OD_Reqs_-_Sec_2_-_Overview_-_Final_v_3_UPDATED_2-28-14.pdf

O&D Business Requirements

Section 2. Overview of O&D

2.0 Overview

2.0.1 Purpose and Objectives

This section provides background information on the history of O&D along with a description of the high-level business processes that support the O&D environment. This section also describes many of internal and external interfaces with which the O&D System exchanges data to achieve the business requirements described in subsequent sections.

2.1 Background & Key Concepts

2.1.1 History of O&D

In April 2002, the Common Origination and Disbursement (COD) System was launched to reengineer the process of delivering and reporting Federal Pell Grants and Direct Loans into a common origination and disbursement process.1 Although federal student aid loans and grants have unique operating characteristics and requirements, providing a common business process and technology platform significantly eased the burden for school Financial Aid Administrators. As a result, the COD process provided educational institutions a simplified and shared process for requesting, reporting, and reconciling Title IV funds. The current COD system supports most federal student aid programs (Pell Grants, TEACH Grants, and Direct Loans, and post deadline processing for ACG and SMART).2 In the past, ACG and SMART grant programs were added to the scope of COD and other programs may need to be added in the future. For example, FSA would like to add the Iraq Afghanistan Student Grant (IASG) and improved coordination of campus-based aid programs. Details for these business requirements are provided in subsequent sections of this document.

2.1.2 O&D Environment

As noted in the Introduction section, the scope of O&D covers the “Receive” stage of the Federal Student Aid Lifecycle. This stage requires two major high-level business processes that enable the efficient completion of providing students with financial awards and ultimately completing the processes required to make that aid available:

(1) Loan and Grants Processing – the process of submitting and processing origination and disbursement records for designated federal student aid programs, from participating schools, and for eligible students.

1 2012-2013 COD Technical Reference, Volume I – Getting Started, June 2012, p. I-3-1.

2 The COD system does not accept originations or disbursements for the Iran-Afghanistan Service Grants

(IASG).

Federal Student Aid, O&D To-Be Requirements 2-1 O&D Overview

(2) Funds Management – the process of providing the funds to schools to disburse the awards to students and ensure all appropriate program requirements are met.

2.1.3 Loan and Grants Processing

One major business process for O&D is Loans and Grants Processing, which generally involves the applicant, the school’s financial aid office (versus the Funds Management process which is generally handled by the school’s business office), and the O&D System.

Figure 2-1 provides a high-level process flowchart of the Loans and Grants Processing business process. The key steps involved in Loans and Grants Processing are described as follows (note: FSA’s business rules provide for some variation in the sequence of these steps):

A. Determine Financial Aid – based on information provided in the ISIR, a school participating in Title IV programs offers a financial aid award package that includes federal loans and/or grants to a prospective or current student.

B. Receive / Accept Financial Aid Package – the student accepts the financial aid package that best suits his/her needs. Once the financial aid package is accepted, the school can determine the disbursement schedule, which is later created at the time of origination for loans.

C. Provide Commitment – in the meantime, the student enrolls in school as required.

Before aid is disbursed to the student, he/she must sign any commitments depending on the type of federal aid provided. Commitments can be Promissory Notes for loans, an Agreement-to-Serve (ATS) in the case of a TEACH grant, and other commitments such as entrance counseling.

D. Submit Origination and Disbursement Records to FSA – the school’s Financial Aid Office submits origination and disbursement records to the O&D System for processing.

E. Receive Payment –the school draws down the funds and disburses these funds to the students in accordance with regulatory requirements. Schools in good standing may draw down and disburse funds before origination records are received by the O&D System.

F. Report Actual Disbursements/Submit Changes and Adjustments – Schools submit records of actual disbursements and changes and/or adjustments to previously accepted data.

G. Distribute Loans for Servicing – loans that are ready for servicing (i.e., loans that have met certain criteria to become “booked loans”) are then distributed by the O&D System to approved Servicers based on an algorithm provided by FSA. This algorithm may be adjusted by FSA at any time.

Federal Student Aid, O&D To-Be Requirements 2-2 O&D Overview

Figure 2-1: High-Level Overview of the Loans & Grants Processing Business Process.

