[Code of Federal Regulations]

[Title 34, Volume 3]

[Revised as of July 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 34CFR668.25]



[Page 434-436]

 

                           TITLE 34--EDUCATION

 

 CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION

 

PART 668_STUDENT ASSISTANCE GENERAL PROVISIONS--Table of Contents

 

     Subpart B_Standards for Participation in Title IV, HEA Programs

 

Sec. 668.25  Contracts between an institution and a third-party servicer.



    (a) An institution may enter into a written contract with a third-

party servicer for the administration of any aspect of the institution's 

participation in any Title IV, HEA program only to the extent that the 

servicer's eligibility to contract with the institution has not been 

limited, suspended, or terminated under the proceedings of subpart G of 

this part.

    (b) Subject to the provisions of paragraph (d) of this section, a 

third-party servicer is eligible to enter into a written contract with 

an institution for the administration of any aspect of the institution's 

participation in any Title IV, HEA program only to the extent that the 

servicer's eligibility to contract with the institution has not been 

limited, suspended, or terminated under the proceedings of subpart G of 

this part.

    (c) In a contract with an institution, a third-party servicer shall 

agree to--

    (1) Comply with all statutory provisions of or applicable to Title 

IV of the HEA, all regulatory provisions prescribed under that statutory 

authority, and all special arrangements, agreements, limitations, 

suspensions, and terminations entered into under the authority of 

statutes applicable to Title IV of the HEA, including the requirement to 

use any funds that the servicer administers under any Title IV, HEA 

program and any interest or other earnings thereon solely for the 

purposes specified in and in accordance with that program;

    (2) Refer to the Office of Inspector General of the Department of 

Education for investigation any information indicating there is 

reasonable cause to believe that the institution might have engaged in 

fraud or other criminal misconduct in connection with the institution's 

administration of any Title IV, HEA program or an applicant for Title 

IV, HEA program assistance might have engaged in fraud or other criminal 

misconduct in connection with his or her application. Examples of the 

type of information that must be referred are--

    (i) False claims by the institution for Title IV, HEA program 

assistance;

    (ii) False claims of independent student status;

    (iii) False claims of citizenship;

    (iv) Use of false identities;

    (v) Forgery of signatures or certifications; and

    (vi) False statements of income;

    (3) Be jointly and severally liable with the institution to the 

Secretary for any violation by the servicer of any statutory provision 

of or applicable to Title IV of the HEA, any regulatory provision 

prescribed under that statutory authority, and any applicable special 

arrangement, agreement, or limitation entered into under the authority 

of statutes applicable to Title IV of the HEA;

    (4) In the case of a third-party servicer that disburses funds 

(including funds received under the Title IV, HEA programs) or delivers 

Federal Stafford Loan Program proceeds to a student--

    (i) Confirm the eligibility of the student before making that 

disbursement



[[Page 435]]



or delivering those proceeds. This confirmation must include, but is not 

limited to, any applicable information contained in the records required 

under Sec. 668.24; and

    (ii) Calculate and return any unearned title IV, HEA program funds 

to the title IV, HEA program accounts and the student's lender, as 

appropriate, in accordance with the provisions of Sec. Sec. 668.21 and 

668.22, and applicable program regulations; and

    (5) If the servicer or institution terminates the contract, or if 

the servicer stops providing services for the administration of a Title 

IV, HEA program, goes out of business, or files a petition under the 

Bankruptcy Code, return to the institution all--

    (i) Records in the servicer's possession pertaining to the 

institution's participation in the program or programs for which 

services are no longer provided; and

    (ii) Funds, including Title IV, HEA program funds, received from or 

on behalf of the institution or the institution's students, for the 

purposes of the program or programs for which services are no longer 

provided.

    (d) A third-party servicer may not enter into a written contract 

with an institution for the administration of any aspect of the 

institution's participation in any Title IV, HEA program, if--

    (1)(i) The servicer has been limited, suspended, or terminated by 

the Secretary within the preceding five years;

    (ii) The servicer has had, during the servicer's two most recent 

audits of the servicer's administration of the Title IV, HEA programs, 

an audit finding that resulted in the servicer's being required to repay 

an amount greater than five percent of the funds that the servicer 

administered under the Title IV, HEA programs for any award year; or

    (iii) The servicer has been cited during the preceding five years 

for failure to submit audit reports required under Title IV of the HEA 

in a timely fashion; and

    (2)(i) In the case of a third-party servicer that has been subjected 

to a termination action by the Secretary, either the servicer, or one or 

more persons or entities that the Secretary determines (under the 

provisions of Sec. 668.15) exercise substantial control over the 

servicer, or both, have not submitted to the Secretary financial 

guarantees in an amount determined by the Secretary to be sufficient to 

satisfy the servicer's potential liabilities arising from the servicer's 

administration of the Title IV, HEA programs; and

    (ii) One or more persons or entities that the Secretary determines 

(under the provisions of Sec. 668.15) exercise substantial control over 

the servicer have not agreed to be jointly or severally liable for any 

liabilities arising from the servicer's administration of the Title IV, 

HEA programs and civil and criminal monetary penalties authorized under 

Title IV of the HEA.

    (e)(1)(i) An institution that participates in a Title IV, HEA 

program shall notify the Secretary within 10 days of the date that--

    (A) The institution enters into a new contract or significantly 

modifies an existing contract with a third-party servicer to administer 

any aspect of that program;

    (B) The institution or a third-party servicer terminates a contract 

for the servicer to administer any aspect of that program; or

    (C) A third-party servicer that administers any aspect of the 

institution's participation in that program stops providing services for 

the administration of that program, goes out of business, or files a 

petition under the Bankruptcy Code.

    (ii) The institution's notification must include the name and 

address of the servicer.

    (2) An institution that contracts with a third-party servicer to 

administer any aspect of the institution's participation in a Title IV, 

HEA program shall provide to the Secretary, upon request, a copy of the 

contract, including any modifications, and provide information 

pertaining to the contract or to



[[Page 436]]



the servicer's administration of the institution's participation in any 

Title IV, HEA program.



(Approved by the Office of Management and Budget under control number 

1840-0537)



(Authority: 20 U.S.C. 1094)



[59 FR 22441, Apr. 29, 1994, as amended at 59 FR 34964, July 7, 1994; 61 

FR 60492, Nov. 27, 1996; 63 FR 40624, July 29, 1998; 64 FR 59042, Nov. 

1, 1999]