Publication Date: May 16, 2006
Author: G. Kay Jacks, General Manager, FSA Application, School Eligibility and Delivery Services
Summary: HERA Operational Implementation Guidance (CPS, COD System, and EDExpress Suite)--Direct PLUS Loan for Graduate and Professional Students
THIS ELECTRONIC ANNOUNCEMENT HAS BEEN SUPERSEDED. PLEASE SEE THE ELECTRONIC ANNOUNCEMENT DATED 5/23/06.
Posted on 05-16-2006
As explained in Dear Colleague Letter GEN-06-02, the Higher Education Reconciliation Act of 2005 (the HERA), Pub. L. 109-171, provides for eligible graduate and professional students to receive Federal Direct PLUS Loans (Direct PLUS Loans) on or after July 1, 2006. Graduate and professional students will complete the Federal Direct PLUS Loan Application and Master Promissory Note (PLUS MPN). An addendum to the PLUS MPN (Addendum) will provide specific instructions for completion of the MPN by a graduate or professional student PLUS (Grad PLUS) borrower.
Note: We will soon post an Electronic Announcement that addresses the use and availability of all Direct Loan MPNs, addenda, and Plain Language Disclosures (PLDs). In the meantime, schools should follow the guidance issued in our high-level overview announcement (http://www.ifap.ed.gov/eannouncements/0505HERAOperationalImplGuide.html).
In this announcement, we cover information in the following order:
- Awarding Direct PLUS Loans to Graduate and Professional Students
- Operational Implementation of Direct PLUS Loans for Graduate and Professional Students
- Availability of Technical Information
- Contact Information
Awarding Direct PLUS Loans to Graduate and Professional Students
Terms and conditions applicable to both parent PLUS and Grad PLUS borrowers
The terms and conditions of PLUS loans made to graduate and professional students are the same as those that apply to PLUS loans made to parents of dependent undergraduates. These terms and conditions include the following:
- A Grad PLUS borrower must not have an adverse credit history as that term is defined in the William D. Ford Federal Direct Loan (Direct Loan) Program regulations at 34 CFR 685.200(b)(vii). To determine whether a borrower has an adverse credit history, a credit check must be completed. All other requirements concerning determinations of adverse credit also apply. As is the case with parent PLUS loan applicants, a Grad PLUS applicant who is determined to have an adverse credit history may receive a Direct PLUS Loan if he or she obtains an endorser who does not have an adverse credit history.
- The repayment period for a Direct PLUS Loan made to a graduate or professional student begins on the date of the final disbursement of the loan, and the first payment is due within 60 days after the date the loan is fully disbursed. Of course, a Grad PLUS borrower may receive a deferment while he or she is enrolled on at least a half-time basis at an eligible school. Upon dropping to less than half-time enrollment status, the borrower is not entitled to a grace period on his or her PLUS loans.
- The interest rate on a PLUS loan for Grad PLUS borrowers is the same fixed rate as that for parent PLUS borrowers. Effective for Direct PLUS Loans first disbursed on or after July 1, 2006, the fixed interest rate will be 7.9 percent.
- Grad PLUS borrowers may borrow up to the cost of attendance for the period of enrollment, minus other estimated financial assistance.
- If a Grad PLUS borrower is also a parent who is borrowing a Direct PLUS Loan for one or more dependent students, the borrower must sign one PLUS MPN to borrow for himself or herself and a separate PLUS MPN to borrow for each dependent student.
- The rules for multi-year use and expiration of the PLUS MPN are the same for both parent PLUS and Grad PLUS borrowers.
- A school must use and document an active confirmation process for new PLUS loans made under a previously signed PLUS MPN.
- A Grad PLUS borrower may choose to sign a new PLUS MPN for each new loan period even if that would not otherwise be required.
- A school may also require a new PLUS MPN before making a new PLUS loan to the Grad PLUS borrower.
- As is the case with Direct PLUS Loans made to parent borrowers, the Grad PLUS borrower must provide the school with the requested PLUS loan amount. The school must originate the PLUS loan for the lesser of the maximum amount for which the student is eligible or the amount requested by the Grad PLUS borrower.
In addition to the above requirements, a Grad PLUS borrower is subject to all Title IV student eligibility requirements as provided in 34 CFR Part 668.
