Posted Date: October 19, 2010

Author:  Jana Hernandes, Service Director, Operations, Federal Student Aid

Subject: Loan Servicing Information-Reducing Amount of FFEL Purchased Loans (Updated March 20, 2015)

March 20, 2015 Note: We updated this announcement by removing the attachment titled “Payment Instructions for Returning FFEL Purchased Loan Funds” because it contained outdated information.

April 4, 2012 Note: We updated this announcement by replacing the attachment titled “Payment Instructions for Returning FFEL Purchased Loan Funds”. The replacement file includes the updated PO Box address for the submission of the School Transmittal File to Sallie Mae.

November 19, 2010 Note: On November 19, 2010, we updated this announcement by replacing the attachment titled “Payment Instructions Chart.” The replacement file includes the correct e-mail address for the submission of the School Transmittal File to Great Lakes Educational Services, Inc. and additional instructions for sending check payments.

In a March 26, 2010 Electronic Announcement on the Information for Financial Aid Professionals (IFAP) Web site, we provided guidance to schools about the process they should follow when they need to reduce the amount of a borrower's FFEL Purchased Loan. FFEL Purchased Loans are made under the Federal Family Education Loan (FFEL) Program by FFEL lenders and subsequently purchased by the Department of Education (the Department). Through methods commonly referred to as a “PUT” by FFEL loan holders and the Department, the Department becomes the owner of the loan and assumes all servicing responsibilities.

Previously, a school was instructed to first contact the lender that sold the loan to the Department, and then forward the loan adjustment information to the servicer servicing the loan. If the school had problems, it was then able to forward the loan adjustment information and the loan amount to the lockbox for the servicer servicing the loan.

Now, we are providing updated procedures that allow a school to return these funds directly to the federal loan servicers—specifically FedLoan Servicing (PHEAA), Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae—instead of to the selling lender. The federal loan servicer will then apply the adjustment to the borrower’s loan account and handle any subsequent transactions as needed.

The purpose of this announcement is to provide the updated procedures and resource materials a school will need to ensure the timely processing of a borrower’s reduced FFEL Purchased Loan.

Note: The Direct Loan Servicing Center (ACS) services a very limited number of FFEL Purchased Loans, which we do not anticipate will need to be adjusted. For this reason, we have not included information about this federal loan servicer in the announcement or its attachments. Guidance about returning unused William D. Ford Federal Direct Loan (Direct Loan) funds was posted in a July 23, 2010 Electronic Announcement. Guidance about making adjustments to Direct Loans will be provided in a forthcoming Electronic Announcement posted on the IFAP Web site.

Updated School Procedures

The updated procedures are as follows:

  1. The school determines that Title IV funds need to be returned on FFEL Program loans that the Department has purchased. The school then performs a servicer look-up in National Student Loan Data System (NSLDS) to determine which federal servicer is servicing the loans and to obtain current servicer information. Information about the school report that can be used in addition to individual lookups can be found in a November 24, 2009 Electronic Announcement on the IFAP Web site.
  1. The school prepares a data file (School Transmittal File) for the appropriate federal loan servicer. The layout for the School Transmittal File is provided in the attachment titled “School Transmittal File Layout for Returning FFEL Purchased Loan Funds in PDF format.”

  2. The school sends the School Transmittal File to the appropriate federal loan servicer via e-mail. There must be two e-mail transmissions.

    • The first e-mail will transmit the School Transmittal File. The file itself must be encrypted, password-protected, and attached to this e-mail. The subject line of this e-mail should read: “Refund Transmittal File – [School ID].”

    • The second e-mail will transmit information for the school’s contact person and the password for the encrypted, password-protected School Transmittal File. The subject line of this e-mail should also read: “Refund Transmittal File – [School ID].”
  1. The school should separately send the funds that need to be returned to the appropriate federal loan servicer using the specific payment instructions for that servicer. Payment should equal the total dollars provided on the School Transmittal File. The payment instructions for the federal loan servicers are provided in the attachment titled “Payment Instructions for Returning FFEL Purchased Loan Funds in PDF format.”

Contact Information 

If you have questions about the updated instructions, contact the federal loan servicer directly. Contact information for the appropriate servicer can be found on the Loan Servicing Centers for Schools Contact Information page on the IFAP Web site.

Attachments/Enclosures:

School Transmittal File Layout for Returning FFEL Purchased Loan Funds in PDF format, 84KB, 2 pages

   

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