65624 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

DEPARTMENT OF EDUCATION

34 CFR Parts 682 and 685

RIN 1845–AA11

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

Federal Family Education Loan (FFEL)

Program and the William D. Ford

Federal Direct Loan (Direct Loan)

Program regulations. These final

regulations implement changes made to

the Higher Education Act of 1965, as

amended, (HEA) by the Higher

Education Amendments of 1998 (1998

Amendments). The final regulations

implement the teacher loan forgiveness

programs in the FFEL and Direct Loan

programs that were included in the 1998

Amendments. In addition, these final

regulations make conforming changes

for both the FFEL Program and the

Direct Loan Program, as well as

unrelated technical amendments to the

Direct Loan Program regulations.

DATES: These regulations are effective

July 1, 2001.

FOR FURTHER INFORMATION CONTACT: For

the FFEL Program, Ms. Beth

Grebeldinger, or for the Direct Loan

Program, Mr. Don Watson, U.S.

Department of Education, 400 Maryland

Avenue, SW., Room 3045, Regional

Office Building #3, Washington, DC

20202–5346. Telephone: (202) 708–

8242. If you use a telecommunications

device for the deaf (TDD), you may call

the Federal Information Relay Service

(FIRS) at 1–800–877–8339.

Individuals with disabilities may

obtain this document in an alternate

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

audiotape, or computer diskette) on

request to one of the contact persons

listed in the preceding paragraph.

SUPPLEMENTARY INFORMATION: These

regulations implement certain changes

made to the HEA by the 1998

Amendments (Pub.L. 105–244) that

affect the FFEL and Direct Loan

programs.

On August 10, 2000, the Secretary

published a notice of proposed

rulemaking (NPRM) for the FFEL and

Direct Loan programs in the Federal

Register (65 FR 49124).

In the preamble to the NPRM, on

pages 49125 to 49127, the Secretary

discussed the proposed regulations that

would implement the teacher loan

forgiveness program in the FFEL and

Direct Loan programs. These include the

following:

Amending §§ 682.211(h)(2) and (3),

682.215(e), 685.205(a)(5), and

685.205(b)(6) to allow some borrowers

to request forbearance while performing

qualifying teaching service, and during

the submission and processing of their

applications for teacher loan

forgiveness.

Amending §§ 682.215(a), 685.212(h),

and 685.217(a) to reflect sections 428J

and 460 of the HEA, which established

teacher loan forgiveness programs for

certain borrowers in the FFEL Direct

Loan programs.

Amending §§ 682.215(b) and

685.217(b) to provide specific

definitions for the terms ‘‘academic

year’’, ‘‘elementary school’’, ‘‘full-time’’,

‘‘secondary school’’, and ‘‘teacher’’ for

purposes of the teacher loan forgiveness

program.

Amending §§ 682.215(c) and

685.217(c) to provide that to qualify for

the teacher loan forgiveness program a

borrower must have been employed fulltime for five consecutive complete years

in a low-income elementary or

secondary school that has been listed in

a designated Department directory.

Amending §§ 682.215(d) and

685.217(d) to provide that $5,000 is the

maximum amount that may be forgiven

for an individual teacher under these

programs.

Amending §§ 682.215(f) and

685.217(e) to explain the application

process for both the borrower and the

loan holder.

Analysis of Comments and Changes

The regulations in this document

were developed through the use of

negotiated rulemaking. Section 492 of

the HEA requires that, before publishing

any proposed regulations to implement

programs under Title IV of the HEA, the

Secretary obtain public involvement in

the development of the proposed

regulations. After obtaining advice and

recommendations, the Secretary must

conduct a negotiated rulemaking

process to develop the proposed

regulations.

These regulations were published in

proposed form on August 10, 2000,

following completion of the negotiated

rulemaking process. The Secretary

invited comments on the proposed

regulations by September 25, 2000. In

response to the Secretary’s invitation in

the NPRM, 10 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 discuss substantive issues under

the sections of the regulations to which

they pertain. Generally, we do not

address technical and other minor

changes—and suggested changes the

law does not authorize the Secretary to

make.

Section 682.215(a)—General

Comment: One commenter requested

additional information regarding the

regulatory requirement that the loan for

which the borrower is requesting

forgiveness must have been made prior

to the end of the fifth year of qualifying

teaching service.

Discussion: The regulations require

that the loan for which forgiveness is

sought must have been made prior to

the end of the five-year qualifying

teaching service. This requirement was

included to be consistent with the stated

intent of the statute that the teacher loan

forgiveness programs encourage

individuals to enter and continue in the

teaching profession. We believe that

there needs to be a safeguard against the

possibility that a borrower, who after

meeting the teaching requirements of

the forgiveness program, quits teaching,

returns to school to train for another

profession and then asks to have $5,000

in loans for the new training forgiven

based on that earlier teaching. To avoid

this situation, the regulations require

that loans for which forgiveness is being

sought must have been made prior to

the end of the qualifying five-year

teaching service.

Changes: None.

Comment: Four commenters

recommended modifying § 682.215(a) to

clarify that $5,000 is the total amount

for all loans that a borrower may be

eligible to have forgiven, not a per

program amount.

Discussion: We agree that the

regulations would be clearer with the

recommended change.

Change: We have revised the language

in both § 682.215(a) and § 685.217(a) to

state that the combined total forgiveness

limit is $5,000 for loans in the FFEL or

Direct Loan programs.

Section 682.215(c)—Borrower Eligibility

Comment: Four commenters stated

that they believed that the discussion in

the preamble to the NPRM, regarding

when the borrower’s qualifying teaching

at the school begins, seemed

contradictory to the statute and the

proposed regulations and requested

clarification.

Discussion: To clarify, if the school at

which a borrower is performing

qualifying teaching is not a designated

eligible low-income school when the

borrower begins the teaching service,

but becomes such a school while the

borrower is performing qualifying

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65625

teaching, the required five years begins

from the point that the school gains the

designated eligible low-income school

status. Any years of teaching prior to

that designation do not apply to the five

complete, consecutive years required for

forgiveness. On the other hand, if an

eligible, designated school loses its

designation while the borrower is

teaching there, any continuous

subsequent years of qualified teaching

service at that same school may be

included in the five-year requirement.

Change: None.

Comment: Three commenters

suggested specifically including criteria

to § 682.215(c)(3) and (4) to make

special education teachers eligible for

the loan forgiveness based solely on

their role as a special education teacher.

Discussion: The regulations that the

commenters wish to revise are based

directly on the statute and the requested

change is not supported by the statutory

language. Special education teaching is

not one of the specific criteria included

in the statute, but the teacher may

qualify for the loan forgiveness program

if the qualifying teaching otherwise

meets the statutory requirements. The

regulations do specifically include

special education teachers in the

definition of a teacher, so if a special

education teacher met the other criteria

in paragraphs (c)(3) or (c)(4), he or she

could be eligible for teacher loan

forgiveness.

Change: None.

Comment: One commenter suggested

that the regulations provide certification

criteria for school officials to follow to

ensure consistent, objective and fair

determinations of a teacher’s eligibility

to participate in the loan forgiveness

program.

Discussion: We do not see a need for

such regulatory guidance. The statute

requires that the chief administrative

officer of the school determine that a

borrower has met the criteria outlined in

the statute and the regulations. We

believe that the criteria are sufficiently

clear and that school administrators will

be able to provide the needed

certifications. Our experience with the

certifications used in the Federal

Perkins Loan Program, while based on

slightly different eligibility criteria, has

shown that school administrators can

apply the required standards without

prescriptive regulatory guidance.

Change: None.

Comment: One commenter indicated

that § 682.215(c)(5) did not address

‘‘gaps’’ that may occur between the end

of an accepted condition that would not

constitute a ‘‘break’’ in the consecutive

complete years of teaching required by

the law and the resumption of qualified

teaching. This commenter requested

that these regulations allow borrowers

to delay their return to qualifying

teaching service to the beginning of the

next academic year if necessary, as was

done in connection with the special

grace period for borrowers returning

from active duty military service.

Discussion: We agree that due to the

scheduling of academic years, it may be

impossible for a teacher to resume

teaching immediately at the conclusion

of one of the exempted conditions. Such

‘‘gap’’ periods should not penalize a

borrower who met an exempted

condition.

Change: We have made a change in

§§ 682.215(c)(6) and 685.217(c)(6) to

ensure that these gaps are not treated as

a break in qualifying service.

Comment: One commenter suggested

an expansion of conditions that would

not constitute a break in the

consecutive, complete qualifying

teaching service. The commenter argued

that there are other conditions over

which the teacher has no control.

Among the conditions suggested were:

periods of protracted labor disputes,

natural disasters or emergencies, and

funding shortfalls.

Discussion: While we acknowledge

that these conditions are events over

which the teacher may have no control,

it was not our intent to address every

possible event that could disrupt the

school year. We believe that if the

events listed by the commenter occur,

the school or school district would

extend the academic year or declare that

the academic year has been completed

early. Either of these results would

qualify the year as a complete academic

year for purposes of teacher loan

forgiveness.

Change: None.

Comment: One commenter suggested

that the school’s certifying chief

administrative official should have

greater flexibility in determining the

relationship of the studies the borrower

undertakes in returning to

postsecondary education while taking a

break in their qualifying teaching if the

borrower returns to qualifying teaching.

Discussion: We believe that it is

appropriate to require that the teacher

undertake education that is ‘‘directly

related’’ to the performance of the

service that the statute wants to support.

We do not think it would be appropriate

to allow the borrower to engage in

postsecondary education that is

unrelated to the performance of the

qualifying service and still receive the

loan forgiveness.

Change: None.

Sections 682.215(d) and 685.217(d)—

Forgiveness Amount

Comment: Three commenters

suggested changing the regulations to

clarify that a borrower with a

consolidation loan qualifies for loan

forgiveness only if the consolidation

loan is outstanding and the forgiveness

amount relates to a qualifying loan (a

subsidized or unsubsidized loan made

under the FFEL Program or the Direct

Loan Program) that was repaid by the

Consolidation Loan.

