TOTAL AND PERMANENT DISABILITY DISCHARGE PROCEDURES

Transcription

1 Illinois Student Loan Administrators September 24, 2013 TOTAL AND PERMANENT DISABILITY DISCHARGE PROCEDURES Presented By: Nancy Paris Xerox Education Services, Inc

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3 TOTAL AND PERMANENT DISABILITY DISCHARGE PROCEDURES PURPOSE: Outline changes to the process for discharging Federal Perkins loans total and permanent disability (TPD) effective July 1, Note: TPD discharge applications received prior to July 1, 2013 will be processed under the regulations that are currently in effect. SUPPORTING REGULATION: Federal Register (77 FR 66087) PERFORMED BY: Federal Perkins loan holder and student loan servicers. DEFINITIONS: For ease in reading the process overview that follows, the subsequent terms will be depicted throughout this procedural packet. Borrower: refers to the disabled individual who applies for TPD discharge. Loan holder: refers to Perkins loan holders as well as to the student loan servicers who assist in the servicing of Federal Perkins loans. Nelnet: refers to the Department of Education s (ED) TPD servicer who assists ED in administering the TPD discharge process and will communicate with the borrower on behalf of ED concerning the borrower s TPD discharge request. ED s notification to loan holder: refers to ED s notifications to loan holders through the use of a TPD Loan Holder Notification File (TPD LHN File) that Nelnet will send electronically to Perkins Loan lenders or student loan servicers. STD: refers to a standard TPD discharge as indicated on the TPD LHN File s Field 11. VET: refers to a veteran s service-connected discharge as indicated on the TPD LHN File s Field 11. The new TPD discharge regulations apply to TPD discharge applications received on or after July 1, All borrowers seeking a TPD discharge will submit their discharge application directly to the Department of Education s (ED) Total and Permanent Disability Servicer, Nelnet, rather than to their individual loan holder(s). A borrower will be required to submit only one application to apply for a TPD discharge of all of his or her Title IV loans and/or TEACH Grant service obligations. A borrower also qualifies for TPD discharge if he or she is receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, and submits a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that the borrower s next scheduled disability review will be within 5 to 7 years from the date of the borrower s most recent SSA disability determination. A borrower who provides this documentation is not required to obtain a separate certification from a physician on the TPD discharge application. I. TPD INQUIRIES If a borrower notifies a loan holder that he or she is totally and permanently disabled, the loan holder must direct the borrower to ED s TPD servicer (Nelnet) at , Monday through Sunday, 8:00 a.m. to 8:00 p.m. (EST). A. Nelnet Assistance Nelnet will assist the borrower with all inquiries regarding their request for TPD discharge. If the borrower notifies Nelnet that he or she intends to apply for a TPD discharge, Nelnet reviews eligibility

4 requirements and provides the borrower with a TPD discharge application. Nelnet will refer the borrower to in order to login and apply TPD online application. See Attachment 1 Nelnet notifies all of the borrower s loan holders to suspend collection activity on the borrower s loans for up to 120 days. B. Appointing a Representative A borrower is allowed to have a representative complete and submit the TPD discharge application on the borrower s behalf and assist the borrower throughout the discharge process. The borrower, however, must complete an Applicant Representative Designation form. See Attachment 2 Nelnet must receive and process this form before it can work with the representative. The borrower must submit the Applicant Representative Designation form even if he or she has a power of attorney for the representative. II. RECEIPT OF TPD APPLICATION Loan holders who receive applications for TPD discharge must forward the applications to Nelnet. ED has one contact point, Nelnet, for loan holders and borrowers seeking assistance with all TPD discharge questions. A. Materially-Complete TPD Discharge Application If Nelnet receives a materially-complete TPD discharge application from the borrower, the loan holder(s) are notified to suspend collection activity on the borrower s loan(s) indefinitely while the TPD discharge application is reviewed to determine whether the borrower qualifies for discharge. Please refer to IV.B B. Borrower Qualifies for TPD Discharge. If ED determines that the borrower is eligible for a TPD discharge, ED notifies the borrower and the borrower s loan holder(s) that the discharge application has been approved.

