Loan Servicing and Collection Frequently Asked Questions

These Frequently Asked Questions provide information about the servicing and collection of federally-owned loans.

The listing of Frequently Asked Questions will be updated as needed and include the date of the update. New and/or updated questions and answers will be marked NEW.

The questions below are grouped by the follow categories:

- Loan Rehabilitation [LR]

- Total and Permanent Disability Discharge [TPD]

- Treasury Offset Program [TOP]

- Third-Party Authorizations [TPA]

- FSA ID Issues [FSAID]

- Collections Fees [CF]

- Incarcerated Borrowers [IB]

- Alternative Repayment Plans [ARP]

- PCA Complaint Process [PCACP]

- Joint Consolidation [JC]

- Judgments and Pending Judgments [JPJ]

- Servicers and Consolidation [SERC]

- Discharges and Other Entitlements [DIS]

- Unpaid Refund Discharges [URD]

- False Certification Discharges [FCD]

- Settlements and Compromises [SETC]

- Bankruptcy Discharges [BD]

- Defense to Repayment [DR]

Private Collection Agency (PCA) customer service representatives are allowed to discuss a variety of ways to resolve the debt prior to bringing up loan rehabilitation. PCA staff is not currently required to calculate the Reasonable and Affordable monthly payment amount using the 15 percent rule until they are explicitly discussing loan rehabilitation. In some cases, this option may not be discussed if borrowers choose another repayment approach. The Department is in the process of reviewing our instructions to PCAs to ensure that borrowers receive basic information about all repayment options before selecting the approach that best meets their financial circumstances. [January 8, 2016]

PCA employees are allowed to create an estimated reasonable and affordable payment amount based on verbal information provided by the borrower. PCA staff may suggest that the borrower start making payments based on this estimated amount, but they must also inform the borrower that if the reasonable and affordable payment amount increases when recalculated based on actual documentation, any payments for amounts below the final calculated amount will not count toward the nine payments needed to complete loan rehabilitation. If the final payment is less than the estimated amount, estimated payments will count toward the nine payments, with excess amounts applied to reduce the borrower’s outstanding balance. [January 8, 2016]

Only borrowers who are eligible to rehabilitate their loans may use the 15 percent formula. Borrowers meeting the following criteria are not eligible for loan rehabilitation:

  • FFEL and Direct Loans that were previously rehabilitated on/after 8/14/08;

  • Perkins loans that were previously rehabilitated—regardless of date;

  • Loans where the borrower was determined to have been ineligible for the loan in the first place (e.g., because of inaccurate information on the FAFSA or an error by the school) (there are currently fewer than 7,000 loans in Federal Student Aid’s default portfolio that fail this eligibility criterion);

  • Loans obtained under fraudulent pretenses (there are currently fewer than 800 loans in Federal Student Aid’s default portfolio that fail this eligibility criterion);

  • Borrowers who have not provided a valid social security number (SSN), date of birth and a mailing address in order to rehabilitate (in rare instances, Federal Student Aid did not receive the correct SSN or a date of birth when the loan was assigned);

  • Loans against which a judgment has been obtained;

  • PCAs are not allowed to rehabilitate borrowers in bankruptcy (Federal Student Aid may authorize rehabilitation for affected borrowers on a case-by-case basis);

  • FFEL borrowers assigned to a PCA must provide three references in order to rehabilitate them.

We should note that some borrowers who are eligible for a rehabilitation payment based on the 15 percent formula do not qualify for a corresponding repayment plan in non-default servicing. As a result, these borrowers—estimated at roughly 10 percent of the total number of borrowers who rehabilitate their loans—may have a much higher repayment amount after their loan is rehabilitated and transferred to regular servicing. One example of this would be a PLUS borrower who upon rehabilitation would not be eligible for an income-driven repayment plan. Given that borrowers in default only have one opportunity to rehabilitate their loans, it is important that those in this situation have a clear plan for how they will make payments at the higher, post-rehabilitation amount. For example, alternative repayment plans are available, but only if the borrower provides documentation to their non-default servicer showing why the terms and conditions of the other available repayment plans are not adequate to accommodate the borrower's exceptional circumstances. [January 8, 2016]

The Department will not accept expenses in excess of limits set in the IRS standards. For expense categories that are not limited in the IRS standards, such as medical costs, the Department also does not set a limit. [January 8, 2016]

When the new rehabilitation regulations were implemented on July 1, 2014, Federal Student Aid provided instruction to calculate rehabilitation payments based on the income and expense form at 100 percent of the difference between the borrower’s household income and household expenses (after some reported expenses may have been subjected to reasonability limits). Setting the second formula at 100 percent of “discretionary income” creates a high likelihood that payments based on the income and expense form would be higher than those based on the 15 percent formula. Upon consideration we now believe that while this approach is allowable under the regulations, it does not fully conform to the intent of the option to use income and expense forms to set rehabilitation payment amounts.

Accordingly, Federal Student Aid will change its guidance to require that, beginning June 1, 2015, a rehabilitation payment amount based on the income and expense form be set at 15 percent of “discretionary income,” defined as the difference between the borrower’s household income and household expenses (after some reported expenses were subjected to reasonability limits). The manner in which a borrower’s income or expenses are determined and the standards for determining the reasonability of those expenses will not change. [January 8, 2016]

Household size is used to determine the poverty level for the borrower, as it is a variable in the Federal poverty level table. [January 8, 2016]

Federal Student Aid uses the AGI from the borrower’s Federal tax return (or an official transcript from the Internal Revenue Service) to compute the borrower’s payment under the 15% formula; if the borrower and spouse filed jointly, then the spouse’s income would be included in the calculation. [January 8, 2016]

When using the 15% formula, FSA will only use the borrower’s Federal tax return to determine AGI. The borrower may provide a signed statement indicating his/her family size if it is different from what is shown on the return. When using the Financial Disclosure form, the borrower may provide any of the following:

  • Federal tax return or tax return transcript

  • Most recent 2 pay stubs or earnings statements (but these must be less than 90 days old)

  • Self-employed borrowers should provide the most recent signed 1040 or 1040-ES worksheet

  • A copy of the divorce decree to document alimony

  • Award letter or payment stubs to document unemployment income

  • Other reasonable documentation sufficient to document income not outlined above

  • Borrowers may use line 7 of the Financial Disclosure form to indicate that they have no income and to explain their means of support [January 8, 2016]

Both guaranty agencies and Federal Student Aid are required by regulation to suspend administrative wage garnishment (AWG) after the fifth valid loan rehabilitation payment. It is important to understand that a rehabilitation payment is only considered valid when we have all the documentation from the borrower. Payments based on preliminary information provided by phone do not count toward the five valid rehabilitation payments needed to suspend AWG unless they are equal to or greater than the eventual valid repayment amount calculated based on complete documentation. Prior to the suspension of AWG, borrowers can request a hearing to reduce AWG amounts during which they can document that the AWG amount represents an economic hardship. This should also be the process for FFEL loans held by guaranty agencies.

We should also clarify that PCA employees do not have authority to start or stop wage garnishments; these decisions are made by a federal employee. If a borrower is with a PCA and they request a hearing, the request does go to the PCA, but the PCA only facilitates Federal Student Aid the information needed for the hearing. A borrower can do a hardship hearing with the Department and it is a federal employee that decides if the garnishment can be reduced. [January 8, 2016]

Yes. [January 8, 2016]

While there is no formal “accelerated” rehabilitation program, under the regulatory definition of a timely payment it is possible to shorten the amount of time it takes to complete the nine payments needed to complete a valid rehabilitation. Under the regulations any rehabilitation payment received 20 days before or after the due date is considered timely; as a result, it is conceivably possible to complete nine valid rehabilitation payments in seven calendar months, as shown in the following example for a borrower whose monthly due date is the 15th.

Due Date

Payment Made

Days Early or Late

1/15/2015

2/4/2015

20 days late

2/15/2015

2/15/2015

On time

3/15/2015

3/15/2015

On time

4/15/2015

4/15/2015

On time

5/15/2015

5/15/2015

On time

6/15/2015

6/15/2015

On time

7/15/2015

7/15/2015

On time

8/15/2015

8/15/2015

On time

9/15/2015

8/26/2015

20 days early

Individual rehabilitation agreements that can be completed in fewer than nine calendar months are sometimes established by PCAs and guaranty agencies based on individual borrower circumstances but we are not aware of agencies intentionally marketing this option as a broadly available program or plan. We are in the process of clarifying our guidance to all PCA’s to ensure that rehabilitation regulations in this area are applied consistently across the default portfolio. [January 8, 2016]

Once a rehabilitated loan is transferred from DMCS to a non-default servicer, the borrower is automatically put on an alternative repayment plan with a monthly payment amount equal to the amount he or she was paying DMCS in order to achieve eligibility for rehabilitation. This alternative repayment plan remains in place for 90 days, during which the borrower has the opportunity to apply for another available repayment plan based on the loan(s) in question; this may include Income-Driven Repayment (IDR), depending on the loan type. If the borrower does not apply for a repayment plan, he or she is automatically converted to a standard repayment plan after 90 days. Typically, information regarding the borrower’s options is provided in the welcome letter from the servicer at the time the account is loaded to the servicer’s database. [October 18, 2016]

The Department has implemented a process to assign rehabilitated loans from Guaranty Agencies. Our servicer is Great Lakes. The process has been in place since the beginning of the year. [October 18, 2016]

For Necessary Medical and Dental, this is the guidance that has been given to the PCAs:

No documentation is required if less than $60/month is spent per person in a family. If more than that is spent, proof must be provided of the amount spent out of pocket on copayments for prescription drugs, doctor visits, and other medical needs: canceled checks and/or receipts, statements, etc.

Providing only a bill showing the amount owed is not acceptable.

in the event that borrowers have different payroll deductions for medical and dental, PCAs are allowed to consider both. An example is a vision plan that was optional and extra that covered cost for glasses, but the actual eye exam portion was already covered under medical. In this case only, the extra vision was not included. However, if the same borrower is able to provide out of pocket expenses for medical needs and they could be included with proof of cancelled checks, receipts, statements, etc. it would be factored in as stated in the guidance above. [October 18, 2016]

There are no known “other expenses” that are not already covered in what is allowed. This would be a case-by-case basis to review and determine. [October 18, 2016]

Yes, by July 1, 2015, the Secretary of Education, in consultation with the Director of the Social Security Administration, will develop a plan to identify and assist any Federal student loan borrower who receives Social Security Disability Insurance in determining whether they qualify for a total and permanent disability discharge, initiating the discharge process for all qualified borrowers, and assisting other borrowers in entering a suitable repayment plan. [January 8, 2016]

Yes, the Department’s TPD servicer will accept any SSA-branded correspondence that clearly confirms that the applicant has received a Medical Improvement Not Expected (MINE) rating with SSA. [January 8, 2016]

Yes. Once an authorized representative form has been received, notifications regarding the TPD process are sent to both the borrower and the representative. [January 8, 2016]

Tax forms are sent in a co-branded envelope with the statement ‘Important Tax Return Documents Enclosed’ printed on the outside. [January 8, 2016]

Applicants may be working provided that they are not engaged in "substantial gainful activity," which is defined in regulation at 34 CFR 685.102(b) as a level of work performed for pay or profit that involves doing significant physical or mental activities, or a combination of both. An applicant’s inability to engage in substantial gainful activity is certified by a physician or demonstrated through the provision of SSA or VA documentation. The process for documenting this certification is described in more detail on the TPD application form.

In the case of a physician certification or SSA documentation, during the three-year monitoring period the Department verifies that the borrower cannot engage in substantial gainful activity by reviewing earnings documentation submitted by the borrower and ensuring that it not exceed the HHS poverty guideline for a family of two. [January 8, 2016]

The financial statement form that Federal Student Aid prefers borrowers use to request hardship suspension of offset depends on the type of Federal payment being offset.

Tax Refunds: We do not suspend offset of tax refunds due to hardship (though we may refund offsets of tax refunds in cases of extreme hardship, which is generally limited to borrowers facing eviction or foreclosure).

