34 C.F.R. Subpart F—Requirements, Standards, and Payments for Participating Schools
Title 34 - Education
Title 34: Education
PART 682—FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
Subpart F—Requirements, Standards, and Payments for Participating Schools
§ 682.600 [Reserved]
§ 682.601 Rules for a school that makes or originates loans.
Link to an amendment published at 71 FR 45708, Aug. 9, 2006.
(a) General. To make or originate loans under the FFEL programs—
(1) The school shall employ full-time at least one person whose responsibilities are limited to the administration of financial aid programs for students attending the school;
(2) The school may not be a correspondence school;
(3) The school may not make or originate loans that would be outstanding to or on behalf of more than 50 percent of the undergraduates in attendance at that school on at least a half-time basis unless the Secretary waives this rule pursuant to paragraph (c) of this section;
(4) The school shall inform any undergraduate student who has not previously obtained a loan that was made or originated by the school and who seeks to obtain such a loan that he or she must first make a good faith effort to obtain a loan from a commercial lender;
(5)(i) The school may not make or originate a loan for an academic period to a student described in paragraph (a)(4) of this section until the student provides the school with evidence under paragraph (b) of this section of denial of a loan by a commercial lender for the same academic period.
(ii) In determining whether a school has complied with the requirement set paragraph (a)(5)(i) of this section, the Secretary may take into consideration any patterns reflected by the letters of denial or the students' sworn statements referred to in paragraph (b) of this section that indicate that the school has not given sufficient counseling to students to seek loans from a commercial lender first. An example of an unacceptable pattern would be if all denials of loans to a school's students were made by a small number of lenders; and
(6) The school's cohort default rate as calculated under subpart M of 34 CFR part 668 may not exceed 15 percent; and
(7) Except for reasonable administrative expenses directly related to the FFEL Program, the school must use payments received under §682.300 and §682.302 for need-based grant programs for its students.
(b) Establishing a loan denial by a commercial lender. (1) To verify that a borrower has sought and been denied a loan from a commercial lender pursuant to paragraph (a)(4) of this section, the school shall obtain from the borrower—
(i) A written statement from a commercial lender indicating that the lender denied the borrower a loan for that academic period; or
(ii) The borrower's sworn statement, indicating both the refusal of a loan by a commercial lender and the lender's refusal to provide a written statement of the denial.
(2) If the borrower's statement is used to establish the denial of a loan, the statement must include—
(i) The name and address of the lender that denied the loan;
(ii) The approximate date on which the loan was denied;
(iii) The name and telephone number of the official who communicated the denial to the borrower; and
(iv) The borrower's signature.
(3) If the school determines that the denial of a loan to an eligible borrower by a commercial lender is based upon the lender's refusal to lend more than a part of the amount requested by the borrower, the school may either—
(i) Make or originate a loan to the borrower for the entire amount; or
(ii) Supplement the loan that the commercial lender is willing to make with a second loan to the borrower.
(c) Waiver of the 50 percent lending limit. A school may request the Secretary to waive the 50 percent lending limit described in paragraph (a)(3) of this section if adherence to that limit would create a substantial hardship for the school's present or prospective students. The Secretary determines whether to grant the school a waiver after considering, among other factors—
(1) The extent to which the school provides and expects to continue providing educational opportunities to economically disadvantaged students, as measured by the percentage of those students enrolled at the school who—
(i) Are in families that fall within the “low-income family” category used by the Bureau of the Census;
(ii) Would not be able to enroll or continue their enrollment at that school without Stafford or PLUS loans made or originated by the school; and
(iii) Would not be able to obtain a comparable education at another school;
(2) The extent to which the school offers educational programs that—
(i) Are unique in the geographical area the school serves; and
(ii) Would not be available to some students if the school adhered to the 50 percent lending limit; and
(3) The quality of the school's—
(i) Management of student financial assistance programs; and
(ii) Conformance with sound business practices.
(Approved by the Office of Management and Budget under control number 1845–0020)(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1078–2, 1078–3, 1082, 1085)
[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9120, Feb. 19, 1993; 59 FR 33358, June 28, 1994; 64 FR 58965, Nov. 1, 1999; 65 FR 65650, Nov. 1, 2000; 66 FR 34764, June 29, 2001]
§ 682.602 [Reserved]
§ 682.603 Certification by a participating school in connection with a loan application.