Discussion: We agree that the

regulations need to be clarified to

describe the relationship between the

consolidation loan and the underlying

loans for purposes of the loan

forgiveness.

Change: We have changed

§§ 682.215(d)(1) and 685.217(d)(1) to

clarify how loan forgiveness affects

consolidation loans.

Comment: Three commenters

suggested clarifying that the forgiveness

amount total of $5,000 includes both

outstanding principal and accrued

interest.

Discussion: We agree that this change

would clarify the regulations.

Change: We have made the suggested

change to §§ 682.215(d)(2) and

685.217(d)(2) to clarify that the

forgiveness amount limit of $5,000

applies to both outstanding principal

and accrued interest.

Comment: Four commenters

suggested revising § 682.215(d)(3) to

clarify that payments received from a

borrower or on behalf of a borrower

would not be refunded as directed in

the statute.

Discussion: Proposed §§ 682.215(d)(3)

and 685.217(d)(3) reflect the statutory

provision that payments received from a

borrower are not refunded if the

borrower qualifies for loan forgiveness.

However, the statutory provision also

applies to payments made on behalf of

the borrower and we agree with the

commenters that the regulations should

make it clear that payments made on the

borrower’s behalf also will not be

refunded.

Change: We have modified

§§ 682.215(d)(3) and 685.217(d)(3) to

clarify that payments made on a

borrower’s behalf are not returned if the

borrower qualifies for loan forgiveness.

Section 682.215(e)—Authorized

Forbearance During Qualifying

Teaching Service and Discharge

Processing

Comment: Two commenters

questioned the interchangeable use of

‘‘holder’’ and ‘‘lender’’ in the FFEL

proposed regulations. They argued that

65626 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

this practice creates consistency and

accuracy problems.

Discussion: We agree that it is

important to use the terms ‘‘lender’’ and

‘‘holder’’ carefully since the term

‘‘holder’’ includes parties who are not

included in the definition of a lender.

Change: Throughout these regulations

we will use the term ‘‘holder’’ since the

obligations placed on the loan holders

in the teacher loan forgiveness program

do not just apply to lenders but to all

loan holders.

Comment: Four commenters proposed

using the term ‘‘must’’ in

§ 682.215(e)(1), as well as redesignating

paragraphs. These changes would

require a loan holder to provide an

annual forbearance to a borrower for

certain qualified periods without a

request from the borrower. The

commenters noted that a borrower is not

required to request a forbearance in

connection with other loan cancellation

opportunities such as the unpaid

refund, false certification, and closed

school discharges.

Discussion: The commenter

incorrectly assumes that the regulations

do not require the loan holder to grant

a forbearance to a borrower who may

qualify for the teacher loan forgiveness

program. Section 682.215(e)(1) includes

a cross-reference to the mandatory

forbearance section of the FFEL

regulations. Therefore, the use of

‘‘must’’ is not necessary. We also do not

agree with the commenter’s suggestion

that a borrower should not have to

request the forbearance. This mandatory

forbearance requires an annual request

from the borrower, in part to allow the

loan holder to ensure that the borrower

still meets the qualifications for the

discharge. The request also allows the

borrower to certify his or her intent to

satisfy the five-year teaching

requirement. In addition, since the

$5,000 discharge will not, for many

borrowers, extinguish their entire debt,

a borrower may determine that it is

better to make payments for a period of

time and not request the forbearance.

The requirement for an annual request

gives the borrower an opportunity to

consider his or her options. As to the

commenter’s statement that other loan

cancellation programs do not require a

borrower request, we note that those

loan cancellations are based on

situations relating to the loan that

would be reflected in records that are

otherwise available to the holder. The

borrower’s qualification for a teacher

loan forgiveness and the related

forbearance would not be reflected in

other information available to the loan

holder.

Change: None.

Comment: Some commenters also

suggested that lenders only be required

to review the borrower’s balance at the

time the initial forbearance request is

submitted instead of multiple times

throughout the qualifying five-year

teaching period.

Discussion: As noted earlier, these

regulations permit the borrower to

request a forbearance for each year of

the qualifying service. As discussed in

the preamble to the NPRM, this

mandatory forbearance was added to

ensure that borrowers with a low

balance loan who qualify for loan

forgiveness would not lose the

maximum benefit by continuing to make

monthly payments. The annual request

allows the lender to determine if

capitalized interest will create an

outstanding balance for the borrower at

the end of the five-year period. It also

provides an opportunity for the lender

to counsel the borrower regarding the

effects of capitalized interest and to

advise the borrower of any balance that

may remain outstanding at the

conclusion of the qualifying teaching

period.

Change: None.

Section 682.215(f)—Application and

processing

Comment: Three commenters

suggested adding an additional crossreference to § 682.215(f)(2)(i) to include

all references to certifying officials.

Another commenter suggested revising

the language of § 682.215(f)(2)(i) to make

it clear that the application may include

the certifications of the borrower and

the appropriate chief administrative

official or officials.

Discussion: With respect to the

comment about adding a crossreference, we believe that removing all

cross-references is the better approach

to address the commenters’ concerns.

