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.

Current Common Manual policy does not address the eligibility of certain health profession students for increased annual and aggregate unsubsidized Stafford loan limits that exceed the current maximums.

Subsection 5.7.H. of the manual has been updated to reflect that increased unsubsidized loan limits are available to certain health profession students who are unable to borrow under the Health Education Assistance Loan (HEAL) program due to budgetary constraints on the program and its gradual phase out.

A new subsection 5.7.I. has been added to provide guidance on increased annual and aggregate unsubsidized loan limits for eligible health profession students. The previous subsection 5.7.I., Interest Subsidy on Stafford Loans, has been redesignated subsection 5.7.J.

For loan periods beginning on or after May 1, 1999, all institutions offering eligible health profession programs are eligible to award the increased unsubsidized loan amounts regardless of past participation in the HEAL program. Eligible health profession programs include:

• Allopathic medicine programs accredited by the Liaison Committee on Medical Education.
• Osteopathic medicine programs accredited by the American Osteopathic Association, Bureau of Professional Education.
• Dentistry programs accredited by the American Dental Association, Commission on Dental Accreditation.
• Veterinary medicine programs accredited by the American Veterinary Medical Association, Council on Education.
• Optometry programs accredited by the American Optometric Association, Council on Optometric Education.
• Podiatric medicine programs accredited by the American Podiatric Medical Association, Council on Podiatric Medical Education.
• Pharmacy programs accredited by the American Council of Pharmaceutical Education.
• Public health programs accredited by the Council on Education for Public Health.
• Chiropractic medicine programs accredited by the Council on Chiropractic Education, Commission on Accreditation.
• Health administration graduate programs accredited by the Accrediting Commission on Education for Health Services Administration.
• Clinical psychology programs accredited by the American Psychological Association, Committee on Accreditation.

To be eligible for unsubsidized Stafford loans exceeding standard annual loan limits, a health profession student must meet the following criteria:

• The student must be eligible for an unsubsidized Stafford loan.
• The student must be enrolled full time.
• The student must not receive a HEAL program loan for any portion of the same loan period as the increased unsubsidized Stafford loan amount.
• The student must be enrolled in an eligible program at an eligible school, as defined above.

The 5-year Bachelor of Pharmacology Program is the only undergraduate program eligible for additional unsubsidized funding under these provisions. In addition to meeting all other eligibility requirements set forth in subsection 5.7.I., a health profession student enrolled in this program must be in the fourth or fifth year of the program; and must be independent, or be a dependent student whose parent is unable to borrow a PLUS loan.

The annual unsubsidized Stafford loan limits for eligible health profession students are in addition to the regular Stafford loan limit the student would be eligible to receive in the same loan period, and cannot exceed the lesser of the student’s cost of attendance less other financial aid; or the student’s regular unsubsidized Stafford loan maximum plus the student’s applicable HEAL loan maximum.

Schools must follow HEAL proration requirements and other HEAL program restrictions when awarding students increased unsubsidized Stafford loans, except that the HEAL program needs test is not required for the student to receive the increased unsubsidized Stafford loan amount.

Health profession students who are eligible for increased unsubsidized Stafford loans may receive an aggregate amount of $189,125. Subsidized Stafford loans may comprise no more than $65,500 of this amount. Undergraduate 5-year pharmacy students may receive an aggregate amount of $70,625. Subsidized Stafford loans may comprise no more than $23,000 of this amount.

Affected Section:             5.7.H., 5.7.I., and 5.7.J.
Effective Date:                Loan periods beginning on or after May 15, 1998
Policy Information:          Reference #331
Guarantor Comments:    None

Definition of Parent

A legal guardian is no longer considered a parent for purposes of taking out a PLUS loan. Federal publications and forms for the 1999-2000 award year, including the Free Application for Federal Student Aid, exclude legal guardians from the definition of parent for student financial aid purposes. As a result, the Common Manual has been updated to remove the legal guardian definition and the reference to legal guardians in the definition of a parent.

Affected Sections:            2.1.B., 5.4, and Appendix G
Effective Date:                 Loans certified by the school for periods of enrollment beginning on or after July 1, 1999
Policy Information:           Reference #340
Guarantor Comments:     None

Unauthorized Signing of Loan Documents by a School

The Common Manual has been revised, for purposes of clarification, to include a new heading of "Discharge Approvals" and to relocate the current bulleted list of actions guarantors and lenders must take upon a determination that a loan is dischargeable due to the school’s endorsement of a borrower’s loan check without the borrower’s authorization. Guarantors and lenders must also take these actions upon a determination that a loan is dischargeable due to a school signing the EFT or master check authorization without the borrower’s permission. The revisions include an additional bulleted list of actions to be taken upon a determination that the loan is dischargeable due to the school signing an application or promissory note without the borrower’s authorization, or the school improperly determining the student’s ability to benefit from the school’s training.

