As you are aware, the Common Manual Governing Board periodically approves modifications to the Common Manual.  Recently, several policies were approved to modify the Common Manual. These changes will be incorporated into the Common Manual when the next annual update is published.

Attached are interim updates to the Common Manual which address additional Common Manual policy revisions approved on March 18, 1999 and April 15, 1999. Pay particular attention to the effective dates for these interim policy updates.

Any questions related to the attached Common Manual interim policy updates should be directed to the Policy and Training Department at (801) 321-7166.

Attachment

Chapter 3 - Lender Participation

3.8.A. ANNUAL COMPLIANCE AUDITS

Lender Audit Exemptions Clarified
The Higher Education Amendments of 1998 make permanent the exemption from the annual audit requirement for any lender fiscal year in which the lender holds or originates $5 million or less in FFELP loans. However, an exception to this statutory change applies to an eligible lender that is a wholly owned subsidiary of a tax-exempt nonprofit foundation [as described in §501(c)(3) of the Internal Revenue Code of 1986, and exempt from taxation under §501(1) of the Code), makes FFELP loans only to undergraduate students who are age 22 or younger, and has a portfolio that is $5 million dollars or less. Such lenders must submit the results of an audit annually.

These changes are being made to subsection 3.8.A. of the Common Manual and are effective retroactive to the implementation date of the Common Manual for a lender who made or held $5 million or less in FFELP loans.  For a lender that is a bank as defined in section 3(a)(1) of the Federal Deposit Insurance Act, a wholly owned subsidiary of a tax- exempt nonprofit foundation, makes loans only to undergraduate students who are age 22 or younger, and has a portfolio of such loans that is $5 million or less, the effective date is applicable to a lender audit completed for any fiscal year ending on or after October 1, 1998.

ANNUAL COMPLIANCE AUDITS

Plan for Doing Business
For changes to Subsection 3.8.A., please see Section 3.8.C.

3.8.B. AUDITS FOR LENDERS THAT DO NOT MAKE OR PURCHASE LOANS WITH TAX-EXEMPT OBLIGATIONS

Plan for Doing Business
For changes to Subsection 3.8.B., please see Section 3.8.C.

3.8.C. AUDITS FOR AUTHORITIES THAT MAKE OR PURCHASE LOANS WITH PROCEEDS OF TAX-EXEMPT OBLIGATIONS

Plan for Doing Business
Current Common Manual policy requires lending and purchasing programs of a governmental entity or nonprofit organization that makes or purchases FFELP loans with tax-exempt obligations to be audited for compliance with its Plan for Doing Business.

The Higher Education Amendments of 1998, eliminated the requirement for a Plan for Doing Business and the associated audits.  The audit requirements of the Plan for Doing Business have been removed from subsection 3.8.C. of the Common Manual. In addition, subsections 3.8.A.,  3.8.B., and 3.8.C. have been merged into subsection 3.8.A. to eliminate any misconception that three separate audits are required.

This change is effective retroactively to the date a lender's Plan for Doing Business was approved by the Secretary or Governor. In addition, lenders may not pursue any action against the Secretary for any amounts paid or offset by the Secretary based on a final settlement agreement that was entered into prior to July 1, 1998 and that resolves any audit or program review violations that were identified based on provisions in effect at the time of the audit.

Chapter 5 - Borrower Eligibility and Loan Certification

5.2.A. BORROWER AND STUDENT ELIGIBILITY REQUIREMENTS

Borrower and Student Eligibility Requirements Revised
The Higher Education Amendments of 1998 changed some borrower and student eligibility requirements:

A  student must certify, as part of the Free Application for Federal Student Aid (FAFSA), a statement of educational purpose.  Prior to the 1998 Reauthorization of the Higher Education Act, students were allowed to file the statement of educational purpose with either the lender or school.  A PLUS loan borrower must continue to certify a statement of educational purpose by signing and submitting the application and promissory note to the lender or school.

