There are no significant differences between the NPRM and these final regulations resulting from public comments.

In addition to the changes necessary to implement provisions of the HEOA, these final regulations also incorporate certain changes made to the HEA by Public Law 11139, enacted on July 1, 2009, and by the Ensuring Continued Access to Student Loans Act of 2008 (Pub. L. 110 227) (ECASLA), enacted on May 7, 2008. These changes are:

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In addition to the changes related to Public Law 11139 and ECASLA that are discussed above, these final regulations make a number of minor technical corrections and conforming changes. Changes that are statutory or that involve only minor technical corrections are generally not discussed in the Analysis of Comments and Changes section.
Waiver of Proposed Rulemaking and Negotiated Rulemaking Regulations Implementing the HEOA

Under the Administrative Procedure Act (APA) (5 U.S.C. 553), the Department is generally required to publish an NPRM and provide the public with an opportunity to comment on proposed regulations prior to issuing final regulations. In addition, all Department regulations for programs authorized under title IV of the HEA are subject to the negotiated rulemaking requirements of section 492 of the HEA. However, the APA provides that an agency is not required to conduct noticeand comment rulemaking when the agency for good cause finds that notice and comment are impracticable, unnecessary or contrary to the public interest. Similarly, section 492 of the HEA provides that the Secretary is not required to conduct negotiated rulemaking for title IV, HEA program regulations if the Secretary determines that applying that requirement is impracticable, unnecessary or contrary to the public interest within the meaning of the APA.

Although the regulations implementing the changes made by Public Law 11139 and ECASLA are subject to the APA's noticeandcomment and the HEA's negotiated rulemaking requirements, the Secretary has determined that it is unnecessary to conduct negotiated rulemaking or noticeandcomment rulemaking on the limited regulatory changes. These changes simply reflect statutory changes made by Public Law 11139 and ECASLA that are already effective. The Secretary does not have discretion as to whether or how to implement these changes. Implementation Date of These Regulations

Section 482(c) of the HEA requires that regulations affecting programs under title IV of the HEA be published in final form by November 1 prior to the start of the award year (July 1) to which they apply. However, that section also permits the Secretary to designate any regulation as one that an entity subject to the regulation may choose to implement earlier and the conditions under which the entity may implement the provisions early.

Consistent with the intent of this regulatory effort to strengthen and improve the administration of the title IV, HEA programs, the Secretary is using the authority granted him under section 482(c) of the HEA to designate the new provisions in Sec. Sec. 682.211(f) and 685.205(b) governing administrative forbearances for PLUS loans for early implementation at the discretion of each lender, guaranty agency, or servicer, as appropriate.

Analysis of Comments and Changes

Except as noted above in regard to the limited regulations implementing provisions of Public Law 11139 and ECASLA, the regulations in this document were developed through the use of negotiated rulemaking. Section 492 of the HEA requires that, before publishing any proposed regulations to implement programs under title IV of the HEA, the Secretary must obtain public involvement in the development of the proposed regulations. After obtaining advice and recommendations, the Secretary must conduct a negotiated rulemaking process to develop the proposed regulations. All proposed regulations must conform to agreements resulting from the negotiated rulemaking process unless the Secretary reopens that process or explains any departure from the agreements to the negotiated rulemaking participants.

These regulations were published in proposed form on July 23, 2009, in conformance with the consensus of the negotiated rulemaking committee. Under the committee's protocols, consensus meant that no member of the committee dissented from the agreedupon language. The Secretary invited comments on the proposed regulations by August 24. Eighteen parties submitted comments, many of which were substantially similar. The commenters generally supported the proposed regulations. An analysis of the comments and the changes in the regulations since publication of the NPRM follows.

We group major issues according to subject, with appropriate sections of the regulations referenced in parentheses. We discuss other substantive issues under the sections of the regulations to which they pertain. Generally, we do not address minor, nonsubstantive changes, recommended changes that the law does not authorize the Secretary to make, or comments pertaining to operational processes. We also do not address comments pertaining to issues that were not within the scope of the NPRM.
Total and Permanent Disability Loan Discharges (Sec. Sec. 674.61(b) and (c), 682.402(c), and 685.213)

Comment: One commenter noted that there are a significant number of United States citizens who live abroad and suggested that the regulations be revised to allow a disabled borrower living overseas to submit an application for a total and permanent disability discharge certified by a physician who is licensed to practice in the foreign country where the borrower resides.

Discussion: The proposed regulations retained the current regulatory requirement that the physician who certifies a total and permanent disability discharge application must be a doctor of medicine or osteopathy who is legally authorized to practice in a State. The term ``State'' is defined in section 103(23) of the HEA to include the States of the United States, the District of Columbia, Puerto Rico, Guam, Samoa, the U.S. Virgin Islands, the Northern Mariana Islands and the Freely Associated States (the Marshall Islands, Micronesia and Palau). The total and permanent disability discharge application requires the certifying physician to identify the State in which he or she is licensed to practice, and to provide his or her professional license number.

