Sallie Mae 2012 Annual Report Download - page 203
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If a school closes while a student is enrolled, or within 90 days after the student withdrew, loans made for that
enrollment period are discharged. If a school falsely certifies that a borrower is eligible for the loan, the loan may
be discharged. And if a school fails to make a refund to which a student is entitled, the loan is discharged to the
extent of the unpaid refund.
Rehabilitation of Defaulted Loans
ED is authorized to enter into agreements with the guaranty agency under which the guaranty agency may sell
defaulted loans that are eligible for rehabilitation to an eligible lender. For a loan to be eligible for rehabilitation
the guaranty agency must have received reasonable and affordable payments for 12 months (reduced to 9
payments in 10 months effective July 1, 2006), then the borrower may request that the loan be rehabilitated.
Because monthly payments are usually greater after rehabilitation, not all borrowers opt for rehabilitation. Upon
rehabilitation, a borrower is again eligible for all the benefits under the HEA for which he or she is not eligible as
a borrower on a defaulted loan, such as new federal aid, and the negative credit record is expunged. No student
loan may be rehabilitated more than once.
The July 1, 2009 technical corrections made to the HEA under H.R. 1777, Public Law 111-39, provide
authority between July 1, 2009 through September 30, 2011, for a guaranty agency to assign a defaulted loan to
ED depending on market conditions.
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