| AwardYear: 1998-1999 ChapterNumber: 4 ChapterTitle: Information and Counseling for Borrowers PageNumbers: 1-8 Essential Questions * How can I explain the new program to my students? * What is the official name of the program? How should the name appear in our publications? * Does the Department have publications about the Direct Loan Program? * Will the Direct Loan Servicing Center send communications to students? * Does the Department have publications that explain interest rates and repayment options? * Are there any sample repayment schedules? * For which borrowers must I provide entrance and exit counseling sessions? When do I hold these sessions? * What latitude does a campus have in developing its own entrance and exit counseling materials? * How can a student learn about variable interest rates, capitalization, discharge (cancellation), deferments, forbearance, and consolidation? Explaining the Direct Loan Program to Borrowers With any new program, it is important to integrate information into all your existing publications, presentations, counseling sessions, and phone contacts. You might want to consider preparing news releases and newsletters to inform borrowers about the Direct Loan Program and your schools participation. You may also refer them to the Direct Loan web site at www.ed.gov/DirectLoan In communicating about Direct Loans, the official name of the program is the William D. Ford Federal Direct Loan Program. It may be abbreviated as the Direct Loan Program or Direct Loans. Several loan types are available under the Direct Loan Program. These are * Federal Direct Stafford/Ford Loans (subsidized) * Federal Direct Unsubsidized Stafford/Ford Loans (unsubsidized) * Federal Direct PLUS Loans * Federal Direct Consolidation Loans. Explaining New Terms It may be helpful to define certain words associated with the Direct Loan Program. Several years ago, the Federal Perkins Loan was called a Direct Loan. For students coming back to school or for others involved with that program, the name "Direct Loan Program" may be confusing. The term "Servicing Center" may be new to borrowers as well. "Servicing Center" under Direct Loans is not synonymous with the term "servicer" under the FFEL Program. Department Publications To help you communicate about Direct Loans, the Department has published several booklets that you can give to students and parents: * Direct Loans: A Better Way to Borrow summarizes the Direct Loan Program and includes information on application procedures and loan limits. The booklet also briefly describes the repayment options and outlines the advantages of Direct Loans for student and parent borrowers, schools, and taxpayers. * All About Direct Loans gives students detailed information about the Direct Loan Program, including loan repayment, deferment provisions, and the consequences of default. * Direct PLUS Loan Basics provides a basic overview of Direct PLUS Loans for parent borrowers. * Direct PLUS Loans provides more detailed information on Direct PLUS Loans, including eligibility criteria, the application process, repayment options, and deferment and forbearance provisions. It also assists parents in determining how much they can afford to borrow. You can call the Direct Loan Origination Center at 1-800-848-0978 to order these and other publications. Direct Loan Servicing Center Communications Your borrowers will receive various communications from the Direct Loan Servicing Center. The Appendices to this Guide contain sample correspondence from the Direct Loan Servicing Center to borrowers, which include: * Disbursement confirmation * Quarterly and annual statements * Repayment options information Your staff should have sample correspondence available. Your staff should understand the intent of the notifications and any action the borrowers may be required to take. Although all notifications will provide contact information for the Direct Loan Servicing Center, borrowers are likely to contact the financial aid office first. It may be helpful to inform your students about what they will receive from the Servicing Center before the communication is sent. For example, students will receive a notice within 10 working days after each disbursement has been accepted on a booked loan. A borrower may incorrectly assume the letter requests loan repayment and may contact your office with questions. Repayment Plan Information Communicating about the Direct Loan Program includes providing information to borrowers about repayment options. The repayment plans have been designed to meet borrowers unique financial needs. The Direct Loan Servicing Center will provide information on the various repayment plans as the borrower approaches his or her repayment period. It is important to encourage your borrowers to carefully read the information as they choose a repayment plan. The charts on the following pages describe the plans. The Departments Repayment Book explains in detail the four repayment plans and gives examples of how each plan works. It includes a table that allows borrowers to see at a glance approximately how much they would repay (per month and in total) under each repayment plan (assuming different debt levels). Worksheets and supplementary charts allow borrowers, including Direct PLUS Loan borrowers, to estimate what they would owe under each repayment plan based on their actual circumstances. The Repayment Book will help borrowers choose the best repayment plan. Also available to assist borrowers is the Direct Loan Repayment Calculator located on the Departments Direct Loan Website (www.ed.gov/DirectLoan). [[This file contains the Direct Loan Program Repayment Plans on page 4 in Portable Document Format (PDF). It can be viewed with version 3.0 or greater of the free Adobe Acrobat