COMMON MANUALUnified Student Loan PolicyJuly 1999

©1999 Common Manual Guarantors

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Table of Contents

Chapter 1: Overview

1.1 Introduction ............................................................................................................................................................ 11.2 Acknowledgments .................................................................................................................................................. 11.3 About the Manual .................................................................................................................................................... 11.4 Disclaimer .............................................................................................................................................................. 21.5 Participating Guarantors and Contact Information .................................................................................................... 3

Chapter 2: About the FFELP

2.1 The Federal Family Education Loan Program (FFELP) .............................................................................................. 12.1.A. Overview ................................................................................................................................................................ 12.1.B. Types of Loans Available ......................................................................................................................................... 12.2 The Life of a FFELP Loan ......................................................................................................................................... 22.2.A. Origination .............................................................................................................................................................. 22.2.B. The Interim Period .................................................................................................................................................. 72.2.C. Repayment ............................................................................................................................................................. 82.3 Other FFELP Resources ......................................................................................................................................... 102.3.A. Federal Statute, Regulations, and Dear Colleague Letters ...................................................................................... 102.3.B. U.S. Department of Education Publications ............................................................................................................ 11

Chapter 3: Lender Participation

3.1 Eligible Lenders ...................................................................................................................................................... 13.2 Schools Acting as Lenders ...................................................................................................................................... 23.3 Participation and Guarantees .................................................................................................................................. 23.3.A. Approval for Participation ........................................................................................................................................ 23.3.B. Agreement to Guarantee Loans ............................................................................................................................... 33.3.C. Assignment of Loans .............................................................................................................................................. 33.3.D. Transfer of Loan Guarantee ..................................................................................................................................... 33.4 Lender Responsibilities ........................................................................................................................................... 43.4.A. Recordkeeping Requirements ................................................................................................................................. 43.4.B. Notice to Borrower of Loan Sale or Transfer ............................................................................................................ 53.4.C. Prohibited Activities ................................................................................................................................................ 63.4.D. Borrower Defenses ................................................................................................................................................. 73.4.E. Charges to Borrowers ............................................................................................................................................. 73.5 Lender Reporting .................................................................................................................................................... 83.5.A. Federal Origination Fee Payment and Reporting ...................................................................................................... 83.5.B. Interest Benefits and Special Allowance Reporting .................................................................................................. 83.5.C. Credit Bureau Reporting .......................................................................................................................................... 83.5.D. Reporting Loan Status Changes .............................................................................................................................. 93.5.E. Reporting Loan Sales and Transfers ........................................................................................................................ 93.5.F. Social Security Number Change Reporting ............................................................................................................ 103.5.G. NSLDS Reporting .................................................................................................................................................. 103.5.H. Reporting Loans Paid in Full .................................................................................................................................. 103.6 Third-Party Servicers ............................................................................................................................................ 113.6.A. Administrative Capability ....................................................................................................................................... 113.6.B. Financial Responsibility ......................................................................................................................................... 123.7 Lender of Last Resort ............................................................................................................................................ 143.7.A. Eligible Lenders .................................................................................................................................................... 143.7.B. Benefits of Participation ........................................................................................................................................ 143.7.C. How the LLR Program Works ................................................................................................................................ 143.8 Independent Audits ............................................................................................................................................... 153.8.A. Annual Compliance Audits .................................................................................................................................... 153.8.B. Third-Party Servicer Audits ................................................................................................................................... 16

Table of Contents

3.9 Exceptional Performer Designation ........................................................................................................................ 173.9.A. Applying for the Designation ................................................................................................................................. 173.9.B. Department Determination of Request for Designation .......................................................................................... 17

Chapter 4: School Participation

4.1 Institutional Eligibility .............................................................................................................................................. 14.1.A. Establishing Eligibility ............................................................................................................................................. 14.1.B. Written Agreements between Schools ..................................................................................................................... 24.1.C. Maintaining Eligibility .............................................................................................................................................. 34.1.D. Loss of Eligibility ..................................................................................................................................................... 64.1.E. Disbursement and Release of Funds in Cases of Loss of School Eligibility ............................................................... 84.2 Administrative Capability Standards ........................................................................................................................ 84.2.A. Financial Aid Administrator Responsibilities ............................................................................................................ 94.2.B. Financial Aid Administrator Training ........................................................................................................................ 94.2.C. Withdrawal Rates .................................................................................................................................................. 104.3 Financial Responsibility Standards ........................................................................................................................ 104.3.A. General School Financial Responsibility Requirements .......................................................................................... 104.3.B. Specific Criteria for Determining School Financial Responsibility ........................................................................... 114.3.C. Sufficient Cash Reserve Requirements .................................................................................................................. 124.3.D. Composite Score ................................................................................................................................................... 124.4 Reporting Social Security Number Changes .......................................................................................................... 144.5 Leave of Absence ................................................................................................................................................. 144.6 Determining the Student’s Withdrawal Date .......................................................................................................... 154.7 Refunds ................................................................................................................................................................ 164.7.A. Refund Amounts ................................................................................................................................................... 164.7.B. Pro Rata Refunds .................................................................................................................................................. 164.7.C. Processing Refunds .............................................................................................................................................. 184.8 Student Status Reporting ...................................................................................................................................... 204.8.A. National Student Loan Data System (NSLDS) Student Status Confirmation Reporting ............................................ 204.8.B. Reporting Student Status Changes to the Lender or Guarantor .............................................................................. 214.8.C. National Student Loan Clearinghouse .................................................................................................................... 224.9 Providing Information to Students ......................................................................................................................... 234.9.A. Student Consumer Information .............................................................................................................................. 234.9.B. Entrance Counseling ............................................................................................................................................. 264.9.C. Exit Counseling ..................................................................................................................................................... 264.10 Recordkeeping Requirements ............................................................................................................................... 274.11 Third-Party Servicers ............................................................................................................................................ 294.12 Quality Assurance Program ................................................................................................................................... 304.13 Independent Audits ............................................................................................................................................... 30

