Common Manual Update

To assure that your Common Manual remains current, please record this document on your LPM/LPB index and retain it in Appendix E of your manual.

LOSFA provides the following summaries to inform schools, lenders, and servicers of the latest Common Manual policy changes. These changes will appear in the manual’s next annual update. However, some changes are effective before the next update is scheduled to be delivered.

Current Common Manual policy specifies criteria a lender uses in determining whether a loan is considered consummated or unconsummated, for record keeping purposes, and may imply that a loan must be subsidized in order to be unconsummated in some cases. Revised Common Manual policy specifies criteria a lender will use in determining whether a disbursement, instead of a loan, is consummated or unconsummated, for record keeping and reporting purposes. Revised policy also clarifies that any loan can be considered unconsummated, regardless of subsidy.

A disbursement is consummated if either of the following occurs:

• The disbursement check is negotiated within 120 days after the date of disbursement.
• The EFT or master check funds are released from the account maintained by the school within 120 days after the date of disbursement.

If a consummated disbursement is paid in full by the borrower or the school within 120 days after the date on which it was disbursed, a lender is entitled to receive applicable federal interest benefits and special allowance payments through the date the loan is fully repaid. The borrower may also be entitled to a refund of any guarantee fees and origination fees.

A disbursement is unconsummated if any of the following occurs:

• The disbursement check is returned uncashed to the lender.
• The disbursement check is not negotiated on or before the 120^th day after the date of disbursement.
• The EFT or master check funds are not released from the account maintained by the school on or before the 120^th day after the date of disbursement.

A lender is entitled to receive applicable federal interest benefits and special allowance payments, unless notified that a disbursement is unconsummated (see subsections A.1.B. and A.2.B.).

If an unconsummated disbursement is due to a student’s withdrawal, the lender must cancel all pending disbursements and advise the guarantor of the cancellation. If an unconsummated disbursement is not due to a student’s withdrawal, the lender must report the unconsummated disbursement to the guarantor and advise the guarantor whether to cancel all pending disbursements (see subsection 6.2.G. for information on reissuing a loan disbursement).

If the lender makes a disbursement on a loan, not knowing that a previous disbursement was unconsummated, and the subsequent disbursement is consummated, the loan retains its guarantee as long as the lender has notified the guarantor of the subsequent disbursement according to the guarantor’s established procedures. The lender is entitled to receive applicable federal interest benefits and special allowance payments on a consummated disbursement with a valid guarantee.

Affected Sections: 6.2.F.
Effective Date: Disbursements made by the lender on or after January 1, 2000.
Policy Information: Reference # 332
Guarantor Comments: None

Common Claim Initiative Effective Dates Clarified

This spring, the Common Manual Governing Board unanimously voted to delay implementation of the Common Claim Initiative (CCI) policies in chapter ^CCI8 Delinquency, Default, and Claims of the Common Manual. This delay in implementation was approved to accommodate current industry efforts to standardize electronic formats for the transmission of preclaims and claims information. Because this final action was taken after the text of the manual was finalized for publication, the opening page in chapter ^CCI8 of the July 1999 Common Manual update contains information on the effective date for collection of information, that preceded action by the Governing Board. We apologize for any confusion that this may have caused.

The new effective date for the implementation of the CCI policies in chapter ^CCI8 will be as follows:

July 6, 1999                     Preclaims Documentation Released
September 6, 1999          Earliest Guarantor "G" date
March 6, 2000                 Earliest Required Implementation Date
July 6, 2000                     Latest Guarantor "G" date
January 6, 2001               Latest Required Implementation Date

Please contact LOSFA for more information on implementation of the CCI preclaims and claims requirements, at 1-800-259-5626. Lynda Downing, Preclaim Administrator’s extension is 1062. Gwen Johnson, Claims Administrator, may be reached at extension 1073.

Current Common Manual policy does not advise lenders that they must maintain compliance with origination responsibilities when making a disbursement. Revised Common Manual policy adds a cross-reference to subsection 6.1.A. to ensure that lenders are aware of all disbursement requirements, which include loan origination requirements. Revised policy also clarifies that a lender must not disburse loan proceeds prior to the scheduled disbursement date supplied on the guarantee disclosure.

Affected Sections:                6.2
Effective Date:                     Retroactive to the implementation date of the Common Manual
Policy Information:               Reference # 336
Guarantor Comments:          None

The Higher Education Amendments of 1998 shortened the delivery period for loan proceeds disbursed by EFT or master check from 10 business days to 3. The Common Manual has been revised to state that, for Stafford and PLUS loan proceeds disbursed by EFT or master check and received by the school on or after July 1, 1999, the school must deliver the funds directly to the student, or credit the student's account at the school, within 3 business days after the school's receipt of the loan proceeds. The existing reference to the 10-business-day delivery period will be moved to appendix H of the manual.

The chart entitled "Examples of Time Frames for Disbursing and Returning Loan Proceeds," has been expanded to incorporate a new, fourth example covering the return of funds disbursed by EFT or master check after the conditional 10-business-day period:

Affected Sections:               6.3.E.
Effective Date:                    Loan proceeds disbursed by EFT or master check and 
                                              received by the school on or after July 1, 1999
Policy Information:              Reference # 337
Guarantor Comments:         None

Common Manual policy requires a borrower to request an in-school deferment either verbally or in writing and provide the lender with documentation necessary to support the borrower’s eligibility for deferment.

The Higher Education Amendments of 1998 no longer require a borrower to request an in-school deferment. A lender may now grant an in-school deferment to a borrower based on student status information that documents the borrower’s enrollment at least half-time. The lender may use documentation from an appropriate source (e.g., the borrower, school, guarantor, National Student Loan Clearinghouse, or NSLDS)—provided the documentation supplies sufficient information to ensure that the borrower meets all eligibility criteria.

Affected sections:                     7.9.A., 7.9.B.
Effective Date:                         Deferments granted on or after October 1, 1998
Policy Information:                   Reference # 338
Guarantor Comments:             None

Final Demand Requirement Clarified

Current Common Manual policy states that a final demand letter must require borrowers to remit payment in full and warn that if no payment is received, the default will be reported to a national credit bureau. To more accurately reflect regulatory and statutory requirements, this policy has been revised to state that a final demand letter must require the borrower to remit payment in full and warn that if the borrower defaults on the loan, the default will be reported to a national credit bureau.

Affected Sections:                  8.1.D., ^CCI8.1.D.
Effective Date:                       Retroactively to the implementation of the Common Manual
Policy Information:                 Reference # 339
Guarantor Comments:            None