Federal Student Aid - IFAP
   
DCLPublicationDate: 11/1/95
DCLID: GEN-95-49
AwardYear:
Summary: Guidance for helping Title IV participants affected by Hurricane Marilyn in the Commonwealth of Puerto Rico and the U.S. Virgin Islands and Hurricane Opal in Florida, Alabama, Georgia and North Carolina.


NOVEMBER 1995

GEN-95-49
95-S-74
95-L-185
95-G-285


SUBJECT: Guidance for helping Title IV participants affected
by Hurricane Marilyn in the Commonwealth of
Puerto Rico and the U.S. Virgin Islands and
Hurricane Opal in Florida, Alabama, Georgia
and North Carolina.


REFERENCE: This information supplements the guidance given
in Chapters 2-10, Federal Student Financial
Aid Handbook.


Dear Colleague:

The Secretary recognizes the severe impact that Hurricane Marilyn
(September 1995) and Hurrican Opal (October 1995) have had on Title IV
participants located in Presidentially declared natural disaster areas. As he
has done on similar occasions in the past (for example, after the floods in
Illinois, Louisiana, Mississippi, and Missouri in 1995), the Secretary wishes
to assist the victims of Hurricane Marilyn and Opal in their recovery by
providing certain regulatory relief to students, schools, lenders, and
guaranty agencies in their administration of the student financial aid
programs under Title IV of the Higher Education Act of 1965, as
amended (HEA). This relief is generally applicable to the 1995-96
award period (July 1, 1995 to June 30, 1996).However, if specifically
indicated, relief will be extended into the next award year (July 1,
1996 to June 30, 1997) and is taken in anticipation of a Notice to
be published in the FEDERAL REGISTER.

This regulatory relief applies to individuals (and their families)
who, at the time of the disaster, were residing in, employed in, or
attending a school located in, the Commonwealth of Puerto Rico,
the U.S. Virgin Islands, or a designated county in Florida,
Alabama, Georgia, or North Carolina, and to schools, lenders,
and guaranty agencies that were unable to maintain their
normal participation and interactions with Title IV participants
because of the hurricanes. Please refer to the enclosed list of the
counties currently declared as disaster areas. [Note: updates to
the list 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.]

A Title IV participant 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. [Note: discussions are
presented alphabetically by topic within each of the program areas.]


General Provisions (All Title IV Programs)

- AGREEMENTS TO PERMIT STUDY AT ANOTHER SCHOOL
(§ 600.9). If a school is unable to continue to provide a
student's eligible program because of the disaster, the Secretary
strongly encourages the school to establish a contractual or
consortium agreement with another school to enable the student to
continue to receive Title IV aid while studying at the second school .
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 school enters into
an agreement with another eligible school for this purpose.

- DETERMINING THE DATE OF A STUDENT'S
WITHDRAWAL (§ 688.22(j)(3)). The Secretary will not
enforce the regulatory deadlines for complying with the requirement
that a school determine the withdrawal date for a student if the
school is unable, because of the disaster, to make that
determination within the required timeframe. The school 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.

- INSTITUTIONAL ELIGIBILITY, FINANCIAL
RESPONSIBILITY, AND ADMINISTRATIVE
CAPABILITY (§600.40(a), §668.15, and §668.16). If, in future
program reviews or audits, the Secretary finds that a school
temporarily failed to meet the standards of fiscal and administrative
capability and the school indicates that this failure was
the result of the disaster, the Secretary will carefully
consider those circumstances described by the school.
He will examine each situation on a "case-by-case"
basis and make a determination as part of the audit or program
review resolution process. A short-term, temporary
closure of a school will not, in itself, cause the school to
lose its eligibility.

- LOST STUDENT RECORDS (§668.23). The Secretary
recognizes that, because of the disaster, records and
documentation schools in the disaster area are required
to keep on file may no longer be available or legible.
Affected schools 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 school must
document that the records were lost due to the disaster.
[Note: may apply to the 1996-97 award year.]

- NEED 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 expected family contribution
(EFC). This aid may take the form of grants or low-
interest loans. [Note: may apply to the 1996-97 award
year.]

- 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.
[Note: may apply to the 1996-97 award year.]

- PROFESSIONAL JUDGMENT. Section 479A of the
HEA 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 EFC toward meeting the student's cost of
attendance to reflect the student's special circumstances.
The use of professional judgment in Federal needs
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.

- For the CAMPUS-BASED, DIRECT LOAN, AND FEDERAL
FAMILY EDUCATION LOAN (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 EFC 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.

- For the FEDERAL PELL GRANT PROGRAM, there are
no special conditions on which to "adjust" a student's
EFC 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 EFC will be calculated.
Please note that if a student is not eligible and is
unlikely to become eligible for a Federal Pell Grant, a
school need not resubmit professional judgment
adjustments through the CPS.

