June 2001 The Blue Book 1-1

The Student Financial Aid

Programs

Summary

This chapter provides an overview of federally funded student financial aid

programs. The chapter begins with a discussion of Title IV of the Higher

Education Act, the legislation that created these federal programs. The chapter

also discusses an institutional fiscal year and explains the terms “academic year”

and “award year.”

1.1 Title IV of the Higher Education Act

of 1965 and Federal Regulations

Title IV of the Higher Education Act of 1965, as amended (HEA),

authorizes the following programs:

♦ Federal Pell Grant,

♦ William D. Ford Federal Direct Loan (Direct Loan),

academic year

administrative cost allowance (ACA)

award year

campus-based programs

Code of Federal Regulations (CFR)

cost of attendance (COA)

delivery system

Expected Family Contribution (EFC)

Federal Pell Grant Program

Federal Register

Fiscal Operations Report and

Application to Participate (FISAP)

Free Application for Federal Student

Aid (FAFSA)

gift aid

Higher Education Act of 1965 as

amended (HEA)

Institutional Student Information

Record (ISIR)

master calendar

personal identification numbers

(PINs)

reauthorization

SAR Information Acknowledgement

self-help aid

Student Aid Report (SAR)

Title IV programs

Chapter

1

Key Terms*

*Key terms are in boldface type when they first appear in the text.
The Blue Book June 2001 1-2

Chapter 1

♦ Federal Family Education Loan (FFEL),

♦ Federal Supplemental Educational Opportunity Grant (FSEOG),

♦ Federal Work-Study (FWS), and

♦ Federal Perkins Loan.

These programs are collectively known as Title IV programs. They are

administered by the U.S. Department of Education (ED) and provide some

$50 billion annually in financial assistance to eligible students enrolled in eligible

postsecondary programs of study. Title IV programs are governed by the HEA

and by policies and regulations published by ED.

Reauthorizing and Amending the HEA

Approximately every six years, Congress reviews all the Title IV programs

authorized by the HEA to ensure that they are serving the purposes for which

they are intended. After reviewing the programs, Congress decides whether to

reauthorize them (that is, allow the programs to continue) and, if so, what

changes should be enacted to serve students and taxpayers properly and

efficiently.

Congress also can make changes to (or amend) the HEA between these periodic

reauthorizations. This happens when Congress modifies particular HEA

provisions rather than the entire law.

Title 34 of the Code of Federal Regulations

ED implements the HEA through regulations. Title IV regulations supplement

the HEA; however, regulations cannot supersede any part of the law.

Regulations affecting Title IV programs are contained in Title 34 of the Code of

Federal Regulations (CFR). The sections of Title 34 that most frequently

affect how schools administer federal financial aid programs are in Parts 600 and

higher. When ED issues regulations, they are published in the Federal

Register. ED posts the regulations on its Information for Financial Aid

Professionals (IFAP) Web site. ED also publishes an annual compilation of

current regulations called the Compilation of Student Financial Aid Regulations.

Additions or supplements to the Compilation are published and posted to IFAP

quarterly, as needed.

 Reference:

• http://ifap.ed.gov

 Reference:

• Compilation of Student

Financial Aid

Regulations (latest

version)
June 2001 The Blue Book 1-3

Student Financial Aid Programs

1.2 Family Contribution, Financial Aid

Application, and Delivery System

Expected Family Contribution (EFC)

The basic premise underlying Title IV programs is that a student and the

student’s family have primary responsibility for paying for the student’s

postsecondary education. Because the programs are intended to help students

with financial need, eligibility for financial assistance from most of the programs

is need based. Congress developed an Expected Family Contribution (EFC)

formula to determine the financial strength of a student’s family and the

student’s need for Title IV assistance.

Free Application for Federal Student Aid (FAFSA)

To apply for Title IV financial aid funds, students must submit a Free

Application for Federal Student Aid (FAFSA). Most continuing

postsecondary students may file a condensed Renewal FAFSA. The FAFSA and

Renewal FAFSA collect financial and other information from the student and

the student’s spouse for independent students. They also collect information

from a dependent student and his or her parent(s). This information is used to

calculate the student’s EFC. The EFC represents the amount of money a

student’s family is expected to contribute toward the cost of the student’s

postsecondary education. The EFC is used with the school’s cost of attendance

(COA) in determining an eligible student’s need and the amount of aid that the

student receives from each of the Title IV aid programs.

The EFC is sent to the student on the Student Aid Report (SAR) or the SAR

Information Acknowledgement. Schools receive an electronic version of the

same information, called the Institutional Student Information Record

(ISIR).

All students (undergraduate and graduate) can complete a paper or Web-based

version of the FAFSA. FAFSA on the Web is a dedicated Web site where

students can apply using the Internet. Schools can also transmit students’

FAFSAs through ED’s Electronic Data Exchange (EDE). Students who have

previously applied for federal financial aid may use the condensed Renewal

FAFSA to file. The Renewal FAFSA can be completed on paper or by using

Renewal FAFSA on the Web.

Federal law mandates that the FAFSA be developed according to the timeline

established in the master calendar.* This ensures that delivery of federal

student aid is accomplished in a timely way.

 Reference:

• http://fafsa.ed.gov

*See section 1.10 of

this chapter for more

information.
The Blue Book June 2001 1-4

Chapter 1

Delivery System

The “delivery system” refers to the process by which students apply for federal

financial aid, are awarded federal funds, and use those funds to pay the costs of

attendance they incur when they enroll in an eligible program of study.

Title IV programs may be categorized as either “gift aid” or “self-help aid.”

Gift aid consists of grants and scholarships that are given to students; it does not

have to be repaid. Self-help aid takes the form of loans (which must be repaid)

and work-study (which pays students wages for hours worked at jobs provided

on campus or off campus).

Sections 1.3 through 1.7 of this chapter provide a brief overview of ED’s federal

financial aid programs. For more complete information, please refer to the

Student Financial Aid Handbook.

Personal Identification Numbers (PINs)

Students who apply for Title IV federal financial aid are eligible to obtain

personal identification numbers (PINs). PINs are used to electronically

identify individual aid applicants online, and they also can be used to create

electronic signatures.

Students who use FAFSA on the Web to apply for federal aid and are first-time

FAFSA filers are automatically sent PINs. A student can also request a PIN by

accessing ED’s PIN Web site. PINs are sent to students through the U.S. Postal

Service.

ED’s PIN Web site can also be used to request an additional copy of the

student’s PIN, change the student’s PIN mailing address, request to be assigned

a new PIN, and obtain general information about PINs.

With a PIN, a student can:

♦ electronically sign a FAFSA or Renewal FAFSA,

♦ make online corrections to his or her FAFSA data,

♦ obtain up-to-date Direct Loan account information,

♦ access his or her Access America for Students* account, and

♦ obtain current, reported information from the National Student Loan

Data System (NSLDS) about his or her federal student aid history.

 Reference:

• http://pin.ed.gov

 *Access America for

Students was a pilot

program during the

1999-2000 school

year. The pilot has

been discontinued.
June 2001 The Blue Book 1-5

Student Financial Aid Programs

1.3 Federal Pell Grant Program

Federal Pell Grants are gift aid and are available to eligible undergraduate

students who have not yet received a bachelor’s degree or professional degree,

are enrolled in a degree or certificate program, and meet other program eligibility

requirements, including financial need.

ED, on a case-by-case basis, can provide Federal Pell Grants to students who

have bachelor’s degrees. Those students must be enrolled:

♦ at least half time at a school that doesn’t offer a bachelor’s degree in

education,

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

♦ in state-required courses to obtain an initial professional certification or

licensing credential required to teach in that state.

Various components determine the amount of a student’s award, including EFC;

COA (tuition, fees, room and board, books and supplies,* and so forth);

enrollment status; and the length of the program of study. Funds that an eligible

student receives from this program do not have to be repaid. Each participating

institution receives an administrative cost allowance (ACA) for administering

the Federal Pell Grant Program unless the school declines it.

1.4 The Campus-Based Programs

The Federal Perkins Loan, Federal Work-Study (FWS), and Federal

Supplemental Educational Opportunity Grant (FSEOG) Programs are referred

to as campus-based programs because ED allocates these funds to

participating institutions on the basis of their Fiscal Operations Reports and

Applications to Participate (FISAPs). The schools then manage the programs

and award funds to students on behalf of ED. Students must complete a

FAFSA or Renewal FAFSA each year to apply for these funds. Schools award

the funds to eligible students according to federal laws and regulations. Each

participating institution may claim an ACA for administering each campus-based

program.

