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Serving Those Who Serve Our Country

Serving Those Who Serve Our Country. Moderator – Ashley Norwood, ASA Presenter – Ed Brandt, ACS, a Xerox Company Presenter – Kristi Davis, Edfinancial. Servicemembers Civil Relief Act (SCRA). Background.

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Serving Those Who Serve Our Country

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  1. Serving Those Who Serve Our Country Moderator – Ashley Norwood, ASA Presenter – Ed Brandt, ACS, a Xerox Company Presenter – Kristi Davis, Edfinancial

  2. Servicemembers Civil Relief Act (SCRA)

  3. Background • Signed into law on December 19, 2003, the Servicemembers Civil Relief Act (SCRA), expanded and improved the former Soldiers' and Sailors’ Civil Relief Act (SSCRA) of 1940 • The SCRA is intended to postpone or suspend certain civil obligations to enable service members to devote full attention to duty and relieve stress on the family members of those deployed servicemembers 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  4. Background • The Higher Education Opportunity Act (HEOA), amended section 428(d) of the HEA to provide that FFEL and Direct Loan program loans are subject to the provision in section 207 of the Servicemembers Civil Relief Act (50 U.S.C. 527) that limits the interest rate on a borrower’s loan to six percent during periods of qualifying military service 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  5. Definitions • Title 10 • Title 10 of the United States Code outlines the role of Armed Forces and the legal basis for the roles, missions and organization of each of the Services as well as the United States Department of Defense • Title 14 • Title 14 of the United States Code outlines the role of the United States Coast Guard • Title 32 • Title 32 of the United States Code outlines the role of the United States National Guard • The National Guard is established under Title 32, but members are frequently activated to support the DoD, in which case their orders are covered under Title 10 • If National Guard members are activated to support a State and not the DoD, then the members are not covered (title 32 is paid by the state and title 10 is paid by the Federal government; only title 10 is covered by SCRA) SCRA Sec. 101 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  6. Definitions • Servicemember — The term ‘‘servicemember’’ means a member of the uniformed services, as that term is defined in section 101(a)(5) of title 10, United States Code • Military Service — The term ‘‘military service’’ means— • In the case of a servicemember who is a member of the Army, Navy, Air Force, Marine Corps, or Coast Guard— • Active duty, as defined in section 101(d)(1) of title 10, United States Code, and • In the case of a member of the National Guard, includes service under a call to active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days under section 502(f) of title 32, United States Code, for purposes of responding to a national emergency declared by the President and supported by Federal funds; • In the case of a servicemember who is a commissioned officer of the Public Health Service or the National Oceanic and Atmospheric Administration, active service; and • Any period during which a servicemember is absent from duty on account of sickness, wounds, leave, or other lawful cause • Period of Military Service — The term ‘‘period of military service’’ means the period beginning on the date on which a servicemember enters military service and ending on the date on which the servicemember is released from military service or dies while in military service SCRA Sec. 101 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  7. Definitions • The term “uniformed services” means— • The armed forces; • The commissioned corps of the National Oceanic and Atmospheric Administration; and • The commissioned corps of the Public Health Service SEC. 101(a)(5) of title 10, United States Code 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  8. Definitions • Duty Status— • The term “active duty” means full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned; such term does not include full-time National Guard duty • The term “active duty for a period of more than 30 days” means active duty under a call or order that does not specify a period of 30 days or less • The term “active service” means service on active