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to taxation) in accordance with para- available only if the appropriate State graph (a) of this section. Income de- agency or private nonprofit institution scribed in clause (2) shall be computed or organization has first entered into an in accordance with instructions issued by agreement with the Commissioner purthe Commissioner.
suant to paragraph (b) of this section. (c) Exclusion of income of parents or
The Commissioner may enter into such spouse in exceptional circumstances. The
an agreement if he determines that the income of a parent, or parents living to
State or private nonprofit student loan gether, shall be excluded from considera
insurance program: tion under paragraphs (a) or (b) of this
(1) Authorizes the insurance of loans section if the borrower is not and, during
in amounts up to least $1,000, but not the 12 months preceding the determina
exceeding $1,500, to any individual stution, has not been (1) residing with, (2) claimed as a dependent for Federal in dent in any academic year or its equivacome tax purposes by, nor (3) the re
lent after taking into account other loans cipient of an amount in excess of $600
covered by this part and 45 CFR Part 178 from, such parent or parents. The in
which the student has received in the come of a spouse shall also be excluded same academic year or its equivalent: from such consideration where there has
(li) Authorizes the insurance of loans been a legal separation approved by a
to an individual student for at least 6 court or a separation which has, in fact,
academic years of study or their equivaexisted for 12 months or more.
lent; (d) Method of determination. The de
(uf) Provides that (a) the student termination of the adjusted family in
borrower shall be entitled to accelerate come of a student borrower shall be made
without penalty the repayment of the on the basis of information submitted
whole or any part of the insured loan, on forms supplied or approved by the
and (b) the insured loan shall be repaid Commissioner. The determination shall
within 15 years from the date of execube made by the lender each time funds
tion of the note or other written evidence are advanced, except that no new de
of the loan; termination need be made with respect
(iv) Subject to subdivision (11) to funds advanced (1) within the same
of tax year in which a determination was
this subparagraph, provides that, where
the total of the insured loans to any last made or (2) on a line of credit ex
student which are held by any one pertended after May 31, 1967, where a determination has been made during the son exceeds $2,000, repayment on such preceding 12-month period in connection loans shall be in installments over & with funds advanced on such line of period of not less than 5 years nor more credit.
than 10 years beginning not earlier than (32 F.R. 8146, June 7, 1967]
9 months nor later than 1 year after the
student ceases to pursue & full-time Subpart B-Interest BenefitsState
course of study at an eligible institution, and Private Nonprofit Student Loan
except that if the program provides for Insurance Programs and Direct
the insurance of loans for part-time State Loan Programs
(less than full-time but not less than $ 177.11 In general.
one-half time) study at eligible institu
tions, the program shall provide that Interest benefits as set forth in § 177.15
such repayment period shall begin not are available with respect to loans in
earlier than 9 months and not later than sured under State and private nonprofit
1 year after the student ceases to carry student loan insurance programs meeting the requirements of $ 177.12 or at an eligible institution at least one$177.13, and with respect to direct State half the normal full-time academic loan programs meeting the requirements workload as determined by the of $ 177.14.
institution; $ 177.12 Agreements for Federal pay
(v) Authorizes interest on the unpaid ments to reduce student interest costs principal balance of the loan at a yearly for insured loans.
rate not in excess of 6 per centum per (a) (1) Except to the extent permitted annum exclusive of any premium for in $ 177.13, interest benefits shall be insurance which may be passed on to the borrower, but such insurance premium may not result in charges in excess of the equivalent of one-half of 1 per centum per annum of the unpaid principal;
(vi) Insures not less than 80 per centum of the unpaid principal of loans insured under the program;
(vii) Provides that the benefits of the loan insurance program will not be denied any student because of his family income or lack of need if his adjusted annual family income at the time the note is executed is less than $15,000, as determined under § 177.3;
(viii) Provides that a student may obtain insurance under the program for a loan for any year of study at an eligible institution; and
(ix) In the case of a State loan insurance program, provides that such State program is administered by a single State agency, or by one or more nonprofit private institutions or organizations under the supervision of a single State agency. For purposes of this subparagraph, “supervision" includes the responsibility for setting all policies and procedures for the operation of the program.
(2) The conditions of subparagraph (1) (i) of this paragraph will be met if the student loan insurance program (i) authorizes advances of not more than $1,500 to a student during any 12-month school period (normally beginning in September) or authorizes advances to any student during such 12-month period of not more than an amount which bears the same ratio to the number of credit hours for which a full-time or half-time student borrower is registered during any such 12-month period as $1,500 multiplied by the sum of the academic years or their equivalent leading to the degree or certificate, bears to the total sum of credit hours required to earn such a degree or certificate; and (ii) authorizes advances of at least $1,000 to a full-time student and (if the program includes half-time students) at least $500 to a half-time student during any 12-month school period.
(b) The agreement shall contain such provisions and assurances and be supported by such information as the Commissioner may require pursuant to section 428(b) of the Act, including provision for termination. Termination will not affect any obligation previously incurred pursuant to the agreement and, if ordered by the Commissioner, will not
become final until the State agency or
(1) Interest charges may not exceed 6 per centum per annum of the unpaid principal balance of the loan exclusive of any premium for insurance which may be passed on to the borrower; and
(2) Repayment of such loans shall be in installments beginning not earlier than 60 days after the student borrower ceases to be a full-time student in an eligible institution, or, if insurance is available for part-time study (less than full-time, but not less than half-time) ceases to carry at an eligible institution at least half the normal full-time academic workload as determined by the institution.
(b) Such application shall also contain an assurance that the applicant and lenders making loans insured under the loan insurance program of that State or private nonprofit institution or organization will comply with all regulatoins of this subpart regarding interest payments. The application shall also contain such other provisions as the Commissioner determines to be necessary for obtaining information to make payments of interest on behalf of students and other. wise to carry out the purposes of this part. $ 177.14 Federal payments to reduce
student interest costs on direct State
loans. (a) Federal payments to reduce student interest costs may be made on be
half of students who meet the require (c) In no event shall payments under ments of § 177.2 and who have received subparagraphs (1) or (2) of paragraph a loan under a direct student loan pro (b) of this section include any interest gram of a State which, except to the ex on interest added to principal or exceed tent otherwise required by State law in the interest payable by the student, after effect prior to the promulgation of this taking into consideration the amount of Regulation, meets the following require any interest on that loan which the stuments:
dent is entitled to have paid on his be(1) Interest charges may not exceed 6 half for that period under any insured per centum per annum of the unpaid loan program. principal balance of the loan;
(d) The Commissioner's obligation to (2) Repayment of such loans is in in pay interest shall terminate upon default stallments beginning not earlier than 60 by the borrower, or upon endorsement of days nor later than 1 year after the stu the note in favor of the guarantee dent borrower ceases to be a full-time agency, whichever occurs first. student in an eligible institution, or if (31 F.R 14836, Nov. 23, 1966) loans are available for part-time study,
8 177.16 Effective dates. ceases to carry at an eligible institution at least one-half the normal full-time Interest payments under this subpart academic workload as determined by the
shall be made with respect to a student institution; and
loan only if the note covering such loan (3) The maximum amount of loans to was executed and the loan was advanced any individual student does not exceed (a) on or after November 8, 1965, under a the maximum amounts provided for in program meeting the requirements of section 425 (a) (1) of the Act.
$ 177.12, § 177.13 or $ 177.14, and ap(b) For purposes of this section, a di proved by the Commissioner prior to July rect State student loan program includes
1, 1966, or (b) on or after the date specionly those programs which are available
fied by the Commissioner in cases where to students in one or more categories of
such program is approved on or after eligible institutions.
