Applicant Information Bulletin: School Year 2009-2010
Breaching the FLRP Contract

1. A participant who breaches the FLRP contract by failing to begin or complete the required FLRP service will be placed in default and obligated to pay the United States an amount equal to the sum of the following:

1. The amount of loan repayments paid to the participant representing any period of obligated service not completed, plus 39% of that amount; and

2. $1,000 multiplied by the number of months of obligated service not completed;

Any amounts the United States is entitled to recover, as set forth above, must be paid within 30 days from the date the HHS Secretary’s first demand letter is mailed.  If these amounts are not repaid by the due date, interest and other delinquent charges will be assessed as provided by 45 Code of Federal Regulations Section 30.18 of the Debt Collection Act.

2. Failure to pay the FLRP debt by the due date also has the following consequences:

1. The debt will be reported to credit report agencies.  If the debt becomes past due, it will be reported as “delinquent.”

2. The debt will be referred to a debt collection agency and the Department of Justice.  Any FLRP debt past due for 45 days will be referred to a debt collection agency.  If the debt collection agency is unsuccessful in receiving payment in full, the debt will be referred to the Department of Justice for enforced collection.

3. Administrative offset.  Federal and/or State payments due to the participant (e.g., an IRS income tax refund) may be offset by the Department of Treasury to repay a delinquent FLRP debt.  Also, recovery through Administrative Wage Garnishment may be enforced to repay a delinquent FLRP debt.

4. Bankruptcy.  A financial obligation under the FLRP may only be discharged in bankruptcy if the discharge is granted more than seven years after the due date and only if a bankruptcy court determines that the non-discharge of the debt would be unconscionable.

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