[Federal Register Volume 66, Number 126 (Friday, June 29, 2001)]
[Rules and Regulations]
[Pages 34762-34766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16470]
[[Page 34761]]
-----------------------------------------------------------------------
Part III
Department of Education
-----------------------------------------------------------------------
34 CFR Parts 682 and 685
Federal Family Education Loan Program and William D. Ford Federal
Direct Loan Program; Final Rule
Federal Register / Vol. 66, No. 126 / Friday, June 29, 2001 / Rules
and Regulations
[[Page 34762]]
-----------------------------------------------------------------------
DEPARTMENT OF EDUCATION
34 CFR Parts 682 and 685
Federal Family Education Loan Program and William D. Ford Federal
Direct Loan Program
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains technical corrections and changes to
the regulations for the Federal Family Education Loan (FFEL) Program in
34 CFR part 682 and the William D. Ford Federal Direct Loan (Direct
Loan) Program in 34 CFR part 685. The regulations govern the Federal
Stafford Loan Program, the Federal Supplemental Loans for Students
(Federal SLS) Program, the Federal PLUS Program, and the Federal
Consolidation Loan Program, collectively referred to as the FFEL
Program and the Federal Direct Stafford Loan Program, the Federal
Direct PLUS Loan Program, and the Federal Direct Consolidation Loan
Program, collectively referred to as the Direct Loan Program.
EFFECTIVE DATE: These regulations are effective July 1, 2001.
FOR FURTHER INFORMATION CONTACT: For the FFEL Program, Ms. Patricia
Beavan, or for the Direct Loan Program, Ms. Nicki Meoli, U.S.
Department of Education, 400 Maryland Avenue, S.W. (Room 3053, ROB-3)
Washington, D.C. 20202-5449. Telephone 202-708-8242. If you use a
telecommunications device for the deaf (TDD), you may call the Federal
Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to one of the contact persons listed in the
preceding paragraph.
SUPPLEMENTARY INFORMATION: These corrections and changes incorporate
technical corrections to the existing FFEL and Direct Loan program
regulations in 34 CFR parts 682 and 685 and final regulations published
in the Federal Register on November 1, 2000 (65 FR 65616, 65624, and
65632).
In addition, these final regulations change the existing
regulations to reflect the change in the formula for calculating
interest rates for certain Federal PLUS Loans and Federal Direct PLUS
Loans made by Section 318 of Appendix D to Pub. L. 106-554, the
Consolidated Appropriations Act 2001. The final regulations also add to
the existing regulations a reference to a statutory termination date
for the exemption from certain loan disbursement requirements for
schools with cohort default rates below 10 percent.
Waiver of Proposed Rulemaking and Negotiated Rulemaking
It is the practice of the Secretary to offer interested parties the
opportunity to comment on proposed regulations. However, the provisions
in these final regulations reflect needed technical corrections and
other clarifying changes to the FFEL and Direct Loan program
regulations. These corrections and changes do not affect the
substantive rights or obligations of any affected parties. Therefore,
the Secretary has concluded that solicitation of public comment is
unnecessary and contrary to the public interest under 5 U.S.C.
553(b)(B) and that a deferred effective date is not required under 5
U.S.C. 553(d).
For the same reasons, the Secretary has determined, under section
492(b)(2) of the Higher Education Act of 1965, as amended, that these
regulations should not be subject to negotiated rulemaking.
Regulatory Flexibility Act Certification
The Secretary certifies that these final regulations will not have
a significant economic impact on a substantial number of small
entities. Small entities affected by these regulations are small
institutions of higher education. These regulations also affect
guaranty agencies and lenders that participate in the FFEL Program, as
well as individual FFEL and Direct Loan borrowers, as described in the
NPRM published on July 27, 2000 (65 FR 46316). These regulations
contain technical corrections and other changes to current regulations.
The technical corrections and changes will not have a significant
economic impact.
Paperwork Reduction Act of 1995
These regulations have been examined under the Paperwork Reduction
Act of 1995 and have been found to contain no information collection
requirements.
Assessment of Educational Impact
Based on our own review, we have determined that the regulations in
this document do not require transmission of information that is being
gathered by or is available from any other agency or authority of the
United States.
