Posted Date: May 17, 2013
Jana Hernandes, Service Director, Operations, Federal Student Aid
Subject: TPD Discharge Information - Changes to Total and Permanent Disability Discharge Regulations Effective July 1, 2013
This is the first in a series of Electronic Announcements that we will publish relating to the changes to the total and permanent disability (TPD) discharge regulations that are effective July 1, 2013. In this announcement, we provide a summary of the new TPD discharge process and identify areas for which we will provide additional operational guidance to the financial aid community later in this series.
We present the information in this announcement as follows:
Effective Date of New Regulations
High-Level Overview of New TPD Discharge Process
TPD Lender Notification File
On November 1, 2012, we published in the Federal Register (77 FR 66087) final regulations that made a number of changes to the process for discharging William D. Ford Federal Direct Loan (Direct Loan) Program, Federal Family Education Loan (FFEL) Program, and Federal Perkins Loan (Perkins Loan) Program loans and Teacher Education and Access to College and Higher Education (TEACH) Grant service obligations based on a borrower’s or TEACH Grant recipient’s total and permanent disability (TPD). The two most significant changes made by the final regulations are described below. For more detailed information on other changes to the TPD discharge process, schools and loan holders should refer to the final regulations.
The first major change made by the final regulations is that all individuals seeking a TPD discharge will submit their discharge applications directly to the U.S. Department of Education (the Department) rather than to their individual loan holders, as under the current TPD discharge process. Under the new process, an individual will be required to submit only one application to the Department to apply for a TPD discharge of all of his or her Title IV loans and/or TEACH Grant service obligations.
The second major change is that the final regulations provide for a new option by which an individual can demonstrate that he or she is totally and permanently disabled. Effective July 1, 2013, an individual can qualify for TPD discharge if he or she is receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits, and submits a Social Security Administration (SSA) notice of award for SSDI or SSI benefits stating that the individual’s next scheduled disability review will be within 5 to 7 years from the date of the individual’s most recent SSA disability determination. An individual who provides this documentation is not required to obtain a separate certification from a physician on the TPD discharge application.
With the addition of the option of qualifying for a TPD discharge based on SSA documentation, an individual who applies for TPD discharge on or after July 1, 2013 will be able to demonstrate that he or she is totally and permanently disabled in one of three different ways:
If the individual is a veteran, he or she can submit documentation from the U.S. Department of Veterans Affairs (VA) showing that the VA has determined that the individual is unemployable due to a service-connected disability (same as under the current process);
If the individual is receiving SSDI or SSI benefits, he or she can submit an SSA notice of award for SSDI or SSI benefits stating that the individual's next scheduled disability review will be within 5 to 7 years from the date of the individual's most recent SSA disability determination (new); or
The individual can submit a certification from a physician that he or she is totally and permanently disabled (same as under the current process).
Also as under the current TPD discharge regulations, veterans who qualify for TPD discharge based on a VA determination of unemployability due to a service-connected disability will not be subject to a post-discharge monitoring period.
The TPD process and eligibility changes will be explained to discharge applicants through an updated TPD discharge application. In addition, the correspondence that will be sent to discharge applicants throughout the TPD discharge process will explain the TPD discharge procedures, eligibility criteria, post-discharge monitoring period, and conditions that may result in reinstatement of a discharged loan or TEACH Grant service obligation.
Effective Date of New Regulations
The new TPD discharge regulations apply to TPD discharge applications received on or after July 1, 2013. TPD discharge applications received prior to July 1, 2013 will be processed under the regulations that are currently in effect. Loan holders who receive applications for TPD discharge on or after July 1, 2013 must forward those applications to the Department’s TPD servicer (the Nelnet Total and Permanent Disability Servicer). Contact information for the servicer can be found on the Total and Permanent Disability Discharge and Veterans Disability Discharge Contact Information page on the Information for Financial Aid Professionals (IFAP) Web site.
Note: The mailing address for the Nelnet Total and Permanent Disability Servicer will change prior to July 1, 2013. We will update the contact information page accordingly and inform the community when we do so through a subsequent Electronic Announcement.
High-Level Overview of New TPD Discharge Process
The new TPD discharge process will apply to Direct Loan Program, FFEL Program, and Perkins Loan Program borrowers, and also to TEACH Grant recipients. For ease in reading the process overview that follows, we use the term “borrower” to refer to the disabled individual who applies for discharge. Likewise, we use the term “loan holder” to refer to FFEL and Perkins Loan holders as well as to our team of federal loan servicers who assist us in the servicing of federally-owned loans and TEACH Grants.
