April 6, 1999
Volume 99 - Issue 18

As you know, the 1998 Amendments to the Higher Education Act (HEA) were enacted on October 7, 1998.  These amendments include a change in the definition of default. Loans which have a first day of delinquency on or after October 7, 1998 will not default until they become 270 days delinquent. However, this change in the definition of default does not include the corresponding changes to due diligence requirements. In such situations, the Department of Education (ED) has imposed a "good faith effort" standard on all program participants.

Until official guidance is received from ED, it appears that a reasonable interpretation of the change in the date of default would include a corresponding change to the date for sending the Final Demand letter. Therefore, for loans which become delinquent on or after October 7, 1998, it will be acceptable to send a Final Demand letter at 241 days delinquent, as long as additional due diligence activities are added so that no more than a 45-day gap exists between collection activities. This interpretation does not preclude other reasonable interpretations that meet the "good faith effort" standard.

The due diligence requirements which were in effect prior to the enactment of the 1998 HEA amendments will continue to apply to loans which have a first day of delinquency prior to October 7, 1998.

Any questions concerning this UHEAA Bulletin may be directed to the Policy and Training Department at (801) 321-7166.