Common Manual Update

LOUISIANA STUDENT FINANCIAL ASSISTANCE COMMISSION
OFFICE OF STUDENT FINANCIAL ASSISTANCE

LOAN PROGRAM MEMORANDUM

LPM NO.: L2000 - 3 Effective Date: As Indicated
Pub. Date: March 28, 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. However, some changes are effective before the next update is scheduled to be delivered.

Minimum Period of Enrollment

The Common Manual has been updated to address the minimum period of enrollment for which a school may certify a loan for a defaulted borrower who has regained eligibility during the academic year under reinstatement provisions outlined in section 8.9. For schools that measure academic progress in credit hours and use a semester, trimester, or quarter system, the minimum period of enrollment for which the school may certify the loan is the academic year during which the borrower has regained eligibility unless the borrower was not enrolled at least half-time for the full academic year, or is ineligible for the full-year loan for other reasons.

Affected Sections:  5.7.C.
Effective Date:  Loans certified by the school on or after April 16, 1999
Basis §682.603(f)(1)(i) (B)—as updated by corrections and other technical changes in the Federal Register dated April 16, 1999.
Policy Information:  Reference #343
Guarantor Comments: None

Skip Tracing Requirements Expanded

The Common Manual has been revised to incorporate the following expanded skip tracing requirements for lenders:

Affected Sections:  8.1.H., 8.1.I., CCI8.1.H., CCI8.1.I.
Effective Date:  Skip tracing initiated by the lender on or after July 1, 2000.
Basis §682.411(h) & (m)(1)(iii)—as updated by final rules in the Federal Register dated October 29, 1999.
Policy Information:  Reference #382
Guarantor Comments: None

Lender Record Retention Requirements Updated

The list of required records in Common Manual subsection 3.4.A. has been revised. New regulations require a lender to retain documentation of any MPN Confirmation or Notification process or processes. The lender must also retain the following items for each loan (in addition to the items already listed in subsection 3.4.A.):

Note that a true and exact copy is now acceptable in lieu of an original promissory note.

Affected Sections:  3.4.A.
Effective Date:  For loans made under a Master Promissory Note (MPN), these changes are effective upon disbursement. For all other loans, changes apply to the lender’s retention of the application and promissory note on or after July 1, 2000.
Basis §682.414(a)(4)(ii) (A), (B), and (K); §682.414(a)(5)(ii)—as published in the Federal Register dated November 1, 1999.
Policy Information:  Reference #383
Guarantor Comments: None

Lender Record Retention Requirements Modified

The Common Manual has been revised to incorporate new regulatory provisions regarding record retention time frames and acceptable methods of notifying a borrower that a loan has been paid in full by the borrower.

A lender must retain loan records for a period of not less than:

When a loan is paid in full by the borrower, the lender must either return the original promissory note or a true and exact copy of the promissory note to the borrower, or notify the borrower that the loan is paid in full. A copy of the promissory note must be retained for a period of not less than 3 years after the date the loan is paid in full by the borrower, or not less than 5 years after the date the lender is paid in full from any other source. Documentation of any paid-in-full notice sent to the borrower also must be retained for a period of not less than 3 years after the date the loan is paid in full by the borrower. Revised policy deletes the requirement that any paid-in-full notification to the borrower be made by an alternative procedure acceptable under state law.

Affected Sections:  3.4.A., 7.13, 9.5.F.
Effective Date:  Revisions regarding record retention time frames are effective for loan records retained by the lender on or after July 1, 2000. Revisions regarding lender notification that a loan has been paid in full by the borrower are effective for loans paid in full on or after July 1, 2000, unless the lender implements earlier for loans made under an MPN.
Basis §682.414(a)(4)(iii); §682.414(a)(5)(ii)—as updated in the Federal Registers dated October 29, 1999, and November 1, 1999.
Policy Information:  Reference #384
Guarantor Comments: None

Initial Disclosure Requirements Outlined

The Common Manual has been revised to incorporate two new provisions regarding the initial disclosure of information a lender must provide, at no cost, to a borrower.

At or before the first disbursement of a Stafford or PLUS loan, the lender must provide the borrower, in a written or electronic format, the following information (in addition to that already required):

           The lender meets the preceding disclosure requirement by providing the borrower with the promissory note and associated materials
           approved by the Department.

In addition, lenders are still required to provide a separate statement, written in plain English, that summarizes the borrower’s rights and responsibilities with respect to the loan and the consequences of defaulting on the loan. The manual has been revised to clarify that this disclosure requirement is met if the lender provides the borrower with either the Borrower’s Rights and Responsibilities statement or, in the case of a subsequent loan made using the multi-year feature of the Master Promissory Note (MPN), the plain language disclosure.

