ERIC ED494730: Handbook 2006-2007: Federal Student Aid. Volume 5--Overawards, Overpayments, & Withdrawal Calculations

2006·1.4 MB·English

by  ERIC

HANDBOOK 2006-2007
Federal Student Aid

Volume 5 – Overawards, Overpayments,
& Withdrawal Calculations

U.S. Department of Education
Volume 5 – Contents
CHAPTER 1 – OVERPAYMENTS AND OVERAWARDS ............................5-1
OVERAWARDS.........................................................................................................5-1
Pell Grants ............................................................................................................................ 5-1
Stafford Loans ...................................................................................................................... 5-1
Campus-Based programs...................................................................................................... 5-3
FWS program ....................................................................................................................... 5-4
TREATMENT OF OVERPAYMENTS......................................................................5-4
Overpayments for which the school is responsible .............................................................. 5-4
Overpayments for which the student is responsible............................................................. 5-5
Exceptions to student liability .............................................................................................. 5-6
Overpayments created by inadvertent overborrowing.................................................... 5-7
Reporting overpayments to NSLDS..................................................................................... 5-8
Referring overpayment cases to Collections ........................................................................ 5-8
School responsibility after referral ....................................................................................... 5-9
Responsibilities of Borrower Services - Collections.......................................................... 5-10
Return of Title IV Funds when a school does not maintain a
separate federal bank account ....................................................................................... 5-10
Form – Student Overpayment, Referral to Borrower Services Collections ........................5-11
CHAPTER 2 – WITHDRAWALS AND THE RETURN OF
TITLE IV FUNDS ......................................................................................5-13
WITHDRAWALS.....................................................................................................5-13
General requirements.......................................................................................................... 5-14
Worksheets and software.................................................................................................... 5-14
Consumer information........................................................................................................ 2-15
GENERAL TITLE IV PRINCIPLES WITH SPECIAL APPLICABILITY IN
THE RETURN OF TITLE IV FUNDS...............................................................5-16
Definition of a Title IV recipient ........................................................................................ 5-16
Verification ......................................................................................................................... 5-16
Approved leave of absence................................................................................................. 5-18
Unapproved leaves of absence ........................................................................................... 5-24
Institutional charges............................................................................................................ 5-24
Institutional versus noninstitutional charges................................................................. 5-25
Book vouchers and institutional charges in the
Return of Title IV Funds calculations......................................................................5-26
Returning equipment .....................................................................................................5-26
Treatment Of Title IV Credit Balances When A Student Withdraws ................................. 5-28
PRINCIPLES WITH UNIQUE APPLICATIONS
IN THE RETURN OF TITLE IV AID................................................................5-31
Institutions Required To Take Attendance.......................................................................... 5-31
Date of the institution’s determination that the student withdrew...................................... 5-32
Date of determination at institutions that are required to take attendance.................... 5-32
Use of payment period or period of enrollment ................................................................. 5-34
Funds to include in a Return calculation ............................................................................ 5-36
SPECIAL TREATMENT OF STUDENTS WHO WITHDRAW AND THEN
TRANSFER OR REENTER A CREDIT-HOUR NONTERM-BASED
PROGRAM OR A PROGRAM THAT MEASURES PROGRESS IN
CLOCK HOURS.................................................................................................5-40
Reentry within 180 days..................................................................................................... 5-40
What to do when a student whose overpayment has been referred to
Borrower Services reenters within 180 days........................................................... 5-41
When a student reenters in a new award year............................................................... 5-42
Reentry after 180 days, transfer into a new program at the same institution, or
transfer to a new institution........................................................................................... 5-43
Eligibility of transfer students for additional Title IV funds......................................... 5-44
BREAKS IN ATTENDANCE FOR STUDENTS ENROLLED IN PROGRAMS
MEASURED IN CREDIT HOURS WITHOUT ACADEMIC TERMS............5-46
STEP 1: STUDENT’S TITLE IV AID INFORMATION.........................................5-49
Title IV aid disbursed ......................................................................................................... 5-49
Title IV aid that could have been disbursed ....................................................................... 5-49
Treatment of inadvertent overpayments ............................................................................. 5-51
Late arriving aid............................................................................................................ 5-54
STEP 2: PERCENTAGE OF TITLE IV AID EARNED..........................................5-55
Part 1 – Withdrawal date .................................................................................................... 5-55
Withdrawal date for a student who withdraws from
