Federal Student Aid Ombudsman

Fiscal Year 2009 First Quarter Report: October 1, 2008 through December 31, 2008

Table of Contents Topic

Page

I.

Executive Summary Highlights

1

II.

Introduction

2

Quarterly Case Numbers

2

New Research Cases

3

Loan Cancellation/Discharge Account Balance Default Repayment Plans/Amounts Federal Student Aid (FSA) Assistance New General Assistance Cases

4 5 6 7 8 9

III. Historical Comparison

10

Research Cases

10

NSLDS/OCTS Match

12

General Assistance Cases

14

Referral Sources

15

IV. Total and Permanent Disability - Issue In Depth

17

Page 3 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Executive Summary Highlights of First Quarter FY 2009 Report The United States Department of Education’s Office of the Ombudsman had another busy quarter resolving a wide array of student aid issues. Here are the highlights from the most recently closed quarter. • The Office of the Ombudsman received 19.79% more cases in Fiscal Year 2009 First Quarter than in Fiscal Year 2008 (including a 13.04% increase for research cases and a 21.87% increase for general assistance cases). • Loan Cancellation/Discharge issues remained our top research concern throughout Fiscal Year 2009, and many of our customers still report problems with the Total and Permanent Disability issues specifically with: o undue process complexity, o lack of transparency and o applicant burden. • For the second straight quarter, Default research issues about doubled when comparing the most recent quarter to the same quarter from the previous fiscal year. • Consolidation research issues declined 70% between Fiscal Year 2008 and Fiscal Year 2009, and the volume of these issues is only a fraction of previous fiscal years. In addition, the most frequent type of Consolidation issue shifted from customers seeking a Consolidation loan reversal to those who want to consolidate, but are prevented. • There were significant increases in research case volume for the following issues: Wage Garnishment (63%); Tax Refund/Offset (58%); and Repayment Plans/Amounts (54%). • There was a 48% increase in general Federal Student Aid Assistance inquiries with a corresponding increase of customers reaching our office by telephone. • About 7% of our general assistance cases are directly referred to the Department’s Default Resolution Group.

Page 4 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Introduction The Office of the Ombudsman was created by the 1998 amendments to the Higher Education Act to assist borrowers and the Title IV community with the informal resolution of federal student aid disputes, and to provide trend analysis and reporting. Individuals contact the Ombudsman through one of several channels: by telephone calls to three intake locations; by e-mail through the Ombudsman electronic intake process; by mail; or by referral from other parts of the Department of Education (Department), Congressional offices, schools, lenders, servicers and guarantors (GA). Complaints are logged into the Ombudsman Case Tracking System (OCTS) to record activities and case related materials. OCTS also tracks each case from intake through resolution and provides a case summary. Ombudsman cases fall into one of two broad categories, General Assistance and Research. General Assistance cases are resolved quickly, typically within three days, and, generally, through research and/or referral to the appropriate entity to assist the borrower. Research cases are more complex and are assigned to an Ombudsman Specialist for research and resolution.

Quarterly Numbers Table #1 illustrates that the Office of the Ombudsman received a total of 4,606 new cases for the First Quarter in Fiscal Year 2009. The volume is significantly less than the 5,486 cases received during Fiscal Year 2008 Fourth Quarter, but significantly more than the 3,845 cases received for the First Quarter in Fiscal Year 2008. Traditionally, about 75% of cases are General Assistance; however, this quarter our office had a higher percentage (78%) of general assistance cases. Ombudsman cases fall into one of two broad categories, General Assistance and Research. General Assistance cases are resolved quickly, typically within three days, and, generally, through research and/or referral to the appropriate entity. Research cases are more complex and are assigned to an Ombudsman Specialist for research and resolution. Table #1 Type of Issue Research General Assistance Total

FY 2009 1st Quarter 1,023 3,583 4,606

% of Total 22.21% 77.79% 100.00%

Source: Ombudsman Case Tracking System Version 3.0

Page 5 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Research Cases – 1st Quarter – Fiscal Year 2009 The 1,023 new research cases total is less than the 1,413 cases received during Fiscal Year 2008 Fourth Quarter, but more than the 905 cases received during Fiscal Year 2008 First Quarter. Table #2 illustrates that Loan Cancellation/Discharge cases represent the top research issue, holding that position for the sixth consecutive quarter. Account Balance again is the number 2 issue for the fifth straight quarter. Default and Repayment Plans/Amounts are the number 3 and 4 issues respectively. Federal Student Aid Assistance issues are now the 5th most frequent issue. Table #2 FY 2009 – 1st Quarter Research Cases Issue Category

