A r c h i v e d  I n f o r m a t i o n

Besides providing EDExpress software, technical support services, and borrower counseling materials, ED provides Direct Loan schools with training, various technical references, an electronic bulletin board, videoconferences, policy guidance, and the support services of the Direct Loan Regional Offices. What follows is a brief summary of the case study schools' use of and satisfaction with the latter group of support services.

Training

Reconciliation Training

Based on Year One experiences, numerous modifications were made to training in Year Two. Training in reconciliation was enhanced by the addition of the state-of-the-art facilities at the Regional Offices and better materials, including manuals and guidebooks.

Satisfaction with the reconciliation training was mixed. Some of the FAOs visited indicated that it was scheduled at exactly the time needed--early fall--because they had just begun the reconciliation process. Some also reported that the trainers were responsive and answered all questions. By contrast, FAOs from three schools who attended reconciliation training in Washington, DC, said the trainers were poorly prepared, ended the session hours earlier than scheduled, and did not answer questions about performing reconciliation on a mainframe computer.

All FAOs who made suggestions for improving training said that hands-on training is the most valuable kind. The new Regional Office training laboratories have begun to address this issue; the classes are small and the facilities support participatory training. FAOs who attended Title IV update training and other Regional Office training sessions appreciated the Account Managers' efforts and the fact that travel expenses for training were reduced, allowing them to attend training sessions they would otherwise have had to forgo.

Year Three Training

Of the four Year Three schools, only two had staff members who attended an introductory Direct Loan training session by the time of the site visit. Two others had staff members attend a one-day session about one week after the site visit. Since there will be no three-day Direct Loan training offered in New England (Region 1), schools in that region will have to attend training in New York City.

Schools' Suggestions for Improvement

FAOs reported a number of ways in which ED could expand or improve Direct Loan training. Some of the suggestions included the following:

• "Best Practices Seminars," at which Direct Loan schools could share their experiences;
• Training in solving problems;
• Expanded training in using query and reporting options;
• More time for interaction with other schools; and
• More training for mainframe schools led by trainers knowledgeable on this topic.

It was also suggested by FAOs that published training schedules include more detail about the contents of the training session. FAOs would like to be able to distinguish sessions recapping skills and information they have already learned from those offering new information. Another FAO suggested offering more Direct Loan training sessions focusing on particular topics, similar to the reconciliation training.

Manuals and User's Guide

Some FAOs regarded ED's technical manuals and user's guide as useful resources but limited in scope. Topics such as loan changes and explanations of Servicer error codes either are not covered at all or are not covered with sufficient detail or clarity. (Note: School 13's FAO said she uses the "Get Help" and "Codes" sections of the Software User's Guide extensively.) Others found the printed materials difficult to use because the language is too technical or because they are not arranged in a user-friendly way. They could not always find the section they needed and could not always understand the information presented. Many FAOs did not use the documents for solving technical problems in loan processing because there is no problem-solving section. Instead, they called the Direct Loan Servicer for guidance.

Electronic Bulletin Board

No school reported using ED's bulletin board. The few schools that use the Internet reported using the FINAID-L bulletin board developed by Pennsylvania State University for updates about regulations and general financial aid information. School 18 also used the Direct Loan Bulletin Board (established for use only by Direct Loan schools by the University of Oregon's FAO) for exchange of information on loan processing and ideas on solving problems.

Teleconferences

Schools that participated in ED's teleconferences appreciated this medium because it allowed all office staff to attend training at a minimal cost. The FAOs who viewed some of the videotapes of the sessions exhibited mixed responses. Some FAOs said that although it was a good medium for transmitting information, it should not be viewed as a substitute for in-person or hands-on training. Other FAOs said there was little relevant content. Two FAOs said they appreciated the ability to fast-forward through "boring" or irrelevant sections and view or review the sections containing relevant information. Overall, this medium for transferring information was found to be relatively helpful for most with viewing capabilities.

