55972 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

DEPARTMENT OF EDUCATION 

34 CFR Parts 673, 674, 682, and 685 

RIN 1840–AC98 

[Docket ID ED–2009–OPE–0004] 

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 

Federal Perkins Loan (Perkins Loan) 

Program, Federal Family Education 

Loan (FFEL) Program, and William D. 

Ford Federal Direct Loan (Direct Loan) 

Program regulations to implement 

provisions of the Higher Education Act 

of 1965 (HEA), as amended by the 

Higher Education Opportunity Act of 

2008 (HEOA), and other recently 

enacted legislation. 

DATES: Effective Date: These regulations 

are effective July 1, 2010. 

Implementation Date: The Secretary 

has determined, in accordance with 

section 482(c)(2)(A) of the Higher 

Education Act of 1965, as amended 

(HEA)(20 U.S.C. 1089(c)(2)(A)), that 

lenders, guaranty agencies, and loan 

servicers that administer the FFEL and 

Direct Loan programs may, at their 

discretion, choose to implement the 

new provisions in §§ 682.211(f) and 

685.205(b) governing administrative 

forbearances for PLUS loans on or after 

November 1, 2009. For further 

information, see the section entitled 

Implementation Date of These 

Regulations in the SUPPLEMENTARY

INFORMATION section of this preamble. 

FOR FURTHER INFORMATION CONTACT: For 

information related to total and 

permanent disability loan discharges, 

Jon Utz or Pamela Moran. Telephone: 

(202) 377–4040 or (202) 502–7732 or via 

the Internet at: jon.utz@ed.gov or 

pamela.moran@ed.gov. For information 

related to FFEL and Direct Loan teacher 

loan forgiveness, Donald Conner or Jon 

Utz. Telephone: (202) 502–7818 or (202) 

377–4040 or via the Internet at: 

donald.conner@ed.gov or 

jon.utz@ed.gov. For information related 

to all other provisions included in these 

final regulations, Pamela Moran. 

Telephone: (202) 502–7732 or via the 

Internet at: pamela.moran@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD), call the 

Federal Relay Service (FRS), toll free, at 

1–800–877–8339. 

Individuals with disabilities can 

obtain this document in an accessible 

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

audiotape, or computer diskette) on 

request to the contact person listed in 

this section. 

SUPPLEMENTARY INFORMATION: On July 

23, 2009, the Secretary published a 

notice of proposed rulemaking (NPRM) 

for the Perkins Loan, FFEL, and Direct 

Loan Programs in the Federal Register 

(74 FR 36556). 

In the preamble to the NPRM, the 

Secretary discussed on pages 36558 

through 36575 the major regulations 

proposed in that document to 

implement provisions of the HEOA, 

including the following: 

• Amending §§ 674.51(aa) and 

682.200(b) by revising the definition of 

‘‘totally and permanently disabled’’ for 

title IV loan discharges to incorporate 

statutory changes made by the HEOA, 

including a separate total and 

permanent disability standard for 

certain veterans, and adding a definition 

of ‘‘substantial gainful activity’’ in 

§§ 674.51(x) and 685.200(b) to explain 

the meaning of that term as used in the 

revised definition of totally and 

permanently disabled. The changes to 

§ 674.51(aa) and § 674.51(x) appear in 

final regulations published in the 

Federal Register on October 28, 2009 

(RIN 1840–AC95). 

• Amending §§ 674.61(b), 

682.402(c)(2) through (7), and 

685.213(b) by revising the process for 

discharging a borrower’s title IV loans 

due to total and permanent disability to 

reflect the revised definition of totally 

and permanently disabled, including 

the establishment of a separate 

discharge process for certain veterans. 

• Amending §§ 674.9(g), 682.201(a), 

and 685.200(a) by making conforming 

changes to the borrower eligibility 

regulations needed to effectively 

implement the new total and permanent 

disability loan discharge process in 

§§ 674.61(b), 682.402(c)(2) through (7), 

and 685.213(b). 

• Amending §§ 682.201(e) and 

685.220(d) to provide that a borrower 

with only FFEL Program loans may 

consolidate those loans into the Direct 

Loan Program to use the no accrual of 

interest benefit for active duty military 

service members. 

• Amending § 682.206(f) to require 

FFEL Program lenders to inform 

borrowers that by applying for a 

Consolidation loan, the borrower is not 

obligated to agree to take the loan, and 

to provide borrowers with a 10-day 

period to cancel the Consolidation loan. 

• Amending §§ 682.210 and 685.204 

to provide that: (1) A parent PLUS 

borrower may receive a deferment on a 

PLUS loan first disbursed on or after 

July 1, 2008 while the dependent 

student for whom the loan was obtained 

is enrolled on at least a half-time basis 

at an eligible institution, and during the 

6-month period after the student ceases 

to be enrolled at least half time; and (2) 

a graduate or professional student PLUS 

borrower may receive a deferment on a 

PLUS loan first disbursed on or after 

July 1, 2008 during the 6-month period 

after the student ceases to be enrolled 

on at least a half-time basis at an eligible 

institution. 

• Amending § 682.202(b) to provide 

that a lender may capitalize PLUS loan 

interest that has accrued from the date 

of the first disbursement until the date 

the repayment period begins, and 

making a corresponding change in 

§ 685.202(b) to provide that the 

Secretary may capitalize interest on a 

PLUS loan when the loan enters 

repayment. 

• Amending §§ 682.211(f) and 

685.205(b) to provide that a FFEL lender 

or the Secretary (for a Direct Loan) may 

grant an administrative forbearance on a 

borrower’s PLUS loans that were first 

disbursed before July 1, 2008 to align 

the repayment begin date of those loans 

with the borrower’s PLUS loans first 

disbursed on or after July 1, 2008 that 

are eligible for the new PLUS loan 

deferments in §§ 682.210 and 685.204. 

• Amending §§ 682.202 and 685.202 

to provide that any FFEL or Direct Loan 

program loans of a military 

servicemember that were incurred 

before the servicemember entered 

military service are subject to the 

provision in section 207 of the 

Servicemembers Civil Relief Act (50 

U.S.C. 527) (SCRA) that limits the 

interest rate on a loan to six percent 

during periods of active duty service. In 

addition, § 682.302 was amended to 

provide that for FFEL Program loans 

first disbursed on or after July 1, 2008 

that are subject to the SCRA interest rate 

cap, a lender’s special allowance 

payment is calculated as it otherwise 

would be under program requirements, 

except that the applicable interest rate is 

six percent. 

• Amending §§ 682.210(c)(1) and 

685.204(b)(1)(iii)(A) to provide that a 

FFEL lender or the Secretary (for a 

Direct Loan) may grant an in-school 

deferment based on confirmation of the 

borrower’s enrollment status through 

the National Student Loan Data System 

(NSLDS), if requested by the borrower’s 

school. 

• Amending § 682.210(a)(3) to require 

a lender to notify a borrower of an 

unsubsidized loan, at or before the time 

a deferment is granted, that he or she 

has the option to pay the interest that 

accrues on the loan during the 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55973 

deferment or to cancel the deferment, 

and to provide the borrower with 

information on the impact of interest 

capitalization if accrued interest is not 

paid. A comparable change was made in 

§ 685.204(b)(1)(ii)(B) to provide for the 

same information to be given to Direct 

Loan borrowers. 

• Amending §§ 682.215(a) and 

685.221(a) by revising the definition of 

partial financial hardship for the 

purpose of determining a borrower’s 

eligibility to repay under the incomebased repayment (IBR) plan. The revised 

definition specifies that the annual 

amount due on a borrower’s eligible 

loans (under a standard repayment plan 

with a 10-year repayment period) for 

purposes of determining whether a 

borrower has a partial financial 

hardship is calculated based on the 

greater of: (1) The amount owed on the 

eligible loans when the borrower 

initially entered repayment; or (2) the 

amount owed when the borrower 

selected the IBR plan. 

• Amending §§ 682.215(b)(1) and 

685.221(b)(2) to provide that if a 

borrower who requests the IBR plan and 

the borrower’s spouse both have eligible 

loans and file a joint Federal tax return, 

the calculated IBR partial financial 

hardship payment amount for each 

borrower would be adjusted based on 

each borrower’s percentage of the 

couple’s total eligible loan debt. 

• Amending §§ 682.216 and 685.217 

to specify that an otherwise eligible 

borrower may qualify for teacher loan 

forgiveness based on teaching service 

performed as an employee of an eligible 

educational service agency. The 

proposed regulations also added HEOA 

prohibitions on receiving loan 

forgiveness under the FFEL or Direct 

Loan teacher loan forgiveness programs 

and certain other loan forgiveness 

programs for the same period of 

teaching service. 

• Amending §§ 682.405(a) and 

685.211(f) to provide that a borrower 

may not rehabilitate a defaulted FFEL or 

Direct Loan program loan more than 

once. The proposed regulations also 

amended § 682.405(b)(1)(iii) to clarify 

that both the guaranty agency and its 

agents must comply with the 

requirements in that section when 

determining what constitutes a 

‘‘reasonable and affordable’’ payment 

amount for loan rehabilitation purposes. 

• Amending §§ 682.200(b) and 

682.401(e) by incorporating new 

prohibited and permissible activities by 

lenders and guaranty agencies that were 

added to the HEA by the HEOA. 

• Amending § 682.205 by adding new 

disclosure requirements for FFEL 

Program lenders that were added by the 

HEOA, and by reorganizing the existing 

disclosure provisions to accommodate 

the new disclosure requirements and 

more clearly distinguish the various 

disclosures that are required at various 

points during the lifecycle of a loan. 

• Amending § 682.208(e) to specify 

additional information that must be 

provided to a borrower if the assignment 

or transfer of ownership interest on a 

FFEL Program loan results in a change 

in the identity of the party to whom the 

borrower must send subsequent 

payments. 

• Amending § 682.211(e) to require a 

lender, at the time a borrower is granted 

a forbearance, to provide the borrower 

with information on the impact of 

interest capitalization, and to contact 

the borrower at least once every 180 

days during any period of forbearance 

and provide additional information on 

the impact of forbearance on the 

borrower’s loan. 

• Amending § 682.305(c) to require 

that a FFEL school lender or an eligible 

lender trustee (ELT) originating loans on 

behalf of a school submit an annual 

compliance audit to the Secretary, 

regardless of the dollar volume of loans 

originated. The proposed regulations 

also specify the requirements that the 

annual audit must meet. 

• Adding a new § 682.401(g) to 

implement a statutory requirement for a 

guaranty agency to work with the 

schools that it serves to develop and 

make available to students and their 

families high-quality educational 

materials that provide training in 

budgeting and financial management. 

• Amending § 682.405 to require a 

guaranty agency to make available 

financial and economic education 

materials, including debt management 

information, to any borrower who has 

rehabilitated a defaulted loan. 

• Amending § 682.405(b) to require 

the prior holder of a previously 

defaulted loan that has been 

rehabilitated, in addition to the guaranty 

agency, to request that any consumer 

reporting agency to which the default 

was reported remove the default from 

the borrower’s credit history. The 

proposed regulations also provided 

more detailed reporting deadlines for 

the guaranty agency and prior loan 

holder to request that the default be 

removed from the borrower’s credit 

history, and reduced the period for 

these actions to be completed. 

• Amending § 682.410(b) by 

expanding the information that a 

guaranty agency must provide to a 

borrower who is in default, and by 

adding a requirement that the guaranty 

agency provide this same information to 

a defaulted borrower in a second notice 

that the guaranty agency must send as 

part of its collection efforts. 

• Amending § 682.200(b) by 

removing the definition of ‘‘National 

credit bureau’’ and replacing it with a 

definition of ‘‘Nationwide consumer 

reporting agency’’. The proposed 

regulations also replaced all references 

to ‘‘credit bureau’’ in § 682.410(b)(5) and 

(b)(6) with ‘‘consumer reporting 

agency’’. 

There are no significant differences 

between the NPRM and these final 

regulations resulting from public 

comments. 

In addition to the changes necessary 

to implement provisions of the HEOA, 

these final regulations also incorporate 

certain changes made to the HEA by 

Public Law 111–39, enacted on July 1, 

2009, and by the Ensuring Continued 

Access to Student Loans Act of 2008 

(Pub. L. 110–227) (ECASLA), enacted on 

May 7, 2008. These changes are: 

• Amending the definition of 

‘‘estimated financial assistance’’ (EFA) 

in §§ 673.5(c), 682.200(b), and 

685.102(b). The HEOA amended section 

480(j)(1) of the HEA to exclude Federal 

veterans’ education benefits, as defined 

in section 480(c) of the HEA, from the 

definition of EFA for the Title IV 

student assistance programs. Public Law 

111–39 made technical corrections to 

the HEA that, among other things, 

updated the list of Federal veterans’ 

education benefits that are excluded 

from EFA and excluded the new Iraq 

and Afghanistan Service Grants from the 

definition of EFA. We have made 

technical changes to the definition of 

EFA in §§ 673.5(c), 682.200(b), and 

685.102(b) to reflect these recent 

changes to the HEA. We have also made 

a few technical changes to clarify and 

standardize the current EFA definitions. 

• Amending the lists of prohibited 

activities in §§ 682.200 and 682.401 to 

reflect a change made by Public Law 

111–39 that allows FFEL Program 

lenders and guaranty agencies to 

provide in-person entrance counseling 

as well as exit counseling to borrowers. 

• Amending §§ 682.216 and 685.217 

to reflect a technical correction made by 

Public Law 111–39 to the provisions 

that prohibit a borrower from receiving, 

for the same teaching service, loan 

forgiveness under the FFEL or Direct 

Loan teacher loan forgiveness programs 

and certain other loan forgiveness 

programs. 

• Amending §§ 682.204 and 685.203 

to reflect the changes to the annual and 

aggregate loan limits for unsubsidized 

Stafford Loans in both the FFEL and 

Direct Loan programs that were made by 

ECASLA. 


dcolon on DSK2BSOYB1PROD with RULES3
55974 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

In addition to the changes related to 

Public Law 111–39 and ECASLA that 

are discussed above, these final 

regulations make a number of minor 

technical corrections and conforming 

changes. Changes that are statutory or 

that involve only minor technical 

corrections are generally not discussed 

in the Analysis of Comments and 

Changes section. 

Waiver of Proposed Rulemaking and 

Negotiated Rulemaking Regulations 

Implementing the HEOA 

Under the Administrative Procedure 

Act (APA) (5 U.S.C. 553), the 

Department is generally required to 

publish an NPRM and provide the 

public with an opportunity to comment 

on proposed regulations prior to issuing 

final regulations. In addition, all 

Department regulations for programs 

authorized under title IV of the HEA are 

subject to the negotiated rulemaking 

requirements of section 492 of the HEA. 

However, the APA provides that an 

agency is not required to conduct 

notice-and-comment rulemaking when 

the agency for good cause finds that 

notice and comment are impracticable, 

unnecessary or contrary to the public 

interest. Similarly, section 492 of the 

HEA provides that the Secretary is not 

required to conduct negotiated 

rulemaking for title IV, HEA program 

regulations if the Secretary determines 

that applying that requirement is 

impracticable, unnecessary or contrary 

to the public interest within the 

meaning of the APA. 

Although the regulations 

implementing the changes made by 

Public Law 111–39 and ECASLA are 

subject to the APA’s notice-andcomment and the HEA’s negotiated 

rulemaking requirements, the Secretary 

has determined that it is unnecessary to 

conduct negotiated rulemaking or 

notice-and-comment rulemaking on the 

limited regulatory changes. These 

changes simply reflect statutory changes 

made by Public Law 111–39 and 

ECASLA that are already effective. The 

Secretary does not have discretion as to 

whether or how to implement these 

changes. 

Implementation Date of These 

Regulations 

Section 482(c) of the HEA requires 

that regulations affecting programs 

under title IV of the HEA be published 

in final form by November 1 prior to the 

start of the award year (July 1) to which 

they apply. However, that section also 

permits the Secretary to designate any 

regulation as one that an entity subject 

to the regulation may choose to 

implement earlier and the conditions 

under which the entity may implement 

the provisions early. 

Consistent with the intent of this 

regulatory effort to strengthen and 

improve the administration of the title 

IV, HEA programs, the Secretary is 

using the authority granted him under 

section 482(c) of the HEA to designate 

the new provisions in §§ 682.211(f) and 

685.205(b) governing administrative 

forbearances for PLUS loans for early 

implementation at the discretion of each 

lender, guaranty agency, or servicer, as 

appropriate. 

Analysis of Comments and Changes 

Except as noted above in regard to the 

limited regulations implementing 

provisions of Public Law 111–39 and 

ECASLA, the regulations in this 

document were developed through the 

use of negotiated rulemaking. Section 

492 of the HEA requires that, before 

publishing any proposed regulations to 

implement programs under title IV of 

the HEA, the Secretary must 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. All proposed 

regulations must conform to agreements 

resulting from the negotiated 

rulemaking process unless the Secretary 

reopens that process or explains any 

departure from the agreements to the 

negotiated rulemaking participants. 

These regulations were published in 

proposed form on July 23, 2009, in 

conformance with the consensus of the 

negotiated rulemaking committee. 

Under the committee’s protocols, 

consensus meant that no member of the 

committee dissented from the agreedupon language. The Secretary invited 

comments on the proposed regulations 

by August 24. Eighteen parties 

submitted comments, many of which 

were substantially similar. The 

commenters generally supported the 

proposed regulations. An analysis of the 

comments and the changes in the 

regulations since publication of the 

NPRM follows. 

We group major issues according to 

subject, with appropriate sections of the 

regulations referenced in parentheses. 

We discuss other substantive issues 

under the sections of the regulations to 

which they pertain. Generally, we do 

not address minor, non-substantive 

changes, recommended changes that the 

law does not authorize the Secretary to 

make, or comments pertaining to 

operational processes. We also do not 

address comments pertaining to issues 

that were not within the scope of the 

NPRM. 

Total and Permanent Disability Loan 

Discharges (§§ 674.61(b) and (c), 

682.402(c), and 685.213) 

Comment: One commenter noted that 

there are a significant number of United 

States citizens who live abroad and 

suggested that the regulations be revised 

to allow a disabled borrower living 

overseas to submit an application for a 

total and permanent disability discharge 

certified by a physician who is licensed 

to practice in the foreign country where 

the borrower resides. 

Discussion: The proposed regulations 

retained the current regulatory 

requirement that the physician who 

certifies a total and permanent disability 

discharge application must be a doctor 

of medicine or osteopathy who is legally 

authorized to practice in a State. The 

term ‘‘State’’ is defined in section 

103(23) of the HEA to include the States 

of the United States, the District of 

Columbia, Puerto Rico, Guam, Samoa, 

the U.S. Virgin Islands, the Northern 

Mariana Islands and the Freely 

Associated States (the Marshall Islands, 

Micronesia and Palau). The total and 

permanent disability discharge 

application requires the certifying 

physician to identify the State in which 

he or she is licensed to practice, and to 

provide his or her professional license 

number. 

In June 1999, the Department of 

Education’s Inspector General (IG) 

issued a report that identified a number 

of weaknesses in the procedures for 

determining eligibility for total and 

permanent disability loan discharge and 

concluded that inappropriate discharges 

were being granted as a result of those 

weaknesses. In the years since the IG’s 

report, the Department has revised the 

total and permanent disability discharge 

regulations and taken other measures to 

strengthen the procedures for 

determining a borrower’s eligibility for 

discharge, including verification 

through State records of a physician’s 

license to practice. This verification is 

conducted for each total and permanent 

disability discharge application that the 

Department reviews. Licensure 

requirements for physicians in foreign 

countries may differ significantly from 

the requirements in the United States, or 

in some countries may not exist. It 

would not be possible for the 

Department to verify a physician’s 

license to practice in a foreign country, 

even if a country requires its physicians 

to be licensed. The Department also 

follows up with physicians who 

certified an application but did not 

provide sufficient information 

concerning the borrower’s medical 

condition. Having to contact and 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55975 

communicate with physicians in foreign 

countries would be difficult in many 

cases. 

For these reasons, the Department 

believes that it is important to retain the 

requirement that a physician who 

certifies a total and permanent disability 

discharge application must be licensed 

to practice in a State. 

Changes: None. 

Comment: One commenter believed 

that the preamble to the NPRM 

indicated that the Department’s 

standard for determining disability is 

essentially the same as the standard 

used in the Social Security Disability 

Insurance (SSDI) program, and 

suggested that the process of 

determining a borrower’s eligibility for 

total and permanent disability discharge 

could be made more efficient if the 

Department provided an electronic 

means for a borrower to report that he 

or she is receiving SSDI benefits. 

Discussion: The commenter’s 

understanding of the preamble 

discussion in the NPRM is incorrect. In 

the preamble to the NPRM, the 

Department explained that the proposed 

definition of substantial gainful 

activity—not the definition of totally 

and permanently disabled—is based, in 

part, on the definition of substantial 

gainful activity that is used by the 

Social Security Administration (SSA) to 

determine whether an individual is 

eligible for Social Security disability 

benefits. The NPRM included the 

definition of totally and permanently 

disabled that was added to the HEA by 

the HEOA. This new statutory standard 

does not correspond to any of the 

disability standards used by the SSA for 

determining an individual’s eligibility 

for Social Security disability benefits. 

An individual who receives SSA 

disability benefits may not qualify as 

totally and permanently disabled under 

the definition of that term in the HEA. 

Changes: None. 

Comment: Two commenters 

recommended that the Department 

revise the total and permanent disability 

discharge regulations to use the poverty 

guideline amount for a borrower’s actual 

family size to determine whether the 

borrower’s annual employment earnings 

during the post-discharge monitoring 

period demonstrated that the borrower 

was not totally and permanently 

disabled. One of the commenters stated 

that borrowers with larger families 

should be allowed to earn more income 

during the post-discharge monitoring 

period. This commenter suggested that 

any concerns about potential borrower 

confusion over the use of a variable 

standard based on actual family size 

could be resolved by annually posting 

an updated poverty guideline chart on 

a Department Web site. 

Discussion: During the negotiated 

rulemaking sessions, the Department 

initially proposed an annual earnings 

standard based on the poverty guideline 

amount for the borrower’s actual family 

size because we believed that it would 

be more equitable for borrowers with a 

family size greater than two. The 

Department’s original proposal would 

have been a change from the 

employment earnings standard under 

the current total and permanent 

disability discharge regulations, which 

provide that a conditionally discharged 

loan will be removed from conditional 

discharge status if a borrower has 

annual employment earnings during the 

conditional discharge period that 

exceed the poverty guideline amount for 

a family of two, regardless of the 

borrower’s actual family size. However, 

during the negotiated rulemaking 

sessions, some of the non-Federal 

negotiators, including the student and 

legal aid representatives, felt strongly 

that it would be better to continue to use 

the poverty guideline amount for a 

family of two. These negotiators noted 

that a borrower’s family size could 

change during the three-year postdischarge monitoring period, and in 

such cases the borrower would have to 

monitor changes in the employment 

earnings limit. They believed that a 

changing standard would be confusing 

and could result in a borrower 

inadvertently exceeding the 

employment earnings limit. These 

negotiators urged the Department to 

retain the current fixed standard based 

on a family size of two. The Department 

agreed that retaining a fixed 

employment earnings limit based on the 

poverty guideline amount for a family of 

two during the entire post-discharge 

monitoring period would be less 

confusing for borrowers and simpler to 

administer. 

Changes: None. 

Comment: Several commenters noted 

that under the proposed regulations in 

§ 682.402(c)(8) governing total and 

permanent disability discharges for 

certain veterans, if the Department 

determines that a veteran is eligible for 

a loan discharge, the guaranty agency is 

responsible for notifying the veteran 

that the veteran has no obligation to 

make further payments on the loan. 

These commenters recommended that 

the regulations be revised to provide 

that the lender, rather than the guaranty 

agency, would notify the veteran of his 

or her eligibility for discharge. The 

commenters believed that it would be 

simpler to require the lender to make 

this notification, since the proposed 

regulations already require the lender to 

refund any payments received on the 

loan after the date of the Department of 

Veterans Affairs disability 

determination, and the lender would 

therefore already be communicating 

with the borrower for this purpose. The 

commenters further noted that this 

approach would be more consistent 

with the proposed regulations governing 

the general process for total and 

permanent disability discharges for 

other borrowers. Under those 

regulations, the lender notifies a 

borrower that his or her loan has been 

assigned to the Department for a 

determination of discharge eligibility, 

and that no further payments are 

required. 

Discussion: The Department agrees 

with the commenters. 

Changes: Section 682.402(c)(8)(ii)(F) 

has been revised to specify that upon 

receipt of the claim payment from the 

guaranty agency (after the Department 

has notified the guaranty agency that a 

veteran is eligible for a discharge), the 

lender notifies the veteran that the 

veteran’s obligation to make any further 

payments on the loan has been 

discharged. 

Comment: Several commenters 

recommended that the changes to the 

total and permanent disability discharge 

definition and process should be made 

effective for discharge applications 

received on or after July 1, 2010. The 

commenters believed that using the 

application receipt date as the effective 

date for the changes would benefit 

borrowers who may not qualify for 

discharge based on the current 

definition of totally and permanently 

disabled, and would provide a clearly 

defined transition point for processing 

discharge applications under the new 

regulations. 

Discussion: Under these final 

regulations, the new definition of totally 

and permanently disabled and the new 

discharge process are effective for 

discharge applications received on or 

after July 1, 2010. Disability discharge 

applications from borrowers other than 

qualified veterans that are received prior 

to July 1, 2010 will be processed under 

the current regulations and borrower 

eligibility will be determined based on 

the current definition of totally and 

permanently disabled. Veterans who 

provide documentation that they have 

been determined by the Secretary of 

Veterans Affairs to be unemployable 

due to a service-connected disability 

will have their discharge applications 

processed under the separate 

procedures that the Department has 

already implemented for these 


dcolon on DSK2BSOYB1PROD with RULES3
55976 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

borrowers in accordance with the 

requirements of the HEOA. 

Changes: None. 

Comment: One commenter expressed 

concerns that many disabled military 

borrowers are unaware that they may 

qualify for total and permanent 

disability discharge of their loans 

because of widespread problems with a 

lack of information about this benefit 

from both FFEL Program lenders and 

the Department. The commenter 

recommended a number of operational 

measures that lenders, the Department, 

the Department of Defense, and the 

Department of Veterans Affairs should 

take to help ensure that disabled 

military borrowers are made aware of 

the total and permanent disability loan 

discharge provision. The commenter 

also recommended that loan amounts 

discharged due to total and permanent 

disability should not be treated as 

taxable income, since this presents a 

financial hardship for disabled 

borrowers with low incomes. 

Discussion: The Department provides 

information about total and permanent 

disability discharges on the master 

promissory notes that are signed by all 

borrowers in all three title IV loan 

programs. Further, information about 

total and permanent disability 

discharges is also available on 

Department Web sites, such as Student 

Aid on the Web (http:// 

www.studentaid.ed.gov) and the Direct 

Loan Program Web site (http:// 

www.ed.gov/DirectLoan), as well as Web 

sites maintained by many FFEL Program 

lenders. Moreover, customer service 

representatives for the Department have 

been given information about the 

disability discharge process and can 

provide this information to borrowers. 

These efforts do not have to be 

addressed in the Department’s 

regulations. The commenter’s proposal 

regarding the tax treatment of 

discharged loan amounts would require 

a statutory change in the Internal 

Revenue Code and cannot be addressed 

through these regulations. 

