PLUS Processing A to Z

Session 17 PLUS Processing A to Z Wendy Jerreld and Wood Mason| Nov. 2012 U.S. Department of Education 2012 Fall Conference

Direct PLUS Loans from A to Z • A bit of history • Federal Direct PLUS Loan basics • Federal Direct PLUS Loan eligibility • School and Borrower • Master Promissory Note • Credit Check • Entrance Counseling • Processing • Disbursing • Repayment

Direct PLUS Loans from A to Z • National Defense Education Act (NDEA) of 1958 brought the National Defense Student Loan Program • Higher Education Act of 1965 brought the Guaranteed Student Loan program that evolved into the Federal Family Education Loan Program • 1980 Reauthorization of Higher Education Act included PLUS Loans for parents of undergraduate students • Aparent could borrow up to $3,000 for a dependent student without regard to parent income • Loan limits removed under the Higher Education Amendments of 1992

Direct PLUS Loans from A to Z Federal Direct PLUS Loan - Basics • Origination fee of 4% • Upfront Interest Rebate of 1.5% if earliest disbursement is before July 1, 2012 • Upfront Interest Rebate of 0% if earliest disbursement is on or after July 1, 2012 • Can be used to cover expected family contribution (EFC)

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • School Eligibility - General • Must meet same eligibility requirements applicable to Direct Subsidized/Unsubsidized Loan program participation • Reflected as program of participation of PPA/eCAR • Eligibility start/end dates displayed on COD • Option to participate or not…if you participate in the Direct Subsidized/Unsubsidized Loan program you are NOT required to participate in the Direct PLUS Loan program • Non-participation is NOT grounds for offering additional unsubsidized loan funds to a dependent student

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • Borrower Eligibility - General • School responsible for determining borrower eligibility and loan amount • Loan amount limited to Cost of Attendance (COA) less estimated financial assistance • Borrower cannot have an adverse credit history • Borrower (and student for whom parent is borrowing) must meet Title IV eligibility requirements, i.e.,U.S. citizen or eligible non-citizen

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • Parent must be the student’s biological or adoptive Mother or Father • Can be a stepparent if his/her income and assets are used to calculate the EFC • A legal guardian is not an eligible borrower • Not eligible if delinquent on a debt to the Federal Government, or is incarcerated • Must not have an adverse credit history • Must meet same basic eligibility criteria as an eligible dependent student, i.e., citizenship status

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • A parent can borrow for multiple dependent students • Unique parent/dependent student “pair” for each PLUS loan • Unique PLUS Request via StudentLoans.gov website • Unique Master Promissory Note (MPN) for each parent/student “pair” • StudentLoans.gov will retain parent/student “pair” data for subsequent PLUS loans

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Eligibility • Graduate or professional student • Eligible award year 2005-2006 and forward • School MUST determine eligibility for, and offer, Direct Unsubsidized Loan first • Must meet Title IV eligibility requirements • Must be enrolled at least half-time in an eligible program at an eligible school

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Master Promissory Note (MPN) • Unique PLUS loan Master Promissory Note & Application (MPN) • NOT a subsidized/unsubsidized loan MPN • Contains borrower and/or student data • PLUS MPN used for both parent and graduate/professional student PLUS loan • Expires 10 years from date of receipt at COD provided a disbursement has taken place on the linked loan within the first 12 months

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Master Promissory Note • Has “N” as MPN “type” in MPN Identification • Student SSN, “N,” award year, school direct loan school code, sequence number • XXXXXXXXXN13GXXXXX001 • Links on the SSN, DOB, and first two characters of the first name of both borrower and student • Must use unique MPN for each parent/student “pair” if multiple dependent students

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Master Promissory Note • Single-Loan MPN • When an endorser is linked to the PLUS Loan MPN • Linked MPN reflects a status of “Inactive-Endorser” • Expiration is one year from the date of receipt at COD provided a disbursement has taken place on the endorsed loan within 12 months from the date of receipt at COD • Any future loan will need a new MPN

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • Borrower must undergo a credit check • Must have borrower authorization to conduct a credit check • Authorization included on Federal Direct PLUS Loan MPN • Authorization downloaded from COD website in online Credit Check Request process • Hand written/faxed signed authorization • Regardless of the credit result, you should originate the PLUS loan if borrower otherwise eligible • Only exception is when the borrower with adverse credit doesn’t plan to pursue the PLUS loan

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • Initiated by • COD upon receipt of loan origination record (LOR) • StudentLoans.gov via a Direct PLUS Loan request • The school online at COD website • SSN is the key identifier for a credit check and change will trigger a new credit history • “Hard hit” on the borrower’s credit history • Reported to credit bureaus as any other account

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • A credit check result will be used for 90 days if additional activity occurs that would otherwise trigger a credit check during that period • An LOR with an “A” result will undergo no additional credit check unless identifiers are changed • Credit result can be • Accepted (A) • Declined (D) – indicates adverse credit history • Pending (P) – indicates an issue with the borrower ID/credit bureau and COD will contact the school to remedy

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • Denial of one parent is sufficient to offer additional unsubsidized loan funds to dependent student • Other parent does NOT have to undergo PLUS loan process • A credit result of Declined is not school specific and can be used across schools • School can determine to forego the Direct PLUS Loan process with knowledge, and documentation, of inability of Parent to borrow due to adverse credit or other exceptional circumstances • 34 CFR 685.203 • DCL ID: GEN-11-07

