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Direct Loan Processing

Direct Loan Processing

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Direct Loan Processing

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  1. Direct Loan Processing In clock-hour programs

  2. First Things First • William D. Ford Federal Direct Loan Program (DL) • Capital provided by the US Treasury • Loan Types • Stafford Loans • Subsidized • Unsubsidized • PLUS Loan • Parent loan for undergraduate students • Consolidation Loan

  3. First Things First • Student must be an eligible borrower • “Regular student” (degree seeking) • Meets general eligibility requirements • Program must be an eligible program • Student academic qualifications (general eligibility) • High school diploma • High school equivalency (GED) • Completed homeschooling at secondary level – state determined • (ATB no longer okay)

  4. First Things First • Cost of Attendance for each program • Dependent / Independent • Living with parents / Not living with parents • Subsidized Stafford (need based) • COA-EFC-EFA = subsidized eligibility • Unsubsidized Stafford (non-need based) • COA – EFA = unsubsidized eligibility

  5. First Things First • Annual maximum (based on dependency status & grade level • $3500/2000 $3500/$6000 • $4500/2000 $4500/6000 • Aggregate maximum • Dependent $23,000 sub / $31,000 sub & unsub • Independent $23,000 sub / $57,500 sub & unsub • Cost of Attendance • School determined • Cost of Attendance – EFC = NEED • Difficult to ever reach “need” due to fewer resources

  6. Awarding DL • Determine Loan Period • Scheduled award year (SAY) vs Borrower-based (BBAY) • Borrower-based Academic Year • Floats with a student’s attendance & progression • Ends when student completes calendar period of BBAY • (important with transfers) • No fixed beginning or end dates • School determined • Minimum requirements for a clock-hr award year: • 900 hours / 26 weeks

  7. Awarding DL • What is the minimum length of a loan period in BBAY? • Academic year (as defined by school) • Length of student’s program • Remaining portion of student’s program

  8. Scheduling Disbursements Disbursements must be based on payment period Loans disbursed in a minimum of 2 installments School must deliver proceeds in substantially equal installments

  9. DL Scheduled Award – 2000 hour program 900 hour Award Year 1000 hour Award Year • Year 1: 1-900 hours • (1-450 ; 451-900) • Year 2: 901-1800 hours • (901-1350 ; 1351-1800) • Year 2: 1801-2000 hrs • (1801-1900 ; 1901-2000) • Year 1: 1-1000 hours • (1-500 ; 501-1000) • Year 2: 1001-2000 hrs • (1001-1500 ; 1501-2000)

  10. Loan Proration • Annual loan limits must be prorated when: • Less than an academic year in students program • Students remaining portion is shorter than academic year • 2 Methods for loan proration • Use Method 1 if program is less than an academic year in length • Use Method 2 if students remaining time/hours are less than an academic year in length • As a reminder, prorated loan amount may be more than student eligible for due to things like COA, “need”, over-lapping loan periods, etc.

  11. Loan Proration Method 1 Method 1: program < AY Example Calculate A & B & use the lesser of: Clock hrs in program clock hrs in AY B) Weeks in program Weeks in AY Multiple applicable loan limits by the lesser of A or B Esthetics 600 hrs, award year defined as 900 hrs/26 weeks 600 = .67 900 20 = .77 26

  12. Practice Method 1 Claudia is enrolled in a 700 hour/18 week Taxidermy program. Her school defines an award year as 900 hrs/26 weeks. What is her Direct Loan eligibility? (assuming no other variable conflicts) 700/900 = .77 18/26 = .69 Which calculation would you use?

