[Federal Register: September 17, 1998 (Volume 63, Number 180)]
[Proposed Rules]
[Page 49797-49801]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17se98-23]
[[Page 49797]]
_______________________________________________________________________
Part IV
Department of Education
_______________________________________________________________________
34 CFR Parts 674 and 682
Federal Perkins Loan Program and Federal Family Education Loan Program;
Proposed Rule
[[Page 49798]]
DEPARTMENT OF EDUCATION
34 CFR Parts 674 and 682
Federal Perkins Loan Program and Federal Family Education Loan
Program
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In order to simplify the economic hardship deferment
application process for those Peace Corps volunteers who are ineligible
for deferment or cancellation of their federal student loans based
solely on service in the Peace Corps, the Secretary proposes to amend
the Federal Perkins Loan and Federal Family Education Loan (FFEL)
program regulations by adding criteria that will allow Peace Corps
volunteers to automatically qualify for economic hardship deferments
while they are serving in the Peace Corps. The proposed changes will
also apply to the William D. Ford Federal Direct Loan (Direct Loan)
Program.
The Secretary also proposes to amend the Federal Perkins Loan
Program regulations by eliminating provisions that require borrowers to
submit requests for loan deferments and postponements in writing. The
proposed changes will make the Federal Perkins Loan Program
requirements more consistent with the requirements that apply in the
FFEL and Direct Loan programs.
DATES: Comments must be received on or before October 30, 1998.
ADDRESSES: All comments concerning these proposed regulations should be
addressed to: Mr. Jon Utz, U.S. Department of Education, PO Box 23272,
Washington, DC 20026-3272, or to the following internet address:
peacecorps@ed.gov
You must include the term ``Peace Corps'' in the subject line of your
electronic message.
Comments that concern information collection requirements must be
sent to the Office of Management and Budget at the address listed in
the Paperwork Reduction Act section of this preamble. A copy of these
comments may also be sent to the Department representative named in
this section.
FOR FURTHER INFORMATION CONTACT:
1. For the Federal Perkins Loan Program: Ms. Sylvia Ross, U.S.
Department of Education, 600 Independence Avenue, SW, ROB-3, Room 3045,
Washington, DC 20026-3272, telephone 202-708-8242.
2. For the FFEL Program: Mr. George Harris, U.S. Department of
Education, 600 Independence Avenue, SW, ROB-3, Room 3045, Washington,
DC 20026-3272, telephone 202-708-8242.
3. For the Direct Loan Program: Mr. Jon Utz, Department of
Education, 600 Independence Avenue, SW, ROB-3, Room 3045, Washington,
DC 20026-3272, telephone 202-708-8242.
Individuals who use a telecommunications device for the deaf (TDD)
may call the Federal Information Relay Service (FIRS) at 1-800-877-8339
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.
Individuals with disabilities may obtain this document in an
alternate format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact persons listed in the preceding
paragraph.
SUPPLEMENTARY INFORMATION:
Invitation to Comment
Interested persons are invited to submit comments and
recommendations regarding these proposed regulations.
To ensure that public comments have maximum effect in developing
the final regulations, the Department urges commenters to identify
clearly the specific section or sections of the proposed regulations
that each comment addresses and to arrange comments in the same order
as the proposed regulations.
All comments submitted in response to these proposed regulations
will be available for public inspection, during and after the comment
period, in Room 3045, Regional Office Building 3, 7th and D Streets,
SW, Washington, DC, between the hours of 8:30 a.m. and 4 p.m., Eastern
Time, Monday through Friday of each week except Federal holidays.
On request the Department supplies an appropriate aid, such as a
reader or print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking docket for these proposed regulations. An individual with a
disability who wants to schedule an appointment for this type of aid
may call (202) 205-8113 or (202) 260-9895. An individual who uses a TDD
may call the Federal Information Relay Service at 1-800-877-8339,
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.
To assist the Department in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden, the Secretary invites comments on whether
there may be further opportunities to reduce any regulatory burdens
found in these proposed regulations.
