Chuck Hirman| Dec U.S. Department of Education 2015 FSA Training Conference for Financial Aid Professionals Direct Loan Processing: Making COD Work for You Session 3

Agenda Loan Fees New Award Year Setup PLUS Loan Processing Loan Periods & Academic Years Disbursement Reporting Direct Loan Cash Management/Reconciliation Resources 2

Loan Origination Fees Sequestration Fee for entire loan driven off Earliest Disbursement Date (EDD) COD rounding/truncation rules have not changed Earliest Disb DateSub/Unsub Orig FeePLUS Origination Fee Before 7/1/ %4.0% 7/1/2013 – 11/30/ %4.204% 12/1/2013 – 9/30/ %4.288% 10/1/2014 – 9/30/ %4.292% 10/1/2015 – 9/30/ %4.272% 3

Origination Fee Reject Edit 140 when fee percentage/EDD combination wrong Usually happens when first anticipated disbursement was prior to 10/1 but first actual disbursement is > 10/1 Once COD has accepted a loan at a certain fee the only way to change it is by first inactivating that loan Simply changing the fee and resending won’t do the job 4

COD Processing – Origination Fees COD added two processing changes to facilitate these fee increases 1. New reject edit New CROF system-generated response Electronic Announcement 9/4/2014 5

Reject Edit 213 Actual disbursement arrived with EDD after “configurable date” Next configurable date is 10/1/2016 Edit will only be activated if we don’t know what the new fee percentages will be when the actuals start arriving 6

CROF Response For loans already on the COD system with only anticipated disbursements EDD on/after configurable date When we know what the new fees will be we’ll change them Schools will receive CROF (CROF17OP = 2016/17) Should update your system upon import 7

New Award Year Setup for 2016/17 COD Release 15.0 – implementation mid-March 2016 Funding – for advance funded schools If traditionally have early disbursements funding authorization will be made that is expected to cover them Schools will get ~60% of their award year needs in June Remaining 40% in November or possibly 2 installments Need CFL increase before those scheduled dates? Contact COD but they will first check substantiation of already drawn and if near the end of the award year will want to see loans with pendings 8

2016/17 COD Award Year Setup 2016/17 year added to COD functionality/website Website “Options” steers StudentLoans.gov parameters Electronic process participation eMPN and PLUS Request messages Loan periods for PLUS Response options Reports Delivery and format, and don’t forget the SAS NOTE : Also session #12 – COD System Update S17G

COD SLG: Non-Award Year Specific 10

COD SLG: Award Year Specific 11

PLUS Processing Changes at COD Adverse credit criteria Credit check duration PLUS (credit) counseling Note: Also session #14 – PLUS Processing A to Z Electronic Announcement 10/23/

PLUS Credit Checks New adverse credit criteria One or more debts have a total combined outstanding balance > $2085 (will change, tied to inflation): 90 or more days delinquent, or Charged-off or placed in collections within past two years All the usual disqualifying factors still apply (foreclosure, tax lien, default determination, etc.) Credit check duration expanded to 180 days 13

PLUS (credit) Counseling PLUS borrowers – both parent and grad/prof student Who fail credit check and decide to pursue the loan by 1. Successful appeal based on extenuating circumstances, or 2. Obtain approved endorser Available only in SLG Required before disbursing 14

Better prepare PLUS borrowers for loan repayment Anyone can take in, signed in or not Adverse credit borrowers must take it, and be signed in NSLDS data retrieved Tuition – IPEDS data used or national average Income and expenses, Repayment plans and tips At this time, only available in English Must complete in one sitting (no save and return) PLUS (credit) Counseling 15

PLUS Credit Processing Flow 16

Tag Key off this tag and do not disburse to a PLUS borrower until = Y If it seems stuck on N, where along the line is it? But we recommend you originate while waiting The only tells you about credit Not the MPN, endorser amount, myriad of other PLUS eligibility requirements 17

Loan Counseling in StudentLoans.gov COUNSELING TYPEREQUIRED FORWHEN Entrance First-time sub or unsub borrowers First-time grad/ prof student PLUS borrowers Prior to receiving funds the first time for sub/unsub, and for PLUS as a grad/ professional student Financial Awareness Optional PLUS (credit) PLUS borrowers (all) credit denied and Obtain an endorser, or Successfully appeal Prior to being disbursed, each new credit check with adverse credit Exit Student borrowersWhen student borrowers graduate, leave school, or drop below half-time enrollment 18

