Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program, 61960-62011 [07-5332]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 72, Number 211 (Thursday, November 1, 2007)]
[Rules and Regulations]
[Pages 61960-62011]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-5332]



[[Page 61959]]

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Part II





Department of Education





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34 CFR Parts 674, 682 and 685



Federal Perkins Loan Program, Federal Family Education Loan Program, 
and William D. Ford Federal Direct Loan Program; Final Rule

Federal Register / Vol. 72, No. 211 / Thursday, November 1, 2007 / 
Rules and Regulations

[[Page 61960]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682 and 685

[Docket ID ED-2007-OPE-0133]
RIN 1840-AC89


Federal Perkins Loan Program, Federal Family Education Loan 
Program, and William D. Ford Federal Direct Loan Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the Federal Perkins Loan (Perkins Loan) 
Program, Federal Family Education Loan (FFEL) Program, and William D. 
Ford Federal Direct Loan (Direct Loan) Program regulations. The 
Secretary is amending these regulations to strengthen and improve the 
administration of the loan programs authorized under Title IV of the 
Higher Education Act of 1965, as amended (HEA).

DATES: Effective Date: These regulations are effective July 1, 2008.
    Implementation Date: The Secretary has determined, in accordance 
with section 482(c)(2)(A) of the HEA (20 U.S.C. 1089(c)(2)(A)), that 
institutions, lenders, guaranty agencies, and loan servicers that 
administer Title IV, HEA programs may, at their discretion, choose to 
implement Sec. Sec.  674.38, 674.45, 674.61, 682.202, 682.208, 682.210, 
682.211, 682.401, 682.603, 682.604, 685.204, 685.212, 685.301, and 
685.304 of these final regulations on or after November 1, 2007. For 
further information, see the section entitled Implementation Date of 
These Regulations in the SUPPLEMENTARY INFORMATION section of this 
preamble.

FOR FURTHER INFORMATION CONTACT: For information related to 
Simplification of the Deferment Process, Loan Counseling for Graduate 
or Professional Student PLUS Loan Borrowers, Mandatory Assignment of 
Defaulted Perkins Loans, Reasonable Collection Costs, and Child or 
Family Service Cancellation, Brian Smith. Telephone: (202) 502-7551 or 
via Internet: brian.smith@ed.gov.
    For information related to Accurate and Complete Copy of a Death 
Certificate, NSLDS Reporting Requirements, Maximum Loan Period, and 
Frequency of Capitalization, Nikki Harris. Telephone: (202) 219-7050 or 
via Internet: nikki.harris@ed.gov.
    For information related to Total and Permanent Disability, 
Certification of Electronic Signatures on Master Promissory Notes 
(MPNs) Assigned to the Department, Record Retention Requirements on 
MPNs Assigned to the Department, Eligible Lender Trustees, and Loan 
Discharge for False Certification as a Result of Identity Theft, Gail 
McLarnon. Telephone: (202) 219-7048 or via Internet: 
gail.mclarnon@ed.gov.
    For information related to Prohibited Inducements and Preferred 
Lender Lists, Pamela Moran. Telephone: (202) 502-7732 or via Internet: 
pamela.moran@ed.gov.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Relay Service (FRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to any of the contact persons listed in this 
section.

SUPPLEMENTARY INFORMATION: On June 12, 2007, the Secretary published a 
notice of proposed rulemaking (NPRM) for the Perkins Loan, FFEL and 
Direct Loan Programs in the Federal Register (72 FR 32410).
    In the preamble to the NPRM, the Secretary discussed on pages 32411 
through 32427 the major changes proposed in that document to strengthen 
and improve the administration of the loan programs authorized under 
Title IV of the HEA. These include the following:
     Amending Sec. Sec.  674.38, 682.210, and 685.204 to allow 
institutions that participate in the Perkins Loan Program, FFEL 
lenders, and the Secretary to grant a deferment under certain 
circumstances to a borrower if another FFEL lender or the Department 
has granted the borrower a deferment for the same reason and time 
period.
     Amending Sec. Sec.  674.38, 682.210, and 685.204 to allow 
a Perkins, FFEL or Direct Loan borrower's representative to apply for 
an armed forces or military service deferment on behalf of the 
borrower.
     Amending Sec. Sec.  674.61, 682.402, and 685.212 to allow 
the use of an accurate and complete photocopy of an original or 
certified copy of the death certificate, in addition to the original or 
a certified copy of the death certificate, to support the discharge of 
a Title IV loan due to death.
     Amending Sec. Sec.  674.61, 682.402, and 685.213 to 
restructure the regulations governing the discharge of a Perkins, FFEL 
or Direct Loan based on the borrower's total and permanent disability 
to clarify and provide additional explanation of the eligibility 
requirements.
     Amending Sec. Sec.  674.61, 682.402, and 685.213 to 
provide for a prospective conditional discharge period to establish 
eligibility for a total and permanent disability discharge that is up 
to three years in length and begins on the date that the Secretary 
makes the initial determination that the borrower is totally and 
permanently disabled.
     Amending Sec. Sec.  674.16, 682.208, and 682.414 to 
require institutions, lenders, and guaranty agencies to report 
enrollment and loan status information, or any other Title IV-related 
data required by the Secretary, to the Secretary by the deadline 
established by the Secretary.
     Amending Sec. Sec.  674.19, 674.50, and 682.414 to require 
an institution or lender to maintain the original electronic promissory 
note, plus a certification and other supporting information, regarding 
the creation and maintenance of any electronically-signed Perkins Loan 
or FFEL promissory note or Master Promissory Note (MPN) and provide 
this certification to the Department, upon request, should it be needed 
to enforce an assigned loan. Institutions and lenders are required to 
maintain the electronic promissory note and supporting documentation 
for at least three years after all loan obligations evidenced by the 
note are satisfied.
     Amending Sec. Sec.  674.19 and 674.50 to require an 
institution that participates in the Perkins Loan Program to retain 
records showing the date and amount of each disbursement of each loan 
made under an MPN for at least three years from the date the loan is 
canceled, repaid or otherwise satisfied and require the institution to 
submit disbursement records on an assigned Perkins Loan, upon request, 
should the Secretary need the records to enforce the loan.
     Amending Sec.  682.409 to require a guaranty agency to 
submit the record of the lender's disbursement of loan funds to the 
school for delivery to the borrower when assigning a FFEL loan to the 
Department
     Amending Sec. Sec.  682.604 and 685.304 to require 
entrance counseling for graduate or professional student PLUS Loan 
borrowers and modify the exit counseling requirements for Stafford Loan 
borrowers who have also received PLUS Loans.
     Amending Sec. Sec.  682.401, 682.603, and 685.301 to 
eliminate the maximum 12-month loan period for annual loan limits in 
the FFEL and Direct Loan programs.
     Amending Sec. Sec.  674.8 to permit the Secretary to 
require assignment of a Perkins Loan if the outstanding principal 
balance on the loan is $100 or more, the loan has been in default for 
seven or more years, and a payment has

