Operational Guidance for Direct Loan Origination Fee Change Oct. 1, 2020

Federal Student Aid
Operational Guidance for Direct Loan Origination Fee Change Oct. 1, 2020

On June 23, 2020, we published an Electronic Announcement that explains the sequester required changes to the Title IV federal student aid programs. The June 23, 2020 Electronic Announcement notes decreased 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 Oct. 1, 2020 and before Oct. 1, 2021. 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 made the necessary COD System changes to be able to process loans with the new origination fees on June 28, 2020. Schools should send to the COD System Direct Loan records where the first disbursement will be on or after Oct. 1, 2020 using the origination fees noted in the earlier Electronic Announcement (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 change 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 29, 2020, we began to automatically update the origination fees on accepted Direct Loan records with only anticipated disbursements and an earliest disbursement date on or after Oct. 1, 2020. Impacted schools will receive 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 pennies for Direct Loan awards. COD System business rules for disbursement processing are found in Volume II, Section 1 of the COD Technical Reference.

We will add the new origination fee information to the COD Technical Reference with the next document update scheduled for fall 2020.

Contact Information

If you have questions about this announcement, contact the COD School Relations Center at 1-800-848-0978. You may also email CODSupport@ed.gov.


Last Modified: 06/28/2020