We agree with the commenter who

expressed concern that the proposed

rule implied that there would be

multiple application and certification

forms.

Change: Section 682.215(f)(2)(i) has

been modified by removing the crossreferences and broadening the language

regarding the application to address the

commenters’ concerns.

Comment: Three commenters

recommended adding to the regulations

a provision allowing late filing by a

lender of the request for payment with

the guaranty agency. One commenter

suggested that for late filings the lender

would be responsible for repaying the

Secretary all interest and special

allowance for the late period.

Discussion: We agree and thank the

commenters for pointing out this

oversight.

Change: A new paragraph (iii) has

been added to § 682.215(f)(2) to address

the comments.

Comment: One commenter suggested

clarifying that forgiveness payments

should first be applied to unsubsidized

and then to subsidized Federal

Consolidation loans.

Discussion: The FFEL Program does

not distinguish between subsidized and

unsubsidized Federal Consolidation

Loans. Thus, this change will not be

made.

Change: None

Comment: One commenter requested

an addition to the regulations to allow

a guaranty agency that holds a defaulted

loan that is eligible for this forgiveness

to be able to recover from the

Department the complement of the

reinsurance percentage paid on the

applicable loan amount. The commenter

noted that this change would be

consistent with the treatment provided

in other loan discharge situations.

Discussion: Since a defaulted loan for

which the borrower has made

satisfactory arrangement may be eligible

for discharge under these programs, we

agree with the commenter.

Change: We have added a new

paragraph (g) to § 682.215 to reflect this

correction.

Executive Order 12866

We have reviewed these final

regulations in accordance with

Executive Order 12866. Under the terms

of the order we have assessed the

potential costs and benefits of this

regulatory action.

The potential costs associated with

the final regulations are those resulting

from statutory requirements and those

we have determined as necessary for

administering these programs effectively

and efficiently. Elsewhere in this

SUPPLEMENTARY INFORMATION section, we

identify and explain any burdens

specifically associated with information

collection requirements.

In assessing the potential costs and

benefits—both quantitative and

qualitative—of this regulatory action,

we have determined that the benefits

would justify the costs.

We have also determined that this

regulatory action does not unduly

interfere with State, local, and tribal

governments in the exercise of their

governmental functions.

We summarized the potential costs

and benefits of these final regulations in

the preamble to the NPRM (65 FR

49127).

Paperwork Reduction Act of 1995

The Paperwork Reduction Act of 1995

does not require you to respond to a

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65627

collection of information unless it

displays a valid OMB control number.

We display the valid OMB control

number assigned to the collection of the

information in these final regulations at

the end of the affected section of the

regulations.

Assessment of Educational Impact

Based on the response to the NPRM

and on 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.

Electronic Access to This Document

You may view this document, as well

as all other Department of Education

documents published in the Federal

Register, in text or Adobe Portable

Document Format (PDF) on the Internet

at either the following sites:

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

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

To use PDF you must have Adobe

Acrobat Reader, which is available free

at either of the previous sites. If you

have questions about using PDF, call the

U.S. Government Printing Office (GPO),

toll free, at 1–888–293–6498; or in the

Washington, DC, area at (202) 512–1530.

Note: 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 on GPO

Access at: http://www.access.gpo.gov/nara/

index.html

(Catalog of Federal Domestic Assistance

Numbers 84.032 Federal Family Education

Loan Program, and 84.268 William D. Ford

Federal Direct Loan Program)

List of Subjects in 34 CFR Parts 682 and

685

Administrative practice and

procedure, Colleges and universities,

Education, Loan programs-education,

Reporting and recordkeeping

requirements, Student aid, Vocational

education.

Dated: October 24, 2000.

Richard W. Riley,

Secretary of Education.

For the reasons stated in the

preamble, the Secretary amends title 34

of the Code of Federal Regulations by

revising parts 682 and 685 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.

2. Section 682.211 is amended as

follows:

A. In paragraph (h)(2)(ii)(B), by

removing the period at the end and

adding in its place, ‘‘; or’’.

B. By adding a new paragraph

(h)(2)(ii)(C).

C. By adding a new paragraph

(h)(3)(iii).

The additions and revisions read as

follows:

§ 682.211 Forbearance.

* * * * *

(h) * * *

(2) * * *

(ii) * * *

(C) Is performing the type of service

that would qualify the borrower for loan

forgiveness and associated forbearance

under the requirements of the teacher

loan forgiveness program in § 682.215.

* * * * *

(3) * * *

(iii) Before granting a forbearance to a

borrower under paragraph (h)(2)(ii)(C) of

this section, the lender must require the

borrower to—

(A) Submit documentation for the

period of the annual forbearance request

showing the beginning and anticipated

ending dates that the borrower is

expected to perform, for that year, the

type of service described in § 682.215(c);

and

(B) Certify the borrower’s intent to

satisfy the requirements of § 682.215(c).

(Approved by the Office of Management and

Budget under control number 1845–0020)

* * * * *

3. A new § 682.215 is added to read

as follows:

§ 682.215 Teacher loan forgiveness

program.

