A-1

June 2001 The Blue Book

Appendix

A

GLOSSARY

Academic

Achievement

Incentive

Scholarship

Program

The purpose of this gift-aid program is to help financially needy students who

have demonstrated their academic abilities. The scholarships are for students

who are eligible for Federal Pell Grants and graduate after May 1, 2000 in the

top 10 percent of their high school graduating class. An Academic

Achievement Incentive Scholarship equals up to the amount the student is

eligible for in Federal Pell Grant, which can result in doubling the student’s

grant amount. This program is unfunded for the 2000-01 award year.

academic year A time period of at least 30 instructional weeks in which a full-time

undergraduate student is expected to complete:

♦ For an educational program whose length is measured in credit hours:

24 semester hours, 24 trimester hours, or 36 quarter hours.

♦ For an educational program whose length is measured in clock hours:

at least 900 clock hours.

However, there is an exception for those schools with at least a two-year

program that awards an associate degree, or a four-year academic program that

awards a bachelor’s degree. Those schools may request, in writing, that ED

reduce the minimum period of instructional time of the academic year for any

of its programs as long as they are at least 26 weeks in length.

accepted with

corrections

A category of Federal Pell Grant processed payment data found to be

inaccurate but for which the Recipient Financial Management System (RFMS)

made certain corrections during processing. A school must review the records

carefully and resubmit them if RFMS’s corrections are inaccurate.

Access America for

Students

Access America for Students provides electronic Web-based access for

participating students to government services.

accounting for

restricted funds for

limited purposes

A restricted fund made up of a self-balancing group of accounts: assets,

liabilities, capital (fund balance), revenues, and expenses. It is important to

note that individual funds are separated completely from one another and

from the general fund of the institution and are self-balancing. That is, the

debit balances of the debit accounts within the fund equal the credit balances

of the credit accounts within the fund. This ensures the integrity of individual

funds and provides control over fund expenditures. “Restricted” means that

the use of the funds has been restricted to some specific activity by donors

and/or other external parties.
Appendix A

A-2

The Blue Book June 2001

accounting period A time period for which financial records are maintained and at the end of

which financial statements are prepared. See Financial statement.

accrual basis The type of accounting under which incomes are recorded when earned

(regardless of when cash is actually received) and expenses are recorded when

liabilities are incurred (regardless of when cash is actually expended).

accrued salaries Wages earned between the last pay date and the end of the accounting period

being reported, but not yet paid to the appropriate students. The unpaid

student wages are considered a school liability.

ACH and ACH/EFT See Automated clearinghouse (ACH).

adjusting entry A journal entry made for purposes of correcting an error (such as a transfer of

funds between accounts) or recording an accrual (such as earned, but unpaid,

student payroll at the end of an accounting period).

administrative

capability

A school must show that it has the administrative capability and the financial

responsibility to participate in federal Title IV student aid programs.

Administrative capability covers specific areas in the management of an

institution. These areas include:

♦ establishing and maintaining student records and financial records,

♦ submitting ED-required reports,

♦ designating a capable Title IV financial aid administrator at an

institution,

♦ writing procedures for school offices involved with Title IV programs,

♦ communicating to the financial aid administrator all information

received by any school office that might affect a student’s Title IV aid

eligibility,

♦ dividing the functions of authorizing payments for Title IV funds and

disbursing Title IV funds, and

♦ employing an adequate number of qualified staff.

For further information, refer to 34 CFR 668.16 or Chapter 2 of The Blue Book.

See also Financial responsibility.

administrative cost

allowance (ACA)

A dollar figure the federal government allots an institution to offset the cost of

administering the Federal Pell Grant Program and campus-based programs.

administrative

offset

An offset assessed by ED against a Title IV participating school to collect

program review, audit, and formal fine debts. ED withholds a portion of a

school’s Grant Administration and Payment System (GAPS) authorized

payments and applies them toward the school’s debt.
June 2001 A-3

Glossary

The Blue Book

advance payment

method

Under this payment method, a school may submit a request for funds to ED

before disbursing aid to eligible students. If the request is approved, ED will

make an electronic funds transfer of the requested amount to the school’s

bank account.

agency funds The conduit or clearinghouse funds established to account for assets (usually

cash) received for, and paid to, other funds, individuals, or organizations.

Externally designated scholarship funds are an example of agency funds.

Because assets received this way are held briefly and are to be disposed of at

the direction of others, only asset and liability accounts are needed.

allocation A specific sum of money awarded for an institution to use during a specific

period. Campus-based funds (Federal Supplemental Educational Opportunity

Grant [FSEOG], Federal Work-Study [FWS], and Federal Perkins Loan) are

allocated to a school on an award-year basis. An allocation may also be

referred to as obligation, award authorization, grant authorization, or

Document Number. See Releasing campus-based program funds and Supplemental

appropriation.

allowable charges Educational expenses that a student incurs for which a school may credit a

student’s account with Title IV funds. These charges may be credited to a

student’s school account and paid using Title IV funds. These charges may

include current charges for tuition and fees and room and board (if the student

contracts with the school for these services). Other current charges that a

student incurs for educationally related activities may be considered allowable

charges if the school obtains the student’s authorization (or parent’s

authorization for PLUS Loan funds) to have such charges paid with Title IV

funds. Allowable charges may also include certain minor charges for the

previous award year. See Current charges.

AmeriCorps A program of national and community service that provides education awards

of up to $4,725 a year. Individuals may work before, during, or after their

postsecondary education and can use their awards either to pay current

educational expenses or future educational expenses, or to repay federal

student loans.

appropriation At the federal level, a congressional legislative act allocating a specific amount

of public funds to be spent for a specific purpose during a fiscal year or award

year. The dollar amount appropriated may be equal to or less than (but not

more than) the total amount permissible under the authorizing statute. An

appropriation bill originates in the U.S. House of Representatives. General

appropriation acts are supposed to be approved by both houses of Congress

by the seventh day after Labor Day before the start of the fiscal year to which

they apply. Continuing resolutions allocate funds for expenditures when the

appropriations bill for the new fiscal year has not been enacted. See Continuing

resolution and Supplemental appropriation.
Appendix A

A-4

The Blue Book June 2001

assets Owned property that must be reported on a student’s financial aid application.

These are financial holdings such as cash on hand in checking and savings

accounts, trusts, stocks, bonds, other securities, loan receivables, real estate

(excluding the family’s primary home), business equipment, and business

inventory.

assignment A school’s transfer of a defaulted National Defense Student Loan, National

Direct Student Loan (NDSL), or Federal Perkins Loan to ED for collection.

Once ED accepts a loan, it acquires all rights, title, and interest on the assigned

loan. In certain cases, guaranty agencies also assign defaulted FFEL Program

loans to ED.

audit An independent examination of a school’s financial transactions, accounts,

reports, and compliance with applicable laws and regulations to determine

whether the school is:

♦ maintaining effective control over revenues, expenditures, assets, and

liabilities;

♦ properly accounting for resources, liabilities, and operations;

♦ producing financial reports that contain accurate, reliable, and useful

financial information and that are accurately presented; and

♦ complying with applicable laws, regulations, and ED directives.

Under ED regulations, governmental and nonprofit postsecondary institutions

must have an audit performed pursuant to the requirements of OMB Circular

A-133. A-133 audits are combined financial and compliance audits. For-profit

postsecondary institutions are permitted to obtain separate or combined

financial and compliance audits, performed in accordance with the audit guide

issued by the U.S. Department of Education, Office of Inspector General. See

Independent audit.

audit exceptions Actions identified through an audit that are not in compliance with federal

guidelines. These are often referred to as “Audit Findings.”

Audit Guide A manual to be used by independent auditors performing audits of Title IV

student financial aid program funds at institutions.

audit report A report prepared by an auditor after a federal audit is performed. In a

nonfederal audit, this report is prepared by an auditor or audit firm according

to the guidelines provided in the Audit Guide or according to OMB Circular

A-133. See Federal audit.

audit trail A systemic feature that provides for a clear, easy-to-follow path from summary

reports and ledgers back to lower-level summary information and primary

documentation of individual transactions.
June 2001 A-5

Glossary

The Blue Book

authorization

(legislative)

At the federal level, a congressional legislative act that establishes a program,

specifies its general purpose and conduct, and unless open-ended, sets a ceiling

for the dollar amount that can be used to finance it. An authorization must be

enacted before dollar amounts can be appropriated for program spending.

authorization

(spending)

The approved expenditure level for a federal aid program for an award year.

Each award year, ED notifies each participating institution of its authorized

levels of expenditures for the Federal Pell Grant Program and the campusbased programs in which it participates. See Final funding authorization.

automated

clearinghouse

(ACH)

A nationwide, electronic financial network providing a paperless, efficient

means of making payments by electronically transmitting debits and credits

through the Federal Reserve Communications System. It takes approximately

three business days for funds to reach a school’s bank account.

ACH payments offer a wide range of applications, including direct deposit and

preauthorized debits. Also referred to as Automated Clearinghouse/Electronic

Funds Transfer (ACH/EFT). See Automated voice response (AVR) and Operatorassisted mode.

automated

FEDWIRE system

A process of electronically transferring funds with same-day deposit for

requests made before 2 p.m., Eastern Time (ET) and next-day deposit for

requests made after 2 p.m. ET. See FEDWIRE.

automated

suspension of

funds

The automated decrease of an allocation (authorization amount) listed in the

Grant Administration and Payment System (GAPS). This decrease occurs

when an inactive award (allocation) is closed. As a result, the school must

adjust its own expenditure records for that allocation to the appropriate

disbursement amount.

automated voice

response (AVR)

An option for placing requests for automated clearinghouse (ACH) payments

through a service bureau. This request is made using a touch-tone telephone.

It represents one of two payment-request modes available to schools.

Compare Operator-assisted mode.

award As a noun, a specific amount of financial assistance to pay for education costs

offered to a student through one or more financial aid programs. As a verb,

approving financial assistance to students. One function of an institution is to

award campus-based financial aid to students who meet all the eligibility

criteria.

award adjustment

or revision

An action by a financial aid office resulting in an increase, a decrease, a

program-source substitution, or a cancellation of a student’s financial aid

award. This may be necessitated by factors such as a change in the student’s

enrollment status or a change in the financial circumstances of the student’s

family or the student.

award packaging See Packaging.
Appendix A

A-6

The Blue Book June 2001

award period This refers to the period of time the payee can request funds from GAPS.

The length of the award period varies by program and authorizing statute.