5 1. Physician s certification or acceptable documentation from the Social Security Administration (SSA). If the borrower qualifies for discharge based on a physician s certification or acceptable documentation from the SSA showing that the borrower is totally and permanently disabled, ED notifies the loan holders of the following: a. Provides the date of the physician s certification or the date ED received the SSA documentation. b. Advises to assign the borrower s loan(s) to ED for discharge and a 3-year post-discharge monitoring period. Loan holders must return to the sender any payments on the discharged loans that were received after the date of the physician s certification or the date ED received the SSA documentation. After the loans have been assigned to ED, and if the borrower has maintained eligibility for the discharge, ED discharges the loans and notifies the borrower and the loan holders that the loans have been discharged. 2. Acceptable Documentation from the Veteran s Administration (VA). If the borrower qualifies for discharge based on acceptable documentation from the VA showing that the borrower has been determined to be unemployable due to a service-connected disability, ED notifies the loan holders of the following. a. Provides the effective date of the VA determination. b. Advises the loan holders to discharge the borrower s loan(s). Loan holders must return to the sender any payments on the discharged loans that were received on or after the effective date of the VA determination. C. Borrower Ineligible for TPD Discharge. If ED determines that the borrower is not eligible for a TPD discharge, ED notifies the borrower and the loan holders of this determination and instructs the loan holders to resume collection activity on the borrower s loans. III. TPD LOAN HOLDER NOTIFICATION FILE (TPD LHN FILE) Nelnet s the TPD LHN File to a designated contact, which must be established no later than June 30, Nelnet cannot begin sending notifications to the loan holder until they receive the designated contact for receipt of the TPD LHN File. The school may designate a school staff member or their servicer. A. Designating a Contact. The loan holder must login to National Student Loan Database (NSLDS) Professional Access Website and designate an individual to receive the TPD LHN File as follows. Those who do not have access to the NSLDS must contact their Financial Aid Office to determine who has the access to update information. See Attachment 3

6 1. Log into the NSLDS Professional Access website via 2. Select the ORG tab. 3. Select Disability Processing from the Available Functions drop-down menu. 4. Enter the designated contact s information: 5. Click Submit. a. If the loan holder needs to change its designated contact for the notification file in the future, it will do so by returning to the NSLDS Professional Access website as follows. Log into Select the ORG tab. Click the Disability Processing function key. Update the contact information. Click Submit. D. Receiving Nelnet s Secured Notifications. Nelnet s secure all Personally Identifiable Information (PII) by automatically encrypting outbound communications containing PII. The will be sent from Nelnet s address [email protected] The Subject line will indicate N!! Loan Holder Notification File. 1. Upon receipt of the first encrypted , the designated contact must register his or her contact information to receive the attachment. Once registered, he or she will not be required to register again. 2. Each time there is new or updated borrower information to provide to the loan holder, Nelnet will send the comma separated values (*.csv) TPD LHN File to the address identified for this purpose. a. The TPD LHN File is transmitted Monday through Friday of each week only when there is new information for the loan holder. TPD LHN File transmittals will not occur on New Year s Day, Martin Luther King, Jr. birthday, Washington s Birthday, Memorial Day, Independence Day, Labor Day, Veterans Day, Thanksgiving Day, Day After Thanksgiving and Christmas Day. 3. The TPD LHN File includes 15 data fields. See Attachment 4 a. Field 1: The date ED transmitted the file to the loan holder. b. Fields 2 7: Borrower matching criteria (i.e. SSN, first name, last name, date of birth, OPE ID). c. Fields 8 15: Reason Code and application status information (i.e. suspension start date, suspension end date, TPD type [STD or VET], TPD date, date approved, date rejected, reject reason).