Policy Concerns

FAOs reported that they called the person they knew and felt most comfortable with when they had a Direct Lending policy question. A number of FAOs call a member of the Direct Loan Task Force; others ask questions of the Servicer's technical support team. None of the FAOs reported asking the Direct Loan Account Manager about policy issues, but some would consider that as an option if they were assured that ED was keeping Account Managers up-to-date with all pertinent Direct Loan Program information.

Direct Loan Regional Office

Of the 19 schools visited, five used the Regional Office for technical assistance--two Year One schools, two Year Two schools, and one Year Three school. The TPS of School 20 called the Regional Office frequently. Schools contacted the Regional Office for the following services:

• Assistance with loan processing problems;
• Assistance with reconciliation procedures;
• Questions about completion of paperwork and reporting; and
• Help in resolving conflicting information from the Servicer and the EDExpress software contractor.

Reasons cited for not calling the Regional Office for technical assistance included the following:

• The FAO was not sure what help the Account Managers would provide;
• The FAO did not perceive the Account Manager as being sufficiently knowledgeable in financial aid duties; and
• The FAO called the Direct Loan Servicer, the commercial-software vendor, or a Direct Loan Task Force member to obtain assistance.

The FAO of School 15 noted that she believed that calling ED could entail the risk of triggering a site review. She did not differentiate between the Direct Loan Regional Office and the Institutional Participation and Oversight Board at ED's Regional Office. An Account Manager pointed out that the purported relationship between requests for technical assistance and institutional review was inaccurate. The Account Managers made a great effort to overcome this initial hurdle in gaining schools' trust.

VII. Regional Office Account Managers

Macro's case study teams visited five Regional Offices located near schools in the study sample. The five offices were similar in staff background, training received, structure of staff, services provided, and philosophy. The main differences observed were in the school-to-staff ratio and the stage of development of the training facility.

Staffing, Staff Background, and Office Structure

Most Regional Offices had no more than one or two persons with a background in financial aid to higher education. Most of the Account Managers were hired from other Government agencies. Each office had hired recent college graduates with no experience in financial aid under the Outstanding Scholar Program.

All offices used a form of team structure to organize the staff. Each team was assigned responsibility for a portion of schools in the office's region. The ratio of Direct Loan schools to staff ranged from 14:1 to 35:1. Within the teams, there were Account Managers who had developed specialized expertise in training, computer systems and software, and reconciliation. As training activities increased, the ability of the trainers to respond to "their" schools became more limited, but most offices reported that all staff members participated in developing training materials and training presentations and responded to incoming calls for assistance. There appeared to be a highly cooperative atmosphere within each office, with each Account Manager sharing overall office responsibility.

Account Manager Training

Almost all Account Managers received the same basic training. That training included the following:

• Three weeks of intensive training conducted by Direct Loan Task Force members, representatives from the first cohort of Direct Loan Schools, and representatives of the Direct Loan Servicer and the software contractor--where the focus was on policy and day-to-day Direct Lending administration;
• A two-week externship in the Financial Aid Office of a first-cohort Direct Lending school--a form of training that covered day-to-day operations;
• Two and one half-days of EDExpress training;
• A two and one half-day visit to the Direct Loan Servicer, which included an overview of loan processing and servicing activities and a focus on the reconciliation process;
• A one-week Account Manager Follow-up Training Conference, conducted by first-cohort schools that had made a significant commitment to implementing Direct Lending, in which both large universities and small schools--including proprietary schools--were included; and
• Training in a wide range of computer applications.

Not all late hires received all training because of an accelerated operating timetable and increased demands for staffing the office. There was also considerable cross-training among office staff. For example, at one office Account Managers selected a topic to study in depth and presented their findings and a summary of their notes to other staff members.

