Session #40

1. Session #40 A Direct Loan Primer Isiah DupreeJulie Aloisio Cynthia Battle

2. Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 2

3. Student Aid History

4. Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 4

5. CPS Match and Student Identifiers Common Record XML Origination Disbursement Drawdowns “Booked” Loans Message Classes Reconciliation/Closeout SAIG EDExpress Terms and Definitions

6. Roles and Responsibilities • Students • Apply for aid and meet eligibility requirements • Receive and repay • Schools • Certify eligibility • Deliver proceeds • Educate borrowers about their responsibilities • Send/receive financial and student data to/from Federal Student Aid • Funds management and reconciliation

7. School Responsibilities • What options will best serve your students? • What offices will be involved in the process? • What will their roles be? • Staffing levels sufficient to support operational decisions? • Who will conduct your reconciliation? • Who will work your rejects/resolve processing issues?

8. School Responsibilities • How will you process records? • Process yourself • Software? • Technical support? • How will you back up your data? • Production schedule? • Third Party Servicer

9. Roles and Responsibilities:Federal Student Aid • Provides operational, system, and service support to schools & borrowers • Eligibility • Funding • Reconciliation/Closeout • Communication/Customer Service • Repayment • Loan Servicing to Borrowers

10. Direct Loan Types • Subsidized • Need-based; no interest charged while in school and during grace periods or deferment • Unsubsidized • Not need-based; interest charged during all periods • PLUS • Not need-based; for parents or graduate/professional students • Consolidation • Combines loans for easy repayment

11. Master Promissory Note (MPN) • Legal agreement • Multi-year, multi-loan notes • Exceptions • Plain Language Disclosures • Disclosure Statements

12. Subsidized and Unsubsidized Loans • Enrollment • Eligibility • MPN • Interest • Fees/Rebate • Loan Limits

13. Year Dependent Undergraduate Independent Undergraduate 1st Year $3,500 $7,500 (maximum $3,500 subsidized) 2nd Year $4,500 $8,500 (maximum $4,500 subsidized) 3rd Year and above $5,500 $10,500 (maximum $5,500 subsidized) Annual Loan Limits Graduate/ Professional Student Up to $20,500 each academic year (maximum $8,500 subsidized)

14. PLUS Loans • Eligibility • Credit Check • Interest • Fees/Rebate • Loan limits

15. PLUS Loans • MPN • Borrower Type • Parents • Graduate/Professional students • What is the difference between borrower types?

16. Consolidation Loans • Combines multiple loans into a new single loan with one payment • Both students and parents are eligible to consolidate, but not together • Similar repayment plans as other loans, but HERA changes have created some differences • Eligibility depends on the loan types and status as well as borrower qualifications

17. Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 17

18. Direct Loan Processing Cycle

19. COD Processing • School confirms eligibility, awards, and disburses aid • School creates student record • Common Record or COD Web site • School sends information to COD • COD processes/edits and returns response • Error correction, when necessary

20. Central Processing System (CPS) COD Loans and Disbursements GAPS DLSS NSLDS COD Processing ISIR FAFSA SAR e-MPN Electronic Entrance & Exit Counseling Repayment/ Servicing Originations, Disbursements & Paper MPNs Responses Loans and Disbursements Enrollment Status Funding Data and Payment Requests Funding Request Student data Money

21. School Setup Options • Funding • Advanced Funded vs. Pushed Cash • Multi-year vs. Single-year • MPN Processing • Reports

22. Master Promissory NotesAdvantages of Electronic Processing

23. Master Promissory NotesMPN versus eMPN Statistics 2006 Statistics 24% Paper76% eMPN 2007 Statistics 19% Paper81% eMPN

24. Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup • Application and Decision • Set-Up Tools & Resources Direct Loan Servicing Contact 24

25. School SetupApplication and Decision • Certified eligible for Direct Loan? • Eligibility and Certification Approval Report (ECAR) • “E-APP for Schools” Web site www.eligcert.ed.gov

26. School SetupApplication and Decision • E-mail participation request to CODSupport@acs-inc.com • Direct Loan Operations Review • Decision Letter • PEPS transmits School Information to the COD System

27. School SetupGrant Administration and Payment System (GAPS) • Direct Loan ”Banking” information • GAPS Hotline 1-888-336-8930 • Web site www.e-grants.ed.gov

28. School SetupStudent Aid Internet Gateway (SAIG) • Complete or revise SAIG Agreement • SAIG assigns mailbox (TG#s) • Arrange for testing of transmissions • SAIG Customer Service 1-800-330-5947 • Web site www.fsawebenroll.ed.gov

29. Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 29

30. Tools & ResourcesWeb Sites COD Web sitehttp://COD.ed.gov - Submit & Correct Records, View Batches, Retrieve Reports - Access DL Servicing Website General Direct Loan Informationwww.ed.gov/offices/OSFAP/DirectLoan/index.html General Federal Student Aid Informationhttp://www.ifap.ed.gov - DL Listserv, DL bulletin Schools Portalhttp://fsa4schools.ed.gov

