[Federal Register Volume 86, Number 160 (Monday, August 23, 2021)]
[Rules and Regulations]
[Pages 46972-46982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18081]


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DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682 and 685

[Docket ID ED-2019-FSA-0115]
RIN 1840-AD48


Total and Permanent Disability Discharge of Loans Under Title IV 
of the Higher Education Act

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Department of Education (Department) adopts as final 
regulations, with changes, the interim final regulations for total and 
permanent disability (TPD) student loan discharge.

DATES: 
    Effective date: These regulations are effective July 1, 2022.
    Implementation date: For the implementation date of these 
regulatory changes, see the Implementation Date of These Regulations 
section of this document.

FOR FURTHER INFORMATION CONTACT: Jennifer M. Hong, Director, Policy 
Coordination Group, U.S. Department of Education, Office of 
Postsecondary Education, 400 Maryland Avenue SW, Washington, DC 20202-
2241. Telephone: (202)453-7805. Email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll-free, at 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

    Purpose of This Regulatory Action: On November 26, 2019, the 
Department published in the Federal Register (84 FR 65000) an interim 
final rule (IFR) to amend and update the regulations for TPD student 
loan discharge for veterans by removing administrative burdens that may 
have prevented at least 20,000 totally and permanently disabled 
veterans from obtaining discharges for their student loans. These final 
regulations adopt and amend the regulations established in the IFR as 
further described below. These regulations do not address the process 
of obtaining a TPD student loan discharge through the physician's 
certification process.
    Summary of Major Provisions of This Regulatory Action:
    These regulations--
     Expand the automatic discharge process to borrowers who 
are eligible for TPD loan discharge through their SSA

[[Page 46973]]

data. Borrowers who qualify for TPD through Social Security 
Administration (SSA) data are those who are eligible for Social 
Security Disability Insurance (SSDI) and/or Supplemental Security 
Income (SSI) benefits and whose next scheduled disability review is no 
earlier than five nor later than seven years;
     Clarify that borrowers determined to be eligible for a TPD 
discharge based on data that the Secretary obtains from the Department 
of Veterans Affairs (VA) or the SSA are not required to submit a TPD 
application to have their Federal student loans discharged;
     Describe the process by which the Secretary will 
automatically discharge the Federal student loans of a borrower who is 
determined to be eligible for a TPD discharge based on data obtained 
from either VA or the SSA, unless the borrower notifies the Secretary 
by a specified date that the borrower does not wish to receive the 
discharge;
     Specify the contents of the notice the Secretary sends to 
borrowers who are determined to be eligible for a TPD discharge based 
on data that the Secretary obtains from VA or from the SSA; and
     Provide for the return of payments to the person who made 
payments on the loan on or after the effective date of the 
determination by VA or SSA for borrowers who receive the automatic TPD 
discharge.
    Authority for this Regulatory Action: Section 410 of the General 
Education Provisions Act provides the Secretary with authority to make, 
promulgate, issue, rescind, and amend rules and regulations governing 
the manner of operations of, and governing the applicable programs 
administered by, the Department. 20 U.S.C. 1221e-3. Furthermore, under 
section 414 of the Department of Education Organization Act, the 
Secretary is authorized to prescribe such rules and regulations as the 
Secretary determines necessary or appropriate to administer and manage 
the functions of the Secretary or the Department. 20 U.S.C. 3474. Under 
20 U.S.C. 1087(a)(1)(FFEL), 20 U.S.C. 1087a(b)(2)(Direct Loans), and 20 
U.S.C. 1087dd(c)(1)(F)(ii)(Perkins), the Department has authority to 
cancel or discharge certain loans due to a total and permanent 
disability.
    Costs and Benefits: Veterans and recipients of SSDI and/or SSI 
benefits who qualify for a TPD discharge will benefit from these final 
regulations. Qualifying veterans and recipients of SSDI and/or SSI 
benefits will be relieved of a financial burden related to Federal 
student loans, including the stress associated with repayment or 
potential defaults and collections. This final rule should result in a 
quicker, more efficient process and many more qualified borrowers 
receiving the discharge to which they are legally entitled. In 
addition, the paperwork burden will be reduced as no application will 
be needed for borrowers who qualify for an automatic TPD discharge.
    Implementation Date of These Regulations: Section 482(c) of the HEA 
requires that regulations affecting programs under title IV of the HEA 
be published in final form by November 1, prior to the start of the 
award year (July 1) to which they apply. However, that section also 
permits the Secretary to designate any regulation as one that an entity 
subject to the regulations may choose to implement earlier, as well as 
the conditions of early implementation.
    The Secretary is exercising his authority under section 482(c) of 
the HEA to designate the regulatory changes to parts 674, 682, and 685 
of the Code of Federal Regulations included in this document for early 
implementation effective September 30, 2021. The Secretary takes this 
action for the reasons set forth in the Summary, Background, and Need 
for Regulatory Actions sections included in this document.
    Public Comments: When the IFR was published in the Federal Register 
on November 26, 2019 (84 FR 65000), the Department requested public 
comment on whether we should make any changes to the interim final 
regulations. We received 18 comments. The final regulations include 
changes from the IFR.
    We group major issues according to subject, with appropriate 
sections of the regulations referenced in parentheses. We discuss other 
substantive issues under the sections of the regulations to which they 
pertain. Generally, we do not address minor, non-substantive changes, 
or recommended changes that the law does not authorize the Secretary to 
make.
    Analysis of Comments and Changes: An analysis of the comments and 
of the changes in the regulations since publication of the IFR follows.

General Comments

    Comments: Commenters were generally supportive of the provision 
added by the IFR stating that veterans who are identified as eligible 
for TPD discharge based on data that the Secretary obtains from VA are 
not required to provide any additional documentation to have their 
loans automatically discharged, noting it reduces burden on disabled 
veterans. Several commenters explained that many disabled veterans lack 
a supportive caregiver who can assist them in the application process 
and ensure that they understand the implications of not having their 
Federal student loans discharged. The commenters further noted that 
many veterans who received letters notifying them that they were 
eligible for discharge, and that to receive the discharge they needed 
only to sign and submit a TPD discharge application, failed to 
subsequently submit an application. These commenters stated that these 
veterans are clearly eligible for the discharge, and they are pleased 
that the Department is making it easier for them to have their loans 
discharged.
    Discussion: We thank the commenters for their support. We note that 
the IFR, which provided that veterans identified as TPD based on data 
obtained from VA are not required to submit additional documentation to 
have their loans discharged, may not have made it sufficiently clear 
that ``additional documentation'' meant a TPD discharge application. 
Therefore, we are clarifying this point in the final regulations.
    Changes: In final Sec. Sec.  674.61(d), 682.402(c)(10), and 
685.213(d), we have clarified that a borrower who qualifies for a TPD 
discharge based on data obtained from VA or from the SSA is not 
required to submit a TPD application, or any other documentation of 
eligibility for discharge.
    Comments: One commenter expressed concern that the automatic 
discharge process was paused because the regulations that were 
previously in effect required borrowers to submit a discharge 
application. Another commenter asked that the Department provide a copy 
of the Office of Management and Budget memo that determined rulemaking 
was required before the Department could discharge veterans' loans 
without an application.
    Discussion: As we explained in the IFR, former Secretary Betsy 
DeVos exercised her authority under section 482(c) of the Higher 
Education Act of 1965, as amended (HEA), to designate the regulatory 
changes to parts 674, 682, and 685 of the Code of Federal Regulations, 
as reflected in the IFR, for early implementation effective 
immediately. Accordingly, the automatic TPD discharge process for 
veterans identified as eligible for discharge based on data obtained 
from VA was implemented immediately upon publication of the IFR.
    We have forwarded the request for the Office of Management and 
Budget memo to the Department's Freedom of Information Act (FOIA) 
Service Center. All FOIA requests made to the

