Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program, 55972-56006 [E9-25190]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 74, Number 208 (Thursday, October 29, 2009)]
[Rules and Regulations]
[Pages 55972-56006]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-25190]



[[Page 55971]]

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Part III





Department of Education





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34 CFR Parts 673, 674, 682, et al.



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

Federal Register / Vol. 74, No. 208 / Thursday, October 29, 2009 / 
Rules and Regulations

[[Page 55972]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 673, 674, 682, and 685

RIN 1840-AC98
[Docket ID ED-2009-OPE-0004]


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 to implement 
provisions of the Higher Education Act of 1965 (HEA), as amended by the 
Higher Education Opportunity Act of 2008 (HEOA), and other recently 
enacted legislation.

DATES: Effective Date: These regulations are effective July 1, 2010.
    Implementation Date: The Secretary has determined, in accordance 
with section 482(c)(2)(A) of the Higher Education Act of 1965, as 
amended (HEA)(20 U.S.C. 1089(c)(2)(A)), that lenders, guaranty 
agencies, and loan servicers that administer the FFEL and Direct Loan 
programs may, at their discretion, choose to implement the new 
provisions in Sec. Sec.  682.211(f) and 685.205(b) governing 
administrative forbearances for PLUS loans on or after November 1, 
2009. 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 total and 
permanent disability loan discharges, Jon Utz or Pamela Moran. 
Telephone: (202) 377-4040 or (202) 502-7732 or via the Internet at: 
jon.utz@ed.gov or pamela.moran@ed.gov. For information related to FFEL 
and Direct Loan teacher loan forgiveness, Donald Conner or Jon Utz. 
Telephone: (202) 502-7818 or (202) 377-4040 or via the Internet at: 
donald.conner@ed.gov or jon.utz@ed.gov. For information related to all 
other provisions included in these final regulations, Pamela Moran. 
Telephone: (202) 502-7732 or via the Internet at: pamela.moran@ed.gov.
    If you use a telecommunications device for the deaf (TDD), call the 
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in this section.

SUPPLEMENTARY INFORMATION: On July 23, 2009, the Secretary published a 
notice of proposed rulemaking (NPRM) for the Perkins Loan, FFEL, and 
Direct Loan Programs in the Federal Register (74 FR 36556).
    In the preamble to the NPRM, the Secretary discussed on pages 36558 
through 36575 the major regulations proposed in that document to 
implement provisions of the HEOA, including the following:
     Amending Sec. Sec.  674.51(aa) and 682.200(b) by revising 
the definition of ``totally and permanently disabled'' for title IV 
loan discharges to incorporate statutory changes made by the HEOA, 
including a separate total and permanent disability standard for 
certain veterans, and adding a definition of ``substantial gainful 
activity'' in Sec. Sec.  674.51(x) and 685.200(b) to explain the 
meaning of that term as used in the revised definition of totally and 
permanently disabled. The changes to Sec.  674.51(aa) and Sec.  
674.51(x) appear in final regulations published in the Federal Register 
on October 28, 2009 (RIN 1840-AC95).
     Amending Sec. Sec.  674.61(b), 682.402(c)(2) through (7), 
and 685.213(b) by revising the process for discharging a borrower's 
title IV loans due to total and permanent disability to reflect the 
revised definition of totally and permanently disabled, including the 
establishment of a separate discharge process for certain veterans.
     Amending Sec. Sec.  674.9(g), 682.201(a), and 685.200(a) 
by making conforming changes to the borrower eligibility regulations 
needed to effectively implement the new total and permanent disability 
loan discharge process in Sec. Sec.  674.61(b), 682.402(c)(2) through 
(7), and 685.213(b).
     Amending Sec. Sec.  682.201(e) and 685.220(d) to provide 
that a borrower with only FFEL Program loans may consolidate those 
loans into the Direct Loan Program to use the no accrual of interest 
benefit for active duty military service members.
     Amending Sec.  682.206(f) to require FFEL Program lenders 
to inform borrowers that by applying for a Consolidation loan, the 
borrower is not obligated to agree to take the loan, and to provide 
borrowers with a 10-day period to cancel the Consolidation loan.
     Amending Sec. Sec.  682.210 and 685.204 to provide that: 
(1) A parent PLUS borrower may receive a deferment on a PLUS loan first 
disbursed on or after July 1, 2008 while the dependent student for whom 
the loan was obtained is enrolled on at least a half-time basis at an 
eligible institution, and during the 6-month period after the student 
ceases to be enrolled at least half time; and (2) a graduate or 
professional student PLUS borrower may receive a deferment on a PLUS 
loan first disbursed on or after July 1, 2008 during the 6-month period 
after the student ceases to be enrolled on at least a half-time basis 
at an eligible institution.
     Amending Sec.  682.202(b) to provide that a lender may 
capitalize PLUS loan interest that has accrued from the date of the 
first disbursement until the date the repayment period begins, and 
making a corresponding change in Sec.  685.202(b) to provide that the 
Secretary may capitalize interest on a PLUS loan when the loan enters 
repayment.
     Amending Sec. Sec.  682.211(f) and 685.205(b) to provide 
that a FFEL lender or the Secretary (for a Direct Loan) may grant an 
administrative forbearance on a borrower's PLUS loans that were first 
disbursed before July 1, 2008 to align the repayment begin date of 
those loans with the borrower's PLUS loans first disbursed on or after 
July 1, 2008 that are eligible for the new PLUS loan deferments in 
Sec. Sec.  682.210 and 685.204.
     Amending Sec. Sec.  682.202 and 685.202 to provide that 
any FFEL or Direct Loan program loans of a military servicemember that 
were incurred before the servicemember entered military service are 
subject to the provision in section 207 of the Servicemembers Civil 
Relief Act (50 U.S.C. 527) (SCRA) that limits the interest rate on a 
loan to six percent during periods of active duty service. In addition, 
Sec.  682.302 was amended to provide that for FFEL Program loans first 
disbursed on or after July 1, 2008 that are subject to the SCRA 
interest rate cap, a lender's special allowance payment is calculated 
as it otherwise would be under program requirements, except that the 
applicable interest rate is six percent.
     Amending Sec. Sec.  682.210(c)(1) and 
685.204(b)(1)(iii)(A) to provide that a FFEL lender or the Secretary 
(for a Direct Loan) may grant an in-school deferment based on 
confirmation of the borrower's enrollment status through the National 
Student Loan Data System (NSLDS), if requested by the borrower's 
school.
     Amending Sec.  682.210(a)(3) to require a lender to notify 
a borrower of an unsubsidized loan, at or before the time a deferment 
is granted, that he or she has the option to pay the interest that 
accrues on the loan during the

