March 30, 2000
Volume 2000 - Issue 27


Common Manual Interim Policy Updates

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 in July 2000.

Attached are interim updates to the Common Manual which address policy revisions approved on March 16, 2000.  Pay particular attention to the effective dates for these interim policy updates.

Any questions related to the attached Common Manual interim policy update should be directed to the UHEAA Policy and Training Department at (801) 321-7166 or by email at cjudd@utahsbr.edu.

Attachment

Common Manual Interim Policy Updates
Policy Changes Approved March 16, 2000

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.

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

.  In performing telephone skip tracing with the financial aid administrator or other school official, lenders must direct written or telephone contact to the school identified on the most recent school certification or the most recent loan application.

.  In performing address skip tracing, lenders must contact the schools in the borrower's loan file.  This contact should be with the financial aid administrator or other school official who may reasonably be expected to know the borrower's address.

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, unless implemented earlier by the guarantor.
Basis:   §682.411(h) & (m)(1)(iii)--as updated by final rules in the Federal Register dated October 29, 1999.

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.):

. A copy of the loan application, if a separate application was provided to the lender.

. A copy of the signed promissory note. The original or a true and exact copy of the promissory note must be retained until the loan is paid in full or assigned to the Department.

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 Nov. 1, 1999.

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:

. 3 years after the date the loan is paid in full by the borrower.
. 5 years after the date the lender receives payment in full from any other source.
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 Oct. 29, 1999, and Nov., 1999.

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):

. Information on the availability of income-sensitive repayment.  The lender must provide, together or separately, all of the following:
A statement that the borrower is eligible for income-sensitive repayment, including through loan consolidation.
Procedures by which the borrower may choose income-sensitive repayment.
Where and how the borrower may obtain more information on income-sensitive repayment.

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

. A telephone number, accessible at no cost from within the U.S., that the borrower can use to obtain more information. A lender may disclose its own toll-free number or an alternative number for borrowers to call for additional loan information, provided there is no cost to the borrower (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, 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.

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.

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, unless implemented earlier by the guarantor.
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.

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.

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: 8.1, 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, unless implemented earlier by the guarantor.
Basis:  §682.404(a)(2) and (k) and §682.411(i)--as updated in the Federal Register dated October 29, 1999.

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.

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.
 

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.

School Recordkeeping Requirements
The Common Manual subsection addressing recordkeeping requirements for schools, has been revised to incorporate new regulations as follows:

. A school must retain a copy of the Master Promissory Note certification, or certification data if submitted electronically.
. A school must retain the cost of attendance, estimated financial assistance, and expected family contribution (instead of records of the calculations used to determine the loan amount).
. A school must retain documentation of any MPN Confirmation or Notification process it used.
. The requirement that the school retain the name and address of the lender for each loan certified has been removed.
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.

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) & 682.200; HEA 482(c)(2)(A)-as updated in the Federal Registers dated Oct. 28, 1999 and Nov. 1, 1999.

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.

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.