an introduction to us student loans
DESCRIPTION
An Introduction to US Student Loans. Presented by: Erich McElroy. Agenda. Terms and Players The Life of a Direct Loan Certification Basics Disbursement Rules Refund Calculations Administrative briefing Other Funds Available Resources Questions/ Making the Process Work for You. - PowerPoint PPT PresentationTRANSCRIPT
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An Introduction to US Student
Loans
Presented by:
Erich McElroy
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Agenda
Terms and Players
The Life of a Direct Loan
Certification Basics
Disbursement Rules
Refund Calculations
Administrative briefing
Other Funds Available
Resources
Questions/ Making the Process Work for You
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Players in the Process
Borrower
Student
Department of Education (ED)
Institution
No longer involved in the same way Lenders
Guarantors
Servicers
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Key Terms for Today Title IV
Federal Family Education Loan Program (FFELP)
Direct Loans
Stafford
Subsidized (Unsubsidized)
PLUS
Dependent
Independent
MPN – Master Promissory Note
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Additional Terms for Today FAFSA – Free Application for Student Aid
COA – Cost of Attendance
EFC – Expected Family Contribution
EFA – Estimated Financial Assistance
SAR – Student Aid Report
ISIR – Institutional Student Information Report
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What Programs Can We Use Overseas? Stafford Loans
Borrower is always student Loans can be
Subsidized: Based on need and no interest or payments while student is at least half-time in-school or other eligible status
Unsubsidized: Not based on need and does have interest but no payments required while borrower is at least half time in school or other eligible status
Current interest is set at 4.5% and 6.8% Repayment typically begins six months
after borrower ceases to be enrolled at least ½ time.
Origination fee of 1% for loans, but there is a .5% rebate.
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What Programs Can We Use Overseas? PLUS Loan
Borrower could be parent of Undergraduate student OR student in Postgraduate studies Loan is always unsubsidized and is
not need based Interest is fixed at 7.9% Repayment begins:
Parents – 60 days after final disbursement – Unless extended
Students - Automatically deferred until graduation. Can then be extended 6 months after less than ½ time
Origination fee of 4.0%, with a 1.5% rebate
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Your Responsibilities
Meeting and maintaining loan-program participation requirements;
Establishing borrower eligibility;
Originate loan program loans;
Disbursing loan program proceeds;
Counseling students;
Notifying the Department of changes to borrower information; and
Reporting borrower enrollment information to the U.S. Department of Education’s (ED’s) National Student Loan Data System (NSLDS). (SSCR)
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New Process of Direct Loans
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Change begins 1 July 2010
Federal Family Education Loan Program (FFELP) Ends
The loan types received remain the same, but the source of funds has changed
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What’s the same?
Types of aid:Subsidized LoanUnsubsidized LoanParent PLUSGraduate PLUS
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Eligibility Requirements
There is no significant changes to the eligibility requirements
Still require FAFSA, ISIRs (formally SAR)
Institution still reviews eligibility and sets award levels
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Direct Loans – The Benefits
Single source of funds
Single application site and process
Single Entrance and Exit Portal
One website - studentloans.gov
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Direct Loans – New Opportunities
No more paper cheques
Funding delivered electronically
Must be maintained following specific rules
Requires reconciliation
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Direct Loans – Other differences
Process simplifiedBorrowerUniversityDepartment of
EducationVia servicers/contractors Will include Sallie Mae
No more guarantor or bank
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Process with DL Initial process with the
student is the same Student submits FAFSA Institution receives SAR/ISIR Institution determines award
Award Letter
Borrower completes MPN For ‘Foreign Schools’ must be done
each year
New borrowers do Entrance Counseling
Timeline for this process is set by institution
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Establishing Eligibility
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Establish Borrower Eligibility
1. Is the student enrolled as a “regular” student? Possibly some changes to programs leading to a degree (foundation eligibility in new regs)
2. Is the student academically qualified? Can now accept student who has completed at least 6 credits or is home schooled
3. Is the student enrolled appropriately?
4. Is the student making satisfactory academic progress?
5. Have you received a VALID ISIR or SAR?
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Cost of Attendance
COA includes:Tuition and feesLiving expenses such as
room and boardBooks and suppliesPersonal expenses such as
the renting or purchase of a personal computer
Transportation costs
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Expected Family Contribution (EFC)
Based on student and (for dependents) parents assets
Estimated by ED and supplied on ISIR and SAR 9 month EFC given
Can be adjusted by school only And only by adjusting the factors
For longer or shorter periods, EFC must be prorated
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A Valid ISIR/SAR
Must have 00000 or number
If ‘C’ Comment code listed must be resolved
Must evaluate all tranactions
Other issues on a case by case basis
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Estimated Financial Aid (EFA)
Amount of aid student will receive for the loan period
Can include Loans Grants Scholarships Work awarded based on
enrollment Will no longer include VA
benefits as of July 1, 2010.
