Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

(GEN-00-18) Monitoring and Resolving Defaults and Overpayments.

Publication Date: November 2000

DCL ID: GEN-00-18

Summary: Monitoring and Resolving Defaults and Overpayments.

November 2000

Subject: Monitoring and Resolving Defaults and Overpayments.

Summary: This letter describes the actions a school must take whenever it receives information from any source that a student is in default on a Title IV loan or owes an overpayment of Title IV program funds.

References: Dear Colleague Letters GEN-96-13, GEN-98-6, GEN-98-14, GEN-98-22,
GEN-00-12 and the 2000-2001 Federal Student Aid Handbook.

Dear Partner:

As we are sure you know, a student who is in default on a Title IV loan or who owes an overpayment of Title IV program funds is not eligible to receive further federal student aid until the default or overpayment is resolved. A recent audit performed by the Department's Office of the Inspector General (OIG) found more than a few instances where ineligible students received Title IV funds even though schools were aware, or should have been aware, that those students were in default or owed an overpayment.The OIG reported that some schools simply missed the information that was provided to them on ISIRs and SARs. In other cases, schools resolved one default or overpayment but failed to note that the student had multiple eligibility problems. Finally, the report found instances where the school obtained, what it thought was adequate documentation that the issue had been resolved, when in reality it was not.

When our school partners make certain that all students who receive the support of these programs are eligible for that support and have met their obligations to the programs, program integrity improves. In order to ensure that the statutory and regulatory student eligibility requirements are adhered to, we have prepared, as an attachment to this letter, a document that reminds you of your institutional responsibilities with regard to this issue. The attachment describes the default and overpayment information available through NSLDS, specifically the NSLDS data included on ISIRs. It also describes your options when you have been informed that a student is in default or owes an overpayment, including a description of the documentation that is required for resolution.

As noted above, one of the findings of the OIG report was that schools often did not obtain adequate documentation to support the resolution of the reported default or overpayment. While the attachment provides more detail, you need to be aware of the following general guidance with regard to the adequacy of documentation.

Documentation that is used to show that a reported default or overpayment has been resolved must clearly identify the specific reported defaulted loan or overpayment and include the current status of the loan or overpayment. In no case may a school accept or use documentation from any entity stating that it has "no record" of a student's defaulted loan or overpayment. This is because it was the reporting entity that provided the default or overpayment information to NSLDS in the first place.

Please take the time to review the information provided in the attachment. Make certain that you have developed and utilize systems and procedures that properly monitor the eligibility of your students. Also, make sure that you understand when and how you can obtain documentation that supports the resolution of a default or overpayment. Finally, make sure that your staff understands how to determine what kind of documentation is required to resolve these student eligibility issues.

If you have questions, please contact our SFA Customer Service Call Center. Staff is available Monday through Friday between the hours of 9:00 AM and 5:00 PM (Eastern Time) at 1-800-433-7327. After hours, calls will be accepted by an automated voice response system. Callers leaving their name and phone number will receive a return call the next business day. You may FAX an inquiry to the Customer Service Call Center at (202) 260-4199, or E-mail one to

Thank you for your continued support of the Student Financial Assistance programs.


G. Kay Jacks, General Manager

Jeff Baker, Director

Schools Channel

Program Development Division


Last Modified: 10/31/2000