Policies & Procedures

I. PURPOSE

The purpose of this policy is to establish a Loan Rehabilitation Program.

II. POLICY

It shall be a policy of Longwood University to comport with the Federal Perkins Loan Program regulations.

1. Loan Default:
   1. A defaulted borrower shall be notified of the option and consequences of rehabilitating the loan.
   2. The borrower must also be notified of the availability of the Ombudsman's office.
   3. A loan shall be considered rehabilitated if the borrower makes an on-time monthly payment, as determined by the University, each month for nine (9) consecutive months.
   4. The borrower must request rehabilitation.
   5. The loan may not be rehabilitated again.
   6. Borrowers may not rehabilitate loans on which the holder has obtained a judgment. If, prior to November 01, 2002, rehabilitation was offered to a borrower for loans with judgments, the original rehabilitation agreement will be honored. No additional offer of rehabilitation will be granted to borrowers who miss their required payments.
2. Rehabilitation:
   1. The regulations further require that within thirty (30) days of receiving the borrower's last on-time, consecutive monthly payment, the institution must:
      1. return the loan to a regular payment status.;
      2. instruct credit bureaus to remove the default from the credit history;
      3. treat the first payment of the nine (9) completed payments as the first payment under the new ten (10) year repayment maximum;
      4. inform the borrower that he or she may rehabilitate a defaulted loan only one time;
      5. limit the collection costs to no more than twenty-four (24) percent of the unpaid principal and accrued interest as of the date following the application of the ninth (9th) payment assuming the borrower does not subsequently default on the loan;
      6. inform the borrower that he or she regains the balance of the benefits and privileges of the promissory note as applied prior to the borrower's default on the loan; and
      7. inform the borrower that completion of the loan rehabilitation program provides the borrower with the benefits of potential eligibility to receive additional Title IV funds, removal of the loan default from the borrower's credit history, and reinstatement of any remaining deferment or cancellation benefits.
3.  All Federal Perkins loan borrowers with existing loans will be notified of the loan rehabilitation option by way of Loan Rehabilitation information printed on the back of every bill and past due notice that is generated by Campus Partners, our Perkins loan servicer. Our collection agencies will also be providing information explaining the benefits and requirements to complete the rehabilitation process.
4. Notification of rehabilitation for new borrowers will be implemented in entrance and exit interview materials.
5. When a defaulted borrower requests rehabilitation, the collector will establish a monthly payment amount that will at least ensure payment of all past due amounts, inclusive of collection costs, late fees, past due interest, etc accruing through the rehabilitation process to be negotiated on a case by case basis. The payment date must not be more than twenty (20) days prior to the current due date. The grace period will be no more than fifteen (15) days after the due date.
6. When the monthly payments and due dates are established and approved by the University, the collector will send a Loan Rehabilitation Agreement to the borrower to be signed and returned with the first payment. If any of the monthly payments are not remitted or not remitted on time, the rehabilitation process terminates and the loan goes back to the status as before the Loan Rehabilitation Agreement. If the borrower wishes to attempt rehabilitation again, the requests must be made again and the process will begin over.
7. Our collection agencies are aware of the loan rehabilitation requirements. Borrowers with a collection agency will remain with that agency until rehabilitation has been completed. The rehabilitation will be monitored by the collection agency if applicable and all payments made during the rehabilitation process will be assessed the appropriate collection cost.
8. Within thirty (30) days of receiving the borrower's ninth (9th) consecutive on-time monthly payments, the collection agency will return the account to Longwood, the account will be returned to regular repayment status, and the credit bureau will be instructed to remove the default from the credit history.

Approved by the Board of Visitors, September 7, 2002.
Approved by the Board of Visitors, December 03, 2010