Link to an amendment published at 71 FR 45709, Aug. 9, 2006.
(a) A school shall certify that the information it provides in connection with a loan application about the borrower and, in the case of a parent borrower, the student for whom the loan is intended, is complete and accurate. Except as provided in 34 CFR part 668, subpart E, a school may rely in good faith upon statements made on the application by the student.
(b) The information to be provided by the school about the borrower making application for the loan pertains to—
(1) The borrower's eligibility for a loan, as determined in accordance with §682.201 and §682.204;
(2) For a subsidized Stafford loan, the student's eligibility for interest benefits as determined in accordance with §682.301; and
(3) The schedule for disbursement of the loan proceeds, which must reflect the delivery of the loan proceeds as set forth in §682.604(c).
(c) Except as provided in paragraph (e) of this section, in certifying a loan, a school must certify a loan for the lesser of the borrower's request or the loan limits determined under §682.204.
(d) A school may not certify a Stafford or PLUS loan application, or combination of loan applications, for a loan amount that—
(1) The school has reason to know would result in the borrower exceeding the annual or maximum loan amounts in §682.204; or
(2) Exceeds the student's estimated cost of attendance, less—
(i) The student's estimated financial assistance for that period; and
(ii) In the case of a Stafford loan that is eligible for interest benefits, the borrower's expected family contribution for that period.
(e) A school may refuse to certify a Stafford or PLUS loan application or may reduce the borrower's determination of need for the loan if the reason for that action is documented and provided to the borrower in writing, provided—
(1) The determination is made on a case-by-case basis;
(2) The documentation supporting the determination is retained in the student's file; and
(3) The school does not engage in any pattern or practice that results in a denial of a borrower's access to FFEL loans because of the borrower's race, sex, color, religion, national origin, age, handicapped status, income, or selection of a particular lender or guaranty agency.
(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 668.3.
(2) The maximum period for which a school may certify a loan application is—
(i) Generally an academic year, as defined by 34 CFR 668.3, 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 §682.401(b)(2)(ii); or
(ii) For a defaulted borrower who has regained eligibility under §682.401(b)(4), the academic year in which the borrower regained eligibility.
(3) In certifying a Stafford or SLS loan amount in accordance with §682.204—
(i) A program of study must be considered at least one full academic year if—
(A) The number of weeks of instruction time is at least 30 weeks; and
(B) The number of clock hours is at least 900, the number of semester or trimester hours is at least 24, or the number of quarter hours is at least 36.
(ii) A program of study must be considered two-thirds
(A) The number of weeks of instruction time is at least 20 weeks; and
(B) The number of clock hours is at least 600, the number of semester or trimester hours is at least 16, or the number of quarter hours is at least 24.
(iii) A program of study must be considered one-third
(A) The number of weeks of instruction time is at least 10 weeks; and
(B) The number of clock hours is at least 300, the number of semester or trimester hours is at least 8, or the number of quarter hours is at least 12.
(4) In prorating a loan amount for a student enrolled in a program of study with less than a full academic year remaining, the school need not recalculate the amount of the loan if the number of hours for which an eligible student is enrolled changes after the school certifies the loan.
(g)(1) A school must cease certifying loans based on the exceptions in §682.604(c)(5)(i) and §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 §682.604(c)(5)(ii) and §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.
(h) A school may not assess the borrower, or the student in the case of a PLUS loan, a fee for the completion or certification of any FFEL Program form or information or for providing any information necessary for a student or parent to receive a loan under part B of the Act or any benefits associated with such a loan.
(i) Requesting loan proceeds. Pursuant to paragraph (b)(3) of the section, a school may not request the disbursement by the lender for loan proceeds earlier than the period specified in §668.167.
(Approved by the Office of Management and Budget under control number 1845–0020)(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1078–2, 1082, 1085, 1094)
[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9120, Feb. 19, 1993; 59 FR 33358, June 28, 1994; 59 FR 61722, Dec. 1, 1994; 60 FR 61757, Dec. 1, 1995; 61 FR 60609, Nov. 29, 1996; 64 FR 18981, Apr. 16, 1999; 64 FR 58963, Nov. 1, 1999; 65 FR 65650, Nov. 1, 2000; 66 FR 34764, June 29, 2001; 67 FR 67080, Nov. 1, 2002; 68 FR 75429, Dec. 31, 2003]
§ 682.604 Processing the borrower's loan proceeds and counseling borrowers.