duty or full-time National Guard duty • The term “active status” means the status of a member of a reserve component who is not in the inactive Army National Guard or inactive Air National Guard, on an inactive status list, or in the Retired Reserve SEC. 101(d)(1) of title 10, United States Code 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  9. Definitions • Duty Status— • The term “full-time National Guard duty” means training or other duty, other than inactive duty, performed by a member of the Army National Guard of the United States or the Air National Guard of the United States in the member's status as a member of the National Guard of a State or territory, the Commonwealth of Puerto Rico, or the District of Columbia under section 316, 502, 503, 504, or 505 of title 32 for which the member is entitled to pay from the United States or for which the member has waived pay from the United States SEC. 101(d)(1) of title 10, United States Code 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  10. Definitions • Duty Status— • The term “active Guard and Reserve duty” means active duty performed by a member of a reserve component of the Army, Navy, Air Force, or Marine Corps, or full-time National Guard duty performed by a member of the National Guard pursuant to an order to full-time National Guard duty, for a period of 180 consecutive days or more for the purpose of organizing, administering, recruiting, instructing, or training the reserve components SEC. 101(d)(1) of title 10, United States Code 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  11. Benefits • The SCRA limits the amount of interest that may be collected on debts of persons in military service to 6% • “Interest” includes service charges and fees (such as late charges) • The SCRA states that no interest above 6% can accrue for credit obligations during the period of military service, nor can that excess interest become due once the period of military service ends, instead that portion above 6% is permanently forgiven • The annual interest rate is limited to 6% for qualifying periods of service on/after enactment of HEOA (08/14/2008) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  12. Benefits • The monthly payment must be reduced by the amount of interest saved during the covered period: • The amount of any periodic payment due from a servicemember shall be reduced by the amount of the interest forgiven • ED verbally agreed during Negotiated Rulemaking that the $50.00 minimum payment requirement still applies SCRA Sec. 207(a)(3) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  13. Benefits • As long as the debt was incurred before the borrower’s military service began, the interest rate cap applies to any joint consolidation loan or other co-borrowed loan • The SCRA interest rate limit does not apply to an endorser to a PLUS loan made to a parent or a graduate/professional student unless that individual is also performing eligible military service • For purposes of this restriction, a loan is considered incurred by an endorser when the Endorser Addendum to the PLUS Loan Master Promissory Note is signed, and the requirement that the debt be incurred before military service is based on that date NPRM Preamble, Page 36565 and DCL GEN-08-12 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  14. Requirements • The 6% interest rate limitation is only applicable to loans obtained before military service • Potential trap for the unwary student loan borrower: • Even though the underlying loans were taken out prior to the period of military service, a consolidation loan taken out after that date will not qualify for SCRA benefits • The debt-before-service date on a consolidation loan is the date the consolidation loan was made as a new debt, not the disbursement date of the underlying loans repaid by the consolidation loan NPRM Preamble, Page 36565 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  15. Requirements • Current regulation requires that the borrower submit a written request and copy of military orders • For this purpose, the term “in writing” may include a borrower’s email request and the term “copy of the borrower’s military orders” includes a scanned copy of the orders attached to that email request • A borrower’s written request and copy orders may be provided up to 180 days after the military service end date • Borrowers serving before the effective date of the change in the HEA may not receive a refund of the interest paid in excess of the SCRA six percent limit before August 14, 2008, the HEOA date of enactment NPRM Preamble, Page 36565 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  16. SAP • The HEOA amended § 682.302 to provide that for FFEL Program loans first disbursed on or after July 1, 2008 that are subject to the SCRA interest rate cap, a lender’s special allowance payment is calculated as it otherwise would be under program requirements, except that the applicable interest rate is six percent NPRM Preamble, Page 36565 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  17. Potential Pitfalls • Servicers granting borrowers the SCRA 6% interest rate for 12 months and then requiring them to re-apply • Difficulty reading orders to determine service period • Retroactive adjustments not being made 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  18. Best Practices • The servicemember only needs to apply once! • When orders have missing/unclear end dates: • Utilize the Department of Defense Manpower Data Center (DMDC) database to verify continued eligibility prior to scheduled end dates • Absent specific end date information, extend the eligibility period and monitor regularly until exit information is confirmed • After the rate reduction is applied, ensure that any payments that were previously received during the timeframe now covered by the lower rate are reapplied (more should go towards principal) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  19. Best Practices • Be proactive • When borrowers apply for any military benefit (forbearance, deferment, no interest accrual), give them information about the SCRA and check to see if they are eligible • Ensure monitoring is in place to prevent a loan that is already at a rate of less than 6% from being increased over the SCRA limit (monitor variable interest rate loans that are receiving the SCRA benefit) • Perform internal audits to review accounts and ensure the SCRA rate is being applied correctly • Review new hire training materials and call center scripts • Provide additional/recurring training to staff 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  20. Defense Manpower Data Center (DMDC) SCRA Website • https://www.dmdc.osd.mil/appj/scra/ • This Department of Defense website is the official source of servicemembers' active duty status for the purpose of SCRA compliance • The website will enable you to input identifying information along with a specific Active Duty Status Date and determine if the individual: • Is on active duty on the date in question, • Has left active duty within 367 days of the date in question, or • Has been notified of call-up to active duty before the date in question • Reports on active duty dates from September 30, 1985 to present • Reports Title 10 active duty periods of more than 30 days in length • Note: Coverage under the SCRA is broader in some cases and includes some categories of persons on active duty for purposes of the SCRA who would not necessarily be eligible for a deferment/forbearance related to military service 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  21. Defense Manpower Data Center (DMDC) SCRA Website 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  22. Defense Manpower Data Center (DMDC) SCRA Website 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  23. Defense Manpower Data Center (DMDC) SCRA Website 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  24. Defense Manpower Data Center (DMDC) SCRA Website 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  25. Defense Manpower Data Center (DMDC) SCRA Website • Can request up to 250,000 records in a file • Uploads are limited to 50 requests within a 24-hour period • Upload files must be formatted correctly to allow DMDC database to read and process information • Three critical fields for validating a match: • SSN • Last Name • Active Duty Status Date 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  26. Defense Manpower Data Center (DMDC) SCRA Website • Can use to update a borrower’s SCRA benefit dates (extend “end date” based on continued active duty status) • Allows the ability to proactively identify borrowers who may be eligible for the SCRA interest rate reduction (and or deferment/forbearance) but are not aware of the benefits available • Outreach 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  27. Military Deferments

