Federal Direct Loan Program Reconciliation

Direct Loan reconciliation is the process by which Direct Loan funds received and disbursed as recorded on the Department of Education’s (the Department’s) systems are reviewed and compared with a school’s internal records; AND

Direct Loan reconciliation is a mandatory monthly process, as required under 34 CFR 685.300(b)(5). A school should reconcile all cash (drawdowns and refunds of cash) and disbursement records (actual disbursements and adjustments) with information in the Common Origination and Disbursement (COD) System on an ongoing basis.

There are two types of reconciliation, which can be performed separately or simultaneously during the month, including:

If you have questions about this announcement, contact the FSA Partner and School Relations Center at 1-800-848-0978. You may also emailCODSupport@ed.gov.

Questions and Answers

Q1: How often should a school reconcile for the Direct Loan Program?

A1: Per regulatory requirements a school must reconcile both internally and externally at least monthly to help meet all cash management and disbursement reporting requirements. However, the more frequently a school performs reconciliation, the more likely it will be able to identify issues and resolve them before they become part of a systemic problem.

Q2: In addition to reconciling disbursements and cash transactions internally and data from the Common Origination and Disbursement (COD) website, what other items should be verified during the reconciliation process?

A2: The following items should also be verified during the reconciliation process:

• Disbursement dates to ensure the correct actual disbursement date is on file in the COD website. Refer to the Jan. 29, 2014 Electronic Announcement, “Direct Loan Processing Information – Accurately Reporting Direct Loan Disbursement Dates.”
• Stale dated or uncashed checks (unclaimed credit balances) have been resolved by returning any unclaimed funds and processing the corresponding downward adjustments to disbursements.
• Records that have been updated in the COD website to ensure the 150% Direct Subsidized Loan Limit calculations are accurate for your students (applies to loans first disbursed on or after July 1, 2013, and prior to July 1, 2021). Refer to following guidance for additional information.
  • June 11, 2021 Electronic Announcement, 150% Direct Subsidized Loan Limit: Electronic Announcement #25 – Guidance and Operational Information for the Repeal of 150% Subsidized Usage Limit (EA ID: DL-21-04)

Q3: Who should participate in Direct Loan Program reconciliation?

A3: Reconciliation is a team effort consisting of the business office and the financial aid office, both of which have information that is needed to reconcile.

Note: If a school uses a third-party servicer, the school is ultimately responsible for ensuring that all regulatory requirements are being met and that the school is reconciling on a regular basis. The school should request and retain documentation of all reconciliation efforts. Also, a part of the reconciliation should include ensuring that the school’s internal records match the third-party servicer’s records as well as what is in the COD website.

Q4: Where can schools obtain the Department of Education’s (the Department’s) official Direct Loan Ending Cash Balance and other detailed information for use in required monthly reconciliation?

A4: The Department provides a School Account Statement (SAS) to all schools on a monthly basis. The SAS is similar to a bank statement and provides the Department’s official Ending Cash Balance as of the end of the reported month, as well as detailed cash and loan or disbursement detail transactions for the reported period. The SAS is the school’s primary tool used in reconciliation and program year closeout and should be compared to both financial aid and business office records.

Additional information on the content and formats available for the SAS is available in the COD Technical Reference, Volume 6, Section 7: COD Reports.

Additional optional tools for assistance in reconciliation processes are addressed under Q9 below. However, the SAS must be used for required monthly reconciliation.

Q5: Can a school obtain updated Direct Loan Ending Cash Balance information during the month?

A5: Yes. A school’s Ending Cash Balance can be found on the COD website’s School Summary Financial Information page (found under the “School” link in the blue tool bar along the top of the main page and the School Summary Financial Information link on the left-hand tool bar under School Information). This page mirrors the SAS Cash Summary section of the SAS and provides updated summary cash and disbursement information daily. This can assist schools with monitoring their cash balances, in addition to completing required monthly reconciliation to the SAS.

Q6: How is the Department’s official Direct Loan Ending Cash Balance calculated?

A6: Ending Cash Balance is calculated as follows:

• Ending Cash Balance = Beginning Cash Balance + Net Drawdowns/Payments – Total Net Booked Disbursements
  • Net Drawdowns/Payments = Cash Receipts (Drawdowns + Drawdown Adjustments) – Refunds of Cash (Refunds)
  • Total Net Booked Disbursements = Booked Disbursements + Booked Adjustments (upward or downward)

Note: The Department does not include unbooked, future-dated disbursement transactions in the calculation of official Ending Cash Balance. These are calculated separately and are included in the calculation of Cash > Net Accepted and Posted Disbursements (NAPD). In the SAS, Cash > NAPD is calculated as follows:

• Cash > NAPD = Ending Cash Balance – Total Net Unbooked Disbursements
  • Total Net Unbooked Disbursements = Unbooked Disbursements + Unbooked Adjustments (upward or downward)

Note: A loan is considered booked when there is an accepted origination, and an accepted and linked Master Promissory Note (MPN), along with an accepted actual/funded disbursement on file in the COD website.

Q7: How does a school find its updated Cash > Net Accepted & Posted Disbursement (NAPD) Balance in the COD website?

