Federal Updates

Charting new territory in study-abroad disbursements

As schools begin processing FFELP awards for the upcoming fall semester, and students finalize their study-abroad plans, it is important to be aware of a change in the disbursement rules for students enrolled in study-abroad programs.

The Higher Education Reconciliation Act of 2005 (HERA) requires a lender to disburse a loan directly to the student in a study-abroad program if the following conditions apply:

• The loan is first disbursed on or after July 1, 2006.
• The student requests direct disbursement.
• The student's enrollment in the study-abroad program has been verified with the home institution.

Previously, a student in a study-abroad program was allowed to request and receive direct disbursement of a loan without any enrollment verification.

To facilitate this change in processing, the National Council of Higher Education Loan Programs (NCHELP) Electronic Standards Committee has created a new study-abroad indicator in CommonLine called the Direct Disbursement to Borrower Indicator, which allows schools to identify a study-abroad student who has requested a direct disbursement. The school may enter a "Y" in this new field to indicate that the lender should disburse funds directly to the student. For those records, the originator of the disbursement must perform verification of enrollment prior to disbursing the funds to the borrower. If this field is blank, the lender should disburse the student's funds to the home institution. The earliest implementation date to exchange the new indicator in electronic files is July 1, 2006.

All versions of CommonLine (Releases 4, 5, and Common Record: CommonLine [CRC]) are updated to contain language regarding this new indicator. TG will adhere to this language, which states that it is the originator's responsibility to verify enrollment prior to making a direct disbursement to the borrower.

More information
For more information about this new CommonLine indicator or the procedure associated with it, contact Kyle Smith, TG assistant vice president of loan guarantee operations/data reporting, at (800) 252-9743, ext. 4894, or send an e-mail message to kyle.smith@tgslc.org.

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ED announces approval of FFELP Stafford and PLUS MPNs

On Tuesday, May 23, ED released Dear Colleague Letter (DCL) FP-06-08, announcing the OMB approval of the FFELP Stafford and PLUS Master Promissory Notes (MPNs). The DCL also provides guidance on the implementation of the newly approved forms.

These Stafford and PLUS MPNs have been approved without any changes; however, they do have new OMB expiration dates. The Stafford MPN is set to expire on February 29, 2008, while the PLUS MPN is scheduled to expire on March 31, 2008. ED states that FFELP participants should distribute the newly approved version of the MPNs as soon as possible by Web and should print hardcopy versions of the newly approved forms the next time that they are scheduled to replenish their paper stock.

Highly anticipated revised forms
The FFELP industry is working with ED to revise the Stafford and PLUS MPNs to reflect the recent changes to the loan programs brought about by the passage of the Higher Education Reconciliation Act of 2005 (HERA). Even though the MPNs have just been extended in their current format, the revised forms on which ED and the industry are working may be released sooner than the end of this extension period, as the industry is diligently working to make them available as soon as possible. TG Online will inform customers as soon as the revised versions are available.

Don't forget that until the revised versions of the MPNs are available, any FFELP participant who is distributing an MPN should also be distributing the appropriate Stafford or PLUS loan addendum reflecting the terms and conditions of the loan as a result of the passage of the HERA. You may access a PDF copy of the Stafford and PLUS addenda at www.tgslc.org/forms/frms_addenda.cfm.

More information
To access FP-06-08, visit www.ifap.ed.gov/dpcletters/FP0608.html.

To access copies of the newly approved (extended) MPNs, visit www.tgslc.org/forms/index.cfm.

For questions about MPNs, contact TG customer assistance at (800) 845-6267 or send an e-mail message to cust.assist@tgslc.org.

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