[[Page 55973]]

deferment or to cancel the deferment, and to provide the borrower with 
information on the impact of interest capitalization if accrued 
interest is not paid. A comparable change was made in Sec.  
685.204(b)(1)(ii)(B) to provide for the same information to be given to 
Direct Loan borrowers.
     Amending Sec. Sec.  682.215(a) and 685.221(a) by revising 
the definition of partial financial hardship for the purpose of 
determining a borrower's eligibility to repay under the income-based 
repayment (IBR) plan. The revised definition specifies that the annual 
amount due on a borrower's eligible loans (under a standard repayment 
plan with a 10-year repayment period) for purposes of determining 
whether a borrower has a partial financial hardship is calculated based 
on the greater of: (1) The amount owed on the eligible loans when the 
borrower initially entered repayment; or (2) the amount owed when the 
borrower selected the IBR plan.
     Amending Sec. Sec.  682.215(b)(1) and 685.221(b)(2) to 
provide that if a borrower who requests the IBR plan and the borrower's 
spouse both have eligible loans and file a joint Federal tax return, 
the calculated IBR partial financial hardship payment amount for each 
borrower would be adjusted based on each borrower's percentage of the 
couple's total eligible loan debt.
     Amending Sec. Sec.  682.216 and 685.217 to specify that an 
otherwise eligible borrower may qualify for teacher loan forgiveness 
based on teaching service performed as an employee of an eligible 
educational service agency. The proposed regulations also added HEOA 
prohibitions on receiving loan forgiveness under the FFEL or Direct 
Loan teacher loan forgiveness programs and certain other loan 
forgiveness programs for the same period of teaching service.
     Amending Sec. Sec.  682.405(a) and 685.211(f) to provide 
that a borrower may not rehabilitate a defaulted FFEL or Direct Loan 
program loan more than once. The proposed regulations also amended 
Sec.  682.405(b)(1)(iii) to clarify that both the guaranty agency and 
its agents must comply with the requirements in that section when 
determining what constitutes a ``reasonable and affordable'' payment 
amount for loan rehabilitation purposes.
     Amending Sec. Sec.  682.200(b) and 682.401(e) by 
incorporating new prohibited and permissible activities by lenders and 
guaranty agencies that were added to the HEA by the HEOA.
     Amending Sec.  682.205 by adding new disclosure 
requirements for FFEL Program lenders that were added by the HEOA, and 
by reorganizing the existing disclosure provisions to accommodate the 
new disclosure requirements and more clearly distinguish the various 
disclosures that are required at various points during the lifecycle of 
a loan.
     Amending Sec.  682.208(e) to specify additional 
information that must be provided to a borrower if the assignment or 
transfer of ownership interest on a FFEL Program loan results in a 
change in the identity of the party to whom the borrower must send 
subsequent payments.
     Amending Sec.  682.211(e) to require a lender, at the time 
a borrower is granted a forbearance, to provide the borrower with 
information on the impact of interest capitalization, and to contact 
the borrower at least once every 180 days during any period of 
forbearance and provide additional information on the impact of 
forbearance on the borrower's loan.
     Amending Sec.  682.305(c) to require that a FFEL school 
lender or an eligible lender trustee (ELT) originating loans on behalf 
of a school submit an annual compliance audit to the Secretary, 
regardless of the dollar volume of loans originated. The proposed 
regulations also specify the requirements that the annual audit must 
meet.
     Adding a new Sec.  682.401(g) to implement a statutory 
requirement for a guaranty agency to work with the schools that it 
serves to develop and make available to students and their families 
high-quality educational materials that provide training in budgeting 
and financial management.
     Amending Sec.  682.405 to require a guaranty agency to 
make available financial and economic education materials, including 
debt management information, to any borrower who has rehabilitated a 
defaulted loan.
     Amending Sec.  682.405(b) to require the prior holder of a 
previously defaulted loan that has been rehabilitated, in addition to 
the guaranty agency, to request that any consumer reporting agency to 
which the default was reported remove the default from the borrower's 
credit history. The proposed regulations also provided more detailed 
reporting deadlines for the guaranty agency and prior loan holder to 
request that the default be removed from the borrower's credit history, 
and reduced the period for these actions to be completed.
     Amending Sec.  682.410(b) by expanding the information 
that a guaranty agency must provide to a borrower who is in default, 
and by adding a requirement that the guaranty agency provide this same 
information to a defaulted borrower in a second notice that the 
guaranty agency must send as part of its collection efforts.
     Amending Sec.  682.200(b) by removing the definition of 
``National credit bureau'' and replacing it with a definition of 
``Nationwide consumer reporting agency''. The proposed regulations also 
replaced all references to ``credit bureau'' in Sec.  682.410(b)(5) and 
(b)(6) with ``consumer reporting agency''.
    There are no significant differences between the NPRM and these 
final regulations resulting from public comments.
    In addition to the changes necessary to implement provisions of the 
HEOA, these final regulations also incorporate certain changes made to 
the HEA by Public Law 111-39, enacted on July 1, 2009, and by the 
Ensuring Continued Access to Student Loans Act of 2008 (Pub. L. 110-
227) (ECASLA), enacted on May 7, 2008. These changes are:
     Amending the definition of ``estimated financial 
assistance'' (EFA) in Sec. Sec.  673.5(c), 682.200(b), and 685.102(b). 
The HEOA amended section 480(j)(1) of the HEA to exclude Federal 
veterans' education benefits, as defined in section 480(c) of the HEA, 
from the definition of EFA for the Title IV student assistance 
programs. Public Law 111-39 made technical corrections to the HEA that, 
among other things, updated the list of Federal veterans' education 
benefits that are excluded from EFA and excluded the new Iraq and 
Afghanistan Service Grants from the definition of EFA. We have made 
technical changes to the definition of EFA in Sec. Sec.  673.5(c), 
682.200(b), and 685.102(b) to reflect these recent changes to the HEA. 
We have also made a few technical changes to clarify and standardize 
the current EFA definitions.
     Amending the lists of prohibited activities in Sec. Sec.  
682.200 and 682.401 to reflect a change made by Public Law 111-39 that 
allows FFEL Program lenders and guaranty agencies to provide in-person 
entrance counseling as well as exit counseling to borrowers.
     Amending Sec. Sec.  682.216 and 685.217 to reflect a 
technical correction made by Public Law 111-39 to the provisions that 
prohibit a borrower from receiving, for the same teaching service, loan 
forgiveness under the FFEL or Direct Loan teacher loan forgiveness 
programs and certain other loan forgiveness programs.
     Amending Sec. Sec.  682.204 and 685.203 to reflect the 
changes to the annual and aggregate loan limits for unsubsidized 
Stafford Loans in both the FFEL and Direct Loan programs that were made 
by ECASLA.

