Date: March 5, 2024

To: U.S. Department of Education

From: Robyn Smith and Sophie Laing, Negotiators for Legal Assistance Organizations

Re: Issue Paper 2 – Cash Management

We propose adding language to the Department’s March 4-7 proposal that would allow students to 

request an alternative reasonable and affordable monthly payment calculation (similar to how they may 

do so for rehabilitation) for Pell Grant FSEOG overpayment, as follows:

§ 668.167 Returning Funds and Overpayments

(a) Returning funds. 

(1) Notwithstanding any State law (such as a law that allows funds to escheat to the State), an 

institution must return to the Secretary any title IV, HEA program funds, except FWS program 

funds, that it attempts to disburse directly to a student or parent that are not received by the 

student or parent. For FWS program funds, the institution is required to return only the Federal 

portion of the payroll disbursement. 

(2) If an EFT to a student's or parent's financial account is rejected, or a check to a student or 

parent is returned, the institution may make additional attempts to disburse the funds, provided 

that those attempts are made not later than 45 days after the EFT was rejected or the check 

returned. In cases where the institution does not make another attempt, the funds must be returned 

to the Secretary before the end of this 45-day period. 

(3) If a check sent to a student or parent is not returned to the institution but is not cashed, the 

institution must return the funds to the Secretary no later than 240 days after the date it issued the 

check. 

(b) Overpayments timelines. 

(1) For overpayments for which the student is responsible and that are not tied to nonattendance 

or return of title IV, HEA funds, institutions must promptly send a written notice to the student 

requesting repayment of the overpayment amount. Institutions have 30 calendar days from the 

date the notice is sent to—

(i) Recover the overpayment in full; or 

(ii) Enter into a repayment arrangement with the student that is satisfactory to the 

institution. 
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March 5, 2024

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(2) If the initial 30 calendar days have elapsed and the institution has not received the full 

overpayment or made satisfactory repayment arrangements, the institution has 15 calendar days 

to—

(i) Report the overpayment to NSLDS; and 

(ii) Refer the overpayment to the Department. 

(3) For FSA grant overpayments for which the institution is responsible, institutions have 45 

calendar days from the date of discovery to—

(i) For FSEOG, restore to the institution’s FSEOG account an amount equal to the 

overpayment plus any administrative cost allowance claimed on the overpayment; and 

(ii) For Federal Pell Grant and TEACH grant overpayments, make the appropriate 

downward adjustment to the student’s award in the COD system and either return the 

funds through G5 or disburse them to other eligible students. 

(4) For interim disbursement overpayments for which the institution is responsible and that are 

not recovered by reducing subsequent disbursements to students for the award year, institutions 

have 45 calendar days to make restitution to the appropriate account. 

(c) Liability for and recovery of Federal Pell Grant overpayments. 

(1) Except as provided in paragraphs (c)(2) and (3) of this section, a student is liable for any 

Federal Pell Grant overpayment made to them. 

(2) The institution is liable for a Federal Pell Grant overpayment if the overpayment occurred 

because the institution failed to follow the procedures in this part or 34 CFR part 668. The 

institution must restore an amount equal to the overpayment to its Federal Pell Grant account. 

(3) A student is not liable for, and the institution is not required to attempt recovery of or refer to 

the Secretary, a Federal Pell Grant overpayment if the amount of the overpayment is less than $50 

and is not a remaining balance. 

(4) Except as provided in paragraph (c)(3) of this section, if an institution makes a Federal Pell 

Grant overpayment for which it is not liable, it must promptly send a written notice to the student 

requesting repayment of the overpayment amount. The notice must state that failure to make that 

repayment, or to make arrangements satisfactory to the holder of the overpayment debt to repay 

the overpayment, makes the student ineligible for further title IV, HEA program funds until final 

resolution of the Federal Pell Grant overpayment.
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March 5, 2024

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(5) If a student objects to the institution's Federal Pell Grant overpayment determination on the 

grounds that it is erroneous, the institution must consider any information provided by the student 

and determine whether the objection is warranted. 

(6) Except as provided in paragraph (c)(3) of this section, if the student fails to repay a Federal 

Pell Grant overpayment or make arrangements satisfactory to the holder of the overpayment debt 

to repay the Federal Pell Grant overpayment, after the institution has taken the action required by 

paragraphs (c)(4) and (5) of this section, the institution must refer the overpayment to the 

Secretary for collection purposes in accordance with procedures required by the Secretary. After 

referring the Federal Pell Grant overpayment to the Secretary under this section, the institution 

need make no further efforts to recover the overpayment.