[[Page 46974]]

Department are handled by the Department's FOIA Service Center.
    Changes: None.
    Comment: One commenter suggested that VA should be more involved in 
communicating to veterans regarding the discharge process. The 
commenter was concerned that some veterans might think the discharge 
letter was ``too good to be true'' since it was not something they had 
asked for. The commenter stated that if VA were more involved in the 
process, it might be able to confirm the validity of the letter and 
assist veterans in understanding the ramifications of allowing the 
discharge to go forward versus opting out of the discharge.
    Discussion: The Department plans to work closely with VA in 
implementing these regulations. However, we believe that the 
notification of eligibility for the TPD discharge should come from the 
Department, not VA. The notification relates to student loan programs 
administered by the Department, not to any VA benefit program. If a 
borrower has questions about the notification, the borrower should 
contact the Department, not VA.
    Changes: None.

Opt-Out Provision (Sec. Sec.  674.61(e)(1), 682.402(c)(11)(i), 
685.213(e)(1))

    Comment: One commenter was concerned that the automatic discharge 
process could harm a veteran who is enrolled in school and obtaining 
loans and recommended that the Department include the opt-out provision 
discussed in the preamble to the IFR.
    Another commenter urged the Department to consider the moral hazard 
of lending to a borrower who has been deemed unable to work prior to or 
concurrent with enrollment.
    Discussion: As suggested by the first commenter, a veteran who is 
enrolled in school and receiving loans might wish to opt out of the 
automatic discharge so that the veteran could continue receiving loans 
without having to meet the additional eligibility requirements that 
apply to borrowers seeking new loans after having previously received a 
TPD discharge of earlier loans. We agree with the first commenter that 
we should include the opt-out provision in the regulatory language.
    We do not agree with the commenter who suggested that providing an 
opt-out provision creates a moral hazard that is sufficiently worrisome 
to outweigh the benefits of providing automatic discharges. As noted in 
the Regulatory Impact Analysis the opt out rate for borrowers 
identified through the VA process was just four percent through the two 
rounds of discharges processed since September 2019. This suggests the 
opt out is used in rare circumstances and is not a widespread practice 
that would indicate a significant moral hazard. Veterans who qualify 
for automatic TPD discharges, as well as recipients of SSDI and/or SSI 
benefits, should have the ability to decline the discharge without fear 
that declining the discharge will affect their ability to continue to 
obtain Federal student loans.
    Changes: In Sec. Sec.  674.61(e)(1), 682.402(c)(11)(i), and 
685.213(e)(1), we have specified that the notification to a borrower of 
eligibility for an automatic TPD discharge informs the borrower that 
the borrower may opt out of the discharge. We have revised Sec. Sec.  
674.61(e)(5), 682.402(c)(11)(vii), and 685.213(e)(3) to clarify that, 
if borrowers choose not to receive the automatic TPD discharge, they 
remain responsible for repaying the loan in accordance with the terms 
and conditions of the promissory note that the borrower signed.

Post-Discharge Monitoring Period

    Comments: One commenter urged the Department to make it clear to 
borrowers that if they accept the TPD discharge, there will be a 
monitoring period that may prevent the borrower from receiving loans in 
the immediate future, and that these borrowers would need a physician's 
certification if they are going to use loans to return to school.
    Discussion: For TPD discharges based on a disability determination 
from VA, there is no post-discharge monitoring period. 20 U.S.C. 
1087(a)(2). However, under Sec. Sec.  674.9(g)(1) and (2), 
682.201(a)(6)(i) and (ii), and 685.200(a)(1)(iv)(A)(1) and (2), once 
borrowers' loans have been discharged due to TPD, they cannot obtain 
additional Federal student loans unless the borrower (1) obtains a 
certification from a physician that the borrower is able to engage in 
substantial gainful activity; and (2) signs a statement acknowledging 
that any new loan the borrower receives cannot be discharged in the 
future on the basis of any impairment present when the new loan is 
made, unless that impairment substantially deteriorates. This 
information is included in the notice that is sent to veterans 
informing them that they qualify for a TPD discharge based on data 
obtained from VA.
    For borrowers who receive discharges based on SSA disability 
determinations, Sec. Sec.  674.61(b)(3)(iv), 682.402(c)(3)(iv), and 
685.213(b)(4)(iii) provide that the notification the borrower receives 
after the discharge has been granted explain the terms and conditions 
of the post-discharge monitoring period. The notice also includes the 
requirements for obtaining a new loan discussed above.
    Changes: None.

Defaulted Borrowers

    Comments: Commenters noted that the loans of many veterans who 
qualify for a TPD discharge are in default. The commenters asserted 
that in some cases the loans were wrongly placed in default, because 
the borrower met the eligibility criteria for a TPD discharge at the 
time the loan was placed in default.
    Discussion: It is possible that some veterans who defaulted on 
their loans may have qualified for TPD discharge if they had submitted 
a discharge application. However, the Department would not have known 
at the time the loans defaulted that the veterans with loans described 
in this example were eligible for a TPD discharge. Prior to the 
implementation of the process that enables the Department to identify 
borrowers who are determined to be eligible for TPD discharge based on 
data obtained from VA, the Department and loan servicers had no means 
of knowing that a disabled veteran qualified for discharge unless the 
borrower submitted a TPD discharge application. If such a borrower 
became delinquent in making payments on a loan, and did not apply for 
forbearance, deferment, or discharge, or take other actions to resolve 
the delinquency, the loan would eventually be placed in default, in 
accordance with the terms and conditions of the promissory note that 
the borrower signed. Preventing this situation is a major reason the 
Department automated the process of discharges without the need for an 
application. The automated process will seek to avoid such an outcome 
for a borrower who is eligible for a TPD discharge.
    Changes: None.