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Professional Judgment
Schools are allowed by law to, on a case by case basis, adjust the following:
Student’s COAA data element used to
calculate the EFCDependency status
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Professional Judgment If a school administrator uses professional judgment, he or she
must follow these guidelines:
Professional judgment is performed on a case-by-case basis.
The reason for the professional judgment must be documented in the student’s file, and it must relate to the student’s special circumstances.
A school administrator can only perform a dependency override from dependent to independent.
Professional judgment cannot be used to waive student eligibility requirements or circumvent the intent of U.S. law and regulations.
Examples of special circumstances listed in the law include elementary or secondary tuition, medical or dental expenses not covered by insurance, unusually high child care costs, recent unemployment of a family member…
New! A school may offer the additional unsubsidized Stafford if it can verify the parent does not provide financial support and refuses to file a FAFSA. Recommend testing this via documentation.
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Loan Periods and Amounts
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Academic Year Student loans are based on the
academic year rather than the calendar year
Can now be longer than 12 months
Two types: Scheduled academic year (SAY) Borrower based academic year
(BBAY)
Clock hour and non-term credit hour schools must use BBAY
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SAYFixed period of time Generally starts and ends at
same time each year Normally corresponds to schools
academic year or published calendar
Summer terms are part of the SAY Trailer Header
Can be standard or program by program
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BBAYNot a set period of time
Based on students enrollment and progress
Can be alternated with SAY but one cannot overlap the other
Begins when the student enrolls
Ends when student has completed hours or semester requirements
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BBAYTerm based BBAY must
include same number of terms as the SAY Excluding summer sessions
Term based must be at least 30 weeks in length Unless includes summer term
Clock hour based must be at least 30 weeks (900 clock hours) in length Including summer sessions
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Loan Limits and Amounts
Annual Amounts as of July 1 2008
DependentUndergraduates
Initial Subsidized Stafford
Additional Unsubsidized
Stafford
Combined (maximum)
Levels1st Year $3500 $2000 $5500
2nd Year $4500 $2000 $6500
3rd Year and Up $5500 $2000 $7500
Independent Undergraduates or Dependent Undergrad who’s Parent is denied Parent PLUS.
1st Year $3500 $6000 $9500
2nd Year $4500 $6000 $10500
3rd Year and Up $5500 $7000 $12500
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Annual Amounts as of July 1 2007
Graduate Students $8,500 subsidized $12,000 unsubsidized
(was $10,000-before 01/07/07)
*Note that all amounts given in United States dollars
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Aggregate Dependant undergraduate $23,000 Sub maximum – but up to
$31,000 in total
Dependant undergraduate where parent has been denied PLUS $57,500 No more than $23,000 can be
subsidized
Graduate students $138,500 No more than $65,500 can be
subsidized
Consolidation calculations
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Determining the Amount
COA – EFC – EFA = need Need = Subsidized eligibility
Remainder annual loan limit can be awarded in unsubsidized funds
Dependant or Independent?
Grade Level?
Aggregate?
Borrower requested amount
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PLUSNo annual or aggregate
limits
Amount can be no higher than the lesser of: COA – EFA Borrower requested amount Lender approved amount
Borrower can have multiple loans for multiple dependants for same academic year
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COA Calculation Worksheet
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Disbursements
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Key terms
Disbursement – Date funds are credited to the student’s account at the institution
Delivery – Date excess funds are given to the student
Origination – Process formally known as ‘certification’
Booked – When a loan is set in the DL system
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Key terms - continued
COD – Common Origination & Disbursement System In place of systems such as ASA
Direct or OpenNet (might still use for private loans)
G5 – Government site to manage funds from US Treasury
Reconciliation Process of balancing internally
and with the ED
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The biggest changes…
Funds will be deposited directly into an account you designate
Payment is triggered after disbursement is set
Funds are drawn down by institution
Funds are not delivered by specific borrower
Determining Disbursements
The earliest scheduled disbursement date is the 10days before the start of term. This is new guidance for Foreign Schools which has not been put into writing yet.
