June 2001 The Blue Book TOC-1

TABLE OF CONTENTS

How to Use This Book Intro-1

Purpose ....................................................................................Intro-1

What This Book Contains....................................................Intro-2

Using The Blue Book at Your School...............................Intro-3

Other Resources.....................................................................Intro-3

Effective Date .........................................................................Intro-4

Comments and Suggestions on The Blue Book .............Intro-4

The Student Financial Aid Programs 1-1

Summary..........................................................................................1-1

1.1 Title IV of the Higher Education Act

of 1965 and Federal Regulations .........................................1-1

Reauthorizing and Amending the HEA.................................... 1-2

Title 34 of the Code of Federal Regulations .................................... 1-2

1.2 Family Contribution, Financial Aid Application, and

Delivery System.....................................................................1-3

Expected Family Contribution (EFC)....................................... 1-3

Free Application for Federal Student Aid (FAFSA) .................. 1-3

Delivery System........................................................................ 1-4

Personal Identification Numbers (PINs)................................... 1-4

1.3 Federal Pell Grant Program.................................................1-5

1.4 The Campus-Based Programs ............................................1-5

Federal Perkins Loan Program.................................................. 1-5

Federal Work-Study (FWS) Program........................................ 1-6

America Reads Challenge.......................................................... 1-6

America Counts ...................................................................... 1-6

Federal Supplemental Educational Opportunity Grant

(FSEOG) Program................................................................... 1-6

1.5 Major Loan Programs...........................................................1-7

William D. Ford Federal Direct Loan Program......................... 1-7

Interest Subsidy....................................................................... 1-7

ontents C
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Direct Consolidation Loan ........................................................ 1-8

Federal Family Education Loan (FFEL) Program..................... 1-8

Interest Subsidy....................................................................... 1-8

FFEL Consolidation Loan....................................................... 1-9

1.6 Other Title IV Programs ......................................................1-9

Leveraging Educational Assistance Partnership

(LEAP) Program (formerly State Student Incentive Grant

[SSIG] Program) ....................................................................... 1-9

Special Leveraging Educational Assistance Partnership

(SLEAP) Program............................................................... 1-10

Robert C. Byrd Honors Scholarship Program......................... 1-10

Gaining Early Awareness and Readiness for Undergraduates

Program (GEAR UP) ............................................................. 1-11

Academic Achievement Incentive Scholarship Program......... 1-11

1.7 Other Federal Student Aid Programs ...............................1-11

AmeriCorps............................................................................ 1-12

Programs Funded by the U.S. Department of Health and

Human Services (HHS) .......................................................... 1-12

1.8 Federal Education Tax Credits..........................................1-13

The Hope Scholarship............................................................ 1-13

Lifetime Learning Credit......................................................... 1-13

1.9 Coordination of Financial Aid Resources........................1-13

1.10 The Fiscal Activity Calendar..............................................1-14

The Academic Year................................................................ 1-14

Reduction of Academic Year .................................................... 1-14

Clock-Hour and Term-Based Programs ..................................... 1-15

Nonterm Credit-Hour Programs............................................... 1-16

The Award Year..................................................................... 1-16

The Fiscal Year....................................................................... 1-16

The Federal Master Calendar.................................................. 1-16

General Institutional Responsibilities 2-1

Summary......................................................................................... 2-1

2.1 Overview of Fiscal Operations and the Network of

Responsibilities......................................................................2-2

Managing Title IV Programs..................................................... 2-2

The Administrative (President’s) Office ........................................ 2-3
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The Financial Aid Office .......................................................... 2-5

The Business (Bursar’s) Office.................................................... 2-6

Merging Responsibilities............................................................ 2-8

2.2 Institutional Eligibility....................................................... 2-10

Types of Eligible Institutions.................................................. 2-10

90/10 Rule.......................................................................... 2-11

Application for Approval to Participate.................................. 2-11

Program Participation Agreement and the ECAR................... 2-12

Single Identifier Initiative......................................................... 2-13

2.3 Financial Responsibility Standards ................................. 2-13

Financial Responsibility Standards for Public Institutions....... 2-14

Financial Responsibility Standards for Proprietary and

Private Institutions ................................................................. 2-14

Standard #1 ........................................................................ 2-14

Standard #2 ........................................................................ 2-16

Standard #3 ........................................................................ 2-17

Standard #4 ........................................................................ 2-18

Past Performance ................................................................... 2-18

Other Financial Responsibility Standards................................ 2-19

Letter-of-Credit Alternative ..................................................... 2-19

Zone Alternative.................................................................... 2-19

Provisional Certification Alternative.......................................... 2-21

Provisional Certification Alternative for Institutions Controlled by

Persons or Entities Owing Liabilities......................................... 2-22

Schools That Change Ownership ............................................... 2-23

2.4 Administrative Capability ..................................................2-25

Separation of Functions.......................................................... 2-27

Required Electronic Processes................................................ 2-28

Modernization Blueprint......................................................... 2-30

Access America for Students.................................................. 2-30

2.5 Student Consumer Information........................................ 2-31

Financial Aid Information ...................................................... 2-31

General Information............................................................... 2-32

Availability of Personnel......................................................... 2-32

Job-Placement Claims............................................................. 2-32

Student Right-To-Know Provisions........................................ 2-33

Equity in Athletics Provisions................................................. 2-33
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Campus Security Provisions.................................................... 2-34

Campus-Crime Log................................................................ 2-35

2.6 Institutional Policies and Procedures Manual..............2-36

Advantages of Policies and Procedures Manual ...................... 2-36

Suggested Topics for Policies and Procedures Manual ............ 2-36

2.7 Experimental Sites Initiative.............................................2-37

2.8 Evaluating Your Management of Student Financial

Aid Programs........................................................................2-38

Evaluation Methods ............................................................... 2-39

Self-Evaluation

(Management Assessment/Management Enhancement) ................ 2-39

Peer Evaluation..................................................................... 2-40

Other Opportunities for Schools to Advance Quality ............. 2-40

Quality Assurance (QA) Program/Quality Analysis Tool

(QAT)................................................................................. 2-40

Direct Loan Quality Assurance Component................................ 2-41

2.9 Return of Title IV Funds ................................................... 2-41

Overview of Return of Title IV Funds.................................... 2-42

General Definitions................................................................ 2-42

Institutional Responsibilities................................................... 2-43

Return of Title IV Funds Calculation ....................................... 2-43

Post-Withdrawal Disbursements............................................... 2-45

Grant Overpayments .............................................................. 2-46

Repayment Arrangements........................................................ 2-47

Student Responsibilities.......................................................... 2-49

Factors Affecting Return of Title IV Funds............................ 2-49

Institutional Charges .............................................................. 2-49

Noninstitutional Charges......................................................... 2-50

Applying and Disbursing Aid .................................................. 2-50

Withdrawal Date .................................................................. 2-50

Leave of Absence for the Purpose of the Return of Title IV

Funds.................................................................................. 2-51

2.10 Record Maintenance and Retention Requirements...2-52

General Student Records........................................................ 2-53

General Institutional Records................................................. 2-53

General Fiscal Records........................................................... 2-54

Financial Aid Application and Award Records........................ 2-54
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Financial Aid Software Records ............................................... 2-55

Reporting Records.................................................................. 2-55

Program Records.................................................................... 2-56

Federal Pell Grant Program..................................................... 2-56

FSEOG Program................................................................. 2-57

Federal Perkins Loan Program................................................ 2-57

Federal Work-Study Program.................................................. 2-58

Federal Family Education Loan Program.................................. 2-59

Federal Direct Loan Program.................................................. 2-60

Record-Retention Requirements............................................. 2-61

Record Maintenance for Paper and Imaged Formats.............. 2-62

Special Requirements.............................................................. 2-62

Records Examination ............................................................. 2-62

Disclosing Student Information.............................................. 2-64

School Requirements............................................................... 2-64

Student Rights....................................................................... 2-64

Disclosure to Third Parties ...................................................... 2-65

Recording Disclosures.............................................................. 2-65

Record-Management Procedures............................................ 2-65

Clear Audit Trail.................................................................. 2-66

In-House Control Documents................................................... 2-66

Student Master Record............................................................ 2-66

Obtaining Authorization for Campus-Based Funding

 3-1

Summary......................................................................................... 3-1

