[Code of Federal Regulations]
[Title 34, Volume 3]
[Revised as of July 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 34CFR682.412]

[Page 771-772]
 
                           TITLE 34--EDUCATION
 
 CHAPTER VI--OFFICE OF POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION
 
PART 682_FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM--Table of Contents
 
 Subpart D_Administration of the Federal Family Education Loan Programs 
                          by a Guaranty Agency
 
Sec. 682.412  Consequences of the failure of a borrower or student to 

establish eligibility.

    (a) The lender shall immediately send to the borrower a final demand 
letter meeting the requirements of Sec. 682.411(f) when it learns and 
can substantiate that the borrower or the student on whose behalf a 
parent has borrowed, without the lender or school's knowledge at the 
time the loan was made, provided false or erroneous information or took 
actions that caused the student or borrower--
    (1) To be ineligible for all or a portion of a loan made under this 
part;
    (2) To receive a Stafford loan subject to payment of Federal 
interest benefits as provided under Sec. 682.301 for which he or she 
was ineligible; or
    (3) To receive loan proceeds for a period of enrollment from which 
he or she has withdrawn or been expelled prior to the first day of 
classes or during which he or she failed to attend school and has not 
paid those funds to the school or repaid them to the lender.
    (b) The lender shall neither bill the Secretary for nor be entitled 
to interest benefits on a loan after it learns that one of the 
conditions described in paragraph (a) of this section exists with 
respect to the loan.
    (c) In the final demand letter transmitted under paragraph (a) of 
this section, the lender shall demand that within 30 days from the date 
the letter is mailed the borrower repay in full any principal amount for 
which the borrower is ineligible and any accrued interest, including 
interest and all special allowance paid by the Secretary.
    (d) If the borrower repays the amounts described in paragraph (c) of 
this section within the 30-day period, the lender shall--

[[Page 772]]

    (1) On its next quarterly interest billing submitted under Sec. 
682.305, refund to the Secretary the interest benefits and special 
allowance repaid by the borrower and all other interest benefits and 
special allowance previously paid by the Secretary on the ineligible 
portion of the loan; and
    (2) Treat that payment of the principal amount of the ineligible 
portion of the loan as a prepayment of principal.
    (e) If a borrower fails to comply with the terms of a final demand 
letter described in paragraph (a) of this section, the lender shall 
treat the entire loan as in default, and--
    (1) With its next quarterly interest billing submitted under Sec. 
682.305, refund to the Secretary the amount of the interest benefits 
received from the Secretary on the ineligible portion of the loan, 
whether or not repaid by the borrower; and
    (2) Within the time specified in Sec. 682.406(a)(5), file a default 
claim thereon with the guaranty agency for the entire unpaid balance of 
principal and accrued interest.

(Approved by the Office of Management and Budget under control number 
1840-0538)

(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082, 1087-1)

[57 FR 60323, Dec. 18, 1992, as amended at 58 FR 9120, Feb. 19, 1993; 60 
FR 61757, Dec. 1, 1995; 64 FR 58632, Oct. 29, 1999]