[[Page 55974]]

    In addition to the changes related to Public Law 111-39 and ECASLA 
that are discussed above, these final regulations make a number of 
minor technical corrections and conforming changes. Changes that are 
statutory or that involve only minor technical corrections are 
generally not discussed in the Analysis of Comments and Changes 
section.

Waiver of Proposed Rulemaking and Negotiated Rulemaking Regulations 
Implementing the HEOA

    Under the Administrative Procedure Act (APA) (5 U.S.C. 553), the 
Department is generally required to publish an NPRM 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, 
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 APA.
    Although the regulations implementing the changes made by Public 
Law 111-39 and ECASLA 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 the limited regulatory changes. These 
changes simply reflect statutory changes made by Public Law 111-39 and 
ECASLA that are already effective. The Secretary does not have 
discretion as to whether or how to implement these changes.

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 title IV, HEA programs, the 
Secretary is using the authority granted him under section 482(c) of 
the HEA to designate the new provisions in Sec. Sec.  682.211(f) and 
685.205(b) governing administrative forbearances for PLUS loans for 
early implementation at the discretion of each lender, guaranty agency, 
or servicer, as appropriate.

Analysis of Comments and Changes

    Except as noted above in regard to the limited regulations 
implementing provisions of Public Law 111-39 and ECASLA, the 
regulations in this document were developed through the use of 
negotiated rulemaking. Section 492 of the HEA requires that, before 
publishing any proposed regulations to implement programs under title 
IV of the HEA, the Secretary must obtain public involvement in the 
development of the proposed regulations. After obtaining advice and 
recommendations, the Secretary must conduct a negotiated rulemaking 
process to develop the proposed regulations. All proposed regulations 
must conform to agreements resulting from the negotiated rulemaking 
process unless the Secretary reopens that process or explains any 
departure from the agreements to the negotiated rulemaking 
participants.
    These regulations were published in proposed form on July 23, 2009, 
in conformance with the consensus of the negotiated rulemaking 
committee. Under the committee's protocols, consensus meant that no 
member of the committee dissented from the agreed-upon language. The 
Secretary invited comments on the proposed regulations by August 24. 
Eighteen parties submitted comments, many of which were substantially 
similar. The commenters generally supported the proposed regulations. 
An analysis of the comments and the changes in the regulations since 
publication of the NPRM 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 minor, non-substantive changes, 
recommended changes that the law does not authorize the Secretary to 
make, or comments pertaining to operational processes. We also do not 
address comments pertaining to issues that were not within the scope of 
the NPRM.

Total and Permanent Disability Loan Discharges (Sec. Sec.  674.61(b) 
and (c), 682.402(c), and 685.213)

    Comment: One commenter noted that there are a significant number of 
United States citizens who live abroad and suggested that the 
regulations be revised to allow a disabled borrower living overseas to 
submit an application for a total and permanent disability discharge 
certified by a physician who is licensed to practice in the foreign 
country where the borrower resides.
    Discussion: The proposed regulations retained the current 
regulatory requirement that the physician who certifies a total and 
permanent disability discharge application must be a doctor of medicine 
or osteopathy who is legally authorized to practice in a State. The 
term ``State'' is defined in section 103(23) of the HEA to include the 
States of the United States, the District of Columbia, Puerto Rico, 
Guam, Samoa, the U.S. Virgin Islands, the Northern Mariana Islands and 
the Freely Associated States (the Marshall Islands, Micronesia and 
Palau). The total and permanent disability discharge application 
requires the certifying physician to identify the State in which he or 
she is licensed to practice, and to provide his or her professional 
license number.
    In June 1999, the Department of Education's Inspector General (IG) 
issued a report that identified a number of weaknesses in the 
procedures for determining eligibility for total and permanent 
disability loan discharge and concluded that inappropriate discharges 
were being granted as a result of those weaknesses. In the years since 
the IG's report, the Department has revised the total and permanent 
disability discharge regulations and taken other measures to strengthen 
the procedures for determining a borrower's eligibility for discharge, 
including verification through State records of a physician's license 
to practice. This verification is conducted for each total and 
permanent disability discharge application that the Department reviews. 
Licensure requirements for physicians in foreign countries may differ 
significantly from the requirements in the United States, or in some 
countries may not exist. It would not be possible for the Department to 
verify a physician's license to practice in a foreign country, even if 
a country requires its physicians to be licensed. The Department also 
follows up with physicians who certified an application but did not 
provide sufficient information concerning the borrower's medical 
condition. Having to contact and

[[Page 55975]]

