[Federal Register: ][Rules and Regulations] [summon 61959-62011]From the Federal Register Online via GPO Access [wais access gpo gov][DOCID:fr01no07-10] [[Page 61959]]-----------------------------------------------------------------------Part IIDepartment of Education-----------------------------------------------------------------------34 CFR Parts and Federal Perkins Loan Program. Federal Family Education Loan Program and William D. Ford Federal Direct Loan Program; Final Rule[[Page 61960]]-----------------------------------------------------------------------DEPARTMENT OF EDUCATION34 CFR Parts and [lay ID ED-2007-OPE-0133]RIN 1840-AC89 Federal Perkins give Program. Federal Family Education give schedule and William D. Ford Federal Direct give ProgramAGENCY: Office of Postsecondary Education. Department of Education. ACTION: Final regulations.-----------------------------------------------------------------------SUMMARY: The Secretary amends the Federal Perkins give (Perkins Loan) Program. Federal Family Education Loan (FFEL) Program and William D. Ford Federal Direct Loan (enjoin Loan) Program regulations. The Secretary is amending these regulations to strengthen and improve the administration of the loan programs authorized under Title IV of the Higher Education Act of 1965 as amended (HEA). DATES: Effective go out: These regulations are effective July 1. 2008. Implementation Date: The Secretary has determined in accordance with section 482(c)(2)(A) of the HEA ((c)(2)(A)) that institutions lenders guaranty agencies and loan servicers that care Title IV. HEA programs may at their discretion choose to implement Sec. Sec. 674.38. 674.45. 674.61. 682.202. 682.208. 682.210. 682.211. 682.401. 682.603. 682.604. 685.204. 685.212. 685.301 and 685.304 of these final regulations on or after November 1. 2007. For advance information see the section entitled Implementation Date of These Regulations in the SUPPLEMENTARY INFORMATION section of this preamble. FOR FURTHER INFORMATION CONTACT: For information related to Simplification of the Deferment Process. Loan Counseling for have or Professional Student PLUS Loan Borrowers. Mandatory Assignment of Defaulted Perkins Loans. Reasonable Collection Costs and Child or Family Service Cancellation. Brian Smith. Telephone: (202) 502-7551 or via Internet: . For information related to Accurate and Complete Copy of a Death award. NSLDS Reporting Requirements. Maximum Loan Period and Frequency of Capitalization. Nikki Harris. Telephone: (202) 219-7050 or via Internet: . For information related to Total and Permanent Disability. Certification of Electronic Signatures on Master Promissory Notes (MPNs) Assigned to the Department. preserve Retention Requirements on MPNs Assigned to the Department. Eligible Lender Trustees and Loan accomplish for False Certification as a Result of Identity Theft. Gail McLarnon. Telephone: (202) 219-7048 or via Internet: . For information related to Prohibited Inducements and Preferred Lender Lists. Pamela Moran. telecommunicate: (202) 502-7732 or via Internet: . If you use a telecommunications device for the deaf (TDD) you may label the Federal Relay function (FRS) at 1-800-877-8339. Individuals with disabilities may obtain this document in an alternative change (e g.. transcribe large print audiotape or computer diskette) on request to any of the communicate persons listed in this section. SUPPLEMENTARY INFORMATION: On June 12. 2007 the Secretary published a notice of proposed rulemaking (NPRM) for the Perkins give. FFEL and Direct Loan Programs in the Federal Register (72 FR 32410). In the preamble to the NPRM the Secretary discussed on pages 32411 through 32427 the major changes proposed in that document to strengthen and improve the administration of the loan programs authorized under Title IV of the HEA. These consider the following: Amending Sec. Sec. 674.38. 682.210 and 685.204 to accept institutions that act in the Perkins Loan Program. FFEL lenders and the Secretary to give a deferment under certain circumstances to a borrower if another FFEL lender or the Department has granted the borrower a deferment for the same reason and time period. Amending Sec. Sec. 674.38. 682.210 and 685.204 to accept a Perkins. FFEL or Direct Loan borrower's representative to apply for an armed forces or military service deferment on behalf of the borrower. Amending Sec. Sec. 674.61. 682.402 and 685.212 to allow the use of an accurate and complete photocopy of an original or certified copy of the death certificate in addition to the original or a certified copy of the death certificate to support the discharge of a Title IV loan due to death. Amending Sec. Sec. 674.61. 682.402 and 685.213 to restructure the regulations governing the accomplish of a Perkins. FFEL or enjoin give based on the borrower's total and permanent disability to clarify and provide additional explanation of the eligibility requirements. Amending Sec. Sec. 674.61. 682.402 and 685.213 to provide for a prospective conditional accomplish period to establish eligibility for a total and permanent disability discharge that is up to three years in length and begins on the date that the Secretary makes the initial determination that the borrower is totally and permanently disabled. Amending Sec. Sec. 674.16. 682.208 and 682.414 to require institutions lenders and guaranty agencies to inform enrollment and loan status information or any other Title IV-related data required by the Secretary to the Secretary by the deadline established by the Secretary. Amending Sec. Sec. 674.19. 674.50 and 682.414 to require an institution or lender to maintain the original electronic promissory note plus a certification and other supporting information regarding the creation and maintenance of any electronically-signed Perkins Loan or FFEL promissory note or know Promissory Note (MPN) and provide this certification to the Department upon communicate should it be needed to enforce an assigned loan. Institutions and lenders are required to maintain the electronic promissory say and supporting documentation for at least three years after all loan obligations evidenced by the say are satisfied. Amending Sec. Sec. 674.19 and 674.50 to demand an institution that participates in the Perkins Loan schedule to retain records showing the date and amount of each disbursement of each loan made under an MPN for at least three years from the go out the loan is canceled repaid or otherwise satisfied and require the institution to refer disbursement records on an assigned Perkins Loan upon request should the Secretary need the records to enforce the loan. Amending Sec. 682.409 to require a guaranty agency to refer the record of the lender's disbursement of loan funds to the educate for delivery to the borrower when assigning a FFEL loan to the Department Amending Sec. Sec. 682.604 and 685.304 to require appeal counseling for graduate or professional student PLUS Loan borrowers and change the exit counseling requirements for Stafford Loan borrowers who have also received PLUS Loans. Amending Sec. Sec. 682.401. 682.603 and 685.301 to eliminate the maximum 12-month loan period for annual loan limits in the FFEL and enjoin Loan programs. Amending Sec. Sec. 674.8 to accept the Secretary to demand assignment of a Perkins Loan if the outstanding principal balance on the loan is $100 or more the loan has been in default for seven or more years and a payment has[[summon 61961]]not been received on the loan in the preceding 12 months unless payments were not due because the loan was in a period of authorized forbearance or deferment. Amending Sec. 674.45 to limit the be of collection costs a school may assess against a Perkins give borrower to 30 percent for first collection efforts; 40 percent for second collection efforts; and in cases of litigation. 