STUDENTS FIRST! PROCESS REDESIGN
CHANGE PROPOSAL AND ACTION PLAN

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SERVICE: Financial Transactions - Federal Loan Processes

Current Situation:

Lane participates in the Federal Perkins Loan, Federal Direct Stafford Loan, and Federal PLUS Loan programs. The process of awarding, disbursing, and servicing Federal Perkins Loans is fragmented and involves many hand-offs between Financial Aid, College Finance, and the outside loan servicer, UNISA. During input sessions, employees reported that the entire process confuses students and requires contact with offices in multiple locations to resolve issues.

This loan process is described as follows: 1) Financial Aid awards the loan, records the student's acceptance and conducts pre-loan advising. 2) Student accounts specialists in College Finance confirm acceptance of the loan and authorize disbursement. 3) Funds are disbursed directly to students by cashiers. 4) Any problems with disbursement are referred back to Financial Aid.

In a survey of nearly 300 students during the Spring 1996 disbursement period, sixty- seven percent reported being frustrated or very upset with the process. On average, a student waited in line fifty-eight minutes for disbursement.

The student accounts specialist reports the loan to UNISA (loan servicer) and processes deferments. UNISA handles the remaining repayment responsibilities but does not provide Lane with complete, usable data. UNISA's performance in minimizing the default rate has not been measured. Lane's current cohort default rate on Perkins loans is 26% which caused a $88,000 reduction of federal funding available for disbursement during the 1996-97 academic year. If Lane's default rate reaches 30%, it will lose its entire Federal contribution of nearly $300,000 per year.

The Accounting Unit produces reports and draws down federal funds electronically to reimburse Lane's federal bank account. Lane transfers money from a local government investment pool account into the federal account for the disbursement of financial aid. Disbursement and the electronic drawdown of funds are not simultaneous. The associated delay (i.e., the period between disbursement and drawdown) costs Lane lost interest earnings. This loss can be significant because disbursements can exceed $1,000,000 (e.g., Fall 1996) and are expected to increase with the addition of the Federal Direct Stafford Loan program in the summer of 1996.

In contrast, the entire Federal Direct Student Loan process is handled in Financial Aid except for the electronic federal funds drawdown completed by College Finance.

Desired Situation: One department assumes responsibility for all aspects of the Federal Perkins Loan (Perkins) and Federal Direct Stafford Loan (Stafford) programs. `Perkins disbursements are made by mail or direct deposit. The Perkins servicer provides current, meaningful information to identify delinquent accounts. Perkins funding is not in jeopardy.

Proposed Solution: Consolidate the entire Perkins and Stafford processes (award to final report) and assign responsibility to a Student Loan Team in the Students First! Center. This will alleviate confusion, decrease complaints and increase efficiency by reducing the number of hand-offs. This cross-functional team will reside in one location and have access to all information necessary to answer student inquiries. The team will consist of a loan specialist, EDExpress specialist, Perkins specialist, and accountant. The accountant will disburse funds (as required by Federal regulation) and electronically draw down the Federal funds.

Establish procedures for improving the disbursement process with the intention of eliminating long waits in line and increasing efficiency. In particular, send promissory notes with the financial aid award letter. Also, make provisions for electronic disbursement after the note is received.

Investigate other loan servicers and determine any legal obligations to UNISA. In the interim, request comprehensive data concerning prior and current Lane borrowers to identify borrowers in default or delinquent status. This will provide Lane employees with information so that they can initiate collection activity and decrease the default rate.

Coach (from Redesign Team): Edna Grass
Sponsor: Marie Matsen, Linda Fossen
Due Date: July 1, 1997
Performance Measure(s):

Measurement	Tools for Measuring	Responsibility for Tracking Measurement
decrease Lane's current 26% default rate for Federal Perkins Loans to below 20% by 7/1/98 and below 15% by 7/00	baseline = Federal Department of Education report follow-up = Federal Department of Education report	Students First! Center Process Owner Manager

Action Plan For Implementing Solution:

Task	By Whom	By When	Resources Required
Investigate regulations regarding Federal Perkins Loan administration with relation to the organizational separation of awarding and disbursement.	L. Dewitt	September, 1996	Investigate current legal relationships and performance with UNISA.	V. Whittaker, S. McDonald	September, 1996
Request bi-weekly data tape from UNISA of all Lane borrowers and status.	V. Whittaker, L. DeWitt,S. McDonald, B. Ewing	September, 1996
Using UNISA data, develop a computer program to identify borrowers in default or delinquent.	N. Cheshire	December, 1996
Develop a policy for notifying delinquent borrowers with a pre-claim letter.	Financial Aid Team Leader Manager, C. Deshpande, A. Overton, P. Robison	January, 1997
Identify specific functions to be handled by servicer.	Financial Aid Team Leader Manager, Student Finance Team	January, 1997
Research alternative loan servicers (including in-house) and recommend action.	Financial Aid Team Leader Manager, Student Finance Team	March, 1997-May, 1997
Complete contract with selected loan servicer.	Financial Aid Team Leader Manager, Team Members	June, 1997
Revise current awarding process so Perkins promissory note is sent with award letter.	Financial Aid Team Leader Manager	May, 1997-July, 1997
Transfer entire Federal Perkins Loan Program process to the Student Loan Team.	Financial Aid and Student Finance Team Leader Managers	July, 1997