31358 Federal Register / Vol. 61, No. 119 / Wednesday, June 19, 1996 / Rules and Regulations

DEPARTMENT OF EDUCATION

34 CFR Part 685

RIN 1840–AC19

William D. Ford Federal Direct Loan

Program

AGENCY: Department of Education.

ACTION: Final Regulations.

SUMMARY: This document contains

corrections and other technical changes

to the William D. Ford Federal Direct

Loan (Direct Loan) Program final

regulations published in the Federal

Register on December 1, 1994 (59 FR

61664) and on December 1, 1995 (60 FR

61820 and 60 FR 61790). Most of these

changes apply to regulations governing

the new income contingent repayment

plan, which becomes effective July 1,

1996. However, several amendments

correct provisions currently in effect.

EFFECTIVE DATE: These regulations take

effect July 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Ms. Rachel Edelstein, Program

Specialist, Direct Loan Policy, Policy

Development Division, U.S. Department

of Education, Room 3053, ROB–3, 600

Independence Avenue, SW.,

Washington, DC 20202–5400.

Telephone: (202) 708–9406. Individuals

who use a telecommunications device

for the deaf (TDD) may call the Federal

Information Relay Service (FIRS) at 1–

800–877–8339 between 8 a.m. and 8

p.m., Eastern time, Monday through

Friday.

SUPPLEMENTARY INFORMATION: The

following regulations are amended to

clarify the provisions and to correct

errors and omissions in the text of the

Direct Loan Program final regulations

published on December 1, 1994 (59 FR

61664) and on December 1, 1995 (60 FR

61820 and 60 FR 61790).

Repayment Plans—Section 685.208(f)

The Secretary has amended section

685.208(f)(1) to clarify that, for married

borrowers, the borrower’s repayment

amount is based on the Federal adjusted

gross income (AGI) of the borrower and

the borrower’s spouse, regardless of

whether the borrower files a joint

Federal income tax return with his or

her spouse or files a Federal income tax

return separately from his or her spouse.

In addition, to simplify the regulations,

language alluding to joint repayment for

married borrowers has been removed

because the subject is addressed in

greater detail in section 685.209(b).

The Secretary has also amended

section 685.208(f)(2) to clarify that the

income contingent repayment plan in

effect at the time the borrower either

enters repayment and selects the income

contingent repayment plan or changes

from another repayment plan into the

income contingent repayment plan

governs the method for determining the

borrower’s monthly repayment amount

under the income contingent repayment

plan. The proposed rule published on

September 20, 1995, clearly states the

Secretary’s intent to change the policy

so that the new income contingent

repayment plan would apply to

borrowers who select the income

contingent repayment plan when they

enter repayment and to borrowers who

are in other repayment plans and switch

into the income contingent repayment

plan on or after July 1, 1996 (see 60 FR

48849). While the preamble to the

proposed rule clearly states the

Secretary’s intended change in policy,

this change was inadvertently omitted

from the regulations. Please note that, as

the existing regulations indicate, if the

Secretary amends the regulations and a

borrower who is repaying under the

existing income contingent repayment

plan submits a written request that the

amended regulations apply to the

method of calculation of the borrower’s

loans, the Secretary would grant the

borrower’s request.

Income Contingent Repayment Plan—

Section 685.209

The preamble to the final regulations

states, ‘‘The Secretary has decided to

require a $5.00 minimum monthly

payment of borrowers whose calculated

monthly payment amount is greater

than $0 but less than or equal to $5.00.’’

Although the preamble to the final

regulations clearly states the Secretary’s

intended policy, this policy was

inadvertently omitted from the

regulations. In order to clarify the

Secretary’s intent, section 685.209(a)(6)

has been added to the regulations.

An incorrect cross reference has been

corrected in paragraph (c)(6)(ii) by

removing ‘‘§ 685.209(a)(3)’’, and adding,

in its place, ‘‘§ 685.209(c)(3).’’

