AASFAA Conference

1. AASFAA Conference Top 10 Categories of Misunderstandings in Administering Federal Student Aid October 2007 Auburn, Alabama

2. Introductions Gary Garoffolo Associate Vice President for Interim Staffing

3. Top 10 Categories of Misunderstandings in Administering Federal Student Aid That’s stating it nicely—misunderstandings vs. compliance violations

4. Most Common Audit Findings • Repeated failure to take corrective action • Late refund to Title IV account • Incorrect return of Title IV funds calculation • Entrance/Exit counseling deficiencies • Auditors opinion cited in Audit • Deficiencies in student credit balance • Student Confirmation Report issues • Pell over/under payment Source: SASFAA 07 conference presentation by Greg Martin, U.S. Department of Education

5. Most Common Program Review Findings • Late refund to Title IV account • Incorrect Return to Title IV fund calculation • Return to Title IV fund calculation not documented/performed • Verification violations • Not meeting campus crime reporting requirements • Student credit balance deficiencies • Inconsistent information in student file • Not verifying enrollment before disbursement Source: SASFAA 07 conference presentation by Greg Martin, U.S. Department of Education

6. 10 Categories of Misunderstandings • Return of Title IV Funds – Determination of Withdrawal • Return of Title IV Funds – Timely Return of Funds • Exit Loan Counseling • Satisfactory Academic Progress • Notifications and Authorizations • Prompt Disbursement and FSA Credit Balance • Academic Program Eligibility • Academic Year and Payment Period • School Eligibility – Administrative Capability • Consumer Information • And one additional: Written Policies and Procedures

7. Withdrawal and Return of Title IV Funds (RTIV) – Determination of Withdrawal • Determination of withdrawal • Must track “official” withdrawals during drop/add period. That is, if student began attending and then drops all courses, RTIV must be performed, even if all institutional charges are cancelled. • Must perform a RTIV calculation after the 60% date in the payment period to determine if the student has earned a post-withdrawal disbursement.

8. Withdrawal and Return of Title IV Funds (RTIV) – Determination of Withdrawal • Must identify and perform RTIV for federal aid recipients that withdraw from all courses during the term. The withdrawal date and the date of determination of withdrawal are the same for an “official” withdrawal. • Must record as the withdrawal date (for federal aid purposes) the student began an “official” withdrawal; instead, schools are recording the “official” withdrawal when a school’s required paperwork is received. • School must perform RTIV calculation within 30 days of date of determination; and if needed, notify the student of a grant overpayment or post-withdrawal disbursement.

9. Withdrawal and Return of Title IV Funds (RTIV) – Determination of Withdrawal • Must identify and perform RTIV for federal aid recipients that receive all non-passing grades at the end of the payment period, and therefore, must be treated as “unofficial” withdrawals. • School must determine “unofficial” withdrawals no later than 30 days after the end of the payment period* • School must perform RTIV calculation within 30 days of date of determination; and if needed, notify the student of a grant overpayment or post-withdrawal disbursement * Assumes school is not required to take attendance and is calculating RTIV on a payment period basis.

10. Withdrawal and Return of Title IV Funds (RTIV) – Timely Return of Funds • Timely return of unearned funds. • School must return unearned funds no later than 45 days after the date of determination. Note: The RTIV calculation should be performed within 30 days of date of determination, because a student must be notified within 30 days of date of determination if there is a grant overpayment or post-withdrawal disbursement.

11. Withdrawal, Return of Title IV Funds, and Exit Loan Counseling • Exit loan counseling • School must notify a student of exit loan counseling requirements, if the student withdraws, whether “officially” or “unofficially”, and borrowed a federal loan. • School must report the change in enrollment status within 30 days of the withdrawal date. However, if the school is scheduled to complete enrollment reporting to NSLDS within 60 days, the data may be reported on that file.

