Publication Date: August 2003
DCL ID: G-03-348
Posted on 08-25-2003
Subject: Foreign schools
SUMMARY: This letter informs guaranty agencies and lenders of actions required to assist in the oversight of FFEL program funds for students attending foreign schools.
Dear Guaranty Agency and Lender:
Thank you for your continued support in assisting U.S. students with obtaining loans under the Federal Family Education Loan (FFEL) program for attendance at participating institutions located outside the United States.
Program integrity and accountability are paramount responsibilities for the Department. Unfortunately, we continue to identify fraudulent activities by individuals presenting themselves as students wishing to attend foreign schools. The Department has taken additional steps to educate staff at these foreign schools on Title IV requirements and will hold them accountable for errors within their control that threaten the integrity of the FFEL program. We are sending letters to all foreign schools reminding them of their responsibilities when handling FFEL funds for foreign school attendance (copy attached), but we also need you to take steps to contribute to these efforts.
Actions Required of Guaranty Agencies
To ensure that FFEL program loans are made only to eligible students at foreign schools, guaranty agencies must:
· reconfirm that the institution is eligible to participate in the FFEL program before FFEL program funds are disbursed directly to a student for attendance at a foreign school;
· verify that the student is accepted for enrollment at the foreign institution indicated on the loan application before FFEL program funds are disbursed directly to a student for attendance at a foreign school;
· continue sending paper Student Status Confirmation Reports (SSCRs) to institutions that are unable to connect with the Department’s National Student Loan Data System (NSLDS); and
· perform program reviews of foreign schools as appropriate.
The Department expects guaranty agencies to implement these additional procedures no later than three months from the publication date of this letter for loans disbursed on or after that implementation date.
Confirming Institutional Participation and Verifying Student Enrollment
As you know, a student receiving FFEL program funds for attendance at a foreign school can request that those funds be sent directly to him or her. When a student requests that FFEL funds be sent to him or her directly, the FFEL program funds are subject to possible fraud unless steps are taken to insure that students do not falsify certification by the school. In fact, our Office of the Inspector General (OIG) has identified and prosecuted such cases and is advising us to change our policies to prevent future fraudulent acts.
Therefore, when a student requests that an FFEL disbursement be sent directly to him or her, guaranty agencies must, prior to the disbursement of funds, access the Department’s Postsecondary Education Participants System (PEPS) Database and reconfirm that the institution the student is to attend is certified to participate in the FFEL program. Institutions that have an Eligibility Status of “Eligible/Loan Deferment” and a Certification Status of “Not Certified” in the PEPS Database are eligible for FFEL loan deferment purposes only. They are not certified to participate in the FFEL programs and students attending those schools are not eligible to receive FFEL program loans.
Guaranty agencies must communicate the certification information, as well as any future changes in an institution’s status, to the appropriate lender. If you have questions about the certification of a particular foreign school, please contact the Department’s Foreign Schools Team in the School Eligibility Channel. You can reach this office by calling (202) 377-3168 or by e-mailing email@example.com.
In addition to reconfirming that the institution is certified to participate in the FFEL program, prior to the disbursement of FFEL program funds directly to a student, guaranty agencies must contact the foreign school representative listed in PEPS and verify that the student has been accepted for enrollment at the institution. The Department has previously advised foreign schools that the individual who is authorized to certify FFEL loan applications for the institution must be the individual listed in PEPS as the institutional contact. If the foreign school representative listed on the FFEL loan application is not the individual listed in PEPS, the guaranty agency must resolve the discrepancy. A guaranty agency may contact the institution by telephone or by e-mail.
We remind you that you are not to include students’ entire social security numbers in e-mail communications. E-mail is not a secure means of communication. The guaranty agency must inform the lender of the outcome and document the student’s file with the following information:
· the name and telephone number of the school representative,
· the date of the call or e-mail communication,
· verification that the student was accepted for enrollment,
· the enrollment period, and
· any other information received from the school.
If a lender is operating under a blanket guaranty agreement with a guaranty agency to disburse FFEL funds prior to receiving a guaranty on the loan, the guaranty agency will need to coordinate with the lender to ensure these requirements are met before loan funds are disbursed to students.
Additionally, we continue to find cases where individuals who are applying for FFEL funds for attendance at foreign schools have not completed the Free Application for Federal Student Aid (FAFSA). All FFEL student loan borrowers are required to complete the FAFSA and the resulting output document, the Student Aid Report (SAR) or Institutional Student Information Records (ISIR), must be reviewed to ensure that the applicant has gone through the Department’s edits and matches for student eligibility. Although it is the responsibility of the institution to obtain and review a copy of each student’s SAR prior to loan certification, we strongly recommend that you also collect a copy of the SAR, if you are unable to access the student’s ISIR, and review the student’s eligibility prior to disbursing any FFEL funds directly to a student. If there are comments on the SAR indicating that the student is ineligible, please return the SAR with the appropriate information to the school with a message that the student’s loan request cannot be processed due to unresolved eligibility comments on the SAR. You can obtain the SAR from the student or the school. We also encourage you to perform or assist in the student eligibility review on behalf of foreign schools by obtaining and analyzing the required documentation.