A student who has completed a secondary education in a home school setting that is treated as a home or private school under applicable state law is considered to have completed high school for purposes of Title IV eligibility.  Prior to the 1998 Reauthorization of the Higher Education Act, Title IV eligibility was not extended to home schooled students unless the students met other related requirements such as having a high school diploma or its equivalent, or passing an ability to benefit test (ATB).

A student enrolled in coursework, offered in part or totally through telecommunications by a school, will be considered to be enrolled in correspondence courses unless all of the following criteria are met:

The school offers less than 50% of all courses by telecommunications or correspondence, and the student's coursework is part of a 1-year or longer program leading to a recognized certificate or part of a recognized associate, baccalaureate, or graduate degree program.

The school offers recognized associate, baccalaureate, or graduate degrees for 50% or more of its programs

The school is not an institution or school described in section 521(4)(C) of the Carl D. Perkins Vocational and Applied Technology Education Act.

Prior to the 1998 Reauthorization of the Higher Education Act, neither the certificate study program of one year or longer nor the school's percentage of degree programs was considered in determining a student's FFELP eligibility.

Each eligible borrower and student must be a U.S. citizen or national, U.S. permanent resident, or eligible noncitizen.  The Higher Education Amendments of 1998 requires the Department to verify a student's social security number or alien registration number provided on the FAFSA with the relevant agencies.

Citizens of any one of the Freely Associated States (i.e., The Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau) are not eligible for FFELP funds at any participating school, but may be eligible for other types of Title IV aid.

Subsections 5.2.A., 5.2.B., 5.2.C., 5.2.D., 5.2.I., and 5.2.J. of the Common Manual have been revised to reflect these changes. These changes are effective for loan applications certified by the school on or after October 1, 1998.

5.2.B. STUDENT ELIGIBILITY REQUIREMENTS

Borrower and Student Eligibility Requirements Revised
For changes to Subsection 5.2.B., please see Section 5.2.A.

5.2.C. DETERMINING CITIZENSHIP OR ELIGIBLE NONCITIZEN STATUS

Borrower and Student Eligibility Requirements Revised
For changes to Subsection 5.2.C., please see Section 5.2.A.

5.2.D. PRIOR OVERPAYMENT, DEFAULT, DISHARGE, OR WRITE-OFF

Borrower and Student Eligibility Requirements Revised
For changes to Subsection 5.2.D., please see Section 5.2.A.

5.2.I. USE OF TELECOMMUNICATIONS AND CORRESPONDENCE IN PROGRAMS OF STUDY

Borrower and Student Eligibility Requirements Revised
For changes to Subsection 5.2.I., please see Section 5.2.A.

5.2.J. STUDY AT PARTICIPATING FOREIGN SCHOOLS

Borrower and Student Eligibility Requirements Revised
For changes to Subsection 5.2.J., please see Section 5.2.A.

5.7.H. STAFFORD LOAN ANNUAL AND AGGREGATE LOAN LIMITS

Proration Requirements Modified
Provisions of the Higher Education Amendments of 1998 remove the specific prorated Stafford loan limits applicable to any first and second year undergraduate student whose program, or remainder of the program, is less than one academic year.

To incorporate the statutory changes, the base Stafford loan limits (subsidized and unsubsidized) for first and second year undergraduate students whose program, or remainder of the student's program, is less than one academic year have been removed from subsection 5.7.H. The Common Manual has been revised to specify that the loan amounts for these students are now determined by using the ratio of the student's program or remainder of the student's program (as measured in credit or clock hours) to a full academic year and multiplying that ratio by the applicable annual loan limit for a full academic year.

The "Stafford Annual Loan Limits" table in subsection 5.7.H. has been revised to reflect this change, which is effective for loan applications certified by the school on or after October 1, 1998.

