August 2017

Dear Partner:

On behalf of the federal student loan guarantors, I am pleased to present you with the 2017 Common Manual: Unified Student Loan Policy. Throughout the past year, The Common Manual Policy Development and Maintenance Contractor worked diligently to complete necessary updates to existing policies and finalize new policies that were published in the November 1, 2016, Final Rule. This resulted in the Governing Board approving ten policy proposals during the year. In the June 16, 2017, Federal Register (82 27621), the Department of Education announced the delay of certain regulations that were to take effect on July 1, 2017. Because of this announcement, three policy proposals were not added to the 2017 Common Manual. The remaining seven policy proposals not affected by the June 16, 2017, Federal Register have been incorporated into the 2017 Common Manual. Updates were also made to the History of the Common Manual in Appendix H. In addition, there are recent changes to both the Guarantor Contact Information in Chapter 1 and to the Guarantor-Specific Information in Appendix C.

I would like to thank the members of the Policy Development and Maintenance Contractor for their extraordinary effort in working on these policy proposals. Further, I would like to thank the numerous Federal Family Education Loan (FFEL) program participants who are active in the Common Manual proposal review process and who continue to review and provide comments.

The Common Manual website, www.commonmanual.org, remains the best resource for the most updated information regarding the administration of the FFEL program. The website contains the current Common Manual as well as previous electronic versions and previous integrated versions of the Common Manual. The previous versions can be located under the Archives section. The Archives section also contains previously Approved Policies with the correlated Common Bulletin language since 2006.

I encourage you to review the latest updates to the Common Manual. We look forward to working with all of our partners in the upcoming year.

Sincerely,

Michelle HansenChair, Common Manual Governing Board (2012-2014 and 2017-2018)

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COMMON MANUALUnified Student Loan Policy

2017 Annual Update

©2017 Common Manual Guarantors

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Summary of Changes Approved through April 2017 i

Summary of Changes Approved through April 2017

This summary lists changes made since the 2016 Annual Update of the Common Manual. Changes made before the 2016 Annual Update are noted in Appendix H.

Common Manual Section Description of Change Effective Date/Triggering Event Policy/Batch

Chapter 2: About the FFELP

2.3.C Common Forms Accounts for the Department discontinuing the Public Service Deferment Request (PUB), the Parental Leave/Working Mother Deferment Request (PLWM), and the Education Related Deferment Request (EDU) deferment forms. Also, the Department eliminated the Student in Rehabilitation Training deferment type from the Parent PLUS Borrower Deferment Request (PLUS). The Department created two new deferment request forms, Graduate Fellowship Deferment Request (GFL) and Rehabilitation Training Deferment Request (RHT), and provided guidance on the documentation that the lender must collect should a borrower request to defer loan repayment based on a deferment for which there is no longer an OMB-approved form. They also provided guidance on requirements to consider a deferment form complete. Incorporates revisions to the Deferment Eligibility Chart, Figure 11-1 to align with these changes.

For deferments, revised forms provided to borrowers on or after June 1, 2016.

1316/207

Chapter 6: School Certification

6.11.E Exceeding Loan Limits Incorporates mention of the Reaffirmation Agreement, the new OMB-approved form that a borrower uses to reaffirm any debt that exceeds Stafford annual and/or aggregate loan limits.

For reaffirmation agreements provided to borrowers after March 30, 2016.

1314/206

Chapter 7: Loan Origination

7.4.A Current Stafford Interest Rates

Figure 7-1 Stafford Loan Interest Rates

Revised policy removes the fixed interest rates for FFELP Stafford loans first disbursed on or after July 1, 2010, as no new FFELP loans could be first disbursed on or after July 1, 2010. Revised policy adds the effective variable interest rates for FFELP Stafford loans from July 1, 2012 through June 30, 2017.

Changes in FFELP variable interest rates on July 1, 2011 and thereafter.

1319/208

ii Summary of Changes Approved through April 2017

Chapter 11: Deferment and Forbearance

11.1.B Documentation Required for Authorized Deferment

Figure 11-1 Deferment Eligibility Chart

11.2.B Deferment Documentation—ACTION Program

11.3.B Deferment Documentation—Armed Forces

11.5.B Deferment Documentation—Graduate Fellowship

11.7.B Deferment Documentation—Internship/Residency

11.9.B Deferment Documentation—NOAA

11.10.B Deferment Documentation—Parental Leave

11.11.B Deferment Documentation—Peace Corps

11.13.B Deferment Documentation—Public Health Service

11.14.B Deferment Documentation—Rehabilitation Training Program

11.15.B Deferment Documentation—Tax-Exempt Organization Volunteer

11.16.B Deferment Documentation—Teacher Shortage Area

11.17.B Deferment Documentation—Temporary Total Disability

11.19.B Deferment Documentation—Working Mother

Accounts for the Department discontinuing the Public Service Deferment Request (PUB), the Parental Leave/Working Mother Deferment Request (PLWM), and the Education Related Deferment Request (EDU) deferment forms. Also, the Department eliminated the Student in Rehabilitation Training deferment type from the Parent PLUS Borrower Deferment Request (PLUS). The Department created two new deferment request forms, Graduate Fellowship Deferment Request (GFL) and Rehabilitation Training Deferment Request (RHT), and provided guidance on the documentation that the lender must collect should a borrower request to defer loan repayment based on a deferment for which there is no longer an OMB-approved form. They also provided guidance on requirements to consider a deferment form complete. Incorporates revisions to the Deferment Eligibility Chart, Figure 11-1 to align with these changes.

For deferments, revised forms provided to borrowers on or after June 1, 2016.

