§ 121.191. Approved lending institutions in Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs.
(a) To be approved, a lending institution shall comply with the following:
(1) The lending institution shall be approved by the Agency as an eligible institution for participation in the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs.
(2) The lending institution shall meet the United States Department of Education definition of ‘‘eligible lender’’ contained in section 435(d) of the Higher Education Act of 1965 (20 U.S.C.A. § 1085(d)).
(3) The lending institution shall have executed and filed with the Agency an agreement, on a form provided by the Agency, to make the loan program available to eligible students enrolled or accepted for enrollment in an approved educational institution to the extent of its resources available for these loans.
(b) The lending institution shall comply with the Federal laws and regulations governing the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs.
(c) Mailing dates and receipt dates referenced in this section shall be evidenced by United States Postal Service receipts. If a lending institution refuses or fails to accept a notice mailed as set forth in this section, the Agency will consider the notice as being received on the date that the lending institution refuses or fails to accept the notice as noted by the United States Postal Service.
(d) The following provisions deal with emergency action:
(1) The President and Chief Executive Officer may take emergency action as follows against a lending institution under which the processing of loan applications for students borrowing through the institution is withheld if the President and Chief Executive Officer:
(i) Receives information, determined by an Agency official to be reliable, that the lending institution is in violation of applicable laws, regulations, special arrangements, agreements or limitations.
(ii) Determines that immediate action is necessary to protect the interest of applicants, the United States, the Commonwealth or the Agency.
(iii) Determines that the likelihood of loss outweighs the importance of following the procedures set forth for suspension, limitation or termination in subsection (e).
(2) The Agency will begin an emergency action by notifying the lending institution by certified mail, with return receipt requested, of the emergency action and the basis on which the action is taken. The lending institution shall have an opportunity to show cause that the emergency action is unwarranted by submission of written documentation to the President and Chief Executive Officer. The effective date of the action shall be the date on which the notice is mailed to the lending institution.
(3) An emergency action may not exceed 30-calendar days unless a suspension, limitation or termination proceeding is begun under this section before the expiration of that period. In this case, the period may be extended until the completion of that proceeding, including an appeal to the Board.
(e) The following provisions deal with suspension, limitation or termination:
(1) The President and Chief Executive Officer may suspend the eligibility of a lending institution to participate in the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs if the lending institution violates applicable laws, regulations, special arrangements or agreements. The suspension may not exceed 60-calendar days unless the lending institution and the President and Chief Executive Officer agree to an extension if the lending institution has not requested a hearing or the Agency begins a limitation or termination proceeding under this section.
(i) A designated Agency official will notify the lending institution by certified mail, with return receipt requested, of the Agency’s intent to suspend the participant from the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs, citing the consequences of that action and identifying the alleged violations on which the proposed action is based. The initially designated beginning date of suspension shall be at least 20-calendar days from the date the letter of intent is mailed.
(ii) The lending institution subject to the suspension notice may request in writing a hearing before a hearing examiner or submit written material for consideration by the designated Agency official. If the lending institution submits written material or requests a hearing at least 5-calendar days prior to the effective date of the suspension, the suspension date shall automatically be delayed until after a final determination is made.
(iii) If the lending institution does not request a hearing but submits written material, the designated Agency official will review the material and notify the lending institution that either the proposed suspension is dismissed or the suspension is effective as of a specified date.
(iv) If the lending institution requests a hearing at least 5-calendar days prior to the effective date of suspension, the date of the hearing shall be at least 15-calendar days after receipt of the request.
(A) A hearing examiner selected by the President and Chief Executive Officer will conduct the hearing at the Agency’s principal office, and a written record will be made.
(B) The hearing examiner will consider all written material presented before the hearing and the evidence presented at the hearing.
(C) The hearing examiner will issue a decision to either uphold the suspension or to dismiss it and inform the President and Chief Executive Officer and lending institution of this decision in writing within 30-calendar days of the conclusion of the hearing.