[[Page 61961]]

not been received on the loan in the preceding 12 months, unless 
payments were not due because the loan was in a period of authorized 
forbearance or deferment.
     Amending Sec.  674.45 to limit the amount of collection 
costs a school may assess against a Perkins Loan borrower to 30 percent 
for first collection efforts; 40 percent for second collection efforts; 
and, in cases of litigation, 40 percent plus court costs.
     Amending Sec.  674.56 to clarify the eligibility 
requirements for a Perkins Loan borrower to qualify for a child or 
family service cancellation.
     Amending Sec. Sec.  682.200 and 682.401 to incorporate 
into the regulations specific rules for lenders and guaranty agencies 
on prohibited inducements and activities and permissible activities in 
accordance with the recommendations of the Department's Task Force on 
these issues.
     Amending Sec. Sec.  682.200 and 682.602 to reflect the 
provisions of The Third Higher Education Extension Act of 2006, Public 
Law 109-202, that prohibit a FFEL lender from entering into a new 
eligible lender trustee (ELT) relationship with a school or a school-
affiliated organization as of September 30, 2006, but allowing such 
relationships in existence prior to that date to continue with certain 
restrictions.
     Amending Sec.  682.202 to provide that a lender may only 
capitalize unpaid interest on a Federal Consolidation Loan that accrues 
during an in-school deferment at the expiration of the deferment.
     Amending Sec. Sec.  682.208, 682.211, 682.300, 682.302, 
and 682.411 regarding loan discharge for false certification as a 
result of identity theft.
     Amending Sec. Sec.  682.212 and 682.401 to specify 
requirements that a school must meet if it chooses to provide a list of 
recommended or preferred FFEL lenders for use by the school's students 
and their parents, and prohibit the use of a preferred lender list to 
deny a borrower the right to use a FFEL lender not included on a 
school's list.
    In addition to the changes that strengthen and improve the 
administration of the loan programs authorized under HEA, these final 
regulations also incorporate certain statutory changes made to the HEA 
by the College Cost Reduction and Access Act (CCRAA) (Pub. L. 110-84). 
These changes are:
     Amending Sec. Sec.  674.34, 682.210, and 685.204 to extend 
the military deferment to all Title IV borrowers regardless of when 
their loans were made, eliminate the 3-year limit on the military 
deferment and add a 180-day period of deferment following the 
borrower's demobilization as of October 1, 2007.
     Amending Sec. Sec.  674.34, 682.210, and 685.204 to 
authorize a 13-month deferment following conclusion of their military 
service for certain members of the Armed Forces who were enrolled in a 
program of instruction at an eligible institution at the time, or 
within 6 months prior to the time the borrower was called to active 
duty as of October 1, 2007.
     Amending Sec. Sec.  674.34 and 682.210 to revise the 
definition of economic hardship to allow a borrower to earn 150 percent 
of the poverty line applicable to the borrower's family size as of 
October 1, 2007.
     Amending Sec. Sec.  682.202 and 685.202 to reduce interest 
rates on subsidized Stafford loans made to undergraduate students as of 
July 1, 2008.
     Amending Sec.  682.302 to reduce special allowance 
payments for loans first disbursed on or after October 1, 2007 and 
establish different rates for eligible not-for-profit lenders and other 
lenders.
     Amending Sec.  682.305 to increase the loan fee a lender 
must pay to the Secretary from 0.50 to 1.0 percent of the principal 
amount of the loan for loans first disbursed on or after October 1, 
2007.
     Amending Sec.  682.404 to reduce the percentage of 
collections that a guaranty agency may retain from 23 to 16 percent and 
to decrease account maintenance fees paid to guaranty agencies from 
0.10 to 0.06 percent as of October 1, 2007.
     Removing Sec.  682.415 to eliminate the ``exceptional 
performer'' status as of October 1, 2007.

Because these amendments implement changes to the HEA made by the 
CCRAA, we do not discuss them in the Analysis of Comments and Changes 
section.

Waiver of Proposed Rulemaking--Regulations Implementing the CCRAA

    Under the Administrative Procedure Act (5 U.S.C. 553), the 
Department is generally required to publish a notice of proposed 
rulemaking and provide the public with an opportunity to comment on 
proposed regulations prior to issuing final regulations. In addition, 
all Department regulations for programs authorized under Title IV of 
the HEA are subject to the negotiated rulemaking requirements of 
section 492 of the HEA. However, both the APA and HEA provide for 
exemptions from these rulemaking requirements. The APA provides that an 
agency is not required to conduct notice-and-comment rulemaking when 
the agency for good cause finds that notice and comment are 
impracticable, unnecessary or contrary to the public interest. 
Similarly, section 492 of the HEA provides that the Secretary is not 
required to conduct negotiated rulemaking for Title IV, HEA program 
regulations if the Secretary determines that applying that requirement 
is impracticable, unnecessary or contrary to the public interest within 
the meaning of the HEA.
    Although the regulations implementing CCRAA are subject to the 
APA's notice-and-comment and the HEA's negotiated rulemaking 
requirements, the Secretary has determined that it is unnecessary to 
conduct negotiated rulemaking or notice-and-comment rulemaking on these 
regulations. These amendments simply modify the Department's 
regulations to reflect statutory changes made by the CCRAA, and these 
statutory changes are either already effective or will be effective 
within a short period of time. The Secretary does not have discretion 
in whether or how to implement these changes. Accordingly, negotiated 
rulemaking and notice-and-comment rulemaking are unnecessary.
    There are no significant differences between the NPRM and these 
final regulations resulting from public comments.

