 |
Direct Loan Evaluation |
Executive Summary |
|
U.S. Department of Education - Office of the Under Secretary |
|
This Summary Case Study Report is part of the 5-year evaluation of the Federal Direct Student Loan Program (FDSLP) contracted by the U. S. Department of Education (ED) to be conducted by Macro International and Coopers & Lybrand. In this first year of the evaluation, case studies were conducted with five institutions participating in the first year of Direct Loan implementation. These sites were selected to represent diversity according to geographic region, institutional type, and control and loan volume. Interviews were conducted with the Director of Financial Aid and other administration officials, including the Bursar's Office, the Business Office, the Registrar and computer support staff; at four institutions, interviews were also conducted with a total of 23 student borrowers, only two of whom had obtained Direct Loans. Case study protocols were used to ensure consistency of questions asked and to facilitate cross-site summaries of information. Primary interview topics included:
• Extent to Which Services Met Institutional Needs
• Approaches to Implementing the Direct Loan Program
• Workload, Assignment of Responsibilities and Resources
• Institutional Satisfaction with the Direct Loan Program
• Institutional Satisfaction with ED-Provided Services
Extent to Which Services Met Institutional Needs
• The timely delivery of all services satisfied the first criterion for meeting institutional needs. Institutions were enthusiastic in their praise for the technical support offered, the responsiveness of ED to inquiries and its commitment to resolving problems, and the quality of the training materials.
Those institutions visited said their inquiries about the software were answered quickly and in sufficient detail by the servicing staff. ED initiated communication with the schools and solicited their feedback on training, counseling materials, and the Direct Loan software. Immediate actions were taken to improve the software and training. All institutions said that the training materials were comprehensive and easy to use.
• Institutions' reactions to the delivery of the Direct Loan training, the EDExpress software, and major issues requiring policy specification were mixed.
Specific suggestions for improvement in the training included: (1) targeting different levels of expertise among attendees; (2) offering additional training opportunities for those who could not attend the prescheduled sessions; (3) providing more interactive sessions among experienced and inexperienced institutional users of the software; and (4) making the servicer and ED policy staff available during training to address policy issues.
Chief among the numerous criticisms of the software were that it: (1) does not allow batch processing; (2) is loan based, and therefore does not allow for processing subsidized, unsubsidized, and PLUS loans for a single student in a single module; (3) has no quick-save capability, requiring each screen to be saved; (4) lacks fields assigned to local users to add information on a loan record; (5) is unable to sort and report data by school or report data by student; (6) is not easily used by institutions with multiple start dates within an academic semester; and (7) is not readily adapted by schools in a consortium or in a multischool corporate structure because it requires the same computer to be used in originating loans and drawing down funds.
Areas of concern that require further policy development are: (1) the treatment and definition of default rates in the two Programs; (2) the potential effect of consolidation on FFELP default rates; (3) crediting of PLUS versus Stafford Loan refunds to students or parents; (4) potential for congressional funding caps on student loan programs; (5) relationship of institutions with guarantee agencies, especially public institutions which are subject to State regulatory authority; and (6) potential institutional liability for borrower defense.
Overall, institutions' response to the transition year was positive. Most of those with specific criticisms believed that ED exerted remarkable effort, delivered on its promises, and is attempting to resolve identified problems as quickly as possible.
Approaches to Implementing the Direct Loan Program
• Two primary planning approaches were noted at the case study sites--the "team approach," involving representatives from all offices with responsibilities for implementing the program, and the "directed approach," using a single office or person to plan for implementation.
Not surprisingly, the team approach seemed to facilitate school-wide knowledge of and commitment to the Direct Loan Program. It also corresponded with more targeted resources expended on planning for the program.
• Systems decisions were perhaps the most difficult and involved potentially the greatest impact on resources of all decisions made in the implementation phase.
Schools using mainframes to process FFELPs and/or Pell Grants had to determine the most cost-effective way to integrate Direct Loan processing. Because EDExpress is designed for PCs rather than mainframe systems, two schools developed their own interface systems and wrote or purchased their own software.
Workload Assignment of Responsibilities and Resources
• There were no dramatic changes predicted for staffing levels.
Staff responsibilities for the Direct Loan Program were assigned primarily on the basis of existing FFELP and Pell responsibilities. Only one school hired additional staff to implement the new program.
Only one school said it would add several staff during its first year because it would be operating two loan programs. After 100 percent Direct Loan participation, this school predicted it would only need an additional .5 FTE staff.
• Each school's estimate of resources expended in the transition to the Direct Loan Program was less than $26,000.
Schools originating their own loans spent more on travel, training, and equipment than schools under alternate origination. This may have been due to the smaller size of institutions using the alternate originator. Two schools that spent more than $5,000 believed the investment would be repaid through the administrative allowance, but one school did not think its expenditures would be adequately compensated.
• The schools noted that staff responsibilities are more likely to change within offices than across offices.