Affected Sections:  6.1.I.
Effective Date:  Initial disclosure notifications issued by the lender to the borrower on or after July 1, 2000.
Basis  §682.205(a), (b), and (f) through (h)—as updated in the Federal Register dated October 29, 1999.
Policy Information:  Reference #385
Guarantor Comments: None

Repayment Options Available to All Borrowers

The Common Manual has been revised to incorporate the requirement that the lender offer all borrowers the choice of a standard, income-sensitive, graduated, or, if applicable, an extended repayment schedule. Previous guidance required that the lender offer a choice of standard, graduated, or income-sensitive repayment to only new borrowers who receive a first disbursement of a Stafford or SLS loan on or after July 1, 1993, and to borrowers whose Consolidation loan is made from an application and promissory note received on or after January 1, 1993.

In addition, the lender must inform the borrower through repayment notification that he or she is eligible for income-sensitive repayment, including through loan consolidation, the procedures by which the borrower can choose income-sensitive repayment, and where and how more information on income-sensitive repayment may be obtained.

Affected Sections:  7.5, 7.6.C., 9.5
Effective Date:  Repayment disclosures issued by the lender on or after July 1, 2000.
Basis §682.205(h)(1)—as updated in the Federal Register dated October 29, 1999.
§682.209(a)(7)(iii)—as updated in the Federal Register dated November 1, 1999.
Policy Information:  Reference #386
Guarantor Comments: None

Default Aversion Assistance

Revised Common Manual policy eliminates the guarantor established Preclaim request period and replaces it with the requirement that the lender must request default aversion assistance from the guarantor no earlier than the 60th day and no later than the 120th day of the borrower’s delinquency. In addition, revised policy details the following consequences of a late request for default aversion assistance. If a lender fails to request default aversion assistance between the 60th and 120th day of delinquency, inclusive, and the lender later submits a claim on that loan, the lender would be subject to an interest penalty. If the lender fails to file a request by the 330th day, it will not be entitled to receive interest, interest benefits, and special allowance for the 270 days immediately preceding the date on which the loan defaulted.

Affected Sections:  8.1.D., CCI 8.1.D., 8.1.H,CCI 8.1.H., 8.1.J., CCI8.1.J.
Effective Date:  Loans for which the first day of delinquency on the oldest outstanding due date is on or after July 1, 2000.
Basis §682.404(a)(2) and (k) and §682.411(i)—as updated in the Federal Register dated October 29, 1999. Preamble discussion under §682.411—as published in the Federal Register dated August 3, 1999.
Policy Information:  Reference #387
Guarantor Comments: None

Closed School Loan Discharge Forms

Revised Common Manual policy includes the new requirement that, in most cases, to obtain a closed school discharge, a borrower must complete, certify and submit the closed school loan discharge request form approved by the Department. A copy of this form is included in appendix F of the Common Manual. In some cases, a borrower may qualify for a closed school loan discharge without submitting a request if the borrower received a closed school discharge on a loan under the Federal Perkins Loan program or the Federal Direct Loan Program for the same program of study at the same school; or the Department or the guarantor, with the Department’s permission, determines that the borrower qualifies for a discharge based on information in the Department or guarantor’s possession.

Also added to the manual is the requirement that the borrower certify under penalty of perjury that all of the information provided by the borrower in the request and in any accompanying documents is true and accurate.

Affected Sections:  8.2.G., CCI 8.2.G.
Effective Date:  For closed school discharges based on submission of the request form, effective for all new loan discharge forms sent to borrowers on or after August 1, 1999. Other loan discharge applications sent to borrowers prior to that date may still be processed after that date. For closed school discharges not based on submission of the request form, effective for loan discharge determinations made on or after July 1, 2000.
Basis Dear Guaranty Agency Director letter dated April 1999. §682.402(d)(8)—as updated in the Federal Register dated October 29,1999.
Policy Information:  Reference #388
Guarantor Comments: None

Rejected or Incomplete Default Aversion Assistance Requests

Revised policy states that after initially submitting a default aversion assistance request, a lender must provide any additional information requested by the guarantor or resubmit any rejected default aversion assistance request.

Affected Sections:  8.11, CCI 8.11
Effective Date:  Loans for which the first day of delinquency on the oldest outstanding due date is on or after July 1, 2000.
Basis §682.404(a)(2) and (k) and §682.411(i)—as updated in the Federal Register dated October 29, 1999.
Policy Information:  Reference #389
Guarantor Comments: None

Prohibited Lender Activities

The Common Manual has been revised to reflect that lenders are authorized to provide assistance to schools comparable to the kinds of assistance provided by the Department to schools under, or in furtherance of, the FDLP.

Affected Sections:  3.4.C.
Effective Date:  Assistance provided by lenders to schools on or after July 1, 2000, unless implemented earlier by the lender.
Basis § 682.200(b)—as updated in the Federal Register dated November 1, 1999.
Policy Information:  Reference #390
Guarantor Comments: None

Lender Compliance Audit Requirements Updated

Revised Common Manual policy requires any lender that made or held more than $5 million in FFELP loans during the fiscal year being audited to submit the compliance audit report to the Department no later than 6 months after the close of the audit period—regardless of whether the report identifies findings of noncompliance. This provisions was introduced in recent Final Rules. Under the previous federal requirement reflected in the manual, lenders that made or held more than $5 million but less than $10 million in FFELP loans during the fiscal year being audited were required to submit an audit report only if the report identified findings of noncompliance.

