15 KAR 1:040. Eligibility for insured
student loans made directly by the corporation.
RELATES TO: KRS 164A.040, 164A.050(2),
164A.060(1), (2), (4), 164A.065, 34 C.F.R. 668.32, 682.201, 20 U.S.C. 1078(a),
1078-2, 1078-3, 1091
STATUTORY AUTHORITY: KRS 164A.060(8)
NECESSITY, FUNCTION, AND CONFORMITY: KRS
164A.040 and 164A.050(2) authorize the Kentucky Higher Education Student Loan
Corporation to finance student loan operations in Kentucky. KRS 164A.060(1)
empowers the corporation to make or participate in the making of insured
student loans. KRS 164A.065 authorizes the corporation to exercise all of its
powers in furtherance of making loans, including federal PLUS loans authorized
by Section 428B of the federal Act (20 U.S.C. 1078-2) and federal consolidation
loans authorized by Section 428C of the federal Act (20 U.S.C. 1078-3). This
administrative regulation establishes the eligibility requirements and
procedures for applying for an insured student loan made directly by the
corporation.
Section 1. Definitions. (1) "Adverse
credit history" means information available to the corporation that
indicates that the applicant:
(a) Is ninety (90) days or more
delinquent in the repayment of a debt; or
(b) Has been, within five (5) years
preceding the date of any credit report on which the determination of adverse
credit is based, the subject of a determination of default, foreclosure,
repossession, tax lien, or wage garnishment for any debt or a write-off of any
debt under the federal Act.
(2) "Corporation" is defined by
KRS 164A.020(3).
(3) "Eligible borrower" is
defined by 20 U.S.C. 1078-3(a)(3).
(4) "Eligible institution" is
defined by KRS 164A.020(4).
(5) "Eligible student loans" is
defined by 20 U.S.C. 1078-3(a)(4).
(6) "Federal act" is defined by
KRS 164A.020(6).
(7) "Federal consolidation
loan" means the loan program authorized by 20 U.S.C. 1078-3.
(8) "Federal Family Educational Loan
Program" or "FFELP" means the programs of insured student loans
authorized by Part B of Title IV of the federal Act (20 U.S.C. 1071, et seq.)
including federal consolidation loans, federal PLUS loans, and Robert T.
Stafford federal student loans.
(9) "Federal PLUS Loan" means
the loan program authorized by 20 U.S.C. 1078-2.
(10) "Guarantee agency" is
defined by KRS 164A.020(7).
(11) "Insured student loan" is
defined by KRS 164A.020(9).
(12) "Pell Grant" means the
grant program authorized by 20 U.S.C. 1070a.
(13) "Qualified student" is
defined by KRS 164A.020(8).
(14) "Reaffirmation" means the
acknowledgement of the loan by the borrower in a legally binding manner and may
include the borrower signing a new promissory note or repayment schedule, or
making a payment on the loan.
(15) "Robert T. Stafford Federal
Student Loan" means the student loan program, consisting of subsidized and
unsubsidized loans, authorized by 20 U.S.C. 1078 and 1078-8.
Section 2. Eligibility for Federal
Consolidation Loan Made by the Corporation. An individual shall be eligible to
borrow a federal consolidation loan from the corporation if, at the time of
application:
(1) The applicant:
(a) Is an eligible borrower with eligible
student loans outstanding;
(b) Has no other application pending with
any other lender for a federal consolidation loan;
(c) Supplies the names, addresses and
telephone numbers of a minimum of two (2) verifiable personal references;
(d) Agrees to payment arrangements that
are satisfactory to a guarantee agency, if the applicant is consolidating
defaulted loans;
(e) Agrees to notify the holder of the
loan of any changes in address; and
(f) Certifies that the corporation holds
an outstanding eligible student loan of the borrower that is being consolidated
or that the borrower has unsuccessfully sought a federal consolidation loan
from the holders of the outstanding eligible student loans and was unable to
secure a federal consolidation loan from the holder; and
(2) The federal consolidation loan is
determined eligible for insurance by the Kentucky Higher Education Assistance
Authority or another guarantee agency of the corporation's choice.