a school that is required to take attendance............................................................. 5-55
Determining a student’s withdrawal date at a
school that is not required to take attendance.......................................................... 5-56
When students fail to earn a passing grade
in any of their classes ..............................................................................................5-60
Last date of attendance at an academically related activity .........................................5-62
Withdrawals after rescission of official notification......................................................5-63
Withdrawals from standard term-based programs using modules................................5-63
Withdrawal date when a student dies............................................................................5-65
Part 2 – Percentage of Aid Earned...................................................................................... 5-66
Percentage of payment period or period of enrollment completed............................... 5-66
Scheduled breaks ...........................................................................................................5-66
Credit-hour programs.................................................................................................... 5-67
Clock-hour programs .................................................................................................... 5-70
STEP 3: AMOUNT OF TITLE IV AID EARNED
BY THE STUDENT............................................................................................5-73
Effects of a post-withdrawal reduction in charges ............................................................. 5-73
STEP 4: TOTAL TITLE IV AID TO BE DISBURSED OR RETURNED..............5-73
Part 1 – Post-withdrawal disbursements............................................................................. 5-73
Crediting a student’s account........................................................................................ 5-74
Notice to a student offering a post-withdrawal disbursement....................................... 5-76
Disburse grant before loan............................................................................................ 5-77
Death of a student ......................................................................................................... 5-79
Part 2 – Title IV aid to be returned ..................................................................................... 5-80
STEP 5: AMOUNT OF UNEARNED TITLE IV AID
DUE FROM THE SCHOOL...............................................................................5-80
Aid disbursed to the student before
institutional charges are paid......................................................................................... 5-80
Institutional charges............................................................................................................ 5-81
Use of institutional charges in determining
the school's responsibility for return........................................................................ 5-81
STEP 6: RETURN OF FUNDS BY THE SCHOOL................................................5-82
Order of return of Title IV funds ........................................................................................ 5-82
Time frame for the return of Title IV funds........................................................................ 5-83
STEP 7: INITIAL AMOUNT OF UNEARNED TITLE IV
AID DUE FROM THE STUDENT.....................................................................5-83
STEP 8: RETURN OF FUNDS BY THE STUDENT .............................................5-83
A SCHOOL’S RESPONSIBILITIES IN THE RETURN OF
FUNDS BY THE STUDENT..............................................................................5-84
Grant Overpayments........................................................................................................... 5-84
When a student receives additional funds during the 45-day period of
extended eligibility........................................................................................................ 5-85
Student overpayments less than $25................................................................................... 5-86
Payments on a student’s behalf........................................................................................... 5-87
Recording student payments and reductions in the Pell Grant Program............................ 5-88
Recording student payments and
reductions in the Direct Loan Program......................................................................... 5-89
Notifying the Department................................................................................................... 5-90
Reporting and referring overpayments ......................................................................... 5-91
Summary....................................................................................................................... 5-93
Accepting payments on referred overpayments ................................................................. 5-94
Corrections or recalls of referred overpayments ................................................................ 5-95
When a student loses eligibility at a former school while
receiving aid at a second school.................................................................................... 5-95
POST-WITHDRAWAL DISBURSEMENT TRACKING SHEET..........................5-97
SAMPLE SUMMARY OF THE REQUIREMENTS TO
PROVIDE INFORMATION TO STUDENTS AS PART OF
CONSUMER INFORMATION ..........................................................................5-98
STUDENT OVERPAYMENT DUE TO
WITHDRAWAL REFERRAL FORM ..............................................................5-100
CHART OF WITHDRAWAL DATES FOR A SCHOOL THAT IS
NOT REQUIRED TO TAKE ATTENDANCE.................................................5-101
CHART OF RETURN OF TITLE IV FUNDS REQUIREMENTS AND
DEADLINES.....................................................................................................5-102
CHART OF RETURN OF TITLE IV FUNDS REQUIREMENTS FOR
NOTIFICATION ...............................................................................................5-103
WORKSHEET FOR WITHDRAWAL FROM A
CLOCK-HOUR PROGRAM ............................................................................5-104
WORKSHEET FOR WITHDRAWAL FROM A
CREDIT-HOUR PROGRAM............................................................................5-106
CASE STUDIES IN WITHDRAWALS AND THE RETURN OF
TITLE IV AID ..........................................................................................5-109
Introduction
Introduction
An overpayment occurs when the student receives more aid than he or she
was eligible to receive. One kind of overpayment, traditionally called an
overaward, results from changes in the student’s aid package, a second
occurs when a student withdraws. This volume covers how a school
should respond when either of these types of overpayments occurs.
