Direct Loan Update WASFAA 2017 Conference Seattle Chuck Hirman U.S. Dept. of Education FSA Seattle Agenda 2017/18 COD New Award Year Setup 2017/18 Direct Loan Funding Schema COD Direct Loan Warnings & Rejects PLUS Loans Loan Fees Disbursements DL Cash Management & Reconciliation 2 FOR TRAINING PURPOSES ONLY 1
2017/18 New Award Year Setup 2017/18 COD functionality added in COD Release 16.0 3/26/2017 Reports delivery and format carried forward Studentloans.gov parameters carried forward Funding set for new award year 3 2017/18 COD Functionality Loan ID s MPN ID s Responses Message Classes 123456789S18G99999001 4 FOR TRAINING PURPOSES ONLY 2
2017/18 Message Classes See COD Tech Ref Volume 2 Section 2 5 2017/18 Report Options 17-18 6 FOR TRAINING PURPOSES ONLY 3
2017/18 Report Options See COD Tech Ref Volume 6 Section 8 7 2017/18 School Account Statement Check the options to confirm they will be sent to your TG Mailbox in the format you need Do you really need so many versions? Monthly and YTD? Disbursement detail and loan detail? If you use them, fine, but if you don t please de-select as it s a resource drain for COD 8 FOR TRAINING PURPOSES ONLY 4
COD SLG Non-Award Year Specific 9 COD SLG Award Year Specific 10 FOR TRAINING PURPOSES ONLY 5
2017/18 New Award Year Setup G5 Award Numbers Program G5 Award Number Award Year Direct Loan P268K18#### trailing year TEACH Grant P379T18#### trailing year Pell Grant P063P17#### leading year IASG P408A17#### leading year Campus-based FWS P033A17#### leading year Campus-based SEOG P007A17#### leading year #### - your school s 4-digit G5 identification number 11 2017/18 Direct Loan Funding Advance funded schools If disbursements traditionally begin prior to June a funding level will be available by the end of March June 2017 60% November 2017 40% or November 2017 20% and February 2018 20% 12 FOR TRAINING PURPOSES ONLY 6
Need Additional DL Funds? Advance funded schools 2017/18 funding needs are based on 2016/17 disbursed totals If need additional funds prior to scheduled increases contact COD they will first check that all prior draws have been fully substantiated if near the end of the award year may ask that you first submit origination records so additional funding does not exceed anticipated disbursements 13 COD Release 16.0 New XML Schema Schema 4.0c implemented with COD Release 16.0 near the end of March 2017 Full schema validation Warning edit 211 no longer returned Was intended to alert and software vendors that the data was processed despite bad XML Reject edit 210 when batch fails schema validation 14 FOR TRAINING PURPOSES ONLY 7
Warnings vs Rejects Warnings Record was processed (built) into the COD system FYI about processing/timing Rejects Not built, nor found in Person/Award Search Treated by COD as if never sent in the first place Import Edit Report will tell you why Can also look in COD Batch Search Rejected disbursements = unsubstantiated cash 15 Top DL Warnings in FY16 Edit # Direct Loan Warning Edit # of Hits 054 DRI is still False but within timeframe that could be sent as True 95,676,162 * 055 Disbursement reported late 14,442,236 * 036 PLUS credit is not (yet) accepted 3,237,923 119 COD inactivated loan after school zeroed out loan amount 2,125,601 * Count includes all programs See COD Technical Reference, Volume II, Section IV - Edits 16 FOR TRAINING PURPOSES ONLY 8
Warning Edits Warning is often too harsh a term More like FYI for edits like 054. Just to alert you that COD received an origination record with an anticipated disbursement date that is within the timeframe that could be made an actual did you mean to leave the DRI at F? But other times warning might be too soft regulatory. 17 Top DL Rejects in FY16 Edit # Direct Loan Reject Edit # of Hits 205 Payment Period Start Date is outside the loan period 10,655,879 140 Incorrect loan origination fee 9,890,186 141 Attempted to change fee on an active loan 9,305,364 067 Incorrect disbursement amount 5,275,438 050 Disbursement date outside allowable window 4,465,462 167 Exceeded annual subsidized loan limit 2,404,925 117 Disbursement information incorrect or origination has not yet been accepted 1,417,899 081 Disbursement sent but no MPN on file 1,283,467 See COD Technical Reference, Volume II, Section IV - Edits 18 FOR TRAINING PURPOSES ONLY 9
COD Batch Search The only way on the COD web site to locate reject reasons 19 Late Disbursement Reporting: Warning Edit 055 Late disbursement reporting 14 million hits in FY 2016! COD is still looking at 30-days but the Regs require 15-day reporting COD is not intended to be a regulatory guide When you receive an 055 that week there will also be a School Monitoring Report produced 20 FOR TRAINING PURPOSES ONLY 10