There are four periods in an award period: performance period, liquidation

period, suspension period, and closeout period.

award year The time period from July 1 of one year through June 30 of the following year

for which financial aid awards are made. The award year differs from the

federal fiscal year (October 1 through September 30). However, FFEL and

Direct Loan funds are not tied to an award year.

base guarantee An allocation determined by the allocation a school received for a previous

award year; usually (but not always) the base guarantee is the amount received

in the year directly previous.

batch A group of records assembled in a single file that is then transmitted

electronically as one unit to ED for processing. Each batch contains a header

record and a trailer record with information about the records in the batch,

including the number of records and the school ID number.

billing service A private-sector business organization (“third-party servicer”) that services

loan accounts (billing and/or receiving) for lenders and schools. A fee is

charged for the service.

bookkeeping Analyzing, classifying, and recording financial transactions according to a

preconceived plan to provide a means by which an organization’s business

may be conducted in an orderly fashion and to establish a basis for reporting

the financial condition of an organization and the results of its operation. The

two methods of bookkeeping are single entry and double entry. See Doubleentry bookkeeping and Single-entry bookkeeping.

business office The school office responsible for an institution’s financial accounting,

including Title IV aid program accounting. The office disburses financial aid

award payments to students and processes loan checks. It is sometimes

referred to as the fiscal office, finance office, comptroller’s office, bursar’s

office, treasurer’s office, or student accounts office. See Separation of functions.

Robert C. Byrd

Honors Scholarship

A Title IV financial aid program that makes scholarships available to

full-time postsecondary students with exceptional academic ability and

promise. Students apply for the merit-based scholarships through their state

education agencies. The program, created in 1984, was named to honor

Senator Robert C. Byrd.

campus Any building or property owned or controlled by an institution within the

same reasonably contiguous geographic area and used by the institution in

direct support of, or in a manner related to, the institution’s educational

purposes, including residence halls. Also, any building or property (within the

same reasonably contiguous geographic area) owned by the institution but

controlled by another person, and frequently used by students. It also
June 2001 A-7

Glossary

The Blue Book

supports institutional purposes (such as a food or other retail vendor).

campus-based

programs

The term applied to three federal Title IV student aid programs administered

on campus by eligible institutions of postsecondary education:

♦ Federal Perkins Loan Program,

♦ Federal Work-Study (FWS) Program, and

♦ Federal Supplemental Educational Opportunity Grant (FSEOG)

Program.

See individual program names.

cancellation

(of a loan)

In the Federal Perkins Loan Program, students who are engaged in certain

public services such as teaching, service in a Head Start program, service in the

Peace Corps or ACTION, or service in the military, and others that are

identified by ED, may have their loans canceled. Cancellation is also granted

in case of the borrower’s death or total and permanent disability, if the school

closed before the borrower completed the program, or in some cases,

bankruptcy. Students must make application and meet specific requirements

set by ED to have all or part of their loan canceled (including interest).

In the FFEL and Direct Loan Programs, a loan may be discharged, or canceled,

if the borrower dies or becomes totally and permanently disabled; if the loan is

discharged in bankruptcy; if the school closed before the borrower completed

his or her program; or if the school falsely certified or originated the loan.

The FFEL and Direct Loan provisions generally use the term “discharge”

rather than “cancellation.” There is no regulatory distinction between the two

terms. See Discharge (of a loan).

capitalizing interest A process in which interest that has accrued but has not been paid is added to

the loan principal for both the FFEL and Federal Direct Loan Programs.

Capitalization increases the amount of the principal and, consequently, the

total amount that must be repaid.

carry forward/

carry back

A special provision of the Federal Work-Study (FWS) Program and the

Federal Supplemental Educational Opportunity Grant (FSEOG) Program that

allows an institution to transfer up to 10 percent of its annual FWS and

FSEOG allocations back to the previous award year or forward to the next

award year. In addition, a school may carry back funds from the current award

year to pay student wages earned from May 1 through June 30 of the previous

award year. See Federal Work-Study (FWS) Program and Federal Supplemental

Educational Opportunity Grant (FSEOG) Program.

Case Management

and Oversight

Service

A division in ED responsible for institutional audit resolution, program

review, financial statement analysis, initial certification, and recertification.
Appendix A

A-8

The Blue Book June 2001

cash advance A transfer of funds from a federal agency (from an account in the U.S.

Treasury through the Federal Reserve Bank) to a school, or institutional funds

used in advance of a school receiving Title IV funds.

cash on hand The amount of funds maintained in a school’s bank account equal to the

amount of funds to be disbursed to students. Cash on hand is also part of the

equation used to calculate projected immediate-cash needs.

cash management The federal regulations contained in Subpart K of 34 CFR 668. These

regulations establish the rules and procedures a school must follow to request,

maintain, disburse, and otherwise manage Title IV funds.

cash monitoring

payment method

When ED places a school on the cash monitoring payment method, ED

provides funds to the school after the school makes disbursements to students

and parents. Schools will then be paid using either a form of the advance

payment method or reimbursement payment method.

Schools receiving funds through advance payment request funds just as other

schools under that method, except they must identify to ED the scheduled

disbursements to students for whom those funds are requested. See Advance

payment method.

Under reimbursement cash monitoring method, the school must first make

disbursements to eligible students and parents before ED provides the funds

for the school through GAPS; however, the school must provide different

documentation than under the reimbursement payment method. After

submitting the appropriate documentation to ED, schools are reimbursed. See

Reimbursement payment method.

cash pooling For institutions permitted to do so, depositing federal funds for all Title IV aid

programs (except Direct Loans) in a single bank account.

Central Processing

System (CPS)

ED’s Central Processing System (CPS) analyzes information from Free

Applications for Federal Student Aid (FAFSAs) and calculates Expected

Family Contributions (EFCs). A series of edits is used to check the

consistency of family-supplied and student-supplied information. Eligibility

matches are also conducted with the U.S. Social Security Administration, the

U.S. Immigration and Naturalization Service, and the U.S. Selective Service.

In addition, each student is checked against ED’s National Student Loan Data

System (NSLDS). See National Student Loan Data System (NSLDS).

chart of accounts A list of financial account numbers and account titles arranged in a systematic

way to help institutions identify the accounts in their fiscal management

system and ledgers. These accounts form the foundation for the school’s

Title IV reporting process.
June 2001 A-9

Glossary

The Blue Book

closeout period The end of the award period. During this time, the award is closed and any

remaining disbursements that have been made before the end of the award

period are disbursed.

closing The process of preparing, entering, and posting closing entries. A closing

entry is a journal entry in which balances in revenue accounts and expense

accounts are eliminated at the end of the accounting period (calendar year or

fiscal year). Because revenue accounts and expense accounts provide the

information for a statement of operations of a given accounting period, it is

essential these accounts have zero balances at the beginning of each new

period. Asset, liability, and fund balance accounts are not closed at the end of

the accounting period, as their balances carry over to the new period.

Code of Federal

Regulations (CFR)

The codification of final regulations published in the Federal Register. The CFR

is divided into 50 titles that represent broad areas subject to federal regulation.

Title 34 (Education) contains the regulations that govern the Title IV

programs.

cohort default rate A school receives a cohort default rate from ED for its participation in the

FFEL and/or Direct Loan Program. If a school participates in the Federal

Perkins Loan Program, it calculates its own cohort default rate and reports it

to ED on the FISAP. In general, both types of cohort default rates reflect the

percentage of an institution’s current and former students who entered

student-loan repayment in a specified year on loans received for attendance at

that institution and who defaulted before the end of the following year. For

any year in which fewer than 30 students entered repayment, the school’s

cohort default rate is, in general, the percentage of its students who entered

repayment in that year and in the previous two years and who defaulted before

the end of the year immediately following the year in which they entered

repayment. The two types of cohort default rates are based on different

definitions of the term “default,” and the rules for calculating and applying the

rates are also different. See Default.

collection agency A business organization that receives delinquent or defaulted loan accounts

from lenders and attempts to collect on those accounts. A fee is charged for

the service.

collection costs Reasonable costs incurred by using a collection agency or commercial

skip-trace agency in an attempt to recover delinquent or defaulted student loan

accounts. See Collection agency and Skip tracing.

community service A service identified by an institution of higher education, through formal or

informal consultation with local nonprofit, governmental, and communitybased organizations, that is designed to improve the quality of life for

community residents, particularly low-income individuals, or to solve particular

problems related to their needs.

compliance audit See Audit and Independent audit.
Appendix A

A-10 The Blue Book June 2001

composite score A measure of financial responsibility for proprietary and private nonprofit

institutions. ED uses the composite score to determine whether institutions

demonstrate financial responsibility under the regulations in Subpart L of 34

CFR 668. Institutions provide the information that is used to perform these

calculations in their required annual financial statement audits. See Financial

responsibility.

continuing

resolution

At the federal level, a joint congressional agreement between the U.S. House

of Representatives and the U.S. Senate to continue appropriations for specific

government agencies (at rates generally determined on the basis of previous

fiscal-year appropriation levels). This is done when Congress has not yet

enacted an appropriation act for those agencies for the current fiscal year.

A continuing resolution must pass both houses of Congress and be signed by

the President. See Appropriation.

contra account The other side of an account. When used in T-account diagrams, the term

“contra account” refers to the other part of the entry. For example, if a

Cash Control, GAPS account is debited, the contra account (the account to be

credited) might be Accounts Receivable, GAPS. If Cash Control, GAPS is

credited, the contra account to be debited might be Expended Funds, GAPS.

See T-Account.

control account A ledger account in which posting occurs simultaneously to a number of

identical, similar, or related accounts, usually called subsidiary ledger accounts.

When these subsidiary ledger account balances are added together, that total

should agree with the balance in the control account. A familiar example is

accounts receivable. When several students have receivable balances in

subsidiary accounts (an account receivable system), the sum of the balances for

all the students agrees with the total in the general ledger, control account.

corrected A category of Federal Pell Grant processed payment data returned to a school

by RFMS that the school must keep on file. A school should not resubmit

these corrected data records to RFMS unless the award-year data changes.

corrective action As part of any fine, any limitation, suspension, or termination proceeding, or

any adverse finding in a report or review, ED may require a postsecondary

institution to take corrective action. This action may include making payments

to eligible students or repaying any illegally used funds to ED. ED may offset

any funds to be repaid against any benefits or claims due to the institution

from ED.

corrective action

plan (CAP)

A written plan an institution submits to ED, as required by an ED official, a

hearing official, or the U.S. Secretary of Education. In this plan, the institution

explains what reasonable and appropriate steps it will take to remedy any

ED-determined violation(s) of applicable laws, regulations, special

arrangements, agreements, or limitations based on present or prior financial

aid audit or program review findings.
June 2001 A-11

Glossary

The Blue Book

cost of attendance

(COA)

Section 472 of the Higher Education Act, as amended (HEA) gives specific

statutory parameters for determining a student’s cost of attendance (COA) for

Title IV aid programs. A student’s cost of attendance includes tuition and

fees, room and board expenses while attending school, allowances for books

and supplies (which can include the cost of buying or renting a computer),

transportation, loan fees (if it applies), dependent-care costs (if it applies), costs

related to a disability (if it applies), and other miscellaneous expenses. In

addition, reasonable costs for a study-abroad program and costs associated

with a student’s employment as part of a cooperative education program may

be included. There are also special rules for less-than-half-time students and

correspondence-study students. The cost of attendance is determined by the

school. The cost of attendance is compared to a student’s expected family

contribution (EFC) to determine the student’s need for aid

(COA-EFA-EFC = student’s need).

credit balance

(Title IV)

Refers to those Title IV funds that exceed the student’s allowable charges. A

school must pay this balance directly to the student (or parent, if PLUS Loan

funds create the credit balance) as soon as possible, but no later than 14 days

after the credit balance occurs (or no later than 14 days after the first day of

classes of the payment period if the credit balance occurs on or before the first

day of class). For a school to hold a credit balance, the school must receive

signed authorization from the student (or parent borrower). The school must,

at all times, maintain cash in its bank account at least equal to the amount of

the funds for that student (or parent).

current charges Charges assessed the student by the school for the current award year or the

loan period for which the school certified or originated a FFEL or Direct

Loan. See Allowable charges.

current value of

funds rate

An annual percentage rate published in a Treasury Financial Manual (TFM)

bulletin that reflects the current value of funds to the U.S. Department of

Treasury (Treasury) on the basis of certain investment rates. The rate may be

found at the following Internet Web site:

http/www.fms.treas.gov/prompt/cvfr-history.html

default For Perkins Loans: Failure of a borrower to make a loan-installment payment

when due or to meet other terms of a signed promissory note or written

repayment agreement.

For FFEL Program Loans and Federal Direct Program Loans: Failure of a

borrower or endorser to make a loan-installment payment or to meet other

terms of the promissory note, if the Secretary finds it reasonable to conclude

that the borrower or endorser no longer intends to honor the obligation to

repay. For loans repayable in the monthly installments, the failure must persist

for 270 days. For loans payable in less frequent installments (FFEL only), the

failure must persist for 330 days.
Appendix A

A-12 The Blue Book June 2001

deferment

(of a loan)

A period during which repayment of loan principal is suspended as a result of

the borrower meeting one or more of a number of situations or categories

established by law. The borrower does not pay interest on subsidized loans

during deferment; interest continues to accumulate during deferment of an

unsubsidized loan. Compare Forbearance (on a loan).

delayed

disbursement

A school may not disburse or deliver the first installment of a loan until

30 days after the student’s first day of class. A delayed disbursement applies to

a student in the first year of an undergraduate program who is a first-time

borrower under the FFEL or Direct Loan Programs. Some schools with low

cohort-default rates may be excused from this requirement.

delivery In the Federal Family Education Loan (FFEL) Program, the process of a

school transmitting loan proceeds to a borrower. For cash management

purposes, the process of transmitting FFEL loan proceeds to a borrower is

referred to as a “disbursement.” See Disbursement.

delivery system The process by which students apply for federal financial aid, are awarded

federal funds, and use those funds to pay the cost of attendance they incur

when they are enrolled in an eligible program of study at an eligible school.

Department of

Education Central

Automated

Processing System

(EDCAPS)

A centralized financial management system designed to integrate ED’s

separate financial processes.

Direct

Consolidation Loan

Loans originated by ED’s Consolidation Department that combine some or all

of a borrower’s Title IV loans (including non-Direct loans) into a single loan

with one monthly payment. Borrowers may also consolidate certain types of

loans made under the authority of the U.S. Department of Health and Human

Services. In some cases, borrowers may consolidate defaulted loans, but they

must agree to repay the consolidation loan under the Direct Loan Program’s

income contingent repayment plan or meet other eligibility criteria. Compare

Federal Consolidation Loan.

Direct Loan See Direct Loan Program.

Direct Loan

Program (William D.

Ford Federal Direct

Loan Program)

A federal program where the U.S. government (not a commercial lender)

makes four types of education loans to enable a student or parent to pay the

costs of the student’s attendance at a postsecondary school. They were named

in honor of Congressman William D. Ford.

♦ Direct Subsidized Loan

♦ Direct Unsubsidized Loan

♦ Direct PLUS Loan (for parents)

♦ Direct Consolidation Loan
June 2001 A-13

Glossary

The Blue Book

These are also referred to collectively as Direct Loans. See individual loan

names.

Direct PLUS Loan A type of Direct Loan that a parent may receive for an undergraduate

dependent student who is attending a school participating in the Direct Loan

Program. The parent borrower is responsible for the interest that accrues on

the loan during any period. The Direct PLUS Loan is made directly by the

federal government through the student’s school. Compare Federal PLUS

Loan.

Direct Subsidized

Loan

A type of federally financed, low-interest loan that an undergraduate, graduate,

or professional student may receive to attend a school that participates in the

Direct Loan Program. During in-school, grace, and deferment periods, the

federal government does not charge interest on the loan. The student’s

financial need is considered in determining the amount of the loan. See Direct

Unsubsidized Loan. Compare Federal Stafford Loan (Subsidized).

Direct Unsubsidized

Loan

A type of federally financed, low-interest loan that an undergraduate, graduate,

or professional student may receive to attend a school that participates in the

Direct Loan Program. The loans are not based on financial need, and the

borrower is responsible for the interest that accrues during any period. The

borrower may pay the interest charges on the loan on a quarterly basis during

in-school, grace, or deferment periods, or may allow the interest to accumulate

and be capitalized when repayment begins. See Capitalizing interest and Direct

Subsidized Loan. Compare Federal Stafford Loan (Unsubsidized).

disbursement The process by which Title IV program funds are paid to a student (or parent

borrower for PLUS Loan funds). A school may:

♦ pay a student or parent directly:

♦ by issuing a check or other means payable to the student and

requiring the student’s endorsement or certification (or, in the case

of a parent borrowing from the Direct Loan Program or FFEL

Program, requiring the endorsement of certification of the

student’s parent);

♦ by releasing a check provided to the school by a FFEL lender to

the student (or parent for a PLUS Loan);

♦ by initiating an electronic funds transfer (EFT) to a bank account

designated by the student (or, in the case of a parent borrower, an

account designated by the parent); or

♦ by dispensing cash to the student for which the school obtains a

signed receipt from the student; or

♦ credit a student’s school account.

See Delivery.
Appendix A

A-14 The Blue Book June 2001

disbursement

record (Direct Loan)

An electronic record sent from a school to the Direct Loan Origination Center

(LOC) notifying ED when a loan disbursement has been made to a student

(the day the funds are available for the student to use).

disbursement

record (RFMS)

A record that reports to the Recipient Financial Management System (RFMS)

the actual amount and date of each Federal Pell Grant disbursement.

discharge In the FFEL and Direct Loan programs, a loan can be discharged due to

death, permanent and total disability, bankruptcy (some cases), closed schools,

false certification, and unpaid refunds. Any student who has their loan

discharged is relieved of any past or present obligation to repay the loan and

any accrued interest or collection cost with respect to the loan. See Cancellation

(of a loan).

double-entry

bookkeeping

The method of accounting in which each posted transaction involves a twoway, self-balancing journal entry with equal debit and credit amounts. This

entry is then posted from the journal to the corresponding ledger accounts

involved. See Bookkeeping.

earned aid The amount of financial aid a student is eligible for and entitled to based on

the student’s period of enrollment. Compare Unearned aid.

EDCAPS See Department of Education Central Automated Processing System (EDCAPS).

Electronic Data

Exchange (EDE)

ED’s process for postsecondary institutions (and other participating

destination points) to electronically transmit, receive, and correct application

data, package student awards, and transmit Federal Pell Grant and Direct Loan

payment information using the Student Aid Internet Gateway (SAIG).

electronic data

processing (EDP)

controls

Controls that ensure the integrity and reliability of data. They encompass

operating procedures, software security, data access, program modification,

segregating computer security duties and responsibilities, backup and recovery

plans, and physical computer security.

electronic funds

transfer (EFT)

See Automated clearinghouse (ACH).

Electronic

Statement of

Account (ESOA)

An official statement from ED that sets a school’s authorization level for the

upcoming award year and projects adjustments to the school’s Title IV

program funding needs. ESOAs are produced for the Federal Pell Grant

Program and the campus-based programs. An ESOA also details the amount

expended to date. ED produces an ESOA whenever there is an adjustment to

a school’s current Federal Pell Grant Program or campus-based programs

authorization. See Federal Pell Grant Program.
June 2001 A-15

Glossary

The Blue Book

eligible institution An institution of higher education, a postsecondary vocational school, or a

proprietary institution of higher education that meets all the requirements to

make it eligible to participate in Title IV student financial aid programs. These

requirements include state authorization accreditation and specific program

and admission requirements. These requirements are found primarily in 34

CFR Part 600 and are discussed in Volume 2: Institutional Eligibility of the

Student Financial Aid Handbook.

eligible student The definition of a student eligible to receive federal financial aid from ED is

discussed in detail in the Student Financial Aid Handbook, Volume 1: Student

Eligibility and 34 CFR 668.7 and individual program regulations.

emergency action An action for cause taken by ED against an eligible postsecondary institution.

This action includes withholding funds from the institution or its students and

withdrawing the authority of the institution to obligate federal funds under any

or all of the Title IV student aid programs. Emergency action is taken when

ED:

♦ receives and confirms information that the institution is violating

applicable laws, regulations, special arrangements, agreements, or

limitations;

♦ determines that the likelihood of loss to the federal government

outweighs putting in place limitation, suspension, or termination

procedures; and

♦ determines that the immediate action is necessary to prevent misuse of

federal funds.

See Limitation, suspension, or termination (LS&T) and Program Participation

Agreement (PPA).

enrolled Any student who has completed the registration requirements (except for the

payment of tuition and fees) at the institution that he or she is attending or has

been admitted into an educational program offered predominately by

correspondence and has submitted one lesson, completed by him or her and

without the help of an institutional representative.

enrollment status At those institutions using semesters, trimesters, quarters, or other academic

terms and measuring progress in credit hours, enrollment status equals a

student’s credit-hour course load.

At those institutions measuring progress in clock hours, enrollment status

equals a student’s clock-hour course load.

At any type of school, student enrollment may be categorized as full time,

three-quarter time, half time, or less than half time. See Full-time enrollment.
Appendix A

A-16 The Blue Book June 2001

entrance counseling

(for a student

borrower)

Each institution participating in the Federal Perkins Loan, FFEL, and Federal

Direct Loan Programs (excluding FFEL PLUS Loans and Direct PLUS Loans)

must offer loan counseling to first-time loan borrowers called “entrance

counseling.” The institution must offer this counseling before disbursing the

first disbursement of any of these loans to a borrower at the institution.

