Chuck Hirman & Pat Kennedy | Dec. 2013U.S. Department of Education

2013 FSA Training Conference for Financial Aid Professionals

Session 11

Direct Loan Processing Tips & Troubleshooting

Direct Loan Processing

Today we’re going to cover those elements we feel most impact a school’s ability to comply with Direct Loan requirements and meet the objectives of efficient processing

In a nutshell, we’ll be discussing processing tips and troubleshooting

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AgendaProcessing Tips

• Effective Processing• COD Reports• COD School Options for managing StudentLoans.gov

Troubleshooting• Cash Management Concerns• Common Problems• Disbursement Issues• Edits• Reconciliation

•Training, Resources, & Contact Information

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Processing Tips

Effective Processing• Timely reporting• Sequestration• Monitoring

COD Reports• Subsidized Usage Limit (SUL) report• COD Newsbox

COD Options - SLG

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Remember:finish whatyou start!

Timely Reporting – Loan Records

• Warning Edit 111 - removed in November 2012• Sent when COD received the loan origination record less than 5 days

before the first disbursement date• Designed to give COD time to meet regulatory requirements for lender disclosures to

borrowers• Removed because we could never get it to work right

Tip: the regulations haven’t changed – we must get the disclosures out on time. Please send those origination records as early as possible

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Edit # Message111 First Actual Disbursement was submitted less than 5 days

prior to the first disbursement date without an indication that the school printed/provided a disclosure statement

PLUS Loans – Originate Them

Too often schools hold off originating PLUS loans • Delays usually over credit decisions• Borrowers are pursuing an appeal or endorser• However, when credit is finally resolved on some loans the loan

period has passed• It’s then too late to pursue that loan – even through late

disbursements

Tip: originate the loan even if credit is not yet approved. This is just an award-level warning edit and there is no regulatory prohibition from originating the loan, only from disbursing the loan

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036 W Award PLUS Credit Decision Status is not accepted for this PLUS award No credit decision has been accepted for this award.

Update or Originate a New PLUS Loan?

You have a PLUS loan with accepted credit, more than 90 days have passed since the credit check was run, and the borrower would like additional loan funds

• If you originate a new PLUS loan a new credit check will be run That may or may not come back approved. But if it is denied you cannot disburse additional PLUS funds unless/until appealed or endorsed

Tip: the credit check is actually good for the whole year on that PLUS loan in the absence of information to the contrary. So, better to increase the loan amount of the existing PLUS loan if your system/process will allow

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Does the Order of Processing Matter?It depends …

• The loan can be originated before the eMPN is signed or entrance counseling is completed; or after

• The PLUS loan can be originated before approved credit is obtained; or after

• The PLUS loan can even be originated before the PLUS Application is completed in SLG – provided the borrower has given you permission in writing for a credit check to be run, and has indicated how much they want to borrow

• But disbursements are a whole different matter• Loan origination record first – then disbursement• eMPN first – then disbursement• Entrance counseling first – then disbursement• Approved PLUS credit first – then disbursement

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15-Day Reporting Requirement

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No. Edit Type Block Message 055 W Disbursement Disbursement Information Received 30 Days after Date of Disbursement

• Federal Register – 2/28/2013• Disbursements made on/after 4/1/2013

• Adjustments too• Pell LEU, Subsidized Loan limitations all need earlier

reporting to COD• COD edits will lag but the regulation was in place on

4/1/2013 – take note• School Monitoring Report• 30-Day Warning Report• Warning edit 055

Sequestration - Loan Origination Fees

Loan fee changes due to Sequestration may be a fact of life for several years

• 10/25/2013 Electronic Announcement – on IFAP• Earliest Disbursement Date (EDD) before 7/1/2013

• Subsidized/Unsubsidized: 1.0%• PLUS: 4.0%

• EDD 7/1/2013 thru 11/30/2013• Subsidized/Unsubsidized: 1.051%• PLUS: 4.204%

• EDD 12/1/2013 thru 9/30/2014• Subsidized/Unsubsidized: 1.072%• PLUS: 4.288%

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Sequestration – Loan Origination FeesOn 10/18/2013 COD implemented coding to edit/accept loans with new fees - for EDD’s on/after 12/1/2013•What does this mean?•If you submitted these loans after 10/18 you’re fine

• COD will have accepted them if the correct fees are associated with the proper EDD’s

• COD will have rejected them if the fees were not 1.072% or 4.288% (for EDD’s on/after 12/1/2013), depending on loan type

• When the actual disbursements are sent COD will process them•However, if you submitted these loans before 10/18 they would only have been accepted using outdated loan fees so you will need to fix them

• Follow the instructions in the attachment of the 10/25 EA• If you fail to either fix the original loan or submit a new correct loan - when the

actual disbursements hit COD they will be rejected

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Monitoring Timely Disbursement Reporting

Do you have a way of monitoring if you are sending actual disbursement records (and actual disbursement adjustments) to COD within the required 15 days?