Changes: None. 

Comment: One commenter requested 

clarification of the provisions in 

§§ 674.9(g), 682.201(a), and 685.200(a) 

that require a borrower who requests a 

new title IV loan after receiving a total 

and permanent disability discharge on a 

prior loan to: (1) Provide a physician’s 

certification that he or she is able to 

engage in substantial gainful activity; 

and (2) acknowledge that the new loan 

may not be discharged in the future 

based on any medical condition present 

at the time the new loan is made, unless 

that condition substantially deteriorates. 

Specifically, the commenter asked if 

these requirements apply to all 

borrowers who received a prior total 

and permanent disability discharge, 

regardless of whether the discharge was 

granted under the general discharge 

procedures or the special procedures for 

certain veterans. 

Discussion: The requirements for 

receiving a new loan after having a loan 

discharged due to total and permanent 

disability apply to all borrowers, 

regardless of whether the discharge was 

granted under the general discharge 

process or the special discharge process 

for certain veterans. These requirements 

are intended to assure that the borrower 

is likely to repay the loan in accordance 

with the promissory note that the 

borrower signs for the new loan. 

Changes: None. 

Comment: One commenter 

recommended that current 

§ 682.201(a)(6), which specifies the 

additional eligibility requirements that 

must be met by a borrower who requests 

a new loan following a final discharge 

of a prior title IV loan due to a total and 

permanent disability, also be applied to 

a borrower who is requesting a new loan 

after receiving a final discharge of a 

TEACH Grant service obligation due to 

a total and permanent disability. The 

commenter believed that an individual 

who wants to receive a new loan after 

previously receiving a final total and 

permanent disability discharge should 

have to meet the same eligibility 

requirements, regardless of whether the 

prior disability discharge involved a 

title IV loan or a TEACH Grant service 

obligation. 

The commenter also asked if the 

Department’s National Student Loan 

Data System (NSLDS) will indicate that 

a TEACH Grant service obligation has 

been discharged due to a total and 

permanent disability, just as it currently 

identifies title IV loans that have been 

discharged due to a total and permanent 

disability. 

Discussion: The Department agrees 

that a borrower who requests a new title 

IV loan after previously receiving a final 

total and permanent disability discharge 

of a TEACH Grant service obligation 

should be subject to the same eligibility 

requirements as a borrower who 

previously received a final total and 

permanent disability discharge of a title 

IV loan. NSLDS does identify TEACH 

Grant service obligations that have been 

discharged based on the grant 

recipient’s total and permanent 

disability. 

Changes: Section 682.201(a)(6) has 

been revised by adding a reference to 

TEACH Grant service obligations. 

Corresponding changes have also been 

made in §§ 674.9(g) and 

685.200(a)(1)(iv). 

Comment: One commenter raised 

concerns about the requirement in 

current § 682.402(h)(1)(i)(B) as it relates 

to the proposed regulations in 

§ 682.402(c)(8) that govern the total and 

permanent disability discharge process 

for certain veterans. Under current 

§ 682.402(h)(1)(i)(B), a guaranty agency 

must promptly review a disability 

discharge claim filed by a lender and 

pay an approved claim within 90 days 

after the claim was filed. The 

commenter believed that this deadline 

is reasonable in the case of a disability 

claim processed under the standard 

discharge process in proposed 

§ 682.402(c)(1) through (7), since all of 

the actions that are required to pay a 

lender’s claim are entirely under the 

guaranty agency’s control. However, the 

commenter noted that under the 

separate discharge process for certain 

veterans in proposed § 682.402(c)(8), a 

guaranty agency cannot pay a lender’s 

disability claim until the Department 

has reviewed the veteran’s discharge 

request and notified the guaranty agency 

that the veteran is eligible for discharge. 

Therefore, a delay in the Department’s 

review of a veteran’s discharge request 

could prevent a guaranty agency from 

meeting the 90-day time limit in current 

§ 682.402(h)(1)(i)(B). The commenter 

recommended that the Department 

amend current § 682.402(h)(1)(i)(B) to 

provide one deadline for a guaranty 

agency to review a disability claim 

involving a veteran’s discharge request 

and either refer the discharge 

application and any supporting 

documentation to the Department or 

return it to the lender, and a separate 

deadline for the guaranty agency to 

either pay or return the claim, as 

applicable, after being notified by the 

Department that the veteran is or is not 

eligible for discharge. 

Discussion: The Department agrees 

with the commenter. 

Changes: Section 682.402(h)(1) has 

been revised to provide that a guaranty 

agency must review a disability claim 

based on a veteran’s discharge request 

under § 682.402(c)(8) and either submit 

the request to the Department or return 

the claim to the lender within 45 days 

after the claim was filed, and must pay 

the claim or return the claim to the 

lender within 45 days after being 

notified by the Department of the 

veteran’s eligibility or ineligibility for 

discharge. 

Consolidation Loans (§ 682.201(e)) 

Comment: One commenter asked that 

the regulations clarify which FFEL 

Program loans are eligible for the Direct 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55977 

Loan Program’s no accrual of interest 

benefit for active duty military service 

members after a FFEL borrower 

consolidates the loans into the Direct 

Loan Program. The commenter believed 

the language in the proposed regulations 

did not adequately address this issue 

and suggested that the regulations be 

amended to include the clarifying 

language contained in the Department’s 

Stafford Loan Master Promissory Note 

(MPN). 

Discussion: The Department agrees 

with the commenter that the regulatory 

language defining which loans are 

eligible for the no accrual of interest 

benefit should be clarified and that it is 

appropriate to use the Stafford Loan 

MPN language as a model. The Stafford 

Loan MPN informs borrowers that a 

FFEL Program loan that was first 

disbursed on or after October 1, 2008, 

including a Federal Consolidation Loan 

that repaid FFEL or Direct Loan program 

loans first disbursed on or after October 

1, 2008, may be consolidated into the 

Direct Loan Program to take advantage 

of the no accrual of interest benefit for 

active duty military service members, 

and explains that no interest will be 

charged on the portion of the new Direct 

Consolidation Loan that repaid FFEL or 

Direct Loan program loans first 

disbursed on or after October 1, 2008 

during periods of qualifying active duty 

military service (for up to 60 months). 

A Federal Consolidation Loan that 

repaid some loans that were first 

disbursed on or after October 1, 2008 

and other loans that were first disbursed 

before that date may be consolidated 

into the Direct Loan Program to take 

advantage of the no accrual of interest 

benefit, but the benefit will apply only 

to the portion of the Direct 

Consolidation Loan that is attributable 

to the loans repaid by the Federal 

Consolidation Loan that were first 

disbursed on or after October 1, 2008. 

Changes: Section 682.201(e)(5) has 

been revised to include language 

specifying that FFEL Program loans first 

disbursed on or after October 1, 2008 

(including Consolidation loans that 

repaid FFEL or Direct loans first 

disbursed on or after October 1, 2008) 

are eligible for the no accrual of interest 

benefit when included in a Federal 

Direct Consolidation Loan. 

In-School Deferments for PLUS Loans 

(§ 682.210) 

Comment: One commenter raised an 

issue concerning proposed 

§ 682.210(v)(1)(ii), which provides that 

if a lender grants an in-school deferment 

on a student PLUS loan first disbursed 

on or after July 1, 2008 based on 

enrollment information that confirms 

the borrower’s eligibility for the 

deferment, the deferment period 

includes the additional 6-month postenrollment deferment period that begins 

when the student ceases to be enrolled 

on at least a half-time basis. The 

commenter believed that the regulations 

should not specify the operational 

method by which a lender processes a 

deferment, and recommended that the 

regulatory language be revised to 

provide that a lender may process the 6- 

month post-enrollment deferment as 

either an extension of the in-school 

deferment period, or a separate 

deferment period that begins when the 

student ceases to be enrolled at least 

half time. 

Discussion: The regulatory language 

stating that the deferment period 

‘‘includes’’ the 6-month post-enrollment 

deferment is intended to clarify that if 

a lender grants an in-school deferment 

on a student PLUS loan first disbursed 

on or after July 1, 2008 based on 

enrollment status information, the 6- 

month post enrollment deferment may 

be granted without a separate request 

from the borrower. The regulatory 

language does not dictate the 

operational details of how a lender 

processes the post-enrollment 

deferment. 

Changes: None. 

Deferment (§§ 682.210 and 682.204) 

Comment: One commenter raised an 

issue concerning the discussion of 

proposed § 682.210(a)(3)(ii) in the 

preamble to the NPRM. This provision 

requires a FFEL Program lender, at or 

before the time a deferment is granted 

to a borrower who is responsible for 

paying the interest on a loan during the 

deferment, to notify the borrower of 

certain information, including the 

borrower’s option to pay the interest 

that accrues during the deferment or to 

cancel the deferment and continue 

paying on the loan. The Department 

stated in the preamble that a comparable 

change would be made to 

§ 685.204(b)(1)(iii)(B)(2) to provide that 

Direct Loan borrowers will be notified 

of their right to cancel a deferment and 

continue paying on the loan. The 

commenter noted, however, that the 

corresponding Direct Loan provision 

does not specifically say that borrowers 

will be notified of the option to pay the 

accruing interest during a deferment 

period, and recommended that this be 

added to ensure that Direct Loan 

borrowers receive the same information 

as FFEL borrowers. 

Discussion: Regulations are issued to 

govern the activities of third parties; in 

general, the Secretary does not issue 

regulations to control the Department’s 

activities. Direct Loan Program 

borrowers are notified of their option to 

pay the interest that accrues during a 

deferment on the Direct Loan Program 

deferment request forms and in the 

correspondence borrowers receive when 

a deferment is granted. 

Changes: None. 

Comment: Several commenters raised 

a concern about language in the 

preamble to the NPRM that describes 

the requirement for a lender to inform 

a borrower, at or before the time a 

deferment is granted, that the borrower 

has the option to pay the accruing 

interest or cancel the deferment and 

continue to pay on the loan. The 

commenters noted that, during the 

negotiated rulemaking process, the 

Department agreed that it would be 

helpful for a borrower to receive this 

information at the time of application 

for the deferment, and that including 

the required information in the 

Department-approved, standardized 

deferment forms would satisfy the 

notification requirement. The 

commenters were concerned that the 

discussion in the preamble could be 

misinterpreted to suggest that a lender 

must provide the information both at 

the time the borrower requests the 

deferment and at the time the lender 

grants the deferment. 

Discussion: The Department did not 

intend to imply a change in the meaning 

of the language in the regulations 

through the preamble discussion. As 

stated in § 682.210(a)(3)(ii), the lender 

may provide the required information 

‘‘at or prior to the time the deferment is 

granted.’’ Providing the required 

information to the borrower as part of 

the standardized deferment application 

at the time the borrower requests the 

deferment satisfies the regulatory 

notification requirement. The lender 

may, but is not required to, also provide 

the information at the time the 

deferment is granted. 

Changes: None. 

Income-Based Repayment (IBR) Plan 

Comment: Some commenters praised 

the Department for proposing changes to 

the IBR regulations to address the 

calculation of partial financial hardship 

for borrowers whose outstanding loan 

balances increase rather than decrease 

while they repay their loans under 

another repayment plan prior to 

requesting IBR, and for married 

borrowers who file joint tax returns with 

the IRS and who both have eligible 

education loans. One commenter noted, 

however, that the Department had 

amended the Direct Loan regulations to 

allow a borrower who wants to repay a 

defaulted FFELP loan with a Direct 


dcolon on DSK2BSOYB1PROD with RULES3
55978 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

Consolidation Loan to agree to pay the 

Direct Consolidation Loan under the 

IBR Plan, but did not make a 

comparable change in 

§ 682.201(d)(1)(i)(A). The commenter 

requested that a technical correction be 

made to insert a reference to IBR in the 

corresponding FFEL provision so that 

comparable terms and conditions apply 

to borrowers in both programs. 

Discussion: The commenter is correct 

that this change should be reflected in 

the FFEL Program regulations. The 

Department agrees that comparable 

terms and conditions should apply for 

this purpose for borrowers in both the 

FFEL and Direct Loan programs. 

Changes: Section 682.201(d)(1)(i)(A) 

has been revised to provide that a 

borrower may consolidate a defaulted 

loan if he or she agrees to repay the 

FFEL Consolidation loan under either 

the income-sensitive repayment plan or 

the income-based repayment plan. 

FFEL and Direct Loan Program Teacher 

Loan Forgiveness (§§ 682.216 and 

685.217) 

Comment: One commenter noted that 

under the proposed regulations, an 

educational service agency is 

considered an eligible educational 

service agency for teacher loan 

forgiveness purposes only if the agency 

meets the same eligibility requirements 

as elementary and secondary schools 

under current regulations, including the 

requirement to be listed in the 

Department’s Annual Directory of 

Designated Low-Income Schools (LowIncome School Directory). The 

commenter asked for clarification as to 

whether an otherwise eligible teacher 

who is employed by an educational 

service agency that is not listed in the 

Low-Income School Directory would 

qualify for teacher loan forgiveness if 

the teacher taught for five complete, 

consecutive academic years at an 

elementary or secondary school that is 

included in the Low-Income School 

Directory. 

Discussion: The proposed regulations 

allow a teacher to qualify for loan 

forgiveness if he or she is employed as 

a full-time teacher for five consecutive 

complete academic years at an eligible 

elementary or secondary school or by an 

eligible educational service agency, and 

meets the other eligibility requirements 

of the teacher loan forgiveness program. 

An otherwise eligible teacher who is 

employed by an educational service 

agency, but who teaches at a lowincome elementary or secondary school 

that is not operated by the educational 

service agency, may qualify for loan 

forgiveness if either the educational 

service agency or the school where the 

individual performs qualifying teaching 

service is listed in the Low-Income 

School Directory. 

Changes: None. 

Comment: One commenter asked for 

clarification as to who the appropriate 

certifying official would be for purposes 

of certifying the loan forgiveness 

application of a ‘‘traveling’’ teacher 

who, as discussed in the preamble to the 

NPRM, does not have a fixed location of 

employment, but instead performs 

qualifying teaching service at multiple 

eligible schools or eligible educational 

service agencies, and who may not 

actually be employed by the schools or 

educational service agencies where he 

or she teaches. The commenter believed 

that the reference in the NPRM to not 

having a fixed location of employment 

would imply that a traveling teacher is 

an independent contractor who is not 

actually employed by any school or 

educational service agency. 

Discussion: In the preamble to the 

NPRM, the Department indicated that 

‘‘traveling’’ teachers who do not have a 

fixed location of employment, but who 

perform qualifying teaching service at 

multiple eligible elementary or 

secondary schools, or at multiple 

eligible educational service agencies, 

may (if otherwise eligible) qualify for 

teacher loan forgiveness even though 

they are not employees of the schools or 

educational service agencies where they 

teach. The reference to not having a 

fixed location of employment was not 

intended to suggest that a traveling 

teacher would be an independent 

contractor. A traveling teacher may be 

an employee of a particular school, 

school district, or educational service 

agency and provide teaching services at 

various schools or locations operated by 

educational service agencies. For 

purposes of certifying such a teacher’s 

loan forgiveness application, the 

certifying official must be someone who 

has access to employment records that 

establish the teacher’s eligibility for loan 

forgiveness, and who is authorized to 

verify the teacher’s qualifying 

employment. The appropriate certifying 

official may vary depending on 

individual employment circumstances. 

The certifying official could be someone 

at the borrower’s actual employer, or 

someone at the location where the 

borrower performed the qualifying 

teaching service. 

Changes: None. 

Comment: Several commenters stated 

that there appears to be a conflict 

between the preamble of the NPRM and 

the proposed regulatory language with 

regard to the conditions under which 

qualifying teaching service performed at 

an eligible educational service agency 

prior to the date of enactment of the 

HEOA may be counted toward the 

required five complete consecutive 

years of teaching service. The preamble 

states that the required five complete 

consecutive years may include any 

combination of teaching at eligible 

elementary or secondary schools or 

eligible educational service agencies, 

but that teaching at an educational 

service agency may be counted toward 

the five years only if the consecutive 

five years includes qualifying service at 

an eligible educational service agency 

performed after the 2007–2008 

academic year. The proposed regulatory 

language in §§ 682.216(a)(2) and 

685.217(a)(2) states that for teaching 

service performed by an employee of an 

eligible educational service agency, at 

least one of the five consecutive 

complete academic years must have 

been after the 2007–2008 academic year. 

The commenters noted that the 

regulatory requirement for ‘‘at least one’’ 

of the complete academic years to have 

been after the 2007–2008 academic year 

could be interpreted to mean that for 

any years of teaching at an eligible 

educational service agency prior to the 

enactment of the HEOA to count toward 

the required five consecutive years, a 

borrower must have completed a full 

year of teaching at an eligible 

educational service agency after the 

2007–2008 academic year. They 

believed this approach would be 

contrary to the agreement reached 

during the negotiated rulemaking 

process and the preamble to the NPRM. 

The commenters interpreted the 

preamble language to mean that 

qualifying teaching service performed 

by an employee of an educational 

service agency prior to the enactment of 

the HEOA would count toward the 

required five consecutive years as long 

as the five-year period includes any 

period of qualifying teaching at an 

eligible educational service agency after 

the 2007–2008 academic year, even if 

the qualifying service at an educational 

service agency after the 2007–2008 

academic year is less than a full 

academic year. For example, the 

preamble language would allow a 

borrower who performed qualifying 

teaching service at an eligible 

educational service agency for four 

complete consecutive academic years 

from 2004–2005 through 2007–2008 to 

count those years toward the required 

five consecutive years if, during the 

2008–2009 academic year, the borrower 

taught for half of the year at an eligible 

educational service agency and the 

other half of the year at an eligible 

elementary or secondary school. The 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55979 

commenters recommended that 

proposed § 682.216(a)(2) be revised to 

reflect the language in the preamble. 

Discussion: Proposed § 682.216(a)(2) 

was intended to be consistent with the 

preamble to the NPRM regarding the 

eligibility of teaching service performed 

by an employee of an educational 

service agency prior to the date of 

enactment of the HEOA. However, the 

Department agrees with the commenters 

that the regulatory language could be 

misinterpreted. 

Changes: Sections 682.216(a)(2) and 

685.217(a)(2) have been revised to 

reflect the language in the preamble to 

the NPRM. Conforming changes have 

also been made in §§ 682.216(c)(3)(iii) 

and (c)(4)(iii), and 685.217(c)(3)(iii) and 

(c)(4)(iii). 

Eligibility for Rehabilitation of 

Defaulted FFEL and Direct Loans 

(§§ 682.405(a) and (b)(1)(iii) and 

685.211(f)) 

Comment: One commenter agreed 

with the Department’s interpretation 

that the limit on rehabilitation of 

defaulted loans to one opportunity 

applies to each loan, but requested 

further clarification on the application 

of the limit. The commenter asked 

whether a borrower who successfully 

rehabilitates a defaulted loan, 

consolidates that loan, and then 

subsequently defaults on the 

consolidation loan would be eligible to 

rehabilitate the consolidation loan. The 

commenter believed the borrower 

should be eligible to rehabilitate the 

consolidation loan because the 

previously rehabilitated loan was in 

good standing when it was 

consolidated. 

Discussion: A consolidation loan is a 

new loan. In the commenter’s example, 

the borrower’s previously rehabilitated 

loan was paid in full through the 

consolidation process and has no 

bearing on the borrower’s eligibility for 

rehabilitation of the consolidation loan. 

The Department agrees that the 

borrower is eligible to rehabilitate the 

defaulted consolidation loan, but does 

not believe it is necessary to separately 

address the treatment of consolidation 

loans in the regulations. 

Changes: None. 

Definition of Lender (§ 682.200(b)) 

Comment: One commenter asked 

whether the term ‘‘other group’’ in 

paragraph (5)(i)(A)(6) of the prohibited 

inducement provisions of the proposed 

definition of ‘‘lender’’ includes a 

lender’s board of directors. The 

commenter asked the Department to 

clarify that a lender’s board of directors 

would be covered by the prohibition 

even if the Department decided not to 

define the term. 

Discussion: The term ‘‘other group’’ is 

not defined in the HEA. The Department 

agrees, however, that service on a 

lender’s board of directors is one of the 

groups established by a lender that 

would be covered under the provision. 

The Department declines to define the 

term ‘‘other group’’ and does not believe 

it is possible to provide an all-inclusive 

listing of the possible types of groups a 

lender may establish that would be 

covered by the prohibition. 

Changes: None. 

Lender Disclosures (§ 682.205) 

Comment: One commenter raised 

concerns about the number of new and 

revised borrower disclosures that 

lenders must provide under proposed 

§ 682.205. The commenter indicated 

that his organization would need 

substantial time to prepare the 

disclosures, train its staff, and make 

necessary data processing changes to 

implement the regulations. The 

commenter requested that the 

Department extend the effective date of 

the lender disclosure provisions to one 

year after the final regulations are 

issued. 

Discussion: The Department notes 

that the new and revised borrower 

disclosures included in the proposed 

regulations are required as a result of 

the enactment of the HEOA and became 

effective in most cases on August 14, 

2008. Lenders are expected to comply 

with the requirements to the extent 

possible until these implementing 

regulations become effective on July 1, 

2010. The Department believes that 

providing information to borrowers, 

particularly those who are having 

difficulty making payments or who are 

past due on their payments, is critical, 

and therefore declines to delay the July 

1, 2010, effective date of these 

implementing regulations. 

Changes: None. 

Comment: Several commenters 

requested a change to § 682.205(c)(4) of 

the proposed regulations, which 

describes the information that must be 

provided to borrowers who contact their 

lenders indicating that they are having 

difficulty making their payments. The 

commenters were concerned that 

sending the required information 

repeatedly to a borrower if the borrower 

contacts the lender more than once over 

a short period of time would be 

ineffective and could confuse the 

borrower. The commenters requested 

that the Department require the lender 

to send the disclosure only if the lender 

had not sent one to the borrower within 

the previous 120 days. The commenters 

believed that this change would be 

comparable to a change agreed to during 

the negotiations related to the frequency 

of the required disclosure for borrowers 

who fall 60 days behind in making 

payments. The Department agreed that, 

in that situation, it was not beneficial to 

send multiple disclosures to a borrower 

who was rolling in and out of a 60-day 

delinquency status and, as a result, the 

proposed regulations do not require a 

lender to continue to send the 60-day 

delinquency disclosure if one was sent 

to the borrower within the previous 120 

days. 

Discussion: The Department does not 

agree that the disclosure required under 

§ 682.205(c)(4) when a borrower 

contacts the lender indicating he or she 

is having difficulty making payments is 

comparable to the disclosure of 

information in the 60-day delinquency 

situation. The 60-day delinquency 

disclosure is automatically triggered by 

the borrower’s delinquency status and is 

in addition to other lender due diligence 

contacts with the borrower required 

under § 682.411 of the FFEL regulations. 

In the case of a borrower having 

difficulty making payments, the 

borrower triggers the disclosure by 

contacting the lender and requesting 

assistance. Under these circumstances, 

we believe a lender has a responsibility 

and an obligation to assist the borrower 

by providing information as frequently 

as necessary to assist that borrower. The 

Department disagrees that the situations 

are comparable and declines to make 

the change requested by the 

commenters. 

Changes: None. 

Executive Order 12866 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether the 

regulatory action is ‘‘significant’’ and 

therefore subject to the requirements of 

the Executive order and subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as an action likely to 

result in a rule that may (1) have an 

annual effect on the economy of $100 

million or more, or adversely affect a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local or 

Tribal governments or communities in a 

material way (also referred to as an 

‘‘economically significant’’ rule); (2) 

create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

materially alter the budgetary impacts of 

entitlement grants, user fees, or loan 


dcolon on DSK2BSOYB1PROD with RULES3
55980 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

order. 

Pursuant to the terms of the Executive 

order, it has been determined this 

regulatory action will not have an 

annual effect on the economy of more 

than $100 million. Therefore, this action 

is not ‘‘economically significant’’ and 

subject to OMB review under section 

3(f)(1) of Executive Order 12866. 

Notwithstanding this determination, the 

Secretary has assessed the potential 

costs and benefits of this regulatory 

action and has determined that the 

benefits justify the costs. 

Need for Federal Regulatory Action 

As discussed in the NPRM, these 

regulations are needed to implement 

provisions of the HEA, as amended by 

the HEOA, particularly related to 

changes related to loan discharge, 

deferment, consolidation, rehabilitation, 

and repayment plan provisions, and the 

addition of a new Part E to title I of the 

HEA, which establishes extensive new 

disclosure requirements for lenders and 

institutions participating in Federal and 

private student loan programs. 

Regulatory Alternatives Considered 

Regulatory alternatives were 

considered as part of the rulemaking 

process. These alternatives were 

reviewed in detail in the preamble to 

the NPRM under both the Regulatory 

Impact Analysis and the Reasons 

sections accompanying the discussion 

of each proposed regulatory provision. 

To the extent that they were addressed 

in response to comments received on 

the NPRM, alternatives are also 

considered elsewhere in the preamble to 

these final regulations under the 

Discussion sections related to each 

provision. No comments were received 

related to the Regulatory Impact 

Analysis discussion of these 

alternatives. 

As discussed above in the Analysis of 

Comments and Changes section, these 

final regulations reflect statutory 

amendments included in the HEOA and 

minor revisions in response to public 

comments. In most cases, these 

revisions were technical in nature and 

intended to address drafting issues or 

provide additional clarity. Other 

changes, such as the requirement that 

lenders rather than guaranty agencies 

notify veterans whose loans have been 

discharged that their obligation to make 

any further payments has been 

discharged, were made to simplify and 

standardize program operations. None 

of these changes result in revisions to 

cost estimates prepared for and 

discussed in the Regulatory Impact 

Analysis of the NPRM. 

Benefits 

As discussed in the NPRM, benefits 

provided in these proposed regulations 

include greater transparency for 

borrowers participating in the Federal 

and private student loan programs; 

clearer guidelines on acceptable 

behavior by and relationships among 

institutions participating in the student 

loan programs; improvements to the IBR 

plan, particularly for married borrowers; 

a simpler process for obtaining loan 

discharges due to total and permanent 

disability; and expanded eligibility for 

Teacher Loan forgiveness benefits. It is 

difficult to quantify benefits related to 

the new institutional and lender 

requirements, as there is little specific 

data available on either the extent of 

improper or questionable relationships 

between institutions and lenders prior 

to the HEOA or of the harm such 

relationships actually caused for either 

borrowers, institutions, or the Federal 

taxpayer. In the NPRM, the Department 

requested comments or data that would 

support a more rigorous analysis of the 

impact of these provisions. No 

comments or additional data were 

received. 

Benefits under these regulations flow 

directly from statutory changes included 

in the HEOA; they are not materially 

affected by discretionary choices 

exercised by the Department in 

developing these regulations, or by 

changes made in response to comments 

on the NPRM. As noted in the 

Regulatory Impact Analysis in the 

NPRM, these proposed provisions result 

in net costs to the government of $192.7 

million over 2009–2013. 