(a) General. The teacher loan

forgiveness program is intended to

encourage individuals to enter and

continue in the teaching profession. For

new borrowers, the Secretary repays up

to a combined total of $5,000 of

subsidized and unsubsidized Federal

Stafford Loans, Direct Subsidized Loans,

Direct Unsubsidized Loans, and in

certain cases, Federal Consolidation

Loans or Direct Consolidation Loans.

The forgiveness program is only

available to a borrower who has no

outstanding loan balance under the

FFEL Program or the Direct Loan

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. In addition, the borrower must

have been employed as a full-time

teacher for five consecutive complete

academic years, at least one of which

was after the 1997–1998 academic year,

in certain eligible elementary or

secondary schools that serve lowincome families. The loan for which

forgiveness is sought must have been

made prior to the end of the borrower’s

fifth year of qualifying teaching service.

(b) Definitions. The following

definitions apply to this section:

Academic year means one complete

school year at the same school, or two

complete and consecutive half years at

different schools, or two complete and

consecutive half years from different

school years at either the same school or

different schools. Half years exclude

summer sessions and generally fall

within a twelve-month period. For

schools that have a year-round program

of instruction, nine months is

considered an academic year.

Elementary school means a public or

nonprofit private school that provides

elementary education as determined by

State law or the Secretary if that school

is not in a State.

Full-time means the standard used by

a State in defining full-time

employment as a teacher. For a

borrower teaching in more than one

school, the determination of full-time is

based on the combination of all

qualifying employment.

Secondary school means a public or

nonprofit private school that provides

secondary education as determined by

State law or the Secretary if the school

is not in a State.

Teacher means a person who provides

direct classroom teaching or classroomtype teaching in a non-classroom

setting, including Special Education

teachers.

(c) Borrower eligibility. (1) A borrower

may obtain loan forgiveness under this

program if he or she has been employed

as a full-time teacher for five

consecutive complete academic years, at

least one of which was after the 1997–

1998 academic year, in an elementary or

secondary school that—

(i) Is in a school district that qualifies

for funds under title I of the Elementary

and Secondary Education Act of 1965,

as amended;

(ii) Has been selected by the Secretary

based on a determination that more than

30 percent of the school’s total

enrollment is made up of children who

qualify for services provided under title

I; and

(iii) Is listed in the Annual Directory

of Designated Low-Income Schools for

Teacher Cancellation Benefits. If this

directory is not available before May 1

of any year, the previous year’s

directory may be used.

(2) If the school at which the borrower

is employed meets the requirements

specified in paragraph (c)(1) of this

65628 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

section for at least one year of the

borrower’s five consecutive complete

academic years of teaching and the

school fails to meet those requirements

in subsequent years, those subsequent

years of teaching qualify for purposes of

this section for that borrower.

(3) A borrower who is employed as an

elementary school teacher must

demonstrate knowledge and teaching

skills in reading, writing, mathematics,

and other areas of the elementary school

curriculum, as certified by the chief

administrative officer of the school in

which the borrower was employed.

(4) A borrower who is employed as a

secondary school teacher must teach in

a subject area that is relevant to the

borrower’s academic major as certified

by the chief administrative officer of the

school in which the borrower was

employed.

(5) The academic year may be counted

as one of the borrower’s five consecutive

complete academic years if the borrower

completes at least one-half of the

academic year and the borrower’s

employer considers the borrower to

have fulfilled his or her contract

requirements for the academic year for

the purposes of salary increases, tenure,

and retirement if the borrower is unable

to complete an academic year due to—

(i) A return to postsecondary

education, on at least a half-time basis,

that is directly related to the

performance of the service described in

this section;

(ii) A condition that is covered under

the Family and Medical Leave Act of

1993 (FMLA) (19 U.S.C. 2654); or

(iii) A call or order to active duty

status for more than 30 days as a

member of a reserve component of the

Armed Forces named in section 10101

of title 10, United States Code.

(6) A borrower’s period of

postsecondary education, qualifying

FMLA condition, or military active duty

as described in paragraph (c)(5) 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.

(7) A borrower who taught in more

than one qualifying school 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 involved, is considered to have

completed one academic year of

qualifying teaching.

(8) A borrower is not eligible for

teacher loan forgiveness on a defaulted

loan unless the borrower has made

satisfactory repayment arrangements to

re-establish title IV eligibility, as

defined in § 682.200.

(9) A borrower may not receive loan

forgiveness for qualifying teaching

service under this section if the

borrower receives a benefit for the same

teaching service under subtitle D of title

I of the National and Community

Service Act of 1990.

(d) Forgiveness amount. (1) A

qualified borrower is eligible for

forgiveness of up to $5,000 of the

aggregate amount of a borrower’s

subsidized or unsubsidized Federal

Stafford or Federal 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 consolidation loan that

was used to repay an eligible subsidized

or unsubsidized Federal Stafford loan,

an eligible Direct Subsidized Loan, or an

eligible Direct Unsubsidized Loan

qualifies for loan forgiveness under this

section.

(2) A borrower may not receive more

than a total of $5,000 in loan forgiveness

for outstanding principal and accrued

interest under both this section and

under section 34 CFR 685.217.

