In the past when a borrower made a lump sum payment or otherwise pre-paid their loan, those payments would only count as one qualifying payment toward PSLF. In August, FSA’ changed their policy and as a result prepayments and lump sum payments will count for as qualifying payments if a borrower has a valid employment certification on file and other usual eligibility conditions are being met. This news is HUGE for those working in public service and seeking PSLF.

FSA also announced they are launching a redesigned PSLF Help Tool for borrowers on the studentaid.gov website. The tool will help borrowers determine their eligibility and even apply for PSLF using a single  form for PSLF and Temporary Expanded PSLF (TEPSLF). Following the StudentAid.gov update, borrowers will only need to submit this one form to certify their employment or to be considered for forgiveness under PSLF or TEPSLF. 

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Before you send your next batch of disbursements, make sure your financial aid management system is up to date with the new loan origination fees that went into effect on October 1st or they’ll bomb out on the Common Origination and Disbursement website. If your fees still need to be adjusted, go ahead and check out this guidance in this Electronic Announcement to learn how to fix it. 

Because of the Budget Control Act of 2011, which was enacted to prevent the United States from breaching the “debt-ceiling” sequestered funds from federal agencies to keep the budget in balance. When the federal government begins their federal fiscal year each October 1st, origination fees on direct loans change as a result. The sequestration law isn’t set to expire until 2021. Hey wait, that’s next year! OMG can’t WAIT for this to be over.  

Beginning on October 1, 2020 the loan origination fees have gone down slightly. For Federal Direct Loans where the first disbursement is made on or after October 1, 2020, and before October 1, 2021 the origination fees are as follows:

The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.057%. For example, the fee on a $5,500 loan will be $58.13. 

The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.228%. For example, the fee on a $10,000 PLUS Loan will be $422.80.

Sequestration doesn’t just impact Federal Direct Loans, it impacts other aid programs such as the Iraq – Afghanistan Service Grant Program and TEACH Grant Program. 

Sequestration requires aid in both programs to be reduce by a pre-determined percentage from the amount authorized in the statutes. Fortunately, the reductions in the current year are slightly less than in prior years. The Iraq-Afghanistan Service Grant Program Award was reduced by 5.7% for FY 21 resulting in an award of 5983.34. The TEACH Grant was also reduced by 5.7% resulting in a maximum award of $3772.00.  

For more information about these programs, check out this Electronic Announcement from Federal Student Aid. 

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The closeout deadline for the 2018-2019 Direct Loan Program Year is Friday, July 31, 2020. This is the last processing day before the end of the program year. According to a recent reminder from Federal Student Aid, all school data must be received and accepted by this date to be included in a school’s final Ending Cash Balance for the year.

There are several basic steps that a school must undertake to successfully close out their Direct Loan program at the end of each award year.

First, schools should be sure to reconcile to an Ending Cash Balance of $0 and Total Net Unbooked Disbursements of $0, as reflected on your monthly School Account Statement (SAS) Report and in your school’s internal records. Once everything is in harmony and you have no more disbursements or returns to process, complete the School Balance Confirmation form on the Common Origination and Disbursement (COD) Web Site.

The Balance Confirmation form can be completed after the school has reconciled to a $0 balance both internally and externally. Once the school has completed their final reconciliation, the school should log in to the COD Web Site. From the School options menu click on the Balance Confirmation link on the left-hand side of the page and follow the instructions on the School Balance Confirmation screen.

To meet the closeout deadline, all records must be submitted to the COD System no later than 8:00 p.m. Eastern time (ET) on Friday, July 31, 2020 . After this deadline, Direct Loan records will not be accepted by the COD System and schools will no longer have Direct Loan funds available to draw down for the 2018-2019 Award Year. In other words, the Department of Education (the Department) will reduce the school’s Current Funding Level (CFL) to the greater of Net Drawdowns or Net Accepted & Posted Disbursements.

For more information check out the electronic announcement from FSA.

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Interest Rates for Direct Loans First Disbursed Between July 1, 2020, and June 30, 2021

Undergraduate Students

• Direct Subsidized Loan 2.75%
• Direct Unsubsidized Loans 2.75%
• Direct PLUS Loans 5.30%

Graduate & Professional Students

• Direct Unsubsidized Loans 4.30%
• Direct PLUS Loans 5.30%

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Federal Student Aid made these available on StudentAid.gov on April 26, 2020 and provided guidance for schools who wish to print and use the paper versions.

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According to their recent electronic announcement, previously scheduled webinars have been postponed. FSA will provide more details in the future.

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The Fiscal Year 2017 3-Year Draft CDR is calculated by dividing the number of borrowers who entered repayment in 2017 by the number of borrowers who entered repayment in 2017 and defaulted in 2017, 2018 or 2019.

Although there are no sanctions or benefits associated with the draft rates themselves, the draft rates will become official in September. During the draft cycle, schools have an opportunity to challenge incorrect data or challenge their (low) participation rate. The challenge and appeals cycle begins on March 3, 2020 and lasts for 45 days. More information about submitting an Incorrect Data Challenge or a Participation Rate Index Challenge can be found in the Cohort Default Rate Guide,

Benefits
A school whose most recent official cohort default rate is less than 5.0 percent and is an eligible home institution that is originating loans to cover the cost of attendance in a study abroad program may disburse loan proceeds in a single installment to a student studying abroad regardless of the length of the student’s loan period, and may choose not to delay the disbursement of the first installment of loan proceeds for first year first-time borrowers studying abroad.

A school with a cohort default rate of less than 15.0 percent for each of the three most recent fiscal years for which data are available, including eligible home institutions and foreign institutions, may disburse, in a single installment, loans that are made for one semester, one trimester, one quarter, or a four-month period and may choose not to delay the first disbursement of a loan for 30 days for first time, first-year undergraduate borrowers.

Sanctions
If a school’s three most recent official cohort default rates are 30.0 percent or greater for the three-year calculation it will lose Direct Loan and Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years.

If a school’s current official cohort default rate is greater than 40.0 percent, for the three-year CDR calculation, it will lose Direct Loan and Pell Grant program eligibility for the remainder of the fiscal year in which the school is notified of its sanction and for the following two fiscal years

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