Compliance Corner
PASFAA 2011
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
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Agenda
• Determining Loan Eligibility
• Inadvertent Overborrowing
• Bankruptcy, Default, and Total and Permanent
Disability
• Reporting Enrollment
• Satisfactory Academic Progress
• Professional Judgment
• Dependency Override
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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
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What can go wrong?
• Certain conditions can affect eligibility!
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Overborrowing
Default
Bankruptcy
Total And Permanent Disability
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.
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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 kind
until the overborrowing situation is resolved.
• Two basic categories:
» Overborrowing Resulting from School Error
» Inadvertent Overborrowing
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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.
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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.
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.
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Overborrowing
• Student has several options to resolve
Inadvertent Overborrowing
1. Repay the overborrowed amount;
2. Reallocate funds between subsidized and
unsubsidized;
3. Consolidate the loan that include this amount; or
4. Establish a “Satisfactory Repayment Arrangement”
with the loan holder to repay the overborrowed
amount.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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
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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 period or a conditional discharge period – the student
must resume payment on the old loan before they can receive a
new loan or TEACH grant.
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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
acknowledgement would be required.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 pace at which the student must progress through the
program to ensure completion in the maximum time frame.
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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.
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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.
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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
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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.
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!
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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.
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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.
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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.
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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.
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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.
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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
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Questions
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