Electronic Access to This Document
You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text of Adobe
Portable Document Format (PDF) on the Internet at the following site:
www.ed.gov/legislation/FedRegister
To use PDF, you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, D.C. area at (202) 512-1530.
Note: The official version of a document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://www.access.gpo.gov/nara/index.html.
(Catalog of Federal Domestic Assistance Numbers: 84.032 Federal
Family Education Loan Program, and 84.268 William D. Ford Federal
Direct Loan Program)
List of Subjects in 34 CFR Parts 682 and 685
Administrative practice and procedure, Colleges and universities,
Education, Loan programs-education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
Dated: June 26, 2001.
Maureen A. McLaughlin,
Deputy Assistant Secretary, Policy, Planning and Innovation, Office of
Postsecondary Education.
For the reasons discussed in the preamble, the Secretary amends
title 34 of the Code of Federal Regulations parts 682 and 685 as
follows:
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
1. The authority citation for Part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
Sec. 682.100 [Amended]
2. Section 682.100(b)(2)(i)(C) is amended by removing the comma
after ``1994'', and adding, in its place, a semi-colon.
Sec. 682.101 [Amended]
3. Section 682.101(b) is amended by removing ``, technical, and
correspondence'', and adding, in its place, ``technical''.
4. Section 682.202(a)(2) is amended by adding a new paragraph (vi);
and paragraph (a)(3) is amended by adding a new paragraph (iv) to read
as follows:
Sec. 682.202 Permissible charges by lenders to borrowers.
* * * * *
(a) * * *
(2) * * *
[[Page 34763]]
(vi)(A) Beginning on July 1, 2001, the interest rate on the loans
described in paragraphs (a)(2)(ii) through (iv) of this section is a
variable rate applicable to each July 1-June 30, as determined on the
preceding June 26, and is equal to the weekly average 1-year constant
maturity Treasury yield, as published by the Board of Governors of the
Federal Reserve System, for the last calendar week ending on or before
such June 26; plus--
(1) 3.25 percent for loans described in paragraph (a)(2)(ii) of
this section; or
(2) 3.1 percent for loans described in paragraphs (a)(2)(iii) and
(iv) of this section.
(B) The interest rates calculated under paragraph (a)(2)(vi)(A) of
this section shall not exceed the limits specified in paragraphs
(a)(2)(ii)(B), (a)(2)(iii)(B), and (a)(2)(iv)(B) of this section, as
applicable.
(3) * * *
(iv)(A) Beginning on July 1, 2001, the interest rate on the loans
described in paragraphs (a)(3)(ii) and (iii) of this section is a
variable rate applicable to each July 1-June 30, as determined on the
preceding June 26, and is equal to the weekly average 1-year constant
maturity Treasury yield, as published by the Board of Governors of the
Federal Reserve System, for the last calendar week ending on or before
such June 26; plus--
(1) 3.25 percent for loans described in paragraph (a)(3)(ii) of
this section; or
(2) 3.1 percent for loans described in paragraph (a)(3)(iii) of
this section.
(B) The interest rates calculated under paragraph (a)(3)(iv)(A) of
this section shall not exceed the limits specified in paragraphs
(a)(3)(ii)(B) and (a)(3)(iii)(B) of this section, as applicable.
* * * * *
Sec. 682.204 [Amended]
5. Section 682.204 is amended:
A. In paragraph (a)(1)(iii), in the second formula, by removing
``Number of weeks in program'', and adding, in its place, ``Number of
weeks enrolled''.
B. In paragraph (c)(2), by adding, ``under the conditions specified
in Sec. 682.201(a)(3)'' after ``dependent undergraduate students''.
C. In paragraph (d), by adding, ``under the conditions specified in
Sec. 682.201(a)(3)'', after ``dependent undergraduate students''.
D. In paragraph (f)(2)(ii), by removing the reference to
``(f)(4)'', and adding, in its place, ``(f)(3)''.
E. By redesignating paragraph (f)(4) as paragraph (f)(3).
F. In redesignated paragraph (f)(3)(ii), by removing reference to
``(f)(4)(i)'', and adding, in its place, ``(f)(3)(i)''.
6. Section 682.206(e)(2) is amended to read as follows:
Sec. 682.206 Due diligence in making a loan.
* * * * *
(e) * * *
(2) A Federal PLUS Program Loan may be made to an eligible borrower
with an endorser who is secondarily liable for repayment of the loan.
