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Federal Updates

Shoptalk Online 442, February 19, 2008

Federal Updates

Taking a closer look at the final rules: Affirmative confirmation and the loan cancellation notice

When the Stafford MPN was first implemented, the Department of Education (ED) gave schools the option of using an "active" or a "passive" confirmation process prior to crediting Title IV loan proceeds to the student's school account. Which process the school chooses to implement determines the timelines for certain activities, including sending the borrower notice of credit to the student's school account and allowing the borrower to cancel loan funds as a result of that notice. While schools still have the option of implementing an active or passive confirmation process, the final rules will change the notification timelines for schools that choose to use a passive confirmation process.

What is affirmative confirmation?
By "affirmative, or active, confirmation" we mean the process by which a school obtains written confirmation of the types and amounts of Title IV loans under a Master Promissory Note (MPN) that a student wants for an award year before the school credits the student's school account.

Requiring the student to return an award letter constitutes an active process. The preamble to the final rules also provides, as an example of an active process, the practice of a school sending the student to a secure website to confirm the types and amount of loans the student has been offered, thereby informing the school that the student accepts the loans. On the other hand, an example of a passive confirmation process might be a process which a school sends an award letter, telling the student that unless the school hears otherwise, the types and amounts of loans provided in the award letter will be certified for the student.

In many cases, the school's decision to use an active or passive confirmation process depends on the unique characteristics of its student body and school processes, as well as the need to balance student convenience with consumer protection. In other words, while we want to make financial aid processes as seamless and straightforward as possible, we are also mindful of the need to provide the borrower as much control as possible over the types and amounts of loan funds he or she borrows.

As an additional safeguard in this process, regardless of whether it chooses to use passive or active confirmation, a school is also required to notify the borrower each time it credits his or her account with Title IV loan funds. The only exception to this rule is in the case of a post-withdrawal disbursement of loan funds that are applied toward the student's school charges. This notice provides the student or borrower with a final opportunity to change his or her mind about borrowing the loan funds, as well as instructions for returning those funds if they are no longer needed or wanted.

Rules for active confirmation
Schools using active confirmation will be unaffected by the new rules. These schools must still:

  • Send the notice of credit to the student's school account within 30 days before and 30 days after the school credits the account
  • Give the borrower 14 days to cancel the loan funds as a result of the notice of credit to the student's account

Rules for passive confirmation
ED has imposed greater requirements upon schools that choose to use a passive confirmation process, since students at these schools face a heightened possibility of unintentional or unnecessary borrowing. For those students, the final rules put into place additional protection by revising the loan cancellation notice. Specifically, those schools will be required to:

  • Send the notice of credit to the student's school account within 30 days before and 7 days after the school credits the account
  • Give the borrower 30 days to cancel the loan funds as a result of the notice of credit to the student's account

For more information
This change will be effective July 1, 2008, unless the school chooses to implement the change earlier. We encourage our readers to review the preamble discussions to the proposed and final rules. These documents are available, respectively, on line at (see page 44631) and at (see page 62020).

If you have any questions, please contact TG customer assistance at (800) 845-6267, or send an message to

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ED releases FY 2006 draft cohort default rates

FY 2006 draft electronic cohort default rate (eCDR) notification packages were transmitted via the Student Aid Internet Gateway (SAIG) to domestic Title IV-eligible schools that are enrolled in eCDR on February 11, 2008. Domestic schools that are not enrolled in eCRR will not receive notification packages from ED, but may download their cohort default rates and accompanying materials at

Foreign schools will be mailed their notification package as an encrypted Portable Document Format (PDF) file on a CD-ROM. Foreign schools that receive a CD-ROM will also receive a separate letter providing the password needed for decryption.

Schools are allowed five business days to report any technical problems to ED's Default Prevention and Management office at

If a school identifies any data it believes to be inaccurate, it may challenge its draft CDR and request a verification and correction of errors. Challenges of FFELP data must be submitted to the guarantor responsible for managing that data within a 45-day timeline. The timeline is scheduled to begin on February 20, 2008, for domestic schools. For foreign schools, the time period begins on the receipt date of the notification letter and password, whichever is latest.

ED also provides every school with 30 calendar days to submit a participation rate index challenge to ED's Default Prevention and Management (DPM) division. A participation rate index challenge is intended to prevent potential adverse consequences anticipated by a school based on a high official CDR; but these challenges are based on a low number of student loan borrowers rather than on an allegation of inaccurate data.

Submitting incorrect data challenges to TG
Beginning with FY 2006 draft CDR, schools will have the option of submitting and processing certain CDR challenge and adjustment requests via the electronic Cohort Default Rate Appeals process (eCDR Appeals), a Web-based application available February 11, 2008. A link to the system will be established on the Default Prevention and Management website available at Pertinent user guide information will be provided at the same location.

The eCDR Appeal facilitates the exchange of information between parties for three of the challenge/adjustment processes: Incorrect Data Challenge (IDC), Uncorrected Data Adjustments (UDA), and New Data Adjustments (NDA). The application allows schools to electronically submit these challenges and adjustment requests during a CDR cycle, and allows the guaranty agency and Federal Student Aid (FSA) personnel to electronically view and respond to these challenges and adjustment requests. The application tracks the entire life cycle of each challenge/adjustment request from the time the case is created until the time a decision is made and the case is closed.

This electronic process will eventually replace the paper process of challenging and appealing CDRs for all Title IV schools, foreign and domestic. At this time, the use of eCDR Appeals is optional for schools. The guaranty agency is required to respond to a school's IDC submission in the format used by the school.

ED released an electronic announcement on January 24, 2008, which included an attachment providing a summary of important features the system will offer, focusing on the IDC process. The ability to process UDA and NDA data will be available Fall 2008, for the official FY 2006 CDR cycle. You can access FSA's electronic announcement and attachment at

Mailing IDC Challenges
Schools may mail IDC challenges to TG at one of the following addresses:

For regular mail:
Attn: Compliance Analyst
P.O. Box 83100
Round Rock, TX 78683-3100
For overnight delivery services:
TG Distribution Center
Attn: Compliance Analyst
3500 Wadley Place, #303
Austin, TX 78728-1244

Cohort Default Rate Guide
ED's Cohort Default Rate Guide (Guide) is Web-based and can be accessed via the DPM website. Additionally, the Cohort Default Rate Guide Quick Reference (Quick Reference) is available as an easy-to-understand resource that provides a high-level overview of the CDR process. You can access both the Guide and Quick Reference at

For questions about the FY 2006 draft CDR challenge procedures, contact Ken Johnson at (800) 252-9743, ext. 4701, or send an message to

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Latest volume of the 2008-09 FSA Handbook now online

ED has released volume 1, Student Eligibility, of the new 2008-09 Federal Student Aid Handbook (FSA Handbook). In total, three volumes of the latest FSA Handbook have been released, including:

  • The Application and Verification Guide
  • Volume 1: Student Eligibility
  • Volume 2: School Eligibility and Operations

The current volumes are available on TG Online at Other volumes will be posted as they are released. Once all the volumes of the 2008-09 FSA Handbook have been released, TG will provide a single downloadable file encompassing all of the volumes. Watch future editions of Shoptalk Online for details.

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