Volume 4

Processing Aid and Managing FSA Funds

Introduction

This volume provides guidance on how to request, disburse, manage, and report on the use of federal student aid funds.


Here we provide a summary of changes and clarifications. However, the introduction does not provide complete guidance on these changes. For that, refer to the text in the chapters cited, the Code of Federal Regulations (CFR), and the Higher Education Act (HEA).

We appreciate any comments that you have on this volume as well as all the volumes of the FSA Handbook. We revise the text based on questions and feedback from the financial aid community, so please write us at fsaschoolspubs@ed.gov about how to improve the Handbook so that it is always clear and informative.

COVID-19 Guidance and Waivers

The Department of Education recognizes that the ongoing COVID-19 pandemic has created many unique challenges for postsecondary institutions. The Department has provided a variety of special guidance and regulatory flexibilities due to the President’s declaration of the COVID-19 national emergency on March 13, 2020. In addition, Congress has passed legislation offering relief from certain statutory requirements related to the Title IV, HEA programs.

For COVID-19 related guidance, including waivers and exemptions to Title IV rules, please see the following webpages:

We outlined in our April 3, 2020 electronic announcement (EA) that institutions must comply with the cash management regulations (34 C.F.R. Part 668, Subpart K) unless unable to do so due to COVID-19 disruptions. Where an institution is unable to comply, it should document the reason(s) for instances where it is unable to comply and retain the documentation in its records. These include, but are not limited to, the following regulatory requirements:

  • Borrower Requests for Loan Cancellation (§ 668.165(a)(4)(ii))

  • Excess Cash (§ 668.166)

  • Notices/Authorizations (§§ 668.165(a)(3) and 668.165(b)(4)(iii))

In addition, under our December 11, 2020 Federal Register notice, the Secretary waived the requirement that an EFT be a direct deposit transaction allowing institutions and third-party servicers to use any type of EFT under the Treasury Department regulations in 31 CFR 208.2, including person-to-person payment methods such as Zelle and PayPal. Any alternative payment methods used must be disclosed in the institution’s annual compliance audit. The Secretary also temporarily modified the cash management requirements to allow institutions under Heightened Cash Management 1 (HCM1) the ability to submit a request for funds without first paying the credit balances due to the students for whom those funds were requested. Institutions must pay the credit balances no later than three calendar days after receiving the funds.

As outlined in the 12/11/20 notice, these waivers expire at the end of the payment period that begins after the date on which the Federally-declared national emergency related to COVID–19 is rescinded.

Updates for 2022–2023

In Chapter 1, we updated references to the DUNS number with the Unique Entity Identifier (UEI) number throughout and added additional information explaining what a UEI number is.

In Chapter 2, under the “Institutional Charges” section, we removed the information specific to calculating R2T4 funds. This information is located in Volume 5 of the FSA Handbook.

In Chapter 2, under the “Disbursements by payment period” section, we clarified when schools may disburse FWS compensation to students on LOAs.

In Chapter 2, under the “Checking Eligibility At The Time of Disbursement” section, we provided additional information to schools regarding steps to take when a student borrower or parent PLUS loan borrower dies.

In Chapter 4, under the “Returning Funds From An Audit or Program Review” section, we updated the information to emphasize to schools the importance of following the payment instructions located in the Final Audit Determination and Final Program Review Determination.

In Chapter 5, under “The Importance of Title IV Reconciliation” and in Appendix A, under “Reconciling subsidiary records to account balances” sections, we remind schools of the FSA programs that require monthly reconciliations.

In Appendix B, under “The Network of Responsibilities” section, we added cybersecurity requirements to the various tables of responsibilities. Additionally, under the “Evaluating and Improving Your School’s Financial Management Systems” section, we removed the reference to the NASFAA Self-Evaluation Guide.

Last Modified: 07/14/2022 • Published: 03/28/2021