Count

% of Total

Loan Cancellation/Discharge Account Balance Default Repayment Plans/Amounts FSA Assistance Wage Garnishment Deferment/Forbearance Consolidation Service Quality Tax Refund/Offset Collection Practices Credit Reporting Closed School NSLDS Student Eligibility Bankruptcy

226 139 125 114 81 52 50 44 34 30 29 27 20 20 20 12

22.09% 13.59% 12.22% 11.14% 7.92% 5.08% 4.89% 4.30% 3.32% 2.93% 2.83% 2.64% 1.96% 1.96% 1.96% 1.17%

Total

1,023

100.00%

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

Page 6 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Research Cases – 1st Quarter – Leading Issues #1 Loan Cancellation/Discharge More than 52% of the 226 new Loan Cancellation/Discharge cases are customers who have an issue with Total and Permanent Disability (TPD). TPD alone represented almost 12% of the 1,023 new Ombudsman research issues. Table #3 represents the number of new research cases by discharge cancellation category. Table #3 Loan Cancellation Sub-Issues Disability False Signature Unpaid Tuition Refund Ability to Benefit Request Outside Provisions Teacher Service-Low Income Identity theft Teacher Serv - FFEL Public Service Employee Child or Family Service Agency Death Health Care Hurricane Katrina Teach Ser-Shortage Area Teach Ser-Special ED Will be Sub-Classified After Research Head Start

Total

Count

% of Total

119 19 18 16 12 8 6 5 4 3 3 3 3 3 2 1 1

52.65% 8.41% 7.96% 7.08% 5.31% 3.54% 2.65% 2.21% 1.77% 1.33% 1.33% 1.33% 1.33% 1.33% 0.88% 0.44% 0.44%

226

100.00%

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

Page 7 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

#2 Account Balance Account Balance has always been among the most frequent research case issues, and was the second most common complaint in First Quarter of Fiscal Year 2009. Table #4 shows complaints involving disputes of the debt, general questions, and interest accrual represent slightly more than 63% of Account Balance cases. Table #4 Account Balance Sub-Issues Disputes validity of debt Has General Questions Interest Accrual School Refund Payments Not Posted Payments Not Reducing Debt Never Credited To Loan Disbursement Not Enough Refunded Disputes Late Charges Will be Sub-Classified After Research Mil Or Pub Health Services Grant Issue General TIV Fin Aid Question Non-TIV Issue

Total

Count % of Total 50 24 14 11 9 8 5 5 4 3 2 1 1 1 1

35.97% 17.27% 10.07% 7.91% 6.47% 5.76% 3.60% 3.60% 2.88% 2.16% 1.44% 0.72% 0.72% 0.72% 0.72%

139

100.00%

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

In most situations, the balance is accurate. The dispute stems from not knowing how interest accrues, payments are applied, or the impact of capitalization after a period of non-payment.

Page 8 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

#3 Default As Table #5 illustrates, there were 125 new research cases for the First Quarter involving default as primary issue. Customers wanting to resolve their default and customers who believe their defaulted loans are in error represent more than 80% of these cases. These cases often require detailed research. For example, the complaint may be that improper servicing led to the default. Research of the records can be lengthy if the loans were sold before the default or have been transferred to more than one collection agency. Table #5 % of Total

Default Sub-Issues

Count

Default Unresolved Default in Error Rehabilitation Customer was in school Will be Sub-Classified After Research Hurricane Katrina

77 25 17 3

61.60%

3 0

2.40%

Total

125

100.00%

20.00% 13.60% 2.40%

0.00%

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

Common underlying causes appear to be borrower financial hardship and/or failure to keep all lenders apprised of address changes.

Page 9 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

#4 Repayment Plans/Amounts Concerns about Repayment Plans and Amounts remain a significant issue, representing the fourth most frequent basis for research cases for the First Quarter of Fiscal Year 2009. Table #6 shows customers who believe their payments are too high account for more than 38% of the Repayment Plans research issues. Customers who need more flexible terms, who want to set up repayment plans, and who have general questions account for an additional 47%. Table #6 Repayment Plans/ Amounts Sub-Issues Count Payments Too High Need More Flexible Terms Has General Questions Wants to Set Up Plan Wants to Settle Will be Sub-Classified After Research Srvcr Won't Alter Pmt Amt Loan Holder MPA - Issue SLMA

Total

% of Total

44 38 16 10 2

38.60% 33.33% 14.04% 8.77% 1.75%

2 1 1 0

1.75% 0.88% 0.88% 0.00%

114

100.00%

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

We anticipate increases in this category if economic conditions continue to deteriorate, and as borrowers with private loans struggle to meet payments for both federal and private loans.

Page 10 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

#5 Federal Student Aid (FSA) Assistance Our catch-all category, Federal Student Aid (FSA) Assistance is the fifth most common research issue. This category is broken among the following sub-categories as listed in Table #7. The most frequent type of issue involves those who have a general Title IV question. Table #7 Federal Student Aid Assistance Sub-Issues Count

% of Total

General TIV Fin Aid Question Loan Availability Will be Sub-Classified After Research Deceptive practices Non-TIV Issue Grant Issue Exit Interview Has General Questions Inducement Need More Flexible Terms Loan Holder Lender choice Hurricane Katrina Not Listed Other Aid Issue Phone Number SAP Failure

38 8 8 8 5 4 3 2 1 1 1 1 1 0 0 0 0

46.91% 9.88% 9.88% 9.88% 6.17% 4.94% 3.70% 2.47% 1.23% 1.23% 1.23% 1.23% 1.23% 0.00% 0.00% 0.00% 0.00%

School Withholding Funds

0

0.00%

81

100.00%

Total

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

Page 11 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

General Assistance Cases – 1st Quarter –Fiscal Year 2009 General Assistance cases are resolved quickly, typically within three days, and, generally, through research and/or referral to the guarantee agency and lender ombudsman designee when an individual has not had a chance to get assistance from escalated resources at the agency. Through the Student Loan Ombudsman Caucus, the caucus can confirm receipt and disposition as a way of addressing broad issues. During the First Quarter of Fiscal Year 2009, Table #8 shows the Office of the Ombudsman received 3,583 new general assistance cases, which is less than the 4,073 general assistance cases received during the last quarter (Fiscal Year 2008 Fourth Quarter), but more than the 2,940 cases received same quarter last year (Fiscal Year 2008 First Quarter). Of the 3,583 general assistance cases, we directly referred 255 (or 7.1%) to the Department’s Default Resolution Group and we referred 50 directly to the Federal Direct Loan office. Table #8 FY 2009 – 1st Quarter General Assistance Cases Issue Category FSA Assistance Repayment Plans/Amounts Deferment/Forbearance Loan Cancellation/Discharge Default Account Balance Consolidation Service Quality Collection Practices Wage Garnishment NSLDS Credit Reporting Tax Refund/Offset Closed School Bankruptcy Student Eligibility

Total

Count

General Assistance

DRG General Assistance

DL General Assistance

Total

1,711 347 261 237 194 149 101 84 51 39 23 27 8 22 9 15

8 50 6 20 45 17 3 2 27 31 12 3 19 4 8 0

10 10 6 4 0 6 3 1 2 0 1 4 1 1 0 1

1,729 407 273 261 239 172 107 87 80 70 36 34 28 27 17 16

3,278

255

50

3,583

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

During the First Quarter of Fiscal Year 2009, as expected, we received more Federal Student Aid Assistance (FSA) inquiries than any other type of issue. FSA Assistance issues account for almost half of all Ombudsman general assistance issues.

Page 12 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Fiscal Year 2009 and 2008 – 1st Quarter Comparison When comparing the First Quarter only, Table #9 shows there was a sizable 13% increase in new research cases, and a sizable 22% increase of general assistance cases resulting in an overall increase of 19.79%. Table #9 Type of Issue Research General Assistance Total

FY 2009 1st Quarter 1,023 3,583 4,606

FY 2008 1st Quarter 905 2,940 3,845

Difference 118 643 8,451

% Change 13.04% 21.87% 19.79%

Source: Ombudsman Case Tracking System Version 3.0

Table #10 shows a comparison for the First Quarter of Fiscal Year 2008 to 2009. The comparison reveals a doubling of Default issues for the second straight quarter. There was also large percentage increases for Wage Garnishment (62.5%), Tax Refund/Offset (57.9%), and Repayment Plans/Amounts (54.05%) issues. Table #10 Research 1st Quarter Comparison FY 2009 vs FY 2008 Issue Category Loan Cancellation/Discharge Account Balance Default Repayment Plans/Amounts FSA Assistance Wage Garnishment Deferment/Forbearance Consolidation Service Quality Tax Refund/Offset Collection Practices Credit Reporting Closed School NSLDS Student Eligibility Bankruptcy