• If you have an EDExpress database you can run the Disbursement Measurement Tool Report out of Direct Loan Tools

• Or your system may have an equivalent canned report• Or you should routinely query your system to measure the length of

time between the actual disbursement date and when that record was sent to/accepted by COD; and when it was booked

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Monitoring Timely Batch Processing

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BATCH ACTIVITY LOGBATCH/DOCUMENT ID

DATE SENT

BY WHOM?

RESPONSE IMPORT DATE

REJECTS AND/OR WARNINGS

2013-09-04T13:53:43.21001400 9/5 LM 9/6 None

2013-09-06T14:53:44.33001400 9/6 LM

2013-09-22T13:09:15.55001400

2013-10-04T13:53:43.21001400 10/22 HK 11/09 055

2013-10-12T18:29:36.16001400 10/30 HK 11/14 055

COD Reports – Can Help You Manage:

Loan origination process• Completed PLUS Request

Report• Duplicate Student Borrower

Report

Master Promissory Notes• Completed MPN Report• MPNs Due to Expire Report• Expired MPN Report• MPN Discharge Report

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Disbursement processing• Actual Disbursement List• Pending Disbursement List• COD Action Queue• 30-Day Warning Report• Inactive Loan Report

COD Reports – COD Technical Reference

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What the report can be used for

Business Rules• Formats• Message classes• When it’s generated

Record Layouts• What data is included

Mock-up Samples

FSADownload.ed.gov

COD Reports – Format and Delivery

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Set Your COD Report Options on COD Website

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Subsidized Usage Limit (SUL) - Report

Direct Loan Subsidized Usage Change Report• Implemented with COD Release 13.0 (Spring 2014)• Replaces Direct Subsidized Loan Usage Limit (SUL) report• Weekly• COD Newsbox• CSV format• Displays Subsidized loans for a borrower when there is a change to

the borrower’s Subsidized Usage Limitation calculated values• Report is generated when, during the previous week, borrowers

have changes to:• Maximum Subsidized Eligibility Period• Actual (or Anticipated) Subsidized Usage Period• Actual (or Anticipated) Non-Cred Teacher Cert Subsidized Usage Period

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COD Newsbox

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COD Newsbox

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School Monitoring Report discussed

later in the session

COD Options - StudentLoans.gov

COD School Options for managing StudentLoans.gov• You set SLG options in COD: School/School Information/Options• Your choice whether to use any/all of SLG functionality, or

o do those functions yourself on campus• Everything a borrower does in SLG is communicated to schools in

Responses and COD reports, oro schools can search for results on the COD website

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SLGSLGCODCOD

Non-Award Year Specific

COD Options for Managing StudentLoans.gov

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Award Year SpecificCOD Options for Managing StudentLoans.gov

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LOR Required to Complete eMPNYour choice but do you want to put this obstacle in?

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The school you have selected requires an award prior to submitting a Master Promissory Note. Please contact your school’s financial aid office.

Messages

• eMPN message (Non-Award Year Specific screen)• PLUS Application message (Award Year Specific screen)

• Your choice …• You tell us what to tell them• If we have the borrower’s e-mail address we will send them

an e-mail when they’ve successfully completed the eMPN and/or PLUS Application

• This can be a valuable “what to do next” or “who to see with questions” piece of information for your borrowers

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Responses: Daily vs. On-Demand

Daily• If a borrower completed an eMPN or Counseling session (entrance,

financial awareness, exit) or PLUS Application that day then during COD’s evening processing the corresponding Response will be sent to your TG Mailbox

On-Demand• No Responses will be sent unless/until you make the request to

receive them• In many SLG functions this is the way you elect not to participate –

simply make no on-demand requests

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Troubleshooting

• Cash Management Concerns• School Monitoring report• Drawdowns and Refunds• Cash balance

• Common Problems• Disbursement Issues• Edits• Reconciliation

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School Monitoring Report

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• COD July 2012 implementation (see EA 6/29/2012)• Replaces School Monitoring E-mail

• Same information as original School Monitoring E-mail from COD• Distributed weekly

• SAIG mailbox (preformatted): SCHMONOP• COD Newsbox (DL or Pell) in PDF format

• Sent to COD Newsbox if:• Unsubstantiated cash > 30 days*• Pell POP• 30-day reporting requirement*

*Important: Regulations now require disbursements to be reported within 15 days of the disbursement date

The report might be In your COD Newsbox so check periodically.