Account Managers and Regional Office Directors all said that further training was necessary for the Account Managers to be able to fully function in their job. Many reported that the initial Title IV training assumed a basic knowledge of financial aid that the Account Managers did not possess. They could not absorb all of the information presented and "real life" applications of this information, but only realized this after they began working in the field. Most of the offices operate in a structure that requires each Account Manager to function as a specialist in all areas of Direct Lending. Therefore, many requested more cross-training in topics such as reconciliation and computer systems. Additional training was desired in the following areas:

• Overall Title IV (especially whom to contact at ED with questions);
• Hardware and software systems management--particularly in the area of memory and memory backup;
• Direct Loan updates--software and policies;
• Local Area Network (LAN) administration for maintenance of a training facility; and
• Information and technical training from ED contractors for ED's new systems, such as the Postsecondary Education Participation Service (PEPS). (General systems information has been difficult for the Account Managers to obtain.)

A number of Account Managers said that additional hands-on training, in the form of externships at financial aid offices, would be more meaningful once they had acquired a rudimentary knowledge of financial aid.

The Account Managers also noted that they could better serve the schools if they could offer more detailed assistance to schools entering the computer age. There were problems with databases and language, and new commercial software systems that required additional support. The Account Managers realized they cannot become experts in these areas, and said they need expert resources to turn to for help in this area.

Account Managers indicated that attending regional and State professional association meetings helped keep them up-to-date and would like to continue attending those sessions.

Principal Activities

With the number of Direct Loan schools increasing, ED developed the Account Manager system to duplicate the support role played by the Direct Loan Task Force. Account Managers reported providing technical assistance and training to the schools while onsite, or over the telephone, as their main activities. They often served as a liaison with the school, Servicer, and software contractor in solving technical problems. Account Managers received frequent requests from ED for information about the schools (or from the schools) through this office. Some Account Managers reported spending as much as 20 to 25 percent of their time documenting contacts with the schools.

Technical Assistance

At the beginning of office operations, most Account Managers made visits to introduce themselves to their schools. One Regional Office visited in mid-October emphasized in-person technical assistance to its schools. Some offices were directed to limit or stop onsite assistance because of budget constraints.

On-site technical assistance was found to be the most effective means of assistance. FAOs were emphatic about the benefits of Account Managers coming onsite to provide assistance for the following reasons:

• The visit helps create a relationship between the Regional Office and the School; FAOs perceive ED as caring and willing to help;
• The Account Manager has the opportunity to see the computer screens--which are crucial for identifying the source of a problem--and at the same time, they can uncover other potential problems;
• The visit can provide an opportunity to improve trust and confidence in the Account Manager's abilities;
• The Account Manager can walk an FAO though a Direct Loan process, observing where the FAO is having difficulty; and
• The Account Manager can bring other school staff members (from the Business Office or the computer support staff) to a meeting to discuss problems and identify solutions jointly--which is easier in-person than scheduling conference calls and callbacks.

The emphasis during the first year of the Account Management system was on providing technical support over the telephone. During peak periods of loan processing or reconciliation, Account Managers reported receiving as many as 20 or 30 calls from schools each week. There are, however, limitations to telephone-based assistance, including the following:

• Frequent callbacks are needed, especially when the Account Manager is acting as a liaison between the Servicer and the school or does not have an immediate solution to a problem.
• Account Managers often have to schedule calls, especially if more than one person is involved.
• The Account Manager has to rely on the FAO to describe the problem or the data appearing on a screen; however, the source of the problem might lie on another screen. (Account Managers have EDExpress on their PCs, but no school data. They said they would like to be able to have modem connections to the schools so the schools could transmit their data to Account Managers' screens. That would improve their ability to identify and resolve problems over the telephone.)

Some Account Managers expressed frustration with their role as liaison between schools, the Servicer, and the software contractor because the technical support staff did not always have the answer to a question or could not solve a problem. Some schools used the Regional Office as a "last resort" when there was difficulty obtaining the needed assistance from the Servicer's technical support staff, while other FAOs called the Account Manager as a first resource.

The Account Managers are strongly oriented toward customer service. In fact, one Account Manager requested further training in approaches to and techniques for customer service.

