PublicationDate: 7/1/95 ChapterNumber: 4 ChapterTitle: Obtaining, Managing, and Returning Title IV Funds SectionNumber: 6 SectionTitle: Obtaining Federal Family Education Loan Program Funds PageNumbers: 102-105 The Federal Family Education Loan (FFEL) Program includes Federal Stafford Loans (subsidized and unsubsidized), Federal PLUS (parent) Loans, and Federal Consolidation Loans. (The Federal Supplemental Loans to Students [SLS] Program was eliminated by legislation as of July 1, 1994.) The discussion that follows concerns only subsidized and unsubsidized Federal Stafford Loans (Stafford Loans) and Federal PLUS Loans (PLUS Loans). The means by which a school obtains FFEL Program funds differ from methods used to request and receive other Title IV program funds. FFEL Program loans are made to students and parents by banks, savings and loans, credit unions, and other financial institutions. A school obtains a borrower's funds directly from the borrower's lending institution or servicer. Federal statute requires that proceeds from Stafford and PLUS Loans be disbursed directly to schools for delivery to borrowers. (Formerly, lenders were allowed to send PLUS checks directly to parent borrowers.) For FFEL Program funds, the following distinction is made between the terms "disbursement" and "delivery." ((Disbursement of FFEL funds)) - Disbursement refers to the process by which a lender cuts a check and sends it to a school or transmits funds to a school electronically. Disbursement is considered to have occurred on the date that a lender writes and mails a check or deposits funds directly into a school's bank account. ((Delivery of FFEL funds)) - Delivery refers to the process by which a school makes FFEL funds available to a borrower. A school may deliver loan proceeds by paying a borrower directly or by crediting a student's account. Delivery is part of the disbursement process. There are three methods by which a lender may disburse FFEL funds to a school on behalf of a student or parent borrower--electronic funds transfer (EFT), master check, or individual check. 4.6. 1 Electronic Funds Transfer (EFT) and Master Checks ((EFT)) A school may receive a borrower's FFEL funds from a lender by electronic funds transfer (EFT). To do so, a school must enroll in EFT with the lender to enable the lender to deposit FFEL funds directly into the school's designated bank account. ((Master check)) A school may also receive a borrower's loan proceeds by master check if the school and lender have entered into an agreement to use master checks. A master check is a single check, written by a lender, that contains all the lender's FFEL Program funds for the school's borrowers as of a given disbursement date. ((EFT and master check rosters)) Both EFT and master check disbursements must be accompanied by a list of names, Social Security Numbers, and loan amounts of borrowers who are to receive a portion of the EFT or master check disbursement. The list enables a school to identify individual borrowers to whom loan proceeds must be delivered. A school must deliver loan proceeds to a student or parent borrower within 45 days of the date the funds were received by the school, notwithstanding other federal disbursement requirements. (See sections 4.7.2.3, 4.7.3, and 4.7.4.) ((Time frames for requesting funds)) In no case may a school request loan proceeds by EFT or master check earlier than 13 days before the first day of a student's enrollment period. If a Stafford Loan borrower is subject to delayed disbursement (see section 4.7.4), disbursement by EFT or master check may not be requested until the 24th day of the student's enrollment period. ((Borrower authorization)) A school must obtain a borrower's written authorization to receive his or her loan proceeds by EFT or master check. Authorization may be given in the borrower's loan application, or it may be obtained separately. If written authorization to disburse by EFT or master check is not given in the borrower's loan application, it must be obtained not more than 30 days before the beginning of the enrollment period for which the loan is intended. 4.6.2 Individual Checks ((Co-payable checks)) A school may receive a borrower's Stafford Loan or PLUS Loan proceeds from a lender in the form of an individual bank check made co-payable to the borrower and the school. The school then delivers the loan proceeds to the borrower. A school must deliver loan proceeds to a student or parent borrower within 45 days of the date the funds are received by the school, notwithstanding other federal disbursement requirements. (See sections 4.7.2.3, 4.7.3, and 4.7.4.) ((PLUS checks)) Co-payable PLUS checks must be sent directly to a school by a lender. A school must deliver PLUS loan proceeds to a parent borrower within 45 days of receiving a check. However, a school is not required to endorse a PLUS check before sending it to a parent borrower. The school may require the parent borrower to return the endorsed PLUS check to the school for the school to endorse it. The school then deposits it, and credits the student's account. ((Time frames for requesting checks)) In no case may a school request loan proceeds by co-payable check earlier than 30 days before the first day of student's enrollment period. If a Stafford Loan borrower is subject to delayed disbursement (see section 4.7.4), a school may not deliver Stafford Loan proceeds until 30 days after the beginning of the student's enrollment period. For these borrowers, a school must time its requests for Stafford Loan checks to ensure that funds are not held for more than 45 days before they are delivered to the student AND that funds are disbursed within the required time frames. (See section 4.7.2.3.) |