Session 44

Direct Loan A-Z

Julie Aloisio

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Topics of Discussion

• Brief History of Student Aid

• Basic Overview of the Direct Loan Program

• Direct Loan Processing Basics

• Roles and Responsibilities

Brief History of Student Aid

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Student Aid History

The GI B

ill

The GI B

ill

College W

ork-Study

College W

ork-Study

Program

ProgramNatio

nal Defense

National D

efense

Educatio

n Act

Educatio

n Act

19441944 19581958 19651965

Higher

Higher

Educatio

n Act

Educatio

n Act

19641964

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Student Aid History

Basic Educa

tional

Basic Educa

tional

Opportunity

Grant (PELL)

Opportunity

Grant (PELL)

Direct L

oan

Direct L

oan

Program

Program

19691969 19801980

HERAHERA

19941994 20062006

PLUS and Consolidation

PLUS and Consolidation

created

created

19861986

Renamed FFEL, unsub begins

Renamed FFEL, unsub begins

19921992

Creation of SLS

Creation of SLS

Basic Overview of the Direct Loan Program

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Direct Loan Overview

• Official Name:

– William D. Ford Federal Direct Loan Program

• What is it?

– Federal Student Aid program providing low-interest loans to students and parents

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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

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Subsidized and Unsubsidized Loans

• Enrollment

• Eligibility

• Agreement- Master Promissory Note

• Interest

• Loan Limits

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Annual Loan Limits (Sub/Unsub Only)

Year Dependent Undergraduate

Independent Undergraduate

Graduate/Professional

Student

1st Year $2,625 $6,625(maximum $2,625

subsidized)

Up to $18,500 each academic year

(maximum $8,500 subsidized)

2nd Year $3,500 $7,500(maximum $3,500

subsidized)

3rd Year and

above

$5,500 $10,500(maximum $5,500

subsidized)

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Subsidized and Unsubsidized Loans• True or False?True or False?

– There is no charge for There is no charge for Direct LoansDirect Loans

– The student can cancel The student can cancel his/her loanhis/her loan

– Students begin Students begin repayment immediately repayment immediately after graduationafter graduation

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Subsidized and Unsubsidized Loans• True or False?True or False?

– There is only one There is only one type of repayment type of repayment plan.plan.

– Students can Students can postpone payments.postpone payments.

– Loans can be Loans can be discharged (forgiven)discharged (forgiven)

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PLUS Loans

• Eligibility

• Credit Check

• Agreement-MPN

– Single loan MPNs

• Interest

• Loan limit

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PLUS Loans

• Borrower Type

– Parents

– Graduate/Professional students

• What is the difference between borrower types?

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PLUS Loans

• True or False?– There is a charge for the loanThere is a charge for the loan

– Parents receive the money directlyParents receive the money directly

– There is only one repayment planThere is only one repayment plan

– Repayment is delayed until after schoolRepayment is delayed until after school

– There are set loan limits for Graduate/Professional There are set loan limits for Graduate/Professional studentsstudents

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Master Promissory Note (MPN)

• Legal agreement

• Multi-year, multi-loan notes

– Exceptions

• Plain Language Disclosures

• Disclosure Statements

Direct Loan Program Processing Basics

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Bird’s Eye View of the Direct Loan Process

Origination

DrawdownRepayment

SchoolStudent/Borrower

Disburse

Apply

Federal Student Aid

Servicing

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Common Origination and Disbursement (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

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Terms and Definitions• CPS Match and Student

Identifiers

• Common Record

• XML

• Origination

• Disbursement

• Drawdowns

• “Booked” Loans

• Message Classes

• Reconciliation/Closeout

• SAIG

• EDExpress

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School Setup OptionsTrue or False, what do you think?

• Funding– Schools have no options for funding

• MPN Printing and Processing– MPN processing is hard

• Multi-year vs. Single-year– Only 4-year schools can use the multi-year

function of the MPN

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MPNs-Paper or Electronic• Paper Processing

– COD or school can print

– Forms available to order

– School handles the paper

• Electronic Processing

– School signs up via Customer Service

– Setup options

– Faster processing and reduces errors

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School Tools

• COD Web site

• COD Technical Reference

• Reports

• Publications

• Communications

Roles and Responsibilities

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Students and Schools• StudentsStudents

– Apply for aid and meet eligibility requirements– Receive and repay

• SchoolsSchools– Certify eligibility– Deliver proceeds– Educate borrowers about their responsibilities – Send/receive financial and student data to/from

Federal Student Aid– Funds management and reconciliation

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Federal Student Aid• Policy Liaison and Implementation

• Financial Partners

• Borrower Services

• Chief Financial Officer

• Ombudsman

• Business Operations

– Application, Operation, and Delivery Services

– Direct Loan Operations

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Direct Loan Operations

• Provides operational, system, and service support to schools– Eligibility

– Funding

– Reconciliation/Closeout

– Communication/Customer Service

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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

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Resources for Schools• COD School Relations Center

– www.cod.ed.gov 800/848-0978• General Direct Loan Information

– www.ed.gov/offices/OSFAP/DirectLoan/index.html • General Federal Student Aid Information

– www.ifap.ed.gov • Common Services for Borrowers-School Services

– http://schools.dlssonline.com/888/877-7658•  Direct Loan Consolidation Center

– www.loanconsolidation.ed.gov 800/557-7392

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Resources for Borrowers• Direct Loan Information

– www.ed.gov/offices/OSFAP/DirectLoan/index.html • General Federal Student Aid Information

– www.studentaid.ed.gov 800-433-7327• COD School Relations-Applicant Services

– 800/557-7394• Direct Loan Servicing Center/Common Services for Borrowers

– www.dl.ed.gov 800/848-0979•  Direct Loan Consolidation Center

– www.loanconsolidation.ed.gov 800/557-7392• Federal Student Aid Ombudsman

– www.ombudsman.ed.gov 877/557-2575

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Other Direct Loan SessionsSession 40 Hands On Tour of DL ToolsSession 41 Best Practices in Using DL LSDASession 42 DL Funding & Cash Management A-ZSession 43 Best Practices for Processing DL at Your SchoolSession 45 Direct Loans – How to Get StartedSession 46 What’s New in Direct Loans: Grad PLUS and other

HERA Related ChangesSession 47 Direct Loan Reconciliation and CloseoutSession 48 Direct Loan Reports & Reference Materials-Tools

of the TradeSession 49 How Direct Loan Servicing is Improving the

Financial Aid Experience for You and Your Students

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Questions or Comments?We appreciate your feedback and comments. Direct Loan Operations Team can be reached via e-

mail at:

dlops@ed.gov