1316/207

11.20.B Documentation Required for Authorized Forbearance

Figure 11-2 Forbearance Eligibility Chart

11.22 Discretionary Forbearance

Explains the Department’s guidance related to the completion of OMB-approved common forbearance request forms, and incorporates the forms into the Forbearance Eligibility Chart.

For mandatory forbearance forms distributed on or after June 1, 2016, and discretionary (general) forbearance forms distributed on or after July 1, 2016.

1317/207

11.21.F Death

11.23.A Death

Allows two additional types of documentation for a death discharge. Those are an accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or by facsimile transmission, or verification of the borrower’s or student’s death through an authoritative Federal or State electronic database approved for use by the Department.

For death discharge applications and claims received on or after July 1, 2017.

1321/209

Common Manual Section Description of Change Effective Date/Triggering Event Policy/Batch

Summary of Changes Approved through April 2017 iii

11.23.D Teacher Loan Forgiveness

11.24.C National Service, Loan Forgiveness, Department of Defense Repayment, or Active Military State Duty

Revised policy adds to Subsection 11.23.D an additional cross-reference to Subsection 11.24.C where the other TLF forbearance type is explained. In addition, revised policy in Subsection 11.24.C includes reference to the OMB-approved mandatory forbearance request forms, and new subheadings provide clarity on which eligibility criteria pertain to each forbearance type. Revisions also include additional regulatory citations.

For mandatory forbearance forms distributed on or after June 1, 2016.

1318/208

Chapter 13: Claim Filing, Discharge, and Forgiveness

13.1.D Claim File Documentation

13.1.E Missing Claim File Documentation

13.8.C Death

Figure 13-4 Timely Filing Deadlines for Claims and Discharges*

Allows two additional types of documentation for a death discharge. Those are an accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or by facsimile transmission, or verification of the borrower’s or student’s death through an authoritative Federal or State electronic database approved for use by the Department.

For death discharge applications and claims received on or after July 1, 2017.

1321/209

13.8.A Bankruptcy Removes the cross-reference about not yet disbursed or partially disbursed loans when the lender receives a bankruptcy notice.

Retroactive to July 1, 2010. 1315/206

Appendix H: History of the FFELP and the Common Manual

Figure H-1 Summary of Variable-Rate Conversion Provisions

Revised policy removes the fixed interest rates for FFELP Stafford loans first disbursed on or after July 1, 2010, as no new FFELP loans could be first disbursed on or after July 1, 2010. Revised policy adds the effective variable interest rates for FFELP Stafford loans from July 1, 2012 through June 30, 2017.

Changes in FFELP variable interest rates on July 1, 2011 and thereafter.

1319/208

Common Manual Section Description of Change Effective Date/Triggering Event Policy/Batch

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Table of Contents

Chapter 1: Overview

1.1 Introduction ....................................................................................................................................................... 11.2 About the Manual .............................................................................................................................................. 11.3 Using, Duplicating, and Reprinting of Portions of the Common Manual ............................................................... 21.4 Disclaimer ......................................................................................................................................................... 21.5 FFELP 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......................................................................................................................................................... 62.2.B The Interim Period ............................................................................................................................................. 82.2.C Repayment ........................................................................................................................................................ 92.3 Other FFELP Resources.................................................................................................................................... 112.3.A Federal Statute, Regulations, and Dear Colleague Letters/Dear Partner Letters ................................................ 112.3.B U.S. Department of Education Publications ...................................................................................................... 122.3.C Common Forms ............................................................................................................................................... 13

Chapter 3: Lender Participation

3.1 Eligible Lenders ................................................................................................................................................. 13.2 Schools Acting as Lenders and Eligible Lender Trustee Relationships ................................................................ 23.3 Participation and Guarantees ............................................................................................................................. 43.3.A Approval for Participation................................................................................................................................... 43.3.B Agreement to Guarantee Loans.......................................................................................................................... 43.3.C Transfer of Loan Guarantee ............................................................................................................................... 53.4 Lender Responsibilities and Standards............................................................................................................... 53.4.A Recordkeeping Requirements ............................................................................................................................ 63.4.B Loan Assignment, Sale, or Transfer ................................................................................................................... 83.4.C Permitted and Prohibited Activities..................................................................................................................... 93.4.D Borrower Defenses .......................................................................................................................................... 123.4.E Charges to Borrowers ...................................................................................................................................... 133.5 Lender Reporting ............................................................................................................................................. 133.5.A Federal Origination Fee and Lender Fee ........................................................................................................... 133.5.B Interest Benefits and Special Allowance Reporting ........................................................................................... 153.5.C Reporting to Nationwide Consumer Reporting Agencies ................................................................................... 153.5.D Reporting Loan Information.............................................................................................................................. 163.5.E Reporting Loan Assignments, Sales, and Transfers .......................................................................................... 163.5.F Reporting Social Security Number, Date of Birth, and First Name Changes or Corrections ................................ 173.5.G NSLDS Reporting ............................................................................................................................................. 183.5.H Reporting Loans Paid in Full............................................................................................................................. 183.5.I Reporting Information Relating to Preferred Lender Arrangements ................................................................... 183.6 Third-Party Servicers ....................................................................................................................................... 193.6.A Administrative Capability ................................................................................................................................. 203.6.B Financial Responsibility.................................................................................................................................... 203.7 Lender of Last Resort....................................................................................................................................... 223.7.A Eligible Lenders ............................................................................................................................................... 223.7.B Benefits of Participation ................................................................................................................................... 223.7.C How the LLR Program Works ........................................................................................................................... 22

ii Table of Contents—2017 Annual Update

3.8 Independent Audits ..........................................................................................................................................233.8.A Annual Compliance Audits................................................................................................................................233.8.B Third-Party Servicer Audits...............................................................................................................................24

