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ments to all holders of his or her L loans must total the interest accrues during the year on all of loans, unless the borrower, in the nissory note or other written ement, agrees to make payments ng any year or any repayment pein a lesser amount.

e) Repayment schedule agreement. At t 30 and not more than 60 days be-the commencement of the repayat period, a borrower must contact holder of the loan to establish the cise terms of repayment. The borer may select a monthly repayment edule with substantially equal inilment payments or a monthly rement schedule with graduated inilment payments that increase in ount over the repayment period. If borrower does not contact the lendor holder and does not respond to tacts from the lender or holder, the der or holder may establish a onthly repayment schedule with subantially equal installment payments, bject to the terms of the borrower's CAL note.

1) Supplemental repayment agreement. A lender or holder and a borrower Ly enter into an agreement pplementing the regular repayment hedule agreement. Under a suppleental repayment agreement, the nder or holder agrees to consider that se borrower has met the terms of the gular repayment schedule as long as e borrower makes payments in acordance with the supplemental sched

le.

(2) The purpose of a supplemental reayment agreement is to permit a ender or holder, at its option, to offer borrower a repayment schedule based en other than equal or graduated paynents. (For example, a supplemental epayment agreement may base the mount of the borrower's payments on is or her income.)

(3) The supplemental schedule must Contain terms which, according to the Secretary, do not unduly burden the borrower and do not extend the Secretary's insurance liability beyond the number of years specified in paragraph (b) of this section. The supplemental schedule must be approved by the Secretary prior to the start of repayment.

(4) The lender or holder may establish a supplemental repayment agreement over the borrower's objection only if the borrower's written consent to enter into a supplemental agreement was obtained by the lender at the time the loan was made.

(5) A lender or holder may assign a loan subject to a supplemental repayment agreement only if it specifically notifies the buyer of the terms of the supplemental agreement. In such cases, the loan and the supplemental agreement must be assigned together.

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

[48 FR 38988, Aug. 26, 1983, as amended at 51 FR 30644, Aug. 28, 1986; 53 FR 6097, Feb. 29, 1988; 57 FR 28794, June 29, 1992]

§ 60.12 Deferment.

(a) After the repayment period has commenced, installments of principal and interest need not be paid during any period:

(1) During which the borrower is pursuing a full-time course of study at a HEAL school or at an institution of higher education that is a "participating school" in the Guaranteed Student Loan Program;

(2) Up to 4 years during which the borrower is a participant in an accredited internship or residency program, as described in §60.11(a)(2). For a borrower who receives his or her first HEAL loan on or after October 22, 1985, this total of 4 years for an internship or residency program includes any period of postponement of the repayment period, as described in §60.11(a)(1);

(3) Up to 3 years during which the borrower is a member of the Armed Forces of the United States;

(4) Up to 3 years during which the borrower is in service as a volunteer under the Peace Corps Act;

(5) Up to 3 years during which the borrower is a member of the National Health Service Corps; or

(6) Up to 3 years during which the borrower is a full-time volunteer under title I of the Domestic Volunteer S ice Act of 1973.

(b) For any HEAL loan received after October 22, 1985, after the re ment period has commenced, ins ments of principal

est i

not be paid during any period for up to 2 years during which the borrower is a participant in:

must at least 30 days prior to, but not more than 60 days prior to, the onset of the activity and annually thereafter. (1) A fellowship training program, submit to the lender or holder evidence which:

(1) Is directly related to the discipline for which the borrower received the HEAL loan;

(ii) Begins within 12 months after the borrower ceases to be a participant in an accredited internship or residency program, as described in §60.11(a)(2), or prior to the completion of the borrower's participation in such program; (iii) Is a full-time activity in reasearch or reserch training or health care policy;

(iv) Is not a part of, an extension of, or associated with an internship or residency program, as described in § 60.11(a)(2);

(v) Pays no stipend or one which is not more than the annual stipend level established by the Public Health Service for the payment of uniform levels of financial support for trainees receiving graduate and professional training under Public Health Service grants, as in effect at the time the borrower requests the deferment; and

(vi) Is a formally established fellowship program which was not created for a specific individual; or

(2) A full-time educational activity at an institution defined by section 435(b) of the Higher Education Act of 1965 which:

(1) Is directly related to the discipline for which the borrower received the HEAL loan;

(ii) Begins within 12 months after the borrower ceases to be a participant in an accredited internship or residency program, as described in §60.11(a)(2), or prior to the completion of the borrower's participation in such program;

(iii) Is not a part of, an extension of, or associated with an internship or residency program, as described in §60.11(a)(2); and

(iv) Is required for licensure, registration, or certification in the State in which the borrower intends to practice the discipline for which the borrower received the HEAL program loan.

