Common Manual

Common Manual updates

On January 15, 2009, 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/policy/integrated_online_manual.cfm.

The nation's guarantors provide the following summaries to inform schools, lenders, and servicers of the latest Common Manual policy changes. These changes will appear in the manual's next annual update. These changes will also be incorporated into the Integrated Common Manual. The Integrated Common Manual is available on several guarantor websites, and it is also available on Common Manual's Web site at www.commonmanual.org. Please carefully note the effective date of each policy change.

Eligible Lender — Eligible Financial Institutions
The Common Manual has been revised to amend the requirements for certain kinds of lenders to be considered eligible to participate in the FFELP. Under the current requirements, a lender's FFELP loans may not represent more than 50 percent of the lender's consumer credit portfolio. Existing policy provides three exemptions from this 50 percent rule and these three existing exemptions remain unchanged. However, the Higher Education Opportunity Act of 2008 adds a fourth exemption for a national or state chartered bank, or credit union, with assets of less than $1 billion.

New School-as-Lender Audit Requirement
The Common Manual has been revised to add the requirement that a school functioning as a lender, a lender serving as a trustee for a school, or a school-affiliated organization participating as a lender in the FFELP have an annual program audit of its lending function that focuses on ensuring that the income (special allowance payments, interest payments received from students and the Department, proceeds from any loan sale, etc.) from its portfolio is used to provide need-based grants and that only a reasonable portion of this income is used to pay administrative expenses. The purpose of the program audit is to ensure that the income from the loan portfolio is used to supplement and not supplant federal and nonfederal funds that would otherwise be directed to need-based grant programs.

Lender Consumer Reporting Requirements
The Common Manual has been revised to reflect statutory changes from the Higher Education Opportunity Act (HEOA) that require the lender to report to all national consumer reporting agencies and that require the lender to report, in addition to previous credit bureau data reporting requirements, that the loan is an education loan.

Lender of Last Resort (LLR) Changes
The Common Manual has been revised to update the glossary definition of "lender of last resort," to remove the Student Loan Marketing Association as a designated LLR option, and to insert in the history appendix "waiver" subsections of the Common Manual new text to reference the school-wide LLR options authorized in statute through June 30, 2009.

Revised policy also states that the LLR is not permitted to offer reduced interest rates or reductions or waivers of origination or federal default fees, and that the LLR may not offer other loan terms or conditions to the LLR borrowers that are more favorable than those explicitly provided in statute and regulation. Revised policy stipulates that a lender that provides LLR loans is prohibited from marketing those loans and from violating the prohibited inducement provisions. The policy requires that the LLR provide at least 60 days' notice to the designated guarantor of its intent to cease LLR operations and that the LLR ensure that all loans made under the LLR program are fully disbursed prior to the date on which it ceases LLR operations.

Drug Conviction Notices
The Common Manual has been updated to include provisions from the HEOA that incorporate two new consumer information disclosure requirements for a school. Upon a student's enrollment, a school must provide the student with a separate, clear, and conspicuous written notice of the penalty (i.e., the loss of Title IV eligibility) if the student is convicted of a state or federal offense involving the possession or sale of an illegal drug that occurred while the student was enrolled in school and receiving Title IV aid. The current Common Manual includes detailed information about the time frame for which a student loses Title IV eligibility based on whether the student is convicted of a first, second, or third offense for drug possession, or a first or second offense for drug sale.

A school must also provide a student who loses Title IV eligibility due to a drug-related conviction with a timely, separate, clear, and conspicuous written notice. The notice must advise the student of his or her loss of Title IV eligibility and the ways in which the student may regain that eligibility.

Multiple School Enrollment
The Common Manual has been updated based on clarification contained in the FSA Handbook concerning a student who is enrolled simultaneously on at least a half-time basis at more than one school. In such a case, a Stafford or PLUS loan certified by one school is not included as estimated financial assistance (EFA) by another school when determining the student or parent borrower's eligibility for a Stafford or PLUS loan for the same payment period or period of enrollment.

Teacher Education Assistance for College and Higher Education (TEACH) Grants
The Common Manual has been updated to include the following salient TEACH grant references:

• Estimated financial assistance (EFA) includes TEACH grant funds. EFA does not include the amount of a TEACH grant that is used to replace the EFC.
• Stafford annual and aggregate loan limits do not include any TEACH grant amount that has been converted to an unsubsidized Direct Stafford loan. For a student who withdraws, TEACH grant funds are included in the return of Title IV funds calculation, and in the order of unearned funds that a school must return to the Title IV programs.
• One of the criteria that a borrower, comaker, or endorser must meet to qualify for final total and permanent disability discharge is that, during the 3-year conditional discharge period, the borrower, comaker, or endorser must not receive a new TEACH grant or a new loan under the Federal Perkins Loan Program, the FFELP, or the Federal Direct Loan Program (with the exception of a Consolidation loan that does not include any loans that are in a conditional discharge status).
• A TEACH grant that has been converted to an unsubsidized Direct Stafford loan is not considered for the purpose of calculating a school's cohort default rate.
• A TEACH grant is defined in the glossary as a non-need-based grant intended for undergraduate, certain post-baccalaureate, and graduate students enrolled at TEACH grant-eligible schools who plan to become teachers. In exchange for the grant, a student must agree to serve as a full-time teacher in a high need field, in a low-income school for at least four academic years within eight years of completing the program of study for which the student received the grant. If a TEACH grant recipient does not satisfy the service obligation, the TEACH grant funds that the student received convert to an unsubsidized Direct Stafford loan that must be repaid with interest accruing from the date of disbursement. See the FSA Handbook for more information about the TEACH Grant Program.

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