Chapter 4: School Participation

4.1 School Eligibility .................................................................................................................................................24.1.A Establishing Eligibility.........................................................................................................................................24.1.B Written Agreements between Schools ................................................................................................................64.1.C Maintaining Eligibility .........................................................................................................................................74.1.D Loss of Eligibility ..............................................................................................................................................214.1.E School Misrepresentation .................................................................................................................................224.1.F School Code of Conduct ...................................................................................................................................234.2 Administrative Capability Standards .................................................................................................................244.2.A Financial Aid Administrator Responsibilities......................................................................................................254.2.B Financial Aid Administrator Training .................................................................................................................264.3 Financial Responsibility Standards ...................................................................................................................264.3.A General School Financial Responsibility Requirements......................................................................................274.3.B Specific Criteria for Determining School Financial Responsibility ......................................................................294.3.C Sufficient Cash Reserve Requirements .............................................................................................................294.3.D Composite Score ..............................................................................................................................................314.4 Providing Information to Students.....................................................................................................................334.4.A Preferred Lender Arrangements and Lists.........................................................................................................334.4.B Student Consumer Information .........................................................................................................................354.4.C Entrance Counseling ........................................................................................................................................444.4.D Exit Counseling ................................................................................................................................................464.4.E Private Education Loan Information ..................................................................................................................484.5 Recordkeeping Requirements...........................................................................................................................494.6 Third-Party Servicers........................................................................................................................................514.7 Quality Assurance Program ..............................................................................................................................524.8 Independent Audits ..........................................................................................................................................52

Chapter 5: Borrower Eligibility

5.1 Eligibility Requirements for Stafford and PLUS Loans..........................................................................................15.1.A General Borrower and Student Eligibility Requirements ......................................................................................15.1.B Student Eligibility Requirements .........................................................................................................................25.1.C Graduate or Professional Student and Parent PLUS Loan Borrower Eligibility Requirements ................................35.2 Federal Data Matches ........................................................................................................................................35.2.A Citizenship Data Match.......................................................................................................................................45.2.B Social Security Number Data Match ...................................................................................................................55.2.C Selective Service Registration Data Match..........................................................................................................65.2.D Exceeding Loan Limits and Prior Overpayments Data Match...............................................................................65.2.E Prior Default Data Match ....................................................................................................................................75.2.F Department of Justice Data Match .....................................................................................................................85.2.G Department of Veterans Affairs Data Match ........................................................................................................85.3 Reinstatement of Title IV Eligibility after Default..................................................................................................85.4 Prior Loan Written Off.........................................................................................................................................95.5 Prior Loan Discharge Due to Total and Permanent Disability .............................................................................105.5.A Prior Loan or TEACH Grant Service Obligation in a Post-Discharge Monitoring Period Based on a

Determination of Total and Permanent Disability ..............................................................................................105.5.B Final Discharge of a Prior Loan Based on a Determination of Total and Permanent Disability ............................115.6 Effect of Exceeding Loan Limits on Eligibility ....................................................................................................135.7 Effect of Bankruptcy on Eligibility .....................................................................................................................135.8 Effect of Fraud on Eligibility ..............................................................................................................................135.9 Effect of Drug Conviction on Eligibility ..............................................................................................................135.10 Required High School Diploma or Equivalent ....................................................................................................145.11 Ability-to-Benefit Provisions .............................................................................................................................15

Table of Contents—2017 Annual Update iii

5.12 Student Enrollment Requirements.................................................................................................................... 155.13 Use of Distance Education and Correspondence in Programs of Study ............................................................. 165.13.A Distance Education Program of Study .............................................................................................................. 165.13.B Correspondence Program of Study................................................................................................................... 175.14 Foreign Schools and Study-Abroad Programs .................................................................................................. 175.14.A Study at Participating Foreign Schools ............................................................................................................. 175.14.B Study-Abroad Programs................................................................................................................................... 175.15 Eligibility Requirements Specific to Transfer Students ...................................................................................... 175.15.A Financial Aid History for Transfer Students....................................................................................................... 175.15.B Students Who Transfer after Full Disbursement of the Loan ............................................................................. 185.16 Multiple School Enrollment .............................................................................................................................. 185.17 Ineligible Borrowers ......................................................................................................................................... 195.17.A Ineligibility Based on Borrower Error ................................................................................................................ 195.17.B Ineligibility Based on School Error .................................................................................................................... 205.17.C Ineligibility Based on Lender Error.................................................................................................................... 21

