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AwardYear: 1995-1996 EnterChapterNo: 10 EnterChapterTitle: Federal Family Education Loan Programs SectionNumber: 1 SectionTitle: Eligibility PageNumbers: 9-16 In general, a student must be enrolled at least half time as a regular student in an eligible program and must maintain satisfactory academic progress in order to be eligible for a Federal Stafford or a Federal PLUS loan. Chapters Two and Three of the Handbook cover the eligibility requirements of students and schools in considerable detail; only those eligibility requirements of special interest to Stafford Loan and PLUS borrowers are noted here. BORROWER ELIGIBILITY FOR FEDERAL STAFFORD AND FEDERAL PLUS LOANS While eligibility criteria for students participating in all student financial assistance (SFA) programs are generally the same, there are some significant differences in eligibility requirements for Stafford Loans and PLUS that should be mentioned: - A member of a religious community may be eligible for a Stafford Loan or PLUS. (Members of religious communities, in most cases, are not eligible for other SFA programs.) The school makes a determination of eligibility based on the requirements of Section 682.301(a)(2) of the FFEL Program regulations. - A student must meet the U.S. citizenship requirements explained in 34 CFR 668.7 of the Student Assistance General Provisions regulations. A parent borrower must also meet these requirements. - A student is INELIGIBLE to receive Perkins or Stafford Loans while in a medical internship or residency program, unless the internship is part of the school's degree program, and a parent may not borrow a PLUS for a student in such a program. This restriction became effective January 1, 1990, for any loan proceeds not delivered to the borrower by that date; it does NOT apply to students in dental internship programs. [[For Stafford and PLUS, test required for students without h.s. diploma or GED]] - In general, a student must have a high school diploma or its recognized equivalent, or a General Education Development certificate (GED), in order to be eligible for a Stafford Loan, or for a parent to borrow a PLUS for the student. The Higher Education Technical Amendments of 1991 (P.L. 102-26) require students WITHOUT a high school diploma (or equivalent) or a GED to pass a test approved by the U.S. Department of Education in order to be eligible for a Stafford Loan or for a parent to borrow a PLUS for the student. This provision became effective July 1, 1991. For more information on the testing process, see Chapter Two of the Handbook. A student may now gain eligibility through a determination that he or she has the ability to benefit from an institution's program, in accordance with a state process approved by the Department. Ability to benefit procedures are described in Part 668.7(b) of the General Provisions regulations. [[WORK IN PROGRESS]] A final rule is being developed by the Department on provisions regarding ability to benefit. For more information on student eligibility, please consult Chapter Two of the Handbook. - As with other SFA programs, if a student owes a refund on an SFA grant, or is in default on a loan made under the Stafford Loan, SLS, PLUS, Income Contingent Loan, or Federal Perkins Loan (formerly National Direct Student Loan) programs - or on a Federal Consolidation Loan - for attendance at ANY school, he or she is not eligible for a Stafford Loan. The parents of such a student may not borrow a PLUS loan for him or her. In addition, if a parent is in default or owes a refund to any SFA program, he or she may not take out a PLUS loan for any of his or her children in postsecondary education. An FFEL written off as uncollectible and closed out by the Department is still considered to be a defaulted loan for purposes of borrower eligibility. Certification that the borrower is not in default and does not owe a refund is a requirement for which the school is responsible, and is discussed under "Estimated financial assistance" in Section Seven. More information on student certification requirements is found in Chapter Two of the Handbook. See "Loan rehabilitation" in Section Six for information on regaining eligibility for SFA programs once a borrower has defaulted. [[For unsubsidized Stafford applicant: need for Stafford must be determined]] - A determination of Federal Pell Grant eligibility or ineligibility must be made for undergraduate subsidized and unsubsidized Stafford Loan applicants if the school participates in the Pell Grant Program. This requirement does not apply to students for whom a parent is seeking a PLUS. In addition, a determination of need for a Stafford Loan must be made for an unsubsidized Stafford Loan applicant if the applicant is determined to ave need for a subsidized Stafford Loan of $200 or more. More detail on eligibility determination is provided in Section Seven under "Estimated financial assistance" and "Additional factors in determining loan eligibility." - There are two exceptions to the general rule that an SFA recipient must be enrolled or accepted