(3) The holder does not refund

payments that were received from or on

behalf of a borrower who qualifies for

loan forgiveness under this section.

(e) Authorized forbearance during

qualifying teaching service and

discharge processing. (1) At the

borrower’s request, a holder grants a

forbearance—

(i) Under § 682.211(h)(2)(ii)(C) and

(h)(3)(iii), in annual increments for each

of the years of qualifying teaching

service, if the holder believes, at the

time of each annual request, that the

expected cancellation amount will

satisfy the anticipated remaining

outstanding balance on the loan at the

time of the expected cancellation;

(ii) For a period not to exceed 60 days

while the holder is awaiting a

completed teacher loan forgiveness

application from the borrower; and

(iii) For the period beginning on the

date the holder receives a completed

loan forgiveness application to the date

the holder receives either a denial of the

request or the loan discharge amount

from the guaranty agency, in accordance

with paragraph (f) of this section.

(2) At the conclusion of a forbearance

authorized under paragraph (e)(1) of this

section, the holder must resume

collection activities and may capitalize

any interest accrued and not paid

during the forbearance period in

accordance with § 682.202(b).

(3) Nothing in paragraph (e) of this

section restricts holders from offering

other forbearance options to borrowers

who do not meet the requirements of

paragraph (e)(1)(i) of this section.

(f) Application and processing. (1) A

borrower, after completing the

qualifying teaching service, requests

loan forgiveness from the holder of the

loan on a form approved by the

Secretary.

(2)(i) The holder must file a request

for payment with the guaranty agency

on a teacher forgiveness discharge 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 forgiveness discharge, the

holder must provide the guaranty

agency with the completed loan

forgiveness application submitted by the

borrower and any required supporting

documentation.

(iii) If the holder files a request for

payment later than 60 days after the

receipt of the completed teacher loan

forgiveness application form, interest

that accrued on the loan after the

expiration of the 60-day filing period is

ineligible for reimbursement by the

Secretary, and the holder must repay all

interest and special allowance received

on the loan for periods after the

expiration of the 60-day filing period.

The holder cannot collect from the

borrower any interest that is not paid by

the Secretary under this paragraph.

(3)(i) Within 45 days of receiving the

holder’s request for payment, the

guaranty agency must determine if the

borrower meets the eligibility

requirements for loan forgiveness under

this section and must notify the holder

of its determination of the borrower’s

eligibility for loan forgiveness under

this section.

(ii) If the guaranty agency approves

the discharge, it must, within the same

45-day period, pay the holder the

amount of the discharge, up to $5,000,

subject to paragraphs (c)(9), (d)(1) and

(d)(2) of this section.

(4) After being notified by the

guaranty agency of its determination of

the eligibility of the borrower for the

discharge, the holder must, within 30

days, inform the borrower of the

determination. If the discharge is

approved, the holder must also provide

the borrower with information regarding

any new repayment terms of remaining

loan balances.

(5) Unless otherwise instructed by the

borrower, the holder must apply the

proceeds of the teacher forgiveness

discharge first to any outstanding

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65629

unsubsidized Federal Stafford loan

balances, next to any outstanding

subsidized Federal Stafford loan

balances, then to any eligible

outstanding Federal Consolidation loan

balances.

(g) Claims for reimbursement from the

Secretary on loans held by guaranty

agencies. In the case of a teacher loan

forgiveness discharge applied to a

defaulted loan held by the guaranty

agency, the Secretary pays the guaranty

agency a percentage of the amount

discharged that is equal to the

complement of the reinsurance

percentage paid on the loan. The

payment of up to $5,000 may also

include interest that accrues on the

discharged 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

discharge. (Approved by the Office of

Management and Budget under control

number 1845–0020)

(Authority: 20 U.S.C. 1078–10)

PART 685—WILLIAM D. FORD

FEDERAL DIRECT LOAN PROGRAM

4. The authority citation for Part 685

continues to read as follows:

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

otherwise noted.

§ 685.102 [Amended]

5. Section 685.102(b) is amended in

paragraph (2) of the definition of

‘‘Satisfactory repayment arrangement’’

by removing the reference to ‘‘34 CFR

685.215(d)(1)(ii)(E)’’ and adding, in its

place, ‘‘34 CFR 685.220(d)(1)(ii)(E)’’.

§ 685.200 [Amended]

6. Section 685.200 is amended by:

A. Removing from paragraph (a)(1)(v)

‘‘34 CFR 668.7(b)’’ and adding, in its

place, ‘‘34 CFR 668.32(e)(2) or (3)’’.

B. Removing from paragraph (b)(1)(iv)

‘‘34 CFR 668.7’’ and adding, in its place

‘‘34 CFR 668.32(g)’’.

C. Removing from paragraph (c)

‘‘§ 685.215(d)(1)(ii)(F)’’ and adding, in

its place, ‘‘685.220(d)(1)(ii)(F)’’.

§ 685.201 [Amended]

7. Section 685.201(c)(2) is amended

by removing the reference to

‘‘§ 685.216’’ and by adding, in its place

‘‘§ 685.220’’.

8. Section 685.205 is amended by:

A. Redesignating paragraph (a)(5) as

(a)(6).

