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

Progra

m

Progra

mNatio

nal Defense

National D

efense

Educatio

n Act

Educatio

n Act

19441944 19581958 19651965

Higher

Higher

Educatio

n Act

Educatio

n Act

19641964

5

Student Aid History

Basic E

ducatio

nal

Basic E

ducatio

nal

Opportunity

Grant (P

ELL)

Opportunity

Grant (P

ELL)

Direct L

oan

Direct L

oan

Progra

m

Progra

m

19691969 19801980

HERAHERA

19941994 20062006

PLUS and Conso

lidatio

n

PLUS and Conso

lidatio

n

created

created

19861986

Renamed FFEL, unsu

b begins

Renamed FFEL, unsu

b begins

19921992

Creation of S

LS

Creation of S

LS

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)

YearDependent

UndergraduateIndependent

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