(D) The hearing examiner’s decision is final unless appealed under subsection (g). If the decision is in favor of suspension, the Agency will send a notice to the lending institution which sets forth the effective date of the suspension.
(E) If the Agency begins a limitation or termination proceeding before the suspension period ends, the suspension period may be extended until completion of the new proceeding.
(F) The President and Chief Executive Officer will inform the United States Department of Education of actions taken or decisions made by the Agency in regard to the suspension so the United States Department of Education can take appropriate action.
(v) In accordance with 1 Pa. Code § § 35.111—35.116 (relating to prehearing conferences), at any time prior to or during the hearings, the Agency may schedule a conference with the parties.
(2) The President and Chief Executive Officer may limit the number or percentage of borrowers who may receive loan guaranties if the lending institution violates any applicable laws, regulations, special arrangements or agreements.
(i) A designated Agency official will notify the lending institution by certified mail, with return receipt requested, of the Agency’s intent to limit the lending institution’s participation in the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs, citing the consequences of that action and identifying the alleged violations on which the proposed action is based. The initially designated beginning date of limitation shall be at least 20-calendar days from the date the letter of intent is mailed.
(ii) The lending institution subject to the limitation notice may request a hearing before a hearing examiner or submit written material for consideration by the designated Agency official. If the lending institution submits written material or requests a hearing at least 5-calendar days prior to the effective date of the limitation, the designated limitation date shall automatically be delayed until after a final determination is made.
(iii) If the lending institution does not request a hearing but submits written material, the designated Agency official will review that material and notify the lending institution that either the proposed limitation is dismissed or the limitation is effective as of a specified date.
(iv) If the lending institution requests a hearing at least 5-calendar days prior to the effective date of limitation, the date of the hearing shall be at least 15-calendar days after receipt of the request.
(A) A hearing examiner selected by the President and Chief Executive Officer will conduct the hearing at the Agency’s prinicipal office, and a written record will be made.
(B) The hearing examiner will consider the written material presented before the hearing and the evidence presented at the hearing.
(C) The hearing examiner will issue a decision to either uphold the limitation or to dismiss it and inform the President and Chief Executive Officer and lending institution of this decision in writing within 30-calendar days of the conclusion of the hearing.
(D) The hearing examiner’s decision is final unless appealed under subsection (g). If the decision is in favor of limitation, the Agency will send a notice to the lending institution which sets forth the effective date of the limitation.
(E) If the Agency begins a termination proceeding before the limitation period ends, the limitation period may be extended until completion of the new proceeding.
(F) The President and Chief Executive Officer will inform the United States Department of Education of actions taken or decisions made by the Agency in regard to the limitation so the United States Department of Education can take appropriate action.
(v) In accordance with 1 Pa. Code § § 35.111—35.116, at any time prior to or during the hearings, the Agency may schedule a conference with the parties.
(3) The President and Chief Executive Officer may terminate a lending institution’s eligibility to participate in the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs if the lending institution violates applicable laws, regulations, special arrangements or agreements. Termination prohibits the future guaranty of Federal Stafford Loans, Federal PLUS Loans and Federal Consolidation Loans to borrowers applying through the lending institution.
(i) A designated Agency official will notify the lending institution by certified mail, with return receipt requested, of the Agency’s intent to terminate the lending institution from the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs, citing the consequences of that action and identifying the alleged violations on which the proposed action is based. The initially designated beginning date of termination shall be at least 20-calendar days from the date the letter of intent is mailed.
(ii) The lending institution subject to the termination notice may request in writing a hearing before the hearing examiner or submit written material for consideration by the designated Agency official. If the lending institution submits written material or requests a hearing at least 5-calendar days prior to the effective date of termination, the designated termination date shall automatically be delayed until after a final determination is made.
(iii) If the lending institution does not request a hearing but submits written material, the designated Agency official will review the material and notify the lending institution that either the proposed termination is dismissed or the termination is effective as of a specified date.
(iv) If the lending institution requests a hearing at least 5-calendar days prior to the effective date of termination, the date of the hearing shall be at least 15-calendar days after receipt of the request.
