[Oasfaa] help with bankruptcy question

[DanGHolt at aol.com]

Carol L. Williams
Director of Financial Aid
McPherson College
williamc at mcpherson.edu
Carol wrote:

For you hard-working FA types, still hanging out in the office....

Situation:

8/30/01 We receive valid ISIR, and award Stafford Loan for Fall 2001. 
11/7/01 We receive ISIR with C-Code for default.  Student is contacted, we discover that student had been in default on Perkins loan, made six consecutive on-time payments, and was in good standing.  Stopped making payments in August but did not file a deferment form.  Completed the deferment, we received and email message from the school holding the note that student is back in "good" status, but have not received a new ISIR (and are told we probably won't).  On the NSLDS website, the student has a DEFAULT flag, and as an added bonus, we now have a BANKRUPTCY flag.   WAHOO!

(Student says that defaulted Perkins was not included in the bankruptcy).

Question:
Can I release the SP02 portion of the Stafford Loans with just a note from the school?
Do I need to report an overpayment of the proceeds the student already received?
Is there any documentation I need to prove that the defaulted loan is not included in bankruptcy claim?

Oh help me OBI WAN KENOBIs, your my only hope.....

Thanks in advance for any opinions/advice!

Happy Holidays!!!!
Carol

Carol L. Williams
Director of Financial Aid
McPherson College
www.mcpherson.edu   *  (800) 365-7402  *  (620) 241-8443 FAX