Return of Offset or Garnished Funds

    Comments: Commenters asked that any offsets from a defaulted 
borrower's benefits that were taken to pay on their defaulted loans be 
returned to them, and their credit reports updated, if the borrower 
receives an automatic TPD discharge.
    Discussion: Any payments received on or after the effective date of 
VA's disability determination or the date the Secretary received 
disability data from the SSA are returned to the person who made the 
payments. This includes any payments that were obtained through 
offsets.
    Section 674.61(c)(4)(ii) requires a school that holds a Perkins 
Loan to return the payments. Section

[[Page 46975]]

682.402(c)(10)(vii) requires a FFEL lender to return payments after the 
guaranty agency has paid a disability claim. Section 685.213(b)(4)(ii) 
and (c)(2)(i) provides for the return of payments for Direct Loans.
    The discharge of a loan is also reported to nationwide consumer 
reporting agencies.
    Changes: None.

Tax Implications

    Comments: One commenter asked that the Department take additional 
action to ensure that veterans are counseled regarding which States 
treat loan amounts discharged due to TPD as taxable income.
    Discussion: The letter informing borrowers that they are eligible 
for discharge explains that, although loan amounts discharged due to 
TPD are no longer considered taxable income for Federal tax purposes, 
some States still consider discharged loan amounts as income. The 
letter recommends that borrowers scheduled to receive a TPD discharge 
contact their State revenue office or a tax professional before 
deciding to accept or opt out of the TPD discharge.
    Changes: None.

Deregulatory Action

    Comment: One commenter asked why the IFR was not treated as a 
significant regulatory action under Executive Order (E.O.) 13771, which 
requires that for every significant regulatory action proposed by an 
agency for notice and comment or otherwise promulgated that imposes a 
cost greater than zero, the agency must repeal two regulatory actions.
    Discussion: On January 20, 2021, President Joseph Biden issued E.O. 
13992, which revoked E.O. 13771, so the terms of E.O. 13771 no longer 
apply. Regardless, the Department identified the IFR as a deregulatory 
action because it eliminates a regulatory requirement: In this case, 
the requirement that a disabled veteran submit an application for a TPD 
discharge.
    Changes: None.

Automatic Discharges for Borrowers With SSA Disability Designations

    Comments: Several commenters supported the Department's 
implementation of automatic TPD discharges for disabled veterans and 
asked that the Department also allow for automatic TPD discharges for 
borrowers who are identified as eligible for a TPD discharge through 
the existing data match with SSA.
    Discussion: We agree. Under Sec. Sec.  674.61(b)(2)(iv), 
682.402(c)(2)(iv), and 685.213(b)(1), these borrowers are eligible to 
receive a loan discharge but are currently required to submit an 
application before they may receive the discharge. Eliminating the 
application requirement for borrowers who are identified as eligible 
for a TPD discharge through the data match with SSA, so they can 
receive an automatic discharge, is a logical extension of the IFR. The 
rationale for providing borrowers with a TPD discharge based on a 
disability determination by VA obtained through a data match, thereby 
eliminating unnecessary documentation burdens on individuals determined 
by a government agency to qualify for a TPD discharge, applies equally 
to individuals who qualify for TPD discharge based on a disability 
determination by the SSA as obtained through a data match.
    The object of the logical outgrowth standard ``is one of fair 
notice.'' Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 174 
(2007). The standard is well described in Mid Continent Nail Corp. v. 
United States, 846 F.3d 1364, 1373-76 (Fed. Cir. 2017), which states 
that ``a final rule is a logical outgrowth of a proposed rule only if 
interested parties should have anticipated that the change was 
possible, and thus reasonably should have filed their comments on the 
subject during the notice-and-comment period.'' Id. at 1373 (quoting 
Veteran's Justice Grp., L.L.C. v. Sec'y of Veterans Affairs, 818 F.3d 
1336, 1344 (Fed. Cir. 2016)). The Federal Circuit indicated that the 
logical outgrowth standard is very broad, implying that it would even 
allow the removal of ``critical elements'' of rules so long as the NPRM 
contains ``the merest hint'' of the agency's actions in the final rule. 
See id. at 1374, 1376.
    As supported by public comment on the IFR requesting this expansion 
of the automatic TPD discharge, the public could reasonably have 
anticipated that the final rule would apply to borrowers who are 
identified as eligible for a TPD discharge through the data match with 
SSA. The position taken in this final rule--expanding the automatic TPD 
discharge to apply to these borrowers--is consistent with and 
responsive to public comment, including comments from several U.S. 
Senators, a State Attorney General, legal aid societies, and other non-
governmental organizations. The number of comments, the diversity of 
the commenters, and the universal support for this expansion all 
demonstrate that this rule is a logical outgrowth of the IFR.
    Changes: In Sec. Sec.  674.61(d)(1)(ii), 682.402(c)(10)(i)(B), and 
685.213(d)(1)(ii), we have provided that a borrower who is identified 
as eligible for TPD discharge through the data match with SSA does not 
need to submit a TPD application as a condition of receiving a loan 
discharge.

Additional Proposals

    Comments: Some commenters suggested that all veterans with a 
service-related disability should have their loans discharged. One 
commenter recommended that student loans for all veterans be paid or 
forgiven, not just veterans who are totally and permanently disabled. 
Another commenter recommended that all veterans with a disability 
should qualify for a TPD discharge, regardless of whether their 
disability is service-connected.
    Two commenters stated that veterans who have never been deployed 
can receive a 100 percent disability rating from VA. These veterans 
would qualify for TPD, while veterans who were deployed, but who are 
less than 100 percent disabled, would not qualify. This commenter 
believed that veterans who have not been deployed should not have 
priority over veterans who were deployed.
    One commenter recommended eliminating the post-discharge monitoring 
period for all TPD discharge borrowers.
    Discussion: The statutory section authorizing a TPD discharge for 
veterans does not take a veteran's deployment status into account and, 
therefore, deployment status has no bearing on whether a student loan 
is discharged. In addition, the Department does not have the statutory 
authority to grant a TPD discharge to a veteran who is not totally and 
permanently disabled. A veteran who is totally and permanently 
disabled, but whose disability is not service connected, may receive a 
TPD discharge under the other TPD discharge processes, which require 
either an SSA disability determination or a physician's certification.
    There is no post-discharge monitoring period for borrowers who 
received TPD discharges based on VA disability determinations. Because 
the IFR only addressed automatic TPD discharges for veterans for whom 
there are no post-discharge monitoring periods, any changes to the 
post-discharge monitoring periods for other recipients of TPD 
discharges are outside the scope of this final rule. However, the 
Department has heard from the public on ways to improve the rules 
governing total and permanent disability discharge and may consider 
these policies through upcoming negotiated rulemaking. See 86 FR 28299 
(May 26, 2021).