Chapter 5: Borrower Eligibility and Loan Certification

5.1 Applying for Stafford and PLUS Loans ..................................................................................................................... 15.2 Eligibility Requirements for Stafford and PLUS Loans .............................................................................................. 25.2.A. Borrower and Student Eligibility Requirements ........................................................................................................ 35.2.B. Student Eligibility Requirements .............................................................................................................................. 45.2.C. Student Enrollment Requirements ........................................................................................................................... 45.2.D. Determining Citizenship or Eligible Noncitizen Status .............................................................................................. 55.2.E. Prior Overpayment, Default, Discharge, or Write-Off ................................................................................................ 75.2.F. Effect of Bankruptcy on Eligibility ............................................................................................................................ 85.2.G. Recognized Equivalent of a High School Diploma .................................................................................................. 105.2.H. Ability-to-Benefit Provisions .................................................................................................................................. 105.2.I. Use of Telecommunications and Correspondence in Programs of Study ................................................................ 115.2.J. Study at Participating Foreign Schools .................................................................................................................. 115.2.K. Study-Abroad Programs ........................................................................................................................................ 11

Table of Contents

5.2.L. Ineligibility of Medical Interns and Residents ......................................................................................................... 125.2.M. Social Security Number Data Match ...................................................................................................................... 125.3 Eligibility Requirements Specific to Stafford Loans ................................................................................................ 125.4 Eligibility Requirements Specific to PLUS Loans .................................................................................................... 135.5 Determining the Student’s Dependency Status ...................................................................................................... 145.6 Verification Requirements ..................................................................................................................................... 155.7 Loan Limits and Amounts ..................................................................................................................................... 165.7.A. Defining an Academic Year ................................................................................................................................... 175.7.B. Defining Enrollment Status .................................................................................................................................... 195.7.C. Determining the Period of Enrollment .................................................................................................................... 205.7.D. Determining the Loan Amount ............................................................................................................................... 205.7.E. Determining the Student’s Cost of Attendance (COA) ............................................................................................. 205.7.F. Determining the Expected Family Contribution (EFC) ............................................................................................. 225.7.G. Determining the Amount of Estimated Financial Assistance (EFA) .......................................................................... 225.7.H. Stafford Loan Annual and Aggregate Loan Limits .................................................................................................. 235.7.I. Interest Subsidy on Stafford Loans ........................................................................................................................ 255.8 School Certification of the Loan ............................................................................................................................. 265.8.A. Preventing Overawards ......................................................................................................................................... 275.8.B. Refusing to Certify an Application or Reducing Borrower Eligibility ........................................................................ 275.8.C. Financial Aid Administrator Professional Judgment ............................................................................................... 275.8.D. Determining the Disbursement Schedule .............................................................................................................. 275.8.E. Forwarding the Loan Information .......................................................................................................................... 315.8.F. The NCHELP FFELP CommonLine Network ............................................................................................................ 31

Chapter 6: Guarantee, Disbursement, and Delivery

6.1 Obtaining a Loan Guarantee .................................................................................................................................... 16.1.A. Lender Origination of the Loan ................................................................................................................................ 16.1.B. Guarantee of the Loan ............................................................................................................................................. 26.1.C. Facilitating Guarantee Processing ........................................................................................................................... 36.1.D. Stafford Loan Interest Rates .................................................................................................................................... 36.1.E. Resolving Interest Rate Discrepancies on Stafford Loans ......................................................................................... 46.1.F. PLUS Loan and SLS Loan Interest Rates .................................................................................................................. 66.1.G. Processing the Guarantee Disclosure ...................................................................................................................... 76.1.H. Adjusting the Guaranteed Loan Amount .................................................................................................................. 76.1.I. Initial Disclosure to the Borrower ............................................................................................................................ 86.2 Loan Disbursement by Lenders ............................................................................................................................... 96.2.A. Earliest Date a Loan May be Disbursed ................................................................................................................... 96.2.B. Multiple Disbursement Requirements for Stafford and PLUS Loans ....................................................................... 106.2.C. Disbursement of Loan Proceeds by Individual Check ............................................................................................. 106.2.D. Disbursement of Loan Proceeds by Electronic Funds Transfer (EFT) or Master Check ............................................ 116.2.E. Disbursement for Students in Study-Abroad Programs or Foreign Schools ............................................................ 116.2.F. Consummated and Unconsummated Loans .......................................................................................................... 126.2.G. Reissuing a Loan Disbursement ............................................................................................................................ 136.2.H. Late Disbursement by a Lender ............................................................................................................................ 136.2.I. Effect of Bankruptcy on Loan Disbursement .......................................................................................................... 146.3 Loan Delivery by Schools ...................................................................................................................................... 146.3.A. Verification of Satisfactory Academic Progress ...................................................................................................... 156.3.B. Overawards .......................................................................................................................................................... 156.3.C. Notices and Authorizations .................................................................................................................................... 166.3.D. Receipt of Loan Proceeds ..................................................................................................................................... 196.3.E. Delivery of Proceeds ............................................................................................................................................. 206.3.F. Credit Balances ..................................................................................................................................................... 256.3.G. Return or Refund of Loan Proceeds ....................................................................................................................... 256.3.H. Late Delivery by a School ...................................................................................................................................... 276.3.I. School Disbursement and Delivery Requirements ................................................................................................. 27

