TPD Discharge for Applications Received by Loan Holders Before July 1, 2010

For total and permanent disability discharge applications received by loan holders before July 1, 2010, total and permanent disability is defined as the condition of an individual who is unable to work and earn money because of an injury or illness that is expected to continue indefinitely or result in death.

Total and Permanent Disability Discharge Process Effective for Discharge Applications Received by Loan Holders Before July 1, 2010  

For total and permanent disability discharge applications received by loan holders before July 1, 2010, the discharge process is as follows:

1. Review of discharge application by the loan holder. (For any loans that are held by the Department, or in the case of an application for discharge of a TEACH Grant service obligation, the discharge process begins with the review by the Department described in Item 2, below). After the borrower submits the completed discharge application to the loan holder, the loan holder reviews the discharge application and any accompanying documentation to determine whether the borrower appears to meet the eligibility requirements for a discharge based on total and permanent disability. If applicable, the loan holder may also contact the borrower’s physician for additional information. For FFEL Program loans held by a lender, this determination will be made by both the lender and the guaranty agency.

   If the loan holder determines that the borrower does not meet the eligibility requirements, the loan holder notifies the borrower of that decision. The borrower must then resume payment of his or her loan(s).

   If the loan holder determines that the borrower appears to meet the eligibility requirements for a total and permanent disability discharge, the loan holder assigns the borrower’s loan(s) to the Department. The Department will be the new loan holder.

2. Review of discharge application by the Department. The Department will review the physician’s certification in Section 4 (if applicable) and any accompanying documentation. The Department may also contact the physician for additional information. Based on the results of this review, the Department will make an initial determination on the borrower’s application.

   If the Department determines that the borrower does not have a total and permanent disability, the Department will notify the borrower of that determination. The borrower must then resume repayment of his or her loan(s) or, in the case of an application for discharge of a TEACH Grant service obligation, must comply with all terms and conditions of the TEACH Grant Agreement to Serve.

   If the Department determines that the borrower has a total and permanent disability, the Department will notify the borrower that a conditional discharge has been granted for a period of up to three years beginning on the date the physician certified the discharge application in Section 4.

3. Conditional discharge. During the conditional discharge period:

• The borrower is not required to make any payments on his or her loan(s);

• The borrower is not considered to be delinquent or in default on his or her loan(s), unless the borrower was delinquent or in default at the time the conditional discharge was granted;

• The 8-year period in which a TEACH Grant service obligation must be completed remains in effect, unless the grant recipient qualifies for a suspension of the 8-year period based on certain provisions of the Family and Medical Leave Act of 1993;

• The borrower must promptly notify the Department if the borrower’s annual earnings from employment exceed the poverty line amount for a family of two in the borrower’s state;

• The borrower must promptly notify the Department of any changes in address or telephone number; and

• If requested, the borrower must provide the Department with additional documentation or information related to the borrower’s eligibility for loan discharge. This may include, but is not limited to, documentation of annual earnings from employment or additional medical documentation. As part of the Department’s initial review of a borrower’s loan discharge application, or at any time during or at the end of the conditional discharge period, the Department may also arrange for a review of the borrower’s medical condition by an independent physician, at the Department’s expense.

4. Final discharge. If the borrower meets the following eligibility requirements during and at the end of the conditional discharge period, the Department will grant a final discharge at the end of the 3-year conditional discharge period:

   • The borrower’s annual earnings from employment do not exceed the poverty line amount (see "Note about employment earnings" below) for a family of two in the borrower’s state, regardless of your actual family size;

   • The borrower does not receive any new loans under the FFEL, Perkins Loan, or Direct Loan programs, or any new TEACH Grants; and

   • If a FFEL Program loan was certified, a Perkins Loan was awarded, or a Direct Loan program loan or TEACH Grant was originated before the date the physician certified the borrower’s discharge application, but a disbursement of that loan or grant is made during the conditional discharge period, the borrower provides the Department with documentation showing that the disbursement was returned to the loan holder or (for a TEACH Grant) the Department within 120 days of the disbursement date.

    

   If the Department grants a final discharge, the discharge will be reported to national consumer reporting agencies, and any loan payments made after the date the physician certified the total and permanent disability discharge application will be returned to the person who made the payments.

   Note about employment earnings: In accordance with the definition of total and permanent disability that was in effect before July 1, 2010, the physician cannot certify in Section 4 of the discharge application that a borrower has a total and permanent disability if, at the time of the physician’s certification, the borrower is able to work and earn money in any capacity in any field of work. However, if the borrower attempts to work during the conditional discharge period, the borrower may earn up to the poverty line amount each year during that period. This standard allows the borrower to try to work without being disqualified from receiving a final discharge. The poverty line amounts are updated annually. The Department will notify the borrower of the current poverty line amounts during each year of the conditional discharge period.

5. Requirement to repay loans or complete TEACH Grant service obligation if the borrower does not qualify for a final discharge. If the borrower does not meet the requirements for a final discharge as described above at any time during or at the end of the conditional discharge period, the conditional discharge period will end and the borrower will not receive a final discharge.

   If the borrower received a conditional discharge of his or her loan(s), this means that the borrower will be responsible for repaying the loan(s) in accordance with the terms of the promissory note(s). However, the borrower will not be required to pay interest that accrued on the loan(s) from the date the Department made an initial determination that the borrower was totally and permanently disabled until the date the conditional discharge period ended. The Department will continue to be the loan holder.

   If a conditional discharge of a TEACH Grant service obligation was granted, the grant recipient will again be subject to the requirements of the TEACH Grant Agreement to Serve. If the grant recipient does not meet the terms of that agreement and the TEACH Grant funds he or she received are converted to a Direct Unsubsidized Loan, the grant recipient must repay that loan in full, and interest will be charged from the date(s) that the TEACH Grant funds were disbursed.

Eligibility Requirements to Receive Future Loans or TEACH Grants  

The following requirements apply to borrowers who wish to receive new loans or TEACH Grants after receiving a conditional or final total and permanent disability discharge under the procedures described above that apply to discharge applications received by loan holders before July 1, 2010:

1. If a borrower is granted a final discharge due to total and permanent disability, the borrower is not eligible to receive future loans under the FFEL, Perkins Loan, or Direct Loan programs or TEACH Grants unless:

   • The borrower obtains a certification from a physician that he or she is able to engage in substantial gainful activity; and

   • The borrower signs a statement acknowledging that the new loan or TEACH Grant service obligation cannot be discharged in the future on the basis of any injury or illness present at the time the new loan or TEACH Grant is made, unless the borrower’s condition substantially deteriorates so that he or she is again totally and permanently disabled.

    

2. If a borrower is granted a conditional discharge based on a total and permanent disability and the borrower requests a new FFEL, Perkins Loan, or Direct Loan program loan or a new TEACH Grant during the conditional discharge period, the borrower is not eligible to receive the new loan or TEACH Grant unless:

   • The borrower obtains a certification from a physician that he or she is able to engage in substantial gainful activity;

   • The borrower signs a statement acknowledging that neither the previous conditionally discharged TEACH Grant service obligation or loan(s) nor the new loan or TEACH Grant service obligation can be discharged in the future on the basis of any injury or illness present when the borrower applied for a total and permanent disability discharge or at the time the new loan or TEACH Grant is made, unless the borrower’s condition substantially deteriorates so that he or she is again totally and permanently disabled;

   • The borrower signs a statement acknowledging that the conditionally discharged loan(s) or TEACH Grant service obligation will be removed from conditional discharge status; and

   • The Department has removed the conditionally discharged loan(s) or TEACH Grant service obligation from conditional discharge status.