Session 44 Direct Loan A-Z Julie Aloisio

2 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

4 Student Aid History The GI Bill College Work-Study Program National Defense Education Act Higher 1964

5 Student Aid History Basic Educational Opportunity Grant (PELL) Direct Loan Program HERA PLUS and Consolidation created 1986 Renamed FFEL, unsub begins 1992 Creation of SLS

Basic Overview of the Direct Loan Program

7 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

8 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

9 Subsidized and Unsubsidized Loans Enrollment Eligibility Agreement- Master Promissory Note Interest Loan Limits

10 Annual Loan Limits (Sub/Unsub Only) Year Dependent Undergraduate Independent Undergraduate Graduate/ Professional Student 1 st Year $2,625 $6,625 (maximum $2,625 subsidized) Up to $18,500 each academic year (maximum $8,500 subsidized) 2 nd Year $3,500 $7,500 (maximum $3,500 subsidized) 3 rd Year and above $5,500 $10,500 (maximum $5,500 subsidized)

11 Subsidized and Unsubsidized Loans True or False?True or False? –There is no charge for Direct Loans –The student can cancel his/her loan –Students begin repayment immediately after graduation

12 Subsidized and Unsubsidized Loans True or False?True or False? –There is only one type of repayment plan. –Students can postpone payments. –Loans can be discharged (forgiven)

13 PLUS Loans Eligibility Credit Check Agreement-MPN –Single loan MPNs Interest Loan limit

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

15 PLUS Loans True or False? –There is a charge for the loan –Parents receive the money directly –There is only one repayment plan –Repayment is delayed until after school –There are set loan limits for Graduate/Professional students

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

Direct Loan Program Processing Basics

18 Bird’s Eye View of the Direct Loan Process Origination DrawdownRepayment School Student/Borrower Disburse Apply Federal Student Aid Servicing

19 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

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

21 School Setup Options True 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

22 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

23 School Tools COD Web site COD Technical Reference Reports Publications Communications

Roles and Responsibilities

25 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

26 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

27 Direct Loan Operations Provides operational, system, and service support to schools –Eligibility –Funding –Reconciliation/Closeout –Communication/Customer Service

28 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

29 Resources for Schools COD School Relations Center – 800/ General Direct Loan Information – General Federal Student Aid Information – Common Services for Borrowers-School Services – Direct Loan Consolidation Center –

30 Resources for Borrowers Direct Loan Information – General Federal Student Aid Information – COD School Relations-Applicant Services –800/ Direct Loan Servicing Center/Common Services for Borrowers – Direct Loan Consolidation Center – Federal Student Aid Ombudsman –

31 Other Direct Loan Sessions Session 40Hands On Tour of DL Tools Session 41Best Practices in Using DL LSDA Session 42DL Funding & Cash Management A-Z Session 43Best Practices for Processing DL at Your School Session 45Direct Loans – How to Get Started Session 46What’s New in Direct Loans: Grad PLUS and other HERA Related Changes Session 47Direct Loan Reconciliation and Closeout Session 48Direct Loan Reports & Reference Materials-Tools of the Trade Session 49How Direct Loan Servicing is Improving the Financial Aid Experience for You and Your Students

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