Common Manual Updates

 

LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
OFFICE OF STUDENT FINANCIAL ASSISTANCE

LOAN PROGRAM MEMORANDUM

LPM NO.: L97-10 Effective Date: As Indicated
Pub. Date: September 29, 1997 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.

 

Unemployment Deferment Documentation Revised

Many employers and employment agencies offer employment information through the Internet, making it possible for a borrower to register and apply for employment electronically. To accommodate borrowers who may be using the Internet to seek and apply for employment, the Common Manual will be modified to allow this information to be used as documentation of the borrower’s search for employment when the borrower is seeking an unemployment deferment. The requirements for documenting the borrower’s search for employment in subsection 7.10.E. of the Common Manual will be expanded as follows:

To obtain an unemployment deferment or an extension of an unemployment deferment, a borrower must request the deferment or extension. Each deferment request must contain self-certifying statements from the borrower that describe the borrower’s conscientious search for full-time employment during the preceding 6 months. If requesting an extension, this description must document at least six attempts to secure employment during the period to be covered by the deferment, including (a) the names of the firms contacted, (b) the names or titles of the persons contacted, and (c) the addresses and telephone numbers of the firms. An Internet address for the firm or place of employment (e.g., Website or electronic mail) is an acceptable address if the borrower applied electronically for employment. As an alternative to certifying employer contacts, a lender may accept comparable documentation that the borrower has used to meet the requirements of the Unemployment Insurance Service, provided the documentation shows the same number of contacts and contains the same information required from the borrower.

The borrower must also demonstrate that he or she has registered with a public or private employment agency, if one is accessible. The name and address of the agency and the date of registration with the agency must be provided if such an agency is accessible. An agency is considered accessible if it is located within a 50-mile radius of the borrower’s residence. An Internet address for the agency (e.g., Website or electronic mail) is an acceptable address if the borrower registered electronically with the agency. It may not be presumed that a borrower has access to an employment agency based on the borrower’s providing a firm’s Internet address as part of the documentation that the borrower attempted to secure full-time employment. School placement and temporary help agencies are not considered employment agencies for the purposes of establishing unemployment deferment eligibility.

This change is effective for unemployment deferment requests received by the lender on or after November 1, 1997. Earlier implementation by the lender is acceptable. Subsection 7.10.E. of the Common Manual will be revised to incorporate this change.

 

Release of Endorser Requirements Expanded

Current Common Manual policy does not address the release of an endorser from his or her repayment obligation on a loan in the case of the endorser’s death. The Common Manual will be expanded to allow an endorser to be

released from his or her repayment obligation on a loan if the endorser dies, and the lender receives evidence of the endorser’s death, such as a copy of the death certificate or other proof of the endorser’s death that is acceptable under applicable state law.

This change is effective for death certificates or other acceptable documentation received by the lender on or after November 1, 1997. Earlier implementation by the lender is acceptable. Subsection 8.1.E. of the Common Manual will be revised to reflect this change.

 

Repayment Term for Rehabilitated Loans Clarified

Section 8.10 of the Common Manual will be revised to clarify that a borrower who has rehabilitated his or her defaulted loan is eligible for other, more flexible, loan-type-specific repayment schedules after the lender that purchases the borrower’s rehabilitated loan has established an initial repayment schedule. This change will more closely reflect the regulatory language found in 34 CFR 682.405(a)(3).

The requirements a lender must use for establishing a repayment schedule upon purchasing a rehabilitated loan will be revised as follows:

A lender that purchases a rehabilitated loan must immediately establish a repayment schedule with the borrower that meets the requirements applicable to other FFELP loans of the same type. The schedule must be sent to the borrower within 60 days of receiving the loan file, and the first payment due date must be within 75 days of the receipt of that file. The lender must consider the first payment made under the 12 consecutive monthly payments required for rehabilitation as the first payment under the applicable maximum repayment period for the loan type (For example, a borrower would have a maximum repayment period of 9 years remaining on a loan with a 10-year repayment period, and a Consolidation loan borrower with a balance greater than $60,000 would have a maximum repayment period of 29 years, because the 12 consecutive monthly payments are considered the first year of a repayment term). The initial repayment schedule must provide for monthly payments that are greater than or equal to the average of the 12 consecutive monthly payments received by the guarantor. The guarantor will provide payment history information (such as payment amounts and dates) with the loan documentation sent to the purchasing lender to assist in the accurate conversion to repayment. A rehabilitated loan regains the same interest rate and deferment provisions that were applicable when the loan was first disbursed and repayment terms and all other benefits applicable to other FFELP loans made under the same loan type.

