# Presentation: 942127

## Session 36

- Disbursement of
- Title IV Funds
- Linda Burkhardt
- Greg Martin

## 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

## 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

## 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)

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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 1⁄2 time
- School must have system in place to check enrollment status
- If student drops below 1⁄2 time temporarily, disbursement may be made when 1⁄2 time status resumes assuming he/she still qualifies for the entire loan amt.

## 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

## 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

## 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

|        300 hours |        300 hours |
| --- | --- |

- payment periodone

- payment periodtwo

## 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

| 450 hours | 450 hours | 450 hours | 450 hours |
| --- | --- | --- | --- |

- paymentperiod one

- paymentperiod two

- paymentperiod one

- paymentperiod two

- First acad. year

- Second acad. year

## 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

| 450 hours | 450 hours | 300 hours |
| --- | --- | --- |

- payment

- payment

- payment

- First acad. year

- Second acad. year

## Payment Periods (Clock-Hour Programs)

- Program longer than an academic year with a remaining portion more 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

| 450 hours | 450 hours | 400 hours | 400 hours |
| --- | --- | --- | --- |

- paymentperiod one

- paymentperiod two

- payment period one

- paymentperiod two

- First acad. year

- Second acad. year

## 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)

## 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

## 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:

| Pell | $1,500 |
| --- | --- |
| Stafford  | $2,000 |
| FSEOG | $1,000 |
| Institutional Scholarship | $2,500 |

- Does this studenthave a Title IV credit balance?

***No***

## 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:

| Pell | $1,000 |
| --- | --- |
| Stafford  | $1,500 |
| FSEOG | $1,000 |
| Perkins | $2,000 |

- Does this studenthave a Title IV credit balance?

***Yes***

## 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

## 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

## 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*

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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

## 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)

## 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

## 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

## Disbursements—Advance Funded

- COD

- GAPS

- Student

- School

## Disbursements—Report Driven

**Disbursements—Report Driven**

- COD

- GAPS

- Student

- School

## Disbursements—School Funded

**Disbursements—School Funded**

- COD

- GAPS

- Student

- School

## 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)

## 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

## 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

## Disbursement Reporting—FISAP 

- No reporting of student level disbursements of campus based funds required
- Total expenditures for the campus based programs are reported on the FISAP
- This is reconciled with GAPS draw downs

## Technical Slide

- Linda Burkhardt
- Phone: (206) 615-2174
- Email: linda.burkhardt@ed.gov

- We appreciate your feedback and comments.
- We can be reached at the following:

- Greg Martin
-    Phone: (215) 656-6452
-    Email: gregory.martin@ed.gov

## Please provide any comments regarding this training or the trainers to:

Jo Ann Borel,
Title IV Training Supervisor
Joann.borel@ed.gov
202-377-3930

- Jo Ann Borel,
- Title IV Training Supervisor
- _Joann.borel@ed.gov_
- 202-377-3930