Subchapter C. FEDERAL STAFFORD LOAN PROGRAMS

§ 121.61. Submission and processing of applications.

 (a)  Applicant. A student desiring to secure a Federal Stafford Loan shall obtain from a participating lender, a participating school or Agency a loan application packet containing the application/promissory note form for the Federal Stafford Loan Program. The information provided on the form will be used to determine the eligibility of the applicant to receive a Federal Stafford Loan. The applicant shall complete the loan application, which includes the affidavit in which the applicant agrees to use the loan proceeds solely for educational expenses. The applicant shall also read, sign and date the promissory note that is part of the loan application form. After completing the loan application, including the promissory note, the applicant shall retain a copy of the form and forward the remaining copies of these forms as referenced on the form.

 (b)  Educational institution. The institution shall certify the loan application according to instructions provided by the Agency.

 (c)  Processing by the Agency. The Agency will check the application/promissory note form for completeness. If not complete, the Agency will obtain from the applicant the missing data items.

 (d)  Completion of processing. Upon receipt of missing information, the Agency will complete the processing of the loan application and determine the amount of loan assistance the applicant is entitled to obtain. The Agency will then inform the lender of the amount of the guaranty by sending the lender a Loan Guaranty Notice and Disclosure Statement.

 (e)  Action by lender. The lender shall provide the applicant with a copy of the Loan Guaranty Notice and Disclosure Statement and disburse the funds by means of a check or electronic funds transfer. If the lender does not wish to make the loan, the lender shall mark denied on the Loan Guaranty Notice and Disclosure Statement or report the denial by the computer terminal. An adverse action notice shall be provided to the borrower by the lender if loan assistance is denied.

   The provisions of this §  121.61 amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104); section 1 of the act of January 25, 1966 (P. L. 1546, No. 541) (24 P. S. §  5151); the act of July 18, 1974 (P. L. 483, No. 174) (24 P. S. § §  5181—5189); the act of July 1, 1988 (P. L. 1259, No. 155) (24 P. S. § §  5191—5197); and the act of June 26, 1992 (P. L. 322, No. 64) (24 P. S. § §  5198.1—5198.7).

 A bank, Federal or State savings and loan association, mutual savings bank, Federal or State credit union or other lender, approved by the United States Secretary of Education and by the Agency which executes a Lender Participation Agreement with the Agency shall become an eligible lender.

   The provisions of this §  121.62 issued under act of July 12, 1981 (P. L. 264, No. 89) (24 P. S. § §  5102.1 and 5104(1.2)).

 A student borrower shall, at the option of the Agency, pay to the lender, at the time the student borrower obtains the loan, a loan insurance premium calculated as a percentage of the loan guaranty amount. The percentage used may not exceed the rate mandated by Federal law and regulations.

   The provisions of this §  121.64 amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104).

 The Agency will guarantee loans to the maximum amounts specified in the following table:

   * Or dependent students whose parents cannot borrow a Federal PLUS loan. The amount an independent student or eligible dependent student can borrow under the unsubsidized Federal Stafford Loan Program during an academic year is: (a) the amount indicated in the first column minus the subsidized loan amount for which the student is eligible, plus (b) the amount indicated in the second column.

   **Straight proration applies if the final portion of the program of study is less than a full academic year. The prorated loan amount must bear the same ratio to the full-academic year loan amount as the remainder of the program bears to 1 academic year.

   The provisions of this §  121.65 amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104); section 1 of the act of January 25, 1966 (P. L. 1546, No. 541) (24 P. S. §  5151); sections 3 and 4 of the act of July 12, 1981 (P. L. 264, No. 89) (24 P. S. § §  5102.1 and 5104(1.2)); the act of July 18, 1974 (P. L. 483, No. 174) (24 P. S. § §  5181—5189); the act of July 1, 1988 (P. L. 1259, No. 155) (24 P. S. § §  5191—5197); and the act of June 26, 1992 (P. L. 322, No. 64) (24 P. S. § §  5198.1—5198.7).

 (a)  The repayment is due as follows:

   (1)  A loan is due for repayment when the student borrower has ceased to be enrolled on at least a half-time basis at an approved school for 9 consecutive months in the case of:

     (i)   A loan issued to a borrower for a period of enrollment that began prior to January 1, 1981.

     (ii)   A loan issued to a borrower for a period of enrollment beginning on or after January 1, 1981 if the borrower on the date the loan is disbursed has a loan guaranteed and outstanding under Title IV, Part B of the Higher Education Act of 1965 (Pub. L. No. 89-329, 79 Stat. 1219) for an enrollment period that began prior to January 1, 1981.