July 1, 1966, and
(1) Not later than June 30, 1967, if the $ 177.15 Amount of interest benefits loan was insured under a student loan and procedures for payment.
program pursuant to § 177.13, or (a) After a loan is made to a student
(2) Not later than June 30, 1968, if the meeting the requirements of § 177.2 (or
loan was made under a student loan inan application is received from such stu
surance program covered by an agreedent for Federal interest payments), a
ment pursuant to $177.12, or under a direport shall be submitted to the Commis
rect State student loan program covered sioner in such form as the Commissioner
by $ 177.14, except that such date is exmay require. On the basis of such re
tended in the case of a loan for which the port, the Commissioner shall periodically
note was executed and the advance made
not later than June 30, 1972, if inquire of the guarantee agency (or State loan agency) or of the institution, or of
“(1) Such loan is made to a student both, as to the enrollment status of the
who had obtained a prior loan on or bestudent borrower. On the basis of such
fore June 30, 1968, with respect to which reports and inquiries, the Commissioner
interest is payable under this subpart, will compute the interest to be paid at
and". the applicable rate to each holder on
(ii) Such loan is made to continue the behalf of each student. Upon certifica
student's educational program. tion of the computation, the Commis
(81 F.R. 6109, Apr. 21, 1961; 31 F.R. 6591, sioner will pay the amount so determined
May 3, 1966) at least every 6 months.
Subpart C-Advances for Reserve (b) The payment shall be limited to: Funds of State and Private Non(1) The total amount of the interest
profit Loan Insurance Programs on the unpaid principal balance of each loan which accrued prior to the begin
$ 177.21 In general. ning of the repayment period of such
(a) The Commissioner may make adloan; and
vances to any State with which he has (2) Three percent per year of the un entered into an agreement pursuant to paid principal balance of any such loan section 428(b) of the Act for the purpose thereafter.
of helping to establish or strengthen the
8 177.24 Terms and conditions of ad
reserve fund of the student loan insurance program covered by such agreement.
(b) If for any fiscal year a State does not have a student loan insurance program which is covered by an agreement pursuant to section 428(b) of the Act, and the Commissioner determines, after consultation with the chief executive officer of that State, that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Commissioner may make such advances for such year to one or more nonprofit private institutions or organizations with which he has entered into such an agreement.
(c) The Commissioner may make advances to a State program (with which he has such an agreement) and to one or more nonprofit private institutions or organizations (with which he has such an agreement) in that State if he determines that such advances are necessary in order that students in each eligible institution have access through such institution to a student loan insurance program which meets the requirements of section 428(b). $ 177.22 Applications.
Applications for funds made available pursuant to § 177.21 shall be submitted at such time or times and in such manner and shall contain such information as the Commissioner may require. § 177.23 Allocation and payment of
State's allotment. (a) II, in any State, there is no State student loan insurance program (covered by an agreement pursuant to section 428(b) of the Act) extending to all students at eligible institutions who are residents of that State (regardless of the State in which the eligible institution is located) the State's allotment, as determined in accordance with the first two sentences of section 422(b) of the Act, shall be allocated and reallocated from time to time among all guarantee agencles, covering such residents, on the basis of the most recent information available to the Commissioner as to the coverage of the loan insurance programs of such agencies.
(b) Payments on account of allocations and reallocations shall be made on the basis of the Commissioner's most recent estimates of the expected demand for insured loans and such other information as the Commissioner may deem appropriate.
Advances of funds to a guarantee agency shall be upon such terms and conditions (including conditions relating to the time or times of payment) consistent with the requirements of section 428(b) as the Commissioner determines will best carry out the purposes of the Act and shall be repaid at such time or times as may be agreed to by the Commissioner, in the light of the maturity and solvency of the fund for which the advance was made, and shall be made pursuant to an agreement which shall include such other terms and conditions as are agreed to by the Commissioner and the guarantee agency, including the following:
(a) Funds advanced pursuant to this subpart shall be used only for the purpose of insuring loans for the same category of students on account of which the Federal advance was made. Loan insurance premiums, if any (referred to in $ 177.12 (a) (1) (v)), and interest or other earnings derived from such funds may be used for such purposes and for expenditures necessary for the proper and efficient administration of the program;
(b) The applicant shall submit such financial reports as the Commissioner may reasonably require to enable him to carry out his functions under this subpart. If, on the basis of such report and such other information as may be appropriate, the Commissioner determines that any of the funds advanced pursuant to this subpart are no longer required to maintain an adequate reserve, he may require that such funds be returned to the Federal Government or made available to some other guarantee agency within the State; and
(c) Such other provision as the Commissioner finds necessary to protect the Interests of the United States and promote the purposes of the Act.
