

the Department has not established a

minimum Direct Loan amount that it

will process, and a school participating

in the Direct Loan Program may

continue to originate loans of $200 or

less to meet borrower needs.

The Secretary realizes that an

additional interest cost is incurred by a

student who is awarded an amount in

an unsubsidized loan rather than in a

subsidized loan, even if the loan amount

is $200 or less, because the government

does not charge interest on a subsidized

loan if it is not in repayment status or

in a deferment. The Department

estimates a maximum cost to a student

of $66, for interest accruing on $200

over four years. However, this provision
Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Proposed Rules 50463

1The introductory language for § 682.202(c)(5) is

incorrect as published in the Code of Federal

Regulations (CFR), revised as of July 1, 1996. The

CFR reflects the final rule published in the Federal

Register on May 17, 1994 (59 FR 25745). However,

a correction to the May 17, 1994, rule was

published on July 13, 1994 (59 FR 35625). The

correction was not included in the current CFR. To

ensure that the correct introductory language is

properly reflected in regulations, it is included in

this NPRM and will be included in the final rule

as a technical correction.

was established for a school

participating in the FFEL Program for

the reasons described above, and it is

proposed for a school participating in

the Direct Loan Program to provide

parity with the FFEL Program and to

allow a school to control its

administrative costs in making loans.

The Secretary expects the proposed

regulations to have little actual effect on

costs to borrowers for receiving FFEL or

Direct Loan program funds because

current FFEL Program policy would

remain unchanged and current Direct

Loan Program policy would only be

defined in regulations. The only change

to current Direct Loan Program policy in

the proposed regulations is the

provision of a $200 limit to replace the

currently unspecified ‘‘minimum loan

amount,’’ so a school would no longer

be able to establish a minimum loan

amount higher than $200.

Sections 682.202(c)(5), 682.401(b)(10),

and 685.202(c)(4) Refund of FFEL

Program Origination Fees and Insurance

Premiums and of Direct Loan Program

Loan Fees

Under § 682.202(c)(5), a lender must

refund, by a credit against the

borrower’s loan balance, the applicable

portion of the origination fee previously

deducted from the loan if (1) the

borrower repays a portion of the loan

within 120 days of disbursement, (2) the

funds are not delivered within 120 days

of disbursement, or (3) the funds are

returned by the school to the lender.1

Similarly, under § 682.401(b)(10)(vi)(B),

a lender must refund the applicable

portion of the insurance premium

previously deducted by application to

the borrower’s account if (1) the loan is

paid in full within 120 days of

disbursement, (2) the loan check has not

been negotiated within 120 days of

disbursement, or (3) the loan or a

portion of a loan is returned by the

school to the lender. Direct Loan

Program regulations at § 685.202(c)(4)

provide for the refund of the applicable

portion of the loan fee previously

deducted from the loan if a portion of

the loan is repaid within 120 days or

should have been repaid by the school

within 120 days of disbursement.

The Secretary proposes to revise

§§ 682.202(c)(5)(i),

682.401(b)(10)(vi)(B)(1), and

685.202(c)(4) to provide that the

applicable portion of the origination fee,

insurance premium, or loan fee is to be

repaid or returned in cases in which

loan funds are returned by the school in

order to comply with the HEA or with

applicable regulations.

For example, the applicable portion of

the origination fee, insurance premium,

or loan fee would be repaid or returned

to a borrower if during a program review

it was determined that a school should

have paid a larger refund to a student,

even if that refund should have

occurred more than 120 days after the

disbursement was made. On the other

hand, the applicable portion of the

origination fee, insurance premium, or

loan fee would not be repaid or returned

to a borrower if a school assists the

borrower by forwarding a prepayment to

the lender more than 120 days after

disbursement. In this example, the

school would not be returning the funds

in order to comply with the HEA or

with applicable regulations; it would be

returning the funds to comply with the

borrower’s request.

This proposed revision clarifies

current FFEL requirements. Further, it

expands the circumstances under which

the Secretary would reduce the Direct

Loan Program loan fee charged to

borrowers by removing the requirement

that the repayment should have been

made within 120 days of disbursement.

