| AwardYear: 1995-1996 ChapterNumber: 9 ChapterTitle: Servicer Response and Support PageNumbers: 1-11 CHAPTER 9 - SERVICER RESPONSE AND SUPPORT Essential Questions - What will the Servicing Center do for my school? - Can I choose the Servicing Center for my school? - What happens if the Servicing Center does not meet the specified time frames? - How does my school lodge a complaint about, or a compliment for, the Servicing Centers performance? General Information The Department of Education performs a range of functions from origination to servicing and collection. - One Servicing Center provides customer support and all origination services for all Direct Loan schools. - Beginning in 1996-97, there will be multiple Servicing Centers for loan servicing and collection functions. The Department will determine how borrowers will assigned to the various Servicing Centers. The servicing and collection activities parallel those currently performed by lenders in the Federal Family Education Loan (FFEL) Program. These activities are - processing school and borrower inquiries, documenting adjustments, and preparing correspondence - maintaining borrower and loan data, including all changes, corrections, additions, and deletions to the data - reconciling cash balances and loan detail with schools - applying accrued interest and fees, and maintaining borrower account balances - supporting entrance and exit interviews - recording all payments received daily, and applying payments to borrower accounts - tracking payments and researching unapplied payments - tracking loans through in-school and in-grace statuses, and converting loans to repayment status - processing deferment and forbearance requests - performing comprehensive loan collections, including billing, letter writing, telephone calling, skip tracing, and borrower tracking activities - maintaining audit trails - providing required accounting support - facilitating inquiries from the Department and participating schools - providing for standard and ad-hoc reporting needs - interfacing with other systems, as required Many of these activities are known to schools familiar with these operations under the current FFEL Program. Several activities are worthy of special discussion, however, because they apply directly to borrowers and schools. STUDENT SERVICES FEATURES. The school is the borrowers primary contact up to the time Direct Loan funds are disbursed. At that point, the Servicing Center notifies the borrower of the booked loan and begins a relationship that will continue until the borrowers loan has been fully repaid. The first communication from the Servicing Center to the borrower occurs after the loan has been booked. Additional communication occurs throughout the repayment period, primarily in response to borrower requests. The Servicing Center also provides the borrower with appropriate contacts and telephone numbers in the event the borrower has questions about the loan or its provisions. ADDRESSES AND TOLL-FREE NUMBERS. The Department maintains a toll-free telephone number and a special mailing address at the Servicing Center to support borrower inquiries. This information is provided in communications to the borrower. STANDARD COMMUNICATIONS. The majority of the Servicing Centers communications with the borrower will fall into one of the following categories: loan issuance notification, deferment and forbearance assistance, and account servicing documents such as monthly billings, quarterly statements, coupon books, and annual statements. LOAN ISSUANCE NOTIFICATION. Through the loan disbursement record, the school notifies the Servicing Center of each loan disbursement made to a borrower. Within 10 business days of receipt of this record, the Servicing Center will contact the borrower at his/her permanent address. The communication to the borrower will include - a redisclosure of the loan amount, the amount disbursed to date, and the loans terms - the name of the office to contact if the borrower did not receive the loan proceeds or if the borrower has questions. DEFERMENT AND FORBEARANCE ASSISTANCE. After the beginning of the repayment period, the borrower may request that the loan repayments be deferred (temporarily postponed, and for Direct Subsidized Loans, no interest is charged) or forborne (temporarily postponed or reduced, but the borrower is charged interest during authorized periods). The Servicing Center will notify the borrower of deferment and forbearance options - when sending the borrower a repayment schedule, and - upon beginning delinquent loan collection for the borrower The notification will describe the options available to the borrower and provide a telephone number or address to seek further assistance. Regarding deferments and forbearance: - Forms may be requested by telephone. - Information and documents necessary to establish eligibility for a specific type of forbearance or deferment must be provided to the Servicing Center. - The Servicing Center tracks all requests for deferment and forbearance from a borrower. - The Servicing Center sends deferment and forbearance forms and instructions to a borrower within three business days of receiving the request. - The Servicing Center negotiates deferments and forbearances to meet borrower needs while maintaining compliance with the law and regulations. All Direct Loan borrowers are entitled to the same deferments as new FFEL Program borrowers. Such deferments are authorized during any period when the borrower is - enrolled at least half-time - pursuing a course of study under an eligible graduate fellowship program - pursuing a rehabilitation training program for disabled individuals - conscientiously seeking, but unable to find, full-time employment (not to exceed three years) - experiencing or will experience economic hardship (not to exceed three years) Additionally, Direct Loan borrowers who have an outstanding balance on a FFEL Program loan (made before July 1, 1993) at the time they apply for a Direct Loan are eligible for all the additional deferments available to borrowers who had an outstanding balance on a FFEL Program loan made before July 1, 1993. A forbearance may be granted when the borrower is willing but unable to make scheduled payments. Forbearance may include - a short period during which the borrower makes no payments - an extension of time for making payments - a period during which the borrower makes smaller payments than originally scheduled Borrowers should contact the Servicing Center for other special conditions where forbearance may be granted, such as - during periods of financial hardship or illness - while serving in a medical or dental internship or residency program - serving in a federally defined national service position for which the borrower receives a National Service Education award - if the borrowers monthly debt burden for all federal Title IV student loans equals or exceeds 20 percent of his or her total monthly gross income The Servicing Center reviews deferment and forbearance forms for completeness and accuracy. If necessary, the Servicing Center contacts and assists the borrower in order to obtain a complete request. The Servicing Center acts upon all deferment and