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

Introduction and General Program Information - General Program Information

AwardYear: 1997-1998
EnterChapterNo: 1
EnterChapterTitle: Introduction and General Program Information
SectionNumber: 1
SectionTitle: General Program Information
PageNumbers: 5-14

This section starts out with a description of each SFA program,
followed by a listing of statutes and regulations that apply to each
SFA program. Finally, this section mentions several types of non-
SFA assistance programs for students and provides information on
other useful Department publications. In general, students apply for
federal student aid by completing the Free Application for Federal
Student Aid (FAFSA). Once the student applies he or she will
receive a Student Aid Report (SAR), which contains the Expected
Family Contribution (EFC). The application process is described in
detail in the Counselor's Handbook for Postsecondary Schools.

[[Program requirements differ]]
The SFA Programs provide postsecondary students with need-based
grants, loans, and work-study. Requirements differ somewhat for
each program, depending on the type of aid provided and the manner
in which funds are delivered to students. The SFA programs are
described below.

SFA Program summaries

Federal Pell Grant Program

The Federal Pell Grant is usually considered the first source of
student assistance. The Pell Grant is "portable" in that an eligible
student may submit the SAR to any participating school and be
assured payment. Students who apply electronically through the
school will receive a SAR Information Acknowledgment. Electronic
schools will receive an Institutional Student Information Report
(ISIR). The ISIR and SAR contain the same processed student
information in different formats. Pell Grant payments are not limited
to the available funds at the school. ED provides an initial
authorization for all participating schools and can increase the
school's authorization when necessary. Consequently, the school is
able to pay awards to all eligible students attending the school during
a given award year.

[[Maximum award]]
The Pell Grant amount a student can receive is based on the student's
EFC and cost of attendance. For the 1997-98 award year, the
maximum Pell Grant is $2,700, but this amount alone rarely meets a
student's financial need. Therefore, additional funds are often
available from other federal, private, or institutional sources.

William D. Ford Federal Direct Loan Program

The William D. Ford Federal Direct Loan (Direct Loan) Program
provides student and parent loans. Under the Direct Loan Program
the federal government provides the loan principal; private lenders
are not involved. (Flexible repayment options and Consolidation
Loans are also available.) Currently, over 1500 schools are eligible to
participate in the Direct Loan Program. See Chapter 11 for more
details about this program, or call the Direct Loan Task Force at 202-

[[Direct Loan approval procedure]]
Under the Direct Loan Program, the school certifies a student's
eligibility for the loan, and ED sends the loan funds directly to the
school for delivery to the borrower. Direct Subsidized Loans, for
student borrowers, are subsidized (that is, the federal government
pays the accruing interest on the loan while the student is in school,
during the grace period, and during deferment periods). An
independent student in need of additional aid (or, in some cases, a
dependent student whose parents cannot receive a PLUS Loan) may
receive a Direct Unsubsidized Loan. (Interest accrues from the date
that the first installment is disbursed and is the responsibility of the
borrower.) For both types of loans, the borrower is not required to
make payments until the he or she has left school and the grace
period has expired.

[[Direct Loans for parents]]
The parent of a dependent student may borrow a Federal Direct
PLUS Loan as long as the student is otherwise eligible for aid and
the PLUS borrower meets other eligibility requirements found in 34
CFR Part 685.200 (b). This type of loan is also unsubsidized, so
parent borrowers are responsible for accruing interest from the date
the first installment is disbursed. Repayment begins as soon as the
loan is fully disbursed, and there is no grace period.

Federal Family Education Loan (FFEL) Program

Under the FFEL Program, private lenders provide loan principal for
Federal Stafford Loans (for student borrowers) and Federal PLUS
Loans (for parent borrowers). The federal government guarantees
the loan through a state guaranty agency. (Some schools act as
lenders, and in some cases, the guaranty agency may act as a "lender
of last resort.") If the student or parent borrower defaults on the loan
(or if the loan is canceled), the lender can be reimbursed by the
federal government.

[[FFEL loan approval procedure]]
The school certifies a student's eligibility for the loan, and then the
guaranty agency and lender approve the loan. Then, the lender sends
the loan amount to the school, which then disburses the proceeds to
the student or--in the case of a PLUS Loan--to the parent.

Most Federal Stafford Loans are "subsidized" (that is, the federal
government pays the accruing interest on the loan while the student
is in school and during certain deferment periods). Throughout the
life of the loan, the federal government also pays the lender a special
allowance to cover the difference between the Stafford interest rate
and the prevailing market rate. Repayment of loan principal does not
begin until the student has left school and the grace period has

An independent student in need of additional aid may also receive an
unsubsidized Federal Stafford Loan. For these unsubsidized loans,
however, interest accrues from the date of loan origination and is the
responsibility of the borrower. Repayment of loan principal does not
begin until the student has left school and the grace period has

[[FFEL loans for parents]]
The parent(s) of a dependent student may also borrow a Federal
PLUS Loan, provided the student is otherwise eligible for aid. PLUS
loans are unsubsidized, so parent borrowers are responsible for
accruing interest from the date of loan origination. Repayment
begins while the student is still in school. There is no grace period.