Link to an amendment published at 71 FR 45709, Aug. 9, 2006.
(a) General. (1) This section establishes rules governing a school's processing of a borrower's Stafford or PLUS loan proceeds, and for counseling borrowers. The school shall also comply with any rules for processing a loan contained in 34 CFR part 668.
(2) Prior to a school delivering or crediting an FFEL loan account by EFT or master check, the school must provide the student or parent borrower with the notice as described under §668.165.
(3) Except as provided in §668.167, if the school is placed under the reimbursement payment method, a school shall not disburse a loan.
(b) Releasing loan proceeds. (1) Except as provided in §682.207(b)(1)(v)(C)(1) and (D)(1), the proceeds of a Stafford or PLUS loan disbursed using electronic transfer of funds must be sent directly to the school by the lender.
(2)(i) Except in the case of a late disbursement under paragraph (e) of this section or as provided in paragraph (b)(2)(iii) or (iv) of this section, a school may release the proceeds of any disbursement of a loan only to a student, or a parent in the case of a PLUS loan, if the school determines the student has continuously maintained eligibility in accordance with the provisions of §682.201 from the beginning of the loan period for which the loan was intended.
(ii) [Reserved]
(iii) If, after the proceeds of the first disbursement are transmitted to the student, the student becomes ineligible due solely to the school's loss of eligibility to participate in the Title IV programs, the school may transmit the proceeds of the second or subsequent disbursement to the borrower as permitted by §668.26.
(iv) If, prior to the transmittal of the proceeds of a disbursement to the student, the student temporarily ceases to be enrolled on at least a half-time basis, the school may transmit the proceeds of that disbursement and any subsequent disbursement to the student if the school subsequently determines and documents in the student's file—
(A) That the student has resumed enrollment on at least a half-time basis;
(B) The student's revised cost of attendance; and
(C) That the student continues to qualify for the entire amount of the loan, notwithstanding any reduction in the student's cost of attendance caused by the student's temporary cessation of enrollment on at least a half-time basis.
(c) Processing of the loan proceeds by the school. (1) Except as provided in paragraph (c)(3) of this section, if a school receives a borrower's loan proceeds, it shall hold the funds until the student has registered for classes for the period of enrollment for which the loan is intended and then follow the procedures in paragraph (c) (2) of this section.
(2)(i) Except as provided in §682.207(b)(1)(v)(C)(1) and (D)(1), after the student has registered, if the loan proceeds are disbursed by means of a check that requires the endorsement of the student only, the school shall deliver the check to the student, subject to paragraph (d)(2) of this section, within 30 days of the school's receipt of the check.
(ii) If the loan proceeds are disbursed by means of a check that requires the endorsement of both the borrower and the school, the school shall—
(A) In the case of the initial disbursement on a loan, endorse the check on its own behalf, and, after the student has registered, deliver it to the student subject to paragraph (d)(2) of this section, within 30 days of the school's receipt of the check; or
(B) Obtain the borrower's endorsement on the check, endorse the check on its own behalf and, after the student has registered, credit the student's account, in accordance with paragraph (d)(1) of this section, and deliver the remaining loan proceeds to the student, as specified in §668.164(e).
(3) If the loan proceeds are disbursed by electronic funds transfer to an account of the school in accordance with §682.207(b)(1)(ii)(B), or by master check in accordance with §682.207(b)(1)(ii)(C), the school must, unless authorization was provided in the loan application or MPN, obtain the student's, or in the case of a PLUS loan, the parent borrower's written authorization for the release of the initial and any subsequent disbursement of each FFEL loan to be made, and after the student has registered either—
(i) Deliver the proceeds to the student or parent borrower as specified in §668.164; or
(ii) Credit the student's account in accordance with paragraph (d)(1) of this section and §668.164, notify the student or parent borrower in writing that it has so credited that account, and deliver to the student or parent borrower the remaining loan proceeds not later than the timeframe specified in 668.164.
(4) A school may not credit a student's account or release the proceeds of a loan to a student who is on a leave of absence, as described in §668.22(d).
