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(Loans) Subject: Total and Permanent Disability Discharge Regulations Effective July 1, 2010 (Updated May 27, 2011)

Posted Date:June 30, 2010

Author: Jana Hernandes, Service Director, Operations, Federal Student Aid

Subject: Total and Permanent Disability Discharge Regulations Effective July 1, 2010 (Updated May 27, 2011)

May 27, 2011 Note: The phone, fax, and mailing address information for the Department's Veterans Disability Discharge Unit provided in "Updated Contact Information for Veterans Disability Discharge Unit" section has changed since publication of this announcement. The updated information is as follows:

Phone:

888/303-7818

Fax:

303/696-5669

Mailing Address:

Nelnet Total and Permanent Disability Servicer
P.O. Box 173904
Denver, CO 80217

For overnight delivery:

Nelnet Total and Permanent Disability Servicer
3015 South Parker Road, Suite 400
Aurora, CO 80014

Note: The physical street address for mailing assignments and referrals is in Aurora, CO, a suburb of Denver.

In this announcement, we remind loan holders of changes to the total and permanent disability discharge regulations that are effective July 1, 2010 and provide some important operational updates.

We present the information in this announcement as follows:

  • Background
  • Total and Permanent Disability Definition Effective July 1, 2010
  • Total and Permanent Disability Discharge Processes Effective July 1, 2010
  • Discharge Application: Total and Permanent Disability
  • Updated Contact Information for Veterans Disability Discharge Unit
  • Contact Information

Background

As explained in Dear Colleague Letter GEN-08-12 (also posted as FP-08-10), the Higher Education Opportunity Act (HEOA), Pub. L. 110-315, amended Sections 437(a) and 464(c) of the Higher Education Act of 1965, as amended (HEA) by establishing a new standard (including a separate standard for certain veterans) for discharging Federal Family Education Loan (FFEL) Program, Federal Perkins Loan (Perkins Loan) Program, and William D. Ford Federal Direct Loan (Direct Loan) Program loans based on a borrower’s total and permanent disability. The HEOA provisions related to total and permanent disability loan discharges are summarized on pages 132-133 and 140 of the attachment to Dear Colleague Letter GEN-08-12 titled “The Higher Education Opportunity Act.”

Subsequent to enactment of the HEOA, the Department of Education (the Department), through negotiated rulemaking, issued final regulations on October 29, 2009 that amended the total and permanent disability loan discharge provisions. The amended regulations are effective July 1, 2010. In addition to implementing the new statutory definition of total and permanent disability (including the separate standard for certain veterans), the regulations also make changes to the discharge process. For more detailed information, refer to the July 23, 2009 Notice of Proposed Rulemaking (NPRM) and the October 29, 2009 Final Rule.

Total and Permanent Disability Definition Effective July 1, 2010

Effective July 1, 2010, total and permanent disability is defined as the condition of an individual who—

1) Is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months;

OR

2) Has been determined by the Secretary of Veterans Affairs to be unemployable due to a service-connected disability.

The amended regulations define “substantial gainful activity” as a level of work performed for pay or profit that involves doing significant physical or mental activities, or both.

Loan holders (lenders and guaranty agencies for the FFEL Program and schools for the Perkins Loan Program) must evaluate all discharge applications received on or after July 1, 2010 in accordance with the revised definition of total and permanent disability. If it is unclear whether the borrower is totally and permanently disabled under the new definition, the loan holder must follow up with the physician and provide documentation establishing the borrower’s eligibility. In addition, the Department will apply the new definition when reviewing all discharge applications that were received by the loan holder on or after July 1, 2010.

Total and Permanent Disability Discharge Processes Effective July 1, 2010

Effective July 1, 2010, the general discharge process for borrowers who meet condition 1 in the definition of total and permanent disability above will change. The discharge process for veterans who meet condition 2 will not change.

General Discharge Process for Borrowers Who Meet Condition 1

The general discharge process that is effective July 1, 2010 for borrowers who meet condition 1 in the definition of total and permanent disability is similar in some respects to the discharge process under the current regulations. However, instead of using the previous conditional discharge process, the Department will discharge a borrower’s obligation to repay a loan after determining that the borrower meets the discharge eligibility requirements. The Department will then reinstate the borrower’s obligation to repay the loan if the borrower fails to meet certain requirements during a three-year post-discharge monitoring period.

For complete information about the general discharge process, refer to sections 674.61(b) (for Perkins Loan Program loans), 682.402(c)(2) through (7) (for FFEL Program loans), and 685.213(b) (for Direct Loan Program loans) of the final regulations.

Veterans Discharge Process for Borrowers Who Meet Condition 2

As announced in Dear Colleague Letter GEN-09-07, the Department previously implemented a separate discharge process for veterans who meet condition 2 in the definition of total and permanent disability. No changes were made to this process through negotiated rulemaking and the issuance of final regulations. Borrowers will continue to submit to the loan holder a loan discharge application accompanied by documentation from the Department of Veterans Affairs showing that the borrower has been determined to be unemployable due to a service-connected disability.

For complete information about the veterans discharge process, refer to Dear Colleague Letter GEN-09-07 (also posted as FP-09-05 and CB-09-04) and sections 674.61(c) (for Perkins Loan Program loans), 682.402(c)(8) (for FFEL Program loans), and 685.213(c) (for Direct Loan Program loans) of the final regulations.

Discharge Application: Total and Permanent Disability

We are updating the Discharge Application: Total and Permanent Disability to reflect the changes to the total and permanent disability discharge regulations that take effect July 1, 2010. We will make the revised form available to loan holders after we receive approval from the Office of Management and Budget (OMB).

Until the updated form is available, the current version of the form remains valid for use; however, loan holders must evaluate all discharge applications received on or after July 1, 2010 in accordance with the new definition of total and disability. (Note that the current version of the form already reflects the separate discharge process for veterans who meet condition 2 of the definition of total and permanent disability.) Once the revised discharge application is available, we will provide further guidance on implementing the new form and will establish a deadline for acceptance of the current version of the form.

Updated Contact Information for Veterans Disability Discharge Unit

The phone and fax numbers for the Veterans Disability Discharge Unit have changed. The updated information is as follows:

Phone:404/974-9490
Fax:404/974-9326

All hard copy files for application referrals should continue to be mailed to:

U.S. Department of Education
Federal Student Aid, Processing Division
Veterans Disability Discharge Unit
61 Forsyth Street, SW 19T89
Atlanta, GA 30303

E-mails should continue to be sent to FSAAtlantaContracts@ed.gov.

Note: The subject line of a fax or e-mail should include the words “Veterans Disability Discharge”.

Loan holders can find a comprehensive list of contact information on the Information for Financial Aid Professionals (IFAP) Web site’s Disability Discharge Loan Servicing Center and Veterans Disability Discharge Unit page.

Contact Information

If you have questions about the information in this announcement, contact Patricia Raling at patricia.raling@ed.gov.

Last Modified: 06/29/2010