LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
|LPM NO.:||L97-7||Effective Date:||As Indicated|
|Pub. Date:||June 24, 1997||Distribution:||Lenders and Schools|
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.
Regulatory Waivers for Disasters Added
The Common Manual currently does not provide specific guidance on how the Department of Education may waive regulatory requirements in order to provide relief to FFELP borrowers, schools, lenders, or guarantors. Subsection 2.3.A. of the Common Manual will be revised to inform program participants that occasionally, the Secretary uses his authority under §432(a)(6) of the Higher Education Act of 1965, as amended, and 34 CFR 682.406(b) and 682.413(f) of the regulations, to provide relief to FFELP borrowers, schools, lenders, or guarantors from certain regulatory provisions. For example, if an area has been designated a disaster area by the President of the United States or Mexico, the Prime Minister of Canada, or a governor of a state, certain regulations may be waived. The Department will issue guidance to notify program participants of the regulations being waived. This guidance will specify time frames and other conditions applicable to these waivers, such as military mobilizations.
Lender Recordkeeping Requirements Corrected
The Common Manual has been corrected to indicate that the storage and retrieval of lender records pertains to all media formats -- not just to imaged media formats. A lender is permitted to store records for each FFELP loan it holds in hard copy or on microform (e.g., microfilm or microfiche), computer file, optical disk (e.g., electronic optical image), CD-ROM or other media formats. All records must be retrievable in a coherent hard copy format or in other media formats such as microform, computer file, optical disk, or CD-ROM. This change is effective for records retained on or after July 1, 1997.
The Common Manual will also be corrected to reflect current federal regulations that require special recordkeeping requirements for the loan application and promissory note. Federal regulations require that the lender maintain copies of the loan application and the signed promissory note (whether combined or separate documents). The original promissory note (until fully repaid or assigned to the Department) and the original application must be retained by either the current holder of the loan or the guarantor on the holders behalf. When a loan is paid in full by the borrower, the holder or guarantor shall either return the original promissory note to the borrower or notify the borrower by an alternate procedure acceptable under state law that the loan is paid in full. The holder or guarantor must retain a copy of the promissory note for a period of not less than 5 years following the date the loan is paid in full by the borrower or the lender is reimbursed on a claim. This change is effective retroactive to the effective date of the Common Manual.
Subsections 3.4.A. and 7.13 of the Common Manual will be revised to reflect these changes.
Lender of Last Resort Requirements Modified
Common Manual policy currently requires that within 60 days of a request for a Lender of Last Resort (LLR) loan, a guarantor must respond to the student and either designate an eligible lender to make the LLR loan or serve as the lender under the LLR program. The policy will be modified to require that within 60 days of receipt of an original, complete application, the guarantor must respond to the student with an approval or denial. If the LLR loan is approved, the guarantor will either designate an eligible lender to make the LLR loan or serve as the lender under the LLR program. Lenders should contact individual guarantors for information on specific LLR operating procedures.
Subsection 3.7.C. of the Common Manual will be revised to reflect this clarification. This change is retroactive to the effective date of the Common Manual.
Eligibility for Addition of New Programs at a School Corrected
Subsection 4.1.C. of the Common Manual incorrectly states that in certain instances a school is not required to notify the Department of the addition of new programs, but that the school must determine the programs eligibility. A school is not always required to notify the Department of the addition of new programs. The school itself may determine program eligibility in either of the following cases:
If a school determines incorrectly that an additional program of study satisfies eligibility requirements and does not apply to the Department for approval, the school is liable for repayment of all Title IV funds received by the school for the ineligible program as well as for all funds received by or on behalf of students enrolled in the ineligible program of study from the date of the school's addition of the program.
This change is effective retroactive to the effective date of the Common Manual.
Pro Rata Refunds for Clock-Hour Programs Corrected
Common Manual policy currently requires that in order to determine whether a student enrolled in a clock-hour program is subject to the pro rata refund prescribed in federal regulations, the school divides the number of clock hours that the student was scheduled to have completed at the point of withdrawal by the number of clock hours in the program for which the student was charged.
The policy will be revised to clarify that the requirements for determining pro rata refunds for students enrolled in a clock-hour program are as follows:
To determine whether a student is subject to the pro rata refund prescribed in federal regulations, the school must first determine whether the student is attending the school for the first time and has completed 60% or less of the enrollment period for which the student was charged before withdrawing. For a student enrolled in a clock-hour program, the school divides the number of clock hours that the student actually completed at the point of withdrawal by the scheduled number of clock hours in the program for which the student was charged.
This change is retroactive to the effective date of the Common Manual. Subsection 4.7.C. of the Common Manual will be revised to reflect this change.
Eligibility of Incarcerated Student Clarified
An eligible student who is seeking a Stafford loan--or on whose behalf a PLUS loan is being sought--must not be incarcerated at the time loan funds are disbursed or delivered. The Common Manual currently states that this only applies to students who are incarcerated in a state or federal facility. The manual will be modified to clarify that this restriction on eligibility applies to a student who is serving a criminal sentence in a federal, state, or local penitentiary, prison, jail, reformatory, work farm, or other similar correctional institution. A student who is living in a half-way house, home detention, or who has been sentenced to serve only weekends is not considered to be incarcerated.
