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PLUS Processing A to Z

Detailed guide on Federal Direct PLUS Loans from application to repayment, eligibility criteria, and borrower responsibilities. Learn about credits checks, processing, disbursement, and repayment options.

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PLUS Processing A to Z

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  1. Session #9 PLUS Processing A to Z Wood Mason | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals

  2. Direct PLUS Loans from A to Z • Federal Direct PLUS Loan basics • Federal Direct PLUS Loan eligibility • School and Borrower • Master Promissory Note • Credit Check • Entrance Counseling • Processing • Disbursing • Repayment

  3. Direct PLUS Loans from A to Z Federal Direct PLUS Loan - Basics • Two categories of borrowers...Parents of a dependent student and graduate/professional students • Can be used to cover expected family contribution (EFC) • PLUS loans are limited in amount to the Cost of Attendance (COA) less any estimated financial assistance (EFA) • PLUS borrowers must undergo a credit check

  4. Direct PLUS Loans from A to Z Federal Direct PLUS Loan - Eligibility • School eligibility - General • Same as Direct Subsidized/Unsubsidized Loan Program • Reflected as separate program PPA/eCAR • Option to participate or not • If you participate in the Direct Subsidized/Unsubsidized Program you are NOT required to participate in the Direct PLUS Loan Program* • Non-participation is NOT grounds for offering or awarding additional unsubsidized funds to a dependent student *You must first inform a graduate/professional student of his eligibility for a Direct Unsubsidized Loan before offering and awarding a Direct PLUS Loan

  5. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • Borrower Eligibility - General • A borrower (and student for whom parent is borrowing) must meet Title IV eligibility requirements found in 34 CFR 668 Subpart C • School determines borrower eligibility and loan amount • A borrower cannot have an adverse credit history as defined in CFR 685.200

  6. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • Parent must be the student’s biological or adoptive Mother or Father • Can be a stepparent if his/her income and assets are used to calculate the EFC • A legal guardian is not an eligible borrower • Not eligible if delinquent on a debt to the Federal Government, or incarcerated

  7. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • A parent can borrow for multiple dependent students • Unique parent/dependent student “pair” for each PLUS loan • 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

  8. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • Graduate or professional student • Eligible award year 2005-2006 and forward • School MUST determine eligibility for, and offer, Direct Unsubsidized Loan first • Must meet Title IV eligibility requirements • Must be enrolled at least half-time in an eligible program at an eligible school

  9. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Master Promissory Note (MPN) • Unique MPN – NOT a subsidized/unsubsidized loan MPN • Contains borrower and/or student data • PLUS MPN used for ALL PLUS loans • No financial data on the MPN • COD generates a “Disclosure Statement” with loan financial data 7-days prior to the first disbursement (EDD) of each loan with accepted credit decision • Expires 10 years from date of receipt at COD • 12 months if there’s no disbursement on a linked loan

  10. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Master Promissory Note • PLUS MPN has “N” as “type” in MPN ID • Student SSN, “N,” award year, school direct loan school code (G or E), sequence number • XXXXXXXXXN14GXXXXX001 • Links on the SSN, DOB, and first two characters of the first name of both borrower and student • Must use unique MPN for each parent/student “pair” if multiple dependent students

  11. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Master Promissory Note • Single-Loan MPN • When an endorser is linked to the PLUS Loan MPN • Linked MPN reflects a status of “Inactive-Endorser” • Any future loan will need a new MPN

  12. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • ALL Direct PLUS Loan Borrowers undergo a credit check • Initiated by the school or the borrower • The school via the loan origination record (LOR) • The school online via the COD website • The borrower via a Direct PLUS Request on the StudentLoans.gov website • Regardless of the credit result, you should originate the PLUS loan if borrower is otherwise eligible

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  14. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • Must have borrower authorization to conduct a credit check • Part of Federal Direct PLUS Loan MPN • Downloaded from COD website • Hand written/faxed signed authorization • SSN is the key identifier for a credit check and change will trigger a new credit history • Reflected as inquiry on applicant’s credit history

