Federal Student Aid - IFAP
   
Publication Date: December 2003
FRPart:
RegPartsAffected:

Page Numbers: 69312-69318

Notice of waivers and modifications of statutory and regulatory provisions pursuant to the Higher Education
Relief Opportunities for Students Act of 2003, Pub. L. 108-76.

Posted on 12-18-2003


[Federal Register: December 12, 2003 (Volume 68, Number 239)]
[Rules and Regulations]
[Page 69312-69318]
From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr12de03-6] [Federal Register: December 12, 2003 (Volume 68, Number 239)]
[Rules and Regulations]
[Page 69312-69318]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12de03-6]

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DEPARTMENT OF EDUCATION

34 CFR Parts 668, 674, 682, and 685


Federal Student Aid Programs (Student Assistance General
Provisions, Federal Perkins Loan Program, Federal Direct Loan Program,
Federal Family Education Loan Program and the Federal Pell Grant
Program)

AGENCY: Department of Education.

ACTION: Notice of waivers and modifications of statutory and regulatory
provisions pursuant to the Higher Education Relief Opportunities for
Students Act of 2003, Pub. L. 108-76.

--------------------------------------------------------------------------------------------------------------

SUMMARY: The Secretary of Education announces waivers and modifications
of statutory and regulatory provisions that are appropriate to assist
individuals (referred to in this notice as ``affected individuals'')
who are applicants and recipients of student financial assistance under
title IV of the Higher Education Act of 1965, as amended (HEA), and
who--
[sbull] Are serving on active duty during a war or other military
operation or national emergency;
[sbull] Are performing qualifying National Guard duty during a war
or other military operation or national emergency;
[sbull] Reside or are employed in an area that is declared a
disaster area by any Federal, State, or local official in connection
with a national emergency; or
[sbull] Suffered direct economic hardship as a direct result of a
war or other military operation or national emergency, as determined by
the Secretary.
The Secretary is issuing these waivers and modifications under the
authority of section 2(a) of the Higher Education Relief Opportunities
for Students (HEROES) Act of 2003, Pub. L. 108-76. Section 2(b) of the
HEROES Act requires the Secretary to publish, in a notice in the
Federal Register, the waivers or modifications of statutory or
regulatory provisions applicable to the student financial assistance
programs under title IV of the HEA that the Secretary believes are
appropriate to ensure that:

[[Page 69313]]

[sbull] Individuals who are recipients of student financial
assistance under title IV are not placed in a worse position
financially in relation to that student financial assistance because
they are affected individuals;
[sbull] Affected individuals who are recipients of student
financial assistance are not unduly subject to administrative burden or
inadvertent, technical violations or defaults;
[sbull] Affected individuals are not penalized when a determination
of need for student financial assistance is calculated;
[sbull] Affected individuals are not required to return or repay an
overpayment of grant funds based on the HEA's Return of Title IV Funds
provision; and
[sbull] Entities that participate in the student financial
assistance programs under title IV of the HEA and that are located in
areas that are declared disaster areas by any Federal, State, or local
official in connection with a national emergency, or whose operations
are significantly affected by such a disaster, receive temporary relief
from administrative requirements.
Section 2(b)(1) of the HEROES Act further provides that section 437
of the General Education Provisions Act (20 U.S.C. 1232) and Section
553 of the Administrative Procedure Act (5 U.S.C. 553) do not apply to
the contents of this notice.
Section 5 of the HEROES Act defines the following terms used in
this notice:
Active duty--The term ``active duty'' has the meaning given that
term in 10 U.S.C. section 101(d)(1), but does not include active duty
for training or attendance at a service school (e.g., the U.S. Military
Academy or U.S. Naval Academy).
Military operation--The term ``military operation'' means a
contingency operation as that term is defined in 10 U.S.C. section
101(a)(13).
National emergency--The term ``national emergency'' means a
national emergency declared by the President of the United States.
Serving on active duty--The term ``serving on active duty during a
war or other military operation or national emergency'' includes
service by an individual who is--
(A) a Reserve member of an Armed Force ordered to active duty under
10 U.S.C. 12301(a), 12301(g), 12302, 12304, or 12306, or any retired
member of an Armed Force ordered to active duty under 10 U.S.C. 688,
for service in connection with a war or other military operation or
national emergency, regardless of the location at which that active
duty service is performed; and
(B) any other member of an Armed Force on active duty in connection
with any war, operation, or emergency or subsequent actions or
conditions who has been assigned to a duty station at a location other
than the location at which the individual is normally assigned.
Qualifying National Guard duty--The term ``qualifying National
Guard duty during a war or other military operation or national
emergency'' means service as a member of the National Guard on full-
time National Guard duty (as defined in 10 U.S.C. 101(d)(5)) under a
call to active service authorized by the President or the Secretary of
Defense for a period of more than 30 consecutive days under 32 U.S.C.
502(f), in connection with a war, another military operation, or a
national emergency declared by the President and supported by Federal
funds.
Section 2(c) of the HEROES Act requires the Secretary to provide an
impact report to the Committee on Education and the Workforce of the
U.S. House of Representatives and the Committee on Health, Education,
Labor, and Pensions of the U.S. Senate not later than 15 months after
first exercising the authority to issue a waiver or modification under
section 2(a) of the HEROES Act. The report will describe the impact of
any waivers or modifications on affected individuals and the programs
under title IV of the HEA, and the basis for that determination, and
will include the Secretary's recommendations for changes to the
statutory or regulatory provisions that were the subject of the waivers
or modifications. Therefore, a guaranty agency, lender, or institution
must document its application of a waiver or modification made in
accordance with this notice in such a manner that the institution can,
upon request, report to the Secretary on the effect of the waivers and
modifications.