40 percent plus act costs. Amending Sec. 674.56 to explain the eligibility requirements for a Perkins Loan borrower to qualify for a child or family service cancellation. Amending Sec. Sec. 682.200 and 682.401 to incorporate into the regulations specific rules for lenders and guaranty agencies on prohibited inducements and activities and permissible activities in accordance with the recommendations of the Department's assign Force on these issues. Amending Sec. Sec. 682.200 and 682.602 to designate the provisions of The Third Higher Education Extension Act of 2006. Public Law 109-202 that prohibit a FFEL lender from entering into a new eligible lender trustee (ELT) relationship with a educate or a school-affiliated organization as of September 30. 2006 but allowing such relationships in existence prior to that go out to continue with certain restrictions. Amending Sec. 682.202 to give that a lender may only capitalize unpaid arouse on a Federal Consolidation Loan that accrues during an in-school deferment at the expiration of the deferment. Amending Sec. Sec. 682.208. 682.211. 682.300. 682.302 and 682.411 regarding loan accomplish for false certification as a result of identity theft. Amending Sec. Sec. 682.212 and 682.401 to specify requirements that a school must cater if it chooses to provide a enumerate of recommended or preferred FFEL lenders for use by the educate's students and their parents and prohibit the use of a preferred lender list to deny a borrower the right to use a FFEL lender not included on a school's list. In addition to the changes that strengthen and improve the administration of the loan programs authorized under HEA these final regulations also incorporate certain statutory changes made to the HEA by the College be Reduction and Access Act (CCRAA) (Pub. L. 110-84). These changes are: Amending Sec. Sec. 674.34. 682.210 and 685.204 to increase the military deferment to all Title IV borrowers regardless of when their loans were made eliminate the 3-year limit on the military deferment and add a 180-day period of deferment following the borrower's demobilization as of October 1. 2007. Amending Sec. Sec. 674.34. 682.210 and 685.204 to authorize a 13-month deferment following conclusion of their military function for certain members of the Armed Forces who were enrolled in a schedule of instruction at an eligible institution at the measure or within 6 months prior to the time the borrower was called to active duty as of October 1. 2007. Amending Sec. Sec. 674.34 and 682.210 to rewrite the definition of economic hardship to allow a borrower to earn 150 percent of the poverty line applicable to the borrower's family coat as of October 1. 2007. Amending Sec. Sec. 682.202 and 685.202 to decrease interest rates on subsidized Stafford loans made to undergraduate students as of July 1. 2008. Amending Sec. 682.302 to reduce special allow payments for loans first disbursed on or after October 1. 2007 and establish different rates for eligible not-for-profit lenders and other lenders. Amending Sec. 682.305 to increase the loan fee a lender must pay to the Secretary from 0.50 to 1.0 percent of the principal amount of the loan for loans first disbursed on or after October 1. 2007. Amending Sec. 682.404 to reduce the percentage of collections that a guaranty agency may bear from 23 to 16 percent and to decrease account maintenance fees paid to guaranty agencies from 0.10 to 0.06 percent as of October 1. 2007. Removing Sec. 682.415 to eliminate the ``exceptional performer'' status as of October 1. 2007. Because these amendments implement changes to the HEA made by the CCRAA we do not discuss them in the Analysis of Comments and Changes section. Waiver of Proposed Rulemaking--Regulations Implementing the CCRAA Under the Administrative Procedure Act () the Department is generally required to publish a notice of proposed rulemaking and give the public with an opportunity to comment on proposed regulations prior to issuing final regulations. In addition all Department regulations for programs authorized under Title IV of the HEA are affect to the negotiated rulemaking requirements of section 492 of the HEA. However both the APA and HEA give for exemptions from these rulemaking requirements. The APA provides that an agency is not required to conduct notice-and-comment rulemaking when the agency for good create finds that notice and comment are impracticable unnecessary or contrary to the public interest. Similarly section 492 of the HEA provides that the Secretary is not required to conduct negotiated rulemaking for call IV. HEA schedule regulations if the Secretary determines that applying that requirement is impracticable unnecessary or contrary to the public interest within the meaning of the HEA. Although the regulations implementing CCRAA are subject to the APA's notice-and-comment and the HEA's negotiated rulemaking requirements the Secretary has determined that it is unnecessary to conduct negotiated rulemaking or notice-and-comment rulemaking on these regulations. These amendments simply modify the Department's regulations to reflect statutory changes made by the CCRAA and these statutory changes are either already effective or will be effective within a short period of measure. The Secretary does not undergo discretion in whether or how to apply these changes. Accordingly negotiated rulemaking and notice-and-comment rulemaking are unnecessary. There are no significant differences between the NPRM and these final regulations resulting from public comments. Implementation Date of These Regulations Section 482(c) of the HEA requires that regulations affecting programs under call IV of the HEA be published in final form by November 1 prior to the start of the award year (July 1) to which they apply. However that section also permits the Secretary to designate any regulation as one that an entity subject to the regulation may decide to implement earlier and the conditions under which the entity may implement the provisions early. Consistent with the intent of this regulatory effort to strengthen and improve the administration of the loan programs authorized under call IV of the HEA the Secretary is using the authority granted her under section 482(c) to appoint certain provisions of the regulations identified in the following paragraph for early implementation at the discretion of each institution lender guaranty agency or servicer as appropriate. In accordance with the authority provided by section 482(c) of the HEA the Secretary has determined that for some provisions there are conditions that must be met in order for an institution lender guaranty agency or servicer as allot to implement[[Page 61962]]those provisions early. The provisions subject to early implementation and the conditions are-- Provision: Sections 674.38. 682.210 and 685.204 that alter the deferment granting process and accept a borrower's representative to request a military service deferment or an Armed Forces deferment. Condition: None. Provision: Sections 674.61. 682.402 and 685.212 that allow the use of an accurate and complete reproduce of the original or certified copy of the borrower's death certificate to support the accomplish of a Title IV loan due to death. Condition: None. Provision: Sections 682.603. 682.604. 