Implementation Date of These Regulations

    Section 482(c) of the HEA requires that regulations affecting 
programs under Title IV of the HEA be published in final form by 
November 1 prior to the start of the award year (July 1) to which they 
apply. However, that section also permits the Secretary to designate 
any regulation as one that an entity subject to the regulation may 
choose to implement earlier and the conditions under which the entity 
may implement the provisions early.
    Consistent with the intent of this regulatory effort to strengthen 
and improve the administration of the loan programs authorized under 
Title IV of the HEA, the Secretary is using the authority granted her 
under section 482(c) to designate certain provisions of the 
regulations, identified in the following paragraph, for early 
implementation at the discretion of each institution, lender, guaranty 
agency, or servicer, as appropriate.
    In accordance with the authority provided by section 482(c) of the 
HEA, the Secretary has determined that for some provisions there are 
conditions that must be met in order for an institution, lender, 
guaranty agency, or servicer, as appropriate, to implement

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those provisions early. The provisions subject to early implementation 
and the conditions are--
    Provision: Sections 674.38, 682.210, and 685.204 that simplify the 
deferment granting process and allow a borrower's representative to 
request a military service deferment or an Armed Forces deferment.
    Condition: None.
    Provision: Sections 674.61, 682.402, and 685.212 that allow the use 
of an accurate and complete photocopy of the original or certified copy 
of the borrower's death certificate to support the discharge of a Title 
IV loan due to death.
    Condition: None.
    Provision: Sections 682.603, 682.604, 685.301, and 685.304 that 
require entrance counseling requirements and modify exit counseling for 
graduate or professional student PLUS borrowers.
    Condition: None.
    Provision: Section 674.45 that limits the amount of collection 
costs a school may assess against a Perkins Loan borrower.
    Condition: None.
    Provision: Section 682.202 that limits the frequency of 
capitalization on Federal Consolidation loans to quarterly, except that 
a lender may only capitalize unpaid interest that accrues during an in-
school deferment at the expiration of the deferment.
    Condition: None.
    Provision: Sections 682.208 and 682.211, which allow a lender to 
suspend credit bureau reporting for 120 days and grant borrowers a 120-
day forbearance on a loan while the lender investigates a false 
certification as a result of an alleged identity theft.
    Condition: None.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM published on 
June 12, 2007, 241 parties submitted comments on the proposed 
regulations. An analysis of the comments and the changes in the 
regulations since publication of the NPRM and as a result of public 
comment follows.
    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address technical and other minor 
changes--and suggested changes the law does not authorize the Secretary 
to make. We also do not address comments pertaining to issues that were 
not within the scope of the NPRM.

Simplification of Deferment Process (Sec.  674.38, 682.210, and 
685.204)

    Comments: Commenters were generally supportive of our proposal to 
simplify the deferment process. Some commenters, however, had 
suggestions for modifications.
    The proposed regulations would allow a borrower's representative to 
request a military service or Armed Forces deferment on behalf of the 
borrower. Some commenters recommended that we define ``borrower's 
representative'' for purposes of a military service or Armed Forces 
deferment. However, several other commenters did not think it was 
necessary to define ``borrower's representative.''
    One commenter recommended that the Department revise the 
regulations to require (rather than just allow) lenders to grant 
military service deferments to eligible borrowers based upon a request 
from the borrower's representative.
    With regard to the simplified deferment granting procedures, some 
commenters recommended that we require, rather than allow, lenders to 
grant deferments under the proposed procedures.
    One commenter noted that interest does not accrue on subsidized 
FFEL or Direct Loans, or on Perkins Loans, during deferment periods and 
recommended that borrowers with these types of loans not be required to 
make an initial deferment request.
    One commenter recommended that the notification of a deferment to a 
borrower of unsubsidized loans include information on the cost of the 
deferment.
    One commenter recommended that we adopt a comparable simplified 
forbearance process for schools that participate in the Perkins Loan 
Program. This commenter felt that Perkins Loan schools should be able 
to grant forbearances based on a forbearance granted on a borrower's 
FFEL or Direct Loan. This commenter also requested that we allow 
borrowers in the Perkins Loan Program to verbally request a forbearance 
on their loans.
    Several commenters recommended that we modify the regulations to 
permit a lender to grant a deferment ``during'' the same time period as 
a deferment granted by another lender. This would allow the deferment 
dates of a deferment granted by one lender to be part of the deferment 
period granted by another lender. The commenter noted that the dates of 
the deferment periods may not be exactly the same based on the status 
of the loans held by each of the lenders and the applicability of the 
deferments to the separate loans.
    Discussion: The Department agrees with the commenters who 
recommended that we not define the term ``borrower's representative'' 
for purposes of a military service or Armed Forces deferment. A 
borrower's representative would be a member of the borrower's family, 
or another reliable source. We do not think it is necessary to regulate 
a specific definition of the term ``borrower's representative.'' We 
believe allowing flexibility in this regard will be especially helpful 
to borrowers called to active duty and stationed overseas in areas of 
conflict. Defining ``borrower's representative'' could unnecessarily 
limit access to this benefit for those most deserving of it. Commenters 
also overwhelmingly supported our decision not to define the term 
``borrower's representative.''
    We also agree with the recommendation that lenders should be 
required to accept a military service or Armed Forces deferment request 
from a borrower's representative. We believe that the proposed 
regulations would require lenders to accept such deferment requests and 
we have not changed that language.
    However, we believe the simplified process that applies to other 
types of deferments should be optional for lenders. While many lenders 
may welcome the simplified deferment requirements as a convenience, 
other lenders may prefer to grant deferments based on their own review 
of a borrower's deferment documentation. We intend that these amended 
regulations will provide lenders with flexibility in structuring their 
processes for granting deferment requests; we do not want to 
unnecessarily limit their flexibility.
    We disagree with the suggestion that lenders be allowed to grant 
deferments to borrowers with subsidized loans or Perkins Loans without 
a request from the borrower. We believe that the borrower who is 
ultimately liable for the loan should be responsible for deciding 
whether to request a deferment.
    We disagree with the recommendation that schools participating in 
the Perkins Loan Program be allowed to grant forbearances based on 
forbearances granted on the borrower's FFEL Program loans. The 
mandatory forbearance requirements in the FFEL Program differ from the 
forbearance requirements in the Perkins Loan Program. Additionally, 
given that Perkins schools have wide flexibility in granting 
forbearances in the Perkins Loan Program, the Department sees no value 
in allowing schools to base Perkins forbearances on

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forbearances granted in the FFEL Program.
    We also disagree with the recommendation that we allow deferments 
to be granted ``during'' the same time period as another deferment 
under the simplified procedures. If the applicability of the deferment 
and the status of the separate loans is not the same, the simplified 
deferment process cannot be used because the loan holder would need to 
obtain separate documentation verifying the eligibility of the borrower 
based on different dates.
    Changes: None.