EFFECTIVE DATE: December 12, 2003. The provisions of Pub. L. 108-76,
and the waivers and modifications in this document, expire on September
30, 2005.

FOR FURTHER INFORMATION CONTACT: For provisions related to the title IV
loan programs (Federal Perkins Loan Program, Federal Family Education
Loan (FFEL) Program, and Federal Direct Loan (Direct Loan) Program):
Ms. Gail McLarnon or Mr. George Harris, Office of Postsecondary
Education, U.S. Department of Education, 1990 K Street, NW., (8th
Floor), Washington, DC 20006. Internet and Telephone: Gail.McLarnon@ed.gov and (202) 219-7048 or GeorgeOPE.Harris@ed.gov and

(202) 502-7521.
For other provisions: Ms. Wendy Macias, U.S. Department of
Education, 1990 K Street, NW. (8th Floor), Washington, DC 20006. Internet and Telephone: Wendy.Macias@ed.gov and (202) 502-7526.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the program contact persons listed under FOR
FURTHER INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:
Category 1: The Secretary is waiving or modifying the following
provisions of title IV of the HEA and the Department's regulations for
ALL affected individuals specified in the SUMMARY section of this
notice:

Need Analysis

Section 480 of the HEA provides that, in the calculation of an
applicant's expected family contribution (EFC), the term ``total
income,'' which is used in the determination of ``annual adjusted
family income'' and ``available income,'' is equal to adjusted gross
income plus untaxed income and benefits for the preceding tax year
minus excludable income. The HEROES Act allows an institution to
substitute adjusted gross income plus untaxed income and benefits
received in the first calendar year of the award year for which such
determination is made for any affected individual, and for his or her
spouse and dependents, if applicable, in order to reflect more
accurately the financial condition of an affected individual and his or
her family. The Secretary has determined that an institution has the
option of using the applicant's original EFC or the EFC based on the
data from the first calendar year of the award year.
If an institution chooses to use the alternate EFC, it should use
the administrative Professional Judgment procedures established by the
Secretary as discussed in the following section on ``Professional
Judgement.''

Professional Judgment

Section 479A of the HEA specifically gives the financial aid
administrator (FAA) the authority to use professional judgment to make
adjustments on a case-by-case basis to the cost of attendance or to the
values of the items used in calculating the EFC to reflect a student's
special circumstances. The

[[Page 69314]]

Secretary is modifying this provision by removing the requirement that
adjustments be made on a case-by-case basis for affected individuals.
The use of professional judgment in Federal need analysis is discussed
in the Student Financial Aid Handbook.
The Secretary encourages FAAs to use professional judgment in order
to reflect more accurately the financial need of affected individuals.
To that end, the Secretary encourages institutions to determine need
for any affected individual by determining the most beneficial of:
[sbull] The individual's need as determined using the adjusted
gross income plus untaxed income and benefits received in the first
calendar year of the award year;
[sbull] The individual's need as determined using professional
judgment; or
[sbull] The individual's need as determined making no
modifications. (For example, in some cases, an individual's income will
increase as a result of serving on active duty or performing qualifying
National Guard duty.)
The FAA must clearly document the reasons for any adjustment. As
usual, any professional judgment decisions made by an FAA that affect a
student's eligibility for a Federal Pell Grant must be reported to the
Central Processing System (CPS).