   (2)  In all other cases, the loan is due for repayment when the student borrower has ceased to be enrolled on at least a half-time basis at an approved school for 6 consecutive months.

   (3)  Within the applicable 9-month or 6-month period, the lender will provide the borrower with a repayment schedule.

 (b)  For loans disbursed by lenders prior to October 1, 1981, a student borrower shall repay in substantially equal monthly installment payments at least $360 per year, including principal and interest. If the total of the insured loans would not be repaid in less time with minimum payments of $360 per year, the repayment schedule shall provide for repayment in not less than 5 years nor more than 10 years beginning upon the expiration of the applicable grace period after the student ceases to be enrolled on at least a half-time basis at a participating institution of higher learning, except where the borrower requests an earlier repayment starting date or where the lender agrees to monthly payments of less than $30 over not more than a 10-year repayment schedule.

 (c)  For loans disbursed by the lender on or after October 1, 1981, a student borrower shall repay in substantially equal monthly installment payments at least $600 per year, including principal and interest. If the total of the insured loans would not be repaid in less time with minimum payments of $600 per year, the repayment schedule shall provide for repayment in not less than 5 years nor more than 10 years beginning upon the expiration of the applicable grace period after the student ceases to be enrolled on at least a half-time basis at a participating institution of higher learning, except where the borrower requests an earlier repayment starting date or where the lender agrees to monthly payments of less than $50 over not more than a 10-year repayment schedule period.

 (d)  Upon proper notice to the lender, repayment of principal may be deferred in accordance with, and during periods specified in, the Higher Education Act of 1965 and Federal regulations based on this act. The borrower is responsible for interest not paid by the Federal government that accrues during any period principal repayment is deferred.

   The provisions of this §  121.67 issued under the act of July 12, 1981 (P. L. 264, No. 89) (24 P. S. § §  5102.1 and 5104(1.2)); amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104).

   The provisions of this §  121.67 adopted February 27, 1969; adopted May 21, 1976, effective May 22, 1976, 6 Pa.B. 1134; amended November 19, 1976, effective November 20, 1976, 6 Pa.B. 2907; corrected December 9, 1978, 8 Pa.B. 3493; amended November 10, 1978, effective November 11, 1978, 8 Pa.B. 3084; amended July 3, 1980, effective July 5, 1980, 10 Pa.B. 2874; amended September 4, 1981, effective September 5, 1981, 11 Pa.B. 3045; amended March 26, 1982, effective March 27, 1982, 12 Pa.B. 1043; amended July 22, 1988, effective July 23, 1988, 18 Pa.B. 3208; amended October 4, 1991, effective October 5, 1991, 21 Pa.B. 4637. Immediately preceding text appears at serial pages (128123) to (128127).

 A student borrower placed on academic or disciplinary probation shall remain eligible for a State loan guaranty if the institution of higher learning permits him to continue his studies on at least a half-time basis.

 The indebtedness of a borrower who dies, who becomes totally and permanently disabled, whose loans are discharged in bankruptcy, who is enrolled at an institution that closes or who has his eligibility to borrow falsely certified by the institution, shall be cancelled upon the acceptance of proper documentation by the lender or holder of the loan.

   The provisions of this §  121.69 amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104); section 1 of the act of January 25, 1966 (P. L. 1546, No. 541) (24 P. S. §  5151); the act of July 18, 1974 (P. L. 483, No. 174) (24 P. S. § §  5181—5189); the act of July 1, 1988 (P. L. 1259, No. 155) (24 P. S. § §  5191—5197); and the act of June 26, 1992 (P. L. 322, No. 64) (24 P. S. § §  5198.1—5198.7).

 Except as otherwise provided in §  121.67 (relating to repayment), a note shall be declared in default at the following times:

   (1)  One hundred and eighty days, or as otherwise established by the Agency to comply with Federal statutes or regulations, after the date on which a monthly payment was scheduled to be made by a student borrower under a repayment schedule, if the borrower fails to make the monthly payment within 180 days of its due date, or as otherwise established by the Agency to comply with Federal statutes or regulations.

   (2)  Two hundred forty days, or as otherwise established by the Agency to comply with Federal statutes or regulations, after the date on which a quarterly payment of nonsubsidized interest was scheduled to be made by a student borrower under a quarterly interest repayment schedule, if the borrower fails to make the quarterly payment within 240 days of its due date, or as otherwise established by the Agency to comply with Federal statutes or regulations.