685.301 and 685.304 that require appeal counseling requirements and modify exit counseling for graduate or professional student PLUS borrowers. instruct: None. Provision: divide 674.45 that limits the amount of collection costs a school may assess against a Perkins Loan borrower. instruct: None. Provision: Section 682.202 that limits the frequency of capitalization on Federal Consolidation loans to quarterly except that a lender may only capitalize unpaid interest that accrues during an in-school deferment at the expiration of the deferment. Condition: None. Provision: Sections 682.208 and 682.211 which accept a lender to suspend credit bureau reporting for 120 days and grant borrowers a 120-day forbearance on a loan while the lender investigates a false certification as a result of an alleged identity theft. instruct: None. Analysis of Comments and Changes In response to the Secretary's invitation in the NPRM published on June 12. 2007. 241 parties submitted comments on the proposed regulations. An analysis of the comments and the changes in the regulations since publication of the NPRM and as a prove of public comment follows. We group study issues according to subject with appropriate sections of the regulations referenced in parentheses. We address other substantive issues under the sections of the regulations to which they pertain. Generally we do not communicate technical and other minor changes--and suggested changes the law does not authorize the Secretary to make. We also do not address comments pertaining to issues that were not within the scope of the NPRM. Simplification of Deferment affect (Sec. 674.38. 682.210 and 685.204) Comments: Commenters were generally supportive of our proposal to simplify the deferment process. Some commenters however had suggestions for modifications. The proposed regulations would allow a borrower's representative to request a military service or Armed Forces deferment on behalf of the borrower. Some commenters recommended that we be ``borrower's representative'' for purposes of a military service or Armed Forces deferment. However several other commenters did not evaluate it was necessary to define ``borrower's representative.'' One commenter recommended that the Department revise the regulations to demand (rather than just accept) lenders to grant military function deferments to eligible borrowers based upon a communicate from the borrower's representative. With regard to the simplified deferment granting procedures some commenters recommended that we require rather than accept lenders to give deferments under the proposed procedures. One commenter noted that interest does not accrue on subsidized FFEL or Direct Loans or on Perkins Loans during deferment periods and recommended that borrowers with these types of loans not be required to make an initial deferment communicate. One commenter recommended that the notification of a deferment to a borrower of unsubsidized loans include information on the be of the deferment. One commenter recommended that we choose a comparable simplified forbearance process for schools that participate in the Perkins Loan Program. This commenter felt that Perkins give schools should be able to grant forbearances based on a forbearance granted on a borrower's FFEL or enjoin Loan. This commenter also requested that we allow borrowers in the Perkins Loan Program to verbally request a forbearance on their loans. Several commenters recommended that we modify the regulations to permit a lender to grant a deferment ``during'' the same time period as a deferment granted by another lender. This would accept the deferment dates of a deferment granted by one lender to be part of the deferment period granted by another lender. The commenter noted that the dates of the deferment periods may not be exactly the same based on the status of the loans held by each of the lenders and the applicability of the deferments to the displace loans. Discussion: The Department agrees with the commenters who recommended that we not define the term ``borrower's representative'' for purposes of a military service or Armed Forces deferment. A borrower's representative would be a member of the borrower's family or another reliable obtain. We do not think it is necessary to regulate a specific definition of the term ``borrower's representative.'' We believe allowing flexibility in this regard will be especially helpful to borrowers called to active duty and stationed overseas in areas of contrast. Defining ``borrower's representative'' could unnecessarily limit access to this benefit for those most deserving of it. Commenters also overwhelmingly supported our decision not to define the term ``borrower's representative.'' We also agree with the recommendation that lenders should be required to accept a military service or Armed Forces deferment communicate from a borrower's representative. We believe that the proposed regulations would demand lenders to accept such deferment requests and we have not changed that language. However we believe the simplified process that applies to other types of deferments should be optional for lenders. While many lenders may welcome the simplified deferment requirements as a convenience other lenders may like to give deferments based on their own review of a borrower's deferment documentation. We intend that these amended regulations will give lenders with flexibility in structuring their processes for granting deferment requests; we do not want to unnecessarily limit their flexibility. We be with the suggestion that lenders be allowed to grant deferments to borrowers with subsidized loans or Perkins Loans without a communicate from the borrower. We accept that the borrower who is ultimately liable for the loan should be responsible for deciding whether to request a deferment. We disagree with the recommendation that schools participating in the Perkins Loan schedule be allowed to grant forbearances based on forbearances granted on the borrower's FFEL Program loans. The mandatory forbearance requirements in the FFEL schedule differ from the forbearance requirements in the Perkins Loan schedule. Additionally given that Perkins schools undergo wide flexibility in granting forbearances in the Perkins Loan schedule the Department sees no value in allowing schools to base Perkins forbearances on[[summon 61963]]forbearances granted in the FFEL Program. We also be with the recommendation that we allow deferments to be granted ``during'' the same measure period as another deferment under the simplified procedures. If the applicability of the deferment and the status of the separate loans is not the same the simplified deferment affect cannot be used because the loan holder would be to obtain displace documentation verifying the eligibility of the borrower based on different dates. Changes: None. Accurate and Complete Copy of a Death Certificate (Sec. Sec. 674.61. 682.402 and 685.212) Comments: Many commenters supported the proposed changes in Sec. Sec. 674.61. 682.402 and 685.212 to accept loan holders to use an accurate and end photocopy of a death certificate to discharge a Title IV loan due to the death of a borrower. The commenters agreed that this approach will reduce the cost of securing additional original or certified copies of a death certificate for the surviving family members and decrease burden for loan holders. Several commenters suggested that the language in Sec. Sec. 674.61. 682.402 and 685.212 be revised to allow a loan holder to use other data sources to grant a loan discharge based on the death of the borrower such as official act documents the National Student Loan Data System (NSLDS) or the Social Security Administration's (SSA's) Death Master File. Two commenters suggested that the Department allow loan holders to use NSLDS to ``look approve'' and discharge loans for a deceased borrower that were not included in an original accomplish due to the death of the borrower. Discussion: During the negotiations concerning these regulations some non-Federal negotiators asked the Department to expand the types of documentation that could be used to support a communicate for a discharge based on the death of the borrower. Specifically these negotiators asked that they be allowed to base discharges on documentation from NSLDS. SSA's know Death file or act documents. We declined to adopt these proposals in request to guard against fraud and abuse in the discharge process. The SSA has publicly acknowledged that its know Death file contains inaccuracies. For that cerebrate we do not consider the file to be appropriate for use in granting a death discharge and act to believe that we should not grow the types of documentation for program integrity reasons. The Department agrees that using NSLDS to determine the loans of a deceased borrower that were not included in a discharge based on the death of the borrower is worth exploring; however for program integrity reasons we do not agree that NSLDS information alone should be the basis for discharging loans that were not included in the original accomplish. The Department will furnish further consideration to the commenters' suggestion but declines to adopt the suggestion in these final regulations. Change: None. Comments: While supporting the Department's efforts to decrease the burden on families applying for a accomplish one commenter expressed concern that fraudulent photocopies would be used to secure a accomplish based on the death of the borrower thus threatening the integrity of the Title IV loan programs. Another commenter recommended that the Secretary conduct a study of how the process for granting requests for discharges based on the death of the borrower will work before issuing final regulations allowing use of a photocopy. Discussion: We appreciate the commenter's concern about the possible use of fraudulent photocopies of death certificates and will closely observe the use of this documentation. We do not believe a study is necessary at this time. An official death certificate is very difficult to alter and we expect loan holders to be vigilant when using a photocopy as the basis for a death accomplish. To ensure the integrity of the Title IV loan programs the granting of a discharge of a Title IV loan based on the accurate and complete photocopy of an original or certified write of the original death award is still at the discretion of lenders and the Secretary. Change: None. be and Permanent Disability accomplish (Sec. Sec. 674.61. 682.402 and 685.213) mention: Many commenters supported our proposals to restructure the regulations in Sec. Sec. 674.61. 682.402 and 685.213 to clarify the eligibility requirements a borrower must meet to receive a be and permanent disability loan discharge and to provide for a similar affect across the three loan programs. Several commenters also supported the requirement for a three-year conditional discharge period beginning on the date the Secretary makes an sign determination that the borrower is totally and permanently disabled. Discussion: We acknowledge the commenters' support. Upon further internal review we believe that the Perkins Loan Program regulations could be clearer with respect to the information that an institution must give to a borrower upon receipt of the borrower's discharge application. Changes: The Department has made changes to Sec. 674.61(b)(2) of the Perkins Loan schedule regulations to provide a more detailed description of the information that must be provided to a borrower upon the institution's communicate of an application for a accomplish. mention: Several commenters supported the proposal in Sec. Sec. 674.61(b)(2)(i). 682.402(c)(2) and 685.213(b)(1) requiring a borrower seeking a be and permanent disability accomplish to submit the completed application within 90 days of the go out the physician certifies the application thus ensuring that the loan holder has timely and accurate information on which to locate a preliminary determination about the borrower's eligibility for the discharge. However other commenters believed that the 90-day time limit would be insufficient for a borrower who may be incapable of managing his or her affairs or unable to put together the paperwork necessary to submit the application. The commenters also stated that the proposed time limit would not conform to delays in the process that are out of the borrower's control. The commenters suggested that the Secretary alter exceptions to the 90-day measure check to accommodate extenuating circumstances so that borrowers ordain not be required to obtain a new physician certification if the borrower misses the 90-day time limit. One commenter suggested that we choose a 180-day measure limit for submission of the accomplish application. Discussion: The Department continues to accept that the requirement in Sec. Sec. 674.61(b)(2)(i). 682.402(c)(2) and 685.213(b)(1) that borrowers submit the completed application for a total and permanent disability discharge to the loan holder within 90 days of the date the physician certifies the application is appropriate and reasonable. Allowing exceptions based on extenuating circumstances or allowing a 180-day time limit would not ensure that the Secretary has accurate and timely information on which to base her determination on the borrower's application. Allowing exceptions or a longer time limit would also open up the possibility that a borrower might inadvertently take action that would disqualify the borrower for a final discharge. Changes: None.[[Page 61964]] Comment: Several commenters noted that the proposed regulations do not provide for a 60-day administrative forbearance that is provided to a borrower under the current FFEL regulations for completion and submission of the discharge application form. The commenters were concerned that the omission of the forbearance would increase delinquency on borrower accounts and penalize the borrower. One commenter recommended that we require lenders to suspend collection activity and give a forbearance to a borrower who is attempting to complete a discharge application as come up as during any period while the application is pending. Discussion: divide 682.402(c)(5) of the proposed regulations allows a lender to give a borrower a forbearance of payment of both principal and interest if the lender does not receive the physician's certification of be and permanent disability within 60 days of the receipt of the physician's earn requesting additional time to end and bear witness the borrower's discharge application. Under Sec. 674.33(d)(5) of the Perkins Loan schedule regulations an institution is required to forbear payment on a loan for any acceptable cerebrate. In the Direct give Program. Sec. 685.205(b)(5) specifically allows the Secretary to give a borrower an administrative forbearance for the period of measure it takes the borrower to submit appropriate documentation indicating that the borrower has change state totally and permanently disabled. Given that these provisions provide a borrower with significant access to forbearance while obtaining a physician's certification and completing the accomplish application the Department believes that requiring the cessation of collection activity is unnecessary until the loan holder actually receives the discharge application. Changes: None. Comment: Several commenters stated that we should continue our current learn of using the date the borrower became totally and permanently disabled instead of the go out the physician certifies the borrower's disability on the application as we proposed in Sec. Sec. 674.61(b)(3)(ii). 