New Disaster Area Guidance from the
U.S. Department of Education

LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
OFFICE OF STUDENT FINANCIAL ASSISTANCE

LOAN PROGRAM BULLETIN

TO:
Lenders and Schools
DATE:
January 28, 1997
TOPIC:
New Disaster Area Guidance from the
U.S. Department of Education

To assure that your Common Manual remains current, please record this document on your LPM/LPB index, and retain it in Appendix E of your manual.

The U.S. Department of Education recently released guidance that is different from its previous guidance for helping borrowers who live in natural disaster areas [Dear Guaranty Agency Director letters, January 14, 21, and 24, 1997], as follows:

 

Interim Policy

For the past few years, the Department has notified guarantors whenever the President has officially declared that specific areas in the U.S. have experienced major natural disasters that would qualify the residents and businesses located in those areas to become eligible for individual disaster assistance from the federal government. Those declarations have been made in accordance with the standards used by the Federal Emergency Management Agency (FEMA). Based on those Presidential declarations, the Department initially permitted, and later required loan holders to grant forbearances to borrowers who were harmed by the disasters.

Because lenders, loan servicers, and guarantors have great difficulty identifying borrowers directly affected by such disasters, forbearance has been granted for a 90-day period to all borrowers residing in a designated area. In the case of delinquent and defaulted borrowers, this has resulted in the total cessation of all collection efforts for a 90-day period, even if

there was no evidence that the borrower had been affected by the disaster.

In light of the standards used by FEMA, which frequently result in large geographical areas being designated as disaster areas, such as last year's designation of the entire state of Pennsylvania, the Department believes it must reevaluate its current policy for handling natural disasters. The Department hopes to publish a "Dear Colleague" letter shortly following its reevaluation of the current policy. Until such time as that guidance is developed, the Department strongly recommends that lenders and guaranty agencies take the following steps to provide relief to affected borrowers who contact them:

1. Loan holders are strongly recommended to grant forbearances to borrowers who contact them and indicate that they have been adversely affected by the disaster and need temporary relief from their loan obligations. If the holder believes that the borrower has been harmed and needs assistance, the holder may grant a forbearance for up to 3 months based on either the borrower's oral or written request for assistance, which must be documented in the holder's files.

2. The holder does not need to obtain supporting documentation or a signed written agreement from the borrower to justify a forbearance for this initial 3-month period. The Secretary will decline to enforce the requirements of 34 CFR 682.211(c) for this period.

3. A continuation of the forbearance past this 3-month period will require supporting documentation and a written agreement from the borrower.

 

New Disaster Areas

In response to the flooding that occurred in December and early January in California, Idaho, Nevada, Oregon, and Washington, President Clinton has declared the following counties and jurisdictions to be disaster areas:

California:
Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Lake, Lassen, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey, Napa, Nevada, Placar, Plumas, Sacramento, San Benito, San Joaquin, San Mateo, Santa Clara, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Yolo, Yuba, and the city of Morgan Hill.

Idaho:
Adams, Boundary, Bonner, Boise, Clearwater, Elmore, Gem, Idaho, Latah, Nez Perce, Payette, Shoshone Valley, and Washington.

Oregon:
Jackson, Josephine, and Klamath.

Nevada:
Douglas, Lyon, Storey, Washoe, and the city of Carson City.

Washington:
King, Snohomish.

 

Home Page Policy and Procedure Menu
Information Center Menu LPM/LPB Index