Student/ Borrower

Aware & Prepare Apply Receive Repay Loan

Resolution

Student/Borrower

School Financial Aid Office

O&D System

School Business Office

FSA Program Management

Receive Accepted Financial Aid Package

Receive Financial Aid Package

Determine Financial Aid

Disburse Loan Payment

Accept Financial Aid Provide Commitment

(MPN/ATS)

Process Commitment Information

(MPN, ATS)

Receive Payment

Provide DL Authorization & Establish Funding

Controls (Initial CFL)

Receive Grants and DL Authorization

Process Origination Records

Process Disbursement

Records Back End

Processing Distribute Loans for Servicing

Drawdown Funds

Process Drawdown Data

From U.S Treasury (Via G5)

FSA Origination & Disbursement- High Level Process Flow- Loans and Grants

Substantiate Drawdown

Return Unused Funds

Receive School/ Student Eligibility

Information (From other FSA systems)

Make Adjustments Close-out and ArchiveUpdate Funding

Controls

Via Loan Web/ Tech Web/ Paper

Federal Student Aid, O&D To-Be Requirements 2-3 O&D Overview

2.1.4 Funds Management

The process of making funds available to schools and reconciling those funds for each award year is called, Funds Management. Figure 2-2 provides a high-level overview of the Funds Management process, which works as follows:

A. Provide Initial Funding Authorization – this process starts with FSA establishing a pre-defined initial funding level for schools. The funding level to schools is called, the Current Funding Level (CFL). The initial authorization establishes an Initial CFL. In the case of Direct Loans, the value is pre-determined based on a number of factors such as prior year aid, enrolled students, and being in good standing with program rules.

For Pell Grants, there is no pre-determined Initial CFL. The CFL is established upon the completion of the first approved record. Subsequent sections of this document provide additional details and business requirements.

B. Process Upward and Downward Adjustments – over the course of the award year, the school will process all upward and downward funding adjustments that include those generated by disbursement batches from schools as well as manual adjustments generated by FSA staff and as the result of mass global jobs generated by FSA staff.

These adjustments occur daily during the award year and during post deadline adjustments that may last up to five years after the end of the award year.

C. Post Deadline Adjustments – process all origination and disbursement data from the time of close out until period of funds availability ends or FSA determines an end date.

D. Update Funding Controls – throughout the Award Year, FSA provides oversight of the program and monitors and adjusts funding levels as needed to ensure the smooth operation of the funds management process. Schools found to be out of compliance may end up in a restricted category which places stringent requirements for drawing down funds.

E. Substantiation – schools are required to report actual disbursements (through the O&D process) that support their draw down balance. This requires reconciliation between the financial aid and business offices of the schools. FSA monitors the difference between the disbursements reported and the draw down balance to determine whether funds have been “substantiated”. If the two are too far out of balance, this is an indication that the school may be out of compliance with the cash management or reporting rules.

Federal Student Aid, O&D To-Be Requirements 2-4 O&D Overview

F. Reconciliation – School are required to reconcile their disbursement and cash records against the O&D System’s disbursement and cash records on a monthly basis. O&D provides reports for this purpose. Schools must also reconcile internally to ensure disbursements have been recorded correctly. This is similar to balancing a checkbook/checking account statement. Discrepancies must be resolved. FSA performs reconciliations between various systems (O&D, FMS, Servicer, etc.) to ensure the “internal” books are in order.

G. Refund Unused Funds – Schools are required to return any unused funds back to the payment system.

H. Close-Out – Schools complete final reconciliation of their disbursement and cash records with the O&D records at the end of the processing cycle. FSA monitors school progress towards close-out and works with schools to resolve outstanding issues.

I. Archive System – FSA decides a date to archive student and financial data, which later can be accessed, adjusted and processed, even in completely closed award years.

Federal Student Aid, O&D To-Be Requirements 2-4 O&D Overview

Figure 2-2: High-Level Overview of the Funds Management Business Process.