  15. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • A credit check result is valid for 90 days • If additional activity occurs that would otherwise trigger a credit check during that 90-day period COD will use the result on the database • If additional activity occurs that would otherwise trigger a credit check beyond the 90-day period COD will initiate a subsequent credit check • Credit result can be • Accepted (A) • Declined (D) – adverse credit history • Pending (P) – issue with the inquiry

  16. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • Denial of one parent is sufficient to offer additional unsubsidized loan funds to dependent student • Other parent does NOT have to undergo PLUS loan process • A credit result of Declined is not school specific and can be used across schools in the same academic year • School can forego the Direct PLUS Loan process with knowledge, and documentation, of inability of Parent to borrow due to exceptional circumstances • 34 CFR 685.203 • DCL ID: GEN-11-07

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  20. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Credit • PLUS loan with credit declination can be accepted and displayed on COD but with an unacceptable credit decision • Can’t disburse unless and until credit denial is cured by a successful appeal via COD or by borrower securing an endorser • Initial declined credit status remains on the COD website and is NOT changed after a successful appeal or securing an endorser

  21. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Credit Appeal • Appeals… • Appeal on extenuating circumstances or errant data from the Credit Bureau • Appeal by submitting via fax the specific documents requested by COD • Can start appeal process on StudentLoans.gov - instructions on StudentLoans.gov screens • A successful appeal will result in a credit override response (Document Type CO) sent to the school • Reconsideration Eligibility • Reconsideration Report

  22. Direct PLUS Loans from A to Z COD will generate and make available to schools a new “Credit Check Reconsideration Eligibility ” report • Generated weekly and posted to the school NewsBox on the COD website in CSV format • Identifies borrowers at their school whose most recent credit check is eligible for credit check reconsideration • If the borrower appeal is accepted, then the record will not display on the following week’s report • A borrower’s credit check will be displayed on the report for 180 days from the record’s Credit Check Date

  23. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • CANNOT be the student for whom the loan is intended • Endorser undergoes a credit check • Endorsed loan reported to credit bureau as any other financial obligation • Endorser promises to pay outstanding principal balance, accrued interest, any penalties, AND any collection costs • Endorser cannot “backout” of an originated PLUS loan • Endorser completes an Endorser Addendum, NOT another MPN • Paper or electronic via StudentLoans.gov

  24. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Endorser completes an electronic Endorser Addendum via StudentLoans.gov • Must have FSA PIN to access StudentLoans.gov • Uses PLUS loan ID (if PLUS Loan originated by school) or the Loan Reference Number (if borrower has completed a PLUS Request via StudentLoans.gov and no LOR on COD database) • Endorser sets endorsed loan amount • COD will send “CO” response to school if there is a PLUS loan origination on the COD database or… • Subsequent “SP” response if no LOR on COD

  25. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Endorser completes a paper Endorser Addendum • The borrower can print a paper addendum for the endorser for submission off of the StudentLoans.gov website • If no PLUS loan LOR on the system, no response from COD until PLUS loan LOR is submitted • PLUS loan LOR will link to endorser addendum and COD will generate a “CO” response and send to school • Graphic in the 2013-2014 COD Technical Reference, Volume II, Section I, Page 166

  26. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Endorser data and endorsed amount displayed on the COD loan information screen • Cannot disburse more than the lesser of the endorsed amount or loan amount approved • Endorsed amount is displayed on response from StudentLoans.gov • CANNOT increase a PLUS loan with an endorser • Must create and originate a subsequent PLUS loan • A new credit history on borrower and endorser if last credit check older than 90 days

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  29. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Entrance Counseling • First-time graduate & professional student PLUS borrower MUST complete PLUS entrance counseling prior to first disbursement of the PLUS loan • Not the same as undergraduate entrance counseling • Offered at StudentLoans.gov • Results sent to COD in Doc Type “EC” from StudentLoans.gov • Schools are NOT required to use FSA online counseling

