65678 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682, and 685

RIN 1845–AA12

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

regulations governing the Federal

Perkins (Perkins) Loan Program, Federal

Family Education Loan (FFEL) Program,

and William D. Ford Federal Direct

Loan (Direct Loan) Program to

strengthen and improve the processes

for granting loan discharges based on a

borrower’s death or total and permanent

disability.

DATES: Effective July 1, 2002, except the

following provisions of these

regulations are effective July 1, 2001:

§§ 674.9(h)(3), 674.51(s), 674.61(a),

682.200(b), the redesignations of

§ 682.201(a)(5)–(a)(7), 682.201(a)(6)(iii),

682.402(b)(2) and (3), 682.402(g)(1)(iii),

685.200(a)(1)(iv)(A) and (B), and

685.212(a).

For additional information see the

discussion of effective dates under the

Analysis of Comments and Changes

section that follows.

FOR FURTHER INFORMATION CONTACT: For

the FFEL and Perkins Loan Programs,

Mr. Brian Smith, or for the Direct Loan

Program, Mr. Jon Utz; U.S. Department

of Education, 400 Maryland Avenue,

SW., Room 3045, Regional Office

Building No. 3, Washington, DC 20202–

5345. 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 alternative

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

audiotape, or computer diskette) on

request to the contact persons listed

under FOR FURTHER INFORMATION

CONTACT.

SUPPLEMENTARY INFORMATION: On August

2, 2000, the Secretary published a notice

of proposed rulemaking (NPRM) for the

Perkins, FFEL, and Direct Loan

programs in the Federal Register (65 FR

47634). In the preamble to the NPRM,

the Secretary discussed the following

major proposed changes:

Amending §§ 674.61, 682.402, and

685.212 to require that an original or

certified copy of a death certificate be

provided to support a discharge of a

loan based on death, although other

documentation may be accepted under

unusual circumstances (page 47636).

Amending §§ 674.51, 682.200, and

685.102 to revise the definition of

‘‘totally and permanently disabled’’

(page 47636).

Amending §§ 674.61(b)(3)(ii),

682.402(c)(2)(ii), and 685.213(b)(2) to

allow disability discharges to be granted

based on documentation from the Social

Security Administration (SSA) in lieu of

a physician’s certification of total and

permanent disability.

Amending §§ 674.61(b)(3)–(6),

682.402(c)(2)–(12), and 685.213(b) to

change the process for considering

applications for a disability discharge

on a student loan by placing loans in a

conditional discharge status for up to

three years, before granting a final

discharge. We proposed requiring FFEL

and Perkins loans to be assigned to us

after a determination by the loan holder

or guaranty agency that the borrower

meets the criteria for a total and

permanent disability discharge (pages

47637–47638).

Amending §§ 674.61(b)(1), (6), and

(7), 682.402(c)(1), (12), and (13), and

685.213(a)(1) and (d) to establish the

rules for granting a borrower a

conditional discharge if the borrower

appears to meet the requirements for a

total and permanent disability

discharge. When a loan is in a

conditional discharge status, collection

activity on the loan is suspended for up

to three years from the date of the onset

of the disability.

Amending §§ 674.61(b)(2), (8) and (9),

682.402(c)(14) and (15), and

685.213(a)(2) and (c) to discharge the

loan if the borrower continues to meet

the disability discharge criteria at the

end of the three-year conditional

discharge period.

If the borrower does not the disability

discharge criteria collection activity

resumes, but the borrower is not

obligated to pay interest that has

accrued on the loan during the

conditional discharge period (page

47638).

Amending §§ 674.61(b)(11) and (12),

682.402(r)(2) and (3), and 685.212(g)(2)

to require that payments received by a

Perkins Loan school, FFEL lender or

guaranty agency on a loan that has been

assigned to us prior to a final

determination of eligibility for a

disability discharge must be sent to us.

We will apply those payments to the

loan. If the loan is ultimately

discharged, the payments will be

returned to the sender (page 47639).

Amending §§ 674.9, 682.201, and

685.200 to allow a borrower whose loan

is in a conditional disability discharge

period to be eligible for additional title

IV loans if a physician or the SSA

certifies that the borrower is able to

engage in substantial gainful activity;

the borrower acknowledges that neither

the conditionally discharged loan nor

the new loan can be discharged on the

basis of the borrower’s current disability

unless that disability substantially

deteriorates; and collection activity

resumes on the conditionally discharged

loan (page 47639).

These final regulations contain

changes from the NPRM that are

explained in the Analysis of Comments

and Changes that follows.

Analysis of Comments and Changes

The regulations in this document

were developed through the use of

negotiated rulemaking. Section 492 of

the Higher Education Act requires that,

before publishing any proposed

regulations to implement programs

under title IV of the Act, 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 2, 2000. The

negotiated rulemaking committee was

unable to reach consensus on the

proposed regulations. The Secretary

invited comments on the proposed

regulations by September 18, 2000. In

response to the Secretary’s invitation in

the NPRM, 46 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.

Effective Date

Comment: Many commenters

responded to our request for comments

on whether a later effective date should

be considered for these regulations.

Most commenters supported an effective

date of July 1, 2001 for the death

discharge provisions, but generally

recommended a delay in the effective

date for the total and permanent

disability discharge provisions until

July 1, 2002 or 90 days after the

issuance of a revised discharge

application form and implementation

guide to the new discharge procedures,

whichever is later.

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65679

Discussion: We agree that the

operational changes needed to

implement some of the conditional

discharge provisions of the regulations

support a delay in the effective date of

those provisions. We must develop a

system for monitoring borrowers’

earnings during the conditional

discharge period, revise the assignment

process for guaranty agencies and

develop a comparable assignment

process for the Perkins Loan Program.

We must also retain and train an

organization that will handle initial and

final discharge determinations for the

Secretary. We may also have to retain a

loan servicer to handle pre-default

disability assignments that must be

converted back to repayment. We will

need to revise the current total and

permanent disability discharge request

form to reflect the new process and to

allow for its use in the Perkins Loan

Program. Procedural guidance will need

to be developed and distributed to

schools, lenders, and guaranty agencies.

Change: As suggested by some of the

commenters, the provisions that govern

death discharges, §§ 674.61(a),

682.402(b), 682.402(g)(1)(iii), and

685.212(a), will become effective on July

1, 2001. We will also implement the

revised definition of ‘‘totally and

permanently disabled’’ in §§ 674.51(s)

and 682.200(b) on July 1, 2001.

Even though we will delay the

implementation of the conditional

discharge until July 1, 2002, we have

decided that for any loan that is

discharged due to total and permanent

disability on or after July 1, 2001

through June 30, 2002, the borrower

must reaffirm that loan if the borrower

receives a new title IV loan within three

years from the date that the borrower

became totally and permanently

disabled as certified by the physician.

These provisions, §§ 674.9(h)(3),

682.201(a)(6)(iii), and

685.200(a)(1)(iv)(A) and (B) will become

effective on July 1, 2001.

All other changes related to

implementing the new processes for

granting total and permanent disability

discharges will become effective on July

1, 2002.

Sections 674.61, 682.402, and 685.212

Death Discharge

Comment: In response to the

requirement in the proposed regulations

that an ‘‘original’’ or ‘‘certified’’ copy of

the death certificate be submitted to

support a request for a discharge based

on death, two commenters indicated

that the terms ‘‘original’’ or ‘‘certified’’

may be defined differently in different

States. One of the commenters

recommended that the regulation be

revised to indicate that a death

discharge must be based on an ‘‘official

death certificate as defined by the State

in which the borrower died.’’ The other

commenter suggested that the

regulations specify what is required for

a copy of a death certificate to be

considered ‘‘certified.’’

Discussion: We believe the term

‘‘original’’ is self-explanatory. We also

believe it is implicit in the term

‘‘certified’’ that the governmental entity

issuing the death certificate defines

what constitutes a ‘‘certified’’ copy of

the original.

Change: None.

Comment: Several commenters

suggested that in lieu of requiring each

of a borrower’s loan holders to obtain an

original or certified copy of the death

certificate, the regulations should allow

a loan holder to discharge a borrower’s

loan if the National Student Loan Data

System (NSLDS) indicates that one of

the borrower’s other title IV loans has

been discharged due to death. The

commenters felt that if one of the

borrower’s loan holders obtained the

necessary documentation to establish

that the borrower had died and reported

this information to NSLDS, this should

be sufficient to discharge the borrower’s

other title IV loans. One commenter

suggested that NSLDS should be

modified to indicate whether a death

discharge was based on a death

certificate or alternative documentation.

The commenter argued that, with this

information, a loan holder could choose

to seek independent corroboration of the

borrower’s death if a loan had been

cancelled based on alternative

documentation. The commenters

believed that this approach would

reduce burden on the families of

deceased borrowers.

One commenter proposed an

alternative approach whereby a loan

holder would be required to notify the

Secretary upon learning of a borrower’s

death and the Secretary would assume

the responsibility of obtaining

confirmation.

Discussion: As discussed in the

preamble to the NPRM (65 FR 47634,

47636), the changes to this regulation

are based in part on the findings of a

report issued by the Department of

Education’s Office of Inspector General

(OIG) in June 1999. That report

concluded, among other things, that

death discharges were being granted

without reliable supporting

documentation. In light of the OIG’s

findings with regard to fraudulent death

discharge claims, we believe it is

important to require each of a

borrower’s loan holders to

independently obtain the required

documentation of a borrower’s death.

We note that this is the current

requirement and this regulation will not

increase any burden on the borrower or

loan holder. However, we appreciate the

commenters’ suggestions and will

consider whether to explore ways in

which NSLDS might be used in the

future to improve the processing of

death discharge applications. With

regard to the suggestion that the

Secretary should obtain the necessary

documentation of a borrower’s death,

we believe that—as is the case with

other types of loan discharges—

documentation of a borrower’s

eligibility for discharge should remain

the responsibility of the loan holder.

Change: None.

Comment: Two commenters felt that

the problems identified by the OIG were

not significant enough to warrant

requiring an original or certified copy of

the death certificate in all but

exceptional circumstances. One of the

commenters noted that while his

institution generally requests an official

copy of the death certificate, it would be

preferable to retain the current option of

using an alternative proof of death that

is acceptable under State law. Another

commenter felt that the proposed

requirements would place an undue

burden on families, on the grounds that

certified copies of death certificates can

be difficult and expensive to obtain. The

commenter did not believe that allowing

alternative documentation in

‘‘exceptional circumstances’’ would

reduce burden for the majority of

families of deceased borrowers. The

commenter recommended keeping the

current documentation requirements,

but encouraging loan holders to more

closely inspect documents for fraud.

Two commenters noted that obtaining

an original or certified copy of the death

certificate may not be the only official

means of confirming an individual’s

death. One of the commenters reported

that some State social service agencies

are beginning to put public records on

their websites, and suggested that loan

holders should be allowed to approve

death discharges if they can obtain

electronic verification of an individual’s

death directly from an official source.

One commenter recommended that

§ 682.402(b)(2) be revised to provide

that a guaranty agency must maintain

documentation of death discharges

based on alternative documentation ‘‘as

required in § 682.414(a).’’ The

commenter believed that this change

would clarify that documentation of

exceptional circumstances must be

maintained within the borrower’s record

as is the case with all other claim

documentation.

65680 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

Discussion: We do not agree with the

commenters’ view that the problems

identified by the OIG are not significant

enough to warrant changing the

requirements for documentation of

death. Even a small number of

improperly granted death discharges

represents a serious problem and

undermines program integrity. We

believe that the most appropriate

response to the OIG’s findings is to

require loan holders to obtain proof of

a borrower’s death in the form of an

original or certified copy of the death

certificate. In the vast majority of cases,

obtaining an original or certified copy of

the death certificate is not unduly

burdensome or costly. In addition, such

documentation is generally required by

insurance companies and other parties

in order to pay benefits and close

accounts.

We are interested in the commenters’

suggestions regarding the possibility of

using electronic records and we will

consider whether to explore these other

means for obtaining official proof of

death that could potentially be used in

the future.

Finally, we do not believe it is

necessary to cross-reference the general

record keeping requirements in

§ 682.414.

Change: None.