Subpart D— [Reserved)
PART 178—FEDERAL, STATE, AND
PRIVATE PROGRAMS OF LOW.
Subpart A-General Provisions Sec. 178.1 Definitions. 178.2 Student eligibilty for interest bene
Ats. 178.3 Adjusted family income.
Subpart B Interest Benefits State and Private vides within that State, & program of
Nonprofit Student Loan Insurance Programs and postsecondary vocational or technical Direct State Loan Programs
education designed to fit individuals for Sec.
useful employment in recognized occu178.11 In general.
pations; (3) has been in existence for 178.12 Agreements for Federal payments to 2 years or has been specially accredited
reduce student interest costs for by the Commissioner as an institution insured loans.
meeting the other requirements of this 178.13 Interim coverage for insured loan
paragraph; and (4) is accredited (1) by programs.
a nationally recognized accrediting 178.14 Federal payments to reduce student interest costs on direct State loans.
agency or association listed by the Com• 178.15 Amount of interest benefits and pro
missioner pursuant to this paragraph, cedures for payment.
(il) if the Commissioner determines . 178.16 Effective dates.
there is no nationally recognized acSubpart C-Advances for Reserve Funds of State crediting agency or association qualified
and Private Nonprofit Loan Insurance Programs to accredit schools of a particular cate178.21 In general.
gory, by a State agency listed by the 178.22 Applications.
Commissioner pursuant to this para178.23 Allocation and payment of State's graph, and (iii) if the Commissioner deallotment.
termines there is no nationally recog178.24 Terms and conditions of advances.
nized or State agency or association AUTHORITY: The provisions of this Part 178 qualified to accredit schools of a particuunder secs. 2–17, 79 Stat. 1037-1049; 20 U.S.C. lar category, by an advisory committee 981-996.
appointed by him and composed of perSOURCE: The provisions of this part 178 sons specially qualified to evaluate trainappear at 31 F.R. 14942, Nov. 26, 1966, unless ing provided by schools of that category, otherwise noted.
which committee shall prescribe the Subpart A-General Provisions
standards of content, scope and quality
which must be met by those schools in $ 178.1 Definitions.
order for loans to students attending
them to be insurable under the Act, and As used in this part:
shall also determine whether particular (a) "Act" means the National Voca
schools meet those standards. For the tional Student Loan Insurance Act of
purpose of this paragraph, the Com1965 (P.L. 89–287, 79 Stat. 1037–1049, 20
missioner shall publish a list of nationU.S.C. 981-996).
ally recognized accrediting agencies or (b) "Internal Revenue Code" means
associations and State agencies which he the Internal Revenue Code of 1954 as
determines to be reliable authority as amended (Title 26, United States Code).
to the quality of education or training (c) "Academic year or its equivalent".
afforded. means the period of time in which a full
(f) “Program of postsecondary vocatime student would normally be expected tional or technical education" means & to complete 28 semester hours, 42 quarter program of vocational or technical eduhours or 900 clock hours of instruction, cation designed to provide occupational or its equivalent. For purposes of this skills more advanced than those genpart, 18 months is considered the equiva erally provided at the high school level lent of an academic year when applied to and which provides not less than 300 & program offered by correspondence. clock hours of classroom instruction or
(d) "Commissioner" means the U.S. Its equivalent, or in the case of a program Commissioner of Education or his offered by correspondence, requiring nordesignee.
mal completion in not less than 6 months. (e) "Eligible institution" or "Institu (g) "Eligible lender" means an eligi. tion" means a business or trade school, ble institution as defined in paragraph or technical institution or other techni (e) of this section, or an agency or incal or vocational school in any state strumentality of a State, or a financial which (1) admits as regular students or credit institution (including banks, only persons who have completed or left credit unions, savings and loan associaelementary or secondary school and who tions and insurance companies) which is have the ability to benefit from the train subject to examination and supervision ing offered by such Institution; (2) is by an agency of the United States or of legally authorized to provide, and pro- any State.