[[Page 46976]]

    Changes: None.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether this regulatory action is ``significant'' 
and, therefore, subject to the requirements of the Executive order and 
subject to review by OMB. Section 3(f) of Executive Order 12866 defines 
a ``significant regulatory action'' as an action likely to result in a 
rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
Tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    These final regulations, taken together with the IFR, are an 
economically significant action and will have an annual effect on the 
economy of more than $100 million because the changes to an opt-out 
process for borrowers identified as TPD eligible through the data 
matches with VA and SSA are expected to increase transfers from the 
Federal Government as more loans are discharged by $1,685.8 million 
when annualized at a seven percent discount rate. Pursuant to the 
Congressional Review Act (5 U.S.C. 801 et seq.), the Office of 
Information and Regulatory Affairs designated this rule as a ``major 
rule,'' as defined by 5 U.S.C. 804(2).
    We have also reviewed these final regulations and the IFR under 
Executive Order 13563, which supplements and explicitly reaffirms the 
principles, structures and definitions governing regulatory review 
established in Executive Order 12866. To the extent permitted by law, 
Executive Order 13563 requires that an agency--
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account, among other things, and to the extent practicable, the costs 
of cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or providing 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    The Department has assessed the potential costs and benefits, both 
quantitative and qualitative, of this regulatory action, and we issued 
the IFR, and are issuing these final regulations, in response to the 
pressing need for, and manifest public interest in, deregulatory relief 
from bureaucratic burdens that have denied tens of thousands of 
veterans who are totally and permanently disabled, due to service-
related injuries, student loan discharges for which they are eligible. 
Individuals who SSA has determined to be disabled have faced similar 
burdens and hurdles. The harm caused to our veterans, other disabled 
individuals, and to the public interest by the application process is 
significant and widely recognized. See Presidential Memorandum at 
44677; S. Rep. No. 115-150, at 182. Based on this analysis and the 
reasons stated in the preamble, the Department believes that these 
final regulations are consistent with the principles in Executive Order 
13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, or Tribal governments in the exercise of 
their governmental functions.

Need for Regulatory Action

    The HEA provides that veterans who are totally and permanently 
disabled are eligible to have their Federal student loans discharged. 
Prior to the IFR, once determined by the Secretary of Veterans Affairs 
to be totally and permanently disabled due to a service-connected 
condition, the veteran was required to obtain documentation of that 
status from VA and provide it to the Secretary of Education, along with 
an application for total and permanent disability discharge, in order 
to receive the discharge of their student loans. Similarly, borrowers 
who are identified as eligible for a TPD discharge through the data 
match with SSA had to submit an application to the Department in order 
to receive the discharge.
    However, now that the Department has data sharing agreements with 
VA and SSA in place, the Department obtains all of the information it 
needs directly from those two agencies to discharge loans. This makes 
the submission of the TPD application to the Department an unnecessary 
and burdensome step for both groups of borrowers. Consequently, the 
President and Congress have asked the Department to ensure that 
individuals who have received a qualifying disability determination 
from SSA or VA receive all benefits the law allows with as little 
burden on the borrower as possible. Under the IFR and this final rule, 
individuals who have received a qualifying disability determination 
from SSA or VA only need to contact the Department if they choose to 
opt out of the TPD discharge, in which case they would be responsible 
for full payment on the loan.
    In terms of the potential impact on borrowers, the most significant 
change from the IFR is the extension of the automatic TPD discharge 
process to borrowers who are identified as eligible for a TPD discharge 
through the data match with SSA. Expanding TPD discharges without an 
application to individuals identified as TPD by SSA is a logical 
extension of the IFR. The rationale for providing an automatic 
discharge to veterans based on a disability determination by VA 
eliminating unnecessary documentation burdens on individuals determined 
by a government agency to have total and permanent disabilities that 
qualify them under statute to a discharge of their loans, particularly 
when those total and permanent disabilities may pose challenges to 
providing additional documentation--applies equally to individuals 
whose TPD has been identified by the SSA.
    The Department has been working with VA since 2018 to facilitate a 
more expedited TPD discharge process and about 22,000 veterans have 
received

[[Page 46977]]

approximately $650 million in discharges under the opt-in process in 
effect prior to the IFR. However, thousands more have not applied for 
the discharge for which they were eligible. A similar match has been in 
place with the Social Security Administration since 2016 and 
approximately 141,000 borrowers have received $8.2 billion in 
discharges under the opt-in process for the period 2016-2021. While 
veterans do not have to complete a post-discharge monitoring period, 
other borrowers who receive a TPD discharge are subject to a three-year 
post-discharge monitoring period during which a loan discharge could be 
reversed, so the final number of discharges associated with SSA matches 
from 2016-2021 may shift somewhat.
    The amendments in the IFR and these final regulations provide a 
quicker, more efficient process and will likely result in many more 
qualified veterans and individuals SSA determined to have a qualifying 
disability status receiving the discharge for which they are eligible.
    In the past, loan discharge amounts were subject to Federal and, in 
some States, State tax, which may have dissuaded some veterans or other 
borrowers who could otherwise navigate the TPD application process from 
seeking a discharge. However, under the Tax Cuts and Jobs Act of 2017 
(Pub. L. 115-97), all Federal tax was eliminated on loan discharges of 
borrowers based on death or total and permanent disability through 
2025. Some small percentage of these eligible veterans or other 
borrowers may opt out due to concerns over State tax treatment that was 
not affected by the 2017 Federal law.
    In addition, borrowers who are enrolled in a postsecondary 
institution at the time of the disability determination, or who plan to 
enroll in the future, may opt to forego loan forgiveness through TPD 
discharge so that they can continue to receive new Federal student 
loans for such enrollments. Although a borrower who accepts loan 
forgiveness through TPD discharge may still be able to borrow in the 
future, the Department requires such a borrower to obtain a 
certification from a physician that the borrower is able to engage in 
substantial gainful employment and to sign a statement acknowledging 
that the new Direct Loan the borrower receives cannot be discharged in 
the future on the basis of any impairment present when the new loan is 
made, unless that impairment substantially deteriorates. In addition, 
borrowers who want to receive new loans after receiving a TPD discharge 
based on SSA documentation (or based on a physician's certification) 
are also required under Sec. Sec.  674.61(b)(6), 682.402(c)(4) and (5), 
and 685.213(b)(6) and (7) to resume payment on the discharged loans if 
they receive a new loan during the three-year post-discharge monitoring 
period.
    Some borrowers may elect to simply forego loan forgiveness to 
preserve future borrowing opportunities and avoid the need to obtain 
medical certification regarding their ability to engage in substantial 
gainful employment. Although borrowers could opt out of an automatic 
discharge before we issued the IFR, that option was not specified in 
the regulations. Currently, the opt-out rate for veterans is low, at 
four percent (approximately 2,100 borrowers of nearly 48,000 opted out 
from the two rounds of discharges processed since September 2019). 
Accordingly, the Department expects a small percentage of borrowers who 
qualify for an automatic discharge based on SSA data to choose to opt 
out of the discharge.
    Nevertheless, this final rule removes barriers and allows many more 
qualified veterans and other borrowers to receive the TPD discharge to 
which they are entitled.

