Loan Discharge Application

Document Sample
Loan Discharge Application Powered By Docstoc
					Loan Forgiveness and
     Discharge
          Session Moderator:


       Byron Henderson
Louisiana Office of Student Financial
            Assistance
  Loan Forgiveness and
       Discharge
     The Guarantor/Holder
        Perspective
• Change Focus away from
  Recovery of the Debt
• Utilize Separate Unit for
  Determinations
• Tracking System
   Loan Forgiveness and
        Discharge
        Session Presenters:

          Pamela Moran
   Office of Postsecondary Education
     U. S. Department of Education

Connie Jesse and Lynel McFadden
       Office of the Ombudsman
     U. S. Department of Education
Loan Forgiveness and
     Discharge
        Session Presenter:

         Pamela Moran
 Office of Postsecondary Education
  U. S. Department of Education
           (202) 502-7732
       Pamela.Moran@ed.gov
    Loan Forgiveness and
         Discharge
Statutory and Regulatory Overview:

     Teacher Loan Forgiveness

   Death and Disability Discharges
           FFEL and Direct Loan
         Teacher Loan Forgiveness

• Enacted as part of 1998 Amendments
  to Higher Education Act – Section 428J
  of HEA
• Regulations – 34 CFR 682. 215
  published November 1, 2000;
 effective July 1, 2001
               FFEL and Direct Loan
             Teacher Loan Forgiveness
• Must be “new borrower”
   • no outstanding balance on October 1, 1998
     or on date loan is obtained after October 1,
     1998
• $5,000 in combined forgiveness after 5
  consecutive years of full-time teaching
• At least one of 5 years after date of enactment
• Qualifying loan must be made prior to end of
  5th year of qualifying service
              FFEL and Direct Loan
            Teacher Loan Forgiveness
Eligible Teaching:
   • Low-income (Title I eligible) public or
     nonprofit private school (same as Federal
     Perkins Loans) with 30% or more Title I
     eligible enrolled students
  • Direct classroom or classroom type
    teaching: (includes special education; does
    not include librarians, guidance counselors,
    administrators)
            FFEL and Direct Loan
          Teacher Loan Forgiveness

Elementary:
  • State defines
  • Knowledge and teaching skills in
    reading, writing and mathematics
Secondary:
  • Teaching in subject area of academic
    major
            FFEL and Direct Loan
          Teacher Loan Forgiveness

• Forbearance granted during qualifying
  service if payments will reduce benefit
  amount

• Annual forbearance application and
  lender determination
               “New” Teacher Loan
              Forgiveness Provisions
P. L. 108-409 – Taxpayer-Teacher
Protections Act of 2004 – Enacted
October 30, 2004
• Loan forgiveness of up to $5,000 if
   teacher:
  • Teaches five years in an elementary or
    secondary school with 30% or more Title I
    enrollment
  • Is “highly qualified”
               “New” Teacher Loan
              Forgiveness Provisions
“Highly Qualified” teachers are:
● Those who are fully certified or passed a
  state licensing exam and are licensed by
  State in which teacher teaches
● New teachers who hold a B.A. and pass a
  rigorous state test demonstrating knowledge
  and teaching skills; secondary teachers also
  must complete major, graduate degree, or
  coursework equivalent to a major in teaching
  areas
● Other teachers who demonstrate competence
  in subject areas in which they teach based on
  uniform state standards
               “New” Teacher Loan
              Forgiveness Provisions
Loan forgiveness up to $17,500 if teacher:
  • Meets same requirements as for up to
    $5,000 forgiveness AND
  • Teaches special education in elementary or
    secondary school OR
  • Teaches math or science in secondary
    school
             “New” Teacher Loan
           Forgiveness Provisions
Teachers who began qualifying
service before new law was enacted:
• Do not have to meet the new
  requirements to get the $5,000, but
• Must meet the new requirements to
  get the $17,500
               “New” Teacher Loan
              Forgiveness Provisions
Qualifying service started before October 30,
2004:
   • “old” requirements for up to $ 5,000
Qualifying service started on/after October
30, 2004:
   • must be “highly qualified” full-time
     elementary or secondary school teacher
     for up to $5,000
   • must be “highly qualified” full-time
     mathematics or science teacher in secondary
     school or “highly qualified” special education
     teacher for up to $17,500
              “New” Teacher Loan
             Forgiveness Provisions
Teacher previously received or almost
eligible to receive benefits under prior
law:
  • can receive difference between
    $17,500 and $5,000
  • prior service counts if highly qualified
           “New” Teacher Loan
          Forgiveness Provisions

• Immediate Implementation

• DCL GEN-04-14 summarizes
  provisions

• Revised Application and Forbearance
  forms posted to IFAP as
 GEN-05-2/FP-05-02
               FFEL and Direct Loan
              Discharge Regulations –
                      Death
Regulations Effective July 1, 2001:
  • Require original or certified copy of death
    Certificate for discharge
  • Provide “exceptional circumstances”
    discharge without death certificate upon
    approval of guaranty agency chief financial
    officer
  • Require reliable documentation maintained
    separately; available upon request
              FFEL and Direct Loan
             Discharge Regulations -
                    Disability
Regulations Effective July 1, 2002:
  • Require initial school determination of
    eligibility and assignment of loan to
    Secretary
  • Create a “conditional discharge” period
    up to 3 years from date of disability
  • Provide no payments need be made
    during “conditional discharge” period
    and no interest accrues
             FFEL and Direct Loan
            Discharge Regulations -
                   Disability
Loan Holder’s Preliminary Determination
 • Must be rigorous
 • Requires additional documentation if
   not definitive or incomplete
 • Clarify TPD definition and reaffirm
   certification with physician
Report to OIG suspicious patterns
              FFEL and Direct Loan
             Discharge Regulations -
                    Disability
Assignment
 • TPD Application (original signed or
   certified copies)
 • Supporting Documentation
 • Listing of payments or total sum of
   payments on or after date of disability
 • Original promissory note and any
   judgement/bankruptcy documents
                FFEL and Direct Loan
               Discharge Regulations -
                      Disability
● Provides that Secretary will make final
  determination of eligibility
   • During “conditional period”
      • No earnings in excess of poverty line
        for family of 2
      • No receipt of additional Title IV loan for
        school attendance
● Provides that ineligible borrower’s loans
  remain with the Secretary for collection
             FFEL and Direct Loan
            Discharge Regulations -
                   Disability
Ongoing Issues:
    • Retroactive “conditional” periods
    • “New” Loans outside the conditional
      period but before final discharge
    • Substantial deterioration of a
      medical condition
          FFEL and Direct Loan
         Discharge Regulations -
                Disability

