The Direct Loan Program & What You Need To Know

The Direct Loan Program & Wood Mason U.S. Department of Education Federal Student Aid 770.383.9662 wood.mason@ed.gov Late Breaking The 30-Day reporting window is now a 15-Day reporting window Actual disbursements, and adjustments to actual disbursements, completed on or after April 1, 2013 An actual disbursement occurs when a school credits those funds to a student s account in the institution s general ledger or any sub-ledger of the general ledger OR pays those funds to a student directly Funds are considered disbursed even if an institution used its own funds in advance of receiving Program funds Though COD edits and reports will NOT be in place with the initial 2013-2014 COD Release the regulation is! 2 Late Breaking Public Law 112-141 establishes a limit of how many years a student may receive subsidized loans Limits a student to receiving subsidized loans for 150% of the published length of the academic program in which he or she is enrolled He or she may not receive additional subsidized loans for enrollment in that program Applies to new borrowers on or after July 1, 2013 A new borrower is one who has never borrowed a Federal loan or has an a $0 outstanding balance on a Federal loan(s) 3 1

Late Breaking Tracking and enforcement of 150% eligibility will be done via COD FSA will determine how to record college program length Schools will need to provide some data needed for accurate calculation Dear Colleague Letter (DCL GEN 13-13) dated May 10, 2013 and Electronic Announcement dated may 16, 2013, have more information and details 4 General student eligibility criteria are the same for the Direct Loan Program as they are for the other Title IV programs CFR 34 668.32 The student must be enrolled, or accepted for enrollment, in an eligible program at an eligible institution Program must be on your Program Participation Agreement U.S. Citizen or eligible non-citizen Enrolled or accepted for enrollment with a half-time or greater enrollment status 5 Subsidized loans are based on need and can be awarded to undergraduate students only Current interest rate for loans disbursed on or after July 1, 2011 and before July 1, 2013, is 3.4% Unsubsidized loans are NOT need based and can be awarded to undergraduate and graduate/professional students Current interest rate for loans disbursed on or after July 1, 2006 is 6.8% 6 2

Subsidized and unsubsidized loan amounts are based on the borrower s grade level as determined at your school as well as his or her dependency status For a transfer student, grade level from a previous school does not necessarily transfer to your school The grade level can change over the course of the academic year/award period The loan can be increased or another LOR for the amount of increase can be submitted 7 Annual loan limits for dependent undergraduate students whose parents can secure a PLUS loan $3,500 combined subsidized/unsubsidized plus $2,000 unsubsidized for 1 st academic year $4,500 combined subsidized/unsubsidized plus $2,000 subsidized for 2 nd academic year $5,500 combined subsidized/unsubsidized plus $2,000 unsubsidized for 3 rd, 4 th, and 5 th academic years 8 Annual loan limits for independent undergrads or dependent students whose parents CANNOT secure a PLUS loan $3,500 combined subsidized/unsubsidized plus $6,000 additional unsubsidized for 1 st year $4,500 combined subsidized/unsubsidized plus $6,000 additional unsubsidized for 2 nd year $5,500 combined subsidized/unsubsidized plus $7,000 unsubsidized for 3 rd, 4 th, and 5 th year 9 3

Annual unsubsidized loan limit for graduate/professional students $20,500 for grade level 06 and 07 10 A dependent student whose parents refuse to financially support him or her may be able to receive unsubsidized Stafford loans only Documentation required Parents refuse to complete FAFSA Parents do not, and will not, provide any financial support, including date support ended If parents refuse to provide signed documentation you need 3 rd party to document Student statement not sufficient Teacher, counselor, cleric, court document, etc 11 For a student whose parents refuse to financially support him or her the annual loan limit is the combined subsidized/unsubsidized loan limit by grade level ALL IN UNSUBSIDIZED FUNDS ONLY Grade level 1 $5,500 Grade level 2 $6,500 Grade level 3, 4, & 5 $7,500 12 4

Ground Rules A loan can be increased upon request by the borrower or circumstances Borrower changes grade level between terms Borrower did not receive 100% of his or her eligibility and discovers he or she needs it Increase the loan amount and add a disbursement or increase anticipated disbursement(s) Originate an 002 loan for the requested increase May require another credit check if it s a PLUS loan Check with your software provider to see what procedure you need to follow Cannot increase an endorsed PLUS loan 13 Ground Rules A loan can be reduced upon request by the borrower or circumstances Does not need, or want to borrow, full eligibility Receives grant or scholarship funds Decides to work Loans are reduced but NOT cancelled Reduce actual disbursement(s) first then anticipated After reducing disbursements you can reduce the loan amount to $0 or new loan amount to keep the data on your database, and the COD database, clean 14 Ground Rules A subsidized or unsubsidized loan cannot be front loaded and must reflect substantially equal anticipated or actual disbursements You can originate a single-term loan to cover unusual or extraordinary costs assessed for that term There is no minimum loan amount If a subsidized loan is $200 or less you can forego the origination and add the amount to an unsubsidized loan 15 5