for enrollment in a degree or certificate program: 1) An otherwise eligible student may apply for a Stafford Loan (and the student's parent may borrow under the PLUS Program) for a single consecutive 12-month period, IF the school has determined that the course work is necessary in order for the student to enroll in a degree or certificate program and the student is enrolled at least half time; and [[Stafford and PLUS permitted for non-degree teacher certification or recertification]] 2) A student enrolled at least half time in a program required by a state for teacher certification or recertification at the elementary or secondary level may apply for a Stafford Loan without being enrolled as a regular student (and the student's parent may apply for a PLUS). The school's records must indicate that the courses taken are those required by the state where the student will be teaching. (See Chapter Two of the Handbook for more detail on these two exceptions to student eligibility requirements.) Incarcerated students are no longer eligible to receive Stafford Loans. [[Parent with an adverse credit history may secure an endorser]] An eligible parent borrower for a PLUS Loan is a student's natural mother or father, adoptive parent, or legal guardian. If a stepparent is an adoptive parent or a legal guardian, he or she can borrow under PLUS. Effective July 1, 1995, a parent with an adverse credit history may secure an endorser without an adverse credit history in order to qualify for a PLUS loan. Regulatory criteria for determining an adverse credit history have been established by the Department. The provision that enables a parent with an adverse credit history to secure an endorser without adverse credit was published November 29, 1994. The definition of adverse credit history was provided in a final regulation published June 28, 1994. Upon obtaining a credit history of the applicant (or applicants, if both parents are applying as endorsers), the lender should consider an applicant to have an adverse credit history if - the applicant is 90 days or more delinquent on the repayment of any debt; or - the applicant has been determined to be in default on a debt, the applicant's debts have been discharged in bankruptcy, or the applicant has been the subject of foreclosure, repossession, tax lien, wage garnishment, or write-off of an SFA debt during the five years preceding the date of the credit report. Regarding the criteria listed to determine adverse credit history, a lender may establish a more stringent definition if it chooses to do so. Please note that a parent cannot be rejected for a PLUS loan simply on the basis of the absence of a credit history. The absence of a credit history cannot be construed as an adverse credit history. INSTITUTIONAL ELIGIBILITY In order to participate in the Stafford or PLUS loan programs, a school must be an institution of higher education as defined in Section 481 of the Higher Education Amendments of 1992. As a result of changes in the amendments, a hospital or health-care facility offering a one-year program for graduates of accredited health professions programs is no longer an eligible school, unless it meets one of the other definitions of an eligible school found in Part 600 of the Institutional Eligibility regulations. Definitions of eligible institutions are found in Chapter Three of the Handbook. A foreign school comparable to an institution of higher education can be eligible to participate in the Stafford Loan or PLUS programs, if it is approved by the Department of Education. However, an eligible student may receive financial aid for a study abroad program approved for academic credit by the home school, regardless of whether the study is at an eligible foreign school, or whether the study is required as part of the student's degree program. [[Restrictions on correspondence study]] Only a school accredited as an institution of higher education offering a graduate level program may certify FFEL loans at the graduate level. A school offering programs EXCLUSIVELY for study by correspondence is not eligible to participate in the Stafford Loan or PLUS programs. Note that a student enrolled in a correspondence course must be enrolled in an associate, bachelor, or graduate degree program in order to receive SFA assistance. [[New "academic year" definition]] The Higher Education Amendments of 1992 made changes in program eligibility standards and redefined "academic year," which may affect whether a school's program meets FFEL Program eligibility requirements. An academic year is defined as a minimum of 30 weeks of instruction during which a full-time student is expected to complete at least 24 semester or trimester hours, 36 quarter hours, or 900 clock hours. For an undergraduate Stafford Loan borrower who has not completed the first year of a program of study, the definition is effective for loans certified on or after October 1, 1992. For all other Stafford Loan borrowers, and for other SFA programs, the definition is effective July 1, 1993. On a case-by-case basis, the Secretary may grant to an institution a longterm