  28. Available Deferments • Military Service Deferment • Post-Active Duty Deferment • Armed Forces Deferment (pre-7/1/93 borrowers) • Public Health Deferment (pre-7/1/93 borrowers) • National Oceanic and Atmospheric Administration (NOAA) Deferment (pre-7/1/93 borrowers) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  29. Military Service Deferment • Available to all FFELP borrowers who are performing qualifying service • No cumulative time limit • Generally no time limit per request, except for the service period being certified at that time (or confirmed by military order) • Deferment covers qualifying service period, plus 180 days in cases where an actual end-of-military-service date is provided 73 FR 37694, page 37697; Dear Colleague Letter GEN-08-01, pages 5-6 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  30. Military Service Deferment Qualifying Service. The borrower must be: • Serving on active duty during a war, other military operation, or national emergency; or • Performing qualifying National Guard duty during a war, other military operation, or national emergency Seems simple enough, but these conditions are further defined… 34 CFR 682.210(t)(1) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  31. Military Service Deferment Qualifying active duty service is service by a borrower who is: • A Reserve member ordered to active duty under 10 U.S.C. 12301(a), 12301(g), 12302, 12304, or 12306, or a retired member ordered to active duty under 10 U.S.C. 688, for service in connection with a war, contingency operation, or national emergency • An active member reassigned to a duty station away from where they are normally assigned, in connection with a war, contingency operation, or national emergency. • “Active duty” excludes active duty for training or attendance at a service school 20 U.S.C 1088(d)(4); 34 CFR 682.210(t)(3) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  32. Military Service Deferment Qualifying National Guard duty is service by a borrower who is: • On full-time National Guard duty, as defined in 10 U.S.C. 101(d)(5), under a call to active duty service authorized by the President or Defense Secretary for a period of more than 30 consecutive days under 32 U.S.C. 502(f). This training or other duty must be in connection with a war or other military operation, or a national emergency declared by the President and supported by federal funds. 20 U.S.C 1088(d)(5); 34 CFR 682.210(t)(4) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  33. Military Service Deferment Other features of the deferment: • Can be requested by the borrower, or by a representative of the borrower • Initial 12 months can be requested by the borrower or borrower’s representative, even verbally, without supporting documentation • Eligible for simplified processing, provided servicer can accommodate the same exact deferment period that was granted by ED or the other FFELP servicer 34 CFR 682.210(t)(7) and (8); 34 CFR 682.210(s)(iii) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  34. Military Service Deferment • Can be requested via the federal MIL form, a new version of which is slated to be released in the near future • A borrower who qualifies for this meets the eligibility criteria for the SCRA, though not necessarily vice versa • NCHER members, during the recent public review periods for the new MIL, urged ED to consider allowing the borrowers to use the MIL as the vehicle for their SCRA request, but ED declined. However, ED will likely include language encouraging borrowers to separately request SCRA benefit 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  35. Military Service Deferment One possible pitfall: • In 2011, ED declined to allow servicers to grant the SCRA benefit based solely on the borrower’s submission of a certified MIL form, opining that the borrower still had to submit a separate written request and a copy of their orders • So, what if you receive a certified MIL form, along with orders (for purposes of the SCRA benefit) indicating military service, such as active duty for training or NOAA active service, that would render the borrower ineligible for the deferment? • Might Reauthorization resolve this type of discrepancy? ED letter to CBA, EFC, NCHER, and SLSA, dated 6/27/11 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  36. Post-Active Duty Student Deferment • Service: National Guard, retired member or other reserve component ordered to active duty, including active State duty. • Borrower: Must have been enrolled at an eligible school at least half-time when ordered to active duty, or no more than six months prior to the date of the order 34 CFR 682.210(u)(1) and (2) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  37. Post-Active Duty Student Deferment • Request: • Can also be requested via the federal MIL form • Length: • 13 months after conclusion of active duty service period • If borrower qualifies for both 180-day Military Deferment extension and PADS deferment, the periods run concurrently • Deferment ends immediately if borrower returns to school on at least a half-time basis during the 13 months 34 CFR 682.210(u)(1), (3), and (4) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  38. Old Armed Forces Deferment • Only available to pre-7/1/93 Stafford and SLS borrowers and PLUS loans made before 8/15/83 • Requires only active duty service; not limited to service in connection with a war, contingency operation, or national emergency • Limited to three years over the life of the borrower’s loan • Eligibility for this would also qualify borrower for SCRA • Reservists and National Guard members must be on full-time active duty that is expected to last for at least one year, absent a national mobilization order for Reservists. • Can be requested via the federal PUB form 34 CFR 682.210(b)(2)(i) and 34 CFR 682.210(i) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  39. Public Health Service Deferment • Only available to pre-7/1/93 Stafford and SLS borrowers and PLUS loans made before 8/15/83 • Borrower must be a full-time officer in the Commissioned Corps of the United States Public Health Service • Limited to three years over the life of the borrower’s loan (including Armed Forces and NOAA deferment months) • Eligibility for this would also qualify borrower for SCRA, and vice versa • Can be requested via the federal PUB form 34 CFR 682.210(b)(2)(i) and 34 CFR 682.210(j) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  40. NOAA Deferment • Only available to “new borrowers” between 7/1/87 and 6/30/93 • Borrower must be on active duty status in the National Oceanic and Atmospheric Administration Corps • Limited to three years over the life of the borrower’s loan (including Armed Forces and Public Health Service deferment months) • Only active commissioned officers of NOAA would also qualify for SCRA • Can be requested via the federal PUB form 34 CFR 682.210(b)(3)(ii) and 34 CFR 682.210(p) 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  41. Higher Education Relief Opportunities for Students (HEROES) Act of 2003

