Team # 835 -- Direct Loan Implementation
Finance and Business / Information Technology Services (ITS) / Undergraduate Education

March 2008

Objective

To determine the technical, processing, programming, and communication flows required for federal loans to be obtained directly from the US Department of Education, due to the instability in the financial markets and the resulting lack of access to loans through banks. It was also necessary to ensure that the students be notified to sign new promissory notes with the Department of Education.

Last year’s turmoil in the financial markets resulted in reduced capacity of private banks and lenders that provided the funding for students in the federal student loan program. The primary lender that served Penn State students announced it would cease lending under the federal program. This would impact over 40,000 Penn State students in need of loans for the 2008-09 year. The instability in the financial markets would make access to federal loan funds through banks uncertain for our students. Students and parents began expressing concern. The Penn State Office of Student Aid and Office of the Bursar would need to address this problem swiftly. All systems and processes used to process loans over the past decade would need to be changed.

An alternate method for students to receive the federal loan is through the Direct Loan Program whereby the U.S. Department of Education would be the lender for our students. The Direct Loan Program would provide an efficient system for processing student loans and would give students a guaranteed source of funds. We would secure loans for students with a single entity as opposed to multiple banks.

Eligibility for the federal loan is determined by the Office of Student Aid and disbursement of the funds is handled by the Office of the Bursar. These two offices had to begin immediately to transition to this new way of providing federal student and parent loans. Much work was required to prepare the ISIS system to transact business with the Department of Education’s automated processing systems. The objective was to be ready to disburse loan funds to students beginning with summer 2008 and to be fully prepared for the high volume of loans at the beginning of fall semester. We needed to disburse funds comparable to the amounts normally disbursed in prior years.

An implementation team was put together quickly to determine the technical, processing, programming, and communication flows required for the Direct Loan Program. This implementation team was comprised of staff from the Offices of Student Aid, Bursar and Administration Information Systems. The full team met every Monday morning beginning in March 2008 with working groups meeting more often as needed.

Among the many processing, programming and technical tasks required, another task was to ensure that all students who had previously borrowed from banks would now take the step to sign a new master promissory note with the Department of Education as their new lender. A targeted communication plan for notifying and following up with students was implemented. This step is necessary in order for the University to receive the loan funding through this program.

Team Membership

  • Al Horvath, Co-Sponsor
  • Rob Pangborn, Co-Sponsor
  • Gary Schultz, Co-Sponsor
  • Anna Griswold, Co-Chair
  • Roseann Sieminski, Co-Chair
  • Jackie Babcock, Member
  • Scott Bitner, Member
  • Susan Bogart, Member
  • Dawn Boyer, Member
  • Joetta Bradica, Member
  • Sandy Coyle, Member
  • Amy Edmonds, Member
  • Sasie Fernando, Member
  • Laura Garver, Member
  • Giovanna Genard, Member
  • Ralph Hosterman, Member
  • Shari Howell, Member
  • Melissa Kunes, Member
  • Wayne Leone, Member
  • Nancy Meyer, Member
  • Evelyn Nordberg, Member
  • Marty Nordberg, Member
  • Mark Proper, Member
  • Bob Quinn, Member
  • Rick Ramsay, Member
  • Anita Sather, Member
  • Paul Simenson, Member
  • Rod Smith, Member
  • Bob Snyder, Member

Results Achieved to Date

  • ExpectedResults: An initiative that would normally take nine to twelve months to complete was accomplished in four months, at least for the core functions that enabled us to disburse funds for summer and fall sessions. Students were highly responsive to requests that they sign a new promissory note electronically with the Department of Education. By the first week of fall semester student loan funding in excess of $150M disbursed into students’ accounts for payment toward tuition. This is a figure comparable to prior years. Both of these objectives were the measures of success for this project. Work continues to further refine the systems that support the Direct Loan Program. By spring semester, the University actually had received more funding from the federal student loan program than in past years. All due to the efficiency of working with a single loan provider and the University’s control over drawing down funds for deposit; a great fiscal benefit to the University that did not exist in the lender based program.

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