Direct Loan Process Training for New Participants

1. Direct Loan Process Training for New Participants

2. Benefits to Schools Funds obtained from a single source Integrated with other school financial processes Schools have control over: Handling of Promissory Notes Timing and amount of disbursements Handling adjustments, refunds, and cancellations

3. What are the Loans? • Stafford Subsidized • Stafford Unsubsidized • PLUS • Grad PLUS • Consolidation • TEACH Conversion to Unsub

4. What are the Interest Rates?

5. 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: • 7.9% fixed interest rate

6. Fees to Borrower • For Sub/Unsub loans first disbursed • on/after 7/1/2009 and before 7/1/2010 • 1.5% with an upfront interest rebate of 1.0% • on/after 7/1/2010 and before 7/1/2011 • 1.0% with an upfront interest rebate of 0.5% • Plus fees remain 4.0% with an upfront interest rebate of 1.5%

7. What Are the Benefits for Borrowers? • Up Front Interest Rebate • Increases net amount to borrower • To retain, must make initial 12 required payments timely • Electronic Debit Account incentive • .25% interest reduction to use EDA for repayment

8. Cod.ed.gov

9. Looking for More Information?

10. Quick Reference Guide

11. Quick Reference Guide, continued

12. Direct Loan Processing Cycle

13. Originate Loan School confirms eligibility, determines loan award and creates student record School Originates a Direct Loan when it creates Direct Loan Award and Disbursement data on its system (equal to certifying a loan in FFEL terminology) School then sends this origination and disbursement data to the COD system School uses batch record process or COD Web site to create records 13

14. The Direct Loan Award ID Sequence # of loan at this school for this borrower during award year • 21 characters 123456789S10G99999001 Award year Trailing (0910) Social Security Number Loan Type Sub, Unsub, Plus Direct Loan School code

15. PLUS Loan Origination • Includes credit check • GRAD 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 • Denials can be overridden with a credit worthy Endorser or successful appeal through COD applicant services

16. Credit Check Decision

17. E - Master Promissory Note • Electronic MPN • School sets up profile • Specify capability to file eMPN before origination • School specific message • May use eMPN from another school

18. eMPN Simulations • IFAP/tools for Schools COD CBT • Completing a Sub/Unsub • Completing a Grad PLUS • Completing a Parent Plus

19. Dlenote.ed.gov

20. Paper 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 • In all cases paper Promissory notes are sent to the loan processor either by borrower or school • 0910 COD Technical reference page II-1-116

21. COD-Promissory Note Search

22. What’s New? • Beginning in March 2010, the eMPN website will become the myDirectLoan website. • The myDirectLoan website will continue to allow users to: • Complete an electronic promissory note • View and print electronic disclosure statements

23. What’s New? Beginning in March 2010, the myDirectLoan website will be enhanced to: • Allow Parents and Graduate Students to complete a PLUS Application • Allow Direct Loan borrowers to complete Entrance Counseling • Allow endorsers to endorse a PLUS Loan electronically • Allow borrowers to electronically appeal credit check decisions during the application process

24. Voila!

25. myDirectLoan log in

26. PLUS Process- New Features • Save all Parent/Student relationships to reduce re-entry in subsequent Award Years • Parents are able to submit multiple students and schools during a single application process • Allow Parents to resubmit applications for subsequent Award Years • Send electronic notifications to all schools included in a completed PLUS loan application • Streamline the Application/Promissory Note Process • Parent/Student Identifier and School information submitted in the PLUS loan application will be pre-populated on all applicable promissory notes

27. 6 New DL School Options • Default values will be populated in the School Options fields • The new options are not award year specific • Default values for the one time update are listed below:

28. Direct Loan Processing Cycle

29. Funding and Disbursements • Advance funding: • School draws funds from G5 based on their own calculation of immediate need • Normal cash management rules apply • Report disbursements to COD within 30 days • Disbursements can be submitted up to 7 calendar days prior to the actual disbursement date

30. Funding and Disbursements • Schools use G5 System to • View current funding information • Request payments and adjust drawdowns • Return cash • P268K101234 • P268K • 10 (trailing year) • 1234 (Gaps ID)

31. Funding and Disbursements • Accepted actual disbursements at COD: • Result in Current Funding Level (CFL) increase for Advance Funded schools • COD screens provide 24/7 view of current funding and disbursement status

32. 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 • ID’s unbooked loans for school

33. Cod Technical Referencehttps://www.fsadownload.ed.gov (software and technical ref)

34. Reconcile • Monthly basis • School reconciles internally, FAA 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 • COD Reconciliation specialists

35. School Summary Information Lucy Loo (222) 222-2222 Amy Ang (222) 111-1111 Chris Car (222)333-3333

36. Accessing DL Reports Online

37. Services: Direct Loan Newsbox 01234567-DL

38. 30 Day Warning

39. School Account Statement • Cash Summary • Cash Detail • Loan Detail • Disbursement Detail • All either monthly and/or YTD

40. SAS Cash Summary Do the totals match school records?

41. SAS Disb Detail Match School Records? Missing Data?

42. School: Summary Financial

43. Direct Loan Processing Cycle

44. Servicing “Today” - one Direct Loan Servicer • Direct Loan Servicing – Borrower Services • Direct Loan Servicing – School Services • School Reports • Delinquency & Default Prevention • Servicing “Tomorrow” - multiple Servicers • A Changing Landscape in FSA • Additional Servicers • Default Aversion Servicing

45. Direct Loan Servicing Web sites For Borrowers - www.dl.ed.gov • Real Time Account Information • Online Transaction Processing - Borrower Self-Service • Online Counseling and Rules Based Messaging • Interactive Pre-qualifier for Deferment and Forbearance Requests including online submission • Online payments • Electronic Mail Services • EDA Enrollment • Online Calculators • Online Surveys For Schools - www.dl.ed.gov/schools • Student Account Lookup • Online Reports – Portfolio, Delinquency and Counseling • Complete Question Center

46. Additional Servicers • Created an environment of competition to ensure student borrowers received best in business service • Selected Additional Federal Loan Servicers • ACS (current servicer) • Great Lakes Education Loan Services (additional) • Nelnet (additional) • Sallie Mae Corporation (additional) • AES / PHEAA (additional)

47. Approach: All borrower federally held loans will be maintained by a single servicer Servicers must comply with all legislative and regulatory requirements and will provide unique best in business services Schools will be working with multiple servicers Examples of Services: Single Point of Contact for Schools per Servicer Financial literacy materials and web tools Predictive call modeling (for delinquency) Robust skip tracing tools (for delinquency) Web Chat 47

48. What does all this mean for schools? Will schools have to work with multiple servicers? Will schools likely have different reporting formats for various school reports ? Can a school designate which servicer they want? How will a school know which servicer has a borrowers loans? Yes, schools will work with all servicers. Yes, schools will likely have different reporting from each servicer. No, schools cannot designate a servicer. Schools will use NSLDS to determine which servicer has borrower loans.

49. Implementation Timeline • Timeline: • August 31, 2009: (Phase 1) - COMPLETE • Additional Servicers fully operational to handle loan sales for Department • March 31, 2010: (Phase 2) • July 15, 2010: • Allocations of new borrower loan volume will be determined (per servicer) • August 31, 2010: (Phase 3) • Additional Servicers fully operational to handle William D. Ford Direct Loans Three-Phase Implementation • Phase 1 (Initial) – COMPLETE • Phase 2 (Intermediate) – 3/31/10 Completion Date • Phase 3 (Final) – 8/31/10 Completion

50. Get to know your Federal Loan Servicers: