go with the flows: identifying the ffelp process flow that is right for your institution

MASFAP spring 2006 1

Go With The Flows:Identifying the FFELP process flow that is right for your institution

Presented by:

Julie Meyer and Stephanie WilsonMissouri Department of Higher Education


Agenda

Players and roles Definitions Comparison of application flow

options Suggestions for how to determine

which flow is right for your school and borrowers


Who Are The Players?

The role of the school Determines its processes and

partners/vendors (the decision maker) The role of the lender or disbursing

agent Approves the prom note for

disbursement Disburses funds according to the

school’s instructions


Who Are The Players?

The role of the guarantor Provides insurance for the loan Is required to pay its Federal Fund a

1% default fee for loans guaranteed The role of the servicer

Administers repayment processes


Definitions Process flow: The path a loan follows;

the steps involved in applying for a loan Origination: “Front-end” processes

involved in making a new loan; includes School certification Borrower processes, such as signing the

prom note Guarantee and approval processes Disbursement processes


Definitions CommonLine: Industry initiative to

develop and use common file layouts, terms, and processes Most commonly used version is CL4 Common Record: CommonLine (CRC)

currently being tested and piloted within the industry

Types of files: App send Change send Response Disbursement-related


Definitions School-initiated process: School initiates

the loan application by sending one of the following to the guarantor: CommonLine application send file School certification via the web Paper certification

Borrower-initiated process: Borrower initiates the loan application via the web or telephone


Definitions

Guarantor flow: Loan data is sent to the guarantor first. The guarantor then notifies the lender, servicer, and/or disbursing agent.

Lender flow: Loan data is sent to the lender first. The lender then notifies the guarantor.


Definitions

Guarantee and print (GP): School certifies the loan and sends a complete loan record to the guarantor. If non-serial, borrower must then sign a prom note electronically or via paper.

Print and guarantee (PG): School sends a partial loan record to the guarantor. Borrower must complete missing information in order to guarantee the loan.


Definitions

Guarantee only (GO): All necessary information is provided before submitting for the guarantee, including prom note signature if non-serial.

Other flows Print only (PO) Credit only (CO) Etc.


What are the processing flow options?


School-Initiated Guarantor GP Flow

1. School certifies loan via CL app send file or via web

2. Guarantor guarantees loan and forwards information to lender and/or disbursing agent

3. Non-serial borrowers complete prom note via paper or web

4. Disbursing agent approves loan for disbursement



1 School certifies loans; sends certification to

guarantor

2 Guarantor guarantees loans; forwards

information to lenders

3 If new borrower: lenders request

signed prom note

5 Lenders notify guarantor of promissory

note approval

4 New borrowers sign promissory note, return to lenders

(paper or electronic)


Recommended for schools: With sophisticated FAM Systems that

are able to generate and send CommonLine App Send files

<OR> That can provide most or all of the

information needed to guarantee the loan

Borrower/student name, SSN, DOB, etc. School, lender, and guarantor information Loan type and certification amount



School-Initiated Guarantor PG Flow

1. School submits loan information via CL app send file or via web

2. Borrower completes application and prom note via paper or web

3. Guarantor guarantees the loan and notifies the lender and/or disbursing agent

4. Disbursing agent approves loan for disbursement



1 School submits loan information to guarantor

4 Guarantor guarantees loans

3 Borrowers provide missing information (provide lender, sign

promissory note, pass credit check, etc.)

2 Guarantor prints & mails prom note OR makes available for e-sign on the web

5 Guarantor notifies lender or disbursing

agent


Recommended for schools: With FAM Systems that are able to generate

and send CL App Send files<OR> PLUS loans or other loans not yet credit

approved<OR> That cannot provide all of the information

needed to guarantee the loan Borrower or student info not complete Lender or guarantor not known



School-Initiated Guarantor GO Flow

1. School provides all necessary loan information via CL app send file or via web

2. Guarantor guarantees loan3. Disbursing agent approves loan

for disbursement (if valid prom note on file)


Recommended for schools: Gathering all FFELP loan information at the

time of packaging/awarding (e.g., lender)<OR> With a large serial population<OR> Using loan types not requiring a credit check<OR> Using the web for online entry and real-time

guarantee

School-Initiated Guarantor GO Flow


School-Initiated Lender Flow

1. School certifies loan via CL app send file or via lender’s web product

2. Non-serial borrowers complete prom note via paper or via lender’s e-sign process

3. Lender/disbursing agent: submits loan information to guarantor approves loan for disbursement



1 School initiates loans with lender

2 Lender makes loan available to borrower

online

4 Lender notifies guarantors of loan

and prom note approval

3 Borrower completes – credit check

performed, prom note signed


Recommended for schools: Partnering strongly with one or two lenders;

using that lender’s web loan delivery product ELM Credit checks E-sign

<OR> That can provide most or all of the

information needed to guarantee the loan Borrower/student name, SSN, DOB, etc. School, lender, and guarantor information Loan type and certification amount



Borrower-Initiated Lender Flow

1. Borrowers apply for loans via lender’s website

Credit check performed Application signed electronically

2. Lender sends school cert request; school certifies

3. Lender/disbursing agent submits loan for guarantee

4. Lender/disbursing agent disburses loan



2 Lender requests school certification

3 School certifies online or via CL app

send file

4 Lenders notify guarantor of loan

and prom note approval

1 Borrowers apply for loans via lender’s

website


Recommended for schools: Strongly partnered with one lender or

disbursing agent; school may be: Using one lender with multiple guarantors Using lender’s web loan delivery product ELM

<OR> Heavily using PLUS or other loan

types requiring credit checks



How do I determine which flow is right for my school?


Factors to Consider

How much information does my school gather at the time of awarding? Is the lender always known? Is the requested amount known?

Are credit checks a part of the application process? Are credit approval rates generally high

or low?


Factors to Consider

How reliant is my school on its FAMS? Is my FAMS capable of supporting CommonLine 4 (or 5)? Many vendors no longer support CL3 Common Record: CommonLine (CRC)

still being piloted


Factors to Consider

How web-savvy is my student and/or parent population? Are they willing to: Initiate or complete an application

and/or credit check on the web? E-sign?


Factors to Consider

Which vendor(s) does my school want to work with based on borrower benefits or other factors? ELM Private loan borrowing Upfront fees Rate relief programs during

repayment


Thank you for your time and attention!

go with the flows: identifying the ffelp process flow that is right for your institution

Documents

loan application

loan data

telephonemasfap spring

disbursementmasfap spring

borrowersmasfap spring

complete loan record

lender flow

partial loan record