Common Manual Updates



LPM NO.: L98-10 Effective Date: As Indicated
Pub. Date: September 8, 1998 Distribution: Lenders and Schools
Topic: Common Manual Updates

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.


Reorganization of Subsections on FFELP Eligibility Requirements

Section 5.2. of the Common Manual currently combines the enrollment eligibility requirements and the exceptions to those requirements with other eligibility requirements for Stafford and PLUS loans. Because many users have found the current organization of section 5 .2. difficult to follow, subsections 5.2.A., 5.2.B., 5.2.C.,5.2.D., 5.2.E. and 5.2.F. are being revised and rearranged to improve the flow of the applicable eligibility and enrollment requirements. The revised organization is effective retroactively to the effective date of the Common Manual.


Ineligibility of Medical Interns and Residents Clarified

Current Common Manual policy states only that a student may not receive a Stafford loan while serving in a medical (excluding dental) internship or residency program. The Common Manual is being revised to reflect statutory requirements noted in Dear Colleague Letter GEN-90-33, which clarifies that a student may not receive a Stafford loan while serving in a medical internship or residency program required of doctors of medicine, osteopathy, and optometry. In addition, a parent may not receive a PLUS loan on behalf of a student serving in such a medical internship or residency program. However, students who are serving in an internship as part of any other degree program (e.g., a dental or veterinary internship) are considered eligible students for purposes of Stafford loans and PLUS loans, as applicable.

Subsection 5.2.L. of the Common Manual is being revised to incorporate these changes, which are effective retroactively to the effective date of the Common Manual.


Verification Requirements

Current Common Manual policy lists the steps a school should take in verifying data for each selected application and promissory note. The Common Manual is being revised to clarify that a school may require aid applicants to document the data used in determining a student’s expected family contribution (EFC). A school is required to use such documentation to verify the EFC if the student aid applicant is selected by the Central Processing System (CPS) according to criteria established by the Department, or if the school has reason to believe that any incorrect information was provided on a student aid application used to calculate the EFC. Schools are reminded that unless they have reason to believe that the information provided in the application is incorrect, verification is not required if the student has no need—even if the student’s aid application is selected for verification. PLUS borrowers are not subject to verification, although PLUS loan eligibility may be affected by the verification process.

In addition, the Common Manual has been revised to specify that if the EFC certified on any FFELP loan application and promissory note changes as a result of the verification process, the school must make the necessary corrections and adjust the borrower’s loan eligibility. No tolerance is permitted on any FFELP loan when determining whether a loan should be decreased. The school is responsible for eliminating any overaward resulting from corrections necessitated by the verification process. A school must develop and apply an adequate system to identify and resolve discrepancies in the information provided by the aid applicant. The school must reconcile all conflicting information before disbursing any funds, whether or not the student’s application was selected for verification.

Section 5.6 of the Common Manual is being modified to reflect these changes, which are effective retroactively to the effective date of the Common Manual.


Loan Certification and Delivery Restrictions for Certain Schools

Under the terms of the financial responsibility standards, issued in the Federal Register on November 25, 1997, a school must receive approval from the Department before certifying or delivering Stafford or PLUS funds if required by the Department under the reimbursement payment method provisions, the cash monitoring payment method provisions, or if the school participates solely in the FFELP and the Department has determined that there is a need to monitor the school's participation in that program.

Section 5.8 and subsection 6.3.E. of the Common Manual are being revised to provide a brief summary of these provisions and to refer affected schools to the Department for additional guidance. These changes are effective for loan periods beginning on or after July 1, 1998.


Initial Disclosure Requirements for Lenders

The Department of Education has removed the interest rate formula language from the Borrower Rights and Responsibilities section of the common Federal Stafford and PLUS loan application materials. Lenders are now required to provide this information to borrowers in a disclosure statement. Subsection 6.1.I. of the Common Manual is being revised to require the lender to provide the borrower with the actual interest rate, including information as to how the interest rate is calculated, in the initial disclosure to the borrower at or before the time of the first disbursement of a Stafford or PLUS loan.

This change is effective for Stafford and PLUS loans first disbursed on or after January 1, 1999, unless implemented earlier.


Refund Requirements Corrected for Less Than Half-time Status

The Common Manual is being revised to correct requirements for the calculation of a refund if the student drops below half-time status. Subsection 6.3.G. is being revised to specify that if a student drops to less than half-time enrollment status, but is still enrolled, the school need not calculate a refund.

This correction is effective retroactively to the effective date of the Common Manual.


Consolidation Loan Nondiscrimination and Permissible Practices

Current Common Manual policy states that lenders must make Consolidation loans without discriminating against an applicant based on the number or type of eligible student loans the borrower wishes to consolidate, the type or category of school the borrower attended, the interest rate that will be charged to the borrower on the Consolidation loan, or the types of repayment schedules offered to the borrower. Subsection 9.1.A. of the Common Manual is being revised to state that these items are examples and not a complete list of actions that are considered to be discriminatory.

In addition, subsection 9.1.A. of the Common Manual is being revised to include guidance regarding specific lender policies and practices that the Department considers not to violate the statutory nondiscrimination provisions when making a Consolidation loan. A lender may do any of the following:

These provisions are effective for Consolidation loan applications received by the lender on or after November 13, 1997, including loans added within the 180-day add-on period after November 13, 1997, to a Consolidation loan first disbursed before November 13, 1997.


Definition of Annual Loan Limit

The definition of "Annual Loan Limit" has been updated by removing references to SLS and PLUS loans. The new definition is as follows:

Annual Loan Limit: The maximum loan amount a student may borrow for each academic year of study under the Federal Stafford Loan Program.

This correction is effective retroactively to the effective date of the Common Manual.


Definition of Guarantee Disclosure

The current Common Manual definition of "Guarantee Disclosure" notes that some lenders use their own forms and that others use a guarantor's form to disclose guarantee information. This procedural language and language which explains the purpose of a guarantee will be deleted. The new definition of "Guarantee Disclosure" is as follows:

Guarantee Disclosure: The form used by the guarantor that serves as evidence that the loan identified on the form has been insured (guaranteed) under the guarantor’s program (see also Guarantee). The form also provides relevant loan data, which may include the loan amount, interest rate, guarantee and origination fees (if applicable), and projected maturity date. See subsection 6.1.G.

This change is effective retroactively to the effective date of the Common Manual.


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