Federal Perkins Loan Program

Federal Perkins Loans are low-interest (5 percent) student loans that participating

schools make to eligible undergraduate and graduate students. No interest

accrues on a loan while a student is enrolled at least half time in an eligible

program at an eligible school. A school must give priority to students who

demonstrate exceptional financial need as defined by the school.

 Reference:

• Student Financial Aid

Handbook , Volume 3:

Pell Grant Program

• HEA, Part A, Section

401

• 34 CFR Part 690

 Reference:

• Student Financial Aid

Handbook , Volume 4:

Campus-Based

Common Provisions

• 34 CFR Part 673

*The Higher Education

Amendments of 1998

include a provision for

a reasonable

allowance for the

documented purchase

or rental of a personal

computer.

 Reference:

• HEA, Part E

• 34 CFR Part 674
The Blue Book June 2001 1-6

Chapter 1

Federal Work-Study (FWS) Program

The Federal Work-Study (FWS) Program provides on-campus jobs and

off-campus jobs for undergraduate and graduate students. Students can be

employed in a variety of positions, including off-campus, community-service

jobs. Students must be paid at least the current federal minimum wage and, in

most cases, the institution or off-campus employer must pay a portion of their

wages.

As of the 2000-01 award year, which began July 1, 2000, a school must use at

least 7 percent of its total FWS allocation for an award year to pay students

employed in community-service activities, unless ED approves a waiver.

Further, at least one community-service project must be in reading tutoring or

family literacy and must employ at least one FWS student.

America Reads Challenge

Schools are encouraged to place FWS students as reading tutors of preschool-age

children and children in elementary school as part of their efforts to support the

America Reads Challenge. For schools that participate, ED authorizes a

100 percent federal share of such students’ FWS wages. Students must perform

the work for the school itself; a federal, state, or local public agency; or a private,

nonprofit organization.

America Counts

ED launched America Counts, which is similar to the America Reads Challenge,

in July 1999. The program places FWS students as mathematics tutors for

students in elementary school through ninth grade. The tutoring can be, but

does not have to be, in a school setting. The program is another way for schools

to meet FWS Program community-service expenditure requirements. For

schools that participate, ED authorizes a 100 percent federal share of such

students’ FWS wages.

Federal Supplemental Educational Opportunity Grant (FSEOG)

Program

Federal Supplemental Educational Opportunity Grants (FSEOGs) are gift aid

and do not have to be repaid. These funds are for undergraduate students with

financial need who have not yet received a bachelor’s degree or a first

professional degree. When selecting FSEOG recipients, a school must make

awards first to applicants with exceptional financial need and give priority to

applicants who receive Federal Pell Grants.

 Reference:

• HEA, Part C

• 34 CFR Part 675

 Reference:

• HEA, Part A, Sections

413A-413E

• 34 CFR Part 676
June 2001 The Blue Book 1-7

Student Financial Aid Programs

1.5 Major Loan Programs

The largest amounts of Title IV funds come from the William D. Ford Federal

Direct Loan Program and the Federal Family Education Loan (FFEL) Program.

William D. Ford Federal Direct Loan Program

The William D. Ford Federal Direct Loan Program (usually referred to as the

Direct Loan Program) consists of:

♦ the Direct Stafford/Ford Loan (Direct Subsidized Loan) Program,

♦ the Direct Unsubsidized Stafford/Ford Loan (Direct Unsubsidized

Loan) Program,

♦ the Direct PLUS (Direct PLUS Loan) Program (for parents of eligible

dependent students), and

♦ the Direct Consolidation Loan (Direct Consolidation Loan) Program.

Eligible students may borrow Direct Subsidized Loans and Direct Unsubsidized

Loans, while parents of eligible dependent students may borrow Direct PLUS

Loans. Direct Consolidation Loans are available to both student and parent

borrowers.

The federal government makes Direct Loans to eligible undergraduate and

graduate students and parents of dependent undergraduate students through

financial aid offices at participating schools. Direct Subsidized Loans and Direct

Unsubsidized Loans are made to eligible undergraduate and graduate students

enrolled at least half time in an eligible program of study, and Direct PLUS

Loans are made to eligible parents of dependent undergraduate students enrolled

at least half time in an eligible program of study. The loans can also be used to

pay for course work necessary as a prerequisite to enroll in an eligible program or

for teacher certification programs.