Costs, Benefits, and Transfers

    The primary parties affected by the IFR and these final regulations 
will be the veterans and recipients of Social Security benefits who 
qualify for the discharge; and the taxpayers, through the transfers 
from the Federal government. Qualifying borrowers will be relieved of a 
financial burden related to Federal student loans, including the stress 
associated with repayment or potential defaults and collections.
    VA estimates that approximately 150,000 veterans a year will reach 
a qualifying disability rating over the next 10 years, of which 
approximately 18 percent will be 50 years old or under and 
approximately 20 percent will have at least some postsecondary 
education at the time of their separation from the armed services. Many 
more will likely use education benefits and loans to pursue 
postsecondary credentials after separation. Therefore, we expect that 
thousands of current and future veterans will be affected by these 
final regulations.
    The match with the Social Security Administration is for 
individuals with Social Security Disability Insurance (SSDI) or 
Supplemental Security Income (SSI) benefits indicating that the 
borrower's next scheduled disability review will occur in no less than 
five and no more than seven years. The number of borrowers eligible for 
a discharge depends on the age profile, student loan borrowing history, 
and repayment history of those with a qualifying disability status. The 
Department estimates that approximately 21,000 borrowers are newly 
identified through the SSA match on a quarterly basis, and the 
quarterly average of borrowers who apply for a discharge and 
successfully complete the monitoring period is just over 10,000. This 
is based on borrowers from existing loan cohorts who have already 
received a qualifying disability status. More borrowers from past loan 
cohorts could qualify for a disability status in future years, and 
future cohorts of borrowers will also be affected by these final 
regulations, so many thousands of borrowers from existing loan cohorts 
and those in the 10-year budget window will benefit from the opt-out 
process.
    As described in the Paperwork Reduction Act section of this 
preamble, the elimination of the application will reduce the burden on 
borrowers who qualify for the automatic TPD discharge. The elimination 
of the application is a reduction in burden of 5,000 hours and $140,900 
for veterans and 11,586 hours and $326,493 for other borrowers, 
calculated at a wage rate of $28.18.\1\
---------------------------------------------------------------------------

    \1\ Bureau of Labor Statistics, Economic News Release Table B-3. 
Average hourly and weekly earnings of all employees on private 
nonfarm payrolls by industry sector, seasonally adjusted. Applying 
average hourly wage rate for October 2019 for total private 
industry. Available at www.bls.gov/news.release/empsit.t19.htm.
---------------------------------------------------------------------------

    The increase in transfers for discharges will affect taxpayers, 
through the Federal government, as more borrowers receive the loan 
discharge for which they qualify. This effect is described in the Net 
Budget Impacts section of this Regulatory Impact Analysis. Estimated 
annualized transfers are $1,685.8 million at a 7 percent discount rate. 
The servicing contractor that processes disability discharges for the 
Department could see an increase in the number of discharges to 
process, which could require system upgrades or other resources. 
However, they have already adjusted to an opt-out process for veterans 
and manage the notifications for eligible borrowers identified through 
the match with the SSA, so we do not expect significant changes would 
be required. Additionally, the Department is required to pay the cost 
of SSA providing Medical Improvement Not Expected status as part of the 
match agreement. This is estimated to cost approximately $8,000 
annually, but this cost would be incurred whether or not the results of 
the match were used for

[[Page 46978]]

the existing opt-in process or the opt-out process established by these 
final regulations.

Net Budget Impacts

    We estimate that the IFR and these final regulations will have a 
net Federal budget impact over the 2022-2031 loan cohorts of $13.3 
billion in outlays and a modification to past cohorts of $20.9 billion, 
for a total net impact of $34.1 billion. A cohort reflects all loans 
originated in a given fiscal year. Consistent with the requirements of 
the Credit Reform Act of 1990, budget cost estimates for the student 
loan programs reflect the estimated net present value of all future 
non-administrative Federal costs associated with a cohort of loans. The 
Net Budget Impact is compared to the 2022 President's Budget baseline 
(PB2022) that includes the estimated effects of the student loan 
related provisions in the Coronavirus Aid, Relief, and Economic 
Security Act (CARES Act) and subsequent extensions.
    As discussed throughout this preamble, the IFR and these final 
regulations changed the discharge process of loans for veterans with a 
service-related disability to an opt-out process instead of the opt-in 
process associated with the match between the Department and VA prior 
to the IFR. While the match has been processed since 2018 and the 
Department has accepted VA determinations of disability status without 
additional medical information since 2013, a significant percentage of 
veterans who would qualify for the discharge did not submit 
applications. Of approximately 58,000 qualifying veterans identified in 
the match process since 2018, only about 22,000 veterans have received 
discharges, totaling approximately $650 million. According to Federal 
Student Aid, approximately 4,000 additional veterans are identified in 
each quarterly match. For the SSA match, approximately 21,000 
additional borrowers are identified in each quarterly match. Since the 
start of the SSA match with the opt-in process in 2016, approximately 
$8.2 billion in TPD discharges have been processed.
    To estimate the effect of the opt-out procedure, the Department 
adjusted the disability component of its Death, Disability, and 
Bankruptcy assumption (DDB), which also includes closed school and 
borrower defense discharges that have been the subject of recent 
regulations. To calculate the effect on past cohorts from borrowers 
currently eligible for the discharge, the Department summarized the 
balances, collections, and payments associated with veterans identified 
in the August 2018 match who had not received a disability or death 
discharge by the end of FY 2019. These potential claims were grouped by 
population identification (non-consolidated, consolidated not-from-
default, and consolidated from default), and offset between the fiscal 
year of loan origination and fiscal year of disability. Baseline 
disability claims were also summarized by these factors and an 
adjustment factor for the increase represented by the potential claims 
was calculated.
    The change to the opt-out approach will increase the level of 
disability discharges going forward, but not to the same degree as the 
significant adjustment in FY2020 that captures the build-up of years 
from those who did not submit applications. To estimate the adjustment 
for future claims, the Department focused on those newly identified as 
disabled in 2018 and calculated an adjustment factor based on those who 
received a discharge versus those borrowers with potential discharges 
who were in the match but did not submit applications. This adjustment 
was applied to future cohorts and future disability determinations for 
borrowers in past cohorts.
    A separate adjustment was added to the disability rate to capture 
the effect of the SSA match switching to opt-out. A review of existing 
borrowers identified in the SSA match file prior to September 30, 2020, 
indicates that there are approximately $11.5 billion in outstanding 
balances of borrowers who would be eligible for a TPD discharge. This 
confirms that the potential increase in claims from existing and future 
cohorts is significant. The disability component of the DDB rate was 
almost doubled to estimate the effect of the SSA match opt-out process, 
resulting in the increase to $34.1 compared to the $1.96 billion 
estimated for only VA match in the IFR.
    A number of factors may affect the estimated cost of these final 
regulations. The estimate does not include any reduction in defaults 
associated with the borrowers' loans, but borrowers' repayment profile 
will affect the cost of this discharge. For borrowers in the SSA match 
prior to September 30, 2020, approximately 62 percent of loan 
disbursements across all loan cohorts have been in default at some 
point. While the estimate for these final regulations is conservative 
and does not include any reduction in defaults, we know from prior 
analysis that a change such as this can have an impact on defaults 
going forward. As an example, a sensitivity analysis was done for the 
FY 2020 financial statements that showed that a 5 percent reduction in 
defaults for the last 5 originated cohorts saves $849 million. The 
Department will monitor the effect of these final regulations on 
defaults as the opt-out process is implemented and reflect it in future 
student loan program costs. Some borrowers may have lacked awareness of 
the potential discharge or found the application process difficult. To 
the extent borrowers previously chose to not apply for Federal tax 
reasons, the tax provision granting that relief is currently scheduled 
to expire on December 31, 2025. While that tax provision may be 
renewed, the opt-out rate for future discharges occurring in 2026 and 
later could increase if it is not. In estimating the net budget impact 
of these final regulations, the Department reduced the adjustment 
factor for 2027 and later by 15 percent to account for this. If that 
provision is extended, or if more of the unfiled applications were for 
process reasons and did not reflect deliberate tax planning, the opt-
out rate may decrease and the costs could go up.
    We also assumed that the non-applicants and future qualifying 
veterans and other borrowers will have a similar profile to applicants 
in terms of the amount of loans, repayment profiles, and the timing of 
their qualifying disability. It is possible that those who applied for 
a discharge as the result of the match had higher balances and thus 
more incentive to file, especially once the Federal tax consequences 
were removed. Applicants and non-applicants could vary by debt level, 
educational attainment, nature of their disability, availability of 
support, or other factors that could result in the discharges granted 
through the opt-out process having a different average amount or 
subsidy cost for the Department.
    Another challenge is predicting the effect on future loan cohorts. 
We assume the level and timing of service-related and other 
disabilities will remain similar to that for existing borrowers. 
Clearly, geopolitical and global health factors that the Department 
cannot predict could affect the number of veterans and other borrowers 
who qualify for the discharge. Additionally, student loan borrowing 
among those who may serve in the military and eventually qualify for a 
discharge could increase depending upon recruitment patterns and 
further education pursued by those serving in the military. However, it 
is possible that the relatively generous provisions of the Post 9/11 GI 
bill will reduce borrowing by more recent and future cohorts of 
veterans relative to past cohorts. An