Ground Rules Unlike Pell Grants, a student can be in receipt of a subsidized or unsubsidized at multiple schools Also PLUS recipients Schools must coordinate to ensure Loans do not exceed academic year loan limit There is no duplication of non-institutional costs when determining COA Funds awarded at one school are not included as estimated financial assistance by any other school when determining eligibility for the same period 16 Subsidized and unsubsidized loans reflecting an earliest disbursement date (EDD) on or after July 1, 2013, are subject to an increased origination fee of 1.051% Business rules associated with truncating and rounding have NOT changed do what you have been doing Subsidized and unsubsidized loans subject to the 1.051% origination fee CANNOT be transmitted to COD until after June 28, 2013 17 School eligibility for participation in the PLUS Loan program is, generally, the same as for the subsidized and unsubsidized programs Participation is optional If you participate in the subsidized/unsubsidized program you are NOT required to participate in the Direct PLUS Loan program Non-participation is NOT grounds for offering unsub to a dependent student Graduate schools MUST participate in the unsubsidized program if you offer PLUS Must first offer unsubsidized loan before offering PLUS 18 6

PLUS loans are NOT need based and can be awarded to Parents of a dependent student or a graduate/professional student Parent borrower AND dependent student must meet all Title IV eligibility requirements, i.e., U.S. citizen or eligible non-citizen Current interest rate for loans disbursed on or after July 1, 2006 is 7.9% PLUS loans are not counted against aggregate loan limits and not used in the calculation of your Cohort Default Rate (CDR) 19 Parent of a PLUS loan must be the biological or adoptive Mother or Father of the student or a stepparent if his or her income is used in the EFC calculation Must not have an adverse credit history 34 CFR 685.200 NOT eligible if delinquent on a Federal debt NOT eligible if incarcerated A legal guardian is NOT an eligible PLUS borrower 20 A parent can be the borrower of a PLUS loan for multiple dependent students Unique parent/student pair for each PLUS loan originated Unique PLUS Request via StudentLoans.gov website Unique Master Promissory Note (MPN) for each parent/student pair StudentLoans.gov will retain parent/student pair data for subsequent PLUS loans 21 7

Graduate/professional student eligibility for PLUS loans was established for award year 2005-2006 and forward Must be enrolled at least half-time in an eligible program at an eligible school Must meet all other Title IV student eligibility criteria You MUST determine eligibility for, and offer, a graduate/professional student a Direct Unsubsidized Loan before offering and awarding a PLUS loan 22 Your school is responsible for determining PLUS loan eligibility for parent of a dependent student or a graduate/professional student borrower AND the loan amount Loan amount limited to Cost of Attendance (COA) less any estimated financial assistance Includes Unsubsidized loan funds Borrower cannot have an adverse credit history 23 Plus loan eligibility includes a credit check Can be done by the school An origination submitted to COD initiates a credit check AN MPN DOES NOT TRIGGER A CREDIT CHECK Instant online via the COD website Can be done by the parent or graduate/professional student Online via a PLUS Loan on the StudentLoans.gov website 24 8

The Plus loan credit check looks for an adverse credit history as per 34 CFR 685.200 Absence of credit is NOT evidence of adverse credit Does not look at credit worthiness Does not look at FICO score Does not look at income to debt ratio Does not look at loan amount 25 To run a credit check on a Plus loan applicant you must have authorization to do so StudentLoans.gov PLUS request and PLUS MPN includes authorization School process Written authorization received from applicant Can be faxed authorization Authorization form downloaded from the COD website 26 27 9

28 29 A Plus Loan Request via StudentLoans.gov results in a credit check COD will send an SP acknowledgement Separate from the MPN process PLUS Request offers several options to the borrower Who gets the credit balance In-school/deferment options to delay repayment Do they want to specify a loan amount Is this a modification to a prior loan Select a loan period 30 10

31 32 33 11

34 35 Borrower must provide Loan reference number (PLUS Application ID) or Award ID to endorser 36 12

