Maintained for Historical Purposes

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

Federal Pell Grant Program - Disbursing Federal Pell Grant Awards

AwardYear: 1997-1998
EnterChapterNo: 4
EnterChapterTitle: Federal Pell Grant Program
SectionNumber: 4
SectionTitle: Disbursing Federal Pell Grant Awards
PageNumbers: 57-64


[[All eligible students must be paid for all eligible enrollment]]
This section explains how payments can be made and when the
payments can be made. A school must pay ANY student who is
eligible (including payment for less-than-half-time students), and
must make payments for ALL eligible periods of enrollment (including
remaining eligibility for students in summer school terms).

On November 29, 1996, the Department published revisions to the
regulations regarding cash management, which provide uniform
rules for disbursing and managing funds for all programs (see
Chapter 3, Section 3 for more information).

SCHOOL CERTIFICATION AND STUDENT ELIGIBILITY

[[School certification]]
The school is required to certify, when submitting Payment Data
through the Recipient Data Exchange (RDE), the Electronic Data
Exchange (EDE), or the Floppy Disk Data Exchange, that the
information about the student is accurate and complete. The
procedures used are slightly different for the three systems.

Under RDE, the aid administrator must sign the Certification
statement that is part of the transmittal included with the tape. Under
EDE, there is a signature flag in the record. Under the Floppy Disk
Data Exchange, the school will be asked to acknowledge the
certification as part of the batch generation process.

The school is liable for incorrect payments made to the student
because of a mistake by the school. The financial aid administrator is
subject to a $10,000 fine, a prison sentence, or both if he or she
knowingly makes false or misleading statements.

[[Reviewing student's eligibility]]
The school must review the student's eligibility at the time it is going
to make a payment. For instance, a student may have been making
satisfactory academic progress when award letters were mailed in the
spring term, but may no longer be making progress when he or she
comes to the business office for payment at the beginning of the fall
term. The school must make sure the student still meets the eligibility
requirements for the Pell (as discussed in Section 1 of this chapter),
and that the appropriate documentation is retained.

METHODS OF DISBURSEMENT

[[Credit to account or direct payment]]
There are several ways a school may pay a Pell to a student:
crediting the student's account for any outstanding education
expenses, paying the student directly by check or EFT, or dispensing
cash to the student for which it gets a signed receipt. The school must
have authorization from the student to pay him or her by EFT (see
Chapter 3 for more about this requirement). Usually, a school will
use the Pell to credit the student's account for any unpaid charges for
tuition and fees (and room and board, if provided by the school), and
then will pay the remaining Pell (if any) to the student for remaining
living expenses.

[[Limitation on credit to account]]
The school may use the Pell to pay other charges at the school only if
the student gives written authorization. The school cannot require the
student to authorize payment of such charges. As with any SFA
funds, payments may be made only for education expenses.*1* If a
credit balance remains after the Pell is credited to the student's
account, the balance must be returned to the student unless the
student provides written authorization for the school to hold the
funds. (See Chapter 3, Section 3 for more on authorizations and
credit balances.)

[[Early payment option]]
[[NEW]]
The cash management regulations permit a school to pay a student
before the beginning of a payment period if the student has already
registered for that payment period. The earliest a school may
disburse a Pell is 10 days before the first day of classes in the
payment period. Remember that in a clock-hour program or a
nonterm credit-hour program, the school may not pay a student until
he or she has completed the coursework for the previous payment
period. Effective July 1, 1997, this rule also applies to credit-hour
programs offered in nonstandard terms: the school cannot disburse
before the student completes the previous payment period.

If the school disburses the Pell before the payment period begins, but
the student never actually begins attending any classes, the school
must reimburse the Pell account for that payment. (If the student
begins attending some but not all of his or her classes, the school
may have to recalculate the award--see Section 5.)

[[The graphic on page 4-58 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

FIRST PAYMENT OPTIONS

[[Verification]]
[[34 CFR 668.58]]
In general, schools are not allowed to make a disbursement of a Pell
award without a valid output document. However, the school may
make an interim disbursement to a student who is selected for
verification (including a student selected for verification by the
school rather than the CPS). See The Verification Guide for more
information.