Table of Contents

6.4 Disbursement and Delivery of Proceeds in Cases of Loss of School Eligibility ........................................................ 316.5 Students Who Transfer ......................................................................................................................................... 316.5.A. Students Who Transfer before Full Disbursement of the Loan ................................................................................ 326.5.B. Students Who Transfer after Full Disbursement of the Loan .................................................................................. 326.6 Guarantee and Federal Origination Fees ................................................................................................................ 326.6.A. Payment of Guarantee Fees .................................................................................................................................. 326.6.B. Nonpayment of Guarantee Fees ............................................................................................................................ 326.6.C. Recalculation of the Guarantee Fee ....................................................................................................................... 336.6.D. Refund of the Guarantee Fee ................................................................................................................................. 336.6.E. Deducting the Federal Origination Fee ................................................................................................................... 356.6.F. Refund of the Federal Origination Fee ................................................................................................................... 356.6.G. Lender Origination Fee .......................................................................................................................................... 366.7 Disbursement Cancellation ................................................................................................................................... 36

Chapter 7: Loan Servicing

7.1 In-School Period ..................................................................................................................................................... 17.2 Grace Period ........................................................................................................................................................... 27.3 Verification of Enrollment ........................................................................................................................................ 47.3.A. Lender Processing of Enrollment Changes .............................................................................................................. 47.3.B. Lender Reporting of Enrollment Changes ................................................................................................................ 67.4 Beginning Repayment of the Loan ........................................................................................................................... 67.4.A. Conversion to Repayment ....................................................................................................................................... 77.4.B. Establishing the First Payment Due Date ................................................................................................................. 77.4.C. Late Notification ...................................................................................................................................................... 87.4.D. New Out-of-School Dates after Conversion ............................................................................................................. 97.5 Repayment Notification ......................................................................................................................................... 107.5.A. Notifying Stafford Loan Borrowers of Repayment Terms ........................................................................................ 117.5.B. Notifying SLS Loan Borrowers of Repayment Terms .............................................................................................. 117.5.C. Notifying PLUS Loan Borrowers of Repayment Terms ............................................................................................ 117.5.D. Disclosure of Repayment Terms ............................................................................................................................ 127.6 Repayment Terms ................................................................................................................................................. 127.6.A. Determining the Borrower’s Indebtedness ............................................................................................................. 137.6.B. Length of the Repayment Period ........................................................................................................................... 137.6.C. Repayment Options ............................................................................................................................................... 147.6.D. Repayment Schedules .......................................................................................................................................... 157.6.E. Adjusting the Borrower’s Repayment Terms .......................................................................................................... 167.7 Interest Charges ................................................................................................................................................... 177.7.A. Payment of Accrued Interest on Loans Not Eligible for Federal Interest Benefits .................................................... 187.7.B. Capitalization of Accrued Interest .......................................................................................................................... 187.8 Application of Borrower Payments and School Refunds ......................................................................................... 207.8.A. Regular Payments ................................................................................................................................................. 207.8.B. Prepayments ........................................................................................................................................................ 207.8.C. Changing the Borrower’s Payment Due Date ......................................................................................................... 217.8.D. Payments during Deferment or Forbearance ......................................................................................................... 217.8.E. School Refunds ..................................................................................................................................................... 217.9 Authorized Deferments ......................................................................................................................................... 227.9.A. Conditions for Authorized Deferment ..................................................................................................................... 237.9.B. Documentation Required for Authorized Deferments ............................................................................................. 247.9.C. Reporting Deferments ........................................................................................................................................... 257.9.D. Deferment of Delinquent Loans ............................................................................................................................. 257.9.E. Deferment of Defaulted Loans ............................................................................................................................... 257.9.F. Post-Deferment Grace Period ................................................................................................................................ 267.9.G. Resuming Repayment after Deferment .................................................................................................................. 26

Table of Contents

7.10 Deferment Types .................................................................................................................................................. 267.10.A. In-School or Student Deferment ............................................................................................................................ 287.10.B. Summer Bridge Extension ..................................................................................................................................... 307.10.C. Graduate Fellowship Deferment ............................................................................................................................ 307.10.D. Rehabilitation Training Program Deferment ........................................................................................................... 317.10.E. Unemployment Deferment .................................................................................................................................... 327.10.F. Temporary Total Disability Deferment ................................................................................................................... 337.10.G. Military Deferment ................................................................................................................................................ 347.10.H. Peace Corps Deferment ........................................................................................................................................ 357.10.I. ACTION Program Deferment .................................................................................................................................. 357.10.J. Tax-Exempt Organization Volunteer Deferment ..................................................................................................... 367.10.K. Internship/Residency Deferment ........................................................................................................................... 367.10.L. Parental Leave Deferment ..................................................................................................................................... 377.10.M. National Oceanic and Atmospheric Administration Corps Deferment ..................................................................... 387.10.N. Teacher Shortage Area or Targeted Teacher Deferment ........................................................................................ 387.10.0. Working Mother Deferment ................................................................................................................................... 397.10.P. Economic Hardship Deferment .............................................................................................................................. 407.10.Q. Public Health Service Deferment ........................................................................................................................... 447.11 Forbearance ......................................................................................................................................................... 447.11.A. Discretionary Forbearance .................................................................................................................................... 457.11.B. Administrative Forbearance .................................................................................................................................. 457.11.C. Mandatory Forbearance ........................................................................................................................................ 487.11.D. Mandatory Administrative Forbearance ................................................................................................................. 497.11.E. Forbearance of Delinquent or Defaulted Loans ...................................................................................................... 507.11.F. Forbearance Length .............................................................................................................................................. 507.11.G. Borrower Contact during Forbearance ................................................................................................................... 507.11.H. Payment of Interest during Forbearance ................................................................................................................ 507.11.I. Documentation Required for Authorized Forbearance ............................................................................................ 517.11.J. Reporting Forbearances ........................................................................................................................................ 517.11.K. Resuming Repayment after Forbearance ............................................................................................................... 517.12 Ineligible Borrowers .............................................................................................................................................. 517.12.A. Ineligibility Based on Borrower Error ..................................................................................................................... 527.12.B. Ineligibility Based on School Error ......................................................................................................................... 527.12.C. Ineligibility Based on Lender Error ......................................................................................................................... 537.13 Paid-in-Full Loans ................................................................................................................................................. 537.14 Loan Forgiveness Program for Teachers ............................................................................................................... 547.15 Loan Forgiveness Demonstration Program for Child Care Providers ....................................................................... 54

