[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: 42CFR60.33]

[Page 325-326]
 
                         TITLE 42--PUBLIC HEALTH
 
    CHAPTER I--PUBLIC HEALTH SERVICE, DEPARTMENT OF HEALTH AND HUMAN 
                                SERVICES
 
PART 60--HEALTH EDUCATION ASSISTANCE LOAN PROGRAM--Table of Contents
 
                    Subpart D--The Lender and Holder
 
Sec. 60.33  Making a HEAL loan.

    The loan-making process includes the processing of necessary forms, 
the approval of a borrower for a loan, determination of a borrower's 
creditworthiness, the determination of the loan amount (not to exceed 
the amount approved by the school), the explanation to a borrower of his 
or her responsibilities under the loan, the execution of the promissory 
note, and the disbursement of the loan proceeds. A lender may rely in 
good faith upon statements of an applicant and the HEAL school contained 
in the loan application papers, except where those statements are in 
conflict with information obtained from the report on the applicant's 
credit history, or other information available to the lender. Except 
where the statements are in conflict with information obtained from the 
applicant's credit history or other information available to the lender, 
a lender making loans to nonstudent borrowers may rely in good faith 
upon statements by the borrower and authorizing officials of internship, 
residency, or other programs for which a borrower may receive a 
deferment.
    (a) Processing of forms. Before making a HEAL loan, a lender must 
determine that all required forms have been completed by the borrower, 
the HEAL school, the lender, and the authorized official for an 
internship, a residency, or other deferment activity.
    (b) Approval of borrower. A lender may make a HEAL loan only to an 
eligible student or nonstudent borrower.
    (c) Lender determination of the borrower's creditworthiness. The 
lender may make HEAL loans only to an applicant that the lender has 
determined to be creditworthy. This determination must be made at least 
once for each academic year during which the applicant applies for a 
HEAL loan. An applicant will be determined to be ``creditworthy'' if he 
or she has a repayment history that has been satisfactory on any loans 
on which payments have become due. The lender may not determine that an 
applicant is creditworthy if the applicant is currently in default on 
any loan (commercial, consumer, or educational) until the delinquent 
account is made current or satisfactory arrangements are made between 
the affected lender(s) and the HEAL applicant. The lender must obtain 
documentation, such as a letter from the authorized official(s) of the 
affected lender(s) or a corrected credit report indicating that the HEAL 
applicant has taken satisfactory actions to bring the account into good 
standing. It is the responsibility of the HEAL loan applicant to assure 
that the lender receives each such documentation. No loan may be made to 
an applicant who is delinquent on any Federal debt until the delinquent 
account is made current or satisfactory arrangements are made between 
the affected agency and the HEAL applicant. The lender must receive a 
letter from the authorized Federal official of the affected Federal 
agency stating that the borrower has taken satisfactory actions to bring 
the account into good standing. It is the responsibility of the loan 
applicant to assure that the lender has received each such letter. The 
absence of any

[[Page 326]]

previous credit, however, is not an indication that the applicant is not 
creditworthy and is not to be used as a reason to deny the status of 
creditworthy to an applicant. The lender must determine the 
creditworthiness of the applicant using, at a minimum, the following:
    (1) A report of the applicant's credit history obtained from an 
appropriate consumer credit reporting agency, which must be used in 
making the determinations required by paragraph (c) of this section; and
    (2) For student applicants only, the certification made by the 
applicant's school under Sec. 60.51(e).
    (d) Determination of loan amount. A lender may not make a HEAL loan 
in an amount that exceeds the permissible annual and aggregate maximums 
described in Sec. 60.10.
    (e) Promissory note. (1) Each loan must be evidenced by a promissory 
note approved by the Secretary. A lender must obtain the Secretary's 
prior approval of the note form before it makes a HEAL loan evidenced by 
a promissory note containing any deviation from the provisions of the 
form most currently approved by the Secretary. The lender must give the 
borrower a copy of each executed note.
    (2) The lender must explain to the borrower that the loan must be 
repaid and that the loan proceeds may be applied toward educational 
expenses only.
    (f) Disbursement of HEAL loan. (1) A lender must disburse HEAL loan 
proceeds:
    (i) To a student borrower, by means of a check or draft payable 
jointly to the student borrower and the HEAL school. Except where a 
lender is also a school, a lender must mail the check or draft to the 
school. A lender may not disburse the loan proceeds earlier than is 
reasonably necessary to meet the cost of education for the period for 
which the loan is made.
    (ii) To a nonstudent borrower, by means of a check or draft payable 
to the borrower. However, when a previous loan is held by a different 
lender, the current lender must make the HEAL loan disbursement check or 
draft payable jointly to the borrower and the holder of the previous 
HEAL loan for which interest is payable.
    (2) Effective July 1, 1987, a lender must disburse the HEAL loan 
proceeds in two or more installments unless the loan is intended to 
cover a period of no more than one-half an academic year. The amount 
disbursed at one time must correspond to the borrower's educational 
expenses for the period for which the disbursement is made, and must be 
indicated by the school on the borrower's application. If the loan is 
intended for more than one-half an academic year, the school must 
indicate on the borrower's application both the approximate dates of 
disbursement and the amount the borrower will need on each such date. In 
no case may the lender disburse the proceeds earlier than is reasonably 
necessary to meet the costs of education for the period for which the 
disbursement or the loan is made.
    (g) If the lender determines that the applicant is not creditworthy, 
pursuant to paragraph (c) of this section, the lender must not approve 
the HEAL loan request. If the applicant is a student, the lender must 
notify the applicant and the applicant's school named on the application 
form of the denial of a HEAL loan, stating the reason for the denial.
    (h) The lender must report a borrower's HEAL indebtedness to one or 
more national credit bureaus within 120 days of the date the final 
disbursement on the loan is made.

(Approved by the Office of Management and Budget under control numbers 
0915-0043, 0915-0108, and 0915-0144)

[48 FR 38988, Aug. 26, 1983, as amended at 51 FR 30645, Aug. 28, 1986; 
52 FR 748, Jan. 8, 1987; 57 FR 28796, June 29, 1992; 58 FR 67349, Dec. 
21, 1993]