Required Borrower must provide Loan reference number (PLUS Application ID) or Award ID to endorser 37 THE ENDORSER CANNOT BE THE STUDENT FOR WHOM THE PLUS LOAN IS INTENDED To successfully associate an endorser to a PLUS Request via the StudentLoans.gov website the borrower must provide Loan ID or PLUS Request number Endorser agrees to repay the loan if the borrower does not Undergoes a credit check Completes an endorser addendum 38 If you ve originated the award and the endorser links to it COD will generate and transmit to you a CO response file If you ve not originated the loan No notification is sent if endorsed via paper Endorser Addendum COD will generate and send an updated SP file if done electronically via StudentLoans.gov Endorser Search now available via the COD website 39 13

Credit decision stands on the COD database for 90 days Declination stands for the academic year Approval stands for the loan submitted Credit check looks for adverse credit Adverse credit defined in 34 CFR 685.200 Does not look at FICO score/income to debt ratio Does not look at loan amount NOW INCLUDES CHARGE-OFF AND COLLECTION ACCOUNTS Balance greater than $0 and within 5 years of date of credit check 40 If you run a credit check online via the COD website Instant response Accept or declined THERE IS NO REQUIREMENT TO ORIGINATE THE LOAN WITHIN 90 DAYS If the loan is originated more than 90 days beyond the online credit check it will be run again when originated My suggestion is to originate no matter the result 41 There are alternatives if your borrower is denied a PLUS loan due to adverse credit You can forego the PLUS process completely in certain circumstances 34 CFR 685.203 Your borrower can opt for one of the following Appeal the declination via COD Secure an endorser The endorser will also undergo a credit check Decline to proceed with either of the two above and request the school offer unsubsidized funds to the dependent student 42 14

On April 21, FSA began sending emails to certain PLUS Loan applicants who were declined due to adverse credit inviting them to appeal that result Email or letter if no email address Borrower, NOT the school, should contact the COD Student Loan Support Center immediately at the phone number displayed on the communication Approval can come in minutes On June 28 COD will begin to generate a report for schools that identifies flagged PLUS Loan borrowers 43 So, Mom cannot borrow a PLUS loan due to denied credit and she doesn t know what she is going to do about it You should have a procedure in place to address a circumstance such as this Expect an answer by a certain date Offer the dependent student unsubsidized funds What if she is later able to secure the PLUS loan? If the unsubsidized loan is fully disbursed You can calculate and award the PLUS reflecting the disbursed unsubsidized loan funds as estimated financial assistance 44 Or The dependent student can return the unsubsidized loan funds, you reduce the loan to $0 and disburse the full PLUS loan What if the unsubsidized loan is only partially disbursed? First, you cannot disburse any more unsubsidized loan funds The disbursed unsubsidized loan funds can be kept and reflected as estimated financial assistance when calculating the PLUS loan 45 15

Ground Rules If one parent cannot obtain a PLUS loan due to adverse credit you do not have to run the other parent before offering the dependent student unsubsidized funds COD does NOT edit incoming additional unsubsidized loans against a parent declination 46 Ground Rules You CANNOT disburse on a PLUS loan unless and until you have an acceptable credit result associated with the award The PLUS loan will build on the COD database but will reflect an unacceptable credit result Edit code #036 The award will NOT link to an MPN until in receipt of an acceptable credit decision The common record response will reflect R (No promissory note on file) for MPN status even if there is a valid MPN on the COD database 47 Ground Rules You CANNOT increase a PLUS loan if you are in receipt of a subsequent credit denial Borrower can appeal or secure an endorser If the 001 PLUS loan is fully disbursed Offer unsubsidized funds up to COA and eligibility Disbursed PLUS funds are treated as estimated financial assistance If the 001 PLUS loan is NOT fully disbursed You can fully disburse the loan Reduce remaining disbursements to $0 and offer unsubsidized funds up to eligibility and COA 48 16

PLUS loans reflecting an earliest disbursement date (EDD) on or after July 1, 2013, are subject to an increased origination fee of 4.204% Business rules associated with truncating and rounding have NOT changed do what you have been doing PLUS loans subject to the 4.204% origination fee CANNOT be transmitted to COD until after June 28, 2013 49 You may refuse to originate, or reduce, a subsidized, unsubsidized, or PLUS loan if The determination is made on a case-by-case basis and is documented Reason must be provided to the student in writing Must be maintained in the student file Is not because of a pattern or practice that results in denial because of the borrower's race, gender, color, religion, national origin, age, disability status, or income 50 Once a loan is awarded and accepted the school must originate the award and transmit that origination data to the Common Origination & Disbursement system (COD) Origination data, commonly called the Loan Origination Record (LOR), can be transmitted to COD via batch processing School resident software creates the common record that carries the data to COD Origination data can be entered individually student by student via the COD website 51 17

