Posted Date:February 3, 2015
|Author:||Sue O'Flaherty, Service Director, Program Management, Federal Student Aid|
Subject: Direct PLUS Loan Changes - Operational Impacts to Schools and Preliminary COD System Information
In final regulations published on October 23, 2014, the Department of Education (the Department) made changes to the adverse credit history provisions that are used in determining an applicant’s eligibility for a Direct PLUS Loan. These changes apply to both parent and graduate/professional student Direct PLUS Loan applicants. As explained in a January 27, 2015 Electronic Announcement posted to the Information for Financial Aid Professionals (IFAP) Web site, the final regulations include two key changes:
1) Revised criteria for determining that a Direct PLUS Loan applicant has an adverse credit history, and
2) A new loan counseling requirement for applicants who are determined to have an adverse credit history, but who qualify for a Direct PLUS Loan by documenting extenuating circumstances or obtaining an endorser. The applicant must complete the counseling on the Department’s StudentLoans.gov Web site.
In addition, the Department announced in the preamble to the final regulations that it would modify its procedures so that a credit check for a Direct PLUS Loan applicant will remain valid for 180 days instead of the current 90 days.
In a Federal Register notice posted on January 14, 2015 and in the January 27, 2015 Electronic Announcement, the Department announced that it will implement the new regulations and the procedural change on March 29, 2015.
This is the first in a series of announcements that will provide operational information about the changes to the Direct PLUS Loan adverse credit history provisions. In this first announcement, we explain early operational impacts to schools and provide preliminary information about the changes planned for the Common Origination and Disbursement (COD) System implementation during the period March 27-29, 2015. We hope this information will assist schools and software vendors as they begin preparing for the changes.
School-Based Operational Impacts
Schools will need to consider the new rules as they approach the March 29, 2015 implementation date. Some early operational changes a school may need to consider include:
Modifications to School Web Sites and Paper Materials – Schools that provide information about Direct PLUS Loan eligibility requirements on school Web sites or in paper materials may need to update this information to reflect the new requirements, in particular the new counseling requirement for Direct PLUS Loan applicants who are determined to have an adverse credit history, but who qualify for a Direct PLUS Loan by documenting extenuating circumstances or obtaining an endorser.
Updates to Applicant Correspondence – We will notify Direct PLUS Loan applicants who are required to complete the new counseling requirement through electronic or paper correspondence. However, a school that also sends its own notifications to Direct PLUS Loan applicants may need to revise these notifications to reflect the new counseling requirement.
Note: Schools are not responsible for providing the special PLUS Loan counseling for applicants who are determined to have an adverse credit history, but qualify for a Direct PLUS Loan by documenting extenuating circumstances or obtaining an endorser. The final regulations specify that the Department will provide this counseling, and as noted above, applicants who are subject to the new counseling requirement must complete the counseling on the StudentLoans.gov Web site.
Modifications to Internal Processes and Procedures – Schools may need to update internal processes and procedures to ensure that, if required, the special PLUS Loan counseling has been completed prior to the school making the Direct PLUS Loan disbursement. In addition, schools should begin updating their systems and software to receive the new credit check and counseling information, as described below under “COD System Operational Impacts.”
Note: As explained in the January 27th announcement, there is no impact to an applicant who was approved for a Direct PLUS Loan based on a credit check performed before March 29, 2015. However, if that same applicant has another credit check performed on or after March 29, 2015, the new regulations will apply, and the applicant will be required to complete PLUS Loan counseling, if he or she is determined to have an adverse credit history, but is approved for a Direct PLUS Loan after documenting extenuating circumstances or obtaining an endorser.
COD System Operational Impacts
More detailed information about the March 29, 2015 COD System changes related to adverse credit history requirements and PLUS Loan counseling will be provided in a few weeks; however, some key points about the coming changes are provided below:
The duration of a credit check will be changed from 90 days to 180 days. The change to 180 days will also apply to credit checks performed prior to March 29, 2015. For example, an applicant had a credit check performed before March 29, 2015 that is set to expire on April 30, 2015 under the current 90-day standard. After the system implementation on March 29, 2015, the expiration date for this credit check will be extended to June 29, 2015, under the new 180-day standard.
Schools will receive a new <CreditRequirementsMet> tag that will indicate whether an applicant has fulfilled all necessary credit requirements, including completion of the new PLUS Loan counseling, if required, and can receive funding for the Direct PLUS Loan. This tag will be returned to schools in a number of ways, including Common Record responses, system-generated responses (both Credit Status (CRCSxx OP) and PLUS Application Acknowledgements (CRSPxxOP)), and will also be available on the COD Web site.
Schools will receive credit check and PLUS Loan counseling information in a new system-generated Credit Status response (CRCSxxOP). Credit check and counseling information will also be available on the COD Web site (both at the person-level and on a new Web-only report).
Schools will receive a new COD Reject Edit 217 (Actual disbursement submitted with no PLUS Counseling on file) on Direct PLUS Loan disbursements if PLUS Loan counseling is required, but not yet completed by the applicant.
All correspondence (both paper and electronic) sent to applicants from the Department will be updated to include information about the PLUS Loan counseling requirement.
Applicants who are required to complete the new PLUS Loan counseling must do so on the StudentLoans.gov Web site. Note: The new mandatory PLUS Loan counseling is a separate module and does not fulfill the entrance counseling requirement for first-time graduate and professional student Direct PLUS Loan applicants. Depending on a graduate or professional student applicant’s circumstances, he or she may have to complete both modules.
Additional information about COD System changes related to Direct PLUS Loans is available in the 2015-2016 COD Technical Reference posted on the IFAP Web site. We are also planning a webinar in mid-February to discuss the changes to the Direct PLUS Loan adverse credit history provisions. A training announcement providing details about the webinar will be posted soon.
If you have questions about this announcement, contact the COD School Relations Center at 800/848-0978 for Direct Loans. You may also e-mail CODSupport@ed.gov.