Costs 

As discussed extensively in the 

Regulatory Impact Analysis in the 

NPRM, many of the statutory provisions 

implemented though these regulations 

will require regulated entities to 

develop new disclosures and other 

materials, as well as accompanying 

dissemination processes. Other 

regulations generally would require 

discrete changes in specific parameters 

associated with existing guidance—such 

as changes to the process for loan 

discharges, IBR, and various deferment 

and forbearance benefits—rather than 

wholly new requirements. In total, these 

changes are estimated to increase 

burden on entities participating in the 

FFEL program by 1,313,964 hours. Of 

this increased burden, 1,184,115 hours 

are associated with lenders, 110,360 

hours with guaranty agencies, and 7,200 

hours with institutions. An additional 

12,289 hours are associated with 

borrowers, generally reflecting the time 

required to read new disclosures or 

submit required information. 

For lenders, over half of the 

additional burden—798,000 hours—is 

related to the requirement to provide 

additional disclosures to borrowers who 

are over 60 days delinquent or are 

otherwise having trouble making 

repayments. Another 216,000 hours are 

associated with new requirements 

related to the provision of 

administrative forbearances. Roughly 

90,000 hours in new burden are related 

to changes in the methodology for 

calculating income-based repayments. 

The balance of additional burden is 

spread across a number of minor 

changes made by these regulations. 

For guaranty agencies, virtually the 

entire additional burden relates to new 

requirements to provide information to 

borrowers who are in default or have 

rehabilitated their loans after being in 

default. Other minor additional burden 

for guaranty agencies results from new 

requirements to provide consumer 

information. 

The monetized cost of this additional 

burden, using loaded wage data 

developed by the Bureau of Labor 

Statistics, is $24,334,225, of which 

$21.95 million is associated with 

lenders, $2.05 million with guaranty 

agencies, $0.2 million with borrowers, 

and $0.13 million with schools. Given 

the large number of entities affected by 

these provisions, actual burden on 

individual entities is not substantial. 

Because data underlying many of 

these burden estimates was limited, in 

the NPRM, the Department requested 

comments and supporting information 

for use in developing more robust 

estimates. In particular, we asked 

institutions to provide detailed data on 

actual staffing and system costs 

associated with implementing these 

regulations. No comments or additional 

data were received. 

Net Budget Impacts 

As discussed more fully in the 

Regulatory Impact Analysis of the 

NPRM, HEOA provisions implemented 

by these regulations are estimated to 

have a net budget impact of $34.7 

million in 2009 and $192.7 million over 

FY 2009–2013. (The estimated impact 

for 2009 does not include $144.2 

million in costs related to loans 

originated in prior fiscal years.) 

Consistent with the requirements of the 

Credit Reform Act of 1990, budget cost 

estimates for the student loan programs 

reflect the estimated net present value of 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55981 

all future non-administrative Federal 

costs associated with a cohort of loans. 

(A cohort reflects all loans originated in 

a given fiscal year.) 

The budgetary impact of these 

regulations is largely driven by statutory 

changes involving teacher loan 

forgiveness, loan discharges, and IBR. 

The Department estimates no budgetary 

impact for other provisions included in 

these regulations; there is no data 

indicating that the new requirements 

related to improper inducements and 

additional loan disclosures will have 

any impact on the volume or 

composition of Federal student loans. 

Assumptions, Limitations, and Data 

Sources 

As noted in the NPRM, because these 

regulations would largely restate 

statutory requirements that would be 

self-implementing in the absence of 

regulatory action, impact estimates 

provided in the preceding section reflect 

a pre-statutory baseline in which the 

HEOA changes implemented in these 

proposed regulations do not exist. Costs 

have been quantified for five years. 

In developing these estimates, a wide 

range of data sources were used, 

including data from the NSLDS; 

operational and financial data from 

Department systems; and data from a 

range of surveys conducted by the 

National Center for Education Statistics, 

such as the 2004 National 

Postsecondary Student Aid Survey, the 

1994 National Education Longitudinal 

Study, and the 1996 Beginning 

Postsecondary Student Survey. Data 

from other sources, such as the Census 

Bureau, were also used. 

Elsewhere in this SUPPLEMENTARY

INFORMATION section we identify and 

explain burdens specifically associated 

with information collection 

requirements. See the heading 

Paperwork Reduction Act of 1995. 

Accounting Statement 

In Table 2 below, we have prepared 

an accounting statement showing the 

classification of the expenditures 

associated with the provisions of these 

proposed regulations. This table 

provides our best estimate of the 

changes in Federal student aid 

payments as a result of these proposed 

regulations. Expenditures are classified 

as transfers from the Federal 

government to student loan borrowers 

(for expanded loan discharges, teacher 

loan forgiveness payments). 

TABLE 2—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES

[In millions] 

Category Transfers 

Annualized Monetized Transfers .............................................................. $57. 

From Whom To Whom? ........................................................................... Federal Government to Student Loan Borrowers. 

Regulatory Flexibility Act Certification 

The Secretary certifies that these 

regulations would not have a significant 

economic impact on a substantial 

number of small entities. These 

regulations would affect institutions of 

higher education, lenders, and guaranty 

agencies that participate in Title IV, 

HEA programs and individual students 

and loan borrowers. The U.S. Small 

Business Administration Size Standards 

define institutions and lenders as ‘‘small 

entities’’ if they are for-profit or 

nonprofit institutions with total annual 

revenue below $5,000,000 or if they are 

institutions controlled by small 

governmental jurisdictions, which are 

comprised of cities, counties, towns, 

townships, villages, school districts, or 

special districts, with a population of 

less than 50,000. 

As discussed in more detail in the 

Regulatory Flexibility Act section of the 

NPRM, data from the Integrated 

Postsecondary Education Data System 

(IPEDS) indicate that roughly 1,200 

institutions participating in the FFEL 

program meet the definition of ‘‘small 

entities.’’ Institutional burden stemming 

from these regulations is associated with 

audit requirements for schools serving 

as lenders. Institutions meeting the 

definition of small entities are extremely 

unlikely to act as lenders in the FFEL 

program. Accordingly, new 

requirements imposed under these 

regulations are not expected to impose 

significant new costs on these 

institutions. 

The Department believes few if any 

lenders participating in the FFEL 

program have revenues of less than $5 

million. Lenders of this size are 

extremely unlikely to engage in the type 

of activities—inducements, etc.— 

governed by these regulations. 

Accordingly, the Department has 

determined that the regulations did not 

represent a significant burden on small 

lenders. 

Guaranty agencies are State and 

private nonprofit entities that act as 

agents of the Federal government, and 

as such are not considered ‘‘small 

entities’’ under the Regulatory 

Flexibility Act. The impact of the 

regulations on individuals is not subject 

to the Regulatory Flexibility Act. 

In the NPRM, the Secretary invited 

comments from small institutions and 

lenders as to whether they believe the 

proposed changes would have a 

significant economic impact on them. 

No comments were received. 

Paperwork Reduction Act of 1995 

Sections 674.61, 682.202, 682.205, 

682.206, 682.208, 682.210, 682.211, 

682.216, 682.302, 682.305, 682.401, 

682.402, 682.410, 682.601, 685.202, 

685.204, 685.205, 685.213, and 685.217 

contain information collection 

requirements. Under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

3507(d)), the Department of Education 

has submitted a copy of these sections 

to the Office of Management and Budget 

(OMB) for its review. 

Sections 674.61, 682.402, and 685.213— 

Total and Permanent Disability Loan 

Discharges 

The final regulations revise the loan 

discharge process for borrowers seeking 

to have their title IV loans discharged 

based on a total and permanent 

disability. The changes to the loan 

discharge process affect borrowers, loan 

holders (and their servicers), and 

guaranty agencies. 

The burden hour estimate associated 

with the current total and permanent 

disability loan discharge provisions is 

reported under OMB Control Number 

1845–0065 (Discharge Application: 

Total and Permanent Disability). The 

Department does not expect these 

changes to increase the burden for this 

collection. However, the Department 

will need to revise the Discharge 

Application: Total and Permanent 

Disability currently approved under 

1845–0065 to reflect these final 

regulations. The Department will submit 

a revised form for clearance after the 

final regulations have been published. 

The revised form will not be needed 

until July 1, 2010, the effective date of 

the final regulations. 


dcolon on DSK2BSOYB1PROD with RULES3
55982 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

In response to public comments, the 

Department revised § 682.402(c)(8)(ii)(F) 

to specify that upon receipt of a claim 

payment from the guaranty agency (after 

the Department has notified the 

guaranty agency that a borrower is 

eligible for a discharge under the 

separate discharge process for certain 

veterans), the lender notifies the veteran 

that the veteran’s obligation to make any 

further payments on the loan has been 

discharged. Under the proposed 

regulations, the guaranty agency would 

have been responsible for notifying the 

veteran of the discharge. This change 

from the proposed regulations has no 

effect on burden for lenders or guaranty 

agencies, as it simply makes the 

borrower notification process under the 

special discharge procedures for 

veterans consistent with the general 

discharge procedures for other 

borrowers and the notification 

requirements under existing regulations. 

Section 682.206—Consolidation Loans 

The final regulations revise 

§ 682.206(f) to incorporate a new 

requirement that is needed to fully 

implement proposed § 682.205(i)(7), 

which requires lenders to inform 

borrowers that, by applying for the 

Consolidation loan, the borrower is not 

obligated to take the loan. Specifically, 

§ 682.206(f) is revised to include a 

requirement that the lender provide a 

Consolidation loan borrower a period of 

not less than 10 days, from the date the 

borrower is notified by the lender that 

it is ready to make the Consolidation 

loan, to cancel the loan. The final 

regulations require the lender to send 

the notice of the option to cancel the 

loan to the borrower before making any 

payments to pay off a loan with the 

proceeds of a Consolidation loan. 

We estimate that these changes will 

increase burden for borrowers by 10,032 

hours and for loan holders (and their 

servicers) by 54,552 hours for a total 

increase in burden of 64,584 hours in 

OMB Control Number 1845–0020. 

Sections 682.210, 682.211, 685.204 and 

685.205—In-School Deferments and 

Administrative Forbearance for PLUS 

Loans 

The final regulations revise 

§§ 682.210 and 685.204 to reflect 

statutory deferment provisions for FFEL 

and Direct PLUS loan borrowers with 

loans first disbursed on or after July 1, 

2008. Upon the request of the borrower, 

a parent PLUS borrower must be granted 

a deferment on a PLUS loan first 

disbursed on or after July 1, 2008, 

during the period when the student on 

whose behalf the loan was obtained is 

enrolled on at least a half-time basis at 

an eligible institution, and during the 6- 

month period that begins on the later of 

the day after the student ceases to be 

enrolled on at least a half-time basis or, 

if the parent borrower is also a student, 

the day after the parent ceases to be 

enrolled on at least a half-time basis. 

For graduate and professional student 

PLUS borrowers, the final regulations 

provide that a borrower may be granted 

a deferment on a PLUS loan first 

disbursed on or after July 1, 2008 during 

the 6-month period that begins on the 

day after the student ceases to be 

enrolled on at least a half-time basis at 

an eligible institution. If a lender or the 

Secretary grants an in-school deferment 

on a student PLUS loan based on 

information from the borrower’s school 

about the borrower’s eligibility for a 

new loan, student status information 

from the school or information from 

NSLDS confirming the borrower’s halftime enrollment status, the in-school 

deferment period for a student PLUS 

loan first disbursed on or after July 1, 

2008 would include the 6-month period 

that begins on the day after the student 

PLUS borrower ceases to be enrolled on 

at least a half-time basis. 

The final regulations also add a new 

administrative forbearance provision to 

§ 682.211(f) allowing a lender to grant a 

forbearance, upon notice to the 

borrower, on a borrower’s PLUS loans 

first disbursed before July 1, 2008 to 

align repayment of the loans with a 

borrower’s PLUS loans first disbursed 

on or after July 1, 2008, or with a 

borrower’s Stafford loans that are 

subject to a grace period. The lender is 

required to notify the borrower that he 

or she has the option to cancel the 

forbearance and to continue paying on 

the loan. A corresponding 

administrative forbearance provision 

will be added to § 685.205(b) in the 

Direct Loan Program regulations. 

The changes to §§ 682.210 and 

685.204 affect borrowers and loan 

holders (and their servicers). The new 

deferment provisions for certain PLUS 

borrowers are expected to increase the 

number of borrowers who apply for 

deferments. Because these statutory 

provisions could be implemented 

without regulations, the FFEL and 

Direct Loan deferment request forms 

were previously revised to include the 

new deferments for PLUS borrowers and 

have been approved under OMB Control 

Numbers 1845–0005 (FFEL Program 

Deferment Request Forms) and 1845– 

0011 (Direct Loan Program Deferment 

Request Forms). The increased burden 

associated with the final regulatory 

changes is reflected in the burden 

estimates reported under those control 

numbers. 

We estimate that the final regulations 

in § 682.211(e) related to administrative 

forbearances will increase burden for 

loan holders by 14,440 hours in OMB 

Control Number 1845–0020. 

Sections 682.215 and 685.221—IncomeBased Repayment (IBR) Plan 

The final regulations revise the 

definition of partial financial hardship 

in § 682.215(a)(4) and 685.221(a)(4) to 

specify that the annual amount due on 

a borrower’s eligible loans for purposes 

of determining whether the borrower 

has a partial financial hardship is the 

greater of the amount due on the eligible 

loans when the borrower initially 

entered repayment on those loans, or 

the amount due on those loans when the 

borrower elects the IBR plan. The final 

regulations also provide that when a 

married borrower and his or her spouse 

file a joint Federal tax return with the 

IRS and both the borrower and the 

spouse have eligible loans, the joint AGI 

and the total amount of the borrower’s 

and spouse’s eligible loans will be used 

in determining whether each borrower 

has a partial financial hardship. 

The final regulations revise 

§§ 682.215(b)(1) and 685.221(b)(2) to 

provide that if a borrower and a 

borrower’s spouse both have eligible 

loans and filed a joint Federal tax 

return, each borrower’s percentage of 

the couple’s total eligible loan debt 

would be determined, and the 

calculated partial financial hardship 

payment amount for each borrower 

would be adjusted by multiplying the 

payment by the applicable borrower’s 

percentage. As with all other borrowers, 

each borrower’s adjusted payment 

amount would be further adjusted if the 

borrower’s loans are held by multiple 

holders. 

We estimate that the final regulations 

will increase burden for loan holders by 

90,286 hours in OMB Control Number 

1845–0020. 

Sections 682.202, 682.302, and 

685.202—Applicability of the 

Servicemembers Civil Relief Act 

(SCRA) to FFEL and Direct Loan 

Program Loans 

The final regulations revise 

§§ 682.202 and 685.202 to provide that, 

effective August 14, 2008, upon a loan 

holder’s receipt of a written request 

from a borrower and a copy of the 

borrower’s military orders, the 

maximum interest rate (as defined in 50 

U.S.C. 527, App, section 207(d)) that 

may be charged on FFEL or Direct Loan 

program loans made prior to the 

borrower entering active duty status is 

six percent while the borrower is on 

active duty status. The final regulations 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55983 

would also revise § 682.302 of the FFEL 

regulations by adding a new paragraph 

(h) that specifies that, for FFEL loans 

first disbursed on or after July 1, 2008, 

that are subject to the SCRA interest rate 

cap, the FFEL lender’s special 

allowance payment is calculated as it 

otherwise would be under program 

requirements, except that the applicable 

interest rate used is six percent. 

We estimate that the final regulations 

will increase burden for borrowers by 

1,694 hours and for loan holders by 542 

hours in new OMB Control Number 

1845–XXX1. We estimate that the final 

regulations will increase burden for 

borrowers by 563 hours in new OMB 

Control Number 1845–XXX2. 

Sections 682.210 and 685.204—InSchool Deferment 

The final regulations revise 

§ 682.210(a)(3) of the FFEL regulations 

to provide that if a borrower is 

responsible for the interest on a loan 

during a deferment period, the lender, at 

or before the time the deferment is 

granted, must notify the borrower that 

he or she has the option to pay the 

accruing interest or cancel the 

deferment and continue paying on the 

loan. The lender is also required to 

provide information, including an 

example, on the impact on a borrower’s 

loan debt of capitalization of accrued 

unpaid interest and on the total amount 

of interest to be paid over the life of the 

loan. A similar notification provision 

that applied only to the granting of inschool deferments is removed from 

§ 682.210(c)(2) of the FFEL regulations. 

A comparable change is made in 

§ 685.204(b)(1)(iii)(B) of the Direct Loan 

regulations to provide that borrowers 

will be notified of their option to cancel 

a deferment and continue paying on the 

loan and will be provided with 

information on the impact of 

capitalization, including an example. 

The changes to §§ 682.210 and 

685.204 affect borrowers and loan 

holders (and their servicers). The FFEL 

and Direct Loan deferment request 

forms currently approved under OMB 

Control Numbers 1845–0005 and 1845– 

0011 already include the information 

that a loan holder must provide to a 

borrower at or before the time a 

deferment is granted, as described 

above. Therefore, there is no increase in 

burden associated with the final 

regulations. 

Sections 682.216 and 685.217—FFEL 

and Direct Loan Program Teacher Loan 

Forgiveness 

The final regulations allow a borrower 

who otherwise meets the eligibility 

requirements for teacher loan 

forgiveness to receive forgiveness based 

on teaching service performed at one or 

more eligible elementary or secondary 

schools that serve low-income families, 

or one or more eligible educational 

service agencies that serve low-income 

families. A borrower can also qualify 

based on teaching service performed at 

a combination of eligible elementary or 

secondary schools and eligible 

educational service agencies. To be 

considered eligible for teacher loan 

forgiveness purposes, an educational 

service agency has to meet the same 

eligibility requirements that apply to 

elementary and secondary schools. 

These changes will increase the 

number of borrowers who are eligible 

for teacher loan forgiveness, and will 

require a revision of the FFEL and 

Direct Loan Program Teacher Loan 

Forgiveness Application that is 

currently approved under OMB Control 

Number 1845–0059. The Department 

will submit a change request for 1845– 

0059 (including an adjustment to the 

burden hours associated with this 

collection) after the final regulations 

have been published. 

Section 682.205—Disclosure 

Requirements for Lenders 

The final regulations reorganize and 

expand § 682.205 to reflect new 

disclosure requirements added by the 

HEOA. The HEOA added additional 

disclosures by lenders before 

disbursement and requires new 

disclosures at differing points in the 

borrower’s repayment cycle. The HEOA 

also added a separate set of disclosures 

specifically for Consolidation loan 

borrowers. 

We estimate that the final regulations 

will increase burden for loan holders 

(and their servicers) by 797,661 hours in 

OMB Control Number 1845–0020. 

Section 682.208—Information to 

Borrowers Upon Transfer, Sale or 

Assignment of a FFEL Program Loan 

The final regulations incorporate 

three additional information items 

specified in the HEA that must be 

provided to a borrower if the assignment 

or transfer of an ownership interest in 

a FFEL program loan results in a change 

in the identity of the party to whom 

subsequent payments must be sent. The 

three additional data items are: (1) The 

effective date of the assignment or 

transfer of the loan; (2) the date on 

which the current loan servicer will 

cease accepting payments; and (3) the 

date on which the new loan servicer 

will begin accepting payments. The date 

on which the current servicer will stop 

accepting payments is required only if 

that is applicable. 

Loan holders are already required, 

under current regulations, to provide 

certain information to a borrower if the 

assignment of a FFEL Program loan 

results in a change in the identity of the 

party to whom the borrower must send 

payments. The final regulations merely 

add three additional items to the notice 

that a loan holder is already required to 

provide. Therefore, the Department 

believes that the final regulations will 

not significantly increase burden for 

loan holders (and their servicers) in 

OMB Control Number 1845–0020. 

Section 682.211—Forbearance 

Section 682.211(e) of the final 

regulations requires the lender, at the 

time the borrower is granted a 

forbearance, to give the borrower 

information about the impact of 

capitalization of interest on the loan and 

the total amount to be repaid over the 

life of the loan. The final regulations 

also require the lender to contact the 

borrower at least once every 180 days 

during any period of forbearance and to 

give the borrower or endorser more 

specific information, in conjunction 

with that required under existing 

regulations, as to the impact of 

forbearance on the loan. This 

information includes the amount of 

interest that will be capitalized and 

when that capitalization will take place 

and the option of the borrower or 

endorser to pay the interest that has 

accrued before it is capitalized. 

We estimate that the final regulations 

will increase burden for loan holders 

(and their servicers) by 215,734 hours in 

OMB Control Number 1845–0020. 

Sections 682.305 and 682.601—Audit 

Requirements for a FFEL School Lender 

or an Eligible Lender Trustee (ELT) 

The final regulations revise 

§ 682.305(c) to require that a FFEL 

school lender, or a lender serving as a 

trustee on behalf of a school or schoolaffiliated organization for the purpose of 

originating loans, submit an annual 

compliance audit to the Department 

regardless of the dollar volume of loans 

originated. The final regulations also 

require that the audit be conducted by 

a qualified, independent organization or 

person. Section 682.305(c)(2)(vii) 

governs the compliance audit of a 

school or school-affiliated organization 

lender trustee. The final regulations 

require that the trustee’s audit include 

a determination that the school for 

whom the lender serves as trustee used 

all the proceeds from special allowance 

payments, interest subsidies received 

from the Department, and any proceeds 

from the sale or other disposition of the 

loans originated through the lender for 


dcolon on DSK2BSOYB1PROD with RULES3
55984 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

need-based grants, and that those funds 

supplemented, but did not supplant, 

other Federal or non-Federal funds 

otherwise available to the school to 

make need-based grants to its students. 

The final regulations also require that 

the audit determine that no more than 

a reasonable portion of the payments 

and proceeds from the loans were used 

for direct administrative expenses in 

accordance with § 682.601(b) of the 

current regulations. These same 

requirements with regard to annual 

compliance audit determinations were 

also added to the FFEL school lender 

audit requirements in § 682.601(a)(7) of 

the regulations. 

We estimate that the final regulations 

will increase burden for institutions by 

7,200 hours and for loan holders (and 

their servicers) by 10,900 hours for a 

total increase in burden of 18,100 hours 

in OMB Control Number 1845–0020. 

Section 682.401—Consumer Education 

Information Provided by Guaranty 

Agencies 

The final regulations require a 

guaranty agency to work with the 

schools that it serves to develop and 

make available high-quality educational 

materials and programs that provide 

training for students and their families 

in budgeting and financial management, 

including debt management and other 

aspects of financial literacy, such as the 

cost of using high-interest loans to pay 

for postsecondary education, and how 

budgeting and financial management 

relate to the title IV student loan 

programs. 

We estimate that the final regulations 

will increase burden for institutions and 

guaranty agencies by 8,748 hours in 

OMB Control Number 1845–0020. 

Section 682.405—Financial and 

Economic Literacy for Rehabilitated 

Borrowers 

The final regulations revise § 682.405, 

regarding loan rehabilitation 

agreements, by adding a provision 

requiring guaranty agencies to make 

available financial and economic 

education materials, including debt 

management information, to any 

borrower who has rehabilitated a 

defaulted loan. 

We estimate that the final regulations 

will increase burden for guaranty 

agencies by 24,427 hours in OMB 

Control Number 1845–0020. 

Section 682.405—Consumer Credit 

Reporting Following Loan 

Rehabilitation 

If a borrower successfully 

rehabilitates a previously defaulted 

loan, the final regulations require the 

prior holder of the loan, in addition to 

the guaranty agency, to request that a 

consumer reporting agency to which the 

default was reported remove the default 

from the borrower’s credit history. The 

final regulations also provide more 

detailed reporting deadlines for the 

guaranty agency and prior loan holder 

to request removal of the report of the 

default from the borrower’s credit 

history, and reduce the overall period 

for this activity from 90 to 75 days. 

We estimate that the final regulations 

will increase burden for guaranty 

agencies by 18,392 hours in OMB 

Control Number 1845–0020. 

Section 682.410—Notifications to 

Borrowers in Default 

The final regulations expand the 

information that must be provided in 

the notice required under 

§ 682.410(b)(5)(ii) to include 

information on the options that are 

available to the borrower to remove the 

loan from default, including an 

explanation of the fees and conditions 

associated with each option. The final 

regulations also require a guaranty 

agency to provide this same information 

to a defaulted borrower in a second 

notice that the guaranty agency must 

send as part of its required collection 

efforts on a defaulted loan under 

§ 682.410(b)(6). The second notice has 

to be sent within a reasonable time after 

the end of the period during which the 

borrower may request an administrative 

review as specified in 

§ 682.410(b)(5)(iv)(B) or, if the borrower 

has requested an administrative review, 

within a reasonable time following the 

conclusion of the administrative review. 

We estimate that the final regulations 

will increase burden for guaranty 

agencies by 58,793 hours in OMB 

Control Number 1845–0020. 

Consistent with the discussion above, 

the following chart describes the 

sections of the final regulations 

involving information collections, the 

information being collected, and the 

collections that the Department 

submitted to the Office of Management 

and Budget for approval and public 

comment under the Paperwork 

Reduction Act. 

Regulatory section Information collection Collection 

674.61, 682.402, and 

685.213.

The final regulations revise the loan discharge process 

for borrowers seeking to have their title IV loans discharged based on total and permanent disability. Borrowers who apply for a total and permanent disability 

discharge must complete a discharge application that 

collects the information needed to determine their eligibility for discharge.

OMB 1845–0065. The Discharge Application: Total and 

Permanent Disability that is currently approved under 

1845–0065 will be revised to reflect the final regulations that will be published by November 1, 2009. 

The Department will submit a revised form for clearance after the final regulations have been published. 

The revised form will not be needed until July 1, 

2010, the effective date of the final regulations. 

682.206 ............................... § 682.206(f) is amended to include a requirement that 

the lender provide a Consolidation loan borrower a 

period of not less than 10 days, from the date the 

borrower is notified by the lender that it is ready to 

make the Consolidation loan, to cancel the loan.

OMB 1845–0020. There will be an increase in burden 

of 64,584 hours. 

682.210, 682.211, 685.204 

and 685.205.

The final regulations implement the new deferment provisions for FFEL and Direct PLUS loan borrowers 

with loans first disbursed on or after July 1, 2008 that 

were added to the HEA by the HEOA. A loan holder 

must collect the information needed to determine that 

a borrower is eligible for a deferment.

OMB 1845–0005, 1845–0011 and 1845–0020. The 

FFEL and Direct Loan deferment request forms were 

previously revised to include the new deferments for 

PLUS borrowers and have been approved under 

OMB Control Numbers 1845–0005 (FFEL) and 1845– 

0011 (Direct Loan). There will be an increase in burden of 14,440 hours in OMB 1845–0020. 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55985 

Regulatory section Information collection Collection 

682.202, 682.302, and 

685.202.

The final regulations provide that, effective August 14, 

2008, upon a loan holder’s receipt of a written request from a borrower and a copy of the borrower’s 

military orders, the maximum interest rate that may 

be charged on FFEL or Direct Loan program loans 

made prior to the borrower entering active duty status 

is six percent while the borrower is on active duty 

status.

OMB 1845–XXX1 and 1845–XXX2. These are new collections. A separate 60-day Federal Register Notice 

has been published to solicit comments. In OMB 

1845–XXX1 there will be an increase in burden of 

2,236 hours. In OMB 1845–XXX there will be an increase in burden of 563 hours. 

682.210 and 685.204 .......... The final regulations require a loan holder to provide information about interest capitalization to a borrower 

prior to or at the time of granting a deferment on an 

unsubsidized loan.

OMB 1845–0005 and 1845–0011. These collections 

(FFEL and Direct Loan Program deferment request 

forms) were previously revised to include the required 

information about interest capitalization and have 

been approved by OMB. 