3.1 Funding Process .................................................................... 3-1

Applying for Federal Campus-Based Funds.............................. 3-2

Allocating Federal Campus-Based Funds.................................. 3-2

3.2 Federal and Nonfederal Shares of Funding.....................3-9

Federal Perkins Loan Program.................................................. 3-9

Level of Expenditure (LOE)..................................................... 3-9

Federal Work-Study (FWS) Program...................................... 3-10

Federal Share and Nonfederal Share ......................................... 3-10

Nonfederal Share Sources........................................................ 3-11

Community-Service Jobs .......................................................... 3-12

Payment for Training and/or Travel.......................................... 3-13
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Reallocated FWS Funds ......................................................... 3-13

Job Location and Development (JLD) Program........................... 3-13

Work-Colleges Program.......................................................... 3-14

Federal Supplemental Educational Opportunity Grant

(FSEOG) Program................................................................. 3-15

3.3 Administrative Cost Allowance (ACA)............................ 3-17

3.4 Funds Available for Awards .............................................. 3-19

Transferring Funds Between Campus-Based Programs........... 3-19

FWS and FSEOG Carry Forward and Carry Back.................. 3-21

Carry Back Funds for Summer FWS Employment and

FSEOG Awards.................................................................. 3-22

Requesting, Managing, and Returning Title IV

Funds 4-1

Summary......................................................................................... 4-1

4.1 Overview of Cash Management..........................................4-2

4.2 Projecting Cash Needs.........................................................4-3

Immediate Need....................................................................... 4-3

Special Program Considerations ............................................... 4-4

Federal Pell Grant Program....................................................... 4-4

Campus-Based Programs........................................................... 4-4

William D. Ford Federal Direct Loan Program

(Direct Loan Program) ............................................................ 4-5

Timing Issues ........................................................................... 4-6

4.3 Grant Administration and Payment System (GAPS) .....4-6

EDCAPS.................................................................................. 4-6

GAPS Overview....................................................................... 4-6

Accessing GAPS....................................................................... 4-7

4.4 Requesting Funds .................................................................4-8

Award Periods.......................................................................... 4-8

Performance Period ................................................................... 4-8

Liquidation Period ................................................................... 4-9

Suspension Period .................................................................... 4-9

Closeout Period........................................................................ 4-9

Methods of Receiving Funds.................................................. 4-10

Automated Clearinghouse (ACH) ............................................ 4-10
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FEDWIRE......................................................................... 4-10

Payment Methods................................................................... 4-11

Advance Payment Method ....................................................... 4-11

Just-in-Time Payment Method.................................................. 4-11

Reimbursement Payment Method .............................................. 4-13

Cash Monitoring Payment Method............................................ 4-13

William D. Ford Federal Direct Loan Program

(Direct Loan Program) ........................................................... 4-14

Schools Participating Under Origination Option 2 ....................... 4-14

Schools Participating Under Origination Option 1 or

Standard Origination.............................................................. 4-15

Timing Issues ........................................................................ 4-16

4.5 Maintaining Funds.............................................................. 4-16

Bank Account......................................................................... 4-16

Interest-Bearing Account........................................................ 4-17

4.6 Obtaining Federal Family Education Loan (FFEL)

Program Funds .................................................................... 4-18

Electronic Funds Transfer (EFT) and Master Checks............. 4-19

Individual Checks................................................................... 4-19

4.7 Disbursing Title IV Program Funds ...............................4-20

Paying Students or Parents Directly........................................ 4-21

Issuing Checks........................................................................ 4-22

EFT........................................................................................ 4-22

Crediting a Student’s Account ................................................ 4-22

Title IV Loan Programs......................................................... 4-23

Separation of Functions.......................................................... 4-24

Title IV Credit Balances.......................................................... 4-24

Early Disbursements .............................................................. 4-25

Multiple Disbursements.......................................................... 4-26

Delayed Disbursements.......................................................... 4-27

Late Disbursements................................................................ 4-28

Holding Title IV Credit Balances............................................ 4-29

Student/Parent Authorizations............................................... 4-30