Comment: Several commenters

recommended that loan holders not be

limited to obtaining acceptable

documentation of death only from the

borrower’s representative or parent,

since a loan holder may obtain a death

certificate directly from an official

source.

Discussion: We agree with the

commenters. However, we emphasize

that the loan holder must still obtain an

original or certified copy of the death

certificate and may not simply contact

an official source for verification of a

borrower’s death.

Change: We have revised

§ 682.402(b)(2) and § 685.212(a)(1) and

(2) to eliminate the suggestion that a

parent or representative must provide

the necessary documentation of the

borrower’s death. No changes are

needed in the Perkins Loan Program

regulations.

Comment: Many commenters

recommended that we reconsider the

proposed requirement that only the

chief executive officer (CEO) of the

guaranty agency or chief financial

officer (CFO) of the institution would be

authorized to approve a death discharge

application that is based on

documentation other than the original

or a certified copy of a death certificate.

The commenters felt that the proposed

requirement was overly restrictive, and

could result in delays in the processing

of discharges. Many of the commenters

believed that it would be more

appropriate to allow the CEO or CFO to

designate another official of the

organization who would be authorized

to approve alternative documentation of

a borrower’s death.

Discussion: As explained in the

preamble to the proposed regulation, the

requirement that a senior official of the

guaranty agency or institution approve

the use of alternative documentation is

intended to ensure that such

documentation is used only rarely, and

in exceptional circumstances. We

believe that allowing the CEO or CFO to

designate another official who could

approve alternative documentation

would be contrary to the intent of the

regulations. Since very few death

discharges should be approved based on

such alternative documentation, we

believe the restrictions will not

adversely affect the processing of death

discharges.

Change: None.

Comment: One commenter suggested

that the proposed Direct Loan

regulations appear to allow the use of

alternative documentation of death on a

broader basis than would be permitted

in the Perkins and FFEL programs. The

commenters noted that § 674.61(a) and

§ 682.402(b)(2) state that discharges

based on alternative documentation of

death may be approved only ‘‘under

exceptional circumstances and on a

case-by-case basis,’’ while the

corresponding section of the Direct Loan

Program regulations, § 685.212(a)(2),

does not contain the same restrictive

language. The commenter recommended

that the Direct Loan regulations be

revised to include the same language as

the Perkins and FFEL program

regulations.

Discussion: We did not intend to

establish a less restrictive requirement

for the Direct Loan Program and agree

with the commenter’s recommendation.

Change: We have revised

§ 685.212(a)(2) to indicate that the

Secretary will approve discharges in the

Direct Loan Program based on

alternative documentation only in

exceptional circumstances and on a

case-by-case basis.

Comment: Several commenters

recommended that § 682.402(b)(3) of the

proposed regulation be revised to

provide that the lender must suspend

collection activity against the borrower

‘‘and any endorser’’ after receiving

reliable information indicating that the

borrower has died. The commenters

noted that this would be consistent with

the corresponding provision for total

and permanent disability discharges in

§ 682.402(c)(3).

Discussion: We agree with the

commenters.

Change: We have revised

§ 682.402(b)(3) to authorize suspension

of collection activities against an

endorser under these circumstances.

Sections 674.51, 682.200, and 685.102

Definitions

Comment: Many commenters

supported the removal of the criteria ‘‘or

attend school’’ from the definition of

totally and permanently disabled.

However, one commenter expressed

concerns about a borrower’s eligibility

to receive loans after the end of the

three-year conditional discharge period.

The commenter noted that the borrower

might later be unable to repay those

loans because of a pre-existing medical

condition that prevents the borrower

from working.

Discussion: We thank the commenters

for their support. In response to the

commenter’s concerns about a borrower

being unable to repay loans received

after the end of the three-year

conditional discharge period because of

a pre-existing medical condition that

prevents the borrower from working, we

note that a borrower who seeks a new

loan after the final discharge of a

previous loan at the end of the threeyear conditional discharge period will

continue to be subject to the same

requirements that apply under the

current regulations. That is, the

borrower must provide a certification

from a physician that the borrower is

able to engage in substantial gainful

activity, and must acknowledge in

writing that the new loan cannot be

discharged based on a pre-existing

condition unless that condition has

substantially deteriorated.

Change: None.

Comment: One commenter questioned

the rationale for removing ‘‘attend

school’’ from the definition of ‘‘totally

and permanently disabled,’’ and

recommended that the current

definition be retained. The commenter

believed that the purpose of attending

school is to receive training that will

later lead to gainful employment and

the ability to repay a student loan.

Discussion: As explained in the

preamble to the NPRM, the requirement

that an individual must be unable to

attend school was removed from the

definition of totally and permanently

disabled because of our belief that given

medical and technological advances, it

is no longer meaningful to use ability to

attend school as an indicator of total

and permanent disability. In addition,

the prohibition against attending school

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65681

could have the unintended consequence

of discouraging disabled individuals

from pursuing further education or

training.

Change: None.

Comment: Three commenters felt that

the proposed definition of ‘‘totally and

permanently disabled,’’ which provides

that a borrower must be ‘‘unable to work

and earn money,’’ is not consistent with

the proposed discharge eligibility

criteria, which allow a borrower to

receive earnings from work and still

qualify for loan discharge. The

commenters believed that this

difference would be confusing to

borrowers, and suggested that the

definition of ‘‘totally and permanently

disabled’’ be revised to indicate that a

borrower must either be unable to work

or, if able to work, that the borrower’s

earnings could not exceed 100 percent

of the poverty line for a family of two

during the conditional discharge period.

Discussion: We do not agree that the

definition of ‘‘totally and permanently

disabled’’ conflicts with the discharge

eligibility criteria. To qualify for a

conditional discharge due to total and

permanent disability, a borrower must

provide a certification from a physician

indicating that, in the physician’s best

professional judgment, the borrower is

unable to work and earn money because

of an illness or injury that is expected

to continue indefinitely or result in

death. However, advances in medical

treatment may result in an improvement

in the borrower’s condition that could

not be predicted at the time of the

physician’s certification. In addition,

changes in employment conditions may

allow a borrower to return to work

despite his or her condition. We do not

wish to discourage disabled individuals

from attempting employment.

Accordingly, the regulations do not

disqualify borrowers who have minimal

earnings during the conditional

discharge period.

On the other hand, we do not believe

it is appropriate to revise the definition

of ‘‘totally and permanently disabled,’’

to include an earnings limit. First of all,

such an addition would be inconsistent

with the rest of the definition which

refers to a borrower who cannot work

and earn money. Second, as a practical

matter, it would significantly

complicate the process for determining

if the borrower is disabled by requiring

the borrower to submit income

information as well as the doctor’s

certification as part of the initial

application.

Sections 674.61, 682.402, 685.212 and

685.213 Total and Permanent Disability

Discharge

Comment: Many commenters argued

that the Inspector General’s report

discussed in the preamble to the NPRM

(‘‘Improving the Process for Forgiving

Student Loans’’) does not provide

compelling evidence that substantive

changes are required to the process for

granting total and permanent disability

discharges. One commenter disagreed

with this view, and stated that the

findings of the Inspector General’s

report are cause for concern and

legitimate reasons for the Department to

take action.

The commenters who stated the view

that the findings in the OIG’s report do

not justify the changes proposed in the

NPRM suggested that we conduct a

comprehensive examination of the

specific accounts supporting the

findings in the OIG’s report before

making changes to the existing process

for granting total and permanent

disability discharges. They believe that

such an examination is necessary to

establish the reason for the exceptions,

to identify possible vulnerabilities in

the system for granting disability

discharges, and to allow us to design a

tailored solution to address the problem.

Discussion: The OIG clearly found

evidence of inappropriate disability

discharges being awarded in the FFEL

program. The OIG’s conclusion that 81

individuals earned more than $50,000

in 1997 after receiving a disability

discharge between July 1, 1994 and

December 31, 1996 cannot be ignored.

The OIG also reported that 6,800 new

loans totaling almost $20 million were

awarded to borrowers who returned to

school after having loans totaling nearly

$11.5 million discharged. These

findings indicate a significant problem

that warrants the proposed changes.

Change: None.

Comment: Many commenters

criticized the proposed regulations on

the grounds that our approach to

reforming the disability discharge

procedures would adversely impact all

eligible borrowers, rather than focusing

on those borrowers who are later

determined to be ineligible for a final

discharge.

Several commenters objected to the

proposed change because they believe it

would cause undue hardship to

borrowers. They contend that the

complexity of the proposed disability

discharge procedures would create

unnecessary anxiety and confusion for

disabled borrowers, particularly those

afflicted with severe mental or

emotional impairments.

One commenter raised concerns about

the effect the proposed change would

have on potential borrowers who might

think twice about obtaining student

loans for their future educational needs.

The commenter believed that the

conditional discharge approach may

potentially discourage a person from

pursuing higher education for fear of an

inability to repay his or her loans due

to medical difficulties.

Discussion: As noted in the OIG

report, the discharge of student loans

based on a total and permanent

disability can provide a significant

benefit to the borrower. At the same

time, the disability discharge reflects a

governmental decision to forgive

thousands of dollars in debt. Disability

discharges thus represent a significant

cost to federal taxpayers. In these

circumstances, it is clearly appropriate

to have stringent criteria for discharging

a loan. While the conditional discharge

period may be a slight inconvenience

for some borrowers, it helps to ensure

that total and permanent disability

discharges are only granted to borrowers

whose disabilities are truly

‘‘permanent.’’

We disagree with the commenters’

assumption that the three-year

conditional discharge period will create

undue anxiety for borrowers. Borrowers

will be informed up front of the criteria

they must meet to qualify for a disability

discharge. Borrowers who continue to

meet the eligibility criteria will receive

a final discharge at the close of the

conditional period. Moreover, borrowers

suffer no negative consequences during

the conditional discharge period. No

collection activity or adverse credit

reporting occurs during the conditional

discharge period. If a borrower’s

situation changes during this period, we

believe the borrower should be expected

to repay the student loan. However,

even if collection activity resumes on

the loan, the borrower is not obligated

to pay any interest that accrued during

the conditional discharge period.

We disagree with the claim by one of

the commenters that the conditional

discharge approach will be particularly

harmful to borrowers with severe

mental or emotional impairments. As

we noted in the preamble to the NPRM

(65 FR at 47635), we are not aware of

any other major federal program that

provides disability benefits based on a

one-time review of an individual’s

condition, and we did not receive any

comments suggesting otherwise. The

adoption of the policies reflected in this

regulation will make the processes for

discharges of student loans more

comparable to that of other federal

65682 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

programs to which the borrower may

also be applying for benefits.

We strongly disagree with the

commenter who suggested that the new

regulations would somehow discourage

borrowers from taking out student loans

to further their education. Most

borrowers, even those with some preexisting condition, recognize the value

of postsecondary education and

appreciate the opportunity and access to

education that student loans provide

them. We do not share the commenter’s

apparent belief that a borrower will be

dissuaded from pursuing an education

based on the standard for a disability

discharge.

Change: None.

Comment: Several commenters

objected to the proposed change because

they believe it will result in undue

administrative burden on institutions

and guaranty agencies. One commenter

claimed that the proposed approach will

not work and will result in genuinely

disabled borrowers not receiving

discharges to which they are entitled.

The commenter also believed that the

new process will require guaranty

agencies and the Department to meet

impossible demands for vastly increased

staffing and medical and vocational

expertise.

Several commenters also claimed that

implementation of the proposed

regulations would result in considerable

expense for taxpayers and loan

administrators, and questioned whether

the benefits of the regulations justify the

expense.

Discussion: We agree that there are

many operational details that will need

to be addressed before the regulations

can be implemented (see the prior

discussion on effective date). However,

we do not believe that the regulations

will create undue administrative burden

on loan holders and guaranty agencies.

For these participants, there will be

little change from the current process of

reviewing discharge requests, except

that their decision to grant a total and

permanent disability discharge will not

be final and they will assign the loans

to us.

In regard to the commenters’ claim

that the costs of the new process will

exceed the benefits, our analysis does

not support this claim. Moreover, even

a small percentage of borrowers who

were ineligible for loan discharge calls

the integrity of the loan discharge

process into question and may threaten

public support for the title IV student

loan programs.

Change: None.

