1. New Rules for Loan Rehabilitation and Administrative Wage Garnishment
Fred Lundquist, Windham Professionals
Susan High, Texas Guaranteed
Dwight Vigna, U.S. Department of Education
Doug St. Peters, Sallie Mae, Inc.

2. November 5-7, 2013 ● St. Pete, Florida
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, ● St. Pete, Florida

3. November 5-7, 2013 ● St. Pete, Florida
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, ● St. Pete, Florida

4. November 5-7, 2013 ● St. Pete, Florida
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, ● St. Pete, Florida

5. Rehabilitation continued
Determine appropriate poverty guideline (
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, ● St. Pete, Florida

6. Rehabilitation continued- Example
Necessary information
Calculation steps
Family size = 2
HSS poverty guideline = $15,510
Adjusted gross income = $26,530
$15,510 X 150% = $23,265
$26,530 - $23,265 = $3,265
$3,265 X 15% = $489.75
$ ÷ 12 = $40.81
Monthly payment amount
2013 Knowledge Symposium
November 5-7, ● 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, ● 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, ● 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, ● 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, ● 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, ● 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, ● St. Pete, Florida

13. November 5-7, 2013 ● St. Pete, Florida
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 Symposium
November 5-7, ● St. Pete, Florida

14. November 5-7, 2013 ● St. Pete, Florida
Questions?
2013 Knowledge Symposium
November 5-7, ● St. Pete, Florida