The U.S. Department of Education (ED) has re-emphasized the requirement that schools which participate in the William D. Ford Direct Loan Program are required to have a quality assurance process in place.  While this is a regulatory requirement specified in 34 CFR 685.300(b)(9), a school would be hard-pressed to find any information about it elsewhere on the “Information for Financial Aid Professionals” (IFAP) Web page at www.ifap.ed.gov.  Thus, it is quite understandable that questions may have been raised when ED produced the November 13, 2013 Electronic Announcement with the reminder of the requirement. [And, to clarify, the requirement to have a DL quality assurance program and processes is separate and distinct from the option to participate in a Quality Assurance Program related to verification described in 34 CFR 668.53(a)(1)-(4); 668.54(a)(1),(2), and (4); 668.56; 668.57; and, 668.60(a).]

The Direct Loan (DL) quality assurance requirement stipulates that schools must implement a quality assurance (QA) process that ensures they are complying with the DL program requirements and meeting the DL program objectives.  Schools must also be able to document that they are complying with this requirement.  In order to comply with this requirement, schools must be able to document that its QA process evidences:

  • Regulatory compliance in reporting loan records, disbursements, and adjustments to disbursements to the Common Origination and Disbursement (COD) System, to include that such transactions are done within applicable timeframes, etc.
  • Disbursements are made for the correct amount to the correct student, and that
  • Monthly reconciliation and Program Year close-outs are performed timely.

Schools do have options in the methods selected for meeting the DL QA requirements.  ED does not mandate a specific method for meeting the QA requirement.  Schools may choose to use institutionally developed assessments and processes to ensure compliance with this requirement.  However, ED does offer a number of tools that schools may choose to use as part of their QA process.  Some of ED’s assessment tools relate to identifying reconciliation issues and developing policies and procedures applicable to packaging DL funds, counseling borrowers, and other general administrative and fiscal matters.  Some of these tools and reports are included in the COD System and in Direct Loan Tools software.

Additionally, clients of FAME may utilize the reports and services provided by FAME.  As part of their services received, either as a subscriber to our Fiscal Services or Direct Loan servicing, etc., clients benefit from many reports and services that assist in the quality assurance of the school’s DL processing.   Some of the services and reports available include the reporting of disbursements—and adjustments to disbursements—to COD, reconciliation of the school’s DL account with COD, and reconciliation of G5 as it relates to DL funds.  Also, for those schools who may so desire, FAME’s Consulting Services Department may be engaged to assist with a review of a school’s policies and procedures to ascertain their effectiveness and to ensure they conform to current Federal requirements, as well as to provide suggestions for improving required policies to ensure quality assurance.

It should be noted that an effective QA program or process must be utilized, monitored, and evaluated on an ongoing basis.  The results of such monitoring and evaluation must be documented, and then acted upon, to enhance areas where the school may have been unintentionally placing itself at risk.

For more detailed information or assistance, please contact your FAME Customer Service Representative via support.fameinc.com.

(EA11132013)