Understanding Title IV Fund Disbursements in Education

1. Session FF-10 Disbursing Title IV Funds Jamie Malone U.S. Department of Education

2. What Is A Disbursement? • A disbursement occurs when a school credits a student’s account or pays a student or parent directly with: • Title IV funds received from the Department or • Funds received from an FFEL lender or • School funds labeled as Title IV funds in advance of receiving actual federal funds

3. Checking Eligibility at Time of Disbursement • Before disbursing Title IV funds, schoolmust confirm that: • Recipient is an eligible student • Student is enrolled for the period • For loans, student is enrolled at least half-time • Student has begun attendance if disbursement occurs on/after first day of classes

4. Methods of Disbursement • Crediting student’s account at the institution • Direct Payment • Releasing FFEL lender check directly to student/parent • Issuing a check to student/parent • EFT to student or parent bank account • Dispensing cash with signed receipt

5. Crediting the Student’s Account • May use Title IV funds to credit student’s account to satisfy current charges for • Tuition and Fees • Room and board (if the student contracts with the institution) • With prior student/parent authorization, may use Title IV funds to credit student’s account to satisfy current charges for other educationally related charges

6. Memo Entries and Estimated Aid • Memo entries for billing purposes that do not identify a Title IV credit, e.g. “estimated Federal Pell Grant” are not considered disbursements • Memo entries are often needed to prepare billing statements and/or allow students to register for classes

7. Crediting Account With School Funds • If credit account with school’s funds earlier than 10 days before first day of classes of the payment period • Not considered a Title IV disbursement until the 10th day before first day of classes • Stafford borrowers subject to 30 day delay – not considered a disbursement until 30th day after beginning of the payment period

8. Direct Payment • Issuing a check • ED considers check to be issued on date it is mailed or date of notification to student that it is available for pickup • Notification to student must provide specific location for pickup • Checks may be held for pickup for up to 21 days after notification to student • After 21 days, mail check or return to Title IV program

9. Notification of Disbursement • School must notify student/parent of Perkins, FFEL/DL, and TEACH Grant disbursements credited to student’s account • Date and amount of disbursement • Student’s/parent’s right to cancel all or portion of disbursement • Procedures and time by which student/parent must notify school of desire to cancel

10. Notification Of Disbursement • For schools that obtain affirmative confirmation prior to disbursement • Notification must be made no earlier than 30 days before or no later than 30 days after disbursement • Student/parent must be given 14 days to cancel

11. Notification Of Disbursement • For schools that do not obtain affirmative confirmation prior to disbursement • Notification must be made no earlier than 30 days before or no later than 7 days after disbursement • Student/parent must be given 30 days to cancel

12. FFEL/DL Disbursements • For schools with cohort default rates of 10% or greater • May not make first disbursement to first year first time borrower until 30 days after first day of program of study • Must make multiple disbursements of one-term only loans

13. Required Authorizations • School may not require or coerce students to provide an authorization • Authorization may be modified or cancelled at any time (procedure must be explained) • Cancellation or modification is not retroactive • Authorization may remain in effect for entire period of enrollment – unless cancelled or modified

14. Electronic Processes for Notifications/Authorizations • Schools may provide notifications or obtain authorizations electronically • Reasonable safeguards must be adopted • E-Sign Act governs electronic signatures • Provides that a signature, contract etc. may not be deemed invalid solely because it is electronic

15. Disbursements to Students on Leave of Absence • May not disburse FFEL/DL • May disburse • Pell Grant • ACG • National SMART Grant • FSEOG • Perkins Loan • Title IV credit balances

16. Payment Periods • Academic term is payment period for programs offered in • credit hours and standard terms • credit hours and non-standard terms that are substantially equal* • All Title IV disbursements except FWS are made by academic term • Terms are substantially equal in length if no term is more than 2 weeks of instructional time longer than any other term in the program

17. Payment Periods • Non-standard terms not substantially equal • Academic term is payment period for Title IV grants and Perkins • For FFEL/DL, each academic year is divided into two payment periods • Payment periods are same as those for non-term credit hour programs

18. Payment PeriodsClock hour and Non-Term Credit hour programs • For clock hour and non-term credit hour programs less than an academic year • First payment period is period of time in which student successfully completes half of credit/clock hours and half of weeks of instructional time in program • Second payment period is period of time in which student successfully completes remainder of program in credit/clock hours and weeks

19. Payment PeriodsClock hour and Non-Term Credit hour programs • Programs equal to or multiples of one academic year • First payment period is period of time in which student successfully completes half of credit/clock hours and half of weeks in academic year • Second payment period is period of time in which student successfully completes remainder of credit/clock hours and weeks in academic year

20. Payment PeriodsClock hour and Non-Term Credit hour programs • For any remaining portion of a program that is more than half of an academic year but less than a full year • Period of time in which student successfully completes half of credit/clock hours and half of weeks of instructional time • For any remaining portion of a program that is not more than half of a year • Payment period is the remainder

21. Clock Hour Examples Academic year is 900 clock hours and 30 weeks Program is 750 clock hours and 25 weeks 375 Clock Hours/13 weeks 375 Clock Hours/12 weeks Program is 1200 clock hours and 40 weeks 450 clock hours/15 weeks 450 clock hours/15 weeks 300 clock hours/10 weeks

