34762 Federal Register / Vol. 66, No. 126 / Friday, June 29, 2001 / Rules and Regulations

DEPARTMENT OF EDUCATION

34 CFR Parts 682 and 685

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: This document contains

technical corrections and changes to the

regulations for the Federal Family

Education Loan (FFEL) Program in 34

CFR part 682 and the William D. Ford

Federal Direct Loan (Direct Loan)

Program in 34 CFR part 685. The

regulations govern the Federal Stafford

Loan Program, the Federal

Supplemental Loans for Students

(Federal SLS) Program, the Federal

PLUS Program, and the Federal

Consolidation Loan Program,

collectively referred to as the FFEL

Program and the Federal Direct Stafford

Loan Program, the Federal Direct PLUS

Loan Program, and the Federal Direct

Consolidation Loan Program,

collectively referred to as the Direct

Loan Program.

EFFECTIVE DATE: These regulations are

effective July 1, 2001.

FOR FURTHER INFORMATION CONTACT: For

the FFEL Program, Ms. Patricia Beavan,

or for the Direct Loan Program, Ms.

Nicki Meoli, U.S. Department of

Education, 400 Maryland Avenue, S.W.

(Room 3053, ROB–3) Washington, D.C.

20202–5449. 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 one of the contact persons

listed in the preceding paragraph.

SUPPLEMENTARY INFORMATION: These

corrections and changes incorporate

technical corrections to the existing

FFEL and Direct Loan program

regulations in 34 CFR parts 682 and 685

and final regulations published in the

Federal Register on November 1, 2000

(65 FR 65616, 65624, and 65632).

In addition, these final regulations

change the existing regulations to reflect

the change in the formula for calculating

interest rates for certain Federal PLUS

Loans and Federal Direct PLUS Loans

made by Section 318 of Appendix D to

Pub. L. 106–554, the Consolidated

Appropriations Act 2001. The final

regulations also add to the existing

regulations a reference to a statutory

termination date for the exemption from

certain loan disbursement requirements

for schools with cohort default rates

below 10 percent.

Waiver of Proposed Rulemaking and

Negotiated Rulemaking

It is the practice of the Secretary to

offer interested parties the opportunity

to comment on proposed regulations.

However, the provisions in these final

regulations reflect needed technical

corrections and other clarifying changes

to the FFEL and Direct Loan program

regulations. These corrections and

changes do not affect the substantive

rights or obligations of any affected

parties. Therefore, the Secretary has

concluded that solicitation of public

comment is unnecessary and contrary to

the public interest under 5 U.S.C.

553(b)(B) and that a deferred effective

date is not required under 5 U.S.C.

553(d).

For the same reasons, the Secretary

has determined, under section 492(b)(2)

of the Higher Education Act of 1965, as

amended, that these regulations should

not be subject to negotiated rulemaking.

Regulatory Flexibility Act Certification

The Secretary certifies that these final

regulations will not have a significant

economic impact on a substantial

number of small entities. Small entities

affected by these regulations are small

institutions of higher education. These

regulations also affect guaranty agencies

and lenders that participate in the FFEL

Program, as well as individual FFEL and

Direct Loan borrowers, as described in

the NPRM published on July 27, 2000

(65 FR 46316). These regulations

contain technical corrections and other

changes to current regulations. The

technical corrections and changes will

not have a significant economic impact.

Paperwork Reduction Act of 1995

These regulations have been

examined under the Paperwork

Reduction Act of 1995 and have been

found to contain no information

collection requirements.

Assessment of Educational Impact

Based on our own review, we have

determined that the regulations in this

document do not require transmission

of information that is being gathered by

or is available from any other agency or

authority of the United States.

Electronic Access to This Document

You may view this document, as well

as all other Department of Education

documents published in the Federal

Register, in text of Adobe Portable

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Note: The official version of a document is

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(Catalog of Federal Domestic Assistance

Numbers: 84.032 Federal Family Education

Loan Program, and 84.268 William D. Ford

Federal Direct Loan Program)

List of Subjects in 34 CFR Parts 682 and

685

Administrative practice and

procedure, Colleges and universities,

Education, Loan programs-education,

Reporting and recordkeeping

requirements, Student aid, Vocational

education.

