LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
OFFICE OF STUDENT FINANCIAL ASSISTANCE

LOAN PROGRAM BULLETIN

TO:

Lenders and Schools

DATE:

March 28, 2003

TOPIC:

Administrative Relief for Students and Borrowers Affected by Military Mobilizations

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 wishes to provide complete guidance to lenders and schools concerning administrative relief for loan program participants from the U.S. Department of Education to students and borrowers who have been affected by military mobilizations. The text of GEN-03-06/G-03-347/L-03-241 follows:

GEN-03-06
G-03-347
L-03-241

Subject: Administrative relief for students and borrowers affected by military mobilizations.

Summary: This letter provides guidance regarding the administration of the Federal student aid programs authorized under Title IV of the Higher Education Act for students and borrowers who have been ordered to active military duty and for active duty military personnel whose duty station has been changed as a result of a military mobilization.

Dear Colleague:

In September 2001 we issued a Dear Colleague Letter (GEN-01-13) that provided guidance for the treatment of students and borrowers who were impacted by the military mobilization that followed the September 11 terrorist attacks. This letter updates that guidance for students and borrowers who are military personnel and who are activated or reassigned for a period of more than 30 days as a result of a military mobilization.

The loan issues guidance in this letter applies to lenders and guaranty agencies in the Federal Family Education Loan (FFEL) Program and to school lenders in the Federal Perkins Loan (Perkins) Program. In addition, the Secretary will treat borrowers who are ordered to active duty or reassigned and who have Direct Loans or other loans held by the Department in accordance with this guidance.

Loan Issues

Borrowers whose Title IV loans are in an in-school, in-school deferment, or grace period status

If a borrower's loan is in an in-school status or an in-school deferment status, or in a grace period status when the borrower is ordered to active duty or reassigned, the lender must maintain the loan in that status during the period of the borrower's active duty service or reassignment, plus the time necessary for the borrower to resume enrollment in the next regular enrollment period that is reasonably available to the borrower, if the borrower is planning to go back to school. However, this maintenance of loan status may not exceed a total of 3 years, including the period of time necessary for the borrower to resume enrollment. Additionally, if the loan was in a grace period status at the time the borrower was ordered to active duty, the period of time during which the borrower served on active duty must be excluded from the grace period in order to ensure that the borrower receives the full grace period in the future.

Borrowers whose Title IV loans are in repayment

If a borrower's loan is in repayment, FFEL lenders must grant the borrower forbearance based upon the request of the borrower, a member of the borrower's family, or another reliable source. Under the amendment to 34 CFR 682.211(c) which was published by the Department on November 1, 2002, (at 67 Fed. Reg. 67048), an FFEL lender may accept an oral request for the forbearance. The forbearance agreement need not be in writing and the forbearance can be granted without documentation. However, the reason for granting the forbearance must be documented in the borrower's loan records. The lender may extend this initial forbearance for a period that is the lesser of one year or the period of active duty (if known at the time of granting the forbearance).

Under the amended procedures in 34 CFR 682.211(f) that were also included in the final regulations published November 1, 2002, an FFEL lender may grant a discretionary, administrative forbearance immediately for up to three months to borrowers who are affected by the military mobilization. Such an administrative, discretionary forbearance, if granted, will be considered part of an initial forbearance period, thereby extending the initial period of forbearance to 15 months. Forbearance beyond any initial period will require supporting documentation and a written agreement with the borrower. This forbearance authority applies to all borrowers who have been part of a military mobilization, including borrowers who were called up immediately following September 11, 2001, and who are still on active duty.

If a Federal Perkins Loan borrower's loan is in repayment, school lenders must also grant the borrower forbearance for a period that is the lesser of one year or the period of active duty based upon the request of the borrower, a member of the borrower's family, or another reliable source. The forbearance agreement need not be in writing and the forbearance can be granted without documentation as long as the reason is noted in the borrower's loan records. However, forbearances beyond any initial period will require a written request because of statutory requirements.

During the initial forbearance period, lenders are encouraged to examine the borrower's eligibility for a deferment. For example, some FFEL, Direct and Perkins loan borrowers may be eligible for an economic hardship deferment or a military deferment, depending on when the loan was made. Schools are also encouraged to examine a Federal Perkins loan borrower's eligibility for a military service cancellation based on the borrower serving in an area of hostilities.

Borrowers whose loans are in default status

If a borrower is in default on a loan, the guaranty agency or Perkins school must, upon being notified that the borrower has been called to active duty or reassigned, cease all collection activities for the expected period of the borrower's military service. Collection activities must resume no later than 30 days after the end of the borrower's military service.

Applicability of the Soldiers' and Sailors' Civil Relief Act of 1940

The Soldiers' and Sailors' Civil Relief Act of 1940 only applies if an FFEL guaranty agency or a Perkins school lender is suing a borrower who is covered by that Act. That Act prevents a creditor from obtaining a default judgment in court. It does not prohibit other collection efforts. A borrower's interest rate is not affected by the provision of the Act restricting interest charged to certain borrowers in military service, because section 428(d) of the Higher Education Act states that no provision of any law which limits the interest rate on a loan shall apply to the FFEL Program.

Other Issues

Institutional Charges and Refunds

We strongly encourage schools to provide a full refund of required tuition, fees, and other institutional charges, or to provide a credit in a comparable amount against future charges for students who are forced to withdraw from school as a result of the military mobilization. In addition, we urge schools to consider providing easy and flexible re-enrollment options to affected students.

Return of Title IV Funds Treatment

If a Title IV eligible student withdraws because of being called to active duty, or has been otherwise impacted by the military mobilization (such as a change of duty station away from the borrower's home), the school must perform the Return of Title IV Funds calculations that are required by the statute and regulations (34 CFR 668.22). If those calculations result in the school being required to return funds to one or more of the Title IV programs, it must do so. If these calculations result in an overpayment that is the responsibility of the student to repay, the school should not contact the student or notify NSLDS. Please note, however, that although previous guidance instructed the school not to refer these overpayments to the Department, beginning on May 1, 2003, the school must refer overpayments to the Department for tracking and verification purposes. To the extent possible, these referrals should also include any overpayments identified previously by the school for military mobilization withdrawals under the guidance provided in Dear Colleague Letter GEN-01-13, September 2001. Schools should make the referral using the overpayment referral format on page 1-131 of the Student Eligibility section (Volume 1) of the 2002-2003 Student Financial Aid Handbook. Schools must specify "MILITARY MOBILIZATION" as the reason for the overpayment in Part 5 of the overpayment referral format.

Thank you for supporting the many students who have been called to serve our nation.

Sincerely,

Jeffrey Andrade

Deputy Assistant Secretary for Policy, Planning and Innovation