Return of Title IV Funds--Grant Overpayments Owed by the Student

Section 484B(b)(2) of the HEA and 34 CFR 668.22(h)(3)(ii) require a
student to return or repay, as appropriate, 50 percent of any unearned
grant funds for which the student is responsible under the Return of
Title IV Funds calculation. For a student who withdraws from an
institution because of his or her status as an affected individual, the
Secretary is waiving these statutory and regulatory requirements so
that a student is not required to return or repay an overpayment of
grant funds based on the Return of Title IV Funds provisions. For these
students, the Secretary also waives 34 CFR 668.22(h)(4), which:
[sbull] Requires an institution to notify a student of a grant
overpayment and the actions the student must take to resolve the
overpayment;
[sbull] Denies eligibility to a student who owes an overpayment and
does not take an action to resolve the overpayment; and
[sbull] Requires an institution to refer an overpayment to the
Secretary under certain conditions.
Therefore, an institution is not required to contact the student,
notify NSLDS, or refer the overpayment to the Department. Note that
this is a change from previous guidance that instructed institutions to
refer these overpayments to the Department. However, the institution
must document in the student's file the amount of any overpayment as
part of the documentation of the application of this waiver. The
student is not required to return or repay an overpayment of grant
funds based on the Return of Title IV Funds provision; therefore, an
institution must not apply any title IV credit balance to the grant
overpayment before paying any amount of the title IV credit balance to
the student or parent, in the case of a PLUS loan.

Return of Title IV Funds--Amount of Unearned Funds Owed by the
Institution

If the Return of Title IV Funds calculation results in the
institution being required to return funds to one or more of the title
IV programs, the institution must do so as it must for any student who
withdraws. In many cases a return of funds by the institution will
reduce the student's loan debt.
Section 484B(b)(1) of the HEA and 34 CFR 668.22(g) provide that an
institution must return the lesser of (1) the total amount of unearned
aid to be returned; or (2) an amount equal to the student's total
institutional charges for the payment period or period of enrollment
multiplied by the percentage of unearned aid. The total (initial)
amount of institutional charges is used even if the institution fully
refunds or otherwise adjusts the amount of institutional charges after
the student withdraws. For a student who withdraws because of his or
her status as an affected individual, the Secretary is modifying this
provision to exclude from the amount of a student's total institutional
charges any institutional charges that the institution is required to
cover, and has covered, with non-title IV sources of aid. For example,
assume a student receives a state grant of $800 that must be used only
for tuition charges. The institution applies the state grant toward the
total institutional charges of $1,000. The student withdraws. The
institution uses $200, the difference between the full institutional
charges and the amount of the state grant the institution was required
to apply to the institutional charges, as the student's total
institutional charges for the payment period or period of enrollment
when determining the amount of unearned title IV funds that the
institution must return.

Verification of AGI and U.S. Income Tax Paid

34 CFR 668.57(a)(3) provides that when an individual whose income
was used in the calculation of the EFC of an applicant for title IV
assistance has not filed an income tax return because he or she has
been granted a filing extension by the IRS, an institution must accept,
in lieu of an income tax return for verification of AGI or income tax
paid:
[sbull] A copy of IRS Form 4868, ``Application for Automatic
Extension of Time to File U.S. Individual Income Tax Return,'' that the
individual filed with the IRS for the base year, or a copy of the IRS's
approval of an extension beyond the automatic four-month extension if
the individual requested an additional extension of the filing time;
and
[sbull] A copy of each W-2 received for the base year, or for a
self-employed individual, a statement signed by the individual
certifying the amount of AGI for the base year.
The Secretary is modifying this provision so that the submission of
a copy of IRS Form 4868 or a copy of the IRS extension approval is not
required if an individual whose income was used in the calculation of
the EFC:
[sbull] Has not filed and was not required to file an income tax
return by the filing deadline because he or she was called up for
active duty or for qualifying National Guard duty during a war or other
military operation or national emergency; and
[sbull] Was not required to file for an extension.
For these individuals, an institution must accept, in lieu of an
income tax return for verification of AGI or income tax paid:
[sbull] A statement from the individual certifying that he or she
has not filed and was not required to file an income tax return or a
request for a filing extension because he or she was called up for
active duty or for qualifying National Guard duty during a war or other
military operation or national emergency; and
[sbull] A copy of each W-2 received for the base year, or for a
self-employed individual, a statement signed by the individual
certifying the amount of AGI for the base year.
The student must submit the tax return to the institution once it
is filed with the IRS for the institution to re-verify the AGI and
taxes paid.
Category 2: The Secretary is waiving or modifying the following
provisions of title IV of the HEA and the Department's regulations for
affected individuals who are serving on active duty, performing

