Volume 1 Issue 4 July 2010
100 Airport Road
Frankfort, KY 40601
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In This Issue
A Message from our Executive Director ............ 2 r ............2
FFELP Loan Issues .......................................... 3-6
KHEAA’s Net Price Calculator .......................... 7
Private Loan Student Loan Marketplace ..........8
J uly is the beginning of a new era in the administration of
federal student loan programs with implementation of 100
percent Direct Lending. In observance of the passing of the
Federal Family Education Loan Program (FFELP) into the
pages of history, I am extending our sincere appreciation
to our school and lender partners for your tremendous
support. For the last four decades, we have been honored
and privileged to be your local partner in helping students
and families pursue a college education or technical training.
Without your support, fulﬁlling our public-purpose mission
would not have been possible.
Many of you, along with much of our staff and management, have dedicated entire careers
to assisting students in pursuing their educational dreams. FFELP was a resounding
success because of you! Your accomplishments are something for which I hope you will
be very proud!
As we look to the future, we reafﬁrm our commitment to our public-purpose mission and
are conﬁdent that we will provide quality programs and services for many years to come.
Like you, helping students and families pursue higher education will remain at the heart
of everything we do. Thank you again for your friendship and support.
Monday, July 5, 2010
Monday, September 6, 2010
FFELP LOAN PROCESSING AND DISBURSEMENT ISSUES
In a previous KHEAAPartners message on the termination of new
lending in the FFEL Program, we provided information regarding
closing dates for schools that use our loan origination, disbursement
and guarantee services. To further assist schools in the transition to
Direct Lending, we are providing additional information regarding
the termination of new FFELP lending and the processing and
disbursement of loans that we guarantee, originate and disburse.
For this purpose, we are utilizing selected portions of the “Direct
Loan Transition School Q&A” compiled and published by the
National Council of Higher Education Loan Programs (NCHELP)
and reprinted by NASFAA. The entire Q&A is available on the
NCHELP Direct Loan Transition Web Page.
For clarity, we have provided headings for the Q&As below. The ﬁrst group of Q&As addresses general issues regarding the
termination of new FFELP lending. The remaining groups address issues regarding hold and release, increases, cancellations,
refunds, reissues, reinstatements, reallocations, schools with set disbursement days, and entrance and exit counseling. Please
note that answers with an asterik (*) denote responses provided by the Department of Education and answers with two asteriks
(**) denote information speciﬁc to KHEAA, KHESLC, or the Alabama College Loan Program (ACLP). If you have any
questions or concerns regarding the Q&As, please contact KHEAA loan personnel at 800-617-2699.
• Question: What is the triggering event of the provisions from the Health Care and Education Reconciliation Act of
• Answer: The legislation terminates the authority to make or insure new loans under FFELP after June 30, 2010, but does
not totally eliminate the FFEL Program. The inability to make new FFELP loans is triggered off of the date the loan is
ﬁrst disbursed by the lender. In order for a FFELP loan to be made, the ﬁrst disbursement of the FFELP loan must occur
prior to July 1, 2010 (including for borrowers subject to 30-day delayed delivery). (NOTE: The date on which a loan is
certiﬁed is not relevant; the date on which the loan is ﬁrst disbursed is key).
• Question: Will FFELP loans made prior to July 1, 2010, be serviced as FFELP loans?
• Answer: Yes, all existing FFELP loans and new FFELP loans made prior to July 1, 2010, will continue to be services as
FFELP loans throughout the remainder of the life of the loans.
• Question: According to regulations and guidance in the FSA Handbook, a student (or parent borrowing on behalf of
a dependent student) may not receive a Direct Loan and a FFELP loan for the same period of enrollment. Given the
transition to Direct loan only, is this guidance still applicable?
• Answer: No. The legislation deleted §454(a)(4) of the Higher Education Act, which prohibited students (and parents)
from receiving loans under both the FFELP and Direct Loan programs for the same period of enrollment. This statutory
change supersedes the regulation and FSA Handbook guidance.
• Question: If a school certiﬁes a FFELP loan prior to June 30, 2010 and schedules the ﬁrst disbursement to occur prior to
July 1, 2010, but schedules the second disbursement to occur on or after July 1, 2010, can the FFELP loan still be made?
- School certiﬁes loan on June 15, 2010
- 1st disbursement is scheduled for June 20, 2010
- 2nd disbursement is scheduled for July 15, 2010
• Answer: Yes. As long as the ﬁrst disbursement on the FFELP loan occurs prior to July 1, 2010, it is a valid loan even if
the second (and any subsequent) disbursement is scheduled to occur on or after July 1, 2010.
**Subsequent disbursements will be made according to each individual lender’s preferences. As a reminder for KHESLC
and the ACLP: For FFELP loans that were ﬁrst disbursed by April 9, 2010, KHESLC and ACLP will fund subsequent
disbursements regardless of the date of the ﬁnal scheduled disbursement. For FFELP loans that were ﬁrst disbursed
between April 20, 2010 and June 30, 2010, KHESLC and ACLP will fund subsequent disbursements made no later than
September 30, 2010.
• Question: If a school certiﬁes a FFELP loan prior to July 1, 2010 but both the ﬁrst and second disbursements are scheduled
to occur on or after this date, will the loan be guaranteed or rejected?
• Answer: The loan will be rejected (with an 081 Lender ineligible error code) and will need to be certiﬁed as a Direct Loan
since the authority to originate FFELP loans with a ﬁrst disbursement scheduled on or after July 1, 2010 will cease.
For Schools That Use Hold and Release Functions
• Question: What happens if loans are certiﬁed and guaranteed prior to July 1, 2010, but the school wishes to “hold” the loans
for ﬁrst disbursement to occur on or after July 1, 2010?
• Answer: The inability to make a FFELP loan is triggered off of the date the funds are ﬁrst disbursed by the lender. If the
ﬁrst disbursement of the loan would not occur on or after July 1, 2010 (meaning in this case that the ﬁrst disbursement
would not be released until on or after July 1, 2010), the FFELP loans cannot be made. The school must certify a Direct
Loan for the student.
**Any 1st disbursements in “hold” status must be released before June 28 to ensure that they will disburse before July 1,
2010. KHEAA will run queries of disbursements still in “hold” status on June 28 and will contact schools to see if those
disbursements should be released or cancelled.
• Question: A school certiﬁes a FFELP loan prior to July 1, 2010 and the ﬁrst disbursement date is made prior to July 1,
2010. After July 1st, the student decides more money is needed and the school determines that the student is eligible for
an increased loan amount. Can the school increase the existing FFELP loan or does the school have to submit a new loan
request through the Direct Loan program for the increased amount?
• Answer: If the school is able to work with its trading partners to increase the existing FFELP loan (e.g., via a CommonLine
change transaction), the additional loan funds can be processed because the ﬁrst disbursement of the FFELP loan was made
prior to July 1, 2010. However, if the school is unable to increase the existing FFELP loan and new loan certiﬁcation is
needed, the new loan must be originated through the Direct Loan Program.
**A loan must have an existing disbursement that has not disbursed in order to increase the loan amount.
• Question: A FFELP loan is guaranteed for $2000 and the ﬁrst disbursement is made prior to July 1, 2010. On or after July
1, 2010 the school determines that the borrower is eligible for additional loan funds and sends a request to increase the loan
amount by $500. Can the increased amount be added to the loan?
• *Answer: Yes. A school may request an increase if the lender’s
system treats this as an adjustment to an existing loan that was
ﬁrst disbursed prior to July 1, 2010 or if the lender treats this
kind of “positive” adjustment as a new loan that requires a new
certiﬁcation by the school, only if the ﬁrst disbursement of that
supplemental loan is also ﬁrst disbursed prior to July 1, 2010.
**A loan must have an existing disbursement that has not
disbursed in order to increase the loan amount.
• Question: What happens if a ﬁrst disbursement that is scheduled to occur prior to July 1, 2010 is cancelled prior to
disbursement but the school wishes to keep the second disbursement that is scheduled to occur after July 1, 2010? Can
the FFELP loan still be made?
• Answer: No. The FFELP loan can no longer be made because the cancellation of the ﬁrst disbursement would result in
the FFELP loan being ﬁrst disbursed on or after July 1, 2010, which cannot occur based on the legislative changes. The
school would need to certify a Direct Loan for the student.
• Question: The ﬁrst disbursement of a FFELP loan is made prior to July 1, 2010, but the school subsequently returns the
disbursement and asks to have the ﬁrst disbursement reissued. Based on the timing of the school request, the lender will
have to reissue the ﬁrst disbursement on or after July 1, 2010. Will the lender be allowed to reissue this disbursement of
the FFELP loan?
• *Answer: No. The school must originate a new loan under the Direct Loan program. The Department of Education has
stated, for purposes of the transition from FFELP to the Direct Loan program, that any rescheduled ﬁrst disbursement
(the actual transfer of funds to the school that are delivered) of a FFELP loan must take place prior to July 1, 2010 for the
remainder of the loan to be made (disbursed) under FFELP.
• Question: The school schedules a ﬁrst disbursement of a FFELP loan prior to July 1, 2010, but before the disbursement
is made the school informs the lender to cancel that disbursement. If the school later needs to reinstate that disbursement
can the lender make that disbursement or must the school originate a new loan under the Direct Loan program?
• *Answer: If the lender is able to make the disbursement prior to July 1, 2010, the lender may choose to do so. The
Department of Education has stated that a FFELP lender can disburse a FFELP loan if a cancelled ﬁrst disbursement
(cancelled prior to or after disbursement) is rescheduled and the rescheduled disbursement can be made prior to July 1,
2010. If that is not possible, the school must originate a new loan under the Direct Loan program.
• Question: If a FFELP Stafford loan is ﬁrst disbursed prior to July 1, 2010, and later a reallocation of funds is needed, is
• *Answer: Yes. A reallocation between the subsidized and unsubsidized loans may take place on or after July 1, 2010,
if both the subsidized and unsubsidized loans were ﬁrst disbursed before July 1, 2010 and both those loans stand (were
not cancelled but rescheduled and disbursed prior to July 1, 2010). However, if the Stafford Loan ﬁrst disbursed to the
borrower was only a Subsidized Loan or only an Unsubsidized Loan, such a reallocation may not take place after July 1,
**Please note that any reallocation involving the creation of a loan type after July 1, 2010 will not be allowed. This
includes changing a loan completely from SF to SU or SU to SF.
• Question: The ﬁrst disbursement of a FFELP loan is made prior to July 1, 2010. A second
disbursement is scheduled to be made on August 25, 2010. The school returns the ﬁrst
disbursement on July 15, 2010. Will the lender be allowed to make the second and any
subsequent disbursements of the FFELP loan?
• *Answer: No. The ﬁnal ﬁrst disbursement (transfer of funds to the school ) must take place
prior to July 1, 2010 for the remainder of the loan to be made (disbursed) as a FFELP loan.
If a cancelled ﬁrst disbursement can be rescheduled and the rescheduled disbursement takes
place prior to July 1, 2010, the remaining FFELP disbursements may take place. However,
the ﬁnal ﬁrst disbursement (original or rescheduled) also must “stand” for the remaining
disbursements to be made as FFELP disbursements. In this case, the ﬁrst disbursement
meets the pre-July 1, 2010 requirement, but is cancelled after July 1, 2010. Under these
circumstances, the lender must cancel the second and all subsequent disbursements of the
**When a school cancels a 1st disbursement on KLAS or Zip Access and the remaining
disbursements are scheduled on or after July 1, the school must cancel the remaining
disbursements. When KHEAA cancels the ﬁrst disbursement at the request of a school or
borrower, KHEAA will cancel future disbursements.
• Question: The ﬁrst disbursement of a FFELP loan is made prior to July 1, 2010. The second disbursement is made on
August 5, 2010. The school returns and cancels the ﬁrst disbursement on August 15, 2010 after the second disbursement
is made. How should the school handle this situation?