Social Security Benefits: The financial statement form that Federal Student Aid prefers borrowers use for suspending (or reducing) offset of their Social Security benefits is not currently available on the myeddebt.com web site; DRG operators send this form to borrowers after verifying the borrower’s eligibility for suspension. The package we send to borrowers is attached for your reference. We are planning to add the financial statement form part of this package to the website, but do not yet have an implementation date for this.

The financial statement form for administrative wage garnishment (AWG) is slightly different, but Federal Student Aid would accept the AWG form from a borrower for SSA offset suspension purposes. The AWG financial statement form is available at the following link:

Federal Salary: Borrowers whose Federal salary is being offset should request a hearing, using the hearing request forms available at the following link:

[January 8, 2016]

Yes. Provided the borrower submits the same information requested in our form, we will perform the hardship review. [January 8, 2016]

Regardless of whether the official form is used or if information is provided through alternative means, if information needed to make a determination is missing, we will reach out to the borrower to request the missing information. [January 8, 2016]

The Status of Financial Status form used to request a financial hardship (embedded above) includes information on the TPD discharge. When Federal Student Aid staff reviewing the form believes the borrower could be eligible for a TPD discharge, they inform the borrower. [January 8, 2016]

Federal Student Aid has not provided servicers with forms or specific guidance regarding third-party authorizations, though multiple requirements do establish the servicer’s responsibility to protect borrowers’ personally identifiable information (PII) and the release of information. We are in the process of moving to a single form and process that will be used by all Department servicers. [January 8, 2016]

Although some restrictions may seem to be “barriers,” servicers must balance making things easy for borrowers with their obligation to protect borrower privacy under federal law and Federal Student Aid’s servicing requirements. Servicers have reported instances of borrower impersonations, such as third-party debt relief companies claiming to act on behalf of borrowers without their permission. They are therefore vigilant when ensuring third parties are authorized. One servicer who required notarization of third party forms has rescinded this requirement and, as noted above, we are moving to a standardized form and process to ensure consistency and streamline access for authorized parties while ensuring borrower’s privacy. [January 8, 2016]

No. If the borrower is on the phone with the third party, they can grant one-time permission for that conversation. Longer-term permission is also allowable, provided that the servicer (1) has an authorization to release information signed by the borrower and (2) the servicer is able to establish that the caller is authorized to discuss the borrower’s account. All servicers use a third-party authorization form. They also have a list of verification questions designed to determine that the caller is among those authorized to receive information and/or discuss the borrower’s account. If, however, the caller is unable to fully answer the verification questions the agent will not discuss the account with them.

In addition to the process standardization discussed above, we are considering moving to a process where servicers will accept verbal authorization for individual calls where the borrower confirms on the line that the 3rd party has authorization. Without written authorization, verbal authorization must occur each call. [January 8, 2016]

Access to NLSDS is limited to those that participate in Title IV programs and have been approved by Federal Student Aid. These participants can grant their third-party servicers access to NSLDS to perform work on their behalf. The school grants access to each servicer individually and monitors and controls the access to NSLDS. [January 8, 2016]

Borrowers are directed to not share their FSA ID with third parties. The Department does not endorse sharing FSA ID information with anyone, including third-party servicers. The Systems of Record Notice for NSLDS is available at http://www.gpo.gov/fdsys/pkg/FR-2013-06-28/pdf/2013-15574.pdf and references the Routine Uses listing the purposes system data can be used and who can access the data. [January 8, 2016]

PCA commissions vary depending on the method of collection and are typically a percentage of the amount collected. There is one percentage for collections received directly from the borrower or through the AWG process; another for collections via loan rehabilitation; and a third for collections from a loan consolidation. In addition, PCAs receive a flat fee for Administrative Resolutions, which involve obtaining information needed to support the collection process. Examples of administrative resolutions include the submission of a valid certified death certificate that allows Federal Student Aid to close an account due to death; the referral of TPD-eligible borrowers to the TPD contractor, and the provision of data related to a borrower’s incarceration. Beginning July 1, 2015, PCAs will receive a fixed fee for loan rehabilitations rather than a percentage of the amount collected.