Loan Term 1 Oct – 16 Dec 2 Jan -15 April 30 April -30 June
Earliest date to make disbursement active (in COD)
13 September 15 December 13 April
Funds should be available in G5 14 September 16 December 14 April
Funds should arrive in university account 17/18 September 18 December / 19th December 17 April / 18 April
Earliest disbursement date 20 September 22nd December 20 April
Determining Disbursement – First Time Borrowers
Disbursements for first time, first year borrowers must be delayed until the borrower completes 30 days of the program.
Subsequent disbursements may be made as usual without the 30 day delay.
Loan Term 1 Oct – 16 Dec 2 Jan -15 April 30 April -30 June
Earliest date to make disbursement active (in COD)
25 October 15 December 13 April
Funds should be available in G5 26 October 16 December 14 April
Funds should arrive in university account
28 October / 29 October
18 December / 19th December 17 April / 18 April
Earliest disbursement date
1 November (30 October is a Saturday)
22nd December 20 April
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COD Tool
The Department has designed a new system just for Foreign SchoolsOriginate LoansSet first disbursementCalculate Cost of
AttendanceUsing your institutions
information
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Getting the funds
When you originate you will set pending disbursment
Seven days prior to disbursement you can make a disbursement active
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Active Disbursement
An active disbursement (sent in a batch) will total to an amount of US Dollars Example First Batch is
for a total all students $100,000
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Active Disbursement cont.
The $100,000 is processed and accepted (or rejected)
Money is authorized to be drawn down
Draw down will occur in G5.
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G5
With in a few days $100,000 should be available in G5 and you request the funds
Funds will be deposited into your account in a few days
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What happens when funds arrive?
When the funds arrive in your account you have three local business days to credit the student’s institutional account or initiate a return of the funds
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Adjust Disbursment Date
If the actual disbursement date changed you need to go back into COD and update the record
The disbursement triggers the date interest begins to accrue
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Options
Most schools in the U.S. post a ledger transaction to the student’s account before receiving the G5 funds. Benefits mean there is no
three day rushDrawback – You don’t
have the money yet
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Required notifications
Must notify the student of the Title IV funds they will receiveHow and when the funds
will be disbursed If the loan funds will be
subsidized or unsubsidizedCan be done via award
letter
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Required notifications
After the funds are received must notify the studentDate and amount of
disbursementRight to cancel the loanHow to cancelNotice can be 30 days
before or after disbursementThe student has 14 days to
respond
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Required authorizations
Must have written authorizationUsing Title IV funds to pay
any allowable charges beyond tuition and housing
Holding credit balancesFor Parent PLUS –
permission to disburse excess funds directly to student
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New Issues
Exchange rate What rate to use to if
doing a ledger transaction
Planning for processing days – aware of local and US business days
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Disbursement relief
Schools with a Cohort Default Rate of less than 10% over the most recent three fiscal years may disburse single semester/term loans in a single disbursement.
Schools with a Cohort Default Rate of less than 10% over the most recent three fiscal years do not have to apply the 30 day disbursement delay to 1st year, 1st borrowers.
This will change to 15% on October 1, 2011
Cohort Default Rates available at: http://www.ed.gov/offices/OSFAP/defaultmanagement/cdr.html
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Reconciliation
Monthly you need to ‘balance the cheque book’ and make sure what you authorized in COD matches what you drew down from G5
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Staffing
You must separate the functions of ‘awarding’ and ‘disbursing’
Must be a separate office. ‘Financial Aid’ office works with
student, FAFSA, origination and can even do the G5 process
‘Business Office’ transfers the money, credits the students account and issues funds.
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Setting Disbursements If there is more than one term in the
loan period, the loan must be disbursed over all terms of the loan period. For example, if a loan period includes all three quarters of an academic year, the loan must be disbursed in three substantially equal disbursements.
If there is only one term in the loan period, the loan must be disbursed in equal amounts at the beginning of the term and at the term’s calendar midpoint.
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Setting Disbursements
Q: What if the institution has a payment plan that does not match the loan terms?
A: Disbursements must still be based on the terms in the student's program of study and the associated academic year. You may still require the student to pay according to your institution’s payment plan (even all at once up front) but that is a separate policy decision.