* * * * *
Sec. 682.207 [Amended]
7. Section 682.207(b)(1)(ii)(B) is amended in the first sentence by
removing ``a'', and adding, in its place, ``an''; by removing
``Sec. 688.163'', and adding, in its place, ``Sec. 668.163''; by
removing ``written''; by adding a period after the second occurrence of
the word ``borrower''; and by removing the remainder of the sentence.
Sec. 682.209 [Amended]
8. Section 682.209(a)(7)(viii)(C) is amended by removing ``Except
in the case of a Consolidation Loan, if'', and adding in its place,
``If''; and by removing ``maximum 10-year'', and adding, in its place,
``applicable maximum''.
Sec. 682.210 [Amended]
9. Section 682.210(s)(6) introductory text is amended by adding
``of up to one year at a time'' after ``periods''.
Sec. 682.211 [Amended]
10. Section 682.211 is amended by removing from paragraph (i)(4)
``sections 672(a), 672(g), 673, 673(b), 674, or 688 of title 10,'', and
adding, in its place, ``sections 688, 12301(a), 12301(g), 12302, 12304,
and 12306 of title 10,''.
Sec. 682.215 [Amended]
11. Section 682.215 is amended:
A. In paragraph (b), in the definition of Academic year, in the
last sentence, by adding ``a minimum of'', before ``nine''.
B. In paragraph (e)(1), by removing ``At the borrower's request,
a'' and adding, in its place, ``A''.
C. In paragraph (e)(1)(i), by removing the second occurrence of the
word ``each'', and adding, in its place, ``the borrower's''.
D. In paragraph (f)(2)(iii), by removing, ``on the loan'' both
times it appears, and adding, in its place, ``on the discharged
amount''.
E. In paragraph (f)(3)(ii), by removing ``and (d)(2)'', and adding,
in its place, ``, (d)(2), and (f)(2)(iii)''.
Sec. 682.300 [Amended]
12. Section 682.300(b)(2)(viii) is amended by removing the
reference to ``Sec. 682.402(d) or (e)'', and adding, in its place,
``Sec. 682.402(d), (e), or (l)''.
Sec. 682.302 [Amended]
13. Section 682.302 is amended:
A. In paragraph (b)(2)(iv), by removing ``October 1, 1998'', and
adding, in its place, ``July 1, 1998''.
B. In paragraph (c)(2), by removing ``(c)(1)(iii)(D)'', and adding,
in its place, ``(c)(1)(iii)(F)''.
C. In paragraph (c)(3)(i), by removing ``(c)(1)(iii)(D)'', and
adding, in its place, ``(c)(1)(iii)(F)''.
D. In paragraph (c)(4), by adding ``tax-exempt'' before
``obligations''.
E. In paragraphs (d)(2)(i) and (ii), by removing ``restricted''.
14. Section 682.401 is amended:
A. In paragraph (b)(5)(ii), by removing ``Stafford or''.
B. In paragraph (b)(5)(ii)(B), by removing ``to borrow or''.
C. In paragraph (b)(5)(ii)(C), by removing ``by or''.
D. By revising paragraph (d)(4)(iii) to read as follows:
Sec. 682.401 Basic program agreement.
* * * * *
(d) * * *
(4) * * *
(iii) A student or parent borrower who is borrowing funds for
attendance at a school for which the multi-year feature of the MPN has
not been authorized must complete a new promissory note for each
academic year.
* * * * *
Sec. 682.402 [Amended]
15. Section 682.402 is amended:
A. In paragraph (g)(1)(i), by removing ``accurate'', and adding, in
its place, ``exact''.
A. In paragraph (i)(1)(iii) by adding a new sentence at the end of
the paragraph, ``If the guaranty agency has determined that the
expected costs of opposing the discharge petition will exceed one-third
of the total amount of the loan, it may, but is not required to, engage
in the activities described in paragraph (i)(1)(iv) of this section.''
C. In paragraph (l)(1), by adding, ``, in whole or in part,'',
after ``disbursed''.
D. In paragraph (l)(2), by adding, ``, in whole or in part,'',
after ``disbursed''.
E. In paragraph (l)(2)(i), by removing ``has ceased to attend'',
and adding, in its place, ``is not attending''.
