MASFAP spring Go With The Flows: Identifying the FFELP process flow that is right for your institution Presented by: Julie Meyer and Stephanie Wilson Missouri Department of Higher Education

MASFAP spring Agenda Players and roles Definitions Comparison of application flow options Suggestions for how to determine which flow is right for your school and borrowers

MASFAP spring Who Are The Players? The role of the school Determines its processes and partners/vendors (the decision maker) The role of the lender or disbursing agent Approves the prom note for disbursement Disburses funds according to the school’s instructions

MASFAP spring Who Are The Players? The role of the guarantor Provides insurance for the loan Is required to pay its Federal Fund a 1% default fee for loans guaranteed The role of the servicer Administers repayment processes

MASFAP spring Definitions Process flow: The path a loan follows; the steps involved in applying for a loan Origination: “Front-end” processes involved in making a new loan; includes School certification Borrower processes, such as signing the prom note Guarantee and approval processes Disbursement processes

MASFAP spring Definitions CommonLine: Industry initiative to develop and use common file layouts, terms, and processes Most commonly used version is CL4 Common Record: CommonLine (CRC) currently being tested and piloted within the industry Types of files: App send Change send Response Disbursement-related

MASFAP spring Definitions School-initiated process: School initiates the loan application by sending one of the following to the guarantor: CommonLine application send file School certification via the web Paper certification Borrower-initiated process: Borrower initiates the loan application via the web or telephone

MASFAP spring Definitions Guarantor flow: Loan data is sent to the guarantor first. The guarantor then notifies the lender, servicer, and/or disbursing agent. Lender flow: Loan data is sent to the lender first. The lender then notifies the guarantor.

MASFAP spring Definitions Guarantee and print (GP): School certifies the loan and sends a complete loan record to the guarantor. If non-serial, borrower must then sign a prom note electronically or via paper. Print and guarantee (PG): School sends a partial loan record to the guarantor. Borrower must complete missing information in order to guarantee the loan.

MASFAP spring Definitions Guarantee only (GO): All necessary information is provided before submitting for the guarantee, including prom note signature if non-serial. Other flows Print only (PO) Credit only (CO) Etc.

MASFAP spring What are the processing flow options?

MASFAP spring School-Initiated Guarantor GP Flow 1. School certifies loan via CL app send file or via web 2. Guarantor guarantees loan and forwards information to lender and/or disbursing agent 3. Non-serial borrowers complete prom note via paper or web 4. Disbursing agent approves loan for disbursement

MASFAP spring School-Initiated Guarantor GP Flow 1 School certifies loans; sends certification to guarantor 2 Guarantor guarantees loans; forwards information to lenders 3 If new borrower: lenders request signed prom note 5 Lenders notify guarantor of promissory note approval 4 New borrowers sign promissory note, return to lenders (paper or electronic)

MASFAP spring Recommended for schools: With sophisticated FAM Systems that are able to generate and send CommonLine App Send files That can provide most or all of the information needed to guarantee the loan Borrower/student name, SSN, DOB, etc. School, lender, and guarantor information Loan type and certification amount School-Initiated Guarantor GP Flow

MASFAP spring School-Initiated Guarantor PG Flow 1. School submits loan information via CL app send file or via web 2. Borrower completes application and prom note via paper or web 3. Guarantor guarantees the loan and notifies the lender and/or disbursing agent 4. Disbursing agent approves loan for disbursement

MASFAP spring School-Initiated Guarantor PG Flow 1 School submits loan information to guarantor 4 Guarantor guarantees loans 3 Borrowers provide missing information (provide lender, sign promissory note, pass credit check, etc.) 2 Guarantor prints & mails prom note OR makes available for e-sign on the web 5 Guarantor notifies lender or disbursing agent

MASFAP spring Recommended for schools: With FAM Systems that are able to generate and send CL App Send files PLUS loans or other loans not yet credit approved That cannot provide all of the information needed to guarantee the loan Borrower or student info not complete Lender or guarantor not known School-Initiated Guarantor PG Flow

MASFAP spring School-Initiated Guarantor GO Flow 1. School provides all necessary loan information via CL app send file or via web 2. Guarantor guarantees loan 3. Disbursing agent approves loan for disbursement (if valid prom note on file)

MASFAP spring Recommended for schools: Gathering all FFELP loan information at the time of packaging/awarding (e.g., lender) With a large serial population Using loan types not requiring a credit check Using the web for online entry and real-time guarantee School-Initiated Guarantor GO Flow

MASFAP spring School-Initiated Lender Flow 1. School certifies loan via CL app send file or via lender’s web product 2. Non-serial borrowers complete prom note via paper or via lender’s e-sign process 3. Lender/disbursing agent:  submits loan information to guarantor  approves loan for disbursement

MASFAP spring School-Initiated Lender Flow 1 School initiates loans with lender 2 Lender makes loan available to borrower online 4 Lender notifies guarantors of loan and prom note approval 3 Borrower completes – credit check performed, prom note signed

MASFAP spring Recommended for schools: Partnering strongly with one or two lenders; using that lender’s web loan delivery product ELM Credit checks E-sign That can provide most or all of the information needed to guarantee the loan Borrower/student name, SSN, DOB, etc. School, lender, and guarantor information Loan type and certification amount School-Initiated Lender Flow

MASFAP spring Borrower-Initiated Lender Flow 1. Borrowers apply for loans via lender’s website  Credit check performed  Application signed electronically 2. Lender sends school cert request; school certifies 3. Lender/disbursing agent submits loan for guarantee 4. Lender/disbursing agent disburses loan

MASFAP spring Borrower-Initiated Lender Flow 2 Lender requests school certification 3 School certifies online or via CL app send file 4 Lenders notify guarantor of loan and prom note approval 1 Borrowers apply for loans via lender’s website

MASFAP spring Recommended for schools: Strongly partnered with one lender or disbursing agent; school may be: Using one lender with multiple guarantors Using lender’s web loan delivery product ELM Heavily using PLUS or other loan types requiring credit checks Borrower-Initiated Lender Flow

MASFAP spring How do I determine which flow is right for my school?

MASFAP spring Factors to Consider How much information does my school gather at the time of awarding? Is the lender always known? Is the requested amount known? Are credit checks a part of the application process? Are credit approval rates generally high or low?

MASFAP spring Factors to Consider How reliant is my school on its FAMS? Is my FAMS capable of supporting CommonLine 4 (or 5)? Many vendors no longer support CL3 Common Record: CommonLine (CRC) still being piloted

MASFAP spring Factors to Consider How web-savvy is my student and/or parent population? Are they willing to: Initiate or complete an application and/or credit check on the web? E-sign?

MASFAP spring Factors to Consider Which vendor(s) does my school want to work with based on borrower benefits or other factors? ELM Private loan borrowing Upfront fees Rate relief programs during repayment

MASFAP spring Thank you for your time and attention!