Kentucky Administrative Regulations
Title 11 - KENTUCKY HIGHER EDUCATION ASSISTANCE AUTHORITY
Chapter 4 - Kentucky Higher Education Assistance Authority
Section 11 KAR 4:050 - Set off of authority claims
Universal Citation: 11 KY Admin Regs Service 4:050
Current through Register Vol. 51, No. 3, September 1, 2024
RELATES TO: KRS 44.030, 131.565, 164.748(10), (14), (19)
NECESSITY, FUNCTION, AND CONFORMITY: KRS 164.748(10) and (14) authorize the authority to collect student loans from individual borrowers and to perform acts that are necessary or appropriate to carry out the purposes of the authority. KRS 131.565 and 31 USC 3720A provide that the authority may enter agreements with the Kentucky Revenue Cabinet and with the federal government to provide for the withholding of income tax refunds owed to individuals indebted to the authority to satisfy claims established by the authority. In accordance with KRS 44.030, the authority may submit a claim to the State Treasurer to withhold an amount due to an individual from the treasury against a claim of the authority. This administrative regulation establishes the process for notification and appeal afforded to an individual in implementing a set off of an authority claim through the Kentucky Revenue Cabinet, the State Treasurer, or the federal government.
Section 1. Federal Payment Setoff.
(1) Notification.
(a) The authority shall, not less than
sixty-five (65) days prior to submitting the claim to the federal government
for setoff, send written notification by U.S. First Class Mail to the last
known address of a person against whom the authority has a claim of
indebtedness to the authority for a sum certain for which setoff is sought
pursuant to
31 USC
3718.
(b) The notification shall contain
information sufficient to identify the person and to inform the person of the
amount of the claim to be set off, the authority's intention to set off the
claim, and the right to dispute the claim. The notification may contain
additional information as the authority may prescribe.
(2) Objection.
(a) A person notified pursuant to subsection
(1) of this section may submit to the authority a written objection to the
setoff of federal payments to repay the claim of the authority. This written
objection shall specify the basis on which the authority's claim is disputed,
including all legal and equitable defenses the petitioner may have against
recovery by the authority. The petitioner may supplement the written statement
of appeal prior to a final determination with additional documentation. The
petitioner shall submit additional documentation as the authority may require
based upon the particular facts alleged in the petitioner's statement of
appeal.
(b) The authority, or its
designated representative, shall make a final written determination of the
validity of the claim and refrain from submitting the claim to the federal
government pending the final determination if:
1. The person objects to the setoff of
federal payments to repay the claim of the authority within sixty-five (65)
calendar days of the date the notification required by subsection (1) of this
section is sent; or
2. The person
submits a written request to inspect records to the authority within twenty
(20) days of the date of the notification described in subsection (1) of this
section and subsequently submits a written objection to the authority not later
than fifteen (15) days after the date the authority mails copies of the
requested documents to the petitioner.
(c) The authority, or its designated
representative, shall not consider as a defense a question of law or fact that
has previously been adjudicated by a court of competent jurisdiction or that
was previously raised in an administrative proceeding before the authority
pursuant to
11 KAR
4:030 pertaining to the existence, amount, or the
person's liability on the particular debt in question or the terms of a prior
repayment schedule, except if the petitioner demonstrates that:
1. Circumstances have changed or new
information is available; or
2. The
prior decision:
a. Substantially disregarded
or ignored the defense; or
b. Was
arbitrary, capricious, not supported by the facts or made through
fraud.
(d)
1. The final determination of the authority
shall be based on documentation submitted by the petitioner, other records
relevant to the loan obligation received from another source, and relevant
records of the authority, which shall be made available to the petitioner upon
request, except that the petitioner may appear in person or by telephone to
present additional facts upon request by the petitioner and explanation of why
the authority cannot adequately resolve the issues raised by the petitioner by
review of the documentary evidence.
2. The petitioner's request to appear in
person or by telephone shall include identification of all persons that the
petitioner wishes to have testify, identification of the specific issues
regarding which each person is prepared to testify, and an explanation of the
reasons why each person's testimony is necessary to resolve the
issues.
