Table G: Loan Servicing-The Process: Due Diligence, Student Status Deferments, and Skips

Table G: Loan Servicing — The Process: Due Diligence, Student Status Deferments, and Skips

Student Aid Partner # SDI Recommendations What happened?

Schools 1   More training for staff about what is involved in loan servicing. Not a common practice.

2
More verification reporting.
Applications to be verified are chosen randomly by the Central Processing System according to criteria established by ED. As provided in the 1992 reauthorization of the Higher Education Act, schools may be exempt from certain verification requirements if they are participating in ED’s Quality Assurance Program.

3
Utilize student associations to communicate repayment, default, etc. information to students.
Not a common practice.

4
Explain in detail about deferments in the exit interview session.
Beginning in 1993, TG publishes a handbook entitled New Directions: A Guide to Repaying Your Student Loans to help students understand their student loan debt responsibility and explain repayment options.

5
Verify student’s address upon disbursement of loan. If it has changed, notify lender.
Federal regulations require schools to notify the lender and guaranty agency within 30 days of a student’s change of address.

6
Send student’s personal information to the lender at time of exit interview.
The 1992 Higher Education Amendments require a school to notify the borrower’s guaranty agency(s) within 60 days after the exit interview of changes in a student’s personal information. Lenders can access this information.

Lenders
1
Involvement in preloan exit interview counseling.
Many lenders now offer their servicers to schools to facilitate or conduct entrance and exit counseling.

2
Additional training for staff.
TG provides training opportunities.

3
Early/more frequent telephone contact.
Effective 7/1/97, federal regulations require lenders to send the first delinquency notice no later than the 15th day of delinquency offering assistance to the borrower.

4
More informative grace letters.
Letters are reviewed and improved.

5
Enhance training for collectors.
Not adopted.

6
Emphasize bank drafts (auto payments).
Many lenders offer this option.

7
More comfortable and open lines of communicatons with the students.
Lenders and TG provide different channels for communication-email, Internet, 1-800 numbers, etc.

8
Diversity collection letters and envelopes.
The Fair Debt Collection Act tightly regulates all communication with debters.

9
Second shift collectors.

10
More non-related references and verifying references through the form of post cards, etc.
More information is needed.

11
More education on deferment forms.
Adventures in Education helps to educate borrowers about deferments forms and provides a way for students to download the forms from the Internet.

12
Send letter at 45 days past due listing deferment availability.
Part of diligence.

13
Send deferment form in due diligence progress.
More information is needed.

14
Send grace letters prior to the end of grace period.
The Higher Education Amendments of 1992 require lenders to disclose repayment to borrower "not less than 60 days nor more than 240 days before the first payment is due."

Guaranty Agency
1
More specific handbook. Include more examples. Maybe smaller handbooks explaining specific situations.
Beginning in 1993, TG publishes a handbook entitled New Directions: A Guide to Repaying your Student Loans to help student understand their student loan debt responsibility and explain repayment options.

2
Provide simplified deferment packet.
In a letter issued May 8, 1996, ED announced approval of common deferment forms.

3
Automation-from guarantor to schools and vice versa.
In response to suggestion offered by lenders and schools, TG has made several enhancements to the Loan Information Network Clearinghouse (LINC) since its initial implementation in 1988. CommonLine'96 was developed by the National Council of Higher Education Loan programs and allows schools to expand automated connections for guaranteed loan processing natinally. ED's implementation of the National Student Loan Data System (NSLDS) allows direct access to current loan-level information on Title IV aid. TG also offers online access to borrower information.

4
Standarize withdrawal forms.
Federal regulations define how a school determines a student's date of withdrawal. Schools are required to report the withdrawal date to NSLDS.

Legislative
1
Statewide skip tracing agency.
Not adopted.

2
Minimum payment requirement while in school.
Not adopted.

3
Hotline information concerning who owns the loan.
NSLDS provides schools with access to information on a student's loan. For TG borrowers, Customer Services provides information that is also shown in Dear Graduate letters.

