Session #40 A Direct Loan Primer Isiah Dupree Julie Aloisio Cynthia Battle

Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 2

3 Student Aid History 1965 – Higher Education Act 1994 – Direct Loan Program 2002 – COD HERA

Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 4

5 Terms and Definitions CPS Match and Student Identifiers Common Record XML Origination Disbursement Drawdowns “Booked” Loans Message Classes Reconciliation/Closeout SAIG EDExpress

6 Roles and Responsibilities 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

7 School Responsibilities What options will best serve your students? What offices will be involved in the process? –What will their roles be? –Staffing levels sufficient to support operational decisions? Who will conduct your reconciliation? Who will work your rejects/resolve processing issues?

8 School Responsibilities How will you process records? –Process yourself Software? Technical support? How will you back up your data? Production schedule? –Third Party Servicer

9 Roles and Responsibilities: Federal Student Aid Provides operational, system, and service support to schools & borrowers –Eligibility –Funding –Reconciliation/Closeout –Communication/Customer Service –Repayment –Loan Servicing to Borrowers

10 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

11 Master Promissory Note (MPN) Legal agreement Multi-year, multi-loan notes –Exceptions Plain Language Disclosures Disclosure Statements

12 Subsidized and Unsubsidized Loans Enrollment Eligibility MPN Interest Fees/Rebate Loan Limits

13 Annual Loan Limits Year Dependent Undergraduate Independent Undergraduate 1 st Year $3,500 $7,500 (maximum $3,500 subsidized) 2 nd Year $4,500 $8,500 (maximum $4,500 subsidized) 3 rd Year and above $5,500 $10,500 (maximum $5,500 subsidized) Graduate/ Professional Student Up to $20,500 each academic year (maximum $8,500 subsidized)

14 PLUS Loans Eligibility Credit Check Interest Fees/Rebate Loan limits

15 PLUS Loans MPN Borrower Type –Parents –Graduate/Professional students What is the difference between borrower types?

16 Consolidation Loans Combines multiple loans into a new single loan with one payment Both students and parents are eligible to consolidate, but not together Similar repayment plans as other loans, but HERA changes have created some differences Eligibility depends on the loan types and status as well as borrower qualifications

Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 17

18 Originate Promissory Note DisburseReconcile Program Year Close-Out Direct Loan Processing Cycle

19 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

20 ISIR COD Processing Funding Data and Payment Requests Central Processing System (CPS) FAFSA SAR COD Originations, Disbursements & Paper MPNs Responses GAPS NSLDS DLSS e-MPN Funding Request Money Loans and Disbursements Enrollment Status Electronic Entrance & Exit Counseling Repayment/ Servicing Student data

21 School Setup Options Funding –Advanced Funded vs. Pushed Cash Multi-year vs. Single-year MPN Processing Reports

22 Master Promissory Notes Advantages of Electronic Processing Paper Processing Electronic Processing School signs up via Customer Service Setup options Faster processing and reduces errors COD or school can print Forms available to orderSchool handles the paper

23 Master Promissory Notes MPN versus eMPN Statistics 2006 Statistics 24% Paper 76% eMPN 2007 Statistics 19% Paper 81% eMPN

Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Application and Decision Set-Up Tools & Resources Direct Loan Servicing Contact 24

25 Certified eligible for Direct Loan? –Eligibility and Certification Approval Report (ECAR) –“E-APP for Schools” Web site School Setup Application and Decision

26 1. participation request to 2.Direct Loan Operations Review 3.Decision Letter 4.PEPS transmits School Information to the COD System School Setup Application and Decision

27 Direct Loan ”Banking” information GAPS Hotline Web site School Setup Grant Administration and Payment System (GAPS)

28 Complete or revise SAIG Agreement –SAIG assigns mailbox (TG#s) Arrange for testing of transmissions SAIG Customer Service Web site School Setup Student Aid Internet Gateway (SAIG)

Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 29

30 COD Web site - Submit & Correct Records, View Batches, Retrieve Reports - Access DL Servicing Website General Direct Loan Information General Federal Student Aid Information - DL Listserv, DL bulletin Schools Portal Tools & Resources Web Sites

31 Tools & Resources DL Tools –Cash Management Tools –Reconciliation –Rebuild

32 Direct Loan Basics Entrance and Exit Counseling To order visit: Tools & Resources Borrower Publications

33 COD Technical Reference –Implementation Guide Direct Loan School Guide Blue Book Financial Aid Handbook NSLDS Enrollment Reporting Guide Tools & Resources School Publications

34 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

Session Outline Brief History of Student Aid Direct Loan Program Overview Direct Loan Processing Basics School Setup Tools & Resources Direct Loan Servicing Contact 35

