What

1
Session 46

• Whats New in Direct Loans Grad PLUS and other
  HERA-Related Changes
• Lisa DiCarlo

2
Whats New for Direct Loans?

• The Higher Education Reconciliation Act (HERA) of
  2005
• COD System 6.0 Release, April 13, 2007

3
The HERA of 2005

• Changes affecting Direct Loans
• Effective February 8, 2006
• Reinstatement of low cohort default rate
  exemption
• Effective July 1, 2006
• New False Certification Discharge due to Identity
  Theft
• Graduate/Professional Students may borrow PLUS
  (Grad PLUS)
• Effective July 1, 2007
• New Stafford (Sub/Unsub) Loan Limits for loans
  disbursed on or after July 1, 2007
• New Sub/Unsub origination fees reduced over
  time.

4
The HERA of 2005

• Low cohort default rate exemption February 8,
  2006
• COD System has implemented many changes as a
  result of the HERA
• Updated e-MPN site July 2006
• Student borrowers can complete a PLUS MPN
• Reflects HERA changes to Sub/Unsub and PLUS

5
The HERA of 2005

• Updated correspondence July 2006
• Revised Plain Language Disclosure Statements for
  DL Sub/Unsub and PLUS.
• New MPN Addenda for DL Sub/Unsub and PLUS
• Updated correspondence to reflect HERA changes,
  including new PLUS borrower type.
• Credit Check
• MPN Packages

6
The HERA of 2005

• Full Grad PLUS Functionality August 12, 2006
• Process Grad PLUS via existing PLUS Common Record
• Both student and borrower block must be completed
  and contain identical information
• COD System will implement additional changes with
  the COD 6.0 Release on April 13, 2007

7
COD 6.0 System Changes

• April 13, 2007
• MPN Expiration Date changes
• Discharge due to Identity Theft
• Loan Limit changes
• Origination Fee changes

8
MPN Expiration Date Tags

• Will send MPN Expiration Date in
• MPN response (message class CRPNOP, where
  award year)
• Award Response Block
• New tag is ltMPNExpirationDategt
• Change applies to all award years

9
MPN Expiration Date Tags (continued)

• MPN Response will be sent to
• School listed on MPN
• All schools w/ active award linked to MPN

10
MPN Expiration Date Tags (continued)

• MPN Response will be sent when
• MPN is received and doesnt link
• MPN is received and links to one or more loans
• MPN expiration date changes due to acceptance of
  actual disbursement

11
MPN Expiration Date Tags (continued)

• MPN Response wont be sent when
• Loan is inactive
• School has confirmed closeout for year
• FSA has confirmed school closed out for year
• Year is closed and school isnt on extended
  processing for that year

12
Discharge for Identity Theft

• COD will accept new false certification discharge
  type for identity theft
• MPN Discharge Report will include new reason
  identifier of I
• Discharged loan wont count against loan limit

13
Discharge for Identity Theft (continued)

• What does it mean for processing?
• MPN linked to discharged loan wont link to
  additional loans
• Disbursements and adjustments for discharged loan
  may reject
• Person w/ stolen identity may receive other loans

14
Discharge for Identity Theft (continued)

• Example
• Discharge date 8/1/2007

Record Type Received? Disb. Date? Accept/Reject?
Disbursement Discharged Loan 8/2/2007 7/30/2007 Accept
Disbursement Discharged Loan 8/2/2007 8/1/2007 Reject
Origination New Loan 8/3/2007 N/A Accept
Disbursement New Loan 8/3/2007 8/7/2007 Accept
15
Annual Loan Limit Changes

• Certain loan limits will increase for loans
  disbursed on or after 7/1/2007
• COD System will accept loan origination records
  beginning 4/13/2007 however, higher limits apply
  only to loans disbursed on or after 7/1/2007
• Aggregate loan limits are unchanged
• Applies to 2006-2007 and forward

