Know Who You Owe Helping Students Manage Split-Loan Servicing

Transcription

1 Know Who You Owe Helping Students Manage Split-Loan Servicing

2 Agenda Background on split-loan servicing Federally-owned loans and ED servicers Options available to help students manage split-loan servicing Taking inventory Consolidation Communication Resources

3 Background on Split-Loan Servicing

4 Background on Split-loan Servicing Split-loan servicing borrowers with multiple loans serviced by multiple servicers Split-loan servicing is not a new phenomenon An increased focus in today s environment due to: Lenders exiting FFELP, selling portfolios to secondary markets FFELP loans purchased by ED Transition from FFELP to FDLP

5 Federally-owned loans and ED servicers

6 Federally-owned Loans and ED Servicers ED owns both FDLP loans and FFELP purchased loans FFELP purchased loans are loans made under FFELP by lenders and subsequently purchased by ED ED awarded servicing contracts to four new servicers (June 2009) New ED servicers manage both FFELP purchased loans and FDLP loans

7 Federally-owned Loans and ED Servicers New ED servicers Fedloan Servicing (PHEAA) Great Lakes Educational Loan Service, Inc. Nelnet Sallie Mae Existing ED servicers Department of Education Student Loan Servicing (ACS) Direct Loan Servicing Center (ACS) Contact info available on TG s website:

8 Federally-owned Loans and ED Servicers Servicer assignment: The goal is to assign all of a borrower s federally-owned loans to the same servicer This has not automatically occurred for all borrowers ED is working to resolve situations where a borrower s federally-owned loans are assigned to two or more ED servicers DL transfer initiative (see e-announcement dated November 23, 2010) Over time, assignment of a borrower s federally-owned loans to the same servicer will become standard operating procedure

9 Federally-owned Loans and ED Servicers Direct Loan transfer initiative Affects a student or parent borrower who has: Direct Loans serviced by ACS Direct Loans and FFELP purchased loans serviced by the other four ED servicers The borrower s Direct Loans along with loan status information will be transferred (from ACS) to the borrower s other ED servicer ED servicer will correspond with the borrower about the transfer

10 Federally-owned Loans and ED Servicers Direct Loan transfer initiative (continued) School can continue to use NSLDS to view the federal loan servicer code and name associated with each loan School can view this information associated with each Direct Loan in COD website Under the Person tab on the website s top menu bar Click on Servicer and enter Award ID or SSN Servicer identified under Borrower-Servicer Relationship

11 Federally-owned Loans and ED Servicers Direct Loan transfer initiative (continued) New servicer information should available within 7-10 business days on NSLDS after transfer has been completed This is consistent with prior ED guidance If school has questions, it may contact Federal Student Aid Research and Customer Care Center at (800) or for assistance

12 Federally-owned Loans and ED Servicers Q: How will the school know which ED servicer is servicing the borrower s FFELP purchased loan? A: The ED servicer is identified in NSLDS. Schools can use the report entitled: Status of Loans Purchased by ED report (PLPED3)

13 Federally-owned Loans and ED Servicers Q: Is there an ED resource that can provide delinquency information reported to NSLDS by the four new ED servicers? A: Schools can use the new report titled Delinquent Borrower Report (DELQ01) available in NSLDS. Report contains both FFELP purchased loans and Direct loans. See NSLDS Newsletter #27 for more information.

14 Helping Borrowers Understand Their Options Taking Inventory

15 Taking Inventory Q: Where can borrowers obtain information about their federal student loan(s)? A: National Student Loan Data System (NSLDS) at Provides loan amount(s) and loan holder(s)

16 Taking Inventory Q: What happens to a borrower s loan(s) when he or she leaves school? A: A Perkins loan either: Enters a 9-month grace period Enters a 6-month post-deferment grace period A: A Stafford loan either: Enters a 6-month grace period Enters repayment

17 Taking Inventory Q: What happens to a borrower s loan(s) when he or she leaves school? A: A Grad PLUS loan either: Enters a 6-month deferment Enters repayment A: A parent PLUS loan either: Enters a 6-month deferment, if requested Enters repayment

18 Taking Inventory Q: What happens to a borrower s loan(s) when he or she leaves school? A: A federal consolidation loan: Enters repayment A: A non-title IV loan: Enters repayment based on the terms and conditions of the loan

19 Taking Inventory Q: What should a borrower expect from his or her loan holder(s)? A: Repayment disclosure notice(s) Outlines the terms of the loan(s) borrowed Provides the repayment options available Establishes the first payment due date

20 Taking Inventory Q: What does the loan holder expect of the borrower? A: The loan holder expects the borrower to: Select a repayment plan Make timely payments on the loan(s) Provide updated contact information whenever it changes Contact the loan holder whenever he or she is having difficulty managing repayment

21 Taking Inventory Q: What should a borrower expect when a FFELP loan has been purchased by ED or when a Direct loan is transferred to an ED servicer? A: The borrower will receive correspondence from the ED servicer that contains the pertinent contact information. The borrower will be responsible for managing repayment with the ED servicer

22 Taking Inventory Q: Is it possible for the borrower to have combined billing for both FFELP purchased loans and regular FFELP loans that are with the same servicer? A: Combined billing is not possible in this instance. Because federal law requires federallyowned loans to be processed through a federal payment lockbox, and prohibits the processing of payments on loans that are not federally-owned through this lockbox, borrowers are required to make separate payments.

