Questions
A student has a valid MPN on file. Must the school certify a loan before the end of the loan period in order for a student to be eligible for a late disbursement? Where can a school find this information?
FFEL lenders are required to determine the creditworthiness of an individual who is applying for a PLUS loan. An applicant is not eligible for a PLUS loan if a lender finds the applicant has an adverse credit history as specified in loan program regulations.

May a lender use additional criteria in determining PLUS loan eligibility?
An undergraduate student had previously obtained a Federal Direct student loan while attending another institution. They have now applied for their first FFELP Stafford loan at our school. Must the student undergo entrance loan counseling at our school before they can receive their first disbursement?
How did the general provisions changes published on November 1, 2007 affect the way current-year Title IV funds can be used to pay a student’s minor prior-year charges?
If a Stafford loan application is received from a school by the lender after the loan period has ended, even if it was certified prior to the loan period ending, must the lender or guarantor deny the application?
If a borrower’s FFELP loan is in default, do they have to continue making payments if they are called to active military duty in the Reserves?
If a loan is guaranteed for the annual loan limit for attendance at school A during the fall/spring school year but the student transfers to school B between semesters, can the initial guarantee still be used to allow for the spring disbursement to be made at the new school?
What is the time frame to disburse student loan funds to a student after a school has received an individual loan check from the lender?
A PLUS loan was approved for the parent of a dependent student for the Fall/Spring school year. The first disbursement was made on September 6, and credited to the student’s school account. Before the second disbursement was made, the lender learned that the parent borrower had died on August 29. Since the lender and school were unaware of the borrower’s death before the Fall loan proceeds were delivered, may the school retain the first disbursement while cancelling the Spring disbursement?
When multiple disbursements are required, can a parent borrower request and receive a first disbursement of their PLUS loan that exceeds half the total loan amount?
A student previously attended college but never borrowed a FFELP loan. He enrolls in another school and is classified as a first-year student. Is this student subject to delayed delivery?
If a first-time borrower transfers to a school as a junior, does delayed delivery apply?
A student has applied for the maximum Unsubsidized Federal Stafford Loan for the academic year, but now does not want all of the funds. The school has received the loan proceeds. How should this be handled?
Is a lender permitted to stale date or stop payment on a check prior to the 120th day after the check is issued?
What are a lender’s responsibilities when an overaward of the loan proceeds is received from the school?


A student has a valid MPN on file. Must the school certify a loan before the end of the loan period in order for a student to be eligible for a late disbursement? Where can a school find this information?

Yes. Section 6.15 of the Common Manual, School Certification of a Loan, states: “A school must certify the borrower’s loan eligibility by the end of the loan period or the date on which the student ceases to be enrolled at least half time, whichever is earlier. If the school does not certify the loan by the earlier of these two dates, the loan cannot be disbursed”.

Also, see federal regulations sections 668.164(g)(2)(ii)(A); 682.207(f).
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FFEL lenders are required to determine the creditworthiness of an individual who is applying for a PLUS loan. An applicant is not eligible for a PLUS loan if a lender finds the applicant has an adverse credit history as specified in loan program regulations.

May a lender use additional criteria in determining PLUS loan eligibility?

Yes. A lender is responsible for developing and applying its own lending criteria in reviewing an applicant’s request for a PLUS loan, which may include credit standards that are more restrictive than those listed in program regulations.

A lender is required to apply its standards consistently to all PLUS loan applicants.
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An undergraduate student had previously obtained a Federal Direct student loan while attending another institution. They have now applied for their first FFELP Stafford loan at our school. Must the student undergo entrance loan counseling at our school before they can receive their first disbursement?

No. The main federal loan for students is called the Stafford loan and has two variations; Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDSLP).

Federal regulations (Sect. 682.604(f)(1)) require a school to conduct entrance counseling with each student borrower who’s obtaining their first Stafford loan for attendance at that school, unless the student previously received a Stafford, SLS, or Federal Direct Stafford loan for attendance at another school.

Since the student previously received a FDSLP loan, the school would not be required to provide entrance loan counseling for this student.

* Please note, if a student is applying for a Graduate or Professional Student PLUS Loan, initial loan counseling must be conducted if the student has not borrowed a PLUS loan in the past – even if they have received a prior Federal Stafford or Federal Direct Stafford Loan.
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How did the general provisions changes published on November 1, 2007 affect the way current-year Title IV funds can be used to pay a student’s minor prior-year charges?

Before July 1, 2008, an institution was allowed to use current-year Title IV funds to pay for minor prior-year charges of less than $100, or, with a student’s or parent’s authorization, more than $100, if it did not prevent the student from paying his or her current-year educational expenses.

As of July 1, 2008, the new rules allow an institution to use only up to $200 of Title IV funds to satisfy prior-year charges of tuition and fees, room or board, and, with the written permission from the student or parent, other educationally related charges.
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If a Stafford loan application is received from a school by the lender after the loan period has ended, even if it was certified prior to the loan period ending, must the lender or guarantor deny the application?