General
The Peace Corps has requested that the Secretary provide a less
burdensome means for borrowers who are not eligible for a statutory
loan deferment or cancellation based on Peace Corps service to apply
for economic hardship deferments of their federal student loans while
serving in the Peace Corps. The Secretary believes that the service
performed by Peace Corps volunteers is important to the national
interest, and is proposing to amend the economic hardship deferment
eligibility criteria in the federal student loan programs in response
to that request. The Secretary is also proposing changes that will make
the requirements for requesting a loan deferment or postponement in the
Federal Perkins Loan Program more consistent with the requirements that
apply in the FFEL and Direct Loan programs. A discussion of each
proposed change is provided below.
Sections 674.34 and 682.210 Deferment
In the Federal Perkins Loan Program, which includes National
Defense Student Loans (Defense Loans), National Direct Student Loans
(NDSLs), and Federal Perkins Loans, the vast majority of borrowers are
eligible for categorical deferments based on service as Peace Corps
volunteers. Specifically, all Defense Loan borrowers, borrowers with
NDSLs made before July 1, 1993, and all Federal Perkins Loan borrowers
may defer repayment while serving as Peace Corps volunteers. For
Federal Perkins Loan borrowers only, service as a Peace Corps volunteer
also qualifies a borrower for loan cancellation. In the FFEL and Direct
Loan programs, certain borrowers who received loans prior to July 1,
1993 are entitled by law to defer repayment of their loans while
serving as Peace Corps volunteers.
Borrowers who are ineligible for loan deferment or cancellation
based on service as Peace Corps volunteers are: (1) The small number of
borrowers who received NDSLs on or after July 1, 1993; (2) FFEL Program
borrowers who received loans first disbursed on or after July 1, 1993
and who, at the time they obtained those loans, had no outstanding
balance on any FFEL Program loan made before that date; and (3) Direct
Loan Program borrowers who, at the time they received their first
Direct Loans, had no outstanding balance on any FFEL Program loan made
before July 1, 1993. In all three loan programs, borrowers who wish to
defer repayment of their loans while serving as Peace Corps volunteers,
but
[[Page 49799]]
who are ineligible for a deferment or cancellation based on Peace Corps
service, may apply for deferments based on economic hardship.
The Peace Corps has brought to the Secretary's attention the fact
that Peace Corps volunteers who are ineligible for loan deferment or
cancellation based on Peace Corps service qualify for economic hardship
deferments in the federal student loan programs based on the low
monthly stipends that they receive. However, the Peace Corps believes
that the unique circumstances under which Peace Corps volunteers
serve--in foreign countries, often in inaccessible areas--make it
difficult for them to apply for economic hardship deferments in
accordance with the requirements imposed by current regulations.
Section 674.34(e) of the Federal Perkins Loan Program regulations
establishes the economic hardship deferment eligibility criteria for
borrowers with Federal Perkins Loans and NDSLs made on or after July 1,
1993. Section 682.210(s)(6) of the FFEL Program regulations establishes
the criteria by which a ``new borrower'' as defined under
Sec. 682.210(s) is eligible for an economic hardship deferment. In
accordance with Sec. 685.204(b)(3)(ii) of the Direct Loan Program
regulations, economic hardship deferment eligibility for all Direct
Loan borrowers is based on the standards set forth in the FFEL Program
regulations at Sec. 682.210(s)(6).
Under Sec. 674.34(e)(3) and Sec. 682.210(s)(6)(iii), borrowers are
eligible for an economic hardship deferment if they are working full-
time and earning a total monthly gross income that does not exceed the
greater of the minimum wage rate described in section 6 of the Fair
Labor Standards Act of 1938, or 100 percent of the poverty line for a
family of two, as determined in accordance with section 673(2) of the
Community Service Block Grant Act. Peace Corps volunteers currently
receive monthly living stipends and other smaller allowances that vary
according to the country to which they are assigned. Based on an
analysis of data provided by the Peace Corps and current minimum wage
rate and poverty line amounts, the Secretary has determined that Peace
Corps volunteers meet the criteria for economic hardship deferment
under Sec. 674.34(e)(3) and Sec. 682.210(s)(6)(iii).
