Cathy Bridegroom

1
Cathy Bridegroom

• OmbudsmanUSA Funds

2
Conditional TPD Process

• Rinn D. Harper
• Vice President, Operations
• Texas Guaranteed

3
Changes Effective July 1, 2002

• After guarantor pays claim, loan is permanently
  assigned to ED.
• ED reviews disability documentation for initial
  determination of eligibility
• If denied, ED resumes collection.
• If approved, loan is placed in conditional
  discharge status.

4
Conditional Period

• Loan remains in conditional status for 3 years
  from date that borrower became totally and
  permanently disabled, as certified by the
  physician.

5
Conditional Period

• Discharge period ends if
• Borrowers earnings from employment exceed 100
  of poverty line for family of two.
• Borrower receives new loan under FFEL, Direct, or
  Perkins (except a Consolidation loan which does
  not include any loans in conditional status).
• Borrower fails to provide employment earning
  information when requested.

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Conditional Period

• Once 3-year period concludes
• Loan is considered fully discharged.
• Any payments received on or after the date the
  borrower became totally and permanently disabled
  are refunded to the sender.

7
New TPD Form

• Issued - December, 2002 (GEN-02-12).
• Effective date - March 31, 2003
• (only form that may be distributed for use for
  TPD discharge requests received on or after March
  31, 2003).
• Other TPD applications may still be processed
  after that date.

8
Assignment Process

• Assigned to ED via tape or paper file.
• Receipt acknowledged via e-mail (approximately
  1-3 days after receipt).
• Once initial determination is made, GA receives
  copy of letter sent to the borrower
  (approximately 30 days from acknowledgment).

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Assignment Documentation

• Assignment Form
• Collateral Documentation
• Indemnification Agreement
• Assignment Letter
• TPD Form, including any additional documentation
  used to validate disability

10
Statistics

• July 1 November 30, 2002
• 1,065 - FFEL loans received
• 1 Discharged (lt1)
• 150 Reinstated (14)
• 914 Conditional period (86)

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Reasons for Reinstatement

• Medical review failure
• Physician not licensed
• Incomplete documentation
• Physician backs down on prognosis once contacted
  by RN.
• Physician did not return additional information
  requested by RN.

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Reasons for Reinstatement

• New loan after disability date.
• Income exceeds poverty guidelines.

13
Outstanding Issues

• TPD QA
• Submitted to ED - June 21, 2002
• Industry response to EDs follow-up questions
  regarding credit bureau reporting October 31,
  2002
• Response still pending

14
THANK YOU!

• Rinn D. Harper
• Texas Guaranteed
• [phone]
• rinn.harper_at_tgslc.org

15
New Consolidation Discharge Provisions

• Larry Miller
• Nelnet

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Federal Regulations

• Final Rules published November 1, 2002 and
  effective for discharge requests received on or
  after November 1, 2002.
• 682.402(a)(2) Provides for the partial
  discharge of a spousal Consolidation Loan if one
  of the borrowers dies or becomes totally and
  permanently disabled.
• The outstanding balance that is attributable to
  the deceased or disabled borrowers underlying
  loan(s), as of the date of the death or
  disability.

17
Federal Regulations

• 682.402(b)(6) Provides for the partial
  discharge of a Consolidation Loan if a dependent
  for whom an underlying PLUS loan was obtained
  dies.
• The outstanding balance, as of the date of the
  death, that is attributable to the underlying
  PLUS loans taken out on the deceased dependents
  behalf.

18
Federal RegulationsCorresponding Changes

• 682.402(k)(2)(iii) Provides for reinsurance to
  the guarantor, should the guarantor determine
  that a Consolidation Loan that was previously
  paid as a default claim is eligible for partial
  discharge due to the death or disability of one
  of the co-makers.
• 682.604(g) Provides that the school must review
  the conditions for a partial discharge, in the
  course of conducting exit counseling.
• 682.500 Provides for corresponding changes to
  the Federal Direct Loan Program.

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Guidance from the Department of Education

• Preamble Both borrowers are jointly and
  severally liable for the remaining portion of the
  Consolidation Loan for those circumstances other
  than death.
• Only applies to Consolidation Loans
• (not outstanding PLUS loans made to
• co-makers).

20
NCHELP takes Action!

• NCHELP Program Ops
• Established a workgroup to address implementation
  issues related to the partial discharge of a
  Consolidation Loan with underlying PLUS loans for
  which the dependent student has died.

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Implementation Issues Include

• Identifying eligible loans.
• Determining the amount eligible for discharge.
• How will the lender submit the discharge to the
  guarantor?
• Will the Department of Education require the
  lender to file the entire loan as a disability
  when only a portion qualifies.
• Which guarantor pays the claim?
• How are NSLDS and Credit Bureau reporting
  impacted?

22
Teacher Loan Forgiveness

• Kristine Brown Nelnet

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Teacher Loan Forgiveness

• Up to 5,000 discharge award for qualifying
  loans.
• Borrowers teach for five years in needy school.

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Teacher Loan Forgiveness

• Established by the HEA Amendments of 1998.
• Available for new borrowers on or after October
  1, 1998.

25
Borrower Qualifications

• Must teach full-time for 5 consecutive, complete
  academic years in a qualifying school.
• Must teach at least one year after the 1997-98
  school year.
• Must teach a subject relevant to academic major.

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School Qualifications

• Listed in the Annual Directory of Designated
  Low-Income Schools for Teacher Cancellation
  Benefits.
• http//www.ed.gov/offices/FSA/Students/repayment/t
  eachers/search_t02.html.

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Loan Qualifications

• FFELP or FDLP subsidized and unsubsidized
  Stafford Loans.
• Portion of Consolidation loan attributable to
  FFELP or FDLP sub and unsub Stafford Loans.
• Loans made before the end of the fifth year of
  service.

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Discharge Amount

• Outstanding principal and interest on qualifying
  loans.
• Maximum amount is 5,000 cumulative.

29
Discharge Restrictions

• Previously made payments are not refunded.
• Periods of teaching used to qualify for National
  Community Service awards may not be used.

30
Mandatory Forbearance

• Forbearance granted during teaching service based
  on borrower request.
• Forbearance applied in one-year increments.
• Entire loan balance, including accrued interest,
  must be expected to be repaid when discharge
  qualifications met.

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Administrative Forbearance

• Forbearance may be applied for up to 60 days by
  the lender when discharge application sent to
  borrower.
• Forbearance automatically applied while
  discharge request is being evaluated by lender
  and guarantor.

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Teacher Loan Forgiveness Forms

• Teacher Loan Forgiveness Application for
  discharge.
• Teacher Loan Forgiveness Forbearance Form for
  mandatory forbearance requested by borrower.

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Lender Review of Discharge Application

• Borrower requests TLF application. (60 day admin
  forb possible)
• Lender reviews completed application for
  eligibility. (admin forb)
• Lender forwards completed application to
  guarantor for review. (admin forb)

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Guarantor Review of Discharge

• Guarantor reviews application for discharge.
  (admin forb)
• Guarantor pays or denies the request. (admin
  forb)
• Guarantor requests reimbursement from ED.

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Lender Final Steps

• Lender notifies borrower within 30 days.
• Lender applies payment to unsub then sub loans.
• Lender rediscloses remaining balance on loans
  after payment applied and admin forb ended.

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The Future of Teacher Loan Forgiveness

• Entitlement program so automatically funded
• Larger numbers expected after 2007