Common Manual

Common Manual updates

On April 20, 2006, guarantor representatives who serve on the Common Manual Governing Board approved several changes to the Common Manual. Details on these changes and a newly updated Integrated Common Manual incorporating the changes are available online at www.tgslc.org/resources/integrated_online_manual.cfm.

Death of a Student or Parent
The Common Manual has been updated to include guidance for schools and lenders to follow in the event of a student or parent borrower's death. Information has been added to address the following issues:

1. Certification of an additional unsubsidized Stafford loan for a student whose parent dies during the loan period.
2. Lender cancellation of a Stafford or PLUS loan disbursement if the borrower, or student for whom a PLUS loan was borrowed, dies before all disbursements of the loan are completed.
3. Treatment of a Title IV credit balance when a student dies.
4. Return of loan funds for a deceased borrower.
5. Determining the withdrawal date for a deceased student.
6. Disbursements that are not completed at the time of the borrower's or student's death.

The school is not permitted to deliver Stafford or PLUS loan funds if the student has died. In addition, if the parent who borrowed the PLUS loan dies, the school may not deliver the PLUS loan funds after the date of the parent's death. The death of the parent creates sufficient "exceptional circumstances" to permit the school to certify additional unsubsidized Stafford loan funds for the dependent student for the current academic year if those funds would not result in the student exceeding applicable annual or aggregate loan limits.

If the student dies at any time during the loan period, the school must perform a return of Title IV funds calculation and must return all Title IV funds for which it is responsible. However, the student's estate is not responsible for returning any unearned funds that would be the responsibility of the student to repay. A school may not under any circumstances make a late disbursement or a post-withdrawal disbursement of Title IV funds on behalf of a student who has died.

Text has been added to state that the student's withdrawal date is the date related to any of the following conditions that result in the student's withdrawal:

• Illness
• Accident
• Grievous personal loss
• Death
• Other circumstances beyond the student's control

If the lender learns that a borrower — or student, in the case of a PLUS loan, — died before a disbursement is completed, the lender must cancel all remaining disbursements. If after forwarding a loan disbursement to a school, the lender learns that the borrower — or student, as applicable, — died before a disbursement is completed, the lender must contact the school and request an immediate repayment of the ineligible funds.

Loan Delivery via Stored Value Cards
The Common Manual has been updated to include the stored-value card as an acceptable method of delivery. The school must obtain the student or parent borrower's authorization, as applicable, to deliver Title IV funds using a stored-value card, and the following conditions must be met:

• The value of the card must be convertible to cash and may not be limited to specific vendors.
• The student must not incur any fees for using the card to withdraw the disbursement over a reasonable period of time. It would be reasonable to allow automated teller machine (ATM) withdrawals to be free, or to provide several free withdrawals per month. It would also be reasonable to charge a fee for use of an ATM that is not affiliated with the issuing bank, as long as ATMs from the issuing bank are conveniently located for the student.
• The student must not be charged by either the school or the affiliated bank for the issuing of a stored-value card. The student may be charged for a replacement card.
• The bank must have an individual account for each student that is insured by the Federal Deposit Insurance Corporation (FDIC).
• The school must not make any claims against the funds on the card without the written permission of the student, except to correct an error in transferring the funds to the bank under existing banking rules.
• The account must not be marketed or portrayed as a credit card account, nor be structured to be converted into a credit card at any time after it is issued. The issuing bank may not link the stored-value card account to any other banking services it may offer, such as checking, savings, or credit card accounts.
• The school must inform the student of any terms and conditions associated with accepting and using the stored-value card.
• The school must ensure that its stored-value card process meets all regulatory time frames for delivery of loan proceeds or payment of Title IV credit balances.
• The student's access to the funds on the stored-value card must not be contingent upon the student's continued enrollment, academic status, or financial standing with the school.

Master Promissory Note (MPN) Signed after the Date the Student Lost Eligibility
The Common Manual has been updated to specify that a borrower is not required to sign the Master Promissory Note (MPN) prior to the end of the loan period or the date on which the student ceased to be enrolled at least half time to be eligible for a late delivery of Stafford or PLUS loan funds. However, the borrower must sign the MPN before a lender may make a late disbursement of loan funds. In order for a school to include Stafford or PLUS loan funds, as applicable, as "aid that could have been disbursed" in the return of Title IV funds calculation, or for a school to make a post-withdrawal disbursement, the borrower must have signed the MPN prior to the date the school completes the calculation.

Exceptional Circumstances for Certifying Additional Unsubsidized Stafford Loan Funds for a Dependent Student
The Common Manual has been updated to include additional 'exceptional circumstances' that a school may use to certify additional unsubsidized Stafford loan funds for an otherwise eligible dependent student. These circumstances may include, but are not limited to:

• The dependent student's parent is not a U.S. citizen or eligible non-citizen and the dependent student is otherwise eligible for the additional unsubsidized Stafford loan.
• The dependent student's parent files a bankruptcy petition and provides the school with an official letter from the bankruptcy court confirming that the parent has filed for bankruptcy and is prohibited from incurring additional debt.
• The dependent student's parent is in default on a Title IV loan.