forbearance requests within 10 business days of obtaining all required information. ANNUAL STATEMENTS. The Servicing Center prepares and sends an annual statement to every borrower in June each year. At a minimum, the annual statement includes - borrower identification number - borrower name and address - period covered by statement - beginning account balance of all the borrowers open Direct Loans - account activity for the year - ending account balance - toll-free customer service telephone number The statement will also include any additional information needed for adequate reporting as required by the Department. Endorsers will be sent annual statements only on loans that are delinquent 60 days or more. SCHOOL SERVICE FEATURES. The Direct Loan Servicing Center will also assist schools with specific functions. - SUPPORT ENTRANCE COUNSELING. · It will distribute entrance counseling materials as requested by schools for Direct Subsidized and Unsubsidized Loan borrowers. (See Chapter 3 for a description of these materials.) · These materials will be available to schools before a borrowers first disbursement. - SUPPORT EXIT INTERVIEWS. The Servicing Center will provide schools with exit counseling materials and with borrower-specific repayment disclosure statements for use in conducting exit interviews for each Direct Subsidized and Unsubsidized Loan borrower. · It will contact schools to determine whether they want to receive these materials for their borrowers. · If so, it will send materials based on the borrowers anticipated graduation date. · Schools will receive the materials in sufficient time to conduct exit interviews. · The materials will reinforce borrowers understanding of their communication responsibilities, repayment options, and obligations with respect to their Direct Loans. ADDRESS AND TOLL-FREE NUMBER. The Department maintains a toll-free telephone number and a special mailing address at what will be called the Loan Origination Center, for the School Relations team, whose sole function is to support schools inquiries. To provide the greatest possible level of support, the School Relations teams are each responsible for specific geographic locations. - Schools send paper Direct Subsidized and Unsubsidized Loan promissory notes, Direct PLUS application/promissory notes, and other origination materials to School Relations Loan Origination Center 231 North Eastern Blvd. Warehouse No. 3 Bay 1 Montgomery, AL 36117 or, for direct deliveries (OTHER THAN materials): School Relations Loan Origination Center 474 South Court Street 5th Floor Montgomery, AL 36104 - School Relations toll-free number, for ordering bulk materials and Direct Loan school inquiries: 1(800)848-0978 - School Relations fax number: 1(800)557-7396 - Loan Origination Center response summary. The following chart outlines various functions and turnaround times in functional categories. SERVICING CENTER TURNAROUND TIMES ------------------------------------------------------------------------------ Origination Functions ------------------------------------------------------------------------------ * Determine parent eligibility for Direct PLUS loan * Edit and validate electronically transmitted loan data * Transmit electronic file to school of processing results of daily loan data transactions TURNAROUND * 5 business days of receipt of PLUS application/promissory note * 1 business day of receipt * By noon of day after validating days loan record submission ------------------------------------------------------------------------------ Promissory Note Functions ------------------------------------------------------------------------------ * Ship printed promissory notes to school * Notify school of promissory note shipment via confirmation letter * Transmit notice of incomplete or altered promissory notes to school * Transmit notice of applicant approval and promissory note to school TURNAROUND * 3 business days of request * 5 business days of shipment * 3 business days of receipt * 3 business days of record payroll ------------------------------------------------------------------------------ Disbursement/Reconciliation Functions ------------------------------------------------------------------------------ * Edit and validate electronic disbursement records * Notify borrower of loan booking and redisclose terms * Transmit discrepancy report on unbooked loan to school * Notify school of late reconciliation data * Cancel a booked loan TURNAROUND * 1 business day of receipt * 10 business days of receipt of each disbursement record * 60 business days of receipt of promissory note * 5 business days of reconciliation date * 5 business days of cancel notice ------------------------------------------------------------------------------ General Functions ------------------------------------------------------------------------------ * Respond to customer telephone inquires * Respond to customer mail inquiries * Initiate appropriate servicing activity * Update loan records with SSCR or other status changes * Key enter and verify hard copy records (alternative origination only) TURNAROUND * Within 5 minutes of average * Within 10 business days of receipt * Within 3 business days of receipt of materials * 5 business days of receipt * 7 business days of receipt ------------------------------------------------------------------------------ PROBLEM RESOLUTION. When the Department receives a complaint from a borrower about a function performed at the Servicing Center, a copy of the complaint will be sent to the Servicing Center manager. - If the complaint alleges a violation of state or federal law, the Servicing Center will immediately cease collection activity on the account in question. - Within five business days, the Servicing Center sends the Department a copy of its collection activity record on the account and any other relevant information so the Department may respond to the complaint. - Any state consumer requirement that would cause the promissory note to be invalid could trigger such a complaint. These requirements vary by state. - If the school receives a Servicing Center-related complaint from a borrower, the school refers the borrower to the Department. When the Servicing Center receives a complaint directly from a borrower alleging a violation of state or federal law, it will - immediately cease collection activity on the account in question - will send a copy of the complaint to the Department within three business days The Servicing Center will not resume activity on the account until resolution of the complaint has been approved by the Department. If a school has a Servicing Center-related complaint, the school should contact the Departments Regional Direct Loan Account Management Staff in the schools respective region. A staff member from this unit will research and follow up on all school questions and complaints, generally within 48 hours. The addresses and telephone numbers of the Direct Loan Regional Account Managers are included in the appendices. IMPLEMENTATION ISSUSE AND MANAGEMENT TIPS It may be useful to share information with your colleagues about your experience with the Servicing Centers performance, as well as how any problems were resolved. |