Transitioning to Direct LoansDr. Claude Pressnell

TIUCA President

Presentation is borrowed largely from the US DOE given at that NAICU Board Meeting on November 19, 2009

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Access to Funds

• If the Student Aid and Fiscal Responsibility Act (SAFRA) passes, schools need to be ready

• If SAFRA does not pass, the Ensuring Continued Access to Student Loans Act (ECASLA) of 2008 expires September 30, 2010 and the Department of Education’s ability to purchase FFEL loans ends

School Readiness• Request to Participate

• Recommend conversations with IT, business office, and financial aid staff

• Recommend conversations with commercial software vendors (or use EDE Express)

• Update printed school information for parents and students

• Timing and messaging of communication to parents and students about program change

• Recommend development of a campus transition team

FSA Readiness• Increase in number of Customer Service

Representatives• Increase in system capacity for all direct loan

systems, added additional servicers• Targeted School Support• Provide Direct Loan training• Conduct Webinars• FSA Conference• Direct Loan Source (monthly newsletter)• Direct Loan Web Site (www.direct.ed.gov)

Direct Lending and FFEL• Many similarities: rules, regulations are

nearly the same.• Some differences in repayment plans

– Parent Loans have lower interest rate– Civil service loan forgiveness

• School still must obtain documentation, verify data, and make awards

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Direct Loan Processing• Currently, most schools send a record to

their lender to originate and disburse a loan.

• Under DL the record is sent to Federal Student Aid

• Record used to send the DL data is the same record used to send the Pell grant data.– Common Orgination Disbursements (COD)– http://ifap.ed.gov/ifap/toolsforschools.jsp

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Direct Loan Processing• Under FFEL the funds are

sent to the school from the lender

• Under DL, the school is given an allocation from which they draw down funds, as they currently do with Pell, ACG, SMART, TEACH, and the Campus Based Programs

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Direct Loan Program

(Department of Education)

Direct Loan Processing

• DL regulations require that schools perform a monthly reconciliation of funds.

• DL has tools and reports to support this activity

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Direct Loan Processing• School does not need to

send a reconciliation report to FSA on a monthly basis, but they need to know where the money resides.

• CSR staff monitor funds and if problems, contact school and provide support

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Direct Loan Processing

• Servicing and collection activity is the responsibility of the government

• Delinquency and Default Management is the responsibility of the government.

• Schools have options and tools if they want to be more active in avoiding defaults.

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School Concerns

• Staffing increases

• IT costs

• Alternative Loan Loss

• Federalization of Student Aid

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Direct Loan Contact Information

• Additional information about the Direct Loan Program at www.direct.ed.gov

• Experienced staff to answer Direct Loan questions at dlenrollment_fsa@ed.gov

• Information about Direct Loan processing, the COD School Relations Center (800)848-0978.

• Pat Stephenson – Pat.Stephenson@ed.gov• Sue O’Flaherty – Sue.OFlaherty@ed.gov

Transitioning to Direct LoansDr. Claude Pressnell

TIUCA President