[Code of Federal Regulations]
[Title 42, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 42CFR57.216a]

[Page 270-271]
 
                         TITLE 42--PUBLIC HEALTH
 
    CHAPTER I--PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN 
                                SERVICES
 
PART 57--GRANTS FOR CONSTRUCTION OF TEACHING FACILITIES, EDUCATIONAL IMPROVEMENTS, SCHOLARSHIPS AND STUDENT LOANS--Table of Contents
 
               Subpart C--Health Professions Student Loans
 
Sec. 57.216a  Performance standard.

    On June 30, 1984, and on each June 30 thereafter, except as provided 
in paragraph (b) of this section, each school must have a default rate 
(as calculated under paragraph (a) of this section) of not more than 5 
percent.
    (a) The default rate for each school shall be the ratio (stated as a 
percentage) that the defaulted principal amount outstanding of the 
school bears to the matured loans of the school. For this purpose:
    (1) The term defaulted principal amount outstanding means the total 
amount borrowed from the loan fund of a school that has reached the 
repayment stage (minus any principal amount repaid or canceled) on loans 
in default for more than 120 days; and
    (2) The term matured loans means the total principal amount of all 
loans made by a school under this subpart minus the total principal 
amount of loans made by the school to students who are:
    (i) Enrolled in a full-time course of study at the school; or
    (ii) In their grace period.
    (b) Any school that has a default rate greater than 5 percent on 
June 30 of any year will be required to:
    (1) Reduce its default rate by 50 percent (or a school with a 
default rate below 10 percent must reduce its rate to 5 percent) by the 
close of the following 6-month period; and
    (2) By the end of each succeeding 6-month period, reduce its default 
rate to 50 percent of the required rate for the previous 6-month period, 
until it reaches 5 percent.
    (c) Any school subject to the provisions of paragraph (b) of this 
section which fails to comply with those requirements will receive no 
new HPSL funds and will be required to:
    (1) Place the revolving fund monies and all subsequent collections 
into an insured interest-bearing account;
    (2) Make no loan disbursements; and
    (3) By the end of the succeeding 6-month period, reduce its default 
rate to 50 percent of the rate it failed to achieve under paragraph (b) 
of this section, or 5 percent. A school that meets this requirement wil 
be permitted to resume the use of its health professions student loan 
funds, but must continue to comply with the requirements of paragraph 
(b)(2) of this section if its default rate is still greater than 5 
percent.
    (d) Any school subject to the provisions of paragraph (c)(3) of this 
section which fails to comply with those requirements will be subject to 
termination. The Secretary will provide the school with a written notice 
specifying his or her intention to terminate the school's participation 
in the program and stating that the school may request, within 30 days 
of the receipt of this notice, a formal hearing. If the school requests 
a hearing, it must within 90 days of the receipt of the notice, submit 
material, factual issues in

[[Page 271]]

dispute to demonstrate that there is cause for a hearing. These issues 
must be both substantive and relevant. The hearing will be held in the 
Washington, DC metropolitan area. The Secretary will deny a hearing if:
    (1) The request for a hearing is untimely (i.e., fails to meet the 
30-day requirement);
    (2) The school does not provide a statement of material, factual 
issues in dispute within the 90-day required period; or
    (3) The statement of factual issues in dispute is frivolous or 
inconsequential.

In the event that the Secretary denies a hearing, the Secretary will 
send a written denial to the school setting forth the reasons for 
denial. If a hearing is denied, or if as a result of the hearing, 
termination is still determined to be necessary, the school will be 
terminated from participation in the program and will be required to 
return the Federal share of the revolving fund to the Department. A 
school terminated for failure to comply with the provisions of paragraph 
(c)(3) of this section must continue to pursue collections and may 
reapply for participation in the program only when it has attained a 
default rate of 5 percent or less.

(Approved by the Office of Management and Budget under control number 
0915-0047)

[50 FR 34423, Aug. 23, 1985, as amended at 52 FR 20988, June 3, 1987; 53 
FR 46550, Nov. 17, 1988; 56 FR 19294, Apr. 26, 1991]