eral capital contributions, institutional capital contributions, repayments of capital and interest, charges collected pursuant to § 144.8 (h), and any other earnings of the fund.

contribution.

(1) Federal capital "Federal capital contribution" means the capital portion contributed by the Commissioner to a National Defense Loan Fund pursuant to section 203 of the Act.

(m) Federal institutional loan. "Federal institutional loan" means a loan made by the Federal Government pursuant to section 207 of the Act to an institution, the proceeds of which are to be deposited by such institution in its National Defense Student Loan Fund.

(n) Institutional capital contribution. "Institutional capital contribution" means the money deposited into a National Defense Student Loan Fund by the institution in an amount not less than one-ninth of the Federal capital contributions thereto.

(0) National of the United States. "National of the United States" means (1) a citizen of the United States or (2) a person who though not a citizen of the United States owes permanent allegiance to the United States (8 U.S.C.A 1101(a) (22)).

(p) Full-time student. "Full-time student" means a student who is carrying a full-time academic workload in terms of course work or other required activities as determined by the institution.

(q) Full-time attendance. "Full-time attendance" means compliance by a fulltime student with the policies and regulations regarding attendance in effect at the institution in which he is enrolled.

(r) Half-time student. "Half-time student," or "student enrolled on at least a half-time basis," means a student who is carrying at least one-half of the normal full-time academic workload as determined by the institution where he is enrolled.

(s) Professional or graduate student. "Professional or graduate student" means, in general, a student who is enrolled in an academic program of instruction above the college level which is provided at an institution of higher education. The term includes (1) that portion of any program involving a period of study beyond 4 years of study at the college level, or (2) any portion of a program leading to (i) a degree beyond the bachelor's or first professional

degree, or (ii) a first professional degree, when at least 3 years of study at the college level are required for entrance into a program leading to such degree.

(t) Satisfactory standing, good standing. The terms "satisfactory standing" and "good standing" mean the eligibility of a student to continue in attendance at the institution where he is enrolled as a student in accordance with the institution's standards and practices.

(u) Full-time teacher. "Full-time teacher" for the purpose of section 205(b)(3) of the Act means:

(1) In the case of an elementary or secondary school teacher, an individual professionally employed on a full-time basis, and regularly engaged in carrying out the instructional programs of an elementary or secondary school.

While

the term generally includes classroom teachers and their supervisors, it may also include other personnel such as school librarians and guidance counselors meeting the above requirements; and

(2) In the case of a teacher in an institution of higher education, an individual professionally employed by such institution and who is regarded by the institution for purposes of salary, tenure, academic rank, or similar purposes as being engaged on a full-time basis in activities primarily concerned with rendering direct and personal services either in the instructional program or in a capacity directly related to the improvement of the students' educational development at such institution.

(v) Elementary school. "Elementary school" means a school which provides elementary education, as determined under State law or, if such school is not in any State, as determined by the Commissioner.

(w) Secondary school. "Secondary school" means a school which provides secondary education, as determined under State law or, if such school is not in any State, as determined by the Commissioner, except that it does not include any education provided beyond grade 12.

(x) Academic year or its equivalent. "Academic year or its equivalent" means:

(1) In general, the number of credit hours which a student must acquire during any one school year in order to secure the degree or certificate toward which he is working in the number of semesters or terms normally taken therefor at the

institution where he is pursuing a course of study; and

(2) For purposes of section 205(b) (3) of the Act, means any two complete semesters, two complete trimesters or, three complete quarters falling within a school year of approximately 12 months duration.

(y) Fiscal year. "Fiscal year" means the Federal fiscal year commencing on the 1st day of July and ending on the 30th day of June.

(z) Permanently and totally disabled. "Permanently and totally disabled" means the inability to engage in any substantial gainful activity because of a medically determinable impairment, which impairment is expected to continue for a long and indefinite period of time, or to result in death, such disability to be determined on the basis of the report of a physician on such forms as the Commissioner may prescribe.

(aa) Routine expenses. "Routine expenses," for purposes of section 204(3) (C) of the Act, means the normal or typical expenses incurred by the lending institution in its exercise of the general and normal administration of the National Defense Student Loan Program. This includes activities such as those involving receiving and processing applications for loans, approving of loans, accounting for and reporting Fund transactions, and normal collection efforts.

