DEPARTMENT OF EDUCATION

Unofficial Copy: Official Copy to be Published by the Federal Register

4000-01-U DEPARTMENT OF EDUCATION 34 CFR Parts 668, 674, 682, and 685 RIN 1840-AD12 [Docket ID ED-2013-OPE-0063] Student Assistance General Provisions, Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program AGENCY: Office of Postsecondary Education, Department of Education. ACTION: Final regulations. SUMMARY: The Secretary amends the Student Assistance General Provisions, Federal Perkins Loan (Perkins Loan) Program, Federal Family Education Loan (FFEL) Program, and William D. Ford Federal Direct Loan (Direct Loan) Program regulations. These final regulations will: amend the FFEL and Direct Loan program regulations to reflect changes made to the Higher Education Act of 1965, as amended (HEA), by the SAFRA Act included in the Health Care and Education Reconciliation Act of 2010; incorporate statutory changes to interest rates and other recent statutory changes in the Direct Loan Program regulations; update, strengthen, and clarify various areas of the Student Assistance General

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Unofficial Copy: Official Copy to be Published by the Federal Register

Provisions, Perkins Loan, FFEL, and Direct Loan program regulations; and provide for greater consistency in the regulations governing the title IV, HEA student loan programs. These final regulations will ensure that the title IV, HEA Federal student aid programs operate as efficiently as possible. DATES: Effective date: These regulations are effective July 1, 2014.

Implementation dates: For implementation dates, see the Implementation Date of These Regulations section of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: For further information related to loan rehabilitation reasonable and affordable payments, contact Brian Smith or Pamela Moran at (202)-5027551 or (202)-502-7732 or by e-mail at: Brian.Smith@ or Pamela.Moran@. For further information related to administrative wage garnishment, contact Nathan Arnold or Pamela Moran at (202)-219-7134 or (202)-502-7732 or by e-mail at: Nathan.Arnold@ or Pamela.Moran@. For further information related to Federal Perkins Loan program changes, contact Gail McLarnon or Brian Smith at (202)-219-7048 or (202)-502-7551 or by e-mail at: Gail.McLarnon@ or Brian.Smith@. For further information related to Direct

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Unofficial Copy: Official Copy to be Published by the Federal Register

Loan program changes, contact Gail McLarnon, Jon Utz, or Pamela Moran at (202)-219-7048, (202)-377-4040, or (202)-5027732 or by e-mail at: Gail.McLarnon@, Jon.Utz@, or Pamela.Moran@. For further information on FFEL program changes, contact Pamela Moran or Nathan Arnold at (202)-5027732 or 202-219-7134 or by e-mail at: Pamela.Moran@ or Nathan.Arnold@.

If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339. SUPPLEMENTARY INFORMATION: Executive Summary:

Purpose of This Regulatory Action: These final regulations address issues arising from the changes made to the HEA by the SAFRA Act, included in the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152). The SAFRA Act ended the origination of new loans under the FFEL Program after June 30, 2010. With this change, all new Stafford, PLUS, and Consolidation loans with a first disbursement on or after July 1, 2010, are now made under the Direct Loan Program. Because all new loans are being made under the Direct Loan Program, these final regulations amend the FFEL Program regulations in 34 CFR part 682 by

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Unofficial Copy: Official Copy to be Published by the Federal Register

removing provisions related to the making of new loans. The final regulations also reflect changes made to interest rates in the Direct Loan program by the Bipartisan Student Loan Certainty Act of 2013 (Pub.L. 113-28). In addition, the regulations amend the Direct Loan Program regulations in 34 CFR part 685 by adding detailed regulations in areas where the Direct Loan Program regulations cross-reference the FFEL Program regulations.

The regulations also strengthen and clarify provisions of the Perkins Loan, FFEL, and Direct Loan program regulations including, but not limited to, regulations governing: deferments, forbearances, loan cancellation, rehabilitation of defaulted loans, administrative wage garnishment, and satisfactory repayment arrangements. The regulations also make the rules governing the various title IV, HEA loan programs more consistent.

Summary of the Major Provisions of This Regulatory Action: The final regulations--

Raise the participation rate index ceiling applicable to institutions that have a single three-year cohort default rate of over 40 percent for purposes of challenges to, and appeals from, sanctions based on

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Unofficial Copy: Official Copy to be Published by the Federal Register

that default rate. (34 CFR 668.204(c) and 668.214(a) and (d)) Clarify the Perkins Loan, FFEL, and Direct Loan program regulations to provide that a borrower who makes six payments in the course of rehabilitating a defaulted loan, but who does not seek additional title IV aid, will not be considered to have used the onetime-only opportunity to regain title IV eligibility by making satisfactory repayment arrangements. The regulations also define the term "satisfactory repayment arrangement" more consistently across the title IV, HEA loan programs. (34 CFR 674.2(b), 674.9(k), 682.200(b), 685.102(b), and 685.200(d)) Amend the closed school discharge provisions in the Perkins Loan, FFEL, and Direct Loan program regulations to specify that a borrower may qualify for a loan discharge if the borrower withdrew from school not more than 120 days before the school closed, instead of the current 90-day standard. The regulations also add examples of the types of exceptional circumstances under which the Department may extend the 120-day window. (34 CFR 674.33(g), 682.402(d), and 685.214)

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Unofficial Copy: Official Copy to be Published by the Federal Register

Update the FFEL and Direct Loan program enrollment status reporting requirements for institutions to reflect current processes and eliminate obsolete terms and procedures. The regulations also add comparable enrollment status reporting provisions to the Perkins Loan Program regulations. (34 CFR 674.19(f), 682.605, 682.610(c), and 685.309(b))

Revise the terms under which a guaranty agency in the FFEL Program may authorize a lender to grant forbearance to permit a borrower or endorser to resume honoring the agreement to repay a debt after default but prior to claim payment to require either a signed written agreement to repay or an oral affirmation of the borrower's or endorser's obligation to repay the debt. The regulations provide that if a forbearance is granted based on the borrower's or endorser's oral request and affirmation of the obligation, the forbearance is limited to 120 days and cannot be granted for consecutive periods. In addition, the lender must orally review with the borrower the terms and conditions of the forbearance and send a notice to the borrower or endorser that confirms the terms of the forbearance. The regulations also define the term

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