34 C.F.R. Subpart C—Requirements, Standards, and Payments for Direct Loan Program Schools
Title 34 - Education
(a) General. (1) Participation of a school in the Direct Loan Program means that eligible students at the school may receive Direct Loans. To participate in the Direct Loan Program, a school shall— (i) Demonstrate to the satisfaction of the Secretary that the school meets the requirements for eligibility under the Act and applicable regulations; and (ii) Enter into a written program participation agreement with the Secretary that identifies the loan program or programs in which the school chooses to participate. (2) The chief executive officer of the school shall sign the program participation agreement on behalf of the school. (b) Program participation agreement. In the program participation agreement, the school shall promise to comply with the Act and applicable regulations and shall agree to— (1) Identify eligible students who seek student financial assistance at the institution in accordance with section 484 of the Act; (2) Estimate the need of each of these students as required by part F of the Act for an academic year. For purposes of estimating need, a Direct Unsubsidized Loan, a Direct PLUS Loan, or any loan obtained under any State-sponsored or private loan program may be used to offset the expected family contribution of the student for that year; (3) Certify that the amount of the loan for any student under part D of the Act is not in excess of the annual limit applicable for that loan program and that the amount of the loan, in combination with previous loans received by the borrower, is not in excess of the aggregate limit for that loan program; (4) Set forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 428G of the Act; (5) Provide timely and accurate information to the Secretary for the servicing and collecting of loans— (i) Concerning the status of student borrowers (and students on whose behalf parents borrow) while these students are in attendance at the school; (ii) Upon request by the Secretary, concerning any new information of which the school becomes aware for these students (or their parents) after the student leaves the school; and (iii) Concerning student eligibility and need, for the alternative origination of loans to eligible students and parents in accordance with part D of the Act; (6) Provide assurances that the school will comply with requirements established by the Secretary relating to student loan information with respect to loans made under the Direct Loan Program; (7) Provide that the school will accept responsibility and financial liability stemming from its failure to perform its functions pursuant to the agreement; (8) Provide that eligible students at the school and their parents may participate in the programs under part B of the Act at the discretion of the Secretary for the period during which the school participates in the Direct Loan Program under part D of the Act, except that a student may not receive loans under both part D of the Act and part B of the Act for the same period of enrollment and a parent (borrowing for the same student) may not receive loans under both part D of the Act and part B of the Act for the same period of enrollment; (9) Provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with the school, to ensure that the school is complying with program requirements and meeting program objectives; (10) Provide that the school will not charge any fees of any kind, however described, to student or parent borrowers for origination activities or the provision of any information necessary for a student or parent to receive a loan under part D of the Act or any benefits associated with such a loan; and (11) Comply with other provisions that the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of part D of the Act. (c) Origination. (1) If a school or consortium originates loans in the Direct Loan Program, it shall enter into a supplemental agreement that— (i) Provides that the school or consortium will originate loans to eligible students and parents in accordance with part D of the Act; and (ii) Provides that the note or evidence of obligation on the loan is the property of the Secretary. (2) The chief executive officer of the school shall sign the supplemental agreement on behalf of the school. (Authority: 20 U.S.C. 1087a et seq., 1094) [59 FR 61690, Dec. 1, 1994, as amended at 64 FR 58970, Nov. 1, 1999]
Link to an amendment published at 71 FR 45717, Aug. 9, 2006. (a) Determining eligibility and loan amount. (1) A school participating in the Direct Loan Program shall ensure that any information it provides to the Secretary in connection with loan origination is complete and accurate. A school shall originate a Direct Loan while the student meets the borrower eligibility requirements of §685.200. Except as provided in 34 CFR part 668, subpart E, a school may rely in good faith upon statements made in the application by the student. (2) A school shall provide to the Secretary borrower information that includes but is not limited to— (i) The borrower's eligibility for a loan, as determined in accordance with §685.200 and §685.203; (ii) The student's loan amount; and (iii) The anticipated and actual disbursement date or dates and disbursement amounts of the loan proceeds. (3) A school may not originate a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan, or a combination of loans, for an amount that— (i) The school has reason to know would result in the borrower exceeding the annual or maximum loan amounts in §685.203; or (ii) Exceeds the student's estimated cost of attendance less— (A) The student's estimated financial