(c) (1) To receive a deferment, including a deferral of the onset of the repayment period (see §60.11(a)), a borrower

ender

of his or her status in the deferment
activity and evidence that verifies
deferment eligibility of the activity 3
(with the full expectation that the bar
rower will begin the activity). It is the
responsibility of the borrower to pr
vide the lender or holder with all re
quired information or other inform-
tion regarding the requested
deferment. If written evidence that
verifies eligibility of the activity and
the borrower for the deferment, includ
ing a certification from an authorized
official (e.g., the director of the fellow-
ship activity, the dean of the school
etc.), is received by the lender or hold-
er within the required time limit, the
lender or holder must approve the
deferment. The lender or holder m
rely in good faith upon statements d'
the borrower and the authorized
cial, except where those statementi
other information conflict with inf
mation available to the lender or hold
er. When those verification statement
or other information conflict with in
formation available to the lender of
holder, to indicate that the applicant
fails to meet the requirements for
deferment, the lender or holder may
not approve the deferment until those
conflicts are resolved.

(2) For those activities described in paragraphs (b)(1) or (b)(2) of this sec tion, the borrower may request that the Secretary review a decision by the lender or holder denying the deferment by sending to the Secretary copies of the application for deferment and the lender's or holder's denial of the re quest. However, if information submitted to the lender or holder conflicts with other information available to the lender or holder, to indicate that the borrower fails to meet the require ments for deferment, the borrower may not request a review until such conflicts have been resolved. During the review process, the lender or holder must comply with any requests for information made by the Secretary. If the Secretary determines that the fel lowship or educational activity is eligi ble for deferment and so notifies the

er or holder, the lender or holder forbearance and add interest to print approve the deferment.

roved by the Office of Management and et under control numbers 0915-0034 and 0108)

R 38988, Aug. 26, 1983, as amended at 51 0644, Aug. 28, 1986; 53 FR 6097, Feb. 29, 57 FR 28795, June 29, 1992]

13 Interest.

Rate. At the lender's option, the rest rate on the HEAL loan may be ulated on a fixed rate or on a varirate basis. However, whichever hod is selected must continue over life of the loan, except where the is consolidated with another

L loan.

For all loans made on or after Ocer 22, 1985, for each calendar quarthe Secretary determines the maxIm annual HEAL interest rate by ermining the average of the bond ivalent rates reported for the 91-day . Treasury bills auctioned for the ceding calendar quarter, adding 3 centage points, and rounding that ount to the next higher one-eighth percent.

) Interest that is calculated on a ed rate basis is determined for the of the loan during the calendar rter in which the loan is executed. may not exceed the rate determined that quarter by the Secretary under agraph (a)(1) of this section.

3) Interest that is calculated on a iable rate basis varies every callar quarter throughout the life of loan as the market price of U.S. easury bills changes. For any quarit may not exceed the rate deterned by the Secretary under paraaph (a)(1) of this section.

4) The Secretary announces the rate termined under paragraph (a)(1) of is section on a quarterly basis rough a notice published in the FEDLAL REGISTER.

(b) Compounding of interest. Interest crues from the date the loan is disirsed until the loan is paid in full. npaid accrued interest shall be mpounded not more frequently than miannually and added to principal. owever, a lender or holder may postone the compounding of interest beDre the beginning of the repayment peod or during periods of deferment or

cipal at the time repayment of principal begins or resumes.