• Credit bureau reporting
  • Tracking the transfer and status of
    the loan
  • Treatment of joint consolidation
    borrowers during the conditional
    discharge period
       ED Contacts - Disability
Regulations:
         Pamela Moran (OPE)
         Jon Utz (FSA)
         (202) 377-4040
Program Management:
         Jennifer Ryder
         Program Manager
         Conditional Disability
         Discharge Unit (CDDU)
         (202) 377-4295
        ED Contacts - Disability
Conditional Total and Permanent
Disability Assignments:
 • Customer Service: 1-888-869-4169
 • Assignments by U. S. Mail:
    U. S. Department of Education
    Conditional Disability/Discharge Unit
    P.O. Box 7200
    Utica, New York 13504
  Loan Forgiveness and
       Discharge
       Session Presenters:

Connie Jesse and Lynel McFadden
     Office of the Ombudsman
         Federal Student Aid
   U. S. Department of Education
Loan Forgiveness and
     Discharge
 The Borrower Perspective
     Loan Forgiveness and Discharge
    . . . questions are among the most frequently
        received by the FSA Ombudsman Office
     More than 1 in 10 of all inquiries are about
       Loan Forgiveness and Discharge. . .
•   2,028 of 16,707 total cases in FY2002      12%
•   2,147 of 17,664 total cases in FY2003      12%
•   1,845 of 14,688 total cases in FY2004      12%
•   767 of 6,362 cases in FY05 thru 03/15/05   12%
     Loan Forgiveness and Discharge
          . . . questions are a larger share of
                     research cases

•   510 of 3,305 research cases in FY2002         15.4%
•   686 of 3,621 research cases in FY2003         18.9%
•   635 of 3,697 research cases in FY2004         17.2%
•   326 of 1,833 research cases in FY2005         17.7%
    (through 03/15/05)
          Ombudsman Research Case Characteristics
                         by Sub-Category
                    Fiscal Year 2005 To Date

Half of the Questions are about Disability Discharge…..
Customers Want to Know…
  • What’s the process?

  • How does it apply to me?

  • What do I do next?
How We Work With Them…
• Explain the Rules/Processes

• Do Thorough Research/Analysis

• Define Options and Next Steps
  For Their Situation
                And…
• Share Case Details and Statistics with
  FSA and Department of Education
  Leadership, e.g. relationships of rules-
  based and process-driven questions

• Identify Ways to Improve our Consumer
  Information with More Self-Help Options,
  e.g. website update….
             A Few Case
             Examples

TEACHER LOAN FORGIVENESS…
Borrower asked for assistance with
Teacher Loan Forgiveness. His first loan
was for 8/25/98-5/4/99. His first
disbursement was 9/15/98. Because he
had a balance on 10/1/98, he is ineligible
for the Teacher Loan Forgiveness
Program.
              A Few Case
              Examples
Teacher Loan Forgiveness. . .
Customer consolidated all loans in 2002.
Underlying loans (all FFEL) were disbursed
before 1998. She teaches full time in a
school serving low income students, which
is on the list of schools recognized by
Department of Education. Loan payments
are difficult for her to meet. She’s been told
that she doesn’t qualify for the teacher loan
forgiveness program but doesn’t
understand why.
                  A Few Case
                  Examples
TOTAL AND PERMANENT DISABILITY. . .
Customer has one (1) FFEL Subsidized Stafford
Loan and one (1) Perkins Loans to attend School A
and four (4) FFEL Subsidized Stafford Loans and
one (1) Perkins Loan to attend School B. Each
school received a Loan Discharge Application: Total
and Permanent Disability form, and sent the loans to
the Conditional Discharge Disability Unit (CDDU).
The Perkins Loans were discharged on 3/25/04. No
discharge application was received for any of the
five FFEL Subsidized Stafford Loans, which were
with the same guaranty agency and lender. The
customer doesn’t believe he should have to do
another application.
             A Few Case
             Examples
TOTAL AND PERMANENT DISABILITY . . .

Borrower received notification that his loans
were preliminarily approved for discharge
and assigned to Department of Education.
He expected an immediate refund and did
not understand that it could be a year before
he gets:
         1) permanent discharge
         2) the money
                 Contact Information
Internet: www.ombudsman.ed.gov
E-mail: fsaombudsmanoffice@ed.gov
Mail:     FSA Ombudsman
          U. S. Department of Education
          UCP III, 830 First Street, NE
          Washington, DC 20202-5144
Office: (202)-377-3800 Fax: (202) 275-0549
  Connie Jesse:              (202) 377-3809
  Lynel McFadden:            (202) 377-3811
Toll Free (for borrowers):   1-877-557-2575
Loan Discharge and
   Forgiveness


   Questions?
• Thank you!
• Please be sure to
  complete your 2005 DMC
  evaluation forms!

				
DOCUMENT INFO
Description: Loan Discharge Application document sample