Accurate and Complete Copy of a Death Certificate (Sec. Sec.  674.61, 
682.402 and 685.212)

    Comments: Many commenters supported the proposed changes in 
Sec. Sec.  674.61, 682.402, and 685.212 to allow loan holders to use an 
accurate and complete photocopy of a death certificate to discharge a 
Title IV loan due to the death of a borrower. The commenters agreed 
that this approach will reduce the cost of securing additional original 
or certified copies of a death certificate for the surviving family 
members and decrease burden for loan holders.
    Several commenters suggested that the language in Sec. Sec.  
674.61, 682.402, and 685.212 be revised to allow a loan holder to use 
other data sources to grant a loan discharge based on the death of the 
borrower, such as official court documents, the National Student Loan 
Data System (NSLDS), or the Social Security Administration's (SSA's) 
Death Master File. Two commenters suggested that the Department allow 
loan holders to use NSLDS to ``look back'' and discharge loans for a 
deceased borrower that were not included in an original discharge due 
to the death of the borrower.
    Discussion: During the negotiations concerning these regulations, 
some non-Federal negotiators asked the Department to expand the types 
of documentation that could be used to support a request for a 
discharge based on the death of the borrower. Specifically, these 
negotiators asked that they be allowed to base discharges on 
documentation from NSLDS, SSA's Master Death file or court documents. 
We declined to adopt these proposals in order to guard against fraud 
and abuse in the discharge process. The SSA has publicly acknowledged 
that its Master Death file contains inaccuracies. For that reason, we 
do not consider the file to be appropriate for use in granting a death 
discharge and continue to believe that we should not expand the types 
of documentation for program integrity reasons.
    The Department agrees that using NSLDS to identify the loans of a 
deceased borrower that were not included in a discharge based on the 
death of the borrower is worth exploring; however, for program 
integrity reasons we do not agree that NSLDS information alone should 
be the basis for discharging loans that were not included in the 
original discharge. The Department will give further consideration to 
the commenters' suggestion but declines to adopt the suggestion in 
these final regulations.
    Change: None.
    Comments: While supporting the Department's efforts to decrease the 
burden on families applying for a discharge, one commenter expressed 
concern that fraudulent photocopies would be used to secure a discharge 
based on the death of the borrower, thus threatening the integrity of 
the Title IV loan programs. Another commenter recommended that the 
Secretary conduct a study of how the process for granting requests for 
discharges based on the death of the borrower will work before issuing 
final regulations allowing use of a photocopy.
    Discussion: We appreciate the commenter's concern about the 
possible use of fraudulent photocopies of death certificates and will 
closely monitor the use of this documentation. We do not believe a 
study is necessary at this time. An official death certificate is very 
difficult to alter and we expect loan holders to be vigilant when using 
a photocopy as the basis for a death discharge. To ensure the integrity 
of the Title IV loan programs, the granting of a discharge of a Title 
IV loan based on the accurate and complete photocopy of an original or 
certified copy of the original death certificate is still at the 
discretion of lenders and the Secretary.
    Change: None.

Total and Permanent Disability Discharge (Sec. Sec.  674.61, 682.402, 
and 685.213)

    Comment: Many commenters supported our proposals to restructure the 
regulations in Sec. Sec.  674.61, 682.402, and 685.213 to clarify the 
eligibility requirements a borrower must meet to receive a total and 
permanent disability loan discharge and to provide for a similar 
process across the three loan programs. Several commenters also 
supported the requirement for a three-year conditional discharge period 
beginning on the date the Secretary makes an initial determination that 
the borrower is totally and permanently disabled.
    Discussion: We appreciate the commenters' support. Upon further 
internal review, we believe that the Perkins Loan Program regulations 
could be clearer with respect to the information that an institution 
must provide to a borrower upon receipt of the borrower's discharge 
application.
    Changes: The Department has made changes to Sec.  674.61(b)(2) of 
the Perkins Loan Program regulations to provide a more detailed 
description of the information that must be provided to a borrower upon 
the institution's receipt of an application for a discharge.
    Comment: Several commenters supported the proposal in Sec. Sec.  
674.61(b)(2)(i), 682.402(c)(2), and 685.213(b)(1) requiring a borrower 
seeking a total and permanent disability discharge to submit the 
completed application within 90 days of the date the physician 
certifies the application, thus ensuring that the loan holder has 
timely and accurate information on which to base a preliminary 
determination about the borrower's eligibility for the discharge. 
However, other commenters believed that the 90-day time limit would be 
insufficient for a borrower who may be incapable of managing his or her 
affairs or unable to put together the paperwork necessary to submit the 
application. The commenters also stated that the proposed time limit 
would not accommodate delays in the process that are out of the 
borrower's control. The commenters suggested that the Secretary make 
exceptions to the 90-day time limit to accommodate extenuating 
circumstances so that borrowers will not be required to obtain a new 
physician certification if the borrower misses the 90-day time limit. 
One commenter suggested that we adopt a 180-day time limit for 
submission of the discharge application.
    Discussion: The Department continues to believe that the 
requirement in Sec. Sec.  674.61(b)(2)(i), 682.402(c)(2), and 
685.213(b)(1) that borrowers submit the completed application for a 
total and permanent disability discharge to the loan holder within 90 
days of the date the physician certifies the application is appropriate 
and reasonable. Allowing exceptions based on extenuating circumstances 
or allowing a 180-day time limit would not ensure that the Secretary 
has accurate and timely information on which to base her determination 
on the borrower's application. Allowing exceptions or a longer time 
limit would also open up the possibility that a borrower might 
inadvertently take action that would disqualify the borrower for a 
final discharge.
    Changes: None.

[[Page 61964]]

    Comment: Several commenters noted that the proposed regulations do 
not provide for a 60-day administrative forbearance that is provided to 
a borrower under the current FFEL regulations for completion and 
submission of the discharge application form. The commenters were 
concerned that the omission of the forbearance would increase 
delinquency on borrower accounts and penalize the borrower. One 
commenter recommended that we require lenders to suspend collection 
activity and provide a forbearance to a borrower who is attempting to 
complete a discharge application as well as during any period while the 
application is pending.
    Discussion: Section 682.402(c)(5) of the proposed regulations 
allows a lender to grant a borrower a forbearance of payment of both 
principal and interest if the lender does not receive the physician's 
certification of total and permanent disability within 60 days of the 
receipt of the physician's letter requesting additional time to 
complete and certify the borrower's discharge application. Under Sec.  
674.33(d)(5) of the Perkins Loan Program regulations, an institution is 
required to forbear payment on a loan for any acceptable reason. In the 
Direct Loan Program, Sec.  685.205(b)(5) specifically allows the 
Secretary to grant a borrower an administrative forbearance for the 
period of time it takes the borrower to submit appropriate 
documentation indicating that the borrower has become totally and 
permanently disabled. Given that these provisions provide a borrower 
with significant access to forbearance while obtaining a physician's 
certification and completing the discharge application, the Department 
believes that requiring the cessation of collection activity is 
unnecessary until the loan holder actually receives the discharge 
application.
    Changes: None.
    Comment: Several commenters stated that we should continue our 
current practice of using the date the borrower became totally and 
permanently disabled instead of the date the physician certifies the 
borrower's disability on the application as we proposed in Sec. Sec.  
674.61(b)(3)(ii), 682.402(c)(3)(ii), and 685.213(c)(2) as the date to 
establish the borrower's eligibility for a discharge. The commenters 
claimed that using the date the physician certifies the application as 
the date the borrower became totally and permanently disabled is 
arbitrary and contradicts statutory intent that disabled borrowers 
receive immediate relief as of the date the borrower becomes totally 
and permanently disabled.
    Several commenters stated that many borrowers do not realize they 
have the ability to obtain a discharge of their student loans and as a 
result do not apply for a total and permanent disability discharge 
until several years after becoming disabled. These commenters expressed 
concern that using the date the physician certifies the borrower's 
application as the disability date combined with a prospective 
conditional discharge period would subject these borrowers to a long 
delay in receiving the discharge.
    One commenter stated that, in the FFEL Program, using a date 
identified by a physician as the borrower's disability date ensures 
that only one date of disability appears on all applications and forms 
received by the Secretary when the borrower has multiple loans. The 
commenter believes that under the proposed changes to the disability 
discharge process, the start date of the three-year conditional 
discharge period for a borrower who has multiple loans may vary for 
each loan because loans can be assigned to the Secretary at different 
times in the discharge process based on when the borrower submits 
documentation to each lender when the lender files the claim with the 
guarantor, and when the guarantor reviews and pays the claim.
    Several commenters questioned the Department's contention that 
certifying physicians rely solely on a borrower's statements in 
determining the borrower's date of disability and that there may not be 
strong medical evidence for using a different date to establish 
eligibility for Federal benefits. The commenters did not believe that 
it was appropriate for the Department to assume that a physician's 
diagnostic methodology is flawed.
    Discussion: Sections 437(a) and 464(c)(1)(F) of the HEA provide for 
the discharge of a borrower's Title IV loans if the borrower becomes 
totally and permanently disabled as determined in accordance with 
regulations of the Secretary. As discussed in the preamble to the NPRM, 
the Department proposed these regulatory changes to eliminate the 
possibility that a final discharge would be made immediately upon 
assignment of the account to the Department. We believe this result is 
inconsistent with the intent of these regulations, which is to conform 
the discharge requirements to those of other Federal programs that only 
provide for Federal benefits after appropriate monitoring of the 
applicant's condition.
    The Department believes that borrowers are sufficiently informed 
about the availability of a total and permanent disability discharge. 
The promissory notes used in the Title IV loan programs notify 
borrowers of the possibility to have the loan discharged if the 
borrower becomes totally and permanently disabled. Information on the 
discharge is also available on the Department's Web site and in 
numerous Department publications as well as in information from other 
program participants. Although a borrower may experience a delay before 
receiving a total and permanent disability discharge under these 
regulations, we wish to emphasize again our belief that the provision 
of Federal benefits should be made only after there is sufficient 
monitoring of the applicant's condition.
    We do not agree that using a date identified by a physician as the 
borrower's disability date instead of the date the physician certifies 
the borrower's disability on the discharge application means that a 
borrower with multiple loans assigned to the Department has only one 
date of disability. The Department addresses this and similar issues 
frequently under the current total and permanent disability discharge 
process and resolves discrepancies in disability dates on assigned 
loans by consulting with the physician that certified the borrower's 
application. The Department expects to continue this approach to 
resolve discrepancies under the new process and does not believe the 
regulations need to specifically address issues related to processing 
an application.
    Lastly, the Department does not agree that the concern we expressed 
in the NPRM that there may not be strong medical evidence to support 
using the borrower's disability date assumes a flawed diagnostic 
methodology on the part of the certifying physician. As we stated in 
the preamble to the NPRM, we believe that the best date to use as the 
eligibility date is the date the physician certified the application 
because that process requires the physician to review the borrower's 
condition at that time, rather than speculate about the borrower's 
condition in the past.
    Changes: None.
    Comment: Several commenters disagreed with the Secretary's opinion 
that a three-year prospective conditional discharge period would help 
prevent fraud and abuse in the Title IV loan programs by allowing the 
Secretary to monitor a borrower's status before granting a discharge. 
The commenters stated that whether the conditional discharge period is 
prospective or retroactive is irrelevant as long as the Secretary has 
access to a physician's

[[Page 61965]]