[[Page 46979]]

analysis conducted by Veterans Education Success of National 
Postsecondary Student Aid Survey (NPSAS) data for the most recent three 
survey cycles (NPSAS:08, NPSAS:12 and NPSAS:16) concluded that the 
percentage of veterans borrowing at proprietary schools decreased from 
78 percent in NPSAS:08, which surveyed students prior to passage of the 
Post-9/11 GI Bill, to 42 percent in NPSAS:16, which surveyed students 
after, and the average annual amount borrowed decreased slightly from 
$8,680 to $8,630 in 2015 dollars.\2\ The percent of veterans borrowing 
declined slightly in other sectors (38 percent to 32 percent for public 
4-year institutions) and the average annual amounts borrowed also 
declined ($10,410 for 4-year private non-profit in NPSAS:08 to $8,980 
in NPSAS:16).\3\
---------------------------------------------------------------------------

    \2\ Walter Ochinko and Kathy Payea, Veterans Education Success, 
Veteran Student Loan Debt: Data from NPSAS: 08,12,16, January 2019, 
Figure 1, p.4. Available at https://vetsedsuccess.org/veteran-student-loan-debt-7-years-after-implementation-of-the-post-9-11-gi-bill/./
    \3\ Id.
---------------------------------------------------------------------------

    Medical or technical advances that affect the classification of 
disability could potentially be a factor reducing the estimated costs 
associated with future loan cohorts. In its report, Trends in Social 
Security Disability,\4\ published in August 2019, SSA indicated a 
decline in disability incidence since 2010 after an increase between 
2007-2010. While SSA identifies economic conditions as a contributing 
factor to disability incidence, the report indicates that the decline 
is more significant than would be expected by economic conditions 
alone. Other factors identified that could affect disability rates in 
the future include availability of health insurance, a change in the 
mix of jobs to ones with less physically demanding labor, and policy 
and administrative procedural changes. For estimation purposes, we 
assume future cohorts will look like existing cohorts but acknowledge 
that a number of factors could shift the estimated costs in either 
direction.
---------------------------------------------------------------------------

    \4\ Social Security Administration, Office of Retirement and 
Disability Policy, Trends in Social Security Disability, August 
2019. Available at https://www.ssa.gov/policy/docs/briefing-papers/bp2019-01.html.
---------------------------------------------------------------------------

Accounting Statement

    As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in the 
following table we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
these final regulations. This table provides our best estimate of the 
changes in annual monetized transfers as a result of these final 
regulations. Expenditures are classified as transfers from the Federal 
government to veterans or borrowers eligible for SSDI and/or SSI 
benefits who qualify for a total and permanent disability discharge.

 Table 1--Accounting Statement: Classification of Estimated Expenditures
                              [In millions]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Category                                             Benefits
------------------------------------------------------------------------
Increased share of qualifying veterans
 or borrowers eligible for SSDI and/or
 SSI benefits who receive a total and
 permanent disability discharge.........          Not Quantified
                                         -------------------------------
Reduced paperwork burden on veterans or               7%              3%
 borrowers eligible for SSDI and/or SSI           $[.34]          $[.35]
 benefits whose next disability review
 is no earlier than five and no later
 than seven years who qualify for a TPD
 discharge..............................
------------------------------------------------------------------------
Category                                             Transfers
------------------------------------------------------------------------
Increased loan discharges for veterans                7%              3%
 or borrowers eligible for SSDI and/or        $[1,685.8]      $[1,138.6]
 SSI benefits with a qualifying total
 and permanent disability status........
------------------------------------------------------------------------

Paperwork Reduction Act of 1995 (PRA)

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the PRA (44 U.S.C. 3506(c)(2)(A)). 
This helps ensure that: The public understands the Department's 
collection instructions, respondents provide the requested data in the 
desired format, reporting burden (time and financial resources) is 
minimized, collection instruments are clearly understood, and the 
Department can properly assess the impact of collection requirements on 
respondents.
    Sections 674.61, 682.402, and 685.213 of these final regulations 
contain information collection requirements. Under the PRA, the 
Department has submitted a copy of these sections and an Information 
Collections Request to OMB for its review. These final regulations do 
not impose any new information collection burden. OMB previously 
approved the information collection requirements under OMB control 
number 1845-0065. The forms that are part of this information 
collection do not change as a result of these final regulations.

Sections 674.61(c), 682.402(c)(9), and 685.213(c)

    Discussion: Prior to the IFR, a veteran was required to submit an 
application with documentation from VA to receive a TPD discharge of a 
loan under the Federal Perkins Loan Program, Federal Family Education 
Loan Program, or Federal Direct Loan Program. This information has been 
collected under OMB approved form control number 1845-0065. The IFR and 
these final regulations eliminate the application requirement.
    Requirements: These changes allow the Secretary to offer a Federal 
student loan borrower who is identified through a data match with VA as 
being totally and permanently disabled a discharge of his or her loans 
without requiring the borrower to submit a separate TPD application. 
The veteran may elect to opt out of the TPD discharge and will continue 
to be responsible for repaying the loans.
    Burden Calculation: These changes eliminate burden on the veteran. 
The currently approved form, 1845-0065, estimates 30 minutes (.50 
hours) to read, gather documentation, and complete the discharge 
application. We estimate that

[[Page 46980]]

annually approximately 10,000 veterans have submitted the application 
for discharge due to total permanent disability. This regulatory change 
reduces the burden assessed on the approved form by 5,000 hours (10,000 
applicants x .50 hours = 5,000 hours). This will be a one-time 
reduction in burden. We are not changing the TPD Discharge Application 
to remove the section applicable to a veteran's request for such a 
discharge.