(5) A school may not release the first installment of a Stafford loan for endorsement to a student who is enrolled in the first year of an undergraduate program of study and who has not previously received a Stafford, SLS, Direct Subsidized, or Direct Unsubsidized loan until 30 days after the first day of the student's program of study unless—
(i) The school in which the student is enrolled has a cohort default rate, calculated under subpart M of 34 CFR part 668, of less than 10 percent for each of the three most recent fiscal years for which data are available;
(ii) The school is an eligible home institution certifying a loan to cover the student's cost of attendance in a study abroad program and has a cohort default rate, calculated under subpart M of 34 CFR part 668, of less than 5 percent for the single most recent fiscal year for which data are available; or
(iii) The school is not in a State.
(6) Unless the provision of §682.207(d) or the provisions of paragraph (c)(7) of this section apply—
(i) If a loan period is more than one payment period, the school must deliver 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 deliveries of loan proceeds during that payment period. The school may not make the second delivery until the calendar midpoint between the first and last scheduled days of class of the loan period.
(7)(i) If a school measures academic progress in an educational program in credit hours and either does not use terms or does not use terms that are substantially equal in length for a loan period, the school may not deliver a second disbursement until the later of—
(A) The calendar midpoint between the first and last scheduled days of class of the loan period; or
(B) The date, as determined by the school, that the student has completed half of the academic coursework in the loan period.
(ii) For purposes of paragraph (c)(7) of this section, terms in a loan period are substantially equal in length if no term in the loan period is more than two weeks longer than any other term in that loan period.
(8) If an educational program measures academic progress in clock hours, the school may not deliver a second disbursement until the later of—
(i) The calendar midpoint between the first and last scheduled days of class of the loan period; or
(ii) The date, as determined by the school, that the student has completed half of the clock hours in the loan period.
(9) The school must deliver loan proceeds in substantially equal installments, and no installment may exceed one-half of the loan.
(10) Notwithstanding the requirements of paragraphs (c)(6)–(c)(9) of this section, a school is not required to deliver loan proceeds in more than one installment if—
(i)(A) The student's loan period is not more than one semester, one trimester, one quarter, or, for non term-based schools or schools with non-standard terms, 4 months; and
(B) The school in which the student is enrolled has a cohort default rate, calculated under subpart M of 34 CFR part 668, of less than 10 percent for each of the three most recent fiscal years for which data are available;
(ii) The school is an eligible home institution certifying a loan to cover the student's cost of attendance in a study abroad program and has a cohort default rate, calculated under subpart M of 34 CFR part 668, of less than 5 percent for the single most recent fiscal year for which data are available; or
(iii) The school is not in a State.
(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 §682.603(g).
(d) Applying the loan proceeds. (1)(i) For purposes of paragraphs (c)(2)(ii)(B) and (c)(3)(ii) of this section, a school may not credit a registered student's account earlier than the period specified in §668.164.
(ii)(A) The school may credit a registered student's account with only those loan proceeds covering costs specified in §668.164.
(B) The school, as a fiduciary for the benefit of the guaranty agency, the Secretary, and the student, may hold any additional loan proceeds that the student requests in writing that the school retain in order to assist the student in managing his or her loan funds for the remainder of the academic year. The school shall maintain these funds, as provided in §668.165(b)(5).
(2) For purposes of paragraphs (c)(2)(i), (c)(2)(ii) and (c)(3) of this section, a school may not deliver loan proceeds earlier than the timeframe specified in §668.164.
(3) If a student does not register for the period of enrollment for which the loan was made, or a registered student withdraws or is expelled prior to the first day of classes of the period of enrollment for which the loan is made, the school shall return the proceeds to the lender no later than the period specified in §668.167.
(4) If the school is unable for any other reason to document that a registered student attended school during the period of enrollment for which the loan is made, the school must determine the student's withdrawal date as required under §682.605, and by the deadline described in §682.607(c), shall notify the lender of the student's withdrawal, expulsion, or failure to attend school, if applicable, and return to the lender—
(i) Any loan proceeds credited directly by the school to the student's account; and
(ii) The amount of payments made directly by the student to the school, to the extent that they do not exceed the amount of any loan proceeds delivered by the school to the student.
(e) Processing a late disbursement. (1) A school may process a late disbursement received from a lender under §682.207(f) in accordance with §668.164(g).
(2) If the total amount of the late disbursement and all prior disbursements is greater than that portion of the borrower's educational charges, the school shall return the balance of the borrower's loan proceeds to the lender with a notice certifying—
(i) The beginning and ending dates of the period during which the borrower was enrolled at the school as an eligible student during the loan period or payment period; and
(ii) The borrower's corrected financial need for the loan for that period of enrollment or payment period.
