Session 36

1. Session 36 Disbursement of Title IV Funds Linda Burkhardt Greg Martin

2. Resources • 06-07 Federal Student Aid Handbook • Volume 4, Chapter 2 • Code of Federal Regulations • 34 CFR 668.164 • The Blue Book (October 2005) • Chapter 14

3. Notification of Disbursement • School must notify a student of the amount of funds he or she can expect to receive and how those funds will be disbursed • Notification must be sent before the disbursement is made • If funds include Stafford Loans (FFEL or DL) notice must indicate which funds are from subsidized and which funds are from unsubsidized loans

4. Definition of Date of Disbursement • A disbursement occurs when a school credits a student’s account or pays a student or parent directly with: • Title IV funds received from the Department or an FFEL lender, or • School funds labeled as Title IV funds in advance of receiving actual FSA program funds • Note: Exceptions exist (see following slides)

5. Crediting Accounts With School Funds • If school credits student’s account with its own funds earlier than 10 days before the first day of classes for the payment period • Not considered a Title IV disbursement until the 10th day before 1st day of classes • Stafford borrowers subject to 30 day delay – not considered a disbursement until 30th day after beginning of the payment period

6. Memo Entries and Estimated Aid • Memo entries for billing purposes that do not identify a Title IV credit, e.g. estimated Federal Pell Grant are not considered disbursements • Memo entries are often needed to prepare billing statements and/or allow students to register for classes

7. Method of Disbursement • Direct Payment • Releasing FFEL check directly to student or parent • Issuing a check to student or parent • EFT to student or parent bank account • Dispensing cash with signed receipt • Crediting student’s account at the institution

8. Notification of Disbursement • School must notify student in writing (on paper or electronically) when Perkins, Stafford or PLUS loans are being credited to student’s account: • Must be no earlier than 30 days before and no later than 30 after crediting student account • Must include: date and disbursement amount; student right to cancel all or part of loan or disbursement; and procedures and time by which student must notify school of desire to cancel

9. Cancellation Procedures • Borrower must inform school of desire to cancel all or part of loan • School must honor request if received prior to start of payment period or within 14 days after the date notice was sent to the borrower – school may but is not required to honor late requests • Student must be informed of the outcome of any cancellation request • School is not responsible for returning portion of loan directly disbursed to student cancellation request was received

10. Required Authorizations • School must obtain authorization from student before: • Disbursing FSA funds by EFT to a bank account designated by the student • Using FSA funds to pay allowable charges other than tuition, fees, and room and board (if student contracts with school) • Holding an FSA credit balance • Applying FSA funds to minor prior year charges

11. Required Authorizations (Conditions) • School may not require or coerce students to provide an authorization • Authorization may be modified or cancelled at any time (procedure must be explained) • Cancellation or modification is not retroactive • Authorization may remain in effect for the entire period that the student is enrolled at the school – unless cancelled or modified

12. Electronic Processes for Notifications and Authorizations • Schools may provide notifications or obtain authorizations electronically • Reasonable safeguards must be adopted • E-Sign Act governs electronic signatures • Provides that a signature, contract etc. may not be deemed invalid solely because it is electronic

13. Checking Eligibility at Time of Disbursement • Before disbursing FSA funds, schoolmust confirm that: • Recipient is an eligible student • Student is enrolled for classes for the period • For loans, student is enrolled at least half-time • If disbursement occurs on or after the first day of classes, that the student has begun attendance

14. School Determined Eligibility Criteria • Student is a regular student – enrolled or accepted for enrollment for purpose of obtaining a degree, certificate or other recognized credential (offered by school) • Student may not be merely taking classes • Student is in an eligible program that has been approved for Title IV aid through the school’s certification

15. School Determined Eligibility Criteria • Student is making satisfactory academic progress (SAP) • Qualitative measures (grades, completed projects etc.) • C average/2.0 GPA or equivalent or standing consistent with grad. requirements by end of 2nd yr. • Quantitative (time) measures • Undergraduate programs must be completed within maximum timeframe of 150% of program length • Timeframe must be divided into even increments with SAP checked at the end of each increment

16. School Determined Eligibility Criteria • If student is enrolled in a correspondence course, course is part of an eligible program • At least 2 academic years long and acceptable for full credit toward a bachelor’s degree • Student is not enrolled solely in remedial coursework

17. Student Eligibility Criteria Specific to ACG • U.S. Citizen (does not include Title IV eligible non-citizens) • Federal Pell Grant recipient • First or second academic year student in a two or four year degree program • Full-time enrollment • No specific major required