assistance for that period; and (B) In the case of a Direct Subsidized Loan, the borrower's expected family contribution for that period. (4)(i) A school determines a Direct Subsidized or Direct Unsubsidized Loan amount in accordance with §685.203. (ii) When 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 originates the loan. (5) The date of loan origination is the date a school creates the electronic loan origination record. (6) If a student has received a determination of need for a Direct Subsidized Loan that is $200 or less, a school may choose not to originate a Direct Subsidized Loan for that student and to include the amount as part of a Direct Unsubsidized Loan. (7) A school may refuse to originate a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan 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, and if— (i) The determination is made on a case-by-case basis; (ii) The documentation supporting the determination is retained in the student's file; and (iii) The school does not engage in any pattern or practice that results in a denial of a borrower's access to Direct Loans because of the borrower's race, gender, color, religion, national origin, age, disability status, or income. (8) A school may not assess a fee for the completion or certification of any Direct Loan Program forms or information or for the origination of a Direct Loan. (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 668.3. (ii) The maximum period for which a school may originate a Direct Loan is— (A) Generally an academic year, as defined by 34 CFR 668.3, 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 §685.203; or (B) For a defaulted borrower who has regained eligibility, the academic year in which the borrower regained eligibility. (b) Determining disbursement dates and amounts. (1) Before disbursing a loan, a school that originates loans shall determine that all information required by the loan application and promissory note has been provided by the borrower and, if applicable, the student. (2) Unless paragraph (b)(5) or (6) of this section applies, an institution must disburse the loan proceeds on a payment period basis in accordance with 34 CFR 668.164(b). (3) Unless paragraph (b)(4), (5), (6), or (8) of this section applies— (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. (4)(i) If one or more payment periods have elapsed before a school makes a disbursement, the school may include in the disbursement loan proceeds for completed payment periods; or (ii) If the loan period is equal to one payment period and more than one-half of it has elapsed, the school may include in the disbursement loan proceeds for the entire payment period. (5)(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 make 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 this paragraph, 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. (6) If an educational program measures academic progress in clock hours, the school may not make 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 institution, that the student has completed half of the clock hours in the loan period. (7) The school must disburse loan proceeds in substantially equal installments, and no installment may exceed one-half of the loan. (8)(i) A school is not required to make more than one disbursement if— (A)(1) The 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 (2) The school 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; (B) The school is an eligible home institution originating a loan to cover the cost of attendance in a study abroad program and has a cohort default rate, calculated under subpart M of 34 part 668, of less than 5 percent for the single most recent fiscal year for which data are available; or (C) The school is not in a State. (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. (c) Promissory note handling. (1) The Secretary provides promissory notes for use in the Direct Loan Program. A school may not modify, or make any additions to, the promissory note without the Secretary's prior written approval. (2) A school that originates a loan must ensure that the loan is supported by a completed promissory note as proof of the borrower's indebtedness. (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. (Authority: 20 U.S.C. 1087a et seq.) [59 FR 61690, Dec. 1, 1994, as amended at 60 FR 33345, June 28, 1995; 60 FR 61794, Dec. 1, 1995; 61 FR 29900, June 12, 1996; 61 FR 31359, June 19, 1996; 61 FR 60610, Nov. 29, 1996; 62 FR 63435, Nov. 28, 1997; 64 FR 58970, Nov. 1, 1999; 65 FR 65622, 65651, Nov. 1, 2000; 66 FR 34765, June 29, 2001; 67 FR 67082, Nov. 1, 2002; 68 FR 75430, Dec. 31, 2003]
Title 34: Education
PART 685—WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
Subpart C—Requirements, Standards, and Payments for Direct Loan Program Schools
§ 685.300 Agreements between an eligible school and the Secretary for participation in the Direct Loan Program.
§ 685.301 Origination of a loan by a Direct Loan Program school.
§ 685.302 [Reserved]
§ 685.303 Processing loan proceeds.
(a) Purpose. This section establishes rules governing a school's processing of a borrower's Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan proceeds. The school shall also comply with any rules for processing loan proceeds contained in 34 CFR part 668.
(b) General—(1)(i) A school that initiates the drawdown of funds. A school may not disburse loan proceeds to a borrower unless the school has obtained an executed, legally enforceable promissory note from the borrower.
(ii) A school that does not initiate the drawdown of funds. A school may disburse loan proceeds only to a borrower for whom the school has received funds from the Secretary.
