53374 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

DEPARTMENT OF EDUCATION 

34 CFR Part 681 

RIN 1840–AD21 

[Docket ID ED–2017–OPE–0031] 

Health Education Assistance Loan 

(HEAL) Program 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Final rule. 

SUMMARY: On July 1, 2014, the HEAL 

Program was transferred from the U.S. 

Department of Health and Human 

Services (HHS) to the U.S. Department 

of Education (the Department). To 

reflect this transfer and to facilitate the 

servicing of all HEAL loans that are 

currently held by the Department, the 

Secretary adds the HEAL Program 

regulations to the Department’s chapter 

in the Code of Federal Regulations 

(CFR). 

DATES: These final regulations are 

effective November 15, 2017. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Vanessa Freeman, U.S. Department of 

Education, 400 Maryland Avenue SW., 

Room 6W236, Washington, DC 20202. 

Telephone: (202) 453–7378 or by email: 

Vanessa.Freeman@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD) or a text 

telephone (TTY), you may call the 

Federal Relay Service (FRS), toll free, at 

1–800–877–8339. 

SUPPLEMENTARY INFORMATION: 

Background: The HEAL Program is 

authorized by sections 701–720 of the 

Public Health Service Act (the Act), 42 

U.S.C. 292–292o. The HEAL Program 

was first administered by the Office of 

Education in the former Department of 

Health, Education, and Welfare. On May 

21, 1980, the HEAL Program was 

transferred from the Office of Education 

to HHS until July 1, 2014, when 

Congress transferred the program to the 

Department pursuant to Division H, title 

V, section 525 of the Consolidated 

Appropriations Act, 2014 (Pub. L. 113– 

76) (Consolidated Appropriations Act, 

2014). From fiscal year (FY) 1978 

through FY 1998 the HEAL Program 

insured loans made by participating 

lenders to eligible graduate students in 

schools of medicine, osteopathy, 

dentistry, veterinary medicine, 

optometry, podiatry, public health, 

pharmacy, and chiropractic, and in 

programs in health administration and 

clinical psychology. 

Lenders such as banks, savings and 

loan associations, credit unions, 

pension funds, State agencies, HEAL 

schools, and insurance companies made 

HEAL loans, which were insured by the 

Federal Government against loss due to 

borrowers’ death, disability, bankruptcy, 

and default. The purpose of the program 

was to ensure the availability of funds 

for loans to eligible students who need 

to borrow money to pay for their 

educational costs. 

Authorization to fund new HEAL 

loans to students expired September 30, 

1998. Provisions of the HEAL legislation 

allowing for the refinancing or 

consolidation of existing HEAL loans 

expired September 30, 2004. However, 

the reporting, notification, and 

recordkeeping burden associated with 

refinancing HEAL loans, servicing 

outstanding loans, and administering 

and monitoring of the HEAL Program 

regulations continues. On July 1, 2014, 

the HEAL Program was transferred from 

HHS to the Department. To reflect this 

transfer and to facilitate the servicing of 

HEAL loans that are currently held by 

the Department, the Secretary adds the 

HEAL Program regulations that are 

currently part of HHS’s regulations (42 

CFR part 60) to Title 34 Subpart B 

Chapter VI Part 681 of the CFR. 

Consistent with this regulatory action, 

HHS intends to remove the HEAL 

Program regulations from its 

regulations. 

Significant Regulations: 

In adding the HEAL Program 

regulations to Title 34 of the CFR, we 

have made a limited number of 

technical changes to the regulations. It 

is important to note, we have removed 

references to the making of HEAL loans 

to streamline the regulations and avoid 

confusion, where possible. However, in 

many places we have retained those 

provisions, even though there is no 

authority to fund new HEAL loans, 

because those provisions may continue 

to form the basis of a claim by a lender, 

holder, borrower, or the Secretary 

relating to an outstanding HEAL loan. In 

addition, we note that the Consolidated 

Appropriations Act, 2014 provided that, 

in servicing, collecting, and enforcing 

HEAL loans, all the authorities under 

part B of title IV of the Federal Family 

Education Loan Program (FFELP 

program) would be available. 

Accordingly, we have made a number of 

technical changes to conform the HEAL 

Program servicing, collection, and 

enforcement regulations with those in 

the FFELP program regulations. 

Specifically, the changes to the final 

regulations include: 

• Revising § 681.1(c) to specifically 

note that administrative wage 

garnishment (AWG) may be used as a 

method of loan collection for HEAL 

loans, in accordance with the 

Consolidated Appropriations Act, 2014; 

• Deleting outdated references in 

§ 681.8(b)(3) to reflect the phaseout of 

the HEAL program and that no new 

HEAL loans have been issued since 

September 30, 1998; 

• Revising § 681.11(f)(6) by adding a 

cross-reference to include title IV 

repayment plans available for FFELP 

borrowers for eligible HEAL loans, in 

accordance with the Consolidated 

Appropriations Act, 2014; 

• Revising § 681.18 to reflect that 

HEAL loans may be consolidated in 

accordance with section 525 of the 

Consolidated Appropriations Act, 2014; 

• Revising § 681.20(a) by deleting the 

reference to the statute of limitations on 

collection of HEAL loans in accordance 

with 42 U.S.C 292f(i); 

• Revising § 681.20(d) by adding a 

cross-reference to update the procedures 

and standards to determine if a 

borrower is totally and permanently 

disabled in accordance with section 

525(d) of the Consolidated 

Appropriations Act, 2014; 

• Revising § 681.34(c) by deleting 

outdated information and modernizing 

the language to reflect current practices 

related to how a lender may contact 

HEAL loan borrowers to obtain updated 

information; 

• Revising § 681.34(d) to reflect 

current practices related to skip tracing 

procedures for HEAL loans as outlined 

in § 682.411 and in accordance with 

section 525 of the Consolidated 

Appropriations Act, 2014; 

• Revising § 681.35(a)(2) by deleting 

obsolete information related to actions a 

lender may take to contact a delinquent 

HEAL loan borrower; 

• Revising § 681.35(g)(2) to reflect 

current practices for lenders that obtain 

public records electronically rather than 

requiring submission of paperwork from 

a HEAL loan borrower; 

• Revising § 681.38(a)(3) by deleting 

obsolete information and to reflect that 

all HEAL loans are currently in 

repayment; 

• Revising § 681.39(a) by adding a 

cross-reference to update the death 

discharge procedures for HEAL loan 

borrowers in accordance with section 

525 of the Consolidated Appropriations 

Act, 2014; 

• Revising § 681.39(b) to reference the 

Department’s total and permanent 

disability discharge procedures in 

accordance with the Consolidated 

Appropriations Act, 2014; 

• Updating references related to 

publication of HEAL loan data to reflect 

the Department’s student aid Web site 

as an online resource; 


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Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 53375 

1Federal Student Aid (FSA), HEAL Online 

Processing System (HOPS) (December 2016). Data 

extracted from an internal system by FSA in April 

2017. 

• Changing references to HHS to the 

Department or the Department’s 

servicer, as appropriate; 

• Changing HHS OMB control 

numbers for information collections to 

the Department’s control numbers; and 

• Making technical changes such as 

updating the names of student loan 

servicing companies and medical 

associations. 

We are not making any significant 

substantive changes to the HEAL 

regulations. The regulations are being 

transferred from HHS’s regulations at 42 

CFR part 60 to the Department’s 

regulations at 34 CFR part 681 to reflect 

the Department’s authority to 

administer and service outstanding 

HEAL loans. For more information on 

the substance of the regulations please 

see the final rule published in the 

Federal Register on August 26, 1983 (48 

FR 38988) and subsequent amendments 

published on August 28, 1986 (51 FR 

30644); January 8, 1987 (52 FR 746); and 

June 29, 1992 (57 FR 28794). 

Executive Orders 12866, 13563, and 

13771 

Regulatory Impact Analysis 

Under Executive Order 12866, the 

Secretary must determine whether this 

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 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 

stated in the Executive order. 

This regulatory action is not a 

significant regulatory action subject to 

review by OMB under section 3(f) of 

Executive Order 12866. 

Under Executive Order 13771, for 

each new regulation that the 

Department proposes for notice and 

comment or otherwise promulgates that 

is a significant regulatory action under 

Executive Order 12866 and that imposes 

total costs greater than zero, it must 

identify two deregulatory actions. For 

FY 2017, any new incremental costs 

associated with a new regulation must 

be fully offset by the elimination of 

existing costs through deregulatory 

actions. The final regulations are not a 

significant regulatory action. Therefore, 

the requirements of Executive Order 

13771 do not apply. 

We have also reviewed these 

regulations under Executive Order 

13563, which supplements and 

explicitly reaffirms the principles, 

structures, and definitions governing 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, Executive Order 

13563 requires that an agency— 

(1) Propose or adopt regulations only 

upon a reasoned determination that 

their benefits justify their costs 

(recognizing that some benefits and 

costs are difficult to quantify); 

(2) Tailor its regulations to impose the 

least burden on society, consistent with 

obtaining regulatory objectives and 

taking into account—among other things 

and to the extent practicable—the costs 

of cumulative regulations; 

(3) In choosing among alternative 

regulatory approaches, select those 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety, 

and other advantages; distributive 

impacts; and equity); 

(4) To the extent feasible, specify 

performance objectives, rather than the 

behavior or manner of compliance a 

regulated entity must adopt; and 

(5) Identify and assess available 

alternatives to direct regulation, 

including economic incentives—such as 

user fees or marketable permits—to 

encourage the desired behavior, or 

provide information that enables the 

public to make choices. 

Executive Order 13563 also requires 

an agency ‘‘to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible.’’ The Office of 

Information and Regulatory Affairs of 

OMB has emphasized that these 

techniques may include ‘‘identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes.’’ 

We are issuing these final regulations 

only on a reasoned determination that 

their benefits would justify their costs. 

In choosing among alternative 

regulatory approaches, we selected 

those approaches that would maximize 

net benefits. Based on the analysis that 

follows, the Department believes that 

these final regulations are consistent 

with the principles in Executive Order 

13563. 

We have also determined that this 

regulatory action would not unduly 

interfere with State, local, and Tribal 

governments in the exercise of their 

governmental functions. 

In accordance with the applicable 

Executive orders, the Department has 

assessed the potential costs and 

benefits, both quantitative and 

qualitative, of this regulatory action. 

The final regulations are not expected to 

have a significant impact on Federal, 

State, or local government, institutions, 

or borrowers. The potential costs 

associated with this regulatory action 

are those resulting from statutory 

requirements and those we have 

determined are necessary for 

administering the Department’s 

programs and activities. The final 

regulations support the Department’s 

efforts to facilitate the servicing of 

student loans and consolidate Federal 

student loan oversight. 

Elsewhere in this document under 

Paperwork Reduction Act of 1995, we 

identify and explain burdens 

specifically associated with information 

collection requirements. 

In this Regulatory Impact Analysis we 

discuss the need for regulatory action; 

costs, benefits, and transfers; net budget 

impacts, assumptions, limitations, and 

data sources; and regulatory alternatives 

we considered. 

Need for Regulatory Action 

Section 525 of the Consolidated 

Appropriations Act, 2014 establishes 

the need for regulatory action. This 

legislation authorizes, and the final 

regulations reflect, the transfer of the 

collection of HEAL loans from HHS to 

the Department effective July 1, 2014. 

As part of this transfer, the Department 

also received information collections 

from HHS required to operate the 

program. As of December 31, 2016, there 

were 22,265 HEAL loans outstanding; 

11,390 unique borrowers; and a total 

value of $187,029,585.1 The mean loan 

balance is $8,400 with a range of $1 to 

$341,907. At that date, 99.5 percent of 

outstanding HEAL loans were in 

repayment. 

Discussion of Costs, Benefits, and 

Transfers 

The final regulations are not expected 

to have a significant economic impact 


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53376 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

either by imposing additional costs or 

providing additional benefits. 

Borrowers 

The final regulations reflect that, as of 

July 1, 2014, borrowers’ loans are 

insured by the Department rather than 

HHS. The final regulations do not 

change borrowers’ loan servicers or 

lenders nor do they cause any change in 

cost or benefit for borrowers. 

Lenders and Holders 

These final regulations reflect that, as 

of July 1, 2014, in the event of borrower 

default, death, disability, or bankruptcy, 

lenders and loan holders file insurance 

claims with the Department, rather than 

HHS. The final regulations do not 

impact the future incidence of these 

events; therefore, we do not estimate 

any change in lenders’ costs or benefits 

as a result of the regulations. 

Loan Servicers 

The final regulations do not change 

the lenders or borrowers for any loan 

servicers. Therefore, we do not estimate 

any change in loan servicers’ costs or 

benefits as a result of the regulations. 

Federal Government 

All aspects of administering the HEAL 

Program transferred from HHS to the 

Department. This includes program 

costs the Department incurs and 

proceeds it receives. Therefore, we do 

not anticipate any additional costs or 

benefits to the Federal government as a 

result of the final regulations. 

Net Budget Impacts 

The final regulations are not expected 

to have a significant net budget impact. 

No change in costs or benefits to 

borrowers, lenders, or loan servicers is 

expected as a result of the regulations. 

The final regulations do reflect the 

change in the insurer of the HEAL loans 

and the department to which lenders 

submit insurance claims; however, these 

changes are transfers within the Federal 

government and result in no change in 

fiscal burden to lenders or the Federal 

government. Based on this, the 

Department estimates no significant net 

budget impact from the final 

regulations. 

Assumptions, Limitations, and Data 

Sources 

We considered HEAL Program data 

obtained from FSA to assess whether 

the final regulations affect the costs or 

benefits to borrowers, the Federal 

government, lenders, and loan servicers. 

Because we determined that the final 

regulations only result in transfers, we 

did not include the data in the 

Regulatory Impact Analysis. 

Alternatives Considered 

The transfer of the HEAL Program was 

authorized by section 525 of the 

Consolidated Appropriations Act, 2014. 

To reflect this transfer and to facilitate 

the servicing of all HEAL loans that are 

currently held by the Department, the 

Secretary adds the HEAL Program 

regulations to Title 34 Subpart B 

Chapter VI Part 681 of the CFR. The 

final regulations reflect the program’s 

transfer to the Department and make the 

other technical changes described under 

Significant Regulations. Accordingly, no 

other alternatives were considered. 

Clarity of the Regulations 

Executive Order 12866 and the 

Presidential memorandum ‘‘Plain 

Language in Government Writing’’ 

require each agency to write regulations 

that are easy to understand. 

The Secretary invites comments on 

how to make these regulations easier to 

understand, including answers to 

questions such as the following: 

• Are the requirements in the 

regulations clearly stated? 

• Do the regulations contain technical 

terms or other wording that interferes 

with their clarity? 

• Does the format of the regulations 

(grouping and order of sections, use of 

headings, paragraphing, etc.) aid or 

reduce their clarity? 

• Would the regulations be easier to 

understand if we divided them into 

more (but shorter) sections? (A 

‘‘section’’ is preceded by the symbol 

‘‘§ ’’ and a numbered heading; for 

example, § 681.39.) 

• Could the description of the 

regulations in the SUPPLEMENTARY

INFORMATION section of this preamble be 

more helpful in making the regulations 

easier to understand? If so, how? 

• What else could we do to make the 

regulations easier to understand? 

Send any comments that concern how 

the Department could make these 

regulations easier to understand to the 

program contact person listed under FOR

FURTHER INFORMATION CONTACT. 

Waiver of Rulemaking and Delayed 

Effective Dates 

Under the Administrative Procedure 

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

Department generally offers interested 

parties the opportunity to comment on 

proposed regulations. 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 

public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest. 5 U.S.C. 553(b)(B). 

Rulemaking is ‘‘unnecessary’’ when the 

agency is issuing a minor rule in which 

the public is not particularly interested. 

It applies in those situations in which 

‘‘the administrative rule is a routine 

determination, insignificant in nature 

and impact, and inconsequential to the 

industry and to the public.’’ Utility 

Solid Waste Activities Group v. EPA, 

236 F.3d 749, 755 (D.C. Cir. 2001), 

quoting U.S. Department of Justice, 

Attorney General’s Manual on the 

Administrative Procedure Act 31 (1947) 

and South Carolina v. Block, 558 F. 