reduction in the minimum of 30 weeks of instructional time for an academic year. This special exception is set forth in a regulation published November 29, 1994 governing both Student Assistance General Provisions and the FFEL Program. The Department has also developed regulations for programs of 600 clock hours or less; these provisions were published April 29, 1994 as an Interim Final Rule again governing both Student Assistance General Provisions and the FFEL Program. [[Requirements of short-term programs less than 600 clock hours]] A short-term program provides eligibility for loans such as Federal Stafford Loans and Federal PLUS Loans if it meets certain standards. The following criteria apply to these programs, which must * contain a minimum of ten weeks of instruction; * consist of at least 300, but less than 600, clock hours; * Provide undergraduate training that prepares a student for gainful employment in a recognized occupation, and admit as regular students some persons who have not completed the equivalent of an associate degree; * Have a documented completion rate of 70 percent or above; * Consist of a number of clock hours which does not exceed by more than 50 percent the minimum number of clock hours required for training in the recognized occupation for which the program prepares students; * Have been in existence for at least one year. [[Guaranty agencies may limit loans to schools]] Under the Higher Education Amendments of 1992, guaranty agencies must develop, and submit to the Department for approval, their own standards for institutional participation. Guaranty agencies now have the authority to limit the total number or volume of loans made to students attending a particular school during a given academic year, if the agency makes a determination that the school does not satisfy the standards of administrative and financial capability. [[Loss of eligibility--notification requirement]] If a school has been notified that it has lost its eligibility to participate in the FFEL programs and the school does not intend to appeal the decision, it must immediately inform all current AND PROSPECTIVE students of its loss of eligibility, and explain that it can no longer certify FFEL loans for attendance at the school. If the school appeals its loss of eligibility within the required time frame, it may continue certifying FFEL loans during the appeal process. Once a final decision on the appeal is made, the school must take the appropriate action described in the Department's final appeal decision letter. (See Section Nine under "Appealing loss of eligibility" for more information about the appeal process.) If a school loses eligibility or decides not to participate in FFEL programs, reinsurance of loans previously disbursed will not be affected, and interest benefits will continue as long as the student maintains his or her required enrollment status. The student's grace period and eligibility for in-school deferment also will not be affected by a school's loss of eligibility. However, if a school loses eligibility BEFORE it delivers any loan proceeds to the student, the proceeds may not be delivered to the student, because the school is no longer an eligible school. (See Section Nine under "Default Reduction Initiatives" for information about how excessive default rates affect a school's eligibility.) If a school plans to withdraw from participation in the FFEL programs, it must notify both the appropriate guaranty agency or agencies and the Department of its decision. Once the effective date of withdrawal has been established, the school cannot deliver to a student any loan proceeds it receives from a lender, and must return the loan proceeds to the lender within 30 days. To find out more about the procedures required for withdrawal from the FFEL programs, call (202) 708-4906. NOTE: If the first disbursement of a Federal Stafford Loan was delivered to the student or credited to the student's account prior to non-participation, the school may deliver subsequent disbursements of that Federal Stafford Loan to satisfy any unpaid commitment made to a student for that period of enrollment for which the Stafford Loan was made. If a school has never participated in the SFA programs but wants to be considered an eligible school for DEFERMENT purposes, the school must satisfy the Department that it meets the definition of an eligible school before it may certify borrower deferment forms. To find out more about elgibility for deferment purposes, write to: U.S. Department of Education Institutional Participation Division 600 Independence Ave. S.W., Room 3522 Washington, D.C. 20202-5323 The word "school(s)" as used in this chapter means a school participating in Federal Stafford Loan and Federal PLUS programs, even though the word "participating" is not always included. Also note that when the term "Stafford Loans" is used, it includes both subsidized and unsubsidized Stafford Loans; when a distinction needs to be made, the word "subsidized" or "unsubsidized" will appear before "Stafford Loan(s)."

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