Federal regulations allow a lender to process and disburse a loan as long as the school certified the borrower’s eligibility by the end of the loan period or the date on which the student ceases to be enrolled at least half time, whichever is earlier. If the school does not certify the loan by the earlier of these two dates, the loan cannot be disbursed. Although the application wasn’t received during the loan period, it can still be processed and disbursed assuming the lender adheres to late disbursement requirements
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If a borrower’s FFELP loan is in default, do they have to continue making payments if they are called to active military duty in the Reserves?

Based on the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, the provisions that require collection activities by loan holders on defaulted Title IV loans are waived while a borrower is on active duty service in the Reserves in connection with a war or other military operation, or a national emergency.

Some members of other U.S. Armed Forces serving on active duty and persons residing in areas that are declared a disaster area, considered “affected individuals”, may also be eligible for certain waivers to provisions applicable to the Title IV federal student aid programs. You may contact HESC if you would like additional information on the waivers and modifications in the HEROES Act.
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If a loan is guaranteed for the annual loan limit for attendance at school A during the fall/spring school year but the student transfers to school B between semesters, can the initial guarantee still be used to allow for the spring disbursement to be made at the new school?

No. Loans guaranteed for attendance at a particular school cannot be carried over to a different school if a student transfers. The spring disbursement guaranteed for attendance at school A would have to be cancelled and a new loan would need to be certified by school B for the remaining annual eligibility.
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What is the time frame to disburse student loan funds to a student after a school has received an individual loan check from the lender?

A school is required to deliver or return loan proceeds within specific time frames. These include the Initial Period, Conditional Period and Return Period.

In the case where proceeds are disbursed by individual check, the school must secure the necessary endorsements and deliver the funds within an initial thirty days after the school’s receipt of the check. Undelivered proceeds must be returned to the lender no later than ten business days from the end of the initial period.

If, however, the school is unable to deliver loan funds during the initial period due to the student’s failure to meet certain loan eligibility requirements, the school may delay delivery for a conditional period of ten business days from the end of the initial period if the school anticipates the student will meet all eligibility requirements within the conditional period. It is recommended that the school document the reason for holding loan proceeds during this conditional period.

If the school is unable to deliver loan funds within the initial or conditional period, it must return the loan proceeds to the lender no later than ten business days from the end of the conditional period. However, should the student become eligible during the return period, the school may deliver the proceeds rather than return them provided delivery is made before the last day of the return period.

The reference to "no later than ten business days" means the mailing of a check or the initiation of an electronic funds transfer by the school by the close of business day of the last day of the return period.
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A PLUS loan was approved for the parent of a dependent student for the Fall/Spring school year. The first disbursement was made on September 6, and credited to the student’s school account. Before the second disbursement was made, the lender learned that the parent borrower had died on August 29. Since the lender and school were unaware of the borrower’s death before the Fall loan proceeds were delivered, may the school retain the first disbursement while cancelling the Spring disbursement?

No. The disbursement or delivery of any PLUS loan funds after the date of the borrower’s death (or the death of the dependent student) is prohibited. The school must be notified to return to the lender PLUS proceeds received in the Fall, and the Spring disbursement must be cancelled.
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When multiple disbursements are required, can a parent borrower request and receive a first disbursement of their PLUS loan that exceeds half the total loan amount?

No, loan proceeds must be delivered in substantially equal installments with no installment exceeding one half of the loan.
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A student previously attended college but never borrowed a FFELP loan. He enrolls in another school and is classified as a first-year student. Is this student subject to delayed delivery?

Yes. If a student is a first-year, first-time borrower, the student is subject to delayed delivery requirements.
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If a first-time borrower transfers to a school as a junior, does delayed delivery apply?

No. Only first-year, first-time borrowers are subject to delayed delivery.
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A student has applied for the maximum Unsubsidized Federal Stafford Loan for the academic year, but now does not want all of the funds. The school has received the loan proceeds. How should this be handled?

The school can deliver the loan proceeds and return the amount the student does not need to the lender. Alternatively, the school can send the disbursement back to the lender, cancel the loan, and have the student submit another application for the desired amount. (If the loan is canceled and the student reapplies, the student will not be charged origination/insurance fees based on the higher amount.)

If the student signed a Master Promissory Note, the school would cancel the loan and complete a new certification.
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Is a lender permitted to stale date or stop payment on a check prior to the 120th day after the check is issued?

Yes. The guarantee on the loan is in effect for 120 days, but the lender may elect to use an earlier date. If the check is not honored before the 120th day, the school may request a new disbursement check.
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What are a lender’s responsibilities when an overaward of the loan proceeds is received from the school?

The lender must reduce the student’s outstanding loan balance and reduce origination and insurance fees (if applicable) in proportion to the refunded amount.
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