Chapter 8: Delinquency, Default, and Claims

8.1 Required Due Diligence Activities ............................................................................................................................ 18.1.A. Minimum Due Diligence Standards ......................................................................................................................... 18.1.B. Delinquency of Loans .............................................................................................................................................. 28.1.C. Collection Costs and Late Charges .......................................................................................................................... 38.1.D. Due Diligence Schedules and Activities ................................................................................................................... 38.1.E. Comaker and Endorser Due Diligence Schedules and Activities ............................................................................... 88.1.F. Written Notices and Collection Letters ..................................................................................................................... 98.1.G. Diligent Efforts to Contact Borrower by Telephone ................................................................................................... 98.1.H. Telephone Skip Tracing Requirements .................................................................................................................. 108.1.I. Address Skip Tracing Requirements ...................................................................................................................... 118.1.J. Preclaim Assistance .............................................................................................................................................. 128.1.K. Supplemental Preclaim Assistance ........................................................................................................................ 138.1.L. Final Demand Letter ............................................................................................................................................. 158.1.M. Ineligible Borrower Due Diligence ......................................................................................................................... 15

Table of Contents

8.2 Claim Types .......................................................................................................................................................... 168.2.A. Default Claims ...................................................................................................................................................... 168.2.B. Death Claims ........................................................................................................................................................ 178.2.C. Total and Permanent Disability Claims .................................................................................................................. 188.2.D. Bankruptcy Claims ................................................................................................................................................ 198.2.E. Dismissal or Reversal of Bankruptcy Action ........................................................................................................... 218.2.F. Ineligible Borrower Claims .................................................................................................................................... 228.2.G. Closed School Loan Discharge .............................................................................................................................. 228.2.H. False Certification Loan Discharge ........................................................................................................................ 288.3 Claim Filing Requirements .................................................................................................................................... 348.3.A. Claim Review Process ........................................................................................................................................... 348.3.B. Claim File Documentation ..................................................................................................................................... 348.3.C. Missing Claim File Documentation ........................................................................................................................ 378.3.D. Claim File Receipt ................................................................................................................................................. 378.3.E. Credit Bureau Reporting ........................................................................................................................................ 378.3.F. Receipt of Payments after Claim Payment ............................................................................................................. 388.4 Claim Returns ....................................................................................................................................................... 388.4.A. Refile Deadline ...................................................................................................................................................... 388.4.B. Resuming Loan Servicing after Claim Return ......................................................................................................... 388.5 Claim Recalls ........................................................................................................................................................ 398.6 Claim Purchase ..................................................................................................................................................... 398.6.A. Claim Payment Amount ......................................................................................................................................... 408.6.B. Amount of Interest Purchased on Eligible Claims ................................................................................................... 408.6.C. Amount of Interest Purchased on Returned Claims ................................................................................................ 418.6.D. Requests for Increase in Claim Payment ............................................................................................................... 418.6.E. Exceptional Performers ......................................................................................................................................... 418.7 Claim Repurchase ................................................................................................................................................. 428.8 Claim Rejects ........................................................................................................................................................ 438.8.A. Due Diligence Violations ........................................................................................................................................ 438.8.B. Due Diligence Gaps ............................................................................................................................................... 448.8.C. Penalties for Due Diligence Violations and Gaps .................................................................................................... 448.8.D. Timely Claim Filing Violations ................................................................................................................................ 468.8.E. Penalties for Timely Claim Filing Violations ............................................................................................................ 468.8.F. Reinstatement of the Guarantee: Cure Procedures ................................................................................................ 488.8.G. Amount of Interest Purchased on Cured Claims ..................................................................................................... 498.8.H. Cure Procedure for Due Diligence Violations and Gaps .......................................................................................... 498.8.I. Missing Payment History ....................................................................................................................................... 508.8.J. Cure Procedure for Timely Filing Violations ........................................................................................................... 508.8.K. Intensive Collection Activities (ICA)/Location Cure Procedure ................................................................................. 518.8.L. Certification of Borrower Location ......................................................................................................................... 528.9 Reinstatement of Borrower Eligibility after a Default Claim Is Purchased ............................................................... 538.10 Rehabilitation of Defaulted Loans .......................................................................................................................... 538.11 Preclaim Request Form ......................................................................................................................................... 55

Chapter CCI 8: Delinquency, Default, and Claims • Common Claim Initiative (CCI)

CCI 8.1 Required Due Diligence Activities ............................................................................................................................ 3CCI 8.1.A. Minimum Due Diligence Standards ......................................................................................................................... 3CCI 8.1.B. Delinquency of Loans .............................................................................................................................................. 4CCI 8.1.C. Collection Costs and Late Charges .......................................................................................................................... 5CCI 8.1.D. Due Diligence Schedules and Activities ................................................................................................................... 5CCI 8.1.E. Comaker and Endorser Due Diligence Schedules and Activities ............................................................................. 10CCI 8.1.F. Written Notices and Collection Letters ................................................................................................................... 11CCI 8.1.G. Diligent Efforts to Contact Borrower by Telephone ................................................................................................. 11CCI 8.1.H. Telephone Skip Tracing Requirements .................................................................................................................. 12CCI 8.1.I. Address Skip Tracing Requirements ...................................................................................................................... 13

