Introduction to Student Loan

This module covers the student loans which are governed by rules of the Finnish authority KELA.

Click here to understand the terms and abbreviations used in this functionality.

KELA, the Social Insurance Institution of Finland, guarantees the student loan in Finland. After KELA gives guarantee for the loan, the student opens a student loan in any bank of his choice. The bank sends the list of student loan which are disbursed to KELA (mostly happens twice in a year) for the confirmation on the capitalization of interest. Based on the confirmation from the KELA, the bank decides to capitalize the interest. If KELA does not confirm, then the interest and fee has to make due and the repayment has to start after three consecutive non confirmation from KELA.

The benefits of this functionality are:

• The interest can be capitalized or made due based on the KELA confirmation.
• The repayment schedule can be adjusted based on the KELA confirmation.

As part of this functionality the following new applications are released:

• The FISTLN.KELA.DETAILS application is created to store the list of the accounts that has been sent to KELA for confirmation and also to capture the confirmation status.
• The FISTLN.KELA.ACC.DETAILS application is created to capture the data which has to be updated for each arrangement after the service is run.

The external property class has to be created for the parameter set up.

Based on the confirmation from KELA, the payment schedule is updated with the help of service or batch process.

The error log is captured for the arrangements for which the payment schedule is not updated as per the rules.

An Activity API is created to restrict any update of the payment schedule by the user, when the loan is in the capitalization period. When the repayment of loan starts, the user will not be able to amend any payment schedule.

KELA Interface

KELA (Social Insurance Institution of Finland) guarantees student loans given by any bank in Finland. An interface communicates the loan request details between the bank and KELA. Whenever there is a new student loan request in the bank, a change in loan details, during the loan transfer, or during prohibition, the details will be shared with KELA.

Temenos Transact needs to process the 111,4; 111,5; 111,8 files and also, to update the loan details based on these files.

The Finnish Regulatory Param (FIBASE.KELA.PARAMETER.DETAILS) application is created to store the common information across the company. The record ID of this application will be the company ID.

The KELA Transactions Table (FISTLN.KELA.TRANSACTION.DETAILS) staging application is created to hold the information received from KELA. The record ID of this application will be the SSN (Social Security Number) ID. All the new student loan requests and loan cancellation details will be stored in the KELA Transactions Table (FISTLN.KELA.TRANSACTION.DETAILS) application and will be sent to KELA in the EOD using an ad-hoc service. Once KELA receives the file, it will send a response file for a new student loan and cancellation requests. The incoming file will be stored in the staging application and processed based on the responses.

The KELA Transactions (FISTLN.KELA.TRANSACTIONS) enquiry is created to list the transactions for which the responses are not received from KELA.

The KELA Interface functionality allows the bank to process the 111,4; 111,5; 111,8 files and to update the student loan details based on these files.

Term or Maturity Date

As part of the Term or Maturity Date functionality, new rules are applied for the interest capitalization. If the capitalization falls on holiday, the system will not move to the next working day, the interest capitalization will start from the holiday itself. If KELA does not provide the confirmation on the interest capitalization for three consecutive times, then the repayment starts with the maturity date as the first repayment date plus the number of Academic Year*2.

KELA Details in the Loan Overview Screen

The student loan details received from KELA (Social Insurance Institution of Finland) are available in the corresponding arrangement overview screen. The disbursements done for the student loan are validated against the plan provided by KELA. The bank is able to cancel the student loans to facilitate the transfer to another bank and Temenos Transact will not allow disbursements for the cancelled loans.

KELA reserves the guarantee for the requesting bank and sends the information of the guarantee and its disbursement plan. Banks are able to add the KELA’s disbursement plan to the student loan. The user is able to create and modify the student disbursement schedule or perform manual loan disbursements if the student requires it. The system allows the bank to amend the student disbursement schedule within the allowed duration and the periods for each disbursement as defined in the KELA disbursement plan. Validations are built around this to ensure that the system does not allow the user to violate the KELA disbursement plan in the amended student disbursement schedule.

KELA may send a disbursement prohibition for the student, in case the student has discontinued his or her studies. When the student loan disbursement is prohibited, the system will not allow all the upcoming loan disbursements.

If the student later continues his or her studies and gets a new guarantee from KELA and applies for a new loan, the banks send a new guarantee reservation request to KELA.

If KELA does not approve the bank's guarantee request, KELA sends its response with the information on the rejection's reason.

The following enquiries are available to allow the bank to get all KELA related information for a particular loan:

• AA.KELA.CONDITIONS: This enquiry displays the following details: the KELA Rejection of capitalization counter, Loan disbursement Mode, Guarantee Expiry Date, Loan Disbursement prohibition and the Amount of Transferred Loan.
• AA.KELA.GUARANTEE: This enquiry contains the guarantee details of the KELA loan.
• AA.KELA.GUARANTEE.INCREASE: This contains details related to the increase in the guarantee amount.
• AA.KELA.GUARANTEE.CANCELLATION: This enquiry contains details related to the guarantee cancellation.
• AA.KELA.DISBURSEMENT.PLAN: This enquiry contains details related to the reservation disbursement plan.