Total

FY2008

FY2009

% of Total

FY 2008 to FY 2009 % Change

192 119 64 74 61 32 37 151 24 19 41 24 13 23 22 9

226 139 125 114 81 52 50 44 34 30 29 27 20 20 20 12

22.09% 13.59% 12.22% 11.14% 7.92% 5.08% 4.89% 4.30% 3.32% 2.93% 2.83% 2.64% 1.96% 1.96% 1.96% 1.17%

17.71% 16.81% 95.31% 54.05% 32.79% 62.50% 35.14% -70.86% 41.67% 57.89% -29.27% 12.50% 53.85% -13.04% -9.09% 33.33%

905

1,023

100.00%

13.04%

FY 2009

Legend: presented in order of frequency Source: Ombudsman Case Tracking System Version 3.0

Page 13 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Loan Cancellation/Discharge When comparing just the First Quarters of 2009 and 2008, there was a 17.71% increase in Loan Cancellation/Discharge research issues (see Table #10). Loan Cancellation is the number one issue for the sixth consecutive quarter. Sub-issue Total and Permanent Disability (disability) accounts for almost 12% of all new research issues during the first quarter. We anticipate continuing to receive a large number of Loan Cancellation/Discharge issues particularly with disability through next Fiscal Year as the overall population continues to age. Account Balance For the First Quarter, Account Balance remains a significant source of cases as the number two research issue with a 16.81% increase over Fiscal Year 2007 First Quarter (see Table #10). Default When comparing the First Quarters of 2009 and 2008, Default cases have more than doubled. This Fiscal Year, we received 95.31% more cases than last Fiscal Year (see Table #10). We can partially attribute the doubling increases in Default cases, due to the tenuous economic environment. Repayment Plans/Amounts This quarter, our fourth most common new research issue is Repayment Plans/Amounts issues, which accounts for 11.14% of our new research cases (see Table #10) this quarter. We can partially attribute the significant increases in Default cases, due to the tenuous economic environment. Federal Student Aid Assistance A trend that emerged in Fiscal Year 2008 is that Federal Student Aid Assistance is a Top 5 research issue. Over the last fiscal year, there was a 32.79% increase (see Table #10) of these issues. Consolidation Consolidation questions/complaints have continued to drop significantly in Fiscal Year 2009. Comparing the last two Fiscal Year’s First Quarters, there was a precipitous 70.86% (see Table #10) drop in Consolidation cases. No longer a top 5 issue, Consolidation accounts for less than 5% of our research cases. Comparing this quarter to FY 2006 Fourth Quarter, our office is currently receiving only 10% of what we received when students were aggressively consolidating their loans before loan interest rates increased. Interestingly, the most frequent sub-issue is “Wants to Consolidate” which has replaced “Loan Reversals” as the most common sub-issue.

Page 14 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

NSLDS/OCTS Matches of FY 2009 Research Cases The 1,023 new research cases for Fiscal Year 2009 represent 8,467 loans in NSLDS. Table #11 shows more than 80% of the loans are FFEL. Table #13 shows about 31% of the loans have been in repayment 5 years or less. Table #14 (next page) shows about 21% of the loans show a default status. Table #11 Loan Program FFEL Direct Loans Federal Perkins FISL Insufficient Data

Total

Loan Count

% of Total

6,786 1,227 405 29 20

80.15% 14.49% 4.78% 0.34% 0.24%

8,467

100.00%

Table #12 School Type Public Schools Private Schools Proprietary Schools Insufficient Data Foreign Schools

Total

Loan Count 3,574 2,365 1,540 934 54

42.21% 27.93% 18.19% 11.03% 0.64%

8,467

100.00%

Table #13 Age Of Loan

Loan Count

% of Total

0 - 5 Years 6 - 10 Years 11 - 15 Years 16 - 20 Years 21 - 25 Years 26 - 30 Years > 30 Years Insufficient Data