(f) Initial counseling. (1) A school must ensure that initial counseling is conducted with each Stafford loan borrower either in person, by audiovisual presentation, or by interactive electronic means prior to its release of the first disbursement, unless the student borrower has received a prior Federal Stafford, Federal SLS, or Direct subsidized or unsubsidized loan. A school must ensure that an individual with expertise in the title IV programs is reasonably available shortly after the counseling to answer the student borrower's questions regarding those programs. As an alternative, in the case of a student borrower enrolled in a correspondence program or a student borrower enrolled in a study-abroad program that the home institution approves for credit, the counseling may be provided through written materials, prior to releasing those loan proceeds.
(2) The initial counseling must—
(i) Explain the use of a Master Promissory Note;
(ii) Emphasize to the student borrower the seriousness and importance of the repayment obligation the student borrower is assuming;
(iii) Describe the likely consequences of default, including adverse credit reports, Federal offset, and litigation;
(iv) In the case of a student borrower of a Stafford loan (other than a loan made or originated by the school), emphasize that the student borrower is obligated to repay the full amount of the loan even if the student borrower does not complete the program, is unable to obtain employment upon completion, or is otherwise dissatisfied with or does not receive the educational or other services that the student borrower purchased from the school; and
(v) Inform the student borrower of sample monthly repayment amounts based on a range of student levels of indebtedness or on the average indebtedness of Stafford loan borrowers at the same school or in the same program of study at the same school.
(3) If initial counseling is conducted through interactive electronic means, the school must take reasonable steps to ensure that each student borrower receives the counseling materials, and participates in and completes the initial counseling.
(4) A school must maintain documentation substantiating the school's compliance with this section for each student borrower.
(g) Exit counseling. (1) A school must ensure that exit counseling is conducted with each Stafford loan borrower either in person, by audiovisual presentation, or by interactive electronic means. In each case, the school must ensure that this counseling is conducted shortly before the student borrower ceases at least half-time study at the school, and that an individual with expertise in the title IV programs is reasonably available shortly after the counseling to answer the student borrower's questions. As an alternative, in the case of a student borrower enrolled in a correspondence program or a study-abroad program that the home institution approves for credit, written counseling materials may be provided by mail within 30 days after the student borrower completes the program. If a student borrower withdraws from school without the school's prior knowledge or fails to complete an exit counseling session as required, the school must ensure that exit counseling is provided through either interactive electronic means or by mailing written counseling materials to the student borrower at the student borrower's last known address within 30 days after learning that the student borrower has withdrawn from school or failed to complete the exit counseling as required.
(2) The exit counseling must—
(i) Inform the student borrower of the average anticipated monthly repayment amount based on the student borrower's indebtedness or on the average indebtedness of student borrowers who have obtained Stafford or SLS loans for attendance at the same school or in the same program of study at the same school;
(ii) Review for the student borrower available repayment options, including standard, graduated, extended, and income-sensitive repayment plans and loan consolidation;
(iii) Suggest to the student borrower debt-management strategies that would facilitate repayment;
(iv) Include the matters described in paragraph (f)(2)(i) through (f)(2)(iv) of this section;
(v) Review for the student borrower the conditions under which the student borrower may defer or forbear repayment or obtain a full or partial discharge of a loan;
(vi) Require the student borrower to provide current information concerning name, address, social security number, references, and driver's license number and State of issuance, as well as the student borrower's expected permanent address, the address of the student borrower's next of kin, and the name and address of the student borrower's expected employer (if known). The school must ensure that this information is provided to the guaranty agency or agencies listed in the student borrower's records within 60 days after the student borrower provides the information;
(vii) Review for the student borrower information on the availability of the Student Loan Ombudsman's office; and
(viii) Inform the student borrower of the availability of title IV loan information in the National Student Loan Data System (NSLDS).
(3) If exit counseling is conducted by electronic interactive means, the school must take reasonable steps to ensure that each student borrower receives the counseling materials, and participates in and completes the counseling.
(4) The school must maintain documentation substantiating the school's compliance with this section for each student borrower.