(2)(i) Except in the case of a late disbursement under paragraph (d) of this section, or as provided in paragraph (b)(2)(iii) of this section, a school may disburse loan proceeds 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 §685.200 from the beginning of the loan period for which the loan was intended.
(ii) In the event a student delays attending school for a period of time, the school may consider that student to have maintained eligibility for the loan from the first day of the period of enrollment. However, the school must comply with the requirements under paragraph (b)(3) of this section.
(iii) If, after a school makes the first disbursement to a borrower, the student becomes ineligible due solely to the school's loss of eligibility to participate in the title IV programs or the Direct Loan Program, the school may make subsequent disbursements to the borrower as permitted by 34 CFR part 668.
(iv) If, prior to making any disbursement to a borrower, the student temporarily ceases to be enrolled on at least a half-time basis, the school may make a disbursement and any subsequent disbursement to the student if the school 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.
(3) If 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, or fails to attend school during that period, or if the school is unable for any other reason to document that the student attended school during that period, the school shall notify the Secretary, within 30 days of the date described in §685.305(a), of the student's withdrawal, expulsion, or failure to attend school, as applicable, and return to the Secretary—
(i) Any loan proceeds credited by the school to the student's account; and
(ii) The amount of payments made by the student to the school, to the extent that they do not exceed the amount of any loan proceeds disbursed by the school to the student.
(4)(i) If a student is enrolled in the first year of an undergraduate program of study and has not previously received a Federal Stafford, Federal Supplemental Loans for Students, Direct Subsidized, or Direct Unsubsidized Loan, a school may not disburse the proceeds of a Direct Subsidized or Direct Unsubsidized Loan until 30 days after the first day of the student's program of study unless—
(A) The school has a cohort default rate, calculated under subpart M of 34 CFR part 668, or weighted average cohort rate of less than 10 percent for each of the three most recent fiscal years for which data are available;
(B) The school is an eligible home institution originating a loan to cover the cost of attendance in a study abroad program and has a Direct Loan Program cohort rate, FFEL cohort default rate, or weighted average cohort rate of less than 5 percent for the single most recent fiscal year for which data are available; or
(C) The school is not in a State.
(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.
(c) Processing of the proceeds of a Direct Loan. Schools shall follow the procedures for disbursing funds in 34 CFR 668.164.
(d) Late Disbursement. A school may make a late disbursement according to the provisions found under 34 CFR 668.164(g).
(e) Treatment of excess loan proceeds. Before the disbursement of any Direct Subsidized or Direct Unsubsidized Loan proceeds, if a school learns that the borrower will receive or has received financial aid for the period of enrollment for which the loan was intended that exceeds the amount of assistance for which the student is eligible (except for Federal Work-Study Program funds up to $300), the school shall reduce or eliminate the overaward by either—
(1) Using the student's Direct Unsubsidized, Direct PLUS, or State-sponsored or another non-Federal loan to cover the expected family contribution, if not already done; or
(2) Reducing one or more subsequent disbursements to eliminate the overaward.
(Approved by the Office of Management and Budget under control number 1840–0672)[59 FR 61690, Dec. 1, 1994, as amended at 60 FR 33345, June 28, 1995; 61 FR 29901, June 12, 1996; 61 FR 60610, Nov. 29, 1996; 64 FR 58971, Nov. 1, 1999; 65 FR 65651, Nov. 1, 2000; 66 FR 34766, June 29, 2001; 68 FR 75430, Dec. 31, 2003]
§ 685.304 Counseling borrowers.
(a) Initial counseling. (1) Except as provided in paragraph (a)(4) of this section, a school must ensure that initial counseling is conducted with each Direct Subsidized Loan or Direct Unsubsidized Loan student borrower prior to making the first disbursement of the proceeds of a loan to a student borrower unless the student borrower has received a prior Direct Subsidized, Direct Unsubsidized, Federal Stafford, or Federal SLS Loan.
(2) The initial counseling must be in person, by audiovisual presentation, or by interactive electronic means. In each case, the 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. As an alternative, in the case of a student borrower enrolled in a correspondence program or a study-abroad program approved for credit at the home institution, the student borrower may be provided with written counseling materials before the loan proceeds are disbursed.
