PROCESSING FLOW FOR PARTIAL DISCHARGE OF A by drg59916

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									         PROCESSING FLOW FOR PARTIAL DISCHARGE OF A CONSOLIDATION LOAN DUE TO THE
                     TOTAL AND PERMANENT DISABILITY OF A CO-BORROWER


Loans Held by Lender/Servicer:

•   The lender receives the completed Loan Discharge Application: Total and Permanent Disability (Discharge Application:
    TPD) form submitted by the borrower or the borrower’s representative and applies forbearance to the full Consolidation
    loan, if necessary. (See Common Manual subsection 12.8.E for additional information regarding forbearance eligibility
    due to total and permanent disability.)

•   The lender reviews the Discharge Application: TPD form to determine if the borrower meets the eligibility criteria.

•   If the lender determines the borrower does not meet the eligibility criteria for partial discharge, the lender ends any
    forbearance granted due to the receipt of the Discharge Application: TPD form and places the full Consolidation loan
    amount back into repayment. The lender must notify the borrower who applied for discharge that the request has been
    denied, the reason(s) for the denial and that repayment of the full Consolidation loan amount resumes immediately.

•   If the lender determines the borrower meets eligibility criteria for partial discharge, the lender:

             •    Completes the Request for Reimbursement Due to Partial Discharge of a Consolidation Loan form (Request
                  for Reimbursement) form.

             •    Submits the Request for Reimbursement form and the Discharge Application: TPD form to the guarantor of
                  the Consolidation loan.

             •    Continues to hold the Consolidation loan.

•   The guarantor reviews both the Request for Reimbursement form and the Discharge Application: TPD form to determine
    if the borrower meets the eligibility criteria.

•   If the guarantor determines the borrower meets eligibility criteria for partial discharge, the guarantor pays the amount
    determined eligible for conditional discharge to the Consolidation lender (amount reimbursed), submits a request to the
    Department of Education (the Department) for reinsurance and forwards the Discharge Application: TPD form and the
    Request for Reimbursement form to the CDD Unit for determination and conditional discharge monitoring.

    •   The lender applies the amount reimbursed by the guarantor to the outstanding balance of the Consolidation loan.

    •   The lender ends any forbearance previously granted due to the receipt of the Discharge Application: TPD form.

    •   The lender notifies the borrower who applied for discharge that the guarantor has approved a portion of the
        Consolidation loan for submission to the Department for determination of eligibility for total and permanent disability
        discharge, the amount preliminary approved for conditional discharge, and that he/she remains jointly and severally
        liable for the remaining balance of the Consolidation loan.

    •   If a balance remains on the Consolidation loan after the application of the amount reimbursed, the lender continues
        servicing the balance of the Consolidation loan with only the non-disabled borrower being held responsible for
        repayment during the conditional discharge period.

    •   If the application of the amount reimbursed or the application of payments received during the period of conditional
        discharge results in the Consolidation loan being paid in full, the lender must not notify the borrowers that the
        Consolidation loan is paid in full. The lender may only notify the borrowers that the loan is paid in full upon
        notification of final discharge approval from the Department. The lender must notify the borrowers that no payments
        are due currently pending final discharge determination.



                                                                                                               04/22/2004 revision
    •   If the application of the amount reimbursed or the application of payments received during the period of conditional
        discharge results in the Consolidation loan having a credit balance, the lender refunds the credit balance to the
        borrowers and notifies the borrowers that they remain responsible for the balance granted a conditional discharge,
        including any credit balance refunded, until/unless a final discharge is granted.

    •   If the non-disabled borrower is unable to maintain the status of the Consolidation loan as it was when the conditional
        discharge was granted, the lender must ensure that no change in status occurs. This may be accomplished by the
        receipt of borrower payments or the application of deferment, forbearance or administrative forbearance.

•   If the guarantor determines the borrower does not meet the eligibility criteria for partial discharge, the guarantor notifies
    the lender with the reason(s) for the ineligible determination.

    •   The lender notifies the borrower who applied for discharge that the request for discharge has been denied, the
        reason(s) for the denial, and that repayment of the full Consolidation loan amount resumes immediately.

