DUE DILIGENCE - Help to apply due diligence collecting outstanding amounts on loans
"DUE DILIGENCE - Help to apply due diligence collecting outstanding amounts on loans" submitted by SchoolGrantsfor Editorial Team and last updated on Monday 9th January 2012
If you fail to make payments on a loan in accordance with the terms of the promissory note, the federal government requires the lender, holder, or servicer of the loan to make frequent attempts to contact you (via telephone and mail) to encourage you to repay the loan and arrange to resolve the delinquency.
The U.S. Department of Health and Human Services (HHS) runs several loan programs for students in the health care professions. These programs are:
- Health Professions Student Loan (HPSL) Program
- Primary Care Loan (PCL) Program (part of HPSL)
- Loans for Disadvantaged Students (LDS) Program
- Nursing Student Loans (NSL) Program
Schools participating in any of these programs are responsible for collecting on a loan when the student leaves school. If a school is unable to collect on a loan, it must show that it exercised due diligence during the collection process before it can write off the loan.
During the delinquency period, your loan holder must exercise "due diligence" in attempting to collect the loan; that is, your loan holder must make repeated efforts to locate and contact you about repayment. If your loan holder’s efforts are unsuccessful, steps will be taken to place the loan in default and to turn the loan over to the guaranty agency in your state. Your loan holder may "accelerate" a defaulted loan, which means that the entire balance of the loan (principal and interest) becomes due in a single payment.
Once your loan is assigned to a guaranty agency or the U.S. Department of Education (Department) for collection, the following steps may be taken to recover the outstanding balance due.
You may compromise the repayment of a defaulted loan if you have fully complied with all due diligence requirements and the borrower pays, in a single lump-sum payment, at least 90% of the outstanding principal balance, plus all interest and collection fees. The federal share of the compromise repayment must bear the same relation to the school’s share as the Federal Capital Contribution (FCC) bears to the Institutional Capital Contribution (ICC).
Technical Assistance Guide for Due Diligence will help you to apply due diligence collecting outstanding amounts on loans in accordance with the requirements and procedures outlined in the Student Financial Aid Guidelines (SFAG).