3. The authority shall
grant the petitioner's request to appear in person or by telephone if the
authority determines, in its discretion, that the issues to be resolved require
a determination of credibility or veracity.
4. Documentation considered by the authority
and the record of an in-person or telephonic testimony shall constitute the
record of the appeal.
5. The
authority's decision shall be written and sent to the petitioner at his last
known address. If the decision is adverse to the petitioner, the decision shall
state the facts on which the decision is based, any applicable statutes or
administrative regulations, the conclusion underlying the decision, and the
amount of the authority's claim to be set off against federal payments owed to
the petitioner.
(e)
Review of final determination of the authority.
1. If the petitioner disagrees with the
final, written determination of the authority, the petitioner may submit a
written request for review of the decision by the Secretary of the U.S.
Department of Education.
2. The
authority, or its designated representative, shall refrain from referring the
authority's claim to the federal government, if the request for review by the
Secretary of the U.S. Department of Education is submitted to the authority and
received by the authority within thirty (30) calendar days after the date the
authority's final written determination is rendered and mailed to the
petitioner.
(3)
If a person notified pursuant to subsection (1) of this section does not submit
an objection within the time specified in subsection (2)(b) of this section or,
upon a final determination upholding, in part or in whole, the claim of the
authority, the petitioner does not submit a request for review of the
authority's final determination within the time specified in subsection (2)(e)
of this section, the claim shall be referred by the authority to the federal
government in accordance with
31 USC
3718 and
34
CFR 30.33(a).
(4) Voluntary repayment. A person notified
pursuant to subsection (1) of this section may agree to repay the debt to the
authority on terms satisfactory to the authority.
(a) The authority, or its designated
representative, shall refrain from referring the authority's claim to the
federal government, if:
1. The person owing
the debt:
a. Agrees to make monthly payments;
and
b. Submits the first payment to
the authority; and
2. The
payment is received by the authority not later than:
a. The 65th calendar day following the date
the notification required by subsection (1) of this section is sent;
b. The seventh calendar day after the date
the authority's final written determination is rendered and mailed to the
petitioner; or
c. The 15th calendar
day after documents are mailed to the person owing the debt by the authority if
the person requests to inspect documents within twenty (20) calendar days
following the date the notification required by subsection (1) of this section
is sent.
(b)
For purposes of paragraph (a) of this subsection, the authority shall require
that payments be received monthly on a timely basis and a down payment of the
lesser of the outstanding balance of the debt or $250. The monthly payment
amount acceptable to the authority shall be based upon the balance owed and at
least equal the monthly accrual of interest on the debt, except that the
monthly payment amount may be less than the monthly accrual of interest on the
debt based upon consideration of the petitioner's and the petitioner's spouse's
disposable income and reasonable and necessary expenses including housing,
utilities, food, medical costs, work-related expenses, dependent care costs,
and other student loan repayments.
(c)
1.
After the authority has referred a claim to the federal government for setoff
against a federal payment owed to the person owing the debt, an amount
previously set off shall not be refunded.
2. The authority's claim for setoff shall be
withdrawn if the person owing the debt or another person on behalf of the
debtor agrees to make monthly payments acceptable to the authority, submits six
(6) consecutive, timely payments as agreed, and requests the authority to
withdraw the claim for setoff.
3.
The monthly payment amount acceptable to the authority shall be based upon the
balance owed and at least equal the monthly accrual of interest on the debt,
except that the monthly payment amount may be less than the monthly accrual of
interest on the debt based upon consideration of the petitioner's and the
petitioner's spouse's disposable income and reasonable and necessary expenses
including housing, utilities, food, medical costs, work-related expenses,
dependent care costs, and other student loan repayments.
(d) In support of a monthly payment amount
less than the monthly accrual of interest, the petitioner shall submit to the
authority:
1. Evidence of current
income;
2. Evidence of current
expenses; and
3. A statement of the
unpaid balance on all other student loan debt.
