The Shifting Sands of TPD Carl Casey-Nelnet Ron Stroud-TG Barbara Wilhelm-USA Funds Current Process • CDDT transition to Nelnet • Responsibilities • Borrower • Loan Holders • FSA • TPD Servicing TPD Servicing Review • Receipt and Review • FSA Review • Reporting • Communications Processing Time Improvements • The Average Days to Process represents the time it took to get the borrower into Monitoring from the receipt date: 140 120 116 116 104 100 97 92 100 73 80 62 60 41 40 26 25 26 Jul-12 Aug-12 Sep-12 20 0 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 Average Days to Process May-12 Jun-12 New Process • All discharge applications to be submitted to the Department. • Department will notify all loan holders to suspend collection activity. • Department will notify all loan holders to submit claims and/or assign loans. All Loan Holders • Transition/Trigger – Any discharge application received on or after 7/1/2013 must be forwarded to the Department. • Instructions to borrower – A borrower contacting any FFEL entity about a TPD situation on or after 7/1/2013 must be referred to the Department. All Loan Holders • Suspension periods – Collection activity suspended for up to 120 days upon notification of intent to submit discharge application. – Collection activity suspended for indeterminate period of time while the Department reviews discharge application. All Loan Holders • Interest capitalization – If no TPD application received within 120 days, holder may capitalize interest for that period, unless holder is a guarantor. – If TPD application is denied by the Department, holder may capitalize interest for the entire review period, unless holder is a guarantor. All Loan Holders • Payment refunds – Approval notification from the Department will include either the date of the physician’s certification, Department’s receipt date of SSA notice of award for SSI or SSDI, or date unemployable due to a service-connected disability. – Any payment received after that date must be refunded, by the holder, to the borrower. All Loan Holders • Denial of discharge application – Department will notify holder of reason for denial. – Borrower must be informed, by the holder, of date payments will resume. – Loan returns to the appropriate status as if discharge application had not been submitted. Servicers • Notification of suspension – Servicers are not required to notify guarantors at the start of the 120-day suspension but are strongly encouraged to do so if an open DAAR exists. – Servicers must notify applicable guarantor(s) at the start of the indeterminate-length suspension period. Servicers • Claim submittal – Claim must be submitted to the guarantor within 60 days of receipt of the Department’s notification of discharge approval. – Amount claimed reflects principal and interest balance as though any refundable borrower payments had not been posted; refund is issued to borrower after claim payment. – Department notification of approval is required claim documentation. Guarantors • Claim review – Claim packet must not include any discharge application received on or after 7/1/2013. – If claim meets requirements of 682.402(g)(1) and 682.406, guarantor must pay the claim. Guarantors • Claim payment deadline – Claim payment must be issued within 45 days of claim receipt. Guarantors • Assignment process – Claim-purchased loans must be assigned to the Department within 45 days of receipt of federal reinsurance payment. – Guarantor-held loans must be assigned within 45 days of receipt of the Department’s notice of discharge approval. – No payment histories or lump sum payment refund totals with assignment; borrower payment refunds are issued by loan holders prior to assignment. Discharge Application • Community Recommendations – Borrower Representative clarified. – Date of Birth to facilitate NSLDS research. – Co-maker information to facilitate partial discharge requests. TPD Servicing Planning • Processing changes • Communications • Technology • Borrower experience FAQs • Q. If a borrower’s obligation to repay a loan is reinstated during the post-discharge monitoring period, is the borrower responsible for interest accrued between the date of discharge and reinstatement? • A. No. If a borrower’s obligation to repay a loan is reinstated, the borrower is not required to pay interest accrued between the date that the loan was discharged and the date the borrower’s obligation to repay the loan was reinstated. FAQs • Q. May a borrower who is in a three year post-discharge monitoring period due to TPD receive a new Title IV loan or TEACH grant? • A. Yes. However, the borrower must sign a statement acknowledging that collection activity will resume on any loan that is in a post-discharge monitoring period, and a TEACH grant recipient must acknowledge that he or she is once again subject to the service obligation terms of the TEACH grant. Additionally, the borrower must obtain a physician’s statement certifying that the borrower may now engage in “substantial gainful activity”, and must sign a statement acknowledging that any new loan the borrower receives may not be discharged due to the same, or any, disability existing at the time the new loan is made, unless the disabling condition substantially deteriorates to the extent that the definition of TPD is met. FAQs • Q. May a borrower who has received a final discharge (i.e. after the conclusion of the post-discharge monitoring period) based on a determination of total and permanent disability receive a new Title IV loan or TEACH grant? • A. Yes. However, the borrower must obtain a physician’s statement certifying that the borrower may now engage in “substantial gainful activity”, and must sign a statement acknowledging that any new loan the borrower receives may not be discharged due to the same, or any, disability existing at the time the new loan is made, unless the disabling condition substantially deteriorates to the extent that the definition of TPD is met. FAQs • Q. May an administrative forbearance be granted for a period of delinquency prior to an authorized period of suspension? • A. No, not at this time. However, a regulatory change to allow this is currently pending in Package 2, expected in 2014. Stay tuned! Questions???