Wendy Jerreld and Wood Mason| Nov. 2012 U.S. Department of Education 2012 Fall Conference PLUS Processing A to Z Session 17.

Wendy Jerreld and Wood Mason| Nov. 2012

U.S. Department of Education

2012 Fall Conference

PLUS Processing A to Z

Session 17

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Direct PLUS Loans from A to Z

• A bit of history• Federal Direct PLUS Loan basics• Federal Direct PLUS Loan eligibility

• School and Borrower

• Master Promissory Note• Credit Check• Entrance Counseling• Processing

• Disbursing• Repayment

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• National Defense Education Act (NDEA) of 1958 brought the National Defense Student Loan Program

• Higher Education Act of 1965 brought the Guaranteed Student Loan program that evolved into the Federal Family Education Loan Program

• 1980 Reauthorization of Higher Education Act included PLUS Loans for parents of undergraduate students

• A parent could borrow up to $3,000 for a dependent student without regard to parent income

• Loan limits removed under the Higher Education Amendments of 1992

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Federal Direct PLUS Loan - Basics• Origination fee of 4%

• Upfront Interest Rebate of 1.5% if earliest disbursement is before July 1, 2012

• Upfront Interest Rebate of 0% if earliest disbursement is on or after July 1, 2012

• Can be used to cover expected family contribution (EFC)

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Federal Direct PLUS Loan Basics - Eligibility • School Eligibility - General

• Must meet same eligibility requirements applicable to Direct Subsidized/Unsubsidized Loan program participation

• Reflected as program of participation of PPA/eCAR• Eligibility start/end dates displayed on COD• Option to participate or not…if you participate in the Direct

Subsidized/Unsubsidized Loan program you are NOT required to participate in the Direct PLUS Loan program

• Non-participation is NOT grounds for offering additional unsubsidized loan funds to a dependent student

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Federal Direct PLUS Loan Basics - Eligibility • Borrower Eligibility - General

• School responsible for determining borrower eligibility and loan amount

• Loan amount limited to Cost of Attendance (COA) less estimated financial assistance

• Borrower cannot have an adverse credit history• Borrower (and student for whom parent is borrowing) must

meet Title IV eligibility requirements, i.e., U.S. citizen or eligible non-citizen

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Federal Direct PLUS Loan Basics - Eligibility• Parent must be the student’s biological or adoptive

Mother or Father• Can be a stepparent if his/her income and assets are used to

calculate the EFC• A legal guardian is not an eligible borrower• Not eligible if delinquent on a debt to the Federal Government, or

is incarcerated • Must not have an adverse credit history• Must meet same basic eligibility criteria as an eligible dependent

student, i.e., citizenship status

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Federal Direct PLUS Loan Basics - Eligibility• A parent can borrow for multiple dependent students• Unique parent/dependent student “pair” for each PLUS

loan• Unique PLUS Request via StudentLoans.gov website• Unique Master Promissory Note (MPN) for each parent/student

“pair” • StudentLoans.gov will retain parent/student “pair” data for

subsequent PLUS loans

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Federal Direct PLUS Loan Basics - Eligibility• Graduate or professional student

• Eligible award year 2005-2006 and forward• School MUST determine eligibility for, and offer, Direct

Unsubsidized Loan first• Must meet Title IV eligibility requirements• Must be enrolled at least half-time in an eligible program at an

eligible school


Federal Direct PLUS Loan Basics – Master Promissory Note (MPN)

• Unique PLUS loan Master Promissory Note & Application (MPN)• NOT a subsidized/unsubsidized loan MPN

• Contains borrower and/or student data• PLUS MPN used for both parent and

graduate/professional student PLUS loan• Expires 10 years from date of receipt at COD provided a

disbursement has taken place on the linked loan within the first 12 months

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Federal Direct PLUS Loan Basics – Master Promissory Note