682.215 and 685.221 .......... The final regulations revise the definition of partial financial hardship for purposes of determining a borrower’s eligibility for the income-based repayment 

plan and would also revise the provisions governing a 

loan holder’s calculation of a borrower’s incomebased payment amount.

OMB 1845–0020. There will be an increase in burden 

of 90,286 hours. 

682.216 and 685.217 .......... The final regulations expand eligibility for teacher loan 

forgiveness to allow a borrower who otherwise meets 

the loan forgiveness eligibility requirements to receive 

forgiveness based on teaching service performed at 

one or more eligible educational service agencies 

that serve low-income families.

OMB 1845–0059. The final regulations require a revision of the FFEL and Direct Loan Program Teacher 

Loan Forgiveness Application currently approved 

under OMB Control Number 1845–0059. The Department will submit a change request for 1845–0059 (including an adjustment to the burden hours associated 

with this collection) after the final regulations have 

been published. 

682.205 ............................... The final regulations implement new statutory requirements for lenders to disclose certain information to 

borrowers at various points during the lifecycle of a 

borrower’s loan. The proposed regulations also add 

new lender disclosure requirements for consolidation 

loan borrowers.

OMB 1845–0020. There will be an increase in burden 

of 797,661 hours. 

682.208 ............................... The final regulations incorporate three additional information items that must be provided to a borrower if 

the assignment or transfer of an ownership interest in 

a FFEL program loan results in a change in the identity of the party to whom subsequent payments must 

be sent.

OMB 1845–0020. There will be no change in burden 

hours. 

682.211 ............................... The final regulations require the lender, at the time the 

borrower is granted a forbearance, to give the borrower information about the impact of capitalization of 

interest on the loan and the total to be repaid over 

the life of the loan.

OMB 1845–0020. There will be an increase in burden 

of 215,734 hours. 

682.305 and 682.601 .......... The final regulations amend § 682.305(c) to require that 

a FFEL school lender, or a lender serving as a trustee on behalf of a school or school-affiliated organization for the purpose of originating loans, submit an 

annual compliance audit to the Department regardless of the dollar volume of loans originated.

OMB 1845–0020. There will be an increase in burden 

of 181,100 hours. 

682.401 ............................... The final regulations require guaranty agencies to work 

with the schools that it serves to develop and make 

available high-quality educational materials and programs to provide training for students and their families in budgeting and financial management, including 

debt management and other aspects of financial literacy, such as the cost of using high-interest loans to 

pay for postsecondary education, and how budgeting 

and financial management relate to the title IV student loan programs.

OMB 1845–0020. There will be an increase in burden 

of 8,748 hours. 

682.405 ............................... The final regulations require guaranty agencies to provide certain information to borrowers who have rehabilitated defaulted loans.OMB 1845–0020. There will be an increase in burden 

of 24,427 hours. 

682.405 ............................... The final regulations require the prior holder of a previously defaulted loan, in addition to the guaranty 

agency, to request that consumer reporting agencies 

remove the record of the default from the borrower’s 

credit history after the borrower has successfully rehabilitated the loan.

OMB 1845–0020. There will be an increase in burden 

of 18,392 hours. 

682.410 ............................... The final regulations require guaranty agencies to provide certain additional notifications to borrowers who 

are in default.

OMB 1845–0020. There will be an increase in burden 

of 58,793 hours. 


dcolon on DSK2BSOYB1PROD with RULES3
55986 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

Assessment of Educational Impact 

Based on our own 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 the following site: http://www.ed.gov/ 

news/FedRegister. 

To use PDF you must have Adobe 

Acrobat Reader, which is available free 

at this site. If you have questions about 

using PDF, call the U.S. Government 

Printing Office (GPO), toll free, at 1– 

888–293–6498; or in the Washington, 

DC area at (202) 512–1530. 

Note: The official version of this document 

is the document published in the Federal 

Register. Free Internet access to the official 

edition of the Federal Register and the Code 

of Federal Regulations is available on GPO 

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

index.html. 

(Catalog of Federal Domestic Assistance 

Number: 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 Parts 673, 

674, 682, and 685 

Administrative practice and 

procedure, Colleges and universities, 

Education, Loan programs—education, 

Reporting and recordkeeping 

requirements, Student aid, and 

Vocational education. 

Dated: October 15, 2009. 

Arne Duncan, 

Secretary of Education. 

■ For the reasons discussed in the 

preamble, the Secretary amends parts 

673, 674, 682, and 685 of title 34 of the 

Code of Federal Regulations as follows: 

PART 673—GENERAL PROVISIONS 

FOR THE FEDERAL PERKINS LOAN 

PROGRAM, FEDERAL WORK-STUDY 

PROGRAM, AND FEDERAL 

SUPPLEMENTAL EDUCATIONAL 

OPPORTUNITY GRANT PROGRAM 

■ 1. The authority citation for part 673 

continues to read as follows: 

Authority: 20 U.S.C. 421–429, 1070b– 

1070b–3, 1070g, 1087aa–1087ii, 42 U.S.C. 

2751–2756b, unless otherwise noted. 

■ 2. Section 673.5(c) is amended by: 

■ A. Revising paragraph (c)(1)(v). 

■ B. In paragraph (c)(1)(vi), removing 

the words ‘‘and ROTC scholarships’’. 

■ C. Revising paragraph (c)(1)(ix). 

■ D. In paragraph (c)(2)(iii), removing 

the word ‘‘and’’ immediately after the 

semicolon at the end of the paragraph. 

■ E. In paragraph (c)(2)(iv), removing 

the words ‘‘this part’’ and adding, in 

their place, the words ‘‘a title IV, HEA 

program,’’ and removing the 

punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

punctuation ‘‘;’’. 

■ F. Adding a new paragraph (c)(2)(v). 

■ G. Adding a new paragraph (c)(2)(vi). 

■ H. In paragraph (c)(3), removing the 

words ‘‘veterans education benefits paid 

under Chapter 30 of title 38 of the 

United States Code (Montgomery GI 

Bill-Active Duty) and’’. 

The revisions and additions read as 

follows: 

§ 673.5 Overaward. 

(c) * * * 

(1) * * * 

(v) Grants, including FSEOGs, State 

grants, Academic Competitiveness 

Grants, and National SMART Grants; 

* * * * * 

(ix) Except as provided in paragraph 

(c)(2)(v) of this section, veterans’ 

education benefits; 

* * * * * 

(2) * * * 

(v) Federal veterans’ education 

benefits paid under— 

(A) Chapter 103 of title 10, United 

States Code (Senior Reserve Officers’ 

Training Corps); 

(B) Chapter 106A of title 10, United 

States Code (Educational Assistance for 

Persons Enlisting for Active Duty); 

(C) Chapter 1606 of title 10, United 

States Code (Selected Reserve 

Educational Assistance Program); 

(D) Chapter 1607 of title 10, United 

States Code (Educational Assistance 

Program for Reserve Component 

Members Supporting Contingency 

Operations and Certain Other 

Operations); 

(E) Chapter 30 of title 38, United 

States Code (All-Volunteer Force 

Educational Assistance Program, also 

known as the ‘‘Montgomery GI Bill— 

active duty’’); 

(F) Chapter 31 of title 38, United 

States Code (Training and Rehabilitation 

for Veterans with Service-Connected 

Disabilities); 

(G) Chapter 32 of title 38, United 

States Code (Post-Vietnam Era Veterans’ 

Educational Assistance Program); 

(H) Chapter 33 of title 38, United 

States Code (Post 9/11 Educational 

Assistance); 

(I) Chapter 35 of title 38, United States 

Code (Survivors’ and Dependents’ 

Educational Assistance Program); 

(J) Section 903 of the Department of 

Defense Authorization Act, 1981 (10 

U.S.C. 2141 note) (Educational 

Assistance Pilot Program); 

(K) Section 156(b) of the ‘‘Joint 

Resolution making further continuing 

appropriations and providing for 

productive employment for the fiscal 

year 1983, and for other purposes’’ (42 

U.S.C. 402 note) (Restored Entitlement 

Program for Survivors, also known as 

‘‘Quayle benefits’’); 

(L) The provisions of chapter 3 of title 

37, United States Code, related to 

subsistence allowances for members of 

the Reserve Officers Training Corps; and 

(M) Any program that the Secretary 

may determine is covered by section 

480(c)(2) of the HEA; and 

(vi) Iraq and Afghanistan Service 

Grants made under section 420R of the 

HEA. 

* * * * * 

PART 674—FEDERAL PERKINS LOAN 

PROGRAM 

■ 3. The authority citation for part 674 

continues to read as follows: 

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

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

■ 4. Section 674.9 is amended by: 

■ A. Revising paragraph (g). 

■ B. In the introductory text of 

paragraph (h), removing the words 

‘‘based on’’ and adding, in their place, 

the word ‘‘after’’, and adding the words 

‘‘based on a discharge request received 

prior to July 1, 2010’’ immediately after 

the word ‘‘disabled’’. 

■ C. In paragraph (h)(1), removing the 

words ‘‘paragraphs (h)(1) and (h)(2)’’ 

and adding, in their place, the words 

‘‘paragraphs (g)(1) and (g)(2)’’. 

■ D. In paragraph (h)(2)(ii), removing 

the words ‘‘, as described in 

§ 674.61(b)(9)’’ immediately after the 

word ‘‘period’’. 

■ E. In the second sentence of paragraph 

(i), removing the words ‘‘described in 

§§ 674.61(b), 682.402(c), or 685.213(a)’’ 

immediately after the word ‘‘period’’. 

The revision reads as follows: 

§ 674.9 Student eligibility. 

* * * * * 

(g) In the case of a borrower whose 

prior loan under title IV of the Act or 

whose TEACH Grant service obligation 

was discharged after a final 

determination of total and permanent 

disability— 

(1) Obtains a certification from a 

physician that the borrower is able to 

engage in substantial gainful activity; 

(2) Signs a statement acknowledging 

that any new Federal Perkins Loan the 

borrower receives cannot be discharged 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55987 

in the future on the basis of any present 

impairment, unless that condition 

substantially deteriorates; and 

(3) If the borrower receives a new 

Federal Perkins Loan within three years 

of the date that any previous title IV 

loan or TEACH Grant service obligation 

was discharged due to a total and 

permanent disability in accordance with 

§ 674.61(b)(3)(i), 34 CFR 682.402(c), 34 

CFR 685.213, or 34 CFR 686.42(b) based 

on a discharge request received on or 

after July 1, 2010, resumes repayment 

on the previously discharged loan in 

accordance with § 674.61(b)(5), 34 CFR 

682.402(c)(5), or 34 CFR 685.213(b)(4), 

or acknowledges that he or she is once 

again subject to the terms of the TEACH 

Grant agreement to serve before 

receiving the new loan. 

* * * * * 

■ 5–6. Section 674.61 is amended by: 

■ A. Revising paragraph (b). 

■ B. Redesignating paragraphs (c) and 

(d) as paragraphs (d) and (e), 

respectively. 

■ C. Adding a new paragraph (c). 

The revision and addition read as 

follows: 

§ 674.61 Discharge for death or disability. 

* * * * * 

(b) Total and permanent disability as 

defined in § 674.51(aa)(1)— 

(1) General. A borrower’s Defense, 

NDSL, or Perkins loan is discharged if 

the borrower becomes totally and 

permanently disabled, as defined in 

§ 674.51(aa)(1), and satisfies the 

additional eligibility requirements 

contained in this section. 

(2) Discharge application process for 

borrowers who have a total and 

permanent disability as defined in 

§ 674.51(aa)(1). (i) To qualify for 

discharge of a Defense, NDSL, or 

Perkins loan based on a total and 

permanent disability as defined in 

§ 674.51(aa)(1), a borrower must submit 

a discharge application approved by the 

Secretary to the institution that holds 

the loan. 

(ii) The application must contain a 

certification by a physician, who is a 

doctor of medicine or osteopathy legally 

authorized to practice in a State, that the 

borrower is totally and permanently 

disabled as defined in § 674.51(aa)(1). 

(iii) The borrower must submit the 

application to the institution within 90 

days of the date the physician certifies 

the application. 

(iv) Upon receiving the borrower’s 

complete application, the institution 

must suspend collection activity on the 

loan and inform the borrower that— 

(A) The institution will review the 

application and assign the loan to the 

Secretary for an eligibility 

determination if the institution 

determines that the certification 

supports the conclusion that the 

borrower is totally and permanently 

disabled, as defined in § 674.51(aa)(1); 

(B) The institution will resume 

collection on the loan if the institution 

determines that the certification does 

not support the conclusion that the 

borrower is totally and permanently 

disabled; and 

(C) If the Secretary discharges the loan 

based on a determination that the 

borrower is totally and permanently 

disabled, as defined in § 674.51(aa)(1), 

the Secretary will reinstate the 

borrower’s obligation to repay the loan 

if, within three years after the date the 

Secretary granted the discharge, the 

borrower— 

(1) Has annual earnings from 

employment that exceed 100 percent of 

the poverty guideline for a family of 

two, as published annually by the 

United States Department of Health and 

Human Services pursuant to 42 U.S.C. 

9902(2); 

(2) Receives a new TEACH Grant or a 

new loan under the Perkins, FFEL, or 

Direct Loan programs, except for a FFEL 

or Direct Consolidation Loan that 

includes loans that were not discharged; 

or 

(3) Fails to ensure that the full amount 

of any disbursement of a Title IV loan 

or TEACH Grant received prior to the 

discharge date that is made during the 

three-year period following the 

discharge date is returned to the loan 

holder or to the Secretary, as applicable, 

within 120 days of the disbursement 

date. 

(v) If, after reviewing the borrower’s 

application, the institution determines 

that the application is complete and 

supports the conclusion that the 

borrower is totally and permanently 

disabled as defined in § 674.51(aa)(1), 

the institution must assign the loan to 

the Secretary. 

(vi) 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 and 

that no payments are due on the loan. 

(3) Secretary’s eligibility 

determination. (i) If the Secretary 

determines that the borrower is totally 

and permanently disabled as defined in 

§ 674.51(aa)(1), the Secretary discharges 

the borrower’s obligation to make 

further payments on the loan and 

notifies the borrower that the loan has 

been discharged. The notification to the 

borrower explains the terms and 

conditions under which the borrower’s 

obligation to repay the loan will be 

reinstated, as specified in paragraph 

(b)(5) of this section. 

(ii) If the Secretary determines that 

the certification provided by the 

borrower does not support the 

conclusion that the borrower is totally 

and permanently disabled as defined in 

§ 674.51(aa)(1), the Secretary notifies the 

borrower that the application for a 

disability discharge has been denied, 

and that the loan is due and payable to 

the Secretary under the terms of the 

promissory note. 

(iii) The Secretary reserves the right to 

require the borrower to submit 

additional medical evidence if the 

Secretary determines that the borrower’s 

application does not conclusively prove 

that the borrower is totally and 

permanently disabled as defined in 

§ 674.51(aa)(1). As part of the 

Secretary’s review of the borrower’s 

discharge application, the Secretary may 

arrange for an additional review of the 

borrower’s condition by an independent 

physician at no expense to the borrower. 

(4) Treatment of disbursements made 

during the period from the date of the 

physician’s certification until the date of 

discharge. If a borrower received a Title 

IV loan or TEACH Grant prior to the 

date the physician certified the 

borrower’s discharge application and a 

disbursement of that loan or grant is 

made during the period from the date of 

the physician’s certification until the 

date the Secretary grants a discharge 

under this section, the processing of the 

borrower’s loan discharge request will 

be suspended until the borrower 

ensures that the full amount of the 

disbursement has been returned to the 

loan holder or to the Secretary, as 

applicable. 

(5) Conditions for reinstatement of a 

loan after a total and permanent 

disability discharge. (i) The Secretary 

reinstates a borrower’s obligation to 

repay a loan that was discharged in 

accordance with paragraph (b)(3)(i) of 

this section if, within three years after 

the date the Secretary granted the 

discharge, the borrower— 

(A) Has annual earnings from 

employment that exceed 100 percent of 

the poverty guideline for a family of 

two, as published annually by the 

United States Department of Health and 

Human Services pursuant to 42 U.S.C. 

9902(2); 

(B) Receives a new TEACH Grant or 

a new loan under the Perkins, FFEL or 

Direct Loan programs, except for a FFEL 

or Direct Consolidation Loan that 

includes loans that were not discharged; 

or 

(C) Fails to ensure that the full 

amount of any disbursement of a Title 

IV loan or TEACH Grant received prior 


dcolon on DSK2BSOYB1PROD with RULES3
55988 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

to the discharge date that is made 

during the three-year period following 

the discharge date is returned to the 

loan holder or to the Secretary, as 

applicable, within 120 days of the 

disbursement date. 

(ii) If a borrower’s obligation to repay 

a loan is reinstated, the Secretary— 

(A) Notifies the borrower that the 

borrower’s obligation to repay the loan 

has been reinstated; and 

(B) Does not require the borrower to 

pay interest on the loan for the period 

from the date the loan was discharged 

until the date the borrower’s obligation 

to repay the loan was reinstated. 

(iii) The Secretary’s notification under 

paragraph (b)(5)(ii)(A) of this section 

will include— 

(A) The reason or reasons for the 

reinstatement; 

(B) An explanation that the first 

payment due date on the loan following 

reinstatement will be no earlier than 60 

days after the date of the notification of 

reinstatement; and 

(C) Information on how the borrower 

may contact the Secretary if the 

borrower has questions about the 

reinstatement or believes that the 

obligation to repay the loan was 

reinstated based on incorrect 

information. 

(6) Borrower’s responsibilities after a 

total and permanent disability 

discharge. During the three-year period 

described in paragraph (b)(5)(i) of this 

section, the borrower or, if applicable, 

the borrower’s representative— 

(i) Must promptly notify the Secretary 

of any changes in address or phone 

number; 

(ii) Must promptly notify the 

Secretary if the borrower’s annual 

earnings from employment exceed the 

amount specified in paragraph 

(b)(5)(i)(A) of this section; and 

(iii) Must provide the Secretary, upon 

request, with documentation of the 

borrower’s annual earnings from 

employment. 

(7) Payments received after the 

physician’s certification of total and 

permanent disability. (i) If, after the date 

the physician certifies the borrower’s 

loan discharge application, the 

institution receives any payments from 

or on behalf of the borrower on or 

attributable to a loan that was 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. 

(ii) 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 

prior to the Secretary’s determination of 

eligibility for a total and permanent 

disability discharge, unless the 

Secretary directs the borrower 

otherwise. 

(iii) When the Secretary makes a 

determination to discharge the loan, the 

Secretary returns any payments received 

on the loan after the date the physician 

certified the borrower’s loan discharge 

application to the person who made the 

payments on the loan. 

(c) Total and permanent disability 

discharges for veterans—(1) General. A 

veteran’s Defense, NDSL, or Perkins 

loan will be discharged if the veteran is 

totally and permanently disabled, as 

defined in § 674.51(aa)(2). 

(2) Discharge application process for 

veterans who have a total and 

permanent disability as defined in 

§ 674.51(aa)(2). (i) To qualify for 

discharge of a Defense, NDSL, or 

Perkins loan based on a total and 

permanent disability as defined in 

§ 674.51(aa)(2), a veteran must submit a 

discharge application approved by the 

Secretary to the institution that holds 

the loan. 

(ii) With the application, the veteran 

must submit documentation from the 

Department of Veterans Affairs showing 

that the Department of Veterans Affairs 

has determined that the veteran is 

unemployable due to a serviceconnected disability. The veteran will 

not be required to provide any 

additional documentation related to the 

veteran’s disability. 

(iii) Upon receiving the veteran’s 

completed application and the required 

documentation from the Department of 

Veterans Affairs, the institution must 

suspend collection activity on the loan 

and inform the veteran that— 

(A) The institution will review the 

application and submit the application 

and supporting documentation to the 

Secretary for an eligibility 

determination if the documentation 

from the Department of Veterans Affairs 

indicates that the veteran is totally and 

permanently disabled as defined in 

§ 674.51(aa)(2); 

(B) The institution will resume 

collection on the loan if the 

documentation from the Department of 

Veterans Affairs does not indicate that 

the veteran is totally and permanently 

disabled as defined in § 674.51(aa)(2); 

and 

(C) If the documentation from the 

Department of Veterans Affairs does not 

indicate that the veteran is totally and 

permanently disabled as defined in 

§ 674.51(aa)(2), but the documentation 

indicates that the veteran may be totally 

and permanently disabled as defined in 

§ 674.51(aa)(1), the veteran may reapply 

for a total and permanent disability 

discharge in accordance with the 

procedures described in § 674.61(b). 

(iv) If the documentation from the 

Department of Veterans Affairs indicates 

that the veteran is totally and 

permanently disabled as defined in 

§ 674.51(aa)(2), the institution must 

submit a copy of the veteran’s 

application and the documentation from 

the Department of Veterans Affairs to 

the Secretary. At the time the 

application and documentation are 

submitted to the Secretary, the 

institution must notify the veteran that 

the veteran’s discharge request has been 

referred to the Secretary for 

determination of discharge eligibility 

and that no payments are due on the 

loan. 

(v) If the documentation from the 

Department of Veterans Affairs does not 

indicate that the veteran is totally and 

permanently disabled as defined in 

§ 674.51(aa)(2), the institution must 

resume collection on the loan. 

(3) Secretary’s determination of 

eligibility. (i) If the Secretary 

determines, based on a review of the 

documentation from the Department of 

Veterans Affairs, that the veteran is 

totally and permanently disabled as 

defined in § 674.51(aa)(2), the Secretary 

notifies the institution of this 

determination, and the institution 

must— 

(A) Discharge the veteran’s obligation 

to make further payments on the loan; 

and 

(B) Return to the person who made 

the payments on the loan any payments 

received on or after the effective date of 

the determination by the Department of 

Veterans Affairs that the veteran is 

unemployable due to a serviceconnected disability. 

(ii) If the Secretary determines, based 

on a review of the documentation from 

the Department of Veterans Affairs, that 

the veteran is not totally and 

permanently disabled as defined in 

§ 674.51(aa)(2), the Secretary notifies the 

institution of this determination, and 

the institution must resume collection 

on the loan. 

* * * * * 

PART 682—FEDERAL FAMILY 

EDUCATION LOAN (FFEL) PROGRAM 

■ 7. The authority citation for part 682 

continues to read as follows: 

Authority: 20 U.S.C. 1071 to 1087–2 unless 

otherwise noted. 

■ 8. Section 682.200(b) is amended by: 

■ A. In the definition of ‘‘Estimated 

financial assistance,’’ revising 

paragraphs (1)(i) and (ii). 

■ B. In the definition of ‘‘Estimated 

financial assistance,’’ removing 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55989 

paragraphs (1)(iii) and (iv), and 

redesignating paragraphs (1)(v), (vi), 

(vii), and (viii) as paragraphs (1)(iii), 

(iv), (v), and (vi), respectively. 

■ C. In paragraph (2)(i) of the definition 

of ‘‘Estimated financial assistance,’’ 

removing the word ‘‘is’’ in the second 

sentence and adding, in its place, the 

words ‘‘must be’’. 

■ D. In paragraph (2)(iii) of the 

definition of ‘‘Estimated financial 

assistance,’’ removing the words 

‘‘veterans’ educational benefits paid 

under chapter 30 of title 38 of the 

United States Code (Montgomery GI 

Bill—Active Duty) and’’. 

■ E. In paragraph (2)(v) of the definition 

of ‘‘Estimated financial assistance,’’ 

removing the word ‘‘and’’ after the 

semicolon at the end of the paragraph. 

■ F. In paragraph (2)(vi) of the definition 

of ‘‘Estimated financial assistance,’’ 

removing the words ‘‘this title’’ in the 

first sentence and adding, in their place, 

the words ‘‘a title IV, HEA program’’, 

and removing the punctuation ‘‘.’’ at the 

end of the paragraph and adding, in its 

place, the punctuation ‘‘;’’. 

■ G. In the definition of ‘‘Estimated 

financial assistance,’’ adding new 

paragraphs (2)(vii) and (viii). 

■ H. Revising paragraph (5) of the 

definition of ‘‘Lender.’’ 

■ I. Removing the definition of 

‘‘National credit bureau.’’ 

■ J. Adding a definition of ‘‘Nationwide 

consumer reporting agency.’’ 

■ K. Adding a definition of ‘‘Substantial 

gainful activity.’’ 

■ L. Revising the definition of ‘‘Totally 

and permanently disabled.’’ 

The revisions and additions read as 

follows: 

§ 682.200 Definitions. 

* * * * * 

(b) * * * 

Estimated financial assistance. (1) 

* * * 

(i) Except as provided in paragraph 

(2)(iii) of this definition, national 

service education awards or post-service 

benefits under title I of the National and 

Community Service Act of 1990 

(AmeriCorps); 

(ii) Except as provided in paragraph 

(2)(vii) of this definition, veterans’ 

education benefits; 

* * * * * 

(2) * * * 

(vii) Federal veterans’ education 

benefits paid under— 

(A) Chapter 103 of title 10, United 

States Code (Senior Reserve Officers’ 

Training Corps); 

(B) Chapter 106A of title 10, United 

States Code (Educational Assistance for 

Persons Enlisting for Active Duty); 

(C) Chapter 1606 of title 10, United 

States Code (Selected Reserve 

Educational Assistance Program); 

(D) Chapter 1607 of title 10, United 

States Code (Educational Assistance 

Program for Reserve Component 

Members Supporting Contingency 

Operations and Certain Other 

Operations); 

(E) Chapter 30 of title 38, United 

States Code (All-Volunteer Force 

Educational Assistance Program, also 

known as the ‘‘Montgomery GI Bill— 

active duty’’); 

(F) Chapter 31 of title 38, United 

States Code (Training and Rehabilitation 

for Veterans with Service-Connected 

Disabilities); 

(G) Chapter 32 of title 38, United 

States Code (Post-Vietnam Era Veterans’ 

Educational Assistance Program); 

(H) Chapter 33 of title 38, United 

States Code (Post 9/11 Educational 

Assistance); 

(I) Chapter 35 of title 38, United States 

Code (Survivors’ and Dependents’ 

Educational Assistance Program); 

(J) Section 903 of the Department of 

Defense Authorization Act, 1981 (10 

U.S.C. 2141 note) (Educational 

Assistance Pilot Program); 

(K) Section 156(b) of the ‘‘Joint 

Resolution making further continuing 

appropriations and providing for 

productive employment for the fiscal 

year 1983, and for other purposes’’ (42 

U.S.C. 402 note) (Restored Entitlement 

Program for Survivors, also known as 

‘‘Quayle benefits’’); 

(L) The provisions of chapter 3 of title 

37, United States Code, related to 

subsistence allowances for members of 

the Reserve Officers Training Corps; and 

(M) Any program that the Secretary 

may determine is covered by section 

480(c)(2) of the HEA; and 

(viii) Iraq and Afghanistan Service 

Grants made under section 420R of the 

HEA. 

* * * * * 

Lender. * * * 

(5)(i) The term eligible lender does not 

include any lender that the Secretary 

determines, after notice and opportunity 

for a hearing before a designated 

Department official, has, directly or 

through an agent or contractor— 

(A) Except as provided in paragraph 

(5)(ii) of this definition, offered, directly 

or indirectly, points, premiums, 

payments (including payments for 

referrals, finder fees or processing fees), 

or other inducements to any school, any 

employee of a school, or any individual 

or entity in order to secure applications 

for FFEL loans or FFEL loan volume. 