More specific information on these contracts is available publically online at:

[January 8, 2016]

This response applies to Department-held loans (both FFEL and Direct Loans). If the borrower is assigned to a PCA, collection fees are charged against each of the nine qualifying payments; approximately 20% of each payment would apply to collection fees, with the rest applying to interest and/or principal. Once full eligibility for rehabilitation has been achieved, only the principal and interest balance of the loan is transferred to a non-default servicer. From that point forward, no further collection fees are charged unless/until the borrower re-defaults on the loan. In the event of re-default, collection fees are charged according to the same rules as if the loan were a first-time default. Collection fees are not capitalized in the rehabilitation process. Collection fees are only capitalized if a borrower consolidates the defaulted loans. [October 18, 2016]

If a borrower who consolidates is assigned to a PCA, the Department will assess collection fees up to 18.5% of the combined principal and interest amount as part of the consolidation payoff. In general, if the borrower does a forced-IDR consolidation, the collection fees charged will be $150 (unless that exceeds 18.5% of combined principal and interest; if the borrower establishes satisfactory repayment (three consecutive monthly payments) prior to certification, the collection fees will be 2.8% of combined principal and interest. All outstanding interest and collection fees are capitalized at the time of consolidation, meaning the initial principal balance of the new consolidation loan will be the sum of principal, interest, and collection fees certified by FSA. [October 18, 2016]

In general, the Department has no authority to cease servicing and collection activities for incarcerated borrowers. Depending on the specific circumstance Federal Student Aid servicers may apply broadly available benefits such as forbearances or income-driven repayment plans, or may take other actions to temporarily suspend collection activities for incarcerated borrowers. In cases of defaulted loans where a borrower’s incarceration extends beyond 10 years, however, the Department will write off debts as uncollectable. Should borrowers whose loans have been written off as a result of prolonged incarceration subsequently wish to make repayment arrangements, the debts can be reinstated.

A borrower seeking to document the length of their incarceration must provide written verification through a letter completed on the penal institution's letterhead and signed by a prison official. The letter must include the borrower's name, social security number, date of birth, inmate number, and release date or date of eligibility for parole, whichever is sooner. The letter must also include the name, title, and phone number of the official verifying the provided information. Alternatively, this information can be provided via an e-mail from a prison official. The e-mail must be without adulteration and must clearly identify the name of the penal facility and the name and title of the sender. Documentation should be provided to the private collection agency servicing the borrower's account or sent to the following address:

Address
US Department of Education
PO Box 5609
Greenville, TX 75403-5609

[January 8, 2016]

No. Other than the default write-off policy discussed in the above response, incarcerated borrowers are subject to the same rights and responsibilities as other borrowers and are treated accordingly by Department servicers and collection agencies. [January 8, 2016]

No. [January 8, 2016]

Guaranty agencies generally do not provide information on whether a borrower is incarcerated when assigning a loan to the Department, so these loans are transferred to PCAs for collection at the same time as any other defaulted loan. As noted in the response to question 1, PCA’s may subsequently suspend collection activity or write off a debt after establishing that the borrower is subject to prolonged incarceration. [January 8, 2016]

Write-offs are applied automatically when Federal Student Aid is aware of an incarceration in excess of 10 years. As noted above, other actions to temporarily suspend servicing or collection activity are based on individual circumstances stemming from conversations between the servicer/PCA and the borrower. [January 8, 2016]

All Department servicers are required to offer alternative repayment plans. The alternative repayment regulations at §685.208(1) CFR state that the Department may provide an alternative repayment plan for a borrower who demonstrates to the Secretary's satisfaction that the terms and conditions of the other available repayment plans are not adequate to accommodate the borrower's exceptional circumstances. The regulations also authorize the Department to require a borrower to provide evidence of exceptional circumstances before approving an alternative repayment plan. The regulations do not define exceptional circumstances; Department servicers currently have discretion to identify exceptional circumstances in the context of their work with the small number of individual borrowers who believe they require terms not available under the other repayment plans. The Department is currently working with our servicers to determine whether additional standardization would benefit borrowers. [January 8, 2016]

Yes, this is correct. [October 18, 2016]

The REPAYE plan is now available. Borrowers can select the REPAYE plan using the IDR application. The most recent IDR application is posted on the IFAP website at: https://fsapartners.ed.gov/knowledge-center/library/resource-type/dear-colleague-letters/10-11-2016-gen-16-18-subject-revision-income-driven-repayment-plan-request. [October 18, 2016]

