1. 1 FFELP Loan Processing A-Z Presented by: Susan Knoten, MDHE Julie Meyer, MDHE

2. 2 Today’s Agenda Who are the participants in the FFEL Program? What are the differences between subsidized and unsubsidized loans? How do I determine loan eligibility? Once funds arrive, what do I do next? Repayment timelines and resources for FAOs

3. 3 What is FFELP? Federal Family Education Loan Program – Enacted by Congress in federal statute – Title IV of the Higher Education Act (HEA) of 1965 – Reauthorized every 5 years (last October 1998) U.S. Department of Education publishes regulations – 34 CFR 682

4. 4 Who are the participants in the FFEL Program?

5. 5 Student Loan Participants Student Borrower School Lender Guarantor Disbursing agent Servicer Secondary market

6. 6 Students and Borrowers Students are able to finance their education through loans as long as they are at least half time Borrowers are individuals who have received loan(s) – May be a parent – May be a student – May be in repayment

7. 7 Schools Calculate loan eligibility Certify the student’s eligibility Deliver the funds to the student Monitor the student’s academic progress (SAP) Provide entrance and exit counseling Report enrollment status to NSLDS

8. 8 Lenders Provide the loan funds Are guaranteed against a loss when the borrower: – Fails to repay (defaults) – Dies or suffers total and permanent disability – Files bankruptcy – Cannot complete the program due to school closure – Claims false certification

9. 9 Disbursing Agents Verify that a valid promissory note is on file Disburse loans, which includes: – Issuing funds to the school for delivery to the borrower – Providing the school with the Disbursement Roster Process returns and refunds

10. 10 Servicers and Secondary Markets Perform loan operations – Origination and disbursement functions – Interim servicing – Repayment servicing Purchase loans – After disbursement – At repayment – At consolidation

11. 11 Quick Quiz Question: What type of FFELP entity is Sallie Mae? Answer: – Lender – Servicer – Disbursing agent – Secondary market

12. 12 What are the differences between subsidized and unsubsidized loans?

13. 13 Loan Basics Education loans come in three types: – Federal student loans – Federal parent loans – Private (alternative) loans

14. 14 Federal Loan Types Subsidized Stafford – Definition: In-school interest due paid by USDE – Eligibility based on need Unsubsidized Stafford – Definition: In-school interest due paid by borrower – Eligibility based on COA minus EFA Parent PLUS – Borrower = parent of undergraduate dependent – Eligibility based on COA minus EFA Graduate PLUS – Borrower = graduate or professional student – Eligibility based on COA minus EFA 14

15. 15 Quick Quiz Question: Are PLUS loans subsidized or unsubsidized? Answer: – Even though PLUS loans are not titled “unsubsidized PLUS loans” they are nonetheless unsubsidized BECAUSE – The borrower is responsible for the interest while in school or in other periods of deferment

16. 16 How are loans processed?

17. 17 Steps Award/package aid types and amounts Determine loan eligibility, calculate the amount(s) Send Award Letter; student accepts aid Certify FFEL Program loan(s) – Paper form – FAMS (CommonLine App Send file) – Online via web loan delivery product Receive and deliver funds 17

18. 18 What is an Award Letter? Definition May be paper or electronic (online) Student should accept the aid awarded

19. 19 Award Letter Example

20. 20 Determining Student Loan Eligibility Is the student: – Meeting the institution’s standards of academic progress? – Enrolled at least half time in college level credit hours? – Degree seeking? – a U.S. citizen? – Meeting institutional and federal policy guidelines?

