CHAPTER 2 PERFORMANCE STANDARDS
CHAPTER 2 PERFORMANCE STANDARDS
The following standards apply for participation in the Primary Care Loan Program by schools of allopathic or osteopathic medicine.
Beginning with the one-year period ending June 30, 1997, and for each subsequent one-year period, a school must meet at least one of the following conditions with respect to its graduates of the school whose date of graduation from the school occurred approximately four years before the end of the one-year period:
[Section 723(b) of the Public Health Service Act]
Schools that do not meet one of the criteria listed in Section 1 above are subject to certain penalties. The penalties, which are described below, require schools to return a portion of their Health Professions Student Loan fund incomes, exclusive of any income derived from the Loans for Disadvantaged Students Loan Program.
Schools must pay the amounts required within 90 days of receiving notification of noncompliance from the Division of Student Assistance.
[Section 723(b) of the Public Health Service Act]
The Division of Student Assistance redistributes funds that allopathic and osteopathic medical schools have returned as a result of not meeting the criteria described in Chapter 2, Section 1 above.
Most processes for awarding Primary Care Loan Program funds are the same as the Health Professions Student Loan Program funds. (See Health Professions, HPSL, Chapter 2.) However, there is one exception for distributing newly authorized funds to allopathic and osteopathic schools. The law restricts these funds to schools that meet at least one of the three conditions described in Chapter 2, Section 1 above.
The regulations require a school to meet a performance standard for participation in the Health Professions and Nursing FCC Loan Programs.
On June 30 each year a school must have a default rate of not more than five percent. The default rate is the ratio (stated as a percentage) that the defaulted principal amount outstanding of the school bears to the matured loans of the school. For this purpose:
The worksheet for calculating the default rate for the Nursing FCC Loan Program can be found at Exhibit D. The worksheet for calculating the default rate in one or more of the Health Professions FCC Loan Programs can be found at Exhibit E.
Any school that has a default rate greater than five percent on June 30 of any year will be required to:
Any school which fails to comply with the requirements will receive no new Federal funds and will be required to:
Any school which fails to comply with these requirements will be subject to termination. The Secretary will provide the school with a written notice specifying his or her intention to terminate the school's participation in the program and stating that the school may request, within 30 days of the receipt of this notice, a formal hearing. If the school requests a hearing, it must within 90 days of the receipt of this notice, submit material, factual issues in dispute to demonstrate that there is cause for a hearing. 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:
In the event that the Secretary denies a hearing, the Secretary will send a written denial to the school 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 school will be terminated from participation in the program and will be required to return the Federal share of the fund to the Department of Health and Human Services. A school terminated for failure to comply with the performance standard requirements must continue to pursue collections and may reapply for participation in the program only when it has attained a default rate of five percent or less.
[42 CFR Part 57.216 and 42 CFR Part 57.316]
There are also certain performance standards which must be met by schools to participate in the Health Education Assistance Loan (HEAL) Program.
Effective January 1, 1993, any school with a HEAL default rate in excess of 20 percent became ineligible to participate in the HEAL Program. However,
In addition, schools have the right to appeal their ineligibility to the Department based on mitigating circumstances.
Schools with default rates at or below 20 percent may continue to participate in the HEAL Program. However, these schools are divided into three risk categories that determine the amount of the insurance premium the borrower and the school must pay on each HEAL loan issued. These risk categories are:
Each school's risk category is determined every September 30 by calculating the institutional default rate. The risk category becomes effective January 1 through December 30 of the following year. The default rate is calculated as follows:
The total principal amount of HEAL loans made to students of the school for a period of enrollment (or expected enrollment) that entered into repayment status after April 7, 1987 for which claims have been paid due to default or bankruptcy
Minus
defaulted HEAL loans for which the borrower has made payments to the Department of Health and Human Services for 12 consecutive months in accordance with a repayment agreement, and HEAL loans that have been discharged due to bankruptcy
Divided by
the total principal amount of HEAL loans made to students of a school for a period of enrollment (or expected enrollment) that entered into repayment status after April 7, 1987.
[Section 719 of the Public Health Service Act]
Statute permits schools to pay off outstanding principal and interest owed by borrowers who have defaulted on their HEAL loans. Schools may use this option as a mechanism to reduce their institutional default rates, thus maintaining eligibility (if the default rate is over 20 percent) or moving to a lower risk category.
[Section 708 of the Public Health Service Act]
The Department will send a quarterly billing invoice to all schools that are required to pay a risk-based insurance premium. This invoice will be based on all HEAL disbursements made to students enrolled at that institution during the preceding quarter and reported to the Department. The institution must pay this bill within a specified time period before a delinquency occurs. Schools should pay these bills on a timely basis since a delinquent debt to the Federal Government may initiate limitation and/or suspension.
For further information, see Health Professions Programs, HEAL, Chapter 3.
[Section 708 of the Public Health Service Act]
Schools with default rates greater than five percent, but no more than 20 percent, must prepare and submit an annual default management plan to the Division of Student Assistance for approval.
The default management plan must specify the detailed short-term and long-term procedures that the school will have in place to minimize HEAL defaults. Under the plan, the school must provide an exit interview to all borrowers. The exit interview is to include information concerning repayment schedules, loan deferments, forbearance, and the consequences of default. This requirement also applies to any historically black college or university that has a default rate greater than 20 percent and continues to participate in the HEAL Program during the three-year transitional period which ends on October 13, 1995.
The Division of Student Assistance may grant a waiver of the default management plan requirement if it determines that the default rate for the school is not an accurate indicator due to low HEAL volume.
For a detailed discussion of other compliance requirements of the HEAL Program, see Health Professions Programs, HEAL, Chapter 2.