This includes but is not limited to— 

(1) Payments or offerings of other 

benefits, including prizes or additional 

financial aid funds, to a prospective 

borrower or to a school or school 

employee in exchange for applying for 

or accepting a FFEL loan from the 

lender; 

(2) Payments or other benefits, 

including payments of stock or other 

securities, tuition payments or 

reimbursements, to a school, a school 

employee, any school-affiliated 

organization, or to any other individual 

in exchange for FFEL loan applications, 

application referrals, or a specified 

volume or dollar amount of loans made, 

or placement on a school’s list of 

recommended or suggested lenders; 

(3) Payments or other benefits 

provided to a student at a school who 

acts as the lender’s representative to 

secure FFEL loan applications from 

individual prospective borrowers, 

unless the student is also employed by 

the lender for other purposes and 

discloses that employment to school 

administrators and to prospective 

borrowers; 

(4) Payments or other benefits to a 

loan solicitor or sales representative of 

a lender who visits schools to solicit 

individual prospective borrowers to 

apply for FFEL loans from the lender; 

(5) Payment to another lender or any 

other party, including a school, a school 

employee, or a school-affiliated 

organization or its employees, of referral 

fees, finder fees or processing fees, 

except those processing fees necessary 

to comply with Federal or State law; 

(6) Compensation to an employee of a 

school’s financial aid office or other 

employee who has responsibilities with 

respect to student loans or other 

financial aid provided by the school or 

compensation to a school-affiliated 

organization or its employees, to serve 

on a lender’s advisory board, 

commission or other group established 

by the lender, except that the lender 

may reimburse the employee for 

reasonable expenses incurred in 

providing the service; 

(7) Payment of conference or training 

registration, travel, and lodging costs for 

an employee of a school or schoolaffiliated organization; 

(8) Payment of entertainment 

expenses, including expenses for private 

hospitality suites, tickets to shows or 

sporting events, meals, alcoholic 

beverages, and any lodging, rental, 

transportation, and other gratuities 

related to lender-sponsored activities for 

employees of a school or a schoolaffiliated organization; 

(9) Philanthropic activities, including 

providing scholarships, grants, 

restricted gifts, or financial 

contributions in exchange for FFEL loan 

applications or application referrals, or 


dcolon on DSK2BSOYB1PROD with RULES3
55990 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

a specified volume or dollar amount of 

FFEL loans made, or placement on a 

school’s list of recommended or 

suggested lenders; 

(10) Performance of, or payment to 

another third party to perform, any 

school function required under title IV, 

except that the lender may perform 

entrance counseling as provided in 

§ 682.604(f) and exit counseling as 

provided in § 682.604(g), and may 

provide services to participating foreign 

schools at the direction of the Secretary, 

as a third-party servicer; and 

(11) Any type of consulting 

arrangement or other contract with an 

employee of a financial aid office at a 

school, or an employee of a school who 

otherwise has responsibilities with 

respect to student loans or other 

financial aid provided by the school 

under which the employee would 

provide services to the lender. 

(B) Conducted unsolicited mailings, 

by postal or electronic means, of student 

loan application forms to students 

enrolled in secondary schools or 

postsecondary institutions or to family 

members of such students, except to a 

student or borrower who previously has 

received a FFEL loan from the lender; 

(C) Offered, directly or indirectly, a 

FFEL loan to a prospective borrower to 

induce the purchase of a policy of 

insurance or other product or service by 

the borrower or other person; or 

(D) Engaged in fraudulent or 

misleading advertising with respect to 

its FFEL loan activities. 

(ii) Notwithstanding paragraph (5)(i) 

of this definition, a lender, in carrying 

out its role in the FFEL program and in 

attempting to provide better service, 

may provide— 

(A) Technical assistance to a school 

that is comparable to the kinds of 

technical assistance provided to a 

school by the Secretary under the Direct 

Loan program, as identified by the 

Secretary in a public announcement, 

such as a notice in the Federal Register; 

(B) Support of and participation in a 

school’s or a guaranty agency’s student 

aid and financial literacy-related 

outreach activities, including in-person 

entrance and exit counseling, as long as 

the name of the entity that developed 

and paid for any materials is provided 

to the participants and the lender does 

not promote its student loan or other 

products; 

(C) Meals, refreshments, and 

receptions that are reasonable in cost 

and scheduled in conjunction with 

training, meeting, or conference events 

if those meals, refreshments, or 

receptions are open to all training, 

meeting, or conference attendees; 

(D) Toll-free telephone numbers for 

use by schools or others to obtain 

information about FFEL loans and free 

data transmission service for use by 

schools to electronically submit 

applicant loan processing information 

or student status confirmation data; 

(E) A reduced origination fee in 

accordance with § 682.202(c); 

(F) A reduced interest rate as 

provided under the Act; 

(G) Payment of Federal default fees in 

accordance with the Act; 

(H) Purchase of a loan made by 

another lender at a premium; 

(I) Other benefits to a borrower under 

a repayment incentive program that 

requires, at a minimum, one or more 

scheduled payments to receive or retain 

the benefit or under a loan forgiveness 

program for public service or other 

targeted purposes approved by the 

Secretary, provided these benefits are 

not marketed to secure loan applications 

or loan guarantees; 

(J) Items of nominal value to schools, 

school-affiliated organizations, and 

borrowers that are offered as a form of 

generalized marketing or advertising, or 

to create good will; and 

(K) Other services as identified and 

approved by the Secretary through a 

public announcement, such as a notice 

in the Federal Register. 

(iii) For the purposes of this 

paragraph (5)— 

(A) The term ‘‘school-affiliated 

organization’’ is defined in § 682.200. 

(B) The term ‘‘applications’’ includes 

the Free Application for Federal Student 

Aid (FAFSA), FFEL loan master 

promissory notes, and FFEL 

Consolidation loan application and 

promissory notes. 

(C) The term ‘‘other benefits’’ 

includes, but is not limited to, 

preferential rates for or access to the 

lender’s other financial products, 

information technology equipment, or 

non-loan processing or non-financial 

aid-related computer software at below 

market rental or purchase cost, and 

printing and distribution of college 

catalogs and other materials at reduced 

or no cost. 

* * * * * 

Nationwide consumer reporting 

agency. A consumer reporting agency as 

defined in 15 U.S.C. 1681a. 

* * * * * 

Substantial gainful activity. A level of 

work performed for pay or profit that 

involves doing significant physical or 

mental activities, or a combination of 

both. 

* * * * * 

Totally and permanently disabled. 

The condition of an individual who— 

(1) Is unable to engage in any 

substantial gainful activity by reason of 

any medically determinable physical or 

mental impairment that— 

(i) Can be expected to result in death; 

(ii) Has lasted for a continuous period 

of not less than 60 months; or 

(iii) Can be expected to last for a 

continuous period of not less than 60 

months; or 

(2) Has been determined by the 

Secretary of Veterans Affairs to be 

unemployable due to a serviceconnected disability. 

* * * * * 

■ 9. Section 682.201 is amended by: 

■ A. In paragraph (a)(4)(i), removing the 

words ‘‘legal costs, and late charges’’ 

and adding, in their place, the words 

‘‘court costs, attorney fees, and late 

charges’’. 

■ B. In paragraph (a)(5), removing the 

words ‘‘under § 682.402(c)’’. 

■ C. In the introductory text of 

paragraph (a)(6), adding the words ‘‘or 

whose TEACH Grant service obligation’’ 

immediately after the word ‘‘Act’’. 

■ D. Revising paragraph (a)(6)(iii). 

■ E. In the introductory text of 

paragraph (a)(7), removing the words 

‘‘based on’’ and adding, in their place, 

the word ‘‘after’’, and adding the words 

‘‘based on a discharge request received 

prior to July 1, 2010’’ immediately after 

the word ‘‘disabled’’. 

■ F. In paragraph (a)(7)(ii)(B), removing 

the words ‘‘, as described in paragraph 

682.402(c)(16)’’. 

■ G. In paragraph (d)(1)(i)(A)(3), adding 

the words ‘‘or the income-based 

repayment plan described in § 682.215’’ 

immediately after the reference 

‘‘§ 682.209(a)(6)(iii)’’. 

■ H. In paragraph (e)(4), adding the 

words ‘‘is in default or’’ immediately 

after the first appearance of the words 

‘‘consolidation loan’’ and adding the 

words ‘‘or an income-based repayment 

plan’’ immediately after the words 

‘‘income contingent repayment plan’’. 

■ I. Revising paragraph (e)(5). 

The revisions read as follows: 

§ 682.201 Eligible borrowers. 

(a) * * * 

(6) * * * 

(iii) If a borrower receives a new FFEL 

loan, other than a Federal Consolidation 

Loan, within three years of the date that 

any previous title IV loan or TEACH 

Grant service obligation was discharged 

due to a total and permanent disability 

in accordance with § 682.402(c)(3)(ii), 

34 CFR 674.61(b)(3)(i), 34 CFR 685.213, 

or 34 CFR 686.42(b) based on a 

discharge request received on or after 

July 1, 2010, resume repayment on the 

previously discharged loan in 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55991 

accordance with § 682.402(c)(5), 34 CFR 

674.61(b)(5), or 34 CFR 685.213(b)(4), or 

acknowledge that he or she is once 

again subject to the terms of the TEACH 

Grant agreement to serve before 

receiving the new loan. 

* * * * * 

(e) * * * 

(5) A FFEL borrower may consolidate 

his or her loans (including a FFEL 

Consolidation Loan) into the Federal 

Direct Consolidation Loan Program for 

the purpose of using— 

(i) The Public Service Loan 

Forgiveness Program; or 

(ii) For FFEL Program loans first 

disbursed on or after October 1, 2008 

(including Federal Consolidation Loans 

that repaid FFEL or Direct Loan program 

Loans first disbursed on or after October 

1, 2008), the no accrual of interest 

benefit for active duty service members. 

■ 10. Section 682.202 is amended by: 

■ A. In the introductory text of 

paragraph (a), adding the words ‘‘and 

(a)(8)’’ after the reference ‘‘(a)(4)’’. 

■ B. Adding a new paragraph (a)(8). 

■ C. In paragraph (b)(2)(i), adding the 

words ‘‘or, for a PLUS loan, for the 

period from the date the first 

disbursement was made to the date the 

repayment period begins’’ immediately 

before the semicolon. 

The addition reads as follows: 

§ 682.202 Permissible charges by lenders 

to borrowers. 

* * * * * 

(a) * * * 

(8) Applicability of the 

Servicemembers Civil Relief Act (50 

U.S.C 527, App. sec. 207). 

Notwithstanding paragraphs (a)(1) 

through (a)(4) of this section, effective 

August 14, 2008, upon the loan holder’s 

receipt of the borrower’s written request 

and a copy of the borrower’s military 

orders, the maximum interest rate, as 

defined in 50 U.S.C. 527, App. section 

207(d), on FFEL Program loans made 

prior to the borrower entering active 

duty status is 6 percent while the 

borrower is on active duty military 

service. 

* * * * * 

■ 11. Section 682.204 is amended by: 

■ A. Revising paragraph (c)(1). 

■ B. Revising paragraph (d) introductory 

text. 

■ C. In paragraph (d)(1)(i), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ D. In paragraph (d)(1)(ii), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ E. In paragraph (d)(1)(iii), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ F. In paragraph (d)(2)(i), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ G. In paragraph (d)(2)(ii), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$,4000’’. 

■ H. In paragraph (d)(3)(i), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $7,000,’’ 

immediately after ‘‘$5,000’’. 

■ I. In paragraph (d)(3)(ii), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $7,000,’’ 

immediately after ‘‘$5,000’’. 

■ J. In paragraph (d)(6)(i), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ K. Adding a new paragraph (d)(9). 

■ L. Redesignating paragraphs (e)(1) and 

(e)(2) as paragraphs (e)(2) and (e)(3), 

respectively. 

■ M. Adding a new paragraph (e)(1). 

■ N. Revising newly redesignated 

paragraph (e)(2). 

The revisions and additions read as 

follows: 

§ 682.204 Maximum loan amounts. 

* * * * * 

(c) Unsubsidized Stafford Loan 

Program. (1) In the case of a dependent 

undergraduate student— 

(i) For a loan first disbursed before 

July 1, 2008, the total amount the 

student may borrow for any period of 

study under the Unsubsidized Stafford 

Loan Program in combination with the 

Federal Direct Unsubsidized Stafford/ 

Ford Loan Program is the same as the 

amount determined under paragraph (a) 

of this section, less any amount received 

under the Stafford Loan Program or the 

Federal Direct Stafford/Ford Loan 

Program. 

(ii) Except for a dependent 

undergraduate who qualifies for 

additional Unsubsidized Stafford Loan 

funds under paragraph (d) of this 

section in accordance with the 

conditions specified in § 682.201(a)(3), 

for a loan first disbursed on or after July 

1, 2008, the total amount the student 

may borrow for any period of study 

under the Unsubsidized Stafford Loan 

Program in combination with the 

Federal Direct Unsubsidized Stafford/ 

Ford Loan Program is the same as the 

amount determined under paragraph (a) 

of this section, less any amount received 

under the Stafford Loan Program or the 

Federal Direct Stafford/Ford Loan 

Program, plus— 

(A) $2,000, for a program of study of 

at least a full academic year in length. 

(B) For a program of study that is at 

one academic year or more in length 

with less than a full academic year 

remaining, the amount that is the same 

ratio to $2,000 as the— 

Number of semester, trimester, quarter, or clock hours enrolled

Number of semester, trimester, quarter, or clock hours in academic year.

(C) For a program of study that is less 

than a full academic year in length, the 

amount that is the same ratio to $2,000 

as the lesser of the— 

Number of semester, trimester, quarter, or clock hours enrolled

Number of semester, trimester, quarter, or clock hours in academic year.


dcolon on DSK2BSOYB1PROD with RULES3ER29OC09.000</MATH> ER29OC09.001</MATH>
55992 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

or 

Number of weeks in program

Number of weeks in academic year.

* * * * * 

(d) Additional eligibility under the 

Unsubsidized Stafford Loan Program. 

An independent undergraduate student, 

graduate or professional student, and 

certain dependent undergraduate 

students under the conditions specified 

in § 682.201(a)(3) may borrow 

additional amounts under the 

Unsubsidized Stafford Loan Program in 

addition to any amount borrowed under 

paragraphs (a) and (c) of this section, 

except as provided in paragraph (d)(9) 

of this section. The additional amount 

that such a student may borrow for any 

academic year of study under the 

Unsubsidized Stafford Loan Program in 

combination with the Federal Direct 

Unsubsidized Stafford/Ford Loan 

Program, in addition to the amounts 

allowed under paragraphs (a) and (c) of 

this section, except as provided in 

paragraph (d)(9) of this section for 

certain dependent undergraduate 

students— 

* * * * * 

(9) A dependent undergraduate 

student who qualifies for the additional 

Unsubsidized Stafford Loan amounts 

under this section in accordance with 

the conditions specified in 

§ 682.201(a)(3) is not eligible to receive 

the additional Unsubsidized Stafford 

Loan amounts under paragraph (c)(1)(ii) 

of this section. 

(e) * * * 

(1) $23,000, or, effective July 1, 2008, 

$31,000, for a dependent undergraduate 

student. 

(2) $46,000, or, effective July 1, 2008, 

$57,500, for an independent 

undergraduate student or a dependent 

undergraduate student under the 

conditions specified in § 682.201(a)(3). 

* * * * * 

■ 12. Section 682.205 is amended by: 

■ A. In paragraph (a)(2)(vi), removing 

the words ‘‘insurance premium’’ and 

adding, in their place, the words 

‘‘Federal default fee’’, and adding, 

immediately before the semicolon, the 

words ‘‘or paid by the lender’’. 

■ B. In paragraph (a)(2)(ix), removing 

the words ‘‘a national credit bureau’’ 

and adding, in their place, the words 

‘‘each nationwide consumer reporting 

agency’’. 

■ C. In paragraph (a)(2)(x), adding, 

immediately before the semicolon, the 

words ‘‘, and a description of the types 

of repayment plans available’’. 

■ D. In paragraph (a)(2)(xvi), removing 

the words ‘‘a national credit bureau’’ 

and adding, in their place, the words 

‘‘each nationwide consumer reporting 

agency’’. 

■ E. In paragraph (a)(2)(xviii), removing 

the words ‘‘in the making or’’ and 

adding, in their place, the words 

‘‘during repayment or in the’’; adding 

the words ‘‘including any fees the 

borrower may be charged’’ immediately 

after the words ‘‘the loan’’; and 

removing the words ‘‘; and’’ at the end 

of the paragraph and adding, in their 

place, the punctuation ‘‘;’’. 

■ F. In paragraph (a)(2)(xx), removing 

the punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

punctuation ‘‘;’’. 

■ G. Adding new paragraphs (a)(2)(xxi), 

(a)(2)(xxii), (a)(2)(xxiii), and (a)(2)(xxiv). 

■ H. In paragraph (b), in the second 

sentence, adding the words ‘‘, and that 

the default will be reported to each 

nationwide consumer reporting agency’’ 

immediately after the word ‘‘loan’’. 

■ I. In paragraph (c), in the heading, 

removing the words ‘‘Disclosure of 

repayment’’ and adding, in their place, 

the word ‘‘Repayment’’. 

■ J. In paragraph (c)(1), adding the 

heading ‘‘Disclosures at or prior to 

repayment.’’ immediately after the 

paragraph designation ‘‘(1)’’; removing 

the words ‘‘Federal SLS’’ and adding, in 

their place, the words ‘‘Federal PLUS’’; 

and removing the words ‘‘240 days’’ and 

adding, in their place, the words ‘‘150 

days’’. 

■ K. In paragraph (c)(2)(ii), adding the 

words ‘‘, or a deferment under 

§ 682.210(v), if applicable, is to end’’ 

immediately after the word ‘‘begin’’ at 

the end of the sentence. 

■ L. In paragraph (c)(2)(iii), adding the 

words ‘‘a deferment under § 682.210(v), 

if applicable, is to end,’’ immediately 

after the words ‘‘begin’’. 

■ M. In paragraph (c)(2)(vi), adding the 

words ‘‘based on the repayment 

schedule selected by the borrower’’ 

immediately after the word ‘‘payments’’. 

■ N. In paragraph (c)(2)(viii), removing 

the words ‘‘; and’’ and adding, in their 

place, the words ‘‘, and if interest has 

been paid, the amount of interest paid;’’. 

■ O. In paragraph (c)(2)(ix), removing 

the punctuation ‘‘.’’ at the end of the 

sentence and adding, in its place, the 

punctuation ‘‘;’’. 

■ P. Adding new paragraphs (c)(2)(x), 

(c)(2)(xi), (c)(2)(xii), (c)(2)(xiii) and 

(c)(2)(xiv). 

■ Q. Adding new paragraphs (c)(3), 

(c)(4) and (c)(5). 

■ R. In paragraph (d), adding the words 

‘‘Federal Unsubsidized Stafford loan or 

a’’ immediately after the words ‘‘In the 

case of a’’ at the beginning of the first 

sentence; removing the words ‘‘the 

student’’ in the first sentence and 

adding, in their place, the words ‘‘the 

borrower or student on whose behalf the 

loan is made’’; and removing the words 

‘‘PLUS promissory note’’ in the last 

sentence and adding, in their place, the 

words ‘‘Stafford and PLUS promissory 

notes’’. 

■ S. Adding new paragraph (i). 

■ T. Adding new paragraph (j). 

The additions read as follows: 

§ 682.205 Disclosure requirements for 

lenders. 

(a) * * * 

(2) * * * 

(xxi) For unsubsidized Stafford or 

student PLUS borrowers, an explanation 

that the borrower may pay the interest 

while in school and, if the interest is not 

paid by the borrower while in school, 

when and how often the interest will be 

capitalized; 

(xxii) For parent PLUS borrowers, an 

explanation that the parent may defer 

payment on the loan while the student 

on whose behalf the parent borrowed is 

enrolled at least half-time and, if the 

parent does not pay interest while the 

student is in school, when and how 

often interest will be capitalized, and 

that the parent may be eligible for a 

deferment on the loan if the parent is 

enrolled at least half-time; 

(xxiii) A statement summarizing the 

circumstances in which a borrower may 

obtain forbearance on the loan; and 

(xxiv) A description of the options 

available for forgiveness of the loan and 

the requirements to obtain that 

forgiveness. 

* * * * * 

(c) * * * 

(2) * * * 

(x) Information on any special loan 

repayment benefits offered on the loan, 

including benefits that are contingent on 

repayment behavior, and any other 

special loan repayment benefits for 

which the borrower may be eligible that 

would reduce the amount or length of 

repayment; and at the request of the 

borrower, an explanation of the effect of 

a reduced interest rate on the borrower’s 

total payoff amount and time for 

repayment; 

(xi) If the lender provides a repayment 

benefit, any limitations on that benefit, 

any circumstances in which the 

borrower could lose that benefit, and 

whether and how the borrower may 

regain eligibility for the repayment 

benefit; 

(xii) A description of all the 

repayment plans available to the 

borrower and a statement that the 

borrower may change plans during the 

repayment period at least annually; 

(xiii) A description of the options 

available to the borrower to avoid or be 


dcolon on DSK2BSOYB1PROD with RULES3ER29OC09.002</MATH>
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55993 

removed from default, as well as any 

fees associated with those options; and 

(xiv) Any additional resources, 

including nonprofit organizations, 

advocates and counselors, including the 

Department of Education’s Student Loan 

Ombudsman, the lender is aware of 

where the borrower may obtain 

additional advice and assistance on loan 

repayment. 

(3) Required disclosures during 

repayment. In addition to the 

disclosures required in paragraph (c)(1) 

of this section, the lender must provide 

the borrower of a FFEL loan with a bill 

or statement that corresponds to each 

payment installment time period in 

which a payment is due that includes in 

simple and understandable terms— 

(i) The original principal amount of 

the borrower’s loan; 

(ii) The borrower’s current balance, as 

of the time of the bill or statement; 

(iii) The interest rate on the loan; 

(iv) The total amount of interest for 

the preceding installment paid by the 

borrower; 

(v) The aggregate amount paid by the 

borrower on the loan, and separately 

identifying the amount the borrower has 

paid in interest on the loan, the amount 

of fees the borrower has paid on the 

loan, and the amount paid against the 

balance in principal; 

(vi) A description of each fee the 

borrower has been charged for the most 

recent preceding installment time 

period; 

(vii) The date by which a payment 

must be made to avoid additional fees 

and the amount of that payment and the 

fees; 

(viii) The lender’s or servicer’s 

address and toll-free telephone number 

for repayment options, payments and 

billing error purposes; and 

(ix) A reminder that the borrower may 

change repayment plans, a list of all of 

the repayment plans that are available to 

the borrower, a link to the Department 

of Education’s Web site for repayment 

plan information, and directions on how 

the borrower may request a change in 

repayment plans from the lender. 

(4) Required disclosures for borrowers 

having difficulty making payments. The 

lender shall provide a borrower who has 

notified the lender that he or she is 

having difficulty making payments 

with— 

(i) A description of the repayment 

plans available to the borrower, and 

how the borrower may request a change 

in repayment plan; 

(ii) A description of the requirements 

for obtaining forbearance on the loan 

and any costs associated with 

forbearance; and 

(iii) A description of the options 

available to the borrower to avoid 

default and any fees or costs associated 

with those options. 

(5) Required disclosures for borrowers 

who are 60-days delinquent in making 

payments on a loan. (i) The lender shall 

provide to a borrower who is 60 days 

delinquent in making required 

payments a notice of— 

(A) The date on which the loan will 

default if no payment is made; 

(B) The minimum payment the 

borrower must make, as of the date of 

the notice, to avoid default, including 

the payment amount needed to bring the 

loan current or payment in full; 

(C) A description of the options 

available to the borrower to avoid 

default, including deferment and 

forbearance and any fees and costs 

associated with those options; 

(D) Any options for discharging the 

loan that may be available to the 

borrower; and 

(E) Any additional resources, 

including nonprofit organizations, 

advocates and counselors, including the 

Department of Education’s Student Loan 

Ombudsman, the lender is aware of 

where the borrower may obtain 

additional advice and assistance on loan 

repayment. 

(ii) The notice must be sent within 

five days of the date the borrower 

becomes 60 days delinquent, unless the 

lender has sent such a notice within the 

previous 120 days. 

* * * * * 

(i) Separate disclosure for 

Consolidation loans. At the time the 

lender provides a Consolidation loan 

application to a prospective borrower, it 

must disclose to the prospective 

borrower, in simple and understandable 

terms— 

(1) Whether consolidation will result 

in a loss of loan benefits, including, but 

not limited to, loan forgiveness, 

cancellation, deferment, or a reduced 

interest rate on FFEL or Direct Loans 

repaid through consolidation; 

(2) If a borrower is repaying a Federal 

Perkins Loan with the Consolidation 

loan, that the borrower will lose— 

(i) The interest-free periods available 

on the Perkins Loan while the borrower 

is enrolled in-school at least half-time, 

in the grace period, or in a deferment 

period; and 

(ii) The cancellation benefits on the 

Perkins Loan. The lender must provide 

to the borrower a list of the Perkins 

Loan cancellation benefits that would 

not be available on the Consolidation 

loan. 

(3) The repayment plans available to 

the borrower; 

(4) The borrower’s options to prepay 

the Consolidation loan, to pay the loan 

on a shorter repayment schedule, and to 

change repayment plans; 

(5) That the borrower benefit 

programs for a Consolidation loan vary 

among lenders; 

(6) The consequences of default on 

the Consolidation loan; and 

(7) That applying for the 

Consolidation loan does not obligate the 

borrower to agree to take the 

Consolidation loan, and the process and 

deadline by which the borrower may 

cancel the Consolidation loan. 

(j) Disclosure procedures when a 

borrower’s address is not available. If a 

lender receives information indicating it 

does not know the borrower’s current 

address, the lender is excused from 

providing disclosure information under 

this section unless it receives 

communication indicating a valid 

borrower address before the 241st day of 

delinquency, at which point the lender 

must resume providing the installment 

bill or statement, and any other 

disclosure information required under 

this section not previously provided. 

■ 13. Section 682.206 is amended by 

revising paragraph (f) to read as follows: 

§ 682.206 Due diligence in making a loan. 

* * * * * 

(f) Additional requirements for 

Consolidation loans. (1) Prior to making 

any payments to pay off a loan with the 

proceeds of a Consolidation loan, the 

lender shall— 

(i) Obtain from the holder of each loan 

to be consolidated a certification with 

respect to the loan held by the holder 

that— 

(A) The loan is a legal, valid, and 

binding obligation of the borrower; 

(B) The loan was made and serviced 

in compliance with applicable laws and 

regulations; and 

(C) In the case of a FFEL loan, that the 

guarantee on the loan is in full force and 

effect; and 

(ii) Consistent with the requirements 

of § 682.205(i)(7), notify the borrower, 

upon receipt of all information 

necessary to make the Consolidation 

loan, of the borrower’s option to cancel 

the Consolidation loan, and the 

deadline by which the borrower must 

notify the lender that he or she wishes 

to cancel the loan. The lender must 

allow the borrower no less than 10 days 

from the date of the notice to cancel the 

loan. 

(2) The Consolidation loan lender 

may rely in good faith on the 

certification provided under paragraph 

(f)(1)(i) of this section by the holder of 

a loan to be consolidated. 

■ 14. Section 682.208 is amended by: 


dcolon on DSK2BSOYB1PROD with RULES3
55994 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

■ A. In paragraph (e)(1) introductory 

text, adding the words ‘‘or transfer of 

ownership interest’’ immediately after 

the word ‘‘assignment’’. 

■ B. In paragraph (e)(1)(iii), removing 

the word ‘‘and’’ after the semicolon. 

■ C. In paragraph (e)(1)(iv), removing 

the punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

punctuation ‘‘;’’. 

■ D. Adding new paragraphs (e)(1)(v), 

(vi), and (vii). 

The additions read as follows: 

§ 682.208 Due diligence in servicing a 

loan. 

* * * * * 

(e) * * * 

(1) * * * 

(v) The effective date of the 

assignment or transfer of the loan; 

(vi) The date, if applicable, on which 

the current loan servicer will stop 

accepting payments; and 

(vii) The date on which the new loan 

servicer will begin accepting payments. 

* * * * * 

§ 682.209 [Amended] 

■ 15. Section 682.209 is amended in 

paragraph (a)(2)(v) by removing the 

reference ‘‘(a)(2)(ii)’’ and adding, in its 

place, the reference ‘‘(a)(2)(i)’’. 

■ 16. Section 682.210 is amended by: 

■ A. In paragraph (a)(1)(i), adding the 

words ‘‘and paragraphs (s) through (v)’’ 

after the words ‘‘paragraph (b)’’. 

■ B. Revising paragraph (a)(3). 

■ C. In paragraph (a)(4), removing the 

words ‘‘paragraphs (c)(1)(ii) and (iii)’’ 

and adding, in their place, the words 

‘‘paragraphs (c)(1)(ii), (iii), and (iv)’’. 

■ D. In paragraph (c)(1)(ii), removing the 

word ‘‘or’’ at the end of the paragraph. 

■ E. In paragraph (c)(1)(iii), removing 

the punctuation ‘‘.’’ and adding, in its 

place, ‘‘; or’’ at the end of the paragraph. 

■ F. Adding a new paragraph (c)(1)(iv). 

■ G. Revising paragraph (c)(2). 

■ H. In paragraph (c)(3), removing the 

word ‘‘SSCR’’ and adding, in its place, 

the words ‘‘Student Status Confirmation 

Report’’. 

■ I. Adding a new paragraph (v). 

The revisions and additions read as 

follows: 

§ 682.210 Deferment. 

(a) * * * 

(3)(i) Interest accrues and is paid by— 

(A) The Secretary during the 

deferment period for a subsidized 

Stafford loan and for all or a portion of 

a Consolidation loan that qualifies for 

interest benefits under § 682.301; or 

(B) The borrower during the 

deferment period and, as applicable, the 

post-deferment grace period, on all 

other loans. 

(ii) A borrower who is responsible for 

payment of interest during a deferment 

period must be notified by the lender, 

at or before the time the deferment is 

granted, that the borrower has the 

option to pay the accruing interest or 

cancel the deferment and continue 

paying on the loan. The lender must 

also provide information, including an 

example, on the impact of capitalization 

of accrued, unpaid interest on loan 

principal, and on the total amount of 

interest to be paid over the life of the 

loan. 

* * * * * 

(c) * * * 

(1) * * * 

(iv) The lender confirms a borrower’s 

half-time enrollment status through the 

use of the National Student Loan Data 

System if requested to do so by the 

school the borrower is attending. 

(2) The lender must notify the 

borrower that a deferment has been 

granted based on paragraphs (c)(1)(ii), 

(iii), or (iv) of this section and that the 

borrower has the option to cancel the 

deferment and continue paying on the 

loan. 

* * * * * 

(v) In-school deferments for PLUS 

loan borrowers with loans first 

disbursed on or after July 1, 2008. (1)(i) 

A student PLUS borrower is entitled to 

a deferment on a PLUS loan first 

disbursed on or after July 1, 2008 during 

the 6-month period that begins on the 

day after the student ceases to be 

enrolled on at least a half-time basis at 

an eligible institution. 

(ii) If a lender grants an in-school 

deferment to a student PLUS borrower 

based on § 682.210(c)(1)(ii), (iii), or (iv), 

the deferment period for a PLUS loan 

first disbursed on or after July 1, 2008 

includes the 6-month post-enrollment 

period described in paragraph (v)(1)(i) 

of this section. The notice required by 

§ 682.210(c)(2) must inform the 

borrower that the in-school deferment 

on a PLUS loan first disbursed on or 

after July 1, 2008 will end six months 

after the day the borrower ceases to be 

enrolled on at least a half-time basis. 

(2) Upon the request of the borrower, 

an eligible parent PLUS borrower must 

be granted a deferment on a PLUS loan 

first disbursed on or after July 1, 2008— 

(i) During the period when the 

student on whose behalf the loan was 

obtained is enrolled at an eligible 

institution on at least a half-time basis; 

and 

(ii) During the 6-month period that 

begins on the later of the day after the 

student on whose behalf the loan was 

obtained ceases to be enrolled on at 

least a half-time basis or, if the parent 

borrower is also a student, the day after 

the parent borrower ceases to be 

enrolled on at least a half-time basis. 

■ 17. Section 682.211 is amended by: 

■ A. Revising paragraph (e). 

■ B. In paragraph (f)(11), removing the 

word ‘‘or’’ at the end of the paragraph. 

■ C. In paragraph (f)(12), removing the 

punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

punctuation ‘‘;’’. 

■ D. In paragraph (f)(13), removing the 

punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

punctuation ‘‘;’’. 

■ E. In paragraph (f)(14), removing the 

punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, ‘‘; 

or’’. 

■ F. Adding new paragraph (f)(15). 

The revisions and additions read as 

follows: 

§ 682.211 Forbearance. 

* * * * * 

(e)(1) At the time of granting a 

borrower or endorser a forbearance, the 

lender must provide the borrower or 

endorser with information to assist the 

borrower or endorser in understanding 

the impact of capitalization of interest 

on the loan principal and total interest 

to be paid over the life of the loan; and 

(2) At least once every 180 days 

during the period of forbearance, the 

lender must contact the borrower or 

endorser to inform the borrower or 

endorser of— 

(i) The outstanding obligation to 

repay; 

(ii) The amount of the unpaid 

principal balance and any unpaid 

interest that has accrued on the loan 

since the last notice provided to the 

borrower or endorser under this 

paragraph; 

(iii) The fact that interest will accrue 

on the loan for the full term of the 

forbearance; 

(iv) The amount of interest that will 

be capitalized, as of the date of the 

notice, and the date capitalization will 

occur; 

(v) The option of the borrower or 

endorser to pay the interest that has 

accrued before the interest is 

capitalized; and 

(vi) The borrower’s or endorser’s 

option to discontinue the forbearance at 

any time. 

(f) * * * 

(15) For PLUS loans first disbursed 

before July 1, 2008, to align repayment 

with a borrower’s PLUS loans that were 

first disbursed on or after July 1, 2008, 

or with Stafford Loans that are subject 

to a grace period under § 682.209(a)(3). 

The notice specified in paragraph (f) 

introductory text of this section must 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55995 

inform the borrower that the borrower 

has the option to cancel the forbearance 

and continue paying on the loan. 

* * * * * 

■ 18. Section 682.215 is amended by: 

■ A. Revising paragraph (a)(4). 

■ B. In paragraph (b)(1), removing the 

words ‘‘Except as provided under 

paragraph (b)(1)(i), (b)(1)(ii), and 

(b)(1)(iii) of this section, the’’ in the 

second sentence and adding, in their 

place, the word ‘‘The’’. 

■ C. In paragraph (b)(1)(i), removing the 

word ‘‘The’’ at the beginning of the 

paragraph and adding, in its place, the 

words ‘‘Except for borrowers provided 

for in paragraph (b)(1)(ii) of this section, 

the’’. 

■ D. Redesignating paragraphs (b)(1)(ii) 

and (b)(1)(iii) as paragraphs (b)(1)(iii) 

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

■ E. Adding a new paragraph (b)(1)(ii). 

■ F. In newly redesignated paragraph 

(b)(1)(iii), removing the words ‘‘or 

(b)(1)(i)’’ and adding, in their place, the 

words ‘‘, (b)(1)(i), or (b)(1)(ii)’’. 

■ G. In newly redesignated paragraph 

(b)(1)(iv), removing the words ‘‘or 

(b)(1)(i)’’ and adding, in their place, the 

words ‘‘, (b)(1)(i), or (b)(1)(ii)’’. 

■ H. In paragraph (b)(2), removing the 

words ‘‘(b)(1)(ii) and (iii)’’ in the second 

sentence and adding, in their place, the 

words ‘‘(b)(1)(iii) and (iv)’’. 

The revision and addition reads as 

follows: 

§ 682.215 Income-based repayment plan. 

(a) * * * 

(4) Partial financial hardship means a 

circumstance in which— 

(i) For an unmarried borrower or a 

married borrower who files an 

individual Federal tax return, the 

annual amount due on all of the 

borrower’s eligible loans, as calculated 

under a standard repayment plan based 

on a 10-year repayment period, using 

the greater of the amount due at the time 

the borrower initially entered 

repayment or at the time the borrower 

elects the income-based repayment 

plan, exceeds 15 percent of the 

difference between the borrower’s AGI 

and 150 percent of the poverty guideline 

for the borrower’s family size; or 

(ii) For a married borrower who files 

a joint Federal tax return with his or her 

spouse, the annual amount due on all of 

the borrower’s eligible loans and, if 

applicable, the spouse’s eligible loans, 

as calculated under a standard 

repayment plan based on a 10-year 

repayment period, using the greater of 

the amount due at the time the loans 

initially entered repayment or at the 

time the borrower or spouse elects the 

income-based repayment plan, exceeds 

15 percent of the difference between the 

borrower’s and spouse’s AGI, and 150 

percent of the poverty guideline for the 

borrower’s family size. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) Both the borrower and the 

borrower’s spouse have eligible loans 

and filed a joint Federal tax return, in 

which case the loan holder 

determines— 

(A) Each borrower’s percentage of the 

couple’s total eligible loan debt; 

(B) The adjusted monthly payment for 

each borrower by multiplying the 

calculated payment by the percentage 

determined in paragraph (b)(1)(ii)(A) of 

this section; and 

(C) If the borrower’s loans are held by 

multiple holders, the borrower’s 

adjusted monthly payment by 

multiplying the payment determined in 

paragraph (b)(1)(ii)(B) of this section by 

the percentage of the total outstanding 

principal amount of eligible loans that 

are held by the loan holder; 

* * * * * 

■ 19. Section 682.216 is amended by: 

■ A. Revising paragraph (a). 

■ B. In paragraph (b), adding, in 

alphabetical order, a definition of 

Educational service agency. 

■ C. Revising the introductory text of 

paragraph (c)(1). 

■ D. In paragraph (c)(1)(ii), adding the 

words ‘‘or educational service agency’s’’ 

immediately after the words ‘‘the 

school’s’’. 

■ E. In paragraph (c)(1)(iii), removing 

the words ‘‘Bureau of Indian Affairs 

(BIA)’’ and adding, in their place, the 

words ‘‘Bureau of Indian Education 

(BIE)’’, and removing the words ‘‘the 

BIA’’ and adding, in their place, the 

words ‘‘the BIE’’. 

■ F. In paragraph (c)(2), adding the 

words ‘‘or educational service agency’’ 

immediately after the words ‘‘If the 

school’’ at the beginning of the 

paragraph, and removing the words ‘‘the 

school’’ immediately after the words 

‘‘teaching and’’. 

■ G. In paragraph (c)(3)(i)(A), removing 

the words ‘‘in which’’ and adding, in 

their place, the words ‘‘or educational 

service agency where’’. 

■ H. In paragraph (c)(3)(i)(B), removing 

the words ‘‘in which’’ and adding, in 

their place, the words ‘‘or educational 

service agency where’’. 

■ I. In paragraph (c)(3)(ii)(A), removing 

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

the word ‘‘at’’, and adding the words 

‘‘, or taught mathematics or science to 

secondary school students on a full-time 

basis at an eligible educational service 

agency,’’ immediately after the words 

‘‘secondary school’’. 

■ J. In paragraph (c)(3)(ii)(B), removing 

the word ‘‘in’’ the first time it appears 

and adding, in its place, the word ‘‘at’’, 

and adding the words ‘‘or educational 

service agency’’ immediately after the 

words ‘‘secondary school’’ the first time 

they appear. 

■ K. Adding a new paragraph (c)(3)(iii). 

■ L. In paragraph (c)(4)(i), removing the 

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

word ‘‘at’’, and adding the words ‘‘or 

educational service agency’’ 

immediately after the words ‘‘secondary 

school’’ the first time they appear. 

■ M. In paragraph (c)(4)(ii)(A), removing 

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

the word ‘‘at’’, and adding the words 

‘‘, or taught mathematics or science on 

a full-time basis to secondary school 

students at an eligible educational 

service agency,’’ immediately after the 

words ‘‘secondary school’’. 

■ N. In paragraph (c)(4)(ii)(B), removing 

the word ‘‘in’’ the first time it appears 

and adding, in its place, the word ‘‘at’’, 

and by adding the words ‘‘or 

educational service agency’’ 

immediately after the words ‘‘secondary 

school’’ the first time they appear. 

■ O. Adding a new paragraph (c)(4)(iii). 

■ P. Revising paragraph (c)(9). 

■ Q. Revising paragraph (c)(11). 

The revisions and additions read as 

follows: 

§ 682.216 Teacher loan forgiveness 

program. 

(a) General. (1) The teacher loan 

forgiveness program is intended to 

encourage individuals to enter and 

continue in the teaching profession. For 

new borrowers, the Secretary repays the 

amount specified in this paragraph on 

the borrower’s subsidized and 

unsubsidized Federal Stafford Loans, 

Direct Subsidized Loans, Direct 

Unsubsidized Loans, and in certain 

cases, Federal Consolidation Loans or 

Direct Consolidation Loans. The 

forgiveness program is only available to 

a borrower who has no outstanding loan 

balance under the FFEL Program or the 

Direct Loan Program on October 1, 1998 

or who has no outstanding loan balance 

on the date he or she obtains a loan after 

October 1, 1998. 

(2)(i) The borrower must have been 

employed at an eligible elementary or 

secondary school that serves lowincome families or by an educational 

service agency that serves low-income 

families as a full-time teacher for five 

consecutive complete academic years. 

The required five years of teaching may 

include any combination of qualifying 

teaching service at an eligible 

elementary or secondary school or an 

eligible educational service agency. 


dcolon on DSK2BSOYB1PROD with RULES3
55996 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

(ii) Teaching at an eligible elementary 

or secondary school may be counted 

toward the required five consecutive 

complete academic years only if at least 

one year of teaching was after the 1997– 

1998 academic year. 

(iii) Teaching at an educational 

service agency may be counted toward 

the required five consecutive complete 

academic years only if the consecutive 

five-year period includes qualifying 

service at an eligible educational service 

agency performed after the 2007–2008 

academic year. 

(3) All borrowers eligible for teacher 

loan forgiveness may receive loan 

forgiveness of up to a combined total of 

$5,000 on the borrower’s eligible FFEL 

and Direct Loan Program loans. 

(4) A borrower may receive loan 

forgiveness of up to a combined total of 

$17,500 on the borrower’s eligible FFEL 

and Direct Loan Program loans if the 

borrower was employed for five 

consecutive years— 

(i) At an eligible secondary school as 

a highly qualified mathematics or 

science teacher, or at an eligible 

educational service agency as a highly 

qualified teacher of mathematics or 

science to secondary school students; or 

(ii) At an eligible elementary or 

secondary school or educational service 

agency as a special education teacher. 

(5) The loan for which the borrower 

is seeking forgiveness must have been 

made prior to the end of the borrower’s 

fifth year of qualifying teaching service. 

(b) * * * 

Educational service agency means a 

regional public multiservice agency 

authorized by State statute to develop, 

manage, and provide services or 

programs to local educational agencies, 

as defined in section 9101 of the 

Elementary and Secondary Education 

Act of 1965, as amended. 

* * * * * 

(c) * * * 

(1) A borrower who has been 

employed at an elementary or secondary 

school or at an educational service 

agency as a full-time teacher for five 

consecutive complete academic years 

may obtain loan forgiveness under this 

program if the elementary or secondary 

school or educational service agency— 

* * * * * 

(3) * * * 

(iii) Teaching service performed at an 

eligible educational service agency may 

be counted toward the required five 

years of teaching only if the consecutive 

five-year period includes qualifying 

service at an eligible educational service 

agency performed after the 2007–2008 

academic year. 

(4) * * * 

(iii) Teaching service performed at an 

eligible educational service agency may 

be counted toward the required five 

years of teaching only if the consecutive 

five-year period includes qualifying 

service at an eligible educational service 

agency performed after the 2007–2008 

academic year. 

* * * * * 

(9) A borrower who was employed as 

a teacher at more than one qualifying 

school, at more than one qualifying 

educational service agency, or at a 

combination of both during an academic 

year and demonstrates that the 

combined teaching was the equivalent 

of full-time, as supported by the 

certification of one or more of the chief 

administrative officers of the schools or 

educational service agencies involved, 

is considered to have completed one 

academic year of qualifying teaching. 

* * * * * 

(11) A borrower may not receive loan 

forgiveness for the same qualifying 

teaching service under this section if the 

borrower receives a benefit for the same 

teaching service under— 

(i) Subtitle D of title I of the National 

and Community Service Act of 1990; 

(ii) 34 CFR 685.219; or 

(iii) Section 428K of the Act. 

* * * * * 

■ 20. Section 682.302 is amended by 

adding a new paragraph (h) to read as 

follows: 

§ 682.302 Payment of special allowance on 

FFEL loans. 

* * * * * 

(h) Calculation of special allowance 

payments for loans subject to the 

Servicemembers Civil Relief Act (50 

U.S.C. 527, App. sec. 207). For FFEL 

Program loans first disbursed on or after 

July 1, 2008 that are subject to the 

interest rate limit under the 

Servicemembers Civil Relief Act, special 

allowance is calculated in accordance 

with paragraphs (c) and (f) of this 

section, except the applicable interest 

rate for this purpose shall be 6 percent. 

■ 21. Section 682.305 is amended by: 

■ A. Revising paragraph (c)(1). 

■ B. In paragraph (c)(2)(v), removing the 

word ‘‘and’’ immediately after the 

semicolon. 

■ C. In paragraph (c)(2)(vi), removing 

the punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

words ‘‘; and’’. 

■ D. Redesignating paragraph (c)(2)(vii) 

as paragraph (c)(3). 

■ E. Adding a new paragraph (c)(2)(vii). 

The revision and addition read as 

follows: 

§ 682.305 Procedures for payment of 

interest benefits and special allowance and 

collection of origination and loan fees. 

* * * * * 

(c) Independent audits. (1)(i) A lender 

originating or holding more than $5 

million in FFEL loans during its fiscal 

year must submit an independent 

annual compliance audit for that year, 

conducted by a qualified independent 

organization or person. 

(ii) Notwithstanding the dollar 

volume of loans originated or held, a 

school lender under § 682.601 or a 

lender serving as trustee on behalf of a 

school or a school-affiliated 

organization for the purpose of 

originating loans must submit an 

independent annual compliance audit 

for that year, conducted by a qualified 

independent organization or person. 

(iii) The Secretary may, following 

written notice, suspend the payment of 

interest benefits and special allowance 

to a lender that does not submit its audit 

within the time period prescribed in 

paragraph (c)(2) of this section. 

(2) * * * 

(vii) With regard to a lender serving 

as a trustee for the purpose of 

originating loans for a school or schoolaffiliated organization, the audit must 

include a determination that— 

(A) Except as provided in paragraph 

(c)(2)(vii)(B) of this section, the school 

used all proceeds from special 

allowance payments, interest subsidies 

received from the Department, and any 

proceeds from the sale or other 

disposition of the loans originated 

through the lender for need-based grant 

programs and that those funds 

supplemented, but did not supplant, 

other Federal or non-Federal funds 

otherwise available to be used to make 

need-based grants to its students; and 

(B) The lender used no more than a 

reasonable portion of payments and 

proceeds from the loans for direct 

administrative expenses in accordance 

with § 682.601(b), with all references to 

eligible school lender understood to 

mean a lender in its capacity as trustee 

on behalf of a school or school-affiliated 

organization for the purpose of 

originating loans. 

* * * * * 

■ 22. Section 682.401 is amended by: 

■ A. In paragraph (e)(1)(i), adding the 

words ‘‘stock or other securities, tuition 

payment or reimbursement’’ 

immediately after the word ‘‘payment’’, 

and by adding the words ‘‘, or any 

individual or entity,’’ immediately after 

the words ‘‘school-affiliated 

organization’’ the second time they 

appear. 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55997 

■ B. In paragraph (e)(1)(i)(D), adding the 

words ‘‘travel or’’ immediately after the 

words ‘‘Payment of’’. 

■ C. Revising paragraph (e)(1)(i)(F). 

■ D. In paragraph (e)(1)(iii)(C), removing 

the word ‘‘and’’ immediately after the 

semicolon. 

■ E. In paragraph (e)(1)(iii)(D), removing 

the punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

punctuation ‘‘;’’. 

■ F. Adding new paragraphs 

(e)(1)(iii)(E), (F), and (G). 

■ G. In paragraph (e)(1)(v), adding the 

words ‘‘, terms or conditions’’ 

immediately after the word 

‘‘availability’’. 

■ H. In paragraph (e)(2)(i), removing the 

word ‘‘Assistance’’ at the beginning of 

the paragraph and adding, in its place, 

the words ‘‘Technical assistance’’, and 

removing the words ‘‘that provided’’ 

and adding, in their place, the words 

‘‘the technical assistance provided’’. 

■ I. In paragraph (e)(2)(ii), adding the 

words ‘‘and 433A’’ immediately after 

the reference to ‘‘422(h)(4)(B)’’. 

■ J. In paragraph (e)(2)(iii), removing the 

word ‘‘excluding’’ and adding, in its 

place, the word ‘‘including’’, and 

removing the word ‘‘initial’’ and adding, 

in its place, the word ‘‘entrance’’. 

■ K. Revising paragraph (e)(2)(vi). 

■ L. In paragraph (e)(3)(iii), removing 

the words ‘‘The terms’’ and adding, in 

their place, the words ‘‘The term’’, and 

removing the words ‘‘computer 

hardware’’ and adding, in their place, 

the words ‘‘information technology 

equipment’’. 

■ M. Removing paragraph (e)(3)(v). 

■ N. Adding a new paragraph (g). 

The revision and additions read as 

follows: 

§ 682.401 Basic program agreement. 

* * * * * 

(e) * * * 

(1) * * * 

(i) * * * 

(F) Performance of, or payment to a 

third party to perform, any school 

function required under title IV, except 

that the guaranty agency may provide 

entrance counseling as provided in 

§ 682.604(f) and exit counseling as 

provided in § 682.604(g), and may 

provide services to participating foreign 

schools at the direction of the Secretary, 

as a third-party servicer. 

* * * * * 

(iii) * * * 

(E) Providing or reimbursing travel or 

entertainment expenses; 

(F) Providing or reimbursing tuition 

payments or expenses; and 

(G) Offering prizes, or providing 

payments of stocks or other securities. 

* * * * * 

(2) * * * 

(vi) Reimbursement of reasonable 

expenses incurred by school employees 

to participate in the activities of an 

agency’s governing board, a standing 

official advisory committee, or in 

support of other official activities of the 

agency; 

* * * * * 

(g)(1) A guaranty agency must work 

with schools that participate in its 

program to develop and make available 

high-quality educational materials and 

programs that provide training to 

students and their families in budgeting 

and financial management, including 

debt management and other aspects of 

financial literacy, such as the cost of 

using high-interest loans to pay for 

postsecondary education, and how 

budgeting and financial management 

relate to the title IV student loan 

programs. 

(2) The materials and programs 

described in paragraph (g)(1) of this 

section must be in formats that are 

simple and understandable to students 

and their families, and must be made 

available to students and their families 

by the guaranty agency before, during, 

and after a student’s enrollment at an 

institution of higher education. 

(3) A guaranty agency may provide 

similar programs and materials to an 

institution that participates only in the 

William D. Ford Federal Direct Loan 

Program. 

(4) A lender or loan servicer may also 

provide an institution with outreach 

and financial literacy information 

consistent with the requirements of 

paragraphs (g)(1) and (2) of this section. 

■ 23. Section 682.402 is amended by: 

■ A. Revising paragraph (c). 

■ B. In paragraph (h)(1)(i), removing the 

word ‘‘The’’ at the beginning of the 

sentence and adding, in its place, the 

words ‘‘Except as provided in paragraph 

(h)(1)(v) of this section, the’’. 

■ C. Adding a new paragraph (h)(1)(v). 

The revision and addition read as 

follows: 

§ 682.402 Death, disability, closed school, 

false certification, unpaid refunds, and 

bankruptcy payments. 

* * * * * 

(c)(1) Total and permanent disability. 

(i) A borrower’s loan is discharged if the 

borrower becomes totally and 

permanently disabled, as defined in 

§ 682.200(b), and satisfies the eligibility 

requirements in this section. 

(ii) For a borrower who becomes 

totally and permanently disabled as 

described in paragraph (1) of the 

definition of that term in § 682.200(b), 

the borrower’s loan discharge 

application is processed in accordance 

with paragraphs (c)(2) through (7) of this 

section. 

(iii) For a veteran who is totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), the veteran’s loan 

discharge application is processed in 

accordance with paragraph (c)(8) of this 

section. 

(2) Discharge application process for 

a borrower who is totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term in § 682.200(b). 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 a 

discharge application to the lender on a 

form approved by the Secretary. The 

application must contain a certification 

by a physician, who is a doctor of 

medicine or osteopathy legally 

authorized to practice in a State, that the 

borrower is totally and permanently 

disabled as described in paragraph (1) of 

the definition of that term in 

§ 682.200(b). The borrower must submit 

the application to the lender within 90 

days of the date the physician certifies 

the application. If the lender and 

guaranty agency approve the discharge 

claim under the procedures described in 

paragraph (c)(7) of this section, the 

guaranty agency must assign the loan to 

the Secretary. 

(3) Secretary’s eligibility 

determination. (i) If, after reviewing the 

borrower’s application, the Secretary 

determines that the certification 

provided by the borrower supports the 

conclusion that the borrower is totally 

and permanently disabled, as described 

in paragraph (1) of the definition of that 

term in § 682.200(b), the borrower is 

considered totally and permanently 

disabled as of the date the physician 

certifies the borrower’s application. 

(ii) Upon making a determination that 

the borrower is totally and permanently 

disabled as described in paragraph (1) of 

the definition of that term in 

§ 682.200(b), the Secretary discharges 

the borrower’s obligation to make 

further payments on the loan and 

notifies the borrower that the loan has 

been discharged. Any payments 

received after the date the physician 

certified the borrower’s loan discharge 

application are returned to the person 

who made the payments on the loan. 