(3) The initial counseling must—
(i) Explain the use of a Master Promissory Note (MPN);
(ii) Emphasize to the 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, garnishment of wages, Federal offset, and litigation;
(iv) Inform the student borrower of sample monthly repayment amounts based on a range of student levels of indebtedness or on the average indebtedness of Direct Subsidized Loan and Direct Unsubsidized Loan borrowers at the same school or in the same program of study at the same school; and
(v) 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.
(4) A school may adopt an alternative approach for initial counseling as part of the school's quality assurance plan described in §685.300(b)(9). If a school adopts an alternative approach, it is not required to meet the requirements of paragraphs (a)(1)–(3) of this section unless the Secretary determines that the alternative approach is not adequate for the school. The alternative approach must—
(i) Ensure that each student borrower subject to initial counseling under paragraph (a)(1) of this section is provided written counseling materials that contain the information described in paragraph (a)(3) of this section;
(ii) Be designed to target those student borrowers who are most likely to default on their repayment obligations and provide them more intensive counseling and support services; and
(iii) Include performance measures that demonstrate the effectiveness of the school's alternative approach. These performance measures must include objective outcomes, such as levels of borrowing, default rates, and withdrawal rates.
(5) If initial counseling is conducted through interactive electronic means, a school must take reasonable steps to ensure that each student borrower receives the counseling materials, and participates in and completes the initial counseling.
(6) The school must maintain documentation substantiating the school's compliance with this section for each student borrower.
(b) Exit counseling. (1) A school must ensure that exit counseling is conducted with each Direct Subsidized Loan or Direct Unsubsidized Loan borrower shortly before the student borrower ceases at least half-time study at the school.
(2) The exit counseling must be in person, by audiovisual presentation, or by interactive electronic means. In each case, the 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. As an alternative, in the case of a student borrower enrolled in a correspondence program or a study-abroad program approved for credit at the home institution, the student borrower may be provided with written counseling materials within 30 days after the student borrower completes the program.
(3) If a student borrower withdraws from school without the school's prior knowledge or fails to complete the exit counseling as required, exit counseling must be provided either through 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 the school learns that the student borrower has withdrawn from school or failed to complete the exit counseling as required.
(4) 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 Direct Subsidized Loan and Direct Unsubsidized Loan borrowers 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 the standard repayment, extended repayment, graduated repayment, and income contingent repayment plans, and loan consolidation;
(iii) Suggest to the student borrower debt-management strategies that would facilitate repayment;
(iv) Explain to the student borrower how to contact the party servicing the student borrower's Direct Loans;
(v) Meet the requirements described in paragraphs (a)(3)(i), (ii), (iii), and (v) of this section;
(vi) 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;
(vii) Review for the student borrower information on the availability of the Department's Student Loan Ombudsman's office;
(viii) Inform the student borrower of the availability of title IV loan information in the National Student Loan Data System (NSLDS); and
(ix) 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).
(5) The school must ensure that the information required in paragraph (b)(4)(ix) of this section is provided to the Secretary within 60 days after the student borrower provides the information.
(6) If exit counseling is conducted through interactive electronic means, a school must take reasonable steps to ensure that each student borrower receives the counseling materials, and participates in and completes the exit counseling.
(7) The school must maintain documentation substantiating the school's compliance with this section for each student borrower.
(Approved by the Office of Management and Budget under control number 1845–0021)(Authority: 20 U.S.C. 1087a et seq.)
[59 FR 61690, Dec. 1, 1994, as amended at 62 FR 63435, Nov. 28, 1997; 64 FR 58971, Nov. 1, 1999; 65 FR 65651, Nov. 1, 2000; 66 FR 34766, June 29, 2001; 67 FR 67082, Nov. 1, 2002]
§ 685.305 Determining the date of a student's withdrawal.
(a) Except as provided in paragraph (b) of this section, a school shall follow the procedures in §668.22(b) or (c), as applicable, for determining the student's date of withdrawal.
(b) For a student who does not return for the next scheduled term following a summer break, which includes any summer term(s) in which classes are offered but students are not generally required to attend, a school shall follow the procedures in §668.22(b) or (c), as applicable, for determining the student's date of withdrawal except that the school must determine the student's date of withdrawal no later than 30 days after the start of the next scheduled term.
(c) The school shall use the date determined under paragraph (a) or (b) of this section for the purpose of reporting to the Secretary the student's date of withdrawal and for determining when a refund or return of title IV, HEA program funds must be paid under §685.306.
