Direct Loan Program Overview
Presented by: Anafe Robinson
Director of Financial Aid, Scholarships & Veterans Pierce College
Agenda
What is the Direct Loan Program?
What is the student’s role? What is the school’s role? What is the FSA’s role?
How does the Direct Loan process work?
Resources for borrowers
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/Exit Counseling, and
repayment options
What is the Student’s Role?
Complete FAFSA and meet eligibility requirements
Complete loan entrance/exit counseling
Notify school or DL Servicer timely for changes in enrollment, demographic information changes, repayment options, etc
What is the School’s Role?
Document Student Eligibility Encourage student loan awareness: entrance and exit counseling
Award student loans
Manage Master Promissory Note (MPN) process
Transmit loan origination, disbursement and adjustment data to COD
Draw down Direct Loan funds via G5
Disburse loan funds to students
What is the School’s Role?
Update NSLDS enrollment status Reconcile with ED monthly and complete annual close-out
Determine staffing roles and responsibilities
FA’s role vs Business Office’s role Use of third-party servicer?
Determine MPN processing options
Loan Counseling
Online Entrance – StudentLoans.gov Exit – NSLDS.gov In Person Group Combination of the above
Entrance Counseling Requirements
Explain Master Promissory Note Emphasize the seriousness of borrowing and repayment obligations
Consequences of default
Emphasize the obligation to repay the loan in full
Sample monthly repayment amounts
Explain the effect of accepting the loan on the eligibility for other forms of financial assistance
Entrance Counseling – cont’d
Information on the option to pay the interest of theunsubsidized loan while in school
Definition of half-time enrollment and consequences if not maintaining half-time enrollment
Importance of contacting school if withdrawing from school
How to access NSLDS and its benefits
Provide the borrower with school’s contact information
for questions
Exit Counseling Requirements
Average anticipated monthly repayment amount Repayment options available
Option to prepay each loan
Effects of loan consolidation
Debt-management strategies designed to facilitate repayment
How to contact the Direct Loan Servicer
Explain Master Promissory Note
Exit Counseling – cont’d
Consequences of default Terms and conditions of the loan
Student Loan Ombudsman Office of the USDE
Access NSLDS to track student loan balances and status of loans
Tax benefits available to borrowers
Provide current demographic information: name, address, SSN, references, driver’s license, expected permanent address, expected employer
What is FSA’s Role?
Track school eligibility Provide funding (G5)
COD processing
Tools and reports
Reconciliation and Closeout assistance
Training and customer service for schools
What are the loans under the
Direct Loan Program
Stafford Subsidized
Stafford Unsubsidized
PLUS
Grad PLUS
Consolidation
What are the Limits?*
Effective July 1, 2008 Year Dependent Undergraduate Independent Undergraduate 1st Year $5,500 (maximum 3,500 subsidized) $9,500 (maximum 3,500 subsidized) 2nd Year $6,500 (maximum $4,500 subsidized) $10,500 (maximum $4,500 subsidized) 3rd Year and beyond $7,500 (maximum $5,500 subsidized) $12,500 (maximum $5,500 subsidized)What are the Interest Rates?
First Disbursement of a DL
Subsidized loan for Undergraduate borrowers:
Interest rate on the unpaid
balance Made on or after And Made before
July 1, 2011 July 1, 2012 3.4 %
July 1, 2012 ?? 6.8 %
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:
What Fees are Charged to
Borrowers?
Origination fee for Subsidized and Unsubsidized loans first disbursed on/after 7/1/2011 and before 7/1/2012:
1.0%
A 0.5% up front rebate also applies to be covered under borrower benefits.
2011-2012 – make 12 consecutive payments 2012-2013 – No rebate
How Does the Direct Loan
Process Work?
19 Originate Promissory Note Disburse Reconcile Program Year Close-Out
Direct Loan Processing Cycle
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
COD processes/edits and returns response
School corrects errors and resends to COD
School makes adjustments and sends to COD as needed
PLUS Loan Origination
Includes credit checkGRAD 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
Establish school policies for handling credit denials
Availability of additional unsubsidized 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
Originate Promissory Note Disburse Reconcile Program Year Close-Out
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
Electronic MPN
www.studentloans.gov
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
Master Promissory Note
School prints MPN
Follow review guidelines
Ship to MPN processor
Effective 12/19/2011 – overnight & express delivery Department of Education
100 Capitol Commerce Blvd Montgomery, AL 36117
27 Originate Promissory Note Disburse Reconcile Program Year Close-Out
Direct Loan Processing Cycle
Funding and Disbursements
Schools use G5 System to
View current funding information
Request payments and adjust draw downs
Return cash
Initial Funding
School receives initial Current Funding Level (CFL) in G5
Only for “Advanced Fund” schools
Feb/March – historically early disbursement June – others
Funding and Disbursements
Funding Increases
Scheduled – ED initials CFL Automatic
Reporting actual disbursements to COD
Manual
Contacting COD School Relations Center
Requesting Funds – G5
Cash Management rules/timing of disbursement
Direct Loan funds are award year specific
Direct Loan funds are not student specific
Direct Loan funds are requested or returned in whole dollars
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
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
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
33 Originate Promissory Note Disburse Reconcile Program Year Close-Out
Direct Loan Processing Cycle
Reconcile
Monthly basis
School reconciles internally, Financial Aid 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
Choose program and year
Summary financial info
37 Originate Promissory Note Disburse Reconcile Program Year Close-Out
Direct Loan Processing Cycle
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.
COD and FSA assist with reports and screens:
School Account Statement
Cash Activity
SAS Cash Summary
Do the totals match school
records?
SAS Disbursement Detail
Match School Records? Any Unbooked? Missing Data?
Resources for Borrowers
Direct Loan Servicing Center
www.myedaccount.com
(800) 848-0979
www.StudentLoans.gov
What Resources are Available for
Assistance and Training?
Resources for Schools
COD School Relations Center Direct Loan Program
(800) 848-0978
Email: CODSupport@acs-inc.com
Website: https://cod.ed.gov/cod/LoginPage
Direct Loan Servicing Center School Support Services
www.cod.ed.gov
Training Resources
COD Computer Based TrainingIncludes DL Reports session
eMPN simulation session
EDExpress Web-based training
Self-paced training for users of EDExpress and EDconnect