Note: At the time of publication, the Department had neither updated the December 1996 Audit Guide for lenders and servicers, nor provided further information regarding lender audit submission requirements in any other known source. Clarification from any future Departmental guidance will be incorporated into the Common Manual as it becomes available.

Affected Sections:  3.8.A.
Effective Date:  October 1, 1998. The enforcement of this change is determined by the Department.
Basis HEA 428(b)(1)(U)((iii)(I); §682.305(c)(1)—as updated in the Federal Register dated October 29, 1999.
Policy Information:  Reference #391
Guarantor Comments: None

Methods for Conducting Entrance Counseling

Current Common Manual policy has been revised to reflect the latest methods by which schools may conduct entrance counseling. Schools are now authorized to use interactive electronic means as a method to conduct entrance counseling. Specific references to touch-tone and computer-assisted technology as acceptable methods have been removed. Note that regulations specify that the electronic means schools use must be interactive, which at a minimum, requires schools to take reasonable steps to ensure that each borrower receives the counseling materials and participates in and completes the counseling. A change was also made to incorporate the requirement that schools include an explanation of the use of the MPN.

Affected Sections:  4.9.B.
Effective Date:  Entrance counseling conducted by the school on or after July 1, 2000, unless implemented earlier by the school.
Basis §682.604(f)—as updated in the Federal Register dated November 1, 1999.
Policy Information:  Reference #392
Guarantor Comments: None

School Record keeping Requirements

The Common Manual subsection addressing record keeping requirements for schools, has been revised to incorporate new regulations as follows:

Affected Sections:  4.10
Effective Date:  Loan application/certification related records maintained for loans certified on or after July 1, 2000, unless implemented earlier by the school as a result of initiating the MPN process.
Basis § 682.610(b)—as updated in the Federal Register dated November 1, 1999.
Policy Information:  Reference #393
Guarantor Comments: None

Estimated Financial Assistance Definition Amended

The Common Manual has been updated to reflect recent changes regarding determination of a student’s estimated financial assistance (EFA). The EFA must now include national service education awards or postservice benefits, except when determining eligibility for a subsidized Stafford loan. In addition, veterans’ educational benefits paid under Title 38, Chapter 30 (Montgomery GI Bill–Active Duty) must be excluded from a student’s EFA when determining eligibility for a subsidized Stafford loan.

The definition of Estimated Financial Assistance in appendix G of the Common Manual has been revised to reflect these changes.

Affected Sections:  5.7.G., Appendix G
Effective Date:  Stafford loans certified by the school on or after October 1, 1998.
Basis §673.5(c)and 682.200; HEA 482(c)(2)(A)—as updated in the Federal Registers dated October 28, 1999 and November 1, 1999.
Policy Information:  Reference #394
Guarantor Comments: None

Lender Repayment Disclosure Requirements Modified

The Common Manual has been revised to incorporate the new requirement that the lender provide to borrowers, at the time repayment options are offered, a telephone number accessible at no cost to the borrower from within the U.S. from which the borrower can obtain additional loan information. A lender may disclose its own toll-free number or an alternative number (for example, a lender may offer a toll number at which the borrower can call collect; or with the permission of the guarantor, arrange to provide the guarantor’s toll-free number).

In addition, the Common Manual has been revised to reflect that the lender may rely on the PLUS promissory note and associated materials approved by the Department to satisfy the requirement to provide the borrower with sample projections of monthly repayment amounts assuming different levels of borrowing and interest accruals.

Affected Sections:  7.5.D.
Effective Date:  Repayment disclosures issued by the lender on or after July 1, 2000.
Basis §682.205(c)(2)(i) and (d)—as updated in the Federal Register dated October 29, 1999.
Policy Information:  Reference #395
Guarantor Comments: None

Extended Repayment Criteria Added

The Common Manual has been revised to incorporate extended repayment provisions. Extended repayment is available to a new borrower on or after October 7, 1998, who has more than $30,000 in principal and interest outstanding on FFELP loans. An extended repayment schedule may provide for standard or graduated installments over a period not to exceed 25 years, an exception to the 10-year repayment period maximum. Another exception for the extended repayment schedule is that the $600 minimum annual payment requirement does not apply.

A definition of extended repayment schedule has been added to the glossary and a coordinating change has been made to the definition of graduated repayment schedule.

Affected Sections:  7.6.B., 7.6.C., 7.6.D., Appendix G
Effective Date:  New borrowers on or after October 7, 1998
Basis §682.200(b) and §682.209(a)(7)(ix) and (c)—as updated in the Federal Register dated November 1, 1999.
Policy Information:  Reference #396
Guarantor Comments: None

 

 

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