Supp. 1004, 1016 (D.S.C. 1983). 

There is good cause here for waiving 

rulemaking under the APA. Rulemaking 

is unnecessary because this rulemaking 

merely transfers the HEAL Program 

regulations from HHS to the Department 

in accordance with section 525 of the 

Consolidated Appropriations Act, 2014. 

The final regulations reflect the 

program’s transfer to the Department 

and make the other technical changes 

described under Significant Regulations. 

The APA also generally requires that 

regulations be published at least 30 days 

before their effective date, unless the 

agency has good cause to implement its 

regulations sooner (5 U.S.C. 553(d)(3)). 

Again, because the final regulations 

merely implement the statutory 

mandate to transfer the HEAL Program 

from HHS to the Department, the 

Secretary is also waiving the 30-day 

delay in the effective date of these 

regulatory changes under 5 U.S.C. 

553(d)(3). 

For the same reasons, the Secretary 

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

of the Higher Education Act of 1965, as 

amended, that these regulations should 

not be subject to negotiated rulemaking. 

Regulatory Flexibility Act Certification 

The Regulatory Flexibility Act does 

not apply to this rulemaking because 

there is good cause to waive notice and 

comment under 5 U.S.C. 553. 

Paperwork Reduction Act of 1995 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department provides the 

general public and Federal agencies 

with an opportunity to comment on 

proposed and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA) 

(44 U.S.C. 3506(c)(2)(A)). This helps 

ensure that: The public understands the 

Department’s collection instructions, 

respondents can provide the requested 

data in the desired format, reporting 

burden (time and financial resources) is 

minimized, collection instruments are 


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Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 53377 

clearly understood, and the Department 

can properly assess the impact of 

collection requirements on respondents. 

The authorization to fund new HEAL 

loans to students expired September 30, 

1998. Section 525 of the Consolidated 

Appropriations Act, 2014, transferred 

the servicing, collecting, and enforcing 

of the HEAL loans from HHS to the 

Department. To fulfill this mandate, the 

Department reviewed the regulations 

and approved forms and then requested 

and received the transfer of the 

pertinent OMB approved information 

collections from HHS to the 

Department. This was completed in 

June 2014. 

Information collection 1845–0125 

contains information collection 

requirements pertaining to the 

regulatory language. 

This filing also identifies separate 

information collections under 1845– 

0124, 1845–0126, 1845–0127, and 1845– 

0128 pertaining to required forms and 

reporting mechanisms. Since the 

transfer of the necessary ICRs from HHS, 

the Department has renewed each of the 

aforementioned collections. 

A Federal agency may not conduct or 

sponsor a collection of information 

unless OMB approves the collection 

under the PRA and the corresponding 

information collection instrument 

displays a currently valid OMB control 

number. Notwithstanding any other 

provision of law, no person is required 

to comply with, or is subject to penalty 

for failure to comply with, a collection 

of information if the collection 

instrument does not display a currently 

valid OMB control number. 

In the final regulations, we have 

displayed the control numbers assigned 

by OMB to any information collection 

requirements contained in the 

regulations. 

Discussion 

The language in the final regulations 

contains information collection 

requirements that have been assigned 

OMB Control number 1845–0125. The 

following figures represent revised 

information as of December 31, 2016, 

which we obtained from HOPS. 

The calculations below represent 

updated figures since the latest renewal 

of the 1845–0125 collection in August, 

2016, with an expiration date of August 

31, 2019. The changes included here are 

due to an updating of the number of 

borrowers and loan holders but there 

has been no change to the regulatory 

language associated with this collection. 

We will be requesting a nonsubstantive 

change clearance for the updated 

figures. 

This is a summary of the reporting, 

notification, and recordkeeping burden 

associated with the information 

collection in the supporting statement. 

The estimate for this information 

collection burden is based on 14 HEAL 

loan holders in the program; and a 

current cumulative total of 11,390 

individuals with outstanding loans 

requiring a variety of servicing 

transactions depending on loan status, 

i.e., internship/residency, repayment, or 

delinquent. 

Entity Respondents Responses Burden hours 

Reporting Requirements 

Loan Holders ................................................................ 14 56 × .20 Hrs. ................................................................. 11 

Notification Requirements 

Loan Holders ................................................................ * 91,000 × .17 Hrs. .......................................................... 15,470 

Individuals ..................................................................... 11,390 11,390 × .17 Hrs. .......................................................... 1,936 

Recordkeeping Requirements 

Loan Holders ................................................................ * 36,400 × .23 Hrs. .......................................................... 8,372 

Revised Totals 

Loan Holders ................................................................ 14 127,456 ......................................................................... 23,853 

Individuals ..................................................................... 11,390 11,390 ........................................................................... 1,936 

Total ....................................................................... 11,404 138,846 ......................................................................... 25,789 

Final Totals 

Current Totals ............................................................... 25,650 144,930 ......................................................................... 26,409 

Revised Totals .............................................................. 11,404 138,846 ......................................................................... 25,789 

Difference ..................................................................... ¥14,246 ¥6,084 ......................................................................... ¥620 

(The * represents the universe of 14 HEAL loan holders participating in the program and is done to avoid double counting the number of 

respondents.) 

The final regulations contain 

reporting, recordkeeping, and 

notification requirements. As each of 

the noted ICRs was approved by OMB 

prior to the transfer of HEAL Program to 

the Department, the table below 

identifies the affected party and burden 

assessment approved by OMB by the 

ICR number. 

OMB control 

No. Topic and form No. Burden hours by affected entity 

1845–0124 ...... Physician’s Certification of Total Permanent Disability #539 ..................................... Individual 15 hrs.; State 3 hrs. 

Total ......... ...................................................................................................................................... 18 hours. 


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53378 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

OMB control 

No. Topic and form No. Burden hours by affected entity 

1845–0126 ...... HEAL Repayment Schedules Form #502–1, #502–2, ................................................ #502–1 & #502–2 Private Not-for Profit 

175 hrs. 

Holder’s Report on HEAL Form #512 ......................................................................... Private Not-for-Profit 30 hrs. 

Total ......... ...................................................................................................................................... 205 hours. 

1845–0127 ...... Lender Application for Insurance Claim #510 ............................................................. #510 Private For-Profit 182 hrs. 

Request for Collection Assistance Form #513 ........................................................... Private For-Profit 983 hrs. 

Total ......... ...................................................................................................................................... 1,165 hours. 

1845–0128 ...... HEAL Forms—Application for Contract for Federal Loan Insurance #504, ............... Private For-Profit 2 hrs. 

Borrower Deferment Request #508 ............................................................................ Individual 11 hrs. 

Borrower Loan Status Record Layout ......................................................................... Private For-Profit 10 hrs. 

Loan Purchase Consolidation Electronic submission ................................................. Private For-Profit 1 hr. 

Total ......... ...................................................................................................................................... 24 hours. 

Intergovernmental Review 

This program is subject to Executive 

Order 12372 and the regulations in 34 

CFR part 79. One of the objectives of the 

Executive order is to foster an 

intergovernmental partnership and a 

strengthened federalism. The Executive 

order relies on processes developed by 

State and local governments for 

coordination and review of proposed 

Federal financial assistance. 

This document provides early 

notification of our specific plans and 

actions for this program. 

Assessment of Educational Impact 

Based on our own review, we have 

determined that the final regulations do 

not require transmission of information 

that any other agency or authority of the 

United States gathers or makes 

available. 

Accessible Format: Individuals with 

disabilities can obtain this document in 

an accessible format (e.g., Braille, large 

print, audiotape, or compact disc) on 

request to the person listed under FOR

FURTHER INFORMATION CONTACT. 

Electronic Access to This Document 

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 via the Federal 

Digital System at: www.gpo.gov/fdsys. 

At this site you can view this document, 

as well as all other documents of this 

Department published in the Federal 

Register, in text or Portable Document 

Format (PDF). To use PDF you must 

have Adobe Acrobat Reader, which is 

available free at the site. 

You may also access documents of the 

Department published in the Federal 

Register by using the article search 

feature at: www.federalregister.gov. 

Specifically, through the advanced 

search feature at this site, you can limit 

your search to documents published by 

the Department. 

List of Subjects in 34 CFR Part 681 

Educational study programs, Health 

professions, Loan programs—education, 

Loan programs—health, Medical and 

dental schools, Reporting and 

recordkeeping requirements, Student 

aid. 

Dated: November 8, 2017. 

Betsy DeVos, 

Secretary of Education. 

■ For the reasons discussed in the 

preamble, the Secretary adds part 681 to 

title 34 of the Code of Federal 

Regulations as follows: 

PART 681—HEALTH EDUCATION 

ASSISTANCE LOAN PROGRAM 

Subpart A—General Program Description 

Sec. 

681.1 What is the HEAL program? 

Subpart B—The Borrower 

681.5 Who is an eligible student borrower? 

681.6 Who is an eligible nonstudent 

borrower? 

681.7 The loan application process. 

681.8 What are the borrower’s major rights 

and responsibilities? 

Subpart C—The Loan 

681.10 How much can be borrowed? 

681.11 Terms of repayment. 

681.12 Deferment. 

681.13 Interest. 

681.14 The insurance premium. 

681.15 Other charges to the borrower. 

681.16 Power of attorney. 

681.17 Security and endorsement. 

681.18 Consolidation of HEAL loans. 

681.19 Forms. 

681.20 The Secretary’s collection efforts 

after payment of a default claim. 

681.21 Refunds. 

Subpart D—The Lender and Holder 

681.30 Which organizations are eligible to 

apply to be HEAL lenders and holders? 

681.31 The application to be a HEAL lender 

or holder. 

681.32 The HEAL lender or holder 

insurance contract. 

681.33 Making a HEAL loan. 

681.34 HEAL loan account servicing. 

681.35 HEAL loan collection. 

681.36 Consequence of using an agent. 

681.37 Forbearance. 

681.38 Assignment of a HEAL loan. 

681.39 Death and disability claims. 

681.40 Procedures for filing claims. 

681.41 Determination of amount of loss on 

claims. 

681.42 Records, reports, inspection, and 

audit requirements for HEAL lenders and 

holders. 

681.43 Limitation, suspension, or 

termination of the eligibility of a HEAL 

lender or holder. 

Subpart E—The School 

681.50 Which schools are eligible to be 

HEAL schools? 

681.51 The student loan application. 

681.52 The student’s loan check. 

681.53 Notification to lender or holder of 

change in enrollment status. 

681.54 Payment of refunds by schools. 

681.55 Administrative and fiscal 

procedures. 

681.56 Records. 

681.57 Reports. 

681.58 Federal access to school records. 

681.59 Records and Federal access after a 

school is no longer a HEAL school. 

681.60 Limitation, suspension, or 

termination of the eligibility of a HEAL 

school. 

681.61 Responsibilities of a HEAL school. 

Authority: Sec. 215, Pub. L. 78–410, 58 

Stat. 690, as amended, 63 Stat. 35 (42 U.S.C. 

216); secs. 727–739A, Pub. L. 78–410, 90 

Stat. 2243, as amended, 93 Stat. 582, 99 Stat. 

529–532, 102 Stat. 3122–3125 (42 U.S.C. 

294–294l–1); renumbered as secs. 701–720, 

as amended by 106 Stat. 1994–2011 (42 

U.S.C. 292–292p); sec. 525, Pub. L. 113–76, 

Division H, title V, transferred HEAL to the 

Secretary of Education effective July 1, 2014. 


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Subpart A—General Program 

Description 

§ 681.1 What is the HEAL program? 

(a) The Health Education Assistance 

Loan (HEAL) program is a program of 

Federal insurance of educational loans 

that were made to graduate students in 

the fields of medicine, osteopathic 

medicine, dentistry, veterinary 

medicine, optometry, podiatric 

medicine, pharmacy, public health, 

chiropractic, health administration, and 

clinical psychology. The basic purpose 

of the program is to encourage lenders 

to make loans to students in these fields 

who desire to borrow money to pay for 

their educational costs. In addition, 

certain nonstudents (such as doctors 

serving as interns or residents) could 

borrow in order to pay the current 

interest charges accruing on earlier 

HEAL loans. By taking a HEAL loan, the 

borrower is obligated to repay the lender 

or holder the full amount of the money 

borrowed, plus all interest which 

accrues on the loan. 

(b) HEAL loans were made by schools, 

banks, credit unions, State agencies, and 

other institutions eligible as lenders 

under § 681.30. HEAL school eligibility 

is described in § 681.50. 

(c) The Secretary insures each lender 

or holder for the losses of principal and 

interest it may incur in the event that a 

borrower dies; becomes totally and 

permanently disabled; files for 

bankruptcy under chapter 11 or 13 of 

the Bankruptcy Act; files for bankruptcy 

under chapter 7 of the Bankruptcy Act 

and files a compliant to determine the 

dischargeability of the HEAL loan; or 

defaults on his or her loan. In these 

instances, if the lender or holder has 

complied with all HEAL statutes and 

regulations and with the lender’s or 

holder’s insurance contract, then the 

Secretary pays the amount of the loss to 

the lender or holder and the borrower’s 

loan is assigned to the Secretary. Only 

after assignment does the Secretary 

become the holder of the HEAL loan 

and the Secretary will use all collection 

methods legally authorized to obtain 

repayment of the HEAL loan, including, 

but not limited to, reporting the 

borrower’s default on the loan to 

consumer credit reporting agencies, 

certifying the debt for offset in the 

Treasury Offset Program (TOP), using 

available methods to locate the debtor, 

utilizing administrative wage 

garnishment, and referring the debt to 

the Department of Justice for litigation. 

(d) Any person who knowingly makes 

a false statement or misrepresentation in 

a HEAL loan transaction, bribes or 

attempts to bribe a Federal official, 

fraudulently obtains a HEAL loan, or 

commits any other illegal action in 

connection with a HEAL loan is subject 

to possible fine and imprisonment 

under Federal statute. 

(e) In counting the number of days 

allowed to comply with any provisions 

of these regulations, Saturdays, 

Sundays, and holidays are to be 

included. However, if a due date falls on 

a Saturday, Sunday, or Federal holiday, 

the due date is the next Federal work 

day. 

Subpart B—The Borrower 

§ 681.5 Who is an eligible student 

borrower? 

To receive a HEAL loan, a student 

must satisfy the following requirements: 

(a) He or she must be a citizen, 

national, or lawful permanent resident 

of the United States, permanent resident 

of the Trust Territory of the Pacific 

Islands (the Republic of Palau), the 

Republic of the Marshall Islands, the 

Federated States of Micronesia, the 

Commonwealth of the Northern Mariana 

Islands, or American Samoa, or lawful 

permanent resident of the 

Commonwealth of Puerto Rico, the 

Virgin Islands or Guam; 

(b) He or she must be enrolled or 

accepted for enrollment at a HEAL 

school in a course of study that leads to 

one of the following degrees: 

(1) Doctor of Medicine. 

(2) Doctor of Osteopathic Medicine. 

(3) Doctor of Dentistry or equivalent 

degree. 

(4) Doctor of Veterinary Medicine or 

equivalent degree. 

(5) Doctor of Optometry or equivalent 

degree. 

(6) Doctor of Podiatric Medicine or 

equivalent degree. 

(7) Bachelor or Master of Science in 

Pharmacy or equivalent degree. 

(8) Graduate or equivalent degree in 

Public Health. 

(9) Doctor of Chiropractic or 

equivalent degree. 

(10) Doctoral degree in Clinical 

Psychology. 

(11) Masters or doctoral degree in 

Health Administration. 

(c) He or she must be carrying or plan 

to carry, during the period for which the 

loan is intended, the normal work load 

of a full-time student, as determined by 

the school. The student’s work load may 

include any combination of courses, 

work experience, research or special 

studies that the school considers 

sufficient to classify the student as full 

time. 

(d) If currently enrolled in school, he 

or she must be in good standing, as 

determined by the school. 

(e)(1) In the case of a pharmacy 

student, he or she must have 

satisfactorily completed 3 years of 

training toward the pharmacy degree. 

These 3 years of training may have been 

taken at the pharmacy school or at a 

different school whose credits are 

accepted on transfer by the pharmacy 

school. 

