FEDERAL CAMPUS-BASED LOAN PROGRAMS DUE DILIGENCE PROCEDURES

Transcription

1 FEDERAL CAMPUS-BASED LOAN PROGRAMS DUE DILIGENCE PROCEDURES Campus Responsibilities and The Role of the SUNY Student Loan Service Center The SUNY Student Loan Service Center (hereafter referred to as the SUNY SLSC) services Federal Perkins, Health Professions and Nursing loans, received by students while attending any one of SUNY s state-operated campuses. The Federal Perkins Loan Program and the Federal Health Professions and Nursing Loan Programs are revolving loan programs administered by the U.S. Departments of Education (DOE) and Health and Human Services (DHHS). These loans are known as campus-based loans because the campus originates the note and disburses the loan funds directly to the student. DOE and DHHS regulations require counseling with a student prior to his or her receipt of loan funds (entrance counseling); at the time the student separates from school (exit counseling); and during the student s grace period. Campuses are responsible for performing the entrance and exit counseling for those borrowers who sign paper notes, and the SUNY SLSC is responsible for performing online entrance and exit counseling for those borrowers who sign their notes electronically. The SLSC provides the required contact with the borrower during their grace period. Campuses are encouraged to refer to the SUNY SLSC s web site at the U.S. Department of Education s Student Financial Aid Handbook and the Health Resources Services Administration s Student Financial Aid Guidelines to assist them in complying with applicable Federal laws and regulations governing the campus-based loan programs.

2 1. PERKINS ENTRANCE COUNSELING Before making the first Perkins loan disbursement, the campus must have the borrower sign the Federal Perkins Loan Master Promissory Note (Perkins MPN), provide written or electronic disclosure of cumulative and principal loan amounts and terms, fully complete an Entrance Interview Questionnaire and provide the borrower with the SUNY Federal Perkins Loan Program Borrower s Guide. (Samples of all aforementioned documents are attached herein). The Perkins Entrance Counseling process, including the signing of the Perkins MPN, is available electronically to all Perkins borrowers enrolled at your campus. The borrower may access the electronic entrance process by visiting the Borrowers section of our website at Regulations require that the specific information contained within the above listed documents be disclosed to every student in writing, whether it be in paper or electronic form. Although this information can be mailed to a student, DOE prefers that campuses meet with the student to answer any questions and to emphasize his or her responsibility to repay the loan. The campus must advise the student borrower of his or her rights and responsibilities, reminding the student that the loan may be used only for educational expenses. DOE guidelines encourage schools to collect the personal information listed below from the borrower at the time of entrance counseling to assist in the collection of the loan and to help the school locate a student who withdraws without providing formal notice. The SUNY SLSC developed the enclosed Entrance Interview Questionnaire to assist campuses in this endeavor. 1. Name, address and telephone numbers of the borrower s parents and spouse; 2. Spouse s employer; and 3. Names and addresses of two or three of the student s personal acquaintances. 2. PERKINS EXIT COUNSELING A campus must conduct exit counseling with each borrower either in person, by audiovisual presentation, or by interactive electronic means. The borrower must fully complete the Exit Interview Questionnaire and the Federal Perkins Loan Program Exit Repayment Agreement during exit counseling. The campus must provide each borrower with a copy of the SUNY Federal Perkins Loan Program Borrower s Guide, which discloses critical repayment information. Exit counseling must be done shortly before the student graduates or drops below half-time enrollment (if known in advance). 2

3 Campuses conducting exit interviews through their website must ensure that students receive a password to access the site and that appropriate security measures are taken to protect the confidentiality of the student s personal information. The complete exit counseling process is available electronically at to all Perkins loan borrowers who have completed an electronic Entrance Interview. If the student borrower is enrolled in a correspondence program or a study-abroad program that the campus approves for credit, the campus may provide written exit counseling materials by mail within 30 days after the borrower completes the program. If the student borrower withdraws from school without the campus prior knowledge, or fails to complete an exit counseling session, the school must provide exit counseling through either interactive electronic means, or by mailing counseling materials to the borrower at the borrower s last known address within 30 days after learning that the borrower has withdrawn from school or failed to complete exit counseling as required. The borrower must provide the following personal information on the Exit Interview Questionnaire: 1. Name, address (both current and permanent), social security number, and driver s license number; 2. Three references and address of borrower s next of kin; and 3. Name and address of borrower s expected employer. When the borrower signs the Exit Repayment Agreement, the campus representative must emphasize the seriousness and importance of the repayment obligation the borrower is assuming, describing in forceful terms the consequences of default, including adverse credit reports, tax offsets, litigation and assignment to a collection agency. The counselor must further emphasize that the borrower is obligated to repay the full amount of the loan even if the borrower has not completed the program, is unable to obtain employment upon completion, or is otherwise dissatisfied with the school s educational or other services. A campus must maintain documentation substantiating its compliance with these requirements. The SUNY SLSC requires the campus to submit all original signed entrance and exit counseling documentation when it transfers a loan to the SUNY SLSC for servicing. SUNY campuses may place a hold on the academic transcripts for borrowers who fail to complete their exit interview based on New York State regulation (8 NYCRR Section 302.1(m)) which states: No person shall receive credit or other official recognition for work completed satisfactorily...until "university student loan obligations" are satisfied. 3

