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HERA Changes and Grad PLUS Loans: What You Need to Know

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  1. Session 46 What’s New in Direct Loans: Grad PLUS and other HERA-Related Changes Lisa DiCarlo

  2. What’s 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 CRPN##OP, where ## = award year) • Award Response Block • New tag is <MPNExpirationDate> • 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 doesn’t 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 won’t 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 isn’t 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 won’t count against loan limit

  13. Discharge for Identity Theft (continued) • What does it mean for processing? • MPN linked to discharged loan won’t 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

  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) HERA Changes to Loan Limits Apply to loans disbursed on or after 7/1/2007

  17. Annual Loan Limits-July 1, 2007 (continued) 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

  19. Origination Fee Changes (continued) Example 1: • Origination submitted w/ two actual disbursements • Loan amt = $3000, Origination Fee = 3.0%

  20. Origination Fee Changes (continued) Example 2: • Origination submitted w/ one actual • Loan amt = $3000, Origination Fee = 2.5%

  21. Origination Fee Changes (continued) Example 3: • Origination submitted with no actual disbursements • Loan amt = $3000, Origination Fee = 2.5%

  22. Origination Fee Changes (continued) Example 4: • Origination submitted with no actual disbursements • Loan amt = $3000, Origination Fee = 3%

  23. Origination Fee Changes (continued) Example 4: (continued) • Disbursement 2 becomes the first actual disbursement • Loan amt = $3000, Origination Fee = 3%

  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@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

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