Interest Subsidy

Borrowers are not charged interest on Direct Subsidized Loans during certain

periods, such as when they are enrolled at least half time and during grace

periods and deferment periods.*

Because the federal government subsidizes the interest on students’ Direct

Subsidized Loans, students must show financial need to qualify for these loans.

The student’s COA, EFC, and the amount of other aid the student is receiving

determine the loan amount.

Eligibility for unsubsidized loans (Direct Unsubsidized Loans and Direct PLUS

Loans) is not determined on the basis of financial need. All or a portion of a

 Reference:

• Student Financial Aid

Handbook , Volume 8:

Direct Loan and FFEL

Programs

• HEA, Part D

• 34 CFR Part 685

*In some cases, a

student may be

charged interest on a

subsidized loan while

enrolled half time at

an eligible school. An

example would be

when a student’s loan

has entered

repayment and the

student returns to

school, but the

student does not

receive an in-school

deferment on the loan.
The Blue Book June 2001 1-8

Chapter 1

Direct Unsubsidized Loan or Direct PLUS Loan can replace a student’s EFC

and/or the parent’s portion of the EFC. Student borrowers are charged interest

on Direct Unsubsidized Loans and parent borrowers are charged interest on

Direct PLUS Loans throughout the lives of the loans.

Every student borrower is subject to annual and aggregate loan limits for Direct

Subsidized Loans and Direct Unsubsidized Loans. The amount of the annual

and/or aggregate limit is determined by the student’s grade level in college and

his or her dependency status.* A parent may borrow a Direct PLUS Loan up to

the dependent student’s cost of attendance minus estimated financial aid (from all

other resources, including other loan programs).

ED’s Direct Loan Servicing Center (DLSC) services all Direct Loans and collects

payments from borrowers.

Direct Consolidation Loan

A Direct Consolidation Loan is designed to help student and parent borrowers

simplify loan repayment by consolidating their federal education loans so that

they make only one payment each month. The Direct Loan Consolidation

Program offers a number of repayment options. Borrowers may consolidate

subsidized and/or unsubsidized Direct Loans, Direct PLUS Loans, as well as

most other federal student loans including loans received under the Federal

Family Education Loan (FFEL) Program and the Federal Perkins Loan Program.

Federal Family Education Loan (FFEL) Program

The Federal Family Education Loan (FFEL) Program consists of subsidized and

unsubsidized Federal Stafford Loans (for students), Federal PLUS Loans (for

parents), and FFEL Consolidation Loans (for both students and parents).

Participating lending institutions, such as banks and credit unions, make these

loans, which are guaranteed by state or national guaranty agencies and insured by

the federal government. FFEL Program loans are made to eligible

undergraduate and graduate students enrolled at least half time in an eligible

program or, in the case of Federal PLUS Loans, to the eligible parents of

dependent undergraduate students enrolled at least half time in an eligible

program.

Interest Subsidy

The federal government pays the interest on subsidized Federal Stafford Loans

during certain periods, such as when a borrower is enrolled in school, during

a deferment,** and during a borrower’s grace period preceding repayment.

A borrower makes payments to his or her lender (or to a servicing agent

employed by the lender), unless the lender sells the borrower’s loan to a

secondary market. Then, the secondary market becomes the holder of the loan,

and the borrower makes his or her payments to the new loan holder.

 Reference:

• Student Financial Aid

Handbook , Volume 8:

Direct Loan and FFEL

Programs

• HEA, Part B

• 34 CFR Part 682

 Reference:

• Student Financial Aid

Handbook , Volume 8:

Direct Loan and FFEL

Program s

*Certain health

professions

students may be

eligible for higher

annual and

aggregate loan

limits.

 **In some cases, a

student may be

charged interest on a

subsidized loan while

enrolled half time at

an eligible school. An

example would be

when a student’s loan

has entered

repayment and the

student returns to

school, but the

student does not

receive an in-school

deferment on the loan.
June 2001 The Blue Book 1-9

Student Financial Aid Programs

Because the federal government pays the interest on subsidized Federal Stafford

Loans, students must show financial need to qualify for these loans. The

student’s COA, EFC, and the amount of other aid the student is receiving

determine the loan amount.

Eligibility for unsubsidized loans (unsubsidized Federal Stafford Loans and Federal

PLUS Loans) is not determined on the basis of need, and all or a portion of

these loans can replace a student’s EFC. A borrower is responsible for paying all

interest on an unsubsidized Federal Stafford Loan or a Federal PLUS Loan, with

interest beginning to accrue on the date the loan is disbursed.