This change is effective retroactive to the effective date of the Common Manual. Section 8.10 of the Common Manual will be revised to incorporate this change.

 

Determining Title IV Eligibility for Credit-Hour Programs

The Common Manual currently does not include information about requirements for determining program eligibility and Title IV eligibility for schools that measure progress in credit hours. The following new language will be added to the Common Manual to assist schools with this important task:

Schools that measure progress in credit hours must determine the Title IV eligibility of their undergraduate programs using the formulas listed below except in the following cases:

If the program does not meet one of the preceding three criteria, the school must use the appropriate formula, as follows. Clock hours used in the formula must comply with the regulatory definition of clock hour in appendix G of the Common Manual.

To determine the number of credit hours in a program for Title IV eligibility purposes, schools must use the appropriate formula, as follows:

Number of clock hours in the credit-hour program
                                        30

Number of clock hours in the credit-hour program
                                      20

The school must use the resulting number of equivalent credit hours to determine if a program is eligible under the program requirements. For a program to qualify as eligible by providing at least 16 semester or trimester credit hours or 24 quarter credit hours, the program must include at least 480 clock hours of instruction. For a program to qualify as eligible by providing at least 8 semester or trimester credit hours or 12 quarter credit hours, the program must include at least 240 clock hours of instruction.

A program that fails to include the minimum number of equivalent semester, trimester, or quarter credit hours of instruction does not qualify as an eligible program regardless of whether the Department previously designated that program as an eligible program. A school may not deliver the proceeds of any loan to a student enrolled in such a program regardless of when that program began. The school must return to the lender any loan funds delivered to or on behalf of students enrolled in a program that does not qualify as an eligible program.

In addition, a school must apply the appropriate formula to determine the amount of Stafford funds that a student who is enrolled in the program is eligible to receive. Based on this calculation, the school must determine whether the student’s educational program constitutes a full academic year, at least two-thirds of an academic year, at least one-third of an academic year, or less than one-third of an academic year. The school must then calculate the loan amount that reflects the length of the student’s educational program.

The PLUS program does not require loans to be reduced based on the length of a student’s educational program. If the school determines that the student is enrolled in an eligible program, no further action is necessary. If, however, the student is enrolled in a program the school determines is not eligible, the school cannot deliver any loan proceeds.

These revised requirements for determining eligibility for a credit-hour program are effective retroactive to the effective date of the Common Manual. Subsections 4.1.C., 5.7.B., and 5.7.D. of the Common Manual will be revised to include this information. Schools may also refer to chapter 3 of The Federal Student Financial Aid Handbook for more information.

 

Definition of "Parent" for PLUS Loan Eligibility Corrected
Appendix G of the Common Manual will be revised to correct the definition parent as follows:

Parent: For purposes of PLUS loan eligibility, a student’s natural or adoptive mother, father, court-appointed legal guardian, or the spouse of a parent who remarried if the spouse’s income and assets would have been taken into account when calculating a dependent student’s expected family contribution.

In addition, the eligibility requirement for PLUS loans in section 5.4 of the Common Manual will be revised to eliminate the reference to a stepparent’s being eligible for a PLUS loan only if he or she is also the student’s adoptive parent or legal guardian.

These changes are effective for PLUS loans certified for periods of enrollment beginning on or after July 1, 1996. This effective date correlates to previous Common Manual changes to implement the July 1, 1996 regulations.

 

Unemployment Deferment Documentation Requirements Modified

The Common Manual will be modified to clarify that a borrower who is requesting an unemployment deferment and who resides on a U.S. military base in a foreign country or on a U.S. embassy compound in a foreign country because his or her spouse is stationed there must provide documentation equivalent to that required of other borrowers describing the borrower’s conscientious search for full-time employment. However, when identifying employment contacts, the "name of the firm" may be, for example, the U.S. military base employment office or U.S. embassy personnel office. These borrowers are not required to comply with the requirement that they document further attempts to secure employment during the period of certification, if the borrower has sought employment with the U.S. military base employment office, the U.S. embassy personnel office or their equivalent.