F. In paragraph (l)(2)(ii), by removing ``borrower submits'', and
adding, in its place, ``guarantor receives''.
G. In paragraph (l)(4)(i)(A), by adding, ``, in whole or in
part,'', after ``loan''.
H. In paragraph (l)(5)(vii)(A), by removing ``The'', and adding, in
its place, ``Within 30 days of the
[[Page 34764]]
guarantor's determination, the''; and by adding ``. The guaranty agency
must make a determination'' after ``agency's determination''.
I. In paragraph (l)(5)(vii)(B), by removing ``for the'', and
adding, in its place, ``for any''; by adding, ``under this section''
after ``suspended''; and by removing ``the review period'' and adding,
in its place, ``these periods''.
Sec. 682.405 [Amended]
16. Section 682.405(b)(2) is amended by adding ``and that the
default is to be removed from the borrower's credit history'' before
the period.
Sec. 682.406 [Amended]
17. Section 682.406 is amended:
A. In paragraph (a)(11), by removing the period, and adding, in its
place, a semi-colon.
B. In paragraph (a)(12)(v), by removing ``preclaims'', and adding,
in its place, ``default aversion''.
Sec. 682.410 [Amended]
18. Section 682.410(a)(2) is amended by removing paragraph (iii);
and by redesignating paragraphs (iv) through (xii) as paragraphs (iii)
through (xi).
19. Section 682.414 is amended:
A. In paragraph (a)(1)(ii)(D), by removing ``preclaims and
supplemental preclaims assistance'', and adding, in its place,
``default aversion assistance''.
B. In paragraph (a)(4)(i), by removing the reference to
``(a)(3)(ii)'', and adding, in its place, ``(a)(4)(ii)''.
C. In paragraph (a)(4)(ii)(J), by removing ``preclaims
assistance'', and adding, in its place, ``default aversion
assistance''.
D. In paragraph (a)(5), by redesignating paragraph (a)(5)(ii) as
paragraph (a)(5)(iii) and by adding a new paragraph (a)(5)(ii) to read
as follows:
Sec. 682.414 Records, reports, and inspection requirements for
guaranty agency programs.
(a) * * *
(5) * * *
(ii) A guaranty agency or lender may store a promissory note in
accordance with 34 CFR 668.24(d)(3)(i) through (iv) only if the
promissory note was signed electronically.
* * * * *
Sec. 682.415 [Amended]
20. Section 682.415 is amended:
A. In paragraph (a)(6)(iii), by removing the reference to
``(a)(6)'', and adding, in its place, ``(a)(6)(ii)''.
B. In paragraph (c)(2)(i), by removing ``Secs. 682.410(b)(6)(iii)
through (xii), and 682.406(a)(8) and (a)(9), or Secs. 682.410(b)(7)'',
and adding, in its place, ``Secs. 682.410(b)(6)(i) through (xii)''.
C. In paragraph (c)(4), by removing ``Secs. 682.410(b)(6)(iii)
through (xii) and 682.406(a)(8) and (a)(9) or Secs. 682.410(b)(7)'' and
adding, in its place, ``Secs. 682.410(b)(6)(i) through (xii)''.
D. In paragraph (c)(6)(i), by removing ``Secs. 682.410(b)(6)(iii)
through (xii) and 682.406(a)(8) and (a)(9) or 682.410(b)(7)'', and
adding, in its place, ``Secs. 682.410(b)(6)(i) through (xii)''.
E. In paragraph (d)(1), by removing ``Secs. 682.410(b)(6)(iii)
through (xii) and 682.406(a)(8) and (a)(9) or Secs. 682.410(b)(7)'',
and adding, in its place, ``Secs. 682.410(b)(6)(i) through (xii)''.
Sec. 682.416 [Amended]
21. Section 682.416(f) is amended by removing the reference to
``Sec. 682.414(a)(3)(ii)'' and adding, in its place,
``Sec. 682.414(a)(4)(ii)''.
Sec. 682.601 [Amended]
22. Section 682.601(c)(1)(ii) is amended by removing ``, SLS,''.
23. Section 682.603 is amended:
A. By revising paragraphs (f)(1) and (f)(2).
B. By revising paragraph (g).
C. In paragraph (i) by removing ``(1)''; and by removing the
reference to ``(b)(5)'' and adding, in its place, ``(b)(3)''.