In June 1999, the Department of Education's Inspector General (IG) issued a report that identified a number of weaknesses in the procedures for determining eligibility for total and permanent disability loan discharge and concluded that inappropriate discharges were being granted as a result of those weaknesses. In the years since the IG's report, the Department has revised the total and permanent disability discharge regulations and taken other measures to strengthen the procedures for determining a borrower's eligibility for discharge, including verification through State records of a physician's license to practice. This verification is conducted for each total and permanent disability discharge application that the Department reviews. Licensure requirements for physicians in foreign countries may differ significantly from the requirements in the United States, or in some countries may not exist. It would not be possible for the Department to verify a physician's license to practice in a foreign country, even if a country requires its physicians to be licensed. The Department also follows up with physicians who certified an application but did not provide sufficient information concerning the borrower's medical condition. Having to contact and
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communicate with physicians in foreign countries would be difficult in many cases.

For these reasons, the Department believes that it is important to retain the requirement that a physician who certifies a total and permanent disability discharge application must be licensed to practice in a State.

Changes: None.

Comment: One commenter believed that the preamble to the NPRM indicated that the Department's standard for determining disability is essentially the same as the standard used in the Social Security Disability Insurance (SSDI) program, and suggested that the process of determining a borrower's eligibility for total and permanent disability discharge could be made more efficient if the Department provided an electronic means for a borrower to report that he or she is receiving SSDI benefits.

Discussion: The commenter's understanding of the preamble discussion in the NPRM is incorrect. In the preamble to the NPRM, the Department explained that the proposed definition of substantial gainful activitynot the definition of totally and permanently disabledis based, in part, on the definition of substantial gainful activity that is used by the Social Security Administration (SSA) to determine whether an individual is eligible for Social Security disability benefits. The NPRM included the definition of totally and permanently disabled that was added to the HEA by the HEOA. This new statutory standard does not correspond to any of the disability standards used by the SSA for determining an individual's eligibility for Social Security disability benefits. An individual who receives SSA disability benefits may not qualify as totally and permanently disabled under the definition of that term in the HEA.

Changes: None.

Comment: Two commenters recommended that the Department revise the total and permanent disability discharge regulations to use the poverty guideline amount for a borrower's actual family size to determine whether the borrower's annual employment earnings during the post discharge monitoring period demonstrated that the borrower was not totally and permanently disabled. One of the commenters stated that borrowers with larger families should be allowed to earn more income during the postdischarge monitoring period. This commenter suggested that any concerns about potential borrower confusion over the use of a variable standard based on actual family size could be resolved by annually posting an updated poverty guideline chart on a Department Web site.

Discussion: During the negotiated rulemaking sessions, the Department initially proposed an annual earnings standard based on the poverty guideline amount for the borrower's actual family size because we believed that it would be more equitable for borrowers with a family size greater than two. The Department's original proposal would have been a change from the employment earnings standard under the current total and permanent disability discharge regulations, which provide that a conditionally discharged loan will be removed from conditional discharge status if a borrower has annual employment earnings during the conditional discharge period that exceed the poverty guideline amount for a family of two, regardless of the borrower's actual family size. However, during the negotiated rulemaking sessions, some of the nonFederal negotiators, including the student and legal aid representatives, felt strongly that it would be better to continue to use the poverty guideline amount for a family of two. These negotiators noted that a borrower's family size could change during the threeyear postdischarge monitoring period, and in such cases the borrower would have to monitor changes in the employment earnings limit. They believed that a changing standard would be confusing and could result in a borrower inadvertently exceeding the employment earnings limit. These negotiators urged the Department to retain the current fixed standard based on a family size of two. The Department agreed that retaining a fixed employment earnings limit based on the poverty guideline amount for a family of two during the entire postdischarge monitoring period would be less confusing for borrowers and simpler to administer.

Changes: None.

Comment: Several commenters noted that under the proposed regulations in Sec. 682.402(c)(8) governing total and permanent disability discharges for certain veterans, if the Department determines that a veteran is eligible for a loan discharge, the guaranty agency is responsible for notifying the veteran that the veteran has no obligation to make further payments on the loan. These commenters recommended that the regulations be revised to provide that the lender, rather than the guaranty agency, would notify the veteran of his or her eligibility for discharge. The commenters believed that it would be simpler to require the lender to make this notification, since the proposed regulations already require the lender to refund any payments received on the loan after the date of the Department of Veterans Affairs disability determination, and the lender would therefore already be communicating with the borrower for this purpose. The commenters further noted that this approach would be more consistent with the proposed regulations governing the general process for total and permanent disability discharges for other borrowers. Under those regulations, the lender notifies a borrower that his or her loan has been assigned to the Department for a determination of discharge eligibility, and that no further payments are required.

Discussion: The Department agrees with the commenters.