The Loans 52 The Keys to Successful Participation 53 The keys to successfully processing award and disbursement data Review the current COD technical reference, Volume I things change from year-to-year Know what COD is looking for from your school Loan Origination Records (LOR) Disbursement data Adjustments and updates Send accurate data Submit data that passes COD and Award edits Hard rejects Warning edits 54 18

Hard rejects Identifies data that does not pass COD or Award edits Data needs to be corrected and re-submitted to COD Data will NOT build on the COD database Warning edits Identifies data that is questionable Does not stop processing of that data Data builds on the COD database What happens to your database? 55 COD mailbox sweep every 15 minutes Captured data is processed, and a response returned, promptly* Viewable on COD award and disbursement screens shortly after batch is processed Online submissions processed in near real-time Financial data pull and apply twice a day Displayed as Net Applied & Posted Disbursement (NAPD) data Updates COD financial screens *Peak processing may slow your response 56 COD communicates directly with Servicers Daily transmission of data associated with booked loans Servicers communicate with NSLDS weekly NSLDS Daily transmission of Pell Grant disbursement data NSLDS updated with Pell Grant data daily but not in real-time G5 Twice-a-day transmissions of financial activity after each pull and apply 57 19

You directly participate in several aspects of the process Origination & disbursement Dates Amounts Adjustments Counseling Entrance and exit Master Promissory Note (MPN) Electronic or paper Must be linked to a loan before COD will accept a disbursement on that loan 58 The goal is to book a loan by submitting, and COD accepting, an LOR, a linked MPN, and an actual disbursement Loan is now a binding obligation between the borrower and the U.S. Government Liability for drawn funds migrates from the school Generally disbursement #1, sequence #1, books the loan Each subsequent disbursement is booked as well 59 Direct Loan Processing Cycle Originate MPN Exit Cslg Ent Cslg Servicing Disburse 60 20

Transmit the LOR out of your resident software to COD via a Common Record Each common record is built in blocks Each common record is considered a batch Multiple schools Multiple persons Multiple awards Multiple disbursements or adjustments Transmit the LOR online via the COD website Individual award 61 COD processes the common record hierarchically Block by block If data in one block doesn t pass edits no further processing of subsequent blocks If Entity data is errant the Person, Award, and Disbursement blocks will not be processed Rejects are identified and stored in the COD database Except for Common Record or batch level reject COD will contact school of malformed document 62 Common Record Entity Person Award Response Response Response Disbursement Response 63 21

Common Record Entity Block Common record data includes general and technical information about the document Document ID Source/destination entity IDs Create date and time stamp Entity block data includes reporting/attended entity IDs, award year, and summary student/disbursement and award data Total number of awards/students 64 Entity Block The Entity ID is the 8-digit COD School Code that is assigned to institutions and 3 rd party servicers in the COD system Source entity ID The entity that transmits the data to COD School, Corporate office, third party servicer Destination entity ID COD entity ID is 00000001 Reporting entity ID The school that sends and receives data for the campuses or students it serves Cannot be a 3 rd party servicer 65 Entity Block The Entity ID is the 8-digit COD School Code that identifies each institution and third party servicer in the COD system Attended entity ID The school or campus where the student attends class if that location is separately eligible Could, and can, be the Reporting entity ID if not eligible An additional location to a Main Campus that awards, disburses, draws funds and reconciles under it s own direct loan school code MUST have it s own DUNS number 66 22

i 67 Person Block The person block contains student or parent data and occurs once per person Key identifiers Social Security Number Date of birth Last name Additional demographic data Email address (if provided) Citizenship status If a Grad PLUS loan there will be two person blocks per person with identical data 68 Award Block The award block occurs once per award per person Award data Award type, award ID, and award number Award amount Anticipated and/or actual disbursement data equal to the loan amount Loan fee CPS transaction number Dependency status 69 23

Award Block The loan ID consists of 21 characters XXXXXXXXX S 14 GXXXXX XXX The first nine digits is the student SSN The letter identifies the loan type Subsidized, Unsubsidized, PLUS The next two digits identify the award year The trailing year of the award year pair The next 6 digits is the Direct Loan school code G for the main campus E for an additional location The last three digits is the award number 001, 002, etc. 70 Award Block The award block occurs once per award per person Academic year start/end dates For credit hour schools a minimum of 30 weeks of instructional time and 24 semester/trimester (36 quarter) hours For clock hour schools a minimum of 26 weeks of instructional time and 900 clock hours COD assesses annual loan limits based on the academic year NOT LOAN PERIODS 71 Award Block The award block occurs once per award per person Award start/end dates This is the loan period Equal to, or within, academic year start/end dates Can be multiple loan periods in an academic year 72 24

