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(a) Under the William D. Ford Federal Direct Loan (Direct Loan) Program (formerly known as the Federal Direct Student Loan Program), the Secretary makes loans to enable a student or parent to pay the costs of the student's attendance at a postsecondary school. This part governs the Federal Direct Stafford/Ford Loan Program, the Federal Direct Unsubsidized Stafford/Ford Loan Program, the Federal Direct PLUS Program, and the Federal Direct Consolidation Loan Program. The Secretary makes loans under the following program components: (1) Federal Direct Stafford/Ford Loan Program (formerly known as the Federal Direct Stafford Loan Program), which provides loans to undergraduate, graduate, and professional students. The Secretary subsidizes the interest while the borrower is in an in-school, grace, or deferment period. (2) Federal Direct Unsubsidized Stafford/Ford Loan Program (formerly known as the Federal Direct Unsubsidized Stafford Loan Program), which provides loans to undergraduate, graduate and professional students. The borrower is responsible for the interest that accrues during any period. (3) Federal Direct PLUS Program, which provides loans to parents of dependent students and to graduate or professional students. The borrower is responsible for the interest that accrues during any period. (4) Federal Direct Consolidation Loan Program, which provides loans to borrowers to consolidate certain Federal educational loans. (b) The Secretary makes a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan only to a student or a parent of a student enrolled in a school that has been selected by the Secretary to participate in the Direct Loan Program. (c) The Secretary makes a Direct Consolidation Loan only to— (1) A borrower with a loan made under the Direct Loan Program; or (2) A borrower with a loan made under the Federal Family Education Loan Program who— (i) Is not able to obtain a Federal Consolidation Loan; (ii) Is not able to obtain a Federal Consolidation Loan with income-sensitive repayment terms that are satisfactory to the borrower; or (iii) Has a Federal Consolidation Loan that has been submitted by the lender to the guaranty agency for default aversion, and wishes to consolidate the Federal Consolidation Loan into the Direct Loan Program for the purpose of obtaining an income contingent repayment plan. (Authority: 20 U.S.C. 1087a et seq. ) [59 FR 61690, Dec. 1, 1994, as amended at 71 FR 45709, Aug. 9, 2006] § 685.101 Participation in the Direct Loan Program.(a)(1) Colleges, universities, graduate and professional schools, vocational schools, and proprietary schools selected by the Secretary may participate in the Direct Loan Program. Participation in the Direct Loan Program enables an eligible student or parent to obtain a loan to pay for the student's cost of attendance at the school. (2) The Secretary may permit a school to participate in both the Federal Family Education Loan (FFEL) Program, as defined in 34 CFR part 600, and the Direct Loan Program. A school permitted to participate in both the FFEL Program and the Direct Loan Program may certify loan applications under the FFEL Program according to the terms of its agreement with the Secretary. (b) An eligible undergraduate student who is enrolled at a school participating in the Direct Loan Program may borrow under the Federal Direct Stafford/Ford Loan and Federal Direct Unsubsidized Stafford/Ford Loan Programs. An eligible graduate or professional student enrolled at a school participating in the Direct Loan Program may borrow under the Federal Direct Stafford/Ford Loan, Federal Direct Unsubsidized Stafford/Ford Loan, and Federal Direct PLUS Programs. An eligible parent of an eligible dependent student enrolled at a school participating in the Direct Loan Program may borrow under the Federal Direct PLUS Program. (Authority: 20 U.S.C. 1087a et seq. ) [59 FR 61690, Dec. 1, 1994, as amended at 71 FR 45709, Aug. 9, 2006] § 685.102 Definitions.Link to an amendment published at 74 FR 56000, Oct. 29, 2009. (a)(1) The definitions of the following terms used in this part are set forth in subpart A of the Student Assistance General Provisions, 34 CFR part 668: Academic Competitiveness Grant (ACG) Program Academic year Campus-based programs Dependent student Disburse Eligible program Eligible student Enrolled Expected family contribution (EFC) Federal Consolidation Loan Program Federal Direct Student Loan Program (Direct Loan Program) Federal Pell Grant Program Federal Perkins Loan Program Federal PLUS Program Federal Supplemental Educational Opportunity Grant Program Federal Work-Study Program Full-time student Graduate or professional student Half-time student Independent student Leveraging Educational