Changes: Section 682.402(c)(8)(ii)(F) has been revised to specify that upon receipt of the claim payment from the guaranty agency (after the Department has notified the guaranty agency that a veteran is eligible for a discharge), the lender notifies the veteran that the veteran's obligation to make any further payments on the loan has been discharged.

Comment: Several commenters recommended that the changes to the total and permanent disability discharge definition and process should be made effective for discharge applications received on or after July 1, 2010. The commenters believed that using the application receipt date as the effective date for the changes would benefit borrowers who may not qualify for discharge based on the current definition of totally and permanently disabled, and would provide a clearly defined transition point for processing discharge applications under the new regulations.

Discussion: Under these final regulations, the new definition of totally and permanently disabled and the new discharge process are effective for discharge applications received on or after July 1, 2010. Disability discharge applications from borrowers other than qualified veterans that are received prior to July 1, 2010 will be processed under the current regulations and borrower eligibility will be determined based on the current definition of totally and permanently disabled. Veterans who provide documentation that they have been determined by the Secretary of Veterans Affairs to be unemployable due to a serviceconnected disability will have their discharge applications processed under the separate procedures that the Department has already implemented for these
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borrowers in accordance with the requirements of the HEOA.

Changes: None.

Comment: One commenter expressed concerns that many disabled military borrowers are unaware that they may qualify for total and permanent disability discharge of their loans because of widespread problems with a lack of information about this benefit from both FFEL Program lenders and the Department. The commenter recommended a number of operational measures that lenders, the Department, the Department of Defense, and the Department of Veterans Affairs should take to help ensure that disabled military borrowers are made aware of the total and permanent disability loan discharge provision. The commenter also recommended that loan amounts discharged due to total and permanent disability should not be treated as taxable income, since this presents a financial hardship for disabled borrowers with low incomes.

Discussion: The Department provides information about total and permanent disability discharges on the master promissory notes that are signed by all borrowers in all three title IV loan programs. Further, information about total and permanent disability discharges is also available on Department Web sites, such as Student Aid on the Web (http://www.studentaid.ed.gov) and the Direct Loan Program Web site (http://www.ed.gov/DirectLoan), as well as Web sites maintained by many FFEL Program lenders. Moreover, customer service representatives for the Department have been given information about the disability discharge process and can provide this information to borrowers. These efforts do not have to be addressed in the Department's regulations. The commenter's proposal regarding the tax treatment of discharged loan amounts would require a statutory change in the Internal Revenue Code and cannot be addressed through these regulations.

Changes: None.

Comment: One commenter requested clarification of the provisions in Sec. Sec. 674.9(g), 682.201(a), and 685.200(a) that require a borrower who requests a new title IV loan after receiving a total and permanent disability discharge on a prior loan to: (1) Provide a physician's certification that he or she is able to engage in substantial gainful activity; and (2) acknowledge that the new loan may not be discharged in the future based on any medical condition present at the time the new loan is made, unless that condition substantially deteriorates. Specifically, the commenter asked if these requirements apply to all borrowers who received a prior total and permanent disability discharge, regardless of whether the discharge was granted under the general discharge procedures or the special procedures for certain veterans.

Discussion: The requirements for receiving a new loan after having a loan discharged due to total and permanent disability apply to all borrowers, regardless of whether the discharge was granted under the general discharge process or the special discharge process for certain veterans. These requirements are intended to assure that the borrower is likely to repay the loan in accordance with the promissory note that the borrower signs for the new loan.

Changes: None.

Comment: One commenter recommended that current Sec. 682.201(a)(6), which specifies the additional eligibility requirements that must be met by a borrower who requests a new loan following a final discharge of a prior title IV loan due to a total and permanent disability, also be applied to a borrower who is requesting a new loan after receiving a final discharge of a TEACH Grant service obligation due to a total and permanent disability. The commenter believed that an individual who wants to receive a new loan after previously receiving a final total and permanent disability discharge should have to meet the same eligibility requirements, regardless of whether the prior disability discharge involved a title IV loan or a TEACH Grant service obligation.

The commenter also asked if the Department's National Student Loan Data System (NSLDS) will indicate that a TEACH Grant service obligation has been discharged due to a total and permanent disability, just as it currently identifies title IV loans that have been discharged due to a total and permanent disability.

Discussion: The Department agrees that a borrower who requests a new title IV loan after previously receiving a final total and permanent disability discharge of a TEACH Grant service obligation should be subject to the same eligibility requirements as a borrower who previously received a final total and permanent disability discharge of a title IV loan. NSLDS does identify TEACH Grant service obligations that have been discharged based on the grant recipient's total and permanent disability.

Changes: Section 682.201(a)(6) has been revised by adding a reference to TEACH Grant service obligations. Corresponding changes have also been made in Sec. Sec. 674.9(g) and 685.200(a)(1)(iv).

