FFELP Loan Processing A-Z

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FFELP Loan Processing A-Z

• Presented by
• Susan Knoten, MDHE
• Julie Meyer, MDHE

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Todays 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

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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

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Who are the participants in the FFEL Program?
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Student Loan Participants

• Student
• Borrower
• School
• Lender
• Guarantor
• Disbursing agent
• Servicer
• Secondary market

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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

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Schools

• Calculate loan eligibility
• Certify the students eligibility
• Deliver the funds to the student
• Monitor the students academic progress (SAP)
• Provide entrance and exit counseling
• Report enrollment status to NSLDS

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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

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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

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Servicers and Secondary Markets

• Perform loan operations
• Origination and disbursement functions
• Interim servicing
• Repayment servicing
• Purchase loans
• After disbursement
• At repayment
• At consolidation

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Quick Quiz

• Question What type of FFELP entity is Sallie
  Mae?
• Answer
• Lender
• Servicer
• Disbursing agent
• Secondary market

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What are the differences between subsidized and
unsubsidized loans?
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Loan Basics

• Education loans come in three types
• Federal student loans
• Federal parent loans
• Private (alternative) loans

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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

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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

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How are loans processed?
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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

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What is an Award Letter?

• Definition
• May be paper or electronic (online)
• Student should accept the aid awarded

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Award Letter Example
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Determining Student Loan Eligibility

• Is the student
• Meeting the institutions 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?

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Other Eligibility Factors

• What is the students dependency status?
• FAFSA completed? SAR/ISIR received?
• Verification necessary to complete?
• Expected Family Contribution (EFC)?
• What is the students enrollment status?

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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

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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

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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

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Loan Budget Worksheet Example 1

• COA
• EFC
• Scholarship
• Pell Grant
• FWS
• Unmet need

• 15,000
• 0
• 3,000
• 4,050
• 3,500
• 4,450

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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

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Loan Budget Worksheet Example 2

• COA
• EFC
• Scholarship
• Pell Grant
• FWS
• Unmet need

• 15,000
• 5,500
• 3,000
• 0
• 3,500
• 3,000

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Loan Budget Worksheet Example 3

• COA
• EFC
• Scholarship
• Pell Grant
• FWS
• Unmet need

• 15,000
• 17,000
• 3,000
• 0
• 0
• 0

The student has zero unmet need and is NOT
eligible for subsidized funds
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Funds have arrived, what do I do next?
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School Duties

• Verify the borrower is still eligible for the
  loan funds
• Student enrollment
• Student academic progress (SAP)
• Overaward?
• Deliver the funds to the borrower

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Delivery Guidelines
Disbursement to school Delivery to borrower Timeframe
EFT Credit student account 3 business days
Mastercheck Credit student account 3 business days
Individual check Release check to borrower 30 calendar days
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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

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Late Disbursement

• Requirements outlined on MDHE website
  (http//www.dhe.mo.gov/compliancelatedisbursement.
  shtml)

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What else do I need to know about the FFEL
Program?
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Repayment Timelines
Stafford
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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

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Important Websites for FAOs

• Common Manual website www.commonmanual.org
• FAFSA www.fafsa.ed.gov
• IFAP www.ifap.ed.gov
• MASFAP www.masfap.org
• MDHE www.dhe.mo.gov
• MYF www.mapping-your-future.org
• NASFAA www.nasfaa.org
• NCHELP e-library www.nchelp.org
• NSLDS www.nslds.ed.gov

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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

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Questions?
3515 Amazonas Drive Jefferson City, MO
65109-5717 [phone] [phone] Fax
[phone] www.dhe.mo.gov