Posted Date: November 13, 2013

Author:  Sue O'Flaherty, Service Director, Program Management, Federal Student Aid

Subject: Direct Loan Quality Assurance Requirement Reminder

As a reminder, schools that participate in the William D. Ford Federal Direct Loan (Direct Loan) Program are required to implement a quality assurance process within their financial aid office operations.

In this announcement, we cover the information in the following order:

  • Direct Loan Quality Assurance Requirement Overview
  • Options for Meeting the Direct Loan Quality Assurance Requirement
  • Documentation for the Direct Loan Quality Assurance Requirement
  • Contact Information

Direct Loan Quality Assurance Requirement Overview

The Direct Loan Program regulations at 34 CFR 685.300(b) (9) require schools to implement and document a quality assurance process to ensure that they are complying with program requirements and meeting program objectives.

A school should have a quality assurance process in place that documents that the school is:

  • Reporting loan records, disbursements, and adjustments to disbursements correctly to the Common Origination and Disbursement (COD) System,

  • Disbursing and returning loan funds in accordance with regulatory requirements,

  • Disbursing the correct loan amount to the correct student,

  • Completing monthly reconciliation and Program Year Closeout.

To be effective, the steps for implementing a Direct Loan quality assurance process will be unique to each school and need to take into account the characteristics of a school’s academic policies and programs and its borrower population. Schools are encouraged to use self-assessments to examine their procedures and take action on an ongoing basis to strengthen areas of risk.

Options for Meeting the Direct Loan Quality Assurance Requirement

The Department of Education (the Department) does not mandate the method by which schools meet the quality assurance requirement. Schools may have institutional-designed assessments and quality assurance processes in place to ensure that the Direct Loan quality assurance requirement is met. However, there are several options and tools available from the Department that can assist schools in meeting the quality assurance requirement.  Schools can choose from these tools to best fit their needs. These include:

Direct Loan Reports:

There are several reports available via the COD System, the Direct Loan Tools software, or within EDExpress (for those schools that use the EDExpress software) that can assist your school with evaluating the effectiveness of your school’s Direct Loan processes and procedures. Some reports can also assist your school with the reconciliation process to ensure that the monthly and year end process for reconciling is done efficiently. Information about the various reports can be found in Volume VI, Section 8 and Volume IV, Section 4 of the 2013-2014 COD Technical Reference. The reports include:

  • COD School Monitoring Report (produced by the COD System)

  • 30-Day Warning Report (produced by the COD System)

  • Counseling Report (produced by the COD System)

  • Actual Disbursement List (produced by the COD System)

  • School Account Statement (SAS) (produced by the COD System)

  • EDExpress List Reports (produced within EDExpress software) or Direct Loan processing reports and queries (produced from your software system)

    • For schools using EDExpress, EDExpress List Reports can be used to monitor Direct Loan processing for efficiency, timely and accurate reporting, resolving rejected records, and reconciling. For complete information about EDExpress List reports, refer to the Desk Reference of the EDExpress for Windows 2012-2013 Release 2.0 on the FSADownload Web site.

    • For schools using their own software system, software-specific or school-created Direct Loan processing reports and queries can be used to monitor Direct Loan processing for efficiency, timely and accurate reporting, resolving rejected records and reconciling.

  • Direct Loan Tools (DL Tools)

    • Disbursement Measurement Tool Report (For EDExpress schools only)

    • Direct Loan SAS Comparison Reports

FSA Assessments:

In collaboration with schools, the Department has designed the FSA Assessments to assist schools with compliance and improvement activities. The FSA Assessments, including Direct Loan-specific activities, are available under “Tools for Schools” on the Information for Financial Aid Professionals (IFAP) Web site. The Direct Loan-specific FSA activities are as follows:

The Direct Loan FSA Assessment

  • Activity 1: Direct Loan Reconciliation. Fiscal Management (Direct Loan Monthly Reconciliation and Year-To-Date Reconciliation) – This assessment can assist in identifying any discrepancies between disbursements and funding reported and the information in the financial aid office, business office, G5, or the COD System.

  • Activity 2: Direct Loan Quality Assurance - A Guide to Creating a Policies and Procedures Manual, Section 9 – This assessment related to the administration of the Direct Loan program specifically addresses packaging policies for Federal Direct Loan/PLUS, counseling borrowers, payment of a refund or Return of Title IV funds, and administrative and fiscal control.

As part of the FSA Assessments, to assist with documentation and making improvements to processes, schools are encouraged to use the Action Plan. The Action Plan can be accessed, completed, and saved to your computer.  Blank copies can be printed and completed off-line directly from the FSA Assessment home page or in the Direct Loan Assessment. Schools are encouraged to keep copies of completed Action Plans as part of the documentation of the quality assurance requirement.

Documentation for the Direct Loan Quality Assurance Requirement

Regardless of the method or tools a school chooses, it is important for a school to have a clearly documented quality assurance process, to review this process on a regular basis, and document that the process is being used.  The quality assurance documentation should be easily accessible and readily available to Department reviewers in the case of a program review or audit.

Contact Information

If you have questions about this announcement, contact the COD School Relations Center at 800/848-0978. You may also e-mail CODSupport@ed.gov.

   

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