Dated: June 26, 2001.

Maureen A. McLaughlin,

Deputy Assistant Secretary, Policy, Planning

and Innovation, Office of Postsecondary

Education.

For the reasons discussed in the

preamble, the Secretary amends title 34

of the Code of Federal Regulations parts

682 and 685 as follows:

PART 682—FEDERAL FAMILY

EDUCATION LOAN (FFEL) PROGRAM

1. The authority citation for Part 682

continues to read as follows:

Authority: 20 U.S.C. 1071 to 1087–2,

unless otherwise noted.

§ 682.100 [Amended]

2. Section 682.100(b)(2)(i)(C) is

amended by removing the comma after

‘‘1994’’, and adding, in its place, a semicolon.

§ 682.101 [Amended]

3. Section 682.101(b) is amended by

removing ‘‘, technical, and

correspondence’’, and adding, in its

place, ‘‘technical’’.

4. Section 682.202(a)(2) is amended

by adding a new paragraph (vi); and

paragraph (a)(3) is amended by adding

a new paragraph (iv) to read as follows:

§ 682.202 Permissible charges by lenders

to borrowers.

* * * * *

(a) * * *

(2) * * *

Federal Register / Vol. 66, No. 126 / Friday, June 29, 2001 / Rules and Regulations 34763

(vi)(A) Beginning on July 1, 2001, the

interest rate on the loans described in

paragraphs (a)(2)(ii) through (iv) of this

section is a variable rate applicable to

each July 1–June 30, as determined on

the preceding June 26, and is equal to

the weekly average 1-year constant

maturity Treasury yield, as published by

the Board of Governors of the Federal

Reserve System, for the last calendar

week ending on or before such June 26;

plus—

(1) 3.25 percent for loans described in

paragraph (a)(2)(ii) of this section; or

(2) 3.1 percent for loans described in

paragraphs (a)(2)(iii) and (iv) of this

section.

(B) The interest rates calculated under

paragraph (a)(2)(vi)(A) of this section

shall not exceed the limits specified in

paragraphs (a)(2)(ii)(B), (a)(2)(iii)(B), and

(a)(2)(iv)(B) of this section, as

applicable.

(3) * * *

(iv)(A) Beginning on July 1, 2001, the

interest rate on the loans described in

paragraphs (a)(3)(ii) and (iii) of this

section is a variable rate applicable to

each July 1–June 30, as determined on

the preceding June 26, and is equal to

the weekly average 1-year constant

maturity Treasury yield, as published by

the Board of Governors of the Federal

Reserve System, for the last calendar

week ending on or before such June 26;

plus—

(1) 3.25 percent for loans described in

paragraph (a)(3)(ii) of this section; or

(2) 3.1 percent for loans described in

paragraph (a)(3)(iii) of this section.

(B) The interest rates calculated under

paragraph (a)(3)(iv)(A) of this section

shall not exceed the limits specified in

paragraphs (a)(3)(ii)(B) and (a)(3)(iii)(B)

of this section, as applicable.

* * * * *

§ 682.204 [Amended]

5. Section 682.204 is amended:

A. In paragraph (a)(1)(iii), in the

second formula, by removing ‘‘Number

of weeks in program’’, and adding, in its

place, ‘‘Number of weeks enrolled’’.

B. In paragraph (c)(2), by adding,

‘‘under the conditions specified in

§ 682.201(a)(3)’’ after ‘‘dependent

undergraduate students’’.

C. In paragraph (d), by adding, ‘‘under

the conditions specified in

§ 682.201(a)(3)’’, after ‘‘dependent

undergraduate students’’.

D. In paragraph (f)(2)(ii), by removing

the reference to ‘‘(f)(4)’’, and adding, in

its place, ‘‘(f)(3)’’.

E. By redesignating paragraph (f)(4) as

paragraph (f)(3).

F. In redesignated paragraph (f)(3)(ii),

by removing reference to ‘‘(f)(4)(i)’’, and

adding, in its place, ‘‘(f)(3)(i)’’.

6. Section 682.206(e)(2) is amended to

read as follows:

§ 682.206 Due diligence in making a loan.

* * * * *

(e) * * *

(2) A Federal PLUS Program Loan

may be made to an eligible borrower

with an endorser who is secondarily

liable for repayment of the loan.

* * * * *

§ 682.207 [Amended]

7. Section 682.207(b)(1)(ii)(B) is

amended in the first sentence by

removing ‘‘a’’, and adding, in its place,

‘‘an’’; by removing ‘‘§ 688.163’’, and

adding, in its place, ‘‘§ 668.163’’; by

removing ‘‘written’’; by adding a period

after the second occurrence of the word

‘‘borrower’’; and by removing the

remainder of the sentence.

§ 682.209 [Amended]

8. Section 682.209(a)(7)(viii)(C) is

amended by removing ‘‘Except in the

case of a Consolidation Loan, if’’, and

adding in its place, ‘‘If’’; and by

removing ‘‘maximum 10-year’’, and

adding, in its place, ‘‘applicable

maximum’’.

§ 682.210 [Amended]

9. Section 682.210(s)(6) introductory

text is amended by adding ‘‘of up to one

year at a time’’ after ‘‘periods’’.

§ 682.211 [Amended]

10. Section 682.211 is amended by

removing from paragraph (i)(4)

‘‘sections 672(a), 672(g), 673, 673(b),

674, or 688 of title 10,’’, and adding, in

its place, ‘‘sections 688, 12301(a),

12301(g), 12302, 12304, and 12306 of

title 10,’’.

§ 682.215 [Amended]

11. Section 682.215 is amended:

A. In paragraph (b), in the definition

of Academic year, in the last sentence,

by adding ‘‘a minimum of’’, before

‘‘nine’’.

B. In paragraph (e)(1), by removing

‘‘At the borrower’s request, a’’ and

adding, in its place, ‘‘A’’.

C. In paragraph (e)(1)(i), by removing

the second occurrence of the word

‘‘each’’, and adding, in its place, ‘‘the

borrower’s’’.

D. In paragraph (f)(2)(iii), by

removing, ‘‘on the loan’’ both times it

appears, and adding, in its place, ‘‘on

the discharged amount’’.

E. In paragraph (f)(3)(ii), by removing

‘‘and (d)(2)’’, and adding, in its place, ‘‘,

(d)(2), and (f)(2)(iii)’’.

§ 682.300 [Amended]

12. Section 682.300(b)(2)(viii) is

amended by removing the reference to

‘‘§ 682.402(d) or (e)’’, and adding, in its

place, ‘‘§ 682.402(d), (e), or (l)’’.

§ 682.302 [Amended]

13. Section 682.302 is amended:

A. In paragraph (b)(2)(iv), by

removing ‘‘October 1, 1998’’, and

adding, in its place, ‘‘July 1, 1998’’.

B. In paragraph (c)(2), by removing

‘‘(c)(1)(iii)(D)’’, and adding, in its place,

‘‘(c)(1)(iii)(F)’’.

C. In paragraph (c)(3)(i), by removing

‘‘(c)(1)(iii)(D)’’, and adding, in its place,

‘‘(c)(1)(iii)(F)’’.

D. In paragraph (c)(4), by adding ‘‘taxexempt’’ before ‘‘obligations’’.

E. In paragraphs (d)(2)(i) and (ii), by

removing ‘‘restricted’’.

14. Section 682.401 is amended:

A. In paragraph (b)(5)(ii), by removing

‘‘Stafford or’’.

B. In paragraph (b)(5)(ii)(B), by

removing ‘‘to borrow or’’.

C. In paragraph (b)(5)(ii)(C), by

removing ‘‘by or’’.

D. By revising paragraph (d)(4)(iii) to

read as follows:

§ 682.401 Basic program agreement.

* * * * *

(d) * * *

(4) * * *

(iii) A student or parent borrower who

is borrowing funds for attendance at a

school for which the multi-year feature

of the MPN has not been authorized

must complete a new promissory note

for each academic year.

* * * * *

§ 682.402 [Amended]

15. Section 682.402 is amended:

A. In paragraph (g)(1)(i), by removing

‘‘accurate’’, and adding, in its place,

‘‘exact’’.

A. In paragraph (i)(1)(iii) by adding a

new sentence at the end of the

paragraph, ‘‘If the guaranty agency has

determined that the expected costs of

opposing the discharge petition will

exceed one-third of the total amount of

the loan, it may, but is not required to,

engage in the activities described in

paragraph (i)(1)(iv) of this section.’’

C. In paragraph (l)(1), by adding, ‘‘, in

whole or in part,’’, after ‘‘disbursed’’.

D. In paragraph (l)(2), by adding, ‘‘, in

whole or in part,’’, after ‘‘disbursed’’.

E. In paragraph (l)(2)(i), by removing

‘‘has ceased to attend’’, and adding, in

its place, ‘‘is not attending’’.

F. In paragraph (l)(2)(ii), by removing

‘‘borrower submits’’, and adding, in its

place, ‘‘guarantor receives’’.

G. In paragraph (l)(4)(i)(A), by adding,

‘‘, in whole or in part,’’, after ‘‘loan’’.

H. In paragraph (l)(5)(vii)(A), by

removing ‘‘The’’, and adding, in its

place, ‘‘Within 30 days of the

34764 Federal Register / Vol. 66, No. 126 / Friday, June 29, 2001 / Rules and Regulations

guarantor’s determination, the’’; and by

adding ‘‘. The guaranty agency must

make a determination’’ after ‘‘agency’s

determination’’.

I. In paragraph (l)(5)(vii)(B), by

removing ‘‘for the’’, and adding, in its

place, ‘‘for any’’; by adding, ‘‘under this

section’’ after ‘‘suspended’’; and by

removing ‘‘the review period’’ and

adding, in its place, ‘‘these periods’’.

§ 682.405 [Amended]

16. Section 682.405(b)(2) is amended

by adding ‘‘and that the default is to be

removed from the borrower’s credit

history’’ before the period.

§ 682.406 [Amended]

17. Section 682.406 is amended:

A. In paragraph (a)(11), by removing

the period, and adding, in its place, a

semi-colon.

B. In paragraph (a)(12)(v), by

removing ‘‘preclaims’’, and adding, in

its place, ‘‘default aversion’’.

§ 682.410 [Amended]

18. Section 682.410(a)(2) is amended

by removing paragraph (iii); and by

redesignating paragraphs (iv) through

(xii) as paragraphs (iii) through (xi).

19. Section 682.414 is amended:

A. In paragraph (a)(1)(ii)(D), by

removing ‘‘preclaims and supplemental

preclaims assistance’’, and adding, in its

place, ‘‘default aversion assistance’’.

B. In paragraph (a)(4)(i), by removing

the reference to ‘‘(a)(3)(ii)’’, and adding,

in its place, ‘‘(a)(4)(ii)’’.

C. In paragraph (a)(4)(ii)(J), by

removing ‘‘preclaims assistance’’, and

adding, in its place, ‘‘default aversion

assistance’’.

D. In paragraph (a)(5), by

redesignating paragraph (a)(5)(ii) as

paragraph (a)(5)(iii) and by adding a

new paragraph (a)(5)(ii) to read as

follows:

§ 682.414 Records, reports, and inspection

requirements for guaranty agency

programs.

(a) * * *

(5) * * *

(ii) A guaranty agency or lender may

store a promissory note in accordance

with 34 CFR 668.24(d)(3)(i) through (iv)

only if the promissory note was signed

electronically.