Reader software.]] [[This file contains the Repayment Periods For Extended or Graduated Plans on page 5 in Portable Document Format (PDF). It can be viewed with version 3.0 or greater of the free Adobe Acrobat Reader software.]] Entrance and Exit Counseling One of the most important ways of providing information to borrowers about Direct Loans is through entrance and exit counseling. Entrance Counseling All schools (except those participating in an experimental site contract) must conduct entrance counseling for first-time student borrowers before disbursing a Direct Subsidized or Direct Unsubsidized Loan to the student borrower. The counseling may be done in person or by using a videotape presentation or computer-assisted technology (such as the Internet, computer-based training, or an automated calling system). Counseling sessions conducted by video or computer-assisted technology must meet the same requirements as those sessions conducted in person. If counseling is by video or computer-assisted technology, a counselor with Title IV knowledge must be available shortly after the counseling to answer questions. The borrower must not be able to circumvent the counseling or leave before completion, and you must document that the borrower completed counseling. Exceptions are made for correspondence school and study abroad programs. In these instances, you must provide borrowers with written counseling materials by mail before you disburse the loan funds. As part of your schools quality assurance plan (see Chapter 11), you may design entrance counseling to suit your students needs. Under this approach, called alternative counseling, you must provide all full-time borrowers with written counseling materialsincluding performance measures such as withdrawal, default rates, and levels of borrowing, to demonstrate the effectiveness of the alternative counseling. Review the procedures for withholding funds from students who have not participated in entrance counseling. If you already use Electronic Funds Transfer (EFT), you probably have procedures in place. If your current process is based on your office receiving a check, however, and if you operate with a student accounts system, the way you handle entrance counseling tracking may change with Direct Loans. You should consider how your process will indicate that students have met the required entrance counseling activity so that Direct Loan disbursements are authorized correctly. For example, many institutions with student accounts systems use the FFEL loan check as a mechanism to trigger the review of the entrance counseling requirement. With Direct Loans, the money is credited to the students account and this trigger no longer exists. Therefore, you will need to design a method to flag students who have not participated in entrance counseling before crediting their accounts. Exit Counseling Exit counseling is required for all Direct Subsidized and Direct Unsubsidized loan recipients before they cease to be at least half-time students at your institution. The counseling must be done in person, with exceptions for correspondence school students and students who withdraw without notice. While in-person counseling is not required for those two categories of students, you must mail them exit counseling materials. Counseling Materials Keeping borrowers informed of their obligations and rights and responsibilities is essential to the Direct Loan Programs success. To assist Direct Loan schools, the Department will provide all necessary materials for entrance and exit counseling. Schools, however, are not required to use these materials and may develop their own materials if they choose. If schools develop materials, they should refer to section 34 CFR 685.304 of the Direct Loan regulations for counseling requirements. The Departments entrance and exit counseling materials consist of booklets as well as companion entrance and exit counseling videotapes. * The Entrance Counseling Guide for Borrowers covers topics such as loan amounts, interest rates, capitalization of interest, andbrieflythe repayment plans. Also discussed are deferments, forbearance, and the consequences of default. A sample entrance counseling quiz, a loan history worksheet, and a glossary of common Direct Loan terms are included as well. It includes tips on how students can budget their money (and provides a planning worksheet) so that students will have enough to stay in school and to repay their loans later. * The Entrance Counseling Guide for Counselors offers tips on what to cover in entrance counseling and gives explanations that follow the order of topics in the Entrance Counseling Guide for Borrowers. * The Exit Counseling Guide for Borrowers explains the Direct Loan Servicing Centers role, the various repayment plans, Direct Consolidation Loans, deferment and forbearance provisions, and discharge (cancellation). The publication spells out the consequences of default and offers suggestions on how borrowers can budget once they leave school so they can avoid default. A list of borrower rights and responsibilities is also included. The Exit Counseling Guide for Counselors explains what to cover to meet the Departments regulatory requirements, offers tips on organizing counseling sessions, and presents an outline of discussion topics that follows the order of topics in the Exit Counseling Guide for Borrowers. Exit Counseling Support The Loan Origination Center and the Direct Loan Servicing Center provide support to assist schools with exit counseling. A school may receive borrower-specific exit counseling packages for its graduating borrowers by notifying the Loan Origination Center. The school must specify the desired time of receipt, i.e., 30, 60 or 90 days prior to the anticipated graduation date. |