Comment: One commenter raised concerns about the requirement in current Sec. 682.402(h)(1)(i)(B) as it relates to the proposed regulations in Sec. 682.402(c)(8) that govern the total and permanent disability discharge process for certain veterans. Under current Sec. 682.402(h)(1)(i)(B), a guaranty agency must promptly review a disability discharge claim filed by a lender and pay an approved claim within 90 days after the claim was filed. The commenter believed that this deadline is reasonable in the case of a disability claim processed under the standard discharge process in proposed Sec. 682.402(c)(1) through (7), since all of the actions that are required to pay a lender's claim are entirely under the guaranty agency's control. However, the commenter noted that under the separate discharge process for certain veterans in proposed Sec. 682.402(c)(8), a guaranty agency cannot pay a lender's disability claim until the Department has reviewed the veteran's discharge request and notified the guaranty agency that the veteran is eligible for discharge. Therefore, a delay in the Department's review of a veteran's discharge request could prevent a guaranty agency from meeting the 90day time limit in current Sec. 682.402(h)(1)(i)(B). The commenter recommended that the Department amend current Sec. 682.402(h)(1)(i)(B) to provide one deadline for a guaranty agency to review a disability claim involving a veteran's discharge request and either refer the discharge application and any supporting documentation to the Department or return it to the lender, and a separate deadline for the guaranty agency to either pay or return the claim, as applicable, after being notified by the Department that the veteran is or is not eligible for discharge.

Discussion: The Department agrees with the commenter.

Changes: Section 682.402(h)(1) has been revised to provide that a guaranty agency must review a disability claim based on a veteran's discharge request under Sec. 682.402(c)(8) and either submit the request to the Department or return the claim to the lender within 45 days after the claim was filed, and must pay the claim or return the claim to the lender within 45 days after being notified by the Department of the veteran's eligibility or ineligibility for discharge. Consolidation Loans (Sec. 682.201(e))

Comment: One commenter asked that the regulations clarify which FFEL Program loans are eligible for the Direct
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Loan Program's no accrual of interest benefit for active duty military service members after a FFEL borrower consolidates the loans into the Direct Loan Program. The commenter believed the language in the proposed regulations did not adequately address this issue and suggested that the regulations be amended to include the clarifying language contained in the Department's Stafford Loan Master Promissory Note (MPN).

Discussion: The Department agrees with the commenter that the regulatory language defining which loans are eligible for the no accrual of interest benefit should be clarified and that it is appropriate to use the Stafford Loan MPN language as a model. The Stafford Loan MPN informs borrowers that a FFEL Program loan that was first disbursed on or after October 1, 2008, including a Federal Consolidation Loan that repaid FFEL or Direct Loan program loans first disbursed on or after October 1, 2008, may be consolidated into the Direct Loan Program to take advantage of the no accrual of interest benefit for active duty military service members, and explains that no interest will be charged on the portion of the new Direct Consolidation Loan that repaid FFEL or Direct Loan program loans first disbursed on or after October 1, 2008 during periods of qualifying active duty military service (for up to 60 months). A Federal Consolidation Loan that repaid some loans that were first disbursed on or after October 1, 2008 and other loans that were first disbursed before that date may be consolidated into the Direct Loan Program to take advantage of the no accrual of interest benefit, but the benefit will apply only to the portion of the Direct Consolidation Loan that is attributable to the loans repaid by the Federal Consolidation Loan that were first disbursed on or after October 1, 2008.

Changes: Section 682.201(e)(5) has been revised to include language specifying that FFEL Program loans first disbursed on or after October 1, 2008 (including Consolidation loans that repaid FFEL or Direct loans first disbursed on or after October 1, 2008) are eligible for the no accrual of interest benefit when included in a Federal Direct Consolidation Loan.

InSchool Deferments for PLUS Loans (Sec. 682.210)

Comment: One commenter raised an issue concerning proposed Sec. 682.210(v)(1)(ii), which provides that if a lender grants an inschool deferment on a student PLUS loan first disbursed on or after July 1, 2008 based on enrollment information that confirms the borrower's eligibility for the deferment, the deferment period includes the additional 6month postenrollment deferment period that begins when the student ceases to be enrolled on at least a halftime basis. The commenter believed that the regulations should not specify the operational method by which a lender processes a deferment, and recommended that the regulatory language be revised to provide that a lender may process the 6month postenrollment deferment as either an extension of the inschool deferment period, or a separate deferment period that begins when the student ceases to be enrolled at least half time.

Discussion: The regulatory language stating that the deferment period ``includes'' the 6month postenrollment deferment is intended to clarify that if a lender grants an inschool deferment on a student PLUS loan first disbursed on or after July 1, 2008 based on enrollment status information, the 6month post enrollment deferment may be granted without a separate request from the borrower. The regulatory language does not dictate the operational details of how a lender processes the postenrollment deferment.

Changes: None.