* * * * *

§ 682.415 [Amended]

20. Section 682.415 is amended:

A. In paragraph (a)(6)(iii), by

removing the reference to ‘‘(a)(6)’’, and

adding, in its place, ‘‘(a)(6)(ii)’’.

B. In paragraph (c)(2)(i), by removing

‘‘§§ 682.410(b)(6)(iii) through (xii), and

682.406(a)(8) and (a)(9), or

§§ 682.410(b)(7)’’, and adding, in its

place, ‘‘§§ 682.410(b)(6)(i) through

(xii)’’.

C. In paragraph (c)(4), by removing

‘‘§§ 682.410(b)(6)(iii) through (xii) and

682.406(a)(8) and (a)(9) or

§§ 682.410(b)(7)’’ and adding, in its

place, ‘‘§§ 682.410(b)(6)(i) through

(xii)’’.

D. In paragraph (c)(6)(i), by removing

‘‘§§ 682.410(b)(6)(iii) through (xii) and

682.406(a)(8) and (a)(9) or

682.410(b)(7)’’, and adding, in its place,

‘‘§§ 682.410(b)(6)(i) through (xii)’’.

E. In paragraph (d)(1), by removing

‘‘§§ 682.410(b)(6)(iii) through (xii) and

682.406(a)(8) and (a)(9) or

§§ 682.410(b)(7)’’, and adding, in its

place, ‘‘§§ 682.410(b)(6)(i) through

(xii)’’.

§ 682.416 [Amended]

21. Section 682.416(f) is amended by

removing the reference to

‘‘§ 682.414(a)(3)(ii)’’ and adding, in its

place, ‘‘§ 682.414(a)(4)(ii)’’.

§ 682.601 [Amended]

22. Section 682.601(c)(1)(ii) is

amended by removing ‘‘, SLS,’’.

23. Section 682.603 is amended:

A. By revising paragraphs (f)(1) and

(f)(2).

B. By revising paragraph (g).

C. In paragraph (i) by removing ‘‘(1)’’;

and by removing the reference to

‘‘(b)(5)’’ and adding, in its place,

‘‘(b)(3)’’.

D. By removing paragraph (i)(2).

The amendments read as follows:

§ 682.603 Certification by a participating

school in connection with a loan

application.

* * * * *

(f)(1) The minimum period of

enrollment for which a school may

certify a loan application is—

(i) At a school that measures academic

progress in credit hours and uses a

semester, trimester, or quarter system, a

single academic term (e.g., a semester or

quarter); or

(ii) At a school that measures

academic progress in clock hours, or

measures academic progress in credit

hours but does not use a semester,

trimester, or quarter system, the lesser

of—

(A) The length of the student’s

program at the school; or

(B) The academic year as defined by

the school in accordance with 34 CFR

668.2.

(2) The maximum period for which a

school may certify a loan application

is—

(i) Generally an academic year, as

defined by 34 CFR 668.2, except that a

guaranty agency may allow a school to

use a longer period of time, not to

exceed 12 months, corresponding to the

period to which the agency applies the

annual loan limits under

§ 682.401(b)(2)(ii); or

(ii) For a defaulted borrower who has

regained eligibility under

§ 682.401(b)(4), the academic year in

which the borrower regained eligibility.

* * * * *

(g)(1) A school must cease certifying

loans based on the exceptions in

§ 682.604(c)(5)(i) and § 682.604(c)(10)(i)

no later than—

(i) 30 days after the date the school

receives notification from the Secretary

of an FFEL cohort default rate,

calculated under subpart M of 34 CFR

part 668, that causes the school to no

longer meet the qualifications outlined

in those paragraphs; or

(ii) October 1, 2002.

(2) A school must cease certifying

loans based on the exceptions in

§ 682.604(c)(5)(ii) and

§ 682.604(c)(10)(ii) no later than 30 days

after the date the school receives

notification from the Secretary of an

FFEL cohort default rate, calculated

under subpart M of 34 CFR part 668,

that causes the school to no longer meet

the qualifications outlined in those

paragraphs.