[[Must have valid output document]]
If a student is not selected for verification, the school may not make
a disbursement to the student until it has a valid output document. If
the student needs to make corrections to his or her data, or the
financial aid administrator wishes to use professional judgment to
adjust the student's data, the student must submit the SAR for
reprocessing (using Part 2) or the school must make the changes
through EDExpress and receive the new output document before
making a disbursement.

TIMING OF PAYMENTS

[[34 CFR 690.76(a)]]
The school may use its discretion in disbursing funds within a
payment period to best meet a student's needs. For instance, some
schools pay students on the first day of class in a payment period,
while others wait until the end of the add/drop period. Other schools
pay the student in monthly installments to help meet living expenses
throughout the payment period. (Note that if the school rations
payments to students by crediting the entire payment for the payment
period to the student's account and making periodic payments to the
student from these funds, it must have the student's written
authorization.) In all cases, however, the full amount due the student
for a payment period must be disbursed to the student before the end
of the payment period.

[[The graphic on page 4-59 is currently unavailable for viewing. Please
reference your paper document for additional information.]]

[[Retroactive payment]]
The school may pay a student retroactively for any completed
payment periods within the award year if the student was eligible for
payment in those periods. Thus, if the school receives a valid output
document for the student while he or she is enrolled as an eligible
student in the summer term, but the student was also enrolled and
eligible for payment in the fall term, that student must be paid
retroactively for the fall term. However, the fall payment would be
based on the hours COMPLETED by the student for that term. If the
student had enrolled full time at the beginning of the fall term but
dropped to half-time status by the end of the term, the retroactive
payment must be based on half-time status.

A school may make any retroactive payments in one lump sum to
decrease the administrative workload.

[[Notification of payment]]
The school must notify the student of the amount he or she will be
paid and the method of payment (by credit to the student's account or
directly to the student). If the school will be paying the student by
check, it must tell the student when the check will be available and
where to go to pick it up. (It is helpful to include the cashier's office
hours in any notification.)

[[Releasing a check--34 CFR 690.78(c)]]
If the student does not pick up the check on time, the school must
still make the check available to the student for 20 days after the
student's last day of enrollment for that award year. (Instead of
holding the check for that period, the school may cancel the first
check and issue a new check when the student requests payment.)

A student attends the fall term at a community college. The
college credits the student's account for tuition and fees early in
the term and sends a letter to the student to notify her of the
payment. However, at the end of the term, the student still has not
picked up the check.

The school MUST release the check to the student if she claims it
within 20 days after the end of the fall term. If the student has
withdrawn from school but resumes enrollment later in the award
year, the school must again make the payment for fall living
expenses available to her.

If the student has not picked up the check at the end of the 20-day
period, the school may credit the student's account ONLY for
outstanding charges for tuition and fees and room and board for the
award year. If the student contacts the school to request the check
more than 20 days after the student's last day of enrollment, the
school may pay the student through the next payment period (if it
chooses) even though the student is no longer enrolled. The school
may mail the check to the student rather than waiting for him or her
to return and pick it up.

[[Payments to students who have completed a program]]
If there is a delay in a school receiving its Pell funds, some students
could complete their program or academic year before receiving their
final Pell payments. If this happens, as soon as the school receives its
funds, it must pay any student who has a valid output document.
Even though these students would receive their payments late, no
regulations would be violated given that the students had previously
met all the requirements for payment.

[[Payments to students who have lost eligibility--34 CFR
668.164(g)]]
[[NEW]]
Ordinarily, a student who has lost his or her Pell eligibility before
receiving a disbursement cannot be paid. However, in some cases a
school can pay a student if it received the student's valid output
document while the student was eligible for payment, but the student
lost eligibility before his or her account was credited or he or she
received a payment. The regulations published on 11/29/96 provide a
unified treatment of such disbursements; these disbursements are
called late disbursements. As previously for Pell, the school must
have received the student's valid output document before the student
became ineligible, and may only pay the student if the funds are used
to pay educational costs incurred while the student was enrolled and
eligible. The regulations now specify that in order for the school to
make a late disbursement the student must be ineligible solely
because he or she is no longer enrolled. In addition, the school must
make the disbursement within 90 days after the student becomes
ineligible. A late Pell disbursement can be made by crediting it to the
student's account to cover institutional charges or by paying it
directly to the student (in cash or by check or EFT) for
noninstitutional costs, such as living expenses.

For example, a student submits a valid SAR during the second week
of classes and is eligible for payment at that time. But by the time the
check is processed for the student and she has been notified to pick
up the check, she has withdrawn from school.