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • A Direct PLUS Loan with a credit decision of Pending (P) or Declined (D) can be modified • Pending (P) status indicates an issue between the borrower identifiers submitted and those held by the credit bureau • Resolved with COD Customer Service Representative contact with the school • Cannot change SSN on a PLUS loan not inactivated (reduced to $0) or fully disbursed for more than 24 hours

Direct PLUS Loans from A to Z

Direct PLUS Loans from A to Z All personal identifiers including SSN, DOB, Name, and address, are fictitious and created for system test purposes

Direct PLUS Loans from A to Z XXXXXXXXX

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Credit • PLUS loan with credit declination • Can be accepted and displayed on COD but with an unacceptable credit decision • Can’t disburse unless and until credit denial is cured by a successful appeal via COD or by borrower securing an endorser • Initial declined credit status remains on the COD website and is NOT changed after a successful appeal or securing an endorser

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Credit Appeal • Appeals… • Appeal on extenuating circumstances or errant data from the Credit Bureau • Appeal by submitting via fax the specific documents requested by COD • Can start appeal process on StudentLoans.gov – COD CSR will contact borrower • A successful appeal will result in a credit override response (Document Type CO) sent to the school

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Declined Federal Direct PLUS Loan can be remedied with an acceptable endorser • Cannot be the student for whom the loan is intended • Endorser promises to pay outstanding principal balance, accrued interest, any penalties, AND any collection • Endorser completes an Endorser Addendum, NOT another MPN • Paper or electronic via StudentLoans.gov • Endorser undergoes a credit check • A “hard hit” credit inquiry same as borrower • Endorsement reported to credit bureau

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Endorser completes an electronic Endorser Addendum via StudentLoans.gov • Must have FSA PIN to access StudentLoans.gov • Uses PLUS loan ID (if PLUS Loan originated by school) or the Loan Reference Number (if borrower has completed a PLUS Request via StudentLoans.gov and no LOR on COD database) • Accepted endorser sets endorsed loan amount • COD will send “CO” response to school if there is a PLUS loan origination on the COD database or… • Subsequent “SP” response if no LOR on COD

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Endorser completes a paper Endorser Addendum • Endorser can print a paper addendum, and obtain the mailing address, via StudentLoans.gov • If no PLUS loan LOR on the system, no response from COD until PLUS loan LOR is submitted • PLUS loan LOR will link to endorser addendum and COD will generate a “CO” response and send to school

Direct PLUS Loans from A to Z Graphic found in 2012-2013 COD Tech Ref, Implementation Guide, pg. 165

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Endorser • Endorser data and endorsed amount displayed on the COD loan information screen • Cannot disburse more than the lesser of the endorsed amount or loan amount approved • Endorsed amount is displayed on response from StudentLoans.gov • CANNOT increase a PLUS loan with an endorser • Must create and originate a subsequent PLUS loan • A new credit history on borrower and endorser if last credit check older than 90 days

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Entrance Counseling • Graduate & professional students requesting a PLUS Loan for the first time MUST complete graduate student PLUS loan entrance counseling • Completion of undergraduate entrance counseling doesn’t count for PLUS • Cannot disburse graduate/professional student PLUS loan if entrance counseling not completed • Available via StudentLoans.gov • Not required to participate in e-counseling • Response to participating schools-results on COD website and Counseling Report

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics – Entrance Counseling • Graduate/professional student PLUS loan entrance counseling offered at StudentLoans.gov • Results sent to COD • Schools are NOT required to use FSA online counseling • Not the same as undergraduate entrance counseling

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Processing • Same origination and disbursement requirements as Federal Direct Subsidized & Unsubsidized Loans • Anticipated and/or actual disbursements required on origination • Anticipated and/or actual disbursements must total loan amount on origination • Up to 20 actual disbursements • Report ACTUAL date of disbursements • Interest accrues from date of disbursement

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Caveat • School can deny origination, or originate a reduced award, on a case-by-case basis and MUST document the reason • Cannot limit the borrower on an across-the-board basis • 2012-2013 FSA Student Aid Handbook, Volume 3, pg. 86 • 34 CFR 685.203

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Processing • PLUS loan processing can be done by batch via submission of Common Record (CR) • CR response returned reflecting status of award, credit, and MPN • Disclosure Statement generated seven days prior to earliest disbursement date reflected on an LOR with accepted credit • Individually online at COD website • Virtually real-time processing including immediate editing of submitted data

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - Processing • Federal Direct PLUS Loan Request by borrower at StudentLoans.gov • 4-step process with instant credit result • Ability to begin appeal process if needed • School is responsible for determining eligibility and certifying that the borrower is eligible for the loan and amount

Direct PLUS Loans from A to Z Daffina Duck 000000000

Direct PLUS Loans from A to Z Daffy Duck’s Drafting Academy 00000000 Quackston Mallard Eider III Quackston Mallard Eider III

Direct PLUS Loans from A to Z Daffina Duck 000000000 3/12/1994

Direct PLUS Loans from A to Z Federal Direct PLUS Loan Basics - IMPORTANT • For Federal Direct PLUS Loans with an earliest disbursement date on or after July 1, 2012, the loan has no eligibility for an upfront interest rebate! • Schools that have Federal Direct PLUS Loans on the COD system with an incorrect rebate percentage MUST CORRECT THEM IMMEDIATELY • Interest rebate report posted weekly to your school newsbox that identifies each errant loan • Call your COD CSR, or your Federal Loan School Support Team Point of Contact for help with the report or fixing errant loans

PLUS Processing A to Z