Direct Loan A-Z

1
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

3
Brief History of Student Aid
4
Student Aid History
National Defense Education Act
Higher Education Act
College Work-Study Program
The GI Bill
1965
1944
1958
1964
5
Student Aid History
Basic Educational Opportunity Grant (PELL)
PLUS and Consolidation created
Renamed FFEL, unsub begins
Creation of SLS
Direct Loan Program
HERA
1969
1980
1994
2006
1986
1992
6
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/profession
  al 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)
11
Subsidized and Unsubsidized Loans

• 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?
• 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/Professiona
  l students

16
Master Promissory Note (MPN)

• Legal agreement
• Multi-year, multi-loan notes
• Exceptions
• Plain Language Disclosures
• Disclosure Statements

17
Direct Loan Program Processing Basics
18
Birds Eye View of the Direct Loan Process
Student/Borrower
Apply
Disburse
Origination
Servicing
Drawdown
Repayment
Federal Student Aid
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 OptionsTrue 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

24
Roles and Responsibilities
25
Students and Schools

• Students
• Apply for aid and meet eligibility requirements
• Receive and repay
• Schools
• 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
• www.cod.ed.gov 800/848-0978
• General Direct Loan Information
• www.ed.gov/offices/OSFAP/DirectLoan/index.html
• General Federal Student Aid Information
• www.ifap.ed.gov
• Common Services for Borrowers-School Services
• http//schools.dlssonline.com/ 888/877-7658
•  Direct Loan Consolidation Center
• www.loanconsolidation.ed.gov 800/557-7392

30
Resources for Borrowers

• Direct Loan Information
• www.ed.gov/offices/OSFAP/DirectLoan/index.html
• General Federal Student Aid Information
• www.studentaid.ed.gov 800-433-7327
• COD School Relations-Applicant Services
• 800/557-7394
• Direct Loan Servicing Center/Common Services for
  Borrowers
• www.dl.ed.gov 800/848-0979
•  Direct Loan Consolidation Center
• www.loanconsolidation.ed.gov 800/557-7392
• Federal Student Aid Ombudsman
• www.ombudsman.ed.gov 877/557-2575

31
Other Direct Loan Sessions

• Session 40 Hands On Tour of DL Tools
• Session 41 Best Practices in Using DL LSDA
• Session 42 DL Funding Cash Management A-Z
• Session 43 Best Practices for Processing DL at
  Your School
• Session 45 Direct Loans How to Get Started
• Session 46 Whats New in Direct Loans Grad PLUS
  and other HERA Related Changes
• Session 47 Direct Loan Reconciliation and
  Closeout
• Session 48 Direct Loan Reports Reference
  Materials-Tools of the Trade
• Session 49 How 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
• dlops_at_ed.gov