(2) The Doctor of Pharmacy degree is 

considered to be an equivalent degree if 

it is taken in a school that does not 

require the Bachelor or Master of 

Science in pharmacy as a prerequisite 

for the Doctor of Pharmacy degree. 

(f) In the case of a medical, dental or 

osteopathic student enrolled in a 6-year 

program that the student may enter 

directly from secondary school, the 

student must be enrolled in the last 4 

years of the program. 

(g) He or she must agree that all funds 

received under the proposed loan will 

be used solely for tuition, other 

reasonable educational expenses, 

including fees, books, supplies and 

equipment, and laboratory expenses, 

reasonable living expenses, reasonable 

transportation costs (only to the extent 

that they are directly related to the 

borrower’s education), and the HEAL 

insurance premium. 

(h) He or she must require the loan to 

pursue the course of study at the school. 

This determination of the maximum 

amount of the loan will be made by the 

school, applying the considerations in 

§ 681.51(f). 

(i) If required under section 3 of the 

Military Selective Service Act to present 

himself for and submit to registration 

under such section, he must have 

presented himself and submitted to 

registration under such section. 

§ 681.6 Who is an eligible nonstudent 

borrower? 

To receive a HEAL loan, a person who 

is not a student must satisfy all of the 

following requirements: 

(a) He or she must have received a 

HEAL loan prior to August 13, 1981, for 

which he or she is required to make 

payments of interest, but not principal, 

during the period for which the new 

loan is intended. This may be the grace 

period or a period of internship, 

residency, or deferment. 

(b) He or she must continue to meet 

the citizenship, nationality, or residency 

qualifications required of student 

borrowers. 

(c) He or she must agree that all funds 

received under the proposed loan will 

be used solely for payment of currently 

accruing interest on HEAL loans and the 

HEAL insurance premium. 

(d) If required under section 3 of the 

Military Selective Service Act to present 

himself for and submit to registration 

under such section, he must have 


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53380 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

presented himself and submitted to 

registration under such section. 

§ 681.7 The loan application process. 

(a)(1)(i) A student seeking a HEAL 

loan applies to a participating lender for 

a HEAL loan by submitting an 

application form supplied by the school. 

(ii) The applicant must fill out the 

applicant sections of the form 

completely and accurately. 

(2) The student applicant must have 

been informed of the Federal debt 

collection policies and procedures in 

accordance with the Health and Human 

Services (HHS) Claims Collection 

Regulation (45 CFR part 30) prior to the 

student receiving the loan. The 

applicant must sign a certification 

statement attesting that the applicant 

has been notified of the actions the 

Federal Government can take in the 

event that the applicant fails to meet the 

scheduled payments. This signed 

statement must be maintained by the 

school and the lender or holder as part 

of the borrower’s official record. 

(3) A student applicant must have his 

or her school complete a portion of the 

application providing information 

relating to: 

(i) The applicant’s eligibility for the 

loan; 

(ii) The cost of his or her education; 

and 

(iii) The total financial resources that 

are actually available to the applicant 

for his or her costs of education for the 

period covered by the proposed HEAL 

loan, as determined in accordance with 

§ 681.51(f), and other student aid that 

the applicant has received or will 

receive for the period covered by the 

proposed HEAL loan. 

(4) The student applicant must certify 

on the application that the information 

provided reflects the applicant’s total 

financial resources actually available for 

his or her costs of education for the 

period covered by the proposed HEAL 

loan and the applicant’s total 

indebtedness, and that the applicant has 

no other financial resources that are 

available to the applicant or that the 

applicant will receive for the period 

covered by the proposed HEAL loan. 

(5) A student applicant must certify 

on the application that if required under 

section 3 of the Military Selective 

Service Act to present himself for and 

submit to registration under such 

section, he has presented himself and 

submitted to registration under such 

section. 

(b) The applicant pursuing a full-time 

course of study at an institution of 

higher education that is a ‘‘participating 

school’’ in the Guaranteed Student Loan 

Program but is not pursuing a course of 

study listed in § 681.5(b), applies for a 

HEAL loan as a nonstudent under 

paragraph (c) of this section. 

(c)(1)(i) A nonstudent seeking a HEAL 

loan applies to a participating lender for 

a HEAL loan by submitting an 

application form supplied by the lender. 

(ii) The applicant must fill out the 

applicant sections of the form 

completely and accurately. 

(2) The nonstudent applicant must 

have been informed of the Federal debt 

collection policies and procedures in 

accordance with HHS’ Claims 

Collection Regulation (45 CFR part 30) 

prior to the nonstudent receiving the 

loan. The applicant must sign a 

certification statement attesting that the 

applicant has been notified of the 

actions the Federal Government can 

take in the event that the applicant fails 

to meet the scheduled payments. This 

signed statement will be maintained by 

the lender or holder as part of the 

borrower’s official record. 

(3) A nonstudent applicant must have 

his or her employer or institution, 

whichever is relevant, certify on the 

application that the applicant is: 

(i) Enrolled as a full-time student in 

an eligible school, as described in 

§ 681.12; 

(ii) A participant in an accredited 

internship or residency program, as 

described in § 681.11(a); 

(iii) A member of the Armed Forces of 

the United States; 

(iv) A Peace Corps volunteer; 

(v) A member of the National Health 

Service Corps; or 

(vi) A full-time VISTA volunteer 

under Title I of the Domestic Volunteer 

Service Act of 1973. 

(4) The nonstudent applicant seeking 

a HEAL loan during the grace period 

applies to the lender directly. 

(5) A nonstudent applicant must 

certify on the application that if 

required under section 3 of the Military 

Selective Service Act to present himself 

for and submit to registration under 

such section, he has presented himself 

and submitted to registration under 

such section. 

(6) The nonstudent applicant must 

have certified on the application that 

the information provided reflects the 

applicant’s total financial resources and 

indebtedness. (Approved by the Office 

of Management and Budget under 

control numbers 0915–0038 and 1845– 

0125). 

§ 681.8 What are the borrower’s major 

rights and responsibilities? 

(a) The borrower’s rights. (1) Once the 

terms of the HEAL loan have been 

established, the lender or holder may 

not change them without the borrower’s 

consent. 

(2) The lender must provide the 

borrower with a copy of the completed 

promissory note when the loan is made. 

The lender or holder must return the 

original note to the borrower when the 

loan is paid in full. 

(3) A lender must disburse HEAL loan 

proceeds as described in § 681.33(f). 

(4) The lender or holder must provide 

the borrower with a copy of the 

repayment schedule before repayment 

begins. 

(5) If the loan is sold from one lender 

or holder to another lender or holder, or 

if the loan is serviced by a party other 

than the lender or holder, the buyer 

must notify the borrower within 30 days 

of the transaction. 

(6) The borrower does not have to 

begin repayment until 9 full months 

after leaving school or an accredited 

internship or residency program as 

described in § 681.11. 

(7) The borrower is entitled to 

deferment from repayment of the 

principal and interest installments 

during periods described in § 681.12. 

(8) The borrower may prepay the 

whole or any portion of the loan at any 

time without penalty. 

(9) The lender or holder must allow 

the borrower to repay a HEAL loan 

according to a graduated repayment 

schedule. 

(10) The borrower’s total loan 

obligation is cancelled in the event of 

death or total and permanent disability. 

(11) To assist the borrower in 

avoiding default, the lender or holder 

may grant the borrower forbearance. 

Forbearance, including circumstances in 

which the lender or holder must grant 

forbearance, is more fully described in 

§ 681.37. 

(12) Any borrower who received a 

fixed interest rate HEAL loan in excess 

of 12 percent per year could have 

entered into an agreement with the 

lender which made this loan for the 

reissuance of the loan in accordance 

with section 739A of the Public Health 

Service Act (the Act). 

(b) The borrower’s responsibilities. (1) 

The borrower must pay any insurance 

premium that the lender may require as 

more fully described in § 681.14. 

(2) The borrower must pay all interest 

charges on the loan as required by the 

lender or holder. 

(3) The borrower must immediately 

notify the lender or holder in writing in 

the event of: 

(i) Change of address; 

(ii) Change of name; or 

(iii) Change of status that authorizes 

deferment. 

(4) The borrower must repay the loan 

in accordance with the repayment 

schedule. 


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Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 53381 

(5) A borrower may not have a HEAL 

loan discharged in bankruptcy during 

the first 5 years of the repayment period. 

This prohibition against the discharge of 

a HEAL loan applies to bankruptcy 

under any chapter of the Bankruptcy 

Act, including Chapter 13. A borrower 

may have a HEAL loan discharged in 

bankruptcy after the first 5 years of the 

repayment period only upon a finding 

by the Bankruptcy Court that the nondischarge of such debt would be 

unconscionable and upon the condition 

that the Secretary shall not have waived 

his or her rights to reduce any Federal 

reimbursements or Federal payments for 

health services under any Federal law in 

amounts up to the balance of the loan. 

(6) If the borrower fails to make 

payments on the loan on time, the total 

amount to be repaid by the borrower 

may be increased by additional interest, 

late charges, attorney’s fees, court costs, 

and other collection charges. In 

addition, the Secretary may offset 

amounts attributable to an unpaid loan 

from reimbursements or payment for 

health services provided under any 

Federal law to a defaulted borrower 

practicing his or her profession. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

Subpart C—The Loan 

§ 681.10 How much can be borrowed? 

(a) Student borrower. An eligible 

student may borrow an amount to be 

used solely for expenses, as described in 

§ 681.5(g), incurred or to be incurred 

over a period of up to an academic year 

and disbursed in accordance with 

§ 681.33(f). The maximum amount he or 

she may receive for that period shall be 

determined by the school in accordance 

with § 681.51(f) within the following 

limitations: 

(1) A student enrolled in a school of 

medicine, osteopathic medicine, 

dentistry, veterinary medicine, 

optometry or podiatric medicine may 

borrow up to $80,000 under this part. 

The amount received may not exceed 

$20,000 in any academic year. 

(2) A student enrolled in a school of 

public health, pharmacy, or 

chiropractic, or a graduate program in 

health administration, clinical 

psychology, or allied health, may 

borrow up to $50,000 under this part. 

The amount received may not exceed 

$12,500 per academic year. 

(3) For purposes of this paragraph, an 

academic year means the traditional 

approximately 9-month September-toJune annual session. For the purpose of 

computing academic year equivalents 

for students who, during a 12-month 

period, attend for a longer period than 

the traditional academic year, the 

academic year will be considered to be 

9 months in length. 

(4) The student’s estimated cost of 

attendance shall not exceed the 

estimated cost of attendance of all 

students in like circumstances pursuing 

a similar curriculum at that school. 

(b) Non-student borrower. An eligible 

nonstudent may borrow amounts under 

this authority with the following 

restrictions: 

(1) In no case may an eligible 

nonstudent borrower receive a loan that 

is greater than the sum of the HEAL 

insurance premium plus the interest 

that is expected to accrue and must be 

paid on the borrower’s HEAL loans 

during the period for which the new 

loan is intended. 

(2) An eligible nonstudent in the field 

of medicine, osteopathic medicine, 

dentistry, veterinary medicine, 

optometry, or podiatric medicine may 

borrow up to $80,000 under this part 

including loans obtained while the 

borrower was a student. The loan 

amount may not exceed $20,000 in any 

12-month period. 

(3) An eligible nonstudent in the field 

of pharmacy, public health, 

chiropractic, health administration, or 

clinical psychology may borrow up to 

$50,000 under this part including loans 

obtained while the borrower was a 

student. The loan amount received 

under this part may not exceed $12,500 

in any 12-month period. 

§ 681.11 Terms of repayment. 

(a) Commencement of repayment. (1) 

The borrower’s repayment period begins 

the first day of the 10th month after the 

month he or she ceases to be a full-time 

student at a HEAL school. The 9-month 

period before the repayment period 

begins is popularly called the ‘‘grace 

period.’’ 

(i) Postponement for internship or 

residency program. However, if the 

borrower becomes an intern or resident 

in an accredited program within 9 full 

months after leaving school, then the 

borrower’s repayment period begins the 

first day of the 10th month after the 

month he or she ceases to be an intern 

or resident. For a borrower who receives 

his or her first HEAL loan on or after 

October 22, 1985, this postponement of 

the beginning of the repayment period 

for participation in an internship or 

residency program is limited to 4 years. 

(ii) Postponement for fellowship 

training or educational activity. For any 

HEAL loan received on or after October 

22, 1985, if the borrower becomes an 

intern or resident in an accredited 

program within 9 full months after 

leaving school, and subsequently enters 

into a fellowship training program or an 

educational activity, as described in 

§ 681.12(b)(1) and (2), within 9 months 

after the completion of the accredited 

internship or residency program or prior 

to the completion of such program, the 

borrower’s repayment period begins on 

the first day of the 10th month after the 

month he or she ceases to be a 

participant in the fellowship training 

program or educational activity. 

Postponement of the commencement of 

the repayment period for either activity 

is limited to 2 years. 

(iii) Non-student borrower. If a 

nonstudent borrower obtains another 

HEAL loan during the grace period or 

period of internship, residency, or 

deferment (as defined in § 681.12), the 

repayment period on this loan begins 

when repayment on the borrower’s 

other HEAL loans begins or resumes. 

(2) An accredited internship or 

residency program must be approved by 

one of the following accrediting 

agencies: 

(i) Accreditation Council for Graduate 

Medical Education. 

(ii) Council on Optometric Education. 

(iii) Commission on Accreditation of 

Dental and Dental Auxiliary Programs. 

(iv) American Osteopathic 

Association. 

(v) Council on Podiatry Education. 

(vi) American Council on 

Pharmaceutical Education. 

(vii) Council on Education for Public 

Health. 

(viii) American College of Veterinary 

Surgeons. 

(ix) Council on Chiropractic 

Education. 

(b) Length of repayment period. In 

general, a lender or holder must allow 

a borrower at least 10 years, but not 

more than 25 years, to repay a loan 

calculated from the beginning of the 

repayment period. A borrower must 

fully repay a loan within 33 years from 

the date that the loan is made. 

(1) For a HEAL borrower who 

received any HEAL loan prior to 

October 22, 1985, periods of deferment 

(as described in § 681.12) are not 

included when calculating the 10 to 25 

or 33 year limitations. 

(2) For a borrower who receives his or 

her first HEAL loan on or after October 

22, 1985, periods of deferment (as 

described in § 681.12) are included 

when calculating the 33 year limitation, 

but are not included when calculating 

the 10 to 25 year limitation. 

(c) Prepayment. The borrower may 

prepay the whole or any part of the loan 

at any time without penalty. 

(d) Minimum annual payment. During 

each year of repayment, a borrower’s 

payments to all holders of his or her 


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53382 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

HEAL loans must total the interest that 

accrues during the year on all of the 

loans, unless the borrower, in the 

promissory note or other written 

agreement, agrees to make payments 

during any year or any repayment 

period in a lesser amount. 

(e) Repayment schedule agreement. 

At least 30 and not more than 60 days 

before the commencement of the 

repayment period, a borrower must 

contact the holder of the loan to 

establish the precise terms of 

repayment. The borrower may select a 

monthly repayment schedule with 

substantially equal installment 

payments or a monthly repayment 

schedule with graduated installment 

payments that increase in amount over 

the repayment period. If the borrower 

does not contact the lender or holder 

and does not respond to contacts from 

the lender or holder, the lender or 

holder may establish a monthly 

repayment schedule with substantially 

equal installment payments, subject to 

the terms of the borrower’s HEAL note. 

(f) Supplemental repayment 

agreement. (1) A lender or holder and a 

borrower may enter into an agreement 

supplementing the regular repayment 

schedule agreement. Under a 

supplemental repayment agreement, the 

lender or holder agrees to consider that 

the borrower has met the terms of the 

regular repayment schedule as long as 

the borrower makes payments in 

accordance with the supplemental 

schedule. 

(2) The purpose of a supplemental 

repayment agreement is to permit a 

lender or holder, at its option, to offer 

a borrower a repayment schedule based 

on other than equal or graduated 

payments. (For example, a supplemental 

repayment agreement may base the 

amount of the borrower’s payments on 

his or her income.) 

