| AwardYear: 1997-1998 EnterChapterNo: 10 EnterChapterTitle: Federal Family Education Loan Program SectionNumber: 11 SectionTitle: Additional School Requirements PageNumbers: 111-118 REFUNDS Chapter 3 provides a general discussion of refunds and refund policies. Only information specific to the Federal Family Education Loan (FFEL) Program is provided here. Note that the refund policy information in Chapter 3, of course, extends to a parent who receive a Federal PLUS Loan on behalf of a dependent student who does not enroll for the academic period for which the loan was intended or who does not complete the academic period for which the loan was made. [[Refund to student via lender]] In the case where a school makes a refund to a student via the lender, the school must make the refund within 60 days after the student's official withdrawal date. If a student drops out, the school must pay the refund within 60 days of the earliest date of the following three dates: 1) the date the student dropped out according to the school 2) the last day of the academic term in which the student withdrew 3) the last day of the period of enrollment for which the student has been charged [[Student doesn't return from leave of absence]] Concerning the refund policy for a student who does not return to school following an approved leave of absence, any refund due must be paid within 30 days of whichever of the following dates is earlier: 1) the expiration of the leave of absence 2) the student's date of notification that he or she will not be returning to the institution after the leave of absence expires If the student was on an unapproved leave of absence, the refund must be made within 60 days of the student's last recorded date of class attendance. ALL REFUNDS MUST BE SENT DIRECTLY TO THE LENDER-- THEY MUST NOT BE GIVEN TO THE STUDENT OR PARENT. When a school makes a refund to a lender, the school must notify the student in writing and--if the borrower is the student's parent--the school must also notify the parent. EXCHANGE OF INFORMATION REQUIREMENTS A school is required to inform a lender or guaranty agency within 30 days of discovery of any change in a Stafford Loan borrower's permanent address. The school also must (on request) provide a lender or guaranty agency with the borrower's name, address, and if possible, the employer and employer address. Within 60 days after the exit interview, the school must provide the guaranty agency that was listed in the borrower's student aid records with updated information about - the borrower's future permanent address, - the borrower's 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. To promote loan repayment, a school may make agreements to provide the holders of delinquent loans of current or former students with information about the delinquent borrower's location or employment. The school may also try to contact the borrower and counsel him or her to avoid default. A lender must provide a school with the name and Social Security Number of the student for whom a parent is borrowing a PLUS Loan. If a lender has requested preclaims assistance from a guaranty agency, the guaranty agency (rather than the lender) must provide the school at which the borrower obtained a loan with the borrower's name, address, and Social Security Number. The guaranty agency may charge the school a reasonable fee for the service. The school may only use the information to remind the borrower to repay his or her loan(s). At the request of a school, a guaranty agency must provide, without charge, information about students enrolled at the school if such students are in default on FFELs. The guaranty agency must also provide the school, on request, with the notice of sale, transfer, or assignment of the loan to another holder, as well as the address and telephone number of the new loan holder. This requirement must be met prior to the beginning of the loan repayment period but only applies if a borrower is in the grace period or is in repayment. RECORDKEEPING, AUDITS, AND REPORTS Record retention and examination requirements have been standardized for all SFA programs and are set forth in the November 27, 1996 Student Assistance General Provisions Final Rule. Chapter 3 provides detailed information on these subjects. Included here is FFEL-specific information. A school must keep records relating to a student or parent borrower's eligibility and participation in the FEEL Program for three years after the end of the award year in which the student last attended the institution. A school must keep all other records relating to the school's participation in the FFEL Program for three years after the end of the award year in which the records are submitted. The following lists some examples of the types of student loan records that a school must maintain: [[Loan application]] - the name of the borrower and a copy of the loan application (if the borrower is a parent, the name of the student on whose behalf the PLUS Loan was made); [[SAR]] - the Student Aid Report (SAR) or Institutional Student Information Record (ISIR) used to determine the borrower's eligibility for SFA funds; [[Loan details]] - the amount of the loan, its payment period, its loan period, (if appropriate), the calculations used to determine the loan amount, and the date and amount of each loan disbursement; - the name and address of the lender; [[EFA]] - financial assistance that was available to the student and used in determining estimated financial assistance (EFA) for the loan period; [[Data used for COA]] - the data used to construct an individual student's budget or the school's itemized standard budget used in calculating the student's estimated cost of attendance (COA); [[Student's school account information]] - the amount of a student's tuition and fees for the loan period, the date the student paid the tuition and fees, and the date the loan check was received and delivered to the student; [[Refund recalculation]] - the amount and basis for calculation of any refund paid to or on behalf of the student; and [[Data used to calculation EFC]] - for subsidized Stafford Loans, the data used to determine the student's EFC. For Stafford Loans, loan records must also contain the following information: - the date the school received each loan disbursement and the amount of the disbursement; - the date the school endorsed the loan check; - the date(s) of transmittal of loan proceeds to the student; - a record of the student's job placement, if known; and - documentation of the student's Federal Pell Grant eligibility or ineligibility. [[Format of records]] A school may keep these required records in hard copy or in microform, computer files, optical disk, CD-ROM, or other media formats. All record information must be retrievable in a coherent hard copy format or in other media formats acceptable to the Department. [[School that is lender]] If a school is a lender and the holder of a promissory note, the school must also retain the original note. Every