Every student borrower is subject to annual and aggregate loan limits for

subsidized Federal Stafford Loans and unsubsidized Federal Stafford Loans.

The amount of the annual and/or aggregate limit is determined by the student’s

grade level in college and his or her dependency status.* A parent may borrow a

Federal PLUS Loan up to the dependent student’s cost of attendance minus

estimated financial aid (from all other resources, including other loan programs).

FFEL Consolidation Loan

A FFEL Consolidation Loan is designed to help student and parent borrowers

consolidate several types of federal student loans with various repayment

schedules into one loan. Borrowers make only one payment a month for all

loans that were consolidated in the FFEL Consolidation Loan. Students can

consolidate subsidized and unsubsidized Stafford loans and parents can

consolidate PLUS loans as well as most other federal student loans. Borrowers

can only receive one consolidation loan. Those loans that were subsidized retain

their eligibility for subsidies.

1.6 Other Title IV Programs

Leveraging Educational Assistance Partnership (LEAP) Program

(formerly State Student Incentive Grant [SSIG] Program)

The Leveraging Educational Assistance Partnership (LEAP) Program assists

states in providing grants to eligible students who attend postsecondary schools

and who have financial need. Each state receives an annual allocation of federal

LEAP funds that must be matched with a certain amount of state funds. The

name of the program, amount of funds available, application procedures, and

other aspects of the LEAP Program may vary from state to state. For specific

information about the LEAP Program in your state, contact your state education

agency. The LEAP Program formerly was the State Student Incentive Grant

(SSIG) Program.

 Reference:

• Student Financial Aid

Handbook, Volume 9:

State Grant Programs

• HEA, Part A, Section 415

• 34 CFR Part 692

• DCL GEN-98-28

• SPL LEAP-00-01

• DPL LEAP-00-02

 Reference:

• Student Financial Aid

Handbook , Volume 8:

Direct Loan and FFEL

Programs

*Certain health

professions

students may be

eligible for higher

annual and

aggregate loan

limits.
The Blue Book June 2001 1-10

Chapter 1

Special Leveraging Educational Assistance Partnership (SLEAP) Program

When Congress appropriates amounts in excess of $30 million for the LEAP

Program, those excess funds must be applied to the Special Leveraging

Educational Assistance Partnership (SLEAP) Program. The SLEAP Program

authorizes states to use the funds for any or all of the following eight activities:

♦ increasing the dollar amount of grants under the LEAP Program;

♦ carrying out transition programs from secondary school to postsecondary

education for needy students;

♦ carrying out a financial aid program for needy students who wish to enter

careers in information technology or other fields determined by the state

to be critical to its workforce needs;

♦ making funds available for community service work-study activities for

needy students;

♦ creating a scholarship program for needy students who wish to be

teachers;

♦ creating a scholarship program for needy students who plan to major in

mathematics, computer science, or engineering;

♦ carrying out early intervention, mentoring, and career education

programs for needy preschool, elementary-school, or secondary-school

students; and

♦ awarding merit or academic scholarships to needy students.

Postsecondary students receiving aid through a SLEAP program must meet

general student eligibility requirements and demonstrate financial need.

The maximum amount the federal government contributes (the federal share)

under the SLEAP Program is 33 1/3 percent. Funds are allocated to states in the

same manner as LEAP, and these funds pay the federal share of costs for any or

all of those authorized program activities. States are required to assure ED that

they are meeting the nonfederal-share matching terms according to program

requirements.

Robert C. Byrd Honors Scholarship Program

This program provides federal grants to states so that scholarships may be made

to exceptionally able students for postsecondary study. The purpose of the

program is to promote academic excellence and achievement. Each state

establishes its own application procedures for Byrd Scholarships. For specific

information about how the Byrd Scholarship Program is administered in your

state, contact your state education agency.

 Reference:

• Student Financial Aid

Handbook: Volume 9

State Grant Programs

• HEA, Part A, Section

419 A-K

• 34 CFR Part 654
June 2001 The Blue Book 1-11

Student Financial Aid Programs

Gaining Early Awareness and Readiness for Undergraduates

Program (GEAR UP)

Gaining Early Awareness and Readiness for Undergraduates Program

(GEAR UP) replaced the National Early Intervention Partnership and

Scholarship Program (NEISP).*

GEAR UP provides a range of early-intervention services to middle schools

serving a high percentage of low-income students. Partnerships are required to

include:

♦ a degree-granting institution of higher education,

♦ a middle school in which 50 percent of the students are eligible for free

or reduced-cost lunch,

♦ high schools where these students will ultimately enroll, and

♦ at least two community organizations.