23 Helping Borrowers Understand Their Options Consolidation

24 Consolidation Consolidation enables borrower to combine one or more federal student loans into a single new loan with one holder (and consequently, a single servicer) At the time of consolidation, ED pays off outstanding balances of loans included in the consolidation

25 Consolidation Q: Who can consolidate? Is there a fee? A: Any federal student loan borrower, including: Borrowers with student loans Borrowers with parent loans Borrowers with student and parent loans There is no fee to obtain a Consolidation loan.

26 Consolidation Types that may be consolidated include: Federal Family Education Loans Federal Direct Loans Federal Perkins Loans Health Professions Student Loans Nursing Student Loans Health Education Assistance Loans

27 Consolidation Q: What is the general eligibility criteria? A: A borrower: Must be in grace period or in repayment No grace for a Grad PLUS loan; borrower can consolidate while in school because loan is in repayment Repayment includes deferment periods May be delinquent or in default on one or more existing loans

28 Consolidation Factors to consider: Consolidation: Brings together loans with multiple lenders for convenience of one payment May lower loan payments by lengthening repayment period May be able to lock in a more favorable interest rate (for loans with a variable interest rate, if those rates are low during the year the borrower consolidates)

29 Consolidation Factors to consider: May lose some or all of grace period May lose certain borrower benefits Perkins loans lose: Deferment subsidy when consolidated Cancellation eligibility when consolidated

30 Consolidation Factors to consider: Certain deferments may be lost, but these older deferments are not used frequently Borrowers retain ability to request most major deferments after consolidation In-school Unemployment Economic hardship

31 Consolidation Factors to consider: May increase total cost of loan If borrower lengthens repayment period, he or she will pay more interest over life of the loan.

32 Temporary Loan Consolidation Authority New, temporary loan consolidation authority created by the Health Care and Education Reconciliation Act of 2010 The main purpose of this temporary authority is to allow borrowers who may have lender-held FFELP, Direct, and FFELP purchased loans to combine them into a single loan. For Consolidation loan applications received by ED on or after July 1, 2010, and before July 1, 2011

33 Temporary Loan Consolidation Authority Eligibility: Borrower must have loans in at least two of the following categories Federal Direct loan, FFELP loan held by a lender FFELP purchased loan Borrower must have at least one eligible loan in the above categories that has not yet entered repayment (this includes loans in a grace period)

34 Temporary Loan Consolidation Authority Terms and conditions: Direct Consolidation loan made under this authority has the same terms and conditions that apply to regular Consolidation loans, except The weighted average interest rate applied to a Consolidation loan made under this provision will not be rounded up to the nearest 1/8 th of one percent However, if the Consolidation loan includes one or more variable rate Stafford loans made July 1, 1994, June 30, 2006, the weighted average is rounded up to the nearest 1/8 th of one percent

35 Temporary Loan Consolidation Authority Benefits: A borrower can obtain a single loan with a single holder before repayment begins The weighted average interest rate is not rounded up to the nearest 1/8 th percent unless a variable rate Stafford loan made July 1, 1994 June 30, 2006 is included in the Consolidation loan.

36 Temporary Loan Consolidation Authority Considerations: A Stafford loan borrower will lose the six-month grace period if he or she consolidates while in school Parent and Grad PLUS borrowers will lose the sixmonth post-enrollment deferment benefit if they consolidate while in school A borrower who consolidates while in school has not received exit counseling, therefore may not have enough information to make an informed decision

37 Temporary Loan Consolidation Authority The regular consolidation loan program may continue to be used it has not gone away. However, all of the loans that are being consolidated must have entered repayment prior to consolidation

38 Communication and Borrower Resources

39 Communication Strategically communicate with borrowers today to help set the right expectation Encourage borrowers to open and read loan holder correspondence Focus on the importance of NSLDS outside the realm of student loan counseling

40 Communication Offer supplemental counseling above and beyond traditional entrance and exit sessions Provide comprehensive information on consolidation May be the right option on an individualized basis to help students manage repayment Encourage students to make larger payments on the consolidation loan As a reminder, extending the repayment term will likely increase the overall cost of the loan

41 Resources for Borrowers ED s Federal Student Aid Information Center at FED-AID or (800) mytg SM TG s Customer Assistance at (800)

42 Resources for Schools ED electronic announcements on IFAP related to Loan Servicing Information dated: 08/28/2009, 09/16/2009, 03/26/2010, 06/03/2010, 08/26/2010, 11/23/ Federal Student Aid Conference presentations entitled: Essentials of Federal Student Loan Servicing Schools Best Practices in Default & Delinquency Management NSLDS update Entrance and Exit counseling Loan Repayment and Forgiveness Plans

43 TG Resources for Schools Financial literacy, entrance and exit counseling, income-based repayment Integrated Default Assistant (IDA ) Shoptalk TG s Account Executives and Default Aversion Consultants

44 Questions? To order additional copies, or to request permission to reproduce any of the information provided, please call TG Communications at (800) Texas Guaranteed Student Loan Corporation