(bb) Other collection costs. "Other collection costs," for purposes of section 204 (3) (D) of the Act, means such extra identifiable costs of collection that are in excess of the routine expenses incurred in the collection of student loan notes, but does not include costs of employing individual contractors or agents to handle collection duties that reasonably may be expected to be performed by the lending institution's own personnel.

§ 144.3

Allotment and reallotment of Federal capital contributions to States.

(a) Allotment. From sums appropriated for Federal capital contributions for any fiscal year ending prior to July 1, 1968, the Commissioner shall allot to each State an amount which bears the same ratio to the amount so appropriated pursuant to section 201 of the Act, as the number of persons enrolled on a full-time basis in institutions in each of such States bears to the total number of persons enrolled on a fulltime basis in institutions of higher edu

cation in all of the States. For the purposes of this paragraph, the number of persons enrolled on a full-time basis in institutions of higher education shall be determined by the Commissioner for the most recent year for which satisfactory data are available to him.

(b) Reallotment. In the event that the allotment for Federal capital contributions made to a State under paragraph (a) of this section exceeds the total Federal capital contributions made to the institutions within such State, for a given fiscal year, the unused portion of such allotment may be reallotted from time to time, on such date or dates as the Commissioner may fix, to other States in proportion to the original allotments to such States for such fiscal year, except that such reallotments shall be made only (1) to the States in which allotments are insufficient to meet the requests for Federal capital contributions which have been reviewed and approved by the Commissioner in accordance with § 144.4(a) (3), and (2) to the extent necessary to meet such requests in any such State. § 144.4 Institutional applications.

(a) Applications for Federal capital contributions. (1) Applications for Federal capital contributions shall be filed by institutions in such form and manner as may be prescribed by the Commissioner.

(2) The Commissioner shall from time to time issue a notice setting a date by which an institution must file the application in order to be eligible to receive a Federal capital contribution for the period stated in such notice.

(3) The amount requested in each application for a Federal Capital contribution shall be reviewed and approved by the Commissioner for the purposes of section 203 (a) of the Act in the light of the demands which may reasonably be expected to be made upon the Fund during the period covered by the application after taking into consideration the balance in the Fund. When necessary to this end the Commissioner may require the submittal of additional data.

(b) Application for Federal institutional loan. (1) Each application for a Federal institutional loan shall include a statement of supporting data on which there shall be provided such information as the Commissioner may require (including information relative to the terms and conditions under which such funds are available from non-Federal

sources) in order to make the necessary determinations under section 207(a) of the Act.

(2) The amount requested in each application for a Federal institutional loan shall be reviewed and approved by the Commissioner in the light of the requirements of section 207(a) of the Act and the amount of the Federal capital contribution that has been reviewed and approved in accordance with paragraph (a) (3) of this section.

(c) Agreement for Federal capital contributions. (1) The institutional application to participate in the National Defense Student Loan Program shall also include a proposed agreement, signed by an authorized representative of the applicant institution, which shall be submitted for consideration and concurrence by the Commissioner.

(2) No application for a Federal capital contribution or for a Federal institutional loan shall be approved unless there is in effect an agreement between the Commissioner and the applicant institution for Federal capital contributions pursuant to section 204 of the Act.

(3) The agreement shall provide for the following items: (1) Establishment of a Student Loan Fund by the institution; (ii) deposit in the Fund of (a) the Federal capital contributions, (b) the institutional capital contributions, equal to not less than one-ninth of the Federal contributions, (c) collections of principal and interest on student loans made from the Fund, (d) charges collected pursuant to section 205(c) of the Act, and (e) other earnings of the Fund; (iii) that the Fund be used only for (a) loans to students in accordance with the agreement, (b) capital distributions as provided in section 206 of the Act, (c) routine expenses incurred by the institution in administering the Fund, not exceeding the lesser of either one-half of the routine expenses as estimated for that year by the Commissioner or one per centum of the aggregate of the outstanding loans made from the fund as of the close of that year, and (d) costs of litigation, and other collection costs agreed to by the Commissioner arising in connection with the collection of a loan, the interest thereon or a charge assessed with respect to the loan pursuant to section 205(c) of the Act; (iv) that in the selection of students to receive loans from such student loan fund special consideration shall be given to students with a superior academic back

ground; and (v) include such other provisions as may be necessary to protect the financial interest of the United States and promote the purposes of this part and as are agreed to by the Commissioner and the institution.