7 IV. TPD LHN FILE REASON CODES The TPD LHN File will include one of the following notifications, identified by a reason code. The designated contact must take action upon receipt. See Attachment 4 A. Reason Code 120SUSP: Time allotted to borrower to gather TPD documentation to submit for discharge. Loan holder must suspend collection activity for up to 120 days while the borrower completes and submits the TPD discharge application. The Suspension Start date signifies the date the borrower ceases to be responsible for payments. B. Reason Code INDEFSUSP: Materially-complete TPD application received. Loan holder must suspend collection activity indefinitely while the TPD discharge application is reviewed to determine whether the borrower qualifies for discharge. The Suspension Start date signifies the date the borrower ceases to be responsible for payments. C. Reason Code APPREJ: TPD discharge application has been rejected, including the reason it was rejected. Sample reject reasons may include, but are not limited to, the following. i. Incomplete/illegible TPD application ii. Applicant signature missing iii. Applicant SSN invalid/illegible iv. Applicant failed to return application within 120 days v. Borrower requested recall vi. Expired application vii. Received application more than 90 days after physician signature viii. Physician indicated applicant capable to work ix. Invalid physician license x. Invalid/illegible physician signature/date D. Reason Code APPAPPR: TPD discharge application has been approved STD versus VET. 1. Approval based on physician s certification or acceptable documentation from the SSA (TPD LHN File Field 11 indicates STD). The loan(s) must be assigned to ED for discharge and a 3-year post-discharge monitoring period. Loan holders must return to the sender any payments that were received after the date of the physician s certification or the date that we received the SSA documentation that supported the borrower s eligibility for discharge. b. Assign the loan to ED.

8 Loan holders must assign loans to ED within 45 days of the date the notification is received (i.e. Field 1 of the TPD LHN File). 2. Approval based on acceptable documentation from the VA: TPD LHN File Field 11 indicates VET. The loan holder(s) discharge the borrower s loans and return to the sender any payments received on or after the effective date of the VA determination that supported the borrower s eligibility for discharge. E. Reason Code DISCRG: Loan(s) for borrower discharged due to TPD. 1. The discharge coding (DISCRG) is for notification purposes only. V. NSLDS REPORTING Before assigning the loan to ED, the NSLDS record for the loan must be updated using Loan Status Code AE which reflects the assignment. In reporting the assignment to NSLDS, the school must report to NSLDS the same date for the Date of Loan Status that the school reports as the Certification Date on ED Form 553. When the loan is assigned to ED, the code number must be reported to NSLDS for the entity (i.e. Nelnet) that will receive the loan. Nelnet s NSLDS identification information is as follows: VI. LOAN ASSIGNMENT Loan holders must assign loans to the ED within 45 days of the date the notification is received (i.e. Field 1: Date Notified of the TPD LHN File). Payments received after the account has been assigned should be refunded to the sender. A. Completing the Account Manifest. Each assignment submission package must include a manifest listing the accounts submitted. The loan holder must a copy of the assignment manifest and institutional certification form to Nelnet in a password-protected.zip file (and provide the password in a separate ) at [email protected]. The copy may be in.pdf or MS Word compatible formats (i.e..doc,.docx,.rtf,.txt, etc.) See Attachments 5 and 6 1. The loan holder is required to complete only one Institutional Certification page of the Perkins Assignment Form for each assignment submission package. 2. The Institutional Certification page must bear the original signature of the school official who is authorized to transfer the institution s assets. B. Completing the Perkins Assignment Form (OMB Number ).

