Common Manual Updates
LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
|LPM NO.:||L99-4||Effective Date:||As Indicated|
|Pub. Date:||March 26, 1999||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.
Consolidation Loan Interest Payment Rebate Fee
The Higher Education Amendments of 1998, signed by the President on October 7, 1998, revised certain provisions of Federal Consolidation loan policy. Current Common Manual policy states that the Consolidation loan interest payment rebate fee is 1.05% per annum of the principal balance and accrued interest of the loans. Section 9.8 of the Common Manual has been revised to reflect new law which provides a reduction in this fee for certain loans.
Each month, a holder must remit to the Department an interest payment rebate fee for all of its Federal Consolidation loans made on or after October 1, 1993.
For loans made on or after October 1, 1993, from applications received prior to October 1, 1998 and after January 31, 1999, this fee is equal to 1.05% per annum of the unpaid principal and accrued interest of the loans. To calculate the fee, the holder should multiply the sum of unpaid principal and interest balances of the applicable loansas of the end of the monthby 0.0875% (0.000875).
For loans made from applications received during the period beginning October 1, 1998 through January 31, 1999, inclusive, this fee is equal to .62% per annum of the unpaid principal and accrued interest of the loans. To calculate the fee, the holder should multiply the sum of unpaid principal and interest balances of the applicable loansas of the end of the monthby 0.0517% (0.000517).
These changes are effective for loan applications received by the lender on or after October 1, 1998.
Lender Audit Exemptions Clarified
The Higher Education Amendments of 1998 make permanent the exemption from the annual audit requirement for any lender fiscal year in which the lender holds or originates $5 million or less in FFELP loans. However, an exception to this statutory change applies to an eligible lender that is a wholly owned subsidiary of a tax-exempt nonprofit foundation [as described in
§501(c)(3) of the Internal Revenue Code of 1986, and exempt from taxation under §501(1) of the Code), makes FFELP loans only to undergraduate students who are age 22 or younger, and has a portfolio that is $5 million dollars or less. Such lenders must submit the results of an audit annually.
These changes are being made to subsection 3.8.A. of the Common Manual and are effective retroactive to the implementation date of the Common Manual for a lender who made or held $5 million or less in FFELP loans. For a lender that is a bank as defined in section 3(a)(1) of the Federal Deposit Insurance Act, a wholly owned subsidiary of a tax-exempt nonprofit foundation, makes loans only to undergraduate students who are age 22 or younger, and has a portfolio of such loans that is $5 million or less, the effective date is applicable to a lender audit completed for any fiscal year ending on or after October 1, 1998.
Borrower and Student Eligibility Requirements Revised
The Higher Education Amendments of 1998 changed some borrower and student eligibility requirements:
Prior to the 1998 Reauthorization of the Higher Education Act, neither the certificate study program of one year or longer nor the schools percentage of degree programs was considered in determining a students FFELP eligibility.
Subsections 5.2.A., 5.2.B., 5.2.C., 5.2.D., 5.2.I., and 5.2.J. of the Common Manual have been revised to reflect these changes. These changes are effective for loan applications certified by the school on or after October 1, 1998.
Lender's Initial and Repayment Disclosure Requirements Modified
Subsections 6.1.I. and 7.5.D. of the Common Manual have been revised to incorporate provisions of the Higher Education Amendments of 1998 that affect the lenders initial and repayment disclosures.
Revised policy in subsections 6.1.I. and 7.5.D. permits the lender to provide the borrower with required initial and repayment disclosures in either a written or electronic format. In addition to the data elements currently listed in subsections 6.1.I. and 7.5.D., initial and repayment disclosure information must now include the lenders telephone number and, at the lenders option, an electronic address from which the borrower can obtain additional loan information.
Revisions to Common Manual subsections 6.1.I. and 7.5.D. are effective for initial and repayment disclosures issued by the lender on or after October 1, 1998.
Lenders May Pay Origination Fees on All Stafford Loans
Until the 1998 Reauthorization, lenders were required by statute to charge federal origination fees to unsubsidized Stafford loan borrowers. Although the lender continues to owe the origination fees on all Stafford loans, and will continue to remit those fees via the quarterly ED Form 799, lenders now are permitted to pay origination fees on both subsidized and unsubsidized Stafford loans on the borrower's behalf.
This change is effective for unsubsidized Stafford loans first disbursed by the lender on or after October 1, 1998. Section 6.6 and subsections 6.6.E. and A.3.C. of the Common Manual have been updated accordingly.
Mandatory Forbearance Requests Modified
The Common Manual has been revised to incorporate the provisions of the Higher Education Amendments of 1998 that delete the requirement for a borrower to request a mandatory forbearance in writing.
Revised policy states that, upon receiving a borrowers request and documentation required to support the borrowers eligibility, a lender is required to grant a forbearance in any of the following situations: internship/residency, debt exceeds monthly income, national service, or Department of Defense Repayment. In all cases, the lender must provide the borrower with a written agreement that explains the terms of the forbearance.
In addition, the current policy has been revised to delete the requirement for a written request, and to provide additional clarity to existing policy. Revised policy now states that a lender must grant forbearance to a qualified borrower who meets either of the following criteria:
Eligibility and documentation requirements are the same as for a borrower who has requested an internship/residency deferment (see subsection 7.10.K.). A lender must grant forbearance in 12-month increments unless the actual period during which a borrower is eligible is less than 12 months.
Subsection 7.11.C. of the Common Manual has been revised to reflect these changes, which are effective for mandatory forbearances granted by the lender on or after October 1, 1998.
Cohort Default Rates and Appeals Modified
Due to the 1998 Reauthorization of the Higher Education Act, changes have been made to chapter 10 of the Common Manual.
- The student is eligible to receive a Pell Grant that is at least equal to one-half of the maximum available Pell Grant based on the students enrollment status.
- The student has an adjusted gross income that is less than the poverty level, as determined by the Department of Health and Human Services. (Please note that the adjusted gross income of a dependent student equals the adjusted gross income of the students parents plus the adjusted gross income of the student).
Except for school appeals of FDLP and weighted average cohort default rates on the basis of improper loan servicing or collection which take effect on July 1, 1999, all of the above revisions to sections 10.1 and 10.5 and subsections 10.5.A. and 10.5.C. of the Common Manual are effective for school cohort default rates published on or after October 1, 1998.