[[Page 69315]]

qualifying National Guard duty during a war or other military operation
or national emergency, or who reside or are employed in a disaster area
as described in the SUMMARY section of this notice:

Return of Title IV Funds--Postwithdrawal Disbursements

Under 34 CFR 668.22(a)(4)(ii)(A)(3) and (B), a student (or parent
for a PLUS loan) must be provided a postwithdrawal disbursement if the
student (or parent) responds to an institution's notification of the
postwithdrawal disbursement within 14 days of the date that the
institution sent the notice. If a student or parent submits a late
response, an institution may, but is not required to, make the
postwithdrawal disbursement. The Secretary is modifying this
requirement so that, for a student who withdraws because of his or her
status as an affected individual in this category and is eligible for a
postwithdrawal disbursement, the 14-day time period in which the
student (or parent) must normally respond to the offer of the post-
withdrawal disbursement is extended to 45 days. If the student or
parent submits a response after the 45-day period, the institution may,
but is not required to, make the postwithdrawal disbursement. As
required under the current regulations, if the student or parent
submits the timely response instructing the institution to make all or
a portion of the postwithdrawal disbursement, or the institution
chooses to make a postwithdrawal disbursement based on receipt of a
late response, the institution must disburse the funds within 120 days
of the date of the institution's determination that the student
withdrew.

Leaves of Absence

34 CFR 668.22(d)(4)(iii)(B) requires a student to provide a
written, signed, and dated request, which includes the reason for that
request, for an approved leave of absence prior to the leave of
absence, or at a later date if the student is prevented from providing
a prior written request by unforeseen circumstances. It may be
appropriate in certain limited cases for an institution to provide an
approved leave of absence to a student who must interrupt his or her
enrollment because he or she is an affected individual. Therefore, the
Secretary is waiving the requirement that the student provide a written
request for affected individuals who would have difficulty providing a
written request as a result of being an affected individual. The
institution's documentation of its decision to grant the leave of
absence must include, in addition to the reason for the leave of
absence, the reason for waiving the requirement that the waiver be
requested in writing.

Treatment of Title IV Credit Balances When a Student Withdraws

Under 34 CFR 668.164(e), an institution must pay any credit balance
to the student, or parent in the case of a PLUS loan, within 14 days
after the balance occurred. However, if a student (or parent) has
provided permission, an institution may use a title IV credit balance
to reduce the borrower's loan debt.
Therefore, for students who withdraw because they are affected
individuals, the Secretary is modifying 34 CFR 668.164(e) to consider
an institution to have met the 14-day requirement if, within that
timeframe, the institution attempts to contact the student to suggest
that permission be given to the institution allowing it to return the
credit balance to the loan program(s). Based upon the instructions of
the student (or parent), the institution must promptly return the funds
to the title IV loan programs or pay the credit balance to the student
(or parent).
If an institution chooses to attempt to contact the student (or
parent), it must allow the student (or parent) 45 days to respond. If
there is no response within 45 days, the institution must promptly
return the funds to the title IV programs. The institution may also
choose to pay the credit balance to the student (or parent) without
first requesting permission to return the funds to the loan program in
order to reduce the borrower's debt.

Cash Management--Borrower Request for Loan Cancellation

Under 34 CFR 668.165(a)(4)(ii), an institution must return loan
proceeds or cancel the loan, or both, if the institution receives a
loan cancellation request from a borrower within 14 days after the date
of the institution's notice to the borrower, or by the first day of the
payment period if the institution sends the notice more than 14 days
before the first day of the payment period. If an institution receives
a late loan cancellation request from a borrower, the institution may,
but is not required to, comply with the request. For a borrower who is
an affected individual in this category, the Secretary is modifying
this provision to require an institution to allow at least 60 days,
rather than at least 14 days, for the borrower to request the
cancellation of all or a portion of loan proceeds that have been
credited to the account at the institution. If an institution receives
a loan cancellation request from a borrower after the 60-day period,
the institution may, but is not required to, comply with the request.