Assistance Partnership Program National Science and Mathematics Access to Retain Talent Grant (National SMART Grant) Program One-third of an academic year Parent Payment period State Teacher Education Assistance for College and Higher Education (TEACH) Grant Program TEACH Grant Two-thirds of an academic year Undergraduate student U.S. citizen or national (2) The following definitions are set forth in the regulations for Institutional Eligibility under the Higher Education Act of 1965, as amended, 34 CFR part 600: Accredited Clock hour Educational program Eligible institution Federal Family Education Loan (FFEL) Program Institution of higher education Nationally recognized accrediting agency or association Preaccredited Program of study by correspondence Secretary (3) The following definitions are set forth in the regulations for the Federal Family Education Loan (FFEL) Program, 34 CFR part 682: Act Endorser Federal Insured Student Loan (FISL) Program Federal Stafford Loan Program Foreign school Guaranty agency Holder Legal guardian Lender Totally and permanently disabled (b) The following definitions also apply to this part: Alternative originator: An entity under contract with the Secretary that originates Direct Loans to students and parents of students who attend a Direct Loan Program school that does not originate loans. Consortium: For purposes of this part, a consortium is a group of two or more schools that interacts with the Secretary in the same manner as other schools, except that the electronic communication between the Secretary and the schools is channeled through a single point. Each school in a consortium shall sign a Direct Loan Program participation agreement with the Secretary and be responsible for the information it supplies through the consortium. Default: The failure of a borrower and endorser, if any, to make an installment payment when due, or to meet other terms of the promissory note, if the Secretary finds it reasonable to conclude that the borrower and endorser, if any, no longer intend to honor the obligation to repay, provided that this failure persists for 270 days. Estimated financial assistance. (1) The estimated amount of assistance for a period of enrollment that a student (or a parent on behalf of a student) will receive from Federal, State, institutional, or other sources, such as scholarships, grants, net earnings from need-based employment, or loans, including but not limited to— (i) Except as provided in paragraph (2)(iv) of this definition, veterans' educational benefits paid under chapters 30 (Montgomery GI Bill—Active Duty), 31 (Vocational Rehabilitation and Employment Program), 32 (Veterans' Educational Assistance Program), and 35 (Dependents' Educational Assistance Program) of title 38 of the United States Code; (ii) Educational benefits paid under chapters 31 (National Call to Service), 1606 (Montgomery GI Bill—Selected Reserve), and 1607 (Reserve Educational Assistance Program) of title 10 of the United States Code; (iii) Reserve Officer Training Corps (ROTC) scholarships and subsistence allowances awarded under chapter 2 of title 10 and chapter 2 of title 37 of the United States Code; (iv) Benefits paid under Public Law 96–342, section 903: Educational Assistance Pilot Program; (v) Any educational benefits paid because of enrollment in a postsecondary education institution, or to cover postsecondary education expenses; (vi) Fellowships or assistantships, except non-need-based employment portions of such awards; (vii) Insurance programs for the student's education; (viii) The estimated amount of other Federal student financial aid, including but not limited to a Federal Pell Grant, Academic Competitiveness Grant, National SMART Grant, campus-based aid, and the gross amount (including fees) of subsidized and unsubsidized Federal Stafford Loans or subsidized and unsubsidized Direct Stafford Loans and Federal PLUS or Direct PLUS Loans; and (ix) Except as provided in paragraph (2)(iv) of this definition, national service education awards or post-service benefits under title I of the National and Community Service Act of 1990 (AmeriCorps). (2) Estimated financial assistance does not include— (i) Those amounts used to replace the expected family contribution (EFC), including the amounts of any TEACH Grant unsubsidized Federal Stafford Loans or Direct Stafford Loans, Federal PLUS or Direct PLUS Loans, and non-federal non-need-based loans, including private, state-sponsored, and institutional loans. However, if the sum of the amounts received that are being used to replace the student's EFC exceed the EFC, the excess amount must be treated as estimated financial assistance; (ii) Federal Perkins loan and Federal Work-Study funds that the student has declined; (iii) Non-need-based employment earnings; (iv) For the purpose of determining eligibility for a Direct Subsidized Loan, veterans' educational benefits paid under chapter 30 of title 38 of the United States Code (Montgomery GI Bill—Active Duty) and national service education awards or post-service benefits under title I of the National and Community Service Act of 1990 (AmeriCorps); (v) Any portion of the estimated financial assistance described in paragraph (1) of this definition that is included in the calculation of the student's EFC; and (vi) Assistance not received under this part if that assistance is designated to offset all or a portion of a specific amount of the cost of attendance and that component is excluded from the cost of attendance as well. If that assistance is excluded from either estimated financial assistance or cost of attendance, it must be excluded from both. Federal Direct Consolidation Loan Program: (1) A loan program authorized by title IV, part D of the Act that provides loans to borrowers who consolidate certain Federal educational loan(s), and one of the components of the Direct Loan Program. Loans made under this program are referred to as Direct Consolidation Loans. (2) The term “Direct Subsidized Consolidation Loan” refers to the portion of a Direct Consolidation Loan attributable to certain subsidized title IV education loans that were repaid by the consolidation loan. Interest is not charged to the borrower during deferment periods, or, for a borrower whose consolidation application was received before July 1, 2006, during in-school and grace periods. (3) The term “Direct Unsubsidized Consolidation Loan” refers to the portion of a Direct Consolidation Loan attributable to unsubsidized title IV education loans, certain subsidized title IV education loans, and certain other Federal education loans that were repaid by the consolidation loan. The borrower is responsible for the interest that accrues during any period. (4) The term “Direct PLUS Consolidation Loan” refers to the portion of a Direct Consolidation Loan attributable to Direct PLUS Loans, Direct PLUS Consolidation Loans, Federal PLUS Loans, and Parent Loans for Undergraduate Students that were repaid by the consolidation loan. The borrower is responsible for the interest that accrues during any period. Federal Direct PLUS Program: A loan program authorized by title IV, Part D of the Act that is one of the components of the Federal Direct Loan Program. The Federal Direct PLUS Program provides loans to parents of dependent students attending schools that participate in the Direct Loan Program. The Federal Direct PLUS Program also provides loans to graduate or professional students attending schools that participate in the Direct Loan Program. The borrower is responsible for the interest that accrues during any period. Loans made under this program are referred to as Direct PLUS Loans. Federal Direct Stafford/Ford Loan Program: A loan program authorized by title IV, part D of the Act that provides loans to undergraduate, graduate, and professional students attending Direct Loan Program schools, and one of the components of the Direct Loan Program. The Secretary subsidizes the interest while the borrower is in an in-school, grace, or deferment period. Loans made under this program are referred to as Direct Subsidized Loans. Federal Direct Unsubsidized Stafford/Ford Loan Program: A loan program authorized by title IV, part D of the Act that provides loans to undergraduate, graduate, and professional students attending Direct Loan Program schools, and one of the components of the Direct Loan Program. The borrower is responsible for the interest that accrues during any period. Loans made under this program are referred to as Direct Unsubsidized Loans. Grace period: A six-month period that begins on the day after a Direct Loan Program borrower ceases to be enrolled as at least a half-time student at an eligible institution and ends on the day before the repayment period begins. Interest rate: The annual interest rate that is charged on a loan, under title IV, part D of the Act. Loan fee: A fee, payable by the borrower, that is used to help defray the costs of the Direct Loan Program. Master Promissory Note (MPN): (1) A promissory note under which the borrower may receive loans for a single academic year or multiple academic years. (2) For MPNs processed by the Secretary before July 1, 2003, loans may no longer be made under an MPN after the earliest of— (i) The date the Secretary or the school receives the borrower's written notice that no further loans may be disbursed; (ii) One year after the date of the borrower's first anticipated disbursement if no disbursement is made during that twelve-month period; or (iii) Ten years after