National Question-and-Answer Database

At the time of the visits, the Regional Offices were in the process of developing a National Question-and-Answer (Q&A) Database. The objective was to combine all school-based questions and appropriate responses into a single resource that all Account Managers could use to provide uniform responses to schools.

Some Account Managers were apprehensive about the planned Q&A system, expressing fear that the system will fall short of its potential because critical elements of information will be missing. The envisioned system would contain the schools' histories and questions and answers being fielded by the 10 Direct Loan Regional Offices, but not policy pieces from ED. The questions and answers from the Direct Loan Servicer's technical support staff would also be excluded. Although a team of Account Managers was working on categorizing the Servicer's database of technical questions and answers, nothing (to the knowledge of the interviewed Account Managers) had been done with the results. They believed that for the system to be an effective tool, all participating agencies must be funneling information in.

The Account Managers said that another weakness of the planned Q&A system is the lack of integration with other information databases. The IQUERY system--which allows the Account Manager to read the Direct Loan Servicer's file on each school--is not integrated with the Q&A system. To be able to use this information about the school in conjunction with the Q&A system, the Account Manager would have to log off one system and log on to the other. They believed that ED is working on a means to download IQUERY to a flat file in order to later upload it into the Q&A system. The Account Managers will be able to access the National Student Loan Data System (NSLDS), but that data system is not integrated with the Q&A system.

Training for Schools

Eventually each Regional Office will have a state-of-the-art training facility on-site. At the time of the five site visits, three of the training facilities were operational.⁽¹¹⁾ These facilities include multiple user stations, a server, and instructor stations. They also contain a variety of audiovisual equipment, including a new LCD projector and an overhead projector.

Training schools for Direct Lending has the highest priority at these facilities, but the facilities will also be used for training in other student financial aid programs as well as ED training in other areas. Two of the offices had fully operational training facilities and were offering regularly scheduled sessions. In conjunction with the ED Student Financial Aid (SFA) Office, Regional Offices conducted Direct Loan and EDExpress segments for training in Title IV updates. Three Year Three Direct Loan training sessions and several Title IV Update training sessions were scheduled for spring 1996. The Regional Offices will offer training on reconciliation and (with the Guarantee Agencies) training on Student Status Confirmation Reports (SSCRs).

Relationship With ED

Quality of Communication

Account Managers reported regular, continual communication with ED and the Task Force by means of weekly conference calls. Most offices had a single member of the Task Force designated as the liaison. The Account Managers often called that person to answer specific technical questions.

The Account Managers at one office said they had only one conference call to address policy issues in Direct Lending. They said they need to be more informed about changes that are taking place at ED so that when schools have questions, they are better prepared to respond. They have asked for a conference call to be held every 2 weeks to discuss policy issues and update them on Direct Lending changes, but they said the Task Force would not make a commitment to that schedule.

At one office, the Account Managers said they received ED's "Dear Colleague" letters at the same time the schools received them. That timing did not give the staff sufficient time to review and understand the implications of the information before the schools began calling with questions.

Overall Relationship

Examining their relationship with ED as a whole (beyond issues of communication), some Account Managers expressed dissatisfaction. They said that ED officials have a different vision of the Direct Loan Program from that of Regional Headquarters staff. These different visions hinder their mutual ability to develop the cooperative relationship needed for best serving the schools. For example, some perceived ED as having a different philosophy about the internal workings of the Direct Loan Program, saying the Task Force puts more of a premium on appearances than substance. They cited the following examples:

If a school has a problem, the office will hear about it first-hand from front-line Direct Loan staff; the Task Force, however, may hear about it "fourth-hand" from the school's administration. The office will try to determine the source of the problem and attempt to find a solution--sometimes a time-consuming process. In comparison, ED gives the office a directive for an immediate and instantaneous resolution, without--according to the Account Managers--having a thorough understanding of the problem.

The Account Managers have been frank with schools, disclosing problems with EDExpress; they believe they need to be open with schools to maintain credibility.