Chapter 6: School Certification

6.1 Defining an Academic Year ................................................................................................................................ 16.1.A Minimum Length for an Academic Year ............................................................................................................. 16.1.B Academic Year Categories ................................................................................................................................. 26.2 Determining the Loan Period.............................................................................................................................. 86.3 Determining Payment Periods.......................................................................................................................... 106.3.A Credit-Hour Programs Offered in Modules........................................................................................................ 106.3.B Credit-Hour Programs with Standard Terms or with Nonstandard Terms That Are Substantially Equal in Length116.3.C Credit-Hour Programs with Nonstandard Terms That Are Not Substantially Equal in Length ............................. 116.3.D Clock-Hour Programs or Non-Term-Based Credit-Hour Programs .................................................................... 126.3.E Excused Absences in Clock-Hour Programs ..................................................................................................... 136.3.F Students Returning to a Non-Term-Based Credit-Hour or Clock-Hour Program after a Withdrawal ................... 136.4 Determining the Disbursement Schedule ......................................................................................................... 146.4.A Multiple Disbursements and Low Cohort Default Rate Exemptions ................................................................... 146.4.B When Disbursements May Be Scheduled ......................................................................................................... 156.5 Determining the Student’s Cost of Attendance (COA)........................................................................................ 196.5.A COA Components............................................................................................................................................. 196.5.B COA Exceptions for Correspondence and Distance Education Programs of Study ............................................. 206.5.C COA Documentation Requirements .................................................................................................................. 206.5.D Use of Professional Judgment to Determine COA ............................................................................................. 206.6 Determining the Expected Family Contribution (EFC) ........................................................................................ 206.6.A Performing Verification Requirements .............................................................................................................. 216.6.B Use of Professional Judgment to Determine EFC.............................................................................................. 226.7 Determining the Amount of Estimated Financial Assistance (EFA)..................................................................... 226.8 Determining the Student’s Dependency Status ................................................................................................ 246.9 Defining Enrollment Status............................................................................................................................... 266.10 Determining the Student’s Grade Level ............................................................................................................ 276.11 Loan Limits...................................................................................................................................................... 286.11.A Stafford Annual Loan Limits ............................................................................................................................. 286.11.B Stafford Aggregate Loan Limits........................................................................................................................ 386.11.C PLUS Loans for Graduate and Professional Students ........................................................................................ 396.11.D Increased Unsubsidized Stafford Loan Limits for Health Profession Students.................................................... 396.11.E Exceeding Loan Limits ..................................................................................................................................... 416.11.F Prorated Loan Limits........................................................................................................................................ 426.11.G Effects of a Consolidation Loan on New Stafford Loan Eligibility ....................................................................... 466.12 Determining the Eligible Loan Amount ............................................................................................................. 466.13 Determining the Loan Amount at Schools with Credit-Hour Programs .............................................................. 476.14 Determining a Student’s Eligibility for Interest Subsidy on Stafford Loans......................................................... 476.14.A Subsidized Stafford Loans ............................................................................................................................... 476.14.B Unsubsidized Stafford Loans............................................................................................................................ 486.14.C Nonsubsidized Stafford Loans.......................................................................................................................... 48

iv Table of Contents—2017 Annual Update

6.15 School Certification of the Loan ........................................................................................................................486.15.A Preventing Overawards ....................................................................................................................................496.15.B Stafford Loan Certification................................................................................................................................496.15.C PLUS Loan Certification ....................................................................................................................................506.15.D Additional Unsubsidized Stafford Loan Certification for a Dependent Student....................................................516.15.E Refusing to Certify a Loan or Reducing Borrower Eligibility ...............................................................................526.16 Applying for Federal Stafford and PLUS Loans ..................................................................................................536.17 Forwarding the Loan Information......................................................................................................................556.18 Facilitating Guarantee Processing.....................................................................................................................556.19 Guarantee of the Loan......................................................................................................................................566.20 Adjusting the Guaranteed Loan Amount............................................................................................................566.21 NCHER Standards and Operations ....................................................................................................................56

Chapter 7: Loan Origination

7.1 Reviewing the Loan Request ..............................................................................................................................17.1.A General Determinations......................................................................................................................................17.1.B Credit Standards and Determining Adverse Credit ..............................................................................................17.1.C Effect of Bankruptcy on the Lender’s Determination of Adverse Credit................................................................27.2 Reviewing the Promissory Note ..........................................................................................................................27.2.A Lender Responsibilities under a Master Promissory Note....................................................................................37.2.B Transfer Students and Master Promissory Notes ................................................................................................47.3 Processing the Loan Request .............................................................................................................................47.4 Establishing Stafford Loan Interest Rates............................................................................................................57.4.A Current Stafford Interest Rates ...........................................................................................................................57.4.B Reduced Stafford Interest Rates .........................................................................................................................57.4.C Previous Stafford Interest Rates .........................................................................................................................67.4.D Resolving Interest Rate Discrepancies on Stafford Loans ....................................................................................87.5 Establishing PLUS Loan and SLS Loan Interest Rates .........................................................................................87.5.A Current PLUS Interest Rate .................................................................................................................................87.5.B Reduced PLUS Interest Rates .............................................................................................................................87.5.C Previous PLUS and SLS Interest Rates..............................................................................................................107.6 Borrower Disclosures .......................................................................................................................................117.6.A General Initial Disclosure Requirements............................................................................................................117.6.B Income-Sensitive and Income-Based Repayment Disclosure Requirements......................................................127.6.C Guarantee Disclosure .......................................................................................................................................127.7 Disbursing the Loan .........................................................................................................................................137.7.A Earliest Date for Disbursement .........................................................................................................................137.7.B Multiple Disbursement .....................................................................................................................................147.7.C Disbursement by Individual Check....................................................................................................................147.7.D Disbursement by Electronic Funds Transfer (EFT) or Master Check...................................................................157.7.E Disbursement for Students in Study-Abroad Programs or Foreign Schools........................................................157.7.F Reissuing Disbursements .................................................................................................................................167.7.G Late Disbursement ...........................................................................................................................................177.7.H Effect of Loss of School Eligibility on Disbursement ..........................................................................................177.7.I Effect of Bankruptcy on Disbursement..............................................................................................................177.7.J Disbursement to Transfer Students ..................................................................................................................187.7.K Disbursement Cancellation...............................................................................................................................187.7.L Consummated and Unconsummated Disbursements ........................................................................................197.8 Processing the Federal Default Fee (Formerly the Guarantee Fee).....................................................................207.8.A Paying the Federal Default Fee (Formerly the Guarantee Fee) ...........................................................................207.8.B Recalculating the Federal Default Fee (or Guarantee Fee) .................................................................................207.8.C Refunding the Federal Default Fee (or Guarantee Fee) ......................................................................................207.9 Processing Federal Origination Fees.................................................................................................................237.9.A Collecting the Origination Fee...........................................................................................................................237.9.B Reporting the Origination Fee ...........................................................................................................................237.9.C Refunding the Origination Fee ..........................................................................................................................24