School Monitoring Report Produced that week when any of these occur: Unsubstantiated cash > 30 days Pell POP Warning edit 055 triggers 21 COD Newsbox - Reports 22 FOR TRAINING PURPOSES ONLY 11
Newsbox/COD Website 23 PLUS Credit: Warning Edit 036 PLUS credit decision still not accepted 3 million hits in FY 2016 New requirement of PLUS (credit) counseling for denied borrowers could delay an accepted credit longer But we recommend you originate the PLUS loan in the interim, before the window closes 24 FOR TRAINING PURPOSES ONLY 12
Credit Requirements Met Key on tag: <CreditRequirementsMet> 25 Credit Requirements Met Originate, yes, but don t disburse until <CreditRequirementsMet> = Y If it is stuck on N, where along the line is it? <CreditAppealStatus>? <EndorserApproved>? <PLUSCounselingCompleted>? <CRM> only tell you about credit, not MPN, endorser amount, other PLUS eligibility requirements 26 FOR TRAINING PURPOSES ONLY 13
PLUS Credit and Early FAFSA If credit check was run when 1718 FAFSA became available on 10/1/16 Credit check will expire on 3/30/17 COD Release 16.0 with 1718 award year is scheduled for 3/26/17 Need to originate and send to COD the PLUS award promptly Will your software be ready? 27 PLUS Borrower Default Check COD Release 15.2 implementation 10/30/16 Parent PLUS and Grad PLUS borrowers have loan default check automatically made in NSLDS during SLG application process Results to schools in SP responses 28 FOR TRAINING PURPOSES ONLY 14
PLUS Borrower Default If federal student loan default returned by NSLDS borrower will be alerted in SLG Schools will be informed in SP response <DefaultOverpayCode> Tag Also displayed on COD web site 29 Loan Fee Rejects: Edits 140, 141 Edit 140: incorrect fee-edd combination 9.9 million hits in FY 2016 Usually happens when anticipated EDD is before 10/1 but actual EDD is on/after 1.068% 1.068% 30 FOR TRAINING PURPOSES ONLY 15
Reject Edits 140, 141 Loan Fees Edit 141: trying to change the fee on an active loan 9.3 million hits in FY 2016 Once COD has accepted a loan at one fee the only way to change it is to first inactivate the loan Zero out all disbursements and the loan amount 31 Disbursement Rejects: Edits 067, 050, 117, 081 Edit 067 disbursement amount (5.3 million hits) reduced loan amount but not disbursement(s)? one disbursement only but not exempt? Edit 050 disbursement date (4.5 million hits) window is 10 days before to 180 days after Edit 117 general (1.4 million hits) disbursement sent before origination was accepted? Edit 081 no MPN (1.3 million hits) disbursement sent but no MPN linked 32 FOR TRAINING PURPOSES ONLY 16
Disbursement Date Reporting Increasingly common audit and program review finding Often when disbursement date in student accounts differs from those at COD Actual disbursement date is the date a school credits the student s account or pays the student directly It s key for loan fees, SULA, interest rates, cancellation timeframes, etc. 33 Disbursement Date Error - example Late 2016 - unsubsidized loan originated with first anticipated disbursement date of 1/15/2017 Come January school determines borrower is not yet eligible for disbursement (no MPN, entrance counseling, SAP, whatever) On 3/15/2017 borrower is finally eligible and school goes in to flip the DRI to T and sends the record to COD Warning edit 055 triggers, School Monitoring Report produced, borrower is charged interest from 1/15 Where was the mistake made? 34 FOR TRAINING PURPOSES ONLY 17
Upward Disbursement Adjustments Only do these to correct an erroneously reported disbursement amount Never report these when additional funds are disbursed send a new disbursement instead Interest is always calculated from the sequence-01 date 35 Regulatory Deadlines Earlier deadlines supersede later deadlines Program year closeout deadline of 7/31/2017 does not take precedence over monthly reconciliation requirements Monthly reconciliation deadline does not take precedence over disbursement reporting timeframes Disbursement reporting timeframes do not take precedence over cash management immediate need requirements 36 FOR TRAINING PURPOSES ONLY 18