Deferment (Sec. Sec. 682.210 and 682.204)

Comment: One commenter raised an issue concerning the discussion of proposed Sec. 682.210(a)(3)(ii) in the preamble to the NPRM. This provision requires a FFEL Program lender, at or before the time a deferment is granted to a borrower who is responsible for paying the interest on a loan during the deferment, to notify the borrower of certain information, including the borrower's option to pay the interest that accrues during the deferment or to cancel the deferment and continue paying on the loan. The Department stated in the preamble that a comparable change would be made to Sec.
685.204(b)(1)(iii)(B)(2) to provide that Direct Loan borrowers will be notified of their right to cancel a deferment and continue paying on the loan. The commenter noted, however, that the corresponding Direct Loan provision does not specifically say that borrowers will be notified of the option to pay the accruing interest during a deferment period, and recommended that this be added to ensure that Direct Loan borrowers receive the same information as FFEL borrowers.

Discussion: Regulations are issued to govern the activities of third parties; in general, the Secretary does not issue regulations to control the Department's activities. Direct Loan Program borrowers are notified of their option to pay the interest that accrues during a deferment on the Direct Loan Program deferment request forms and in the correspondence borrowers receive when a deferment is granted.

Changes: None.

Comment: Several commenters raised a concern about language in the preamble to the NPRM that describes the requirement for a lender to inform a borrower, at or before the time a deferment is granted, that the borrower has the option to pay the accruing interest or cancel the deferment and continue to pay on the loan. The commenters noted that, during the negotiated rulemaking process, the Department agreed that it would be helpful for a borrower to receive this information at the time of application for the deferment, and that including the required information in the Departmentapproved, standardized deferment forms would satisfy the notification requirement. The commenters were concerned that the discussion in the preamble could be misinterpreted to suggest that a lender must provide the information both at the time the borrower requests the deferment and at the time the lender grants the deferment.

Discussion: The Department did not intend to imply a change in the meaning of the language in the regulations through the preamble discussion. As stated in Sec. 682.210(a)(3)(ii), the lender may provide the required information ``at or prior to the time the deferment is granted.'' Providing the required information to the borrower as part of the standardized deferment application at the time the borrower requests the deferment satisfies the regulatory notification requirement. The lender may, but is not required to, also provide the information at the time the deferment is granted.

Changes: None.

IncomeBased Repayment (IBR) Plan

Comment: Some commenters praised the Department for proposing changes to the IBR regulations to address the calculation of partial financial hardship for borrowers whose outstanding loan balances increase rather than decrease while they repay their loans under another repayment plan prior to requesting IBR, and for married borrowers who file joint tax returns with the IRS and who both have eligible education loans. One commenter noted, however, that the Department had amended the Direct Loan regulations to allow a borrower who wants to repay a defaulted FFELP loan with a Direct
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Consolidation Loan to agree to pay the Direct Consolidation Loan under the IBR Plan, but did not make a comparable change in Sec. 682.201(d)(1)(i)(A). The commenter requested that a technical correction be made to insert a reference to IBR in the corresponding FFEL provision so that comparable terms and conditions apply to borrowers in both programs.

Discussion: The commenter is correct that this change should be reflected in the FFEL Program regulations. The Department agrees that comparable terms and conditions should apply for this purpose for borrowers in both the FFEL and Direct Loan programs.

Changes: Section 682.201(d)(1)(i)(A) has been revised to provide that a borrower may consolidate a defaulted loan if he or she agrees to repay the FFEL Consolidation loan under either the incomesensitive repayment plan or the incomebased repayment plan.
FFEL and Direct Loan Program Teacher Loan Forgiveness (Sec. Sec. 682.216 and 685.217)

Comment: One commenter noted that under the proposed regulations, an educational service agency is considered an eligible educational service agency for teacher loan forgiveness purposes only if the agency meets the same eligibility requirements as elementary and secondary schools under current regulations, including the requirement to be listed in the Department's Annual Directory of Designated LowIncome Schools (LowIncome School Directory). The commenter asked for clarification as to whether an otherwise eligible teacher who is employed by an educational service agency that is not listed in the LowIncome School Directory would qualify for teacher loan forgiveness if the teacher taught for five complete, consecutive academic years at an elementary or secondary school that is included in the LowIncome School Directory.

Discussion: The proposed regulations allow a teacher to qualify for loan forgiveness if he or she is employed as a fulltime teacher for five consecutive complete academic years at an eligible elementary or secondary school or by an eligible educational service agency, and meets the other eligibility requirements of the teacher loan forgiveness program. An otherwise eligible teacher who is employed by an educational service agency, but who teaches at a lowincome elementary or secondary school that is not operated by the educational service agency, may qualify for loan forgiveness if either the educational service agency or the school where the individual performs qualifying teaching service is listed in the LowIncome School Directory.

Changes: None.

Comment: One commenter asked for clarification as to who the appropriate certifying official would be for purposes of certifying the loan forgiveness application of a ``traveling'' teacher who, as discussed in the preamble to the NPRM, does not have a fixed location of employment, but instead performs qualifying teaching service at multiple eligible schools or eligible educational service agencies, and who may not actually be employed by the schools or educational service agencies where he or she teaches. The commenter believed that the reference in the NPRM to not having a fixed location of employment would imply that a traveling teacher is an independent contractor who is not actually employed by any school or educational service agency.

