(a) Borrower failure to fulfill all graduation requirements, including failure to submit information as specified in § 765.101(c) of this chapter, within the time-period specified by the Agency constitutes default on the loan. Except as provided in paragraph (b) of this section, the Agency will accelerate the borrower's loan without offering servicing options provided in 7 CFR part 766 if any outstanding direct loan was closed prior to September 25, 2024.

(b) If all outstanding direct loans were closed after September 25, 2024, or when the borrower makes a written request in response to the Agency's notification of intent to accelerate within provided timeframes, the Agency will convert the debt to a non-program loan under the following conditions:

(1) It is in the interest of the Agency;

(2) The debt will be subject to the interest rate for non-program loans in effect at the time of default;

(3) The debt will be serviced as a non-program loan; and

(4) The term of the non-program loan will be:

(i) For FOs, the Agency will schedule repayment in equal installments over the lesser of the remaining number of years on the loan, the useful life of security, or 25 years.

(ii) For OLs, the Agency will schedule repayment in equal installments over the lesser of the remaining number of years on the loan, the useful life of security or 5 years.