Federal Default Fee Processing Update

As you know from previous bulletins, HESC is set to begin charging the federal default fee for Stafford and PLUS loans guaranteed on or after May 1, 2008. Lenders who originate and/or hold loans guaranteed by HESC should be aware of the following information in order to receive, submit and reconcile federal default fee billing.

Default Fee Implementation

As a result of discussions with the lender community, HESC is making system changes so that it may implement the default fee based on the guarantee date rather than the period of loan. As such, loans with a beginning period of loan of May 1, 2008 or later, which were received between late March and April 30th, will be processed to guarantee on May 1st and 2nd.

Billing Process

On the first day of each month, beginning June 1, 2008, HESC will bill Lenders or Servicers for the federal default fee. At this time two options will be available: 1) CAM record types 21/22/95 using the guarantor initiated flow and 2) spreadsheet format via FTP or Web File Transfer. The layout for the spreadsheet is available on the Federal Default Fee Processing Web page. Instructions on how to reconcile the spreadsheet and return the information to HESC will be provided in a later bulletin. Direct questions regarding data exchange to EDES@hesc.org or 518-408-3685.

Billing Set Up

In order to appropriately calculate and direct the federal default fee bill, HESC is requiring each originating lender and each servicer to complete a lender profile, providing information for rebates, billing preferences, contacts, transmission, and disbursement cancellation. The profile may be accessed on the Federal Default Fee Processing Web page and returned to: DefaultFee@hesc.org. If you have provided this information, return the profile only if you wish to add or change existing information.

Disbursements and Cancellations

At this time, HESC will include the federal default fee for disbursements issued through HESC’s EFT( Express and Escrow) processes on the monthly bill, NOT at the time of disbursement. Additional actual disbursements made through processes other than HESC EFT (i.e., NDN) will also be included on the monthly bill. If a disbursement is made and cancelled during the billing month it will be netted out.

For a smooth billing process, your organization must report disbursements and cancellations outside of HESC EFT on a timely basis. It is vitally important that you review and confirm the method your organization uses to report disbursements and cancellations to HESC:
  • ASM340 Disbursal/Cancellation Transaction –HESC’s proprietary EFAN file layout is normally provided monthly, but may be submitted as frequently as daily. It may be used to report both disbursements and cancellations.
  • CAM Record Type 10 – the NCHELP industry standard for reporting disbursements and post disbursement cancellations. HESC currently does not support the reinstatement/reissue function in this record type.

HESC does not accept disbursement or cancellation transactions via NSLDS Lender Manifest.

Reconciliation of Current Disbursements/Cancellations

The quarterly report, ASM170 Approved not Disbursed or Cancelled for the first quarter ending March 31, 2008 was distributed to lenders/servicers on April 10, 2008. We ask that you make every effort to complete this quarterly report and return it prior to receiving the first federal default fee bill.

Webinar Scheduled

HESC has scheduled a Webinar to review that billing process. It will take place on Tuesday, June 3, 2008 at 1pm EST. Please ensure that appropriate staff is invited to this call. Learn more by visiting the Training Center on HESC.org.

Direct questions regarding the default fee billing process to Beth Wicks (518-486-7403 or ewicks@hesc.org), or email to DefaultFee@hesc.org.