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(Direct Loans) Subject: Operational Guidance for Direct Loan Origination Fee Change October 1, 2016

Posted Date:June 2, 2016

Author: Sue O'Flaherty, Service Director, Program Management, Federal Student Aid

Subject: Operational Guidance for Direct Loan Origination Fee Change October 1, 2016

On May 31, 2016, we published Dear Colleague Letter (GEN-16-11) that explains the Fiscal Year 2017 sequester required changes to the Title IV federal student aid programs. GEN-16-11 notes increased origination fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans (for both parent and graduate student borrowers) with a first disbursement on or after October 1, 2016 and before October 1, 2017. In this announcement, we remind schools how the Common Origination and Disbursement (COD) System will process Direct Loans with the new origination fees and how to correct records if necessary.

We implemented the necessary COD System changes to be able to process loans with the new origination fees on June 1, 2016. Schools should send to the COD System Direct Loan records where the first disbursement will be on or after October 1, 2016 using the origination fees noted in GEN-16-11 (and in the attachment below) as soon as their systems allow. As a reminder –

  • If a school submits a Direct Loan record with an incorrect origination fee, it will be rejected with COD Reject Edit 140 (Incorrect Origination Fee Percent and/or Interest Rebate Percent on New Awards).

  • If a school needs to correct or make changes to a Direct Loan record that has already been accepted by the COD System (such as a case in which the earliest disbursement date has changed and the new earliest disbursement date falls within a different origination fee period), the school should follow the instructions in the attachment below titled “Submitting Changes to Origination Fee Percentages and Disbursements.”

    • Note: On June 1, 2016, we automatically updated the origination fees on Direct Loan records with only anticipated disbursements and an earliest disbursement date on or after October 1, 2016. Impacted schools received system-generated origination fee responses (message class: CROF) with the updated information.

  • The rounding and truncating rules for the COD System have not changed. The COD System will not accept or store penny amounts on Direct Loan awards. COD System business rules for disbursement processing are found in Volume II, Section 1 of the 2016-2017 COD Technical Reference (beginning on page 97).

We will add the new origination fee information to the COD Technical Reference with the next document update scheduled for July 2016.

Contact Information

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.