(Authority: 20 U.S.C. 1087 et seq.)
[64 FR 59044, Nov. 1, 1999]
§ 685.306 Payment of a refund or return of title IV, HEA program funds to the Secretary.
(a) General. By applying for a Direct Loan, a borrower authorizes the school to pay directly to the Secretary that portion of a refund or return of title IV, HEA program funds from the school that is allocable to the loan. A school—
(1) Shall pay that portion of the student's refund or return of title IV, HEA program funds that is allocable to a Direct Loan to the Secretary; and
(2) Shall provide simultaneous writ-ten notice to the borrower if the school pays a refund or return of title IV, HEA program funds to the Secretary on be-half of that student.
(b) Determination, allocation, and payment of a refund or return of title IV, HEA program funds. In determining the portion of a student's refund or return of title IV, HEA program funds that is allocable to a Direct Loan, the school shall follow the procedures established in 34 CFR 668.22 for allocating and paying a refund or return of title IV, HEA program funds that is due.
(Authority: 20 U.S.C. 1087a et seq.)
[64 FR 59044, Nov. 1, 1999; 65 FR 37045, June 13, 2000]
§ 685.307 Withdrawal procedure for schools participating in the Direct Loan Program.
(a) A school participating in the Direct Loan Program may withdraw from the program by providing written notice to the Secretary.
(b) A participating school that intends to withdraw from the Direct Loan Program shall give at least 60 days notice to the Secretary.
(c) Unless the Secretary approves an earlier date, the withdrawal is effective on the later of—
(1) 60 days after the school notifies the Secretary; or
(2) The date designated by the school.
(Authority: 20 U.S.C. 1087a et seq.)
§ 685.308 Remedial actions.
(a) General. The Secretary may require the repayment of funds and the purchase of loans by the school if the Secretary determines that the unenforceability of a loan or loans, or the disbursement of loan amounts for which the borrower was ineligible, 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 purchase loans from the Secretary in connection with an audit or program review, the Secretary follows the procedures described in 34 CFR part 668, subpart H.
(c) 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 Direct Loan Program in accordance with 34 CFR part 668, subpart G.
(Authority: 20 U.S.C. 1087a et seq.)
§ 685.309 Administrative and fiscal control and fund accounting requirements for schools participating in the Direct Loan Program.
(a) General. A participating school shall—
(1) Establish and maintain proper administrative and fiscal procedures and all necessary records as set forth in this part and in 34 CFR part 668; and
(2) Submit all reports required by this part and 34 CFR part 668 to the Secretary.
(b) Student status confirmation reports. A school shall—
(1) Upon receipt of a student status confirmation report from the Secretary, complete and return that report to the Secretary within 30 days of receipt; and
(2) Unless it expects to submit its next student status confirmation report to the Secretary within the next 60 days, notify the Secretary within 30 days if it discovers that a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan has been made to or on behalf of a student who—
(i) Enrolled at that school but has ceased to be enrolled on at least a half-time basis;
(ii) Has been accepted for enrollment at that school but failed to enroll on at least a half-time basis for the period for which the loan was intended; or
(iii) Has changed his or her permanent address.
(3) The Secretary provides student status confirmation reports to a school at least semi-annually.
(4) The Secretary may provide the student status confirmation report in either paper or electronic format.
(c) Record retention requirements. An institution shall follow the record retention and examination requirements in this part and in 34 CFR 668.24.
(d) Accounting requirements. A school shall follow accounting requirements in 34 CFR 668.24(b).
(e) Direct Loan Program bank account. Schools shall follow the procedures for maintaining funds established in 34 CFR 668.163.
(f) Division of functions. Schools shall follow the procedures for division of functions in 34 CFR 668.16(c).
(g) Limit on use of funds. Except for funds paid to a school under section 452(b)(1) of the Act, funds received by a school under this part may be used only to make Direct Loans to eligible borrowers and may not be used or hypothecated for any other purpose.
(Approved by the Office of Management and Budget under control number 1840–0672)(Authority: 20 U.S.C. 1087a et seq.)
[59 FR 61690, Dec. 1, 1994, as amended at 60 FR 33345, June 28, 1995; 61 FR 60493, Nov. 27, 1996; 61 FR 60610, Nov. 29, 1996]
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