Interim procedures for partial discharge of consolidation loans

The U.S. Department of Education published final rules on Nov. 1, 2002 (34 CFR 682.402), that allow for the partial discharge of a Federal Consolidation loan due to the death of a dependent student for whom a PLUS loan was obtained and subsequently consolidated. Currently, the Federal Family Education Loan Program (FFELP) community is developing processing guidelines and creating a form for loan holders to use when requesting reimbursement for this reason. USA Funds^® issues the following guidance for loan holders who wish to file such requests with USA Funds in the interim.

Until the FFELP-community guidelines are established, loan holders must indicate "Partial Discharge of a Consolidation Loan" on the claim form and then complete the form as usual. An original or certified death certificate for the dependent student must accompany the form. USA Funds' claim-review servicer will review the request for reimbursement and, if necessary, contact the loan holder for any additional information.

USA Funds reminds loan holders that claims filed for consolidation loans consisting solely of PLUS loans for one dependent student who has died should be filed as a death (DE) claim. In these cases, the form should not be marked as "Partial Discharge of a Consolidation Loan."

To address specific concerns in filing this type of partial discharge, send an e-mail to USA Funds' claim-review servicer or call (317) 578-6061. For general guidance, contact the USA Funds policy department.