B. Adding a new paragraph (a)(5).

C. Removing from paragraph (b)(6)(i)

the reference to ‘‘§ 685.213’’ and adding,

in its place, ‘‘§ 685.214’’. D. Removing from paragraph (b)(6)(ii)

the reference to ‘‘§ 685.214’’ and adding,

in its place, ‘‘§ 685.215’’. E. Removing from paragraph (b)(6)(iii)

the reference to ‘‘§ 685.215; or’’ and

adding, in its place, ‘‘§ 685.216;’’. F. By redesignating paragraph

(b)(6)(iv), as paragraph (b)(6)(v). G. By adding a new paragraph

(b)(6)(iv).

The additions read as follows:

§ 685.205 Forbearance.

(a) * * *

(5) The borrower—

(i) 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; and

(ii) Is required, by the Secretary,

before a forbearance is granted under

§ 685.205(a)(5)(i) to—

(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).

* * * * *

(b) * * *

(6) * * *

(iv) Under § 685.217; or

(Approved by the Office of Management and

Budget under control number 1845–0021)

* * * * *

§ 685.210 [Amended]

9. Section 685.210(b)(2)(ii) is

amended by removing the reference to

‘‘§ 685.209(d)(2)’’ and by adding, in its

place ‘‘§ 685.209(c)(4)’’.

§ 685.211 [Amended]

10. Section 685.211(e)(4) is amended

by removing the reference to

‘‘§ 685.215’’ and by adding, in its place,

‘‘§ 685.220’’.

11. Section 685.212 is amended by:

A. Removing from paragraph (d) the

reference to ‘‘§ 685.213’’ and adding, in

its place, ‘‘§ 685.214’’. B. Removing from paragraph (e) the

reference to ‘‘§ 685.214’’ and adding, in

its place, ‘‘§ 685.215’’. C. Removing from paragraph (f) the

reference to ‘‘§ 685.215’’ and adding, in

its place, ‘‘§ 685.216’’. D. By adding a new paragraph (h).

The addition reads as follows:

§ 685.212 Discharge of a loan obligation.

* * * * *

(h) Teacher loan forgiveness program.

If a new borrower meets the

requirements in § 685.217, the Secretary

repays up to $5,000 of the borrower’s

Direct Subsidized Loans, Direct

Unsubsidized Loans, and, in certain

cases, Direct Consolidation Loans.

§§ 685.214, 685.215, 685.216

[Redesignated as §§ 685.215, 685.216, and

685.220]

12. Sections 685.214, 685.215, and

685.216 are redesignated as §§ 685.215,

685.216, and 685.220, respectively.

§ 685.213 [Redesignated as § 685.214,

§ 685.213 Reserved]

13. Section 685.213 is redesignated as

§ 685.214, and § 685.213 is reserved.

§ 685.215 [Amended]

14. In § 685.215, paragraph (c)(5)(ii) is

amended by removing the references to

‘‘§ 685.213(d)’’ and ‘‘§ 685.213(e)’’ and

adding, in their place, ‘‘§ 685.214(d)’’

and ‘‘§ 685.214(e)’’, respectively.

§ 685.216 [Amended]

15. In § 685.216, paragraph

(c)(1)(iii)(B) is amended by removing the

references to ‘‘§ 685.213(d)’’ and

‘‘§ 685.213(e)’’ and adding, in their

place, ‘‘§ 685.214(d)’’ and

‘‘§ 685.214(e)’’, respectively.

16. A new § 685.217 is added to read

as follows:

§ 685.217 Teacher loan forgiveness

program.

(a) General. The teacher loan

forgiveness program is intended to

encourage individuals to enter and

continue in the teaching profession. For

new borrowers, the Secretary will repay

up to a combined total of $5,000 of

subsidized and unsubsidized Federal

Stafford Loans, Direct Subsidized Loans,

Direct Unsubsidized Loans, and, in

certain cases, Federal Consolidation

Loans or Direct Consolidation Loans.

The forgiveness program is only

available to a borrower who has no

outstanding loan balance under the

FFEL Program or the Direct Loan

Program on October 1, 1998 or who has

no outstanding loan balance on the date

he or she obtains a loan after October l,

1998. In addition, the borrower must

have been employed as a full-time

teacher for five consecutive complete

academic years, at least one of which

was after the 1997–1998 academic year,

in certain eligible elementary or

secondary schools that serve lowincome families. The loan for which the

borrower is seeking forgiveness must

have been made prior to the end of the

fifth year of qualifying teaching service.

(b) Definitions. The following

definitions apply to this section:

65630 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

Academic year means one complete

school year at the same school, or two

complete and consecutive half years at

different schools, or two complete and

consecutive half years from different

school years at either the same school or

different schools. Half years exclude

summer sessions and generally fall

within a twelve-month period. For

schools that have a year-round program

of instruction, a minimum of nine

months is considered an academic year.

Elementary school means a public or

nonprofit private school that provides

elementary education as determined by

State law or the Secretary if that school

is not in a State.

Full-time means the standard used by

a State in defining full-time

employment as a teacher. For a

borrower teaching in more than one

school, the determination of full-time is

based on the combination of all

qualifying employment.

