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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