Under the proposed provision, students

in both the FFEL and Direct Loan

programs would receive the same

benefits.

Sections 682.402 and 685.212

Discharge of a Loan

Under § 682.402(c)(1), FFEL Program

regulations provide for the discharge of

a borrower’s or endorser’s obligation to

repay a Consolidation Loan, due to a

total and permanent disability, for a

borrower who became disabled (or

whose condition substantially

deteriorated, so as to render the

borrower totally and permanently

disabled) after applying for all of the

Consolidation Loan’s underlying loans.

This discharge is made even if a

borrower’s condition did not

substantially deteriorate after the

borrower applied for the Consolidation

Loan itself. Corresponding Direct Loan

Program regulations, at § 685.212(b), do

not allow for a discharge of a loan

obligation for a Direct Consolidation

Loan if the borrower did not become

disabled (or whose condition did not

substantially deteriorate, so as to render

the borrower totally and permanently

disabled) after the Direct Consolidation

Loan was made.

For example, a borrower who received

several loans, then became totally and

permanently disabled, and then

consolidated those loans into a Direct

Consolidation Loan, remains obligated

to repay the loan. Under current Direct

Loan Program regulations, a borrower is

not considered totally and permanently

disabled on the basis of a condition that

existed at the time the borrower applied

for the consolidation loan, unless the

borrower’s condition substantially

deteriorated after the loan was made so

as to render the borrower totally and

permanently disabled. In the example

above, since the borrower’s condition

existed at the time the borrower applied

for the Direct Consolidation Loan and

did not substantially deteriorate after

the Direct Consolidation Loan was

made, the borrower would remain

obligated to repay the loan. By contrast,

corresponding FFEL regulations would

allow a discharge of the borrower’s

obligation to make further payments on

the loan.

The Secretary proposes to revise

Direct Loan Program regulations to

provide the same discharge conditions

for a Direct Consolidation Loan as are

currently provided for an FFELP

Consolidation Loan. Because there has

been some confusion regarding the

FFEL rule on this issue, the Secretary

also proposes to clarify the current FFEL

Program provision and to make a

conforming change to regulations at

§ 682.402(k)(2)(iii).

Sections 682.604(g)(2) and 685.304(b)(2)

Exit Counseling

Section 485(b)(1)(A)(i) of the HEA

requires a school to inform a student of

‘‘the average anticipated monthly

repayments’’ during exit counseling. For

an FFEL borrower, under

§ 682.604(g)(2)(i), a school is required to

base the calculation of this amount on

an average indebtedness for students at

that school. Direct Loan Program

regulations, at § 685.304(b)(2)(i), go

beyond the requirements in FFEL

regulations and require a school to base

its calculation of this amount on the

individual student’s actual

indebtedness.

The Secretary proposes to revise both

FFEL and Direct Loan program

regulations to allow a school to base its

calculation of this amount upon either

the student’s individual indebtedness or

upon the average indebtedness of

students who have obtained loans for

attendance at that school or in the

borrower’s program of study. This

change would provide more flexibility

in both loan programs, would promote
50464 Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Proposed Rules

consistency in exit counseling, and

would reduce burden for schools

participating in both the FFEL and the

Direct Loan programs.

A Direct Loan borrower’s ability to

make an informed choice when

selecting a repayment plan is not

lessened by this change. A school

participating in the Direct Loan Program

may, and is encouraged to, continue to

receive information regarding an

individual borrower’s anticipated Direct

Loan Program monthly repayment

amount for distribution to the borrower

during exit counseling. If a borrower

does not select a repayment plan by the

60th day of the loan’s grace period, he

or she is sent the individualized

information by the Direct Loan Servicer.

In addition, the individualized

repayment information is always

available to a borrower who calls the

Direct Loan Servicer, both when the

borrower is selecting an initial

repayment plan and when the borrower

is considering a change from one plan

to another.

Under § 685.304(b)(2) (ii) and (iii), a

school is required to review available

repayment options with a borrower and

to provide the borrower with options

concerning debt-management strategies.

Should these proposed regulations be

included in the final rule, to comply

with § 685.304(b)(2) (ii) and (iii), a

school that chooses not to provide the

individualized repayment information

to a student would be expected to

advise the student of the availability of

this information at the student’s Direct

Loan servicer and of its usefulness in

selecting the most appropriate

repayment plan.

The Secretary requests specific

comments on whether the timing and

availability of the individualized Direct

Loan Program repayment information,

as described above, provides all Direct

Loan Program borrowers with an

adequate opportunity to select the most

appropriate repayment plan. In

particular, the Secretary requests

comments on the ability of a borrower

to make an informed choice when

selecting a repayment plan if he or she

does not receive individualized

information until the 60th day of the

loan’s grace period because his or her

school has chosen to supply repayment

information based on average

indebtedness during its exit counseling.

Executive Order 12866

1. Assessment of Costs and Benefits

These proposed regulations have been

reviewed in accordance with Executive

Order 12866. Under the terms of the

order the Secretary has assessed the

potential costs and benefits of this

regulatory action.

The potential costs associated with

the proposed regulations are those

resulting from statutory requirements

and those determined by the Secretary

to be necessary for administering these

programs effectively and efficiently.

Burdens specifically associated with

information collection requirements, if

any, are identified and explained

elsewhere in this preamble under the

heading Paperwork Reduction Act of

1995.

In assessing the potential costs and

benefits—both quantitative and

qualitative—of these proposed

regulations, the Secretary has

determined that the benefits of the

proposed regulations justify the costs.

The Secretary has also determined

that this regulatory action does not

unduly interfere with State, local, and

tribal governments in the exercise of

their governmental functions.

To assist the Department in

complying with the specific

requirements of Executive Order 12866,

the Secretary invites comments on

whether there may be further

opportunities to reduce any potential

costs or increase potential benefits

resulting from these regulations without

impeding the effective and efficient

administration of these programs.

Summary of Potential Costs and

Benefits

Potential costs and benefits of these

proposed regulations are discussed

elsewhere in this preamble under the

following heading: Regulatory

Flexibility Act Certification, and in the

information stated previously under

Supplementary Information.

2. Clarity of Regulations

Executive Order 12866 requires each

agency to write regulations that are easy

to understand.

The Secretary invites comments on

how to make these regulations easier to

understand, including answers to

questions such as the following: (1) Are

the requirements in the proposed

regulations clearly stated? (2) Do the

regulations contain technical terms or

other wording that interferes with their

clarity? (3) Does the format of the

regulations (grouping and order of

sections, use of headings, paragraphing,

etc.) aid or reduce their clarity? Would

the regulations be easier to understand

if they were divided into more (but

shorter) sections? (A ‘‘section’’ is

preceded by the symbol ‘‘§ ’’ and a

numbered heading; for example,

§ 668.24 Records retention and

examinations.) (4) Is the description of

the proposed regulations in the

‘‘Supplementary Information’’ section of

this preamble helpful in understanding

the proposed regulations? How could

this description be more helpful in

making the proposed regulations easier

to understand? (5) What else could the

Department do to make the regulations

easier to understand?

A copy of any comments that concern

how the Department could make these

proposed regulations easier to

understand should be sent to Mr.

Stanley M. Cohen, Regulations Quality

Officer, U.S. Department of Education,

600 Independence Avenue, SW, Room

5121, FOB–10, Washington, DC 20202–

2241.

Regulatory Flexibility Act Certification

The Secretary certifies that these

proposed regulations would not have a

significant economic impact on a

substantial number of small entities.

Small entities affected by these

proposed regulations are small schools

and loan holders participating in the

federal student loan programs.

The provisions of this regulation

provide added flexibility to schools and

loan holders, or reduce the

administrative burden on schools. Thus,

no significant adverse economic impacts

on small entities are expected to occur.

The Secretary particularly invites

comments on the effect that these

proposed regulations would have on

small entities.

Paperwork Reduction Act of 1995

Section 685.212 contains information

collection requirements. As required by

the Paperwork Reduction Act of 1995

(44 U.S.C. 3507(d)), the Department of

Education has submitted a copy of this

section to the Office of Management and

Budget (OMB) for its review.

Collection of Information: William D.

Ford Federal Direct Loan Program—

685.212—Discharge of a loan obligation.

The Secretary proposes to provide for

the discharge of a Direct Consolidation

Loan due to a total and permanent

disability for a borrower who would be

eligible for the discharge of all the loans

that were included in the Direct

Consolidation Loan if those loans had

not been consolidated. The Department

may require additional certifications

and information concerning the

underlying loans in order to provide

this benefit to the borrower. Annual

public reporting burden for this

collection of information is estimated to

average 0.2 hours per response for 180

respondents, including the time for

reviewing instructions, searching

existing data sources, gathering and

maintaining the data needed, and
Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Proposed Rules 50465

completing and reviewing the collection

of information. The total estimated

annual recordkeeping and reporting

burden hours equals 36 hours.

Organizations and individuals

desiring to submit comments on the

information collection requirements

should direct them to the Office of

Information and Regulatory Affairs,

OMB, Room 10235, New Executive

Office Building, Washington, D.C.

20503; Attention: Desk Officer for the

U.S. Department of Education.

The Department considers comments

by the public on this proposed

collection of information in—

• Evaluating whether the proposed

collection of information is necessary

for the proper performance of the

functions of the Department, including

whether the information will have

practical utility;

• Evaluating the accuracy of the

Department’s estimate of the burden of

the proposed collection of information,

including the validity of the

methodology and assumptions used;

• Enhancing the quality, usefulness,

and clarity of the information to be

collected; and

• Minimizing the burden of the

collection of information on those who

are to respond, including through the

use of appropriate automated,

electronic, mechanical, or other

technological collection techniques of

other forms of information technology;

e.g., permitting electronic submission of

responses.

OMB is required to make a decision

concerning the collection of information

contained in these proposed regulations

between 30 and 60 days after

publication of this document in the

Federal Register. Therefore, a comment

to OMB is best assured of having its full

effect if OMB receives it within 30 days

of publication. This does not affect the

deadline for the public to comment to

the Department on the proposed

regulations.

Invitation To Comment

Interested persons are invited to

submit comments and recommendations

regarding these proposed regulations.

All comments submitted in response

to these proposed regulations will be

available for public inspection, during

and after the comment period, in Room

3045, Regional Office Building 3, 7th

and D Streets, SW, Washington, DC,

between the hours of 8:30 a.m. and 4:00

p.m., Monday through Friday of each

week, except Federal holidays.

On request the Department supplies

an appropriate aid, such as a reader or

print magnifier, to an individual with a

disability who needs assistance to

review the comments or other

documents in the public rulemaking

docket for these proposed regulations.

An individual with a disability who

wants to schedule an appointment for

this type of aid may call (202) 205–8113

or (202) 260–9895. An individual who

uses a TDD may call the Federal

Information Relay Service at 1–800–

877–8339, between 8 a.m., and 8 p.m.,

Eastern time, Monday through Friday.

To assist the Department in

complying with the specific

requirements of Executive Order 12866

and its overall requirement of reducing

regulatory burden, the Secretary invites

comments on whether there may be

further opportunities to reduce any

regulatory burdens found in these

proposed regulations.

Assessment of Educational Impact

The Secretary particularly requests

comments on whether the proposed

regulations in this document would

require transmission of information that

is being gathered by or is available from

any other agency or authority of the

United States.

Electronic Access to This Document

Anyone may view this document, as

well as all other Department of

Education documents published in the

Federal Register, in text or portable

document format (pdf) on the World

Wide Web at either of the following

sites:

http://ocfo.ed.gov/fedreg.htm

http://www.ed.gov/news.html

To use the pdf you must have the Adobe

Acrobat Reader Program with Search,

which is available free at either of the

previous sites. If you have questions

about using the pdf, call the U.S.

Government Printing Office toll free at

1–888–293–6498.

Anyone may also view these

documents in text copy only on an

electronic bulletin board of the

Department. Telephone: (202) 219–1511

or, toll free, 1–800–222–4922. The

documents are located under Option

G—Files/Announcements, Bulletins and

Press Releases.

Note: The official version of this document

is the document published in the Federal

Register.

List of Subjects in 34 CFR Parts 682 and

685

Administrative practice and

procedure, Colleges and universities,

Loan programs-education, Reporting

and recordkeeping requirements,

Student aid, Vocational education.

(Catalog of Federal Domestic Assistance

Numbers: 84.032: Federal Stafford Loan

Program; 84.032: Federal PLUS Program;

84.032: Federal Supplemental Loans for

Students Programs; 84.033 and 84.268:

Federal Direct Student Loan Program.)

Dated: September 17, 1997.

Richard W. Riley,

Secretary of Education.

The Secretary proposes to amend

parts 682 and 685 of title 34 of the Code

of Federal Regulations as follows:

PART 682—FEDERAL FAMILY

EDUCATION LOAN (FFEL) PROGRAM

1. The authority citation for part 682

continues to read as follows:

Authority: 20 U.S.C. 1071 to 1087–2,

unless otherwise noted.

§ 682.201 [Amended]

2. Section 682.201 is amended by

removing the words ‘‘receive an SLS

loan’’ in the introductory language of

paragraph (a) and adding, in their place,

‘‘receive an unsubsidized Stafford

loan’’; by removing the acronym ‘‘SLS’’

in paragraph (a)(1) and adding, in its

place, ‘‘unsubsidized Stafford’’; by

removing the words ‘‘who, for a period

of enrollment that begins prior to July 1,

1994, seeks an SLS’’ in the introductory

language to paragraph (a)(2) and adding,

in their place, ‘‘who seeks an

unsubsidized Stafford’’; and by

removing the acronym ‘‘SLS’’ in

paragraph (a)(3) and adding, in its place,

‘‘unsubsidized Stafford’’.

3. Section 682.202 is amended by

revising paragraph (c)(5) to read as

follows:

§ 682.202 Permissible charges by lenders

to borrowers.

* * * * *

(c) * * *

(5) Shall refund by a credit against the

borrower’s loan balance the portion of

the origination fee previously deducted

from the loan that is attributable to any

portion of the loan that is—

(i) Returned by a school to a lender in

order to comply with the Act or with

applicable regulations;

(ii) Repaid or returned within 120

days of disbursement; or

(iii) Not delivered within 120 days of

disbursement.

* * * * *

4. Section 682.401 is amended by

revising paragraphs (b)(10)(vi)(B)(1) and

(b)(10)(vi)(B)(2) to read as follows:

§ 682.401 Basic program agreement.

* * * * *

(b) * * *

(10) * * *

(vi) * * *

(B) * * *

(1) The loan or a portion of the loan

is returned by the school to the lender
50466 Federal Register / Vol. 62, No. 186 / Thursday, September 25, 1997 / Proposed Rules

in order to comply with the Act or with

applicable regulations;

(2) Within 120 days of disbursement,

the loan or a portion of the loan is

repaid;

* * * * *

5. Section 682.402 is amended by

revising paragraph (c)(1) and by

removing the words ‘‘become totally

and permanently disabled since

applying for the Consolidation loan’’ in

paragraph (k)(2)(iii) and adding, in their

place, ‘‘is determined to be totally and

permanently disabled under

§ 682.402(c)’’, to read as follows:

§ 682.402 Death, disability, closed school,

false certification, and bankruptcy

payments.

* * * * *

(c) Total and permanent disability. (1)

(i) If a lender determines that an

individual borrower has become totally

and permanently disabled, the

obligation of the borrower and any

endorser to make any further payments

on the loan is discharged.

(ii) Except as provided in paragraph

(c)(1)(iii)(A) of this section, a borrower

is not considered totally and

permanently disabled based on a

condition that existed at the time the

borrower applied for the loan unless the

borrower’s condition substantially

deteriorated after the loan was made so

as to render the borrower totally and

permanently disabled.

(iii)(A) For a Consolidation Loan, a

borrower who would be considered

totally and permanently disabled under

paragraphs (c)(1)(i) and (ii) of this

section for all loans that were included

in the Consolidation Loan, if those loans

had not been consolidated, is

considered totally and permanently

disabled.

(B) For the purposes of discharging a

loan under paragraph (c)(1)(iii)(A) of

this section, provisions in paragraphs

(c)(1) (i) and (ii) of this section apply to

all loans included in the Consolidation

Loan.

(C) If requested, a borrower seeking to

discharge a loan obligation under

paragraph (c)(1)(iii)(A) of this section

must provide the lender with the

disbursement dates of the underlying

loans if the lender does not possess that

information.

* * * * *

6. Section 682.604 is amended by

revising paragraph (g)(2)(i) to read as

follows:

§ 682.604 Processing the borrower’s loan

proceeds and counseling borrowers.

* * * * *

(g) * * *

(2) * * *

(i) Inform the student of the average

anticipated monthly repayment amount

based on the student’s indebtedness or

on the average indebtedness of students

who have obtained FFEL Program loans

for attendance at that school or in the

borrower’s program of study.

* * * * *

PART 685—WILLIAM D. FORD

FEDERAL DIRECT LOAN PROGRAM

7. The authority citation for part 685

continues to read as follows:

Authority: 20 U.S.C. 1087a et seq., unless

otherwise noted.

8. Section 685.202 is amended by

revising paragraph (c)(4) to read as

follows:

§ 685.202 Charges for which Direct Loan

Program borrowers are responsible.

* * * * *

(c) * * *

(4) Applies to a borrower’s loan

balance the portion of the loan fee

previously deducted from the loan that

is attributable to a disbursement of the

loan that is—

(i) Repaid or returned within 120 days

of disbursement; or

(ii) Returned by a school in order to

comply with the Act or with applicable

regulations.

9. Section 685.212 is amended by

revising paragraph (b) to read as follows:

§ 685.212 Discharge of a loan obligation.

* * * * *

(b) Total and permanent disability. (1)

If the Secretary receives acceptable

documentation that a borrower has

become totally and permanently

disabled, the Secretary discharges the

obligation of the borrower and any

endorser to make any further payments

on the loan.

(2) Except as provided in paragraph

(b)(3)(i) of this section, a borrower is not

considered totally and permanently

disabled based on a condition that

existed at the time the borrower applied

for the loan unless the borrower’s

condition substantially deteriorated

after the loan was made so as to render

the borrower totally and permanently

disabled.

(3)(i) For a Direct Consolidation Loan,

a borrower who would be considered

totally and permanently disabled under

paragraphs (b) (1) and (2) of this section

for all loans that were included in the

Direct Consolidation Loan, if those

loans had not been consolidated, is

considered totally and permanently

disabled.

(ii) For the purposes of discharging a

loan under paragraph (b)(3)(i) of this

section, provisions in paragraphs (b)(1)

and (2) of this section apply to all loans

included in the Consolidation Loan.

(iii) If requested, a borrower seeking

to discharge a loan obligation under

paragraph (b)(3)(i) of this section must

provide the Secretary with the

disbursement dates of the underlying

loans.

* * * * *

10. Section 685.301 is amended by

redesignating paragraphs (a)(6) and

(a)(7) as paragraphs (a)(7) and (a)(8),

respectively, and by adding a new

paragraph (a)(6) to read as follows:

§ 685.301 Origination of a loan by a Direct

Loan Program school.

* * * * *

(a) * * *

(6) 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.

* * * * *

11. Section 685.304 is amended by

revising paragraph (b)(2)(i) to read as

follows:

§ 685.304 Counseling borrowers.

* * * * *

(b) * * *

(2) * * *

(i) Inform the student of the average

anticipated monthly repayment amount

based on the student’s indebtedness or

on the average indebtedness of students

who have obtained Direct Subsidized or

Direct Unsubsidized Loans for

attendance at that school or in the

borrower’s program of study.

* * * * *

[FR Doc. 97–25377 Filed 9–24–97; 8:45 am]

BILLING CODE 4000–01–U