[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: 34CFR685.215]



[Page 843-844]

 

                           TITLE 34--EDUCATION

 

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

 

PART 685_WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM--Table of Contents

 

                      Subpart B_Borrower Provisions

 

Sec. 685.215  Discharge for false certification of student eligibility 

or unauthorized payment.



    (a) Basis for discharge. (1) False certification. The Secretary 

discharges a borrower's (and any endorser's) obligation to repay a 

Direct Loan in accordance with the provisions of this section if a 

school falsely certifies the eligibility of the borrower (or the student 

on whose behalf a parent borrowed) to receive the loan. The Secretary 

considers a student's eligibility to borrow to have been falsely 

certified by the school if the school--

    (i) Certified the student's eligibility for a Direct Loan on the 

basis of ability to benefit from its training and the student did not 

meet the eligibility requirements described in 34 CFR part 668 and 

section 484(d) of the Act, as applicable;

    (ii) Signed the borrower's name on the loan application or 

promissory note without the borrower's authorization; or

    (iii) Certified the eligibility of a student who, because of a 

physical or mental condition, age, criminal record, or other reason 

accepted by the Secretary, would not meet the requirements for 

employment (in the student's State of residence when the loan was 

originated) in the occupation for which the training program supported 

by the loan was intended.

    (2) Unauthorized payment. The Secretary discharges a borrower's (and 

any endorser's) obligation to repay a Direct Loan if the school, without 

the borrower's authorization, endorsed the borrower's loan check or 

signed the borrower's authorization for electronic funds transfer, 

unless the proceeds of the loan were delivered to the student or applied 

to charges owed by the student to the school.

    (b) Relief pursuant to discharge. (1) Discharge for false 

certification under paragraph (a)(1) of this section relieves the 

borrower of any past or present obligation to repay the loan and any 

accrued charges and collection costs with respect to the loan.

    (2) Discharge for unauthorized payment under paragraph (a)(2) of 

this section relieves the borrower of the obligation to repay the amount 

of the payment discharged.

    (3) The discharge under this section qualifies the borrower for 

reimbursement of amounts paid voluntarily or through enforced collection 

on the discharged loan or payment.

    (4) The Secretary does not regard a borrower who has defaulted on a 

loan discharged under this section as in default on the loan after 

discharge, and such a borrower is eligible to receive assistance under 

programs authorized by title IV of the Act.

    (5) The Secretary reports the discharge under this section to all 

credit reporting agencies to which the Secretary previously reported the 

status of the loan.

    (c) Borrower qualification for discharge. In order to qualify for 

discharge under this section, the borrower shall submit to the Secretary 

a written request and a sworn statement, and the factual assertions in 

the statement must be true. The statement need not be notarized but must 

be made by the borrower under penalty of perjury. In the statement, the 

borrower shall meet the requirements in paragraphs (c) (1) through (5) 

of this section.

    (1) Ability to benefit. In the case of a borrower requesting a 

discharge based on defective testing of the student's ability to 

benefit, the borrower shall state that the borrower (or the student on 

whose behalf a parent borrowed)--

    (i) Received a disbursement of a loan, in whole or in part, on or 

after January 1, 1986 to attend a school; and

    (ii) Received a Direct Loan at that school on the basis of an 

ability to benefit from the school's training and did not meet the 

eligibility requirements described in 34 CFR part 668 and section 484(d) 

of the Act, as applicable;

    (2) Unauthorized loan. In the case of a borrower requesting a 

discharge because the school signed the borrower's



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name on the loan application or promissory note without the borrower's 

authorization, the borrower shall--

    (i) State that he or she did not sign the document in question or 

authorize the school to do so; and

    (ii) Provide five different specimens of his or her signature, two 

of which must be within one year before or after the date of the 

contested signature.

    (3) Unauthorized payment. In the case of a borrower requesting a 

discharge because the school, without the borrower's authorization, 

endorsed the borrower's loan check or signed the borrower's 

authorization for electronic funds transfer, the borrower shall--

    (i) State that he or she did not endorse the loan check or sign the 

authorization for electronic funds transfer or authorize the school to 

do so;

    (ii) Provide five different specimens of his or her signature, two 

of which must be within one year before or after the date of the 

contested signature;

    (iii) State that the proceeds of the contested disbursement were not 

delivered to the student or applied to charges owed by the student to 

the school.

    (4) Claim to third party. The borrower shall state whether the 

borrower (or student) has made a claim with respect to the school's 

false certification or unauthorized payment with any third party, such 

as the holder of a performance bond or a tuition recovery program, and, 

if so, the amount of any payment received by the borrower (or student) 

or credited to the borrower's loan obligation.

    (5) Cooperation with Secretary. The borrower shall state that the 

borrower (or student)--

    (i) Agrees to provide to the Secretary upon request other 

documentation reasonably available to the borrower that demonstrates 

that the borrower meets the qualifications for discharge under this 

section; and

    (ii) Agrees to cooperate with the Secretary in enforcement actions 

as described in Sec. 685.214(d) and to transfer any right to recovery 

against a third party to the Secretary as described in Sec. 685.214(e).

    (6) Discharge without an application. The Secretary may discharge a 

loan under this section without an application from the borrower if the 

Secretary determines, based on information in the Secretary's 

possession, that the borrower qualifies for a discharge.

    (d) Discharge procedures. (1) If the Secretary determines that a 

borrower's Direct Loan may be eligible for a discharge under this 

section, the Secretary mails the borrower a disclosure application and 

an explanation of the qualifications and procedures for obtaining a 

discharge. The Secretary also promptly suspends any efforts to collect 

from the borrower on any affected loan. The Secretary may continue to 

receive borrower payments.

    (2) If the borrower fails to submit the written request and sworn 

statement described in paragraph (c) of this section within 60 days of 

the Secretary's mailing the disclosure application, the Secretary 

resumes collection and grants forbearance of principal and interest for 

the period in which collection activity was suspended. The Secretary may 

capitalize any interest accrued and not paid during that period.

    (3) If the borrower submits the written request and sworn statement 

described in paragraph (c) of the section, the Secretary determines 

whether to grant a request for discharge under this section by reviewing 

the request and sworn statement in light of information available from 

the Secretary's records and from other sources, including guaranty 

agencies, State authorities, and cognizant accrediting associations.

    (4) If the Secretary determines that the borrower meets the 

applicable requirements for a discharge under paragraph (c) of this 

section, the Secretary notifies the borrower in writing of that 

determination.

    (5) If the Secretary determines that the borrower does not qualify 

for a discharge, the Secretary notifies the borrower in writing of that 

determination and the reasons for the determination.



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

1845-0021)



(Authority: 20 U.S.C. 1087a et seq.)



[59 FR 61690, Dec. 1, 1994, as amended at 59 FR 66134, Dec. 22, 1994; 61 

FR 29900, June 12, 1996; 64 FR 58972, Nov. 1, 1999; 65 FR 65622, Nov. 1, 

2000. Redesignated and amended at 65 FR 65629, Nov. 1, 2000; 66 FR 

34765, June 29, 2001]



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