Common Manual Update



LPM NO.: L2000-8 Effective Date: As Indicated
Pub. Date: October 16, 2000 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 in 2001. However, these changes are effective before the next update is scheduled to be delivered.

Administrative Forbearance After Deferment

Subsection 7.9.G. now includes the regulatory provision permitting a lender to grant an administrative forbearance to resolve any delinquency existing after a borrower’s deferment period ends. The provision, authorized in regulations effective July 1, 1996, already appears in subsections 7.4.B. and 7.11.B., and is added now to subsection 7.9.G. for consistency.

Affected Sections:            7.9.G.
Effective Date:                  Deferments ending on or after July 1, 1996.
Basis:                               §682.211(f)(8).
Policy Information:           Reference 457
Guarantor Comments:      None

Forbearance for Child Care Providers

Guarantors have clarified a potential lender requirement associated with the Loan Forgiveness Demonstration Program for Child Care Providers, which currently is not funded. If the program is activated by Congressional funding, the policy change clarifies that the lender will be required to grant a forbearance to any borrower who serves as a qualifying child care provider if the borrower does not otherwise qualify for deferment.

Affected Sections:            7.15
Effective Date:                 New borrowers with loans first disbursed on or after October 8, 1998,
                                        provided the program is funded.
Basis:                               HEA 428K.
Policy Information:          Reference 458
Guarantor Comments:     None

Special Allowance Clarifications

One of the special allowance formulas listed in subsection A.2.A. contains an error. Formula 10, the formula applicable to subsidized and nonsubsidized Stafford loans and fixed-rate PLUS loans first disbursed prior to October 1, 1981, contains an incorrect addend of 3.25%. The correct addend is 3.5%. Guarantors have corrected Formula 10 so that it reads as follows:


Guarantors also have clarified the following special allowance billing requirements:

•                         Special allowance is calculated on the basis of a loan's quarterly
average principal balance.

•                         The Department’s obligation to pay special allowance for an eligible loan
                    has the potential to end on the date the lender receives a returned,
                    uncashed disbursement check for the loan only if the loan was first
                    disbursed prior to October 1, 1992.

•                         For loans first disbursed prior to October 1, 1992, the lender is eligible
                    for special allowance through the 120th day after the disbursement date
                    if the disbursement check has not been cashed or the EFT/master
                    check funds have not been released from the school’s account to the
                    borrower by that date.

•                         The Department’s obligation to pay special allowance for an eligible loan has the
                    potential to end on the date of disbursement (retroactively) when a loan is 
                    unconsummated only if the loan was first disbursed on or after October 1, 1992.

Affected Sections:                   A.2.A., A.2.B.
Effective Date:                         Retroactive to the implementation of the Common Manual.
Basis:                                      §682.302(a) and (d)(1).
Policy Information:
                  Reference 459
Guarantor Comments:             None


Capitalization of Interest between Claim Payment and Repurchase

The Common Manual has been revised to confirm that the lender may capitalize interest accrued from the date a claim is paid through the date the claim is later repurchased—regardless of whether the lender or guarantor initiated the repurchase. Previously, the manual implied that such capitalization was authorized only for repurchases initiated by the lender. In all cases, the lender must document the reason for capitalization in the borrower's loan record.

Affected Sections:                  7.7.B, 8.7, CCI 8.7
Effective Date:                        Repurchase transactions completed on or after January 1, 2001.
Basis:                                      None.
Policy Information:                 Reference 286
Guarantor Comments:            None


Eligibility Criteria for Temporary Total Disability Deferment

Guarantors have revised the Common Manual to clarify that a borrower will be eligible for a temporary total disability deferment only when the qualifying period of disability is comprised of a specific number of consecutive days, rather than cumulative days. A borrower may qualify for deferment if he or she has been unable to work and earn money or attend school during a period of 60 consecutive days. A borrower also may qualify if a dependent or spouse requires continuous nursing or similar services during a period of 90 consecutive days. Further details and conditions are outlined in subsection 7.10.F.

This clarification should help ensure that FFELP participants determine eligibility for temporary total disability deferments in a unified manner.

Affected Sections:                   7.10.F.
Effective Date:                         Temporary total disability deferment eligibility determinations made by the lender on or after
                                                January 1, 2001.
Basis:                                       §682.200(b); Federal Registers dated June 16, 1981 and December 18, 1992.
Policy Information:                  Reference 460
Guarantor Comments:             None