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Total and Permanent Disability (TPD) Discharge Training Teleconference

Carl Casey-NelnetRon Stroud-TGJune 12, 2013

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What We’re Covering

• New Process• Communications• New Forms• Borrower Experience• Loan Holder / Guarantor

Responsibilities

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New Process

• On or after July 1, 2013, all discharge applications are to be submitted to the Department.

• Department will communicate with the loan holders throughout the application process.

• Once approved, the Department will notify all loan holders to process refunds, submit claims and/or assign loans.

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Communications

• Borrower– New letters include 1099C information– Provide loan level detail– Revised Web Site

• Loan Holders– Loan Holder Notification file

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Loan Holder Notification File• Sent via SAIG or secure e-mail– SAIG approved for Fed Loan Servicers and FFEL

Guaranty Agencies• In .csv format• Intent – Materially Complete – Approval/Rejection – Discharge Processed

• Suspension start and end dates• Guarantor ID

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New TPD Forms

• Three new forms to support the changes

– New TPD Application

– New Borrower Representative Form

– New Monitoring Period Form

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New Discharge Application

• Date of Birth• Section 2 – Demonstrating TPD• Section 3 – ROA form is now required• Section 4 – Medical abbreviations

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Representative Designation Form

• Designate, change, or revoke representation

• May be an individual or organization• Required even with Power of Attorney• Authorized representative must be

furnished with same notifications as borrower

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Post Discharge Monitoring Form• Provides self-certification option on

the form itself• Requests documentation of annual

earnings from employment• Monitored for three years• Acceptable documentation• Obligation reinstated if income

exceeds poverty level for family of two

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Borrower Experience

• Verbal and written intent processes• Online intent processes• Revised written communications• Guide to filling out a TPD Discharge

Application• Revised website (

www.disabilitydischarge.com)

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Revised Website

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Collection Activity

• Collection activity suspended for up to 120 days upon notification of intent to submit discharge application

• Collection activity suspended for indefinite length of time while the Department reviews discharge application

• Collection activity resumes if the borrower’s request for discharge is rejected

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Notification of Suspension

• Servicers are not required to notify guarantors at the start of the 120-day suspension but must cancel any open DAAR or recall any pending claim

• Servicers must notify applicable guaranty agencies at the start of the indefinite-length suspension period

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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

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Denial of Discharge

• 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

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New FFELP Forms• Revised Claim Form• Revised Partial Discharge Request

Form• Other Current FFELP Forms document

library: http://www.ncher.us/?page=e0063

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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

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Guarantor 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

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Claim Payment

• Claim payment must be issued within 45 days of claim receipt

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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 (on, or after for VA) that date must be refunded, by the holder, to the borrower

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NSLDS Reporting• No changes to guarantor reporting• New forbearance code for indefinite

suspension - Federal Loan Servicers only

• Discharge application status may be captured at a future date

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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

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Partial Discharges• Pseudo eligibility report unchanged• Suspension periods• Loan Holder Notification file identifies

the borrower, not the loan or loan type

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Community Best Practices• Developed by NCHER TPD Workgroup• Includes Implementation Q&As

approved by the Department

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Community Best Practices• Q. If a borrower contacts their loan holder

about a potential TPD on or after 7/1/2013, how should they be instructed to contact the Department?

• A. Refer them to Nelnet, the Department’s TPD servicer. Borrowers can go online at www.disabilitydischarge.com to initiate their intent to apply. In addition, borrowers can call Nelnet seven days a week at 888.303.7818 from 8:00 a.m. to 8:00 p.m. (Eastern) or send an email to disabilityinformation@nelnet.net.

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Community Best Practices

• Q. What action should a loan holder take on any TPD discharge application that is received on or after 7/1/2013?

• A. The loan holder must forward the application to the Department for review, and notify the borrower accordingly.

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Community Best Practices• Q. If the loan holder forwards a TPD

application to the Department, should the loan holder suspend collection on the loan?

• A. No. The loan holder should only suspend collection on the loan based on the lender notification described in 682.402(c)(2)(viii).

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Community Best Practices• Q. Must the two suspension periods, 120-day or

indefinite-length, be uninterrupted (i.e. continuous)?• A. No. Upon receipt of the discharge application,

the loan holder(s) will be instructed to “suspend collection activity or maintain the suspension of collection activity…”. In other words, the initial suspension may last no more than 120 days. If no discharge application is received by the Department within that time, the period of suspension ends. If a discharge application is received by the Department after the 120th day, a new suspension period must be applied.

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Community Best Practices• Q. If a guarantor has certified a borrower for

TOP, must TOP activity be suspended based on receipt of the Department’s notification to apply a period of suspension?

• A. No. Due to the administrative and timing issues associated with suspending TOP, the Department does not believe it is in the best interests of tax payers to suspend TOP based solely on the borrower’s intent to submit a discharge request, or on the mere receipt by the Department of a discharge request.

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Community Best Practices• Q. If the borrower is not in repayment (e.g.

grace, deferment, etc.) when the lender receives a notice from the Department to suspend collection, must the lender put the loan into repayment and apply the appropriate suspension period?

• A. No. The lender must monitor the account to ensure that the account enters into the appropriate suspension period if the current non-repayment status ends before the period of TPD suspension ends.

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Community Best Practices• Q. Are lenders expected to perform a loan

level verification of eligibility for discharge (and submit claims accordingly) upon notification of discharge approval from the Department?

• A. No. Loan holders do not need to perform any loan level review for eligibility, as this is part of the Department’s NSLDS review prior to approving the discharge.  Claims for all loans held by the lender for discharged borrowers should be submitted to the appropriate guarantor(s) per Department instruction.

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Community Best Practices

• 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.

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Resources• PowerPoint Presentation• FFELP Forms• Best Practices• TPD LHN File Layout• IFAP Updates• Guaranty Agency Contacts• NCHER e-Library – TPD Discharge Info– http://www.ncher.us/?page=e2125

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Additional TrainingNCHER 2013 Knowledge Symposium

November 5-7, 2013http://www.ncher.us/events/event_details.asp?id=319497

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Thank You! Questions???