new rules for loan rehabilitation and administrative wage garnishment fred lundquist, windham...
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New Rules for Loan Rehabilitation and Administrative Wage Garnishment
Fred Lundquist, Windham Professionals
Susan High, Texas GuaranteedDwight Vigna, U.S. Department of
EducationDoug St. Peters, Sallie Mae, Inc.
2
Basics
• Package 2 – Includes other regulations beyond Rehabilitation and AWG
• Effective July 1, 2014• Agencies may implement early as
of Nov 1, 2013 for some of the regulations
• Changes amend FFELP, DLP, and Perkins
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
3
Basics Continued
• Focus today on Rehabilitation and AWG
• SRA – Satisfactory Repayment Arrangements– If Borrower paying towards
rehabilitation and has made 6 payments, Borrower does not use one-time opportunity for SRA of Title IV Reinstatement and does not receive additional Title IV assistance prior to defaulting on that loan again
– Six on-time payments is now 20 days of due date instead of 15 days
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
4
Rehabilitation
• STEP ONE – Calculate R&A Payment using the “15 Percent Formula”– 15% of amount of Borrower’s AGI (Adjusted Gross Income) that exceeds 150% of poverty guideline applicable to family size and state, divided by 12
• NOT considered an IBR payment plan
• MUST be at least $5 monthly payment
• MUST be calculated first in all cases for rehabilitation
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
5
Rehabilitation continued
• Determine appropriate poverty guideline (http://aspe.hhs.gov/POVERTY/13poverty.cfm)
• Multiply poverty guideline by 150 percent• Subtract borrower’s adjusted gross
income• Multiply by 15 percent• Divide result by 12 to determine
borrower’s monthly payment amount
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
6
Rehabilitation continued- Example
Necessary information
• Family size = 2• HSS poverty
guideline = $15,510
• Adjusted gross income = $26,530
Calculation steps1. $15,510 X 150% =
$23,2652. $26,530 - $23,265 =
$3,2653. $3,265 X 15% =
$489.754. $489.75 ÷ 12 =
$40.81Monthly payment amount
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
7
Rehabilitation Continued
• Can NOT:– Be a required minimum payment,
except as described under the “15 Percent Formula”
– Be a percentage of Borrower’s total loan balance
– Be an amount based on other criteria unrelated to financial circumstances
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
8
Rehabilitation Continued• CAN:– Offer payment amount orally – Discuss other payment arrangements such as PIF or
Consolidation – Borrower objects the offer
• MUST:– If Borrower agrees to payment amount, provide
documentation required to calculate the “15 Percent Formula”- such as, Tax Return, ADOI (Alternative Documentation of Income)
– Provide Borrower with written rehabilitation agreement within 15 business days of determination of R&A payment amount
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
9
Rehabilitation Continued• MUST continued:– Agreement must include comprehensive
description of rights, terms (including amount of payment), conditions, and collection costs
– Include a prominent statement that Borrower can object orally or in writing to amount, terms, conditions
– If Borrower does NOT provide documentation required within a reasonable time, Rehabilitation Agreement for amount agreed upon is null and void
– Require Borrower to sign Rehabilitation Agreement
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
10
Rehabilitation Continued
• CAN:– Request updated contact information
including references on agreement– Contact Borrowers to communicate
support for Rehabilitation • Reminder of payment coming due• Missed payment
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
11
Rehabilitation Continued• STEP TWO – If Borrower objects
to initial payment amount, calculate amount based on Borrower, and Spouse if applicable, current disposable income, family size, R&A expenses on approved form –
“Financial Disclosure For Reasonable and Affordable Rehabilitation Payments”
• Can request supporting documentation
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
12
Rehabilitation Continued• Flexibility of expenses allowed; no national
standards required• Borrower may choose which payment amount
to accept – from Step One or Step Two• Provide Borrower with written rehabilitation
agreement within 15 business days of determination of R&A payment amount ; other agreement requirements apply
• Borrower may request payment amount be adjusted due to change in financial circumstances
2013 Knowledge Symposium
November 5-7, 2013 ● St. Pete, Florida
13
AWG Rehabilitation
• Borrowers in AWG making payments toward Rehabilitation – Agency Must Suspend AWG after 5 qualifying monthly payments
• Borrowers may request that AWG continue
• Borrower has one opportunity to comply
• If missed payment, suspension lifted on AWG 2013 Knowledge
SymposiumNovember 5-7, 2013 ● St. Pete,
Florida
14
Questions?
2013 Knowledge SymposiumNovember 5-7, 2013 ● St. Pete, Florida
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