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Direct Loan Program Overview

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  1. Direct Loan Program Overview

  2. Agenda • What is the Direct Loan Program? • What is the student’s role? • What is the school’s role? • What is FSA’s role? • How does the Direct Loan process work? • What are the benefits for borrowers? • What resources are available for schools?

  3. What is the Direct Loan Program? • The Department of Education is the lender • Provides funds for Stafford and PLUS loans • Provides Consolidation loans • Provides borrower services to include: eMPN, online Entrance/Entrance Counseling, and repayment options

  4. What is the Direct Loan Program? • Standard, Graduated and Extended Repayment Plans • Income Contingent Repayment Plan (ICR) • July 1, 2009: Income Based Repayment Plan (IBR) • Note: ICR and IBR are not available to Direct PLUS borrower applicants

  5. What is the Student’s Role? • Complete FAFSA, establish and maintain eligibility • Complete entrance/exit counseling • Notify school or DL Servicer timely of relevant changes • Repay loan(s)

  6. What is the School’s Role? • Document Student Eligibility • Encourage student awareness; entrance/exit counseling • Originate/Award loans

  7. What is the School’s Role? • Manage MPN process • Draw down Direct Loan funds via G5 • “Pushed Cash” option also available • Disburse funds to students • Update NSLDS enrollment status

  8. What is the School’s Role? • Transmit loan origination, disbursement, and adjustment data to COD • Reconcile with ED on a regular basis and complete annual close-out • Determine staffing roles and responsibilities

  9. What is the School’s Role? • Use of third-party servicer? • Determine MPN processing options • Determine software options

  10. What is FSA’s Role? • Track school eligibility • Provide funding (G5) • COD processing • Tools and reports

  11. What is FSA’s Role? • Reconciliation and Closeout assistance • Training and customer service for schools • Loan servicing/customer service for borrowers

  12. What are the Loans? • Stafford Subsidized • Stafford Unsubsidized • PLUS • Grad PLUS • Consolidation

  13. What are the Limits?*Effective July 1, 2008 *based on HR 5715 signed into law May 7, 2008

  14. What are the Limits? • Graduate and professional students: • $20,500 ($8,500 maximum subsidized) for all years

  15. What are the Interest Rates?

  16. What are the Interest Rates? • Direct Subsidized Loans for Grad students: • 6.8% fixed interest rate • Direct Unsubsidized Stafford Loans: • 6.8% fixed interest rate • Direct PLUS and Grad PLUS: • 7.9% fixed interest rate

  17. What Fees are Charged to Borrowers? • Origination fee for Subsidized and Unsubsidized loans first disbursed on/after 7/1/2007 and before 7/1/2008: 2.5%* • For Sub/Unsub loans first disbursed on/after 7/1/2008 and before 7/1/2009: 2.0%* *A 1.5% up front interest rebate also applies, to be covered under borrower benefits

  18. What Fees are Charged to Borrowers? • Direct PLUS, regardless of first disbursement date, origination fee for all loans: 4.0%

  19. How Does the Direct Loan Process Work?

  20. Direct Loan Processing Cycle 20

  21. Originate Loan School confirms eligibility, determines loan award and creates student record School Originates a Direct Loan when it sends Direct Loan Award and Disbursement data to the COD system School uses batch record process or COD Web site to create records 21

  22. Originate Loan • COD processes/edits and returns response • School corrects errors and resends to COD • School makes adjustments and sends to COD as needed

  23. PLUS Loan Origination • Includes credit check • GRAD PLUS borrower must complete FAFSA • PLUS MPN includes authorization for credit check by COD • Preliminary Credit check can be initiated by school at COD website, with signed authorization

  24. PLUS Loan Origination • Establish school policies for handling credit denials • Availability of additional unsub for dependent student with parent denial • Early determination of parents unable to meet criteria • Bypass credit check and document reason for parent inability to meet criteria

  25. Direct Loan Processing Cycle 25

  26. Master Promissory Note • Paper MPN vs. eMPN • Borrower cannot be required to use eMPN • Several options for printing paper notes • Multi-year vs. Single year • Use Multi-year feature for some or all students • Borrower may decline multi-year feature

  27. Master Promissory Note • Electronic MPN • School sets up profile • Specify capability to file eMPN before origination • School specific message • May use eMPN from another school

  28. Log in for school setup

  29. Master Promissory Note • School print vs COD print options: • COD prints MPN and sends to school or to borrower • School sends blank MPN to borrower • School sends MPN with preprinted data to borrower • School prints MPN to ED specifications and provides to borrower

  30. Master Promissory Note • School prints MPN • Follow review guidelines • Ship to MPN processor • Rejected MPN’s returned for correction

  31. Direct Loan Processing Cycle 31

  32. Funding and Disbursements • Schools use G5 System to • View current funding information • Request payments and adjust drawdowns (Advance Pay schools) • Return cash

  33. Funding and Disbursements • Schools receive DL funds in one of two methods: • Advance Funded • Pushed Cash

  34. Funding and Disbursements • Transmission of funds to the school • ACH (Automated Clearinghouse) • FEDWIRE

  35. Funding and Disbursements • Advance Funding • Schools receive initial Current Funding Level (CFL) • May request funds before/after disbursing aid • School submits Actual Disbursement Records to COD to substantiate drawdown • CFL increases when accepted disbursements show need for additional funds

  36. Funding and Disbursements • Advance Funding • Take into account funds on hand and adjustments well as upcoming disbursements • DL disbursements based on Net loan amount, not gross • Pending Disbursement List from COD

  37. Funding and Disbursements • Pushed Cash • Schools do not request funds through G5 • Amount based on accepted actual disbursements from school • COD sends funds via FEDWIRE or ACH • Submit no earlier than 7 days prior to disbursement date • Funded Disbursement List issued daily

  38. Funding and Disbursements • Effective March 15, 2008 • Must have an accepted MPN in place before disbursements • COD will reject any disbursements for loans without an accepted MPN • Affects both Advance Funding and Pushed Cash Schools • Affects all award years

  39. Funding and Disbursements • “Booked” Loan: • Accepted Origination record • Accepted signed MPN • Accepted Actual Disbursement • Is now a binding obligation between borrower and ED • 30-Day Warning Report • ID’s unbooked loans for school

  40. Funding and Disbursements • Same disbursement requirements as other Title IV aid • Credit student’s account • Pay credit balances within time frames • May pay student/parent cash, check or EFT • Stored value and debit cards are a form of EFT

  41. Funding and Disbursements • Returning Direct Loan funds • Excess cash (unable to disburse within 3 business days • Return overpayment of DL funds • Borrower wishes to cancel all or a portion of disbursement • Return using G5 or by check • Remember to update COD record

  42. Funding and Disbursements • Accepted actual disbursements at COD: • Result in Current Funding Level (CFL) increase for Advance Funded schools • Pushed disbursements to Pushed Cash schools • Timely reporting of actual disbursements for Advance Funded schools avoids “Freeze Cash” • COD screens provide 24/7 view of current funding and disbursement status

  43. Direct Loan Processing Cycle 43

  44. Reconcile • Monthly basis • School reconciles internally, FAA and Business offices • School reconciles externally with COD • Aids to Reconciliation: • School Account Statement (From COD) • Direct Loan Tools Software (FSA Download site) • COD screens and reports • COD Reconciliation specialists

  45. Choose program and year Summary financial info

  46. Select program and year

  47. Direct Loan Processing Cycle 47

  48. Program Year Close-out • Process is complete when: • School and COD show a cash balance of $0 and • All COD records match all school DL record and business office system transactions, and • School Account Statement reflects a $0 unbooked balance.

  49. Program Year Close-out • COD and FSA assist with reports and screens: • School Account Statement • Cash Activity • Ending Cash Balance

  50. SAS Cash Summary Do the totals match school records?