2,625 2,023 1,692 869 417 163 103 575

31.00% 23.89% 19.98% 10.26% 4.93% 1.93% 1.22% 6.79%

Total

8,467

100.00%

% of Total

Source: Ombudsman Case Tracking System Version 3.0 and National Student Loan Data System

Page 15 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

NSLDS/OCTS Matches of FY 2009 Research Cases (continued) Table #14 Loan Status Paid-in-Full Through Consolidation Defaulted In Repayment Paid-in-Full Cancelled Loan Originated Deferred Defaulted, Paid-in-Full Through Consolidation Forbearance In Grace Discharge Insufficiently Identified Data Bankrupt Death Unreinsured Reinsured Abandoned Loan Temporarily Uninsured-No Default Claim Requested

Total

Loan Count

% of Total

2,831 1,515 918 702 529 454 365 337 284 176 144 137 41 17 12 3 2

33.44% 17.89% 10.84% 8.29% 6.25% 5.36% 4.31% 3.98% 3.35% 2.08% 1.70% 1.62% 0.48% 0.20% 0.14% 0.04% 0.02%

0

0.00%

8,467

100.00%

Source: Ombudsman Case Tracking System Version 3.0 and National Student Loan Data System

Page 16 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

General Assistance - Historical Comparison Overall, general assistance case volume increased 21.87% as shown in Table #16. Typically, general assistance cases result in an immediate referral to the appropriate entity (lender, guaranty agency, school, etc.) and are resolved within three days. Our catchall sub-issue, Federal Student Aid (FSA) Assistance, had a significant 41.95% increase from Fiscal Year 2008 to Fiscal Year 2009. There was a solid increase in general assistance cases for the issues of – Default, Wage Garnishment, and Service Quality. There was a sizable 27% drop in Account Balance issues. Table #15 General Assistance Year To Date Comparison FY 2009 vs FY 2008 Issue Category FY2008 FSA Assistance Repayment Plans/Amounts Loan Cancellation/Discharge Account Balance Deferment/Forbearance Default Consolidation Collection Practices Service Quality Wage Garnishment Credit Reporting NSLDS Closed School Student Eligibility Tax Refund/Offset Bankruptcy

TOTAL

FY2009

FY 2008 to FY 2009 % of Total % Change

1,218 385 251 237 211 138 132 113 63 47 44 29 29 18 14 11

1,729 407 261 172 273 239 107 80 87 70 34 36 27 16 28 17

48.26% 11.36% 7.28% 4.80% 7.62% 6.67% 2.99% 2.23% 2.43% 1.95% 0.95% 1.00% 0.75% 0.45% 0.78% 0.47%

41.95% 5.71% 3.98% -27.43% 29.38% 73.19% -18.94% -29.20% 38.10% 48.94% -22.73% 24.14% -6.90% -11.11% 100.00% 54.55%

2,940

3,583

100.00%

21.87%

Legend: presented in order of frequency (FY 2008) Source: Ombudsman Case Tracking System Version 3.0

Page 17 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Referral Sources Historical Comparison As in the past, the majority of new Ombudsman customers contact the Ombudsman Office by telephone. Most reach the toll-free line at 1-877-557-2575. Table #16 (on page 16) compares the Ombudsman case referral sources between Fiscal Year 2009 to date with Fiscal Year 2008. There has been a significant increase in customers that initially contact our office by telephone for both general assistance cases and for research cases. Although around the same number of people are contacting our office via the On-Line Assistance Form, during Fiscal Year 2009 to date, the percentage of persons contacting our office via the On-Line Assistance dropped from 9% to 7%. The drop can be attributed to the increasing volume of customers contacting our office. Referrals from Congressional Offices have been steady when comparing the last fiscal year. Of interest, but not surprising, is that referrals from Congressional Offices are more likely to be research cases than referrals from other sources.

