# Presentation: 799781

## Session 46

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

## What’s New for Direct Loans?

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

## 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.

## 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

## 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

## 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

## COD 6.0 System Changes

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

## 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

## MPN Expiration Date Tags (continued)

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

## 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

## 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

## 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

## 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

## 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 |

## 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

## 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)
 |  |  |
|  | $2,625 | $4,000 |
| 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**

## 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 |
| >6 | $8500 | $20,500 |
| 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”)  |  |  |
| 5 | $5500 | $12,500 |

**Annual Loan Limits-July 1, 2007 ****(continued)**

**COD Loan Limit Edits**
**(Edit 39)**
**Apply to loans *****disbursed***** on or after 7/1/2007**

## 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: |  |  |
| --- | --- | --- |
| 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% |

## 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 |  |

## Origination Fee Changes (continued)

| 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 |  |

- Example 2:
- Origination submitted w/ one actual
- Loan amt = $3000, Origination Fee = 2.5%

## 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 |  |

## Origination Fee Changes (continued)

| 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 |  |

- Example 4:
- Origination submitted with no actual disbursements
- Loan amt = $3000, Origination Fee = 3%

## 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 |  |

## Origination Fee Changes (continued)

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

## Contact Information

- We appreciate your feedback and comments. We can be reached at:
- Direct Loan Operations
- 	dlops@ed.gov

## 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