Disbursement Block The disbursement block contains disbursement data and adjustments to disbursement data and occurs once per disbursement Disbursement number, sequence number, date and amount Fee Disbursement Release Indicator (DRI) DRI = FALSE or DRI = TRUE Enrollment school code 8-digit OPE ID code of the institution the student attends 73 Disbursement Block The disbursement block also contains the required Ability To Benefit (ATB) code Required 2013-2014 award year and forward Valid values are 01 Testing completed 02 College credit 04 Home schooled 06 High School 07 GED ATB codes 03 and 05 are no longer valid values and will REJECT 74 COD will return to the school a common record response for each common record submitted Indicates what data passed edits and what data did not Remember warning edits will NOT reject data How does your software treat a warning edit? Generally speaking, your resident software will update your database to correspond accurately to what is on COD 75 25

COD will respond to online submissions by returning a message stating the data was submitted successfully or the submission failed Reasons for failure (edits not passed) are viewable immediately 76 Ground Rules Accepted awards generate a disclosure statement Provided to borrower on or before first disbursement Generated 7 days prior to anticipated/actual EDD NOT THE SCHOOL REQUIRED NOTIFICATION Loan and disbursement details Borrower rights and responsibilities Electronic delivery via StudentLoans.gov website Default is for COD to print 77 Ground Rules To adjust an award downward or reduce an award to $0 If the award has NOT been disbursed Reduce the loan amount to the desired amount and COD will reduce the anticipated disbursements Warning edit 118 will trigger as a heads-up If there are actual disbursements Adjust actual disbursements highest number to lowest until the disbursed amount equals the new loan amount 78 26

Direct Loan Processing Cycle Originate MPN Exit Cslg Ent Cslg Servicing Disburse 79 80 ALL MPNs have a 10-year life from the date of receipt at COD If no actual disbursement in the first 12 months from receipt the MPN goes inactive An MPN ID is unique XXXXXXXXXM14GXXXXX001 for a sub/unsub loan XXXXXXXXXN14GXXXXX001 for a PLUS loan A single-loan MPN is one linked to an endorsed PLUS loan No additional loan can be linked Status inactive as soon as endorser linked to MPN 81 27

Ground Rules Schools can opt to take advantage of the multiyear functionality feature of the MPN Originations from a multi-year functionality school will link to ANY active MPN on the COD database The origination will link to the active MPN on the COD database with the latest expiration date when the key identifiers on the loan and MPN match SSN DOB First two characters of the first name 82 Ground Rules Schools can opt for single-year functionality The SYF school origination links to a new MPN each academic year The SSN, DOB, and first two characters of the first name on the loan and the MPN must match The loan academic year start/end dates AND the direct loan school code in the loan ID must match the academic year start/end dates and the direct loan school code on the MPN 83 Ground Rules Schools can search for MPNs on the COD database several ways Online search function By SSN By MPN ID By date range Search under the Person tab Weekly MPN Report posted weekly to your school NewsBox 84 28

85 86 xxxxxxxxxm14gxxxxx001 87 29

Entrance counseling is required for first-time borrowers 34 CFR 685.204 Subsidized, Unsubsidized, and Grad PLUS Does not have to be repeated each year/each award or for a transfer student to your school You can suggest a borrower repeat entrance counseling but you cannot deny disbursement if they decline Doesn t have to be StudentLoans.gov School determines if the counseling is appropriate to loan type 88 89 COD returns an acknowledgement to your school for each entrance counseling session completed Your option to receive acknowledgements daily or on-demand Set option on the Options screen via the COD website EC Doc Type 90 30

COD generates a weekly Direct Loan Entrance Counseling Report Saturday Friday data capture Generated Saturday StudentLoans.gov data School NewsBox CSV format only Print or import into spreadsheet Completion date and time Type of counseling completed 91 Direct Loan Processing Cycle Originate MPN Exit Cslg Ent Cslg Servicing Disburse 92 What is a disbursement? 34 CFR 668.164(a) an institution makes a disbursement of title IV, HEA program funds on the date that the institution credits a student s account at the institution OR pays a student or parent directly with (i) funds received from the Secretary (ii) funds received from a Lender in the FFELP (iii) institutional funds used in advance of receiving title IV, HEA program funds 93 31