An activity API (Application Programming Interface) is attached to the disbursement activity and change schedule activity to check if the disbursement or amended plan is within the KELA disbursement plan. Also, the API will check if the cancellation is processed for the corresponding loan.

The existing AA.PRD.DES.XKELA property class is amended to include the below additional fields:

• Disbursement Plan Type: This field indicates if the disbursement is based on KELA’s plan or student’s plan. This field is defaulted as KELA. Whenever there is a change in the disbursement schedule, then the user needs to manually update this field.
• Prohibition Flag: This is a Yes or No field to indicate if the prohibition is applicable on a loan.

The following fields are included in the arrangement overview screen:

• KELA disbursement plan: Indicates if it is a KELA’s based plan or if it’s a student’s plan.
• Mode of disbursement: Indicates the mode of disbursement.
• Type of disbursement plan: Indicates the type of disbursement.
• Disbursement prohibition flag: Indicates if the prohibition is applicable on a loan.

The benefits of this functionality are:

• Ability to display all KELA related details in the arrangement overview screen.
• Ability to validate the student disbursement schedule during the amendment.
• Ability to update the payment schedule from KELA in the loan arrangement.
• Ability to process the disbursement prohibition from KELA.
• Ability to cancel the guarantee reservation.
• Ability to amend the student disbursement schedule if KELA sends new disbursement plan (reduction in loan amount).
• Ability to retrieve and display the historical KELA disbursement and guarantee management.
• Ability to calculate the guarantee expiry date.
• Ability to define the guarantee expiry period.

Student Loan Termination

The loan termination is an activity performed by the bank when the customer doesn’t pay the due amount of the loan. It is up to the bank to decide when they will trigger this activity for a particular loan so it may vary for each loan.

Student loans are secured by the state guarantees issued by KELA (state organization in Finland which provides state guarantees for student loans for issuing banks). Banks must follow strict rules defined by KELA in case if a loan is not repaid by the customer in due, banks can request the payment under the KELA guarantee.

This functionality allows the user to perform the loan termination for student and normal loans. The user can set the loan termination and maturity date for the loan selected for termination and select the demand reason as appropriate. The user has the possibility to reverse the termination and the restrictions created earlier.

The LENDING-RENEGOTIATE-ARRANGEMENT activity is created to initiate the termination process for the student and normal loans. During the termination, there will be validations based on the termination reason updated by user. An activity charge is attached to the termination activity that will be triggered and a charge will be levied based on the termination reason. Disbursements and repayments are validated against the termination flag set in the XKELA property during the termination activity.

The XKELA external property class is amended to include the following additional fields to allow the user to record the termination details of the loan:

• Termination Date: It is a standard date field which will be available in the termination activity and it will be stored in the XKELA external property class. It is a user input field.
• Maturity Date: It is a standard date field which allow the user to update the maturity date. This is a new field in the XKELA external property class. It will be updated by Temenos Transact and can be input by the user.
• Termination Reason Code: It is a dropdown field from which the user can select the appropriate termination reason. The list of fields will be retrieved from the EB.LOOKUP data. This is a mandatory field for the student’s loan configured in the FI parameter application. This will be stored in the XKELA external property class.
• Termination Flag: It is a Yes or No field which will be updated by Temenos Transact when the termination is triggered. It is not a user input field.
• Ps Rec Id: This field holds the payment schedule product condition which will be removed during the termination. This field is not a user input field. This is multi-value field and it is associated with the Termination Date field and Termination Reversal Date fields.
• Termination Reversal Date: The date on which termination is revered is updated in this field. This field is not a user input field. This is multi-value field and it is associated with the Termination Date and Ps Rec Id fields.

The FIBASE.KELA.PARAMETER.DETAILS application is amended to include the following additional fields to allow the user to record the null termination reasons, suspense account and restructure status that needs to be excluded from termination:

• No Fee Reason Code: This field is used to configure the termination reasons for which the termination fee is not collected and the termination date is not inputtable by the users. Some reasons are Customer deceased and Bankrupted. This field is vetted from the EB.LOOKUP application and holds the termination reason.
• No Termination Rstruct Status: This field is used to configure the restructure status for which the termination activity needs to be stopped. It is vetted from the EB.LOOKUP value with the restructure status.
• Credit Internal Account: This field is used to configure the suspense account to which the incoming credit needs to be redirected.
• Product Name: This field is used to configure the AA product that is created for the student loan.
• Min Maturity Period: This field identifies the minimum maturity period.
• Max Maturity Period: This field identifies the maximum maturity period.
• Penalty Interest Property: This field holds the penalty interest property.
• Termination Fee Property: This field holds the termination fee property.

The Arrangement Overview Heading (ENQ AA.OVERVIEW-HEADING.LIV.FI) enquiry is created to allow the user to view the arrangement overview header appended as Terminated.

This functionality allows the user to:

• Process the demand reasons during the loan termination.
• Apply the loan termination fee.
• Reverse (cancel) the loan termination.

The system restricts any automatic payments to loan account after the termination date. Any incoming payment to terminated loan account are stopped for manual processing. The user is allowed to adjust the loan balances.