(3) The supplemental schedule must 

contain terms which, according to the 

Secretary, do not unduly burden the 

borrower and do not extend the 

Secretary’s insurance liability beyond 

the number of years specified in 

paragraph (b) of this section. The 

supplemental schedule must be 

approved by the Secretary prior to the 

start of repayment. 

(4) The lender or holder may establish 

a supplemental repayment agreement 

over the borrower’s objection only if the 

borrower’s written consent to enter into 

a supplemental agreement was obtained 

by the lender at the time the loan was 

made. 

(5) A lender or holder may assign a 

loan subject to a supplemental 

repayment agreement only if it 

specifically notifies the buyer of the 

terms of the supplemental agreement. In 

such cases, the loan and the 

supplemental agreement must be 

assigned together. 

(6) As authorized by section 525 of 

the Consolidated Appropriations Act, 

2014, any repayment plan available 

under part B of title IV of the HEA (the 

Federal Family Education Loan Program 

(FFELP)) is available for servicing, 

collecting, or enforcing HEAL loans. 

Such repayment plans are set forth in 34 

CFR part 682, and in particular in 

§§ 682.102, 682.209, and 682.215. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0126) 

§ 681.12 Deferment. 

(a) After the repayment period has 

commenced, installments of principal 

and interest need not be paid during any 

period: 

(1) During which the borrower is 

pursuing a full-time course of study at 

a HEAL school or at an institution of 

higher education that is a ‘‘participating 

school’’ in the William D. Ford Federal 

Direct Loan Program; 

(2) Up to 4 years during which the 

borrower is a participant in an 

accredited internship or residency 

program, as described in § 681.11(a)(2). 

For a borrower who receives his or her 

first HEAL loan on or after October 22, 

1985, this total of 4 years for an 

internship or residency program 

includes any period of postponement of 

the repayment period, as described in 

§ 681.11(a)(1); 

(3) Up to 3 years during which the 

borrower is a member of the Armed 

Forces of the United States; 

(4) Up to 3 years during which the 

borrower is in service as a volunteer 

under the Peace Corps Act; 

(5) Up to 3 years during which the 

borrower is a member of the National 

Health Service Corps; or 

(6) Up to 3 years during which the 

borrower is a full-time volunteer under 

title I of the Domestic Volunteer Service 

Act of 1973. 

(b) For any HEAL loan received on or 

after October 22, 1985, after the 

repayment period has commenced, 

installments of principal and interest 

need not be paid during any period for 

up to 2 years during which the borrower 

is a participant in: 

(1) A fellowship training program, 

which: 

(i) Is directly related to the discipline 

for which the borrower received the 

HEAL loan; 

(ii) Begins within 12 months after the 

borrower ceases to be a participant in an 

accredited internship or residency 

program, as described in § 681.11(a)(2), 

or prior to the completion of the 

borrower’s participation in such 

program; 

(iii) Is a full-time activity in research 

or research training or health care 

policy; 

(iv) Is not a part of, an extension of, 

or associated with an internship or 

residency program, as described in 

§ 681.11(a)(2); 

(v) Pays no stipend or one which is 

not more than the annual stipend level 

established by the Public Health Service 

for the payment of uniform levels of 

financial support for trainees receiving 

graduate and professional training 

under Public Health Service grants, as 

in effect at the time the borrower 

requests the deferment; and 

(vi) Is a formally established 

fellowship program which was not 

created for a specific individual; or 

(2) A full-time educational activity at 

an institution defined by section 435(b) 

of the HEA which: 

(i) Is directly related to the discipline 

for which the borrower received the 

HEAL loan; 

(ii) Begins within 12 months after the 

borrower ceases to be a participant in an 

accredited internship or residency 

program, as described in § 681.11(a)(2), 

or prior to the completion of the 

borrower’s participation in such 

program; 

(iii) Is not a part of, an extension of, 

or associated with an internship or 

residency program, as described in 

§ 681.11(a)(2); and 

(iv) Is required for licensure, 

registration, or certification in the State 

in which the borrower intends to 

practice the discipline for which the 

borrower received the HEAL loan. 

(c)(1) To receive a deferment, 

including a deferral of the onset of the 

repayment period (see § 681.11(a)), a 

borrower must at least 30 days prior to, 

but not more than 60 days prior to, the 

onset of the activity and annually 

thereafter, submit to the lender or 

holder evidence of his or her status in 

the deferment activity and evidence that 

verifies deferment eligibility of the 

activity (with the full expectation that 

the borrower will begin the activity). It 

is the responsibility of the borrower to 

provide the lender or holder with all 

required information or other 

information regarding the requested 

deferment. If written evidence that 

verifies eligibility of the activity and the 

borrower for the deferment, including a 

certification from an authorized official 

(e.g., the director of the fellowship 

activity, the dean of the school, etc.), is 

received by the lender or holder within 

the required time limit, the lender or 

holder must approve the deferment. The 


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lender or holder may rely in good faith 

upon statements of the borrower and the 

authorized official, except where those 

statements or other information conflict 

with information available to the lender 

or holder. When those verification 

statements or other information conflict 

with information available to the lender 

or holder, to indicate that the applicant 

fails to meet the requirements for 

deferment, the lender or holder may not 

approve the deferment until those 

conflicts are resolved. 

(2) For those activities described in 

paragraphs (b)(1) or (b)(2) of this 

section, the borrower may request that 

the Secretary review a decision by the 

lender or holder denying the deferment 

by sending to the Secretary copies of the 

application for deferment and the 

lender’s or holder’s denial of the 

request. However, if information 

submitted to the lender or holder 

conflicts with other information 

available to the lender or holder, to 

indicate that the borrower fails to meet 

the requirements for deferment, the 

borrower may not request a review until 

such conflicts have been resolved. 

During the review process, the lender or 

holder must comply with any requests 

for information made by the Secretary. 

If the Secretary determines that the 

fellowship or educational activity is 

eligible for deferment and so notifies the 

lender or holder, the lender or holder 

must approve the deferment. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0128) 

§ 681.13 Interest. 

(a) Rate. At the lender’s option, the 

interest rate on the HEAL loan may be 

calculated on a fixed rate or on a 

variable rate basis. However, whichever 

method is selected must continue over 

the life of the loan, except where the 

loan is consolidated with another HEAL 

loan. 

(1) For all loans made on or after 

October 22, 1985, for each calendar 

quarter, the Secretary determines the 

maximum annual HEAL interest rate by 

determining the average of the bond 

equivalent rates reported for the 91-day 

U.S. Treasury bills auctioned for the 

preceding calendar quarter, adding 3 

percentage points, and rounding that 

amount to the next higher one-eighth of 

1 percent. 

(2) Interest that is calculated on a 

fixed rate basis is determined for the life 

of the loan during the calendar quarter 

in which the loan is executed. It may 

not exceed the rate determined for that 

quarter by the Secretary under 

paragraph (a)(1) of this section. 

(3) Interest that is calculated on a 

variable rate basis varies every calendar 

quarter throughout the life of the loan as 

the market price of U.S. Treasury bills 

changes. For any quarter it may not 

exceed the rate determined by the 

Secretary under paragraph (a)(1) of this 

section. 

(4) The Secretary announces the rate 

determined under paragraph (a)(1) of 

this section on a quarterly basis through 

a notice published on the Department’s 

student aid Web site at www.ifap.ed.gov. 

(b) Compounding of interest. Interest 

accrues from the date the loan is 

disbursed until the loan is paid in full. 

Unpaid accrued interest shall be 

compounded not more frequently than 

semiannually and added to principal. 

However, a lender or holder may 

postpone the compounding of interest 

before the beginning of the repayment 

period or during periods of deferment or 

forbearance and add interest to 

principal at the time repayment of 

principal begins or resumes. 

(c) Payment. Repayment of principal 

and interest is due when the repayment 

period begins. A lender or holder must 

permit a borrower to postpone paying 

interest before the beginning of the 

repayment period or during a period of 

deferment or forbearance. In these cases, 

payment of interest begins or resumes 

on the date repayment of principal 

begins or resumes. 

(d) Usury laws. No provision of any 

Federal or State law that limits the rate 

or amount of interest payable on loans 

shall apply to a HEAL loan. 

§ 681.14 The insurance premium. 

(a) General. (1) The Secretary insures 

each lender or holder for the losses of 

principal and interest it may incur in 

the event that a borrower dies; becomes 

totally and permanently disabled; files 

for bankruptcy under chapter 11 or 13 

of the Bankruptcy Act; files for 

bankruptcy under chapter 7 of the 

Bankruptcy Act and files a complaint to 

determine the dischargeability of the 

HEAL loan; or defaults on his or her 

loan. For this insurance, the Secretary 

charges the lender an insurance 

premium. The insurance premium is 

due to the Secretary on the date of 

disbursement of the HEAL loan. 

(2) The lender may charge the 

borrower an amount equal to the cost of 

the insurance premium. The cost of the 

insurance premium may be charged to 

the borrower by the lender in the form 

of a one-time special charge with no 

subsequent adjustments required. The 

lender may bill the borrower separately 

for the insurance premium or may 

deduct an amount attributable to it from 

the loan proceeds before the loan is 

disbursed. In either case, the lender 

must clearly identify to the borrower the 

amount of the insurance premium and 

the method of calculation. 

(3) If the lender does not pay the 

insurance premium on or before 30 days 

after disbursement of the loan, a late fee 

will be charged on a daily basis at the 

same rate as the interest rate that the 

lender charges for the HEAL loan for 

which the insurance premium is past 

due. The lender may not pass on this 

late fee to the borrower. 

(4) HEAL insurance coverage ceases to 

be effective if the insurance premium is 

not paid within 60 days of the 

disbursement of the loan. 

(5) Except in cases of error, premiums 

are not refundable by the Secretary, and 

need not be refunded by the lender to 

the borrower, even if the borrower 

graduates or withdraws from the school, 

defaults, dies or becomes totally and 

permanently disabled. 

(b) Rate. The rate of the insurance 

premium shall not exceed the statutory 

maximum. The Secretary announces 

changes in the rate of the insurance 

premium through a notice published on 

the Department’s student aid Web site: 

www.ifap.ed.gov. 

(c) Method of calculation—(1) Student 

borrowers. For loans disbursed prior to 

July 22, 1986, the lender must calculate 

the insurance premium on the basis of 

the number of months beginning with 

the month following the month in 

which the loan proceeds are disbursed 

to the student borrower and ending 9 

full months after the month of the 

student’s anticipated date of graduation. 

For loans disbursed on or after July 22, 

1986, the insurance premium shall be 

calculated as a one-time flat rate on the 

principal of the loan at the time of 

disbursement. 

(2) Non-student borrowers. For loans 

disbursed prior to July 22, 1986, the 

lender must calculate the insurance 

premium for nonstudent borrowers on 

the basis of the number of months 

beginning with the month following the 

month in which the loan proceeds are 

disbursed to the borrower and ending at 

the conclusion of the month preceding 

the month in which repayment of 

principal is expected to begin or resume 

on the borrower’s previous HEAL loans. 

For loans disbursed on or after July 22, 

1986, the insurance premium shall be 

calculated as a one-time flat rate on the 

principal of the loan at the time of 

disbursement. 

(3) Multiple installments. In cases 

where the lender disburses the loan in 

multiple installments, the insurance 

premium is calculated for each 

disbursement. 


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53384 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

§ 681.15 Other charges to the borrower. 

(a) Late charges. If the borrower fails 

to pay all of a required installment 

payment or fails to provide written 

evidence that verifies eligibility for the 

deferment of the payment within 30 

days after the payment’s due date, the 

lender or holder will require that the 

borrower pay a late charge. A late charge 

must be equal to 5 percent of the unpaid 

portion of the payment due. 

(b) Collection charges. The lender or 

holder may also require that the 

borrower pay the holder of the note for 

reasonable costs incurred by the holder 

or its agent in collecting any installment 

not paid when due. These costs may 

include attorney’s fees, court costs, 

telegrams, and long-distance phone 

calls. The holder may not charge the 

borrower for the normal costs associated 

with preparing letters and making 

personal and local telephone contacts 

with the borrower. A service agency’s 

fee for normal servicing of a loan may 

not be passed on to the borrower, either 

directly or indirectly. No charges, other 

than those authorized by this section, 

may be passed on to the borrower, either 

directly or indirectly, without prior 

approval of the Secretary. 

(c) Other loan making costs. A lender 

may not pass on to the borrower any 

cost of making a HEAL loan other than 

the costs of the insurance premium. 

§ 681.16 Power of attorney. 

Neither a lender nor a school may 

obtain a borrower’s power of attorney or 

other authorization to endorse a 

disbursement check on behalf of a 

borrower. The borrower must personally 

endorse the check and may not 

authorize anyone else to endorse it on 

his or her behalf. 

§ 681.17 Security and endorsement. 

(a) A HEAL loan must be made 

without security. 

(b) With one exception, it must also 

be made without endorsement. If a 

borrower is a minor and cannot under 

State law create a legally binding 

obligation by his or her own signature, 

a lender may require an endorsement by 

another person on the borrower’s HEAL 

note. For purposes of this paragraph, an 

‘‘endorsement’’ means a signature of 

anyone other than the borrower who is 

to assume either primary or secondary 

liability on the note. 

§ 681.18 Consolidation of HEAL loans. 

HEAL loans may be consolidated as 

permitted in 34 CFR 685.220. 

§ 681.19 Forms. 

All HEAL forms are approved by the 

Secretary and may not be changed 

without prior approval by the Secretary. 

HEAL forms shall not be signed in blank 

by a borrower, a school, a lender or 

holder, or an agent of any of these. The 

Secretary may prescribe who must 

complete the forms, and when and to 

whom the forms must be sent. All HEAL 

forms must contain a statement that any 

person who knowingly makes a false 

statement or misrepresentation in a 

HEAL loan transaction, bribes or 

attempts to bribe a Federal official, 

fraudulently obtains a HEAL loan, or 

commits any other illegal action in 

connection with a HEAL loan is subject 

to possible fine and imprisonment 

under Federal statute. 

§ 681.20 The Secretary’s collection efforts 

after payment of a default claim. 

After paying a default claim on a 

HEAL loan, the Secretary attempts to 

collect from the borrower and any valid 

endorser in accordance with the Federal 

Claims Collection Standards (4 CFR 

parts 101 through 105), the Office of 

Management and Budget Circular 

A–129, issued January 2013, and the 

Department’s Claims Collection 

Regulation (34 CFR parts 30, 31, and 

34). The Secretary attempts collection of 

all unpaid principal, interest, penalties, 

administrative costs, and other charges 

or fees, except in the following 

situations: 

(a) The borrower has a valid defense 

on the loan. The Secretary refrains from 

collection against the borrower or 

endorser to the extent of any defense 

that the Secretary concludes is valid. 

Examples of a valid defense include 

infancy or proof of repayment in part or 

in full. 

(b) A school owes the borrower a 

refund for the period covered by the 

loan. In this situation, the Secretary 

refrains from collection to the extent of 

the unpaid refund if the borrower 

assigns to the Secretary the right to 

receive the refund. 

(c) The school or lender or holder is 

the subject of a lawsuit or Federal 

administrative proceeding. In this 

situation, if the Secretary determines 

that the proceeding involves allegations 

that, if proven, would provide the 

borrower with a full or partial defense 

on the loan, then the Secretary may 

suspend collection activity on all or part 

of a loan until the proceeding ends. The 

Secretary suspends collection activity 

only for so long as the proceeding is 

being energetically prosecuted in good 

faith and the allegations that relate to 

the borrower’s defense are reasonably 

likely to be proven. 

(d) The borrower dies or becomes 

totally and permanently disabled. In 

this situation, the Secretary terminates 

all collection activity against the 

borrower. The Secretary follows the 

procedures and standards in 34 CFR 

685.213 and 34 CFR 685.212(a) to 

determine if the borrower is totally and 

permanently disabled. If the borrower 

dies or becomes totally and permanently 

disabled, the Secretary also terminates 

all collection activity against any 

endorser. 

§ 681.21 Refunds. 

(a) Student authorization. By applying 

for a HEAL loan, a student authorizes a 

participating school to make payment of 

a refund that is allocable to a HEAL loan 

directly to the original lender (or to a 

subsequent holder of the loan note, if 

the school has knowledge of the 

holder’s identity). 

(b) Treatment by lenders or holders. 