Section 3. Eligibility for a FFELP Loan
Other than Federal Consolidation Loans. An individual shall be eligible to
borrow a FFELP loan, other than a federal consolidation loan, if, at the time
of application, the applicant:
(1)(a) Is an undergraduate student who:
1. Is seeking a Robert T. Stafford loan
for the cost of attendance at a school that participates in the Pell Grant
Program; and
2. Has received a final determination; or
(b) Is a student who:
1. Has filed an application with the
school for a Pell Grant;
2. Has received a preliminary
determination from the school of the student's eligibility or ineligibility for
a Pell Grant; and
3. If eligible, has applied for the
period of enrollment for which the loan is sought;
(2) Is a borrower whose previous FFELP
loan was cancelled due to total and permanent disability and the applicant:
(a) Provides reaffirmation of the loan
amount that previously was canceled due to the borrower's total and permanent
disability or that was written off;
(b) Obtains a certification from a
physician that the borrower's condition has improved and that the borrower is
able to engage in substantial gainful activity; and
(c) Signs a statement acknowledging that
any new FFELP loan the borrower receives cannot be cancelled in the future on
the basis of any present impairment, unless that condition substantially
deteriorates;
(3) Is not serving in a medical
internship or residency program, except for an internship in dentistry;
(4) Is a resident of Kentucky or is in
attendance at a Kentucky institution of higher education;
(5) Is an eligible student or a parent
borrowing on behalf of an eligible student as specified in Section 4 of this
administrative regulation;
(6) Submits either the Federal Consolidation
Loan Application and Promissory Note or the Application and Promissory Note for
Federal PLUS Loan, whichever is applicable, fully completed and signed by the
borrower;
(7) For purposes of borrowing a federal
PLUS Loan, is determined by the corporation to:
(a) Not have an adverse credit history;
or
(b) Have an adverse credit history if the
applicant either:
1. Demonstrates to the satisfaction of
the corporation that extenuating circumstances exist that excuse or correct the
adverse credit history; or
2. Obtains an endorser who is determined
by the corporation to not have an adverse credit history; and
(8) Is determined to be eligible for loan
insurance by the Kentucky Higher Education Assistance Authority or another
guarantee agency of the corporation's choice.
Section 4. Student Eligibility. The
eligibility of a student for purposes of obtaining a FFELP loan shall be
governed by 34 C.F.R. 668.32 to 668.35.
Section 5. Request for Redetermination of
Eligibility. (1) Upon a determination by the corporation that the loan will not
be made on the basis of an adverse credit history, the applicant or any
prospective endorser declined due to an adverse credit history may submit a
written request for redetermination of eligibility to the corporation within
thirty (30) calendar days after the date of the denial notice provided by the
corporation. The applicant or prospective endorser shall submit with the
request documentation to demonstrate to the satisfaction of the corporation
that:
(a) The credit report or other
information relied upon by the corporation is erroneous or outdated;
(b) Extenuating circumstances beyond the
control of the individual contributed materially to the adverse credit history;
or
(c) The individual has made a substantial
good faith effort to resolve past delinquencies, including payment arrangements
satisfactory to a guarantee agency on any defaulted insured student loan.
(2) The corporation shall, upon timely
submission of all documentation, notify the applicant and any prospective
endorser in writing of the final decision on whether it will make the desired
loan.
Section 6. Incorporation by Reference.
(1) The following material is incorporated by reference:
(a) Federal Consolidation Loan
Application and Promissory Note, OMB No. 1845-0036; and
(b) Application and Promissory Note for
Federal PLUS Loan, OMB No. 1845-0009.
(2) This material may be inspected,
copied, or obtained, subject to applicable copyright law, at the Kentucky
Higher Education Student Loan Corporation, 10180 Linn Station Road, Suite C200,
Louisville, Kentucky 40223, Monday through Friday, 8 a.m. to 4:30 p.m. (22
Ky.R. 125; Am. 587; eff. 9-7-95; 30 Ky.R. 368; 841; eff. 10-31-2003.)