                         1845-0065 Discharge Application--Total and Permanent Disability
----------------------------------------------------------------------------------------------------------------
                                                                                                  Estimate costs
         Affected entity             Number of       Number of       Hours per     Total burden     individual
                                    respondents      responses       response                         $28.18
----------------------------------------------------------------------------------------------------------------
Individual Veteran..............         -10,000         -10,000             .50          -5,000       -$140,000
                                 -------------------------------------------------------------------------------
    Total.......................         -10,000         -10,000  ..............          -5,000        -140,000
----------------------------------------------------------------------------------------------------------------

    Discussion: The TPD discharge regulations currently require a 
borrower who qualifies for discharge of a Federal Perkins Loan Program, 
Federal Family Education Loan Program, or Federal Direct Loan Program 
loan based on total and permanent disability certified by the SSA to 
submit an application in order to receive a TPD discharge. This 
information was collected under OMB control number 1845-0065. Under 
these final regulations, a borrower who qualifies for a TPD discharge 
based on total and permanent disability as identified by the SSA will 
no longer be required to submit a TPD application in order to receive a 
TPD discharge.
    Requirements: These changes allow the Secretary to offer a Federal 
student loan borrower who is identified through SSA data as being 
totally and permanently disabled a discharge of his or her loans 
without requiring the borrower to submit a separate TPD application. 
The borrower may elect to opt out of the TPD discharge and will 
continue to be responsible for repaying the loans.
    Burden Calculation: These changes eliminate burden on the borrower. 
The currently approved form, 1845-0065, estimates 30 minutes (.50 
hours) to read, gather documentation, and complete the discharge 
application. In 2020 the Department received 23,171 applications from 
borrowers who were required to submit the application for discharge 
based on a total permanent disability determination from SSA. This 
regulatory change reduces the burden assessed on the approved form by 
11,586 hours (23,171 applicants x .50 hours = 11,586 hours). This will 
be a one-time reduction in burden. We are not changing the TPD 
Discharge Application to remove the section applicable to a borrower's 
request for a discharge based on SSA documentation.

                         1845-0065 Discharge Application--Total and Permanent Disability
----------------------------------------------------------------------------------------------------------------
                                                                                                     Estimated
                                     Number of       Number of       Hours per                         costs
         Affected entity            respondents      responses       response      Total burden     individual
                                                                                                      $28.18
----------------------------------------------------------------------------------------------------------------
Individual SSA Disability.......         -23,171         -23,171             .50         -11,586       -$326,493
                                 -------------------------------------------------------------------------------
    Total.......................         -23,171         -23,171  ..............         -11,586        -326,493
----------------------------------------------------------------------------------------------------------------

    In total, we are revising the total burden assessment for the 
Information Collection 1845-0065 to be 221,629 respondents, 221,629 
responses, and 110,814 hours. There are no changes to any of the forms 
in this collection.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of the 
law, no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
The U.S. Small Business Administration Size Standards define for-profit 
institutions as small businesses if they are independently owned and 
operated, are not dominant in their field of operation, and have total 
annual revenue below $7,000,000. Non-profit institutions are defined as 
small entities if they are independently owned and operated and not 
dominant in their field of operation. Public institutions are defined 
as small organizations if they are operated by a government overseeing 
a population below 50,000.
    This regulation would not affect any small entities. Small entities 
do not qualify as borrowers under these Federal loan programs, nor do 
small entities provide or fund Federal loans or their discharge.

Intergovernmental Review

    This program is not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In the IFR we requested comments on whether the regulations would 
require transmission of information that any other agency or authority 
of the United States gathers or makes available. Based on the response 
to the IFR and our own review, we have determined that these final 
regulations do not require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at

[[Page 46981]]

www.govinfo.gov. At this site you can view this document, as well as 
all other documents of this Department published in the Federal 
Register, in text or PDF. To use PDF you must have Adobe Acrobat 
Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

List of Subjects

34 CFR Part 674

    Loan programs--education, Reporting and recordkeeping, Student aid.

34 CFR Part 682

    Administrative practice and procedure, Colleges and Universities, 
Loan programs--education, Reporting and recordkeeping requirements, 
Student aid, Vocational education.

34 CFR Part 685

    Administrative practice and procedure, Colleges and Universities, 
Loan programs--education, Reporting and recordkeeping requirements, 
Student aid, Vocational education.

Annmarie Weisman,
Deputy Assistant Secretary for Policy, Planning, and Innovation, Office 
of Postsecondary Education.
    Accordingly, the interim rule amending 34 CFR parts 674, 682, and 
685, which published on November 26, 2019 (84 FR 65000), is adopted as 
final with the following changes:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0
1. The authority citation for part 674 continues to read as follows:

    Authority:  20 U.S.C. 1070g, 1087aa-1087hh; Public Law 111-256, 
124 Stat. 2643; unless otherwise noted.


0
2. Section 674.61 is amended by:
0
a. In paragraph (c)(2)(iv), removing ``The veteran'' and adding in its 
place ``Except as provided in paragraph (d) of this section, the 
veteran''.
0
b. Removing paragraph (c)(2)(x).
0
c. Redesignating paragraphs (d) and (e) as paragraphs (f) and (g), 
respectively.
0
d. Adding new paragraphs (d) and (e).
0
e. Removing the parenthetical authority citation at the end of the 
section.
    The additions read as follows:


Sec.  674.61   Discharge for death or disability.