Entrance counseling covers the borrower’s rights and responsibilities, the

terms and conditions of the loan, the use of a Master Promissory Note, and

the consequences of default. It is also called initial counseling. Compare Exit

counseling (for a student borrower).

Direct Loan schools have the option of using an alternative approach.

(See 34 CFR 685.304(a)(5).)

entrance interview

(for a compliance

audit)

A meeting, before the beginning of a financial aid audit, between an auditor

and school administrative officials involved in the audit. Operating rules, an

agenda, and a schedule for the on-site work are established. A similar

interview is conducted by a federal official before conducting a program

review. This meeting is also called initial counseling. See Audit. Compare Exit

interview (for a compliance audit).

equity ratio Under the financial responsibility regulations, the equity ratio is:

♦ For proprietary schools: Modified Equity

Modified Assets

♦ For private, nonprofit schools: Modified Net Assets

Modified Assets

For further definitions and other details, refer to 34 CFR 668– Subpart K,

Appendix F (proprietary) and Appendix G (private, nonprofit).

ESOA See Electronic Statement of Account (ESOA).

estimated financial

assistance (EFA)

The school’s estimate of the amount of financial assistance from federal, state,

institutional, or other sources that a student (or parent on behalf of a student)

will receive for a period of enrollment. This may include veterans’ and

national service awards and benefits (except when determining eligibility for a

subsidized Stafford Loan), scholarships, grants, financial need-based

employment, or Perkins Loans or Federal Work-Study funds that the student

has declined or certain loans used to replace the Expected Family

Contribution.

excess cash Any amount of Title IV program funds (other than FFEL Program or Federal

Perkins Loan Program funds) that a school has not disbursed to students or

parents by the end of the third business day following the date the school

received the funds. There are penalties for holding excess cash.

excess funds See Excess cash.
June 2001 A-17

Glossary

The Blue Book

excess liquid capital A school has excess liquid capital in its Federal Perkins Loan Fund if funds

available (cash on hand, plus Federal Capital Contribution [FCC] and

Institutional Capital Contribution [ICC], plus interest income and cancellation

repayments) for the current award year significantly exceed the award year’s

total expenditures from the Fund.

exit counseling (for

a student borrower)

Each institution participating in the Federal Perkins Loan, FFEL, and Direct

Loan Programs (excluding FFEL PLUS Loans and Direct PLUS Loans) must

offer loan counseling called “exit counseling” to loan borrowers. For Federal

Perkins Loan borrowers, the interview must take place before the borrower

leaves school. In the case of FFEL and Direct Loan student borrowers, the

interview must take place shortly before the borrower ceases to be enrolled at

least half time. During the interview, the borrower’s rights and responsibilities

are reviewed; details about handling loan repayment are discussed; the

consequences of default are explained; the availability of ED’s Student Loan

Ombudsman’s Office is discussed; and the average anticipated monthly

repayment amount must be disclosed. Borrowers are also required to provide

updated personal information, such as address, telephone number, employer

(if known), and driver’s license and the state where it was issued (if the student

has a license). See the Student Financial Aid Handbook, Volume 5: Perkins Loan

and Volume 8: Direct Loan and FFEL Programs for complete information on loan

counseling requirements. Compare Entrance counseling (for a student borrower).

exit interview (for a

compliance audit)

A closing meeting, following completion of a financial aid audit, between an

auditor and administrative officials of the school involved in the audit.

General audit findings and conclusions that will be included in the audit report

are discussed. A similar interview is conducted by a federal official after

conducting a program review. See Audit. Compare Entrance interview (for a

compliance audit).

Expected Family

Contribution (EFC)

The amount a student and his or her spouse and family are expected to pay

toward the student’s cost of attendance. This figure, determined according to

a statutorily defined method known as need analysis, is used for all students in

determining eligibility for most federal Title IV student financial aid.

FAFSA (Free

Application for

Federal Student

Aid)

A student financial aid application form completed by a student and his or her

family. It is the ED input document that serves as the foundation for all need

analysis computations. The FAFSA gathers all the data to calculate the

Expected Family Contribution (EFC). See Expected Family Contribution (EFC),

Need analysis, and Renewal FAFSA.

federal audit A financial and/or compliance audit conducted by an office or officer of a

federal agency, such as a representative from ED’s Office of Inspector

General.

Federal Capital

Contribution (FCC)

The portion of a school’s Federal Perkins Loan fund allocated to an institution

by the federal government for a specific award year. Compare Institutional

Capital Contribution (ICC).
Appendix A

A-18 The Blue Book June 2001

Federal

Consolidation Loan

Loans originated by eligible FFEL Program lenders combined. Multiple Title

IV student loans, the Health Professions Student Loan (HPSL) Program, the

Health Education Assistance Loan (HEAL) Program, and the Nursing Student

Loan Program (NSLP) are combined into a single loan with one monthly payment. Delinquent or defaulted borrowers may be allowed to establish a

repayment schedule through a consolidation loan. Compare Direct Consolidation

Loan.

Federal Family

Education Loan

(FFEL) Program

The Federal Family Education Loan (FFEL) Program is made up of:

♦ Federal Stafford Loans (subsidized)

♦ Federal Stafford Loans (unsubsidized)

♦ Federal PLUS Loans (for parents)

♦ Federal Consolidation Loans

All of these are long-term loans insured by state or private nonprofit guaranty

agencies that are reimbursed by the federal government for all or part of the

insurance claims paid to lenders. This guarantee replaces the collateral or

security usually required with long-term consumer loans. See individual loan

names.

Federal Pell Grant

payment and

disbursement

schedules

Charts published annually by the U.S. Secretary of Education that determine

the dollar value of student Federal Pell Grant awards on the basis of schools’

costs of attendance (COA) and students’ Expected Family Contribution

(EFC).

Federal Pell Grant

Program

A grant program for undergraduate students who have not completed a first

baccalaureate degree. It is designed to financially assist students with

demonstrated financial need who are the least able to contribute toward their

basic education expenses.

If students apply, meet all the eligibility criteria, and are enrolled in an eligible

program at an eligible institution, they will receive Federal Pell Grants.

Formerly, this grant was called the Basic Educational Opportunity Grant

(BEOG). In 1982, it was renamed to honor Senator Claiborne Pell; later the

word “Federal” was added to its name.

Students with bachelor’s degrees who are enrolled in a teacher-certification

program are also eligible if they are enrolled:

♦ at least half time,

♦ at a school that does not offer a baccalaureate degree in education,

♦ in a post-baccalaureate program not leading to a graduate degree,

♦ in teacher certificate or licensing courses required by a state to teach in

that state, and
June 2001 A-19

Glossary

The Blue Book

♦ the student is pursuing an initial teacher certification or licensing

credential within a state.

Federal Perkins

Loan Program

This campus-based loan program provides low-interest student loans to

undergraduate and graduate students with financial need. Formerly, it was

called the National Direct Student Loan Program (now referred to as the

NDSL Program) and, originally, the National Defense Student Loan Program.

In 1987, it was renamed to honor Congressman Carl D. Perkins; later the word

“Federal” was added to its name. See Campus-based programs.

Federal PLUS Loan Parents may borrow from this FFEL loan program on behalf of their

undergraduate dependent children. Loans are made by lenders such as banks,

credit unions, or savings and loan associations. Compare Direct PLUS Loan.

Federal Register The government publication, published each weekday (except federal

holidays), that prints regulations, regulatory amendments, notices, and

proposed regulatory changes for all federal executive agencies. ED makes

them available on ED’s Information for Financial Aid Professionals (IFAP)

Web site.

Federal Reserve

Bank

One of 12 reserve banks set up under the Federal Reserve Act to hold

government reserves. ED uses this system to deliver campus-based, Federal

Pell Grant, and Direct Loan funds to schools.

Federal Stafford

Loan (subsidized)

An FFEL Program loan providing federally subsidized, low-interest loans to

students in undergraduate, graduate, or professional programs. Subsidized

loans are awarded on the basis of student financial need. The loan formerly

was part of the Guaranteed Student Loan (GSL) Program. In 1987, it was

renamed to honor Senator Robert T. Stafford; later, the word “Federal” was

added to its name. See Unsubsidized Federal Stafford Loan. Compare Subsidized

Direct Loan.

Federal

Supplemental

Educational

Opportunity Grant

(FSEOG) Program

A campus-based aid program that provides grant assistance to students with

financial need who are in undergraduate programs and have not earned a

bachelor’s degree or first professional degree. Priority in awarding Federal

Supplemental Educational Opportunity Grant (FSEOG) funds is given to

students who have exceptional financial need and are Federal Pell Grant

recipients. See Campus-based programs.

Federal Work-Study

(FWS) Program

A federally funded employment program that provides paid jobs, on campus

or off campus, for undergraduate or graduate students who need such earnings

to meet a portion of their education expenses. See Campus-based programs.
Appendix A

A-20 The Blue Book June 2001

FEDWIRE This system provides for electronic funds transfer (EFT) through the Federal

Reserve Communications System (FRCS). The system differs from the

automated clearinghouse (ACH) in that funds are deposited directly into a

school’s deposit account the day the payment is sent through the FRCS.

Financial institutions charge for this type of funds transfer. (There is no

charge to a school for ACH transfer.)

The U.S. Treasury Department’s Financial Communications System (TFCS)

Deposit Message Retrieval System (DMRS) uses FEDWIRE for returning

funds to ED, including:

♦ a liability or combination of liabilities totaling $100,000 or more for a

prior award year (except for some Federal Perkins Loan liabilities);

♦ excess cash in, or liquidation of, a Federal Perkins Loan fund; and

♦ ED-proposed or assessed fines of $100,000 or more.

See Automated FEDWIRE system. Compare Automated clearinghouse (ACH).

Final Audit

Determination (FAD)

ED’s evaluation of findings and recommendations included in an audit report

and the issuance of a final decision by ED management including actions

determined to be necessary. See Final Audit Determination Letter (FADL).

Final Audit

Determination

Letter (FADL)

An official written notice responding to a school and detailing ED’s evaluation

of findings and recommendations included in the school’s audit report. It

includes ED’s response to findings, including all necessary actions and

financial adjustments necessary to resolve the findings in an external audit

report.

Final Funding

Authorization

An electronic notification that tells a school the final allocations for each

campus-based program in which it participates.

Final Funding

Worksheet

The final funding worksheet is sent in conjunction with a school’s Final

Funding Authorization. The worksheet explains in detail a school’s allocation

for each campus-based program and shows the figures used to make this

determination.

Final Program

Review

Determination

(FPRD)

The letter ED sends to school officials to close out the program review

process. The FPRD finalizes the status of findings that were outlined in the

original Program Review Report, indicating issues that are considered

“resolved” and those the school failed to resolve. This may include

assessment of liabilities the school must pay to ED. The school has the right

to appeal the FPRD.

final regulations Federal government operating rules published in the Federal Register. When

published, final regulations have the force of law and identify when the

regulations will take effect.

See Federal Register and Notice of proposed rulemaking (NPRM).
June 2001 A-21

Glossary

The Blue Book

financial aid history A document used by institutions to collect data about Title IV aid and other

financial aid received by a student or his/her current school. The financial aid

history allows the current institution the information needed to prevent the

student from receiving an overaward or exceeding loan limits. It also tells the

institution if the student already owes an overpayment or is in default on Title

IV funds, and is therefore ineligible for further Title IV aid. Institutions must

obtain financial aid history at no charge to students and former students.

Schools are allowed to retrieve a student’s prior award-year data from the

National Student Loan Data System (NSLDS). See 34 CFR 668.19. See

National Student Loan Data System.

financial need The difference between the student’s cost of attendance (COA) at a specific

institution and the student’s Expected Family Contribution (EFC) and the

student’s estimated financial assistance:

COA-EFA-EFC = student’s financial need.

See Cost of attendance (COA), Estimated financial assistance (EFA),and Expected

Family Contribution (EFC).

financial

responsibility

One set of major requirements an institution must meet to participate in the

Title IV student aid programs (the other is administrative capability).

An institution must show that it has the financial responsibility and the

administrative capability to participate in federal Title IV student aid programs.

The financial responsibility standards include those that measure an

institution’s financial health for proprietary, private nonprofit, and public

institutions and cover the past performance of an institution or persons

affiliated with an institution. For further information, refer to 34 CFR 668,

Subpart K; Federal Register, November 25, 1997; or Chapter 2 of The Blue Book.

See also Administrative capability.

financial statement A report prepared at the end of a school’s fiscal year that provides an overview

of the institution’s financial activities for that fiscal year. Financial statements

are audited by an independent public accountant (IPA) and submitted to ED

according to applicable regulations.

findings See Program review exceptions.

FISAP (Fiscal

Operations Report

and Application to

Participate)

A computer-based, campus-based program report on prior-year fiscal

operations and an application to participate in the upcoming award year.

It must be submitted to ED by schools that participate in any or all campusbased programs. A school may submit the data using either a personal

computer or a mainframe computer. See Campus-based programs.

fiscal operations Activities related to managing and completing financial transactions. Funds

management, including student accounts, is the primary responsibility of an

institution’s business office.
Appendix A

A-22 The Blue Book June 2001

forbearance (on a

loan)

When a Federal Family Education Loan (FFEL) Program lender (or the U.S.

Department of Education for Direct Loans) allows a temporary cessation of

payments or reduction of payment amounts for subsidized or unsubsidized

Federal Stafford, Federal PLUS, Federal Perkins, or any of the Direct Loans.

In doing so, it allows an extended period for making payments or accepts

smaller payments than were previously scheduled. Forbearance may be given

for circumstances that are not covered by deferment. Interest continues to

accrue on the loans during forbearance. Forbearance is an option of the FFEL

Program lender or ED. However, there are a few circumstances where

granting forbearance to FFEL borrowers is mandatory. See 34 CFR 682.211

(h) and (i). Compare Deferment (of a loan).

William D. Ford

Federal Direct Loan

Program

See Direct Loan Program.

Form PMS 270 See Reimbursement payment method.

FRB See Federal Reserve Bank.

Free Application for

Federal Student Aid

(FAFSA)

See FAFSA.

full-time enrollment At schools using semesters, trimesters, quarters, or other academic terms and

measuring progress in credit hours, a full-time undergraduate student enrolls in

at least 12 semester hours, 12 trimester hours, or 12 quarter hours each term.

At nonterm institutions, enrollment status for a full-time student is 24

semester hours or 36 quarter hours per academic year or the prorated

equivalent for a program of less than one academic year.

At schools measuring progress in clock hours, a full-time student receives 24

hours of instruction in one week.

In an educational program using both credit and clock hours, any combination

of credit and clock hours where the sum of the following fractions is equal to

or greater than one:

♦ For a program using a semester, trimester, or quarter system:

Number of credit hours per term

12

plus

Number of clock hours per week

24
June 2001 A-23

Glossary

The Blue Book

♦ For a program not using a semester, trimester, or quarter system:

Number of semester or trimester hours

per academic year

24

plus

Number of quarter hours per academic year

36

plus

Number of clock hours per week

24

A series of courses or seminars equaling 12 semester or quarter hours over a

maximum of 18 weeks.

The work portion of a cooperative education program in which the amount of

work performed is equivalent to the academic workload of a full-time student.

fund A self-balancing group of accounts that consists of:

♦ assets,

♦ liabilities,

♦ revenues,

♦ expenses, and

♦ fund balance.

Funds separated in an institution’s books are limited to specific uses and are

accounted for using a double-entry bookkeeping system.

GAAP See Generally accepted accounting principles.

Gaining Early

Awareness and

Readiness for

Undergraduates

Program (GEAR UP)

Enacted in 1998, GEAR UP funds partnerships of high poverty middle

schools, colleges and universities, community organizations, and business to

work with entire grade levels of students beginning in 7th grade or earlier

through high school graduation. The partnership provides tutoring,

mentoring, information on college preparation and financial aid, an emphasis

on core academic preparation, and in some cases scholarships to help students

succeed in high school and go on to college.

GAPS See Grant Administration and Payment System (GAPS).

GEAR UP See Gaining Early Awareness and Readiness for Undergraduates Program.

generally accepted

accounting

principles (GAAP)

A common set of standards that is generally accepted and universally

practiced. These industry standards indicate how to report economic events.
Appendix A

A-24 The Blue Book June 2001

gift aid Financial aid that a student is not required to repay or earn through

employment. Generally, gift aid is in the form of a grant or scholarship.

Compare Self-help aid.

grace period The time period that begins the day after a loan recipient ceases to be enrolled

at least half time and ends the day before the loan repayment period starts.

Grant

Administration and

Payment System

(GAPS)

The ED payment system that provides financial management support services

for the Title IV funds delivery system. Functions supported by GAPS include

planning grant awards, obligation of award authorizations, disbursing funds,

and final grant closeout for Title IV programs.

grant programs Gift-aid programs that require neither repayment nor a work obligation from

students. Federal Title IV grant programs are the Federal Pell Grant Program,

the Federal Supplemental Educational Opportunity Grant (FSEOG) Program,

and the Leveraging Educational Assistance Partnership (LEAP) Program.

See individual grant program names.

guaranty agency A state agency or private, nonprofit institution or organization that administers

financial aid programs within the Federal Family Education Loan (FFEL)

Program. A major function is to insure FFEL Program loans. The federal

government reimburses guaranty agencies for all or part of insurance claims

they pay to lenders.

Higher Education

Act of 1965,

as amended (HEA)

Landmark national higher education act passed by Congress and signed by

President Lyndon B. Johnson in 1965, as well as subsequent amendments and

reauthorizing (extending) legislation of the statute. Title IV of the HEA

authorizes the majority of the nation’s federal postsecondary student financial

aid programs and mandates that they be regulated and administered by the

U.S. Secretary of Education. The HEA is effective for approximately five

years, requiring Congress to reauthorize it every five years or to extend the

legislation for up to one additional year. The most recent reauthorization was

in 1998. The statute’s most current version, as amended, always stands as the

official version of the law. See Reauthorization and Title IV student financial aid.

Higher Education

Amendments of

1992

Congressional amendments and technical changes to the Higher Education

Act of 1965, as amended (HEA), put in place during the 1992 reauthorization

of the HEA. They became federal law on July 23, 1992 when President

George Bush signed the bill. Sometimes referred to as “the 1992

Amendments.”

Higher Education

Amendments of

1998

Technical changes and additions to the 1992 reauthorization of the Higher

Education Act (HEA) made in 1998 in Public Law 105-244. Although

President Bill Clinton signed the bill on October 7, 1998, most of the

amendments became effective on October 1, 1998. These amendments are

sometimes referred to as the “1998 Amendments.”
June 2001 A-25

Glossary

The Blue Book

idle cash All or part of disbursed funds if and when they are returned to the school’s

Title IV account(s). The return may be due to a refund or the student

returning a disbursement.

immediate need A school requests funds to meet its “immediate need” for disbursing Federal

Pell Grant Program, Direct Loan Program, and campus-based program

awards. Immediate need is defined as the amount of funds a school needs to

make disbursements to students within the required three business days.

Schools request funds as needed, for example, every three days, once a week,

or whenever is appropriate. (Note: Immediate need does not authorize an

institution to maintain a federally funded cash-on-hand balance.) See

Automated clearinghouse (ACH) and Automated FEDWIRE system.

incarcerated

student

A student who is serving a criminal sentence in a federal, state, or local

correctional facility. A student in a less formal arrangement, such as a halfway

house, home detention, or sentenced to serve only weekends, is not considered

to be incarcerated. Students incarcerated in federal or state correctional

facilities are not eligible to receive Title IV aid; however, students incarcerated

in local correctional facilities might be eligible for Federal Pell Grant, FSEOG,

and LEAP funds.

independent audit See Audit and Nonfederal audit.

independent auditor An accountant who is a certified public accountant or government auditor,

who must be qualified under both generally accepted auditing standards and

government auditing standards, and who:

♦ is free from personal and external impairments to independence,

♦ is organizationally independent, and 

♦ maintains an independent attitude and appearance.

See Audit and Nonfederal audit.

in-house control

documents

Documents a school uses to meet federal record-keeping requirements for

federal student financial aid programs, provide data needed for aid-related

reports, and maintain a clear audit trail.

Institutional Capital

Contribution (ICC)

The portion of a school’s Federal Perkins Loan fund contributed by an

institution. Institutional Capital Contributions (ICCs) must be equal to at least

one-third (33 and 1/3 percent) of the new Federal Capital Contribution (FCC)

amount or one-quarter (25 percent) of the combined FCC plus ICC. Compare

Federal Capital Contribution (FCC) and Program Participation Agreement (PPA).

institutional liability Financial penalties or repayments that an institution must pay to ED as a result

of incorrect institutional action or actions. A liability is the difference between

the actual expenditures reported by the institution in GAPS for an Obligation

Document Number for the award year and the final allowable expenditures as

determined by the auditor, program reviewer, or hearing official.
Appendix A

A-26 The Blue Book June 2001

Institutional Student

Information Record

(ISIR)

An electronic output document generated by ED’s Central Processing System

(CPS) that summarizes information submitted on a student’s Free Application

for Federal Student Aid (FAFSA) and provides financial-need calculations

(including the student’s Expected Family Contribution [EFC]) based on the

submitted data. It is available to schools through the Electronic Data

Exchange (EDE). The ISIR includes full applicant data and information on

reject reasons, comments, and assumptions. See Student Aid Report (SAR).

interest benefits The interest payments (benefits) made by ED to an FFEL Program lender on

behalf of a student. These payments are based on the student’s subsidized

Federal Stafford Loan interest rate, but only during certain periods: the

student’s enrollment (at least half time), the grace period, or any authorized

deferment period. Interest benefits are not paid on unsubsidized Federal

Stafford Loans. See Special allowance.

issuing checks Schools can issue checks to disburse funds directly to students and parents. A

check is issued if a student (or parent for PLUS Loan funds) is notified that his

or her check is available for immediate pickup, or the school can release or

mail the checks to the students or parents.