certification confirming that the borrower meets the eligibility 
requirements for a disability discharge.
    Several commenters also disagreed with the Department's statement 
in the preamble to the NPRM that there have been instances when 
borrowers have received otherwise disqualifying Title IV loans and 
earnings in excess of allowable levels after the date of the borrower's 
disability discharge application but also after the date of the 
borrower's retroactive final discharge. The commenters cited an 
analysis of a sample of total and permanent disability cases that they 
claimed did not support the Secretary's view.
    Several commenters acknowledged the need to protect the integrity 
of the Title IV programs in regard to disability discharges and stated 
that reliance on a single physician's certification or determination of 
permanent disability may encourage fraud and abuse in the discharge 
process.
    Discussion: In a Final Audit Report published in November 2005, the 
Department's Inspector General concluded that the current, three-year 
conditional discharge period was ineffective for ensuring that a 
borrower is totally and permanently disabled because it does not always 
allow the Department to examine the borrower's current earnings and 
loan information. As a result, a borrower who is not currently disabled 
could receive a disability discharge even though the borrower has 
received current disqualifying income or loans. The Inspector General's 
Audit Report noted that approximately 54 percent of the borrowers who 
received disability discharges applied for the discharge more than 
three years after the disability. As a result, for the discharges 
approved by the Department from July 1, 2002, through June 30, 2004, 
approximately 54 percent (2,593 borrowers) were based on a three-year 
period during which there was no examination of the borrower's current 
income. The Inspector General examined current income information that 
was available for a limited number of these borrowers who had submitted 
a Free Application for Federal Student Aid (FAFSA) and found that a 
number of borrowers who claimed to be totally and permanently disabled 
also reported current income over the limit for a disability discharge. 
As a result the Inspector General recommended that the Department 
revise the regulations to ensure that current income and Title IV loan 
information is considered when determining whether a borrower is 
totally and permanently disabled.
    The proposed regulations address the Inspector General's concerns 
and we believe they will discourage fraud and abuse in the disability 
discharge process. To further ensure against the possibility of fraud 
and abuse, we have added a provision to the Perkins, FFEL and Direct 
Loan Program regulations specifically reflecting the Secretary's 
authority to require a borrower to submit additional medical evidence 
if the Secretary determines that the borrower's application does not 
conclusively prove that the borrower is disabled. As part of this 
review, the Secretary may arrange for an additional review of the 
borrower's condition by an independent physician at no expense to the 
applicant.
    Changes: We have amended Sec. Sec.  674.61(b)(4), 682.402(c)(4), 
and 685.213(d) to provide that the Secretary reserves the right to 
require additional medical evidence of a borrower's total and permanent 
and disability as well as an additional review of the borrower's 
condition by an independent physician at the Secretary's expense.
    Comment: Many commenters disagreed with the Department's proposal 
in Sec. Sec.  674.61(b)(5), 682.402(c)(4)(iii), and 685.213(d)(3)(ii) 
that only payments made on the loan after the date the physician 
certifies the borrower's total and permanent disability discharge 
application would be returned to the borrower. The commenters claimed 
this proposal would harm borrowers who do not obtain a timely 
certification of disability or who continue to make payments to keep 
from defaulting or becoming delinquent on their loans. One commenter 
recommended that repayments be refunded back to the date certified by 
the physician even if a prospective conditional discharge period is 
required.
    One commenter recommended that no payments previously made on a 
loan be returned to a borrower if the borrower receives a final 
discharge based on a total and permanent disability.
    One commenter requested that we clarify to whom the Secretary 
returns payments after a final determination of the borrower's total 
and permanent disability is made in Sec.  674.61(b)(5)(iii).
    Discussion: As stated in the preamble to the NPRM, the Department 
proposed this change to be consistent with the decision to rely on the 
date the physician certifies the borrower's disability on the 
application and to maintain program integrity in the administration of 
the discharge process. Under these regulations, the borrower's 
disability date is the date the physician certifies the borrower's 
discharge application. In this situation, there is no basis for 
returning payments made by the borrower, or on the borrower's behalf, 
before that date. However, it is appropriate to return any payments 
made by or on behalf of the borrower after that date.
    Lastly, the Secretary returns any payments to the individual who 
made the payments after a final determination of the borrower's total 
and permanent disability is made. We agree that the regulations should 
reflect this fact.
    Changes: Sections 674.61(b)(5)(iii), 682.402(c)(4)(iii), and 
685.213(d)(3)(ii) have been changed to reflect that any payments made 
after the date that the physician certified the borrower's application 
for a disability discharge will be sent to the person who made the 
payment after the final discharge is issued.
    Comment: Several commenters felt that the prospective three-year 
conditional discharge period should begin on the date the physician 
certifies the borrower's total and permanent disability discharge 
application rather than on the date the Secretary makes an initial 
determination that the borrower is totally and permanently disabled. 
The commenters stated that using the date the Secretary makes the 
initial determination would be unfair to borrowers. The commenters also 
believed that using the date the Secretary initially determines that a 
borrower is disabled weakens the Secretary's incentive to make 
expeditious decisions on disability discharge applications and 
increases the likelihood that a borrower might inadvertently take an 
action that would disqualify him or her for a final discharge. One 
commenter recommended that the final regulations set a time limit for 
the Department to make a determination of a borrower's initial 
eligibility for a disability discharge.
    Discussion: The Department has considered the comments and has 
decided that beginning the prospective three-year conditional discharge 
period on the date the physician certifies the borrower's total and 
permanent disability discharge application rather than on the date the 
Secretary makes an initial determination that the borrower is totally 
and permanently disabled is appropriate and will not increase the 
opportunity for fraud in the disability discharge process.
    Changes: We have revised Sec. Sec.  674.61(b)(3)(i), 
682.402(c)(3)(i), and 685.213(c)(2) to provide that the three-year 
conditional discharge period begins on the date the physician certifies 
the

[[Page 61966]]

borrower's total and permanent disability discharge application.
    Comment: Several commenters requested that we apply the same 
eligibility standards that apply during the conditional discharge 
period (which prohibit the receipt of any additional Title IV loans and 
allow a borrower to earn no more than 100 percent of the poverty line 
for a family of two, as determined in accordance with the Community 
Service Block Grant Act) to the period between the date the borrower 
obtains a physician's certification and the date the Secretary makes 
her initial determination that the borrower is totally and permanently 
disabled. The commenters believed that applying different eligibility 
requirements at different stages in the process would confuse borrowers 
and jeopardize their ability to qualify for a discharge.
    Discussion: The Department has considered the comments and agrees 
that applying the same eligibility standards beginning on the date the 
borrower obtains the physician's certification on the total and 
permanent disability discharge application and continuing those 
standards throughout the prospective three-year conditional discharge 
would reduce the complexity of the process without creating an 
opportunity for fraud.
    Changes: We have revised Sec. Sec.  674.61(b)(4)(i), 
682.402(c)(4)(i), and 685.213(d)(1) to provide that a borrower may not 
receive any Title IV loans or earn more than 100 percent of the poverty 
line for a family of two, as determined in accordance with the 
Community Service Block Grant Act, beginning on the date the physician 
certifies the borrower's discharge application and throughout the 
prospective three-year conditional discharge period.
    Comment: One commenter requested that the proposed regulations be 
clarified to define the term ``new Title IV loan'' to exclude 
subsequent disbursements of a prior loan.
    Discussion: The Department does not believe that such a change is 
necessary. The regulations in Sec. Sec.  674.61(b)(2)(iv)(C)(2) and 
(3), 682.402(c)(4)(i)(B) and (C), and 685.213(b)(2)(ii)(A) and (B) 
already differentiate between new loans and subsequent disbursements of 
prior loans.
    Changes: None.
    Comment: One commenter requested that the effective dates and 
trigger dates in the proposed regulations be carefully evaluated so 
that borrowers who are in the process of having discharge forms 
certified are not subject to the new requirements. Another commenter 
requested that the effective date of any new regulations governing the 
disability discharge process be based on the approval date of a new 
Federal form to eliminate processing confusion and inadvertent delays 
for applicants.
    Discussion: The Department anticipates that both the new total and 
permanent disability discharge applications and the final regulations 
that govern the process will be effective on July 1, 2008, for 
borrowers who apply for a discharge on or after that date. Borrowers 
who are in the process of having discharge forms certified as of that 
date will not be subject to the new regulations.
    Changes: None.
    Comment: One commenter suggested the Secretary return Perkins Loan 
accounts to the school that assigned them if the Secretary determines 
that the borrower is not totally and permanently disabled. The 
commenter stated that if such accounts were returned to the school, the 
school's Perkins Loan revolving fund would benefit from any repayments 
made when the school resumes collection.
    Discussion: The current assignment process in Sec.  674.50 of the 
Perkins Loan Program regulations requires that, upon accepting 
assignment of a loan, the Secretary acquire all rights, title, and 
interest of the institution in that loan. Returning an assigned Perkins 
Loan account to the school if the Secretary determines that a borrower 
is not totally and permanently disabled would add administrative burden 
to the process and is inconsistent with current regulatory requirements 
in Sec.  674.50(f)(1).
    Changes: None.
    Comment: One commenter suggested that if the Secretary makes an 
initial determination that the borrower's disability is not total and 
permanent, the borrower should not only resume repayment but should 
also be required to repay all amounts that would have been due during 
the cessation of collection on the loan while the application was being 
processed by the loan holder and the Secretary.
    Discussion: The Department believes that to require a borrower to 
repay all amounts that would have been due during the cessation of 
collection on the loan while the application is being processed would 
unnecessarily discourage borrowers who might qualify for a discharge 
from applying.
    Changes: None.
    Comment: One commenter felt that the Department should consider 
disability determinations made by other Federal agencies such as the 
SSA or the Veteran's Administration (VA) in determining whether 
borrowers are eligible for a disability discharge on their Title IV 
loans.
    Discussion: The Department has previously considered the idea of 
applying the disability standards used by other Federal agencies to 
borrowers seeking a discharge of their Title IV loans. However, the 
definition of total and permanent disability used in the Department's 
discharge process is appropriately more demanding than that used by SSA 
and the VA. Those agencies use regular medical reviews of applicants 
over a number of years to ensure that the applicants remain eligible 
for benefits. In those programs, an individual loses benefits if they 
are no longer disabled. In contrast, the Department is providing a 
significant benefit to an individual on a one-time basis without any 
opportunity to conduct future reviews to determine if the individual is 
actually disabled. The Secretary believes that the process established 
in these regulations provides an appropriate process that will ensure 
that only appropriate discharges are granted.
    Changes: None.

