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default claim. The Secretary may excuse certain defects if the holder submitting the default claim satisfies the Secretary that the defect did not contribute to the default or prejudice the Secretary's attempt to collect the loan from the borrower. The Secretary may also excuse certain defects if the defect arose while the loan was held by another lender or holder and the holder submitting the default claim satisfies the Secretary that the assignment of the loan was an arm's length transaction, that the present holder did not know of the defect at the time of the sale and that the present holder could not have become aware of the defect through an examination of the loan documents.

(e) Payment of insured interest. The payment on an approved claim covers the unpaid principal balance and interest that accrues through the date the claim is paid, except:

(1) If the lender or holder failed to submit a claim within the required period after the borrower's default; death; total and permanent disability; or filing of a petition in bankrupty under chapter 11 or 13 of the Bankruptcy Act, or under chapter 7 where the borrower files a complaint to determine the dischargeability of the HEAL loan; the Secretary does not pay interest that accrued between the end of that period and the date the Secretary received the claim.

(2) If the Secretary returned the claim to the lender or holder for additional documentation necessary for the approval of the claim, the Secretary pays interest only for the first 30 days following the return of the claim to the lender or holder.

[48 FR 38988, Aug. 26, 1983, as amended at 56 FR 42702, Aug. 29, 1991; 57 FR 28798, June 29, 1992]

$60.42 Records, reports, inspection,

and audit requirements for HEAL lenders and holders.

(a) Records. (1) A lender or holder must keep complete and accurate records of each HEAL loan which it holds. The records must be organized in a way that permits them to be easily retrievable and allows the ready identification of the current status of each loan. The required records include:

(i) The loan application;

(ii) The original promissory note; (iii) The repayment schedule agreement;

(iv) Evidence of each disbursement of loan proceeds;

(v) Notices of changes in a borrower's address and status as a full-time student;

(vi) Evidence of the borrower's eligibility for a deferment;

(vii) The borrower's signed statement describing his or her rights and responsibilities in connection with a HEAL loan;

(viii) The documents required for the exercise of forbearance;

(ix) Documentation of the assignment of the loan; and

(x) Evidence of a borrower's creditworthiness, including the borrower's credit report.

(2) The lender or holder must maintain for each borrower a payment history showing the date and amount of each payment received on the borrower's behalf, and the amounts of each payment attributable to principal and interest. A lender or holder must also maintain for each loan a collection history showing the date and subject of each communication with a borrower or endorser for collection of a delinquent loan. Furthermore, a lender or holder must keep any additional records which are necessary to make any reports required by the Secretary.

(3) A lender or holder must retain the records required for each loan for not less than 5 years following the date the loan is repaid in full by the borrower. However, in particular cases the Secretary may require the retention of records beyond this minimum period. A lender or holder must keep the original copy of an unpaid promissory note, but may store all other records in microform or computer format.

(4) The lender or holder must maintain accurate and complete records on each HEAL borrower and related school activities required by the HEAL program. All HEAL records shall be maintained under security and protected from fire, flood, water leakage, other environmental threats, electronic data system failures or power fluctuations, unauthorized intrusion for use, and theft.

(b) Reports. A lender or holder must submit reports to the Secretary at the time and in the manner required by the Secretary.

(c) Inspections. Upon request, a lender or holder must afford the Secretary, the Comptroller General of the United States, and any of their authorized representatives access to its records in order to assure the correctness of its reports.

(d) The lender or holder must comply with the Department's biennial audit requirements of section 705 of the Act.

(e) Any lender or holder who has information which indicates potential or actual commission of fraud or other offenses against the United States, involving these loan funds, must promptly provide this information to the appropriate Regional Office of Inspector General for Investigations.

(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 52 FR 750, Jan. 8, 1987; 57 FR 28798, June 29, 1992]

§ 60.43 Limitation, suspension, or termination of the eligibility of a HEAL lender or holder.

(a) The Secretary may limit, suspend, or terminate the eligibility under the HEAL program of an otherwise eligible lender or holder that violates or fails to comply with any provision of title VII, part A, subpart I of the Act as amended (42 U.S.C. 292–292p), these regulations, or agreements with the Secretary concerning the HEAL program. Prior to terminating a lender or holder's participation in the program, the Secretary will provide the entity an opportunity for a hearing in accordance with the procedures under paragraph (b) of this section.

(b) The Secretary will provide any lender or holder subject to termination with a written notice, sent by certified mail, specifying his or her intention to terminate the lender or holder's participation in the program and stating that the entity may request, within 30 days of the receipt of this notice, a formal hearing. if the entity requests a hearing, it must, within 90 days of the receipt of the notice, submit material, factual issues in dispute to demonstrate that there is cause for a hear

ing. These issues must be both substantive and relevant. The hearing will be held in the Washington, DC metropolitan area. The Secretary will deny a hearing if:

(1) The request for a hearing is untimely (i.e., fails to meet the 30-day requirement);

(2) The lender or holder does not provide a statement of material, factual issues in dispute within the 90-day required period; or

(3) The statement of factual issues in dispute is frivolous or inconsequential. In the event that the Secretary denies a hearing, the Secretary will send a written denial, by certified mail, to the lender or holder setting forth the reasons for denial. If a hearing is denied, or if as a result of the hearing, termination is still determined to be necessary, the lender or holder will be terminated from participation in the program. An entity will be permitted to reapply for participation in the program when it demonstrates, and the Secretary agrees, that it is in compliance with all HEAL requirements.

