Go With The Flows: Identifying the FFELP process flow that is right for your institution
description
Transcript of Go With The Flows: Identifying the FFELP process flow that is right for your institution
MASFAP spring 2006 1
Go With The Flows:Identifying the FFELP process flow that is right for your institution
Presented by:
Julie Meyer and Stephanie WilsonMissouri Department of Higher Education
MASFAP spring 2006 2
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 2006 3
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 2006 4
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 2006 5
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 2006 6
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 2006 7
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 2006 8
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 2006 9
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 2006 10
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 2006 11
What are the processing flow options?
MASFAP spring 2006 12
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 2006 13
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 2006 14
Recommended for schools: With sophisticated FAM Systems that
are able to generate and send CommonLine App Send files
<OR> 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 2006 15
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 2006 16
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 2006 17
Recommended for schools: With FAM Systems that are able to generate
and send CL App Send files<OR> PLUS loans or other loans not yet credit
approved<OR> 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 2006 18
School-Initiated Guarantor GO Flow
1. School provides all necessary loan information via CL app send file or via web
2. Guarantor guarantees loan3. Disbursing agent approves loan
for disbursement (if valid prom note on file)
MASFAP spring 2006 19
Recommended for schools: Gathering all FFELP loan information at the
time of packaging/awarding (e.g., lender)<OR> With a large serial population<OR> Using loan types not requiring a credit check<OR> Using the web for online entry and real-time
guarantee
School-Initiated Guarantor GO Flow
MASFAP spring 2006 20
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 2006 21
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 2006 22
Recommended for schools: Partnering strongly with one or two lenders;
using that lender’s web loan delivery product ELM Credit checks E-sign
<OR> 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 2006 23
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 2006 24
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 2006 25
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
<OR> Heavily using PLUS or other loan
types requiring credit checks
Borrower-Initiated Lender Flow
MASFAP spring 2006 26
How do I determine which flow is right for my school?
MASFAP spring 2006 27
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 2006 28
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 2006 29
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 2006 30
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 2006 31
Thank you for your time and attention!