5.8.D. DETERMINING THE DISBURSEMENT SCHEDULE

Multiple Disbursement Exemptions
Federal statute and regulations have imposed multiple disbursement requirements on schools and lenders for a number of years. Reauthorization provisions from October 1998 create two new exemptions from these requirements for schools with exceptionally low cohort default rates:

A school with a cohort default rate of less than 10% for each of the 3 most recent fiscal years for which information is available may schedule loans to be disbursed in single installments, if the loan is for a period of enrollment that is not more than a single semester, trimester, quarter, or for a school without standard terms, not more than 4 months.

A loan made to a student enrolled in a study-abroad program may be made in a single disbursement if the eligible school at which the student will receive course credit for the study-abroad program has a cohort default rate of less than 5%.

These exceptions are applicable during the period beginning on or after October 1, 1998 and ending prior to September 30, 2002. Common Manual subsections 5.8.D., 6.2.A., and 6.2.B. have been revised to reflect the exemptions.

DETERMINING THE DISBURSEMENT SCHEDULE

Delayed Delivery Exemptions
Under the 1998 Reauthorization, schools with cohort default rates of less than 10% for each of the 3 most recent fiscal years for which data is available are now exempt from delayed delivery provisions. The provisions, which remain in effect for all other schools, require that a school delay the delivery of loan funds to first-year undergraduates who have not borrowed Stafford or SLS loans until the 31st day of the student's first payment period.

This change is effective during the period beginning on or after October 1, 1998 and ending prior to September 30, 2002. Revisions have been made to subsections 5.8.D., 6.2.A., 6.3.E., 6.3.I., A.1.B., and Appendix G of the Common Manual.

Chapter 6 - Guarantee, Disbursement, and Delivery

6.1.I. INITIAL DISCLOSURE TO THE BORROWER

Lender's Initial and Repayment Disclosure Requirements Modified
Subsections 6.1.I. and 7.5.D. of the Common Manual have been revised to incorporate provisions of the Higher Education Amendments of 1998 that affect the lender's initial and repayment disclosures.

Revised policy in subsections 6.1.I. and 7.5.D. permits the lender to provide the borrower with required initial and repayment disclosures in either a written or electronic format. In addition to the data elements currently listed in subsections 6.1.I. and 7.5.D., initial and repayment disclosure information must now include the lender's telephone number and, at the lender's option, an electronic address from which the borrower can obtain additional loan information.

Revisions to Common Manual subsections 6.1.I. and 7.5.D. are effective for initial and repayment disclosures issued by the lender on or after October 1, 1998.

6.2.A. EARLIEST DATE A LOAN MAY DISBURSED

Multiple Disbursement Exemptions
For changes to Subsection 6.2.A., please see Section 5.8.D.

EARLIEST DATE A LOAN MAY DISBURSED

Delayed Delivery Exemptions
For changes to Subsection 6.2.A., please see Section 5.8.D.

6.2.B. MULTIPLE DISBURSEMENT REQUIREMENTS FOR STAFFORD AND PLUS LOANS

Multiple Disbursement Exemptions
For changes to Subsection 6.2.B., please see Section 5.8.D.

6.3.E. DELIVERY OF PROCEEDS

Delayed Delivery Exemptions
For changes to Subsection 6.3.E., please see Section 5.8.D.

6.3.I. SCHOOL DISBURSEMENT AND DELIVERY REQUIREMENTS

Delayed Delivery Exemptions
For changes to Subsection 6.3.I., please see Section 5.8.D.

6.6. GUARANTEE AND FEDERAL ORIGINATION FEES

Lenders May Pay Origination Fees on All Stafford Loans
Until the 1998 Reauthorization, lenders were required by statute to charge federal origination fees to unsubsidized Stafford loan borrowers. Although the lender continues to owe the origination fees on all Stafford loans, and will continue to remit those fees via the quarterly ED Form 799, lenders now are permitted to pay origination fees on both subsidized and unsubsidized Stafford loans on the borrower's behalf.

This change is effective for unsubsidized Stafford loans first disbursed by the lender on or after October 1, 1998. Section 6.6 and subsections 6.6.E. and A.3.C. of the Common Manual have been updated accordingly.