18. Student Eligibility Criteria Specific to ACG • 1st year students • May not have been previously enrolled in a program of undergraduate study • Have graduated from a rigorous secondary high school program after 1/1/06 • 2nd year students • Have graduated from a rigorous program of study after 1/1/05 • Have at least a 3.0 GPA in an eligible program

19. Student Eligibility Criteria Specific to National SMART • U.S. citizen (does not include Title IV eligible non-citizens) • Federal Pell Grant recipient • Third or fourth academic year student in an eligible program • Full-time enrollment • Majoring in an eligible major • Cumulative GPA of at least 3.0 on a 4.0 scale in student’s eligible program

20. Checking Eligibility at Time of Disbursement – Loan Issues • Stafford and PLUS – students’ eligibility is certified when loan is certified/originated • School must ensure continuous eligibility has been maintained before loan is disbursed, e.g. student may have dropped below ½ time • School must have system in place to check enrollment status • If student drops below ½ time temporarily, disbursement may be made when ½ time status resumes assuming he/she still qualifies for the entire loan amt.

21. Disbursements to Students on LOA (Leave of Absence) • School may not disburse FFEL/DL to students on an LOA • School may disburse Federal Pell Grant, ACG, National SMART, FSEOG and Perkins funds to students on an LOA • Title IV credit balances may be disbursed to students on an LOA

22. Payment Periods • For programs offered in semester, trimester, quarter or non-standard terms and measured in credit hours the payment period is the term • For programs measured in clock hours, payment periods vary depending upon length of the program (discussed on an upcoming slide) • Title IV disbursements (except FWS) must generally be made on a payment period basis

23. Payment Periods (Clock-Hour Program) • Program less than an academic year • 1st payment period is period of time in which student completes the first half of the program • 2nd payment period is period of time in which student completes the second half of the program ex. 600 hour program payment periodone payment periodtwo

24. Payment Periods (Clock-Hour Programs) • Program equal to or more than two academic years in length - first academic year and any subsequent academic year • 1st payment period is period of time in which student completes first half of the academic year • 2nd payment period is period of time in which student completes second half of the academic year ex. 1800 hour program paymentperiod one paymentperiod two paymentperiod one paymentperiod two First acad. year Second acad. year

25. Payment Periods (Clock-Hour Programs) • Program longer than an academic year with a remaining portion equal to or shorter than one-half an academic year • First and any subsequent complete academic years – follow guidance on the previous slide • Final payment period is the remaining portion of the program ex. 1200 hour program payment payment payment First acad. year Second acad. year

26. Payment Periods (Clock-Hour Programs) • Program longer than an academic year with a remaining portionmore than one-half an academic year in length, but less than a full academic year • First and any subsequent academic years – follow guidance on slide 25 • Remaining portion of program is divided into equal payment periods ex. 1700 hour program paymentperiod one paymentperiod two payment period one paymentperiod two First acad. year Second acad. year

27. Crediting the Student’s Account • Without student authorization, school may use Title IV funds to credit student’s account to satisfy current charges for: • Tuition and Fees • Room and board (if the student contracts with the institution) • With prior student authorization: • Other allowable current charges (per HEA)

28. Title IV Credit Balances • Occur when Title IV funds credited to student’s account exceed allowable charges • Must be paid to student or parent no later than 14 days after: • Date balance occurred – if after 1st day of class for the payment period • 1st day of classes for the payment period if balance occurred on or before the 1st day of classes

29. Title IV Credit Balances (Example) A student has $5,000 of allowable charges on his account. The institution receives and credits his account with the following aid: Does this studenthave a Title IV credit balance? No

30. Title IV Credit Balances (Example) Another student also has allowable charges of $5,000 on her account. The institution credits her account with the following aid: Does this studenthave a Title IV credit balance? Yes

31. Title IV Credit Balances • Excess PLUS Loan funds (not Grad PLUS) must be returned to the parent • If school determines PLUS Loan funds created the credit balance – balance goes to parent • School may disburse excess PLUS funds to student with parent authorization • School determines which Title IV funds created a credit balance • No order of posting rules exist

32. Minor Prior Year Charges • In general, Title IV funds may be used to pay only current educational expenses • With student authorization, Title IV funds may be used for paying prior-year charges less than $100 • Prior-year charges equal to or greater than $100 may be paid with an authorization and documentation that payment would not prevent student from paying current expenses • Both institutional and non-institutional charges

33. Early Disbursements • Standard-term, credit-hour program • Earliest date to disburse is 10 days before the 1st day of classes for the payment period • Clock-hour program or credit-hour program not measured in standard terms • Earliest date to disburse is later of 10 days before the 1st day of classes for the payment period; or date student completed the previous payment period Note: Standard terms are semesters, trimesters and quarters