Terms and conditions applicable only to Grad PLUS borrowers
Dear Colleague Letter GEN-06-02 also noted the following additional requirements that apply only to Direct PLUS Loans made to graduate or professional students:
- All Grad PLUS applicants must complete and submit the Free Application for Federal Student Aid (FAFSA) before applying for a Direct PLUS Loan.
- Before applying for a Direct PLUS Loan, a graduate or professional student must also apply for and the school must determine the student's eligibility for the maximum annual Direct Subsidized Loan and/or Direct Unsubsidized Loan amount. We expect that a Grad PLUS applicant would wish to receive a Direct PLUS Loan to supplement the maximum Direct Subsidized Loan and/or Direct Unsubsidized Loan amount that he or she is eligible to receive. However, a graduate or professional student is not required to receive Direct Subsidized Loan and/or Direct Unsubsidized Loan funds as a condition for receiving a Direct PLUS Loan, and a school may not require a graduate or professional student to receive Direct Subsidized Loan and/or Direct Unsubsidized Loan funds before the student may apply for a Direct PLUS Loan.
- Graduate or professional students may sign PLUS MPNs before July 1, 2006, and schools may include estimated or recommended Direct PLUS Loan amounts in their award packages for graduate or professional students before that date.
School Participation in the Direct PLUS Loan Program
Some schools participating in the Title IV loan programs may have never participated in the Direct PLUS Loan Program. A school can check to see if it is currently approved for participation in the Direct PLUS Loan Program by reviewing Section A, Title IV Student Financial Assistance Programs, of its Eligibility and Certification Approval Report (ECAR). Instructions for viewing and checking an electronic copy of a school's ECAR are provided in an attachment to this announcement.
A school that participates in the Direct PLUS Loan Program must make PLUS loans available to both parent and graduate or professional student borrowers, as applicable. That is, a school may not choose to make Direct PLUS Loans available only to its parent borrowers, or only to its graduate and professional student borrowers.
Operational Implementation of Direct PLUS Loans for Graduate and Professional Students
Ultimately, we will receive and process Grad PLUS loans as we do parent PLUS loans.
- A school will provide information about its Grad PLUS loans to us via submission of the Extensible Markup Language (XML) Common Record to the Common Origination and Disbursement (COD) System or via the COD Web site. In either case, the COD System will return responses to the school.
- A credit check will be initiated either by the school via the COD Web site or by the COD System upon receipt of an award.
- A student will complete a PLUS MPN via the Direct Loan Electronic MPN Web site or will complete and return a paper PLUS MPN to the school or to us, as applicable.
- Once the COD System has an accepted award, approved credit check, valid PLUS MPN, and first actual disbursement on file, it will "book" the Grad PLUS loan and send it to the Direct Loan Servicing System (DLSS).
- After the loan has been submitted to the DLSS, information about the loan will be available in the National Student Loan Data System (NSLDS).
To facilitate the processing of Grad PLUS loans, we need to modify the XML Common Record, EDExpress software, COD System, Electronic MPN Web site, and paper MPN process. In addition, we need to issue the Addendum that will be used with the PLUS MPN.
We will complete and implement all necessary changes and additions over the next several months. In developing an implementation plan and schedule, we had to consider and balance the complexity of the new requirements, the effort required by our school/third party servicer/software provider partners to make and adjust to the changes, and the challenge of minimizing risk to the functioning of existing software and systems.
High-Level Implementation Plan Summary
A high-level summary of the implementation plan and key dates associated with the plan follow below. After the summary, we outline more specifically what schools can do now to begin providing service to students and what schools will be able to do after full operational implementation.
|Activity/Action ||Implementation Date |
- Schools determine graduate/professional student eligibility and perform online individual credit checks and view results via COD Web site (www.cod.ed.gov).
| Available Now |
Drawdowns and Disbursements
- Schools are able to draw down funds via GAPS for disbursements to eligible students who have completed/signed PLUS MPN and do not require endorser. Schools must provide PLUS Disclosure Statement at or before first disbursement.
| July 1, 2006 |
Master Promissory Notes
- Students are able to complete PLUS MPN electronically via Direct Loan Electronic MPN Web site (www.dlenote.ed.gov).