12. Exit Loan Counseling • If the student borrower drops out without notifying the school, it must confirm that the student has completed online counseling, or mail exit counseling material to the borrower at his or her last known address. The material must be mailed within 30 days of determining that a borrower has withdrawn or failed to participate in an exit counseling session. • If the school mails the exit materials, it is not required to use certified mail with a return receipt requested, but it must document in the student’s file that the materials were sent. If the student fails to provide the updated contact information, the school is not required to take any further action. • The personal and contact information collected at the time of exit counseling must be provided to the guaranty agency or Direct Loan Servicing Center within 60 days. Updated information includes: the borrower’s name; address; references; future permanent address; Social Security Number; the identity and address of the borrower’s expected employer, the address of the borrower’s next of kin, and the borrower’s driver’s license number and state of issuance.

13. Satisfactory Academic Progress (SAP) • Must have written SAP standards (i.e., GPA, Completion Rate, Maximum Time Frame) for all types of programs offered, e.g., less than 1-year, 1-year, 2-year, 4-year, graduate, and other programs • Each SAP policy must: • be as stringent as the institution’s academic standing policy • at a minimum, require a “C” average or its equivalent or have an academic standing consistent with the requirement for graduation from the program at the end of the second academic year (Having a standard consistent with graduation requirements accommodates a school using an escalating GPA.)

14. Satisfactory Academic Progress (SAP) • require a minimum amount of work be completed at the end of each increment, (where an increment is no longer than half the program or an academic year, whichever is less), that is sufficient to ensure the student will complete the program within the maximum time frame. (At some point, this must convert to at least 66.67% of attempted credits for undergraduate students.) • Set a maximum time frame, which must be no more than 150% of the academic program for undergraduates. If at any point it is clear that a student cannot mathematically finish the program within the maximum time frame, the student becomes ineligible for aid. The student may appeal.

15. Satisfactory Academic Progress (SAP) - Include written statement of the treatment of: • Repeat coursework • Incomplete course grades • Withdrawals, which must be included in maximum time frame and completion rate • Transfer credits, which must be included in maximum time frame • Non-credit remedial coursework • ESL coursework • Dropped courses during the add/drop period, if they are to be excluded in attempted credits • Prior coursework that the school ignores because it has given “academic amnesty” • Change in major or academic program • Pursuit of additional degrees

16. Notifications and Authorizations • School must issue a Notification of Disbursement and Opportunity to Cancel or Reduce a Loan. • This notification must be sent no earlier than 30 days before and no later than 30 days after crediting a student’s account. • A student has 14 days to notify a school if she wants the loan cancelled (or reduced). Note: Proposed rulemaking would add a condition to the timeframes based on type of confirmation (active or passive). - If a school obtains a active (affirmative) confirmation of a student’s acceptance of a loan, the timeframe for notification is unchanged. - If not, a school must notify a student no earlier than 30 days before and no later than 7 days after crediting a student’s account, and the student would have 30 days to cancel all or a portion of the loan.

17. Notifications and Authorizations • School must obtain a written authorization before it may: • Disburse federal student aid funds (including FWS earnings) by EFT to a back account designated by the student. • Use federal student aid funds (including FWS earnings) to pay for allowable charges other than tuition, fees and room and board if the student contracts with the school. • Hold a federal student aid credit balance (An FSA credit balance occurs whenever your school credits FSA program funds to a student’s account and the total amount of those FSA funds exceeds the student’s allowable charges.) • Apply federal student aid funds toward minor year charges.

18. Prompt Disbursement and FSA Credit Balance • School is required to make a disbursement by crediting a student’s account (or releasing funds directly to student) no more than three (3) business days after receiving the funds. This is different from the timeframe for paying a federal credit balance. • An FSA credit balance must be paid no later than 14 days after the balance occurred on the student account, assuming it occurred after the first day of classes.