   The provisions of this §  121.70 amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104); section 1 of the act of January 25, 1966 (P. L. 1546, No. 541) (24 P. S. §  5151); the act of July 18, 1974 (P. L. 483, No. 174) (24 P. S. § §  5181—5189); the act of July 1, 1988 (P. L. 1259, No. 155) (24 P. S. § §  5191—5197); and the act of June 26, 1992 (P. L. 322, No. 64) (24 P. S. § §  5198.1—5198.7).

 A student borrower shall be eligible for a State loan guaranty for a Year Abroad Program, which shall provide the borrower with the equivalent credit for the academic term or terms involved in the program as he would earn at the approved institution of higher learning, and which requires the borrower to pay his educational costs to the approved institution of higher learning.

 (a)  A student applicant shall be a resident of this Commonwealth at the time the student applies for a Federal Stafford Loan or to renew a loan guaranty. Establishment of residency may be based upon any one of the following:

   (1)  A student applicant who is under 18 years of age at the time the student applies for a Federal Stafford Loan or to renew a loan guaranty shall have a supporting parent or guardian who has been a bona fide domiciliary of this Commonwealth for at least 30 days immediately preceding the date of receipt by the Agency of the loan guaranty application or renewal application.

   (2)  A student applicant who is 18 years of age or older at the time the student applies for a Federal Stafford Loan or to renew the guaranty shall have been a bona fide domiciliary of this Commonwealth for at least 30 days immediately preceding the date of receipt by the Agency of the loan guaranty application or renewal application.

   (3)  A student applicant who is accepted for enrollment in or is attending an approved institution of higher education located in this Commonwealth is considered a bona fide domiciliary of this Commonwealth except in cases where the student is enrolled in a correspondence (home study) course, in which case the student shall be a bona fide domiciliary of this Commonwealth as described in paragraphs (1) and (2).

 (b)  For purposes of determining domicile, a guardian shall be one of the following:

   (1)  A person appointed by a court.

   (2)  A person other than a parent with whom the applicant has lived and in whose continuous direct care and control the applicant has been for at least 2 years.

 (c)  Military status of persons and their dependents who reside in the civilian community rather than on a military installation will not alone be grounds for determining an applicant ineligible.

 (d)  Persons and their dependents who leave this Commonwealth on military or foreign assignments, such as missionaries, United States military service personnel and representatives of domestic companies or government agencies, shall be presumed to maintain their domicile in this Commonwealth for purposes of satisfying the loan guaranty residence requirement.

 (e)  In the case of a student attending an institution of higher education in another state who is under 18 years of age whose parents or guardians move from this Commonwealth after the Agency has issued a loan guaranty, the eligibility of the applicant continues to the end of the applicant’s program of study.

 (f)  A student who transfers to an approved institution of higher education located outside of this Commonwealth after having received guaranteed student loan assistance while attending a Commonwealth institution of higher education is eligible to have the loan guaranty renewed.

 (g)  A student applicant filing a loan guaranty renewal application who has outstanding loans with the Agency and whose domicile has changed from this Commonwealth due to the relocation of the applicant or supporting parents or guardian shall continue to be eligible for guaranteed student loan assistance until the end of the applicant’s program of study.

 (h)  The Agency will make the final decision in all matters pertaining to residency or domicile, or both.

   The provisions of this §  121.72 amended under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. §  5104); section 1 of the act of January 25, 1966 (P. L. 1546, No. 541) (24 P. S. §  5151); the act of July 18, 1974 (P. L. 483, No. 174) (24 P. S. § §  5181—5189); the act of July 1, 1988 (P. L. 1259, No. 155) (24 P. S. § §  5191—5197); and the act of June 26, 1992 (P. L. 322, No. 64) (24 P. S. § §  5198.1—5198.7).

   The provisions of this §  121.72 adopted July 28, 1972, effective July 29, 1972, 2 Pa.B. 1438; amended February 16, 1973, effective February 17, 1973, 3 Pa.B. 325; amended December 27, 1974, effective December 28, 1974, 4 Pa.B. 2699; amended June 10, 1977, effective June 11, 1977, 7 Pa.B. 1579; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 249; amended July 12, 1996, effective July 13, 1996, 26 Pa.B. 3321. Immediately preceding text appears at serial pages (161837) to (161838).