Oversight Report on Student Loan Disability Discharge Process Finds Program Design Weakness

By Hugh T. Ferguson, NASFAA Staff Reporter 

A report issued last week by the Department of Education’s (ED) Office of Inspector General (OIG) determined that the Office of Federal Student Aid's (FSA) total and permanent disability (TPD) discharge process appropriately processed applications, but also found a number of weaknesses within the program’s design.

The TPD discharge process, which dates back to July of 2013, relieves student loan borrowers who are totally and permanently disabled according to federal program requirements of having to repay federal student loans or complete their grant service obligations. From fiscal years 2014 through 2018, more than 715,000 borrowers had $17.7 billion in loan principal and $1.8 billion in interest discharged through the program.

OIG wrote in the report that between July 1, 2013 and March 3, 2017, a random sample of TPD accounts showed that Nelnet, a federally-contracted loan servicer, “generally serviced the sampled TPD accounts in accordance with federal program requirements.” 

“However ... we identified design weaknesses in FSA’s control activities for the TPD discharge application review process,” the report said.

Specifically, OIG called for FSA to use sufficient sampling parameters, update quality control reviews, and improve monitoring of the discharge process.

FSA disagreed with some of these findings, taking issue with the report’s “arbitrary” sampling parameters and said that its “current percentage-based methodology has consistently led to an oversampling of TPD accounts for review.”

Further, FSA said it increased the review percentage for smaller batches of TPD applications to avoid over-rejection of TPD applications and increase the confidence level. 

According to the report, FSA did not explicitly agree or disagree with the remaining recommendations.

“FSA informed us it had made some changes based on the initial exit conference but had not significantly changed its TPD discharge process and monitoring practices, as noted in our findings, since the initial exit conference,” the audit read. 

ED policy requires that the department develop a final corrective action plan within 30 days of the issuance of this report.

 

Publication Date: 7/1/2020


Saara K | 10/4/2020 9:42:47 PM

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Aurie C | 7/2/2020 6:8:19 PM

I wonder if they will address the student who cancels all loan debt due to Total and Permanent Disability who waits three years for discharge and the monitoring period to end to then begin borrowing again.

Fiona C | 7/1/2020 7:10:22 PM

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