D. By removing paragraph (i)(2).
The amendments read as follows:
Sec. 682.603 Certification by a participating school in connection
with a loan application.
* * * * *
(f)(1) The minimum period of enrollment for which a school may
certify a loan application is--
(i) At a school that measures academic progress in credit hours and
uses a semester, trimester, or quarter system, a single academic term
(e.g., a semester or quarter); or
(ii) At a school that measures academic progress in clock hours, or
measures academic progress in credit hours but does not use a semester,
trimester, or quarter system, the lesser of--
(A) The length of the student's program at the school; or
(B) The academic year as defined by the school in accordance with
34 CFR 668.2.
(2) The maximum period for which a school may certify a loan
application is--
(i) Generally an academic year, as defined by 34 CFR 668.2, except
that a guaranty agency may allow a school to use a longer period of
time, not to exceed 12 months, corresponding to the period to which the
agency applies the annual loan limits under Sec. 682.401(b)(2)(ii); or
(ii) For a defaulted borrower who has regained eligibility under
Sec. 682.401(b)(4), the academic year in which the borrower regained
eligibility.
* * * * *
(g)(1) A school must cease certifying loans based on the exceptions
in Sec. 682.604(c)(5)(i) and Sec. 682.604(c)(10)(i) no later than--
(i) 30 days after the date the school receives notification from
the Secretary of an FFEL cohort default rate, calculated under subpart
M of 34 CFR part 668, that causes the school to no longer meet the
qualifications outlined in those paragraphs; or
(ii) October 1, 2002.
(2) A school must cease certifying loans based on the exceptions in
Sec. 682.604(c)(5)(ii) and Sec. 682.604(c)(10)(ii) no later than 30
days after the date the school receives notification from the Secretary
of an FFEL cohort default rate, calculated under subpart M of 34 CFR
part 668, that causes the school to no longer meet the qualifications
outlined in those paragraphs.
* * * * *
24. Section 682.604 is amended:
A. In paragraph (a)(1) by removing ``, PLUS, or SLS'' and adding,
in its place, ``or PLUS''.
B. In paragraph (b)(1), by removing ``, SLS''.
C. In paragraph (c)(3), by adding ``or'' after ``application''.
D. By adding a new paragraph (c)(11).
E. In paragraph (e)(1), by removing the reference to
``Sec. 682.207(d)'' and adding, in its place, ``Sec. 682.207(f)''.
The amendments read as follows:
Sec. 682.604 Processing the borrower's loan proceeds and counseling
borrowers.
* * * * *
(c) * * *
(11) A school may deliver loan proceeds in accordance with
paragraphs (c)(5) and (c)(10) of this section, if the school certified
the loan prior to the deadline as provided for in Sec. 682.603(g).
* * * * *
Sec. 682.610 [Amended]
25. Section 682.610(b)(5) is amended by adding ``, if applicable,''
before ``to deliver''.
Sec. 682.705 [Amended]
26. Section 682.705(b)(2)(v) is amended by removing the reference
to ``(c)(8)'' and adding, in its place, ``(c)(9)''.
[[Page 34765]]
Sec. 682.707 [Amended]
27. Section 682.707(a) introductory text is amended by removing the
cross reference to ``Sec. 682.706(b)(9)'' and adding, in its place,
``Sec. 682.706(b)(10)''.
Appendix D--[Amended]
28. Appendix D is amended by:
A. In the introduction, in paragraph (2), in the last sentence, by
removing the references to ``682.300(b)(2)(vi), 682.300(b)(2)(vii)''
and adding, in their place, ``682.300(b)(2)(vii), 682.302(d)(1)(iv)''.
B. In Appendix D, I.B.5., by removing ``180/270'' and adding, in
its place, ``180/240''.
C. In Appendix D, I.D.1.a., by removing ``ten-year repayment'', and
adding, in its place, ``repayment period'', by removing the reference
to ``682.209(a)(7)'' and adding, in its place, ``682.209(a)(8) and
682.209(h)(2)''.
D. In Appendix D, I.E.2., in the eighth sentence, by adding, ``and
Sec. 682.402(f)(5)(ii) and (f)(6)'' after ``Sec. 682.211 (f)(4)''.
