Total and permanent disability is defined as the condition of an individual who is unable to work or earn money due to an injury or illness that is expected to continue indefinitely or result in death. A borrower may qualify for a total and permanent discharge if a doctor of medicine or osteopathy, legally authorized to practice in a state, certifies that the borrower is totally and permanently disabled.
A borrower is not considered totally and permanently disabled on the basis of a condition that existed at the time the loan was made, unless the condition has substantially deteriorated to the point of total and permanent disability since the loan was made. In this situation, the borrower should ensure that the physician clearly notes that the condition became totally and permanently disabling after the date on which the loan was made.
Total and permanent disability discharge determinations made by the lender, and subsequently paid as a claim by ISAC, are permanently assigned to the U.S. Department of Education. ED then determines if the certification and information provided by the borrower meets the criteria for a total and permanent disability discharge. If ED determines that the certification and documentation do not support the conclusion that the borrower is eligible for a total and permanent disability discharge, ED notifies the borrower that the application for a disability discharge has been denied and that the loan is due and payable under the terms of the promissory note.
If ED makes the initial determination that the borrower is totally and permanently disabled, ED notifies the borrower that the loan is conditionally discharged for a period of up to 3 years after the date the borrower became totally and permanently disabled as certified by a physician. ED’s notification specifies that all or part of the 3-year period may predate their initial determination, and identifies the following conditions that apply during the 3-year conditional discharge period:
- The borrower is not required to make any payments on the loan.
- The borrower is not considered delinquent or in default of the loan, unless the borrower was delinquent or in default at the time the conditional discharge was granted.
- The borrower must promptly notify ED of any changes in address or phone number.
- The borrower must notify ED if his or her annual earnings from employment exceed 100% of the poverty line for a family of two.
- The borrower must provide ED, upon request, with additional documentation or information related to the borrower’s eligibility for a total and permanent disability discharge.
- The borrower must not receive a new loan under the Perkins, FFELP, or Direct Loan Programs, except for a FFELP or Direct Loan Consolidation loan that does not include any loans that are in a conditional discharge status.
ED also notifies the borrower that, if at any time during the 3-year conditional period the borrower does not continue to meet the eligibility requirements for a total and permanent disability discharge, ED will resume collection activity on the loan but will not require the borrower to pay any interest that accrued from the date of the initial determination of total and permanent disability through the end of the conditional discharge period.
Timely Filing Deadline
A lender must file a disability claim within 90 days of receiving the physician’s certification. The process for filing a claim, as well as information regarding required documention, can be found in the Common Manual. If a disability claim is not filed by the 90th day, the guarantor will still purchase the claim—unless prior servicing violations were not cured appropriately. However, the claim will be subject to an interest penalty, and the lender will be required to repay all interest benefits and special allowance payments for amounts received or otherwise payable after the expiration of the 90-day deadline.
If ISAC determines the borrower is eligible, the lender will be paid for the claim. After the lender receives payment of the total and permanent disability claim, the lender must notify the borrower that the loan will be assigned to the U.S. Department of Education for determination of eligibility for a total and permanent disability discharge.
If ISAC determines the borrower is not eligible, the claim will be returned to the lender with an explanation of the reason for denial. The lender must notify the borrower that the application for disability discharge has been denied, provide the basis for the denial, and inform the borrower that the lender will resume collection activity on the loan.
Payments Received after Claim Submission
If the lender receives a payment from or on behalf of the borrower after a total and permanent disability claim has been filed but before the lender receives claim payment, the lender must hold the borrower’s payment. After the lender receives the claim payment, the lender must forward the borrower’s payment to ISAC.
At the time the lender forwards the borrower’s payment to ISAC, the lender must notify the borrower or other party who sent the payment that there is no obligation to make further payments, unless otherwise directed.