Job Location and

Development (JLD)

Program

Under the Job Location and Development (JLD) Program, an institution can

use up to 10 percent or $50,000 (whichever is less) of its annual Federal WorkStudy (FWS) Program total allocation to expand off-campus job opportunities,

including community-service jobs for its currently enrolled students. Jobs may

be in either profit or nonprofit settings. Students in this program do not have

to meet Federal Work-Study (FWS) criteria, show financial need, or meet other

Title IV student-aid eligibility criteria. See Federal Work-Study (FWS) Program.

journal A record of original accounting entries, providing a chronological record of

the debit and credit elements of each transaction. As transactions occur, they

are entered initially into the journal. At frequent intervals, such as daily,

weekly, or at least monthly, the debits and credits recorded in the journal are

transferred (posted) to the individual accounts in a ledger. See Ledger.

just-in-time

payment method

Under this payment method, a school electronically submits a request for

funds up to five days before the actual date of disbursement for the Federal

Pell Grant Program. The school’s request includes the date and amount of the

disbursement it will make or has made to each student. ED places funds in

the school’s bank account immediately before the funds are needed to make

student disbursements. Unlike schools using the advance payment method,

these schools do not receive advance authorization of funds. In 2000-01, this

method is continuing to be tested under a pilot program by a small group of

schools for the Federal Pell Grant Program.
June 2001 A-27

Glossary

The Blue Book

ledger A book of accounts in which each item of a monetary nature to be included in

reports is assigned an account. Posting from a journal to the ledger results in

each account having either a debit or credit balance that is shown on a

particular report listing. Separate ledgers should be maintained for each

program or fund. See Journal.

level of expenditure

(LOE)

The total amount of Federal Perkins Loan funds a school is allowed to use to

make loans to students and to pay administrative and collection costs in a

given award year. A school’s level of expenditure (LOE) is calculated by ED

on the basis of funds available from a school’s collection of outstanding

Federal Perkins Loans, the amount of Federal Capital Contribution (FCC) the

school receives, and the amount of Institutional Capital Contribution (ICC)

the school provides.

Leveraging Educational Assistance

Partnership (LEAP)

Program

A Title IV gift-aid program jointly funded by the federal government and

participating states. It provides state scholarship or grant assistance to

students who show financial need. Previously it was called the State Student

Incentive Grant (SSIG) Program. See Special Leveraging Educational Assistance

Partnership (SLEAP) Program.

limitation,

suspension, or

termination (LS&T)

Actions undertaken by ED against a postsecondary institution that has either:

♦ violated the laws or regulations governing Title IV or Title VII student

financial aid programs or the Program Participation Agreement (PPA)

or any other agreement made under the law or regulations or

♦ substantially misrepresented the nature of its educational program, its

financial charges, or the employability of its graduates.

These ED actions against the institution may include proceedings on

limitation, suspension, or termination (LS&T) of the school’s participation in

federal student financial aid programs; assessing fines up to $25,000 for each

statutory or regulatory violation; and/or implementing emergency action.

A limitation means the postsecondary institution agrees to abide by certain

specific restrictions or conditions in its administration of student financial aid

programs so that it can continue to participate in any of those programs. A

limitation lasts for at least 12 months and, if a postsecondary institution fails to

abide by the limitation’s conditions, termination proceedings may be initiated.

A suspension removes an institution from participating in Title IV and

Title VII student financial aid programs for a period not to exceed 60 days,

unless a limitation proceeding has begun. Suspension actions are used when a

postsecondary institution can be expected to correct a program violation in a

short time.
Appendix A

A-28 The Blue Book June 2001

A termination ends a postsecondary institution’s participation in Title IV and

Title VII programs.

A terminated institution can be reinstated by ED at a later date to participate in

Title IV and Title VII programs.

However, at least three months must elapse from the school’s suspension and

at least 18 months must elapse from the school’s limitation or termination

before an institution can request reinstatement. The request must be in

writing. See Emergency action and Program Participation Agreement (PPA).

liquidation period This is the second period in an award period. During this period:

♦ no new authorizations may be processed against a grant award,

♦ payees may request payments for expenditures incurred during the

performance period, and

♦ payees may adjust drawdowns for expenditures incurred during the

performance period.

loan An advance of funds guaranteed by a signed promissory note in which the

recipient of the funds promises to repay a specified amount under prescribed

conditions.

loan disclosure

statement

A statement sent to a loan borrower by the lender before or at the time a loan

is disbursed, as well as before the start of the repayment period. The purpose

of the disclosure statement is to provide the borrower with thorough and

accurate information about the loan terms and the consequences of default. It

includes information such as the:

♦ amount of the loan,

♦ interest rate,

♦ fee charges,

♦ length of the grace period (if any),

♦ the maximum length of the repayment,

♦ the minimum annual repayment,

♦ deferment conditions, and

♦ the definition of default.

Loan Origination

Center (LOC)

Under contract with ED, the Loan Origination Center (LOC) performs many

of the operational tasks needed to originate Direct Loans for borrowers and

for schools’ day-to-day participation in the Direct Loan Program. The LOC is

located in Montgomery, Alabama.
June 2001 A-29

Glossary

The Blue Book

master calendar To assure adequate notification about, and timely delivery of, Title IV financial

aid, ED operates using a master calendar defined in the Higher Education Act

of 1965, as amended (HEA). This calendar gives specific dates by which

federal forms will be developed and distributed, as well as dates campus-based

funds will be allocated and Federal Pell Grant funds will be authorized for an

award year. The master calendar determines the effective date for federal

financial aid regulations, based on the date of their publication. Section 1.10 of

The Blue Book has further details on the master calendar.

master check A master check is a single check, written by a lender, that contains all the

lender’s FFEL Program funds for the school’s borrowers for a given

disbursement date. A master check must be accompanied by a list of names,

Social Security numbers, and loan amounts of borrowers who are to receive a

portion of the master check.

Modernization

Blueprint

A collaborative effort by financial aid administrators, higher education

officials, business leaders, and students to:

♦ reexamine customer needs,

♦ improve and integrate customer access to information and funds, and

♦ modernize federal student financial aid programs using up-to-date

technology and business processes.

multiple

disbursement

A requirement of Title IV programs, except the Federal Work-Study Program,

for payments to students based on payment periods.

multiple reporting

record (MRR)

A record automatically generated by the Recipient Financial Management

System (RFMS) when it receives an origination and/or a disbursement record

from more than one school for the same student during the same payment

period. It informs a school about the other school(s) that have submitted

origination records and disbursement records for the same student during that

period.

National Student

Loan Data System

(NSLDS)

An ED database that collects and maintains data on recipients from:

♦ the Federal Family Education Loan (FFEL) Program,

♦ the William D. Ford Federal Direct Loan Program,

♦ the Federal Perkins Loan Program (including National Defense

Student Loans, NDSLs, and Income Contingent Loans),

♦ the Federal Pell Grant Program, and

♦ the Federal Supplemental Educational Opportunity Grant (FSEOG)

Program.
Appendix A

A-30 The Blue Book June 2001

This database receives and reports weekly or monthly using information

provided by:

♦ ED’s Central Processing System (CPS),

♦ ED’s Debt Collection Service (DCS),

♦ ED’s Recipient Financial Management System (RFMS),

♦ schools,

♦ lenders, and

♦ guaranty agencies.

nationally

recognized

accrediting agency

or association

An independent organization that monitors schools’ practices and certifies or

approves schools to operate and/or offer certain programs of study. Schools

participating in Title IV programs must be accredited by an agency that is

recognized by U.S. Secretary of Education. See Site visit.

need analysis The method defined in the Higher Education Act of 1965, as amended (HEA)

for determining Expected Family Contributions (EFCs) for all students

applying for federal student financial aid. See Cost of attendance (COA) and

Expected Family Contribution (EFC).

net income ratio Under the financial responsibility regulations, the equity ratio is:

♦ For proprietary schools: Income Before Taxes

Total Revenue

♦ For private, nonprofit schools: Change in Unrestricted Net Assets

Total Unrestricted Revenue

For further definitions and other details, refer to 34 CFR 668–Subpart K,

Appendix F (proprietary) and Appendix G (private, nonprofit).

nonfederal audit An institutional financial statement and/or compliance audit conducted by an

independent public accountant (as defined by the audit standards of the

U.S. General Accounting Office) who has been hired by the institution. Also

called an independent audit or an OMB Circular A-133 audit. See Audit and

Independent auditor.

nonfederal share The portion of campus-based program funds that a school must contribute

from a nonfederal source (usually the portion comes from the school itself).

For Title IV campus-based programs, a nonfederal source must contribute

amounts equal to at least one-third (33 1/3 percent) of the federal

contribution to the school’s Federal Perkins Loan fund; one-quarter (25

percent) of Federal Work-Study (FWS) awards; and one-quarter (25 percent)

of Federal Supplemental Educational Opportunity Grant (FSEOG) awards.

Some students working FWS community-service jobs may be eligible for a
June 2001 A-31

Glossary

The Blue Book

100 percent federal share of their awards. See Chapter 3 of The Blue Book for

specific information.

Notice of Proposed

Rulemaking (NPRM)

Notice printed in the Federal Register of proposed regulations from a

government agency, such as ED. Interested parties are invited to submit

comments and recommendations about proposed regulations. All proposed

regulations are subject to this process, including issues to be negotiated.

♦ The exception is if ED determines that it is impractical, unnecessary,

or contrary to the public interest to publish proposed regulations and

publishes the basis for its determination.

See Federal Register and Final regulations.

OCFO See Office of the Chief Financial Officer.

Office of the Chief

Financial Officer

The Office of the Chief Financial Officer is primarily responsible for serving

as the principal adviser to the U.S. Secretary of Education on all matters

related to discretionary grant-making, cooperative agreements, and

procurements, as well as financial management, financial control, and

accounting. It is also responsible for supervising those activities.

OMB Circular A-133 A publication published by the Office of Management and Budget (OMB) that

gives specific guidelines under limited circumstances to nonprofit

postsecondary schools on procedures for conducting an audit. For A-133

audits, the auditor is required to report only audit findings of noncompliance.

