Compliance Corner PASFAA 2011

1. Compliance CornerPASFAA 2011

2. Who the heck is this guy? David Racculia 18 Years of Experience with AES/PHEAA Default Claim Examiner Supervisor - Default Claim Process Program Review Specialist Title IV Compliance Specialist

3. Agenda • Determining Loan Eligibility • Inadvertent Overborrowing • Bankruptcy, Default, and Total and Permanent Disability • Reporting Enrollment • Satisfactory Academic Progress • Professional Judgment • Dependency Override

4. Determining Loan Eligibility • Evaluate Each Student’s Financial Aid History. • Institutional Student Information Report (ISIR) • National Student Loan Data System (NSLDS) • Request Transfer Monitoring (as appropriate) • What is transfer monitoring? • Originate Title IV aid • Be Alert for Postscreening Notifications

5. What can go wrong? • Certain conditions can affect eligibility! • Overborrowing • Default • Bankruptcy • Total And Permanent Disability

6. Overborrowing • Annual Loan Limits • The amount of Stafford funds a student may receive in a given academic year based upon academic grade level and dependency status. • Aggregate Loan limits • The maximum loan amounts a student may borrower during his or her academic career.

7. Overborrowing • When a student is found to have exceeded their annual or aggregate borrowing limits, they are ineligible for additional Title IV aid of any kinduntil the overborrowing situation is resolved. • Two basic categories: • Overborrowing Resulting from School Error • Inadvertent Overborrowing

8. Overborrowing • Overborrowing that results from School Error • Errors made by your school’s evaluation of the student’s eligibility during a prior academic year. • It is your school’s responsibility to work with the student to resolve the situation. • If possible, reallocate loan funds between subsidized and unsubsidized. • Return ineligible loan amount and work with the student to find an alternate funding source to replace the lost dollars.

9. Overborrowing • Inadvertent Overborrowing • Error made by a prior school’s evaluation of the student’s eligibility during an earlier academic year. • Should be discovered by your evaluation of the student’s financial aid History, through transfer monitoring, or with the receipt of a new ISIR due to post screening.

10. Overborrowing • Student has several options to resolve Inadvertent Overborrowing • Repay the overborrowed amount; • Reallocate funds between subsidized and unsubsidized; • Consolidate the loan that include this amount; or • Establish a “Satisfactory Repayment Arrangement” with the loan holder to repay the overborrowed amount.

11. Overborrowing • What is a “Satisfactory Repayment Arrangement” and how do we get one? • Contact the loan holder directly or work through the designated servicer of the loan. • A “Satisfactory Repayment Arrangement” is defined by the loan holder, but typically involves signing a statement agreeing to repay the overborrowed amount per the normal terms and conditions of the promissory note.

12. Bankruptcy • Recent economic conditions have seen an increase in bankruptcy filing. • A student who has filed for bankruptcy is eligible for aid provided he or she has no defaulted loans. • The Bankruptcy Reform Act of 1994 prohibits a school or a lender from denying a student access to a Federal loan or grant solely on the basis of that borrower filing for bankruptcy.

13. Default • A student in default on a Title IV loan is not eligible for further federal student aid until the default is resolved. • A default can be resolved in several ways • Repayment of the defaulted balance in full; • Consolidate the defaulted loans; • Establish “Satisfactory Repayment Arrangements” for the defaulted loans; or • Loan Rehabilitation

14. Default • “Satisfactory Repayment Arrangement” (Note - This differs from that used for inadvertent overborrowing.) • Student must make six voluntary, consecutive, full monthly payments. • With the receipt of the sixth payment – Title IV eligibility will be restored, but the loan remains in default. • A student may regain eligibility under this option only one time.

15. Default • Loan Rehabilitation • Student must make nine full, voluntary, monthly payments - on time - within 10 consecutive months. • “On time” is defined as no later than 20 days after the due date. • With rehabilitation, the loan is no longer considered to be in default, and the student regains all normal loan benefits, such as eligibility for deferment.

