[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: 34CFR682.304]



[Page 685-686]

 

                           TITLE 34--EDUCATION

 

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

 

PART 682_FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM--Table of Contents

 

      Subpart C_Federal Payments of Interest and Special Allowance

 

Sec. 682.304  Methods for computing interest benefits and special 

allowance.



    (a) General. The Secretary pays a lender interest benefits and 

special allowance on eligible loans on a quarterly basis. These calendar 

quarters end on March 31, June 30, September 30, and December 31 of each 

year. A lender may use either the average daily balance method or the 

actual accrual method to determine the amount of interest benefits 

payable on a lender's loans. A lender shall use the average daily 

balance method to determine the



[[Page 686]]



balance on which the Secretary computes the amount of special allowance 

payable on its loans.

    (b) Average daily balance method for interest benefits. (1) Under 

this method, the lender adds the unpaid principal balance outstanding on 

all loans qualifying for interest benefits at each actual interest rate 

for each day of the quarter, divides the sum by the number of days in 

the quarter, and rounds the result to the nearest whole dollar. The 

resulting figure is the average daily balance for qualified loans 

outstanding at each actual interest rate.

    (2) The Secretary computes the interest benefits due on all 

qualified loans at each actual interest rate by multiplying the average 

daily balance thereof by the actual interest rate, multiplying this 

result by the number of days in the quarter, and then dividing this 

result by the actual number of days in the year.

    (c) Actual accrual method for interest benefits. (1) Under this 

method, the lender computes the total unpaid principal balance 

outstanding on all qualified loans at each actual interest rate on each 

day of the quarter, multiplies this result by the actual interest rate, 

and divides this result by the actual number of days in the year, or, 

alternatively, 365.25 days. A lender who chooses to divide by 365.25 

days must do so for four consecutive years.

    (2) The interest benefits due for a quarter equal the sum of the 

daily interest benefits due, computed under paragraph (c)(1) of this 

section, for each day of the quarter.

    (d) Average daily balance method for special allowance. (1) To 

compute the average daily balance outstanding for purposes of special 

allowance, the lender adds the unpaid principal balance outstanding on 

all qualified loans at each applicable interest rate for each day of the 

quarter, divides this sum by the number of days in the quarter, and 

rounds the result to the nearest whole dollar. The resulting figure is 

the average daily balance for the quarter for qualifying loans at each 

applicable interest rate.

    (2) The Secretary computes the special allowance payable to a lender 

based upon the average daily balance computed by the lender under 

paragraph (d)(1) of this section.



(Authority: 20 U.S.C. 1082, 1087-1)