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
29. The authority citation for Part 685 continues to read as
follows:
Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.
Sec. 685.102 [Amended]
30. Section 685.102(b) is amended as follows:
A. By indenting paragraph (b)(2)(i)(C) as a separate paragraph.
B. By removing, in the definition of ``Half-time student'', ``a
school participating in the FFEL Program or the Direct Loan Program''
and adding, in its place, ``an institution of higher education''.
Sec. 685.200 [Amended]
31. Section 685.200 is amended as follows:
A. By removing in paragraph (a)(1)(v) ``any'' and adding, in its
place, ``a''.
B. By removing in paragraph (a)(1)(v) ``34 CFR 668.32(e)(2) or
(3)'' and adding, in its place, ``34 CFR 668.32(e)(2), (3), or (4)''.
C. By removing in paragraph (b)(1)(iii) ``34 CFR 668.7'' and
adding, in its place, ``34 CFR 668.33''.
32. Section 685.202 is amended as follows:
A. By revising paragraph (a)(2)(i).
B. By removing in paragraph (a)(3)(i)(C) ``District'' and adding,
in its place, ``Direct''.
The amendments read as follows:
Sec. 685.202 Charges for which Direct Loan Program borrowers are
responsible.
(a) * * *
(2) * * *
(i) Loans first disbursed before July 1, 1998. (A) Interest rates
for periods ending before July 1, 2001. During all periods, the
interest rate during any twelve-month period beginning on July 1 and
ending on June 30 is determined on the June 1 preceding that period.
The interest rate is equal to the bond equivalent rate of 52-week
Treasury bills auctioned at the final auction held prior to that June 1
plus 3.1 percentage points, but does not exceed 9 percent.
(B) Interest rates for periods beginning on or after July 1, 2001.
During all periods, the interest rate during any twelve-month period
beginning on July 1 and ending on June 30 is determined on the June 26
preceding that period. The interest rate is equal to the weekly average
1-year constant maturity Treasury yield, as published by the Board of
Governors of the Federal Reserve System, for the last calendar week
ending on or before that June 26 plus 3.1 percentage points, but does
not exceed 9 percent.
* * * * *
Sec. 685.205 [Amended]
33. Section 685.205 is amended by redesignating paragraph (c)(9) as
paragraph (b)(9).
Sec. 685.208 [Amended]
34. Section 685.208(f)(2) is amended by removing ``borrowers's''
and adding, in its place, ``borrower's''.
35. Section 685.211 is amended by italicizing the paragraph (c)
heading to read as follows:
Sec. 685.211 Miscellaneous repayment provisions.
* * * * *
(c) Refunds and returns of title IV, HEA program funds from
schools. * * *
* * * * *
Sec. 685.212 [Amended]
36. Section 685.212 is amended as follows:
A. By adding in paragraph (d) ``, in whole or in part,'' after
``disbursed''.
B. By adding in paragraph (e) ``, in whole or in part,'' after
``disbursed''.
C. By adding in paragraph (f) ``, in whole or in part,'' after
``disbursed''.
Sec. 685.214 [Amended]
37. Section 685.214(c)(1)(i) is amended by adding ``, in whole or
in part, on or after January 1, 1986'' after ``loan''.
Sec. 685.215 [Amended]
38. Section 685.215(c)(1)(i) is amended by adding, ``, in whole or
in part, on or after January 1, 1986'' after ``loan''.
Sec. 685.216 [Amended]
39. Section 685.216 is amended as follows:
A. By removing in paragraph (a)(2)(i)(A) ``has ceased to attend''
and adding, in its place, ``is not attending''.
B. By adding in paragraph (c)(1)(i)(A) ``, in whole or in part,''
after ``loan''.
40. Section 685.220 is amended by italicizing the paragraph (k)
heading to read as follows:
Sec. 685.220 Consolidation.
* * * * *
(k) Refunds and returns of title IV, HEA program funds received
from schools.
* * * * *
41. Section 685.301 is amended as follows:
A. By adding new paragraph (a)(9).
B. By adding new paragraphs (b)(3)(i) and (ii).
C. By revising paragraph (b)(8)(ii).
D. By adding a new paragraph (b)(8)(iii).
E. By revising paragraph (d).
The revisions and additions read as follows:
Sec. 685.301 Origination of a loan by a Direct Loan Program school.