Comment: Overall, the commenters

claimed that the proposed rule will be

difficult to comprehend, difficult to

administer, difficult to explain to

students, and that setting up new

bureaucratic systems is not the answer.

However, two commenters agreed in

general with the key provisions of the

proposed regulations.

Many commenters recommended that

we withdraw the proposed regulations.

A couple of commenters stated that

the proposed regulations are

unnecessary because it is feasible to

identify abusers by cross-referencing tax

information with discharge information

and to reverse a discharge granted to an

ineligible borrower.

Some commenters questioned

whether we have the legal authority to

impose a conditional discharge on

borrowers, since a conditional discharge

is not specifically mentioned in the

statute.

Discussion: The proposed regulations

were discussed during an extensive

negotiated rulemaking process and were

subject to the opportunity for public

comment. The comments we received

and which are discussed in this

preamble have raised a number of

issues. We have responded to those

issues in this document and, where

appropriate, have made changes to the

regulations. We believe that this final

regulation creates a workable process

that will result in fair treatment for

borrowers and taxpayers.

We also disagree with the commenters

who suggested that the regulations are

unnecessary because we already have

the ability to revoke discharges.

Generally, a final agency decision

cannot be changed based on events

occurring after the decision.

Accordingly, we believe that it is

unlikely that loan discharges for

borrowers who met the eligibility

criteria could be easily reinstated and

legally enforced at a later date.

Change: None.

Comment: Several commenters

recommended that we develop an

operational guide for the new policy

and allow interested organizations to

review the guide. They believe that such

a major change in policy will require

careful coordination between the

various entities that administer the title

IV student loan programs and that

operational details must be carefully

considered and documented.

Discussion: We agree with the

commenters and intend to work with

representatives of schools, lenders,

servicers, guarantors and borrowers to

develop appropriate written guidance to

implement the regulations.

Change: None.

Comment: Several commenters

offered alternative solutions to those

proposed in the NPRM. Some

recommended that we reconsider the

proposal made by the non-federal

negotiators during the negotiated

rulemaking process. Under that

proposal, a borrower would receive a

disability discharge after consideration

of the initial application. However, the

borrower would also be notified that if

certain events occur (receipt of an

additional title IV loan or significant

earnings) during a specified time period

following the discharge, the discharge

would be revoked.

One commenter pointed out that

reinstatement of loans in cases where a

borrower has requested another title IV

loan subsequent to a disability discharge

has been a workable element of the title

IV program in the past. In addition, the

Department has routinely reinstated

nonconditionally discharged loans in

cases where the determination of

discharge eligibility was based on

incorrect or changing information, as is

often the case with closed school

revisions.

One commenter recommended that

we rely on State or Federal agencies,

such as the Social Security

Administration, that are specifically

charged by law with making disability

determinations. The commenter

believes that these agencies are far more

capable of making fair, uniform, and

reliable disability determinations than

loan holders or guaranty agencies. The

commenter believes that placing

disability discharge determinations in

the hands of a knowledgeable third

party is the best way to ensure the

integrity and fairness of all such

determinations.

One commenter recommended that

we turn over verified fraudulent

disability claims to the U.S. Attorney’s

Office for possible prosecution. The

commenter believes that if it became

known that the Department vigorously

pursues fraud, it would deter physicians

from falsely certifying disability request

forms.

One commenter recommended that

we require lenders to offer credit

insurance to student loan borrowers at

reasonable rates. This insurance would

repay the full loan in cases of authentic

total and permanent disability that can

be quickly and fairly verified. Borrowers

who accept the credit insurance could

be given reduced interest points as an

incentive.

Another commenter suggested that

Perkins Loan holders be allowed to

continue to make disability

determinations, which would be

reviewed as part of the annual audit. In

cases where the auditors question the

holder’s judgment, we would disallow

the discharge, and the loan holder

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65683

would be required to reimburse the

Perkins loan fund. The commenter

believed that this approach would

eliminate approvals based on

insufficient evidence.

Two commenters recommended that

we reinstate the deferment for

temporary total disability. By doing so,

borrowers would receive the relief they

need, and lenders and schools would

have the ability to determine, based on

the physicians’ certification, if the

disability is total and permanent at the

end of an appropriate period of time.

Loan holders could also monitor the

status of the borrower during the

deferment period for signs of substantial

gainful employment.

Discussion: Although we have

reinstated discharged loans in the past

due to fraud or based on inaccurate

information submitted by the borrower,

inappropriate disability discharges are

not necessarily fraudulent. The new

regulations recognize that a borrower’s

medical condition is not static and

could improve after the borrower

received a disability discharge.

Similarly, changes in employment

technologies and opportunities could

allow a disabled individual to return to

work. We do not believe that it is

appropriate to discharge the obligation

to repay thousands of dollars of loans

based on a one-time review of the

borrower’s medical condition. The

commenters did not cite any other

disability benefit program that relies on

such a limited amount of evidence to

support the disability determination.

We have explored the option of

relying on determinations by other

agencies, such as the Social Security

Administration (SSA). We have found

that most of these agencies have

disability criteria that are less stringent

than ours because they provide

disability payments or benefits based on

the borrower’s continuing disability. If

an individual’s condition improves, the

agency stops providing the benefits. We

believe that with a discharge—a onetime cancellation of a borrower’s

obligation to repay a debt of thousands

of dollars—there is a need to use a

higher standard. As a result, we have

decided against using SSA disability

determinations. See ‘‘Use of Social

Security Disability Documentation’’ for

a further discussion of this issue.

We also do not believe that reviews of

disability determinations with annual

audits would be practical. Auditors do

not have the expertise to make

judgments about a holder’s

determination in disability cases. We

believe that the centralized process

provided in the regulations provides for

a more consistent review of disability

discharge approvals.

We believe that the commenter’s

suggestion that we require lenders to

offer credit insurance would only

increase costs to all student loan

borrowers and would not address the

problem of providing the discharge to

ineligible borrowers. Moreover, this

proposal and the proposal to reinstate

the temporary total disability deferment

for all borrowers, would require

statutory changes.

Change: None.

Sections 674.61(b)(3)(ii),

682.402(c)(2)(ii), and 685.213(b)(2)

Use of Social Security Administration

Disability Documentation

Comment: Many commenters

expressed concern that the proposed

regulations did not provide specific

guidelines on the type of SSA

documentation that a borrower could

provide as an alternative to a

physician’s certification. The

commenters suggested that the lack of

guidelines on what type of

documentation is acceptable would

result in significant borrower confusion

and increase the administrative burden

for loan holders in this process. The

commenters strongly recommended that

the final regulations include explicit

and clearly defined guidelines for

determining the type of SSA

documentation that could be used as an

alternative to a physician’s certification.

Many of the commenters stated that if

it was not possible to incorporate such

guidelines in the final regulations, all

references to the use of SSA

documentation should be removed.

One commenter supported the

concept of using SSA documentation as

an alternative to a physician’s

certification only if it were allowed to

be used in all cases. The commenter felt

that, if it were not allowed in all cases,

it would be too difficult to explain to

borrowers when SSA documentation

would be acceptable, and when it would

not.

One commenter believed that using

SSA documentation to establish that a

borrower is totally and permanently

disabled would be the most sensible

approach, and expressed hopes that we

would be able to implement this

approach. Another commenter noted

that the ability to accept a SSA

disability determination as an

alternative to a physician’s certification

would reduce administrative burden.

However, the commenter has seen SSA

disability documentation and was

concerned that the SSA’s eligibility

requirements are not as stringent as the

current requirements for discharging

student loans based on total and

permanent disability.

One commenter, representing

organizations that specialize in

consumer issues, believed that the

language of the preamble to the

proposed regulations might suggest to

some readers that any disability

determination from the SSA would be

sufficient to establish a borrower’s

eligibility for a total and permanent

disability discharge of a title IV loan.

However, the commenter believed that

our intent is to allow the use of SSA

documentation only for individuals

whom the SSA has placed in the highest

of three continuing disability review

categories, ‘‘medical improvement not

expected.’’ The commenter felt that this

approach would benefit very few

borrowers, since the ‘‘medical

improvement not expected’’ category

consists of individuals with serious

conditions that are usually progressive

and possibly fatal and who would

probably have no trouble obtaining a

physician’s certification for a discharge.

The commenter believed that we should

go further and use the SSA’s continuing

disability review categories, as a basis

for determining which borrower’s

discharges to review for possible

revocation within a limited time period.

The commenter felt that borrowers

should be able to submit documentation

of any SSA disability benefits award as

sufficient evidence to warrant a

disability discharge.

Discussion: We agree with the many

commenters who felt that the lack of

specific guidelines on acceptable SSA

documentation could cause confusion

for borrowers and loan holders. As

explained in the preamble to the

proposed regulations, the standard that

an individual must meet to qualify for

SSA disability benefits is not the same

as the total and permanent disability

standard that applies in the title IV loan

programs. Many individuals who

receive disability benefits from the SSA

would not be considered totally and

permanently disabled under the title IV

definition. For this reason, we

concluded that it would not be

appropriate to accept SSA

documentation as an alternative to a

physician’s certification in all cases.

In the preamble to the NPRM we

indicated that we would work with SSA

to determine whether there is

documentation that the SSA provides to

some individuals that would be

comparable to a physician’s certification

that a borrower is totally and

permanently disabled according to our

definition. After extensive discussion

and examination, however, we have

determined that there is no

65684 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

documentation currently issued by SSA

that would effectively establish that a

borrower is totally and permanently

disabled under the title IV standard.

Change: We have revised the

regulations by removing all references to

the use of SSA documentation as an

alternative to a physician’s certification.

Sections 674.61(b)(3)–(6), 682.402(C)(2)–

(12), and 685.213(b) Initial

Determination of Total and Permanent

Disability

Comment: One commenter questioned

the ability of loan holders and guaranty

agencies to make medical

determinations regarding a borrower’s

disability status. The commenter

expressed the view that it is not

possible, even for a medically trained

reviewer, to determine, merely by

reading a physician’s certification,

whether a borrower is disabled. Another

commenter questioned whether we

would be able to make valid

determinations of a borrower’s disability

without having full access to the

borrower’s entire medical history. The

commenter also expressed concern that

our disability determinations under the

new process will be arbitrary and

inconsistent.

Discussion: The regulations do not

change the role of loan holders and

guarantors in reviewing the basis for a

borrower’s disability discharge claims.

Loan holders have always had the

authority to request additional

information or retain medical advice in

evaluating disability discharge requests.

We believe that the added step of

assigning approved disability discharge

claims to us for a second review will

ensure a comprehensive evaluation of

the disability request. We plan to

request any additional information and

expertise necessary to ensure such a

review.

We believe that the new procedures

will improve the consistency of

decisions on disability discharge claims.

Under the new process, we will be able

to develop standards and procedures for

reviewing such claims and to

communicate those standards to the

loan holders and guaranty agencies.

Change: None.

Comment: One commenter

recommended identifying specific

medical records that a borrower must

provide to support a disability claim.

The commenter stated that, in many

cases, physicians charge for providing

copies of records and letters, and a

specific list of documents would

prevent a borrower from incurring extra

costs by obtaining unnecessary records.

Discussion: We believe loan holders

should not be restricted as to the type

of additional medical documentation

they can request in order to make a

disability determination. We believe

that the types of documentation

required may differ depending on the

circumstances and that it is neither

possible nor useful to attempt to provide

such a list.

Change: None.

Comment: A large number of

commenters approved of our proposal

that we assume responsibility for

servicing loans after the loan holder or

guarantor has assigned to us a loan on

which the loan holder or guarantor has

approved a disability discharge claim.

These commenters agreed that once the

loan is assigned to us for determination

of eligibility for a conditional discharge,

regardless of the determination made,

the loan should remain with us.

Discussion: We appreciate the

commenters’ support for this provision

of the regulations.

Change: None.

Comment: One commenter felt that

disabled borrowers with multiple loans

should not be forced to submit separate

disability discharge claims to each loan

holder. This commenter pointed out

that, for other title IV loan discharges,

there exists a cross-program

documentation policy that allows the

appropriate program participant to

discharge a loan based on the

comparable discharge of another title IV

loan. The commenter suggested that we

should adopt a similar policy and

authorize schools and guaranty agencies

to discharge a borrower’s loan without

requiring additional documentation if

another of the same borrower’s loans

has been discharged due to a disability.