Page 18 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Historical - Fiscal Year 2009 and 2008 – Referral Sources Comparison Table #16 Research Problem Self Telephone Letter Website Email Public Media/News Attorney Guaranty Agency/Loan Servicer US Department of Education (ED) Secretary's Office Other ED Office OIG OGC ED - Federal Student Aid COO’s Office Other FSA Office Communication Borrower Services - Collections FSAIC (1-800-4 FED AID) White House Congressional Office Other Federal Government Agency State Government School/Exit Interview Collection Agency Federal Trade Commission Other

TOTAL

FY 2008 through Quarter 490 232 95 101 59 3 19 93 109 7 83 19 0 37 0 30 2 5 8 3 74 16 10 39 5 2 0

905

1st

General Assistance Self Telephone Letter Website E-Mail Public Media/News Attorney Guaranty Agency/Loan Servicer US Department of Education (ED) Secretary's Office Other ED Office OIG OGC ED - Federal Student Aid COO's Office Other FSA Offices Communications Borrower Services - Collections FSAIC (1-800-4 FED AID) White House Congressional Office Other Federal Government Agency State Government School/Exit Interview Collection Agency Federal Trade Commission Other

TOTAL

Source: Ombudsman Case Tracking System Version 3.0 and National Student Loan Data System

FY 2009 through 1st Quarter

FY 2008 through 1st Quarter

2,863 1,997 603 190 66 7 30 168 190 2 185 3 0 111 1 42 65 3 18 0 10 27 7 146 11 2 0

2,087 1,194 601 215 69 8 31 181 205 2 189 13 1 153 0 74 73 6 28 1 21 26 17 171 19 0 0

3,583

2,940

Page 19 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Total and Permanent Disability – Issue in Depth First Quarter, FY 2009 The Higher Education Act of 1965, as amended, creates a statutory entitlement to the discharge of federal student loans for borrowers who become totally and permanently disabled (TPD). Why is TPD identified as a problem area? • • •

The Ombudsman receives more research cases about TPD than any other issue, and the number of TPD cases continues to increase. TPD cases are the number one issue in Congressional inquiries to the Ombudsman office. Failure to address these problems could place the Department in a position of vulnerability if the current process is challenged in court.

Ombudsman clients frequently describe a process characterized by administrative inefficiencies and insensitivity to applicants, the root causes of which can be found in the following fundamental deficiencies: • •

Lack of transparency and inability to document consistency in decision-making; Placing undue burden and costs on the borrower.

Transparency and Consistency Process deficiencies linked to the following problems: • • • •

No written medical standards for determining disability Poor and uninformative communication with applicants No tracking of outside entities that can deny applications No formal appeal process with Department

Undue Burden Primary responsibility for the provision of information required in deciding TPD cases falls on the applicant. This can create hardship or burden for members of a vulnerable population: • •

Responsibility for provision of additional medical information falls on applicant and physician; cost falls on applicant. Responsibility for provision of federal information to meet discharge requirements falls on applicant; no formal data exchange agreements with other federal agencies to help resolve problems.

Page 20 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

Service Problems • •

Ombudsman customers frequently complain of having to resubmit documents numerous times because original submissions are said to be lost or never received. Ombudsman customers complain of rudeness, insensitivity and inappropriate comments from contractor staff who process TPD requests.

Possible Corrections The recent reauthorization of the Higher Education Act included changes to the TPD process that include: • • •

An expedited discharge process for certain disabled veterans; Revisions to the definition of total and permanent disability to make it more consistent with that used by Social Security; and The creation of discretionary authority for the Secretary to track and, if necessary, reverse discharges over a longer period of time.

The negotiated rule making process that will occur in the spring of 2009 provides an opportunity to significantly reshape the TPD discharge process in ways that can increase the focus on customer experience rather than on procedural technicalities. Transparency •

•

Promulgate medical standards, adopt existing, widely-accepted medical standards, accept disability decisions of other federal agencies (e.g. SSA and/or VA), and/or contract with another federal entity, such as SSA’s State Disability Determination Services, to make TPD determinations for the Department. Improve general communication with TPD applicants to add specificity.

Consistency • •

Implement and publish detailed standards that express the Department’s requirements for total and permanent disability. Eliminate TPD review by lenders and guarantee agencies or institute a formal appeal process within the Department.

Burden • •

Focus the discharge process on transparency and consistency including the use of casespecific disability information produced by other federal agencies. Enter into formal information exchange agreements with other federal agencies (e.g. SSA and IRS) to provide data needed in the TPD review.

Page 21 Federal Student Aid Ombudsman Fiscal Year 2009 First Quarter Report

•

Consider using the new discretionary authority granted the Secretary to impose fewer burdens in making the initial TPD determination; keep loans in conditional discharge indefinitely; enter into formal information exchange agreements with other federal agencies (i.e. IRS and SSA); and return loans to repayment if the borrower fails to continue to meet the requirements for discharge.