Table of ContentsCCI 8.1.J. Preclaim Assistance .............................................................................................................................................. 14CCI 8.1.K. Supplemental Preclaim Assistance ........................................................................................................................ 15CCI 8.1.L. Final Demand Letter ............................................................................................................................................. 17CCI 8.1.M. Ineligible Borrower Due Diligence ......................................................................................................................... 17CCI 8.2 Claim Types .......................................................................................................................................................... 18CCI 8.2.A. Default Claims ...................................................................................................................................................... 18CCI 8.2.B. Death Claims ........................................................................................................................................................ 19CCI 8.2.C. Total and Permanent Disability Claims .................................................................................................................. 20CCI 8.2.D. Bankruptcy Claims ................................................................................................................................................ 21CCI 8.2.E. Dismissal or Reversal of Bankruptcy Action ........................................................................................................... 23CCI 8.2.F. Ineligible Borrower Claims .................................................................................................................................... 24CCI 8.2.G. Closed School Loan Discharge .............................................................................................................................. 24CCI 8.2.H. False Certification Loan Discharge ........................................................................................................................ 30CCI 8.3 Claim Filing Requirements .................................................................................................................................... 36CCI 8.3.A. Claim Review Process ........................................................................................................................................... 36CCI 8.3.B. Claim File Documentation ..................................................................................................................................... 36CCI 8.3.C. Missing Claim File Documentation ........................................................................................................................ 38CCI 8.3.E. Credit Bureau Reporting ........................................................................................................................................ 39CCI 8.3.F. Receipt of Payments after Claim Payment ............................................................................................................. 39CCI 8.4 Claim Returns ....................................................................................................................................................... 39CCI 8.4.A. Refile Deadline ...................................................................................................................................................... 40CCI 8.4.B. Resuming Loan Servicing after Claim Return ......................................................................................................... 40CCI 8.5 Claim Recalls ........................................................................................................................................................ 40CCI 8.6 Claim Purchase ..................................................................................................................................................... 41CCI 8.6.A. Claim Payment Amount ......................................................................................................................................... 41CCI 8.6.B. Amount of Interest Purchased on Eligible Claims ................................................................................................... 42CCI 8.6.C. Amount of Interest Purchased on Returned Claims ................................................................................................ 42CCI 8.6.D. Requests for Increase in Claim Payment ............................................................................................................... 43CCI 8.6.E. Exceptional Performers ......................................................................................................................................... 43CCI 8.7 Claim Repurchase ................................................................................................................................................. 43CCI 8.8 Loss of Guarantee ................................................................................................................................................. 44CCI 8.8.A. Due Diligence Violations ........................................................................................................................................ 44CCI 8.8.B. Due Diligence Gaps ............................................................................................................................................... 45CCI 8.8.C. Penalties for Due Diligence Violations and Gaps .................................................................................................... 46CCI 8.8.D. Timely Claim Filing Violations ................................................................................................................................ 48CCI 8.8.E. Penalties for Timely Claim Filing Violations ............................................................................................................ 49CCI 8.8.F. Reinstatement of the Guarantee: Cure Procedures ................................................................................................ 51CCI 8.8.G. Amount of Interest Purchased on Cured Claims ..................................................................................................... 52CCI 8.8.H. Cure Procedure for Due Diligence Violations and Gaps .......................................................................................... 53CCI 8.8.I. Missing Payment History ....................................................................................................................................... 53CCI 8.8.J. Cure Procedure for Timely Filing Violations ........................................................................................................... 54CCI 8.8.K. Intensive Collection Activities (ICA)/Location Cure Procedure ................................................................................. 54CCI 8.8.L. Certification of Borrower Location ......................................................................................................................... 55CCI 8.9 Reinstatement of Borrower Eligibility after a Default Claim Is Purchased ............................................................... 56CCI 8.10 Rehabilitation of Defaulted Loans .......................................................................................................................... 56CCI 8.11 Preclaim Request Form ......................................................................................................................................... 58CCI 8.12 Claim Form ........................................................................................................................................................... 58CCI 8.13 Supplemental Claim Form ..................................................................................................................................... 58

Chapter 9: Federal Consolidation Loans

9.1 Lender Participation ................................................................................................................................................ 19.1.A. Agreement to Guarantee Federal Consolidation Loans ............................................................................................. 19.1.B. Certificate of Comprehensive Insurance Coverage ................................................................................................... 29.1.C. Notifying the Guarantor ........................................................................................................................................... 39.2 Borrower Eligibility and Underlying Loan Holder Requirements ................................................................................ 3

Table of Contents

9.3 The Application Process .......................................................................................................................................... 69.3.A. Providing Consolidation Loan Information ................................................................................................................ 69.3.B. Completing the Application ..................................................................................................................................... 69.3.C. Completing the Verification Certificate ..................................................................................................................... 69.3.D. Calculating the Interest Rate ................................................................................................................................... 79.4 Disbursement ......................................................................................................................................................... 99.5 Repayment ............................................................................................................................................................. 99.5.A. Disclosing Repayment Terms .................................................................................................................................. 99.5.B. Maximum Repayment Period ................................................................................................................................ 109.5.C. Deferments ........................................................................................................................................................... 109.5.D. Forbearance ......................................................................................................................................................... 119.5.E. Delinquency, Default, and Claim Filing .................................................................................................................. 119.5.F. Paid-in-Full Loans ................................................................................................................................................. 119.6 Interest Benefits and Special Allowance ................................................................................................................ 129.7 Interest Payment Rebate Fee ................................................................................................................................ 12

