(b) Determination of Need. In determining a student's need for a loan from the Fund, the institution shall where appropriate take into consideration (1) the income, assets, and resources of the applicant, (2) the income, assets, and resources of the applicant's family, and (3) the cost reasonably necessary for the student's attendance at the institution, including any special needs and obligations which directly affect the student's financial ability to attend such institution. All determination of need shall be made in accordance with the policies and procedures established by the institution and made a part of the agreement for Federal capital contributions.

(c) Limitations Governing Maximum Amount of Loans. In accordance with section 205 (a) of the Act (1) the loans advanced from any Fund or Funds to a student for any "academic year or its equivalent" (as defined in section 144.2 (24) may not exceed a total of $2,500 in the case of a professional or graduate student, $1,000 in the case of all other students; and (2) the total of all such loans to a student (regardless of the nature of his enrollment when received) may not exceed $10,000 in the case of a graduate or professional student and $5,000 in the case of all other students. This statutory limit on the amount of loans which may be made in any "academic year or its equivalent" will be complied with if either (1) not more than $2,500 is advanced to a professional or graduate student or $1,000 to any other student during any 12 month school period (normally beginning in September) or (2) the total of the sums advanced to a student during any such period does not exceed an amount which bears the same ratio to the number of credit hours for which the student borrower is registered during such period as $1,000 (or $2,500, in the case of a graduate or professional student) multiplied by the sum of the academic years or their equivalent leading to the degree or certificate bears to the total sum of credit hours required to earn such a degree.

(d) Selection-In General. Loans from the Fund shall be made reasonably available (to the extent permitted by the Fund and subject to the provisions of section 204 (4) of the Act) to all eligible applicants. In the event applications exceed available funds, the order of selection shall be made on the basis of objective criteria established by the institution and made a part of the agreement for Federal capital contributions.

(e) Selection-Non-discrimination. No eligible applicant shall be denied a student loan from the Fund on account of sex, race, creed, color, or national origin.

(f) Selection-Special Considerations. In the selection of students to receive loans from the Fund, special consideration shall be given to students with superior academic backgrounds.

(g) Records of Approval or Disapproval. The records of the institution shall indicate the basis of approval or disapproval (including any special consideration given) of all or any part of each student application for a loan.

Sec. 1448 Advancement and Repayment of Loans

(a) Evidence of Indebtedness; Note. All loans shall be evidenced by a promisory note executed by a student borrower which shall be in a form meeting the requirements of section 205(b) of the Act. The Commissioner shall from time to time make available a promissory

note form which meets the statutory requirements. Except for a provision reflecting an institution's election to require security or endorsement in cases permitted under subparagraph (b) of this section, any substantive deviation from the provisions of the most current promissory note form made available by the Commissioner must be approved by the Commissioner prior to the making of any loans to be evidenced thereby. A copy of every executed note shall be supplied to the student maker thereof.

(b) Security. Neither security nor endorsement may be required except that, if the borrower is a minor and if under the State law the note executed by him would not create a binding obligation, the institution is permitted to require security or endorsement.

(c) Repayment. The note evidencing the loan shall provide for repayment of the principal amount, together with interest thereon, in equal installments (or, if the borrower so requests, in graduated periodic installments determined in accordance with such schedules as may be approved by the Commissioner) payable quarterly, bimonthly, or monthly (at the option of the institution) over a period beginning nine months after the date on which the borrower ceases to carry, at an institution of higher education or at a comparable institution outside the States approved for this purpose by the Commissioner, at least one-half the normal full-time academic workload as determined by the institution in which he is enrolled, and ending ten years and nine months after such date. Selection of a repayment plan shall be made prior to the date on which the student ceases to be enrolled on at least a half-time basis at the lending institution. (d) Accelerated Repayments. Any student borrower may, at his option, and without penalty, prepay all or any part of the principal and accrued interest at any time.

