Transitioning to Direct Loans

Pending Legislation  Student Aid and Fiscal Responsibility Act – HR 3221  Passed the House of Representatives 9/17/2009  Mandatory Pell Grant funding  100% Direct Loans July 1, 2009 and forward  Expand/modify Perkins Loan Program

Where are we now…  Transition Planning and Activities  Developed Customer Support plan for the transition that includes support for all phases of transitioning 3

Where are we now…  COD System capacity enhancements for 100% FFELP volume in progress, on time and on taget  FSA Customer Service Centers  Increased and trained staff  Monitor incoming volume  COD has dedicated OnBoarding Team to assist setup completion requests and “starts”

Where are we now…  Other FSA systems gearing up  myDirectLoan eMPN website  NSLDS  G5

Where are we now…  Teams designed for targeted support  Graduate/Professional  Small schools  Career Colleges  Community Colleges  HBCU, HSI, and Tribally controlled colleges  Foreign schools  Pacific Island Schools

Where are we now…  Selected 4 additional Servicers  Great Lakes Educational Loan Services  NelNet  Sallie Mae  AES PHEAA 7

Where are we now…  Training  Spring and Summer “new school” DL training  Direct Loan processing with EdExpress  Business Officers  Foreign Schools  Extensive new suite of DL training Up to 4x per month after January

Where YOU Are Now…  FSA made benign changes to most school profiles  FSA made benign changes to most TG mailboxes  Does NOT obligate school to process Direct Loans

10 Where YOU Are Now…  What do you do next to be prepared  Complete setup information  Request completion of FSA setup 800/  FSA Transition Team

11 …to make you comfortable and hopefully not blue… Something old, something new…

The same  Virtually all of the regulations  Origination/Certification  Loan type and interest*  MPN  Counseling *FFELP PLUS 8.5%, D/L PLUS 7.9%

Differences  Disbursement  Origination Fee/Upfront rebate  Reconciliation  Monthly

Differences  Cash  Direct Loan schools calculate and draw immediate need  Single source – G5  Direct Loan Code  Main Campus/Additional Location

What’s New?  Beginning in March 2010, the eMPN website will become the myDirectLoan website.  The myDirectLoan website will continue to allow users to:  Complete an electronic promissory note  View and print electronic disclosure statements 15

What’s New? Beginning in March 2010, the myDirectLoan website will be enhanced to:  Allow Parents and Graduate Students to complete a PLUS Application  Allow Direct Loan borrowers to complete Entrance Counseling  Allow endorsers to endorse a PLUS Loan electronically  Allow borrowers to electronically appeal credit check decisions during the application process 16

Voila! 17

myDirectLoan log in 18

PLUS Process- New Features  Save all Parent/Student relationships to reduce re-entry in subsequent Award Years  Parents are able to submit multiple students and schools during a single application process  Allow Parents to resubmit applications for subsequent Award Years  Send electronic notifications to all schools included in a completed PLUS loan application  Streamline the Application/Promissory Note Process  Parent/Student Identifier and School information submitted in the PLUS loan application will be pre- populated on all applicable promissory notes 19

6 New DL School Options 20 Default values will be populated in the School Options fields The new options are not award year specific Default values for the one time update are listed below: Field NameValid Values Displayed on the Web One Time Update Entries: Participate in Electronic Parent PLUS ApplicationYes or NoYes Participate in Electronic Parent PLUS Application Begin Date MM/DD/YYYY05/01/2010 Parent PLUS Application Response OptionDaily or On DemandDaily Participate in Electronic Grad PLUS ApplicationYes or NoYes Grad PLUS Application Response OptionMM/DD/YYYY05/01/2010 Participate in Electronic Grad PLUS Application Begin Date Daily or On DemandDaily

21 Entrance Counseling The “What You Need” section of the myDirectLoan homepage provides users a guide for Entrance Counseling Information on Entrance Counseling and a link to the PIN site is provided

22 Direct Loan Processing Cycle

Originate  Similar to Grants/FFELP  Confirm eligibility  Determine award/loan amount  Create award  School transmits award/loan origination data to COD  Via Common Record and same transmission as Pell Grant data

Originate  COD sends a Receipt  The CR is readable and can be processed  COD sends Response  Accepted data  Rejected data  MPN status  PLUS credit decision

Originate  PLUS loan requires credit check  Systemic check via Loan Origination submission  School check via COD website  Or after March 27, 2010… borrower initiate  Denial Packet  Explanation for denial/appeal process  Pre-filled endorser form  Materials to submit endorser form

Direct Loan Processing Cycle

Disbursements  Advanced Funded Schools  Calculate immediate need  Draw funds from same source as other Title IV award funds - G5 Flexibility to avoid excess cash  Remember Cash Management Rules Must submit data within 30 days of event Actual Disbursement Data substantiates drawn funds ALWAYS submit actual date

Master Promissory Note  One lender, one MPN  No linked MPN no disbursement  Paper or electronic  All MPNs 10-year active Provides borrower mobility  School selected options COD School Options screen COD prints paper note options

Booked loan  A “Booked” Loan is a GOOD thing…  Accepted Origination record, MPN and 1 st actual disbursement  Is now a binding obligation between borrower and ED  30-Day Warning Report  ID’s unbooked loans for school

Reconciliation  Monthly basis  School reconciles internally Financial aid office/business office  School reconciles externally COD/G5  School Account Statement (SAS)  Know where the money is  COD Reconciliation Specialists

Direct Loan Processing Cycle

32 School Services Online

School Services Slide 33  Default/Delinquency Management  Pre-Repayment Counseling Calls begin two months prior to repayment s to assist with repayment options  Delinquency Counseling Calls begin at 31 days (22 calls) Letters begin at 7 days delinquent (12)  Call campaigns ($80k plus)  Late Stage Delinquency

DL.ed.gov (current servicer) 34

Borrower Services  Repayment options tailored to individual need  Standard, Graduated, & Extended  Income Based Repayment Plan  Income Contingent Repayment Plan*  Alternative Repayment Plan*  Public Service Loan Forgiveness* *Unique to Direct Loan Program

Borrower Services  Date due flexibility for all repayment plans  Electronic billing/payments  EDA and on-line payment options  Self-Service tools for borrowers

Borrower Services  Repayment incentives  Online form submission with electronic signature  Forbearance/Deferment

Some Things To Consider… IT Staff FSA Support Staff IT Reconciliation Resources Tools IT Staff Resources FSA Support Reconciliation

Some Things To Consider…  Commonality with Grants  Same person  Same origination process  Same disbursement process  Same transmission vehicle

Some things to consider…  Resources/Staff  Commonality of awards  Same system (COD)  Same institution solution Work with your software provider to understand the DL process and fields

Some things to consider…  COD staff resources for assistance  COD Customer Service Representatives  COD Issue Resolution Specialists  COD Reconciliation Specialists

42 Questions and Comments contact for more information...

43 Questions and Comments