(A) A hearing examiner selected by the President and Chief Executive Officer will conduct the hearing at the Agency’s principal office, and a written record will be made.
(B) The hearing examiner will consider all written material presented before the hearing and the evidence presented at the hearing.
(C) The hearing examiner will issue a decision to either uphold the termination or to dismiss it and inform the President and Chief Executive Officer and the lending institution of this decision in writing within 30-calendar days of the conclusion of the hearing.
(D) The hearing examiner’s decision is final unless appealed under subsection (g). If the decision is in favor of termination, the Agency will send a notice to the lending institution which sets forth the effective date of termination.
(E) The President and Chief Executive Officer will inform the United States Department of Education of actions taken or decisions made by the Agency in regard to the termination so the United States Department of Education can take appropriate action.
(v) In accordance with 1 Pa. Code § § 35.111—35.116, at any time prior to or during the hearings, the Agency may schedule a conference with the parties.
(f) A lending institution may lose its eligibility to participate in the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs through other than emergency action, suspension, limitation or termination. This may occur under one or more of the following conditions:
(1) Permanent closure of the lending institution.
(2) Action taken by the United States Secretary of Education under applicable Federal regulations to limit, suspend or terminate the lending institution’s eligibility.
(g) The Agency and the lending institution have the right to appeal the decision of the hearing examiner to the Board within 20-calendar days after the receipt or a copy of the decision, which shall be done by certified mail.
(1) Written notice of appeal and the materials submitted in support shall be addressed to the Chairperson of the Board at the Agency’s principal address, with a copy to the other party.
(2) The appealing party has 20-calendar days from the date of the notice of appeal to submit exceptions to the hearing examiner’s decision and supporting briefs and statements.
(3) The opposing party has 20-calendar days from receipt of the appealing party’s exceptions and brief to respond.
(4) When the Chairperson of the Board receives notice of an appeal, the Chairperson will place the appeal on the meeting agenda of the Board at a time in the future that the Board has received a record of the hearing and the briefs and supporting materials and has had an opportunity to review the record. Before issuing a final order, the Board of Directors will review the record and hearing examiner’s decision and may order oral argument.
(5) Notice of a final order by the Board of Directors will be mailed promptly to the lending institution, the Agency and the United States Department of Education.
(6) The decision of the Board of Directors will become final upon mailing. Within 30-calendar days after the decision of the Board of Directors becomes final, the lending institution may file an appeal with Commonwealth Court.
(h) A lending institution whose eligibility to participate was limited may not apply for removal of the limitation before the expiration of 12 months from the effective date of the limitation.
(1) After the minimum limitation period, the lending institution may request removal of the limitation. The request shall be in writing and be supported by documented evidence that the institution has corrected the violations on which the limitation was based.
(2) Within 60-calendar days after receipt of the request, the President and Chief Executive Officer will respond to the lending institution by granting the request, denying the request or granting the request subject to other limitation.
(i) A lending institution whose eligibility to participate has been terminated may file a request for reinstatement 18 months after the effective date of the termination. To be reinstated, a lending institution shall:
(1) Demonstrate to the President and Chief Executive Officer’s satisfaction that it has corrected the violations on which termination was based and repaid any funds which it had improperly received.
(2) Meet the requirements for participation in the Federal Stafford Loan, Federal PLUS Loan and Federal Consolidation Loan Programs.
(3) Enter into a new participation agreement with the Agency.
Authority The provisions of this § 121.191 issued under section 4 of the act of August 7, 1963 (P. L. 549, No. 290) (24 P. S. § 5104); and section 1 of the act of January 25, 1966 (P. L. 1546, No. 541) (24 P. S. § 5151); 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).
Source The provisions of this § 121.191 adopted October 16, 1987, effective October 17, 1987, 17 Pa.B. 4120; amended July 12, 1996, effective July 13, 1996, 26 Pa.B. 3321. Immediately preceding text appears at serial pages (183526) to (183527).
Cross References This section cited in 22 Pa. Code § 121.1 (relating to definitions).
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