HESC Colleague NewsletterSummer 2010  

Thoughts from Colleagues about the Transition to Direct Lending

John Austin

Over the past few months many New York State colleges have been busier than usual as they transition to the Direct Loan program by the July 1 deadline. While a number of colleges had expressed concern that the process would be technically difficult and confusing, so far, this does not seem to be the case. Two of your colleagues discuss, in their own words, the transition process on their campuses and some of the challenges and positive developments. We are grateful to Diane Corbett of the University at Albany and Howard Leslie of Berkley College.

Diane Corbett

Director of Financial Aid
University at Albany

The University at Albany has experienced a smooth transition to Direct Lending (DL) by following several key steps.

Collect Best Practices
Early in the transition process we reached out to other schools, the Department of Education, and the Comptroller’s Office to learn as much as possible about what was required for the our set up and transition to DL.

Involve IT Early
The transition to DL was heavily dependent on the smooth meshing of their systems with ours. Our IT staff did a great job in providing development and testing of Direct Lending as it related to our software system. We have encountered some delays in our ability to read certain files from COD, but this is mainly due to the limitations of our own system.

Work with Your Financial Arm to Prepare for Smooth Funds Transfers
We worked with our Accounting Office and the SUNY Comptroller’s Office to set up our accounts for the drawdown of funds through G5.

Communications is Key to New Prom Notes
One of our biggest challenges is ensuring that our continuing Stafford Loan borrowers complete a new MPN. Communication is key to success in this area. Stony Brook University graciously provided us with their communication plan which we used as a guide in developing our own plan.

Our plan includes a letter and Q&A that we mailed to families, emails to student borrowers, a notice in the student paper and on the student portal, banners and posters on campus as well as an item on the student borrower’s electronic “To-Do” list.

Over 40% of our returning student loan borrowers have complied and we are hoping to reach them all before the fall semester begins.

Be Aware of Potential Problems
Be aware of potential problems and try to solve them before they become large. For instance, we have found that some students are clicking out of the electronic DL MPN process too soon, causing some confusion regarding MPN completion. We are assessing the scope of this issue and, if necessary, we will work with students to resolve it.

Throughout this experience, we have found our representatives at FSA and COD to be both helpful and responsive. Overall, we are excited about our progress thus far and look forward to continued success as we complete the transition to Direct Lending.

Time to Move On but Don’t Ever Forget

Howard Leslie
Vice President, Financial Aid Berkeley College
2nd Vice President, NYSFAAA

I am tired of being told to "get over it."

Our community and profession have been besmirched and it was all done towards a totally different end goal. Maybe it was our own fault for not self monitoring. It was something that had been discussed several times in the past. We let some bad apples, and those who would take advantage of it, put us in a situation of looking very bad. I will not ‘get over it’ and if you are one of the 99.9% of us that make up the barrel of quality fruit then you should not either. Now that FFELP is dead LONG LIVE DL. It is certainly time to get past it but never forget.

Did FFELP deserve to die? Maybe. Did it deserve to be buried in the manner it was? Absolutely not! Its passing was given less attention, having the last nail in the coffin attached to a reconciliation bill regarding a much broader issue, than poor Charlie’s Angel who was unfortunate enough to pass on the same day as a very young King of Pop.
So what now? In my opinion, when implemented correctly, DL is a far easier program to manage than was FFELP. However, one must note that it is not an easy program to implement – at least not as easy as those who were selling us that bag of goods.

Questions
  1. Are you first implanting DL now – because lo and behold – you have no other choice? If so, I really feel bad for you.
  2. Do you have a homegrown administrative software system? If so, I really feel bad for you.
  3. Do one and two, above, apply to you? Then I REALLY feel bad for you.

If your situation falls into any of the above categories, if you have not yet convinced the bean counters at your school, you need as much technical support as can possibly be afforded – and you need it quickly. Maybe you have the resources in-house. Make sure they are 100% dedicated to your conversion.

If you are using one of the large recognized enterprise software solutions then you are a jump or two ahead of the others. However, don’t take things for granted. This is still not going to be easy.