682.402(c)(3)(ii) and 685.213(c)(2) as the date to establish the borrower's eligibility for a discharge. The commenters claimed that using the date the physician certifies the application as the date the borrower became totally and permanently disabled is arbitrary and contradicts statutory intent that disabled borrowers receive immediate relief as of the date the borrower becomes totally and permanently disabled. Several commenters stated that many borrowers do not realize they have the ability to acquire a discharge of their student loans and as a result do not apply for a total and permanent disability accomplish until several years after becoming disabled. These commenters expressed concern that using the date the physician certifies the borrower's application as the disability date combined with a prospective conditional discharge period would affect these borrowers to a long delay in receiving the discharge. One commenter stated that in the FFEL schedule using a date identified by a physician as the borrower's disability go out ensures that only one go out of disability appears on all applications and forms received by the Secretary when the borrower has multiple loans. The commenter believes that under the proposed changes to the disability accomplish process the start date of the three-year conditional accomplish period for a borrower who has multiple loans may vary for each loan because loans can be assigned to the Secretary at different times in the discharge process based on when the borrower submits documentation to each lender when the lender files the claim with the guarantor and when the guarantor reviews and pays the claim. Several commenters questioned the Department's contention that certifying physicians rely solely on a borrower's statements in determining the borrower's go out of disability and that there may not be strong medical bear witness for using a different go out to establish eligibility for Federal benefits. The commenters did not believe that it was allot for the Department to assume that a physician's diagnostic methodology is flawed. Discussion: Sections 437(a) and 464(c)(1)(F) of the HEA provide for the discharge of a borrower's Title IV loans if the borrower becomes totally and permanently disabled as determined in accordance with regulations of the Secretary. As discussed in the preamble to the NPRM the Department proposed these regulatory changes to destroy the possibility that a final accomplish would be made immediately upon assignment of the account to the Department. We believe this result is inconsistent with the intent of these regulations which is to change the accomplish requirements to those of other Federal programs that only give for Federal benefits after appropriate monitoring of the applicant's condition. The Department believes that borrowers are sufficiently informed about the availability of a total and permanent disability discharge. The promissory notes used in the Title IV loan programs inform borrowers of the possibility to have the loan discharged if the borrower becomes totally and permanently disabled. Information on the discharge is also available on the Department's Web site and in numerous Department publications as come up as in information from other schedule participants. Although a borrower may undergo a decelerate before receiving a be and permanent disability discharge under these regulations we desire to evince again our belief that the furnish of Federal benefits should be made only after there is sufficient monitoring of the applicant's condition. We do not agree that using a date identified by a physician as the borrower's disability date instead of the date the physician certifies the borrower's disability on the accomplish application means that a borrower with multiple loans assigned to the Department has only one date of disability. The Department addresses this and similar issues frequently under the current total and permanent disability discharge process and resolves discrepancies in disability dates on assigned loans by consulting with the physician that certified the borrower's application. The Department expects to continue this approach to resolve discrepancies under the new process and does not believe the regulations need to specifically address issues related to processing an application. Lastly the Department does not agree that the concern we expressed in the NPRM that there may not be strong medical evidence to support using the borrower's disability date assumes a flawed diagnostic methodology on the part of the certifying physician. As we stated in the introduce to the NPRM we believe that the best date to use as the eligibility go out is the date the physician certified the application because that process requires the physician to review the borrower's condition at that time rather than anticipate about the borrower's condition in the past. Changes: None. mention: Several commenters disagreed with the Secretary's opinion that a three-year prospective conditional accomplish period would help prevent fraud and abuse in the Title IV loan programs by allowing the Secretary to monitor a borrower's status before granting a discharge. The commenters stated that whether the conditional discharge period is prospective or retroactive is irrelevant as long as the Secretary has access to a physician's[[Page 61965]]certification confirming that the borrower meets the eligibility requirements for a disability discharge. Several commenters also disagreed with the Department's statement in the preamble to the NPRM that there have been instances when borrowers have received otherwise disqualifying call IV loans and earnings in excess of allowable levels after the date of the borrower's disability discharge application but also after the date of the borrower's retroactive final accomplish. The commenters cited an analysis of a sample of total and permanent disability cases that they claimed did not give the Secretary's view. Several commenters acknowledged the be to defend the integrity of the call IV programs in believe to disability discharges and stated that reliance on a single physician's certification or determination of permanent disability may encourage fraud and do by in the discharge affect. Discussion: In a Final Audit Report published in November 2005 the Department's Inspector General concluded that the current three-year conditional discharge period was ineffective for ensuring that a borrower is totally and permanently disabled because it does not always accept the Department to examine the borrower's current earnings and loan information. As a result a borrower who is not currently disabled could receive a disability discharge even though the borrower has received current disqualifying income or loans. The Inspector General's analyse inform noted that approximately 54 percent of the borrowers who received disability discharges applied for the accomplish more than three years after the disability. As a result for the discharges approved by the Department from July 1. 2002 through June 30. 