Reporting Loan Periods and Academic Years 19

Loan Period & Academic Year Basics Includes payment periods (terms) for which student received and kept DL funds If student withdraws but keeps even $1 of disbursement for payment period keep in Loan Period If term (payment period) disbursement(s) are zero – remove from Loan Period Loan period Dates tied to how school tracks annual loan limits Single-term Academic Year is never correct Use school-defined but not less than 26 or 30 weeks For SAY schools: If summer is required - always include If summer is not required - only include if student attends, receives, and keeps summer funds Academic year 20

Scheduled Academic Year Example Student at SAY (fall-spring) is graduating at end of fall term. Fall term only Loan period Fall and spring term Even though student is not enrolled in both terms Academic year 21

Borrower-Based Academic Year Student starts at BBAY-1 school in spring term. SAY is fall-spring. Spring term only Loan period Spring and summer term BBAY is comprised of number of terms in SAY Academic year 22

Borrower-Based Academic Year Student starts at BBAY-3 school at 30 clock-hours/week. TIV AY is 900 clock-hours and 28 weeks. Program is 540 clock-hours and 18 weeks. Period of time it will take the student to complete greater of: 540 clock-hours 18 weeks of instructional time Loan period Period of time it would take student to complete: 900 clock-hours 28 weeks of instructional time Academic year 23

Disbursement Reporting We’ve seen problems with: Reporting timeframe Disbursement dates Upward disbursement adjustments Loan proration Credit balances Unused disbursements Rejected disbursements Other disbursement odds and ends 24

Disbursement Reporting Timeframe Actual disbursements and adjustments must be reported to COD within 15 days Pell LEU and SULA need prompt reporting For now COD edits still looking at 30 days but the Regulations are tighter: 15 days Warning edit 055 School Monitoring Report Booking Warning Report 25

Disbursement Date Reporting The actual disbursement date is the date school credits student’s account or pays the student or parent directly Interest calculations, timeframes and deadlines, regulatory triggers – must have accurate date reported We’re seeing some schools merely flipping the DRI to True instead of changing the date first when actual disb falls on a different day than anticipated disb Implications include warning edit 055, School Monitoring Report Example … 26

Disbursement Date Example July Fall-spring loan originated D1-9/1 DRI=F $2,000 D2-1/5 DRI=F $2,000 September Borrower still not eligible (SAP, MPN, Counseling, etc.) November Borrower finally becomes eligible Disbursement made on 11/1 School merely flips DRI to T, sends to COD, which: charges interest from 9/1 sends school warning 055 produces School Monitoring Report Electronic Announcement 1/29/

Upward Disbursement Adjustments Should only be used to correct an erroneously reported actual disbursement Interest is calculated from the sequence 01 date If you give additional funds make a new disbursement for that additional amount 28

Loan Proration Proration of annual loan limits for undergrads (only) Borrowers may receive up to prorated amount, if otherwise eligible 1. enrolled in a program that is shorter than a full academic year, or 2. enrolled in a program longer than an academic year but the remaining portion is less than an academic year Significance: Costs, EFC, other aid may require loan to be less than prorated amount REP > 1.0 Year does not mean the loan can be for the full subsidized annual loan limit if it is subject to proration Cannot exceed annual or aggregate loan limits 29

Unused Disbursements 150% Subsidized Limit regulations require that terms/payment periods with unused disbursements be removed from loan period In addition, when students transfer the new school will know late disbursements will not be made Take these steps: 1. Zero out pending disbursements you will not be using 2. Shorten loan period to remove terms/payment periods where no disbursement is made/retained 3. Reduce loan amount to sum of actual disbursements Note: Also session #27 – 150% Direct Subsidized Loan Limit 30

COD Action Queue All loans accepted by COD with pending disbursements (anticipated not yet made actual) Won’t cover it all Disbursements made actual but later zeroed out won’t be here Even if the pending disbursement is zero – was the loan period shortened and the loan amount reduced? 31

Disbursements Rejected at COD Remember: Rejected disbursements = unsubstantiated funds Rejects: record not built in COD database so will not be able to find them in Person/Award search check your import edit report or COD Batch search Warnings: record was processed, an FYI concerning processing/timing 32

COD Batch Search See COD Technical Reference Volume II, Section 4 - Edits 33

Disbursement Date & Amount Changes Since October 11, 2015 can be made in the same transaction COD retired Reject Edit 57 Applies to all award years If school chooses can continue to send in separate transactions and 34

