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 in 2001. However, these changes are effective before the next update is scheduled to be delivered.

School and Program Eligibility at Additional Locations

The Common Manual has been revised to include Final Rules concerning the addition of school locations. When a school adds a licensed and accredited location that offers at least 50% of an educational program, the school must report to the Department before delivering Title IV funds to eligible students attending the added location. Reporting consists of submitting an electronic application that provides specific information about the added location and other required documentation. Further information on these requirements can be found in 34 CFR 600.20 and in The Federal Student Financial Aid Handbook, Institutional Eligibility and Participation. In addition, after reporting, a school must have approval from the Department before it can deliver Title IV funds to eligible students attending the added location if it meets any of the following criteria:

• The school is provisionally certified.

• The school is on the reimbursement or cash monitoring system of payment.

• The school has acquired the assets of another school that provided educational programs at that location during the preceding year, and the other school participated in Title IV programs during that year.

• The school would be subject to a loss of eligibility due to its cohort default rate if it adds the location.

• The school has been notified by the Department that it must apply for approval of an additional location.

Electronic Notification When Crediting a Student's Account

If a school credits a student's school account with Stafford or PLUS loan proceeds, the school is required to notify the student or parent borrower. This notice may be written or electronically transmitted. Common Manual policy has been revised to state that if the notice is sent electronically, the school must confirmreceipt of the notice by the student, or parent borrower in the case of a PLUS loan, and must maintain documentation of that confirmation. Methods by which a school could confirm receipt include, but are not limited to, electronic confirmations or receipts automatically generated by the school's e-mail system. Previous guidance stated that the school had to require the student, or parent in the case of a PLUS loan, to confirm receipt.

Determination and Certification of Eligibility

The Common Manual has been updated to clarify that to participate in any Title IV program, a school must establish its eligibility under the Higher Education Act of 1965, as amended, in accordance with the procedures specified by the Department.

To establish its eligibility, a school must submit an application to the Department to request a determination that it qualifies as an eligible institution. In addition, the school must include in the application for determination of FFELP eligibility a request for certification to participate in the FFELP.

To be certified for participation, a school must meet the qualifications of an eligible institution (see section 4.1); the school must meet administrative capability and financial responsibility requirements (see sections 4.2 and 4.3); and if the school is participating for the first time in Title IV programs, and it has not requested and been granted a training waiver, designated school administrators defined by the Department must complete Title IV training within 12 months after the school executes the Program Participation Agreement. A school that is currently participating in some Title IV programs is not required to have certification training if it is only requesting approval to participate in additional Title IV programs.

Increase in Level of Program Offering

The Common Manual has been revised to add that a school must apply to the Department to increase the level of program offering (e.g., offering graduate degree programs when it previously offered only baccalaureate degree programs) and obtain approval before delivering Title IV funds to students enrolled in the new programs at the increased level.

Converting an Eligible Location to a Branch Campus

The Common Manual has been revised to add that a school must apply to the Department and wait for approval to convert an eligible location to a branch campus. The school may continue to deliver Title IV funds to students attending that location.

Totally and Permanently Disabled Definition Change

The Common Manual has been revised to incorporate a change to borrower eligibility requirements if the borrower has had a prior loan discharged due to total and permanent disability. As provided by the Final Rules in the November 1, 2000, Federal Register, a borrower who has had a prior loan discharged due to total and permanent disability must meet the following requirements to be eligible to receive a new Stafford or PLUS loan:

• Obtain a physician's statement certifying that the borrower may now engage in "substantial gainful activity."

• Sign a statement acknowledging that any new loan the borrower receives may not be discharged due to the same or any disability existing at the time the new loan is made, unless the disabling condition substantially deteriorates to the extent that the definition of total and permanent disability is met.

• Reaffirm any loan that had been discharged due to total and permanent disability on or after July 1, 2001, but before July 1, 2002, if the borrower receives a new loan within three years of the date the borrower became totally and permanently disabled, as certified by a physician. (A borrower who has had a prior loan discharged due to total and permanent disability before July 1, 2001 is not required to reaffirm the discharged obligation.)