Table of Contents—2017 Annual Update v

Chapter 8: Loan Delivery

8.1 Managing Loan Funds ....................................................................................................................................... 18.2 Required Notices ............................................................................................................................................... 28.2.A Initial Notice of Funds ........................................................................................................................................ 28.2.B Confirmation Requirements for the Multi-Year Feature of the MPN..................................................................... 28.2.C School’s Notice of Credit to Student’s Account................................................................................................... 38.2.D School’s Notice of Borrower's Right to Cancel Loan Disbursed by EFT or Master Check ..................................... 38.2.E Notification of Late Disbursement or Post-Withdrawal Disbursement of Loan Funds........................................... 48.3 Required Authorizations ..................................................................................................................................... 48.3.A Authorization Modifications and Cancellations.................................................................................................... 58.3.B Authorization for Release of EFT/Master Check Disbursements .......................................................................... 58.4 Assessing Satisfactory Academic Progress ........................................................................................................ 78.5 Completing Verification ...................................................................................................................................... 98.6 Managing Overawards ....................................................................................................................................... 98.7 Delivering Loan Funds at Eligible Schools ........................................................................................................ 108.7.A Delivery Time Frames ...................................................................................................................................... 108.7.B Delivering Second and Subsequent Disbursements.......................................................................................... 138.7.C Early Delivery................................................................................................................................................... 148.7.D Delayed Delivery.............................................................................................................................................. 158.7.E Late Delivery.................................................................................................................................................... 168.7.F Delivery in Credit-Hour Programs Offered in Modules....................................................................................... 178.7.G Delivery to Borrowers in Special Circumstances............................................................................................... 178.7.H Delivery to Transfer Students........................................................................................................................... 188.7.I Delivery Methods............................................................................................................................................. 198.8 Managing Credit Balances ............................................................................................................................... 218.8.A Timeframes for Paying Credit Balances............................................................................................................ 218.8.B How to Pay Credit Balances ............................................................................................................................. 218.8.C Holding Credit Balances................................................................................................................................... 238.8.D Treatment of a Title IV Credit Balance When a Student Withdraws ................................................................... 238.8.E Treatment of a Title IV Credit Balance When a Student Dies ............................................................................. 248.9 Return of Loan Funds....................................................................................................................................... 248.9.A Return of Undelivered Loan Funds ................................................................................................................... 248.9.B Return of Ineligible Borrower Loan Funds......................................................................................................... 258.9.C Return of Unearned Loan Funds....................................................................................................................... 268.9.D Return of Loan Funds for a Deceased Borrower ............................................................................................... 278.10 Delivery When Department Approval Is Required.............................................................................................. 318.11 Delivering Loan Funds in Cases of Lost School Eligibility .................................................................................. 318.11.A Exceptions to Delivery Restrictions at Ineligible Schools ................................................................................... 318.11.B Delivery of Second or Subsequent Disbursements after a School Loses Eligibility............................................. 31

Chapter 9: School Reporting Responsibilities and the Return of Title IV Funds

9.1 Reporting Social Security Number, Date of Birth, and First Name Changes or Corrections .................................. 19.2 Student Enrollment Status Reporting.................................................................................................................. 29.2.A National Student Loan Data System (NSLDS) Enrollment Reporting .................................................................... 39.2.B Ad Hoc Reporting............................................................................................................................................... 59.2.C Information Sharing with the Department, a Lender, or a Guarantor ................................................................... 69.3 Leave of Absence .............................................................................................................................................. 69.4 Withdrawal Dates .............................................................................................................................................. 79.5 Return of Title IV Funds.................................................................................................................................... 139.5.A Return Amounts for Title IV Grant and Loan Programs...................................................................................... 139.5.B Processing Returned Funds ............................................................................................................................. 209.5.C Responsibilities for Unpaid Refunds ................................................................................................................. 229.5.D Return of Title IV Funds Calculations for Students Subject to Verification.......................................................... 22

