Go With The FlowsIdentifying the Right Process Flow

Input

Start

End

Decision A

Question?

Decision B

Agenda

� What do Guarantors, Lenders and Servicers do?

� What does “Full Service” mean?

� What does “originate” mean?

� Who initiates the process?

� What’s the difference between Lender Flow and Guarantor Flow?

� Which process is best for a school?

Who are the Players?

Guarantor: A state or private nonprofit organization that has an agreement with the U.S. Secretary of Education to administer a loan guarantee program under the Higher Education Act. Basically, a guarantor guarantees (a.k.a. “insures”) the loan in case of default

Lender: A national or state chartered bank, mutual savings bank, savings and loan association, stock savings bank, or credit union… Basically, a lender lends the funds for the loan

Servicer: An entity that enters into a contract with a program participant to administer any aspect of its participation in a Title IV program. Basically, a servicer oversees the repayment of the loan by the borrower

Definitions:

Process Flow:The process by which a loan goes from certification to disbursement; the path a loan follows from beginning to end.

Origination: The process of collecting a school certification, obtaining a signed promissory note, ensuring completion of the application, and disbursing the funds.

Disbursement: The process of delivering funds to a school, either directly or via a 3rd party disbursing agent.

Definitions (Cont’d):

School-Initiated Process:The school kick-starts the whole process by sending a certification file to the originator (like ASA, for example).

Borrower-Initiated Process:The borrower kick-starts everything by going directly to an entity (like ASA) other than the school and completing the MPN / loan application on-line or over the phone.

Definitions (Cont’d)

Lender Flow: Loan data is first sent to the lender. The lender will originate the loans and also disburse the funds to the school, obtaining a guarantee from the guarantor(s).

Guarantor Flow: Loan data is first sent to the guarantor. The guarantor will originate the loans, guarantee the loans, and disburse the funds to the school, obtaining those funds from the lender(s).

Lender Flow (School Initiated)

Process for School Initiated Lender Flow:

• School Certifies Loan; sends Certification file to Lenders• Lenders request guarantee from Guarantor• Guarantor guarantees the loan; sends to Lenders• Lenders request signed MPN for new borrowers (either on paper MPN or

electronically)

• New students sign MPN, return to Lenders • Lenders disburse funds to School (either directly or via a 3rd party

disbursement agent, such as the NDN)

Lender Flow (School Initiated)

School sends certification file to the Lender

12

Lender receives the certification and then

contacts borrower with requests to

complete an MPN

3Borrower completes. signs & returns the MPN to the Lender

6 Lender disburses funds to school

Lender requests guarantee from ASA

4

5Lender receives guarantee back

from ASA

Lender Flow (Borrower Initiated)

Process for Borrower Initiated Lender Flow:

• Borrower applies for loan with Lender; signs MPN (either on printed paper MPN or electronically)

• Lenders request School Certification• School Certifies Loan; sends Certification File to Lenders• Lenders request guarantee from Guarantor• Guarantor guarantees loans; sends to Lenders• Lender sends funds to School (either directly or via a 3rd party disbursement

agent, such as the NDN)

Lender Flow (Borrower Initiated)

1

2

Lender receives application from the

borrower and then sends request to

school for certification

3School receives Lender’s request and sends back certification

Lender requests guarantee from ASA

6

4

Lenderdisburses funds to the school

Borrower applies for college loan thru Lender

5Lender receives guarantee back

from ASA

Guarantor Flow (School Initiated)

Process for School Initiated Guarantor Flow 1:

• School Certifies Loan; sends Certification file to Guarantor• Guarantor guarantees the loan • Guarantor requests signed MPN for new borrowers (either on paper

MPN or electronically)

• New students sign MPN, return to Guarantor • Guarantor obtains funds from Lender(s)• Guarantor disburses consolidated funds to School (either directly or via

a 3rd party disbursement agent, such as the NDN)

Guarantor Flow (School Initiated)

School sends certification file to Guarantor (ASA)

12

ASA receives the certification and then

contacts borrower with requests to

complete an MPN

3Borrower completes. signs & returns the MPN to ASA

ASA obtains the funds from the lender

5

4

ASA disburses funds to school

Guarantor Flow (Borrower Initiated)

Process for Borrower Initiated Guarantor Flow:

• Borrower applies for loan with Guarantor; signs MPN (either on paper MPN or electronically)

• Guarantor requests School Certification• School Certifies Loan; sends Certification File to Guarantor• Guarantor guarantees loan• Guarantor obtains funds from Lender(s)• Guarantor sends funds to School (either directly or via a 3rd party

disbursement agent, such as the NDN)

Guarantor Flow (Borrower Initiated)

1

2

ASA receives application from the

borrower and then sends request to

school for certification

3School receives ASA’s request and sends in certification

ASA obtains the funds from the lender

5

4ASA disburses funds to the school

Borrower applies for college loan thru ASA

Which Process is Right for a School?

Factors to Consider:

Loan Delivery, FAM Systems, Proprietary Systems

Number of Players

Number of Steps Involved

Number of Points of Contact

Lender / Guarantor Benefits

Relationship

Partner capabilities

Split Processing

Q U I Z T I M E !N A M E T H A T F L O W !

School sends certification file to Guarantor (ASA)

1

2

ASA receives the certification and then contacts borrower with request to complete an MPN

3Borrower completes. signs & returns the MPN to ASA

ASA obtains the funds from the

lender

5

4

ASA disburses funds to school

Guarantor Flow (School Initiated)

LIGHTNING ROUND !

F I L LT H E SQUARES!

I N

1 2

Lender receives certification from the

school and then contacts borrower

with request to complete an MPN

3

Lender requests

guarantee from ASA

6

4

Lender disburses funds to the school 5

ASA receives guarantee-request file and responds

back to the lender with guarantee

affirmed

Lender Flow -School Initiated

School sends certification file to Lender

Borrower completes. signs & returns the MPN to

Lender

BONUS ROUND !

T R U E O R F A L S E !

TRUE or FALSE: In a Guarantor-flow process, loan data

(a.k.a ‘certification file’) from the school is first sent to

the lender.

In a Guarantor-flow process, loan data from the school is first sent to the guarantor.

F A L S E

THANKS FOR PLAYING . . . .

N A M E T H A T FLOW!

A FRANCK ‘n FEROCE productionMeg Franck - Executive DirectorJeff Feroce - Executive Producer

ASA Studios - Boston, MA

Questions?

American Student Assistance®

100 Cambridge Street, Suite 1600Boston, MA 02114

(800) 999-9080(617) 728-4265 F A X(800) 999-0923 T D D

www.amsa.com