34 C.F.R. 34 CFR--PART 682
Title 34 - Education
Effective Date(s): September 8, 2006 48. Section 682.302 is amended by: A. Revising paragraph (b)(1). B. In paragraph (b)(2), adding the words “or on or after January 1, 2000 for any period prior to April 1, 2006,” after the words “on or after July 1, 1998”. C. Revising paragraph (c). D. Revising paragraph (e). E. Adding a new paragraph (f). The revisions and addition read as follows: * * * * * (b) * * * (1) Except for non-subsidized Federal Stafford loans disbursed on or after October 1, 1981, for periods of enrollment beginning prior to October 1, 1992, or as provided in paragraphs (b)(2), (b)(3), or (e)(1) of this section, FFEL loans that otherwise meet program requirements are eligible for special allowance payments. * * * * * (c) Rate. (1) Except as provided in paragraph (c)(2), (c)(3), or (e) of this section, the special allowance rate for an eligible loan during a 3-month period is calculated by— (i) Determining the average of the bond equivalent rates of— (A) The quotes of the 3-month commercial paper (financial) rates in effect for each of the days in such quarter as reported by the Federal Reserve in Publication H–15 (or its successor) for such 3-month period for a loan for which the first disbursement is made on or after January 1, 2000; or (B) The 91-day Treasury bills auctioned during the 3-month period for a loan for which the first disbursement is made prior to January 1, 2000; (ii) Subtracting the applicable interest rate for that loan; (iii) Adding— (A)(1) 2.34 percent to the resulting percentage for a Federal Stafford loan for which the first disbursement is made on or after January 1, 2000; (2) 2.64 percent to the resulting percentage for a Federal PLUS loan for which the first disbursement is made on or after January 1, 2000; (3) 2.64 percent to the resulting percentage for a Federal Consolidation Loan that was made based on an application received by the lender on or after January 1, 2000; (4) 1.74 percent to the resulting percentage for a Federal Stafford loan for which the first disbursement is made on or after January 1, 2000 during the borrower's in-school, grace, and authorized period of deferment; (5) 2.8 percent to the resulting percentage for a Federal Stafford loan for which the first disbursement is made on or after July 1, 1998 and prior to January 1, 2000; (6) 2.2 percent to the resulting percentage for a Federal Stafford loan for which the first disbursement is made on or after July 1, 1998 and prior to January 1, 2000, during the borrower's in-school, grace, and authorized period of deferment; (7) 2.5 percent to the resulting percentage for a Federal Stafford loan for which the first disbursement is made on or after July 1, 1995 and prior to July 1, 1998 for interest that accrues during the borrower's in-school, grace, and authorized period of deferment; (B) 3.1 percent to the resulting percentage for— (1) A Federal Stafford Loan made on or after October 1, 1992 and prior to July 1, 1998, except as provided in paragraph (c)(1)(iii)(A)(7) of this section; (2) A Federal SLS Loan made on or after October 1, 1992; (3) A Federal PLUS Loan made on or after October 1, 1992 and prior to July 1, 1998; (4) A Federal PLUS loan made on or after July 1, 1998 and prior to October 1, 1998, except that no special allowance shall be paid during any quarter unless the average of the 91-day Treasury bills auctioned during that quarter, plus 3.1 percent, exceeds the rate determined under §682.202(a)(2)(v); (5) A Federal PLUS loan made on or after October 1, 1998 and prior to January 1, 2000, except that no special allowance shall be paid during any quarter unless the rate determined under §682.202(a)(2)(v) exceeds 9 percent; (6) A Federal Consolidation Loan for which the application was received by the lender prior to January 1, 2000, except that no special allowance shall be paid during any quarter on a loan for which the application was received on or after October 1, 1998 unless the average of the bond equivalent rate of the 91-day Treasury bills auctioned during that quarter, plus 3.1 percent, exceeds the rate determined under Section 682.202(a)(4)(iv); (C) 3.25 percent to the resulting percentage, for a loan made on or after November 16, 1986, but prior to October 1, 1992; (D) 3.25 percent to the resulting percentage, for a loan made on or after October 17, 1986 but prior to November 16, 1986, for a