Account Lookup View live account data for students including balances, account status, separation dates, and more. Reporting Tools Exit & Entrance Counseling Reports Identify students who have completed Counseling Online Delinquency Reports Detail, Summary, Late Stage Delinquency, and Borrower History Subscription Receive notifications when reports are available online DL Servicing Resources Web Site Help General Information Contact Us Spanish Version Login to Servicing is through COD School Services Online 36

Direct Loan Servicing School Site School Services Online 37

Click here to see Repayment Estimates School Services Online Student Account Lookup 38

Summary Delinquency Report Late Stage Delinquency Report School Services Online Delinquency Reports 39

Stafford Borrower Delinquency Pattern12 Month Average 0% 5% 10% 15% 20% 25% 30% 35% Days Past Due Percentage of Total Delinquency School Services Online Borrower Delinquency Pattern 40

Pre-Repayment Counseling –Default Propensity Index (DPI) score –We use both Outbound and Inbound calls for counseling 83% of all Default borrowers were not successfully contacted by phone during the 360-day collection effort during delinquency Delinquency Counseling –31 days we begin a series of calls (22 calls) High Balance and current cohort year (44 calls) –Letters begin at 7 days delinquent (12) School Services Online 41

FAFSA Promissory notes Entrance Counseling & Exit Counseling Repayment Servicing Loan Consolidation Universal single PIN access to all sites The Direct Loan Program offers online services to borrowers from start to finish. Student Portal Benefits to Borrowers 42

Repayment incentives Repayment options tailored to individual need (Standard, Extended, Graduated, Income Contingent, Alternative Repayment) Payment due date selection by borrower Options for receiving bills and/or correspondence electronically Electronic Payments (EDA and on-line) Self-Service tools for borrowers (telephone voice response system, Web portals) Online form submission with electronic PIN signatures (forbearance, deferments, EDA, FAFSA) Loan Consolidation The Direct Loan Program offers borrowers flexibility. Benefits to Borrowers 43

Your Account View live account data and manage loans online Question Center Online information resource for borrowers Download Forms Download loan-related forms directly, avoiding the time and expense of mailing Provides over 6 million student borrowers with highly secure on-line services for: Spanish/English Options Entire site available in Spanish Loan Consolidation Consolidate existing loans into a single Direct Loan Online Billing & Payment Receive bills and correspondence electronically, make payments online Borrower Services Online 44

Exit Counseling Click here to view your Non-Direct Loans Borrowers are provided with the amount of their total indebtedness (Direct Loans, FFEL, and Perkins) during Exit Counseling or from the Account Summary page. Borrower Services Online Account Information 45

Borrowers may select one of our four repayment plans: Standard Extended Graduated Income Contingent Repayment (ICR) Borrowers may also select from any of the four available due dates: 7 th, 14 th, 21 st, or 28 th Borrower Services Online Repayment Options 46

Direct Loan borrowers can receive their bills and make payments online; and they can choose to receive their Direct Loan correspondence electronically, all for free. 381,227 online payments were made during the month of July for a grand total of $96,065, Borrower Services Online Bills and Payments 47

Borrower feedback: I just wanted to congratulate you on providing an excellent way to manage my student loan account. I cannot tell you how much simpler it is for me, knowing I can do everything I need on-line. I don't have to mail anything or call someone -- I just need to log in. - Troy 958,200 borrowers are receiving a.25% incentive by enrolling in EDA! Borrower Services Online Electronic Debit Account 48

Borrowers can submit Unemployment Deferment and General Forbearance applications online. Borrower Services Online Online Form Submission 49

Borrower Services Online Entrance Counseling 50

Borrower Services Online Exit Counseling 51

52 Call Center Resources for Schools COD School Relations Center (800) School Services – Direct Loan Servicing (888) Direct Loan Consolidation Center (800)

53 General Federal Student Aid Information COD School Relations-Applicant Services (800) Direct Loan Servicing Center – Borrower Services Direct Loan Consolidation Center Federal Student Aid Ombudsman Direct Loan Information Call Center Resources for Borrowers

54 Related Direct Loan Sessions Session #4 Title IV Funding to Schools: From COD to GAPS Session #24COD Web Hands On Session #41 Unlocking the Potential of Direct Loan Reports Session #42What’s New in Direct Loans for

55 Questions or Comments? We appreciate your feedback and comments. Direct Loan Operations Team can be reached via at:

Contact Information 56 Isiah Dupree Supervisor, Direct Loan Operations (202) Julie Aloisio Management/Program Analyst, Direct Loan Operations (202) Cynthia Battle Direct Loan Servicing (Non-Default Group), Director (202)