(h) Treatment of excess loan proceeds. Except as provided under paragraph (i) of this section, or in the case of a student attending a foreign school, if, before the delivery of any Stafford or SLS loan disbursement, the school learns that the borrower will receive or has received financial aid for the period of enrollment for which the loan was made that exceeds the amount of assistance for which the student is eligible, the school shall reduce or eliminate the overaward by either—
(1) Using the student's SLS, PLUS, nonsubsidized or unsubsidized Stafford, or State-sponsored or private loan to cover the expected family contribution, if not already done;
(2)(i) Returning the entire undelivered disbursement to the lender or escrow agent; and
(ii) Providing the lender with a written statement—
(A) Describing the reason for the return of the funds, if any;
(B) Setting forth the student's revised financial need; and
(C) Directing the lender to re-disburse a revised amount and, if necessary, revise subsequent disbursements to eliminate the overaward; or
(3) Returning to the lender any portion of the disbursement for which the student is ineligible and providing the lender with a written statement explaining the return of the funds.
(i) For purposes of paragraph (h) of this section, funds obtained from any Federal College Work-Study employment that do not exceed the borrower's financial need by more than $300 may not be considered as excess loan proceeds.
(Approved by the Office of Management and Budget under control number 1845–0020)(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1082, 1085, 1092, 1094)
[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9119, Feb. 19, 1993; 59 FR 25747, May 17, 1994; 59 FR 33358, June 28, 1994; 59 FR 61216, Nov. 29, 1994; 59 FR 61429, Nov. 30, 1994; 59 FR 61722, Dec. 1, 1994; 60 FR 30788, June 12, 1995; 60 FR 31411, June 15, 1995; 60 FR 61757, Dec. 1, 1995; 61 FR 60609, Nov. 29, 1996; 62 FR 63434, Nov. 28, 1997; 64 FR 18981, Apr. 16, 1999; 64 FR 58963, 59043, Nov. 1, 1999; 65 FR 65621, 65651, Nov. 1, 2000; 66 FR 34764, June 29, 2001; 67 FR 67080, Nov. 1, 2003; 68 FR 75429, Dec. 31, 2003]
§ 682.605 Determining the date of a student's withdrawal.
(a) Except in the case of a student who does not return for the next scheduled term following a summer break, which includes any summer term or terms in which classes are offered but students are not generally required to attend, a school must follow the procedures in §668.22(b) or (c), as applicable, for determining the student's date of withdrawal. In the case of a student who does not return from a summer break, the school must follow the procedures in §668.22(b) or (c), as applicable, except that the school shall determine the student's withdrawal date no later than 30 days after the first day of the next scheduled term.
(b) The school must use the withdrawal date determined under §668.22(b) or (c), as applicable for the purpose of reporting to the lender the date that the student has withdrawn from the school.
(c) For the purpose of a school's reporting to a lender, a student's withdrawal date is the month, day and year of the withdrawal date.
(Approved by the Office of Management and Budget under control number 1845–0020)[60 FR 61757, Dec. 1, 1995, as amended at 64 FR 58965, 59043, Nov. 1, 1999]
§ 682.606 [Reserved]
§ 682.607 Payment of a refund or a return of title IV, HEA program funds to a lender upon a student's withdrawal.
(a) General. By applying for a FFEL loan, a borrower authorizes the school to pay directly to the lender that portion of a refund or return of title IV, HEA program funds from the school that is allocable to the loan upon the borrower's withdrawal. A school—
(1) Must pay that portion of the student's refund or return of title IV, HEA program funds that is allocable to a FFEL loan to—
(i) The original lender; or
(ii) A subsequent holder, if the loan has been transferred and the school knows the new holder's identity; and
(2) Must provide simultaneous written notice to the borrower if the school makes a payment of a refund or a return of title IV, HEA program funds to a lender on behalf of that student.
(b) Allocation of a refund or returned title IV, HEA program funds. In determining the portion of a refund or the return of title IV, HEA program funds upon a student's withdrawal for an academic period that is allocable to a FFEL loan received by the borrower for that academic period, the school must follow the procedures established in part 668 for allocating a refund or return of title IV, HEA program funds.
(c) Timely payment. A school must pay a refund or a return of title IV, HEA program funds that is due in accordance with the timeframe in §668.22(j).
(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1078–2, 1082, 1094)
[64 FR 59043, Nov. 1, 1999]
§ 682.608 Termination of a school's lending eligibility.
(a) General. The Secretary may terminate a school's eligibility to make loans under this part if the school reaches the 15 percent limit on loan defaults described in paragraph (b) of this section.