Origination of Loan by a Direct Loan

Program School—Section 685.301

The terminology of this section has

been changed to clarify that schools

certify loan information in the Direct

Loan Program by means of the

origination process. Throughout this

section, the word ‘‘certification’’ has

been changed to ‘‘origination.’’ This

change in terminology does not reflect

a change in policy or procedures. In the

Federal Family Education Loan (FFEL)

Program, a financial aid administrator

signs the application, thereby certifying

that the borrower is eligible. In the

Direct Loan Program, the process of

originating a loan is comparable to the

FFEL certification process. When the

school originates the loan, the school is

certifying the borrower’s eligibility.

Paragraph (a)(6) has been amended to

reflect this concept. This technical

change does not impose any new

policies or procedural requirements.

In addition, paragraph (a)(7) has been

amended to specify that a school may

not assess a fee for the origination of a

Direct Loan. According to section

454(a)(6) of the Higher Education Act of

1965, as amended, schools may not

‘‘charge any fees of any kind, however

described, to student or parent

borrowers for origination activities

. . . .’’ This statutory requirement was

inadvertently omitted from the

regulations.

Appendix A to Part 685—Income

Contingent Repayment

The Secretary has updated the income

percentage factors in the appendix to

reflect the Department of Health and

Human Services (HHS) Annual Update

of the HHS Poverty guidelines,

published in the Federal Register on

March 4, 1996. In addition, the

examples of the calculation of monthly

repayment amounts and the charts

showing sample repayment amounts

have been amended to reflect the

updated income percentage factors.

Under the updated income percentage

factors, at any given income, borrowers’

payments will be slightly lower than

under the income percentage factors

published in the December 1, 1995

regulations. The Secretary believes the

updated income percentage factors more

accurately reflect a borrower’s ability to

repay than those previously published.

Waiver of Proposed Rulemaking

In accordance with the

Administrative Procedure Act, 5 U.S.C.

553, it is the practice of the Secretary to

offer interested parties the opportunity

to comment on proposed regulations.

However, the regulatory changes in this

document are necessary to correct minor

technical errors and omissions in the

Direct Loan Program final regulations

published on December 1, 1994, and

December 1, 1995. The changes in this

document do not establish any new

rules. Therefore, the Secretary has

determined that publication of a

proposed rule is unnecessary and

contrary to the public interest under 5

U.S.C. 553(b)(B). For the same reasons,

the Secretary also waives the 30-day

delayed effective date under 5 U.S.C.

553(d).
Federal Register / Vol. 61, No. 119 / Wednesday, June 19, 1996 / Rules and Regulations 31359

Executive Order 12866

These final regulations have been

reviewed in accordance with Executive

Order 12866. Under the terms of the

order, the Secretary has assessed the

potential costs and benefits of this

regulatory action.

The potential costs associated with

these final regulations are those

resulting from statutory requirements

and those determined by the Secretary

as necessary for administering the

program effectively and efficiently.

Burdens specifically associated with

information collection requirements, if

any, are identified and explained

elsewhere in this preamble under the

heading Paperwork Reduction Act of

1995.

In assessing the potential costs and

benefits—both quantitative and

qualitative—of these final regulations,

the Secretary has determined that the

benefits of the regulations justify the

costs.

The Secretary has also determined

that this regulatory action does not

unduly interfere with State, local, and

tribal governments in the exercise of

their governmental functions.

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.

Regulatory Flexibility Act Certification

The Secretary certifies that these

regulations will not have significant

economic impact on a substantial

number of small entities. The

regulations will affect borrowers who

are in repayment. These regulations

contain technical amendments designed

to clarify and correct current

regulations. The changes will not have

a significant economic impact on any

small entities under the Regulatory

Flexibility Act.

Assessment of Educational Impact

The Secretary has determined that the

regulations in this document would not

require transmission of information that

is being gathered by or is available from

any other agency or authority of the

United States.

List of Subjects in 34 CFR Part 685

Administrative practice and

procedure, Colleges and universities,

Education, Loan programs-education,

Reporting and recordkeeping

requirements, Student aid, Vocational

education.