Discussion: In some instances the

eligibility for discharge relies in part on

when the individual loan was made and

on the borrower’s condition at that time.

Therefore, we believe that the

preliminary determination of whether a

borrower qualifies for a disability

discharge should be made by the holder

of the loan (Secretary, school, lender,

guaranty agency).

Change: None.

Comment: One commenter requested

clarification on the status of a loan that

is delinquent or in default at the time it

is placed into a conditional discharge

status. The regulations state that the

borrower is not considered delinquent

or in default on the loan during the

conditional discharge period.

Discussion: We agree that the

regulatory language should be clarified.

During the conditional discharge period,

the loan retains the status that it was in

at the time the conditional discharge

was granted. If a loan was current at the

time of the conditional discharge, it will

remain current and not be considered

delinquent or in default during the

conditional discharge period. If the loan

was delinquent or in default at the time

the conditional discharge was granted, it

will remain delinquent or in default

during the conditional discharge period.

Change: We have revised

§§ 674.61(b)(7)(ii), 682.402(c)(14)(ii),

and 685.213(d)(2) to clarify that a

borrower is not considered delinquent

on a loan during the conditional

discharge period, unless the loan was

delinquent or in default at the time of

the conditional discharge.

Comment: One commenter

recommended that we explain the

process that a guarantor must follow if

the guarantor is the holder of the loan

at the time the borrower requests a total

and permanent discharge.

Discussion: The process is the same as

described in the regulations, except that

the borrower applies directly to the

guaranty agency for the discharge, rather

than to the lender. We do not believe it

is necessary to specifically describe this

process in the regulations.

Change: None.

Comment: Several commenters

suggested that we work with the student

loan community to develop a

standardized application form and

physician’s certification for total and

permanent disability discharges.

Commenters believed that a

standardized form would reduce

confusion for physicians and loan

holders. One commenter recommended

that the standardized form include a

specific definition of ‘‘permanent and

total disability’’ to clarify any ambiguity

or misconceptions a physician might

have.

Discussion: We agree with the

commenters and will work with the

student aid community to develop

revised total and permanent disability

forms. We are interested in the

suggestion that a single standardized

discharge application form be

developed for use in all three of the title

IV student loan programs.

Change: None.

Comment: One commenter

recommended that during the time

required for the medical reviews of the

disability claim, borrowers should be

granted an automatic forbearance on

payments. This would eliminate the

need to require return of payments

made on the loan after the onset of the

disability at the end of the conditional

discharge period.

Discussion: The regulations provide

for a suspension of payments after the

borrower submits the physician’s

certification, or the letter from a

physician requesting additional time to

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65685

make a certification. We believe that

this will serve the same purpose as a

forbearance.

Change: None.

Comment: Several commenters

recommended that §§ 674.61(b)(5) and

682.402(c)(11), be revised by replacing

‘‘due and payable’’ with ‘‘due and

payable to the Secretary’’ to clearly

advise the borrower that, despite the

disability denial, the Secretary retains

ownership of the loan.

One commenter proposed additional

language: ‘‘The notice must identify the

address where payments are to be sent.’’

Discussion: We do not believe that it

is necessary to include this level of

operational detail in the regulation.

Changes: None

Comment: Several commenters

recommended that §§ 674.61(b)(4) and

682.402(c)(8) be revised to make the

Department responsible for informing

the borrower of the borrower’s rights

and responsibilities, as well as who the

borrower should contact in the future.

Discussion: We disagree. The first

notification to a borrower that his or her

loan has been assigned to us comes from

the lender for FFEL or from the school

for Perkins. At that point, the borrower

will want to know the next steps for

being granted a disability discharge. We

believe that the lender or school that

already has been in contact with the

borrower concerning the discharge

request should provide specific,

detailed information about the disability

discharge process with the notification

of assignment.

Change: None.

Comment: Several commenters

recommended that we revise

§ 682.402(c)(3) to provide for a 60-day

suspension of collection activities upon

notification by the borrower that the

borrower claims to be totally and

permanently disabled, or upon receipt

of a physician’s letter to request

additional time to determine if the

borrower is totally and permanently

disabled.

Discussion: The regulations provide

for a suspension of collection activity

after receipt of the physician’s

certification or letter. We do not believe

that there should be a suspension of

collection activity for the period when

the borrower is obtaining the

documentation needed to support the

claim of a total and permanent

disability. However, if the lender

believes that the borrower’s

circumstances warrant a period of

forbearance, while the borrower is

obtaining supporting documentation,

the lender is free to grant such a

forbearance.

Change: None.

Comment: Several commenters

recommended that we revise

§§ 682.402(c)(4)(i) and (ii) and

682.402(c)(6)(i) and (ii) to say that the

lender or guaranty agency has

determined that the documentation

‘‘appears’’ to support the borrower’s

claim. The commenters suggested that

this language is needed because, while

the lender or guaranty agency may

believe, based on its own expertise and

review criteria, that the documentation

supports a discharge, we will make the

actual determination to grant the

conditional discharge.

Discussion: We disagree with this

recommendation. Loan holders and

guarantors are required to thoroughly

review the applications and make

determinations of eligibility for

disability discharges based upon the

application and any supporting medical

documentation. Adding the word

‘‘appears’’ undercuts the sense that

lenders and guaranty agencies are

responsible for making appropriate

decisions.

Change: None.

Comment: Several commenters

recommended that in § 682.402(c)(5) we

replace ‘‘* * * from the date the lender

received the physician’s letter

requesting additional time * * *’’ with

‘‘* * * from the date collection activity

was suspended * * *’’ These

commenters suggested that this

language was needed to cover all

situations in which collection may have

been suspended, not just for situations

in which a physician has requested

additional time.

Discussion: We agree with the

commenters.

Change: We have revised

§ 682.405(c)(5) to specify that the

forbearance period begins from the date

collection activity was suspended.

Comment: Several commenters

requested that we add a sentence to

§ 682.402(c)(7) authorizing the lender to

grant forbearance for the period during

which collection activities were not

performed in cases when the guaranty

agency does not pay a disability claim

and returns the claim to the lender.

Discussion: We agree with the

commenters’ recommendation.

Change: We have revised

§ 682.402(c)(7) to authorize forbearance

as requested in the comments.

Comment: Several commenters

recommended that we revise

§ 682.402(c)(10) as follows: ‘‘The

guaranty agency must assign the loan to

the Secretary after the guaranty agency

pays the disability claim. Upon

assignment of a loan to the Secretary

under this section, the Secretary

assumes all obligations, responsibilities,

and liabilities associated with that

loan.’’ The commenter suggested that

this language should replace the crossreference to § 682.409 in the proposed

regulation, which addresses subrogation

rules that are not applicable to disability

discharges. The commenter

recommended that assignment of a loan

for determination of eligibility for a

conditional discharge should occur

immediately after claim payment to the

lender by the guaranty agency rather

than waiting for the payment of

reinsurance so that we may immediately

evaluate the borrower’s request for a

disability discharge.

Discussion: We agree that the

assignment of these accounts should

take place immediately after the

agency’s determination and notice to the

borrower. However, we do not agree that

the regulations need to specify the

Secretary’s responsibilities in this

process.

Change: We have revised

§ 682.409(c)(10), which we have

renumbered as § 682.409(c)(11), to

direct the guaranty agency to assign

disability accounts to us immediately

following the agency’s payment of a

lender’s claim.

Comment: Several commenters

requested that we add a sentence to

§ 682.402(c)(12) specifying the contents

of the notice the Secretary sends to the

borrower. Paragraphs (c)(12) and (c)(16)

both provide guidance regarding the

Secretary’s notification to a borrower.

They recommended that we merge the

information in (c)(16) with the

information in (c)(12) to more clearly

state in one paragraph the information

provided when the borrower is notified

that the loan is conditionally

discharged.

Discussion: We agree with this

change.

Change: We have revised

§ 682.402(c)(12), which we have

renumbered as § 682.409(c)(13), in

accordance with the commenter’s

suggestion.

Comment: One commenter

representing doctors of podiatric

medicine noted that the SSA recently

amended its regulations by adding

licensed podiatrists as acceptable

medical sources for establishing medical

impairments of the foot, or foot and

ankle. Given this development, the

commenter requested that we change

the definition of ‘‘totally and

permanently disabled’’ to allow doctors

of podiatric medicine, within their

scope of practice as defined by State

law, to certify that a borrower is totally

and permanently disabled for the

purpose of a loan discharge.

65686 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

Discussion: Our long-standing policy

has been that the only physicians

authorized to certify that a borrower is

totally and permanently disabled for the

purpose of a loan discharge are doctors

of medicine or osteopathy. In light of

the other significant changes we are

making to the process for evaluating

requests for discharges on total and

permanent disability we are not willing,

at this time, to consider an expansion of

the categories of medical professionals

who can certify a borrower’s request for

a discharge. However, we will monitor

the types of disabilities that lead to

requests for a discharge and may decide

to revise the regulations to increase the

categories of medical professionals in

the future. Of course, a doctor of

podiatric medicine who meets State law

requirements as a doctor of medicine

may certify the borrower’s application.

Change: None.

Sections 674.61(b)(1), (b)(6), and (b)(7),

682.402(c)(1), (c)(12), and (c)(13), and

685.213(a)(1) and (d) Conditional

Discharge

Comment: Many commenters

recommended that we revise

§§ 674.61(b)(1), 674.61(b)(6),

682.402(c)(1)(i) by using the term, ‘‘from

the date the physician determined the

borrower to be totally and permanently

disabled’’ instead of ‘‘onset of the

disability.’’ The commenters pointed

out that the onset date of the disability

is not the date on which the discharge

is based, rather it is the date the

physician determines the borrower is

totally and permanently disabled. In

many cases, the onset of the disability

could occur many years in the past.

Therefore, the begin date of the

conditional period should be clarified as

the date the borrower became totally

and permanently disabled.

Discussion: We agree that the threeyear conditional discharge period

should begin on the date the borrower

became totally and permanently

disabled as certified by a physician.

However, the language suggested by the

commenters could be interpreted to

mean that the conditional discharge

period begins on the date of the doctor’s

certification. We have revised the

regulations to clarify that the

conditional discharge period begins on

the date that the borrower became

totally and permanently disabled.

Change: We have revised the language

as stated.

Comment: Several commenters

recommended that we reduce the length

of the conditional period from three

years to two years. Another commenter

suggested that the three years is too

short. Another suggested that we

conduct additional research to

determine if three years is an

appropriate length of time. One

commenter requested that we clarify

whether our use of the term ‘‘up to three

years’’ means that we would grant

conditional discharges for shorter

periods.

Discussion: We believe that three

years is an appropriate length of time for

the conditional discharge period. The

term ‘‘up to three years’’ is intended to

make it clear that we can terminate a

conditional discharge at any time, if we

become aware that a borrower no longer

meets the eligibility criteria for a

discharge. We do not intend to grant

conditional discharges for shorter time

periods than three years.

Change: None.

Comment: One commenter noted that

if the total and permanent disability

onset date is more than three years prior

to the disability review, the borrower

would have already exhausted the

conditional discharge period and our

final determination on the borrower’s

discharge application would be based

on data with regard to the borrower’s

income in the past. The commenter

suggested that we change the

regulations to reflect this fact.

Discussion: The conditional discharge

period begins on the date the borrower

became totally and permanently

disabled. The commenter is correct in

noting that in some cases three years

could have already elapsed before a

borrower applies for a disability

discharge. In those cases, determination

of eligibility for a final discharge would

be based on data from the prior three

years and would be made immediately

upon assignment of the account to us.

Change: The regulations have been

changed to clarify that some or all of the

three-year conditional period could

occur before the initial determination of

eligibility for discharge.

Sections 674.61(b)(2), (8), and (9),

682.402(c)(14) and (15), and

685.213(a)(2) and (c) Final

Determination of Total and Permanent

Disability

Comment: Some commenters argued

that a borrower should be able to have

annual earnings above the poverty line

for a family of two without losing

eligibility for a final disability

discharge. These commenters argued

that the income limit is too low, and is

not a fair measure of a borrower’s

eligibility for a disability discharge. One

commenter suggested using 150 percent

of the poverty line. Other commenters

felt that the poverty line was an

adequate measurement.