21. 21 Other Eligibility Factors What is the student’s dependency status? FAFSA completed? SAR/ISIR received? Verification necessary to complete? Expected Family Contribution (EFC)? What is the student’s enrollment status? 21

22. 22 Calculating the Loan Amount The eligibility formula is – Cost of Attendance (COA) – Minus the Expected Family Contribution (EFC) – Minus Estimated Financial Aid (EFA) – Equals unmet need 22

23. 23 Cost of Attendance (COA) Definition Determined by the financial aid office Takes into consideration such items as tuition, fees, books, supplies, maintenance, loan fees COA - EFC - EFA = Unmet need 23

24. 24 Loan Budget Worksheet Indicate the Cost of Attendance (COA) and subtract the EFC, Pell, SEOG, FWS, scholarship funds, any other aid The result is called unmet need, which is used to determine subsidized and unsubsidized loan eligibility 24

25. 25 Loan Budget Worksheet Example 1 COA EFC Scholarship Pell Grant FWS Unmet need = $15,000 $ 0 $ 3,000 $ 4,050 $ 3,500 $ 4,450 25

26. 26 Loan Budget Worksheet Example 1 We have determined unmet need at $4,450 Current loan limit for a dependent, freshman, full-time student = $3,500 – Question: Certify as subsidized or unsubsidized? – Answer: The need is higher than the loan limit, so the full $3500 can be certified as a subsidized Stafford Loan 26

27. 27 Loan Budget Worksheet Example 2 COA EFC Scholarship Pell Grant FWS Unmet need = $15,000 $ 5,500 $ 3,000 $ 0 $ 3,500 $ 3,000 27

28. 28 Loan Budget Worksheet Example 3 COA EFC Scholarship Pell Grant FWS Unmet need = $15,000 $17,000 $ 3,000 $ 0 28 The student has zero unmet need and is NOT eligible for subsidized funds

29. 29 Funds have arrived, what do I do next?

30. 30 School Duties Verify the borrower is still eligible for the loan funds 1. Student enrollment 2. Student academic progress (SAP) 3. Overaward? Deliver the funds to the borrower

31. 31 Delivery Guidelines Disbursement to school: Delivery to borrower: Timeframe: EFTCredit student account 3 business days MastercheckCredit student account 3 business days Individual check Release check to borrower 30 calendar days

32. 32 Returning FFELP Proceeds FFELP loan funds must be returned to the lender or disbursing agent when/if: – An overaward has been identified – The student withdraws or is not making satisfactory academic progress – The school cannot deliver the funds to the borrower timely

33. 33 Late Disbursement Requirements outlined on MDHE website (http://www.dhe.mo.gov/compliancelate disbursement.shtml)http://www.dhe.mo.gov/compliancelate disbursement.shtml

34. 34

35. 35 What else do I need to know about the FFEL Program?

36. 36 Repayment Timelines Repayment begins 6-month grace period Up to 10 years of repayment, with deferment and forbearance options Loan paid in full Out of school date Stafford PLUS Out of school date Loan fully disbursed Repayment begins (in- school deferment option) Loan paid in full In-school deferment ends; repayment continues for up to 10 years

37. 37 Training Manuals and Publications Federal Student Aid (FSA) Handbook Common Manual (CM) Dear Colleague Letters (DCL) The Blue Book Code of Federal Regulations (CFR) Financial Aid Dictionary

38. 38 Important Websites for FAOs Common Manual website www.commonmanual.orgwww.commonmanual.org FAFSA www.fafsa.ed.govwww.fafsa.ed.gov IFAP www.ifap.ed.govwww.ifap.ed.gov MASFAP www.masfap.orgwww.masfap.org MDHE www.dhe.mo.govwww.dhe.mo.gov MYF www.mapping-your-future.orgwww.mapping-your-future.org NASFAA www.nasfaa.orgwww.nasfaa.org NCHELP e-library www.nchelp.orgwww.nchelp.org NSLDS www.nslds.ed.govwww.nslds.ed.gov

39. 39 Your State Agency Services MDHE Digest E-distribution messages Free training/speaker services – Fall workshops each Sept/Oct – Beginner workshops – Default prevention and related topics (upon request) Default prevention grant program http://www.dhe.mo.gov/mdhedigest/signup.shtml

40. 40 Questions? 3515 Amazonas Drive Jefferson City, MO 65109- 5717 (800) 473-6757 (573) 751-3940 Fax: (573) 751-6635 www.dhe.mo.gov