COD will not accept an actual disbursement on a loan without an accepted and linked Master Promissory Note (MPN) The MPN is the document of obligation between the borrower and the United States The MPN an be executed electronically via the StudentLoans.gov website The MPN can be a paper MPN Must be provided if the borrower insists on a paper document COD no longer prints paper MPNs or MPN correspondence 94 Disbursement data can be pending Disbursement Release Indicator (DRI) = FALSE Pending disbursements are actually part of the LOR Sometimes referred to as anticipated Pending disbursements are those yet to come CAN be updated before the DRI is flagged TRUE Amount and date Pending disbursements have no impact on funding Not reflected on the School Account Statement (SAS) No impact on monthly reconciliation 95 Disbursement data can be actual DRI = TRUE Actual disbursement data drives funding Substantiates drawdown from G5 Increases/decreases CFL Origination fee is assessed actual disbursement amount Disbursement #1, Sequence #1 Actual disbursement date sent to COD MUST match exactly the disbursement date on the student account 96 32

Disbursement data can be actual Impacts reconciliation and Program Year Closeout (PYCO) Actual disbursement date starts several clocks School notification Accrual of interest 14-day cancellation/return request window 14-day credit balance window 15-day reporting window Actual disbursement data can be adjusted upward or downward 97 Reasons to adjust actual disbursement data Your borrower cancels the loan, returns funds or withdraws Doesn t begin attendance Disbursement amount in error Disbursement sent to COD in error Do Not Adjust amount and date in same transaction Change the disbursement date to match the date of adjustment The sequence number will increase 98 You can disburse funds to a student up to 10 days prior to the beginning of classes AND You can send actual disbursement data to COD up to 7 days prior to the actual date of disbursement Example: Award start/end dates 9/10/2013 5/31/2014 Actual disbursement date 8/31/2013 Transmit to COD 8/24/2013 DO NOT CHANGE AWARD START/END DATE IN COD 99 33

You need to monitor your COD responses and make sure any rejected actual disbursement data is corrected and submitted anew REJECTED ACTUAL DISBURSEMENT DATA MEANS UNSUBSTANTIATED FUNDS Use COD web Batch screens to identify rejected actual disbursement data Review your resident software import edit report Monitor your cash activity 100 Common disbursement edits Loan limits exceeded Reject edit 039 & 167 (check grade level and sub/unsub amount) Disbursement reported > 7 days prior to event Reject edit 051 (resend again later) Changing DRI from TRUE to FALSE Reject edit 074 (trying to reduce to $0?) PLUS disbursement with no approved credit Reject edit 080 (wait for approved credit before disb) Disbursement on loan NOT linked to MPN Reject edit 081 (check MPN status) 101 Generally, the funding method associated with most direct loan schools is Advance Funded Advance Funded schools calculate their own immediate need and draw their funds from the G5 website Drawn funds MUST be substantiated with actual disbursement data within 15 calendar days of receipt Excess cash (drawn funds exceed immediate need) must be returned to G5 within 3 business days 102 34

Advance Funded Direct Loan schools with a history of early disbursement activity received their initial Current Funding Level (CFL) on March 25, 2013 Second generation of CFLs in June for remaining schools Subsequent increase of CFLs in November Increases to CFL can be generated by reporting (and having accepted) actual disbursement records Increases to CLF can also be requested by calling your COD CSR Internal Controls Division (ICD) staff will monitor CFLs ICD will bump CFL if necessary 103 NEW for award year 2013-2014 No initial funding for HCM1 Direct Loan schools HCM1 schools must submit actual disbursement records (can submit up to 7 days in advance of disbursement date) to establish their CFL in COD and their available balance in G5 Must submit, and COD must accept, actual disbursement data for a bump in CFL 104 There are occasions when you will need to return funds to the Direct Loan Program Over payments Student withdraws Excess cash Cancellation or reduction of loan Return funds electronically to G5 You ll receive a confirmation number for that return DO NOT send funds to a Servicer 105 35

Direct Loan Processing Cycle Originate MPN Exit Cslg Ent Cslg Servicing Disburse 106 Booked direct loan awards are assigned to contracted Servicers TIVAS An acronym for Title IV Additional Servicers FedLoan Servicing (PHEAA) NelNet SallieMae Great Lakes Educational Loan Services Not for profit Not reflected on the School Account Statement (SAS) No impact on monthly reconciliation 107 COD LDE Origination Disbursement Loan Allocation Servicer Assignment Customer Service COD LDE : Loan Distribution Engine: interface to assign loans to the federal loan servicers. Booked Loan: occurs when the COD system accepts an origination record; links p-note to the record and accepts actual disbursement. S E R V I C I N G Servicers Direct Loan Servicing Center (ACS) FedLoan Servicing (PHEAA) Great Lakes Educational Loan Services, Inc. Nelnet The federal loan servicer is assigned upon booking of loan. Sallie Mae 108 36