(e) If a person establishes a repayment
schedule in accordance with this subsection and subsequently fails to submit
consecutive, timely payments, a subsequent repayment schedule established for
the purpose of paragraphs (a) or (c) of this subsection shall require an
initial payment of the lesser of the outstanding balance of the debt or $500
plus ten (10) percent of the outstanding balance that exceeds $1,000.
Section 2.
(1) State income tax refund setoff.
(a) Notification.
1. The authority shall, not less than thirty
(30) days prior to submitting the claim to the Kentucky Revenue Cabinet for
setoff, send written notification by U.S. First Class Mail to the last known
address of a person against whom the authority has a claim of indebtedness to
the authority for a sum certain for which setoff is sought pursuant to
KRS
131.560.
2. The notification shall contain sufficient
information to identify the person and to inform the person of the amount of
the claim to be set off, the authority's intention to set off the claim
pursuant to
KRS
131.560, and the right to dispute the claim.
The notification may contain additional information as the authority may
prescribe.
(b) Objection.
1. A person notified by the authority
pursuant to paragraph (a) of this subsection or notified by the Kentucky
Revenue Cabinet pursuant to
KRS
131.570(1) may petition the
authority for an administrative review and a hearing in accordance with
11 KAR
4:030, Sections 4 and 5.
2. The authority, or its designated
representative, shall refrain from referring the authority's claim to the
Kentucky Revenue Cabinet, if the request for administrative review is submitted
to the authority and received by the authority within thirty (30) calendar days
after the date the notice required by paragraph (a) of this subsection is
sent.
(2)
Setoff of amounts due from the State Treasurer pursuant to
KRS
44.030.
(a)
Notification.
1. The authority shall, not
less than fifteen (15) calendar days prior to submitting the claim to the
Kentucky State Treasurer for setoff, send written notification by U.S. First
Class Mail to the last known address of a person against whom the authority has
a claim of indebtedness to the authority for a sum certain for which setoff is
sought pursuant to
KRS
44.030.
2. The notification shall contain sufficient
information to identify the person and to inform the person of the amount of
the claim to be set off, the authority's intention to set off the claim
pursuant to
KRS
44.030, and the right to dispute the claim.
The notification may contain additional information as the authority may
prescribe.
(b) Objection.
1. A person notified by the authority that an
amount due from the State Treasurer may be withheld pursuant to
KRS
44.030 may petition the authority for a
hearing in accordance with
11 KAR
4:030, Section 5.
2. The authority, or its designated
representative, shall refrain from referring the authority's claim to the
Kentucky State Treasurer, if the request for administrative review is submitted
to the authority and received by the authority within fifteen (15) calendar
days after the date the notice required by paragraph (a) of this subsection is
sent.
(3)
Defenses.
(a) Except as provided in paragraph
(b) of this subsection, a debtor may assert a legal or equitable defense to a
claim by the authority for setoff pursuant to subsections (1) and (2) of this
section pertaining to the existence, amount or the person's liability on the
particular debt in question or the terms of a prior repayment
schedule.
(b) The designated
authority representative conducting an administrative review in accordance with
11 KAR
4:030, Section 4, or the hearing officer conducting a
hearing pursuant to
11 KAR
4:030, Section 5, shall not consider as a defense a
question of law or fact that has previously been adjudicated by a court of
competent jurisdiction or that was previously raised in an administrative
proceeding before the authority pursuant to
11 KAR
4:030 pertaining to the existence, amount, or the
person's liability on the particular debt in question or the terms of a prior
repayment schedule, except if the petitioner demonstrates that:
1. Circumstances have changed or new
information is available; or
2. The
prior decision:
a. Substantially disregarded
or ignored the defense; or
b. Was
arbitrary, capricious, not supported by the facts or made through
fraud.
STATUTORY AUTHORITY: KRS 13B.170, 164.748(4), 34 C.F.R. 30.33, 31 U.S.C. 3718, 3720A
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