31. Tools & Resources • DL Tools • Cash Management Tools • Reconciliation • Rebuild

32. Tools & ResourcesBorrower Publications • Direct Loan Basics • Entrance and Exit Counseling • To order visit: www.fsapubs.org

33. Tools & ResourcesSchool Publications • COD Technical Reference • Implementation Guide • Direct Loan School Guide • Blue Book • Financial Aid Handbook • NSLDS Enrollment Reporting Guide

34. Direct Loan Information • Regulatory Cites: Code of Federal Regulations 34 • Part 668 provides the general provisions for all the Title IV programs • Part 685 is specific to the Direct Loan Program • FSA Handbook References • Origination: Volume 4, Chapter 1 • MPNs: Volume 4, Chapter 1 • Disbursements: Volume 4, Chapter 2 • Cash Management: Volume 4, Chapter 3

35. Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 35

36. School Services Online http://www.dl.ed.gov/schools Account Lookup View live account data for students including balances, account status, separation dates, and more. DL Servicing Resources Web Site Help General Information Contact Us Reporting Tools Exit & Entrance Counseling Reports Identify students who have completed Counseling Online Delinquency Reports Detail, Summary, Late Stage Delinquency, and Borrower History Email Subscription Receive email notifications when reports are available online Spanish Version Login to Servicing is through COD 36

37. School Services Online Direct Loan Servicing School Site 37

38. Click here to see Repayment Estimates School Services Online Student Account Lookup 38

39. School Services Online Delinquency Reports Summary Delinquency Report Late Stage Delinquency Report 39

40. School Services Online Borrower Delinquency Pattern Stafford Borrower Delinquency Pattern 12 Month Average 35% 30% 25% 20% Percentage of Total Delinquency 15% 10% 5% 0% 31-60 61-90 91-120 121-150 151-180 181-210 211-240 241-270 271-300 301-330 331-360 Days Past Due 40

41. School Services Online • Pre-Repayment Counseling • Default Propensity Index (DPI) score • We use both Outbound and Inbound calls for counseling • 83% of all Default borrowers were not successfully contacted by phone during the 360-day collection effort during delinquency • Delinquency Counseling • 31 days we begin a series of calls (22 calls) • High Balance and current cohort year (44 calls) • Letters begin at 7 days delinquent (12) 41

42. FAFSA Promissory notes Entrance Counseling & Exit Counseling Repayment Servicing Loan Consolidation Benefits to Borrowers The Direct Loan Program offers online services to borrowers from start to finish. Student Portal http://www.studentaid.ed.gov http://www.studentaid.ed.gov Universal single PIN access to all sites 42

43. Repayment incentives Repayment options tailored to individual need (Standard, Extended, Graduated, Income Contingent, Alternative Repayment) Payment due date selection by borrower Options for receiving bills and/or correspondence electronically Electronic Payments (EDA and on-line) Self-Service tools for borrowers (telephone voice response system, Web portals) Online form submission with electronic PIN signatures (forbearance, deferments, EDA, FAFSA) Loan Consolidation Benefits to Borrowers The Direct Loan Program offers borrowers flexibility. 43

44. http://www.dl.ed.gov Borrower Services Online Provides over 6 million student borrowers with highly secure on-line services for: Question Center Online information resource for borrowers Spanish/English Options Entire site available in Spanish Your Account View live account data and manage loans online Download Forms Download loan-related forms directly, avoiding the time and expense of mailing Loan Consolidation Consolidate existing loans into a single Direct Loan Online Billing & Payment Receive bills and correspondence electronically, make payments online 44

45. Borrower Services Online Account Information Borrowers are provided with the amount of their total indebtedness (Direct Loans, FFEL, and Perkins) during Exit Counseling or from the Account Summary page. Exit Counseling Click here to view your Non-Direct Loans 45

46. Borrower Services Online Repayment Options • Borrowers may select one of our four repayment plans: • Standard • Extended • Graduated • Income Contingent • Repayment (ICR) • Borrowers may also select from any of the four available due dates: • 7th, 14th, 21st, or 28th 46

47. Borrower Services Online Bills and Payments Direct Loan borrowers can receive their bills and make payments online; and they can choose to receive their Direct Loan correspondence electronically, all for free. 381,227 online payments were made during the month of July for a grand total of $96,065,817.69. 47

48. Borrower Services Online Electronic Debit Account 958,200 borrowers are receiving a .25% incentive by enrolling in EDA! Borrower feedback: I just wanted to congratulate you on providing an excellent way to manage my student loan account. I cannot tell you how much simpler it is for me, knowing I can do everything I need on-line. I don't have to mail anything or call someone -- I just need to log in. - Troy 48

49. Borrower Services Online Online Form Submission Borrowers can submit Unemployment Deferment and General Forbearance applications online. 49

50. Borrower Services Online Entrance Counseling 50