* * * * *

24. Section 682.604 is amended:

A. In paragraph (a)(1) by removing ‘‘,

PLUS, or SLS’’ and adding, in its place,

‘‘or PLUS’’.

B. In paragraph (b)(1), by removing ‘‘,

SLS’’.

C. In paragraph (c)(3), by adding ‘‘or’’

after ‘‘application’’.

D. By adding a new paragraph (c)(11).

E. In paragraph (e)(1), by removing the

reference to ‘‘§ 682.207(d)’’ and adding,

in its place, ‘‘§ 682.207(f)’’.

The amendments read as follows:

§ 682.604 Processing the borrower’s loan

proceeds and counseling borrowers.

* * * * *

(c) * * *

(11) A school may deliver loan

proceeds in accordance with paragraphs

(c)(5) and (c)(10) of this section, if the

school certified the loan prior to the

deadline as provided for in § 682.603(g).

* * * * *

§ 682.610 [Amended]

25. Section 682.610(b)(5) is amended

by adding ‘‘, if applicable,’’ before ‘‘to

deliver’’.

§ 682.705 [Amended]

26. Section 682.705(b)(2)(v) is

amended by removing the reference to

‘‘(c)(8)’’ and adding, in its place,

‘‘(c)(9)’’.

Federal Register / Vol. 66, No. 126 / Friday, June 29, 2001 / Rules and Regulations 34765

§ 682.707 [Amended]

27. Section 682.707(a) introductory

text is amended by removing the cross

reference to ‘‘§ 682.706(b)(9)’’ and

adding, in its place, ‘‘§ 682.706(b)(10)’’.

Appendix D—[Amended]

28. Appendix D is amended by:

A. In the introduction, in paragraph

(2), in the last sentence, by removing the

references to ‘‘682.300(b)(2)(vi),

682.300(b)(2)(vii)’’ and adding, in their

place, ‘‘682.300(b)(2)(vii),

682.302(d)(1)(iv)’’.

B. In Appendix D, I.B.5., by removing

‘‘180/270’’ and adding, in its place,

‘‘180/240’’.

C. In Appendix D, I.D.1.a., by

removing ‘‘ten-year repayment’’, and

adding, in its place, ‘‘repayment

period’’, by removing the reference to

‘‘682.209(a)(7)’’ and adding, in its place,

‘‘682.209(a)(8) and 682.209(h)(2)’’.

D. In Appendix D, I.E.2., in the eighth

sentence, by adding, ‘‘and

§ 682.402(f)(5)(ii) and (f)(6)’’ after

‘‘§ 682.211 (f)(4)’’.

PART 685—WILLIAM D. FORD

FEDERAL DIRECT LOAN PROGRAM

29. The authority citation for Part 685

continues to read as follows:

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

otherwise noted.

§ 685.102 [Amended]

30. Section 685.102(b) is amended as

follows:

A. By indenting paragraph (b)(2)(i)(C)

as a separate paragraph.

B. By removing, in the definition of

‘‘Half-time student’’, ‘‘a school

participating in the FFEL Program or the

Direct Loan Program’’ and adding, in its

place, ‘‘an institution of higher

education’’.

§ 685.200 [Amended]

31. Section 685.200 is amended as

follows:

A. By removing in paragraph (a)(1)(v)

‘‘any’’ and adding, in its place, ‘‘a’’.

B. By removing in paragraph (a)(1)(v)

‘‘34 CFR 668.32(e)(2) or (3)’’ and adding,

in its place, ‘‘34 CFR 668.32(e)(2), (3), or

(4)’’.

C. By removing in paragraph (b)(1)(iii)

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

‘‘34 CFR 668.33’’.

32. Section 685.202 is amended as

follows:

A. By revising paragraph (a)(2)(i).

B. By removing in paragraph

(a)(3)(i)(C) ‘‘District’’ and adding, in its

place, ‘‘Direct’’.

The amendments read as follows:

§ 685.202 Charges for which Direct Loan

Program borrowers are responsible.

(a) * * *

(2) * * *

(i) Loans first disbursed before July 1,

1998. (A) Interest rates for periods

ending before July 1, 2001. During all

periods, the interest rate during any

twelve-month period beginning on July

1 and ending on June 30 is determined

on the June 1 preceding that period. The

interest rate is equal to the bond

equivalent rate of 52-week Treasury

bills auctioned at the final auction held

prior to that June 1 plus 3.1 percentage

points, but does not exceed 9 percent.

(B) Interest rates for periods beginning

on or after July 1, 2001. During all

periods, the interest rate during any

twelve-month period beginning on July

1 and ending on June 30 is determined

on the June 26 preceding that period.

The interest rate is equal to the weekly

average 1-year constant maturity

Treasury yield, as published by the

Board of Governors of the Federal

Reserve System, for the last calendar

week ending on or before that June 26

plus 3.1 percentage points, but does not

exceed 9 percent.

* * * * *

§ 685.205 [Amended]

33. Section 685.205 is amended by

redesignating paragraph (c)(9) as

paragraph (b)(9).

§ 685.208 [Amended]

34. Section 685.208(f)(2) is amended

by removing ‘‘borrowers’s’’ and adding,

in its place, ‘‘borrower’s’’.

35. Section 685.211 is amended by

italicizing the paragraph (c) heading to

read as follows:

§ 685.211 Miscellaneous repayment

provisions.

* * * * *

(c) Refunds and returns of title IV,

HEA program funds from schools. ***

* * * * *

§ 685.212 [Amended]

36. Section 685.212 is amended as

follows:

A. By adding in paragraph (d) ‘‘, in

whole or in part,’’ after ‘‘disbursed’’.

B. By adding in paragraph (e) ‘‘, in

whole or in part,’’ after ‘‘disbursed’’.

C. By adding in paragraph (f) ‘‘, in

whole or in part,’’ after ‘‘disbursed’’.

§ 685.214 [Amended]

37. Section 685.214(c)(1)(i) is

amended by adding ‘‘, in whole or in

part, on or after January 1, 1986’’ after

‘‘loan’’.

§ 685.215 [Amended]

38. Section 685.215(c)(1)(i) is

amended by adding, ‘‘, in whole or in

part, on or after January 1, 1986’’ after

‘‘loan’’.

§ 685.216 [Amended]

39. Section 685.216 is amended as

follows:

A. By removing in paragraph

(a)(2)(i)(A) ‘‘has ceased to attend’’ and

adding, in its place, ‘‘is not attending’’.

B. By adding in paragraph (c)(1)(i)(A)

‘‘, in whole or in part,’’ after ‘‘loan’’.

40. Section 685.220 is amended by

italicizing the paragraph (k) heading to

read as follows:

§ 685.220 Consolidation.

* * * * *

(k) Refunds and returns of title IV,

HEA program funds received from

schools.

* * * * *

41. Section 685.301 is amended as

follows:

A. By adding new paragraph (a)(9).

B. By adding new paragraphs (b)(3)(i)

and (ii).

C. By revising paragraph (b)(8)(ii).

D. By adding a new paragraph

(b)(8)(iii).

E. By revising paragraph (d).

The revisions and additions read as

follows:

§ 685.301 Origination of a loan by a Direct

Loan Program school.

(a) * * *

(9)(i) The minimum period of

enrollment for which a school may

originate a Direct Loan is—

(A) At a school that measures

academic progress in credit hours and

uses a semester, trimester, or quarter

system, a single academic term (e.g., a

semester or quarter); or

(B) At a school that measures

academic progress in clock hours, or

measures academic progress in credit

hours but does not use a semester,

trimester, or quarter system, the lesser

of—

(1) The length of the student’s

program at the school; or

(2) The academic year as defined by

the school in accordance with 34 CFR

668.2.