2004 approximately 54 percent (2,593 borrowers) were based on a three-year period during which there was no examination of the borrower's current income. The Inspector General examined current income information that was available for a limited number of these borrowers who had submitted a remove Application for Federal Student Aid (FAFSA) and open that a number of borrowers who claimed to be totally and permanently disabled also reported current income over the check for a disability discharge. As a result the Inspector command recommended that the Department revise the regulations to ensure that current income and Title IV loan information is considered when determining whether a borrower is totally and permanently disabled. The proposed regulations communicate the Inspector General's concerns and we believe they ordain disapprove fraud and abuse in the disability accomplish affect. To further ensure against the possibility of fraud and do by we have added a provision to the Perkins. FFEL and enjoin Loan Program regulations specifically reflecting the Secretary's authority to demand a borrower to submit additional medical evidence if the Secretary determines that the borrower's application does not conclusively be that the borrower is disabled. As part of this review the Secretary may arrange for an additional analyse of the borrower's instruct by an independent physician at no depreciate to the applicant. Changes: We have amended Sec. Sec. 674.61(b)(4). 682.402(c)(4) and 685.213(d) to give that the Secretary reserves the alter to require additional medical evidence of a borrower's be and permanent and disability as well as an additional review of the borrower's instruct by an independent physician at the Secretary's expense. Comment: Many commenters disagreed with the Department's proposal in Sec. Sec. 674.61(b)(5). 682.402(c)(4)(iii) and 685.213(d)(3)(ii) that only payments made on the loan after the date the physician certifies the borrower's total and permanent disability discharge application would be returned to the borrower. The commenters claimed this proposal would injure borrowers who do not acquire a timely certification of disability or who act to alter payments to act from defaulting or becoming delinquent on their loans. One commenter recommended that repayments be refunded approve to the go out certified by the physician change surface if a prospective conditional accomplish period is required. One commenter recommended that no payments previously made on a loan be returned to a borrower if the borrower receives a final discharge based on a total and permanent disability. One commenter requested that we explain to whom the Secretary returns payments after a final determination of the borrower's total and permanent disability is made in Sec. 674.61(b)(5)(iii). Discussion: As stated in the preamble to the NPRM the Department proposed this change to be consistent with the decision to believe on the date the physician certifies the borrower's disability on the application and to maintain program integrity in the administration of the discharge affect. Under these regulations the borrower's disability go out is the go out the physician certifies the borrower's discharge application. In this situation there is no basis for returning payments made by the borrower or on the borrower's behalf before that date. However it is appropriate to return any payments made by or on behalf of the borrower after that date. Lastly the Secretary returns any payments to the individual who made the payments after a final determination of the borrower's total and permanent disability is made. We agree that the regulations should reflect this fact. Changes: Sections 674.61(b)(5)(iii). 682.402(c)(4)(iii) and 685.213(d)(3)(ii) have been changed to reflect that any payments made after the date that the physician certified the borrower's application for a disability accomplish ordain be sent to the person who made the payment after the final discharge is issued. Comment: Several commenters felt that the prospective three-year conditional discharge period should begin on the go out the physician certifies the borrower's be and permanent disability discharge application rather than on the date the Secretary makes an initial determination that the borrower is totally and permanently disabled. The commenters stated that using the date the Secretary makes the initial determination would be unfair to borrowers. The commenters also believed that using the go out the Secretary initially determines that a borrower is disabled weakens the Secretary's incentive to make expeditious decisions on disability accomplish applications and increases the likelihood that a borrower might inadvertently take an action that would alter him or her for a final discharge. One commenter recommended that the final regulations set a time limit for the Department to alter a determination of a borrower's initial eligibility for a disability discharge. Discussion: The Department has considered the comments and has decided that beginning the prospective three-year conditional discharge period on the go out the physician certifies the borrower's total and permanent disability accomplish application rather than on the date the Secretary makes an initial determination that the borrower is totally and permanently disabled is appropriate and ordain not increase the opportunity for fraud in the disability discharge process. Changes: We undergo revised Sec. Sec. 674.61(b)(3)(i). 682.402(c)(3)(i) and 685.213(c)(2) to give that the three-year conditional discharge period begins on the go out the physician certifies the[[summon 61966]]borrower's total and permanent disability accomplish application. mention: Several commenters requested that we apply the same eligibility standards that bear on during the conditional accomplish period (which prohibit the receipt of any additional call IV loans and allow a borrower to acquire no more than 100 percent of the poverty lie for a family of two as determined in accordance with the Community Service block Grant Act) to the period between the date the borrower obtains a physician's certification and the date the Secretary makes her initial determination that the borrower is totally and permanently disabled. The commenters believed that applying different eligibility requirements at different stages in the process would misidentify borrowers and jeopardize their ability to answer for a accomplish. Discussion: The Department has considered the comments and agrees that applying the same eligibility standards beginning on the date the borrower obtains the physician's certification on the be and permanent disability discharge application and continuing those standards throughout the prospective three-year conditional discharge would reduce the complexity of the process without creating an opportunity for fraud. Changes: We have revised Sec. Sec. 674.61(b)(4)(i). 682.402(c)(4)(i) and 685.213(d)(1) to provide that a borrower may not acquire any call IV loans or earn more than 100 percent of the poverty line for a family of two as determined in accordance with the Community Service block give Act beginning on the date the physician certifies the borrower's discharge application and throughout the prospective three-year conditional discharge period. mention: One commenter requested that the proposed regulations be clarified to be the term ``new Title IV loan'' to exclude subsequent disbursements of a prior loan. Discussion: The Department does not believe that such a change is necessary. The regulations in Sec. Sec. 674.61(b)(2)(iv)(C)(2) and (3). 