Department Issues Clarification Regarding Loan Funds Delivered After Student’s Death
The U.S. Department of Education recently clarified its position on loan funds delivered after the date of death of a Federal Stafford- or Federal PLUS-loan borrower or a student for whom a PLUS loan was obtained.
A school should not deliver the loan funds if the borrower or student is deceased. If, however, a school determines that loan funds have been delivered under these circumstances, the school has the sole responsibility for ensuring that the funds are returned to the lender. The school must return that amount to the lender, even if doing so creates an outstanding balance on the student’s account.
If a lender receives a death certificate for a borrower or student that shows the loan funds were delivered after the date of death, and the school has not yet refunded the ineligible funds, the lender must do one of the following:
- In cases in which loan disbursements were made both before and after the date of death: Complete a Claim Form, available from the Lender Forms page of USA Funds® Web site. Using the normal claim procedures, submit a death claim for the full amount of the loan. USA Funds will pay claims only for the disbursements delivered prior to the date of death.
Claim-review staff then will forward the claim information to USA Funds’ compliance department, which will contact the school for a refund of the amount delivered after the date of death. USA Funds will forward the refunded amount to the lender that filed the claim.
- In cases in which disbursements were made only after the date of death: Complete a Claim Form and submit a death claim for the entire loan amount to:
USA Funds Compliance Department
M.C. 8516
P.O. 6028
Indianapolis, IN 46206-6028
The compliance department will work with the school to ensure the lender receives the appropriate refund.
For more information about policies regarding loan funds delivered after the death of a student or borrower, contact USA Funds’ policy department.
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