NSLDS Reporting (Sec. Sec.  674.16, 682.208, 682.401, and 682.414)

    Comment: Many commenters did not agree with proposed Sec.  
682.401(b)(20), which would change the timeframe in which guarantors 
must report certain student enrollment data to the current loan holder 
from 60 days to 30 days. The commenters believed that this change would 
not accommodate timely reporting in months that have 31 days. Other 
commenters stated that guarantors currently report information to NSLDS 
at least monthly and that changing the requirement for guarantors to 
report enrollment information to lenders to 30 days would not improve 
the timeliness of information. One commenter believed that the 
Secretary did not appropriately consider all the other established 
reporting periods and deadlines when developing this proposal, and that 
new NSLDS reporting requirements will unnecessarily burden schools with 
additional reporting.
    One commenter asked how the Department intends to categorize 
Perkins Loan data that are reported to NSLDS under the new regulations. 
The commenter noted that historically schools categorized and reported 
Perkins Loans based on the terms and conditions of the loan and 
reported disbursements made under these categories as one loan made 
over a period of years. A school would create a new category of Perkins 
Loan when

[[Page 61967]]

the terms and conditions of Perkins Loans were affected by statutory 
changes. The commenter believed that reporting Perkins Loans as 
separate loans each award year would dramatically increase the number 
of loans reported to NSLDS and increase burden and costs associated 
with NSLDS reporting. The commenter noted that new NSLDS reporting 
criteria would increase the number of Perkins Loan account records and 
associated costs of reporting with no benefit to the institution or 
borrowers.
    Three commenters stated that the language in paragraph (j) of 
proposed Sec.  674.16 fails to reflect the intent of Section 485B of 
the HEA which specifically provides that the development of NSLDS 
reporting timeframes be accomplished according to mutually agreeable 
solutions based on consultation with guaranty agencies, lenders and 
institutions. The commenters stated that the Department has not devoted 
sufficient effort to conducting a meaningful dialogue and information 
exchange with institutions about reporting needs for research and 
policy analysis purposes.
    Several other commenters suggested that there should be weekly 
updates to NSLDS instead of the suggested 30 days and believed that 
guaranty agencies, servicers, students, and schools would benefit from 
having more accurate and timely information in NSLDS.
    Discussion: The Secretary believes that the new NSLDS reporting 
timeframes will improve the timeliness and availability of information 
important to managing the student loan program. The Secretary also 
believes that the proposed regulatory changes, such as the 
simplification of the deferment granting process, will be easier and 
more efficiently implemented if timely and accurate information is more 
readily available in NSLDS.
    The Department appreciates the commenters' concerns about the cost 
associated with increased reporting of Perkins Loans. Although the 
costs incurred by institutions to make the systems changes necessary to 
comply with new NSLDS reporting requirements are difficult to estimate, 
we believe that requiring institutions to report Perkins Loans on an 
award year basis, as FFEL and Direct Loan Program loans are reported, 
will increase the quality and integrity of Perkins Loan data and allow 
the Department to make meaningful comparisons between the Title IV loan 
programs for research and budgeting purposes. We also believe that 
reporting Perkins Loans on an award year basis will provide borrowers 
with a more accurate picture of their total indebtedness.
    The Department regularly consults with program participants in 
setting NSLDS reporting requirements in established workgroups that 
meet several times a year. We believe the regulations reflect this 
consultative process.
    With regard to the commenter who suggested that there should be 
weekly updates to NSLDS instead of the suggested 30-day timeframe, 
entities that wish to report to NSLDS on a weekly basis are able to so 
under current protocols. We decline to require weekly reporting 
requirements for all entities at this time, however, because we believe 
that small institutions would find such a standard difficult to manage.
    The Secretary agrees with commenters that the 30-day reporting 
timeframe does not leave guarantors adequate time to report data to the 
current loan holder in months that have 31 days.
    Changes: We have changed the reporting timeframe in Sec.  
682.401(b)(20) to 35 days.