This change is effective for unemployment deferment requests received by the lender on or after January 1, 1998. Lenders are encouraged to implement this policy earlier. Subsection 7.10.E. of the Common Manual will be revised to reflect this change.

 

Release of Endorser after Loan Discharge Corrected

The Common Manual currently provides for discharge of a borrower’s loan if a borrower dies or, in the case of a PLUS loan, if the dependent student for whom a parent obtained a PLUS loan dies on or after July 23, 1992. The manual will be corrected to also indicate that any endorser is released from his or her repayment obligation upon discharge of the borrower’s loan.

This change is effective for death certificates received by the lender on or after July 1, 1996, unless the guarantor provided for earlier implementation. Subsection 8.2.B. of the Common Manual will be revised to incorporate this correction.

 

Definitions for Preclaims Assistance Time Frames Added

The "Preclaims Assistance Time Frames" chart in subsection 8.1.J. of the Common Manual will be modified to add definitions for each heading in the chart. The following new definitions will assist lenders to comply with the preclaims assistance time frames established by each guarantor:

PRECLAIMS ASSISTANCE
TIME  FRAMES

Preclaim Request Period1

Preclaim Cancellation Date2

Skip Preclaims Assistance Available3

Deadline for Refiling Rejected Preclaim4

Updated Preclaim Delinquency Date5

1 The period of time (expressed in number of days delinquent) established by a guarantor for a lender to request preclaims assistance. If preclaims assistance is not requested during this time period, the loan may be subject to an interest penalty if a claim is later filed and paid.

2 If the delinquency date falls below this number of days delinquent, the lender must notify the guarantor to cancel the request for preclaims assistance

3 The period of time (expressed in number of days delinquent) established by a guarantor in which a lender may request skip tracing from the guarantor. An entry of "All" or "Any" specifies that skip preclaims assistance is available throughout the life of a loan. An entry of "None" specifies that the guarantor does not offer skip preclaims assistance.

4 The deadline (expressed in the number of calendar days from the date the lender receives the rejected preclaims assistance) established by a guarantor for the lender to refile the request for a preclaims assistance that has been rejected by the guarantor. An entry of "None" specifies that the guarantor has no time constraints for refiling the request by the lender.

5 Indicates whether or not the guarantor must be informed of any changes in the delinquency status of the loan, even if the delinquency is not reduced below the point at which the guarantor requires preclaims assistance to be canceled.

The new definitions of the headings of the "Preclaims Assistance Time Frames" chart are effective retroactive to the effective date of the Common Manual.

 

SAMPLE   SAMPLE    SAMPLE   SAMPLE   SAMPLE   SAMPLE    SAMPLE    

PRECLAIMS ASSISTANCE TIME FRAMES

Guarantor

Preclaim Request Period1

Preclaim Cancellation Date2

Skip Preclaims Assistance Available3

Deadline for Refiling Rejected Preclaim4

Updated Preclaim Delinquency Date5

Student Loan Guarantor A

80–100

60

80–100

10

None

Student Loan Guarantor B

50–70

30

60

30

Any Change

Student Loan Guarantor C

60-90

60

All

None

None

1 The period of time (expressed in number of days delinquent) established by a guarantor for a lender to request preclaims assistance. If preclaims assistance is not requested during this time period, the loan may be subject to an interest penalty if a claim is later filed and paid.

2 If the delinquency date falls below this number of days delinquent, the lender must notify the guarantor to cancel the request for preclaims assistance

3 The period of time (expressed in number of days delinquent) established by a guarantor in which a lender may request skip tracing from the guarantor. An entry of "All" or "Any" specifies that skip preclaims assistance is available throughout the life of a loan. An entry of "none" specifies that the guarantor does not offer skip preclaims assistance.

4 The deadline (expressed in number of calendar days from the date the lender receives the rejected preclaims assistance) established by a guarantor for the lender to refile the request for preclaims assistance that has been rejected by the guarantor. An entry of "None" specifies that the guarantor has no time constraints for refiling the request by the lender.

5 Indicates whether or not the guarantor must be informed of any changes in the delinquency status of the loan, even if the delinquency is not reduced below the point at which the guarantor requires preclaims assistance to be canceled. An entry of "None" specifies that the guarantor does not require an update on the preclaim delinquency date.

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