Bulletin ID
DLB - 99 - 39
SFA Information for Financial Aid Professionals
U.S. Department of Education
| PublicationDate: 6/1/99 BulletinID: DLB - 99 - 39 June 1999 DLB 99-39 Subject: Meeting Our Promise Procedures on Processing the Reduced Loan Origination Fee Dear Partner: Last week, Secretary Riley announced a number of exciting fee reductions for Direct Loan borrowers. The reductions include a one percentage point reduction in the origination fee that Direct Loan student borrowers now pay. As we promised, this bulletin provides you with detailed information on processing loans with the reduced origination fee. 1. To which loans does the new fee apply? The new 3% origination fee applies to ALL 1999-2000 Direct Subsidized and Unsubsidized Loans with a first disbursement on or after August 15, 1999. 2. Is the origination fee reduction dependent upon the borrowers family income? No, it applies to all Direct Loans to student borrowers that are first disbursed on or after August 15, 1999. 3. Does the origination fee reduction apply to PLUS loans? No. 4. When will the Loan Origination Center (LOC) be ready to receive Loan Origination Records (LORs) with the new fee? Beginning July 16, the LOC will accept 1999-2000 LORs with the 3% origination fee. We will continue to accept LORs with an origination fee of 4% as long as at least one anticipated disbursement date is before August 15, 1999. We will reject: LORs with an origination fee of 3%, if any of the anticipated disbursement dates are before August 15, 1999, LORs with an origination fee of 4%, if the first anticipated disbursement date is on or after August 15, 1999, Disbursement Date Adjustments (Q records) for loans with an origination fee of 3%, if the new disbursement date is before August 15, 1999, and Disbursement Date Adjustments (Q records) to the first actual disbursement for loans with an origination fee of 4%, if the new first disbursement date is on or after August 15, 1999. 5. What do I need to do to be able to originate loans with the new fee? Mainframe Users: If your school uses a mainframe system, you will need to work with your technical staff or software vendor to determine what changes are needed in your software. Your software will need to be able to calculate 1st, 2nd, 3rd, and 4th Disbursement Anticipated Loan Fee Amounts and Anticipated Gross/Net Disbursement Amounts using the following percentages:
Determining whether you add software logic, reset control fields, or use a manual process to effect these changes, depends upon your software and systems design. It is important that you dont make any changes to the record layouts for the Full Loan Origination Record or Loan Origination Change Records you send to the LOC. EDExpress Users: Currently, EDExpress, version 5.2, has only one Origination Fee Field that is used to calculate the fees for all loans. EDExpress, version 5.3, will be available in mid-July and will include enhancements to process separate loan fee percentages for Direct Subsidized and Unsubsidized Loans and PLUS loans at both the default and loan record level. The cover letter accompanying the release will provide details on the new process. We highly recommend that you wait for this release. In the meantime, if you must originate using EDExpress, version 5.2, you will need to separate all Direct Subsidized and Unsubsidized Loans with a first disbursement on or after August 15, 1999 and originate them as a group. To do this you must change the origination fee percentage at the system level following the steps below. CAUTION you must reset the origination fee at the system level for all PLUS loans and all Direct Subsidized and Unsubsidized Loans that do not include a first disbursement on or after August 15, 1999 back to 4% before originating these loans. To change the origination fee percentage: A. At the opening screen, go to the tool bar and click on Tools, then Setup, then Direct Loan, then System. A window titled System will open. B. In the "System" window, tab down to the "Fee Percentage" field C. Click OK. A window will open that says, Record updates saved. D. Click OK. E. You are now ready to create 1999-2000 loan origination records at the fee rate you just set. REMEMBER: You must reset the origination fee each time you change groups of loans based on the table above. 6. What do I do if I have already originated loans with a first disbursement date that is on or after August 15, 1999 using the 4% fee? If you have originated 1999-2000 Direct Subsidized and Unsubsidized Loans with an origination fee of 4% and plan to first disburse on or after August 15, 1999, you must change the origination fee for those loans to 3%. To do this, follow all of the steps below: A. On the LOR, adjust the anticipated disbursement amounts to $0 and the loan amount approved to $0. B. C. Change the origination fee percentage to 3%. If you are using EDExpress, version 5.2, follow the directions under question 5 above. D. Either: activate the loan by raising the loan amount approved up to the approved amount while using the 3% fee to calculate the gross, net, and fee amounts or create a new loan using the 3% fee following the instructions below. The method you use will depend on what your software will allow you to do. You may need to check with your software provider to determine your software's capability. Note: EDExpress, version 5.2 (the current version) won't allow you to change the origination fee after the loan is originated. EDExpress, version 5.3 available in mid-July, will allow you to change the origination fee for inactive loans on a loan by loan basis. (1) If you can activate the loan using the 3% fee, do the following: (a) Increase the loan amount approved and anticipated disbursements. (b) (c) (2) If you can't activate the loan using the 3% fee or do not wish to do so, you must create a new loan by doing the following: (a) Originate a replacement loan and send to the LOC. (b) 7. If I have loans scheduled to be disbursed before August 15, 1999, is there anything I can do to give these students the benefit of the new fee? Yes. Follow the procedures outlined above and make the first disbursement on or after August 15, 1999. If you have made or will make the first the disbursement before August 15, 1999, change the loan to cover only the first payment period and originate a second loan to cover subsequent payment periods. If you choose to do this, you will need a new MPN to cover the second loan. 8. We use summer as a header and have already originated summer/fall/spring loans. The summer portion has been disbursed. What do we need to do so that our summer students receive this new fee for the fall/spring portion of their loan? As explained above, in order for these borrowers to receive benefit of the new origination fee, you need to change their current loan to a summer only loan and originate a second loan to cover fall and spring. If you choose to do this, you will need a new MPN to cover the second loan. We are glad that we are able to extend this important benefit to your borrowers. If you have any questions, please call the LOC at 1-800-848-0978 or your regional Client Account Manager. Thank you once again for your continued partnership in the Direct Loan Program. Sincerely, Margaret E. White Acting Chair Direct Loan Task Force |