DLB-08-05: Origination Fee Reduction For Direct Subsidized Loans And Direct Unsubsidized Loans

Publication Date: February 29, 2008

Bulletin ID: DLB-08-05

Summary: Origination Fee Reduction for Direct Subsidized Loans and Direct Unsubsidized Loans

Dear Direct Loan Colleague:

As part of the changes to the student loan programs made by the Higher Education Reconciliation Act of 2005 (the HERA), Pub. L. 109-171, the origination fee for Direct Subsidized Loans and Direct Unsubsidized Loans will again be reduced for 2008-2009. This bulletin provides operational guidance for schools and third party software providers on implementing the latest reduction in the origination fee. In summary—

  • For all Direct Subsidized Loans and Direct Unsubsidized Loans that are first disbursed on or after July 1, 2008 and before July 1, 2009, the origination fee is changing from 2.5 percent to 2.0 percent.
  • The Direct PLUS Loan origination fee is not changing and will remain at 4 percent for Direct PLUS Loans made to both parent and graduate/professional student borrowers.
  • The up-front interest rebate amount is not changing and will remain at 1.5 percent for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
  • Beginning with implementation of the COD System for the 2008-2009 Award Year (scheduled to occur during the period March 14-15, 2008), the COD System will process awards with the 2.0 percent origination fee. The COD System will continue to accept awards with a 2.5 percent or 3.0 percent origination fee, as appropriate, based on the earliest disbursement date.

Last year, many Direct Subsidized Loan and Direct Unsubsidized Loan awards rejected because the correct origination fee was not included with the award and/or was not used to calculate the award and its disbursements. For this reason, we want to remind schools of previously provided guidance that is critical to successfully implementing the origination fee reduction for Direct Subsidized Loan and Direct Unsubsidized Loan awards.

  • If an award’s earliest disbursement date is before July 1, 2007, the origination fee for the entire award (meaning all of its disbursements) is 3.0 percent. 
  • If an award’s earliest disbursement date is on or after July 1, 2007 and before July 1, 2008, the origination fee for the entire award (meaning all of its disbursements) is 2.5 percent. 
  • If an award’s earliest disbursement date is on or after July 1, 2008 and before July 1, 2009, the origination fee for the entire award (meaning all of its disbursements) is 2.0 percent. 
  • When determining an award’s earliest disbursement date, actual disbursements [Disbursement Release Indicator (DRI) equals “True”] will take precedence over anticipated disbursements (DRI equals “False”).

Some schools may have already begun the origination process. If a school has already originated a Direct Subsidized Loan or Direct Unsubsidized Loan award, it should confirm that the origination fee and earliest disbursement date are consistent with the rules stated above.

If a school must make a change to the origination fee for an award, it must complete the following actions:

  1. Determine if the original award contains only anticipated disbursements or at least one actual disbursement.
  2. Follow all applicable steps outlined in the appropriate document attached to this bulletin.

At this time, we ask that you share this bulletin with the appropriate staff at your school. If you have questions about any of our origination fee guidance or need assistance with implementing the origination fee reduction, please contact the COD School Relations Center at 800/848-0978 or by e-mail at CODSupport@acs-inc.com.

Thank you for your ongoing partnership in the Direct Loan Program.

Sincerely,
William Leith
Acting General Manager, Application, Operations and Delivery Services

Attachments/Enclosures:

2.5 to 2.0 Percent Origination Fee Change for Direct Subsidized Loan and Direct Unsubsidized Loan Awards in PDF Format, size 112kb, 1 page 

2.0 to 2.5 Percent Origination Fee Change for Direct Subsidized Loan and Direct Unsubsidized Loan Awards in PDF Format, size 112kb, 1 page 

 

Publication Date: 2/29/2008


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