TG Updates

How will your school implement Grad PLUS?

Did you attend the TG Conference last month? If so, we hope that you were able to attend the session titled Higher Education Reconciliation Act - TG and You! In that session, some of TG's top policy and product experts explained how the changes in the HERA will impact TG's business processes. One of the most significant issues for our customers is the implementation of the Grad PLUS program and, as TG works to refine our processes, we want to learn how schools are planning to launch this extension of the PLUS Loan Program.

In particular, one topic of concern within the FFELP industry is the collection of the requested loan amount for Grad PLUS borrowers. Schools must have a "confirmation" process (as opposed to a "passive" process) for PLUS loans. A confirmation process is a process that requires the borrower to take some type of action to confirm the loan offer or to request a specific loan amount. A passive process — for example, not responding to an offer within a certain timeframe — requires no action on the part of the borrower. ED does not permit a passive process for PLUS loans.

To implement a confirmation process, a school could ask a Grad PLUS borrower to provide his or her RLA on the award letter via e-mail or the Internet. Upon receipt of this information, the school would then package the PLUS loan. Another option is for the school to include a recommended loan amount in an award letter. The borrower could then be advised to contact the guarantor or lender of any adjustments in the loan amount or to confirm the loan amount. If this option is selected, the school needs to coordinate the process with the appropriate entity to receive such contact from borrowers.

Beginning in late September, TG Loans By Web™ will solicit the PLUS borrower's RLA. For schools using other loan processing software, CommonLine permits the school to transmit zeroes in the RLA field, and TG's loan guarantee operations/data reporting team will obtain the RLA from the borrower. Clearly, an automated process for securing this information is desirable but, given the constraints we are all working under to meet July 1 deadlines, automation may not be a realistic possibility right now. TG is committed to providing exceptional customer service and plans to do whatever it takes to make the new Grad PLUS process seamless for our business partners.

To help us in planning our system changes, please send an e-mail message to kyle.smith@tgslc.org that includes:

• The name of your school.
• Information about how your school will be processing Grad PLUS loans for the 2006-07 school year; in particular, let us know what your method will be in collecting the RLA. For example, "Our school will collect the RLA for Grad PLUS loans, since the school has direct contact with the student borrower, but will ask TG to collect the RLA for parent PLUS loans."

Your responses will influence our ongoing efforts to develop the best service and products possible for our customers.

More information
For more information about this request, please contact Kyle Smith, assistant vice president for TG loan guarantee operations/data reporting, at kyle.smith@tgslc.org.

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Question of the week

Q: If a student has already completed the FAFSA for the 2006-07 academic year, and notifies the school that he or she will be utilizing distributions from a prepaid tuition plan for the upcoming academic year, what should the school do based on changes to the Higher Education Act (HEA) as a result of the recently passed Higher Education Reconciliation Act of 2005 (HERA)?

A: The HERA has amended the HEA to state that, effective July 1, 2006, distributions from a prepaid tuition plan are no longer counted as a resource (also known as estimated financial assistance), but rather are reported on the FAFSA as an asset of the owner (as long as the owner is not a dependent student). Specifically, per the HERA and per recent guidance in Dear Colleague Letter (DCL) GEN-06-05 (which states that this change is effective for the 2006-2007 award year), for a dependent student, distributions from a prepaid tuition plan are reported as an asset of the parent if the parent (including a stepparent) is the owner of the account or plan. Thus, if the school receives information from a dependent student that the student will be utilizing distributions from a prepaid tuition plan in which the parent is the owner, the school must not count such distributions as a resource for the purposes of packaging financial aid, but will instead need to submit corrections to the student's Institutional Student Information Record (ISIR), reporting the distributions as an asset of the parent. If the school receives information from an independent student that the student will be utilizing distributions from a prepaid tuition plan in which the student is the owner, the school will need to submit ISIR corrections, reporting the distributions as an asset of the student. The school should report only the amount of the distributions that the student will utilize for the upcoming academic year, not the full value of the plan.

The school should be aware that reporting the prepaid tuition plan distributions as an asset may increase the student's expected family contribution (EFC). However, using the distributions as an asset (in which case, the distributions are factored into the federal methodology) versus as a resource (in which the distributions are a dollar-for-dollar offset of the student's cost of attendance) is beneficial to the student. The school may need to counsel the student as to how this change in how prepaid tuition plan distributions are counted for the purposes of determining financial aid eligibility benefits the student.

To access GEN-06-05
To access DCL GEN-06-05, visit www.ifap.ed.gov/dpcletters/GEN0605.html.

Do you have a question?
If you have a question that needs an answer, feel free to Ask TG™. Ask TG is TG's online query tool for borrowers, schools, and lenders. Ask TG includes a database of frequently asked questions about financial aid, student loan processing, and TG's products and services. To submit a question to Ask TG, visit http://tgslc.custhelp.com.

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