communicate with physicians in foreign countries would be difficult in 
many cases.
    For these reasons, the Department believes that it is important to 
retain the requirement that a physician who certifies a total and 
permanent disability discharge application must be licensed to practice 
in a State.
    Changes: None.
    Comment: One commenter believed that the preamble to the NPRM 
indicated that the Department's standard for determining disability is 
essentially the same as the standard used in the Social Security 
Disability Insurance (SSDI) program, and suggested that the process of 
determining a borrower's eligibility for total and permanent disability 
discharge could be made more efficient if the Department provided an 
electronic means for a borrower to report that he or she is receiving 
SSDI benefits.
    Discussion: The commenter's understanding of the preamble 
discussion in the NPRM is incorrect. In the preamble to the NPRM, the 
Department explained that the proposed definition of substantial 
gainful activity--not the definition of totally and permanently 
disabled--is based, in part, on the definition of substantial gainful 
activity that is used by the Social Security Administration (SSA) to 
determine whether an individual is eligible for Social Security 
disability benefits. The NPRM included the definition of totally and 
permanently disabled that was added to the HEA by the HEOA. This new 
statutory standard does not correspond to any of the disability 
standards used by the SSA for determining an individual's eligibility 
for Social Security disability benefits. An individual who receives SSA 
disability benefits may not qualify as totally and permanently disabled 
under the definition of that term in the HEA.
    Changes: None.
    Comment: Two commenters recommended that the Department revise the 
total and permanent disability discharge regulations to use the poverty 
guideline amount for a borrower's actual family size to determine 
whether the borrower's annual employment earnings during the post-
discharge monitoring period demonstrated that the borrower was not 
totally and permanently disabled. One of the commenters stated that 
borrowers with larger families should be allowed to earn more income 
during the post-discharge monitoring period. This commenter suggested 
that any concerns about potential borrower confusion over the use of a 
variable standard based on actual family size could be resolved by 
annually posting an updated poverty guideline chart on a Department Web 
site.
    Discussion: During the negotiated rulemaking sessions, the 
Department initially proposed an annual earnings standard based on the 
poverty guideline amount for the borrower's actual family size because 
we believed that it would be more equitable for borrowers with a family 
size greater than two. The Department's original proposal would have 
been a change from the employment earnings standard under the current 
total and permanent disability discharge regulations, which provide 
that a conditionally discharged loan will be removed from conditional 
discharge status if a borrower has annual employment earnings during 
the conditional discharge period that exceed the poverty guideline 
amount for a family of two, regardless of the borrower's actual family 
size. However, during the negotiated rulemaking sessions, some of the 
non-Federal negotiators, including the student and legal aid 
representatives, felt strongly that it would be better to continue to 
use the poverty guideline amount for a family of two. These negotiators 
noted that a borrower's family size could change during the three-year 
post-discharge monitoring period, and in such cases the borrower would 
have to monitor changes in the employment earnings limit. They believed 
that a changing standard would be confusing and could result in a 
borrower inadvertently exceeding the employment earnings limit. These 
negotiators urged the Department to retain the current fixed standard 
based on a family size of two. The Department agreed that retaining a 
fixed employment earnings limit based on the poverty guideline amount 
for a family of two during the entire post-discharge monitoring period 
would be less confusing for borrowers and simpler to administer.
    Changes: None.
    Comment: Several commenters noted that under the proposed 
regulations in Sec.  682.402(c)(8) governing total and permanent 
disability discharges for certain veterans, if the Department 
determines that a veteran is eligible for a loan discharge, the 
guaranty agency is responsible for notifying the veteran that the 
veteran has no obligation to make further payments on the loan. These 
commenters recommended that the regulations be revised to provide that 
the lender, rather than the guaranty agency, would notify the veteran 
of his or her eligibility for discharge. The commenters believed that 
it would be simpler to require the lender to make this notification, 
since the proposed regulations already require the lender to refund any 
payments received on the loan after the date of the Department of 
Veterans Affairs disability determination, and the lender would 
therefore already be communicating with the borrower for this purpose. 
The commenters further noted that this approach would be more 
consistent with the proposed regulations governing the general process 
for total and permanent disability discharges for other borrowers. 
Under those regulations, the lender notifies a borrower that his or her 
loan has been assigned to the Department for a determination of 
discharge eligibility, and that no further payments are required.
    Discussion: The Department agrees with the commenters.
    Changes: Section 682.402(c)(8)(ii)(F) has been revised to specify 
that upon receipt of the claim payment from the guaranty agency (after 
the Department has notified the guaranty agency that a veteran is 
eligible for a discharge), the lender notifies the veteran that the 
veteran's obligation to make any further payments on the loan has been 
discharged.
    Comment: Several commenters recommended that the changes to the 
total and permanent disability discharge definition and process should 
be made effective for discharge applications received on or after July 
1, 2010. The commenters believed that using the application receipt 
date as the effective date for the changes would benefit borrowers who 
may not qualify for discharge based on the current definition of 
totally and permanently disabled, and would provide a clearly defined 
transition point for processing discharge applications under the new 
regulations.
    Discussion: Under these final regulations, the new definition of 
totally and permanently disabled and the new discharge process are 
effective for discharge applications received on or after July 1, 2010. 
Disability discharge applications from borrowers other than qualified 
veterans that are received prior to July 1, 2010 will be processed 
under the current regulations and borrower eligibility will be 
determined based on the current definition of totally and permanently 
disabled. Veterans who provide documentation that they have been 
determined by the Secretary of Veterans Affairs to be unemployable due 
to a service-connected disability will have their discharge 
applications processed under the separate procedures that the 
Department has already implemented for these

[[Page 55976]]