Chapter 10: Cohort Default Rates and Appeals

10.1 Overview of Cohort Default Rates ............................................................................................................................ 110.2 Calculation of Cohort Default Rates ......................................................................................................................... 110.3 Effect of Rates on Schools ...................................................................................................................................... 410.3.A. Default Reduction Requirements ............................................................................................................................. 410.3.B. Termination of Eligibility .......................................................................................................................................... 510.3.C. Limitation, Suspension, or Termination of FFELP Participation ................................................................................. 510.4 Draft Cohort Default Rates for Schools .................................................................................................................... 510.5 School Appeals ....................................................................................................................................................... 610.5.A. Exceptional Mitigating Circumstances ..................................................................................................................... 610.5.B. Erroneous Data ....................................................................................................................................................... 810.5.C. Improper Loan Servicing or Collection ..................................................................................................................... 910.6 Cohort Default Rates for Lenders and Holders ....................................................................................................... 11

Chapter 11: Program Reviews

11.1 Purpose and Scope of Program Reviews ................................................................................................................. 111.2 Selecting Entities for Program Review ..................................................................................................................... 111.2.A. Selection Criteria for Schools .................................................................................................................................. 111.2.B. Selection Criteria for Lenders and Servicers ............................................................................................................ 211.3 The Program Review Process .................................................................................................................................. 311.3.A. The Preliminary Review .......................................................................................................................................... 311.3.B. The On-Site Review ................................................................................................................................................ 311.3.C. Program Review Report .......................................................................................................................................... 411.3.D. Program Review Close-Out Procedures ................................................................................................................... 5

Chapter 12: Limitation, Suspension, and Termination

12.1 Actions to Limit, Suspend, or Terminate Participation .............................................................................................. 112.1.A. Limitation ............................................................................................................................................................... 212.1.B. Suspension ............................................................................................................................................................. 212.1.C. Termination ............................................................................................................................................................ 212.1.D. Emergency Action ................................................................................................................................................... 312.2 Proceedings ............................................................................................................................................................ 412.2.A. Appealing an LS&T Action ....................................................................................................................................... 412.2.B. Prehearing Conference ........................................................................................................................................... 412.2.C. Hearing ................................................................................................................................................................... 412.2.D. Action by the U.S. Department of Education ............................................................................................................ 512.2.E. Appealing a Final Determination .............................................................................................................................. 512.2.F. Offsets, Reimbursements, and Refunds .................................................................................................................. 5

Table of Contents

12.3 Removal of Limitation ............................................................................................................................................. 612.4 Reinstatement after Termination ............................................................................................................................. 6

Appendix A: Interest Benefits and Special Allowance

A.1 Federal Interest Benefits ......................................................................................................................................... 1A.1.A. Amount of Federal Interest Benefits ........................................................................................................................ 1A.1.B. When Federal Interest Benefits Will Be Paid ............................................................................................................ 1A.2 Special Allowance ................................................................................................................................................... 3A.2.A. Special Allowance Rates ......................................................................................................................................... 3A.2.B. Termination of Special Allowance ........................................................................................................................... 6A.3 Interest and Special Allowance Billing ..................................................................................................................... 6A.3.A. ED Form 799 Submission ........................................................................................................................................ 7A.3.B. General Instructions for Completing ED Form 799 ................................................................................................... 8A.3.C. Summary of ED Form 799 ....................................................................................................................................... 9A.3.D. Deactivation .......................................................................................................................................................... 10A.4 Consistency Between ED Form 799 and NSLDS Data ............................................................................................ 10

Appendix B: PLUS/SLS Refinancing

B.1 Option 1: Refinancing to Secure a Combined Payment ............................................................................................ 1B.2 Option 2: Refinancing to Secure a Variable Interest Rate ......................................................................................... 1B.3 Option 3: Refinancing to Discharge a Previous Loan ................................................................................................ 2B.4 Repayment Options on Refinanced Loans ............................................................................................................... 3

Appendix C: Guarantor-Specific Information

California Student Aid Commission (CSAC)/EdFund ................................................................................................. 1Connecticut Student Loan Foundation (CSLF) .......................................................................................................... 1Educational Credit Management Corporation (ECMC) .............................................................................................. 2Florida Department of Education, Office of Student Financial Assistance (OSFA) ...................................................... 3Illinois Student Assistance Commission (ISAC) ........................................................................................................ 3Iowa College Student Aid Commission (ICSAC) ........................................................................................................ 5Louisiana Student Financial Assistance Commission (LASFAC) ................................................................................ 6Missouri Student Loan Program .............................................................................................................................. 6New Jersey Higher Education Student Assistance Authority .................................................................................... 8New Mexico Student Loan Guarantee Corporation (NMSLGC) .................................................................................. 8New York State Higher Education Services Corporation (HESC) ................................................................................ 9Northwest Education Loan Association (NELA) ....................................................................................................... 10Oklahoma Guaranteed Student Loan Program (OGSLP) ......................................................................................... 10Pennsylvania Higher Education Assistance Agency (PHEAA) .................................................................................. 10Student Loan Guarantee Foundation of Arkansas (SLGFA) ..................................................................................... 11Tennessee Student Assistance Corporation (TSAC) ................................................................................................ 11United Student Aid Funds, Inc. (USA Funds) .......................................................................................................... 12

Appendix D: U.S. Department of Education Contact Information

D.1 Institutional Review Branches ................................................................................................................................. 1D.2 Guarantor and Lender Review Branches .................................................................................................................. 2D.3 Federal Student Aid Information Center ................................................................................................................... 3D.4 Student Financial Assistance Program: Accounting and Financial Management Service .......................................... 3D.5 National Student Loan Data System (NSLDS) Customer Service Center ................................................................... 3D.6 Default Management Division ................................................................................................................................. 3