  42. HEROES Act of 2003 • Provides ED with specific waiver authority to assist borrowers affected by a war, other military operation, or national emergency • First signed into law on 8/18/03 (P.L. 108-76), but with expiration date of 9/30/05 • Extended through 9/30/07, via P.L. 109.78 • Made permanent on 9/30/07, via P.L. 110-93 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  43. HEROES Act of 2003 • Waivers have been issued by ED via Federal Register updates: • On 12/12/03, ED issued 68 FR 69312 establishing the regulatory waivers and making them valid through 9/30/95 • On 10/20/05, ED issued 70 FR 61037 extending the waivers, without changes, through 9/30/97 • On 12/26/07, ED issued 72 FR 72947 extending the waivers, without changes, through 9/30/12 • On 9/27/12, ED issued 77 FR 59311 extending the waivers through 9/30/17, but with two longstanding waivers removed and a new one added 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  44. HEROES Act of 2003 • Four “categories” of affected individuals • Category 1: borrowers who are • Serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency • Living or working in an area declared a disaster area in connection with a national emergency, or • Suffering economic hardship as a direct result of a war or other military operation or national emergency 68 FR 69312, pages 69312-69313; 77 FR 59311 , pages 59312-59313 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  45. HEROES Act of 2003 • Regulatory waivers for Category 1 borrowers: • Need Analysis: School can use more current total income when determining student’s expected family contribution (EFC) • Professional Judgment: School has more flexibility when making adjustments for students • Verification of AGI and Taxes Paid: School can accept borrower’s self-certifying statement of non-filing plus W2’s; IRS form 4868 not required • Grant overpayments: Student not required to return unearned grant funds; school not required to report overpayment or deny further eligibility 68 FR 69312, pages 69313-69314; 77 FR 59311, pages 59313-59314 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  46. HEROES Act of 2003 • Category 2: borrowers who are • Serving on active duty or performing qualifying National Guard duty during a war or other military operation or national emergency • Living or working in an area declared a disaster area in connection with a national emergency, or 68 FR 69312, pages 69314-69315; 77 FR 59311, page 59314 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  47. HEROES Act of 2003 • Regulatory waivers for Category 2 borrowers: • Postwithdrawal Disbursements: Student has at least 45 days, instead of 14, to accept or decline • Leaves of Absence: Student not required to provide a written request • Title IV Credit Balances: School can contact borrower within 14 days to determine his/her preference and wait up to 45 days for a response, or simply pay the borrower 68 FR 69312, page 69315; 77 FR 59311, page 59314 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  48. HEROES Act of 2003 • Regulatory waivers for Category 2 borrowers (continued): • Request for Loan Cancellation: School must allow the borrower up to 60 days, instead of 14, to request a cancellation • Student/Parent Authorizations: School can accept verbal authorizations for disposition of Title IV funds • Satisfactory Academic Progress: Student’s status as HEROES-eligible can be deemed a special circumstance 68 FR 69312, page 69315; 77 FR 59311, pages 59314-59315 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  49. HEROES Act of 2003 • Regulatory waivers for Category 2 borrowers (continued): • Grace Period: Borrower entitled to up to three years of additional grace status, including time necessary to re-enroll in next available term, while an affected individual. Borrower must be given full six or nine-month grace period afterward. 68 FR 69312, pages 69315-69316; 77 FR 59311, page 59315 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

  50. HEROES Act of 2003 • Regulatory waivers for Category 2 borrowers (continued): • In-school Period: Borrower entitled to up to three years of additional in-school status, including time necessary to re-enroll in next available term, while an affected individual. Borrower must be given full six or nine-month grace period afterward. 68 FR 69312, page 69316; 77 FR 59311, page 59315 2013 Knowledge Symposium November 5-7, 2013 ● St. Pete, Florida

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