The notification to the borrower 

explains the terms and conditions under 

which the borrower’s obligation to repay 

the loan will be reinstated, as specified 

in paragraph (c)(5)(i) of this section. 


dcolon on DSK2BSOYB1PROD with RULES3
55998 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

(iii) If the Secretary determines that 

the certification provided by the 

borrower does not support the 

conclusion that the borrower is totally 

and permanently disabled as described 

in paragraph (1) of the definition of that 

term in § 682.200(b), the Secretary 

notifies the borrower that the 

application for a disability discharge has 

been denied and that the loan is due 

and payable to the Secretary under the 

terms of the promissory note. 

(iv) The Secretary reserves the right to 

require the borrower to submit 

additional medical evidence if the 

Secretary determines that the borrower’s 

application does not conclusively prove 

that the borrower is totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term in § 682.200(b). As part of the 

Secretary’s review of the borrower’s 

discharge application, the Secretary may 

arrange for an additional review of the 

borrower’s condition by an independent 

physician at no expense to the borrower. 

(4) Treatment of disbursements made 

during the period from the date of the 

physician’s certification until the date of 

discharge. If a borrower received a Title 

IV loan or TEACH Grant prior to the 

date the physician certified the 

borrower’s discharge application and a 

disbursement of that loan or grant is 

made during the period from the date of 

the physician’s certification until the 

date the Secretary grants a discharge 

under this section, the processing of the 

borrower’s loan discharge request will 

be suspended until the borrower 

ensures that the full amount of the 

disbursement has been returned to the 

loan holder or to the Secretary, as 

applicable. 

(5) Conditions for reinstatement of a 

loan after a total and permanent 

disability discharge. (i) The Secretary 

reinstates the borrower’s obligation to 

repay a loan that was discharged in 

accordance with paragraph (c)(3)(ii) of 

this section if, within three years after 

the date the Secretary granted the 

discharge, the borrower— 

(A) Has annual earnings from 

employment that exceed 100 percent of 

the poverty guideline for a family of 

two, as published annually by the 

United States Department of Health and 

Human Services pursuant to 42 U.S.C. 

9902(2); 

(B) Receives a new TEACH Grant or 

a new loan under the Perkins, FFEL, or 

Direct Loan programs, except for a FFEL 

or Direct Consolidation Loan that 

includes loans that were not discharged; 

or 

(C) Fails to ensure that the full 

amount of any disbursement of a title IV 

loan or TEACH Grant received prior to 

the discharge date that is made during 

the three-year period following the 

discharge date is returned to the loan 

holder or to the Secretary, as applicable, 

within 120 days of the disbursement 

date. 

(ii) If a borrower’s obligation to repay 

a loan is reinstated, the Secretary— 

(A) Notifies the borrower that the 

borrower’s obligation to repay the loan 

has been reinstated; and 

(B) Does not require the borrower to 

pay interest on the loan for the period 

from the date the loan was discharged 

until the date the borrower’s obligation 

to repay the loan was reinstated. 

(iii) The Secretary’s notification under 

paragraph (c)(5)(ii)(A) of this section 

will include— 

(A) The reason or reasons for the 

reinstatement; 

(B) An explanation that the first 

payment due date on the loan following 

reinstatement will be no earlier than 60 

days after the date of the notification of 

reinstatement; and 

(C) Information on how the borrower 

may contact the Secretary if the 

borrower has questions about the 

reinstatement or believes that the 

obligation to repay the loan was 

reinstated based on incorrect 

information. 

(6) Borrower’s responsibilities after a 

total and permanent disability 

discharge. During the three-year period 

described in paragraph (c)(5)(i) of this 

section, the borrower or, if applicable, 

the borrower’s representative must— 

(i) Promptly notify the Secretary of 

any changes in address or phone 

number; 

(ii) Promptly notify the Secretary if 

the borrower’s annual earnings from 

employment exceed the amount 

specified in paragraph (c)(5)(i)(A) of this 

section; and 

(iii) Provide the Secretary, upon 

request, with documentation of the 

borrower’s annual earnings from 

employment. 

(7) Lender and guaranty agency 

actions. (i) After being notified by a 

borrower or a borrower’s representative 

that the borrower claims to be totally 

and permanently disabled, 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 as 

described in paragraph (1) of the 

definition of that term in § 682.200(b). 

Except as provided in paragraph 

(c)(7)(iii) of this section, after receiving 

the physician’s certification or letter the 

lender may not attempt to collect from 

the borrower or any endorser. 

(ii) 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 is totally and permanently 

disabled as described in paragraph (1) of 

the definition of that term in 

§ 682.200(b). 

(iii) If the lender determines that a 

borrower who claims to be totally and 

permanently disabled is not totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term in § 682.200(b), 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)(7)(i) of this section, the 

lender must resume collection of the 

loan 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. 

(iv) 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 is totally 

and permanently disabled as described 

in paragraph (1) of the definition of that 

term in § 682.200(b). 

(v) 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. 

(vi) If the guaranty agency pays the 

disability claim, the lender must notify 

the borrower that— 

(A) The loan will be assigned to the 

Secretary for determination of eligibility 

for a total and permanent disability 

discharge and that no payments are due 

on the loan; and 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 55999 

(B) If the Secretary discharges the loan 

based on a determination that the 

borrower is totally and permanently 

disabled as described in paragraph (1) of 

the definition of that term in 

§ 682.200(b), the Secretary will reinstate 

the borrower’s obligation to repay the 

loan if, within three years after the date 

the Secretary granted the discharge, the 

borrower— 

(1) Receives annual earnings from 

employment that exceed 100 percent of 

the poverty guideline for a family of 

two, as published annually by the 

United States Department of Health and 

Human Services pursuant to 42 U.S.C. 

9902(2); 

(2) Receives a new TEACH Grant or a 

new title IV loan, except for a FFEL or 

Direct Consolidation Loan that includes 

loans that were not discharged; or 

(3) Fails to ensure that the full amount 

of any disbursement of a title IV loan or 

TEACH Grant received prior to the 

discharge date that is made during the 

three-year period following the 

discharge date is returned to the loan 

holder or to the Secretary, as applicable, 

within 120 days of the disbursement 

date. 

(vii) 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. 

(viii) The Secretary reimburses the 

guaranty agency for a disability claim 

paid to the lender after the agency pays 

the claim to the lender. 

(ix) The guaranty agency must assign 

the loan to the Secretary after the 

guaranty agency pays the disability 

claim. 

(8) Discharge application process for 

veterans who are totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b)—(i) General. After 

being notified by the veteran or the 

veteran’s representative that the veteran 

claims to be totally and permanently 

disabled, the lender promptly requests 

that the veteran or the veteran’s 

representative submit a discharge 

application to the lender, on a form 

approved by the Secretary. The 

application must be accompanied by 

documentation from the Department of 

Veterans Affairs showing that the 

Department of Veterans Affairs has 

determined that the veteran is 

unemployable due to a serviceconnected disability. The veteran will 

not be required to provide any 

additional documentation related to the 

veteran’s disability. 

(ii) Lender and guaranty agency 

actions. (A) After being notified by a 

veteran or a veteran’s representative that 

the veteran claims to be totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), the lender must 

continue collection activities until it 

receives the veteran’s completed loan 

discharge application with the required 

documentation from the Department of 

Veterans Affairs, as described in 

paragraph (8)(i) of this section. Except 

as provided in paragraph (c)(8)(ii)(C) of 

this section, the lender will not attempt 

to collect from the veteran or any 

endorser after receiving the veteran’s 

discharge application and 

documentation from the Department of 

Veterans Affairs. 

(B) If the veteran submits a completed 

loan discharge application and the 

required documentation from the 

Department of Veterans Affairs, and the 

documentation indicates that the 

veteran is totally and permanently 

disabled as described in paragraph (2) of 

the definition of that term in 

§ 682.200(b), the lender must submit a 

disability claim to the guaranty agency. 

(C) If the documentation from the 

Department of Veterans Affairs does not 

indicate that the veteran is totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), the lender— 

(1) 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. 

(2) Must inform the veteran that he or 

she may reapply for a total and 

permanent disability discharge in 

accordance with the procedures 

described in § 682.402(c)(2) through 

(c)(7), if the documentation from the 

Department of Veterans Affairs does not 

indicate that the veteran is totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), but indicates that 

the veteran may be totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term. 

(D) If the documentation from the 

Department of Veterans Affairs indicates 

that the borrower is totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), the guaranty 

agency must submit a copy of the 

veteran’s discharge application and 

supporting documentation to the 

Secretary, and must notify the veteran 

that the veteran’s loan discharge request 

has been referred to the Secretary for a 

determination of discharge eligibility. 

(E) If the documentation from the 

Department of Veterans Affairs does not 

indicate that the veteran is totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), the guaranty 

agency does not pay the disability claim 

and 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 veteran that the 

application for a disability discharge has 

been denied, provide the basis for the 

denial, and inform the veteran 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. 

(F) If the Secretary determines, based 

on a review of the documentation from 

the Department of Veterans Affairs, that 

the veteran is totally and permanently 

disabled as described in paragraph (2) of 

the definition of that term in 

§ 682.200(b), the Secretary notifies the 

guaranty agency that the veteran is 

eligible for a total and permanent 

disability discharge. Upon notification 

by the Secretary that the veteran is 

eligible for a discharge, the guaranty 

agency pays the disability discharge 

claim. Upon receipt of the claim 

payment from the guaranty agency, the 

lender notifies the veteran that the 

veteran’s obligation to make any further 

payments on the loan has been 

discharged and returns to the person 

who made the payments on the loan any 

payments received on or after the 

effective date of the determination by 

the Department of Veterans Affairs that 

the veteran is unemployable due to a 

service-connected disability. 

(G) If the Secretary determines, based 

on a review of the documentation from 

the Department of Veterans Affairs, that 

the veteran is not totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in § 682.200(b), the Secretary 

notifies the guaranty agency of this 

determination. Upon notification by the 

Secretary that the veteran is not eligible 

for a discharge, the guaranty agency and 

the lender must follow the procedures 

described in paragraph (c)(8)(ii)(E) of 

this section. 

(H) The Secretary reimburses the 

guaranty agency for a disability claim 

paid to the lender after the agency pays 

the claim to the lender. 

* * * * * 


dcolon on DSK2BSOYB1PROD with RULES3
56000 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

(h) * * * 

(1) * * * 

(v) In the case of a disability claim 

based on a veteran’s discharge request 

processed in accordance with 

§ 682.402(c)(8), the guaranty agency 

shall— 

(A) Review the claim promptly and 

not later than 45 days after the claim 

was filed by the lender submit the 

veteran’s discharge application and 

supporting documentation to the 

Secretary or return the claim to the 

lender in accordance with 

§ 682.402(c)(8)(ii)(D) or (E), as 

applicable; and 

(B) Not later than 45 days after 

receiving notification from the Secretary 

of the veteran’s eligibility or ineligibility 

for discharge, pay the claim or return 

the claim to the lender in accordance 

with § 682.402(c)(8)(ii)(F) or (G), as 

applicable. 

* * * * * 

■ 24. Section 682.405 is amended by: 

■ A. In paragraph (a)(3), adding a new 

sentence at the end of the paragraph. 

■ B. In paragraph (b)(1)(iii), adding the 

words ‘‘by the guaranty agency or its 

agents’’ immediately after the word 

‘‘affordable’’. 

■ C. Revising paragraph (b)(3). 

■ D. Adding a new paragraph (c). 

The revision and additions read as 

follows: 

§ 682.405 Loan rehabilitation agreement. 

(a) * * * 

(3) * * * Effective for any loan that 

is rehabilitated on or after August 14, 

2008, the borrower cannot rehabilitate 

the loan again if the loan returns to 

default status following the 

rehabilitation. 

(b) * * * 

(3) Upon the sale of a rehabilitated 

loan to an eligible lender— 

(i) The guaranty agency must, within 

45 days of the sale— 

(A) Provide notice to the prior holder 

of such sale, and 

(B) Request that any consumer 

reporting agency to which the default 

was reported remove the record of 

default from the borrower’s credit 

history. 

(ii) The prior holder of the loan must, 

within 30 days of receiving the 

notification from the guaranty agency, 

request that any consumer reporting 

agency to which the default claim 

payment or other equivalent record was 

reported remove such record from the 

borrower’s credit history. 

* * * * * 

(c) A guaranty agency must make 

available financial and economic 

education materials, including debt 

management information, to any 

borrower who has rehabilitated a 

defaulted loan in accordance with 

paragraph (a)(2) of this section. 

■ 25. Section 682.410 is amended by: 

■ A. In paragraph (b)(5), removing the 

heading ‘‘Credit bureau reports’’ and 

adding, in its place, the heading 

‘‘Reports to consumer reporting 

agencies’’. 

■ B. In paragraph (b)(5)(i) introductory 

text, removing the words ‘‘national 

credit bureaus’’ at the end of the 

paragraph and adding, in their place, 

the words ‘‘nationwide consumer 

reporting agencies’’. 

■ C. In paragraph (b)(5)(ii) introductory 

text, removing the words ‘‘credit 

bureau’’ and adding, in their place, the 

words ‘‘consumer reporting agency’’, 

and removing the reference ‘‘(b)(6)(v)’’ 

and adding, in its place, the reference 

‘‘(b)(6)(ii)’’. 

■ D. In paragraph (b)(5)(iv)(A), removing 

the words ‘‘credit bureaus’’ and adding, 

in their place, the words ‘‘consumer 

reporting agencies’’. 

■ E. In paragraph (b)(5)(vi)(F), removing 

the words ‘‘national credit bureaus’’ and 

adding, in their place, the words 

‘‘nationwide consumer reporting 

agencies’’. 

■ F. In paragraph (b)(5)(vi)(G), removing 

the words ‘‘credit bureaus’’ and adding, 

in their place, the words ‘‘consumer 

reporting agencies’’. 

■ G. In paragraph (b)(5)(vi)(K), removing 

the word ‘‘and’’ at the end of the 

paragraph. 

■ H. In paragraph (b)(5)(vi)(L), removing 

the punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, the 

words ‘‘; and’’. 

■ I. Adding a new paragraph 

(b)(5)(vi)(M). 

■ J. Redesignating paragraphs (b)(6)(ii), 

(iii), (iv), (v), and (vi) as paragraphs 

(b)(6)(v), (vi), (vii), (ii), and (iii) 

respectively. 

■ K. In newly redesignated paragraph 

(b)(6)(iii), removing the reference 

‘‘(b)(6)(v)’’ and adding, in its place, the 

reference ‘‘(b)(6)(ii)’’, and removing the 

words ‘‘national credit bureaus (if that 

is the case)’’ and adding, in their place, 

the words ‘‘nationwide consumer 

reporting agencies’’. 

■ L. Adding a new paragraph (b)(6)(iv). 

■ M. In newly redesignated paragraph 

(b)(6)(vi), removing the reference 

‘‘(b)(6)(iv)’’ and adding, in its place, the 

reference ‘‘(b)(6)(vii)’’. 

The additions read as follows: 

§ 682.410 Fiscal, administrative, and 

enforcement requirements. 

* * * * * 

(b) * * * 

(5) * * * 

(vi) * * * 

(M) Inform the borrower of the 

options that are available to the 

borrower to remove the loan from 

default, including an explanation of the 

fees and conditions associated with 

each option. 

* * * * * 

(6) * * * 

(iv) The agency must send a notice 

informing the borrower of the options 

that are available to remove the loan 

from default, including an explanation 

of the fees and conditions associated 

with each option. This notice must be 

sent within a reasonable time after the 

end of the period for requesting an 

administrative review as specified in 

paragraph (b)(5)(iv)(B) of this section or, 

if the borrower has requested an 

administrative review, within a 

reasonable time following the 

conclusion of the administrative review. 

* * * * * 

■ 26. Section 682.601 is amended by 

adding a new paragraph (a)(7)(iii) to 

read as follows: 

§ 682.601 Rules for a school that makes or 

originates loans. 

(a) * * * 

(7) * * * 

(iii) With regard to any school, the 

audit must include a determination 

that— 

(A) Except as provided in paragraphs 

(a)(8) and (b) of this section, the school 

used all payments and proceeds from 

the loans for need-based grant programs; 

(B) The school met the requirements 

of paragraph (c) of this section in 

making the need-based grants; and 

(C) The school used no more than a 

reasonable portion of payments and 

proceeds from the loans for direct 

administrative expenses. 

* * * * * 

PART 685—WILLIAM D. FORD 

FEDERAL DIRECT LOAN PROGRAM 

■ 27. The authority citation for part 685 

continues to read as follows: 

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

otherwise noted. 

■ 28. In § 685.102(b), the definition of 

‘‘Estimated financial assistance’’ is 

amended by: 

■ A. Removing paragraphs (1)(ii), (iii), 

(iv), and (ix), and redesignating 

paragraphs (1)(i), (v), (vi), (vii), and (viii) 

as paragraphs (1)(ii), (iii), (iv), (v), and 

(vi), respectively. 

■ B. Adding a new paragraph (1)(i) and 

revising newly redesignated paragraph 

(1)(ii). 

■ C. Adding the word ‘‘and’’ after the 

semicolon at the end of newly 

redesignated paragraph (1)(v). 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 56001 

■ D. Removing the words ‘‘; and’’ at the 

end of newly redesignated paragraph 

(1)(vi) and adding, in their place, the 

punctuation ‘‘.’’. 

■ E. Removing paragraph (2)(iii), and 

redesignating paragraphs (2)(iv) and (v) 

as paragraphs (2)(iii) and (iv), 

respectively. 

■ F. In newly redesignated paragraph 

(2)(iii), removing the words ‘‘veterans’ 

educational benefits paid under chapter 

30 of title 38 of the United States Code 

(Montgomery GI Bill-Active Duty) and’’. 

■ G. In newly redesignated paragraph 

(2)(iv), removing the word ‘‘and’’ at the 

end of the paragraph. 

■ H. Adding a new paragraph (2)(v). 

■ I. In paragraph (2)(vi), removing the 

words ‘‘this part’’ in the first sentence 

and adding, in their place, the words ‘‘a 

title IV, HEA program,’’ and by 

removing the punctuation ‘‘.’’ at the end 

of the paragraph and adding, in its 

place, the punctuation ‘‘;’’. 

■ J. Adding new paragraphs (2)(vii) and 

(viii). 

The revisions and additions read as 

follows: 

§ 685.102 Definitions. 

Estimated financial assistance. 

(1) * * * 

(i) Except as provided in paragraph 

(2)(iii) of this definition, national 

service education awards or post-service 

benefits under title I of the National and 

Community Service Act of 1990 

(AmeriCorps). 

(ii) Except as provided in paragraph 

(2)(vii) of this definition, veterans’ 

education benefits; 

* * * * * 

(2) * * * 

(v) Non-need-based employment 

earnings; 

* * * * * 

(vii) Federal veterans’ education 

benefits paid under— 

(A) Chapter 103 of title 10, United 

States Code (Senior Reserve Officers’ 

Training Corps); 

(B) Chapter 106A of title 10, United 

States Code (Educational Assistance for 

Persons Enlisting for Active Duty); 

(C) Chapter 1606 of title 10, United 

States Code (Selected Reserve 

Educational Assistance Program); 

(D) Chapter 1607 of title 10, United 

States Code (Educational Assistance 

Program for Reserve Component 

Members Supporting Contingency 

Operations and Certain Other 

Operations); 

(E) Chapter 30 of title 38, United 

States Code (All-Volunteer Force 

Educational Assistance Program, also 

known as the ‘‘Montgomery GI Bill— 

active duty’’); 

(F) Chapter 31 of title 38, United 

States Code (Training and Rehabilitation 

for Veterans with Service-Connected 

Disabilities); 

(G) Chapter 32 of title 38, United 

States Code (Post-Vietnam Era Veterans’ 

Educational Assistance Program); 

(H) Chapter 33 of title 38, United 

States Code (Post 9/11 Educational 

Assistance); 

(I) Chapter 35 of title 38, United States 

Code (Survivors’ and Dependents’ 

Educational Assistance Program); 

(J) Section 903 of the Department of 

Defense Authorization Act, 1981 (10 

U.S.C. 2141 note) (Educational 

Assistance Pilot Program); 

(K) Section 156(b) of the ‘‘Joint 

Resolution making further continuing 

appropriations and providing for 

productive employment for the fiscal 

year 1983, and for other purposes’’ (42 

U.S.C. 402 note) (Restored Entitlement 

Program for Survivors, also known as 

‘‘Quayle benefits’’); 

(L) The provisions of chapter 3 of title 

37, United States Code, related to 

subsistence allowances for members of 

the Reserve Officers Training Corps; and 

(M) Any program that the Secretary 

may determine is covered by section 

480(c)(2) of the HEA; and 

(viii) Iraq and Afghanistan Service 

Grants made under section 420R of the 

HEA. 

* * * * * 

■ 29. Section 685.200 is amended by: 

■ A. In the introductory text to 

paragraph (a)(1)(iv), adding the words 

‘‘or TEACH Grant service obligation’’ 

immediately after the word ‘‘loan’’. 

■ B. In the introductory text to 

paragraph (a)(1)(iv)(A), adding the 

words ‘‘or TEACH Grant service 

obligation’’ immediately after the word 

‘‘Act’’. 

■ C. In paragraph (a)(1)(iv)(A)(1), 

removing the word ‘‘and’’ at the end of 

the paragraph. 

■ D. In paragraph (a)(1)(iv)(A)(2), 

removing the punctuation ‘‘.’’ at the end 

of the paragraph and adding, in its 

place, the words ‘‘; and’’. 

■ E. Adding a new paragraph 

(a)(1)(iv)(A)(3). 

■ F. Removing paragraph (a)(1)(iv)(B). 

■ G. Redesignating paragraph 

(a)(1)(iv)(C) as paragraph (a)(1)(iv)(B). 

■ H. In the introductory text to newly 

redesignated paragraph (a)(1)(iv)(B), 

removing the words ‘‘based on’’ and 

adding, in their place, the word ‘‘after’’, 

and adding the words ‘‘based on a 

discharge request received prior to July 

1, 2010’’ immediately after the word 

‘‘disabled’’. 

The addition reads as follows: 

§ 685.200 Borrower eligibility. 

(a) * * * 

(1) * * * 

(iv) * * * 

(A) * * * 

(3) If the borrower receives a new 

Direct Loan, other than a Direct 

Consolidation Loan, within three years 

of the date that any previous title IV 

loan or TEACH Grant service obligation 

was discharged due to a total and 

permanent disability in accordance with 

§ 685.213(b)(4), 34 CFR 674.61(b)(3)(i), 

34 CFR 682.402(c), or 34 CFR 686.42(b) 

based on a discharge request received 

on or after July 1, 2010, resumes 

repayment on the previously discharged 

loan in accordance with 

§ 685.213(b)(3)(ii)(A), 34 CFR 

674.61(b)(5), or 34 CFR 682.402(c)(5), or 

acknowledges that he or she is once 

again subject to the terms of the TEACH 

Grant agreement to serve before 

receiving the new loan. 

* * * * * 

■ 30. Section 685.202 is amended by: 

■ A. Adding a new paragraph (a)(4). 

■ B. In paragraph (b)(2), removing the 

words ‘‘the Secretary capitalizes’’ and 

adding, in their place, the words ‘‘or for 

a Direct PLUS Loan, the Secretary may 

capitalize’’. 

The addition reads as follows: 

§ 685.202 Charges for which Direct Loan 

Program borrowers are responsible. 

(a) * * * 

(4) Applicability of the 

Servicemembers Civil Relief Act (50 

U.S.C. 527, App. sec. 207). 

Notwithstanding paragraphs (a)(1) 

through (3) of this section, effective 

August 14, 2008, upon the Secretary’s 

receipt of a borrower’s written request 

and a copy of the borrower’s military 

orders, the maximum interest rate, as 

defined in 50 U.S.C. 527, App. section 

207(d), on Direct Loan Program loans 

made prior to the borrower entering 

active duty status is 6 percent while the 

borrower is on active duty military 

service. 

* * * * * 

■ 31. Section 685.203 is amended by: 

■ A. In paragraph (a)(1)(iii), adding the 

punctuation ‘‘,’’ immediately after 

‘‘$3,500’’. 

■ B. Revising paragraph (b). 

■ C. In paragraph (c)(1)(i), adding the 

words ‘‘, except as provided in 

paragraph (c)(3) for certain dependent 

undergraduate students’’ immediately 

after the words ‘‘this section’’. 

■ D. In paragraph (c)(2)(i)(A), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ E. Removing paragraph (c)(2)(i)(B). 

■ F. Redesignating paragraph (c)(2)(i)(C) 

as paragraph (c)(2)(i)(B). 


dcolon on DSK2BSOYB1PROD with RULES3
56002 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

■ G. In newly redesignated paragraph 

(c)(2)(i)(B), adding the words ‘‘, or, for 

a loan first disbursed on or after July 1, 

2008, $6,000,’’ immediately after 

$4,000’’. 

■ H. Redesignating paragraph (c)(2)(i)(D) 

as paragraph (c)(2)(i)(C). 

■ I. In newly redesignated paragraph 

(c)(2)(i)(C), adding the words ‘‘, or, for 

a loan first disbursed on or after July 1, 

2008, $6,000,’’ immediately after 

‘‘$4,000’’. 

■ J. In paragraph (c)(2)(ii)(A), adding the 

words ‘‘, or, for a loan first disbursed on 

or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ K. In paragraph (c)(2)(ii)(B), adding 

the words ‘‘, or, for a loan first disbursed 

on or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ L. In paragraph (c)(2)(iii)(A), adding 

the words ‘‘, or, for a loan first disbursed 

on or after July 1, 2008, $7,000,’’ 

immediately after ‘‘$5,000’’. 

■ M. In paragraph (c)(2)(iii)(B), adding 

the words ‘‘, or, for a loan first disbursed 

on or after July 1, 2008, $7,000,’’ 

immediately after ‘‘$5,000’’. 

■ N. In paragraph (c)(2)(vi)(A), adding 

the words ‘‘, or, for a loan first disbursed 

on or after July 1, 2008, $6,000,’’ 

immediately after ‘‘$4,000’’. 

■ O. Adding a new paragraph (c)(3). 

■ P. In paragraph (e)(1), adding the 

words ‘‘, or, effective July 1, 2008, 

$31,000,’’ immediately after ‘‘$23,000’’. 

■ Q. In paragraph (e)(2), adding the 

words ‘‘, or, effective July 1, 2008, 

$57,500,’’ immediately after ‘‘$46,000’’. 

■ R. Adding a new paragraph (k). 

The revisions and additions read as 

follows: 

§ 685.203 Loan limits. 

(a) * * * 

(b) Direct Unsubsidized Loans. (1) In 

the case of a dependent undergraduate 

student— 

(i) For a loan first disbursed before 

July 1, 2008, the total amount a student 

may borrow for any period of study 

under the Federal Direct Unsubsidized 

Loan Program and the Federal 

Unsubsidized Stafford Loan Program is 

the same as the amount determined 

under paragraph (a) of this section, less 

any amount received under the Federal 

Direct Stafford/Ford Loan Program or 

the Federal Stafford Loan Program. 

(ii) Except as provided in paragraph 

(c)(3) of this section, for a loan first 

disbursed on or after July 1, 2008, the 

total amount a student may borrow for 

any period of study under the Federal 

Direct Unsubsidized Stafford/Ford Loan 

Program in combination with the 

Federal Unsubsidized Stafford Loan 

Program is the same as the amount 

determined under paragraph (a) of this 

section, less any amount received under 

the Federal Direct Stafford/Ford Loan 

Program or the Federal Stafford Loan 

Program, plus— 

(A) $2,000, for a program of study of 

at least a full academic year in length. 