(a) * * *
(9)(i) The minimum period of enrollment for which a school may
originate a Direct Loan is--
(A) At a school that measures academic progress in credit hours and
uses a semester, trimester, or quarter system, a single academic term
(e.g., a semester or quarter); or
(B) At a school that measures academic progress in clock hours, or
measures academic progress in credit hours but does not use a semester,
trimester, or quarter system, the lesser of--
(1) The length of the student's program at the school; or
(2) The academic year as defined by the school in accordance with
34 CFR 668.2.
(ii) The maximum period for which a school may originate a Direct
Loan is--
(A) Generally an academic year, as defined by 34 CFR 668.2, except
that a school may use a longer period of time, not to exceed 12 months,
corresponding to the period to which the school applies the annual loan
limits under Sec. 685.203; or
[[Page 34766]]
(B) For a defaulted borrower who has regained eligibility, the
academic year in which the borrower regained eligibility.
(b) * * *
(3) * * *
(i) If a loan period is more than one payment period, the school
must disburse loan proceeds at least once in each payment period; and
(ii) If a loan period is one payment period, the school must make
at least two disbursements during that payment period. The school may
not make the second disbursement until the calendar midpoint between
the first and last scheduled days of class of the loan period.
* * * * *
(8) * * *
(ii) Paragraph (b)(8)(i)(A) of this section does not apply to any
loans originated by the school beginning--
(A) 30 days after the date the school receives notification from
the Secretary of a cohort default rate, calculated under subpart M of
34 CFR part 668, that causes the school to no longer meet the
qualifications outlined in that paragraph; or
(B) October 1, 2002.
(iii) Paragraph (b)(8)(i)(B) of this section does not apply to any
loans originated by the school beginning 30 days after the date the
school receives notification from the Secretary of a cohort default
rate, calculated under subpart M of 34 CFR part 668, that causes the
school to no longer meet the qualifications outlined in that paragraph.
* * * * *
(d) Reporting to the Secretary. (1) A school that participates
under school origination option 2 must submit the promissory note, loan
origination record, and initial disbursement record for a loan to the
Secretary no later than 30 days following the date of the initial
disbursement. The school must submit subsequent disbursement records,
including adjustment and cancellation records, to the Secretary no
later than 30 days following the date the disbursement, adjustment, or
cancellation is made.
(2) A school that participates under school origination option 1 or
standard origination must submit the initial disbursement record for a
loan to the Secretary no later than 30 days following the date of the
initial disbursement. The school must submit subsequent disbursement
records, including adjustment and cancellation records, to the
Secretary no later than 30 days following the date the disbursement,
adjustment, or cancellation is made.
42. Section 685.303 is amended as follows:
A. By revising paragraph (b)(4)(ii).
B. By adding a new paragraph (b)(4)(iii).
C. By adding in the introductory text of paragraph (e) ``(except
for Federal Work-Study Program funds up to $300)'' after ``eligible''.
The amendments read as follows:
Sec. 685.303 Processing loan proceeds.
* * * * *
(b) * * *
(4) * * *
(ii) Paragraph (b)(4)(i)(A) of this section does not apply to any
loans originated by the school beginning--
(A) 30 days after the date the school receives notification from
the Secretary of a cohort default rate, calculated under subpart M of
34 CFR part 668, that causes the school to no longer meet the
qualifications outlined in that paragraph; or
(B) October 1, 2002.
(iii) Paragraph (b)(4)(i)(B) of this section does not apply to any
loans originated by the school beginning 30 days after the date the
school receives notification from the Secretary of a cohort default
rate, calculated under Subpart M of 34 CFR part 668, that causes the
school to no longer meet the qualifications outlined in that paragraph.
* * * * *
Sec. 685.304 [Amended]
43. Section 685.304 is amended in paragraph (a)(1) by removing
``(a)(5)'' and adding, in its place, ``(a)(4)''.
44. Section 685.400 is amended by revising the section heading to
read as follows:
Sec. 685.400 School participation requirements.
* * * * *
45. Section 685.402 is amended by revising the section heading to
read as follows:
Sec. 685.402 Criteria for schools to originate loans.
* * * * *
[FR Doc. 01-16470 Filed 6-28-01; 8:45 am]
BILLING CODE 4001-01-P