Federal Perkins Loan Program borrowers who apply for an economic
hardship deferment based on the income requirements specified in
Sec. 674.34(e)(3) are required by Sec. 674.34(e) to provide
documentation showing that they meet those requirements. In accordance
with Sec. 682.210(s)(6)(vii) of the FFEL Program regulations, FFEL and
Direct Loan borrowers who apply for an economic hardship deferment
under Sec. 682.210(s)(6)(iii) are required to submit evidence showing
the amount of their most recent total monthly gross income. In all
three loan programs, economic hardship deferments are limited to
periods of up to one year at a time that, collectively, do not exceed
three years. See Sec. 674.34(e), Sec. 674.38(d), and
Sec. 682.210(s)(6). The maximum three year limitation is mandated by
sections 428(b)(1)(M)(iii), 455(f)(2)(C), and 464(c)(2)(A)(iii) of the
Higher Education Act of 1965, as amended (the HEA). A borrower who
applies for a subsequent period of economic hardship deferment that
begins less than one year after a deferment granted under
Sec. 674.34(e)(3) or Sec. 682.210(s)(6)(iii) is required by
Sec. 674.34(e)(7) and Sec. 682.210(s)(6)(viii) to provide a copy of the
borrower's federal income tax return, if a tax return was filed within
eight months prior to the date of the deferment request.
Peace Corps volunteers generally do not have documentation of the
amount of their monthly stipend for living expenses prior to beginning
their volunteer service. Since Peace Corps volunteers serve overseas,
often in remote areas of underdeveloped countries, the current
requirement that borrowers submit documentation of their most recent
monthly gross income when applying for economic hardship deferments
presents significant logistical difficulties for many volunteers. For
the same reason, the provisions that limit individual economic hardship
deferments to periods of one year at a time are burdensome for Peace
Corps volunteers, who normally serve for a period of 27 months. Under
current regulatory requirements, they must reapply for an economic
hardship deferment each year, and must submit additional income
documentation with each deferment request.
The Secretary has the authority under Sec. 435(o) of the HEA to
establish criteria by which borrowers may qualify for economic hardship
deferments in the Federal Perkins Loan, FFEL, and Direct Loan programs.
Because Peace Corps volunteers meet current regulatory requirements for
economic hardship deferments based on the modest stipends that they
receive, and because of the unique circumstances under which they
serve, the Secretary believes that it is appropriate and in the
national interest to establish new criteria that will make it easier
for Peace Corps volunteers to apply for economic hardship deferments.
The new economic hardship criteria that the Secretary is proposing are
consistent with this provision of the HEA.
The proposed changes will allow Peace Corps volunteers who are
ineligible for deferment or cancellation based on Peace Corps service
to qualify for economic hardship deferments simply by providing
documentation showing that they will be serving as Peace Corps
volunteers. Since this documentation will be available to Peace Corps
volunteers at pre-service orientation sessions, they will be able to
apply for economic hardship deferments while still in the United
States. In addition, the Secretary is proposing to eliminate the one-
year-at-a-time restriction for economic hardship deferments based on
service as a Peace Corps volunteer. This will allow Peace Corps
volunteers who have not previously received economic hardship
deferments to defer repayment of their loans for up to three years, or
for their full term of service in the Peace Corps, whichever is less,
without having to reapply each year. Peace Corps volunteers who have
received previous economic hardship deferments may defer repayment of
their loans for up to their remaining period of eligibility under the
statutory three-year limitation, or for their full term of service,
whichever is less.
Section 674.38 (Deferment Procedures) and Sec. 674.39 (Postponement
of Loan Repayments in Anticipation of Cancellation--Loans Made
Before July 1, 1993)
The Secretary believes that, to the extent possible, the
requirements for requesting a deferment in the Federal Perkins Loan
Program, the FFEL Program, and the Direct Loan Program should be the
same. For this reason, the Secretary is proposing to amend Sec. 674.38
and Sec. 674.39 by revising paragraph (a)(1) in each section to
eliminate the requirement that a borrower request a deferment or
postponement of repayment of a loan in writing. The Secretary believes
that a telephone or electronic request to the institution from the
borrower is sufficient to initiate the deferment/postponement process.
The proposed changes reduce burden for both borrowers and institutions,
and make the Federal Perkins Program regulations more consistent with
the less restrictive regulations in the FFEL and Direct Loan programs.