§ 144.5 Federal institutional loan agree

ments.

Federal institutional loans shall be made subject to the terms of a note which shall be executed by an official who is duly authorized to execute such notes on behalf of the borrowing institution. Such loans shall be used only for institutional capital contributions to the borrower's National Defense Student Loan Fund. Each such note shall include such terms with respect to the payment of interest and repayment of capital as are not inconsistent with section 207(a) of the Act and shall include such other terms which the Commissioner finds necessary to protect the financial interest of the United States and to promote the purposes of the Act.

§ 144.6 Allocation and payment of Federal capital contributions and Federal institutional loans.

(a) Allocation of Federal capital contributions to institutions. (1) Federal capital contributions will be offered to institutions within a State in relation to the amount of the requests for Federal capital contributions that have been reviewed and approved in accordance with § 144.4(a) (3). In the event that the total of such requested amounts in all the applications for the Federal capital contributions from a State exceeds that State's current allotment therefor, the amount of the Federal capital contribution that can be made available to any applicant institution from that allotment shall bear the same ratio to such requested amount as the amount of the State's allotment bears to the total of such requested amounts within the State.

(2) In the event that an institution which has applied for a Federal institutional loan is unable to secure the necessary amount of loan funds from the Commissioner or otherwise to secure such funds as may be required in order to make the necessary institutional capital contribution, the amount of the Federal capital contribution which could have been offered to such institution pursuant to subparagraph (1) of this paragraph shall be reduced to an amount equal to not more than nine times the amount of

such institutional capital contribution as the institution is able to make to the Fund.

(3) If an institution fails to accept all of the Federal capital contributions that have been offered to it, the amount represented by such unaccepted offer shall be restored as part of the State's allotment.

(4) When funds that have been restored as a part of a State's allotment are sufficient to increase significantly the amount of the Federal capital contribution that can be made available to other institutions within the State, they shall be offered to such institutions whose requests for Federal capital contributions were reduced pursuant to subparagraphs (1) and (2) of this paragraph.

(b) Allocation of Federal institutional loans. (1) Federal institutional loans shall be made by the Commissioner upon the basis of his review of the data that are provided to him in the application for a Federal institutional loan.

(2) In the event that the funds available for the purpose of making Federal institutional loans are insufficient to satisfy the requests to which institutions would otherwise be entitled in accordance with § 144.4 (b) (2), the Commissioner shall allocate such available funds among all of such requests therefor in the same ratio as the amount of each such request bears to the sums of the amounts of all such requests.

(3) If an institution fails to accept all of the funds that would otherwise be loaned to it, the Commissioner shall reallocate such unaccepted funds to other institutions if the amount of such funds is sufficient to increase significantly the size of the loans to such other institutions.

(c) Payments of Federal capital contributions and institutional loans. Payment of the Federal capital contributions and institutional loans shall be made in such amounts and at such times as the Commissioner shall designate.

§ 144.7 Eligibility and selection of loan recipients.

dergraduate student at the institution; (3) is capable, in the opinion of the institution, of maintaining good standing in such course of study; and (4) has been accepted for enrollment as at least a half-time student at such institution or, in the case of a student already attending such institution, is in good standing and is enrolled on at least a half-time basis at such institution.

(b) Determination of need. In determining a student's need for a loan from the Fund, the institution shall where appropriate take into consideration (1) the income, assets, and resources of the applicant, (2) the income, assets, and resources of the applicant's family, and (3) the cost reasonably necessary for the student's attendance at the institution, including any special needs and obligations which directly affect the student's financial ability to attend such institution. All determination of need shall be made in accordance with the policies and procedures established by the institution and made a part of the agreement for Federal capital contributions.