Here, we provide a summary of the changes and clarifications
presented in greater detail in the chapters that follow. Alone, the
text herein does not provide schools with the guidance needed to
satisfactorily administer the Title IV, HEA programs. For more
complete guidance, you should refer to the text in the chapters
cited, the Code of Federal Regulations (CFR) and the Higher
Education Assistance Act (HEA) as amended.
Throughout this volume, new information is indicated with the
following symbol.
New
When the text represents a clarification rather than a change, it
is indicated with this symbol.
Clarification
When we believe that historically there might be some
misunderstanding of a requirement, we indicate that with
Reminder
or
Important
Finally, if we want to point out a bit of helpful information we
indicate it with
Tip
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Volume 5 – Overawards, Overpayments, and Return Calculations, 2006-2007
MAJOR CHANGES
Chapter 1 – Overpayments and Overawards
None
Chapter 2 – Withdrawals and the Return of Title IV
Funds
√ Informed schools that, a promissory note must be signed for
a loan to be included as Aid that could have been disbursed in a
return calculation.
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Chapter 1 — Overpayments and Overawards
Overpayments and
1
CHAPTER
Overawards
An overpayment occurs when the student receives more aid than he or she was eligible to receive.
One kind of overpayment, traditionally called an overaward, results from changes in the
student’s aid package.
In this chapter we will discuss a student’s and a school’s responsibility for resolving
overpayments and overawards. This chapter does not cover returning funds when a student
withdraws. Please see chapter 2 for a discussion of those returns.
OVERAWARDS
An overaward is created when the student’s aid package exceeds
Traditionally, the FFEL regulations have
the student’s need. While you must always take care not to overaward
referred to the lender’s “disbursement” of
the student when packaging aid, circumstances may change after the
funds to a school, and the school’s
aid has been awarded and result in an overaward. For instance, the “delivery” of the loan proceeds to a student.
student may receive a scholarship or grant from an outside More recently, the Cash Management
organization, or the student may want to extend his or her work-study regulations have used the term
employment. When these circumstances arise, you may be required to “disbursement” to refer to the payment of
adjust the other federal student aid in the package. FSA funds to a student or parent, including
the payment of loan funds. In this chapter,
Pell Grants we will use “disbursement” in the sense of
the Cash Management regulations, that is,
Pell Grants are never adjusted to take into account other forms of all payments to a student or borrower.
aid. If there’s a Title IV overaward, you must look at other aid that
your school controls, and reduce that aid.
Stafford Loans Campus-based overawards, cite
34 CFR 673.5
If you find out that there’s going to be an overaward before
Stafford funds are disbursed to the student, you must eliminate the
Recovery of funds, cite
overaward. If you have certified or originated the loan but haven’t Verification 34 CFR 668.61
received the funds, you can ask the FFEL lender to cancel the loan or Immigration status 34 CFR 668.139
reduce the loan proceeds, or make a downward adjustment to a
Direct Loan. As an alternative, you can reduce or cancel aid over
which you have control.
Overpayments, cite
Title IV debts 34 CFR 668.35(e)
If your school has already received the funds, you have a number
Pell Grants 34 CFR 690.79
of options: FFEL 34 CFR 682.604(h)
DL 34 CFR 685.303(e)
• If the package includes an unsubsidized Stafford, a PLUS Loan,
or a nonfederal loan and the aid package doesn’t already apply
these loans to finance the EFC, and the school so chooses, the
Treatment of excess loan
aid package can be adjusted so that all or some part of these
proceeds, cite
loans replaces the EFC, thus reducing or eliminating the
34 CFR 682.604(h) and 34 CFR 685.303(e)
overaward.
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Volume 5 — Overawards, Overpayments, and Withdrawal Calculations, 2006-2007
• The second or subsequent disbursement of a Stafford can be
Overaward and unsubsidized
canceled or reduced. For an FFEL loan, you must inform the
loan example
lender of the reduced award and request cancellation or
Hector’s EFC is 4,000. His cost of
reduction of subsequent disbursements. For a Direct Loan, you
attendance is $12,000. He is supposed to
make the adjustments in COD.
receive a subsidized Stafford Loan of
$5,000 and an unsubsidized Stafford Loan
of $3,000, which completely meets his • If these adjustments have been made and an overaward still
need. Before he receives his first loan exists for a Stafford Loan borrower, you must withhold and
disbursement, Guerrero University also promptly return to the lender or the federal government any
gives him a $2,000 scholarship. If Hector’s funds that have not yet been disbursed to the borrower. If the
entire loan amount of $8,000 had been student is determined to be ineligible for the entire loan
subsidized, Guerrero would have to send
disbursement and the overaward cannot be reduced or
some of the loan back. But because part
eliminated, you must return all of the loan proceeds. Note that
of the loan amount is unsubsidized,
Stafford Loan overawards must be repaid before adjusting or
Guerrero simply considers that $2,000 of
cancelling campus-based funds.
the unsubsidized loan that applied to
Hector’s financial need is now being used
• If a student becomes ineligible for only a part of a Direct Loan,
to replace his EFC.
you can reduce the loan to eliminate the amount for which the
student is ineligible.