Discussion: In the preamble to the NPRM, the Department indicated that ``traveling'' teachers who do not have a fixed location of employment, but who perform qualifying teaching service at multiple eligible elementary or secondary schools, or at multiple eligible educational service agencies, may (if otherwise eligible) qualify for teacher loan forgiveness even though they are not employees of the schools or educational service agencies where they teach. The reference to not having a fixed location of employment was not intended to suggest that a traveling teacher would be an independent contractor. A traveling teacher may be an employee of a particular school, school district, or educational service agency and provide teaching services at various schools or locations operated by educational service agencies. For purposes of certifying such a teacher's loan forgiveness application, the certifying official must be someone who has access to employment records that establish the teacher's eligibility for loan forgiveness, and who is authorized to verify the teacher's qualifying employment. The appropriate certifying official may vary depending on individual employment circumstances. The certifying official could be someone at the borrower's actual employer, or someone at the location where the borrower performed the qualifying teaching service.

Changes: None.

Comment: Several commenters stated that there appears to be a conflict between the preamble of the NPRM and the proposed regulatory language with regard to the conditions under which qualifying teaching service performed at an eligible educational service agency prior to the date of enactment of the HEOA may be counted toward the required five complete consecutive years of teaching service. The preamble states that the required five complete consecutive years may include any combination of teaching at eligible elementary or secondary schools or eligible educational service agencies, but that teaching at an educational service agency may be counted toward the five years only if the consecutive five years includes qualifying service at an eligible educational service agency performed after the 20072008 academic year. The proposed regulatory language in Sec. Sec. 682.216(a)(2) and 685.217(a)(2) states that for teaching service performed by an employee of an eligible educational service agency, at least one of the five consecutive complete academic years must have been after the 20072008 academic year.

The commenters noted that the regulatory requirement for ``at least one'' of the complete academic years to have been after the 20072008 academic year could be interpreted to mean that for any years of teaching at an eligible educational service agency prior to the enactment of the HEOA to count toward the required five consecutive years, a borrower must have completed a full year of teaching at an eligible educational service agency after the 20072008 academic year. They believed this approach would be contrary to the agreement reached during the negotiated rulemaking process and the preamble to the NPRM. The commenters interpreted the preamble language to mean that qualifying teaching service performed by an employee of an educational service agency prior to the enactment of the HEOA would count toward the required five consecutive years as long as the fiveyear period includes any period of qualifying teaching at an eligible educational service agency after the 20072008 academic year, even if the qualifying service at an educational service agency after the 20072008 academic year is less than a full academic year. For example, the preamble language would allow a borrower who performed qualifying teaching service at an eligible educational service agency for four complete consecutive academic years from 20042005 through 20072008 to count those years toward the required five consecutive years if, during the 20082009 academic year, the borrower taught for half of the year at an eligible educational service agency and the other half of the year at an eligible elementary or secondary school. The
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commenters recommended that proposed Sec. 682.216(a)(2) be revised to reflect the language in the preamble.

Discussion: Proposed Sec. 682.216(a)(2) was intended to be consistent with the preamble to the NPRM regarding the eligibility of teaching service performed by an employee of an educational service agency prior to the date of enactment of the HEOA. However, the Department agrees with the commenters that the regulatory language could be misinterpreted.

Changes: Sections 682.216(a)(2) and 685.217(a)(2) have been revised to reflect the language in the preamble to the NPRM. Conforming changes have also been made in Sec. Sec. 682.216(c)(3)(iii) and (c)(4)(iii), and 685.217(c)(3)(iii) and (c)(4)(iii).
Eligibility for Rehabilitation of Defaulted FFEL and Direct Loans (Sec. Sec. 682.405(a) and (b)(1)(iii) and 685.211(f))

Comment: One commenter agreed with the Department's interpretation that the limit on rehabilitation of defaulted loans to one opportunity applies to each loan, but requested further clarification on the application of the limit. The commenter asked whether a borrower who successfully rehabilitates a defaulted loan, consolidates that loan, and then subsequently defaults on the consolidation loan would be eligible to rehabilitate the consolidation loan. The commenter believed the borrower should be eligible to rehabilitate the consolidation loan because the previously rehabilitated loan was in good standing when it was consolidated.

Discussion: A consolidation loan is a new loan. In the commenter's example, the borrower's previously rehabilitated loan was paid in full through the consolidation process and has no bearing on the borrower's eligibility for rehabilitation of the consolidation loan. The Department agrees that the borrower is eligible to rehabilitate the defaulted consolidation loan, but does not believe it is necessary to separately address the treatment of consolidation loans in the regulations.

Changes: None.

