Bulletin ID
DLB - 99 - 66
| PublicationDate: 11/1/99 BulletinID: DLB - 99 - 66 November 1999 DLB 99-66 Subject: Guidance on Processing Adjustments to Actual Disbursements Dear Partner: Based on the number of questions that we have received from Direct Loan schools, there still seems to be some confusion concerning when it is appropriate to adjust the amount or date of an actual disbursement, and when it is necessary to make a new disbursement. It is important to use the correct transaction type, because interest on a Direct Loan whether it must be paid by the borrower or is subsidized by the federal government is calculated from the date that you actually disburse the loan funds. Adjustments are applied to the borrowers account as of the date of the related disbursement, not the adjustment date. We hope this bulletin will clarify the adjustment process. When should I adjust the amount or date of an actual disbursement? You should adjust the amount or date of an actual disbursement when you need to change the amount of the disbursement or the date that the disbursement was made. You must not adjust the amount of an actual disbursement for the purpose of giving a borrower more money later during the same loan period. In other words, adjustments should not be used to make additional disbursements on a loan. Downward adjustment of an actual disbursement amount Various situations may require you to adjust the amount of an actual disbursement downward. For example, you would adjust an actual disbursement amount downward when -- you incorrectly reported the amount of the disbursement as more than the amount that you actually disbursed; at the borrowers request, you are returning all or a portion of the loan within 120 days of the date of disbursement; or you are returning all or a portion of the loan (at any time) to comply with a statutory or regulatory requirement. Upward adjustment of an actual disbursement amount You may adjust an actual disbursement amount upward only when -- you incorrectly reported the amount of the disbursement as less than the amount that you actually disbursed, or you adjusted a previous actual disbursement amount to $0, but are now using that disbursement number to make a subsequent disbursement. Adjustment to an actual disbursement date You adjust an actual disbursement date when -- you incorrectly reported the date that you made a disbursement, or you adjusted a previous actual disbursement amount to $0, but are now using that disbursement number to make a subsequent disbursement. Examples: Downward Adjustment:You made a first disbursement of $1,313 on 8/30/99. On 9/15/99, per the borrowers request, you adjust the amount of the first disbursement to $1,000. You do not adjust the 8/30/99 disbursement date. Interest will be recalculated from 8/30/99 based on the reduced disbursement amount of $1,000. Upward Adjustment:You made a first disbursement of $1,313 on 8/30/99, but later discover that you incorrectly reported the disbursement amount as $1,000. You correct the error by adjusting the first disbursement amount to $1,313. You do not adjust the disbursement date, because you actually disbursed $1,313 on 8/30/99. Upward Adjustment and Change in Date:You made a first disbursement of $1,313 on 8/30/99. On 9/15/99, per the borrowers request, you adjust the first disbursement amount to $0. On 9/25/99, the borrower requests $1,000 for the first disbursement. You adjust the first disbursement amount from $0 to $1,000, and adjust the date of first disbursement from 8/30/99 to 9/25/99. In this example, you must adjust the date to reflect the date that the borrower actually received the funds. Otherwise, interest would be calculated from 8/30/99, even though the borrower did not receive the loan funds until 9/25/99. Date Adjustment:You made the first disbursement of a loan on 9/15/99, but incorrectly reported the disbursement date as 8/30/99. You correct the error by adjusting the first disbursement date to 9/15/99 so that interest will be recalculated from the date that the borrower actually received the loan funds. When do I need to make a new disbursement? You must make a new disbursement when you have already made one or more disbursements and you are giving a borrower additional loan funds later during the same loan period. This situation might occur when a borrowers loan eligibility increases (for example, due to a change in financial need, grade level, or dependency status), or when a borrower who previously requested a lesser loan amount later wishes to borrow the full amount for which he or she was eligible. You may not increase the loan amount simply by making an adjustment to a prior actual disbursement. An adjustment to an actual disbursement amount is treated as if it occurred on the date of the original disbursement, and interest on the adjusted loan amount is calculated from the date of the original disbursement. This means that if you process a loan amount increase by making an adjustment to a prior disbursement, interest on the increased amount will be calculated from the date of the prior disbursement rather than from the later date when the borrower actually receives the additional funds. In the case of an unsubsidized loan, the borrower will then be charged interest on the increased loan amount for a period before the borrower had use of the funds. In the case of a subsidized loan, the federal government and therefore the taxpayer will be responsible for paying the interest on the increased amount before it was given to the borrower. Example: New Disbursement:A borrower is eligible to receive a first disbursement of $2,000, but requests only $1,000. You make the first disbursement of $1,000 on 8/30/99. On 10/1/99, the borrower requests the additional $1,000. You make a newdisbursement for this amount with a disbursement date of 10/1/99. You cannot simply adjust the first disbursement upward to $2,000, because interest would then be charged on the full $2,000 beginning on 8/30/99, the date of the first disbursement. Again, we hope this information will clarify the adjustment process. Thank you for your ongoing partnership in the Direct Loan Program. Sincerely, Margaret E. White Acting Lead, Title IV Delivery Schools Channel |