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Trends and Issues
Loan Disbursement Q&A
In light of the recent expiration of two provisions related to loan disbursement, Shoptalk Online has assembled a series of Q&As on the topic.
Q: Does the 30-day delayed disbursement rule apply to first-time PLUS loan borrowers?
A: No—according to federal regulations, "A school may not release the first installment of a Stafford loan for endorsement to a student who is enrolled in the first year of an undergraduate program of study and who has not previously received a Stafford, SLS, Direct Subsidized, or Direct Unsubsidized loan until 30 days after the first day of the student's program of study" [34 CFR 682.604(c)(5)]. Therefore, the regulation applies only to first-year, undergraduate Stafford loan borrowers who are borrowing for the first time.
Q: Do the multiple disbursement requirements apply on a loan-period or payment-period basis?
A: According to the Common Manual, subsection 5.8.D, "The payment period is the basis on which a school must schedule and deliver disbursements for a particular loan period." In addition, for a loan period that consists of more than one payment period, the school must deliver loan proceeds at least once in each payment period. If a loan period consists of only one payment period, the school must deliver loan proceeds at least twice during that payment period (also from the Common Manual, subsection 6.3.E).
Q: Must all disbursements of a loan be equal?
A: Yes—a school must deliver loan proceeds on a payment-period basis in substantially equal installments, with no installment exceeding one half of the loan amount (Common Manual subsection 6.3.E).
Q: Has the time frame by which a school may issue a late disbursement changed recently?
A: Not yet, but it's on the horizon. Currently, according to the Federal Student Aid Handbook, Volume 8, Chapter 6, page 8-63, if a student is otherwise eligible for a late disbursement, "A school must make the late disbursement no later than 90 days after the date that the borrower became ineligible for the loan." Recent proposed changes to the federal regulations would increase the length of time a late disbursement may be issued from 90 days to 120 days after the borrower became ineligible. ED is expected to finalize the proposed changes this November.
Q: If a school has to return a disbursement where the actual amount of the disbursement differed from the amount certified for the disbursement, which amount should the school return?
A: The school should return the amount actually disbursed (TG's Support Knowledgebase, http://tgslc.custhelp.com/cgi-bin/tgslc.cfg/php/enduser/home.php).
Q: What is the difference between "disbursement" and "delivery"?
A: ED uses the term disbursement to apply to the issuance of all types of financial aid from the school to the student. However, to distinguish between the transfer of funds between lender and school and the transfer of funds between school and student, the Common Manual uses "disbursement" for lender activities and "delivery" for school activities. Both terms are defined as follows:
- Disbursement: The transfer of loan proceeds by individual check, master check, or electronic funds transfer (EFT) by a lender to a borrower, a school, or an escrow agent. (Common Manual Glossary)
- Delivery: A school's processing of Stafford and PLUS loan proceeds and delivery of those proceeds to borrowers. (Common Manual section 6.3)
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Meeting at TG to Gather Input on MYF Online Counseling
Mapping Your Future (MYF) wants to know what financial aid professionals would like in the next version of its Online Student Loan Counseling (OSLC). OSLC 3.0, as the next evolution will be called, will be the topic of discussion during a two-day meeting to be conducted October 29 and 30 at the offices of TG. Any MYF team member is welcome to attend.
At this joint application development session, participants will discuss comments and suggestions from schools and students regarding OSLC, brainstorm new ideas, and plan how to address those ideas and suggestions. The meeting will also cover technical issues and industry standards as well as a review of the history of OSLC.
Agenda
The agenda includes the following:
- Tuesday, Oct. 29
8:30 a.m. to 4:30 p.m.
- Introduction
- Process and Purpose of Meeting
- History of Online Student Loan Counseling
- Customer Perspective
- Industry Standards update
- Re-engineering of Online Student Loan Counseling
- Lunch (11:30 a.m.)
- Brain-Storming Session (Exploring and Discovering the Objectives)
- Determining Priorities and Scope
- Wednesday, Oct. 30
8:30 a.m.
- Continue Brain Storming and Determining Priorities and Scope
- Gather Functional Requirements
- Closing: Next Steps, Assignments, Future Involvement of Participants, Schedule Future Calls
To Attend or for More Information
Those interested in attending the meeting should RSVP to Cathy Mueller at cathy.mueller@mapping-your-future.org so that MYF will have enough materials and refreshments for the meeting. Cathy can also provide information on TG's location as well as travel arrangements.
MYF is a public service web site providing college, career, and financial aid information and services. MYF is sponsored by TG and other guarantors and is supported by many lenders and servicers across the country.
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