(c) Limitations governing maximum amount of loans. In accordance with section 205 (a) of the Act (1) the loans advanced from any Fund or Funds to a student for any "academic year or its equivalent" (as defined in § 144.2(x)) may not exceed a total of $2,500 in the case of a professional or graduate student, $1,000 in the case of all other students; and (2) the total of all such loans to a student (regardless of the nature of his enrollment when received) may not exceed $10,000 in the case of a graduate or professional student and $5,000 in the case of all other students. This statutory limit on the amount of loans which may be made in any "academic year or its equivalent" will be complied with if either (3) not more than $2,500 is advanced to a professional or graduate student or $1,000 to any other student during any 12-month school period (normally beginning in September) or (4) the total of the sums advanced to & student during any such period does not exceed an amount which bears the same ratio to the number of credit hours for which the student borrower is registered during such period as $1,000 (or $2,500, in the case of a graduate or professional student) multiplied by the sum of the academic years or their equivalent leading to the degree or certificate

5

bears to the total sum of credit hours required to earn such a degree.

Loans

(d) Selection-in general. from the Fund shall be made reasonably available (to the extent permitted by the Fund and subject to the provisions of section 204 (4) of the Act) to all eligible applicants. In the event applications ex1 ceed available funds, the order of selection shall be made on the basis of objecI tive criteria established by the institution and made a part of the agreement 1 for Federal capital contributions.

(e) Selection-Nondiscrimination. No # eligible applicant shall be denied a student loan from the Fund on account of sex, race, creed, color, or national origin.

(f) Selection-special considerations. In the selection of students to receive #loans from the Fund, special consideration shall be given to students with superior academic backgrounds.

(g) Records of approval or disapproval. The records of the institution shall E indicate the basis of approval or disapproval (including any special consideration given) of all or any part of each student application for a loan.

(a) Evidence of indebtedness; note. All loans shall be evidenced by a promissory note executed by a student borrower which shall be in a form meeting the requirements of section 205 (b) of the Act. The Commissioner shall from time to time make available a promissory note form which meets the statutory requirements. Except for a provision reflecting an institution's election to require security or endorsement in cases permitted under paragraph (b) of this section, any substantive deviation from the provisions of the most current promissory note form made available by the Commissioner must be approved by the Commissioner prior to the making of any loans to be evidenced thereby. A copy of every executed note shall be supplied to the student maker thereof.

(b) Security. Neither security nor endorsement may be required except that, if the borrower is a minor and if under the State law the note executed by him would not create a binding obligation, the institution is permitted to require security or endorsement.

(c) Repayment. The note evidencing the loan shall provide for repayment of the principal amount, together with interest thereon, in equal installments (or,

86-096-68-23

if the borrower so requests, in graduated periodic installments determined in accordance with such schedules as may be approved by the Commissioner) payable quarterly, bimonthly, or monthly (at the option of the institution) over a period beginning 9 months after the date on which the borrower ceases to carry, at an institution of higher education or at a comparable institution outside the States approved for this purpose by the Commissioner, at least onehalf the normal full-time academic workload as determined by the institution in which he is enrolled, and ending 10 years and 9 months after such date. Selection of a repayment plan shall be made prior to the date on which the student ceases to be enrolled on at least a half-time basis at the lending institution.

(d) Accelerated repayment. Any student borrower may, at his option, and without penalty, repay all or any part of the principal and accrued interest at any time.

(e) Minimum rate of repayment. The institution may provide if the scheduled adopted pursuant to paragraph (c) of this paragraph provides for repayments at a rate of less than $15 per month, and if the total of repayments required of the student on all loans made pursuant to this part does not exceed the rate of $15 per month, that during the repayment period of the loan, payments of principal and interest by the borrower with respect to all the outstanding loans made to him from loan funds established pursuant to this part shall be at a rate equal to not less than $15 per month.

(f) Deferment of repayment. Interest shall not accrue on any such loan, and installments need not be paid during any period (1) during which the borrower is carrying, at an institution of higher education or at a comparable institution outside the States approved for this purpose by the Commissioner, at least one-half the normal full-time academic workload as determined by the institution, (2) not in excess of 3 years, during which the borrower is a member of the Armed Forces of the United States, and (3) not in excess of 3 years during which the borrower is in service either as a volunteer under the Peace Corps Act, or a volunteer (VISTA) under section 603 of the Economic Opportunity Act of 1964; except that this provision does not apply to any loan outstanding