Cash Management--Student and Parent Authorizations

34 CFR 668.165(b)(1) provides that an institution must obtain a
written authorization from a student or parent, as applicable, to:
[sbull] Disburse title IV funds to a bank account designated by the
student or parent;
[sbull] Use title IV funds to pay for current charges other than
tuition, fees, room, and board, if the student contracts with the
school for room and board; and
[sbull] Hold on behalf of the student or parent any title IV funds
that would otherwise be paid directly to the student or parent.
The Secretary is modifying these provisions to permit an
institution to accept an authorization provided by a student (or parent
for a PLUS loan) orally, rather than in writing, if the student or
parent is prevented from providing a written authorization because of
his or her status as an affected individual in this category.

Satisfactory Academic Progress

Institutions may, in cases where a student failed to meet
satisfactory academic progress standards as a direct result of being an
affected individual in this category, apply the exception provision of
``other special circumstances'' contained in 34 CFR 668.34(c)(3) of the
regulations.

Borrowers in a Grace Period

Sections 428(b)(7)(D) and 464(c)(7) of the HEA and 34 CFR
674.31(b)(2)(i)(C), 682.209(a)(6), and 685.207(b)(2)(ii) and (c)(2)(ii)
exclude from a Federal Perkins Loan, FFEL, or Direct Loan borrower's
(title IV borrower's) initial grace period, any period, not to exceed
three years, during which a borrower who is a member of an Armed Forces
reserve component is called or ordered to active duty for a period of
more than 30 days. The statutory and regulatory provisions further
require that any single excluded period may not exceed three years and
must include the time necessary for the borrower to resume enrollment
at the next available regular enrollment period. Lastly, borrowers are
entitled to another full six- or nine-month grace period, as
applicable, upon completion of the excluded period of service.
The Secretary is modifying these statutory and regulatory
provisions to exclude from a title IV borrower's initial

[[Page 69316]]

grace period, any period, not to exceed three years, during which a
borrower is an affected individual in this category. Any excluded
period must include the time necessary for an affected individual in
this category to resume enrollment at the next available enrollment
period. Affected individuals in this category are also entitled to
another full six- or nine-month grace period upon completion of the
excluded period of service.

Borrowers in an ``In-School'' Period

A title IV borrower is considered to be in an ``in-school'' status
and is not required to make payments on a title IV loan that has not
entered repayment as long as the borrower is enrolled at an eligible
school on at least a half-time basis. Under sections 428(b)(7) and
464(c)(1)(A) of the HEA and 34 CFR 674.31(b)(2), 682.209(a), and
685.207(b), (c), and (e)(2) and (3), when a title IV borrower ceases to
be enrolled at an eligible institution on at least a half-time basis,
the borrower is obligated to begin repayment of the loan after a six-
or nine-month grace period, depending on the title IV loan program and
the terms of the borrower's promissory note. The Secretary is modifying
the statutory and regulatory provisions that obligate an ``in-school''
borrower who has dropped below half-time status to begin repayment if
the borrower is an affected individual in this category by requiring
the holder of the loan to maintain the loan in an ``in-school'' status
for a period not to exceed three years, including the time necessary
for the borrower to resume enrollment in the next regular enrollment
period, if the borrower is planning to go back to school. The Secretary
will pay interest that accrues on a subsidized Stafford Loan as a
result of the extension of a borrower's in-school status under this
modification.