[[Page 49800]]
Executive Order 12866
1. Potential Costs and Benefits
These proposed regulations have been reviewed in accordance with
Executive Order 12866. Under the terms of the order the Secretary has
assessed the potential costs and benefits of this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those determined by the
Secretary as necessary for administering these programs effectively and
efficiently. Burdens specifically associated with information
collection requirements are identified and explained elsewhere in this
preamble under the heading Paperwork Reduction Act of 1995.
In assessing the potential costs and benefits--both quantitative
and qualitative--of these proposed regulations, the Secretary has
determined that the benefits of the proposed regulations justify the
costs.
2. Clarity of the Regulations
Executive Order 12866 requires each agency to write regulations
that are easy to understand.
The Secretary invites comments on how to make these regulations
easier to understand, including answers to questions such as the
following: (1) Are the requirements in the proposed regulations clearly
stated? (2) Do the regulations contain technical terms or other wording
that interferes with their clarity? (3) Does the format of the
regulations (grouping and order of sections, use of headings,
paragraphing, etc.) aid or reduce their clarity? Would the regulations
be easier to understand if they were divided into more (but shorter)
sections? (A ``section'' is preceded by the symbol ``Sec. '' and a
numbered heading; for example, Sec. 682.210 Deferment.) (4) Is the
description of the proposed regulations in the ``Supplementary
Information'' section of this preamble helpful in understanding the
proposed regulations? How could this description be more helpful in
making the proposed regulations easier to understand? (5) What else
could the Department do to make the regulations easier to understand?
A copy of any comments that concern how the Department could make
these proposed regulations easier to understand should be sent to Mr.
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of
Education, 600 Independence Avenue, SW, Room 5121, FB-10B, Washington,
DC 20202-2241.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. The small entities affected by these proposed regulations are
small schools and loan holders that participate in the federal student
loan programs.
The changes proposed in this regulation would reduce administrative
burden on schools and loan holders by allowing them to process economic
hardship deferments for eligible Peace Corps volunteers for more than
one year at a time, and would provide schools participating in the
Federal Perkins Loan Program with greater flexibility in processing
deferment requests. Thus, the proposed regulations are not expected to
have an adverse economic impact on small entities.
The Secretary particularly invites comments on the effect that
these proposed regulations would have on small entities.
Paperwork Reduction Act of 1995
Sections 674.34 and 682.210 contain information collection
requirements. As required by the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)), the Department of Education has submitted a copy of
these sections to the Office of Management and Budget (OMB) for its
review.
Collection of Information: Federal Perkins Loan Program, Federal
Family Education Loan Program, and William D. Ford Federal Direct Loan
Program--Economic Hardship Deferments.
There is no change to the current burden for this collection. The
respondents affected by the proposed regulations (Peace Corps
volunteers with federal student loans who are ineligible for loan
deferment or cancellation based on Peace Corps service) may currently
apply for economic hardship deferments in accordance with existing
regulatory requirements. The proposed changes to the economic hardship
deferment criteria are not expected to increase the number of
respondents or significantly reduce the amount of time needed to
respond. Although the documentation requirements for Peace Corps
volunteers who apply for economic hardship deferments in the three
federal student loan programs will be somewhat simplified, and Peace
Corps volunteers will be required to apply only once instead of
annually, the Secretary does not believe that the number of volunteers
with student loans who apply for economic hardship deferments is large
enough to significantly alter the total burden hours for this
collection.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, OMB, Room 10235, New Executive
Office Building, Washington, DC, 20503; Attention: Desk Officer for
U.S. Department of Education.
The Department considers comments by the public on this proposed
collection of information in--
* Evaluating whether the proposed collection of information
is necessary for the proper performance of the functions of the
Department, including whether the information will have practical use;
* Evaluating the accuracy of the Department's estimate of
the burden of the proposed collection of information, including the
validity of the methodology and assumptions used;
* Enhancing the quality, usefulness, and clarity of the
information to be collected; and
* Minimizing the burden of the collection on those who are
to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques of
other forms of information technology; e.g., permitting electronic
submission of responses.
OMB is required to make a decision concerning collection of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment to OMB is best assured of having its full effect
if OMB receives it within 30 days of publication. This does not affect
the deadline for the public to comment to the Department on the
proposed regulations.
Intergovernmental Review
The Federal Perkins Loan, Federal Family Education Loan, and
William D. Ford Federal Direct Loan programs are not subject to the
requirements of Executive Order 12372 and the regulations in 34 CFR
part 79.