Discussion: We disagree that the

maximum earnings level in the

proposed regulations is too low. By

definition, a borrower who is totally and

permanently disabled is unable to work

and earn money. The regulations allow

a borrower to work and earn a modest

amount so that borrowers are not

discouraged from attempting to return to

work during the conditional discharge

period. We believe that any earnings

above a very modest amount indicate

that a borrower is able to work and earn

money, and should disqualify the

borrower from receiving a final

discharge of his or her loan.

Change: None.

Comment: Several commenters

objected to the provision in the

regulations that denies a borrower a

final discharge if the borrower takes out

a title IV loan during the conditional

discharge period. They felt this was

unfair, because a borrower who returns

to school without taking out additional

title IV loans would continue to qualify

for a final discharge.

Discussion: A borrower whose loan

has been conditionally discharged due

to total and permanent disability cannot

receive another title IV loan unless a

physician certifies that the borrower is

capable of substantial gainful activity. A

borrower who is capable of substantial

gainful activity is able to work and earn

money. In addition, a borrower who

takes out a new loan agrees to pay it

back, which means that the borrower

expects to have earnings. We believe

that such a borrower does not qualify for

a discharge.

Change: None.

Comment: Several commenters had

concerns about how we will verify a

borrower’s income for purposes of

determining the borrower’s ultimate

qualification for a discharge. One

commenter pointed out that commonly

used measuring devices such as tax

returns and W–2 forms measure income

on a calendar-year basis. This

commenter noted that using calendar

year income may put a borrower

claiming disability at the beginning of

the year at a disadvantage compared to

a borrower claiming disability at the end

of the year. Several commenters

recommended that we not use calendar

year income to measure a borrower’s

earnings. Instead, they recommended

that we use income over a 12-month

period.

Some commenters recommended that

we measure income on a calendar-year

basis because attempting to measure

income over a period not in common

usage might lead to a lack of clarity and

consistency.

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65687

Discussion: We agree that the income

measurement should be based on three

12-month periods starting on the date

the borrower became totally and

permanently disabled. However, we do

not agree that the term ‘‘annual income’’

in the regulation limits us to measuring

income on a calendar-year basis.

Change: None.

Comment: One commenter

recommended that we require borrowers

to notify us if the borrower earns money

above the income limits after a final

disability discharge has been granted.

The commenter noted that advances in

medical technology may ease a

disability previously deemed total and

permanent.

Discussion: As with the current

regulations, a borrower is not obligated

to make payments on a discharged loan,

even if the borrower’s medical status

improves. We believe that the three-year

conditional discharge period is an

adequate length of time to determine if

a borrower’s medical condition will

improve sufficiently to no longer meet

the criteria for a total and permanent

disability discharge. Once the borrower

meets all of the criteria for a final

discharge of his or her loan, the

borrower should not be required to

continue reporting on his or her status

to us.

Change: None.

Comment: Several commenters

recommended that we revise

§ 682.402(c)(1)(ii)(B) to provide an

exception for consolidation loans. The

commenters believe that a borrower

who consolidates loans that have not

been conditionally discharged should

not be precluded from having the

conditionally discharged loans

discharged at the end of the conditional

discharge period.

Discussion: We agree, as long as the

borrower is not including a

conditionally discharged loan in the

consolidation loan.

Change: We have revised

§§ 674.61(b)(2)(ii), 682.402(c)(1)(ii)(B),

and 685.213(c)(2) to provide an

exception for consolidation loans. We

have also clarified that a borrower may

not consolidate a loan while it is in a

conditional discharge period.

Comment: One commenter

recommended that we add a new

paragraph to § 682.402(c)(1)(ii) stating

that a borrower is not considered

disabled if the borrower was ‘‘otherwise

determined not to be totally and

permanently disabled’’ by the Secretary.

The commenter cites language in the

preamble to the proposed regulations

indicating that the Secretary might

refuse a final discharge based on other

criteria not specified in the regulations.

Discussion: The language in the

preamble was intended to account for

incidents of fraud, and was not meant

to suggest that we would deny the

discharge of a loan based on criteria

other than what is specified in the

regulations. However, it is not necessary

to restate in this section of the

regulations our authority to revoke a

discharge due to fraud.

Change: None.

Comment: Several commenters

recommended that we revise

§ 682.402(c)(1)(iii) as follows: ‘‘Except

as provided in paragraph (c)(1)(iv)(A) of

this section, a borrower is not

considered totally and permanently

disabled based on a condition that

existed at the time the loan was made

unless the borrower’s condition

substantially deteriorated * * *’’ The

revision is consistent with proposed

regulations in which the borrower’s

disability date is compared to the date

the loan is made, rather than the date

the borrower applied for the loan.

Discussion: We agree with the

commenters’ recommendation.

Changes: We have revised

§ 682.402(c)(1)(iii) in accordance with

the commenters’ recommendation. We

have also made corresponding changes

in § 685.213(a)(4) of the Direct Loan

regulations. There is no need to make a

change to the Perkins regulations.

Sections 674.61(b)(11) and (12),

682.402(r)(2) and (3), 685.212(g)(2)

Payments Received After the Onset of

the Disabling Condition

Comments: Several commenters

recommended that we revise

§§ 674.61(b)(12) and 682.402(r)(3) by

deleting ‘‘100 percent of’’ and replacing

‘‘* * * any payments received, directly

or indirectly, from or on behalf of the

borrower’’ with ‘‘* * * any payments

received on the loan after the date the

borrower became totally and

permanently disabled.’’ The

commenters believed that this language

clarified that when the final discharge is

granted, only those payments made after

the date the borrower became totally

and permanently disabled should be

returned.

Discussion: We agree.

Changes: We have revised

§§ 674.61(b)(12) and 682.402(r)(3) in

accordance with the commenter’s

suggestion.

Comment: Several commenters

recommended that we revise

§ 674.61(b)(1) by adding the following

sentence: ‘‘The institution shall not

refund a repayment made during a

period for which the borrower qualified

for a total and permanent disability

discharge unless the borrower made a

payment due to an institutional error.’’

These commenters recommend that

only those payments made after the date

the institution approved the preliminary

disability discharge should be returned

after the final discharge is granted.

Discussion: In many cases a borrower

will make payments between the time

he or she became totally and

permanently disabled, and the time the

conditional discharge was granted.

Borrowers do not always apply for a

discharge immediately after becoming

totally and permanently disabled. It

would be unfair to penalize a borrower

for keeping current on his or her

payments prior to applying for a

discharge. We also believe the handling

of payments received from disabled

borrowers should be consistent across

the three title IV student loan programs.

Changes: None.

Comment: Several commenters

recommended that we revise

§§ 674.61(b)(11) and 682.402(r)(2) by

deleting the language which requires the

institution or the guaranty agency to

notify the borrower that there is no

obligation to make payments on the loan

while it is conditionally discharged.

These commenters pointed out that the

institution or guaranty agency will not

know the borrower’s loan status after

the loan has been assigned to us.

Without this information, the

institution’s notification to the borrower

may be confusing or inaccurate. The

notification could be contradictory if we

had removed the loan from a

conditional discharge status and placed

it into repayment.

Discussion: Both §§ 674.61(b)(11)

(which has been renumbered

§ 674.61(b)(10)) and 682.402(r)(2)

specify that the notice must tell

borrowers not to make payments

‘‘unless the Secretary directs the

borrower otherwise.’’ We believe that

loan holders and GAs should make it

clear in their notices that we may

instruct the borrower to resume making

payments.

Change: None.

Comment: Several commenters

recommended that we revise

§§ 674.61(b)(12) and 682.402(r)(3) by

replacing ‘‘sender’’ with ‘‘borrower’’ or

‘‘borrower’s representative.’’ They noted

that it is not easy to determine who may

have sent a payment on an account,

especially up to three years after the

fact. The sender may be a lender or GA

that is forwarding the payment to us.

Lenders and GAs may be required to

process a payment received from a

borrower and forward their own

cashier’s check to us to create an audit

trail of payments received.

65688 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

Discussion: Other provisions of the

regulations refer to ‘‘sender’’ not

‘‘borrower.’’ The regulations retain the

word ‘‘sender’’ to maintain consistency.

Change: None.

Comment: Several commenters

objected to the provisions in

§§ 674.61(b)(12) and 682.402(r)(3) which

provide for keeping payments for a

three-year period. They recommend

refunding payments made by the

borrower after the onset of the disability

at the time of our determination of the

borrower’s eligibility for conditional

discharge, not at the end of the

conditional discharge period three years

later.

Discussion: Until the discharge is

finalized, collection activity may

resume on the loan. As a result, we feel

that it sends the wrong signal to

borrowers to return payments prior to

the final discharge. In order to avoid

prematurely giving borrowers the

impression that their loan has been

discharged, we will wait until the final

discharge before refunding payments.

Change: None.

Comment: Several commenters

recommended revising

§ 682.402(c)(13)(i) to read ‘‘Is not

required to make payments on the

loan.’’ The paragraph states that a

borrower is not required to make

payments from the date the Secretary

makes the conditional discharge

determination. However, the suspension

of collection activities actually begins

earlier (upon receipt of the

documentation identified in

§ 682.402(c)(3)).

Discussion: We agree that the

language in § 682.402(c)(13)(i) is

unnecessary and possibly confusing.

Change: We have revised

§ 682.402(c)(13)(i) (which has been

renumbered as § 682.402(c)(14)(i)) to

clarify that payments need not be made

from the date of suspension of

collection activities.

Comment: Several commenters

recommend revising § 682.402(c) by

adding a new paragraph (c)(9) as

follows: ‘‘After receiving a claim

payment from the guaranty agency, the

lender shall forward to the guaranty

agency any payments subsequently

received from or on behalf of the

borrower.’’ The commenters noted that

paragraph (c) does not address the

disposition of borrower payments

received by the lender after the date of

total and permanent disability.

Discussion: We agree.

Change: We have revised § 682.402(c)

in accordance with the commenter’s

suggestion.

Sections 674.9, 682.201, and 685.200

Borrower Eligibility for Title IV Loans

Comment: Section 682.201(a)(5)

provides that a borrower who has a loan

in a conditional discharge status is not

eligible to receive a new title IV loan

until the suspension of collection

activity has been lifted on the

conditionally discharged loan. Many

commenters suggested that this

requirement would cause unnecessary

delays in loan processing, since a

school, lender, or guaranty agency

generally may not know if collection

activity has resumed on a conditionally

discharged loan. The commenters

suggested that resumption of collection

activity should be included in the

regulations only as a consequence of

receiving a new loan during the

conditional discharge period, rather

than as a condition of eligibility for a

new loan. Other commenters

recommended that § 682.201(a)(5) be

replaced by a new provision requiring,

as a condition of eligibility for a new

loan, that a borrower sign a statement

acknowledging that collection activity

will resume on any conditionally

discharged loan.

Discussion: A borrower who receives

a new title IV loan while a previous loan

is in a conditional discharge period is

no longer considered to be totally and

permanently disabled, and therefore is

responsible for repaying the

conditionally discharged loan. To

emphasize the importance of this

repayment obligation, we believe that

collection activity must resume on a

conditionally discharged loan before the

borrower receives a new loan, as

opposed to simply having the borrower

acknowledge that collection activity

will resume. The means by which a

school, lender, or guaranty agency will

know that collection activity has

resumed is an operational issue that will

be addressed as we implement the new

regulations.

While we do not agree that

§ 682.201(a)(5) should be removed, we

do support the commenters’ suggestion

that a borrower be required to

acknowledge in writing that collection

activity will resume on any

conditionally discharged loan.

Change: Sections 674.9(i),

682.201(a)(7), and 685.200(a)(1)(iv)(C)

have been amended to include a

provision requiring a borrower to sign a

statement acknowledging that he or she

understands that collection activity will

resume on a conditionally discharged

loan if the borrower applies for a new

loan.

Sections 674.5, 674.9, 674.51, and

674.61 Federal Perkins Loan Program

Comment: Several commenters stated

that defaulted borrowers whose Perkins

loans have been conditionally

discharged should not be included in

the institution’s cohort default rate for

Perkins Loans. They recommended that

we amend § 674.5(c)(3)(ii) by adding the

following subsection: ‘‘(E) Assigned to

and conditionally discharge by the

Secretary in accordance with Section

674.61(b).’’