(B) For a program of study that is one 

academic year or more in length with 

less than a full academic year 

remaining, the amount that is the same 

ratio to $2,000 as the— 

Number of semester, trimester, quarter, or clock hours enrolled.

Number of semester, trimester, quarter, or clock hours in academic year.

(C) For a program of study that is less 

than a full academic year in length, the 

amount that is the same ratio to $2,000 

as the lesser of the— 

Number of semester, trimester, quarter, or clock hours enrolled.

Number of semester, trimester, quarter, or clock hours in academic year.

or 

Number of weeks in program.

Number of weeks in academic year.

(2) In the case of an independent 

undergraduate student, a graduate or 

professional student, or certain 

dependent undergraduate students 

under the conditions specified in 

paragraph (c)(1)(ii) of this section, 

except as provided in paragraph (c)(3) of 

this section, the total amount the 

student may borrow for any period of 

enrollment under the Federal Direct 

Unsubsidized Stafford/Ford Loan and 

Federal Unsubsidized Stafford Loan 

programs may not exceed the amounts 

determined under paragraph (a) of this 

section less any amount received under 

the Federal Direct Stafford/Ford Loan 

Program or the Federal Stafford Loan 

Program, in combination with the 

amounts determined under paragraph 

(c) of this section. 

(c) * * * 

(3) A dependent undergraduate 

student who qualifies for additional 

Direct Unsubsidized Loan amounts 

under this section in accordance with 

paragraph (c)(1)(ii) is not eligible to 

receive the additional Direct 

Unsubsidized Loan amounts provided 

under paragraph (b)(1)(ii) of this section. 

* * * * * 

(k) Any TEACH Grants that have been 

converted to Direct Unsubsidized Loans 

are not counted against any annual or 

aggregate loan limits under this section. 

■ 32. Section 685.204 is amended by: 

■ A. In paragraph (b)(1)(iii)(A)(2), 

removing the word ‘‘or’’ at the end of 

the paragraph. 

■ B. In paragraph (b)(1)(iii)(A)(3), 

removing the punctuation ‘‘.’’ and 

adding, in its place, ‘‘; or’’ at the end of 

the paragraph. 

■ C. Adding a new paragraph 

(b)(1)(iii)(A)(4). 

■ D. Revising paragraph (b)(1)(iii)(B). 

■ E. Redesignating paragraphs (g) and 

(h) as paragraphs (h) and (i), 

respectively. 

■ F. In newly redesignated paragraph 

(i)(3), removing the words ‘‘paragraph 

(h)(2)’’ each time they appear and 

adding, in their place, the words 

‘‘paragraph (i)(2)’’. 

■ G. In newly redesignated paragraph 

(i)(4), removing the words ‘‘paragraph 

(h)(2)’’ and adding, in their place, the 

words ‘‘paragraph (i)(2)’’. 

■ H. Adding a new paragraph (g). 

The revisions and additions read as 

follows: 

§ 685.204 Deferment. 

* * * * * 

(b) * * * 

(1) * * * 

(iii)(A) * * * 

(4) The Secretary confirms a 

borrower’s half-time enrollment status 

through the use of the National Student 

Loan Data System if requested to do so 

by the school the borrower is attending. 


dcolon on DSK2BSOYB1PROD with RULES3ER29OC09.003</MATH> ER29OC09.004</MATH> ER29OC09.005</MATH>
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 56003 

(B)(1) Upon notification by the 

Secretary that a deferment has been 

granted based on paragraph 

(b)(1)(iii)(A)(2), (3), or (4) of this section, 

the borrower has the option to cancel 

the deferment and continue paying on 

the loan. 

(2) If the borrower elects to cancel the 

deferment and continue paying on the 

loan, the borrower has the option to 

make the principal and interest 

payments that were deferred. If the 

borrower does not make the payments, 

the Secretary applies a deferment for the 

period in which payments were not 

made and capitalizes the interest. The 

Secretary will provide information, 

including an example, to assist the 

borrower in understanding the impact of 

capitalization of accrued, unpaid 

interest on the borrower’s loan principal 

and on the total amount of interest to be 

paid over the life of the loan. 

* * * * * 

(g) In-school deferments for Direct 

PLUS Loan borrowers with loans first 

disbursed on or after July 1, 2008. (1)(i) 

A student Direct PLUS Loan borrower is 

entitled to a deferment on a Direct PLUS 

Loan first disbursed on or after July 1, 

2008 during the 6-month period that 

begins on the day after the student 

ceases to be enrolled on at least a halftime basis at an eligible institution. 

(ii) If the Secretary grants an in-school 

deferment to a student Direct PLUS 

Loan borrower based on 

§ 682.204(b)(1)(iii)(A)(2), (3), or (4), the 

deferment period for a Direct PLUS 

Loan first disbursed on or after July 1, 

2008 includes the 6-month postenrollment period described in 

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

(2) Upon the request of the borrower, 

an eligible parent Direct PLUS Loan 

borrower will receive a deferment on a 

Direct PLUS Loan first disbursed on or 

after July 1, 2008— 

(i) During the period when the 

student on whose behalf the loan was 

obtained is enrolled at an eligible 

institution on at least a half-time basis; 

and 

(ii) During the 6-month period that 

begins on the later of the day after the 

student on whose behalf the loan was 

obtained ceases to be enrolled on at 

least a half-time basis or, if the parent 

borrower is also a student, the day after 

the parent borrower ceases to be 

enrolled on at least a half-time basis. 

* * * * * 

■ 33. Section 685.205 is amended by: 

■ A. In paragraph (b)(8), removing the 

word ‘‘or’’ at the end of the paragraph. 

■ B. In paragraph (b)(9), removing the 

punctuation ‘‘.’’ at the end of the 

paragraph and adding, in its place, ‘‘; 

or’’. 

■ C. Adding a new paragraph (b)(10) to 

read as follows: 

§ 685.205 Forbearance. 

* * * * * 

(b) * * * 

(10) For Direct PLUS Loans first 

disbursed before July 1, 2008, to align 

repayment with a borrower’s Direct 

PLUS Loans that were first disbursed on 

or after July 1, 2008, or with Direct 

Subsidized Loans or Direct 

Unsubsidized Loans that have a grace 

period in accordance with § 685.207(b) 

or (c). The Secretary notifies the 

borrower that the borrower has the 

option to cancel the forbearance and 

continue paying on the loan. 

* * * * * 

■ 34. Section 685.211 is amended by: 

■ A. In paragraph (f)(1), removing the 

words ‘‘credit bureau’’ in the third 

sentence and adding, in their place, the 

words ‘‘consumer reporting agency’’. 

■ B. Adding a new paragraph (f)(4). 

The addition reads as follows: 

§ 685.211 Miscellaneous repayment 

provisions. 

* * * * * 

(f) * * * 

(4) Effective for any defaulted Direct 

Loan that is rehabilitated on or after 

August 14, 2008, the borrower cannot 

rehabilitate the loan again if the loan 

returns to default status following the 

rehabilitation. 

■ 35. Section 685.213 is revised to read 

as follows: 

§ 685.213 Total and permanent disability 

discharge. 

(a) General. (1) A borrower’s Direct 

Loan is discharged if the borrower 

becomes totally and permanently 

disabled, as defined in 34 CFR 

682.200(b), and satisfies the eligibility 

requirements in this section. 

(2) For a borrower who becomes 

totally and permanently disabled as 

described in paragraph (1) of the 

definition of that term in 34 CFR 

682.200(b), the borrower’s loan 

discharge application is processed in 

accordance with paragraph (b) of this 

section. 

(3) For veterans who are totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in 34 CFR 682.200(b), the veteran’s 

loan discharge application is processed 

in accordance with paragraph (c) of this 

section. 

(b) Discharge application process for 

a borrower who is totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term in 34 CFR 682.200(b). (1) Borrower 

application for discharge. To qualify for 

a discharge of a Direct Loan based on a 

total and permanent disability, a 

borrower must submit a discharge 

application to the Secretary on a form 

approved by the Secretary. The 

application must contain a certification 

by a physician, who is a doctor of 

medicine or osteopathy legally 

authorized to practice in a State, that the 

borrower is totally and permanently 

disabled as described in paragraph (1) of 

the definition of that term in 34 CFR 

682.200(b). The borrower must submit 

the application to the Secretary within 

90 days of the date the physician 

certifies the application. Upon receipt of 

the borrower’s application, the Secretary 

notifies the borrower that no payments 

are due on the loan while the Secretary 

determines the borrower’s eligibility for 

discharge. 

(2) Determination of eligibility. (i) If, 

after reviewing the borrower’s 

application, the Secretary determines 

that the certification provided by the 

borrower supports the conclusion that 

the borrower meets the criteria for a 

total and permanent disability 

discharge, as described in paragraph (1) 

of the definition of that term in 34 CFR 

682.200(b), the borrower is considered 

totally and permanently disabled as of 

the date the physician certifies the 

borrower’s application. 

(ii) Upon making a determination that 

the borrower is totally and permanently 

disabled, as described in paragraph (1) 

of the definition of that term in 34 CFR 

682.200(b), the Secretary discharges the 

borrower’s obligation to make any 

further payments on the loan, notifies 

the borrower that the loan has been 

discharged, and returns to the person 

who made the payments on the loan any 

payments received after the date the 

physician certified the borrower’s loan 

discharge application. The notification 

to the borrower explains the terms and 

conditions under which the borrower’s 

obligation to repay the loan will be 

reinstated, as specified in paragraph 

(b)(4)(i) of this section. 

(iii) If the Secretary determines that 

the certification provided by the 

borrower does not support the 

conclusion that the borrower is totally 

and permanently disabled, as described 

in paragraph (1) of the definition of that 

term in 34 CFR 682.200(b), the Secretary 

notifies the borrower that the 

application for a disability discharge has 

been denied, and that the loan is due 

and payable to the Secretary under the 

terms of the promissory note. 

(iv) The Secretary reserves the right to 

require the borrower to submit 

additional medical evidence if the 


dcolon on DSK2BSOYB1PROD with RULES3
56004 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

Secretary determines that the borrower’s 

application does not conclusively prove 

that the borrower is totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term in 34 CFR 682.200(b). As part of 

the Secretary’s review of the borrower’s 

discharge application, the Secretary may 

arrange for an additional review of the 

borrower’s condition by an independent 

physician at no expense to the borrower. 

(3) Treatment of disbursements made 

during the period from the date of the 

physician’s certification until the date of 

discharge. If a borrower received a title 

IV loan or TEACH Grant prior to the 

date the physician certified the 

borrower’s discharge application and a 

disbursement of that loan or grant is 

made during the period from the date of 

the physician’s certification until the 

date the Secretary grants a discharge 

under this section, the processing of the 

borrower’s loan discharge request will 

be suspended until the borrower 

ensures that the full amount of the 

disbursement has been returned to the 

loan holder or to the Secretary, as 

applicable. 

(4) Conditions for reinstatement of a 

loan after a total and permanent 

disability discharge. (i) The Secretary 

reinstates a borrower’s obligation to 

repay a loan that was discharged in 

accordance with paragraph (b)(2)(ii) of 

this section if, within three years after 

the date the Secretary granted the 

discharge, the borrower— 

(A) Has annual earnings from 

employment that exceed 100 percent of 

the poverty guideline for a family of 

two, as published annually by the 

United States Department of Health and 

Human Services pursuant to 42 U.S.C. 

9902(2); 

(B) Receives a new TEACH Grant or 

a new loan under the Perkins, FFEL or 

Direct Loan programs, except for a FFEL 

or Direct Consolidation Loan that 

includes loans that were not discharged; 

or 

(C) Fails to ensure that the full 

amount of any disbursement of a title IV 

loan or TEACH Grant received prior to 

the discharge date that is made during 

the three-year period following the 

discharge date is returned to the loan 

holder or to the Secretary, as applicable, 

within 120 days of the disbursement 

date. 

(ii) If the borrower’s obligation to 

repay the loan is reinstated, the 

Secretary— 

(A) Notifies the borrower that the 

borrower’s obligation to repay the loan 

has been reinstated; and 

(B) Does not require the borrower to 

pay interest on the loan for the period 

from the date the loan was discharged 

until the date the borrower’s obligation 

to repay the loan was reinstated. 

(iii) The Secretary’s notification under 

paragraph (b)(4)(ii)(A) of this section 

will include— 

(A) The reason or reasons for the 

reinstatement; 

(B) An explanation that the first 

payment due date on the loan following 

reinstatement will be no earlier than 60 

days after the date of the notification of 

reinstatement; and 

(C) Information on how the borrower 

may contact the Secretary if the 

borrower has questions about the 

reinstatement or believes that the 

obligation to repay the loan was 

reinstated based on incorrect 

information. 

(5) Borrower’s responsibilities after a 

total and permanent disability 

discharge. During the three-year period 

described in paragraph (b)(4)(i) of this 

section, the borrower or, if applicable, 

the borrower’s representative must— 

(i) Promptly notify the Secretary of 

any changes in address or phone 

number; 

(ii) Promptly notify the Secretary if 

the borrower’s annual earnings from 

employment exceed the amount 

specified in paragraph (b)(4)(i)(A) of this 

section; and 

(iii) Provide the Secretary, upon 

request, with documentation of the 

borrower’s annual earnings from 

employment. 

(c) Discharge application process for 

veterans who are totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in 34 CFR 682.200(b). 

(1) Veteran’s application for 

discharge. To qualify for a discharge of 

a Direct Loan based on a total and 

permanent disability as described in 

paragraph (2) of the definition of that 

term in 34 CFR 682.200(b), a veteran 

must submit a discharge application to 

the Secretary on a form approved by the 

Secretary. The application must be 

accompanied by documentation from 

the Department of Veterans Affairs 

showing that the Department of 

Veterans Affairs has determined that the 

veteran is unemployable due to a 

service-connected disability. The 

Secretary does not require the veteran to 

provide any additional documentation 

related to the veteran’s disability. Upon 

receipt of the veteran’s application, the 

Secretary notifies the veteran that no 

payments are due on the loan while the 

Secretary determines the veteran’s 

eligibility for discharge. 

(2) Determination of eligibility. (i) If 

the Secretary determines, based on a 

review of the documentation from the 

Department of Veterans Affairs, that the 

veteran is totally and permanently 

disabled as described in paragraph (2) of 

the definition of that term in 

§ 682.200(b), the Secretary discharges 

the veteran’s obligation to make any 

further payments on the loan and 

returns to the person who made the 

payments on the loan any payments 

received on or after the effective date of 

the determination by the Department of 

Veterans Affairs that the veteran is 

unemployable due to a serviceconnected disability. 

(ii)(A) If the Secretary determines, 

based on a review of the documentation 

from the Department of Veterans Affairs, 

that the veteran is not totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in 34 CFR 682.200(b), the Secretary 

notifies the veteran that the application 

for a disability discharge has been 

denied, and that the loan is due and 

payable to the Secretary under the terms 

of the promissory note. 

(B) The Secretary notifies the veteran 

that he or she may reapply for a total 

and permanent disability discharge in 

accordance with the procedures 

described in paragraph (b) of this 

section if the documentation from the 

Department of Veterans Affairs does not 

indicate that the veteran is totally and 

permanently disabled as described in 

paragraph (2) of the definition of that 

term in 34 CFR 682.200(b), but indicates 

that the veteran may be totally and 

permanently disabled as described in 

paragraph (1) of the definition of that 

term. 

■ 36. Section 685.217 is amended by: 

■ A. Revising paragraph (a). 

■ B. In paragraph (b), adding a 

definition of Educational service agency 

in alphabetical order. 

■ C. Revising the introductory text of 

paragraph (c)(1). 

■ D. In paragraph (c)(1)(ii), adding the 

words ‘‘or educational service agency’s’’ 

immediately after the words ‘‘the 

school’s’’. 

■ E. In paragraph (c)(1)(iii), removing 

the words ‘‘Bureau of Indian Affairs 

(BIA)’’ and adding, in their place, the 

words ‘‘Bureau of Indian Education 

(BIE)’’, and removing the words ‘‘the 

BIA’’ and adding, in their place, the 

words ‘‘the BIE’’. 

■ F. In paragraph (c)(2), adding the 

words ‘‘or educational service agency’’ 

immediately after the words ‘‘If the 

school’’ at the beginning of the 

paragraph, and removing the words ‘‘the 

school failed’’ and adding, in their 

place, the word ‘‘fails’’. 

■ G. In paragraph (c)(3)(i)(A), removing 

the words ‘‘in which’’ and adding, in 

their place, the words ‘‘or educational 

service agency where’’. 


dcolon on DSK2BSOYB1PROD with RULES3
Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 56005 

■ H. In paragraph (c)(3)(i)(B), removing 

the words ‘‘in which’’ and adding, in 

their place, the words ‘‘or educational 

service agency where’’. 

■ I. In paragraph (c)(3)(ii)(A), removing 

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

the word ‘‘at’’, and adding the words ‘‘, 

or taught mathematics or science to 

secondary school students on a full-time 

basis at an eligible educational service 

agency,’’ immediately after the words 

‘‘secondary school’’. 

■ J. In paragraph (c)(3)(ii)(B), removing 

the word ‘‘in’’ the first time it appears 

and adding, in its place, the word ‘‘at’’, 

and adding the words ‘‘or educational 

service agency’’ immediately after the 

words ‘‘secondary school’’ the first time 

they appear. 

■ K. Adding a new paragraph (c)(3)(iii). 

■ L. In paragraph (c)(4)(i), removing the 

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

word ‘‘at’’, and adding the words ‘‘or 

educational service agency’’ 

immediately after the words ‘‘secondary 

school’’ the first time they appear. 

■ M. In paragraph (c)(4)(ii)(A), removing 

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

the word ‘‘at’’, and adding the words ‘‘, 

or taught mathematics or science on a 

full-time basis to secondary school 

students at an eligible educational 

service agency,’’ immediately after the 

words ‘‘secondary school’’. 

■ N. In paragraph (c)(4)(ii)(B), removing 

the word ‘‘in’’ the first time it appears 

and adding, in its place, the word ‘‘at’’, 

and by adding the words ‘‘or 

educational service agency’’ 

immediately after the words ‘‘secondary 

school’’ the first time they appear. 

■ O. Adding a new paragraph (c)(4)(iii). 

■ P. Revising paragraph (c)(9). 

■ Q. Revising paragraph (c)(11). 

■ R. In paragraph (d)(2), removing the 

reference ‘‘34 CFR 682.215’’ and adding, 

in its place, the reference ‘‘34 CFR 

682.216’’. 

The revisions and additions read as 

follows: 

§ 685.217 Teacher loan forgiveness 

program. 

(a) General. (1) The teacher loan 

forgiveness program is intended to 

encourage individuals to enter and 

continue in the teaching profession. For 

new borrowers, the Secretary repays the 

amount specified in this paragraph (a) 

on the borrower’s subsidized and 

unsubsidized Federal Stafford Loans, 

Direct Subsidized Loans, Direct 

Unsubsidized Loans, and in certain 

cases, Federal Consolidation Loans or 

Direct Consolidation Loans. The 

forgiveness program is only available to 

a borrower who has no outstanding loan 

balance under the FFEL Program or the 

Direct Loan Program on October 1, 1998 

or who has no outstanding loan balance 

on the date he or she obtains a loan after 

October 1, 1998. 

(2)(i) The borrower must have been 

employed at an eligible elementary or 

secondary school that serves lowincome families or by an educational 

service agency that serves low-income 

families as a full-time teacher for five 

consecutive complete academic years. 

The required five years of teaching may 

include any combination of qualifying 

teaching service at an eligible 

elementary or secondary school or an 

eligible educational service agency. 

(ii) Teaching at an eligible elementary 

or secondary school may be counted 

toward the required five consecutive 

complete academic years only if at least 

one year of teaching was after the 1997– 

1998 academic year. 

(iii) Teaching at an eligible 

educational service agency may be 

counted toward the required five 

consecutive complete academic years 

only if the consecutive five-year period 

includes qualifying service at an eligible 

educational service agency performed 

after the 2007–2008 academic year. 

(3) All borrowers eligible for teacher 

loan forgiveness may receive loan 

forgiveness of up to a combined total of 

$5,000 on the borrower’s eligible FFEL 

and Direct Loan Program loans. 

(4) A borrower may receive loan 

forgiveness of up to a combined total of 

$17,500 on the borrower’s eligible FFEL 

and Direct Loan Program loans if the 

borrower was employed for five 

consecutive years— 

(i) At an eligible secondary school as 

a highly qualified mathematics or 

science teacher, or at an eligible 

educational service agency as a highly 

qualified teacher of mathematics or 

science to secondary school students; or 

(ii) At an eligible elementary or 

secondary school or educational service 

agency as a highly qualified special 

education teacher. 

(5) The loan for which the borrower 

is seeking forgiveness must have been 

made prior to the end of the borrower’s 

fifth year of qualifying teaching service. 

(b) * * * 

Educational service agency means a 

regional public multiservice agency 

authorized by State statute to develop, 

manage, and provide services or 

programs to local educational agencies, 

as defined in section 9101 of the 

Elementary and Secondary Education 

Act of 1965, as amended. 

* * * * * 

(c) * * * 

(1) A borrower who has been 

employed at an elementary or secondary 

school or an educational service agency 

as a full-time teacher for five 

consecutive complete academic years 

may obtain loan forgiveness under this 

program if the elementary or secondary 

school or educational service agency— 

* * * * * 

(3) * * * 

(iii) Teaching service performed at an 

eligible educational service agency may 

be counted toward the required five 

years of teaching only if the consecutive 

five-year period includes qualifying 

service at an eligible educational service 

agency performed after the 2007–2008 

academic year. 

(4) * * * 

(iii) Teaching service performed at an 

eligible educational service agency may 

be counted toward the required five 

years of teaching only if the consecutive 

five-year period includes qualifying 

service at an eligible educational service 

agency performed after the 2007–2008 

academic year. 

* * * * * 

(9) A borrower who was employed as 

a teacher at more than one qualifying 

school, at more than one qualifying 

educational service agency, or at a 

combination of both during an academic 

year and demonstrates that the 

combined teaching was the equivalent 

of full-time, as supported by the 

certification of one or more of the chief 

administrative officers of the schools or 

educational service agencies involved, 

is considered to have completed one 

academic year of qualifying teaching. 

* * * * * 

(11) A borrower may not receive loan 

forgiveness for the same qualifying 

teaching service under this section if the 

borrower receives a benefit for the same 

teaching service under— 

(i) Subtitle D of title I of the National 

and Community Service Act of 1990; 

(ii) 34 CFR 685.219; or 

(iii) Section 428K of the Act. 

* * * * * 

§ 685.219 [Amended] 

■ 37. Section 685.219 is amended in 

paragraph (b) by removing the words 

‘‘licensed or regulated health care’’ in 

paragraph (5)(i) of the definition of 

‘‘Public service organization’’ and 

adding, in their place, the words 

‘‘licensed or regulated child care’’. 

§ 685.220 [Amended] 

■ 38. Section 685.220 is amended by: 

■ A. In paragraph (d)(1)(i)(B)(3), adding 

the words ‘‘or the no accrual of interest 

benefit for active duty service’’ 

immediately after the word ‘‘Program’’. 

■ B. In paragraph (d)(1)(i)(B)(4), adding 

the words ‘‘or an income-based 

repayment plan’’ immediately after the 


dcolon on DSK2BSOYB1PROD with RULES3
56006 Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / Rules and Regulations 

words ‘‘income contingent repayment 

plan’’. 

■ C. In paragraph (d)(1)(i)(B)(5), adding 

the words ‘‘or the no accrual of interest 

benefit for active duty service’’ 

immediately after the words 

‘‘Forgiveness Program’’. 

■ D. In paragraph (d)(1)(ii)(D), adding 

the words ‘‘or the income-based 

repayment plan described in 

§ 685.208(m),’’ immediately after the 

reference ‘‘§ 685.208(k)’’. 

■ 39. Section 685.221 is amended by: 

■ A. Revising paragraph (a)(4). 

■ B. In paragraph (b)(1), removing the 

words ‘‘Except as provided under 

paragraph (b)(2) of this section, the’’ in 

the second sentence and adding, in their 

place, the word ‘‘The’’. 

■ C. In paragraph (b)(2)(i), removing the 

word ‘‘The’’ at the beginning of the 

sentence and adding, in its place, the 

words ‘‘Except for borrowers provided 

for in paragraph (b)(2)(ii) of this section, 

the’’. 

■ D. Redesignating paragraphs (b)(2)(ii) 

and (b)(2)(iii) as paragraphs (b)(2)(iii) 

and (b)(2)(iv), respectively. 

■ E. Adding a new paragraph (b)(2)(ii). 

■ F. In newly redesignated paragraph 

(b)(2)(iii), removing the words ‘‘or 

(b)(2)(i)’’ and adding, in their place, the 

words ‘‘, (b)(2)(i), or (b)(2)(ii)’’. 

■ G. In newly redesignated paragraph 

(b)(2)(iv), removing the words ‘‘or 

(b)(2)(i)’’ and adding, in their place, the 

words ‘‘, (b)(2)(i), or (b)(2)(ii)’’. 

The revision and addition read as 

follows: 

§ 685.221 Income-based repayment plan. 

(a) * * * 

(4) Partial financial hardship means a 

circumstance in which— 

(i) For an unmarried borrower or a 

married borrower who files an 

individual Federal tax return, the 

annual amount due on all of the 

borrower’s eligible loans, as calculated 

under a standard repayment plan based 

on a 10-year repayment period, using 

the greater of the amount due at the time 

the borrower initially entered 

repayment or at the time the borrower 

elects the income-based repayment 

plan, exceeds 15 percent of the 

difference between the borrower’s AGI 

and 150 percent of the poverty guideline 

for the borrower’s family size; or 

(ii) For a married borrower who files 

a joint Federal tax return with his or her 

spouse, the annual amount due on all of 

the borrower’s eligible loans and, if 

applicable, the spouse’s eligible loans, 

as calculated under a standard 

repayment plan based on a 10-year 

repayment period, using the greater of 

the amount due at the time the loans 

initially entered repayment or at the 

time the borrower or spouse elects the 

income-based repayment plan, exceeds 

15 percent of the difference between the 

borrower’s and spouse’s AGI, and 150 

percent of the poverty guideline for the 

borrower’s family size. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Both the borrower and borrower’s 

spouse have eligible loans and filed a 

joint Federal tax return, in which case 

the Secretary determines— 

(A) Each borrower’s percentage of the 

couple’s total eligible loan debt; 

(B) The adjusted monthly payment for 

each borrower by multiplying the 

calculated payment by the percentage 

determined in paragraph (b)(2)(ii)(A) of 

this section; and 

(C) If the borrower’s loans are held by 

multiple holders, the borrower’s 

adjusted monthly Direct Loan payment 

by multiplying the payment determined 

in paragraph (b)(2)(ii)(B) of this section 

by the percentage of the outstanding 

principal amount of eligible loans that 

are Direct Loans; 

* * * * * 

[FR Doc. E9–25190 Filed 10–28–09; 8:45 am] 

BILLING CODE 4000–01–P 


dcolon on DSK2BSOYB1PROD with RULES3