In August 2000, the Department of Education published a Notice of Proposed Rule Making (NPRM) intended to modify the conditions of certain discharges. On November 1, 2000 the final regulations were published in the Federal Register. The rules take effect in two stages: one set on July 1, 2001 and the remainder of the rules on July 1, 2002. The delay in enacting some of the rules came as the result of responses received during the comment period.

The modified rules concern two topics:

1. The Department of Education determined that death discharges were being granted without reliable supporting documentation
2. The regulations covering total and permanent disability discharges have been modified in an order to reduce fraudulent discharges

The following provisions relating to death discharges are effective as of July 1, 2001.

1. The institution must discharge the unpaid balance of a loan, including interest, if the borrower dies. An original or certified copy must be presented. Under exceptional circumstances, the institution's chief financial officer may discharge based on other reliable documentation.

The following provisions relating to disability discharges are effective as of July 1, 2001.

1. The definition of total and permanent disability has been clarified, removing the inability to attend school as a requirement for discharge. The definition now reads:

   "The condition of an individual who is unable to work and earn money because of an injury or illness that is expected to continue indefinitely or result in death."

Starting July 1, 2002, the rules concerning disability discharges will change. A highlight of the changes are given below.

1. A three-year conditional discharge period
2. No payments are required during the conditional period. Payments received during the conditional period are refunded upon final discharge.
3. A borrower cannot receive a discharge if their annual income exceeds 100% of the poverty level for a family of two
4. All discharges must be assigned to the Secretary
5. Conditions on receiving additional loans
6. Rules governing collection agency activity

This information was summarized from the Federal Register, November 1, 2000, page 65667-65695. The original notice of proposed rulemaking can be found in the Federal Register, August 2, 2000, page 47633-47646.