CUNA Comment Letter

Federal Family Education Loan Program and William D. Ford Federal Direct Loan Program

September 15, 1999

Ms. Patsy Beavan and
Ms. Nicki Meoli
U.S. Department of Education
P.O. Box 23272
Washington, D.C. 20026-3272

RE: Federal Family Education Loan Program and William D. Ford Federal Direct Loan Program

Dear Mses. Beavan and Meoli:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the notice of proposed rulemaking submitted by the Department of Education (DOE) for the Federal Family Education Loan Program (FFEL Program) and the William D. Ford Federal Direct Loan Program (Direct Loan Program), which was published in the Federal Register on August 10, 1999. As a national trade association, CUNA represents more than 90 percent of the nation's 11,000 state and federal credit unions and solicits the opinions of these credit unions on relevant matters.

CUNA has few comments on the proposal because most of the regulatory changes to the FFEL Program and Direct Loan Program are mandated by recently enacted law. On October 7, 1998, the Higher Education Amendments of 1998 (1998 Amendments) became law and amended the Higher Education Act of 1965 (HEA). The proposed regulations incorporate changes from the 1998 Amendments that are specific to the FFEL Program and that are common to both the FFEL Program and Direct Loan Program. All of CUNA's comments relate to the components of the proposed rulemaking that are not statutorily mandated. As DOE requests, these comments identify the specific section that they address and are arranged in the same order as the proposed regulations.

Section 682.102 - Obtaining and Repaying a Loan
The 1998 Amendments allow a lender to give a lower origination fee to a borrower who demonstrates greater financial need. A lender may find a borrower has greater financial need if the borrower meets one of two standards: the borrower's expected family contribution (EFC) is equal to or less than the maximum qualifying EFC for a Federal Pell Grant, or the borrower qualifies for a subsidized Stafford loan. CUNA commends DOE for also permitting a lender to use a comparable alternative to define greater financial need, if the financial institution first obtains approval from DOE. In addition, CUNA recommends that DOE clarify the documentation a lender should use in order to demonstrate greater financial need.

Section 682.202 - Permissible Charges by Lenders to Borrowers Capitalization of Interest
DOE asks if the regulations are understandable, include clear terms, and are easily read. CUNA suggests that the regulations may be more easily understood if DOE provides examples for calculating the interest rate of FFEL Program consolidation loans

Sections 682.210 and 685.204 - Deferment
DOE also requests comments regarding what a borrower should submit to obtain an unemployment deferment on a loan. The recommendation of some lenders that the documentation should at least include the borrower's personal identifying information and the effective dates of the borrower's unemployment eligibility appears reasonable.

Sections 682.300 and 682.301
In addition, the language in §§ 682.300 and 682.301 would be clearer if the term interest subsidy payment was explained within the section and the sentences within that section were shortened.

Section 682.604 and 685.304 - Counseling Borrowers
CUNA also supports the requirement that the initial and exit counseling of students must include information about the new Student Loan Ombudsman office. Providing this information to students should help credit union members and credit unions.

In conclusion, CUNA thanks you for the opportunity to comment on the proposed rule to amend the FFEL and Direct Loan Programs. If DOE staff members have questions about CUNA's comments, please give me a call at (202) 218-7766.

Michelle Q. Profit Assistant General Counsel