the date of the first anticipated disbursement, except that a remaining portion of a loan may be disbursed after this date. (3) For MPNs processed by the Secretary on or after July 1, 2003, loans may no longer be made under an MPN after the earliest of— (i) The date the Secretary or the school receives the borrower's written notice that no further loans may be made; (ii) One year after the date the borrower signed the MPN or the date the Secretary receives the MPN, if no disbursements are made under that MPN; or (iii) Ten years after the date the borrower signed the MPN or the date the Secretary receives the MPN, except that a remaining portion of a loan may be disbursed after this date. Period of enrollment: The period for which a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan is intended. The period of enrollment must coincide with one or more bona fide academic terms established by the school for which institutional charges are generally assessed (e.g., a semester, trimester, or quarter in weeks of instructional time; an academic year; or the length of the program of study in weeks of instructional time). The period of enrollment is also referred to as the loan period. Satisfactory repayment arrangement. (1) For the purpose of regaining eligibility under section 428F(b) of the HEA, the making of six consecutive, voluntary, on-time, full monthly payments on a defaulted loan. A borrower may only obtain the benefit of this paragraph with respect to renewed eligibility once. (2) For the purpose of consolidating a defaulted loan under 34 CFR 685.220(d)(1)(ii)(C), the making of three consecutive, voluntary, on-time, full monthly payments on a defaulted loan. (3) The required monthly payment amount may not be more than is reasonable and affordable based on the borrower's total financial circumstances. “On-time” means a payment made within 15 days of the scheduled due date, and voluntary payments are those payments made directly by the borrower and do not include payments obtained by Federal offset, garnishment, or income or asset execution. School origination option 1: In general, under this option the school performs the following functions: creates a loan origination record, transmits the record to the Servicer, prepares the promissory note, obtains a completed and signed promissory note from a borrower, transmits the promissory note to the Servicer, receives the funds electronically, disburses a loan to a borrower, creates a disbursement record, transmits the disbursement record to the Servicer, and reconciles on a monthly basis. The Servicer initiates the drawdown of funds for schools participating in school origination option 1. The Secretary may modify the functions performed by a particular school. School origination option 2: In general, under this option the school performs the following functions: creates a loan origination record, transmits the record to the Servicer, prepares the promissory note, obtains a completed and signed promissory note from a borrower, transmits the promissory note to the Servicer, determines funding needs, initiates the drawdown of funds, receives the funds electronically, disburses a loan to a borrower, creates a disbursement record, transmits the disbursement record to the Servicer, and reconciles on a monthly basis. The Secretary may modify the functions performed by a particular school. Servicer: An entity that has contracted with the Secretary to act as the Secretary's agent in providing services relating to the origination or servicing of Direct Loans. Standard origination: In general, under this option the school performs the following functions: creates a loan origination record, transmits the record to the Servicer, receives funds electronically, disburses funds, creates a disbursement record, transmits the disbursement record to the Servicer, and reconciles on a monthly basis. The Servicer prepares the promissory note, obtains a completed and signed promissory note from a borrower, and initiates the drawdown of funds for schools participating in standard origination. The Secretary may modify the functions performed by a particular school. (Authority: 20 U.S.C. 1070g, 1087a, et seq. ) [59 FR 61690, Dec. 1, 1994] Editorial Note:
For § 685.103 Applicability of subparts.(a) Subpart A contains general provisions regarding the purpose and scope of the Direct Loan Program. (b) Subpart B contains provisions regarding borrowers in the Direct Loan Program. (c) Subpart C contains certain requirements regarding schools in the Direct Loan Program. (d) Subpart D contains provisions regarding school eligibility for participation and origination in the Direct Loan Program. (Authority: 20 U.S.C. 1087a et seq. ) Browse Next
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