In summary, Account Managers said that more direction and a more uniform vision from ED would provide more support for the Regional Office. The Office staff saw their role as serving the schools and helping them work with ED.

VIII. Summary of Institutional Costs

The cost of implementing Direct Loans differed dramatically across schools, with a range from $3,000 at School 10 to about $80,000 at Schools 1 and 2. (Table 7 summarizes total costs to date for all schools.) As reported last year, the most extensive expenditures occurred in the  areas of computer equipment and programming. With the exception of School 16, travel for training costs appeared to be less for Year Two schools than for Year One schools. Those costs should continue to decline as schools take advantage of the more convenient location of training provided by the Regional Offices. Only one Year One school reported additional training costs of $1,000.

*Includes mailing promissory notes to Servicer, publicity costs, and the 1-year cost of a third-party Servicer at School 3.

**School 20 did not provide cost of third-party Servicer.

Ongoing expenditures were reported in the categories of added staff, printing ($1,000-$1,500), future travel to Direct Loan training ($1,000-$2,000) and mailing promissory notes to the Servicer ($500-$700 per year). Some schools said they might need system upgrades and more software in the future, but those estimated costs are not included here because it was not clear that these could be attributed to Direct Lending. Although School 20 did not report the cost of its third-party Servicer, this will be an ongoing cost unless, like School 3, they begin to administer Direct Loans at the school. All other expenditures reported were one-time start-up costs.

Followup With Year One Schools

Because Year One schools did not report the extra annual cost of mailing promissory notes to the Servicer, for many schools, costs reflected this year are lower than reported last year.

• School 1 reduced estimated implementation costs by $15,000. This amount represented the expected cost of their commercial mainframe software. The software for Direct Lending was included in the school's annual contract for the schoolwide system at no extra cost.
• Last year, School 1 reported $50,000 in salary and benefits for two FTE clerks to assist in administering two loan programs in Year One. At the time of the visit, the school was only administering Direct Loans, but the FAO did not report a reduction in staff (which is reflected as a lower administrative cost this year).
• School 3 replaced the former FAO and discontinued third-party servicing, reducing costs in its second year of Direct Lending by $13,500.
• School 4 reported planning to hire additional staff (.25 FTE) for Direct Lending, at a cost of $4,000. At the time of the second follow-up visit--more than one year after implementing Direct Lending--the staff change had not been made.

Year Two Schools

Of the five Year Two schools with prior visits (Schools 11 through 15), two schools reported changes from their original estimated implementation costs. School 13 spent an additional $1,000 for travel to Regional Office training. School 15 dramatically reduced estimated costs. The FAO anticipated programming costs of $55,000; actual costs to date for the service have come to $10,000.

Year Three Schools

At the time of the site visits, the Year Three schools visited had no Direct Loan expenditures and had not yet made any estimates of future expenditures to implement the Program. Based on Macro's observations of Year Two schools' experiences, Year Three schools should budget for a possible increase in costs because of start-up time, training, and equipment and expect few, if any, future costs.

IX. Perceptions of Direct Lending

FAOs were asked not only to rate their satisfaction with each of the Direct Loan procedures, but also to summarize their experience with the Program in terms of ease of implementation, estimated level of effort, and overall satisfaction (see Table 8).

*NA signifies data were not applicable.

Overall Ease of Implementation

Schools were almost equally divided between rating implementation as relatively easy or easier than anticipated and relatively difficult or more difficult than anticipated. If a school had a mainframe or developed a mainframe-to-PC interface, they were more likely than schools using a stand-alone PC to have reported difficulties with implementation. Most schools said that the first few weeks of learning the system and establishing procedures were stressful, but after that, the Program operated smoothly. Generally they found the process of originating loans to be the easiest task. Aside from the reported computer programming difficulties, FAOs found reconciliation to be the most difficult task. School 2 had expected reconciliation to entail only matching total dollars with the Servicer (as in the Perkins Student Loan Program); Schools 4 and 5 encountered numerous reconciliation problems--mostly caused by Year One computer processing issues.