FFEL Consolidation Loans are also available. Loan consolidation
enables a borrower with loans from different lenders to obtain one
loan with one interest rate and repayment schedule. The lender pays
off the existing loans and makes one Federal Consolidation Loan to
replace them.

Campus-based Programs

There are three campus-based programs: Federal Supplemental
Educational Opportunity Grants, Federal Work Study, and Federal
Perkins Loans. They are called "campus based" because they are
managed at the campus level. These programs provide grants
(FSEOG), part-time employment administered through the school
(FWS), and low-interest loans (Perkins). In the fall preceding the
award year, the school submits to ED a fiscal report for the past year
and an application for funds for the coming year (the report and
application are jointly known as the FISAP). For Example, during
the 1997-98 year, the school submits its fiscal report for 1996-97 and
its application for funds for 1998-99.

[[School decides on award amounts]]
Each year, participating schools are allocated funds based on the
anticipated financial need of its student body. (The funds are
allocated based on the FISAP data.) The school must decide on the
campus-based aid recipients and award amounts within certain
regulatory parameters. There is a statutory limit on the amount of
aid an individual may receive under the FSEOG and Perkins Loan
programs. For the FWS, the sum of the student's FWS award plus
other resources may not exceed his or her financial need. Most
campus-based aid recipients who have remaining unmet need will be
eligible for aid from other federal, private, or institutional sources.

[[Not all schools participate]]
Some schools that participate in other SFA Programs choose not to
participate in the campus-based programs because of the increased
administrative responsibility. For instance, when a school acts as a
lender in the Federal Perkins Loan Program or as an employer in the
FWS Program, the school must comply with many of the same legal
requirements (such as the Fair Debt Collection Practices Act and the
Fair Labor Standards Act) that apply to banks and businesses.

State Grants and Scholarships

ED also provides state agencies with funds for other grant and
scholarships programs. The State Student Incentive Grant (SSIG), for
instance, is a matching-funds program intended to assist states in
providing grants to eligible students. Many of the eligibility criteria
are established by the state agency, although SSIG recipients must
also meet the same basic eligibility criteria applicable to the other
SFA Programs.

[[Robert C. Byrd Honors Scholarship Program]]
Eligibility criteria for the Robert C. Byrd Honors Scholarship (Byrd
Scholarship) Program differs from other SFA Programs. Byrd
Scholarships are based on merit, not on financial need. Federal
requirements for this program are described in Chapter 9. For
information about student eligibility, program eligibility, and funding
procedures, students should refer to materials provided by the Byrd
agency in their state of residence.

[[Paul Douglas Teacher Scholarship Program]]
Funding for the Paul Douglas Teacher Scholarship Program was not
authorized for 1997-98. However, any student who has received a
Douglas Scholarship in the past and has not yet fulfilled the terms of
that scholarship agreement must continue to fulfill those terms.
Chapter 9, Section 3 covers the Douglas Scholarship Agreement in

[[National Early Intervention Scholarship & Partnership Program]]
Under the National Early Intervention Scholarship and Partnership
(NEISP) Program, the Secretary of Education provides states with
grants for early intervention and scholarship assistance.

Statutes and Regulations

The statutory authority for the SFA Programs is found in Title IV of
the Higher Education Act of 1965, as amended. The programs were
most recently reauthorized by the Higher Education Amendments of
1992 (HEA) and the Higher Education Technical Amendments of
1993 (HETA). The Omnibus Reconciliation Act of 1993 (OBRA)
also affected certain aspects of the SFA Programs, as did the
Improving America's Schools Act of 1994 (IASA).

SFA Program requirements are specified in Department regulations.
The most recent final regulations were published in December 1996
and are effective for the 1997-98 award year. The SFA-related
sections of the Code of Federal Regulations (CFR) are

- 34 CFR Part 600, Institutional Eligibility

- 34 CFR Part 602, Recognition of Accrediting Agencies

- 34 CFR Part 653, Paul Douglas Teacher Scholarship Program

- 34 CFR Part 654, Robert C. Byrd Honors Scholarship Program

- 34 CFR Part 668, Student Assistance General Provisions

- 34 CFR Part 673, Common Provisions for Campus-based

- 34 CFR Part 674, 675, 676, Campus-based Programs

- 34 CFR Part 682, FFEL Program

- 34 CFR Part 685, William D. Ford Federal Direct Loan Program

- 34 CFR Part 690, Federal Pell Grant Program

- 34 CFR Part 692, SSIG

- 34 CFR Part 693, National Early Intervention Scholarship and
Partnership Program

The following margin marker alerts the reader to major regulatory
changes and to new guidance:


Funding of SFA Programs

The federal government has a substantial interest in and commitment
to federal student aid programs for students at the postsecondary
level. Each year, the Administration and both Houses of Congress
labor to adequately fund the student aid programs. The chart on page
11 shows the federal funding (and the amount actually provided to
students) for each program for the 1996 fiscal year. The chart shows
that in each case the federal appropriation does not represent the total
amount of aid actually provided to students.

Under the Pell Grant Program, the additional .7 billion represents a
surplus from previous funding. Each participating school in the FWS
and FSEOG programs contributes a share of its own funds to the
amounts it receives from the Department. Under the FFEL Program,
private lenders provide the capital for the FFEL Program loans, in
addition to the federal funds spent on the program (which cover
interest and special allowance payments, and other maintenance
costs). For the Direct Loan Program, the capital used to provide
loans to borrowers is provided through the U.S. Treasury Department
through its regular Treasury bill auctions and through the receipt of
loan repayments. The FY appropriation for the Direct Loan Program
covers the operational costs of the program.

[[FFEL provided largest amount of aid to parents and students]]
For FY 96, the FFEL Program was the largest SFA program in terms
of actual aid provided to students. As the chart on page 11 shows,
16.7 billion was provided to students and their parents.

[[The chart "FY 96 Appropriations Compared to Actual Aid
Provided" on page 1-11 is currently unavailable for viewing.
Please reference your paper document for additional information.]]

Other Assistance Programs For Students

The SFA programs office is contained within the Office of
Postsecondary Education (OPE). While the SFA programs provide
students with aid directly, other offices within OPE and within the
Department provide grants to states and to local education agencies
that in turn administer those funds for education programs. Within
OPE, one example of such a program is the Robert C. Byrd
Scholarship Program, which is covered in Chapter 9 of this
handbook. Examples of federal assistance outside of OPE include
grants provided for aid to handicapped students through the Office of
Special Education and Rehabilitative Services (OSERS) and grants
provided for adult education and literacy through the Office of
Vocational and Adult Education (OVAE). This aid is administered
(under federal guidelines) by state agencies, local education
agencies, or other state or local organizations, and students must
meet designated eligibility criteria. More information on vocational
rehabilitation programs, for example, may be available at local or
state vocational rehabilitation offices.

[[Specific aid targeting particular groups of students]]
Several other federal agencies provide student financial aid that
targets certain groups of students. Consider, for example, the
financial aid offered through veterans educational benefits; tuition
assistance payments through the Job Training and Partnership Act
(JTPA) Program administered by the department of Labor; and the
health loans and nursing scholarships from the Public Health Service
(within the Department of Health and Human Services). For more
information on these programs, contact the appropriate agency or the
administering state agency.

Other Useful Department Publications

The handbook summarizes regulatory and statutory requirements
related to SFA Program administration. Nonetheless, schools may
find useful other Department publications that address special topics
of interest to financial aid administrators. For instance, The
Counselor's Handbook (the high school version and the
postsecondary school version) discusses the application process and
explains how to make corrections or other changes to application
information. The EFC Formula Book offers a detailed description of
the statutory formula used to calculate a student's Expected Family
Contribution (EFC). The Verification Guide describes the
procedures for verifying a student's application data. These
publications are usually published in the late fall preceding the
beginning of an award year.

Other SFA Program reference materials include a compilation of
regulations affecting these programs and various publication indexes.
While the handbook and related publications serve as comprehensive
reference documents for financial aid administrators, additional
resources may serve more specialized needs. Schools that use SFA
Program automated data systems will automatically receive manuals
and other materials describing the operating procedures for the
Recipient Data Exchange (RDE), the Electronic Data Exchange
(EDE), the electronic FISAP (report and application for campus-
based program funds), and the electronic DRAP (default reduction
assistance for Perkins/NDSL).

[[Publications for auditors and fiscal officers]]
ED also provides special publications for fiscal officers and auditors.
The Blue Book describes accounting, recordkeeping, and reporting
procedures for schools participating in the SFA Programs. ED's
Payment Management System issues a User's Manual for the
Automated Clearinghouse/Electronic Funds Transfer system--the
direct deposit system that provides participating schools with SFA
funds. The Office of Inspector General (OIG) publishes the Audit
Guide, which identifies federal program compliance areas that must
be reviewed by the auditor.

Throughout the award year, ED informs the financial aid community
of policy and procedure changes via "Dear Colleague" letters.

Last Modified: 07/27/1998