Certification of Electronic Signatures on Master Promissory Notes 
(MPNs) Assigned to the Department (Sec. Sec.  674.19, 674.50, 682.409, 
and 682.414)

    Comment: One commenter agreed that proper execution and retention 
of electronic loan records is necessary for program integrity reasons. 
Several other commenters stated that the proposed changes in Sec.  
674.19(e)(2)(ii) requiring a school participating in the Perkins Loan 
Program to develop and maintain a certification of its electronic 
signature process were overly broad, would discourage schools from 
using electronic notes, and would impose burdensome new record-keeping 
requirements. Other commenters stated that institutional compliance 
with these new requirements would be difficult unless the Department 
clearly defines these new requirements and provides schools with a 
``safe harbor'' of minimum compliance standards for Perkins Loans 
already signed electronically by borrowers. The commenters stated that 
the burden of complying with Sec.  674.50(c)(12)(i) for institutions 
would be difficult to justify given the few borrowers who might dispute 
the validity of the electronic signature at some future date.
    Several commenters stated that the requirement in Sec.  
674.50(c)(12)(ii)(B) that a school's certification include screen shots 
as they would have appeared to the borrower is impractical and 
unnecessary and asked that this requirement be eliminated.
    Discussion: The Department believes that the requirements in Sec.  
674.19(e)(2) that an institution create and maintain a certification 
regarding the creation and maintenance of electronically signed Perkins 
Loan promissory notes or MPNs in accordance with Sec.  674.50(c)(12) 
ensures that the school and the Department have the evidence to enforce 
an assigned loan if a challenge or factual dispute arises in connection 
with the validity of the borrower's electronic signature. Schools are 
required to take legal action to collect on a defaulted Perkins Loan in 
accordance with Sec.  674.46 of the Perkins Loan Program regulations. 
If a legal challenge to the validity of an electronic signature should 
arise in the course of litigating a defaulted Perkins Loan, a school 
will be in a much stronger legal position to prove that the borrower 
signed the loan and benefited from the proceeds of the loan. The need 
to ensure the integrity of the Perkins Loan Program justifies 
establishing electronic signature safeguards. Perkins Loan schools 
should generally not be incurring new costs or burden related to the 
certification of electronic signatures on promissory notes. In July of 
2001, the Department published its Standards for Electronic Signature 
in Electronic Student Loan Transactions (Standards) to facilitate the 
development of electronic processes under the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act). These Standards provided 
guidance to FFEL Program lenders and guaranty agencies, and to schools 
in their role as lenders under the Perkins Loan Program, regarding the 
use of electronic signatures in conducting student loan transactions, 
including using electronic promissory notes. At that time, we informed 
loan holders and institutions in the FFEL or Perkins Loan Program that 
if their processes for electronic signature and related records did not 
satisfy the Standards and the loan was held by a court to be 
unenforceable based on those processes, the Secretary would determine 
on a case-by-case basis whether Federal benefits would be denied, in 
the case of the FFEL Program, or whether a school would be required to 
reimburse its Perkins Loan Fund, in the case of the Perkins Loan 
Program. If, as we assume, Perkins Loan holders are complying with the 
Standards, added burden or cost should not be an issue. The regulations 
in Sec.  674.50(c)(12) that describe what the certification must 
include are already very specific and detailed and a ``safe harbor'' is 
unnecessary. The only provision of these regulations that is not 
specific is

[[Page 61968]]

Sec.  674.50(c)(12)(ii)(F), which requires the certification to include 
``all other documentation and technical evidence requested by the 
Secretary to support the validity or the authenticity of the 
electronically signed promissory note.'' This provision is not intended 
to be overly burdensome on schools. This provision is intended to cover 
whatever documentation a school has that is not already listed in Sec.  
674.50(c)(12)(ii)(A) through (E).
    Lastly, the Department does not agree with the commenters' 
suggestion that inclusion of screen shots as they would have appeared 
to the borrower is impractical or unnecessary. The inclusion of screen 
shots in the certification is a critical part of the process to ensure 
that the promissory note is a valid, legal document, that the terms and 
conditions of the loan were properly represented to the borrower, and 
that the borrower was fully aware of the fact he or she was receiving a 
loan.
    Changes: None.
    Comment: One commenter suggested that the Department require each 
institution that participates in the Perkins Loan Program to designate 
an ``E-Sign Contact Person'' on its FISAP submission to enable 
institutions to meet documentation requests from the Secretary in a 
timely manner.
    Discussion: The Department believes this suggestion has merit and 
will consider implementing this proposal administratively. However, no 
change to the regulations is necessary.
    Changes: None.
    Comment: Many commenters stated that the 10-business day deadline 
required by Sec. Sec.  674.50(c)(12)(iii) and 682.414(a)(6)(iii) within 
which Perkins Loan and FFEL loan holders must respond to a request for 
evidence that may be needed to resolve a dispute with a borrower on a 
loan assigned from the Secretary was too short. One commenter 
recommended a 10-business day standard only if the request relates to 
pending litigation and an alternative, 30-day standard if the request 
is not related to litigation. One commenter recommended delaying 
implementation of the 10-business day deadline by one year to give 
institutions the opportunity to put in place the systems, policies, and 
capability to comply and produce the requested documentation. One 
commenter suggested adopting a 15-business day deadline with an option 
to appeal if the institution faces a special situation. Another 
commenter suggested a 25-business day deadline. One commenter requested 
that the Secretary withdraw this proposal completely.
    Discussion: The Department does not believe that a 10-business day 
deadline to respond to requests from the Secretary for evidence needed 
to resolve a dispute involving an electronically-signed loan that has 
been assigned to the Secretary is burdensome. The Department believes 
that 10 business days provides sufficient time for loan holders. The 
Secretary believes that a timely response to a request for information 
is essential to proper enforcement of a promissory note, especially 
when a borrower is contesting the validity of an electronic signature 
and that challenge involves court proceedings or court-imposed 
deadlines. Finally, we believe that delaying implementation of this 
deadline or not imposing any deadline would threaten the integrity of 
the FFEL and Perkins Loan Programs.
    Changes: None.
    Comment: Several commenters expressed concern regarding the 
provision in proposed Sec.  674.50(c)(12)(i)(B), under which the 
Department would require a Perkins Loan holder to provide testimony to 
ensure the admission of electronic records in a legal proceeding. These 
commenters requested that the Department clarify that the institution 
will not be responsible for any expenses related to this requirement.
    Discussion: Section 489 of the HEA and 34 CFR Sec.  673.7 of the 
General Provisions regulations for the Federal Perkins Loan, Federal 
Work Study, and Federal Supplemental Educational Opportunity Grant 
Programs provide for an administrative cost allowance that an 
institution may use to offset its cost of administering the campus-
based programs, including the costs related to the provision of 
testimony.
    Changes: None.
    Comment: One commenter requested that the Department revise Sec.  
682.409(c)(4)(viii), which would require a guaranty agency to provide 
the Secretary with the name and location of the entity in possession of 
an original, electronically signed MPN that has been assigned to the 
Department. The commenter asked that we change this provision to give 
guaranty agencies the option of providing the Secretary the name and 
location of the entity that created the original MPN or promissory note 
in response to the Secretary's request. The commenter belie