6.6.E. DEDUCTING THE FEDERAL ORIGINATION FEE

Lenders May Pay Origination Fees on All Stafford Loans
For changes to Subsection 6.6.E., please see Section 6.6

Chapter 7 - Loan Servicing

7.2. GRACE PERIOD

Military Extension of the Grace Period
For changes to Subsection 7.2., please see Section 7.10.G.

7.5.D. DISCLOSURE OF REPAYMENT TERMS

Lender's Initial and Repayment Disclosure Requirements Modified
For changes to Subsection 7.5.D., please see Section 6.1.I.

7.6.C. REPAYMENT OPTIONS

Extended Repayment Schedule Terms
The 1998 Reauthorization requires lenders to offer an extended repayment schedule of up to 25 years to new borrowers with loans first disbursed on or after October 7, 1998, who accumulate outstanding FFELP loans totaling more than $30,000. This extended schedule must comply with the statutory minimum annual payment amount of $600.

In addition, all FFELP borrowers regardless of the date on which their first funds were disbursed or their outstanding indebtedness--are permitted to change their selection of repayment schedule annually. Statute requires lenders to comply with an eligible borrower's request at least once every 12 months.

Subsections 7.6.C., 7.6.D., and 7.6.E. of the Common Manual have been revised to reflect these changes.  The provision permitting a borrower to revise his or her repayment schedule at least once every 12 months is effective for borrower requests received by the lender on or after October 1, 1998. The addition of the new extended repayment schedule is effective for new borrowers with loans first disbursed on or after October 7, 1998.

7.6.D. STANDARD, GRADUATED, AND INCOME-SENSITIVE REPAYMENT

Extended Repayment Schedule Terms
For changes to Subsection 7.6.D., please see Section 7.6.C.

7.6.E. ADJUSTING THE BORROWER'S REPAYMENT TERMS

Extended Repayment Schedule Terms
For changes to Subsection 7.6.E., please see Section 7.6.C.

7.10. DEFERMENT TYPES

In-School Deferment Eligibility Criteria Modified
For changes to Subsection 7.10., please see Section 7.10.A.

7.10.A. IN-SCHOOL OR STUDENT DEFERMENT

In-School Deferment Eligibility Criteria Modified
The Higher Education Amendments of 1998 removed the requirement that a new borrower from July 1, 1987 to June 30, 1993 obtain a new loan for the enrollment period that is to be covered by an in-school deferment for half-time enrollment. Common Manualsubsection 7.10.A. and the "Deferment Eligibility Chart" contained in section 7.10 have been revised to remove this obsolete requirement.

In addition, the "Deferment Eligibility Chart" in section 7.10 has been revised to remove information that addresses interest subsidy of Consolidation loans. This information is already addressed in other sections of the Common Manual.

These changes are effective for in-school deferments granted by the lender on or after October 1, 1998.

IN-SCHOOL OR STUDENT DEFERMENT

In-School Deferment Documentation Requirements Modified

The Common Manual currently requires that, prior to the granting of an in-school deferment, the lender must receive a written or verbal request from a borrower--or, as applicable, the dependent student--along with supporting documentation from the school. To align the manual with the Higher Education Amendments of 1998, the in-school deferment requirements have been modified.

Under the new provisions, the lender must determine the eligibility of a borrower--or, as applicable, the dependent student--for an in-school deferment based upon the receipt of any one of the following:

A written or verbal request for deferment from the borrower and documentation of the borrower's eligibility for the deferment.

A newly completed loan application that documents the borrower's eligibility for a deferment.

Student status information received by the lender indicating that the borrower is enrolled at least half-time.

The deferment should be granted through the eligible student's anticipated graduation date. If an in-school deferment is granted by the lender based upon a newly completed loan application or the receipt of student status information and, in either case, the borrower has not requested the deferment, the lender must notify the borrower of the in-school deferment and of the option to continue paying on the loan.
 

