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Session # 7. Federal Loan Servicing Update. Sue O’Flaherty | Dec. 2013 U.S. Department of Education 2013 FSA Training Conference for Financial Aid Professionals. Meet the Servicer Panel. 2. Servicing Team Updates Looking Back Program Updates Challenges and Improvements - PowerPoint PPT Presentation


  • Sue OFlaherty | Dec. 2013U.S. Department of Education2013 FSA Training Conference for Financial Aid ProfessionalsFederal Loan Servicing UpdateSession # 7

  • *Meet the Servicer Panel

    Dan Weigledweigle@pheaa.org

    Brett Lindquistblindquist@glhec.org

    Jim HarrisJames.Harris@nelnet.netBob Leary Robert.K.Leary@salliemae.com

  • Servicing Team Updates

    Looking BackProgram UpdatesChallenges and Improvements

    Delinquency Support Activities

    Looking Forward On the Horizon


  • * Direct Loan Servicing Center (ACS) Decommissioned*Loan Servicing UpdatesDirect Loan Servicing Center (ACS) closed beginning October 1, 2013.Effective November 16, 2013, all Direct Loan Servicing Center support and messaging was no longer available. The Direct Loan Servicing Center phone number, e-mail address, and website are inaccessible.

    A borrower must make payments to and communicate solely with his or her new federal loan servicer.

    A borrower can access NSLDS to identify the servicer to which the borrower's loans have been transferred.


  • To seed the NFP servicers, we transferred borrower accounts that were assigned to the Direct Loan Servicing Center (ACS).When we transfer a student or parent borrower to a servicer, the new servicer will correspond with the borrower after the transferred loans have been fully loaded to the system.As of April 2013 (due to the Sequestration), the implementation of additional NFPs was placed on hold. All Direct Loan accounts previously assigned to COSTEP, EDGEucation Loans, EdManage, and KSA Servicing were successfully transferred to appropriate NFP servicer partner by the end of September 2013.

    *Loan Servicing Updates Not-For-Profit (NFP)

  • Federal Loan Servicers All Federal Loan Servicers must comply with legislative and regulatory requirements.Through the multi-servicer borrower-centric approach schools may experience different processes and procedures offered by the servicers. Schools see many; but Borrowers see ONE! Together with our servicers, we work to serve borrowers and schools as efficiently as possible to: Educate and inform borrowers of the tools and options available to assist in the management of their student loans.Offer multiple repayment options tailored to borrower preferences (i.e. online payments, ACH, check, etc.).Provide self-service tools for borrowers and options to receive bills and/or correspondence electronically.


  • *Loan Servicing Updates Split ServicingBorrowers with federally-owned loans serviced by more than one federal loan servicer.Ongoing processes to resolve situations where a borrowers federally-held loans are assigned to two or more federal servicers. Federally-owned and commercial loans may still be split among servicers.Consolidation sometimes viable option, but not in all circumstances. PSLF Loans are transferred to FedLoan/PHEAA.


  • *Loan Servicing Updates Split ServicingOctober December 2013During the October December 2013 timeframe, we plan to transfer accounts of borrowers whose loans are split across FedLoan, Great Lakes, Nelnet, and Sallie Mae.We determine the servicer to which a borrowers account (or accounts) will be based on the number of federally-owned loans each servicer services for the borrower or, if the number of loans is equal across servicers, the total dollar amount of the loans. The borrowers accounts will be transferred to the servicer that services the most loans or the highest total dollar amount.


  • *Loan Servicing Updates Repayment CampaignThe Department launches an Income-Driven Student Loan Repayment Campaign

    President Obama called for the Department to do more to ensure that all federal student loan borrowers are aware of affordable repayment options.Beginning in November, we contacted borrowers to ensure they have the information they need to choose the right repayment option for them.









    In SchoolIn GraceDefermentForbearanceIn RepaymentDefaulted





  • *Loan Servicing Updates Repayment CampaignIncome-Driven Student Loan Repayment Campaign (cont.)