  13. Practice Method 1 Claudia is enrolled in a 750 hour/20 week Taxidermy program. Her school defines an award year as 900 hrs/26 weeks. What is her Direct Loan eligibility? (assuming no other variable conflicts) 700/900 = .77 18/26 = .69 We have determined the using “B” is the lesser, and therefore required, method of proration for Claudia. Subsidized Eligibility: 3500 x 18 / 26 = $2,423 Unsubsidized Eligibility (dependent student) 2000 x 18 / 26 = $1,385

  14. Loan Proration Method 2 Method 2: hour left< AY Calculate A: Clock hrs in program clock hrs in AY Then, multiply applicable loan limits by “A” to determine prorated loan limit

  15. Practice Method 2 Mark completed 1600 hours (12 weeks) at a COS school in CA. He must complete 400 more hours at your school to become licensed in ID. His school defines an award year as 900 hrs/26 weeks. What is his Direct Loan eligibility? (assuming no other variable conflicts) Subsidized Eligibility: 4500 x 400 / 900 = $2,000 Unsubsidized Eligibility (independent student) 6000 x 400 / 900 = $2,667

  16. “Everyday” Proration Even without a transfer or re-enroll situation, you may have routine proration in your program. How you define your award year might be the reason. Example: 2000 hour COS programs in Idaho…..

  17. Standard Award / Dependent Student 900 hr AY / Dependent 1000 hr AY / Dependent • Year 1 • $3500 sub DL • $2000 unsub DL • Year 2 • $4500 sub DL • $2000 unsub DL • Year 2 (200hrs) • $1000 sub DL • $444 unsub DL • Year 1 • $3500 sub DL • $2000 unsub DL • Year 2 • $4500 sub DL • $2000 unsub DL

  18. Standard Award / Independent Student 900 hr AY / Independent 1000 hr AY / Independent • Year 1 • $3500 sub DL • $6000 unsub DL • Year 2 • $4500 sub DL • $6000 unsub DL • Year 2 (200hrs) • $1000 sub DL • $1333 unsub DL • Year 1 • $3500 sub DL • $6000 unsub DL • Year 2 • $4500 sub DL • $6000 unsub DL

  19. Other DL review points There are some other key points to be aware of as you process DL funds in your clock-hour program:

  20. Before Delivering Funds Initially • You must determine the student’s previous financial aid history. • ISIR • NSLDS • You must ensure student has completed Entrance Counseling • Make sure student is enrolled at least half-time • Over-lapping loan periods may decrease the eligibility of the student to receive loans at your school – always check prior FA history

  21. Overlapping Loan Periods Example Kiley (a dependent student) was enrolled at A to Z Beauty in the Cosmetology program. She completed 700 hours with them. You have checked NSLDS and see that she received: sub: 2,800 and unsub: 1,600 You see her loam period with them was 3-20-12 to 9-18-12. She comes to you on August 15th and wants to enroll. How points would you cover as you advised Kiley? What can you get for her if she enrolls with you on August 20th? What can you get for her if she enrolls with you on September 19th? Is there any concern you might have over the amounts reported in NSLDS?

  22. Before Delivering Future Funds • You must determine that the student is meeting: • Satisfactory Academic Progress (SAP) • Is in a Warning period • Is being monitored in an approved satisfactory Academic Plan in a Probation period (following a successful appeal)

  23. When DL Funds Are Received • There are requirements when it comes to delivery time frames for DL funds: • Funds must be posted to students’ account within 3 days (business days) • You are required to sent delivery notification to borrower: • No later than 30 days after crediting account if obtaining affirmative confirmation • No later than 7 days after crediting account if you DO NOT obtain affirmative confirmation

  24. Credit Balances on Students Account If you have a Credit Balance Authorization form on file, you may hold a credit balance. You must have written authorization. If not, you have 14 days (calendar days) from when funds were disbursed to return the credit balance to the student.

  25. Return of Title IV funds Should you be returning Title IV funds due to either an R2T4 or a case where the student requested funds be returned, you have 10 days (business days) to return these funds.

  26. Wrap-Up Any questions on today’s content? IASFAA/WASFAA involvement Clock-hour training opportunities Thank you for your time & participation today. Please stay in touch, and I look forward to seeing you at future IASFAA & WASFAA events! Nichole Doering ndoering@razzledazzlecollege.com 208-465-7660