Certain GEAR UP provisions allow states to receive grants that:

♦ provide or maintain a guaranteed amount of financial assistance

necessary to permit eligible, low-income students who obtain high school

diplomas or the equivalent to attend institutions of higher education;

♦ provide financial incentives in cooperation with local educational

agencies, institutions of higher education, community organizations, and

businesses; and

♦ provide a variety of early-intervention services.

Academic Achievement Incentive Scholarship Program

The purpose of the Academic Achievement Incentive Scholarship 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. The maximum scholarship a student can receive is equal to the amount of

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

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

1.7 Other Federal Student Aid Programs

In addition to the Title IV programs described previously, there are other federal

financial assistance programs for students.

 Reference:

• HEA, Part A, Section

404 A-H

*Please note that the

former NEISP

provisions make up

only a small part of

the GEAR UP

provisions.

 Reference:

• HEA, Part A, Sections

406A-407E
The Blue Book June 2001 1-12

Chapter 1

AmeriCorps

AmeriCorps, a program of national and community service, provides

education awards of up to $4,725 a year. Education awards vary depending on

whether the student participates on a full-time or part-time basis. Students

participating in AmeriCorps usually receive a living allowance on a regular basis.

This living allowance is not considered an hourly wage or salary.

Living allowances are taxable by the Internal Revenue Service (IRS) but are an

exclusion from the income used to calculate a student’s EFC for purposes of

awarding Title IV aid. If the stipend is included in the student’s AGI, it is to be

included on Worksheet C of the 2002-2003 FAFSA. Also, a student participating

in the Federal Work-Study Program (FWS) is ineligible to receive a living

allowance.

Wages earned from FWS will be reported on the appropriate worksheet and

excluded from the AGI need analysis calculation. In most cases, according to the

IRS, educational awards are subject to income taxes in the calendar year in which

they are used. This taxable amount is reported on form 1099. When the student

files a FAFSA for the following year, the amount of the AmeriCorps award

received in the base year (2001 calendar year for the 2002-2003 FAFSA) and

included in that year’s AGI is to be excluded from the need analysis calculation

and included on line 4 of Worksheet C of the 2002-2003 FAFSA.

Individuals may work before, during, or after their postsecondary education and

can use the funds either to pay current or future education expenses or to repay

federal student loans. Participants must be high school graduates, have GEDs,

or be working toward their GEDs. For more information students can call

1-800-942-2677 or write to:

The Corporation for National Service

1201 New York Avenue, NW

Washington, DC 20525

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

Services (HHS)

The U.S. Department of Health and Human Services (HHS) offers a variety of

financial aid programs for students who are interested in becoming health

professionals, such as physicians, nurses, and dentists. Some of the programs

require students to make a commitment to work as a health care provider in an

area of need, such as in a geographically underserved area.

 Reference:

• http://americorps.org

 Reference:

• http://www.hrsa.dhhs.

gov/bhpr/dsa
June 2001 The Blue Book 1-13

Student Financial Aid Programs

1.8 Federal Education Tax Credits

The Hope Scholarship

The Hope Scholarship is really a federal tax credit authorized by Congress in the

Taxpayer Relief Act of 1997. For families with students in the first two years of

postsecondary school, taxpayers are eligible for a tax credit equal to 100 percent

of the first $1,000 of tuition and fees and 50 percent of the second $1,000 (the

amounts are indexed for inflation after 2001). The credit became available on a

per-student basis for net tuition and fees (less grant aid) paid for college

enrollment after December 31, 1997. The credit is phased out for joint filers

who have between $80,000 and $100,000 of adjusted gross income and for single

filers who have between $40,000 and $50,000 (indexed after 2001). The credit

can be claimed in two taxable years (but not beyond the year when the student

completes the first two years of college) for any individual enrolled on at least a

half-time basis for any portion of the year.

Schools must report certain information to students and the Internal Revenue

Service (IRS), such as students’ tuition and fees. Specific institutional reporting

requirements are published by IRS.

