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(Direct Loans) Subject: Operational Implementation Information - Elimination of the Up-Front Interest Rebate and End of Subsidized Loan Eligibility for Graduate or Professional Students

Posted Date:April 5, 2012

Author: William Leith, Service Director, Program Management, Federal Student Aid

Subject: Operational Implementation Information - Elimination of the Up-Front Interest Rebate and End of Subsidized Loan Eligibility for Graduate or Professional Students

As explained in Dear Colleague Letter GEN-11-16 and Dear Colleague Letter GEN-12-04, the Budget Control Act of 2011 made two changes to the William D. Ford Federal Direct Loan (Direct Loan) Program. Specifically, the Budget Control Act eliminated the Up-Front Interest Rebate effective for all Direct Loans first disbursed on or after July 1, 2012 and eliminated graduate or professional student eligibility for Direct Subsidized Loans effective for loans with loan periods beginning on or after July 1, 2012.

In a February 28, 2012 Electronic Announcement, we provided information about our implementation plans for the Common Origination and Disbursement (COD) System to accommodate the two changes described above. The interest rebate change will be implemented in April 2012 and the elimination of graduate or professional student eligibility for Direct Subsidized Loans will be implemented in July 2012. Additional information about the April 2012 and July 2012 implementations will be provided in forthcoming announcements posted on the Information for Financial Aid Professionals (IFAP) Web site.

In this announcement, we provide specific operational implementation information about the two changes. We will also add processing information for these two changes in the next update of the 2012-2013 COD Technical Reference.

Note for EDExpress Users: Specific guidance about recommended procedures for handling these changes in EDExpress 2012-2012, Release 2.0 was provided in a March 29, 2012 Electronic Announcement.

Elimination of the Up-Front Interest Rebate

Beginning April 15, 2012, the COD System will accept a value of zero for the Interest Rebate Percent and the Interest Rebate Amount for any Direct Loan awards with an earliest disbursement date on or after July 1, 2012.

    • The <InterestRebatePercent> and <InterestRebateAmount> tags must be submitted.
    • Both tags must be populated with a value of zero.
    • When determining an award's earliest disbursement date, actual disbursements [Disbursement Release Indicator (DRI) equals "True"] take precedence over anticipated disbursements (DRI equals "False").
    • The origination fee percentages are not changing.

In the attachment to this announcement, we provide a summary table of the origination fee percent and interest rebate percent based on a loan's first disbursement date. We also provide steps to correct Direct Loan awards if a school must make a change to the interest rebate percent.

Elimination of Graduate or Professional Student Eligibility for Direct Subsidized Loans

Beginning July 7, 2012, the COD System will reject a Direct Subsidized Loan award when the loan period begins on or after July 1, 2012 and the student's grade level is 6 or 7. In these cases, the COD System will return COD Reject Edit 150 (Incorrect Student Grade Level on Direct Loan PLUS Award or Direct Loan Subsidized Award for Graduate/irect Loan PLUS Award or Direct Loan Subsidized Award for Graduate/rong>

If you have any questions about this announcement, contact the COD School Relations Center at 800/848-0978 for Direct Loans. You may also e-mail CODSupport@acs-inc.com.

Last Modified: 04/04/2012