Example: Student ineligible for
If a student becomes ineligible for only a part of an FFEL
part of an FFEL disbursement
disbursement, you can return all the funds or only the amount
Owen’s EFC is 0. Owen’s loan
for which the student is ineligible. A school that returns the
disbursement was $1,000. However,
Guerrero discovered after it received the entire disbursement must request a disbursement for the correct
loan funds that Owen also received an amount. You must provide the lender with a written statement
outside scholarship, which created an describing why the funds were returned, and the lender must
overaward. Guerrero determines that the credit to the borrower’s account the portion of the insurance
overaward is $800. Guerrero could return premium and origination fee attributable to the amount
just the $800 or could instead return the returned. If you return the entire amount and ask for a new
entire $1,000 and have the lender issue a
disbursement, the student will pay only for the reduced
new check for $200.
insurance premium and origination fee (if applicable)
attributable to the reduced loan amount. To return only the
If Owen were at a Direct Loan school, the
amount for which the student is ineligible, you must have the
school should reduce the loan amount to
student endorse the loan check or, in the case of a loan
$200.
disbursed by electronic funds transfer (EFT), obtain the
student’s authorization to release loan funds. You can then
credit the student’s account for the amount for which the
Overaward tolerance for Title IV Loans
student is eligible and promptly refund to the lender the
portion of the disbursement for which the student is ineligible.
In general, there is no overaward toler-
ance for Title IV loans. However, if a
student’s The requirement to return overawards does not apply to Stafford
financial aid package contains a Title IV Loans made to cover the cost of attendance at foreign schools or to
Loan and a Campus-Based award there’s PLUS Loans.
a $300 overaward tolerance.
If the overaward situation occurs after Stafford Loan funds have been fully
If an overpayment occurs for a student
disbursed, there is no Stafford Loan overaward that needs to be
who has both Stafford loans and
addressed. However, you might have to adjust the aid package to
Campus-Based awards, unless the
prevent an overaward of campus-based funds.
Stafford loans have been fully disbursed,
the Stafford Loans should be
reduced before the Campus-Based
awards are adjusted or canceled.
5–2
Chapter 1 — Overpayments and Overawards
Although a school isn’t required to return Stafford Loan funds
that were disbursed to the borrower (either directly or by applying
them to the student account) before the overaward situation occurred,
the law doesn’t prevent your school from returning funds that were
applied to the student account if you choose to do so. A borrower
who receives a direct payment of loan funds is not required to repay
an overawarded amount, unless the overaward was caused by his or
her misreporting or withholding information.
Campus-Based programs
There is a $300 overaward tolerance/threshold for all campus-based Campus-based overawards cite
programs. The $300 threshold is allowed only if an overaward occurs 34 CFR 673.5(d)
after campus-based aid has been packaged. The threshold does not
allow a school to deliberately award campus-based aid that, in
combination with other resources, exceeds the student’s financial
need.
If a school learns that a student received resources that were not
included in calculating the student’s eligibility for aid from the
campus-based programs and those resources would result in the
student’s total resources exceeding his or her financial need by more
than $300, the school must take steps to resolve the overpayment.
Before reducing the student’s campus-based aid, the school
should reevaluate the student’s need to determine whether he or she
has increased need that was not anticipated when the school initially
awarded aid to the student. If the student’s need has increased and if
the total resources do not exceed the revised need by more than $300,
the school is not required to take further action.
If the school recalculates the student’s need and determines that
the student’s need has not increased, or that his or her need has
increased but that the total resources still exceed his or her need by
more than $300, the school must reduce or cancel any future Title IV
or institutional disbursements.
If the student’s total resources still exceed his or her need by more
than $300, and the student’s resources include a Perkins Loan and/
or FSEOG, the amount that exceeds the student’s need by more than
$300 is a Perkins Loan or FSEOG overpayment.
The student must repay the full amount of the campus-based loan
or grant disbursements that are considered an overpayment.
5-3