• Has “N” as MPN “type” in MPN Identification• Student SSN, “N,” award year, school direct loan school code,

sequence number• XXXXXXXXXN13GXXXXX001

• Links on the SSN, DOB, and first two characters of the first name of both borrower and student• Must use unique MPN for each parent/student “pair” if multiple

dependent students

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Federal Direct PLUS Loan Basics – Master Promissory Note

• Single-Loan MPN• When an endorser is linked to the PLUS Loan MPN • Linked MPN reflects a status of “Inactive-Endorser”• Expiration is one year from the date of receipt at COD provided a

disbursement has taken place on the endorsed loan within 12 months from the date of receipt at COD

• Any future loan will need a new MPN

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Federal Direct PLUS Loan Basics - Credit• Borrower must undergo a credit check• Must have borrower authorization to conduct a

credit check• Authorization included on Federal Direct PLUS Loan MPN• Authorization downloaded from COD website in online Credit

Check Request process• Hand written/faxed signed authorization

• Regardless of the credit result, you should originate the PLUS loan if borrower otherwise eligible • Only exception is when the borrower with adverse credit doesn’t

plan to pursue the PLUS loan

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Federal Direct PLUS Loan Basics - Credit• Initiated by

• COD upon receipt of loan origination record (LOR)• StudentLoans.gov via a Direct PLUS Loan request • The school online at COD website

• SSN is the key identifier for a credit check and change will trigger a new credit history

• “Hard hit” on the borrower’s credit history• Reported to credit bureaus as any other account

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Federal Direct PLUS Loan Basics - Credit• A credit check result will be used for 90 days if additional

activity occurs that would otherwise trigger a credit check during that period• An LOR with an “A” result will undergo no additional credit check

unless identifiers are changed

• Credit result can be • Accepted (A)• Declined (D) – indicates adverse credit history• Pending (P) – indicates an issue with the borrower ID/credit

bureau and COD will contact the school to remedy

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Federal Direct PLUS Loan Basics - Credit• Denial of one parent is sufficient to offer additional

unsubsidized loan funds to dependent student• Other parent does NOT have to undergo PLUS loan process• A credit result of Declined is not school specific and can be used

across schools

• School can determine to forego the Direct PLUS Loan process with knowledge, and documentation, of inability of Parent to borrow due to adverse credit or other exceptional circumstances• 34 CFR 685.203• DCL ID: GEN-11-07

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Federal Direct PLUS Loan Basics - Credit• A Direct PLUS Loan with a credit decision of Pending

(P) or Declined (D) can be modified• Pending (P) status indicates an issue between the borrower

identifiers submitted and those held by the credit bureau • Resolved with COD Customer Service Representative contact

with the school• Cannot change SSN on a PLUS loan not inactivated (reduced to

$0) or fully disbursed for more than 24 hours


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19 All personal identifiers including SSN, DOB, Name, and address, are fictitious and created for system test purposes


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XXXXXXXXX


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XXXXXXXXX


Federal Direct PLUS Loan Basics - Credit• PLUS loan with credit declination

• Can be accepted and displayed on COD but with an unacceptable credit decision

• Can’t disburse unless and until credit denial is cured by a successful appeal via COD or by borrower securing an endorser

• Initial declined credit status remains on the COD website and is NOT changed after a successful appeal or securing an endorser

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Federal Direct PLUS Loan Basics – Credit Appeal• Appeals…

• Appeal on extenuating circumstances or errant data from the Credit Bureau

• Appeal by submitting via fax the specific documents requested by COD

• Can start appeal process on StudentLoans.gov – COD CSR will contact borrower

• A successful appeal will result in a credit override response (Document Type CO) sent to the school

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Federal Direct PLUS Loan Basics - Endorser• Declined Federal Direct PLUS Loan can be remedied

with an acceptable endorser• Cannot be the student for whom the loan is intended• Endorser promises to pay outstanding principal balance, accrued

interest, any penalties, AND any collection • Endorser completes an Endorser Addendum, NOT another MPN• Paper or electronic via StudentLoans.gov

