TIPS FOR SEQUESTER RELATED DIRECT LOAN ORIGINATION FEE CHANGE

Last Month the COD system was updated to be able to process loans with the new origination fee scheduled to go into effect on October 1st, 2018 because of the budget control act of 2011, known as the sequester law. This much earlier than in years past and great news for schools who have inevitable been caught flat footed and were plagued with hundreds of rejected loan disbursements come October 1 each year.

If a school submits a Direct Loan record with an incorrect origination fee based on the reported scheduled anticipated disbursement date, it will be rejected with COD Reject Edit 140 (Incorrect Origination Fee Percent and/or Interest Rebate Percent on New Awards).

If a school needs to correct or make changes to a Direct Loan record that has already been accepted by the COD System (such as a case in which the earliest disbursement date has changed and the new earliest disbursement date falls within a different origination fee period), COD recommends that schools run a pending disbursement list either from the school’s financial aid software or from the anticipated disbursement queue on the COD website to identify loans where the first pending disbursement with a date prior to October 1 and with the old origination fee. Once those are identified the school can determine the proper course of action to fix the loan. According to COD:

  • If a disbursement will not be made, then reduce it to zero ($0).
  • If a disbursement was posted to a student’s account prior to October 1, but is not reported to the COD System, then report the disbursement.
  • If a disbursement will post to a student’s account after October 1, and it is not reported to the COD System, then follow the guidance below for changing the origination fee for Direct Loan awards with only anticipated disbursements.
  • If the award was originally rejected by the COD System, then correct the loan fee (and any other rejected data element) and resubmit the award.

For more guidance, check out this electronic announcement from FSA and this helpful attachment too.