(Catalog of Domestic Assistance Number:

84.268, William D. Ford, Federal Direct Loan

Program)

Dated: June 12, 1996.

Richard W. Riley,

Secretary of Education.

The Secretary amends Part 685 of

Title 34 of the Code of Federal

Regulations as follows:

PART 685—[AMENDED]

1. The authority citation for Part 685

continues to read as follows:

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

otherwise noted.

2. Section 685.208 is amended by

revising paragraphs (f) (1) and (2) to

read as follows:

§ 685.208 Repayment plans.

* * * * *

(f) * * *

(1) Under the income contingent

repayment plan, a borrower’s monthly

repayment amount is generally based on

the total amount of the borrower’s Direct

Loans, family size, and Adjusted Gross

Income (AGI) reported by the borrower

for the most recent year for which the

Secretary has obtained income

information. The borrower’s AGI

includes the income of the borrower’s

spouse. A borrower shall make

payments on a loan until the loan is

repaid in full or until the loan has been

in repayment through the end of the

income contingent repayment period.

(2) The regulations in effect at the

time a borrower enters repayment and

selects the income contingent

repayment plan or changes into the

income contingent repayment plan from

another plan govern the method for

determining the borrowers’s monthly

repayment amount for all of the

borrower’s Direct Loans, unless—

* * * * *

3. Section 685.209 is amended by

redesignating paragraphs (a) (6) through

(8) as (a) (7) through (9), respectively,

and adding a new paragraph (a)(6); and

by removing ‘‘§ 685.209(a)(3)’’ in

paragraph (c)(6)(ii), and adding, in its

place, ‘‘§ 685.209(c)(3)’’ to read as

follows:

§ 685.209 Income contingent repayment

plan.

(a) * * *

(6) If a borrower’s monthly payment is

calculated to be greater than $0 but less

than or equal to $5.00, the amount

payable by the borrower shall be $5.00.

* * * * *

§ 685.301 [Amended]

4. Section 685.301 is amended by

removing the word ‘‘certify’’ from the

introductory text in paragraph (a)(6) and

adding, in its place, ‘‘originate’’; and

paragraph (a)(7) is amended by adding,

before the period at the end of the

sentence, ‘‘or for the origination of a

Direct Loan’’.

5. Appendix A is amended by revising

the computations following Example 1,

Steps 2, 3, and 4; revising the

computations following Example 2,

Steps 3, 4, and 5; revising the

computations following the

Interpolation; and by revising the charts

of Income Percentage Factors (Based on

Annual Income), Income Contingent

Repayment Plan (Sample First-Year

Monthly Repayment Amounts for a

Single Borrower at Various Income and

Debt Levels), and Income Contingent

Repayment Plan (Sample First-Year

Monthly Repayment Amounts for a

Married or Head-of-Household Borrower

at Various Income and Debt Levels) to

read as follows:

Appendix A to Part 685—Income

Contingent Repayment

* * * * * *

Example 1. * * *

Step 2: * * *

• 84.46% (0.8446)×1,644.315=1,388.7884

Step 3: * * *

• $25,000¥$7,740=$17,260

• $17,260×0.20=$3,452

Step 4: * * *

• 1,388.7884÷12=$115.73

Example 2. * * *

Step 3: * * *

• 91.27% (0.9127)×2,630.904=2,401.2261

Step 4: * * *

• $30,000¥$10,360=$19,640

• $19,640×0.020=$3,928

Step 5: * * *

• 2,401.2261÷12=$200.10

Interpolation: * * *

• $27,904¥$25,000=$2,904

* * * * *

• 88.77¥84.46=4.31

* * * * *

• $26,000¥$25,000=$1,000

* * * * *

• 1,000÷2,904=0.3444

* * * * *

• 0.3444×4.31=1.48

* * * * *

• 1.48+84.46=85.94%

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31360 Federal Register / Vol. 61, No. 119 / Wednesday, June 19, 1996 / Rules and Regulations
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[FR Doc. 96–15516 Filed 6–18–96; 8:45 am]

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