Alternative Methods of Disbursing Title IV Funds................. 4-31

4.8 Excess Cash.......................................................................... 4-31

Tolerances.............................................................................. 4-32

Liabilities ................................................................................ 4-33
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Disallowed Program Expenditures............................................ 4-33

4.9 Methods for Returning Funds ..........................................4-34

Excess Cash for the Federal Pell Grant and Campus-Based

Programs................................................................................ 4-34

Closed Award......................................................................... 4-35

Federal Pell Grant................................................................. 4-35

Funds from an Audit or Program Review............................... 4-35

Interest Earned....................................................................... 4-36

Technical Assistance............................................................... 4-36

4.10 Releasing Campus-Based Funds.....................................4-37

4.11 Returning Federal Family Education Loan (FFEL)

Program Funds ....................................................................4-37

Initial Period........................................................................... 4-38

Conditional Period ................................................................. 4-38

Return Period ......................................................................... 4-38

4.12 Returning Direct Loan Funds..........................................4-39

Direct Loan Excess Cash........................................................ 4-39

Idle Cash ................................................................................ 4-40

Return of Direct Loan Funds ................................................. 4-40

Accounting Procedures for Title IV Programs 5-1

Summary......................................................................................... 5-1

5.1 Institutional Financial Management Systems.................5-2

5.2 Bookkeeping and Recordkeeping......................................5-2

5.3 Accounting..............................................................................5-6

Accounting Principles (Fund Accounting)................................ 5-6

Chart of Accounts.................................................................... 5-7

Summary Chart of Accounts .................................................... 5-8

GAPS Title IV Accounts ...................................................... 5-13

National Finance Center (NFC) Accounts................................. 5-14

Federal Pell Grant Accounts.................................................... 5-15

Federal Supplemental Educational Opportunity Grant (FSEOG)

Accounts .............................................................................. 5-17

Federal Work-Study (FWS) Accounts ...................................... 5-19

Federal Perkins Loan Accounts................................................ 5-25

William D. Ford Federal Direct Loan Accounts ......................... 5-39
June 2001 The Blue Book TOC-9

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Accounting Practices for EFT: Federal Family Education

Loan (FFEL) Program............................................................ 5-41

5.4 Internal Control: Checks and Balances.........................5-42

Separation of Functions.......................................................... 5-42

Trial Balance........................................................................... 5-43

Reconciliation of Cash............................................................ 5-43

Reconciling Federal Funds...................................................... 5-44

Monthly Direct Loan Reconciliation .......................................... 5-44

Electronic Data Processing (EDP) Controls........................... 5-46

Other Checks and Balances.................................................... 5-46

Title IV Reporting, NSLDS, Audit, Program Review,

and Guaranty Agency Procedures 6-1

Summary......................................................................................... 6-1

6.1 Federal Pell Grant Reporting ..............................................6-2

Recipient Financial Management System (RFMS)..................... 6-2

Acknowledgement .................................................................... 6-3

Electronic Letters..................................................................... 6-4

Requesting Data ....................................................................... 6-4

Electronic Statement of Account (ESOA).................................... 6-4

Multiple Reporting Record (MRR).............................................. 6-5

Year-to-Date Data .................................................................. 6-6

Reconciliation File.................................................................... 6-6

Administrative Cost Allowance (ACA)..................................... 6-6

6.2 William D. Ford Federal Direct Loan Program Reporting

..............................................................................................6-7

Monthly Reconciliation............................................................. 6-7

Cash Summary Record.............................................................. 6-8

Cash Detail Record.................................................................. 6-9

Loan Detail Record.................................................................. 6-9

Tools to Help with Reconciliation .......................................... 6-10

School System Reports............................................................. 6-10

Loan Detail Exception File..................................................... 6-10

The Compare Program............................................................ 6-10

Exit Counseling Reporting...................................................... 6-11

6.3 Federal Family Education Loan (FFEL) Program

Reporting ...............................................................................6-11
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Exit Counseling Reporting...................................................... 6-12

6.4 National Student Loan Data System (NSLDS)............. 6-12

Accessing NSLDS .................................................................. 6-12

Data Providers........................................................................ 6-13

ED’s Internal Data Sources.................................................... 6-13

ED’s External Data Sources .................................................. 6-13