period of enrollment beginning on or after November 16, 1986; (E) 3.5 percent to the resulting percentage, for a loan made prior to October 17, 1986, or a loan described in paragraph (c)(2) of this section; or (F) 3.5 percent to the resulting percentage, for a loan made on or after October 17, 1986 but prior to November 16, 1986, for a period of enrollment beginning prior to November 16, 1986; (iv) Rounding the result upward to the nearest one-eighth of 1 percent, for a loan made prior to October 1, 1981; and (v) Dividing the resulting percentage by 4. (2) The special allowance rate determined under paragraph (c)(1)(iii)(E) of this section applies to loans made or purchased from funds obtained from the issuance of an obligation of the— (i) Maine Educational Loan Marketing Corporation to the Student Loan Marketing Association pursuant to an agreement entered into on January 31, 1984; or (ii) South Carolina Student Loan Corporation to the South Carolina National Bank pursuant to an agreement entered into on July 30, 1986. (3)(i) Subject to paragraphs (c)(3)(iii), (c)(3)(iv), and (e) of this section, the special allowance rate is that provided in paragraph (c)(3)(ii) of this section for a loan made or guaranteed on or after October 1, 1980 that was made or purchased with funds obtained by the holder from— (A) The proceeds of tax-exempt obligations originally issued prior to October 1, 1993; (B) Collections or payments by a guarantor on a loan that was made or purchased with funds obtained by the holder from obligations described in paragraph (c)(3)(i)(A) of this section; (C) Interest benefits or special allowance payments on a loan that was made or purchased with funds obtained by the holder from obligations described in paragraph (c)(3)(i)(A) of this section; (D) The sale of a loan that was made or purchased with funds obtained by the holders from obligations described in paragraph (c)(3)(i)(A) of this section; or (E) The investment of the proceeds of obligations described in paragraph (c)(3)(i)(A) of this section. (ii) The special allowance rate for a loan described in paragraph (c)(3)(i) is one-half of the rate calculated under paragraph (c)(1) of this section, except that in applying paragraph (c)(1)(iii), 3.5 percent is substituted for the percentages specified therein. (iii) The special allowance rate applicable to loans described in paragraph (c)(3)(i) of this section that are made prior to October 1, 1992, may not be less than— (A) 2.5 percent per year on eligible loans for which the applicable interest rate is 7 percent; (B) 1.5 percent per year on eligible loans for which the applicable interest rate is 8 percent; or (C) One-half of 1 percent per year on eligible loans for which the applicable rate is 9 percent. (iv) The special allowance rate applicable to loans described in paragraph (c)(3)(i) of this section that are made on or after October 1, 1992, may not be less than 9.5 percent minus the applicable interest rate. (4) Loans made or purchased with funds obtained by the holder from the issuance of tax-exempt obligations originally issued on or after October 1, 1993, and loans made with funds derived from default reimbursement collections, interest, or other income related to eligible loans made or purchased with those tax-exempt funds, do not qualify for the minimum special allowance rate specified in paragraph (c)(3)(iii) or (iv) of this section, and are not subject to the 50 percent limitation on the maximum rate otherwise applicable to loans made with tax-exempt funds. (5) For purposes of paragraphs (c)(3) and (c)(4), a loan is purchased with funds described in those paragraphs when the loan is refinanced in consideration of those funds. * * * * * (e) Limits on special allowance payments on loans made or purchased with funds derived from tax-exempt obligations. (1) General. (i) The Secretary pays a special allowance on a loan described in paragraph (c)(3) or (c)(4) of this section that is held by or on behalf of an Authority only if the loan meets the requirements of §682.800. (ii) The Secretary pays a special allowance at the rate prescribed in paragraph (c)(1) or (c)(3) of this section on a loan described in paragraph (c)(3)(i) of this section that is held by or on behalf of an Authority in accordance with paragraphs (e)(2) through (e)(5) of this section, as applicable. References to “loan” or “loans” in paragraphs (e)(2) through (e)(5) include only loans