two years, an independent certified public accountant must audit the school; the audit must cover the period of time since the previous audit. A school must agree to allow the Department or a guaranty agency to audit the school's records periodically to verify compliance with SFA regulations. [[SSCRs]] Student Status Confirmation Reports (SSCRs) are a reflection of a school's FFEL borrower data. If these reports are not reconciled and reflect inaccurate data, borrowers will not be converted to their grace and repayment periods properly, and the school's cohort default rate will likely be inaccurate. The school is responsible for completing SSCRs. [[SSCRs and NSLDS]] The Department has incorporated SSCRs into the National Student Loan Data System (NSLDS) in order to centralize and fully automate the enrollment verification process. In April 1996, all schools should have received an electronic SSCR file from NSLDS via the Title IV Wide Area Network (TIV WAN). This file contains enrollment information on FFEL Program and Federal Direct Loan Program borrowers that the Department believes are currently attending each school or who have recently left each school. Since NSLDS is taking over the SSCR process, guaranty agencies will no longer send SSCRs to schools as of March 1, 1997 for schools that have successfully completed their practice rosters; the agencies now receive enrollment verification directly from NSLDS. For further information on NSLDS, please consult "Dear Colleague" Letter GEN-96-13 (July 1996). AUDIT REQUIREMENTS [[Default rate above 20%]] A school with a default rate above 20% is required to undergo a biennial on-site guaranty agency review of its FFEL Programs, unless the school is operating under an approved default management plan or unless the school's default rate is based on loans entering repayment totalling less than $100,000 in a given year. More information is provided in the Audit Guide: Audits of Student Financial Assistance Programs. Compliance audits must be conducted by an independent auditor in accordance with the U.S. General Accounting Office's (GAO's) Government Accounting Standards. The Audit Guide sets forth general accounting standards and the standards specifically for compliance audits. These are some of the FFEL-specific requirements that are subject to audit: - A school must determine student eligibility. In the case of a PLUS Loan, the financial aid administrator must also determine whether the parent is eligible to borrow on behalf of an eligible dependent student. Auditing of the determination of Pell Grant eligibility for undergraduate Stafford Loan borrowers is also required. - A school must complete portions of the loan application regarding student eligibility, the student's estimated COA, the student's EFA, and, if applicable, the EFC. The school also must meet the loan certification and other requirements of 34 CFR 682.603. - A school must follow prescribed procedures in the FFEL Program regulations (34 CFR 682.604) for handling loan proceeds. These procedures vary depending on whether the student does or does not enroll and on whether the proceeds are payable to the student only or jointly to the student and to the school. - When a school becomes aware that: (1) a student with a deferment no longer meets the conditions for an in-school deferment, (2) a student who received a loan or for whom a PLUS Loan was received failed to enroll at least half time for the period for which the loan was intended or was otherwise ineligible for the loan, or (3) a student's permanent address has changed, such information must immediately be reported to the lender or the guaranty agency. - A school must establish adequate entrance and exit counseling procedures. PROGRAM PARTICIPATION AGREEMENT REQUIREMENTS Chapter 3 provides detailed information on the Program Participation Agreement (PPA). Provided here is FFEL-specific information about the PPA. A school's PPA requires that - a school beginning participation in the FFEL Program after a change of ownership or a change in the school's status must develop a Default Management Plan for approval by the Department and must maintain the plan for two years after certification; - if a student is unable to pay costs of attendance owed a school because of a delay in delivery of FFEL proceeds and the delay is the fault of the school or is a result of adhering to SFA Program requirements, the school may not penalize the student; - a school provide students with recent data on employment and graduation statistics when advertising job-placement rates to recruit students; - a school inform enrolled eligible borrowers of the availability of state grant assistance from the state in which the school is located, and provide a source of information for programs in the home state of the eligible borrower; and - a school certify the availability of a drug abuse prevention program for officers, employees, and students of the school. The PPA (as well as program regulations) also prohibits schools from charging students fees for processing applications or data required to determine eligibility for SFA Programs or for processing FFEL Program deferment forms and prohibits the certification of loans in excess of the student's eligibility. PROHIBITED SCHOOL AND LENDER ACTIVITY An eligible school may not employ or use commissioned salespersons to promote the availability of loans. A commissioned salesperson is any person who receives compensation that is related to, or calculated on the basis of, student applications, enrollments, or acceptances. "Promote the availability" means providing prospective or enrolled students with applications, names of lenders, or other information designed to encourage students to apply for FFELs. This term does not prohibit a commissioned salesperson from providing prospective or enrolled students with general financial aid information. However, the Higher Education Act of 1965 (HEA), as amended, prohibits any commission, bonus, or other incentive payments based on an employee's success in securing enrollment, admissions, or the awarding of student aid. (This prohibition does not apply to the recruitment of foreign students who are not eligible for SFA funds.) Similarly, guaranty agencies and lenders are prohibited by law from offering inducements (such as points, premiums, or payments) to schools or individuals as a means to market loans. Lenders and guaranty agencies are also forbidden to mail unsolicited loan application forms to a student, unless the student has previously obtained a student loan from that lender or agency. A school may not make payments to induce lenders to make loans to students (or to the parents of students) at that school. Examples of prohibited inducements are provided in 34 CFR 682.212(b) and 682.401(e)(2)(i). A March 1995 "Dear Colleague" Letter (95-G-278) provided further guidance on prohibited inducements by lenders as a result of special arrangements with schools and on limitations on lending by schools. |