The Electronic Process 109 Direct Loan Processing Cycle Originate MPN Exit Cslg Ent Cslg Servicing Disburse 110 Exit counseling is required when no longer attending or has dropped below half-time attendance Doesn t have to be FSA website or materials Must meet regulatory requirements for content The school determines validity of counseling Exit counseling now available on the StudentLoans.gov website 111 37

StudentLoans.gov StudentLoans.gov has brought ALL FSA loan counseling tools together on one web site Entrance Counseling Subsidized & unsubsidized as well as Graduate/Professional student PLUS Exit Counseling NSLDS will continue to provide the detailed exit counseling reports and you ll continue to obtain demographic and reference information from that web site as you do today Financial Awareness Counseling 112 StudentLoans.gov New features for authenticated students New landing page with guidance to help the student select the correct type of counseling Select schools to notify from a list of associated schools Add new schools to notify Select preferred repayment plan in Exit Counseling Send notifications of previously completed counseling sessions to additional schools 113 StudentLoans.gov 114 38

StudentLoans.gov New counseling response functionality for schools on Options screen on the COD website Entrance Counseling participation response frequency (Daily or On-Demand) Exit & Financial Awareness Counseling 115 response frequency (Daily or On-Demand) StudentLoans.gov 116 StudentLoans.gov New counseling search options Counseling Search Award Year will default to the most recent Maximum allowable date range search is one week 117 39

StudentLoans.gov Counseling option under Person tab 118 StudentLoans.gov The Direct Loan Counseling batch search will return batches for Entrance, Financial Awareness, and Exit Counseling 119 StudentLoans.gov You ll receive an acknowledgement from COD for each completed session CREC message class EC Doc Type The weekly Counseling Report posted to your newsbox will identify counseling type S for sub/unsub entrance counseling P for sub, unsub, & PLUS entrance counseling L for financial awareness counseling X for exit counseling 120 40

StudentLoans.gov StudentLoans.gov has added a new Repayment Estimator to the web site On the My Preferences screen Authenticated users will see loan data from NSLDS, the prospective eligibility of each loan for a particular plan based on several factors including Loan type Loan balance Income Family size Where you live 121 StudentLoans.gov 122 StudentLoans.gov 123 41

Reconciliation & Program Year Closeout 124 Reconciliation Basics Reconcile To bring into agreement or harmony; make compatible or consistent: to reconcile differing statements; to reconcile accounts Kumbayah! 125 Reconciliation Basics For the purposes of FSA, reconciliation is the process by which Title IV aid, i.e., Grants, Loans, and Campus-Based awards, as recorded on the U.S. Department of Education data systems, is reviewed and compared with the school s internal data 126 42

Reconciliation Basics TAKE AWAY: Monthly reconciliation is a REQUIRED task by regulation for the Direct Loan Program and is strongly recommended for all Title IV programs 127 Reconciliation Basics There are several key players that have a part in the reconciliation task The Financial Aid Office The Money Office(s) Business Office Comptroller s Office Bursar s Office Keep in mind, though, that the U.S. Department of Education looks at your school holistically and not office by office 128 Reconciliation Basics Whose job is it? Anyone and everyone that touches Title IV funds or data bears some responsibility for reconciling You and your colleagues determine what that means for your school and your reconciliation process Define & assign responsibilities Document your process Revisit frequently 129 43

Reconciliation Basics Reconciliation is a two-part task Internal reconciliation Identify and resolve discrepancies Document reasons for any ending cash balances External reconciliation Identify and resolve discrepancies Document reasons for any ending cash balances 130 Reconciliation Basics Financial Aid Office Business Office Reconcile Internally Reconcile with COD Reconcile with COD COD G 5 131 Reconciliation Basics Internal reconciliation matches business office, bursar office, and comptroller office data with financial aid system origination and disbursement data Ensure that Student account data, i.e., date and amount, matches exactly the data that resides on Financial Aid systems Net Drawdowns (ND) = Net Accepted & Posted Disbursements (NAPD) Internal cash transactions match school bank statements 132 44