borrowers in accordance with the requirements of the HEOA.
    Changes: None.
    Comment: One commenter expressed concerns that many disabled 
military borrowers are unaware that they may qualify for total and 
permanent disability discharge of their loans because of widespread 
problems with a lack of information about this benefit from both FFEL 
Program lenders and the Department. The commenter recommended a number 
of operational measures that lenders, the Department, the Department of 
Defense, and the Department of Veterans Affairs should take to help 
ensure that disabled military borrowers are made aware of the total and 
permanent disability loan discharge provision. The commenter also 
recommended that loan amounts discharged due to total and permanent 
disability should not be treated as taxable income, since this presents 
a financial hardship for disabled borrowers with low incomes.
    Discussion: The Department provides information about total and 
permanent disability discharges on the master promissory notes that are 
signed by all borrowers in all three title IV loan programs. Further, 
information about total and permanent disability discharges is also 
available on Department Web sites, such as Student Aid on the Web 
(https://www.studentaid.ed.gov) and the Direct Loan Program Web site 
(https://www.ed.gov/DirectLoan), as well as Web sites maintained by many 
FFEL Program lenders. Moreover, customer service representatives for 
the Department have been given information about the disability 
discharge process and can provide this information to borrowers. These 
efforts do not have to be addressed in the Department's regulations. 
The commenter's proposal regarding the tax treatment of discharged loan 
amounts would require a statutory change in the Internal Revenue Code 
and cannot be addressed through these regulations.
    Changes: None.
    Comment: One commenter requested clarification of the provisions in 
Sec. Sec.  674.9(g), 682.201(a), and 685.200(a) that require a borrower 
who requests a new title IV loan after receiving a total and permanent 
disability discharge on a prior loan to: (1) Provide a physician's 
certification that he or she is able to engage in substantial gainful 
activity; and (2) acknowledge that the new loan may not be discharged 
in the future based on any medical condition present at the time the 
new loan is made, unless that condition substantially deteriorates. 
Specifically, the commenter asked if these requirements apply to all 
borrowers who received a prior total and permanent disability 
discharge, regardless of whether the discharge was granted under the 
general discharge procedures or the special procedures for certain 
veterans.
    Discussion: The requirements for receiving a new loan after having 
a loan discharged due to total and permanent disability apply to all 
borrowers, regardless of whether the discharge was granted under the 
general discharge process or the special discharge process for certain 
veterans. These requirements are intended to assure that the borrower 
is likely to repay the loan in accordance with the promissory note that 
the borrower signs for the new loan.
    Changes: None.
    Comment: One commenter recommended that current Sec.  
682.201(a)(6), which specifies the additional eligibility requirements 
that must be met by a borrower who requests a new loan following a 
final discharge of a prior title IV loan due to a total and permanent 
disability, also be applied to a borrower who is requesting a new loan 
after receiving a final discharge of a TEACH Grant service obligation 
due to a total and permanent disability. The commenter believed that an 
individual who wants to receive a new loan after previously receiving a 
final total and permanent disability discharge should have to meet the 
same eligibility requirements, regardless of whether the prior 
disability discharge involved a title IV loan or a TEACH Grant service 
obligation.
    The commenter also asked if the Department's National Student Loan 
Data System (NSLDS) will indicate that a TEACH Grant service obligation 
has been discharged due to a total and permanent disability, just as it 
currently identifies title IV loans that have been discharged due to a 
total and permanent disability.
    Discussion: The Department agrees that a borrower who requests a 
new title IV loan after previously receiving a final total and 
permanent disability discharge of a TEACH Grant service obligation 
should be subject to the same eligibility requirements as a borrower 
who previously received a final total and permanent disability 
discharge of a title IV loan. NSLDS does identify TEACH Grant service 
obligations that have been discharged based on the grant recipient's 
total and permanent disability.
    Changes: Section 682.201(a)(6) has been revised by adding a 
reference to TEACH Grant service obligations. Corresponding changes 
have also been made in Sec. Sec.  674.9(g) and 685.200(a)(1)(iv).
    Comment: One commenter raised concerns about the requirement in 
current Sec.  682.402(h)(1)(i)(B) as it relates to the proposed 
regulations in Sec.  682.402(c)(8) that govern the total and permanent 
disability discharge process for certain veterans. Under current Sec.  
682.402(h)(1)(i)(B), a guaranty agency must promptly review a 
disability discharge claim filed by a lender and pay an approved claim 
within 90 days after the claim was filed. The commenter believed that 
this deadline is reasonable in the case of a disability claim processed 
under the standard discharge process in proposed Sec.  682.402(c)(1) 
through (7), since all of the actions that are required to pay a 
lender's claim are entirely under the guaranty agency's control. 
However, the commenter noted that under the separate discharge process 
for certain veterans in proposed Sec.  682.402(c)(8), a guaranty agency 
cannot pay a lender's disability claim until the Department has 
reviewed the veteran's discharge request and notified the guaranty 
agency that the veteran is eligible for discharge. Therefore, a delay 
in the Department's review of a veteran's discharge request could 
prevent a guaranty agency from meeting the 90-day time limit in current 
Sec.  682.402(h)(1)(i)(B). The commenter recommended that the 
Department amend current Sec.  682.402(h)(1)(i)(B) to provide one 
deadline for a guaranty agency to review a disability claim involving a 
veteran's discharge request and either refer the discharge application 
and any supporting documentation to the Department or return it to the 
lender, and a separate deadline for the guaranty agency to either pay 
or return the claim, as applicable, after being notified by the 
Department that the veteran is or is not eligible for discharge.
    Discussion: The Department agrees with the commenter.
    Changes: Section 682.402(h)(1) has been revised to provide that a 
guaranty agency must review a disability claim based on a veteran's 
discharge request under Sec.  682.402(c)(8) and either submit the 
request to the Department or return the claim to the lender within 45 
days after the claim was filed, and must pay the claim or return the 
claim to the lender within 45 days after being notified by the 
Department of the veteran's eligibility or ineligibility for discharge.

Consolidation Loans (Sec.  682.201(e))

    Comment: One commenter asked that the regulations clarify which 
FFEL Program loans are eligible for the Direct

[[Page 55977]]

Loan Program's no accrual of interest benefit for active duty military 
service members after a FFEL borrower consolidates the loans into the 
Direct Loan Program. The commenter believed the language in the 
proposed regulations did not adequately address this issue and 
suggested that the regulations be amended to include the clarifying 
language contained in the Department's Stafford Loan Master Promissory 
Note (MPN).
    Discussion: The Department agrees with the commenter that the 
regulatory language defining which loans are eligible for the no 
accrual of interest benefit should be clarified and that it is 
appropriate to use the Stafford Loan MPN language as a model. The 
Stafford Loan MPN informs borrowers that a FFEL Program loan that was 
first disbursed on or after October 1, 2008, including a Federal 
Consolidation Loan that repaid FFEL or Direct Loan program loans first 
disbursed on or after October 1, 2008, may be consolidated into the 
Direct Loan Program to take advantage of the no accrual of interest 
benefit for active duty military service members, and explains that no 
interest will be charged on the portion of the new Direct Consolidation 
Loan that repaid FFEL or Direct Loan program loans first disbursed on 
or after October 1, 2008 during periods of qualifying active duty 
military service (for up to 60 months). A Federal Consolidation Loan 
that repaid some loans that were first disbursed on or after October 1, 
2008 and other loans that were first disbursed before that date may be 
consolidated into the Direct Loan Program to take advantage of the no 
accrual of interest benefit, but the benefit will apply only to the 
portion of the Direct Consolidation Loan that is attributable to the 
loans repaid by the Federal Consolidation Loan that were first 
disbursed on or after October 1, 2008.
    Changes: Section 682.201(e)(5) has been revised to include language 
specifying that FFEL Program loans first disbursed on or after October 
1, 2008 (including Consolidation loans that repaid FFEL or Direct loans 
first disbursed on or after October 1, 2008) are eligible for the no 
accrual of interest benefit when included in a Federal Direct 
Consolidation Loan.

