GEN-01-11
September 2001
Subject: Recent Terrorist Attacks - Relief for Borrowers in the Title IV Loan
Programs
Summary: This letter is
the first of a series that will provide guidance regarding the administration
of the federal student aid programs authorized under Title IV of the Higher
Education Act as a result of the terrorist attacks on the United States. The
first three letters (this letter and ones that will address institutional reporting
deadlines and the treatment of students and borrowers who are affected by the
their call to active military duty) should be available by the end of this week.
We will also publish a letter that will comprehensively address other issues
that relate to regulatory and administrative relief for those affected by the
terrorist attacks.
This letter specifically
addresses the immediate needs of borrowers who are in repayment on a loan under the Federal Family Education Loan (FFEL), the William D. Ford Federal
Direct Loan (Direct Loan), and Federal Perkins Loan programs.
Dear Colleague:
On September 11, 2001,
President Bush designated all five boroughs of New York City (The Bronx, Brooklyn,
Manhattan, Queens and Staten Island) as eligible for national disaster assistance.
There may be borrowers affected by the attacks who will need assistance with
their loan obligation.
The following provides
guidance to Title IV loan holders on the granting of forbearances and discharges
to affected borrowers. It also provides guidance on the treatment of defaulted
borrowers who have been affected by the disaster.
Forbearance in the FFEL and Direct Loan Programs
Forbearance for borrowers
who reside or work in the designated disaster area
Until it can be determined
whether a borrower qualifies for a deferment or discharge because of disruptions
caused by the terrorist attacks, the Secretary is authorizing FFEL lenders to
grant mandatory administrative forbearance to certain borrowers (or endorsers,
if applicable) who either reside in or, to the extent the lender has knowledge,
work in the designated disaster area (New York City). Mandatory administrative
forbearance does not require either a request or documentation from the borrower.
This period of mandatory administrative forbearance is effective from September
11, 2001 through January 31, 2002. The Secretary is granting administrative
forbearance to similarly situated Direct Loan borrowers for the same period.
See 34 CFR 682.211(i)(2)(i) and 34 CFR 685.205(b)(8).
Borrowers must be notified
that an administrative forbearance has been granted to allow them to pursue
other potential program benefits that may be available to them or to ask for
resumption of normal billing and payment schedules. Forbearance beyond January
31, 2002 may be granted only based on supporting documentation and with a written
forbearance agreement with the borrower.
Forbearance for other
borrowers
Based upon the request
of the affected borrower, the borrower's family or another reliable source,
borrowers who have been impacted by the terrorist attacks (other than those
who reside or work in New York City) should be granted forbearance for a period
that ends no later than January 31, 2002 without supporting documentation and
without a written forbearance agreement. The reasons for granting the forbearance
should be documented in the borrower's loan records. Forbearance beyond the
initial period will require supporting documentation and a written agreement
with the borrower.
During the initial forbearance
process, lenders are encouraged to examine the borrower's eligibility for available
deferment or discharge benefits.
Defaulted Borrowers in the FFEL and Direct Loan Programs
The Secretary will, without
a request from the borrower, curtail collection activities from September 11,
2001 through January 31, 2002 for defaulted borrowers who reside or work the
designated disaster area (New York City) and authorizes guaranty agencies in
the FFEL Program to do the same for their defaulted borrowers. For other defaulted
borrowers who have been impacted by the disaster the Secretary will and guaranty
agencies may, upon request of the borrower, curtail collection activities for
a period that ends no later than January 31, 2002.
Forbearance in the Federal Perkins Loan Program
Perkins Loan borrowers
who reside or work in the designated disaster area (New York City) should be
granted a forbearance without a borrower request or written forbearance agreement
from September 11, 2001 through January 31, 2002. Borrowers must be notified
that a forbearance has been granted to allow them to pursue other potential
program benefits that may be available to them. Forbearance beyond this period
may be granted only based on a written request of the borrower, supporting documentation
and with a written forbearance agreement with the borrower.
Collection efforts on the
accounts of defaulted borrowers in the designated areas may be discontinued
from September 11, 2001 through January 31, 2002.
For other affected borrowers,
forbearance should be granted for a period that ends no later than January 31,
2002 based on the request of the borrower, the borrower's family or another
reliable source (which need not be in writing) and without supporting documentation
and without a written forbearance agreement. Forbearance beyond the initial
period will require supporting documentation and a written forbearance agreement
with the borrower.
For defaulted borrowers,
upon request of the borrower, the school may discontinue collection efforts
for a period that ends no later than January 31, 2002.
Discharges
The Secretary encourages
FFEL lenders (without approval from the Secretary or from the guaranty agency),
guaranty agencies, and Perkins schools to use "reliable information"
of a borrower's (or the dependent student in the case of a PLUS loan) death
due to the terrorist attacks, as the information becomes available, to immediately
suspend collection activities without contacting the borrower's family for whatever
period is necessary in order to process a death discharge. The Secretary reminds
guaranty agencies and schools that they may grant a death discharge on the basis
of exceptional circumstances using reliable documentation other than an original
or certified copy of a death certificate.
"Other reliable documentation"
may include, but is not limited to, obituary notices and published listings
of the dead provided by a Federal, State, or local government entity, or by
one of the affected airlines. The Secretary will implement these same guidelines
for the Direct Loan Program and for other loans held by the Department.
Guaranty agencies and schools
are encouraged, at a later date, to obtain a certified copy of the death certificate
if one is available through alternative sources without contacting the borrower's
family.
Due Diligence Timelines
Due to disruptions in mail
and other communications throughout the country, the Secretary will, for the
period of September 11, 2001 through October 31, 2001 or later if the Secretary
determines that these disruptions still exist, not enforce time sensitive deadlines
that lenders and guaranty agencies in the FFEL Program and institutions in the
Perkins Loan Program normally are required to comply with in their loan due
diligence activities.
I want to thank you in advance
for serving those borrowers who have been impacted by these terrible tragedies.
Sincerely,
William D, Hansen
Deputy Secretary
Posted September 17, 2001, on the NASFAA Web Site www.nasfaa.org
Please submit questions or comments to ask@nasfaa.org