    The campaign targets borrowers:whose grace periods will end soon borrowers who have fallen behind on their student loan paymentsborrowers with higher-than-average debts, and borrowers in deferment or forbearance because of financial hardship or unemploymentThe e-mails, which will be distributed through mid-December, will reach approximately 3.5 million federal student loan borrowers

    Borrowers will be prompted to access resources designed to educate them on repayment options, apply for an income-driven repayment plan, or contact their federal student loan servicer for additional information

  • *Loan Servicing Updates Repayment Plan PreferenceJanuary 2014:

    Repayment plan preference information provides loan servicers with borrowers' repayment plan preference information gathered during Exit Counseling sessions on the StudentLoans.gov website. At the end of the Exit Counseling module on StudentLoans.gov, a borrower is provided with preliminary repayment plan eligibility information and estimated repayment amounts. The preliminary information is based on the borrowers loan information in the National Student Loan Data System (NSLDS) and offers the borrower the opportunity to select the repayment. .

  • *On January 1, 2014, we will begin sharing the repayment plan preference information with members of our federal loan servicing team and Federal Family Education Loan (FFEL) Program lenders, lender servicers, and guaranty agencies through updated NSLDS loan exit counseling completion reports.

    The repayment plan preference information is being provided to loan servicers for informational purposes.

    Loan servicers are encouraged, but not required, to use this information to facilitate actual repayment plan selection and better serve borrowers.

    Loan Servicing Updates Repayment Plan Preference

  • Managing Change Multi-Servicer Environment*Requirement changes evolve from regulatory changes, policy updates, and new business decisions.

  • In order to provide the best service to our customers, our servicing contracts are structured to allow for servicer creativity and innovation. However, there are times when decisions are made to standardize our servicing processes.

    Why the need for consistency or standardization? Standardization makes sense when differences in servicer processing cause different results to borrowers in the same circumstance.

    *Managing Change - Decision to Standardize

  • Forbearance Limits

    The Basics: A forbearance is used to postpone or reduce a borrower's monthly payment amount for a limited and specific period during which the borrower is charged interest. A general forbearance can be granted on a borrower's loan(s) for up to 1 year (12 months) at a time. After 1 year (12 months), the borrower is required to reapply to renew the forbearance. A general forbearance does not have a specified time limit.

    *Managing Change - Decision to Standardize

  • Forbearance Limits

    Identifying the Issue:Through monitoring our loan portfolio, we discovered that some borrowers were on general forbearances for extended periods of time.Goal to ensure borrowers are adequately advised or counseled of alternative repayment options.

    Therefore, the forbearance process and rules were reevaluated to place a limit on a borrower request to extend forbearance, in cases where there was 36 months of consecutive forbearance.

    *Managing Change - Decision to Standardize

  • Forbearance Limits

    Objectives:To establish healthy repayment habits and behaviors Counsel borrowers on all the eligible repayment plans (with focus on the income-driven repayment options) before a forbearance granted Standardization Rules:When a borrower has received 36 months of consecutive forbearance, the request to extend the forbearance will not be automatically granted To allow for extenuating circumstances, a forbearance may only be extended if a supervisor has reviewed and determined that efforts to place the borrower on an affordable repayment plan or deferment (if eligible) have been attempted and an extension justifiedThe justification for the extension must be noted on the borrower's account

    *Managing Change - Decision to Standardize

  • *Capitalization

    Background:All of our servicers were compliant with the rules and requirements for capitalization. The capitalization regulations provide a certain amount of discretion on the frequency of capitalization (for example, the Secretary may capitalize at point x). The update to our practice ensures consistency in interest capitalization between Direct Loans and federally-held Federal Family Education Loans (ED held loan portfolio) for all the federal loan servicers.

    Managing Change - Decision to Standardize

  • Capitalization: Rules

    Interest capitalization occurs when the interest that has accrued is added to the principal balance of the loan, and interest is then calculated on the new principal balance. Our servicers have updated their systems to consistently capitalize interest at the following events:At the end of the grace periodAt the end of a deferment or forbearance period, or consecutive periods of deferment or forbearance (specifically, this covers the scenario if a borrower enters a period of back-to-back deferment or forbearance. The servicer would only capitalize once at the end of the final status change).



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