It’s October 1st and that means origination fees on direct loans are changing again. Blame it on the Budget Control Act of 2011. Since 2013 the sequester law has been a nuisance for college financial aid administrators working with Federal Direct Student Loans. Unfortunately, the sequestration law isn’t set to expire until 2021.
Beginning on October 1, 2017 the loan origination fees have gone down slightly. For Federal Direct Loans where the first disbursement is made on or after October 1, 2017, and before October 1, 2018 the origination fees are as follows:
- The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.066%. For example, the fee on a $5,500 loan will be $58.63.
- The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.264%. For example, the fee on a $10,000 PLUS Loan will be $426.40.
Sequestration doesn’t just impact Federal Direct Loans, it impacts other forms of aid too including the Iraq – Afghanistan Service Grant Program and TEACH Grant Program, both of which require a reduced award amount for any grant that is first disbursed during the time the sequester is in effect. For more information about these programs, check out this electronic announcement from Federal Student Aid.
If your school uses EDExpress to print master Promisorry Notes you’ll be disappointed to learn that the service has been discontinued following the implementation of new forms last week. When a school begins using the newly approved Master Promissory Notes (MPNs), it will no longer be able to print MPNs, MPN Manifests, and Disclosure Statements using EDExpress. Fillable PDF versions of the revised MPNs will be available on the StudentLoans.gov. EDExpress Direct Loan users should begin directing loan applicants to the StudentLoans.gov website to complete online versions of the MPN. Otherwise, schools will need to have students complete pre-printed paper versions of the MPN, MPN Manifest, and Disclosure Statement which can be obtained from FSA Pubs or use another software system to complete the MNP. http://bit.ly/2eNcNor
Students, parents, and even Financial Aid Officers can learn everything they need to know about the terms and conditions of federal student loans, right on the Master Promissory Note and accompanying disclosures that borrowers sign when they apply. The Direct Loan Entrance Counseling guides that are provided by Federal Student Aid do a great job of summarizing the essential points of student loan borrower rights and responsibilities.
When students are equipped with these basics, they can borrow wisely and that’s the real foundation of establishing a healthy credit history and learning good debt management practices.
If your school participated in the Direct Loan program during the 2014-2015 Award Year, you should have received the U.S. Department of Education’s Closeout Letter. You must sign and return the letter once you have fully reconciled all of your Direct Loan awards and have no more outstanding Direct Loan disbursements pending and have otherwise confirmed closeout on the COD Website. Friday, July 29, 2016 is the last processing day of the program year, so all school data must be received and accepted by this date to be included in a school’s final Ending Cash Balance for the year.
Schools that use “Third-Party Servicers” should be very careful to monitor their closeout process closely. Third Party Servicers are notorious for errors and according to Federal Student Aid, “It is the school’s responsibility to ensure that it finishes processing and confirms closeout on time.”
A key factor to an easy reconciliation and closeout is staying on top of the process. Here’s how:
- Complete monthly reconciliation. This should include:
- Internal reconciliation – compare internal student accounts and Business Office/Bursar records with Financial Aid Office records
- External reconciliation – compare internal records to your Direct Loan School Account Statement sent via your SAIG mailbox
- Resolution of any discrepancies and documentation of any outstanding timing issues.
- Ensure that all drawdowns and refunds of cash are accounted for and applied to the correct program and award year.
- Ensure that all batches have been sent to and accepted by the COD System, all disbursements and adjustments are accurately reflected on the COD System, and all responses are imported into the school’s system.
- Review all pending disbursements and determine whether these need to be reported as actuals (DRI = TRUE) and if not, reduce these to $0 and make changes to loan period dates if needed. This will ensure that all disbursement data has been correctly reported to the COD System, and ensure subsidized usage limit calculations are correct for your borrowers. For more information on Subsidized Usage Limit Applies (SULA) reductions, see Q3 in the attachment to this announcement.
- Ensure that all “unbooked” loans are booked or inactivated (reduced to $0).
- Resolve all outstanding rejected records.
- Return all refunds of cash. All refunds for the Direct Loan Program must be returned via G5.
- Request any remaining funds owed to the school based on actual disbursements accepted by the COD System.