In-School Deferments for PLUS Loans (Sec.  682.210)

    Comment: One commenter raised an issue concerning proposed Sec.  
682.210(v)(1)(ii), which provides that if a lender grants an in-school 
deferment on a student PLUS loan first disbursed on or after July 1, 
2008 based on enrollment information that confirms the borrower's 
eligibility for the deferment, the deferment period includes the 
additional 6-month post-enrollment deferment period that begins when 
the student ceases to be enrolled on at least a half-time basis. The 
commenter believed that the regulations should not specify the 
operational method by which a lender processes a deferment, and 
recommended that the regulatory language be revised to provide that a 
lender may process the 6-month post-enrollment deferment as either an 
extension of the in-school deferment period, or a separate deferment 
period that begins when the student ceases to be enrolled at least half 
time.
    Discussion: The regulatory language stating that the deferment 
period ``includes'' the 6-month post-enrollment deferment is intended 
to clarify that if a lender grants an in-school deferment on a student 
PLUS loan first disbursed on or after July 1, 2008 based on enrollment 
status information, the 6-month post enrollment deferment may be 
granted without a separate request from the borrower. The regulatory 
language does not dictate the operational details of how a lender 
processes the post-enrollment deferment.
    Changes: None.

Deferment (Sec. Sec.  682.210 and 682.204)

    Comment: One commenter raised an issue concerning the discussion of 
proposed Sec.  682.210(a)(3)(ii) in the preamble to the NPRM. This 
provision requires a FFEL Program lender, at or before the time a 
deferment is granted to a borrower who is responsible for paying the 
interest on a loan during the deferment, to notify the borrower of 
certain information, including the borrower's option to pay the 
interest that accrues during the deferment or to cancel the deferment 
and continue paying on the loan. The Department stated in the preamble 
that a comparable change would be made to Sec.  
685.204(b)(1)(iii)(B)(2) to provide that Direct Loan borrowers will be 
notified of their right to cancel a deferment and continue paying on 
the loan. The commenter noted, however, that the corresponding Direct 
Loan provision does not specifically say that borrowers will be 
notified of the option to pay the accruing interest during a deferment 
period, and recommended that this be added to ensure that Direct Loan 
borrowers receive the same information as FFEL borrowers.
    Discussion: Regulations are issued to govern the activities of 
third parties; in general, the Secretary does not issue regulations to 
control the Department's activities. Direct Loan Program borrowers are 
notified of their option to pay the interest that accrues during a 
deferment on the Direct Loan Program deferment request forms and in the 
correspondence borrowers receive when a deferment is granted.
    Changes: None.
    Comment: Several commenters raised a concern about language in the 
preamble to the NPRM that describes the requirement for a lender to 
inform a borrower, at or before the time a deferment is granted, that 
the borrower has the option to pay the accruing interest or cancel the 
deferment and continue to pay on the loan. The commenters noted that, 
during the negotiated rulemaking process, the Department agreed that it 
would be helpful for a borrower to receive this information at the time 
of application for the deferment, and that including the required 
information in the Department-approved, standardized deferment forms 
would satisfy the notification requirement. The commenters were 
concerned that the discussion in the preamble could be misinterpreted 
to suggest that a lender must provide the information both at the time 
the borrower requests the deferment and at the time the lender grants 
the deferment.
    Discussion: The Department did not intend to imply a change in the 
meaning of the language in the regulations through the preamble 
discussion. As stated in Sec.  682.210(a)(3)(ii), the lender may 
provide the required information ``at or prior to the time the 
deferment is granted.'' Providing the required information to the 
borrower as part of the standardized deferment application at the time 
the borrower requests the deferment satisfies the regulatory 
notification requirement. The lender may, but is not required to, also 
provide the information at the time the deferment is granted.
    Changes: None.

Income-Based Repayment (IBR) Plan

    Comment: Some commenters praised the Department for proposing 
changes to the IBR regulations to address the calculation of partial 
financial hardship for borrowers whose outstanding loan balances 
increase rather than decrease while they repay their loans under 
another repayment plan prior to requesting IBR, and for married 
borrowers who file joint tax returns with the IRS and who both have 
eligible education loans. One commenter noted, however, that the 
Department had amended the Direct Loan regulations to allow a borrower 
who wants to repay a defaulted FFELP loan with a Direct

[[Page 55978]]

Consolidation Loan to agree to pay the Direct Consolidation Loan under 
the IBR Plan, but did not make a comparable change in Sec.  
682.201(d)(1)(i)(A). The commenter requested that a technical 
correction be made to insert a reference to IBR in the corresponding 
FFEL provision so that comparable terms and conditions apply to 
borrowers in both programs.
    Discussion: The commenter is correct that this change should be 
reflected in the FFEL Program regulations. The Department agrees that 
comparable terms and conditions should apply for this purpose for 
borrowers in both the FFEL and Direct Loan programs.
    Changes: Section 682.201(d)(1)(i)(A) has been revised to provide 
that a borrower may consolidate a defaulted loan if he or she agrees to 
repay the FFEL Consolidation loan under either the income-sensitive 
repayment plan or the income-based repayment plan.

FFEL and Direct Loan Program Teacher Loan Forgiveness (Sec. Sec.  
682.216 and 685.217)