Sending Student Status Confirmation Reports
Some foreign schools are currently connected to the Department’s National Student Loan Data System (NSLDS). These institutions are able to comply with the Student Status Confirmation Report (SSCR) requirement through that system. However, most eligible foreign schools are unable to connect with NSLDS. For foreign schools that do not connect to NSLDS, guaranty agencies must continue sending the paper SSCR report to facilitate timely agency receipt of SSCR updates from these foreign schools. If you are aware that an institution is not complying with the SSCR requirement, please refer that institution to the Foreign Schools Team at the e-mail address or phone number provided below.
Performing Program Reviews of Foreign Schools
Guaranty agencies can visit foreign schools for the purposes of performing a program review of the FFEL programs. This is especially appropriate in cases of suspected misrepresentation of the information on loan applications or SSCRs. Reviews performed at foreign schools may also qualify as a substitute for the reviews required in 34 C.F.R. § 682.410(c)(1)(ii). We encourage guaranty agencies to submit for approval a proposed alternative selection methodology for this purpose. We ask that you inform the Foreign Schools Team, in FSA’s School Eligibility Channel, of the problems identified and of your plans to perform a program review.
Actions Required of Lenders
As noted above, when a student requests that an FFEL disbursement be sent directly to him or her, guaranty agencies must now, prior to the disbursement of funds, reconfirm that the institution the student is to attend is certified to participate in the FFEL program and verify that the student has been accepted for enrollment. If a lender is operating under a blanket guaranty agreement with a guaranty agency, the guaranty agency will need to coordinate with the lender to ensure these requirements are met before loan funds are disbursed to students.
After the guaranty agency verifies the institution’s participation and that the student has been accepted for enrollment, the lender must comply with the requirement that they notify the foreign school when they actually disburse the FFEL funds directly to the borrower.
This procedure will provide the foreign school with an immediate opportunity to notify the lender if a borrower does not attend class and provide an opportunity to prevent additional disbursements from being made.
Referrals to the Department’s Office of Inspector General
We remind you that, if your agency finds that a student may have engaged in a fraudulent submission of information or other criminal misconduct in applying for FFEL program funds, you must refer this information to our OIG. Fraudulent activities may include the use of false identities, forgery of signatures or certifications, and false claims of income, citizenship, or independent student status. The OIG may be reached at 1-800-MIS-USED (1 800-647-8733) or 202-205-5770, by fax at 202-260-0230, and by e-mail at OIG.firstname.lastname@example.org.
The Department is committed to stopping fraudulent activities while continuing to provide access to international education for our students. These additional steps will help to prevent student fraud, protect American taxpayers’ funds, and ensure that FFEL program funds are used for their intended purpose. We appreciate your assistance and look forward to working with you to strengthen accountability for FFEL program funds. If you have questions, please contact our Foreign Schools Team in the office of Federal Student Aid. You can reach them by calling (202) 377-3168 or by e-mailing email@example.com.
Sally L. Stroup
Assistance Secretary for Postsecondary Edcuation
 See HEA § 428(b)(1)(N)(ii)(“[insurance program of a participating guaranty agency must provide that funds borrowed by a student] in the case of a student who is studying outside the United States at an eligible foreign institution, are, at the request of the student, disbursed directly to the student . . . unless such student requests that the check be endorsed, or the funds transfer authorized, pursuant to an authorized power-of-attorney”); see also 34 C.F.R. § 682.207(b)(1)(“In disbursing a loan, a lender- -(v) shall disburse- (D) In the case of a student enrolled in an eligible foreign school, if the student requests- (1) Directly to the student; or (2) To the institution if the borrower provides a power-of-attorney to an individual not affiliated with the institution to endorse the check or complete an electronic fund transfer authorization”).
 See 34 C.F.R. § 682.207(b)(1)(v)(E) (“If a lender disburses a loan directly to the borrower for attendance at an eligible foreign school, as provided in paragraph (b)(1)(v)(D)(1) of this section, the lender must, at the time of disbursement, notify the school of-
(1) The name and social security number of the student;(2) The name and social security number of the parent borrower, if the loan disbursed is a PLUS loan;(3) The type of loan;(4) The amount of the disbursement, including the amount of any fees assessed the borrower;(5) The date of the disbursement; and(6) The name, address, telephone and fax number or electronic address of the lender, servicer, or guaranty agency to which any inquiries should be addressed.”).