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DEC 20 1994

To: Lenders, Holders, and Schools Participating in the Health Education Assistance Loan (HEAL) Program

Subject: (1) Deferment status of HEAL borrowers in schools participating in the Direct Loan Program administered by the Department of Education (ED) and (2) New HEAL forms.
Lender Policy Memorandum L-95-03
School Policy Memorandum S-95-02

Purpose

The purpose of this memorandum is to provide lenders, holders and schools with guidance concerning deferments for HEAL borrowers attending schools participating in the Direct Loan Program, and to inform them about use of new HEAL forms.

Deferment Status of HEAL Borrowers

Section 60.1 2(a)(1) of the HEAL regulations states that a borrower can obtain a deferment while in a "full-time course of study ... at an institution of higher education that is a participating school in the Guaranteed Student Loan Program". This regulatory provision is based on section 705(a)(2)(C)(i) of the HEAL statute which permits deferment for debtors pursuing a full-time course of study at an institution defined by section 481 (a) of the Higher Education Act of 1965. That section of the Higher Education Act defines an institution of higher education for purposes of eligibility for the Department of Education loan programs, including both the Federal Family Education Loan (FFEL) Program and the new Direct Loan Program.

The HEAL regulatory provision which references only the Guaranteed Student Loan Program is technically incorrect due to recent changes in the ED programs. The HEAL Program will be clarifying the regulation at the next opportunity, however, in the interim, we are advising you to use the broader statutory language for deferment, thus permitting deferment for borrowers who are pursuing a full-time course of study at an institution of higher education that participates in either the FFEL Program or the Direct Loan Program. HEAL Forms

The following HEAL forms have been revised:

Forms are available by contacting the HEAL Branch at (301) 443-1540. Lenders originating loans in fiscal year 1995 were provided with camera-ready copies of the promissory notes and student application. Schools should contact these lenders for copies of these forms.

A copy of the Lender Quarterly Report on HEAL Loans Outstanding (Call Report) is attached. This revised version was shortened considerably to eliminate the collection of data by discipline. For the reporting period ending December 31, 1994 all holders of HEAL loans must report their loan activity using this form. Also, the report must be returned to the HEAL Branch 30 days rather than 45 days after the end of each quarter. This is a chance from the previous reporting deadline,

The HEAL Student Application will be ready for use in early January 1995. There will be a "phase-in" period of 90 days for use of this form since we realize the current application form may have already been completed by students and forwarded to schools and lenders. Therefore, HEAL lenders will accept both the present application and the new application until March 31, 1995. Originating lenders transmitting data to the HEAL Branch via magnetic media must submit separate tapes or disks for new application data and old application data. New application data should be submitted using the tape specifications included in Lender Policy Memorandum L-95-01, dated October 11, 1994.

Finally, although a new student application has been issued, we continue to strive to make the process easier for our customers. To this end we are reviewing the Department of Education common application and considering alternatives to the HEAL application.

Conclusion

We firmly believe that involving our customers in the HEAL Program benefits all parties. To wit, we want to thank the representatives from schools, lenders and professional associations who by their many useful comments improved the revised versions of our forms.

If you have any questions regarding this policy memorandum, please contact Ms. Terri Ehrenfeld of the HEAL Branch at (3al) 443-1540.

Stephen J.  Boehlent
Chief, HEAL Branch
Division of Student Assistance