* * * * *
    (d) Discharge without an application. (1) The Secretary may 
discharge a loan under this section without an application or any 
additional documentation from the borrower if the Secretary--
    (i) Obtains data from the Department of Veterans Affairs (VA) 
showing that the borrower is unemployable due to a service-connected 
disability; or
    (ii) Obtains data from the Social Security Administration (SSA) 
showing that the borrower qualifies for SSDI or SSI benefits and that 
the borrower's next scheduled disability review will be no earlier than 
five nor later than seven years.
    (2) [Reserved]
    (e) Notifications and return of payments. (1) After determining 
that a borrower qualifies for a total and permanent disability 
discharge under paragraph (d) of this section, the Secretary sends a 
notification to the borrower informing the borrower that the Secretary 
will discharge the borrower's title IV loans unless the borrower 
notifies the Secretary, by a date specified in the Secretary's 
notification, that the borrower does not wish to receive the loan 
discharge.
    (2) Unless the borrower notifies the Secretary that the borrower 
does not wish to receive the discharge, the Secretary notifies the 
borrower's lenders that the borrower has been approved for a disability 
discharge.
    (3) In the case of a discharge based on a disability determination 
by VA--
    (i) The notification--
    (A) Provides the effective date of the disability determination by 
VA; and
    (B) Directs each institution holding a Defense, NDSL, or Perkins 
Loan made to the borrower to discharge the loan; and
    (ii) The institution returns to the person who made the payments 
any payments received on or after the effective date of the 
determination by VA that the borrower is unemployable due to a service-
connected disability.
    (4) In the case of a discharge based on a disability determination 
by the SSA--
    (i) The notification--
    (A) Provides the date the Secretary received the SSA notice of 
award for SSDI or SSI benefits; and
    (B) Directs each institution holding a Defense, NDSL, or Perkins 
Loan made to the borrower to assign the loan to the Secretary within 45 
days of the notice described in paragraph (e)(2) of this section; and
    (ii) After the loan is assigned, the Secretary discharges the loan 
in accordance with paragraph (b)(3)(v) of this section.
    (5) If the borrower notifies the Secretary that they do not wish to 
receive the discharge, the borrower will remain responsible for 
repayment of the borrower's loans in accordance with the terms and 
conditions of the promissory notes that the borrower signed.
* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

0
3. The authority citation for part 682 continues to read as follows:

    Authority:  20 U.S.C. 1071-1087-4, unless otherwise noted.


0
4. Section 682.402 is amended by:
0
a. In paragraph (c)(9)(iv), removing ``The veteran'' and adding in its 
place ``Except as provided in paragraph (c)(10) of this section, the 
veteran''.
0
b. Removing paragraph (c)(9)(xiii).
0
c. Adding paragraphs (c)(10) and (11).
0
d. Removing the parenthetical authority citation at the end of the 
section.
    The additions read as follows:


Sec.  682.402   Death, disability, closed school, false certification, 
unpaid refunds, and bankruptcy payments.

* * * * *
    (c) * * *
    (10) Discharge without an application. (i) The Secretary may 
discharge a loan under this section without an application or any 
additional documentation from the borrower if the Secretary--
    (A) Obtains data from the Department of Veterans Affairs (VA) 
showing that the borrower is unemployable due to a service-connected 
disability; or
    (B) Obtains data from the Social Security Administration (SSA) 
showing that the borrower qualifies for SSDI or SSI benefits and that 
the borrower's next scheduled disability review will be no earlier than 
five nor later than seven years.
    (ii) [Reserved]
    (11) Notifications and return of payments. (i) After determining 
that a borrower qualifies for a total and permanent disability 
discharge under paragraph (c)(10) of this section, the Secretary sends 
a notification to the borrower informing the borrower that the 
Secretary will discharge the borrower's title IV loans unless the 
borrower notifies the Secretary, by a date specified in the Secretary's 
notification, that the borrower does not wish to receive the loan 
discharge.
    (ii) Unless the borrower notifies the Secretary that the borrower 
does not wish to receive the discharge, the Secretary notifies the 
borrower's loan holders that the borrower has been approved for a 
disability discharge. With this notification the Secretary

[[Page 46982]]

provides the effective date of the determination by VA or the date the 
Secretary received the SSA notice of award for SSDI or SSI benefits, 
and directs the holder of each FFELP loan made to the borrower to 
submit a disability claim to the guaranty agency in accordance with 
paragraph (g)(1) of this section.
    (iii) If the claim meets the requirements of paragraph (g)(1) of 
this section and Sec.  682.406, the guaranty agency pays the claim and 
must--
    (A) Discharge the loan, in the case of a discharge based on data 
from VA; or
    (B) Assign the loan to the Secretary, in the case of a discharge 
based on data from the SSA.
    (iv) The Secretary reimburses the guaranty agency for a disability 
claim after the agency pays the claim to the lender.
    (v) Upon receipt of the claim payment from the guaranty agency, the 
loan holder returns to the person who made the payments any payments 
received on or after--
    (A) The effective date of the determination by VA that the borrower 
is unemployable due to a service-connected disability; or
    (B) The date the Secretary received the SSA notice of award for 
SSDI or SSI benefits.
    (vi) For a loan that is assigned to the Secretary for discharge 
based on data from the SSA, the Secretary discharges the loan in 
accordance with paragraph (c)(3)(iv) of this section.
    (vii) If the borrower notifies the Secretary that they do not wish 
to receive the discharge, the borrower will remain responsible for 
repayment of the borrower's loans in accordance with the terms and 
conditions of the promissory notes that the borrower signed.
* * * * *

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

0
5. The authority citation for part 685 continues to read in part as 
follows:

    Authority:  20 U.S.C. 1070g, 1087a, et seq., unless otherwise 
noted.
* * * * *

0
6. Section 685.213 is amended by:
0
a. In paragraph (b)(1) introductory text, removing the words ``To 
qualify'' and adding, in their place, ``Except as provided in paragraph 
(d)(2) of this section, to qualify''.
0
b. In paragraph (c)(1) introductory text, removing ``To qualify'' and 
adding in their place ``Except as provided in paragraph (d)(1) of this 
section, to qualify''.
0
c. Removing paragraph (c)(1)(v).
0
d. Adding paragraphs (d) and (e).
0
e. Removing the parenthetical authority citation at the end of the 
section.
    The additions read as follows:


Sec.  685.213   Total and permanent disability discharge.

* * * * *
    (d) Discharge without an application. (1) The Secretary may 
discharge a loan under this section without an application or any 
additional documentation from the borrower if the Secretary--
    (i) Obtains data from the Department of Veterans Affairs showing 
that the borrower is unemployable due to a service-connected 
disability; or
    (ii) Obtains data from the Social Security Administration (SSA) 
showing that the borrower qualifies for SSDI or SSI benefits and that 
the borrower's next scheduled disability review will be no earlier than 
five nor later than seven years.
    (2) [Reserved]
    (e) Notification to the borrower. (1) After determining that a 
borrower qualifies for a total and permanent disability discharge under 
paragraph (d) of this section, the Secretary sends a notification to 
the borrower informing the borrower that the Secretary will discharge 
the borrower's title IV loans unless the borrower notifies the 
Secretary, by a date specified in the Secretary's notification, that 
the borrower does not wish to receive the loan discharge.
    (2) Unless the borrower notifies the Secretary that the borrower 
does not wish to receive the discharge the Secretary discharges the 
loan--
    (i) In accordance with paragraph (b)(4)(iii) of this section for a 
discharge based on data from the SSA; or
    (ii) In accordance with paragraph (c)(2)(i) of this section for a 
discharge based on data from VA.
    (3) If the borrower notifies the Secretary that they do not wish to 
receive the discharge, the borrower will remain responsible for 
repayment of the borrower's loans in accordance with the terms and 
conditions of the promissory notes that the borrower signed.
* * * * *
[FR Doc. 2021-18081 Filed 8-20-21; 8:45 am]
BILLING CODE 4000-01-P