Cross-Year Issues

We are seeing multiple years out of balance

•Make sure you draw from the year you are disbursing to•When students return funds or withdraw and R2T4 funds are refunded

• Either return them to G5 for the year they were drawn from• Or re-disburse them to another borrower – but for that same

program and program year• In other words – do not cross years or programs

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Where to Send Refunds• Returning Direct Loan return funds to G5

• You drew down too much (borrower not eligible within three business days)

• Borrower’s absolute right to cancel• Borrower returns funds to you within 120 days• R2T4 calculations• You’ve drawn from the wrong year• You’ve drawn from the wrong program

• Returning Direct Loan funds to the loan servicerIf a borrower brings funds back to you after 120 days of the disbursement

direct them to their loan servicer insteadThe 120-day rule does not apply to regulatory or statutory returns

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How to Send Refunds• Return funds electronically to G5• Far more accurate and timely• Paper checks:

• Are a problem!• Schools too often mail them to the wrong place• They are far slower than electronic G5 refunds

If $100,000 and over cash management regulations require funds be returned electronically

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Tracking Your Cash BalanceTo effectively process Direct Loans you need to understand what makes up and how to compute your Direct Loan ending cash balance

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Total Net Drawdowns – Total Net Booked

Disbursements= Ending Cash Balance (ECB)

The complete calculation:Beginning cash balance+ Total drawdowns from G5- Total refunds in G5- Total actual disbursements+/- Total disbursement adjustments= Ending Cash Balance

COD Cash Management Screens

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The COD website has a number of screens to help you track your funding and cash management:

•School Funding Information• CFL, Available Balance, NAPD• Net Draws, Cash>NAPD

•Cash Activity• Printer friendly button in right corner• Lists your drawdowns and refunds• # of days left to substantiate a drawdown

•School Summary Information• Cash>NAPD over than 30 days

•School Summary Financial Information• Same info and format of School Account Statement Cash Summary page

COD.ED.GOV

COD Tracks Your Cash Balance• Remember - COD computations may differ from yours due to timing• Understanding what impacts COD computations, and when, will

help you understand FSA’s monitoring of school balances

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Which of the following impact your ECB at COD?

1.Initial $2M funding level set up in G5 for new award year2.Borrower requests PLUS loan for $10,000 in StudentLoans.gov3.You originate $100K in loans, send to COD, one loan for $5K rejects4.Draw $50K from G55.Two loan origination change records sent to COD, increasing loan amount approved for upcoming loans

Continued …

COD Tracks Your Cash Balance

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Which of the following impact your ECB at COD (continued)?

6.Credit students’ accounts for $45K in actual disbursements7.$5K refund returned to G58.$45K in actual disbursements sent to COD, $42K worth are accepted9.$3K actual disbursement corrected, resent, accepted at COD10.R2T4 results in $5K of downward disb adjustments sent to/accepted at COD

Your ECB at COD at this snapshot in time is: +$5,000

Need Additional Direct Loan Funds?

• Schools on Heightened Cash Monitoring have funding levels set as a result of actual disbursements accepted at COD

• Advanced Funded schools (the majority) are given an initial funding level and then periodic increases at pre-set times throughout the year• If at any time you need additional funding apart from that pre-set

date:• Contact your Customer Service Representative at COD (1-800-848-0978)• They will first check to make sure you’ve substantiated what you’ve already drawn

down• If the award year is drawing to a close they will want to see the loan origination

records on the COD system which have pending disbursements totaling the amount you are requesting

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Common Problems: Student Fails to Begin

Student fails to begin attending any classes*

•Return all funds that were applied directly to student’s account•Return amount of any payments made by the student to the school, up to amount of disbursement•Not responsible to return portion which was given directly to student

o But must notify servicer so a 30-day demand letter can be issued

* Dear Colleague Letter GEN-13-02 dated 1/17/2013

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Student Attends Less than Half-time

Student begins attendance but less than half-time*

•Of course, will need to have enrolled in at least half-time course load•Report through normal enrollment reporting process•Servicer will take usual steps with changing student’s status•School is not required to return loan proceeds but future disbursements cannot be made