Assessment of Educational Impact
The Secretary particularly requests comments on whether the
proposed regulations in this document would require transmission of
information that is being gathered by or is available from any other
agency or authority of the United States.
Electronic Access to This Document
Anyone may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or
portable
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document format (pdf) on the World Wide Web at either of the following
sites:
http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html
To use the pdf you must have the Adobe Acrobat Reader Program with
Search, which is available free at either of the previous sites. If you
have questions about using the pdf, call the U.S. Government Printing
Office toll free at 1-888-293-6498.
Anyone may also view these documents in text copy only on an
electronic bulletin board of the Department. Telephone: (202) 219-1511
or, toll free, 1-800-222-4922. The documents are located under Option
G--Files/Announcements, Bulletins and Press Releases.
Note: The official version of this document is the document
published in the Federal Register.
List of Subjects in 34 CFR Parts 674 and 682
Administrative practice and procedure, Colleges and universities,
Loan programs--education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
Dated: September 10, 1998.
Richard W. Riley,
Secretary of Education.
(Catalog of Federal Domestic Assistance Numbers: 84.032 Stafford
Loan Program; 84.032 PLUS Program; 84.032 Supplemental Loans for
Students Program; 84.038 Federal Perkins Loan Program; and 84.268
William D. Ford Federal Direct Loan Program)
The Secretary proposes to amend parts 674 and 682 of title 34 of
the Code of Federal Regulations as follows:
PART 674--FEDERAL PERKINS LOAN PROGRAM
1. The authority citation for part 674 continues to read as
follows:
Authority: 20 U.S.C. 1087aa-1087ii and 20 U.S.C. 421-429, unless
otherwise noted.
2. Section 674.34 is amended by revising paragraphs (e) and (e)(2)
to read as follows:
Sec. 674.34 Deferment of repayment--Federal Perkins loans and Direct
Loans made on or after July 1, 1993.
* * * * *
(e) The borrower need not repay principal, and interest does not
accrue, for periods of up to one year at a time (except that a
deferment under paragraph (2)(ii) of this section may be granted for
longer than one year at a time) that, collectively, do not exceed 3
years, during which the borrower is suffering an economic hardship, if
the borrower provides documentation satisfactory to the institution
showing that the borrower--
* * * * *
(2) Is receiving payment--
(i) Under a federal or state public assistance program, such as Aid
to Families with Dependent Children, Supplemental Security Income, Food
Stamps, or state general public assistance; or
(ii) From the Peace Corps while serving as a Peace Corps volunteer;
* * * * *
3. Section 674.38 is amended by revising paragraphs (a)(1) and (d)
to read as follows:
Sec. 674.38 Deferment procedures.
(a)(1) As a condition for receiving a deferment, a borrower shall
request the deferment, and provide the institution with all information
and documents required by the institution by the date that the
institution establishes.
* * * * *
(d) Except for a deferment under paragraph (2)(ii) of section
674.34, the institution shall determine the continued eligibility of a
borrower for a deferment at least annually.
Sec. 674.39 [Amended]
4. Section 674.39, paragraph (a)(1), is amended by removing the
words ``in writing''.
PART 682--FEDERAL FAMILY EDUCATION LOAN PROGRAM
5. The authority citation for part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
6. Section 682.210 is amended by revising paragraph (s)(6)
introductory text and (s)(6)(ii) to read as follows:
Sec. 682.210 Deferment.
* * * * *
(s) * * *
(6) Economic hardship deferment. An eligible borrower is entitled
to an economic hardship deferment for periods of up to one year at a
time (except that a deferment under paragraph (s)(6)(ii)(B) of this
section may be granted for longer than one year at a time) that,
collectively, do not exceed 3 years, if the borrower provides
documentation satisfactory to the lender showing that the borrower--
* * * * *
(ii) Is receiving payment--
(A) Under a federal or state public assistance program, such as Aid
to Families with Dependent Children, Supplemental Security Income, Food
Stamps, or state general public assistance; or
(B) From the Peace Corps while serving as a Peace Corps volunteer;
* * * * *
[FR Doc. 98-24866 Filed 9-16-98; 8:45 am]
BILLING CODE 4000-01-P