USA Funds Clarifies 2002 Final Regulation Provisions

USA Funds recently published a summary of the Nov. 1, 2002, final regulations governing federal student-aid programs. Based on questions from the student-aid community, we are clarifying the following points:

• New regulations permit the discharge of the portion of a consolidation loan that represents the balance of a PLUS loan made for a dependent student who dies. USA Funds strongly encourages the lender to work with a borrower whose child has died to accurately determine the amount of the consolidation loan to be discharged and to provide maximum benefit of this provision to consolidation-loan borrowers before the July 1, 2003, mandatory implementation deadline. The lender may access information from NSLDS, use records of Loan Verification Certificates and any other stored documentation to ensure accurate assessment of the loan balances to be discharged.
• If a lender elects early implementation of the late-disbursement policy that extends the late-disbursement timeframe to 120 days, USA Funds may not approve the disbursement of loan funds after the 120th day. Lenders or schools will be required to contact the Department of Education to request permission to disburse loan funds after the 120th day following the student's last date of at least half-time attendance.
• Other provisions of the regulations published Nov. 1, 2002, may be implemented as of the date of publication. The regulations provide for voluntary implementation prior to the July 1, 2003, mandatory effective date. Schools may redefine payment periods, provide borrowers additional periods of leave of absence, enhance entrance- and exit-counseling materials and provide borrowers the full benefits of the regulatory changes. Similarly, lenders may implement changes to repayment start dates, reduce unemployment deferment documentation requirements, grant forbearance based on verbal agreements and other borrower-friendly provisions as soon as their systems and processes can be amended to accommodate the changes.

For more information about the final regulations, contact USA Funds' Policy department.