    •   The lender ends any forbearance granted due to the receipt of the Discharge Application: TPD form and continues
        servicing the full Consolidation loan.

•   If, after the guarantor has made a reimbursement payment to the lender, the Department does not approve the conditional
    or final partial discharge or the borrower loses eligibility for partial discharge, the guarantor bills the lender for the full
    amount previously reimbursed.

    •   The lender returns the full amount reimbursed to the guarantor as a repurchase transaction.

    •   The lender notifies the borrower who applied for discharge that the request for discharge has been denied, the
        reason(s) for the denial, and that repayment of the discharged amount resumes immediately.

    •   The lender places the full amount reimbursed to the guarantor back into repayment with the portion of the
        Consolidation loan that did not meet discharge eligibility criteria. The full amount reimbursed already contains any
        amount refunded to the borrowers.

    •   No interest that accrued on the amount reimbursed during the period of conditional discharge is added to the
        borrowers’ Consolidation loan balance or billed to the borrowers.

Loans Held by Guarantors:

•   The guarantor receives the Loan Discharge Application: TPD form submitted by the borrower or the borrower’s
    representative.

•   The guarantor reviews the Loan Discharge Application: TPD to determine if the borrower meets the eligibility criteria.

•   If the guarantor determines the borrower does not meet the eligibility criteria for partial discharge, the guarantor must
    notify the borrower who applied for discharge that the request has been denied, the reason(s) for the denial and that
    repayment of the full Consolidation loan amount resumes immediately.

•   If the guarantor determines the borrower meets the eligibility criteria for partial discharge, the guarantor makes financial
    adjustments to the Consolidation loan which reduces the Consolidation loan balance by the amount determined eligible
    for conditional discharge, completes Request for Reimbursement form and submits request for reinsurance to the
    Department, if applicable.

    •   The guarantor notifies the borrower who applied for discharge that a portion of the Consolidation loan has been
        approved for submission to the Department for determination of eligibility for total and permanent disability
        discharge, the amount preliminary approved for conditional discharge, and that he/she remains jointly and severally
        liable for the remaining balance of the loan.

    •   The guarantor forwards the Loan Discharge Application: Total and Permanent Disability form and the Request for
        Reimbursement form to the CDD Unit for conditional discharge monitoring.


                                                                                                                   04/22/2004 revision
    •   If there is an outstanding balance remaining on the Consolidation loan after the financial adjustments have been
        made, the guarantor continues to service the balance of the Consolidation loan with only the non-disabled borrower
        being held responsible for repayment during the conditional discharge period.

    •   If the financial adjustments or the application of payments received during the period of conditional discharge result
        in the Consolidation loan being paid in full, the guarantor must not notify the borrowers that the Consolidation loan is
        paid in full. The guarantor may only notify the borrower that the loan is paid in full upon notification of final
        discharge approval from the Department. The guarantor must notify the borrowers that no payments are due
        currently pending final discharge determination.

    •   If the financial adjustments or the application of payments received during the period of conditional discharge result
        in the Consolidation loan having a credit balance, the guarantor refunds the credit balance to the borrowers and
        notifies the borrowers that they remain responsible for the balance granted a conditional discharge, including any
        credit balance refunded, until/unless a final discharge is granted.

    •   If the non-disabled borrower is unable to maintain the status of the Consolidation loan as it was when the conditional
        discharge was granted, the guarantor must ensure that no change in status occurs. This means the guarantor may not
        implement AWG, withhold income taxes, or negatively change credit bureau reporting during the conditional
        discharge period.


•   If the Department of Education does not approve the conditional or final partial discharge or the borrower loses eligibility
    for partial TPD discharge:

    •   The guarantor reverses the financial adjustments previously made and places the full amount back into repayment
        with the portion of the Consolidation loan that did not meet the discharge eligibility criteria.

    •   The guarantor notifies the borrower who applied for discharge that the request for discharge has been denied, the
        reason(s) for the denial, and that repayment of the discharged amount has been added back into the balance of the
        Consolidation loan.

    •   No interest that accrued on the amount granted the conditional discharge during the period of conditional discharge is
        added to the borrowers’ Consolidation loan balance or billed to the borrowers.




                                                                                                                04/22/2004 revision

								
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