The Shifting Sands of TPD

Report
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???

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