682.402(c)(4)(i)(B) and (C) and 685.213(b)(2)(ii)(A) and (B) already identify between new loans and subsequent disbursements of prior loans. Changes: None. mention: One commenter requested that the effective dates and initiate dates in the proposed regulations be carefully evaluated so that borrowers who are in the affect of having discharge forms certified are not subject to the new requirements. Another commenter requested that the effective date of any new regulations governing the disability discharge process be based on the approval date of a new Federal form to eliminate processing confusion and inadvertent delays for applicants. Discussion: The Department anticipates that both the new be and permanent disability discharge applications and the final regulations that govern the affect ordain be effective on July 1. 2008 for borrowers who bear on for a accomplish on or after that date. Borrowers who are in the process of having discharge forms certified as of that date will not be affect to the new regulations. Changes: None. mention: One commenter suggested the Secretary return Perkins Loan accounts to the school that assigned them if the Secretary determines that the borrower is not totally and permanently disabled. The commenter stated that if such accounts were returned to the school the educate's Perkins Loan revolving finance would benefit from any repayments made when the educate resumes collection. Discussion: The current assignment affect in Sec. 674.50 of the Perkins Loan Program regulations requires that upon accepting assignment of a loan the Secretary change all rights call and interest of the institution in that loan. Returning an assigned Perkins give account to the school if the Secretary determines that a borrower is not totally and permanently disabled would add administrative burden to the affect and is inconsistent with current regulatory requirements in Sec. 674.50(f)(1). Changes: None. Comment: One commenter suggested that if the Secretary makes an initial determination that the borrower's disability is not total and permanent the borrower should not only bear on repayment but should also be required to repay all amounts that would have been due during the cessation of collection on the loan while the application was being processed by the loan holder and the Secretary. Discussion: The Department believes that to require a borrower to repay all amounts that would have been due during the cessation of collection on the loan while the application is being processed would unnecessarily discourage borrowers who might qualify for a accomplish from applying. Changes: None. Comment: One commenter felt that the Department should believe disability determinations made by other Federal agencies such as the SSA or the Veteran's Administration (VA) in determining whether borrowers are eligible for a disability discharge on their call IV loans. Discussion: The Department has previously considered the idea of applying the disability standards used by other Federal agencies to borrowers seeking a accomplish of their Title IV loans. However the definition of total and permanent disability used in the Department's accomplish process is appropriately more demanding than that used by SSA and the VA. Those agencies use regular medical reviews of applicants over a number of years to ensure that the applicants remain eligible for benefits. In those programs an individual loses benefits if they are no longer disabled. In contrast the Department is providing a significant benefit to an individual on a one-time basis without any opportunity to care future reviews to determine if the individual is actually disabled. The Secretary believes that the affect established in these regulations provides an appropriate process that will ensure that only appropriate discharges are granted. Changes: None. NSLDS Reporting (Sec. Sec. 674.16. 682.208. 682.401 and 682.414) Comment: Many commenters did not agree with proposed Sec. 682.401(b)(20) which would change the timeframe in which guarantors must report certain student enrollment data to the current loan holder from 60 days to 30 days. The commenters believed that this change would not conform to timely reporting in months that have 31 days. Other commenters stated that guarantors currently report information to NSLDS at least monthly and that changing the requirement for guarantors to inform enrollment information to lenders to 30 days would not improve the timeliness of information. One commenter believed that the Secretary did not appropriately believe all the other established reporting periods and deadlines when developing this proposal and that new NSLDS reporting requirements will unnecessarily burden schools with additional reporting. One commenter asked how the Department intends to reason Perkins Loan data that are reported to NSLDS under the new regulations. The commenter noted that historically schools categorized and reported Perkins Loans based on the terms and conditions of the loan and reported disbursements made under these categories as one loan made over a period of years. A school would act a new category of Perkins Loan when[[Page 61967]]the terms and conditions of Perkins Loans were affected by statutory changes. The commenter believed that reporting Perkins Loans as separate loans each award year would dramatically increase the number of loans reported to NSLDS and increase burden and costs associated with NSLDS reporting. The commenter noted that new NSLDS reporting criteria would increase the number of Perkins Loan account records and associated costs of reporting with no benefit to the institution or borrowers. Three commenters stated that the language in carve up (j) of proposed Sec. 674.16 fails to designate the intent of Section 485B of the HEA which specifically provides that the development of NSLDS reporting timeframes be accomplished according to mutually agreeable solutions based on consultation with guaranty agencies lenders and institutions. The commenters stated that the Department has not devoted sufficient effort to conducting a meaningful dialogue and information exchange with institutions about reporting needs for research and policy analysis purposes. Several other commenters suggested that there should be weekly updates to NSLDS instead of the suggested 30 days and believed that guaranty agencies servicers students and schools would acquire from having more accurate and timely information in NSLDS. Discussion: The Secretary believes that the new NSLDS reporting timeframes ordain alter the timeliness and availability of information important to managing the student loan program. The Secretary also believes that the proposed regulatory changes such as the simplification of the deferment granting affect will be easier and more efficiently implemented if timely and accurate information is more readily available in NSLDS. The Department appreciates the commenters' concerns about the cost associated with increased reporting of Perkins Loans. Although the costs incurred by institutions to make the systems changes necessary to comply with new NSLDS reporting requirements are difficult to estimate we accept that requiring institutions to report Perkins Loans on an allocate year basis as FFEL and Direct give schedule loans are reported will change magnitude the quality and integrity of Perkins Loan data and allow the Department to make meaningful comparisons between the call IV loan programs for research and budgeting purposes. We also believe that reporting Perkins Loans on an award year basis ordain give borrowers with a more accurate conceive of of their total indebtedness. The Department regularly consults with program participants in setting NSLDS reporting requirements in established workgroups that meet several times a year. We believe the regulations reflect this consultative affect. With regard to the commenter who suggested that there should be weekly updates to NSLDS instead of the suggested 30-day timeframe entities that desire to inform to NSLDS on a weekly basis are able to so under current protocols. We change state to require weekly reporting requirements for all entities at this time however because we accept that small institutions would find such a standard difficult to manage. The Secretary agrees with commenters that the 30-day reporting timeframe does not leave guarantors adequate time to report data to the current loan holder in months that undergo 31 days. Changes: We have changed the reporting timeframe in Sec. 682.401(b)(20) to 35 days. Certification of Electronic Signatures on know Promissory Notes (MPNs) Assigned to the Department (Sec. Sec. 674.19. 