vi Table of Contents—2017 Annual Update

Chapter 10: Loan Servicing

10.1 Verifying Enrollment ...........................................................................................................................................110.1.A Lender Processing of Enrollment Changes..........................................................................................................210.1.B Lender Reporting of Enrollment Changes............................................................................................................310.2 In-School Period.................................................................................................................................................410.3 Grace Period ......................................................................................................................................................410.3.A Length of the Grace Period .................................................................................................................................410.3.B Payment of Interest during the Grace Period.......................................................................................................510.3.C Military Extension of the Grace Period ................................................................................................................510.4 Establishing the Repayment Start Date...............................................................................................................510.4.A Stafford Loan Repayment Start Date...................................................................................................................510.4.B PLUS and SLS Loan Repayment Start Date .........................................................................................................610.4.C Aligning Repayment Start Dates for Stafford and SLS Loans...............................................................................610.5 Establishing the First Payment Due Date ............................................................................................................610.5.A Stafford Loan First Payment Due Date ................................................................................................................610.5.B PLUS and SLS Loan First Payment Due Date ......................................................................................................710.5.C Aligning First Payment Due Dates for Stafford and SLS Loans ............................................................................710.5.D Revised Out-of-School Dates before Conversion to Repayment...........................................................................710.5.E Revised Out-of-School Dates after Conversion to Repayment .............................................................................810.6 Establishing Repayment Terms ..........................................................................................................................910.6.A Determining the Borrower’s Indebtedness ........................................................................................................1010.6.B Length of the Repayment Period.......................................................................................................................1010.6.C Repayment Options ..........................................................................................................................................1110.6.D Minimum Payment Requirements.....................................................................................................................1110.6.E Adjusting the Borrower’s Repayment Terms .....................................................................................................1210.7 Disclosing Repayment Terms ...........................................................................................................................1210.7.A Time Frame for Disclosure ...............................................................................................................................1410.7.B Dispute of Loan Terms .....................................................................................................................................1510.8 Establishing a Repayment Schedule .................................................................................................................1510.8.A Standard Repayment Schedule.........................................................................................................................1610.8.B Graduated Repayment Schedule.......................................................................................................................1610.8.C Income-Sensitive Repayment Schedule............................................................................................................1610.8.D Income-Based Repayment Schedule ................................................................................................................1710.8.E Extended Repayment Schedule ........................................................................................................................2110.9 Interest Charges...............................................................................................................................................2110.9.A Annual Variable Interest Rate Charges ..............................................................................................................2110.9.B Reduced Interest Rates ....................................................................................................................................2210.9.C Excess Interest Rebates ...................................................................................................................................2310.9.D Payment of Accrued Interest on Loans Not Eligible for Federal Interest Benefits................................................2310.10 Capitalizing Accrued Interest ............................................................................................................................2310.10.A Permitted Capitalization ...................................................................................................................................2310.10.B Capitalization Frequency ..................................................................................................................................2410.10.C Capitalization of Delinquent Interest Payments .................................................................................................2510.11 Applying Borrower Payments and Funds Returned by the School......................................................................2510.11.A Applying Regular Borrower Payments...............................................................................................................2510.11.B Applying Prepayments......................................................................................................................................2610.11.C Changing the Borrower’s Payment Due Date ....................................................................................................2710.11.D Applying Payments during Deferment or Forbearance ......................................................................................2710.11.E Applying Funds Returned by the School............................................................................................................2710.12 Lender Disclosures during Repayment .............................................................................................................2810.13 Paid-in-Full Loans ............................................................................................................................................29

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Chapter 11: Deferment and Forbearance

11.1 Authorized Deferment ........................................................................................................................................ 111.1.A General Deferment Eligibility Criteria.................................................................................................................. 111.1.B Documentation Required for Authorized Deferment............................................................................................ 311.1.C Deferment Length.............................................................................................................................................. 311.1.D Payment of Interest during Deferment................................................................................................................ 411.1.E Reporting Deferments........................................................................................................................................ 411.1.F Deferment of Loans in Delinquency ................................................................................................................... 411.1.G Deferment of Loans in Default ........................................................................................................................... 411.1.H Post-Deferment Grace Period............................................................................................................................. 511.1.I Establishing Repayment after Deferment ........................................................................................................... 511.1.J Disclosure When Granting a Deferment on Unsubsidized Stafford or PLUS Loan................................................. 511.2 ACTION Program Deferment............................................................................................................................... 711.2.A Eligibility Criteria—ACTION Program.................................................................................................................. 711.2.B Deferment Documentation—ACTION Program ................................................................................................... 811.2.C Length of Deferment—ACTION Program............................................................................................................ 811.3 Armed Forces Deferment ................................................................................................................................... 811.3.A Eligibility Criteria—Armed Forces ...................................................................................................................... 811.3.B Deferment Documentation—Armed Forces ....................................................................................................... 911.3.C Length of Deferment—Armed Forces ................................................................................................................ 911.4 Economic Hardship Deferment........................................................................................................................... 911.4.A Eligibility Criteria—Economic Hardship .............................................................................................................. 911.4.B Deferment Documentation—Economic Hardship ............................................................................................. 1011.4.C Length of Deferment—Economic Hardship ...................................................................................................... 1011.4.D Simplified Deferment Processing ..................................................................................................................... 1111.5 Graduate Fellowship Deferment ....................................................................................................................... 1111.5.A Eligibility Criteria—Graduate Fellowship .......................................................................................................... 1111.5.B Deferment Documentation—Graduate Fellowship ........................................................................................... 1111.5.C Length of Deferment—Graduate Fellowship .................................................................................................... 1111.5.D Simplified Deferment Processing ..................................................................................................................... 1211.6 In-School Deferment, Summer Bridge Extension, and Post-Enrollment Deferment ........................................... 1211.6.A Eligibility Criteria—In-School ........................................................................................................................... 1211.6.B Deferment Documentation—In-School ............................................................................................................ 1311.6.C Length of Deferment—In-School ..................................................................................................................... 1411.6.D Summer Bridge Extension................................................................................................................................ 1411.6.E Post-Enrollment Deferment.............................................................................................................................. 1511.7 Internship/Residency Deferment ...................................................................................................................... 1511.7.A Eligibility Criteria—Internship/Residency ......................................................................................................... 1511.7.B Deferment Documentation—Internship/Residency........................................................................................... 1611.7.C Length of Deferment—Internship/Residency ................................................................................................... 1611.8 Military Service Deferment............................................................................................................................... 1611.8.A Eligibility Criteria—Military Service.................................................................................................................. 1611.8.B Deferment Documentation—Military Service ................................................................................................... 1711.8.C Length of Deferment—Military Service ............................................................................................................ 1811.8.D Simplified Deferment Processing ..................................................................................................................... 1811.9 National Oceanic and Atmospheric Administration Corps Deferment ................................................................ 1811.9.A Eligibility Criteria—NOAA................................................................................................................................. 1811.9.B Deferment Documentation—NOAA .................................................................................................................. 1911.9.C Length of Deferment—NOAA........................................................................................................................... 1911.10 Parental Leave Deferment................................................................................................................................ 1911.10.A Eligibility Criteria—Parental Leave................................................................................................................... 1911.10.B Deferment Documentation—Parental Leave .................................................................................................... 1911.10.C Length of Deferment—Parental Leave............................................................................................................. 2011.11 Peace Corps Deferment ................................................................................................................................... 2011.11.A Eligibility Criteria—Peace Corps ...................................................................................................................... 2011.11.B Deferment Documentation—Peace Corps........................................................................................................ 2011.11.C Length of Deferment—Peace Corps ................................................................................................................ 20

