ED Proposes Changes to Loan Programs, Part 1
July 23, 2009
In the first of five notices of proposed rulemaking that are expected to be issued this summer, on July 23, the Department of Education published proposed regulatory changes for its loan programs, focusing primarily on lender and guaranty agency issues. The rules will implement provisions of the Higher Education Opportunity Act (HEOA) of 2008 for the Federal Perkins Loan, the Federal Family Education Loan (FFEL), and the Federal Direct Loan programs. Topics addressed include permanent disability discharges, prohibited inducements in the FFEL program, expanded information disclosures for FFEL and Direct Loan borrowers, loan rehabilitation, and financial literacy programs. The comment period is very short, with an August 24 deadline.
Total and Permanent Disability Loan Discharges
The proposed changes to the rules for disability discharges, which apply to all three loan programs, are probably of the most interest to business officers. The definition of total and permanent disability would be modified to align with the HEOA as follows.
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-
(i) Can be expected to result in death;
(ii) Has lasted for a continuous period of not less than 60 months; or
(iii) 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.
A definition of "substantial gainful activity" would also be provided.
The process for granting discharges based on total and permanent disability would also change under these rules. Rather than the current process under which a borrower who is determined to be disabled receives a conditional discharge for three years before being granted a permanent discharge, the proposed rules would grant a permanent discharge when the borrower was first determined to be disabled. Then if the borrower, within three years of the date of the discharge, receives another Title IV loan or has earned income in excess of the poverty line, the loan would be reinstated.
A separate discharge process for veterans would be set up that only requires the submission of documentation from the Department of Veterans Affairs that the borrower is considered unemployable due to a service-connected disability.
These proposed rules were drafted with the help of a representative team of stakeholders, known as a negotiated rulemaking committee. Now, this notice solicits public comments on the proposed rules. NACUBO encourages its members to review the notice and submit comments about any concerns. Please share your comments with NACUBO. In order for the regulations to take effect on July 1, 2010, as scheduled, ED must publish the final rules no later than November 1.
Vice President, Regulatory Affairs
- NACUBO Responds to White House College Affordability Plans
- Recommendations for Completing Form 1098-T
- Preliminary Results Show that College and University Endowments Returned 11.7 Percent in FY13
- 2014 Intermediate Accounting and Reporting - Winter
January 27-28, 2014
- 2014 Endowment and Debt Management Forum
February 5-7, 2014
- 2014 Facilities and Administrative Rates - Long Form
March 3-5, 2014
- WEBCAST: Developing a Market-Informed Approach to Tuition Pricing
Thursday, December 12, 2013 1:00 PM ET
- WEBCAST: How Behavioral Changes Helped Cut Energy Usage in Half
Wednesday, December 18, 2013 1:00 PM ET
- ON-DEMAND: Responsibility Center Management: The Process Necessary to Complete a Successful Implementation
- ON-DEMAND: OD: Responsibility Center Management: How Innovations Have Changed the Nature of RCM
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis