Activity 10: Federal Direct Loan

Regulations:
[**685.304**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=685&SECTION=304&TYPE=TEXT)
(Counseling Borrowers), Teach Grant
[**DCL-GEN-08-01**](http://www.ifap.ed.gov/dpcletters/attachments/010808ccraadclattachJan8.doc)
(Counseling Borrowers),
[**685.306**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=685&SECTION=306&TYPE=TEXT)*[,]{.underline}*
Grad Plus Loans, 682.603(g), (Payment of a Refund or Return of Title
IV),
[**685.309**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=685&SECTION=309&TYPE=TEXT)
(Administrative and Fiscal Control)

Review Section:

-   Counseling Borrowers

-   Payment of a Refund or Return of Title IV

-   Administrative and Fiscal Control

Good Practices:

To assist you with the completion of this Policy and Procedure, we
recommend that you\
consider the following:

-   Consider developing the Policies and Procedures in a manual or an
    electronic format with a table of contents for easy reference.

-   Develop a schedule to test, review and update your manual.

-   Establish a team that incorporates all appropriate offices to assist
    in the review and writing of the procedure.

-   Complete Fiscal Management Assessment.

**Instructions for completing this activity:** We recommend that you
refer to your current policies and procedures to determine if your
institution meets the requirements listed above in the Review Section
and set forth in the Federal Regulations. Please review the appropriate
sections in the Code of Federal Regulations (the link is provided for
you), and the activity below, to determine if your institution is
currently meeting those requirements. Use the activity as a chart and
checklist to assist you with evaluating and/or developing your policies
and procedures. Remember, you are required to have policies and
procedures and are responsible to follow the procedures you develop. An
auditor or program reviewer can cite your school for not having polices
and procedures and not following them.

+-----------------------------------------------------------------------+
| Reminder:                                                             |
|                                                                       |
| It is important to have your policy and procedures in writing. It is  |
| equally important however, to ensure that the process is being        |
| followed. We recommend that you test your policy and procedures by    |
| completing the recommended assessment(s) outlined in the Design       |
| Process for Policies and Procedures. Also, remember to\               |
| train your staff on the procedures you develop or revise.             |
+-----------------------------------------------------------------------+

Management Enhancement:

If you determine that an area requires improvement, it is recommended
(not required) that you consider completing a Management Enhancement
Form. This will help you track what needs to be included who is
responsible to make sure the policy and/or procedure is updated and
identifies an anticipated completion date. [Management Enhancement
Form](http://ifap.ed.gov/qamodule/MgtEnhancementWk.html).

**Topic:** Counseling Borrowers

Regulation:
[**685.304**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=685&SECTION=304&TYPE=TEXT),
[**685.604(g)**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=682&SECTION=604&TYPE=TEXT)
and Teach Grant
[**DCL-GEN-08-01**](http://www.ifap.ed.gov/dpcletters/attachments/010808ccraadclattachJan8.doc)
(Counseling Borrowers)

+--------------------------+--------------------+---------------------+
| Counseling Borrowers     | Located In         | Offices Involved    |
+--------------------------+--------------------+---------------------+
| -   **Initial            |                    |                     |
|     Counseling:**        |                    |                     |
|     Determine the method |                    |                     |
|     that initial         |                    |                     |
|     counseling is        |                    |                     |
|     conducted with each  |                    |                     |
|     Direct Subsidized    |                    |                     |
|     Loan or Direct       |                    |                     |
|     Unsubsidized Loan    |                    |                     |
|     student borrower or  |                    |                     |
|     Grad PLUS, unless    |                    |                     |
|     the student borrower |                    |                     |
|     has received a prior |                    |                     |
|     Direct Subsidized,   |                    |                     |
|     Direct Unsubsidized, |                    |                     |
|     Federal Stafford, or |                    |                     |
|     Federal SLS Loan     |                    |                     |
|     (i.e. in person,     |                    |                     |
|     audiovisual          |                    |                     |
|     presentation or      |                    |                     |
|     interactive          |                    |                     |
|     electronic means).   |                    |                     |
|     If interactive       |                    |                     |
|     electronic means is  |                    |                     |
|     the method, your     |                    |                     |
|     procedures include   |                    |                     |
|     reasonable steps to  |                    |                     |
|     ensure that each     |                    |                     |
|     student borrower     |                    |                     |
|     receives the         |                    |                     |
|     counseling materials |                    |                     |
|     and participates in  |                    |                     |
|     and completes the    |                    |                     |
|     initial counseling.  |                    |                     |
+--------------------------+--------------------+---------------------+
| -   Procedures to ensure |                    |                     |
|     staff member with    |                    |                     |
|     expertise in the     |                    |                     |
|     Title IV programs to |                    |                     |
|     be reasonable        |                    |                     |
|     available shortly    |                    |                     |
|     after the counseling |                    |                     |
|     to answer questions. |                    |                     |
+--------------------------+--------------------+---------------------+
| -   Include procedures   |                    |                     |
|     to ensure borrowers  |                    |                     |
|     enrolled in          |                    |                     |
|     correspondence       |                    |                     |
|     programs or study    |                    |                     |
|     abroad programs to   |                    |                     |
|     provide written      |                    |                     |
|     counseling materials |                    |                     |
|     before the loan      |                    |                     |
|     proceeds are         |                    |                     |
|     disbursed.           |                    |                     |
+--------------------------+--------------------+---------------------+
| -   Develop counseling   |                    |                     |
|     materials to include |                    |                     |
|     all of the elements  |                    |                     |
|     outlined in          |                    |                     |
|     [685.304(a)(3        |                    |                     |
| )](http://frwebgate.acce |                    |                     |
| ss.gpo.gov/cgi-bin/get-c |                    |                     |
| fr.cgi?TITLE=34&PART=685 |                    |                     |
| &SECTION=304&TYPE=TEXT). |                    |                     |
+--------------------------+--------------------+---------------------+
| -   If the school adopts |                    |                     |
|     an alternative       |                    |                     |
|     approach for initial |                    |                     |
|     counseling as part   |                    |                     |
|     of the school's      |                    |                     |
|     quality assurance    |                    |                     |
|     plan described in    |                    |                     |
|     [685.300(b)(9        |                    |                     |
| )](http://frwebgate.acce |                    |                     |
| ss.gpo.gov/cgi-bin/get-c |                    |                     |
| fr.cgi?TITLE=34&PART=685 |                    |                     |
| &SECTION=300&TYPE=TEXT), |                    |                     |
|     develop materials in |                    |                     |
|     accordance with\     |                    |                     |
|     [685.304(3           |                    |                     |
| )](http://frwebgate.acce |                    |                     |
| ss.gpo.gov/cgi-bin/get-c |                    |                     |
| fr.cgi?TITLE=34&PART=685 |                    |                     |
| &SECTION=304&TYPE=TEXT). |                    |                     |
|     In addition, the     |                    |                     |
|     materials are        |                    |                     |
|     designed to target   |                    |                     |
|     borrowers who are    |                    |                     |
|     most likely to       |                    |                     |
|     default, and must    |                    |                     |
|     include performance  |                    |                     |
|     measures that        |                    |                     |
|     demonstrate the      |                    |                     |
|     effectiveness of the |                    |                     |
|     alternative approach |                    |                     |
|     [685.304(4           |                    |                     |
| )](http://frwebgate.acce |                    |                     |
| ss.gpo.gov/cgi-bin/get-c |                    |                     |
| fr.cgi?TITLE=34&PART=685 |                    |                     |
| &SECTION=304&TYPE=TEXT). |                    |                     |
+--------------------------+--------------------+---------------------+
| -   Maintain             |                    |                     |
|     documentation of     |                    |                     |
|     initial counseling   |                    |                     |
|     in each student's    |                    |                     |
|     file.                |                    |                     |
+--------------------------+--------------------+---------------------+

+---------------------------+--------------------+---------------------+
| Counseling Borrowers      | Located In         | Offices Involved    |
+---------------------------+--------------------+---------------------+
| -   Exit Counseling:      |                    |                     |
|     Determine the method  |                    |                     |
|     that exit counseling  |                    |                     |
|     is conducted with     |                    |                     |
|     each Direct           |                    |                     |
|     Subsidized Loan or    |                    |                     |
|     Direct Unsubsidized   |                    |                     |
|     Loan borrower shortly |                    |                     |
|     before the student    |                    |                     |
|     borrower ceases at    |                    |                     |
|     least half-time study |                    |                     |
|     at the school (i.e.   |                    |                     |
|     in person,            |                    |                     |
|     audiovisual           |                    |                     |
|     presentation or       |                    |                     |
|     interactive           |                    |                     |
|     electronic means). If |                    |                     |
|     interactive           |                    |                     |
|     electronic means is   |                    |                     |
|     the method, your      |                    |                     |
|     procedures include    |                    |                     |
|     reasonable steps to   |                    |                     |
|     ensure that each      |                    |                     |
|     student borrower      |                    |                     |
|     receives the          |                    |                     |
|     counseling materials  |                    |                     |
|     and participates in   |                    |                     |
|     and completes the     |                    |                     |
|     exit counseling.      |                    |                     |
|                           |                    |                     |
| -   Note: Grad PLUS exit  |                    |                     |
|     requirement:          |                    |                     |
|                           |                    |                     |
|     -   If a school is    |                    |                     |
|         conducting exit   |                    |                     |
|         counseling for a  |                    |                     |
|         borrower who has  |                    |                     |
|         also received a   |                    |                     |
|         Stafford loan,    |                    |                     |
|         Grad PLUS         |                    |                     |
|         information must  |                    |                     |
|         be included in    |                    |                     |
|         the exit          |                    |                     |
|         counseling.       |                    |                     |
+---------------------------+--------------------+---------------------+
| -   Procedures to ensure  |                    |                     |
|     staff member with     |                    |                     |
|     expertise in the      |                    |                     |
|     Title IV programs to  |                    |                     |
|     be reasonable         |                    |                     |
|     available shortly     |                    |                     |
|     after the exit        |                    |                     |
|     counseling to answer  |                    |                     |
|     questions.            |                    |                     |
+---------------------------+--------------------+---------------------+
| -   Include procedures to |                    |                     |
|     ensure borrowers      |                    |                     |
|     enrolled in           |                    |                     |
|     correspondence        |                    |                     |
|     programs or study     |                    |                     |
|     abroad programs to    |                    |                     |
|     provide written       |                    |                     |
|     counseling materials  |                    |                     |
|     within 30 days after  |                    |                     |
|     the student borrower  |                    |                     |
|     completes the         |                    |                     |
|     program.              |                    |                     |
+---------------------------+--------------------+---------------------+
| -   Include procedures to |                    |                     |
|     ensure borrowers who  |                    |                     |
|     withdraw from the     |                    |                     |
|     school without the    |                    |                     |
|     school's prior        |                    |                     |
|     knowledge or fail to  |                    |                     |
|     complete exit         |                    |                     |
|     counseling are        |                    |                     |
|     provided with exit    |                    |                     |
|     counseling through    |                    |                     |
|     interactive electric  |                    |                     |
|     means or by mailing   |                    |                     |
|     written counseling    |                    |                     |
|     materials to the      |                    |                     |
|     borrower's last know  |                    |                     |
|     address within 30     |                    |                     |
|     days after the school |                    |                     |
|     learns the borrower   |                    |                     |
|     has withdrawn or      |                    |                     |
|     failed to complete    |                    |                     |
|     the required exit     |                    |                     |
|     counseling.           |                    |                     |
+---------------------------+--------------------+---------------------+
| -   Develop exit          |                    |                     |
|     counseling materials  |                    |                     |
|     to include all of the |                    |                     |
|     elements outlined in  |                    |                     |
|     [685.304(             |                    |                     |
| b)(3).](http://frwebgate. |                    |                     |
| access.gpo.gov/cgi-bin/ge |                    |                     |
| t-cfr.cgi?TITLE=34&PART=6 |                    |                     |
| 85&SECTION=304&TYPE=TEXT) |                    |                     |
+---------------------------+--------------------+---------------------+
| -   Develop procedures to |                    |                     |
|     ensure that the       |                    |                     |
|     information required  |                    |                     |
|     in                    |                    |                     |
|     [685.304(b)           |                    |                     |
| (4)(x)](http://frwebgate. |                    |                     |
| access.gpo.gov/cgi-bin/ge |                    |                     |
| t-cfr.cgi?TITLE=34&PART=6 |                    |                     |
| 85&SECTION=304&TYPE=TEXT) |                    |                     |
|     is provided to the    |                    |                     |
|     Secretary within 60   |                    |                     |
|     days after the        |                    |                     |
|     borrower provides the |                    |                     |
|     information.          |                    |                     |
+---------------------------+--------------------+---------------------+
| -   Maintain              |                    |                     |
|     documentation of exit |                    |                     |
|     counseling in each    |                    |                     |
|     student's file.       |                    |                     |
+---------------------------+--------------------+---------------------+

As a good practice, include a copy of your current Direct Loan Initial
and Exit Counseling Materials with these procedures

**Topic:** Payment of a Refund or Return of Title IV

Regulation:
[**685.306**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=685&SECTION=306&TYPE=TEXT)

+--------------------------+--------------------+---------------------+
| Payment of a Refund or   | Located In         | Offices Involved    |
| Return of Title IV       |                    |                     |
+--------------------------+--------------------+---------------------+
| -   Include procedures   |                    |                     |
|     for the school to    |                    |                     |
|     pay a portion of the |                    |                     |
|     student's refund or  |                    |                     |
|     return of title IV,  |                    |                     |
|     HEA program funds    |                    |                     |
|     that is allocable to |                    |                     |
|     a Direct Loan to the |                    |                     |
|     Secretary.           |                    |                     |
+--------------------------+--------------------+---------------------+
| -   Provide simultaneous |                    |                     |
|     written notice to    |                    |                     |
|     the borrower if the  |                    |                     |
|     school pays a refund |                    |                     |
|     or return of title   |                    |                     |
|     IV, HEA program      |                    |                     |
|     funds to the         |                    |                     |
|     Secretary on behalf  |                    |                     |
|     of the borrower.     |                    |                     |
+--------------------------+--------------------+---------------------+
| -   In determining the   |                    |                     |
|     portion of s         |                    |                     |
|     student's refund or  |                    |                     |
|     return of title IV,  |                    |                     |
|     HEA program funds    |                    |                     |
|     that is allocable to |                    |                     |
|     a Direct Loan, the   |                    |                     |
|     school follows the   |                    |                     |
|     procedures           |                    |                     |
|     established in       |                    |                     |
|     [668                 |                    |                     |
| .22](http://frwebgate.ac |                    |                     |
| cess.gpo.gov/cgi-bin/get |                    |                     |
| -cfr.cgi?TITLE=34&PART=6 |                    |                     |
| 68&SECTION=22&TYPE=TEXT) |                    |                     |
|     for allocating and   |                    |                     |
|     paying a refund or   |                    |                     |
|     return of title IV,  |                    |                     |
|     HEA program funds    |                    |                     |
|     that is due.         |                    |                     |
+--------------------------+--------------------+---------------------+

**Topic:** Administrative and Fiscal Control

Regulation:
[**685.309**](http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=34&PART=685&SECTION=309&TYPE=TEXT)

