UNIVERSITY ADMINISTRATIVE POLICY NO. 13
SUBJECT: NATIONAL DEFENSE STUDENT LOAN/NATIONAL DIRECT STUDENT LOAN PROGRAM/PERKINS LOAN PROGRAM, BILLING AND COLLECTION PROCEDURE
RESPONSIBLE OFFICES: Financial Aid Office and Business Office
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The Policy and preocedures contained herein apply only to the National Defense
Student Loan Program now the National Direct Student Loan/Perkins Loan Program.
Policy and procedures for other student loans such as Virginia State Loans will
be provided by separate instructions.
The National Defense Student Loan Program was estabalished in 1958 for the purpose of making long-term, low-interest loans to qualified studnets in need of financial assistance. Effective July 1, 1972, the National Defense Student Loan Program was replaced by a new program known as the National Direct Direct Student Loan Program. Beginning with the 1987-88 award year, the National Direct Student Loan Program was renamed the Perkins Loan Program in honor of the late Carl D. Perkins, former chairman of the House Education and Labor Committee. Loans made before July 1, 1972, are Defense Loans; loans made from July 1, 1972 to June 30, 1987 area Direct Loans; a loan made on or after July 1, 1987, may be either a Direct Loan or a Perkins Loan: if the borrower had an outstanding balance on a previous Defense or Direct Loan on July 1, 1987, the new loan is a Direct Loan; if the borrower had no outstanding balance on a previous Defense or Direct Loan on July 1, 1987, the new loan is a Perkins Loan.
Perkins Loans and Direct Loans are low-interest, long-term loans made through institutional financial aid offices to help needy undergraduate and graduate students pay their postsecondary educational costs. The school must give priority to students with exceptional financial need as defined by the school. The current interest rate is 5 percent.
These programs are administered in accordance with the National Defense Education Act and the Higher Education Act of 1965 and such regulations and instructions that are promulgated by the U.S. Secretary of Education.
This administrative policy is provided to designate areas of responsibility in the administration of the program and to prescribe the appropriate billing and collection procedures.
The Financial Aid Office and the Business Office are responsible for monitoring and managing this Administrative Policy.
A. The Financial Aid Officer is responsible for:
1. The general administration and conduct of the program.
2. Determining eligibility of applicants.
3. Determining the amoount of the loan.
4. Approving the loan.
5. Obtaining "Statement of Educational Purpose."B. The Business Office is responsible for:
1. Issuance of check for approved loans.
2. Obtaining signed promissory note.
3. Maintenance of required accounting records.
4. Maintenance of the Cash of the fund.
5. Operate an effective collections program.C. The Financial Aid Officer and the Business Office are jointly responsible for:
1. Conducting exit interview with departing student.
2. Submission of required financial reports.
A. Exit Interview
Although the borrower should be aware of the program at the time they accept a loan, the exit interview will serve a two-fold purpose. First, it serves as a vehicle through whicht he borrower will be reminded of details previously provided in the promissory note; such as duration of grace period, terms of payments, billiing proceudres and interest charges. The borrower at this time may be apprised of the advantagae of accelerated payment and the opportunities for deferment and/or cancellation of the loan obligation. Secondly, the exit interview will be utilized to obtain all possible up-to-date information with respect to the borrowers' status that may be valuable should extraordinary collection efforts eventually become necessary. In this regar,d the Perkins loan questionnaire will be utilized.
B. Establishment of Repayment Schedule
At the time of leaving the University, a Loan Repayment Schedule will be provided the borrower and a copy signed by him as acknowledgement that the repayment terms are understood. This schedule will reflect when each payment is due, the amount of interest and principle included in each payment and the balance of the loan after each scheduled payment. The schedule also provides information as to the grace period and the payee to be shown on checks and money orders.
C. Issuance of First Contact Letter
In order that public funds be repaid promptly, it is necessary that the collection process be systematically administered. This is particularly important since the contractual obligation represented by the loan may very well be the first debtor/creditor relationship established by the borrower. It is necessary therefore that the borrower be reminded in advance of the payment due date. For this purpose, the form letter (attachment 2) will be used. This letter will be sent out between 30 and 60 days before the end of the grace period.
D. Issuance of Statement of Account
Approximately 15 days prior to the due date of payment, a statemnet will be submitted to the borrower. If no payment has been received 15 days afer due date, a second notice of statement will be sent. George Mason University Billing Form (attachment 3) will be used for this purpose.
E. Issuance of Follow-up Letters
If no payment has been received 60 days after due date, a follow-up letere (attachment 4) will be sent. After 90 days a final follow-up letter (attachment 5) will be issued.
F. Referral to a Collection Agency
It after 120 days the preceding steps have not resulted in any collection or any explanation by the borrower as to the circumstances causing the delinquency, the account will be turned over to the collection agency with which George Mason University has a contract. Prior to taking this final action, if the borrower provides information that indicates his financial difficulties are of a temporarynature and deomonstrates a sincere desire to meet his obligation, all possible consideration will be given by revising the payment schedule as necessary to provide minimal payments over a current period withincreased payments as borrower's financial prospects improve.
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All amendments and additions to George Mason University Administrative Policy
Number 13 are to be reviewed and approved by the Office of the Executive Vice
President for Administration and the Office of the Executive Vice President
for Finance and Planning.
VI. EFFECTIVE DATE This policy set forth became effective immediately upon receipt, but not later than April 1, 1973.
The policies herin are effective March 5, 1993. This Administrative Policy shall be reviewed and revised, if necessary, annually and to become effective at the beginning of the University's fiscal year, unless otherwise noted.
Maurice W. Scherrens
Executive Vice President
for Finance and Planning
APPROVED: George W. Johnson DATE: March 5, 1993
PRESIDENT
Stanley Taylor, Administration: (703) 993-8754, staylor@gmu.edu