Lifetime Learning Credit

The Lifetime Learning Credit is also a federal tax credit authorized in the

Taxpayer Relief Act of 1997. It is for students who have completed their first

two years of college or are enrolled in classes part time to improve or upgrade

their job skills. Families receive a 20 percent tax credit for the first $5,000 of

tuition and fees through 2002, and for the first $10,000 thereafter. The credit is

available for net tuition and fees (less grant aid) paid for postsecondary

enrollment after June 30, 1998. The credit is available on a per-taxpayer (family)

basis, and it is phased out at the same income levels as the Hope Scholarship.

Like the Hope Scholarship, schools must report certain information to students

and the IRS, such as students’ tuition and fees. Specific institutional reporting

requirements are published by the IRS.

1.9 Coordination of Financial Aid Resources

A student receiving federal student aid can only receive financial assistance,

from all available resources, up to his or her COA. Financial assistance can be

received from a variety of resources, including veteran’s education benefits,

scholarships from outside sources, and nonfederal student loans.

Students who receive outside sources of financial assistance are required to

report the receipt of that aid to the financial aid office. This is to ensure that the

student does not receive more Title IV assistance than allowed under federal law.

 Reference:

• 26 CFR, Part 1, 1.25A-3,

of January 6, 1997,

NPRM

• DCL ANN-98-16

 Reference:

• http://ed.gov/inits/hope

 Reference:

• 26 CFR, Part 1, 1.25A4, of January 6, 1997,

NPRM

• DCL ANN-98-16

 Reference:

• http://ed.gov/inits/hope
The Blue Book June 2001 1-14

Chapter 1

For this same reason, it’s important that the financial aid office and the fiscal

office coordinate information on funds received for financial assistance.

1.10 The Fiscal Activity Calendar

Fiscal activities managed by postsecondary institutions occur at various points

during the academic year, the award year, and the fiscal year.

The Academic Year

The HEA establishes the definition of an academic year. ED regulations guide

schools in complying with the definition.

Every eligible school program, including graduate programs, must have a defined

academic year that contains a minimum of 30 weeks of instructional time.

In addition, for undergraduate programs, an academic year must contain

30 weeks of instructional time during which a full-time undergraduate student

must be expected to complete at least 24 semester or trimester hours, 36 quarter

hours, or 900 clock hours, as appropriate. A school may determine the amount

of course work a full-time graduate or professional student is expected to

complete over an academic year.

To determine the number of weeks of instructional time, a school must count

the period that begins on the first day of classes and ends on the last day of

classes or examinations.

Reduction of Academic Year

ED may grant waivers of the 30-week requirement for schools that provide

two-year or four-year programs of study for which they award associate or

baccalaureate degrees. ED may grant a reduction in the length of an

academic year.

♦ If a reduction is approved, a school is permitted to have an academic year

of less than 30 weeks of instructional time (but not less than 26 weeks)

without reducing the amount of Title IV funds that a student enrolled in

an eligible program is eligible to receive for an entire academic year.

A reduction is available to schools that want to begin or continue to operate with

a reduced academic year on a long-term basis. This reduction must be renewed

each time a school is required to apply for recertification to award federal

financial aid.

When evaluating a school’s application to reduce the length of an academic year,

ED will consider such factors as:

♦ any unique circumstances that justify granting the request,

 Reference:

• Student Financial Aid

Handbook , Volume 2:

Institutional Eligibility

• HEA, Part G, Section

481

• 34 CFR 668.2(b)(1)

 Reference:

• 34 CFR 668.3(c)(1)(i-iv)

 Reference:

• 34 CFR 668.3
June 2001 The Blue Book 1-15

Student Financial Aid Programs

♦ the school’s compliance with procedures for awarding aid and

disbursement based on the academic-year requirements of the HEA,

♦ the approval of the academic year by the school’s accrediting agency or

state agency, and

♦ the hours of attendance and other course work that a full-time student is

required to complete in the academic year.

ED has granted this waiver to very few schools. Schools can request the waiver

by two methods. One method is for a school to submit its request to either of

the following addresses:

By U.S. Postal Service: U.S. Department of Education

Case Management and Oversight Service

P.O. Box 44805

L’Enfant Plaza Station

Washington, DC 20026-4805

By commercial overnight mail or courier delivery:

U.S. Department of Education

Case Management and Oversight Service

7th and D Streets, SW

GSA Building, Room 5643

Washington, DC 20407

The other method is for a school to submit its request electronically through the

World Wide Web at http://eligcert.ed.gov. At the Web site, the school must

complete questions 1 and 69 and the signature page.

