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Summary: Changes in Assignment Procedures for Conditional Disability Discharge

Publication Date: July 9, 2008

Author: Jana Hernandes, General Manager, Borrower Services, Federal Student Aid

Summary: Changes in Assignment Procedures for Conditional Disability Discharge

Posted on 07-09-2008

This announces several changes in procedures for assignments to the U.S. Department of Education (the Department) for conditional disability discharge. Some of the changes implement the new regulations that became effective July 1, 2008. These regulations were published in the Federal Register dated November 1, 2007 (Volume 72, Number 211). Other changes improve the quality of the Department's review of incoming assignments.

Included with this announcement is a Question and Answer document developed by the National Council of Higher Education Loan Programs, Inc. (NCHELP) and agreed upon by the Department. This document addresses several questions related to the new regulations that became effective July 1, 2008.

Changes for new regulations - effective July 1, 2008

Receipt Date - All assignments received on or after July 1, 2008 must have a receipt date stamped on the Total and Permanent Disability loan discharge application, or there must be attached documentation of the receipt date.

Loan holders must attach documentation of the receipt date if there is no receipt date stamped on the application. The attached documentation will clarify the receipt date to be used. This attached documentation must contain the following information:

  1. Borrower's name
  2. Borrower's SSN
  3. Loan holder's name
  4. Receipt date

If there are multiple receipt date stamps on an application, and no attached documentation to clarify the correct receipt date, the Department will use the earliest date stamp.

Background - The receipt date is the date the loan holder received the application. Since most loan holders use receipt date stamps, the Department will consider the date stamp as the receipt date. The receipt date determines whether the Department will process the assignment under the old or new regulations. All assignments with applications that have receipt dates on or after July 1, 2008 will be processed under the new regulations. All assignments with applications that have receipt dates before July 1, 2008 will be processed under the old regulations.

Listing of Payments or Lump Sum Payment Information - For assignments processed under the new regulations (received on or after July 1, 2008), loan holders must inform the Department of the amount of any payments received after the date the physician signed the application. For applications processed under the old regulations (received before July 1, 2008), loan holders must inform the Department of the amount of payments received after the date provided in Section 3, Line 3b of the application. If the Department receives an assignment and there is no payment information attached, the Department will assume that no payments were received.

All payment information should include payments from any source, including those made by Treasury Offset and Administrative Wage Garnishment. The format for the payment listing/lump sum payment information is as follows:

  1. Provide the borrower's name on all pages with payment information. Provide the borrower's SSN (or partial SSN) on at least the first page.
  2. Loan holder's name
  3. Date of printout or submission of the payment list
  4. If you provide a payment listing, provide an itemized list of the amounts of payments with their effective dates and the total amount of the list of payments. (Do not include non-payment transactions such as payment applications to principal and interest, fee applications, etc.) If you provide a lump sum amount, please use the established format for lump sum amounts. (For questions about this format, contact the Disability Discharge Servicing Center at 1(888) 869 - 4169 or
  5. If the payment information you provide includes any payment(s) that you refunded to the borrower, you should indicate the payment amount(s) and effective date(s) of the refund.

Background - Under the old regulations, loan holders were required to forward payment information to the Department. Even if the borrower made no payments, loan holders were required to indicate that fact to the Department. Under the new regulations, if CDD approves the loan(s) for disability discharge, new regulations only require the refund of payments after the date the physician signed the application. The Department therefore anticipates that most borrowers will not make payments after this date. For this reason, loan holders are no longer required to indicate that no payments were received.

Dates on the Current Discharge Application - For all applications for disability discharge received by the loan holder on or after July 1, 2008 on the current loan discharge application, the following fields no longer need to be completed:

  1. Section 3 (Physician's Certification), Line 2 (When did the borrower's medical condition begin?); and
  2. Section 3 (Physician's Certification), Line 3b (If Yes, when did the borrower become unable to work and earn money in any capacity?)

The Department will not reject an assignment due to either of these fields being missed or incomplete, as long as the application was received by the loan holder on or after July 1, 2008.

Background - At this time, the Department has not issued an updated discharge application that incorporates the new regulations going into effect on July 1, 2008. Loan holders must continue to use the current discharge application. However, since new regulations do not require the date information supplied in these fields, the Department will no longer require these fields to be completed.

Changes to improve the quality of the Department's review - effective July 1, 2008

NSLDS Check - Beginning July 1, 2008, and for all incoming assignments (regardless of whether the application will be processed under the old or new regulations), the Department will check NSLDS prior to accepting any incoming assignments. The Department will not accept assignment of borrowers with loans or loan disbursements after the date the physician signed the application (or Section 3, Line 3b, if the application is to be processed under the old regulations). The Assignment Rejection Checklist accompanying each assignment rejection will indicate that the assignment failed the NSLDS check.

Exception - The Department will accept the assignment when the loan holder attaches documentation that the borrower qualifies under the "120-Day Disbursement Rule." (See attached "Applying the 120-Day Disbursement Rule.")

Background - All loan holders are expected to review NSLDS in determining whether the borrower is eligible for the disability discharge. If a particular lender does not have access to NSLDS to confirm the borrower's eligibility relative to disbursements made after the physician's certification date, it should inform the guaranty agency of this fact when filing the discharge claim. Guaranty agencies are expected to confirm the eligibility of the borrower prior to paying the lender's claim and assigning the loan to the Department. Beginning July 1, 2008, this determination should include a review of the borrower's NSLDS record for any disqualifying disbursements.

Monthly Assignment Report (guaranty agencies only) - On a monthly basis, the Department will provide each guaranty agency with a listing of assignments that were accepted and rejected that month. For assignment rejections, the Department will provide the rejection reason in the report.

The Department will issue the monthly assignment reports to guaranty agencies through the Student Aid Internet Gateway, using the following new message class:

Message Class Description
GACDDTOP GA Accept/Reject from CDDTS

The first monthly assignment reports issued will list the acceptances and rejections for the month of July 2008.

The Department appreciates your ongoing feedback on the format of this report. Please send your feedback to Jennifer Ryder at ''.

Additional changes to improve the quality of the Department's review - effective with approval of the new discharge application

The Department currently does not have an estimated date when the new discharge application will be approved. The changes described below will take effect upon the approval of the new discharge application.

Pre-Medical Check - Prior to accepting assignment, the Department will also review the physician's responses to questions on the application to ensure that the responses are complete. In order for the Department to accept the assignment, the physician must provide sufficient responses to the medical questions on the application. If the physician supplies incomplete or partial responses, the Department will reject the assignment.

The Department is developing guidelines to help loan holders ensure the physician's responses are complete. The Department will issue these guidelines once the new discharge application is approved.

Background - The Department is adopting more stringent policies for accepting disability discharge assignments to provide better service to borrowers and to ensure that loan holders perform their responsibilities when reviewing the discharge applications.

Assignment File Manifest - In the assignment process for conditional disability discharge, an assignment manifest must accompany the hard copy (collateral) files, regardless of whether the loan holder assigns the loans by transmitting an assignment file via SAIG, or submits Assignment Forms. Therefore, whenever a loan holder assigns accounts to the Department for conditional disability discharge consideration, the file must be accompanied by an assignment manifest. The assignment manifest must contain the following elements:

  1. Agency name
  2. Agency code
  3. Date of submission of the manifest
  4. A numerical listing of the borrowers
  5. Borrowers' names
  6. Borrowers' SSN's
  7. The number of promissory notes (i.e., loans) per SSN
  8. The total Record Count (i.e., the total number of loans represented by the total number of promissory notes)

Loan holders must include an assignment manifest with all files, regardless of whether the loan holder transmits via SAIG or submits Assignment Forms.

If you have any questions on the information provided in this letter, please send all inquiries to Jennifer Ryder at ''.

Last Modified: 07/08/2008