- Schools are able to view paper and electronic PLUS MPN data for school via COD Web site. (Schools will not receive responses.)
- Schools are able to request report listing all PLUS MPNs accepted by COD System for school.
July 1, 2006
July 29, 2006
July 29, 2006
- Federal Student Aid issues EDExpress software update.
- Schools that use EDExpress are able to enter and store awards and disbursements. Software will not export awards and disbursements until COD System is ready to receive.
September 1, 2006
Full COD System Processing
- Federal Student Aid implements modifications to COD System.
- Federal Student Aid issues EDExpress software update.
- All schools (EDExpress and non-EDExpress users) are able to submit awards and disbursements to COD System via XML Common Record batch process.
- All schools (non-EDExpress users) are able to submit awards and disbursements to COD System via COD Web site.
- COD System links MPNs to submitted awards.
- COD System sends responses to schools.
- COD System generates and mails Disclosure Statements to students.
- Schools receive COD reports that reflect Grad PLUS and can access data via COD Web site.
- COD System initiates credit checks, mails endorser packages when students have an adverse credit history, and prints/mails MPNs (if applicable) upon receipt of awards.
- Federal Student Aid issues DL Tools software update that reflects Grad PLUS.
December 16, 2006
Providing Service to Students Before Full Operational Implementation
Although all aspects of the Grad PLUS process will not be ready immediately or at the same time, most schools will be able to begin providing service to their students in the very near future. Depending on a school's systems, software, and processes, the school may be able to complete the following Grad PLUS processing functions before full operational implementation on December 16, 2006:
Have students complete and sign a paper PLUS MPN.
Initiate and complete credit checks via the COD Web site.
- A school must initiate and confirm online credit checks on an individual basis.
- Before a school initiates an online credit check, the student must complete and sign either the PLUS MPN or a credit check authorization form. The credit check authorization form is available on the COD Web site's (www.cod.ed.gov) Credit Check Search screen. To access the form, click on "Credit Record Authorization Form" located in the introductory paragraph.
- In some cases, more than 90 days will elapse between the date a school initiates an online credit check and the date the school submits an award to the COD System. We will not initiate another credit check in these cases provided that the awards are submitted to and accepted by the COD System by January 17, 2007.
- The COD System must have the award information in order to print and mail endorser packages and complete endorser processing. For this reason, a school will be able to complete Grad PLUS processing for students who have an adverse credit history and wish to obtain an endorser after full operational implementation on December 16, 2006.
Package, award, and disburse Grad PLUS loans as soon as the school's system/software is able do so-for students who do not have an adverse credit history.
- A school must hold all records and submit them to the COD System on or after December 16, 2006.
- If a school uses a third party software provider, it should check with the provider about when the provider's software will be available for the school to enter and store awards and disbursements.
- EDExpress software will be available on September 1, 2006 for a school to enter and store awards and disbursements. The EDExpress software will not export the awards and disbursements until they can be submitted to the COD System on December 16, 2006.
Draw down and disburse Grad PLUS loan funds to students who have signed a PLUS MPN and do not have an adverse credit history.
Providing Service to Students After Full Operational Implementation
After full operational implementation on December 16, 2006, a school will be able to complete the following Grad PLUS processing functions:
Availability of Technical Information
We will provide schools, third party servicers, and software providers with the technical information related to the Grad PLUS changes through updates to the 2005-2006 COD Technical Reference and the 2006-2007 COD Technical Reference. We expect these updates to be made in three installments scheduled for late May, mid June, and late July 2006. We will post the technical reference updates to the IFAP Web site (www.ifap.ed.gov).
The technical reference updates will include changes to the COD Common Record Schema that will accommodate the additional information needed for Grad PLUS awards. In addition, the technical reference updates will delineate the differences in what schools will report for parent PLUS and Grad PLUS awards.
We hope this comprehensive presentation of Grad PLUS information is helpful to schools as they prepare to provide service to their students. We will post additional communications over the next several months.
Thank you in advance for your assistance in completing this important work. If you have any questions about this announcement, contact the COD School Relations Center at 800/848-0978. You may also e-mail CODSupport@acs-inc.com.