7.10.G. MILITARY DEFERMENT

Military Extension of the Grace Period
The Higher Education Amendments of 1998 provide that a Stafford borrower with a loan in a grace period, or with a loan in an in-school status that would subsequently enter a grace period, who is called or ordered to active duty, is entitled to a military extension of the grace period for a period not to exceed 3 years. To qualify for this extension, the borrower must be called or ordered to active duty, on or after October 1, 1998, from a reserve component of the U.S. Armed Forces for a period in excess of 30 days. The maximum 3- year military extension includes the time period necessary for a borrower to resume enrollment at the next available and regular, scheduled enrollment period.

If the borrower resumes at least half-time enrollment at the end of the military extension, the borrower is entitled to a new grace period at the end of the in-school period. If the borrower does not resume at least half-time enrollment, the borrower is entitled to a new grace period at the end of the military extension.

Interest that accrues during the military extension is paid by the Department for subsidized Stafford loans. Interest accruing on unsubsidized Stafford loans is the responsibility of the borrower.

Lenders are reminded that if the borrower is in repayment, deferment, or forbearance when he or she is called or ordered to active duty, the borrower may be eligible for a military deferment or a mandatory administrative forbearance (see subsection 7.10.G. or 7.11.D., respectively, for more information.)

This change is effective for Stafford borrowers with loans in grace periods or with loans in an in-school status that would subsequently enter grace periods, who are called or ordered, on or after October 1, 1998, from a reserve component of the U.S. Armed Forces to active duty for a period in excess of 30 days. Section 7.2 of the Common Manual has been revised to reflect this change and subsection 7.10.G. has been revised to add a cross- reference to section 7.2.

7.10.K. INTERNSHIP RESIDENCY DEFERMENT

Mandatory Forbearance Requests Modified
For changes to Subsection 7.10.K., please see Section 7.11.C.

7.11.B. ADMINISTRATIVE FORBEARANCE

New Administrative Forbearance Type Added

Common Manual subsection 7.11.B. has been revised to incorporate a new administrative forbearance type authorized by the Higher Education Amendments of 1998.

The lender may now grant a forbearance for a period not to exceed 60 days if the lender determines it is warranted in order to collect or process supporting documentation following a borrower's request for deferment, forbearance, a change in repayment plan, or loan consolidation. If such supporting documentation is not received within 60 days, the lender must resume servicing activities on the 61st day.

The lender must not capitalize interest that accrues on the borrower's loan during this period of administrative forbearance unless the lender receives documentation or information that results in the granting of a deferment or other forbearance type that would be concurrent with this period in which case capitalization is permitted.

These changes are effective for administrative forbearance granted by the lender on or after October 1, 1998.

7.11.C. MANDATORY FOREBEARANCE

Mandatory Forbearance Requests Modified
The Common Manual has been revised to incorporate the provisions of the Higher Education Amendments of 1998 that delete the requirement for a borrower to request a mandatory forbearance in writing.

Revised policy states that, upon receiving a borrower's request and documentation required to support the borrower's eligibility, a lender is required to grant a forbearance in any of the following situations: internship/residency, debt exceeds monthly income, national service, or Department of Defense Repayment.  In all cases, the lender must provide the borrower with a written agreement that explains the terms of the forbearance.

In addition, the current policy has been revised to delete the requirement for a written request, and to provide additional clarity to existing policy.  Revised policy now states that a lender must grant forbearance to a qualified borrower who meets either of the following criteria:

The borrower has exhausted his or her eligibility for internship/residency deferment.

The borrower's promissory note does not provide for an internship/residency deferment.

Eligibility and documentation requirements are the same as for a borrower who has requested an internship/residency deferment (see subsection 7.10.K.). A lender must grant forbearance in 12-month increments unless the actual period during which a borrower is eligible is less than 12 months.

Subsection 7.11.C. of the Common Manual has been revised to reflect these changes, which are effective for mandatory forbearances granted by the lender on or after October 1, 1998.