4
Twelve payments on time-13th payment forgiven (incentive).
Lenders voluntarily offer incentive programs for borrower discounts.

5
National student data network.
Implemented in 1994, the National Student Loan Data System (NSLDS) is a national database of information on Title IV student aid. The NSLDS was developed to provide current loan-level information on Title IV aid and to provide an integrated view of Title IV programs in terms of aid approval, disbursements, repayments, deliquencies, and school closings.

6
For skip tracing, contact: DMV, Social Security Office, credit bureau, city utilities.
TG communicates with DMV, SS office, credit bureaus, and the other state agencies.

7
Publish names of defaulters in newspapers and on TV.
Not adopted.

8
Suspend and hold licenses.
Effective September 1, 1989, the Texas Education Code requires that a licensing agency shall not renew the license of a person who has default on a loan guaranteed by TG.

9
Allow financial aid office to post a MOST WANTED LIST.
More information is needed.

10
For skip tracing, allow criss-cross at post office.
More information is needed.

11
Include parent's social security number on application for use in skip tracing.
More information is needed.

12
Educate Congress.
Ongoing.

13
Discontinue or make students earn some of their deferments.
Federal legislation passed in July 1993 limited deferments to new borrowers in-school (1/2 time enrollment), graduate fellowship or rehabilitation training, unemployment (not exceed 36 months), and periods of economic hardship. Additionally, PLUS loans may not be deferred based upon the status of the student. Further deferment changes that occurred in July 1996 legislation required borrowers who requested unemployment deferments to provide six persons the borrower had contacted for employment, excluding each initial request. However, this same legislation allowed lenders to give administrative forbearances.

14
Allow guarantors access to Social Security files.
Although guarantors do not have access to Social Security files, the Social Security Administration and the Central Processing System work together at the time the FAFSA is processed to conduct a mact that verifies taht the student's SSN is correct and that the SSN corresponds to the given student's name and date of birth.

15
Require that borrowers designate a primary lender.
Borrowers are required to designate a leader in the "Borrower Section" of the Common Application.

Table G: Loan Servicing — The Process: Due Diligence, Student Status Deferments, and Skips
Student Aid Partner	#	SDI Recommendations	What happened?