(c) This section does not apply to a determination that a HEAL lender fails to meet the statutory definition of an "eligible lender."

(d) This section also does not apply to administrative action by the Department of Health and Human Services based on any alleged violation of:

(1) Title VI of the Civil Rights Act of 1964, which is governed by 45 CFR part 80;

(2) Title IX of the Education Amendments of 1972, which is governed by 45 CFR part 86;

(3) The Family Educational Rights and Privacy Act of 1974 (section 438 of the General Education Provisions Act, as amended), which is governed by 34 CFR part 99; or

(4) Title XI of the Right to Financial Privacy Act of 1978, Pub. L. 95-630 (12 U.S.C. 3401-3422).

(Approved by the Office of Management and Budget under control number 0915-0144)

[48 FR 38988, Aug. 26, 1983, as amended at 57 FR 28799, June 29, 1992; 58 FR 67349, Dec. 21, 1993]

Subpart E-The School

$60.50 Which schools are eligible to be HEAL schools?

(a) In order to participate in the HEAL program, a school must enter into a written agreement with the Secretary. In the agreement, the school promises to comply with provisions of the HEAL law and the HEAL regulations. For initial entry into this agreement and for the agreement to remain in effect, a school must satisfy the following requirements:

(1) The school must be legally authorized within a State to conduct a course of study leading to one of the following degrees:

Doctor of Medicine

Doctor of Osteopathic Medicine

Doctor of Dentistry or equivalent degree Bachelor or Master of Science in Pharmacy

or equivalent degree

Doctor of Optometry or equivalent degree Doctor of Veterinary Medicine or equivalent degree

Doctor of Podiatric Medicine or equivalent degree

Graduate or equivalent degree in Public Health

Doctor of Chiropractic or equivalent degree Doctoral degree of Clinical Psychology Masters or doctoral degree in Health Administration

For the purposes of this section, the term "State" includes, in addition to the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands, Guam, American Samoa, the Trust Territory of the Pacific Islands (the Republic of Palau), the Republic of the Marshall Islands, and the Federated States of Micronesia.

(2)(i) The school must be accredited by a recognized agency approved for that course of study by the Secretary of Education, as described in paragraph (a)(2)(ii) of this section, except where a school is not eligible for accreditation solely because it is too new. A new school is eligible if the Secretary of Education determines that it can reasonably expect to be accredited before the beginning of the academic year following the normal graduation date of its first entering class. The Secretary of Education makes this determination after consulting with the appropriate

accrediting agency and receiving reasonable assurance to that effect.

(ii) The approved accrediting agencies are:

(A) Liaison Committee on Medical Education.

(B) American Osteopathic Association.

(C) Commission on Dental Accreditation.

(D) Council on Education of American Veterinary Medical Association. (E) Council on Optometric Education. (F) Council on Podiatric Medical Education.

(G) American Council on Pharmaceutical Education.

(H) Council on Education for Public Health.

(I) Council on Chiropractic Education.

(J) Accrediting Commission on Education for Health Services Administration.

(K) Committee on Accreditation of American Psychological Association.

(b) If a HEAL school undergoes a change of controlling ownership or form of control, its agreement automatically expires at the time of that change. The school must enter into a new agreement with the Secretary in order to continue its participation in the HEAL program.

[48 FR 38988, Aug. 26, 1983, as amended at 52 FR 751, Jan. 8, 1987; 57 FR 28799, June 29, 1992] $60.51 The student loan application.

When the student completes his or her portion of the student loan application and submits it to the school, the school must do the following:

(a) Accurately and completely fill out its portion of the HEAL application;

(b) Verify, to the best of its ability, the information provided by the student on the HEAL application, including, but not limited to, citizenship status and Social Security number. To comply with this requirement, the school may request that the student provide a certified copy of his or her birth certificate, his or her naturalization papers, and an original Social Security card or copy issued by the Federal Government, or other documentation that the school may require. The school must assure that the applicant's

I-151 or I-551 is attached to the application, if the applicant is required to possess such identification by the United States;

(c) Certify that the student is eligible to receive a HEAL loan, according to the requirements of § 60.5;

(d) Review the financial aid transcript from each institution previously attended by the applicant on at least a half-time basis to determine whether the applicant is in default on any loans or owes a refund on any grants. The school may not approve the HEAL application or disburse HEAL funds if the borrower is in default on any loans or Owes a refund on any educational grants, unless satisfactory arrangements have been made between the borrower and the affected lender or school to resolve the default or the refund on the grant. If the financial aid transcript has been requested, but has not been received at the time the applicant submits his or her first HEAL application, the school may approve the application and disburse the first HEAL installment prior to receipt of the transcript. Each financial aid transcript must include at least the following data:

(1) Student's name;

(2) Amounts and sources of loans and grants previously received by the student for study at an institution of higher education;

(3) Whether the student is in default on any of these loans, or owes a refund on any grants;

(4) Certification from each institution attended by the student that the student has received no financial aid, if applicable; and

(5) From each institution attended, the signature of an official authorized by the institution to sign such transcripts on behalf of the institution.