If a borrower notifies a loan holder that he or she is totally and permanently disabled, the loan holder must direct the borrower to notify the Department of the borrower’s intent to apply for a TPD discharge and provide the borrower with information on how to contact the Department.
The loan holder will direct the borrower to the Nelnet Total and Permanent Disability Servicer. Nelnet assists the Department in administering the TPD discharge process and will communicate with the borrower on behalf of the Department concerning the borrower’s TPD discharge request.
If the borrower notifies the Department that he or she intends to apply for a TPD discharge, the Department provides the borrower with a TPD discharge application and notifies all of the borrower’s loan holders to suspend collection activity on the borrower’s loans for up to 120 days. This 120-day period gives the borrower time to complete and submit the discharge application and obtain any required supporting documentation.
When the Department receives from the borrower a materially-complete TPD discharge application, the Department notifies the borrower’s loan holders to suspend collection activity on the borrower’s loans indefinitely while the Department reviews the TPD discharge application to determine whether the borrower qualifies for discharge.
If the Department determines that the borrower is not eligible for a TPD discharge, the Department notifies the borrower and the borrower’s loan holders of this determination, and instructs the loan holders to resume collection activity on the borrower’s loans.
If the Department determines that the borrower is eligible for a TPD discharge, the Department notifies the borrower and the borrower’s loan holders that the discharge application has been approved.
If the borrower qualifies for discharge based on a physician’s certification or acceptable documentation from the SSA showing that the borrower is totally and permanently disabled, the Department’s notification to loan holders: (1) provides the date of the physician’s certification or the date the Department received the SSA documentation, and (2) directs the borrower’s loan holders to assign the borrower’s loans to the Department for discharge and a 3-year post-discharge monitoring period. Loan holders must return to the sender any payments on the discharged loans that were received after the date of the physician’s certification or the date the Department received the SSA documentation.
If the borrower qualifies for discharge based on acceptable documentation from the VA showing that the borrower has been determined to be unemployable due to a service-connected disability, the Department’s notification to loan holders: (1) provides the effective date of the VA determination and (2) instructs the loan holders to discharge the borrower’s loans. Loan holders must return to the sender any payments on the discharged loans that were received on or after the effective date of the VA determination.
After the loans have been assigned to the Department, and if the borrower has maintained eligibility for the discharge, the Department discharges the loans and notifies the borrower and the loan holders that the loans have been discharged.
TPD Lender Notification File
We will implement the notifications to loan holders described above through the use of a “TPD Lender Notification File” that the Nelnet Total and Permanent Disability Servicer will send to FFEL Program lenders or lender servicers, FFEL Program guaranty agencies, and Perkins Loan schools in a comma separated values file format (*.csv).
FFEL Program guaranty agencies will have the option of receiving the TPD Lender Notification File through the Student Aid Information Gateway (SAIG) or via e-mail to a designated contact. FFEL Program lenders or lender servicers and Perkins Loan schools will receive the notification file via e-mail to a designated contact. Each entity will designate its contact for receipt of the notification file through a new National Student Loan Data System (NSLDS) contact type.
We will provide detailed guidance related to the TPD Lender Notification File, including contact designation and file layout information, in an Electronic Announcement that will be posted to the IFAP Web site shortly.
We are in the process of revising our assignment procedures to reflect the new TPD discharge regulations. In early June 2013, we will post updated Electronic Announcements, one for FFEL guaranty agencies and one for Perkins Loan schools, that provide detailed guidance on the new assignment procedures.
Note: For TPD discharge applications received by FFEL Program lenders or lender servicers, guaranty agencies, and Perkins Loan schools prior to July 1, 2013, the assignment procedures described in Electronic Announcements dated September 10, 2010 (FFEL, Perkins) will continue to apply.
We appreciate the financial aid community’s participation in our implementation of the new TPD discharge process. Please monitor the IFAP Web site for subsequent Electronic Announcements in the “TPD Discharge Information” series.
If you need assistance with TPD discharge processing, contact the Nelnet Total and Permanent Disability Servicer as outlined on the current Total and Permanent Disability Discharge and Veterans Disability Discharge Contact Information page