Common Manual Interim Policy Updates

As you are aware, the Common Manual Governing Board periodically approves modifications to the Common Manual.  Recently, several policies were approved to modify the Common Manual. These changes will be incorporated into the Common Manual when the next annual update is published in 2000.

Attached are interim updates to the Common Manual which address policy revisions approved on August 19, 1999.  Pay particular attention to the effective dates for these interim policy updates.

Any questions related to the attached Common Manual interim policy update should be directed to the UHEAA Policy and Training Department at (801) 321-7166 or by email at cjudd@utahsbr.edu.

Attachment

Consummated and Unconsummated Disbursements Clarified
Current Common Manual policy specifies criteria a lender uses in determining whether a loan is considered consummated or unconsummated, for recordkeeping 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 recordkeeping 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.

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 120th 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 120th day after the date of disbursement.

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, unless implemented earlier by the guarantor.

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:

A guarantor will establish the date on which it is ready to trade CCI electronic records with its trading partners (i.e., lenders and servicers). This date is referred to as the "G" date. All guarantor "G" dates will be established based on the final publication of the CCI electronic formats with one "G" date for Preclaims and another "G" date for Claims. The earliest "G" date that a guarantor may establish is two months after the final release of the CCI Preclaim and Claim documentation, respectively. The latest "G" date that a guarantor may use is 12 months following the final release of the CCI documentation.  All CCI trading partners (i.e., lenders, servicers, and the guarantor) will be provided a window of six months from each guarantor's "G" date to start reporting data using the CCI electronic format.  Therefore, the preclaims and claims effective dates will be the guarantor "G" date plus six months.  For example:

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

Loan Disbursement by Lenders
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

Three-Day Delivery Period for EFT and Master Check
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 For a copy of this chart, please call Lynda Reid at (801) 321-721

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

Conditions for Authorized Deferment
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

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