MANDATORY FORBEARANCE

Mandatory Forbearance For  Loan Forgiveness Programs
The Higher Education Amendments of 1998 eliminate the Stafford Loan Forgiveness Demonstration Program, which was never funded, and introduces the Loan Forgiveness Demonstration Program for Child Care Providers. Current language addressing the eligibility of a borrower for a mandatory forbearance for his or her participation in the Stafford Loan Forgiveness Demonstration Program has been removed. The manual has been revised to require that a lender grant forbearance to any borrower participating in the Loan Forgiveness Demonstration Program for Child Care Providers, provided the program is funded.

Subsection 7.11.C. of the Common Manual has been revised to reflect this change, which is effective for mandatory forbearance granted on or after October 7, 1998, provided the Loan Forgiveness Demonstration Program for Child Care Providers is funded

7.11.D. MANDATORY ADMINISTRATIVE FORBEARANCE

Military Extension of the Grace Period
For changes to Subsection 7.11.D., please see Section 7.10.G.

7.14. STAFFORD LOAN FORGIVENESS DEMONSTRATION PROGRAM

Loan Forgiveness Program for Teachers
The Higher Education Amendments of 1998 eliminated the Stafford Loan Demonstration Forgiveness Program and implemented the Loan Forgiveness Program for Teachers, which is intended to encourage individuals to enter and continue in the teaching profession. Under this program, the Department repays a portion of a borrower's Stafford loan obligations. In order to be eligible for this forgiveness program, the following criteria must be met:

The borrower must be a "new borrower" on or after October 1, 1998.  (A new borrower is defined as a borrower who has no outstanding balance on a FFELP loan at the time he or she signs a promissory note for a FFELP loan.)

The borrower must have been employed as a full-time teacher for 5 consecutive, complete school and academic years in a school that qualifies - in at least one of the 5 years of service -- for loan cancellation for Perkins Loan recipients who teach in such schools.  Each borrower must meet one of the following criteria:

If employed as an elementary school teacher, the borrower must have demonstrated knowledge and teaching skills in reading, writing, mathematics, and other areas of the school's curriculum, as certified by the chief administrative officer of the school in which the borrower is employed.

If employed as a secondary school teacher, the borrower must be teaching a subject which is relevant to the borrower's academic major, as certified by the chief administrative officer of the secondary school in which the borrower is employed.

The borrower must not be in default on a loan for which the borrower seeks forgiveness.

The Department will repay, on behalf of a qualified borrower, no more than $5,000 of the borrower's outstanding Stafford loan balances (or the outstanding portion of a Consolidation loan used to repay qualifying Stafford loans) at the end of the 5th complete year of teaching. Receipt of a benefit under this program does not entitle the borrower to a refund of any payments made on the loan.

No borrower may, for the same service, receive a benefit under both the Loan Forgiveness Program for Teachers and subtitle D of Title I of the National and Community Service Act of 1990. In addition, the borrower may not receive this benefit under both the FFELP and the FDLP.

As of this printing, processes and procedures for applying for loan forgiveness have not been defined, but are being addressed by the community in its discussions with the Department.

The Department is authorized to issue regulations, as necessary, to carry out the provisions of this section. These changes are effective for new borrowers on or after October 1, 1998. Section 7.14 of the Common Manual has been revised to reflect these changes.

7.15. LOAN FORGIVENESS DEMONSTRATION PROGRAM FOR CHILD CARE PROVIDERS (New Section)

Loan Forgiveness Program for Child Care Providers
The Higher Education Amendments of 1998 authorized a new loan forgiveness demonstration program. The Loan Forgiveness Demonstration Program for Child Care Providers is intended to bring more highly trained individuals into the early child care profession and to retain those providers for longer periods of time. Under this demonstration program, the Department would repay up to 100% of a borrower's Stafford loan obligations. For the purpose of this program, the term "child care services" is defined as activities and services provided for the education and care of children from birth through age 5.