(1) A holder of a HEAL loan must treat 

a refund payment received from a HEAL 

school as a downward adjustment in the 

principal amount of the loan. 

(2) When a lender receives a school 

refund check for a loan it no longer 

holds, the lender must transfer that 

payment to the holder of the loan and 

either inform the borrower about the 

refund check and where it was sent or, 

if the borrower’s address is unknown, 

notify the current holder that the 

borrower was not informed. The current 

holder must provide the borrower with 

a written notice of the refund payment. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

Subpart D—The Lender and Holder 

§ 681.30 Which organizations are eligible 

to apply to be HEAL lenders and holders? 

(a) A HEAL lender may hold loans 

under the HEAL program. 

(b) The following types of 

organizations were eligible to apply to 

the Secretary to be HEAL lenders: 

(1) A financial or credit institution 

(including a bank, savings and loan 

association, credit union, or insurance 

company) which is subject to 

examination and supervision in its 

capacity as a lender by an agency of the 

United States or of the State in which 

it has its principal place of business; 

(2) A pension fund approved by the 

Secretary; 

(3) An agency or instrumentality of a 

State; and 

(4) A private nonprofit entity, 

designated by the State, regulated by the 

State, and approved by the Secretary. 

(c) The following types of 

organizations are eligible to apply to the 

Secretary to be HEAL holders: 


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Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 53385 

(1) Public entities in the business of 

purchasing student loans; 

(2) Navient (formerly known as the 

Student Loan Marketing Association, or 

‘‘Sallie Mae’’); and 

(3) Other eligible lenders. 

(d) HEAL holders must comply with 

any provisions in the regulations 

required of HEAL lenders including, but 

not limited to, provisions regarding 

applications, contracts, and due 

diligence. 

§ 681.31 The application to be a HEAL 

lender or holder. 

(a) In order to be a HEAL lender or 

holder, an eligible organization must 

submit an application to the Secretary 

annually. 

(b) In determining whether to enter 

into an insurance contract with an 

applicant and what the terms of that 

contract should be, the Secretary may 

consider the following criteria: 

(1) Whether the applicant is capable 

of complying with the requirements in 

the HEAL regulations applicable to 

lenders and holders; 

(2) The amount and rate of loans 

which are currently delinquent or in 

default, if the applicant has had prior 

experience with similar Federal or State 

student loan programs; and 

(3) The financial resources of the 

applicant. 

(c) The applicant must develop and 

follow written procedures for servicing 

and collecting HEAL loans. These 

procedures must be reviewed during the 

biennial audit required by § 681.42(d). If 

the applicant uses procedures more 

stringent than those required by 

§§ 681.34 and 681.35 for its other loans 

of comparable dollar value, on which it 

has no Federal, State, or other third 

party guarantee, it must include those 

more stringent procedures in its written 

procedures for servicing and collecting 

its HEAL loans. 

(d) The applicant must submit 

sufficient materials with his or her 

application to enable the Secretary to 

fairly evaluate the application in 

accordance with these criteria. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0128) 

§ 681.32 The HEAL lender or holder 

insurance contract. 

(a)(1) If the Secretary approves an 

application to be a HEAL lender or 

holder, the Secretary and the lender or 

holder must sign an insurance contract. 

Under this contract, the lender or holder 

agrees to comply with all the laws, 

regulations, and other requirements 

applicable to its participation in the 

HEAL program and the Secretary agrees 

to insure each eligible HEAL loan held 

by the lender or holder against the 

borrower’s default, death, total and 

permanent disability, bankruptcy under 

chapter 11 or 13 of the Bankruptcy Act, 

or bankruptcy under chapter 7 of the 

Bankruptcy Act when the borrower files 

a complaint to determine the 

dischargeability of the HEAL loan. The 

Secretary’s insurance covers 100 percent 

of the lender’s or holder’s losses on both 

unpaid principal and interest, except to 

the extent that a borrower may have a 

defense on the loan other than infancy. 

(2) HEAL insurance, however, is not 

unconditional. The Secretary issues 

HEAL insurance on the implied 

representations of the lender that all the 

requirements for the initial insurability 

of the loan have been met. HEAL 

insurance is further conditioned upon 

compliance by the holder of the loan 

with the HEAL statute and regulations, 

the lender’s or holder’s insurance 

contract, and its own loan management 

procedures set forth in writing pursuant 

to § 681.31(c). The contract may contain 

a limit on the duration of the contract 

and the number or amount of HEAL 

loans a lender may make or hold. Each 

HEAL lender has either a standard 

insurance contract or a comprehensive 

insurance contract with the Secretary, as 

described below. 

(b) Standard insurance contract. A 

lender with a standard insurance 

contract must submit to the Secretary a 

borrower’s loan application for HEAL 

insurance on each loan that the lender 

determines to be eligible. The Secretary 

notifies the lender whether the loan is 

or is not insurable, the amount of the 

insurance, and the expiration date of the 

insurance commitment. A loan which 

has been disbursed under a standard 

contract of insurance prior to the 

Secretary’s approval of the application 

is considered not to have been insured. 

(c)(1) Comprehensive insurance 

contract. A lender with a 

comprehensive insurance contract may 

disburse a loan without submitting an 

individual borrower’s loan application 

to the Secretary for approval. All 

eligible loans made by a lender with this 

type of contract are insured immediately 

upon disbursement. 

(2) The Secretary will revoke the 

comprehensive contract of any lender 

who utilizes procedures which are 

inconsistent with the HEAL statute and 

regulations, the lender’s insurance 

contract, or its own loan management 

procedures set forth in writing pursuant 

to § 681.31(c), and require that such 

lenders disburse HEAL loans only under 

a standard contract. When the Secretary 

determines that the lender is in 

compliance with the HEAL statute and 

regulations and its own loan 

management procedures set forth in 

writing pursuant to § 681.31(c), the 

lender may reapply for a comprehensive 

contract. 

(3) In providing comprehensive 

contracts, the Secretary shall give 

priority to eligible lenders that: 

(i) Make loans to students at interest 

rates below the rates prevailing during 

the period involved; or 

(ii) Make loans under terms that are 

otherwise favorable to the student 

relative to the terms under which 

eligible lenders are generally making 

loans during the period involved. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

§ 681.33 Making a HEAL loan. 

The loan-making process includes the 

processing of necessary forms, the 

approval of a borrower for a loan, 

determination of a borrower’s 

creditworthiness, the determination of 

the loan amount (not to exceed the 

amount approved by the school), the 

explanation to a borrower of his or her 

responsibilities under the loan, the 

execution of the promissory note, and 

the disbursement of the loan proceeds. 

A lender may rely in good faith upon 

statements of an applicant and the 

HEAL school contained in the loan 

application papers, except where those 

statements are in conflict with 

information obtained from the report on 

the applicant’s credit history, or other 

information available to the lender. 

Except where the statements are in 

conflict with information obtained from 

the applicant’s credit history or other 

information available to the lender, a 

lender making loans to nonstudent 

borrowers may rely in good faith upon 

statements by the borrower and 

authorizing officials of internship, 

residency, or other programs for which 

a borrower may receive a deferment. 

(a) Processing of forms. Before making 

a HEAL loan, a lender must determine 

that all required forms have been 

completed by the borrower, the HEAL 

school, the lender, and the authorized 

official for an internship, a residency, or 

other deferment activity. 

(b) Approval of borrower. A lender 

may make a HEAL loan only to an 

eligible student or nonstudent borrower. 

(c) Lender determination of the 

borrower’s creditworthiness. The lender 

may make HEAL loans only to an 

applicant that the lender has 

determined to be creditworthy. This 

determination must be made at least 

once for each academic year during 

which the applicant applies for a HEAL 

loan. An applicant will be determined 

to be ‘‘creditworthy’’ if he or she has a 


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53386 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

repayment history that has been 

satisfactory on any loans on which 

payments have become due. The lender 

may not determine that an applicant is 

creditworthy if the applicant is 

currently in default on any loan 

(commercial, consumer, or educational) 

until the delinquent account is made 

current or satisfactory arrangements are 

made between the affected lender(s) and 

the HEAL applicant. The lender must 

obtain documentation, such as a letter 

from the authorized official(s) of the 

affected lender(s) or a corrected credit 

report indicating that the HEAL 

applicant has taken satisfactory actions 

to bring the account into good standing. 

It is the responsibility of the HEAL loan 

applicant to assure that the lender 

receives each such documentation. No 

loan may be made to an applicant who 

is delinquent on any Federal debt until 

the delinquent account is made current 

or satisfactory arrangements are made 

between the affected agency and the 

HEAL applicant. The lender must 

receive a letter from the authorized 

Federal official of the affected Federal 

agency stating that the borrower has 

taken satisfactory actions to bring the 

account into good standing. It is the 

responsibility of the loan applicant to 

assure that the lender has received each 

such letter. The absence of any previous 

credit, however, is not an indication 

that the applicant is not creditworthy 

and is not to be used as a reason to deny 

the status of creditworthy to an 

applicant. The lender must determine 

the creditworthiness of the applicant 

using, at a minimum, the following: 

(1) A report of the applicant’s credit 

history obtained from an appropriate 

consumer credit reporting agency, 

which must be used in making the 

determinations required by paragraph 

(c) of this section; and 

(2) For student applicants only, the 

certification made by the applicant’s 

school under § 681.51(e). 

(d) Determination of loan amount. A 

lender may not make a HEAL loan in an 

amount that exceeds the permissible 

annual and aggregate maximums 

described in § 681.10. 

(e) Promissory note. (1) Each loan 

must be evidenced by a promissory note 

approved by the Secretary. A lender 

must obtain the Secretary’s prior 

approval of the note form before it 

makes a HEAL loan evidenced by a 

promissory note containing any 

deviation from the provisions of the 

form most currently approved by the 

Secretary. The lender must give the 

borrower a copy of each executed note. 

(2) The lender must explain to the 

borrower that the loan must be repaid 

and that the loan proceeds may be 

applied toward educational expenses 

only. 

(f) Disbursement of HEAL loan. (1) A 

lender must disburse HEAL loan 

proceeds: 

(i) To a student borrower, by means of 

a check or draft payable jointly to the 

student borrower and the HEAL school. 

Except where a lender is also a school, 

a lender must mail the check or draft to 

the school. A lender may not disburse 

the loan proceeds earlier than is 

reasonably necessary to meet the cost of 

education for the period for which the 

loan is made. 

(ii) To a nonstudent borrower, by 

means of a check or draft payable to the 

borrower. However, when a previous 

loan is held by a different lender, the 

current lender must make the HEAL 

loan disbursement check or draft 

payable jointly to the borrower and the 

holder of the previous HEAL loan for 

which interest is payable. 

(2) Effective July 1, 1987, a lender 

must disburse the HEAL loan proceeds 

in two or more installments unless the 

loan is intended to cover a period of no 

more than one-half an academic year. 

The amount disbursed at one time must 

correspond to the borrower’s 

educational expenses for the period for 

which the disbursement is made, and 

must be indicated by the school on the 

borrower’s application. If the loan is 

intended for more than one-half an 

academic year, the school must indicate 

on the borrower’s application both the 

approximate dates of disbursement and 

the amount the borrower will need on 

each such date. In no case may the 

lender disburse the proceeds earlier 

than is reasonably necessary to meet the 

costs of education for the period for 

which the disbursement or the loan is 

made. 

(g) If the lender determines that the 

applicant is not creditworthy, pursuant 

to paragraph (c) of this section, the 

lender must not approve the HEAL loan 

request. If the applicant is a student, the 

lender must notify the applicant and the 

applicant’s school named on the 

application form of the denial of a 

HEAL loan, stating the reason for the 

denial. 

(h) The lender must report a 

borrower’s HEAL indebtedness to one or 

more national credit bureaus within 120 

days of the date the final disbursement 

on the loan is made. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0126) 

§ 681.34 HEAL loan account servicing. 

HEAL loan account servicing involves 

the proper maintenance of records, and 

the proper review and management of 

accounts. Generally accepted account 

servicing standards ensure that 

collections are received and accounted 

for, delinquent accounts are identified 

promptly, and reports are produced 

comparing actual results to previously 

established objectives. 

(a) Borrower inquiries. A lender or 

holder must respond on a timely basis 

to written inquiries and other 

communications from a borrower and 

any endorser of a HEAL loan. 

(b) Conversion of loan to repayment 

status. (1) At least 30 and not more than 

60 days before the commencement of 

the repayment period, the lender or 

holder must contact the borrower in 

writing to establish the terms of 

repayment. Lenders or holders may not 

charge borrowers for the additional 

interest or other charges, penalties, or 

fees that accrue when a lender or holder 

does not contact the borrower within 

this time period and a late conversion 

results. 

(2) Terms of repayment are 

established in a written schedule that is 

made a part of, and subject to the terms 

of, the borrower’s original HEAL note. 

(3) The lender or holder may not 

surrender the original promissory note 

to the borrower until the loan is paid in 

full. At that time, the lender or holder 

must give the borrower the original 

promissory note. 

(c) Borrower contacts. The lender or 

holder must contact each borrower to 

request updated contact information for 

the borrower and to notify the borrower 

of the balance owed for principal, 

interest, insurance premiums, and any 

other charges or fees owed to the lender, 

at least every 6 months from the time 

the loan is disbursed. The lender or 

holder must use this notice to remind 

the borrower of the option, without 

penalty, to pay all or part of the 

principal and accrued interest at any 

time. 

(d) Skip-tracing. If, at any time, the 

lender or holder is unable to locate a 

borrower, the lender or holder must 

initiate skip-tracing procedures as 

described in § 682.411. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0126) 

§ 681.35 HEAL loan collection. 

A lender or holder must exercise due 

diligence in the collection of a HEAL 

loan with respect to both a borrower and 

any endorser. In order to exercise due 

diligence, a lender or holder must 

implement the following procedures 

when a borrower fails to honor his or 

her payment obligations: 

(a) When a borrower is delinquent in 

making a payment, the lender or holder 


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Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 53387 

must remind the borrower within 15 

days of the date the payment was due 

by means of a written contact. If 

payments do not resume, the lender or 

holder must contact both the borrower 

and any endorser at least 3 more times 

at regular intervals during the 120-day 

delinquent period following the first 

missed payment of that 120-day period. 

The second demand notice for a 

delinquent account must inform the 

borrower that the continued delinquent 

status of the account will be reported to 

consumer credit reporting agencies if 

payment is not made. Each of the 

required four contacts must consist of at 

least a written contact which has an 

address correction request on the 

envelope. The last contact must consist 

of a telephone contact, in addition to the 

required letter, unless the borrower 

cannot be contacted by telephone. The 

lender or holder may choose to 

substitute a personal contact for a 

telephone contact. A record must be 

made of each attempt to contact and 

each actual contact, and that record 

must be placed in the borrower’s file. 

Each contact must become progressively 

firmer in tone. If the lender or holder is 

unable to locate the borrower and any 

endorser at any time during the period 

when the borrower is delinquent, the 

lender or holder must initiate the skiptracing procedures described in 

§ 681.34(d). 

(b) When a borrower is 90 days 

delinquent in making a payment, the 

lender or holder must immediately 

request preclaim assistance from the 

Department’s servicer. The Secretary 

does not pay a default claim if the 

lender or holder fails to request 

preclaim assistance. 

(c) Prior to the filing of a default 

claim, a lender or holder must use, at a 

minimum, collection practices that are 

at least as extensive and effective as 

those used by the lender or holder in the 

collection of its other loans. These 

practices must include, but need not be 

limited to: 

(1) Using collection agents, which 

may include its own collection 

department or other internal collection 

agents; 

(2) Immediately notifying an 

appropriate consumer credit reporting 

agency regarding accounts overdue by 

more than 60 days; and 

(3) Commencing and prosecuting an 

action for default unless: 

(i) In the determination of the 

Secretary that: 

(A) The lender or holder has made 

reasonable efforts to serve process on 

the borrower involved and has been 

unsuccessful in these efforts; or 

(B) Prosecution of such an action 

would be fruitless because of the 

financial or other circumstances of the 

borrower; 

(ii) For loans made before November 

4, 1988, the loan involved was made in 

an amount of less than $5,000; or 

(iii) For loans made on or after 

November 4, 1988, the loan involved 

was made in an amount of less than 

$2,500. 

