Federal Student Aid - IFAP
   
DCLPublicationDate: 1/1/95
DCLID: 95-L-175
AwardYear:
Summary: This letter provides information to postsecondary institutions and to guaranty agencies and lenders in the Federal Family Education Loan Program (FFELP) to assist students and institutions in areas designated as natural disaster areas due to the October floods in Texas. The guidance offered in this letter is similar to that provided after the floods in the Southeast earlier this year.


January 1995
GEN-95-1
95-G-276
95-L-175

SUMMARY: This letter provides information to postsecondary
institutions and to guaranty agencies and lenders in the Federal
Family Education Loan Program (FFELP) to assist students and
institutions in areas designated as natural disaster areas due to
the October floods in Texas. The guidance offered in this letter
is similar to that provided after the floods in the Southeast
earlier this year.

Dear Colleague:

The Secretary recognizes the severe impact that the October floods
in Texas have had on institutions and their students located in
Presidentially declared natural disaster areas. As he has done on
similar occasions in the past, the Secretary wishes to assist
institutions and students in their recovery from the effects of
this disaster by providing certain regulatory relief to
institutions in their administration of the Title IV student
financial aid programs. This relief is applicable to the 1994-95
award period (July 1, 1994 to June 30, 1995). This action is taken
in anticipation of a Notice to be published in the Federal
Register.

This regulatory relief applies to institutions located in the
designated natural disaster areas in Texas that were unable to
maintain normal operations due to the disaster and to individuals
(and their families) who, at the time of the disaster, were
residing, attending an institution of higher education, or
employed in the designated natural disaster areas as declared by
President Clinton. (Please refer to the enclosed listing of those
counties currently declared as disaster areas.)

An institution that deviates from otherwise required actions in its
administration of the Title IV programs on the basis of guidance
offered within this letter must document the action being taken.

The Secretary provides the following guidance and enforcement
relief from regulatory requirements:

General Provisions

- Satisfactory Academic Progress (§668.7(c) and §668.16(e)). The
Secretary will not enforce satisfactory academic progress standards
in the situation in which a student may not be able to complete
course requirements because he or she is a victim of the disaster
and may not, for that reason, receive credit and fails to meet the
institution's satisfactory academic progress standards. In this
situation, the Secretary encourages the institution to refrain from
applying its satisfactory academic progress standards at least
where their application would disqualify a student from receiving
Title IV aid. The institution must, in this case, document in the
student's file that the student's failure to maintain satisfactory
academic progress was due to the natural disaster.

- Tuition Refunds or Credits (§668.22 and 34 CFR Part 668,
Appendix A) . The Secretary strongly encourages an institution to
provide a full refund of required tuition and fees or a credit in
a comparable amount against future tuition and fees to a student
who has been unable to complete course requirements because he or
she is a victim of the disaster.

- Professional Judgment (20 U.S.C. 1087tt).

(1) Section 479A of the Higher Education Act of 1965, as amended,
specifically gives the financial aid administrator (FAA) the
authority to use professional judgment to make adjustments on a
"case-by-case" basis to the cost of attendance or to the values of
the items used in calculating the expected contribution toward
meeting the student's cost of attendance to reflect the
student's special circumstances. The use of professional judgment
in Federal need analysis is discussed in Chapter 2 of the Federal
Student Financial Aid Handbook and in Part II of the Counselor's
Handbook for Postsecondary Schools.

(2) Campus-Based and FFEL Programs. The Secretary is
encouraging FAAs to use their professional judgment in determining
whether to make adjustments to the data used to calculate a student's
expected family contribution in order to reflect more accurately his or
her financial need and provide some relief to a student whose need
requirements may have changed due to the economic losses
caused by the disaster. An FAA still must make adjustments on a
"case-by-case" basis and clearly document the student's file with
the reasons for any adjustment.

(3) Federal Pell Grant Program. There are no special conditions
on which to "adjust" a student's expected family contribution when
the student suffers, or the student's family suffers, economic loss
through a natural disaster. Instead, as in the case with the other
Title IV student financial aid programs, to provide relief for
disaster area victims, the Secretary is encouraging FAAs to use
their professional judgment to determine whether adjustments to
a student's data will more accurately reflect a student's personal
circumstances. An FAA must make adjustments on a "case-by-case"
basis and clearly document the student's file with the reasons for
any adjustment.

If the FAA makes adjustments to a student's data, the SAR must be
returned to the Title IV application processing system, or reported
to the Central Processing System (CPS) through the Electronic Data
Exchange. The adjusted data will then be processed through the
CPS, and a new expected family contribution (EFC) will be
calculated. Please note that if a student is not and is unlikely
to become eligible for a Federal Pell Grant, an institution need
not resubmit professional judgment adjustments through the CPS.

- Verification (34 CFR 668 Subpart E). The Secretary will not
enforce the verification requirements during the award year for
those applicants selected for verification whose records were lost
or destroyed because of the disaster. An institution must document
the student's file when it does not perform verification for this
reason. For these students, Verification Sttus Code "S" may be
used to report a Federal Pell Grant disbursement.

- Determining the Date of a Student's Withdrawal
(§668.22(i)(1)(ii)). The Secretary will not enforce the
regulatory deadlines for complying with the requirement that an
institution determine the withdrawal date for a student if the
institution is unable, because of the disaster, to make that
determination within the required timeframe. The institution will
be required to determine that the student has withdrawn WITHIN 60
DAYS (instead of 30 days) after the expiration of the earlier of
the period of enrollment for which the student has been charged,
the academic year in which the student withdrew, or the educational
program from which the student withdrew.

- Lost Student Records (§668.23). The Secretary recognizes that,
because of the disaster, records and documentation institutions in
the disaster area are required to keep on file may no longer be
available or legible. Affected institutions are required to
attempt to reconstruct financial aid application data and award
data lost because of the disaster but will not be held responsible
for records and documentation that, because of disaster damage,
cannot be reconstructed. The institution must document that the
records were lost due to the disaster.

- Institutional Eligibility, Administrative Capability, and
Financial Responsibility (§600.40(a),§668.15, and §668.16). If,
in future program reviews or audits, the Secretary finds that an
institution temporarily failed to meet the standards of fiscal and
administrative capability and the institution indicates that this
failure was the result of the disaster, the Secretary will
carefully consider those circumstances described by the
institution. He will examine each situation on a "case-by-case"
basis and make a determination as part of the audit or program
eview resolution process. A short-term, temporary closure
of an institution will not, in itself, cause the institution to
lose its eligibility.

- Transfer Students (§668.19). The institution to which a student
is transferring must make an effort to obtain the records and
documentation required to disburse or deliver Title IV aid. If
this information is not available as a result of damage caused by
the disaster, the institution to which the student transferred will
not be held responsible for collecting the information nor will the
student be held responsible for providing the information. Any
institution affected by this situation should document that the
information is unavailable due to the disaster.

- Agreements to Permit Study at Another Institution (§600.9). If
an institution is unable to continue to provide a student's
eligible program because of the disaster, the Secretary strongly
encourages the institution to establish a contractual or consortium
agreement with another institution to enable the student to
continue to receive Title IV aid while studying at the second
institution. The requirements for such an agreement are
found in §600.9 of the Institutional Eligibility regulations.
Generally, an eligible "home institution" following these
requirements will not face potential liabilities concerning written
agreements if the institution enters into an agreement with another
eligible institution for this purpose.


Determination of Need

- Needs Analysis. No special aid received by victims of the
disaster from the Federal Government or the State for the purpose
of providing financial relief will be counted as income for the
purposes of calculating a family's EFC. This aid may take the form
of grants or low-interest loans.

- Other Resources. No special aid received by the victims of the
disaster from the Federal Government or the State for the purpose
of providing financial relief will be counted as other resources or
estimated financial assistance for the purposes of determining
need. This aid may take the form of grants or low-interest loans.

Federal Pell Grant Program

- Reporting Deadlines (Notices of Deadline Dates). The Secretary
will consider carefully, on a "case-by-case" basis, the effect of
the disaster on any institution's ability to meet required Federal
Pell Grant reporting deadlines.


Campus-Based Programs

FWS Program

- Community Services (§675.2). The Secretary encourages
institutions to employ its Federal Work-Study (FWS) students in the
cleanup and relief efforts for the communities affected by the
disaster. These efforts would be considered part of the
institution's community services activities under the FWS Program.

Federal Perkins Loan Program

- Borrowers in an "In-School" Status (§674.31). The Secretary
will consider that any borrower who was in an "in-school" status at
the time of the natural disaster and was unable to complete course
requirements or enroll in classes will continue to be in an
"in-school" status until such time as the borrower withdraws, or
until the end of the 1994-95 award period, whichever is later.
The institution should document this reason for continued
"in-school" status in the student's file.

- Borrowers in Initial or Post-Deferment Grace Periods (§674.42).
The Secretary will notrequire an institution to comply with
§674.42(b) requiring an institution to make contact with the
borrower during an initial or post-deferment grace period. An
institution must document the reason for suspension of these
activities in the borrower's file.

- Borrowers in Default-Due Diligence. The Secretary will not
enforce 34 CFR 674 Subpart C - Due Diligence. An institution may
suspend the collection activities for borrowers already in default
at the time of the natural disaster. An institution must document
the reason for suspension of these activities in the borrower's
file.