  30. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Processing • CAVEAT - a school can decline to originate, or originate a lesser loan amount than requested, on a case-by-case basis • You MUST document the reason • You cannot do so on an across-the-board basis • 34 CFR 685.203

  31. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Processing • Same origination and disbursement requirements as Federal Direct Subsidized & Unsubsidized Loans • Anticipated and/or actual disbursements equal to loan amount required on origination • Up to 20 actual disbursements • Report ACTUAL date of disbursements • Origination fee assessed on each actual disbursement • 4.288% on loans first disbursed (EDD) on or after December 1, 2013 and on or before September 30, 2014 • COD code to validate EDD vs. origination fee migrated October 17, 2013

  32. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Origination • Via “batch” by submission of a Common Record (CR) • CR response returned reflecting status of award, credit, actual disbursement (if applicable) and MPN • Individually online at COD website • Immediate editing of submitted data • Manually create an award from the “Person Information” screen and “submit” • Automatically create an award from the “SP” acknowledgement from StudentLoans.gov • Creates a “skeleton” award to complete and submit

  33. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Processing • Data from a PLUS Request via the StudentLoans.gov website will allow you to “create” an award from the “SP” response • Does not include ALL the information necessary to originate the award • Ability to begin appeal process if needed • DOES NOT ORIGINATE AN AWARD • Results in PLUS borrower/student demographic, loan request, deferment, and disbursement information being sent to the school via the type “SP” acknowledgement • School is responsible for determining eligibility for and originating the PLUS loan

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  36. Direct PLUS Loans from A to Z Daffy Duck’s Drafting Academy 00000000 Quackston Mallard Eider III Quackston Mallard Eider III

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  43. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Disbursement • Assure eligibility of the dependent student • Disburse via batch or online via the Award Disbursements Information screen • Also disburse from the Action Queue • Unless otherwise directed, any credit balance is given to the parent • Adhere to the normal and required school notifications • The disbursement data MUST be accepted by COD within 15 days of the actual date of disbursement • You must report the ACTUAL DISBURSEMENT DATE

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  45. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Disbursement • You may increase a PLUS loan established on the COD database • Change record if software allows • New PLUS loan for the difference requested • But you cannot increase an established PLUS loan if in receipt of a subsequent adverse credit decision • If the established PLUS loan is NOT fully disbursed you can fully disburse it • Alternatively, reduce remaining disbursements to $0 and offer student unsubsidized funds up to their eligibility for grade level and need

  46. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Disbursement • If the established PLUS loan has been fully disbursed… • Offer the dependent student an additional unsubsidized loan up to their eligibility appropriate to their grade level and remaining need

  47. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Booking the PLUS loan • Once COD has received an accepted LOR, a linked MPN, and an actual disbursement the PLUS loan is “booked” • Generally, disbursement #1, sequence #1 books the loan • Each subsequent disbursement books as well • When the loan is booked it is assigned to a Servicer • Liability for any drawn funds migrates from the school to FSA

  48. Direct PLUS Loans from A to Z LDE : The Loan Distribution Engine is the interface that assigns a booked loan to a federal loan servicer

  49. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Repayment • Deferment and Forbearance options available • Parent can request to defer repayment while dependent student, or parent, is enrolled at an eligible school more than half-time • Student does not need to request in-school deferment • Parent can request to defer repayment for an additional six months from the date the dependent student ceases to be enrolled on at least a half-time basis

  50. Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Repayment • Repayment options much like subsidized/unsubsidized loan borrowers • Standard • Graduated • Extended • Must have outstanding loan balance > $30,000 • Income dependent repayment plans are NOT available for parent PLUS loan • Income-contingent repayment plan available for Direct Consolidation Loan that includes an underlying Parent PLUS Loan

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