- SATISFACTORY ACADEMIC PROGRESS (34 CFR
668.7(c) AND §668.16(e)). The Secretary will not
enforce satisfactory academic progress standards in the
situation in which a student fails to meet the school's
satisfactory academic progress standards due to the
disaster. In this situation, the Secretary encourages the
school to refrain from applying its satisfactory academic
progress standards, at least where their application
would disqualify a student from receiving Title IV aid.
The school 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.

- TRANSFER STUDENTS (§668.19). The school 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 school 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 school affected by this situation
should document that the information is unavailable due
to the disaster. [Note: may apply to the 1996-97 award
year.]

- TUITION REFUNDS OR CREDITS (§668.22 AND
APPENDIX A). The Secretary strongly encourages a
school 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.

- 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. A school must document the
student's file when it does not perform verification for
this reason. For these students, Verification Status
Code "S" may be used to report a Federal Pell Grant
disbursement. [Note: may apply to the 1996-97 award
year.]


Campus-Based Programs

FEDERAL WORK-STUDY (FWS) PROGRAM

- COMMUNITY SERVICES (§675.2). The Secretary
encourages schools to employ their FWS students in the
cleanup and relief efforts for the communities affected
by the disaster. These efforts would be considered part
of the school'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 1995-96 award period, whichever is
earlier. The school 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 not require a
school to comply with §674.42(b) requiring a school to
make contact with the borrower during an initial or
post-deferment grace period. A school must document
the reason for suspension of these activities in the
borrower's file.

- BORROWERS IN DEFAULT-DUE DILIGENCE. The
Secretary will not enforce the billing and collection
activities required under 34 CFR 674 Subpart C - Due
Diligence. A school may suspend the collection
activities for borrowers already in default at the time of
the natural disaster. A school must document the reason
for suspension of these activities in the borrower's file.

- BORROWERS IN REPAYMENT (§674.33). The
Secretary authorizes the school to grant a forbearance 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 forbearance. A borrower may
request this forbearance orally, or in writing, and will
not be required to submit documentation to be
considered eligible for this forbearance. A school must
document this forbearance in the borrower's file.


Federal Family Education Loan (FFEL) Program

- 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 school was
interrupted due to the disaster to be (or have been) in an
"in-school" status and to continue in that status until the
school 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 was not in a default status on
the date the borrower's attendance at the school 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 school
shall be treated as if the loan continues in an "in-school"
deferment status during this same period of disaster-
related nonattendance.

- GUARANTY AGENCY AND LENDER DISBURSEMENT
OF LOAN PROCEEDS. The Secretary authorizes lenders not to
disburse loan checks to schools 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 a
school 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 schools. Schools 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 school's new
academic schedule.

- LENDER AND GUARANTY AGENCY DUE DILIGENCE
The Secretary has decided that it is in the best interest
of the hurricane victims and the Federal government to
waive his right to refuse to pay reinsurance to guaranty
agencies or interest and special allowance benefits to
lenders under the following circumstances:

A. LENDERS AND GUARANTY AGENCIES SERVICING
ACCOUNTS OF BORROWERS RESIDING IN
DESIGNATED NATURAL DISASTER AREAS OR WHO
WOULD BE REQUIRED TO CONTACT OTHER ENTITIES
LOCATED IN A DESIGNATED NATURAL DISASTER AREA
WHO ARE UNABLE TO MAINTAIN NORMAL OPERATIONS.

If a borrower resides in an area designated by
the President as a natural disaster area, lenders and
guaranty agencies are not required to comply with any
regulatory provision requiring the lender or agency to
contact the borrower in writing or by telephone within
specified timeframes. For example, contacts with a
delinquent or defaulted borrower (or endorser, if
applicable) of an FFEL Program loan, that normally
would be required under §682.410 and §682.411, may
be suspended. This waiver will apply to all such
contacts that would otherwise be required during the
periods specified at the end of this section. Lenders and
guaranty agencies must grant administrative forbearance,
in accordance with §682.211(j), to all borrowers residing in
the designated disaster areas during this period. All
regulatory requirements shall resume on the date indicated
at the end of this section, beginning with the activities that
immediately follow those activities last performed at the
time the lender or guaranty agency suspended its collection
efforts.

If a lender or guaranty agency is able to maintain
normal business operations (regardless of its location),
but would normally be required to contact an entity
(e.g., a school) that is adversely affected by the
hurricane to the extent that the entity to be contacted
cannot maintain normal business operations, the lender
or guaranty agency is not required to comply with any
time-driven regulatory provision with respect to that
entity during the waiver period. All regulatory
requirements shall resume on the date indicated at the end
of this section, beginning with the activities that immediately
follow those activities last performed at the time the
lender or guaranty agency suspended its contact with the
entity.

