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. 

Pro Rata Refunds Clock Hour Programs Corrected

In order to determine whether a student is subject to the pro rata refund prescribed in federal regulations, the school is currently required to first determine whether the student attended the school for the first time and completed 60% or less of the enrollment period for which the student was charged before withdrawing. For a student enrolled in a clock-hour program, the school divides the number of clock hours that the student actually completed at the point of withdrawal by the number of clock hours in the program for which the student was charged.

This Common Manual policy will be corrected to clarify that excused absences may be added to the number of clock hours the student actually completed at the point of withdrawal. A school may only include excused absences in the number of clock hours completed if both of the following conditions exist:

• Under the school’s written policy the absences do not have to be made up to complete the program.
• The school documents that the hours actually were scheduled and missed prior to the student’s withdrawal.

In addition to the required conditions noted above, the number of excused absences included as hours completed during the enrollment period for which the student was charged must be limited to the least of the following:

• The number of clock hours permitted under the excused absence policy of the school’s nationally recognized accrediting agency.
• The number of clock hours permitted under the excused absence policy of the state agency that licenses or authorizes the school to operate in the state.
• 10% of the number of clock hours in the period of enrollment for which the student was charged.

This change is effective for students eligible for pro rata refunds on or after July 1, 1997. Subsection 4.7.B. of the Common Manual will be revised to reflect this change.

Determination of Stafford Aggregate Loan Limit Revised

The Common Manual policy for determining a Stafford borrower’s aggregate loan amount has been revised. Based on information received from the Department of Education, the revised policy clarifies that a Stafford aggregate loan limit does not include the amount of capitalized interest or any collection costs that may have been added to the balance of any of the borrower’s prior loans. When determining the borrower’s Stafford loan eligibility, the financial aid administrator may assume that all outstanding principal balances include only the balance of original principal. However, the school must secure and retain documentation of the capitalized amount included in any reported loan balances if the school’s certification of a new loan would otherwise cause the borrower to exceed his or her aggregate limit.

 This change is effective for loan applications certified by the school on or after January 1, 1998. Earlier implementation by the school is acceptable. Subsections 5.7.H. and appendix G of the Common Manual will be revised to reflect this change.

Telephone and Address Skip Tracing Requirements for Endorsers Corrected

The Common Manual policy on telephone skip tracing requirements for an endorser will be corrected to require that if a lender determines that it does not know the current telephone number for a delinquent endorser, the lender must diligently attempt to locate the endorser through the use of normal commercial skip tracing techniques. This effort must include an inquiry to directory assistance or a comparable service. If the lender determines that the endorser’s telephone number is incorrect after it sends the final demand letter, skip tracing activities are not required.

In addition, the Common Manual policy on endorser address skip tracing requirements will be corrected to require the lender to attempt to locate a delinquent endorser through the use of normal commercial skip tracing techniques. This effort must include an inquiry to directory assistance or a comparable service. If the lender determines that the endorser’s address is incorrect after it sends the final demand letter, skip tracing activities are not required.

Subsections 8.1.H, 8.1.I., and appendix G of the Common Manual will be revised to reflect this change. This change will be enforced for loans on which the first day of delinquency on the oldest outstanding due date was after July 1, 1996. Earlier implementation by the lender is acceptable if the guarantor is notified.

Effect of Telephone Numbers on Due Diligence Gaps Corrected

The Common Manual will be revised to clarify that a due diligence gap may occur beginning the day after the date the lender receives a new correct telephone number for a delinquent borrower. In addition, the due diligence gap ends on the day on which the lender begins the first subsequent collection activity, including skip tracing activities to obtain a correct address or telephone number for the borrower.

This correction will be enforced for loans on which the first day of delinquency on the oldest outstanding due date is after July 1, 1996. Earlier implementation by the lender is acceptable if the guarantor is notified. Subsection 8.8.B. of the Common Manual will be revised to reflect this change.