Matrix of November 1, 2016 Final Rule Changes* The U.S. Department of Education (ED) held negotiated rulemaking sessions with members of the community to address borrower defense to repayment and other FFELP and Direct Loan issues. These sessions were held in January through March, 2016. Consensus was not reached on the entire package. The Notice of Proposed Rulemaking (NPRM) was published on June 16, 2016, (81 FR 39330). The final regulations were published November 1, 2016, (81 FR 75926). This matrix contains a summary of the changes that impact the FFELP Program. Prepared by Great Lakes Higher Education Guaranty Corporation May 2, 2017 *This matrix provides a summary of the regulatory provisions. The information is subject to change based upon guidance obtained from ED or clarifications that may be received. Readers should refer to the actual law and final rules to resolve any questions.
Table of Contents Closed School Discharge... 3 Closed School Discharge Denial... 3 Lender/Guaranty Agency Provision of Discharge Application... 3 Lender Action Upon Borrower s Failure to Submit Completed Discharge Application... 3 Discharge Without Application... 4 Death Discharge... 4 Death Discharge Documentation... 4 Interest Capitalization... 4 Lender Purchase of Rehabilitated Loan... 4 Guaranty Agency Capitalization at Default Claim... 5 Borrower Failure to Submit Application... 5 Forbearance... 5 Mandatory Administrative Forbearance for Borrower Defense Claim... 5 Suspension of Collection Activity for Borrower Defense Claim... 7
Key: Date/Trigger = contains the effective date and trigger (i.e., the event that triggers the change to occur). The date is directly from the legislation, Department of Education (ED) regulations, or as recommended by the loan community, as applicable. DCL/Other = refers to Dear Colleague Letter(s) in which the topic is discussed, or other sub-regulatory guidance provided by ED. = Contains supplementary guidance from or obtained by the FFELP community. = Information on Great Lakes implementation of the changes. This information is subject to change as Great Lakes continues to work through issues associated with the changes. Unless otherwise noted, contact Client Services at 888-686-6919 with questions. Closed School Discharge Closed School Discharge Denial 1. A guaranty agency that denies a closed school discharge request from a defaulted borrower must inform the borrower of the reasons for the denial, the opportunity for review of the agency s decision by ED, and an explanation of how to request such a review within 30 days of receiving a borrower s request for an ED review, the guarantor must forward the request and all relevant documentation to ED. 682.402(d)(6)(ii)(F) Lender/Guaranty Agency Provision of Discharge Application 2. Upon resuming collection on any affected loan, a lender or guaranty agency must provide the borrower another discharge application and an explanation of the requirements and procedures for obtaining a discharge. 682.402(d)(6)(ii)(I) July 1, 2017 Closed school applications sent on or after July 1, 2017 Lender Action Upon Borrower s Failure to Submit Completed Discharge Application 3. If a borrower fails to submit a completed Loan Discharge Application: School Closure, within 60 days of being notified of that option, a lender shall resume collection and shall be deemed to have exercised forbearance of payment and principal and interest from the date the lender suspended collection activity. Upon resuming collection, a lender must provide the borrower another such application and an explanation of the requirements and procedures for obtaining a discharge. Closed school applications sent on or after July 1, 2017 November 1, 2016 Final Rule (81 FR 75926) 3 May 2, 2017
Closed School Discharge 682.402(d)(7)(ii) Discharge Without Application 4. A guaranty agency must grant a closed school discharge to an FFELP borrower without a borrower application based on information in ED s or the guaranty agency s possession that the borrower did not subsequently re-enroll in any Title IV eligible schools within a period of three years after the school closed. 682.402(d)(8)(ii) For notifications received from ED or guaranty agency on or after July 1, 2017. Limited to schools that close on or after November 1, 2013. GL is prepared to implement changes upon notification from ED of its requirements and time frames. Death Discharge Death Discharge Documentation 5. A death discharge may be granted based on an accurate and complete original or certified copy of a death certificate that is scanned and submitted electronically or sent by fax, or upon verification of the death through an authoritative or State database approved for use by ED. 682.402(b)(2)(i) For death discharge applications and claims received on or after July 1, 2017. ED has not provided guidance on any approved or State database for this purpose. compliance with accepting electronic or faxed death certificates Interest Capitalization Lender Purchase of Rehabilitated Loan 6. An FFELP lender must not consider the purchase of a rehabilitated loan as entry into repayment or resumption of For rehabilitated loans purchased on November 1, 2016 Final Rule (81 FR 75926) 4 May 2, 2017