B. LENDERS AND GUARANTY AGENCIES LOCATED IN A
DESIGNATED NATURAL DISASTER AREA WHO ARE
UNABLE TO MAINTAIN NORMAL OPERATIONS.

Lenders and guaranty agencies located in a
designated natural disaster area who are adversely
affected by the hurricane to the extent that they cannot
maintain normal business operations are not required to
comply with regulatory provisions that normally would
require them to perform a specific action in a prescribed
period of time during the waiver period. These provisions
include the time-driven requirements in §682.205,
§682.207, §682.208, §682.209, §682.402, §682.404,
§682.406, §682.410, §682.411, and §682.412 that
relate to activities such as loan disclosures, disbursement,
servicing, repayment, claim processing and filing deadlines,
certain terms of the federal reinsurance agreement, and
due diligence requirements. All regulatory requirements
shall resume on the date indicated at the end of this section,
beginning with the activities that immediately follow those
activities last performed at the time the lender or guaranty
agency was unable to comply with regulatory requirements
because of the hurricane.

DATES APPLICABLE TO HURRICANE MARILYN IN THE
COMMONWEALTH OF PUERTO RICO AND THE U.S.VIRGIN
ISLANDS: FFEL waiver period September 18, 1995 through
December 31, 1995. All normal FFEL regulatory requirements
resume on January 1, 1996.

DATES APPLICABLE TO HURRICANE OPAL IN THE
DESIGNATED COUNTIES IN FLORIDA, ALABAMA
GEORGIA AND NORTH CAROLINA: FFEL waiver period
October 3, 1995 through December 31, 1995. All normal FFEL
regulatory requirements resume on January 1, 1996.
[Note: The Secretary is aware that Hurricane Opal is recorded as
striking on October 4, 1995, however as a result of advance
warnings of the hurricane, those affected spent October 3
preparing for the hurricane or evacuating the area. Therefore,
the period of relief begins on October 3.]

C. WAIVERS APPLICABLE TO FFEL SCHOOLS
LOCATED IN A DISASTER AREA..

- 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 school must pay a
refund that is due to a student or to a lender after the
student's withdrawal as determined under §668.22(j)(3).
Instead, the Secretary will require the school 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.

- SCHOOL'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 school's receipt of the
check but will instead permit the school to deliver loan
proceeds to the borrower up to 120 days from the
school's receipt of the check.

- SUBMISSION OF STUDENT STATUS CONFIRMATION
REPORTS (§682.610(c)). The Secretary will not enforce
the deadline that a school complete and submit required
student status confirmation reports to the Secretary or
guaranty agency within 30 days of the school'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 school does not expect
to submit its next report within the next 60 days may
also be submitted WITHIN 90 DAYS (instead of 30 days).


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
school's ability to meet required Federal Pell Grant
reporting deadlines.


William D. Ford Federal Direct Loan Program

- PAYMENT OF A REFUND TO A STUDENT OR TO
THE SECRETARY (§668.22 and §685.305). The Secretary will
not enforce the deadlines by which an affected school
must pay a refund that is due to a student or to the
Secretary after the student's withdrawal as determined
under §668.22(j)(3). Instead, the Secretary will require
the school to pay a refund to the student WITHIN 90 DAYS
(instead of 30 days) and to the Secretary WITHIN 120
DAYS (instead of 60 days) after the student's withdrawal.

- REPAYMENT OF DIRECT SUBSIDIZED AND DIRECT
UNSUBSIDIZED LOANS (§685.204 AND §685.207). The
Secretary believes that it is in the best interest of the
Direct Loan Program to consider each Direct Subsidized
and Direct Unsubsidized loan that has not entered
repayment and that was not in a default status on the
date the borrower's attendance at the school was
interrupted due to the disaster to be (or have been) in an
"in-school" status and to continue in that status until the
school 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 Direct Subsidized and Direct Unsubsidized
loan that had entered repayment status and that was not
in a default status on the date the borrower's attendance
at the school 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.

- SUBMISSION OF STUDENT STATUS CONFIRMATION
REPORTS (§685.309(b)). The Secretary will not enforce
the deadline that a school complete and submit required
student status confirmation reports to the Secretary
within 30 days of the school'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 school does not expect to submit its next
report 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 (ROB-3)
Washington, DC 20202-5345
Telephone: (202) 708-9967 FAX: (202) 708-7196

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,

Elizabeth M. Hicks
Deputy Assistant Secretary
for Student Financial Assistance




Attachment