(e) State that it has no reason to believe that the borrower may not be willing to repay the HEAL loan;

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provable, the school will calculate the difference between:

(1) The total financial resources available to the applicant for his or her costs of education for the period covered by the proposed HEAL loan, and other student aid that the applicant has received or will receive during the period covered by the proposed HEAL loan. To determine the total financial resources available to the applicant for his or her costs of education for the period covered by the proposed HEAL loan (including familial, spousal, or personal income or other financial assistance that the applicant has received or will receive), the school must consider information provided through one of the national need analysis systems or any other procedure approved by the Secretary of Education, in addition to any other information which the school has regarding the student's financial situation. The school may make adjustments to the need analysis information only when necessary to accurately reflect the applicant's actual resources, and must maintain in the borrower's record documentation to support the basis for any adjustments to the need analysis information; and

(2) The costs reasonably necessary for each student to pursue the same or similar curriculum or program within the same class year at the school for the period covered by the proposed HEAL loan, using a standard student budget. The school must maintain in its general office records the criteria used to develop each standard student budget. Adjustments to the standard student budget may be made only to the extent that they are necessary for the student to complete his or her education, and documentation must be maintained in the borrower's record to support the basis for any adjustments to the standard student budget.

(g) Comply with the requirements of § 60.61.

(Approved by the Office of Management and Budget under control numbers 0915-0038 and 0915-0108)

[52 FR 751, Jan. 8, 1987, as amended at 57 FR 28799, June 29, 1992]

§ 60.52 The student's loan check.

(a) When a school receives from a HEAL lender a loan disbursement

check or draft payable jointly to the school and to one of its students, it must:

(1) If the school receives the instrument after the student is enrolled, obtain the student's endorsement, retain that portion of funds due the school, and disburse the remaining funds to the student.

(2) If the school receives the instrument before the student is enrolled, it must, prior to endorsing the instrument, send the instrument to the student to endorse and return to the school. The school may then retain that portion of funds then due the school but must hold the remaining funds for disbursement to the student at the time of enrollment. However, if the student is unable to meet other educational expenses due before the time of enrollment, the school may obtain the student's endorsement and disburse to the student that portion of funds required to meet these other educational expenses.

(b) If a school determines that a student does not plan to enroll, the school must return a loan disbursement check or draft to the lender within 30 days of this determination.

[48 FR 38988, Aug. 26, 1983, as amended at 52 FR 751, Jan. 8, 1987]

§60.53

Notification to lender or holder of change in enrollment status. Each school must notify the holder of a HEAL loan of any change in the student's enrollment status within 30 days following the change in status. Each notice must contain the student's full name under which the loan was received, the student's current name (if different), the student's Social Security number, the date of the change in the enrollment status, or failure to enroll as scheduled for any academic period as a full-time student, the student's latest known permanent and temporary addresses, and other information which the school may decide is necessary to identify or locate the student. If the school does not know the identity of the current holder of the HEAL loan, it must notify the HEAL Program Office of a change in the student's enrollment status. This notification is not required for vacation periods and leaves of absence or other tem

porary interruptions which do not exceed one academic term.

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

[52 FR 751, Jan. 8, 1987, as amended at 57 FR 28799, June 29, 1992]

$60.54 Payment of refunds by schools.

A participating school must pay that portion of a refund that is allocable to a HEAL loan directly to the original lender (or to a subsequent holder of the loan note, if the school has knowledge of the holder's identity). At the same time, the school must provide to the borrower written notice that it is doing

So.

(Approved by the Office of Management and Budget under control number 0915-0108) [48 FR 38988, Aug. 26, 1983, as amended at 57 FR 28799, June 26, 1992]

§ 60.55 Administrative and fiscal procedures.

Each school must establish and maintain administrative and fiscal procedures necessary to achieve the following objectives:

(a) Proper and efficient administration of the funds received from students who have HEAL loans;

(b) Protection of the rights of students under the HEAL program;

(c) Protection of the United States from unreasonable risk of loss due to defaults; and

(d) Compliance with applicable requirements for HEAL schools.

$60.56 Records.

(a) In addition to complying with the requirements of section 739(b) of the Act, each school must maintain an accurate, complete, and easily retrievable record with respect to each stuIdent who has a HEAL loan. The record must contain all of the following information:

(1) Student's name, address, academic standing and period of attendance;

(2) Name of the HEAL lender, amount of the loan, and the period for which the HEAL loan was intended;

(3) If a noncitizen, documentation of the student's alien registration status. (4) Amount and source of other financial assistance received by the student

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