(7) When a Pell Grant overpayment has been referred to the Secretary under paragraph (c)(6) of 

this section, the Secretary must provide the student the opportunity to repay the amount in 

accordance with a reasonable and affordable monthly payment plan on the basis of the borrower’s 

total financial circumstances.

(8) The Secretary considers the monthly student’s reasonable and affordable payment amount to 

be an amount equal to 15 percent of the amount by which the student’s Adjusted Gross Income 

(AGI) exceeds 150% percent of the poverty guideline amount applicable to the student’s family 

size and State, divided by 12, except that if this amount is less than $5, the student’s monthly 

payment is $5reasonable and affordable if it is consistent with the Direct Loan rehabilitation 

requirements under 34 C.F.R. 685.211(f)(1).

(9) The Secretary may calculate the payment amount based on information provided in the 

student’s FAFSA or orally, electronically, or in writing by the student or the student’s 

representative and provide the student with a payment plan using that amount, a prominent 

statement that the student may object orally or in writing to the payment amount, with the method 

and timeframe for raising such an objection. A student may confirm their information by giving 

written, electronic, or oral permission to disclose applicable tax information to the Secretary, or 

by providing alternative documentation of income and family size. If the student does not provide 

documentation requested by the Secretary to calculate or confirm the reasonable and affordable 

payment amount within a reasonable time deadline set by the Secretary that is not less than 30 

days, the payment agreement provided is null and void.

(10) Within 15 business days of the Secretary’s determination of the student’s payment amount, 

the Secretary must provide the student with a written statement confirming the student’s 

reasonable and affordable monthly payment amount calculated under paragraph (c)(78) of this 

section, the date on which the first payment is due, a statement that the payment amount is null 

and void if the student does not provide any documentation requested by the Secretary pursuant 

to paragraph (c)(9), and an explanation of any other terms and conditions applicable to the 

payments that must be made. The Secretary will not impose any conditions unrelated to the 

amount or timing of the payments. 
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(11) If the student objects to the monthly payment amount determined under paragraph 

(c)(7) of this section, the Secretary must recalculate the payment amount based solely on 

information provided on a form approved by the Secretary and, if requested, supporting 

documentation from the student and other sources, and must consider— 

(i) The student’s, and if applicable, the spouse's current disposable income, 

including public assistance payments, and other income received by the student and the 

spouse, such as welfare benefits, Social Security benefits, Supplemental Security Income, 

and workers' compensation. Spousal income is not considered if the spouse does not 

contribute to the student’s household income;

(ii) Family size as defined in 34 C.F.R. § 682.215(a)(3); and

(iii) Reasonable and necessary expenses, which include— 

a. Food;

b. Housing;

c. Utilities;

d. Basic communication expenses;

e. Necessary medical and dental costs;

f. Necessary insurance costs;

g. Transportation costs;

h. Dependent care and other work-related expenses;

i. Legally required child and spousal support;

j. Other title IV and non-title IV student loan payments; and

k. Other expenses approved by the Secretary.

(iv) The Secretary must provide the student with a new payment amount. Within 15 

business days of the Secretary’s determination of the student’s new payment amount, the 

Secretary must provide the student with a written statement confirming the student’s 

reasonable and affordable monthly payment amount. 

(12) The student remains eligible to receive Title IV, HEA program assistance under 34 

C.F.R. 668.32(g)(4) until- 

(i) The student does not respond or provide documentation satisfactory to the 

Secretary for 90 days to the Department’s offer to enter into a reasonable and affordable 

repayment plan;

(ii) The student fails to make any payment pursuant to the payment plan for a period 

of 120 or more days. 
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(13) A student may request that the monthly payment amount be recalculated due to a change 

in the student’s total financial circumstances by submitting alternative documentation of the 

student’s income or family size. In this case, the Secretary shall recalculate the monthly payment 

amount pursuant to paragraphs (c)(7) through (c)(11) of this section.

(d) Recovery of funds from interim disbursements. 

(1) If an institution discovers, as a result of verification, that an applicant received under § 

668.58(a)(2)(i)(B) more financial aid than the applicant was eligible to receive, the institution 

must eliminate the Federal Pell Grant or FSEOG overpayment by- 

(i) Adjusting subsequent disbursements in the award year in which the overpayment 

occurred; or

(ii) Reimbursing the appropriate program account by— 

(A) Requiring the applicant to return the overpayment to the institution if the 

institution cannot correct the overpayment under paragraph (d)(1) of this section; or

(B) Making restitution from its own funds, by the deadline specified in paragraph 

(b)(4) of this section.