9 The approved Federal Perkins Loan Program/NDSL Assignment Form must be used for assignment submissions. All loans must be recalled from any outside firms that the loan holder employed for billing, collection, litigation and credit bureau reporting at least 45 days prior to the certification date on the Perkins Assignment Form. See Attachments 7 and 8 Loan holders may provide documentation that the loan has been recalled or a copy of the letter from the loan holder requesting such recall. 1. The Borrower and Loan Information page should be completed for each loan included in the assignment submission package. 2. A school may use a computer-generated facsimile or photocopy of the approved Perkins Assignment Form. a. If an institution chooses to use a computerized facsimile of the Perkins Assignment Form, it must ensure that the computer-generated form is identical in format and content to the OMBapproved Perkins Assignment Form. Facsimiles that do not comply with this requirement or cannot be easily read due to tight spacing or blurring will be rejected. Assignments using any form other than the approved Perkins Assignment Form, or an acceptable facsimile or photocopy of that form will be rejected. C. Submitting the Original Promissory Note and Certification/Audit of E-Signature. All promissory notes that are submitted for assignment must be valid legal instruments. 1. Open-end and closed-end Perkins/NDSL promissory notes must contain signatures, loan amounts, and dates for each loan period. a. Copies of disbursement checks or vouchers may also be submitted as documentation of unsigned advances on a closed-end or open-end promissory note. b. Partial assignment of a note may be made by including a clarifying statement noting that assignment is being made of only the valid advances and by completing the Perkins Assignment Form to reflect this. 2. Perkins Master Promissory Notes (MPNs) must contain the borrower s signature and the principal amount loaned must be supported by institutional disbursement records. 3. If defective, missing or invalid notes are identified, approval from the appropriate ED official may need to be granted prior to assignment by sending a password-protected.zip file (and providing the password in a separate ) to [email protected]. a. If a defective promissory note cannot be corrected, the loan may be assigned as follows. If the original promissory note is no longer available and only a photocopy exists, the photocopy (front and back) may be submitted with a Certified True Copy statement, signed by an appropriate institutional official, appearing on the photocopy. See Attachment 9 b. If neither the original nor a photocopy of the promissory note is available, or if the promissory note is defective, the loan may still be assigned if the school submits copies (front and back) of

10 the signed disbursement checks or vouchers, or submits an original legal judgment with the appropriate transfer statement. 4. If a school has a National Defense Student Loan and a National Direct Student Loan on the same promissory note, or the promissory note includes more than one interest rate for the same borrower, or different individuals co-signed parts of the same promissory note, each loan must be treated as a separate loan even though the loans are on the same promissory note. a. A certified true copy of the original promissory note must be made along with the original promissory note with one loan and the certified true copy with the other loan(s). See Attachment 9 b. Attach a clarifying statement with the certified true copy indicating that the original promissory note is attached to one of the borrower's other loans included in the assignment package. See Attachment 9 c. A separate Perkins Assignment Form, along with supporting documentation, must be completed for each note with different provisions. 5. For promissory notes that are signed electronically, a most recent audit must verify the extent to which the school s electronic signature authentication process meets the ED s Standards for Electronic Signatures in Electronic Student Loan Transactions. a. ED may request an affidavit or certification regarding the creation and maintenance of the electronic records of the loan or loans assigned to ED in a form that is admissible in a legal proceeding. b. Testimony by an authorized official of the school may also need to be provided to ensure the admission of the electronic records of the loan in any legal proceedings. D. Submitting Repayment Histories. A copy of the student's loan repayment history (financial profile of the account) must be provided and must include the following. 1. All payments made, on a payment-by-payment basis. 2. How individual payments were applied (such as what portion of the payment was applied to principal and what portion was applied to interest, etc.). 3. Total amounts for each of these areas of payment application. 4. A key to interpret the repayment history may be provided as an attachment to any printout. In order to assist in the interpretation of every accounting transaction that appears on the repayment history. E. Submitting the Assignment to Nelnet. If submitting by mail, loan holders must double package all sensitive documents in opaque materials that are approved by the shipping agent of the school (i.e. DHL, FedEx, UPS, USPS, etc.). Both the "TO" and "FROM" addresses must be included on both the inner and outer packages. Shipping agents must have the capability of tracking the shipment's status and must require signatures upon receipt.