Immediate Need Funds drawndown must be disbursed or returned by the end of the third business day Requirement has been around a long time But we occasionally see a school draw their entire available balance without taking into consideration the dates of upcoming disbursements Schools were placed on records-first processing 37 Tips from our Funds Control Division Schools need to know (and show) which students/disbursements are tied to which drawdowns neither G5 nor COD tracks this but an auditor can ask for it Too many instances of financial aid and business offices not cooperating Suggest that business office be granted read-only access to COD to monitor cash balances too often they think they re fully reconciled just because the G5 available balance shows $0 Financial aid office should get read-only access to monitor G5 activity 38 FOR TRAINING PURPOSES ONLY 19
Third Party Servicers Funds Management is seeing too many schools which use a TPS but take no interest in oversight of cash management, reconciliation or program year closeout Schools should not just assume this is being done, and correctly Some sharp TPSs out there but others not always on top of things They work for you and FSA holds the school responsible We recommend at least view-only access by school staff into G5 and COD 39 Booking Warning Report Was called the 30-Day Warning Report More parameter-driven criteria being introduced But basic data is still the same and is intended to point out loans that are missing an element required to book them If you ve disbursed on these loans and drawndown funds to cover the disbursements it remains unsubstantiated Required elements to book: accepted loan origination record linked MPN accepted actual disbursement 40 FOR TRAINING PURPOSES ONLY 20
Unsubstantiated Cash Formula Unsubstantiated cash are funds which have been drawn but not offset (justified or substantiated) by actual disbursements Since October 2015 the unsubstantiated cash begin date is displayed on Cash Activity page of the COD web site Shows the date the financial transaction (i.e. drawdown) first became unsubstantiated 41 Negative Cash Balances Should they bother FSA? It appears that you ve disbursed more than you ve drawndown so do we owe you money? We ve learned that it matters what is causing the negative balance Seeing some schools calculating R2T4s and sending the lump sum back to G5 which creates a negative cash balance But then they delay getting the individual downward disbursement adjustments in and sent to COD 42 FOR TRAINING PURPOSES ONLY 21
Refunds to G5 Still getting some paper checks mailed to COD COD is directed by FSA s Funds Management to mail them back and instruct the school to submit the returns electronically This is a Treasury directive 43 Records-First Processing REPORT DISBURSEMENT REQUEST FUNDS POST DISBURSEMENT This can be forced on a school but this method may work better for some schools voluntarily Report future-dated actual disbursements, up to 7 days into the future Once accepted you draw the funds Funds are usually available before the disbursement date arrives and funds are posted 44 FOR TRAINING PURPOSES ONLY 22
Program Year Closeout Next year up is 2015/16 Deadline 7/31/2017 Completed on COD web site with Balance Confirmation form Form made available when SAS reflects $0 ending cash balance Schools missing deadline but haven t requested extended processing billing process begins 1516 45 G5 Drawdown Adjustments Seeing this happen in the days, weeks before the program year closeout deadline at the end of July High number of drawdown funds moved from the year being closed out to the next award year We know that many of these are just schools kicking the can down the road Will it be any easier next year trying to reconcile these? 46 FOR TRAINING PURPOSES ONLY 23
Extended Processing Requests On the rise Two big reasons: 1. Unclaimed credit balances that schools either discover late or from an audit finding 2. SULA updates/corrections not completed on time 47 Extended Processing for Credit Balances Credit balances are funds already disbursed It s the borrower s money, not the school s Be careful not to let it convert into the school general fund (escheating) Watch the deadlines If credit balance is unclaimed it must be returned to the program downward adjustment to student s disbursement funds returned or re-disbursed to another borrower 48 FOR TRAINING PURPOSES ONLY 24
School Contact Information at COD Contact information is often outdated or inaccurate We don t know who to alert when we see a problem developing COD outreach FSA efforts to be proactive FAA, CFO, President Update E-app in eligcert.ed.gov DL Officer and Pell Officer Contact me Update directly on the COD web site Not me! Me neither 49 50 FOR TRAINING PURPOSES ONLY 25