Discussion: We agree with the

commenters.

Change: Section 674.5(c)(3)(ii) has

been revised to specify that defaulted

Perkins Loans assigned to and

conditionally discharged by the

Secretary are excluded from an

institution’s Perkins Loan cohort default

rate.

Comment: Several commenters

recommended that for the Perkins Loan

Program we use the term ‘‘cancelled’’

rather than discharged in § 674.61(b)(1).

Under the current Perkins Loan

regulations, a borrower’s loan may be

‘‘cancelled’’ due to his or her disability

and the commenters preferred to retain

this language. The commenters argued

that the amount of the discharge is

recorded as a cancellation on the

institution’s general ledger and on the

FISAP, and that a change in the term

would require institutions to make

changes to their accounting records and

may cause confusion on the FISAP.

Discussion: As reflected in these

regulations, the standard for and

treatment of loans made to borrowers

who become totally and permanently

disabled is consistent across the Perkins

Loan, FFEL and Direct Loan programs.

To avoid confusion among borrowers

and others, we believe that the language

across all of the title IV loan programs

should be consistent. The term

‘‘discharge’’ is more widely used and we

will use that term for all three programs.

We will revise the FISAP to reflect the

change in terminology as soon as

practicable. We do not believe that this

change in terminology should cause any

significant changes in a school’s

accounting records since the effect of

the discharge does not change.

Change: None.

Comment: Several commenters

recommended that the proposed

regulations not apply to the Perkins

Loan Program because the OIG’s report

was based on a review of FFEL program

loans and there is no evidence of similar

abuse in the Perkins Loan Program. The

commenters noted that schools

participating in the Perkins Loan

Program already have a powerful

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65689

financial incentive to prevent

inappropriate disability discharges.

Unlike lenders and GAs in FFEL,

schools which make Perkins Loans are

not reimbursed for loans cancelled due

to total and permanent disability.

One commenter reported that

currently even the largest colleges and

universities receive only a handful of

disability claims a year and that the

Perkins Loan Program has not

experienced the same increase in

disability claims as the FFEL program in

recent years.

Another commenter indicated that

they, in fact, expect the number of

applicants for disability discharges in

the Perkins Loan Program to increase

under the new rule. The commenter

believes that borrowers will dispute

school denial of discharges and force

schools to assign the account to the

Department.

Many commenters from schools in the

Perkins Loan Program also expressed

concern that the proposed regulations

will compromise their ability to interact

with disabled students and their

families in a flexible manner.

Discussion: We believe that since

many students receive assistance from

both the Perkins Loan and either FFEL

or Direct Loans and the same disabled

borrower is likely to apply for discharge

of all of his or her loans, the problems

uncovered in the FFEL program are

likely to exist in the Perkins and Direct

Loan Programs. We also believe that

since the Perkins Loan Program use the

same definition of totally and

permanently disabled and the same

disability discharge process as the FFEL

and Direct Loan Programs, any changes

to the process must apply to the Perkins

Loan Program to ensure that borrowers

in all of the title IV loan programs are

treated fairly.

We disagree with the commenter who

speculated that the regulations will

increase the number of Perkins Loan

disability discharges. Schools will still

have the responsibility to review

disability discharge requests and the

supporting documentation and will

have the same financial incentives to

prevent inappropriate disability

discharges. Except for the assignment

requirement, the regulations will not

require any changes to a school’s

current process for reviewing and

approving or denying disability

discharge requests. Therefore, we do not

believe that the regulations will prevent

schools from interacting with students

in a flexible manner.

Change: None.

Comment: Several commenters had

raised issues relating to the assignment

process for Perkins Loans on which a

borrower requests a discharge. Several

commenters noted that the requirement

in § 674.61(b)(3) that a Perkins loan

approved for a disability discharge be

assigned to us conflicts with the current

assignment regulations in § 674.50,

which allow an institution to submit

only a defaulted loan for assignment.

They also pointed out that § 674.50(e)(4)

provides that the Secretary will not

accept assignment of a loan where the

borrower ‘‘has filed for or been granted

cancellation due to permanent and total

disability.’’

Some commenters agreed with our

proposal to require a school to assign

Perkins loans to us after it approves the

borrower’s disability claim. Other

commenters argued that the loan should

stay with the institution. One

commenter recommended that we

reimburse the institution for the loan.

Another suggested that we return the

loan to the institution if we deny the

disability claim.

Other commenters were concerned

that a loan assigned to us would be

subject to an initial review and could be

rejected. They recommended that

§ 674.61(b)(3) be revised to require the

school to ‘‘* * * automatically and

irrevocably assign the loan to the

Secretary * * *’’

Several commenters recommended

that the assignment process for these

loans should be simplified. The current

assignment process is voluntary. They

argued that it is not appropriate to

require mandatory assignment of

accounts on which the borrower has

requested a disability discharge. They

recommended that a special assignment

process be developed for disability

discharges.

Discussion: We agree that the

reference to § 674.50 mentioned by the

commenters is inaccurate. We do not

agree with the suggestion that the

addition of the phrase ‘‘automatically

and irrevocably’’ to § 674.61(b)(3) is

necessary but plan to work with the

schools that participate in the Perkins

Loan Program to develop a simplified

assignment process for disability

accounts.

Change: We have removed the

reference to § 674.50.

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 to be 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. See the

heading Paperwork Reduction Act of

1995.

In assessing the potential costs and

benefits—both quantitative and

qualitative—of these final regulations,

we have determined that the benefits of

the regulations 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

47639). Based on the expectation that all

provisions would be effective July 1,

2001, we estimated a savings of $72

million over FY 2001–2005 as a result

of borrowers who would have received

a discharge losing eligibility during the

three-year conditional period. The final

regulations include a one-year delay in

implementing the conditional discharge

provisions for total and permanent

disability. Therefore, under the final

regulations the Department estimates a

revised savings of $59 million over FY

2001–2005.

Paperwork Reduction Act of 1995

The Paperwork Reduction Act of 1995

does not require you to respond to a

collection of information unless it

displays a valid OMB control number.

We display the valid OMB control

numbers assigned to the collections of

information in these final regulations at

the end of the affected sections of the

regulations.

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.

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.

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 of the following sites:

65690 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

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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

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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; 84.037 Federal Perkins Loan

Program; and 84.268 William D. Ford Federal

Direct Loan Program)

List of Subjects in 34 CFR Part 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 25, 2000.

Richard W. Riley,

Secretary of Education.

For the reasons discussed in the

preamble, the Secretary amends parts

674, 682, and 685 of Title 34 of the Code

of Federal Regulations as follows:

PART 674—FEDERAL PERKINS LOAN

PROGRAM

1. The authority citation for part 674

continues to read as follows:

Authority: 20 U.S.C. 1087aa–1087ii and 20

U.S.C. 421–429, unless otherwise noted.

2. Section 674.5 is amended by

removing ‘‘or’’ at the end of paragraph

(c)(3)(i)(D); removing the period at the

end of paragraph (c)(3)(i)(E) and adding,

in its place ‘‘; or’’ and adding a new

paragraph (c)(3)(ii)(F) to read as follows:

§ 674.5 Federal Perkins Loan Program

cohort default rate and penalties.

* * * * *

(c) * * *

(3) * * *

(ii) * * *

(F) Assigned to the Secretary in

accordance with § 674.61(b).

3. Section 674.9 is amended by:

A. Removing the period at the end of

paragraph (h)(2) and adding in its place

‘‘; and’.

B. Adding a new paragraph (h)(3).

C. Redesignating paragraphs (i) and (j)

as paragraphs (k) and (l), respectively.

D. Adding a new paragraph (i).

E. Adding a new paragraph (j).

The additions and revisions read as

follows:

§ 674.9 Student eligibility.

* * * * *

(h)(3) In the case of a borrower whose

previous loan under title IV of the HEA

was discharged due to a total and

permanent disability on or after July 1,

2001 and before July 1, 2002, meets the

requirements of (h)(1) and (h)(2) of this

section. If the borrower receives another

loan within three years from the date

the borrower became totally and

permanently disabled, as certified by

the physician, the borrower must

reaffirm the previously discharged loan.

(i) In the case of a borrower whose

previous loan under title IV of the HEA

was conditionally discharged based on

an initial determination that the

borrower was totally and permanently

disabled, the borrower must—

(1) Comply with the requirements of

paragraphs (h)(1) and (h)(2) of this

section; and

(2) Sign a statement acknowledging

that—

(i) The loan that has been

conditionally discharged prior to a final

determination of total and permanent

disability cannot 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 a new loan is made,

unless that impairment substantially

deteriorates; and

(ii) Collection activity will resume on

any loan in a conditional discharge

period, as described in § 674.61(b)(9).

(j) Does not have any loans under title

IV of the HEA on which collection

activity has been suspended based on a

conditional determination that the

borrower was totally and permanently

disabled. If a borrower applies for a loan

under title IV of the HEA during the

conditional discharge period described

in §§ 674.61(b), 682.402(c), or

685.213(a), the suspension of collection

activity must be ended before the

borrower becomes eligible to receive

any additional loans.

* * * * *

3. Section 674.51 is amended by

adding a new paragraph (s) to read as

follows:

§ 674.51 Special definitions.

* * * * *

(s) Total and permanent disability:

The condition of an individual who is

unable to work and earn money because

of an injury or illness that is expected

to continue indefinitely or result in

death.

* * * * *

4. Section 674.61 is amended by:

A. Revising the section heading.

B. Revising paragraph (a).

C. Revising paragraph (b).

The revisions read as follows:

§ 674.61 Discharge for death or disability.

(a) Death. An institution must

discharge the unpaid balance of a

borrower’s Defense, NDSL, or Perkins

loan, including interest, if the borrower

dies. The institution must discharge the

loan on the basis of an original or

certified copy of the death certificate.

Under exceptional circumstances and

on a case-by-case basis, the chief

financial officer of the institution may

approve a discharge based upon other

reliable documentation supporting the

discharge request.

(b) Total and permanent disability. (1)

If the Secretary has made an initial

determination that the borrower is

totally and permanently disabled, as

defined in § 674.51(s), the loan is

conditionally discharged for up to three

years from the date that the borrower

became totally and permanently

disabled, as certified by a physician.

The Secretary suspends collection

activity on the loan from the date of the

initial determination of total and

permanent disability until the end of the

three-year conditional period. If the

borrower satisfies the criteria for a total

and permanent disability discharge

during and at the end of the conditional

discharge period, the balance of the loan

is discharged at the end of the

conditional discharge period and any

payments received after the date the

borrower became totally and

permanently disabled as certified under

§ 674.61(b)(3) are returned to the sender.

(2) A borrower satisfies the criteria for

a discharge of a loan based on a total

and permanent disability if, during and

at the end of the three-year conditional

discharge period described in paragraph

(b)(1) of this section—

(i) The borrower’s annual earnings

from employment do not exceed 100

percent of the poverty line for a family

of two, as determined in accordance

with the Community Service Block

Grant Act; and

(ii) The borrower does not receive a

new loan under the Perkins, FFEL or

Direct Loan programs, except for a FFEL

or Direct Consolidation Loan that does

not include any loans that are in a

conditional discharge status.

(3) If a borrower becomes totally and

permanently disabled after receiving a

Defense, NDSL, or Perkins loan, the

institution must assign the loan to the

Secretary if the borrower submits a

certification by a physician and the

institution reviewed the application and

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65691

determined that it is complete and that

it supports the conclusion that the

borrower has a total and permanent

disability as defined in § 674.51(s).

(4) At the time the loan is assigned to

the Secretary the institution must notify

the borrower that the loan has been

assigned to the Secretary for

determination of eligibility for a total

and permanent disability discharge.

(5) If the Secretary determines that the

certification provided by the borrower

does not support the conclusion that the

borrower meets the criteria for a total

and permanent disability discharge, the

Secretary notifies the borrower that the

application for a disability discharge has

been denied, and that the loan is due

and payable under the terms of the

promissory note.