11 The package should not identify the sensitivity of the contents. F. Resubmission Procedures. If it is necessary for a school to resubmit an account, corrections can be made directly on the returned Perkins Assignment Form, on a computer-generated facsimile or a photocopy of the Perkins Assignment Form. It may be ed, along with a copy of the assignment manifest and institutional certification form Nelnet in a password-protected.zip file (and provide the password in a separate ) at [email protected]. The copy can be in.pdf or MS Word compatible formats (i.e..doc,.docx,.rtf,.txt, etc). a. Corrections should be made using blue or black ink. b. Each change must bear the initials of the staff member making the change. c. Corrections must be clear and legible. Alternatively, a school may prepare a new form. If a new Perkins Assignment Form is prepared, a school should not resubmit the old Perkins Assignment Form. d. If the account is resubmitted more than 45 days after its date of return to the school, the certification date and interest due must be changed. e. If an account is rejected due to a problem with any of the dates appearing on the Perkins Assignment Form, a school should ensure that all correlating dates are correct before resubmitting the assignment. f. "Resubmission" must be clearly written on the envelope. An assignment submission package manifest must be included with each resubmission package. g. An assignment submission package manifest must be included with each resubmission package. VII. CREDIT BUREAU REPORTING A. Non-Defaulted Loans. The account is reported as Status Code 05 and the Payment Rating that is consistent with the current or delinquent status of the account on the date the loan is assigned to ED (i.e., 0, 1, 2, 3, 4, 5 or 6). 1. Status Code 05 is defined as account transferred to another office. 2. The Payment Rating indicates that the payment for this month was current or delinquent.

12 3. No further reporting by the school would be required because a Status Code 05 is a final status. Since ED is responsible for the loan after assignment, it is not necessary for the school to continue to report on the loan. B. Defaulted Loans Previously Reported by the School as Status Code 93 Collection. The account is reported as Status Code 05, Payment Rating G and Special Comment Code AL. 1. Status Code 05 is defined as account transferred to another office. 2. Payment Rating G indicates that the account was a Collection prior to the transfer. 3. Special Comment Code AL indicates student loan permanently assigned to government. 4. All collection history already reported would be retained for historical credit reporting purposes. No further reporting by the school would be required because a Status Code 05 is a final status. Since ED is responsible for the loan after assignment, it is not necessary for the school to continue to report on the loan. ATTACHMENT 1: Total and Permanent Disability Discharge Application (OMB No ) Page 1

13 ATTACHMENT 1 (continued): Total and Permanent Disability Discharge Application (OMB No ) Page 2

14 ATTACHMENT 1 (continued):

15 Total and Permanent Disability Discharge Application (OMB No ) Page 3

16 ATTACHMENT 1 (continued): Total and Permanent Disability Discharge Application (OMB No ) Page 4 ATTACHMENT 1 (continued):

17 Total and Permanent Disability Discharge Application (OMB No ) Page 5

18 ATTACHMENT 1 (continued): Total and Permanent Disability Discharge Application (OMB No ) Page 6

19 ATTACHMENT 1 (continued): Total and Permanent Disability Discharge Application (OMB No ) Page 7

20 ATTACHMENT 2: Applicant Representative Designation Form Page 1

21 ATTACHMENT 2 (continued): Applicant Representative Designation Form Page 2

22 ATTACHMENT 3: TPD LHN File Designating a Contact

23 ATTACHMENT 4: TPD LHN File Notification Layout

24 ATTACHMENT 4 (continued): TPD LHN File Notification Layout

25 ATTACHMENT 5: Assignment Form (OMB Number ) - Institutional Certification

26 ATTACHMENT 6: Assignment Form Institutional Certification Instructions

27 ATTACHMENT 6 (continued): Assignment Form Institutional Certification Instructions

28 ATTACHMENT 7: Assignment Form (OMB Number ) Borrower and Loan Information Page 1

29 ATTACHMENT 7 (continued): Assignment Form (OMB Number ) Borrower and Loan Information Page 2

30 ATTACHMENT 8: Assignment Form Borrower and Loan Information Instructions

31 ATTACHMENT 8 (continued): Assignment Form - Borrower and Loan Information Instructions

32 ATTACHMENT 8 (continued): Assignment Form - Borrower and Loan Information Instructions

33 ATTACHMENT 9: Certified True Statement I declare under penalty of perjury that the foregoing is a true and correct copy of the original promissory note. Signature: Title: Date: ATTACHMENT 10: Nelnet Contact Information & Assistance with TPD LHN File transmittals Questions regarding the assignment process for TPD discharge or questions about loans after they have been assigned due to TPD should be directed either in writing or by phone toe Nelnet as follows. IMPORTANT LINKS: html Regulations.html

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