Disbursement 120-Day Rule For any loan type (Sub, Unsub, PLUS) if the borrower returns funds asking the disbursement be reduced you may accept those funds up to 120 days from the disbursement date 1. Reduce disbursement and report to COD 2. Re-disburse or return the funds to G5 Borrower gets a break on interest and loan fees of returned amount If loan/disbursement completely zeroed out – SULA reduced too Not required to do this beyond regulatory right to cancel timeframes but lower debt burden … Note: funds returned for regulatory reasons have no such timeframe 35

DL Cash Management & Reconciliation Booking Warning Report Ending Cash Balance School Monitoring Report Reconciliation Program Year Closeout 36

Direct Loan Booking Warning Report Was 30-Day Warning Report, renamed on 10/11/2015 All warning reports produced prior to that will retain former name Data contained in the report will not change But some data will now be parameter-driven 37

Ending Cash Balance Ending cash balance = If net drawdowns > net actual disbursements: positive If net drawdowns = net actual disbursements: zero If net drawdowns < net actual disbursements: negative Drawn down funds that exceed disbursements are unsubstantiated As of 10/11/2015 Unsubstantiated Cash Begin Date is added to the Cash Activity page on COD website 38

COD School Monitoring Report Produced weekly if any of the following conditions occur: 1. Unsubstantiated Cash (currently looking at >30 days) 2. Pell POP Day Disbursement Reporting (15-day regulatory deadline anyhow) Posted to COD Newsbox Also to SAIG Mailbox SCHMONOP We produce this report weekly so you should check for this report that often too 39

COD Website Newsbox Pell and Direct Loans each have their own Newsbox But they’ll have the same School Monitoring Report 40

COD Newsbox 41

Reconciliation Notes Drawdown adjustments – too many around time of closeout. Reconcile the balance rather than pushing it to another year. Won’t get any easier to deal with later! Easy to spot in audit Negative cash balances – yes, why should they bother us? Are you sure these aren’t refund calculations made, funds returned to G5, but downward disbursement adjustments not entered? Regulatory deadlines – supersede monthly reconciliation and program year closeout deadlines Note: Also session #2 – Title IV Reconciliation: Agreement, Accountability and Action 42

1415 DL Program Year Closeout Deadline 7/29/2016 Program Year Closeout (PYCO) completed by submitting School Balance Confirmation form Which is made available when School Account Statement (SAS) reflects $0 Ending Cash Balance Schools missing deadline which haven’t requested Extended Processing will be billed 43

Extended Processing Requests Are increasing … two big reasons: 1. Credit balances (specifically – unclaimed) Pay within 14 days Borrower cancels authorization to hold – 14 days Otherwise – end of loan period Returned check – 45 days Uncashed check – 240 days 2. Incomplete loan updates (specifically - SULA) Unused disbursements zeroed out Loan period reduced to only include payment periods with disbursements Loan amount reduced to sum of actual disbursements 44

Resources – speaking the same language “You’ll have to phrase it another way. They have no word for ‘fetch’” … New Yorker 45

COD Communications Page COD website “File Share & Messages” Broadcast messages File share FSA campaigns with student-specific information Customized reports will alert schools to file availability 1. Log into COD/School tab/School Summary Info page 2. File Share/Messages link on the left side of page Electronic Announcement 6/20/

COD Website Searches: CSV Format For most COD website searches “Export Results to CSV” icon added 10/11/2015 CSV: Comma-Separated Values (Excel friendly) Maximum number of results that can be downloaded into a CSV format is 5,000 Need to refine search to not exceed this number 47

COD Website Report Readers Simplified way of importing some COD files into Excel SAS Disbursement Detail on Demand Pell Grant Reconciliation File Pell Grant YTD File Readers & Instructions COD Website “COD Resources” Request “fixed-length” files Electronic Announcement 1/28/

COD Computer-Based Training On the IFAP Website 12 COD system simulations – most were updated Sept. or Oct Managing School Information, Locating Direct Loan Information, Working with Batches, Working the Action Queue, etc. Direct Loan Reports Others 49

COD Website School Contact Info Contact information accurate? Processing issues FLSST and COD Recon team outreach Your colleagues needing clarification/updates to records Is the E-App updated in eligcert.ed.gov? FAA, CFO, School president Update directly on the COD website: DL Financial Aid Officer Pell Financial Aid Officer 50

My Contact Information We appreciate your feedback and comments. 51 Chuck Hirman Federal Student Aid Seattle, WA “They rubbed my tummy, chief – I told them everything.” … New Yorker

QUESTIONS? 52