Student Status Confirmation Report (SSCR)........................... 6-14

SSCR Roster File.................................................................. 6-15

SSCR Submittal File............................................................. 6-16

SSCR Error Notification File ................................................. 6-17

Overpayments........................................................................ 6-17

Federal Perkins Loan.............................................................. 6-18

6.5 The Fiscal Operations Report and Application to

Participate (FISAP)............................................................. 6-19

Part I: Identifying Information, Certifications, and

Warning.................................................................................. 6-20

Section A: Identifying Information............................................ 6-20

Section B: Certifications and Warning....................................... 6-20

Part II: Application to Participate .......................................... 6-21

Section A: Request for Funds.................................................. 6-21

Section B: Federal Perkins Loan Program Liquidation Request .... 6-22

Section C: Waiver Request for the Underuse of Funds.................. 6-22

Section D: Information on Enrollment ...................................... 6-22

Section E: Assessments and Expenditures ................................. 6-23

Section F: Information on Eligible Aid Applicants ..................... 6-24

Part III: Federal Perkins Loan Program................................. 6-25

Section A: Fiscal Report (Cumulative)...................................... 6-25

Section B: Fund Activity (Annual).......................................... 6-30

Section C: Cumulative Repayment Information ........................... 6-32

Section D: Institutions with 30 or More Borrowers Who 

Entered Repayment................................................................ 6-34

Section E: Institutions with Less Than 30 Borrowers Who

Entered Repayment ................................................................ 6-34

Part IV: Federal Supplemental Educational Opportunity

Grant (FSEOG) Program....................................................... 6-34

Section A: Federal Funds Authorized for FSEOG .................... 6-34

Section B: Federal Funds Available for FSEOG Expenditures.... 6-35

Section C: Funds to FSEOG Recipients................................... 6-35
June 2001 The Blue Book TOC-11

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Section D: Federal Funds Spent for FSEOG Program................ 6-36

Section E: Use of FSEOG Authorization ................................ 6-36

Prior-Year Recoveries.............................................................. 6-37

Part V: Federal Work-Study (FWS) Program......................... 6-37

Section A: Federal Funds Authorized for FWS ......................... 6-37

Section B: Federal Funds Available for FWS Expenditures......... 6-37

Section C: Total Compensation for FWS .................................. 6-38

Section D: Funds Spent from Federal Share of FWS................... 6-38

Section E: Use of Federal FWS Authorization.......................... 6-39

Section F: Information About the Job Location and Development

(JLD) Program..................................................................... 6-39

Section G: Information About FWS Community-Service

Activities.............................................................................. 6-40

Section H: Information About FWS Reading Tutors of Children

and Tutors in Family Literacy Programs.................................... 6-40

Section I: Information about FWS Mathematics Tutors for

Children............................................................................... 6-40

Part VI: Program Summary.................................................... 6-40

Section A: Distribution of Program Recipients and Expenditures by

Type of Student ..................................................................... 6-40

Section B: Calculating the Administrative Cost Allowance

(ACA)................................................................................ 6-41

6.6 Adjusting Expenditures Reported to GAPS...................6-42

Open Awards (Current-Year and Prior-Year Adjustments)..... 6-42

Closed Awards (Canceled-Year Adjustments)......................... 6-43

6.7 Audits and Program Reviews............................................6-43

Federal Audits........................................................................ 6-44

Nonfederal Audits.................................................................. 6-44

Audit Deadlines.................................................................... 6-44

Method and Type of Audit ...................................................... 6-45

Corrective Action Plans (CAPs)............................................... 6-46

Audits for Foreign Schools....................................................... 6-48

Audits for Third-Party Servicers ............................................... 6-48

Program Reviews.................................................................... 6-49

Focus of Program Reviews..................................................... 6-50

6.8 Repayment of Liabilities from an Audit or Program

Review ................................................................................... 6-51

6.9 Guaranty Agency Reviews .................................................6-52
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Table of Contents

Glossary A-1

Acronyms B-1

Key Resources C-1

Technical Assistance Directory D-1

Index Index-1

Dedicated to the memory of David H. Wyatt, whose

creativity, professionalism, and commitment touched all

who had the pleasure of knowing him.