The alternative documentation of income form was discontinued nearly 4 years ago. The form posted at the link provided in ARP-Q3 is the most current. This form addresses the need for further documentation by stating: If documentation is not available or if a borrower wants to explain his or her income, the borrower should attach a signed statement explaining each source of income and giving the name and the address of each source of income. [October 18, 2016]

The borrower is asked if he or she files jointly or separately on question # 14. Keep in mind that the fact that a borrower files separately does not mean his or her spouse's income is not considered when processing an IDR application. The income of both the borrower and spouse is included in the calculation of REPAYE regardless if they filed separately. [October 18, 2016]

Yes, this is self-certifying, as well as the indication of separation from spouse. [October 18, 2016]

Borrowers can submit complaints to PCA’s or to the Department directly. PCA’s are required to submit all valid complaints they receive to the Department for review. Federal Student Aid is in the initial stages of developing a consolidated complaint system for all student loan servicing and collection issues; upon completion, this system will simplify and consolidate the complaint process and support additional analysis and targeted oversight. [January 8, 2016]

Complaint information is tracked by the Department to inform oversight and contract management activities. This information is not publically available, but the Department is considering the extent to which to publicize at least some complaint data as part of the development of the new consolidated complaint system. [January 8, 2016]

Federal Student Aid does not currently require collection and servicing vendors to include instructions on how to submit complaints on correspondence and borrower-facing websites. As part of the process of implementing our consolidated complaint system, we plan to add this requirement for all vendors interacting with borrowers. [January 8, 2016]

“Each of the Department’s contracted collection agencies has set up a “Special Assistance Unit” to address customer concerns. If your account is assigned to one of the contracted collection agencies, and you have concerns about their servicing of your account, the Department of Education requests that you call the Default Resolution Group call center at 1-800-621-3115. They are supposed to direct you to the correct Special Assistance Unit personnel.

If the Special Assistance Unit is not able to resolve your concern, you may file a written complaint. The Department of Education says that the Default Resolution Group takes all complaints seriously and takes action as necessary to resolve the issue. To file a written complaint, you should send a letter with any evidence to: Chief of Contract Analysis and Compliance US Department of Education 61 Forsyth Street, SW 19T89 Atlanta, GA 30303.”

Yes, this information is still correct. We will provide updated information as we move to our consolidated compliant system. [January 8, 2016]

The statute does not allow the Department to split joint consolidation loans unless one spouse did not actually have underlying loans in the consolidation and so should not have been included in the loan. Borrowers facing unique circumstances, such as domestic violence, are encouraged to contact the Federal Student Aid Ombudsman, which offers confidentiality, and can explore with an individual customer the options for mitigating the issues. [January 8, 2016]

Yes, this is still correct. [October 18, 2016]

Litigation is a last resort pursued for a relatively small number of borrowers at significant expense to the Department of Justice and the court system. Borrowers have many opportunities to resolve their debt through rehabilitation, consolidation, or other repayment methods prior to the point at which litigation is undertaken. After that point, the government believes it is in the best interest of taxpayers to pursue the litigation to its conclusion. [January 8, 2016]

The Department generally does not vacate judgments, which, as noted above, are only pursued as a last resort for a relatively small number of borrowers and which require a great deal of effort by the Department of Justice to put in place. [January 8, 2016]

For some Department-held FFEL loans with State court judgments for which liens have expired, the Department will sometimes work with borrowers to resolve their defaults through other means such as consolidation. The terms of these resolutions are determined on a case-by-case basis. (This is not done for Federal court judgments, which typically have longer liens and for which the Department of Justice will represent the Federal Student Aid to keep judgments in place.) [January 8, 2016]

The actual consolidation servicer selection process is as follows: At the on-line application site borrowers are asked to “Choose one of the federal loan servicers listed below to complete the consolidation and then service your Direct Consolidation Loan. The servicers listed are the U.S. Department of Education’s consolidation servicers.” [Borrowers see a drop-down menu with the servicers listed and are provided with the opportunity to select one.]

A second paragraph reads: “Note: The current servicer of the loans that you want to consolidate may be one of the listed consolidation servicers. If your current servicer is listed, you may choose to keep your current servicer for your new Direct Consolidation Loan, or you may choose a different servicer.” Federal Student Aid provides servicer performance information, in the form of quarterly servicer survey scores and success in avoiding delinquency and default, on the Federal Student Aid Data Center which is available to the general public. In addition, the Federal Student Aid Data Center provides extensive data on the portfolios of each servicer. Federal Student Aid is considering the addition of Federal Student Aid Data Center links to the loan consolidation application page so borrowers can more easily access information to compare servicer performance. [January 8, 2016]

PCAs do not determine which servicer will receive a consolidation from default. The Department created a rotating schedule under which each PCA sends their consolidation data to a different servicer for each quarter of the year. [January 8, 2016]

Federal Student Aid uses a loan distribution engine (LDE) for servicer assignment, with assignment occurring at disbursement with a booked loan. The logic first determines if the borrower already has a loan, and if so, who services it. The loan is then routed to that servicer. If there are no existing loans then the new loan is assigned based on Federal Student Aid’s performance metric allocations. [January 8, 2016]

Our records indicate paper applications take an average of 3-4 days longer than electronic applications to process when measuring time elapsed from application receipt to consolidation loan booking.

Great Lakes will accept and process adjustment requests from FSA and FFEL servicers on existing consolidation loans that were created by the Direct Loan Consolidation System (DLCS).

If a borrower consolidates and selects IDR, the borrower will need to complete the IDR process online before their loan application is completed, as the servicer needs the IDR information to place the consolidation loan on the IDR plan. The 7 days is related to FSA’s requirement that the servicer complete the consolidation application within 30 days. The 30 days must include the time for LVC receipt and to allow for the 10 day rescind period for the borrower after the monthly payment has been established. [October 18, 2016]

Most forms are available in Spanish on myeddebt.ed.gov at:

More broadly, “Español” appears in the upper right hand corner of every page on myeddebt.ed.gov. When you click on that it moves you to the Spanish version of the web site.

Federal Student Aid wants borrowers to discuss all options and eligibility requirements prior to applying for a deferment or forbearance, application forms for these entitlements are only available from individual loan servicers. This is to avoid situations where borrowers who are unaware of all options inadvertently apply for forbearance when they could be eligible for income-driven repayment, deferments, or discharge. All servicers provide the following forms in both English and Spanish:

  • Economic Hardship Deferment (HRD)

  • Education Related Deferment (EDU)

  • In-School Deferment (SCH)

  • Parental Leave & Working Mother Deferment (PLWM)

  • Parent Plus Borrower Deferment (PLUS)

  • Public Service Deferment (PUB)

  • Temporary Total Disability Certification (TDIS)

  • Unemployment Deferment (UNEM)

  • General Forbearance (GFB)

  • Mandatory Forbearance (SERV)

  • Student Loan Debt Burden Forbearance (SLDB)

  • Income Driven Repayment Plan Request (IDR)

[January 8, 2016]

When it is determined that a borrower is eligible for any valid discharge, payments made on loans that were discharged are refunded if the borrower can be found. If there are outstanding debts, however, any refunds would be moved to those debts first before a refund was calculated and processed. [January 8, 2016]

Yes, consistent with the regulatory requirements outlined in CFR 685.212, servicers are required, upon receipt of acceptable documentation and approval of a discharge request, to return to the borrower, or, for a discharge based on death, the borrower's estate, any payments received after the date that the eligibility requirements for discharge were met. [January 8, 2016]

No, the Department does not require conditions beyond those listed in the regulations in order to qualify for a loan discharge based on false certification – disqualifying status. This type of discharge relates to borrowers who, at the time of enrollment, had a condition that under state law or regulation would prevent their employment in the field for which they were being trained. Borrowers applying for this discharge must provide proof of their status or condition and a copy of the prohibiting statute or regulation. [January 8, 2016]

Borrowers are not eligible for a false certification discharge due to ATB if the borrower is not eligible to demonstrate student eligibility for Title IV aid through ATB (if the student does not meet the ATB grandfathering test that was outlined in DCLGEN-12-03). If the school gave a student a loan when the student did not have a high school diploma and was not able to use ATB as a path to student eligibility, then we would treat this as a school error and require the school to return the funds. If the student could not resolve the situation with the school directly, we would ask that the student call the Ombudsman. [January 8, 2016]

Settlements and compromises are only available to defaulted borrowers and are intended as a last resort after other repayment options have been exhausted. Specific guidance related to settlements and compromises is confidential, given that publicizing this information is not in the best interest of the government as it could enable borrowers to reduce their repayments below the amount they can legitimately afford. [January 8, 2016]

There are two issues related to bankruptcy filing:

  • Notification of bankruptcy filing. The general rule is to notify the loan servicer. Notifications to any of the below addresses will be processed, and in any case most entities monitor PACER for new bankruptcies on their loans.

Address
U.S. Department of Education
Bankruptcy Department
PO Box 65128
St. Paul, MN 55165
Address
U.S. Department of Education
Federal Student Aid
830 1st Street, NE
Washington, DC 20202
Address
U.S Department of Education
P.O. Box 5609
Greenville, TX 75403
  • Amending claim when loan holder changes. This can cause issues when loans have moved to a different servicer and that servicer has not yet amended their claim, so the prior servicer/holder shows as the payee. In these cases, trustees can e-mail FSABankruptcy@ed.gov and we will notify them of the change and notify the servicer to get the claim amended.

[January 8, 2016]

For loans that the Department holds, the Department will automatically place a borrower in forbearance or stopped collections after the borrower has submitted a completed DTR application, unless the borrower requests otherwise or the borrower is in a deferment.

Loan holders in the FFEL Program may, at their discretion, grant forbearance or suspend collection activity for borrowers who have submitted a completed DTR application to the Department, upon being notified by the Department that a DTR application has been submitted. Although the decision to grant forbearance or suspend collection activity is at the discretion of each FFEL Program loan holder, the Department encourages loan holders to do so.

The forbearance or suspension of collection activity is applied regardless of what school is named in the borrower’s DTR application.

During forbearance, borrowers may receive statements from their servicer but no payments are due. Interest continues to accrue during forbearance.

For borrowers who are in default, stopping collections means that no bills will be sent, there will be no collection efforts, and there will be no involuntary offsets or garnishments. Interest continues to accrue during stopped collections. Voluntary payments will still be accepted so that, for example, borrowers who are in a rehabilitation agreement can continue their process on that agreement. [August 17, 2017]

The Department will continue to process DTR claims under the existing DTR regulations that were in effect prior to the November 1, 2016 final regulations that have now been delayed, and following the process that it has used over the past several years.

The provisions of the November 1, 2016 regulations that would have required loan holders in the FFEL Program to grant forbearance or suspend collection activity for a borrower who has submitted a DTR application to the Department have been delayed, but these provisions remain designated for early implementation at the discretion of each loan holder. [August 17, 2017]

All loans managed by a guaranty agency should have collection activity suspended for the period of time during which the Department is evaluating the borrower’s DTR claim, regardless of whether all of those loans are the subject of the DTR claim. [August 17, 2017]

The forbearance or suspension of collection activity should begin on the date that the loan holder or guaranty agency receives notice from the Department that the borrower has submitted a DTR application. [August 17, 2017]

Yes. Once a guaranty agency has suspended collection activity, involuntary collection efforts such as AWG or TOP must be discontinued. [August 17, 2017]

A guaranty agency must refund only AWG and TOP payments that were taken after the later of the following two dates—the DTR claim received date provided by ED in the DTR listing or June 9, 2017.

Example:

  • DTR claim received by ED on 7/10/2017.

  • DTR listing (that includes the DTR claim received date) received by the guaranty agency on 7/15/2017.

  • Effective date of collection cessation is 7/15/2017.

  • Only AWG and TOP payments taken after 7/10/2017 (the later of DTR claim received date and 6/9/17) must be refunded by the guaranty agency. [August 17, 2017]

No. [August 17, 2017]

Yes. [August 17, 2017]

Yes. [August 17, 2017]

Loans on which a DTR claim is pending should not be assigned to the Department. [August 17, 2017]