(6) If the Secretary makes an initial

determination that the borrower is

totally and permanently disabled, the

Secretary notifies the borrower that the

loan will be in a conditional discharge

status for a period of up to three years

after the date the borrower became

totally and permanently disabled as

certified under § 674.61(b)(3). This

notification identifies the conditions of

the conditional discharge period

specified in paragraphs (b)(6) through

(b)(9) of this section and specifies that

all or part of the three-year period may

predate the Secretary’s initial

determination.

(7) During the conditional discharge

period, the borrower—

(i) Is not required to make any

payments on the loan;

(ii) Is not considered past due or in

default on the loan, unless the loan was

past due or in default at the time the

conditional discharge was granted;

(iii) Must promptly notify the

Secretary of any changes in address or

phone number;

(iv) Must promptly notify the

Secretary if the borrower’s annual

earnings from employment exceed the

amount specified in paragraph (b)(2)(i)

of this section; and

(v) Must provide the Secretary, upon

request, with additional documentation

or information related to the borrower’s

eligibility for discharge under this

section.

(8) If, during and at the end of the

conditional discharge period, the

borrower continues to satisfy the

eligibility criteria for a total and

permanent disability discharge, as

described in paragraph (b)(2) of this

section, the balance of the loan is

discharged.

(9) If, at any time during or at the end

of the three-year conditional discharge

period, the borrower does not continue

to meet the eligibility requirements for

total and permanent disability

discharge, the Secretary resumes

collection activity on the loan. The

Secretary does not require the borrower

to pay any interest that accrued on the

loan from the date of the initial

determination described in paragraph

(b)(6) of this section through the end of

the conditional discharge period.

(10) If the institution receives any

payments from or on behalf of the

borrower on or attributable to a loan that

has been assigned to the Secretary for

determination of eligibility for a total

and permanent disability discharge, the

institution must forward those

payments to the Secretary for crediting

to the borrower’s account. At the same

time that the institution forwards the

payment, it must notify the borrower

that there is no obligation to make

payments on the loan while it is

conditionally discharged prior to a final

determination of eligibility for a total

and permanent disability discharge,

unless the Secretary directs the

borrower otherwise.

(11) When the Secretary makes a final

determination to discharge the loan, the

Secretary returns to the sender any

payments received on the loan after the

date the borrower became totally and

permanently disabled.

* * * * *

PART 682—FEDERAL FAMILY

EDUCATION LOAN (FFEL) PROGRAM

5. The authority citation for part 682

continues to read as follows:

Authority: 20 U.S.C. 1071 to 1087–2,

unless otherwise noted.

6. In § 682.200(b) the definition of

‘‘Totally and permanently disabled’’ is

revised to read as follows:

§ 682.200 Definitions.

* * * * *

(b) * * *

Totally and permanently disabled.

The condition of an individual who is

unable to work and earn money because

of an injury or illness that is expected

to continue indefinitely or result in

death.

* * * * *

7. Section 682.201 is amended by:

A. Redesignating paragraphs (a)(5),

(a)(6), and (a)(7) as paragraphs (a)(6),

(a)(8), and (a)(9), respectively.

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

C. Adding a new paragraph (a)(6)(iii).

D. Revising redesignated paragraph

(a)(6) introductory text and (a)(6)(i) and

(ii).

E. Adding a new paragraph (a)(7).

The additions and revisions read as

follows:

§ 682.201 Eligible borrowers.

(a) * * *

(5) The suspension of collection

activity has been lifted from any loan on

which collection activity had been

suspended based on a conditional

determination that the borrower was

totally and permanently disabled under

§ 682.402(c).

(6) In the case of a borrower whose

prior loan under title IV of the Act was

discharged after a final determination of

total and permanent disability, the

student must—

(i) Obtain certification from a

physician that the borrower is able to

engage in substantial gainful activity;

(ii) Sign a statement acknowledging

that the FFEL loan the borrower receives

cannot be discharged in the future on

the basis of any impairment present

when the new loan is made, unless that

impairment substantially deteriorates;

and

(iii) In the case of a borrower whose

previous loan under title IV of the Act

was discharged due to a total and

permanent disability on or after July 1,

2001 and before July 1, 2002, meets the

requirements of paragraphs (a)(6)(i) and

(a)(6)(ii) of this section. If the borrower

receives another loan within three years

from the date that the borrower became

totally and permanently disabled, as

certified by the physician, the borrower

must reaffirm the previously discharged

loan.

(7) In the case of a borrower whose

prior loan under title IV of the HEA was

conditionally discharged based on an

initial determination that the borrower

was totally and permanently disabled,

the borrower must—

(i) Comply with the requirements of

paragraphs (a)(6)(i) and (a)(6)(ii) of this

section; and

(ii) Sign a statement acknowledging

that—

(A) The loan that has been

conditionally discharged prior to a final

determination of total and permanent

disability cannot 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

(B) Collection activity will resume on

any loans in a conditional discharge

period, as described in paragraph

682.402(c)(16).

* * * * *

8. Section 682.402 is amended by:

A. Revising paragraph (b)(2).

B. Revising paragraph (b)(3).

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

65692 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

D. Redesignating paragraphs (c)(1)(ii)

and (c)(1)(iii) as paragraphs (c)(1)(iii)

and (c)(1)(iv), respectively.

E. Adding a new paragraph (c)(1)(ii).

F. Revising redesignated paragraph

(c)(1)(iii).

G. Amending redesignated paragraph

(c)(1)(iv)(A) by removing the reference

to paragraphs ‘‘(c)(1)(i) and (ii)’’ and

adding, in its place, ‘‘(c)(1)(i) through

(iii)’’.

H. Amending redesignated paragraph

(c)(1)(iv)(B) by removing the reference to

paragraph ‘‘(c)(1)(iii)(A)’’ and adding, in

its place, ‘‘(c)(1)(iv)(A)’’.

I. Amending redesignated paragraph

(c)(1)(iv)(B) by removing the reference to

paragraphs ‘‘(c)(1)(i) and (ii)’’ and

adding, in its place, ‘‘(c)(1)(i) through

(iii)’’.

J. Amending redesignated paragraph

(c)(1)(iv)(C) by removing the reference to

paragraph ‘‘(c)(1)(iii)(A)’’ and adding, in

its place, ‘‘(c)(1)(iv)(A)’’.

K. Revising paragraph (c)(2).

L. Revising paragraph (c)(3).

M. Redesignating paragraph (c)(4) as

paragraph (c)(5).

N. Adding a new paragraph (c)(4).

O. Revising redesignated paragraph

(c)(5).

P. Adding new paragraphs (c)(6)

through (c)(16).

Q. Revising paragraph (g)(1)(iii).

R. Revising paragraph (k)(5)(i).

S. Redesignating paragraph (k)(5)(ii)

as paragraph (k)(5)(iii).

T. Adding a new paragraph (k)(5)(ii).

U. Revising paragraph (r)(1).

V. Redesignating paragraphs (r)(2) and

(r)(3) as paragraphs (r)(4) and (r)(5),

respectively.

W. Adding a new paragraph (r)(2).

X. Adding a new paragraph (r)(3).

Y. Revising redesignated paragraph

(r)(5).

The additions and revisions read as

follows:

§ 682.402 Death, disability, closed school,

false certification, unpaid refunds, and

bankruptcy payments.

* * * * *

(b) * * *

(2) A discharge of a loan based on the

death of the borrower (or student in the

case of a PLUS loan) must be based on

an original or certified copy of the death

certificate. Under exceptional

circumstances and on a case-by-case

basis, the chief executive officer of the

guaranty agency may approve a

discharge based upon other reliable

documentation supporting the discharge

request.

(3) After receiving reliable

information indicating that the borrower

(or student) has died, the lender must

suspend any collection activity against

the borrower and any endorser for up to

60 days and promptly request the

documentation described in paragraph

(b)(2) of this section. If additional time

is required to obtain the documentation,

the period of suspension of collection

activity may be extended up to an

additional 60 days. If the lender is not

able to obtain an original or certified

copy of the death certificate or other

documentation acceptable to the

guaranty agency, under the provisions

of paragraph (b)(2) of this section,

during the period of suspension, the

lender must resume collection activity

from the point that it had been

discontinued. The lender is deemed to

have exercised forbearance as to

repayment of the loan during the period

when collection activity was suspended.

* * * * *

(c) * * *

(1)(i) If the Secretary has made an

initial determination that the borrower

is totally and permanently disabled, as

defined in § 682.200(b), the loan is

conditionally discharged for up to three

years from the date that the borrower

became totally and permanently

disabled, as certified by a physician.

The Secretary suspends collection

activity on the loan from the date of the

initial determination of total and

permanent disability until the end of the

conditional period. If the borrower

satisfies the criteria for a total and

permanent disability discharge during

and at the end of the conditional

discharge period, the balance of the loan

is discharged at the end of the

conditional discharge period and any

payments received after the date the

borrower became totally and

permanently disabled as certified under

§ 682.402(c)(2), are returned to the

sender.

(ii) A borrower satisfies the criteria for

a discharge of a loan based on a total

and permanent disability if, during and

at the end of the three-year period

described in paragraph (c)(1)(i) of this

section—

(A) The borrower’s annual earnings

from employment do not exceed 100

percent of the poverty line for a family

of two, as determined in accordance

with the Community Service Block

Grant Act; and

(B) The borrower does not receive a

new loan under the Perkins, FFEL, or

Direct Loan programs, except for a FFEL

or Direct Consolidation loan that does

not include any loans that are in a

conditional discharge status.

(iii) Except as provided in paragraph

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

is not considered totally and

permanently disabled based on a

condition that existed at the time the

loan was made unless the borrower’s

condition substantially deteriorated.

* * * * *

(2) After being notified by the

borrower or the borrower’s

representative that the borrower claims

to be totally and permanently disabled,

the lender promptly requests that the

borrower or the borrower’s

representative submit, on a form

approved by the Secretary, a

certification by a physician, who is a

doctor of medicine or osteopathy and

legally authorized to practice in a State,

that the borrower is totally and

permanently disabled as defined in

§ 682.200(b).

(3) The lender must continue

collection activities until it receives

either the certification of total and

permanent disability from a physician

or a letter from a physician stating that

the certification has been requested and

that additional time is needed to

determine if the borrower is totally and

permanently disabled. Except as

provided in paragraph (c)(5) or (c)(7) of

this section, after receiving the

physician’s certification or letter the

lender may not attempt to collect from

the borrower or any endorser.

(4) The lender must submit a

disability claim to the guaranty agency

if the borrower submits a certification

by a physician and the lender makes a

determination that the certification

supports the conclusion that the

borrower meets the criteria for a total

and permanent disability discharge, as

defined in § 682.200(b).

(5) If the lender determines that a

borrower who claims to be totally and

permanently disabled is not totally and

permanently disabled, or if the lender

does not receive the physician’s

certification of total and permanent

disability within 60 days of the receipt

of the physician’s letter requesting

additional time, as described in

paragraph (c)(3) of this section, the

lender must resume collection and is

deemed to have exercised forbearance of

payment of both principal and interest

from the date collection activity was

suspended. The lender may capitalize,

in accordance with § 682.202(b), any

interest accrued and not paid during

that period.

(6) The guaranty agency must pay a

claim submitted by the lender if the

guaranty agency has reviewed the

application and determined that it is

complete and that it supports the

conclusion that the borrower meets the

criteria for a total and permanent

disability discharge, as defined in

§ 682.200(b).

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65693

(7) If the guaranty agency does not

pay the disability claim, the guaranty

agency must return the claim to the

lender with an explanation of the basis

for the agency’s denial of the claim.

Upon receipt of the returned claim, the

lender must notify the borrower that the

application for a disability discharge has

been denied, provide the basis for the

denial, and inform the borrower that the

lender will resume collection on the

loan. The lender is deemed to have

exercised forbearance of both principal

and interest from the date collection

activity was suspended until the first

payment due date. The lender may

capitalize, in accordance with

§ 682.202(b), any interest accrued and

not paid during that period.

(8) If the guaranty agency pays the

disability claim, the lender must notify

the borrower that the loan will be

assigned to the Secretary for

determination of eligibility for a total

and permanent disability discharge.