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Setting Disbursements
Q: What about programs that are taught for one academic year followed by a “writing up” period?
A: Many UK programs have postgraduate courses where classes are taught September to June, after which students have from June to August to write and submit a thesis, though no additional fees are charged. In this case the “writing up” period is considered a term and requires a separate disbursement if the student is considered enrolled at least ½ time.
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Refunds
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WhenThe student withdraws prior
to completing loan period
Calculation must be completed regardless if student paid school
60% loan period completion = full loan eligibility
School must return unearned portion of loan attributed to institutional charges Even if student did not pay
school!!
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When
Funds must returned within 45 days of the date of determination
Clock starts Date student withdraws or Date student notified school of
withdrawal or Date the school became aware
the student was no longer attending
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HowCredit hour schools Based on calendar days
completed
Credit hour example: Borrower completed 42 days Loan period 200 days
(excluding breaks) Borrower completed 21% Borrower earned $2,152.50 of
$10,250 loan
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Returning Funds Order of return: Unsubsidized Stafford Subsidized Stafford GRAD PLUS Parent PLUS
School must return the lesser of: Amount of unearned funds or the amount of institutional charges that the
student incurred for the payment period or period of enrollment multiplied by the percentage of funds that was not earned.
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Returning funds
Can be through G5 system If you have an account in
the United States
Must be returned by cheque if you have a ‘foreign’ based accountDoesn’t matter if it’s a
dollar account
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Administrative Items
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Student Status Confirmation Reports (SSCR)
Generally sent bi-annually
Enrolled or recently enrolled students sent on list with most recent enrollment status
School reviews and updates
Must be returned within 30 days
Can be removed from FFELP for non-compliance
Can update more frequently
Deferments
Can be done via NSLDS or Clearinghouse
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Exit Counseling
School must provide copy of exit counseling information to guaranty agency within 60 days of completion
Online counseling can be found at: www.studentloan.gov
Must register for this service
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Record Retention Schools must maintain records
for a minimum of three years from when the student last attended
Any signature, seal, etc must be kept in original format
All others can be maintained electronically as long as it can be reproduced
SAR’s originals must be kept
Must develop procedures to retain ISIR’s
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Record Retention
School must allow the following entities access to records on request: Independent auditors; The U.S. Secretary of Education;
ED’s OIG; The Comptroller General of the
United States; and Any guaranty agency in whose
program the school participates.
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Written PoliciesSatisfactory Academic Progress Can be different for FFELP recipients but must
be at least as strict as general policy Minimum standard is 150% of program time
Federal Education Right to Privacy (FERPA)Written policy on how students and
parents can review records Includes disclosure of said procedures to
students Must include documentation of when info is
released to third party
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On-line Programs
If your programme has a compulsory online component, which does not include a face to face class attendance between lecturer/tutor and student, you cannot award any US Federal Loans to the student.
This compulsory component removes eligibility for the whole programme. It is our interpretation that if the online class is also offered in the “traditional” manner of physical class attendance, and the US student is not allowed access to the online version, the programme retains it’s eligibility for US Federal loans.
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New Requirements
School Code of Conduct Ban gifts
Revenue sharing
Staffing assistance
Advisory board compensation
Expanded Exit Counseling Requirements
Expanded Lender List Requirements
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New Requirements – cont.
Cannot use Title IV funds to lobby Congress or any agency
Fire Safety Report
Transfer Credit Reporting
Crime Report requirement has ended for Foreign Schools
New requirements regarding certification of private loans (will need to know that all Title IV aid has been exhausted)
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Other Programs
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Private Credit Based Loans
Amount can be no higher than the lesser of:COA – EFABorrower requested amountLender approved amountGood credit is necessary Interest variable Prime vs LIBOR
Will have most likely have an origination fee
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Resources and Contacts
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International Education Council
IEC is a non-profit association tracking issues and policies affecting international education with a focus on student financial aid
www.intl-edcouncil.org
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US Loans Listserv
Go to http://www.jiscmail.ac.uk/cgi-bin/webadmin?SUBED1=us-loans&A=1
Enter your email address and name.
Wait for a confirmation email and click on the link in the email.
Your request to join the list will be then reviewed by the list owner, Sean McNally.
Receive your confirmation of the list, including directions on managing your account.
Start using the list!
Problems? Email Sean at [email protected]