[[The graphic on page 4-61 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

The school can pay this student if it makes the disbursement within
90 days of the student's withdrawal. The aid administrator must
determine what unpaid educational costs for the enrollment period
still exist (that is, what costs have not been paid by the student or
other sources of aid). (See Chapter 3, Section 3 for more information
on late disbursements.)

STUDENTS WHO WITHDRAW AND LATER RETURN

[[Returning student may receive refunded amount]]
A student who withdraws but returns to the program in the same
award year may be paid the amount of any refund that was returned
to the Pell account. For example, a student is given a Pell
disbursement of $875 for the first of two payment periods but then
withdraws in that payment period. The school calculates a refund and
returns $400 to the student's Pell account. If the student returns in the
same award year, the student must be paid the $400 when he or she
re-enrolls in the program. When the student completes the payment
period, he or she would be eligible for the Pell disbursement for the
next payment period.

[[Incompletes at term schools]]
Suppose a student enrolled for the fall semester withdraws before the
semester is over, receiving all "Ws" before the school receives his or
her output document. When the student re-enrolls for the spring
semester, the "Ws" are changed to "incompletes." When the student
submits a valid output document, he or she can be paid retroactively
for the fall semester. The understanding is that the student would
have the opportunity to complete the fall courses.

[[Retaking hours and courses]]
In general, students at term-based credit-hour schools may receive
Pell funds for retaking coursework. The situation is more
complicated at clock-hour or nonterm credit-hour schools. If a
student withdraws from a clock-hour program or nonterm credit-hour
program but returns to it in the same award year, or in the subsequent
award year, the student will be held accountable for the remaining
clock or credit hours in the payment period before the next
disbursement of the Pell can be made. However, in the case of a
student who returns two years after withdrawing, the school may pay
the student without waiting until the student has completed the hours
from the previous period of enrollment. The following example will
clarify the eligibility of students for Pell disbursements when they
are retaking hours for which they have already been paid.

Dean enrolled in a 1,284-clock-hour program at Sarven Technical
Institute in September. The school defined the academic year as
900 clock hours. Dean was paid for the first payment period
(1-450) and second payment period (451-900). He withdrew due
to illness after completing 768 hours (first payment period plus
318 hours of second payment period).

[[The graphic on page 4-63 is currently unavailable for viewing.
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When Dean recovered, he had to wait until the next enrollment
group in September of the following year. He completed the entire
course, including the repetition of the first 768 clock hours. He
was making satisfactory progress and was otherwise eligible.

When Dean withdrew, Sarven made a Pell refund for those clock
hours that he had not completed. However, because Dean returned
in the following award year he could not receive the amount that
had been refunded as a Pell payment. And, as he did not complete
the entire clock hour program, he could be paid only for those
clock hours for which he was not already paid (that is, clock hours
901-1284). Note that if Dean had re-enrolled in the same award
year, he could have received the amount that the school returned
to the Pell account.

[[The graphic on page 4-63 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

Suppose instead that the school did not make a Pell refund
when Dean withdrew. Dean still may begin to receive Pell funds
only after he has completed the 900th clock hour (clock hours
901-1284). Even if he picked up the program at the 769th clock
hour, the situation would be the same. In this case, even if Dean
had re-enrolled in the same award year, he would not receive Pell
funds until completing the 900th clock hour (because there was no
refund).

Assume that instead of returning in the next award year, Dean
returned two years later. He could then be paid for the entire
program because, as noted previously, a student who returns two
years after withdrawing is not held accountable for remaining
clock hours.

If the student receives his or her Scheduled Award for a clock-hour
program, completes the entire program, and later decides to retake
the program, the student could again be paid for the entire program.

The difference in the treatment of a student at a clock-hour or
nonterm credit-hour school versus a term-based credit-hour school is
that at a term-based credit-hour school, a student may be paid to
repeat a course and does not necessarily have to complete the
program before he or she can be paid for that course. Generally, at a
clock-hour or nonterm credit-hour school, the student can be paid
again for clock hours or credit hours that he or she has already
completed at that school only if he or she has completed a program
and re-enrolls to take that program again or to take another program.


*1* Pell funds may not be used to repay a student's loan. Loan
payments are not considered an education expense.

Last Modified: 07/21/1998