674.50. 682.409 and 682.414) Comment: One commenter agreed that proper execution and retention of electronic loan records is necessary for program integrity reasons. Several other commenters stated that the proposed changes in Sec. 674.19(e)(2)(ii) requiring a school participating in the Perkins Loan schedule to develop and maintain a certification of its electronic signature affect were overly broad would discourage schools from using electronic notes and would impose burdensome new record-keeping requirements. Other commenters stated that institutional compliance with these new requirements would be difficult unless the Department clearly defines these new requirements and provides schools with a ``safe harbor'' of minimum compliance standards for Perkins Loans already signed electronically by borrowers. The commenters stated that the charge of complying with Sec. 674.50(c)(12)(i) for institutions would be difficult to confirm given the few borrowers who might dispute the validity of the electronic signature at some future date. Several commenters stated that the requirement in Sec. 674.50(c)(12)(ii)(B) that a educate's certification consider screen shots as they would have appeared to the borrower is impractical and unnecessary and asked that this requirement be eliminated. Discussion: The Department believes that the requirements in Sec. 674.19(e)(2) that an institution create and maintain a certification regarding the creation and maintenance of electronically signed Perkins give promissory notes or MPNs in accordance with Sec. 674.50(c)(12) ensures that the school and the Department undergo the bear witness to enforce an assigned loan if a contend or factual dispute arises in connection with the validity of the borrower's electronic signature. Schools are required to take legal challenge to hive away on a defaulted Perkins Loan in accordance with Sec. 674.46 of the Perkins Loan Program regulations. If a legal challenge to the validity of an electronic signature should become in the course of litigating a defaulted Perkins Loan a educate will be in a much stronger legal position to prove that the borrower signed the loan and benefited from the proceeds of the loan. The need to ensure the integrity of the Perkins Loan schedule justifies establishing electronic signature safeguards. Perkins give schools should generally not be incurring new costs or burden related to the certification of electronic signatures on promissory notes. In July of 2001 the Department published its Standards for Electronic Signature in Electronic Student give Transactions (Standards) to facilitate the development of electronic processes under the Electronic Signatures in Global and National Commerce Act (E-Sign Act). These Standards provided guidance to FFEL schedule lenders and guaranty agencies and to schools in their role as lenders under the Perkins Loan Program regarding the use of electronic signatures in conducting student loan transactions including using electronic promissory notes. At that time we informed loan holders and institutions in the FFEL or Perkins Loan Program that if their processes for electronic signature and related records did not satisfy the Standards and the loan was held by a court to be unenforceable based on those processes the Secretary would determine on a case-by-case basis whether Federal benefits would be denied in the inspect of the FFEL Program or whether a school would be required to give back its Perkins Loan Fund in the case of the Perkins Loan schedule. If as we anticipate. Perkins give holders are complying with the Standards added burden or cost should not be an issue. The regulations in Sec. 674.50(c)(12) that describe what the certification must consider are already very specific and detailed and a ``safe harbor'' is unnecessary. The only provision of these regulations that is not specific is[[Page 61968]]Sec. 674.50(c)(12)(ii)(F) which requires the certification to consider ``all other documentation and technical bear witness requested by the Secretary to give the validity or the authenticity of the electronically signed promissory say.'' This provision is not intended to be overly burdensome on schools. This furnish is intended to cover whatever documentation a educate has that is not already listed in Sec. 674.50(c)(12)(ii)(A) through (E). Lastly the Department does not agree with the commenters' suggestion that inclusion of screen shots as they would undergo appeared to the borrower is impractical or unnecessary. The inclusion of screen shots in the certification is a critical move of the affect to verify that the promissory note is a valid legal document that the terms and conditions of the loan were properly represented to the borrower and that the borrower was fully aware of the fact he or she was receiving a loan. Changes: None. mention: One commenter suggested that the Department require each institution that participates in the Perkins Loan Program to appoint an ``E-Sign Contact Person'' on its FISAP submission to enable institutions to meet documentation requests from the Secretary in a timely manner. Discussion: The Department believes this suggestion has merit and will consider implementing this proposal administratively. However no change to the regulations is necessary. Changes: None. Comment: Many commenters stated that the 10-business day deadline required by Sec. Sec. 674.50(c)(12)(iii) and 682.414(a)(6)(iii) within which Perkins give and FFEL loan holders must respond to a request for evidence that may be needed to end a dispute with a borrower on a loan assigned from the Secretary was too short. One commenter recommended a 10-business day standard only if the communicate relates to pending litigation and an alternative. 30-day standard if the request is not related to litigation. One commenter recommended delaying implementation of the 10-business day deadline by one year to give institutions the opportunity to put in place the systems policies and capability to comply and create the requested documentation. One commenter suggested adopting a 15-business day deadline with an option to appeal if the institution faces a special situation. Another commenter suggested a 25-business day deadline. One commenter requested that the Secretary withdraw this proposal completely. Discussion: The Department does not believe that a 10-business day deadline to respond to requests from the Secretary for evidence needed to resolve a dispute involving an electronically-signed loan that has been assigned to the Secretary is burdensome. The Department believes that 10 business days provides sufficient time for loan holders. The Secretary believes that a timely response to a request for information is essential to proper enforcement of a promissory note especially when a borrower is contesting the validity of an electronic signature and that challenge involves act proceedings or court-imposed deadlines. Finally we believe that delaying implementation of this deadline or not imposing any deadline would threate |