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ED Proposes Revisions to Student Loan Program Rules

July 29, 2013

The Department of Education published a notice of proposed rulemaking on July 29 that would update its regulations governing the Federal Direct Loan, the Federal Family Education Loan, and the Perkins Loan programs. The proposed rules would implement statutory changes including the elimination of new FFEL loans in 2010, conform the regulations across programs and to match current practice, and address several loan collection and rehabilitation issues. Comments are due August 28.

Perkins Loan Changes

Modifications to the rules governing the Perkins Loan program have a more direct impact on colleges and universities since they are responsible for administering and collecting those loans. Proposed revisions to the Perkins Loan program regulations are summarized in the notice as follows.

  • Update the FFEL and Direct Loan program enrollment status reporting requirements for institutions to reflect current processes and eliminate obsolete terms and procedures. The proposed regulations would also add comparable enrollment status reporting provisions to the Perkins Loan Program regulations.
  • Incorporate into the Perkins Loan Program the same eligibility criteria used in the Direct Loan and FFEL programs to define an ''eligible graduate fellowship program'' and to establish the eligibility of a Perkins Loan borrower for a graduate fellowship deferment.
  • Eliminate the debt-to-income economic hardship deferment category in the Perkins Loan Program.
  • Modify the rehabilitation provisions in the Perkins Loan Program regulations to define the term ''on-time'' as it relates to the series of payments required to successfully rehabilitate a defaulted loan.
  • Allow assignment of a Perkins Loan to the Secretary without the borrower's Social Security Number if the loan was made before September 13, 1982.
  • Permit a Perkins Loan borrower who is unable to complete the second half of an academic year of teaching due to a condition covered under the Family and Medical Leave Act (FMLA) to still count that year as eligible teaching service for loan cancellation purposes, if the borrower's employer considers the borrower to have fulfilled the teacher contract requirements for that academic year.
  • Permit a Perkins Loan borrower who is unable to complete a full year of eligible public service due to a condition that is covered under the FMLA to count that year as a full year of public service for loan cancellation purposes if the borrower completes at least six months of consecutive eligible service.
  • Specify that, if a Perkins Loan borrower who is performing service that qualifies the borrower for loan cancellation at a cancellation rate progression of 15 percent for the first and second years of qualifying service, 20 percent for the third and fourth years of qualifying service, and 30 percent for the fifth year of qualifying service, takes a job in a different field that qualifies the borrower under a different cancellation category that provides loan cancellation at the same cancellation rate progression as the prior category, the borrower's cancellation rate under the new cancellation category would continue from the last year the borrower received a cancellation under the former cancellation category, rather than starting over at the first-year cancellation rate.

Tight Timeline

A negotiated rulemaking committee, composed of various stakeholders including a representative of NACUBO, completed their work on these proposed rules over a year ago. The length of the notice (112 Federal Register pages) and the technical nature of many of the changes likely contributed to the delay in publication of the proposed rules. The unusually short 30-day comment period is probably due to a statutory provision that requires ED to publish final rules implementing Title IV of the Higher Education Act no later than November 1 in order for revised rules to take effect July 1, 2014.

Contact

Anne Gross
Vice President, Regulatory Affairs
202.861.2544
E-mail


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