(b) The 15 percent limit. (1) The Secretary may terminate a school's eligibility to make loans if at the end of each of the 2 most recent consecutive Federal fiscal years for which data are available, the total amount of loans described in paragraph (b)(1)(i) of this section is equal to or greater than 15 percent of the total amount of loans described in paragraph (b)(1)(ii) of this section as follows:
(i) The original principal amount of all loans the school has ever made that went into default during that period.
(ii) The original principal amount of all loans the school has ever made, including loans in deferment status that—
(A) Were in repayment status at the beginning of that period; or
(B) Entered repayment status during that period.
(2) In making the determination under this section, the Secretary considers the status of all FFEL loans made by the school whether the loans are held by the school or by a subsequent holder.
(c) Exception based on hardship. The Secretary does not terminate a school's lending eligibility under paragraphs (a) and (b) of this section if the Secretary determines that the termination would result in a hardship for the school or its students. The Secretary makes this determination if the school shows that—
(1) Termination is not justified in light of recent improvements the school has made in its collection capabilities that will reduce the school's loan default rate significantly within the next year. Examples of these improvements include—
(i) Adopting more efficient collection procedures; or
(ii) Employing increased collection staff; or
(2) Termination would cause a substantial hardship to the school's current or prospective students or their parents based on—
(i) The extent to which the school provides, and expects to continue to provide educational opportunities to economically disadvantaged students as measured by the percentage of students enrolled at the school who—
(A) Are in families that fall within the “low-income family” category used by the Bureau of the Census;
(B) Would not be able to enroll or continue their enrollment at that school without a loan from the school; and
(C) Would not be able to obtain a comparable education at another school;
(ii) The extent to which the school offers educational programs that—
(A) Are unique in the geographical area that the school serves; and
(B) Would not be available to some students if they or their parents could not obtain loans from the school; and
(iii) The quality of improvements the school has made in its—
(A) Management of student financial assistance programs; and
(B) Conformance with sound business practices.
(d) Termination procedures. (1) The Secretary notifies the school of the proposed termination of its lending eligibility and provides an opportunity for a hearing before the Secretary terminates the school under this section.
(2) The Secretary or his designee begins a termination action by sending a notice to the school. The notice is sent by certified mail with return receipt requested. The notice—
(i) Informs the school of the intent to terminate the school's lending eligibility because of the school's default experience;
(ii) Specifies the proposed date the termination becomes effective; and
(iii) Informs the school that it has 15 days to—
(A) Submit any written material it wants considered in determining whether its lending eligibility should be terminated under paragraphs (a) and (b) of this section, including written material in support of a hardship exception under paragraph (c) of this section; or
(B) Request an oral hearing to show why the school's lending eligibility should not be terminated.
(3) If the school does not request an oral hearing but submits written material, the Secretary or the designated official considers that material and notifies the school as to whether the termination action will be taken.
(4) The Secretary or the designated official (presiding officer) schedules the date and place of a hearing for a school that has requested an oral hearing. The date of the hearing is at least 15 days from the date of receipt of the request. A presiding officer—
(i) Conducts the hearing;
(ii) Considers all written material presented before the hearing and any other material presented during the hearing; and
(iii) Determines if termination of the school's lending eligibility is warranted.
(5) The decision of the designated official is subject to review by the Secretary.
(e) Effects of termination. A school that has its lending eligibility terminated under this section may not—
(1) Make further loans under this part until it has entered into a new guarantee agreement with the Secretary; or
(2) Enter into a new guarantee agreement with the Secretary until at least one year after the school's lending eligibility has been terminated under this section.
(f) Schools under the same ownership. If a school makes loans to students or parents of students in attendance at other schools under the same ownership, the Secretary may make the determination required by this section by—
(1) Treating all of the schools as one school; or
(2) Treating each school on an individual basis.
(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1078–2, 1082, 1085)
§ 682.609 Remedial actions.
(a) The Secretary may require a school to repay funds paid to other program participants by the Secretary. The Secretary also may require a school to purchase from the holder of a FFEL loan that portion of the loan that is unenforceable, that the borrower was ineligible to receive, or for which the borrower was ineligible to receive interest benefits contrary to the school's certification, and to make arrangements acceptable to the Secretary for reimbursement of the amounts the Secretary will be obligated to pay to program participants respecting that loan in the future. The repayment of funds and purchase of loans may be required if the Secretary determines that the payment to program participants, the unenforceability of the loan, or the disbursement of loan amounts for which the borrower was ineligible or for which the borrower was ineligible for interest benefits, resulted in whole or in part from—
(1) The school's violation of a Federal statute or regulation; or
(2) The school's negligent or willful false certification.