Appendix E: Guarantor Bulletins

Table of Contents

Appendix F: Common Forms

Loan Origination FormsFederal Stafford Loan Master Promissory Note ........................................................................................................ 1Federal Stafford Loan School Certification ............................................................................................................... 3Application and Promissory Note for Federal Stafford Loans .................................................................................... 5Application and Promissory Note for Federal PLUS Loan .......................................................................................... 7Endorser Addendum to Federal PLUS Loan Application and Promissory Note ........................................................... 9

Deferment FormsSCH In-School Deferment Request ....................................................................................................................... 11NEW EDU Education-Related Deferment Request ................................................................................................. 13EDU Education-Related Deferment Request ......................................................................................................... 15PUB Public Service Deferment Request ................................................................................................................ 17DIS Temporary or Permanent Total Disability Deferment Request ......................................................................... 19UNEM Unemployment Deferment Request ........................................................................................................... 21FAM Family Deferment Request ........................................................................................................................... 23NEW HRD Economic Hardship Deferment Request ............................................................................................... 25

Claim FormsPreclaim Request Form ......................................................................................................................................... 27Claim Form ........................................................................................................................................................... 29Supplemental Claim Form ..................................................................................................................................... 33

Loan Discharge/Cancellation FormsLoan Discharge Application: School Closure .......................................................................................................... 35Loan Discharge Application: False Certification of Ability to Benefit ....................................................................... 37Loan Discharge Application: False Certification (Disqualifying Status) .................................................................... 39Loan Discharge Application: Unauthorized Signature/Unauthorized Payment ......................................................... 41Total and Permanent Disability Cancellation Request ............................................................................................ 43

Appendix G: Glossary

Appendix H: History of Federal Education Loan Programs and the Common Manual

H.1 History of Federal Education Loan Programs and the Common Manual .................................................................... 1H.2 History of Excess Interest Rebates and Variable Interest Rate Conversions ............................................................ 34H.3 History of Ability-to-Benefit Provisions .................................................................................................................. 37H.3.A. Ability-to-Benefit Requirements ............................................................................................................................ 37H.3.B. Ability-to-Benefit Provisions .................................................................................................................................. 39

Appendix I: Index

1 Overview

1.1 Introduction ............................................................................................................................................................ 1

1.2 Acknowledgments .................................................................................................................................................. 1

1.3 About the Manual .................................................................................................................................................... 1

1.4 Disclaimer .............................................................................................................................................................. 2

1.5 Participating Guarantors and Contact Information .................................................................................................... 3

Guarantor Name Designated State(s)*

American Student Assistance (ASA) MA, DCCalifornia Student Aid Commission (CSAC)/EdFund CAColorado Student Loan Program (CSLP) COCSLF-Student Loan Foundation CTEducation Assistance Corporation (EAC) (South Dakota) SDEducational Credit Management Corporation (ECMC) VAFinance Authority of Maine (FAME) MEFlorida Department of Education FLGeorgia Higher Education Assistance Corporation GAGreat Lakes Higher Education Guaranty Corporation WI, MN, OH, PR, VIIllinois Student Assistance Commission (ISAC) ILIowa College Student Aid Commission (ICSAC) IAKentucky Higher Education Assistance Authority (KHEAA) KY, ALLouisiana Student Financial Assistance Commission (LASFAC) LAMichigan Higher Education Assistance Authority MIMissouri Student Loan Program (MSLP) MOMontana Guaranteed Student Loan Program (MGSLP) MTNew Hampshire Higher Education Assistance Foundation NHNew Jersey Higher Education Student Assistance Authority NJNew Mexico Student Loan Guarantee Corporation (NMSLGC) NMNew York State Higher Education Services Corporation (HESC) NYNorth Carolina State Education Assistance Authority NCNorthwest Education Loan Association (NELA) WA, IDNSLP, Inc. NEOklahoma State Regents for Higher Education OKOregon State Scholarship Commission (OSSC) ORPennsylvania Higher Education Assistance Agency PA, DE, WVRhode Island Higher Education Assistance Authority (RIHEAA) RISouth Carolina Student Loan Corporation SCStudent Loan Guarantee Foundation of Arkansas (SLGFA) ARStudent Loans of North Dakota (SLND) NDTennessee Student Assistance Corporation TNTexas Guaranteed Student Loan Corporation (TG) TXUnited Student Aid Funds, Inc. (USA Funds) IN, AK, AZ, HI and the Pacific Islands,

KS, MD, MS, NV, WYUtah Higher Education Assistance Authority (UHEAA) UTVermont Student Assistance Corporation (VSAC) VT

*These are the states that the U.S. Department of Education has designated for the guarantor.A guarantor’s area of service may include clients in additional states.

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Chapter 1: Overview—July 1999 1

1.1Introduction

The Common Manual: Unified Student Loan Policy is anintroduction to and overview of participation in the FederalFamily Education Loan Program (FFELP). It is designed tohelp train new financial aid and student loan personnel andto assist the experienced officer in finding answers toquestions about federal regulations and guarantor policy.

Where possible, the guarantors that have participated in thedevelopment and distribution of this manual have agreed toadopt uniform policies. In a few cases, some guarantorshave policies that are different from the uniform policiesoutlined in this manual. Places in this manual where suchexceptions exist include a cross reference to appendix C,which details guarantor-specific policies.

The FFELP is based on a partnership among schools,lenders, guarantors, and the federal government. The failureof any one member of this group to carry out itsresponsibilities—as outlined in either federal regulations orthis manual—directly affects other participants’ ability tomeet their obligations. By becoming familiar with thismanual, participants can gain an appreciation for the rulesand restrictions under which their counterparts operate.

