August 6, 2008
Total and Permanent Disability Discharge: Processing Changes
In a July 9 Electronic Announcement, the Department of Education (ED) relayed several important procedural changes relating to total and permanent disability discharge. These changes are a result of the November 1, 2007 regulations that became effective July 1, 2008. The announcement also includes a question and answer document developed by the National Council of Higher Education Loan Programs, Inc. (NCHELP) and accepted by ED.
Until a new total and permanent disability discharge application form is issued to incorporate the new regulations, loan holders must continue to use the current application form.
A summary of the processing changes is provided below.
Receipt Date for Total and Permanent Disability Application
- The receipt date for a total and permanent disability loan discharge application must be stamped on the form, or other documentation of the receipt date must be attached to the form. Attached documentation must include the following information:
- Borrower name.
- Borrower Social Security number (SSN).
- Loan holder name.
- Receipt date.
- The receipt date determines whether the borrower’s total and permanent disability discharge application will be processed under the old regulations or new regulations.
- The borrower is required to submit the total and permanent disability application within 90 days of the date the physician certifies the application. A five-day allowance for U.S. mail is acceptable. This requirement applies to discharges received after July 1, 2008 and processed under the new regulations.
Listing of Lump Sum Payments or Information
- For total and permanent disability loan applications received by the loan holder on or after July 1, 2008, loan holders must provide the amount of any payments received from the date the physician signed the application.
Date Fields on the Current Total and Permanent Disability Application
- For total and permanent disability loan applications received by the loan holder on or after July 1, 2008, the following fields on the current application no longer need to be completed:
- Section 3 (Physician Certification), Line 2 (When did the borrower’s medical condition begin?).
- Section 3 (Physician’s Certification), Line 3b (If yes, when did the borrower become unable to work and earn money in any capacity?).
120-Day Disbursement Rule
- Borrowers with loans or loan disbursements after the date the physician signed the application (or the date supplied in Section 3 Line 3b, if the application is to be processed under the old regulations) will not be accepted for assignment by ED. This is effective July 1, 2008, regardless of whether the application will be processed under the old or new regulations. There is an exception, however; ED will accept the assignment when the loan holder attaches documentation indicating that the borrower qualified under the “120-Day Disbursement Rule,” as outlined in the July 9 announcement.
Pre-Medical Check
- ED is developing guidelines to help loan holders ensure that the physician’s responses are complete. These guidelines will be issued once the new discharge application is approved.