Federal Student Aid - IFAP
   
DCLPublicationDate: 8/1/98
DCLID: 98-L-208
AwardYear:
Summary: This letter announces a less burdensome way for Peace Corps volunteers to apply for economic hardship deferments on their Federal student loans.


NOTE: "The certification of Peace Corps service form referenced in this letter is not available in electronic format. However, a copy of the form will be included with the printed version of the letter that is being mailed to schools, lenders, and guaranty agencies."


August 1998

GEN-98-16
98-L-208
98-G-310


Summary: This letter announces a less burdensome way for Peace Corps volunteers to apply for economic hardship deferments on their Federal student loans.


References: 34 CFR 674.34; 34 CFR 682.210; 34 CFR 685.204
1998-99 Federal Student Aid Handbook:
Chapter 6, Section 4
Chapter 10, Section 5
Chapter 11, Section 2


Dear Colleague:
In response to a request from the Peace Corps, the Secretary will propose regulatory changes to the Federal Family Education Loan (FFEL) Program, the William D. Ford Federal Direct Loan (Direct Loan) Program, and the Federal Perkins Loan Program that will make it easier for Peace Corps volunteers who are ineligible for categorical loan deferments based on Peace Corps service to apply for economic hardship deferments on their Federal student loans.1 The reasons for the proposed regulatory changes are discussed below. Until these changes are finalized and become effective, the Secretary is waiving enforcement of the current regulations in this area and is providing interim procedures to be used by FFEL loan holders, the Direct Loan Servicing Center, and postsecondary educational institutions in granting economic hardship deferments to Peace Corps volunteers. This letter describes these interim procedures.

1These proposed changes will not affect borrowers who are currently eligible for categorical loan deferments based on Peace Corps service. In the FFEL and Direct Loan programs, certain borrowers who received loans prior to July 1, 1993 are eligible for a specific Peace Corps service deferment. In the Federal Perkins Loan Program, which includes National Defense Student Loans (Defense Loans), National Direct Student Loans (NDSLs), and Federal Perkins Loans, the vast majority of borrowers are eligible for a Peace Corps service deferment. In addition, all borrowers with Federal Perkins Loans are eligible for loan cancellation based on Peace Corps service. The only borrowers under the Federal Perkins Loan Program who are NOT eligible for a categorical Peace Corps service deferment are those few individuals with NDSLs that were made on or after July 1, 1993.

Background:
The Peace Corps has noted that borrowers who are not eligible for a loan deferment or cancellation based on service in the Peace Corps qualify for economic hardship deferments in the Title IV Federal student loan programs because of the extremely modest level of monthly allowances received by Peace Corps volunteers. The unique circumstances of Peace Corps assignments, however, make it difficult for volunteers to apply for these deferments in accordance with the requirements imposed by current regulations and procedures.

Borrowers are eligible for economic hardship deferments if they are working full-time and earning a total monthly gross income that does not exceed the greater of the minimum wage rate described in Section 6 of the Fair Labor Standards Act of 1938, or 100 percent of the poverty line for a family of two, as determined in accordance with Section 673(2) of the Community Service Block Grant Act. Peace Corps volunteers currently receive monthly living stipends and other smaller allowances that vary according to the country to which they are assigned. Based on an analysis of data provided by the Peace Corps and current minimum wage rate and poverty line amounts, we have determined that Peace Corps volunteers qualify for an economic hardship deferment based on the income criteria described above.

Under current regulations, borrowers who apply for economic hardship deferments are required to submit evidence showing their most recent total monthly gross income. In addition, current regulations limit individual economic hardship deferments to periods of up to one year at a time. Peace Corps volunteers generally do not have documentation of the amount of their monthly allowance for living expenses prior to beginning their volunteer service. Because Peace Corps volunteers serve overseas, often in remote areas of underdeveloped countries, the current requirement that borrowers submit documentation of their most recent monthly gross income when applying for economic hardship deferments presents significant logistical difficulties for many volunteers. For the same reason, the provision in the current regulations that limits individual economic hardship deferments to periods of one year at a time is burdensome for Peace Corps volunteers, who normally serve for a period of 27 months.

Because Peace Corps volunteers meet the requirements for economic hardship deferments based on the extremely modest allowances that they receive and because of the unique circumstances under which they serve, it is appropriate and in the national interest to amend current regulatory requirements in order to make it easier for Peace Corps volunteers to apply for and maintain economic hardship deferments on their eligible Federal student loans.

Interim Procedures:
Documentation:
Effective immediately, a Peace Corps volunteer who wishes to apply for an economic hardship deferment may simply provide the loan holder with a signed and dated economic hardship deferment request form and documentation from the Peace Corps showing that the borrower will be serving as a Peace Corps volunteer. This documentation will be available to volunteers at their pre-departure Peace Corps orientation sessions, so that they will be able to apply for economic hardship deferments while still in the United States. Until revised deferment forms are developed that will allow borrowers to specifically request economic hardship deferments based on Peace Corps service, borrowers need only sign and date the current form and, if the information is not already pre-printed on the form, provide their name, social security number, address, and phone number.

Working with the Peace Corps, the Department has established that acceptable documentation of Peace Corps service will be provided by a properly completed form from the Peace Corps that certifies the borrower’s Peace Corps period of service, including beginning and anticipated ending dates. This form must be signed and dated by a Peace Corps official. The Peace Corps currently uses a form, a copy of which is attached to this letter, that has been developed for such a certification. We will continue to work with the Peace Corps and with Title IV loan holders to refine this form and to develop other certification processes.

Once again, the submission of an economic hardship deferment request form together with a properly completed certification of Peace Corps service form will be considered sufficient documentation for a loan holder to grant an economic hardship deferment to a Peace Corps volunteer.

Term of Deferment:
Loan holders are authorized to grant an economic hardship deferment to a Peace Corps volunteer for the full term of Peace Corps service shown on the Peace Corps certification form, up to the statutorily mandated maximum of three years. Peace Corps volunteers normally serve for a period of 27 months. This modification of the current provision that limits individual deferments to periods of one year at a time will allow Peace Corps volunteers to receive economic hardship deferments for their full term of service without having to reapply each year from remote parts of the world. Volunteers who extend beyond the normal 27-month term of service may apply for an additional period of deferment to cover the balance of the 3-year economic hardship deferment period authorized by law. In instances when a borrower who received a previous economic hardship deferment is not eligible to receive a subsequent economic hardship deferment for the full term of Peace Corps service, loan holders are urged to offer a forbearance for the time needed for the completion of the Peace Corps term of service.

If you have questions about these new procedures, please contact our Policy Development Division at (202) 708-8242.

I thank you for your continued support of our Title IV student assistance programs in general and your cooperation in this effort to assist those Americans who have volunteered to serve their country throughout the world in the Peace Corps.


Sincerely,

Diane E. Rogers
Acting Deputy Assistant Secretary
Student Financial Assistance Programs