Borrowers in an In-School or Graduate Fellowship Deferment

Under sections 427(a)(2)(C)(i), 428(b)(1)(M)(i), 428B(a)(2),
428C(b)(4)(C), 455(f)(2)(A), and 464(c)(2)(A)(i)(I) of the HEA and 34
CFR 674.34(b)(1), 682.210(b)(1)(i) and (ii), 682.210(s)(2),
682.210(s)(3), and 685.204(b)(1)(i), a title IV borrower is eligible
for a deferment on the loan during periods after the commencement or
resumption of the repayment period on the loan when the borrower is
enrolled and in attendance as a regular student on at least a half-time
basis (or full-time, if required by the terms of the borrower's
promissory note) at an eligible institution; enrolled and in attendance
as a regular student in a course of study that is part of a graduate
fellowship program; or engaged in graduate or post-graduate fellowship-
supported study outside the United States. The borrower's deferment
period ends when the borrower no longer meets one of the above
conditions. The Secretary is waiving the statutory and regulatory
eligibility requirements for this deferment for title IV borrowers who
were required to interrupt a graduate fellowship deferment or who were
in an in-school deferment but who left school because of their status
as an affected individual in this category. The holder of the loan is
required to maintain the loan in a graduate fellowship deferment or in-
school deferment status for a period not to exceed three years during
which the borrower is an affected individual. This period includes the
time necessary for the borrower to resume his or her graduate
fellowship program or resume enrollment in the next regular enrollment
period if the borrower returns to school. The Secretary will pay
interest that accrues on a subsidized Stafford Loan as a result of
extending a borrower's eligibility for deferment under this waiver.

Forbearance

Under section 464(e) of the HEA and 34 CFR 674.33(d)(2), there is a
3-year cumulative limit on the length of forbearances that a Federal
Perkins Loan borrower can receive. To assist Perkins borrowers who are
affected individuals in this category, the Secretary is waiving these
statutory and regulatory requirements so that any forbearance based on
a borrower's status as an affected individual is excluded from the 3-
year cumulative limit.
Under section 464(e) of the HEA and 34 CFR 674.33(d)(2) and (3), a
school must receive a written request and supporting documentation from
a Federal Perkins Loan borrower before granting the borrower a
forbearance, the terms of which must be in the form of a written
agreement. The Secretary is waiving these statutory and regulatory
provisions to require an institution to grant forbearance based on the
borrower's status as an affected individual in this category for a one-
year period, including a 3-month ``transition period'' that immediately
follows that period, without supporting documentation or a written
agreement, based on the written or oral request of the borrower, a
member of the borrower's family, or another reliable source. The
purpose of the 3-month ``transition period'' is to assist borrowers so
that they will not be required to reenter repayment immediately after
they are no longer affected individuals.
In order to grant the borrower forbearance beyond the initial
period, supporting documentation from the borrower, a member of the
borrower's family, or another reliable source is required.
34 CFR 682.211(i)(1) requires an FFEL borrower who requests
forbearance because of a military mobilization to provide the loan
holder with documentation showing that he or she is subject to a
military mobilization. The Secretary is waiving this requirement to
allow the borrower to receive forbearance at the request of the
borrower, a member of the borrower's family, or another reliable source
for a one-year period, including a three-month transition period that
immediately follows that period, without providing the loan holder with
documentation. In order to grant the borrower forbearance beyond this
period, documentation supporting the borrower's military mobilization
must be submitted to the holder of the loan.
The Secretary will apply the forbearance waivers and modifications
in this section to loans held by the Department of Education.

Collection of Defaulted Loans

In accordance with 34 CFR Part 674, Subpart C-Due Diligence and
682.410, schools and guaranty agencies must attempt to recover amounts
owed from defaulted Perkins and FFEL borrowers. The Secretary is
waiving the regulatory provisions that require schools and guaranty
agencies to attempt collection on defaulted loans for the time period
during which the borrower is an affected individual. The school or
guaranty agency may stop collection activities upon notification by the
borrower, a member of the borrower's family, or another reliable source
that the borrower is an affected individual in this category.
Collection activities must resume after the borrower has notified the
school or guaranty agency that he or she is no longer an affected
individual and must include the 3-month transition period. The loan
holder must document in the loan file why it has suspended collection
activities on the loan, and the loan holder is not required to obtain
evidence of the borrower's status while collection activities have been
suspended. The Secretary will apply the waivers described in this
paragraph to loans held by the Department of Education.