1.2Acknowledgments

The Common Manual was developed from inception topublication in less than one year. Acknowledgment for thisaccomplishment is due to many individuals and theirorganizations:

• To the staff of participating guarantors for their time,patience, and long hours spent going through severaldrafts and compromising on sensitive issues.

• To NSLP, Inc., the Montana Guaranteed Student LoanProgram (MGSLP), and the Northwest Education LoanAssociation (NELA) for providing administrativeleadership and support throughout the development ofthe manual.

• To the Iowa College Student Aid Commission forguiding the manual through the various draft stages,receiving numerous edits from the guarantors involved,and compiling and inserting the edits into a readableformat.

• To the Texas Guaranteed Student Loan Corporation(TG) and the Oregon State Scholarship Commission(OSSC) for performing final editing on the manual.

• To USA Funds, Inc., for providing its December 1994manual as the foundation for this manual, performingfinal editing on the text, and preparing the manual forpublication.

It is in the spirit of partnership and cooperation that thismanual was created. By developing the Common Manual,the participating guarantors hope to provide lenders andschools with a useful reference tool for administering theFFELP.

1.3About the Manual

The Common Manual is divided into thirteen chapters andnine appendices.

Chapters

1 Overview2 About the FFELP3 Lender Participation4 School Participation5 Borrower Eligibility and Loan Certification6 Guarantee, Disbursement, and Delivery7 Loan Servicing8 Delinquency, Default, and Claims

CCI 8 Delinquency, Default, and Claims –Common Claim Initiative (CCI)

9 Consolidation Loans10 Cohort Default Rates and Appeals11 Program Reviews12 Limitation, Suspension, and Termination

Appendices

A Interest Benefits and Special AllowanceB PLUS/SLS RefinancingC Guarantor-Specific InformationD U.S. Department of Education Contact InformationE Guarantor BulletinsF Common FormsG GlossaryH History of Federal Education Loan Programs and

the Common ManualI Index

2 Chapter 1: Overview—July 1999

Sections and Subsections

All of the chapters and a few of the appendices are dividedinto numbered sections; in many cases, these sections arefurther divided into subsections. Both of these levels oforganization are reflected in the table of contents thataccompanies each chapter and most appendices. Additionalunnumbered subheadings may be included within sectionsor subsections, but are not included in the table of contents.

For example:

• Chapter 4 addresses school participation in the FFELP.

• Section 4.9 outlines school requirements for providinginformation to students.

• Subsection 4.9.A. covers student consumerinformation; subsection 4.9.B., entrance counseling;and subsection 4.9.C., exit counseling.

Citations

Citations are provided throughout the manual to federalstatute, regulations, Dear Colleague Letters, and otherU.S. Department of Education publications. Unlessotherwise noted, all regulatory references are to 34 CFR.The following examples reflect how citations in this manualare treated:

[HEA 427A(f)] Section 427A(f) of the Higher EducationAct of 1965, as amended, Title IV, Part B

[§682.209] Section 682.209 of Title 34 of the Codeof Federal Regulations (34 CFR).

[DCL 95-L-178] March 1995 Dear Colleague Letter95-L-178.

Guarantor Contact Information

Section 1.5 of this chapter lists detailed contact informationfor guarantors using the Common Manual. Included areaddresses, telephone and fax numbers for various depart-ments of each guarantor, and, in some cases, Internetaddresses.

▲▲▲▲▲ This symbol marks areas in the text of this manualwhere guarantors may have specific procedures forimplementing a policy. A school or lender may wish tocontact a guarantor for more information if not familiarwith that guarantor’s procedure.

Updates

Loans made under the FFELP—which consist of FederalStafford loans (both subsidized and unsubsidized), FederalPLUS loans, and Federal Consolidation loans—routinelyundergo changes in terms or conditions according tolegislation and subsequent regulations. As a supplement tothis manual, a guarantor may periodically provide bulletinsor newsletters to participants, explaining changes to bothguarantor policies and procedures and federal regulations. Itis essential that lenders and schools also note guidancegiven in the Dear Colleague Letters and Q&A Newsletterspublished by the U.S. Department of Education (theDepartment). Copies of these reference materials may bekept in appendix E of this manual.

Revisions to the manual and common forms will be madeand distributed as required by changes to the Act or federalregulations. Forms will be revised as needed to enhance“usability” or improve the quality of service provided toclients.

Additional copies of this manual may be ordered bycontacting a participating guarantor.

1.4Disclaimer

This manual has been developed in cooperation withnumerous guarantors, lenders, schools, and others vitallyinterested in the needs of students seeking access to highereducation. Schools, lenders, and servicers are responsiblefor administering the provisions of the Federal FamilyEducation Loan Program (FFELP) under the federal HigherEducation Act of 1965, as amended, and applicable stateand federal laws and regulations. Revisions to law andregulatory guidance will supersede guidance provided inthis manual. The guarantor will endeavor to notify users ofthe manual of these changes as they occur.

Chapter 1: Overview—July 1999 3

Guidance provided in this manual has been developed as anaid to compliance, but users of this manual should consulttheir own legal counsel and the U.S. Department ofEducation (the Department) when determining applicabilityor construction of federal or state law and regulatoryrequirements. This manual is not intended as legal advice inany manner, and no user of this manual shall be entitled torely on this manual as a basis for any claim against theDepartment or the guarantors that have endorsed thismanual for use in the student loan community. Further, norepresentations or warranties are made or intended by anyof the participating guarantors as to the interpretations,construction, or enforcement practices of the Departmentunder the FFELP.

Descriptions of guarantor policies, p