Two of the Year Three schools expected relatively easy implementation, but they said that the level of ease would depend on the usefulness of the reference materials. The FAO at a third Year Three school anticipated a moderately difficult transition and was considering using a third-party servicer.

Level of Effort

In general, computer programmers and FAOs involved with computer programming reported a moderate increase in their level of effort, but it was considered transitional and was not expected to continue. In schools where one person performs all Direct Loan tasks, the FAOs reported an increase in their level of effort. Some of the increase was regarded as transitional and temporary. A few of the FAOs said that once all procedures were operating smoothly they expected to transfer a number of operations to an office clerk, thus reducing their overall of effort. In School 5, the Corporate Accounting staff took on almost all of the functions of Direct Lending. (FFELP Loans had been administered by a different Corporate Office and were all transmitted using EFT.) Thus, all responsibilities in the Program were in addition to their prior accounting tasks and were considered increases to the office's level of effort.

Decreased effort was reported for administrative financial aid staff and counseling staff. Schools generally reported fewer problems and delays with loans and fewer calls and visits by students concerned about delayed loans. The improvement gave the financial aid counselors more time to spend on counseling students and other job responsibilities. School 18 was able to administer all aid even though the office was short of staff, and School 2 was able to decrease the FAO clerical staff. Business offices, especially at large schools, reported that their level of effort decreased substantially because they no longer had to distribute paper checks or communicate with multiple lenders and guarantee agencies.

Experiences With FFELP

Most FAOs did not report serious problems with FFELP; however, processing of in-school deferments by Servicers was still a problem. FAOs indicated that guarantee agencies and loan servicers appeared to have improved their products, services, and attitude toward customer service in recent years. Most of them attributed the improvements to the competition with Direct Lending. A number of FAOs said that they have had longstanding collegial relationships with staffers at guarantee agencies and lending institutions and have maintained those relationships since entering the Direct Loan Program.

Two FAOs reported a less cooperative attitude from their guarantor and an active effort on the part of the guarantor to discredit Direct Lending. For example, the former guarantor for School 4 visited the school without the FAO's knowledge and told school administrators that the default rate for Direct Loans would "go through the roof." School 11's FAO reported that the guarantor was disparaging the school to student borrowers.

Overall Satisfaction

The case studies revealed that all FAOs were very satisfied with Direct Lending despite experiencing transitional or permanent increases in effort and difficulties with computers and reconciliation. They reported improved service to students with faster funds receipt, fewer delays, and less frustration. Large schools, which had paper checks under FFELP reported no student lines waiting to pick up or sign loan checks. Schools reported that Financial Aid Office procedures had been streamlined as a result of Direct Lending--paperwork was reduced, staff no longer had to communicate with multiple lenders and guarantee agencies, and loan processing was under the school's control. As a result, cash flow to the schools had improved, and the need for emergency student loans had substantially decreased.

X. Ongoing Issues for Program Year Three

While, overall, case study schools were satisfied with Direct Lending, issues emerged that may affect future satisfaction with the Program. These issues either emerged during the first 2 years of Program implementation, but have not been fully addressed by ED or were issues stemming from new initiatives such as the Title IV WAN. They are briefly discussed below, and will be further examined in Year 4 of Macro's evaluation.

Computer Systems

Many of the case study schools' suggestions for improvement focused on computer systems and increased opportunity for technical training on all ED-supplied software including any new versions. To address this, it was suggested that enhanced training be provided to schools on backing up data, installation and use of the Title IV WAN, and special EDExpress modules such as QUERY, report generation, and SSCR reporting.

Respondents also suggested that ED impress upon schools that Direct Lending is technology-dependent and that participating schools need a strong technical support staff who also have detailed knowledge about financial aid processing in order to successfully implement the Program.