Steps and Recommendations
  1. The first obvious step is to make sure you are in good stead with the DOE. In addition to ensuring your school’s eligibility you also want to make some good quality contacts. You will need them.
  2. Find out exactly what your software can and cannot do. Don’t expect to do the same things you have always done as a FFELP shop. It is different (for example – say goodbye to x-over loans unless you are willing to build multiple versions of the same term in two different award years). Locate people that can help you. If not directly from your software vendor, as some are better at that than others, then from friends and colleagues. Take advantage of the people that have already done it and that are using the same FAAM as you. We/they want to help. You know how we FA folk are. Always there for each other in a real pinch. This pinch doesn’t get more real. Here’s one of the best heads-up I can give you. There is a Coalition comprised of schools that are dedicated to help us newbies. You can find them all at http://www.directstudentloancoalition.org/. You will locate all the help you can possibly hope for right there. These are your colleagues and they want to lend a hand.
  3. Make sure you get input from your end users. Like any other major change there are different approaches. Different policies and procedures. The manner in which you engage other FA and SA staff can make or break your implementation. Don’t forget the Finance Office. Their GL will not be left untouched by this change.
  4. Training – TRAINING – TRAINING. Remember, this is a whole different game. You can bring up the best system and have the greatest P&P in place but if the users don’t know what to do or if they cannot read the danger signs you will be doomed to problem after problem.

Major Things to Watch Out For
  1. If you are reading this as someone who is concerned about implementing for the fall then watch out. You are coming into the game at the worst time. Sure the DOE is doing whatever they can in the way of support and training. I give them an A+ for effort. I just don’t think it is enough. I don’t think they think it is enough – though they will never admit it. You may need a consultant but don’t spend good money on bad advice. Be careful. Again, I suggest making some very high quality contacts and be kind. They are under as much pressure to make this work as you are.
  2. You have probably heard that reconciliation can be a nightmare. Yes it can. However, it does not have to be. I have experienced very good implementations where the colleges were reconciled before the end of each day. I have also experienced those where reconciliation has been a difficult, time consuming task. It is all in the knowledge base, support, amount of dedicated time and testing – testing and more testing. The DOE has dedicated specialists to assist you with reconciliation. They can point you to the Promised Land but they cannot do the work for you. It would be far better to get it right the first time around and not play catch-up.
  3. When you think you have it all down and perfect – trust me – it will not be. Unexpected issues will come up. There is no such thing as a perfect implementation of any large project. The only thing you can do is your very best. Be warned; don’t tell administration that all is well. Prepare them for the worst and then give them the best you have. It will all be fine in the end. I promise.

I fought against DL for almost 2 decades. My argument then was – You don’t take a jet in mid flight and change the engine, no less to one that is untested. If I do say so myself I was very much on the money back in the 90s. Many of those that were forced by their higher-ups into DL, or were (in my opinion) foolish enough to jump in to the game far too early, had it far worse than all of us. I have heard real nightmarish tales about how reconciliation was almost impossible no matter how well you implement your systems. I am told it is much easier now. Of those early participants, many were eventually able to return to the safety of FFELP. Now that island is gone. The good news is once you settle into DL, whether it takes you one, two or three years, you will look back and say – this was a good change. Mind you, I am not speaking highly yet of the service to our students, assistance in default management and all the auxiliary services we have become used to and need. Only the future will answer whether or not DL will hold its own or do better than FFELP in these areas.

I will never "get over it." Too many people have lost their jobs. Too many people have had their reputations inappropriately tarnished. However, what concerns me the most now, especially now when so many of our colleagues and students are feeling the effect of this dramatic change, are the truths.

The Truths Are
  1. Administratively and for cash control – DL is the better program but you cannot convince me that it is a money saver. Good program – wrong reasons.
  2. For those of us that have gotten on the bike and no longer need the training wheels – it is time to help those that would help you if given the reverse situation.
  3. Be ready to reach out to your students. They need new prom notes now and they will need your help avoiding default later. Nothing like a split borrower population to increase default rates. And do remember, this is just adding to your/their problems in this regard. You all know what’s has been going on with the sales of FFELP to DL (PUT). Full DL is just adding to an already existing problem.
  4. The final truth is that DL will not be our final stop. There is something new coming. Hard to predict exactly what it will look like but whatever it is we won’t have any options. From this point forward it’s all or nothing. That means when the time comes make sure your opinion is heard. What we get next is what we will all need to work with.

Folks, we have weathered many storms over the years. This is no small one nor is it the biggest. In fact, I predict, the biggest storms are yet to come. Watch out for the upcoming NPRMs. Some of them are real scary. The important thing, however, is that we always stick together for as a force joined as one we will always prevail and be able to get those students graduated and working in the field of their choice. Remember, that is why we are doing this in the first place. Keep that in mind and all the rest will be fine. Oh yes, one last thing. Don’t ever forget. Don’t ever ‘get over it’. If nothing else, this will keep us strong and dedicated to our very honorable profession.