(b) In requiring a school to repay funds to the Secretary or to another party or to purchase loans from a holder in connection with an audit or program review, the Secretary follows the procedures described in 34 CFR part 668, subpart H.
(c) Notwithstanding paragraph (a) of this section, the Secretary may waive the right to require repayment of funds or repurchase of loans by a school if, in the Secretary's judgment, the best interest of the United States so requires.
(d) The Secretary may impose a fine or take an emergency action against a school or limit, suspend, or terminate a school's participation in the FFEL programs, in accordance with 34 CFR part 668, subpart G.
(e) A school shall comply with any emergency action, limitation, suspension, or termination imposed by a guaranty agency in accordance with the agency's standards and procedures. A school shall repay funds to the Secretary or other party or purchase loans from a holder if a guaranty agency determines that the school improperly received or retained the funds in violation of a Federal law or regulation or a guaranty agency rule or regulation.
(Authority: 20 U.S.C. 1077, 1078 , 1078–1, 1078–2, 1082, 1094)
§ 682.610 Administrative and fiscal requirements for participating schools.
(a) General. Each school shall—
(1) Establish and maintain proper administrative and fiscal procedures and all necessary records as set forth in the regulations in this part and in 34 CFR part 668;
(2) Follow the record retention and examination provisions in this part and in 34 CFR 668.24; and
(3) Submit all reports required by this part and 34 CFR part 668 to the Secretary.
(b) Loan record requirements. In addition to records required by 34 CFR part 668, for each Stafford, SLS, or PLUS loan received by or on behalf of its students, a school must maintain—
(1) A copy of the loan certification or data electronically submitted to the lender, that includes the amount of the loan and the period of enrollment for which the loan was intended;
(2) The cost of attendance, estimated financial assistance, and estimated family contribution used to calculate the loan amount;
(3) For loans delivered to the school by check, the date the school endorsed each loan check, if required;
(4) The date or dates of delivery of the loan proceeds by the school to the student or to the parent borrower;
(5) For loans delivered by electronic funds transfer or master check, a copy of the borrower's written authorization required under §682.604(c)(3), if applicable, to deliver the initial and subsequent disbursements of each FFEL program loan; and
(6) Documentation of any MPN confirmation process or processes the school may have used.
(c) Student status confirmation reports. A school shall—
(1) Upon receipt of a student status confirmation report form from the Secretary or a similar student status confirmation report form from any guaranty agency, complete and return that report within 30 days of receipt to the Secretary or the guaranty agency, as appropriate; and
(2) Unless it expects to submit its next student status confirmation report to the Secretary or the guaranty agency within the next 60 days, notify the guaranty agency or lender within 30 days—
(i) If it discovers that a Stafford, SLS, or PLUS loan has been made to or on behalf of a student who enrolled at that school, but who has ceased to be enrolled on at least a half-time basis;
(ii) If it discovers that a Stafford, SLS, or PLUS loan has been made to or on behalf of a student who has been accepted for enrollment at that school, but who failed to enroll on at least a half-time basis for the period for which the loan was intended;
(iii) If it discovers that a Stafford, SLS, or PLUS loan has been made to or on behalf of a full-time student who has ceased to be enrolled on a full-time basis; or
(iv) If it discovers that a student who is enrolled and who has received a Stafford or SLS loan has changed his or her permanent address.
(Approved by the Office of Management and Budget under control number 1845–0020)(Authority: 20 U.S.C. 1078, 1078–1, 1078–2, 1082, 1094)
[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9119, Feb. 19, 1993; 61 FR 60493, Nov. 27, 1996; 64 FR 58965, Nov. 1, 1999; 66 FR 34764, June 29, 2001]
§ 682.611 Foreign schools.
A foreign school is required to comply with the provisions of this part, except to the extent that the Secretary states in this part or in other official publications or documents that those schools need not comply with those provisions.
(Authority: 20 U.S.C. 1077, 1078, 1078–1, 1078–2, 1078–3, 1082, 1088, and 1094)
[60 FR 61816, Dec. 1, 1995]
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