• Endorser undergoes a credit check• A “hard hit” credit inquiry same as borrower• Endorsement reported to credit bureau

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Federal Direct PLUS Loan Basics - Endorser• Endorser completes an electronic Endorser Addendum

via StudentLoans.gov • Must have FSA PIN to access StudentLoans.gov• Uses PLUS loan ID (if PLUS Loan originated by school) or the

Loan Reference Number (if borrower has completed a PLUS Request via StudentLoans.gov and no LOR on COD database)

• Accepted endorser sets endorsed loan amount• COD will send “CO” response to school if there is a PLUS loan

origination on the COD database or…• Subsequent “SP” response if no LOR on COD

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Federal Direct PLUS Loan Basics - Endorser• Endorser completes a paper Endorser Addendum

• Endorser can print a paper addendum, and obtain the mailing address, via StudentLoans.gov

• If no PLUS loan LOR on the system, no response from COD until PLUS loan LOR is submitted

• PLUS loan LOR will link to endorser addendum and COD will generate a “CO” response and send to school

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Graphic found in 2012-2013 COD Tech Ref, Implementation Guide, pg. 165


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Federal Direct PLUS Loan Basics - Endorser• Endorser data and endorsed amount displayed on the

COD loan information screen• Cannot disburse more than the lesser of the endorsed amount or

loan amount approved

• Endorsed amount is displayed on response from StudentLoans.gov

• CANNOT increase a PLUS loan with an endorser• Must create and originate a subsequent PLUS loan• A new credit history on borrower and endorser if last credit check

older than 90 days

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Federal Direct PLUS Loan Basics – Entrance Counseling

• Graduate & professional students requesting a PLUS Loan for the first time MUST complete graduate student PLUS loan entrance counseling • Completion of undergraduate entrance counseling doesn’t count

for PLUS• Cannot disburse graduate/professional student PLUS loan if

entrance counseling not completed• Available via StudentLoans.gov

• Not required to participate in e-counseling• Response to participating schools-results on COD website and Counseling

Report

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Federal Direct PLUS Loan Basics – Entrance Counseling

• Graduate/professional student PLUS loan entrance counseling offered at StudentLoans.gov • Results sent to COD• Schools are NOT required to use FSA online counseling

• Not the same as undergraduate entrance counseling

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Federal Direct PLUS Loan Basics - Processing• Same origination and disbursement requirements as

Federal Direct Subsidized & Unsubsidized Loans• Anticipated and/or actual disbursements required on origination • Anticipated and/or actual disbursements must total loan amount

on origination• Up to 20 actual disbursements• Report ACTUAL date of disbursements

• Interest accrues from date of disbursement

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Federal Direct PLUS Loan Basics - Caveat • School can deny origination, or originate a reduced award, on a case-by-case basis and MUST document the reason• Cannot limit the borrower on an across-the-board basis• 2012-2013 FSA Student Aid Handbook, Volume 3, pg. 86• 34 CFR 685.203


Federal Direct PLUS Loan Basics - Processing • PLUS loan processing can be done by batch via

submission of Common Record (CR)• CR response returned reflecting status of award, credit, and MPN• Disclosure Statement generated seven days prior to earliest

disbursement date reflected on an LOR with accepted credit

• Individually online at COD website• Virtually real-time processing including immediate editing of

submitted data

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Federal Direct PLUS Loan Basics - Processing • Federal Direct PLUS Loan Request by borrower at

StudentLoans.gov• 4-step process with instant credit result• Ability to begin appeal process if needed• School is responsible for determining eligibility and certifying that

the borrower is eligible for the loan and amount

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Daffina Duck000000000


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Daffy Duck’s Drafting Academy

00000000

Quackston Mallard Eider IIIQuackston Mallard Eider III


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Daffina Duck0000000003/12/1994


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Daffina Duck0000000003/12/1994


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Daffina Duck0000000003/12/1994


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Federal Direct PLUS Loan Basics - IMPORTANT • For Federal Direct PLUS Loans with an earliest

disbursement date on or after July 1, 2012, the loan has no eligibility for an upfront interest rebate!