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11.12 Post-Active Duty Student Deferment ................................................................................................................2011.12.A Eligibility Criteria—Post-Active Duty Student....................................................................................................2111.12.B Deferment Documentation—Post-Active Duty Student .....................................................................................2111.12.C Length of Deferment—Post-Active Duty Student..............................................................................................2211.12.D Simplified Deferment Processing......................................................................................................................2211.13 Public Health Service Deferment ......................................................................................................................2211.13.A Eligibility Criteria—Public Health Service..........................................................................................................2211.13.B Deferment Documentation—Public Health Service...........................................................................................2211.13.C Length of Deferment—Public Health Service....................................................................................................2311.14 Rehabilitation Training Program Deferment ......................................................................................................2311.14.A Eligibility Criteria—Rehabilitation Training Program..........................................................................................2311.14.B Deferment Documentation—Rehabilitation Training Program...........................................................................2311.14.C Length of Deferment—Rehabilitation Training Program....................................................................................2411.14.D Simplified Deferment Processing......................................................................................................................2411.15 Tax-Exempt Organization Volunteer Deferment.................................................................................................2411.15.A Eligibility Criteria—Tax-Exempt Organization Volunteer....................................................................................2411.15.B Deferment Documentation—Tax-Exempt Organization Volunteer .....................................................................2511.15.C Length of Deferment—Tax-Exempt Organization Volunteer ..............................................................................2511.16 Teacher Shortage Area or Targeted Teacher Deferment ...................................................................................2511.16.A Eligibility Criteria—Teacher Shortage Area.......................................................................................................2511.16.B Deferment Documentation—Teacher Shortage Area ........................................................................................2611.16.C Length of Deferment—Teacher Shortage Area.................................................................................................2611.17 Temporary Total Disability Deferment...............................................................................................................2611.17.A Eligibility Criteria—Temporary Total Disability ..................................................................................................2611.17.B Deferment Documentation—Temporary Total Disability ...................................................................................2711.17.C Length of Deferment—Temporary Total Disability ............................................................................................2711.18 Unemployment Deferment................................................................................................................................2711.18.A Eligibility Criteria—Unemployment ...................................................................................................................2711.18.B Deferment Documentation—Unemployment ....................................................................................................2811.18.C Length of Deferment—Unemployment .............................................................................................................2811.18.D Simplified Deferment Processing......................................................................................................................2811.19 Working Mother Deferment ..............................................................................................................................2911.19.A Eligibility Criteria—Working Mother..................................................................................................................2911.19.B Deferment Documentation—Working Mother...................................................................................................2911.19.C Length of Deferment—Working Mother............................................................................................................2911.20 Forbearance.....................................................................................................................................................3011.20.A Forbearance Types...........................................................................................................................................3011.20.B Documentation Required for Authorized Forbearance .......................................................................................3111.20.C Forbearance Length .........................................................................................................................................3111.20.D Payment of Interest during Forbearance ...........................................................................................................3211.20.E Reporting Forbearances ...................................................................................................................................3211.20.F Forbearance of Defaulted Loans .......................................................................................................................3211.20.G Borrower Contact during Forbearance ..............................................................................................................3311.20.H Establishing Repayment after Forbearance.......................................................................................................3311.21 Administrative Forbearance..............................................................................................................................3611.21.A Bankruptcy Filing .............................................................................................................................................3611.21.B Borrower Ineligible for Deferment.....................................................................................................................3611.21.C Closed School or False Certification by the School ............................................................................................3611.21.D False Certification as a Result of the Crime of Identity Theft..............................................................................3711.21.E Cures ...............................................................................................................................................................3711.21.F Death ...............................................................................................................................................................3711.21.G Delinquency before a Deferment or an Authorized Period of Forbearance .........................................................3811.21.H Delinquency after a Deferment or Mandatory Forbearance ...............................................................................3811.21.I Delinquency under Income-Based Repayment (IBR) .........................................................................................3811.21.J Documentation Collection and Processing ........................................................................................................3811.21.K Forgiveness under Income-Based Repayment (IBR) ..........................................................................................3811.21.L Late Notification of Out-of-School Dates...........................................................................................................3811.21.M Loan Sale or Transfer .......................................................................................................................................39