Student/ Borrower

Aware & Prepare Apply Receive Repay Loan

Resolution

Student/Borrower

School Financial Aid Office

O&D System

School Business Office

FSA Program Management

Receive Accepted Financial Aid Package

Receive Financial Aid Package

Determine Financial Aid

Disburse Loan Payment

Accept Financial Aid Provide Commitment

(MPN/ATS)

Process Commitment Information

(MPN, ATS)

Receive Payment

Provide DL Authorization & Establish Funding

Controls (Initial CFL)

Receive Grants and DL Authorization

Process Origination

Records

Via Loan Web/ Tech Web/ Paper

Process Disbursement

Records Back End

Processing Distribute Loans for Servicing

Drawdown Funds

Process Drawdown Data

From U.S Treasury (Via G5)

FSA Origination & Disbursement- High Level Process Flow- Funding

Substantiate Drawdown

Return Unused Funds

Receive School/ Student Eligibility

Information (From other FSA systems)

Make Adjustments Close-out and ArchiveUpdate Funding

Controls

Federal Student Aid, O&D To-Be Requirements 2-5 O&D Overview

2.2 Interfaces

O&D operates in the middle of the Federal Student Aid lifecycle as noted earlier; therefore, the O&D System must interface with a number of internal FSA systems as well as external systems to exchange data. As shown in Figure 2-3, the O&D System interfaces with numerous systems, applications, websites, and services to transmit and receive data and transactions as input to and output from the O&D System. Please note that Figure 2-3 is intended to depict the types of data exchanged between O&D and other systems rather than a comprehensive view of all system interfaces. General descriptions of the major interfaces are presented below. Detailed specifications for these interfaces are covered in the individual Interface Control Documents (ICD’s), which are not included in these business requirements.

Figure 2-3: O&D System Interfaces

A. Central Processing System (CPS) Interface: CPS processes a student’s Free Application for Federal Student Aid (FAFSA) and determines a student’s aid eligibility and expected family contribution. CPS sends the results from the processed to FAFSA to the student in the Student Aid Report (SAR) and sends an Institution Student Information Record (ISIR) to the schools the student indicated on the FAFSA.

Nightly, the O&D System accepts a file from CPS. O&D will then use the information in the CPS file to edit incoming records to ensure the students are eligible to receive Title IV aid.

O&D System

Grants Administration Payment System (G5)

Drawdown/Payments

Financial Management System

Payment Transactions

Payment and Funding Transactions

Loan Servicing

Loan Bookings; Disbursem ents;

Paym ent, Discharge, and Transfer National Student Loan Data System (NSLDS)

Debt Management Collection System

(DMCS)

Treasury

Credit BureausPostsecondary Education Participants System

(PEPS)

Applicant Web (studentloans.gov;

teach-ats.ed.gov)

Central Processing System (CPS)

School

Student/ Borrower

Ancillary Services

Credit C heck

Student Grant Payment

StudentData

COD Web

View/Update Data &

View/Request Reports

XML Common Record O&D Batches

Responses, Receipts, Acknowledgements

ISIR

FAFSASAR

Applicant Data

SAIG

MPN, PLUS App, ATS, Counseling

School Eligibility

Imaged/Printed

P-Notes

O&D Interfaces

Federal Student Aid, O&D To-Be Requirements 2-6 O&D Overview

B. Loan Servicing Interface: The component of the O&D System that is responsible for transmitting and receiving loan origination data to and from the Servicers’ systems.

This component shall send booked O&D-originated Direct Loan and TEACH Grant activity to the appropriate Servicer. The Servicers maintain loan and borrower information sent by the O&D System for Direct Subsidized, Direct Unsubsidized, Direct PLUS Loans, and TEACH Grants (which are processed like loans as they become loans if the Agreement to Serve is not honored) in order to service the loans.

The component and the Servicers exchange data through the SAIG interface. Each Servicer has a unique mailbox number in SAIG. The component sends a Loan Activity File to each Servicer via SAIG and each Servicer returns back a Receipt and Response to O&D via SAIG. The Servicers send a Servicer Activity File, which includes Payment to Servicer and Discharge activity to O&D via SAIG and O&D returns a Receipt and Response to the Servicers via SAIG.

C. eCampus-Based System (eCB): While eCB is not an existing interface to the current COD system, FSA requires the ability for schools to see all program funding and G5 funding changes in the future-state O&D System and to include campus-based funding.

This will require an interface with eCB to include campus-based program school level award and disbursement information into the O&D Web. In addition, FSA would like to migrate the eCB funding component to the O&D System to ensure that schools and staff would only need to use one system to see all program and G5 funding changes in O&D. This would include the loading of the Campus Based Initial Authorization file (commonly referred to as Campus Based Finals) into the O&D System and allowing for individual and manual funding adjustments as well as any additional files for additional global jobs.