If the program is implemented, the borrower must meet the following criteria to qualify for this forgiveness program:

The borrower must be a "new borrower" on or after October 8, 1998 (a new borrower is defined as a borrower who has no outstanding balance on a FFELP loan at the time he or she signs a promissory note for a FFELP loan).

The borrower must complete a degree in early childhood education.  This field is defined as education in the areas of early child education, child care, or any other educational area related to child care that the Department determines to be appropriate.

The borrower must obtain employment in a child care facility, defined as a facility, including a home, that provides child care services and meets the applicable state or local government licensing, certification, approval, or registration requirements, if any.

The borrower must work full-time as a child care provider for the 2 consecutive and immediately preceding years in a low-income community, defined as a community in which 70% of households within the community earn less than 85% of the state's median household income.

If the borrower qualifies, the Department will pay--on a first-come, first-served basis subject to the availability of funds--a percentage of the total amount of all eligible loans (excluding PLUS and Consolidation loans) at the rate of:

20% after completion of the 2nd year
20% after completion of the 3rd year
30% after completion of the 4th year
30% after completion of the 5th year

The Department will also pay a proportionate amount of the interest that accrues each year.

If an individual not participating in this program returns to school, after initially graduating from school, to obtain an associate or baccalaureate degree in early childhood education, the student may apply to the Department for repayment under this forgiveness program of qualified loans received for a maximum of 2 academic years when the student returned to school. Repayment by the Department will be made in accordance with the preceding rate schedule.

The Department will give loan repayment priority to borrowers who received forgiveness in the prior year. No borrower may, for the same service, receive a benefit under both this Loan Forgiveness Program for Child Care Providers and subtitle D of title 1 of the National and Community Service Act of 1990.

Qualified borrowers may request loan forgiveness at the end of each year of eligible child care employment by completing an application as required by the Department. During the period of eligible employment, a borrower shall receive a forbearance unless the borrower qualifies for a deferment. Receipt of a benefit under this program does not entitle the borrower to a refund of payments made on the loan.
 (HEA 428K)

As of this printing, processes and procedures for applying for loan forgiveness have not been defined, but are being addressed by the community in its discussions with the Department.

These changes are effective for new borrowers on or after October 8, 1998, provided the program is funded. A new section 7.15, reflecting the preceding language has been added to the Common Manual.

Chapter 9 - Federal Consolidation Loans

9.8. INTEREST PAYMENT REBATE FEE

Consolidation Loan Interest Payment Rebate Fee
The Higher Education Amendments of 1998, signed by the President on October 7, 1998, revised certain provisions of Federal Consolidation loan policy. Current Common Manual policy states that the Consolidation loan interest payment rebate fee is 1.05% per annum of the principal balance and accrued interest of the loans.  Section 9.8 of the Common Manual has been revised to reflect new law which provides a reduction in this fee for certain loans.

Each month, a holder must remit to the Department an interest payment rebate fee for all of its Federal Consolidation loans made on or after October 1, 1993.

For loans made on or after October 1, 1993, from applications received prior to October 1, 1998 and after January 31, 1999, this fee is equal to 1.05% per annum of the unpaid principal and accrued interest of the loans.  To calculate the fee, the holder should multiply the sum of unpaid principal and interest balances of the applicable loans--as of the end of the month--by 0.0875% (0.000875).

For loans made from applications received during the period beginning October 1, 1998 through January 31, 1999, inclusive, this fee is equal to .62% per annum of the unpaid principal and accrued interest of the loans. To calculate the fee, the holder should multiply the sum of unpaid principal and interest balances of the applicable loans--as of the end of the month--by  0.0517% (0.000517).

These changes are effective for loan applications received by the lender on or after October 1, 1998.

Chapter 10 - Cohort Default Rates and Appeals
 

10.1. OVERVIEW OF COHORT DEFAULT RATES

Cohort Default Rates and Appeals Modified
Due to the 1998 Reauthorization of the Higher Education Act,  changes have been made to chapter 10 of the Common Manual.