(ii) The maximum period for which a

school may originate a Direct Loan is—

(A) Generally an academic year, as

defined by 34 CFR 668.2, except that a

school may use a longer period of time,

not to exceed 12 months, corresponding

to the period to which the school

applies the annual loan limits under

§ 685.203; or

34766 Federal Register / Vol. 66, No. 126 / Friday, June 29, 2001 / Rules and Regulations

(B) For a defaulted borrower who has

regained eligibility, the academic year

in which the borrower regained

eligibility.

(b) * * *

(3) * * *

(i) If a loan period is more than one

payment period, the school must

disburse loan proceeds at least once in

each payment period; and

(ii) If a loan period is one payment

period, the school must make at least

two disbursements during that payment

period. The school may not make the

second disbursement until the calendar

midpoint between the first and last

scheduled days of class of the loan

period.

* * * * *

(8) * * *

(ii) Paragraph (b)(8)(i)(A) of this

section does not apply to any loans

originated by the school beginning—

(A) 30 days after the date the school

receives notification from the Secretary

of a cohort default rate, calculated under

subpart M of 34 CFR part 668, that

causes the school to no longer meet the

qualifications outlined in that

paragraph; or

(B) October 1, 2002.

(iii) Paragraph (b)(8)(i)(B) of this

section does not apply to any loans

originated by the school beginning 30

days after the date the school receives

notification from the Secretary of a

cohort default rate, calculated under

subpart M of 34 CFR part 668, that

causes the school to no longer meet the

qualifications outlined in that

paragraph.

* * * * *

(d) Reporting to the Secretary. (1) A

school that participates under school

origination option 2 must submit the

promissory note, loan origination

record, and initial disbursement record

for a loan to the Secretary no later than

30 days following the date of the initial

disbursement. The school must submit

subsequent disbursement records,

including adjustment and cancellation

records, to the Secretary no later than 30

days following the date the

disbursement, adjustment, or

cancellation is made.

(2) A school that participates under

school origination option 1 or standard

origination must submit the initial

disbursement record for a loan to the

Secretary no later than 30 days

following the date of the initial

disbursement. The school must submit

subsequent disbursement records,

including adjustment and cancellation

records, to the Secretary no later than 30

days following the date the

disbursement, adjustment, or

cancellation is made.

42. Section 685.303 is amended as

follows:

A. By revising paragraph (b)(4)(ii).

B. By adding a new paragraph

(b)(4)(iii).

C. By adding in the introductory text

of paragraph (e) ‘‘(except for Federal

Work-Study Program funds up to $300)’’

after ‘‘eligible’’.

The amendments read as follows:

§ 685.303 Processing loan proceeds.

* * * * *

(b) * * *

(4) * * *

(ii) Paragraph (b)(4)(i)(A) of this

section does not apply to any loans

originated by the school beginning—

(A) 30 days after the date the school

receives notification from the Secretary

of a cohort default rate, calculated under

subpart M of 34 CFR part 668, that

causes the school to no longer meet the

qualifications outlined in that

paragraph; or

(B) October 1, 2002.

(iii) Paragraph (b)(4)(i)(B) of this

section does not apply to any loans

originated by the school beginning 30

days after the date the school receives

notification from the Secretary of a

cohort default rate, calculated under

Subpart M of 34 CFR part 668, that

causes the school to no longer meet the

qualifications outlined in that

paragraph.

* * * * *

§ 685.304 [Amended]

43. Section 685.304 is amended in

paragraph (a)(1) by removing ‘‘(a)(5)’’

and adding, in its place, ‘‘(a)(4)’’.

44. Section 685.400 is amended by

revising the section heading to read as

follows:

§ 685.400 School participation

requirements.

* * * * *

45. Section 685.402 is amended by

revising the section heading to read as

follows:

§ 685.402 Criteria for schools to originate

loans.

* * * * *

[FR Doc. 01–16470 Filed 6–28–01; 8:45 am]

BILLING CODE 4001–01–P