A7: A school’s Cash > Net Accepted & Posted Disbursement balance can be found on the COD website, either on the School Summary Financial Information page for Direct Loans (remember, this mimics the SAS Cash Summary information), or on the School Funding Information page for any program (found under the “School” link in the blue tool bar along the top of the main page and the “Summary Financial Info” and “Funding Info” link on the left-hand tool bar under School Information). It is calculated by taking Net Drawdowns minus Net Accepted and Posted Disbursements (NAPD includes both booked and unbooked disbursement and adjustment transactions accepted and posted in the COD website).

Q8: When should a school balance to a Zero Ending Cash Balance and complete a final reconciliation?

A8: Direct Loan schools should be able to reach a Zero Ending Cash Balance for the award year within a month of making their final disbursements, if they are meeting all cash management, disbursement reporting, and monthly reconciliation requirements. Schools should then reconcile to a Zero Ending Cash Balance on their monthly SAS. If the school has completed all required processing per regulatory requirements and is ready to complete Direct Loan closeout, the school should:

• Document their final reconciliation to a zero ending cash balance on their SAS; and
• Confirm closeout using the form on the School Balance Confirmation page on the COD website.

For more information on this final reconciliation and program year closeout, refer to Direct Loan Closeout Electronic Announcements posted on the FSA Partner Connect – Knowledge Center website.

Note: Prior to program year close out, schools should ensure that fields related to 150% Direct Subsidized Loan Limit are updated appropriately for loans first disbursed on or after July 1, 2013, and prior to July 1, 2021, as outlined in Q2.

Q9: Do I need extended processing to process records in the COD website after the data submission (closeout) deadline?

A9: Extended processing is not needed to submit decreases to award or disbursement amounts or any non-financial changes. If you need to submit increases to award or disbursement amounts or new award or disbursements after the data submission (closeout) deadline, you will need to request an extension to the deadline via the COD website Request Reopen/Extended Processing page. However, you should not submit a request until after you have completed reconciliation of all program records and are ready to submit increases or new award or disbursement data to the COD website. Note: You must submit a separate request for each award year for which extended processing is needed.

To request extended processing for the Direct Loan Program, log in to the COD website> and complete the following steps:

1. Go to the School Summary Information screen by clicking on the School tab on the top blue bar and entering your school identifier information.
2. Once on the School Summary Information screen, click on “Request Reopen/Extended Processing” link located on the left-hand tool bar under School Information.
3. Complete all required fields—including choosing the reason for the request from a drop-down menu and providing the required additional information. (Do not include Personally Identifiable Information (PII) data in this field (i.e., SSNs, award identifiers, etc.)). The Help link in the upper right corner has additional information to assist you in filling out the form.
4. Click on the “SUBMIT” button below the data fields.

Q10: What other tools are available to assist with Direct Loan Program Reconciliation?

A10: There are various tools provided by the Department that your school can use to reconcile externally to cash and disbursement data from the COD website.

• School Account Statement (SAS) (refer to Q4 above)
• SAS Disbursement Detail on Demand – ad-hoc report that allows schools to get SAS Disbursement Detail data independent of the school’s monthly SAS file.
• SAS Disbursement Detail on Demand Report Reader and Instructions – formats the fixed length SAS Disbursement Detail on Demand Report into an Excel spreadsheet. Found under the “COD Resources” link at the bottom of any COD website page.
• Pending Disbursement List Report – contains disbursements not yet funded in the COD website (Disbursement Release Indicator (DRI) = False).
• Discrepant Loan Data Report – helps schools identify awards with disbursements dates prior to July 1, 2021, that should be adjusted and/or corrected in their system in accordance with the 150% Direct Subsidized Loan Limit requirements.
• COD Website pages:
  • School Funding Information – (refer to Q7 above)
  • School Summary Financial Information – (refer to Q5 and Q7 above)
  • Cash Activity – (found under the “School” link in the blue tool bar along the top of the main page and the “Cash Activity” link on the left-hand tool bar under School Information), shows all individual drawdown, refund of cash, and drawdown adjustment transactions. This information is sent to the COD website from G5. This information can be used to reconcile to internal bank statements and cash transactions.
  • Anticipated Disbursement Queue – (found under the “Batch” link in the blue tool bar along the top of the main page and the “Anticip Disb Queue” link on the left-hand tool bar), lists all anticipated (pending) disbursements. It can be used to determine if anticipated disbursements need to be canceled (reduced to zero) or made into actual disbursements (DRI = True). This information is updated daily.
  • Action Queue – (found under the “Batch” link in the blue tool bar along the top of the main page and the “Action Queue” link on the left-hand tool bar), lists records that are in review by the Department’s payment analysts for schools on Heightened Cash Monitoring 2 (HCM2). Can be used by schools to ensure all records that the school intends to submit in their HCM2 submission have been sent to the COD website.
• Direct Loan Tools Software – main function is to compare cash and disbursement data from EDExpress or a school’s custom software/system to the cash and disbursement data from the SAS and produce a discrepancy report. Schools with other software can create an external file to be used with DL Tools as well.

Q11: Where can schools find additional resources for reconciliation?

A11: Additional resources for reconciliation can be found on the FSA Partner Connect – Knowledge Center website, which includes: