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(Loans) Subject: Total and Permanent Disability Match Process with Department of Veterans Affairs Begins

Posted Date:April 17, 2018

Author: Federal Student Aid

Subject: Total and Permanent Disability Match Process with Department of Veterans Affairs Begins

In 2016, the Department of Education (the Department) began a new process to identify and assist disabled federal student loan borrowers who may be eligible for Total and Permanent Disability (TPD) loan discharge. The process simplified the steps needed to obtain a TPD discharge by directly leveraging Social Security Administration (SSA) data to document a borrower’s eligibility.

This year, the Department will begin a similar data-matching process with the Department of Veterans Affairs (VA). Like the SSA process, the Department will begin to match the borrowers on the National Student Loan Data System (NSLDS®) who owe federal student loans or have Teacher Education Assistance for College and Higher Education (TEACH) Grants to the VA database.

Beginning in April 2018, borrowers who were positively identified in the match will start to receive a customized letter (a sample letter is attached below) from the Department’s TPD servicer, Nelnet. The mailed letter will explain that the borrower is eligible for loan discharge and include a TPD application. The borrower can sign and return the application to complete the process of applying for TPD discharge.

The borrower notifications will be staggered over a period of several weeks. The match process will then be conducted on a quarterly basis – in March, June, September, and December of each year.

Impact of TPD-VA Match on Loan Holders

From an operational perspective, the TPD discharge process does not change. Generally, loan holders should not need to alter existing systems or TPD discharge procedures; however, there will be two minor changes to consider:

  1. A new value will be added to the “TPD Type” field in the TPD Loan Holder Notification (LHN) file. We will add VA2 to indicate a borrower is receiving a TPD discharge under the VA match process. We will continue to use VET to indicate a borrower is receiving a TPD discharge under the standard (non-match) VA process.

  2. Two new values will be added to the “Claim/Discharge Reason Code” field of the School Portfolio Report (SCHPR1). In April 2018, schools will begin to see VA01 for a TPD discharge under the standard (non-match) VA process and VA02 for a TPD discharge under the VA-match process. For the updated NSLDS Record Layouts, refer to the NSLDS Record Layouts page of the Information for Financial Aid Professionals (IFAP) website.

Loan holders may also see an increase in the number of borrowers moving through the TPD discharge process. We provide the following important reminders to help ensure efficient and timely TPD discharge processing:

  • Refunding loan payments – If a borrower is approved for a TPD discharge, the loan holder is responsible for returning any loan payments received on or after the disability date to the person who made the payments. This must be done before discharging the loan.

  • Reviewing NSLDS Information – The Nelnet TPD Servicer uses NSLDS to retrieve loan holder and contact information to send LHN files. To ensure your organization receives LHN files timely, keep both loan holder information and contact information on the NSLDS Professional Access website current.

  • Timing of the discharge and reporting NSLDS Status Codes – A loan holder should only discharge the loan after it receives the LHN file with the reason code “APPAPPR.” Do not discharge the loan prior to receiving the LHN file with this approval reason code, as the borrower has not yet been approved for TPD Discharge.

    Likewise, NSLDS status codes should not be updated until after your organization receives the LHN file indicating that the borrower’s application is approved. As a reminder, when the NSLDS status code is updated, it changes the contact codes used for the LHN files. As a result, if your organization updates the status code too early, it will not receive the LHN files with the updated information during the remainder of the TPD discharge process.

  • LHN files – As noted above, the LHN file is the primary form of communication of TPD discharge information between the Nelnet TPD Servicerand loan holders. There will be one new value added to the “TPD Type” field. For complete information about the LHN, refer to a separate April 2018 Electronic Announcement posted to the IFAP website. If your organization does not currently receive an LHN file, it should review the information in that announcement to begin receiving it.

We appreciate the financial aid community’s support of the TPD discharge process and this new outreach effort.

Last Modified: 04/16/2018