[Federal Register: June 19, 1996 (Volume 61, Number 119)]
[Rules and Regulations]
[Page 31357-31362]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
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Part VII
Department of Education
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34 CFR Part 685
William D. Ford Federal Direct Loan Program; Final Rule
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DEPARTMENT OF EDUCATION
34 CFR Part 685
RIN 1840-AC19
William D. Ford Federal Direct Loan Program
AGENCY: Department of Education.
ACTION: Final Regulations.
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SUMMARY: This document contains corrections and other technical changes
to the William D. Ford Federal Direct Loan (Direct Loan) Program final
regulations published in the Federal Register on December 1, 1994 (59
FR 61664) and on December 1, 1995 (60 FR 61820 and 60 FR 61790). Most
of these changes apply to regulations governing the new income
contingent repayment plan, which becomes effective July 1, 1996.
However, several amendments correct provisions currently in effect.
EFFECTIVE DATE: These regulations take effect July 1, 1996.
FOR FURTHER INFORMATION CONTACT:
Ms. Rachel Edelstein, Program Specialist, Direct Loan Policy, Policy
Development Division, U.S. Department of Education, Room 3053, ROB-3,
600 Independence Avenue, SW., Washington, DC 20202-5400. Telephone:
(202) 708-9406. 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.
SUPPLEMENTARY INFORMATION: The following regulations are amended to
clarify the provisions and to correct errors and omissions in the text
of the Direct Loan Program final regulations published on December 1,
1994 (59 FR 61664) and on December 1, 1995 (60 FR 61820 and 60 FR
61790).
Repayment Plans--Section 685.208(f)
The Secretary has amended section 685.208(f)(1) to clarify that,
for married borrowers, the borrower's repayment amount is based on the
Federal adjusted gross income (AGI) of the borrower and the borrower's
spouse, regardless of whether the borrower files a joint Federal income
tax return with his or her spouse or files a Federal income tax return
separately from his or her spouse. In addition, to simplify the
regulations, language alluding to joint repayment for married borrowers
has been removed because the subject is addressed in greater detail in
section 685.209(b).
The Secretary has also amended section 685.208(f)(2) to clarify
that the income contingent repayment plan in effect at the time the
borrower either enters repayment and selects the income contingent
repayment plan or changes from another repayment plan into the income
contingent repayment plan governs the method for determining the
borrower's monthly repayment amount under the income contingent
repayment plan. The proposed rule published on September 20, 1995,
clearly states the Secretary's intent to change the policy so that the
new income contingent repayment plan would apply to borrowers who
select the income contingent repayment plan when they enter repayment
and to borrowers who are in other repayment plans and switch into the
income contingent repayment plan on or after July 1, 1996 (see 60 FR
48849). While the preamble to the proposed rule clearly states the
Secretary's intended change in policy, this change was inadvertently
omitted from the regulations. Please note that, as the existing
regulations indicate, if the Secretary amends the regulations and a
borrower who is repaying under the existing income contingent repayment
plan submits a written request that the amended regulations apply to
the method of calculation of the borrower's loans, the Secretary would
grant the borrower's request.
Income Contingent Repayment Plan--Section 685.209
The preamble to the final regulations states, ``The Secretary has
decided to require a $5.00 minimum monthly payment of borrowers whose
calculated monthly payment amount is greater than $0 but less than or
equal to $5.00.'' Although the preamble to the final regulations
clearly states the Secretary's intended policy, this policy was
inadvertently omitted from the regulations. In order to clarify the
Secretary's intent, section 685.209(a)(6) has been added to the
regulations.
An incorrect cross reference has been corrected in paragraph
(c)(6)(ii) by removing ``Sec. 685.209(a)(3)'', and adding, in its
place, ``Sec. 685.209(c)(3).''
Origination of Loan by a Direct Loan Program School--Section 685.301
The terminology of this section has been changed to clarify that
schools certify loan information in the Direct Loan Program by means of
the origination process. Throughout this section, the word
``certification'' has been changed to ``origination.'' This change in
terminology does not reflect a change in policy or procedures. In the
Federal Family Education Loan (FFEL) Program, a financial aid
administrator signs the application, thereby certifying that the
borrower is eligible. In the Direct Loan Program, the process of
originating a loan is comparable to the FFEL certification process.
When the school originates the loan, the school is certifying the
borrower's eligibility. Paragraph (a)(6) has been amended to reflect
this concept. This technical change does not impose any new policies or
procedural requirements.
In addition, paragraph (a)(7) has been amended to specify that a
school may not assess a fee for the origination of a Direct Loan.
According to section 454(a)(6) of the Higher Education Act of 1965, as
amended, schools may not ``charge any fees of any kind, however
described, to student or parent borrowers for origination activities .
. . .'' This statutory requirement was inadvertently omitted from the
regulations.
Appendix A to Part 685--Income Contingent Repayment
The Secretary has updated the income percentage factors in the
appendix to reflect the Department of Health and Human Services (HHS)
Annual Update of the HHS Poverty guidelines, published in the Federal
Register on March 4, 1996. In addition, the examples of the calculation
of monthly repayment amounts and the charts showing sample repayment
amounts have been amended to reflect the updated income percentage
factors. Under the updated income percentage factors, at any given
income, borrowers' payments will be slightly lower than under the
income percentage factors published in the December 1, 1995
regulations. The Secretary believes the updated income percentage
factors more accurately reflect a borrower's ability to repay than
those previously published.