34. Disbursement to Student Who Fails to Begin Attendance • Student who withdraws before beginning attendance is not entitled to any Title IV • School must return Pell, ACG, National SMART, Perkins or FSEOG disbursed to student who fails to begin attendance • School must return Stafford/PLUS credited to the account of student who fails to begin attendance

35. Stafford/PLUS Disbursements • Standard terms and substantially equal* nonstandard terms • More than one term in the loan period - loan must be disbursed over all terms in loan period • Only one term in loan period • Loan may be disbursed in one payment (with default rate < 10% for three most recently published years) • Loan must be disbursed in equal amounts at beginning of the term and at the term’s calendar midpoint if default rate restriction is not met • * No term is more than two weeks longer than any other term

36. Stafford/PLUS Disbursements • Credit hour programs with non-standard terms not substantially equal in length or without terms and clock hour programs • Loan must be disbursed in two substantially equal amounts with the first disbursement at the beginning of the loan period • Second half of loan may not be disbursed until later of: • Calendar midpoint, or • Date student successfully completes clock hours in the loan period or completes half the credit hours

37. Retroactive Disbursements for Completed Periods • School must pay retroactively for any completed payment periods within award year if student was eligible for payment in those periods • Federal Pell Grant disbursements for a completed term are based on hours competed by the student • Stafford Loan certifications may include an earlier period of eligibility only if student completed a half-time course load during that period • Retroactive disbursements may be made in one lump sum

38. Late Disbursements • Generally, a student becomes ineligibleto receive Title IV funds on the date that: • For FFEL/DL, student is no longer enrolled at least half-time • For Pell Grant, ACG, National SMART, FSEOG and Perkins Loan, student is no longer enrolled at the school • If certain circumstances are met, student may qualify for late disbursements after they become ineligible

39. Conditions for a Late Disbursement • SAR/ISIR with an official EFC processed before the student became ineligible • FFEL or DL must have been certified or originated prior to the student’s becoming ineligible • FSEOG and Perkins awards must have been made prior to the student’s becoming ineligible

40. Mandatory vs. Optional Late Disbursements • School must offer a late disbursement of Title IV funds to student who successfully completes the payment period or period of enrollment • School may offer a late disbursement of FFEL/DL to student who does not withdraw but ceases to be enrolled on a half-time basis

41. Limitations on Late Disbursements • Second or subsequent late disbursement is prohibited unless: • Student has successfully completed the loan period, or • Student has graduated • Late disbursement to a first- year, first-time borrower is prohibited if he/she withdraws before 30th day of the program* • * Only if the school is subject to 30 day delay

42. Limitations on Late Disbursements • Late disbursements of Federal Pell Grant, ACG and National SMART Grant may only be made to students who have a valid SAR/ISIR by the deadline established • Late disbursements must be made no later than 120 days after date student became ineligible • ED may approve school requests for late disbursements later than 120 (exception basis)

43. Disbursements—Funding • Schools receive funds from ED through the Grants Administration and Payment System (GAPS) • Advance payment method • Reimbursement or cash monitoring • Schools receive FFEL funds directly from lenders • EFT • Master check • Individual paper checks

44. Reporting Disbursements • COD • Schools submit a common record that reports anticipated or actual disbursements to COD • Direct Loan records submitted to COD must have anticipated and/or actual disbursement dates • Schools are required to report “actual” disbursements of Pell grants and Direct Loans within 30 days of the date the disbursement was made

45. Disbursements—Advance Funded School Student GAPS COD

46. Disbursements—Report Driven School Student GAPS COD

47. Disbursements—School Funded School Student GAPS COD

48. Adjusting Disbursements • Disbursement adjustments may be necessary for various reasons • Verification • Change in estimated financial assistance (resources) • Cost of attendance adjustment • Professional judgment • Withdrawal (R2T4) • Required recalculation based on actual attendance • POP (Pell Overpayment Process)

49. Adjusting Disbursements • Adjustments to disbursements must be made within 30 days of determination that an adjustment is necessary • Report Pell, ACG, National SMART and Direct Loan adjustments to COD • Also may need to adjust GAPS draw downs • Report FFEL adjustments to the lender

50. Disbursement Reporting—NSLDS • Pell disbursements are reported to NSLDS through COD daily • Direct Loan disbursements are reported to NSLDS by the DL Servicer • Overpayments of disbursed funds must be reported to NSLDS using NSLDS on-line access • Overpayment information in NSLDS may result in student ineligibility • Reported to schools via ISIR Financial Aid History