[Federal Register: June 3, 1997 (Volume 62, Number 106)]
[Rules and Regulations]               
[Page 30411-30412]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 30411]]


Part IV

Department of Education

34 CFR Part 685

William D. Ford Federal Direct Loan Program; Rule

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34 CFR Part 685

RIN 1840-AC42

William D. Ford Federal Direct Loan Program

AGENCY: Department of Education.

ACTION: Final regulations.


SUMMARY: The Secretary of Education amends Sec. 685.212(c) of the 
William D. Ford Federal Direct Loan (Direct Loan) Program final 
regulations to correct a technical error. These regulations apply to 
loans under the Federal Direct Stafford/Ford Loan (Direct Subsidized 
Loan) Program, the Federal Direct Unsubsidized Stafford/Ford Loan 
(Direct Unsubsidized Loan) Program, the Federal Direct PLUS Loan 
(Direct PLUS Loan) Program, and the Federal Direct Consolidation Loan 
(Direct Consolidation Loan) Program, collectively referred to as the 
Direct Loan Program. The Secretary is amending these regulations to 
require that an endorser of a Direct PLUS Loan or a Direct PLUS 
Consolidation Loan is obligated to repay that Direct Loan when the 
borrower's obligation to repay is discharged in bankruptcy.

EFFECTIVE DATE: These regulations take effect June 3, 1997.

FOR FURTHER INFORMATION CONTACT: Mr. Jon Utz, Program Specialist, U.S. 
Department of Education, 600 Independence Avenue, S.W. (ROB-3, Room 
3045), Washington, DC 20202-5400. Telephone: (202) 708-8242. 
Individuals who use a telecommunications device for the deaf (TDD) may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339 
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.



    The Direct Loan Program regulations at 34 CFR 685.212(c) provide 
that the Secretary does not require a borrower or any endorser to make 
any further payments on a loan if the borrower's obligation to repay 
that loan is discharged in bankruptcy. The Secretary has determined 
that the regulation is inconsistent with applicable statutory 
requirements. Section 455(a)(1) of the Higher Education Act of 1965, as 
amended (HEA), generally requires that loans made to student and parent 
borrowers under the Direct Loan and Federal Family Education Loan 
(FFEL) Programs have the same terms, conditions, and benefits, unless 
otherwise specified. Regulations governing the FFEL Program conform to 
the general rule that a bankruptcy discharge relieves the debtor of his 
or her personal liability to repay the debt but does not discharge the 
obligation of a cosigner or endorser to repay the discharged debt. The 
HEA does not suggest that a Direct Loan endorser should be treated 
differently than an endorser of a FFEL loan when the borrower declares 
bankruptcy, and it was not the Secretary's intent to establish 
different treatment. Accordingly, the Secretary is amending 
Sec. 685.212(c) to ensure that endorsers in the Direct Loan Program are 
subject to the same rules that apply to endorsers in the FFEL Program.
    Since this amendment merely makes a technical correction needed to 
conform the regulations with statutory requirements, it is not subject 
to a delayed effective date.

Waiver of Proposed Rulemaking

    In accordance with the Administrative Procedure Act, 5 U.S.C. 553, 
it is the practice of the Secretary to offer interested parties the 
opportunity to comment on proposed regulations. However, the regulatory 
changes in this document are necessary in order to amend a regulation 
that, as a result of a technical error, is inconsistent with a 
statutory requirement that Direct Loans have the same terms, 
conditions, and benefits as loans made to borrowers under the FFEL 
Program, unless otherwise specified by the statute. The Secretary did 
not intend or have discretion to exempt endorsers in the Direct Loan 
Program from a requirement that applies to endorsers in the FFEL 
Program. Since this regulatory amendment corrects an error in 
implementing a statutory requirement, the Secretary has determined that 
the publication of a proposed rule is unnecessary and contrary to the 
public interest under 5 U.S.C. 553(b)(B). For the same reasons, the 
Secretary waives the 30-day delayed effective date under 5 U.S.C. 

Paperwork Reduction Act of 1995

    These regulations have been examined under the Paperwork Reduction 
Act of 1995 and have been found to contain no information collection 

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have a 
significant economic impact on any small entities under the Regulatory 
Flexibility Act. These regulations amend current regulations that are 
inconsistent with a statutory requirement. The regulations will affect 
endorsers of loans that are discharged in bankruptcy. Endorsers are not 
considered to be small entities under the Regulatory Flexibility Act.

Assessment of Educational Impact

    The Secretary has determined that the regulations in this document 
would not require transmission of information that is being gathered by 
or is available from any other agency or authority of the United 

List of Subjects in 34 CFR Part 685

    Administrative practice and procedure, Colleges and universities, 
Education, Loan programs-education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

    Dated: May 22, 1997.
David A. Longanecker,
Assistant Secretary for Postsecondary Education.
(Catalog of Federal Domestic Assistance Number: 84.268, William D. 
Ford, Federal Direct Loan Program.)

    The Secretary amends part 685 of title 34 of the Code of Federal 
Regulations as follows:


    1. The authority citation for part 685 continues to read as 

    Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.

    2. Section 685.212, paragraph (c), is amended by removing the words 
``or any endorser''.

[FR Doc. 97-14357 Filed 6-2-97; 8:45 am]