    Comment: One commenter noted that under the proposed regulations, 
an educational service agency is considered an eligible educational 
service agency for teacher loan forgiveness purposes only if the agency 
meets the same eligibility requirements as elementary and secondary 
schools under current regulations, including the requirement to be 
listed in the Department's Annual Directory of Designated Low-Income 
Schools (Low-Income School Directory). The commenter asked for 
clarification as to whether an otherwise eligible teacher who is 
employed by an educational service agency that is not listed in the 
Low-Income School Directory would qualify for teacher loan forgiveness 
if the teacher taught for five complete, consecutive academic years at 
an elementary or secondary school that is included in the Low-Income 
School Directory.
    Discussion: The proposed regulations allow a teacher to qualify for 
loan forgiveness if he or she is employed as a full-time teacher for 
five consecutive complete academic years at an eligible elementary or 
secondary school or by an eligible educational service agency, and 
meets the other eligibility requirements of the teacher loan 
forgiveness program. An otherwise eligible teacher who is employed by 
an educational service agency, but who teaches at a low-income 
elementary or secondary school that is not operated by the educational 
service agency, may qualify for loan forgiveness if either the 
educational service agency or the school where the individual performs 
qualifying teaching service is listed in the Low-Income School 
Directory.
    Changes: None.
    Comment: One commenter asked for clarification as to who the 
appropriate certifying official would be for purposes of certifying the 
loan forgiveness application of a ``traveling'' teacher who, as 
discussed in the preamble to the NPRM, does not have a fixed location 
of employment, but instead performs qualifying teaching service at 
multiple eligible schools or eligible educational service agencies, and 
who may not actually be employed by the schools or educational service 
agencies where he or she teaches. The commenter believed that the 
reference in the NPRM to not having a fixed location of employment 
would imply that a traveling teacher is an independent contractor who 
is not actually employed by any school or educational service agency.
    Discussion: In the preamble to the NPRM, the Department indicated 
that ``traveling'' teachers who do not have a fixed location of 
employment, but who perform qualifying teaching service at multiple 
eligible elementary or secondary schools, or at multiple eligible 
educational service agencies, may (if otherwise eligible) qualify for 
teacher loan forgiveness even though they are not employees of the 
schools or educational service agencies where they teach. The reference 
to not having a fixed location of employment was not intended to 
suggest that a traveling teacher would be an independent contractor. A 
traveling teacher may be an employee of a particular school, school 
district, or educational service agency and provide teaching services 
at various schools or locations operated by educational service 
agencies. For purposes of certifying such a teacher's loan forgiveness 
application, the certifying official must be someone who has access to 
employment records that establish the teacher's eligibility for loan 
forgiveness, and who is authorized to verify the teacher's qualifying 
employment. The appropriate certifying official may vary depending on 
individual employment circumstances. The certifying official could be 
someone at the borrower's actual employer, or someone at the location 
where the borrower performed the qualifying teaching service.
    Changes: None.
    Comment: Several commenters stated that there appears to be a 
conflict between the preamble of the NPRM and the proposed regulatory 
language with regard to the conditions under which qualifying teaching 
service performed at an eligible educational service agency prior to 
the date of enactment of the HEOA may be counted toward the required 
five complete consecutive years of teaching service. The preamble 
states that the required five complete consecutive years may include 
any combination of teaching at eligible elementary or secondary schools 
or eligible educational service agencies, but that teaching at an 
educational service agency may be counted toward the five years only if 
the consecutive five years includes qualifying service at an eligible 
educational service agency performed after the 2007-2008 academic year. 
The proposed regulatory language in Sec. Sec.  682.216(a)(2) and 
685.217(a)(2) states that for teaching service performed by an employee 
of an eligible educational service agency, at least one of the five 
consecutive complete academic years must have been after the 2007-2008 
academic year.
    The commenters noted that the regulatory requirement for ``at least 
one'' of the complete academic years to have been after the 2007-2008 
academic year could be interpreted to mean that for any years of 
teaching at an eligible educational service agency prior to the 
enactment of the HEOA to count toward the required five consecutive 
years, a borrower must have completed a full year of teaching at an 
eligible educational service agency after the 2007-2008 academic year. 
They believed this approach would be contrary to the agreement reached 
during the negotiated rulemaking process and the preamble to the NPRM. 
The commenters interpreted the preamble language to mean that 
qualifying teaching service performed by an employee of an educational 
service agency prior to the enactment of the HEOA would count toward 
the required five consecutive years as long as the five-year period 
includes any period of qualifying teaching at an eligible educational 
service agency after the 2007-2008 academic year, even if the 
qualifying service at an educational service agency after the 2007-2008 
academic year is less than a full academic year. For example, the 
preamble language would allow a borrower who performed qualifying 
teaching service at an eligible educational service agency for four 
complete consecutive academic years from 2004-2005 through 2007-2008 to 
count those years toward the required five consecutive years if, during 
the 2008-2009 academic year, the borrower taught for half of the year 
at an eligible educational service agency and the other half of the 
year at an eligible elementary or secondary school. The

[[Page 55979]]

commenters recommended that proposed Sec.  682.216(a)(2) be revised to 
reflect the language in the preamble.
    Discussion: Proposed Sec.  682.216(a)(2) was intended to be 
consistent with the preamble to the NPRM regarding the eligibility of 
teaching service performed by an employee of an educational service 
agency prior to the date of enactment of the HEOA. However, the 
Department agrees with the commenters that the regulatory language 
could be misinterpreted.
    Changes: Sections 682.216(a)(2) and 685.217(a)(2) have been revised 
to reflect the language in the preamble to the NPRM. Conforming changes 
have also been made in Sec. Sec.  682.216(c)(3)(iii) and (c)(4)(iii), 
and 685.217(c)(3)(iii) and (c)(4)(iii).

Eligibility for Rehabilitation of Defaulted FFEL and Direct Loans 
(Sec. Sec.  682.405(a) and (b)(1)(iii) and 685.211(f))

    Comment: One commenter agreed with the Department's interpretation 
that the limit on rehabilitation of defaulted loans to one opportunity 
applies to each loan, but requested further clarification on the 
application of the limit. The commenter asked whether a borrower who 
successfully rehabilitates a defaulted loan, consolidates that loan, 
and then subsequently defaults on the consolidation loan would be 
eligible to rehabilitate the consolidation loan. The commenter believed 
the borrower should be eligible to rehabilitate the consolidation loan 
because the previously rehabilitated loan was in good standing when it 
was consolidated.
    Discussion: A consolidation loan is a new loan. In the commenter's 
example, the borrower's previously rehabilitated loan was paid in full 
through the consolidation process and has no bearing on the borrower's 
eligibility for rehabilitation of the consolidation loan. The 
Department agrees that the borrower is eligible to rehabilitate the 
defaulted consolidation loan, but does not believe it is necessary to 
separately address the treatment of consolidation loans in the 
regulations.
    Changes: None.

Definition of Lender (Sec.  682.200(b))

    Comment: One commenter asked whether the term ``other group'' in 
paragraph (5)(i)(A)(6) of the prohibited inducement provisions of the 
proposed definition of ``lender'' includes a lender's board of 
directors. The commenter asked the Department to clarify that a 
lender's board of directors would be covered by the prohibition even if 
the Department decided not to define the term.
    Discussion: The term ``other group'' is not defined in the HEA. The 
Department agrees, however, that service on a lender's board of 
directors is one of the groups established by a lender that would be 
covered under the provision. The Department declines to define the term 
``other group'' and does not believe it is possible to provide an all-
inclusive listing of the possible types of groups a lender may 
establish that would be covered by the prohibition.
    Changes: None.