(2) If an institution discovers, as a result of verification, that an applicant received under § 

668.58(a)(2)(ii) more financial aid than the applicant was eligible to receive, the institution must 

eliminate the FWS overpayment by— 

(i) Adjusting the applicant's other financial aid; or

(ii) Reimbursing the FWS program account by making restitution from its own funds if 

the institution cannot correct the overpayment under paragraph (d)(2)(i) of this section. 

The applicant must still be paid for all work performed under the institution's own payroll 

account.

(3) If an institution disbursed subsidized student financial assistance to an applicant under § 

668.58(a)(3) and did not receive the valid SAR or valid ISIR reflecting corrections within the 

deadlines established under § 668.60, the institution must reimburse the appropriate program 

account by making restitution from its own funds. The applicant must still be paid for all work 

performed under the institution's own payroll account.

(e) TEACH Grant overpayments. 

(1) Except as provided in paragraphs (e)(2) and (e)(3) of this section, a student is liable for any

TEACH Grant overpayment made to them.

(2) The institution is liable for a TEACH Grant overpayment if the overpayment occurred 

because the institution failed to follow the procedures in this part or in 34 CFR part 668. The 

institution must restore an amount equal to the overpayment to its TEACH Grant account.
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March 5, 2024

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(3) A student is not liable for, and the institution is not required to attempt recovery of or refer to 

the Secretary, a TEACH Grant overpayment if the amount of the overpayment is less than $25

$50 and is not a remaining balance.

(4) Except as provided in paragraph (e)(3) of this section, if an institution makes a TEACH Grant 

overpayment for which it is not liable, it must promptly send a written notice to the student 

requesting repayment of the overpayment amount. The notice must state that failure to make the 

requested repayment, or to make arrangements satisfactory to the holder of the overpayment debt 

to repay the overpayment, makes the student ineligible for further title IV, HEA program funds 

until final resolution of the TEACH Grant overpayment.

(5) If a student objects to the institution's TEACH Grant overpayment determination, the 

institution must consider any information provided by the student and determine whether the 

objection is warranted.

(6) Except as provided in paragraph (e)(3) of this section, if the student fails to repay a 

TEACH Grant overpayment or make arrangements satisfactory to the holder of the overpayment 

debt to repay the TEACH Grant overpayment, after the institution has taken the action required 

by paragraphs (e)(4) and (5) of this section, the institution must refer the overpayment to the 

Secretary for collection in accordance with procedures required by the Secretary. After referring 

the TEACH Grant overpayment to the Secretary under this section, the institution need make no 

further efforts to recover the overpayment.

(f) FSEOG overpayments. 

(1) Except as provided in paragraphs (f)(2) and (3) of this section, a student is liable for any 

FSEOG overpayment made to them. An FSEOG overpayment for purposes of this paragraph does 

not include the non-Federal share of an FSEOG award if an institution meets its FSEOG 

matching share by the individual recipient method or the aggregate method.

(2) The institution is liable for an FSEOG overpayment if the overpayment occurred because 

the institution failed to follow the procedures in this part or 34 CFR parts 668, 674, or 676. The 

institution must restore an amount equal to the overpayment and any administrative cost 

allowance claimed on that amount to its FSEOG account for an FSEOG overpayment.

(3) A student is not liable for, and the institution is not required to attempt recovery of an 

FSEOG overpayment, nor is the institution required to refer an FSEOG overpayment to the 

Secretary, if the overpayment— 

(i) Is less than $25 $50; and

(ii) Is neither a remaining balance nor a result of the application of the overaward 

threshold in § 673.5(d).
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(4) Except as provided in paragraph (f)(3) of this section, if an institution makes an FSEOG 

overpayment for which it is not liable, it must promptly send a written notice to the student 

requesting repayment of the overpayment amount. The notice must state that failure to make that 

repayment, or to make arrangements satisfactory to the holder of the overpayment debt to pay the 

overpayment, makes the student ineligible for further title IV, HEA program funds until final 

resolution of the overpayment.

(5) If a student objects to the institution's FSEOG overpayment determination on the grounds 

that it is erroneous, the institution must consider any information provided by the student and 

determine whether the objection is warranted.