• *Answer: If a school must return and cancel the ﬁrst disbursement after June 30, 2010, it must also return any other funds
for the loan that have been disbursed to the school and cancel any other pending disbursements for the loan. The school
may then be able to originate the loan under the Direct Loan program.
**KHEAA will monitor this scenario when possible and notify the school if additional funds need to be returned.
• Question: If the ﬁrst disbursement of a FFELP loan made prior to July 1, 2010 is returned on or after July 1, 2010, must
subsequent disbursements of the loan also be made prior to July 1, 2010 be returned?
• Answer: No.
For Schools That Only Disburse on Certain Days of the Week
Question: If a school certiﬁes a FFELP loan prior to July 1, 2010 and the ﬁrst disbursement date is scheduled to occur prior to
this date, but because of the school’s disbursement preferences with KHEAA, the next scheduled disbursement day available
to that school is on or after July 1, 2010, can the loan be disbursed to the school? (For example, a school has requested to have
their disbursements occur only on Thursdays but June 30, 2010 is a Wednesday.)
Answer: No, KHEAA could not make the disbursement since it would disburse on or after July 1, 2010.
**KHEAA will attempt to monitor this scenario and will notify the school of any adjustments that need to be made.
Entrance and Exit Counseling
• Question: Do FFELP Stafford and student PLUS loan borrowers need to complete entrance counseling prior to their
receipt of any Direct Stafford or student PLUS loans?
• Answer: According to §685.304(a)(1) & (2), entrance counseling is not required prior to the delivery of a ﬁrst Direct
Stafford Loan if the student borrower has previously received a Federal Stafford or SLS loan, or prior to the delivery of a
ﬁrst Direct PLUS loan if the student borrower has previously received a Federal student PLUS loan.
• Question: Are borrowers with both FFELP and Direct loans required to complete both FFELP exit counseling and Direct
loan exit counseling?
• Answer: Not necessarily. The Department has previously stated that borrowers with loans from both programs may
complete either FFELP or Direct loan exit counseling, provided the counseling materials addressed the required elements
from both programs.
Thank you again for your tremendous support. We look forward to working with you to serve students for many years to come.
Please don’t hesitate to contact us if you need any assistance with the transition. 800.928.8926
Net Price Calculatortm
The Higher Education families that the institution methodologies and the various
Opportunity Act (HEOA), is affordable. Customized to federal, state and institutional
mandates institutions receiving the institution’s ﬁnancial aid award calculations annually for
Title IV funds must have a net packaging policy, the calculator you!
price calculator available to provides an accurate estimate
ﬁrst-time, full-time students on of the student’s aid packages The ThinkAhead Net Price
their website by October, 2011. that can vary depending on Calculator will match your
multiple variables including: institution’s expected net price
To help schools in the SASFAA ﬁnancial background, academic results through three easy
region have more options when performance, geographical steps:
it comes to which calculator location, etc. Our calculator • discovery process that
to use, KHEAA has partnered can be used by institution’s engages your ﬁnancial aid
with Studentaid.com to offer addmisions and ﬁnancial ofﬁce
the ThinkAhead Net Price aid ofﬁce staff to calculate • create sample student
Calculator KHEAA Pilot estimated ﬁnancial aid for proﬁles to estimate award
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• verify and calibrate the
The KHEAA Pilot Program Our calculator is able to results
allows you to have a ThinkAhead determine eligibility for each
Net Price Calculator built to appropriate federal, state and To learn more about the choices
your speciﬁcations and pay institutional aid program, as well Title IV institutions face and
nothing for the ﬁrst year. (A as ensuring program eligibility how using the ThinkAhead Net
set-up and yearly fee will be requirements and packaging Price Calculator can beneﬁt both
assessed after the initial year.) techniques accurately reﬂecting the institution and prospective
your institutions policies. students, contact your KHEAA
KHEAA’sThinkAhead Net Price representative to sign up for
Calculator includes an effective Perhaps best of all the Think a free ThinkAhead Net Price
enrollment management tool Ahead Net Price Calculator Calculator demonstration.