(c) Payment. Repayment of principal and interest is due when the repayment period begins. A lender or holder must permit a borrower to postpone paying interest before the beginning of the repayment period or during a period of deferment or forbearance. In these cases, payment of interest begins or resumes on the date repayment of principal begins or resumes.

(d) Usury laws. No provision of any Federal or State law that limits the rate or amount of interest payable on loans shall apply to a HEAL loan.

[48 FR 38988, Aug. 26, 1983, as amended at 51 FR 30644, Aug. 28, 1986; 57 FR 28795, June 29, 1992]

§ 60.14 The insurance premium.

(a) General. (1) The Secretary insures each lender or holder for the losses of principal and interest it may incur in the event that a borrower dies; becomes totally and permanently disabled; files for bankruptcy under chapter 11 or 13 of the Bankruptcy Act; files for bankruptcy under chapter 7 of the Bankruptcy Act and files a complaint to determine the dischargeability of the HEAL loan; or defaults on his or her loan. For this insurance, the Secretary charges the lender an insurance premium. The insurance premium is due to the Secretary on the date of disbursement of the HEAL loan.

(2) The lender may charge the bor rower an amount equal to the cost of the insurance premium. The cost of the insurance premium may be charged to the borrower by the lender in the form of a one-time special charge with no subsequent adjustments required. The lender may bill the borrower separately for the insurance premium or may deduct an amount attributable to it from the loan proceeds before the loan is disbursed. In either case, the lender must clearly identify to the borrower the amount of the insurance premium and the method of calculation.

(3) If the lender does not pay the insurance premium on or before 30 days after disbursement of the loan, a late fee will be charged on a daily basis at the same rate as the interest rate that the lender charges for the HEAL lo

for which the insurance premium is past due. The lender may not pass on this late fee to the borrower.

(4) HEAL insurance coverage ceases to be effective if the insurance premium is not paid within 60 days of the disbursement of the loan.

(5) Except in cases of error, premiums are not refundable by the Secretary, and need not be refunded by the lender to the borrower, even if the borrower graduates or withdraws from the school, defaults, dies or becomes totally and permanently disabled.

(b) Rate. The rate of the insurance premium shall not exceed the statutory maximum. The Secretary announces changes in the rate of the insurance premium through a notice published in the FEDERAL REGISTER.

(c) Method of calculation—(1) Student borrowers. For loans disbursed prior to July 22, 1986, the lender must calculate the insurance premium on the basis of the number of months beginning with the month following the month in which the loan proceeds are disbursed to the student borrower and ending 9 full months after the month of the student's anticipated date of graduation. For loans disbursed on or after July 22, 1986, the insurance premium shall be calculated as a one-time flat rate on the principal of the loan at the time of disbursement.

(2) Non-student borrowers. For loans disbursed prior to July 22, 1986, the lender must calculate the insurance premium for nonstudent borrowers on the basis of the number of months beginning with the month following the month in which the loan proceeds are disbursed to the borrower and ending at the conclusion of the month preceding the month in which repayment of principal is expected to begin or resume on the borrower's previous HEAL loans. For loans disbursed on or after July 22, 1986, the insurance premium shall be calculated as a one-time flat rate on the principal of the loan at the time of disbursement.

(3) Multiple installments. In cases where the lender disburses the loan in multiple installments, the insurance

premium is calculated for each disbursement.

[48 FR 38988, Aug. 26, 1983, as amended at 51 FR 30644 Aug. 28, 1986; 52 FR 746, Jan. 6, 1987; 56 FR 42700, Aug. 29, 1991; 57 FR 28795, June 29, 1992]

§ 60.15 Other charges to the borrower.

(a) Late charges. If the borrower fails to pay all of a required installment payment or fails to provide written evidence that verifies eligibility for the deferment of the payment within 30 days after the payment's due date, the lender or holder will require that the borrower pay a late charge. A late charge must be equal to 5 percent of the unpaid portion of the payment due.

(b) Collection charges. The lender or holder may also require that the bor rower pay the holder of the note for reasonable costs incurred by the holder or its agent in collecting any installment not paid when due. These costs may include attorney's fees, com costs, telegrams, and long-distance phone calls. The holder may not charge the borrower for the normal costs associated with preparing letters and mak ing personal and local telephone contacts with the borrower. A service agency's fee for normal servicing of s loan may not be passed on to the bor rower, either directly or indirectly. No charges, other than those authorized by this section, may be passed on to the borrower, either directly or indi rectly, without prior approval of the Secretary.

(c) Other loan making costs. A lende may not pass on to the borrower and cost of making a HEAL loan other tha the costs of the insurance premium.

[48 FR 38988, Aug. 26, 1983, as amended at FR 747, Jan. 8, 1987; 57 FR 28795, June 29, 1958

$60.16 Power of attorney.

Neither a lender nor a school may o tain a borrower's power of attorney other authorization to endorse a di bursement check on behalf of a bo rower. The borrower must persons endorse the check and may not autho ize anyone else to endorse it on his her behalf.

§60.17 Security and endorsement. (a) A HEAL loan must be made with out security.

(b) With one exception, it must also be made without endorsement. If a borrower is a minor and cannot under

State law create a legally binding obligation by his or her own signature, a lender may require an endorsement by another person on the borrower's HEAL note. For purposes of this paragraph, an "endorsement" means a signature of anyone other than the borrower who is to assume either primary or secondary liability on the note. $60.18 Consolidation of HEAL loans.

HEAL loans may be consolidated as follows provided that the lender or holder must first inform the borrower of the effect of the consolidation on the nterest rate and explain to the borower that he or she is not required to gree to the consolidation:

(a) If a lender or holder holds two or nore HEAL loans made to the same borrower, the lender or holder and the Dorrower may agree to consolidate the oans into a single HEAL loan obligalon evidenced by one promissory note. (b) A HEAL loan may be consolidated ith any other loan only if:

(1) The consolidation will not result terms less favorable to the borrower an if no consolidation had occurred, id

(2) The Federal Government does not, a result of the consolidation, become ible for any payment of principal or terest for a Guaranteed Student an under the provisions of section (0) of the Higher Education Act of $5.

pproved by the Office of Management and dget under control number 0915-0108)

FR 38988, Aug. 26, 1983, as amended at 57 28795, June 29, 1992)

0.19 Forms.

All HEAL forms are approved by the cretary and may not be changed thout prior approval by the Secary. HEAL forms shall not be signed blank by a borrower, a school, a der or holder, or an agent of any of ese. The Secretary may prescribe o must complete the forms, and en and to whom the forms must be

sent. All HEAL forms must contain a statement that any person who knowingly makes a false statement or misrepresentation in a HEAL loan transaction, bribes or attempts to bribe a Federal official, fraudulently obtains a HEAL loan, or commits any other ille

gal action in connection with a HEAL loan is subject to possible fine and imprisonment under Federal statute.

[52 FR 747, Jan. 8, 1987, as amended at 87 FR 28795. June 29, 1992)

$60.20 The Secretary's collection of forts after payment of a default claim.

After paying a default claim on a HEAL loan, the Secretary attempts to collect from the borrower and any valid endorser in accordance with the Federal Claims Collection Standards (4 CFR parts 101 through 105), the Office of Management and Budget Circular A 129, issued May 9, 1985, and the Department's Claims Collection Regulation (45 CFR part 30). The Secretary attempts collection of all unpaid principal, interest, penalties, administrative costs, and other charges or fees, except in the following situations:

(a) The borrower has a valid defense on the loan. The Secretary refrains from collection against the borrower or ondorser to the extent of any defense that the Secretary concludes is valid. Ex amples of a valid defense include expl ration of the statute of limitations and infancy.

(b) A school owes the borrower a refund for the period covered by the loan. In this situation, the Secretary refrains from collection to the extent of the unpaid refund if the borrower assigns to the Secretary the right to receive the refund.

(c) The school or lender or holder is the subject of a lawsuit or Federal administrative proceeding. In this situation, if the Secretary determines that the proceeding involves allegations that, if proven, would provide the borrower with a full or partial defense on the loan, then the Secretary may suspend collection activity on all or part of a loan until the proceeding ends. The Secretary suspends collection activity only for so long as the proceeding is being energetically prosecuted in good faith and the allegations that relate to

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