Loan Processing

The main source of frustration for case study schools in all areas of loan processing, including loan origination, loan changes and cancellations, and reconciliation, stemmed from a lack of clear communication from the Servicer to inform schools when there were problems. For example, during Program Year One, schools did not receive PLUS Loan denial notices directly from the Servicer, but rather these notices had to be self-reported by students. Thus, alternative loan processing was often delayed for these students. The Servicer now sends this information directly to schools, solving this problem for Year Two.

Problems that can be rectified by timely, clear communication to schools include erroneous loan origination transmissions, partial batch transmissions (by designing a batch system on EDExpress which reports the number of records in the batch to the Servicer and allows the Servicer to immediately notify schools of partial batch transmission), loan changes and cancellations (by sending a list of canceled or changed loans to schools on a regular basis), and reconciliation (by acknowledging each month's data separately).

Training

In addition to clear communication, many of the problems that occurred during loan processing could be addressed with enhanced training and reference material. Schools expressed the desire for a "quick reference" as used in other ED programs and a "troubleshooting handbook" listing explanations of Servicer acknowledgment report codes and common errors and problems with possible solutions or corrective actions to take. Training for procedures for canceling loans--both before and after disbursements--was also suggested. Finally, by emphasizing the importance of sequencing of processes to schools, ED should be able improve the success that schools have with reconciliation.

Counseling

Counseling has been an area of enhanced concern by schools and ED. The initial set of counseling material was reported to be excellent by schools. It was requested that ED further refine some of this material--particularly the entrance and exit counseling videos and loan consolidation material.

Customer Service

Despite the expanded resources offered to schools, including the Account Managers, case study schools reported varied amounts of success with customer service staff from ED, Direct Loan contracting staff including the Direct Loan Servicer, and the Account Managers. There were two main reasons offered by schools for not taking full advantage of the resources offered to them. The first was that schools were not clear about who they needed to call for specific problems. This was further exacerbated by the fact that some schools were bounced from one source to another and did not get their problems resolved in a timely fashion. The other reason was that schools did not think that customer service staff was knowledgeable about Direct Lending and other financial aid issues.

To rectify this problem, schools suggested that ED should ensure that all customer service staff undergo adequate training and provide clear direction so that schools clearly know which entity to contact under various circumstances, such as reconciliation problems, hardware problems, and EDExpress problems.

1. The initial sample size called for five third cohort schools to be visited. Macro was unable to find a fifth school in the specified geographic region that fit the required study sample characteristics and was able to coordinate schedules with Macro staff to facilitate a site visit.

2. All site visits were conducted prior to enactment of the Omnibus Consolidated Recisions and Appropriations Act of 1996 (P.L. 194-134), which did not include a cap on Direct Lending.

3. Site visits occurred in the midst of the academic year cycle. Macro did not obtain data on end-of-year reconciliation status.

4. Primary and alternate selections were made for each sample cell. Not all the schools initially contacted chose to participate in Macro's study. When a school declined, the alternate selection was contacted to participate in the study. To limit demands on school administrators, further efforts were made to contact schools that were not participating in any other Direct Loan Program study or evaluation.

5. The process by which financial aid eligibility is determined by the federal government.

6. For proprietary, non-degree-granting schools, loans repaid under the Income Contingent option will be included in the default calculation as a default against the school if the payment is too low to repay the interest (and therefore, the loan is negatively amortized) during the first 2 years of repayment (34 C.F.R. 66827 (e) and (f)).

7. The U.S. Department of Education offers the operating software, EDExpress, to schools free of charge. Many larger schools chose to modify or replace this software with alternate products.

8. To mail the promissory note with the award letter, the school must create Direct Loan origination records and print notes for all aid applicants eligible to borrow.

9. In this report, the term disbursement refers to crediting students' accounts with loan funds; the term refund refers to the loan funds in excess of tuition and fees that are returned to the student.

10. Full descriptions of Quality Assurance (QA) procedures were not obtained. FAOs were asked whether they were implementing QA and if so, whether they were using ED's guide.

11. As of July 1996, 10 of the 11 training facilities were operational. The remaining Regional Office is in the process of looking for a more appropriate site to house these facilities.

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