ffelp loan processing a-z
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FFELP Loan Processing A-Z
Presented by:Susan Knoten, MDHEJulie Meyer, MDHE
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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
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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 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
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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 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?
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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?
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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
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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
1. Student enrollment2. Student academic progress (SAP)3. 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
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
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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
http://www.dhe.mo.gov/mdhedigest/signup.shtml
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Questions?
3515 Amazonas DriveJefferson City, MO 65109-5717(800) 473-6757(573) 751-3940Fax: (573) 751-6635www.dhe.mo.gov
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