- Borrowers in Repayment (§674.34-674.36). The Secretary
authorizes the institution to grant an administrative hardship
deferment to a borrower who is in repayment at the time of the
natural disaster but is unable to continue to repay the loan due to
the disaster. The legislation governing the Perkins Loan Program
requires that interest will accrue during any period
of administrative hardship deferment. A borrower may request this
deferment orally, or in writing, and will not be required to submit
a deferment documentation form to be considered eligible for this
deferment. An institution must document this deferment in the
borrower's file.

FFEL Program

- Institution's Delivery of Loan Proceeds (§682.604). The
Secretary will not enforce the requirement in §682.604 that loan
proceeds be delivered to the borrower within 45 days of the
institution's receipt of the check but will instead permit the institution
to deliver loan proceeds to the borrower up to 120 days from the
institution's receipt of the check.

- Guaranty Agency and Lender Disbursement of Loan Proceeds. The
Secretary authorizes lenders not to disburse loan checks to
institutions or to PLUS borrowers in the affected area according to
the originally established disbursement schedules as required under
§682.207(b)(1)(i)(B) if they have been informed that an
institution has delayed opening for a scheduled term or has ceased
operations for an undetermined period of time. Lenders should
await revised disbursement schedules from the affected
institutions. Institutions are also urged to request revised
disbursement dates.

The Secretary instructs guaranty agencies and lenders to revise
information on loan periods, graduation dates, and so forth, on the
loan applications related to these disbursements as the information
becomes available. This instruction means that a borrower need not
reapply for the loan. This also will allow a student to receive
his or her loan proceeds according to a schedule that fits the
institution's new academic schedule.

- Converting the Borrower to Repayment (§682.209(a) and §682.210)
The Secretary believes that it is in the best interest of the FFEL
Program to consider each Federal Stafford loan that has not entered
repayment and that was not in a default status on the date the
borrower's attendance at the institution was interrupted due to the
disaster to be (or have been) in an "in-school" status and to
continue in that status until the institution resumes normal
operations. THIS PERIOD OF DISASTER-RELATED
NONATTENDANCE SHOULD NOT REQUIRE A BORROWER
TO ENTER OR USE ANY OF HIS OR HER GRACE PERIOD.

Each Federal Stafford loan that had entered repayment status and
that is not in a default status on the date the borrower's
attendance at the institution was interrupted due to disaster
conditions is to be considered as in an in-school deferment status
during the period of disaster-related nonattendance. THIS INTERIM
PERIOD OF NONATTENDANCE SHOULD NOT FORCE A
BORROWER BACK INTO REPAYMENT.

A borrower whose FFEL loan was in an in-school deferment status on
the date the disaster conditions interrupted normal operations at
the institution shall be treated as if the loan continues in an
in-school deferment status during this same period of
disaster-related nonattendance.

The Secretary will afford similar treatment to borrowers under the
William D. Ford Federal Direct Loan Program.

- Payment of a Refund to a Student or to a Lender (§668.22 and
§682.607). The Secretary will not enforce the deadlines by which an
affected institution must pay a refund that is due to a student or to a
lender after the student's withdrawal as determined under
§668.22(i). Instead, the Secretary will require the institution
to pay a refund to the student WITHIN 90 DAYS (instead of 30 days)
and to the lender WITHIN 120 DAYS (instead of 60 days) after the
student's withdrawal.

- Submission of Student Status Confirmation Reports (SSCR)
(§682.610(c)). The Secretary will not enforce the deadline that
an institution complete and submit required SSCRs to the Secretary
or guaranty agency within 30 days of the institution's receipt of
the report but will instead require completion and submission of
these reports WITHIN 90 DAYS. Reports of changes of borrower
status if the institution does not expect to submit its next SSCR
within the next 60 days may also be submitted WITHIN 90 DAYS
(instead of 30 days).

For additional information or if you have any questions please
contact:

Jeffrey Baker, Director
Policy Development Division
Student Financial Assistance Programs
U.S. Department of Education
600 Independence Avenue, SW
Washington, DC 20202
(202) 708-9967

We hope that these options for regulatory relief will be of use to
you in assisting students whose families have been affected by the
disaster.

Sincerely,


William L. Moran
Director, Student Assistance
Programs

Enclosure to flood disaster letter January 1995

COUNTIES DESIGNATED BY PRESIDENT CLINTON
AS FLOOD DISASTER AREAS IN TEXAS - FALL 1994

Angelina Jasper Victoria
Austin Jefferson Washington
Bastrop Lee Waller
Brazos Liberty Walker
Brazoria Madison Wharton
Burleson Matagorda
Chambers Montgomery
Fayette Nacagdoches
Fort Bend Orange
Galveston Polk
Grimes San Augustine
Hardin San Jacinto
Harris Shelby
Houston Trinity
Jackson Tyler

[Updates may be obtained by calling the Department's toll-free
number at 1-800-433-3243, Monday through Friday from 9:00 a.m. to
5:30 p.m. Eastern time]