HEROES Act Waivers
The Common Manual history appendix has been revised by adding a new entry, dated October 20, 2005, for the publication date of the Federal Register that extends the HEROES Act waivers until September 30, 2007. A new section of the history appendix, H.4, titled Statutory and Regulatory Waivers, has been created for the HEROES Act waivers and any future waivers that ED may publish pursuant to hurricane disaster relief or other special circumstances. Section H.4 describes "affected individuals" as defined in the HEROES Act and provides for quick reference a chart that indicates which of the HEROES Act waivers or modifications apply to six different groups of individuals. The text of section H.4 summarizes the current requirement that each waiver affects, includes appropriate cross-references for more comprehensive information about each current requirement, describes each waiver or modification in detail, and discusses documentation requirements associated with granting the HEROES Act waivers or modifications.

As a technical edit, standardized cross-referencing language will be inserted into the manual's policy text to refer the reader to section H.4 of appendix H for more information about the HEROES Act waiver or modification that applies to the policy's topic.

Required Updates to a Student's Dependency Status
The Common Manual has been updated to state that a student must update his or her dependency status if it changes at any time during the award year, unless it changes because the student's marital status changes. If an unmarried and otherwise dependent student marries after he or she submits the FAFSA, the student remains dependent for the rest of that award year. If the student is still married when he or she submits the FAFSA for the next award year, the student is independent for that award year. If a married student divorces after he or she submits the FAFSA, the student remains independent for the current award year. However, if the student is independent in the current award year solely because he or she is married, the student is dependent in the next award year if he or she cannot answer "yes" to any of the dependency questions on the FAFSA.

If the student's last remaining parent dies after the FAFSA is submitted, the student must update his or her dependency status on the Student Aid Report (SAR) and report income and assets as an independent student.

After the school certifies a Stafford loan, the certification record cannot be changed to reflect a change in dependency status. However, the school may use the updated status to recalculate the expected family contribution (EFC) and certify additional loans if the student qualifies. The school is liable for any overpayment of Stafford loan funds due to recalculation errors.

Total and Permanent Disability Loan Discharge Determination with New Loan
The Common Manual has been revised to state that if a borrower receives a new loan under the Perkins, FFEL, or Direct Loan programs (with the exception of a Consolidation loan that does not include any loans that are in a conditional discharge status) within three years of the date the borrower became unable to work and earn money, the borrower is not eligible for discharge on that loan or any loan made prior to that date. This three-year period (i.e., the conditional discharge period) begins on the date the borrower became unable to work and earn money, as certified by the physician. The lender must review its records for any new loan(s) made to the borrower on or after the date the borrower became totally and permanently disabled. If the lender's records indicate (or the lender is otherwise aware) that a new loan(s) was made during the three-year conditional discharge period, the lender must deny the discharge and inform the borrower.

Borrower Authorization to Release Loan Funds Received via EFT or Master Check
The Common Manual has been updated to remove language that implies that when a borrower signs the Master Promissory Note (MPN), he or she is giving the lender permission to disburse Stafford or PLUS loan funds, as applicable, via electronic funds transfer (EFT) or master check. Revised language clarifies that when the borrower signs the MPN, he or she is authorizing the school to release funds received via EFT or master check from the school account to the student's account with the school.

Teacher Loan Forgiveness Payment Application
The Common Manual has been revised to state that unless instructed otherwise by the borrower, a lender must apply a teacher loan forgiveness payment received on the borrower's behalf first to any outstanding unsubsidized Federal Stafford loan balances, next to any outstanding subsidized Federal Stafford loan balances, and then to any eligible outstanding Federal Consolidation loan balances.

Deferment Eligibility
The Common Manual has been revised to more clearly state that if all of the loans that qualified the borrower as a "new borrower" in one category are paid in full through consolidation, the borrower changes to the "new borrower" category applicable to the date on which the Consolidation loan is made. The borrower is eligible for deferments in that category on the Consolidation loan and all subsequent loans. In addition, revised policy removes an incorrect regulatory citation and replaces it with a correct citation.

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2006 Common Manual to include HERA updates

The Common Manual Governing Board, comprised of representatives of all FFELP guarantors, have agreed to defer publication of the 2006 version of the Common Manual and ensure that the version includes as many changes as possible that pertain to changes to the Higher Education Act brought about by the passage of the Higher Education Reconciliation Act (HERA) of 2005. The Governing Board projects an October 2006 delivery of the printed and CD versions of the manual.

Previous annual updates of the Manual have usually been delivered to customers on around July 1 of each year, based on a time line and production schedule that coincides with the statutory master calendar. This year's February enactment date of the HERA threw a wrench into the Manual's normal time line, so the time line is being adjusted to ensure that the resources the Common Manual provides to the community are as up-to-date as possible. Regular updates of the Integrated Common Manual, the Web-based version of the manual's text that shows underlines and strikethroughs as new policies are approved, will continue to be issued each month to ensure that schools and lenders have access to the latest version of the Manual at all times.

As part of the HERA policy development effort, the Common Manual Policy Committee will be distributing three batches of HERA policies for community review. The first batch was published April 21 with comments due May 12; a second batch is scheduled for May 12, and a third batch is scheduled for early June. The Governing Board, which includes Nina Hold, TG assistant vice president for policy and regulatory affairs, appreciates the community's understanding and support of the deferred 2006 publication, and its participation in the extended development process.

More information
For more information about the Common Manual or for questions regarding the deferred publication of the 2006 Manual, contact TG customer assistance at (800) 845-6267, or send an e-mail message to cust.assist@tgslc.org.

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