Some Historically Black Colleges and Universities (HBCUS), and tribally controlled and Navajo community colleges, may qualify for an exemption from the loss of FFELP eligibility based on cohort default rates in excess of applicable thresholds.

If a school's cohort default rate or loss of FFELP eligibility appeal based on exceptional mitigating circumstances, erroneous data, or improper loan servicing or collection is unsuccessful, the school is required to pay, to the Department, the amount of interest, special allowance, reinsurance, and any related payments made by the Department (or which the Department is obligated to make) with respect to FFELP loans made to students attending or planning to attend the school during the pending appeal.

A school may appeal its loss of FFELP eligibility on exceptional mitigating circumstances by demonstrating that its participation rate index is equal to or less than 0.0375 for any one of the 3 most recent fiscal years for which data is available.

A school may appeal its loss of FFELP eligibility on exceptional mitigating circumstances based on educating low-income students by providing documentary evidence that, for a 12-month period that ended during the 6 months immediately preceding the fiscal year for which the cohort of borrowers used to calculate the school's cohort default rate is determined, at least two-thirds of the students, enrolled on at least a half-time basis meet either of the following criteria:

The student is eligible to receive a Pell Grant that is at least equal to one-half of the maximum available Pell Grant based on the student's enrollment status.

The student has an adjusted gross income that is less than the poverty level, as determined by the Department of Health and Human Services. (Please note that the adjusted gross income of a dependent student equals the adjusted gross income of the student's parents plus the adjusted gross income of the student).

If a school appeals its loss of FFELP eligibility on exceptional mitigating circumstances based on educating economically disadvantaged or low-income students, both degree- and non-degree-granting schools can add students who entered active duty in the U.S. Armed Forces to the numerator in the calculation of their respective completion and placement rates. For non-degree granting schools, students or former students for whom the school is the employer should not be included in the numerator of the placement rate calculation.

In a cohort default rate or loss of FFELP eligibility appeal based on improper loan servicing or collection, the Department must ensure that a school has access for a reasonable period of time, not to exceed 30 days, to a representative sample of the relevant loan servicing and collection records used by a guarantor in paying default claims or by the Department in determining a school's default rate in the loan program under part D of this title. If a school proves, during the appeal process, that a loan or loans defaulted due to improper loan servicing or collection, the Department will adjust the numerator and denominator of the school's FFELP, FDLP, or weighted average cohort default rate based on statistical inference from the appropriate representative sample.

Except for school appeals of FDLP and weighted average cohort default rates on the basis of improper loan servicing or collection which take effect on July 1, 1999, all of the above revisions to sections 10.1 and 10.5 and subsections 10.5.A. and 10.5.C. of the Common Manual are effective for school cohort default rates published on or after October 1, 1998.

10.5. SCHOOL APPEALS

Cohort Default Rates and Appeals Modified
For changes to Subsection 10.5., please see Section 10.1.

10.5.A. EXCEPTIONAL MITIGATING CIRCUMSTANCES

Cohort Default Rates and Appeals Modified
For changes to Subsection 10.5.A., please see Section 10.1.

10.5.C. IMPROPER LOAN SERVICING OR COLLECTION

Cohort Default Rates and Appeals Modified
For changes to Subsection 10.5.C., please see Section 10.1.

Appendix A - Interest Benefits and Special Allowance

A.1.B. WHEN FEDERAL INTEREST BENEFITS WILL BE PAID

Delayed Delivery Exemptions
For changes to Subsection A.1.B., please see Section 5.8.D.

A.3.C. SUMMARY OF ED FORM 799

Lenders May Pay Origination Fees on All Stafford Loans
For changes to Subsection A.3.C., please see Section 6.6

Appendix G - Glossary

DEFINITION OF DELAYED DELIVERY

Delayed Delivery Exemptions
For changes to Appendix G., please see Section 5.8.D.