Definition of Lender (Sec. 682.200(b))

Comment: One commenter asked whether the term ``other group'' in paragraph (5)(i)(A)(6) of the prohibited inducement provisions of the proposed definition of ``lender'' includes a lender's board of directors. The commenter asked the Department to clarify that a lender's board of directors would be covered by the prohibition even if the Department decided not to define the term.

Discussion: The term ``other group'' is not defined in the HEA. The Department agrees, however, that service on a lender's board of directors is one of the groups established by a lender that would be covered under the provision. The Department declines to define the term ``other group'' and does not believe it is possible to provide an all inclusive listing of the possible types of groups a lender may establish that would be covered by the prohibition.

Changes: None.

Lender Disclosures (Sec. 682.205)

Comment: One commenter raised concerns about the number of new and revised borrower disclosures that lenders must provide under proposed Sec. 682.205. The commenter indicated that his organization would need substantial time to prepare the disclosures, train its staff, and make necessary data processing changes to implement the regulations. The commenter requested that the Department extend the effective date of the lender disclosure provisions to one year after the final regulations are issued.

Discussion: The Department notes that the new and revised borrower disclosures included in the proposed regulations are required as a result of the enactment of the HEOA and became effective in most cases on August 14, 2008. Lenders are expected to comply with the requirements to the extent possible until these implementing regulations become effective on July 1, 2010. The Department believes that providing information to borrowers, particularly those who are having difficulty making payments or who are past due on their payments, is critical, and therefore declines to delay the July 1, 2010, effective date of these implementing regulations.

Changes: None.

Comment: Several commenters requested a change to Sec. 682.205(c)(4) of the proposed regulations, which describes the information that must be provided to borrowers who contact their lenders indicating that they are having difficulty making their payments. The commenters were concerned that sending the required information repeatedly to a borrower if the borrower contacts the lender more than once over a short period of time would be ineffective and could confuse the borrower. The commenters requested that the Department require the lender to send the disclosure only if the lender had not sent one to the borrower within the previous 120 days. The commenters believed that this change would be comparable to a change agreed to during the negotiations related to the frequency of the required disclosure for borrowers who fall 60 days behind in making payments. The Department agreed that, in that situation, it was not beneficial to send multiple disclosures to a borrower who was rolling in and out of a 60day delinquency status and, as a result, the proposed regulations do not require a lender to continue to send the 60day delinquency disclosure if one was sent to the borrower within the previous 120 days.

Discussion: The Department does not agree that the disclosure required under Sec. 682.205(c)(4) when a borrower contacts the lender indicating he or she is having difficulty making payments is comparable to the disclosure of information in the 60day delinquency situation. The 60day delinquency disclosure is automatically triggered by the borrower's delinquency status and is in addition to other lender due diligence contacts with the borrower required under Sec. 682.411 of the FFEL regulations. In the case of a borrower having difficulty making payments, the borrower triggers the disclosure by contacting the lender and requesting assistance. Under these circumstances, we believe a lender has a responsibility and an obligation to assist the borrower by providing information as frequently as necessary to assist that borrower. The Department disagrees that the situations are comparable and declines to make the change requested by the commenters.

Changes: None.
Executive Order 12866

Regulatory Impact Analysis

Under Executive Order 12866, the Secretary must determine whether the regulatory action is ``significant'' and therefore subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a ``significant regulatory action'' as an action likely to result in a rule that may (1) have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or Tribal governments or communities in a material way (also referred to as an ``economically significant'' rule); (2) create serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impacts of entitlement grants, user fees, or loan [[Page 55980]]
programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order.

Pursuant to the terms of the Executive order, it has been determined this regulatory action will not have an annual effect on the economy of more than $100 million. Therefore, this action is not ``economically significant'' and subject to OMB review under section 3(f)(1) of Executive Order 12866. Notwithstanding this determination, the Secretary has assessed the potential costs and benefits of this regulatory action and has determined that the benefits justify the costs.

Need for Federal Regulatory Action

As discussed in the NPRM, these regulations are needed to implement provisions of the HEA, as amended by the HEOA, particularly related to changes related to loan discharge, deferment, consolidation, rehabilitation, and repayment plan provisions, and the addition of a new Part E to title I of the HEA, which establishes extensive new disclosure requirements for lenders and institutions participating in Federal and private student loan programs.

Regulatory Alternatives Considered

Regulatory alternatives were considered as part of the rulemaking process. These alternatives were reviewed in detail in the preamble to the NPRM under both the Regulatory Impact Analysis and the Reasons sections accompanying the discussion of each proposed regulatory provision. To the extent that they were addressed in response to comments received on the NPRM, alternatives are also considered elsewhere in the preamble to these final regulations under the Discussion sections related to each provision. No comments were received related to the Regulatory Impact Analysis discussion of these alternatives.