D. Debt Management Collection System (DMCS) Interface: DMCS processes referral and collection information regarding student Grant repayments, as submitted by schools. The DMCS Grant Student Collections file contains Grant student collection records (Pell, ACG, National SMART, TEACH) for students referred to the DMCS process by the school. O&D processes DMCS Grant student transactions that match student awards on O&D to establish that the student is in a collection status. The O&D System uses the total amount of the referral provided by DMCS to determine payment activity and that the student has repaid the Grant amount referred. Within O&D, DMCS data is stored at the student award level. The data collected is to be used to calculate Eligibility Used and Total Eligibility Used for the student within the related Grant program (with the exception of the TEACH program). The transactions sent by DMCS are applicable to individual award years, and are reported for each award year level in O&D.

E. Financial Management System (FMS) Interface: FMS is FSA’s accounting system that stores all FSA-related financial information, including any financial transaction information processed by the O&D System. O&D sends school level financial information to FMS and receive and store school level financial information from FMS (e.g., draw downs). O&D sends school level financial information to FMS as required via the Enterprise Service Bus (ESB), and receive financial transaction information from FMS in real-time via the ESB. FMS is a pass through system that processes O & D files

Federal Student Aid, O&D To-Be Requirements 2-7 O&D Overview to G5, EDs payment system. FMS receives a common output file back from G5 that is passed to O & D and is used to update financial screens and web pages.

F. Applicant Web Interface: Applicant Web, which includes the functionality currently provided by the StudentLoans.gov and TEACH-ATS.gov web sites, provides borrowers with various required award origination and management functions through the Applicant Web module. It interfaces with O&D when borrowers (student and parent) submit electronic MPN and ATS data, complete PLUS Loan processes, complete Entrance, Financial and Exit Counseling and TEACH Grant Counseling, endorse a PLUS Loan, and request Loan Consolidation. Applicant Web also provides general federal student aid information and links to other relevant web sites as required by FSA.

G. Paper Master Promissory Note (P-Note) Interface: The O&D System receives data from paper MPNs and Endorser Addenda from the imaging system. The O&D System edits and sends a file back to the imaging system. Any rejects are worked and resent.

H. Agreement to Serve (ATS) Interface: ATS data is exchanged between O&D and the ATS Website. Applicants for TEACH Grants submit an Agreement-To-Serve (ATS) through the TEACH Grant website prior to the TEACH Award being disbursed to the student.

I. National Student Loan Database System (NSLDS) Interface: O&D reports Pell, ACG, National SMART, and IASG award and disbursement activity to NSLDS.

NSLDS processes O&D data files and in return sends individual Award Year files back to O&D with information on any records that were rejected or that are in conflict with data already in the NSLDS system. ESB will be used to transmit the files between O&D and NSLDS. O&D sends the Add/Change transactions to NSLDS as an output of the Student Posting process and NSLDS sends rejected transactions back to O&D in response to the outbound posting file.

J. Postsecondary Education Participants System (PEPS) Interface: O&D receives and processes school demographic and eligibility information received from PEPS.

Currently, only limited file elements are used but this should be reviewed and expanded.

K. Participation Management (PM) Interface: The O&D System receives and processes the PM-O&D (SAIG Mailbox) interface file created by the PM. O&D will use this data to populate and maintain the SAIG mailbox number for all schools and third party servicers participating in Title IV programs on an award year basis. The O&D System receives and processes the Participation Management (PM) and Origination and Disbursement (PM/O&D) interface file. O&D uses this data to create and maintain school/Third Party Servicer/Federal Servicer/FSA/Contractor online user access. The Enterprise Service Bus (ESB) sweeps the SAIG mailboxes frequently and passes incoming data to the receiving system.

L. Credit Bureau Interface: O&D interfaces with Credit Bureaus to obtain credit check data for applicant requesting Direct PLUS Loans. Credit checks are initiated through the batch processing, Applicant Web or O&D Web.

Federal Student Aid, O&D To-Be Requirements 2-8 O&D Overview

M. O&D Web Interface: The O&D Web module provides a centralized site for schools’ Financial Aid Administrators (FAAs), third-party operators working on behalf of schools, FSA staff, CSRs, or other authorized users to perform a variety of functions related to applicant/award/disbursement data for Title IV Programs. The O&D Web interface allows users to view, create and update data and perform setup functions related to financial, MPN, counseling, award and disbursement processing. In addition, authorized users may view reports and run ad hoc queries.

Federal Student Aid, O&D To-Be Requirements 2-9 O&D Overview