Waiver of Proposed Rulemaking
In accordance with the Administrative Procedure Act, 5 U.S.C. 553,
it is the practice of the Secretary to offer interested parties the
opportunity to comment on proposed regulations. However, the regulatory
changes in this document are necessary to correct minor technical
errors and omissions in the Direct Loan Program final regulations
published on December 1, 1994, and December 1, 1995. The changes in
this document do not establish any new rules. Therefore, the Secretary
has determined that publication of a proposed rule is unnecessary and
contrary to the public interest under 5 U.S.C. 553(b)(B). For the same
reasons, the Secretary also waives the 30-day delayed effective date
under 5 U.S.C. 553(d).
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Executive Order 12866
These final 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 these final regulations are
those resulting from statutory requirements and those determined by the
Secretary as necessary for administering the program effectively and
efficiently. Burdens specifically associated with information
collection requirements, if any, 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 final regulations, the Secretary has
determined that the benefits of the regulations justify the costs.
The Secretary has also determined that this regulatory action does
not unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
Paperwork Reduction Act of 1995
These regulations have been examined under the Paperwork Reduction
Act of 1995 and have been found to contain no information collection
requirements.
Regulatory Flexibility Act Certification
The Secretary certifies that these regulations will not have
significant economic impact on a substantial number of small entities.
The regulations will affect borrowers who are in repayment. These
regulations contain technical amendments designed to clarify and
correct current regulations. The changes will not have a significant
economic impact on any small entities under the Regulatory Flexibility
Act.
Assessment of Educational Impact
The Secretary has determined that the regulations in this document
would not require transmission of information that is being gathered by
or is available from any other agency or authority of the United
States.
List of Subjects in 34 CFR Part 685
Administrative practice and procedure, Colleges and universities,
Education, Loan programs-education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
(Catalog of Domestic Assistance Number: 84.268, William D. Ford,
Federal Direct Loan Program)
Dated: June 12, 1996.
Richard W. Riley,
Secretary of Education.
The Secretary amends Part 685 of Title 34 of the Code of Federal
Regulations as follows:
PART 685--[AMENDED]
1. The authority citation for Part 685 continues to read as
follows:
Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.
2. Section 685.208 is amended by revising paragraphs (f) (1) and
(2) to read as follows:
Sec. 685.208 Repayment plans.
* * * * *
(f) * * *
(1) Under the income contingent repayment plan, a borrower's
monthly repayment amount is generally based on the total amount of the
borrower's Direct Loans, family size, and Adjusted Gross Income (AGI)
reported by the borrower for the most recent year for which the
Secretary has obtained income information. The borrower's AGI includes
the income of the borrower's spouse. A borrower shall make payments on
a loan until the loan is repaid in full or until the loan has been in
repayment through the end of the income contingent repayment period.
(2) The regulations in effect at the time a borrower enters
repayment and selects the income contingent repayment plan or changes
into the income contingent repayment plan from another plan govern the
method for determining the borrowers's monthly repayment amount for all
of the borrower's Direct Loans, unless--
* * * * *
3. Section 685.209 is amended by redesignating paragraphs (a) (6)
through (8) as (a) (7) through (9), respectively, and adding a new
paragraph (a)(6); and by removing ``Sec. 685.209(a)(3)'' in paragraph
(c)(6)(ii), and adding, in its place, ``Sec. 685.209(c)(3)'' to read as
follows:
Sec. 685.209 Income contingent repayment plan.
(a) * * *
(6) If a borrower's monthly payment is calculated to be greater
than $0 but less than or equal to $5.00, the amount payable by the
borrower shall be $5.00.
* * * * *
Sec. 685.301 [Amended]
4. Section 685.301 is amended by removing the word ``certify'' from
the introductory text in paragraph (a)(6) and adding, in its place,
``originate''; and paragraph (a)(7) is amended by adding, before the
period at the end of the sentence, ``or for the origination of a Direct
Loan''.
5. Appendix A is amended by revising the computations following
Example 1, Steps 2, 3, and 4; revising the computations following
Example 2, Steps 3, 4, and 5; revising the computations following the
Interpolation; and by revising the charts of Income Percentage Factors
(Based on Annual Income), Income Contingent Repayment Plan (Sample
First-Year Monthly Repayment Amounts for a Single Borrower at Various
Income and Debt Levels), and Income Contingent Repayment Plan (Sample
First-Year Monthly Repayment Amounts for a Married or Head-of-Household
Borrower at Various Income and Debt Levels) to read as follows:
Appendix A to Part 685--Income Contingent Repayment
* * * * * *
Example 1. * * *
Step 2: * * *
* 84.46% (0.8446) x 1,644.315=1,388.7884
Step 3: * * *
* $25,000-$7,740=$17,260
* $17,260 x 0.20=$3,452
Step 4: * * *
* 1,388.7884/12=$115.73
Example 2. * * *
Step 3: * * *
* 91.27% (0.9127) x 2,630.904=2,401.2261
Step 4: * * *
* $30,000-$10,360=$19,640
* $19,640 x 0.020=$3,928
Step 5: * * *
* 2,401.2261/12=$200.10
Interpolation: * * *
* $27,904-$25,000=$2,904
* * * * *
* 88.77-84.46=4.31
* * * * *
* $26,000-$25,000=$1,000
* * * * *
* 1,000/2,904=0.3444
* * * * *
* 0.3444 x 4.31=1.48
* * * * *
* 1.48+84.46=85.94%
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[FR Doc. 96-15516 Filed 6-18-96; 8:45 am]
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