We changed the look and expanded the Student Loan Borrower Assistance web site this week. We hope you find it easier to use.
As of July 1, there are a number of important changes to the federal student loan regulations. The final rules were published in November 2012, but did not go into effect until July 1, 2013. These rules came out of the 2012 negotiated rulemaking process. They are only a part of the rules agreed to during that process. The remaining rules, including key changes to loan rehabilitation and other areas, have not yet been published. We will keep you posted as new developments occur.
The key changes in effect as of July 1, 2013 are:
The rules are intended to streamline the application and annual recertification process for these repayment plans. Under all three plans (IBR/ICR/PAYE), borrowers must submit updated income documentation annually. As of July 1, borrowers should start receiving notice that they must submit income and family size information/documentation and the consequences of not doing so. These notices must be sent no earlier than 90 days and no later than 60 days before the annual deadline. (The deadline or anniversary date is based on when the borrower initially entered the repayment plan).
Borrowers submitting income documentation within 10 days of the deadline will have their current payments maintained until income documentation is processed and a new payment amount is calculated. Assuming the borrower meets these deadlines, loan holders should no longer be automatically increasing payment amounts and capitalizing outstanding interest.
We wrote about these changes in an earlier post. Since then, the Department has issued a series of announcements explaining the new process. The Department’s disability discharge contractor, Nelnet, should have information about the new process and a new form posted on July 1. The Department has instructed Nelnet to continue to accept the old disability discharge form through December 31, 2013. Borrowers, however, are advised to start using the new form as of July 1, 2013. The new form and other information about the new process is now available on the Nelnet web site.
Key changes:
1. All borrowers seeking a disability discharge will submit their applications directly to the Department of Education (through Nelnet) rather than to individual loan holders. Borrowers will be required to submit only one application for all federal student loans (including Perkins) and/or TEACH grant obligations.
2. Qualifying veterans may still apply through the separate V.A. documentation process. Other borrowers will also have a new way to prove permanent and total disability. The prior system requiring a doctor’s certification is still available. Under the new rules, borrowers receiving Social Security Disability or SSI benefits may submit a Social Security notice of award as proof of disability to the Department of Education. However, not all SSDI and SSI recipients can use this method. Only those with Social Security awards stating that the next scheduled disability review will be within 5 to 7 years can use this method to prove disability. Unlike the separate veterans process, borrowers applying with proof of an SSA award will still be monitored for three years after obtaining a discharge.
3. If the borrower notifies the Department of her intent to apply for a disability discharge, the Department must provide the borrower with an application and also must notify all of the borrower’s loan holders to suspend collection activity on the borrower’s loans for up to 120 days. When the Department receives the final application, the Department must then notify all loan holders to suspend collection activity indefinitely while the Department reviews the application. Collection activity should resume only if the Department determines that the borrower is not eligible for discharge and notifies the borrower and loan holders of this decision. Note that the Department says that the suspension of collection does not include administrative wage garnishment or Treasury offsets. The Department or guaranty agencies for FFEL loans may, however, stop or reduce offsets during the application process.