Subsection 5.2.B. and appendix G of the Common Manual will be revised to reflect this change. This change is retroactive to the effective date of the Common Manual.
Eligibility After Prior Loan Discharge Clarified
The Common Manual will be revised to clarify the eligibility requirements for a borrower who has had a prior loan discharged due to total and permanent disability. A borrower is not required to reaffirm the discharged obligation to be eligible to obtain a new loan. However, to be eligible to receive a new loan, the borrower must meet the following requirements:
For these purposes, "substantial gainful activity" may be defined as the ability to work and earn money or to attend school.
This change is retroactive to the effective date of the Common Manual. Subsection 5.2.D. of the Common Manual will be revised to reflect this change.
Reaffirmation of Prior Written-Off Loan Clarified
The Common Manual will be revised to clarify the reaffirmation requirements for borrowers who have had a prior loan partially or totally written off.
A borrower who has had a loan partially or totally written off (the lender or guarantor has stopped all collection activity on the written-off portion) must reaffirm the written-off portion of the loan before a new loan may be approved. Reaffirmation is the borrowers legally binding acknowledgment of a loan that has previously been totally or partially written off. By this acknowledgment of the loan, the borrower agrees to the reinstatement of his or her repayment obligation on the previous loan. The reaffirmation may include but is not limited to the following:
The amount reaffirmed must include all principal and interest accrued on the written-off portion of the loan through the date on which the borrower reaffirms his or her commitment to repay the loan. It may also include collection costs, late charges, and legal costs. Any outstanding charges, such as interest, collection costs, late charges, or legal costs, may be capitalized as of the date the loan is reaffirmed.
This change is effective retroactive to the effective date of the Common Manual. Please note that enforcement of this provision of the December 1992 regulations was waived until July 1, 1996, although some guarantors may have implemented it earlier. Contact your guarantor if you have any questions. Subsection 5.2.D. of the Common Manual will be revised to reflect this change.
Payment Period Start Date Clarified
Because of possible differences in interpretation of the term "first day of classes," (i.e., first day of classes for an individual student or first day of regularly scheduled classes) the Common Manual definition of "payment period" in appendix G will be amended to clarify that the payment period begins on the first day of regularly scheduled classes. In addition, credit hour non-term program requirements will be incorporated into the description of "Payment Period" in subsection 5.8.D. of the Common Manual. These changes are effective for loan periods beginning on or after July 1, 1997.
Borrower Eligibility for a Consolidation Loan Corrected
One of the borrower eligibility criteria for a Federal Consolidation loan in Section 9.2 of the Common Manual will be revised as follows to conform it to federal guidelines:
To qualify for a Federal Consolidation loan, a borrower must certify that the consolidating lender holds an outstanding loan that has been selected by the borrower to be consolidated, or the borrower must certify that he or she has unsuccessfully sought a Consolidation loan with income-sensitive repayment terms from the holders of the loans to be consolidated.
Previously, the Common Manual only required that at least one of the borrowers loans must be held by the consolidating lender--unless the borrower certified that he or she has tried but failed to obtain a Consolidation loan from the holders of the loans.
Section 9.2. of the Common Manual will be revised to reflect this clarification. This change is retroactive to the effective date of the Common Manual.
Glossary Definitions Updated
Several definitions of FFELP terms will be revised or added to appendix G of the Common Manual. The definition for "administrative cost allowance" and its acronym "ACA" have been removed, since these terms are not applicable to schools or lenders. These following changes are effective retroactive to the effective date of the Common Manual:
Participating School: A school that meets the standards for participation in Title IV, HEA programs in subpart B, has a current Program Participation Agreement with the Department, and is eligible to receive funds under these programs.
Program of Study: A Department-authorized postsecondary educational program that leads to a degree, certificate, or other educational credential.
Recognized Equivalent of a High School Diploma: A recognized equivalent of a high school diploma is any one of the following:
- A General Education Development (GED) Certificate.
- A state certificate received by the student after passing a state-authorized examination recognized by the state as the equivalent of a high school diploma.
- The academic transcript of a student who has successfully completed at least a two-year program acceptable for full credit toward a bachelors degree.
- For a student seeking enrollment in at least an associate degree program or its equivalent, who has not completed high school but has excelled academically at the high school level, documentation obtained by the participating school that the student excelled academically and has met the participating schools written policies for admitting such students.
Regular Student: A person enrolled or accepted for enrollment for the purpose of obtaining a degree, certificate, or other recognized educational credential.
Repayment Period: The period during which payments of principal and interest are required. The repayment period follows any applicable period of in-school or grace and excludes any period of authorized deferment or forbearance.
Telecommunications Course: A course offered during an award year that principally uses television, audio, or computer transmission, including open broadcast, closed circuit, cable, microwave or satellite, audio conferencing, computer conferencing, or video cassettes or discs. A course is not considered to be a telecommunications course if the course is delivered using video cassettes or discs unless that same course is also delivered to students who are physically attending classes at the school providing the course during the same award year.
Totally and Permanently Disabled: The condition of an individual who is unable to work and earn money or attend school due to an impairment that is expected to continue indefinitely or result in death.