22. Clock Hour Examples Academic year is 900 clock hours and 30 weeks Program is 1700 clock hours and 68 weeks 450 clock hours/15 weeks 450 clock hours/15 weeks 400 clock hours/ 19 weeks 400 clock hours/ 19 weeks Program is 1800 clock hours and 60 weeks 450 clock hours/15 weeks 450 clock hours/15 weeks 450 clock hours/15 weeks 450 clock hours/15 weeks

23. Title IV Credit Balance • Occurs when Title IV funds credited to student’s account exceed allowable charges • Must be paid to student/parent no later than 14 days after • first day of class for the payment period if credit balance occurred on/before the first day of class • date credit balance occurred if credit balance occurred after first day of class for the payment period

24. Title IV Credit Balance Example Allowable charges are $5,000 The following aid is credited to the student’s account Does this studenthave a Title IV credit balance? No

25. Title IV Credit Balance Example Allowable charges are $5,000 The following aid is credited to the student’s account Does this studenthave a Title IV credit balance? Yes

26. Title IV Credit Balance • Excess parent PLUS Loan funds (not Grad PLUS) must be returned to the parent • If school determines PLUS Loan funds created the credit balance – balance goes to parent • School may disburse excess PLUS funds to student only with parent authorization • School determines which Title IV funds created a credit balance

27. Prior Award Year Charges • May never pay prior award year charges in excess of $200 • No student/parent authorization required to pay prior award year charges for tuition/fees and contracted room/board • With student/parent authorization, may pay prior award year charges for other educationally related charges

28. Early Disbursements • Credit hour term-based programs • Earliest date to disburse is 10 days before the first day of classes for the payment period • Clock-hour and non-term credit hour programs • Earliest date to disburse is later of 10 days before first day of class for the payment period or date student completed the previous payment period

29. Student Who Never Begins Attendance • Student who never begins attendance is not Title IV eligible • School must return all Pell, ACG, National SMART Grant, TEACH Grant, FSEOG and Perkins funds disbursed • School must return FFEL/DL funds that it has retained

30. Student Who Never Begins Attendance • Funds must be returned no later than 30 days after school becomes aware of failure to attend • School must notify lender/Secretary of FFEL/DL funds disbursed directly to student • Lender/Secretary will issue final demand letter

31. Retroactive Disbursements • School must pay retroactively for any completed payment periods within award year if student was eligible for payment in those periods • Pell/ACG/SMART/TEACH Grant disbursements for a completed term are based on hours completed by the student • Stafford Loan certifications may include an earlier period of eligibility only if student completed a half-time course load during that period

32. Excess Cash • Funds must be disbursed within 3 business days of receipt of funds from ED • Tolerance of 1% • May maintain excess cash not to exceed 1% of funds drawn in prior award year for up to 7 days • Definition expanded to include Title IV funds received from ED and transferred into school’s federal account as a result of award cancellation, adjustment, or recovery

33. Late Disbursements • Must be made within 180 days of date student becomes ineligible • Student is considered ineligible • for FFEL/DL, when no longer enrolled at least half-time • for Pell Grant, ACG, National SMART Grant, TEACH Grant, FSEOG and Perkins Loan, when no longer enrolled at the school

34. Conditions for a Late Disbursement Prior to student becoming ineligible • CPS must have processed SAR/ISIR with official EFC (except parent PLUS) • FFEL/DL must have been certified/originated • TEACH Grant must have been originated • FSEOG and Perkins award must have been made to student

35. Mandatory vs. Optional Late Disbursements • School must offer a late disbursement of Title IV funds to student who successfully completes the payment period or period of enrollment • School may offer a late disbursement of FFEL/DL to student who does not withdraw but ceases to be enrolled on a half-time basis

36. Limitations on Late Disbursement of FFEL/DL • Second or subsequent late disbursement is prohibited unless • Student has graduated or successfully completed the loan period • If school is subject to 30 day delay, late disbursement to a first-year, first-time borrower is prohibited unless student withdrew beyond 30th day

37. Recovery of Unclaimed Funds • When student/parent does not receive or negotiate direct disbursement, credit balance, or FWS payment • For checks not cashed, school must return funds no later than 240 days after date check is issued • For returned checks or rejected EFT, school must return funds no later than 45 days after return/reject

38. Recovery of Unclaimed Funds • May make additional attempt to disburse returned checks or rejected within 45 days. If fails, must return funds within 240 days of original issue • School only returns federal portion of FWS wages

39. Disbursements - Funding • Schools receive funds from ED through the G5 system • Advance payment method • Reimbursement or cash monitoring • Schools receive FFEL funds directly from lenders • EFT • Master check • Individual paper checks

40. Reporting Disbursements To COD • Schools submit a common record that reports anticipated and/or actual disbursements COD • Actual disbursements must be reported • Pell - within 30 days of the date of disbursement (before or after) • ACG, SMART, TEACH – no earlier than 7 days before disbursement date and no later than 30 days after disbursement date

41. Resources • 2008-2009 Federal Student Aid Handbook • Volume 4, Chapter 2 • Code of Federal Regulations • 34 CFR 668.164 • The Blue Book (October 2005) • Chapter 14

42. Contact Information Your feedback and comments are appreciated. Jamie Malone Training Officer 312-730-1528 jamie.malone@ed.gov