* Dear Colleague Letter GEN-13-02 dated 1/17/2013

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Inadvertent Over-Borrowing

School discovers student has inadvertent over-borrowing of annual loan limit*

1. Can the student simply contact loan servicer to repay the overaward amount?

2. If not, the student should contact the servicer to begin satisfactory repayment arrangement procedures/reaffirmation

3. Or, the student can consolidate the loan that put them over as that is considered a satisfactory repayment arrangement

* Dear Colleague Letter GEN-13-02 dated 1/17/2013

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Disbursement Date Edits

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• Some schools are correctly originating loans, processing actual disbursements, then later sending change records which shorten the loan period such that an actual disbursement is now over 180 days from the loan period end date

• What are we missing, why is this being done?

• COD Reject 050 will not catch this, only looks at the initial loan/disbursement submissions

• Causing issues of invalid disbursements and possible loan servicing complications

Actual Disbursement Adjustments

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Downward adjustments•Borrower gets break on interest as it is recomputed as if the lower amount was disbursed on the initial date•Increase your cash balance

Upward adjustments•Should only be used to correct an error•Otherwise borrower will be charged interest on the higher amount from the initial disbursement date•Create a new disbursement in most cases•Decrease your cash balance

Upward Disbursement Adjustments

• Should only be made to correct an erroneously reported disbursement

• Interest is recalculated from the Sequence-01 date• If you give additional funds make a new disbursement

for that additional amount

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Disbursements - 120-Day “Rule”

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For any loan type (Sub, Unsub, or PLUS) if the borrower returns funds, asking the disbursement be reduced, at any time up to 120-days past the disbursement date you may accept those funds:

• Reduce disb and report to COD• Re-disburse or return the money (to G5)• Borrower gets a break on interest and loan fees of returned amount• You are not required to do this beyond the regulatory right to cancel

timeframes. However, a reduction in debt burden is a borrower less likely to default

Does not apply with returns required for regulatory reasons. Those must be made no matter when they’re discovered

Pending Disbursements – still pending?

Warning Edit 054 - what are we telling you?• As with some “Warning” edits, this is just a reminder, we have a

loan with an anticipated disbursement date within range that it could be an actual

• Have you disbursed on it? Will you be?• Remember, per GEN-13-13 you should be zeroing out unused

disbursements and adjusting the loan period dates

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Pending Disbursements – still pending?

• The COD website Action Queue can help you identify pending disbursements but these will only be from loan origination records sent to and accepted by COD

• Found under “Batch” on the COD website• The Action Queue/pending disbursements help schools

estimate upcoming funding needs• Periodically you should query your system to see if

you’ve paid/disbursed on any of these but not reported them as actuals

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Other Common Disbursement Issues

Disbursement Records: actual disbursements, actual disbursement adjustments

• Unsent/unacknowledged disbursement records/batches• Rejected disbursements• Disbursements not entered in any system (pending actuals)• Disbursements recorded in business office but not in financial aid

office/system• Unbooked records• Timing: records sent to COD near the end of the month• Disbursements using cents• School data loss

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COD Edits – Rejects and Warnings

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Watch your rejectsRejected disbursements = unsubstantiated funds

•Rejects – record was not “built” and will not be in Person/Award search•Warnings – record was processed, an FYI concerning your processing/timing

COD Rejects and Warnings

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Edit Some of the Top Edits # of Hits

W-54 Disbursement Date Within 7 Days or Passed, Disbursement Release Indicator Set To “False” 17,627,962

W-55 Disbursement Information Received 30 Days after Date of Disbursement 8,199,110

R-50 Disbursement Date Outside Allowable Window 917,828

R-140 Incorrect Origination Fee Percent and/or Interest Rebate Percent on New Awards 705,854

W-36 PLUS Credit Decision Status is not accepted for this PLUS award

595,949

COD Technical Reference, Volume II, Section 4

COD Technical Reference - Edits

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COD Rejects

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• Responses• Work the responses when you import them

• Query your system for rejects• Most systems will keep resending rejected records until they

are accepted• COD website Batch Search functionality

• Since rejected records are not found in Person or Award search – the batch search functionality will tell you what the reject edits were

COD Batch Search

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Or, enter SSN and choose specific award year or select all award years for complete history

Enter school ID and date range (up to 60 days)

Subsidized Usage Limit (SUL) - Edits

A number of new warning and reject edits will be implemented with COD Release 13.0 (Spring 2014)

•Warning edit 200 (already in place) – alerts schools that the borrower is a first-time borrower and subject to SUL•Reject edits 994 and 996 when new required tags are missing or invalid values were included in your common record submission•Reject (R) and Warning (W) edits R-202, R-203, R-204, R-205, W-207, R-208 and R-209 - award (loan) level or disbursement-level edits for various data inconsistencies•Reject edit 206 is a subsidized award/loan level reject when the borrower’s remaining subsidized eligibility period is less than zero

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Reconciliation Recommended StepsTips recommended for your day-to-day Direct Loan processing and to follow in getting ready to reconcile each month:1.Run a report to determine which records are not in an accepted status2.Resolve the rejected records3.Identify pending disbursements that should have been entered as actual disbursements and sent to COD4.Make sure all records/batches have been exported/transmitted5.Confirm that all acknowledgements/responses have been imported6.Verify that internal reconciliation has been completed7.Import the SAS, run Compares and reconcile it8.Document!

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Records Not in an Accepted Status

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SAS Disbursement Detail on Demand

• Part of COD March 2013 implementation• COD website modified for Grant data requests,

Rebuild requests, and now SAS Disbursement Detail

• For all award years, DL, and TEACH• Independent of and no impact on normal

monthly SAS• Can request Date Range, Month-to-Date, Year-

to-Date• Can continue requesting these even after

closeout

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SAS on Demand - Request

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Direct Loan Tools Software

It’s not the software itself that matters but what it does – some of the key functions:•Imports & formats the School Account Statement (SAS) for viewing/printing•Electronically compares the data on the SAS against corresponding data in school database (EDExpress or other)•Disbursement Measurement Tool Report (only EDExpress) – measures how long it is taking you to send disbursements to CODAvailable on FSADownload.ed.govCurrent version Release 13.0: 2011/2012, 2012/2013 and 2013/2014

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Direct Loan Training

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Posted on IFAP•Electronic Announcements/Training Announcements•Tools for Schools

• COD Computer-Based Training (CBT) modules• FSA Conference presentations/videos• FSA Assessments

Webinars posted• http://www2.ed.gov/offices/OSFAP/training/specific.html

Direct Loan Resources

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Resource LocationDear Colleague Letters IFAP.ed.gov

Electronic Announcements IFAP

Blue Book (recently updated) IFAP

FSA Handbook IFAP

Federal Regulations (34 CFR 668, 685) IFAP

COD Technical Reference FSADownload.ed.gov

Department Software FSADownload

Direct Loan School Guide (being updated)

School Contacts - Reminder• COD e-mail alerts and our team alerts go to listed FAA• Financial Aid Administrator, President, Chief Financial Officer

• Update E-App in eligcert.ed.gov – which then feeds over to COD• Cannot update these directly on COD website

• Financial aid program contacts (DL, Pell)• Update directly on the COD website

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We need accurate contact info to know who to call at your school

when we see an issue developing.

Need Help?

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COD School Relations Center• URL: http://www.cod.ed.gov• E-mail: CODSupport@ed.gov• COD Reconciliation Team• Phone: 1-800-848-0978 (Direct Loans)• Foreign Schools: 571-392-3737

CPS/SAIG Technical Support• URLs:

– FSAWebEnroll.ed.gov– FSADownload.ed.gov

• E-mail: CPSSAIG@ed.gov• Phone: 1-800-330-5947

Related Conference Sessions

Session # Session Title

2 Title IV Loan and Grant Funding Process

4 Loan Counseling Tools

5 COD Update for FAAs - Lecture

6 COD Hands-On

8 Title IV Reconciliation: What You Need to Know

9 PLUS Processing A to Z

20 Cash Management Requirements

28 What FAAs Must Know About 150% Direct Subsidized Loan Limits

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Contact InformationPat Kennedy

Federal Student AidDirect Loan Division, FLSSTDallas, TX 214-661-9480Patrick.Kennedy@ed.gov

Chuck HirmanFederal Student AidDirect Loan Division, FLSSTSeattle, WA 206-615-3643Chuck.Hirman@ed.gov

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The Federal Loan School Support Team

(FLSST)

Bob Berry – PhiladelphiaChuck Hirman – SeattleMatt Staples – Kansas CityMichelle Saigh – Washington, DCPat Kennedy – DallasWood Mason – Atlanta

DLOps@ed.govSee Electronic Announcement

Dated 7/14/2001

QUESTIONS?

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