(d) If the Secretary’s preclaim 

assistance locates the borrower, the 

lender or holder must implement the 

loan collection procedures described in 

this section. When the Secretary’s 

preclaim assistance is unable to locate 

the borrower, a default claim may be 

filed by the lender as described in 

§ 681.40. The Secretary does not pay a 

default claim if the lender or holder has 

not complied with the HEAL statute and 

regulations or the lender’s or holder’s 

insurance contract. 

(e) If a lender or holder does not sue 

the borrower, it must send a final 

demand letter to the borrower and any 

endorser at least 30 days before a default 

claim is filed. 

(f) If a lender or holder sues a 

defaulted borrower or endorser, it may 

first apply the proceeds of any judgment 

against its reasonable attorney’s fees and 

court costs, whether or not the judgment 

provides for these fees and costs. 

(g) Collection of chapter 7 

bankruptcies. (1) If a borrower files for 

bankruptcy under chapter 7 of the 

Bankruptcy Act and does not file a 

complaint to determine the 

dischargeability of the HEAL loan, the 

lender or holder is responsible for 

monitoring the bankruptcy case in order 

to pursue collection of the loan after the 

bankruptcy proceedings have been 

completed. 

(i) For any loan for which the lender 

or holder had not begun to litigate 

against the borrower prior to the 

imposition of the automatic stay, the 

period of the automatic stay is to be 

considered as an extended forbearance 

authorized by the Secretary, in addition 

to the 2-year period of forbearance 

which lenders and holders are 

authorized to grant without prior 

approval from the Secretary. Only 

periods of delinquency following the 

date of receipt (as documented by a date 

stamp) of the discharge of debtor notice 

(or other written notification from the 

court or the borrower’s attorney of the 

end of the automatic stay imposed by 

the Bankruptcy Court) can be included 

in determining default, as described in 

§ 681.40(c)(1)(i). The lender or holder 

must attempt to reestablish repayment 

terms with the borrower in writing no 

more than 30 days after receipt of the 

discharge of debtor notice (or other 

written notification from the court or 

the borrower’s attorney of the end of the 

automatic stay imposed by the 

Bankruptcy Court), in accordance with 

the procedures followed at the end of a 

forbearance period. If the borrower fails 

to make a payment as scheduled, the 

lender or holder must attempt to obtain 

repayment through written and 

telephone contacts in accordance with 

the intervals established in paragraph 

(a)(1) of this section, and must perform 

the other HEAL loan collection 

activities required in this section, before 

filing a default claim. 

(ii) For any loan for which the lender 

or holder had begun to litigate against 

the borrower prior to the imposition of 

the automatic stay, the lender or holder 

must, upon written notification from the 

court or the borrower’s attorney that the 

bankruptcy proceedings have been 

completed, either resume litigation or 

treat the loan in accordance with 

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

(2) If the lender or holder has not 

received written notification of 

discharge within 12 months of the date 

that the borrower filed for bankruptcy, 

the lender or holder must contact the 

court and the borrower’s attorney (if 

known) within 30 days to determine if 

the bankruptcy proceedings have been 

completed. If no response is received 

within 30 days of the date of these 

contacts, the lender or holder must 

resume its collection efforts, in 

accordance with paragraph (g)(1) of this 

section. If a written response from the 

court or the borrower’s attorney 

indicates that the bankruptcy 

proceedings are still underway, the 

lender or holder is not to pursue further 

collection efforts until receipt of written 

notice of discharge, except that followup in accordance with this paragraph 

must be done at least once every 12 

months until the bankruptcy 

proceedings have been completed. A 

lender or holder may utilize PACER 

(Public Access to Court Electronic 

Records) in place of contact with the 

court and/or borrower’s attorney. 

(3) If, despite the lender or holder’s 

compliance with required procedures, a 

loan subject to the requirements of 

paragraph (g)(1) of this section is 

discharged, the lender or holder must 

file a claim with the Secretary within 10 

days of the initial date of receipt (as 

documented by a date stamp) of written 

notification of the discharge from the 

court or the borrower’s attorney, in 

accordance with the procedures set 

forth in § 681.40(c)(4). The lender or 

holder also must file with the 

bankruptcy court an objection to the 

discharge of the HEAL loan, and must 


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53388 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

include with the claim documentation 

showing that the bankruptcy 

proceedings were handled properly and 

expeditiously (e.g., all documents sent 

to or received from the bankruptcy 

court, including evidence which shows 

the period of the bankruptcy 

proceedings). 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0127) 

§ 681.36 Consequence of using an agent. 

The delegation of functions to a 

servicing agency or other party does not 

relieve a lender or holder of its 

responsibilities under the HEAL 

program. 

§ 681.37 Forbearance. 

(a) Forbearance means an extension of 

time for making loan payments or the 

acceptance of smaller payments than 

were previously scheduled to prevent a 

borrower from defaulting on his or her 

payment obligations. A lender or holder 

must notify each borrower of the right 

to request forbearance. 

(1) Except as provided in paragraph 

(a)(2) of this section, a lender or holder 

must grant forbearance whenever the 

borrower is temporarily unable to make 

scheduled payments on a HEAL loan 

and the borrower continues to repay the 

loan in an amount commensurate with 

his or her ability to repay the loan. Any 

circumstance which affects the 

borrower’s ability to repay the loan must 

be fully documented. 

(2) If the lender or holder determines 

that the default of the borrower is 

inevitable and that forbearance will be 

ineffective in preventing default, the 

lender or holder may submit a claim to 

the Secretary rather than grant 

forbearance. If the Secretary is not in 

agreement with the determination of the 

lender or holder, the claim will be 

returned to the lender or holder as 

disapproved and forbearance must be 

granted. 

(b) A lender or holder must exercise 

forbearance in accordance with terms 

that are consistent with the 25- and 33- 

year limitations on the length of 

repayment (described in § 681.11) if the 

lender or holder and borrower agree in 

writing to the new terms. Each 

forbearance period may not exceed 6 

months. 

(c) A lender or holder may also 

exercise forbearance for periods of up to 

6 months in accordance with terms that 

are inconsistent with the minimum 

annual payment requirement if the 

lender or holder complies with the 

requirements listed in paragraphs (c)(1) 

through (4) of this section. Subsequent 

renewals of the forbearance must also be 

documented in accordance with the 

following requirements: 

(1) The lender or holder must 

reasonably believe that the borrower 

intends to repay the loan but is 

currently unable to make payments in 

accordance with the terms of the loan 

note. The lender or holder must state 

the basis for its belief in writing and 

maintain that statement in its loan file 

on that borrower. 

(2) Both the borrower and an 

authorized official of the lender or 

holder must sign a written agreement of 

forbearance. 

(3) If the agreement between the 

borrower and lender or holder provides 

for forbearance of all payments, the 

lender or holder must contact the 

borrower at least every 3 months during 

the period of forbearance in order to 

remind the borrower of the outstanding 

obligation to repay. 

(4) The total period of forbearance 

(with or without interruption) granted 

by the lender or holder to any borrower 

must not exceed 2 years. However, 

when the borrower and the lender or 

holder believe that there are bona fide 

reasons why this period should be 

extended, the lender or holder may 

request a reasonable extension beyond 

the 2-year period from the Secretary. 

This request must document the reasons 

why the extension should be granted. 

The lender or holder may grant the 

extension for the approved time period 

if the Secretary approves the extension 

request. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

§ 681.38 Assignment of a HEAL loan. 

A HEAL note may not be assigned 

except to another HEAL lender or 

organization as specified in § 681.30 and 

except as provided in § 681.40. In this 

section ‘‘seller’’ means any kind of 

assignor and ‘‘buyer’’ means any kind of 

assignee. 

(a) Procedure. A HEAL note assigned 

from one lender or holder to another 

must be subject to a blanket 

endorsement together with other HEAL 

notes being assigned or must 

individually bear effective words of 

assignment. Either the blanket 

endorsement or the HEAL note must be 

signed and dated by an authorized 

official of the seller. Within 30 days of 

the transaction, the buyer must notify 

the following parties of the assignment: 

(1) The Secretary; and 

(2) The borrower. The notice to the 

borrower must contain a clear statement 

of all the borrower’s rights and 

responsibilities which arise from the 

assignment of the loan, including a 

statement regarding the consequences of 

making payments to the seller 

subsequent to receipt of the notice. 

(b) Risks assumed by the buyer. Upon 

acquiring a HEAL loan, a new holder 

assumes responsibility for the 

consequences of any previous violations 

of applicable statutes, regulations, or the 

terms of the note except for defects 

under § 681.41(d). A HEAL note is not 

a negotiable instrument, and a 

subsequent holder is not a holder in due 

course. If the borrower has a valid legal 

defense that could be asserted against 

the previous holder, the borrower can 

also assert the defense against the new 

holder. In this situation, if the new 

holder files a default claim on a loan, 

the Secretary denies the default claim to 

the extent of the borrower’s defense. 

Furthermore, when a new holder files a 

claim on a HEAL loan, it must provide 

the Secretary with the same 

documentation that would have been 

required of the original lender. 

(c) Warranty. Nothing in this section 

precludes the buyer of a HEAL loan 

from obtaining a warranty from the 

seller covering certain future reductions 

by the Secretary in computing the 

amount of insurable loss, if any, on a 

claim filed on the loan. The warranty 

may only cover reductions which are 

attributable to an act or failure to act of 

the seller or other previous holder. The 

warranty may not cover matters for 

which the buyer is charged with 

responsibility under the HEAL 

regulations. 

(d) Bankruptcy. If a lender or holder 

assigns a HEAL loan to a new holder, or 

a new holder acquires a HEAL loan 

under 20 U.S.C. 1092a (the Combined 

Payment Plan authority), and the 

previous holder(s) subsequently 

receives court notice that the borrower 

has filed for bankruptcy, the previous 

holder(s) must forward the bankruptcy 

notice to the purchaser within 10 days 

of the initial date of receipt, as 

documented by a date stamp, except 

that if it is a chapter 7 bankruptcy with 

no complaint for dismissal, the previous 

holder(s) must file the notice with the 

purchaser within 30 days of the initial 

date of receipt, as documented by a date 

stamp. The previous holder(s) also must 

file a statement with the court notifying 

it of the change of ownership. 

Notwithstanding the above, the current 

holder will not be held responsible for 

any loss due to the failure of the prior 

holder(s) to meet the deadline for giving 

notice if such failure occurs after the 

current holder purchased the loan. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0128) 


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Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 53389 

§ 681.39 Death and disability claims. 

(a) Death. The Secretary will 

discharge a borrower’s liability on the 

loan in accordance with section 738 of 

the Act upon the death of the borrower. 

The holder of the loan may not attempt 

to collect on the loan from the 

borrower’s estate or any endorser. The 

holder must secure a certification of 

death or whatever official proof is 

conclusive under State law. The holder 

must return to the sender any payments 

in accordance with § 685.212(a) 

received from the estate of the borrower 

or paid on behalf of the borrower after 

the date of death. 

(b) Disability. The Secretary will 

discharge a borrower’s liability on the 

loan in accordance with 34 CFR 

685.213. 

§ 681.40 Procedures for filing claims. 

(a) A lender or holder must file an 

insurance claim on a form approved by 

the Secretary. The lender or holder must 

attach to the claim all documentation 

necessary to litigate a default, including 

any documents required to be submitted 

by the Federal Claims Collection 

Standards, and which the Secretary may 

require. Failure to submit the required 

documentation and to comply with the 

HEAL statute and regulations or the 

lender’s or holder’s insurance contract 

will result in a claim not being honored. 

The Secretary may deny a claim that is 

not filed within the period specified in 

this section. The Secretary requires for 

all claims at least the following 

documentation: 

(1) The original promissory note; 

(2) An assignment to the United States 

of America of all right, title, and interest 

of the lender or holder in the note; 

(3) The loan application; 

(4) The history of the loan activities 

from the date of loan disbursement 

through the date of claim, including any 

payments made; and 

(5) A Borrower Status Form (HEAL– 

508), documenting each deferment 

granted under § 681.12 or a written 

statement from an appropriate official 

stating that the borrower was engaged in 

an activity for which he or she was 

entitled to receive a deferment at the 

time the deferment was granted. 

(b) The Secretary’s payment of a claim 

is contingent upon receipt of all 

required documentation and an 

assignment to the United States of 

America of all right, title, and interest of 

the lender or holder in the note 

underlying the claim. The lender or 

holder must warrant that the loan is 

eligible for HEAL insurance. 

(c) In addition, the lender or holder 

must comply with the following 

requirements for the filing of default, 

death, disability, and bankruptcy 

claims: 

(1) Default claims. Default means the 

persistent failure of the borrower to 

make a payment when due or to comply 

with other terms of the note or other 

written agreement evidencing a loan 

under circumstances where the 

Secretary finds it reasonable to conclude 

that the borrower no longer intends to 

honor the obligation to repay the loan. 

In the case of a loan repayable (or on 

which interest is payable) in monthly 

installments, this failure must have 

persisted for 120 days. In the case of a 

loan repayable (or on which interest is 

payable) in less frequent installments, 

this failure must have persisted for 180 

days. If, for a particular loan, an 

automatic stay is imposed on collection 

activities by a Bankruptcy Court, and 

the lender or holder receives written 

notification of the automatic stay prior 

to initiating legal proceedings against 

the borrower, the 120- or 180-day period 

does not include any period prior to the 

end of the automatic stay. 

(i) If a lender or holder determines 

that it is not appropriate to commence 

and prosecute an action against a 

default borrower pursuant to 

§ 681.35(c)(3), it must file a default 

claim with the Secretary within 30 days 

after a loan has been determined to be 

in default. 

(ii) If a lender files suit against a 

defaulted borrower and does not pursue 

collection of the judgment obtained as a 

result of the suit, it must file a default 

claim with the Secretary within 60 days 

of the date of issuance of the judgment. 

If a lender or holder files suit against a 

defaulted borrower, and pursues 

collection of the judgment obtained as a 

result of the suit, these collection 

activities must begin within 60 days of 

the date of issuance of the judgment. If 

the lender or holder is unable to collect 

the full amount of principal and interest 

owed, a claim must be filed within 30 

days of completion of the post-judgment 

collection activities. In either case, the 

lender or holder must assign the 

judgment to the Secretary as part of the 

default claim. 

(iii) In addition to the documentation 

required for all claims, the lender or 

holder must submit with its default 

claim at least the following: 

(A) Repayment schedule(s); 

(B) A collection history, if any; 

(C) A final demand letter; 

(D) The original or a copy of all 

correspondence relevant to the HEAL 

loan to or from the borrower (whether 

received by the original lender, a 

subsequent holder, or an independent 

servicing agent); 

(E) A claims collection litigation 

report; and 

(F) If the defaulted borrower filed for 

bankruptcy under chapter 7 of the 

Bankruptcy Act and did not file a 

complaint to determine the 

dischargeability of the loan, all 

documents sent to or received from the 

bankruptcy court, including evidence 

which shows the period of the 

bankruptcy proceedings. 

(iv) If a lender or holder files a default 

claim on a loan and subsequently 

receives written notice from the court or 

the borrower’s attorney that the 

borrower has filed for bankruptcy under 

chapter 11 or 13 of the Bankruptcy Act, 

or under chapter 7 with a complaint to 

determine the dischargeability of the 

loan, the lender or holder must file that 

notice with the Secretary within 10 days 

of the lender or holder’s initial date of 

receipt, as documented by a date stamp. 

If the borrower is declaring bankruptcy 

under chapter 7 of the Bankruptcy Act, 

and has not filed a complaint to 

determine the dischargeability of the 

loan, the lender or holder must file the 

written notice with the Secretary within 

30 days of the lender’s or holder’s initial 

date of receipt, as documented by a date 

stamp. If the Secretary has not paid the 

claim at the time the lender or holder 

receives that notice, upon receipt of the 

notice, the lender or holder must file 

with the bankruptcy court a proof of 

claim, if applicable, and an objection to 

the discharge or compromise of the 

HEAL loan. If the Secretary has paid the 

claim, the lender or holder must file a 

statement with the court notifying it that 

the loan is owned by the Secretary. 