The revised policy clarifies that a guarantor will not pay a lender claim based solely on a determination that a school endorsed the borrower’s name on a loan check without the borrower’s permission. The revised policy also clarifies that a guarantor will pay, within 30 days of approving the borrower’s discharge, a lender claim based on either of the following guarantor determinations (not merely on borrower assertions):

That the school (not any other person, but specifically the school) signed the borrower’s name on the promissory note or the authorization for electronic funds transfer (EFT) or master check without the borrower’s permission.

• That the school failed to properly determine the student’s ability to benefit from the school’s training.
• The revisions do not alter current policies regarding the criteria for determining eligibility for discharge of a loan based on false certification.

Affected Sections:             8.2.H. and CCI 8.2.H.
Effective Date:                  Retroactive to the implementation of the Common Manual
Policy Information:            Reference #351
Guarantor Comments:      None

Regulatory Technical Corrections

The Common Manual has been revised to incorporate the provisions of the regulatory Technical Corrections published in the Federal Register on April 16, 1999. The following updates reflect modifications needed to reflect these regulatory changes.

Each student borrower seeking a Stafford loan, each parent borrower seeking a PLUS loan, and each student for whom a PLUS loan is being obtained must not have property subject to a judgment lien for a debt owed to the United States.

Affected Sections:             5.2.A.
Effective date:                   Provisions regarding PLUS borrowers are effective for loans certified by the school on or after April 16,
                                            1999. Provisions regarding students are effective for loans certified by the school on or after July 1, 1996
Policy Information:            Reference #341
Guarantor Comments:       None

Co payable Checks

Current Common Manual policy states that a guarantor or a lender may require an individual check to be made co payable to the student and the school. Also, current policy does not address Federal PLUS loan disbursements for a student who attends a foreign school. Revised Common Manual policy states that a Federal PLUS loan disbursed by an individual check must be made co payable to the parent borrower and the school. The lender must send individual checks for Stafford and PLUS loan borrowers directly to the school (except in the case of a student enrolled at an eligible foreign school). Revised policy also deletes the reference that a lender or guarantor may require individual checks to be made co payable. A school, lender, or guarantor may choose to require this.

A Federal PLUS loan for a student enrolled in an eligible foreign school must be disbursed by an individual check that is made co payable to the parent borrower and the school. The check must be sent directly to either the parent borrower or the school.

Affected Sections:             6.2.C. and 6.2.E.
Effective Date:                  Loan proceeds disbursed by individual checks on or after April 16, 1999
Policy Information:            Reference #344
Guarantor Comments:      None

Schools are no longer subject to the 30-day time restriction regarding when they must obtain EFT or master check authorizations on forms other than the common application and promissory note. Regulations no longer require that schools obtain such authorizations 30 days prior to the first day of classes for the period of enrollment for which the loan is intended.

For Stafford loans made using a Master Promissory Note (MPN), the school is not required to obtain separate borrower authorization to permit the transfer of loan proceeds received by EFT or master check to the student's account. For Stafford and PLUS loans made using a common application and promissory note, the school continues to be required to obtain written authorization from the borrower to permit the release of loan proceeds received by EFT or master check from the school's account. The authorization may be obtained on the common application and promissory note or a separate form, and it must be obtained at or before the release of the loan's first disbursement.

Affected Sections:             6.3.C.
Effective Date:                  EFT or master check disbursements delivered by the school on or after April 16, 1999
Policy Information:            Reference #345
Guarantor Comments:      None

A school may hold a borrower's Stafford or PLUS loan proceeds as a fiduciary for the benefit of not only the student but also the guarantor and the Department, if those proceeds represent a credit balance that would otherwise have been paid directly to the student or parent borrower. This revision does not apply to schools that are prohibited by the Department, under reimbursement payment method provisions, from holding credit balances.

Affected Sections:             6.3.F.
Effective Date:                  Credit balances held by a school on or after April 16, 1999
Policy Information:            Reference #346
Guarantor Comments:      None

A borrower’s defaulted loan is not eligible for a deferment that begins after the date of default, unless the borrower makes payment arrangements acceptable to the lender that resolve the default prior to the payment of a default claim by the guarantor. Prior guidance was borrower-specific with respect to deferment of a defaulted loan prior to claim payment.

Affected Sections:             7.9.E.
Effective Date:                  Deferment requests of defaulted loans granted by the lender on or after April 16, 1999
Policy Information:            Reference #348
Guarantor Comments:      None

For borrowers who are jointly liable for repayment of a PLUS loan or Consolidation loan, a lender may grant forbearance on repayment of the loan only if the ability of each individual to make scheduled payments has been impaired based on the same or differing conditions.

Affected Sections:              7.11
Effective Date:                   Forbearance granted by the lender on or after April 16, 1999
Policy Information:             Reference #349
Guarantor Comments:       None

Lenders may grant forbearance to a borrower or endorser to permit the resumption of payments following the date of default only if the forbearance is granted prior to the lender’s receipt of the claim payment.

Affected Sections:              7.11.E.
Effective Date:                   Forbearance granted by the lender on or after April 16, 1999
Policy Information:             Reference #350
Guarantor Comments:        None