(9) After receiving a claim payment

from the guaranty agency, the lender

must forward to the guaranty agency

any payments subsequently received

from or on behalf of the borrower.

(10) The Secretary reimburses the

guaranty agency for a disability claim

paid to the lender after the agency pays

the claim to the lender.

(11) The guaranty agency must assign

the loan to the Secretary after the

guaranty agency pays the disability

claim.

(12) If the Secretary determines that

the certification and information

provided by the borrower do not

support the conclusion that the

borrower meets the criteria for a total

and permanent disability discharge, the

Secretary notifies the borrower that the

application for a disability discharge has

been denied, and that the loan is due

and payable under the terms of the

promissory note.

(13) If the Secretary makes an initial

determination that the borrower is

totally and permanently disabled, the

Secretary notifies the borrower that the

loan is conditionally discharged and

that the conditional discharge period

will last for up to three years after the

date the borrower became totally and

permanently disabled as certified under

§ 682.402(c)(2). The notification

identifies the conditions of the

conditional discharge period specified

in paragraphs (c)(13) through (c)(16) of

this section and specifies that all or part

of the three-year period may predate the

Secretary’s initial determination.

(14) During the conditional discharge

period, the borrower—

(i) Is not required to make any

payments on the loan;

(ii) Is not considered delinquent or in

default on the loan, unless the borrower

was delinquent or in default at the time

the conditional discharge was granted;

(iii) Must promptly notify the

Secretary of any changes in address or

phone number;

(iv) Must promptly notify the

Secretary if the borrower’s annual

earnings from employment exceed the

amount specified in paragraph

(c)(1)(ii)(A) of this section; and

(v) Must provide the Secretary, upon

request, with additional documentation

or information related to the borrower’s

eligibility for discharge under this

section.

(15) If, during and at the end of the

conditional discharge period, the

borrower continues to satisfy the

eligibility criteria for a total and

permanent disability discharge, as

described in § 682.402(c)(1)(ii), the

balance of the loan is discharged.

(16) If, at any time during the threeyear conditional discharge period, the

borrower does not continue to meet the

eligibility requirements for a total and

permanent disability discharge, the

Secretary resumes collection activity on

the loan. The Secretary does not require

the borrower to pay any interest that

accrued on the loan from the date of the

initial determination described in

paragraph (c)(13) of this section through

the end of the conditional discharge

period.

* * * * *

(g) * * *

(1) * * *

(iii) In the case of a death claim, an

original or certified death certificate, or

other documentation supporting the

discharge request that formed the basis

for the determination of death.

* * * * *

(k) * * *

(5) * * *

(i) For death or bankruptcy claims, the

shorter of 60 days or the period from the

date the guaranty agency determines

that the borrower (or the student for

whom a parent obtained a PLUS loan,

or each of the co-makers of a PLUS loan)

dies, or filed a petition for relief in

bankruptcy until the Secretary

authorizes payment;

(ii) For disability claims, the shorter

of 60 days or the period from the date

the guaranty agency makes a

preliminary determination that the

borrower became totally and

permanently disabled until the

Secretary authorizes payment; or

* * * * *

(r)(1) If the guaranty agency receives

any payments from or on behalf of the

borrower on or attributable to a loan that

as been discharged in bankruptcy on

which the Secretary previously paid a

bankruptcy claim, the guaranty agency

must return 100 percent of these

payments to the sender. The guaranty

agency must promptly return, to the

sender, any payment on a cancelled or

discharged loan made by the sender and

received after the Secretary pays a

closed school or false certification

claim. At the same time that the agency

returns the payment, it must notify the

borrower that there is no obligation to

repay a loan discharged on the basis of

death, bankruptcy, false certification, or

closing of the school.

(2) If the guaranty agency receives any

payments from or on behalf of the

borrower on or attributable to a loan that

has been assigned to the Secretary for

determination of eligibility for a total

and permanent disability discharge, the

guaranty agency must forward those

payments to the Secretary for crediting

to the borrower’s account. At the same

time that the agency forwards the

payments, it must notify the borrower

that there is no obligation to make

payments on the loan while it is

conditionally discharged prior to a final

determination of eligibility for a total

and permanent disability discharge,

unless the Secretary directs the

borrower otherwise.

(3) When the Secretary makes a final

determination to discharge the loan, the

Secretary returns to the sender any

payments received on the loan after the

date the borrower became totally and

permanently disabled.

* * * * *

(5) If the guaranty agency has returned

a payment to the borrower, or the

borrower’s representative, with the

notice described in paragraphs (r)(1) or

(r)(2) of this section, and the borrower

(or representative) continues to send

payments to the guaranty agency, the

agency must remit all of those payments

to the Secretary.

* * * * *

PART 685—WILLIAM D. FORD

FEDERAL DIRECT LOAN PROGRAM

9. The authority citation for part 685

continues to read as follows:

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

otherwise noted.

10. Section 685.200 is amended as

follows:

A. By revising paragraphs (a)(1)(iv)(A)

and (B).

B. By adding new paragraph

(a)(1)(iv)(C).

The revised and added text reads as

follows:

65694 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

§ 685.200 Borrower eligibility.

(a)(1) * * *

(iv)(A) In the case of a borrower

whose prior loan under title IV of the

Act 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 the Direct Loan the borrower

receives cannot 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.

(B) In the case of a borrower whose

prior loan under title IV of the Act was

discharged on or after July 1, 2001 and

before July 1, 2002 after a final

determination of total and permanent

disability, the borrower—

(1) Complies with the requirements of

paragraph (a)(1)(iv)(A) of this section;

and

(2) If the borrower receives another

loan within three years from the date

that the borrower became totally and

permanently disabled, as certified by

the physician, reaffirms the previously

discharged loan. For the purposes of

this paragraph, reaffirmation means the

acknowledgement of the loan by the

borrower in a legally binding manner.

The acknowledgement may include, but

is not limited to, the borrower signing

a new promissory note that includes the

same terms and conditions as the

original note signed by the borrower,

making a payment on the loan, or

signing a repayment agreement.

(C) In the case of a borrower whose

prior loan under title IV of the Act was

conditionally discharged based on an

initial determination that the borrower

was totally and permanently disabled—

(1) The suspension of collection

activity on the prior loan has been

lifted;

(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 prior

loan nor the Direct Loan that the

borrower receives may 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.

* * * * *

11. Section 685.212 is amended as

follows:

A. By revising paragraph (a).

B. By revising paragraph (b).

C. By revising paragraph (g)(1).

D. By redesignating paragraph (g)(2)

as (g)(3).

E. By adding a new paragraph (g)(2).

The additions and revisions read as

follows:

§ 685.212 Discharge of a loan obligation.

(a) Death. (1) If a borrower (or the

student on whose behalf a parent

borrowed a Direct PLUS Loan) dies, the

Secretary discharges the obligation of

the borrower and any endorser to make

any further payments on the loan based

on an original or certified copy of the

borrower’s (or student’s in the case of a

Direct PLUS loan) death certificate.

(2) If an original or certified copy of

the death certificate is not available, the

Secretary discharges the loan only based

on other reliable documentation that

establishes, to the Secretary’s

satisfaction, that the borrower (or

student) has died. The Secretary

discharges a loan based on

documentation other than an original or

certified copy of the death certificate

only under exceptional circumstances

and on a case-by-case basis.

(b) Total and permanent disability. If

a borrower meets the requirements in

§ 685.213(c), the Secretary discharges

the obligation of the borrower and any

endorser to make any further payments

on the loan.

* * * * *

(g) * * *

(1) For the discharge conditions in

paragraphs (a), (c), (d), and (e) of this

section. Upon receipt of acceptable

documentation and approval of the

discharge request, the Secretary returns

to the sender, or, for a discharge based

on death, the borrower’s estate, any

payments received after the date that the

eligibility requirements for discharge

were met.

(2) For the discharge condition in

paragraph (b) of this section. Upon

making a final determination of

eligibility for discharge based on total

and permanent disability, the Secretary

returns to the sender any payments

received after the date the borrower

became totally and permanently

disabled, as certified under § 685.213(b).

* * * * *

12. A new § 685.213 is added to read

as follows:

§ 685.213 Total and permanent disability

discharge.

(a) General. (1) If the Secretary makes

an initial determination that a borrower

is totally and permanently disabled, the

Secretary—

(i) Notifies the borrower that the loan

will be in a conditional discharge status

for up to three years from the date that

the borrower became totally and

permanently disabled, as certified under

685.213(b). The Secretary also notifies

the borrower of the conditions of the

conditional discharge period, and that

all or part of the three-year conditional

discharge period may predate the

Secretary’s initial determination.

(ii) Suspends any efforts to collect on

the loan from the date of the initial

determination described in paragraph

(a)(1) of this section until the end of the

conditional discharge period.

(2) If the borrower continues to meet

the eligibility requirements for total and

permanent disability discharge during

and at the end of the three-year

conditional discharge period, the

Secretary—

(i) Discharges the obligation of the

borrower and any endorser to make any

further payments on the loan at the end

of that period; and

(ii) Returns to the borrower any

payments received after the date the

borrower became totally and

permanently disabled, as certified under

§ 685.213(b).

(3) If the borrower does not continue

to meet the eligibility requirements for

a total and permanent disability

discharge at any time during or at the

end of the three-year conditional

discharge period, the Secretary resumes

collection activity on the loan. The

Secretary does not require the borrower

to pay any interest that accrued on the

loan from the date of the initial

determination described in paragraph

(a)(1) of this section through the end of

the conditional discharge period.

(4) Except as provided in paragraph

(e)(1) of this section, a borrower is not

considered totally and permanently

disabled based on a condition that

existed at the time the loan was made,

unless the borrower’s condition

substantially deteriorated after the loan

was made so as to render the borrower

totally and permanently disabled.

(b) Initial determination of total and

permanent disability. The Secretary

makes an initial determination that a

borrower is totally and permanently

disabled if the borrower (or the

borrower’s representative) provides the

Secretary with a certification (on a form

approved by the Secretary) by a

physician who is a doctor of medicine

or osteopathy and legally authorized to

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65695

practice in a State that the borrower is

totally and permanently disabled as

defined in 34 CFR 682.200(b).

(c) Eligibility requirements for total

and permanent disability discharge. A

borrower meets the eligibility

requirements for total and permanent

disability discharge if, during and at the

end of the three-year conditional

discharge period described in paragraph

(a)(1) of this section—

(1) The borrower’s annual earnings

from employment do not exceed 100

percent of the poverty line for a family

of two, as determined in accordance

with the Community Service Block

Grant Act; and (2) The borrower does

not receive a new loan under the

Perkins, FFEL, or Direct Loan programs,

except for a FFEL or Direct

consolidation loan that does not include

any loans that are in a conditional

discharge status.

(d) Conditional discharge period.

During the conditional discharge period

described in paragraph (a)(1) of this

section, the borrower—

(1) Is not required to make any

payments of principal or interest on the

loan beginning on the date the Secretary

makes an initial determination that the

borrower is totally and permanently

disabled;

(2) Is not considered to be delinquent

or in default on the loan, unless the loan

was delinquent or in default at the time

the conditional discharge was granted;

(3) Must promptly notify the Secretary

of any changes in the borrower’s address

or telephone number;

(4) Must promptly notify the Secretary

if the borrower’s annual earnings from

employment exceed the amount

specified in paragraph (c)(1) of this

section; and

(5) Must provide the Secretary, upon

request, with additional documentation

or information related to the borrower’s

eligibility for discharge under this

section.

(e) Provisions for discharge of Direct

Consolidation Loans. (1) For a Direct

Consolidation Loan, a borrower is

considered totally and permanently

disabled if he or she would be

considered totally and permanently

disabled under the provisions of this

section for all of the loans that were

included in the Direct Consolidation

Loan if those loans had not been

consolidated.

(2) For the purposes of discharging a

loan under paragraph (e)(1) of this

section, the provisions of this section

apply to each loan included in the

Direct Consolidation Loan, even if the

loan is not a Direct Loan Program loan.

(3) If requested, a borrower seeking to

discharge a loan obligation under

paragraph (e)(1) of this section must

provide the Secretary with the

disbursement dates of the underlying

loans.

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

[FR Doc. 00–27891 Filed 10–31–00; 8:45 am]

BILLING CODE 4000–01–P