(2) Death claims. A lender or holder 

must file a death claim with the 

Secretary within 30 days after the lender 

or holder obtains documentation that a 

borrower is dead. In addition to the 

documentation required for all claims, 

the lender or holder must submit with 

its death claim those documents which 

verify the death, including an official 

copy of the Death Certificate. 

(3) Disability claims. A lender or 

holder must file a disability claim with 

the Secretary within 30 days after it has 

been notified that the Secretary has 

determined a borrower to be totally and 

permanently disabled. In addition to the 

documentation required for all claims, 

the lender or holder must submit with 

its claim evidence of the Secretary’s 

determination that the borrower is 

totally and permanently disabled. 

(4) Bankruptcy claims. For a 

bankruptcy under chapter 11 or 13 of 

the Bankruptcy Act, or a bankruptcy 

under chapter 7 of the Bankruptcy Act 

when the borrower files a complaint to 

determine the dischargeability of the 


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53390 Federal Register / Vol. 82, No. 219 / Wednesday, November 15, 2017 / Rules and Regulations 

HEAL loan, the current holder must file 

a claim with the Secretary within 10 

days of the initial date of receipt of 

court notice or written notice from the 

borrower’s attorney that the borrower 

has filed for bankruptcy under chapter 

11 or chapter 13, or has filed a 

complaint to determine the 

dischargeability of the HEAL loan under 

chapter 7. The initial date of receipt of 

the written notice must be documented 

by a date stamp. The lender or holder 

must file with the bankruptcy court a 

proof of claim, if applicable, and an 

objection to the discharge or 

compromise of the HEAL loan. In 

addition to the documentation required 

for all claims, with its claim the lender 

or holder must submit to the Secretary 

at least the following: 

(i) Repayment schedule(s); 

(ii) A collection history, if any; 

(iii) A proof of claim, where 

applicable; 

(iv) An assignment to the United 

States of America of its proof of claim, 

where applicable; 

(v) All pertinent documents sent to or 

received from the bankruptcy court; 

(vi) A statement of any facts of which 

the lender is aware that may form the 

basis for an objection to the bankrupt’s 

discharge or an exception to the 

discharge; 

(vii) The notice of the first meeting or 

creditors, or an explanation as to why 

this is not included; 

(viii) In cases where there is defective 

service, a declaration or affidavit 

attesting to the fact that the lender or 

holder was not directly served with the 

notice of meeting of creditors. This 

declaration or affidavit must also 

indicate when and how the lender or 

holder learned of the bankruptcy; and 

(ix) In cases where there is defective 

service due to the borrower’s failure to 

list the proper creditor, a copy of the 

letter sent to the borrower at the time of 

purchase of the HEAL loan by the 

current holder, or a sample letter with 

documentation indicating when the 

letter was sent to the borrower. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0127) 

§ 681.41 Determination of amount of loss 

on claims. 

(a) General rule. HEAL insurance 

covers the unpaid balance of principal 

and interest on an eligible HEAL loan, 

less the amount of any judgment 

collected pursuant to default 

proceedings commenced by the eligible 

lender or holder involved. In 

determining whether to approve an 

insurance claim for payment, the 

Secretary considers legal defects 

affecting the initial validity or 

insurability of the loan. The Secretary 

also deducts from a claim any amount 

that is not a legally enforceable 

obligation of the borrower except to the 

extent that the defense of infancy 

applies. The Secretary further considers 

whether all holders of the loan have 

complied with the requirements of the 

HEAL regulations, including those 

concerned with the making, servicing, 

and collecting of the loan, the timely 

filing of claims, and the submission of 

documents with a claim. 

(b) Special rules for loans acquired by 

assignment. If a claim is filed by a 

lender or holder that obtained a loan by 

assignment, that lender or holder is not 

entitled to any payment under this 

section greater than that to which a 

previous holder would have been 

entitled. In particular, the Secretary 

deducts from the claim any amounts 

that are attributable to payments made 

by the borrower to a prior holder of the 

loan before the borrower received 

proper notice of the assignment of the 

loan. 

(c) Special rules for loans made by 

school lenders. (1) If the loan for which 

a claim is filed was originally made by 

a school and the claim is filed by that 

school, the Secretary deducts from the 

claim an amount equal to any unpaid 

refund that the school owes the 

borrower. 

(2) If the loan for which a claim is 

filed was originally made by a school 

but the claim is filed by another lender 

of holder that obtained the note by 

assignment, the Secretary deducts from 

the claim an amount equal to any 

unpaid refund that the school owed the 

borrower prior to the assignment. 

(d) Circumstances under which 

defects in claims may be cured or 

excused. The Secretary may permit a 

lender or holder to cure certain defects 

in a specified manner as a condition for 

payment of a default claim. The 

Secretary may excuse certain defects if 

the holder submitting the default claim 

satisfies the Secretary that the defect did 

not contribute to the default or 

prejudice the Secretary’s attempt to 

collect the loan from the borrower. The 

Secretary may also excuse certain 

defects if the defect arose while the loan 

was held by another lender or holder 

and the holder submitting the default 

claim satisfies the Secretary that the 

assignment of the loan was an arm’s 

length transaction, that the present 

holder did not know of the defect at the 

time of the sale and that the present 

holder could not have become aware of 

the defect through an examination of the 

loan documents. 

(e) Payment of insured interest. The 

payment on an approved claim covers 

the unpaid principal balance and 

interest that accrues through the date 

the claim is paid, except: 

(1) If the lender or holder failed to 

submit a claim within the required 

period after the borrower’s default; 

death; total and permanent disability; or 

filing of a petition in bankruptcy under 

chapter 11 or 13 of the Bankruptcy Act, 

or under chapter 7 where the borrower 

files a complaint to determine the 

dischargeability of the HEAL loan; the 

Secretary does not pay interest that 

accrued between the end of that period 

and the date the Secretary received the 

claim. 

(2) If the Secretary returned the claim 

to the lender or holder for additional 

documentation necessary for the 

approval of the claim, the Secretary 

pays interest only for the first 30 days 

following the return of the claim to the 

lender or holder. 

§ 681.42 Records, reports, inspection, and 

audit requirements for HEAL lenders and 

holders. 

(a) Records. (1) A lender or holder 

must keep complete and accurate 

records of each HEAL loan which it 

holds. The records must be organized in 

a way that permits them to be easily 

retrievable and allows the ready 

identification of the current status of 

each loan. The required records include: 

(i) The loan application; 

(ii) The original promissory note; 

(iii) The repayment schedule 

agreement; 

(iv) Evidence of each disbursement of 

loan proceeds; 

(v) Notices of changes in a borrower’s 

address and status as a full-time 

student; 

(vi) Evidence of the borrower’s 

eligibility for a deferment; 

(vii) The borrower’s signed statement 

describing his or her rights and 

responsibilities in connection with a 

HEAL loan; 

(viii) The documents required for the 

exercise of forbearance; 

(ix) Documentation of the assignment 

of the loan; and 

(x) Evidence of a borrower’s 

creditworthiness, including the 

borrower’s credit report. 

(2) The lender or holder must 

maintain for each borrower a payment 

history showing the date and amount of 

each payment received on the 

borrower’s behalf, and the amounts of 

each payment attributable to principal 

and interest. A lender or holder must 

also maintain for each loan a collection 

history showing the date and subject of 

each communication with a borrower or 


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endorser for collection of a delinquent 

loan. Furthermore, a lender or holder 

must keep any additional records which 

are necessary to make any reports 

required by the Secretary. 

(3) A lender or holder must retain the 

records required for each loan for not 

less than 5 years following the date the 

loan is repaid in full by the borrower. 

However, in particular cases the 

Secretary may require the retention of 

records beyond this minimum period. A 

lender or holder must keep the original 

copy of an unpaid promissory note, but 

may store all other records in microform 

or computer format. 

(4) The lender or holder must 

maintain accurate and complete records 

on each HEAL borrower and related 

school activities required by the HEAL 

program. All HEAL records shall be 

maintained under security and 

protected from fire, flood, water leakage, 

other environmental threats, electronic 

data system failures or power 

fluctuations, unauthorized intrusion for 

use, and theft. 

(b) Reports. A lender or holder must 

submit reports to the Secretary at the 

time and in the manner required by the 

Secretary. 

(c) Inspections. Upon request, a 

lender or holder must afford the 

Secretary, the Comptroller General of 

the United States, and any of their 

authorized representatives access to its 

records in order to assure the 

correctness of its reports. 

(d) The lender or holder must comply 

with the Department’s biennial audit 

requirements of section 705 of the Act. 

(e) Any lender or holder who has 

information which indicates potential or 

actual commission of fraud or other 

offenses against the United States, 

involving these loan funds, must 

promptly provide this information to 

the appropriate Regional Office of 

Inspector General for Investigations. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125 

and 1845–0126) 

§ 681.43 Limitation, suspension, or 

termination of the eligibility of a HEAL 

lender or holder. 

(a) The Secretary may limit, suspend, 

or terminate the eligibility under the 

HEAL program of an otherwise eligible 

lender or holder that violates or fails to 

comply with any provision of the Act, 

these regulations, or agreements with 

the Secretary concerning the HEAL 

program. Prior to terminating a lender or 

holder’s participation in the program, 

the Secretary will provide the entity an 

opportunity for a hearing in accordance 

with the procedures under paragraph (b) 

of this section. 

(b)(1) The Secretary will provide any 

lender or holder subject to termination 

with a written notice, sent by certified 

mail, specifying his or her intention to 

terminate the lender or holder’s 

participation in the program and stating 

that the entity may request, within 30 

days of the receipt of this notice, a 

formal hearing. If the entity requests a 

hearing, it must, within 90 days of the 

receipt of the notice, submit material, 

factual issues in dispute to demonstrate 

that there is cause for a hearing. These 

issues must be both substantive and 

relevant. The hearing will be held in the 

Washington, DC metropolitan area. The 

Secretary will deny a hearing if: 

(i) The request for a hearing is 

untimely (i.e., fails to meet the 30-day 

requirement); 

(ii) The lender or holder does not 

provide a statement of material, factual 

issues in dispute within the 90-day 

required period; or 

(iii) The statement of factual issues in 

dispute is frivolous or inconsequential. 

(2) In the event that the Secretary 

denies a hearing, the Secretary will send 

a written denial, by certified mail, to the 

lender or holder setting forth the 

reasons for denial. If a hearing is denied, 

or if as a result of the hearing, 

termination is still determined to be 

necessary, the lender or holder will be 

terminated from participation in the 

program. An entity will be permitted to 

reapply for participation in the program 

when it demonstrates, and the Secretary 

agrees, that it is in compliance with all 

HEAL requirements. 

(c) This section does not apply to a 

determination that a HEAL lender fails 

to meet the statutory definition of an 

‘‘eligible lender.’’ 

(d) This section also does not apply to 

administrative action by the Department 

of Education based on any alleged 

violation of: 

(1) Title VI of the Civil Rights Act of 

1964, which is governed by 34 CFR part 

100; 

(2) Title IX of the Education 

Amendments of 1972, which is 

governed by 34 CFR part 106; 

(3) The Family Educational Rights 

and Privacy Act of 1974 (section 444 of 

the General Education Provisions Act, 

as amended), which is governed by 34 

CFR part 99; or 

(4) Title XI of the Right to Financial 

Privacy Act of 1978, Public Law 95–630 

(12 U.S.C. 3401–3422). 

(Approved by the Office of Management and 

Budget under control number 0915–0144) 

Subpart E—The School 

§ 681.50 Which schools are eligible to be 

HEAL schools? 

(a) In order to participate in the HEAL 

program, a school must enter into a 

written agreement with the Secretary. In 

the agreement, the school promises to 

comply with provisions of the HEAL 

law and the HEAL regulations. For 

initial entry into this agreement and for 

the agreement to remain in effect, a 

school must satisfy the following 

requirements: 

(1)(i) The school must be legally 

authorized within a State to conduct a 

course of study leading to one of the 

following degrees: 

(A) Doctor of Medicine. 

(B) Doctor of Osteopathic Medicine. 

(C) Doctor of Dentistry or equivalent 

degree. 

(D) Bachelor or Master of Science in 

Pharmacy or equivalent degree. 

(E) Doctor of Optometry or equivalent 

degree. 

(F) Doctor of Veterinary Medicine or 

equivalent degree. 

(G) Doctor of Podiatric Medicine or 

equivalent degree. 

(H) Graduate or equivalent degree in 

Public Health. 

(I) Doctor of Chiropractic or 

equivalent degree. 

(J) Doctoral degree of Clinical 

Psychology. 

(K) Masters or doctoral degree in 

Health Administration. 

(ii) For the purposes of this section, 

the term ‘‘State’’ includes, in addition to 

the several States, the District of 

Columbia, the Commonwealth of Puerto 

Rico, the Commonwealth of the 

Northern Mariana Islands, the Virgin 

Islands, Guam, American Samoa, the 

Trust Territory of the Pacific Islands 

(the Republic of Palau), the Republic of 

the Marshall Islands, and the Federated 

States of Micronesia. 

(2)(i) The school must be accredited 

by a recognized agency approved for 

that course of study by the Secretary of 

Education, as described in paragraph 

(a)(2)(ii) of this section, except where a 

school is not eligible for accreditation 

solely because it is too new. A new 

school is eligible if the Secretary of 

Education determines that it can 

reasonably expect to be accredited 

before the beginning of the academic 

year following the normal graduation 

date of its first entering class. The 

Secretary of Education makes this 

determination after consulting with the 

appropriate accrediting agency and 

receiving reasonable assurance to that 

effect. 

(ii) The approved accrediting agencies 

are: 


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(A) Liaison Committee on Medical 

Education. 

(B) American Osteopathic 

Association, Bureau of Professional 

Education. 

(C) American Dental Association, 

Commission on Dental Accreditation. 

(D) American Veterinary Medical 

Association, Council on Education. 

(E) American Optometric Association, 

Council on Optometric Education. 

(F) American Podiatric Medical 

Association, Council on Podiatric 

Medical Education. 

(G) Accreditation Council for 

Pharmacy Education. 

(H) Council on Education for Public 

Health. 

(I) Council on Chiropractic Education, 

Commission on Accreditation. 

(J) Accrediting Commission on 

Accreditation of Healthcare 

Management Education. 

(K) American Psychological 

Association, Committee on 

Accreditation. 

(b) If a HEAL school undergoes a 

change of controlling ownership or form 

of control, its agreement automatically 

expires at the time of that change. The 

school must enter into a new agreement 

with the Secretary in order to continue 

its participation in the HEAL program. 

§ 681.51 The student loan application. 

When the student completes his or 

her portion of the student loan 

application and submits it to the school, 

the school must do the following: 

(a) Accurately and completely fill out 

its portion of the HEAL application; 

(b) Verify, to the best of its ability, the 

information provided by the student on 

the HEAL application, including, but 

not limited to, citizenship status and 

Social Security number. To comply with 

this requirement, the school may 

request that the student provide a 

certified copy of his or her birth 

certificate, his or her naturalization 

papers, and an original Social Security 

card or copy issued by the Federal 

Government, or other documentation 

that the school may require. The school 

must assure that the applicant’s I–151 or 

I–551 is attached to the application, if 

the applicant is required to possess such 

identification by the United States; 

(c) Certify that the student is eligible 

to receive a HEAL loan, according to the 

requirements of § 681.5; 

(d) Review the financial aid transcript 

from each institution previously 

attended by the applicant on at least a 

half-time basis to determine whether the 

applicant is in default on any loans or 

owes a refund on any grants. The school 

may not approve the HEAL application 

or disburse HEAL funds if the borrower 

is in default on any loans or owes a 

refund on any educational grants, unless 

satisfactory arrangements have been 

made between the borrower and the 

affected lender or school to resolve the 

default or the refund on the grant. If the 

financial aid transcript has been 

requested, but has not been received at 

the time the applicant submits his or her 

first HEAL application, the school may 

approve the application and disburse 

the first HEAL installment prior to 

receipt of the transcript. Each financial 

aid transcript must include at least the 

following data: 

(1) Student’s name; 

(2) Amounts and sources of loans and 

grants previously received by the 

student for study at an institution of 

higher education; 

(3) Whether the student is in default 

on any of these loans, or owes a refund 

on any grants; 

(4) Certification from each institution 

attended by the student that the student 

has received no financial aid, if 

applicable; and 

(5) From each institution attended, 

the signature of an official authorized by 

the institution to sign such transcripts 

on behalf of the institution; 

(e) State that it has no reason to 

believe that the borrower may not be 

willing to repay the HEAL loan; 

(f) Make reasonable determinations of 

the maximum loan amount approvable, 

based on the student’s circumstances. 