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TO SCHEDULE A NET PRICE CALCULATOR
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OR CALL 866.638.7524
Student Loan Marketplace
PRIVATE LOAN PREFERRED LENDER LISTS
Under HEOA Section 601, you choose their lender based on brand (instructions provided).
have limited options to help recognition without comparing In addition to serving as your
students with private loans and loans and beneﬁts. Students may private loan preferred lender list,
comply with onerous Preferred waste thousands of dollars in the Marketplace also provides:
Lender Arrangement regulations. interest payments. • Meaningful information that
students need to make an
To help you decipher and comply The third option you have is to informed decision.
with the new private loan offer no guidance on private loans. • A straightforward path
requirements, the Student Loan Without help from you, students towards compliance with
Marketplace provides meaningful are left to ﬁnd their own funding Section 601 regulations.
information for your students and from search engines and direct-to- • Required disclosures and
offers you an easy path to HEOA customer marketing which can be Code of Conduct.
compliance. misleading. • Standardized lender selection
The ﬁrst option under HEOA The fourth option is to have a • One click to download and
Section 601 involves the RFP third-party lender list such as print annual report
process and extensive Section 601 Marketplace. Setting up the • Virtually no increase in
disclosures. You must keep up- Marketplace as your Preferred school burden.
to-date with the changing lending Lender Arrangement is simple: • Obtained opinion from
landscape. • Add the suggested link to outside legal counsel that
your website directing your schools using Marketplace
Option two is to have a preferred students to the Marketplace. are compliant.
lender list that simply provides • Provide Overture with your • Opinion that school is
a list of all lenders serving the Code of Conduct. exercising Duty of Care.
school in the past 3 - 5 years. • Once a year your school’s
This option presents students with Annual Report is prepared For more information about
an overwhelming list of lenders for you to mail to the Marketplace, please contact your
and it is likely that students will Department of Education KHEAA representative or call
Know. Compare. Decide.
E nhanced KHEAA.com
Will Succeed GoHigherKY.org
Beginning July 1, KHEAA will replace GoHigherKY.org with a new feature-packed kheaa.com. Enhancements to kheaa.
com began in April, with even more improvements scheduled in the upcoming months.
The change is being made to provide a single source for information about college planning and student ﬁnancial aid.
The “Students and Parents” section of kheaa.com now
includes information formerly under GoHigherKY.
org’s tabs for:
• Planning for College
• Selecting a College
• Paying for College
On the KHEAA home page, click on Students and
Parents. A list of links will appear on the left-hand side
of the page.
In addition to the new links listed above, you’ll ﬁnd
detailed information about:
• Grant Programs for Kentucky Residents
• Federal Grant Programs
• Scholarship Programs for Kentucky Residents
• Work-Study Programs
• Student Loan Programs
• Conversion Scholarship/Loan Programs
• Tuition Waiver Programs
• Savings/Prepaid Tuition Programs
• Money Management
• Your KHEAA College Connection Newsletters Some publications are available only online, while others may be
• Publications ordered using an online ordering page.
Similar improvements have been made to the “Adult Students may continue to use their GoHigherKY.org account user
Learners” section of kheaa.com. It also discusses name and password to access their information via the
why adults might want to consider going to college, federal MyFSA website at https://studentaid2.ed.gov/xap_pack/
possible careers and resources speciﬁcally for adults. Default.asp. With MyFSA, students can create a
The Publications links will take you to KHEAA’s personal portfolio to store and retrieve their ﬁnancial aid
college-planning publications, which include: information, add colleges they are interested in attending, explore
careers and much more.
• The College Circuit
• Getting Started (for high school freshmen)
• Getting Set (for high school sophomores) KHEAA appreciates the support of GoHigherKY.org over the years
• Getting Ready (for high school juniors) and with the implementation of new features at kheaa.com, we hope
• Getting In (for high school seniors) to provide even better services to Kentuckians.
• Adults Returning to School
• Affording Higher Education (information about If you have any questions or comments regarding the website,
• some 5,000 sources of ﬁnancial aid for Kentucky please call our Customer Care staff at 1.800.928.8926 by
• students) choosing “0” at the options menu.
• It’s Money, Baby (ﬁnancial literacy)