ED Works to Provide More Regulatory Clarification on Total and Permanent Disability
Through further refinement of draft regulatory revisions, the Department of Education (ED) continues to work with representatives from schools, guaranty agencies, servicers and student and consumer groups to clarify process issues, documentation and terminology to the rules that govern total and permanent discharges in the final student loan negotiated rulemaking session.
In the third of three week-long meetings, the student loan committee is negotiating 25 student loan regulatory issues that will ultimately result in a package of proposed rules to be published for public comment before promulgation of final rules.
The negotiating committee worked to improve rules affecting borrowers whose loans have been discharged due to total and permanent disability. ED raised this issue in an effort to reduce the number of disabled borrowers whose loans are reinstated due to a monitoring error or failure to provide proper documentation.
Total and Permanent Disability Discharge: Post-Discharge Monitoring of Employment Earnings
To better serve disabled borrowers who must meet an income monitoring requirement to receive the final total and permanent disability discharge, ED is proposing the release of a standard form to support the collection of information on the borrower’s earnings. The form would be developed through the Office of Management and Budget process, and would allow disabled borrowers more flexibility in the type of documentation they can submit, in lieu of tax returns.
Because the 3-year post-discharge monitoring period currently begins on the discharge date, in most cases ED has to obtain employment earnings information for two partial calendar years at the beginning and end of the 3-year period, which is hard to obtain. Borrowers have not filed income tax returns for a calendar year that isn’t over; social security earnings statements only provide income information on a calendar-year basis; and other documentation of employment earnings that a borrower could provide for a partial calendar year may be inconclusive. Proposed changes would move the monitoring period to three complete years following the year in which the discharge is approved.
Total and Permanent Disability Discharge: Single Application Process
ED responded to criticism it received last year that its total and permanent disability (TPD) discharge application process is unduly burdensome for borrowers by proposing a streamlined TPD discharge process, by which a borrower would submit one TPD discharge application directly to the Department. The language would also provide the borrower 120 days of suspended collection activity to allow the borrower to pursue TPD discharge. ED has also proposed more regulatory language to provide the borrower with clear information about their rights and the consequences of failure to complete the application process. The Department would then determine from its records whether the borrower has other Title IV loans, and notify those loan holders of the pending application for discharge.
Total and Permanent Disability Discharge: Borrower Notification of Denial
The Department has proposed changes to regulations that would provide borrowers with more detailed information in their total and permanent disability (TPD) denial letters, including the reason for the denial, an explanation that payment must resume and how the borrower can request re-evaluation for discharge within a specified period or subsequently submit a second application with new information. ED has also proposed language crafted in cooperation with negotiators to clarify what information lenders and guaranty agencies need regarding the department’s determination of the denial of discharge.