With either method, the school must submit documentation supporting its

request for the waiver. If a school has questions about the waiver, the school

should contact the Case Management Team that serves its state.

A school may have different academic years for different programs, but must use

the same academic year definition for:

♦ calculating all Title IV awards for students enrolled in a particular

program and

♦ all other Title IV program purposes, such as certifying loan deferments.

Clock-Hour and Term-Based Programs

For educational programs using semesters, trimesters, or quarters or clock hours,

a week of instructional time is defined as any consecutive seven-day period in

which at least one day of regularly scheduled instruction, examinations, or

preparation for examinations occurs.

 Reference:

• See Appendix D for

further details on Case

Management Teams.

 Reference:

• 34 CFR 668.8(b)(3)(i)

 Reference:

• http://eligcert.ed.gov
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Chapter 1

Nonterm Credit-Hour Programs

For educational programs measured in credit hours without standard terms

(semesters, trimesters, or quarters), a week of instructional time is defined as any

consecutive seven-day period in which at least 12 hours of instruction,

examinations, or preparation for examination occurs.

The Award Year

Funds are appropriated by Congress for a specific financial aid award year.

That year is the 12-month period during which postsecondary institutions

disburse Title IV aid and other federal financial aid funds to students. The award

year runs from July 1 of one calendar year to June 30 of the next calendar year.

For example, the 2001-02 award year begins on July 1, 2001 and ends on June 30,

2002. Immediately following the end of the award year, schools must file reports

on that award year’s activities.

For any award year, financial aid application processing begins on January 1 of

the calendar year in which the award year begins; financial aid payment

processing ends on September 30 of the calendar year in which the award year

ends.

♦ For example, for the 2001-02 award year, processing begins on

January 1, 2001 and ends on September 30, 2002.

The Fiscal Year

The fiscal year is defined by the institution. Examples of commonly used fiscal

year periods are:

♦ January 1 to December 31 (the calendar year),

♦ July 1 to June 30 (the financial aid award year), and

♦ October 1 to September 30 (the federal fiscal year).

For many institutions, the school fiscal year differs from the federal fiscal year.

The Federal Master Calendar

To ensure timely delivery of Title IV funds to students, federal law requires that

ED adhere to a master calendar when developing required publications,

communicating with postsecondary institutions, issuing regulations, and

performing other activities necessary to both ED’s and the institutions’

administration of Title IV programs.

See page 1.18 for the mandated FAFSA development schedule and page 1.19 for

the master allocation calendar for Federal Pell Grant and campus-based aid.

 Reference:

• Student Financial Aid

Handbook: Volume 2

Institutional Eligibility

• HEA, Part G, Section

481

 Reference:

• 34 CFR 668.8(b)(3)(ii)

 Reference:

• HEA, Part G, Section

482
June 2001 The Blue Book 1-17

Student Financial Aid Programs

The master calendar requires that regulations affecting a given award year be

published by ED no later than November 1 of the preceding calendar year.

♦ For example, for the 2001-02 award year, all final regulations had to be

issued on or before November 1, 2000. These regulations may take

effect no earlier than July 1, 2001.*

For allocations of Federal Pell Grant and other campus-based funds, the law also

mandates that ED adhere to the following master calendar dates in the year

preceding the award year.

♦ August 1—distribution of application for campus-based funds (Fiscal

Operations Report and Application to Participate [FISAP]) to institutions

♦ October 1—final date for institutions to submit FISAP to ED

♦ November 15—ED sends FISAP edits to institutions

♦ December 1—appeal procedures received by institutions

♦ December 15—institutions return any FISAP edits to ED

♦ February 1—institutions receive tentative ED award levels for campusbased programs; institutions also receive final Federal Pell Grant

Program Payment and Disbursement Schedule

♦ February 15—closing date for institutional appeals of campus-based

awards to be received by ED

♦ March 1—appeals process completed

♦ April 1—final award notifications for campus-based programs sent to

institutions by ED

♦ June 1—Federal Pell Grant Program initial authorization levels sent to

schools using the advance payment method

*Please note,

although it is

generally true that

the regulations will

not take effect before

July 1, 2001, on

occasion there are

exceptions.
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Chapter 1
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Student Financial Aid Programs