For example, schools that said they were likely to spend less time following up on borrower inquiries involving multiple lenders and guarantors but that they would probably spend more time counseling students.
Institutional Satisfaction with the Direct Loan Program
• Four of the schools believe that this program will provide substantially better service to their borrowers and that it will eliminate much staff effort and student time.
Specifically, the schools mentioned that the delivery of loan funds to students will be faster and that students will not have to spend time waiting in lines to receive their checks. Similarly, they feel that this Program will considerably reduce institutional staff time spent in alphabetizing and disbursing loan checks.
• One school did not believe the Direct Loan Program will offer any significant advantages over the FFELP with Electronic Funds Transfer (EFT).
This school's administrators believe that the EFT transmission of loan funds provides the greatest benefits in terms of saving staff time and minimizing delays in loan fund receipt by students.
Institutional Satisfaction with ED-Provided Services
• As stated under the Federal Administration highlights, schools praised the ED services received as timely and responsive to their needs.
Training, software, the counseling materials, and the servicing system were delivered on time. Counseling materials did not, however, contain information on loan repayment options and consolidation.
• Specific suggestions for software and training were offered by all schools visited.
Software did not accommodate some schools' needs for: (1) sorting and reporting by students, (2) multiple starts within an academic semester, (3) batch processing, or (4) efficient processing of multiple loan records for a single student. Training delivery, although adequate, did not facilitate: (1) sharing of information by experienced school users, (2) needs for unscheduled training, or (3) accommodation of diverse levels of experience and/or backgrounds (i.e., business officers versus financial aid administrators).
Considerations for Schools and ED
Based on case study school comments, the project staff compiled a list of suggestions for schools entering the Direct Loan Program and/or ED to consider in planning for and implementing the Program. These suggestions represent the experiences of five different schools; therefore, not all items will be applicable to any given school.
Considerations for Schools
The following are project staff observations based on comments made by the schools during our site visits about lessons they learned in the transition to the FDSLP.
Planning
• Assign FDSLP responsibilities on the basis of past Title IV experience.
• Involve other offices in planning for higher levels of commitment and success.
• Involving others in planning may lead to increased workload sharing.
• Make use of other schools' experiences.
• Adapt and modify the practices of other schools to suit your own unique needs.
• Draw on knowledgeable personnel, especially computer literate staff.
Training
• Have more than one person attend ED training.
• Select the appropriate level of training for staff to attend.
• Staff members that will be working closely with the program should attend the training.
Operations and Resources
• State-of-the-art PCs improve the efficiency of Direct Loan operations.
• Computer literate FAO staff are assets and can offer immediate computer help.
• Utilize staff with relevant skills during the first and second year to develop your processes.
• The current software is DOS-based and may be inefficient for Macintoshes.
• Student accounts can be an efficient way of operating within the FDSLP.
Student Counseling
• Explain repayment options and payment methods soon after admission.
• Do not assume one explanation will suffice. Repeat and repeat again.
Considerations for ED
The following are project staff observations based on comments made by the schools during our site visits that ED may want to consider for Year 2 and subsequent years of the Direct Loan Program. Please note that some of these suggestions have already been implemented or are under consideration.
Training
• Plan separate training sessions based on loan and ED software experience.
• Schedule training time or special regional sessions for schools to exchange information.
• Encourage trainer involvement during hands-on practice.
• Develop a clearinghouse of implementation information.
• Establish a school referral system for schools to exchange information.
Software
• Consider working with major commercial vendors of mainframe software for postsecondary institutions in order to develop needed system interfaces.
• Set up an EDExpress testing process of origination and drawdown procedures for schools with limited experience.
• Consider converting the current software from a loan-based system to a borrower-based system.
• Allow an unsubsidized loan record to be automatically generated using the subsidized loan record for the same borrower.
• Design a save-screen override so the user does not have to save each screen when exiting.
• Add fields to the loan record to allow for unique student information or identifiers.
• Allow school access to the EDExpress programming code for individual software modification.
Customer Support
• Ensure adequate ED and servicer customer support staff and equipment during Year 2 and beyond.
Loan Servicing
• Provide schools with online query functions of their origination activity and loan status information.
Policy Guidance
• The cohort default rate under the FDSLP needs to be defined.
• Define how consolidations of FFEL loans with Direct Loans will affect the FFEL default rate.
• Improve conformity and compatibility of regulations for FDSLP with those in other Title IV programs.
• Clarify regulations regarding the timeline for considering a PLUS loan denial as final.
Based on the experiences of the five case study schools, there are numerous planning approaches that can be taken to implement the Direct Loan Program. The information collected during the case studies allowed the project team to develop Direct Loan implementation suggestions for schools and ED. We hope that this report will provide schools and ED with useful information in planning for and/or implementing the Direct Loan Program.
-###-
Text of Report
Return to Direct Loan Evaluation Page
Return to Financial Aid Evaluation Page
Last Updated -- July 1, 1998 (swz)