See Nonfederal audit.

operator-assisted

mode

One of the two modes schools and other GAPS recipients use to request

funds from GAPS under the automated clearinghouse (ACH). As the name

implies, recipients speak directly to an operator to request funds. Compare

Automated voice response (AVR).

order of return of

Title IV funds

A federally prescribed order of returning funds resulting from return of

Title IV funds calculation. It requires that funds are credited first to

outstanding loan balances for the payment period or enrollment period and

that the funds are returned in the following order:

1. Unsubsidized Federal Stafford Loans

2. Subsidized Federal Stafford Loans

3. Unsubsidized Federal Direct Loans

4. Subsidized Federal Direct Loans

5. Federal Perkins

6. Federal PLUS Loans received on behalf of the student
Appendix A

A-32 The Blue Book June 2001

If funds remain after repaying all loan amounts, the remaining funds must be

credited in the following order:

1. Federal Pell Grants

2. Federal Supplement Educational Opportunity Grants (FSEOGs)

3. Other assistance under Title IV

origination record

(Direct Loan)

Data collected from the borrower and sent to the Direct Loan Origination

Center (LOC) in the form of an electronic record.

The record:

♦ is part of the borrower’s permanent loan record,

♦ consists of the required demographic, financial, and statistical

information,

♦ is the initial record required to “book” a loan, and

♦ must be created only while the borrower meets all eligibility

requirements.

These records are created using either software provided by ED or other

software that meets ED’s specifications.

origination record

(RFMS)

A record that reports to the Recipient Financial Management System (RFMS)

expected award information about each student who may receive a Federal

Pell Grant. It also verifies a student’s eligibility for a Pell Grant.

overpayment Any financial aid amount paid to a student in excess of the amount the student

is eligible to receive. This situation may arise due to a student’s change in

enrollment status, withdrawal, or change in financial situation. Except for

Federal Work-Study funds (which are received for work that has been done),

the student would be required to repay excess funds received unless

adjustments could be made to the student’s aid during subsequent payment

periods within the same award year. See Repayment.

packaging The process of assembling one or more financial aid awards of loans, grants

and/or scholarships, as well as employment, for a student. Also referred to as

award packaging.

payment period A school-defined length of time for which financial aid funds are paid to a

student. For programs using academic terms (semester, trimester, or quarter),

a payment period is equal to a term. For programs not using academic terms,

schools must designate at least two payment periods within an academic year
June 2001 A-33

Glossary

The Blue Book

that meets all applicable regulations. In the Federal Family Education Loan

(FFEL) Program and campus-based programs, a payment period is considered

to be the time between the beginning and midpoint of the academic year or

nontraditional program calendar and between the midpoint and the end of the

academic year or nontraditional program calendar. Payment period guidance

for the Federal Pell Grant Program is provided in 34 CFR 685.301(b)(2).

Compare Period of enrollment.

peak enrollment Peak enrollment occurs when at least 25 percent of a school’s students start

classes during a given 30-day period.

peer evaluation An objective review of an institution’s policies, procedures, and practices by a

financial aid administrator from another school or by a consultant. Peer

evaluations also allow first-hand observations and comparisons of how

comparable institutions carry out financial aid responsibilities.

Pell Grant See Federal Pell Grant Program.

performance period The first period in the award period. The performance period is the period

between the grant award begin date and the grant award end date. During this

period:

♦ payees may request payments,

♦ payees may modify payment requests,

♦ payees may adjust drawdowns, and

♦ the Office of Student Financial Assistance (OSFA) Programs may

make changes to the grant award’s authorizations.

period of enrollment The actual period for which an institution charges a student. However, this

period is subject to a minimum. For a term-based educational program

(whether measured in credit or clock hours), the minimum period is the

academic term. For a nonterm educational program that is shorter than an

academic year in length, the minimum period is the length of the educational

program. For a nonterm educational program that equals or exceeds an

academic year in length, the minimum period is the greater of the payment

period or one-half of the academic year. Compare with Payment period.

Perkins Loan See Federal Perkins Loan Program.

personal

identification

numbers (PINs)

Personal identification numbers (PINs) are 4-digit numbers assigned to

students by ED. PINs are used to electronically identify a student. Students

can use their PINs to access their FAFSA data, to make corrections to that

data, and to electronically sign an initial FAFSA on the Web or Renewal

FAFSA on the Web. They can also access their Direct Loan account

information.

PLUS Loan See Federal Direct PLUS Loan and Federal PLUS Loan.
Appendix A

A-34 The Blue Book June 2001

policies and

procedures manual

An in-house manual that helps an institution effectively and consistently

manage financial aid using a compilation of written policies and procedures.

Although ED does not require such a manual be used, it recommends that a

school compile one, especially as federal financial aid regulations require

schools to have, maintain, and disclose certain written policies.

posting Transferring debits and credits from a journal to the proper control and

subsidiary ledger accounts. Each amount recorded in the debit column of a

journal is posted by entering it on the debit side of the appropriate ledger

account, and each amount recorded in the credit column of the journal is

posted by entering it on the credit side of the appropriate ledger account.

primary reserve

ratio

Under the financial responsibility regulations, the primary reserve ratio is:

♦ For proprietary schools: Adjusted Equity

Total Expenses

♦ For private, nonprofit schools: Expendable Net Assets

Total Expenses

For further definitions and other details refer to 34 CFR 668–Subpart K,

Appendix F (proprietary) and Appendix G (private, nonprofit).

principal and

interest

Principal is the loan amount borrowed. Interest is the amount the FFEL

lender or ED for Direct Loans or the postsecondary institution for Perkins

Loans charges a borrower for using the money. Interest rates are usually

stated in annual percentages. A loan must be repaid; both principal and

interest are included in the repayment made by the borrower to the lender or

ED or the school.

prior-year

recoveries

Funds a school recovers in a given award year from money disbursed in prior

award years. Institutions must adjust award expenditures and administrative

cost allowances (ACAs) in award years in which recoveries are made. See

Administrative cost allowance (ACA).

Program

Participation

Agreement (PPA)

A written agreement that must be signed by both a top official at an institution

and ED that permits the institution to participate in one or more Title IV

student financial aid programs (other than the Leveraging Educational

Assistance Partnership [LEAP] Program). The signed agreement makes the

institution’s initial and continued eligibility to participate in Title IV programs

conditional on compliance with all provisions of the applicable laws and

program regulations. This agreement may have to be updated periodically due

to changes at the institution; schools also have to be recertified at regular

intervals. See Emergency action and Limitation, suspension, or termination (LS&T).
June 2001 A-35

Glossary

The Blue Book

program review The process in which the management of one or more federal financial aid

programs at an institution is reviewed by ED or a guaranty agency. A program

review assesses the institution’s compliance with federal laws and regulations

and its own school policies. The process may also review the institution’s

overall management and administrative capabilities.

program review

exceptions

Institutional policies, procedures, or actions related to federal student financial

aid programs cited in a program review report as being contrary to federal laws

or regulations that govern the programs. Also referred to as findings.

promissory note A contract between a lender and a borrower that contains the terms and

conditions of the loan, including how the loan must be repaid. It becomes

legally binding when signed (executed) by the borrower.

Quality Analysis

Tool

A stand-alone software tool that is part of the EDExpress Suite software. The

software provides schools with data about their Title IV recipient population

by comparing data from initial ISIR transactions and data from a sample

selection of chosen recipients. The data provide schools with reports that

identify changes in Pell Grant eligibility, problematic application data elements,

and areas where school verification procedures can be improved or enhanced.

reauthorization The process of continuing and changing current legislation because the

existing law has expired and has to be reenacted. It is conducted every five to

seven years in the case of the Higher Education Act (HEA), during which time

Congress reviews and then renews, terminates, or amends existing programs.

(The most recent HEA reauthorization was in 1998.) See Higher Education Act

of 1965, as Amended (HEA) and Title IV student financial aid.

Recipient Financial

Management

System (RFMS)

An ED system that processes Pell Grant payment data, alerts schools to any

errors, and makes any needed adjustments to a school’s Pell authorization level

on the basis of reports of actual disbursements.

reconciliation of

cash

A confirmation that the cash amount shown in a school’s accounting records

agrees with the cash amount reported by the school’s bank. Prompt and

thorough cash reconciliation helps ensure the ongoing accuracy of a school’s

internal-control accounting system.

reconciliation of

federal funds

Balancing the school’s records of federal funds received, expended, and

returned against ED’s records. Reconciliation should be performed monthly

to ensure that reported expenditures, the trial balance, ED’s year-to-date

summary for the Pell Grant Program, the school’s FISAP (Fiscal Operations

Report and Application to Participate) for the campus-based programs, and

any other allocation (other than Title IV student financial aid) are in

agreement. There should also be a yearly reconciliation of the same items that

should be included in the school’s most recent audit. The Direct Loan

Program has a reconciliation process that is different from the process for

other Title IV programs (see Chapter 6 of The Blue Book). See also Trial balance.
Appendix A

A-36 The Blue Book June 2001

refund The return of interest or excess cash to ED from GAPS drawdowns or the

return of audit and program review liabilities and fines. This term used to

refer to the required return of funds by a school to the Title IV programs

when a student withdrew. This process is now referred to as the “return of

Title IV funds.”

refund policy A school policy that determines the conditions under which a student is

entitled to a refund of payments made to the school or whether the student

owes the school for outstanding charges. The policy also determines the

amount of any refund.

regular student A person who is enrolled or accepted for enrollment at an institution for the

purpose of obtaining a degree, certificate, or other recognized educational

credential offered by that institution.

reimbursement

payment method

A method certain schools are required to use to receive federal financial aid

funds from ED. Rather than drawing down Title IV funds before disbursing

them to students, a school submits Form PMS 270, “Request for Advance or

Reimbursement,” to ED to be reimbursed for the funds it has expended after

making aid disbursements to students. If the request is approved, the ED

regional office processes a payment request in GAPS. Payment is made by

ACH/EFT.

rejected (Pell

payment data)

A category of Federal Pell Grant processed payment data containing

unacceptable or incomplete information that is rejected by RFMS. An

institution must correct the records and resubmit them to the RFMS.

releasing campusbased program

funds

Action by ED reducing all or part of an institution’s allocation for a campusbased program. This reduction usually results from an institution releasing

funds back to the federal government that will not be used during the period

for which the funds were allocated. See Allocation and Supplemental appropriation.