(e) Minimum Rate of Repayment. The institution may provide, if the schedule adopted pursuant to subparagraph (c) provides for repayments at a rate of less than $15 per month, and if the total of repayments required of the student on all loans made pursuant to this Part does not exceed the rate of $15 per month, that during the repayment period of the loan, payments of principle and interest by the borrower with respect to all the outstanding loans made to him from loan funds established pursuant to this Part shall be at a rate equal to not less than $15 per month.

(f) Deferment of Repayment. Interest shall not accrue on any such loan, and installments need not be paid during any period (i) during which the borrower is carrying, at an institution of higher education or at a comparable institution outside the States approved for this purpose by the Commissioner, at least one-half the normal full-time academic workload as determined by the institution, (ii) not in excess of three years, during which the borrower is a member of the Armed Forces of the United States, and (iii) not in excess of three years during which the borrower is in service either as a volunteer under the Peace Corps Act, or a volunteer (VISTA) under section 603 of the Economic Opportunity Act of 1964; except that this provision does not apply to any loan outstanding on the effective dates of the Peace Corps Act or the Economic Opportunity Act of 1964 unless with the consent of the then obligee institution. Any such period

shall not be included in determining the ten-year period in which the repayment must be completed. The institution may also provide that installments need not be paid during any period or periods, aggregating not in excess of three years, during which the borrower is in less than half-time attendance at an institution of higher education taking courses which are creditable toward a degree, and may also provide that any such period shall not be included in determining the ten-year period during which the repayment must be completed, but interest shall continue to accrue during any such period.

(g) Revision of Repayment Schedule. In the event that a student who has borrowed from the Fund is unable, due to extraordinary circumstances, to comply with his obligations in regard thereto, he may make application to the institution to whose Fund he is indebted for revision of his schedule of repayment. Such application shall be reviewed by the institution for determination as to appropriate action to be taken and, where the action taken by the institution involves an extension beyond the ten-year period pursuant to section 205(b) (2) (C) of this Act, such action shall be reported to the Commissioner.

(h) Late Payment Charges. An institution may assess a charge with respect to a loan from the loan fund established by the institution pursuant to this Part for failure of the borrower to pay all or any part of an installment when it is due and, in the case of a borrower who is entitled to deferment benefits under section 205 (b) (2) of the Act, or cancellation benefits under section 205 (b) (3) of the Act, for any failure to file timely and satisfactory evidence of such charge may not exceed

(1) in the case of a loan which is repayable in monthly installments, $1 for the first month or part of a month by which such installment or evidence is late and $2 for each such month or part of a month thereafter; and

(2) in the case of a loan which has a bimonthly or quarterly repayment interval, $3 and $6 respectively, for each interval or part thereof by which such installment or evidence is late. The institution may determine the time of assessment and collection of any such charges, except that no such charge may be added to the principal amount of the loan prior to the first day after the day on which such installment or evidence was due, and if not added to the principal amount of the loan, no such charge shall become payable prior to the due date of the next installment after receipt by the borrower of written notice thereof.

(i) Teacher Cancellation. (1) For service as a full-time teacher in a public or other nonprofit elementary or secondary school in a State, in an institution of higher education, or in the elementary or secondary school overseas of the Armed Forces of the United States, except for any academic year for which a borrower is entitled to cancellation pursuant to subparagraph 2, there shall be cancelled, at the rate of 10 per centum of the total amount of his loan plus interest thereon for each complete academic year or its equivalent (as defined in section 144.2(24)) of such service, an amount not to exceed 50 per centum of the total amount of his loan plus interest thereon.

(2) Commencing with the school year 1966-67, for service as a full-time teacher in a public or other nonprofit elementary or secondary

school which is in the school district of a local educational agency eligible in that year for assistance pursuant to Title II of Public Law 874, 81st Congress, as amended, and which for the purpose of this section and for that year has been determined by the Commissioner to be a school with a high concentration of students from low-income families (as determined in accordance with 45 CFR 116.4-Financial Assistance to Local Educational Agencies for the Education of Children of Low-Income Families), a borrower may cancel his loan at the rate of 15 per centum of the total amount of his loan plus interest thereon for each complete academic year or its equivalent (as defined in section 144.2 (24)) of such service. The Commissioner's determination shall be based upon a ranking of such schools with a high concentration of students from low-income families, submitted by the State educational agency for the State in which the school is located, but in no event shall include more than 25 per centum of the total of the public and other nonprofit elementary and secondary schools of that State. Schools in eligible school districts shall be ranked on the basis of objective standards and methods approved by the Commissioner which take into account the numbers and percentages of students from low-income families in attendance in such schools. With respect to each school year, the Commissioner shall make available to each State educational agency a list of schools which have been determined to be those with a high concentration of students from low-income families.

(3) Nothing in this subsection authorizes the refunding of any payment.

Sec. 144.9 Oath or Affirmation.

In conformity with section 1001 (f) of the Act, no loan shall be made or funds advanced to any individual unless during the school year in which the loan or advance is made such individual has taken and subscribed to an oath or affirmation in the following form:

I do solemnly swear (or affirm) that I bear true faith and allegiance to the United States of America and will support and defend the Constitution and laws of the United States against all its enemies, foreign and domestic.

Sec. 144.10 Provisions for Loan Cancellations.

(a) Full-time Teaching. The determination as to whether or not a student-borrower is entitled to have any portion of his loan cancelled for service as a full-time teacher in a public or other nonprofit elementary or secondary school within a State, in an institution of higher education, or in an elementary or secondary school overseas of the Armed Forces of the United States in accordance with section 205 (b) (3) of the Act, shall be made by the institution to whose Fund such loan is payable upon receipt and evaluation of an application for cancellation from such student.

(b) Permanent and Total Disability. Determinations (based on medical evidence supplied by the borrower) as to whether or not a student is entitled to a cancellation of indebtedness in accordance with section 205 (b) (6) of the Act on the basis of permanent and total disability shall be made by the institution to whose Fund the borrower is indebted, subject to approval of the Commissioner.

(c) Death. Determination as to whether or not a student is entitled to a cancellation of indebtedness in accordance with section 205(b)(6) of the Act because of the death of the borrower shall be made by the institution to whose Fund the borrower is indebted on the basis of a certificate of death or such other official proof as is conclusive under State law.

Sec. 144.11 Fiscal.

(a) In General. The Fund shall be deposited and carried in a special account of the institution, and shall be used only for the purposes designated in section 144.4 (c) (3) of the Regulations. The Federal capital contribution shall be deposited promptly into the Fund with the full and proper amount of the institution's capital contribution. There shall be in the Fund at all times monies representing the institutional capital contribution equal to at least oneninth of the amount of the balance of the Federal capital contributions in such Fund.

(b) Payment of Loans.

(1) Loans from the Fund shall be made to student-borrowers from the Fund in such installments as are deemed appropriate by the institution, except that no borrower may receive more, during a given semester, term or quarter, than he needs for such period.

(2) No monies shall be advanced to any student-borrower from the Fund unless at the time of such advancement he is at least a halftime student.

(3) Upon failure of a student-borrower to maintain satisfactory standing, the institution shall withhold any or all further installments of his loan as may be appropriate.

(c) Collection of Loans. Each institution at which a Fund is established shall accept responsibility for and use due diligence in effecting collection of all amounts due and payable to the Fund in connection wtih loan transactions of the Fund. The institution shall use such collection practices as are generally accepted among institutions of higher education and which are at least as extensive and forceful as those used in the collection of other student loan accounts due the institution.

In the exercise of due diligence, the institution shall:

(1) conduct, whenever possible, an exit interview with each borrower prior to separation and provide the borrower with a copy of his repayment schedule (which shall specify the dates and amounts of installments as they become due),

(2) maintain contact with borrower after separation in order to facilitate billing at the time the first installment falls due,

(3) establish and maintain regular billing and follow-up procedures during the period in which any outstanding balance remains unpaid, and

(4) establish such further collection procedures as the institution may consider appropriate to effect prompt and regular repayments.

(d) Records and Reporting.

(1) Each institution shall maintain, on a current basis, adequate records which reflect all transactions with respect to the Fund, and

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