For these purposes, "substantial gainful activity" may be defined as the ability to work and earn money.

PLUS Borrowers with Adverse Credit

The Common Manual has been updated to clarify that in those cases in which a lender approves a PLUS loan for an applicant with an adverse credit history, the lender must retain a record supporting its decision based on extenuating circumstances.

Modifying the Disbursement Schedule

The Common Manual has been updated to clarify that Stafford and PLUS disbursements must be made in accordance with the original disbursement schedule provided by the school or any request made by the school, or guarantor acting on behalf of the school, modifying that schedule.

Notification of Late Disbursements

The Common Manual has been updated to eliminate the requirement that a lender, when knowingly making a late disbursement, must include a notice to the school indicating that the loan proceeds should be delivered as a late disbursement.

Deferment Backdating

The Common Manual has been updated to remove existing 6-month backdating restrictions on all deferments except the initial unemployment deferment that is based on a borrower's self-certification. Most deferments now begin on the date the condition entitling the borrower to the deferment first existed, as determined by the lender. However, an initial unemployment deferment based on a borrower's self-certification may not begin more than 6 months before the date the lender receives a request and documentation required for the deferment. Any extension of an existing unemployment deferment or an unemployment deferment that is based on evidence of the borrower's eligibility for unemployment benefits is not subject to the 6-month backdating restriction. For all deferment types, other than an in-school deferment, elimination of the 6-month backdating restriction is only applicable for deferments granted on or after July 1, 2001, for any period of deferment that includes July 1, 2001 or a later date.

Unemployment Deferment Documentation

The Common Manual is being revised to allow for more flexible documentation requirements for a borrower who wants to continue an unemployment deferment based on the borrower's self-certification of his or her search for employment following the initial period of deferment. A borrower must provide the lender with information showing that the borrower made at least six diligent attempts to secure full-time employment during the prior 6-month period. Revised policy removes the previously required documentation and states that the information may include the employer's name, address, telephone number, electronic addresses, or other information acceptable to the lender showing the borrower made 6 diligent attempts to obtain full-time employment.

Death Claim Documentation

The Common Manual has been revised to limit the acceptable documentation permitted for death claims in accordance with the Final Rules published in Part X of the Federal Register, pages 65676-65695, dated November 1, 2000. Lenders and guarantors may now accept only an original or certified copy of the death certificate as proof of death. In the event of an exceptional circumstance and on a case-by-case basis, the guarantor's CEO may approve a discharge based on other reliable documentation.

Totally and Permanently Disabled Definition Change

The Common Manual has been revised to incorporate the change to the definition of a total and permanent disability for the purpose of obtaining a loan discharge as provided by the Final Rules in the November 1, 2000, Federal Register. The new definition is as follows:

Totally and Permanently Disabled: A total and permanent disability is defined as the condition of an individual who is unable to work and earn money due to an injury or illness that is expected to continue indefinitely or result in death.

Under this new definition, the certifying physician (i.e., a doctor of medicine or osteopathy, legally authorized to practice in a State) does not need to consider the borrower's ability to attend school as a condition of his or her eligibility for discharge. In addition, the physician is no longer required to consider the date the borrower became unable to attend school when providing the begin date of the borrower's total and permanent disability.

Administrative Forbearance Clarified for Total and Permanent Disability

The Common Manual has been revised to clarify that if a lender receives reliable information indicating that a borrower has become totally and permanently disabled, the lender may grant the borrower an administrative forbearance, not to exceed 60 days, until the lender receives certification of the borrower's total and permanent disability. If the lender does not grant the borrower an administrative forbearance, the lender must continue collection activity until it receives certification of the borrower's total and permanent disability, or until it receives a letter from the physician requesting additional time to determine whether the borrower is totally and permanently disabled. The addition of the administrative forbearance language coordinates subsections 8.2.C. and ^CCI 8.2.C. of the manual with the existing administrative forbearance policy in subsection 7.11.B.