(Authorized by Sections
701-720 of the Public Health Service Act)
New HEAL loans to
student borrowers were discontinued as of September 30, 1998. From fiscal
year 1978 through 1998 the Federal Health Education Assistance Loan (HEAL)
Program insured loans made by participating lenders to eligible graduate
students in schools of medicine, osteopathy, dentistry, veterinary medicine,
optometry, podiatry, public health, pharmacy, chiropractic, or in programs
in health administration, and clinical psychology. HEAL refinancing occurred
from fiscal year 1994 through fiscal year 2004.
INTEREST
Legislation states
that the maximum interest which may be charged to the borrower on the
unpaid balance of the loan may not exceed the average bond-equivalent
rate during the prior calendar quarter for 91-day Treasury bills sold
at auction, plus three percent, rounded to the next higher 1/8 of one
percent. Payment of principal and interest may be deferred during specific
eligible periods of deferment. The HEAL program does not provide a subsidy
payment for interest. Accrued interest may be compounded not more frequently
than annually by adding it to the principal amount of the loan.
REPAYMENT
Repayment begins the
first day of the 10th month after the month the borrower ceases to be
a full-time student at a HEAL school. The 9-month period before the repayment
period begins is called the "grace period." However, if the
borrower becomes an intern or resident in an accredited program within
9 full months after leaving school, repayment will begin the first day
of the 10th month after the borrower ceases to be an intern or a resident.
A borrower has from 10 to 25 years to repay the loan after the repayment
period starts even when the borrower participates in an authorized deferment
program. There is no penalty for prepayment. Overdue accounts will be
aggressively pursued and referred to collection agencies and credit bureaus
or for legal action when borrowers fail to meet the terms of their loans.
Repayment schedule
provisions may vary and affect the total amount to be repaid.
- Lenders must
offer a graduated repayment option to borrowers which require smaller
payments early in the repayment period.
- Lenders must
offer an income contingent loan repayment schedule that, during the
first 5 years of repayment is based on a borrower's income.
FORBEARANCE
Forbearance is an
extension of time for making loan payments or the acceptance of smaller
payments than were previously scheduled to prevent a borrower from defaulting.
Lenders have the authority to grant forbearance in six-month increments
up to a maximum of three years. Periods of forbearance may be extended
beyond three years with the approval of the Secretary. Any such period
would be in addition to the 3-year period which lenders/holders can grant.
Any period of forbearance granted to a HEAL borrower shall not be included
in the 25 year loan repayment period for loans made on or after 10/13/1992.
Lenders must notify each borrower of the right to request forbearance;
however, if the lender determines that the default of the borrower is
inevitable and that forbearance would be ineffective in preventing default,
the lender is not required to grant forbearance.
DEFERMENT
Repayment of principal
and interest can be deferred, but interest continues to accrue during
periods of:
- Full-time study
at a HEAL school or at an institution of higher education participating
in the Federal Family Education Loan Program;
- Up to three years
for full time active duty in the Armed Forces;
- Up to three years
each for service in the Peace Corps, VISTA or the National Health Service
Corps;
- Up to two years
for certain fellowship and educational training programs*;
- Up to four years
for internship and residency training*;
- Up to one year
for graduates of schools of chiropractic;
- Up to three years
for completion of an internship or residency training program in osteopathic
general practice, family medicine, general internal medicine, preventive
medicine, or general pediatrics and is practicing primary care; and/or
- Up to three years
for providing health care services (beginning 02/01/1999) to Indians
through any health program or facility funded in whole or part by the
Indian Health Service for the benefit of Indians.
TOTAL AND
PERMANENT DISABILITY
To be totally and
permanently disabled the borrower must be unable to engage in any substantially
gainful activity because of a medically determinable impairment that is
expected to continue for a long and indefinite period of time or to result
in death. A
borrower should contact their lender/servicer to discuss their situation
and obtain the necessary paperwork to submit
an application for total and permanent disability. Please see the HEAL
Web Site listed below for a copy of the Physician’s
Certification of Borrower’s Total and Permanent Disability Form and Disability
Medical Release document.
DUE DILIGENCE
Lenders must:
- Contact the borrower
every 6 months to notify him/her of the amount of the debt;
- Contact the borrower
in writing 30-60 days before the commencement of the repayment period
to establish the repayment terms;
- Contact both the
borrower and any endorser at least 4 times at regular intervals during
the first 120 days of any delinquency period.
- Notify national
consumer credit reporting agencies regarding accounts overdue by more
than 60 days; and
- Request pre-claim
assistance from the HEAL Program when the borrower is 90 days delinquent.
(HEAL pre-claim assistance consists of three progressively stronger
letters urging the borrower to contact his/her lender before the lender
initiates litigation against the borrower.)
LITIGATION
Lenders and holders
are required to litigate defaulted loans and obtain a judgment against
the borrower in most cases. Litigation is not required when the loan
involved was made in an amount of less than $5,000 prior to 11/04/1988
or the loan was made in an amount of less than $2,500 on or after 11/04/1988
or if the defaulted claim is less than $1,000. Schools may assist in
the collection of delinquent HEAL loans. HEAL loans are exempted from
any State or Federal Statute of Limitations provisions which limit the
period within which a loan may be collected.
POST DEFAULT
ACTIVITIES
Defaulted borrowers
are subject to the following:
- Account referred
to a collection agency;
- Referral to the
Inspector General, DHHS and the Department of Justice (DOJ);
- DOJ registers
the judgment in Federal court for enforced collection;
- Exclusion from
Medicare;
- IRS offset;
- Publish names
of defaulters (who have not entered into a settlement agreement)
in the Federal Register and on web site at www.defaulteddocs.dhhs.gov
For additional information
about HEAL use:
*
may postpone repayment period
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