+----------------------------+------------------+---------------------+
| Payment of a Refund or     | Located In       | Offices Involved    |
| Return of Title IV         |                  |                     |
+----------------------------+------------------+---------------------+
| -   Establish and maintain |                  |                     |
|     proper administrative  |                  |                     |
|     and fiscal procedures  |                  |                     |
|     and all necessary      |                  |                     |
|     records related to     |                  |                     |
|     Direct Loan and as set |                  |                     |
|     forth in 34 CFR part\  |                  |                     |
|     668 and submit all     |                  |                     |
|     such reports to the    |                  |                     |
|     Secretary.             |                  |                     |
+----------------------------+------------------+---------------------+
| -   Procedures to complete |                  |                     |
|     and submit Student     |                  |                     |
|     Status Confirmation    |                  |                     |
|     Reports to the         |                  |                     |
|     Secretary within 30    |                  |                     |
|     days of receipt.       |                  |                     |
+----------------------------+------------------+---------------------+
| -   Unless the school      |                  |                     |
|     expects to submit its  |                  |                     |
|     next student status    |                  |                     |
|     confirmation report to |                  |                     |
|     the Secretary within   |                  |                     |
|     60 days, the school    |                  |                     |
|     must develop           |                  |                     |
|     procedures to notify   |                  |                     |
|     the Secretary within   |                  |                     |
|     30 days if it          |                  |                     |
|     discovers that a       |                  |                     |
|     Direct Loan recipient: |                  |                     |
|                            |                  |                     |
| -                          |                  |                     |
|                            |                  |                     |
| 1.  Enrolled at the school |                  |                     |
|     but has ceased to be   |                  |                     |
|     enrolled on at least a |                  |                     |
|     half-time basis.       |                  |                     |
|                            |                  |                     |
| 2.  Has been accepted for  |                  |                     |
|     enrollment at the      |                  |                     |
|     school but failed to   |                  |                     |
|     enroll on at least a   |                  |                     |
|     half-time basis for    |                  |                     |
|     the period for with    |                  |                     |
|     the loan was intended. |                  |                     |
|                            |                  |                     |
| 3.  Has changed his or her |                  |                     |
|     permanent address.     |                  |                     |
+----------------------------+------------------+---------------------+
| -   **Record Retention     |                  |                     |
|     Requirements:**        |                  |                     |
|     Develop procedures to  |                  |                     |
|     ensure that the record |                  |                     |
|     retention and          |                  |                     |
|     examination            |                  |                     |
|     requirements for       |                  |                     |
|     Direct Loan are        |                  |                     |
|     followed in accordance |                  |                     |
|     with                   |                  |                     |
|                            |                  |                     |
|    [668.24](http://frwebga |                  |                     |
| te.access.gpo.gov/cgi-bin/ |                  |                     |
| get-cfr.cgi?TITLE=34&PART= |                  |                     |
| 668&SECTION=24&TYPE=TEXT). |                  |                     |
+----------------------------+------------------+---------------------+
| -   **Accounting           |                  |                     |
|     Requirements:**        |                  |                     |
|     Develop procedures to  |                  |                     |
|     ensure that accounting |                  |                     |
|     requirements are       |                  |                     |
|     followed in accordance |                  |                     |
|     with                   |                  |                     |
|                            |                  |                     |
| [668.24(b).](http://frwebg |                  |                     |
| ate.access.gpo.gov/cgi-bin |                  |                     |
| /get-cfr.cgi?TITLE=34&PART |                  |                     |
| =668&SECTION=24&TYPE=TEXT) |                  |                     |
+----------------------------+------------------+---------------------+
| -   **Direct Loan program  |                  |                     |
|     bank account:**        |                  |                     |
|     Develop procedures for |                  |                     |
|     maintaining funds in   |                  |                     |
|     accordance with        |                  |                     |
|                            |                  |                     |
|  [668.163](http://frwebgat |                  |                     |
| e.access.gpo.gov/cgi-bin/g |                  |                     |
| et-cfr.cgi?TITLE=34&PART=6 |                  |                     |
| 68&SECTION=163&TYPE=TEXT). |                  |                     |
+----------------------------+------------------+---------------------+
| -   **Division of          |                  |                     |
|     functions:** Develop   |                  |                     |
|     procedures for         |                  |                     |
|     divisions of functions |                  |                     |
|     in accordance with     |                  |                     |
|                            |                  |                     |
| [668.16(c)](http://frwebga |                  |                     |
| te.access.gpo.gov/cgi-bin/ |                  |                     |
| get-cfr.cgi?TITLE=34&PART= |                  |                     |
| 668&SECTION=16&TYPE=TEXT). |                  |                     |
+----------------------------+------------------+---------------------+
| -   **Limit on use of      |                  |                     |
|     funds:** Ensure that   |                  |                     |
|     all Direct Loan funds  |                  |                     |
|     received by a school   |                  |                     |
|     are used only to make  |                  |                     |
|     Direct Loans to        |                  |                     |
|     eligible borrowers and |                  |                     |
|     are not used or        |                  |                     |
|     hypothecated for any   |                  |                     |
|     other purpose.         |                  |                     |
+----------------------------+------------------+---------------------+
| Payment of a Refund or     | Located In       | Offices Involved    |
| Return of Title IV         |                  |                     |
+----------------------------+------------------+---------------------+
| Origination:               |                  |                     |
|                            |                  |                     |
| -   Must determine Direct  |                  |                     |
|     Loan Subsidized or     |                  |                     |
|     Unsubsidized           |                  |                     |
|     eligibility before     |                  |                     |
|     originating a Direct   |                  |                     |
|     Grad PLUS Loan. Must   |                  |                     |
|     notify Grad PLUS       |                  |                     |
|     student of maximum     |                  |                     |
|     Direct Loan Sub and    |                  |                     |
|     Unsub eligibility      |                  |                     |
|     available and provide  |                  |                     |
|     opportunity for        |                  |                     |
|     student to request     |                  |                     |
|     maximum Direct loan    |                  |                     |
|     Sub and Unsub amount.  |                  |                     |
|                            |                  |                     |
| [685.301](http://frwebgate |                  |                     |
| .access.gpo.gov/cgi-bin/ge |                  |                     |
| t-cfr.cgi?TITLE=34&PART=68 |                  |                     |
| 5&SECTION=301&TYPE=TEXT).  |                  |                     |
+----------------------------+------------------+---------------------+