Publication Date: March 2003
DCL ID: G-03-347
Administrative relief for students and borrowers affected by military mobilizations.
Posted on 03-25-2003
March 2003
GEN-03-06
G-03-347
L-03-241
Subject: Administrative relief for students and borrowers affected by
military mobilizations.
Summary: This letter
provides guidance regarding the administration of the Federal student aid programs
authorized under Title IV of the Higher Education Act for students and borrowers
who have been ordered to active military duty and for active duty military personnel
whose duty station has been changed as a result of a military mobilization.
Dear Colleague:
In September 2001 we issued
a Dear Colleague Letter (GEN-01-13)
that provided guidance for the treatment of students and borrowers who were
impacted by the military mobilization that followed the September 11 terrorist
attacks. This letter updates that guidance for students and borrowers who are
military personnel and who are activated or reassigned for a period of more
than 30 days as a result of a military mobilization.
The loan issues guidance
in this letter applies to lenders and guaranty agencies in the Federal Family
Education Loan (FFEL) Program and to school lenders in the Federal Perkins Loan
(Perkins) Program. In addition, the Secretary will treat borrowers who are ordered
to active duty or reassigned and who have Direct Loans or other loans held by
the Department in accordance with this guidance.
Loan Issues
Borrowers whose Title
IV loans are in an in-school, in-school deferment, or grace period status
If a borrower's loan is
in an in-school status or an in-school deferment status, or in a grace period
status when the borrower is ordered to active duty or reassigned, the lender
must maintain the loan in that status during the period of the borrower's active
duty service or reassignment, plus the time necessary for the borrower to resume
enrollment in the next regular enrollment period that is reasonably available
to the borrower, if the borrower is planning to go back to school. However,
this maintenance of loan status may not exceed a total of 3 years, including
the period of time necessary for the borrower to resume enrollment. Additionally,
if the loan was in a grace period status at the time the borrower was ordered
to active duty, the period of time during which the borrower served on active
duty must be excluded from the grace period in order to ensure that the borrower
receives the full grace period in the future.
Borrowers whose Title
IV loans are in repayment
If a borrower's loan is
in repayment, FFEL lenders must grant the borrower forbearance based upon the
request of the borrower, a member of the borrower's family, or another reliable
source. Under the amendment to 34 CFR 682.211(c) which was published by the
Department on November 1, 2002, (at 67 Fed. Reg. 67048), an FFEL lender may
accept an oral request for the forbearance. The forbearance agreement need not
be in writing and the forbearance can be granted without documentation. However,
the reason for granting the forbearance must be documented in the borrower's
loan records. The lender may extend this initial forbearance for a period that
is the lesser of one year or the period of active duty (if known at the time
of granting the forbearance).
Under the amended procedures
in 34 CFR 682.211(f) that were also included in the final regulations published
November 1, 2002, an FFEL lender may grant a discretionary, administrative forbearance
immediately for up to three months to borrowers who are affected by the military
mobilization. Such an administrative, discretionary forbearance, if granted,
will be considered part of an initial forbearance period, thereby extending
the initial period of forbearance to 15 months. Forbearance beyond any initial
period will require supporting documentation and a written agreement with the
borrower. This forbearance authority applies to all borrowers who have been
part of a military mobilization, including borrowers who were called up immediately
following September 11, 2001, and who are still on active duty.
If a Federal Perkins Loan
borrower's loan is in repayment, school lenders must also grant the borrower
forbearance for a period that is the lesser of one year or the period of active
duty based upon the request of the borrower, a member of the borrower's family,
or another reliable source. The forbearance agreement need not be in writing
and the forbearance can be granted without documentation as long as the reason
is noted in the borrower's loan records. However, forbearances beyond any initial
period will require a written request because of statutory requirements.
During the initial forbearance
period, lenders are encouraged to examine the borrower's eligibility for a deferment.
For example, some FFEL, Direct and Perkins loan borrowers may be eligible for
an economic hardship deferment or a military deferment, depending on when the
loan was made. Schools are also encouraged to examine a Federal Perkins loan
borrower's eligibility for a military service cancellation based on the borrower
serving in an area of hostilities.
Borrowers whose loans
are in default status
If a borrower is in default
on a loan, the guaranty agency or Perkins school must, upon being notified that
the borrower has been called to active duty or reassigned, cease all collection
activities for the expected period of the borrower's military service. Collection
activities must resume no later than 30 days after the end of the borrower's
military service.
Applicability of the
Soldiers' and Sailors' Civil Relief Act of 1940
The Soldiers' and Sailors'
Civil Relief Act of 1940 only applies if an FFEL guaranty agency or a Perkins
school lender is suing a borrower who is covered by that Act. That Act prevents
a creditor from obtaining a default judgment in court. It does not prohibit
other collection efforts. A borrower's interest rate is not affected by the
provision of the Act restricting interest charged to certain borrowers in military
service, because section 428(d) of the Higher Education Act states that no provision
of any law which limits the interest rate on a loan shall apply to the FFEL
Program.
Other Issues
Institutional Charges
and Refunds
We strongly encourage schools
to provide a full refund of required tuition, fees, and other institutional
charges, or to provide a credit in a comparable amount against future charges
for students who are forced to withdraw from school as a result of the military
mobilization. In addition, we urge schools to consider providing easy and flexible
re-enrollment options to affected students.
Return of Title IV Funds
Treatment
If a Title IV eligible
student withdraws because of being called to active duty, or has been otherwise
impacted by the military mobilization (such as a change of duty station away
from the borrower's home), the school must perform the Return of Title IV Funds
calculations that are required by the statute and regulations (34 CFR 668.22).
If those calculations result in the school being required to return funds to
one or more of the Title IV programs, it must do so. If these calculations result
in an overpayment that is the responsibility of the student to repay, the
school should not contact the student or notify NSLDS. Please note, however,
that although previous guidance instructed the school not to refer these overpayments
to the Department, beginning on May 1, 2003, the school must refer overpayments
to the Department for tracking and verification purposes. To the extent possible,
these referrals should also include any overpayments identified previously by
the school for military mobilization withdrawals under the guidance provided
in Dear Colleague Letter GEN-01-13,
September 2001. Schools should make the referral using the overpayment referral
format on page 1-131 of the Student Eligibility section (Volume 1) of the 2002-2003
Student Financial Aid Handbook. Schools must specify "MILITARY MOBILIZATION"
as the reason for the overpayment in Part 5 of the overpayment referral format.
Thank you for supporting
the many students who have been called to serve our nation.
Sincerely,
Jeffrey Andrade
Deputy Assistant Secretary for
Policy, Planning and Innovation