Lender Disclosures (Sec.  682.205)

    Comment: One commenter raised concerns about the number of new and 
revised borrower disclosures that lenders must provide under proposed 
Sec.  682.205. The commenter indicated that his organization would need 
substantial time to prepare the disclosures, train its staff, and make 
necessary data processing changes to implement the regulations. The 
commenter requested that the Department extend the effective date of 
the lender disclosure provisions to one year after the final 
regulations are issued.
    Discussion: The Department notes that the new and revised borrower 
disclosures included in the proposed regulations are required as a 
result of the enactment of the HEOA and became effective in most cases 
on August 14, 2008. Lenders are expected to comply with the 
requirements to the extent possible until these implementing 
regulations become effective on July 1, 2010. The Department believes 
that providing information to borrowers, particularly those who are 
having difficulty making payments or who are past due on their 
payments, is critical, and therefore declines to delay the July 1, 
2010, effective date of these implementing regulations.
    Changes: None.
    Comment: Several commenters requested a change to Sec.  
682.205(c)(4) of the proposed regulations, which describes the 
information that must be provided to borrowers who contact their 
lenders indicating that they are having difficulty making their 
payments. The commenters were concerned that sending the required 
information repeatedly to a borrower if the borrower contacts the 
lender more than once over a short period of time would be ineffective 
and could confuse the borrower. The commenters requested that the 
Department require the lender to send the disclosure only if the lender 
had not sent one to the borrower within the previous 120 days. The 
commenters believed that this change would be comparable to a change 
agreed to during the negotiations related to the frequency of the 
required disclosure for borrowers who fall 60 days behind in making 
payments. The Department agreed that, in that situation, it was not 
beneficial to send multiple disclosures to a borrower who was rolling 
in and out of a 60-day delinquency status and, as a result, the 
proposed regulations do not require a lender to continue to send the 
60-day delinquency disclosure if one was sent to the borrower within 
the previous 120 days.
    Discussion: The Department does not agree that the disclosure 
required under Sec.  682.205(c)(4) when a borrower contacts the lender 
indicating he or she is having difficulty making payments is comparable 
to the disclosure of information in the 60-day delinquency situation. 
The 60-day delinquency disclosure is automatically triggered by the 
borrower's delinquency status and is in addition to other lender due 
diligence contacts with the borrower required under Sec.  682.411 of 
the FFEL regulations. In the case of a borrower having difficulty 
making payments, the borrower triggers the disclosure by contacting the 
lender and requesting assistance. Under these circumstances, we believe 
a lender has a responsibility and an obligation to assist the borrower 
by providing information as frequently as necessary to assist that 
borrower. The Department disagrees that the situations are comparable 
and declines to make the change requested by the commenters.
    Changes: None.

Executive Order 12866

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
the regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive order and subject to review by the Office 
of Management and Budget (OMB). Section 3(f) of Executive Order 12866 
defines a ``significant regulatory action'' as an action likely to 
result in a rule that may (1) have an annual effect on the economy of 
$100 million or more, or adversely affect a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or Tribal governments or communities in a 
material way (also referred to as an ``economically significant'' 
rule); (2) create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency; (3) materially alter the 
budgetary impacts of entitlement grants, user fees, or loan

[[Page 55980]]

programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
order.
    Pursuant to the terms of the Executive order, it has been 
determined this regulatory action will not have an annual effect on the 
economy of more than $100 million. Therefore, this action is not 
``economically significant'' and subject to OMB review under section 
3(f)(1) of Executive Order 12866. Notwithstanding this determination, 
the Secretary has assessed the potential costs and benefits of this 
regulatory action and has determined that the benefits justify the 
costs.

Need for Federal Regulatory Action

    As discussed in the NPRM, these regulations are needed to implement 
provisions of the HEA, as amended by the HEOA, particularly related to 
changes related to loan discharge, deferment, consolidation, 
rehabilitation, and repayment plan provisions, and the addition of a 
new Part E to title I of the HEA, which establishes extensive new 
disclosure requirements for lenders and institutions participating in 
Federal and private student loan programs.

Regulatory Alternatives Considered

    Regulatory alternatives were considered as part of the rulemaking 
process. These alternatives were reviewed in detail in the preamble to 
the NPRM under both the Regulatory Impact Analysis and the Reasons 
sections accompanying the discussion of each proposed regulatory 
provision. To the extent that they were addressed in response to 
comments received on the NPRM, alternatives are also considered 
elsewhere in the preamble to these final regulations under the 
Discussion sections related to each provision. No comments were 
received related to the Regulatory Impact Analysis discussion of these 
alternatives.
    As discussed above in the Analysis of Comments and Changes section, 
these final regulations reflect statutory amendments included in the 
HEOA and minor revisions in response to public comments. In most cases, 
these revisions were technical in nature and intended to address 
drafting issues or provide additional clarity. Other changes, such as 
the requirement that lenders rather than guaranty agencies notify 
veterans whose loans have been discharged that their obligation to make 
any further payments has been discharged, were made to simplify and 
standardize program operations. None of these changes result in 
revisions to cost estimates prepared for and discussed in the 
Regulatory Impact Analysis of the NPRM.

Benefits

    As discussed in the NPRM, benefits provided in these proposed 
regulations include greater transparency for borrowers participating in 
the Federal and private student loan programs; clearer guidelines on 
acceptable behavior by and relationships among institutions 
participating in the student loan programs; improvements to the IBR 
plan, particularly for married borrowers; a simpler process for 
obtaining loan discharges due to total and permanent disability; and 
expanded eligibility for Teacher Loan forgiveness benefits. It is 
difficult to quantify benefits related to the new institutional and 
lender requirements, as there is little specific data available on 
either the extent of improper or questionable relationships between 
institutions and lenders prior to the HEOA or of the harm such 
relationships actually caused for either borrowers, institutions, or 
the Federal taxpayer. In the NPRM, the Department requested comments or 
data that would support a more rigorous analysis of the impact of these 
provisions. No comments or additional data were received.
    Benefits under these regulations flow directly from statutory 
changes included in the HEOA; they are not materially affected by 
discretionary choices exercised by the Department in developing these 
regulations, or by changes made in response to comments on the NPRM. As 
noted in the Regulatory Impact Analysis in the NPRM, these proposed 
provisions result in net costs to the government of $192.7 million over 
2009-2013.

Costs

    As discussed extensively in the Regulatory Impact Analysis