Returning Funds Let s talk about returning funds to FSA Should be returned electronically via G5 Generates a confirmation number If funds are being returned to G5 for regulatory reasons you MUST send a downward disbursement adjustment for Pell Grant and Direct Loan Program awards to COD* Establish a return of funds bank account for G5 G5 Hotline 888.336.8930 YOU SHOULD NOT SEND FUNDS TO A SERVICER 133 Returning Funds If exceptional circumstances require that you return FSA funds via a paper check There is a unique address for Direct Loan funds and other program funds Information and addresses found in the current FSA Student Aid Handbook (2012-2013), Volume 4, Chapter 4, pg 68 Adjustments to Campus Based funds Amend your FISAP Return funds via G5 Complete information in the current FSA Student Aid Handbook (2012-2013), Volume 4, Chapter 4, pg. 71 134 Reconciliation Basics How do we know we ve successfully reconciled? When our internally reconciled data matches exactly the origination and disbursement data that resides on FSA systems and Net Drawdowns (ND) = Net Accepted and Posted Disbursements (NAPD) 135 45

What to expect from FSA FSA provides many tools in the form of reports Direct Loan & TEACH Grant Program(s) School Account Statement (SAS) Cash and disbursement data Monthly report delivered via SAIG Reflects the official Ending Cash Balance Document to which you reconcile SAS Disbursement Detail on Demand Report Booked and unbooked transaction level disbursement data Report request delivered via SAIG Pending Disbursement Listing Report Delivered weekly via SAIG and posted to the COD website 136 What to expect from FSA FSA provides many tools in the form of reports Direct Loan Program 30-Day Warning Report Unbooked loans (originations) without a linked Master Promissory Note (MPN), an actual disbursement, or both MPNs without a linked loan Delivered weekly via SAIG and posted to your school NewsBox Actual Disbursement List Booked, unbooked, and future dated actual disbursements and adjustments Delivered weekly via SAIG and posted to your school NewsBox 137 Direct Loan School Account Statement Generated the first FULL weekend of the month and reflects data through the end of the previous month You must reconcile monthly to the balances reflected on the SAS and you MUST document that you have done so Composed of 4 sections Cash Summary Cash Detail Disbursement summary by loan type Loan detail, loan level or detail disbursement activity level 138 46

Direct Loan School Account Statement The cash summary reflects monthly and yearto-date, drawdown, refund, disbursement and disbursement adjustment SUMMARY data If cash and disbursement summary totals match your Financial Aid Office and Money Office data you re done If they don t match due to timing, i.e., not yet posted in COD, you re done If neither, you can move on to the cash detail or loan detail sections DOCUMENT 139 Direct Loan School Account Statement Use the cash detail to ensure your cash and refunds post to the correct award year Use the loan detail, either loan level or disbursement level, to ensure that what is on the COD database matches exactly your school data Both disbursement dates and amounts must match exactly the data transmitted to, and accepted by, COD DOCUMENT Direct Loan Tools Can be used with any school software to compare the SAS to school records or print/view SAS reports Download for free from www.fsadownload.ed.gov 140 Direct Loan School Account Statement New report School Account Statement Detail On Demand Report Available with the COD Release 12.0 on March 22, 2013 Reports Request option on COD website Program and award year specific Flexibility to select end date for Year-To-Date Month-To-Date Flexibility to select start and end date for Date Range Delivered via SAIG 141 47

Direct Loan School Account Statement New report School Account Statement Disbursement Detail On Demand Report Disbursement level data Available for all active award years Select award year during request Flexibility to select format Comma Delimited (D/L) option of borrower names Comma Delimited with Headers (D/L & TEACH) - option of borrower names Pipe Delimited (D/L) - option of borrower names Fixed Length (D/L) No borrower names 142 Direct Loan School Account Statement 143 Direct Loan School Account Statement New report School Account Statement Disbursement Detail On Demand Report Disbursement level data Available for all active award years Select award year during request Flexibility to select format Comma Delimited (D/L) option of borrower names Comma Delimited with Headers (D/L & TEACH) - option of borrower names Pipe Delimited (D/L) - option of borrower names Fixed Length (D/L) No borrower names 144 48

Program Year Closeout Program Year Closeout May 31, 2012 145 Program Year Closeout The Program Year Closeout (PYCO) deadline date is the last processing day in July of the year following the end of that award year July 31, 2013 for award year 2011-2012 After the PYCO deadline date COD will Reduce your funding to net drawdowns Reject award year specific submissions of awards and/or disbursements Discontinue award year specific reports Generate your final SAS and a PYCO letter The award year can be re-opened if necessary 146 Program Year Closeout Thirty days after your last award year end date COD will generate a series of communications indicating any remaining balance if not $0 Positive and negative balances Sent monthly until your ECB settles at $0 at which time COD will send your school a $0 Balance Letter At this point in time the Balance Confirmation screen on the COD website becomes active and you can closeout the program year electronically COD will reduce your CFL to net drawdowns A closed year can be re-opened if necessary 147 49

Reconciliation and PYCO 148 50