16
Annual Loan Limits-July 1, 2007 (continued)
Base Sub/Unsub Additional Unsub
1st Year Undergrad 3,500 4,000
2nd Year Undergrad 4,500 4,000
3rd Year beyond undergrad 5,500 5,000
Graduate 8,500 12,000
Preparatory coursework (for enrollment in an undergraduate program) Preparatory coursework (for enrollment in an undergraduate program) Preparatory coursework (for enrollment in an undergraduate program)
2,625 4,000
Preparatory coursework (for enrollment in a graduate or professional program) and Teacher Certification Preparatory coursework (for enrollment in a graduate or professional program) and Teacher Certification Preparatory coursework (for enrollment in a graduate or professional program) and Teacher Certification
5,500 7,000
HERA Changes to Loan Limits Apply to loans
disbursed on or after 7/1/2007
17
Annual Loan Limits-July 1, 2007 (continued)
Grade Level Max Sub Amt (base amt) Max Combined Sub/Unsub Amt
0 or 1 3500 7500
2 4500 8500
3, 4, 5 5500 10,500
gt6 8500 20,500
Health Professions (HPPA Flag) Y Health Professions (HPPA Flag) Y Health Professions (HPPA Flag) Y
4 or 5 N/A 27,167
6 or 7 N/A 47,167
Preparatory coursework (to enroll in graduate or professional program) or Teacher Certification (PreProfessionalCourseworkIndicator true) Preparatory coursework (to enroll in graduate or professional program) or Teacher Certification (PreProfessionalCourseworkIndicator true) Preparatory coursework (to enroll in graduate or professional program) or Teacher Certification (PreProfessionalCourseworkIndicator true)
5 5500 12,500
COD Loan Limit Edits (Edit 39) Apply to loans
disbursed on or after 7/1/2007
18
Origination Fee Changes

• HERA reduces Direct Loan origination fees over
  next 4 years
• COD implements fee changes 4/13/2007
• Subsidized and unsubsidized loans only

Loans first disbursed Loans first disbursed Loans first disbursed
On or after Before Fee
July 1, 2007 3
July 1, 2007 July 1, 2008 2.5
July 1, 2008 July 1, 2009 2
July 1, 2009 July 1, 2010 1.5
July 1, 2010 1
19
Origination Fee Changes (continued)

• Example 1
• Origination submitted w/ two actual disbursements
• Loan amt 3000, Origination Fee 3.0

Disb Seq Disb Date Gross Net Disbursed? Accept?
1 1 6/1/2007 1000 985 Yes
2 1 11/30/2007 1000 985 Yes Yes
3 1 7/10/2007 1000 985 No
20
Origination Fee Changes (continued)

• Example 2
• Origination submitted w/ one actual
• Loan amt 3000, Origination Fee 2.5

Disb Seq Disb Date Gross Net Disbursed? Accept?
1 1 11/30/2007 1000 990 Yes Yes
2 1 1/10/2008 1000 990 No
21
Origination Fee Changes (continued)

• Example 3
• Origination submitted with no actual
  disbursements
• Loan amt 3000, Origination Fee 2.5

Disb Seq Disb Date Gross Net Disbursed? Accept?
1 1 6/1/2007 1000 990 No
2 1 11/30/2007 1000 990 No No
3 1 1/10/2008 1000 990 No
22
Origination Fee Changes (continued)

• Example 4
• Origination submitted with no actual
  disbursements
• Loan amt 3000, Origination Fee 3

Disb Seq Disb Date Gross Net Disbursed? Accept?
1 1 6/1/2007 1000 985 No
2 1 11/30/2007 1000 985 No Yes
3 1 1/10/2008 1000 985 No
23
Origination Fee Changes (continued)

• Example 4 (continued)
• Disbursement 2 becomes the first actual
  disbursement
• Loan amt 3000, Origination Fee 3

Disb Seq Disb Date Gross Net Disbursed? Accept?
1 1 6/1/2007 1000 985 No
2 1 11/30/2007 1000 985 Yes No
3 1 1/10/2008 1000 985 No
24
Origination Fee Changes (continued)

• What if this happens to me?
• Inactivate loan
• Change Date and Fee
• Reactivate loan and submit recalculated
  disbursements

25
Contact Information

• We appreciate your feedback and comments. We can
  be reached at
• Direct Loan Operations
• dlops_at_ed.gov

26
Other Direct Loan Sessions

• Session 40 Hands On Tour of DL Tools
• Session 41 Best Practices in Using DL LSDA
• Session 42 DL Funding Cash Management A-Z
• Session 43 Best Practices for Processing DL at
  Your School
• Session 44 Direct Loans A Z
• Session 45 Direct Loans How to Get Started and
  Get Going
• Session 47 Direct Loan Reconciliation and
  Closeout
• Session 48 Direct Loan Reports Reference
  Materials-Tools of the Trade
• Session 49 How Direct Loan Servicing is Improving
  the Financial Aid Experience for You and Your
  Students