• Schools that have Federal Direct PLUS Loans on the COD system with an incorrect rebate percentage MUST CORRECT THEM IMMEDIATELY• Interest rebate report posted weekly to your school newsbox that

identifies each errant loan • Call your COD CSR, or your Federal Loan School Support Team

Point of Contact for help with the report or fixing errant loans

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Daffina Duck0000000003/12/1994

Daffy Duck’s Academy of Duck Tail Barbering000000000P13G00000001‘12-’13


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Daffina Duck0000000003/12/1994

Daffy Duck’s Academy of Duck Tail Barbering000000000P13G00000001‘12-’13

XXXXXXXXX XXXXXXXXXXXXXXXXXX XXXXXXXXXP13GXXXXX001 Daffy Duck University


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Federal Direct PLUS Loan Basics - Disbursement• Assure eligibility of the dependent student• Unless otherwise directed, any credit balance is given to

the parent• Adhere to the normal and required notifications

• 14-day cancellation request/credit balance

• The disbursement data MUST be accepted by COD within 30 days of the actual date of disbursement

• You must report the ACTUAL DISBURSEMENT DATE• Business office date that funds were credited to the student

account must match actual disbursement date reported to COD

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Federal Direct PLUS Loan Basics - Disbursement• You may increase a PLUS loan established on the COD

database • Change record if software allows • New PLUS loan for the difference requested

• But you cannot increase an established PLUS loan if in receipt of a subsequent adverse credit decision• If the established PLUS loan is NOT fully disbursed you can fully

disburse it• Alternatively, reduce remaining disbursements to $0 and offer

student unsubsidized funds up to their eligibility for grade level and COA using disbursed unsubsidized loan funds as estimated financial assistance

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Federal Direct PLUS Loan Basics - Disbursement• If the established PLUS loan has been fully disbursed…

• Offer the dependent student additional unsubsidized loan funds up to their eligibility appropriate to their grade level and COA reflecting the disbursed PLUS loan funds as estimated financial assistance

• If awarding additional unsubsidized loan funds you must make sure your incoming LOR reflects the award as such

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Federal Direct PLUS Loan Basics - Disbursement• If an established PLUS loan with a declined credit

decision is remedied AFTER the dependent student has received an additional unsubsidized loan • If not disbursed the unsubsidized loan must be reduced to $0• If partially disbursed you MUST cancel any pending

disbursements before awarding the PLUS loan• Disbursed additional unsubsidized funds must be applied as estimated financial

assistance when calculating the now approved PLUS loan amount

• Reduce the disbursed additional unsubsidized loan funds, and the unsubsidized loan itself, to $0 and disburse the PLUS loan in full• Parent and student decision

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Federal Direct PLUS Loan Basics - Repayment• Deferment and Forbearance options same as

subsidized/unsubsidized loans• Parent can request to defer repayment while dependent student, or

parent, is enrolled at an eligible school more than half-time• Student does not need to request in-school deferment

• Parent can request to defer repayment for an additional six months from the date the dependent student ceases to be enrolled on at least a half-time basis

• Repayment options much like subsidized/unsubsidized loan borrowers• Income-Based Repayment (IBR) and Income-Contingent

Repayment (ICR) plans are NOT an option for parent PLUS loans

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QUESTIONS?

Wendy Jerreld and Wood Mason| Nov. 2012 U.S. Department of Education 2012 Fall Conference PLUS Processing A to Z Session 17.

Documents

direct plus loans

plus loan unique plus

direct unsubsidized

linked loan

future loan

endorsed loan

subsequent plus loans

school direct loan school