Common Manual Update



LPM NO.: L99-15 Effective Date: As Indicated
Pub. Date: December 6, 1999 Distribution: Lenders and Schools
Topic: Common Manual Update

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.

LOSFA provides the following summaries to inform schools, lenders, and servicers of the latest Common Manual policy changes. These changes will appear in the manual’s next annual update. However, some changes are effective before the next update is scheduled to be delivered.

Economic Hardship Deferment Requirements

The Common Manual has been revised to specify that lenders must include defaulted loans on which the borrower has made satisfactory repayment arrangements with the holder when determining a borrower’s federal education debt burden for purposes of establishing economic hardship deferment eligibility.

Affected Sections:                7.10.P.
Effective Date:                     Economic hardship deferment requests received by the lender on or after
                                               February 1, 2000
Policy Information:               Reference #281
Guarantor Comments:         None

Cost of Attendance Components Revised

The Common Manual has been updated to remove specific minimum allowances to be used for the room and board component of the cost of attendance (COA). Schools are also now authorized to include a reasonable allowance for the documented rental or purchase of a personal computer. Additionally, the COA for students receiving instruction by telecommunications may include the documented cost of renting or purchasing equipment required for them to complete their educational programs. Previously, the COA for telecommunications students was generally limited to tuition and fees.

These changes reflect provisions of the Higher Education Amendments of 1998.

Affected Sections:                 5.7.E.
Effective Date:                      Loans certified by the school for periods of enrollment beginning on or
                                               after October 1, 1998
Policy Information:               Reference #364
Guarantor Comments:          None

Applying Stafford Aggregate Loan Limits

The Common Manual has been revised to explain the application of aggregate loan limits to independent undergraduate borrowers, dependent borrowers whose parent is unable to borrow PLUS loans, and graduate and professional student borrowers. These students may continue to borrow up to the subsidized and unsubsidized aggregate loan limits, regardless of the base or additional unsubsidized loan amounts borrowed. Special calculations are required if a student’s status changes from independent to dependent or if a dependent student borrower’s parent, who initially was unable to borrow a PLUS loan, is later determined eligible. In these cases, the school must calculate the student’s remaining aggregate loan eligibility by totaling only those portions of loans that represent the student’s base Stafford loan amounts.

These changes reflect guidance given in Dear Colleague Letter GEN-97-3.

Affected Sections:                 5.7.H.
Effective Date:                      Loans certified by the school on or after June 1, 1997
Policy Information:               Reference #365
Guarantor Comments:         None

Mandatory Forbearance Documentation for Borrowers in Americorps

Subsection 7.11.C. of the Common Manual has been updated to correct the omission of documentation required for granting mandatory forbearance to borrowers serving in Americorps. Before granting a forbearance to a borrower or endorser under this program, the lender must require the borrower or endorser to submit documentation of the beginning and ending dates of the borrower’s Americorps service.

Affected sections:                 7.11.C.
Effective Date:                     Retroactive to the implementation date of the Common Manual
Policy Information:               Reference #366
Guarantor Comments:         None

False Certification Loan Discharge Forms

Revised Common Manual policy includes the new requirement that a borrower must complete, certify, and submit to the lender the applicable loan discharge form approved by the Department to qualify for a false certification discharge. Copies of these forms are included in appendix F of the July 1999 Common Manual.

The revisions add the requirements for loan discharge based on a disqualifying status. The borrower must complete, certify, and submit to the lender the Loan Discharge Application: False Certification (Disqualifying Status) form, in which the borrower states that he or she (or the student in the case of a PLUS borrower) was unable to meet the legal requirements for employment in the student’s state of residence in the occupation for which the program of study was intended, due to age, physical or mental condition, criminal record, or other reason. The borrower must also provide information about the state legal requirement for employment that the student could not meet, including a reference to - or a copy of - the specific state law or regulation, and provide supporting documentation proving that the borrower had the disqualifying status at the time the loan was originated.

The revisions also provide additional details regarding discharged loans, to clarify existing Common Manual policy. If the guarantor determines that a borrower is eligible for a loan discharge or a discharge of one or more disbursements on a loan, the discharge cancels the obligation of the borrower to repay the applicable outstanding principal, accrued interest, collection costs, and late fees. It also qualifies the borrower for reimbursement of any amounts paid voluntarily or through forced collection on the amount discharged. The lender or guarantor must ensure that a discharge is reported to credit bureaus, such that the adverse credit history associated with the amount discharged is removed.

Affected Sections:             8.2.H., CCI 8.2.H.
Effective Date:                 All new loan discharge forms sent to borrowers on or after August 1, 1999.
                                          Other loan discharge applications sent to borrowers prior to that date may
                                           still be processed after that date.
Policy Information:           Reference #368
Guarantor Comments:     None



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