4 In addition, the student should also be advised that the campus holds the promissory note and is authorized to withhold the student s transcript and to prevent the student from registering at any SUNY state-operated campus in the event the student defaults on the loan. (Enclosed is a copy of the SUNY Board of Trustees regulation, 8B N.Y.C.R.R (m), authorizing the withholding of transcripts and services due to student default on university loan obligations). 3. GRACE PERIOD CONTACT There is a nine-month grace period for Perkins loans currently awarded to students. The regulations require schools to contact a borrower three times during this initial nine-month period. The SUNY SLSC provides this contact on behalf of the SUNY state-operated campuses. In accordance with regulations, the SUNY SLSC sends the borrower an acknowledgement after it receives the loan(s) from the campus. Included with this acknowledgement is a copy of their Truth In Lending Statement and the Federal Perkins Loan Program Borrower s Guide. HEALTH PROFESSION AND NURSING STUDENT LOANS The Health Professions Student Loan Programs (HPSL) and the Nursing Student Loan Programs (NSL) are authorized under Title VII and Title VIII of the Public Health Services Act, respectively, and are administered by DHHS. Health Professions Student Loans are available to students in the following disciplines: doctors of allopathic or osteopathic medicine, doctor of dentistry, bachelor or doctor of science in pharmacy, doctor of podiatric medicine, doctor of optometry and doctor of veterinary medicine. Statutory changes to the HPSL program now require students studying to become doctors of allopathic or osteopathic medicine to fulfill a primary care service obligation; therefore, HPSL loans provided to these students are called Primary Care Loans (PCL). There are also Loans to Disadvantaged Students (LDS) that are special HPSL loans available only to students who come from a disadvantaged background. 1. HPSL and NSL ENTRANCE COUNSELING DHHS regulations require campuses to conduct and document an entrance interview for each academic year during which the student receives loan funds before it disburses loan funds to a borrower in any academic year. Entrance interviews can be conducted individually, in groups, or by mail if a face-to-face meeting is not practical. 4

5 As with the Perkins Loan Program, the HPSL and the NSL Programs require campuses to provide certain information to student borrowers at the time the loan is made. Much of this information can be found in the Master Promissory Notes (MPN), the Statement of Rights 5 and Responsibilities Form and the Health Professions and Nursing Loan Program Borrower s Guides. Campuses are also encouraged to refer to the DHHS Borrower s Guidelines at to assist in providing the necessary information. The campus must advise the student borrower of his or her rights and responsibilities under the respective DHHS loan program, and it must remind the student that the loan may be used only for educational expenses and that the loan must be repaid. The borrower must fully complete an Entrance Interview Questionnaire during the entrance counseling session. Personal information is required from the borrower, which will assist the SLSC in skip tracing should this be necessary during the collection process. Enclosed is an Entrance Interview Questionnaire developed by the SUNY SLSC for this purpose. For a borrower who receives loan funds in more than one academic year, the school must require the borrower to provide this information anew each year or review and update the original entrance interview questionnaire and re-sign and date the information to indicate when the updating occurred. 2. HPSL and NSL EXIT COUNSELING The regulations require campuses to conduct and document an exit interview with its borrowers. The campus must provide the student with information on each loan he or she borrowed, to include the total amount borrowed and a repayment schedule, which reflects the number, amount, and frequency of the payments to be made. The borrower must provide updated personal information to the campus at the time of exit (Exit Interview Questionnaire). If the borrower fails to appear for an exit interview, the school must attempt to conduct the exit interview by mailing (certified mail) the Exit Interview Questionnaire, the Statement of Rights and Responsibilities Form, and the Exit Interview/Repayment Agreement to the borrower and requesting that a copy of the above-referenced items be signed, dated and returned to the school. If the borrower fails to return the information, the SUNY SLSC must maintain in the borrower s file, a copy of the exit information sent to the borrower and the date it was mailed as documentation of the contact. When transmitting loans to the SUNY SLSC for servicing, it is imperative that campuses include green certified mail cards for exit interview forms that are not signed. 5

6 SUNY campuses may place a hold on the academic transcripts for borrowers who fail to complete their exit interview based on New York State regulation (8 NYCRR Section 302.1(m)) which states: No person shall receive credit or other official recognition for work completed satisfactorily...until "university student loan obligations" are satisfied. In addition, the student should also be advised that the campus holds the promissory note and is authorized to withhold the student s transcript and to prevent the student from registering at any SUNY state-operated campus in the event that the student defaults on the loan. (Enclosed is a copy of the SUNY Board of Trustees regulation, 8B N.Y.C.R.R (m), authorizing the withholding of transcripts and services due to student default on university loan obligations). 3. GRACE PERIOD CONTACT Grace periods for Health and Nursing Loans vary. Some are nine-months; others are as long as one year. The SUNY SLSC sends the borrower an acknowledgement after it receives the loan(s) from the campus. Included with this acknowledgement is a copy of their Truth In Lending Statement and borrower s guide. Unlike DOE regulations governing Perkins loans, DHHS requires only two contacts to be made with the borrower during the initial grace period. CONCLUSION The campus role in providing entrance and exit counseling to student borrowers is crucial not only in assuring compliance with federal due-diligence requirements, but also in assisting in the collection of campus-based loans, which provide so many of SUNY s students with the funds necessary to attend school. The SUNY SLSC is continually updating and revising its forms and materials to assist campuses with their due-diligence obligations. Please visit the SUNY SLSC s website at: for convenient reference to Federal regulations, Perkins electronic entrance and exit processes, and a variety of SUNY collection related documents and procedures. Revised 7/2015 6