Loan Cancellation

Depending on the loan program, borrowers may qualify for loan

[[Page 69317]]

cancellation if they are employed full-time in specified occupations,
such as teaching, childcare, or law enforcement, pursuant to sections
428J(b)(1), 428K(d)(1), 460(b)(1)(A), and 465(a)(2)(A)-(I) and (a)(3)
of the HEA, and 34 CFR 674.53(d), 674.55(a)(2), 674.55(b)(5),
674.55(c)(2), 674.56(d)(1), 674.57(b)(1), 674.58(b), 674.60(b),
682.215, and 685.217. Generally, to qualify for loan cancellation,
borrowers must perform uninterrupted, otherwise qualifying service for
a specified length of time (for example, one year) or for consecutive
periods of time, such as 5 consecutive years. For borrowers who are
affected individuals in this category, the Secretary is waiving the
requirements that apply to the various loan cancellations that such
periods of service be uninterrupted and/or consecutive, if the reason
for the interruption is related to the borrower's status as an affected
individual. Therefore, the period during which the borrower is an
affected individual in this category, including the 3-month transition
period, will not be considered an interruption in the required service
for the borrower to receive an otherwise eligible loan cancellation.
The Secretary will apply the waivers described in this paragraph to
loans held by the Department of Education.

Rehabilitation of Defaulted Loans

A borrower of an HEA, title IV loan must make 12 consecutive,
monthly, on-time payments to rehabilitate a defaulted loan in
accordance with sections 428F(a) and 464(h)(1) of the HEA and 34 CFR
674.39(a)(2), 682.405, and y685.211(f)(1). To assist title IV borrowers
who are affected individuals in this category, the Secretary is waiving
the statutory and regulatory requirements that payments made to
rehabilitate a loan be consecutive. Loan holders should not treat any
payment missed during the time that a borrower is an affected
individual in this category, or the 3-month transition period, as an
interruption in the number of consecutive, monthly, on-time payments
required for loan rehabilitation. When the borrower is no longer
considered to be an affected individual in this category, the required
sequence of qualifying payments may resume at the point they were
discontinued as a result of the borrower's status. The Secretary will
apply the waivers described in this paragraph to loans held by the
Department of Education.

Reinstatement of Title IV Eligibility

Under sections 428F(b) and 464(h)(2) of the HEA and under the
definition of ``satisfactory repayment arrangement'' in 34 CFR
668.35(a)(2), 674.2(b), 682.200(b), and 685.102(b), a defaulted title
IV borrower may make six consecutive, monthly, on-time payments to
reestablish eligibility for title IV student financial assistance. To
assist title IV borrowers who are affected individuals in this
category, the Secretary is waiving statutory and regulatory provisions
that require the borrower to make consecutive payments in order to
reestablish eligibility for title IV student financial assistance. Loan
holders should not treat any payment missed during the time that a
borrower is an affected individual as an interruption in the six
consecutive, monthly, on-time payments required for reestablishing
title IV eligibility. When the borrower is no longer considered to be
an affected individual or in the 3-month transition period for purposes
of this notice, the required sequence of qualifying payments may resume
at the point they were discontinued as a result of the borrower's
status. The Secretary will apply the waivers described in this
paragraph to loans held by the Department of Education.

Consolidation of Defaulted Loans

Under the definition of ``satisfactory repayment arrangement'' in
34 CFR 682.200(b) and 685.102(b), a defaulted FFEL or Direct Loan
borrower may establish eligibility to consolidate a defaulted loan by
making three consecutive, monthly, on-time payments on the loan. The
Secretary is waiving the regulatory requirement that such payments be
consecutive. FFEL loan holders should not treat any payment missed
during the time that a borrower is an affected individual in this
category as an interruption in the three consecutive, monthly, on-time
payments required for establishing eligibility to consolidate a
defaulted loan. When the borrower is no longer considered to be an
affected individual in this category or in the 3-month transition
period, the required sequence of qualifying payments may resume at the
point they were discontinued as a result of the borrower's status as an
affected individual. The Secretary will apply the waivers described in
this paragraph to loans held by the Department of Education.
Category 3: The Secretary is waiving or modifying the following
provisions of title IV of the HEA and the Department's regulations for
affected individuals who are serving on active duty or performing
qualifying National Guard duty during a war or other military operation
or national emergency as described in the SUMMARY section of this
notice:

Military Deferment

Under section 455(f)(4) of the HEA and 34 CFR 674.35(c)(1),
674.36(c)(1), 674.37(c)(1), 682.210(b)(2), and 685.204(d), certain
borrowers are eligible for a deferment on their title IV loans for
periods, not to exceed 3 years, during which the borrower is on active
duty status in the United States Armed Forces. This provision includes
a member of the National Guard or the Reserves serving a period of
full-time active duty in the Armed Forces. The Secretary is modifying
the statutory and regulatory requirements that limit military
deferments to a 3-year cumulative period so that the time during which
affected individuals in this category are serving on active duty is
excluded from this time limit. The Secretary will pay interest that
accrues on subsidized Stafford Loans during an extended period of
deferment under this modification.
Under 34 CFR 674.38(a)(1) and 682.210(a)(4), a borrower must
request the deferment and provide the institution or lender with
supporting documentation to receive a deferment. The Secretary is
modifying the regulations to allow a loan holder to grant an affected
individual in this category a military deferment based on a request
from a family member or another reliable source. The Secretary is also
waiving documentation requirements to allow a loan holder to grant an
affected individual in this category a military deferment for a one-
year period without documentation. In order to grant a military
deferment beyond the initial period, supporting documentation from the
borrower, a member of the borrower's family, or another reliable source
is required. The Secretary will apply the waivers described in this
paragraph to loans held by the Department of Education.

Institutional Charges and Refunds

The HEROES Act encourages institutions to provide a full refund of
tuition, fees, and other institutional charges for the portion of a
period of instruction that a student was unable to complete, or for
which the student did not receive academic credit, because he or she
was called up for active duty or for qualifying National Guard duty
during a war or other military operation or national emergency.
Alternatively, the Secretary encourages institutions to provide a
credit in a comparable amount against future charges.
The HEROES Act also recommends that institutions consider providing
easy and flexible reenrollment options to such students who are
affected

[[Page 69318]]

individuals in this category. Specifically, institutions are urged to
minimize deferral of enrollment or reapplication requirements and to
provide the greatest flexibility possible with administrative deadlines
related to those applications.
Of course, an institution may provide such treatment to affected
individuals other than those who are called up to active duty or for
qualifying National Guard duty during a war or other military operation
or national emergency.
However, before an institution makes a refund of institutional
charges, it must perform the required Return of title IV Funds
calculations based upon the originally assessed institutional charges.
After determining the amount that the institution must return to the
title IV Federal student aid programs, any reduction of institutional
charges may take into account the funds that the institution is
required to return. In other words, we do not expect that an
institution would both return funds to the Federal programs and also
provide a refund of those same funds to the student.
Category 4: The Secretary is waiving or modifying the following
provisions of the HEA and regulations for dependents and spouses of
affected individuals who are serving on active duty or performing
qualifying National Guard duty during a war or other military operation
or national emergency as described in the SUMMARY section of this
notice:

Verification Signature Requirements

34 CFR 668.57(b) and (c) require signatures to verify the number of
family members in the household and the number of family members
enrolled in postsecondary institutions. The Secretary is waiving the
requirement that a dependent student submit a statement signed by one
of the applicant's parents when no responsible parent can provide the
required signature because of the parent's status as an affected
individual in this category.

Required Signatures on the Free Application for Federal Student Aid
(FAFSA), Student Aid Report (SAR), and Institutional Student
Information Record (ISIR)

Generally, when a dependent applicant for title IV aid submits an
application (FAFSA) or submits corrections to a previously submitted
application, at least one parental signature is required. The Secretary
is waiving this requirement so that an applicant need not provide a
parent's signature when there is no responsible parent who can provide
the required signature because of the parent's status as an affected
individual in this category. In these situations, a student's high
school counselor or the FAA may sign on behalf of the parent as long as
the applicant provides adequate documentation concerning the parent's
inability to provide a signature due to the parent's status as an
affected individual in this category.

Electronic Access to This Document

You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
http://www.ed.gov/news/fedregister.
To use PDF you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC, area at (202) 512-1530.
You may also view this document in PDF at the following site:
http://www.ifap.ed.gov.

Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://www.gpoaccess.gov/nara/index.html
.


Catalog of Federal Domestic Assistance Numbers: 84.007 Federal
Supplemental Educational Opportunity Grant Program; 84.032 Federal
Family Education Loan Program; 84.032 Federal PLUS Program; 84.033
Federal Work Study Program; 84.038 Federal Perkins Loan Program;
84.063 Federal Pell Grant Program and 84.268 William D. Ford Federal
Direct Loan Program.

Program Authority: 20 U.S.C. 1071, 1082, 1087a, 1087aa, Pub. L.
108-76.

Dated: December 8, 2003.
Sally L. Stroup,
Assistant Secretary, Office of Postsecondary Education.
[FR Doc. 03-30781 Filed 12-11-03; 8:45 am]

BILLING CODE 4000-01-P


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