Renewal FAFSA A partially completed application form to be updated by a current federal

financial aid applicant to be eligible to receive Title IV financial aid for the

next award year. To use the Renewal FAFSA, the student must have

submitted a FAFSA applying for (although not necessarily receiving or

accepting) federal financial aid for the preceding award year. A student may

access his or her Renewal FAFSA on the Web. Alternatively, a paper renewal

aid application can be mailed directly to the student by the school or Central

Processing System (CPS). Completed Renewal FAFSAs are then returned to

the CPS. See FAFSA (Free Application for Federal Student Aid).

repayment schedule A specific timetable, using the borrower’s repayment plan as its basis, that details

the payment amount that is in each repayment installment and the number of

payments that will be required to pay off the loan in full. Additionally, a

repayment schedule traditionally lists the loan’s interest rate, the due date of

the first loan payment, and the frequency of loan payments.
June 2001 A-37

Glossary

The Blue Book

return of Title IV

funds

When a recipient of Title IV aid withdraws from an institution during a

payment period or period of enrollment in which the recipient began

attendance, the institution must calculate the amount of Title IV aid the

recipient did not earn. Unearned Title IV funds must be returned to the

appropriate Title IV programs.

RFMS See Recipient Financial Management System (RFMS).

satisfactory

academic progress

(SAP)

A satisfactory rate of student course completion determined using qualitative

and quantitative measures. By law, schools whose students receive Title IV

funds must create policies for monitoring satisfactory academic progress

(SAP). Schools must check at least once a year and document for each

payment period that their students receiving Title IV aid are making

satisfactory academic progress.

self-evaluation A school’s regularly scheduled in-house evaluation of the way it administers its

student financial aid program. A self-evaluation is undertaken in an effort to

detect any problems early on and resolve them.

self-help aid Student financial aid loan programs where funds must be repaid or

employment-opportunity programs awarded to students. Compare Gift aid.

separation of

functions

As a part of administering federal student financial aid programs, a school is

required to establish and maintain a checks-and-balances, internal-control

system ensuring that no single school office or individual can both authorize

payments of Title IV aid and disburse those funds to students. Often this

required separation is created by dividing the functions between the school’s

financial aid office and the school’s business office.

single-entry

bookkeeping

The system, for example, in a personal checkbook, where generally only

records of cash and of personal accounts are maintained. Where transactions

are infrequent and receivables, payables, and assets other than cash are few,

carefully maintained single-entry records may be adequate. SeeBookkeeping.

site visit A visit to a school during which an independent auditor, nationally recognized

accrediting agency, and/or ED seeks to understand the school’s physical plant,

enrollment, student financial aid application process, and methods of

monitoring student attendance. See Independent audit and Nationally recognized

accrediting agency or association.

skip tracing Traditionally, searching for someone with unpaid debts who has left without

leaving a forwarding address (“skipped”). In a federal financial aid context,

this is when, for whatever reason, a loan borrower no longer lives at the

address where the Direct Loan Servicing Center (DLSC) or a lender or school is

sending loan billing notices, and the DLSC or lender or school must attempt to

locate the borrower’s correct address. In the search, the law allows the use of

any information obtained from the borrower while the borrower was at the

school (such as data taken from applications and files), as well as information
Appendix A

A-38 The Blue Book June 2001

available from any school office (including the registrar’s office and the alumni

office). If the borrower still cannot be located using information from the

school (or otherwise available to the lender), the lender or school can use ED’s

free skip-tracing service to try to locate the missing loan borrower.

special allowance A percentage of the average unpaid principal balance paid to the lender of an

FFEL Program loan by ED. In effect, ED pays extra interest on the loan to

the lender in addition to the base interest charged on subsidized and

unsubsidized loans. This amount makes up the difference between the rates

charged to FFEL Program borrowers and market interest rates. The amount

of the special allowance is set by a statutory formula related to 91-day Treasury

bill rates.

special

disbursement

record

A disbursement record that reports information, such as the cost of attendance

and enrollment status, to allow ED’s Recipient Financial Management System

(RFMS) to recalculate a Federal Pell Grant disbursement for a particular

payment period. Institutions on the reimbursement payment method or cash

monitoring payment method are required to send special disbursement

records. This is optional for all other schools. This record will be deleted from

the 2001-02 RFMS process; only the disbursement record will be used from

2001-02 and beyond.

Special Leveraging

Educational

Assistance

Partnership

(SLEAP) Program

State grant programs providing aid to students with financial need to assist

them in paying for their postsecondary cost or help states fulfill service

programs to strengthen opportunities for elementary school and secondary

school students with financial need to enter postsecondary education. The

SLEAP Program is funded only when the Leveraging Educational Assistance

Partnership (LEAP) Program fund is in excess of $30 million. The excess

amount must be applied to the SLEAP Program.

SSIG See Leveraging Educational Assistance Partnership (LEAP) Program.

Stafford Loan See Direct Stafford/Ford Loan (subsidized), Direct Unsubsidized Stafford/Ford Loan,

Subsidized Federal Stafford Loan, and Unsubsidized Federal Stafford Loan.

Student Aid Internet

Gateway (SAIG)

ED network that provides an electronic, Web-based link between schools and

ED’s various databases. Formerly called the Title IV Wide Area Network

(TIV WAN).

student aid master

record

An institutional record containing information for an in-school student for

each award year. The institution records all basic information relating to all

student aid programs, including institutional and other aid programs, on the

master record.
June 2001 A-39

Glossary

The Blue Book

Student Aid Report

(SAR)

The report sent directly to a student from ED’s Central Processing System

(CPS) that summarizes information submitted on the student’s Free

Application for Federal Student Aid (FAFSA). It also provides financial-need

calculations (including the student’s Expected Family Contribution [EFC])

based on the submitted figures. The SAR has two parts: Part 1 is the Student

Information Summary. Part 2, the Information Review Form or Information

Request Form, is where the student can make any needed corrections or

information changes. The student makes the corrections and returns Part 2 of

the SAR to the CPS. The CPS will then send the student a copy of the

corrected SAR. See Institutional Student Information Record (ISIR).

Student Financial

Aid Handbook

An ED publication that explains procedures schools should follow in

administering federal student financial aid programs. Some of these

procedures are required by law and regulations, while other procedures are

necessary for the various Title IV programs reporting systems. The Handbook

(as it is usually referred to) consists of nine volumes that are published

individually and successively by ED each year.

Student Status

Confirmation Report

(SSCR)

The SSCR is used as a monitoring device to help determine when student

borrowers must begin repaying their student loans. When a student’s

enrollment status changes in any way that affects his or her enrollment data,

schools must notify the Direct Loan servicer or FFEL lender of the change

within 30 days through an ad hoc report, unless a school has a regularly

scheduled SSCR roster file due within the next 60 days.

All schools participating in any of the Title IV programs, as well as

nonparticipating schools eligible to process Title IV loan deferments, must

submit a Student Status Confirmation Report (SSCR) to the National Student

Loan Data System (NSLDS) through the SAIG.

subsidiary accounts Accounts related to the control account that support in detail the summary

transactions posted in the control account. See Control account.

subsidiary records Institutional records that must exist to support the totals in each Title IV

financial aid program account. Reconciliation between accounts and

subsidiary record detail should be performed at least once a month; this is

required by some Title IV programs.

supplemental

appropriation

An additional allocation of available funds for one or more campus-based

programs that may be given to a school on the basis of the school’s need for

additional funds. Supplemental allocations are made after schools release

unexpended campus-based funds at the end of an award year. See Allocation,

Appropriation, and Releasing campus-based program funds.

suspension period The third of four periods in the award period. During the suspension period,

no payment actions can take place without the approval of the program office.

ED program offices use this period to prepare for final closeout.
Appendix A

A-40 The Blue Book June 2001

T-account A short method accountants use to illustrate ledger accounts, alleviating the

tedious reproduction of accounts as they actually appear in an institution’s

ledger. Accountants use the t-account as a worksheet to check the debit and

credit balances of individual ledger accounts and to trace posting of

transactions to the various ledger accounts. See Contra account.

third-party servicer An individual, a state, or a private, profit, or nonprofit organization that enters

into a contract with Title IV eligible institutions to administer or service any

aspect of the institution’s participation in any Title IV program.

Title IV student

financial aid

Federal financial aid programs for students attending postsecondary

educational institutions; they are authorized under Title IV of the Higher

Education Act of 1965, as amended (HEA). The programs are administered

by the U.S. Department of Education. Title IV programs consist of:

♦ Academic Achievement Incentive Scholarship Program,

♦ Robert C. Byrd Honors Scholarships,

♦ Federal Family Education Loan (FFEL) Program loans,

♦ William D. Ford Federal Direct Loans,

♦ Federal Pell Grant Program,

♦ Federal Perkins Loan Program,

♦ Federal Supplemental Educational Opportunity Grant (FSEOG)

Program,

♦ Federal Work-Study (FWS) Program,

♦ Gaining Early Awareness and Readiness for Undergraduates Program

(GEAR UP) grants, and

♦ Leveraging Educational Assistance Partnership (LEAP) Program

grants and Special Leveraging Educational Assistance Partnership

(SLEAP) Program grants.

See Higher Education Act of 1965, as amended (HEA).

Title IV Wide Area

Network (TIV WAN)

See Student Aid Internet Gateway.
June 2001 A-41

Glossary

The Blue Book

trial balance A comparison of debit and credit balances and the addition of account

balances. A successful trial balance for Title IV programs is a confirmation

that accounts receivable, program expenditures, and cash balances equal the

amounts authorized. The purpose of a trial balance is to check that the dollar

amounts of debits and credits are equal in the general ledger accounts. This is

a useful tool for catching many types of errors, but having a trial balance in

balance, in and of itself, is not an assurance that other accounting errors

haven’t been made. Taking a trial balance should be performed at least

monthly. See Reconciliation of federal funds.

unearned aid The difference between Title IV aid that was disbursed or could have been

disbursed for the payment period or period of enrollment and the amount of

Title IV aid that was earned when a student withdraws. See Return of Title IV

funds.

Uniform

Commercial Code

Statement (UCC-1)

A UCC-1 statement discloses to the appropriate state or local government

entity that the institution’s account contains federal funds. If required, the

institution must retain a copy of these notices in its records.

Unsubsidized

Federal Stafford

Loan

A federal student loan (part of the FFEL Program) that provides low-interest

loans to students in undergraduate, graduate, and professional programs.

Unsubsidized loans are not awarded on the basis of financial need. Interest on

an unsubsidized loan is charged to the borrower throughout the life of the

loan. See Capitalizing interest and Federal Stafford Loan (Subsidized). Compare

Federal Direct Unsubsidized Stafford/Ford Loan.

User’s Guide A technical reference publication produced by ED and designed to support or

assist recipients using electronic systems such as EDE, SAIG, and GAPS.

verification Technical and administrative procedures for detecting and resolving

inaccuracies in data a student (and family) supplied on the Free Application for

Federal Student Aid (FAFSA) when applying for Title IV aid.

work college A public or private, nonprofit school with a commitment to community

service.

Work Colleges

Program

A program that encourages students to participate in a comprehensive work/

learning program. It encourages students to participate in community-service

activities and is used to help reduce a student’s need to rely on grant aid and

loan aid.