Schools	1	More training for staff about what is involved in loan servicing.	Not a common practice.
	2	More verification reporting.	Applications to be verified are chosen randomly by the Central Processing System according to criteria established by ED. As provided in the 1992 reauthorization of the Higher Education Act, schools may be exempt from certain verification requirements if they are participating in ED’s Quality Assurance Program.
	3	Utilize student associations to communicate repayment, default, etc. information to students.	Not a common practice.
	4	Explain in detail about deferments in the exit interview session.	Beginning in 1993, TG publishes a handbook entitled New Directions: A Guide to Repaying Your Student Loans to help students understand their student loan debt responsibility and explain repayment options.
	5	Verify student’s address upon disbursement of loan. If it has changed, notify lender.	Federal regulations require schools to notify the lender and guaranty agency within 30 days of a student’s change of address.
	6	Send student’s personal information to the lender at time of exit interview.	The 1992 Higher Education Amendments require a school to notify the borrower’s guaranty agency(s) within 60 days after the exit interview of changes in a student’s personal information. Lenders can access this information.
Lenders	1	Involvement in preloan exit interview counseling.	Many lenders now offer their servicers to schools to facilitate or conduct entrance and exit counseling.
	2	Additional training for staff.	TG provides training opportunities.
	3	Early/more frequent telephone contact.	Effective 7/1/97, federal regulations require lenders to send the first delinquency notice no later than the 15th day of delinquency offering assistance to the borrower.
	4	More informative grace letters.	Letters are reviewed and improved.
	5	Enhance training for collectors.	Not adopted.
	6	Emphasize bank drafts (auto payments).	Many lenders offer this option.
	7	More comfortable and open lines of communicatons with the students.	Lenders and TG provide different channels for communication-email, Internet, 1-800 numbers, etc.
	8	Diversity collection letters and envelopes.	The Fair Debt Collection Act tightly regulates all communication with debters.
	9	Second shift collectors.
	10	More non-related references and verifying references through the form of post cards, etc.	More information is needed.
	11	More education on deferment forms.	Adventures in Education helps to educate borrowers about deferments forms and provides a way for students to download the forms from the Internet.
	12	Send letter at 45 days past due listing deferment availability.	Part of diligence.
	13	Send deferment form in due diligence progress.	More information is needed.
	14	Send grace letters prior to the end of grace period.	The Higher Education Amendments of 1992 require lenders to disclose repayment to borrower "not less than 60 days nor more than 240 days before the first payment is due."
Guaranty Agency	1	More specific handbook. Include more examples. Maybe smaller handbooks explaining specific situations.	Beginning in 1993, TG publishes a handbook entitled New Directions: A Guide to Repaying your Student Loans to help student understand their student loan debt responsibility and explain repayment options.
	2	Provide simplified deferment packet.	In a letter issued May 8, 1996, ED announced approval of common deferment forms.
	3	Automation-from guarantor to schools and vice versa.	In response to suggestion offered by lenders and schools, TG has made several enhancements to the Loan Information Network Clearinghouse (LINC) since its initial implementation in 1988. CommonLine'96 was developed by the National Council of Higher Education Loan programs and allows schools to expand automated connections for guaranteed loan processing natinally. ED's implementation of the National Student Loan Data System (NSLDS) allows direct access to current loan-level information on Title IV aid. TG also offers online access to borrower information.
	4	Standarize withdrawal forms.	Federal regulations define how a school determines a student's date of withdrawal. Schools are required to report the withdrawal date to NSLDS.
Legislative	1	Statewide skip tracing agency.	Not adopted.
	2	Minimum payment requirement while in school.	Not adopted.
	3	Hotline information concerning who owns the loan.	NSLDS provides schools with access to information on a student's loan. For TG borrowers, Customer Services provides information that is also shown in Dear Graduate letters.
	4	Twelve payments on time-13th payment forgiven (incentive).	Lenders voluntarily offer incentive programs for borrower discounts.
	5	National student data network.	Implemented in 1994, the National Student Loan Data System (NSLDS) is a national database of information on Title IV student aid. The NSLDS was developed to provide current loan-level information on Title IV aid and to provide an integrated view of Title IV programs in terms of aid approval, disbursements, repayments, deliquencies, and school closings.
	6	For skip tracing, contact: DMV, Social Security Office, credit bureau, city utilities.	TG communicates with DMV, SS office, credit bureaus, and the other state agencies.
	7	Publish names of defaulters in newspapers and on TV.	Not adopted.
	8	Suspend and hold licenses.	Effective September 1, 1989, the Texas Education Code requires that a licensing agency shall not renew the license of a person who has default on a loan guaranteed by TG.
	9	Allow financial aid office to post a MOST WANTED LIST.	More information is needed.
	10	For skip tracing, allow criss-cross at post office.	More information is needed.
	11	Include parent's social security number on application for use in skip tracing.	More information is needed.
	12	Educate Congress.	Ongoing.
	13	Discontinue or make students earn some of their deferments.	Federal legislation passed in July 1993 limited deferments to new borrowers in-school (1/2 time enrollment), graduate fellowship or rehabilitation training, unemployment (not exceed 36 months), and periods of economic hardship. Additionally, PLUS loans may not be deferred based upon the status of the student. Further deferment changes that occurred in July 1996 legislation required borrowers who requested unemployment deferments to provide six persons the borrower had contacted for employment, excluding each initial request. However, this same legislation allowed lenders to give administrative forbearances.
	14	Allow guarantors access to Social Security files.	Although guarantors do not have access to Social Security files, the Social Security Administration and the Central Processing System work together at the time the FAFSA is processed to conduct a mact that verifies taht the student's SSN is correct and that the SSN corresponds to the given student's name and date of birth.
	15	Require that borrowers designate a primary lender.	Borrowers are required to designate a leader in the "Borrower Section" of the Common Application.