Secondary school means a public or

nonprofit private school that provides

secondary education as determined by

State law or the Secretary if the school

is not in a State.

Teacher means a person who provides

direct classroom teaching or classroomtype teaching in a non-classroom

setting, including Special Education

teachers.

(c) Borrower eligibility. (1) A borrower

may obtain loan forgiveness under this

program if he or she has been employed

as a full-time teacher for five

consecutive complete academic years, at

least one of which was after the 1997–

1998 academic year, in an elementary or

secondary school that—

(i) Is in a school district that qualifies

for funds under title I of the Elementary

and Secondary Education Act of 1965,

as amended;

(ii) Has been selected by the Secretary

based on a determination that more than

30 percent of the school’s total

enrollment is made up of children who

qualify for services provided under title

I; and

(iii) Is listed in the Annual Directory

of Designated Low-Income Schools for

Teacher Cancellation Benefits. If this

directory is not available before May 1

of any year, the previous year’s

directory may be used.

(2) If the school at which the borrower

is employed meets the requirements

specified in paragraph (c)(1) of this

section for at least one year of the

borrower’s five consecutive complete

academic years of teaching and the

school failed to meet those requirements

in subsequent years, those subsequent

years of teaching qualify for purposes of

this section for that borrower.

(3) A borrower who is employed as an

elementary school teacher must

demonstrate knowledge and teaching

skills in reading, writing, mathematics,

and other areas of the elementary school

curriculum, as certified by the chief

administrative officer of the school in

which the borrower was employed.

(4) A borrower who is employed as a

secondary school teacher must teach in

a subject area that is relevant to the

borrower’s academic major as certified

by the chief administrative officer of the

school in which the borrower was

employed.

(5) The academic year may be counted

as one of the borrower’s five consecutive

complete academic years if the borrower

completes at least one-half of the

academic year and the borrower’s

employer considers the borrower to

have fulfilled his or her contract

requirements for the academic year for

the purposes of salary increases, tenure,

and retirement if the borrower is unable

to complete an academic year due to—

(i) A return to postsecondary

education, on at least a half-time basis,

that is directly related to the

performance of the service described in

this section;

(ii) A condition that is covered under

the Family and Medical Leave Act of

1993 (FMLA) (19 U.S.C. 2654); or

(iii) A call or order to active duty

status for more than 30 days as a

member of a reserve component of the

Armed Forces named in section 10101

of title 10, United States Code.

(6) If a borrower meets the

requirements of paragraph (c)(5) of this

section, the borrower’s period of

postsecondary education, active duty, or

qualifying FMLA condition 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.

(7) A borrower who teaches in more

than one qualifying school 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 involved, is considered to have

completed one academic year of

qualifying teaching.

(8) A borrower is not eligible for

teacher loan forgiveness on a defaulted

loan unless the borrower has made

satisfactory repayment arrangements to

re-establish title IV eligibility, as

defined in § 685.200(b).

(9) A borrower may not receive loan

forgiveness for qualifying teaching

service under this section if the

borrower receives a benefit for the same

teaching service under subtitle D of title

I of the National and Community

Service Act of 1990.

(d) Forgiveness amount. (1) A

qualified borrower is eligible for

forgiveness of up to $5,000 of the

aggregate amount of a borrower’s Direct

Subsidized Loan, 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 a Direct Consolidation Loan

that was used to repay an eligible

subsidized or unsubsidized Federal

Stafford loan, an eligible Direct

Subsidized Loan, or an eligible Direct

Unsubsidized Loan qualifies for loan

forgiveness under this section.

(2) A borrower may not receive more

than a total of $5,000 in loan forgiveness

for outstanding principal and accrued

interest under both this section and 34

CFR § 682.215.

(3) The Secretary does not refund

payments that were received from or on

behalf of a borrower who qualifies for

loan forgiveness under this section.

(e) Application. (1) A borrower, after

completing the qualifying teacher

service, must request loan forgiveness

from the Secretary on a form provided

by the Secretary.

(2) If the Secretary determines that the

borrower meets the eligibility

requirements for loan forgiveness under

this section, the Secretary—

(i) Notifies the borrower of this

determination; and

(ii) Unless otherwise instructed by the

borrower, applies the proceeds of the

loan forgiveness first to any outstanding

Direct Unsubsidized Loan balances,

next to any outstanding Direct

Subsidized Loan balances, next to any

qualifying Direct Unsubsidized

Consolidation Loan balances, and last to

any qualifying outstanding Direct

Subsidized Consolidation Loan

balances.

(3) If the Secretary determines that the

borrower does not meet the eligibility

requirements for loan forgiveness under

this section, the Secretary notifies the

borrower of this determination.

(Approved by the Office of Management and

Budget under the control number 1845–0021)

(Authority: 20 U.S.C. 1087a et seq.)

§§ 685.218, 685.219 [Added and Reserved]

17. New §§ 685.218 and 685.219 are

added and reserved.

[FR Doc. 00–27737 Filed 10–31–00; 8:45 am]

BILLING CODE 4000–01–P