(6) Except as provided in paragraph (f)(3) of this section, if a student fails to repay an 

FSEOG overpayment or make arrangements satisfactory to the holder of the overpayment debt to 

repay the FSEOG overpayment after the institution has taken the action required by paragraph 

(f)(4) of this section, the institution must refer the FSEOG overpayment to the Secretary for 

collection purposes in accordance with procedures required by the Secretary. After referring the 

FSEOG overpayment to the Secretary under this section, the institution need make no further 

effort to recover the overpayment.

(7) When a FSEOG overpayment has been referred to the Secretary under paragraph (f)(6) of 

this section, the Secretary must provide the student the opportunity to repay the amount in 

accordance with a reasonable and affordable monthly payment plan on the basis of the borrower’s 

total financial circumstances.

(8) The Secretary considers the monthly student’s reasonable and affordable payment amount to 

be an amount equal to 15 percent of the amount by which the student’s Adjusted Gross Income 

(AGI) exceeds 150% percent of the poverty guideline amount applicable to the student’s family 

size and State, divided by 12, except that if this amount is less than $5, the student’s monthly 

payment is $5reasonable and affordable if it is consistent with the Direct Loan rehabilitation 

requirements under 34 C.F.R. 685.211(f)(1).

(9) The Secretary may calculate the payment amount based on information provided in the 

student’s FAFSA or orally, electronically, or in writing by the student or the student’s 

representative and provide the student with a payment plan using that amount, a prominent 

statement that the student may object orally or in writing to the payment amount, with the method 

and timeframe for raising such an objection. A student may confirm their information by giving 

written, electronic, or oral permission to disclose applicable tax information to the Secretary, or 

by providing alternative documentation of income and family size. If the student does not provide 

documentation requested by the Secretary to calculate or confirm the reasonable and affordable 

payment amount within a reasonable time deadline set by the Secretary that is not less than 30 

days, the payment agreement provided is null and void.

(10) Within 15 business days of the Secretary’s determination of the student’s payment amount, 

the Secretary must provide the student with a written statement confirming the student’s 
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March 5, 2024

8 

reasonable and affordable monthly payment amount calculated under paragraph (f)(78) of this 

section, the date on which the first payment is due, a statement that the payment amount is null 

and void if the student does not provide any documentation requested by the Secretary pursuant 

to paragraph (f)(9), and an explanation of any other terms and conditions applicable to the 

payments that must be made. The Secretary will not impose any conditions unrelated to the 

amount or timing of the payments. 

(14) If the student objects to the monthly payment amount determined under paragraph 

(f)(7) of this section, the Secretary must recalculate the payment amount based solely on 

information provided on a form approved by the Secretary and, if requested, supporting 

documentation from the student and other sources, and must consider— 

(v) The student’s, and if applicable, the spouse's current disposable income, 

including public assistance payments, and other income received by the student and the 

spouse, such as welfare benefits, Social Security benefits, Supplemental Security Income, 

and workers' compensation. Spousal income is not considered if the spouse does not 

contribute to the student’s household income;

(vi) Family size as defined in 34 C.F.R. § 682.215(a)(3); and

(vii) Reasonable and necessary expenses, which include— 

a. Food;

b. Housing;

c. Utilities;

d. Basic communication expenses;

e. Necessary medical and dental costs;

f. Necessary insurance costs;

g. Transportation costs;

h. Dependent care and other work-related expenses;

i. Legally required child and spousal support;

j. Other title IV and non-title IV student loan payments; and

k. Other expenses approved by the Secretary.

(viii) The Secretary must provide the student with a new payment amount. Within 15 

business days of the Secretary’s determination of the student’s new payment amount, the 

Secretary must provide the student with a written statement confirming the student’s 

reasonable and affordable monthly payment amount. 

(15) The student remains eligible to receive Title IV, HEA program assistance under 34 

C.F.R. 668.32(g)(4) until- 
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9 

(iii) The student does not respond or provide documentation satisfactory to the 

Secretary for 90 days to the Department’s offer to enter into a reasonable and affordable 

repayment plan;

(iv) The student fails to make any payment pursuant to the payment plan for a period 

of 120 or more days. 

(16) A student may request that the monthly payment amount be recalculated due to a change 

in the student’s total financial circumstances by submitting alternative documentation of the 

student’s income or family size. In this case, the Secretary shall recalculate the monthly payment 

amount pursuant to paragraphs (f)(7) through (f)(11) of this section.