As discussed above in the Analysis of Comments and Changes section, these final regulations reflect statutory amendments included in the HEOA and minor revisions in response to public comments. In most cases, these revisions were technical in nature and intended to address drafting issues or provide additional clarity. Other changes, such as the requirement that lenders rather than guaranty agencies notify veterans whose loans have been discharged that their obligation to make any further payments has been discharged, were made to simplify and standardize program operations. None of these changes result in revisions to cost estimates prepared for and discussed in the Regulatory Impact Analysis of the NPRM.

Benefits

As discussed in the NPRM, benefits provided in these proposed regulations include greater transparency for borrowers participating in the Federal and private student loan programs; clearer guidelines on acceptable behavior by and relationships among institutions participating in the student loan programs; improvements to the IBR plan, particularly for married borrowers; a simpler process for obtaining loan discharges due to total and permanent disability; and expanded eligibility for Teacher Loan forgiveness benefits. It is difficult to quantify benefits related to the new institutional and lender requirements, as there is little specific data available on either the extent of improper or questionable relationships between institutions and lenders prior to the HEOA or of the harm such relationships actually caused for either borrowers, institutions, or the Federal taxpayer. In the NPRM, the Department requested comments or data that would support a more rigorous analysis of the impact of these provisions. No comments or additional data were received.

Benefits under these regulations flow directly from statutory changes included in the HEOA; they are not materially affected by discretionary choices exercised by the Department in developing these regulations, or by changes made in response to comments on the NPRM. As noted in the Regulatory Impact Analysis in the NPRM, these proposed provisions result in net costs to the government of $192.7 million over 20092013.

Costs

As discussed extensively in the Regulatory Impact Analysis in the NPRM, many of the statutory provisions implemented though these regulations will require regulated entities to develop new disclosures and other materials, as well as accompanying dissemination processes. Other regulations generally would require discrete changes in specific parameters associated with existing guidancesuch as changes to the process for loan discharges, IBR, and various deferment and forbearance benefitsrather than wholly new requirements. In total, these changes are estimated to increase burden on entities participating in the FFEL program by 1,313,964 hours. Of this increased burden, 1,184,115 hours are associated with lenders, 110,360 hours with guaranty agencies, and 7,200 hours with institutions. An additional 12,289 hours are associated with borrowers, generally reflecting the time required to read new disclosures or submit required information.

For lenders, over half of the additional burden798,000 hoursis related to the requirement to provide additional disclosures to borrowers who are over 60 days delinquent or are otherwise having trouble making repayments. Another 216,000 hours are associated with new requirements related to the provision of administrative forbearances. Roughly 90,000 hours in new burden are related to changes in the methodology for calculating incomebased repayments. The balance of additional burden is spread across a number of minor changes made by these regulations.

For guaranty agencies, virtually the entire additional burden relates to new requirements to provide information to borrowers who are in default or have rehabilitated their loans after being in default. Other minor additional burden for guaranty agencies results from new requirements to provide consumer information.

The monetized cost of this additional burden, using loaded wage data developed by the Bureau of Labor Statistics, is $24,334,225, of which $21.95 million is associated with lenders, $2.05 million with guaranty agencies, $0.2 million with borrowers, and $0.13 million with schools. Given the large number of entities affected by these provisions, actual burden on individual entities is not substantial.

Because data underlying many of these burden estimates was limited, in the NPRM, the Department requested comments and supporting information for use in developing more robust estimates. In particular, we asked institutions to provide detailed data on actual staffing and system costs associated with implementing these regulations. No comments or additional data were received.

Net Budget Impacts

As discussed more fully in the Regulatory Impact Analysis of the NPRM, HEOA provisions implemented by these regulations are estimated to have a net budget impact of $34.7 million in 2009 and $192.7 million over FY 20092013. (The estimated impact for 2009 does not include $144.2 million in costs related to loans originated in prior fiscal years.) Consistent with the requirements of the Credit Reform Act of 1990, budget cost estimates for the student loan programs reflect the estimated net present value of
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all future nonadministrative Federal costs associated with a cohort of loans. (A cohort reflects all loans originated in a given fiscal year.)

The budgetary impact of these regulations is largely driven by statutory changes involving teacher loan forgiveness, loan discharges, and IBR. The Department estimates no budgetary impact for other provisions included in these regulations; the

FOR FURTHER INFORMATION CONTACT

For information related to total and permanent disability loan discharges, Jon Utz or Pamela Moran. Telephone: (202) 3774040 or (202) 5027732 or via the Internet at: jon.utz@ed.gov or pamela.moran@ed.gov. For information related to FFEL and Direct Loan teacher loan forgiveness, Donald Conner or Jon Utz. Telephone: (202) 5027818 or (202) 3774040 or via the Internet at: donald.conner@ed.gov or jon.utz@ed.gov. For information related to all other provisions included in these final regulations, Pamela Moran. Telephone: (202) 5027732 or via the Internet at: pamela.moran@ed.gov.

If you use a telecommunications device for the deaf (TDD), call the Federal Relay Service (FRS), toll free, at 18008778339.

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