The student applicant determines the 

amount he or she wishes to borrow, up 

to this maximum amount. Only then 

may the school certify an eligible 

application. In determining the 

maximum loan amount approvable, the 

school will calculate the difference 

between: 

(1) The total financial resources 

available to the applicant for his or her 

costs of education for the period 

covered by the proposed HEAL loan, 

and other student aid that the applicant 

has received or will receive during the 

period covered by the proposed HEAL 

loan. To determine the total financial 

resources available to the applicant for 

his or her costs of education for the 

period covered by the proposed HEAL 

loan (including familial, spousal, or 

personal income or other financial 

assistance that the applicant has 

received or will receive), the school 

must consider information provided 

through one of the national need 

analysis systems or any other procedure 

approved by the Secretary of Education, 

in addition to any other information 

which the school has regarding the 

student’s financial situation. The school 

may make adjustments to the need 

analysis information only when 

necessary to accurately reflect the 

applicant’s actual resources, and must 

maintain in the borrower’s record 

documentation to support the basis for 

any adjustments to the need analysis 

information; and 

(2) The costs reasonably necessary for 

each student to pursue the same or 

similar curriculum or program within 

the same class year at the school for the 

period covered by the proposed HEAL 

loan, using a standard student budget. 

The school must maintain in its general 

office records the criteria used to 

develop each standard student budget. 

Adjustments to the standard student 

budget may be made only to the extent 

that they are necessary for the student 

to complete his or her education, and 

documentation must be maintained in 

the borrower’s record to support the 

basis for any adjustments to the 

standard student budget. 

(g) Comply with the requirements of 

§ 681.61. 

(Approved by the Office of Management and 

Budget under control numbers 1845–0125) 

§ 681.52 The student’s loan check. 

(a) When a school receives from a 

HEAL lender a loan disbursement check 

or draft payable jointly to the school and 

to one of its students, it must: 

(1) If the school receives the 

instrument after the student is enrolled, 

obtain the student’s endorsement, retain 

that portion of funds due the school, 

and disburse the remaining funds to the 

student. 

(2) If the school receives the 

instrument before the student is 

enrolled, it must, prior to endorsing the 

instrument, send the instrument to the 

student to endorse and return to the 

school. The school may then retain that 

portion of funds then due the school but 

must hold the remaining funds for 

disbursement to the student at the time 

of enrollment. However, if the student is 

unable to meet other educational 

expenses due before the time of 

enrollment, the school may obtain the 

student’s endorsement and disburse to 

the student that portion of funds 

required to meet these other educational 

expenses. 

(b) If a school determines that a 

student does not plan to enroll, the 

school must return a loan disbursement 

check or draft to the lender within 30 

days of this determination. 

§ 681.53 Notification to lender or holder of 

change in enrollment status. 

Each school must notify the holder of 

a HEAL loan of any change in the 

student’s enrollment status within 30 

days following the change in status. 

Each notice must contain the student’s 


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full name under which the loan was 

received, the student’s current name (if 

different), the student’s Social Security 

number, the date of the change in the 

enrollment status, or failure to enroll as 

scheduled for any academic period as a 

full-time student, the student’s latest 

known permanent and temporary 

addresses, and other information which 

the school may decide is necessary to 

identify or locate the student. If the 

school does not know the identity of the 

current holder of the HEAL loan, it must 

notify the HEAL Program Office of a 

change in the student’s enrollment 

status. This notification is not required 

for vacation periods and leaves of 

absence or other temporary 

interruptions which do not exceed one 

academic term. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

§ 681.54 Payment of refunds by schools. 

A participating school must pay that 

portion of a refund that is allocable to 

a HEAL loan directly to the original 

lender (or to a subsequent holder of the 

loan note, if the school has knowledge 

of the holder’s identity). At the same 

time, the school must provide to the 

borrower written notice that it is doing 

so. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

§ 681.55 Administrative and fiscal 

procedures. 

Each school must establish and 

maintain administrative and fiscal 

procedures necessary to achieve the 

following objectives: 

(a) Proper and efficient administration 

of the funds received from students who 

have HEAL loans; 

(b) Protection of the rights of students 

under the HEAL program; 

(c) Protection of the United States 

from unreasonable risk of loss due to 

defaults; and 

(d) Compliance with applicable 

requirements for HEAL schools. 

§ 681.56 Records. 

(a) In addition to complying with the 

requirements of section 739(b) of the 

Act, each school must maintain an 

accurate, complete, and easily 

retrievable record with respect to each 

student who has a HEAL loan. The 

record must contain all of the following 

information: 

(1) Student’s name, address, academic 

standing and period of attendance; 

(2) Name of the HEAL lender, amount 

of the loan, and the period for which the 

HEAL loan was intended; 

(3) If a noncitizen, documentation of 

the student’s alien registration status; 

(4) Amount and source of other 

financial assistance received by the 

student during the period for which the 

HEAL loan was made; 

(5) Date the school receives the HEAL 

check or draft and the date it either 

gives it to the student or returns it to the 

lender (if the school is not the lender); 

(6) Date the school disburses the loan 

to a student (if the school is the lender); 

(7) Date the school signs the loan 

check or draft (if the school is a 

copayee); 

(8) Amount of tuition, fees and other 

charges paid by the student to the 

school for the academic period covered 

by the loan and the dates of payment; 

(9) Photocopy of each HEAL check or 

draft received by the student; 

(10) Documentation of each entrance 

interview, including the date of the 

entrance interview and the signature of 

the borrower indicating that the 

entrance interview was conducted; 

(11) Documentation of the exit 

interview, including the date of the exit 

interview and the signature of the 

borrower indicating that the exit 

interview was conducted, or 

documentation of the date that the 

school mailed exit interview materials 

to the borrower if the borrower failed to 

report for the exit interview; 

(12) A photocopy made by the school 

of the borrower’s I–151 or I–551, if the 

borrower is required to possess such 

identification by the United States, or 

other documentation, if obtained by the 

school, to verify citizenship status and 

Social Security number (e.g., a certified 

copy of the borrower’s birth certificate 

or a photocopy made by the school of 

the borrower’s original Social Security 

card or copy issued by the Federal 

Government); 

(13) Documentation of the 

calculations made which compare the 

financial resources of the applicant with 

the cost of his or her education at the 

school; 

(14) Copy(s) of the borrower’s 

financial aid transcript(s); 

(15) The standard budget used for the 

student, and documentation to support 

the basis for any deviations made to the 

standard budget; 

(16) Copies of all correspondence 

between the school and the borrower or 

between the school and the lender or its 

assignee regarding the loan; 

(17) Copy of each form used by the 

school in connection with the loan; and 

(18) Expected postgraduate 

destination of borrower. 

(b) The school must maintain the 

record for not less than 5 years 

following the date the student 

graduates, withdraws or fails to enroll as 

a full-time student. The school may 

store the records in microform or 

computer format. 

(c) The school must comply with the 

Department’s biennial audit 

requirements of section 705 of the Act. 

(d) The school must develop and 

follow written procedures for the 

receipt, verification of amount, and 

disbursement of HEAL checks or drafts. 

These procedures must be maintained 

in the school’s policies and procedures 

manuals or other general office records. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

§ 681.57 Reports. 

A school must submit reports to the 

Secretary at the times and in the manner 

the Secretary may reasonably prescribe. 

The school must retain a copy of each 

report for not less than 5 years following 

the report’s completion, unless 

otherwise directed by the Secretary. A 

school must also make available to a 

HEAL lender or holder, upon the 

lender’s or holder’s request, the name, 

address, postgraduate destination and 

other reasonable identifying information 

for each of the school’s students who 

has a HEAL loan. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

§ 681.58 Federal access to school records. 

For the purposes of audit and 

examination, a HEAL school must 

provide the Secretary of Education, the 

Comptroller General of the United 

States, and any of their authorized 

representatives access to the records 

that the school is required to keep and 

to any documents and records pertinent 

to the administration of the HEAL 

program. 

§ 681.59 Records and Federal access after 

a school is no longer a HEAL school. 

In the event a school ceases to 

participate in the HEAL program, the 

school (or its successor, in the case of 

a school which undergoes a change in 

ownership) must retain all required 

HEAL records and provide the Secretary 

of Education, the Comptroller General of 

the United States, and any of their 

authorized representatives access to 

them. 

§ 681.60 Limitation, suspension, or 

termination of the eligibility of a HEAL 

school. 

(a) The Secretary may limit, suspend, 

or terminate the eligibility under the 

HEAL program of an otherwise eligible 

school that violates or fails to comply 

with any provision of the Act, these 

regulations, or agreements with the 

Secretary concerning the HEAL 

program. Prior to terminating a school’s 


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participation in the program, the 

Secretary will provide the school an 

opportunity for a hearing in accordance 

with the procedures under paragraph (b) 

of this section. 

(b)(1) The Secretary will provide any 

school subject to termination with a 

written notice, sent by certified mail, 

specifying his or her intention to 

terminate the school’s participation in 

the program and stating that the school 

may request, within 30 days of the 

receipt of this notice, a formal hearing. 

If the school requests a hearing, it must, 

within 90 days of the receipt of the 

notice, submit material, factual issues in 

dispute to demonstrate that there is 

cause for a hearing. These issues must 

be both substantive and relevant. The 

hearing will be held in the Washington, 

DC metropolitan area. The Secretary 

will deny a hearing if: 

(i) The request for a hearing is 

untimely (i.e., fails to meet the 30-day 

requirement); 

(ii) The school does not provide a 

statement of material, factual issues in 

dispute within the 90-day required 

period; or 

(iii) The statement of factual issues in 

dispute is frivolous or inconsequential. 

(2) In the event that the Secretary 

denies a hearing, the Secretary will send 

a written denial, by certified mail, to the 

school setting forth the reasons for 

denial. If a hearing is denied, or if as a 

result of the hearing, termination is still 

determined to be necessary, the school 

will be terminated from participation in 

the program. A school will be permitted 

to reapply for participation in the 

program when it demonstrates, and the 

Secretary agrees, that it is in compliance 

with all HEAL requirements. 

(c) This section does not apply to a 

determination that a HEAL school fails 

to meet the statutory definition of an 

‘‘eligible school.’’ 

(d) This section does not apply to 

administrative action by the Department 

of Education based on any alleged 

violation of the Family Educational 

Rights and Privacy Act of 1974 (section 

444 of the General Education Provisions 

Act, as amended), as governed by 34 

CFR part 99. 

(Approved by the Office of Management and 

Budget under control number 0915–0144) 

§ 681.61 Responsibilities of a HEAL 

school. 

(a) A HEAL school is required to carry 

out the following activities for each 

HEAL applicant or borrower: 

(1) Conduct and document an 

entrance interview with each student 

(individually or in groups) no later than 

prior to the loan recipient’s first HEAL 

disbursement in each academic year 

that the loan recipient obtains a HEAL 

loan. The school must inform the loan 

recipient during the entrance interview 

of his or her rights and responsibilities 

under a HEAL loan, including the 

consequences for noncompliance with 

those responsibilities, and must gather 

personal information which would 

assist in locating the loan recipient 

should he or she depart from the school 

without receiving an exit interview. A 

school may meet this requirement 

through correspondence where the 

school determines that a face-to-face 

meeting is impracticable. 

(2) Conduct and document an exit 

interview with each HEAL loan 

recipient (individually or in groups) 

within the final academic term of the 

loan recipient’s enrollment prior to his 

or her anticipated graduation date or 

other departure date from the school. 

The school must inform the loan 

recipient in the exit interview of his or 

her rights and responsibilities under 

each HEAL loan, including the 

consequences for noncompliance with 

those responsibilities. The school must 

also collect personal information from 

the loan recipient which would assist 

the school or the lender or holder in 

skiptracing activities and to direct the 

loan recipient to contact the lender or 

holder concerning specific repayment 

terms and options. A copy of the 

documentation of the exit interview, 

including the personal information 

collected for skiptracing activities, and 

any other information required by the 

Secretary regarding the exit interview 

must be sent to the lender or holder of 

each HEAL loan within 30 days of the 

exit interview. If the loan recipient 

departs from the school prior to the 

anticipated date or does not receive an 

exit interview, the exit interview 

information must be mailed to the loan 

recipient by the school within 30 days 

of the school’s knowledge of the 

departure or the anticipated departure 

date, whichever is earlier. The school 

must request that the loan recipient 

forward any required information (e.g., 

skiptracing information, request for 

deferment, etc.) to the lender or holder. 

The school must notify the lender or 

holder of the loan recipient’s departure 

at the same time it mails the exit 

interview material to the loan recipient. 

(3) Verify the accuracy and 

completeness of information provided 

by each student on the HEAL loan 

application, particularly in regard to the 

HEAL eligibility requirements, by 

comparing the information with 

previous loan applications or other 

records or information provided by the 

student to the school. Notify the 

potential lender of any discrepancies 

which were not resolved between the 

school and the student. 

(4) Develop and implement 

procedures relating to check receipt and 

release which keep these functions 

separate from the application 

preparation and approval process and 

assure that the amount of the HEAL loan 

check(s) does(do) not exceed the 

approved total amount of the loan and 

the statutory maximums. Checks must 

not be cashed without the borrower’s 

personal endorsement. Documentation 

of these procedures and their usage 

shall be maintained by the school. 

(5) Maintain accurate and complete 

records on each HEAL borrower and 

related school activities required by the 

HEAL program. All HEAL records shall 

be properly safeguarded and protected 

from environmental threats and 

unauthorized intrusion for use and 

theft. 

(6) Maintain documentation of the 

criteria used to develop the school’s 

standard student budgets in the school’s 

general records, readily available for 

audit purposes, and maintain in each 

HEAL borrower’s record a copy of the 

standard budget which was actually 

used in the determination of the 

maximum loan amount approvable for 

the student, as described in § 681.51. 

(7) Notify the lender or its assignee of 

any changes in the student’s name, 

address, status, or other information 

pertinent to the HEAL loan not more 

than 30 days after receiving information 

indicating such a change. 

(b) Any school which has information 

which indicates potential or actual 

commission of fraud or other offenses 

against the United States involving 

these loan funds must promptly provide 

this information to the appropriate 

Regional Office of Inspector General for 

Investigations. 

(c) The school will be considered 

responsible and the Secretary may seek 

reimbursement from any school for the 

amount of a loan in default on which 

the Secretary has paid an insurance 

claim, if the Secretary finds that the 

school did not comply with the 

applicable HEAL statute and 

regulations, or its written agreement 

with the Secretary. The Secretary may 

excuse certain defects if the school 

satisfies the Secretary that the defect did 

not contribute to the default or 

prejudice the Secretary’s attempt to 

collect the loan from the borrower. 

(d) A school is authorized to withhold 

services from a HEAL borrower who is 

in default on a HEAL loan received 

while enrolled in that school, except in 

instances where the borrower has filed 

for bankruptcy. Such services may 

include, but are not limited to academic 


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transcripts and alumni services. 

Defaulted HEAL borrowers who have 

filed for bankruptcy shall provide court 

documentation that verifies the filing for 

bankruptcy upon the request of the 

school. Schools will also supply this 

information to the Secretary upon 

request. All academic and financial aid 

transcripts that are released on a 

defaulted HEAL borrower must indicate 

on the transcript that the borrower is in 

default on a HEAL loan. It is the 

responsibility of the borrower to provide 

the school with documentation from the 

lender, holder, or Department when a 

default has been satisfactorily resolved, 

in order to obtain access to services that 

are being withheld, or to have the 

reference to default removed from the 

academic and financial aid transcripts. 

(Approved by the Office of Management and 

Budget under control number 1845–0125) 

[FR Doc. 2017–24636 Filed 11–14–17; 8:45 am] 

BILLING CODE 4000–01–P 


sradovich on DSK3GMQ082PROD with RULES3