16. Total and Permanent Disability • The condition of an individual who • Is unable to engage in substantial gainful activity by reason of a medically determinable physical or mental impair­ment that can be expected to result in death; has lasted for a continuous period of at least 60 months; or can be expected to last for a continuous period of at least 60 months; or • Has been determined by the De­partment of Veterans Affairs (VA) to be unemployable due to a service-con­nected disability.

17. Total and Permanent Disability • Borrowers whose discharge applications are received: • On or after July 1, 2010 – borrowers receive loan discharge followed by a three year post-discharge monitoring period that begins on the date the discharge was granted. • Before July 1, 2010 – borrowers received a conditional discharge followed by three year conditional discharge period that began on the date the borrower’s physician certified the disability discharge application.

18. Total and Permanent Disability • For students who wish to borrower again • If a prior loan was discharged - the student must • Obtain a physician’s certification stating that they have the ability to engage in substantial gainful activity; and • They must sign a statement acknowledging that the new loan (or TEACH grant service obligation) cannot later be discharged for any present impairment unless it deteriorates to a point where they are again considered totally and permanently disabled. • If the new loan is requested during either a post discharge monitoring periodor a conditional discharge period– the student must resume payment on the old loan before they can receive a new loan or TEACH grant.

19. Total and Permanent Disability • A student whose loan is discharged based on a determination from the De­partment of Veterans Affairs (VA) is not subject to any monitoring period; therefore, they would not be required to resume payment on that discharged loan. • Only the physician’s certification and borrower acknowledgementwould be required.

20. Reporting Enrollment Accurate and Timely enrollment reporting is a critical responsibility! • The report of a student’s last date of attendance will determine the start of that student’s grace and repayment period. • All schools that participate in the Title IV loan or grant programs must have a method to report student enrollment data to NSLDS.

21. Reporting enrollment • Please remember • School’s must respond to requests for borrower information received from the U.S. Department of Education, guaranty agencies, lenders, and loan servicers. • A student authorizes the release of information to these organizations by signing the promissory note. • Financial aid staff should be encouraged to verify the identity of any individual requesting sensitive student information; however, they should not refuse that information once the requester’s identity has been established.

22. Reporting Enrollment Student’s who fail to begin attendance • If your school cannot document a student’s attendance in any class, that student is considered to have never attended. • It is important that you have a reliable process to verify that a student has begun attendance once classes begin. • You may not ignore information available to any office at the school indicating that a student failed to begin attendance.

23. Reporting Enrollment • If a school disburses loan funds to a student who did not be­gin attendance, the school must return all the funds that were credited to the student’s account at the institution for the payment period or period of enrollment. • In addition, a school must return the amount of any payments made directly by, or on behalf of, the student to the school for the payment period or period of enrollment, up to the total amount of the loan funds disbursed.

24. Reporting Enrollment • For any funds disbursed directly to the student - the loan servicer may issue a 30-day demand letter to the student to recover the funds. • It is important that the school provide the servicer with accurate details regarding: • The student’s last date of attendance; • The amount of the loan funds that were returned; and • The amount that remains outstanding.

25. Reporting Enrollment • A school must return the funds disbursed as soon as possible, but no later than 30 days after the date the school becomes aware that the student will not, or did not, begin attendance. • A school that does not take attendance, but reports enrollment statuses on a census date, must return these funds within 30 days of the census date.

26. Reporting Enrollment • If the student withdraws after attending class for any length of time, the Return of Title IV Funds calculation must be used to determine the amount of unearned funds the school must return. • In this situation, the school must return all unearned funds, including any disbursed directly to the student. • It is a school’s responsibility to recover any funds that were previously disbursed to the student.

27. Satisfactory Academic Progress • Satisfactory Academic Progress (SAP) must be measured: • At the end of each payment period for programs that are one academic year or less; or • For all other programs, at the end of the payment period, or at least annually to correspond with the end of the payment period. • The policy must specify the grade point average (GPA) that must be achieved at each evaluation; and • The paceat which the student must progress through the program to ensure completion in the maximum time frame.