19. Program Eligibility Aid should not be awarded/disbursed to students enrolled in: • Undergraduate “programs” that do not lead to a degree or certificate. These open admission “programs” are: • often coded AAS • set up as a convenience to track applicants that declared an interest in a program that requires another stage of admission with more rigorous admission criteria and limited enrollment, e.g., Pre-Nursing, Pre-Dental, Pre-Radiology, Pre-Photography. • Undergraduate certificate or licensure preparation programs that have not been submitted to the U.S. Department of Education for approval before disbursing any federal aid, even if each course in the program is acceptable for full credit toward a 2-year or more degree program at the school.

20. Academic Year and Payment Periods Academic Programs may be administered on a Standard Term basis, but not in compliance with requirements for: • Treatment of an intersession with start and end dates between the standard Fall and Spring semester or Fall and Winter quarter. It must be combined with Fall or Spring, and aid awarded for credits attempted. It cannot be ignored. • Treatment of summer sessions. They must be combined, and aid awarded for credits attempted. The school cannot choose to award aid for one session and not another; and, if it does not combine summer sessions, the whole program must be treated as nonstandard.

21. Academic Year and Payment Periods • Treatment of compressed (e.g., “accelerated”, “short”, “mini”, “modules”) coursework with start and end dates that are part of a standing “mini term” or “session” operating within a standard term (i.e., semester, trimester, or quarter). • A school must track a student’s start and end date within a term to ensure the student is enrolled for the full span of a term. • If the student is enrolled for only a part of the term, the school must: • Adjust the Cost of Attendance • Adjust the EFC • Compute the financial need based on the adjusted COA and EFC • Establish the loan period for the compressed period of enrollment • Monitor when an initial disbursement may be released based on the start date of the first course the student begins attending • Monitor the end date of last course that the student begins to determine within 30 days whether there was an “unofficial” withdrawal • Adjust the payment period calendar when computing Return of Title IV Funds to properly compute the percentage of earned aid.

22. School Eligibility – Administrative Capability Under Administrative Capability • Biennial report on drug prevention to comply with Drug-Free Schools and Communities Act is required, although not submitted to the U.S. Department of Education, unless requested. • Annual distribution of institution’s drug abuse prevention activities and description of unlawful behavior to comply with Drug-Free Workplace Act of 1988 is required, not solely at the time of employment. • School must register with NSLDS to participate in Transfer Student Monitoring Process and collect financial aid history before disbursing aid to transfer students.

23. Consumer Information Under Consumer Information • Each year a school must provide to enrolled students a notice (disclosure statement) containing a list of the consumer information it is required to disseminate, and the procedures for obtaining the consumer information. The notice must be made through a one-on-one distribution. • Under Student Right-To-Know Act, the school must publish its graduation (or completion) rates by July 1 of each year. • Under Campus Security/Clery Act requires timely reporting of campus crime statistics and annual distribution of campus crime report and statistics directly to students and employees by October 1 of each year.

24. Written Policies and Procedures • Policies and Procedures Manual is not required. However, there are many program-related requirements for written policies and procedures, e.g., verification, C-code resolution, Pell Grant recalculation, treatment of summer session for standard term loan processing, handling of borrower-based academic year for student loan, awarding of campus-based aid to less than half-time students.

25. Identifying Compliance Issues • Training, e.g., national, regional, state associational meetings; ED and state workshops, Webinars, ED’s Coach • Internal assessment, e.g., Internal Auditor, NASFAA Self-Evaluation Guide or ED’s Self-Assessment Tool • Peer reviews • Contract with third-party to review financial aid operation, e.g., Financial Aid Services, NASFAA’s Standard of Excellence • Annual independent audits • State agency audit, e.g., audit by guaranty agency or state grant agency • Program review • Office of the Inspector General (OIG) review

26. The presenter is not a representative of the U.S. Department of Education. The presentation and remarks are solely those of the presenter. Thank you for your time. Gary Garoffolo Associate Vice President for Interim Staffing Telephone: (405) 747-0424 EmailAddress: GGaroffolo@FinancialAidServices.org