described in paragraph (c)(3)(i). (2) Effect of Refinancing on Special Allowance Payments. Except as provided in paragraphs (e)(3) through (e)(5) of this section— (i) The Secretary pays a special allowance at the rate prescribed in paragraph (c)(3) of this section to an Authority that holds a legal or equitable interest in the loan that is pledged or otherwise transferred in consideration of— (A) Funds listed in paragraph (c)(3)(i) of this section; (B) Proceeds of a tax-exempt refunding obligation that refinances a debt that— (1) Was first incurred pursuant to a tax-exempt obligation originally issued prior to October 1, 1993; (2) Has been financed continuously by tax-exempt obligation. (ii) The Secretary pays a special allowance to an Authority that holds a legal or equitable interest in the loan that is pledged or otherwise transferred in consideration of funds other than those specified in paragraph (e)(2)(i) of this section either— (A) At the rate prescribed in paragraph (c)(1) of this section, if_ (1) The prior tax-exempt obligation is retired; or (2) The prior tax-exempt obligation is defeased by means of obligations that the Authority certifies in writing to the Secretary bears a yield that does not exceed the yield restrictions of section 148 of the Internal Revenue Code and the regulations thereunder, or (B) At the rate prescribed in paragraph (c)(3) of this section. (3) Loans affected by transactions or events after September 30, 2004. The Secretary pays a special allowance to an Authority at the rate prescribed in paragraph (c)(1) of this section if, after September 30, 2004— (i) The loan is refinanced with funds other than those listed in paragraph (e)(2)(i) of this section; (ii) The loan is sold or transferred to any other holder; or (iii)(A) The loan is financed by a tax-exempt obligation included in the sources in paragraph (e)(2)(i), and (B) That obligation matures, is refunded, is defeased, or is retired, whichever occurs earliest. (4) Loans Affected by Transactions After February 7, 2006. Except as provided in paragraph (e)(5) of this section, the Secretary pays a special allowance at the rate prescribed in paragraph (c)(1) of this section on any loan— (i) That was made or purchased on or after February 8, 2006, or (ii) That was not earning, on February 8, 2006, a quarterly rate of special allowance determined under paragraph (c)(3) of this section. (5) Loans affected by transactions after December 30, 2010. (i) The Secretary pays a special allowance to a holder described in paragraph (e)(5)(ii) of this section at the rate prescribed in paragraph (c)(3) of this section only on a loan— (A) That was made or purchased prior to December 31, 2010, or (B) That was earning, before December 31, 2010, a quarterly rate of special allowance determined under paragraph (c)(3) of this section. (ii) A holder for purposes of this paragraph is an entity that— (A) On February 8, 2006 and during the quarter for which special allowance is determined under this paragraph— (1) Is a unit of State or local government or a private nonprofit entity, and (2) Is not owned or controlled by, or under common ownership or control by, a for-profit entity; and (B) In the most recent quarterly special allowance payment prior to September 30, 2005, held, directly or through any subsidiary, affiliate, or trustee, a total unpaid balance of principal of $100,000,000 or less for which special allowance was determined and paid under paragraph (c)(3) of this section. (f) As used in this section— (1) A tax-exempt obligation is an obligation the income of which is exempt from taxation under the Internal Revenue Code of 1986 (26 U.S.C.); (2) An obligation is originally issued at the time that an Authority issues the obligation to obtain funds to make loans or to purchase loans that an Authority does not hold or have any interest in; (3) A loan is refinanced when an Authority that has pledged the loan as collateral for an obligation of that Authority retains an interest in the loan, but causes the loan to be released from the lien of that obligation and pledged as collateral for a different obligation of that Authority. (4) References to an Authority include a successor entity that may not qualify as an Authority under §682.200(b). * * * * *
Amendment from August 09, 2006
34 CFR--PART 682
Amendment(s) published August 9, 2006, in 71 FR 45703
§ 682.302 Payment of special allowance on FFEL Loans.