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11.21.N Natural Disasters, Local or National Emergency, or Military Mobilization .......................................................... 3911.21.O New Out-of-School Dates after Conversion to Repayment................................................................................ 3911.21.P Repayment Alignment...................................................................................................................................... 3911.21.Q Repurchase of a Non-Bankruptcy Claim........................................................................................................... 4011.21.R Spouses and Parents of Victims of September 11, 2001 .................................................................................. 4011.21.S Total and Permanent Disability......................................................................................................................... 4011.21.T Unpaid Refund Discharge................................................................................................................................. 4111.21.U Repayment Plan Change.................................................................................................................................. 4111.22 Discretionary Forbearance ............................................................................................................................... 4211.22.A Reduced-Payment Forbearance ....................................................................................................................... 4211.23 Mandatory Administrative Forbearance ............................................................................................................ 4311.23.A Death .............................................................................................................................................................. 4311.23.B Exceptional Circumstances .............................................................................................................................. 4311.23.C Repayment Accommodation ............................................................................................................................ 4411.23.D Teacher Loan Forgiveness ............................................................................................................................... 4411.24 Mandatory Forbearance ................................................................................................................................... 4411.24.A Student Loan Debt Burden............................................................................................................................... 4511.24.B Medical or Dental Internship or Residency ....................................................................................................... 4511.24.C National Service, Loan Forgiveness, Department of Defense Repayment, or Active Military State Duty ............. 4611.24.D Applying a Mandatory Forbearance Retroactively ............................................................................................. 47

Chapter 12: Due Diligence in Collecting Loans

12.1 Collection Philosophies, Goals, and Minimum Standards.................................................................................... 112.1.A Lender Disclosure Requirements ....................................................................................................................... 112.2 Situations Requiring Collection Activities............................................................................................................ 212.3 Factors Relating to Collection Activities.............................................................................................................. 212.3.A Bankruptcy Petition Filing .................................................................................................................................. 212.3.B Deferment of Loans in Delinquency or Default ................................................................................................... 212.3.C Forbearance Option ........................................................................................................................................... 312.3.D Payment Application during Delinquency ........................................................................................................... 312.3.E Rolling Delinquency ........................................................................................................................................... 312.3.F Special Occurrence............................................................................................................................................ 312.3.G Collection Costs and Late Charges ..................................................................................................................... 412.4 Due Diligence Requirements.............................................................................................................................. 412.4.A Due Diligence Requirements for Loans with Monthly Repayment Obligations ..................................................... 512.4.B Due Diligence Requirements for Loans with Repayment Obligations Less Frequent Than Monthly.................... 1112.4.C Written Notices and Collection Letters.............................................................................................................. 1312.4.D Contact by Telephone ...................................................................................................................................... 1312.4.E Endorser Due Diligence.................................................................................................................................... 1412.4.F Ineligible Borrower Due Diligence .................................................................................................................... 1512.5 Default Aversion Assistance............................................................................................................................. 1612.5.A Default Aversion Assistance Request (DAAR).................................................................................................... 1612.5.B Default Aversion Assistance Request Form ...................................................................................................... 1712.5.C Default Aversion Assistance and Bankruptcy Filing .......................................................................................... 2012.6 Final Demand Letter ........................................................................................................................................ 2012.7 Address Skip Tracing....................................................................................................................................... 2112.7.A Timing of Address Skip Tracing Activities......................................................................................................... 2112.7.B Address Skip Tracing When the Loan Is Not Delinquent ................................................................................... 2112.7.C Required Address Skip Tracing Activities ......................................................................................................... 2212.7.D Endorser Address Skip Tracing Requirements.................................................................................................. 2212.7.E Address Skip Tracing Exceptions ..................................................................................................................... 2212.8 Telephone Skip Tracing ................................................................................................................................... 2312.8.A Telephone Skip Tracing Activities .................................................................................................................... 2412.8.B Endorser Telephone Skip Tracing Requirements .............................................................................................. 2412.9 Resuming Loan Servicing after Claim Return ................................................................................................... 24

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Chapter 13: Claim Filing, Discharge, and Forgiveness

13.1 Claim Filing ........................................................................................................................................................113.1.A Claim Filing Requirements..................................................................................................................................113.1.B Claim File Receipt ..............................................................................................................................................413.1.C Claim Review Process ........................................................................................................................................413.1.D Claim File Documentation...................................................................................................................................413.1.E Missing Claim File Documentation......................................................................................................................613.1.F Missing Payment History ....................................................................................................................................713.1.G Additional Documentation Requested by the Guarantor.......................................................................................713.2 Claim Returns ....................................................................................................................................................713.2.A Refiling the Returned Claim................................................................................................................................813.2.B Claim Recalls .....................................................................................................................................................813.3 Claim Purchase or Discharge Payment ...............................................................................................................913.3.A Claim Payment Amount ......................................................................................................................................913.3.B Amount of Interest Purchased on Eligible Claims ..............................................................................................1013.3.C Amount of Interest Purchased on Returned Claims ...........................................................................................1013.3.D Amount of Interest Purchased on Cured Loans .................................................................................................1113.3.E Receipt of Payments after Claim Purchase .......................................................................................................1113.4 Requests for Increase/Decrease in Claim Payment ...........................................................................................1113.5 Claim Repurchase ............................................................................................................................................1313.6 Default .............................................................................................................................................................1413.6.A Default Claims..................................................................................................................................................1413.6.B Ineligible Borrower Claims................................................................................................................................1513.7 Rehabilitation of Defaulted FFELP Loans...........................................................................................................1513.8 Discharge.........................................................................................................................................................1713.8.A Bankruptcy.......................................................................................................................................................1913.8.B Closed School ..................................................................................................................................................2113.8.C Death ...............................................................................................................................................................2813.8.D False Certification by the School.......................................................................................................................3013.8.E False Certification as a Result of the Crime of Identity Theft..............................................................................3713.8.F Spouses and Parents of Victims of September 11, 2001...................................................................................4213.8.G Total and Permanent Disability .........................................................................................................................4713.8.H Unpaid Refund ...........................................................................................