Posted Date:April 2, 2013
| Author: | William Leith, Service Director, Program Management, Federal Student Aid |
Subject: Updated Guidance on Making Direct Loan Refunds of Cash
Each year, we remind schools of the correct process for making a Direct Loan refund of cash (i.e., returning unused Direct Loan funds) to the Department of Education (the Department). All Direct Loan funds that are not disbursed to student or parent borrowers within three business days from the date that the drawdown is received (or within seven calendar days in certain circumstances) must be returned to the Department in accordance with the cash management regulations at 34 CFR 668.166.
As a reminder, Direct Loan funds are not student-specific, but are school, program, and award year-specific. This means that when one student will not use the funds or returns them to the school, the funds can be disbursed to other eligible students who will be receiving Direct Loans for the same award year at the same school. If the funds cannot be disbursed within the regulatory timeframes, they must be returned for the same school, program, and award year.
To ensure the most accurate and timely processing, a school should refund cash as follows:
Electronically via the G5 Web site. A school should refund cash electronically unless instructed otherwise. This method is faster and more secure than manual/paper processing, and is less likely to result in errors. If a school needs assistance in making electronic refunds, they should contact the G5 Hotline using the contact information below. Refunds of cash greater than $100,000 must be returned electronically via the G5 Web site.
Manually via paper check. Paper checks should only be used as an exception when a school is unable to process electronically or is instructed to refund cash via paper check in an audit or program review. In the near future, the Department will move away from paper processing. Schools should begin to update their processes to refund cash electronically as soon as possible. If a school must refund cash via paper check, it must:
Note: Schools should not use drawdown adjustments in G5 to make a refund of cash. Also, refunds of cash are school, program, and award year-specific and refunds of cash should not be netted with a drawdown from another school, program, or award year.
Make the check payable to the U.S. Department of Education and include the Direct Loan School Code or OPE ID and the award year to which the funds apply on the check. Note: If there is not enough information to allow us to process the check, it will be returned to the school.
Include a completed Direct Loan Refunds of Cash transmittal sheet (attached below) with the check. Note: Funds should not be combined for multiple award years or multiple school codes. A separate check and transmittal sheet should be used for each award year and school.
Mail the check to the COD School Relations Center at:
Regular Mail/No Signature Required
U.S. Department of Education
Attention: Direct Loan Refunds of Cash
P.O. Box 9001
Niagara Falls, NY 14302
Overnight Address/Requiring Signature
U.S. Department of Education
Attention: Direct Loan Refunds of Cash
2429 Military Rd, Suite 200
Niagara Falls, NY 14304
(Phone number for tracking form only: 716/284-2225)
Note: If a school is required to refund cash as part of a liability assessed in an audit or program review, it must follow the instructions provided by the issuing office.
If a school is returning cash as a result of refunds made to a borrower’s account, a corresponding downward disbursement adjustment must also be reported to the COD System. For further information regarding making disbursement adjustments, refer to the November 21, 2011 Electronic Announcement posted on the Information for Financial Aid Professionals (IFAP) Web site.
Also, remember that Direct Loan disbursements, disbursement adjustments, and refunds of cash, should be reported or submitted in whole dollar amounts only. The use of pennies in Direct Loan processing will impact a school's ability to successfully complete its monthly reconciliation because its Net Drawdowns may not match the Net Disbursements reported to the COD System. For further information, refer to the November 21, 2011 Electronic Announcement posted on the IFAP Web site.
Note to Foreign Schools: The way a foreign school will refund Direct Loan funds varies depending on whether the school has a U.S. bank account or a foreign bank account.
A foreign school with a U.S. bank account should refund cash electronically as explained in #1 above.
A foreign school with a foreign bank account may have its bank “wire” a refund of cash to G5. The school will initiate the refund in G5. During the process, G5 will display a form that the school will need to print and submit to its bank. The form has all the information the bank will need to “wire” the funds to G5. There should not be any fees assessed with this transaction. For any questions regarding this process, please refer to the G5 contact information below.
A foreign school with a foreign bank account may also refund cash via paper check. In those cases, the school should use the attached transmittal sheet to send information about the funds being returned to G5.
Contact Information
For additional information on refunding cash via G5, refer to the G5 Web site or call the G5 Hotline at 888/336-8930 or 202/401-6238 for assistance.
For questions about this announcement or refunding cash via paper check, contact the COD School Relations Center at 800/848-0978 or 571/392-3737. You may also e-mail CODSupport@ed.gov.