Interest Capitalization repayment for purposes of capitalizing interest. 682.202(b)(1) & 682.405(b)(4)(ii) Guaranty Agency Capitalization at Default Claim 7. A guaranty agency may only capitalize interest when it pays an FFELP lender a default claim, but shall not capitalize any unpaid interest thereafter. 682.410(b)(4) Borrower Failure to Submit Application 8. When a guaranty agency holds a defaulted FFELP loan and has suspended collection activity to give the borrower time to submit a closed school or false certification discharge application, capitalization of unpaid interest is not permitted if collection on the loan resumes because the borrower does not return the appropriate from within the allotted time frame. 682.402(d)(6)(ii)(H) & 682.402(e)(6)(iii) or after July 1, 2017. For rehabilitated loans purchased on or after July 1, 2017. July 1, 2017 Capitalization by a guaranty agency when selling a rehabilitated FFELP loan is not permitted. Capitalization language was stricken from the regulations in 682.402(d) and (e). Forbearance Mandatory Administrative Forbearance for Borrower Defense Claim 9. A lender must grant a mandatory administrative forbearance to a borrower upon being notified by ED that an FFELP borrower has made a borrower defense claim related to an FFELP that the borrower intends to consolidate into the Direct Loan Program for the purpose of seeking relief in accordance with the Direct Loan borrower defense to repayment regulations. The forbearance shall be granted in yearly increments, or for a period designated by ED, until the loan is consolidated or until the lender is notified by ED to July 1, 2017, but early implementation allowed at discretion of lender. In DCL GEN-17-01: ED explains that if a lender chooses to early implement these regulatory provisions, they would be required to place the loan(s) in forbearance GL is prepared to implement changes upon notification from ED of its requirements and time frames. November 1, 2016 Final Rule (81 FR 75926) 5 May 2, 2017
Forbearance discontinue the forbearance. 682.211(i)(7) when notified to do so by ED prior to July 1, 2017. ED explains that a lender may apply an administrative forbearance to a non-defaulted FFELP loan to cover any period of delinquency that exists at the time that the prospective mandatory administrative forbearance is granted. ED states that a lender must honor a borrower s request to shorten or remove the forbearance, or to restrict it to certain loans. ED reminds lenders that the existing regulations on borrower notifications for administrative November 1, 2016 Final Rule (81 FR 75926) 6 May 2, 2017
Forbearance forbearance have not changed. ED states that the application of the mandatory administrative forbearance does not preclude a lender from discussing other available options to aid a borrower in loan repayment, such as entering into an Income- Based repayment plan. Suspension of Collection Activity for Borrower Defense Claim 9. A guaranty agency must suspend all collection activities on an affected loan upon being notified by ED that an FFELP borrower has made a borrower defense claim related to an FFELP loan that the borrower intends to consolidate into the Direct Loan Program for the purpose of seeking relief in accordance with the Direct Loan borrower defense to repayment regulations. 682.410(b)(6)(vii) July 1, 2017, but early implementation allowed at discretion of guaranty agency. In DCL GEN-17-01: ED explains that if a guaranty agency chooses to early implement these regulatory provisions, they would be required to suspend collections on affected loans when notified to do so by GL is prepared to implement changes upon notification from ED of its requirements and time frames. November 1, 2016 Final Rule (81 FR 75926) 7 May 2, 2017
Forbearance ED prior to July 1, 2017. ED explains that a guaranty agency s suspension of collection activities would include suspending any Treasury offset and/or wage garnishment processes. ED states that a guaranty agency must honor a borrower s request to remove the suspension of collection activities, or to restrict it to certain loans. ED explains that a borrower is free to enter into a voluntary rehabilitation agreement, loan consolidation, or other satisfactory payment arrangements and such action will not November 1, 2016 Final Rule (81 FR 75926) 8 May 2, 2017
Forbearance prevent the borrower defense claim from being granted. November 1, 2016 Final Rule (81 FR 75926) 9 May 2, 2017