28. Satisfactory Academic Progress • Maximum Timeframe is defined as: • For an undergraduate program measured in credit hours – No longer than 150% of the published length of the program, measured in credit hours. • For an undergraduate program measured in clock hours – No longer than 150% of the published length of the program, as measured by the cumulative number of clock hours the student is required to complete and expressed in calendar time. • For a graduate program, the maximum timeframe is defined by the school and is based upon the length of the educational program.

29. Satisfactory Academic Progress • Financial Aid Warning - a status assigned to a student who fails to make satisfactory academic progress at a school that evaluates academic progress at the end of each payment period. A student may be placed on financial aid warning and may continue to receive Title IV funds for one subsequent payment period. • Financial Aid Probation - a status assigned to a student who fails to make satisfactory academic progress and who has successfully appealed and has had eligibility for aid reinstated. A student who submits a successful appeal, and is placed on financial aid probation may receive Title IV funds for one subsequent payment period. • The school may require the student to meet certain terms and conditions while on financial aid probation. • The student must meet the school’s SAP standards at the end of this payment period or meet the requirements of an academic plan developed by the school.

30. Professional Judgment • A Financial Aid Officer may use Professional Judgment (PJ) to alter data used to calculate a student’s Expected Family Contribution (EFC) or to adjust a student’s Cost of Attendance (COA). • These adjustments must relate to the student’s unique circumstances. Some examples might include • Elementary or secondary school tuition expenses; • Medical, dental, or nursing home expenses not covered by insurance; • Unusually high child care costs; • Recent unemployment of a family member; or • Other changes in a family’s income or assets.

31. Professional Judgment • You are tasked with making “reasonable” decisions which support the intent of this regulatory provision. • According to the U.S. Department of Education, some examples of “unreasonable” judgments have included: EFC reductions based on recurring costs such as vacation expenses, utilities, credit card expenses, etc. Schools are accountable for their professional judgment decisions, and each one must be fully documented!

32. Professional Judgment • The U.S. Department of Education encourages Financial Aid Officers to responsibly utilize their authority to perform professional judgment. • In light of these challenging economic times, Dear Colleague Letters GEN 09-04, GEN 09-05, and more recently GEN 11-04 provide additional guidance to assist in this effort. • The information provided in these DCL’s continues to be in effect for subsequent award years until further notice.

33. Professional Judgment • DCL GEN 11-04 encourages aid administrators to consider the special circumstances that may arise for members of the U.S. Armed Forces. • The Department considers the loss of income due to a service member's return to college or the deployment of a service member as examples of changed circumstances.

34. Dependency Override • A school may perform a dependency override “…on a case-by-case basis for students with unusual circumstances.” • The phrase “unusual circumstances” is defined as “…circumstances that make it inappropriate to expect a parental contribution for the student.” (DCL GEN 03-07) • If an override is considered appropriate, a written statement detailing the determination must be maintained in the student’s file along with any supporting documen­tation.

35. Dependency Override • None of the following conditions would qualify as unusual circumstances • Parents refusal to contribute to a student’s education; • Parents unwillingness to provide information on the FAFSA or for verification; • Parents do not claim the student as a dependent for income tax purposes; • The student demonstrates total self-sufficiency. • However, the above may be caused by an abusive family environment or the student being abandoned by parents. These circumstances might merit a dependency override.

36. Dependency Override • A dependency override must be thoroughly documented. • Documentation should come from a third party that knows the student’s situation such as a teacher, counselor, medi­cal authority, or member of the clergy. • If this is not possible, a signed and dated statement from the student or a family member detailing the unusual circumstances could be accepted. Such a statement should only be used as a last resort.

37. Where Can I find Help? • Policy Assistance is available from PHEAA! • E-mail – CMPolicy@aesSuccess.org • Phone – (717) 720-3460 • Or, if you prefer, you may contact me directly David Racculia(Compliance Specialist) • Direct Phone – (717) 720-2379 • E-mail – dracculi@aessuccess.org

38. Questions